| Date | 8 July 1998 |
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| Judgment | Inserco Ltd -v- Honeywell Control Systems, Court of Appeal, 12 February 1998 |
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| The Issue | Global costs claims. |
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| Implication |
The applicability or otherwise of a global claims approach may be irrelevant in the context of agreement between the parties to carry out work on a quantum meruit basis. |
printAs everyone who reads this column will know, a global claim is the term applied where the connection between the matters complained of within the claim and their consequences in respect of time or money, is not fully spelt out. The claim will often address the entitlement to extension of time on the basis of the actual time taken to complete the works without any means of showing how specific delays relate to specific events. Similarly the financial consequences of delay and disruption will be an assessment of the cost of the total resources said to have been expended as a consequence collectively of the various events cited. A common form of the global claim is often called a total costs claim where the financial consequences are in fact calculated by reference to the actual costs of the works in their totality less the contractor's anticipated costs drawn from an analysis of its tender price. Such claims were first given prominence in the case of J Crosby and Sons Ltd -v- Portland Urban District Council in November 1967. In this case it was held that where a claim depended on an extremely complex interaction in the consequences of various denials, suspensions and variations, it may well be difficult and even impossible to make an accurate apportionment of the total extra cost between the several causative events. In dealing with this, the Court gave approval to what was then thought to be a common sense method of measuring claims. In a frequently quoted paragraph Donaldson, J. said "I can see no reason why he (the arbitrator) should not recognise the realities of the situation and make individual awards in respect of those parts of individual items of the claim which can be dealt with in isolation, and a supplementary award in respect of the remainder of these claims as a composite whole." Despite numerous cases concerning global claims since 1967, many of which have tended to deal with the structure of the pleadings rather than the nature of the financial assessment of the claim, the Crosby case tends still to be relied upon in support of such claims. The principle established in the Crosby case is however subject to a number of important qualifications. These include that the events which are the subject of the claim must be complex and must interact so that it is difficult, if not impossible, to make an accurate apportionment. Secondly, there must be no duplication and thirdly, any financial claim must exclude profit. In Bernards Rugby Landscapes -v- Stockley Park Consortium in August of last year the court added that such a claim would be permissible only providing that the inability to attribute loss to each head of claim had not been brought about by delay or other conduct on the part of the plaintiff contractor. These matters were considered in the case of Inserco Ltd -v- Honeywell Control Systems decided in the Court of Appeal in February of this year. Honeywell were engaged by Olympia & York to supply electrical systems for the Canary Wharf development. They in turn had engaged Inserco to wire up those systems. The subcontract provided for a remuneration on a re-measurement basis. Work commenced in April 1990 but by February 1991 Honeywell were under considerable pressure to complete the project by 1 April 1991. They asked Inserco to provide more labour to enable this to be achieved. Both parties negotiated and agreed that Inserco would be paid on a weekly basis by reference to the men on site and thus remuneration would no longer be on a re-measurement basis but on a cost plus basis. Subsequently there were disruptions and delays and significant extra works. Work continued after the anticipated completion date of 1 April and Honeywell stopped paying. The matters came before trial, and after having studied an extremely complex claim which had been submitted on behalf of Inserco on the basis of its total costs, the Official Referee had awarded Inserco approximately half of their claim, including a profit element of £105,000, dismissing the counter-claim. Honeywell appealed to the Court of Appeal, arguing that the judge had effectively awarded a claim which was based on the principles set out in Crosby -v- Portland but that Inserco's case came nowhere near meeting those requirements. In particular they argued that on the principles set out in Crosby, Inserco should not have been entitled to a profit award. The Court of Appeal dismissed the appeal holding that this case had nothing to do with the Crosby principles, but was instead decided upon the basis of the agreements made between the parties. In particular the judge was entitled to find on the facts that it was impossible to distinguish between the original work and extra work and to allow a margin for overheads and profit despite being unable to distinguish between work that did not attract that addition and extras which did.
CJ-9824
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