Global claims

11 April 2008

A global claim is one where a claimant complains of a number of events of liability and goes on to say the combined effect of these events is one aggregate (or global) sum or period of delay. The claimant does not demonstrate the causal link between any one event of liability and a discrete sum of money or period of time.

In the past, the courts have expressed concerns about global claims because they tend to reverse the onus of proof. The respondent ends up having to prove that there is no link between the events and the claimed aggregate monies, rather than the claimant having to prove there is one.

Since the judgments of the Scottish Court of Session in John Doyle Construction Limited v Laing Management (Scotland) Ltd, there has been an attitude from some quarters that global claims have been given a green light. However, two recent decisions in the English courts show claimants should remain cautious, particularly where claims are presented outside the jurisdiction of the Scottish courts.

In Doyle v Laing, Doyle presented a global claim and Laing sought to have the claim struck out. The Court of Session reused, effectively restating the accepted view that global claims should be used only where it is impossible or highly impractical to demonstrate the specific loss attached to each cause. The Court went on to make a number of exceptions – de-globalised elements that can be proven at trial will succeed;

• If an item of loss results from concurrent causes and one of those causes can be identified as the proximate and dominant cause of the loss, it will be treated as the operative case and the person responsible for it will be responsible for the loss; and

• Even if matters for which the defendant is responsible cannot be said to be the dominant cause of the claimant's increased costs, it may be possible to use a process of apportionment to divide the claimant's increased costs between the two sets of causes.

Controversy

It was the last of these exceptions which has caused controversy.

In a recent case before Mr Justice Ramsey, London Underground Limited (LUL) v Citylink Telecommunications (CTL), LUL challenged an arbitrator's award of 48 weeks delay to CTL. The arbitrator had rejected a global claim advanced by CTL but decided that it was possible to determine a causal link between one particular breach of contract by LUL and 48 weeks' delay.

Essentially, the arbitrator found that he could “de-globalise” part of the claim. However, LUL argued that, upon rejecting the global claim, CTL's entitlement should have been nil.

Mr Justice Ramsey held that there was no error in the arbitrator's approach and, in effect, gave approval to the first exception in Laing v Doyle.

However, the judge sided with the arbitrator in that the successful claim was based on facts that had been at issue between the parties in the arbitral proceedings. The success of the claim did not rely on an apportionment in accordance with the last of the Laing v Doyle exceptions.

A second case from this year, Petromec Inc v Petroleo Brasileiro, was in respect of the upgrade of an oil rig. A compensation clause in the contract said that if the specification changed, Petromec was entitled to extra costs over and above the cost of carrying out the work to the original specification. In advancing its claim, Petromec simply looked at the final cost against the original projected cost and claimed the difference between the two.

This was a classic global claim in that it assumed that there was no cost incurred in the works (as carried out) that could be put down to Petromec's own poor workmanship or inefficiencies.

Mr Justice Cooke would not allow the claim on that basis. The judge said, “It makes no difference whether consideration is being given to multiple breaches or multiple variations. The overall principle remains the same. There is a need to show the consequences of complying with the instruction in terms of work done and cost reasonably incurred. The causal nexus is important and must be spelt out in an intelligible form.”

Conclusions

These cases demonstrate that the Courts continue to take a dim view of global claims and require claimants to prove their loss with evidence of cause and effect.

In LUL v CTC, Mr Justice Ramsey was willing to allow the claim, but not in its global form. It was only where the arbitrator could identify a link between an alleged event and the consequent delay that the claim could succeed. In the Petromec case, Mr Justice Cooke highlighted the importance of proving the causal link.

Claimants should continue to present their claims based on detailed evidence demonstrating the relationship between individual events and consequent delay and/or cost. There will still be difficulty in proving global claims to the satisfaction of a Court, arbitrator or adjudicator, and they therefore remain a risky option for claimants.

MAGAZINE
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