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The hazards of going global

Contractors might see a global claim as the best option for fighting a case. But, if it reverses the burden of proof, it will almost certainly fail

Most construction disputes are about extra payment. Pursuing the dispute will require evidence to show that a particular event caused the extra cost claimed. Getting the evidence can be expensive, particularly for multiple events.

Contractors attempt to avoid this by adopting a broad approach. A global claim is one method, and it simply lists all the events against one sum. There is no attempt to break down the contribution of each event. The global element of the claim is not usually the listed events, but the alleged extra cost.

The problem with this is that not all the events may be the responsibility of the employer. There are often other events, for which the contractor is responsible, that have not been listed and that may have incurred some of the extra cost.

If the claim proceeds, then the employer may find itself in the position that the contractor, by making a global claim, has avoided: having to prove individual cause and effect or lack thereof.

That effectively reverses the burden of proof, which is unfair as it is the contractor that needs to prove its claim.

If the global claim succeeds then the employer will be held liable for events for which it has no responsibility under the contract. That also is unfair.

Failures of global claims

It is for these reasons that global claims usually fail. Two cases from July 2007 show the difficulties. The first, decided by Judge Ramsey, was London Underground Limited v Citylink Telecommunications (CTL).

The project involved the replacement of the communication systems throughout London’s underground rail network together with the operation of that new system.

CTL claimed an overall extension of time – based on a large number of alleged breaches of contract by LUL, which was alleged to have caused delay. It was a global claim.

The dispute proceeded first to adjudication and then to arbitration. The adjudicator rejected CTL’s claim as a global claim because he did not consider that CTL had made good the claim in all but the most trivial respects.

The arbitrator also rejected CTL’s global claim. The arbitrator was a respected construction lawyer and recognised that even if the global claim failed that may not be the end of the matter.

Identifying a link

There may be sufficient evidence of a surviving claim to establish a connection between an individual loss and an individual event. The arbitrator decided that it was possible to identify a link between a particular LUL breach of contract and 48 weeks of delay to progress on one Underground line.

LUL challenged the arbitrator’s award and argued that it should have ended at the finding on the global claim. LUL submitted that what the arbitrator did was to deal with a case which was not before him.

Dealing with a surviving claim in this way was suggested in the Scottish case of Laing Management (Scotland) v John Doyle Construction.

There has been academic argument whether the decision in Doyle applied in English law, but there is no doubt that the concept is consistent with basic legal principles of fairness.

In the LUL v CTL proceedings there was no dispute that the concept applied and there was no adverse comment from Judge Ramsey.

Judge Ramsey held that there was, in principle, no objection to an arbitrator taking such a course provided the result was based on primary facts that had been at issue in the proceedings. The arbitrator’s finding was based on the case presented, argued and dealt with in evidence, taking account of the failure of the global claim.

The judge considered that there was nothing in this case that required the arbitrator to seek further submissions.

No green light

The decision in LUL v CTL is not a green light for global claims but the reverse, since the arbitrator decided only that issue where the evidence showed a connection between delay and the event. In most cases, the tribunal will not immediately decide the surviving claim but will give the parties the opportunity to make further submissions.

The need to prove the connection between the individual event and the extra cost is emphasised in a second case: Petromec Inc v Petroleo Brasileiro. The contract was in the form of a supervision agreement for the upgrade of an oil rig specified for use on the South Marlim field.

The original specification was changed for vessel use on the Roncodor field. The parties agreed the basis of compensation by clause 12 of the supervision agreement for the upgrade to the amended specification as the reasonable extra cost that might have been incurred by upgrading the specification.

Contractor Petromec assessed the cost as the difference between the total cost incurred in building the rig to the amended specification and the estimated cost that would have been incurred in producing the rig to the original specification – a total loss global claim.

Mr Justice Cooke said the problem with Petromec’s methodology was that it assumed that which it had to prove. He added that the methodology reversed the burden of proof, since it required the employer to show that some elements of cost did not follow from amendments to the original specification.
Mr Justice Cooke held that the connection between each instruction and the extra cost had to be proved and there was no shortcut which the court could approve.

The above cases show that a global claim that shifts the burden of proof and makes no attempt to establish the connection between the events and the costs claimed will not succeed.

KEY POINTS

  • A global claim lists all the events against a single sum. If it attempts to reverse the burden of proof it will usually fail.

  • When a global claim fails, surviving individual claims may be settled if there is primary information available to the arbitrator or the court.

  • A global claim that shifts the burden of proof and makes no attempt to establish the connection between the events and the costs claimed will not succeed.