Permissibility of Global and Total Cost Claims in Construction?

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What are Global and Total Cost Claims, and are they the same?

Global claims are defined in Keating on Construction Contracts, Eleventh Edition, 2021, page 309, as “one that provides an inadequate explanation of the causal nexus between the breaches of contract or relevant events/matters relied upon and the alleged loss and damage or delay that relief is claimed for”.

Whereas, total cost claims are “a form of global claim where the contractor has calculated (and) has quantified its alleged entitlement to further payment by subtracting the expected cost of the works from the final actual costs” (Keating on Construction Contracts, Eleventh Edition, 2021, page 309).

The benefits of this approach to the Contractor are:

  1. Easier to prepare these claims, as a full analysis is not required;
  2. Quicker and therefore cheaper in terms of general costs and expert costs; and
  3. It seeks to place the burden on the Employer to investigate the claims, which includes cost.

However, the downsides for the Contractor are:

  1. The claims are generally vague;
  2. Increased pressure when responding to Employer’s queries regarding breakdowns and details, which may be time consuming and delay progress of the claim; and
  3. Difficult to prove entitlement to costs, as there is no specific record or causal link between the breaches and loss/expense.

Are they permissible?

Global and total cost claims were not viewed favourably by the Courts, due to the failure of Contractors to provide supplementary information and for imposing an unfair obligation on the Employer to disprove the Contractor’s claim, therefore reversing the burden of proof.

However, over time global and total cost claims have become more acceptable, in particular, where it is considered impossible to specify the cause and impact. Note, “more acceptable.”  They are still unwelcome and should be used as a last resort.

Nevertheless, entitlement to these claims is still subject to complying with contractual terms, more specifically, condition precedents and the outcome of these claims is subject to a variety of factors, including but not limited to;

  1. Notifying the relevant party i.e. Employer, Project Manager or Contractor Administrator/Employer’s Agent of any delays which are likely to occur as soon as possible, as per the contractual notice requirements;
  2. Providing supplementary evidence to support the losses incurred (meeting notes, photographs, correspondence, witness statements, timesheets, etc.);
  3. Successfully proving the claim as a matter of fact (an event occurred, which the Employer was responsible for and this caused the Contractor to experience delays and subsequently loss/expense); and
  4. Proving the Contractor incurred a loss which it would not have incurred, had the event causing the delay/disruption not occurred (the “but-for test”).

It is however all too obvious that if you had 1-4 then you probably would not need to bring a global claim.  Thus, if you are missing any or all of these, do not despair. Your claim is not lost – it will just take more work to establish and prove.

It is important to note that where the Contractor’s claim appears to be vague or it is clear there are no real prospects, the Employer is entitled to submit an application to strike out the claim. Our aim in those circumstances and acting for the Contractor is to persuade the tribunal that more particulars be provided, normally within a strict timetable, than the claim be struck out.

It is also sometimes the advice, that when a party claims lack of detail, that in making that claim and pending explanation, that they enable you to focus on those parts of your claim (that are perhaps weaker) and to provide more evidence and detail.

A good outcome might be the Court orders the Contractor to amend its claim, as opposed to striking it out in its entirety.

Regardless of whether a Contractor attempts to issue a global or total cost claim, it is essential accurate records and supplementary evidence are maintained, in the event these are required at a later date.

Permissibility of Global and Total Cost Claims was discussed in our 20 Brilliant Construction and Engineering Questions – and answers! webinar on 20 August 2020.  This question and answer was provided by Paul Darling KC of 39 Essex Chambers. To see other Brilliant Construction and Engineering Questions and answers from the webinar, please click here to see a PDF of the presentation.

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