WHAT METHODS OF EVALUATING DISRUPTION HAVE BEEN ACCEPTED BY THE COURTS?

Many forms of contract entitle the Contractor to recover expense or loss caused by compliance with Architect's instructions or delay in the issue of such instructions or failure to issue such instructions.

Clause 32.5 of the JBCC Series 2000 Principal Building Agreement for example entitles the Contractor to recover such costs, provided the proper notices are given timeously.

But the difficulty which many Contractors face under these circumstances is how to evaluate the effect of such disruption - the problem usually being caused by a lack of accurate records or the difficulty of interpreting or using what records do exist.

The English courts have given some assistance in the manner in which disruption should be evaluated.

In the case of Whittal Builders Company Ltd -v- Chester-Le Street District Council (1985), difficulties were experienced by the Employer in giving possession of dwellings on a rehabilitation scheme. The court found that during the period when these problems existed the Contractor was grossly hindered in the progress of the work and as a result ordinary and economic planning and arrangement of the work was rendered impossible. However, a stage was reached in November 1974 when dwellings were handed over in an orderly fashion and no further disruption occurred. The court had to decide upon the appropriate method of evaluating disruption. Mr Recorder Percival QC in his judgement had this to say:

"Several different approaches were presented and argued. Most of them are highly complicated, but there was one simple one - that was to compare the value to the Contractor of the work done per man in the period up to November 1974 with that from November 1974 to the completion of the contract. The figures for this comparison, agreed by the experts for both sides, were ₤108 per man week while the breaches continued, ₤161 per man week after they ceased.

At one stage I thought that some adjustment should be made in the figure of ₤161 to allow for inflation, but Mr Collins satisfied me that was not appropriate as both figures had been calculated at contract rates.

It seemed to me that the most practical way of estimating the loss of productivity, and the one most in accordance with common sense and having the best chance of producing a real answer was to take the total cost of labour and reduce it in the proportions which those actual production figures bear to one another - i.e. by taking one-third of the total as the value lost by the contractor.

(161 - 108 )
--------------- x 100 = 33%
( 161 )

I asked both Mr Blackburn and Mr Simms if they considered that any of the other methods met those same tests as well as that method or whether they could think of any other approach which met them better than that method. In each case the answer was no. Indeed, I think that both agreed with me that that was the most realistic and accurate approach of all those discussed. But whether that be so or not, I hold that that is the best approach open to me, and find that the loss of productivity of labour which the plaintiff suffered is to be quantified by taking one-third of the total. That gives a figure of ₤21,479.35."

There should be little difficulty in calculating the productivity per man week using the build up for interim certificates. The productivity per man week could be calculated by dividing the number of man weeks worked during a valuation period into the value of work carried out giving an output per man week.

It may not be possible due to the nature of the disrupting matters and the complexity of the project to employ the simple approach used in the Whittal Builders case. It may therefore be appropriate to attempt to isolate the additional hours of labour and plant and to draw up a detailed schedule of all matters causing disruption and to apportion those costs to each item.

Difficulties may be encountered isolating the additional hours of labour and plant which result from each and every disrupting matter. Inevitably some form of assessment will be necessary.

The courts again have provided assistance in dealing with this problem. In the case of Chaplin -v- Hicks heard as long ago as 1911, it was held:

"Where it is clear that there has been actual loss resulting from the breach of contract, which it is difficult to estimate in money, it is for the jury to do their best to estimate; it is not necessary that there should be an absolute measure of damages in each case."

Two years later, Justice Meredith in the Canadian case of Wood -v- The Grand Valley Railway Co, had this to say:

"It was clearly impossible under the facts of that case to estimate with anything approaching to mathematical accuracy the damages sustained by the plaintiffs, but it seems to me to be clearly laid down there by the learned Judges that such an impossibility cannot ‘relieve the wrongdoer of the necessity of paying damages for his breach of contract', and that on the other hand the tribunal to estimate them whether jury or Judge must under such circumstances do ‘the best it can' and its conclusion will not be set aside even if ‘the amount of the verdict is a matter of guess work'."

The Canadian case of Penvidic Contracting Co Ltd -v- International Nickel Co of Canada Ltd (1975) also provides some guidance on the manner in which disruption should be evaluated where anything like an accurate evaluation is impossible. The dispute arose out of a construction agreement to lay ballast and track for a railroad. The owner was in breach in several respects of its obligation to facilitate the work. The Contractor, who had agreed to do the work for a certain sum per ton of ballast, claimed by way of damages the difference between that sum and the larger sum that he would have demanded had he foreseen the adverse conditions caused by the owner's breach of contract. There was evidence that the larger sum would have been a reasonable estimate.

At the hearing, damages were awarded on the basis claimed, but on appeal to the Court of Appeal this portion of the award was disallowed. On further appeal the Supreme Court of Canada, held, restoring the trial judgement, that where proof of the actual additional costs caused by the breach of contract was difficult, it was proper to award damages on the basis used at trial. The difficulties of accurate assessment cannot relieve the wrongdoer of the duty of paying damages for breach of contract.

BACK TO LEGAL & CONTRACTUAL FAQS