Delay and Disruption Claims

Delay and Disruption
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Delay and disruption claims

by Robert Fenwick Elliott
The ICE 6th does not expressly refer to "delay claims" or "disruption claims". The expression "delay claim" is usually used to describe a monetary claim which follows on from a delay to the work as a whole. The expression "disruption claim" is usually used to describe a monetary claim in circumstances where part of the works has been disrupted, without affecting the ultimate completion date of the project; this typically equates with delay which is not on the critical path. For the purpose of a delay claim, it is usually taken for granted that the contractor must first establish a right to an extension of time under Clause 44. There is no corresponding presumption in the case of a disruption claim. In practice, the issues arising in relation to claims for extension of time under Clause 44 and for monetary delay claims (most usually under Clause 52 (Valuation of Ordered Variations) but sometimes under Clause 12 (Adverse Physical Conditions and Artificial Obstructions)) are so intertwined that it is helpful to consider them together.
Relevance of Programme in Assessment

Almost always, the starting point for the assessment of a delay claim has to be "in respect of what period is the Contractor entitled to further payment?" It is very common in disputed delay claims for the question to arise not only as to how many weeks the contractor is entitled to be paid for, but which weeks, since his entitlement will depend upon his actual costs, particularly preliminary costs which inevitably vary throughout the project; in practice, however, settlements are often achieved by establishing the number of weeks, and applying an averaged figure for the Contractors weekly prolongation costs. What relevance does the Contractor's programme have to the ascertainment of how many weeks (and which weeks) the Contractor is to be compensated for?
Shortened Programmes
Clause 14(1)(a) of ICE 6th provides:Within 21 days after the award of the Contract the Contractor
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shall submit to the Engineer for his acceptance a programme showing the order(1) in which he proposes to carry out the Works having regard to the provisions of Clause 42(1).(2)
Contractors sometimes submit shortened programmes, that is to say programmes which show completion of the works occurring prior to the contractual date for completion(3). What is the legal position in respect of such shortened programmes? In Glenlion Construction Limited v Guiness Trust (1987) 39BLR 89 the question arose as to whether a shortened programme imposes an implied obligation on the employer? The Court decided that the answer to this question is "no". One of the questions the Judge had to answer was put as follows:Whether there was an implied term of the Contract between the applicant and the respondent that, if and so far as the programme showed a completion date before the date for completion the Employer by himself, his servants or agents should so perform the said agreement as to enable the Contractor to carry out the Works in accordance with the Programme and to complete the Works on the said completion date. The Judge said: The answer to the question must be "no". It is not suggested by Glenlion that they were entitled and obliged to finish by the earlier completion date. If there is such an implied term, it imposed an obligation on the Trust but none on Glenlion. It is not immediately apparent why it is reasonable or equitable that a unilateral absolute obligation should be placed on an employer. Is the Contractor entitled to an extension of time and/or money where the effect of, e.g. a variation, is to prevent the Contractor from completing by the earlier date, not to prevent him from completing by the contractual date? In JCT Contracts, the answer is that the contractor's rights to extension of time are certainly to be construed by reference to the contractual completion date. This is clear, not only from the wording of Clause 25.3.1.2(4), but also from the cases of Glenlion Construction v Guiness and Finnegan v Sheffield (1988) 39 BLR 94.(5) In the case of ICE 6th, it is generally thought that the same position obtains(6), but the position is rather less certain, particularly where there is a claim made under Clause 12 for adverse physical conditions and artificial obstructions. The wording of Clause 12(6) is as follows:http://www.fenwickelliott.co.uk/files/docs/articles/html/delay_disruption.htm
1. The wording of this requirement is curious, in that it refers only to the order to which the Contractor proposes to carry out works, not the timing of the various activities. But Clause 14(4) begins with the words "Should it appear to the Engineer at anytime that the actual progress of the work does not conform with the accepted programme referred to in sub-clause (1) of this clause ...." thereby suggesting by implication that the Clause 14 programme must identify timing as well as order. 2. This provision permits the prescription of the extent of
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portions of the Site of which the Contractor is to be given possession from time to time, the order in which such proportions of the Site shall be made Even though the Contractor may not be entitled to an extension of time for available to the completion of the Works as a whole, he may nevertheless be able to the Contractor, successfully argue that the cost of his shortened programme being disrupted the availability falls within this express wording. in nature of the access which is to be Causation provided by the Employer The overall concept of causation is easy to grasp: the Contractor is only and the order entitled to additional time and money in so far as that additional time and money has been caused by something which entitles him to time or money in which the as the case may be. But behind this apparently straight forward concept lie Works shall be constructed. difficult problems, in respect of which the decided cases do not speak in harmony. 3. Clause 43. First, there is a fundamental question as to what "caused" means. In some contexts, the Courts have applied a "but for" test, ie. B could be said to have 4. "The completion of been caused by A if it would not have happened but for A. That approach typically leads to the identification of a large number of causes of any given the Works is event; the law then cuts down the legal responsibilities it would otherwise likely to be delayed apply by the doctrines of forseeability, remoteness and mitigation. thereby beyond the Another approach is to adopt what is sometimes known as the "dominant cause" approach, ie. that the Court tries to establish what was the effective, Completion Date." dominant cause of the delay. 5. Hudson's The Sixth Edition of Keating on Building Contracts, Sir Anthony May, Sweet & Maxwell 1995, contains an interesting passage on this issue (page summary of the Finnegan 209 et seq). The hypothetical case is : case is as Where a contractor claims payment under the contract, eg. for follows: delay resulting from variation instructions and there is a "Special competing cause of delay. The competing cause of delay could Conditions in be: the Bills, in a Contract for (i) no one's fault, eg. bad weather, or the refurbishment (ii) the contractor's own delay in breach of of 34 Council contract. Houses with tenants in Four possible approaches are considered: occupation,
Where an extension of time or additional payment is claimed pursuant to sub-clause (2) of this clause, the Engineer shall if in his opinion such conditions or obstructions could not reasonably have been foreseen by an experienced contractor determine the amount of any costs which may reasonably have been incurred by the Contractor by reason of such conditions or obstructions together with a reasonable percentage addition thereto in respect of profit and any extension of time to which the Contractor may be entitled and shall notify the Contractor accordingly with a copy to the Employer.
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(1) The Devlin approach(7). If a breach of contract is one of two causes of a loss, both causes co-operating and both of approximately equal efficacy, the breach is sufficient to carry judgment for the loss; (2) the dominant cause approach. If there are two causes, one the contractual responsibility of the defendant and the other the contractual responsibility of the plaintiff, the plaintiff succeeds if he establishes that the cause for which the defendant is responsible is the effective, dominant cause. Which cause is dominant is a question of fact, which is not solved by the mere point of order in time, but is to be decided by applying common sense standards; (3) the burden of proof approach. If part of the damage is shown to be due to a breach of contract by the plaintiff, the claimant must show how much of the damage is caused otherwise than by his breach of contract, failing which he can recover nominal damages only. There is also: (4) the tortious solution, ie. the application of the "but for" test Sir Anthony prefers the dominant cause approach, but he himself recognises the difficulty that in H Fairweather & Co v London Borough of Wandsworth (1987) 39 BLR 106 the Court rejected the dominate cause approach point blank; Sir Anthony suggests that the decision was obiter. A related question concerns supervening events. What is the position where a delay is first caused by one matter, but that delay is subsequently wholly or partly overtaken by a delay of another cause. In other words, should a retrospective delay analysis (RDA) operate on a first cause basis, or an ultimately critical basis. First Cause RDA The choice between First Cause RDA and Ultimately Critical RDA is probably the most important unanswered causation question among experts in this field. It may be helpful to start with a non-building example, an example frequently debated by analysts in this area. Suppose a man, A, needs to cross a desert. In order to survive the journey he will need water for the trip. He has two enemies, B and C, both of whom wish to kill him. Both take action shortly before A's departure. B poisons the water in A's can. C, unaware of B's action, makes a small puncture in A's can. A duly sets off; when he comes to drink his water, he finds it is gone and he dies. The question, of course, is : Who caused A's death? The method sometimes called First Cause RDA will have it that B caused
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indicated that the houses would be handed over in batches of 4 at weekly intervals for completion in 10 weeks (which if strictly complied with would have permitted completion of the whole in 19 weeks, but that start and completion dates for the Contract in the main documentation gave the contract period as 25 weeks. The Contractor was instructed by the owners, who admitted liability for the additional loss and expense, but disputed a prolongation calculated by reference to the 19 week period: held, by Judge Sir William Stabb QC, following the Glenlion case, that the Special Conditions in the Bills, were expressed to take precedence
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A's death.
over the General The method sometimes called Ultimately Critical RDA will have it that C Conditions, caused A's death. when in the nature of The First Cause RDA in this scenario would run as follows. By poisoning programming A's water, B took a step that was sufficient of itself to ensure A's death. intentions and imposed no This is essentially the approach that was taken by the House of Lords in the obligation on gruesome case of Baker v Willoughby [1970] AC 467 where the facts were the Contractor as follows: to complete at the earlier 19 The Plaintiff was injured in the leg as a result of a motor week date, so accident caused by the Defendant's negligent driving. That that the injury caused the Plaintiff pain and suffering, and adversely prolongation affected the Plaintiff's earning capacity. The Plaintiff was then should be involved in an attempted robbery, during which he was shot in calculated the same leg in such a manner as to require amputation of that from the 25 leg. week date." The question, of course, was whether the Defendant was liable to the 6. See for Plaintiff for a lifetime's worth of pain and suffering and loss of earnings, or example the just the pain and suffering that occurred prior to the amputation. commentary in Keating on The House of Lords said that the Defendant was liable for the full lifetime. Clause 43: Lord Reid said that the Defendant did not have his liability reduced if, as he "The put it, "The later injuries merely become a concurrent cause of the Contractor is disabilities suffered by the injury inflicted by the Defendant". entitled to carry out the There are some important features of First Cause RDA : work faster and to (a) It is necessary to start the analysis from the base of a complete contract programme, in order that there may be a calculation of earlier than is what would have been the effect of that delaying event alone if required by there had not been any subsequent delaying events. the Contract. The Employer (b) If there are successive causes of delay (as there always are under such in these complex cases) then the analyst is logically bound to circumstances construct a new contract programme in respect of the position is obliged to following every delaying event. In these programmes, he must pay for the suppress his knowledge of subsequent delaying events. work as and (c) It is thus evident that First Cause RDA carries with it a when done, subjective element, or at any rate a high degree of professional but is under no judgment. It may well be incumbent on the contractor, further following the first cause of delay, to look at the ways in which obligation to the delay might be mitigated. This is particularly important facilitate when one comes to consider resourcing issues. Suppose, for earlier example, a bricklaying team starts a ten-day job repointing a performance wall. They plan to move from west to east. On the third day or pay they encounter an obstruction, in the form of an old advertising compensation board which should have been removed by others, but which if the
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has not yet been removed. Do they stop in their tracks and wait for the advertising board to be removed? Of course not, they continue work at the other end of the wall and little or no time is lost. Ultimately Critical RDA Ultimately Critical RDA will tell you that the man in the desert above was killed by enemy C, ie. one has to look at what was ultimately the cause of A's death, taking advantage of the benefit of hindsight. A died, not of poisoning, but of thirst. This is the approach that was adopted in Jobling v Associated Dairies [1982] AC 794. The facts here were as follows: The Plaintiff suffered an accident at work which left him with a back injury and a consequent reduction in earning capacity. A few years later, but before the trial of his action against his employers took place, he was found to be suffering from myelopathy, a condition with which the accident had no connection but which rendered him very soon after its discovery totally unfit for work. The House of Lords held that there could be no recovery for loss of earnings from the time of total incapacity; the myelopathy was not to be disregarded since the court must recognise that the supervening illness would have overtaken the plaintiff in any event. The House of Lords thought that the Baker v Willoughby case may have been wrongly decided. It should be clear that, under the Ultimately Critical method, the sequence planned within the original contract programme is largely irrelevant. What matters is what actually happened. To this extent, Ultimately Critical RDA is much more straightforward and more objective than First Cause RDA. There is however a complication. In the case of First Cause RDA the analyst is, in effect, keeping track of the delay, rather than of the project duration. In the case of Ultimately Critical RDA, on the other hand, the analyst's first task is to identify the string of critical activities which in total add up to the actual project duration. Some of those activities will be characterised as delay, and some of those activities will be characterised as contract work which was always necessary. How does the analyst separate the wheat from the chaff? Suppose, for example, a contract period is 50 weeks, but the project in fact takes 60 weeks to complete. Using a First Cause RDA the analyst will look at the first cause of delay, to which he might ascribe, say, one week. He will then look at the next cause of delay, to which he might ascribe another week of critical delay, bringing the total of critical at that point to two weeks. By the time he has finished analysing the project he will have to ensure that the
Contractor is prevented from achieving an accelerated programme, unless it is agreed under Clause 46(3)". 7. The Devlin approach is so called because it derives from the judgment of Devlin J. in Heskell v Continental Express Ltd. [1950] 1 All ER 1033.
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total number of critical weeks' delay he has analysed adds up to the actual delay, ie. ten weeks. Conversely, under Ultimately Critical RDA, the analyst's first task is to identify what was in fact the critical path through the actual 60 weeks of the project. He must then identify how much of that period he ascribes to delay, and where. In answer to the "how much" question, he obviously looks at the contract period. Here, the contract period was 50 weeks, and accordingly the amount of time ascribed to be as delay is 10 weeks. The question of where he puts that 10 weeks is much more difficult. In practice, most analysts would usually pay great attention to the contract programme here.
Common Sense or Analysis?

The question arises whether, in cases where such analysis becomes unduly complex, it is legitimate to take a common sense rather than an analytical approach. The older cases suggest that a common sense approach is appropriate. For example, Lord Wright had this to say (in Yorkshire Dale Steamship v Minister of War Transport [1942] AC 691): This choice of the real or efficient cause from out of the whole complex of the facts must be made by applying common-sense standards. Causation is to be understood as the man in the street, and not as either of the scientist or the metaphysician, would understand it. Cause here means what a business or seafaring man would take to be the cause without too microscopic analysis but on a broad view. More recently, however, that the Courts have more recently found that a detailed calculation is required. Of particular importance is the Court of Appeal decision McAlpine Humberoak v McDermott International [1992] 58 BLR 1. In that case, the Court of Appeal, reversing a somewhat surprising first instance decision, threw out a subcontractor's claim for delay against the main contractor in its entirety, saying this:the Judge dismissed the Defendants' approach to the case as being a 'retrospective and dissectional reconstruction by expert evidence of events almost day by day, drawing by drawing, TQ and TQ and weld procedure by weld procedure, designed to show that the fate of additional drawings which descended upon McAlpine virtually from the start of the work really had
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little retarding or disruptive effect on its progress. In our view the Defendants' approach is just what the case required'. More recently, in John Barker Construction v London Portman Hotel (1996 CILL Page 1152) the Court made a detailed examination of the certification process adopted by the Architect, Mr Miller, and in finding that the contractual machinery for certification had broken down, said this:I am satisfied that Mr. Miller's total allowance of 3 days for items 7, 8 and 27 bore no logical relation to the delay caused by those items, except on the false premise that because the contract provided for the walls to be filled and rubbed down until perfectly flat and smooth, these items were not to be regarded as involving any significant additional work. Moreover Mr. Miller did not examine the impact which they had on the Plaintiffs' planned programme, coming when they did. Had he done so, he could not have concluded that the critical path lay simply through the bathroom. There was cogent evidence that these matters caused delay, and in not taking them into account when granting his extension of time, Mr. Miller failed to take into account relevant matters. I accept that Mr. Miller believed, and believes, that he made a fair assessment of the extension of time due to the Plaintiffs. It is fairly apparent that the Defendants were concerned by the overrun of the contract in time and costs, and I have no doubt that Mr. Miller was conscious of this, but I believe also that he endeavored to exercise his judgement independently. However, in my judgment his assessment of the extension of time due to the Plaintiffs was fundamentally flawed in a number of respects, namely: 1. Mr. Miller did not carry out a logical analysis in a methodical way of the impact which the relevant matters had or were likely to have on the Plaintiffs' planned programme. 2. He made an impressionistic, rather than a calculated, assessment of the time which he thought was reasonable for the various items individually and overall. (The Defendants themselves were aware of the nature of Mr. Miller's assessment, but decided against seeking to have any more detailed analysis of the Plaintiffs' claim carried out unless and until there was litigation). Next arises the question of whether analysis should proceed on the "gross method" or the "net method" ...
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The Gross Method

This has traditionally been a contractor-led argument. It arises out of the case of Wells v Army & Navy Cooperative Society (1902) 86 LT 764. The Wells case is curiously relevant in another context, namely that it is an early forerunner of the prevention arguments which appeared much later and with significantly more force in cases like Peak v McKinney. The drift of the approach appears from the words of Wright J: Some of the details were not even supplied until after the expiration of the time for completion ..... The only answer given by the architect is that in his view the plaintiffs were not ready to go on with the work for which the details were asked. I think that this, even if proved, is not a sufficient answer. The plaintiffs must within reasonable limits be allowed to decide for themselves at what time they are to be supplied with details. It is very difficult to determine how far any particular defaults of this kind on the part of the defendants would entitle the plaintiffs to relief from penalties, especially when, as in this case, there were other and more important causes of delay which would not be grounds of relief in this action; but on the whole I think that the delays in giving details not merely contributed to the delay of completion, but were such as even in the absence of the other causes of delay would have prevented completion in due time, and in my view to a great extent increased the delay of completion. The Court of Appeal agreed with the judge, and said: ....... In the contract one finds the time limited within which the builder is to do this work. This means, not only that he is to do it within that time, but it means also that he is to have that time within which to do it...... Mr. Bray having admitted really that, if you take the findings in fact by the learned judge, the building owners had so delayed the works as to prevent their execution within the time limited, and to deprive the builder of the benefit of that time, meets the case by saying, "Oh, yes, that may be so; but the builder did not get on as fast as he might have got on, and I say, therefore, on behalf of the building owners, that you cannot say that the conduct of the building owners and the delay caused by them prevented the execution of this work within the time, because another contributory cause was the fact that the builder did not get on as fast as he might have done." It seems to me that there are one or two answers to that - one an answer in fact, and the other an answer in law. The answer in fact is, that although there may have been some delay on the part of the builder, and I am including in the consideration of this the assumption that he was responsible under the contract for the delay in the delivery of the ironwork by Messrs. Lucy - even assuming that, it was not in fact the
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delay of the builder or any delay by those for whom he was responsible which prevented the execution of this work within the Contract time, in my judgment, whatever the builder might have done, the delay of the building owners and of their architect was such as to render the performance of the work within the contract time impossible. In law I wholly deny the proposition Mr. Bray put forward, which was this really in effect: "Never mind how much delay there may be caused by the conduct of the building owner, the builder will not be relieved from penalties if he too has been guilty of delay in the execution of the works. I do not accept that proposition in law. This approach has traditionally been attractive to contractors seeking extensions of time and the approach involves the contractor saying: "It is entirely up to me how I carry out these works, and I was entirely at liberty to programme them as I wished. If I was unable to take a particular step at any particular time by reason of someone else's fault, then I am entitled to say that I was so delayed; it does not lie in the mouths of anyone else to say that I ought to have carried out the work in some other way such that that delay would not have been critical." In JCT63 contracts, the ambit of the principle was somewhat circumscribed by: (i) the time limitation imposed by the wording of clause 23(f), and (ii) the express mitigation provision. And in JCT80 the principle came under further attack by the imposition of a programme with contractual effect. The Wells principle has also been the subject of some erosion in decided cases. In Glenlion Construction v Guinness Trust (1978) 39 BLR 89 at 104, His Honour Judge Fox-Andrews quoted, apparently with approval, the following passage from Keating: Further, it is sometimes said relying upon the dictum of Wright J. ... that the prime consideration is the contractor's own decision as to the time when he is to be supplied with instructions. Again, it is thought that this is too wide. Such decision is a factor, but not decisive. The contractor cannot unilaterally determine what is a reasonable time. Thus a contractor does not prove a claim for delay in instructions, merely by establishing non-completion with requests for instructions or a schedule of dates for instructions he has served upon the architect.
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In the same case, the Judge quoted the suggestion in Hudson that litigious contractors frequently supplied to architects highly optimistic programmes in order to justify allegations that information or possession has been supplied late by the architect or engineer. Frequently, contractors adopt an argument which used often to be known as the "colour of the front door" argument and has now been judicially defined as the gross method. The traditional hypothetical example has been of a building contract where the main contractor has been in culpable delay for many months. Just as the building is about to be handed over, the architect issues an instruction to the contractor to repaint the front door a different colour. The contractor seeks an extension of time for the whole of the delay, on the basis that he could not comply with that instruction (and hence complete the work) until such time as it was given. This issue was dealt with by Lord Denning in Amalgamated Building Contractors Limited v Waltham Holy Cross UDC [1952] 2 All ER 452, in which he said: Take a simple case where the contractors near the end of the work, have overrun the contract time for 6 months without legitimate excuse. They cannot get an extension of time for that period. Now suppose that the works are still uncompleted and a strike occurs and lasts a month. The contractors can get an extension of time for that month. The final conclusion is not one that the courts have always followed in subsequent cases, but note that there is no question of the contractors getting an extension of time of 6 months in those circumstances. The point came before the Court of Appeal in McAlpine Humberoak v McDermott International [1992] 58 BLR 1 at 55, Mr Thomas submits, that since the extra work is covered by the definition of "the work" in Clause 1 of the Contract, and since the extra work was not ordered until 11 June, the date for completion of the contract cannot precede that date. Accordingly the Defendants' claim for damages cannot run from 1st May. We do not agree... if a contractor is already a year late through his culpable fault, it would be absurd that the Employer should lose his claim for unliquidated damages just because, at the last moment, he orders an extra coat of paint.
The Net Method

And again in January 1993, the issue was dealt with at considerable length in Balfour Beatty Building Limited v Chestermount Properties where in answer to the preliminary question:
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In granting an extension of time in respect of the Relevant Event occurring during a period of culpable delay, ought the Architect to award a "gross" extension (that is one that refixes the Completion Date at the calendar date upon which the work would reasonably be expected to be completed, having regard to the calendar date upon which it is instructed), ought it to be a "net" extension (that is one which calculates the revised Completion Date by taking the date currently fixed and adding the number of days which the Architect regards as fair and reasonable). The Court approved the Architect's answer that it was the "net" method that was appropriate.
Acceleration Claims, Burden of Proof and Loss of a Chance

Finally, one comes to the burden of proof. The ordinary standard of proof in civil cases, including arbitrations, is the "balance of probabilities". The higher test of "beyond reasonable doubt" applies only to criminal cases, and cases involving fraud. But two interesting variants on the "balance of probabilities" approach appear from the recent cases of Balfour Beatty v Docklands Light Railway (Court of Appeal April 1996 CILL 1143) and John Barker Construction v London Portman Hotel (April 1996 CILL page 1152). The Balfour Beatty case concerned an unusual contractual arrangement, where the Arbitration Clause had been struck out, and the Employer was named as the certifier. There are a number of old cases which suggest that, if the Contractor is able to pass the high threshold of proof needed to show disqualification of the certifier, then he may recover without a certificate. Thus in Hickman v Roberts [1913] AC 229 HL, the contractor failed to issue certificates at the proper time and wrote to the Contractor saying, "Had you better not call and see my clients, because in the face of their instructions to me I cannot issue a certificate whatever my own private opinion in the matter". In those extreme circumstances of fraud or turpitude, the Contractor can recover notwithstanding the absence of the necessary certificate. In the Balfour Beatty case, the Court of Appeal set a much lower threshhold. The Court found in those circumstances that the Employer was under an obligation to certify honestly, fairly and reasonably, that such that if the contractor could show (presumably on the ordinary civil test of balance of probabilities), that the Employer had not so certified, then the Contractor is entitled to damages for breach of Contract. It is uncertain from this Judgment whether, where the certificates are being issued by an independent engineer, that there is the same implied term that the engineer will so certify (the key element of the new test is that the certificates must be "reasonable"). 8. Mr. Toulson
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In the John Barker v London Portman Case, Mr Recorder Roger Toulson QC(8) adopted a different way of circumventing the Crouch decision, holding that the contractual machinery had broken down. But as a related issue, he was asked to consider the terms of an Acceleration Agreement whereby the Contractor was to be paid 20,000 if it achieved completion by a certain date. The Court found that it was impossible to tell whether, as a matter of probability, the Plaintiffs would or not have finished by that date but for further changes made after the Acceleration Agreement, and the Court, somewhat unusually, adopted the "loss of a chance" line, finding (without, it seems, any analysis) that the Plaintiffs were entitled to damages of a chance equal to 50% of the agreed performance bonus.
8. Mr. Toulson has since been elevated to the High Court Bench.
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