Lloyds List Wednesday October 10, 2012

Insurance & Law 9

Nothing in
principle
wrong with
global claims
True, but global claims
often mask bad claims
ANDREAS DRACOULIS

IN construction law circles, the

accusation that a contractor was
bringing a global claim for its
additional costs on a project has, for
some years, been almost a term of
abuse.
However, the recent case of Walter
Lilly & Co Ltd v Mackay and DMW
Developments Ltd [2012] EWHC 1773
(TCC) illustrates that the courts are
more sympathetic to such claims than
may have been the case in the past.
That may ease the burden (and the
legal costs) on shipyards and
contractors of demonstrating their
losses, but it may also encourage
weak claims.
The Walter Lilly judgment arose out
of a residential construction project in
London, but as illustrated in the
recent case of Adyard Abu Dhabi v
SD Marine Services [2011] EWHC 848
(Comm), the court will, where
appropriate, apply construction law
principles to shipbuilding contracts.
It is often difficult for a builder to
link a particular breach by the buyer
to a specific head of loss. As a result,
the builder may, for example, advance
a claim which identifies a number of
events and the builders losses, but

which does not link each element of

loss to a specific breach. This is
known as a global claim.
The courts attitude in the past to
the steps that a builder should take to
prove its claim is illustrated by the
judgment of the Court of Appeal in
McAlpine Humberoak Ltd v
McDermott International Inc (1992)
58 B.L.R.1, which held (reversing the
judgment of the court below): 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

Global claims often mask

bad claims. The risk is that
this judgment will encourage
builders to pursue claims
that should never have been
advanced
drawing, TQ by TQ and weld
procedure by weld procedure,
designed to show that the spate of
additional drawings which descended
on McAlpine virtually from the start of
the work really had little retarding or
disruptive effect on its progress. In
our view the defendants approach is
just what the case required.
Although the current editions of

The court will, where appropriate, apply construction law principles to shipbuilding contracts.

the construction law textbooks

recognise that the courts position on
global claims has softened, at least in
circumstances where it is impossible
for the builder to make the link
between each head of loss and the
relevant breach, such claims are still
described as the exception rather than
the rule and to be avoided if possible.
They are said to suffer from the risk
of failing completely if part of the
cause of the delay or disruption is
caused by the builder, thereby
tainting the whole claim.
Following a detailed review of the
relevant authorities, the judge in
Walter Lilly said there is nothing in
principle wrong with a total or
global cost claim [h]owever, there
are added evidential difficulties.
A builder will generally have to
demonstrate, on the balance of
probabilities, that the losses claimed
would not have been incurred in any
event (ie there are no contributing

factors other than those it relies

upon).
The judge observed that a builders
claim for delay and disruption should
not fail simply because it is advanced
on a global basis; nor will it fail in its
entirety should a single issue not be
properly pleaded or evidenced, or
even where an event or series of
events was caused by the builder;
instead, it is open to the court to
reduce the claim accordingly.
However, the judge did consider
the court will be more sceptical
about the global cost claim if the
direct linkage approach is readily
available but is not deployed. That
does not mean that the global cost
claim should be rejected out of hand.
Delay and disruption claims are
almost invariably very expensive
cases to run, particularly if a rigorous
McAlpine Humberoak approach is
adopted.
The Walter Lilly judgment may give

a claimant builder comfort that its

claim will not fail if it takes a more
pragmatic approach to causation,
thereby reducing the costs of
resolving such cases.
However, global claims often mask
bad claims. The risk is that this
judgment will encourage builders to
pursue claims that should never have
been advanced.
If the claim is bad, it will generally
unravel at some point, but this may only
be during the hearing, by which time
both parties will have spent significant
time and costs on the dispute. n
Andreas Dracoulis is an associate at
Curtis Davis Garrard LLP
www.lloydslist.com/regulation

Claims for sudden loss of power

are running to millions of dollars
LIZ MCMAHON

Main engine failures or electrical blackouts amount to 7% of the clubs third-party claims.

lloydslist.com

MAIN engine failures or electrical

blackouts now amount to 7% of the
UK P&I Clubs third-party property
damage claims, which in some cases
amounted to millions of dollars.
The club has voiced its concern on
the issue of sudden loss of power, a
problem it said had been highlighted
by incidents during and after the
switching to lower-sulphur fuels that
are now mandated in certain coastal
regions.
Ships effectively out of control as
a result of these problems have
caused extensive damage to berths,
locks, bridges, navigational marks,
loading arms, cranes and gantries as
well as moored ships, the club
warned.
Costly collision and grounding
claims can similarly be caused by
these failures.
Concern about these rising claims
prompted the club to initiate a data
collection exercise by the UK Clubs
risk assessors and a detailed analysis
of more than 700 claims.
Following this exercise, the club
said: It is no exaggeration to suggest
that main engine failures and
blackouts tend to occur most regularly
at the point in a voyage where the ship
is at its most vulnerable.
In confined waters or entering
and leaving port, the stable loads,
which will generally prevail with the
ship on passage, are disturbed.

There is additionally some

evidence that compliance with the
low-sulphur fuel regulations and
changing from one grade of fuel to
another may have exacerbated these
problems.
Reports from pilots also
indicate these problems have
become quite widespread, noting that
ships regularly seem to be
experiencing power losses, invariably
at critical times in their manoeuvres
and which are attributed to fuel
problems.

It is no exaggeration to
suggest that main engine
failures and blackouts
tend to occur most
regularly at the point in a
voyage where the ship is at
its most vulnerable
UK P&I Club

The club said vulnerability of ships

to third-party property claims had
also tended to increase as a result of
the self-sufficiency of modern
vessels, the provision of lateral
thrusters tending to persuade
operators to minimise their
dependence upon tug assistance in
port waters.
The club also urged better
communication between deck officers
and engineers.

Their justification was that around

three-quarters of all chief engineers
questioned reported blackouts caused
by starting bow thrusters and deck
machinery such as mooring winches
or cranes with insufficient electrical
power being available.
It is clearly not always realised
that the starting current of electrical
motors can be several times the full
on load current and starting large
motors can sometimes cause circuit
breakers to trip and lead to
blackouts, the club said.
While many modern ships have
in-built safety features to prevent this
happening, it is still a sensible
precaution to have routines in place to
ensure that adequate generating
power is available before starting
large electrical motors.
Engineers also need to warn the
bridge of depleted air bottles,
according to findings from the club.
A shortage of fuel supply to the
generating engines accounted for 16%
of reported blackouts, the club said,
with a high proportion of these
attributed to blocked fuel filters.
Engineers need to be more
thorough when cleaning filters and be
aware that if a vessel changes over
from higher-sulphur fuel, when
marine gas oil is introduced into the
system, it may act like a solvent,
releasing any asphaltenes which then
collect in the fuel filters or strainers
and clog them, it advised. n
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