How do the courts view loss of profit claims?

Loss of profit claims can be notoriously difficult to pursue. A recent court case gives some guidance on how the courts view this matter.

Aldgate Construction Company Ltd is a residential property developer and it was developing a dual site at 33 and 35 Cambridge Road, Aldgate. Aldgate subcontracted the plumbing works to Unibar Plumbing and Heating Ltd.

Unibar caused a fire that resulted in 35 Cambridge Road being destroyed when the build was nearly complete. Aldgate claimed almost £800,000 in damages from Unibar mostly on the basis that the fire to 35 Cambridge Road prevented Aldgate from pursuing its policy of dual development sites whilst it rebuilt the destroyed property.

In the court case that dealt with this matter, the court found that the damages claimed by Aldgate were recoverable, in principle, under the second limb of Hadley v Baxendale as the loss that Aldgate suffered arising from the breach of contract by Unibar should reasonably have been in the contemplation of the parties at the time of the contract.

However, in considering the quantum of the damages, the court reduced the claim. This was because the court considered that Aldgate had allowed an unrealistic time period for the acquisition, design, construction and disposal of the proposed developments. The court also further reduced the claim because of profits made by Aldgate on other small scale developments that it carried out in the period in question. As a result of the above adjustments, the court reduced Aldgate’s damages claim from very nearly £800,000 to just over £400,000.

The court’s decision as outlined above gives useful guidance as to how the courts will approach loss of profit claims (particularly in a residential development context), but also demonstrates that any claims made must be fully supported so that they will stand up to expert scrutiny.

If you are pursuing a loss of profit claim, or are defending such a claim, you need to contact us (i.e. Melbury Construction Consultants Ltd) to find out the approach you should follow to ensure you reach a successful conclusion

Adjudication enforcement.

In adjudication enforcement proceedings, is a party bound by the position adopted by it in respect of jurisdiction in the adjudication process?

In the case of Nickleby FM Limited v Somerfield Stores Ltd [2010] Nickleby in attempting to enforce an Adjudicator’s Decision, advanced a jurisdictional position on a different basis to that which had been run in the adjudication process itself.

Somerfield argued that in enforcement proceeding Nickleby could not run a jurisdictional challenge which was materially different to that which had been argued in front of the Adjudicator. It had made an election as to which jurisdictional position should be run in the adjudication, and it could not move away from that elected position in the enforcement proceedings.

The court disagreed and found that the principle of election was not applicable to matters concerning an Adjudicator’s jurisdiction, as the matter of jurisdiction (subject to the parties’ agreement to the contrary) is a matter on which only the court can give a binding decision. Accordingly, Nickleby was not bound in the enforcement proceedings by the arguments it had raised before the adjudicator.

If you face a similar situation to the above, or if you need any general advice regarding the enforcement of Adjudicators’ decisions, contact us at Melbury Construction Consultants Ltd.

Royal Wedding – Delay to Projects

The Royal Wedding due to be held next year may cause delay to constructions projects, but is the Contractor entitled to an extension of time for those delays?

As with most questions, the answer lies in the terms of the contract between the parties.

Therefore, if we take the JCT Standard Building Contract 2005 as an example, then one of the Relevant Events that gives the Contractor an entitlement to an extension of time is covered under clause 2.29.12 which is in respect of “the exercise after the Base Date by the United Kingdom Government of any statutory power which directly affects the execution of the Works”

On 23 November 2010, the UK Government said that the day of the Royal Wedding next year (29 April 2011) would be a Bank Holiday in England and Wales. The UK Government granted that further Bank Holiday day by way of its statutory power that allows it to do so as derived from the Banking and Financial Dealing Act 1971. Therefore assuming that the Base Date in the contract is before 23 November 2010, and assuming that the Bank Holiday on 29 April 2011 directly affects the works and is likely to cause a delay to the progress of the works and to the Completion Date, then a Contractor would be entitled to an extension of time. In that case, the Employer would not be able to recover liquidated damages for that particular period of delay.

Therefore, you can see from the above that a Contractor’s entitlement to an extension of time in respect of the Bank Holiday on 29 April 2011, very much depends upon the wording of the contract.

If you need advice regarding whether or not your contract entitles you to an extension of time for the Royal Wedding Bank Holiday on 29 April 2011, then you need to contact us.

Of course, the other key point is, are you entitled to be paid for the costs associated with the delay caused by the above, but that is for another day .....

If, you need advice regarding your time and/or costs entitlements in respect of the additional Bank Holiday next year, you need to contact us (i.e. Melbury Construction Consultants Ltd) to see what your rights are.

November Breakfast Seminar in Waltham Abbey

Free Breakfast Seminar held at the Marriott Hotel, Waltham Abbey on Tuesday 16^th November 2010 on Design Liability under the NEC and JCT Forms of Contract.” The consequences of a design failure can be disastrous, but what is your liability?. The seminar was well attended by local construction contractors and sub-contractors.