The conceptual skills required of the sound quantum analyst makes a good... · Franco Mastrandrea...

Page | 2Franco Mastrandrea LLB (Hons), MSc, PhD, FRICS, FCI Arb, Barrister

Introduction

Myobjec ve in thisar cle is to iden fyanddescribewhatseemtometobethequali es,skills,andmethodsofworkingofthesoundquantumanalyst.

By‘’quantumanalyst’’Imeanthefinancialappraiserofconstruc onclaims.Idonotmeanthetribunalchargedwithdecidingaconstruc ondispute;thepersonIhaveinmindusuallyactsasaquantumexpert.By‘’construc onclaims’’Imeanclaimsagainstunder-performingprofessionals,defectsclaims,claimsforcomponentsofthecontractprice,termina onclaimsor,morefrequently,delayanddisrup onclaims.Assomeonewhohimselfprac sesinthisfield,Ideclareaninterest.

Thesinglefactorlikelytobeuppermostinthemindsofthoseinvolvedintheresolu onofconstruc onclaimsisthefinancialworthofthoseclaims.Thequalityofthequantumanalystcanthereforebeofthefirstimportanceintheirsa sfactoryresolu on.

LetmeimmediatelysetoutwhatIconsidertobethecorequali esrequired.Thesoundquantumanalystiswell-informedyet inquisi ve.He iscrea ve,andmo vatedtotraceaproblemdownto itsessen alcomponents.Hewillsearchforgaps,hypothesiseaboutmissingmaterial,andexplorejus fiableanswers.

The role of the quantum analyst

Thissummarymaybethoughttoconcealapoten altensionbetweenexper se inma erstodowithquantum,andthedischargeoftheroleofquantumexpert.

InEngland,anexpertwitness(some mescalleda‘’tes fyingexpert’’)issomeonewhohasbeeninstructedtoprepareorgiveexpertevidenceforthepurposesofcontestedproceedings.Heowesanoverridingdutytothetribunal,regardlessoftheinterestsofthosefromwhomtheexperthasreceivedhisinstruc ons,or bywhomhe is paid.1 Hiswork should be independent, uninfluenced as to formor content by theexigenciesofli ga on.2

An‘’advising’’expert,bycontrast,mayberetainedbyapartyforthepurposesofgivingadvicetothatparty.Suchanexpertwillbefreetohelpinthedevelopmentofacase;hisinstruc onsandadvicegiveninthecontempla onoflegalproceedingswillusuallybeprivilegedagainstdisclosure.3

Whicheverrolehedischarges,however,theexpertshouldinmyviewalwaysbeobjec veandhaveawell-developedscep cismforthecommitmentoftheprotagonist,par cularlyonewhoadvanceshiscaseinfiniteandinflexibleterms.Heshouldbecau oustothetempta on,nodoubtsome messpurredbythedesireforareadyanswer,tofurnishanunwarrantedorunsa sfactorilyra onalisedevalua on.

WHAT MAKES A SOUND QUANTUM ANALYST?


The conceptual skills required of the sound quantum analyst

The evalua on of construc on claims sits at the crossroads of a number of disciplines. It is perhapsunderstandablethatthosewhodonothaveeitherthetrainingortheexperienceinavarietyofrelevantfieldswillbenervousasanalysts.ThusBonbright,aslongagoas1937,said:‘’Doubtlessoneofthereasonswhy legal valua onhasnotbeen studied synthe cally is that the subjectdoesnot correspond to thespecialtyofanysingleprofessionorofanyoneperson’scareerwithinthatprofession.Thecau ousexpertfightsshyofaproblemthatinvolveslaw,economics,accountancy,andcommercialappraisal.’’4

Theprimarydisciplines likelytobeinvokedbythesoundquantumanalystworkinginconstruc onarelaw,economics,accountancyandtheconstruc onprocess,includingitsorganisa onandmanagement.

Occasionally, the soundquantumanalystwill consult the tenetsofevenmoredistantdisciplines.Thismightextendtotheworkofthehistorianandphilosopher(inrela on,forexample,tocausa on);thepsychologistandwelfareeconomist(inrela on,forexample,toa tudetoandmo va onforwork);themeandmo onanalyst(inrela on,forexample,toresourceoutputsandefficiency).

Asoundquantumanalystmaythereforebemul -disciplinarian. Ifnot,thenhewillbeableto iden fyandcallupontherelevantaddi onalexper seorassistancewhenrequired,andproperlyassimilateandbalancetheinforma onoradvicereceived.

Giventhisspecifica onofquali es, itmightbethoughtthatthesoundquantumanalyst is likelytobedrawnfromalimitedpoolofpeopleworkingwithinawell-defineddiscipline,inawell-recognised(ifnotcommon)structure,pursuinganestablishedprac ceandprocedure,deployinga ght,well-developedandcomprehensivesetofprinciplesthroughtheuseofstandardtoolsandmethodologies.

Infact,thepoolturnsouttobemuchlarger. It ishighlyfragmented,beingamixtureofpeopledrawnfromdiversebackgrounds.Thereisgreatdivergenceinindividualskills,andlimitedconsensusbetweenitsprac oners,whoo endrawheavilyontheirsubjec vepercep onsandpar cularcompetencies.

Inaddi on,someareasofprac cecommonlyvergeonthe insular.Bywayofexample,the laypersonusuallyassociatestheconceptofa‘’remedy’’withaprocesswherebyadefaul ngdefendantisbroughttoaccountbyovertlyformallegalmeans.Aspartofthisprocess,theclaimantisusuallyseekingaremedyfortheinvasionbythedefendantofan‘’interest’’protectedbythelaw.Thesoundquantumanalystshouldbeinaposi ontoiden fytheappropriateinterest,beawareoftheconsidera onsinvolvedinpursuingapar cular interestratherthananyalterna veinterests,andbeabletoevaluateitfinancially.Yettheconstruc onclaimsevalua onliteraturenotablyfails,onanythingotherthanasuperficialandfalteringbasis, torecognise,categorise,discussorseektoreflect thevarious interestsaddressedbythe lawofremediesortheirproperevalua on.

Thisdeficiencyistobenotedalsoattheworkface:fewanalystsreflectthesevariousinterests intheirwork. That remains the case notwithstanding, in the context of damages for breach of contract, thepublica oninthelegalliteraturemorethan70yearsagoofaseminal(ands lltheleading)essayonthesubject.5Thus,thevastmajorityofquantumanalystswouldbemys fiedbyreferencesto‘’essen al’’or


‘’incidental’’reliance,orthe‘’expecta on’’,‘’res tu on’’and‘’indemnity’’6interests(whichhavedifferingobjec ves,maycons tutealterna vesandmayhavesignificantconsequencesontheburdenofproof)whichformtheessenceofthatnowclassicformula on.

The detailed skills required of the sound quantum analyst

Iwilllimitmyselfinthissec ontoconsidera onsof‘’cost’’,whicharelikelytooccupyasubstan alpartoftheworkofthequantumanalyst.

Theproperalloca onofcostmayo enbethekeytoestablishingitsrecoverabilityaspartofaconstruc onclaim.Theques onwhetherapar cular cost isproperly categorisedas me-related, volume-related,‘’once-only’’,etc.,isbeyondthescopeofthisar cle.Theessen alpoint,however,isthattheskillsinvolvedindeterminingtheproperalloca onofthatcostareasmuchtechnicalconstruc onskillsastheyareafacilitywiththeproperassembly,a ribu onandmanipula onoftherelevantfigures.

Thedifferingapproachofthevariousdisciplinesto‘’cost’’mayalsobeasignificantconsidera on.Thus,to the tradi onal accountant cost usually represents the historical outlay made to secure par cularresources. This approach can expose significant difficul es, such aswith long-lived assets, and assetscontribu ngtomorethanoneproduct.Inconstruc onclaims,plantandoverheadsareprimeexamplesofthesesortsofassets.Somecosts,ontheotherhand,suchastheimputedinterestoncapitalusedinthebusiness,maynotbereflectedatallbythetradi onalaccountant.Totheeconomist,theconceptofcosttendstobeusedmoreasanaidtodecisionmaking,indica ngwhether,forexample,theresourceunderanalysisisbeingputtoitsbestuse.Thecostofapar cularcommodityisthenthevaluethatwouldhavebeena ributedtothatcommodityinitsnextbestalterna veuse,i.e.,its‘’opportunitycost’’.Theanalystshouldbeawareofthesedifferencesandbepreparedtoar culateandjus fyhisuseofand/orpreferencebetweenthem.

Anotherimportantdis nc onisbetweenfixedandvariablecosts.Theseare,again,primarilyofinteresttotheeconomist,whousuallyseekstodis nguishbetweenthosecoststhatcanbeavoidedintheshortrun(variablecosts),andthosecoststhatcannotbesoavoided(fixedcosts).Thisdis nc oncanturnouttobeoffundamentalimportancealsotothequantumanalystandsignificantlyaffecthisconclusions.7

Sufficientconfidenceintheclaimant’scostsmayonlybeachievedbyananalystwhohasathisfinger psathoroughunderstandingofthecos ngsystemusedbytheclaimant.Thiswillusuallyinvolveconsidera onofcomprehensiveaccoun ngdata.Thisrangesacrossthevariousstagesofthecos nghierarchy,star ngwiththelowliestrequisi onsheetthroughtotheglobalcorporateand/ormanagementaccounts,sufficienttoprovideafullfinancialpictureoftheprojectinthecontextoftheclaimant’sbusinessasawhole.Ananalystwhofailstoachievethislevelofunderstandingmaybefallingshortofwhatisreasonablytobeexpectedofhiminthatrole.8

Even an analyst armedwith this raw datamay find the task less than straigh orward. A simple andcommonplacecomplica onmaybetheaccountcodingallocatedtoapar cularentry:costsmayeasilybemiscoded.Thereasonsforthismayrangefromblamelessinadvertencetomischievousaccountancy.


Toillustratemoresignificantcomplica ons,assumethatthetaskofthequantumanalystistoestablishtheexpenditureincurredbythecontractoroverapar cularperiod,beingtheexpenditurerelevanttoadelayclaim,andthathehasavailabletohimthecontractor’saccountledgers.Itwouldbenormal,inseekingtoestablishtheexpenditureovertherelevantperiod,totakethebalanceshowninthegeneral(orpar cular)ledgerattheendoftheperiodandtotakefromitthebalanceasatthebeginningofthesameperiod.That,however,mustbesubjectedtoadjustmentsforarangeofitems.Twoofpar cularinterestwouldbe:• Provisions.• Post-eventalloca ons.

Provisionsrepresentan cipatedexpenditurewhoseprecisemagnitudemaynotbeknownat thedatethe provision is made. They therefore act as temporary entries. As and when actual expenditure ismadeor iden fied, theprovision is adjusted.Accordingly, onemust take care to adjust provisionsbyactualexpenditure.Whereprovisionsaremadeagainstexpendituretobeincurredinrespectofafutureobliga on,itmaybesensibletoexcludeitfromtheperiodinwhichtheprovisionismade,andtrackitforwardintotherelevantperiod.Itwouldthusbecomean‘’omission’’fromtheledger.

Post-event alloca ons occur when an expense is posted in the ledger at some date later than thecommitmenttowhichitrelates.Itwillclearlybenecessarytoconsidertheperiodbeyondthatwhichisthefocusofimmediateinteresttotheanalystandtoeffectrelevantcorrec ons.Correc onsmaybebywayofaddi onsoromissions.Omissionsaremostlikelytoresultfromananalysisofthehinterlandbeforethebeginningoftheperiodwhichisthefocusofinterest;addi onsaremostlikelytoresultfromananalysisofthehinterlandbeyondtheenddateoftheperiodwhichisthefocusofinterest.

Adjustmentswhichdonotmakeanobviousappearanceintheaccoun ngmaterialbeforethequantumanalystmayormaynotfallwithintheperiodoffocusintheanalysis.Dealingswiththirdpar eso enprovidea frui ulsource forsuchadjustments.Arecurrentexample isdiscounts that thecontractor isabletosecureagainsthis liabili estothirdpar es.Theunscrupulouscontractorwillnotdisclosesuchdiscounts.9Totheextentthatitisrelevanttoanyclaim,itisimportantfortheanalysttoseethefullextentof intermediate invoicingand thedocuments that cons tute the se lementof accountsbetween thecontractorandsuchthirdpar es.

In fact, adjustmentsoraccommoda onsmademaygobeyondnotonly the immediate me-frameofanalysis but also beyond the projectwhich is the focus of analysis. These pose someof the greatestchallenges,simplybecausetheyarenottobeseen,orreadilytobediscerned,fromthedatatowhichthequantumanalystislikelytobedirected,orgivenaccess.Thesemayinclude:• Creditsorrebatesfromthirdpar esmadea ertheevent,withoutadjustmentstoearlierentries/documentsbeingnotedorshown.

• Turnoverdiscounts,i.e.,discountswhicharerelevanttothetradingrela onsbetweenorganisa onsasawhole,rela ngtothetotalityoftheirbusiness.

• Accommoda onsonotherprojects (whetherextantoran cipated), suchasarrangements forfavouredpricingonthoseotherprojects.


Becauseitisimpossibletobecertainthattheanalysthasbeenprovidedwithacompleteandaccuratepicture,aneffec vesupplementmaybe for theanalystwhohasotherwisedonehisbest to secureacomprehensiveunderstandingofthesema ers,toprovokeproduc onofanexpressstatementoftruth.This shouldbe from (either,butpreferablyboth)a responsibleofficerof theclaimantorganisa on/anindependentauditor,andshouldverifythattheaccoun ngdatamadeavailableiden fiesandquan fiesallrelevantma ers.Aformula onwhichIhavedevised,andusedsuccessfully,requiresconfirma onthat,inrela ontoallsumsclaimed,theclaimanthasdisclosedandtakenintoaccountinhisclaimsevalua on:allrelevanttransac ons,(posi veandnega ve)accruals,provisions,discounts,credits,allowances,rebates,reversals,post-eventalloca ons,accommoda ons,orotheraccoun ngarrangements,etc.,whetherinrela ontothepar cularprojectunderscru ny,anyotherprojects,orthebroaderdealingsbetweentheclaimantandthirdpar es.

Theessen almessageis,therefore,thatsufficientconfidenceintheclaimant’scostsmayo enbeachievedonlybyananalystwhohasathisdisposalathoroughunderstandingoftheaccoun ngsystemusedbytheclaimant,comprehensiveaccoun ngdata,accesstothevariousstagesofthecos nghierarchy,andacompletefinancialpictureoftheprojectinthecontextoftheclaimant’sbusinessasawhole.

Inves ga onofdocumentsdirectlyrelevanttotheworkofthequantumanalystmayprovideimportantaddi onal informa on,with consequencesbeyond thema ers strictly relevant to the analyst’swork.Whilstinves ga onsintotheseareasmustalwaysbetreatedobjec velyandwithsomecircumspec on(andareprobablybestdoneunderspecificauthorisa ononcealeadisiden fied),itisclearthatthissortofmaterialmaycometothea en onofonlythequantumanalyst(asnobodyelseislikelytobechargedwithconsideringit)andyetmaybeofmuchbroadersignificanceinthedisputeresolu onprocess.Thus,takethefollowingexampleofmaterialunearthedaspartofthedisclosureprocess:acontractor’squan tysurveyor,appointedasitsrepresenta vetomakeinterimapplica onsforpaymentandtose lethefinalaccount,knowinglyplacesincompleteandincorrectfinancialinforma onrela ngtothepaymentsmadetoandse lementsachievedwithsubcontractorsbeforetheemployer’squan tysurveyor,inorderthatitbeactedupon,tothefinancialadvantageofthecontractor,whilsthehadother,completeandcorrect,informa oninhispossessionwhichhedidnotplacebeforetheemployer’squan tysurveyor.Thematerialcanbeshowntohavebeenacteduponbytheemployer,asintended.

Thissortofmaterialmaynotonlyunderminethecredibilityoftheindividualsassociatedwithitscrea onanddissemina on,orthecaseasawhole,butalsoprovidetheemployerwitharemedydirectagainstthecontractor(throughtheconceptofvicariousresponsibility10),andagainstthecontractor’squan tysurveyor,11aswellasfoundingcriminalproceedings.12

Anotherexample,alsodrawn fromthewriter’sexperience,aroseupon the rou ne inspec onaspartof the expert process of invoices submi ed by one of the par es’ legal representa ves, the value ofwhichwasclaimedinconnec onwithaninterna onalarbitra on.Thedetailedentriesshowedthattherehadbeendirect,andextended,telephonecontactbetweenthoselegalrepresenta ves(and,bywayofconferencecalls,others)anda(thenprospec veandlateractual)memberofthearbitraltribunalpriortohisappointment,leadingtoasubsequentchallengetotheappointmentofthattribunalmember.

Page|7Franco Mastrandrea LLB (Hons), MSc, PhD, FRICS, FCI Arb, Barrister

Is there an appropriate profession of quantum analysts?

Whilstdisciplinesotherthanthelawhaveasubstan alroletoplay,itisthelawthatprovidestheessen alframeworkwithinwhichthequantumanalystcarriesouthiswork.Theroleofthecourtshasbeentolaydownguidingprinciplesonmeasurement.13Thus,regardlessofthebasicdisciplineofthequantumanalyst,athoroughgraspofthelawofremedies,itsrequirementsandboundariesisanessen alprerequisitetohiswork.Iwillnextconsideran(inexhaus ve)listoftheprofessionswhichmaybeinvolvedasquantumanalysts.

Architects/engineers

Itisrare,inthewriter’sexperience,forarchitectsorengineerstodisplayanyovertinterestinquantumanalysis.Whilsttheseprac onerswouldobviouslybefamiliarwiththeconstruc onprocess,theymaylacksufficientexper seinthelaw,accountancyoreconomics.

Lawyers

Somecommentatorsonquan fica onare lawyers,although few ifanyareactualprac oners in thefieldofquantumanalysis.Althoughthereisastrongertradi onoflegalcommentaryintheUS,todatethereisonlyonenotableexampleintheUK.14Yetotherscombinetheperspec vesofthelawyerandtheconstruc onprac oner,buttheseares llrela velyrare.

Somejudgeshaveshownamarkedreluctancetodeal,inanydetail,withmoneyma ers.15 That this sort ofapproach is inadequatehasbeen thesubjectofadversecommentaryat thehighest judicial level.16

Whilstatthepresentdayjudgesappeartobemorecomfortablewiththequan fica onrole,itseemstothiswriterthatfewofthemwouldbeateasewithmakingadecisiononquantumwithouttheaidofsomeexpertevidence.

Accountants

There has been a significant, albeit rela vely recent, interest in the UK in the subject par cularly by‘’forensic’’accountants.AccountancyhastendedtohaveamoreprofoundinfluenceuponUSprac ce.Thesubstan aldrawbacks,iftheyexistinrela ontopar cularanalystsdrawnfromthisdiscipline,arelikelytorelatetothelackofexper seinthelawandtheconstruc onprocessandwith‘’value’’asopposedto‘’cost’’drivenappraisals,withwhichagainaccountantsarelikelytobeunfamiliar.

Quantity surveyors

In theUK (and theCommonwealth) thequantumanalysthas tended tobedrawn from the ‘’quan tysurveying’’ profession. There is no statutory defini on of the discipline or, unlike terms such as‘’architect’’ any protec onof the term ‘’quan ty surveyor’’.17 It is somewhat of amongrel professiontradi onallydifficulttodefine,whichhasadaptedsignificantlytochangingcircumstancesandtheneedsofthemarketplace.Theprofessionhastendedtodeployabroadremit.Forthesereasonsthetermhastradi onallybeenmuchoverused.


Thequan tysurveyor isprimarilyconcernedwith thecommercialaspectsofconstruc oncontracts.18

Quan ty surveyingactsasboth toobroadand toonarrowadefini onof thequantumanalystat thepresentday.Thus,thetradi onalprofessionalquan tysurveyormaynotbesufficientlyfamiliarwith:• appropriatemanagementprinciples;• thecontractors’approachtoandmethodsofworking;• construc oncosts:itisama erofsurprisejusthowmany‘’professional’’quan tysurveyorss llknowli leifanythingaboutthemannerinwhichcontractorsreflecttheircostsintheirtendersforwork,orhowtheiractualcostsareincurredorrecorded;

• therelevantlaw.

The sound quantum analyst’s approach to evaluation

Thesoundquantumanalystwillapproachhisworkmethodically,havingregardtothepointsmadeabove.Hewill(orshould)haveamentallist(itmightevenbewri endown,drawnfromhisownexperienceandwhathehaslearnedordis lledfromothersoverhislife me’sexperience)ofkeyprinciplesofevalua on.

Isetoutbelow,andbrieflyannotate,someoftheitemsthatIbelieveshouldappearonthatlist.Inevitably,someofthesewillatpointsoverlap.

Correctly identify the claimant’s cause of action

LawyersnowknowthatitisneversufficienttoasksimplywhetherAowesBadutyofcare.ItisalwaysnecessarytodeterminethescopeofthedutybyreferencetothekindofdamagefromwhichAmusttakecaretosaveBharmless.Thedetermina onofthescopeofthedutyvarieswiththeareaoflawinvolved.Inthecaseofanimpliedcontractualduty,thenatureandextentoftheliabilityisdefinedbythetermwhichthelawimplies.19Thequantumanalystshouldworkwithinthesameparameters.

Give effect to causal requirements

Proofofcausa onisusuallyanessen alingredienttoafindingofliability.Thus,itisusuallyincumbentupontheclaimanttoshownotonlythefactofdamagebutalsothatitiscausallyconnectedtothema ercomplainedof,i.e.,thatitwasduetoora ributabletoit.20

Expendituremaybeexpressedincausallanguage:where,forexample,commitmenttoexpenditureismaderegardlessofthepar es’contract,itcannotbesaidtohavebeenincurredbyreasonoftheexistenceofthecontract.21Suchexpenditureisthereforeunlikelytoberecoverableinanac onforreliancedamages(whicharedesignedtoputthenon-breachingpartybackintheposi oninwhichhewouldhavebeeninhadthecontractnotbeenmade);bycontrastitmayberecoverableasexpecta ondamages(whicharedesignedtoputthenon-breachingpartyintheposi onhewouldhavebeeninhadthebreachingpartyperformedthecontract).22Thesearch,atlaw,isusuallyfor‘’effec ve’’cause.


In construc on disputes a complica ng factor is o en the ques on of concurrent causa on. Whilstdiscussionofconcurrentcausa onisbeyondthescopeofthisar cle,asageneralruleacontractbreakercannotexcusehimselffromperformancebypoin ngtoaconcurrentcauseofsomebodyelse’smaking;itisenoughthathisbreachofcontractis‘’an’’effec vecause.23

Nor is it usually necessary in contract to evaluate compe ng causes and ascertain which of them isdominant.24Whilstexplicitdiscussionofcausa onincontractis,bycontrastwithtort,rela velyrareithasbeensaidthatequivalentconsidera onsapply.25

Notwithstanding all this, account should always be taken of any par cular contractual rules on theresolu onofcausal issues.Thus, itmaybethatthecontractrequirestheextensionof meprovisions(andanyrelateddelayanalysis)tobeoperatedinapar cularway,e.g.,prospec vely.Intheabsenceofacontractualrequirementsotodo,adogma capplica onofrulesofthumb,suchastheprospec veapproach,maywellproduceinvalidanswers.

Whatdoesseemclearisthatwheretheallegeddefaultisabreachofcontract,itwillusuallybeimportant,whenconsidering causa on, to specifywith someprecision theobliga onwhich is said tohavebeenbreached,e.g., the failure to complete thewholeof theworksbya specifieddate (orwheredefaultsarespecifiedagainstsec onsofwork,byapar cular listofdates).Again, this iso en ignored,tothedetrimentofanalysis.

Work within the remoteness requirements

It iswellknownthatwhilstanorderingof the factsandaresolu onof thecausal issuesmaysuggestrecoveryforma ersfarremovedfromtheimmediatedifficulty,thelawwillnotallowrecoveryofalltheconsequencesofawrong.

Whilstadiscussionofremotenessisbeyondthescopeofthisar cle,itisofcentralimportancethattheanalyst understand andworkwithin the limita ons imposed by the law, having regard in turn to thedifferentconsidera onswhichapplytotheareaoflawwhichfoundsthecauseofac on.

Take proper account of ‘’no loss’’ arguments

Aclaimantmaybeunabletorecoveranydamagesbecausehecanshowno loss.26Theanalystshouldfamiliarisehimselfwith themanyexcep onstoorglossesuponthis rule,however,suchaswheretheclaimantreceivessomeextrinsicorcollateraladvantage,27orthereisunavoidablebe erment.28Inrela ontobe erment,theburdenofprooflieswiththedefendant.Itisnotenoughthatanelementofbe ermentcanbeiden fied.Ithastobeshownthattheclaimanthadachoice,andthathewouldhavebeenabletomi gatehislossatlesscost.29

Where there is more than one measure of loss, select the most appropriate

Theremay be a number of differentways ofmeasuring the damage. Theymay produce significantlydifferentfinancialanswers.Thus,bywayofexample,thelosstoabuildingownerduetotheincorpora on


ofdefec veornon-compliantmaterialsmaybemeasuredbythecostofcorrec onorthediminu oninvalueofthebuilding.

30concernedtheques onwhetherthecostofreinstatementoflandtoitscontracted-forcondi onshouldberecoverableasdamages.Itwasdecidedthatrelevantfactors,guidedbythefactsofeachcase(includinginthatpar cularcasethetenacityoftheclaimant in seeking todevelop the landand theprospectsof securingplanningpermission,whichinfluenced the likelihood of reinstatement being in fact effected) include both considera ons thatdamagesarecompensatoryandthatanydamagesshouldbereasonableasbetweentheclaimantandthedefendant.Havingregardtosuchma ers,thecostofreinstatementwasallowed.

Recognise avoidable consequences and compensating advantages

Itiso enthecasethatwhilstanobviousdisadvantageissufferedbyreasonofabreachofcontract,anadvantageisalsogained.31

Lessimmediateorobviouscompensa ngadvantagesmayalsocomeintoplay.Forexample,construc onworkwhichwasintendedtobecarriedoutduringthesummermonthsmaybepushedintothewintermonthsandfollowingwork,whichwasoriginallyduetobecarriedoutduringthewinterisnowpushedevenfurtherbacktothefollowingsummerwhen,forexample,workinghoursarelongerandefficiencygreater.

Thesameprinciplemayapplytothevolumeofwork:thusif,byreasonofabreach,lessworkthanotherwisewouldhavebeenthecaseiscarriedoutduringinclementweatherbecause,forexample,thepaceofworkissloweddown,thatadvantageshouldbeweighedinthebalanceagainstdamagesotherwiseresul ngfromthebreach.Similarly,animprovementinefficiencymaybegeneratedbecauseoffewerworkpeopleworkinginagivenareathanwouldotherwisebethecaseifnobreachhadoccurred.Theobvioussolu onistobalancelossagainstgainandtoawardanynetlossascompensa on.32

Achieve as certain a measure as the circumstances allow

Atribunalexpectstohavesa sfactoryevidenceofdamages,whereitis,ormightreasonablyhavebeenavailable.33Thus,in 34

claimsweremadebyanemployeragainstanarchitectandacontractorinrespectofbuildingworkstocreate a restaurant andpublic bar. Bothorganisa onswere found liable. In respect of one item, lossofprofitinthesumof£10,000,however,theemployerlednoevidence.HHJudgeGilliland,QC,atfirstinstanceheldthattheclaimwasneverthelessareasonablees mate,concludingthatitwasnotnecessaryfortheretobeevidencetoestablishthetruevalueoftheclaim.TheCourtofAppealheldthatthiswasthewrongapproach.Themerefactthataclaimwasmadehadnoeviden alvaluewhatever;thecourtmusthavesomeevidence.Lossofprofitscouldnotbeinferredfromalackofchallenge.Ithas,nevertheless,beensaidthat:‘’Thefactthatdamagescannotbeassessedwithcertaintydoesnotrelievethewrongdoerofthenecessityofpayingdamages.’’35


Thedis nc onappearstobebetweenthecasewhereliabilityhasnotbeenmadeoutandthecasewhereliability isclearbutquantumcannotbepreciselyestablished.Intheformer,noremedyisgiven; inthela er,whereclearquantumevidencedoesnotexist,somethinglessmaydoandaremedyneverthelessgiven.36

Make comparisons on a valid, equivalent, basis

Comparisonsareo enmadeindamagesclaimsbetweenwhatoughtto,andwhatdoes,obtain.37 In order forsuchcomparisonstobevalid,theymustbemadeonabasisofequivalence.38Construc onclaimsarenoexcep on,39althoughitisremarkablehowo eninprac cethisverysimpleprincipleisoverlookedorignored.

Recognise latitude of choice

Whereabreachofcontractisormaybeinvolved,theexpressremedygran ngprovisionsaresome mescoupledwithasavingcommonlawremedyprovision.40Theclaimantisen tledinsuchacasetopursuealterna veclaims,andthereisnorequirementtoelectbetweenthem.41

Wheretheclaimantisobligedtopursueanexpressremedysetoutinthecontracthemayneedtobringhimselfwithinsomepar cularadministra veprovisionrequiredbythatremedy.Therelevanttribunalmayinsistonstrictcomplianceinordertoadmittheremedy.42Thisisperhapshardlysurprising,par cularlyincircumstanceswhereanequivalentremedydoesnotexistunderthegenerallaw.Theanalystshouldthereforehaveregardtothepar cularremedy-gran ngprovisionsandthestricturestheyimposeupontheclaimant.

Itmay,bycontrast(andexcep onally),bethattheremedyatcommonlawissuperiortothatavailableunder an express remedy-gran ng clause. Thus, par cular heads of damagemay not be recoverablewheretheprovisionextendsonlyto‘’cost’’or‘’expense’’,43butotherwisewhere‘’loss’’isallowable.44

Take account of price considerations

Claims based upon price (as opposed to ‘’cost’’) aremany and varied, but they can broadly be splitbetween thosewhereoriginal contractprice is reliedon-either to founda claim forapartofwhat isincludedwithinthatprice,orasabasistodeterminethevalueofaremedyforaclaiminexcessoftheoriginalcontractprice-andthosewherethevalueofthepricethatitissoughttorecoverisunrelatedtotheoriginalcontractprice.

Forclaimswhichrelyonallowancessaidtohavebeenmadebytheclaimantinitsoriginalcontractprice,itwouldbeoddifthequantumanalystdidnotseektosa sfyhimselfthatanallowancewasinfactmadeinthatoriginalpricing,thatitwasoftheorderclaimed,andthattheoriginalcontractpricewasadequatetosustaintheclaimedallowance.Thesearedifficult,butimportant,prerequisitesforwhichthealterna ve,ofpresump onsinfavouroftheclaimant,arealltooeasilymade,usuallybyoversight.


Examplesofpricingconsidera onsunrelatedtotheoriginalcontractpriceincludequantummeruitclaims-wherearou nelyappliedruleofevalua onputsthemeasureofrecoveryatcostplusareasonablemark-upforprofit.

Require adequate proof of loss of alternative opportunities

Itmaybethattheclaimis,orcanonlybe,putonthebasisthatthedefendantdeprivedtheclaimantofanopportunitywhichwouldotherwisehavebeenavailabletotheclaimanttoexploithiscommercialassetsorresources.Inthosecircumstancesitwouldbeoddifthequantumanalystdidnotseekadequateevidenceofthatallega on.By‘’adequate’’hereisintendednotonlythattheclaimantadducesa sfactoryevidencethatanalterna veopportunitywasinfactlost,butthatthemagnitudeofthatopportunitycoincideswiththesizeoftheclaimmade.Thisis,again,rou nelyoverlookedbyquantumanalysts,par cularlyinrela ontoclaimsnotovertlycouchedinlossofopportunityterms.

Recognise spare capacity and voluntary expenditure

Thenormalawardfordamagesforbreachofcontractisdesignedtoputtheclaimantintotheposi onhewouldhavebeenin,absentthedefendant’sbreachofcontract(the‘’expecta on’’interest,referencedabove).Wheretheclaimant,forsomereasonotherthanthedefendant’sbreach,over-providesresources,suchaswheretheresourcesreflectedintheoriginalpricingoftheprojecthave(orshouldhave)sparecapacityassociatedwiththem,themeasureofsuchover-provisionmaybeignoredforthepurposesofevalua on.

Take the simple example of job-dedicated tools. Such tools are largely of the non-mechanical variety(e.g.,screwdrivers,brushes,chisels,hammers).Althoughtheymayclearlyhaveaphysicallifeextendingbeyondtheprojecttowhichtheyarededicated,suchresourcesarecommonlypricedandshowninthecontractor’scostaccoun ngasconsumables.Where,byreasonofanemployer’sbreachofcontract,thosetoolsareretainedlongerontheproject,orexposedtogreaterusethanan cipatedbutnotreplaced,theymaygeneratenoaddi onalcosttothecontractorandhencewouldnot,withoutmore,legi matelyfigureinabreachofcontractclaimforsuchcosts:theyhave‘’sparecapacity’’associatedwiththem.

An example of spare capacity in the cases is to be seen in45inwhichtheclaimantssoughtrecoveryofincreasedcostsallegedtoariseoutof

theexecu onofvaria ons(Nos73and75)topalletsthatwerepartoftheweatherdeckforatensionlegpla ormofanoffshoreoilstructure.Theclaimrelatedtotheincreasedcostofacraneallegedlyrequiredtoloadthevariedpalletsonabarge.Thedefendantconcededthatacranelargerthanthatallowedforbytheclaimantswasrequired,butdeniedtheclaim,arguingthatacraneoflargercapacitywouldinanyeventhavebeen required tohandle theoriginalwork. TheCourtofAppeal accepted thedefendant’sargument.46Alterna vely,theclaimantmayhavebeenobligedtoprovideaddi onalresourcesasaresultof abreachof contract forwhichpaymentmayhavealreadybeenmade,e.g., the introduc onof anaddi onaljob-dedicatedprojectmanagerwhose meisnotwhollytakenupandcanalsoa endtotheconsequencesofotherdefendantdefaults.


Examples of spare capacity can appear at all areas within a project or organisa on. In contrac ngorganisa ons, it ismost likely toarisewithpreliminaries,overheads,andplant resources. Inaddi on,some expendituremay be undertaken at the risk of the claimant. Thus, whilst expenditure incurredin tendering forconstruc onprojects isalmostalwaysundertakenat therequestof thedefendant, itordinarilyfallsintothiscategory.Intheabsenceofexcep onaleffort(whichmayjus fyares tu onaryremedialresponse47),suchexpenditureordinarilyfallsintoacategoryofvoluntaryeffortbytheclaimantthatmayberecoverableonlyagainstacommission.48

Avoid duplication

Thesoundquantumanalystwillalwaysbealerttotheprospectofduplica oninclaims.Thepoten alforduplica onissowide-rangingthattheanalystshouldbereadytomeetitatallpointsofhisanalysis.Hewillcon nuallyhaveattheforefrontofhisthinkingthatdamagesarecompensatory.

Theduplica onmaybebetweentheclaimathandandotherclaimsadvancedatthesame me,49withtheoriginalcontractpriceoracomponentthereof;orwiththewiderbusinessrevenuesoftheclaimant,etc.50

Experienceshowsthatduplica onbetweenclaimsismorelikelyinpar cularareasthanothers:thesoundquantumanalystwill develop a sixth sense about such poten al. A recurring example in contractors’claimsisbetweenvaria onaccountsandprolonga onordisrup onclaims.51Afurther,everyday,exampleisthecontractorwhoseeksdamagesfromarangeofsubcontractors,recoveryofwhichwouldleadtohisachievingawindfallagainsthistrueloss.52

Conclusion

The primary disciplines drawn upon by the sound quantum analyst are likely to be law, economics,accountancyandtheconstruc onprocess,includingitsorganisa onandmanagement.

Themostsa sfactoryevalua onsarelikelytobethosewhichhaveregardtoandseektobalanceasolu onfromamongtheanswersprovidedbytheserelevantdisciplines.Bycontrast,ananswerwhichachievessa sfac onofonlyone,orlessthanthefullcomplementofanswersfromtherelevantdisciplines,islikelytoprovelesssa sfactoryorpersuasive.Inthatevent,theanalystshouldbeinaposi ontomake,andjus fy,ara onalchoicebetweenthedisparateanswerswhichresult.

Thesoundquantumanalystwillbefamiliarwiththiswidevarietyofrelevantinfluencesuponhisworkandbeable,persuasively,toaccommodateandapplythem.


References:1Part35oftheCivilProcedureRulesaddressestheworkofsuchanexpertinrela ontocourtproceedings.

2SeethespeechofLordWilberforceinWhitehouse v. Jordan [1981] 1 All ER 267 (HL).

3Where,however,thedominantpurposeofthereportofanexpertisnottoprovideadviceinrela ontoactualorpro posedli ga on,thenitmaynotbeprotectedbyli ga onprivilege:see,forexample,London Fire and Emergency Planning

Authority v. Halcrow Gilbert & Crow Ltd [2005] BLR 18.

4JamesCBonbright,TheValua onofProperty(McGraw-Hill,1937),Vol1,p.7.Cf.OWHolmes,‘’ThePathoftheLaw’’,10 HarvLR457(1897):‘’Forthera onalstudyofthelawtheblack-le ermanmaybethemanofthepresent,butthemanof thefutureisthemanofsta s csandthemasterofeconomics.’’

5FullerandPerdue,‘’TheRelianceInterestinContractDamages’’,46YaleLJ52and373(1936).

6A erAIOgus,TheLawofDamages(Bu erworths,1973),p.354.

7Thus,whetheraspecificcostisproperlyclassifiedafixedorvariablecostmayturnonthepar cularfacts.InKutner Buick, Inc v. American Motors Corp, 868 F 2d 614 (1989),GibbonsCJfortheUSCourtofAppeals,ThirdCircuit,observedthatif

abusinessfacilityconductsasingleac vity,allcostswhetherdenominatedfixedorvariableshouldbetakenintoaccount indeterminingtheeffectonnetprofitofthetermina onofthatac vity.Underthosecircumstancesallcostswould eventuallybevariable,becauseatsomepointa erallac vityceasedallcostswouldcease.

Similarly,onthepeculiarfactsofAlfred McAlpine Homes North Ltd v. Property and Land Contractors Ltd (1995) 76 BLR 59,HHJudgeHumphreyLLoyd,QC,observed,inrela ontoaclaimforoverheads:‘’If,asthearbitratorfound,PLCwereto

beregardedasasinglecontractcompany,thenthefixedoverheadsexpenditureonadelayedcontractwouldnecessarily havetoberegardedasdirectexpenseduetotheprogressoftheworksbeingmateriallyaffectedbythedelayinques on.’’

8Hisabilitytoachievesuchanunderstandingmay,ofcourse,behinderedbylackofinforma on,whichmayitselfbedue toanarrowviewbeingtakenbythetribunalchargedwithresolvingthedisputeoftherelevanceofthatinforma onand hencerefusaltorequireitsdisclosure;suchcircumscrip onisrarelyjus fied.Thisunderpinstheimportanceofanunder standingoftheinterplaybetweenthevariousdisciplinesinvolvedinthedisputeresolu onprocess.

9Themanipula onpossiblethroughdiscountshasalongandpervasivehistoryincommercialendeavours,including construc on.Thus,inLondonSchoolBoardv.Northcro ,SonandNeighbour(1902). 4 HBC 2: 147,ALSmithJ,perhaps oversta nghiscase,said:‘’Iknowineverybranchofbusiness,fromyourmenialservant,fromyouroutsideservant, fromyouragent,andfromeveryone,thatcankerwormoftakingcommissionanddiscountpervadesthewholesystem ofbusinessfromstarttofinish,andtheresultisthemasterisrobbed,because,ofcourse,themasterhastopayforit intheresult.’’

10Therelevanttestiswhethertheactissocloselyconnectedwithwhattheemployeeisauthorisedtodothatitcanrightly beregardedasamode,albeitanimproperone,ofdoingit:see,forexample,thespeechofLordNichollsinDubai

Aluminium Co Ltd v. Salaam [2003] 2 AC 366.

11Thecommonlawtestforfraudulentrepresenta onisasauthorita velydefinedbyLordHerschellinDerry v. Peek (1889) 14 App Cas 337:‘’First,inordertosustainanac onofdeceit,theremustbeproofoffraudandnothingshortofthatwill

suffice.Secondly,fraudisprovedwhenitisshownthatafalserepresenta onhasbeenmade(i)knowingly,(ii)without beliefinitstruth,or(iii)recklessly,carelesswhetheritbetrueorfalse.’’

12SeetheFraudAct2006,whichhasrelaxedthetradi onalrequirementsforproofofthiscrime,andfocusesontheof fender’sbehaviourratherthanitsoutcomeuponthevic m.Thus,itisnotnecessarytoproveeitherthatthevic mis deceived,orthathehassufferedloss;itissufficientthatthereisadishonestinten onbytheoffendertocauseorcreate theriskofloss.

13Thus,LordSumnerinAdmiralty Commissioners v. SS Chekiang (The Chekiang) [1926] AC 637said:‘’Damagesmaybea ‘juryques on’thatisaques onoffactforthejury,ifthereisone,buttheymustbemeasuredunderaproperdirec on,as towhatthelawrequires.’’Cf.Hadley v. Baxendale (1854) 9 Exch 341, inwhichAldersonB,said:‘’Wethinkthatthereought tobeanewtrialinthiscase.Butinsodoingwedeemitexpedientandnecessarytostateexplicitlytherulebywhichthe judgeatthenexttrialought,inouropinion,todirectthejurytobegovernedwhentheyes matethedamages.’’

14INDuncanWallace,Construc onContracts:PrinciplesandPoliciesinContractandTort(Sweet&Maxwell,1986), par cularlyChap8.

15Thus,inBernard Sunley & Co Ltd v. Cunard White Star [1939] 2 KB 791(variedonappealat[1940]1KB740(CA)), Halle Jsaidatfirstinstanceinrela ontoaclaimfordelayofaweekinthedeliveryofanexcava ngmachineneededfora contracttolevelanaerodromebecausethedefendantshadsentanunsuitablelorry:‘’Thenextques on,andthelast ques on,whicharisesinthislongjudgmentisastothefigureatwhichIarrivetakingthatview,and,uponthewhole,I


feelthatthelumpsumfigureatwhichIoughttoarriveis£250.Thatisalumpsumfigurearrivedatinconsidera onofall thecircumstances,andanya emptstoanalyseitbyananaly calprocesswill,Ithink,bedoomedtofailure.’’

16Thus,LordSumnerinthetortcaseofThe Chekiang [1926] AC 637said:‘’...the mehascomewhenyourLordships may,withoutanysacrificeofdignity,devotesomeshort metotherulesapplicabletothemeasureofdamagesincollision cases.A erall,li leasthisques onhasengagedthea en onoftheCourts,par estakemoreinterestinitthanany otherissuesinli ga on,andtheyarenotaloneinthinkingthatitisoneinwhichpla tudesandrulesofthumbareno good.’’

17ThefollowingwordstakenfromthePrefacetotheFirstEdi on(1922)oftheStandardMethodofMeasurementcaptures theproblemneatly:‘’Intheabsenceofanystatutoryqualifica onforsurveyorsprac singintheUnitedKingdom,any person,uptothepresent,hasbeenatlibertytodescribehimselfasaquan tysurveyor,andthepublichavenoguarantee thatheis‘qualifiedforthatoffice’.’’Sincethen,li lehaschanged,althoughthedesigna on‘’CharteredQuan tySurveyor’’ isnotavailabletoanyonewhoisnotaqualifiedmemberoftheRoyalIns tu onofCharteredSurveyors(RICS):seeRICS v.

Shepheard [1947] EG 370.

18Thus,thequan tysurveyorisnotordinarilyinterestedintheques onofquality,whetherofdesignorworkmanship.The posi onwill,ofcourse,bedifferentwherethequan tysurveyorobligeshimselfexpresslyinregardtoma ersofquality: see,forexample,GeorgeFischerHoldingsLtdv.Mul DesignConsultantsLtd,DavisLangdon&Everest(1998)61ConLR

85.

19SeethespeechofLordHoffmannin Banque Bruxelles Lambert SA v. Eagle Star Insurance Co Ltd [1997] AC 191.

20See,forexample,Quinn v. Burch Bros [1966] 2 All ER 283 (CA),inwhichadefendantmaincontractoragreed,undera subcontractwiththeplain ffplasterer,tosupplyequipmentreasonablynecessaryfortheplain ff’swork.Thedefendant failedtoprovideastep-ladderdespitearequesttodosofromtheplain ff.Theplain fftherea erfoundafoldedtrestle, whichheproppedagainstawallandusedasifitwerealaddertoallowhimtoreachtheceiling.Whilehewasstanding onthetrestlethefootofitslippedandhefellandbrokehisheel.Heclaimedthathisinjuriesweretheresultofthe defendant’sbreachofcontract.Hefailed:thebreachdidnotcausetheaccident;itmerelyprovidedanopportunityforthe accidenttohappen.Thatisnottosaythatprovidingtheoccasionforharmwillneverfoundliability.Thus,inStansbie v.

Troman [1948] 1 All ER 599 (CA)adecoratorworkingaloneinahouse,inbreachofanimpliedcontractualdutytotake care,wentouttobuywallpaperandle thefrontdoorunlocked,therebyaffordinganopportunitytoathieftoenterthe house.Thedecoratorwasheldliablefortheresul nglossofvaluablegoods.

21Thus,inthecelebratedHighCourtofAustraliadecisionin McRae v. Commonwealth Disposals Commission (1951) ALR 131,thedefendantsinvitedtendersforthepurchaseofanoiltankerlyingonthe‘’JourmaundReef’’andsaidtocontainoil.

Theplain ffswerethesuccessfultenderers.Theyfi edoutatgreatexpensearecoverymission,onlytofindthatthere wasnotanker,indeednoreef,attheplacedescribed.Theplain ffswereen tledtorecoverdamagesforbreachof contract.Equipmentpurchasesandrecondi oningexpendituresweredeniedaswastedexpenditure,however,because theywere,atleastinpart,commi edtobeforethecontractwassecured.

22See,forexample,Anglia Television Ltd v. Reed [1971] 3 All ER 690 (CA),inwhichthedefendant,whoagreedtotakethe leadroleinatelevisionplayhaddouble-bookedhimselfovertherelevantperiodand,asaresult,breachedhiscontract withtheplain ff.Theplain ffhadexpendedmuchmoneyinemployingpersonnelpriortotheconclusionofthecontract, whichitwasfoundthedefendantmusthaveknownwasofatypeofexpenditurethatwouldhavebeenincurred.Inaclaim forthatexpenditureLordDenningMRsaid:‘’Iftheplain ffclaimsthewastedexpenditure,heisnotlimitedtothe expenditureincurreda erthecontractwasconcluded.Hecanclaimalsotheexpenditureincurred the contract, providedthatitwassuchaswouldreasonablybeinthecontempla onofthepar esaslikelytobewastedifthecontract wasbroken.’’(Emphasisinoriginal.)

23See,forexample,Heskellv.Con nentalExpressLtd[1950]1AllER1033.

24See,forexample,thejudgmentofSco BakerLJinHolladay v. East Kent Hospitals NHS Trust [2003] EWCA Civ 1696.

25See,forexample,CountyLtdv.GirozentraleSecuri es[1996]3AllER834(CA).

26See,forexample,Alfred John Jones v. Stroud District Council (1986) 34 BLR 27 (CA)inwhichNeillLJ,said:‘’...asa generalprincipleaplain ffwhoseekstorecoverdamagesmustprovethathehassufferedaloss.’’

In Weatherburn v. Joplings [2002] EWCA Civ 631,whilstvaluersfailedtomen onthepossibilityofsubsidenceofthe proper eswhichtheyappraisedbecausetheywerebuiltonanareaunderlainwithgypsum,nolosswasa ributableto thatbreachastherehadbeennodiminu oninvalueatthe metheyshouldhaveprovidedthecorrectinforma on.Fur ther,thetemporarypropertyblighta ributabletothesubsequentcollapseofaswallowholewasaneventwhichwould haveoccurredevenifthecorrectinforma onhadbeenprovidedinthevalua onreport.

Ithasbeenheldthataholdingcompanycannotusuallyrecoverlossesmadebyasubsidiary:Richard Roberts Holdings Ltd v.DouglasSmithS msonPartnership(1988)46BLR50.Butapersonalinvestormaybeabletorecoveraloss:see,for example,Esso Petroleum Co Ltd v. Mardon [1976] QB 801 (CA).Furthermore,ashareholdermaybeabletorecoverlosses separateanddis nctfromthoseofthecompany:Lee v. Sheard [1956] 1 QB 192 (CA).


27Thus,inBristol&WestBuildingSocietyv.PaulChris e&NicholasButcher[1996]EGCS136(CA)abuildingsocietymade aloanagainstthenegligentadviceofavaluerandsubstan albreachesofdutyfromasolicitor.Eachwas,inthejudge’s view,equallyresponsiblefortheresul nglossofsome£137,500.TheSocietyhadmadeacontractofinsuranceunder whichitwasen tledtobeindemnifiedforpartoftheloss.Some£39,500waspaidtotheSocietyunderthatpolicy.This arrangementwasheldtocreatenointerestforthevaluer.Furthermore,thefactthatthepremiumsofthatpolicywereto havebeenpaidforbytheborrowermadenodifferencetothatconclusion.Whilethisprinciplehasfoundreadyapplica on intortcasesintheUS,itappearstohavemetwithsignificantresistanceinbreachofcontractac ons.

28Asageneralrule,aclaimantshouldderivenowindfallfromthebreach,throughbe erment.Wheretheclaimanthas li leornochoiceinthema er,however,Englishlawhasallowedthefullcostforreplacement:see,forexample,

Hollebone v. Midhurst and Fernhust Builders Ltd [1968] 1 Lloyd’s Rep 38inwhichtheplain ff’scountryhousewasdamaged byfireduetotheadmi ednegligenceoftheseconddefendant’sworkmanincarryingoutsubcontractworks.Itwasheld thattheplain ffwasen tledtorecoverthecostofrepairwithoutdeduc onforbe ermentforthera ersandfloors, becausetheoriginalswouldhavelastedoutthelifeofthehouse.

29See,thejudgmentofCresswellJinKuwait Airways Corp v. Iraq Airways Co [2004] EWHC 2603 (Comm).

30 (1986) 279 EG 759 (CA).

31See,forexample,Bri shWes nghouseElectricandManufacturingCoLtdv.UndergroundElectricRailwaysCoofLondon Ltd [1912] AC 673.

32 Staniforth v. Lyall (1830) 131 ER 65.Thisapproachmayrequireanevalua onofthetradingposi onofthewhole organisa on:seeTate&LyleFoodandDistribu onLtdv.GLC[1982]1WLR149(unaffectedbytheappealsonliability, endingat[1983]2AC509).Theresultmaybenonetdeteriora onintheclaimant’saggregateposi on,inwhichcase:(1) nodamagesatallmayberecoverableforthatheadofclaim:see,inthelawoftort,Hole & Son (Sayers Common) Ltd v.

Harrisons of Thurnscoe Ltd (1973) 1 Lloyd’s Rep. 345;or(2)onlynominaldamagesmaybeappropriate:see,forexample,Erie County Natural Gas and Fuel Co Ltd v. Samuel S Carroll [1911] AC 105 (PC).

33See,forexample,FoaminolLaboratoriesLtdv.Bri shAr dPlas cs[1941]2AllER393inwhichHalle J,said,in rela ontoaclaimforlossofgoodwillfromeditresseswhohadprovidedpuffar clesofasummercreamwhichthe defendantsfailedtodeliverasagreed:‘’Allthatisperfectlytrue,butallthatseemstometobeverygeneral,and, althoughquitereal,veryvague...Therearemanycasesinwhichthequan fyingofthepecuniarylossisextremely difficultandthejudgehastodothebesthecan.Here,however...Ihavenomaterialwhichenablesmetoput anyfigureatalluponthatpecuniaryloss...‘’

34 [1996] EWCA Civ 1041.

35Seethehighlyinfluen aljudgmentofVaughanWilliamsLJin Chaplin v. Hicks [1911] 2 KB 786 (CA). Cf. Story Parchment Cov.PatersonParchmentCo,282US555(1931),inwhichMrJus ceSutherlandindeliveringtheopinionofthe USSupremeCourtsaid:‘’Therulewhichprecludestherecoveryofuncertaindamagesappliestosuchasarenotthe certainresultofthewrong,nottothosedamageswhicharedefinitelya ributabletothewrongandonlyuncertainin respectoftheiramount.’’

36Ausefulillustra onisthoughttobeJohnson Control Systems Ltd v. Techni-Track Europa Ltd (2003) 86 Con LR 108 (substan allyconfirmedat(2003)91ConLR88(CA)),inwhichtwoclaimsappeartohavefalleneithersideofthisline:

(1)Theclaimforlossofproduc vity,claimedas75%ofthedifferencebetweenactualandrecoveredman-hoursinrespect ofwhichthelearnedjudgesaid:‘’Iacceptthatthatmaybeavalidstar ngpointtovalueadelayanddisrup onclaim wherecausa vedelayanddisrup onisdemonstrated.MrQuigley[thesub-subcontractor’squantumexpert]wasunable toestablishtheresponsibilityandreasonsforthedelayssaidtoleadtodisrup veorunproduc veworking...He[carried outasamplingexercise]...Anassessmentofprobabili esisama erofevidence.Theeviden albasisforsucha conclusionhasnotbeenestablished...IrejectMrQuigley’sspecula veandtheore calapproachtoassessing responsibilityunderthecontractforthegeneraldelaycomplainedof.Itisarbitraryandignorescri cality.’’

(2)Theclaimforworkcarriedoutbutunpaid,inrespectofwhichHHJudgeDavidWilcox,QC,said:‘’MrAshworth[the subcontractor’squantumexpert]doesnotseriouslya empttovaluethiswork.Hetakestheviewthat[thesub- subcontractor]wasunabletodemonstratebytherequiredcontractualmeans,thetruevalueofanyworkwhichhadbeen undertakenandisnoten tledtoanypayment.Thatisanuna rac veargumentinallthecircumstances.TheCourtmust doitsbestontheevidencebeforeit.’’

Cf. Osterling v. Frick, 131 A 250 (1925),whichinvolvedanac onbyanarchitectforfeesforworkundertaken.The architecthadcausedlossestotheemployerasaresultofdelaysintheprovisionofinforma on.Themeasureofthatloss wasinissue.TheSupremeCourtofPennsylvaniaupheldonappealacreditof$40,000(asproposedonbehalfofthe architect)againsttheclaimedfeesonthegroundthattheamountofthecreditwasnotbasedonmereguessor specula onbutcouldbefairlyes matedfromtheevidence.WallingJspeakingforthecourtnoted:‘’Ithastrulybeensaid thatsubstan aljus ceisbe erthanexactinjus ce.’’


37LordHoffmanninBanque Bruxelles Lambert SA v. Eagle Star Insurance Co Ltd [1997] AC 191said: ‘’Thecalcula onofloss mustofcourseinvolvecomparingwhattheplain ffhaslostasaresultofmakingtheloanwithwhathisposi onwould havebeenifhehadnotmadeit.Ifforexamplethelenderwouldhavelostthesamemoneyonsomeothertransac on, thenthevaluer’snegligencehascausedhimnoloss.Likewiseifhehassubstan allyovervaluedthepropertysothatthe lenderstandstomakealossifhehastosellthesecurityatcurrentvalues,butariseinthepropertymarketenableshimto realiseenoughtopayoffthewholeloan,thelenderhassufferednoloss.’’

38Foranexample,inthegenerallaw,seeLongdenv.Bri shCoalCorp[1998]AC653,involvingtheassessmentofdam agesforpersonalinjury,inwhichLordHopesaid:‘’Ithinkthatitisclearthat,inordertocomparelikewithlike,theplain ff shouldberequiredtosetagainsthisclaimforthelossofthere rementpensionanappropriatepor onofthelumpsum whichhereceivedonhisre rementonthegroundofincapacity.Thisisforthesamereasonasthatwhichexplainswhy theannualpaymentsbywayoftheincapacitypensionmustbebroughtintoaccount.Theseannualpaymentswillbe receivedasincomeduringthesameperiodasthattowhichtheclaimforlossofpensionrelates.Soitisrightalsotobring intoaccountthatpartofthelumpsumwhichrepresentsthecommuta onofapartoftheannualpaymentswhichhe wouldotherwisehavereceivedasincomeduringthesameperiod.’’

39Otherthanwherenoprocessofreviewisavailable.Thus,suchanerrorwillinEnglandbeinsufficienttoupsetan adjudicator’sdecision:seeBouyguesUKLtdv.Dahl-JensenUKLtd[2000]BLR522(CA)inwhichtheadjudicatorinhis summaryassessmentofclaimandcounterclaimtookagrosssumwhichincluded5%reten onanddeductedfromitthe sumsthathadbeenpaidduringthesubcontract,whichexcludedreten on.Thiscouldnotbechallenged,eventhoughas thelearnedjudgeatfirstinstancerecognised:‘’...itwasnecessarytomakesurethatlikewascomparedwithlike,and par cularlytoensurethatthereten onpercentagewasdeductedfrombothfigures.’’

40See,forexample,cl.26.6oftheJCT1998forms.

41See,forexample,Fairclough Building Ltd v. Vale of Belvoir Superstore Ltd (1990) 56 BLR 74,inwhichHHJudgeThayne Forbes,QC,said:‘’Clause26.6ofthebuildingcontractmakesitclearthattheContractorhastherighttopursueboth claimsintandemtotheextentthathecanmakegoodsuchclaims.ItisnotinequitabletopermittheContractortopursue aclaimfordamages,shouldhefailtosa sfyaclaimunderClause26.’’However,wherethecontractualtermsareintended tobeexhaus ve,itwillbeotherwise,seeforexample,Turner Corp Ltd v. Austotel Pty Ltd (1994) 13 BCL 378,inwhichit washeldthatthecontractualcoderemovedthecommonlawrights.ColeJnoted:‘’Thereis,inmyview,noroomfora ‘widercommonlawright’intheProprietortotreatnon-compliancewiththecontractualobliga onbytheBuilderasa separatebasisforclaimingdamagesbeingthecostofhavingathirdpartyrec fyorcompletedefec veoromi edworks. ThatisbecausethecontractspecifiesandconfersupontheProprietoritsrightsflowingfromsuchbreach;thatisthe par eshave,bycontract,agreedupontheconsequencestoeachoftheProprietorandtheBuilder,bothastorightsand powersflowingfrom,andtheconsequencesof,suchbreach.’’

42Forexamples,see:(1)inthecontextoftermina onprovisions,MuirConstruc onLtdv.HamblyLtd,1990SLT830,Yates BuildingCoLtdv.Pulleyn&Sons(York)Ltd(1975)237EG183;(2)inrela ontootherprovisions,Strachan & Henshaw Ltd v. SteinIndustrie(UK)LtdandGECAlsthomLtd(1997)87BLR52(CA),inwhichanexpressexclusiondeniedanalterna ve remedyatcommonlawforanyclaimarisinginconnec onwiththecontract.

43See,forexample,GCWorks1,Edi on3,atcl.46.ItwasheldinThiessWatkinsWhiteConstruc onsLtdv.Commonwealthof Australia (1992) 14 BCL 61thattheterm‘’extracostsincurred’’didnotextendtooff-siteoverheads.

44Thus,‘’loss’’washeldbyLordDrummondYounginRobertsonGroup(Construc on)Ltdv.AmeyMiller[2005]BLR491 tobewhat:‘’...apersondoesnothave...thathehadorwouldotherwisehavehadbutforaneventwithlegal significance.’’Inthatcaseale erofintentprovidedthatshouldaformalcontractfailtobeenteredinto,thenall‘’direct costsanddirectlyincurredlosses’’wouldbeunderwri en.Thedefenderscontendedthatthisrestrictedrecoverytocosts directlya ributabletothepar cularproject,namely,thecostoflabour,plantandmaterialsused,butnotcostsa ribut abletothepursuers’enterpriseasawhole,suchasheadofficeoverheadsandanyelementofprofitonthecontract. Whilsttheexpression‘’directcostsanddirectlyincurredlosses’’wasnotoneusedinanyofthestandardformsofbuilding contract,itneverthelessclearlyboresomesimilaritytothewell-knownphrase‘’directlossand/orexpense’’foundinthe JCTformsofcontract.Itwasheldthatthetermextendedtobothoverheadsandprofit,onthepremise(consideredbythis writernottobeen relysecure)that:‘’theinten ontomakeaprofitliesattheheartofall,ornearlyall,commercial ac vity,andthelawmustrecognisethatelementaryeconomicfact.’’Whilstthisreasoningwasnotexpresslyadopted,the resultwasconfirmedintheappealdecisionintheInnerHouseat[2005]Scot CS IH 89.

45 (1992) 58 BLR 1 (CA).

46LloydLJ,said:‘’Intheiroriginaltendertheyhadnottakenproperaccountoftheweightoftheli ingbeams,andthe marginofsafetywhichConocorequired.ThepointisdealtwithbyMrRoderickinasupplementaryproof.Itsconclusion wasthatasmallercranecouldnothaveli edthepallets,asoriginallydesigned,withsafety.’’

47See,forexample,William Lacey (Hounslow) Ltd v. Davis [1957] 2 All ER 712.


48See,forexample,Hodgesv.EarlofLitchfield(1835)1BingNC492inwhichTindalCJ,said:‘’Theexpensespreliminary tothecontractoughtnottobeallowed.Thepartyentersintothemforhisownbenefitata mewhenitisuncertain whethertherewillbeanycontractornot.’’Cf.Brennerv.FirstAr sts’ManagementPtyLtd[1993]2VR221,inwhichByrne Jsaid:‘’Inthiscategorywillfallcaseswhereatenderercarriesoutes ma ngorotherworkinresponsetoaninvita onto tenderforacontract.Itisunderstoodinsuchcasesthat,ingeneral,thetenderertakestheriskthatthetenderwillbe unsuccessfulandthat,asaconsequence,theworkwillbeunrewarded.’’

49See,inthecontextofpersonalinjuries,Fish v. Wilcox [1994] 5 Med LR 230 (CA),inwhichdamagesforlossofearningsas wellascompensa onofservicestoberenderedbyamothertoherchildwerenotallowed.

50Thus,theremaybeduplica onbetweendamagesandtherecoverablecostsofanac on/arbitra on:see,forexample,GeorgeFischerHoldingsLtdv.Mul DesignConsultantsLtd,DavisLangdon&Everest[1998]EWHCTCC329(involvingthe

designfeesinestablishingaremedialscheme,thedecisionholdingthat,aslongastherewasnoduplica on,apartywas notobligedtoelectwhetherhewouldpursuethosefeesasdamagesorascosts).

51Seethepoten alformassiveduplica onofthissortintheawardofthedis nguishedpanelofNigerianarbitratorsinIPCO(Nigeria)Ltdv.NigerianNa onalPetroleumCo[2005]2Lloyd’sRep326.

52See,forexample,theDistrictCourtofAppealofFloridadecisioninP&CThompsonBrosConstruc onCov.Rowe,433So2d 1388 (1983)refusingrecoverybyacontractoragainstasubcontractorofbothasumforliquidateddamagesinrespect

ofthecontractor’sliabilitytotheemployer(which,whenaggregatedwithsumsrecoveredfromothersubcontractorswas alreadyinexcessofthecontractor’sactuallossesfordelayedcomple on)and,separately,liquidateddamagesunderthe subcontractforthecontractor’sownlossesfordelays;recoveryofbothwouldhaverepresentedasignificantwindfall.

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