Skanska Construction UK Ltd v Egger (Barony) Ltd.

Contractual valuation provisions must be applied by reference to the agreed contractual mechanism. Additional or substituted work is valued by analogy with work of similar character, or by a fair valuation where no such work exists. Omissions are valued by reference to the relevant subcontract or guaranteed maximum price analysis.

A provision permitting further detailing does not authorise the employer to introduce new requirements outside the existing scope. A global loss claim is permissible where it is the only practical method of proof, but it fails if any material causative factor is attributable to a party for whom the defendant is not responsible. Common sense assists assessment but cannot replace adequate proof.

The claimant contractor sought payment for numerous variations, loss and expense claims, subcontractor settlements, interest and finance charges arising from the construction of a factory under a guaranteed maximum price contract. The defendant employer advanced substantial counterclaims concerning defective construction, drainage, spoil, water ingress and minor items.

The judgment followed an earlier liability judgment in the same action. The principal issues were the valuation of changed and omitted work, the scope of the contractual detailing provision, proof of global and prolongation claims, recovery of subcontractor settlements, interest, and the defendant’s counterclaims.

1. Changes and detailing. Clause 1.16.1 permitted the employer to furnish final detail within the scope of the Employer’s Requirements. It did not permit the employer to introduce new requirements. Changes in size, complexity, construction method, loading or use which went beyond refinement were compensable variations.
2. Valuation. Under clause 12(5), work of similar character supplied the starting point for valuation. Where no such work existed, the court had to make a fair valuation. The agreed contractual price, rather than a later notional design never agreed by the parties, was the proper reference for valuing omissions.
3. Contractual records. The ROD procedure did not make an instruction irrebuttable proof of the work or its value. A late denial could carry little weight, but the court had to consider all the evidence and the claimant retained the burden of proof.
4. Global claims. A global claim could be advanced where tracing individual causal links was impractical. It required proof that every material causative factor was an event for which the defendant was liable. The claim failed if a material contribution came from an event for which the defendant was not responsible. Causation remained a matter of common sense, but adequate proof was essential.
5. Loss and expense. Clause 12(6) permitted a fair and reasonable adjustment for increased management and common-user costs. Clause 26 concerned actual expense caused by disruption or prolongation. A 2.5 per cent allowance was appropriate for contractual management and on-cost claims, but loss of profit at common law was not proved.
6. Subcontractor settlements. Reasonable commercial settlements of subcontractor claims were recoverable where the contractor established the subcontractor’s entitlement, the employer’s responsibility and the reasonableness of the settlement. A payment alone was insufficient.
7. Interest and finance charges. Clauses 26 and 30 permitted recovery of finance charges and interest on established primary loss and expense. The court distinguished contractual recovery from statutory interest and common-law damages, applying different rates and periods according to the category of claim.
8. The individual claims and counterclaims were determined as set out in the judgment, producing a final judgment sum to be calculated by agreed interest formulations.

The judgment was delivered at first instance and was to be read with the earlier liability judgment in the same action. The judgment refers to an earlier appeal concerning the insurance issue, but gives no citation for that decision.