Walter Lilly & Company Ltd v Mackay & Anor

Under a JCT design-and-build contract, contractor design liability arises only for work within the contractual categories and clearly notified in writing by the employer. Specialist subcontracting, design development or fabrication drawings do not themselves transfer overall design responsibility.

Where concurrent delay includes a contractual Relevant Event, the contractor is entitled to a full extension of time. Global loss and expense claims are permissible, provided the contractor proves responsibility, causation and loss on the balance of probabilities. Clause 26 requires timely applications and reasonably necessary details, not every supporting document.

WLC was the main contractor for a high-specification residential development. The project began with substantially incomplete design information and suffered extensive delay, variations and disputes about defects, payment and responsibility for design.

WLC claimed extensions of time, loss and expense, unpaid valuation sums and interest. DMW counterclaimed liquidated damages, alleged defects and overpayments. The central issues included contractor-designed portions, concurrent delay, practical completion, global claims and the effect of settlements with DMW’s professional team.

Judgment for WLC. The court held that WLC was entitled to an extension of time up to 7 July 2008, when practical completion occurred. Liquidated damages were therefore not recoverable for the period after 16 February 2007. The quantified net sum due was £2,330,666.26, exclusive of further contractual interest; costs and remaining interest issues were reserved.

1. Design responsibility. Under the amended JCT provisions, a work item became part of the Contractor’s Designed Portion only if it fell within the contractual list and DMW clearly notified WLC in writing. The notice had to identify the relevant work and be directed to WLC. Architect’s instructions were insufficient unless the architect was expressly authorised to notify on DMW’s behalf. Subcontractor design development, fabrication drawings and direct dealings between the architect and specialist suppliers did not transfer overall design responsibility. WLC was consequently not liable for design deficiencies in the American Black Walnut, Courtyard Sliding Doors, Light Wall, Library leather work or external joinery.
2. Extensions of time. Clause 25 required prospective assessment before practical completion and a final retrospective assessment within 12 weeks afterwards. Where two effective causes operated concurrently and one was a Relevant Event, WLC was entitled to the whole period of delay attributable to the Relevant Event. The court followed the net-delay approach in Balfour Beatty Building Ltd v Chestermount Properties Ltd (2003) 62 BLR 1, approved the reasoning in Henry Boot Construction (UK) Ltd v Malmaison Hotel (Manchester) Ltd (1999) 70 Con LR 32, and declined the apportionment approach in City Inn Ltd v Shepherd Construction Ltd [2010] BLR 473. Critical delay was assessed by identifying the longest sequence of outstanding work, checked against actual progress. The principal delay arose from late instructions and variations concerning the Library leather, Barrisol ceilings and lighting, Stingray doors and Light Wall.
3. Loss and expense. Clause 26 imposed conditions precedent, but required only information reasonably necessary to enable ascertainment. A claim was not defeated because every supporting accounting document was not supplied. The court accepted that a global claim could succeed where the contractor proved the responsible events, causative delay or disruption and resulting loss. Head-office overheads and profit were recoverable where the contractor proved the lost opportunity to undertake profitable alternative work; formulae such as Emden were legitimate aids to assessment.
4. Settlements and defects. WLC could recover reasonable sums paid to delayed subcontractors where the underlying claims had sufficient strength, a causal link and settlement amounts within a reasonable range. Amounts recovered by DMW from other professionals had to be credited against overlapping claims. DMW recovered £35,000 for agreed mechanical and electrical defects and £1,050 for a failed roof membrane, but most other defect claims failed or were extinguished by the settlement credit.

The judgment was a first-instance decision. The court referred to earlier Part 8 proceedings in the same dispute, [2008] EWHC 3139 (TCC) , concerning the American Black Walnut issue. No appeal from the present judgment was stated.