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One man’s delay is another man’s disruption


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Summary: In McGee Group Ltd v Galliford Try, the court applied normal contractual principles to the construction of caps on liability, and found that Galliford Try’s interpretation of the cap strained commercial common sense. In doing so the court considered the loss and expense provisions of the JCT standard form and clarified that there was no real distinction between claims for delay and disruption, since to distinguish between them was impossible.

Galliford Try, a contractor, and McGee Group Limited, a subcontractor, entered into a subcontract for works at Resort’s World, Birmingham.  The subcontract, based on the JCT standard form with copious amendments, contained a cap at clause 2.21B limiting McGee’s liability to Galliford Try for “direct loss and/or expense and/or damages” to 10% of the subcontract sum.  Galliford Try had claims against McGee Group for delay and disruption under both clause 2.21 and 4.21, and it argued that the 10% cap applied only to those claims that were made under clause 2.21, but not those under clause 4.21.  In support of this argument was the fact that the cap was found at clause 2.21B.

The judge reviewed the principles relating to caps and remarked that there was no longer any residual hostility to them (Ailsa Craig Fishing Company Limited v Malvern Fishing Co Ltd). He held that the cap should be construed in accordance with normal contractual principles, although to be effective it must be drafted clearly and unambiguously.

The judge considered that the meaning of “direct loss and/or expense” had been decided in FG Minter v Welsh HTSO [1980] as being synonymous with the financial effects of delay and disruption, and was a term that was dear to every construction lawyer’s heart.  Galliford Try argued that the addition of the words “and/or damages” in this case meant that McGee Group was seeking to limit all of its liability to 10% of the contract sum, and that this “proved too much”.  Coulson J did not agree, holding that contractors routinely put a claim for loss and expense arising out of delay and disruption  as a claim for damages in the alternative.  

It was not possible to distinguish, as Galliford Try proposed, between claims for loss and expense caused to them by McGee's failure to complete the sub-contract on time, and loss and expense caused to them by McGee's failures to allow them to meet the access dates, on the one hand, and claims for loss and expense caused to them by McGee's failures affecting the regular progress of the main contract on the other. This would be an artificial and uncommercial interpretation of the terms, with no basis in practical reality, and furthermore it would be impossible to police because of the degree of overlap between the two.

The judge dismissed Galliford Try’s distinction between delay, which it said was dealt with by clause 2.21, and disruption, which was dealt with by clause 4.21. He doubted whether anyone who had ever put together a claim for delay and disruption could draw a sensible distinction between the two, and noted that Galliford Try themselves had been unable to make such a distinction in their pleading.

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