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Save yourself time and expense and remember the three C's

legal matters

Construction litigation is notoriously time-consuming and costly, writes Kim Franklin, particularly if all the knotty problems that can turn up on any project end up in court. Hence the introduction of the construction and engineering protocol, that encourages parties to settle before they begin proceedings, and the potential usefulness of adjudication during the course of a project to solve things as you go along.

But since these methods need the parties to behave in a sensible, commercial fashion, there are still occasions when the opposite sides end up slugging it out to the end. HHJ Wilcox recently gave judgment about costs in Skanska v Egger (2 March 2005). In this case, concerning construction of a factory that took less that a year to build, litigation took five years. The net winner was Skanska, which recovered about £2.8 million. The costs were about £9 million.

The path that led to this unsatisfactory result started with problems with contract administration.

Egger decided (wrongly) that the employer's requirements enabled it to make changes without cost consequences, and its project manager failed to consider properly Skanska's applications for extensions of time until after the litigation had started.

So Skanska claimed, and Egger counterclaimed. The judgment refers to claims for 19 final account items (one of which comprised 1,700 'minor items'), six loss and expense items and 11 counterclaim items (one comprising 'minor items', which included 89 M&E claims).

This was a liability trial in the forlorn hope that, once responsibility was resolved, the parties could sort out between themselves the sums of money that should be paid. However, a further trial about quantum was needed.

The typical pattern seems to have been that before the quantum trial Skanska revised the amount of its claim downwards, while Egger moved its numbers upwards, but a gulf still remained, as did the antagonism between the parties. The judge said Egger's approach was epitomised when the draft quantum judgment was published, which contained sums awarded on the claim and counterclaim rounded up or down to the nearest pound. Egger tried to have the pence reinstated.

The argument at the costs stage ran along the lines of Egger saying that, compared with the original high amounts claimed by Skanska, it had not been very successful, and that should be reflected in the costs order.

To illustrate, at the quantum trial Skanska had pitched its claim for installing underground ducts at £120,000. Egger admitted £2,300.

Skanska was awarded £30,500. So, Egger said, Skanska had only been about 23 per cent successful, which should be reflected in the costs order. But the judge pointed out that had Egger's admitted amount been the baseline, Skanska's recovery would have been 1,317 per cent.

Having reviewed the saga of each head of claim and counterclaim, the judge decided that Egger should pay 55 per cent of the total costs. In reaching that 'robust' conclusion he was critical of both parties. Egger had failed to administer the contract properly, and that was reflected in the costs order.

In turn, Egger's behaviour had driven Skanska to take an absurd view of what had happened.

Despite the best efforts of the lawyers and some of the experts, the parties had failed to adopt a more reasonable approach as the dispute progressed.

Neither party had made any offer to settle.

There is no real winning party in litigation like this. As well as there being lessons for those engaged in disputes, there are also wise words in the judgment for contract administrators.

The judge concluded that dealing with such things contemporaneously means that everyone has a clear recollection of what happened, a will to investigate the relevant matters economically, and, if not reach a solution, at least narrow the issues. As for Egger's misinterpretation of the contract, it is, of course, always open to a contract administrator to recommend that legal advice be sought at an early stage, and hopefully thereby avoid such misunderstandings developing into full-blown disputes.

So remember the three C's: resolve what you can contemporaneously; take a commercial approach to any dispute that arises; and think about cooperating with the other side to work towards a resolution.

Kim Franklin is a barrister and chartered arbitrator at Crown Office Chambers. Visit www. crownofficechambers. com

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