One man’s delay is another man’s disruption

Article 19/04/2017

Posted by Melissa Moriarty on 19/04/2017

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.