1. SALEEM AKHTAR, J.---These two appeals arise from the judgment passed by the Division Bench in High Court Appeal No.42 of 1990 whereby the judgment of the learned Single Judge making the award rule of the Court was modified and Karachi Tameerat Limited, hereinafter referred as `the appellant' was awarded Rs.18,11,725.80 plus cost of Rs.70,000 as against a sum of Rs.30,21,402.80 and Rs.70,000 as cost originally awarded. Karachi Transport Corporation, (KTC) awarded to appellant work of construction of Mehran Bus Depot in Malir Cantonment Karachi and a formal agreement was executed between the parties on 24-5-1981. The appellant was to complete the work within 12 months from 25-2-1981 and the value of the contract work was Rs.1,22,60,961. The appellant completed the work on 25-5-1985 after a delay of 3 years and-3 months. As a dispute between the parties had arisen the same was referred to Mr. Justice (Retd.) Fakhruddin G. Ebrahim, who was appointed the sole arbitrator. The appellant filed a claim against KTC for Rs.75,57,924.50 while the KTC denying the claim made a counterclaim of Rs.67,66,987. The learned sole arbitrator . Made the award on 18-12-1988 whereby ,a sum of Rs.30,21,402.80 with cost of Rs.70,000 was awarded to the appellant. This award was filed in the Court to which objections were filed by KTC which were heard by the learned Single Judge and were rejected. The award was made rule of the Court. This judgment was challenged before the Division Bench of the High Court which by the impugned judgment modified the judgment of the learned Single Judge as aforestated. As both the appeals arise from the same judgment and the learned counsel have argued both the appeals together, we propose to dispose them of by this common judgment.
2. 2.Mr. Bilal Khawaja, the learned counsel for the appellant contended that the learned Single Judge and the Arbitrator had allowed overhead expenses at the rate of 7-1/2% of the value of the contract against of 10% as claimed but the impugned judgment has further reduced it without any basis.
3. The appellant had claimed Rs.38,37,566 as overhead expenses on account of abnormal delay in the completion of the work. The learned arbitrator found that there was a delay of 39 months on the basis of which the claim had been made. In the award it was held that KTC was responsible for the delay only for 23 months and awarded Rs.17,25,000 as overheads. The learned arbitrator had observed as follows:-- The overhead cost in a construction contract is generally 10 per cent of the total contract value. The Consultants also accept that the if per cent of the contract value represents overhead cost. The contract value being Rs.1,22,60,961 and the original completion by the parties was approximately Rs.100,000 per month. For 23 months ate 10 per cent as overhead the plaintiff would be entitled to Rs.23,00,000 However I cannot lose sight of the fact that this was a case of abnormal delay in the completion of the work and it cannot be said that the plaintiff could not have to the extent possible reduced his overheads. At least the plaintiff was expected to do so. The ends of justice will, therefore, justify the grant of overheads at 7-1/2% per cent instead of 10% of the contract value.
4. Therefore, for extended period of 23 months delay caused by the defendant, the plaintiff will be entitled at Rs.75,000 per month, Rs.17,25,000 as overheads."
5. This was confirmed by the learned Single Judge but it was not accepted by the Division Bench which reduced it to Rs.515,323. The main reason for reducing the claim was that the appellant was to complete the work upto 30th June, 1983, and if completed no overhead expenses could have been charged. Therefore, the appellant would be entitled to overhead expenses from 1-7-1983 onwards. In the impugned judgment the follow.
6. "On the basis aforesaid the total overhead cost at 7-1/2 per cent on the revised work of Rs.1,44,71,047 comes to Rs.10,85,328 for the entire revised completion period of 28 months and therefore the monthly overhead cost would work to Rs.38,761 and in that ratio the monthly overhead cost on Rs.37,72,350 will be Rs.10,104 which when multiplied by the 23 months delay will be Rs.2,32,397 being the liability of the appellant on the first count.
7. As for appellant's liability for the additional overhead cost incurred by it during the completion peiod upto 30-6-1983, the position is that the learned arbitrator has determined the value of the total work as Rs.1,44,71,047 and that of work not completed at the end of the completion period on 30-6-1983 as Rs.37,72,350 as such simply by substracting the latter from the former the value of the work executed during the completion period works out Rs.1,06,98,697 (and not ~'Rs.91,06,650 as observed in the award). Now the respondent has been assumed to have incurred overhead cost on the entire value of work of Rs.1,44,71,0-17 during the completion period but could recover such cost only in respect of work worth Rs.1,06,98,697 completed during the said period. Therefore, the appellant would be liable for the difference between the two being the additional overhead cost to the respondent. As held earlier the overhead cost on the above total work of Rs.1,44,71,047 till the end of the completion period on 30-6-1983 will be Rs.10,85,328 and, therefore, on that basis such cost on Rs.1,06,98,697 for the same period would be Rs.8,02,402. The difference therefore, would be of Rs.2,82,926.
8. Thus, on account of overhead cost the appellant would be liable to the respondent for Rs.5,15,323 (Rs.2,32,397 + Rs.2,82,926) and not Rs.17,25,000 as awarded."
9. 3.The undisputed facts are that the total value of the work including the extra work was Rs.1,44,71,047. There was a delay of 39 months out of which KTC was responsible for a delay of 23 months. It is, therefore, to be considered what should be the basis for granting overhead for such period of delay. According to Mr. Biial Khawaja it should be calculated at the rate of 10% for the period of entire delay of 39 months. This contention cannot be accepted. The Contractors claim overhead expenses as a damage for the delay in execution of the contract caused by the employer, but where the delay is due to reasons caused by the contractor himself he cannot claim any damage or overhead for that period. Therefore, such claim can be restricted only for period of 23 months. Where any delay is caused in completion of the project by the employer contractor may have to incur more expenses which may be termed as a loss. Amongst it is included offsite overheads which are also known as head office \ overheads. Usually the contractors visualise such contingencies and provide for particular percentage in the Contract.
10. However, where specific rates for making such claim are not mentioned or specified in the contract, various principles and formulas have been practised with a view to compensate the contractor. The overhead expenses are partly independent of the actual site expenditure which may also include the recurring head office overheads. As observed by Prof. John Uff in Keating's Building Contracts, 4th edition, "the overheads do not include profit which is otherwise specifically included in the claim. Mr. Khawaja has referred to Civil Engineering Claims by Vincent Powell-Smith and Douglas Stephenson, according to which site overheads include those site costs which are not directly related to the particular item of work. They have included in it salaries and wages of non- productive staff like the Agent, Site Engineer, Quantity Surveyors, Secretaries, General Foreman etc., office erection, hire, removal and other costs including heating, lighting, sanitation, telephone etc., secilrity provision for stores, workshops, latrines etc., construction, maintenance and removal of site- access roads, haulage of plant to and from site, contract insurance, performance bond, provision and maintenance of small tools, subsistence and travelling costs and allowances etc."
11. According to the learned authors, "the majority of the above items are of a time related nature but there arc a few in which the whole or part of the cost is lumpsurti. The latter must obviously be excluded when calculating the weekly site (oil cost), which cost may in general be claimed in respect of the delays for which the employer i: responsible." Offsite overheads also cover salaries and wages of Head Office supervisory estimating, surveying administrative personnel and accounting staff and other related expenses but there would be relationship between the "annual turnover and annual-head turnover and overheads so that the latter may be expressed as a percentage of on-site turnover." These Principles as enumerated give a guideline for estimating the overhead expenses which in practice should be proved by the Contractor by producing cogent and reliable evidence. Mr. Khawaja has referred to the aforesaid stated books as well as Hudson's Building and Engineering Contracts in which a formula for calculating offsite overheads known as Hudson's formula has been given as follows:- HO/profit percentage 100X contract sum contract period (weeks)X period of delay (week)
12. This formula does not seem to be universally accepted for calculating the overhead expenses and according to Vincent Power-Smith and Douglas Stephenson "the formula contains a mathematical inaccuracy, since as set out, it allows a claim for overheads and profit on the amount already included in the contract sum. At the very least, the formula as printed should read contract sum less overheads and profit" instead of `contract sum'. According to these authors, this formula is based on certain assumptions namely.
13. "(1)that the profit or overhead contribution was capable of being earned elsewhere at the time of delay.
14. (2)That the profit and overhead percentage is a reasonable one.
15. (3)That work of the same level of profitability/overhead recovery was available during the period of delay."
16. For making such assumptions, there should be proper evidence to support it.
17. Mr.Khawaja while referring to these Authors, contended that 10% of the total value of the contract should have been awarded as overhead expenses. The sole Arbitrator had awarded at the rate of 7-1/2% which was confirmed by the learned Single Judge. However, in High Court Appeal, a Division Bench maintaining the same percentage, reduced the amount on which it should be calculated. In our Jew the overhead expenses on percentage basis are to be calculated.On the entire value of the contract for the period for which delay has been caused due to default or negligence of the employer. Flat rate of 10% which according to he Learned counsel for the appellant is supported by the Hudson's formula, cannot be applied for the reason that as stated earlier it does not. Exclude the profits which cannot be made a basis for calculating the overhead expenses on percentage basis. There is no other evidence on the basis of which it can be estimated that the actual loss suffered by the appellant would have been the amount claimed by the appellant at the rate of 10% of the value of the contract. In the absence of any such evidence, it would be safe to restrict for overheads claim to 5% of the total value of the contract for the period of 23 months. We, therefore, partly allow Appeal No.144-K of 1991 filed by the Karachi Ta'amirat Limited, as indicated above. The appellant would thus be entitled to Rs.12,50,000.
18. Mr. Dastagir has contended that the entire value of the contract should not be taken into consideration but it is the balance amount of work and value thereof on which overhead expenses should be calculated. He has not been able to produce any authority or any commentary to support his contention. We are not impressed by it. We, therefore, dismiss Civil Appeal No.36-K of 1991, filed by Karachi Transport Corporation. The parties shall bear their own costs.