-
The Court at First Instance held that it did and made clear "there can be no dispute, and no ambiguity, from the plain and clear language used in Clause 21, that the service of notices of claim in writing referred to in Clause 21.1 and 21.2 are conditions precedent, must be 'strictly' complied with, and failure to comply with these conditions will have the effect that the Defendant will have 'no entitlement' and 'no right' to any additional or extra payment, loss and expense."
- The Court of Appeal agreed with the Court at First Instance stating "Within the stipulated time, the Sub-Contractor is required to give notice of the contractual basis, not any possible contractual basis which may turn out not to be the correct basis. The reference to 'the contractual basis' would not preclude identifying more than one basis in the alternative or stating more than one basis in the notice or serving more than one notice each stating a contractual basis."
Maeda Corporation will increase the number of condition precedent clauses that require the contractor or sub-contractor to also state the contractual basis of its claim; increase the focus on strict compliance with 'time-bar' clauses more generally; increase claims of waiver or estoppel made as a result of the way in which the parties had conducted themselves in relation to a claim notified under the 'time-bar' clause; and increase the use of 'in the alternative' notices issued by contractors or sub-contractors.- Parties seeking to circumvent
Maeda Corporation may be tempted to argue that the words "strict compliance" are essential before its jurisprudence is applied. Parties seeking to rely onMaeda Corporation may be tempted to argue that the strict adherence to 'time-bar' comes from plain wording of such clauses such that there is no need to look at the commercial purpose.3
The 'Time-Bar' Clause
Put simply, the JV Plaintiffs (
Clause 21 of the sub-contract stated:
21.1 If the Sub-Contractor intends to claim any additional payment or loss and expense pursuant due to:
21.1.1 any circumstances or occurrence as a consequence of which the Contractor is entitled to additional payment or loss and expense under the Main Contract;
21.1.2 any alleged breach of the Sub-Contract, delay or prevention by the Contractor or by his representatives, employees or other sub-contractors;
21.1.3 any claim for discrepancy between Sub-Contract Drawings and documents pursuant to Clause 8.4;
21.1.4 any claim under Common Law, statute laws or by-law;
21.1.5 any extension of time granted to the Sub-Contractor with exception to those cases which the delay are caused by typhoon signal no. 8 and/or force majeure etc.
21.1.6 any Variation of Sub-Contract Variation,
as a condition precedent to the Sub-Contractor's entitlement to any such claim, the Sub-Contractor shall give notice of its intention to the Contractor within fourteen (14) days after the event, occurrence or matter giving rise to the claim because apparent or ought reasonably to have become apparent to the Sub-Contractor. For the avoidance of doubt, the Sub-Contractor shall have no entitlement to any additional payment or any additional loss and expense and no right to make any claim whatsoever for any amount in excess of the Sub-
21.2 If the Sub-Contractor wishes to maintain its right to pursue a claim for additional payment or loss and expense under Clause 21.1, the Sub-Contractor shall as a condition precedent to any entitlement, within twenty eight (28) Days after giving of notice under Clause 21.1, submit in writing to the Contractor:
21.2.1 the contractual basis together with full and detailed particulars and the evaluation of the claim;
21.2.2 where an event, occurrence or matter has a continuing effect or where the Sub-Contractor is unable to determine whether the effect of an event, occurrence or matter will be continuing, such that it is not practicable for the Sub-Contractor to submit full and detailed particulars and the evaluation in accordance with Clause 21.2.1, a statement to that effect with reasons together with interim written particulars. The Sub-Contractor shall thereafter, as a condition precedent to any entitlement submit to the Contractor at intervals of not more than twenty eight (28) Days (or at intervals necessary for the Contractor to comply with his obligations under the Main Contract, whichever is shorter) further interim written particulars until the full and detailed particulars are ascertainable, whereupon the Sub-Contractor shall as soon as practicable but in any event within twenty eight (28) Days (or as necessary for the Contractor to comply with his obligations under the Main Contract, whichever is shorter) submit to the Contractor full and detailed particulars and the evaluation of the claim;
21.2.3 details of the documents and any contemporary records that will be maintained to support such claim; and
21.2.4 details of the measures which the Sub-Contractor has adopted and proposes to adopt to avoid or reduce the effects of such event, occurrence or matter which gives rise to the claim.
21.3 The Sub-Contractor shall have no right to any additional or extra payment, loss and expense, any claim for an extension of time or any claim for damages under any Clause of the Sub-Contract or at common law unless Clauses 21.1 and 21.2 have been strictly complied with. [emphasis added]
The condition precedent Clause 21.2.1 required Bauer to specify the contractual basis of its claim. Clause 21.3 stated that Bauer would have no entitlement to additional time and/or money unless Clause 21.2 had "been strictly complied with." The "like rights" claim is set out in Clause 21.1.1, but had it been notified pursuant to Clause 21.2.1?
The Arbitrator's Approach
Bauer's Clause 21.2 notice did not make express reference to a claim under Clause 21.2.1. There was no dispute about that specific point. The arbitrator found that the appropriate Clause 21.2 notice had nevertheless been given (despite the fact that Bauer had made its claims based on a variation or sub-contract variation (under Clause 21.1.6), and not on a "like rights" basis under Clause 21.1.1). The arbitrator made it clear in the award that the claim allowed in the arbitration is a new legal basis, but that Bauer was not precluded under Clause 21.2 to pursue a different contractual or legal basis. The Arbitrator stated:
"I consider that both as a matter of sympathy and as a matter of construction, the contractual basis of the claim stated in the Clause 21.2 notice does not have to be the contractual basis on which the party in the end succeeds in an arbitration. First, to expect a party to finalize its legal case within the relatively short period and be tied to that case through to the end of an arbitration is unrealistic. Secondly, what is important from the point of view of the [JV] is to know the factual basis for the claim so that it can assess it and decide what to do.
Indeed, as can be seen on the facts here, the JV's view of the appropriate legal basis for the claim was that it was a Clause 38 unforeseen physical conditions claim as well as a Variation claim, as shown in the notices which were then given to the MTRC. It therefore follows that the fact that Bauer have made its claims on the basis of the relevant claim being a Variation or Sub-Contract Variation does not preclude Bauer from making the claim on a new legal basis based on notices given by reference to a different legal basis."
The Courts' Approach
Both the Court at First Instance and the
[23] In my view, there can be no dispute, and no ambiguity, from the plain and clear language used in Clause 21, that the service of notices of claim in writing referred to in Clause 21.1 and 21.2 are conditions precedent, must be "strictly" complied with, and failure to comply with these conditions will have the effect that the Defendant will have "no entitlement" and "no right" to any additional or extra payment, loss and expense.
The arbitrator had considered that the principal purpose of Clause 21 was to enable the JV to know the factual basis for the claim so that it can assess it and decide what to do and that purpose had been complied with because the JV had made a unforeseen physical conditions claim upstream to the Employer. The Court at First Instance disagreed, stating5:
"There is commercial sense in allocating risks and attaining finality by designating strict time limits for claims to be made and for the contractual basis of claims to be specified. In particular, the language used in Clause 21.1 is in my view clear on its plain reading, and the decisions in
Put shortly, the
Footnotes
1
2 Clause 20.2.4 of the Second Edition of the FIDIC Silver Book requires the claiming party to submit a "fully detailed claim" which includes "a statement of the contractual and/or other legal basis of the Claim" within either "84 days after the claiming Party became aware, or should have become aware, of the event or circumstance giving rise to the claim, or such other period (if any) as may be proposed by the claiming Party and agreed by the other Party."
3 In
'The court's approach to the construction of commercial contracts is now well known and was not in dispute. Absent further intervention by the Supreme Court, the principles can now be taken as settled. They have been re-stated in Arnold v Britton [2015] UKSC 36, [2015] AC 1619 and Wood v
Males LJ continued at paragraph 56 by reference to the five factors in Arnold v Britton: "I propose to undertake the 'unitary exercise' of construction by considering (1) the language of [the clause], (2) other relevant provisions of the Agreement, (3) the overall structure of the Agreement's payment provisions, (4) the background circumstances known to the parties at the time the Agreement was concluded, and (5) commercial common sense."
4
5
6 Clause 38.1 of the main contract provided, inter alia: "If however during the Execution of the Works the Contractor shall encounter within the Site physical conditions (other than weather conditions or conditions due to weather conditions) or artificial obstructions which conditions or obstructions he considers could not reasonably have been foreseen by an experienced contractor at the date of the Letter of Clarification, and the Contractor is of the opinion that additional Cost will be incurred which would not have been incurred if the physical conditions or artificial obstructions had not been so encountered, he shall if he intends to make any claim for additional payment comply with Clause 82 ." It was accepted by the JV that in principle and subject to complying with the notice provisions in Clause 21, pursuant to Clause 21.1.1 Bauer would have a "like rights" claim and be entitled to be paid a proportion of any amount paid under the main contract for a Clause 38 claim.
7
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
Mr
1999 Avenue Of The Stars Suite 600
CA 90067-6022
Tel: 202.887.4000
E-mail: Jlarivee@akingump.com; pazimi@akingump.com
URL: www.akingump.com
© Mondaq Ltd, 2020 - Tel. +44 (0)20 8544 8300 - http://www.mondaq.com, source