By Andrew MacCuish and Denis Moriarty

Given the frequency with which we have referred to, or had others refer us to, and English Court decision interpreting part of the FIDIC standard form, we thought it would be useful to refresh your knowledge. Readers may recall the decision of The Hon. Mr Justice Akenhead in the English High Court case of Obrascon Hautre Lain SA v. Her Majesty’s Attorney General for Gibraltar [2014] EWHC 1028 (TCC), and the useful discussion and views as to the interpretation and operation of aspects of clause 20.1 (and its inter-play with clause 8.4) of the standard FIDIC contract conditions – in this case, the version generally known as the “Yellow Book”.

In general terms, cause 8.4 of those FIDIC Conditions sets out the events entitling a contractor to an extension of time, and clause 20.1 addresses what could be called the procedure and mechanism for notifying and establishing a contractor’s claim for an extension of Time for Completion and/or an additional payment, whether the claim arises under the contract or otherwise.

In the time since it was delivered in April 2014, the numerous references to that decision demonstrates its relevance to the construction industry. It is not often that a court provides a judgment on FIDIC contracts; that form of contract mostly comes before arbitrators, where an arbitral tribunal’s decision (award) is unlikely to become known beyond the parties (the confidentiality obligation invariably prevents that).

A court judgment by Mr Justice Akenhead, a distinguished judge of the internationally renowned Technology & Construction Court, was therefore welcomed by lawyers and other professionals who use FIDIC.

Against that background, the salient points of OHL v. Gibraltar are worthy of note.

In his judgment Mr Justice Akenhead had to consider whether the employer was entitled to terminate the contract. This issue prompted an interesting commentary in the judgment on the contractor’s requirements when giving a valid notice of delay leading to consideration of an extension of time. Mr Justice Aikenhead’s comments in relation to Clause 20.1, and the condition precedent requirements necessary to giving a valid notice for extensions of time and money, are of particular interest and the focus in this article.

To summarise briefly the facts of the case; a dispute arose between Obrascon Hautre Lain SA (OHL), a Spanish based contractor, and the Government of Gibraltar regarding a project called the Airport Access Tunnel Works. OHL contracted to design and construct a road and tunnel under the eastern end of the runway at Gibraltar Airport; the contract was governed by the law of Gibraltar. The project ran over time. Works were due to be completed in 2010, and the Government terminated OHL’s contract in August 2011, at which stage it was said that only some 25% of the contracted works had been completed.

OHL subsequently issued proceedings for breach of contract and in response the Government lodged a counter claim for the damages caused by OHL’s alleged failure to complete the works they had contracted to carry out on schedule and within the allocated budget.

Central to the case was the interpretation of the notice requirements required for an extension of time. The principal focus was thus upon the first two paragraphs of clause 20.1 in the FIDIC Yellow Book Conditions, which read:

If the Contractor considers himself to be entitled to an extension of the Time for Completion and/or any additional payment, under any Clause of these Conditions or otherwise in connection with the Contract, the Contractor shall give notice to the Engineer, describing the event or circumstance giving rise to the claim. The notice shall be given as soon as practicable, and not later than 28 days after the Contractor became aware, or should have become aware, of the event or circumstance.

If the Contractor fails to give notice of a claim within such period of 28 days, the Time for Completion shall not be extended, the Contractor shall not be entitled to additional payment, and the Employer shall be discharged from all liability in connection with the claim. Otherwise, the following provisions of this Sub-Clause shall apply. …”

This clause puts the onus on the contractor to provide due notice for either (i) an event or circumstance which now effects the date of the Time for Completion or a claim for an additional payment, or (ii) an event that will effect the completion date some time in the future.

As the second paragraph quoted above makes clear, the effect of the wording of clause 20.1 is that it is a condition precedent clause which means that should a contractor fail to provide the required notice the result will be that the contractor looses its entitlement to any extension of time or additional payment. As such, for a contractor, it is an onerous clause.

Clause 20.1 has to be viewed in conjunction with Clause 8.4 which sets out when a contractor is entitled to an 28 day extension of time and when such an extension begins. Clause 8.4 goes on to list the events that entitle the contractor to an extension of time.

The perceived general industry interpretation of clause 20.1, before OHL v. Gibraltar, was that the back-stop date of 28 days for giving a notice commenced when the contractor became aware, or should have become aware, of the event or circumstance in question; on that basis many contractor’s found they were too late to give notice when seeking an extension of time.

Mr Justice Akenhead, when considering the provisions of clause 20.1 in relation to the circumstances of the case, said that clause 20.1 should be construed broadly and clause 8.4 had to be taken into account when considering extensions of time.

He went on to say that an extension of time entitlement arises if and to the extent that the Time for Completion is or will be delayed. Adopting that logic, a claim can be made either when it is obvious there will be a delay, or when the delay has started to be incurred.

To reach his decision that an extension of time can be claimed for either a prospective or retrospective delay, Mr Justice Akenhead said that clause 8.4 was worded in such a way that a contractor is entitled to choose from either point when deciding which is the trigger for giving notice; clear language would be required in the contract to deprive the contractor of that option.

Considering the above, the OHL v. Gibraltar decision has been understandably viewed as advantageous to contractors operating under FIDIC contracts. It will be interesting to observe over time the impact of the judgment on the drafting of condition precedent clauses regarding notices as employers, invariably, seek to ensure that notice be given at the earliest possible stage.

 

Mondaq

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