In a previous update issued earlier this year, we discussed the important decision of a Commercial Court Judge in the Court of Session - FES Limited v HFD Construction Group Limited. In that decision the judge decided that the giving of notice by the Contractor under Clause 4.21 of the JCT/SBCC 2016 Standard Form of Building Contract was a condition precedent to a contractor's entitlement to recover loss and expense.
Although the judge confirmed the position was as many had understood it to be, the decision has been the subject of some comment. Some questioned whether it was correct. It was an important decision not least because the relevant standard form wording is in regular use both North and South of the border.
The judge's decision was appealed by the Contractor, FES. The Scottish Appeal Court has now held that the Commercial Judge's interpretation of the relevant contract provisions was correct and should be upheld. It took the court only five brief paragraphs to explain its reasoning.
The Appeal Court was at pains to stress that it was not being asked to assess whether there had been compliance with clauses 4.21.1 or 4.21.2 in the sense of determining whether the Contractor did notify ' as soon as 'it became reasonably apparent' that loss had arisen and whether an initial assessment had been sent 'as soon as reasonably practicable'. The Appeal Court considered that all those terms were 'relatively flexible' and, if the court were called upon to do so, it would 'approach them in that light; no doubt affording the [Contractor] considerable leeway, given the consequences of non- compliance'.
The question posed to the Appeal Court, however, was in the accepted context of there being no notification in terms of clause 4.21.1. In that situation the Appeal Court considered that the answer to the question must be either that compliance is a prerequisite to recovery or it is not. The Appeal Court considered that the judge was right in deciding that notice was a prerequisite to recovery.
Since the court considered that there was no ambiguity in the wording used in the contract, it said that there was no need to analyse what may be regarded as 'commercial common sense' to arrive at the correct interpretation of the words used. If it were, it would be of little assistance to FES. That was because the need to be duly notified and advised of a potential liability within a limited (but not certain) time span is a reasonable condition before a claim could be considered and ultimately determined. There was no ' nonsensical or absurd' result arising from giving the words in the relevant clause their ordinary and plain meaning in the context of the contract as a whole.
The lesson to be learned from this case is that notice should be given if a claim for loss and expense is to be pursued. There may, of course, be arguments about whether any such notice meets all the requirements of the contract but the strong hint from the Appeal Court is that a contractor may be afforded 'considerable leeway' in such circumstances. It is important, therefore, not to fall at the first hurdle by failing to give any notice at all.
