Background
The parties entered into a contract under which FES agreed to carry out certain fit-out works for HFD. The parties’ contract was the Standard Form of Building Contract for use in Scotland (SBC/Q/Scot) (2016 Edition) with certain bespoke amendments (‘the Contract’).
The relevant provisions of the Contract
Clauses 4.20.1 and 4.21.1 of the Contract, which mirrored those of the Standard Form, provided as follows:
“Matters materially affecting regular progress.
4.20.1 If in the execution of this Contract the Contractor incurs or is likely to incur any direct loss and/or expense as a result of any deferment of giving possession of the site or part of it under clause 2.5 or because regular progress of the Works or any part of them has been or is likely to be materially affected by any Relevant Matter, he shall, subject to clause 4.20.2 and compliance with the provisions of clause 4.21 be entitled to reimbursement of that loss and/or expense……………
Notification and ascertainment
4.21.1 The Contractor shall notify the Architect/Contract Administrator as soon as the likely effect of a Relevant Matter on regular progress or the likely nature and extent of any loss and/or expense arising from a deferment of possession becomes (or should have become) reasonably apparent to him…………………………………………………………………………….”.
4.21.2 That notification shall be accompanied by or , as soon as reasonably practicable , followed by the Contractor’s initial assessment of the loss and /or expenses incurred and any further amounts likely to be incurred ……………………………………………………”
The remainder of Clause 4.21 went on to set out in detail even more requirements as to the nature and timing of notices.
The dispute
FES encountered various delays, including the closure of the site due to COVID. A dispute then arose about FES’ entitlement to an extension of time and loss and expense. FES referred the dispute to adjudication. One of the matters the adjudicator had to decide was whether the giving of notice by the contractor (FES) under Clause 4.21 was a condition precedent to reimbursement of loss and expense. The adjudicator decided it was. He went on to find that FES had not given the proper notice and, accordingly, it was not entitled to loss and expense under Clause 4.20.
The arguments and the decision
FES argued that the adjudicator had misinterpreted the contract and, accordingly, was wrong in law. It contended that notice was not a condition precedent to entitlement. It argued that as Clause 4.20.1 does not spell out the consequences of non-compliance with the terms of Clause 4.21, the parties cannot have intended that the clause creates a condition precedent.
The judge rejected these arguments. In his view, they failed to take account of the fact that the contractor’s entitlement is dependent upon compliance. Accordingly, far from not spelling out the consequences of non-compliance, the wording of the Clause made it clear that, without such compliance, the contractor is not entitled to reimbursement of loss and expense.
Although there had been some bespoke amendments to the Standard Form which had been agreed between the parties for the purposes of the Contract, the key point was that the relevant wording of Clause 4.20.1 of the Standard Form had not been altered by them.
The judge did not consider it necessary to address in detail some of the other arguments by FES, such as interpretation of the contract based on ‘business common sense’. As he had found that the language used by the parties clearly disclosed their intention, it was not for the court to ‘second guess what business common sense might have otherwise dictated’. Even if such factors were to be taken into account, the judge considered that they did not assist FES. Interpreting Clause 4.20.1 as a condition precedent served an intelligible purpose – contemporaneous investigation of Relevant Matters and their effects.
Comment
Where, as in the present case, the relevant wording of the Standard Form has not been changed, the decision is a helpful one which clarifies matters going forward. In a previous case dealing with the relevant wording, the ‘condition precedent’ point had not been argued. The judge stresses that decisions in other cases where the parties have changed the relevant wording of the Standard Form have to be considered with care. They might give rise to a different result from the one in this case.
Leaving aside the strict legal position, it will normally be good practice for a contractor to give proper notice where it is intended to seek an extension of time or recovery of loss and expense. It is recognised, however, that in the sometimes complex world of construction, that may be easier said than done!
