The effect of time-bar provisions on the notification of claims has been a hot topic and there remain areas of legal uncertainty. Glen Water v Northern Ireland Water provides a timely reminder that parties ignore such provisions at their peril.
Common law is a wonderful thing. All those decisions by judges providing answers to so many legal questions… but not all.
And for a court’s ruling on an unanswered question we have to wait for warring parties to risk time and money fighting a case to a finish. In the meantime lawyers can perhaps be forgiven for advising, in classic style, “on the one hand … but on the other”.
Take construction contract time bar clauses, for instance, which put a time limit on contractor applications for more time and money: eight weeks under NEC3, 28 days under FIDIC. Miss the date and the wording says it’s goodbye to any more time, money or anything. And, at least in relation to contractors’ claims for additional costs caused by the employer’s actions, it seems clear that the courts will normally enforce well-drafted time bar provisions.
This was recently demonstrated by a decision in Northern Ireland: Glen Water v Northern Ireland Water Ltd  NIQB 20.
A sludge treatment upgrade project agreement had a clause dealing with claims. Notification of a compensation event had to be given within 21 days of the contractor becoming aware of the event causing – or being likely to cause – delay, breach of the agreement or cost.
It was agreed that notification was a condition precedent and the contractor, Glen Water, said it had given notification of a £4.4m claim in a letter which was part of a chain of correspondence relating to a separate claim.
But could notification be inferred from that letter? Could it be a hybrid?
“Though the consequences were dramatic, the decision is in line with cases in England and Wales”
The Northern Ireland High Court said that notification had to have certainty. There must be clarity, and that was absent. Glen Water had not convinced the court that there was a valid notification. The letter being relied on had not even been referred to in the preceding adjudication about the same issue.
The contract terms were clear, commercial certainty is an overarching consideration and the evidence as to the commercial context and surrounding circumstances had not remedied the defect in the letter.
No definitive answer
Though the consequences were dramatic, the decision is in line with cases in England and Wales. So far, so good – but what about the operation of such provisions in relation to time bars and extensions of time?
Here the position in England and Wales is less clear and the concern for lawyers is the prevention principle, which stops an employer who caused a time overrun from claiming liquidated damages for the delay. But does that still apply if the contractor misses the deadline for its extension-of-time claim? Can the employer then benefit from the contractor’s failure and its own delay?
“At the risk of stating the obvious, the safer and easier solution is to make sure that the notices get in on time”
In the Australian case of Gaymark the answer was no, yet this has been heavily criticised. Mr Justice Jackson almost had to decide the case under English law in Honeywell v Multiplex, where he doubted Gaymark and wondered what the point of the time limit was if the contractor’s missed deadline did not matter.
Yet he determined the case on other grounds and so, sadly, his comments on this issue – and those of Judge Stephen Davies in Steria v Sigma, who agreed with him – do not provide the definitive answer.
But what to do in the meantime, while we wait for that answer? How about looking at the drafting.
In 2014, in Bluewater v Mercon, Mr Justice Ramsey reviewed a contract that gave the employer discretion in assessing whether to bar a claim because the contractor had failed to serve a proper notice.
The judge ruled that, in exercising this discretion, the employer could not act capriciously or arbitrarily. In other words, an employer in a similar position needs to think twice before rejecting a claim on grounds of improper notice.
The decision might prove helpful to a contractor, but at the risk of stating the obvious: the safer and easier solution is to make sure the notices get in on time.
Tom Duncan is a partner and George Fisher is an associate in the construction and engineering group at Mayer Brown International