Why notices are important for loss and expense claims in JCT contracts

A decision by Scotland’s Court of Session sheds light into giving notice as a prerequisite for loss and expense claims for JCT Standard Building Contract users in England. By Helen Stuart and Zainab Anwar.

JCT Standard Building Contract
Entrance to the Law Courts in Parliament Square, Edinburgh (Image: Kim Traynor via Wikimedia Commons)

A recent decision by Scotland’s highest civil court on FES Ltd (FES) v HFD Construction Group Ltd (HFD), held that submitting a notice was a condition precedent to a contractor’s entitlement to loss and expense for delay.

The notice provisions in the case were clauses 4.20 and 4.21 of the Standard Building Contract with Quantities for use in the Scotland (SBC/Q/Scot) 2016 Edition. However, as the JCT Standard Building Contract 2016 Edition (JCT) has identical clauses 4.20 and 4.21, the decision will be relevant to users of the JCT and will carry weight in English cases.

Delayed works

HFD and FES entered into a contract to carry out works in a Glasgow office. The contract was based on the SBC/Q/Scot with amendments. The works were delayed due to the Covid-19 pandemic and a dispute arose between the parties regarding FES’s entitlement to an extension of time and an associated claim for loss and expense. The dispute was referred to adjudication.

The contract had not materially altered clauses 4.20 and 4.21 and contained the standard contract wording for clauses 4.20.1 and 4.21.2.

Clause 4.20.1 states that the contractor, if it has become delayed as a result of any deferment of possession of the site or due to a ‘relevant matter’ (as defined in the Contract), is entitled to be reimbursed the associated loss and expense it incurs or is likely to incur “subject to clause 4.20.2 and compliance with the provisions of clause 4.21”.

Clause 4.21.1 states that: “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.”

The adjudicator decided that FES was not entitled to the loss and expense as it failed to give a notice and the giving of a notice was a condition precedent to reimbursement of loss and expense under clauses 4.20 and 4.21 of the contract.

FES disagreed that giving a notice was a condition precedent and sought a decision from the court.

The judgment

The court agreed with the adjudicator and held that the notice requirements were a condition precedent to a loss and expense claim. It stated that:

  • The language of clause 4.20.1 is “clear and straightforward”;
  • The contractor must comply with the notice requirements and notify the employer of a ‘relevant matter’ causing a delay and that it has incurred, or is likely to incur, direct loss or expense as a result of the delay to be entitled to reimbursement;
  • The notification obligation is not “an unduly onerous one” and compliance has benefits in the form of “timely and well-administered contract administration”; and
  • In this case, the clause was from a standard form building contract and it had been “negotiated and drafted by skilled professionals”. Where a contract contains bespoke clauses, the courts will interpret the wording by looking at the wider context in which it has been drafted, including the “nature, formality, and quality of the drafting”, noting that the “poorer the quality of the drafting, the less willing the court should be driven by semantic niceties to attribute to parties an improbable and unbusinesslike intention”.

Why this case is relevant to JCT users in England

The clauses 4.20.1 and 4.21.1 of the SBC/Q/Scot examined by the court are identical to the equivalent clauses 4.20.1 and 4.21.1 of the JCT Standard Building Contract. The decision is therefore important for contractors entering into the JCT equivalent which retains the standard wording for the notice provisions.

Construction contracts often contain conditions precedent requiring contractors to follow detailed notice provisions when making claims for delay to be entitled to reimbursement for such claims. Such requirements can assist the parties’ contract management by ensuring timely notices and so in turn any mitigation to the delay and/or expense can be considered.

Recent judgments have found that contractual notification requirements can be conditions precedent, provided they are clearly drafted.

For example, the court in W.W. Gear Construction v McGee Group Ltd found that clause 4.21 of a JCT Construction Management Trade Contract, containing a similar clause to the one in this case, operated as a condition precedent to a loss and expense claim.

This case serves as a good reminder for contractors to comply with any condition precedents, or risk being deprived of their contractual entitlement to, for example, loss and expense.

While this judgment is helpful in confirming that the notice is a condition precedent under this standard form wording, no doubt there will be further disputes on whether a contractor has given such a notice “as soon as the likely effect becomes (or should have become) reasonably apparent”.

Helen Stuart is a partner and Zainab Anwar is an associate at Trowers & Hamlins.

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