The recent case of WW Gear Construction v. McGee Group Ltd [2012] EWHC 1509 (TCC) provides guidance on whether the TCC will grant a declaration during an adjudication. The decision also considers whether a party that has failed to comply with a condition precedent in respect of a delay claim can look to another clause in the contract for a remedy. Construction contracts often contain terms requiring contractors to follow detailed notice provisions when making claims for delay. It is common for these provisions to be drafted as conditions precedent. If the contractor fails to serve the delay notice in accordance with the contract then the contractor will be prevented from making a claim for that delay.
The contract in this case was an amended form of the JCT Trade Contract. Clause 4.21 of the contract dealt with how the contractor could recover loss and expense incurred as a result of matters materially affecting the progress of the works. In 2010 (WW Gear Construction v. McGee Group Ltd [2010] EWHC 1460 (TCC)) the employer sought a declaration that clause 4.21 operated as a condition precedent such that failure by the contractor to comply with the notice provisions would prevent its right to claim. In this case the judge found that this clause did operate as a condition precedent.
Due to the contractor’s failure to give the correct notice under clause 4.21, the contractor sought to make a claim under alternative provisions of the contract. The contractor sought to make a claim under clause 4.6, which dealt with valuation of variations. The employer sought a declaration that the contractor could not make a claim for direct loss and expense under clause 4.6.
Can the court grant a declaration?
At the time the employer sought the declaration the parties were involved in an ongoing adjudication. The judge stated that it did have jurisdiction to grant a declaration. However, the judge stated that in circumstances where there was an ongoing adjudication “the court should intervene only rarely and in those limited circumstances where it is appropriate to do so”. The judge was of the view that permitting applications during an ongoing adjudication will lead to practical difficulties. Court proceedings may distract the responding party during the tight adjudication timetable. Additionally, if a party seeks a declaration during the adjudication, the parties are unlikely to receive the court judgment until shortly before the adjudicator is due to give his decision. This may interfere with the adjudicator’s ability to conduct the adjudication if he is required at short notice to take the decision of the court into account. The judge was of the view that it would be unacceptable to impose this on adjudicators and may lead to “unfairness, misunderstandings or mistakes – not least because the parties may well have no right or opportunity to make submissions to the adjudicator in light of the judgment”. The judge concluded that it would be rare for a court to grant a declaration in circumstances such as this.
Interaction between clauses 4.6 and 4.21
The judge stated that in principle the contractor could claim loss and expense under clause 4.6 and the issue was whether there was any other term in the contract that prevented the contractor from doing so. The judge decided that items of loss and expense were potentially recoverable under both clause 4.6 and clause 4.21. If the contractor was unable to claim under clause 4.21, in this case because it had failed to comply with the notice provisions, there was nothing to stop the contractor potentially claiming under clause 4.6.
Comment
This case is of interest as it illustrates the circumstances in which a court will grant a declaration where there is an ongoing adjudication. The case highlights that courts continue to uphold the adjudication process and are unwilling to interfere with the jurisdiction of the adjudicator. It is particularly telling that the judge in this case ordered that his judgment should not be published until the adjudicator had delivered his decision unless both parties agreed. It is worth noting the judge’s comments that a declaration may be appropriate if:
- both parties agree;
- it is granted to help the adjudicator make his decision; and
- the adjudicator’s time for making the decision has been extended to take into account the declaration if necessary.
We have seen from case law that parties are caught out by notice provisions. A court will enforce conditions precedent if these are clearly drafted and unambiguous, no matter how onerous the consequences. In the context of delay claims, failure to follow notice provisions in clauses that are deemed to be conditions precedent may result in a contractor being unable to make a claim under that clause. However, this case illustrates that parties should remember that it may be open to the contractor to make a claim under alternative provisions in the construction contract or at common law. If an employer wants to restrict a contractor’s right to claim for delay unless the contractor complies with notice provisions, then the terms of the contract should clearly reflect this. Care should be taken to consider the other contractual terms to decide whether there is an alternative right to claim under the contract. Parties should also consider whether it is appropriate to include an entire agreement clause to restrict the right to claim under common law.
The risk posed by notice provisions should be highlighted from the outset and monitored throughout the project. If the contract contains notice provisions for delay claims, these should be followed precisely. Failure to serve the notice within the correct timescales, in the prescribed detail or on the correct individual may result in potential claims being barred.
