[2010] EWHC 1460 TCC

Gear engaged McGee as ground works contractor at the Westminster Park Plaza Hotel development. The contract incorporated the JCT Trade Contract Terms (TC/C) 2002 edition with Amendment No.1:2003 together with further bespoke amendments. The contract contained a number of conditions precedent. These included clause 4.21 which, as amended, stated:

“If the Trade Contractor makes written application to the Construction Manager that he has incurred or is likely to incur direct loss and/ or expense…then the Construction Manager…shall ascertain the amount of such loss and/or expense…provided always that:

.1 the Trade Contractor’s application shall be made as soon as and in any event not later than two months after it had become, or should reasonably have become apparent to him that the regular progress of the Works or any part thereof has been or was likely to be affected as aforesaid, and such application shall be formally made in writing and fully documented and costed in detail, and it shall be a condition precedent under this clause 4.21.1…that the Trade Contractor has complied fully with all requirements of this clauses [sic] including, for the accordance [sic] of doubt, the said time period of two months.”

McGee made applications for payment, broadly on a monthly basis. The applications included requests for payment of extended preliminary costs associated with delay. More specifically, Application no.18 referred in its summary to a “loss and expense claim” which was “as attached”. Disputes arose between the parties in relation to payments including McGee’s claims for delay and disruption and related loss and expense. Gear referred the issues in dispute to adjudication. These included the proper interpretation and application of the extension for time and delay related loss and expense clauses in the contract. The adjudicator issued a decision broadly in Gear’s favour but found that the condition precedent in clause 4.21 was “devoid of meaning” and of no effect.

Using Part 8, Gear issued proceedings for a declaration that McGee was required to comply with the provisions of clause 4.21 as a condition precedent to its entitlement to make an application for payment of loss and/or expense and/or to have such application ascertained by the Construction Manager. McGee’s position included that conditions precedent should be construed strictly. Therefore, as the words were superficially meaningless, they should not be construed as barring McGee from a legitimate claim, if the application was made outside of the time limits specified.

Mr Justice Akenhead considered that there was a condition precedent. The trigger for the operation of clause 4.21 was the making of the application by the contractor. That application should state that the regular progress is or is likely to be affected by the various matters. Then, whilst there was a need for the construction manager to form an opinion about the claim, the Judge did not see how the forming of that opinion could be part of any precondition. The refusal on the part of the Construction Manager to carry out the ascertainment exercise where there was a justified claim could not in practice be a bar to the Contractor’s entitlement.

The use of the words “provided always that” was important. The Judge held that this type of wording was often the strongest sign that the parties intend there to be a condition precedent. Here as usually, what follows is a qualification and explanation of what is required to enable the preceding requirements or entitlements to materialise. Further, there was nothing particularly difficult or onerous for the contractor in making its application within either the general or specific timetables.

Since the application must state that direct loss and/or expense has been or will be incurred, because the progress of the Works has been or will probably be delayed, the long stop period within which the application must be made is two months after it has become or alternatively should reasonably have become, apparent that the regular progress of the Works or any part was, or was likely to be, affected. This meant the Contractor has the option of making its application at the later of the two alternative stages. Of course, the date when the regular progress of the Works was actually affected may well be later than the date when it became reasonably apparent that the regular progress of the Works was likely to be affected.

The words of the clause were sufficient to establish that the submission of a timely application was a condition precedent to the allowance to the contractor of loss or expense. In other words, the requirement to make a timely application in writing was a precondition to the recovery of loss and/or expense under clause 4.21. The contractor simply had no entitlement to recover such loss or expense unless and until it had made such an application. This was because it was the application which triggers the ascertainment process which leads to the adjustment of the contract sum. That is what the parties had agreed, and the fact that, as had happened here, there was an obvious mistake in the subsub- clause drafting did not change that. The key point was that it was clear what the parties had intended.