2017 edition FIDIC contracts require a contractor, after giving a Notice of Claim, to submit, as part of its fully detailed Claim, a statement of the “contractual and/or other legal basis of the Claim”. A Hong Kong court has recently considered the effect of a similar requirement, in a subcontract, for submission of the “contractual basis” (together with full and detailed particulars and claim evaluation) as a condition precedent to the subcontractor maintaining its right to pursue its previously notified claim for additional payment or loss and expense. The subcontractor had, at most, notified a factual basis for its claim, but had not identified which of the different bases listed in the relevant clause (e.g. breach of subcontract by contractor or variation) was said to have given rise to the claim. Did that matter?

The court ruled that what was required, under the clause, was the basis on which the subcontractor claimed it was entitled, under the subcontract, to maintain and pursue its claim, by reason, or as a result, of the factual circumstances. There might be one, or more, contractual bases which could be identified, but the “contractual basis” required was one or more of the different causes or events set out in the relevant subcontract clause as giving rise to a claim. The subcontractor had not complied strictly with the “contractual basis” requirement and consequently, by operation of the subcontract, it had no right to the payment claimed.

The court noted that, however much sympathy the contractor might deserve, the subcontract clause in question employed clear and mandatory language for the service and contents of the required notices, with no qualifying language such as “if practicable”, or “in so far as the sub-contractor is able”. There is commercial sense in allocating risks and attaining finality by designating strict time limits for claims to be made and for the contractual basis of claims to be specified. In particular, the language used was clear on its plain reading, and the decisions in Rainy Sky SA v Kookmin Bank and Arnold v Britton highlighted the importance of the language used in the provision to be construed, notwithstanding the need to read such language in the proper factual and commercial context. There was no basis for a court or tribunal to rewrite the subcontract or clause for the parties after the event.

Maeda Corporation and another v Bauer Hong Kong Ltd at: http://www.hklii.org/eng/hk/cases/ hkcfi/2019/916.html