Time bar provisions are a relatively common feature of construction contracts, but often arouse concern because they are seen to be "harsh". A recent case from Northern Ireland confirms that notwithstanding any "harsh" operation, "clear and unambiguous" time bar provisions will be enforced.
Glen Water Ltd v Northern Ireland Water Ltd  NIQB 20 concerned a sewage treatment PFI in Northern Ireland, whereunder a project agreement was entered into between the water authority and a private sector contractor.
- The project agreement entitled the contractor to make claims for compensation and/or an extension of time due to, among other things, breach by the authority of its obligations.
- However, the project agreement preconditioned the contractor's right to compensation upon it giving 21 days' notice of a "compensation event".
- In 2010, the contractor sought to make a claim for compensation based on the water authority’s conduct.
- In its defence, the water authority contended that the contractor's claim was barred due to lack of timely notice of the claim.
- The contractor, however, said that it had given timely notice of the claim, and sought to demonstrate this through meeting minutes, correspondence and the like from 2009, when the underlying issues were discussed between the water authority and the contractor.
Did these communications constitute good notice?
Good notice of a claim?
The court held that timely notification was not given, and therefore the claim was barred. In so ruling, the court:
- noted that "[t]he burden is on the plaintiff to establish that this is a proper notification" and that, as a guiding principle, "[a] notification should be clear and unambiguous";
- rejected the letter offered by the contractor as purported notification of claim because it did not clearly state that it was a claim, and instead merely referred to the claim event in passing and as a prospective future claim only;
- denied that the minutes of meeting relied upon by the contractor constituted proper notification of claim.
- held that, although it was clear that the parties had had discussions regarding a potential claim event, the contractor still ought to have notified its claim formally. This was despite the fact, as shown by an internal document provided on discovery, the authority had clearly foreseen the claim.
Thus, according to Glen Water, formal notification of a claim is strictly required, even when contemporary documents demonstrate that a party intended to submit a claim and that the other party was aware of such intention. This is because "the fact that [a party] may anticipate that a compensation event may occur does not equate to notification of an actual compensation event."
Time bar as a condition precedent
Having concluded that the purported notice was defective, the court rejected the contractor's claim by application of the time bar provision in the project agreement. The court:
- held "it was agreed that the notification is a condition precedent. That follows because the relevant clause contains mandatory language. There is no saving provision from that."; and
- did, however, leave the door open to the application of equitable principles such as estoppel to avoid such a "harsh" outcome, i.e. so as to prevent a party from raising a defective notice as a purely technical defence, for example where such party has proceeded on the basis of the defective notice in the past without raising any objection.
This case illustrates the criticality of notice of claim provisions in construction contracts. Besides reaffirming the need for a timely notification, the decision makes an important distinction between discussing the circumstances giving rise to a claim and actually notifying (pursuant to a contractual provision) an intention to make a claim. Under this approach, contractors have to comply strictly with the contractual notice requirements and cannot rely on an employer's constructive or even actual knowledge of a potential claim event to avoid their notification duties.
Although the Glen Water case did not concern a standard form of contract, the way in which the court addressed the notification issue will be relevant to standard forms that use time bars, such as NEC3 and FIDIC.
This publication is provided for your convenience and does not constitute legal advice. This publication is protected by copyright.
© 2017 White & Case LLP