To fee or not to fee, that is the question: Take notice! - DAC Beachcroft

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To fee or not to fee, that is the question: Take notice!

Published On: 2 September 2014

This issue is of singular importance (along with record keeping) in the construction industry. Whether it be in the context of delivering design or cost services or acting as project managers/Contract Administrators, the giving of notices can play a fundamental part to the commercial success of a project for a construction professional.

Construction professionals' fee accounts increasingly resemble contractors' final account claims where entitlement to additional fees (including for prolongation) and relief from delay damages can turn on the delivery of timely notices.

Recognising the contractual importance of giving proper notice is not always easy. First, there is the distraction of delivery an often complex and demanding service in tight timescales. Then, there is the reality that notices are often seen as unattractive messages to give. Combined with the stealthy and insidious creature that is scope creep and the human desire to help, it is understandable to see how a situation can arise where the consultant finds itself at the end of a problem project with additional costs, but without the requisite notices to allow it to recover that cost.

The perceived commercial dichotomy of wanting to please a 'good' client and looking out for one's own interests is of course a contradiction in terms.

In my experience, how you deliver a message and set expectation can help resolve this tension. Ultimately, the purpose of a notice is to help communication and to explain that while a particular issue might not be caused by you, you are nevertheless affected.

It is important to recognise early whether the giving of a notice is a condition precedent under your consultant's appointment (by condition precedent, I mean the absolute requirement to do something otherwise your associated rights and remedies will be lost forever). Increasingly, this is the case in the context of the consultant's entitlement to additional fees and will often be linked to a deadline for service.

Guidance on when there is a condition precedent was given in the House of Lords case of Bremer v Handelgelsellschaft mbH v Vanden Avenne Izegem P.V.B.A (1978), where it was held that a notice provision was unlikely to be a condition precedent unless it stated a specific time for delivery of the notice and stated clearly that the rights would be lost in the event of that the notice was not given.

In the case of Maidenhead Electrical Services Limited v Johnson Control Systems (1996), the contract required all claims for payment to be submitted in writing within 10 days of the occurrence from which the claim arose. This condition specifically provided that if no such notification was received then the claim would be 'automatically invalid'. At the same time, while the contract also required a claim for an extension of time to be made within 10 days of the occurrence from which the claim arose it did not contain a sanction for failure to do so. The Court held that while a claim for payment generally was a condition precedent, this did not extend to claims for an extension of time given the absence of similarly clear wording excluding future rights and remedies.

The law has since developed. In Steria Limited v Sigma Wireless Communications Limited (2007), the Court considered the absence of an express warning in the contract as to the consequences for non-compliance not to be a necessary ingredient for the service of a notice to be a condition precedent. In this case, an entitlement to an extension of time was said to be provisional upon the subcontractor having given 'within a reasonable period written notice to the Contractor of the circumstances giving rise to the delay'.

Care should be taken therefore to submit your notices. I recommend that this become a daily rigour – consultants may even wish to include this question as a screen pop up at the start or finish of the day, or as an ancillary action to completion of timesheets.

In the event you find yourself in the position (as happens) where you are concerned as to whether proper notice has been given (and you consider that their provision is a condition precedent), then you may still have room for manoeuvre.

In the recent case of Obrascon Huarte Lain SA v Her Majesty's Attorney General for Gibraltar (2014), the Court adopted a generous view in its construction of a commonly worded condition precedent clause that may well help a great number of parties who are concerned by late/invalid notification.

The clause in question in Obrascon Huarte Lain SA v Her Majesty's Attorney General for Gibraltar stated that, 'notice shall be given as soon as practicable, and not later than 28 days after [OHL] became aware, or should have become aware, of the event or circumstance'. The event or circumstance as covered included where ' or will be delayed by any of the following causes'.

This type of clause pervades the construction industry and has been seen as onerous to the supplier (in the event that the trigger for notification was foresight of a future delay where the vagaries as to reasonable foreseeability become relevant rather than the actual knowledge of delay in real time).

The Court disagreed and held that the supplier in these circumstances was entitled to a broad spectrum in which to submit a notice ranging from when it becomes apparent that there will be a delay or when the delay has started to be incurred.

Having decided this, the Court also adopted a purposive view as to what is good notice. General advice is that the contractual rules governing the service of notices (including whether it should be writing, who it should be addressed to, how it should be sent and when it is deemed to be received) will be strictly adhered to by the Courts and so must be followed to the letter if not to be invalidated.

In Obrascon Huarte Lain SA v Her Majesty's Attorney General for Gibraltar, the Court held that the primary purpose of the notice clause is to provide an arrangement whereby such communications are effectively dispatched and received. In this case, a notice was given to the site office rather than the head office as specified. The Court was persuaded by the fact that this was the working practice adopted hitherto by the parties without objection and upheld this notice as legitimate.

In my experience, often notice can be said have been given in one way or another whether in meetings or by email or in some other format. This case may help.

This case significantly assists construction professionals and reduces their risk of losing an entitlement.

In circumstances where you are concerned as to whether proper notice has been given, construction professionals should also consider whether:

  • There has been a waiver by the parties of the notice requirements by their conduct?
  • Have the parties agreed some other working practice and, in so doing, not to rely on the notice provisions in which case you may be entitled to relief under the law of estoppel?

While these arguments are very fact sensitive, my experience is that they can be highly effective.