Obrascon Huarte Lain SA v Her Majesty’s Attorney General for Gibraltar

[2014] EWHC 1028 (TCC)

This was a lengthy case relating to a tunnel under a runway at Gibraltar airport, where Mr Justice Akenhead had to consider whether or not the employer, was entitled to terminate the contract. The contract was the FIDIC Conditions of Contract for Plant and Design-Build for Electrical and Mechanical Plant, and for Building and Engineering Works, Designed by the contractor, 1st edition, 1999 (better known as the “Yellow Book”). Amongst the many issues the Judge considered was the approach to take to sub-clause 20.1, the clause which says that a contractor, if he wishes to make a claim must give notice in writing to the Engineer:

“as soon as practicable, and not later than 28 days after the Contractor became aware, or should have become aware, of the event or circumstance.”

The Judge decided that the contractor, OHL was entitled to no more than seven days extension of time (rock and weather). However, this was subject to compliance with sub-clause 20. It was accepted by OHL that sub-clause 20.1 imposed a condition precedent on the contractor to give notice of any claim. The Judge held that properly construed and in practice, the “event or circumstance giving rise to the claim” for extension must occur first and there must have been either awareness by the contractor or the means of knowledge or awareness of that event or circumstance before the condition precedent bites. Importantly Mr Justice Akenhead said that he could see:

“no reason why this clause should be construed strictly against the Contractor and can see reason why it should be construed reasonably broadly, given its serious effect on what could otherwise be good claims for instance for breach of contract by the Employer”.

Sub-clause 20.1 did not call for the notice to be in any particular form and it should be construed as allowing any claim provided that it is made by notice in writing to the engineer, that the notice describes the event or circumstance relied on and that the notice is intended to notify a claim for extension (or for additional payment or both) under the contract or in connection with it. It must be recognisable as a “claim”. The onus of proof was on the Employer if he should want to establish that the notice was given too late.

In terms of claims for an extension of time, the Judge by reference to clause 8, considered that the entitlement to an extension arises if and to the extent that the completion “is or will be delayed by” the various events, such as variations or “unforeseeable” conditions. In particular he noted that the wording in sub-clause 8.4 did not impose any restriction such as “is or will be delayed whichever is the earliest”. This therefore suggested that the extension of time could be claimed either when it was clear that there will be delay (a prospective delay) or alternatively when the delay has at least started to be incurred (a retrospective delay).

To demonstrate the position, the Judge provided his own hypothetical example:

“(a) A variation instruction is issued on 1 June to widen a part of the dual carriageway well away from the tunnel area in this case.

(b) At the time of the instruction, that part of the carriageway is not on the critical path.

(c) Although it is foreseeable that the variation will extend the period reasonably programmed for constructing the dual carriageway, it is not foreseeable that it will delay the work.

(d) By the time that the dual carriageway is started in October, it is only then clear that the Works overall will be delayed by the variation. It is only however in November that it can be said that the Works are actually delayed.

(e) Notice does not have to be given for the purposes of Clause 20.1 until there actually is delay (November) although the Contractor can give notice with impunity when it reasonably believes that it will be delayed (say, October).

(f) The “event or circumstance” described in the first paragraph of Clause 20.1 in the appropriate context can mean either the incident (variation, exceptional weather or one of the other specified grounds for extension) or the delay which results or will inevitably result from the incident in question.”

Finally, the Judge commented that he doubted that this interpretation should in practice necessarily involve “a difficult mental exercise” on construction projects where, as was the case here, an electronic critical path programme was being used. It should therefore be possible to determine fairly easily when delay was actually being suffered.

However, whilst these comments tend to reflect the general approach of most DABs to the FIDIC sub-clause 20.1 and appear to be “contractor-friendly”, they did not help OHL here. One of OHL’s two EOT claims was rejected because the wording of the documents relied upon, for example “The adverse weather condition (rain) have [sic] affected the works” was not recognisable as a notice of a claim about being delayed by the weather. The already small EOT award of seven days was reduced to one.

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