Construction Extension of Time Claim Form by onm80746

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									CONSTRUCTION SPEECHLY BIRCHAM


                                  ne often sees clauses in construction            to comply with the notification requirements of the
Conditions precedent
to extension of
time claims
                       O          contracts that require the contractor to
                                  submit details of any claim for additional
                                  time within a prescribed number of days
                                                                                   contract’s extension of time clause, however, he found
                                                                                   that Walter was not entitled to an extension of time.
                                                                                   Because Gaymark had caused the delay and there
                       of becoming aware of the relevant event. The                was no mechanism by which to extend the time for
                       intention of such a provision is that, if the               completion, the arbitrator therefore found that Walter
                       contractor does not submit the required information         Construction was only obliged to complete the work
                       within the relevant timescale, it will not be entitled      within a reasonable time, thus preventing Gaymark
                       to the appropriate relief under the contract. But will      from recovering liquidated damages for delay.
                       the courts always uphold such conditions?                   This decision was the upheld by the Court. It should
                                                                                   be noted that Gaymark had deleted a provision from
                       An example of such a provision can be found in the          the relevant Australian standard form which would
                       Office of Government Commerce ‘Guidance for                 have entitled the superintendent (or contract
                       Standardisation of PFI Contracts’ where the contractor      administrator) to extend the time for practical
                       is to give notice within 14 days of becoming aware          completion, notwithstanding that the contractor had
                       that any relevant event is likely to cause delay. It must   not given the relevant notice.
                       then give full details of the relief claimed within a
                       further seven days. If it does not comply with these        The judge felt that, while it was possible that the
                       time provisions, then the contractor is not entitled to     contractor’s failure to comply with the requirement for
                       an extension of time.                                       the provision of information might reasonably deny
                                                                                   him the entitlement to additional costs arising out of
                       Recent decisions of the Australian and of the Scottish      the delay caused by the owner, it was inequitable
                       courts have looked at these provisions. While these         that the contractor could be exposed to liquidated
                       authorities are not binding upon the English courts, in     damages as a result. This would, of course, mean that
                       the absence of any English law authority, they do at        the owner was effectively being paid for delay that he
                       least give guidance to those who wish to include such       had caused.
                       provisions in their contracts. Unhelpfully, however,
                       these two jurisdictions appear to have reached              The role of the contract administrator
                       different conclusions.                                      In Peninsula Balmain Pty Ltd v Abigroup Contractors,
                                                                                   Peninsula had engaged a superintendent under a
                       General principles                                          separate project management agreement to act as its
                       First, some general observations. Any provision that        agent under the construction contract with Abigroup.
                       seeks to bar a contractor’s entitlement to relief will be   Under the contract, Abigroup was required to notify
                       construed contra proferentem (usually against the           Peninsula of any delay within prescribed time periods.
                       owner) and, as such, must be clearly drafted.               Failure to do so would mean that its claim was time-
                       Secondly, a number of contracts contain an                  barred. Separately, the contract also provided that,
                       independent right for the contract administrator to         even where the contractor did not have an entitlement
                       assess the extension of time, regardless of what            to an extension of time, the superintendent ‘may at any
                       information has been put forward.                           time and from time to time before the issue of the final
                                                                                   certificate by notice in writing to the contractor extend
                       Finally, remember the ‘prevention principle’, namely        the time for practical completion for any reason’.
                       that neither party shall do anything to prevent the
                       other from performing the contract. This was seen in        The case came before the New South Wales Court of
                       application in Peak Construction v McKinney where           Appeal. The delay was found to have been caused by
                       the Court of Appeal held that an owner’s right to           an act of Peninsula. The Court of Appeal considered
                       liquidated damages would be lost where there was no         that it was mandatory for Abigroup to follow the
                       extension of time provision covering the owner’s delay.     procedure set out in the contract and that it would
                       In the absence of an extension of time in such              lose an extension of time entitlement if it did not do
                       circumstances, the contractual completion date no           so. The Court also found that the power conferred
                       longer applies and the contractor is then only obliged      upon the superintendent to grant an extension of time
                       to complete within a reasonable period, time then           of his own volition was to be exercised in the interests
                       being said to be ‘at large’.                                of both parties. Furthermore, the superintendent was
                                                                                   obliged to act honestly and impartially when deciding
                       Delay caused by owner                                       whether to exercise this power.
                       In Gaymark Investments Pty v Walter Construction
                       Group Ltd, the arbitrator found that Gaymark was            It was recognised that delay caused by the contractor in
                       responsible for 77 days of delay caused to Walter           submitting its application for an extension of time may,
                       Construction. Given the failure by Walter Construction      in some circumstances, be a ground upon which the




                                             IHL July/August 2003                                                                              43
     CONSTRUCTION SPEECHLY BIRCHAM


                                        superintendent could fairly refuse the extension of time,   of the instruction. In this case there was no waiver by
                                        although this was not suggested to be so in this case.      the architect of compliance with the provisions of the
                                                                                                    relevant clause. The contractor claimed that the
                                        A number of contracts make provision for an                 relevant clause was a penalty clause.
                                        independent certifier who will award extensions of
                                        time under the contract. It has long been recognised        At first instance, Lord Macfadyen found that the failure
                                        by the English courts that where a third party is to        of the contractor to give the appropriate notice was a
                                        exercise its professional skill in coming to a decision     breach of contract and had deprived the owner of the
                                        under the contract, then they will act in a fair and        opportunity to consider the contractor’s opinion of the
                                        unbiased manner in applying the terms of the                consequences of the instruction. If not complied with,
                                        contract. This was the decision of the House of Lords       the clause had the effect of preserving the employer’s
                                        in Sutcliffe v Thackrah. It is by no means certain,         right to liquidated damages for delay that would
                                        however, that the English courts would decide that the      otherwise have been lost by an extension of time. The
                                        power to award an extension was, effectively, an            liquidated damages therefore remained payable by the
                                        obligation as in Peninsula Balmain. It should also be       contractor where there was a consequent delay in
                                        remembered that not all contracts which provide for         completion and could not be considered as a penalty
                                        certification by a third party necessarily contemplate      simply because the contractor failed to take the steps
                                        that the third party will be acting independently, and      available to it.
                                        therefore each contract needs to be looked at on its
                                        own merits on this particular issue.                        On appeal, the Inner House of the Court of Session
                                                                                                    broadly agreed with Lord Macfadyen, save that it
                                        Both these Australian decisions appear to stretch the       pointed out that the contractor was not actually in
                                        wording of the contract. In each case there was a           breach of contract in failing to give notice of any delay
                                        contractual procedure for claiming an extension of          to the completion date that might arise out of the
                                        time and the contractor failed to comply. On first          instruction. The court found that the relevant clause
                                        reading, this should be the end of the matter but the       actually gave the contractor an additional right but did
                                        courts appear to have been influenced by the fact that      not oblige the contractor to invoke its protection. If the
                                        the delay was caused by the owner.                          contractor failed to take any action at the appropriate
                                                                                                    time, the ultimate effect of this failure might be that
                                        Architect’s instructions                                    he was unable to complete the works, as varied by the
                                        Most recently, the Scottish court has heard an              instruction, by the completion date, but this would not
                                        appeal in the case of City Inn v Shepherd                   be caused by a breach of the clause requiring
                                        Construction Ltd. This case concerned the JCT 1980          additional information. Instead it would be a result of
                                        standard form building contract together with a             failure to complete the works in accordance with the
                                        number of bespoke amendments. Following issue of            completion date.
                                        an architect’s instruction, the architect had granted
                                        the contractor a four-week extension of time and            Conclusion
                                        subsequently an adjudicator granted a further five          Although the facts of each of these cases are different,
                                        weeks. The owner contended that the contractor was          the issue is broadly the same and is whether failure to
                                        not entitled to any extension of time because it had        comply with requirements for claiming an extension of
                                        failed to comply with one of the amendments to the          time should debar the contractor from its entitlement
                                        JCT contract, namely that where any instruction             where the actual delay was caused by an act or
                                        would require an adjustment to the contract sum             omission of the contractor. The approaches taken by
                                        or delay the completion date, the contractor was            the Australian and the Scottish courts certainly
     City Inn v Shepherd                required to submit to the architect within ten working      conflict. The position in the City Inn case can perhaps
     Construction Ltd                   days various information and estimates so that the          be distinguished on the grounds that the owner may
     [2003] ScotCS 146                  parties could endeavour to agree the entitlement.           have chosen not to proceed with the instruction if it
     Gaymark Investments Pty v Walter   If the contractor did not comply with these                 had been aware that it would have caused delay to
     Construction Group Ltd             requirements, it would not be entitled to any extension     the contractor.
     [1999] NTSC 143                    of time unless the architect dispensed with the
     Peak Construction v McKinney       requirement for compliance.                                 The position under English law remains to be tested,
     [1970] 1 BLR 111                                                                               but both owners and contractors need to think very
     Peninsula Balmain Pty Ltd v        The effect of this, as with the Gaymark case, was that      carefully about the drafting of conditions precedent to
     Abigroup Contractors               failure to give proper notice of extension of time would    an extension of time claim and consider whether it is
     [2002] NSWCA 211                   first of all bar the contractor’s entitlement to an         prudent to require the contractor to give notice within
     Sutcliffe v Thackrah               extension of time and secondly cause a potential            a specified time period in order to qualify for an
     [1974] AC 727                      liability to pay liquidated damages should the              extension of time. If the provision is not effective, the
                                        contractor fail to meet the completion date by reason       owner may lose his right to liquidated damages.




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 CONSTRUCTION SPEECHLY BIRCHAM


Residential                              he Defective Premises Act 1972 (the               Failure to remedy defects
developers’ liability          T         DPA) sets out a statutory regime covering
                                         the liability of developers of residential
                                         property. The recent Court of Appeal
                                                                                           The Court held that, if further work is done to rectify a
                                                                                           problem which originally arose due to a failure to carry
                                                                                           out work in a workmanlike manner, there is a fresh
                               decision in Avril Alderson v Beetham Organisation           cause of action where the further work does not rectify
                               Ltd considered the limitation periods applicable to         the original work as intended. For this second cause of
                               claims under the DPA, particularly where the                action, non-feasance as well as misfeasance can
                               developer has returned to rectify defects.                  constitute the breach. Therefore a failure to carry out
                                                                                           the appropriate works to remedy a defect which falls
                               After the claimants had entered into agreements to          below the standards required by the DPA, can give rise
                               take leases of properties in a new residential              to a new cause of action as at the date of the failure.
                               development, a damp problem was discovered in the
                               flats. Remedial works were carried out in May 1995,         In this case, the reason for the further work was to
                               the claimants moved into the flats on 31 May 1995           rectify the damp which had arisen due to failure to
                               but in September 1995 one of the flats flooded.             carry out the original work in accordance with the
                               Further works were carried out and in October and           standards prescribed by the DPA. The developer’s
                               November 1995 the claimants’ surveyor inspected the         subsequent failure to address the true cause of the
                               properties and concluded that there had been a              damp was the second failure to meet such standards
                               breach of the DPA. The claimants did not bring              and thus constituted a new cause of action.
                               proceedings against the developer until January 2001
                               when they claimed there had been a breach of s1 of          So, under the DPA, two separate causes of action can
                               the DPA. Section 1 provides that a person taking on         arise:
                               work in connection with the provision of a dwelling
                               owes a duty to every person with an interest in the         (1) First, it can arise by virtue of an obligation on the
                               dwelling to see that the work is done in a workmanlike          person who carries out works, to carry out the
                               manner and with proper materials, so that the                   works in a workmanlike manner and to use proper
                               dwelling is fit for habitation. The defendants argued           materials. If this standard is not met, causing a
                               that the relevant cause of action accrued on                    problem to arise, a cause of action accrues in
                               completion of the dwellings (in May 1994) and                   respect of the quality of the original work, the
                               proceedings were therefore statute barred by the                limitation period for which runs from the original
                               expiry of the 6-year limitation period from completion,         completion of the building.
                               as provided for in the DPA.
                                                                                           (2) Secondly, if this person does additional works with
                               However, the DPA goes on to provide that, if a person           the intention to rectify a problem, the obligations
                               who has already done work to the property does                  apply equally to those remedial works. Again, if the
                               further work to rectify work already done, any such             standards are not met, so that the problem is not
                               cause of action in respect of that further work is              rectified, this gives rise to a cause of action in
                               deemed to accrue at the time the further work is                respect of the quality of the remedial works, the
                               finished. The claimants argued that time should                 limitation period for which runs from completion of
                               therefore run from the date of completion of the                the remedial works.
                               additional works in May or September 1995 so that
                               the six-year limitation period would not expire until       The Court was of the view that its decision makes
                               May 2001 at the earliest.                                   practical sense so that, if defects emerge close to the
                                                                                           expiry of the limitation period and remedial works
                               On the defendants’ application, the judge struck out        could take some time, it allows an owner or tenant,
                               the claim, accepting the defendants’ argument that          rather than immediately commencing litigation, to
                               the limitation period would be extended to take into        agree that the developer returns to remedy the defect,
                               account further work (which, in this case, was the          without running the risk that the limitation period could
                               relaying of flagstones) but not in respect of the cost of   expire if the remedial works fail to resolve the problem.
                               repairs to the damp proofing which was not the                  From a developer’s point of view, on the other
                               subject matter of further work. The case went to the        hand, it begs the question whether it is worthwhile to
  Avril Alderson v Beetham     Court of Appeal and the issue was as follows:               return to a new development to attempt to rectify
  Organisation Ltd             Does the second cause of action only apply to actual        defects, if this brings with it the risk of its liability in
  (The Times, 19 April 2003)   further work done or to the problem which the further       respect of a defect (and not just the remedial works it
                               work failed to rectify?                                     carries out) being extended for a further six-year period.




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