This article was originally published in the November 2019 edition of Construction law International; Grimes, MA (2019) 14(2) CLInt, 7-9, and is kindly reproduced with their permission.

FIDIC’s 2017 suite of contracts features a significantly updated Claims framework. This article examines the time-barring procedures and identifies a gap in the fully detailed Claim time-barring procedure. Through contractual analysis, this article examines the potential for stasis in the Clause 20 Claims procedure, created by the drafting of both the definition of the ‘fully detailed Claim’ and of the relevant time-barring criteria. It is submitted that a minor amendment may be appropriate in practice, in order to prevent unnecessary procedural difficulties arising.

Introduction

The 2017 FIDIC forms have been significantly updated since the 1999 Rainbow Suite. One aspect of this rewrite, and the subject of this article, is that the new contracts have completely changed the time-barring framework in respect of Claims. The new process has been described by commentators as ‘reciprocal’ because, whereas the 1999 Forms distinguished Contractor and Employer Claims, with no time-barring in respect of the latter, the 2017 suite now has a unified Claims procedure, with time-bars affecting both Contractor and Employer.

A principal change is that time-barring is no longer automatically applied and the Engineer’s Notice engaging the time-bar must itself be within time limits set out in Clause 20.1 ‘Notice’ is also now a defined term, meaning that the Engineer’s Notice engaging the time-bar could be invalid, even if in time.

Within this framework, there are two opportunities for the Engineer to time-bar a Claim:

1. where the Notice of Claim is submitted more than 28 days from the date of awareness (or deemed awareness) of the relevant event or circumstance, (Sub-Clause 20.2.2); or
2. where the Claiming party fails to submit, within 84 days of the date of awareness, ‘a statement of the contractual and/or other legal basis of the Claim’ (Sub-Clause 20.2.4).2
   This article examines the latter and identifies a gap in the contractual procedure, which could cause uncertainty in the application of the time-barring provisions.

The fully detailed Claim

As aforementioned, the time-barring provision in Sub-Clause 20.2.4 relates specifically to the statement of legal basis for the Claim. How a party satisfies this requirement will be dependent on the particular facts of any given Claim, having regard to its legal complexity. What would satisfy this requirement is, therefore, not explored in this article. The fact that this statement singularly forms the basis of time-barring in relation to the fully detailed claim is, however, important.

Unlike ‘Notice’ or ‘Notice of Dissatisfaction’, ‘fully detailed Claim’ (FDC) is not within the Sub-Clause 1.1 defined terms. Sub-Clause 20.2.4, though, is clearly definitional in nature and should be read as such:

‘In this Sub-Clause 20.2, “fully detailed Claim” means a submission which includes:

• (a) a detailed description of the event or circumstance giving rise to the Claim;
• (b) a statement of the contractual and/or other legal basis of the Claim;
• (c) all contemporary records on which the claiming Party relies; and
• (d) detailed supporting particulars of the amount of additional payment claimed (or amount of reduction of the Contract Price in the case of the Employer as the claiming Party), and/or EOT claimed (in the case of the Contractor or extension of the DNP claimed (in the case of the Employer).’

It is undoubtable that these listed elements must be present for a submission to constitute a ‘fully detailed Claim’.

Statement of legal basis

Despite the FDC being defined by its content, the relevant time-barring provision is explicitly limited to a failure to provide item (b) within the 84-day time limit, rather than the FDC as a whole. Seemingly then, the other parts of the FDC are not as essential:

‘If within this time limit the claiming Party fails to submit the statement under sub-paragraph (b) above, the Notice of Claim shall be deemed to have lapsed, it shall no longer be considered as a valid Notice, and the Engineer shall, within 14 days after this time limit has expired, give a Notice to the claiming Party accordingly.’

The primacy of item (b) is reinforced by subsequent parts of Clause 20. The ‘appeal’ provision of Sub-Clause 20.2.4 refers to ‘circumstances which justify late submission of the statement under sub-paragraph (b) above’. Further, the suggested considerations for the Engineer in exercising its time-bar discretion in Sub-Clause 20.2.5 include, specifically in relation to the FDC, ‘any evidence of the other Party’s prior knowledge of the contractual and/or other legal basis of the Claim’.

The idea that a clear statement of the legal basis would be fundamental to the continuation of the claims process is not surprising. Knowledge of the basis of claim is important in (1) preventing spurious claims; and (2) preventing prejudice to the Respondent in preparing its case.

It is a common requirement in court systems that pleadings must demonstrate the legal basis of the claim. In England and Wales, a civil claim that is deficient in this regard could potentially be struck out under Rule 3.4(2) of the Civil Procedure Rules, though one would expect an application to amend before it got that far. In South Africa, under similar rules in the Uniform Rules of Court, pleadings of this sort are described as ‘vague and embarrassing’.

With regard to the other elements of the FDC, there are also reasons why they may not be as important. With regard to item (a), the Respondent will have already had at least some details regarding the factual circumstances, as required in the Claim Notice per Sub-Clause 20.2.1. The detailed factual circumstances under item (a) are generally of evidential value for the Claimant in proving their entitlement, rather than for the Respondent in preparing their defence. The Claim Notice should also have put both the Engineer and the Employer on notice to gather and review their own factual evidence, if they felt it necessary.

Regarding item (c), the contemporary records provisions under Sub-Clause 20.2.3 give the Engineer a right to inspect the relevant records in connection with the Claim. This gives a degree of equality and reciprocity in respect of these records. As they may not simply be withheld until the submission of the FDC, the Engineer has responsibility for being as involved in this review as it believes necessary to fulfil its duties. In any event, the drafting of this item means that a failure to provide ‘contemporary records on which the claiming Party relies’ would logically lead to the simple conclusion that no reliance is placed on contemporaneous records.

Item (d), in respect of cost or EOT, assists the Engineer’s assessment but it is fundamentally the Claimant’s burden to discharge, so a failure in this regard is to the Claimant’s prejudice.

The procedural gap

A question then arising from Sub-Clause 20.2.4 is whether the Claims procedure may continue without it being submitted within the time limit. Sub-Clause 20.2.5 would appear conclusive against this and states: ‘After receiving a fully detailed Claim under Sub- Clause 20.2.4… the Engineer shall proceed under Sub-Clause 3.7 [Agreement or Determination] to agree or determine…’.

Reading this together with the definition in Sub-Clause 20.2.4, there is a gap in the Claims procedure. Where the Claimant has failed to submit the full FDC, the Engineer lacks contractual jurisdiction to determine a Claim as a result of Sub-Clause 20.2.5. Yet the Engineer also cannot time-bar the Claim where the Claimant has submitted a statement satisfying item (b) of the FDC requirements, as a result of the time-barring provisions in Sub-Clause 20.2.4.

It is, perhaps, a narrow and technical point, but in the face of such a clear definition of the FDC in Sub-Clause 20.2.4, the point is unavoidable. While there has been a steady shift towards commercial, rather than strict, interpretation of contracts in recent times, the reason this is problematic in this situation is because it involves the conferring of contractual jurisdiction upon a third party. The Engineer is simply not empowered to act and the Claim is in stasis after submission of item (b) – neither barred nor able to progress.

Closing the gap?

It should be recognised that detailed procedural steps, with defined time limits and notice requirements, have been laid down. This shows an intention that should be given effect, in order to maintain the flow of Clause 20. While it is clear from the language of Sub-Clauses 20.2.4 and 20.2.5 that FDC item (b) is intended to have significance above the other required elements, it cannot have been intended that the Claim should enter a procedural stasis.

The simplest reconciliation, in this author’s view, is that the Engineer should be permitted to proceed with whichever elements of the FDC have been submitted at the expiry of the 84-day limit. This would allow the Engineer to proceed to determination, except in the absence of item (b) which allows the Engineer to engage the time-barring provisions. In this way, there is always a route forward for the Engineer: either to determination or time-barring.

The tenor of FIDIC’s ‘Golden Principles’ strongly implies that FIDIC would prefer that bespoke drafting be kept to a minimum. However, a drafting amendment seems appropriate in this instance as this is a minor amendment to rectify what seems like a clear error.

The desired effect could be achieved by relaxing the definition of the FDC in Sub-Clause 20.2.4 to be ‘a submission which may include’ items (a) to (d). The effect of the time-barring provisions would retain the mandatory nature of item (b), but the remaining items would no longer be contractually necessary to create an FDC. It could also be achieved by amending Sub-Clause 20.2.5, but this would require more extensive drafting, with correspondingly greater scope for error or interpretation.

The infamous ‘enforcement gap’ of the 1999 FIDIC forms, which caused procedural uncertainty around the enforcement of certain DAB awards, illustrates the potential for varying international approaches to issues in the drafting of standard form contracts. As a result of that gap, various jurisdictions developed differing approaches to the enforcement of final but not binding DAB awards. Enforcement is obviously a more fundamental legal issue and involves greater legal complexity in comparison to this relatively small procedural issue. Nevertheless, it is foreseeable that Engineers, DABs and even national courts may take differing views on resolving the current drafting, if required to do so. As a result, a bespoke amendment is likely to be appropriate to avoid unnecessary procedural difficulties arising.

Notes

1. This article uses the 2017 Red and Yellow book references. See FIDIC (International Federation of Consulting Engineers), Conditions of Contract for Construction, 2nd Edn (FIDIC 2017); FIDIC (International Federation of Consulting Engineers), Conditions of Contract for Plant & Design- Build, 2nd Edn (FIDIC 2017).
2. It is worth noting, athough not directly relevant to this article, that the validity of the Notice of Claim is subject to two deeming processes under Sub-Clause 20.2.4 in relation to this time-bar. The Notice of Claim is first deemed to have lapsed on the expiry of 84 days, if there is a failure to provide the required statement, and then deemed valid again 14 further days after that, provided the Engineer does not issue Notice of time-barring.

References

(2019) 14(1) CLInt

Mark Alexander Grimes is a trainee solicitor with Systech Solicitors. He is currently based in Johannesburg, South Africa, on secondment and may be contacted at mark.grimes@systechsolicitors.com