Introduction

The recently released Fidic 2017 suite of contracts¹ is interesting for many reasons and much has already been written on it. However, an overlooked innovation, in this author’s view, is the new discretion given to the engineer under Sub-Clause 20.2.5 (this article uses the 2017 Red and Yellow Book , references^2,3) for extending time bars in the multi-tiered dispute resolution process 

The agreement or determination of the Claim shall include whether or not the Notice of Claim shall be treated as a valid Notice taking account of the details (if any) included in the fully detailed claim of the claiming Party’s disagreement with such [Time Barring] Notice(s) or why late submission is justified (as the case may be).

There are two components to this discretion. The former, regarding disagreement with the time barring notice, applies where there is a dispute
as to the timing or adequacy of the notice from the engineer that engages the time bar. The latter is clearly intended for when it is accepted that the relevant notice was late but the engineer is requested to exercise its discretion in order to allow the notice to be treated as valid.

While disputes regarding valid notice are likely to be factually contentious, the validity of notice is a relatively straightforward legal issue, especially as ‘notice’ is now a defined term in the new suite. However, the phrase ‘why late submission is justified’ is ambiguous as a legal test, so how should the parties, engineer and dispute avoidance and adjudication board (DAAB) approach it?

Justified

The pre-release 2017 Yellow Book provided a discretion, at DAAB level, in similar terms to the Gold Book 2008⁴ - that is, that the DAAB could overrule time bars where ‘fair and reasonable’ to do so. While Fidic has commented that it felt time barring should be considered at an earlier stage, and so brought it within the engineer’s capacity,¹ it is unclear why it moved away from this test.

However, the ‘fair’ aspect still remains, as the engineer’s discretion forms part of its determination. Therefore, it must exercise it (or not) fairly, in line with its duty under Sub-Clause 3.7.2^2,3

The Engineer shall make a fair determination of the matter or Claim, in accordance with the Contract, taking due regard of all relevant circumstances.

Sub-Clause 3.7.2 further makes it clear that the engineer must take regard of all relevant circumstances. More specifically, Fidic have provided a non-exhaustive list of considerations in Sub-Clause 20.2.5, which can be summarised as:

• any prejudice caused to the other party
• any evidence of the other party’s prior knowledge of the factual or legal basis of claim (depending on whether the time barring notice is issued in respect of the notice of claim or the fully detailed claim,
  respectively).

These considerations were also present in the pre-release, in relation to the ‘fair and reasonable’test. The degree of prejudice to the other side is a natural consideration. The other party’s knowledge of the basis of claim would logically be relevant insofar as a lack of knowledge may impact their ability to respond adequately to the claim, although one might argue that this is a form of prejudice which would fall within the first consideration.

Beyond this, while it is a given that the engineer (and the DAAB) should attempt to be fair, their interpretation of ‘justified’ is likely to be coloured by their professional experience. In international contracts, and contracts in the developing world, one may encounter engineers and DAAB members from different legal traditions, which will also affect their understanding. It is prudent, therefore, to seek guidance, in order to frame submissions and guide the engineer and the DAAB. Unfortunately, there is no available authority on the Gold Book test. However, there is a similar statutory test, no longer used in the UK, which may provide useful guidance.

Raising The Jocelyne?

UK arbitration practitioners will be familiar with the discretion under section 12 of the Arbitration Act 1996,⁵ which allows courts to extend time limits in arbitration clauses. The test to be applied
is restrictive, applying only where the relevant circumstances were ‘outside the reasonable contemplation of the parties’ when they agreed the provision, or where the conduct of one party makes it ‘unjust’ to apply the provision strictly.

However, prior to the Arbitration Act 1996, the Arbitration Act 1950⁶ contained a wider discretion under section 27 that allowed extensions by a
court in circumstances where applying the time bar would cause ‘undue hardship’ to the barred party.

Much like the Arbitration Act 1950 before it, the Arbitration Act 1996 has spread throughout the common law jurisdictions. As a result, the newer, narrower discretion has almost universally supplanted the former, wider discretion. The only major jurisdiction to retain a statutory discretion in the terms of the 1950 act is South Africa. Despite this, due to its previous ubiquity,
there is a substantial corpus of accessible and established authority, throughout the common law jurisdictions, regarding the application of the undue hardship test.

Of course, the undue hardship test and the new Fidic test have some superficial differences; contract versus statute, assessment/adjudicatory versus judicial. However, the aims of the two are the same: to bring proportionality to the
application of contractual time bars.

It is clear that Fidic intends to reduce the heavy and disproportionate effect of time barring on contractors. Insofar as this contrasts with the UK Arbitration Act 1996,⁵ it goes against the recent legislative paradigm in most common law
jurisdictions, but accords with the purpose of the previous statutory discretion:

Claimants used to find their claims barred when, by some oversight, they were only a day or two late. In order to avoid that injustice, the legislature intervened so as to enable the courts to extend the time whenever «in the circumstances of the case undue hardship would otherwise be caused.» «Undue» there simply means excessive. It means greater hardship than the circumstances warrant. Even
though a claimant has been at fault himself, it is an undue hardship on him if the consequences are out of proportion to his fault.⁷

As is apparent from Lord Denning’s dicta above, assessing whether hardship is ‘undue’ requires an examination of the circumstances. In the most famous case on the test, The Jocelyne, the following
were delineated as areas of consideration
(a) the length of the delay; 
(b) the amount at stake; 
(c) whether the delay was due to the fault of the claimant or to circumstances outside his control;
(d) if it was due to the fault of the claimant, the degree of such fault;
(e) whether the claimant was misled by the other party;
(f) whether the other party has been prejudiced by the delay, and, if so, the degree of such prejudice.⁸

Conclusion

Fundamentally, the engineer must be conscious of the implication of possessing a discretion at all. It presupposes that time bars are not intended to be
fatal to the claimant as a matter of course. Indeed, it is worth remembering that, in most cases, the claimant’s entitlement emanates from a failure of
the other party.

An important aspect of time barring being part of the engineer’s determination is that it will be open to adjudication by the DAAB on the same basis. It is therefore in the engineer’s interest to exercise
its discretion prudently. Unreasonably time barring the dispute foregoes the opportunity to avoid escalating the underlying issue(s), incurring
unnecessary time and cost for both parties.

Although the wording of the two tests is different, it seems a difference without distinction. Whether the hardship caused by a time bar is undue, ultimately, is a question of fairness and justification, taking account of all relevant circumstances. This is clear from the considerations listed in The Jocelyne. Therefore, given that the Fidic test and the undue hardship test share a common aim and application, it seems wasteful not to consider the latter as useful guidance to the former. Doing so has
clear benefits; it utilises the well-developed and well-regarded case law of the recent past to provide a degree of consistency and commercial certainty to the new Fidic test.

References:

¹Fidic (International Federation of Consulting Engineers) (2017) FIDIC Rainbow Suite, 2017 edn. Fidic, Geneva, Switzerland. See http://fidic.org/sites/default/files/press%20release_rainbow%20suite_2018_03.pdf (accessed19/05/2018).
²Fidic (2017) Conditions of Contract for Construction, 2nd edn. Fidic, Geneva,Switzerland.
³Fidic (2017) Conditions of Contract for Plant & Design-Build, 2nd end. Fidic, Geneva, Switzerland.
⁴Fidic (2008) Conditions of Contract for Design, Build and Operate Projects, 1st edn. Fidic, Geneva, Switzerland.
⁵Arbitration Act 1996. Chapter 23. Her Majesty’s Stationery Office, London, UK.
⁶Arbitration Act 1950. 14 Geo 6. Chapter 27.His Majesty’s Stationery Office, London, UK.
⁷Liberian Shipping Corporation “Pegasus” v A. King & Sons Ltd. [1967] 2 Q.B. 86; [1967] 2 W.L.R. 856.
⁸Moscow V/O Export Khleb v Helmville (The Jocelyne) [1977] 2 Lloyd’s Rep. 121.