FES Ltd v HFD Construction Group Ltd
[2024] CSIH 37
We discussed this case in Issue 285 [1]. The parties had entered into a contract for fit-out works based on the Standard Building Contract with Quantities for use in Scotland (SBC/Q/Scot) (2016 edition), as amended. During the project, FES had encountered various delays, including site closure due to the COVID-19 pandemic. There was a dispute about FES’s entitlement to an extension of time and their claim for related loss and expense. A preliminary issue arose as to whether or not the giving of a notice in terms of clause 4.21 was a condition precedent for recovering loss and expense. The adjudicator and the court, at first instance, said that it was. As FES had not given the required notice, then they would have no entitlement to direct loss and expense. FES appealed.
Clause 4.20.1 provided that:
“If in the execution of this Contract, the Contractor incurs ... any direct loss and/or expense as a result of any deferment of giving possession of the site ... or because regular progress of the Works ... has been or is likely to be materially affected by any Relevant Matter, he shall, subject to ... compliance with the provisions of clause 4.21 be entitled to reimbursement of that loss and/or expense."
Clause 4.21.1 provided that:
“4.21.1 The Contractor shall notify the Architect/Contract Administrator as soon as the likely effect of a Relevant Matter on regular progress or the likely nature and extent of any loss and/or expense arising from a deferment of possession becomes (or should become) reasonably apparent to him.”
Lord Carloway highlighted what he saw as the fundamental problem with FES’s position, namely the fact that the words found in clause 4.20.1 made it clear that a claim for loss was to be conditional on the procedural requirements set out in 4.21. Clause 4.20.1 used the words: “subject to … compliance with the provisions of clause 4.21”. In effect, FES was asking the court to ignore those words.
Lord Carloway did comment that court was not being asked to assess whether or not FES did notify “as soon as” it became “reasonably apparent” that loss had arisen and whether an initial assessment had been sent “as soon as reasonably practicable”. Those terms were “relatively flexible” and the judge noted that: “if it were called upon to do so, the court would approach them in that light; no doubt affording the pursuers considerable leeway, given the consequences of non-compliance”.
What mattered was the plain meaning of the words used. Here, there was no ambiguity in the wording. Therefore, there was no need to analyse any further, looking, for example, at what may be regarded as commercial common sense. In fact, this would have been of little assistance to FES. Lord Carloway concluded that:
“The need to be duly notified and advised of the potential liability within a limited (but not certain) timespan is a reasonable condition before a claim could be considered and ultimately determined. There is no nonsensical or absurd result arising from giving the words in the clause their ordinary or plain meaning in the context of the contract, or clauses 4.20 and 4.21, as a whole.”
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