| Date | 3 November 1999 |
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| Judgment | Harbour and General Works Limited -v- Environment Agency, CA 12 October 1999 |
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| The Issue | The importance of time limits for taking steps or commencing proceedings relating to construction contracts. |
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| Implication |
Failure to comply strictly with time limits set down in the contract or imposed by statute, may deny a party a remedy which might otherwise have been available. |
printPerhaps it is a feature of modern life that time constraints are becoming increasingly important in the contract and commercial management of construction projects. Most standard forms of contract impose restrictions on the parties as to when certain actions or activities are to be carried out. Many, though not all, are treated as a condition precedent to the parties' rights of redress. In other words, failure to observe strictly the time limit will deny the party the remedy sought. The contract itself must be closely examined to determine whether this is the intended effect of any time constraints. Further such provisions have been imposed by the 'Construction' Act. A large proportion of construction adjudications are currently being decided by reference solely to the mechanisms and time constraints for the making and the withholding of payments. Thus, the merits of a cross claim or set-off may not require to be considered if the adjudicator is satisfied that the correct procedures have not been carried out by the relevant party at the relevant time. The importance of clearly observing contractual time limits was emphasised in the Court of Appeal's decision in the case of Harbour and General Works Limited-v-Environment Agency. This was an appeal from a judgment in the Commercial Court, which I reported in Contract Journal on the 9th of June this year. The contract was an ICE 6th Edition prior to the amendments for adjudication. Clause 66 requires that every dispute which may arise between the parties must be notified to the Engineer who shall state his decision in writing. Broadly speaking should the contractor then disagree with the decision of the Engineer, it has one month within which it must give notice referring the disputed matter to a conciliation process, or three months within which it must refer the matter to arbitration. The decision of the Engineer is said to be final and binding upon the contractor unless either one of these steps has been followed. In March 1998 these procedures were amended to include the adjudication provisions of the Construction Act. A crucial change is that arbitration may now only be commenced within one month of an adjudicator's decision. Harbour was employed as contractor to carry out and complete works involving the construction of flood defences at Harwich. Following substantial completion Harbour submitted five claims arising out of the work for matters including additional excavation costs and additional cost due to delay to site access. A notice of dispute was issued and the Engineer's decision was given on each of the five disputed claims. Within two weeks Harbour wrote to the Engineer stating that the decision was unacceptable. At this point Harbour had taken no steps to commence conciliation or arbitration. A few days prior to the expiry of the three month period for the giving of notice of arbitration, Harbour gave notice that it required the dispute to be considered under the ICE conciliation procedure. The Environment Agency waited until the three month period had passed, and then replied to the effect that the one month period for issuing a notice of conciliation had expired and accordingly the notice served was invalid. The following day, Harbour served a notice to refer to arbitration, itself out of time by approximately eight days. In the notice Harbour invited the Environment Agency to confirm that the arbitrator would have jurisdiction to decide on all issues connected with the final certificate including the claims. The Environment Agency refused to give such confirmation and accordingly Harbour applied to the court for an extension of time under the 1996 Arbitration Act for the commencement of the arbitration. Lord Justice Waller in the Court of Appeal agreed with the lower court that the power given to the court by section 12 of the Arbitration Act to override the agreement of the parties must be fully justified. He agreed that an extension could not be justified in this case. The mistake of Harbour was simply a failure to read the provisions of the contract which it had agreed. Whilst this was a circumstance that the parties might not have contemplated, it was not one which allowed the court to interfere with the contractual bargain between the parties. Neither could the court accept the argument that the Engineer's decision under clause 66 should only provide "temporary finality" until the issue of the final payment certificate. Lord Justice Waller was satisfied that where in clause 66(4) of the ICE Conditions, it was stated that decisions of the Engineer were to be "final and binding" unless certain steps were taken, he could see no basis that these words should be given anything other than their natural and ordinary meaning. In conclusion, the appeal against the decision of the judge in the Commercial Court fell to be dismissed. By missing the deadline for service of its arbitration notice by eight days, Harbour had left itself with no further recourse to challenge the decision of the Engineer in respect of its claims.
CJ-9942
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