Background
MCL are a contractor, 74HT are a property developer. They entered into a JCT Design & Building Contract (2016 Edition) ("the Contract") with extensive, bespoke, amendments. The Contract was dated 2 March 2023.
The parties' dispute centred around the proper construction of Article 12 of the Contract which dealt with "façade costs".
Article 12
Article 12 of the contract entitled 74HT to recover its costs and losses associated with the collapse of a façade from MCL. This was achieved through 74HT making deductions from payments otherwise due to MCL. The contract required 74HT to provide MCL with a full schedule and supporting details of its façade costs ("the Notification") no later than 31 March 2023. Following issue of the Notification, 74HT could make deductions from sums due to MCL (subject to issuing the relevant Payment / Pay Less Notices). The Notification was then to be updated on a monthly basis by 74HT.
The provision relevant to the dispute was Article 12(6) which read [emphasis added]:
"The Contractor shall have no liability to the Employer in respect of any monetary amount that is not included in the Notification of Façade Costs or an update of the Notification of Façade Costs received by the Contractor not later than 4 (four) months after the date of this Contract"
The dispute
On Monday 3 July 2023, 74HT sent documents to MCL which were said to be a Notification under Article 12. MCL disputed the timeliness of this Notification and referred the matter to adjudication.
MCL argued that "not later than four months" after 2 March 2023 (the date of the contract) meant that the Notification required to be issued on or before Sunday 2 July 2023. Therefore, it contended that the documents served on Monday 3 July 2023 were out of time.
The adjudicator disagreed with MCL and determined that the documents served on 3 July 2023 were in compliance with the time limits set out in Article 12(6)
MCL then raised a Part 8 claim in the TCC. The parties agreed that the "corresponding date rule" applied to Article 12. This rule provides that where a contract requires an action to be performed within a certain number of months, the deadline is the same day of the month as when that period started (or the last day of the month if the corresponding day doesn’t exist). Therefore, on the face of it, the corresponding date for the purposes of Article 12(6) was 2 July 2023.
However, 74HT also argued that:
- the deadline had to be extended by four days to account for the four public holidays which fell within the four month period; and ("the public holiday point")
- The Notification should only have had to be received on a business day, such that the Notification received on Monday 3 July should be deemed to be served timeously. ("the business day point")
- Notification could only be properly given when the other party could be expected to deal with it. Therefore a Notification given on Sunday 2 July 2023 wouldn’t have been compliant as nobody from MCL was available to deal with it ("the availability point").
74HT based the public holiday point on Clause 1.5. of the Contract which provided that where an action required to be completed within a certain number of days from a specific date, that period excluded public holidays (as defined elsewhere in the Contract)
The business day point essentially asked the Court to infer the words "upon the next Business Day thereafter" into Article 12(6).
TCC Decision
MCL was successful in its claim.
The Court considered that Clause 1.5 only applied to acts which had to be done with a period of days and therefore didn’t apply to the four month period under Article 12(6). The public holiday point was therefore unsuccessful.
In considering the business day point, the Court noted that "Business Day" was a defined term of the Contract. The term had been used in Article 12(4) but the parties had opted not to use in it Article 12(6) which indicated it was not intended to apply there. The Court was not there to rewrite the contract for the parties, only to interpret what had been agreed. The business day point was rejected.
The Court also rejected the availability point, noting that a notice served, for example, by email on Sunday 2 July 2023 would have been received for the purposes of Article 12(6) notwithstanding that nobody was there to deal with it on receipt.
In rejecting 74HT's arguments, the Court also noted that 74HT had relied on a number of cases which did not assist it, as those cases dealt with different circumstances such as statutory limitation periods and contractual notice provision where one party required the other to take a step upon being notified. Those principals were not applicable to this case.
Lessons to be learned
The decision illustrates the significance of timely notifications and robust contract management. Missing a deadline, even by a single day, can have substantial financial implications. As a result of its failure to timeously serve its updated Notification., 74HT lost its right to recoup the cost of items not already notified to MCL. Those costs were not specified but were likely to be significant given that MCL were prepared to adjudicate and litigate to avoid them.
The dispute also highlights the need for careful drafting where bespoke amendments are being incorporated into standard forms. Article 12(6) could have been even clearer had it stated whether Clause 1.5 applied or when/how a Notification would be deemed as served.
This decision highlights the need to know and understand your contract from the outset, including your obligations and deadline to take actions, how those deadlines are calculated, and the potential impact of not adhering to these. It is a reminder of the need to carefully draft and review your terms before entering the contract, so that there are no nasty surprises down the line. Companies should seek legal advice to ensure that their contracts are enforceable and protect their interests.
In conclusion, the TCC's decision serves as a reminder of the critical importance of knowing, understanding, and sticking to your contract.
Our experienced construction team can provide guidance and advice throughout the life of your contract. To find out more contact Katherine Doran or Hayley Swanson.
