FES LTD against HFD Construction Group Ltd (Court of Session) [2024] CSIH 37

This Scottish case revolved around contractual interpretation of Clause 4.20.1 of the 2016 Scottish Standard Building Contract with Quantities (which has exactly the same wording as clause 4.20.1 of the JCT 2016 standard form). This clause gives a contractor an entitlement to loss and expense, "subject to compliance with clause 4.21", which requires notice to be given regarding a loss and expense claim.

Background

In 2020, the parties entered into a contract, whereby the pursuers agreed to fit out a new Grade A office building at 177 Bothwell Street, Glasgow. During the project, there were various delays, including site closure due to the COVID-19 pandemic. A dispute arose about entitlement to an extension of time and their claim for related loss and expense.

On 4 October 2022, FES gave notice that they intended to refer that dispute to adjudication. An adjudicator was appointed. He issued his decision on 10 March 2023. He found that the giving of notice under clause 4.21.1 was a condition precedent of any entitlement to loss and expense under clause 4.20.1. Since FES had not given the required notice, they had no entitlement to claim direct loss and expense. The adjudicator relied particularly on the words "subject to ... compliance with the provision of clause 4.21" in clause 4.20.1.

Therefore, the claimant (FES) raised an action in court to contend that the adjudicator made an error in his interpretation of clauses 4.20 and 4.21. They asked the court to find that clause 4.21 is not a condition precedent to their entitlement to reimbursement for direct loss and expense.

In the first instance, the court found that the adjudicator’s interpretation was correct.

FES Appealed.

Appeal Decision

The appellate court agreed with the previous judgment that clause 4.21 is a condition precedent to clause 4.20. The need to be duly notified and advised of the potential liability within a limited time span is a reasonable condition before a claim could be considered and ultimately determined. The court refused FES’ arguments.

GEORGE WILLIAM GIBBS LLB (HONS) LLM

[email protected]

Hanscomb Intercontinental provide a wide range of services to parties involved in adjudication in the United Kingdom and internationally. As well as expert witness and expert advisory some of our senior team members sit as adjudicators and dispute board members.