Insight Legal FZE

PANTHER TAKES A BITE AND IT HURTS

TIME BAR – FIDIC 1999, Sub-Clause 20.1

After almost 10 years, on 12 May 2023, the DIFC Court of Appeal handed down Panther Real
Estate Developments LLC v Modern Executive Systems Contracting LLC [2022] DIFC CA 016 and
took a bite out of the judgement of Mr Justice Akenhead in Obrascon Huarte lain SA v Attorney
General for Gibraltar [2014] EWHC 1028 (TCC).

Mr Justice Akenhead’s judgement covered many different issues over its 170 pages. However
it is the entitlement to an extension of time claim, following a suitable notice, as required
under Sub-Clause 20.1 of FIDIC Conditions of Contract for Construction for Building and
Engineering Works designed by the Employer (First Edition 1999), that caused some surprise
followed by its general acceptance within the construction industry.

Sub-Clause 20.1
“If the Contractor considers himself to be entitled to any extension of the Time for
Completion and/or any additional payment under any Clause of these Conditions
or otherwise in connection with the Contract, the Contractor shall give notice to
the Engineer, describing the event or circumstance giving rise to the claim. The
notice shall be given as soon as practicable, and not later than 28 days after the
Contractor became aware, or should have become aware, of the event or
circumstance.”

If the Contractor fails to give notice of a claim within such period of 28 days, the
Time for Completion shall not be extended, the Contractor shall not be entitled to
additional payment, and the Employer shall be discharged from all liability in
connection with the claim. Otherwise, the following provisions of this Sub-Clause
shall apply …”

In short, Mr Justice Akenhead decided that Sub-Clause 20.1 was a condition precedent, which,
if not followed, would result in the loss of entitlement. However, Mr Justice Akenhead went
on to decide that, at paragraph 312 of the judgement:

“Properly construed and in practice, the “event or circumstance giving rise to the
claim” for extension must first occur and there must have been either awareness
by the Contractor or the means of knowledge or awareness of that event or
circumstance before the condition precedent bites. I see no reason why this clause
should be construed strictly against the Contractor and can see reason why it
should be construed reasonably broadly, given its serious effect on what could
otherwise be good claims for instance for breach of contract by the Employer.”
 Insight Legal FZE

In order to explain his judgement Mr Justice Akenhead gave a hypothetical example:

“A hypothetical example might be helpful:

(a) A variation instruction is issued on 1 June to widen a part of the dual
carriageway well away from the tunnel area in this case.
(b) At the time of the instruction, that part of the carriageway is not on the
critical path.
(c) Although it is foreseeable that the variation will extend the period reasonably
programmed for constructing the dual carriageway, it is not foreseeable that
it will delay the work.
(d) By the time that the dual carriageway is started in October, it is only then
clear that the Works overall will be delayed by the variation. It is only
however in November that it can be said that the Works are actually delayed.
(e) Notice does not have to be given for the purposes of Clause 20.1 until there
actually is delay (November) although the Contractor can give notice with
impunity when it reasonably believes that it will be delayed (say, October).
(f) The “event or circumstance” described in the first paragraph of Clause 20.1
in the appropriate context can mean either the incident (variation,
exceptional weather or one of the other specified grounds for extension) or
the delay which results or will inevitably result from the incident in question.

The wording in Clause 8.4 is not: “is or will be delayed whichever is the earliest”.
The above interpretation does not in practice necessarily involve a difficult mental
exercise on construction projects where, as here, a critical path programme,
invariably electronic, is used which can determine when delay is actually being
suffered.”

Thus, it became generally accepted that the Sub-Clause 20.1 notice should be issued as soon
as the Contractor became aware of, or where there was means of knowledge of, an event or
circumstance before the condition precedent becomes effective.

In construing Sub-Clause 20.1 Mr Justice Akenhead referred to Sub-Clause 8.4 which states:

“The Contractor shall be entitled subject to Sub-Clause 20.1 … to an extension of

the Time for Completion if and to the extent that completion for the purposes of
Sub-Clause 10.1 … is or will be delayed by any of the following causes …”

This wording led Mr Justice Akenhead to find that the entitlement to an extension of time can
be claimed either when it is clear that there will be a delay (a prospective delay) or when the
delay has at least started to be incurred (a retrospective delay).

As can be seen Obrascon held that the Contractor had the option of giving a Sub-Clause 20.1
notice when it became clear that a delay would be incurred or when the delay actually started
to be incurred. However, as Mr Justice Akenhead said at paragraph 313:
 Insight Legal FZE

“Additionally, there is no particular form called for in Clause 20.1 and one should
construe it as permitting any claim provided that it is made by notice in writing to
the Engineer, that the notice describes the event or circumstance relied on and that
the notice is intended to notify a claim for extension (or for additional payment or
both) under the Contract or in connection with it. It must be recognisable as a
“claim”. The notice must be given as soon as practicable but the longstop is 28 days
after the Contractor has become or should have become aware. The onus of proof
is on the Employer or GOG here to establish that the notice was given too late.”
(my emphasis)

So far so good. Then along comes Panther Real Estate Development LLC v Modern Executive
Systems Contracting LLC DIFC CA 016 handed down on 12 May 2023. The Court of Appeal
took issue with Obrascon finding that the 28-day notice requirement was triggered when the
Contractor became aware (or ought to have become aware) of the event or circumstance
which gives rise to the claim for an extension of time. This is in contrast to Obrascon where
the 28-day notice requirement was said to be triggered by the Contactor becoming aware of
(or should have been aware of) the delay or likelihood of delay.

This is a much more onerous position than found in Obrascon. Thus, the event or
circumstance that eventually results in a delay must be notified to the Engineer within 28-
days of its occurrence. This will be the case even if, at the time the event or circumstance
occurs, it is not considered by the Contractor that the event or circumstance would cause a
delay to the contract.

The Court of Appeal gave its own example to explain this view (which upheld the Court of
First Instances’ judgement) at paragraph 45 of the judgement:

“At the beginning of para. 312 of his judgment in Obrascon (supra), Akenhead J
says this:

"Properly construed and in practice, the 'event or circumstance giving rise to the
claim' for extension must first occur and there must have been either awareness
by the Contractor or the means of knowledge or awareness of that event or
circumstance before the condition precedent bites."

We have no difficulty with that part of his analysis which correctly focuses on when
the Contractor becomes aware (or should have become aware) of the relevant
event or circumstance giving rise to the claim so as to start time running. But later
in his judgment Akenhead J appears to say that time can start to run from the
moment, usually later in time, that delay to completion of the works in fact
occurred or started to occur. We see difficulties with this analysis. Delay to the
contractual Time for Completion only occurs in fact when the works are not
completed by the contractual completion date. The construction advanced by
Akenhead J would mean that in, say, a three year project, if an event occurred
during the first year which resulted ultimately in the works overrunning by a month
 Insight Legal FZE

or two after the Time for Completion in year three - and there would be no actual
delay to the Time for Completion until

then - then the 28-day notice under Sub-Clause 20.1 would only have to be given
within 28 days of the moment in year three when Time for Completion passed
without the works being completed. That would render Sub-Clause 20.1 - which is
designed to ensure that claims are notified and dealt with swiftly - entirely
ineffective for its purpose.”

As will be apparent the Court of Appeal and the Court of First Instance did not accept that a
delay could be incurred prior to the completion of a project as the actual delay, as explained
in the judgement, will only occur after the Time for Completion has passed. This will no doubt
come as a surprise to many construction professionals, especially those involved in delay
analysis. This will also cause consternation to construction lawyers who have become used to
Obrascon’s formulation in considering whether under FIDIC 1999 a Sub-Clause 20.1 notice has
been served in time and in particular when a delay is said to be incurred during a construction
and/or engineering project.

It is accepted that the Sub-Clause 20.1 procedure is designed to ensure that the
Engineer/Employer has the opportunity to consider the effects of the event or circumstance
and to take such action as may be necessary to reduce or avoid the possible delay and cost
that may be involved, but also to ensure that the claim can be properly examined and agreed
at the appropriate time. I note here that the Engineers’ knowledge of such an event or
circumstance does not obviate the need for the Contractor to serve a Sub-Clause 20.1 notice.

The Court of Appeal’s judgement now puts a much greater emphasis on issuing Sub-Clause
20.1 notices, even where no obvious delay is anticipated. Thus to ensure that the Contractor
does not to lose their entitlement to an extension of time and/or costs a notice should be
issued to guard against a delay arising at a later date which is a result of an earlier event or
circumstance.

Interestingly the FIDIC 2017 editions have grappled with this issue and has within its Contracts
Guide (FIDC 2017 Contracts Guide (Second Edition) 2022) alluded to the condition precedent
sanction as being deliberately harsh. It goes onto to explain that this harsh sanction is to
incentivise the Contractor to issue notices as soon as possible after the event or circumstance
has occurred. This is to give the Engineer the maximum time possible to investigate the event
or circumstance and to consider the effects, if any, on the project. However, Sub-Clause
20.2.2 of FIDIC 2017 states that allowances may be made by the Engineer where there are
circumstances that justify the late submission of the notice by the Contractor. This sub-clause
therefore recognises that in some (exceptional) circumstances the Engineer may waive the
strict 28-day notice period to alleviate the draconian effect of the Sub-Clause 20.1 condition
precedent.

Clearly the judgement in Panther and the wording of FIDIC 2017 will give rise to this issue
being once again reviewed at a later date in the DIFC Courts as well as in the English Courts.
 Insight Legal FZE

Going forward Contractors will need to keep very alive to the possibility of any event or
circumstances that could give rise to a delay and/or additional costs, and when in doubt issue
a notice to safeguard their position.

Robert A Sliwinski
Counsel and Arbitrator

10 July 2023

If you would like discuss any aspect of this article or the issues raised please get in touch with
Robert Sliwinski at robert@ilfze.com or on +971 585 373 470