Recent Privy Council Judgment (NH International) on the importance of making timely claims (FIDIC)

Judgment was handed down by the Pricy Council in August in the case of NH International (Caribbean) v National Insurance Property Development Company [2015] UKPC 37 which concerned the interpretation of FIDIC standard form contract wherein at clause 2.5 it states that the Employer who “considers itself to be entitled to any payment under any” clause of this contract should “give notice and particulars to the Contractor … as soon as practicable after the Employer became aware of the event or circumstances giving rise to the claim”. Clause 2.5. concludes by stating that the Employer should only be entitled “to set off against or make any deduction from an amount certified in a Payment Certificate, or to otherwise claim against the Contractor, in accordance with this sub-clause”.  In the currency of the arbitration between the parties, the Arbitrator allowed the Employer to bring a cross claim which had not been notified in accordance with Clause 2.5. pursuant to the common law rights of set-off / abatement.  The Privy Council concluded that the Arbitrator was wrong to do so stating at paragraph  38 et seq of its judgment as follows:

” it is hard to see how the words of clause 2.5 could be clearer. Its purpose is to ensure that claims which an employer wishes to raise, whether or not they are intended to be relied on as set-offs or cross-claims, should not be allowed unless they have been the subject of a notice, which must have been given “as soon as practicable”. If the Employer could rely on claims which were first notified well after that, it is hard to see what the point of the first two parts of clause 2.5 was meant to be. Further, if an Employer’s claim is allowed to be made late, there would not appear to be any method by which it could be determined, as the Engineer’s function is linked to the particulars, which in turn must be contained in a notice, which in turn has to be served “as soon as practicable”.

The Court concluded the that while the right of the Employer  to raise the defence of abatement remains, the award was to be remitted to the Arbitrator “to reconsider the sums which he allowed … by way of set-off or cross claims” stating that “[any claims] not the subject of appropriate notification complying with the first two parts of clause 2.5 and (ii) cannot be characterised as abatement claims as opposed to set-offs or cross-claims, must be disallowed“.

Comment: This judgment underlines, yet again, the importance of the practice of rigid compliance with the notice provisions of the construction contract in order to preserve claims in dispute. In this context, useful regard might be had to the paper presented at the CBA March 2015 conference by Martin Waldron BL entitled “Conditions precedent – In Irish Construction Contracts” located in the Members Section.

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