Lack of notice defeats claim

The Pursuers undertook the design and construction of six schools for the Defendant as part of the South Ayrshire Schools PPP. Part of the works was subcontracted to Carillion. Clause 10.1 of the Project Agreement required the Pursuers to carry out the works so that each Phase of a Project Facility achieved Service Availability on the Target Service Availability Date ("TSAD") for that Phase. There were to be three Phases. Clauses 8A.3 and 17 of the Agreement allowed the Contractor extensions of time, a postponement of the TSAD and compensation if the works were delayed due to a Works Compensation Event.

The definition of these Works Compensation Events was quite wide, and included a breach by the Local Authority and the time required for Type Asbestos 3 removal in the buildings. Each of the schools had been the subject of an asbestos survey. These had determined the extent of the asbestos in the buildings and an estimate of the time required to remove it. In this context, a Works Compensation Event was the discovery of more asbestos than had been anticipated by the survey.

The Pursuers argued that the works at Prestwick Academy had been delayed because they had come across asbestos which had not been revealed by the survey. They claimed entitlement to a postponement of the works of 16 weeks plus compensation of £815,792.00.

The Defenders challenged the Pursuers’ entitlement because they had failed to give the notice as required by clause 17 of the Agreement within the set time. The pursuers responded that they had only been aware that there was likely to be a delay in achieving the TSAD when they received a report on 6 April 2007. They then gave notice to the Chief Executive by a letter dated 2 May 2007, which was within 20 Business Days of 6 April, as required by the clause.

In order to obtain relief, clause 17.6 of the Agreement required the Contractor to do various things, the first of which was to serve a notice in accordance with clause 17.6.1. Any relief was conditional upon the Contractor having complied with this. The wording of clause 17.5, 17.6 and 17.7 not only required compliance but strict compliance with the terms of the clause. The requirement that the notice be served in 20 Business Days was to be sent to the Chief Executive- no one else. The notice was to be sent by first class post, fax or by hand. E-mail was not acceptable. The Judge was struck by the level of formality of the notice procedure. These requirements were not onerous, and there was no ambiguity about the requirements of the clause.

Part of the compensation claim, 12.5 days, was a claim for time lost due to bad weather. Bad weather was not a Works Compensation Event under the Agreement, but the Pursuers’ argument was that, if they had not been delayed by the discovery of the asbestos, they would have completed the works before the winter months; therefore, they argued that the delay caused by the bad weather was a direct consequence of the delay caused by the discovery of the asbestos and should be included in the calculation. If that were the case, the Judge concluded, then the failure to provide a notice as required by the contract was fatal to that claim for delay.

(Education 4 Ayrshire Ltd. v South Ayrshire Council; 4 November 2009)

Author: Ann Glacki

Date: March 2010

Ann Glacki

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