In Uniform Building Contractors Ltd v The Water and Sewerage Authority of Trinidad and Tobago, the UK Privy Council rejected arguments that disputed works were variations for which additional payments were due.
Summary
In Uniform Building Contractors Ltd v The Water and Sewerage Authority of Trinidad and Tobago, the UK Privy Council (UKPC) allowed an appeal by the Water and Sewerage Authority of Trinidad and Tobago (WSA) against a decision awarding Uniform Building Contractors Ltd (UBC) TT$13,915,215.46 (plus interest and costs) for alleged variations under a pipelaying contract.
The dispute concerned four disputed items of work that UBC claimed were contract variations: laying pipework in the roadway, removal of unsuitable excavated material, importation of suitable backfill, and night work (the Disputed Items). The UKPC held that:
- none of these constituted variations under the FIDIC Yellow Book contract as they were expressly or impliedly included in UBC’s lump sum price obligations;
- UBC had failed to comply with the contractual notice requirements in Clause 20.1, which operated as a condition precedent for any entitlement to payment; and
- UBC was precluded from relying on the principles of waiver and/or estoppel given its failure to plead them before the High Court trial judge.
The UKPC allowed WSA’s appeal and set aside the Court of Appeal’s decision, thereby dismissing UBC’s claim in full.
Background
On 23 May 2007, WSA and UBC entered into a contract for the design, supply and installation of a 28.43 km pipeline in Trinidad and Tobago. The contract was based on the FIDIC Yellow Book Form (1999 Edition), a lump sum contract for design and build projects.
WSA terminated the contract in May/June 2009, following disputes about testing and the alleged failure to provide a method statement for a bridge crossing. UBC later commenced proceedings against WSA claiming payment for the Disputed Items.
The trial judge had dismissed both UBC’s claim and WSA’s counterclaim, concluding that the contract was comprehensive and accounted for all eventualities, unforeseen circumstances, and delays, and that UBC had deviated from its express terms. The Court of Appeal subsequently overturned that decision, awarding UBC TT$13,915,215.46 plus interest and costs on the basis that WSA’s appointed Engineer had approved the works as variations, with payments to be made at a later date. The Court of Appeal focused on the practical management and performance of the contract, rather than a strict, literal interpretation of its terms. It observed that, although the FIDIC terms were formally incorporated into the agreement, the parties were flexible in the conduct of the day-to-day operations. Therefore, reverting to a strict reading of the contract, without consideration of its performance and operation, would lead to an unjustified and unfair outcome. Furthermore, the Court of Appeal noted that the contract required written notice for changes, but found that WSA – through its site Engineer – had waived these requirements. The Court found that it would be unfair for WSA to dispute the additional payments after the Engineer had approved these works as variations and agreed that payment would be made later. Lastly, the Court of Appeal held that Clause 20.1 (which provided a strict time limit for making claims under the contract and clear consequences for non-compliance) did not apply once the contract had been terminated.
WSA then appealed to the UKPC, arguing that the Court of Appeal had wrongly interfered with the trial judge’s findings of facts, and that UBC had ignored and failed to comply with the procedural requirements of the contract.
UKPC Decision
Several issues arose before the UKPC for consideration, which found that:
- (i) the contract’s provisions made it clear to UBC that their obligations were comprehensive, and that all relevant matters needed to be considered when pricing the works. In construing the General Terms of the contract to determine whether they expressly or impliedly included the Disputed Items within the agreed price, the UKPC noted that the principal conditions of the contract were rooted in the FIDIC Yellow Book, which is a lump-sum contract. This form required the contractor to account for all foreseeable risks in its pricing, aiming to provide financial certainty for parties involved in the contract. In a lump sum contract, underestimating the work required to meet the contractual requirements cannot constitute grounds for a variation. Instead, it is an inevitable risk that the contractor must accept, rather than pleading a claim for variations.
- (ii) the Disputed Items did not constitute variations. Due to the general terms of the contract, these were or should have been included in UBC’s lump sum price, and specific items in the contract expressly covered each of the items.
- (iii) UBC’s procedural failings, particularly in relation to contractual notice requirements, precluded it from making any claims for the Disputed Items in any event.
- (iv) that UBC could not rely on the principles of waiver and estoppel. Where UBC never raised issues of waiver and estoppel before the High Court trial judge, it was considered too late to raise it in their submissions before the Court of Appeal and the UKPC. For the principles of waiver and estoppel to apply, parties must properly plead such a claim so that the other party knows the case they must meet.
The UKPC’s analysis in relation to UBC’s procedural failings focused on two clauses: Clause 5.3 and Clause 20.1. The former dealt with a determination by the site Engineer as to any adjustment of the Contract Price and/or Schedule of Payments if a claim for additional monies arose. The latter dealt with UBC’s responsibility to notify WSA early should a claim for additional monies arise.
Clause 5.3 is reproduced below as follows:
"Whenever these Conditions provide that the Engineer shall proceed in accordance with this Sub-Clause 3.5 to agree or determine any matter, the Engineer shall consult with each Party in an endeavour to reach agreement. If agreement is not achieved, the Engineer shall make a fair determination in accordance with the Contract, taking due regard of all relevant circumstances.
The Engineer shall give notice to both Parties of each agreement or determination, with supporting particulars. Each Party shall give effect to each agreement or determination unless and until revised under Clause 20 [Claims, Disputes and Arbitration]."
The UKPC found that UBC had failed to seek a determination from the Engineer under Clause 3.5. UBC never gave any notice to the site Engineer for any potential claims for additional monies, never sought a determination, and never offered any material which could have been the subject of a determination by the Engineer.
Furthermore, the UKPC opined that Clause 20.1 was designed to ensure certainty for both parties. The contractor (i.e., UBC) had to provide an early warning of a claim, with a clear statement of how and why a claim for additional monies had arisen, and an attempt to estimate the additional sums due. Clause 20.1 is reproduced as follows:
"If the Contractor considers himself to be entitled to any extension of the Time for Completion and/or any additional payment … the Contractor shall give notice to the Engineer, describing the event or circumstances 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 events or circumstances.
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 this case, the UKPC stated that UBC had failed to give an early – or any proper – notice of the likely increase in costs arising from the Disputed Items. Furthermore, the language of Clause 20.1 is a condition precedent where failure to fulfil the notice requirements thus precludes UBC from raising a claim for additional payment. Having failed comprehensively to comply with the condition precedent, UBC was prevented by the contract’s terms from making any claims for variations and WSA is thus discharged from any liability to pay for them.
Conclusion
This case is a significant reaffirmation of the principle that the contractual notice provisions in construction contracts governed by FIDIC forms will be strictly applied. The decision underscores the importance of compliance with condition precedents. The journey of this dispute through the various appellate courts also emphasises the difficulties parties have in understanding how best to act and interpret notice provisions of this nature. Given the ultimate outcome, and as a matter of best practice, in our view, parties wishing to issue contractual notices should always be cognisant of stipulated deadlines and err on the side of caution when considering how best to comply with them.
