Chapter 11 Extension of time procedures

Notice of delay

Most contracts require that a claim for an extension of time be made strictly in accordance with specific procedural requirements. While every contract prescribes its own procedure, certain processes tend to be common. A notice of delay and the intention to make a claim is usually required first. Following this a formal claim is usually required, in accordance with the process set out in the contract.

The notice of delay is generally a notice ‘for information only’ and is not a claim. Contract administrators need to be aware of the distinction between a notice of delay and the making of a claim.

Time bar

A time bar is a clause or condition which limits the time within which certain contractual rights can be enforced. A notice must be given under a contract in order for it to be effective in building up a contractual entitlement. Time bars occur in construction contracts in different clauses for different purposes. For example, latent conditions, extensions of time, progress payments and disputes.

For example, in AS4000 / AS4902 the contractor is only entitled to extension of time claims if it submits a written claim within 28 days of when it should reasonably have become aware of the cause of the delay.

AS4300 (and AS2124) contains a similar time bar, with the contractor being obliged to give a notice within 28 days ‘after the delay occurs’. These contracts have led to some dispute as to whether the delay ‘occurs’ at the commencement of the delay or upon completion of the delay.

The decision in the following case study supports the proposition that these words should be interpreted to mean ‘within 28 days of when the delay first occurs’.

CASE STUDY

State of Queensland  v Multiplex Constructions Pty Ltd (1999) 1 Qd R 287

Facts
  • Multiplex (contractor) and the State of Queensland  (principal) entered into a contract for Multiplex to construct the Queensland Conservatorium of Music.
  • The contract required Multiplex to submit a written claim for delay ‘within 28 days after the delay occurs’.
  • Multiplex claimed an extension of time which Queensland rejected because the claim was not made within 28 days of the beginning of the delay.
Result
  • The natural meaning of the phrase ‘after the delay occurs’ means after the delay had first occurred, notwithstanding that it might be continuing, as opposed to after the whole of the delay had occurred.
  • The purpose of the notice provision is to alert the superintendent to the need for investigation of facts on which the claim is based to determine whether it justifies an EOT. The later any notice is given after the start of the delay, the more difficult it may be for the superintendent to verify whether there has been delay.

Courts are generally prepared to give effect to a time bar clause even if it may appear unreasonable or onerous. Generally, courts do not regard it as their role to reconstruct an agreement between the parties in order to make it seem more ‘sensible’. Rather, a time bar clause will be given its ordinary meaning and operation.

Whether or not a time constraint for the provision of notice operates as a complete time bar will depend on the particular circumstances. A failure to notify in accordance with the specific requirements of the contract may entitle the other party to damages arising from the failure, to the extent that the other party can prove loss.

Contractor’s failure to issue a notice for EOT

A failure to comply with the mandatory requirement to give notice within a prescribed period of time will result in the loss of the right to claim an EOT. The underlying logic is that notice of delay and claims for EOT should be given within such time as will allow the principal or its superintendent to take some remedial action while the events are still taking place.

CASE STUDY

Australian Development Corporation (ADC) v White Constructions (ACT) Pty Ltd (1996) 12 BCL 317

Facts
  • White (contractor) contracted to design and construct an office block and residential building for ADC (developer). The work proceeded slowly and was ultimately brought to a halt by an industrial dispute.
  • The EOT provision in the contract provided that:

‘Within 30 days of when the company reasonably believes that delay has occurred within the meaning of this clause, it shall notify the developer of the time of commencement and actual or estimated termination of the delay and the cause thereof.’

Result
  • As a result of White failing to provide notification in a timely manner, it was held that White was not entitled to extension of the date for practical completion because:
  • the underlying purpose of the clause was to place ADC in a position where it could rationally assess the cause of delay, whether it was beyond White’s control and the extent of the delay. The notification requirement was a deliberate and important part of the mechanism for determining the time by which the date for practical completion should be extended;
  • the fact that the clause was expressed in mandatory terms ie, White ‘shall notify’ and ADC ‘shall determine the time’, gave weight to the view that the clause should operate as a bar; and
  • if ADC only obtained an action for damages for the failure to give notification in time, then it would be difficult to establish what loss ADC had suffered as a result of the untimely notification.

Superintendent’s discretion to grant EOT in the absence of notice

It has been suggested that the principal or superintendent may have an implied obligation to act in good faith and to extend time even if there has been a failure on the part of the contractor to issue a notice or make a claim for an EOT. This has occurred because of the obligation expressed in some contracts that the contract administrator or superintendent act fairly, as well as having an express discretion to extend time for any reason.

CASE STUDY

Peninsula Balmain Pty Ltd v Abigroup Contractors Pty Ltd [2002] NSWCA 211

Facts
  • Peninsula (principal) contracted with Abigroup (contractor) for the construction of a home unit development under a modified version of standard form contract AS2124-1992. The contract required Peninsula to ensure that the superintendent acted honestly and fairly in exercising its functions under the contract. Disputes arose and Abigroup was late in completing the works and the contract was terminated by Peninsula.
  • The contract’s EOT regime required Abigroup to ‘promptly notify the superintendent in writing with details of the possible delay and the cause’. Abigroup was only entitled to an EOT for practical completion ‘if within 28 days after the delay occurs it gives the superintendent a written claim for an extension of time for practical completion setting out the facts on which the claim is based’.
  • The superintendent also had power under the contract to extend the time for practical completion for any reason. This was even if the contractor was not entitled to an extension of time.
  • The superintendent extended the date for practical completion, and no other extension was sought by Abigroup or granted prior to the date of termination of the contract.
Result in final decision on appeal
  • The court found that the power to extend time without a claim was not just for the benefit of the principal but could be exercised for the benefit of both parties.
  • The superintendent is obliged to act honestly and impartially in deciding whether to exercise this power.
  • If a timely claim has not been made, and the ground on which an extension is claimed is one which is difficult to decide because of the time that has elapsed since the claim should have been made, that may be a ground on which the superintendent can fairly refuse the extension. It was not the case in this decision.
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