RECORDS, ACCOUNTS AND CLAIMS

Max Abrahamson in his book Engineering law and the ICE contract wrote:

A party to a dispute, particularly if there is an arbitration will learn three lessons (often too late) the importance of records, the importance of records, the importance of records. This quotation came to mind last week when I dealt with a claim raised by the contractor on my DSK rehab project. I found a case Attorney General for the Falkland islands v Gordon Forbes construction (Falklands) limited  similar to mine and want to share the judgement with you. A contract was let for the construction of the infrastructure of the East Stanley Housing development in the Falkland islands using the FIDIC 4th editions conditions.

Contract requirement

These conditions, like most standard forms, require the contractor to follow a procedure in the event of him submitting a claim. Clause 53.1 states that the contractor if he intends to claim any additional payment he must give a written notice of his intention to the Engineer within 28 days after the event giving rise to the claim has first arisen. In addition the contractor is obliged by clause 53.2 to keep such contemporary records necessary to support the claim. The contract goes further in requiring the contractor in clause 53.2 to send to the Engineer within 28 days of the written notice a detailed account of the claim. If the contractor fails to send in a written notice and detailed account there is a fall back position in clause 53.4 which states that in the event of the contractor failing to comply with what after all are very simple obligations his entitlement to payment will not exceed the amount the Engineer or an arbitrator could consider verified by contemporary records.

     

  Contractor's mistake would seem that contractor considering that he was entitled to additional payment made his first mistake in failing to send a written notice and detailed account as required by clauses 53.1 and 53.3. As to whether there was sufficient contemporary records to satisfy the requirements of the fall back position became the subject of a dispute which was referred to a arbitration and subsequently to the court. It would seem that the contemporary records were somewhat lacking and didn't prove sufficiently to convincing as far as the Engineer was concerned to merit payment. The contractor felt this approach unjust as he considered he was able to fill in the gaps where the contemporary records were lacking with verbal testimony from those within his organization able to provide the necessary information. It was the Engineer's view that this type of verbal evidence did not amount to contemporary records.

This proved somehow critical as both parties were agreed that if the contractor failed to comply with these conditions his right to payment was lost and therefore everything hung on the matter of contemporary records.

Intention of the clause in the contract 

The judge considered that the contract set out a clear and ordered way of dealing with any claim for an additional payment. Claims have to be notified at the time they arise, contemporary records have to be kept and regular accounts rendered.  The whole contractual system is aimed at the early resolution of any queries at the time claim arises.

He then had to decide what was meant by the word contemporary  and felt there was little difference between contemporary and the word contemporaneous i.e occurring  the same time.  Examples were given by the judge to illustrate the point. If there was a dispute as to whether labor was employed on the site during a particular date it would be acceptable to produce time sheets showing the hours worked or even a statement by the contractor stating that this was what had taken place. The judge posed something of a conundrum. What would the position be if the contractor wished to claim for labor cost for a four week period? He had times sheet for weeks 1, 2 and 4 but the records for week 3 were missing.  Could the court accept the verbal evidence concerning week 3, the judge felt that such verbal evidence would not be acceptable.

Verdict of claim

The judge found in favor of authority in deciding that to constitute contemporary records they must be prepared at or about the time the events occurred which give rise to the claim. Where there is no contemporary record the claim will fail. Where there are contemporary records to support part of the claim the claim may succeed on that part of the claim which is supported by the contemporaneous records but not otherwise. If the contemporaneous records are ambiguous or unclear as to their meaning then verbal evidence will be accepted to provide clarification.  The contractor probably unaware of Max Abrahamson's words of wisdom found out when it was too late the importance of keeping proper records.

Moral

The lessons to be learned from this decision is that where a contract provides a procedure to be followed if the contractor or for that matter subcontractor intends to claim additional payment, a failure to comply will result in a loss of entitlement. Where records are to be contemporaneous or submitted within a specified time scale it is crucial for them to be properly made at the time the event giving rise to the claim occurs.      

My case

In my case, although several times mentioned, the contractor's claim was not successful because of lack of written notice and detailed account submitted at the time the event giving rise to the claim occurred.