Requirement of Notice for Extension of Time

In a clause on extension of time in construction contracts, it is common to find a requirement to issue notice to the employer (or whichever party identified in the contract) that the contractor intends to claim for extension of time.

In the PAM Conditions of Contract 2006 (with Quantities), this is found in clause 23. In the PWD Form 203A (rev 2007), this is found in clause 43.

What happens when a contractor fails to give such a notice? What happens if the notice was issued later than the time prescribed under the clause?

Yuk Tung Construction Sdn Bhd v Daya CMT Sdn Bhd and another appeal [2020] MLJU 1084

The position of the law in Malaysia pertaining to this is laid down in the Court of Appeal case of Yuk Tung Construction Sdn Bhd v Daya CMT Sdn Bhd and another appeal [2020] MLJU 1084 (“Yuk Tung”).

In the case of Yuk Tung:

(a) one of the claims by the subcontractor against the main contractor includes events of delay which they claim they are entitled for extension of time. The subcontractor did not apply for any extension of time for these events at the relevant time as required under the subcontract. They only did so when the claim was filed in court.

(b) The subcontract includes the PWD Form 203 (Revised 10/83).

(c) The subcontractor argued that these events of delay were attributed by the main contractor and resulted in an act of prevention which renders time at large or what is commonly known as the “prevention principle”.

(d) At 1st instance, the high court judge “took the austere and straightforward view that there can be no re-assessment of time for completion or no act of prevention can be relied upon as Daya had failed to avail itself of the EOT provisions”. Dissatisfied, the subcontractor appealed.

(e) At the Court of Appeal, the subcontractor also argued that the relevant clause under the subcontract did not feature any notice requirement as a condition precedent to the subcontractor’s entitlement for extension of time.

(f) That clause reads: “Upon it becoming reasonably apparent that the progress of the Works is delayed, the Contractor shall forthwith give written notice of the causes of delay to the SO”. In the absence of a condition precedent, the subcontractor argued it was wrong for the learned judge to hold that the prevention principle does not apply.

(g) In dismissing this part of the appeal, the Court of Appeal agreed with the finding of the 1st instance judge, noting that there was indeed a condition precedent. The clause in question “must mean that written notice is obligatory”.

“the obligation remains on the part of the contractor to apply for extension of time by giving timeous written notice, failing which, the contractor could not assert prevention or seek for extension of time many years down the road.” (emphasis is the Respondent’s)

The Court of Appeal held that there are cogent reasons why the subcontractor’s argument cannot succeed. These include:

(i) “A party to a contract cannot rely upon preventing conduct of the other party where it failed to exercise a contractual right which would have negated the effect of that preventing conduct”.

(ii) “parties are free to agree in their contract that written notice by a contractor should be a pre-requisite before any grant of extension of time. Apart from obvious exceptions such as illegality, parties must be fastened to their bargain in the contract.”

(iii) “a timeous notice given at the relevant time will allow contemporaneous matters to be investigated more easily rather than insipid complaints raised years later. Hence the requirement in Clause 43 that the written notice must be given forthwith. One can imagine the formidable task of ascertaining matters concerning delay and extension of time after the construction project is completed when all the evidence is probably buried within the walls of the buildings already erected. In the instant case, these allegations of delay, as mentioned earlier, were unfortunately raised for the first time when the claim was filed in court.

Seen in this light, it may seem quite rightly that the contractors could be gaining some advantage by ignoring the notice requirement. Certainly, there was much merit in YTC’s complaint that Daya was attempting to benefit from its own breach by failing to comply with Clause 43 and then, in the next breath, claim that time for completion has gone at large.”

(iv) “We would certainly be inviting criticism if Daya’s contention on notice is accepted, as it would mean that contractors would be better off not giving notice at all. It would open the floodgates and render the notice requirement redundant and illusory.”

(emphasis is the Respondent’s)

Jabatan Kerja Raya Malaysia & Anor v Sunissa Sdn Bhd [2022] 5 MLJ 705

The decision in Yuk Tung stands in harmony with another very recent case at the same appellate level in Jabatan Kerja Raya Malaysia & Anor v Sunissa Sdn Bhd [2022] 5 MLJ 705 (“Sunissa”).

In Sunissa’s case:

(a) The conditions of contract were also the PWD Contract 203A (rev 2007);

(b) There were delays to the construction works where it was common ground that these were not caused by the contractor’s fault or neglect. The superintendent officer granted 4 extensions of time in accordance with the PWD Contract.

(c) The relevant clauses under the PWD Contract includes:

44.1 If at any time during the regular progress of the Works or any part thereof has been materially affected by reasons of delays as stated under …. And the Contractor has incurred direct loss and/or expense beyond that reasonably contemplated and for which the Contractor would not be reimbursed by a payment made under any other provision in this Contract, then the Contractor shall within 30 days of the occurrence of such event or circumstances or instructions give notice in writing to the S.O. of his intention to claim for such direct loss or expense within an estimate of the amount of such loss and/or expense, subject always to clause 44.2 hereof.

44.2 As soon as is practicable but not later than ninety (90) days after practical completion of the Works, the Contractor shall submit full particulars of all claims for direct loss or expense under Clause 44.1 together with all supporting documents,…

44.3 “If the Contractor fails to comply with Clauses 44.1 and 44.2, he shall not be entitled to such claim and the Government shall be discharged from all liability in connection with the claim”. (emphasis is the Respondent’s)

(d) The contractor did not give such notice within 30 days of the occurrence of the events in question. The notice was given only after the issuance of each of the separate 4 extensions of time. However, it must be said that the contractor had complied with the 2nd condition precedent under clause 44.2 by providing full particulars within 90 days of the certificate of practical completion.

(e) Though the appeal was allowed on a different issue (ie: whether claue 44.1 applies only to losses that were “beyond reasonable contemplation” as opposed to “within reasonable contemplation”), the Court of Appeal agreed with the 1st instance and held:

(i) Following the test in the New Zealand’s case of Smith & Smith Glass Ltd v Winstone Architectural Cladding System Ltd [1992] 2 NZLR473:

“he who seeks to rely upon such a clause to show that there was a condition precedent before liability to pay arose at all should show that the clauses relied upon contain no ambiguity… I believe that unless the condition precedent is spelled out in clear and precise terms and accepted by both parties, the clauses … do no more than identify the time at which certain things are required to be done …” (emphasis is the Respondent’s)

(ii) Referring to the English case of WW Gear Construction Limited v Mcgee Group Limited [2010] EWHC 1460 (TCC), it was held that the courts will enforce conditions precedents, however harsh they may be to the contractor, if they are drafted in clear and unambiguous language. It also held that without compliance with the condition precedent, the process to ascertain loss and expense cannot be triggered. (emphasis is the Respondent’s)

(iii) Although the words ‘condition precedent’ does not appear in clause 44.1, “it is clear that whether a term is an essential condition precedent is very much dependent on the language and its relation to the contract.”. The Court of Appeal held:

“[28] …Clause 44.1, as noted by the learned High Court judge is couched in mandatory language which is unambiguous. It says without qualification that the contractor ‘shall’ give to the SO notice of intention to claim together with an estimate of loss within 30 days. In addition, it provides a severe penalty for failure to comply, ie the contractor will not be able to claim for the loss and expense. Thus, insofar as the necessity for compliance with the said condition is concerned, nothing could be clearer. In the premises, we would affirm the finding of the learned High Court judge that the said clause is a condition precedent which must be complied with unless there is evidence of waiver on the part of the employer…” (emphasis is the Respondent’s)

In summary, the Courts in Yuk Tung and Sunissa insist on the party seeking to rely on extension of time to strictly comply with the provisions they had contracted into.

For those contractors who are in the midst of tendering for a contract, care should be given to such a clause and to negotiate for a more relaxed condition of notice.

For contractors already in the thick of an ongoing contract, it is necessary for their contract administrators or project managers to keep vigil of this requirement and to make the application within time.