Substance is key in Notifications of Claims

July 22, 2012 · Posted in Legal 

The main job during the execution of the agreement as “Engineer” (under the GCC) or “Principle Agent” (within the JBCC) demands frequent decisions and judgements around the actions on location. This function will also be often undervalued and will attract major liabilities.

Experts in the building and engineering industry are often appointed as the Engineer or Principle Agent. It is required of the specialist accomplishing this critical function to be au fait not only with the terms of the contract, but the execution thereof.

What are the implications of inadequate decision making by the Engineer or Principle Agent under these types of building agreements? One particular instance in which the courts discussed the yardstick with which the Engineer or Principle Agent is to be assessed is inside the case of Hawkins & Osborn (South) (Pty) Ltd vs Enviroserve Waste Management. The decision not only sets the current benchmark in this regard, but additionally sounds a reminder to Engineers and Principle Agents to behave in a sensible manner when conducting themselves as the Employer’s consultant on location.

In cases like this, as in a number of other scenarios in the building and engineering sector, the Employer (Enviroserve Waste Management) concluded a verbal contract with the Engineer. The Engineer was employed to monitor and administer a number of contract works.

The Employer then signed a written agreement with a Service provider to perform digging on top of a certain site. The written agreement between the Employer as well as the Service provider included the General Conditions of Contract for Works of Civil Engineering Construction – 6th edition.

The service provider raised a disagreement in relation to a “notification” of likely claims communicated to the Engineer within a letter. The Engineer did however not value the letter as suitable notice. The results of the Engineer’s final decision would be a deadlock between the Employer and the Contractor which had to be sorted out by an Arbitrator. The Arbitrator determined that the letter was without a doubt appropriate notice and that the builder was eligible to claim as advised therein.

As a result of the Arbitrator’s ruling, the Employer had to pay the Contractor’s claim, but then claimed damages for breach of contract from the Engineer in the High Court. The Employer based its claim on an allegation that the Engineer breached the contract by neglecting to construe the Contractor’s letter as an most appropriate notice of the intent to claim payment for further work as considered in clause 50(1) within the GCC.

The main court established that no violation of agreement had happened as the Contractor’s letter did not constitute proper notice as considered in clause 50(1) within the GCC.

Nonetheless, it had been held by the Supreme Court of Appeal that:

“…there were absolutely no reason why the notice contemplated in GCC 50(1) cannot be in the form of a letter granted the letter was framed as to convey unequivocally towards the addressee that the writer was invoking, or depending upon, the conditions of the agreement which provided for the giving of notice. It could do so expressly or by insinuation. In the present case, the contents of the last paragraph of the Contractor’s letter was so closely connected with the substance of clause 50(1) that it completely satisfied that standard. The letter furnished the info required by clause 50(1) (a) and (b).”

The Contractor’s letter did comply with the conditions of the contract for the reason that it included the information that was required to represent a notification as needed by clause 50(1) of the GCC. The technical strategy used by the Engineer in working with the “notification” by the Contractor was not considered to be reasonable by the Court of Appeal. On the flip side, the Court discovered that the Engineer’s behavior in this regard wasn’t satisfactory as assessed against the norm of the “reasonable engineer”.

The letter therefore constituted a notice which any sensible engineer would’ve construed as such. The Engineer’s inability to do this therefore constituted a violation of the Engineer’s duty of care and, thus the agreement with the Employer. The Engineer was found liable to the Employer for the amount due and payable to the Contractor under the award of the Arbitrator in the initial settlement between the Employer and the Builder.

Focussing exclusively on particular legal fields, Dirk is able to make early and accurate assessment of merits and manage legal disputes effectively. His specialist practice areas include construction law and engineering law, insurance law, property law, medical law and product liability law.

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