DIFC Court Rules On Conditions Precedent And Liquidated Damages For Employer Delay In Construction Claims

• Published date: 11 September 2023
• Subject Matter: Litigation, Mediation & Arbitration, Arbitration & Dispute Resolution, Trials & Appeals & Compensation
• Law Firm: K&L Gates
• Author: Jonathan Sutcliffe and Thomas Parkin

The recent judgment of the Dubai International Financial Centre (DIFC) Court of Appeal in Panther Real Estate Development LLC v Modern Executive Systems Contracting LLC [2022] DIFC CA 016 provides guidance on common issues in construction disputes, namely: (i) the effect of failure to comply with a contractual condition precedent to notify a claim by a certain deadline; and (ii) the Employer's entitlement to liquidated damages where it is responsible for the delay, in disputes governed by DIFC law.

BACKGROUND

The dispute arose out of a contract for the construction of a residential block in Al Furjan, Dubai. The contract was an amended form of the FIDIC 1999 conditions, governed by DIFC law. Following delays, the Employer terminated the contract, liquidated security guarantees given by the Contractor, and issued a claim against the Contractor for liquidated delay damages, other delay damages, costs to complete, and lost profit due to its inability to sell apartments in the development on schedule. In turn, the Contractor argued that it was entitled to an extension of time (EOT), prolongation costs, the value of work done, and the cost of liquidation of the guarantees. In the course of the project, the Contractor had made four EOT applications, each of which was rejected by the Engineer.

The contract contained a number of typical notice requirements. It required the Contractor to give notice to the Engineer of a claim for an EOT within 28 days from when the Contractor became aware, or should have become aware, of the event or circumstance giving rise to the claim, as a condition precedent for entitlement to an EOT. That notice had to be followed by a fully detailed claim with supporting particulars within 42 days of the notice. In the event of an adverse determination on an EOT claim by the Engineer, the Contractor was required to challenge that determination within 14 days.

FIRST INSTANCE JUDGMENT

At first instance, the judge found as a matter of fact that, of a total delay of 325 days, the Employer was responsible for 306 days, and the Contractor's failings caused only 19 days of delay. However, the Contractor's claim for an EOT failed for a number of reasons:

• The 28-day notice requirement was a valid condition precedent to a claim for an EOT, and failure to comply precluded the Contractor's entitlement to an EOT. It followed that the subsequent 42-day time limit for submitting a fully detailed claim was likewise a condition precedent.
• The notice...