HT-2020-000448 - [2024] EWHC 1185 (TCC)

There can be no doubt, and it is not disputed by TCS, that the wording of Clause 5.6 is a clause which has the effect of making compliance with Clauses 5.1-5.3 a condition precedent and an entitlement to compensation under Clauses 7 or 8. It provides in plain language that DBS ‘shall not be liable to compensate [TCS] for Delays to which clauses 7 or 8 apply unless [TCS] has fulfilled its obligations set out in, and in accordance with, clauses 5.1, 5.2 and 5.3.’ This starting point was not disputed by Mr Cogley.

It is equally clear that the condition precedent regime applies only to DBS’s liability to compensate TCS for Delays, as defined. This has a number of implications. First, a failure to comply with the condition precedent does not impact upon TCS’s entitlement to what may be called generically ‘relief’ as described in Clause 7.2, namely (a) an extension of time equal to the Delay caused by that ‘AUTHORITY Cause’; (b) not being in breach of contract (or liable for resulting general damages) as a result of the failure to Achieve the relevant Milestone by its Milestone Date; and (c) having no liability for Delay Payments in respect of the relevant Milestone to the extent that the Delay results directly from the ‘AUTHORITY Cause’. In other words, non-compliance with the condition precedent does not preclude TCS from defending itself from DBS’s claims, whether for Delay Payments or for damages for breach of contract, provided it establishes that it ‘would have been able to Achieve the Milestone by its Milestone Date but has failed to do so as a result of an AUTHORITY Cause’ (as set out in Clause 7.1).

Non-compliance with the condition precedent regime may, however, preclude its own claims for compensation, subject to TCS’s point that any claim for damages, as opposed to contractual compensation, is also not caught by Clause 5.6. Whether a claim for general damages survives non-compliance with Clause 5.6 is a matter of construction. Mr Croall argues that the objective intention of the parties cannot have been that, having expressly provided for the payment of delay compensation in certain circumstances subject to certain requirements, TCS can circumvent the contractual regime simply by claiming damages for breaches of other terms of the Agreement. He relies upon Bikam OOD, Central Investment Group SA v Adria Cable S.a.r.l. [2012] EWHC 621 (Comm) at [37]-[38], in which Mr Justice Simon dealt with a counterclaim for misrepresentation which the claimant contended was an illegitimate means of getting around the parties’ agreement that claims were confined to breach of the seller’s warranties and by the terms of a clause limiting the amount of such claims. The Court rejected the defendant’s argument that the clause dealt with contractual claims and did not deal with misrepresentation. Simon J considered, in concluding that the defendant’s construction was ‘uncommercial’:

Set against this is the well known general principle that it requires clear and unequivocal words for a party to be considered to have given up a common law right which otherwise sits alongside contractual entitlements (Modern Engineering (Bristol) v Gilbert -Ash [1974] AC 689).

In the present case, I consider that TCS’s potential entitlement to claim both loss and expense pursuant to Clause 7.4 and general damages at common law for ‘Delays’ (as defined) are subject to compliance with the regime at Clauses 5.1 to 5.3. This is because:

If, therefore, TCS fails to comply with Clauses 5.1 to 5.3, and subject to the further arguments it makes as to estoppel, TCS is not entitled to claim compensation, whether under Clause 7.4 or at common law, for ‘Delays’ it considers to have been caused or contributed to by an ‘AUTHORITY Cause’.

Finally, it should be noted that ‘Delays’ is defined by reference to the period of time by which the implementation or provision of the Services by reference to the Implementation Plan is delayed arising from a failure to Achieve a Milestone. In other words, critical delay. This means that claims for financial compensation for non-critical delay or disruption are not caught by the regime at Clauses 5 to 8. However, such claims would be for breach of contract, rather than as a consequence of ‘AUTHORITY Cause’. If Mr Cogley is right that the latter is wider than the former, it is only the more narrow claims which could be relied upon for claims brought outside the Clause 5-8 regime. This is an academic distinction where no part of TCS’s claimed quantum is allocated between (for example) costs caused by critical delays and those caused by non-critical activity delays or disruption.