FIDIC Contracts: Contemporary Records and Contractors' Claims - Inter...

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Construction - Falkland Islands

FIDIC Contracts: Contemporary Records and Contractors' Claims
September 01 2003 Contractors are frequently advised to keep detailed records of events as they occur in order to be able to substantiate any claim which may have to be made under the contract. However, this advice is often only partially heeded, not least because the time and resources which can economically be allocated to this task are often insufficient. International Federation of Consulting Engineers (FIDIC) contracts go further than some standard forms in this respect by requiring a contractor who wishes to make a claim to keep "contemporary records". The meaning of these words was the issue at stake in the case of Attorney General for Falkland Islands v Gordon Forbes Construction (Falklands) Limited (No 2), decided in the Falkland Islands Supreme Court earlier this year. The case concerned a contract incorporating the Fourth Edition of the FIDIC Conditions for the construction of the infrastructure of the East Stanley Housing Development for the Falkland Islands government. A dispute arose which resulted in the contractor commencing arbitration proceedings against the government. An issue arose in those proceedings as to compliance with the claims procedure laid down in Clause 53 of the contract. This clause provided that, upon the occurence of an event giving rise to a claim, the contractor should keep contemporary records, make these available for inspection by the engineer and provide full particulars of the claim within 28 days. Crucially, Clause 53.4 provided that the contractor's right to payment could not exceed such amount as the engineer or an arbitrator considered was verified by the contemporary records. In effect, substantiation of a claim by such records was made a condition precedent to recovery. The records of the contractor were insufficient for this purpose. Accordingly, the contractor wished to introduce into the arbitration witness statements to fill in the gaps in its contemporary records. The government objected to this. The result was an application to the court for a ruling on this point. The court adopted the definition of a 'record' given by Justice Bingham in H v Schering Chemicals [1983] 1 WLR 143 and stated that contemporary records for the purpose of the contract would be records which a historian would regard as original or primary sources - that is, documents which gave effect to a transaction itself or which contained a contemporaneous register of information supplied by those with direct knowledge of the facts. How 'contemporary' must a record be? The answer was that there had to be a sufficient nexus between that which was being recorded and the act of recording. It would, however, be exceptional if a document produced more than a few weeks after the event were to be regarded as contemporary. Witness statements produced long after the event could not be introduced into the arbitration proceedings to supplement any deficiencies in the contemporary records. The most such statements could do would be to explain the circumstances in which any contemporary record came into being and deal with any lack of clarity in the record itself. Somewhat controversially, the court suggested that in

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FIDIC Contracts: Contemporary Records and Contractors' Claims - Inter...

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circumstances in which the records supported part of the claim, the arbitrator could, if he wished, by inference be satisfied that those records also supported the remainder of the claim for which no direct record existed. Current editions of FIDIC contracts are less harsh on the contractor in providing that failure to keep contemporary records will reduce the contractor's entitlement to the extent that such failure has prevented or prejudiced investigation of the claim in question. Given that such records will often amount to the best evidence of what transpired at the time, a contractor who relies on witness statements to fill in gaps in its records may still suffer considerably as a result. For further information on this topic please contact Roger Button at Shadbolt & Co's London office by telephone (+44 20 7332 5750) or by fax (+44 20 7332 5799) or by email (roger_button@shadboltlaw.co.uk). The Shadbolt & Co website may be accessed at www.shadboltlaw.co.uk.

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