Take the example of a claim for additional payment under one of the standard forms of construction contract, most of which require the contractor to keep contemporary records as evidence of loss. The rationale is to avoid painfully prolonged disputes. If you have the records to prove it, there is no doubt as to what your loss is; but if you don't, your claim for additional payment will fail.
That said, a recent case from the Falkland Islands suggests that there may be a chance, in limited circumstances, to make up for incomplete contemporary records. In Attorney General for the Falkland Islands vs Gordon Forbes Construction Ltd (2003), a representative of the Falkland Islands government entered into a contract with Gordon Forbes Construction that incorporated the terms of the FIDIC 4th edition. A dispute arose, which was referred to arbitration. During the course of the arbitration, the representative of the Falklands government applied to the Supreme Court for a ruling on whether a witness statement could be introduced in evidence to "plug the gaps" in incomplete contemporary records.
Clause 53.1–53.3 of FIDIC provides a disciplined way of dealing with claims for additional payment that is designed to avoid prolonged disputes by requiring the contractor to notify its intention to claim for additional payment to the engineer and the employer, to keep contemporary records and to render regular accounts. There is a similar provision at clause 53 of ICE 7th Edition.
The judge in the case decided that if the contemporary record was in some way ambiguous or if it was necessary to show how and when the document came into being, then allowing further evidence would not break what is otherwise a strict rule of evidence. So if, as is all too often the case, a note was jotted down in a hurry and there is later a dispute as to when that note was created, the contractor may be able to explain the existence of the note in a witness statement.
However, this small window of opportunity for supplementing incomplete contemporary records comes with a health warning. A contractor who fails to meet its contractual obligation to supply contemporary records will not be allowed to use the additional evidence to put itself in a better position than it would have been in had it complied with the contract.
So, what is a contemporary record? Does keeping them mean you have to make a note of every expense as soon as it arises? Evidently not. The judge said that records could be divided up into "primary" and "original" source documents. For example, a claim for additional payment might lead to a dispute about how much labour was employed on site. Timesheets filled in by the labourers will then be "primary source" documents. Where there are no timesheets the contractor should make a contemporary note of the labourers who worked that week and their hours; this will be an "original source" document.
As to what is contemporary there is little comfort for contractors that discover at the eleventh hour that their records are incomplete. Rarely would a document be considered "contemporary" if created more than a few weeks after the event. However, the record does not have to be made instantly. If it is discovered that some records are missing a few days after the event, or if there is only time to make a rough contemporaneous note, it is not too late to remedy the situation by supplementing those records a few days or even weeks later.
The message is clear. If a claim for additional payment arises, keep records of all site and labour costs, even if it is just on a scrap of paper. If there is some confusion as to when it was created or what it says, the court may allow you to clear that up at a later date. But don't be fooled – if you fail to keep the record at all, your claim for additional payment will fail.
Vincent Rowan is a partner in Masons. This article was co-authored with Kate McGill.