The notification in the second sentence you quote refers to the operative notification in the first sentence, which is the notification of the failure to reply. Therefore your answer (2) is correct. The subcontractor may notify the failure to reply any time after it happens. 

The previous paragraph of clause 61.4 sets out when the contractor is required to respond to the initial notification of the compensation event by the subcontractor, which is within two weeks. So, assuming the subcontractor notifies the failure as soon as it occurs, X in your calculation will be two weeks. 

However, if the subcontractor does not notify the failure until three weeks after it occurs, then X will be five weeks and the contractor has a further three weeks to reply. Once the failure to respond has occurred, the ball is firmly in the subcontractor’s court.

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