Tag Archive for: unfair term

Case article – Brolton Group Pty Ltd v Hanson Construction Materials Pty Ltd

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In Brolton Group Pty Ltd v Hanson Construction Materials Pty Ltd [2020] NSWCA 63 (Brolton), the NSW Court of Appeal considered the jurisdictional and procedural fairness grounds of an adjudicator’s determination.

Background

Brolton was contracted by Hanson to build a quarry processing plant at Bass Point. The parties agreed on a guaranteed maximum price of $85 million (excluding GST) in which Brolton was entitled to claim monthly progress payments on the last Tuesday of each month. Hanson claimed liquidated damages and the contract was eventually terminated on 3 October 2018. In August 2019, Brolton served a payment claim on Hanson. The payment claim claimed work up to September 2018 as well as interest on unpaid amounts to August 2019. The adjudicator determined in favour of Brolton, issuing an adjudication amount of $2,877,052.75. Hanson challenged the decision in the Supreme Court, with the Supreme Court finding in favour of Hanson. This resulted in the appeal by Brolton to the NSW Court of Appeal.

The Court’s decision

Brolton raised two main grounds of appeal. The first and most pertinent issue, concerning jurisdiction, centred predominantly on the availability of a reference date on which Brolton could make its payment claim.
Importance of jurisdiction and the trouble of jurisdictional error
Under the Building and Construction Industry Security of Payment Act 1999 (NSW) (SOP Act) section 22, an adjudicator is given the statutory authority to determine the amount of a progress payment, the date on which such amount became payable and the rate of interest payable on any such amount. The importance of section 22 is that it sets out the jurisdiction of an adjudicator. As the saying goes, with great power comes great responsibility. While the adjudicator is given the power to make these determinations, section 22 sets out the limited factors that the adjudicator can consider. These are the responsibility components of the adjudicator’s determination. Two of the relevant factors to consider in Brolton was the provisions of the SOP Act and the payment claim.
While adjudicators are given the power to make determinations, they can only do so in certain circumstances or if there are specified preconditions. In the legal world, this is called a ‘jurisdictional fact’. As Gleeson JA described in Brolton (at paragraph 28), the term jurisdictional fact is used to describe ‘any precondition which a statute requires to exist in order for the decision-maker to embark on the decision-making process’. Jurisdictional facts fall into two types:

1. The existence of an identified state of affairs; or
2. A state of satisfaction of the decision-maker as to an identified state of affairs.

A jurisdictional fact gives a decision-maker the power to make the decision. If it exists, then an adjudicator can make a determination. In this way, the reference date activates the adjudicators powers to make a determination under the SOP Act.
Under the SOP Act, a claimant is only able to make a payment claim when there is a reference date under the construction contract. Therefore, the existence of a reference date is a jurisdictional fact that falls into the first category. This is because the existence or non-existence of a reference date is objective and does not depend on whether the adjudicator is satisfied that a reference date exists. Where an adjudicator exercises its power, but the jurisdictional fact does not actually exist, the adjudicator has made a jurisdictional error..
Getting back to the case, in submitting its payment claim, Brolton claimed in its adjudication submissions that the reference dates for August 2018 and September 2018 were available for the payment claim. Hanson also contended that the September 2018 reference date was available for the progress payment. However, the adjudicator ‘went rogue’ and determined that the reference date was in fact 23 October 2018. There were a few issues with this. Firstly, the 23 October 2018 was not the last Tuesday of the month (which in fact was 30 October 2018). Secondly, the contract had been terminated on 3 October 2018, meaning no further reference dates arose. As the clause entitling Brolton to a progress payment did not continue beyond the termination of the contract, the adjudicator had made a jurisdictional error. The reference date the adjudicator relied on did not exist, and therefore the determination was void and the $2.8 million decision was overturned (as if it had never been made).

Although Hanson succeeded on the first issue, the Court was still minded to consider the second issue on appeal. The second issue concerned the procedural fairness of the adjudicator’s decision. Like jurisdiction, procedural fairness is a legal term that has important consequences for adjudication determinations. Procedural fairness is an aspect of natural justice, a foundational legal principal that sets the standards of how people are to exercise their authority. The concept of procedural fairness means the process in which a decision is made should be just. Procedural fairness requires that parties have the right or opportunity to have their case heard by the decision-maker. If there is a substantial denial of natural justice, the decision-maker’s determination will be void. In this case, the issue of procedural fairness arose because the adjudicator determined that the relevant reference date was a date not submitted by either party. Brolton argued that while procedural fairness was denied to the parties, it was immaterial and should not void the adjudicator’s decision. The Court found that the findings by the adjudicator were a material breach of procedural fairness and therefore there was a breach of natural justice.

Take-away points

While this article has discussed a few technical legal concepts, the main take away points from Brolton are that:
• A progress payment must be linked to a specific reference date. If an adjudicator incorrectly attributes a payment claim to a reference date which does not exist, the determination will be void.
• It is not enough that another reference date is available for the payment claim to be linked to. If the adjudicator goes rogue and determines a reference date not submitted by the parties, the decision will be void.
• Claimants should identify and make it abundantly clear the relevant reference date to which a payment claim relates and make submissions in the adjudication application as to what the relevant reference date is.
• Reference dates are essential for an adjudicator to make a determination. A failure by the adjudicator to appropriately determine a reference date can have dire consequences to claimants.
• Note: The recent amendments to the NSW SOP Act have eliminated the post-termination payment claim issue. Section 13(1C) now states that for construction contracts that have been terminated, a payment claim may be served on and from the date of termination. This change will only apply to contracts entered into after 21 October 2019.

Corona virus and force majeure in construction contracts: Has your contract been immunised

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While many were recovering from New Years’ celebrations, corona virus was starting to make its way into the headlines. For the last 2 months, corona virus has dominated the news with many people and businesses starting to feel its impact as borders are shut down and quarantines are imposed. At the time of writing, the World Health Organisation has reported that corona virus has spread to many parts of the world including Australia, North America and parts of Europe. With much of the corona outbreak concentrated to China, several businesses are starting to feel the economic impact. As the manufacturing hub of the world, China is responsible for much of the world’s imports. Further, as the corona virus spreads and causes further border shutdowns, it becomes harder for businesses to have certainty in knowing when they will be able to import or export their goods. With businesses having to meet their contractual deadlines, the uncertainty can create a real issue for some. Consequently, many businesses may be put into a position where they are unable perform their contractual obligations. This article focuses on the different ways a construction contract may deal with situations such as corona virus.

The clause typically suited to situations or events like the outbreak of corona virus is a force majeure clause. Force majeure means ‘superior force’ and commonly covers natural events such as earthquakes or unforeseeable and disruptive manmade events such as war and industrial strikes. In the Australian context, force majeure clauses are creatures of the contract. This means that they only exist by virtue of a contractual provision which allocates the risk between the parties. Further, Australian courts will interpret these clauses strictly, giving the clauses the minimum application available within the ordinary meaning of the provision. In the construction contract context, it is unusual to see a specific force majeure clause. By way of illustration, the Australian Standard contracts do not contain a standard force majeure clause. Therefore, it is up to the parties to amend and insert a specific force majeure provision into the contract if they wish to have a specific mechanism dealing with the risk arising from these types of events.

As many readers may be aware, at the core of construction contracts is the allocation of risk through program. Therefore, construction contracts may, by their very essence, be differentiated from non—construction contracts. For example, extension of time (EOT), delay costs and liquidated damages clauses assign time related risks between the parties. The definitions of qualifying causes of delay and compensable causes in the Australian Standard provide a mechanism to pass time and cost related risks from contractors or subcontractors to the developer or head contractor. Amending the definition of qualifying causes of delay to extend to force majeure events is one way a construction contract can account for circumstances such as the corona virus. The key difference between allowing relief through a force majeure clause and allowing an EOT for force majeure events is that an EOT provides a contractor or subcontractor protection against liquidated damages. This is differentiated from a force majeure clause which may generally limit a party’s liability under the contract.

Irrespective of the way force majeure events are incorporated into construction contracts, care must be taken in drafting these clauses. When getting into the force majeure territory, contractors and subcontractors need to make sure that the definition of ‘force majeure’ or ‘force majeure event’ is drafted clearly, but not too broadly. For example, stating that a subcontractor is entitled to an EOT for anything outside of their control may be clear, but too broad to specifically cover corona virus. However, stating that the subcontractor is entitled to an EOT for delays related to the corona virus may be clearly drafted, but it does not provide much further scope. The clause would not protect from outbreaks or re-emergence of SARS or other endemics, epidemics or pandemics. A balance must be reached between these two extremes and will depend on the specific project.

When drafting a force majeure clause, it is important to consider some broad points. Firstly, force majeure clauses are usually exhaustive in nature, meaning that only what is in the contract is covered. Secondly, the party affected by the force majeure event must not have caused or contributed to the event and will required to take all steps to overcome or mitigate its effects. There also needs to be a connection between the force majeure event and the performance of the contractual obligations. For instance, the mere occurrence of the corona virus is not sufficient to justify an EOT in all cases. It will only entitle relief from liquidated damages when the event has caused a delay. By including these conditions, a force majeure clause (whether in EOT form or specific clause form) will generally entitle a party to relief or suspension of their obligations under the contract.

A significant problem with force majeure events is that it can be difficult for parties to establish that they should be entitled to relief under the clause. For example, in relation to the mitigation element discussed above, a party is often required to show that it cannot fulfil its supply obligations. While a party may have its preferred third party supplier, the mere fact that supply is not available from this supplier will not justify force majeure relief. The parties are bound by their contractual deal and this remains the case even if the obligations become significantly more onerous or expensive to complete. However, if all of the supply of product X is unavailable, then a party should be entitled to relief under the relevant clause until the supply becomes available again.

If you or someone you may know is in need of advice on existing contracts or advice regarding the force majeure clause, please contact our office by phoning (02) 9248 3450 or by email at info@bradburylegal.com.au.

Expertly building evidence: Lessons learned from White Constructions

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Case note: White Constructions Pty Ltd v PBS Holdings Pty Ltd [2019] NSWSC 1166

In White Constructions, Hammerschlag J considered the issue of delay damages. White Constructions was the property developer of a site in Kiama NSW. The development involved the development and subdivision of 100 lots and required design and installation of sewer infrastructure. These works required a s 73 Certificate issued by Sydney Water before subdivision could occur. White Constructions appointed the Defendants to assist with the design and approval works needed as part of the development and resulting subdivision. A substantial part of the judgment was devoted to the preparing and designing of the sewer designs and the approval of Sydney Water, including the different types of sewage systems, Sydney Water’s preference in relation to these systems, preparation of option reports and correspondence between the Superintendent, the Defendants and Sydney Water.

The discussions between Sydney Water, the Superintendent and the Defendants took considerable time. As a result, White Constructions alleged that the delay in coming to the approved sewage design caused White Constructions to be liable to their building contractor for delay damages. In arguing the substance of the dispute, the parties tendered complex expert evidence. As a result, the Court appointed an expert to assist in interpreting and assessing the expert evidence presented.

With the expert’s assistance, Hammerschlag J criticised the experts’ approach to determining the delays attributable to the sewage works. Both experts used methods derived from the United Kingdom Society of Construction Law, the Delay and Disruption Protocol (the Protocol) in analysing the delay. The Protocol identifies six different methods of delay analysis, but Hammerschlag J held that the inclusion of a delay analysis method in the Protocol does not necessarily mean it should be used. While the Protocol methods have been endorsed in other cases, the analysis of delay must pay close attention to the actual evidence of what was happening on the ground of the project. The delay analysis must show and prove that, on the balance of probabilities, the delay:
• played a role in delaying the project;
• how it delayed the project; and
• how much it delayed the project.

This approach is in line with the common law common-sense approach to causation which the High Court referred to in March v E&MH Stramare Pty Ltd (1991) 171 CLR 506.

A lot of value in White Constructions comes from Hammerschlag J’s analysis of what evidence is needed in cases where delay is alleged in construction matters. Firstly, the Court stated that close attention must be paid to the facts of the matter, rather than the opinion of experts. This evidence should not be general in nature, but specific in that it is able to precisely identify delays in the project. This evidence should be a contemporaneous record of the project. A classic example of this kind of evidence is a site diary which records the day to day of the project, as well as specific cause and effect of each delay.
• what works were undertaken/completed;
• the instructions received from the client;
• the delays/any complaints of delays and how they have affected other activities;
• which personnel were onsite; and
• any other relevant details

The Court found that it was important that the contemporaneous record identified which activities were adversely affected by the delays. For example, if the works of one contractor were delayed and, as a result, caused delay for another contractor, the site diary should record these details. Failing to record these details means that it is harder, if not near impossible, for parties to establish that there was in fact a causal link and adverse effect.

How does White Constructions impact a project?

White Constructions shows the importance of proper project documentation. Most importantly, the site diary, or similar contemporaneous document, should be the primary record of the specific of what is happening on site and how specific events affect different contractors. Proper record keeping, while it may be administratively burdensome, allows the Court to analyse and determine the proper entitlements of the parties if the project ever comes into dispute. While other evidence can be adduced in pursuit of proving delay, it runs the risk of being generalist in nature and not enough to prove the causal link of the delays.

The lessons learned in White Constructions may also have some application in respect of other delay related mechanisms under construction contracts. For example, a comprehensive site diary would also be useful in determining any claim for an EOT claim. However, it is important to note that these types of claims are largely determined by the contract and its processes for determining what is in fact an EOT. Nevertheless, contemporaneous records of what has happened and how this has affected the project is useful in establishing a claim by a party as to their entitlements.
Another important point that comes from White Constructions is ensuring experts are given the proper lay evidence to ensure that they can properly opine on the project. While it does not displace the role of lay evidence such as site diaries, it can assist in assisting the Court in considering and making appropriate decisions on what the parties are entitled to.

If you or someone you know wants more information or needs help or advice, please contact us on +61 2 9248 3450 or email info@bradburylegal.com.au.

See more! The superintendent and the principal

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To those working at building sites, the term “superintendent” may seem as familiar and self-explanatory as “extension of time” or “practical completion”.

However, when disputes arise fine distinctions become important. Even experienced builders, just like experienced judges, have trouble working out what the superintendent is required to do in contentious times.

This is because the superintendent has multiple duties to different parties. They have the difficult job of navigating conflicting interests, and this becomes much harder when the relationship between the principal and contractor has deteriorated.

Although the precise duties of a superintendent will always depend on the terms of the contract, we will describe in general terms some obligations that participants in a building project must be aware of. We will also take a real-life case study to illustrate some of these points.

The role

Sometimes called “contract administrator” or “architect”, the superintendent’s precise role will vary as it is largely determined by the terms of the contract between the principal and the contractor. The parties may agree by contract to restrict or widen the superintendent’s functions, and courts will generally allow this.

However, there are a number of general commonalities to this role across different projects. In most cases, the superintendent has a dual role or function:

  1. On the one hand, the superintendent will often be the agent of the principal, and will perform functions on behalf of the principal such as issuing directions to the contractor, varying the scope, of works, making approvals, or receiving notices;
  2. On the other hand, the superintendent will often be responsible for certifying, assessing and valuing items under the contract, including progress claims, extension of time claims, liquidated damages, and practical completion.

The principal is required to ensure that for the second set of functions above, the superintendent act “honestly and fairly” (or otherwise, “reasonably and in good faith”).

Often this is an obligation to exercise impartial and independent judgment, and to reach a decision without taking improper considerations into account. They should afford procedural fairness to both parties, giving notice of the issues it is considering and allowing both parties to communicate to them their submissions.

In general, for these second set of functions, the interests of not only the Principal, but also those of the Contractor, must be considered. All too often, superintendents fail to understand their obligations of independence and this triggers court proceedings.

In practice, this dual role can be complicated. Superintendents are generally appointed by the principal. They are very often either a part of a firm consulting to the principal, or they are an employee of the principal. Even if there is no pressure exerted by the principal, they are paid by the principal. Exercising their judgment impartially in this context can be very challenging.

A superintendent is not a party to the contract. It is unlikely that they will themselves be the subject of court proceedings. However, their decisions may give rise to disputes as between the principal and contractor.

Case Study

The New South Wales Court of Appeal has given some guidance for what is considered appropriate action by a superintendent under a construction contract, in the case Peninsula Balmain Pty Ltd v Abigroup Contractors Pty Ltd [2002] NSWCA 211.

Peninsula and Abigroup entered into an AS2124 building contract. Abigroup sought payment of a progress claim. The following month, Peninsula issued a notice to Abigroup requiring Abigroup to show cause that a contractual right to terminate should not be exercised, and cross-claimed for liquidated damages under the contract.

In response, Abigroup moved to terminate the contract, claiming that Peninsula had breached the then Trade Practices Act (which has since integrated into the broader Australian Consumer Law), for failing to disclose an agency agreement for design and construction projects between Peninsula and the superintendent.

The Court considered the whether Peninsula contravened the Trade Practices Act for failing to disclose to Abigroup the agency agreement with the superintendent?

On appeal, Hodgson JA held:

“the superintendent is the owner’s agent in all matters only in a very loose sense, and that, when exercising certifying functions in respect of which the superintendent must act honestly and impartially, the superintendent is not acting as the owner’s agent, in the strict legal sense.”

The Court concluded that the superintendent is to exercise their power in the interests of both parties and, is to act honestly and impartially and not as an agent of the owner in undertaking certifying functions such as assessments of variations, delays and progress claims.

There was also an argument that the superintendent should have but failed to exercise its power to award an extension of time. It was common ground that Peninsula Balmain had caused delay, but that Abigroup had not applied for the extension of time or followed the proper procedure. However, the extension of time clause included a paragraph that read: “Notwithstanding that the Contractor is not entitled to an extension of time the Superintendent may at any time and from time to time before the issue of the Final Certificate by notice in writing to the Contractor extend the time for Practical Completion for any reason.”

Hodgson JA found that, even though Abigroup had not applied for the extension of time, “this power is one capable of being exercised in the interests both of the owner and the builder, and in my opinion the Superintendent is obliged to act honestly and impartially in deciding whether to exercise this power”. In the facts of the case, the finding was that if the superintendent had acted fairly and impartially, they would have awarded the extension of time. The date for practical completion was extended, and liquidated damages were reduced.

This ruling was dependent on the particular extension of time clause of the case, and the facts of the dispute. However, it powerfully reinforces the point that even though the superintendent is the agent of the principal, they are obliged to act honestly and fairly in discharging certain functions, unless the contract says otherwise.

Conclusion:

In conclusion, the role of a superintendent is very demanding and requires a high level of understanding of contract law, the responsibilities, the specifics of the project, and a high skill of identifying and managing conflicts. If you have any queries about your obligations under a construction contract, please contact us on +61 2 9248 3450 or email info@bradburylegal.com.au

 

 

The dreaded ACL injury: the Australian Consumer Law and building contracts

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Since it fully came into effect on 1 January 2011, the Australian Consumer Law (ACL) has lived up to its infamous initials. Just as athletes live in fear of hearing those three letters from physicians, now businesspeople must also tread carefully to avoid hearing them from judges.

The ACL is part of the Competition and Consumer Act 2010 (Cth). Although recently enacted, many of its provisions were previously in effect under the now-repealed Trade Practices Act 1974 (Cth).

This law touches all trade and commerce in Australia in some way, and seeks to ensure that parties adhere to standards of fairness and honesty in business. Failure to do so can lead to a number of consequences, including a contract being torn up and even criminal sanctions.

The regime is part of a broad shift of the law away from the fundamental legal principle that if parties willingly and knowingly agree to a contract, they must keep their promise, regardless of how difficult this is or ends up becoming.

Perhaps its name is to blame, but many are under the false impression that the Australian Consumer Law only applies to everyday retail consumers. However, complex “high-end” commercial deals can equally be subject to the ACL. Your building contract could be affected in the same way that Amy buying a DVD player is affected.

This article is only a primer to a range of consumer law issues that people on construction projects should be thinking about. For information about how these might apply to your project or your claim, please seek legal advice.

What is the ACL?

The ACL is the primary law governing protections and expectations about business conduct in Australia. It applies nationally, to every State and Territory. It also applies where foreign companies do business with businesses in Australia.

In general, it is important for developers, homeowners and contractors to know that the ACL applies even if the parties have “agreed” that it doesn’t apply. Parties cannot contract to exclude the application of the ACL.

Having said that, courts are still working out how to deal with contracts that in roundabout ways exclude its operation.

What transactions are caught by the ACL?

This depends.

Certain protections apply to any trade or commerce taking place in Australia. Additional protections regulate more specific types of transaction.

Developers and builders would do well to ask themselves the following questions:

  1. Is my project trade and commerce?
  2. Is my contract a consumer contract?
  3. Is my contract a small business contract?

Is my project “trade or commerce” under the ACL?

This is the broadest category of protections given by the ACL, so if you are thinking about it the answer is very likely “yes, my project is trade and commerce”.

The ACL covers trade or commerce that takes place within Australia and includes business or professional activity (whether for-profit or non-profit).

Some previous examples of constructions that were affected by ACL claims include projects to:

  • build extensions to a large domestic airport;
  • construct a spillway for a dam;
  • design and install a ceiling to an aquatic centre; and
  • build a strata title development in Kirribilli.

So what protections apply in trade and commerce?

The most famous protection is misleading and deceptive conduct. Not precisely defined, it encompasses a broad range of statements, representations or behaviour that may mislead or deceive a reasonable person. In certain circumstances, silence may be misleading, and this will be caught too. It does not matter that the person did not intend to mislead with their conduct, and does not matter that the deception happened before the contract was executed.

Related to this is the protection from unfair practices, which are activities that are broadly misleading. These include false or misleading claims about the standard of goods and services being supplied. They also include prohibitions against bait advertising, against asserting a right to payment without a reasonable cause to believe there is a right to payment, and against supplying unsolicited services.

Another line that all businesses involved in trade or commerce must toe is that of unconscionable conduct. The definition of “unconscionable conduct” is broad and not limited to what is written down in the statute books. Either a supplier or an acquirer of goods or services may be accused of unconscionable conduct.

Some examples of what might be considered to be unconscionable include: the imposition of conditions not reasonably necessary to protect the interests of a party, the exertion of any undue influence or pressure on a party, and unreasonable failure by a party to disclose intended conduct or risks that would not be foreseen.

Is my contract a small business contract?

The contract in question might be a “small business contract”. This will be where:

  • A contract is for supply of good or services, and
  • A party to the contract is a business that has 20 or fewer employees, and
  • The upfront contract price is up to $300,000 (or the upfront contract price is $1 million and the contract has a duration of more than 12 months).

These are the questions businesspeople should be asking themselves.

Small business contracts have all the protections outlined above (including misleading and deceptive conduct, unfair practices, and unconscionable conduct). In addition, they are protected from unfair contract terms

An unfair contract term is a term in a standard form contract that would cause significant imbalance in the parties’ rights, is not reasonably necessary to protect the legitimate interests of the party benefiting from it, and would cause detriment to the other party.

There are no hard and fast rules about what is an unfair term, as the circumstances of the case will always be considered carefully by a court. However, an example is a term that allows one party unilaterally to vary the characteristics of the goods supplied, or to vary the terms of the contract.

Is my contract a consumer contract?

The most protected species under the ACL are consumers. The contract for goods or services is a consumer contract if:

  • The price of the goods or the services is less than $40,000; or
  • The goods or services were of a kind ordinarily acquired for personal, domestic or household use or consumption; or
  • The goods were a commercial road vehicle.

Where any of these apply, the person acquiring the goods or services could be a “consumer” in the eyes of the law. In addition to the protections listed above, consumers benefit from consumer guarantees.

Consumer guarantees are a litany of warranties that a supplier of goods or services makes to a consumer the moment the contract is in place. Some examples include:

  • The goods or services are of acceptable quality;
  • The services are rendered with due care and skill;
  • The services are reasonably fit for a purpose, if the consumer makes it know they hire the services for this purpose.

Many of these guarantees already exist elsewhere, in tort and contract. The difference here is that contracting parties cannot contract out of these consumer or small business guarantees. Subject to what is said below, they will apply regardless of any contractual term stipulating that they don’t.

Remedies

Parties who are a victim and suffer loss or damage because of another party’s breach of the ACL have many remedies at their disposal.

The main remedy is that they may make a claim for damages from the offending party. This claim for damages must be made within 6 years of the day that the entitlement for the claim first arose.

Some of the above breaches of the ACL are also criminal offences. This especially includes false or misleading representations, and unfair practices.

If the ACCC or local bodies such as Fair Trading NSW bring actions against businesses for the above breaches, they can enforce pecuniary penalties. They can also request injunctions preventing the offending conduct. There are a myriad of other remedies to suit the specific circumstances, including requirements to undertake training of staff.

Limiting the effect of the ACL

The effect of the ACL cannot be excluded, restricted or modified by a term of the contract. Any contractual term that purports to do this is struck out by courts.

Though this principle appears clear as day, courts have found it difficult to apply in the real world, and there are isolated examples of businesspeople who have avoided a nasty ACL claim through clever drafting of the contract.

In one NSW case, a contract purported to prevent claims made under statute after one year from the date of practical completion. This had the practical effect of reducing the 6 year limitation under the Act, and the court found this was acceptable. Similarly, another NSW case held that a monetary limit of $300,000 was effective to prevent a claim under the ACL from more than this amount. The courts in both cases gave detailed consideration to the surrounding circumstances.

However, a recent Victorian case has gone the opposite direction. The contract purported to require a claimant to give 7 days’ notice to the other party if it was going to make a claim, including under statute. The Victorian Supreme Court found that this contractual provision was void.

Hopefully these issues will be definitively settled by a superior court. Until then, parties must be wary both of the possibility that the ACL will override what their contract says, and of the possibility that contractual time bars or monetary bars might affect a claim they have.

Conclusion

It is essential for anyone involved in business and all their staff members to understand their obligations under the ACL, because you can be sure the lawyers of the other side will know them. There is no escaping them, as they apply irrespective of what the contract says and government regulators are on the lookout for breaches.

If you or someone you know wants more information or needs help or advice, please contact us on +61 2 9248 3450 or email info@bradburylegal.com.au.