Lessons from a new case: Does the removal of a delay claim clause preclude a claim for delays in a variation claim? What are the implied duties of good faith on a superintendent?

The very recent case of Lucas Earthmovers Pty Limited v Anglogold Ashanti Australia Limited [2019] FCA 1049 contained judicial comment on a number of important principles on:

• delay and disruption;
• latent conditions;
• variations; and
• warranties

Delay and disruption

The principal argued that clause 18.8 of the contract had the effect of precluding the builder from claiming a monetary sum for delay and disruption.  Clause 18.8 provided:

“Notwithstanding any other provision of this contract, the Contractor will not be entitled to claim any liabilities resulting from any delay or disruption (even if caused by an act, default or omission of the Company or the Company’s Personnel (not being employed by the Contractor)) and a claim for an extension of time under Clause 18.3 will be the Contractor’s sole remedy in respect of any delay or disruption and the Contractor will not be entitled to make any other claim…”

The Court decided that:

1. When clause 18.8 is construed in the context of the contract as a whole, it is to be understood as making it plain that the builder was not to have any claim for losses, costs and expenses which result from any delay or disruption. The word “any” is significant.  It indicates that clause 18.8 is directed to delays or disruptions of all kinds.
2. Clause 18.8 cannot be construed as being inapplicable to the costs of delays (critical or otherwise) resulting from variation work. There is nothing in its language, or in the context more generally, to support such a conclusion.  On the contrary, the circumstance that a variation is a defined as a qualifying cause of delay which would entitle the builder to an extension of time is an indication that the parties addressed the effect of a variation in delaying practical completion.

The time bar defence

Clause 30 of the contract contained two principle requirements with respect to EOT claims by the builder.  Clause 30(c)(i) required the builder to give notice in writing within 30 days after the first occurrence of the events or circumstances on which the claim is based.  Clause 30(c)(ii) required the builder to present a claim with the content stipulated by clause 30(b).

The Court said:

1. As it is apparent that the giving of the notice, and the making of the claim, are separate requirements, it can be inferred that the notice need not have the content required by clause 30(b). The requirement for the notice to be given within 30 days after the first occurrence of the events or circumstances on which the claim is based suggests that it may be given even before the full extent, or the precise content, of the claim is known.
2. Accordingly, the issue for determination is whether the builder had established that it gave notice within 30 days of its claim for an extension of time for practical completion, by reason of the delay.
3. The correspondence and notices which the builder did give, constituted notice in writing that an extension of time for practical completion by reason of the delay in the finalisation of the bridge pile design would be sought. This was notice of the kind required by clause 30(c)(i).
4. The communications did constitute adequate notice for the purposes of clause 30(c). They served the purposes of such notices, as discussed in the authorities.

Latent conditions

1. A latent condition is a physical condition on the site and its near surrounds. This requires an objective assessment. The existence or otherwise of a latent condition is to be determined objectively by a consideration of whether the physical condition in question differs materially from the physical conditions which could reasonably have been anticipated by a competent contractor as at the date of contract if the contractor had inspected the sources of information: : BMD Major Projects Pty Ltd v Victorian Urban Development Authority [2007] VSC 409 at [24]; Walton Construction Pty Ltd v Illawarra Hotel Co Pty Ltd [2011] NSWSC 534 at [137].
2. The assessment is not to be made by an examination of the conduct of the contractor in question: BMD Major Projects at [24].
3. There is an implied duty of contracting parties to cooperate in the doing of acts which are necessary to the performance by the parties or one of them of fundamental obligations under a contract: Mackay v Dick (1881) 6 App. Cas. 251 at 263; Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd [1979] HCA 51; (1979) 144 CLR 596 at 607.

Superintendents duty

Persons in the position of a superintendent, have an implied duty (quite apart from the contract) to act honestly and impartially when assessing claims for extensions of time and it is at least arguable that this includes an obligation to act reasonably.

The builder’s warranties and acknowledgements

The warranties and acknowledgements which the builder gave in the contract presented a further difficulty for its case that it relied on information provided by the principal.

The builder warranted that:

• “It had entered into [the] contract, relying solely on its own investigations, determinations, skill and judgment and not in reliance on any information [or] representation expressly or impliedly given by or on behalf of the principal other than to the extent that a relevant representation is expressly recorded in the terms and conditions of this contract”.
• It was satisfied that the contract price covered the costs of performing the works in all respects and included sufficient contingencies and that it had inspected and investigated the site and the surrounding conditions so as to satisfy itself that the contract price covered all risks, obligations and liability it may incur in performing the works.
• The principal did not warrant the accuracy or sufficiency of any information it had provided and that it had not relied upon any express or implied representation made by or on behalf of the principal.

The Court said:

1. “In my opinion, a number of circumstances make it appropriate for the Court to have regard to the warranties and acknowledgements provided by the builder in the present case. This was a commercial contract, negotiated over a period of time by two parties acting at arm’s length.  The builder was not in a “take it or leave it” position.  Further, it had the assistance of its in house lawyers throughout the negotiation process.”
2. “The builder participated in the TCS process with a view to ensuring that all oral representations, assumptions and qualifications were recorded, for the express purpose of seeking to resolve any uncertainties. It had had the opportunity to identify the matters which were important to it and to have them clarified and, if necessary, incorporated into the contract.”
3. “In that circumstance, the giving of the express contractual warranties and acknowledgements assumes additional significance. It is inconsistent with the builder having relied on the [alleged representations] of the principal.  Alternatively, even if the builder did rely on the pleaded representations, it makes it difficult for it to establish that the loss it alleges was caused by that reliance.”

Takeaway lessons

If a contractor in a design and construct contract wants to rely on information or documents provided by the principal, then the contract needs to be very specific to that effect.

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