Supreme Court gives guidance on assessment of delay & disruption claims

On 19 May 2017, the Supreme Court of Queensland handed down its decision in Civil Mining & Construction Pty Ltd v Wiggins Island Coal Export Terminal Pty Ltd [2017] QSC 85.

Background facts

Wiggins Island Coal Export Terminal Pty Ltd (WICET) entered into a contract (Contract) for bulk earthworks to be undertaken by Civil Mining and Construction Pty Ltd (CMC), at the Wiggins Island Coal Export Terminal, at the Port of Gladstone. During the project, CMC claimed that a series of directions issued by WICET significantly affected progress and the scope of works under the Contract. CMC claimed approximately $14.5 million arising from variations, directions, and delay costs. WICET counterclaimed for $12.5 million arising from alleged overpayments and liquidated damages. CMC were successful in the majority of claims brought against WICET, including the award of a 208 day extension of time (EOT).

Programmers take note

Upon interpretation of the Contract, Flanagan J found the better view was that the Contract permitted both prospective and retrospective delay analysis. Clause 35.5 of the Contract entitled an EOT if the Contractor could demonstrate that it “has or will be actually delayed” and that the use of the disjunctive word ‘or’ gave the Contractor a choice to demonstrate that it either had been actually delayed or would be actually delayed, in achieving practical completion.

Importantly, Flanagan J found that the use of the words “has been… actually delayed” addresses past delay, permitting or inviting retrospective analysis. Therefore, clause 35.5 of the Contract entitled CMC to an extension of time if it could demonstrate (with knowledge of hindsight) actual delay after the delay events expiry. Accordingly, Flanagan J preferred and accepted the “as-planned” vs “as-built” analysis methodology used by CMC’s delay expert, in these circumstances. This approach was retrospective in the sense that CMC’s delay expert compared the baseline program with an as-built program.

Principals beware of waiver

Clause 35.5 of the Contract provided that CMC must give notice of any delay event to WICET’s representative, within 28 days after the event occurs. WICET submitted that various EOT claims were of no effect, as CMC made the claims out of time and thus failed to comply with the strict notice requirements. As a matter of fact, CMC had made various EOT claims out of time. However, CMC submitted that WICET, by its conduct over the course of the Project, had waived the requirement for strict compliance with the notice requirements. Flanagan J applied the long line of authority established by the High Court in Commonwealth of Australia v Verwayen and held that WICET, through the superintendent, had waived the requirement for strict compliance with notice in clause 35.5.

Flanagan J placed significant weight on the fact that the superintendent had previously approved a number of EOT claims that were made out of time, or rejected EOT claims for reasons other than the claim being made out of time. This finding has particular significance for principals and superintendents on construction projects. In the event that a principal intends to grant an EOT claim which is made out of time, ensure that you expressly (in writing) reserve your right to insist on strict compliance in the future.

Qualifying the Final Certificate

Flanagan J held that the consequence of serving a notice of dispute is to ‘qualify’ the effect of the Final Certificate. The result is that a superintendent’s final certificate is not ‘final’ while a notice of dispute is unresolved.

Principals should be aware that if a contractor serves a notice of dispute (under the contract) this will qualify the effect of a final certificate, meaning payment of the specified sum may not be required until resolution of the dispute. However, payment obligations remain a question of contractual interpretation in the unique facts and circumstances of each case.

What does this mean for you?

1. If a contract allows an EOT where the contractor has or will be delayed: an “as- planned” vs “as-built” delay analysis method is preferred.

2. Principals should ensure that they, or the superintendent, do not act inconsistently with notice requirements under the contract, or the time bar may be rendered worthless.


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