CONSTRUCTION ON LAW - NON -INDEPENDENT PRINCIPAL REPRESANTIVE CAUSE OF ACTION

Have you been on a jobsite where the principal is directly communicating with the superintendent and instead of the superintendent acting independently, and they seem to make decisions to suit the principal, contrary to the terms of the contract?

On 27 April 2018, the parties in Vetas - Australian Wind Technology Pty Ltd V Lal Lal Wind Farm Nom Co Pty Ltd [2020] VSC 554 (VAWT) (Lal Lal) trustee for the Lal Lal Wind Farms Asset Trust entered into the ‘Engineering, procurement, and construction contract for the Lal Lal Wind Farm’ (‘Agreement’).

The Works

Under the Agreement, there were two components of the project, being the Yendon and Elain works, which remained incomplete at the time of the application and contrary to the date for practical completion under the Agreement.

The Extension of Time Denials

The Contractor had made at 27 claims for extension of time to the dates for Practical Completion and none of them were approved by the principal’s representative.

Demand for Liquidated Damages

On 2 September 2019, the principal issued notice to the contractor demanding payment of delay liquidated damages for the Yendon works - $3,278,476.18. 

On 1 May 2020, the principal issued the contractor a further notice demanding payment of delay liquidated damages - $38,458,627.07 (including the earlier amount of $3,278,476.18).  

On 4 June 2020, the principal issued the contractor a notice in respect of delay liquidated damages in the amount of $7,845,648.20.  

The contractor’s liability to pay liquidated damages reached the delay liquidated damages cap of 15% of the contract price, in the vicinity of $46.4 million (as set out in Schedule 1 to Agreement).

Adjudication

The parties proceeded to adjudication and the adjudicator found that the contractor was entitled to an amount of $38,458,627.07.

Security

On 13 July 2020, the principal paid the contractor the adjudication amount, and on 14 July 2020 the principal pulled the contractors security in the amount of $30,847,425 as purportedly permitted under the Agreement.

The Injunction

Although the applicant did not bring the dispute and or claim to the attention of the respondent by providing written notice or by utilising the agreed dispute resolution process the Agreement relevantly provided that:

“Nothing in this clause 40 prejudices either party’s right to commence legal proceedings to seek urgent injunctive or urgent declaratory relief in respect of a Dispute.”

Relevantly, the applicant was required to provide the principal and the principal’s representative notice pursuant to clause 39.2 of the Agreement if it wished to make a claim for any matter (including a breach of the Agreement by the principal) for works under the Agreement. The applicant did not do this contrary to the Agreement.

The Application

In this case, the applicant was seeking primary relief in the form of pre-action discovery pursuant to r 32.05 of the Supreme Court (General Civil Procedure) Rules 2015 (VIC). The applicant wanted the respondent to inter alia, to disclose (the production of documents) to the potential plaintiff of all documents passing between the potential defendant as principal (including any person acting on behalf of the defendant and specifically including the solicitors for the defendant) and the principal’s representative in connection with the exercise of the principal’s representative’s certification role under the Agreement.

Why?

Because it was suspected (based on some evidence) that the communications between the principal and the principals representative (superintendent) amounted to a breach of the Agreement.

It is important to note that the contractor failed in their pre-action application because, inter alia, there was already enough information for the contractor to commence proceedings; and also, because there were other means available for the contractor to obtain the documents, i.e. the agreed dispute resolution process and steps that could occur after the claim had been filed.  

Two key takeaways from this case are:

1.       a claim for breach of contract for impermissible interference by the principal with the certification role being performed by the principal’s representative is a prima facie recognisable cause of action for breach of contract (varies case-to-case); and

2.       that parties should utilise their contracts dispute resolution process to resolve disputes before commencing proceedings.

If you would like advice in respect of your circumstances, we are happy to provide you with a free initial consultation to help you determine your next steps (if any). Please contact us 1300 011 123 team@wallaceweir.com.au

Please note that this article is written as an informative piece and that you must not take the contents of this article as legal advice. Wallace Law Group accepts no liability from your reliance on this article.