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Times they aren’t a changin’

Has the pendulum of change finally stopped swinging?

Trett Consulting (Australia) director David Court looks at the ever changing views of the courts on the heavily debated (and litigated) topic involving the prevention principle.    

He considers how it applies in circumstances where there is a provision in a contract allowing extension of time (EOT) for the client’s delay, but it cannot be operated due to an absence of the required notice from the contractor?    

The line was drawn in the sand in Australia in this regard in Gaymark Investments versus Walter Construction Group [1999]. As a result of the contractor failing to get his notice in within the 14 days required the client took liquidated damages for the period of his own delay.    

The matter went to arbitration and then appeal where Justice Bailey upheld the decision of the arbitrator that the prevention principle was applicable.    

This applied even where the contract provided for an EOT to be granted for delays caused by the client, but such an extension was unable to be granted because the contractor had failed to comply with a condition precedent for giving notice. The court held therefore that time was at large and that Gaymark could not claim liquidated damages for the delays incurred.    

Gaymark was followed by another Australian case, Peninsula Balmain versus Abigroup Contractors [2002] NSWCA 211, where the contractor was required by the contract to give a written claim for EOT.    

Its failure to do so was considered by the court to preclude the contractor from the benefit of an EOT even if the delay had been caused by variations required by the client. Thus the pendulum swung to find that the prevention principle was not applicable. In the end, in this case the contractor was found to be entitled to an EOT but only as a result of a separate provision of the contract relating to the client’s representative’s discretionary powers.    

The recent decision in Hervey Bay joint venture versus Civil Mining and Construction & Ors [2008] QSC 58 highlighted the importance placed on getting the wording of the discretionary powers granted to the client’s representative right. In this case, the courts decided that the obligation to grant an EOT when no application was made, did not arise where the contract granted the client’s representative an absolute discretion and expressly put the client’s representative under no obligation to grant an EOT.    

The above analysis, though brief, demonstrates the importance of ensuring the wording of the clauses signed up to ‘explicitly’ represent what was originally intended.    

For further details in relation to the prevention principle see the landmark decision handed down in the English case of Peak Construction (Liverpool) versus McKinney Foundations (1970).


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