Monthly Archives: November 2020

Brooking of Argument on Time at Large

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As usual I have, when time allows (this is not every day) been making progress with my book on Extra-Contractual Recoveries.

In the last day or so, I have been particularly focused on the question of whether it is possible to contract out of the time at large principle by a generalised exclusion clause along the lines of, “Nothing we do will set time at large under this contract“. In Australia, at any rate, the usual answer is “yes”, and the brigade of solicitors who march up and down the relevant corridors in grey suits or black trouser suits now regularly insert a clause to that effect in pretty much every contract or subcontract over which they have control.

But is it true? The usual authority relied on is the judgment of Justice Brooking in SMK, but the more I look at it, the more I have come to the view that it does not bear the weight that is typically put upon it.

The current draft of Extra-Contractual Recoveries says this about the topic (obviously, the internal page references will not work for this extract).  I am conscious that this is not merely an important point, but also somewhat contentious one. And so if readers of these pages have any observations, I would be interested to hear them, so that I may take account of them before the book is finalised.

Contracting out of the Principle?

  • Is it possible to contract out of the prevention principle, and/or the time at large principle? The answer to this question is not obvious, and certainly a good deal less obvious than is sometimes assumed in Australia. It has become an important question, because many bespoke contracts and subcontracts now contain clauses purporting to exclude the principle. If the principle may be excluded by such a clause, the effect is not infrequently to render a contractor (or more typically a subcontractor) liable to pay significant liquidated damages for delays of the owner’s (or more typically head contractor’s) making.
  • It seems that there is no reason why the parties cannot agree, if they so wish, that the contractor is bound to complete the works by a stipulated date, without any extension of time and regardless of the prospect that the owner might well order additional work which makes that obligation more onerous, or even impossible. It is an unusual arrangement, but not entirely unknown. It means that the contractor is accepting potential liability in circumstances that are not of his doing, but again, that is not entirely unknown. After all, insurers regularly compensate people who are careless enough to burn down their own homes or crash their own cars.
  • But what of a provision, typically tucked away unnoticed in lengthy boilerplate conditions, that purports to disapply the principle as a matter of generality?
  • In Australia, the answer is usually given that it is possible to disapply the principle by such provision. The authority typically relied on is an obiter remark in SMK Cabinets v Hili (1983).[1] Justice Brooking declined to reach a conclusion as to whether the principle was one of implied term or of a rule of law, regarding that distinction as “largely of academic interest” and “simply a matter of terminology”.[2] He said, however, that “of course” the principle yields to contractual intention, and that the parties can effectively manifest by their contract an intention that the contractor shall be liable for liquidated damages notwithstanding the prevention. It is not clear what Justice Brooking had in mind by manifest contractual intention. Did he have in mind an express agreement that the contractor should be liable for liquidated damages regardless of the ordering of additional work? Or was he contemplating some general words disapplying the principle without any express manifestation of what that would mean? In any event, he did not find any intention to exclude the principle, and found that time was at large.
  • It may be that the obiter remark in SMK is even more restricted. In Probuild v DDI[3], McColl J said that the operation of the prevention principle can be modified or excluded by contract, citing SMK as authority. But she went on:

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A Word about Dragon

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I am continuing to work on Extra Contractual-Recoveries.

Word processing has been a bit challenging. The text is now some 370,000 words; at this length Microsoft Word becomes a little clunky. Functionalities like spell checking cease to work.

At the suggestion of the Microsoft helpdesk, and with their assistance, I upgraded from Office 32 bit to Office 64-bit yesterday evening. They say that this will increase the muscle power of the program.

We will see.

Another issue is that Dragon software, which I use Continue reading →

Scissors, paper, stone

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Back in the times when construction law was permeated by solid commercial sense, there was a widely understood concept of practical completion. It is the stage at which the contract works are, for all intents and purposes, complete and available to be used for their intended purpose.

That concept has been seriously eroded, and more and more unrealistic provisions have been inserted into bespoke contracts. One of the more invidious of these provisions is to the effect that completion is not achieved until the party doing the work has provided a complete set of documentation, including manuals and/or quality assurance documentation.

A commercially-minded contractor – or more often subcontractor – will probably not give such a provision a second thought when the contract is entered into.

But contractors – or subcontractors – typically fail to appreciate that this provision can be used to charge them very large amounts of liquidated damages for delays in providing documentation where those delays are, for all practical purposes, irrelevant. It may be possible, in the circumstances, to assert that the clause in question is penal. But fights about penalty clauses tend to be lengthy, expensive and uncertain, and in the meantime payment for the work done is usually not forthcoming.

Another equally unpalatable aspect of such a clause arose in the recent decision in Wärtsilä Australia v Primero Group [2020] SASC 162.

Primero had been engaged as subcontractor by Wärtsilä in relation to the new power station at Barker Inlet, Torrens Island, South Australia. Primero put in a payment claim for some $85 million. Wärtsilä disputed the claim. It was referred to adjudication, and the adjudicator determined that Wärtsilä should pay some $15 million.

Wärtsilä successfully challenged the adjudication determination on the basis that Continue reading →