Scissors, paper, stone

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 by providing a hyperlink to the quality assurance documentation – extending to about 100,000 pages – Primero had not satisfied the completion requirement that:

the completed quality assurance documentation required by the Quality Management Plan for the Subcontractor Works (including Inspection and Test Plans and supporting documentation) is complete (other than minor non-compliances and omissions) and is available for inspection by the Contractor at the Facility Land.

Accordingly, it was successfully argued that:

  • completion had not been achieved,
  • accordingly, the necessary reference date had not occurred,
  • accordingly, Primera was not entitled to make a payment claim,
  • accordingly, the adjudication was an invalidity.

On any sensible commercial basis, the decision is nonsensical. It is improbable that Wärtsilä had suffered any prejudice at all by not having access to the documentation. The notion that it would have read the 100,000 pages is decidedly fanciful. Perhaps they could have turned those pages into lampshades. That would have been a lot of lampshades. In any event, of course, hitches in downloading documents from Dropbox or other cloud-based sources – however irritating for a few minutes – can be readily resolved, and if Wärtsilä had really had a problem, they could simply have asked for a USB.

The judgment ran to 128 paragraphs, but did not consider the Latin maxim de minimis non curat lex, “the law cares not for small things.” There was reference to the notice provision in the subcontract, which was in the following form:


    1. NOTICES
      40.1 Form of Notice
      (a) A notice or other communication to a Party under this subcontract (Notice) must be:
      (1) addressed to the Contractor’s Representative or Subcontractor’s Representative using the relevant details set out in Item 31 or 32 (or any alternative details nominated by Notice to the sending Party); and
      (2) in writing and signed by or on behalf of the sending Party.
      (b) The postal address for the Contractor’s Representative and Subcontractor’s Representative must be within Australia.
      40.2 How Notice must be given and when Notice is received
      (a) A Notice must be given by one of the methods set out in the table below.
      (b) A Notice is regarded as given and received at the time set out in the table below. However, if this means the Notice would be regarded as given and received outside the period between 9:00 a.m. and 5:00 p.m. (addressee’s time) on a Business Day (business hours period), then the Notice will instead be regarded as given and received at the start of the following business hours period.

Method of giving Notice

When Notice is regarded as given and received

By hand to the nominated address

When delivered to the nominated address

By trackable post or courier to the nominated address

At 9:00 a.m. (addressee’s time) on the second Business Day after the date sent.

By email to the nominated email address

When the email (including any attachment) comes to the attention of the recipient Party or a person acting on its behalf.

40.3 Notice must not be given by other electronic communication
A Notice must not be given by electronic means of communication, other than email as permitted by clause 40.2.
40.4 Not Used.

Clauses such as this are not uncommon. They rarely serve any useful purpose, save to provide one party with a potentially useful way of denying that it has been served with some notice which is expressed to be a condition precedent to the other party’s right to be paid what is due under the contract. Again, contracting parties with a commercial focus rarely give such clauses a second thought when they are entering into the contract.

It is always unfortunate when the law appears to be counting angels dancing on pinheads, instead of applying practical commercial sense. It is no wonder that, throughout the common law world, the construction industry has preferred adjudication to litigation, in the hope of escaping the unreasonable application of the law.

But for those of us who have been involved in the law for a long time, it is no great surprise that the law continues to find ways to intervene.


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