This page contains some selected extracts from Australian construction law cases, and also – in some instances where they have been referred to or adopted in Australian cases – cases from elsewhere in the common law world.

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Case Jurisdiction Reference Extract and Links
620 Collins Street v Abigroup Victoria [2006] VSC 491 (14 December 2006) (re AS 2124)26 In my view the Arbitrator was correct in his decision:
(a) The primary mechanism of cl.35.5 gives the contractor an entitlement to an extension of time, subject to compliance with special conditions;
(b) The penultimate paragraph reserves a discretionary power to grant an EOT in other circumstances effectively where it is just and equitable to do so;
(c) Such power is expressly directed to situations where “the contractor is not entitled to or has not claimed an extension of time …”;
(d) It is expressed to arise on a separate and distinct basis from the provision for the extension of time pursuant to the primary mechanism;
(e) The grounds for exercise of the reserve power are expressed in the broadest possible terms as “for any reason”.
(f) The potential prejudice to the principal flowing from a failure by the contractor to comply with s.35.5 is a matter going squarely to the equitable exercise of the Arbitrator’s discretion.

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B

BBB Constructions Pty Ltd v Frankipile Australia Pty Ltd NSW [2008] NSWSC 982 “[2] Although in the past it was contentious, it is now well established that the circumstance that a creditor’s statutory demand is founded upon a debt arising from an adjudication under the Building and Construction  Industry Security of Payment Act does not preclude the setting up of an offsetting claim pursuant to s 459H on an application to set aside such a demand: Greenaways Australia Pty Ltd v CBC Management Pty Ltd [2004] NSWSC 1186Demir Pty Ltd v Graf Plumbing Pty Ltd [2004] NSWSC 553at [18]–[20]; and, in particular, in respect of an offsetting claim Aldoga Aluminium Pty Ltd v De Silva Starr Pty Ltd [2005] NSWSC 284.
Bernhard’s Rugby Landscapes v Stockley Park
England (1998) Const LJ Vol 14 No 5, HHJ Lloyd 138. A breakdown of the contractual machinery occurs when without material default or interference by a party to the contract, the machinery is not followed by the person appointed to administer and operate it and, as a result, its purpose is not achieved, and is either no longer capable of being achieved or is not likely to be achieved. It can for most practical purposes be equated to interference by a contracting party in the process whereby the other is deprived of a right or benefit, eg the failure of an employer to re-appoint an administrator or certifier on the resignation of the previously appointed person, or where that person fails or is unwilling to do his duty and the employer will not take steps to rectify the position: see Panamena. Non-compliance with the machinery by the administrator is not in itself sufficient: the effect must be that either or both of the parties to the contract do not in consequence of the breakdown truly know their position or cannot or are unlikely to know it. Either is then free to have its position established by the appropriate means available: litigation or arbitration (preceded, if the contract so requires, by recourse to adjudication or the like). If the true position is or can be established by other contractual means then the breakdown is likely to be immaterial even where the result of the breakdown is that one party does not obtain the contractual right or benefit which would or might otherwise have been established by the machinery, eg the issue of a certificate, provided that the true position can be restored by the operation of other contractual machinery.
Booker Industries Pty Ltd v Wilson Parking (Qld) Pty Ltd (1982) 149 CLR 600 If the contractual machinery for fixing the rental were to fail, the rental would be fixed by the court.Such a lease would be valid, for if the machinery for fixing the rent should fail, the court’s machinery will be available to fix it: certum est quod certum reddi potest.
Brewarrina Shire Council v Beckhaus Civil Pty Ltd (2003) 19 BCL 177 per Mason P:there is no doubt that the Superintendent has duties to the Contractor under cl 23 of the Contract and that, even though the Superintendent may have close connections with the proprietor, he owes what could be termed fiduciary duties to the Contractor
Brookhollow Pty Ltd v R & R Consultants Pty Ltd [2006] NSWSC 1. “a payment claim can be treated as a nullity if it does not on its face reasonably purport to comply with s 13(2)(a)… .the nullity of the payment claim could be set up as a defence to an application for summary judgment”. ”.

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C Czarnikow Ltd v Koufos [1969] 1 AC 350 “I am satisfied that the court did not intend that every type of damage which was reasonably foreseeable by the parties when the contract was made should either be considered as arising naturally, i.e., in the usual course of things, or be supposed to have been in the contemplation of the parties … the decision makes it clear that a type of damage which was plainly foreseeable as a real possibility but which would only occur in a small minority of cases cannot … be supposed to have been in the contemplation of the parties: the parties are not supposed to contemplate as grounds for the recovery of damage any type of loss or damage which on the knowledge available to the defendant would appear to him as only likely to occur in a small minority of cases.In cases like Hadley v Baxendale or the present case it is not enough that in fact the plaintiff’s loss was directly caused by the defendant’s breach of contract. It clearly was so caused in both. The crucial question is whether, on the information available to the defendant when the contract was made, he should, or the reasonable man in his position would, have realised … that loss of that kind should have been within his contemplation.”
The Commonwealth v. Amann Pty. Ltd. (1991) 174 CLR 92 “The crucial question is whether, on the information available to the defendant when the contract was made, he should, or the reasonable man in his position would, have realised that such loss was sufficiently likely to result from the breach of contract to make it proper to hold that the loss flowed naturally from the breach or that loss of that kind should have been within his contemplation.”
In Coordinated Construction Co Pty Ltd v J M Hargreaves (NSW) Pty Ltd [2005] NSWCA 228 The task of the adjudicator is to determine the amount of the progress payment to be paid by the respondent to the claimant; and in my opinion that requires determination, on the material available to the adjudicator and to the best of the adjudicator’s ability, of the amount that is properly payable. Section 22(2) says that the adjudicator is to consider only the provisions of the Act and the contract, the payment claim and the claimant’s submissions duly made, the payment schedule and the respondent’s submissions duly made, and the results of any inspection; but that does not mean that the consideration of the provisions of the Act and the contract and of the merits of the payment claim is limited to issues actually raised by submissions duly made: see The Minister for Commerce v. Contrax Plumbing (NSW) Pty. Ltd. [2005] NSWCA 142 at [33]– [36]. The adjudicator’s duty is to come to a view as to what is properly payable, on what the adjudicator considers to be the true construction of the contract and the Act and the true merits of the claim. The adjudicator may very readily find in favour of the claimant on the merits of the claim if no relevant material is put by the respondent; but the absence of such material does not mean that the adjudicator can simply award the amount of the claim without any addressing of its merits.

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Dualcorp Pty Ltd v Remo Constructions Pty Ltd NSW [2009] NSWSC 69 “[60] These various provisions in my view indicate a legislative intent to render adjudication determinations relevantly conclusive. Such determinations do not conclude contractual rights. Section 32 expressly so provides. The Act however creates special statutory rights to progress payments. When a claim is made, a dispute arises and an adjudication determination resolves that dispute. I consider that determination to be final and binding between the parties as to the issues determined, except to the extent that the Act allows the determination to be revisited. It would in my view be quite contrary to the scheme of the Act to permit claimants simply to resubmit the already adjudicated claims if they were dissatisfied with the adjudication.”

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Finnegan v Sheffield England (1988) 43 BLR 124 I am driven to the conclusion that it is only when what I perhaps may call the architect procedure has broken down that the court is empowered to open up and review the architect’s certificates or opinions and substitute its own machinery.

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Hadley v Baxendale A party may recover damages for breach of contract:“… such as may fairly and reasonably be considered either arising naturally, ie, according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it”

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Jemzone Pty Ltd v Trytan Pty Ltd NSW (2002) 42 ACSR 42 Re s 13(2) of the Building and Construction Industry Security of Payment Act 1999 (NSW)…if a claimant wishes to take advantage of the special statutory rights offered by the Act, which override general contractual rights and place the claimant in a privileged position, the payment claim must on its face contain all the ingredients required by the Act. While the court should not take an unduly strict approach to the construction of the claim, it ought not to cure a defect in the claim document by reference to extraneous circumstances or previous communications
Jezer Construction Group P/L and Ors v Lilischkies [2004] QSC 270 The mechanism for assessment has failed in that the QBT has ceased to exist. I respectfully adopt the approach of Lord Fraser in Sudbrook at 484, and conclude that there is no distinction in principle between a case where the mechanism for assessment of the costs and outlays fails because of the non co-operation of one of the parties and the present case where it has failed because of a legislative act in abolishing the body which was to perform the assessment. Accordingly the Court should substitute a mechanism for the assessment of the costs and outlays.
John Barker Construction Limited v London Portman Hotel Limited
England (1996) C.I.L.L. 1152 All in all, I am satisfied that the plaintiffs have established that, although there was no bad faith or excess of jurisdiction on the part of the architect, his determination of the extension of time due to the plaintiffs was not a fair determination, nor was it based on a proper application of the provisions of the contract, and it was accordingly invalid.”…It seems to me that this is a case in which the contractual machinery established by the parties has become frustrated or, put in other words, has broken down to such an extent that it would not now be practicable or just for the matter to be remitted to the architect for re-determination; and that in those circumstances the Court must determine on the present evidence what was a fair and reasonable extension of time.
John Holland v Majorca Projects Victoria (1996) 13 BCL 235 For example, arbitrators at common law owe a duty to exercise reasonable skill in preparing awards; their obligation to be impartial is an absolute one….It would not be profitable for me to embark upon an analysis of (Pacific v Baxter); it depends very much upon the contractual situation in which the certifier was working and, more importantly, upon the substantive law of negligence in England which differs in this area from that in Australia…To my mind it is reasonably foreseeable that the decisions of a certifying architect might cause loss to a contractor in a conventional building project if made negligently. Whatever that loss might be will depend upon the nature of the decision in question; it is in any event pure economic loss. This foreseeability is not removed by a right to review the decision by arbitration. Insofar as an entitlement to payment is concerned, a contractor who is successful upon arbitration must necessarily incur the cost of that arbitration and may suffer a deferment of payment, perhaps without a right to interest pending payment: Farrans (Construction) Ltd v Dunfermline District Council 1988 SLT 466. Nor am I troubled by either of the examples of policy consideration referred to in Bryan v Moloney (1995) 182 CLR 609 at 618-9 in the passage quoted above. The Builder in this case is clearly an identifiable member of the limited class of two persons who must have been in the contemplation of the Architect as being directly affected by its decisions. It is not an affront to the standards expected of a professional person that he or she should exercise the onerous responsibilities of certifier with due care and without partiality or unfairness. I suspect that the community, and particularly those concerned in the building industry, would expect no less.The solution to the present problem must be found in the answer to the questions whether, in the contractual framework in which the parties to this project operated, it is established that the Builder relied on or depended upon the careful and impartial performance by the Architect of its certifying functions as here alleged and whether the Architect, for its part, assumed a legal responsibility to the Contractor so to perform them… There is in this case no room for a duty of care owed by the Architect to the Builder the relevant content of which was a duty to act fairly and impartially in carrying out its functions referred to in cl5.02.02.

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Kane Constructions Pty Ltd v Sopov Victoria [2005] VSC 237 (30 June 2005) In addition to cl 35.5 and the provision for EOTs, it remained open to the superintendent, at any time and from time to time before the issue of the final certificate, by notice in writing to the plaintiff, to extend the time for practical completion for any reason. Furthermore, under cl 35.5, the superintendent was obliged to certify an extension of time for the plaintiff where it may be fair and reasonable to do so, notwithstanding a plaintiff’s failure to make a claim or non-compliance with the relevant timing requirements for an extension of time claim: see Abigroup v Peninsula Balmain.

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Multiplex Constructions v SOR South Australia [2000] SASC 414 “24 Mr Dal Cin submitted that the principal in a construction contract would not be liable for the negligence of a superintendent acting in his capacity as a certifier. He referred to Hudson’s Building and Engineering Contracts (11th ed) Vol 1 para 6-097. The learned author of Hudson relies on Pacific Associates v Baxter [1990] 1 QB 993 for this proposition. In my view this is stating the matter too broadly. In P & E Phontos Pty Ltd v McConnell Smith & Johnson Pty Ltd (1993) 9 BCL 259 Cole J expressed the view that the decision in Pacific Associates turned on the particular circumstances of that case and that the court should approach each case in which negligence is alleged by considering the particular circumstances said to establish a duty of care. Cole J was of the view that in the imprecise area of the law of negligence the burden upon an applicant seeking to strike out a summons is greater because of the developing nature of the concept of duty of care. That statement is just as true now as it was when it was made by Cole J in 1993. (cf Perre & Ors v Apand Pty Ltd (1999) 198 CLR 180). Nor do I agree with Mr Dal Cin’s argument that the contractual relationship necessarily excludes the existence of a duty of care. In my view the pleadings disclose a reasonably arguable cause of action against SOR based on breach of duty of care”.Full case

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Northbuild Construction v Napier Blakely Queensland [2006] QSC 133 “However, the decision in Pacific Associates, which is broadly consistent with the approach taken in John Holland Construction, was not inevitable. At p 1018 to 1019, reference is made to several decisions which tended to suggest that a duty of care of the kind proposed to be alleged in this case did exist and the breach give rise to a claim for compensation in tort.The reasoning in those cases, although plainly disapproved of by the Court of Appeal suggests that, in Australia at any rate, the last word has not been heard on this topic.”
Northern Regional Health Authority v. Derek Crouch Construction Co. Ltd.
[1984] 2 W.L.R. 676 (C.A.) The position might well be different if the machinery in clause 35 had broken down and was incapable of operating. In such a case the agreement of the parties on a matter of machinery (as opposed to substantive obligation) having been frustrated, the court could and would substitute different machinery.

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Pacific v Baxter England [1990] 1 Q.B. 993; [1989] 3 W.L.R. 1150; [1989] 2 All E.R. 159; (1989) 133 S.J. 123; 44 B.L.R. 33; 16 Con. L.R. 90; (1989) N.L.J. 41, CA; affirming 13 Con. L.R. 80 ‘I have come to the conclusion, for the reason already stated, that no liability can be established in tort under which the engineer owed a direct duty to the contractor in the circumstances disclosed in this case. I emphasise, however, that in coming to this conclusion it does depend on the particular circumstances of the case not the least of which were the contractual provisions in the contract which afforded an avenue enabling the contractor to recover from the employer. I see no justification for superimposing on this contractual structure an additional liability in tort as between the engineer and the contractor.’
Perform (NSW) Pty Ltd v MEV-AUS Pty Ltd NSW [2009] NSWCA 157 Even without taking account of the faxes on 29 April 2008, the respondent claimed money and the appellant opposed payment of the money because of the backcharge claims. It was necessary for the adjudicator to decide whether the backcharge claims stood as a set-off against the claim and justified valuing the claim at $nil. Nothing was done by the respondent or the adjudicator whereby the appellant could reasonably have thought that a right of set-off was accepted or conceded, or that whether the backcharge claims could stand as a set-off against the claim was not an issue for decision. It was always an issue for the appellant to address, within the Act’s mechanism for submissions, and a matter for the adjudicator’s decision, in accordance with the Act notwithstanding that submissions going to it had not been made. There would not have been denial of natural justice in his coming to a decision in the absence of submissions in support of a right of set-off.

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Rhodia Chirex v Laker Vent (2004) Const LJ Vol 20 No 3, CA And, in my view, for the reasons I have given in relation to the first claim, that is how the judge should have dealt with it, not as a matter of final certification. If I am right about that, whether Rhodia is in breach of its obligation under cl.43.8 to provide the project manager with information in good time and issues as to the validity of Mr McKinlay’s final termination certification and/or as to what should be put in its place, in relation to Rhodia’s cross-claims not the subject of reference to the expert, may yet be capable of determination in fresh proceedings. These could possibly be by way of arbitration pursuant to cl.46 (since only disputes referred to an expert for resolution are barred by cl.45.7 from resolution by arbitration under cl.46) or by the court on the Bernhard Rugby Landscapes basis that the contractual machinery has broken down.
Rickard Constructions v Rickard Hails Moretti NSW [2006] NSWCA 356 158  “…Prudence is not the same as the exercise of reasonable care and skill, and that some engineers thought it would have been prudent did not mean that there was a failure of reasonable care and skill..”.Full case
Rogers v Whittaker (1992) 175 CLR 479 The standard of care of a professional is “not determined solely or even primarily by reference to the practice followed or supported by a responsible body of opinion in the relevant profession”

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Saloma Pty Ltd v Big Country Developments Pty Ltd NSW [2006] NSWSC 652 The authorities in cases such as Hall v Busst (1960) 104 CLR 206 which go back to the judgment of Sir William Grant in Milnes v Gery (1807) 14 Ves Jun 400 ; 33 ER 574, indicate that when one gets a situation such as the present, equity uses its powers to supply the machinery that has broken down.
Sutcliffe v. Thackrah England [1974] A.C. 727, HL ( In certifying, the architect has to) “act in a fair and unbiased manner and it must therefore be implicit in the owner’s contract with the architect that he shall not only exercise due care and skill but also reach such decisions fairly, holding the balance between the client and the contractor.”

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Valkonen v Jennings Construction (1999)(Full Court of The Supreme Court of South Australia) 26. There is a long line of cases, particularly in England, that expresses an antipathy to exclusion clauses and indemnity clauses and the like in commercial contracts. The modern starting point is Alderslade v Hendon Laundry Ltd (1945) 1 KB 189…
27. That decision has been followed in a great number of cases since 1945. In Canada Steamship Lines Ltd v The King (1952) AC 192 the advice of the Privy Council, delivered by Lord Morton of Henryton, summarized the position with respect to an exclusion clause in the following way –
“(1) If the clause contains language which expressly exempts the person in whose favour it is made (hereinafter called “the proferens”) from the consequence of the negligence of his own servants, effect must be given to that provision …
(2) If there is no express reference to negligence, the court must consider whether the words used are wide enough, in their ordinary meaning, to cover negligence on the part of the servants of the proferens. If a doubt arises at this point, it must be resolved against the proferens …
(3) …

W

Woolcock Street Investments Pty Ltd v CDG Pty Ltd Queensland [2004] HCA 16, (2003) 216 CLR 515 31 “Neither the facts alleged in the statement of claim nor those set out in the Case Stated show that the appellant was, in any relevant sense, vulnerable to the economic consequences of any negligence of the respondents in their design of the foundations for the building. Those facts do not show that the appellant could not have protected itself against the economic loss it alleges it has suffered. It is agreed that no warranty of freedom from defect was included in the contract by which the appellant bought the land, and that there was no assignment to the appellant of any rights which the vendor may have had against third parties in respect of any claim for defects in the building. Those facts describe what did happen. They say nothing about what could have been done to cast on the respondents the burden of the economic consequences of any negligence by the respondents. The appellant’s pleading and the facts set out in the Case Stated are silent about whether the appellant could have sought and obtained the benefit of terms of that kind in the contract.”111 “There are many means of protection open to first owners and purchasers of commercial buildings to cover the risk that the building may have latent defects. The first owner can enter into contractual arrangements with those involved in the construction. Those arrangements can include warranties concerning the fitness of the building for the purpose for which it was constructed. The first owner can supplement the contractual arrangements with those directly involved by obtaining similar warranties from directors and other persons connected with the construction of the building. The first owner can employ other professionals to check the work of those directly involved in the project. Subsequent purchasers can protect themselves by entering into similar arrangements with their vendor. They can take an assignment of the vendor’s rights (if any) against the builders and others. They can minimise the risks of loss from physical defects by obtaining expert investigations of the building.

Full case

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