CONSTRUCTION LAW UPDATE – No. 601
A Global Claim Succeeds in
Introduction
On 20th
December 2005, the Supreme Court of South Australia handed down its judgment in
the appeal in Decor v Cox, a decision that will encourage principal contractors
to ensure that personnel entrusted with the programming of construction works
are competent and diligent. The upholding of Decor’s appeal marks the first
Australian case in which a global claim for damages for breach of a
construction contract has succeeded at trial. Tom Grace, then with Johnson
Winter & Slattery and now a partner in Fenwick Elliott Grace, acted for
Decor in the dispute.
Background
Decor was a
subcontractor to Cox, who as principal contractor to DAIS, undertook the
construction of the TDU centre at Hindmarsh. Decor tendered on the project on
the basis of a 15 week construction period. The project was marked by a series
of delays, and Decor spent 40 weeks on site.
At the
conclusion of the works, Cox claimed that Decor was responsible for the delays
and refused to pay the final amounts due. Decor claimed it was entitled to its
payments and said that the delays had arisen because Cox had not properly
organised the project, resulting in a lack of available work areas and
inefficient use of Decor’s workforce.
The dispute commences
Decor
invoked the arbitration procedures under the AS2545 contract and the parties
entered into a lengthy arbitration. Decor obtained independent expert opinion
showing that the delays caused by Cox’s failure to properly program the works
had resulted in an additional 5,000 man-hours on site. Cox provided answering
expert evidence.
The general position on delay claims
Generally,
to succeed in a claim for delay, it is necessary to prove who caused each delay
and then prove the cost to the claimant of the particular delay.
The global claim by Decor
However, in
this instance, Decor claimed that the delays had been ongoing and general in
nature, arising from a persistent breach of Cox’s obligations to give Decor
access to sufficient of the Site to enable it to carry out the works in
accordance with the contract program, and a breach of Cox’s obligations to
provide information to Decor to enable proper co-ordination of the works. Such
a claim is often described as a global claim.
In addition
to the damages sought for the failure to co-ordinate trades and materials,
Decor also sought the balance due under the contract and compensation for the
extra administrative and site costs it had incurred due to the prolongation of
the construction period.
The interim award
The
arbitrator’s interim award granted to Decor the balance due under the contract
and compensation for the additional administrative and site costs incurred
during the prolongation of the construction period.
The finding on the global claim
In relation
to the global claim, the arbitrator adopted the four elements described by
Justice Bryne in John Holland
Construction & Engineering Pty Ltd v Kvaerner RJ Brown Pty Ltd.
In John Holland, a decision
dealing with the pleadings of a global claim, Justice Byrne said that a
claimant under a global claim must prove four elements to succeed:
The
arbitrator said that Decor had proved the final three of these elements but had
not proved the first because it had not called independent evidence to
corroborate the evidence given by its own estimator.
The findings on appeal
Justice
Besanko found this was an error of law, that Decor’s estimator’s evidence
should have been accepted by the arbitrator and referred the matter back to the
arbitrator.
Significantly,
Decor brought its claim as a claim for damages for breach of contract rather
than under the provisions of the contract that deal with delays and
compensation for delays. This was a strategic decision made by Decor on advice
in order to avoid the limitations otherwise imposed by clauses 35 and 36 of the
contract.
At the time
of writing this article, Cox has appealed the decision of Justice Besanko to
the Full Court of the Supreme Court of South Australia.
Barry
Jenner, of the independent bar, was counsel for Decor in the arbitration. Tom
Grace acted for Décor throughout the dispute and was junior counsel in the
Supreme Court appeals.
Contributor:
Tom Grace
Tom is a
former engineer who ran his own construction company for 20 years before
becoming a construction lawyer. He has
wide experience in the engineering and construction fields and specialises in
the resolution of commercial disputes.
Contact Details:
Tom Grace – Partner
Ph. (08) 8110 8004
Jeanie Elliott – Partner
Ph. (08) 8110 8006
January 2006
This publication is not legal advice. It is for general interest. You should not rely on it without obtaining
legal advice.
Fenwick
Elliott Grace is a law firm that specialises in providing legal services to the
construction and engineering industry.
Office: Level
10, Optus Centre
ADELAIDE SA 5000
Ph: (08) 8110 8000
Fax: (08) 8231 2922
Web: www.feg.com.au