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Common construction disputes arising under modified AS 4902-2000 – Built Qld Pty Limited v Pro-Invest Australian Hospitality Opportunity [2022] QCA 266

by Website Administrator

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In Built Qld the Queensland Court of Appeal considered a common type of construction dispute arising under a modified version of AS 4902-2000. It is an illustration of typical issues in cases of this kind.

The claim was for variations, extensions of time and delay damages said to arise from performing work directed by a superintendent pursuant to a defect rectification notice. There were essentially five issues.

First, a question of constructional choice arising from a non-conforming tender in respect of the plant in question (air-conditioning in a large hotel refurbishment). This question was complicated by the fact that the contract was design and construct but included a prescriptive specification for that plant.

Secondly, the availability of extrinsic evidence to resolve the constructional choice question.

Thirdly, the characterisation of the defect notice, which of course necessarily involved the identification of the subject-matter of the obligation i.e. the defect.

Fourthly, if the defect notice (correctly characterised) required work beyond the contract requirements, whether the contract’s claim requirements were met.

Fifthly, whether the correct approach to quantifying delay was retrospective or prospective analysis.

The first two issues naturally combine. The difficulty was that although a detailed principal’s specification was included in the contract there was an election available to the tenderer to make an alternative proposal under the rubric that it must meet the performance requirement of the tender drawings and specification.

The successful tenderer did so but the dispute was whether any stipulated performance requirement was met. That dispute was complicated by a lack of relevant definition in the alternative proposal. In simple terms, the alternative proposal was to use a different kind of system which might lack one aspect of functionality, but not necessarily so. This opened up the question of whether there was a defect at all.

The appellant (tenderer) contended extrinsic evidence of pre-contractual emails was admissible to identify the contractual subject-matter in this critical respect. The trial judge had rejected this on the basis that no ambiguity was established (although she perversely allowed cross examination of lay witnesses about the meaning of the contract).

The Court of Appeal corrected this error. Ambiguity is not required to admit extrinsic evidence to identify the meaning of a descriptive term, this being a recognised exception to the parol evidence rule since Prenn v Simmonds [1971] 3 All ER 237 and endorsed in Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337.

As it happens, this correction did not assist the appellant. Interestingly, even though the Court of Appeal recognised the appellant identified the type of system it proposed pre-contract and invited acceptance of it as compliant, that acceptance was not in express terms given. That is, the contract as made retained the general requirement that any alternative must meet the performance requirement of the tender drawings and specification. There is an obvious lesson for tenderers in this conclusion.

The third issue concerning characterisation of the purported defect notice led to a related question of constructional choice. That is, the identification of the performance requirement of the tender drawings and specification. The trial judge used dictionary definitions to construe key phrases in this obligation and was held to have erred in doing so. This is partly because contractual meaning is derived from the contract read as a whole and not narrowly by reference to the dictionary defined term and partly because key expression performance specification has a received meaning in building contracts according to the jurisprudence.

It stands in contradistinction to the concept of a prescriptive specification. In this case, performance requirement was to be treated as a performance specification and involved identifying which elements of the original specification concerned performance as distinct from a prescription about the type of plant. The appellant’s case would stand or fall on this.

The fourth issue (the status of the defect notice) naturally turned on what the contract required and arose (as it invariably does) in circumstances where superintendent and contractor disagreed mid-project about the scope of works. The modified version of AS 4902-2000 had relevantly typical requirements for claiming time and money i.e. notice within prescribed time and with prescribed content. In this case, the appellant’s entitlement ultimately depended on whether the purported defect notice enabled it to comply with the notice requirements.

The trial judge held that the defect notice alone was the trigger. The Court of Appeal disagreed in terms which repay careful reading (see at [66]). The short point is that a contractor is allowed time to form a technical and then legal opinion to ascertain the contractual effect of the event (in this case the defect notice). It was then entitled to time to make a commercial decision.

The fifth issue (the correct approach to quantifying delay) had two parts. The first was to recognised that a contract which addresses EOT in terms of whether the contractor is or will be delayed permits both prospective and retrospective analysis at the superintendent’s election. The second part is that a court (or arbitrator) does not simply stand in the superintendent’s shoes and correct for any error in the approach that was used. Correctly, the task (having first found error) involves an assessment in light of the then known facts, including by substituting a retrospective analysis.

Martin Scott KC

Liability limited by a scheme approved under professional standards legislation

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