The decision in CMA Assets Pty Ltd v John Holland Pty Ltd [No 6] [2015] WASC 217, has reinforced the position that contractors MUST comply with the terms of a contract – for example, time and notice provisions - otherwise they risk losing fundamental rights and claims available in the contract such as Extension of Time claims (EOT).
The case involved a subcontract between John Holland Pty Ltd (John Holland) and CMA Assets Pty Ltd (CMA). BHP contracted with John Holland to upgrade and extend a wharf at Finucane Island in Western Australia. John Holland in turn subcontracted demolition works of a shipping berth and underwater mooring and berthing dolphins to CMA.
In the course of undertaking the works CMA claimed that it was delayed by several factors such as the reinforcement of the berthing dolphins which wasn't contemplated in the subcontract, delays by John Holland in moving a shiploader and delays in giving CMA access to structures it was to demolish.
CMA made variation and delay claims against John Holland however, it had failed to issue notices of delay in accordance with the strict notice requirements of the subcontract. These clauses in the contract were condition precedents to CMA being able to make an EOT claim and not doing so would see those rights lost. This is the essence of a 'time bar'.
As CMA had not complied with the strict terms of the subcontract, the company argued that it wasn't in a position to provide the information required by the notice requirements, a failure to give notice does not defeat a claim in its entirety, strict compliance with the subcontract was absurd and harsh, and that John Holland was already aware of the delay and no further notice was required.
Whilst the Court accepted that CMA was delayed by John Holland, it denied its claim on the basis that CMA hadn't complied with the notice requirements of the subcontract. The Court could not depart from a strict interpretation of the subcontract even though the application of the clauses were 'harsh' as otherwise it would be contradicting the wording of the contract. As the subcontract was not followed and the right to bring an EOT claim was lost, John Holland was able to deny liability. The Court also did not accept CMA's arguments that there was a mutual departure from strict compliance as it said there was insufficient evidence to support such a claim.
Lessons Learnt
It is important that contractors comply with the time provisions of a contract they have entered into even if they consider the clauses to be 'harsh'. The risk in not doing so is too great with the loss of otherwise potential valid claims.
It is critical that you understand the contract, keep good records to be able to provide what is required by the contract and otherwise show non-compliance by the contractor, and that you maintain adequate contract administration practices.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
