Contracts in various sectors, in particular the construction industry, often contain ‘no claim’ clauses that are aimed to impose hurdles to shut out claims that are late or inadequately detailed, against the counterparty.
A Victorian Supreme Court decision in March this year is a timely reminder in the construction industry for Principals, Contractors and Subcontractors that these clauses are not necessarily bullet-proof, as there may be another effective way of reframing a similar claim.
In this decision, the issue was whether a claim made using the misleading and deceptive conduct provisions of section 18 of the Australian Consumer Law (ACL) could overcome a time bar provision in the contract.
These types of clauses are not just unique to the construction industry. They are also commonly found in service contracts, consultancies, manufacturing contracts, sales of shares and asset sale agreements.
Brighton Australia v Multiplex
A plastering subcontractor, Brighton Australia brought a claim against Multiplex regarding the NAB Project at Docklands under section 18 of the ACL, alleging that Multiplex made misleading and deceptive representations about the construction program and when Brighton’s subcontract works would be scheduled. Brighton claimed that as a result of delays, it incurred significant costs. A Special Referee decided earlier that the claim could not be made by Brighton.
The Subcontract contained a time bar clause which required Brighton to give a particular notice within 7 days of any claim it wished to make against Multiplex, including details, if it was aware, or should have been aware, of the events supporting the claim. Any failure to comply with the clause would ‘absolutely bar’ Brighton from making the claim.
The Court decided that a clause of this nature could not prevent the claimant from making a claim for misleading and deceptive conduct under the ACL. The ACL permits any action for damages based on misleading and deceptive conduct to be commenced within 6 years of the claimant becoming entitled to make the claim. Any attempt to restrict the remedy by limiting the time in which a proceeding can be commenced is an unacceptable interference with the public policy underpinning the ACL legislation.
Ultimately, Brighton’s claim failed because the alleged misrepresentations had not been made out, and Multiplex had not engaged in misleading and deceptive conduct.
Effect on parties to a contract
While there was still a potential route for Brighton to make a misleading and deceptive conduct claim under the ACL, the time bar would have made it difficult for Brighton to make a late claim which was based on a provision in the Subcontract itself.
Contractors and Subcontractors often need to make additional claims over and above the regular contract payments. These claims often involve variations or extensions of time (EOTs) for completion of work. Counterparties relying on the time bar need to be aware that there may still be an alternative way to be faced with a claim. Minimising the potential for claims in a contract is also commonly attempted for example with disclaimers and limitation of liability clauses.
If you regularly sign-up to contracts containing time bar clauses, in the construction sector or other industries, it’s best to:
• review them in the pre-contractual negotiations, and
• carefully administer all claims, whether based on the contract, applicable legislation or another legal obligation.
Our team at CIE helps clients manage their contractual risk. Please contact Lionel Appelboom or Thomas Kilmartin for further information on how we can help.