Case Digest: The importance of the written word - delays in moving (Heaven) and Earth

In Lucas Earthmovers Pty Limited v Anglogold Ashanti Australia Limited [2019] FCA 1049, the Federal Court of Australia considered several issues that typically arise in large-scale resources projects. In so doing, it reinforced the sanctity of the agreed bargain between the parties and highlighted the inherent difficulties in proving the oft-claimed, but rarely successful, misleading and deceptive conduct claims under the Australian Consumer Law (ACL).

Background

Anglogold Ashanti Australia Limited and Independence Group NL (the Principals) contracted with Lucas Earthmovers Pty Limited (Lucas) to construct an access road to a remote mine site northeast of Kalgoorlie in Western Australia (the Contract).

Lucas commenced work under the Contract in April 2011. The project was delayed, as much of the material along the road alignment did not meet specification and, throughout performance of the Contract, the manner in which significant portions of the road was constructed was changed. This additional work resulted in construction delays and additional costs. Lucas was delayed by 131 days in achieving practical completion.

Lucas brought claims against the Principals under the Contract and under the ACL for almost AUD $7 million. The contractual claims were made in respect of time-related costs, consequential claims, and other variation claims.

Lucas made an alternative claim under the ACL on the basis that certain costs were incurred by reason of the Principals’ misleading or deceptive conduct, allegedly contravening section 18 of the ACL. Lucas alleged it relied on four such representations made to them by the Principals or on their behalf.

Decision

While the Court upheld certain of the contractual claims, significantly, it dismissed both the ACL and time-related costs claims. The case confirms the state of the law in Western Australia in respect of several key issues, namely:

• an appropriately drafted ‘no damage for delay’ clause, including when delay occurs as a result of a variation, will disentitle a claim for prolongation costs in respect of that variation;
• a certifier has an implied duty to act honestly and impartially (and arguably reasonably) when assessing claims for extensions of time;
• courts will interpret the notice requirements of clauses imposing a time bar pragmatically, particularly if notice may need to be given before the full extent, or the precise content, of a claim for an extension of time is known;
• the existence or otherwise of a latent condition is determined objectively by a consideration of whether the physical condition in question differs materially from the physical conditions which could reasonably have been anticipated by a competent contractor as at the date of the contract if the contractor had inspected the sources of information; and
• in respect of a claim under the ACL:
  • the importance of proving that the statement was made, that it was misleading or deceptive (or likely to mislead or deceive) and, crucially, that it was relied upon and caused loss or damage. This is particularly so if a contractor alleges that, had the alleged representation(s) not been made, it would not have entered into the contract (or would have done so on materially different terms);
  • certain representations and warranties made in a contract can count against a finding of reasonable reliance on alleged representations; and
  • the mere fact that the person who executes a Contract is not called as a witness is not fatal to a finding of reliance on alleged representations.

Key takeaways

The Lucas Earthmovers case highlights again the importance of the written word; both the importance of:

• a contract that properly assigns delay risk and deals with the consequences of that delay; and
• addressing (ideally in the contract) important matters raised prior to entering into a contract (either to record them or mitigate reliance risk in properly drafted representations and warranties clauses).

Reliance, after signing the contract, on oral representations made prior to it is fraught with difficulties and inevitably leads to at least uncertain, and often negative, outcomes.