Australian courts unwilling to enforce limitation clauses on consumer law claims

Brighton Australia Pty Ltd v Multiplex Constructions Pty Ltd

In a recent Victorian Supreme Court decision, The Hon. Justice Peter Riordan provided guidance on the use of limitation clauses, among other issues, in misleading and deceptive conduct claims involving construction projects.  Notably, the decision challenges clauses proposing to impose limitations on claims under the Australian Consumer Law (ACL). The decision is particularly relevant for insurers in assessing their exposure in recovery actions or the defence of claims under the ACL.

Background

Multiplex Constructions Pty Ltd was the principal contractor for a commercial development known as the ‘NAB Project’. Brighton Australia Pty Ltd was engaged by Multiplex to provide plasterwork under two subcontracts, one for base build works and the other for fit out works. Due to a number of unanticipated delays and variations in the works, Brighton was unable to carry out their works in accordance with the agreed programme and suffered loss as a result.

The ACL claim

The matter was previously heard before Referee Mr Richard Manly QC who dismissed two claims brought forward by Brighton: an implied contract/restitution claim and second a claim under the ACL (‘ACL Claim’). The Referee further found that the ACL claim was effectively barred on the basis of a limitation clause in the subcontracts.
The ACL Claim brought by Brighton alleged that representations made in Multiplex’s Tender Documentation and Construction Programme were misleading and deceptive because they:

  • were not based on the most accurate and reliable information at the time
  • were not a true and accurate reflection of Multiplex’s intentions, and
  • did not provide Brighton with correct information about timing and completion of relevant subcontract works.

In the Supreme Court Brighton sought to appeal the dismissal of the ACL Claim.

Was non-disclosure within the ambit of the claim?

The ACL claim alleged that express or implied representations made in Multiplex’s Tender documentation from September to December 2011 (‘Tender Period’) were misleading and deceptive. In light of The Referee’s finding that the pleadings placed a temporal limit on the claim, to representations made within the Tender Period, Brighton attempted to rely on subsequent events in further submissions. These submissions alleged that a change of circumstances occurred outside of the Tender period which rendered the Construction Programme inaccurate, a change that Multiplex failed to disclose to Brighton.

In his judgment, Riordan J specified that a continuing representation involves a situation where a representor makes an accurate representation as to existing fact, which as a result of changed circumstances no longer becomes accurate. In the circumstances where continuing representations amount to misleading and deceptive conduct, non-disclosure or silence must form a part of the pleading.

The Court found that Brighton had claimed a change of circumstances amounting to non-disclosure, based on original pleadings that only alleged reliance on express or implied representations made during the Tender Period. This aspect of the ACL claim was therefore relying on unpleaded material, found to be outside the ambit of the pleadings, and was dismissed.

Were the representations misleading or deceptive?

The Referee rejected the claim that the Tender Documentation and the programme implied representations as to the sequence and management of the work. This was based on a number of reasons including the fact that the construction programme was labelled ‘revision 58’ which indicated a changing document that did not purport to be an up-to-date programme. The terms of the subcontract also provided for updates, changes and warranties associated with any delays and variations in the programme.

The Court agreed with The Referee’s findings, concluding that Brighton should have been aware that changes and variations were highly likely, considering the nature of the industry. Both The Referee and Riordan J referred to Baulderstone Hornibrook Pty Ltd v Qantas Airways Ltd [2003] in which Finkelstein J spoke on the significant risk of delay and disruption in every major construction project and how contract works programs are prone to these associated risks.

Can a limitation clause exclude liability under the ACL?

Clause 46.1 of the subcontracts required Brighton to give notice of any claim within 7 days of being aware of a Claim Event or an entitlement to make a claim. The Referee found that this was not an exemption clause and was an enforceable temporal limitation relying on the authorities of Owners SP 62930 v Kell & Rigby Pty Ltd (‘Kell’), Lane Cove Council v Michael Davies & Associates (‘Lane Cove’) and Firstmac Fiduciary Services pty ltd v HSBC Bank of Australia Ltd [ (‘Firstmac’).

The Court accepted Brighton’s argument that, relying on leading authority Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (‘Henjo’), the limitation was not merely time-based but that it would also be contrary to public policy to allow a remedy under the ACL to be excluded by private agreement. Riordan J cited the ‘no exclusion’ principal from Henjo as the proper basis for this rule.

To establish the no exclusion principle, the Court will examine whether:

  • a statute embraces public rather than private rights; and
  • the legislative purpose will not be fulfilled if the court enforces private contractual arrangements.

The Court’s analysis of the underlying case law indicates that the authorities of Kell, Lane Cove and Firstmac support the proposition that monetary and temporal limits may be imposed on a statutory remedy that confers on procedural and private rights.

Comment

The Court has taken a strict approach in deciding that representations under misleading and deceptive conduct claims are strictly limited to the ambit of the pleadings. Parties and insurers bringing these types of claims should be aware that while submissions develop throughout a hearing, additional claims such as non-disclosure cannot be made without specific particularisation in the pleadings.

The judgment has further recognised that, given the nature of the industry, contracting parties should expect variations and delays in large scale construction projects. Tender documents and programmes are unlikely to be binding representations of the principal’s intentions, especially when they provide a high level outline of the construction programme. Principal contractors should provide for contract clauses which put all parties on notice and reserve their rights to vary construction programmes and subcontractor agreements in the face of delays.

Finally the Court has provided greater certainty in relation to the enforceability of clauses that exclude or limit statutory claims. This is a positive development for insurer’s recovery prospects under misleading and deceptive conduct claims as such clauses will likely not be enforced by a court where they interfere with statutes that confer public rights, such as the ACL. Explanatory memoranda and official publications issued in support of legislation should be submitted as evidence on whether a statutory remedy embraces public or private rights.

Read other items in the Construction and Engineering Brief - August 2018