May 25, 2018

A recent decision of the Supreme Court of Victoria, Brighton Australia Pty Ltd v Multiplex Constructions Pty Ltd [2018] VSC 246, has considered the validity of a contractual limitation on the time in which a statutory misleading or deceptive conduct claim under the Australian Consumer Law (ACL) can be made.

Construction contracts frequently include provisions which purport to impose liability limits or other restrictions on parties’ rights to make claims and recover damages under the ACL. The question of the effectiveness of such provisions has, however, received relatively little consideration by the courts.

Brighton Australia Pty Ltd was engaged by Multiplex Constructions Pty Ltd as a plasterwork subcontractor pursuant to two written subcontracts to perform two packages of work in relation to the construction of a building in Docklands, Victoria. A dispute arose between the parties and Brighton commenced proceedings seeking damages and other relief against Multiplex arising out of the subcontracts, including on the basis that Multiplex had made misleading or deceptive pre-contractual representations regarding the program included in the tender documentation.

The subcontracts required Brighton to give a prescribed notice of any claim within 7 days of becoming aware of the matters giving rise to the claim or entitlement, failing which the claim would be ‘absolutely barred’.

The Court appointed a special referee, who found that the ACL claim should fail on a number of bases, including that the representations as alleged were neither made nor misleading or deceptive, and that, in any event, the claims were time-barred pursuant to the notice provisions of the subcontracts. Brighton opposed the adoption of the Referee’s opinion on the basis of an asserted error.

Riordan J adopted the Referee’s opinion that the representations alleged had not been made, nor established as having been misleading or deceptive, but, found that the Referee did make an error in finding that Brighton was precluded from bringing the ACL claim because notice of the claim had not been given within the 7 day period prescribed under the subcontracts.

In finding that the notice provisions of the subcontracts were invalid exclusions of liability under the ACL, his Honour held that:

  •   as a general proposition, parties may by contract fix a shorter limitation period and may exclude some statutory rights unless such a contract is contrary to public policy;
  •   it would be contrary to public policy for a contract to deny a statutory remedy for offending conduct under the ACL, especially in circumstances where the purpose of the ACL is to provide for the availability of the statutory remedy for six years (rather than three years as was initially the case under the Trade Practices Act);
  •   any attempt to restrict the remedies provided for by the ACL by limiting the time in which an action can be brought is an unacceptable interference with the public policy underpinning the provisions; and
  •   in any event, in this case the relevant misleading or deceptive conduct was pre-contractual and founded a ‘no transaction case’, and as such the provisions of the contract could not defeat Brighton’s claim based on a contravention of the ACL. That is, on Brighton’s case it was only as a result of the alleged misleading or deceptive conduct that it had entered into the subcontracts which provided for the exclusion of liability.

Significantly, the decision diverges from the approach taken by the Supreme Court of New South Wales in the decisions of Lane Cove Council v Michael Davies & Associates and Others [2012] NSWSC 727 and Firstmac Fiduciary Services Pty Limited & Anor v HSBC Bank of Australia Limited [2012] NSWSC 1122, which Riordan J expressly considered and rejected. In those cases, the Court held that the notice provisions in question amounted to a ‘procedural temporal limitation’ on the extent of the remedy, and as such represented valid and enforceable limitations. In contrast, Riordan J considered that “the proper inquiry remains whether policy dictates that the right be preserved”.

There remains considerable uncertainty for contracting parties as to how the courts will deal with provisions which seek to limit liability for statutory claims arising under the ACL and, in turn, how to address that uncertainty as part of achieving an effective allocation of risk on construction projects. Riordan J’s decision suggests that the prudent view for parties to construction contracts is to assume that, at least in Victoria, notice provisions will not be effective to preclude or otherwise bar an action under the ACL for misleading or deceptive conduct.

The full decision can be found here.

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