Could limitation clauses in construction projects be unenforceable?
The Supreme Court of Victoria in Brighton Australia Pty Ltd v Multiplex Constructions Pty Ltd  VSC 246 recently held that a limitation clause in a construction project that sought to restrict the time in which a party could bring a misleading or deceptive conduct claim under the Australia Consumer Law (ACL) was unenforceable. This decision is contrary to a line of established authority in New South Wales, thereby creating uncertainty for parties involved in construction and infrastructure projects, as well as their insurers.
Brighton Australia Pty Ltd (Brighton) entered two subcontracts with Multiplex Constructions Pty Ltd (Multiplex) to undertake plastering work for a project to build the headquarters of the National Australia Bank in Melbourne. Brighton incurred significant costs because of delays with the project.
Brighton subsequently brought a claim against Multiplex under section 18 of the ACL saying that it relied on misleading and deceptive representations made by Multiplex to enter into the subcontracts.
The subcontracts required Brighton to give prescribed notice to Multiplex within 7 days of Brighton becoming aware of an event in respect of which a claim could be brought or when it could have reasonably been aware of its entitlement to make a claim, whichever was the earlier. Failure to give notice caused any such claim to be “absolutely barred”. It was accepted that the prescribed notice had not been served within the time limit set out in the subcontracts.
Under the section 236(2) of ACL, Brighton would have had 6 years from the cause of action accruing to bring the claim.
The Court-appointed referee concluded that Brighton had not made out its misleading and deceptive representation claim, and that, in any event, the claim was barred because Brighton had not complied with the 7-day notice period required by the subcontracts.
Although Justice Riordan agreed that there were no misleading and deceptive representations, he did not agree the claim was barred because Brighton failed to give the requisite notice under the subcontracts. He held that to allow misleading and deceptive conduct claims under section 18 of the ACL to be overpowered by provisions of a contract would be inconsistent with both the public policy of protecting people and the compensation and protection powers provided under the ACL.
His Honour also found that it was not consistent with the public purpose of the ACL to leave claimants uncertain about whether Courts, on a case by case basis, would determine contracted time limits to be so unreasonable as to be unenforceable.
While clauses in contracts excluding liability under the ACL are unquestionably void, various decisions of the NSW Supreme Court have held that clauses in contracts limiting monetary and temporal limits of liability for misleading and deceptive conduct under the ACL could be maintainable. Justice Riordan acknowledged that his decision diverged from this line of authority, but reasoned that his decision was consistent with the observations in Omega Air Inc v CAE Australia Pty Ltd  NSWSC 802 that it was reasonably arguable that parties could not contract out of the 6-year limitation period applicable to claims under section 18 of the ACL.
Finally, while his Honour did not consider the enforceability of clauses limiting damages for misleading and deceptive conduct claims under the ACL, we would expect that his reasoning would be similarly applicable.
Parties involved in construction and infrastructure projects notoriously negotiate and rely on clauses that seek to limit their liability with the expectation that such clauses will prevent or limit future claims and/or reduce their exposure to potentially significant claims for damages.
Insurers should be mindful of the risks associated with reliance on these clauses to defend actions, particularly in relation to the enforceability of limitation clauses for misleading and deceptive conduct claims under the ACL in the absence of a decision by an appellant Court in Australia.
25 June 2018