On 30 September 2011 the Supreme Court of Victoria in the decision of SMEC Australia Pty Ltd v McConnell Dowell Constructors (Aust) Pty Ltd (No2) [2011] VSC 492 struck out a $26 million claim for variations, extra work, delay costs and misrepresentations by the design team on the Adelaide Desalination Plant Project. While the claim may be redrawn, this is an extraordinary step. It highlights the need for complex claims to be well considered and particularised before proceeding to litigation. With the prospect of litigation between SA Water and AdelaideAqua looming, the future of this project will be one to watch with interest.

ADELAIDE DESALINATION PLANT PROJECT

On 16 February 2009 SA Water entered into a DBOM contract with the 'AdelaideAqua' consortium (consisting of McConnell Dowell Constructors (Aust) Pty Ltd, Abigroup Contractors Pty Ltd, Acciona Aqua Australia Pty Ltd) and Trility Pty Ltd (formerly United Utilities)) for the design, construction and commissioning of the $1.83 billion, 100GL seawater desalination plant at Port Stanvac, south of Adelaide (Project).

During the bid phase, AdelaideAqua entered into a series of tender services agreements with SMEC Australia Pty Ltd and Hatch Associates Pty Ltd (Design JV) for the initial tender and design services to be provided for the Project. Following the consortium's successful appointment, it also entered into a professional services contract for the detailed design of the Project.

The Project is yet to reach practical completion.

DESIGN JV'S $26 MILLION CLAIMS

On 20 July 2011, the Design JV filed proceedings in the Supreme Court of Victoria claiming:

  • $6.7 million for alleged variations;
  • $16 million for alleged additional project support;
  • $3.7 million for a delay costs; and
  • unspecified damages for misrepresentations under the Trade Practices Act 1974 (Cth) (now the Competition and Consumer Act 2010 (Cth)).

The Design JV also alleged that the AdelaideAqua's conduct set "time at large" arguing that the Design JV was not obliged to pay liquidated damages, perhaps in anticipation of substantial counterclaims yet to be seen.

ADELAIDEAQUA'S CHALLENGE

In response to the claims and even before submitting any defence, AdelaideAqua argued that the Design JV's claims should be struck out on the basis that the claim "may prejudice, embarrass or delay the fair trial of the proceeding".

STRUCK OUT

In a stinging rebuke, the Supreme Court of Victoria struck out the claim holding that the allegations were not properly particularised,inconsistent, incomplete and referred to them as "hopeless". For example, the Court noted, that Design JV had, rather curiously, made allegations but sought no relief or damages in respect of those allegations.

Further, the Court considered there to be a "fundamental defect" with what the Court described as a "global" or "total" delay costs claim – the claim did not connect the delays to the loss claimed. As a consequence, it did not enable AdelaideAqua to know what the case was about.

On global or total claims, the Court confirmed that courts "should approach a total cost claim with a great deal of caution, even distrust" and that the causal connection between the claim and the loss must be spelt out in the pleadings unless it is impossible or impractical to do so.

The Court offered the Design JV an opportunity to re plead its claim in a "complete and comprehensive manner".

FUTURE OF THE PROJECT

The decision highlights the need for complex claims to be well considered and particularised before proceeding to litigation. It is also a timely reminder that global or total delay costs claims should be treated with caution.

Interestingly, in a previous preliminary decision by the Court in this matter, AdelaideAqua suggested that litigation between it and SA Water is "almost certain to be commenced". With the prospect of such litigation looming, the future of this complex project will be one to watch with interest.

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