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CASE STUDY – Bensons Property Group Pty Ltd v Key Infrastructure Australia Pty Ltd & Ors [2021] VSCA 69
What is the Prevention Principle?
The ‘prevention principle’ is a legal doctrine that protects a subcontractor from liquidated damages for delays caused by the principal / main contractor.
The basic idea:
A party should not be permitted to profit from its own default where it has “prevented” a subcontractor from achieving the practical completion date.
Background of case
Developer: Bensons
Planning Company: KIA
Milestone: KIA was required to obtain a planning permit for the site by 31 December 2016 (Sunset Date)
Alleged act of prevention: Benson prevented KIA from obtaining a planning permit by the Sunset Date as it would not fund litigation to appeal Council’s refusal to issue a planning permit.
Primary Proceedings
Robson J held that Bensons had breached its implied duty to cooperate in the DMA by claiming in the 18 May Letter that a planning permit issued by the VCAT would not satisfy the DMA condition. The Court found that:
- Bensons had breached its implied duty to cooperate in the contract; and
- Bensons had prevented KIA from achieving the milestone by issuing a letter that a planning permit issued by VCAT would not satisfy the DMA condition.
Appeal
The Court held that it needed to consider whether the alleged act of prevention constituted a breach under the contract; and whether the party claiming the breach was actually prevented as a matter of fact.
Based on the above analysis, the original decision was overturned.
Key Takeaways
For subcontractors and contractors, a head contractor or principal’s delay may not be an act of prevention if it is not a breach of contract and the delayed party could have (and should have) issued an Extension of Time Notice.
We can assist you to:
Prepare construction programmes on Microsoft Project to understand your PC date and your critical path;
Prepare Extension of Time templates/notices that comply with your contract; and
Assist you to negotiate clauses relating to liquidated damages.
