GEC Marconi Systems Pty Limited v BHP Information Technology Pty Limited [2003] FCA 50
CONTRACT – Government procurement – outsourced contract for provision of a secure communications network for Department of Foreign Affairs and Trade – back-to-back IT contracts – claims and cross-claims of breach of contract or repudiation by subcontractor, head contractor and customer.
CONTRACT – Termination for breach – non-provision by customer of boundary security devices – termination provision invoked – customer (head contractor) defences of contract variation, affirmation by election, estoppel and waiver.
CONTRACT – Variation – oral contract – effect of oral contract – variation or discharge – formation of an oral contract in relational contract settings – difficulties with traditional analysis.
CONTRACT – Affirmation by election – principles governing – significance of an optional contract termination procedure – continued performance consistent with the contract remaining on foot.
CONTRACT – Estoppel – representations and conventional understanding that contract had been varied to remove the obligations alleged to have been breached – reliance.
CONTRACT – Express provision for termination – construction – “failure of performance” – interpretation that accords with business commonsense.
CONTRACT – Damages after termination for breach – losing contract – quantum meruit claim – unjust enrichment and contention that no benefit received from subcontractors performance – valuation of services.
CONTRACT – Financial Securities – form of security prescribed by contract – payable on demand – provision governing call on securities – demand made for payment – call made on an erroneous ground.
CONTRACT – Entire obligation – recovery of milestone payments made in advance – principles to be applied in construction of progress payment provisions.
CONTRACT – Termination of a Standing Offer to sub-contractor to be a member of a panel having the opportunity to participate in tenders to Department of Defence – incorrect termination under the Agreement – efficacy of later reliance on a “termination for convenience” provision to justify termination.
CONTRACT – Duty of good faith and fair dealing – exercise of a power to terminate governed by.
CONTRACT – Damages – back-to-back contracts – Hadley v Baxendale – head contractor performing work “from scratch” that the subcontractor was obliged to perform – recoverable heads of damages.
CONTRACT – Damages – effect of subsequent agreement between customer and head contractor varying the original head contract.
CONTRACT – Damages – repudiation by subcontractor – claim for loss of benefit of head contract – actual costs incurred – saved costs of performance – anticipated profits.
CONTRACT – Damages – head contractor’s costs of performing the work the subcontractor failed to do – claim for loss of return on labour and resources that had to be diverted to this use – whether a recoverable head of damages – proof of loss – applicable principles – claim for unprovided for overhead costs – whether a recoverable head of damages – proof of loss – applicable principles –…
Grounds of appeal
[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.
[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.
[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.
Consideration
[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.
[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.
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AGLC
GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd [2003] FCA 50
Case
[2003] FCA 50
Decision Date
CaseChat Overview and Summary
The case involves GEC Marconi Systems Pty Ltd, BHP Information Technology Pty Ltd, and the Commonwealth of Australia. The dispute pertains to the development of the ER3 software, the execution of various contracts, and the associated financial claims and counterclaims. The court addressed multiple claims and counterclaims made by the parties, including allegations of contract repudiation, breaches of contract, and damages claims. The Commonwealth was also involved in the proceedings, with claims and counterclaims made against it by both GEC Marconi and BHP-IT.
The legal issues the court had to decide included the validity of the claims made by GEC Marconi against BHP-IT, the extent of any repudiation by GEC Marconi of its contract with BHP-IT, the Commonwealth's liability for damages under the Trade Practices Act 1974, and the financial consequences of the parties' contractual and statutory breaches. Additionally, the court had to assess the validity of BHP-IT's claims against GEC Marconi and the Commonwealth, and determine the appropriate damages, if any, owed by the Commonwealth to BHP-IT.
The court found that GEC Marconi's claims were largely rejected except for the claim related to delay and prolongation, which was stood over for further hearing. It was determined that GEC Marconi had repudiated its contract with BHP-IT, and BHP-IT was entitled to call upon the performance guarantee provided by GEC Marconi’s parent company. The court also found that the Commonwealth was liable to BHP-IT for breach of contract, though not to the full extent claimed, and that BHP-IT's claim against the Commonwealth under the Trade Practices Act 1974 was rejected on technical grounds. Finally, the court found that the Commonwealth could claim damages from BHP-IT for its failure to perform its contract on time, though the damages were limited in period and amount.
The court ordered the parties to prepare short minutes of order to reflect the findings and directed an adjournment for consideration of the costs. This was to ensure that the procedural aspects of the case were appropriately documented and that the financial implications for the parties were adequately considered in subsequent proceedings.
Orders
Orders of the court
1. The parties bring in short minutes of orders to give effect to these reasons.
2.
Background
Background to the litigation
Full text does not contain this section.
Evidence
Evidence Before The Court
Full text does not contain this section.
Decision
Reasons for decision
FINN J
This head of claim is for the $509,796 paid to BHP-IT under CR007 for the development of the ER3 software. CR007 was entered into after the 1997 Variation Agreement. For that reason alone the claim is not maintainable.(6) CONCLUSION I find that the Commonwealth is entitled to an award of damages under the following heads and in the amounts indicated:(i)project management costs - $150,000(ii)Edmund Barton Building expenses - $284,525(iii)R G Casey Building expenses – still to be calculated.part vi: conclusion The burden of this proceeding cannot be encapsulated satisfactorily in précis form. Accordingly, I will do no more than record here the outcomes of the various claims and cross-claims. First, I have rejected all of the claims made by GEC Marconi save that relating to delay and prolongation which will be stood over for further hearing on a date to be fixed. Secondly, I have found that BHP-IT has made out its claim that GEC Marconi repudiated its contract with BHP-IT. However, I have not accepted significant parts of the damages claims advanced by BHP-IT. I also have found that BHP-IT is entitled to call upon the performance guarantee given it by GEC Marconi’s parent company, GEC Marconi Australia. Thirdly, BHP-IT has made out a claim of breach of contract by the Commonwealth, though not to the extent that it has claimed. I have not been asked and have not attempted to assess damages for the breach found. I have rejected its claim against the Commonwealth based on the Trade Practices Act 1974 on technical grounds, though I am satisfied that the Commonwealth did engage in misleading and deceptive conduct in an aspect of its dealing with BHP-IT. Fourthly, I have found that the Commonwealth is entitled to claim damages from BHP-IT on account of its failure to perform its contract on time. Those damages, though, are claimable only for a limited period and are relatively small in amount. The only order I propose to make at this stage is to direct the parties to bring in short minutes of order to give effect to these reasons. I will adjourn to a date to be fixed consideration of the question of costs.