Heavy Plant Leasing Pty Ltd (In Liquidation) v McConnell Dowell Constructors (Aust) Pty Ltd (No 2)

In Heavy Plant Leasing Pty Ltd (In Liquidation) v McConnell Dowell Constructors (Aust) Pty Ltd (No 2), the liquidator of Heavy Plant Leasing sought to recover damages from McConnell Dowell Constructors in relation to a subcontract for civil works. The primary dispute centred on whether McConnell Dowell was entitled to withhold payment to Heavy Plant Leasing due to its failure to pay secondary subcontractors, and whether McConnell Dowell could de-certify previously certified provisional payments. The case was heard in the Federal Court of Australia.

The court was required to determine the proper construction of the subcontract and the rights and obligations of the parties under it. It needed to consider whether McConnell Dowell was entitled to withhold payment to Heavy Plant Leasing as a result of the latter's breach of contract, and whether the principal was entitled to de-certify provisional payments. Additionally, the court had to decide whether there was an implied term of the contract that McConnell Dowell would act reasonably and in good faith, and whether it had breached this obligation by de-certifying provisional payments. The court also needed to assess whether McConnell Dowell was entitled to terminate the subcontract, and to determine the measure of damages recoverable by Heavy Plant Leasing.

The court found that McConnell Dowell was entitled to withhold payment to Heavy Plant Leasing due to its failure to pay secondary subcontractors, as this constituted a contingent loss or damage. However, the court held that McConnell Dowell was not entitled to de-certify provisional payments, as these payments were made on account only. The court found that there was an implied term of the contract that McConnell Dowell would act reasonably and in good faith, and that it had breached this obligation by de-certifying provisional payments. The court held that McConnell Dowell was not entitled to terminate the subcontract, as Heavy Plant Leasing had not committed a fundamental breach. The court also held that Heavy Plant Leasing had not established the quantum of its loss, and therefore was not entitled to recover damages.

The court held that McConnell Dowell was liable to pay Heavy Plant Leasing the sum of $5,299,626.60 in damages, together with interest at the rate of 2.75 per cent per annum from 26 July 2013 to the date of judgment, and costs.