Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd

The High Court of Australia heard an appeal from Placer (Granny Smith) Pty Ltd against Thiess Contractors Pty Ltd. The dispute concerned a joint venture mining contract where Thiess Contractors carried out mining operations for Placer. Placer alleged that Thiess Contractors had breached the contract by inflating its cost estimates for the work, thereby overcharging Placer. The core of Placer's claim was that Thiess Contractors had breached a contractual obligation of good faith by submitting rates that were not based on genuine estimates of costs, but rather on inflated figures designed to secure profit beyond the agreed margin.

The legal issues before the High Court were whether there was sufficient evidence for Placer to prove its damages arising from Thiess Contractors' breach, and whether the trial judge had correctly applied the principles for calculating those damages. Specifically, the court had to determine if Placer had adequately demonstrated the amount by which it had been overcharged due to Thiess Contractors' inflated cost estimates and whether the method used by the trial judge to calculate these damages was legally sound, despite criticisms from the Full Court of the Supreme Court of Western Australia.

The High Court reasoned that once Placer established a significant discrepancy between Thiess Contractors' inflated estimated costs and its actual costs, and demonstrated that any purported productivity gains were not substantial, the onus shifted to Thiess Contractors to justify any further adjustments to the calculation of damages. The court found that the trial judge's method of calculating damages, which involved deducting the profit actually earned by Thiess Contractors from the amount paid by Placer, thereby arriving at the actual costs incurred, was appropriate. This approach, coupled with the trial judge's adjustments for cost overruns and productivity gains based on evidence, led to a finding that Placer had overpaid $4.853 million. The High Court concluded that the Full Court had erred in setting aside the trial judge's findings and calculation of damages.

Consequently, the High Court allowed Placer's appeal with costs. It set aside the order of the Full Court of the Supreme Court of Western Australia and ordered in its place that Thiess Contractors' appeal to that Court be dismissed with costs.