LDs will not accrue (as there is no certain date by which completion must be achieved) unless the contract provides a mechanism (e.g. an EOT clause) for setting a new (extended) date for practical completion(5).
The decision in Probuild
The Court found no breach of natural justice and concluded that the adjudicator had sufficiently responded to the parties’ submissions(6), which were underscored by opposing views as to whether the Principal’s discretion was fettered by the operation of the prevention principle.
The Court held that Probuild was obliged to act fairly and honestly and was therefore required to exercise its discretion to grant an EOT in these circumstances, because of (7):
- the underlying rationale of the prevention principle; and/or
- an implied duty of good faith.
Probuild may extend the Principle from Peninsula Balmain
In the case of Peninsula Balmain(8), the NSW Court of Appeal held that the discretion to grant an EOT must be exercised fairly and impartially particularly where, as was the case in Peninsula Balmain, the contract expressly requires the Principal/Superintendent to act in that manner(9).
Interestingly, the Court’s judgement in Probuild does not refer to any express contractual provision that qualified Probuild’s discretion in this manner.
Whilst the decision follows the principle in Peninsula Balmain, the finding of an implied duty of good faith as an alternate basis for the Court’s conclusion goes further than the Peninsula Balmain position.
Can the application of Peninsula Balmain be avoided?
Peninsula Balmain was not followed in Hervey Bay(10).