1. The general law; and
2. The contractual wording.

It is therefore not possible to lay down any hard and fast procedures which can be applied to manage the claims process in all contracts. A repeated theme for this paper is that the contractual wording drives the process. Therefore while an understanding of the standard form contracts discussed in this paper is important it is merely the start.

A contract is organic, it grows and moulds itself starting with the words and then as it is performed. While a contract framework based on a standard form contract may be largely consistent from project to project the circumstances of each individual project will impact upon that framework so as to require careful thought and consideration.

At one level this will be obvious as options are selected in the contract wording, special conditions inserted and perhaps changes made to the standard text.

The claims process cannot be reduced to an assembly line check list to be followed in automaton fashion and nothing in my discussion of the standard form contracts should be interpreted in that fashion. There is no magic bullet. With this caveat in mind I will turn to consider some standard form contracts and how they each deal with claims.

I will consider the following standard form contracts:-

1. AS 4000 - 1997
2. AS 4902 –2000
3. SBW – 2
4. JCC – C 1994

Released in August 1997 this replaced the AS2124 series. The wording of AS 4000 is a general conditions of head contract with other contracts in the AS49xx suite covering particular contract and subcontract variations. AS 4000 has a useful and detailed interpretation section and can include Bills of Quantity if required.

It uses the language of Superintendent, Contractor and Principal to describe the three main players in the contract.

Clause 41 is usefully headed "Notification of claims" and provides:-

2. Liability for failure to communicate

The failure of a party to comply with the provisions of subclause 41.1 or to communicate a claim in accordance with the relevant provisions of the Contract shall, inter alia, entitle the other party to damages for breach of Contract but shall neither bar nor invalidate the claim.

3. Superintendent's decision

In accordance with AS 4000 practice defined expressions are included in italics. This initially gives the reader some heart for it appears prescribed notice is defined, however the definition in clause refers the reader back to "the meaning in subclause 41.1."

Subclause 41.1 does provide the reader with some useful guides as to what a prescribed notice requires. It would appear that to meet the contractual requirements at a minimum the notice must contain four elements:-

1. Be in writing. No formality is required, ie on letterhead or stating that is a notice under clause 42.1. This may mean communication in writing may suffice, even if perhaps at the time it was not contemplated to be a formal notice. For example for the Contractor it seems possible under the clauses wording that site minutes, which are in writing, may initially meet the trigger for the clause if they are sent to both the Principal (the other party) and the Superintendent.
2. State what the claim is, at least in a "general" fashion.
3. State how much the claim is, quaere whether this may also be in a "general" fashion.
4. Be timely. The opening lines of the subsequent paragraph require this. However the clauses contains the weasel words "As soon as practicable ...".

Further you may note there is no definition of a claim however subclause 42.1 includes a shopping list which reference should be made to:-

1. a Superintendent's direction; or
2. a claim:

1. in tort;
2. under statute;
3. for restitution based on unjust enrichment or other quantum meruit; or
4. for rectification or frustration;

In can be seen from the wording used that a claim as understood by subclause 42.1 extends well beyond traditional contractual claims arising under the contract or for breach. This is important for if the word "claim" is used in a consistent manner between subclauses 41.1 and 42.1 this means that the scope of subclause 41.1 is significantly broader than its predecessor in AS 2124.

However the word "claim" is also used in subclauses 37.1 and 37.4 when discussing progress claims and final payment claims. Subclauses 37.1 and 37.4 provide:-

4. Final payment claim and certificates

It is also interesting to note that subclause 42.1 enables a party, presumably the Contractor, to avoid going through what can often be the pointless exercise of having the Superintendent confirm a position already stated. A party may proceed directly to a notice of dispute as soon as they become aware of the claim. This ability to proceed directly to the dispute provisions of the contract appears to be entirely at the discretion of the party issuing the notice. It could also be used to by-pass the Superintendent who does not understand his/her role under clause 20 to act reasonably and in good faith to both parties.

The wording of the subclause draws the reader's attention to the fact that subclause 42.1 is not an exhaustive code covering all the claims which may arise under the contract. Examples of other claims notices which must be given under other provisions of the contract are the usual suspects: discrepancies in the contract documents (clause 8.1), presence of minerals, fossils and relics (clause 24.3), latent conditions (clause 25.2), errors in setting out (clause 26.3), delays (clause 34.2), variations (clause 36.2), progress claims (clause 37.1) and final payment claims (clause 37.4).

The modern forms of standard contracts now include suites which enable users to adopt a "horses for courses approach. Unfortunately we will probably still see attempts to force contracts to fit situations for which they are not designed.

Released as part of the suite of contracts based on AS 4000-1997, AS 4902 -2000 is for design and construct contracts. As it is part of the same suite it contains a large amount of the same language and usefully it has been structured such that the clauses numbering aligns for many of the significant clauses for this paper.

It uses the language of Superintendent, Contractor and Principal to describe the three principle roles in the contract.

The wording of clause 41 and subclause 42.1 in AS 4902 is almost identical to AS 4000.

Most of the other wording relevant to the claims process is similarly almost identical to AS 4000. However it odes not necessarily follow that interpretations which apply to AS 4000 necessarily be the same in AS 4902. There is a significant shift in responsibility and risk share effected by the design and construct elements. Clause 2.2 of AS 4902 contains a number of potentially far reaching warranties that are imposed upon the Contractor by reason of the assumption of the design function.

Therefore while both standard forms use expressions such "whatsoever in connection with the subject matter of the Contract at all times" the different structure of the obligations and assumptions of risks means that in practice these words have different meanings in each.

SBW stands for Simple Building Works. The contract is designed for commercial building works of a simply nature. While it claims to be for simple works it maintains the three main participants in its contractual structure in having a separate administrator. In this way it is more complex than residential building contracts in which there is often no separate administrator.

It use the language of Architect, Builder and Proprietor to describe the three main roles in the contract. The language used to describe these parties cannot be ignored. Courts may place a greater emphasis on the title used than the parties to the contracts may. The language is also a useful introduction into JCC - C from which it has taken significant portions of its structure and language.

While there may not be obvious time bars in the contract that there is a time requirement means that a failure to comply is a breach of contract, albeit generally not giving any right to the wronged party to rescind the contract.

The JCC contracts have also been through a series of revisions and are now part of a suite of contracts.

They use the language of Architect, Builder and Proprietor to describe the three main roles in the contract.

While the language and layout of JCC-C and SBW-2 are similar they are sufficiently different that care needs to be taken when moving from one form of contract to the other.

The requirement to give notice of claims in a proper, timely, manner is designed to ensure the efficient administration of the contract. There is a series of cases that have held that the requirements as to notice are to be strictly applied both as to form and time. Examples of such decisions are Opat Decorating Services (Aust) Pty Ltd v Hansen Yuncken (SA) Pty Ltd (1994) 11 BCL 360, Wormald Engineering Pty Ltd v Resources Conversation Co International (1989) 8 BCL 158 and Jennings Construction Ltd v QH and M Birt Pty Ltd (1987) 3 BCL 189. Though clear words will be required in order to raise the bar and the Courts have expressed some reluctance to apply some time bars to their full literal harshness. There is also power in section 48 of the Commercial Arbitration Act to extend the time "for doing any act or taking any proceedings in or in relation to an arbitration", which words have been given a relatively generous interpretation by the High Court.

However in relation to AS - 4000 and AS - 4902 the wording of subclause 41.2 reduces the harshness of some of these decisions. This subclause provides that a late claim is neither barred nor invalidated. It does provide that a party, presumably the Contractor, who unnecessarily delays making a claim is liable to damages to the other party for delay. Presumably the clauses is attempting to set up a situation that while permitting late claims, it also permits the decision maker to reduce those claims for damages where the respondent has been prejudiced in defending the claim by reason of the claimants dilatory behaviour.

However as discussed above there still remains examples of time bars in the standard form contracts, including the Australian Standards. Therefore the prompt provisions of claims are still required. Again using AS 4000/AS 4902 the Contractor is not given total freedom as to when they may bring their claims. While subclause 41.2 does not raise a bar subclause 37.4 does 7 days after the final certificate is issued.

The standard form contracts require standards of format and detail in order for notice to meet the contractual requirements. It is those requirements which determine whether a notice under the contract has been given not the form or title of the purported notice.

If a notice is given describing itself in some manner if it in fact meets the criteria for a different notice it is the criteria which is determinative not its name. Further letters may amount to notices In the matter of The Rule of the Supreme Court and In the matter of an application pursuant to Order 64 thereof by The Corporation of Trustees of the Order of the Sisters of Mercy in Queensland v Wormald International (Aust.) Pty Ltd (1989) 5 BCL 77 Connolly J stated at 80:-

Therefore you must give proper notice initially. However that does not necessarily mean you cannot expand upon the details in the notice as more information comes to hand, and perhaps by that means even expand upon the claim being made. Apart from the contractual wording there is also the authority of Friend & Brooker Pty Ltd v Council of the Shire of Eurobodalla (unreported, Supreme Court of NSW, Cole J, 1 June 1993). At page 14 his Honour stated:-

While the form of the contract his Honour was considering was NPWC 3 as the quote above shows there is some scope for enlarging a claim by amendment and particularisation albeit that the time for making the claim has expired.

You may recall that subclause 41.3 of AS 4000 gives the claimant an opportunity to further particularise the claim within 28 days of giving the prescribed notice. This is an opportunity that should not be allowed to pass by without careful thought. For it is based on the material before him/her that the Superintendent makes a decision and ultimately certified the amount due and payable.

The party administering, however named, the contract is to act fairly to both parties even though they are appointed as the Proprietor's/Principal's agent. Should the administrator, however described, act in a manner which is partisan the administrator is exposed to the potential of claim being made against them.

The structure will simply not work with a partisan administrator unfortunately some people seem to take on the role of administering contracts without any apparent understanding of their function.

That the Administrator owes a duty of care to the Principal and Contractor, in addition to any contractual obligations owed to the Principal, seems to now be clear. Breach of a duty of care gives rise to a claim in negligence so that the Contractor may sue the Administrator even though they are not parties to the same contract.

In Mackay v Dick (1881) 6 AC 251 it was held that it was an implied term in almost every construction contract that the Principal and Contractor have each agreed to do that which is necessary on their part to achieve the contractual aim. Today, 120 years later, that statement of law is still correct.

However in the intervening years there has also developed a range of other obligations imposed both by the common law and statute. Generally a Court in the early 21^st century is far less forgiving of misleading, deceptive, oppressive or bullying conduct by one party with another. Obtaining a release may not be sufficient protection.

The implied obligation to make the contract work applies to the contractor as well. As does the requirements of the general law as to appropriate business conduct.

No matter how broadly worded no contractual wording can possibly cover all potential claims. Claims could fall outside of the contract for a number of reasons. From the discussions above you will recall the importance of the words "in connection with the subject matter of the Contract" to claims under AS 4000 and AS 4902. Thus if a claim is not "in connection with the subject matter of the Contract" it falls outside of the claims and disputes sections of the contract.

Even if the parties do not consider the question themselves if a matter proceeds to arbitration before entering upon the reference the arbitrator-nominee will inquire as to his/her jurisdiction to hear the dispute. It is likely at this stage the potential net payer will carefully consider the question of whether the claims being made fall within the contract.

If a situation occurs such that a claim arises outside of the contract then in the absence of an agreement to the contrary the contract does not govern the claims process. As a general statement there will usually be nothing preventing the parties from agreeing to deal with such claims as if they fell within the contract.

If such an agreement cannot be reached it will also be theoretically possible for the two classes of claims to be dealt with in separate jurisdictions through separate resolution mechanisms ie to litigate the claims outside of the contract and to arbitrate the claims inside the contract. This process is however unlikely to be attractive to anybody other than your lawyer's bank manager.

The more sensible approach is to seek to have both sets of claims dealt with together and if this cannot be done by agreement there are powers available in the Courts to resolve this. How they would do this in the actual practice will depend on the circumstances. If there were parallel arbitration and litigation fior example there are two obvious solutions:-

1. Terminate the arbitration and remove it to the Court. This will allow the whole matter proceed in Court.
2. Refer the Court process out to arbitration before the same arbitrator and consolidate the two arbitral proceedings. At a practical level this is likely to be much harder to achieve.

The claims process requires a methodical approach. While there is certainly a room for some creative thinking this cannot be used as an excuse to forget the requirements of the contract.

However the parties if well advised need not be slaves to that process and should consider the array of modern mechanisms available to assist in the dispute resolution process. Modern advisers who are not negligent must give consideration to much more than simply litigation or arbitration.

AS 4000 and AS 4903 both have a requirement that the parties confer before arbitrating. In JCC- C there is a similar provision requiring private negotiation before litigation or arbitration. SBW-2 also requires a conference and befitting its role for smaller projects incorporates Expert Determination as the default dispute resolution mechanism unless notice is given that either party seeks arbitration.

What these provisions demonstrate is that perhaps the best means for managing claims is a well thought-out contract dispute resolution mechanism incorporating an appropriate dispute resolution provision for the nature of the contract. There is much to be said for flagging at the commencement of negotiations the need to think about the "what if?" disputes. By the time the dispute arises it is highly likely that one party will have a vested interest in being uncooperative to avoid a decision reached on the merits.

A well thought out disputes provisions will generally increase the chances of a result nearer the merits, even if a negotiated resolution is reached prior to or during the formal dispute resolution procedure.

It is not possible to review all these processes but you should be aware of at a minimum the advantages and disadvantages of:-

1. litigation;
2. arbitration;
3. mediation;
4. conciliation;
5. expert determination; and
6. expert appraisal.

Further recent papers have highlighted that the most common cause of dispute in domestic building contracts is a mismatch of expectations. Those involved in the contract either did not have a clear understanding of their role, or failed to communicate that understanding to the other party until well into the contractual process.

Those using contracts, especially standard form contracts, should consider before the contract is signed if the form of the contract, and the dispute resolution mechanism it contained, is appropriate.

During the contract the standard forms require a level of communication to ensure directions are given and notices are sent. No contract will work effectively if one of the parties simply fails to keep the lines of communication open.

Finally the start of a dispute resolution process is not any reason to stop communicating. While any steps should be taken only after obtaining legal advice if the parties in dispute entrench themselves into their positions the only parties managing the claims will be the lawyers.