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12 November 2015

Surfstone Pty Ltd & Anor v Morgan Consulting Engineers Pty Ltd [2015] QSC 290

The claim

The plaintiffs alleged negligence against the defendant relating to a warehouse engineered by the defendant for the plaintiffs in or around 2003. The plaintiffs contended that from around April 2009, the internal concrete slab floors of the warehouse indicated rotation and deflection said to be caused by the defendant’s negligence and sought judgment in the sum of approximately $1.24 million, plus interest and costs. In its defence, the defendant denied liability and pleaded that its fee proposal included the ACEA Guideline Terms of Agreement (the Terms) which included a time based limitation of liability to bar actions being brought by the plaintiffs against it after one year from the completion of the services. The action was commenced 9 years after the services were provided.

The Decision

In 2015 the Court heard submissions on whether the Terms were incorporated into the agreement and whether the limitation clause operated as a bar to the action.

Interestingly in this case, the Terms were not attached to the fee proposal, they were not requested by the plaintiffs and were never provided to the plaintiffs. The fee proposal was unsigned however there was acceptance of its terms via the performance and payment of services.

Evidence was provided by a number of parties including the chief executive of the ACEA (Consult Australia) and a director of the defendant that the use of the Terms was commonplace and often not attached to fee proposals (but were easily accessible).  In response, the plaintiffs argued that the use of the words ‘generally in accordance with’ in the fee proposal were vague and insufficient to incorporate the Terms into the agreement. The Court heard in evidence that there was enough time after the fee proposal was provided for the plaintiffs to secure a copy of the Terms and obtain legal advice on the Terms.

The Court ultimately dismissed the plaintiffs’ action against the defendant and the dispute did not proceed to a hearing. 

Implications

It has been accepted by The High Court of Australia that parties are typically bound by the terms contained in written agreements that they have signed, regardless of whether they have read the agreement or have been advised that it contains onerous terms. This decision appears to go further, finding that parties are also bound by terms contained in other documents, incorporated by reference into agreements, without signature, and regardless of whether they have read the document or received it from the other party, provided it was otherwise available to them.  

Two key implications of this decision, from a claims and risk management perspective, are that:
(1) Contractual limitation of liability clauses are generally enforceable. Consider incorporating them into your terms of agreement. For more information on limitation of liability clauses, see our Risk Rule ‘Limitation of Liability Clauses’ and seek advice from your lawyer; and

(2) You must take care with your contractual arrangements. It is crucial from both a commercial and an insurance perspective that you are aware of all terms (onerous or otherwise) said to be incorporated into an agreement by reference and have an opportunity to review such terms to ensure that they do not oblige you to waive any rights which your insurer may have under your policy, particularly the right to pursue a subrogated claim for damages, and do not expose you to any additional liability above that which would have otherwise been imposed upon you by the common law. You should have your solicitors review all such documents before agreeing to be bound by its terms.

Hayley Landers
Claims and Risk Manager