Tas v Leighton Contractors Pty Ltd

[2005] TASSC 133

Supreme Court of Tasmania

Built by Barristers,
For Australian Law.

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Interrogate

Catchwords

1. Contract
2. › General contractual principles
3. › Construction and interpretation of contract
4. › Penalties and liquidated damages
5. › General principles
6. › Whether liquidated damages clause in construction deed constituted a penalty
7. › Whether sum out of all proportion to damage likely to be suffered
8. › Objective test applied at time of making contract
1. Contract
2. › General contractual principles
3. › Construction and interpretation of contract
4. › Penalties and liquidated damages
5. › Public utility
6. › Whether public authority reimbursed by Commonwealth can suffer loss from delay
7. › Whether loss of public amenity and interest on capital are relevant components
8. › Whether reimbursement by another public authority converts compensatory provision into penalty

Quick Take

A public authority whose project costs are reimbursed by another government entity is not thereby disentitled from including a liquidated damages clause in a construction contract; the test of disproportionality applies equally to public and private institutions. Loss of public utility, interest on capital, and diversion of resources are all relevant components of the greatest conceivable loss when assessing whether a liquidated damages clause in a public works contract is a penalty. The objective test requires comparison of the stipulated sum as a whole with the greatest conceivable loss, not subjective analysis of the individual components of the estimate.