It’s time to shirtfront non-reliance clauses!

I will start this article by quoting the lines of the immortal song “Down Under” from Men at Work. They sing :

I said, "Do you speak-a my language?"

He just smiled and gave me a Vegemite sandwich.

Vegemite is uniquely Australian, for those who are not familiar with it an explanation is here.

Vegemite is an acquired taste to put it lightly and for the most part only loved by Australians and so it would seem are non-reliance clauses which are much loved and touted by lawyers drafting Australian construction contracts. I regularly see them being inserted into contracts in Australia and not so much in other common law jurisdictions. This speaks volumes to me.

So what is a non-reliance clause ?

An example is provided below

The Contractor has entered into the Contract in reliance on its own skill, judgment and expertise and has not relied on any statements made or information provided by the Employer in relation to conditions which may affect the performance of the Work or the Contractor’s obligations under the Contract.

So the first part seems reasonable as yes a contractor uses its skill, judgement and expertise in assessing the Works but it then goes on to say the Contractor confirms it has not relied on any information provided by the Employer. What is that all about and what relevance does this has to a construction or mining contract where they are often seen?

Put simply it is a contractual provision and a disclaimer for information that’s sole purpose is to seek to limit or exclude liability on the part of the Employer. This really kicks in with respect to site information which the Employer has provided and which the tenderers are using to prepare their cost estimates, planning and make a risk assessment to eventually arrive at the Contract Price.

Basically you are not allowed to rely on ANY information (including factual information) according to the non-reliance statement !

How do the courts view disclaimers and non-reliance clauses ?

I know about the case of BMD Major Projects Pty Ltd v Victorian Urban Development Authority [2007] VSC 409, Pagone J considered that VicUrban had made clear that the relevant information was not presented as being accurate or reliable:

[t]he so called “disclaimers” are positive information for the benefit of BMD rather than an attempt to disavow liability for what was being proffered for assistance. The context in which this was occurring is also important because the parties intended and understood that a contractor was being asked to assume a risk in undertaking a project and that VicUrban was informing BMD about the extent to which VicUrban was able to be of assistance in conveying information to BMD that might be useful...VicUrban took some care to inform BMD that it needed to ensure that the risk it was assuming was properly evaluated.

So this was a disclaimer about accuracy of site information not a non-reliance clause but the court decisions would tend to indicate that Employers are not off the hook no matter what they try to proffer in their Contract.

Site investigation is never intentionally misleading but it certainly can be done negligently or in a way that is likely to mislead if it is not complete enough which sadly is often the case.

This is of little comfort to tenderers who I advise which are constantly faced with these outrageous "non-reliance" clauses. I think if they are ‘tackled at time of tender and the Employer still coerces the tenderer to "accept or else lose the tender" then it the Employer could be wide open for a claim misleading and deceptive conduct. Australia is perhaps unique in that its construction contracts fall under the Australian Consumer Law.

The relevant provision is in section 18(1) within Chapter 2 of the ACL. It provides:

“A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.”

The remedy for a contravention of section 18 is contained in section 236, which provides:

?(1) If:

(a) a person (the claimant) suffers loss or damage because of the conduct of another person; and

(b) the conduct contravened a provision of Chapter 2 or 3,

the claimant may recover the amount of the loss or damage by action against that other person, or against any person involved in the contravention.

(2) An action under subsection (1) may be commenced at any time within 6 years after the day on which the cause of action that relates to the conduct accrued.

It is accepted law in Australia that liability under s.18 cannot be excluded by contract (the ”no exclusion principle”). Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304.

Can no reliance clauses be an effective defence to a misleading conduct claim?

So what about no reliance clauses? Can these be an effective defence against a claim by a contractor that you as the Employer have contracted with that it was mislead by your pre-contractual representations or conduct?

Whether a disclaimer, exclusion or non-reliance clause will found to apply and be effective will depend on the actual facts and available evidence of the particular project.?If the tenderer can demonstrate that it did, in fact, rely on the information in entering into the contract and had no other option to do so given that there is no possibility for the tenderer to investigate the Site itself, then the general consensus among lawyers I speak to is the court will likely give effect to this, notwithstanding a no-reliance clause.

With this being the case why do we still see lawyers acting for Employers still inserting non-reliance clauses in bespoke contracts in Australia?

It beats me. It is a line of defence which is fundamentally flawed and not supported in law or legislation.

Suffice to say I recommend that contractors ‘shirtfront’ their potential Employer over any non-reliance clause.

For those non-Australians reading this are wondering what shirtfronting is the definitive guide to Australian English, the Macquarie Dictionary, changed the meaning of "shirtfront", just weeks after it was used by former Prime Minister Tony Abbott.

In October 2014 prior to the G20 in Brisbane he said he would "shirtfront" Russian President Vladimir Putin over the shooting down of Malaysian Airlines MH17 in Ukraine - 38 Australians were among the 298 dead.

Commonly associated with the rough and tumble of Australian Rules football, Susan Butler, Macquarie's editor, said Mr Abbott has merely revived the term as a political football. In the end there was no shirtfronting done only koala cuddling.

I hope that we can consign the non-reliance clause out of construction in Australia, it has no place in it.