GEC Marconi Systems Pty Limited v BHP Information Technology Pty Limited [2003] FCA 50

FEDERAL COURT OF AUSTRALIA

GEC Marconi Systems Pty Limited v BHP Information Technology Pty Limited [2003] FCA 50 CONTRACT – Government procurement – outsourced contract for provision of a secure communications network for Department of Foreign Affairs and Trade – back-to-back IT contracts – claims and cross-claims of breach of contract or repudiation by subcontractor, head contractor and customer. CONTRACT – Termination for breach – non-provision by customer of boundary security devices – termination provision invoked – customer (head contractor) defences of contract variation, affirmation by election, estoppel and waiver. CONTRACT – Variation – oral contract – effect of oral contract – variation or discharge – formation of an oral contract in relational contract settings – difficulties with traditional analysis. CONTRACT – Affirmation by election – principles governing – significance of an optional contract termination procedure – continued performance consistent with the contract remaining on foot. CONTRACT – Estoppel – representations and conventional understanding that contract had been varied to remove the obligations alleged to have been breached – reliance. CONTRACT – Express provision for termination – construction – "failure of performance" – interpretation that accords with business commonsense. CONTRACT – Damages after termination for breach – losing contract – quantum meruit claim – unjust enrichment and contention that no benefit received from subcontractors performance – valuation of services. CONTRACT – Financial Securities – form of security prescribed by contract – payable on demand – provision governing call on securities – demand made for payment – call made on an erroneous ground. CONTRACT – Entire obligation – recovery of milestone payments made in advance – principles to be applied in construction of progress payment provisions. CONTRACT – Termination of a Standing Offer to sub-contractor to be a member of a panel having the opportunity to participate in tenders to Department of Defence – incorrect termination under the Agreement – efficacy of later reliance on a "termination for convenience" provision to justify termination. CONTRACT – Repudiation – subcontractor's purported termination for breach repudiatory – improvident contract – acceptance. CONTRACT – Duty of good faith and fair dealing – exercise of a power to terminate governed by. CONTRACT – Damages – back-to-back contracts – Hadley v Baxendale – head contractor performing work "from scratch" that the subcontractor was obliged to perform – recoverable heads of damages. CONTRACT – Damages – effect of subsequent agreement between customer and head contractor varying the original head contract. CONTRACT – Damages – repudiation by subcontractor – claim for loss of benefit of head contract – actual costs incurred – saved costs of performance – anticipated profits. CONTRACT – Damages – head contractor's costs of performing the work the subcontractor failed to do – claim for loss of return on labour and resources that had to be diverted to this use – whether a recoverable head of damages – proof of loss – applicable principles – claim for unprovided for overhead costs – whether a recoverable head of damages – proof of loss – applicable principles – dispute management costs – proof of loss – applicable principles – loss of use of money – weighted average cost of capital – proof of loss. CONTRACT – Performance Guarantee by third party – subcontractor's parent company – conditional performance guarantee coupled with an indemnity for "costs and expenses" – construction – scope of conditional guarantee – scope of indemnity – "costs and expenses directly incurred". CONTRACT – Claim by head contractor against Commonwealth mirroring claims against it by the subcontractor – independent claims as well of breach of contract arising from alleged decisions taken, misrepresentations and non-disclosure – failure by the Commonwealth to disclose its actual intentions in relation to provision of boundary security devices. TRADE PRACTICES ACT – Claim against the Commonwealth – denial that it was "carrying on a business" – significance of evidence of business activity – DFAT's purposes in acquiring a secure communication system and its associated intellectual property rights. CONTRACT – Delay claims – claim by Commonwealth for losses suffered in consequence of delayed performance by head contractor – effect on delay damages of later variation agreement. CONTRACT – Delay claims – heads of claim – additional project management costs incurred – extent to which, if at al, costs attributable to the breach – provision by Commonwealth of accommodation and facilities for an extended time in Commonwealth buildings – whether an actual loss – applicable principles – quantification of loss – use of a default measure. 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