The first plaintiffs contracted the first and second defendants to design, engineer, procure, construct, test and commission two practically identical co-generation plants. Each plant was operated by the third plaintiff and contained a boiler system that would produce steam to generate electricity. In constructing the boiler, the first and second defendants erroneously installed and programmed a damper that controls the flow of air to the boiler’s oil burner in reverse. The overheating of the boiler’s grate caused significant damage to the boiler in July 2010.
The first plaintiffs argued that in constructing and programming the boiler so that the damper operated in reverse, and then not identifying that it did, the first and second defendants breached their contract with the first plaintiffs. The defendants pleaded a limitation defence to the first plaintiffs’ causes of action for breach of contract, contending that they accrued at the date the damper was installed. However, the plaintiffs submitted that the contract was an entire contract to complete works and that the limitation period ran from the date of practical completion, not from any earlier date when the defective damper was installed.
The court held that the third defendant was liable pursuant to guarantee and indemnity obligations that it assumed in a Deed of Guarantee in favour of the first plaintiffs. Additionally, the court held that the defendants were not liable for the amounts concerning associated loss and damage because of a contractual provision that excluded their liability for “Indirect Loss”.
Matthew Hickey OAM (with P O’Shea KC) appeared for the defendants, instructed by Clayton Utz.
The judgment is published here.