Background

Vestas – Australian Wind Technology Pty Ltd (Contractor) entered into a contract with Lal Lal Wind Farm Nom Co Pty Ltd (Principal) under which it agreed to provide its services to engineer, procure and construct a wind farm in rural Victoria (the Contract).

Under the Contract, the Contractor was required to submit claims and refer disputes to the ‘Principal’s Representative’.

As part of its role under the Contract, the ‘Principal’s Representative’ was permitted to act in its absolute discretion as the agent of the Principal. However, in circumstances where the Principal’s Representative was required to undertake a ‘Certification Role’ (as that term was defined in the Contract), it was required to act honestly, reasonably and make fair determinations in accordance with the Contract.

After being unsuccessful in multiple claims and disputes, all of which were assessed and/or certified by the Principal’s Representative, the Contractor alleged that the Principal had been ‘improperly involved’ with the Certification Role. Underpinning concerns of this wrongful influence, was the discovery of references to the Principal’s solicitor’s comments on the properties of multiple documents issued by the Principal’s Representative, whilst performing its Certification Role.

In light of this growing concern of collaboration between the Principal and the Principal’s Representative, the Contractor made an application for:

• an injunction to restrain such collaboration; and
• discovery from the Principal as prospective defendant.

Decision at trial

The Court refused the Contractor’s application, on the basis that the Contractor had sufficient information (without the need for further discovery) to decide as to whether it should initiate proceedings. The injunction application was resolved as between the parties by the Principal providing undertakings to the Court not to communicate with the Principal’s Representative whilst it performs its Certification Role.

Notwithstanding the application being denied, the Court held, among other things, that: “any private communication is sufficient to undermine the independence of the Principal’s Representative when acting in the Certification Role”.[1] On this basis, any private communication between the Principal’s Representative and the Principal as to the Certification Role, which was not simultaneously notified to the Contractor was sufficient to amount to an actionable breach with proper basis, eliminating the need for further discovery.

Conclusion

This decision is a timely and important reminder that while the certifying party under a contract acts as agent of the principal, it must simultaneously maintain its independence in certifying and assessing claims as between the parties, if the contract so provides. Industry participants are encouraged to take appropriate steps so that their contractual and liability positions are not adversely affected in communications with independent certifiers.