The recent case of BMD Major Projects Pty Ltd v
Victorian Urban Development Authority represents a victory
for contractors making latent conditions claims under the
Australian Standards contracts. It also raises some interesting
issues for both owners and contractors when dealing with latent
The Victorian Urban Development Authority
(VicUrban) intended to develop a disused
quarry as a residential estate. Mining debris left spread
across the site meant substantial excavation work was needed
and BMD was contracted to undertake the work under a contract
based on the Australian Standards construction contract, AS
2124 1992. As the works progressed BMD claimed the natural
surface level of the site was lower than it could have
reasonably anticipated and argued this was a latent
One of the issues the court had to consider was whether BMD
had given effective notice 'forthwith' of its
claims as required by the contract.
BMD had become aware of the alleged latent condition at the
end of July 2002 and had orally notified VicUrban at that time.
However, written notice of the latent condition was not sent
until 6 August 2002 (some two weeks later).
The court noted that 'forthwith' had variously
been taken to mean 'immediately',
'without delay', 'as soon as reasonably
practicable' and 'as soon as reasonably
However, in this particular case it favoured the meaning
'as soon as reasonably practicable' or
'as soon as reasonably possible'. The court
felt that interpreting 'forthwith' strictly
would simply encourage contractors to anxiously satisfy the
formal notice requirements of the contract rather than allow
for the underlying needs and circumstances to be
In reaching its decision, the court relied on BMD's
initial oral (as opposed to written) notice to VicUrban. This
sits uncomfortably with the requirements of the contract to
give written notification forthwith.
Furthermore, the decision seems somewhat at odds with the
commonly accepted view that notice provisions exist for the
good management of the contract. Owners very often have good
reasons for requiring prompt, if not immediate, notification of
matters. Allowing for an exploration of the underlying needs
and circumstances of the situation may not facilitate those
Turning to the alleged latent condition, the
contractor's original notice referred only to an area
called the Southern Stockpile. An issue arose as to whether
this was sufficient to encompass conditions in an adjacent area
called the Quarry Stockpile.
Is precise 'location' necessary to understand
the nature and extent of the latent condition being notified?
The court effectively said no and held that the notice given
was sufficient to cover the latent condition in both
Finally, there was the question of whether information
contained in a file given to BMD at tender should have alerted
it to the conditions at the site. The court found that that
only a contractor with reasonable expertise in geotechnical
engineering would have understood the geotechnical significance
of the information in the file. BMD did not have the expertise
to understand the information or even to realise that it should
be referred to a geotechnical engineer for advice.
The content of this article is intended to provide a
general guide to the subject matter. Specialist advice should
be sought about your specific circumstances.
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