The importance of exclusion clauses as they relate to
"consequential loss" has been reinforced by the
recent decision of the Victorian Court of Appeal in
Environmental Systems Pty Ltd -v- Peerless Holdings Pty Ltd
 VSCA 26. The question for organisations to consider is
whether or not existing contractual frameworks adequately
define consequential loss.
Environmental Systems entered into a contract with Peerless
Holdings to provide Peerless with a regenerative thermal
oxidiser (RTO). The RTO did not perform as specified under the
agreement and Peerless had to obtain a replacement.
Peerless brought proceedings against Environmental Systems
for the following:
1. breach of contract;
2. breach of the Trade Practices Act 1974 (Cth); and
3. breach of the Fair Trading Act 1985 (Vic).
Importantly, the contract between the parties had an
exclusion clause relating to "liquidated damages" and
"consequential loss". It read as follows:
"As a matter of policy, Environmental Systems does not
accept liquidated damages or consequential loss."
Significantly, consequential loss was not defined in the
contract and so the court determined the meaning of the term.
The results were as follows:
1. "consequential loss" was held to mean all the
loss beyond the normal measure of damages and the
'normal' measure of damage is the loss that
every plaintiff in a like situation will suffer;
2. "consequential loss" will include lost profit
and expenses incurred as a result of the breach of contract;
3. any party wishing to exclude certain types of losses
needs to specifically identify those losses in the exclusion
The consequence of this determination is that clauses that
exclude liability for "consequential loss" may
additionally exclude loss of anticipated profits and other
expenses incurred as a result of the breach. Formerly this was
not necessarily the case. Obviously this will now be beneficial
to some parties to various contractual arrangements
Hopgood Ganim recommendations:
1. Conduct an analysis of your exclusion clauses to ensure
that their operation is not affected by the recent developments
of Environmental Systems Pty Ltd -v- Peerless Holdings Pty
2. Define terms such as "consequential loss"
within your existing contractual arrangements so that there is
certainty as to the types of loss that should be excluded.
The Building and Construction team at Hopgood Ganim will be
offering workshops on the Building and Construction Industry
Payments Act. These workshops will be approximately two hours
in length and can be held onsite or at the Hopgood Ganim
offices. These workshops will start with a brief paper on
identifying issues to be aware of throughout the management of
the claims process under the act and conclude with a hands on
workshop talking through scenarios that may arise during the
These workshops are designed to be a practical hands on
experience and are suitable for anyone from project managers
through to office staff and senior management.
The Council announced planning policies to encourage more inner suburban retirement village and aged care development.
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