The contractor in Environmental Systems Pty Ltd v. Peerless Holdings Pty Ltd [2008] VSCA 26 specialised in the supply of vapour emission control systems and engineering services to the petrochemical industry. In its tender which formed part of the contract there was a provision that the contractor "does not accept liquidated damages or consequential loss". There was no definition of what consequential loss was being referred to.
The contract required the supply of a Regenerative Thermal Oxidizer (RTO) by the contractor. Ultimately the RTO did not perform as required and the purchaser made various claims for its loss and damages as a result including its costs incurred in purchasing, installing and commissioning the RTO, the costs of labour incurred in attempting to the make the RTO operate properly and for the cost of the excessive gas consumption of the RTO when it was operating. Although the purchaser's claim succeeded in part, the Supreme Court held that that the simple statement in the contract documents that the contractor "does not accept ..... consequential loss" prevented the purchaser from claiming its labour costs of attempting to make the RTO operate properly and also prevented its claim for the additional gas costs.
The Court in so deciding rejected earlier cases that limited consequential loss exclusion clauses and decided that the words "consequential loss" should have their ordinary meaning that reasonable business persons would naturally give them. Although from the point of view of the party seeking an exclusion of consequential loss it is clearer to specify exactly what type of consequential loss is being excluded, the Environmental Systems decision means that simple words can be effective to achieve an exclusion.
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