Unprecedented bushfires have devasted Australia this summer. Their full human, environmental and economic consequences are beyond the scope of this article. This article will discuss whether, and in what circumstances, bushfire smoke (separate from fire itself) might relieve contractors from performing their obligations under construction contracts.

What is force majeure?

Force majeure is a common means by which parties to a construction contract exclude liability for a failure to perform their obligations arising from events beyond their control.

It is a creature of contract rather than statute or the common law. This means its application and scope will depend upon the drafting of the specific construction contract, however, some broad themes are common:

  • the concept of “force majeure” is defined: it may include any event beyond the control (or reasonable control) of the affected party. It is, however, common to define the concept by exhaustively listing all qualifying events.
  • the affected party must not have caused or contributed to the force majeure event and must take all possible or reasonable steps to overcome or mitigate its effects.
  • the force majeure event must prevent, or render impractical, the performance of the affected party’s obligations.
  • if the above conditions are satisfied, the affected party’s liability to perform its obligations will be suspended for the duration of the event.

Common force majeure events include acts of god, natural disaster and fire. It is not typical to see smoke specifically listed.

Could bushfire smoke be an event of force majeure?

Whether smoky conditions from bushfires could entitle a contractor to claim relief for force majeure will depend upon the drafting of the relevant construction contract.

The ACCC, for example, recently accepted NSW and Qld bushfires to be events of force majeure under Telstra’s NBN migration plan. In this case, force majeure was defined to include weather conditions which presented a safety risk to employees[1]. However, it was not expressly considered whether smoke alone could entitle such relief where the fire was not on or in proximity to the site.

Bushfire smoke and force majeure in the context of two commonly used construction contracts in the Australian market:

1. The GC21 Contract

Under GC21, subject to notification and other requirements (including that the delay be on the critical path), the Contractor may be entitled to an adjustment to the contractual completion dates if the Contractor is or will be delayed in achieving completion by “a cause beyond the control of the Contractor”. The Contractor must take all reasonable steps to avoid the delay and its effects.

In this context, it is likely bushfire smoke would comprise an event beyond the control of the contractor. The more difficult hurdle is whether the contractor is truly delayed in achieving completion by bushfire smoke and whether the delay could be mitigated by taking reasonable steps such as re-programming activities or providing workers with additional PPE (including breathing apparatus). Incurring additional expense will not generally relieve a party from its obligation to take steps to mitigate.

In most circumstances, it is likely that smoke alone would not be a sufficient basis to claim force majeure under GC21. However, extreme conditions which reduce visibility to unsafe levels or present a risk to the health of workers (that cannot be overcome by reasonable PPE) could meet the threshold[2]. These conditions would need to be considered on a case by case basis.

2. The AS 4000-1997 Contract

In some commonly used contracts, there is no explicit force majeure regime. Instead, parties must rely on the extension of time regime.

Under AS 4000 (unamended), the Superintendent assesses (reasonably and in good faith) the Contractor’s entitlement to an extension of time. Subject to notification requirements, an extension may only be granted where the Contractor is or will be delayed in reaching practical completion by a “qualifying cause of delay”[3]. The definition of “qualifying cause of delay” will probably be interpreted to include any cause of delay, other than:

  • a breach or omission by the Contractor
  • industrial conditions or inclement weather occurring after the date for practical completion
  • those otherwise excluded by agreement between the parties and listed in Annexure Part A of the contract.

When assessing an extension of time, the Superintendent shall have regard to what prevention and mitigation of the delay has not been effected by the contractor.

In practice, it is likely a similar position would be reached under both AS4000 and GC21. In other words, bushfire smoke would likely constitute a qualifying cause of delay, but other than in extreme cases, it may be difficult for the Contractor to demonstrate that after meeting their obligation to mitigate the delay, that they were actually delayed from reaching practical completion.

Conclusion

For contractors currently performing works, in many cases, bushfire smoke will not entitle relief for force majeure.

The position will depend upon the drafting of the specific contract and severity of the conditions. Contractors should continually monitor conditions to assess whether suspension of the works is required (including having regard to WHS obligations).

For contractors looking to enter into a construction contract that offers appropriate relief for bushfire and its consequences, the force majeure regime should be carefully drafted to reflect the balance agreed between the parties.

Either way, Morrissey Law and Advisory is available to assist or provide further advice.

[1] https://www.accc.gov.au/regulated-infrastructure/communications/industry-reform/telstras-migration-plan/force-majeure-event-nsw-and-qld-bushfires
[2] It is beyond the scope of this article to discuss the obligations of employers and contractors to provide safe working conditions and how this may relate to smoke, fine particles and respiratory disease, but these matters do require detailed consideration by all employers and contractors.
[3] The definition of “qualifying cause of delay” in AS4000 (unamended) is open to interpretation given the unusual drafting of paragraph (b), which commences with the words “other than”. While the interpretation is not conclusively settled, it is probable that “qualifying cause of delay” will be interpreted to include any cause of delay other than those specifically listed in sub-paragraphs (b)(i) to (b)(iii). For example, see Ian Bailey and Matthew Bell, Understanding Australian Construction Contracts (Lawbook Co, 2008) 155.

Disclaimer: This publication by Morrissey Law & Advisory is for general information and commentary only and should not be considered or relied upon as legal advice. Formal legal advice should be sought in relation to any matters or transactions that may arise in relation with communication.