The NSW Court of Appeal has dismissed the appeal by Port Macquarie-Hastings Council in its legal battle with the Wauchope-based road construction company Mid Coast Road Services.
The NSW Court of Appeal panel agreed that the primary judge was correct in his construction of the contract option, in question in the case, and that the ‘council failed to establish that the primary judge’s assessment of damages was affected by error’.
The panel also determined that the council would pay the respondent’s costs of the appeal and costs under the Civil Procedure Act 2005 (NSW).
Port Macquarie-Hastings Council says it will respect the process and the decision.
Council general manager Craig Swift-McNair said the appeal was important for council so as to clarify and obtain certainty about contractual terms which are commonly used.
“In about 2013, council fell into dispute with Mid Coast Road Services (MCRS) regarding services provided by MCRS to council,” Mr Swift-McNair said.
“The dispute was unable to be resolved between the parties and MCRS sued council. On December 13, 2016, following a hearing, the Supreme Court found council had breached a contract and were ordered to pay MCRS $217,065 (plus interest), with the total cost including interest being just over $247,000.
“After careful consideration council exercised its rights to appeal, asking the Court of Appeal to review the decision.
“Whilst disappointed, we respect the process and the decision,” the general manager said. “Council always prefers, where possible, to resolve disputes without the intervention of the courts.”
Mr Swift-McNair said legal costs are taken into consideration when undertaking action. He said the settlement costs will be funded from the general fund.
“Operational budgets and expenditure are reviewed on an ongoing basis and noting the current surplus position of the general fund, it is envisaged that the settlement will be funded without impacting on services. Relevant budget adjustments will be reported to a future meeting of Council when all costs are known,” he said.
The terms in question in the case with Mid Coast Road Services centred around which party had the obligation to take up an extension option. The council will, the general manager said, look into the terms of future contracts.
“Regardless of the merits or otherwise of this particular case, the ramifications not just for Council but for all firms who enter contracts with third parties that include future options, is something we have been working through as a result of the original court ruling in December 2016,” Mr Swift-McNair said.
“In January 2017, the former mayor requested a review of existing council contracts and the way in which the council enters into options detailed within those contracts, noting that the court ruled that, in this particular case, the contractor had sole discretion to exercise any options to extend the contract, assuming the original contract included options in the first place.
“Our review has found that in general terms the council can continue to offer option clauses in contracts, noting however that the relevant option clauses must be drafted in a way that is clear and unambiguous in the event that they are challenged in any future legal proceedings. It is in the council’s and the community’s interests to ensure that the power to extend the period of a contract is conferred on the council, so to that end a range of revised clauses around options has been included in all council tender documentation. Council will then ensure that all options are exercised strictly in accordance with the option clauses.
“The majority of the 121 contracts that council had in place in early 2017 for the provision of goods and / or services are not impacted by this recent decision, however there are a handful of contracts (i.e. 6 in total) that Council is currently working through to ensure options are dealt with in an appropriate and correct manner.”
On Monday morning Mr Swift-McNair said the council had not made any decision as to whether it will seek leave to appeal to the High Court on this issue.
Mid Coast Road Services’ Craig Pinson described the past four years as ‘extremely difficult’.
"This has been the most stressful event I have ever experienced and I am grateful to all the people who have supported me over the past four years,” he said.
“This fight has come at a great personal and financial cost which could easily have been avoided.”
Mr Pinson said the question of accountability for the matter within the council remained unanswered.
"No one should cause such a costly event for this community and walk away from it easily.
"The past four years have been extremely difficult for me and my company,” he said.