Tallai v Ellair: no EOT claim, so subcontract LDs ran to the cap

Ellair, a mechanical subcontractor on three Sydney Metro station upgrades, was delayed by late site access but never claimed an extension of time (EOT) (at [1] to [2]). The Court decided whether its “Estimated” completion dates bound it, and whether the prevention principle obliged the contractor to extend time unasked (at [5]). It also decided how the cap on liquidated damages (LDs) was measured and whether termination was valid (at [5]).

Tallai, the contractor, engaged Ellair for air conditioning at Hurlstone Park, Belmore and Wiley Park stations. Tallai was engaged by Downer EDi, which was engaged by Sydney Metro (at [1]). Tallai drafted the subcontract, with input from Ellair at the pre-award interview: a fixed lump sum of $1,211,460 in four separable portions (at [20], [25] to [27]).

Every commencement and completion date was marked “Estimated”. The completion dates ran from 21 September to 19 November 2021 (at [37], [39]). Under clause 17(a), late possession that delayed completion was “deemed to be a ground for extension of time for completion of the Subcontract Works” (at [34]). An EOT claim needed notice within five days (cl 27.3(a), at [47]), and clause 39 barred claims not lodged within 14 days (at [49]). Clause 27.4(a) gave the contractor a reserve power (at [47]):

“Notwithstanding that the Subcontractor has not claimed for extension of time for Practical Completion the Contractor's Representative may in its sole discretion for the benefit of the Contractor, at any time and from time to time and for any reason it considers appropriate, by notice in writing to the Subcontractor, determine that the Date for Practical Completion be extended to a date specified in the notice and the date so specified in the notice shall be the extended Date for Practical Completion…”

Sydney Metro and COVID-19 public health measures delayed site access (at [2], [113] to [117]). Tallai suggested Ellair claim for the delay, and claimed its own EOT from Downer EDi. Ellair never claimed (at [117], [344]).

In August 2023 Ellair claimed close to the full price for work it had not completed. Tallai's payment schedule was late, and Ellair was paid (at [196], [198], [201]). Tallai issued a show cause notice on 3 November 2023 and terminated on 7 November 2023, re-serving the notice the next day (at [219] to [220], [234]).

Rees J gave judgment for Tallai for $1,589,022.45, with costs (at [379]).

The dates were binding.The “Estimated” dates were the dates for practical completion unless extended under clauses 17(a) and 27 (at [75] to [76]). In the Court's words, “Absent an EOT under either mechanism, then the ‘Estimated’ dates become thedates” (at [75]). Clause 17(a) made late possession a ground for an EOT, not an EOT itself, and it was primarily for Ellair to claim (at [51], [53]).

The prevention principle was excluded. Tallai breached the subcontract by not giving possession on time, at least for some portions (at [82]). Under Peninsula Balmain Pty Ltd v Abigroup Contractors Pty Ltd [2002] NSWCA 211 and Probuild Constructions (Aust) Pty Ltd v DDI Group Pty Ltd(2017) 95 NSWLR 82; [2017] NSWCA 151, a reserve power must be exercised honestly and fairly (at [84] to [85]). Clause 27.4(a) added the words “for the benefit of the Contractor” (at [89]). The Court relied on Vodafone Pacific Ltd v Mobile Innovations Ltd [2004] NSWCA 15 (at [89]).

The LD cap ran per separable portion.Item 16 set a daily rate for each portion, “capped at 10% of contract sum”, an undefined term (at [93] to [94]). Tallai argued for 10% of the whole subcontract sum for each portion (at [95]). The Court held the cap was 10% of each portion's subtotal, matching the separate daily rates (at [99] to [101]). It decided this on construction; the subcontract excluded contra proferentem (at [97]). LDs totalled $121,146 (at [102], [346]).

The alternative finding. Had the principle applied, Tallai would have had to extend time (at [377]). The delay caused by Ellair, 186 to 449 days per portion, far exceeded the 7 to 20 days needed to reach each cap (at [103], [378]).

Termination and payment. The show cause notice and termination were valid: Tallai held the opinion clause 35.1(c) required, and held it reasonably (at [296], [302] to [304]). The subcontract was entire but divisible by portion and, as the parties accepted, by item (at [108], [111] to [112]). Ellair was entitled to payment only for items substantially completed, $482,650, plus variations of $678,107.51 (at [308], [341], [379]).

This is a first-instance decision of a single judge of the NSW Supreme Court. At 30 October 2026 the time to appeal is running. The subcontract was bespoke and drafted by the contractor (at [20], [63]).

The prevention result turned on the words “for the benefit of the Contractor” (at [89] to [90]). A reserve power without them is still read with Peninsula Balmain and Probuild (at [84] to [85]). Our article on the prevention principle and time at large explains that line of cases. The facts also helped Tallai: the Court found it would have granted an EOT if asked (at [375]).

1. 01

   Contractors: check what your reserve power says. A reserve power to extend time is usually read with a duty to act honestly and fairly (at [84] to [85]). Here the words “for the benefit of the Contractor” changed the result (at [89] to [90]). Ask your lawyer what your template's wording does. Check it against the head contract and any back-to-back condition like clause 27.8 (at [48]).

2. 02

   Contractors: ask for claims in writing, and file the requests. Tallai repeatedly asked Ellair for time and cost impacts, often within seven days (at [136], [139], [149]). The Court relied on that correspondence (at [375]). Log each request against its delay event in the notice register.

3. 03

   Subcontractors: a deemed ground still needs a claim. Diarise the clocks from the day the delay starts: here five days under clause 27.3(a) and 14 days under clause 39 (at [47], [49]). A lead time in a variation is not an EOT claim (at [345]). Neither is a conversation over coffee (at [125] to [128]).

4. 04

   Money: work out each LD cap at award. Record the daily rate, the cap and the days to the cap for each separable portion. Here every cap was reached within 7 to 20 days (at [102]). The Court observed that once a cap is exceeded, a subcontractor may have little commercial reason to finish (at [91]). Plan for that date.

5. 05

   Hold payment against handover, and never miss a schedule. A late schedule meant Ellair was paid for work it had not completed (at [196], [198], [201]). By trial Tallai had paid $2,628,633.95 on a $1,211,460 subcontract, including variations and an adjudicated amount, and had to sue to recover the excess (at [4], [379]). Missing warranties and handover documents cost Ellair whole items (at [324], [341]). Make them a line in every payment assessment. Our guide on responding to a payment claim in NSW sets out the schedule steps.

• Diarise every delay event on the day it starts, with its notice and claim deadlines.
• Claim each EOT in writing under the EOT clause, separately from any variation.
• Read the reserve power and the LD particulars in every subcontract before award.
• Make warranties and handover documents a line in every payment assessment.
• Serve every payment schedule within time.