Falsified Variation Orders – Contractor Contempt for Interfering with the Course of Justice

Photo credit: stuff.co.nz

Photo credit: stuff.co.nz

Contempt laws have been developed over centuries to prevent or punish conduct that interferes with the administration of justice. As a recent English High Court decision (GB Minerals Holdings Ltd v Short [2015] EWHC 1387) illustrates, the construction industry is not immune from such conduct.

All contractors and principals are familiar with projects where costs have exceeded initial estimates. However, the facts of the GB Minerals Holdings case are quite extreme. The contractor was engaged to carry out consultancy services at an estimated value of £1.9 million. Through a series of variation orders, the contractor claimed well over £10 million. Something was amiss.

A dispute arose regarding payment pursuant to certain alleged variation orders which the principal claimed it did not possess. Eventually the contractor produced the alleged variation orders, the authenticity of which was immediately questioned by the principal. When the dispute reached the Court, the contractor’s representative named Mr Short authorised a statement of truth (somewhat comparable to an affidavit in New Zealand) which relied upon the validity of the alleged variation orders.

Once the contractor disclosed its documentation as part of the Court proceedings, it became patently clear that Mr Short had falsified the dates and signatures on the alleged variation orders. The principal then applied to the Court to bring contempt proceedings against Mr Short for interfering with the course of justice. The Judge granted the application and observed that Mr Short had ‘engaged in a deliberate and careful plan to present the variation orders as documents which had been agreed and signed contemporaneously by the parties’.

We certainly have a great deal of confidence in the ethical standards within the New Zealand construction industry. However, what happened to Mr Short is a lesson to us all about the legal implications of fraudulent conduct, particularly within the context of legal proceedings. While the case is not binding in New Zealand, contempt is well established here and perjury and the fabrication of evidence are crimes punishable by up to many years’ imprisonment.

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