The importance of honest belief

In the examples given in this Module, the circumstances stated are reasonably certain.  However, in many cases on infrastructure projects, the circumstances may not be clear.  For example:

• What is a justifiable additional cost to charge for a variation if the contract requires the charge to be based on a factor which is slightly uncertain such as “market price”?
• What is a fair extension of time when there are several overlapping causes of delay?
• If a disputed problem occurs on a project, whose fault is it, and who is responsible for rectifying the fault?
• What if the contract provisions as to responsibility, quality or quantity are not clear?

In this situation, a dispute is likely to arise between the parties.  The parties are fully entitled to strongly argue their case and to submit evidence in support of their case.   It is very important in this situation for the parties to be clear where the dividing line is between strongly arguing your case on a legitimate basis, and committing fraud.  It is legitimate to make statements which you honestly believe to be true, and to submit documents which you honestly believe to be factually accurate.  However:

• do not make statements or submit documents which you know are incorrect
• do not make statements or submit documents which you know might be incorrect until you have checked as far as reasonable their accuracy
• do not conceal documents which, if disclosed, may make the other party act differently
• if you are uncertain of the accuracy of a fact, disclose your uncertainty.

The key point, whenever you are making a statement or submitting a document which could have a financial impact, is to have an honest belief in the accuracy of your statements and documents.

As criminal offences normally require a dishonest intention, it is very unlikely that you could be criminally liable for an oral or written representation if you honestly believed in its accuracy.

Proof of honesty or intention: 

It is sometimes difficult for prosecuting authorities to prove the necessary dishonesty or intention, as the parties involved will normally claim that they were acting honestly, and will deny that they had any dishonest intention or any knowledge of the relevant inaccuracy in the statement or document.  There may be no clear evidence of such intention or knowledge.  In such cases, courts may infer corrupt intention or knowledge.  This is where the courts conclude that the only reasonable explanation for the matters in question is that they were intended to be corrupt, or that the relevant parties knew they were corrupt. 

For example, if a contractor provides frequent expensive entertainment for a site supervisor, and it is proven that the supervisor incorrectly approved the contractor’s defective work, the court may infer that the only reasonable explanation is that the entertainment was a bribe designed to influence the supervisor to certify the defective work.  The court may disbelieve the claims by the contractor and the supervisor that the entertainment was innocent, and that there was no connection between the approval and the entertainment.