Construction law at Allens

Property in unfixed plant and materials

2012-01-25T15:06:00.002+11:00

The Full Federal Court of Australia has confirmed that, ordinarily, property in unfixed plant and materials does not pass to the Principal until such time as it is incorporated in the works. The Court also emphasised that contractual clauses must be construed in the context of the contract as a whole, and words given their plain and ordinary meaning. [Case ref: Management 3 Group Pty Ltd (In Liq) v Lenny's Commercial Kitchens Pty Ltd [2011] FCAFC 162.]

Home building warranties - limitation period

2012-01-18T12:12:00.000+11:00

The New South Wales Court of Appeal has held in Vero Insurance Ltd v Kassem [2011] NSWCA 381 that in a claim for breaches of statutory warranties under the Home Building Act 1989 (NSW) (as it then was*), the limitation period commences on completion of the work to which the dispute relates, and not on the date of practical completion. Furthermore, the court confirmed in The Owners of Strata Plan 56587 v TMG Developments Pty Ltd [2007] NSWSC 1364 that a home warranty insurer can be subrogated to the eventual owner's rights for the purposes of a claim against the developer for breaches of statutory warranties. The Court considered, but did not determine, whether the insurer's failure to settle a claim over a period of several years was an unreasonable failure to mitigate its damage.

* The Home Building Amendment Act 2011 (NSW) shortened the limitation periods for structural and non-structural defects.

AS 2124 cl 23(c)'s 'reasonable' – dual roles

2012-01-18T12:09:00.000+11:00

The Supreme Court of New South Wales has held that the extent of the disparity between measures and values of the superintendent and, on the other hand, of a subsequent referee was such that the superintendent had failed in the duty (whereby of course the principal was liable in damages). Although per obiter dictum, the Court also said that the superintendent's dual roles as project architect and superintendent put her in a very difficult situation; together with the principal's demands of her as the former, she was placed in a position where the possibility of conflict was real and the appearance of bias was likely to result. [Case ref: Walton v Illawarra [2011] NSWSC 1188.]

Contract – oral v written

2012-01-11T14:55:00.000+11:00

The NSW Court of Appeal has followed the High Court in Equuscorp Pty Ltd v Glengallan Investments Pty Ltd [2004] 218 CLR 471 in holding that prior oral terms contradicting subsequent written ones cannot stand as a partly oral and partly written contract. Any oral consensus is discharged by the subsequent written. [Case ref: Skyrise Consultants Pty Ltd v Metroland Funds Management Ltd [2011] NSWCA 406.]

Adjudication determination void – time for withdrawal

2012-01-11T14:54:00.000+11:00

The New South Wales Court of Appeal has affirmed that a claimant wishing to make a new adjudication application after becoming entitled to withdraw a previous one must do so within the statutory period (five business days) after becoming entitled to withdraw, even where that entitlement arises through the adjudicator's failure being due to the adjudication being void (rather than the date a court may thereafter declare that determination to be void). [Case ref: Cardinal Project Services Pty Ltd v Hanave Pty Ltd [2011] NSWCA 399.]

Contract formation and interpretation

2012-01-09T14:27:00.000+11:00

The Technology and Construction Court (UK) has followed Lord Hoffmann's generous admissibility of extrinsic evidence ( Investors' Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896, as qualified by his Lordship in Bank of Credit and Commerce International SA v Ali [2002] 1 AC 251 at 269), in order to decide a battle of the forms which was compounded both by previous course of dealings and by the fact that the contract had been fully performed. [Case ref: Trebor Bassett Holdings Ltd v ADT Fire and Security PLC [2011] BLR 661.]

General contractual principles - construction and interpretation of contracts

2011-12-21T11:36:00.000+11:00

The Court of Appeal of the Supreme Court of Queensland has confirmed that, where contractually construction must be completed within a specified timeframe, coupled with a condition precedent for performance, the courts will imply an obligation to do whatever is reasonably necessary to achieve performance of the contract. [Case ref: Williamson & McGillivray & Ors v JIA Holdings & Anor [2011] QCA 346.]

Breach of injunction by corporation – liability of agent

2011-12-14T14:57:00.002+11:00

The New South Wales Court of Appeal has held that a director or agent, although not a party, may be guilty of contempt of court for knowingly obstructing the course of justice where a corporation is in breach of an injunction through his actions. The court also confirmed that the 'selling' of property includes entering into a contract for sale. [Case ref: Sigalla v TZ Limited [2011] NSWCA 334.]

'Dominant or separable' issues – alternative submissions

2011-12-14T14:56:00.000+11:00

The New South Wales Court of Appeal has held that it will not be of significance in deciding costs orders that an appellant was not successful on every submission, unless made in respect of 'dominant or separable' issues – as distinct from alternative submissions on the same issue. [Case ref: Xu v Jinhong Design & Constructions Pty Ltd (No 2) [2011] NSWCA 333.]

Contract interpretation – ambiguity – agreed damages

2011-12-08T12:07:00.002+11:00

The New South Wales Supreme Court has followed the High Court decision of Australian Broadcasting Commission v Australasian Performing Right Association (1973) 129 CLR 99 in finding that ambiguous clauses should be construed according to the interpretation which would remove absurdities in light of the apparent intentions of the parties. However, an unambiguous clause must be given effect, regardless of the intentions of one party when agreeing to it.

The Court also confirmed that, where damages are difficult to value, there is all the more reason to uphold an agreed (liquidated) damages clause. [Case ref: The City of Sydney v Streetscape Projects (Australia) Pty Limited [2011] NSWSC 1214.]

Oral variations

2011-12-08T12:06:00.002+11:00

The Supreme Court of New South Wales, Court of Appeal, has held that oral variations to a residential home building contract, regulated by the Home Building Act 1989 (NSW) and agreed upon by the parties, could not be ignored in favour of the original written contract because the Act envisages that a contract not in writing remains valid and enforceable by the owner. [Case ref: Wright v Foresight Constructions Pty Ltd [2011] NSWCA 327.]

Superintendent not acting honestly and fairly – damages

2011-12-01T16:33:00.002+11:00

The Supreme Court of New South Wales has confirmed that, where a Principal is contractually (AS 2124) required to ensure a Superintendent acts honestly and fairly yet the Superintendent fails to do so, the Principal may be in breach of contract, such that damages may theoretically include delay and additional variation costs. [Case ref: Walton v Illawarra [2011] NSWSC 1188.]

Security of Payment – jurisdictional error

2011-11-24T12:06:00.005+11:00

The Supreme Court of Victoria has held that an adjudicator who wrongly found that the Director of Housing was 'in the business of building residences' fell into jurisdictional error, whereby the adjudicator failed to take into account the payment schedule and submissions thereon, such as to deny procedural fairness. [Case ref: Director of Housing of State of Victoria v Structx Pty Ltd (t/a Bizibuilders) & Anor [2011] VSC 410]

Termination for Convenience – amount payable

2011-11-24T12:06:00.002+11:00

The Court of Appeal of the Supreme Court of Queensland has held that a valid termination for convenience did not require the principal to pay the remainder of the contract value. Despite the lump sum, the construction of the contract did not require extrinsic evidence to show that the contractor should be entitled to more than for those services actually performed up to the date of termination. [Case ref: Velvet Glove Holdings Pty Ltd v Mount Isa Mines Ltd [2011] QCA 312]

Security for costs – payment out before assessment

2011-11-24T12:05:00.002+11:00

The NSW Court of Appeal determined that an amount held by the Registrar as security for costs could be paid out before assessment. McColl JA held that, while each case will depend on its own facts, this was one where there was no strong, if any, possibility of the beneficiary being in a position where it would have to repay the moneys. [Case ref: Summer Hill Business Estate Pty Ltd v Equititrust Ltd [2011] NSWCA 211]

Security of payment – SAT cannot review adjudicator's decision not to dismiss

2011-11-17T17:22:00.003+11:00

The Court of Appeal of the Supreme Court of Western Australia has held that the State Administrative Tribunal does not have jurisdiction to review an adjudicator's finding of jurisdiction under the Construction Contracts Act 2004 (WA) (ie not to dismiss an adjudication application). [Case ref: Perrinepod Pty Ltd v Georgiou Building Pty Ltd [2011] WASCA 217.]

Security for costs – discretionary factors

2011-11-17T17:22:00.000+11:00

The Court of Appeal of the Supreme Court of Western Australia has rejected an appeal from a decision not to order security for costs for an appeal. The court emphasised that an application for security for costs should not be declined only on the basis that making such order would stifle an appeal. The court should also consider other discretionary factors (eg the likelihood that the appellant will be unable to meet an adverse costs order and the broader significance of the questions of law to be determined). [Case ref: Dodds v Kennedy [2011] WASCA 32.]

ADR – condition precedent partly mandatory and partly optional

2011-11-17T17:21:00.000+11:00

The Supreme Court of Western Australia has confirmed that 'compliance' with a condition precedent to litigation is achieved upon satisfaction of a mandatory part (conference) without election for the subsequent, optional part (mediation). [Case ref: VDM Construction Pty Ltd v MCC Mining (Western Australia) [2011] WASC 269.]

Security of payment – failure to consider submissions in adjudication response

2011-11-10T16:30:00.000+11:00

The Supreme Court of Queensland has held that an adjudicator who failed to consider some of the submissions in the Principal's adjudication response failed to comply with an essential requirement of the Act, so that his determination was not a valid adjudication decision.

The Court also concluded that had the adjudicator considered the submissions, the Court would have been satisfied that the adjudicator's conclusions were irrational (i.e no reasonable person in his position could have come to that conclusion), and would have been prepared to set the decision aside on that basis. [Case ref: QCLNG Pipeline Pty Ltd v McConnell Dowell Constructors (Aust) Pty Ltd & Anor [2011] QSC 292.]

Arbitration – conclusiveness of interim award

2011-11-10T16:29:00.000+11:00

The Queensland Supreme Court has confirmed that an arbitrator, being functus officio in respect thereof, has no power to alter his determination of issues dealt with in a valid interim award. Res judicata applies to claims the subject of the interim award, including those pleaded but not pursued at the hearing. [Case ref: Discovery Beach Project Pty Ltd v Northbuild Construction Pty Ltd [2011] QSC 306.]

Unfair contracts – Independent Contractors Act 2006 (Cth)

2011-11-03T15:53:00.003+11:00

The Federal Court of Australia has determined that these provisions prohibit courts from making orders varying a contract with retrospective effect. Similarly the court cannot make a prospective order requiring compensation for past unfairness. The general scheme of these provisions is prospective remediation of harsh or unfair contracts. [Case ref: Informax International Pty Ltd v Clarius Group Limited (No2) [2011] FCA 934, at [41].]

Security of payment – proper exercise of jurisdiction by adjudicator

2011-11-03T15:53:00.000+11:00

The Supreme Court of NSW has held that the jurisdiction will not be exceeded nor improperly exercised merely because the matters in s22(2) are considered in a way which leads to a legally or technically incorrect answer. [Case ref: Power Serve v Powerline's Clearing Group [2011] NSWSC 1180.]

Arbitration – adequacy of reasons

2011-11-03T15:52:00.002+11:00

The High Court of Australia has provided valuable particularity about adequacy of reasons. The Court explicitly rejected the proposition that the standard was that required of a judge. The standard depends on the nature of the dispute and the particular circumstances of the case, including the complexity of the issues. If a dispute turned on a short issue of fact, the arbitrator would not be expected to produce more than a rudimentary analysis. In the present case, however, the arbitrators faced a complex issue of statutory interpretation yet failed to explain their reasoning in a crucial element of their decision. Hence, the Court held that the reasons for the award were inadequate and set it aside. [Case ref: Westport Insurance Corporation v Gordian Runoff Ltd [2011] HCA 37.]

Contract – repudiation

2011-11-02T11:50:00.002+11:00

The NSW Court of Appeal has held that a party in breach of a non-essential term is not prevented from repudiating for anticipatory breach by the other party. In doing so, the Court clarified that the principle remains the same whether the party is repudiating a contract for anticipatory or actual breach. [Case ref: Almond Investors Limited v Kualitree Nursery Pty Limited & Anor [2011] NSWCA 198.]

Standard of care – consultants

2011-10-25T10:08:00.002+11:00

The New South Wales Supreme Court has provided guidance in the standard of care required of consultants on building projects. The Court held that an architectural consultant who incorrectly advised that construction was not feasible in accordance with the development approval plans was not negligent, because construction in accordance with the development approval plans was only achievable by employing an unconventional or innovative method involving 'unusual pains and trouble, and high expense'. Such a method was not one that a reasonably competent and prudent architect should have discerned. Additionally, the consultant's advice was not misleading or deceptive within the meaning of the Fair Trading Act 1987, because it conveyed no more than that the consultant held an opinion, and that there was a basis for it (which in fact there was). [Case ref: Lucantonio v Kleinert & Ors [2011] NSWSC 753.]

Security of payment - privilege

2011-10-25T10:07:00.002+11:00

The Victorian Supreme Court has confirmed that litigation privilege under s119 of the Evidence Act 2008 (Vic) can protect documents relevant to adjudications under the Building and Construction Industry Security of Payment Act 2002 (Vic) as an 'Australian proceeding' and an 'Australian court'. The Court also held that documents relating to the preparation of show cause notices can attract litigation privilege. [Case ref: Dura (Australia)Constructions Pty Ltd v Hue Boutique Living Pty Ltd [2011] VSC 477.]

Security of payment – jurisdictional error and denial of natural justice

2011-10-25T10:06:00.000+11:00

The Supreme Court of Queensland has held that an adjudicator's failure to consider various spreadsheets which formed part of the Principal's adjudication response, but which were not included in its payment schedule, amounted to jurisdictional error. The Court clarified that even if the spreadsheets were not included in the Principal's payment schedule, section 26(2)(d) of the Building and Construction Industry Payments Act 2004 (Qld) still required the adjudicator to consider the spreadsheets in making his determination.

The Court also concluded that natural justice required the adjudicator to inform the parties that he was determining the matter without reference to the spreadsheets. The failure to give that notice denied the Principal the opportunity to advance any explanation for the omission. [Case ref: Syntech Resources Pty Ltd v Peter Campbell Earthmoving (Aust) Pty Ltd & Ors [2011] QSC 293.]

New International Chamber of Commerce Rules of Arbitration

2011-10-19T10:09:00.000+11:00

The International Chamber of Commerce has released new Rules of Arbitration which will come into effect on 1 January 2012. These new rules have been shaped by lessons learned from the 1998 rules and are intended to make the arbitration process more efficient. Important improvements include making it easier to join parties to existing arbitrations, the ability to appoint emergency arbitrators to deal with urgent interim matters, allowing a tribunal to determine issues relating to its own jurisdiction, extending powers to deal with issues of confidentiality and requiring more effective case management of tribunals. For a more detailed analysis of the new rules, download our Allens Focus article.

Security of payment – Trade Practices s.52

2011-10-13T11:09:00.000+11:00

The New South Wales Court of Appeal has held that a principal could not rely on a defence under the former s 52 of the Trade Practices Act to resist proceedings by a contractor for payment of a claim under the Building and Construction Industry Security of Payment Act 1999. The principal submitted that it failed to lodge a payment schedule within the statutory period because it had been misled by the contractor into believing that no payment claim had yet been served. However, the Court upheld the primary judge's evidentiary findings to the effect that no misleading representations were in fact made by the contractor. [Case ref: Midcoast County Council t/a Midcoast Water v Reed Constructions Australia [2011] NSWCA 268.]

Expert determination – reasons

2011-10-13T11:08:00.000+11:00

The High Court has indicated that it will not lightly find that the expert failed to give adequate reasons simply, for example, because of inconsistent findings about factual matters to the effect that it is not possible to discern why claims were rejected. Generally, the Court held that a deficiency or error in the expert's reasons may affect the determination's validity if it discloses that the expert has not made a determination in accordance with the contract or, if reasons be a necessary condition of the determination's binding operation, that the purported reasons are not within the meaning of the contract. More particularly, the Court held that the expert determination that a contractor's delay claim had not been made out or was time-barred was not necessarily inconsistent with a factually and conceptually distinct determination that the principal's damages for the same delay ought to be discounted to reflect the principal's contribution to the delay. [Case ref: Shoalhaven City Council v Firedam Pty Ltd [2011] HCA 38.]

Contractual evidence – subsequent conduct

2011-10-06T16:12:00.003+11:00

The New South Wales Court of Appeal has given a comprehensive collation of the law on admissibility of evidence of subsequent conduct. Particularly, it held that, where a contract is wholly or partly oral, subsequent conduct may be used to ascertain its terms and the identity of the contracting parties. Post-contractual conduct, including the exchange of quotations between the builder and MSP, the submission by MSP of eight progress claims to the builder under the Building and Construction Industry Security of Payment Act 1999 and the builder's payment of the first five of those claims supported the finding that the builder had separately contracted with MSP in its own right rather than as agent for the developer. Despite there being no contractual relationship between the developer and MSP, the Court still found that the developer had breached its duty of care under s 177(2) of the Conveyancying Act 1919 not to do anything on the excavation site which removed the support provided to adjacent land. [Case ref: Lym International Pty Ltd v Marcolongo [2011] NSWCA 303.]

SOPA adjudications – error in interpreting contract not jurisdictional error

2011-10-06T16:12:00.000+11:00

The Supreme Court of NSW has held that, in that the adjudicator must interpret and determine the relevant terms of the contract, an error of law doing so does not constitute jurisdictional error. The Court also held that there was no denial of natural justice nor lack of good faith, because the adjudicator did consider the material before him, and because his decision was logical, and not perverse, arbitrary nor capricious. [Case ref: Clyde Bergemann v Varley Power [2011] NSWSC 1039.]

'Building', 'permanent nature' and 'construct'

2011-09-30T16:40:00.002+10:00

The Court of Appeal of Western Australia has held that the question of whether a building is 'of a permanent nature' for the purposes of the Builders' Registration Act 1939 (WA) involves two elements, ie whether it is made of material intended to last indefinitely; and whether it is affixed to the ground in a manner intended to last indefinitely. Each element must be determined by the objective nature of the building, not the subjective intention of the owner. The Court also held that the Act does not require a subcontractor carrying out building work to which that Act applies to be a registered builder, provided that the work is personally managed and supervised by a registered builder. [Case ref: Keller Constructions (WA) Pty Ltd v Builders' Registration Board of Western Australia [2011] WASCA 163.]

Payment claims - multilateral arrangements

2011-09-30T16:39:00.004+10:00

The District Court of NSW has accepted that a tripartite web of contractual obligations between a builder, insurer and insured home owner could constitute an 'arrangement' falling within the definition of a 'construction contract' under the Building and Construction Industry Security of Payment Act 1999 (NSW). For the arrangement to constitute a 'construction contract', parties to a multilateral arrangement must have substantial shared rights and obligations. Additionally, each party must have either an obligation to make, or an entitlement to receive, payment for construction works in order for an arrangement under the Act to exist. Where such an 'arrangement' exists, a payment claim under the Act can be made in respect of either the arrangement or one of the individual contracts. {case ref: DJE Building Services Pty Ltd v Insurance Australia Limited [2011] NSWDC 95.]

Specified supply is not a professional service

2011-09-30T16:39:00.001+10:00

The Victorian Court of Appeal has confirmed that the supply of a specified product, even a bespoke product, is not a professional service. [Case ref: Major Engineering Pty Limited v CGU Insurance Limited [2011] VSCA 226.]

'Costs plus' contract – cap

2011-09-23T10:17:00.002+10:00

The Supreme Court of NSW has held that a 'costs plus' contract does not necessarily have a cap where the parties have specified a contract price. The Court said that it is unlikely that a contractor would agree to a cap on a costs plus contract, thereby assuming all the risk if the quote be an under-estimate but forgoing all the benefit if the cost of the works be less than the quote. The reason for specifying a contract price is for the purposes of determining the deposit payable under the contract. Additionally, in view of the possibility of variations, a cap on a costs plus contract will only work where the scope of works is precisely determined. [Case ref: Simpson and Pritchard v Steward & Steward [2011] NSWSC 491.]

Expert determination – when binding?

2011-09-23T10:16:00.000+10:00

The New South Wales Court of Appeal has held that an appeal from an expert determination is not maintainable where the parties adopted an ADR process with 'final and binding' expert determination and thereby clearly intended to prevent recourse to the courts. The Court said that a liberal approach should be adopted when construing dispute resolution clauses. Courts will seek to give effect to business purpose and will assume that parties are unlikely to have intended multiple venues or occasions to be available for the resolution of their disputes, unless otherwise expressed. [Case ref: Lipman Pty Ltd v Emergency Services Superannuation Board [2011] NSWCA 163.]

Draft proportionate liability laws released

2011-09-22T09:50:00.000+10:00

Draft model legislation to reform Australia's proportionate liability laws has been released by the Standing Committee of Attorneys-General (SCAG) for public consultation. The SCAG proposals clarify a number of issues in relation to proportionate liability and would provide greater certainty as to the application of the legislation.

Importantly, one of the proposals in the model legislation is to allow for a uniform contracting out position, allowing parties to agreements above a monetary threshold to contract out of the legislation. The threshold proposed is either $5 million or $10 million. Currently contracting out is only allowed in New South Wales, Western Australia and Tasmania.

The closing date for comment on the draft model legislation is 7 October 2011.

Allens has put together a Focus publication that examines the draft model legislation in greater detail.

Agreement contemplating execution of a formal contract

2011-09-02T16:49:00.001+10:00

The Full Supreme Court of South Australia has upheld the trial judge's decision that there fell within the first of the Masters v Cameron (1954) 91 CLR 353 categories a facsimile transmission signed by the parties and which set out each of the fundamental elements of a valid contract, despite:
(a) reference to 'further necessary paperwork to be prepared by a lawyer'; and
(b) the fact that the parties subsequently prepared a standard form contract.
[Case ref: Stirnemann v Kaza Investments Pty Ltd [2011] SASCFC 77.]

Rectification – reasonable and necessary

2011-09-02T16:46:00.000+10:00

The famous Bellgrove v Eldridge (1954) 90 CLR 613 at 617 test received very useful particularity in respect of replacement, rather than 'make do and mend' rectification; viz that which was right and necessary, certainty, avoidance of risk of remaining weak spots and difficulties in removing all corrosion if the pipe work had been left in situ, together with the difference in cost between the 'make do and mend' and full replacement not being that great. [Case ref: Linklaters Business Services v Sir Robert McAlpine Ltd [2011] BLR 108.]

Design and construct – continuing liability

2011-08-23T16:37:00.003+10:00

The Supreme Court of Western Australia's Court of Appeal has confirmed a designer's continuing obligation to correct results of past defects which become known. The Court also drew attention to the important, practical difference between re-submission of design proposals and, on the other hand, re-submission of design drawings. The Court also confirmed that the duty to mitigate damages allows a claimant to recover loss incurred in so doing. [Case ref: Cardno BSD Pty Ltd v Water Corporation [No. 2] [2011] WASCA 161.]

Dispute resolution clause to be followed

2011-08-23T16:37:00.000+10:00

Even though the contractor sought an injunction against any termination pursuant to the plaintiff's show cause notice, the Supreme Court of New South Wales confirmed that the parties should observe what they have promised in a carefully constructed (standard) industry contract foreseeing the appropriate forum for the appropriate dispute resolution. The Court emphasised that such multi-tiered dispute resolution process formed an integral part of the bargain negotiated by the parties and that some of the cases go so far as to suggest that it might be an abuse of process for a party to commence litigation in the face of such a clause. [Case ref: Sugar Australia Limited v Conneq [2011] NSWSC 805.]

Company directors – improper conduct

2011-07-04T14:22:00.003+10:00

The Supreme Court of Queensland has made an award of damages under the Corporations Act 2001 (Cth) for the ‘improper’ conduct of a company director. On the facts, the director had caused the company to enter into a joint venture agreement principally for the benefit of someone other than the company; indeed, it was a positive detriment to the company. The case highlights the importance of company directors understanding and distinguishing the interests of the company from their own personal commercial interests and the commercial interests of others. The Court affirmed that it is sufficient for the purposes of a claim for damages that the Court has jurisdiction to grant an injunction restraining the director. [Case ref: Phoenix Constructions Queensland Pty Ltd v Coastline Constructions Pty Ltd and Michelle McCracken and Jarrod McCracken [2011] QSC 167.]

Security of payment – jurisdictional error

2011-07-04T14:22:00.000+10:00

The Supreme Court of NSW has confirmed that the basic and essential requirement for an adjudication application under the Building and Construction Industry Security of Payment Act 1999 (NSW) is the existence of a ‘construction contract’. Whether a construction contract exists requires a consideration of the obligations in the agreement, and not the actual work performed. On the facts, the agreement required nothing more than co ordinating the services of those carrying out ‘related services’; the mere co ordination of ‘related services’ is not enough for that agreement to be described as a ‘construction contract’ within the meaning of the Act. Thus, in making a determination in the absence of a construction contract, the adjudicator had made a ‘basic and essential’ error; the Court quashed the determination. [Case ref: H M Australia Holdings Pty Limited v Edelbrand Pty Limited t/as Domus Homes & Anor [2011] NSWSC 604.]

Negligence – a principal’s duty of care to an independent contractor

2011-06-27T11:36:00.000+10:00

The Supreme Court of New South Wales has followed the High Court in finding that the relationship between principal and independent contractor is not one which, of itself, gives rise to a common law duty of care; much less does it give rise to the special duties resting on an employer to ensure that care is taken. However, in circumstances where a principal creates a risk, that principal will owe a duty to use reasonable care to ensure that a system of work for one or more independent contractors is safe. Such a duty may be discharged by taking reasonable care in the employment of independent contractors competent to control their own systems of work. Where some supervisory role is retained, it is critical that there be a clear demarcation between the respective areas of responsibility.

On the facts, though the principal had engaged competent independent contractors, there remained uncertainty as to whose responsibility it was to guard against site risks. Thus, the principal failed in his duty by failing either to retain and exercise supervisory power or to prescribe discrete areas of responsibility. [Case ref: Dargham v Kovacevic [2011] NSWSC 2.]

Referee's report – adopt or reject?

2011-06-27T11:35:00.002+10:00

The Supreme Court of New South Wales has ordered that a referee’s extension of time findings be adopted but that her delay cost findings be rejected. The Court affirmed the general rule that the findings of referees will be adopted where the their reports demonstrate a scientific and analytical approach and where the facts entitle referees to reach their conclusions. The referee’s extension of time findings were adopted because they were open to her on the evidence. On the other hand, the Court rejected the referee’s delay costs findings because she had used a rate for delay costs that was inconsistent with the contract and which amounted to a ‘patent misapprehension of the evidence’. [Case ref: Walton Construction Pty Limited v Illawarra Hotel Company Pty Limited [2011] NSWSC 534.]

Calling on a bank guarantee

2011-06-17T14:33:00.002+10:00

The Supreme Court of Queensland has refused to grant an injunction restraining a party from calling on an bank guarantee despite there being serious questions to be tried. The Court affirmed the general rule that, in the absence of fraud and unconscionability, courts will not grant an injunction. Bank guarantees have two purposes: one is to provide security, and the other is to allocate risk as to which party should be out of pocket while a dispute is resolved. The Court took the view that the terms of the contract when taken together with the unconditional nature of the bank guarantee showed an intention that the contractor should be out of pocket pending resolution of the dispute; that intention was independent of the seriousness of the questions to be tried. [Case ref: Ceresola TLS AG v Thiess Pty Ltd & John Holland Pty Ltd [2011] QSC 115.]

Negligence, pure economic loss and related entities

2011-06-17T14:32:00.002+10:00

The Queensland Court of Appeal has allowed an appeal and ordered that a party be added as a plaintiff to a case yet to be heard. The court below had dismissed the application on the basis that the pleading did not disclose a cause of action. While following the principle established by the High Court (that a subsequent purchaser of commercial premises could not recover from the builder damages caused by defects in the building resulting from faulty construction unless it demonstrated vulnerability) the Court observed that the principle was framed in circumstances where the purchaser had an arms length relationship with the vendor and could therefore take steps to protect itself. That principle may be of no application where the purchaser and the vendor are part of the same corporate group, since the nature of the transaction is quite different. [Case ref: Project Company No 2 Pty Ltd v Cushway Blackford & Associates Pty Ltd & Anor [2011] QCA 102.]

Contract – principles of formation

2011-06-09T10:12:00.000+10:00

A developer claimed that a utility had contracted to remove an electricity pole from the developer's land. The developer claimed the utility had so agreed during a meeting and by a subsequent letter expressing its intention to relocate the pole. The New South Wales Court of Appeal found that a contract did not exist. Two of the developer's witnesses had conferred to prepare one of their affidavits and this limited their credibility. The letter was found to indicate only that the utility had considered one option to resolve a dispute involving the pole. The Court noted that consensus to perform an act need not amount to a binding contract. [Case ref: Rosebanner Pty Ltd & Anor v EnergyAustralia [2011] NSWCA 28.]

Arbitration – procedural fairness

2011-06-09T10:11:00.002+10:00

The South Australian Supreme Court held that an arbitrator had denied procedural fairness to a party. The arbitrator knew that the parties had different interpretations of his findings, which he acknowledged were ambiguous, but nonetheless failed to clarify his award to them. The court found that in these circumstances procedural fairness required the arbitrator to recall the parties to clarify his findings. [Case ref: Viterra Operations Ltd (T/A ABB Grain & Handling) v Ewing International Limited Partnership (No 2) [2011] SASC 83.]

Security of payment – excluded amounts, severance, and variations

2011-06-06T09:43:00.000+10:00

The Victorian Supreme Court has held that liquidated damages are ‘excluded amounts’ under the Building and Construction Industry Security of Payment Act 2002 (Vic) and cannot therefore be included in payment claims, payment schedules, or adjudication determinations made under the Act. An adjudication determination that takes excluded amounts into account is void only to the extent of those excluded amounts and may be severed from the balance of the determination. As well, for a variation to be ‘claimable variation’ under the Act, the parties must have agreed (before the service of the relevant payment claim) questions of scope, value, entitlement, and timing for payment. [Case references: Seabay Properties Pty Ltd v Galvin Construction Pty Ltd & Anor [2011] VSC 183; The Court confirmed the severance approach in Gantley v Phoenix International Group [2010] VSC 106.]

Settlement agreement – economic duress, misrepresentation or unconscionable conduct

2011-06-06T09:42:00.000+10:00

The Queensland Court of Appeal has affirmed that a threatened breach of contract may amount to normal commercial negotiations if the party exerting the pressure does so in good faith and on a reasonable and honest view of its legal rights. On the facts, the Court found that a settlement agreement was not the result of economic duress, unconscionable conduct, or misrepresentation. Though the builder had claimed that the principal had concealed its inability to make payments, had wrongly asserted a right to delay costs (despite having caused substantial delays), and threatened to breach the contract, the builder actually knew the principal was financially stretched, and that the principal’s delay claim views were legitimate in the circumstances. [Case ref: Mitchell v Pacific Dawn Pty Ltd [2011] QCA 98.]

WA Government Releases State Budget 2011-12

2011-05-25T11:05:00.000+10:00

The Western Australian State Government has released its budget for 2011 - 2012.

Relevantly for the building and construction industry, the budget includes an infrastructure investment of $7.6 billion, which the government claims is the biggest infrastructure program in the state's history.

While this headline figure may raise some eyebrows, most of this amount relates to previously announced projects and policies.

There are, however, some significant infrastructure announcements, including:

• Additional funding to accelerate the Perth City Link and Perth Waterfront projects
• Around $340 million to progress the Pilbara Cities plan
• Deferral of the West Pilbara Desalination Plant
• $170 million additional funding for regional health infrastructure
• Road upgrades, including $50 million for the Dampier Highway and $30 million for widening of the Mitchell Freeway.

Some industry participants may be disappointed by the lack of innovation in project delivery models evident in the budget.

In its 2009-2010 budget, the Barnett government emphasised its support for Public Private Partnerships (PPP) and other methods of increasing private sector involvement in public sector project delivery. The government expressed particular enthusiasm for the National Public Private Partnership Policy and Guidelines developed by the Council of Australian Governments (COAG), and released in November 2008.

Despite the government's emphasis on its infrastructure investment program, the current budget, like the 2010-2011 budget, has little to suggest that the government will be delivering a significant part of its infrastructure programme through PPPs or other innovative project delivery structures.

The government has shown increased private sector involvement in service delivery, through its 'Sustainable Funding and Contracting with the Non-For Profit Sector' policy. However, this budget suggests there is not yet a clear trend towards private sector engagement by the Western Australian government in social infrastructure projects.

It remains to be seen whether such a trend will emerge through new projects that have received initial planning and design funding in this budget, such as the new major stadium and State Museum.

Security of payment – late payment claims

2011-05-23T10:11:00.000+10:00

A contract provided that a payment claim could be served on the first day of every month and that late claims were taken to be served on the next reference day; that is, late claims would be deemed to be served on the first day of the next month. The Supreme Court of Queensland has held that nothing in the Building and Construction Industry Payments Act 2004 (Qld) overrode those provisions. Critically, therefore, the time by which a payment schedule was to be provided was 10 business days after the first day of the following month rather than 10 business days after the date on which it was served. [Case ref: Reed Construction (QLD) Pty Ltd v Martinek Holdings Pty Ltd [2011] 1 Qd R 28.]

Subcontractor’s charge not extinguished

2011-05-23T10:10:00.000+10:00

The Supreme Court of Queensland has held that a plaintiff commencing proceedings to enforce a charge under the Subcontractors’ Charges Act 1974 (Qld) for an amount less than the total amount sought in its notice of charge did not bring about the partial extinguishment of the charge. The plaintiff had sought to amend its statement of claim to increase the amount claimed to include GST, having left off this amount due to an apparent oversight. The Court rejected the argument that the charge was extinguished in respect of the difference between the amount paid into court in response to the notice of charge and the amount claimed by the plaintiff. It confirmed that GST is an amount which can be made the subject of a charge under the Act as money payable 'for work done' by a subcontractor under the contract where the contract makes clear that there is an obligation to pay GST to the subcontractor. [Case ref: Mulherin Rigging & Cranes Australia Pty Ltd v Roberts & Schaefer Australia Pty Ltd [2011] 1 Qd R 139.]

Termination for delay

2011-05-23T10:09:00.000+10:00

An arbitrator had found not only that a contract contained an implied term (based on the prevention principle) that an owner would not delay the contractor in the performance of his contractual obligations, but that the owner had failed to demonstrate a contractual right to terminate as a result of delay. That decision was upheld at first instance and has been upheld again by the Western Australian Court of Appeal. The Court held that, on a proper reading of the contractual terms, there was no inconsistency between the implied term and the express extension of time provisions. Critically, even if there were, mere delay by the contractor does not amount to a failure to progress the works with due diligence. Owners should take care, therefore, in considering their termination rights when these are based on delay. [Case ref: D & M (Australia) Pty Ltd v Crouch Developments Pty Ltd [2011] WASCA 109.]

Security of payment – identifying ‘construction work’

2011-05-19T10:45:00.000+10:00

The Supreme Court of Queensland has held that a payment claim which did not identify the construction work to which it applied was not a payment claim within the meaning of the Building and Construction Industry Payments Act 2004 (Qld), which requires that a payment claim identify the ‘construction work’ being claimed. In this case, a payment claim that included the term ‘add previously claimed and unpaid’ required the respondent to determine the relevant construction work in order to issue the payment schedule. The Court held that this did not satisfy the Act. [Case ref: Neumann Contractors Pty Ltd v Peet Beachton Syndicate Limited [2011] 1 Qd R 17.]

Security of payment – adjudicator’s refusal to dismiss subject to certiorari?

2011-05-19T10:44:00.000+10:00

The Supreme Court of Western Australia has granted leave under the Construction Contracts Act 2004 (WA) to enforce the adjudicator’s determination of a payment claim. The Court held that there was a strong presumption that leave be granted due to the policy of the Act in providing a temporary solution to maintain cash flow. Nevertheless, leave might not be granted if it could be shown that there was a sufficiently arguable case that the adjudicator’s determination should be set aside for jurisdictional error; such an error might occur if the adjudicator were seriously irrational or unreasonable in establishing whether the essential preconditions specified in the Act to the making of a determination had been satisfied. On the facts, the Court found that the adjudicator’s findings that the preconditions had been satisfied were reasonable, and the determination would not be set aside for jurisdictional error. [Case ref: Thiess Pty Ltd -v- MCC Mining (Western Australia) Pty Ltd [2011] WASC 80.]

Interlocutory judgment – appeal?

2011-05-09T11:07:00.000+10:00

The Full Court of South Australia has affirmed the principle that a court should always be cautious about granting permission to appeal from an interlocutory judgment relating to an appeal against an arbitral award; there is every reason why appeals from awards should be considered and disposed of quickly. On the facts, it was open to the judge at first instance to reach the conclusions he reached in respect of the award and, therefore, to make the interlocutory judgments he made. It is not enough for one seeking to appeal to have a reasonably arguable case. [Case ref: Viterra Operations Ltd (t/a ABB Grain Storage & Handling) v Ewing International Limited Partnership [2011] SASCFC 13.]

When is a dispute susceptible to arbitration

2011-05-09T11:06:00.000+10:00

The Supreme Court of NSW has rejected a challenge to an arbitrator’s jurisdiction and affirmed the principle that (with certain exceptions) any dispute or claim which can be the subject of an enforceable award is capable of being settled by arbitration. Disputes in the exclusive domain of the courts are those where there is a sufficient element of legitimate public interest in the subject matter to make its private resolution inappropriate; for instance, criminal matters, bankruptcy, divorce, winding up, and certain intellectual property disputes. Though the disputes between the parties involved prospective conduct, and involved a certain element of futility, they were not so abstract or hypothetical as to make them incapable of determination; nor were there any public interest grounds why the disputes could not be resolved privately. [Case ref: Larkden Pty Limited v Lloyd Energy Systems Pty Limited [2011] NSWSC 268.]

Payment claim for work done on contractor's behalf

2011-05-02T11:48:00.000+10:00

The Victorian Court of Appeal has held that a contractor who enters into a construction contract may make a payment claim for works undertaken pursuant to contract, whether those works are performed by the contracting party or by another on its behalf. In this instance, the works were performed by a related company, with the same ownership, control and workforce as the contracting party. The Court also found that leave to appeal is required from summary judgment on a payment claim, because it does not finally dispose of the rights of the parties. Rather, the judgment may be subject to adjustment in subsequent proceedings. [Case ref: Pearl Hill Pty Ltd v Concorp Construction Group (Vic) Pty Ltd [2011] VSCA 99.]

Security of payment claims – not arbitrable

2011-05-02T11:47:00.000+10:00

The Supreme Court of NSW has held that a cross-claim against a contractor seeking to recover for payment claims is not arbitrable. The entitlement to a payment claim was described as being a statutory right to an interim payment, separate from any contractual obligations between the parties. [Case ref: Siemens Ltd v Origin Energy Uranquinty Power Pty Ltd [2011] NSWSC 195.]

Security of payment – Service of payment claims

2011-04-21T11:51:00.003+10:00

The NSW Court of Appeal has confirmed that an ‘ordinary place of business’ for service of a payment claim includes any place where the person usually engages in activities that form a not insignificant part of the business. The ‘ordinary place of business’ must be a place with some relationship with the contract but this is not confined to that place with the closest connection with the relevant works. Delivery to the head office would usually be sufficient and it is incumbent on the recipient to ensure that appropriate arrangements are in place for dealing with the payment claim. [Case ref: Downer EDI Works Pty Ltd v Parsons Brinckerhoff Australia Pty Ltd [2011] NSWCA 78.]

Security of payment – Re-agitation of a payment claim

2011-04-21T11:51:00.000+10:00

The Supreme Court of Queensland has dismissed an application to set aside an adjudication decision on the basis of jurisdictional error. Though it agreed with the NSW Court of Appeal that the legislation is not intended to permit a fresh adjudication application in respect of work that has already been the subject of an adjudication decision, that prohibition does not extend to instances where an adjudication decision does not address the merits of the claim.

On the facts, the Court found that an adjudicator’s mere determination that a payment claim was invalid because it included claims for services provided after the reference date did not address the underlying merits of the claim. This left the applicant free to issue a valid payment claim in respect of the same work and meant that an adjudicator did not commit a jurisdictional error by determining the subsequent adjudication application. [Case references: VK Property Group Pty Ltd and Ors v Conias Properties Pty Ltd and Anor [2011] QSC 54; Dualcorp Pty Ltd v Remo Constructions Pty Ltd [2009] NSWCA 69.]

Enforcement of an arbitral award

2011-04-21T11:50:00.000+10:00

The Supreme Court of NSW has declared that an arbitral award was not validly made under an arbitration agreement within the meaning of the Commercial Arbitration Act 1984 (NSW), which provides that arbitration agreements must be in writing. [Note: The Commercial Arbitration Act 1984 (NSW) has now been repealed in favour of the Commercial Arbitration Act 2010 (NSW), but the relevant provisions are to the same effect.] Unless a court is satisfied that an award arises from an agreement in writing to refer a dispute to arbitration, then the court will not give effect to it. On the facts, the concluded agreement was oral. Though one of the parties had subsequently proposed written terms – which included an arbitration clause and purported to confirm the earlier oral agreement – that proposal had not been accepted by the other party. [Case ref: Adrian Beard v Cargill Australia Limited [2011] NSWSC 142.]

Subcontractor's payment claim served on a principal Invalid

2011-04-14T10:57:00.003+10:00

The Supreme Court of NSW has confirmed that a subcontractor is not entitled to serve a payment claim on a principal. On the facts, the Court found that the subcontractor's direct correspondence with the principal – including correspondence relating to changes to the scope of works and submission of quotes and proposals as part of the tender process – did not mean that the subcontractor had a contract with the principal. The Court also found that, though post-contractual conduct might result in contractual relationships, that was not the case in the present circumstances. [Case ref: Filadelfia Projects Pty Limited v Entirity Business Services Pty Limited & Anor (No 2) [2011] NSWSC 116.]

Jurisdictional error

2011-04-14T10:57:00.000+10:00

The Supreme Court of Victoria has found that the Building Appeal Board erred by refusing to exercise its jurisdiction to consider whether to modify certain setback regulations where an owner builder had constructed building works without the relevant permits and in breach of those regulations. The fact that the building was finished and occupied was not a sufficient reason to entitle the Board to refuse to exercise jurisdiction, and the refusal effectively meant that an earlier demolition order would stand.

The Court remitted the matter to the Board for it to consider the issue and also followed the High Court in ordering that, as the immediate neighbours’ property rights would be affected, they should be joined so as to avoid the possibility of a future dispute on the question. [Case references: Anstee & Calnan v Eyers & Ors [2011] VSC 79; FAI Insurance v Winneke (1982) 151 CLR 342; Kioa v West (1985) 159 CLR 550.]

Liquidated damages – Penalty – Enforceability of lump sum payments

2011-04-07T12:46:00.000+10:00

The Victorian Court of Appeal has confirmed that one of the indicia that a liquidated damages clause is penal is the payment of a single lump sum for breaches which may cause widely differing amounts of loss. However, it cannot be a penalty where a creditor accepts a sum less than what is due subject to certain undertakings of differing importance being fulfilled (whereby breach of even a minor undertaking may trigger an obligation to pay the whole). As the payment in this case involved a settlement analogous to a pre existing debt owed to a creditor, the Court concluded that it was not a penalty. [Case ref: Talacko v Talacko [2011] VSCA 71.]

Security of payment – When is construction work carried out outside NSW

2011-04-07T12:45:00.000+10:00

The Supreme Court of NSW has confirmed that an adjudicator was correct in concluding that he had no jurisdiction to determine an adjudication because the work the subject of the payment claim was performed outside NSW. The Court held that the mere facts that goods were sourced in NSW, and that some work was carried out in NSW, were not enough to conclude that the contract 'dealt with' construction work in NSW within the meaning of the Building and Construction Industry Security of Payment Act 1999 (NSW). [Case ref: Olympia Group (NSW) Pty Ltd v Hansen Yuncken Pty Ltd & Anor [2011] NSWSC 165.]

Security of payment – adjudication applications

2011-04-04T13:52:00.000+10:00

The Supreme Court of NSW has held that service of the statutory notice of an intention to make an adjudication application under the Building and Construction Industry Security of Payment Act 1999 (NSW) is not itself the making of an adjudication application. Accordingly, claimants remain free to proceed subsequently with the foreshadowed adjudication application or to recover the unpaid portion of the claimed amount as a debt due in any court of competent jurisdiction. [Case ref: Cromer Excavations Pty Ltd v Cruz Concreting Services Pty Ltd [2011] NSWSC 51.]

Interpreting a settlement agreement

2011-04-04T13:51:00.002+10:00

The NSW Court of Appeal has followed the High Court in interpreting a settlement agreement prepared without legal advice and recorded in a string of emails. Applying the principle that the general words in a release clause do not extend to the liability of one party in respect of which the other party was unaware, the Court concluded that the general words in the settlement agreement released only those claims known to the parties at the time it was entered into; it did not release other claims that were unknown at the time and discovered subsequently. [Case references: Marinchek v Cabport Pty Ltd [2010] NSWCA 334; Grant v John Grant & Sons Proprietary Ltd [1954] HCA 23; (1954) 91 CLR 112.]

Enforcement of foreign arbitral awards

2011-04-04T13:50:00.000+10:00

The Federal Court of Australia has ordered the enforcement of a Ugandan arbitral award after finding that it was validly made. The Court found that, under the International Arbitration Act 1974 (Cth), there is no general discretion for courts to refuse to enforce an award where the party seeking to avoid it fails to make out any of the limited grounds for refusal contained in the Act. Rather, the rationale of the Act, and the public policy of Australia, is to enforce international arbitral awards wherever possible in order to uphold contractual arrangements and support certainty and finality in international dispute resolution. [Case ref: Uganda Telecom Limited v Hi-Tech Telecom Pty Ltd [2011] FCA 131.]

Construction management services – defects rectification

2011-03-28T16:23:00.000+11:00

The Queensland Court of Appeal has held that a construction manager, which provided only construction management services and did not undertake any building works, was obliged to rectify defective building work if so directed by the Queensland Building Services Authority under the Queensland Building Services Authority Act 1991 (Qld). In doing so, the Court distinguished an earlier case (on the basis that it related to unlicensed work) which limited the QBSA’s powers to order such rectification in those instances where the entity providing the construction management services also carried out the building works. [Case references: McNab Constructions Australia P/L v Queensland Building Services Authority [2010] QCA 380; Puerto Galera Pty Ltd v JM Kelly (Project Builders) Pty Ltd [2008] QSC 356.]

Expert determination

2011-03-28T16:22:00.003+11:00

The Court of Appeal of Western Australia has held that an expert determination agreement between parties to refer a matter to expert determination gave the expert power to determine costs incurred in litigation before that agreement was made. The Court held that the phrase ‘matters in dispute’ in the expert determination agreement was wide enough to include costs, and was not limited to the issues pleaded in the litigation. [Case ref: Highway Construction Pty Ltd v Commissioner of Main Roads [2011] WASCA 27.]

Arbitration – circumstances justifying indemnity costs order

2011-03-28T16:22:00.000+11:00

The Supreme Court of Victoria has awarded indemnity costs in favour of a party seeking to enforce a foreign arbitral award, and against a party which had unsuccessfully resisted the award. The Court confirmed that the categories of special circumstances in which a court might award indemnity costs is not closed and that, on the facts, there were strong considerations in favour of awarding indemnity costs. These included discouraging unmeritorious challenges to arbitral awards and facilitating access to timely and cost effective dispute resolution.

The Court was careful to say that indemnity costs will not be automatically awarded merely because a party resists the enforcement of a foreign arbitral award; rather, the court retains ultimate discretion as to the appropriate costs order in the circumstances. [Case ref: Altain Khuder LLC v IMC Mining Inc & Anor (No 2) [2011] VSC 12.]

Contract – ascertaining the terms

2011-03-21T14:54:00.003+11:00

The Supreme Court of Victoria has overturned a first-instance decision in the Victorian Civil and Administrative Tribunal and held that a contract was not void for uncertainty. In doing so it reaffirmed the principle that if a court concludes that parties intended to make a contract, it should uphold the commercial bargain even where that bargain is poorly and inconsistently recorded within a contract document. Given that the contract had been largely performed, the Court chose (in contrast to the VCAT) to focus only on those terms that remained in contention between the parties; it concluded that there was sufficient certainty to hold that a warranties clause was capable of definite application. [Case ref: Mrocki v Mountainview Prestige Homes Pty Ltd [2010] VSC 624.]

Contract – repudiation

2011-03-21T14:54:00.000+11:00

The Western Australian Court of Appeal has confirmed that repudiation may refer to a party’s renunciation of the contract in the sense that its conduct evinces an unwillingness or inability to render substantial performance. As well, repudiation may refer to any breach of contract that justifies termination by the other party. The test for the former is whether that party’s conduct is such as to convey to a reasonable person, in the other party’s situation, renunciation of the contract as a whole or of a fundamental obligation. On the facts, the Court upheld the primary judge’s finding that a party’s conduct amounted to renunciation as it evinced an unwillingness to render substantial performance. [Case ref: JR Marine Systems Pte Ltd v Wavemaster International Pty Ltd (in liq) [2011] WASCA 16.]

Adjudication decisions – judicial review

2011-03-21T14:53:00.000+11:00

The Queensland Court of Appeal has followed the High Court and found that, despite the specific exclusion of the Building and Construction Industry Payments Act 2004 (Qld) from the operation of the Judicial Review Act 1991 (Qld), the legislature cannot exclude the power of a State Supreme Court to exercise its supervisory jurisdiction as to jurisdictional error in executive and judicial decision making. On the facts, it upheld the lower Court’s finding that the adjudicator had not made a decision beyond the scope of his legislative powers; that is, there had not been any jurisdictional error. [Case ref: Kirk v Industrial Court (NSW) (2010) 239 CLR 531; Northbuild Construction P/L v Central Interior Linings P/L & Ors [2011] QCA 22.]

Security of Payment Act – identification of work referred to in a payment claim

2011-03-15T11:55:00.000+11:00

The Queensland Court of Appeal has allowed an appeal and held that a valid payment claim under the Building and Construction Industry Payments Act 2004 (Qld) need only reasonably identify the construction work to which it relates, such that the basis of the claim is reasonably comprehensible to the principal. This test does not necessarily require the claimant to provide to the principal all documents referred to in the claim, or explain in detail how a particular claim item was calculated. The trial judge had erred in applying a more stringent test, which required the degree of identification be such as to apprize the parties of the real issues in dispute. [Case ref: T & M Buckley P/L v 57 Moss Rd P/L [2010] QCA 381.]

Security of Payment Act – valuation of construction work in claims for payment

2011-03-15T11:53:00.000+11:00

The Supreme Court of Victoria held that a description of construction work in summary form, accompanied by a statutory declaration and a breakdown of costs in a payment claim, constituted sufficient material for an adjudicator to undertake his statutory task of valuing the construction work. It was emphasised that it is the ‘construction work’ that is to be valued under the Building and Construction Industry Security of Payment Act 2002 (Vic), and not the end product, which should only act as a guide to the valuation of construction work. [Case ref: Claude Neon Pty Ltd v Rhino Signmakers Pty Ltd [2010] VSC 619.]

Security of Payment Act – validity of payment claims and judicial review of adjudications

2011-03-15T11:52:00.000+11:00

The Northern Territory Court of Appeal has held that, for the purposes of the Construction Contracts (Security of Payments) Act 2004 (NT), a valid ‘payment claim’ must strictly comply with the requirements for payment claims contained in the relevant construction contract. If a payment claim does not comply with the contract, then there is no payment claim ‘under’ the contract, and, therefore, no ‘payment claim’ for the purposes of the Act. Accordingly, a failure by a principal to respond to such a faulty payment claim will not create a ‘payment dispute’ under the Act. [Case ref: K & J Burns Electrical Pty Ltd v GRD Group (NT) Pty Ltd & Anor [2011] NTCA 1.]

Security of payment – jurisdictional error by adjudicator

2011-03-08T11:39:00.000+11:00

The Supreme Court of NSW has quashed an adjudicator’s determination because the adjudicator failed to make a bona fide attempt to carry out her functions under the Building and Construction Industry Security of Payment Act 1999 (NSW). This was for two reasons. First, the adjudicator made a jurisdictional error by demonstrating no logical or rational reasoning process in considering delays due to variations. Secondly, the adjudicator denied the parties natural justice by not giving them the opportunity to make submissions on whether a contractual date for payment provision was void. The court made an additional comment that the provision of massive amounts of irrelevant and surplus material to an adjudicator may amount to an abuse of process. [Case ref: St Hilliers Contracting Pty Limited v Dualcorp Civil Pty Ltd [2010] NSWSC 1468.]

Grounds to appeal an arbitration award – denial of natural justice

2011-03-08T11:38:00.000+11:00

The South Australian Supreme Court has allowed a party to appeal against two arbitration awards, having found that a denial of natural justice was a ‘manifest error of law on the face of the award[s]’, under the Commercial Arbitration and Industrial Referral Agreements Act 1986 (SA). In his second award, the arbitrator had found that the party was not entitled to certain damages; this appeared inconsistent with a finding in the arbitrator’s first award, yet he had not given the party any warning, or an opportunity to make submissions on this issue. The arbitrator also admitted an expert report on a restricted basis, without hearing full argument regarding its admissibility. [Case ref: Viterra Operations Ltd (trading as ABB Grain Storage and Handling) v Ewing International Limited Partnership [2010] SASC 328.]

Delegation and authority to contract

2011-02-28T12:06:00.002+11:00

The Supreme Court of New South Wales has held that an agreement involving a statutory corporation will be void when the individual executing the agreement on behalf of the corporation lacks authority to contract. For the corporation to be bound by authority ostensibly (but not actually) conferred on its agent, there must be a representation by the principal, and not by the agent, as to the extent of the agent’s authority.

The court emphasised that, when contracting, parties should observe the position held by the agent and whether entering the agreement is within powers customarily exercised by an officer in that position. Parties should be suspicious if contractual terms (a) appear to be financially unfavourable to the principal, or (b) provide for activities that fall outside the corporation’s main functions, or (c) provide benefits to the agent; inquiries should be made into the nature of the agent’s authority. Further, a principal may rescind an agreement if the agent has negotiated a financial gain for himself without the principal’s consent. [Case ref: Sydney Water Corporation v Makucha & Ors [2010] NSWSC 114.]

Cashing the securities

2011-02-28T12:05:00.003+11:00

The Federal Court of Australia has applied the balance of convenience test and ordered a contractor, which had cashed a subcontractor’s two securities, to renew its undertaking to maintain funds in a nominated account pending the hearing on the substantive issues. In doing so however, the court ordered that the funds, which had corresponded to the total value of the securities, be reduced by half since the terms made it clear that the contractor was entitled to have cashed only one security. This served the twin purposes of allowing the subcontractor to repair its reputation in the industry and with its bankers while not causing any significant prejudice to the contractor. [Case ref: Structural Systems (Constructions) Pty Ltd v Hansen Yuncken Pty Ltd [2010] FCA 1358.]

Security of payment – service of payment claims

2011-02-28T12:05:00.000+11:00

The Supreme Court of New South Wales has followed the NSW Court of Appeal in finding that an adjudicator committed a jurisdictional error by determining an adjudication application under the Building and Construction Industry Security of Payment Act 1999 (NSW) in circumstances where a payment claim and notices had not been properly served. Though the claimant had sent previous payment claims to a particular fax number, it sent the one in question to an older number that the respondent had long-ago relinquished. The court set aside the adjudicator’s determination. [Case refs: Steel v Beks [2010] NSWSC 4044; Chace Oyster Bar Pty Ltd v Hamo Industries Pty Ltd [2010] NSWCA 190.]

Additional security for delayed trial

2011-02-21T11:00:00.002+11:00

The Supreme Court of Queensland has applied the balance of convenience test and ordered an applicant (which had the benefit of an earlier restraining order that prevented a respondent enforcing an adjudication determination against the applicant) to provide an additional bank guarantee to secure the interest that would accrue on an adjudicated amount up until the conclusion of a pending trial. Given the nearly two-year delay in bringing the matter to trial, the initial security provided was insufficient. Failure to provide that additional security would mean that the earlier restraining order would lapse; the respondent would then be free to take steps to enforce that determination. [Case ref: Hansen Yuncken Pty Ltd v Ian James Ericson trading as Flea's Concreting & Anor (No 2) [2010] QSC 457.]

Adjudicator’s determination – natural justice – denial

2011-02-21T10:59:00.000+11:00

The Supreme Court of New South Wales has quashed an adjudication determination because the adjudicator failed to exercise the jurisdiction given to him by the Building and Construction Industry Security of Payment Act 1999 (NSW), which sets out the only matters an adjudicator is to consider.

The court held that the adjudicator failed to carry out his statutory function by not indicating anywhere in his determination that he had examined or even considered the payment schedule, and that – by providing no intellectual justification for his decision – he had made a jurisdictional error in preferring the unsubstantiated assertions of one party over the unsubstantiated assertions of the other party. [Case ref: Bauen Constructions v Westwood Interiors [2010] NSWSC 1359.]

Arbitral awards – appeal rights

2011-02-21T10:58:00.000+11:00

The Supreme Court of Western Australia has refused leave to appeal from two arbitral awards made under the Commercial Arbitration Act 1985 (WA) concerning similar fact situations. In doing so, the court confirmed that appeal rights under the Commercial Arbitration Act are limited. Though the Act provides that appeals may be excluded by contractual terms, a term providing that '[a]ny arbitral award shall be final and binding' is insufficient to do so. Secondly, in the absence of a manifest error of law on the face of the award, there must be strong evidence of an error of law coupled with a determination as to whether the issue of law in appeal may add (or be likely to add) to the certainty of the commercial law. [Case ref: Rizhao Steel Holding Group Co Ltd v Koolan Iron Ore Pty Ltd [No 2] [2010] WASC 385.]

Restitution for mistake

2011-02-14T11:31:00.000+11:00

The Queensland Court of Appeal has confirmed that a builder can claim compensation under the Property Law Act 1974 (Qld) if it made lasting improvements to land in the genuine but mistaken belief that the land was owned by the party with whom the builder had contracted. It may do so even if the builder’s belief was unreasonable or careless. While unreasonableness or carelessness does not preclude compensation, the unreasonableness of an asserted belief may point to the improbability of it in fact being held. [Case ref: Oakwood Constructions Pty Ltd v Wyndon Properties Pty Ltd [2010] QCA 323.]

Default clauses and the exclusion of the common law

2011-02-14T11:30:00.002+11:00

The Supreme Court of South Australia has confirmed that whether a default clause is to be construed as removing common law rights is to be determined primarily by reference to the agreement itself. A clause that deals with relief upon breach may be intended to augment rather than restrict or remove common law rights. Clear words are needed, therefore, to rebut a presumption that a contracting party does not intend to abandon its common law remedies for breach of contract. [Case ref: Horsell Nominees Pty Ltd & Ors v NAJB Pty Ltd [2010] SASC 321.]

Offers of compromise, Calderbank offers and costs orders

2011-02-14T11:29:00.000+11:00

The New South Wales Supreme Court has confirmed that an offer of compromise must be exclusive of costs if it is to be in accordance with the Uniform Civil Procedure Rules. If it does not comply with the Rules, it may still operate as a Calderbank offer. To do so, however, it must include an explicit statement that it will operate as a Calderbank offer if it does not constitute a valid offer under the Rules.

On the question of an appropriate costs order in the case of two or more unsuccessful defendants, the Court confirmed that – though it has wide discretion – in the ordinary course of events those defendants will be jointly and severally liable. [Case ref: Agricultural and Rural Finance Pty Limited v John Edward Atkinson & Ors [2010] NSWSC 1396.]

Exclusion of liability clauses

2011-02-07T16:20:00.000+11:00

The High Court has applied general rules of construction – by having regard to the language of an exclusion clause in light of the contract as a whole – and upheld an appeal against a decision of the Queensland Court of Appeal regarding the correct construction of that exclusion clause. The court agreed with the primary judge that the clause was intended to exclude liability for what a product did, rather than what it failed to do. Accordingly, many in the construction community are re-visiting their exclusion clauses. [Case ref: Selected Seed Pty Ltd v QBEMM Pty Limited and Ors [2010] HCA 37]

Void adjudication determinations

2011-02-07T16:18:00.004+11:00

The NSW Supreme Court has held that there is a disjunction in the mechanism of the Building and Construction Industry Security of Payment Act 1999 (NSW) where an adjudication determination is declared void. In that the Act allows for the adjudication application leading to that void determination to be withdrawn as a prelude to making a fresh application, the five business days for doing so run from the date the void determination was made (not the date on which it was declared by a court to be void). As a practical matter, claimants will have to decide very quickly whether they wish to challenge the determination.

The Court declined to presume the legislature’s intention by a forced construction of the statutory drafting. Rather, it has left it to the legislature to clarify the position. [Case ref: Cardinal Project Services v Hanave [2010] NSWSC 1367]

Staying the enforcement of a costs order

2011-02-07T16:18:00.000+11:00

The Supreme Court of Western Australia has held that, under the Civil Judgments Enforcement Act 2004 (WA), a costs order will be stayed pending an appeal where there is a real risk that a payment made in accordance with that order will not be recovered if the appeal is successful. This is not materially different from the position that existed before the Act was introduced. While the onus is on the party seeking the stay to establish why the stay should be granted, the other party cannot rely on its own refusal to disclose any information as to its assets and liabilities to defeat the application. Once the party seeking the stay has established that there is a real risk that a payment may not be recovered, it then falls to the other party to show that it does have the means to do so. [Case ref: Spiers Earthworks Pty Ltd -v- Landtec Projects Corporation Pty Ltd [2010] WASCA 226]

Good Faith in Contracts

2011-01-28T11:55:00.001+11:00

Following a thorough review of the authorities, the Western Australian Court of Appeal has found that 'good faith' is not yet a term of art; it should be given its natural and ordinary meaning, which is honesty of purpose or honesty of intention in entering into engagements. Parties engaged in good faith negotiations owe each no fiduciary duties and are not required to act in the interests of the other party. Rather, a party’s obligation is no higher than subjecting itself to the process of negotiation, and keeping an open mind in the sense of being willing to consider the other party’s proposals and put forward options for resolving differences. [Case ref: Strzelecki Holdings Pty Ltd v Cable Sands Pty Ltd [2010] WASCA 222]

Negligence and Pure Economic Loss

2011-01-28T10:22:00.000+11:00

The Supreme Court of Queensland has followed the High Court and affirmed that the designer or builder of commercial premises owes no duty of care – in respect of pure economic loss arising from defects in those premises – to a person with whom they have no contractual relationship. The relevant test of whether a duty of care to avoid economic loss is owed is a party’s 'vulnerability'; that is, that party’s inability to protect itself from the consequences of another person’s failure to take reasonable care, either entirely or at least in a way which would cast the consequences of the loss on that other person. [Case ref: Darling Downs Foods Pty Ltd v Bovis Lend Lease Pty Ltd & Ors [2010] QSC 409]

Security of Payment – ordinary place of business

2011-01-28T10:20:00.000+11:00

The NSW Supreme Court has found that for the purposes of the Building and Construction Industry Security of Payment Act 1999 (NSW), a person’s 'ordinary place of business' includes any place at or from which the person usually engages in activities that form a not insignificant part of that person’s business. A person can have more than one ordinary place of business and it is not necessary for an ordinary place of business to have a direct connection with the transaction that is the subject of a payment claim. [Case ref: Parsons Brinckerhoff Australia Pty Ltd v Downer EDI Works Pty Ltd [2010] NSWSC 1295]

Mistake

2011-01-21T12:39:00.000+11:00

The Supreme Court of Queensland has confirmed that rectification of a contract on the basis of contrary common intention requires 'clear and convincing proof' that there was a different common intention as well as proof of what was the 'omitted ingredient', while rectification on the basis of unilateral mistake requires an element of unconscionability. As the parties to the contract had access to professional advice, were commercially sophisticated, and had engaged in substantial and lengthy pre-contract negotiations, the court was not persuaded as to either contrary common intention or unilateral mistake; it declined to order the rectification being sought. [Case ref: JM Kelly (Project Builders) Pty Ltd v Toga Development No 31 Pty Ltd (No 5) [2010] QSC 389]

Liquidated damages

2011-01-21T12:36:00.000+11:00

The Supreme Court of Queensland has held that a liquidated damages clause was a penalty for two reasons. First, a single sum was payable for breaches of a wide variety of covenants, some of which involved little or no damage. Secondly, the liquidated damages amount had been included to ensure compliance with the covenants rather than being a genuine pre-estimate of the likely loss. [Case ref: Vercorp Pty Ltd and Anor v ACN 096 278 483 Pty Ltd as trustee of the Williams Family Trust (No 2) [2010] QSC 405]