Welcome to The Critical Path, HWL Ebsworth Lawyers’ Melbourne Construction and Infrastructure newsletter featuring the latest developments in construction law, to help you stay on the critical path!
As always, we hope you enjoy this issue of The Critical Path and that it finds some use in your endeavours.
Valuing variations – ‘anything you say may be used against you’?
This article was written by Alex Ottaway, Special Counsel and Raihan Hossain, Solicitor.
It is fairly common for a construction contract to provide that the valuation of a variation is to be as agreed between the parties, or (if agreement cannot be reached) determined by the Principal’s Representative. Are negotiations between the parties regarding the valuation of variations subject to ‘without prejudice’ privilege, or can admissions or concessions made by a party be used against it in later legal proceedings? Are the parties under an obligation to negotiate the value of the variations in good faith?
In this article, Alex and Raihan discuss the decision of A&A Mechanical Contractors v Petroleum Company of Trinidad and Tobago, handed down on 3 November 2022, in which the UK Privy Council had some interesting insights on these questions.
Increasing construction costs? Negotiate, don’t repudiate!
This article was written by Colin Harris, Partner, and Kelly Brook, Solicitor.
Headlines regarding the significant increase in construction costs have been hard to avoid over the past twelve months. Whilst many owners and builders have sought to negotiate a fair outcome without enforcing their strict rights, this case comes as a timely reminder for parties to act in accordance the provisions of the relevant building contract or face the risk of repudiation.
The dispute in Addinos Pty Ltd v OJ Pippin Homes Pty Ltd [2022] QDC 205 arose from the termination of a building contract where construction costs had ‘increased significantly since the project was priced’. The District Court of Queensland found that the builder had no lawful basis to terminate the building contract and its communications evinced an intention to no longer be bound by the contract, amounting to repudiation.
While this case involves a building contract terminated in 2016, the decision of Rinaudo J provides a timely warning for contractors to proceed with caution when responding to the pressures arising from dramatic price increases and supply issues flowing from the COVID-19 pandemic and war in Europe.
Does the Domestic Building Contracts Act provide a new way for builders to obtain variation costs and an extension of time? – Jolin Nominees Pty Ltd v Daniel Investments (Aust) Pty Ltd [2022] VSCA 209
This article was written by Leighton Moon, Partner, Julie Charles, Special Counsel and Thomas Appleby, Solicitor.
The main purpose of the Domestic Building Contracts Act 1995 (Vic) (DBCA) is to regulate contracts for the carrying out of domestic building work.
In the recent decision of Jolin Nominees Pty Ltd v Daniel Investments (Aust) Pty Ltd [2022] VSCA 209, the Supreme Court of Victoria Court of Appeal (VCA) clarified that a builder may still be entitled to variation costs and an extension of time under the DBCA even if notice requirements are not complied with. This may occur in circumstances where a builder will experience ‘a significant or exceptional hardship’ in the nature of financial hardship if the cost of variation works performed remains unpaid by the Owner.
Making forms your Forte – how to ensure that your terms prevail
This article was written by Alex Ottaway, Special Counsel and Michael Graziano, Solicitor.
It is a familiar scenario: A wants to engage B to provide works or services, and each of A and B want the engagement to be on its own (self-serving) standard terms. The competing forms (A’s and B’s respective terms), cover the same ground but are very different, like a parallel universe or evil twin. Each of the forms purports to govern the engagement – but they can’t both be right, for in this ‘battle of the forms’, there can only be one winner.
Which form will prevail is highly fact-dependent. The courts approach disputes such as this by analysing the parties’ communications (including the language contained within the forms) and conduct to ascertain which form the parties objectively intended to govern the engagement. That said, some common themes and legal principles emerge in these ‘battle of the forms’ cases, which, if understood, can assist commercial parties maximise the chances that their preferred terms will prevail.
In this article, Alex and Michael discuss the decision of the New South Wales Court of Appeal in Forte Sydney Construction v N Moit & Sons (NSW) (Forte), which involved a ‘battle of the forms’.
Owners Corporation actions and limitation periods under the Building Act 1993 clarified by the Court of Appeal
This article was written by Alan Chiang, Partner and Rob Gilchrist, Solicitor.
In Lendlease Engineering Pty Ltd v Owners Corporation No 1 PS526704E & Ors [2022] VSCA 105, on appeal from the Supreme Court ([2021] VSC 338), the Court of Appeal held that:
- the Supreme Court had erred (with respect to limitation periods), and that where multiple occupancy permits apply to staged works, the limitation period under section 134 of the Building Act 1993 runs from the date of the first permit issued for the relevant works, not the date of the last permit issued; and
- the Supreme Court had not erred (with respect to joinder), and that where an owners corporation commences proceedings within time and subsequently seeks to join lot owners who would be otherwise time barred, those lot owners will remain barred unless there is demonstrative evidence to establish that the OC commenced proceedings on their behalf.
As a result, it is now settled law that the 10-year limitation period under section 134 will run from the date that an occupancy permit is first issued that relates to the relevant portion of the building work (and not the last permit applying to the works more generally), even if it is ‘subsequently cancelled or varied’. Parties seeking to bring claims for defective works where multiple occupancy permits apply should take care to bring proceedings within time as it applies to the particular works in issue and not rely on the date of the final occupancy certificate.
Further, owners corporations are still unable to join individual lot owners for defective works where the lot owners’ limitation period has expired unless there is evidence that the claim was brought by the OC on behalf of that lot owner.
Apportionment and the Wrongs Act: County Court affirms that courts are to decide whether a claim is apportionable, not parties by agreement
This article was written by Paul Graham, Partner, Kevin Lock, Special Counsel and Timothy White, Solicitor.
The recent County Court decision of Oberin v Brandrick & Anor [2022] VCC 1829 is a timely reminder that parties are unable to jointly agree that a claim is apportionable or subject to section 24AJ under the Wrongs Act 1958 (Vic) (Wrongs Act).
The case concerned an architect, Brandrick Architects (Architect), who sought court orders dismissing a Notice of Contribution (Notice) filed by a concurrent wrongdoer, Tugmotion Pty Ltd (Builder), in a dispute concerning defective works. The Architect contended that the Notice should be dismissed because the Architect had entered into a deed of settlement with the claimant which stipulated that the claim was apportionable, and the Architect could not be required to contribute to any damages the Builder was ordered to pay the claimant, in accordance with section 24AJ of the Wrongs Act.
Burchell J held that whether a claim is apportionable and afforded the protections under section 24AJ of the Wrongs Act is a matter for the courts to decide. The Court therefore refused to dismiss the Notice.
In doing so, the County Court has strongly affirmed existing judicial opinion that parties cannot by agreement decide if a claim is apportionable under Part IVAA of the Wrongs Act, and thereby exclude the operation of Part IV of the Wrongs Act. This instead is a matter that can only be determined by the courts.
