HWLE’s Melbourne Construction & Infrastructure newsletter The Critical Path is back in a revamped format that will see articles published on a regular basis. This new form will bring you information when you will find it most useful.
Under our revamped model, articles will be published on a rolling basis to be compiled and circulated quarterly in this newsletter format. We welcome any feedback you may have on The Critical Path, as we wish to make it as relevant to our readers as possible.
An update on impending subcontractor registration requirements in Victoria
This article was written by Alan Chiang, Partner, and Timothy White, Solicitor.
Last year, the Victorian Parliament passed legislation requiring all subcontractors to obtain registration. The purpose of this new scheme is to reduce the incidence of non-compliant building work in Victoria and increase accountability, which the Government intends to gradually roll out across different subcontracting trades in the coming years.
However, before the legislation can come into effect, complementary regulations must be enacted. The precise timing of the release of these regulations is yet to be announced.
HWL Ebsworth Lawyers has expertise in construction registration. Please contact Alan Chiang of our Construction and Infrastructure team with any enquiries.
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Using ‘best endeavours’ – what is required to satisfy this obligation?
This article was written by Alan Chiang, Partner, and Timothy White, Solicitor.
The recent NSW Supreme Court decision of Altis PropCo2 Pty Ltd v Majors Bay Development Pty Ltd1 (8 April 2022) affirms that while ‘best endeavours’ obligations in contracts are onerous, they are by no means limitless.
The case concerned a contract of sale (the Contract) in which Altis PropCo2 Pty Ltd (Altis 2) agreed to purchase apartments from development company Majors Bay Development Pty Ltd. The Contract was subject to Altis 2 obtaining approval for a loan from Westpac which Altis 2 promised to use its ‘best endeavours’ to secure.
In circumstances where Westpac had retracted its initial loan terms, the Court found that Altis 2 had satisfied the ‘best endeavours’ obligation by unsuccessfully attempting to negotiate the terms of the loan with the bank. The Court ultimately declared that the obligation requires the obligor to ‘do all that reasonably can be done in the circumstances to achieve the contractual obligation, but no more’.
HWL Ebsworth Lawyers has expertise in preparing and advising on the correct interpretation of construction contracts. Please contact Alan Chiang of our Construction and Infrastructure team with any enquiries.
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Prevention is better than the cure: the Victorian Court of Appeal affirms that the prevention principle is founded on a duty to cooperate
This article was written by Paul Graham, Partner, and Mia Crema, Solicitor.
The Victorian Court of Appeal recently delivered its judgment in Bensons Property Group Pty Ltd v Key Infrastructure Aus Pty Ltd [2021] VSCA 69 (Bensons).
Bensons is a reminder to parties who turn to the legal system to resolve issues and enforce their rights in circumstances where the relationship has soured. Parties should be aware that the court will not be concerned with all the peripheral grievances that surround the relationship. The court will only have regard to the application of the law to the contract or arrangement when determining a party’s entitlements.
Although the dispute arose during the planning phase as opposed to during construction, Bensons relevantly affirms three key matters for parties to a construction contract:
- Party X cannot assert the strict performance of a contractual obligation that Party X has prevented Party Y from performing;
- The implied duty to cooperate does not impose a duty to act generally in the other party’s best interest, and nor can it be used to impose an obligation that would be commercially advantageous where the contract does not provide for that obligation; and
- The prevention principle cannot be applied as though it is a separate legal principle that, when breached, carries enforceable remedies independent of the contract.
HWL Ebsworth Lawyers has expertise in construction contract disputes. Please contact Paul Graham of our Construction and Infrastructure team to discuss any aspect of the above.
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Commerciality and rectification – Victorian Supreme Court rectifies mistake in contract
This article was written by Leighton Moon, Partner, and Jashrin Whitehead, Solicitor.
The Supreme Court of Victoria in Melbourne Property Group Investments (MPGI) Pty Ltd as trustee for the MPGI Trust v. Knight 43 Martin Street Pty Ltd [2022] VSC 41 considered whether a contract should be rectified on the basis that, there was a clear, common and continuing intention of the parties which was mistakenly not expressed accurately in the drafting. In fact the drafting created an unworkable and nonsensical outcome.
The Court ordered the rectification of a clause 8.1 to reflect the common intention of the parties and highlighted the importance of precise drafting.
HWL Ebsworth Lawyers has expertise in advising on the correct interpretation of construction contracts in a variety of settings. Please contact Leighton Moon of our Construction and Infrastructure team to discuss any aspect of the above.
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A Commonwealth Government Procurement report – ‘Government Procurement: A Sovereign Security Imperative’
This article was written by Toby Mittelman, Partner, Julie Charles, Special Counsel, and Konrad Anderson, Senior Associate.
On 31 March 2022, the House of Representatives Standing Committee on Infrastructure, Transport and Cities published a new report, “Government Procurement: A Sovereign Security Imperative“.
The broad Terms of Reference for the report resulted in a very interesting and wide-ranging report of nearly 200 pages, encompassing the key themes of the infrastructure pipeline, sovereign security challenges and alternative procurement models.
Key recommendations included reviewing the Commonwealth Procurement Rules, establishing a mechanism for monitoring and rating the performance of funding recipients on government-funded infrastructure projects and developing Australia’s sovereign capacity in infrastructure delivery by making projects in the Australian infrastructure pipeline more accessible to tier two and three companies.
HWL Ebsworth has expertise advising public and private sector clients on a wide range of major infrastructure and construction projects, including some of the most complex projects within industry sectors such as transport, defence, energy and natural resources, and social infrastructure (including health, education, sporting and other accommodation). Please contact Toby Mittelman of our Construction and Infrastructure team to discuss any aspect of the above.
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Restrictions on a contractor’s right to payments under an operation agreement found to be void on the basis that they were “pay when paid” provisions
This article was written by Leighton Moon, Partner, and Chris Kipouridis, Solicitor.
It is commonplace for a developer to enter into separate contracts to build (ie an EPC Agreement) and then operate and maintain (ie an O&M Agreement) works.
Following this case, parties will need to be careful when making the right to receive payment under one contract conditional on performance or steps under the other contract. Such conditions may be void as they are captured by prohibition on “pay when paid” provisions within the security of payment legislation.
In Lal Lal Wind Farms Nom Co Pty Ltd v Vestas – Australian Wind Technology Pty Ltd [2021] VSC 807, Lal Lal and Vestas entered into an EPC Agreement and an O&M Agreement in relation to a wind generation facility. Under the O&M Agreement, Vestas served a payment claim. Part of Lal Lal’s argument in providing a nil assessment was the milestone of practical completion had not been achieved under the EPC Agreement, that this was a requirement before a payment claim could be submitted and therefore, no reference date had accrued and no payment was due.
Her Honour Stynes J held in the Supreme Court of Victoria that despite being related agreements, the entitlement for payment under the O&M Agreement was contingent or dependent on the operation of another contract, being the EPC Agreement. It therefore was captured by section 13(2)(c) of the Building and Construction Industry Security of Payment Act 2002 (Vic) and therefore void as a “pay when paid” provision.
HWL Ebsworth Lawyers has expertise in dealing with security of payment disputes. Please contact Leighton Moon of our Construction and Infrastructure team with any enquiries.
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Incomplete heads of agreement found to be complete and enforceable
This article was written by Leighton Moon, Partner, Kevin Lock, Special Counsel, and Chris Kipouridis, Solicitor.
Delaney v Delaney [2022] VSCA 48 concerned a situation where an incomplete heads of agreement was found to be complete and enforceable. The two parties to the heads of agreement agreed on essential terms, but left a substantial amount of non-essential terms to be decided.
In finding the heads of agreement to be legally binding, the Court focussed on the wording of the agreement, which indicated the parties intended to be legally bound. The absence of non-essential did not indicate the heads of agreement was incomplete.
The case serves as an important reminder as to careful drafting in preliminary agreements.
HWL Ebsworth Lawyers has expertise in preparing contract documentation for a range of construction contracts and resolving associated dispute. Please contact Leighton Moon of our Construction and Infrastructure team to discuss any aspect of the above.
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Domestic building disputes and delays at VCAT – County Court affirms decision to bypass VCAT jurisdiction
This article was written by Leighton Moon, Partner, Tara Nelson, Senior Associate, and Kai-Yang Goh, Solicitor.
On 29 October 2021 in the decision of Uber Builders and Developers Pty Ltd v MIFA Pty Ltd2, the County Court reiterated its position that the present pandemic-induced delays in the Victorian Civil and Administrative Tribunal (VCAT) have become so severe that, despite being chiefly responsible for hearing domestic building disputes under legislation, VCAT could be bypassed in the current circumstances.
This finding makes overtly clear the County Court’s position on the interpretation of its obligation to stay proceedings for domestic building disputes where the dispute is one that “could be heard by VCAT” and provides significant comfort for parties that commencing proceedings for domestic building disputes directly in Victorian Courts is now a feasible option while conditions persist.
HWL Ebsworth Lawyers has expertise in acting for all parties including owners, builders and subcontractors in building disputes across both the domestic and commercial setting. Please contact Leighton Moon of our Construction and Infrastructure team with any enquiries.
For further information on the delays currently affecting VCAT, please see our previous Critical Path article here.
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Do principals need to act in good faith when exercising its “absolute direction” to extend the date for practical completion?
This article was written by Paul Graham, Partner, Tara Nelson, Senior Associate, and Thomas Appleby, Solicitor.
The decision in Growthbuilt Pty Ltd v Modern Touch Marble & Granite Pty Ltd [2021] NSWSC 290 is a timely reminder to contractors to comply with the time bars in their construction contracts when submitting their claims for extensions of time as the Principal does not have to act in good faith when exercising its “absolute direction” to extend the date for practical completion.
HWL Ebsworth Lawyers has expertise in construction contract disputes. Please contact Paul Graham of our Construction and Infrastructure team with any enquiries.
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When is a contractor entitled to time and/or costs due to COVID-19 restrictions under standard form AS documents?
This article was written by Leighton Moon, Partner, and Fin Neaves, Associate.
The general position under the unamended AS 4000-1997/AS 4902-2000 and AS 2124-1992/AS 4300-1995 is as follows. As a general rule of thumb the risk profiles are similar under AS 4000-1997/AS 4902-2000 and AS 2124-1992/ AS 4300-1995.
Under AS 4000-1997 / AS 4902-2000:
A COVID-19 delay such as industry shutdown or capacity limits may be a change in legislation that could not have been reasonably anticipated. If so:
- there is no express right for the contractor to be entitled to an EOT. It is arguable that the Superintendent will be obliged to give one despite there being no express right as part of their discretion; and
- the contractor may be entitled to additional costs (but arguably no margin), but only if Annexure Part A lists the affected WUC. If no WUC is listed in Annexure Part A, then the contractor will not be entitled to additional costs. This is a critical point to check for each specific contract.
Under AS 2124-1992 / AS 4300-1995:
A COVID-19 delay such as industry shutdown or capacity limits may be a change in law and delays/directions by authorities that could not have been reasonably anticipated. If so:
- the contractor is entitled to an EOT;
- the contractor is entitled to additional costs (plus margin) for changed work methods; and
- there is no express right to delay damages unless stated in Annexure Part A, but these costs may be included in the assessment of changed work methods per the paragraph (b) above.
Regardless of whether the contractor is able to claim an EOT, it is still obliged to give a notice of delay should one occur. If it is entitled to an EOT, then it must give notice per the procedure in the contract.
HWL Ebsworth Lawyers has expertise in advising principals, contractors and subcontractors on extension of time claims and delay damages claims. Please contact Leighton Moon of our Construction and Infrastructure team to discuss any aspect of the above.
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