The Critical Path – Melbourne C&I Newsletter March 2023 

15 March 2023

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.

Decision of the Victorian Supreme Court of Appeal signals VCAT no longer has the jurisdiction to hear federal matters

This article was written by Paul Graham, Partner, Tara Nelson, Senior Associate and Nick Jarrett, Law Graduate. 

The recent decision of the Court of Appeal in the Victorian Supreme Court in Thurin v Krongold Constructions (Aust) Pty Ltd [2022] VSCA 226 has determined that hearing, interpreting or applying federal matters such as the Competition and Consumer Act 2010 (Cth) and the Insurance Contracts Act 1984 (Cth), is outside of the jurisdiction of the Victorian Civil and Administrative Tribunal (VCAT).

Given that VCAT has primary jurisdiction over domestic building disputes in Victoria, and that such federal matters are the subject of these types of disputes, this decision is likely to cause delays because VCAT will need to refer these matters to an appropriate forum to resolve a federal jurisdictional dispute.

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Payment Schedule or Payment Certificate – Count your days carefully or risk being out of time

This article was written by Colin Harris, Partner and Kelly Brook, Associate.

Section 76(1) of the Building Industry Fairness (Security of Payment) Act 2017 provides that a payment schedule must be given within the earlier of the period specified under the construction contract or 15 business days after receiving the payment claim.

In Allencon Pty Ltd v Palmgrove Holdings Pty Ltd trading as Carruthers Contracting [2023] QCA 6, the Queensland Court of Appeal found that a payment schedule was required to be provided within the time provided in the contract for issuing a “payment certificate”, a period shorter than the 15 business days.

The time for issuing the payment certificate was in calendar days, not business days, with the result the Respondent lost the benefit of the non-business days over Christmas. The late payment schedule resulted in the Claimant obtaining judgment in the amount of the payment claim.

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To be valid, payment claims must sufficiently identify the work claimed

This article was written by Colin Harris, Partner and Kelly Brook, Associate. 

In Denbrook Constructions Pty Ltd v CBO Developments Pty Ltd [2022] QDC 184, the District Court of Queensland found a payment claim was invalid because it failed to sufficiently identify the work to which it related, as required by section 68(1)(a) of the Building Industry Fairness (Security of Payment) Act 2017 (Qld).

This case serves an important reminder to ensure payment claims contain sufficient detail to comply with security of payment legislation.

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Expert Determination Clause – Court Gives Effect to Clause Despite Concerning Third Parties Mineralogy Pty Ltd v Adani Mining Pty Ltd [2022] QCA 206

This article was written by Leighton Moon, Partner, Kevin Lock, Special Counsel and Jashrin Whitehead, Solicitor. 

This case provides useful guidance on dispute resolution clauses and confirms that courts are willing to hold parties to their agreement to use expert determination to resolve disputes.

A dispute arose over whether Mineralogy Pty Ltd (‘Mineralogy’, the ‘Appellant’) was required to enter into third party consent deeds with financiers under the terms of a royalty deed it had with Adani Mining Pty Ltd (‘Adani’, the ‘Respondent’).

Adani referred the dispute to expert determination.

Mineralogy sought declarations there had been no valid notice of dispute and no valid appointment of an independent expert.  It also sought an injunction permanently restraining the expert determination.

Mineralogy contended the dispute resolution clause (which categorised different types of disputes by reference to “technical matter”, “financial matter”, and “legal matter”) was not sufficiently wide enough to capture the dispute. This was due to the dispute being of mixed fact and law and that the dispute related to third party financiers rather than the parties.

The Court of Appeal dismissed the matter and declined to stay the expert determination finding that the dispute fell within the wide scope of the dispute resolution clause.

This case highlights the importance of precise drafting of dispute resolution clauses to capture the intended scope of disputes and is a reminder that courts will interpret and enforce such terms as agreed between the parties.

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Court rejects Proof of Debt linked to SOPA debt: In the matter of Nicolas Criniti Pty Ltd (in Liquidation) [2022] NSWSC 1149

This article was written by Alan Chiang, Partner, and Chris Kipouridis, Associate.

In Re Nicolas Criniti in Liquidation, the interplay of the Corporations Act and the NSW SOP Act came to a head in an appeal against the rejection of a builder’s proof of debt in the winding up of the developer entity.

The Court found that the builder was unable to rely upon an adjudication determination in its proof of debt that was awarded after the date the relevant respondent company entered into voluntary administration. In this case, the liquidator was entitled to reject the proof of debt, on the basis that there was no enforceable debt at the time of the voluntary administration.

The Supreme Court of NSW upheld the liquidator’s decision and rejected the builder’s proof of debt. The case demonstrates the important distinction between the processes under the SOP Act and when enforceable debts arise.

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Security of Payment Act – Service of claims and misleading or deceptive representations in payment schedules

This article was written by Paul Graham, Partner and Fin Neaves, Associate.

The Supreme Court of New South Wales in BCFK Holdings Pty Ltd v Rork Projects Pty Ltd [2022] NSWSC 1706  recently found that if a payment claim issued pursuant to the Building and Construction Industry Security of Payment Act 1999 (NSW) was not effectively served on a respondent but subsequently came to the attention of and was read by the respondent, it will be taken to be validly served at the time it actually came to the attention of the respondent.

The Court also considered whether, the representations made in the payment schedule (the respondent subsequently adopted the opposite position), amounted to misleading or deceptive conduct pursuant to section 18 of the Australian Consumer Law. It was ultimately determined that the claimant did not rely on the representations.

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Waiver, estoppel and variation: a cyclone in a teacup

This article was written by Alex Ottaway, Special Counsel and Raihan Hossain, Associate. 

We read with interest an article by our colleague Nicholas Matkovich on the decision of Allianz Australia Insurance v Delor Vue Apartments (Allianz v Delor Vue) 1 as it relates to the insurer’s duty of utmost good faith. We are interested in the decision for a different reason: it contains guidance from Australia’s highest court on waiver, estoppel and variation, which are ubiquitous in construction disputes, but are commonly misunderstood.

In construction disputes, waiver, estoppel and variation are commonly used in multiple different ways. For example:

  • where a principal seeks to rely on a contractual time bar due to the contractor’s failure to comply with a notification requirement, the contractor may argue that the principal, by its words or conduct, dispensed with the notification requirement, and therefore, due to waiver, estoppel or variation, the principal is prevented from relying on the time bar and the contractor may pursue its entitlement;
  • where a party has elected not to raise a statutory limitation defence, that party may, due to waiver or estoppel, be prevented from raising the defence at a later stage, as the High Court of Australia has recently confirmed; and
  • more generally, where a party expresses a factual, legal or commercial position and later seeks to resile from it, waiver, estoppel and variation are commonly deployed in an attempt to bind that party to its original position.

However, it is often not appreciated that waiver, estoppel and variation are somewhat fragile and may only apply in specific circumstances. The decision of Allianz v Delor Vue, which concerned an insurance claim following cyclone damage to a residential apartment complex, is a case in point: an insurer that waived a defence to an insurance claim was permitted to revoke the waiver (ie ‘unwaive’ the defence). Arguments based on these doctrines turned out to be a storm in a teacup and were unsuccessful.

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