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.
SOPA Payment Claim not enough to prove debt is due and payable
This article was written by Paul Graham, Partner, Tara Nelson, Senior Associate and Chris Kipouridis, Solicitor.
In Re J Build Developments Pty Ltd [2022] VSC 434 a statutory demand was issued in reliance of a progress claim pursuant to the Building and Construction Industry Security of Payment Act 2002 (Vic) (SOP Act) which did not produce the desired effect. The Supreme Court of Victoria held that just because the statutory demand relied upon the SOP Act provisions it did not necessarily mean there was a debt due and payable under that act. Instead, the court found that there was a genuine dispute and the statutory demand was set aside.
In this case, J Build successfully disputed the alleged debt based on two key factors:
- there was a genuine dispute as to whether the SOP Act requirements had been satisfied; and
- there was a genuine dispute as to the existence of the debt itself.
This case serves as an important reminder to ensure statutory demands refer to debts that are actually owed.
Binding or non-binding expert determinations – say what you mean and mean what you say
This article was written by Leighton Moon, Partner, Brian Rom, Special Counsel and Fin Neaves, Associate.
The Supreme Court of Victoria in Aligned Services Group Pty Ltd v Citi-Con (Vic) Pty Ltd [2022] VSC 286 recently found that an expert determination was not final and binding even though expert determination rules expressly providing for a final and binding result were referred to the contract. The expert determination clause in this contract was ambiguous as to what was intended and the case is a reminder that these issues need to be set out clearly.
Non-binding determinations do still serve a commercial purpose and the case provides guidance on when the courts are prepared to find that such a purpose was intended by the parties.
The court also found that although the determination was late, it was not invalid. This was important as it meant that it unnecessary for the parties to go through another expert determination process before litigating.
Recourse has the question of quantification loaded within it
This article was written by Paul Graham, Partner, Jane Ku, Associate and Nicholas Jarrett, Law Graduate.
Perkins (WA) Pty Ltd v Weston [No 2] [2022] WASCA 111 was a dispute between a Contractor and a Financier (having stepped in to replace the Principal). The key issue considered by Quinlan CJ, Beech JA and Tottle J of the Supreme Court of Western Australia (Court of Appeal) was whether the Financier had the right to recourse to a bond provided by the Contractor as security under the building contract. This entitlement centred on whether the Contractor had failed to pay an amount ‘due otherwise than under the Contract’, which the Court interpreted as requiring an identifiable and, importantly, a quantifiable amount owed that has failed to have been paid.
This case reminds practitioners that careful consideration should be given to the drafting of security clauses if a party wishes to have an unrestrained right of recourse or a prompt release of security.
Reputational damage not enough to warrant injunction on call on security
This article was written by Lucas Keogh Partner, Clancy Lambe, Solicitor and Alexander Lalor, Law Graduate.
On 2 March 2022, the Supreme Court of Western Australia delivered judgment in Lanskey Constructions Pty Ltd v WesTrac Pty Ltd [2022] WASC 90, dismissing an interlocutory injunction obtained on an urgent basis seeking to prevent a call on bank guarantees given under a construction contract.
The Court held that reputational damage is an inherent part of the risk assumed by a party advancing a bank guarantee under a construction contract and does not, on its own, warrant an injunction to restrain the call on a security.
The case reflects a classic battle of wills: a principal not wanting to be restricted in calling on its security and a contractor who, in a pre-emptive strike, effectively asks the Court to add new terms to the Contract which have the effect of restricting the principal’s ability to have recourse to its security.
Infrastructure Update: New obligations under the Security of Critical Infrastructure Act 2018 (Cth)September 2022
This article was written by Alex Ottaway, Special Counsel and Michael Graziano, Solicitor.
Due to the recent amendments to the Security of Critical Infrastructure Act 2018 (Cth), most Reporting Entities were required to report certain information in respect of critical infrastructure assets located anywhere in Australia by 8 October 2022. Civil penalties apply for non-compliance. For those who own, operate, control or manage infrastructure assets, please ask your legal advisor: ‘am I a Reporting Entity?’ and ‘is my asset a Critical Infrastructure Asset?’. These, along with other obligations which have yet to come into force, will create a significant compliance framework for those entities that own, operate or control assets which are deemed to form part of Australia’s critical infrastructure.
Affected industries include communications, data storage and processing, energy, water, banking and finance, education, food, transport and defence.
Mistaken interpretation and repudiation of lump sum contracts – knowing your rights
This article was written by Alan Chiang, Partner, Con Koutsantony, Senior Associate and Rob Gilchrist, Solicitor.
In Aslan v Stepanoski [2022] NSWCA 24 the NSW Court of Appeal emphasised that the courts will not lightly determine that a party has repudiated a contract. Repudiation of the contract requires something more than one party’s bona fide reliance on a mistaken interpretation of the contract.
The NSW Court of Appeal also relevantly held that:
- when considering a restitution claim, the court will respect contractual regimes and the parties’ agreed allocation of risk; and
- in determining whether a contractor has been overpaid for work performed under a lump sum contract, the contractor’s entitlement under the contract should be determined on the contract itself, and not through a simple comparison of the works performed as against amounts paid.