CORRS CONSTRUCTION LAW UPDATE JULY 2016

Transcription

1 CORRS CONSTRUCTION LAW UPDATE JULY

2 CONTENTS COMMONWEALTH... 4 Attwells v Jackson Lalic Lawyers Pty Limited [2016] HCA 16 (4 May 2016)...4 Keywords: advocates immunity NEW SOUTH WALES... 6 Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd [2016] NSWSC Keywords: security of payment; judicial review Simic v NSW Land and Housing Corporation [2016] HCATrans Keywords: errors in bank guarantees QUEENSLAND Santos Limited v Fluor Australia Pty Ltd [2016] QSC Keywords: stay proceedings; settlement of disputes; dispute resolution clauses VICTORIA SSC Plenty Road Pty Ltd v Construction Engineering (Aust) Pty Ltd [2016] VSCA Keywords: claimable variations; security of payment Construction Engineering (Aust) Pty Ltd v Adams Consulting Engineering Pty Ltd (Ruling No 2) [2016] VSC Keywords: special referees; assessors; expert evidence North East Solution Pty Ltd v Masters Home Improvement Australia Pty Ltd [2016] VSC Keywords: good faith negotiations Krongold Constructions (Aust) v SR & RS Wales [2016] VSC Keywords: Security of Payment Act; identifying works; valuation process WESTERN AUSTRALIA Quick and dirty adjudication; it is quick but is there a limit to how dirty?...22 Keywords: adjudication; time for determination A Principal may be the Main Contractor in WA and not even know it...26 Keywords: principal contractor; main contractor; OHS Laing O Rourke Australia Construction Pty Ltd v Samsung C&T Corporation [2016] WASC Keywords: injunctions; performance bonds OTHER RECENT DEVELOPMENTS...30 Unfair Contract Terms Legislation may apply to Construction Contracts...30 Keywords: mistaken breach Project Bank Accounts...34 Keywords: Project bank accounts; security of payment MT Højgaard A//S v E.ON Climate and Renewables [2014] EWCA Civ Keywords: how to value negative variations SOUTH AUSTRALIAN SECURITY OF PAYMENT LEGISLATION...40 IRISH SECURITY OF PAYMENT LEGISLATION...40 NEW BOOK...40 Understanding Construction Law...40 JOURNAL ARTICLES AND PAPERS...41 Matthew Lees, No More Mr Nice Guy: The Implied Duty to Cooperate and Remedying Another Party s Mistaken Breach (2016) 44(1) Australian Business Law Review Keywords: mistaken breach Dr Ian Freckelton QC, The Award of Wasted Costs Arising from Defective Expert Evidence (2016) 25(3) Journal of Judicial Administration Keywords: expert evidence; wasted costs Robert McDougall, Construction of Contracts: The High Court s Approach (2016) 41(2) Australian Bar Review Keywords: construction of contracts; extrinsic evidence, ambiguity Lord Neuberger of Abbotsbury, Reflections on the ICLR Top Fifteen Cases: A Talk to Commemorate the ICLR s 150th Anniversary (2016) 32(2) Construction Law Journal Keywords: legal reflections The information contained in this publication is intended as an introduction only, and should not be relied upon in place of detailed legal advice. Some information has been obtained from external sources, and Corrs cannot guarantee the accuracy or currency of any such information. The information contained in this publication was current as at July 2016.

3 WELCOME TO THE LATEST EDITION OF CORRS CONSTRUCTION LAW UPDATE JULY 2016 This publication provides a concise review of, and commercially focussed commentary on, the major judicial and legislative developments affecting the construction and infrastructure industry in recent months. It is a useful resource to help in-house practitioners and commercial managers keep up-to-date with recent legal developments and current legal thinking. We hope that you find it interesting and stimulating. OUR THINKING Corrs regularly publishes thinking pieces which consider issues affecting various sectors of the domestic and global economies. We have included at the end of this Construction Law Update links to some of our recent thinking on issues affecting the construction industry. PAGE iii

4 CORRS CONSTRUCTION LAW UPDATE COMMONWEALTH ATTWELLS V JACKSON LALIC LAWYERS PTY LIMITED [2016] HCA 16 (4 MAY 2016) KEYWORDS: ADVOCATES IMMUNITY KEY TAKEAWAYS The advocate s immunity from suit does not extend to negligent advice which leads to the settlement of a case by agreement between parties. D Orta-Ekenaike v Victoria Legal Aid 1 (D Orta) and Giannarelli v Wraith 2 (Giannarelli) remain good authority on the scope of the immunity. PAGE iv

5 Existing authorities There are two existing High Court authorities on the limited circumstances in which lawyers can be sued for their advocacy: 1. Giannarelli established that there is an immunity that extends to work done out of court which leads to a decision affecting the conduct of the case in court. 2. D Orta held that the advocate s immunity from suit under the common law extends to protect a solicitor involved in the conduct of litigation in court. The scope of the immunity under these authorities was challenged in these proceedings. Facts The appellants claimed that earlier litigation to enforce a guarantee was settled on terms unfavourable to the first appellant as a result of negligent advice from the respondent, who was his solicitor at the time. Specifically, the respondent had advised his clients to agree to a settlement offer that included filing consent orders. In return for extra time to pay their true debt, the guarantors agreed to consent to a judgment for the total indebtedness of the company with a collateral agreement that the judgment would not be enforced should the amount owed under the guarantee (which was less than the agreed judgment) be paid within that extended time. The lesser guaranteed amount was not paid in time, meaning the guarantors became liable for the full judgment amount. The respondent raised the advocate s immunity from suit as a complete answer to the negligence claim, contending that the immunity extends not only to negligent advice which leads to a final judicial determination, but also to negligent advice which leads to an agreed settlement. The New South Wales Court of Appeal (NSWCA) found that the respondent s advice was within the immunity recognised in Giannarelli, which was therefore a complete answer to the negligence claim. This decision was appealed to the High Court. The Law Society of NSW obtained leave to intervene in the High Court proceedings. Its submissions supported the more liberal interpretation of the immunity taken by the NSWCA. Decision What is the scope of the advocate s immunity? The majority French CJ, Kiefel, Bell, Gageler and Keane JJ allowed the appeal. Their Honours held that the test for the application of the advocate s immunity as stated in D Orta and Giannarell is not satisfied where the advocate s work leads litigating parties to settle their dispute. Advice to cease litigation which leads to a settlement was held to be connected in a general sense to the litigation contemplated by the agreement, but was held not to be intimately connected with a decision of the court. The intimate connection required to attract the immunity was held to be a functional connection between the advocate s work and the judge s decision. That is, the immunity s protection can only be invoked where the advocate s work has contributed to the judicial determination of the litigation. Consent orders The majority found that their conclusion was not altered by the fact that the parties agreement was embodied in consent orders. Their Honours held that the connection between advice in relation to settlement (including negligent advice not to settle) and the ensuing outcome of litigation was merely historical and not sufficient to enliven the immunity. Gordon and Nettle JJ both dissented on this point, finding that the work done in agreeing the consent orders went directly to the quelling of the proceedings. They found that it was intimately connected with the work of the Court as the case ended when the Court gave verdict and judgment in respect of the consent orders. Reconsideration of Giannarelli and D Orta The High Court declined to reconsider either of the existing authorities dealing with the extent of the advocate s immunity. To reconsider the previous High Court decisions would generate a legitimate sense of injustice in litigants who have not pursued claims, or who have lost cases on the basis of the law as settled by these authorities. 3 The High Court re-iterated that the basis of the immunity is protecting the finality and certainty of judicial determinations. downloadpdf/2016/hca/16 1 (2005) 223 CLR 1 2 (1988) 165 CLR At [28] PAGE 5

6 CORRS CONSTRUCTION LAW UPDATE RECENT NEW SOUTH WALES DECISIONS PROBUILD CONSTRUCTIONS (AUST) PTY LTD V SHADE SYSTEMS PTY LTD [2016] NSWSC 770 KEYWORDS: SECURITY OF PAYMENT; JUDICIAL REVIEW KEY TAKEAWAY In a decision which goes against the long-standing authority in Brodyn Pty Ltd v Davenport, 1 a single Judge of the New South Wales Supreme Court held that judicial review is available to quash an adjudicator s determination for a non-jurisdictional error of law on the face of the record. This is an interesting result, as it has long been held that judicial intervention into adjudication determinations could only occur in instances of a breach of the basic and essential requirements which were laid down for the existence of an adjudicator s determination. Whether or not future cases will follow this decision remains to be seen. Note: This decision is also the subject of an In Brief on the Corrs website: The Probuild decision: Finding the balance in construction industry payment. PAGE 6

7 Facts Probuild engaged Shade to supply and install external louvres to the façade of an apartment complex in Chatswood. During the course of the work, Shade served a payment claim for $324, Probuild served a payment schedule which asserted that it would pay Shade nil, as Probuild was entitled to liquidated damages of $1,089,900. Shade subsequently applied for adjudication of its payment claim. Shade revised its claim down to $214, in its adjudication application. Probuild continued to rely on its entitlement to liquidated damages in its adjudication response. An adjudicator determined that Probuild owed Shade $277, Probuild then sought to have the adjudicator s determination quashed for reasons including that there was an error of law on the face of the determination, albeit a non-jurisdictional error, relating to the incorrect interpretation by the adjudicator of the liquidated damages clause under the contract, which formed part of the reasons in the determination. Decision Emmett AJA, sitting as an additional Judge in the Technology and Construction List, agreed with Probuild, and held: Had the adjudicator not made the error of law in incorrectly interpreting the liquidated damages clause, he may have well allowed the claim by Probuild for liquidated damages such that the Adjudicated Amount should have been nil. 2 Emmett AJA subsequently quashed the adjudication determination, and ordered the matter of the adjudication be remitted to the adjudicator for further consideration and determination according to law. In coming to this decision, Emmett AJA considered three broad issues. 1 [2004] NSWCA 394; 61 NSWLR At [79] 3 At [56] 4 [2004] NSWCA 394; 61 NSWLR At [58] A court has jurisdiction to judicially review adjudication determinations First, Emmett AJA examined whether a court had jurisdiction to judicially review an adjudicator s decision. After considering the powers of the Court under the Supreme Court Act 1970 (NSW) and the process of adjudication under Part 3 of the Building and Construction Industry Security of Payment Act 1999 (NSW), Emmett AJA found that a determination by an adjudicator is amendable to judicial review: Accordingly, in principle, a determination by an adjudicator is amendable to judicial review under s 69 of the Supreme Court Act and there is no reason why the Court would not have power to quash a determination by an adjudicator that involves an error of law. 3 Brodyn is only obiter for issues relating to judicial review for errors of law Emmett AJA went on to analyse the decision of Hodgson JA in Brodyn Pty Ltd v Davenport. 4 Shade attempted to rely on the case as authority that the scheme of the Security of Payment Act appeared strongly against the availability of judicial review on the basis of non-jurisdictional error of law 5. However, his Honour did not agree, noting that the case had been thrown into doubt as a result of Kirk v Industrial Court of New South Wales 6 and that Brodyn was not strictly binding on his Honour: Mason P and Giles JA agreed with Hodgson JA without comment. However, the correctness of certain propositions advanced by Hodgson JA [in Brodyn] have now been put substantially in doubt by the High Court. That is to say, legislation that would take away from the Supreme Court a power to grant relief on account of jurisdictional error is beyond the legislative power of 6 [2010] HCA 1; 239 CLR At [64], [65] 8 At [74] 9 At [78] [80] the New South Wales Parliament. Further, while I would be very slow to depart from observations made by such a distinguished jurist as Hodgson JA, his Honour s observations are not strictly binding, quite apart from the doubt cast on his Honour s analysis by the High Court. the case is only authority for the proposition that a person who contracts to do work without a licence in contravention of s 4 of the Home Building Act 1989 (NSW) is not precluded from receiving progress payments under the Security of Payment Act. Hodgson JA held that there was in fact no error of law and, accordingly, the observations made by his Honour as to whether relief by way of judicial relief is available under s 69 of the Supreme Court Act were strictly obiter dicta and the question therefore remains open. 7 The Security of Payment Act does not exclude the courts ability to judicially review an adjudicator s determination Finally, Emmett AJA considered the language of sections 25 and 27 of the Security of Payment Act, and stated that there was nothing in the language or intention of the Act that operated to exclude the jurisdiction of the courts to undertake judicial review of an adjudicator s determination: 8 I do not consider that there is a clear indication or implication to be found in the Security of Payment Act that the jurisdiction conferred by s 69 of the Supreme Court Act is intended to be excluded Having identified an error of law made by the adjudicator (namely that Probuild was required to prove fault by Shade before being entitled to deduct liquidated damages), and that it was material, Emmett AJA quashed the determination. 9 n/575f4f9ce4b058596cb9c344 PAGE 7

8 CORRS CONSTRUCTION LAW UPDATE RECENT NEW SOUTH WALES DECISIONS SIMIC V NSW LAND AND HOUSING CORPORATION [2016] HCATRANS 102 KEYWORDS: ERRORS IN BANK GUARANTEES KEY TAKEAWAY The High Court will soon consider whether errors on the face of bank guarantees (or at least misdescription of the beneficiaries) can be corrected. This is an important practical issue, as it is not unknown for there to be errors in formal details in bank guarantees and similar documents. PAGE 8

9 Background Historically, bank guarantees have been governed by the doctrine of strict compliance and autonomy which confines the interpretation of a bank guarantee to the four corners of the document. The New South Wales Court of Appeal took a wider approach and construed a bank guarantee by reference to the identifying features of a related document. In doing so, the Court corrected the name of the beneficiary of the bank guarantee and required the bank to honour the obligation under the agreement. This decision arguably erodes the historical position. The High Court will consider whether the Court of Appeal s approach was correct. The Court of Appeal decision allows superficial errors in bank guarantees, which sometimes occur, to be corrected. However, looking beyond the corners of the agreement imposes a greater onus on the banks when issuing and honouring bank guarantees. This may change the cash like properties that define bank guarantees. History of the proceedings Nebax Constructions (Australia) Pty Ltd (Netbax) entered into a construction contract with the New South Wales Land and Housing Corporation (Corporation), a body corporate established by the Housing Act 2001 (NSW). Nebax was required to provide security of $146, At Nebax s request, ANZ issued two bank guarantees in favour of the non-existent entity New South Wales Land & Housing Department. This does not appear to have been Nebax s intention. Nebax entered liquidation and was in breach of its contract with the Corporation. The Corporation demanded payment under the bank guarantees, which ANZ declined to pay as the Corporation was not the named beneficiary. The Corporation sought a declaration that the guarantee should construe the Corporation as the beneficiary or appropriately rectify the document. The trial judge (Kunc J) construed the reference to New South Wales Land & Housing Department as a reference to the Corporation and therefore required ANZ to pay the demanded amount to the Corporation. That decision was appealed, not by ANZ, but by the guarantors of Nebex s obligations to ANZ. The Court of Appeal dismissed the appeal. Emmett AJA, with Bathurst CJ and Ward JA agreeing, held that Kunc J was correct to construe the bank guarantees as he did. Emmett AJA 1 drew a subtle distinction. His Honour suggested that, in general, it would be impermissible to construe a bank guarantee by reference to the terms of other documents. On the other hand, it might be permissible to interpret a bank guarantee in light of the identifying features of other documents (here, the names of the parties) or even particular clauses of them, where they are referred to in the bank guarantee. On 5 May 2016, Nettle and Gordon JJ granted Simic and the other guarantors special leave to appeal the Court of Appeal s decision. In accordance with the High Court s current practice, this was done on the papers. Written submissions have been filed, and the appeal has been set down to be heard on 20 July HCATrans/2016/102.html (High Court transcript) s (High Court case page) n/56723f5be4b05f2c4f04a132 (Court of Appeal decision) n/54fcc953e4b0bcd7fe7b82c2 (First instance decision) 1 At [106] PAGE 9

10 CORRS CONSTRUCTION LAW UPDATE RECENT QUEENSLAND DECISIONS SANTOS LIMITED V FLUOR AUSTRALIA PTY LTD [2016] QSC 129 KEYWORDS: STAY PROCEEDINGS; SETTLEMENT OF DISPUTES; DISPUTE RESOLUTION CLAUSES KEY TAKEAWAY There is a heavy onus on a party to prove it does not have to comply with contractual dispute resolution clauses. PAGE 10

11 Background Santos Limited (Principal) engaged Fluor Australia Pty Ltd (Contractor) on a project which involved coal seam gas being extracted, processed and exported in its liquefied form from Curtis Island near Gladstone. The contract originally commenced in early Later that year it was amended and converted into a costs reimbursable contract subject to various conditions. At the completion of the project the Principal was concerned that the Contractor had claimed costs which were excluded under the contract and to which it was not entitled. The Contractor had claimed and been paid $5.43 billion, which was an overrun of $1.854 billion from its target budget estimate. Facts In May 2016, the Principal exercised its rights under the contract by applying to access the Contractor s records to ensure the Principal had not been charged or paid excluded costs. The Contractor opposed this and sought to stay the application pending compliance with the contract s dispute resolution clauses which the Principal had not followed. Decision Douglas J held that the dispute resolution procedures were undoubtedly enforceable. This was so even though the Principal had argued similar disputes had not been resolved using the dispute resolution clauses. Douglas J confirmed there was a heavy burden on the Principal to persuade the Court to allow the dispute resolution clause not to be followed and so allow the action to proceed. 1 His Honour determined that staying proceedings was not sufficient to make reference to the contractual procedure obviously futile or so slight as not to justify enforcing the agreement. 2 This was because: the parties had succeeded in compromising similar disputes in the past, even if this was not until litigation commenced, and the formal process of negotiation commonly helps parties settle; 3 Santos was not deprived by the dispute resolution clause of having their claim judicially determined; 4 and it was in the public interest to avoid potentially unnecessary costs and use of court time. 5 In addition, Douglas J noted that while the case generated a legal point suitable for the Court s determination, the commercial reasons for parties entering into dispute resolution agreements are significant. 6 Accordingly, the proceedings were stayed pending the performance of the parties obligations under the dispute resolution clauses of the contract. qjudgment/2016/qsc pdf 1 See also Zeke Services Pty Ltd v Traffic Technologies Ltd [2005] 2 Qd R 563 at At [28] 3 At [31]; Downer EDI Mining Pty Ltd v Wambo Coal Pty Ltd [2012] QSC 290 at [29] 4 At [28] 5 At [28] 6 At [26] and [29]; Cable & Wireless plc v IBM UK Ltd [2002] EWHC 2059 (Comm) PAGE 11

12 CORRS CONSTRUCTION LAW UPDATE RECENT VICTORIAN DECISIONS SSC PLENTY ROAD PTY LTD V CONSTRUCTION ENGINEERING (AUST) PTY LTD [2016] VSCA 119 KEYWORDS: CLAIMABLE VARIATIONS; SECURITY OF PAYMENT KEY TAKEAWAY The Court of Appeal has confirmed that mediation is not a method of resolving disputes for the purpose of section 10A(3)(d)(ii) of the Building and Construction Industry Security of Payment Act 2002 (Vic). Parties wishing to limit variations that can be included in a payment claim should specify arbitration (or potentially binding expert determination) in the dispute resolution clause. PAGE 12

13 Facts The decision at first instance was the subject of a detailed note in an earlier Construction Law Update. In summary, the dispute resolution clauses in the construction contract between the parties provided for a compulsory meeting between the parties, followed by mandatory mediation. This clause was relevant to the claimable variations regime under Victorian security of payment legislation. At first instance, Vickery J held that additional mandatory steps beyond mediation were needed to satisfy the method of resolving disputes requirement in section 10A(3)(d)(ii) of the Building and Construction Industry Security of Payment Act 2002 (Vic). Vickery J held that such a method needed a third party to produce a binding decision. SSC appealed this decision. Regime Unlike other jurisdictions, claimants in Victoria are restricted in the amount of claimable variations that they can include in a payment claim (and adjudication). These claimable variations fall into three categories. There is no restriction for contracts worth less than $150,000. For contracts worth between $150,000 and $5 million, claimable variations are restricted to 10% of the contract sum. For contracts worth more than $5 million, no variations can be included at all if the contract provides for a method of resolving disputes. This means that if there is no method of resolving disputes in the contract all variations can be included in a payment claim under the Act. The second aspect of the regime highlighted in this decision is the role of the adjudicator in assessing the progress payment. If the contract does not provide a methodology for calculating progress payments, then the Act supplies a default methodology. One of the matters an adjudicator must have regard to under the Act is the contract price. When it is in fact the superintendent who sets the contract price by certifying the value of variations, a difficult question arises as to whether the adjudicator is bound by the superintendent s valuation as part of their role to have regard to the contract price. Decision The Court of Appeal (Santamaria, Beach and McLeish JJA) unanimously dismissed the appeal. In holding that mediation was not a method of resolving disputes in accordance with the Act, the Court relied on the following arguments. Mediation is a facilitative process that does not necessarily lead to a binding outcome. It would be inconsistent with the wording of the legislation which speaks of resolving, not addressing, disputes to find that mediation was a method of resolving disputes. 1 The purpose of the Act is to secure cash flow with an expedited dispute resolution procedure. Any deviation from the mechanism of the Act is justifiable only on the basis that it provides an alternative means of securing cash flow. Mediation, which may not resolve the dispute, does not assist in this respect. 2 On examination of the extraneous material, it is apparent that Parliament intended parties only be taken outside of the operation of the Act when they had contractually specified an alternative basis on which their disputes would be finally resolved, not merely discussed. 3 Secondly, the Court of Appeal agreed with the trial judge that an adjudicator must reach their own decision as to the value of the progress payment owed, and will not simply be bound by the superintendent s valuation. The Court s reasoning was: As the contract did not provide a methodology by which the progress payment was to be valued, the adjudicator was to value work in accordance with the default regime in section 11(1)(b) of the Act. One of the factors to be considered was the amount specified by the construction contract. While a third party (such as an architect or valuer) may set the contractual price of works: such a valuation is not final (and presumably does not in truth set the contract price) while the potential for challenge to the price exists; 4 and even if such a determination were final and did set the contract price, the contract price was simply one factor the adjudicator was to have regard to in reaching their view as to valuation. It was not an item to be slavishly followed. 5 The Court noted that this conclusion was consistent with the position adopted in New South Wales and Queensland, and expressed agreement with the thrust of the decisions in those States. 6 While there is some suggestion that binding expert determination will suffice, this decision confirms that parties wishing to limit the claimant s ability to claim variations under the Act should include an arbitration clause. VSCA/2016/119.html 1 At [54] 2 At [56] [58] 3 At [61] 4 At [76] 5 At [72] 6 At [83] PAGE 13

14 CORRS CONSTRUCTION LAW UPDATE RECENT VICTORIAN DECISIONS CONSTRUCTION ENGINEERING (AUST) PTY LTD V ADAMS CONSULTING ENGINEERING PTY LTD (RULING NO 2) [2016] VSC 209 KEYWORDS: SPECIAL REFEREES; ASSESSORS; EXPERT EVIDENCE KEY TAKEAWAY On occasion, a case may arise where a litigant wants the court to appoint an expert to determine the key technical matters in dispute, including where that party is confident of the opinion the independent expert is likely give. Construction Engineering contains useful insights on when a court is likely to appoint a special referee, and further, when it may appoint an assessor to help the court understand the expert evidence before it. A special referee is less likely to be appointed where a case is technically complex, factually dense and involves mixed questions of fact and law. PAGE 14

15 Facts and claims The plaintiff, Construction Engineering (Aust) Pty Ltd (CEA) was engaged to design and construct the upgrade of a shopping centre in Melbourne. The defendant, Adams Consulting Engineering Pty Ltd (Adams), was engaged as a structural engineer on the project. CEA claimed that Adams produced two tranches of structural engineering drawings that were defective, causing it to incur substantial cost overruns. CEA s claims raised structural and civil engineering issues that required expert analysis. The key procedural issue was whether expert input would best be given by a special referee appointed under order 50 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) (Rules), or an assessor appointed under section 77 of the Supreme Court Act 1986 (Vic) (SCA) and section 65M of the Civil Procedure Act 2010 (Vic) (CPA). Special referees and assessors: How are they different? An expert appointed under the Rules has the power to decide questions put to him or her and, to that end, give an opinion on the questions. 1 The expert takes the place of the parties experts. An assessor on the other hand is appointed by the court to help it understand the evidence of the parties experts. 2 While section 65M of the CPA entitles the court to appoint an expert, that person actually fulfils the same role as an assessor appointed under section 77 of the SCA. 3 What if a party does not consent to a special referee? Historically, if a party did not consent to a special referee, the Court would only appoint one in exceptional circumstances. 4 However, the courts have moved away from this rigid position and the consent of one or all of the parties is not required before an appointment is made instead, it is one of many factors to consider. 5 Can you appoint more than one special referee? Unlike in other jurisdictions, only one referee can be appointed for each reference in Victoria. 6 This can render the procedure inappropriate where a case has a range of technical issues involving different disciplines, or technical and legal issues involving mixed questions of fact and law. 7 This can be contrasted with the system often found in arbitrations which allows the appointment of multiple experts. 8 Difficulties in determining the questions to be answered In Victoria, the Rules do not expressly entitle the Court to refer the whole of a proceeding to a special referee. The Court must precisely define the questions for referral. 9 This can cause the following difficulties: 1 defining the questions can lead to significant and expensive controversy between the parties; 2 in a complex proceeding, restating the issues as questions can be costly and time consuming; 3 it might difficult to separate precise questions suitable for determination from other issues; 4 questions might be factual in and legally mixed; 5 additional questions might arise during trial; and 6 there may be a need to reformulate questions throughout the trial. 10 Similar issues arose in Matthews v SPI Electricity (Ruling No 19). 11 In that case, Forrest J declined to refer the matter to a special referee because: 12 1 the issue to be determined was central to the overall determination of the proceeding; 2 the expert s reliability and credit would be in question; 3 the trial would become fragmented; 4 questions might be factually and legally mixed; and 5 adopting the findings of the special referee could be problematic if the report contained an error. Findings Vickery J declined to appoint a special referee to assist with the first part of the proceeding a liability hearing dealing with the defective drawings because: 1 there were many technical questions, questions of law and mixed questions of law and fact; 2 the special referee s report might give rise to further questions; 3 the appointment would not lead to the expeditious and cost effective management of the case; and 4 any challenge to the special referee s report would occupy too much time and be unnecessarily costly. 13 Instead, his Honour appointed an assessor to help the Court understand the complex expert evidence and further appointed a special referee for the second hearing dealing with issues of causation and quantum. Tips to getting a special referee appointed The factors set out above give useful insights to litigants seeking to have special referees and assessors appointed. A court is less likely to appoint a special referee when a matter is complex and factually dense, and deals with mixed questions of law and fact. The key will be to show the court that the matter, even a complex one, can be reduced to a set of precise questions for determination. Rather than leaving this process until trial, it may be worth engaging a shadow expert early in the proceeding to assist with this process. While this can be expensive, the time and money spent may be worth it if the appointment of the special referee is important to the litigant s overall strategy. VSC/2016/209.html 1 Rules, r 50.01(1) 2 At [34]; Matthews v SPI Electricity Pty Ltd (Ruling No 32) [2013] VSC 630 at [27] 3 At [15] 4 At [16]; AT and NR Taylor and Sons Pty Ltd v Brival Pty Ltd [1982] VR At [16] [19]; Talacko v Talacko [2009] VSC 98; Matthews v SPI Electricity (Ruling No 19) [2013] VSC 180 [20] 6 At [30] 7 At [30] 8 At [31] 9 At [23]; his Honour called into question a decision in Kilpatrick Green Pty Ltd v Leading Synthetics Pty Ltd where Nathan J decided that the whole of a proceeding could be referred to a special referee with the question to be decided defined by the Court 10 At [24] [26] 11 [2013] VSC [2013] VSC 180 at [23] [27] 13 At [36] [38] PAGE 15

16 CORRS CONSTRUCTION LAW UPDATE RECENT VICTORIAN DECISIONS NORTH EAST SOLUTION PTY LTD V MASTERS HOME IMPROVEMENT AUSTRALIA PTY LTD [2016] VSC 1 KEYWORDS: GOOD FAITH NEGOTIATIONS KEY TAKEAWAYS An agreement to act reasonably and in good faith may be sufficiently certain to be enforceable. The precise nature and extent of the obligations will be determined by reference to the relevant contractual terms and the facts. PAGE 16

17 Facts The case concerned the development and lease of a Masters Home Improvement store in Bendigo for Woolworths Limited (Woolworths). North East Solution Pty Ltd (NES) agreed to develop the store for Woolworths and then lease it to Masters Home Improvement Australia Pty Ltd (Masters) for at least 12 years. The main provision of the Agreement for Lease (AFL) in dispute was clause 2.2, concerning the determination of the extra cost of building a Masters store instead of a Bunnings Store (the Landlord s Work Costs). The AFL could only be terminated under clause 2.2(c) if the parties, acting reasonably and in good faith, were unable to resolve any disagreement that arose in relation to the Landlord s Work Costs. In May 2010, Woolworths purported to terminate on this basis. The plaintiff s claim NES submitted that there was no genuine disagreement, or alternatively that Woolworths had not acted reasonably or in good faith to resolve it. NES argued that Woolworths took into account various commercial factors: 1 an inability to bring the costs within its budget; perceived opposition by the Council and residents; the belief that NES had funding issues; and the desire to pursue an alternative site, none of which were valid grounds on which the AFL could be terminated. The defendant s claim Woolworths argued that NES could not succeed unless it could show conduct on the part of either defendant which offends conscience or was otherwise wholly unreasonable in the circumstances. It also argued that clause 2.2 of the AFL was merely an agreement to negotiate with no enforceable outcome. Decision Croft J found that Woolworths was not free to terminate the AFL. Clause 2.2 of the AFL was not an agreement merely to negotiate but an agreement to act reasonably and in good faith in an attempt to resolve differences in relation to the estimate by NES of the Landlord s Work Costs. 2 Act in good faith Croft J referred to the following general propositions regarding the requirement to act in good faith: [T]he authorities establish that an agreement to negotiate reasonably and in good faith is sufficiently certain to be enforceable. 3 His Honour referred to Allsop CJ s judgment in the Full Court of the Federal Court in Paciocco v Australia and New Zealand Banking Group Ltd as a reaffirmation of the elements of the obligation to act in good faith: That a normative standard is introduced by good faith is clear. It will, however, not call for the same acts from all contracting parties in all cases... The contractual and factual context... is vital to understand what, in any case, is required to be done or not done to satisfy the normative standard. 4 In respect of the obligation to act reasonably, his Honour determined that while there was overlap, it should not be conflated with the obligation to act in good faith. However, the content of each obligation depends on the contractual terms and circumstances. 5 Enforceability of the obligation Croft J determined that Woolworths argument that clause 2.2 of the AFL was an unenforceable agreement to agree was overly narrow. The position ignored the factual circumstances, as well as the contractual requirement that the cost difference be determined by NES and verified by Woolworths surveyors. 6 Application to the facts Croft J identified seven steps that a reasonable person in Woolworths position would be required to take to resolve their differences: 7 1 Invite NES to participate in the review process; 2 Inform NES of any differences identified in relation to calculation of the Landlord s Works Costs; 3 Communicate to NES the basis of any claim that the Landlord s Work Costs were too high ; 4 Assist NES in obtaining alternative quotes; 5 Provide reports identifying the basis of the differences in the parties quotes; 6 Communicate the contents of the reports it relied on for its quote to identify differences; and 7 If applicable, postpone negotiations until the review process had been completed to allow all parties to consider reports relied upon. Croft J found that, on the evidence, Woolworths had not taken any of these steps. Instead, in breach of clause 2.2, it had not acted reasonably and in good faith in resolving its differences with NES, and so terminated the AFL for reasons that were not permitted. 8 The evidence... discloses, in my view, a continued unwillingness on the part of Woolworths to communicate to NES any differences that it may have had in relation to the estimate by NES of the Landlord s Work Costs or of Masters contribution to those costs. 9 Loss and damage Croft J held that as a result of Woolworths breach, NES had lost a unique and valuable opportunity (to develop and lease the site to Masters). 10 His Honour ordered judgment for NES for damages of $ million plus interest, based on the value of rent over the life of the lease and the expected value of the property at the end of the lease, (with a 25 per cent discount applied to reflect the inherent risks) sinodisp/au/cases/vic/vsc/2016/1.html 1 At [169] 2 At [243] 3 At [56] 4 (2015) 321 ALR 584, at [290] 5 At [72] 6 At [79] [81] 7 At [244] 8 At [247] 9 At [208] and [375] 10 At [259] 11 At [345] [346] and [391] PAGE 17

18 CORRS CONSTRUCTION LAW UPDATE RECENT VICTORIAN DECISIONS KRONGOLD CONSTRUCTIONS (AUST) V SR & RS WALES [2016] VSC 94 KEYWORDS: SECURITY OF PAYMENT ACT; IDENTIFYING WORKS; VALUATION PROCESS KEY TAKEAWAY This case confirms the contractor s obligation to ensure that work the subject of a payment claim is sufficiently identifiable to the principal. Further, it clarifies the adjudicator s burden to apply a reasonable valuation process when assessing a payment claim, and to demonstrate how this process aligns with the requirements of the Building and Construction Industry Security of Payment Act 2002 (Vic) (Act). Simply accepting a contractor s assessment on the basis that it is not unreasonable or excessive is insufficient. PAGE 18

19 Facts Krongold Constructions (Aust) Pty Ltd (Krongold) was engaged to construct a restaurant at a winery in Healesville. Krongold met with SR & RS Wales (Wales) to discuss civil works required for the project. The parties then executed a contract for the works (Contract) with the minutes from the pre-contractual meeting annexed to the Contract (Minutes). The Minutes contained terms providing that payment claims were to be submitted no later than the 25th of the month and paid at the end of the following month. The Contract, however, provided that a payment claim served on or after the 25th of a month was deemed to be served on the 25th of the following month. It provided that payment would follow 30 days from the end of the month in which the claim was served. On 25 August 2015, Wales served a payment claim on Krongold, purportedly in accordance with the Act, supported by invoices and documents (Payment Claim). Krongold failed to serve a payment schedule in response so, on 8 October 2015, Wales notified Krongold by that, if payment was not received within two days, the Payment Claim would be referred to adjudication (Notice). Wales argued that this constituted notice for the purpose of section 18(2) of the Act. On around 16 October 2015, Wales referred the Progress Claim to adjudication. The adjudicator delivered a decision on 24 November 2015, determining that Krongold was to pay Wales the entire claimed amount (Adjudication Determination). Claims and findings Krongold argued that the Adjudication Determination should be set aside because it was contrary to law and failed to satisfy the basic and essential elements of the Act, demonstrated an error of law on the face of the record, and was affected by jurisdictional error. Was the Payment Claim valid? Krongold submitted that the Payment Claim was invalid under section 14 of the Act as it was not possible to identify the construction work or related goods and services that were the subject of the Payment Claim. 1 In response, Wales submitted that the description of the works required specialist evaluation by an adjudicator, as the works were difficult to describe with precision and thus were not capable of judicial review. Alternatively, it submitted that the work was sufficiently identified for different reasons, most of which related to Krongold s knowledge of the works being performed. His Honour cited cases which confirmed that, while the requirements of the Act are not overly demanding and should not be approached in an unduly technical way, the Payment Claim must still be sufficiently detailed to enable the principal to understand the basis of the claim, and provide a considered response. 2 The test is to consider what level of identification is reasonably necessary to be comprehensible to the recipient party when considered objectively, 3 according to a reasonable party in the position of the recipient, taking into account the parties background knowledge. Vickery J found that the Payment Claim did not identify the construction work with the clarity required under section 14 of the Act. 4 According to his Honour, even a principal like Krongold, who was familiar with the work being undertaken on site, is entitled to a payment claim which describes the work claimed for, before the advantages conferred on the contractor by the Act are invoked. 5 His Honour made no comment on Wales argument that the work was not capable of judicial review because of the difficulty in describing the work. Was the Notice valid and was Krongold given the chance to issue a payment schedule? Krongold claimed the adjudicator erred because Wales served the Notice prematurely. Its argument depended on the interpretation of the Minutes and Contract, which arguably conflicted. Wales submitted that the Contract, when read with the Minutes, meant that a Payment Claim submitted on the 25th of a month was due for payment at the end of the following month. Vickery J found that sensible business people would interpret the Contract, when read with the Minutes, to mean that the Payment Claim served on 25 August was deemed to be served on the 25 September and thus payable on 30 October Hence, the Notice served on 8 October 2015 was premature and invalid. 6 Did Wales provide sufficient materials to the adjudicator? Krongold argued that the adjudicator was not provided with all of the documents comprising the Payment Claim because some attachments dealing with variations (which comprised nearly one third of the Payment Claim) had been omitted. Wales conceded that, in error, some documents were not given to the adjudicator. However, it argued that these documents were summaries of other documents in the possession of Krongold which had been provided to the adjudicator. Further, it submitted that the adjudicator did not request further or clarifying documents, and that the omission of the documents was not detrimental to Krongold. Vickery J did not accept Wales arguments: the adjudicator only had part of the Payment Claim and was therefore unable to comply with the Act, and hence fell into jurisdictional error. PAGE 19

20 Adjudicator s valuation process In determining the Adjudicated Amount, the adjudicator accepted Wales valuation in full, stating that, based on the documents which I am required to consider under the Act, it does not appear to me that the Claimant s valuation is incorrect, unreasonable or excessive. Further, the adjudicator noted that Wales claim was undefended as Krongold failed to issue a valid payment schedule. Vickery J was not satisfied that this process met the requirements of the Act. 7 In reliance on SSC Plenty Road v Construction Engineering (Aust) Pty Ltd, his Honour held that the adjudicator erred by not demonstrating any process of assessment of the value of the claim other than merely adopting the amount claimed by the claimant. 8 Vickery J also added that this failure was engendered by the poor identification of work in the Payment Claim. For these reasons, the adjudicator fell into jurisdictional error. Orders Ultimately, Vickery J held that the Adjudication Determination was made in contravention of the Act, and granted Krongold s claim for relief on the ground of jurisdictional error by the adjudicator. 9 VSC/2016/94.html 1 Relying on Protectavale Pty Ltd v K2K [2008] FCA 1248 (Finkelstein J) 2 Protectavale Pty Ltd v K2K [2008] FCA 1248; Gantley Pty Ltd v Phoenix International Group Pty Ltd [2010] VSC Gantley Pty Ltd v Phoenix International Group Pty Ltd [2010] VSC 106 at [51] 4 At [54] 5 At [56] 6 At [47] [50] 7 At [64]; see also sections 11, 22 and 23 of the Act 8 [2015] VSC 631 at [135] 9 At [70] PAGE 20

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22 CORRS CONSTRUCTION LAW UPDATE RECENT WESTERN AUSTRALIA DECISIONS QUICK AND DIRTY ADJUDICATION; IT IS QUICK BUT IS THERE A LIMIT TO HOW DIRTY? KEYWORDS: ADJUDICATION; TIME FOR DETERMINATION KEY TAKEAWAYS In the recent decision of BGC Contracting Pty Ltd v Citygate Properties Pty Ltd [2016] WASC 88, the Supreme Court of Western Australia quashed two adjudication determinations made by the same adjudicator under the Construction Contracts Act (WA) 2004 (Act). The first determination was quashed because the adjudicator had not determined the application within time. The second determination was quashed on the basis of jurisdictional error. At the heart of the Court s decision with respect to the second determination was a finding that the adjudicator s reasons did not demonstrate a rational approach to determining the relevant payment dispute. This decision builds on a growing body of case law which emphasises that, whilst adjudications under the Act are intended to provide a rapid and informal means of resolving payment disputes, adjudicators must demonstrate, by their determinations, that they have engaged with all issues and adopted a rational approach to determining the dispute(s). This decision is also the first instance of a determination being quashed because the adjudicator made his or her determination outside of the strict time period prescribed by the Act. PAGE 22

23 Background facts to the first determination On 1 April 2014, Citygate and BGC entered into a $58 million contract under which BGC agreed to undertake construction work on the Eaton Fair Shopping Centre expansion. On 7 January 2015, BGC applied to adjudicate Citygate s assessment of BGC s 14th progress claim by which Citygate disallowed $1.5 million of BGC s $5.3 million claim. At the adjudicator s request, the parties agreed to extend the time within which the adjudicator had to make his determination to midnight on 26 February As the time leading up to this deadline drew closer, the adjudicator asked both parties whether they would consent to him providing his financial determination together with basic reasons prior to the 26 February 2015 deadline, with full reasons to follow several days later on the 3 March BGC did not consent. At 11:52 pm on 26 February 2015, the adjudicator sent an to the parties attaching a document the adjudicator described as his preliminary determination. The adjudicator s and the preliminary determination document made reference to an Annexure B, but, the adjudicator did not attach Annexure B to his . At 12:53 am on 27 February 2015, the adjudicator must have realised his omission and sent the parties a second , in identical terms to that sent by him just over an hour earlier at 11:52 pm. This second attached both the preliminary determination and the Annexure B document. Relevantly, Annexure B described the amounts the adjudicator determined that Citygate was to pay to BGC. Annexure B contained a prefatory note which stated that, due to time constraints, the adjudicator had been unable to provide detailed reasons for each of BGC s claims and that more detailed reasons would be provided. Later, on 3 March 2015, the adjudicator sent an to the parties attaching what he described as his final determination (which contained more extensive and detailed reasons) and a revised version of Annexure B. Court s finding in respect of the first determination Justice Tottle quashed the adjudicator s determination on the basis that the application was deemed by section 31(3) of the Act to have been dismissed because the adjudicator had made his determination out of time. Tottle J found that the time within which the adjudicator had to make his determination expired at midnight on 26 February Background facts to the second determination On 19 March 2015, BGC applied to adjudicate a payment dispute in respect of its 16th progress claim under the contract. On 8 May 2015, the adjudicator ed his determination which comprised: (a) a narrative section finding that Citygate was liable to pay BGC the sum of $392,145 plus GST; and (b) a lengthy schedule dealing with 64 items (55 variation claims and 9 claims for backcharges). The schedule comprised two columns. In the first column, titled Determination, the adjudicator stated his conclusion and gave brief reasons in respect of most, but not all, of the disputed items. In the second column, titled Awarded, the adjudicator determined a dollar amount in respect of nine of the 64 disputed items. Court s finding in respect of the second determination Tottle J quashed the second determination on the basis that the adjudicator had failed to exercise the jurisdiction conferred on him by the Act (such an error being a jurisdictional error). Tottle J found the adjudicator failed to exercise his jurisdiction because (amongst other things): (a) the adjudicator s reasons did not demonstrate that he had: (i) adopted a rational approach in determining the subject payment dispute; or (ii) engaged with or determined certain disputed items; and (b) it was impossible to ascertain from the adjudicator s responses how the he had determined an award of $392,145. Tottle J helpfully commented on the standard of reasons that adjudicator s are to maintain: It is incumbent on an adjudicator to make it plain in the reasons that he or she has engaged with the issues. The reasons should make plain what the Adjudicator has determined and why. The authorities make it clear that the reasons do not have to be detailed or elaborate but an adjudicator cannot omit to give reasons entirely in respect of significant items and leave the parties to work out for themselves the basis upon which a determination has been made. PAGE 23

24 Tottle J seized upon certain aspects of the adjudicator s determination as examples of the adjudicator s failings, including the adjudicator s determination of: (a) a dispute between the parties as to whether or not Citygate had attempted to claw back in payment certificate 16, the award made against it in the first determination; and (b) Contract Variation 454 (a negative variation). With respect to the claw back dispute, Tottle J found that it was not possible to know from the adjudicator s reasons what approach he had taken in making his determination with respect to this dispute and what he had awarded. With respect to Variation 454, both parties agreed that Citygate was entitled to payment in respect of this variation but differed as to its value. (BGC contended that Citygate should only be entitled to an amount of $15,311 whilst Citygate contended that it was entitled to an amount of $42,555.) The adjudicator had dealt with Variation 454 under two separate items in the determination schedule. In respect of the first item, the adjudicator s reasons in the Determination column of the schedule suggested that he had determined the dispute in Citygate s favour. However, inconsistent with that determination, the adjudicator ordered Citygate to pay BGC $104,250 in the Awarded column. In respect of the second item, the adjudicator awarded an amount of $42,555 to BGC in the Awarded column despite finding the parties submissions failed to explain the large difference between them. The adjudicator had therefore awarded BGC an amount of $146,805 for Variation 454. Based on the above analysis, Tottle J found the adjudicator had adopted an inconsistent approach to the same disputed item. Further, the adjudicator s determination that BGC was entitled to be paid for Variation 454 could not be justified where BGC did not dispute that it owed money to Citygate for the variation; the only dispute was as to the quantum of that amount. His Honour found that the adjudicator s approach to determining Variation 454 was irrational. What can we learn from this decision? One lesson from this decision is that parties to an adjudication should be mindful not to place too much time pressure on adjudicators, particularly with respect to more complex payment disputes. In this case, BGC did not consent to the adjudicator s request for a further extension of time in which to make his determination. As a result, BGC received a determination in its favour which, because it was not made within time, was quashed and thereby unenforceable. Conversely, this decision may encourage adjudication respondents to withhold consent to an adjudicator s request for an extension of time, particularly in more complex payment disputes. Because it was common ground that the adjudicator s first determination had not been made within the prescribed time (as extended), Tottle J s judgment does not grapple with the question of whether section 31(3) may permit an adjudicator to make a determination within the prescribed time and, then, communicate that determination to the parties out of time. As the Act does not specify the service requirements for a determination, it is therefore still open to parties to contend that an adjudicator s determination made within time, but served on the parties out of time, is a valid determination. This note was originally published by Spencer Flay and Kristian Cywicki as a Corrs in Brief article available here: corrs-in-brief/quick-and-dirtyadjudication-it-is-quick-but-there-is-alimit-to-how-dirty/. The case is available at: supreme/supdcsn.nsf/judgment.xsp?do cumentid=fe84e1e7f9dcc f F8&action=openDocument&Ses sionid=ee7dhwxx19 PAGE 24

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26 CORRS CONSTRUCTION LAW UPDATE RECENT WESTERN AUSTRALIAN DECISIONS A PRINCIPAL MAY BE THE MAIN CONTRACTOR IN WA AND NOT EVEN KNOW IT KEYWORDS: PRINCIPAL CONTRACTOR; MAIN CONTRACTOR; OHS KEY TAKEAWAY In all States and Territories other than Western Australia, safety legislation allows for the appointment of a principal contractor. The principal usually appoints the head contractor as principal contractor under their contract. In WA, however, the equivalent duty holder the main contractor cannot be appointed and instead is the person or company that falls within a legislative definition. That can change depending on the circumstances at a particular construction site at a particular time. In other words, a principal may be the main contractor and not even know it. PAGE 26

27 How can you be the main contractor in WA? When two or more contractors are performing construction work at a particular construction site at the same time, by default the person for whose direct benefit all the work done at the site exists upon completion becomes the main contractor. 1 Often, that will be the principal. Importantly, it is immaterial whether the principal in that situation has appointed a contractor as the main contractor. (This is common in contracts used by companies familiar with other States safety legislation, particularly those with a national presence.) In WA, the parameters of the legislation can also be interpreted very broadly. For example: As defined, construction work can include maintenance and repair work. The contractors on site do not have to be performing related work or even know that the other is on the site. The principal can be the main contractor even if it does not have any personnel on site. What does it mean if you are the main contractor in WA? Once a principal is deemed by the legislation to be the main contractor, several duties and obligations are imposed by the WA safety legislation. Some of these duties are shared (for example, between the principal and the person in control of the site) and some specifically apply to the main contractor. While these duties are not always onerous, a failure to comply with them is a breach of the OSH regulations and can result in a financial penalty. 2 However, if there is a safety incident (particularly one involving serious injury or death), a breach of a main contractor obligation may be compelling evidence of the breach of one of the broader safety duties under the Act. Breach of these can attract a much higher monetary penalty: up to $500,000 for a first offence and $625,000 for subsequent offences. What can you do to manage these risks? For parties who are at risk of being the main contractor, there are several ways to position themselves to meet the obligations imposed on a main contractor and mitigate any risk of potential liability. Naturally, the option best suited for a particular company will depend on the work involved. 1 Definition of main contractor under the Occupational Safety and Health Regulations 1996 (WA), rule The maximum financial penalty for a first offence is $50,000 and $62,000 for subsequent offences PAGE 27

28 CORRS CONSTRUCTION LAW UPDATE RECENT WESTERN AUSTRALIAN DECISIONS LAING O ROURKE AUSTRALIA CONSTRUCTION PTY LTD V SAMSUNG C&T CORPORATION [2016] WASC 49 KEYWORDS: INJUNCTIONS; PERFORMANCE BONDS KEY TAKEAWAY Where an injunction will have the practical effect of granting final relief, courts apply a higher standard in determining where the balance of convenience lies. This requires balancing the risk of doing an injustice, and the court must be satisfied that the party seeking injunction would ultimately succeed if the matter went to trial. PAGE 28

29 Facts Samsung C&T Corporation (Samsung) subcontracted Laing O Rourke Australia Construction Pty Ltd (LORAC) for structural steel and related works for the port landside package of the Roy Hill Iron Ore Project. Less than a year later, Samsung terminated the subcontract for its convenience and the parties entered into an Interim Deed under which the bank guarantees LORAC had provided under the subcontract were returned and replaced by another bank guarantee for $7.5 million (Replacement Security). As a result of several disputes between the parties, Samsung notified LORAC of its intention to call on the Replacement Security. LORAC applied for an interim injunction restraining Samsung from demanding or receiving the benefit of the Replacement Security. Decision Tottle J characterised the terms of the injunction (at [15]) as having the practical effect of granting LORAC the final relief it seeks. LORAC argued that it was entitled to an injunction on a number of grounds. The most significant of these was that Samsung failed to satisfy the contractual condition for a call on the Replacement Security requiring it to consider, acting bona fide, that it is or will be entitled to recover more than $7.5 million from LORAC. Although Tottle J accepted that LORAC had established that there was a serious question to be tried in respect of whether this condition had been satisfied, his Honour was not persuaded by LORAC s arguments that Samsung had not acted bona fide in calling on the Replacement Security. LORAC relied on ten matters which it argued gave rise to an inference that Samsung s call on the Replacement Security failed the contractual requirement. Among these were that each new assessment by Samsung of the cumulative value of the Subcontract works showed a progressive downward valuation of those works, and the basis of these assessments were not clearly explained. Tottle J took the view that the evidence LORAC sought to rely on in establishing a lack of bona fides was not sufficient to meet the standard required in a case where the injunction would have the effect of changing, as opposed to preserving, the status quo. That status quo derived from the parties bargain about which of them would bear the risk of being out of pocket pending final determination of their disputes. To avoid the injustice that Samsung might suffer if it were deprived of the benefit of its contractual bargain (that is, that LORAC would bear the risk of being out of pocket while disputes were finally determined), Tottle J found (at [135]) that LORAC s case that there was a serious question to be tried ought to be...of sufficient strength to engender confidence that it would succeed if the matter went to trial. LORAC s case was held to a higher standard because the practical effect of LORAC s injunction was to give it final relief. The general observations that Tottle J made suggest that a court is highly unlikely to grant an injunction based on an inference that a party calling on a security has failed to comply with contractual requirements governing that call. The logic behind this is easy to understand: since there is a greater risk of error when drawing an inference than concluding from proven facts, it is more likely the court will cause injustice to the party seeking the benefit of a security if it grants an injunction based on an inference of non-compliance with contractual provisions governing that security. supreme/supdcsn.nsf/judgment.xsp?do cumentid=f81d4b344aaacb6f48257f5 C002B36C7&action=openDocument PAGE 29

30 CORRS CONSTRUCTION LAW UPDATE RECENT OTHER RECENT DEVELOPMENTS DECISIONS UNFAIR CONTRACT TERMS LEGISLATION MAY APPLY TO CONSTRUCTION CONTRACTS KEYWORDS: MISTAKEN BREACH KEY TAKEAWAY The construction industry must now take note of consumer protection legislation. From 12 November 2016, any unfair term in a standard form contract with a small business could be rendered void. This raises special concerns for some of the most common terms in subcontracts, supply agreements and consultancy agreements. PAGE 30

31 Part A: When does the legislation apply? While the Unfair Contract Terms (UCT) regime will not apply to major head contracts, it may well apply to subcontracts, supply agreements and consultancy agreements if the following conditions are met: one party is a small business ; the parties have signed a standard form contract ; and no exceptions (under the legislation) apply. Where the legislation applies, the next question is whether there are any unfair terms. 1. What is a small business? The ACL defines a small business as one that, at the time the contract is entered into or renewed, employs under 20 people on a head count. 1 In general, the UCT regime will apply to contracts with a small business where: the upfront price payable under the contract is $300,000 or less, or the contract has a duration of more than 12 months and the upfront price payable under the contract is $1,000,000 or less. 2 The contract must also be for the supply of goods or services, or the grant of an interest in land. 2. What is a standard form contract? Under the UCT regime, a contract will be presumed to be a standard form contract unless proved otherwise. 3 Beyond this presumption, in assessing whether a contract is a standard form contract, a court must consider various factors prescribed in the legislation, such as whether one party had all or most of the bargaining power in the transaction and whether the other party had an opportunity to negotiate the terms. 4 Interestingly, there is no express exemption in the UCT regime for industry-negotiated standard form contracts. 5 Further, it has been suggested that a negotiation that merely tinkers with the document will not be sufficient to exclude it from the UCT regime. 6 It is therefore unclear whether standard form construction contracts will be covered by the UCT regime. 3. Exceptions to the regime The UCT regime exempts the following provisions from its scope: terms that define the subject matter of the contract; 7 terms that set the up-front price payable under the contract; 8 and terms that are required or expressly permitted by a law of the Commonwealth, a State or a Territory. 9 Lord Steyn captured the difficulty with these exceptions when he said that, broadly speaking, all terms of the contract are in some way related to the price or remuneration. 10 There are as yet no Australian cases that consider the scope of the exemption. 4. What is an unfair term? While the UCT regime does not set out a definitive meaning of what would be an unfair term, it provides three indicia. A term may be considered unfair if it: (a) would cause a significant imbalance in the parties rights and obligations arising under the contract; and (b) is not reasonably necessary to protect the legitimate interests of the party who is being advantaged by the term; and (c) would cause detriment (financial or otherwise) to a party if it were relied on. The onus of proving requirements (a) and (c) lies with the party asserting unfairness. Requirement (b) is presumed, and the onus of rebutting this assumption lies with the party allegedly favoured by the term. Should a term meet these criteria, the court must then form a view about whether the term is unfair taking into consideration the extent to which the term in question is transparent, and the contract as a whole. The UCT regime provides a non-exclusive list of examples of terms that may be (but are not necessarily) unfair. These include: a term that effectively permits one party to terminate the contract; term that effectively penalises one party for a breach or termination of the contract; a term that effectively permits one party to vary the terms of the contract; a term that effectively permits one party to vary the upfront price payable under the contract without allowing the other party to terminate the contract; and a term that effectively permits one party to assign the contract to the detriment of another party, without that other party s consent. PAGE 31

32 The following common terms in standard form construction contracts might be challenged. Part B: How will the legislation affect construction projects? Time bars and deeming provisions Novation clauses Superintendent or principal discretions Termination for convenience clauses Time bars have the effect of limiting one party s right to sue another. The merits of a time bar may be relevant to its potential unfairness, as may the advantages of resolving disputes expeditiously, but there may be concerns where the time bar is unreasonably short. A novation clause might have the effect of permitting one party to assign the contract unilaterally, to the detriment of another party. Assignment clauses have been held to be unfair if they create confusion and inconsistency. 11 If a novation clause requires a consultant to agree to a future assignment to a then unidentified party, there might be an argument the clause is unfair. The principal would need to demonstrate that it is reasonably necessary. Unilateral powers held by the superintendent or principal may have the effect of permitting one party to unilaterally determine whether the contract has been breached or to interpret its meaning. Since the principal has a legitimate interest in having decisions made swiftly, these powers might not be considered unfair, at least where the superintendent must act honestly, fairly or reasonably. 12 A termination for convenience clause has the effect of permitting one party (but not the other) to terminate the contract, and so could potentially be considered unfair. 5. Establishing that a term is unfair If a small business encounters a term that it wants to challenge, it may apply directly to the court to have the term declared unfair. It may also seek intervention from ASIC. If the court finds that a term is unfair, it will declare the term void. However, if the remainder of the contract can continue to operate without the term, it will Tender process contracts While many in the construction industry have given some thought to the enforceability of in-house standard forms, requests for tender (and the process contracts they can create) are another possible concern under the extended UCT regime. A process contract essentially exists to protect the integrity of the tendering process 14 by creating binding obligations on the party calling for tenders to evaluate each tender in a certain way. 15 The purpose of the process contract is to protect bidders from being treated unfairly before a contract is executed. Similarly, the purpose of the UCT regime is to protect small businesses from unfair contract provisions. The tender process was an issue raised by three organisations in the submission phase of the UCT regime. 16 Arguably, a process contract is not a contract for the provision of goods or services under section 23 of the ACL and, as such, would not be subject to the UCT regime. However, the ACL s broad definition of service is relevant. In Obeid v ACCC, 17 it was held that the Minister who ran an EOI process had, in allowing appellants to participate in an EOI process, provided a right, benefit or privilege within the definition of services under s4(1). 18 If this finding were applied to the extended UCT regime, the service in question could (arguably) be provided by the party issuing the Request for Proposals to the small business and therefore be subject to the UCT regime. Nothing in the legislation would prevent such an outcome. It is therefore not yet clear whether process contracts will fall outside the scope of the UCT regime. 7. Conclusion Until case law on the UCT regime develops, it is hard to know how courts will approach these arguments. Doubtless, many parties will be interested in challenging clauses where no other relief is available. The prudent approach is to review contracts, subcontracts, supply agreements and consultancy agreements before 12 November 2016 and consider amending or removing terms that might be unfair in light of the new statutory provisions from any suite of documents used with small business counterparties. PAGE 32

33 1 Section 23(5) 2 Section 23(4) 3 Section 27 4 Section 27(2) 5 Jeannie Paterson, Unfair Contract Terms in Australia (Thomson Reuters, 2012) at [5.80] 6 Jeannie Paterson, Unfair Contract Terms in Australia (Thomson Reuters, 2012) at [5.60] 7 Section 26(1) 8 Section 26(1) 9 Section 26(1) 10 Director General of Fair Trading v First National Bank Plc [2002] 1 AC 481; [2001] UKHL 52 [31] 11 Director of Consumer Affairs (Vic) v Backloads.com Pty Ltd [2009] VCAT 754 at [262] 12 Alisa Taylor, Fair Play on the Building Site: How Extending Unfair Contract Term Protections to Small Businesses Will Impact Construction Projects (2015) 31 Building and Construction Law 365 at Section R v Ron Engineering & Construction (Eastern) Ltd [1981] 1 SCR 111 at NSW Department of Services (Technology & Administration), Tendering Manual (November 2010) Chapter 2, at 6 16 Post Office Agents Association Limited submission regarding Treasury Legislation Amendment (Small Business and Unfair Contract Terms) Bill 2015 (May 2015); Housing Industry Association submission to the Treasury on the Extending Unfair Contract Term Protections to Small Businesses Consultation Paper (1 August 2014); Master Builders Australia Submission to the Treasury on Extending Unfair Contract Terms Protection to Small Business Draft Legislation (12 May 2015) 17 [2014] FCA Obeid v ACCC [2014] FCA 839 at [54] PAGE 33

34 CORRS CONSTRUCTION LAW UPDATE RECENT OTHER RECENT DEVELOPMENTS DECISIONS PROJECT BANK ACCOUNTS KEYWORDS: PROJECT BANK ACCOUNTS; SECURITY OF PAYMENT KEY TAKEAWAY Queensland is contemplating introducing project bank accounts to help ensure payments from principals flow down to subcontractors. Project bank accounts have been used in New South Wales, the Northern Territory, Victoria and Western Australia, typically on government projects. These arrangements can be beneficial for subcontractors, but the surrounding legislation may give rise to some unexpected issues. If not properly prepared, a principal may inadvertently find itself a respondent to a claim from a subcontractor under security of payment legislation. PAGE 34

35 Overview In December 2015, the Queensland government issued a Security of Payment discussion paper seeking industry feedback on ways to improve security of payment for subcontractors. One of the proposals flagged for consideration is the use of project bank accounts (PBAs). This article assesses the PBA model proposed in the discussion paper and particularly whether PBAs: (a) could give rise to an arrangement for payment under the Building and Construction Industry Payments Act (Qld) 2004 (BCIPA) (where the principal pays subcontractors directly); and (b) may raise practical questions in their operation with the Subcontractors Charges Act (Qld) 1974 (SCA). Similar concerns may arise in other jurisdictions. What are project bank accounts? The aim of PBAs is to ensure that subcontractors are paid in a timely manner. A PBA is a mechanism for contracting parties to make and receive payments. It is not a means for determining amounts payable. Thus, PBAs do not prevent payment delays for amounts which are in dispute. In such circumstances, the relevant parties could rely on their statutory rights under the BCIPA (principally, to proceed to adjudication) or the SCA (principally, to issue a statutory charge). Essentially, the PBA uses a trust arrangement to protect money owed to subcontractors from creditors (of the head contractor) should the head contractor become insolvent. The PBA model proposed for use in Queensland operates as follows: (a) the principal and head contractor set up a ring-fenced trust bank account (the PBA) for payment of both progress payments and retention monies; (b) a trust arrangement is created, with the head contractor and subcontractors as beneficiaries; (c) the payment process starts when a subcontractor submits a payment claim to the head contractor under the subcontract. After the head contractor certifies the amount payable to its subcontractors, the head contractor submits a progress payment claim (which will include the amounts due to each subcontractor) to the principal; (d) the principal (or superintendent) will verify the work completed and then sign the progress payment claim. The principal will then pay the certified amount into the PBA and forward the signed progress payment claim to the bank; and (e) once authorised, the bank will simultaneously distribute the funds in accordance with the signed progress payment claim to the head contractor and the subcontractors. Key benefits PBAs principally benefit subcontractors by: preventing head contractors from holding on to funds not passing them down to subcontractors within the prescribed time; potentially giving subcontractors shorter payment terms than the head contractor would typically agree; and protecting amounts owing to a subcontractor from entering the pool of assets available to creditors if the head contractor becomes insolvent. Adverse impacts PBAs are less advantageous for head contractors as the head contractor does not get access to the total amount that the principal certifies as owing to the head contractor. In addition, as payment is made simultaneously to the head contractor and subcontractors, the payment cycle (for downstream payments) is reduced. This would limit the head contractor s ability to maximise the return on these funds. Where the principal certifies a lesser amount than the head contractor for works undertaken by subcontractors, the difference is deducted from the amount to be paid to the head contractor via the PBA. Where the balance in the PBA is insufficient to meet the amounts owing to subcontractors, the head contractor must contribute funds. PAGE 35

36 How would PBAs sit with existing legislation? While a PBA provides security for payment of certified amounts, it does not resolve underlying disputes about payment. Subcontractors would still need to rely on their rights under their contract, the BCIPA and the SCA. BCIPA A PBA could potentially create an arrangement for payment under BCIPA between the subcontractor and the principal. This characterisation could have serious consequences, especially for principals. The term arrangement is not defined in BCIPA. The courts have held that an arrangement may exist where: a construction contract states that the principal will pay subcontractors on behalf of the head contractor notwithstanding that the principal is not a party to those subcontracts 1 ; and a third party has promised to pay a contractor for work. For example, the courts have held that there was an arrangement between the developer of a property and an architect because of an undertaking to pay for the work, 2 and similarly between a builder and its subcontractor for plastering work. 3 In each case, the courts carefully examined the facts, promises and representations to determine whether an arrangement for payment existed. It is important to note, however, that where the promise to pay is in the form of a guarantee, the arrangement may be excluded from the BCIPA regime under section 3(3)(c)(ii). Essentially, whether a PBA will create an arrangement for the purposes of BCIPA will turn on the drafting of the construction contract and trust arrangements. If these documents are not properly prepared, a principal may inadvertently find itself a respondent to a claim brought by a subcontractor under the BCIPA. SCA PBAs may give rise to several potential questions about their interaction with the SCA. The SCA allows subcontractors to issue a statutory charge over monies payable by a principal (to a head contractor) for money the head contractor owes the subcontractor. For example, where a disputed amount is payable (or to become payable) by the head contractor to the subcontractor and the subcontractor issues a statutory charge: (a) Should the charge be placed over money before it is paid into the PBA? If so, and if the charge causes a shortfall in the PBA, other subcontractors will need to rely on the head contractor to top up the PBA effectively denying them the benefit of the PBA. (b) Will (or can) a charge attach to money once it is in the PBA? (c) Will a principal still need to pay the claimed amount into court to discharge its SCA obligations pending final determination of the payment dispute after it has paid the money into the PBA? In short, if PBAs are to be required in Queensland or elsewhere, the new legislation will require careful drafting to ensure cohesion with existing payment legislation. 1 Okaroo Pty Ltd v Vos Construction and Joinery Pty Ltd [2005] NSWSC 45 (which has been followed in Queensland) 2 IWD No 2 Pty Ltd v Level Orange Pty Ltd [2012] NSWSC Walton Construction (Qld) Pty Ltd v Salce [2008] QSC 235 PAGE 36

37 PAGE 37

38 CORRS CONSTRUCTION LAW UPDATE RECENT OTHER RECENT DEVELOPMENTS DECISIONS MT HØJGAARD A//S V E.ON CLIMATE AND RENEWABLES [2014] EWCA CIV 710 KEYWORDS: HOW TO VALUE NEGATIVE VARIATIONS KEY TAKEAWAY Valuing negative variations or omissions in lump sum contracts is often fraught: should omitted works be valued on the basis of how much they would have cost the contractor to complete, or on the basis of the part of the lump sum price attributable to the works? In this case, the English Court of Appeal considered this issue and held that: (a) negative variations in lump sum contracts should be valued on the basis of the part of the lump sum price attributable to the omitted works; and (b) to determine what part of the lump sum price was attributable to the omitted works it was permissible to examine the contractor s tender breakdown (even though the breakdown did not form part of the contract). PAGE 38

39 Facts The case involved the installation of piles for an offshore wind farm. The barge being used by the contractor (Hojgaard) the LISA kept breaking down and was ultimately withdrawn. A free issue barge was supplied by the employer (E.ON), and used by Hojgaard to install all but two of the sixty-two piles. The contract price was a fixed lump sum. The issue was how to value omission of the works related to the supply of the barge. Hojgaard argued that the part of the contract price attributable to the original barge, the LISA, was the amount which should be deducted from the contract price. The original contribution for the barge ( 12.9 million) was indicated in Schedule of Rates of the Contract. E.ON argued that the omission should be valued with reference to how long it would have taken Hojgaard to have performed the works if they had used the original barge. This would result in a deduction from the contract price of million. E.ON argued that the reason behind the variation (i.e. lack of progress) was relevant in determining what value should be given to the deduction. Decision The English Court of Appeal found in favour of Hojgaard s valuation approach. The Court reasoned that: Hojgaard had agreed to carry out the work for a fixed price and assumed the risk (the pricing risk) that such a price might not be enough to cover all the work. Although the contract provided for a single price, it was clear that part of that price related to the pile installation works. It was irrelevant how many days it would have taken the LISA to complete the works, as this would have relieved Hojgaard of the pricing risk. Adopting E.ON s speculative approach would have meant that the variation would entail a deduction that was substantially larger than the amount considered for the installation works in the pricing schedule of the contract. Even a calculation by reference to the time taken by the replacement barge multiplied by an efficiency factor to reflect the different efficiencies of the two vessels, would result in a sum greatly in excess of those outlined in the contract. It would also remove the pricing risk from Hojgaard. When carrying out a valuation under the contract, one should consider the contract as a whole and, in particular, the pricing risk. Where it is difficult to quantify the amount of the omitted work as a proportion of the contract price (as in this case, where it was a lump sum contract) one should look at any potentially relevant material, including the way the contractor built up the price. It was not necessary to consider the reason for the variation and account for that in the valuation, as this would involve valuing work the LISA, in fact, could not do. E.ON was wrongly attempting to obtain a contractual remedy for Hojgaard s breach of contract, in seeking to account for delay through the variation mechanism. Lord Justice Clarke summarised the Court s findings by saying: If the [whole of the] work was wholly omitted from the Contract the whole of the price properly attributable to such work would fall to be omitted; and if part was omitted, there should be omitted a proportion of the price that appropriately reflected the work omitted and which, but for the omission, would have been paid cgi?doc=ew/cases/ewca/civ/2014/710. html&query=&method=boolean PAGE 39

40 CORRS CONSTRUCTION LAW UPDATE OTHER RECENT DEVELOPMENTS SOUTH AUSTRALIAN SECURITY OF PAYMENT LEGISLATION South Australia may follow Queensland and abolish for-profit authorised nominating authorities. The reform is being promoted by Opposition MP Stephan Knoll. In his second reading speech moving the amending legislation, Knoll described the current situation thus: The intent of the Act is to provide a mechanism to deal fairly and efficiently with disputes around payment. Unfortunately, this mechanism is not always used fairly and efficiently and has drawn a lot of criticism. There are documented issues with the current system that need to be fixed. There is often a claim within the Building and Construction Industry Security of Payment Act of bias towards subcontractors who, through the current system, essentially shop around for an authorised nominating authority that is going to provide them with the outcome they seek. To combat this situation, Knoll has proposed the Building and Construction Industry Security of Payment (Authorised Nominating Authorities) Amendment Bill It remains to be seen whether the Bill will be enacted. IRISH SECURITY OF PAYMENT LEGISLATION The Irish security of payment legislation, the Construction Contracts Act 2013, will enter into force on 25 July The 13-page long Bill for the Act was introduced in 2010 and the Act was passed in 2013, but its operation was long subject to a Ministerial commencement order. This order was signed on 13 April NEW BOOK Understanding Construction Law Jeremy Coggins, Tom Davie, Tony Earls and Phil Evans This overview text is designed for students and practitioners in disciplines such as construction, architecture, engineering or business who need to understand construction law. It is also a valuable reference for individuals working in the construction industry. Illustrating how legal principles are applied in transactions, it covers all Australian jurisdictions and includes information on construction industry and practice. The author team combines in-depth experience in the construction industry, legal practice and academia to present an authoritative but readable and practical text with no assumed knowledge of law. PAGE 40

41 JOURNAL ARTICLES AND PAPERS Matthew Lees, No More Mr Nice Guy: The Implied Duty to Cooperate and Remedying Another Party s Mistaken Breach (2016) 44(1) Australian Business Law Review 7 Keywords: mistaken breach Key takeaways This article (by a partner of Arnold Bloch Leibler in Melbourne) contains a useful summary of the circumstances in which a party is restricted from taking advantage of the other party s mistaken breach. While both of the intermediate appellate court cases examined in the article found no breach by the party taking advantage of the other party s mistaken breach, the article concludes that the limits of the implied duty to cooperate will remain contested for some time to come. Abstract The limits of the implied duty to cooperate are starkly illustrated by two appeal court decisions: Wolfe v Permanent Custodians Ltd [2013] VSCA 331 and Famestock Pty Ltd v Body Corporate for No 9 Port Douglas Road Community Title Scheme [2013] QCA 354. In both cases, one party could have assisted to remedy the consequences of a mistaken breach of contract by the other party. Despite the grave consequences, both courts did not wish to impose a positive duty (or a duty to be nice ) in relation to something that was ultimately the other (mistaken) party s responsibility under the contract. However, the courts were also reluctant to go so far as saying that no positive action was required in this situation, and did not endorse a dispositive principle. As such, the limits of the implied duty will remain contested. JOURNALS_TOC&isTocNav=true&startChunk=1&endChunk=1 Dr Ian Freckelton QC, The Award of Wasted Costs Arising from Defective Expert Evidence (2016) 25(3) Journal of Judicial Administration 113 Keywords: expert evidence; wasted costs Key takeaways Dr Freckelton QC surveys recent case authority in Australia and internationally on this issue, identifying the powers and circumstances in which the relevant party s lawyers, or the experts themselves, may be liable for the wasted costs. Abstract A variety of forms of accountability exist for the written reports and the oral evidence of forensic experts. An emerging form of such accountability is the potential for costs orders to be made by courts when serious problems have been encountered with the reliability of expert evidence. A series of decisions in the United Kingdom, Australia and Canada has engaged with the question of when costs could or should be awarded against experts, solicitors or counsel in respect of expert evidence. This article focuses on leading decisions in England, Australia and British Ontario, in particular the landmark analysis by Dixon J in Hudspeth v Scholastic Cleaning and Consultancy Services Pty Ltd (Ruling No 8) [2014] VSC 567. It draws from the cases the principal considerations applied in awarding or declining to order costs in respect of expert evidence and argues that the award of costs in exceptional cases has the potential to play a constructive role in enhancing the accountability of experts and commissioning lawyers alike in respect of expert opinion evidence. However, it urges the need for caution and stresses the importance of procedural fairness in wasted costs hearings. JOURNALS_TOC&isTocNav=true&startChunk=1&endChunk=1 PAGE 41

42 CORRS CONSTRUCTION LAW UPDATE OTHER RECENT DEVELOPMENTS Robert McDougall, Construction of Contracts: The High Court s Approach (2016) 41(2) Australian Bar Review 103 Keywords: construction of contracts; extrinsic evidence, ambiguity Key takeaways This paper (by a senior New South Wales Supreme Court Judge) reviews the nine High Court decisions since 2000 on the question of when a court can have regard to evidence of extrinsic circumstances when construing a contract, and identifies a view that reconciles Mason J s statements in Codelfa with all of the authorities: In short Codelfa shows that extrinsic evidence is always admissible in the evidentiary sense; that is, courts may always allow its reception. It is then admissible in the usage sense (1) to define a descriptive term, (2) to explain the genesis of a transaction, or (3) to resolve ambiguity, but is inadmissible in the usage sense (4) to contradict plain language, or (5) to prove subjective intentions. Abstract In Codelfa Constructions Pty Ltd v State Rail Authority of New South Wales, Mason J developed the true rule of contractual construction, which determines the extent of admissibility of surrounding circumstances in this context. This paper explores the approach to contractual construction taken by the High Court in more recent times, in light of Mason J s judgment in Codelfa. The High Court has handed down nine judgments since 2000 which deal expressly with the construction of contracts, and these cases demonstrate that Mason J s statements in Codelfa remain reconciled with the High Court s recent approach. These cases further demonstrate that the orthodox principles of contractual construction, which steer away from external context and focus on internal content, continue to be more decisive of the construction of particular terms. Lord Neuberger of Abbotsbury, Reflections on the ICLR Top Fifteen Cases: A Talk to Commemorate the ICLR s 150th Anniversary (2016) 32(2) Construction Law Journal 149 Keywords: legal reflections Key takeaways This is a reprint of a speech given by Lord Neuberger, the President of the Supreme Court of the United Kingdom, in October The speech concerned the 15 most important cases reported by the Incorporated Council of Law Reporting in its 150- year history, as determined by a survey. Abstract Lord Neuberger s speech does not break any new ground, but is an entertaining and informative review of key cases from the past 150 years, some of which are familiar to us, including: Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256 (consideration and intention to create a contract), Salomon v A Salomon & Co [1897] AC 22 (a company s separate legal identity), Donoghue v Stevenson [1932] AC 562 (duty of care in negligence), Central London Property Trust Ltd v High Trees House Ltd [1947] KB 130 (Denning J s celebrated ex tempore rediscovery of promissory estoppel), Associated Provincial Picture Houses v Wednesbury Corporation [1948] 1 KB 223 (unreasonableness), Caparo Industries plc v Dickman [1990] 2 AC 605 (negligence), Chartbrook Ltd v Persimmon Homes Ltd [2009] 1 AC 1101 (meaning of commercial contracts). He contrasts the current view of these cases with some of the contemporaneous commentary. Of local interest, Lord Neuberger noted that the (equal) most represented member of the judiciary was Lord Atkin, who was born in Brisbane. Justice Applegarth has recently written about Lord Atkin (links below), including about the fascinating trivia that his life was entwined with Griffith CJ s, and Dick Atkin of counsel s first brief at the Bar came from a young solicitor named Norman Herbert Smith PAGE 42

43 CORRS THINKING PIECES LINKS TO OUR RECENT THINKING When the rubber hits the road: Opportunities and challenges for Australia s first rubber-tyred train system Better days ahead for building owners in NSW strata schemes Public Stadium projects can they be made into economic champions or will they always be wooden spooners? Are your contractors paying award wages? It might be your problem if they re not! PAGE 43

44 CONTACTS BRISBANE ROD DANN PARTNER Tel rod.dann@corrs.com.au Brisbane Construction/Infrastructure Lawyer of the Year Best Lawyers Best Lawyer Alternative Dispute Resolution, Litigation and Regulatory Best Lawyers Peer Review, ANDREW MCCORMACK PARTNER Tel andrew.mccormack@corrs.com.au Best Lawyer Construction/Infrastructure Best Lawyers Peer Review, MATTHEW MUIR PARTNER Tel Matthew.muir@corrs.com.au [Matt] provided valuable support, strategic advice, insight and good humour in a troublesome case. Steps ahead of the opposition, commercially, legally and tactically proves a winning formula. PETER SCHENK PARTNER Tel peter.schenk@corrs.com.au Brisbane Construction/Infrastructure Lawyer of the Year Best Lawyers Leading Lawyer Construction Chambers Global Guide, Best Lawyer Mining Best Lawyers Peer Review, 2017 Listed Expert Euromoney PLC s Guide to World s Leading Construction Lawyers, 2013 FRANCES WILLIAMS PARTNER Tel frances.williams@corrs.com.au Best Lawyer Construction/Infrastructure Best Lawyers Peer Review, Best Lawyer Litigation Best Lawyers Peer Review, 2012 & 2017 Best Lawyer Alternative Dispute Resolution Best Lawyers Peer Review, 2017 PAGE 44

45 CONTACTS MELBOURNE JOSEPH BARBARO PARTNER Tel joseph.barbaro@corrs.com.au Best Lawyer Water Best Lawyers Peer Review, Builds a strong relationship with the client and delivers SA Water BEN DAVIDSON PARTNER Tel ben.davidson@corrs.com.au Leading Lawyer Construction/Infrastructure Chambers Global Guide, Best Lawyers Construction and Infrastructure Best Lawyers Peer Review, DAVID WARREN PARTNER Tel david.warren@corrs.com.au Leading Lawyer Construction & Projects Chambers Global Guide, Best Lawyer Construction/ Infrastructure and Project Finance & Development Best Lawyers Peer Review, ANDREW STEPHENSON PARTNER Tel andrew.stephenson@corrs.com.au Best Lawyer International Arbitration Best Lawyers Peer Review, Best Lawyer - Construction/ Infrastructure & Litigation Best Lawyers Peer Review, Leading Lawyer - Construction Chambers Asia Pacific Guide, JOHN WALTER PARTNER Tel john.walter@corrs.com.au Melbourne Project Finance & Development Lawyer of the Year Best Lawyers Peer Review, 2011 Best Lawyer Construction Infrastructure, Project Finance & Development and Water Best Lawyers Peer Review, Leading Lawyer Projects & Government Chambers Global Guide, PAGE 45

46 CONTACTS SYDNEY SIMON ASHWORTH PARTNER Tel simon.ashworth@corrs.com.au Best Lawyer Project Finance and Development Best Lawyers Peer Review, SHAUN BAILEY PARTNER Tel shaun.bailey@corrs.com.au A high calibre, specialist practitioner ANDREW CHEW PARTNER Tel andrew.chew@corrs.com.au Featured Expert Construction International Who s Who Legal of Construction Lawyers, 2012 & 2015 Leading Lawyer Construction Chambers Global Guide, 2012 & 2016 Best Lawyer Construction/Infrastructure Best Lawyers Peer Review, ROBERT REGAN PARTNER Tel robert.regan@corrs.com.au Best Lawyer Construction Infrastructure Best Lawyers Peer Review, Leading Building & Construction Lawyer Australasian Legal Business Guide to Building & Construction Law MICHAEL EARWAKER PARTNER Tel michael.earwaker@corrs.com.au Best Lawyer - Construction/ Infrastructure & Litigation Best Lawyers Peer Review, AIRLIE FOX PARTNER Tel airlie.fox@corrs.com.au PAGE 46

47 CONTACTS PERTH SPENCER FLAY PARTNER Tel spencer.flay@corrs.com.au Best Lawyer - Construction/Infrastructure Best Lawyers Peer Review, Leading Lawyer - Construction (WA) Doyle s Guide to the Australian Legal Profession, SARAH LEONARD PARTNER Tel sarah.leonard@corrs.com.au Best Lawyer - Construction/Infrastructure Best Lawyers Peer Review, CHRIS RYDER PARTNER Tel chris.ryder@corrs.com.au Perth Construction Infrastructure Lawyer of the Year Best Lawyers Peer Review, 2013 Leading Lawyer - Construction Chambers Global Guide, Best Lawyer - Construction Infrastructure Best Lawyers Peer Review, PAGE 47