Major projects & construction 5 Minute Fix 24

By the Major projects & construction team
22 Nov 2018
Get your 5 Minute Fix of major projects and construction news. This issue:commencement of Queensland building legislation reform, further guidance on Courts' interpretation of security of payment legislation and contractual good faith obligations.

Just in time for Christmas – Queensland Government delivers new SOP package

The Queensland Government has confirmed that the second phase of its building industry fairness reforms will commence prior to Christmas.  From 17 December 2018, important reforms relating to payment claims, payment schedules and the adjudication process (contained in Chapter 3 of the Building Industry Fairness (Security of Payment) Act 2017 (Qld) (BIF Act)) will take effect.

Associated reforms modernising and simplifying the provisions for making a subcontractor's charge also take effect from 17 December 2018.  As a result, the Subcontractors' Charges Act 1974 (Qld) will be repealed and the modernised provisions governing subcontractors' charges rehoused in Chapter 4 of the BIF Act – providing a one-stop-shop for security of payment legislation in Queensland.

SOP Act: Summary judgment avoided despite absence of Payment Schedule

VicRoads has recently defended a summary judgment application made by John Beever (Aust) Pty Ltd (JBA) after it failed to submit a payment schedule in accordance with the Building and Construction Industry Security of Payment Act 2002 (Vic) (SOP Act).

JBA's payment claim under the SOP Act related to strengthening works to the Wallen Road Bridge in Hawthorn.  Upon VicRoads' failure to serve a payment schedule in response, JBA applied for summary judgment for the amount claimed pursuant to section 16(2)(a)(i) of the SOP, which provides that where payment is due and the respondent fails to pay the claimed amount, a claimant may recover the unpaid portion of the claimed amount as a debt due to the claimant in any court of competent jurisdiction. 

VicRoads successfully argued that there was no applicable reference date under the SOP Act, and therefore JBA's payment claim was invalid and JBA could not obtain summary judgment because VicRoads had a real prospect of success should the matter be taken to a full hearing.  Justice Digby held that VicRoads' various arguments regarding the validity of JBA's payment claim and application of the SOP Act were cogent, viable and prima facie established a real prospect of success in a number of strongly arguable respects.  In particular, Justice Digby found that:

  1. read together, the SOP Act and the Civil Procedure Act 2010 (Vic) required JBA to demonstrate that VicRoads had no real prospect of success in arguing that the requirements of section 16(2)(a)(i) of the SOP Act were not satisfied;
  2. JBA failed to demonstrate that VicRoads had no real prospect of success in arguing that the relevant payment claim:
    1. had no valid reference date;
    2. included amounts defined as excluded under the SOP Act; and
    3. was non-compliant as it included excluded amounts; and
  3. VicRoads had a real prospect of success in its defence. 

The judgment provides a well-reasoned summary of the interaction between the SOP Act and other Victorian procedural mechanisms that regulate summary judgment applications, applying them harmoniously so that the SOP Act did not override other legislative mechanisms."

SOP Act: Court of Appeal holds that late adjudication determinations are not void

The East Coast security of payment laws impose prescribed time limits in applying for, and responding to, an adjudication application.  However, the SOP Act provides adjudicators with more flexibility, after the Victorian Court of Appeal confirmed that an adjudicator's non-compliance with the prescribed time period for issuing a determination did not render that determination void.

In Ian Street Developer Pty Ltd v Arrow International Pty Ltd [2018] VSCA 294, the applicant , Ian Street, and first respondent, Arrow, contested the validity of an adjudicator's determination made in respect of a payment claim issued by Arrow under section 14 of the SOP Act.  The adjudicator had decided in favour of Arrow, however served its determination on the parties outside of the time allowed by section 22(4) of the SOP Act.  That provision specifies a time limit within which an adjudication must be completed, and Ian Street argued that after the expiry of the time period the adjudicator no longer had jurisdiction.

The Court recognised that the SOP Act is silent on whether an adjudicator’s non-compliance with the prescribed time period voided its determination.  Applying the principles of statutory construction, the Court unanimously rejected Ian Street's argument, and found that:

  1. the SOP Act specifically identifies the circumstances in which an adjudicator's determination will be void (which do not include service of a determination outside the statutory time limit);
  2. the consequences of the adjudicator's non-compliance with the adjudication time limit are also separately addressed by the SOP Act (which permits the claimant to withdraw its application for adjudication where the determination is not served within time); and
  3. ultimately, the Principal's construction of the time limit was inconsistent with the purpose of the SOP Act, which was to enable to the adjudicator to resolve disputes regarding payment claims under the SOP Act. 

The decision serves as a reminder to industry participants that the SOP Act is, in the words of President Maxwell, "avowedly established for the benefit of claimants". 

Dealing with contractual good faith obligations: it's all in the drafting

The Queensland Court of Appeal has highlighted the critical importance of contract drafting, particularly in respect of contractual good faith obligations, in Sentinel Robina Office Pty Ltd v Clarence Property Corporation Ltd [2018] QCA 314.  The appellant, Sentinel Robina, and the respondent, Clarence Property, were akin to joint venturers and parties to a deed in relation to shared ownership of a building. 

Clause 16.9 of the deed relevantly provided that "…the parties agree that in the performance of their respective duties and the exercise of their respective powers under this deed and in their respective dealings with each other, they shall act in the utmost good faith".  The key issue was whether actions by Clarence Property, in poaching an employee from Sentinel Robina, occurred "in the course of the co-owners' respective dealings with each other", which was the third aspect of the good faith clause. 

On appeal, Sentinel Robina argued that the absence of the words "under the Deed" from the third aspect of the good faith clause meant that the good faith obligation had a broader application in that context.  This was not accepted by the Court of Appeal.  It was held that poaching an employee did not bear any relationship to the bargain between the parties and the contractual objectives sought to be achieved by them, and that it was not an example of one of the parties "dealing" with another.  This relatively close reading of the good faith clause highlights the importance of ensuring objective clarity when drafting such clauses. 

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