Major projects & construction 5 Minute Fix 28

By the Major projects & construction team
07 Mar 2019
Get your 5 Minute Fix of major projects and construction news. This issue: how Australian jurisdictions have responded to the Building Confidence Report; Lacrosse Tower combustible cladding decision; looming Queensland cladding deadline; Western Australia to establish a new State Infrastructure Authority and further guidance on courts' interpretation of security of payment legislation.


The Building Confidence Report: one year on

The Council of Australian Governments Building Ministers Forum (BMF), commissioned an independent review into compliance and enforcement systems for the building and construction industry in the wake of the Lacrosse and Grenfell Tower fires. The results of that review were published in February 2018 in the Building Confidence Report.

The Building Confidence Report identified serious and widespread compliance failures in the sector and made 24 recommendations designed to address those weaknesses.

The BMF provided in-principle support for the report at the April 2018 meeting. A commitment to develop a joint implementation plan was given and the issue of that joint plan is imminent.

In the meantime, the Opal Tower evacuation on Christmas Eve last year has lead the NSW Government to accelerate matters and issue its own response to the report on 19 February 2019. The NSW Government says its response "supports the vast majority of the Report's recommendations". However, the response sets out only four broad initiatives to address the 24 recommendations. Specifically, the NSW Government has made a commitment to:

  • appoint a Building Commissioner to act as the consolidated building regulator and administer all building laws in NSW;
  • introduce new laws that will require building practitioners involved in designing buildings to submit building plans to the Commissioner and declare that plans are Building Code compliant amongst other measures;
  • require building practitioners who make declarations to be registered by the Building Commissioner and maintain the necessary skills and insurance to meet registration requirements;
  • clarify the law to ensure that building practitioners owe a common law duty of care to owners’ corporations and subsequent titleholders of residential developments, as well as unsophisticated construction clients who are small businesses.

The NSW Government states it will be working with the industry and community stakeholders to develop and implement the reforms.

The BMF has acknowledged all jurisdictions were implementing reforms to achieve the outcomes proposed by the Report, but that Ministers agreed that wherever possible jurisdictions will adopt reforms consistent with those in place or proposed in other jurisdictions. It remains to be seen how other jurisdictions will respond to the report and whether there will be real efforts to have a co-ordinated approach to building reform in Australia.

Sheeting home liability for combustible cladding

Everyone wants to know who's to blame for the installation of non-compliant cladding. As the number of Australian high-rise buildings wrapped in polyethylene-core cladding soars, the first significant decision apportioning liability for loss and damage caused by a cladding fire will be scrutinised by building owners, insurers, building contractors and building consultants alike.

In Owners Corporation No.1 of PS613436T v LU Simon Builders Pty Ltd (Building and Property) [2019] VCAT 286, each of the consultants (building surveyor, architect and fire engineer) involved in the design and construction of the Lacrosse building sought to sheet home liability to the builder, LU Simon for its role in the installation of non-compliant combustible Alucobest aluminium composite panels (ACPs).

Judge Woodward found that the builder was primarily liable to pay damages to the owners. The builder's liability arose due to its breach of the statutory warranties of suitability of materials, compliance with the law and fitness for purpose implied into its design and construct contract via the Domestic Building Contracts Act 1995 (Vic). However, the application of proportionate liability legislation meant that the building consultants ended up bearing the brunt of the damages payable by the builder to the owners.

One cannot draw conclusions as to whether liability will be apportioned in the same way on other projects. Each project will contain different variables: cladding applications, legislative framework, whether the affected building is residential, commercial (or mixed use), differences between proportionate liability regimes, and the contractual relationships between those involved in the selection, approval and installation of ACPs and the day-to-day conduct of the parties. All of these factors will influence decisions as to where the lion's share of liability will rest.

What is clear from the decision is that any party involved in specifying, approving or installing ACPs should not presume that they will escape exposure to liability.

Queensland: affected building owners to complete stage 1 of online combustible cladding checklist by 29 March

The process is aimed at identifying buildings in Queensland that may contain potentially combustible cladding. The Queensland Government regulation applies to buildings that are:

Owners of these buildings must register and complete part 1 of the online checklist by 29 March 2019. Further assessment (if required) must be completed by 29 May 2019. Affected buildings will be required to display a notice on the building and provide copies of risk assessments to lot owners and tenants.

Clayton Utz QLD Cladding timeline

More detail can be found on the "Safer Buildings" website.

The Infrastructure Western Australia Bill: a new authority to prepare strategies for infrastructure development in WA

The Infrastructure Western Australia Bill 2019 was introduced on 20 February 2019.

The Bill is to establish Infrastructure Western Australia as a statutory authority that will provide advice and assistance to the WA Premier and Government on matters relating to infrastructure, including Western Australia’s infrastructure needs and priorities.

Infrastructure WA’s main roles will be to:

  • develop a 20-year State Infrastructure Strategy for the WA Government which identifies WA infrastructure needs and priorities over the next 20 years;
  • provide expert advice to Government on infrastructure matters including advice on funding and financing options for significant projects and programmes; and
  • support the work of agencies in developing their infrastructure plans.

The Bill prescribes a process for a State Infrastructure Strategy developed by the new authority to be laid before Parliament and a response to the strategy by the Premier to be laid before Parliament within six months.

Security of payment: recent Queensland Supreme Court decision highlights the need for adjudicators to give comprehensive reasons

The Queensland Supreme Court has reinforced the need for adjudicators to provide adequate reasoning for their decisions or risk the decision (or a deficient portion) being found void.

In Fulton Hogan Construction Pty Ltd v QH & M Birt Pty Ltd & Ors [2019] QSC 23 the head contractor, Fulton Hogan, applied for a declaration that an adjudication decision, made under the Queensland security of payment legislation, was void for jurisdictional error. The decision required Fulton Hogan to pay its subcontractor, QH & M Birt, $1.3 million for earthworks related to the construction of a dam.

Fulton Hogan attacked the decision on a number of fronts, including a lack of reasoning for the position the adjudicator took on a significant element of the claim about the applicable rate for the removal and replacement of unsuitable material. Justice Ryan dismissed the criticisms of other elements of the decision, but accepted that the adjudicator's reasoning about the rate was so deficient that it constituted jurisdictional error and declared that portion of the decision to be void:

"… the adjudicator did not explain why he was not satisfied that the removal and replacement rate was applicable to the nature of the work undertaken by QBirt. Nor did he explain why he did not apply the rate QBirt claimed had been agreed to the work (that is, the separate rates for removal and replacement).

The adjudicator’s reasons do not demonstrate that he endeavoured in good faith to consider the issue in contest (cf Brookhollow). They do not reveal his reasoning processes (cf Bauen). They are opaque (cf Sierra).

In the absence of reasons, I cannot conclude that the adjudicator has undertaken the task required of him under the Act. I cannot be satisfied that he has not misconceived the nature of the functions that he was to perform."

Striking a balance on the extent of reasons may not be an easy task for adjudicators given the time pressures and complexities they often face, but the thorough analysis in this judgment of the standard that must be met provides helpful guidance to them.

Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.