Major projects & construction 5 Minute Fix 29

By the Major projects & construction team
21 Mar 2019
Get your 5 Minute Fix of major projects and construction news. In this issue, the Building Ministers’ Forum issues its roadmap for reform of the building and construction industry; a special joint taskforce to investigate subcontractor non-payment in the Queensland building industry; Victorian Parliament passes a bill on engineer registration; and the NSW Supreme Court grapples with confusion over successive SOP adjudications.


Special Joint Taskforce to investigate subbie non-payment in the Queensland building industry

On 28 February 2019, the Queensland Government announced a special joint taskforce to investigate subcontractor non-payment in the Queensland building industry – commencing from 27 March 2019. The taskforce will be led by retired Supreme Court Judge, the Honourable John Byrne and will consist of stakeholders from Queensland Police, the Queensland Building and Construction Commission (QBCC) and the Office of the Director of Public Prosecutions.

The taskforce follows the collapse of more than 50 building companies since 2013 including long-standing construction businesses such as Walton Construction (Qld) Pty Ltd and JM Kelly Project Builders, leaving thousands of unpaid subcontractors across Queensland with debts totalling about $500 million.

With the current national focus upon improving security of payment, the taskforce will be of interest not only to the sunshine state, but also the other States and Territories.

What is the scope of the taskforce?

While the terms of reference are yet to be published, the Department of Housing and Public Works has confirmed that the taskforce will:

  • investigate allegations of fraudulent behaviour relating to building subcontractor non-payment;
  • refer evidence of possible breaches of legislation to the relevant prosecuting authority;
  • consider whether the QBCC's existing investigative and supervisory powers are sufficient to deal with misconduct; and
  • by 30 June 2019, provide its recommendations to the Queensland Government about regulatory reforms needed to provide better protection to subcontractors.

Stay tuned for further updates on the taskforce's progress.

Building certifiers could be liable to owners for defective building work

The recent decision of the ACT Supreme Court in Hyblewski v Bellerive Homes Pty Ltd [2019] ACTSC 44 considers the liability of a building certifier for breach of an implied contractual duty to exercise due care and skill in performing his functions as a certifier of a residential building project in the ACT. It is of particular interest given the recent findings of liability for combustible cladding against the building surveyor in the Lacrosse Tower judgment, despite there being no direct contractual relationship with the applicant owners in that case.

In Hyblewski, the plaintiff claimed that the certifier should not have provided certificates that allowed construction of the project to proceed at three different stages when there were defects in the work done at those stages.

The certifier admitted that a contract was formed between the plaintiff and the certifier which contained an implied term that the builder would carry out certification work with all due care and skill and that in the absence of terms appointing the certifier, the content of the requirement to exercise reasonable care and skill must be determined having regard to the provisions of the Building Act 2004 (ACT). Under section 44 of the Act, a certifier may only certify that building work complies with the requirements for carrying out building work in section 42 of the Act (which includes that the building work must be carried out in accordance with approved plans and in a proper and skilful way) if (among other things) it is satisfied on reasonable grounds that the building work complies with section 42 of the Act.

Having regard to the expert evidence tendered, Justice Mossop found that the certifier did not have reasonable grounds for being satisfied that the building work complied with the requirements of section 42 as each of the defects identified was or ought to have been obvious to a certifier who was carrying out its role as a certifier with due care and skill. An example of the certifier's actions which the court characterised as 'manifestly inconsistent with a certifier's duty' under the Act was to allow construction to continue despite being inconsistent with the approved plans without providing notice to the building or the owner at the relevant time. Justice Mossop also found that had the builder been given notice of these defects at the relevant stages, the builder would have remedied them so that the plaintiff would not have suffered loss.

The judgement contains detailed consideration on the point of damages but essentially, the certifier was liable in contract damages for the difference between the contract sum and the amount required to achieve compliance with section 42 of the Act, taking into account the cost of rectifying the defects had the certifier done his job to the contractual standard.

Engineers should now be assessing their eligibility for registration and preparing for the impact of a new bill being considered by the Victorian Parliament

The Professional Engineers Registration Bill 2019 (Vic) is currently being considered by the Victorian Parliament. As described by the Association of Professional Engineers Australia, it represents "the biggest step so far towards mandatory engineer registration" in Victoria. The Bill received its second reading speech on 6 March 2019 and, according to a Victorian Government release last week, will be the subject of public consultation and a public regulatory impact statement process once the Bill passes the Upper House.

The Bill will establish a mandatory registration scheme for all engineers working in prescribed areas (unless working under the direct supervision of a registered professional engineer). Notable aspects of the Bill include the following:

  • applications for registration will be administered by the Business Licensing Authority (BLA);
  • to become registered, applicants will need to satisfy certain eligibility requirements, relevantly, the BLA will need to be satisfied that the applicant is suitably qualified and experienced;
  • the BLA will have the discretion to refuse registration if it is satisfied that the applicant is not a fit and proper person (and for this purpose may make "any inquiries" that the BLA "considers to be appropriate");
  • registration lasts for a period up to three years "as determined" by the BLA;
  • to secure a renewal of registration, among other things the applicant will need to demonstrate compliance with "prescribed continuing professional development requirements";
  • a registered professional engineer will be required to produce a certificate of registration within 7 days of request by certain entities, including a client of the engineer (and failure to do so will constitute a penalty); and
  • if a provision of the Bill does not come into operation before 1 July 2021, unless earlier proclaimed, the Bill will commence on that date.

Importantly, the Government has expressed its commitment to "work with other jurisdictions to develop a nationally consistent registration scheme". The need for a uniform approach to registration and improved professional development were, it will be recalled, the subject of recommendations made in last year's Building Confidence report.

Engineers should be assessing their eligibility for registration and preparing for the impact of the Bill when it passes into law.

Roadmap for reform across the building and construction industry

The Building Ministers' Forum recently published its roadmap for implementing the recommendations contained in its Building Confidence report, published April last year. The Building Confidence Report identified serious and widespread compliance failures in the building and construction industry across Australia and made 24 recommendations designed to address those weaknesses.

Of those 24 recommendations, the Plan prioritises six that would benefit from a national approach:

Mandatory registration: that each jurisdiction requires the registration of the following categories of building practitioners involved in the design, construction and maintenance of buildings:

  • builder
  • site or project manager
  • building surveyor
  • building inspector
  • architect
  • engineer
  • designer/draftsperson
  • plumber
  • fire safety practitioner

Consistent registration requirements: that each jurisdiction prescribes consistent requirements for the registration of building practitioners including certified training, competency and experience requirements, compulsory insurance (where available) and evidence of professional integrity.

Minimum statutory controls: that each jurisdiction establishes minimum statutory controls to mitigate conflicts of interest and increase transparency of the engagement and responsibilities of private building surveyors.

Building surveyor code of conduct: that each jurisdiction put in place a code of conduct for building surveyors which addresses the key matters which, if contravened, would be a ground for a disciplinary inquiry.

Enhanced powers and obligations of building surveyors: that each jurisdiction provides private building surveyors with enhanced supervisory powers and mandatory reporting obligations.

National Construction Code compliance: that each jurisdiction requires building approval documentation to be prepared by appropriate categories of registered practitioners, demonstrating that the proposed building complies with the National Construction Code.

The Plan acknowledges that a one-size-fits-all approach to the recommendations is not appropriate and that a tailored approach to reform for each state and territory is required. It summarises the response provided by each state and territory to the Building Confidence report since its release and the steps that are already underway or planned by each of them to implement the recommendations. Just this week by way of example, a Bill is being considered by the Victorian Parliament to establish a mandatory registration scheme for engineers working in prescribed areas.

To maintain the momentum and commitment to the reforms, the Senior Officers' Group, the Australian Building Codes Board and Building Regulators’ Forum have been charged with providing progress reports to the BMF.

Clearing the confusion over successive SOP adjudications

Icon Co (NSW) Pty Ltd v AMA Glass Facades Pty Ltd [2019] NSWSC 250 illustrates the pitfalls of seeking to re-agitate the same issues through the "repetitious use of the adjudication process" in the hope of securing a more favourable determination rather than challenging the determination in Court.

In this case, three successive adjudications under the same building contract (a subcontract for Sydney's beleaguered Opal Tower) involving the same issues concerning variations and entitlement to liquidated damages resulted in competing and conflicting findings as to the proper contractual interpretation – an outcome that drew the ire of the Court.

The Court stressed the incongruity of the "highly unsatisfactory situation":

  • "on the one hand, [the subcontractor] contends that [the second adjudicator] should have found that [the head contractor] was estopped from contending that [the first adjudicator's] construction of the Contract was incorrect; and
  • on the other hand, [the head contractor] contends that [the first adjudicator], when considering that construction question for the second time in the [third determination], should have found that [the subcontractor] was estopped from contending that [the second adjudicator's] construction was incorrect."

Instead of challenging the second adjudication determination in the usual way (via a judicial review application), the subcontractor sought to re-agitate the same issues by filing fresh payment claims. It was not until the contractor sought judicial review of the third determination that the subcontractor belatedly sought to challenge the second determination by cross summons.

However, non-compliance with the three-month time limit for challenging a SOP adjudication in NSW proved fatal to the subcontractor's challenge. Justice Stevenson was unwilling to grant leave to the subcontractor to apply for an extension of time to seek relief because of the subcontractor's ill-chosen reliance on the adjudication process to resubmit the payment claim, rather than initiating judicial review proceedings.

The key take-home messages from this decision are:

  • if you are seeking to challenge an adjudicator's determination, the Court is the appropriate forum to mount your challenge. Do not engage in tactics that the Court will take a dim view of – such as "repetitious re-agitation of payment claims"; and
  • be aware of time limits and make sure you act quickly – in NSW, there is three-month time limit for challenging a SOP adjudication.
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.