Major Projects & Construction 5 Minute Fix 138: downstream subcontracts, CityLink roaming fees

Downstream subcontract not automatically terminated when head contract ends

In Coulson Aviation (Australia) Pty Ltd v Techfuel Pty Ltd [2025] NSWCA 211, the NSW Court of Appeal considered the effect of termination of a head contract on a downstream subcontract, holding that clear and unambiguous words were required to provide for automatic termination of a subcontract. In the absence of such words, additional costs and termination fees might be payable.

Coulson Aviation was engaged by the Australasian Fire and Emergency Service Authorities Council Ltd under two agreements (AFAC Agreements) to make available two helicopters for use by the RFS and CFA to fight bushfires. Techfuel was, in turn, engaged by Coulson Aviation under two agreements (Fuel Agreements) to deliver aviation fuel for each helicopter when the helicopters were based away from their home airfields.

The AFAC Agreements came to an end prior to the start of the 2023 fire season. Coulson Aviation notified Techfuel that its services under the Fuel Agreements were no longer required. Techfuel alleged this notice constituted termination for convenience by Coulson Aviation which was therefore liable to pay an additional fee.

Under Schedule 1 of the Fuel Agreements, the services would be provided "for the full term of the [AFAC Agreements] contract period, including any extension periods". Coulson Aviation argued that this meant that if the AFAC Agreements were terminated early, the Fuel Agreements would automatically terminate as a result.

The Court held that while the sole commercial purpose of the Fuel Agreements was the services under the AFAC Agreements, the language was not sufficiently clear to construe the Fuel Agreements as terminating automatically. Therefore, Coulson Aviation was liable to pay an additional fee (a liquidated sum of $277,000, being approximately 90 days of Techfuel's daily rate) as a result of a termination for convenience.

Restitutionary interest reaches the end of the road (maybe)

In ConnectEast Pty Ltd v CityLink Melbourne Limited (No 3) [2025] VSC 554, Justice Stynes held that ConnectEast, operator of the EastLink tollway in Melbourne's eastern suburbs, was not entitled to restitutionary interest on roaming fees which had been charged to it by CityLink Melbourne Limited (CML), the operator of the CityLink tollways in inner Melbourne.

In an earlier decision (ConnectEast Pty Ltd v CityLink Melbourne Limited (No 2) [2024] VSC 788), Justice Stynes had ordered CML to pay back roaming fees, being fees charged by CML to allow ConnectEast's tolling account holders to use CML's roads, on the basis that those fees were in excess of a legislative cap. CML had been ordered to pay penalty interest on the judgment sum from when the proceedings began.

ConnectEast's claim for restitutionary interest was made at common law and in equity. In addressing the common law claim, Justice Stynes was ultimately constrained by the "seriously considered dicta" of the High Court (per Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89) that there is no free-standing right to the recovery of interest in a common law restitutionary claim. However, Justice Stynes observed that she otherwise would have found in ConnectEast's favour on the basis that "enrichment" includes the time-value of the money.

The equitable claim was not pressed in oral submissions and Justice Stynes was not persuaded that the facts supported the award of interest in equity.

Arbitration wrap

Court sets aside arbitrator's decision on valuation dispute

In Fremantle Port Authority v Martin [2025] WASC 301, Justice Lundberg set aside an arbitrator’s award under section 34(2) of the Commercial Arbitration Act 2012 (WA) (CAA) for denial of procedural fairness and exceeding authority, and made declarations under section 16(9) of the CAA clarifying the scope of the arbitrator's jurisdiction.

This is a relatively rare instance of an arbitral award being quashed. However, following the recent long-running dispute culminating in CBI Constructors Pty Ltd v Chevron Australia Pty Ltd [2024] HCA 28, it reflects an emerging trend of courts paying close attention to an arbitrator's jurisdiction and the due execution of the functions of their role.

The Fremantle Port Authority (FPA) leased land to Container Refrigeration Pty Ltd (CR). The Lease required CR to improve the premises and provided a formula for calculating the value of compensation for improvements upon expiry or termination of the Lease. Under the Lease, disputes about valuation were to be resolved by the parties' respective valuers, with a third valuer acting as arbitrator determining the issue if no agreement was reached. CR continued as the lessee for some time beyond the Lease's expiry and the parties disputed the value of compensation. The arbitrator rejected both valuers’ methods but failed to actually determine the correct method as required by the dispute resolution clause.

FPA applied to set aside the award and the Court agreed. Justice Lundberg held that the arbitrator had failed to grapple with the critical issue in dispute, being whether the remaining lease term should reduce the CR's entitlement to compensation, and in doing so, had failed to give the parties an opportunity to be heard. Not affording parties the chance to be head on material issues can constitute a failure to afford procedural fairness.

His Honour also found that the arbitrator had exceeded the scope of their authority, which was held to be confined to resolving the differences between the valuers and determining the monetary value of CR's compensation. The arbitrator strayed outside this authority by making determinations inconsistent with matters on which the parties' valuers agreed, and not just resolving difference between those valuers.

24th Annual Clayton Utz and University of Sydney International Arbitration Lecture

Together with the University of Sydney, Clayton Utz hosted the 24^th Annual International Arbitration Lecture at the Federal Court of Australia in Sydney. We were delighted to welcome our keynote speaker, Professor Janet Walker CM, to discuss "Dissents in International Arbitration revisited: the good, the bad, and the ugly", with Professor Chester Brown SC providing closing remarks.

The lecture centred on the role of dissents in arbitral awards, including the potential benefits of expressing dissenting views in collegial decision-making, the ways that dissents can be included in decisions, and the opportunity dissents can provide to improve outcomes, accountability and the finality of arbitral disputes.

Security of payment wrap

Key amendments to legislation regulating entitlement to progress payments under construction contract in Victoria

The first tranche of foreshadowed reforms of Victoria's security of payment regime in the Building Legislation Amendment (Fairer Payments on Jobsites and Other Matters) Bill 2025 passed both houses of Victorian Parliament on 30 October 2025.

The amendments to enacted by the Bill, once proclaimed, are the first step to implement the far-reaching recommendations arising out of the 2023 parliamentary inquiry into subcontractor protections. You can learn more of the Act's major changes and commercial implications here.

Consultation on proposed reforms to WA SOP Act

The industry consultation period has closed regarding proposed reforms to the WA SOP Act that are intended to strengthen security of payment for subcontractors working on State Government construction projects and streamline payment protections.

Proposed amendments include;

• replacing project accounts with a streamlined construction trust scheme; and

• carving out from the "pay when paid provisions" prohibition provisions that compel contemporaneous downstream payment from a head contractor to a subcontractor on the same day that a state agency pays the head contractor.

Service of payment claims under the NSW and WA SOP Acts

In Roberts Co (NSW) Pty Ltd v Sharvain Facades Pty Ltd (Administrators Appointed) [2025] NSWCA 161, the NSW Court of Appeal held that under the Building and Construction Industry Security of Payment Act 1999 (NSW) (NSW SOP Act), a payment claim is served when it is sent and capable of being retrieved, even if the contract between the parties seeks to deem after-hours service as being on the next business day.

As a result, a payment claim can be deemed received under the NSW SOP Act prior to the date it is deemed received under the relevant construction contract. If not carefully managed, this disconnect between legislation and contract can result in serious consequences, given the short timeframes and strict compliance requirements contained in the NSW SOP Act.

Roberts Co (NSW) served a payment claim by email after 5pm on a business day. Sharvain Facades failed to provide a payment schedule within 10 business days of service, and argued that a provision of the contract which deemed service after 5pm as occurring the next business day meant it had an extra day to provide a payment schedule. The Court held this contractual clause to be void, because under the NSW SOP Act, the parties cannot extend the legislative period by agreement and therefore the contractual provision was at odds with the NSW SOP Act.

The payment schedule was therefore served late and Sharvain Facades was liable on an interim basis for the full claimed amount under section 15 of the NSW SOP Act.

Similarly, in Martinus Rail Pty Ltd v Co-Operative Bulk Handling Ltd [2025] WASC 373, the Supreme Court of Western Australia held that, for the purposes of the Building and Construction Industry (Security of Payment) Act 2021 (WA) (WA SOP Act), the 15 business day response period to a payment claim sent by email begins when the claim becomes capable of being retrieved, not when contractually deemed received.

Martinus Rail had emailed a payment claim to Co-operative Bulk Handling on a Saturday, but the contract stated that notices received on non-business days were deemed received the next business day. The Court found that that reg 23(d) of the Building and Construction Industry (Security of Payment) Regulations 2022 (WA) and section 14 of the Electronic Transactions Act 2011 (WA) govern timing of receipt of notices, and that parties cannot contractually alter when a claim is "given" funder the WA SOP Act.

Jurisdictional error regarding security of payment claim in Qld

In Pico Play Pty Ltd v Coast Entertainment Operations Ltd [2025] QSC 227, the Queensland Supreme Court held that an adjudicator's decision was void due because the adjudicator misconstrued the scope of the contract. This is a rare example of an adjudicator's determination being quashed though on the well-established grounds of jurisdictional facts.

The parties agreed that Pico Play would not be entitled to be paid under the Qld SOP Act if it had contravened the Queensland Building and Construction Commission Act 1991 (Qld) (QBCC Act) by undertaking unlicensed building work. The adjudicator dismissed Pico Play’s payment claim, having found that Pico Play undertook unlicensed building work contrary to section 42(1) of the QBCC Act. On appeal to the courts, it was argued that the adjudicator erred in determining that the subject matter of the construction contract involved building work needing a licence under the QBCC Act.

The Court held that the existence of a valid construction contract is an objective jurisdictional fact which the court is entitled to determine when assessing an adjudicator's determination. The Court held that the contract in question only required Pico Play to design, manufacture and supply themed elements, not to install or perform building work, and therefore did not require a licence under the QBCC Act. Because Pico Play had not contravened the QBCC Act, it was entitled to pursue entitlements to payment claims under the Qld SOP Act notwithstanding the adjudicator's contrary determination.