04 Feb 2021

Major projects & construction 5 Minute Fix 68

By THE MAJOR PROJECTS & CONSTRUCTION TEAM

Get your 5 Minute Fix of major projects and construction news. This issue: a 2021 watchlist of the key issues to follow this year; NSW Supreme Court finds that minor errors in adjudication determinations cannot be used to avoid provisional enforcement; social media giants waive right to resolve dispute in arbitration; and the updated declaration proscribing unsafe building materials in Victoria.

2021 national watchlist: key issues to follow this year

WA Security of Payment reform postponed

WA's overhaul of its security of payment laws is on hold until after the State election on 13 March 2021. The WA Legislative Assembly passed the Building and Construction Industry (Security of Payment) Bill 2020 (WA) on 10 November 2020. However, with Parliament prorogued, the Bill will need to be reintroduced following the election.

The SOP Bill is intended to bring WA's regime more closely into alignment with the "East Coast" security of payment model. If enacted, the legislation will significantly impact how participants in the WA construction industry contract and resolve their payment disputes.

WA harmonises WHS Laws

The passage of Western Australia's Work Health and Safety Act 2020, finally brings the state into uniformity with the national model work health and safety laws, apart from some exceptions.

Finalisation of the WHS regulations must happen before proclamation. Work on the WHS regulations will progress through 2021. We will keep you posted as further information about the commencement of the new legislation becomes clear.

NSW Modern Slavery Legislation

Commencement of the Modern Slavery Act 2018 (NSW) may be on the horizon. Since the NSW Act passed into law more than two years ago, speculation has been rife that the NSW Government would abandon its modern slavery legislation for its Commonwealth counterpart (Modern Slavery Act 2018). However, the final report of the NSW Legislative Council's Standing Committee on Social Issues, released on 25 March 2020, put paid to the notion that the NSW Act was redundant. The report recommended that the NSW Government amend the NSW Act in line with the Committee's comments and recommendations and target commencement by 1 January 2021.

In its September 2020 response to the report, the NSW Government reiterated its commitment to implementing a modern slavery regime in NSW and proposed a way forward. First, it proposed discussions between NSW and Commonwealth governments to secure greater harmonisation between the two modern slavery regimes – in particular, harmonisation of the threshold that triggers modern slavery reporting requirements. Second, it flagged further amendments to the NSW Act and stated that it would prepare provisions of the NSW Act that complement and are not inconsistent with the Commonwealth regime.

The targeted date of 1 January 2021 has fallen by the wayside, presumably due to COVID-19. However, the construction industry should ready itself for the NSW Act to come into force later this year. Another effect of the COVID-19 pandemic is the Australian Government's decision to extend some annual financial reporting dates by three months. Read more about the impact of COVID-19 on reporting obligations under the Commonwealth Act here.

NSW: Checks and balances ahead for multi-storey residential building projects

The DBP Act, enacted in June 2020, imposes multiple new obligations on design practitioners and builders throughout the life of the building work to foster better quality design documentation and compliance with the Building Code of Australia. The DBP Act sets up a general framework for checks and balances in building and design work through regulated designs and compliance declarations from designers and builders. 

Most of the DBP Act reforms will commence on 1 July 2021; once the NSW Government finalises the supporting Regulation's detail that underpins the legislative scheme. Release of the draft Regulation in November 2020 for public comment provided greater clarity for affected industry participants and their insurers about the content and scope of the new obligations in readiness for a 1 July 2021 start date. The NSW Government closed its consultation period for the draft Regulation on 11 January 2021. Affected industry participants and their insurers should maintain a watching brief on the final form of the Regulation. 

Queensland rolls out project trust reforms

The roll-out of the first phase of Queensland's new project trust regime starts in 2021. Details are below.

  • From 1 March 2021: Government contracts between $1 million and $10 million, and tendered from 1 March 2021 (until then, this category of projects would have required project bank accounts).
  • From 1 July 2021: Government and hospital and health services contracts over $1 million.

The phasing of the PBA reforms is intended to allow businesses time to manage the financial transition to PBAs and implement changes to business practices. While the 2021 project trust roll-out is currently limited in scope, on 1 January 2022 the scheme will be expanded to private sector and local government contracts $10 million or more. Principals and contractors need to be across the new arrangements.

State-based programs for cladding remediation

The general response to cladding issues continues across various State and Territory Governments, including cladding audits in 2020. Now, the focus is on remediating unsafe cladding from privately-owned residential apartment buildings. Whether owners can access funding to subsidise cladding removal works depends on the affected building's location.

In Victoria, the newly-established Cladding Safety Victoria (CSV) administers the State's cladding rectification program. Rectification works are being fast-tracked to remove high-risk cladding in residential apartment buildings. CSV may provide funding to fix combustible cladding to owners corporations. As noted below, Victoria has updated its declaration of prohibited cladding products with effect from 1 February 2021.

"Project Remediate" is the NSW Government's cladding initiative, which aims to fast-track the removal of combustible cladding on hundreds of at-risk buildings across NSW. The scheme allows eligible building owners to access interest-free loans to remove unsafe cladding on apartment buildings and is expected to commence in March 2021.

In Queensland, building owners of in-scope buildings must complete the building fire safety risk assessment, fire engineering statement and Part 3 of the combustible cladding checklist by 3 May 2021. It remains to be seen how many privately-owned buildings throughout Queensland contain potentially combustible cladding, requiring some form of remediation work.

Minor errors in adjudication determinations not fatal to claim under NSW security of payment legislation

A party considering challenging an adjudicator's determination, especially in New South Wales, should consider whether the alleged error materially affected the decision, even if the error appears to be jurisdictional in nature.

The judgment of Acciona Infrastructure Australia Pty Ltd v Chess Engineering Pty Ltd [2020] NSWSC 1423 resolved submissions made by the parties as to the final orders that should be made following an earlier judgment. Justice Henry previously upheld Acciona's challenge to an adjudication determination under the Building and Construction Industry Security of Payment Act 1999 (NSW) (NSW SOP Act), though only in one minor respect relating to $2,760 of an adjudicated amount of $640,593.

The current judicial decision addressed the form of relief to be granted and the disposition of money that had been paid into Court. Chess Engineering argued that the adjudicator's error was minimal, and that the money should be paid to it with interest and costs. Acciona argued that as the previous judgment had found that the adjudicator committed a jurisdictional error, the adjudication determination should be found to be void ab initio and treated as if it did not exist. This would have resulted in the money paid into court being returned to Acciona.

The NSW SOP Act recognises that errors in the nature of mistakes do not necessarily invalidate a determination. In this case, the error related to a small proportion of the overall determination, and did not infect the decision-making generally. Consequently, her Honour found that the error did not constitute a failure by the adjudicator of its statutory function to "determine the amount and timing of the progress payment". Nor could it have materially affected the decision the adjudicator made. Therefore the determination was not infected by jurisdictional error and Acciona's summons was dismissed with costs.

Her Honour commented that even if jurisdictional error was established in relation to the $2,760, that part of the determination could have been severed, an approach supported by the Court of Appeal in YTO Construction Pty Limited v Innovative Civil Pty Limited [2019] NSWCA 110, noting some conflicting decisions.

Cladding update: proscribed building materials in Victoria

On 13 January 2021, the Victorian Planning Minister's declaration "Prohibition of High-Risk External Wall Cladding Products" was published in the Victorian Government Gazette. The declaration is under s 192B of the Victorian Building Act 1993 and takes effect from 1 February 2021; at the same time, the Minister's 2018 guideline MG-14 on the use of cladding products was revoked.

The declaration's core provision is to prohibit the following from use in "Type A" or "Type B" construction in Victoria:

  • aluminium composite panels (ACP) with a core of less than 93% inert mineral filler by mass in external cladding as part of a wall system
  • expanded polystyrene products (EPS) used in an external insulation and finish (wall) system.

The Victorian Building Authority provides a summary of building classes here. The implications of the prohibitions are complex and important exclusions from the prohibition relate to single dwellings and terrace houses, and (depending upon height) apartment, student accommodation, residential care and other similar buildings. Therefore the prohibition is not a blanket ban on the proscribed ACP and EPS products.

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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.