30 Sep 2021

Major Projects & Construction 5 Minute Fix 85: cladding in Victoria, WA security of payment, and payment schedules

By THE MAJOR PROJECTS & CONSTRUCTION TEAM

Get your 5 Minute Fix of major projects and construction news. This issue: Further cladding-related changes proposed for Victoria; action plan released for security of payment reforms in WA; NSW decision examines payment schedule requirements; Victorian Court of Appeal confirms flagrant non-compliance may attract substantial penalties.

More time to bring combustible cladding claims in Victoria

New legislation in Victoria will, if passed, give building owners more time to commence legal action for cladding building claims relating to non-compliant or non-confirming external wall cladding products, by increasing the limitation period for such actions.

If the Building Amendment (Registration and Other Matters) Bill 2021 (Vic) passes, building owners will have 15 years (rather than 12 years) to bring cladding building actions. The increased timeframe will extend to actions that would otherwise have expired between 16 July 2019 and 1 December 2023.

This extension follows the introduction of various cladding-related reforms earlier this year under the Cladding Safety Victoria Act 2020 (Vic) (read more about these reforms here).

Action plan released for new security of payment reforms in WA

On 21 September 2021, the WA Government released an action plan to support the security of payment reforms introduced by the Building and Construction Industry (Security of Payment) Act 2021 (WA), which was passed in June this year (SOP Act). The plan aims to introduce better payment protections for building and construction industry participants.

The Action Plan provides a roadmap for the rollout of protections implemented by the new SOP Act and comprises the following three stages:

 

Stage

Overview

Commencement

Stage 1: New Security of Payment Laws

This stage will comprise significant changes for the building industry, as this stage introduces the major changes to the security of payment regime. This will impact all parties who enter into a construction contract where the SOP Act applies, save for a few minor exclusions. Contractors will need to be aware of their new payment rights.

1 August 2022

Stage 2: Retention Trust Scheme (Phase 1) and new Regulator powers

This stage introduces the first phase of the retention trust scheme, which applies to construction contracts over $1 million. This stage also introduces the new powers of the Regulator. 

1 February 2023

Stage 3: Retention Trust Scheme (Phase 2) and Fairer Contracting Practices

This stage comprises a further rollout of the retention trust scheme, which will extend to contracts with a value of $20,000 and above. The lower monetary threshold will result in the retention trust scheme applying to a significant number of construction contracts. 

1 February 2024

A useful refresher on payment schedule requirements in New South Wales

In Joye Group Pty Ltd v Cemco Projects Pty Ltd [2021] NSWCA 211, the New South Wales Court of Appeal has provided a refresher of the payment schedule obligations under the Building and Construction Industry Security of Payment Act 1999 (NSW) (SOP Act).

These proceedings arose in respect of two subcontracts under which Cemco Projects Pty Ltd engaged Joye Group Pty Ltd to carry out building works. In the course of the construction work, Joye Group submitted a payment claim under each contract, in response to which Cemco sent an email stating:

"Please be advised that no payment for above Invoices, until all works been completed."

The Court was tasked with determining whether this email constituted a valid payment schedule for the purposes of the SOP Act.

Relevantly, under the SOP Act, a failure to provide a valid payment schedule in response to a payment claim gives rise to liability to pay the full amount claimed.

The Court was satisfied that the single email adequately identified the 2 payment claims to which it related and indicated the amount of the claim that Cemco intended to pay - being, in each case, amounts less than the amount claimed by Joye Group.

The adequacy of the payment schedule turned on whether the email provided reasons as to why the amount to be paid was less than the amount claimed, which is a requirement under the SOP Act.

At first instance, the District Court held that Cemco's email was a valid payment schedule.

On appeal, the Court held that Cemco's email did not constitute a valid payment schedule as it failed to identify a reason for withholding payment. Rather, the statement merely indicated when some or all of the amounts claimed may be paid. In reaching this finding, Justice Basten (who delivered the main judgment) noted that surrounding communications:

  • may be incorporated by reference into a payment schedule; and
  • could be used to explain the meaning of statements in a payment schedule,

although such use of surrounding communications was irrelevant in this case.

This case is a reminder for building industry participants to ensure their payment schedules satisfy the requirements of the SOP Act and, in particular, to include in payment schedules the clear and precise reasons for withholding amounts claimed.

Contract says proceedings are out of time? Parties' conduct may vary

In Howell v Talevski [2021] NSWSC 1133, the Supreme Court of New South Wales concluded that actions speak louder than words in considering whether proceedings based on a contractual date for completion were out of time.

The dispute arose in respect of a contract entered into in 2007, under which Mr Talevski was engaged by Mr and Mrs Howell to construct a residential duplex.

In 2018, Mrs Howell brought a claim against Mr Talevski for breach of a statutory warranty under the Home Building Act 1989 (NSW) (HBA) on the basis that work was not done with due care and skill and in accordance with the plans and specifications set out in the contract.

The Court had to consider whether Mrs Howell's claim under the HBA was out of time. At the relevant time, the HBA required these proceedings to have been commenced within seven years after the date for completion of the work as specified or determined in accordance with the contract.

The contract specified that the date for completion was 32 calendar weeks from when the work was due to commence and included an extension of time regime.

The Court looked to the conduct of the parties to determine whether the date for completion had been extended under the contract. While the Court could not determine an exact date for completion, and while the parties had not formally extended that date, the Court considered that various communications between the parties revealed an agreement by the parties to extend the date for completion beyond June 2011, such that the proceedings were commenced by Mrs Howell within time.

This case is a reminder for parties to construction contracts to familiarise themselves with the applicable statutory limitation periods in place at the time of entering into such contracts.

Victorian Court of Appeal confirms flagrant and blatant non-compliance may attract substantial penalties and "fresh" evidence not sufficient to reverse those findings

In 160 Leicester Pty Ltd v Melbourne City Council [2021] VSCA 250, the Victorian Court of Appeal has refused an application for leave to appeal sought by 160 Leicester Pty Ltd and its two directors, the developers of the Corkman Hotel Site in Melbourne, in respect of penalties imposed by VCAT for a failure to comply with consent orders made by VCAT.

The appeal relates to a failure by 160 Leicester and the directors to comply with consent orders for the site to be cleared and evidence that the land was suitable for informal outdoor recreation, following the unlawful demolition of the Corkman Hotel by 160 Leicester.

VCAT determined that these orders had not been sufficiently complied with by 160 Leicester or the directors and found them guilty of contempt, resulting in fines, cost orders and an order of 1 month imprisonment for the directors.

In seeking to challenge these orders, 160 Leicester and the directors contended that fresh evidence had arisen since the date of sentence, in the form of compliance with the enforcement orders after the date of sentencing.

The Court found this fresh evidence to be irrelevant and unsurprising, noting that VCAT made orders that were realistically the only orders that could have been made in the circumstances as they existed at the time of sentencing.

The Court of Appeal was not persuaded that VCAT had erred in assessing the gravity of the conduct and circumstances that formed the basis of its findings and agreed that the deliberate, wilful, flagrant and blatant non-compliance with the orders justified orders of imprisonment and substantial monetary penalties.

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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.