Large users of construction and related contractors, particularly in the public sector, often establish panels from which they can engage contractors for individual engagements.
Sometimes these panel engagements are formal (involving a Deed of Standing Offer, a Panel Deed, a set of Terms and Conditions, and relevant Schedules such as pricing), and sometimes they are more informal. Regardless of whether a panel is formal or informal, it is usually a very efficient way of engaging contractors for specific works and services.
In the recent case of Austar Plumbing Services Pty Ltd v Sydney Water Corporation1 Sydney Water's ability to deal with a non-performing contractor on a panel has been confirmed as appropriate by the Supreme Court of NSW.
Facts of the Case
Austar had been on Sydney Water's panel of authorised providers for over 14 years, between July 2003 and November 2017.
Between 2013 and 2017 Austar received 47 Corrective Action Requests from Sydney Water regarding poor performance. Further, it received 5 additional written warnings between December 2015 and May 2017 in relation to unsatisfactory performance, warning that if it failed to satisfy the mandatory criteria for listed providers it risked being removed from the panel.
After a further incident in October 2017, where Safework issued a Prohibition Order, Sydney Water issued a show cause notice to Austar.
Austar submitted a response conceding the issue, but requested that it be allowed to remain on the panel provided it complied with Sydney Water's conditions in future.
Despite this request Sydney Water removed Austar from the relevant panel of approved contractors.
The two main arguments put forward by Austar were:
- the arrangement between it and Sydney Water included an implied contractual term to act in good faith
- the decision was biased, unreasonable and/or procedurally unfair (contrary to administrative law principles).
The court considered that the contractual duty to act in good faith and the administrative law obligations overlapped and so considered Sydney Water's conduct in relation to these issues together.
The court found that the conduct of Sydney Water in removing Austar from its panel of prequalified contractors was appropriate and not in breach of either an implied term of good faith, or administrative law obligations.
Panels are a very effective way of engaging contractors where there is a regularity of demand and the values are relatively low.
This case should give comfort to those using panels that they can be appropriately administered where there is a non-performing contactor and that, provided performance monitoring and reporting is part of the panel administration, panel owners can safely remove non-performing panellists.
1 NSWC 864
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