Australia: Corrs High Vis: Episode 19 - Construction Law Update - August 2017

In our latest Corrs High Vis podcast we consider some of the leading case developments around Australia and discuss their implications for the construction industry. Jaclyn Masters is joined by Partners Michael Earwaker, Andrew McCormack, Consultant Wayne Jocic and Special Counsel Jennifer Barrett. This podcast series, brought to you by Corrs Construction team, offers analysis and insights to help you make smarter decisions.

These podcasts do not provide legal or other advice. Obtain legal or other professional advice as required.

TEXT VERSION

Jaclyn Masters: Commentator

Michael Earwaker: Corrs Chambers Westgarth – Construction Partner, Sydney

Andrew McCormack: Corrs Chambers Westgarth – Construction Partner, Brisbane

Jennifer Barrett: Corrs Chambers Westgarth – Construction, Special Counsel, Brisbane

Wayne Jocic: Melbourne University Senior Lecturer and Co-Director of Studies in Construction Law

Jaclyn: Hello and welcome to High Vis the Corrs Chambers Westgarth Construction Podcast. My name is Jaclyn Masters and I am a Senior Associate in the Construction team here at Corrs. Today we are going to be looking at some of the leading case developments around Australia and if you would like further information about any of these they can be found in the print edition of the August 2017 Construction Law Update which is available on the Corrs website. To discuss the cases today I am joined by a Sydney Partner Michael Earwaker, Brisbane Partner Andrew McCormack, Melbourne Consultant Wayne Jocic and Brisbane based Special Counsel Jennifer Barrett. Before we jump into our coverage of the cases today it is also worth noting a development in the international construction community. The Kuala Lumpur Regional Centre For Arbitration became the first arbitration institution in the world to release a suite of standard form building contracts earlier this month. Andrew if we can start with you. The construction industry has been keenly watching the developments of two security of payment special leave applications that went before the High Court recently in Probuild and Shade Systems and Maxcon and Vidas. Both matters were granted special leave. Can you tell us a little bit more about what the High Court had to say here.

ANDREW: Well Jaclyn presently these two cases confirm, pending the High Court's consideration of the issue, that the security of payment legislation in both New South Wales and South Australia does not permit judicial review on any basis other than jurisdictional error by the adjudicator. If we look at the two cases in Shade Systems and Probuild the New South Wales Court of Appeal, reversing the trial Judge's first instance decision, confirmed that an error of law on the face of the record was not a ground for judicial review of an adjudicator's decision. In Maxcon and Vidas, the full court of the Supreme Court of South Australia confirmed two things: first, that the adjudicator in that case did not make a jurisdictional error in construing the retention clause of the relevant construction contract; and second, that the adjudicator's error was an error of law on the face of the record but this did not render the adjudicator's decision void. Both of these cases have been appealed to the High Court and were therefore the subject of a special leave application hearing before the High Court. Because the key issue in the two cases, and indeed the eminent Counsel representing the parties in both cases, were in fact common, the special leave applications were heard together. Interestingly Counsel for the respondents in both cases, that is, the parties actually satisfied with the existing determinations of the New South Wales and South Australian Appellate Courts, submitted that the legal costs of the ligation vastly outweighed the amounts in dispute in these cases which were approximately $30,000 in Maxcon and about $200,000 in the Probuild case. On this basis it was argued special leave should be refused. Ultimately however the High Court decided otherwise and special leave to hear both matters was granted. Notwithstanding the relatively low value of the amounts in dispute, the point of law that needs to be resolved, that is, the scope to seek judicial review of an adjudicator's determination for reasons other than a jurisdictional error on the part of the adjudicator, is an issue of such importance as to warrant the High Court's attention and I think this is to be welcomed. It seems likely that the appeals will be heard together by the High Court when it next sits in Canberra which is in October this year. Now it has to be said that if the High Court overturns the decision of the New South Wales Court of Appeal and the South Australian Supreme Court on this point it will have significant consequences for adjudication determinations not just in New South Wales and South Australia, but also in Queensland, Victoria and Tasmania which all have very similar security of payment legislation. If that were to happen I think it would likely lead to an increase in the number of adjudication decisions being challenged through judicial review and that's an outcome that some might say defeats the purpose of the security of payment legislation which after all is intended to provide a cheap, rapid and enforceable outcome to construction payment disputes. What does all that mean? Well I think it is fair to say that the construction industry will be waiting for the High Court's view on this matter with a great deal of interest.

Jaclyn: Thanks Andrew. Now Michael over in the Western Australia Court of Appeal CPB and JKC Australia LNG is a decision which looked at a call on performance bonds under a construction contract. Can you give us some insight into what construction professionals need to take away from this decision?

Michael: These cases are another example of a contractor seeking relief where there has been a threatened call on its project securities. In this case the project securities were in the form of bank guarantees. The contractor was CPB Contractors and it sought relief in both the Supreme Court and the Court of Appeal in Western Australia. It was unsuccessful in both instances. The decisions of both the Supreme Court and the Court of Appeal were consistent with recent authority. That recent authority is usually, that a high bar will be set for a contractor to obtain the injunctive relief of the type sought by CPB. However there were a few particular matters to which these cases referred which were of interest. Firstly, CPB had commenced a dispute resolution process under the contract prior to bringing its claim for the injunctive relief. CPB relied on that commencement of the dispute resolution process as part of its argument that it ought to be able to secure the injunctive relief against the owner. CPB said that the dispute resolution process under the contract ought to be allowed to run its course in order for the issue to be finally resolved and the Court would not interfere with it. That argument was unsuccessful. The cases also provide an interesting analysis of what might simply be called the "no injunctive clauses". Those clauses are ones which say that a contractor is prohibited from bringing injunctive relief. Seemingly those clauses would "cut the contractor off at the knees" before being able to bring a claim of the type that CPB did. The Supreme Court found that clause was void as an answer of jurisdiction of the Court's authority. But the Court of Appeal did find that that clause had some work to do and deftly connected the operation of that clause with the specific wording of the provisions of the contractor that related to the use of the project securities. Finally, the Courts consider that the substance level whether or not there was a prima facie issue that had to be argued in order for the injunctive relief to be satisfied. Notwithstanding the attempt by CPB to drive this matter in to the dispute resolution provisions, neither the Court alone nor the Court of Appeal thought there was a substantive issue to be tried and that formed the basis of the denial of the injunctive relief sought by the contractor.

Jaclyn: Thanks Michael. Now Jennifer, the recent Federal Court decision in Hughie and Esposito Holdings has some important lessons for clients working in the arbitration space, particularly in light of procedural fairness and circumstances in which it may be necessary and appropriate for a Court to overturn an arbitral award. Can you step us through this decision?

Jennifer: Yes Jaclyn. Thank you for that question. Yes the case of Hughie and Esposito Holdings is a very interesting one and I can certainly commend the description of the arbitral proceedings as set out in the judgment of Justice Beech. They are set out in quite a lot of detail. The matter is complex with various different parties involved at different times. The matter arose under the UNCITRAL Arbitration Rules and the arbitrators identity is not disclosed but it is clear that the matters complained of before the Court were considered quite exceptional. Mr Justice Beech describes the exceptional circumstances of the case and I think the summary in his judgment sets those out quite well. There are various details there including pre-judgments of matters that were not actually raised before the arbitrator or were only raised somewhat by one party and not by the other. There is reference to out of scope defences and decisions made by the arbitrator that appear to be completely in contravention of prior comments from him that he would not make any decisions in that regard. And here we will note that the transcripts were put in evidence and the matters discussed were quite clear. And in this regard you might wish to look at paragraphs 90 to 96 of the judgment. For our purposes we would note that making an application for an arbitral award to be overturned in the first instance, and then secondly for the arbitrator to be disqualified; those are two very significant applications to make and ones that you would not wish to lose upon in case you are sent back to the arbitration and you are dealing with an arbitrator who has formed a certain view of the parties. That will be a tactical difficulty that every client would have to consider in this regard. For our purposes we would note that these exceptional circumstances of the case did result in the arbitral award being set aside and did result in the arbitrator being disqualified. I think the point to highlight here is the really useful restatement of the test for overturning an arbitral award and this was very clear in what is set out in the judgment as Justice Beech explained. He said, and I quote, "this involves to some extent engaging with the merits of the issues the subject of the award that was made but in my view that inevitably follows. The perspective which I am applying is not a review of the merits of the awards as such, but rather the counter factual question of whether there was a reasonable possibility that the award might have been different if the denial had not occurred." Now that is very interesting and it was a way of explaining that although the Court has in no way got jurisdiction to redo an award that is made, where we have a case of this nature whether hearings had been conducted in such a way that defences were precluded to certain parties, a valuable opportunity was lost by those parties. And that in and of itself amounted to real unfairness and practical injustice. Now that tends in my view to confirm the arbitral process in Australia and in no way detracts from it. It's there to show that the Courts are available in very limited circumstances and we had those circumstances here. I think it's interesting to note as in effect a new test as to the caution that will be given by the Supervisory Court in a matter of this nature and these are set out at paragraph 5 of the judgment in three parts. The first, the contractual and therefore consensual nature of the dispute resolution mechanism chosen. Second, the need for expedition, commercial efficiency and finality in the application of that mechanism, and thirdly, in such a context any consequent short of real unfairness or real practical injustice ought not justify the setting aside of an award. So those are the matters which the Court has in mind when putting in to effect the parties' decision usually in our experience at the contracting stage, but potentially also when the dispute itself arises. That's where the parties decide that they will go to arbitration. If you don't like the results you cannot of course simply go to the Court for a second alternative or appeal outcome. We only turn to the Court when essentially there has been a very serious matter which results in effectively the Court's mopping up a difficulty that has been created. The arbitration rules that we see in practice such as the UNCITRAL Rules, the ICC Rules and the [ICACA] Rules all have provisions making it clear that the Court is not to be treated as a grounds of appeal. The question then arises as to how this case will be developed in future. I think the test set out here may not be used very often. It is unusual to see a case of this nature where the arbitration proceeded in the way that was set out and the fact that the arbitrator was also removed by virtue of the decision is also a matter of tremendous significance. That is not something that happens very often. It's an unusual application and as I mentioned at the outset one that you would make with considerable hesitation.

Jaclyn: Thanks Jennifer. Now Wayne if we can turn to you. There had been a development in the South Australian Full Court of the Supreme Court in Stone and Chapel, which gives some interesting guidance on the assessment of damages for breach of contract. Why do clients working in the industry need to be mindful of this decision?

Wayne: Well, this is one of those cases that we should be mindful of because it's fun and because it deals with a really important issue and that is what damages are payable for defective work that has been accepted. Now the facts are really simple. A very discerning couple, the Stones, had a ceiling, it was too short, it was on average 48 millimetres to short. They sued and they were suing for the cost of rectifying that ceiling. Very substantial works; it was going cost several hundred thousand dollars. Now the leading High Court authority suggests that they would probably have been entitled to the cost of rectifying the low ceiling unless that was not a reasonable course to adopt. But what does that mean? When are rectification damages not a reasonable course to adopt? And in this Stone and Chapel case the Full Court sets out a series of considerations. Eight considerations in one judgment. Half a dozen in another and so what we see is a great deal for parties to work with in argument about whether rectification costs should be awarded or not. Things like, whether it matters, whether the party is actually going to rectify the work, whether they can do it, whether it's disproportionate, whether the builder is genuinely blameworthy. These are some of the factors that are considered. Now the last little issue, last interesting thing about this case is that the result was that the Stones didn't get the cost of rectification. Instead of $330,000 they were awarded $30,000 for loss of amenity. What that means is something that the Court really doesn't add to, simply saying that it may that it's incapable of precision, or even substantial explanation. So that's a really interesting case because it goes to what is a reasonable course to adopt and also how we calculate loss of amenity damages and on that we are little better informed.

JACQUELINE: Thanks for joining me today Wayne, Michael, Jennifer and Andrew. To our listeners we hope you will join us next time for the next episode of Corrs High Vis.

This podcast is for reference purposes only. It does not constitute legal advice and should not be relied upon as such and you should always obtain legal advice about your specific circumstances.

This podcast is for reference purposes only. It does not constitute legal advice and should not be relied upon as such. You should always obtain legal advice about your specific circumstances.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Chambers Asia Pacific Awards 2016 Winner – Australia
Client Service Award
Employer of Choice for Gender Equality (WGEA)

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.