Major projects & construction 5 Minute Fix 18

NSW SOP reform back on the agenda: Draft Bill proposes significant changes

Investigatory and enforcement powers for agencies form the centrepiece of the proposed reforms to the Building and Construction Industry Security of Payment Act 1999 (NSW) (SOP Act). Proposed key reforms include:

• increased penalties for offences and new offence-creating provisions for directors and managers;
• granting "authorised officers" broad investigative powers;
• a new code of practice for Authorised Nominated Authorities;
• new minimum requirements for reference dates (at least one for each month in which work is carried out and one the day after the date of termination);
• reinstatement of the requirement to endorse payment claims as being made under the SOP Act;
• reduced timeframes for payment (10 business days for principals and 20 business days for head contractors);
• a mechanism for SOP Act determinations that are affected by jurisdictional error to be remitted to the adjudicator for redetermination; and
• provisions that preclude claimants that are in liquidation from relying upon the SOP Act. These provisions are an attempt to bridge the divide between Victoria and New South Wales, following Seymour Whyte Constructions Pty Ltd v Ostwald Bros Pty Ltd (in liq) [2018] NSWSC 412. The provisions proposed in the Draft Bill are also broadly consistent with the recent decision in Michael J Lonsdale (Electrical) Ltd v Bresco Electrical Services Ltd (in Liq) [2018] EWHC 2043 (TCC).

Stakeholders have until 18 September 2018 to comment on the proposed changes.

More information about the Draft Bill can be found here.

A new Aboriginal Procurement Policy now applies in NSW

On 1 July 2018 a new Aboriginal Procurement Policy (APP) was introduced. It operates in conjunction with the existing Aboriginal Participation in Construction policy. The APP applies to the procurement of goods and services by NSW Government departments, statutory authorities, trusts and other government entities.

Among other things, the APP requires that NSW Government agencies publish an annual Aboriginal Participation Strategy, detailing its plans to meet its obligations under the APP. Agencies must consider opportunities for Aboriginal participation in all major procurement activities over $10 million, and document these opportunities in their procurement strategies. NSW Government agencies are also required to:

• report all contracts valued over $50,000 entered into with an Aboriginal-owned business; and
• ensure that all suppliers are made aware of their obligations under the APP at the time of tender or before.

In tenders, NSW Government agencies must include:

• requirements for suppliers to include an Aboriginal Participation Plan for all contracts over $10 million in their tender response;
• evaluation criteria for Aboriginal participation in tender responses for all contracts over $10 million; and
• supplier reporting requirements for Aboriginal participation in the contract. 

More information can be found here.

Termination under the ACL: actions speak louder than words

The Australian Consumer Law (ACL) provides a mechanism for consumers to terminate contracts with suppliers of services if they fail to comply with certain statutory guarantees. The recent case of Coliban Heights Pty Ltd v Citisolar Vic Pty Ltd [2018] VSCA 191 discusses the prerequisites for valid termination under section 267 of the ACL. The case considered whether several contracts to supply and install photovoltaic (solar power) systems had been validly terminated by the applicant, where:

• the respondent had failed to comply with one or more consumer guarantees in the ACL (the systems that it installed for the applicant were unsafe);
• those "major failures" entitled the applicant to terminate the contracts under section 267(3) of the ACL; and
• the applicant had purported to terminate the contracts with the respondent and then subsequently accepted rectification works from the respondent.

The court upheld the primary judge's decision (that the applicant had not validly terminated the contracts) because "The applicant's acceptance of the goods, manifested in particular by its acceptance of rectification works, was simply inconsistent with it having terminated the contracts for services." 

The key conclusion to be drawn from this case is that a mere statement of termination is not enough to terminate a contract under section 267, if a party then adopts a course of action that is inconsistent with an intention to terminate (for example, by failing to return goods or accepting rectification work). All of the circumstances of the case are relevant, including the parties' actions. 

Does your arbitration agreement work?

The recent decision of the South Australian Supreme Court in Hurdsman v Ekactrm Solutions Pty Ltd [2018] SASC 112 shines a light on the importance of checking that your arbitration agreement works in practice.

The case concerned an interlocutory application for a permanent stay on the basis that the parties were bound by an agreement to arbitrate.

The substantive proceedings related to an alleged breach of a Share Sale Agreement (SSA). Clause 28 of the SSA required that all disputes regarding the SSA be referred to a mediator, for determination in accordance with the rules of the Singapore International Arbitration Centre (SIAC). Clause 28 of the SSA was ambiguous; there are no rules for mediation prescribed by SIAC.

In attempting to resolve the ambiguity, the Court considered communications between the parties prior to executing the SSA, including drafts of the SSA and a Memorandum of Understanding between the plaintiffs and an Indian company that was related to the defendant.

The application was ultimately dismissed, and clause 28 of the SSA was held not to be an agreement to arbitrate or mediate, because: "Neither construction is coherent in the context of the agreement as a whole and especially in light of the communications between the parties prior to entering into the contract."

This case serves as a reminder to check that your arbitration clause is effective. While courts are generally reluctant to interfere where parties have agreed to arbitrate, and will take a broad approach to the interpretation of arbitration agreements, if your arbitration clause doesn't work in practice it won't be enforceable. 

Our Major Projects and Construction talent recognised

Emma Lampard, a Senior Associate in the construction and major projects group at Clayton Utz, has been announced as the joint recipient of the Tom Yuncken Young Construction Lawyer of the Year Award for 2018.  

The Award is provided by the Law Council of Australia with the support of the Society of Construction Law Australia and the Building Dispute Practitioners' Society. It recognises excellence in the field of construction law and practice. Applicants for the Award are required to demonstrate excellence in the provision of construction law services to clients, academic and practical abilities in construction law, their contribution to the field of construction law and practice, and maturity, self-reliance and leadership. Members of Clayton Utz's team have a significant history of success in the Award; Consultant Trevor Thomas was the winner of the award when it was first offered in 2008.

This is a terrific honour for Emma, we're very proud of her!