Major Projects & Construction 5 Minute Fix 114: Infrastructure Australia reforms, contractor's duty of care to road users, execution formalities

Changes coming to Infrastructure Australia – key takeaways from the Infrastructure Australia Amendment (Independent Review) Bill 2023

The Federal Government is reforming Infrastructure Australia (IA), the nation's independent infrastructure adviser. In March 2023, the Government introduced the Infrastructure Australia Amendment (Independent Review) Bill 2023 into Parliament to implement the Government's response to the independent review of IA conducted by Nicole Lockwood and Mike Mrdak AO.

According to the Bill, the proposed changes will strengthen IA's advisory mandate creating "a stronger, more focused expert adviser". In addition, the Bill implements the following seven recommendations from the Independent Review concerning IA's functions, governance and administration:

1. Recommendation 1 that the IA's mandate should be clearly articulated in the Infrastructure Australia Act 2008 (Cth) (IA Act), by including a new Object in the Bill, establishing IA "as the Commonwealth Government’s independent adviser on nationally significant infrastructure investment planning and project prioritisation";
2. Recommendation 3 for a refinement of IA's existing product suite, resulting in new sections being proposed into the Bill, which set out the amended functions of IA in respect of the development of Infrastructure Priority Lists and Infrastructure Plans, including IA's obligation to have regard to the policies of the Commonwealth Government in relation to infrastructure while exercising its powers;
3. Recommendation 7 for the development of a national planning and assessment framework, resulting in new subsections being proposed in the Bill which require IA to develop (and review every five years) a national planning and assessment framework, to promote national consistency, in consultation with states and territories when evaluating proposals;
4. Recommendation 8 for IA's role in the project assessment context to become one of a peer-review of proposals from states and territories who have developed their own project assessment capabilities, resulting in new subsections being proposed in the Bill, which allow IA to review and to endorse those other entities' evaluations so as to reduce duplication of work;
5. Recommendation 9 for IA to adopt a more active role in the post-completion stage through having a clear national evaluation and assurance role, resulting in a new section being included in the Bill, which provides more detail on the functions of IA including, but not limited to, identifying nationally significant infrastructure, promoting the delivery of infrastructure, reviewing proposals and funding arrangements, and providing timely advice;
6. Recommendation 12 for IA to be empowered to undertake formal inquiries into national infrastructure investment topics, resulting in a new section being included in the Bill, which includes detail on providing advice and reporting on nationally significant infrastructure; and
7. Recommendation 13 for IA be restructured as a "commission" model to strengthen IA through its governance framework, resulting in Part 2A of the IA act being repealed and replaced with an alternate Part 2A in the Bill, which has the main effect of replacing the 12-member Board with a commission model consisting of three Commissioners.

What's in a name (and for whom are you signing)? The importance of execution formalities

Xiao v ACT Commercial Builders Pty Ltd [2023] ACTSC 44 serves as a timely reminder of the importance of clarity when executing contracts, lest you end up in the unfortunate position Mr Xiao faced – an appellate court determining whether a contract has been entered into by you personally or on behalf of a company.

While the original proceedings in the ACT Magistrates Court involved "numerous competing claims of the kind familiar in building disputes", the single issue in this appeal was the identity of the party liable to the builder as "Owner" under the contract for the fit-out of a restaurant – Mr Xiao as an individual or the company of which he was a director (BBSJ Partners Pty Ltd).

In her judgment, Chief Justice McCallum identified this issue as one to be determined by the application of an objective test and "in accordance with the construction of the document as a whole and on the basis of admissible surrounding circumstances known to the parties" (quoting Padstow Corp Pty Ltd v Fleming (No 2) [2011] NSWSC 1572).

Mr Xiao did not write that he was authorised to sign on behalf of another or invoke section 127 of the Corporations Act 2001 (Cth). None of the other directors of the company added their signature to the contract, despite one being present at the meeting where the contract was signed and as would be expected if signing on behalf of a company. While Mr Xiao wrote down the company address, this was also his personal address and accordingly was ambiguous. Although Mr Xiao wrote down the company ABN, he did not identify that number as being the ABN of the company. He did not even name the company anywhere on the contract, also resulting in ambiguity.

Having reviewed these circumstances, Chief Justice McCallum dismissed the appeal, noting that "the principal difficulty for Mr Xiao in the present case is that he signed the contract in his own name, with no overt indication that he understood himself to be signing on behalf of a company in his capacity as a director of the company. The objective evidence was silent on that issue". Moreover, her Honour noted that Mr Xiao's submissions "overlooked the objective theory of contract", that is, he sought to make subjective arguments about his understanding of what he was doing in signing the contract, and such subjective arguments are irrelevant to the objective test.

Parties need to be unequivocally clear in which capacity they intend to sign a contract. If signing on behalf of a company, details to this effect must be clearly and consistently detailed in the contract.

NSW Security of Payment wrap-up

Payment claims are substance over form:In Piety Constructions Pty Ltd v Megacrane Holdings Pty Ltd [2023] NSWSC 309, the plaintiff contended that an adjudication determination was void because a valid payment claim had not been issued in accordance with section 13(2) of the Act. The Court held that the requirements for a valid payment claim are "relatively undemanding", and a court should consider substance rather than form in considering whether a payment claim satisfies the requirements of section 13(2). In this case, the plaintiff submitted that the payment claim was, in fact, a letter of demand. However, on a reading of the letter as a whole, it sufficiently identified the construction work to which it related and stated it was a claim issued under the Act. The Court concluded that there is no reason a payment claim cannot also be stated to be a letter of demand. No jurisdictional error was identified, and the adjudication was deemed valid.

Denial of procedural fairness: In Ceerose Pty Ltd v A-Civil Aust Pty Ltd (No 2) [2023] NSWSC 345, the NSW Supreme Court considered whether an adjudicator's reliance on an issue not raised by either party during an adjudication amounted to jurisdictional error. Richmond J held that in such case, where a party could not have reasonably anticipated the issue would be raised, and there has been no opportunity to respond to such issue, then there has been a denial of procedural fairness amounting to a jurisdictional error. As a result of the jurisdictional error, the part of the determination relating to this issue was set aside while the remainder of the determination was upheld (this application is separate to the previous applications determined in March 2023).

Consideration of submissions duly made: In Castle Constructions Pty Ltd v Napoli Excavations and Civil Pty Ltd [2023] NSWSC 348, the NSW Supreme Court was tasked with considering whether failure to consider a submission led to jurisdictional error. Justice Darke considered that the adjudication determination failed to understand the parties' position and overlooked the plaintiff's assertion that the contract had been terminated in May 2022. The determination itself made no reference to this fact or to the plaintiff's submission that due to the termination the defendant was not entitled to serve a payment claim in September 2022. The Court found that the plaintiff's submission was duly made and it followed that a failure to consider it was a material failure. Had the adjudicator considered this submission "he may well have come to a different conclusion" which was the basis for the Court confirming the existence of jurisdictional error. As a result, the entire determination was deemed void and of no effect.

SOP Act takes priority over terms of the contract:In A-Civil Aust Pty Ltd v Meso Solutions Pty Ltd [2023] NSWSC 372, the NSW Supreme Court considered whether an adjudication determination was affected by jurisdictional error. The Plaintiff claimed that the determination was invalid because the notice under section 17(2) of the Act was issued prior to the satisfaction of a condition precedent to payment under the construction contract. That condition precedent required payment claims to be accompanied by certain documents, including a Statutory Declaration, itemised reports and receipts. The Court held that while a payment is made "under the construction contract", the date the payment was "due and payable" was to be determined by operation of section 11(1B) of the Act. In this regard, the Court found that the failure to satisfy the condition precedent set out in the contract did not operate to deprive a contractor of its right to payment under the Act.