Major Projects & Construction 5 Minute Fix 84: Australian Infrastructure Plan 2021, bank guarantees, Offshore Electricity Infrastructure Bill

Launch of the Australian Infrastructure Plan 2021

On 3 September 2021, Infrastructure Australia launched the "2021 Australian Infrastructure Plan", a 15-year roadmap for infrastructure reform. The Plan calls for resilient and adaptable infrastructure that can cope with shocks and stresses, now and in the future.

What is the aim of the Plan?

The Plan aims to support Australia's recovery from the COVID-19 pandemic and the bushfires, droughts, floods and cyber-attacks that have impacted the country in recent years by identifying key areas or issues of reform and making recommendations to address those areas for reform.

The Plan focuses on reform across the infrastructure industry. It is geared towards addressing "population growth, adaptation to climate risk, building resilience, stimulating employment, driving economic productivity and embracing a diversity of places and social equity" (Infrastructure Australia, Reforms to meet Australia’s future infrastructure needs – 2021 Australian Infrastructure Plan (Plan 2021). Notably, for the first time, the Plan includes waste and social infrastructure as areas of reform.

Reform recommendations

The Plan's 29 reform recommendations respond to the 180 challenges and opportunities identified in the 2019 Australian Infrastructure Audit and include:

• Recommendation 2.1: "Building community resilience to all hazards by considering systemic risks, interdependencies and vulnerabilities in infrastructure planning and decision making";
• Recommendation 2.2: recognising sustainable infrastructure investment involves more than just economic considerations and should also involve social, environmental and governance outcomes. The Recommendation endorses "the quadruple bottom line" as a goal for sustainable infrastructure investment;
• Recommendation 3.3: embedding a "digital by default approach" in the infrastructure sector, rather than the current "digital by exception" culture;
• Recommendation 4.2: Improving the liveability and economic sustainability of regional rural and remote areas by developing, maintaining and operating integrated freight and passenger transport networks that meet end-to-end access needs;
• Recommendation 4.3: ensuring transport services deliver "door-to-door mobility" to reduce reliance on motor vehicles for passenger and freight movement;
• Recommendation 5.3: pivoting Australia's reliance on fossil fuels for export and domestic energy to a "high-tech, low-cost, low-emissions energy system"; and
• Recommendation 6.1: addressing future water security by developing a national approach to water security.

Each of the 29 recommendations covered by the Plan fits within one of the key identified areas of reform:

• Place-based outcomes for communities;
• Sustainability and resilience;
• Industry productivity and innovation;
• Transport;
• Energy;
• Water;
• Telecommunications and digital;
• Social infrastructure; and
• Waste.

Supported by the 2021 Reform Priority List the Plan provides a detailed evidence-based roadmap for governments to implement the reforms and recommendations.

Bank guarantee recourse confirmed

The Tasmanian Court of Appeal has upheld the recent Supreme Court decision surrounding enforceability of bank guarantees in Hansen Yuncken Pty Ltd v Parliament Square Hobart Landowner Pty Ltd [2021] TASFC 11 (see MPC 5MF 78), allowing a Principal to draw on a bank guarantee where no express right to do so existed under the contract.

Hansen Yuncken (the Builder) was required to provide a bank guarantee as security for the defects liability period – the "Defects Bond". While the construction contract expressly dealt with when other Performance Bonds could be called upon, it was silent in respect of the Defects Bond.

A dispute arose between the Builder and Parliament Square Hobart Landowner (the Principal) which resulted in the Principal making a demand for payment of in excess of $4.5 million. Concerned that the Principal would make a demand on the Defects Bond for those monies, the Builder sought an injunction to prevent the Principal from doing so. It also sought a declaration that the Principal had no present entitlement to have recourse to the Defects Bond because the Principal's right of recourse must be identifiable in the contract.

The court, at first instance and on appeal, disagreed and confirmed that the unconditional right to access a bank guarantee is found in the terms of the guarantee itself and in the broader context of the contract read in its entirety. The correct approach is not to look for an express right to call upon the guarantee but rather to identify any conditions in the contract which qualify this unconditional right and then determine whether those conditions have been complied with.

In this case, the court found that the Defects Bond was intended to perform a risk allocation function by ensuring that the Principal was put into funds while any dispute with the Builder was resolved.

This case provides comfort to those relying on bank guarantees that less is more.

ACT Supreme Court considers EOTs for challenging an adjudicator’s decision under the security of payment legislation

In Beno Excavations Pty Ltd v Harlech Enterprises Pty Ltd [2021] ACTSC 166, the Supreme Court of the ACT granted the Plaintiff an extension of time to file an application for prerogative relief, but dismissed the Plaintiff’s application for an extension of time to apply for leave to appeal under section 43 of the Building and Construction Industry (Security of Payment) Act 2009 (ACT) (SOP Act). Both applications were to challenge a decision of an adjudicator made under the SOP Act.

The applications for extension of time were necessary because the Plaintiff’s lawyers failed to consider the relevant limitation periods.

Merits of the claim

The Plaintiff had two key arguments:

1. The time bar argument: that the adjudicator erroneously concluded that the time bar in section 15(4)(b) of the SOP Act did not apply to the payment claim, the subject of the application; and
2. The section 24/issue estoppel argument: that the adjudicator adopted an approach to issue estoppel that went beyond what is required by the terms of the SOP Act, and misconstrued section 24 of the SOP Act by holding that many of the issues raised by the Plaintiff could not be re-agitated because they had been previously determined in an earlier adjudication.

In determining whether to grant the extensions, Justice Mossop gave careful consideration to the length of the delay, explanation for the delay (and the prejudice to the Defendant that would arise as a result of orders in favour of the Plaintiff) and the merits of the substantive application.

Justice Mossop dismissed the Plaintiff’s first argument, but was satisfied that the Plaintiff’s second argument had a reasonable basis.

Decision

Ultimately, Justice Mossop did not grant the extension of time in respect of the section 43 application. This was partly because the extension of time sought for the section 43 application was much longer than that for the prerogative relief claim (36 days compared to 4 days), and because section 43(4)(b)(i) of the SOP Act requires a conclusion that there is a “manifest error of law on the face of the adjudication decision”. Justice Mossop was not satisfied that this conclusion could be reached based on the arguments submitted by the Plaintiff.

In relation to the application for an extension of time to seek prerogative relief,  Justice Mossop was satisfied that special circumstances existed and that the Plaintiff had a reasonable argument in relation to section 24 of the SOP Act.

Court requires strict proof for "giving" of an adjudication application

How much proof is needed to show that an adjudication applicant has "given" an adjudication application to the adjudication respondent in accordance with the Building Industry Fairness (Security of Payment) Act 2017 (Qld)? More than one may think, as it turns out.

In Equinox Construction Pty Ltd v Henning & Anor [2021] QSC 223, Mr Henning, who was an applicant for adjudication of a payment claim, "gave" a copy of his adjudication application by posting it to the respondent, Equinox Construction Pty Ltd.

Equinox did not receive the adjudication application and applied for a declaration that the adjudication decision subsequently made in favour of Mr Henning was void on the basis that Mr Henning breached section 79(3) of the Act. Section 79(3) of the Act provides that an adjudication application must be "given" to the respondent.

The Queensland Supreme Court held that the adjudication decision made in favour of Mr Henning was void because there was insufficient proof that the adjudication application had been "given" by Mr Henning to Equinox in accordance with section 79(3) of the Act. In particular, the Court held that:

• evidence of having used a "postage paid" envelope is not sufficient: Mr Henning did not give evidence about how the postage was calculated or paid for, other than having used a "postage paid" envelope. Mr Henning also did not explain how postage paid envelopes were to be used when paying for postage of the items contained in them. The Court found that the marking of "POSTAGE PAID" on the envelope was insufficient; and
• evidence of attending a post office on a specific date is not sufficient: Mr Henning did not give evidence of how the posting was effected. He did not provide evidence on whether he handed the envelope to an Australia Post staff member or whether the envelope was placed in a red post box in Australia Post. He provided evidence of having attended the post office on 9 March 2020 "in order" to post the adjudication application, but the Court found this to be insufficient.

Accordingly, this case is a warning that adjudication applicants should be prepared to take good care when serving adjudication documents and proving service of such documents.

Regulating offshore electrical infrastructure and transmission

The Offshore Electricity Infrastructure Bill 2021 will, if passed, introduce a framework regulating offshore electricity infrastructure (OEI) and transmission. The proposed framework forms part of the Government's efforts to remain competitive in the facilitation of proper management of offshore infrastructure activity, being the "construction, installation, commissioning, operation, maintenance or decommissioning" of OEI projects.

This Framework allows the Australian Government to designate "Offshore Electricity Licence Areas" within Australia's territorial sea and exclusive economic zones, and prohibits unauthorised OEI and transmission.

Who is impacted?

The Bill applies to offshore renewable energy infrastructure erected for the primary purpose of engaging in the exploration of, assessment of feasibility for, and any exploitation, storage, transmission or conveying of, a renewable energy source. It is broad enough to apply across a range of renewable energy sources.

Eligible persons, being "body corporates with a registered office in Australia or body corporates established for a public purpose under a law of the Commonwealth or a state or territory" will now be required to engage with both Federal and State and Territory Governments to gain the relevant permissions to commence work. In addition, they will be required to have an approved management plan, provide financial security, and must meet specific merit criteria.

Key provisions

The Bill would:

• empower the Minister (for Energy and Emissions Reduction) to grant licences allowing such activities in these areas. These licences are divided into three streams (commercial, transmission and infrastructure, and research and demonstration);
• empower the National Offshore Petroleum Safety and Environmental Management Authority to administer and regulate the Framework, and establishes the Offshore Infrastructure Registrar; and
• outline a strict liability offence for interference with other activities (ie. the exercise of Native Title rights, marine conservation and offshore petroleum activities).

Minister Taylor says the Framework will "strengthen the Australian economy, and create jobs and opportunities for Australians". The framework i9s expected to deliver significant local benefits to Australians (particularly those in regional areas) through its support of a more secure and reliable electricity system. It is also expected to encourage market competition from new electricity generation capacity that will help place further downward pressure on wholesale electricity prices.

This Bill currently remains before the House of Representatives and has been referred to the Senate Environment and Communications Legislation Committee, with a report due on 14 October 2021. The Bill was accompanied by the Offshore Electricity Infrastructure (Regulatory Levies) Bill 2021 (Cth), and if passed, the Act shall be known as the Offshore Electricity Infrastructure Act 2021.