Major Projects & Construction 5 Minute Fix 92: electronic document execution, top 5 construction law issues, payment claims

Construction law essay prize success

Dr Matthew Bell has been awarded First Prize in the Society of Construction Law Hudson Essay Prize for 2021. Dr Bell is Professional Support Lawyer to Clayton Utz’s Major Projects and Construction Group on a part-time basis, and Associate Professor and Co-Director of Studies for Construction Law at The University of Melbourne. The award was announced by the Rt Hon Lord Justice Coulson at the Society’s Annual Lunch in London on 11 February 2022. Matthew’s paper is entitled "Contract Damages for Defective Construction Work: An Unsolvable Puzzle?" He has been invited by the Society to present the paper in London in May. 

Federal Parliament makes permanent reforms in electronic document execution

Electronic signing is here to stay. In response to changing business needs in the wake of the COVID-19 pandemic, the Federal Parliament has passed the Corporations Amendment (Meetings and Documents) Bill 2021 (Cth), making, among other things, permanent reforms permitting electronic execution under sections 126 and 127 of the Corporations Act. You can read more about the reforms that give companies additional flexibility to use technology to sign documents. 

"Top 5" construction law issues from 2021

A number of significant construction law issues were the subject of case law and legislative reform in 2021. Summarised below are the five developments and affirmations that attracted our attention when preparing our 5 Minute Fix editions in 2021.

1. WA Parliament passes its security of payment legislation.

   Legislation was enacted in June 2021 bringing the State’s security of payment broadly into line with the “East Coast” model of security of payment legislation.

2. The prevention principle: A tale of two jurisdictions?

   Two cases handed down in Victoria and in NSW illustrated the different approaches adopted in the application of the prevention principle.

   The Victorian decision – Bensons Property Group Pty Ltd v Key Infrastructure Australia Pty Ltd [2021] VSCA was the subject of a Special Leave application that was refused by the High Court.

3. Lacrosse appeal: original judgment largely upheld but appeal judgment in Tanah Merah Vic Pty Ltd v Owners' Corporation No 1 of PS631436T [2021] VSCA 72 provides valuable insights.

   In unanimously dismissing 10 of 11 grounds of appeal against the 2019 VCAT decision, the Victorian Court of Appeal considered principles of proportionate liability, peer professional opinion, contractual allocation of responsibility, and an analysis of the Building Code of Australia.

4. Proving breach of new statutory duty of care: A test case for NSW's Design and Building Practitioners Act.

   In The Owners – Strata Plan No 87060 v Loulach Developments Pty Ltd (No 2) [2021] NSWSC 1068, the NSW Supreme Court handed down a decision which provided guidance on the statutory duty of care created recent legislation.

5. Judicial reluctance to consistently imply obligation of good faith into all commercial contracts as a matter of law continues in Queensland.

The Queensland Supreme Court was unwilling to take a "large step" to imply a duty of good faith as a matter of law in North Queensland Pipeline No 1 Pty Ltd v QNI Resources Pty Ltd [2021] QSC 190. Nor was a good faith obligation implied as a matter of fact because it would have been inconsistent with the express risk allocation agreed by the contracting parties.

A payment claim must identify the construction work: brevity isn’t always best

In Panel Concepts Pty Ltd v Tomkins Commercial & Industrial Builders Pty Ltd [2021] QDC 322, the Court considered section 68 of the Building Industry Fairness (Security of Payment) Act 2017 (Qld). Section 68 requires a claimant to identify the construction work or related goods and services to which the progress payment relates.

The decision follows the same strict approach set by the Queensland courts concerning the requirement to identify construction work, most recently in KDV Sport Pty Ltd v Muggeridge Constructions Pty Ltd [2019] QSC 17. Indeed, Porter QC DCJ adopted Brown J's summary of the relevant principles in KDV Sport.

The decision is a reminder that the test to determine whether a payment claim sufficiently identifies the construction work the subject of the claim is objective. Also, in determining whether the claimant has adequately identified the construction work, the parties should be aware that the courts can look past the payment claim document and consider facts known and correspondence and dealings between the parties.

The decision involved a subcontract for the construction and installation of tilt panels. The Payment Claim in question was very brief: it identified the date, contained only six words: "claim for completion of tilt panels", and then an amount of $85,000. Having considered the subcontract between Panel and Tomkins, Panel's previous two payment claims, and the evidence of Panel's Project Manager, Porter QC DCJ was not persuaded that Panel's payment claim adequately identified any specific work under the contract. Furthermore, his Honour observed that the meaning of the reference to "completion" was unclear in this context.

Key takeaway

Claimants should ensure that their payment claim is sufficiently detailed to allow the principal to understand the basis of the claim. The Courts are clear that it is not incumbent upon the respondent to reconstruct previous claims and amounts paid to ascertain the actual work to which the claim relates. Payment claims that lack specificity in identifying the work under the contract increase the risk of payment delays and challenges to the payment claim, with a potential ruling against the party seeking payment if litigation ensues.

Licensing postscript

Before the Court considered whether the payment claim was valid under the Queensland security of payment regime, it needed to decide whether a subcontractor (Panel) could take advantage of an exemption to the requirement to hold a contractor's licence in Queensland. Without the benefit of the exemption, Panel would face the consequences of carrying out unlicensed building work in breach of section 42 (1) of the QBCC Act. Importantly, as an unlicensed contractor, Panel would not be entitled to make a statutory progress payment claim.

The Court considered the scope of the licensing exemption found in section 8 of Schedule 1A of the QBCC Act. This exemption was originally introduced to remove what was viewed as an impediment to large-scale commercial development. Without the exemption, there were scenarios where developers, who had no intention to carry out building work themselves, were required to be licensed. But, in recent years, the exemption has been increasingly relied upon by unlicensed contractors. Indeed, in this case, the Court adopted an expansive construction of the scope of the exemption and the heading of the section ("head contracts to carry out building work"), to allow contractors other than the "ultimate contractor" to take advantage of the exception.

However, unlicensed contractors should not rejoice too soon because this exemption is likely short-lived. The Queensland Parliament has passed legislation that will remove this particular licence exemption later this year.