Cornwall Stodart has a dedicated team of highly trained lawyers practising in the area of Construction Law.
Our team is regularly engaged to provide full service on a construction project, from drafting the tender and tender contract through to negotiation during and up to the end of the project. We are expert in drafting, reviewing, tailoring and negotiating contract documentation specific for each project. Our team also advises on contract administration and disputes that may arise throughout the currency of a project.
Our clients participate in a range of projects from infrastructure construction and development through to retail and office building projects, and are indicative of the diversity of the construction industry.
Clients include:
- owners;
- developers;
- contractors;
- financiers; and
- operators.
Our Construction team works closely with its clients to achieve optimal outcomes, from concept through to completion. The team prides itself on acting commercially and achieving fast, cost-effective and advantageous outcomes so as not to unnecessarily delay projects and inflate costs. After all, in the construction industry, time is money.
For any further information on any of the content within this newsletter, or within the construction industry generally please contact Peter Macnish, Special Counsel, on +61 3 9608 2229 or p.macnish@cornwalls.com.au
People in the construction industry ignore changes to the Victorian Building and Construction Industry Security of Payment Act 2002 (Vic) (Act) at their peril. This article outlines some recent changes and warns of the serious consequences of not complying with the Act.
If you are waiting to be paid you also would be well-advised to study the legislation. It is a timely reminder to all in the building industry to ensure business systems are able to handle payment obligations within the tight time constraints.
Victoria has had construction industry security of payments legislation since 2002 but it has not been used often.
On 30 March 2007, the changes came into effect. They brought Victoria into line with legislation in New South Wales, Queensland, Western Australia and the Northern Territory. However, in some instances they have gone beyond the legislation in those states.
The Original Act
The original Act was introduced to protect small building contractors and sub-contractors from exploitation by bigger contractors and building owners with poor payment practices. It did not always have the intended result.
Under this Act any person undertaking construction work or supplying goods or services under a construction contract is entitled to progress payments at intervals set out in the contract. If no intervals are provided, the Act sets the payment intervals at every 20 business days or 20 days after the construction work is completed. Intervals are referred to as a "reference date".
To obtain payment, the Claimant must provide the Respondent with a payment claim under the Act. As long as certain criteria are satisfied, an invoice can (but would not always) be sufficient. On receiving the claim, the Respondent must either:
- pay the claimed amount on the due date for payment under the contract (or if none is set, within 10 business days of receiving the claim); or
- dispute the payment within 10 business days by providing the Claimant with a payment schedule that sets out, among other things, details of the amounts in dispute and reasons for the dispute. The amount conceded in the payment schedule (if any) then becomes payable.
Failure either to pay the claimed amount or provide a payment schedule and pay any conceded amount may result in serious consequences, including possible suspension of work and a judgment against the Respondent for the amount of the payment claim or conceded amount.
If the Respondent provides a payment schedule and the Claimant is not happy with the amount (if any) conceded the Claimant may refer the matter to an adjudicator. Once the adjudicator has made his decision and advised both parties, the Respondent has as few as five business days to pay the amount the adjudicator has decided is payable (if any). The Respondent will seldom be happy with the adjudicator’s decision or the adjudication process and associated costs.
The Revised Act
Some of the more significant changes to the Act since 30 March last year are:
- One Payment Claim per Reference Date
The revised Act provides that a Claimant cannot serve more than one payment claim for each “reference date”. This effectively prevents Claimants from serving payment claims at unreasonably short intervals.
- Claimable Variations
Only variations that are “claimable” can be included in a payment claim under the revised Act. While the Act did allow claims for variations, the revised Act clarifies which variations are and are not claimable.
The revised Act provides for two variations capable of inclusion in a claim:
(a) variations to which the parties to the construction contract have agreed; and
(b) certain disputed variations.
- Claimable Amounts
The revised Act excludes some categories of amounts that may be included in a claim. These are:
• latent conditions;
• time-related costs;
• changes in regulatory requirements;
• damages for breach of contract; and
• claims arising at law, other than under the construction contract.
- Restrictions Claimable Variations
The revised Act has also introduced a limitation on variations in the case of high-value contracts. Now, unless the contract value is less than $5 million, variations can only be claimed if the contract does not provide dispute resolution mechanisms.
The revised Act also provides that in circumstances where the total of disputed variations is more than 10 per cent of the contract price, those variations will only be “claimable” if the total contract price is less than $150,000.
These amendments significantly reduce a Claimant’s ability to claim for variations in payment claims. In short, the legislature is, with good reason, aiming to confine the ambit of the Act to contracts in the lower value range.
- Three month Limitation
The original Act did not impose any restrictions on how long after the completion of the work a claimant could make a payment claim. The revised Act requires payment claims to be made within three months after the work is finished. In New South Wales and Queensland claims must be made within 12 months.
- Consequences of Non-Payment
The revised Act has expanded the options available to the Claimant if the Respondent does not respond to a claim by paying or providing a payment schedule within 10 business days of the claim. Previously, the Claimant was able to go to Court to enforce the claim as a judgment debt. Now, the Claimant has two options:
(a) enforce the claim as a judgment debt; or
(b) refer the matter to adjudication.
While option (a) looks to be the more aggressive, it is option (b) that is most likely to result in a less expensive and prompt payment. An unpaid adjudication determination is enforced relatively easily.
Under the revisions the Claimant’s right to stop work if the Respondent does not make the required payments remains unaffected.
It is cold comfort for the Respondent that payments compelled by the Act are payments on account and may be clawed back at the conclusion of the contract. The consequences for the Respondent’s cash flow of an inflated payment compelled mid-contract by the Respondent’s failure to comply with the Act could be expensive or even disastrous.
- Review of Adjudication
If a claim is referred to adjudication and the adjudicator decides more than $100,000 (or another amount prescribed) is payable by the Respondent, either party may now apply for a review of the decision by a review adjudicator. The application for review must be made within five business days of release of the decision. However, a review is limited. It is only available in the wrongful inclusion of an excluded amount, or exclusion of an amount wrongly decided to be excluded.
While the inclusion of a section for appeal of an adjudication determination is a positive step, outside the limited scope of that section appeal against an adjudication decision remains difficult.
Non-compliance with the provisions of the Act may have serious consequences. In particular you need to be ready to respond to the tight time constraints imposed by the Act because they are non negotiable.
For further information, please contact Peter Macnish on +61 3 9608 2229 or p.macnish@cornwalls.com.au
or Katherine Payne on +61 3 9608 2149 or k.payne@cornwalls.com.au
A recent case has highlighted the need for landowners, builders and developers to be aware of their legal obligations to comply with Environment Protection Authority (EPA) requirements.
In the case of Premier Building & Consulting Pty Ltd v Spotless Group Ltd (No. 12) [2007] VSC 377, Justice David Byrne found Spotless Group liable for the costs of cleaning up a site it once owned in Brunswick. The clean-up, ordered under the Environment Protection Act 1970, is expected to cost Spotless between $3-4 million.
A property developer, Premier Building and Consulting (Premier), bought the land and developed it into 49 residential units, which were sold off-the-plan. The development took place without clearance from the EPA. A subsequent EPA inspection found high levels of chemicals in the ground, including white spirit, perchloroethylene and thricholoroethylene. These are commonly used in laundry and dry-cleaning services.
The site, the subject of the dispute, is adjacent to land previously owned by Spotless and had been used for a commercial laundry.
Premier was unable to complete the off-the-plan sales because of the contamination and went into administration last year. Through its receivers, Premier originally pursued a $30 million plus damages claim against Spotless and several other defendants. The claims against Spotless included one that it did not dispose of the chemicals appropriately, and accordingly the land was contaminated.
In his judgment, Justice Byrne criticised Spotless for using the corporate veil to claim it was not responsible for the contamination stating:
"In essence, what the Spotless Parties, and in particular, Spotless, say is that while it was content as holding company to enjoy the fruits of the commercial operations conducted by these subsidiaries at its direction, it should not have to bear the adverse consequences of these commercial operations because it, as holding company, decided for its own purposes to restructure the operations and cause the two subsidiaries to be deregistered. Let me say immediately that this is a surprising position for a well known and respectable commercial enterprise and a listed public company to take. It is one that reflects no credit on the commercial morality of those whose decision it was that this position be adopted. I have been moved to make this observation lest my silence be understood as an indication that I, as a judge of this Court and the Principal Judge in the Commercial and Equity Division, should be seen as compliant, approving or even complicit in this decision." [324]
Spotless used deregistered subsidiaries to attempt to shield itself from responsibility. Three Spotless subsidiary companies operated dry-cleaning businesses at the Brunswick site between 1963 and 1988 and all had been deregistered by the end of 2001. Further, Spotless had not operated a business at the address since 1989. Accordingly, Spotless Group, the parent company, argued it should not be held responsible for the actions of its subsidiaries which led to the contamination of the soil.
Justice Byrne threw out claims of civil nuisance and negligence brought by Premier against Spotless, but found Spotless liable for the costs of the clean-up ordered by EPA. Section 62A of the Environment Protection Act allows the EPA to order the clean-up and ongoing management of land to be completed by the following categories of people or companies:
- the occupier of any premises from which pollution has occurred;
- the person who caused or permitted the pollution to occur;
- anyone who appears to have abandoned or dumped industrial waste or a potentially hazardous substance; and
- anyone handling industrial waste or a potentially hazardous substance in a manner likely to cause an environmental hazard.
A Spotless subsidiary company has now bought the site from Premier for $5 million.
This case provides a timely reminder for all landowners, builders and developers to be aware of their obligations and responsibilities at law to meet EPA requirements. This case demonstrates that disposing of land at law does not necessarily dispose of one’s obligations to ensure the land is safe. Spotless is now liable for clean-up costs of land it stopped using as far back as 1988.
Prospective purchasers should make sure of EPA compliance both with completed properties and with off-the-plan sales. Strict compliance with all government agencies is mandatory and prospective purchasers should be wary of any deals where anything but strict compliance is the case.
For further information, please contact Peter Macnish on +61 3 9608 2229 or p.macnish@cornwalls.com.au
or Jennifer Holdstock on +61 3 9608 2211 or j.holdstock@cornwalls.com.au
