John Holland Pty Ltd v Roads & Traffic Authority [2007] NSWCA 19
The NSW Court of Appeal has handed down a significant decision in relation to security for payment determinations by adjudicators.
Facts
The Roads & Traffic Authority of New South Wales (“the RTA”) entered into a contract with John Holland Pty Limited (“John Holland”) for construction of a dual carriageway and associated bridges in an area north of Kiama, NSW.
John Holland served on the RTA a Payment Claim under the Building and Construction Industry Security of Payment Act 1999 (NSW) (“Act”) claiming $8 million. The RTA responded with a Payment Schedule proposing to pay $738,033.42.
John Holland then served an Adjudication Application and the RTA responded contending that the Adjudicator had no jurisdiction to determine the Adjudication as he was being asked to perform a dispute resolution role under the contract and not a valuation role in relation to an amount of a progress payment. Further, the RTA argued that the Adjudication of the claim was beyond the object of the Act as the claim had been determined by the Superintendent and referred to Expert Determination under the Contract.
The Adjudicator rejected the RTA’s submissions on the grounds that they were not included in its Payment Schedule and determined that the RTA was to pay $5.5 Million. The Supreme Court found that the Adjudicator failed to consider the RTA’s jurisdiction submission. John Holland challenged the decision in the Court of Appeal submitting that the Adjudicator was under no obligation to consider the jurisdiction submission as it was not raised in the Payment Schedule and the RTA had no grounds to withhold payment.
Issue
Whether the Adjudicator considered, and was obliged to consider, the jurisdiction submission notwithstanding that it was not included in the Payment Schedule.
Decision
The NSW Court of Appeal allowed the appeal. Despite the Supreme Court’s finding, the Court of Appeal held that since the RTA’s jurisdiction submissions were not included in the Payment Schedule, they were not considered to be “duly made”. However, the court held that a failure by the Adjudicator to consider these submissions would not amount to a jurisdictional error invalidating the decision.
Impact
In such circumstances it would be wise to include in a Payment Schedule argument that the Payment Claim is invalid on the basis that the Adjudicator lacks jurisdiction. This would ensure that the respondent can later raise such a submission in Adjudication.
Shaw v Yarranova Pty Ltd & Anor [2006] VSCA 291
Victorian Court of Appeal (VCA) rules that an “off the plan” contract for the sale of a residential apartment is not a “major domestic building contract” within the meaning of the Domestic Building Contracts Act 1995 (Vic) (“Act”).
Facts
An apartment was purchased “off the plan” in Melbourne’s Docklands precinct from a developer in April 2000. The purchaser refused to settle until alleged minor defects were rectified. A notice to complete was issued but the purchaser declined to complete the sale contract on the ground that s.42 of the Act applies, that is, the developer cannot demand payment under the sale contract until rectification works have been completed by the developer.
Issue
Whether the contract for sale made between Shaw (purchaser) and Yarranova (developer) was a “major domestic building contract” within the meaning of the Act. The purchaser argued that a “major domestic building contract” was not limited to contracts to carry out building work, but extended to contracts under which the developer arranged for such works to be carried out by a third party.
Decision
Justice Bell J concluded that under the contract, the “core obligation” of Yarranova was to cause the apartment building to be constructed, not to construct it. As a consequence Shaw forfeited his deposit and Yarranova was entitled to sell the apartment.
The Court of Appeal departed from the earlier approach adopted in the Mirvac (Docklands) Pty Ltd v Peter Evan Philp (2004) VSC 301 where Byrne J in the Supreme Court decided a contract of sale was also a building contract.
Impact: Court reads down Domestic Building Contracts Act
Justice Neave, J.A took the view that a broad interpretation of “major domestic building contracts” would require both developers and builders to insure against the same risk and this was not the intention of the Act. The contract of sale indicated that a separate independent builder would be engaged to construct the apartments. It was seen as necessary to read down the words “arrange or manage” in s3 of the Act to exclude contracts for sale.
New South Wales position
Under section 96A of the Home Building Act 1989 (NSW), the New South Wales equivalent of the Victorian Act, a developer must not enter into a contract for sale of land on which residential building work has been commenced unless a certificate of insurance is attached to the contract. A contract of sale is voidable if the insurance certificate is not served on the purchaser before completion.
Abigroup Contractors Pty Ltd v River Street Developments Pty Ltd [2006] VSC 435
Facts
Abigroup Contractors Pty Ltd (“Abigroup”) entered into a construction contract in the sum of $68,654,467 with River Street Developments Pty Ltd (“RSD”) for the design and construction of apartments at Richmond.
Abigroup made a Payment Claim, number 26 in the sum of $4,736,535.97, by faxing it to the financier’s Quantity Surveyor, who was responsible for the valuation of progress claims under the contract. A copy was also faxed to the Superintendent, however, a copy was not sent to the Principal as was required under the contract.
The Quantity Surveyor certified payment against progress claim number 26, for $154,185 and showed how that amount had been calculated. The progress schedule No 26 contained a large sum of liquidated damages applied by the Principal and a large sum of variations that had not been agreed between the parties.
The case by Abigroup was for an application for summary judgment on the basis that there had been a failure to give reasons for the reduced amount in the Payment Schedule. Alternatively, Abigroup argued for a failure to give a Payment Schedule at all, given that the Payment Schedule had been issued by the Quantity Surveyor and not the Principal.
Issue
Whether pursuant to s.15(4) and s.16(2)(a) of the Act, Abigroup was able to recover the amount of the $4,736,535.97 as a debt due pursuant to the Act.
Decision
Habersberger J refused the application for summary judgment stating that on the basis of the material before the Court there were real issues to be tried.
Impact
The rights to use the Security of Payments Act 2002 (Vic) (“the Act”) to recover a claimed amount as a debt due and via a summary judgment is only available if there are no real questions to be tried.
Security of payments update - Victoria
On 30 March 2007 amendments to the security of payments legislation will come into operation. These changes will impact developers, superintendents and contractors, to varying degrees.
For more information please refer to our security of payments update.
Proportionate liability in the building and construction industry – a short overview
What is proportionate liability?
Construction professionals such as architects, engineers, builders and building inspectors owe a duty of care by virtue of the laws of contract, tort and under the Trade Practices Act 1974 (Cth) (“TPA”) and the relevant Fair Trading Act 1987 (NSW) (“FTA”) in each Australian jurisdiction.
Whether a plaintiff makes a claim for damages for breach of contract, tort or a claim under the TPA or the FTA, will turn on the civil liability legislation in place in that particular jurisdiction.
Claims against construction professionals are often for economic loss with a number of concurrent wrongdoers, therefore the relevant civil liability provisions will impact on the outcome available to plaintiffs.
Proportionate liability limits the liability of a defendant who is a concurrent wrongdoer to an amount reflecting that proportion of the loss or damage claimed that the court considers just having regard to the defendant’s responsibility for the loss or damage.
What legislation exists?
In January 2004, Pt IVAA of the Wrongs Act 1958 (Vic) was introduced, changing the way proportionate liability was to be dealt with in Victoria. Similar legislation followed in all other Australian jurisdictions however each with differences.
In July 2004, the Commonwealth introduced proportionate liability under Part VIA of the TPA for claims for economic loss or damage to property arising out of misleading and deceptive conduct under section 52 of the TPA. This legislation differs from the Victorian legislation in that the courts can take into account liability of a concurrent wrongdoer who is not a party to the proceedings.
Issues with the current legislation
Academics and practitioners have highlighted a number of issues with the current legislation. One major area is the inconsistencies between each jurisdiction. Some further areas of discussion include:
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the ability to contract out of the legislation;
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shift of onus between the plaintiff and defendant to join concurrent wrongdoers;
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the affect on the prospects of settlement due to a larger number of parties; and
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the ability/desire to forum shopping among jurisdictions.
Some things to remember
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Draft contracts to ensure that risk allocation is appropriately managed;
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In litigious matters, care must be taken to ensure that all relevant parties are included and that claims are commenced in the correct jurisdiction to obtain the best outcome for the client.
There is still uncertainty as to the implications and application of the legislation and only time will tell how the courts will interpret it.
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