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The following is a selection of recent articles prepared by our project dispute resolution group. If you are interested in reading the full text of these articles, please contact Tess Mathews.
2007
Infrastructure project participants are no strangers to disputation. The increased sophistication and complexity of contract documentation and project demands have done little to stem the scope for problems arising on these projects. However, parties still regularly have little or no regard for the contract terms that govern the resolution of a dispute. Or parties agree to processes that seem superficially expedient, only to pay the price when they find themselves bound to a process that is fundamentally unsuitable and puts them at a serious disadvantage. A recent New South Wales Supreme Court decision regarding issues arising out of the new transport interchange at Chatswood underlines the risks for parties. The case also provides another example of dispute resolution clauses embroiling the parties in significant time and cost, as they grapple with process disputes that have nothing at all to do with the real underlying issues.
The use of expert determination as a process to resolve disputes is becoming more prevalent. One of the attractions of expert determination is the procedural flexibility it offers. Parties can agree the procedural steps for an expert process between themselves or with the expert. Alternatively, the process can be left to the expert to determine. However, what happens if a process is agreed but the expert does not strictly adhere to it? Can a party avoid the consequences of a determination in such circumstances? These issues were recently considered by the Victorian Supreme Court.
Security of payment legislation has been introduced in most jurisdictions. The legislation is modelled on United Kingdom legislation but provides an even shorter time for an adjudication to occur. In some cases the tight timeframes can be absurdly short and encourage ambush tactics. The ability to provide security rather than pay an adjudicated amount is now also disappearing as a result of legislative amendments in Victoria and New South Wales. These and other practical and legal difficulties and risks have prompted a flurry of legal cases. The New South Wales Court of Appeal has recently considered whether there are constitutional limits on the way the legislation operates and good faith requirements for payment claims.
There is ongoing controversy about when an obligation of good faith will be implied into a contract—and what it really means. Such obligations have been criticised as vague and uncertain. And where an obligation of good faith is implied, it can be difficult to determine whether it has been breached. The Federal Court of Australia recently considered whether the termination of a contract was subject to an obligation of good faith and, if so, whether the act of termination was in breach of that obligation. The decision illustrates the willingness of a court to look behind the reasons given for termination. It also provides a warning to parties about the care that should be taken in exercising rights of termination.
Security of payment legislation has been introduced in most states. The legislation is intended to provide contractors with prompt recovery of progress payments due under construction contracts. The legislation sets down strict, short timeframes for the adjudication of payment claims and limits the grounds on which an adjudicator’s determination may be challenged. The courts have acknowledged that this places adjudicators in a ‘pressure-cooker’ environment. The adjudicator’s task is made even more difficult where one of the parties fails to comply with the requirements of the Act. For example, by failing to submit a detailed payment schedule. The New South Wales Supreme Court recently considered the minimum requirements for a valid adjudication determination under the New South Wales security of payment legislation.
The courts are regularly being asked to expand the existing boundaries of liability in negligence for pure economic loss. The High Court in Bryan v Maloney found that a builder owed a duty of care to subsequent purchasers of residential property. However, in the following decision of Woolcock, the High Court did not impose a duty of care on engineers to subsequent purchasers of commercial property. Most recently the Victorian Supreme Court of Appeal was required to decide whether a private building surveyor could be liable in negligence to subsequent purchasers of residential premises.
In a previous article we discussed a decision of the Supreme Court of Tasmania in which the state of Tasmania was precluded from recovering liquidated damages from a contractor for delay in the construction of a public highway. Liquidated damages were unenforceable because the amount was not a genuine pre-estimate of the state’s loss and damage, and was a penalty. The decision has been appealed, providing the Full Court with an opportunity to consider the circumstances in which a government entity can levy liquidated damages against a contractor for late completion of a public utility.
The termination of a building contract usually leaves some sorting out to be done. How will the remaining work be completed? Will re-work be required? How will warranties apply? There is also the question of what amount if any is payable to the original contractor. Where an owner’s termination is wrongful and constitutes a repudiation, the contractor will generally have the option of either suing for damages for breach of contract or claiming payment on a quantum meruit basis for the work carried out. A party claiming a quantum meruit must establish the value of their work but calculations can be complicated, such as where an opposing party claims set-offs for delay costs, rectification works or liquidated damages. The Victorian Supreme Court has recently provided some useful guidance on the calculation of damages for quantum meruit claims.
Contractors regularly say that prompt payment is necessary for cash flow to perform the building works. Most commercial building contracts include a regime for contractors to issue progress claims, with a superintendent or administrator issuing a payment certificate to certify the amount payable to the contractor. The general expectation is that the certified amount will then be required to be paid to the contractor. However, the owner or principal may seek to withhold payment or wish to set-off amounts that it claims are owing. (Whether this is legitimate and effective can be a source of heated debate and confusion.) The Supreme Court of Victoria recently considered these issues in the context of an application for summary judgment.
At the core of a client’s right to legal professional privilege is maintaining the confidentiality of communications between a client and its lawyer. The courts have repeatedly held that parties who choose to refer publicly to legal advice they have received may waive all privilege, even though they had no intention to do so. The Supreme Court of Victoria has again recently confirmed that privilege can be impliedly waived where a party acts inconsistently with the maintenance of confidentiality over its legal advice. In fact the disclosure of legal opinion as to the likely outcome of litigation may have the effect of waiving privilege over all matters and legal analysis supporting that opinion.
The Planning and Development Act 2005 (WA) (Planning Act) received royal assent on 12 December 2005 and will commence on a date to be proclaimed. Current indications are that the commencement date will be some time in March/April 2006.
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When assessing damages arising from defective construction works, the most common method is to look at either the cost of rectification or the diminution in value of the property as a consequence of the defects. However, it is not always clear which method of assessing damages should apply. For instance, what if the property has been sold and the party seeking to recover the damages did not, and will not, perform the rectification works? These issues were recently addressed by the Supreme Court of New South Wales when considering a challenge to a referee’s report.
In a previous article we discussed a decision of the Supreme Court of New South Wales which considered whether an expert report commissioned by an in-house solicitor attracted legal professional privilege. In that case the in-house solicitor considered litigation to be ‘highly likely’. However, the court held that the report was not privileged. This decision has since been appealed, providing the Court of Appeal with an opportunity to consider in what circumstances an expert report commissioned by an in-house solicitor will be privileged.
The role of experts in legal proceedings arising from complex construction and engineering projects is well entrenched and accepted by the courts. Ordinarily, a report prepared by an expert engaged after litigation is commenced will be privileged, on the basis that it was prepared for the dominant purpose of litigation. However, the situation can be more complex when problems arise during the course of a project and an expert is engaged, before proceedings are commenced, to investigate and report on why the problems have occurred. In such circumstances, it may be less clear that an expert’s report is privileged, as demonstrated by a recent decision of the Queen’s Bench division of the Technology and Construction Court of the United Kingdom.
Surprisingly, none of the rules of the major transnational arbitral institutions provide any guidance or assistance in determining how issues of legal professional privilege should be handled in an international arbitration.
For many years, documents and information produced in and for the purposes of arbitral proceedings were regarded as confidential. As such they could not be disclosed or used for purposes other than the arbitration unless ordered by a court in very limited circumstances. During the past 10 years, however, this protection has been significantly eroded.
Parties to arbitration proceedings have a general right to natural justice. This principle is entrenched in the uniform commercial arbitration legislation that exists in all states and territories. For example, the legislation gives the Supreme Court the power to set aside an arbitrator’s award if the arbitrator engaged in misconduct, which includes a breach of natural justice. The New South Wales Supreme Court recently considered whether an arbitrator’s award was tainted by misconduct. The arbitrator had decided a significant claim on a basis that had not been put by the parties.
If a contractor considers that it has been delayed and its claim for an extension of time is rejected, the contractor may then assert that it has no alternative but to accelerate the works to ensure that it meets the contract date for completion. Acceleration would be necessary, from the contractor’s viewpoint, to avoid exposure to claims for liquidated or general damages from the owner for late completion of the works. In some circumstances contractors have then purported to claim the additional costs incurred to accelerate the works. The Court of Appeal of Queensland recently considered such a claim and made some interesting observations about claims of this nature.
Traditionally, expert determination was a popular way of resolving disputes where the facts were agreed but a relevant expert opinion needed to be applied. For example, where parties agreed rent should be paid at market price but could not agree on what that price should be. Or, where the parties agreed that equipment had failed, but required an expert to determine the cause. The courts have upheld such clauses. However, over time, parties have purported to extend the application of expert determination processes to a wider range of disputes or potential disputes. There are now many instances where parties purport to refer any dispute of any kind to an expert, even though likely disputes may involve a mix of fact and law and technical matters. The courts in Western Australia have indicated real concern about the application of expert determination to disputes which do not in truth call for the application of any specific or relevant expertise.
Most construction contracts contain provisions which entitle the owner to claim a specified amount of damages from the contractor if delays to completion of the project occur. These pre-agreed damages are generally called liquidated damages. The purpose of agreeing a liquidated amount of damages is to avoid the owner having to prove its actual loss and damage in the event of delay. However, the courts will only enforce a liquidated damages clause where it is established that the amount of liquidated damages in the contract is a genuine pre-estimate of the owner's loss and damage and is not a penalty. The Supreme Court of Tasmania was recently asked to revisit the circumstances in which a liquidated damages provision may be regarded as a penalty. The case has been reported as being the longest and most expensive civil trial yet held in Tasmania.
It is clearly established that legal professional privilege can attach to communications between corporate or government solicitors and their respective employers. However, as a recent decision of the Supreme Court of the ACT demonstrates, claims for privilege will not always succeed, particularly if there are doubts about the independent nature of the relationship between lawyer and employer.
Mediation is now an entrenched feature of the dispute resolution landscape in Australia. Indeed, it is unusual for the courts, whether state or federal, not to require parties to mediate prior to proceeding to trial. Parties often assume that all communications made for the purpose of (or during) a mediation cannot subsequently be relied on in litigation. However, this is not actually the case as is demonstrated by a recent decision of the Supreme Court of New South Wales.
It seems that the courts are regularly being asked to expand the existing boundaries of liability in negligence for pure economic loss. As we reported in April 2004, the High Court in the Woolcock case found that subsequent purchasers of commercial premises were not owed a duty of care by consulting engineers who had designed foundations for a warehouse and office development in Townsville. However, more recently the Victorian Supreme Court was required to decide for the first time whether a private building surveyor could be liable in negligence to subsequent purchasers of residential premises.
In an important decision for civil contractors in Victoria, the Court of Appeal of the Supreme Court has recently considered whether contractors who perform preliminary infrastructure works, such as drainage and sewer reticulation for a proposed residential subdivision, are performing 'domestic building work' for the purpose of the Domestic Building Contracts Act 1995.
Things go wrong and accidents happen. These are facts of life and sometimes litigation results. When an incident occurs a corporation may consider it important to move quickly to have an expert prepare a report, before evidence disappears and memories fade.
Multi-tiered dispute resolution clauses, which ultimately provide for disputes to be referred to arbitration (or litigation), are now relatively common. But what happens if the early process steps before an international arbitration clause have not occurred and one party decides they don't want to be bound by the arbitration process and issues court proceedings instead? Does the International Arbitration Act entitle the other party to apply for a stay of the court proceedings?
For many years the courts have recognised the concept of an 'entire contract', where payment is effectively conditional on full performance of the relevant obligations. However, the entire contract concept is not well known and therefore presents a potential trap for the unwary.
It is not uncommon for information to be produced for a client but then circulated by the client to third parties. But what happens if third parties rely on the information and then later find the information was flawed? Is the author or the intermediary liable? Are they both liable? The Federal Court has recently considered such issues in the context of claims by a purchaser of land who had relied on erroneous reports, which had been produced for and then passed on by the vendor.
Participants in significant projects often enter multiple project documents with different parties. These separate contractual arrangements necessarily and by definition attract discrete commercial and other considerations. However, disputes under one contract can have implications for contractaul obligations, entitlements or expectations under other contracts. Where issues arise or risks evolve that have a knock-on effect, any incompatibility in the processes employed by the parties for dispute resolution can prove to be a major headache or source of opportunity for the parties involved.
Contracts for project work, whether mining, engineering or other infrastructure, generally incorporate progressive claim and payment processes. Financed arrangements also include embedded payment claim mechanisms. However, it is often unclear what information is required to accompany payment claims. Often it will be even less clear, if insufficient information is provided, what the consequences will be on payment obligations. A recent Court of Appeal decision indicates that inadequately supported claims may not constitute an effective payment claim at all.
It is increasingly common for commercial organisations to have multiple formal and informal relationships and lines of communication with contracting parties. As a result, several employees from an organisation may have dealings or lines of communication with more than one person from the other contracting party.
For almost 10 years it has been clear that a purchaser of residential premises may recover damages from a negligent builder. The fact that the purchaser never met, knew or engaged the builder is irrelevant. What has not been clear, until now, is whether a purchaser of commercial premises should have the same rights against the orginial builder or engineer. The High Court says they should not. Will an absence of a duty of care to purchasers of commercial premises lead to a lesser standard of care?
Parties can challenge arbitral awards in the courts on the basis of an alleged error or law or alleged misconduct of an arbitrator. However, the legislative requirements for appealing against an award have been strictly interpeted. As a result, it is becoming increasingly common for parties to make a two pronged attack on awards, alleging both errors of law and misconduct, but relying essentially on the same conduct in respect of both. Such a situation recently confronted the Supreme Court of Western Australia.
What constitutes 'domestic building work' for the purpose of the Domestic Building Contracts Act 1995 (Vic)? This issue has been the subject of much debate and uncertainty since the legislation was enacted and has recently been revisited by the Victorian Supreme Court. In an appeal from the Victorian Civil and Administrative Tribunal, the court was required to consider whether preliminary infrastructure works, such as drainage and sewer reticulation for a residential subdivision, were 'domestic building work' for the pupose of the Act.
An arbitrator's award may be set aside by the courts where it is established that the award is tainted by misconduct. The term 'misconduct' is broadly defined by the uniform Commercial Arbitration Acts to include corruption, fraud, partiality, bias and a breach of the rules of natural justice.
The viability of arbitration depends in large part on parties having confidence that an arbitrator's award will be final and binding. Arbitration in all States and Terriroties in Australia is governed by legislation, commonly referred to as the uniform Commercial Arbitration Acts. This legislative framework specifically limits the circumstances in which a dissatisfied party may appeal against an arbitrator's decision.
Victoria and many of the states and the Commonwealth intend introducing new legislation regarding the proportionate liability of parties to litigation. If the legislation is enacted as presently expected, sections 131 and 132 of the Building Act 1993 (Vic) will be repealed. These sections have been the subject of well publicised litigation in cases such as Robak Engineering and Wimmera-Mallee Rural Water Authority.
The New South Wales Supreme Court recently considered whether an owner of a building was entitled to recover the costs of rectifying defective work in a situation where the building had been sold, the rectification work had not been performed and the defects had little or no effect on the value of the building.
The effect of the amendments to the Subcontractors' Charges Act 1974 (Qld) were recently considered by the Court of Appeal of the Supreme Court of Queensland in the case of Abigroup Contractors Pty Ltd v Multiplex Constructions Pty Ltd.
In the last few years a number of states have enacted security of payment legislation which is intended to secure prompt recovery of progress payments under a construction contract. While the object of the legislation is laudable, it is open to debate whether cash flow in the construction industry has improved since the introduction of the legislation. It was recently argued before the Supreme Court of New South Wales, in the case of Musico v Davenport, that an adjudicator's decision under the security for payment legislation can be challenged by judicial review. The decision of the court casts further doubt on the effectiveness of the legislation.
Justice Mason of the New South Wales Supreme Court has recently considered the entitlement of a contractor to recover the cost of acceleration work outside the contract. It was accepted that the acceleration costs were not recoverable under the contract as a variation. However, the costs were alternatively claimed on a restitutionary basis outside the contract.
Putting an opponent at risk on costs, whether by a formal offer of compromise under the Rules or a Calderback offer, is a common feature of modern litigation. In an interlocutory judgment earlier this year, Justice Gillard of the Victorian Supreme Court highlighted the importance of offers, saying that 'no party to litigation should commence the hearing where the claim is for compensation without putting the other party at risk as to costs in respect of the outcome of the litigation'.
At the end of 2002, the Victorian Civil and Administrative Tribunal (VCAT) handed down a decision that seemed to greatly restrict the power of parties to arbitrate disputes under domestic building contracts or to engage an expert to determine such disputes. On appeal, the Victorian Supreme Court has adopted an interpretation of the Domestic Building Contracts Act 1995 which supports the autonomy of contracting parties to deal with disputes outside VCAT, but only in certain circumstances.
In a recent interlocutory judgment Justice Lindgren of the Federal Court has provided a timely summary of the key legal professional privilege principles which apply when an expert witness is retained to produce a report for use in litigation.
Arbitration clauses are relatively common but there are many circumstances in which parties later decide, for various reasons, that they don't wish to be bound to the arbitration clauses and the issues associated with obtaining a stay under section 53 of the Commerical Arbitration Act. More importantly, the decision shows how the way in which a party positions itself and then argues that position can have a real impact on the final outcome.
Arbitration is still seen by some parties as a viable alternative to litigation. However arbitral tribunals can only be effective if their decisions are final and binding. In overturning a recent tribunal decision, the Victorian Supreme Court gave a restrictive interpretation to section 38 of the Commercial Arbitration Act. The judge stressed the need for tribunal decisions to carry both certainty and legitimacy. As a result, appeals from arbitral tribunals will only be heard in limited circumstances.
The Supreme Court of New South Wales has considered the application of the Code of Conduct for expert witnesses contained in the Supreme Court Rules. The court has demonstrated a willingness to apply the Code in a flexible manner and to prefer substance over form.
The Full Court of the South Australian Supreme Court has confirmed that a party may seek leave to appeal to the full court from a trial judge's decision in respect of an application for leave to appeal an arbitral award.
The meaning of contractual terms and the extent to which extrinsic evidence may be relied on to interpret them is frequently an issue in contractual disputes. In two recent decisions, the Supreme Court of New South Wales and the Federal Court have usefully restated and confirmed the law in this important area.
A recent interlocutory application in the New South Wales Supreme Court demonstrates how careful parties must be in order to protect their legal professional privilege during the course of proceedings.
The Supreme Court of Western Australia has provided further clarification in relation to the obligations of governments that arise during the course of a tendering process.
Justice Nicholson of the Federal Court has provided important comments on the operation of the practice direction entitled 'Guidelines for Expert Witnesses in Proceedings' (guidelines). In particular, the court addresses for the first time, the interaction between legal professional privilege and the guidelines.
The New South Wales Court of Appeal has provided further clarification in relation to the operation of the AS 2124-1992 progress claim and payment provisions.
The South Australian Supreme Court has recently commented on the relationship between sections 38 and 43 of the Commercial Arbitration Action 1986 (SA) and the circumstances in which an award may be remitted back to an arbitrator.
The Victorian Supreme Court has recently taken a fresh look at the circumstances in which a party may obtain an injunction to restrain unconditional security being called upon.
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2007
Look out — dispute ‘resolution’ can mean dispute ‘creation’
8 November 2007Infrastructure project participants are no strangers to disputation. The increased sophistication and complexity of contract documentation and project demands have done little to stem the scope for problems arising on these projects. However, parties still regularly have little or no regard for the contract terms that govern the resolution of a dispute. Or parties agree to processes that seem superficially expedient, only to pay the price when they find themselves bound to a process that is fundamentally unsuitable and puts them at a serious disadvantage. A recent New South Wales Supreme Court decision regarding issues arising out of the new transport interchange at Chatswood underlines the risks for parties. The case also provides another example of dispute resolution clauses embroiling the parties in significant time and cost, as they grapple with process disputes that have nothing at all to do with the real underlying issues.
When does an expert determination become an arbitration?
8 November 2007
Expert determination has experienced a wave of popularity, although the wave is now subsiding. Proponents of expert determination point to the promise of a quick, relatively informal and confidential process. However, this promise can prove illusory. More and more we are seeing expert determination processes becoming bogged down by disputes about procedure which end up before the courts. This is highlighted by a recent decision of the Queensland Supreme Court, which considered whether parties, by agreeing to allow the cross-examination of witnesses, had turned their expert process into an arbitration.
Careful what you say!
28 March 2007
Claims of misleading and deceptive conduct in breach of the Trade Practices Act 1974 (Cth) (TPA) are relatively common. However, despite the prevalence of such claims, there are still difficult issues in terms of causation, the assessment of damages and the circumstances in which parties can unwittingly fall foul of the law in this area. The best intentions provide no defence. Parties can find themselves liable even where a known risk has been specifically contemplated and dealt with by agreement in their contract. The New South Wales Court of Appeal (court) recently considered some of the key issues of contention surrounding negative representations. The approach taken by the court heightens the onus on principals seeking to effectively allocate risks to contractors in terms of tender processes and pre-contract due diligence. Equally, the decision seems likely to encourage contractors to consider the scope for making such claims where project costs blow out.
Reminder — Changes to the building industry security of payment regime in Victoria about to take effect
28 March 2007
The primary legislative amendments introduced by the Building and Construction Industry Security of Payment (Amendment) Act 2006 (Vic) (Act) will apply to construction contracts entered into after 30 March 2007.
It was originally expected that the amendments would substantially align the Victorian Act with the New South Wales legislation. However, late amendments introduced a number of new concepts that do not exist in other jurisdictions. As a result, the impact of the changes is less predictable than may otherwise have been the case. On the one hand, despite the name of the primary Act, the changes remove the ability for security to be provided, making the scheme more attractive for claimants. On the other hand, there are new limits on the types of claims that fall within the regime, which would seem to make the legislation less attractive in Victoria for claimants.
2006
Flexibility and expert determination — how far can an expert go?
25 October 2006The use of expert determination as a process to resolve disputes is becoming more prevalent. One of the attractions of expert determination is the procedural flexibility it offers. Parties can agree the procedural steps for an expert process between themselves or with the expert. Alternatively, the process can be left to the expert to determine. However, what happens if a process is agreed but the expert does not strictly adhere to it? Can a party avoid the consequences of a determination in such circumstances? These issues were recently considered by the Victorian Supreme Court.
Security of payment — good faith and constitutional invalidity
25 October 2006Security of payment legislation has been introduced in most jurisdictions. The legislation is modelled on United Kingdom legislation but provides an even shorter time for an adjudication to occur. In some cases the tight timeframes can be absurdly short and encourage ambush tactics. The ability to provide security rather than pay an adjudicated amount is now also disappearing as a result of legislative amendments in Victoria and New South Wales. These and other practical and legal difficulties and risks have prompted a flurry of legal cases. The New South Wales Court of Appeal has recently considered whether there are constitutional limits on the way the legislation operates and good faith requirements for payment claims.
Termination of contracts — an exercise in good faith?
28 July 2006There is ongoing controversy about when an obligation of good faith will be implied into a contract—and what it really means. Such obligations have been criticised as vague and uncertain. And where an obligation of good faith is implied, it can be difficult to determine whether it has been breached. The Federal Court of Australia recently considered whether the termination of a contract was subject to an obligation of good faith and, if so, whether the act of termination was in breach of that obligation. The decision illustrates the willingness of a court to look behind the reasons given for termination. It also provides a warning to parties about the care that should be taken in exercising rights of termination.
Security of payment — how easy is it to set aside an adjudicator's determination?
17 May 2006Security of payment legislation has been introduced in most states. The legislation is intended to provide contractors with prompt recovery of progress payments due under construction contracts. The legislation sets down strict, short timeframes for the adjudication of payment claims and limits the grounds on which an adjudicator’s determination may be challenged. The courts have acknowledged that this places adjudicators in a ‘pressure-cooker’ environment. The adjudicator’s task is made even more difficult where one of the parties fails to comply with the requirements of the Act. For example, by failing to submit a detailed payment schedule. The New South Wales Supreme Court recently considered the minimum requirements for a valid adjudication determination under the New South Wales security of payment legislation.
Liability for pure economic loss — expansion continues?
17 May 2006The courts are regularly being asked to expand the existing boundaries of liability in negligence for pure economic loss. The High Court in Bryan v Maloney found that a builder owed a duty of care to subsequent purchasers of residential property. However, in the following decision of Woolcock, the High Court did not impose a duty of care on engineers to subsequent purchasers of commercial property. Most recently the Victorian Supreme Court of Appeal was required to decide whether a private building surveyor could be liable in negligence to subsequent purchasers of residential premises.
Liquidated damages — Governments suffer damages too
02 March 2006In a previous article we discussed a decision of the Supreme Court of Tasmania in which the state of Tasmania was precluded from recovering liquidated damages from a contractor for delay in the construction of a public highway. Liquidated damages were unenforceable because the amount was not a genuine pre-estimate of the state’s loss and damage, and was a penalty. The decision has been appealed, providing the Full Court with an opportunity to consider the circumstances in which a government entity can levy liquidated damages against a contractor for late completion of a public utility.
No profit in quantum meruit claims?
02 March 2006The termination of a building contract usually leaves some sorting out to be done. How will the remaining work be completed? Will re-work be required? How will warranties apply? There is also the question of what amount if any is payable to the original contractor. Where an owner’s termination is wrongful and constitutes a repudiation, the contractor will generally have the option of either suing for damages for breach of contract or claiming payment on a quantum meruit basis for the work carried out. A party claiming a quantum meruit must establish the value of their work but calculations can be complicated, such as where an opposing party claims set-offs for delay costs, rectification works or liquidated damages. The Victorian Supreme Court has recently provided some useful guidance on the calculation of damages for quantum meruit claims.
Does a progress certificate mean there will be payment?
23 January 2006Contractors regularly say that prompt payment is necessary for cash flow to perform the building works. Most commercial building contracts include a regime for contractors to issue progress claims, with a superintendent or administrator issuing a payment certificate to certify the amount payable to the contractor. The general expectation is that the certified amount will then be required to be paid to the contractor. However, the owner or principal may seek to withhold payment or wish to set-off amounts that it claims are owing. (Whether this is legitimate and effective can be a source of heated debate and confusion.) The Supreme Court of Victoria recently considered these issues in the context of an application for summary judgment.
Walking the tightrope of privilege
23 January 2006At the core of a client’s right to legal professional privilege is maintaining the confidentiality of communications between a client and its lawyer. The courts have repeatedly held that parties who choose to refer publicly to legal advice they have received may waive all privilege, even though they had no intention to do so. The Supreme Court of Victoria has again recently confirmed that privilege can be impliedly waived where a party acts inconsistently with the maintenance of confidentiality over its legal advice. In fact the disclosure of legal opinion as to the likely outcome of litigation may have the effect of waiving privilege over all matters and legal analysis supporting that opinion.
WAPC approval for long-term leases in Western Australia — red tape to be cut
19 January 2006The Planning and Development Act 2005 (WA) (Planning Act) received royal assent on 12 December 2005 and will commence on a date to be proclaimed. Current indications are that the commencement date will be some time in March/April 2006.
The Planning Act consolidates and amends the existing planning legislation in Western Australia. Among other things, it will reduce the situations in which the approval of the Western Australian Planning Commission is needed for long-term leases and licences of land, where the land comprises part of a lot.
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2005
Defective work — what's the damage?
02 November 2005When assessing damages arising from defective construction works, the most common method is to look at either the cost of rectification or the diminution in value of the property as a consequence of the defects. However, it is not always clear which method of assessing damages should apply. For instance, what if the property has been sold and the party seeking to recover the damages did not, and will not, perform the rectification works? These issues were recently addressed by the Supreme Court of New South Wales when considering a challenge to a referee’s report.
Privilege and expert reports
02 November 2005In a previous article we discussed a decision of the Supreme Court of New South Wales which considered whether an expert report commissioned by an in-house solicitor attracted legal professional privilege. In that case the in-house solicitor considered litigation to be ‘highly likely’. However, the court held that the report was not privileged. This decision has since been appealed, providing the Court of Appeal with an opportunity to consider in what circumstances an expert report commissioned by an in-house solicitor will be privileged.
Disclosure of legal advice—beware of waiving privilege
14 June 2005
When disputes arise, parties may feel inclined to disclose legal advice in order to add credibility to a demand or threat to commence legal proceedings. However, when a party refers to legal advice in communications with another party, there is a very fine line between maintaining and waiving legal professional privilege in the advice. This is important, because an unintended waiver of privilege can have a significant impact on the conduct of litigation. These issues were recently considered by the Federal Court, when it was asked to consider whether a party had waived privilege in legal advice by referring to the advice in correspondence and also the press.
Expert reports—not always privileged
14 June 2005The role of experts in legal proceedings arising from complex construction and engineering projects is well entrenched and accepted by the courts. Ordinarily, a report prepared by an expert engaged after litigation is commenced will be privileged, on the basis that it was prepared for the dominant purpose of litigation. However, the situation can be more complex when problems arise during the course of a project and an expert is engaged, before proceedings are commenced, to investigate and report on why the problems have occurred. In such circumstances, it may be less clear that an expert’s report is privileged, as demonstrated by a recent decision of the Queen’s Bench division of the Technology and Construction Court of the United Kingdom.
In-house counsel, legal professional privilege and transnational arbitration
1 June 2005Surprisingly, none of the rules of the major transnational arbitral institutions provide any guidance or assistance in determining how issues of legal professional privilege should be handled in an international arbitration.
Confidentiality in arbitral proceedings
23 May 2005For many years, documents and information produced in and for the purposes of arbitral proceedings were regarded as confidential. As such they could not be disclosed or used for purposes other than the arbitration unless ordered by a court in very limited circumstances. During the past 10 years, however, this protection has been significantly eroded.
Natural justice in arbitration — parties have a right not to be caught by surprise
07 April 2005Parties to arbitration proceedings have a general right to natural justice. This principle is entrenched in the uniform commercial arbitration legislation that exists in all states and territories. For example, the legislation gives the Supreme Court the power to set aside an arbitrator’s award if the arbitrator engaged in misconduct, which includes a breach of natural justice. The New South Wales Supreme Court recently considered whether an arbitrator’s award was tainted by misconduct. The arbitrator had decided a significant claim on a basis that had not been put by the parties.
Acceleration — Who should bear the risk?
07 April 2005If a contractor considers that it has been delayed and its claim for an extension of time is rejected, the contractor may then assert that it has no alternative but to accelerate the works to ensure that it meets the contract date for completion. Acceleration would be necessary, from the contractor’s viewpoint, to avoid exposure to claims for liquidated or general damages from the owner for late completion of the works. In some circumstances contractors have then purported to claim the additional costs incurred to accelerate the works. The Court of Appeal of Queensland recently considered such a claim and made some interesting observations about claims of this nature.
Expert determination — Is it enforceable?
2 March 2005Traditionally, expert determination was a popular way of resolving disputes where the facts were agreed but a relevant expert opinion needed to be applied. For example, where parties agreed rent should be paid at market price but could not agree on what that price should be. Or, where the parties agreed that equipment had failed, but required an expert to determine the cause. The courts have upheld such clauses. However, over time, parties have purported to extend the application of expert determination processes to a wider range of disputes or potential disputes. There are now many instances where parties purport to refer any dispute of any kind to an expert, even though likely disputes may involve a mix of fact and law and technical matters. The courts in Western Australia have indicated real concern about the application of expert determination to disputes which do not in truth call for the application of any specific or relevant expertise.
Challenging liquidated damages clauses
2 March 2005Most construction contracts contain provisions which entitle the owner to claim a specified amount of damages from the contractor if delays to completion of the project occur. These pre-agreed damages are generally called liquidated damages. The purpose of agreeing a liquidated amount of damages is to avoid the owner having to prove its actual loss and damage in the event of delay. However, the courts will only enforce a liquidated damages clause where it is established that the amount of liquidated damages in the contract is a genuine pre-estimate of the owner's loss and damage and is not a penalty. The Supreme Court of Tasmania was recently asked to revisit the circumstances in which a liquidated damages provision may be regarded as a penalty. The case has been reported as being the longest and most expensive civil trial yet held in Tasmania.
2004
Independence and privilege claims
22 October 2004It is clearly established that legal professional privilege can attach to communications between corporate or government solicitors and their respective employers. However, as a recent decision of the Supreme Court of the ACT demonstrates, claims for privilege will not always succeed, particularly if there are doubts about the independent nature of the relationship between lawyer and employer.
Information disclosed during mediation — can it be used in litigation?
22 October 2004Mediation is now an entrenched feature of the dispute resolution landscape in Australia. Indeed, it is unusual for the courts, whether state or federal, not to require parties to mediate prior to proceeding to trial. Parties often assume that all communications made for the purpose of (or during) a mediation cannot subsequently be relied on in litigation. However, this is not actually the case as is demonstrated by a recent decision of the Supreme Court of New South Wales.
The latest on liability for pure economic loss in negligence
22 September 2004It seems that the courts are regularly being asked to expand the existing boundaries of liability in negligence for pure economic loss. As we reported in April 2004, the High Court in the Woolcock case found that subsequent purchasers of commercial premises were not owed a duty of care by consulting engineers who had designed foundations for a warehouse and office development in Townsville. However, more recently the Victorian Supreme Court was required to decide for the first time whether a private building surveyor could be liable in negligence to subsequent purchasers of residential premises.
Important clarification on 'domestic building work'
22 September 2004In an important decision for civil contractors in Victoria, the Court of Appeal of the Supreme Court has recently considered whether contractors who perform preliminary infrastructure works, such as drainage and sewer reticulation for a proposed residential subdivision, are performing 'domestic building work' for the purpose of the Domestic Building Contracts Act 1995.
Privilege takes flight
24 August 2004Things go wrong and accidents happen. These are facts of life and sometimes litigation results. When an incident occurs a corporation may consider it important to move quickly to have an expert prepare a report, before evidence disappears and memories fade.
International arbitration — the latest on stay applications
24 August 2004Multi-tiered dispute resolution clauses, which ultimately provide for disputes to be referred to arbitration (or litigation), are now relatively common. But what happens if the early process steps before an international arbitration clause have not occurred and one party decides they don't want to be bound by the arbitration process and issues court proceedings instead? Does the International Arbitration Act entitle the other party to apply for a stay of the court proceedings?
Entire contracts — no payment for only part performance
15 July 2004For many years the courts have recognised the concept of an 'entire contract', where payment is effectively conditional on full performance of the relevant obligations. However, the entire contract concept is not well known and therefore presents a potential trap for the unwary.
Misleading and deceptive conduct — don't kill the messenger!
15 June 2004It is not uncommon for information to be produced for a client but then circulated by the client to third parties. But what happens if third parties rely on the information and then later find the information was flawed? Is the author or the intermediary liable? Are they both liable? The Federal Court has recently considered such issues in the context of claims by a purchaser of land who had relied on erroneous reports, which had been produced for and then passed on by the vendor.
Dispute resolution regimes — expect the unexpected
25 May 2004Participants in significant projects often enter multiple project documents with different parties. These separate contractual arrangements necessarily and by definition attract discrete commercial and other considerations. However, disputes under one contract can have implications for contractaul obligations, entitlements or expectations under other contracts. Where issues arise or risks evolve that have a knock-on effect, any incompatibility in the processes employed by the parties for dispute resolution can prove to be a major headache or source of opportunity for the parties involved.
Sometimes a claim for payment is not a payment claim
4 May 2004Contracts for project work, whether mining, engineering or other infrastructure, generally incorporate progressive claim and payment processes. Financed arrangements also include embedded payment claim mechanisms. However, it is often unclear what information is required to accompany payment claims. Often it will be even less clear, if insufficient information is provided, what the consequences will be on payment obligations. A recent Court of Appeal decision indicates that inadequately supported claims may not constitute an effective payment claim at all.
Unauthorised exposure — why risk it?
20 April 2004It is increasingly common for commercial organisations to have multiple formal and informal relationships and lines of communication with contracting parties. As a result, several employees from an organisation may have dealings or lines of communication with more than one person from the other contracting party.
No duty — less care?
6 April 2004For almost 10 years it has been clear that a purchaser of residential premises may recover damages from a negligent builder. The fact that the purchaser never met, knew or engaged the builder is irrelevant. What has not been clear, until now, is whether a purchaser of commercial premises should have the same rights against the orginial builder or engineer. The High Court says they should not. Will an absence of a duty of care to purchasers of commercial premises lead to a lesser standard of care?
Challenging arbitrators' awards — errors of law and misconduct
17 March 2004Parties can challenge arbitral awards in the courts on the basis of an alleged error or law or alleged misconduct of an arbitrator. However, the legislative requirements for appealing against an award have been strictly interpeted. As a result, it is becoming increasingly common for parties to make a two pronged attack on awards, alleging both errors of law and misconduct, but relying essentially on the same conduct in respect of both. Such a situation recently confronted the Supreme Court of Western Australia.
Domestic building work: Does the court's interpretation reflect parliament's intention?
4 March 2004What constitutes 'domestic building work' for the purpose of the Domestic Building Contracts Act 1995 (Vic)? This issue has been the subject of much debate and uncertainty since the legislation was enacted and has recently been revisited by the Victorian Supreme Court. In an appeal from the Victorian Civil and Administrative Tribunal, the court was required to consider whether preliminary infrastructure works, such as drainage and sewer reticulation for a residential subdivision, were 'domestic building work' for the pupose of the Act.
Arbitral awards lacking reasons — misconduct?
19 February 2004An arbitrator's award may be set aside by the courts where it is established that the award is tainted by misconduct. The term 'misconduct' is broadly defined by the uniform Commercial Arbitration Acts to include corruption, fraud, partiality, bias and a breach of the rules of natural justice.
Arbitrators' awards and errors
15 February 2004The viability of arbitration depends in large part on parties having confidence that an arbitrator's award will be final and binding. Arbitration in all States and Terriroties in Australia is governed by legislation, commonly referred to as the uniform Commercial Arbitration Acts. This legislative framework specifically limits the circumstances in which a dissatisfied party may appeal against an arbitrator's decision.
Relief for defendants — proportionate liability reform
14 January 2004Victoria and many of the states and the Commonwealth intend introducing new legislation regarding the proportionate liability of parties to litigation. If the legislation is enacted as presently expected, sections 131 and 132 of the Building Act 1993 (Vic) will be repealed. These sections have been the subject of well publicised litigation in cases such as Robak Engineering and Wimmera-Mallee Rural Water Authority.
2003
Damages for defective works
15 December 2003The New South Wales Supreme Court recently considered whether an owner of a building was entitled to recover the costs of rectifying defective work in a situation where the building had been sold, the rectification work had not been performed and the defects had little or no effect on the value of the building.
Subcontractor charges: The latest from Queensland
1 December 2003The effect of the amendments to the Subcontractors' Charges Act 1974 (Qld) were recently considered by the Court of Appeal of the Supreme Court of Queensland in the case of Abigroup Contractors Pty Ltd v Multiplex Constructions Pty Ltd.
Security of payment: How secure is it?
15 November 2003In the last few years a number of states have enacted security of payment legislation which is intended to secure prompt recovery of progress payments under a construction contract. While the object of the legislation is laudable, it is open to debate whether cash flow in the construction industry has improved since the introduction of the legislation. It was recently argued before the Supreme Court of New South Wales, in the case of Musico v Davenport, that an adjudicator's decision under the security for payment legislation can be challenged by judicial review. The decision of the court casts further doubt on the effectiveness of the legislation.
Acceleration: Concrete Constructions Group v Litevale Pty Ltd (No 2)
1 November 2003Justice Mason of the New South Wales Supreme Court has recently considered the entitlement of a contractor to recover the cost of acceleration work outside the contract. It was accepted that the acceleration costs were not recoverable under the contract as a variation. However, the costs were alternatively claimed on a restitutionary basis outside the contract.
Jones v Bradley (No 2)
15 October 2003Putting an opponent at risk on costs, whether by a formal offer of compromise under the Rules or a Calderback offer, is a common feature of modern litigation. In an interlocutory judgment earlier this year, Justice Gillard of the Victorian Supreme Court highlighted the importance of offers, saying that 'no party to litigation should commence the hearing where the claim is for compensation without putting the other party at risk as to costs in respect of the outcome of the litigation'.
Age Old Builders Pty Ltd v Swintons Pty Ltd
16 September 2003At the end of 2002, the Victorian Civil and Administrative Tribunal (VCAT) handed down a decision that seemed to greatly restrict the power of parties to arbitrate disputes under domestic building contracts or to engage an expert to determine such disputes. On appeal, the Victorian Supreme Court has adopted an interpretation of the Domestic Building Contracts Act 1995 which supports the autonomy of contracting parties to deal with disputes outside VCAT, but only in certain circumstances.
Australian Securities & Investments Commission v Southcorp Limited
1 September 2003In a recent interlocutory judgment Justice Lindgren of the Federal Court has provided a timely summary of the key legal professional privilege principles which apply when an expert witness is retained to produce a report for use in litigation.
Equuscorp Pty Ltd v Wilmoth Field Warne
15 August 2003Arbitration clauses are relatively common but there are many circumstances in which parties later decide, for various reasons, that they don't wish to be bound to the arbitration clauses and the issues associated with obtaining a stay under section 53 of the Commerical Arbitration Act. More importantly, the decision shows how the way in which a party positions itself and then argues that position can have a real impact on the final outcome.
Anaconda Operations Pty Ltd v Fluor Australia Pty Ltd
7 August 2003Arbitration is still seen by some parties as a viable alternative to litigation. However arbitral tribunals can only be effective if their decisions are final and binding. In overturning a recent tribunal decision, the Victorian Supreme Court gave a restrictive interpretation to section 38 of the Commercial Arbitration Act. The judge stressed the need for tribunal decisions to carry both certainty and legitimacy. As a result, appeals from arbitral tribunals will only be heard in limited circumstances.
Langbourne v State Rail Authority
1 August 2003The Supreme Court of New South Wales has considered the application of the Code of Conduct for expert witnesses contained in the Supreme Court Rules. The court has demonstrated a willingness to apply the Code in a flexible manner and to prefer substance over form.
Kinnane v Zee Homes Pty Ltd
15 July 2003The Full Court of the South Australian Supreme Court has confirmed that a party may seek leave to appeal to the full court from a trial judge's decision in respect of an application for leave to appeal an arbitral award.
LMI Australasia Pty Ltd v Baulderstone Hornibrook Pty Ltd / BP Australia Pty Ltd v Nyran Pty Ltd
2 July 2003The meaning of contractual terms and the extent to which extrinsic evidence may be relied on to interpret them is frequently an issue in contractual disputes. In two recent decisions, the Supreme Court of New South Wales and the Federal Court have usefully restated and confirmed the law in this important area.
Global Medical Imaging Management Limited (in liq) v Australian Mezzanine Investments Pty Ltd
13 June 2003A recent interlocutory application in the New South Wales Supreme Court demonstrates how careful parties must be in order to protect their legal professional privilege during the course of proceedings.
Lovegrove Turf Services Pty Ltd v Minister for Education
20 May 2003The Supreme Court of Western Australia has provided further clarification in relation to the obligations of governments that arise during the course of a tendering process.
Australian Competition & Consumer Commission v Lux Pty Ltd
1 April 2003Justice Nicholson of the Federal Court has provided important comments on the operation of the practice direction entitled 'Guidelines for Expert Witnesses in Proceedings' (guidelines). In particular, the court addresses for the first time, the interaction between legal professional privilege and the guidelines.
Brewarrina Shire Council v Beckhaus Civil Pty Ltd (February 2003)
3 March 2003The New South Wales Court of Appeal has provided further clarification in relation to the operation of the AS 2124-1992 progress claim and payment provisions.
Minister for Industrial Affairs v Civil Tech Pty Ltd (February 2003)
26 February 2003The South Australian Supreme Court has recently commented on the relationship between sections 38 and 43 of the Commercial Arbitration Action 1986 (SA) and the circumstances in which an award may be remitted back to an arbitrator.
Rejan Constructions Pty Ltd v Manningham Medical Centre Pty Ltd (October 2002)
9 January 2003The Victorian Supreme Court has recently taken a fresh look at the circumstances in which a party may obtain an injunction to restrain unconditional security being called upon.