Contractual interpretation: What did we even agree upon?

It is the question as old as human trade and commerce: when we made that agreement, what did we mean?

This is a deceptively simple question. It may appear to parties with amicable relations that the meaning of a document is clear, but when a dispute opens up, what tends to happen is that each party will stretch every definition to suit its purposes.
As will become clear, courts are still grappling with difficult questions about how an agreement should be interpreted, and what evidence put forward by the parties can be considered to discern its meaning.
We consider some basic principles to do with contractual interpretation, and look a recent example of the circumstances in which courts will look at negotiations between the parties and the effect this has on the meaning of the agreement.

Basic principles

Where there is a written contract between two parties that are legally represented and commercially experienced, the law will likely consider this contract to be the complete statement of their legal rights and obligations. In some cases, a contract may be both oral and in writing, but proving this is onerous.
As a result, where there is a dispute, the contract is the first thing that the lawyers and judges will consider. The contract is considered to reflect how the parties intended to allocate risk.
When looking at a contract, the court will assess and interpret the contract to give effect to what is called the objective intention of the parties. This is not what was actually in the minds of the parties. Rather, it is what a reasonable person, a third-party bystander, would understand the words or actions of the parties to show about the parties’ intention.
In the commercial context, this means the court will look at the words used in drafting the contract and determine what they mean to a reasonable businessperson informed about the circumstances of the case.

But wait there’s more

What is said above does not mean that the actions of the parties are irrelevant. Far from it.
In fact, it is sometimes necessary for courts to consider the surrounding circumstances of an agreement, so that they can determine what the intentions of the parties are with respect to what exactly constitutes the agreement and what its terms mean.
This might seem contrary to the court’s tradition of only looking at the contract. However, it will generally only be done when there is ambiguity in the words of the contract.
For example, in Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165, the High Court stated that it is not what the parties think about their rights and obligations that govern contractual relations. Rather, it is the words and conduct of each party that would lead a reasonable person in the position of the other party to believe.
Ten years later, the High Court again commented on the use of evidence outside the contract in Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640. In this case, the High Court said that evidence of the parties’ actual (subjective) intentions is not relevant to construction. What is relevant is the evidence of surrounding circumstances known the parties.
External circumstances can be considered by the courts when interpreting contracts between disputing parties.

So how does this all work?

If courts are supposed to consider the contract as the full statement of the parties’ rights and obligations, but they are able to look at circumstances beyond the contract, how does a judge determine what is the agreement?
Firstly, the contract is still the primary document that is interpreted. The evidence considered by a court of what has been said or what has happened outside of the contract cannot be used to give the contract a meaning that is contrary to what the contract clearly states.
Put another way, evidence outside of the contract cannot be used to add to, vary or contradict the language of the written contract. This is the case no matter how unjust or inconvenient the written terms are. This makes sense, as effective relations depend on the meaning of an agreement being fixed and clear.
Permitting outside factors to change the meaning of a contract introduces significant uncertainty. As any businessperson will know, where there is uncertainty there is conflict. A party could for example attempt to impose its own view on the meaning of the document. External conduct is used to make the meaning of the contract clearer, not to change it. In practice, however, the line between these two can be very difficult to draw.
Secondly, matters outside of the contract become relevant only where there is ambiguity or more than one meaning in what is inside the contract. Words may have different meanings in different contexts, so the context is important in choosing the right interpretation.
To this end, courts may consider the commercial purpose of the contract, the market and industry in which it arose, and the factual background of the agreement. All of this can shed light onto what the parties “must have” intended when they drafted the contract.
It is important to note that courts will only consider outside circumstances that are known to both parties.
However, courts will only consider these factors if the meaning of the written document is not clear. Negotiations that occurred prior to the signing of the agreement are also rarely considered, for the simple reason that they do not often show what was agreed.

For example …

Cherry v Steele-Park [2017] NSWCA 295 was a case that turned on the meaning of a deed of guarantee. Specifically, whether this deed of guarantee required the guarantor to pay the damages that resulted from the failure of their company to complete a contract for sale of land. The guarantor argued that the deed only covered the amounts promised for extending the contract’s completion date. The difference was around $145,750.
The case appeared to challenge the principles talked about above.
The argument was around whether the meaning of term had to be ambiguous before a court would admit evidence outside of the contract to explain its meaning. What happens when a term that appears to have a plain meaning “becomes” ambiguous only when outside material is introduced?
The answer is that as long as the evidence is relevant as information about the genesis or purpose of the transaction, it can bear on the contractual language and can be considered. Then the court will make a conclusion about whether the written terms are clear or ambiguous.
In Cherry v Steele-Park, Cherry wanted to include in evidence emails exchanged between the parties, that represented negotiating positions that were communicated between the parties. (As a side note, it was important that both parties knew about these emails when entering the contract.)
The Court considered the emails. However, the case ultimately reinforces not challenges the conclusions talked about above. The interpretation of the clause given by the court ultimately did not bend to what was said in these emails.
Rather, the Court considered as primary the terms and the structure of the contract, including the definitions and the generality of their language. The interpretation put forward by Cherry was some but clearly not all of the guarantee.
The Court concluded that the emails did not defeat “the wide words in the Guarantee”. The emails showed that there may have been a commercial purpose to make a limited guarantee. However, this context could not overcome the content of the Guarantee. Or, as Leeming JA stated, “such context – even relatively powerful evidence of context such as the present – does not warrant doing the violence to the general language of the document executed by them that they require.”
It was in effect a warning, that regardless of how persuasive evidence of negotiations is, it will not limit or take away from what is stated in a contractual document.

Conclusion

Prevention is always better than the cure. In the early stages of a commercial agreement, a little expense given to ensuring a contract tabled between the parties truly expresses your intentions goes a long way to preventing protracted disputes.
Problems can arise even between parties with a great relationship, and as discussed, once a problem does arise courts will be very reluctant to look beyond the written document that was exchanged. What this written document says will be of paramount importance, so it is worth the extra attention.
If you or someone you know wants more information or needs help or advice, please contact us on +61 2 9248 3450 or email info@bradburylegal.com.au

The Parties’ Minds over Matter: terminated contract versus quantum meruit

The High Court of Australia has recently handed down a rare and significant judgment in the area of building and construction law.
A story that began with the construction of two townhouses in Victoria has led to the shaking of the foundations of the law around contract, repudiation and claiming a quantum meruit.
This decision affects the common situation in which a builder and a developer have a torn-up contract, and the builder is claiming payment for the work they started but were not able to finish.
We explore Mann v Paterson Constructions Pty Ltd [2019] HCA 32 below and provide an overview of the key takeaways from this ruling in relation to quantum meruit.
The High Court also considered some interpretation issues in relation to the Victorian Domestic Building Contract Act 1995. These are not considered here.

Quantum meruit

Before analysing the case, it is useful to outline what is a claim for quantum meruit.
A claim for quantum meruit, is a claim for a fair and reasonable sum for services rendered, where a developer requests and receives a benefit from a builder.
This is not a claim in contract, which is a claim by Party A to be given that which Party B promised or agreed to give.

Where a contract is still alive between the parties, a claim for quantum meruit is not permitted. Some of the situations in which a claim in quantum meruit may be brought include:
(a) a contract never existed between the parties;
(b) statute prevents a claim in contract, because for example the agreement was for residential building work but it was not in writing; or
(c) a contract was in existence but was void or unenforceable.

Case (c) above was the subject of Mann v Paterson Constructions. In this case, the contract was terminated, so it no longer applied between the parties.
An issue that has been plaguing courts for some time is the following: in a claim for quantum meruit, what if a “fair and reasonable sum” for services performed is greater than what the parties agreed to under the contract? Should the claim be limited to what was agreed to by the parties, even if that agreement was ripped up?
It was an inevitable prize fight between contract and quantum meruit, with a purse of several hundred thousand dollars at stake.

The facts

On 4 March 2014, Peter and Angela Mann (the Manns) entered into a Masters Builders Association domestic building contract (Contract) with Paterson Constructions Pty Ltd (Paterson). Under the Contract, Paterson was to build two double-storey townhouses in Blackburn, Victoria. The Manns were to pay Paterson the amount of $970,000 (incl. GST). During the performance of the Contract, the Manns requested 42 variations without giving the required written notice. Paterson performed these variations.
On 16 April 2015, a little over one year into the project, the relationship between the parties had deteriorated, primarily over claims that variations had been completed and had to be paid.
The Manns through their solicitors wrote to Paterson, stating that they considered the contract to have been repudiated by Paterson. Repudiation occurs where a party demonstrates that it is unwilling or unable to perform important parts of the contract. The Manns “accepted” this repudiation and said that they terminated the Contract.
Paterson denied that its conduct had been repudiatory. After some correspondence, Paterson claimed that the Manns’ purported termination was in fact repudiation by the Manns. Paterson said that as a result, it terminated the Contract.

The case history: from VCAT to the High Court
Paterson commenced proceedings in the Victorian Civil and Administrative Tribunal, seeking damages.
Senior Member Walker of VCAT found that the Manns had wrongfully repudiated the contract. Paterson was awarded damages on a quantum meruit. Once rectification of defects was considered, damages were $660,526.41.
The remarkable aspect of the ruling was that the damages awarded to Patterson for quantum meruit were much higher than the contract price that Paterson would have been entitled to had the Contract remained alive. Senior Member Walker was acutely aware of this, but considered the damages to be a fair and reasonable sum.
The Manns appealed first to the Supreme Court of Victoria, however Cavanough J dismissed the appeal. The Manns then appealed to the Court of Appeal.
The Manns argued that the decision-makers had made an error. They argued that the error was that the decision-makers had decided that where a contract is terminated, it is as though it never existed and, as a result, they did not have to consider the costs actually incurred by the builder carrying out the work or the discrepancy between the amount awarded and the contract price.
The Court of Appeal also dismissed this appeal, ruling that only the High Court could overturn a principle that was said to be well-established. Not to be swayed, the Manns embarked on this challenged and took their case to the High Court.

The High Court judgment

All seven judges allowed the appeal. After two unsuccessful appeals, the third and last appeal by the Manns was a success.
The seven judges accepted that the law as currently interpreted had to be corrected.
Three judges refused to allow a claim on a quantum meruit where a contract between the parties had been terminated.
The four other judges accepted that a claim for quantum meruit could be made in limited circumstances: where work was commenced but not completed at the time of termination. However, any claim for quantum meruit was limited by the contract price that was agreed to by the parties.
Where the contract required the principal to pay only once for the “entire” work and labour performed by the contractor, and the contract is terminated before completion, then the contractor will be able to claim for all of the work it completed on a quantum meruit. This is because at the time of termination, the contractor had not yet accrued the contractual “right” to be paid – it had not completed all of the work.
However, the situation was different for the case of the Manns. Under their Contract, the principal was required to pay separate sums upon completion of certain stages of the work and labour. Paterson had fully completed some of these stages, while there was at least one stage which remained incomplete at the time of termination.
The majority decided that for completed stages, these could only be claimed under the contract, and damages would be assessed by reference to the contract price. It was only the incomplete stage that could be claimed on a quantum meruit.
The other important finding by the majority was that the amount to be claimed on a quantum meruit should not in the ordinary case exceed a fair value calculated in accordance with the contract price. This judgment left open the possibility of exceptions, including for example where constant breaches by a principal resulted in a huge cost overrun by the builder.
The Court was at pains to point out that, where a contract is still alive between the parties, parties cannot claim on a quantum meruit for a reasonable sum for the services rendered. The parties made an agreement that is still enforceable. That is all that courts will enforce.
What the decision did not resolve was the common case where a contract provides for progress payments, which are made on account only and are not final entitlements. This issue might be before the superior courts before long.
Conclusion

In some very complicated and differing judgments, the High Court has given a lot of clarity to an issue that has clouded the minds of lawyers, tribunal members and judges alike.
Builders and developers should be aware that even if there is no contract, where work is requested by developer and completed by a contractor, there will be a good case for a claim for damages.
Where a contract existed between parties at some point, this will be a significant factor in calculating the amount of damages, even where it is terminated.
If you or someone you know wants more information or needs help or advice, please contact us on +61 2 9248 3450 or email info@bradburylegal.com.au

Expertly building evidence: Lessons learned from White Constructions

Case note: White Constructions Pty Ltd v PBS Holdings Pty Ltd [2019] NSWSC 1166

In White Constructions, Hammerschlag J considered the issue of delay damages. White Constructions was the property developer of a site in Kiama NSW. The development involved the development and subdivision of 100 lots and required design and installation of sewer infrastructure. These works required a s 73 Certificate issued by Sydney Water before subdivision could occur. White Constructions appointed the Defendants to assist with the design and approval works needed as part of the development and resulting subdivision. A substantial part of the judgment was devoted to the preparing and designing of the sewer designs and the approval of Sydney Water, including the different types of sewage systems, Sydney Water’s preference in relation to these systems, preparation of option reports and correspondence between the Superintendent, the Defendants and Sydney Water.

The discussions between Sydney Water, the Superintendent and the Defendants took considerable time. As a result, White Constructions alleged that the delay in coming to the approved sewage design caused White Constructions to be liable to their building contractor for delay damages. In arguing the substance of the dispute, the parties tendered complex expert evidence. As a result, the Court appointed an expert to assist in interpreting and assessing the expert evidence presented.

With the expert’s assistance, Hammerschlag J criticised the experts’ approach to determining the delays attributable to the sewage works. Both experts used methods derived from the United Kingdom Society of Construction Law, the Delay and Disruption Protocol (the Protocol) in analysing the delay. The Protocol identifies six different methods of delay analysis, but Hammerschlag J held that the inclusion of a delay analysis method in the Protocol does not necessarily mean it should be used. While the Protocol methods have been endorsed in other cases, the analysis of delay must pay close attention to the actual evidence of what was happening on the ground of the project. The delay analysis must show and prove that, on the balance of probabilities, the delay:
• played a role in delaying the project;
• how it delayed the project; and
• how much it delayed the project.

This approach is in line with the common law common-sense approach to causation which the High Court referred to in March v E&MH Stramare Pty Ltd (1991) 171 CLR 506.

A lot of value in White Constructions comes from Hammerschlag J’s analysis of what evidence is needed in cases where delay is alleged in construction matters. Firstly, the Court stated that close attention must be paid to the facts of the matter, rather than the opinion of experts. This evidence should not be general in nature, but specific in that it is able to precisely identify delays in the project. This evidence should be a contemporaneous record of the project. A classic example of this kind of evidence is a site diary which records the day to day of the project, as well as specific cause and effect of each delay.
• what works were undertaken/completed;
• the instructions received from the client;
• the delays/any complaints of delays and how they have affected other activities;
• which personnel were onsite; and
• any other relevant details

The Court found that it was important that the contemporaneous record identified which activities were adversely affected by the delays. For example, if the works of one contractor were delayed and, as a result, caused delay for another contractor, the site diary should record these details. Failing to record these details means that it is harder, if not near impossible, for parties to establish that there was in fact a causal link and adverse effect.

How does White Constructions impact a project?

White Constructions shows the importance of proper project documentation. Most importantly, the site diary, or similar contemporaneous document, should be the primary record of the specific of what is happening on site and how specific events affect different contractors. Proper record keeping, while it may be administratively burdensome, allows the Court to analyse and determine the proper entitlements of the parties if the project ever comes into dispute. While other evidence can be adduced in pursuit of proving delay, it runs the risk of being generalist in nature and not enough to prove the causal link of the delays.

The lessons learned in White Constructions may also have some application in respect of other delay related mechanisms under construction contracts. For example, a comprehensive site diary would also be useful in determining any claim for an EOT claim. However, it is important to note that these types of claims are largely determined by the contract and its processes for determining what is in fact an EOT. Nevertheless, contemporaneous records of what has happened and how this has affected the project is useful in establishing a claim by a party as to their entitlements.
Another important point that comes from White Constructions is ensuring experts are given the proper lay evidence to ensure that they can properly opine on the project. While it does not displace the role of lay evidence such as site diaries, it can assist in assisting the Court in considering and making appropriate decisions on what the parties are entitled to.

If you or someone you know wants more information or needs help or advice, please contact us on +61 2 9248 3450 or email info@bradburylegal.com.au.

What’s in a name?: The Supreme Court Reviews ambiguity in SoPA Payment Claims

Those who are familiar with the Building and Construction Industry Security of Payment Act 1999 (‘the Act’) will likely be aware that the provisions it contains are quite strict, and can leave parties out in the cold when they fail to comply with what are seemingly administrative oversights.

However, the overarching purpose of the Act is ultimately to keep money flowing through the construction system, aimed at ensuring those who perform building and construction works, or supply goods and services to construction projects are able to be paid.

The Supreme Court of New South Wales, in the recent decision of decision Modog Pty Ltd v ZS Constructions (Queenscliff) Pty Ltd [2019] NSWSC 1743 reminded parties of this fact when asked to turn its mind to issues of ambiguity in payment claims and whether a party could be allowed to have an adjudication determination quashed on the basis of technicalities.

The Facts

The facts of the case were reasonably clear and did not form a substantial component of the dispute between the parties. In September 2016, Modog Pty Ltd (‘Modog’) entered into a design and construct head contract with Wyndora 36 Pty Ltd (‘Wyndora’) for the development of senior living apartments at a property located along Wyndora Avenue in Freshwater. Modog then entered a sub-contract with ZS Constructions (Queenscliff) Pty Limited (ZS Queenscliff) for the demolition of the existing structure and the construction of the new seniors living complex, including apartments, basement parking and associated site works (‘the Sub-Contract’).

In March 2018, the Sub-contract was varied to engage ZS Queenscliff to provide Construction Management and procurement services, for which ZS Queenscliff would receive a project manager’s allowance, a contract administrator’s allowance and payments for subcontractors and suppliers to be made at the end of each month.

ZS Queenscliff was part of a wider group of entities, which also included ZS Constructions (Australia) Pty Ltd (‘ZS Australia’) and Zaarour Investments Pty Ltd had been engaged as the project manager for the project. Mr Christopher Zaarour was employed by ZS Queenscliff, was the director of ZS Constructions Pty Ltd and was the primary contact with Modog for the duration of the project.

The further sub-contracts on the project were administered by ZS Queenscliff, however invoices from sub-contractors had historically been issued to a mixture of Modog, Wyndora and ZS Australia, as opposed to ZS Queenscliff. During the course of the project, ZS Queenscliff and Modog adopted a progress payments process in which Mr Zaarour would, on behalf of ZS Queenscliff, prepare and email a payment summary sheet listing all amounts due for procurement and management services, as well as materials acquired, and work completed by trade contractors.

On 29 August 2019, Modog issued a Show Cause Notice to ZS Queenscliff and terminated the Sub-contract on 13 September 2019.

The Payment Claim and Adjudication

On 11 September 2019, ZS Queenscliff served a payment claim on Modog which was comprised of seven emails, from Mr Zaarour using an email signature from Zaarour Sleiman and containing a reference to ZS Australia in fine print at the bottom of the email.

The emails attached supporting invoices from suppliers, and followed the process adopted in earlier progress payments, where sub-contractors and suppliers had addressed their invoices to a mixture of the entities involved with the project, and not to ZS Queenscliff, who were issuing the payment claim.

The payment claim served on Modog was, as highlighted by the Court, unclear in the following respects:

  • It did not specifically assert that it was a progress payment claim under the Act;
  • It did not specify the reference date or refer to the clause within the contract upon which the progress payment was based;
  • It failed to ask Modog to pay ZS Queenscliff;
  • It did not include a total for the sum claimed, only determinable by a thorough review of the claims

Modog, in turn responded to the payment claim with payment schedules which certified the amount payable in respect of the Claim was nil.

The matter proceeded to an adjudication, where, on 23 October 2019, the adjudicator found in favour of ZS Queenscliff in the sum of $89,111.89 (GST incl.).

Modog challenged the decision of the adjudicator before the Supreme Court of Sydney, seeking orders that the Adjudication Determination of be deemed void, that the determination be quashed, and ancillary relief.

The Disputed Issues

At the hearing, Modog challenged the decision of the adjudicator on 3 primary grounds:

  • Whether the 11 September 2019 emails constituted a payment claim within the meaning of s13(1) of the Act;
  • If the emails did constitute a payment claim, whether the claim was sent by ZS Queenscliff as a person who was entitled to seek a determination for the purposes of s17 of the Act; and
  • Whether the Adjudicator has committed a jurisdictional error by allowing multiple payment claims in respect of a single reference date?

The Arguments, Decision and Reasoning

Issue 1: Was there a Payment Claim:

The argument advanced by Modog was effectively, ZS Queenscliff had not submitted a valid payment claim as they did not specifically demand payment from Modog (i.e.: did not say, Modog must pay ZS Queenscliff the sum of $X.). Modog relied on the fact that the invoices provided in support of the payment claim, were addressed to various entities, not ZS Queenscliff, and that ZS Queenscliff could not establish they were actually entitled to the money claimed for.

Modog argued that ZS Queenscliff had indicated invoices would be sent at a later time, which Modog was to pay as directed and that, pursuant to the Court’s decision in Quickway Constructions Pty Ltd v Electrical Energy Pty Ltd, ZS Queenscliff had not served a payment claim pursuant to clause 13(1) of the Act.

The counter argument raised by ZS Queenscliff relied upon the case of Icon Co NSW Pty Ltd v Australia Avenue Developments Pty Ltd [2018] to support their position that Modog had simply misunderstood the payment claim, and that this could not be a basis for quashing the adjudicator’s decision. ZS Queenscliff argued the fact that the invoices were addressed to other parties did not invalidate the payment claim as they were simply disbursements to be paid to suppliers.

Ultimately, the Court favoured the position raised by ZS Queenscliff, noting there is nothing within the Act that requires a payment claim to state the total of the sum claimed. The Court stated and that even if the invoices in support of the payment did require Modog to direct payment elsewhere, as long as ZS Queenscliff had an entitlement to the sum under the contract, this did not invalidate the payment claim itself.

Issue 2: Was the Payment Claim Sent by ZS Queenscliff?

Modog then raised the issue that, as the 11 September 2019 email enclosing the payment claim was sent by Mr. Zaarour, using an email signature that did not belong to ZS Queenscliff, and the only legal entity named in the email was ZS Australia, the payment claim had not been served by the appropriate entity for the purposes of s17 of the Act.

The counter argument raised by ZS Queenscliff was that these errors were irrelevant in light of the fact that the previous correspondence between the parties had been exchanged in much the same way, including when detailing the terms of the caries contract agreements, and the point was not taken at the contract negotiation stage.

The Court ultimately agreed again with ZS Queenscliff, making the point that not was not actually disputed that ZS Queenscliff was entitled to make the payment claim and made the determination that the email payment claim had simply been sent by Mr Zaarrour in his capacity as the project manager, on behalf of ZS Queenscliff.

Issue 3: Was there an issue with multiple emails being used to comprise the payment claim?

Finally, Modog sought to raise the point that multiple invoices had been served on them in the emails from ZS Queenscliff and that it was not open for ZS Queenscliff to seek to have all invoices adjudicated.

Relying on the decision of the court in Rail Corporations of NSW v Nebax Constructions [2012] NSWSC6, this point ultimately failed as well, on the basis that, when viewed in the context of the previous conduct between the parties, and the nature of the invoices supplied, Modog had been more accurately provided with one payment claim, and a number of invoices in support of the claim.

What does this decision mean?

This decision serves as a timely reminder to parties that the Building and Construction Industry Security of Payment Act 1999 (‘the Act’) is intended to allow money to flow through to sub-contractors. Parties should be mindful of this purpose when considering whether to attempt to argue a payment claim on the basis of a minor technicality or ambiguity.

If you or someone you know wants more information or needs help or advice in relation to NSW’s security of payment legislation (or any other state’s or territory’s equivalent), please contact us on (02) 9248 3450 or email info@bradburylegal.com.au.

CHANGE HAS ARRIVED

Amendments to the Building and Construction Industry Security of Payment Act are finally in force

Late last month changes to the Building and Construction Industry Security of Payment Act 1999 (Act)’ (‘the Act’) came into effect under the Building and Construction Industry Security of Payment Amendment Act 2018 (‘the amendments’), passed in November 2018.
The overarching purpose of the amendments is to address issues of insolvency and late-payments within the industry. They aim to alleviate the impact of these issues on small businesses and subcontractors by promoting cash flow and greater transparency in the contracting chain.
Our regular readers may recall, we have been discussing these changes and their potential consequences over the course of the year, but here is a refresher now that the amendments are in force.

What do the changes mean again?
As of 21 October 2019 the amendments are effective and apply prospectively to all building and construction as contracts covered by the Act, entered into on or after this date.
The changes are extensive and place significant new responsibilities on parties within the NSW building and construction industry. In broad terms, the legislative changes cover the following points:

Investigation, Enforcement and Penalties

Officers of the Department of Finance Services and Innovation have been given a suite of new powers to investigate monitor and enforce compliance with the Act, including but not limited to powers of entry to premises to gather information.
Directors and managers may now be personally prosecuted in circumstances where a corporation has committed an offence, under new provisions introducing the concept of executive liability.
Tougher maximum penalties have been applied, particularly when supporting statements are not supplied.

Adjudication

Confirming previous decisions of the Court, the amendments confirm jurisdictional errors made by adjudicators are now reviewable by the Supreme Court, with the power to effectively ‘carve’ out the invalid sections of adjudicator’s decisions.
The amendments also provide parties with an option to withdraw their application for adjudication in circumstances where the adjudicator is not yet appointed. In circumstances where the adjudicator has been appointed, parties are still able to object to the adjudication application being determined.

Progress Claims and Progress Payments

The amendments have removed the concept of the reference date in making a progress claim, and the due date for payments to subcontractors has been reduced from 30 business days to 20 business days.
The amendments again require payment claims to state that they are in fact payment claims made under the Act.

Conclusion

The changes have far reaching consequences for parties operating within the building and construction industry. It is important for all parties operating within the industry to be aware of the changes and the way in which the amendments may affect their rights and obligations under building and construction contracts.
For an in-depth review of each amendment please see our detailed review on the changes here.
If you or someone you know wants more information or needs help or advice in relation to NSW’s security of payments legislation, please contact us( 02) 9248 3450 or email info@bradburylegal.com.au.