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Looking back at the year just completed, 2016 proved to be an interesting year in the space we may call the ‘construction industry law’ space. In early 2017, it’s time to look back on some of the key developments.

There were specific changes that occurred in regards to building permits in Victoria and various changes in the domestic construction industry in Victoria that were mooted.

Three 2016 court decisions in particular resulted in critical changes to the law. The law changes slowly as a general rule, and generally changes only incrementally. This is particularly the case where the changes result from what a tribunal member or presiding member in a court case decides what is actually before him or her.

The first case has general application, which relates to when parties to a contract agree, when the contract is first prepared or entered into, on the amount of damages a party (for example, commonly, the builder) will pay when a contract breach occurs. You may well be familiar with the term ‘liquidated damages.’

A case by the name of Paciocco v ANZ [2016] went to the High Court. It dealt with the issue of the possibility of a particular liquidated damages clause being struck out or struck down. This can occur when the court says the amount of liquidated damages which is specified is too high, or in the correct terminology, ‘extravagant’ or ‘unconscionable.’ In the case at hand, the court was dealing with the issue of late payment fees the bank was charging but the principles stated apply in other contexts, and they apply in particular to the construction industry.

In summary, the court set a ‘new bar’ as to when a liquidated damages clauses may be struck out. As a result, that bar is now arguably now set far higher than it used to be, making it much harder in future to have such a clause struck out.

Another case which is interesting was applied in Victoria, but it arguably has more general application in the sense of it possibly being applicable to other states. At first blush, the result of that case (SSC Plenty Road Pty Ltd v Construction Engineering (Aust) Pty Ltd) may seem somewhat surprising.

The case concerned the security of payment legislation in Victoria which is similar to but not identical in other states in Australia. It involved the issue of a construction contract which provided for a method of resolving disputes between contracting parties if meeting and talking was unsuccessful in resolving the dispute at hand. That method was mediation, which is uncontroversial, and common. The issue was, did the contract contain a ‘method of resolving disputes under the contract.’

At both the trial level and at the level of appeal, the court said mediation was not in fact a ‘method of resolving disputes’ for the purposes at hand, as it was not, in summary a method of resolving a dispute which is final. That is, mediation of a dispute may or may not resolve a dispute and in that sense, the dispute may drag on. In line with the overarching purpose of the legislation, to settle disputed claims to payment quickly and with tight time frames by which parties must take steps within, the court said a mediation was not a method of resolution of disputes, but was a ‘mere’ forum for the issues within the dispute to be aired.

The third case, which came from sunny WA, reminds us to be diligent in relation to the satisfaction of any ‘procedural’ requirements which apply generally when claiming contractual rights, such as, in the case, an extension of time requirement.

In that case (Ralmana Pty Ltd v BGC Contracting Pty Ltd), the court said that a claimant for an extension of time (EOT) or delay costs had to not only abide by the notice requirement, including providing notice of the claim for EOT to the specified person, but the claimant must actually ‘plead’ in the relevant court documentation which initiated the legal claim that it had abided by the notice requirement. It had to actually positively prove (by written documentary evidence) that it had complied.

This case demonstrates what some may argue is a technical or pedantic way of dealing with the legal dispute before it. However, others may well make the valid counterargument that contractual provisions requiring certain things to be done a certain way must in fact be done that certain way, or the contractual requirement wouldn’t have been there in the first place. That is, the requirement is there ‘for a reason.’ At this stage, in the absence of countervailing considerations, it is arguably best to maintain the latter view.

 
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