Practical Tips from “Tracing a Construction Dispute” Seminar at the NSW Supreme Court

It was an eminent panel in fine form at last night’s seminar (3 April 2017) “Tracing a Construction Dispute” at the NSW Supreme Court, presented by the Lighthouse Club and 39 Essex Chambers. The panel was comprised of:

  • Solicitor Simon Bellas, Partner, Jones Day
  • Quantity Surveyor Stephen Bolt, QS, Director – Aquenta and Vice President LHC, Sydney
  • Solicitor Alex Baykitch AM, Partner, King & Wood Mallesons, Sydney and President of ACICA
  • Mediator Dennis Wilson, Independent Barrister and Mediator, Sydney
  • Barrister Ben Olbourne, Barrister, 39 Essex Chambers, Singapore
  • Arbitrator David Bateson, former Head of Construction, King & Wood Mallesons, Hong Kong and now Arbitrator, 39 Essex Chambers, Singapore
  • President of the NSW Court of Appeal Justice Margaret Beazley
  • NSW Chief Justice Tom Bathurst

The panel considered a common construction dispute scenario, each providing their advice to the room on the stage of the dispute in which they would become involved. Some important takeaways included:

(1) Time Bars 

It is common knowledge that tender processes are often short and subcontractors will often not have much opportunity to review the contract documentation before papers are signed and work begins. However, it is of the utmost importance to clearly identify the time limits and notice requirements applicable to any claims under the contract.

It was a point emphasised by barrister Ben Olbourne that while a more understanding approach may be taken in the UK, you should assume that contractual time-bars will be strictly enforced in Australia. This was driven home by Justice Beazley, who explained that unless the extension of time clause, or an estoppel, could be engaged, failing to give notice of the claim in the time required under the contract will often be fatal.

(2) Documentation

Arbitrator David Bateson and Justice Beazley, both emphasised the importance of documentation on construction projects.

Mr Bateson stated that in his experience, while witnesses have their role, it is the documents that will usually carry the day in arbitration. He implored parties to take a focused approach to the presenting of their evidence and arguments. It is far better to present the most salient documents, with targeted submissions that reference (rather than recite at length) the evidence, than to write ‘War & Peace’ and drown the arbitrator.

Mr Bateson also advised that parties select expert witnesses who have the requisite communication skills to be engaging in Court and make their underlying methodologies clear. Sound expertise, incomprehensibly communicated, will be discarded as unhelpful.

Justice Beazley commented on the risky practice on multi-million dollar projects of parties relying on casual verbal assurances. Her Honour referred to the recent case of Crown Melbourne Limited v Cosmopolitan Hotel (VIC) Pty Ltd & Anor [2016] HCA 26 in which a party from Crown said to Cosmopolitan “we’ll look after you at renewal time”. Such casual verbal assurances will often not be sufficient to give rise to a collateral contract or an estoppel by which to enforce the benefit hoped for.

Her Honour commented that such problems are compounded where the identity and position of the person giving the assurance has not been recorded. In such circumstances the nature of what is being promised is not specific enough, it is unclear whether the person had the authority to make good on the assurance, and both these matters question the reasonableness of placing reliance on such an assurance.

(3) Enforcing Security of Payment Determinations 

Solicitor Alex Baykitch took the room through the general procedure for making a Security of Payment claim, obtaining an adjudicator’s determination, and enforcing the determination. Importantly, he reminded everyone that the benefits of the Security of Payment Act are available not just to builders, but also to those who provide goods and services for use in construction work.

Mr Baykitch then commented on the recent case of Fitz Jersey Pty Ltd v Atlas Construction Group Pty Ltd [2017] NSWCA 53 handed down on 23 March 2017. This case contains an important practical lesson for developers looking to challenge an adjudicator’s decision.

In that case,

  • The builder had served a payment claim on the developer for over $10.5M, and stated stated it to be a progress payment claim made under the Building and Construction Industry Security of Payment Act 1999 (NSW).
  • The developer responded by serving a payment schedule on the builder asserting that no amount was payable.
  • The builder successful obtained an adjudicator’s determination that the claim was payable in full.
  • The developer failed to make payment within the required 5 days, and so the builder obtained an adjudication certificate.
  • The developer commenced proceedings in the Supreme Court challenging the validity of the adjudicator’s determination.
  • The builder filed the adjudication certificate in the Supreme Court, causing it to take effect as a judgment debt.
  • The builder successfully applied ex parte to the Supreme Court for a garnishee order to enforce the judgment debt, served it on the developer’s bank, and the bank paid the sum to the builder out of the developer’s account.
  • The developer found out that the money had been paid from its account, but was unsuccessful in having the garnishee order set aside. No undertaking had been given by the builder not to proceed to enforce the judgment debt, and no interlocutory relief had been applied for by the developer at the time the garnishee order was sought.

This case was an important reminder of the speed with which an adjudicator’s determination can be enforced. It was also reminder to those wishing to challenge an adjudicator’s determination to quickly apply for an interlocutory injunction to prevent enforcement of the determination before it can be set aside.

(4) Mediation

Finally, Mediator, Dennis Wilson, reminded the room of the important opportunity that mediation provides parties to achieve the just, quick and cheap resolution of disputes (referring to section 56 of the Civil Procedure Act 2005).

Mediation allows parties to:

  • Keep the dispute confidential;
  • Keep control of the dispute and retain full flexibility as to the terms on which it is resolved;
  • Hold a more open and frank discussion which assists the resolution of disputes;
  • Minimise the cost, procedure, and time required to resolve a dispute;
  • Avoid the damage to reputation and the critical path of proceeding to litigation;
  • Consider mutually acceptable outcomes, rather than digging further into their positions;

The seminar was well attended by fellow members of the Society of Construction Law Australia and other groups. As always it is excellent to see professionals from the construction industry and legal profession gather and exchange such practical advice. With the number of construction projects on foot growing by the day it is more important than ever to support a cooperative and informed approach to resolving disputes efficiently.

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