Notes on Standard Terms of Contracts Impacting Construction Disputes

11 Dec 2020

By David Marsh

Boilerplate terms of contracts can have a significant impact on the conduct of construction disputes.

This is a short article regarding two dissimilar cases, both of which focus attention on the fact that the boilerplate terms of contracts can have a significant impact on the conduct of construction disputes. Our experienced construction law team can help avoid issues with construction disputes and more.

Tianqi Lithium

The first decision comes from the arbitration realm in which the Court of Appeal of the Western Australian Supreme Court dismissed an appeal from a decision of Master Sanderson not to grant a stay of proceedings under s.8 of the Commercial Arbitration Act 2012 (WA) in Tianqi Lithium Kwinana Pty Ltd v MSP Engineering Pty Ltd [No 2] [2020] WASCA 201. It is a reasonably important decision on the question of how one reads the limited preservation of rights provisions in dispute resolution clauses. By this I mean, most construction contracts have dispute resolution clauses and, even where arbitration is prescribed, there is (at least) some protection for the right to seek urgent relief from a court.

In this case, the contract in issue was an Australian Standard AS 4902 that had been slightly modified. Relevantly, the standard preservation provision in clause 42.4 of the dispute resolution remained unamended. As a reminder, that clause provides:

Nothing herein shall prejudice the right of a party to initiate proceedings to enforce payment due under the contract or to seek injunctive or urgent declaratory relief. [Emphasis added]

It is also worthy to note that the standard right of set-off provision in clause 38.2 had been removed, although the withholding of payment provisions in termination were obtained in clause 39.10.

After analysing the authorities on how one reads clauses like clause 42.4, when dealing with a stay application under s.8 of the Act (and after considering three possible ways of doing so), the Court of Appeal adopted the following test at paragraph [127]:

… ‘proceedings to enforce payment due’ under the contract is proceedings which are capable of summary determination: ie, proceedings in which there is no triable issue which would form a proper basis for defending a summary judgment application.

This seems to be a sensible outcome for the reasons given by the Court of Appeal. It is, however, still a matter of contractual interpretation and it might be open for parties to expand the rights of set‑off or to reduce the ambit of the preservation provision in the future so as to circumvent or minimise the impact of this decision.

BCS Infrastructure v Jones Lang Lasalle

The second decision (and an even better example of paying attention to the boilerplate) comes from the Supreme Court of Victoria where Her Honour Justice Stynes handed down an interesting decision in the matter of BCS Infrastructure v Jones Lang Lasalle (NSW) Pty Ltd [2020] VSC 379 regarding service of payment claims under the Victorian SOP Act.

The difference between jurisdictions on service (amongst other things) are such that, from a Western Australian perspective, a detailed analysis of the decision is not warranted. However, the issue of service of payment claims and adjudication applications has long vexed the SOP regime across all Australian jurisdictions such that one wonders whether it might be something best dealt with by Parliament, preferably under uniform legislation dealing with the question of valid service. I note that there is a provision in Western Australia relating to service but it may not go as far or be as clear as it ought to.

In this case, the various claims underpinning the SOPA application were provided through a document sharing platform called Corrigo and was attached to an invoice, notwithstanding the fact that the parties had been communicating by email with respect to unpaid invoices beforehand. Indeed, her Honour found that this was the first time that the builder had used Corrigo to upload these kinds of documents.

The question for the Court was whether the relevant date, for the purpose of the date by which the principal had to respond to the application under the Victorian Act, was the date upon which the claims were uploaded to Corrigo or the date upon which the claim came to the attention of the principal. If the former, the principal would have been liable for the entire amount of the claim. Her Honour, after working through the history of the communications between the parties and the notice provisions of the relevant contract, found that the time by which the respondent had to respond to the payment claim was calculated from the latter date, when it came to the attention of the principal. The effect of her Honour’s finding was that the respondent’s response to the payment claim was within time.

In the end, despite the relatively fact-heavy analysis conducted by her Honour, there is a simple takeaway for all practitioners and that is, to pay close attention to the notice provisions of the contract. This also extends to other administrative provisions of the contract because these provisions might also affect how the claim must be prepared and delivered. For example, if the building contract provides for the SOPA claim to be delivered to a specific appointor body, it should be served on that appointor, and failure to do so might render the claim nugatory. In summary, bringing and defending SOPA claims (which in and of themselves can be quite complex) is often done against significant time pressure such that parties might forget to dot the i’s and cross the t’s of the application. Anyone working in the area, as we do, need to have simple processes in place to make sure that the contractual requirements, as well as the requirements of the relevant SOP legislation, are met.