Australian Construction Law Newsletter ISSUE #162 MAY/JUNE 2015

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1 Australian Construction Law Newsletter ISSUE #162 MAY/JUNE 2015

2 ACLN AUSTRALIAN CONSTRUCTION LAW NEWSLETTER ABN ISSN Website: PUBLISHED BY Australian Construction Law Newsletter is a joint publication between the Swap Exchange Pty. Ltd. and the Society of Construction Law Australia Ltd. PO Box R1140 Royal Exchange SYDNEY NSW 1225 AUSTRALIA IMPORTANT NOTICE The material contained in ACLN is in the nature of general comment only and is not information or advice on any particular matter. No one should act on the basis of anything contained in this Newsletter without taking appropriate professional advice upon the particular circumstances. The publishers, editors and authors do not accept responsibility for the consequences of any action taken or omitted to be taken by any person, whether a subscriber to this Newsletter or not, as a consequence of anything contained in or omitted from this Newsletter. COPYRIGHT Material published in the ACLN is copyright. Apart from fair dealing for the purposes of private study, research, criticism or review as permitted under the Copyright Act 1968 (Cth), no part may be produced by any process without written permission. SUBSCRIPTIONS Please see our website or contact us. PRINTING UTS Printing Services University of Technology, Sydney PO Box 123 BROADWAY NSW 2007 CONTENTS #162 ARTICLES EDITORIAL 4 JOHN TWYFORD INTERNATIONAL ARBITRATION 6 JUDICIAL SUPPORT FOR ARBITRATION A REPRISE THE HON T F BATHURST AC DAMAGES 20 WHAT S THE DAMAGE? ASSESSING DAMAGES AND ESTABLISHING CAUSATION IN ACTIONS FOR MISLEADING OR DECEPTIVE CONDUCT CATHERINE BELL AND JULIAN GRANT PROCUREMENT 23 THE INVERTED BID MODEL FIVE KEY QUESTIONS IN SOLVING IT DAVID DONNELLY SECURITY OF PAYMENT 26 A CLAYTON S TRUST PHILIP DAVENPORT CONTRACTS 32 BANK GUARANTEES AND DEEDS OF RELEASE TIPS TO ENSURE ENFORCEABILITY DAVID RODIGHIERO AND MARK KENNEY INSURANCE 34 CONSTRUCTION INSURANCE POLICIES WHAT DOES PROFESSIONAL SERVICES MEAN? TOBY BLYTH AND AARON BOLTON INDUSTRIAL RELATIONS 36 YOU'RE A 'COMPLETE D CK' AND OTHER THINGS NOT TO SAY TO YOUR BOSS HEDY CRAY AND LAURA HILLMAN DISPUTE RESOLUTION 38 RECENT INTEGRATION OF IAMA AND LEADR AND KEY CHANGES TO IAMA S ARBITRATION RULES GEOFF HANSEN AND JENNIFER GALATAS BUILDING REGULATION 40 DO BUILDERS OF MULTI LEVEL RESIDENTIAL APARTMENT DEVELOPMENTS GIVE THE IMPLIED WARRANTIES IN THE VICTORIAN DBC ACT TO BUILDING OWNERS AND SUBSEQUENT PURCHASERS? GRANT AHEARN WORKPLACE HEALTH AND SAFETY 42 CONTRACTOR MANAGEMENT STRIKING THE RIGHT BALANCE WHEN MANAGING WORK HEALTH AND SAFETY CARLIE HOLT 2 AUSTRALIAN CONSTRUCTION LAW NEWSLETTER #162 MAY/JUNE 2015

3 CONTENTS #162 ARTICLES INTERNATIONAL ARBITRATION 44 COURT'S REFUSAL TO ENFORCE AN AWARD ON PUBLIC POLICY GROUNDS A STEP BACKWARD FOR INTERNATIONAL ARBITRATION IN AUSTRALIA? GITANJALI BAJAJ AND KIRK SIMMONS CONTRACTS 46 AGREEMENTS TO NEGOTIATE ARE THEY ENFORCEABLE? JAMES PLUMB AND DUNCAN LOMAS INSURANCE 48 'DAMAGE IN CONTRACT WORKS AND GENERAL LIABILITY POLICIES TOBY BLYTH SECURITY OF PAYMENT 50 THE VALIDITY OF A SECOND PAYMENT CLAIM SERVED IN RESPECT OF ONE REFERENCE DATE REITSMA CONSTRUCTIONS PTY LTD V DAVIES ENGINEERING PTY LTD T/AS IN CITY STEEL [2015] NSWSC 343 VINESH SINGH STATUTE OF LIMITATIONS 52 COURT CONSIDERS WHETHER LATENT DEFECTS CLAIM AGAINST BUILDING CONSULTANTS OUT OF TIME ROCCO RUSSO AND CAMILLE TEWARI SECURITY OF PAYMENT 54 TOUGH LUCK PAYING A PROGRESS CLAIM THE SUBJECT OF AN ADJUDICATION APPLICATION BEFORE THE DETERMINATION IS MADE CAN RESULT IN AN OVERPAYMENT SPENCER FLAY, KRISTINA BOTSIS AND KRISTIAN CYWICKI DISPUTE RESOLUTION 56 GENERAL AND SPECIFIC DISPUTE RESOLUTION REGIMES BEN VAN WEEL AND HARRISON NURSE BUILDING REGULATION 58 NCC BUILDING CODE OF AUSTRALIA (BCA) WHAT DOES COMPLIANCE WITH THE BCA MEAN? TIMO SIEBECK BOOK REVIEWS BOOK REVIEW 59 INTERNATIONAL CONSTRUCTION CONTRACT LAW BY LUCAS KLEE JOHN TWYFORD EDITOR John Twyford PUBLISHER / ASSISTANT EDITOR Myra Nikolich EDITORIAL PANEL Matthew Bell Senior Lecturer & Co Director of Studies for Construction Law, Faculty of Law, University of Melbourne, Melbourne Philip Davenport Solicitor, Sydney Philip Dawson Clayton Utz, Sydney Leigh Duthie Baker & McKenzie, Melbourne Graham Easton Arbitrator & Mediator G R Easton Pty Ltd, Sydney Arch Fletcher Clayton Utz, Brisbane Robert Floreani Senior Floreani Coates, Adelaide Janet Grey Architect, Arbitrator & Mediator, Sydney Phillip Greenham Minter Ellison, Melbourne Laurie James Chairman of s Kott Gunning, Perth Doug Jones AO Clayton Utz, Sydney Christopher Kerin Legal Practitioner Director Kerin Benson Lawyers, Sydney Scott Laycock Gadens Lawyers, Sydney CONTRIBUTIONS Contributions to the ACLN from readers are encouraged. Please submit articles for consideration to the publishers. PEER REVIEW We now offer the facility of peer review. If you would like to register your name with us as a potential referee willing to peer review other professionals work please send your details and area/s of expertise, marked for the attention of the Editor. AUSTRALIAN CONSTRUCTION LAW NEWSLETTER #162 MAY/JUNE

4 CONTRACTS BANK GUARANTEES AND DEEDS OF RELEASE TIPS TO ENSURE ENFORCEABILITY David Rodighiero, Mark Kenney, Special Counsel Carter Newell Lawyers, Brisbane INTRODUCTION With the start of the New Year, many are looking to close out and finalise construction contracts. Two key documents usually associated with the process are: Deeds of Release; and Bank Guarantees. Sadly, there are a number of common mistakes or oversights in the provision and execution of these documents that can make them unenforceable or impractical to enforce. Generally it is too late to do anything about this at the end of the contract. To help avoid this, we have set out some straightforward, but all too often overlooked, issues that should be checked each time a Bank Guarantee or Deed of Release is included in a contract. DO YOU HAVE THE RIGHT PARTIES? If you are dealing with a company named for example, ABC Supplies Pty Ltd, then it may not be enough to simply refer to ABC or ABC Pty Ltd. The correct and unambiguous company name and ABN or ACN of all parties should be included to clearly identify the parties. A Bank Guarantee is like cash and if a party on the Bank Guarantee is different to the party on the contract, then a bank is likely to refuse payment. Similarly, for a Deed of Release, if the party is not correctly identified in the deed, it may not be fully enforceable. IS THE CORRECT CONTRACT REFERENCED? Where parties are recycling documentation or have numerous contracts between them (such as under a standing order arrangement where each new work order is a new contract), then it is common to simply reuse the template. If this is done and the correct contract name and reference number is not updated and included each time, then, once again, the documents may not be enforceable. For example, when calling on a Bank Guarantee you may only do so where there is a right under the contract referenced in the Bank Guarantee. If the wrong contract is referenced then the bank is unlikely to honour the Bank Guarantee. ARE THEY EXECUTED CORRECTLY? Often contracts are provided with template Bank Guarantees and Deeds of Release as annexures which then need to be executed once the contract is formed. To be enforceable, Bank Guarantees must be an original that has been executed by the bank issuing the Bank Guarantee. In terms of a Deed of Release, the deed must not only be executed, but must be executed correctly to be enforceable. While an individual can sign on his own behalf and a partner may sign on behalf of a partnership, for a corporation the deed must be executed by two directors or a director and secretary (or a single director in the case of a company with a sole director). Unlike certain forms of contract, deeds cannot be executed by agents or delegated authorities or representatives. Deeds may be executed under a Power of Attorney but the execution clause must specify that it is executed under a Power of Attorney and you should always obtain a copy of the Power of Attorney to be satisfied that it does provide the requisite authority to the attorney to execute such a deed. 32 AUSTRALIAN CONSTRUCTION LAW NEWSLETTER #162 MAY/JUNE 2015

5 IS IT ENFORCEABLE IN THE JURISDICTION? Both the Bank Guarantee and a Deed of Release are only as good as the ability to enforce the document where you are. For a Deed of Release, if a party providing a release is a corporation not registered in Australia, then the release may not be enforceable with respect to that party. With respect to a Bank Guarantee, firstly, it should be with a bank that is present in Australia (the guarantee must be presented as an original so it is not advisable to post the original off to a foreign bank never to be seen again). A more practical issue though is whether the bank has offices in the local jurisdiction where the contact is being undertaken. Many foreign banks have head offices only in Sydney or Melbourne. If the works are being carried out in North Queensland, then it may be a significant inconvenience to have to travel to Sydney or Melbourne to call on the Bank Guarantee. Even for Australian banks, commonly the Bank Guarantee will only be enforceable at the head office in Sydney or Melbourne. Where possible, ensure that a Bank Guarantee is enforceable at a location or local branch that is convenient and accessible. IS THERE AN EXPIRY DATE? Deeds of Release should not have an expiry date. However, Bank Guarantees do commonly have an expiry date. Construction contracts often run over time. Therefore, if a Bank Guarantee is going to expire during the defects liability period, when it should still remain valid, then either the contract should have a reinstatement clause requiring the contractor to provide a new Bank Guarantee or you will need to take steps to convert the Bank Guarantee (and hold the funds in trust) or have the other party issue a replacement Bank Guarantee before it expires. It should go without saying, but you should also have a process that gives you a call up or reminder before the expiry date so that you can take steps to make sure that the party providing the Bank Guarantee takes steps to renew or replace it. It may be too late after the Bank Guarantee has expired if the party providing it is in dispute with you or in financial difficulty and not willing or able to obtain another Bank Guarantee. DO YOU HAVE THE ORIGINAL? As noted above, banks treat a Bank Guarantee as cash and will only pay on provision of the original document. Originals of Bank Guarantees should preferably be kept in a secure location. Too often, parties have gone to call on the Bank Guarantee to simply not be able to find it, or only to be able to produce a copy which the bank will not honour. Although an original Deed of Release is less critical, if contract claims do proceed to court, the court is likely to require an original of the document to prove a valid defence or claim involving the terms of the deed. A simple review of compliance with these checklist items, at the time of contract execution, should ensure enforceability and save significant cost at the time that parties seek to enforce their rights under a Bank Guarantee or Deed of Release. The same approach should also be applied to other forms of security or negotiable instruments, such as promissory notes, letters of credit and insurance bonds, to ensure that they are enforceable. David Rodighiero and Mark Kenney's article was previously published in Carter Newell Lawyers Constructive Notes January Reprinted with permission. AUSTRALIAN CONSTRUCTION LAW NEWSLETTER #162 MAY/JUNE

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