Projects, Infrastructure & Construction: 2023 Year in Review

As we come to a close on 2023, our Projects, Infrastructure & Construction team reflects on the achievements, significant projects and highlights of the year.

“In 2023, there has been a continued focus on sustainability, digital transformation, and collaborative risk allocation. We have witnessed a shift away from traditional contracting models, with head contractors less willing to price and absorb unquantified or uncapped project risks, and a move towards more flexible risk allocation which accommodates greater levels of early contractor involvement, emerging technologies, and environmental priorities.”

Martin Lovell – Practice Team leader

Industry insights

The national team has seen a significant upward trend in the number of renewable energy projects (and related storage and electrical infrastructure) as the pipeline for new road and rail projects has started to taper.

We are seeing the increasing adoption of innovative technologies, particularly in hydrogen and transport, with new technologies being deployed at scale to support the energy transition, providing challenges for traditional contracting risk allocation and bankability.

While price volatility appears to have eased, cost overruns, together with waning productivity rates, continue to keep our clients awake at night and likely will for much of 2024.

The imposition of unreasonable contract terms has also become less fashionable. Whether this is driven by the market or the recent commencement of the Australian Consumer Law’s unfair contract terms (UCT) regime remains the subject of some debate.

Parliamentary insights

Updates to the National Construction Code imposing higher standards for fire safety, accessibility, and sustainability will impact the industry during 2024.

Also, given the ACCC and ASIC have prioritised enforcement of the new UCT provisions, we may see the imposition of penalties that will make even the most robust stomach churn. Contract provisions to be alerted to are those that:

• cause significant imbalance in the parties’ rights under the contact;
• are not necessary for the protection of legitimate business interests; and
• would be prejudicial to the party’s interests if applied or relied upon.

Further, the Commonwealth is set to introduce major legislative reforms to the Environment Protection and Biodiversity Conservation Act 1999 (Cth) (EPBC Act) during 2024. While consultation continues, key reforms include:

• the introduction of a national environmental protection agency (EPA);
• referrals under the new environmental legislation will be considered by the new national EPA rather than the Department of Climate Change, Energy, the Environment and Water which currently considers referrals;
• the introduction of National Environmental Standards that will set clear target outcomes for regulated activities under new national environmental legislation; and
• a Ministerial ‘Call In’ power that will enable the Minister for the Environment and Water to make decisions rather than the national EPA.

Meanwhile, in New South Wales, the state government has expanded the application of the Design and Building Practitioners Act 2020 (NSW) to clause 3 and 9c buildings, and the Building Bill 2022 (potentially replacing Home Building Act 1989 (NSW)) was released for public consultation.

Significant reforms expected during 2024 in Victoria include:

• reforms to the Building Act 1993 (VIC) in relation to the class of practitioners requiring registration, amongst other things, come into force on 1 February 2024, unless proclaimed earlier, and include a category of registration for project managers;
• the release of the Stage 2 Report of the Building System Review Expert Panel which considered public procurement contracting policies to be modernised with a view to becoming more collaborative;
• reports being tabled in Parliament into employers and contractors who fail to pay their subcontractors for completed works;
• a review of changes to the Building and Construction Industry Security of Payment Act 2002 (VIC) which will potentially see the Victorian Act brought more into line with other states;
• the announcement of a comprehensive review of the Domestic Building Contracts Act 1995 (VIC), including scope, statutory warranties, and dispute resolution, noting that in Victoria, the Act applies to large scale developments and mixed use projects;
• the first reading of the Building Legislation Amendment (Domestic Building Insurance New offences Bill) 2023 seeking to address some of the issues highlighted by the collapse of Porter Davis, amongst other builders;
• NSW-style developer bonds, decennial liability insurance and statutory duty of care for pure economic loss; and
• potentially statutory trusts for retention monies.

In South Australia, all newly built homes from 1 October 2024 will need to meet a seven star energy rating, an increase from the current six stars, and there will be changes to accessibility standards.

Similarly, the Queensland government’s industry reform agenda will focus on building product safety, security of payment, building certification and energy efficiency (commencing on 1 May 2024, as part of the Modern Homes initiative).

However, having already been kicked down the road multiple times, and with imminent appointment of a new Queensland Labor Party leader/Premier, plus the state election on 26 October 2024, it will be interesting to see whether Queensland’s Project Trust Account Regime remains on track for wider application during 2025. At present, the regime is scheduled to apply to local government and private contracts valued at $3 million or more from 1 March 2025 and at $1 million or more from 1 October 2025. With many of the contractors operating in these markets still recovering from recent price escalation shocks and continuing to manage cash flow challenges, it is surprising this is not already a point of difference between the major parties.

In Western Australia, stage 3 of the security of payment changes will come into effect on 1 February 2024. One of the key changes is the expansion of the retention trust account requirement to contracts valued at $20,000 or more (reduced from $1 million).

High Court insights

During 2023, the High Court of Australia denied special leave to appeal in Probuild Constructions (Aust) Pty Ltd (subject to a deed of company arrangement) v Allianz Australia Insurance Limited [2023] NSWCA 56. As such, the ruling of the NSW Court of Appeal that Probuild held funds in trust for insurer Allianz under a deed of indemnity stands.

However, in March 2023, the High Court granted leave to appeal in Tesseract Interactional Pty Ltd v Pascale Construction Pty Ltd [2022] SASCA 107 with a view to bringing some clarity to whether proportionate liability regimes in State and Commonwealth legislation can apply in arbitration. The appeal has now been heard but is pending judgment. The decision will have implications in terms of choice of dispute resolution forums and the availability to take advantage of proportionate liability regimes.

Piper Alderman appeared in the High Court for Vaughan Constructions in a matter that considered water authorities’ responsibility for the flow of water pursuant to s157(4)(b) of the Water Act 1989 (Vic).

State Court insights

In Owners SP 92450 v JKN Para 1 Pty Ltd & Toplace Pty Ltd [2023] NSWCA 114, the NSW Court of Appeal confirmed that if reinstatement costs are to be displaced as the prima facie measure of damages, then the defendants (here, the builder and developer) had to establish that rectification of defective work was not reasonable. The plaintiff (the building owners) recovered their full costs of reinstatement because the defendants failed to adduce any evidence that might have shown that any alternative solution would satisfy the building code’s performance requirements or otherwise be functionally equivalent.

Perera v Bold Properties (QLD) Pty Ltd [2023] QDC 99 demonstrates how not to draft your price escalation clauses. Here, the contract included a clause permitting the builder to increase the contract price in its ‘sole discretion’. There was no real constraint or reference criteria by which a price increase could be determined or checked by the owners. Nor was there any objective market standard to compare the price increase to. As the potential effect of the price escalation clause was uncertain, the Court found the clause was not enforceable. The clause was also void under the Queensland Building and Construction Commission Act 1991 (QLD) because the statutory warning and explanation had been omitted. Further, the clause was void under the Australian Consumer Law as an unfair clause because it went beyond what was reasonably necessary to protect the builder’s legitimate interests and was not transparent.

The NSW decision of Turnkey Innovative Engineering Pty Ltd v Witron Australia Pty [2023] NSWSC 981 confirmed that reasons given in a payment schedule do not have to be correct, justified or even adequate provided a reason is indicated. The NSW Supreme Court was satisfied that Witron had sufficiently communicated that the amount Witron proposed to pay was $nil by asking Turnkey to adjust and resubmit its claim because certain prices had not been agreed. However, by advising Turnkey that Witron would review other claims (about 40% of the total amount claimed) after it saw ‘real progress’, Witron failed to give reasons for non-payment of other items claimed. By failing to give reasons for withholding payment of this part of the claim, Witron failed to deliver a valid Payment Schedule.

The Queensland Court of Appeal’s decision in Allencon Pty Ltd-V-Palmgrove Holdings Pty Ltd (trading as Carruthers Contracting) [2023] QCA 6 illustrates the importance of harmonising calendar days and Business Days when drafting contract terms. The Court of Appeal considered whether AS2545’s unamended requirement that payment certificates be issued within 21 calendar days had the effect that this period had also been agreed for delivery of payment schedules under Queensland’s Building Industry Fairness (Security of Payment) Act 2017 (QLD) (BIFA). The Queensland Court of Appeal found that it had with the effect that Carruthers had agreed that its representative would issue BIFA payment schedules within 21 calendar days.

The NSW Supreme Court decision in BCFK Holdings v Rork Projects provided useful guidance on important aspects of the critical milestone of valid service of claims under the Building and Construction Industry Security of Payment Act 1999 (NSW) (SoP Act). Subsection 13(1C) of the SoP Act was introduced by the 2018 amendments and was designed to close a loophole identified by the High Court in Southern Han and thus ensure that there was a right under the SoP Act to serve a payment claim following termination. The Court confirmed that only one payment claim can be served post termination.

Richmond J in Piety Constructions Pty Ltd v Megacrane Holdings Pty Ltd [2023] NSWSC 309 suggests that a holistic and practical approach should be used when establishing validity of payment claims and schedules, but the devil remains in the detail. Richmond J made it clear that the question of whether a document is a payment claim or a payment schedule is determined by having regard to its substance, rather than form, and an unduly critical approach is not appropriate. His Honour concluded that there was no reason why the letter of demand could not be considered a payment claim. In a similar vein, payment schedules only need to refer to the payment claim and indicate whether or not the entire, or part of, the amount claimed will be paid and the reasons for amounts claimed being withheld.

Team movements

The team welcomed Nick Foulkes and Katie Winterbourne as Partners in our Perth Office. We are excited to see our team continue to deliver excellent service to our clients.

Significant matters

Throughout the year, we continued to represent and advise our clients, across various industries and issues, including:

Chambers Flat Road Upgrade
Acting for a D&C Contractor delivering this $35 million road upgrade.

Department of Infrastructure and Transport (SA)
Advising the South Australian Government in relation to significant procurement activities on the $15.4 billion Torrens to Darlington (T2D) motorway project. The project is South Australia’s largest road infrastructure project involving the construction of more than two kilometres of twin three-lane tunnels, the extent of the Northern Tunnels, with entry and exit points at Hilton and Torrensville and East-west connectivity maintained and enhanced at James Congdon Drive, Richmond Road, and Everard and Barwell avenues.

Multigate (NSW)
Acting for the principal in drafting and negotiating supply installation and commissioning a of large, automated warehouse at Yenora for assembly and supply of medical and surgical kits throughout Australia and the South Pacific.

Mareeba Granite Creek Pump Station
Advised D&C contractor refurbishing this piece of critical water infrastructure.

Office of Hydrogen Power South Australia
Acting for the State to support the $593 million plus “Hydrogen Jobs Plan” project (Plan) which will see the construction of a world leading hydrogen 250MW power station, 250 MWe of electrolysers, and hydrogen storage for 3,600 tonnes of hydrogen – the equivalent of two months of hydrogen consumption for power generation.

The Plan will deliver significant benefits for South Australia, including lower electricity prices for business and industry, thousands of new jobs for South Australians, and unlocking the development of a $20 billion pipeline of renewable energy projects.

We have also been acting for the South Australian Government in relation to its planned $13 billion hydrogen hub at Port Bonython.

This includes shared infrastructure arrangements with various publicly announced shortlisted projects from Australian and international companies and grant funding arrangements with the Commonwealth. The partners which have been publicly announced for the site, which may host up to 3GW of hydrogen electrolysers by 2030, include Fortescue Future Industries, Origin Energy, Santos and H2U, along with international companies such as Eneos, Chiyoda, Mitsubishi and AMP Energy.

Spinnaker Drive, Sandstone Point
Successfully overturned the first instance decision in the Queensland Court of Appeal, entering summary judgment against the main contractor who failed to issue a payment schedule as required by the BIFA.

Vaughan Constructions
Acting for Vaughan Constructions in respect of a complex multi-party dispute regarding adverse ground conditions and alleged defects in the construction of a warehouse in outer suburban Melbourne. Proceedings issued in the High Court of Australia, Victorian Court of Appeal, Supreme Court and VCAT. The matter before the High Court involved the proper interpretation of the responsibility of water authorities for the flow of water pursuant to s157(4)(b) of the Water Act 1989 (Vic).

Viridi Group
Negotiating supply agreements with the NSW Department of Education for supply manufactured housing (at scale) for use in flood relief in northern NSW.

Wambo Wind Farm (Western Downs)
Advised civil contractors in relation to this project which will potentially generate 500MW of power.

Recognition

The Legal 500 Asia Pacific

In the 2023 edition of The Legal 500 Asia Pacific, Piper Alderman was recognised across 12 areas of law including Infrastructure, Projects and Construction. A number of our team members were highlighted as recommended or key lawyers for this category, including Megan Calder, Martin Lovell and Kathryn Walker.

The Best Lawyers in Australia

In the 2024 edition of The Best Lawyers in Australia, 54 of Piper Alderman’s lawyers are recognised across 43 legal areas including the following in our national Projects & Construction team:

• Megan Calder– Construction / Infrastructure Law
• Geoff Emmett – Construction / Infrastructure Law
• Martin Lovell– Commercial Law, Construction / Infrastructure Law, Project Finance and Development Practice, Structured Finance Law
• Karyn Reardon– Construction / Infrastructure Law
• Kathryn Walker– Construction / Infrastructure Law
• Juniper Watson– Construction / Infrastructure Law
• Katie Winterbourne – Mining Law, Natural Resources Law, Planning and Environmental Law, Water Law

Doyle’s Guide

In the 2023 rankings for Doyle’s Guide, the firm and members of our Projects, Infrastructure & Construction team have been recognised as follows:

• Megan Calder – Recommended Construction & Infrastructure Litigation Lawyer, Victoria
• Martin Lovell– Leading Energy & Resources Lawyer, South Australia
• Andrew Robertson – Leading Construction & Infrastructure Litigation Lawyer, South Australia

Chambers and Partners, Asia-Pacifc

In the 2024 Asia-Pacific rankings for Chambers and Partners, Martin Lovell is again recognised as an individual in Energy & Natural Resources: Utilities (Band 4). Martin is well regarded for his advisory work in relation to major infrastructure projects. He handles acquisitions and joint venture in the utilities sector, with a particular emphasis on renewables.

We were also delighted to receive some very kind feedback from clients and contacts during the research process for the legal directories, including the following testimonials from The Legal 500 Asia Pacific: Australia, 2023 edition:

‘Piper Alderman’s infrastructure projects and construction team are not just subject-matter experts – they really understand our business and what’s important to us. This means they provide advice which is not only technically accurate, but also consistent with our approach and objectives.’

‘Piper Alderman’s construction team are experts in their area. They are attentive and provide astute advice. They are responsive and provide excellent legal service.’

‘The team provide succinct advice on specialist legal issues. They have their finger on the pulse when it comes to construction matters.’