The importance of a sound construction contract is often overlooked when the need to ‘win the project’ or ‘get on with the job at a minimal cost’ are factors at play. When a construction dispute (inevitably) arises, it can cost your company hundreds of thousands, if not millions of dollars to resolve issues which could have been prevented by an expertly drafted contract.
In this article, we consider five important clauses to turn your mind to when negotiating your next construction contract.
Celebrity Chef George Calombaris is under fire for reportedly underpaying 515 past and current workers a staggering $7.8 million in wages.
Last week the Fair Work Ombudsman slapped the celebrity Chef and his Made Establishment business with a $200,000 fine for the underpayment wages to past and current employees.
Coronavirus or 'COVID-19' continues to spread across the globe, with the World Health Organisation (WHO) referring to the epidemic as a “public health emergency”.
With Australia’s reliance on China for providing goods and materials for the construction sector higher than ever before, many of Enterprise Legal’s construction clients have started raising concerns about how the outbreak could affect their projects, big and small – and when it inevitably does, what will their rights and potential liabilities be?
Most Developers/Principals of construction projects care about three main things when it comes to their project delivery, that is - will the project be:
The recent shortage of materials from China as a result of factory closure and import limitations could see Developers and Principals alike exposed on all three of the above criteria.
Some key factors for Developers/Principals who have current projects or projects that are at the ‘sign-up’ phase to consider include:
Conversely, the risk to Contractors are in the reverse. For example:
Enterprise Legal’s advice is ‘be alert, but not alarmed’. Make sure that you arm yourself with the knowledge that you’re legally protected and the best way to do this is to see an expert construction lawyer to get guidance and advice on what the best way forward is for your specific project, so as to mitigate any liability or other exposure under the Contract or otherwise.
Most importantly, by arming yourself with the relevant information and taking practical steps without delay, you will maximise the chance of successfully delivering the project, which is a win-win for both Developer/Principal and Contractors alike.
If you are currently a party to a construction project or planning to sign an agreement in the near future, contact Enterprise Legal’s Construction Law Team for advice today! Ask to speak to our firm director and dedicated building and construction specialist, Sharné Lategan.
Always remember, prevention is better than cure – and being proactive is the best next step you can take!
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If you’re looking to enter into a domestic building contract for the construction of a new home or renovations to your existing home, there are many things you’ll need to think about, from the flooring to your paint choices. In addition to all of your aesthetic choices, there are plenty of things you specifically need to consider when it comes to your contract itself, as this will be the backbone of the entire construction project.
After you enter into a building contract, you will generally have a period of time where you are required to provide the builder with materials including proof of ownership, proof of loan approval and relevant building approvals.
If you need to obtain finance approval prior to being able to commit to the project, make sure the contract documents accurately reflect this to avoid a scenario where you are contractually bound to proceed with the contract, regardless of finance approval. Also make sure you clarify up-front who is responsible to obtain building approval, as often builders advise they will ‘assist’ but the ultimate responsible may lay with the home owner, which is not ideal.
Progress payments are payments made to the builder at certain stages of the construction process, which should be clearly set out and identified in your contract. It is important to ensure you are aware of what is payable and at what time and that your contract does not impose any restrictions on progress payments. It is arguably more important that you make sure the work you are paying for has been carried out, in the manner required by the contract.
Your building contract may be a ‘fixed-price’ or ‘cost-plus’ building contract. A fixed price contract is one where the total price is fixed, barring any variations, delays, or extenuating circumstances. The other form of building contract is ‘cost-plus’ where you may be given an estimated final price but the contractor will obtain the materials and services through the building process and pass the costs onto you, as well as charge their own time by the hour. This can become costly quite quickly, so it is always our recommendation that a fixed price contract be entered into, to minimise the risks of ‘blow outs’ to home owners.
When negotiating the construction contract, it is very important that the contract contains a clause that variations only be allowed where it is agreed to in writing by both parties, prior to the work the subject of the variation being carried out.
What can often happen is a simple site conversation where the home owner innocently changes a product or selection, thinking it will be the same cost, can end up resulting in a very costly exercise for the home owner. Where builders know that variations have to be subject to writing, they will make decisions more carefully and explain them to home owners’ in more depth, as ultimately the risks in those circumstances lies with the builders.
The defects liability period is the period of time where the builder is required to return to repair any defects. This will usually start at the date of practical completion. It is important to check your contract to determine the length of any defect liability period before you enter into your contract to ensure that it is likely to be sufficient, builders will often try for a six month liability period where as twelve months is industry standard.
Prime cost items are fixtures and fittings that may be listed in the contract but not specifically identified and costed – usually because the exact type was not decided on at the time of signing – so the price is only an estimate. Ideally, you should avoid prime cost items as much as possible by deciding on as much as possible as early as you can. Provisional sum items are those that are listed in the contract for possible additional work where a builder is only able to make an estimate of the cost at the time. Items such as these should be avoided where possible as it can increase your overall costs.
Sometimes, however both prime cost and provisional sum items are unavoidable, and in these instances we recommend home owners negotiate a certain ‘capped amount’ with the builder, to ensure builder accountability in product estimation and selection.
Before construction begins, it is important that your builder undertakes appropriate site investigations to determine the soil type, rocks that may need to be removed, and other things that could lead to unexpected price variations later on. Your contract should include warranties relating to any necessary site investigations, and it is very important that all these latent condition issues are covered off before hand, so as to avoid contract price blow out.
The date for practical completion is the date that the construction is scheduled to be completed, barring any unexpected delays. This date should not be left blank on your contract and it should be a realistic estimation of when the project is required to be completed.
Something to consider when entering a contract is whether you want to include a liquidated damages clause. Liquidated damages are a set amount per day that the builder will pay you for every day past the date for practical completion that the work is not finished.
We always recommend that a liquidated damages amount be specified in the contract, because it will motivate the builder to complete the project on time. If there are no liquidated damages amount in the contract, the main remedies available to home owners for late delivery is a breach of contract claim, and most builders know this is a lengthy and expensive process so home owners are unlikely to go down this route.
While it might seem obvious, it is important to ensure that your builder has the appropriate licences for the work they are contracted to do. You should also check whether their work is of a quality you are expecting and whether they have received formal orders from QBCC to rectify defective work. If there are a large number of these orders, you may want to steer clear of the relevant builder and engage a different builder instead. Always ask for references as well, and make sure you contact the references or do standard google review searches, to ensure previous good experiences with that specific builder.
To ensure you fully understand your contract and that there aren’t any hidden surprises, the team at Enterprise Legal can help.
Make sure you contact us before you enter into the relevant construction contract, and we will gladly assist in the review and negotiation of same:
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Obviously one of the biggest areas of uncertainty regarding the impacts of COVID-19 is on staff. Our expert Employment Law Team has put together the following overview, regarding standing-down employees and making employees redundant as a result of the current pandemic.
Pursuant to sections 524 and 525 of the Fair Work Act, employers can stand employees down without pay during a period in which the employee cannot usefully be employed because of:
During a legitimate stand down period, employees do not need to be paid but they will accrue leave in the usual way.
Whether a particular employee can be usefully employed is a question of fact to be determined having regard to the circumstances that face the individual employer and the specific employee. “Usefully employed” has not been defined, but Courts have in the past determined that if an employer is able to obtain some benefit or value for work that could be performed by the employee, then the stand down provisions will not apply.
For example, let’s say a local take away shop has to ‘shut its doors’ due to a government lock-down proclamation, then it may be reasonable to stand the front-line employees down without pay, but employees who do accounts, bookkeeping, marketing and alike may not be eligible to be stood down because there may still exist an opportunity for them to be ‘usefully employed’.
Awards, Enterprise Bargaining Agreements and Employment Agreements could alter the statutory position above, so EL always cautions clients against taking an action as drastic as stand down without pay until considered legal advice tailored to that client’s business and the specific employee(s) have been obtained.
Because of the significant impacts stand down without pay can have on employees, EL would treat such a step with extreme caution. Fair Work guides at the moment are saying that ‘best practice’ would be to discuss different options with each employee, and consider letting employees take leave on the basis of paid leave such as sick, annual, long-service etc. where available, or to allow them to work from home where possible.
However, EL recognises that sometimes when there is a stoppage of work, standing employees down without pay may be the only option available to our clients, and in those circumstances we encourage clients to contact us for a tailored, short-form advice from $1,350.00 (including GST).
Some EL clients may see their business take such a downturn that they need to consider making employee(s) positions redundant.
Essentially, a redundancy could be a potential strategy for employers where an employee’s position is no longer required by the employer due to restructure or operational changes in the employer’s business, which renders the position unnecessary. The work or role must no longer be required to be performed by any employee.
The Fair Work Act has strict requirements that employers must meet prior to qualifying for the redundancy provisions, and a relevant Employment Agreement, Award or Enterprise Bargaining Agreement may create complimentary and/or additional onerous obligations on employers in this regard.
Given the current climate, EL’s advice is to approach any redundancy decision with caution, and always ensure you have sought tailored legal advice so as to minimise any risk or unnecessary exposure to your business.
Our expert Employment Law team can also assist your business by developing a range of customised and appropriate policies and documents – please contact us to obtain a fixed fee quote for these services. In the interim, our team has prepared a generic Coronavirus Policy for your free download and use, to ensure that your business is on the front-foot.
The application of the existing law to the current situation is rapidly-developing, so we encourage all clients to ensure they regularly check our platforms for updates or to contact us directly with any concerns that they have.
It is difficult to know what has spread more prevalently over the last two weeks – COVID-19 itself or the vast, vast amounts of information, misinformation, tips, tricks, commentary, opinions, guidance etc. regarding COVID-19! Like all things at EL, we don’t seek to ‘add to the noise’ by replicating some of the great content that has already been published, but instead, our focus is on assisting business owners to implement practical, easily-adoptable strategies to help lower the immediate impact of the Corona-situation on their business.
So, you own or manage a business? Read on to find out what you can do…
Obviously one of the biggest areas of uncertainty regarding the impacts of COVID-19 is on staff. Our expert Employment Law Team has put together the following overview here, regarding standing-down employees and making employees redundant as a result of the current pandemic.
Of course, it is imperative for businesses to understand that the application of the current law to their employees can significantly differ on a case-by-case basis, so be very wary of adopting generic advice. Our Employment Team is across this topic and can provide properly-considered, tailored advice to ensure your specific business is covered.
We can also assist by developing a range of customised and appropriate policies and documents – please contact us to obtain a fixed fee quote for these services. In the interim, our team has prepared a generic Coronavirus Policy for your free download and use, to ensure that your business is on the front-foot.
The application of the existing law to the current situation is rapidly-developing, so we encourage all clients to ensure they regularly check our platforms for updates.
Brick and mortar stores are already suffering, with people (rightly) avoiding unnecessary trips to the shops. If you run a business with a shopfront, we strongly recommend that you engage us ASAP to commence negotiations with your landlord regarding potential rent reductions, delayed rent payments or adopting other mitigation strategies. There are plenty of commercial proposals that can be put to landlords during this time and reaching early agreement on these matters will assist businesses to survive and landlords to keep their shops tenanted. The terms of your lease may also offer some assistance at this time.
Face-to-face service-based businesses will unfortunately suffer hardest from COVID-19, particularly those in the wedding, events and conferences sector. Business operators and customers alike are shortly going to have to make some tough decisions about cancelling contracts and the implications around refunds and re-bookings will be important. Contact EL ASAP so that we can advise you on your legal obligations in this regard and provide you with practical, commercial suggestions for ensuring the long-term survival of your business.
The EL team is of the view that businesses need to be careful not to assume that they can ‘simply weather the storm’ of Corona, by holding tight for a few months.. The reality is that no-one really knows the length of the economic disruption that Covid-19 will cause, so our advice is for all businesses to stop and consider how they can innovate within their business during this time. Already, there are plenty of businesses leading the charge in this regard, with home delivery, new product development (hello family roll – Google it if you haven’t come across it yet!) and new delivery methods being adopted by small business in an effort to leverage opportunity from an otherwise difficult situation. There has never been a better time to evaluate your businesses’ strengths and weaknesses and pivot so that it is heading in the right direction!
Unless you are a doctor or a scientist, the number one way that you can help society at this time is to be a socially-responsible human being, who adopts and promotes common sense at all times! This extends to making sensible, balanced decisions for the ongoing viability of your business and not ‘sticking your head in the sand’ about the situation.
The Enterprise Legal team are not your average lawyers – we are able to assist you with navigating this challenging time for your business, by bringing our uniquely commercial approach to the legalities of the situation! Call our team today.
With businesses starting to receive JobKeeper payments, the economy is in the midst of transitioning to the ‘new normal’ and business owners are finally starting to feel like they can, at least somewhat, breathe again. Consequently, now is the time to ‘take stock’, conduct an audit and ensure that the measures that your business implemented (most likely in haste), over the past few months are not now leaving your business exposed to potential claims and other legal risks.
Notably, a new section was introduced into the Fair Work Act 2009 (the Act), which allows the Commission to deal with disputes specifically regarding employer ‘JobKeeper directions’. This dispute mechanism allows for employees to lodge an application (at no cost) detailing their dispute, to which an employer must then respond to the application in the relevant time frame. Once the application and response has been submitted, the Fair Work Commission will deal with the dispute via arbitration, mediation, conciliation or alike, and it has broad powers to make orders “to give effect to a direction, set aside the direction, substitute the direction for a different direction or any other direction it considers appropriate”. There are also civil penalties that can be imposed on the employer, in certain circumstances.
New figures revealed by the Fair Work Commission show that its overall workload is already up by 40% compared to April 2019, with the increase apparently due to more cases about unfair dismissal, JobKeeper directions and JobKeeper payment disputes.
As at 7 May 2020, the Fair Work Commission had already received 212 disputes pertaining to the JobKeeper scheme, with the leading dispute topic being JobKeeper directions pertaining to changes to employee working hours.
Most businesses had to respond quickly to be able to adapt to the COVID-19 impacts and this saw a number of businesses taking drastic measures both in the restructuring of their businesses (such as new service offerings and operating hours), but also in the restructuring of their employees and the basis on which they are employed (such as reduced hours, different hours, change of duties and roles, change of location of work and so on). Most of these changes to employees’ employment can be made legally in certain circumstances, provided they strictly comply with the requirements of the Act. The problem is, most of these changes were made in a ‘reactive’ manner by businesses and when businesses ‘react’ they can often fail to comply with the myriad of applicable legal requirements.
The above examples are a mere snapshot of certain key considerations that employers ought to turn their mind to, so as to avoid unnecessarily exposing their businesses to legal claims and potential civil penalties.
It is now critically important that businesses audit the decisions they made over the past few months, to ensure those decisions strictly complied with the relevant laws, regulations and rules. Where it is found that decisions didn’t comply, a number of corrective measures are available to businesses to correct or mitigate any potential impacts.
If your business needs assistance, our team of employment law experts are standing by ready to guide you through this audit process.
EL has further put together an exclusive JobKeeper Audit Package, available to the first five businesses (with under fifteen employees) who contact us, under which we will audit your business and provide you with a compliance report and summary of required corrective measures (if necessary) for a fixed fee of $2,200.00 (incl. GST).
Call our team today to take advantage of this exclusive offer:
Provisions of the Building Industry Fairness (Security of Payment) and Other Legislation Amendment Act 2020(Qld) (the Act) will take effect on 1 October 2020, introducing significant payment security reforms.
In particular, the Act introduces a new remedy for head contractors that have not been paid an adjudication debt by a principal/client following the filing of an adjudication certificate. This remedy allows a head contractor to request a charge over the property on which construction work was carried out where:
Importantly, this charge is lodged with the registrar of titles and is to exist for 24 months after registration unless discharged, set aside, or the adjudicated amount is paid.
Additionally, a head contractor is able to enforce the charge by application to the Court for orders that the property is sold, which will authorise the sale of the property free of all encumbrances and will have effect regardless of any encumbrances. The Act defines ‘encumbrance’ to mean:
This mechanism means that a head contractor is able to apply to have the property sold, even if there are prior encumbrances.
On settlement of sale of property ordered by the Court, sale proceeds would be applied in the following order:
This is a very powerful tool available to head contractors because it provides them with practical, relatively straightforward and economical leverage to force compliance by principals/clients or risk serious ramifications that typically otherwise only eventuates in very limited circumstances.
To avoid any charges being registered and enforced, principals/clients should ensure that any adjudication amounts are paid as a matter of priority. Under the Act, payment must be made 5 business days after the adjudicator’s decision, or a later date if decided by the adjudicator, so it is important that principals act quickly to prevent the registration and enforcement of potential charges.
Need further clarification? Enterprise Legal are Toowoomba's construction law experts - make a time to see us today:
If you’re building a house, you should be aware that the Queensland Building and Construction Commission (QBCC) may be able to provide assistance for any loss that is sustained in the event of defective or incomplete work through the Home Warranty Insurance Scheme.
The catch, however, is that you need to carefully follow the QBCC process and rules which can be very onerous at times, to ensure that your application is not excluded.
One of these conditions is that the relevant building contract must be properly terminated before a claim is made, otherwise it could result in the QBCC disallowing the claim. In a recent decision of Allen & Taylor v Queensland Building and Construction Commission  QCAT 63 the importance of complying with the legislative pre-conditions were emphasised.
In that particular case, the question was whether the homeowners had properly terminated their residential building contract prior to making a claim under the Scheme, which is a condition precedent to being able to access the home warranty insurance. In this case, the builder entered into a contract with the homeowners in early 2016, but little progress was made at the time of termination. In November 2017, the homeowners served a Notice of Substantial Breach for a number of breaches, including failure to complete the standard of work required and terminated the contract.
The Tribunal decided that the contract was not properly terminated under clause 1.2 of the Scheme. This clause sets out that the QBBCC will only pay for losses sustained when the contract with the contractor has been properly terminated. While the homeowner’s contract gave them the right to terminate in the event of a breach by the contractor, the Tribunal held that there was no breach on the basis that:
Given that the Tribunal felt that the builder was able to provide a response to the Notice to Show Cause, it was determined that the defects that the homeowners claimed were not substantial enough to justify their termination of the contract. As a result, it was held that they were not able to make a claim under the Scheme.
If you’re concerned about the progress or quality of your residential building project, it’s important that you act carefully if you want to ensure that you can make a claim under the QBCC Act.
If you think you may need to bring a claim, contact the team at Enterprise Legal to discuss your rights, obligations, and options to ensure that you aren’t barred from making a claim:
In this digital age, many businesses are embracing all the new and exciting things technology has to offer including remote working, virtual meetings and electronic file sharing.
Whilst technology has indeed revolutionised a number of ways in which we work and communicate, the legal industry is still quite a ways behind and you will find yourself dropped into hot water if you do not do your research and check if your tech-savvy approach will be accepted by a court.
The case of McCarthy v TKM Builders Pty Ltd  QSC 301 is an important example of when the use of Dropbox proved fatal to an application under the Building Industry Fairness (Security of Payment) Act 2017 (Qld).
The Building Industry Fairness (Security of Payment) Act 2017 (Qld) (“the BIF Act”) provides for, among other things, the adjudication of disputes over progress payments in building construction contracts.
Importantly, as part of the process of applying for an adjudication decision, the BIF Act requires that an applicant must give a copy of an adjudication application to the respondent. Quite literally, section 79(3) of the BIF Act states:
‘A copy of an adjudication application must be given to the respondent.’
In the case of McCarthy v TKM Builders Pty Ltd  QSC 301, the applicant, Mr McCarthy and TKM entered into a construction contract for a building project at Bells Creek.
Later, TKM filed an adjudication application in the Queensland Building and Construction Commission and on 15 June 2020, they sent an email to Mr McCarthy, attaching the adjudication application form and a Dropbox link to their submissions. The email simply stated:
“Please find below link to correspondence and attached adjudication claim lodged with the QBCC today.https://www.dropbox.com/sh/jt7427ejjhz70ik/AACVuiCVC1Ug2YG6X27CFBuca?dl=0”
Of importance, the submissions could only be obtained by opening the Dropbox link.
Mr McCarthy’s solicitors prepared and submitted a response to the adjudication application and argued that Mr McCarthy had not been given a copy of the adjudication application in accordance with s 79(3) of the BIF Act and, as a result, the adjudicator did not have jurisdiction to deal with the application.
Upon examination, the adjudicator held that he did have jurisdiction to deal with the application, on the grounds that:
‘the fact is that it has been demonstrated that the respondent was in possession of a copy of the adjudication application and its supporting submissions. If a document has been received by the other party, the manner in which it was served is unlikely to matter.’
The adjudicator found in favour of TKM on the payment claim and Mr McCarthy paid the amount found to have been owing.
The matter was subsequently appealed in the Supreme Court of Queensland and overturned by Judge Martin J, who found that TKM had failed to appropriately give Mr McCarthy the adjudication application as required by section 79 of the BIFA Act.
His reasoning? Dropbox was simply not sufficient for the purposes of section 79 of the BIFA Act and section 39 of the Acts Interpretation Act 1954 (Qld) which also provides for the service of documents.
In making his decision, Judge Martin referred to the decision in Conveyor & General Engineering Pty Ltd v Basetec Services Pty Ltd  1 Qd R 265 at 268 , where Justice McMurdo said:
“ Actual service does not require the recipient to read the document. But it does require something in the nature of a receipt of the document. A document can be served in this sense although it is in electronic form. But it was insufficient for the document and its whereabouts to be identified absent something in the nature of its receipt. The purported service by the use of the Dropbox facility may have been a practical and convenient way for CGE to be directed to and to use the documents. But at least until 2 September 2013 (when Mr How became aware of the contents of the Dropboxes), it did not result ‘in the person to be served becoming aware of the contents of the document’.”
Judge Martin held that Mr McCarthy was not given a copy of the adjudication application in accordance with section 79 of the BIFA Act and as a result, the adjudicator did not have the necessary jurisdiction to make the decision.
It is pretty clear that if you are required to ‘give’ another party a document under the BIF Act, you should avoid using Dropbox. You will save yourself being dropped into some seriously hot water like TKM in this matter.
Whilst it might be tempting to use exciting new technology in every aspect of your business and dealings, how you share, serve and file documents in legal proceedings can make or break your claim and it is therefore vital that you get the right advice from the start before you take a wrong turn.
For advice and support with disputes and the construction industry, contact our Dispute and Construction division:
Sharne Lategan Principal Director & Legal Advisor – Construction & Disputes