Corrs High Vis: Episode 39 – Corrs Projects Update Q3 2019

Wayne Jocic (Consultant), David Hastie (Senior Associate) and Hanna Lee (Law Graduate), Corrs Chambers Westgarth

HL: Hello and welcome to Corrs Chambers Westgarth High Vis Podcast, the projects podcast series. My name is Hanna Lee and I am a law graduate with the Corrs Projects Practice Group. I am joined by Corrs Senior Associate, David Hastie, and consultant, Wayne Jocic.

Our podcast will focus on the Corrs Projects Update for this quarter commenting on major judicial developments affecting the construction and infrastructure industry in recent months. Today we will discuss three interesting cases: the High Court’s decision in Victorian Building Authority and Andriotis, which deals with the application of Commonwealth Mutual Recognition Legislation and considerations of good character requirement, the NSW Supreme Court case Lainson Holdings Pty Limited and Duffy Kennedy Pty Limited which is a good illustration of the limitations of expert determination and lastly, we will be discussing global claims and Built Environs Western Australia Pty Limited and Perth Airport Pty Limited No. 2.

David and Wayne welcome. David, perhaps if we could start with you. Can you please tell us more about the VBA and Andriotis decision.

DH: Thanks for that Hanna.

Well we’ll begin with in a recent unanimous decision of the High Court in VBA and Andriotis, the High Court effectively ruled that a building practitioner could not be barred from registering interstate under the mutual recognition legislation even though the interstate registration body found that particular practitioner had lied in their registration application in the first jurisdiction which in this case was New South Wales. The central issue in question was whether the Commonwealth Mutual Recognition Act permitted the Victorian Building Practitioners Board to consider whether Mr Andriotis was of good character under the relevant section of the Victorian Building Act which in this case was section 171C when addressing his application for registration in Victoria and whether this provision fell within the mutual recognition principle exception under the Commonwealth Act. Ultimately, the High Court held that a State Authority which in this case, as I’ve mentioned, was the Victorian Building Authority or the VBA does not have a discretionary power to refuse to register a building practitioner who is already registered in another State again which the example here was New South Wales. What this means is that the second State being Victoria can’t oppose – sorry I should say impose – a higher standard or qualification for registration then the first State.

So, in short, what we refer to the as the mutual recognition principle or section 17(1) of the Commonwealth Act unsurprisingly was held to trump a good character requirement in State legislation under the Victorian Building Act. So what does the Commonwealth Act say? Well the mutual recognition principal provides that a person registered for an occupation in one State may be registered in an equivalent occupation in another State or Territory after only notifying the local registration authority of that particular second State or Territory. Further, section 20(2) provides that the local registration authority which here was the Victorian Building Practitioners Board may grant registration on that particular ground. Section 17(2) provides for an exception which is that the mutual recognition principle must not affect the operation of laws that regulate the manner of carrying on an occupation in that second State. Now this is contingent on those laws not being and I quote “based” on the attainment or possession of some qualification or experience relating to the fitness to carry on that occupation.

So on the facts, what are we dealing with here? Andriotis was a registered water proofer in New South Wales and under the Commonwealth’s Mutual Recognition Act he sought to be registered in Victoria. However, as part of his application for his New South Wales registration it was found that he’d actually made false statements relevant to his work experience. Now the Victorian Building Practitioners Board subsequently refused to grant Andriotis registration on the basis that his New South Wales application demonstrated both dishonesty and he was, therefore, not of good character as required by the Victorian Building Act and the relevant Victorian Scheme which relates to registration. Now the Board refused to grant his registration and ultimately the Administrative Appeals Tribunal also upheld this decision. However, Andriotis successfully appealed to the Federal Court where it was held that firstly, a local registration authority does not retain any discretion to refuse registration under section 20(2) of the Mutual Recognition Legislation and in any event this good character requirement under the Victorian Building Act does not fall within the exception to the mutual recognition principle. After finding its way into the High Court, the seven judges handed down four separate judgments which were all consistent in that the VBA’s appeal was unanimously dismissed with costs and the matter was remitted to the Administrative Appeals Tribunal.

So what do we take away from this decision? On its face, it seems like quite a counterintuitive decision especially in the wake of what seems like a recent tidal wave of serious defects particularly in your high rise multi-dwelling residential buildings. Where a regulation body like Victoria’s Practitioners Board can’t reject a building practitioner who is not of good character alarm bells naturally ring and especially in the context of consumer confidence but as the High Court did emphasise in this particular judgment the VBA could take disciplinary action against a rogue practitioner or similarly should the first State impose any restrictions on that particular practitioner you know in this case such as Andriotis they would naturally filter down via the Commonwealth Act. So while there is obviously no uniform regulations or legislation governing builder and trade licensing in Australia at this particular point in time this High Court decision really does, however, emphasise the need for the States and Territories to take a nationally consistent approach to assessment of practitioner competency.

HL: Thank you very much Dave for that insightful discussion. Now, Wayne, can you please tell us a bit about the Lainson Holdings case.

WJ: Sure. So the Lainson Holdings case is in many ways a neat simple illustration of why expert determination can be very alluring but why it can also lead to some serious difficulties perhaps the parties don’t necessarily appreciate. So there is not really a need to get into the facts of this case but essentially Lainson engaged Duffy to do some construction work. The construction work happened to be at Cronulla but instead of being a nice time at the beach they ended up in the NSW Supreme Court before Justice Hammerschlag. So the way this came about was that the parties had a construction contract and for reasons that aren’t terribly clear had a separate deed providing that disputes under the construction contract will be dealt with by expert determination – nothing new there. Now they linked that expert determination to the IAMA Rules and I’m going to take a bit of a side here and just remind people that IAMA has now become the [07.42] Institute so it’s slightly outdated and not ideal drafting nowadays and the critical thing is that those old IAMA Rules provided two things. So one was that the expert’s determination was to be final and binding. Now think about that for a second - they’re pretty clear words. The second thing that’s provided for in the rules is that the expert is to determine the dispute according to law. So these are the two critical requirements.

So the dispute came about because Lainson considered that Duffy was in serious breach. Lainson purported to terminate and of course you might imagine the next line which is that Duffy considered that that purported termination was in fact a repudiation so they were fighting at this point about who was the wrongdoer. So the dispute ends up in expert determination. Now what the expert decided was that the contract was subject to an implied term. An implied term that the right to terminate had to be exercised reasonably and in good faith. So there is a question about whether that implied term should have been recognised and that’s really the issue. As a consequence, the expert found that Lainson had not terminated in accordance with that implied term and so Lainson effectively became the wrongdoer because it had repudiated the contract. So Lainson doesn’t like this and appeals to the Supreme Court and essentially the argument that Lainson makes is that the expert has made an error of law. So before Justice Hammerschlag there are really two issues. One is what it means for the expert to decide according to law and Justice Hammerschlag deals with this as one might imagine very systematically and reaches the conclusion that the words according to law impose some constraints on the expert. So the expert, for example, has to be honest, it can’t be biased, it can’t be colluding those sorts of things but it doesn’t mean that the expert has to get everything absolutely right. The second issue is whether the court should intervene to correct what may be an error of law and there the problem is this - expert determination is a contractual agreement between the parties. It is not supported by legislation in the way that commercial arbitration is and so his Honour thought that it wasn’t appropriate for the court to intervene in this circumstance because the parties had set up, had agreed a contractual mechanism, that contractual mechanism had been applied and so really that’s what the parties had agreed at the very beginning and I think the critical message as a result is that if you agree to a contract that provides for final and binding expert determination unsurprisingly, that expert determination is likely to be final and binding and that’s so even if the expert gets the law wrong. It’s a very neat decision for reminding us about some of the limitations of expert determination.

HL: Thank you very much, Wayne. Now if you could also tell us a bit about the Built Environs in the Perth Airport case.

WJ: Yes. So I think the critical thing is there in the name of the case. It’s a case that arose out of the Perth Airport project and it’s a complex project, lots of things can go wrong and what we commonly find is that it’s really difficult to untangle everything that’s happened. So I want you to compare that sort of construction project with somebody, for example, slipping in a supermarket they’re issues of causation and not terribly difficult but when you have so many things going wrong some of which might be attributed to problems of the world, some to the principal, some to the contractor then there’s a real difficulty in evidence and so the case really raises the issue of what are sometimes called “global claims”. Its different terminology the judgment is actually very useful in talking about distinctions between like true global claims, total cost claims, modified total cost claims but really one of the problems with all of these claims is what you prove. You have to be sympathetic, for the contractor it’s very difficult to prove chains of causation but of course for the principal it’s very difficult to oppose a claim for a large amount of money without much detail. To me that’s a central issue that arises practically in this case. Dave, I’m wondering whether you have any thoughts about the case and I suppose the practical complications of these sorts of global claims, however, we describe them.

DH: Yes thanks Wayne. I suppose when it comes to these sorts of global claims we often you know from firms like Corrs we often sound a bit like broken records but if you are a claimant contractor you really should only be considering bringing a global claim as a claim of last resort, Wayne, I really would’ve thought. You should only contemplate making a global claim if, say, the traditional approach, for example, tying specific costs to a specific causal event isn’t available to you. I guess too you know things to remember if going down the global claim path for a claimant is ensure there are no other sort of causes of the costs claimed and this must be crystal clear in your particular claim which in this particular case it just wasn’t. Built Environs really struggled with that. They were granted leave of the court to put on further expert evidence which frankly my understanding is that it didn’t really give much to the judge and in particular to Perth Airports.

WJ: Well that’s right and I think the really interesting thing about this case is that essentially in the Western Australian Supreme Court, Justice Kenneth Martin really invited the principal to move to strike out the relevant parts of the claim. So it’s just a clear reminder of these difficulties that if you’re going to make the claim essentially you have to be able to deal with the question of causation. It’s an issue that’s come up in numerous cases in the NSW Court of Appeal is another prominent example and really normally in these cases the message is the same. You need to prove and causations are a real difficulty in these global claims.

DH: Yes that’s right Wayne. Justice Martin in particular issued case management orders requiring Built Environs to file and serve expert evidence of what they’re alleging to be general drawing deficiencies and they also granted leave for Built Environs to plead the facts establishing the allegations and causation of loss relevant to these alleged general drawing deficiencies and frankly they didn’t do a good job of that and as a result Justice Martin got quite frustrated and it was all thrown out in the end wasn’t it.

WJ: Yes that’s right and I think unfortunately for contractors the common result in these global claims cases.

HL: David and Wayne thank you so much for joining me. My name is Hanna Lee and this has been the Corrs High Vis Podcast. Thank you for listening.

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