Get your 5 Minute Fix of major projects and construction news. In this issue: the NSW Government announces its 20-year Research & Development Roadmap; the Victorian Government responds to the Commissioner for Better Regulations Supply Chain Review; the Victorian Supreme Court of Appeal considered the common law concept of accord and satisfaction; the WA Supreme Court considers implied licences for home building plans; and the NSW Supreme Court upholds contractually agreed dispute resolution procedures in the face of technical arguments.

The 20-Year NSW Research & Development Roadmap

The NSW Government has released its 20-year Research & Development (R&D) Roadmap, laying out the State’s long-term strategy to leverage science and technology to maximise economic, social and environmental prosperity.

The Roadmap aims to identify where NSW holds the competitive advantage, direct and develop public and private sector investment in specific R&D sectors and to provide a framework to accelerate development in existing and future industries.

The Roadmap is organised into four technological themes; digital, materials and chemistry, biotechnology, and energy. It identifies 39 specific applications within those four key themes (ranging from cybersecurity to nuclear science) where prioritisation will likely yield the greatest benefit. The Roadmap also indicates the development of action plans to carry R&D from vision to reality.

Implications for the built environment and public transport

While wide-ranging, the Roadmap foreshadows several possible trends and directions for the built environment, infrastructure and transport sectors. Areas of key interest to these sectors include:

  • delivering asset management systems and sustainable building technologies. The objective is to position NSW as an AI and data analytics development hub to deliver this capability to the wider Asia-Pacific region;
  • integrating Internet of Things (IOT) devices into smart buildings and public transport systems. However, leveraging these new digital technologies also creates risks for information to be compromised and new cyber risk challenges; and
  • recognising the concentration of low carbon materials and chemicals R&D companies in NSW and the increased demand for their products. The Roadmap anticipates that smart materials developed in NSW will continue to deliver breakthroughs to a booming construction sector.

The Roadmap also acknowledges the transformation in the Energy space stemming from public and private investment in green power fuels and clean chemicals and continuing interest in renewables. It predicts significant activity in the building sector in decommissioning fossil fuel infrastructure, construction of renewable energy and clean chemical plants and the conversion of existing grid infrastructure to adapt to new capabilities.

The Victorian Governments response to the Supply Chain Review

As a result of the unprecedented increase in demand and pandemic related disruptions, supply chain issues continue to plague the Australian building industry. In an effort to alleviate the downward pressure felt by the industry, the Commissioner for Better Regulation (in consultation with a range of stakeholders across industry groups and government) conducted a supply chain review and, in October 2021, released the report: Addressing Supply Chain Challenges.

The report made 10 recommendations for consideration by the Victorian Government grouped into the following themes:

  • alleviating supply issues in the short-term;
  • assisting industry and consumers to respond to the supply chain impacts in the short-term; and
  • providing incentive to protect against future shocks over the medium to long-term.

The Victorian Government released its response on 14 April 2022: Response to the Commissioner for Better Regulation’s Final Report on Addressing Supply Chain Challenges. For the most part, the Government provided various degrees of support for the recommendations. But, the Government did not support the Report's recommendation for a cost escalation clause for domestic building contracts under $500,000 (Recommendation 4), reasoning that "a cost escalation clause would unfairly increase uncertainty for consumers entering domestic building contracts". Such a clause would be contrary to the Domestic Building Contracts Act 1995, which is designed to protect consumers.

(I Can’t Get No) Accord and Satisfaction

In Zivkovic v Parke [2022] VSCA 43, the Victorian Supreme Court of Appeal considered the common law concept of accord and satisfaction.

Although the appeal considered whether a settlement agreement in defamatory proceedings amounted to accord and satisfaction or accord and conditional satisfaction, the case provides a refresher on the concept of accord and satisfaction, which is useful in the context of final certificates in construction contracts.

In Zivkovic, Justice Kyrou summarised the common law concept of accord and satisfaction as follows:

“An accord and satisfaction describes a settlement agreement which becomes a binding contract when it is made and has the effect of discharging the plaintiff’s cause of action at that time, irrespective of whether the defendant complies with his or her obligations under the agreement.”

The settlement agreement becomes the "accord", and compliance with the obligations of the accord replace the relief the plaintiff claimed, "satisfying" the plaintiff’s original cause of action.

For example, if a plaintiff settles a claim for $1,000 by accepting the defendant’s promise to pay $100 within 30 days, the promise itself becomes consideration and discharges the plaintiff’s claim for $1,000. Once the agreement has been made, the plaintiff's only right is to receive $100. Should the defendant default, the plaintiff’s only remedy is to enforce the contract.

The term "accord and satisfaction" is used in clause 37.4 of AS 4000-1997: "The final certificate shall be conclusive evidence of accord and satisfaction and in discharge of each party’s obligations".

The principle summarized by Justice Kyrou can be applied to AS 4000-1997 in which the provision of a final certificate acts as conclusive evidence that each party has discharged their obligations under the contract, thus extinguishing further claims excepting:

  • fraud or dishonesty;
  • any defect or omission in the works which were not apparent at the end of the last defects liability period, or which would not have been disclosed upon reasonable inspection at the time the final certificate was issued;
  • accidental or erroneous inclusion or exclusion of any work, or figures in any computation; and
  • unresolved issues the subject of any notice of dispute served before the seventh day after issue of the final certificate.

Zivkovic serves as a reminder that contractors and principals should be mindful of the content of final certificates in case they give rise to issues concerning accord and satisfaction.

A licence to use design plans is not always implied

In Building Corporation WA Pty Ltd v Marshall (No 2) WASC 140, the WA Supreme Court held that clients who had contracted with a luxury home builder to prepare a "Design Concept Plan" did not have an implied licence to use the plans however they pleased. The case ultimately turned on its facts. However, the judgment has implications for residential building contracts, which often involve an initial agreement to draw up plans (in return for a small fee) that pre-empts a more substantial contract for design and construction if the client proceeds with the project.

The plaintiff builder claimed that since the Design Concept Plan was an artistic work, it owned the copyright in the Plan. The Court accepted that the plaintiff builder owned the copyright in the Plan. The issue was whether an implied licence arose in favour of the client, which would allow the client to use the Plan to construct a home.

Justice Tottle was unwilling to find an implied licence as a matter of law. The parties did not intend that the Contour and Conceptual Design would govern the entire process of designing a home. It was an agreement used by the plaintiff, who was a builder (not a design consultant), to prepare a full specification and fixed price proposal and governed "only the first stage of a process that might lead to the construction of a home". His Honour acknowledged that a licence to use designs might be implied in some circumstances to give business efficacy, but this was not such a case:

"It follows that the Contour and Conceptual Design Agreement is not stultified or undermined by denying the first defendants a licence to use the Design Concept Plan, because the construction of a home in accordance with the Design Concept Plan was not the contractual benefit the parties contemplated would be conferred by it."

Justice Tottle also acknowledged that an implied licence would be inconsistent with an express term of the Contour and Conceptual Design Agreement, which stated "Copyright of Designs will remain the property of Giorgi Exclusive Homes design fee to be credited against Building Contract". Moreover, his Honour observed that a reasonable person would understand these words to mean that the Contour and Conceptual Design Agreement "did not confer a right to use the Design Concept Plan to build a house unless and until they executed a building contract". His Honour was also unwilling to imply a licence, as a matter of fact, based on his conclusions concerning the limited purpose of the Contour and Conceptual Design Agreement.

The judgment in this case should be a reminder that if a party is paying a substantial sum for a design to be developed, for the avoidance of doubt or dispute, the parties must be clear and agree on what they are entitled to do with the designs.

NSW Supreme Court upholds contractually agreed dispute resolution procedures in the face of technical arguments

Alternative dispute resolution forms an essential part of the legal framework for construction and infrastructure disputes in Australia and other jurisdictions. Australian Courts have typically taken a strongly supportive approach to the enforcement of dispute resolution clauses in project contracts. A recent decision of the NSW Supreme Court provides further indication of the willingness of Australian Courts to hold parties to their contractually agreed dispute resolution procedures. Also it provides guidance on the meaning of "urgent interlocutory relief", being a common exception to an otherwise mandatory tiered dispute resolution process.

In WCX M4-M5 Link AT Pty Ltd v Acciona Infrastructure Projects Australia Pty Ltd (No 2) [2022] NSWSC 505, the plaintiff (the Asset Trustee) sought to injunct the defendants (the Contractor) from referring two substantive disputes to expert determination until after a procedural dispute concerning the expert’s jurisdiction had been determined by expert determination and arbitration. The Contractor, in turn, sought to stay the proceedings commenced by the Asset Trustee pursuant to section 8 of the Commercial Arbitration Act 2010 (NSW).

The Asset Trustee argued that:

  • the arbitration agreement was "inoperative" for the purposes of s 8 of the Act because the dispute had not progressed through the multi-tiered dispute resolution process contained in the contract which required negotiation, then expert determination, then arbitration; and
  • in any event, an injunction about the expert’s jurisdiction fell within a carve-out from the arbitration agreement for “urgent interlocutory relief”.

Justice Rees rejected the Asset Trustee’s arguments and stayed the proceedings finding that:

  • The arbitration agreement was not "inoperative" for the purposes of the Act simply because preliminary stages of the multi-tiered dispute resolution process had not been completed. Her Honour echoed the sentiment expressed in earlier cases that "to construe 'inoperative' to cover such a situation would turn the exception … into a backdoor for a party wanting to escape the arbitration agreement".
  • The Asset Trustee’s injunction was not an example of "urgent interlocutory relief". Urgency requires the matter to be "pressing, compelling or requiring immediate action or attention". The fact that it would cost more money to go through the expert determination process to resolve the initial dispute regarding jurisdiction did not render it "urgent" in the relevant sense. Further, the relief sought by the Asset Trustee would have the effect of supplanting the expert’s power to determine the sequence of the dispute, in effect permitting the Asset Trustee to resile from its contractual bargain.