Sector overview

Trends, developments and prospects

What is the general state of the construction sector in your jurisdiction, including current trends, notable recent transactions/developments and future prospects?

In the 2017-2018 budget, the commonwealth government allocated A$75 billion for infrastructure spending in Australia. This allocation is focused on facilitating economic and job growth in the construction sector over the next 10 years.

Accordingly, each state and territory is investing in priority infrastructure projects. These priority projects include the establishment of the Western Sydney Airport in New South Wales, increased regional and general rail projects in Queensland and Victoria, and crucial road projects in Western Australia.

Overall, the Australian construction sector aims to use skilled migration as a means of driving economic growth. Further, there is a general trend towards enforcing sustainable environmental and planning processes in the delivery of these works.

Legal framework

Legislation

What primary and secondary legislation governs the construction sector in your jurisdiction?

Examples of primary legislation pertaining to building standards include:

  • the Home Building Act 1989 (NSW);
  • the Building Act 1975 (Qld);
  • the Building Act 1993 (Vic); and
  • the Building Act 2004 (ACT).

Examples of regulation pertaining to building standards include:

  • the Building Regulations 1993 (NT); and
  • the Building Regulations 2012 (WA).

Each state and territory also has legislation and regulations pertaining to security of payment. Examples include but are not limited to:

  • the Building and Construction Industry Security of Payment Act 1999 (NSW);
  • the Building Industry Fairness (Security of Payment) Act 2017 (Qld);
  • the Construction Contracts Act 2004 (WA); and
  • the Building and Construction Industry Security of Payment Act 2009 (Tas).

Authorities

Which authorities regulate the construction sector and enforce construction law, and what is the extent of their powers?

The Australian Building Codes Board has established a regulatory framework – the National Construction Code – which is given legal effect by acts and regulations of each state and territory.  The code is a performance-based code which provides guidance and compliance measures for buildings and building elements. The code establishes performance requirements which must be complied with.

Further, local government authorities impose prescribed standards for construction work. These standards establish building controls in relation to building utility, design and construction, as well as planning schemes that affect the characteristics of the construction works.

Construction law is enforced by the tribunals and courts of each state and territory.

Licensing

Project licensing

What licensing requirements and procedures apply to construction projects in your jurisdiction (eg, planning consents)?

A construction project will usually require a variety of licences, permits, approvals, certificates and consents depending on the size, nature and location of the project. Construction projects of all scales may be subject to scrutiny by authorities at the local, state and federal levels.

While smaller residential projects may only require building and specialist licensing and development approval, larger projects may also require zoning approvals, licences for heavy vehicles and high-risk work, and coordination with multiple statutory authorities.

Professional licensing and qualification

What licensing requirements and procedures apply to construction professionals, including any required qualifications?

Builders, tradespeople and construction professionals must be licensed to perform construction work in each of Australia’s states and territories. The licensing requirements vary depending on the nature of the construction work to be performed and the level of responsibility assumed by the individual. For example, a licence for general residential building work will not authorise a builder to supervise such work or perform specialist work (eg, electrical wiring work).

Licensing is generally administered by each state and territory government; however, holders of a licence for a particular type of work in one jurisdiction are usually entitled to perform equivalent work in Australia’s other jurisdictions.

Do any special rules and restrictions apply to foreign construction professionals?

Foreign construction professionals must hold the relevant Australian licences and qualifications to perform construction work in Australia. For construction professionals who have acquired their skills and experience overseas, the recognition of prior learning programmes offers an avenue to have such skills assessed and recognised in Australia and a faster path to the relevant Australian qualifications. Foreign construction professionals must hold an appropriate visa permitting them to work in Australia.

Project structures and relationships

Project structures

What corporate/formal structures are available for construction projects in your jurisdiction? What are the advantages and disadvantages of each? Are any structures explicitly prohibited?

There are many corporate structures available for construction projects in Australia, including joint ventures, public-private partnerships, subcontract arrangements, special purpose vehicles and consortium arrangements. The advantages and disadvantages of each corporate structure will depend on the particular construction project. Corporate structures that do not comply with Australian legislation will be prohibited, including under corporation or competition law.

Relationship management

Are there any special considerations for managing relationships with:

(a) Joint venture partners (where applicable)?

In relation to joint venture arrangements:

  • there is a view that there is a likelihood of an implied term of good faith (that can be excluded by the joint venture agreement); and
  • consideration must be given as to whether to use an incorporated joint venture (special purpose vehicle) model or an unincorporated joint venture with the two partners operating through a joint venture agreement.

(b) Contracting government entities in public-private partnerships (or other construction projects with a public element)?

In relation to contracting with the government, there are often requirements to be accredited through a state or commonwealth government accreditation scheme where the project is funded by the public sector. There are also obligations on the government to act in good faith, as well as model litigant obligations on the part of any government engaged in a dispute.

(c) Subcontractors?

The main issue to note with subcontractors is the operation of the security of payment legislation in each state, as well as ensuring that they are not contractors who are really ‘sham’ employees.

(d) Architects, designers, engineers and any other related professionals?

In relation to these professional services subcontractors, the main issue is to ensure that intellectual property is secured from the professional adviser and that they carry professional indemnity insurance to insure against negligent advice.

(e) Any other relevant parties typically involved in construction projects?

Not applicable.

Contracts and performance

Standard contract forms

What standard contract forms are used for construction projects in your jurisdiction? To what extent do parties deviate from these standard forms?

Examples of standard contract forms released by Standards Australia used in the construction sector include:

  • AS 4000-1997 – General conditions of contract;
  • AS 4902-2000 – General conditions of contract for design and construct;
  • AS 4905-2002 – Minor works contract conditions (superintendent administered); and
  • AS 4903-2000 – Subcontract conditions – design and construct.

Any deviation from the contract will depend on the unique circumstances of the transaction and is commonly reflected in:

  • the formal instrument of agreement, which accompanies the contract;
  • the body of the contract, as amendments; and
  • parts (and annexures) to the contract.

In addition, standard form contracts for specific areas of construction have been made available by different agencies, such as the Master Builders Association, the Property Council of Australia and the International Federation of Consulting Engineers.

Definition of ‘construction work’

How is ‘construction work’ legally defined?

While the following definition relates to the Building and Construction Industry Security of Payment Act 1999 (NSW), it provides an effective and comprehensive definition of construction work:

(b) the construction, alteration, repair, restoration, maintenance, extension, demolition or dismantling of buildings or structures forming, or to form, part of land (whether permanent or not),

(c) the construction, alteration, repair, restoration, maintenance, extension, demolition or dismantling of any works forming, or to form, part of land, including walls, roadworks, power-lines, telecommunication apparatus, aircraft runways, docks and harbours, railways, inland waterways, pipelines, reservoirs, water mains, wells, sewers, industrial plant and installations for purposes of land drainage or coast protection,

(d) the installation in any building, structure or works of fittings forming, or to form, part of land, including heating, lighting, air-conditioning, ventilation, power supply, drainage, sanitation, water supply, fire protection, security and communications systems,

(e) the external or internal cleaning of buildings, structures and works, so far as it is carried out in the course of their construction, alteration, repair, restoration, maintenance or extension,

(f) any operation which forms an integral part of, or is preparatory to or is for rendering complete, work of the kind referred to in paragraph (a), (b) or (c), including:

(i) site clearance, earth-moving, excavation, tunnelling and boring, and

(ii) the laying of foundations, and

(iii) the erection, maintenance or dismantling of scaffolding, and

(iv) the prefabrication of components to form part of any building, structure or works, whether carried out on-site or off-site, and

(v) site restoration, landscaping and the provision of roadways and other access works,

(g) the painting or decorating of the internal or external surfaces of any building, structure or works.

Governing law

Are there any rules or restrictions on the governing law of construction contracts?

Governing law clauses are particularly relevant in transactions where the parties operate in different states or territories. Generally, construction contracts in the Australian jurisdiction will contain governing law clauses which stipulate that the governing law is the state or territory where the project takes place.

However, despite the presence of a governing law clause, parties cannot contract out of certain legislation, such as certain provisions of the Competition and Consumer Act 2010 (Cth) and the security of payment legislation in each state or territory.  

Formalities

Are construction contracts subject to any formal requirements?

While the works for a construction project are often commenced prior to a formal contract being executed between the parties, it is best practice to reduce construction contracts to writing in Australia as early as possible. Letters of intent and preliminary agreements can be used prior to entry into the final written contract to facilitate the early stages of a construction project while the parties negotiate the remaining aspects of their legal relationship. Such documents may be capable of creating binding legal relations. In some contexts, such as for residential building work, a written contract is mandatory for construction work above a certain value.

Mandatory/prohibited provisions

Are there any mandatory or prohibited provisions in relation to construction contracts?

Construction contracts must have provisions which communicate each party’s capacity and intention to enter into contracts, the consideration provided and the agreement between the parties.  These provisions must be stated with certainty. Examples of provisions which are considered mandatory (or at least best practice) include, but are not limited to, the following:

  • scope of work of the construction contract, including timeframes and allocation of responsibilities;
  • payment schedule;
  • security required by the principal;
  • indemnities; and
  • provisions pertaining to dispute resolution, damages and relief available, and limitation clauses.

In contrast, any contractual provisions that purport to impose a penalty on the parties for non-compliance with the contract are prohibited from construction contracts; this particularly relates to excessive liquidated damages. Further, there is a prohibition under state and territory legislation on building standards which prohibits clauses that restrict or remove an individual’s statutory rights.

Implied terms

Can any terms be implied in construction contracts?

Terms can be implied in construction contracts by a court inferring the intention of the parties or by force of statue. These include terms that give contracts business efficacy, terms that were obviously intended by the parties and terms that are mandated in contracts of such sort by certain legislation.

The implication of terms into a contract may be excluded by the parties through the express terms of the contract itself. However, certain implied terms – such as the statutory warranties that apply to domestic building work – cannot be contracted out of by the parties. A range of national and state legislation constrains the ways in which parties may perform work under construction contracts, including through the implication of terms.

Common terms that are implied into construction contracts include the obligation of the principal (owner) to provide access to allow the construction work to take place, and a concept of good faith when taking work out of the hands of a construction contractor.

Risk allocation

How are risks typically allocated between parties to construction contracts?

The allocation of risk between parties is best guided by the principle that the party who should bear a risk is the party who has control of the risk, or who is at least adequately compensated for having assumed a risk out of its total control. Parties to a construction contract use a variety of means to allocate risk between each other. Contracts will contain indemnities that make it clear who bears the risks associated with particular aspects of the construction work. In major construction projects, cash retention, bank guarantees, parent-company guarantees, insurance bonds and similar instruments are frequently used to secure obligations, protect against the insolvency of a counterparty and secure cash flow in the event of a contractual dispute.

Limitation of liability

How and to what extent can parties to construction projects contractually limit or exclude their liability?

Parties are generally free to limit or exclude their liability through the terms of the construction contract. Usually, contracting parties intend that only the remedies expressly provided in the contract should be available against one another. If a party breaches a contract that comprehensively sets out terms detailing the consequences of such a breach, the other party will often be precluded from seeking relief on some alternative legal basis.

Parties are unable to contract out of certain statutory obligations, such as the guarantees and warranties contained in the Competition and Consumer Act 2010 (Cth) and legislation pertaining to building standards. Parties cannot exclude their liability for claims by third parties through a contract.

Liquidated damages

How are liquidated damages typically calculated and to which liabilities are they usually applied?

Liquidated damages must be a genuine pre-estimate of loss that the aggrieved party is likely to suffer due to the other party’s breach of the construction contract. 

Liquidated damages may be lower or higher than the actual damage ultimately suffered, but will be applied so long as documentation is provided showing that they were a genuine pre-estimate of loss. 

Liquidated damages often apply to disputes relating to the timing and delivery of construction works (eg, where there is an unjustifiable delay in completion of the construction work).

Force majeure

How are force majeure clauses treated in your jurisdiction? Is there a legal definition of force majeure events?

There is no prescribed designation of force majeure events in Australia, so contracting parties are free to set their own list. When a force majeure event occurs, the consequence for the parties depends on the extent to which the serious, unforeseen circumstances prevent the parties from fulfilling their contractual obligations. In many cases, a delay in performance caused by a force majeure event will not exempt a contractor from endeavouring to continue to perform its obligations as far as reasonably practical. When the event is prolonged or otherwise frustrates the contract, it may instead be in the interests of the parties to terminate. In addition to force majeure clauses, provisions for extension of time and delay costs and suspension and termination clauses are typically included in Australian standard form construction contracts to deal with force majeure events.

General performance obligations

What are the general performance obligations of contractors and employers?

There is a general obligation for contractors to provide a warranty that the construction works are completed:

  • with due diligence, due care and skill, and in accordance with the contract; and
  • in accordance with statutory requirements.

Further, construction works should befit for the specified purpose or result with which the contractor was engaged, using materials which are suitable for that purpose.

Similarly, there is a general obligation for employers to ensure that:

  • safety standards are in place to protect employees (and contractors) against harm to their health, safety and welfare while at work; and
  • minimum standards are enforced regarding hours, leave, public holidays and termination, in accordance with the National Employment Standards.

Project delays

How are project delays typically handled? Do any set rules, restrictions or procedures apply in this regard?

Construction contracts contain a range of provisions to deal with project delays, including provisions for extensions of time, liquidated damages and termination. The contract will specify when a contractor becomes entitled to an extension of time for the completion of the project. Such circumstances may include adverse weather conditions and a suspension of works caused by conduct of the employer or subcontractors. The contract may also set a sum for liquidated damages per day, which the employer can recover in the event of the contractor’s delay beyond the date for completion, provided that the sum is a genuine pre-estimate of the employer’s loss and not a penalty. The contract may stipulate the point at which a delay gives rise to a party’s right to terminate.

Contract variations

To what extent can the parties make variations to the contract? Do any set rules, restrictions or procedures apply in this regard?

Construction contracts nearly always contain provisions that allow the employer to vary the contract to require the contractor to perform more, less or different work than originally agreed. Contractors usually have no such right of variation against the employer. However, when the employer has ordered a variation, the contractor will usually have the right to an extension of time for the practical completion of the project. Further, contractors will generally be entitled to payment for work beyond the original scope of works where the employer ordered such a variation — provided that this is stated in the contract — or otherwise if the employer consented to that additional work and knew or should have known that it would increase the overall cost of the work.

Termination

What are acceptable grounds for the termination of a contract?

A party’s breach of a fundamental term or repudiation of the contract will entitle the other party to terminate the construction contract. In the construction setting this can be a drastic measure for employers because of the complications that come with replacing a contractor midway through the project. Parties should strive to protect their commercial interests through comprehensive contractual provisions for damages and consider termination only for the most serious breaches. For a contractor, the security of payment legislation in Australia specifies when it may suspend works without giving the employer the right to terminate the contract (eg, if the employer fails to pay a scheduled amount before the due date for a progress payment).

It is also not uncommon for construction contracts to contain ‘no fault termination’ (or termination for convenience) provisions allowing one (usually the principal) or both of the parties to terminate with notice.

Remedies for breach

What remedies are available for the breach of construction contracts?

The following remedies are available:

  • General damages are available for breach of contract, which compensate a plaintiff for breach of contract by seeking to put it in the position it would have been in but for the breach of contract. Any damages are always subject to the rules of mitigation.
  • Liquidated sums in the form of a debt – where the sum sought is expressed within the contract, the plaintiff does not have to prove loss or damage, but the amount claimed must be a genuine pre-estimate of the loss.  
  • Restitution – stemming from principles of justice and equity, restitution is non-compensatory and aims to restore a plaintiff to the position had the contractual promise been fulfilled. This remedy is available only in specific circumstances that trigger the equitable relief.
  • Specific performance – the defendant may be ordered to perform its obligations under the contract, although this is a rare remedy in a basis construction contract dispute, as damages would usually be an adequate remedy and forcing performance is not considered to be the best remedy where damages suffice.
  • Injunction – injunctions can be used in construction contracts to prevent a party from breaching an obligation or enforcing a right that they may not have (eg, enforcing a guarantee or exercising rights of step-in).

Financing

Types of financing

What types of financing are used for construction projects in your jurisdiction? Which are the most common? Are there any restrictions on available financing methods?

Project finance is used in Australia for large construction projects, including for transport, energy, mining and resource-related projects as well as public-private partnerships (PPPs). Such projects are typically financed principally by debt funding, with the balance provided by equity, subordinated debt or both. Some infrastructure projects, including PPPs, are listed on the Australian Stock Exchange to attract institutional investment. Other financing options include short-term, limited-recourse finance, medium-term bonds and long-term annuities. The nature and scale of the construction project, as well as the stage at which financing is sought, will determine the appropriate financing option for a construction project.

For non-infrastructure projects (eg, residential development), debt financing from institutional lenders or mezzanine lenders is common.

Security

What forms of security are used in construction project financing?

The following are the most common forms of security used in construction projects in Australia:

  • cash retention;
  • bank guarantee;
  • insurance bond;
  • unconditional performance bond (sometimes called a ‘surety bond’);
  • parent company guarantee;
  • deed of guarantee and indemnity;
  • parent company guarantee;
  • comfort letter;
  • prepayment of unfixed plant (supported by a security, usually a bank guarantee);
  • letter of credit;
  • mortgage; and
  • charge over real property.

Payment

Methods and timing

What are the typical methods and timing of payment for construction work? Are there any restrictions on ‘pay when paid’ and ‘pay if paid’ provisions? Do any other rules, restrictions or procedures apply?

Examples of the methods of paying for construction works include the following:

  • Fixed price contracts – a sum to complete works is agreed on. The amount may be adjusted to account for variations of costs or on completion.
  • Cost plus contracts – the contractor receives payment for the cost of carrying out the construction works plus a percentage of fees.
  • Rated contracts – a schedule of fees in which costs are fixed per unit of labour and/or material is agreed on. Where the nature of the work or the material to be provided is uncertain, a provisional sum may be included.

Construction works are commonly paid in instalments (ie, progress payments). Further, the security of payment legislation in each jurisdiction establishes restrictions on ‘pay when paid’ and ‘pay if paid’ provisions and in some states (eg, New South Wales) prescribes a payment term of 15 business days for head contractor and 30 business days for subcontractors.

Non-payment

How can the contractor secure itself against non-payment by the employer? Under what circumstances can the contractor suspend work for non-payment?

Australia has state-based security of payment legislation which gives contractors statutory protection against non-payment by principals. Under the security of payment regimes (which differ slightly from state to state), contractors providing goods or services as part of construction work under a construction contract have the right to receive ‘progress payments’ for work delivered. If an employer fails to make payment within the required time in accordance with the relevant security of payment legislation, the contractor can apply for adjudication and any amount determined as payable by the adjudicator will be binding on the employee.

The circumstances under which a contractor may suspend work for non-payment will depend on the exact terms of the construction contract. Typically, a contractor can suspend work (or terminate the contract) where the principal has failed to make payment when due or failed to make payment within a specified time (eg, within 30 days from the due date).

Contractors can also require bank guarantees or deposits in relation to payment entitlements, although this is not something that principals will typically be inclined to provide.

How can subcontractors secure themselves against non-payment by the contractor? Under what circumstances can subcontractors suspend work for non-payment?

The security of payment regimes similarly provide statutory protection against non-payment for subcontractors via the right to receive ‘progress payments’ from head contractors. There are further protections under some security of payment regimes, including the Building and Construction Industry Security of Payment Act 1999 (NSW) which provides a subcontractor with direct rights against a principal to secure payments due to it from the contractor by requiring a principal to withhold money due to a contractor pending the determination of an adjudication application against that contractor. 

On what grounds can payments be withheld?

The contracts usually provide for circumstances allowing for withholding of payment under certain circumstances, such as defective work, where an indemnity is triggered or there is a breach of contract. Despite these contractual provisions, the security of payment regimes in the various states and territories provide for a statutory mechanism under which payment must be made for completed construction work.

Insolvency

Contractor insolvency

What recourse is available to employers in the event of the contractor’s insolvency?

The recourse available to employers in the event of the contractor’s insolvency will often depend on the contractual relationship between the two parties.

An employer may safeguard against the consequences of a contractor’s insolvency by:

  • including an express right to terminate a contract in the event of the contractor’s insolvency (however, a new law came into effect on 1 July 2018 under the Treasury Laws Amendment (2017 Enterprise Incentives No 2) Act 2017 (Cth) which affects a party’s contractual right to terminate, modify or suspend a contract on the basis that the counterparty suffers a pre-insolvency event as these are usually defined in the contracts, such as voluntary administration and receivership);
  • requiring the contractor to provide security under the contract (eg, an unconditional bank guarantee, performance bond or parent company guarantee) which may be called on in the event of the contractor’s insolvency; or
  • registering a security interest under the Personal Property Securities Act 2009 (Cth).

Insurance

Coverage

What mandatory insurance coverage applies to parties involved in construction projects? Is any additional coverage recommended?

Workers’ compensation and compulsory third-party insurance is required under legislation. There is also mandatory home warranty insurance for qualifying residential home building construction projects. 

The following are recommended to be included in the contract:

  • public and product liability – provides protection for personal injury to a third party or damage to their property;
  • professional indemnity – provides protection for personal injury and loss suffered by a third party in the provision of the principal’s professional services;
  • workers’ compensation – a mandatory provision by law, provides protection for injuries that occur in the workplace;
  • fully comprehensive motor vehicle insurance; and
  • works insurance – insuring against damage to the works during construction (usually the value of the works plus a contingency of 10% to 20%).

While the amounts of coverage will depend on the transaction, they are ordinarily as follows:

  • A$20 million for public and product liability;
  • A$10 million coverage for professional indemnity;
  • works insurance of 120% of the value of the works; and
  • workers’ compensation in an amount stipulated by law.

Tax issues

Liability

What tax liabilities arise in relation to construction projects?

A number of tax liabilities and measures may apply in a construction project. The most common are as follows:

  • goods and services tax – a national 10% tax on all goods and services procured by the contractor for the project;
  • stamp duty – a state-based tax on the value of property sold, which arises in a development on a dutiable sale of property;
  • payroll tax – a state-based tax paid by employers in relation to their employees;
  • income tax – a tax paid by entities on revenue and income; and
  • capital gains tax – a tax payable where there is a sale or disposal of a taxable asset as part of a development or project which may give rise to a capital gains tax event.

Incentives

Are there any tax incentive schemes to promote construction and development in certain areas?

Affordable housing

The commonwealth government is providing a tax incentive scheme for affordable housing from 1 January 2018 which will provide an additional 10% capital gains tax discount for resident individuals who invest in qualifying affordable housing.

First home buyers

There are also state-based measures to promote development by providing concessions on stamp duty to first home buyers where they meet the qualifying criteria.

Environmental issues

Environmental protection

What environmental protection legislation and regulations apply to construction projects in your jurisdiction?

The environmental protection legislation relevant to construction projects is state and territory specific. Examples include, but are not limited to:

  • the Environmental Planning and Assessment Act 1979 (NSW);
  • the Planning and Environment Act 1987 (Vic);
  • the Planning and Development Act 2007 (ACT);
  • the Environmental Planning and Assessment Regulation 2000 (NSW);
  • the Development Regulations 2008 (SA); and
  • the Land Use Planning and Approvals Regulations 2014 (Tas).

Authorisation/certification

What environmental authorisations and certifications are required for construction projects and how are they obtained?

Construction works must receive approval and/or consent from an authorised authority (eg, the local government authority) before commencement.

Consent is obtained after the principal lodges an application to the authority for approval. This application sets out the scope of the construction works.

Once approval is given, an expert (ie, building surveyor, inspector or certifier) must inspect the constructions works to ensure compliance with building regulations and the authority’s planning and development controls, such as the State Environmental Planning Policy 65 and the Residential Flat Design Code.

If the expert is satisfied that the construction works comply with building regulations and its controls, the authority may issue a construction certificate. At the completion of works, a compliance certificate may also be issued.

‘Green’ regulations and incentives

Are there any regulations or incentive schemes in place to promote the construction of energy-efficient and low-carbon buildings?

The Australian construction industry has regulatory programmes which encourage sustainable practices in the construction industry.

An example of this is the Commercial Building Disclosure Programme, which enables commercial office spaces of over 1,000 square metres to disclose their energy efficiency information. The energy efficiency of these properties is then rated according to the NABERS or Green Star rating systems.

Further, stakeholders in the construction industry are encouraged to engage in ecologically sustainable design approaches. These sustainable approaches adopt best-practice environmental and waste management processes throughout the entire construction work process.

The promotion of ecologically sustainable design approaches is evident, as a principal’s application for approval and/or consent to authorised authorities (eg, local government authorities) would commonly address environmentally sustainable practices for the conservation of energy, water and additional resources.

Employment issues

Employment and labour law

What employment and labour legislation applies to construction projects in your jurisdiction? What rights and protections are provided to construction workers?

The Fair Work Act 2009 (Cth) is the principal legislation in Australia that regulates employment and labour for construction projects. This national legislation applies in all states and territories; however, its scope differs somewhat from jurisdiction to jurisdiction (eg, Western Australia has its own system that covers the public sector and private sector employees of non-constitutional corporations). Generally, Australia’s employment legislation offers construction workers rights relating to minimum wages and salaries, work hours, leave, enterprise bargaining and workers’ compensation, as well as protection from discrimination, bullying and unfair dismissal. Further rights and protections may also be provided under any relevant modern award or enterprise agreement. Specific protections for labour hire workers exist in some states.

Occupational health and safety

What occupational health and safety regulations apply to construction projects?

The following apply:

  • commonwealth — Work Health and Safety Act 2011 (Cth); Work Health and Safety Regulations 2011 (Cth);
  • New South Wales — Work Health and Safety Act 2011 (NSW); Work Health and Safety Regulation 2011 (NSW); 
  • Queensland — Work Health and Safety Act 2011 (Qld); Work Health and Safety Regulation 2011 (Qld);
  • South Australia — Work Health and Safety Act 2012 (SA); Work Health and Safety Regulations 2012 (SA);
  • Australian Capital Territory — Work Health and Safety Act 2011 (ACT); Work Health and Safety Regulation 2011 (ACT);
  • Northern Territory — Work Health and Safety (National Uniform Legislation) Act 2011 (NT); Work Health and Safety (National Uniform Legislation) Regulations 2011 (NT);
  • Tasmania — Work Health and Safety Act 2012 (Tas); Work Health and Safety Regulations 2012 (Tas);
  • Victoria — Occupational Health and Safety Act 2004 (Vic); Occupational Health and Safety Regulations 2017 (Vic); and
  • Western Australia — Occupational Safety and Health Act 1984 (WA); Occupational Safety and Health Regulations 1996 (WA).

Employment contracts

What types of employment contract are typically used for constructions work? Are there any mandatory or prohibited provisions in relation to employment contracts?

The building and construction industry uses a variety of employment contracts to engage workers in a construction project. These include standard employment contracts, services contracts, period trade contracts and labour hire arrangements. The status of construction workers as employees or independent contractors may vary from project to project. The Fair Work Act prohibits ‘sham contracting’, which attempts to disguise employment relationships as independent contractor arrangements.

Australian legislation and the National Employment Standards impose restrictions and minimum requirements for employment contracts, covering annual, parental and long service leave, maximum weekly hours, redundancy pay and more. Employment contracts in the Australian construction industry may also be subject to the Building Code 2016, which has force under the Building and Construction Industry (Improving Productivity) Act 2016 (Cth).

Foreign workers

What rules, restrictions and considerations apply to the hiring of foreign workers?

Employers and contractors who hire foreign workers must take reasonable steps to ensure that the workers can legally work in Australia, or else face significant pecuniary penalties and imprisonment for more serious breaches. Different rules and restrictions apply to employing foreign workers such as international students, visitors on working holiday visas, refugees and skilled migrants. It may be possible and desirable for the business to sponsor the foreign worker for permanent residence in Australia or for a temporary work visa for up to four years.

Anti-corruption rules

Applicable rules

What regulations and procedures are in place to combat corruption, bribery, fraud, collusion and other dishonest practices in the construction sector in your jurisdiction?

Australia has a multi-agency and regulatory approach to combating corruption, bribery, fraud, collusion and other dishonest practices in the construction sector.

Anti-corruption and bribery offences are governed under the Criminal Code Act 1995 (Cth).

Each state and territory has also criminalised public and private bribery under the following acts:

  • New South Wales – Section 249B of the Crimes Act 1900 (NSW);
  • Victoria – Section 176 of the Crimes Act 1958 (Vic);
  • South Australia – Section 150 of the Criminal Law Consolidation Act 1935 (SA);
  • Queensland – Sections 442B to 442BA of the Criminal Code Act 1899 (Qld);
  • Western Australia – Sections 529 to 530 of the Criminal Code 1913 (WA);
  • Tasmania – Section 266 of the Criminal Code Act 1924 (Tas);
  • Australian Capital Territory – Sections 356 to 357 of the Criminal Code 2002 (ACT); and
  • Northern Territory – Section 236 of the Criminal Code Act 1983 (NT).

Independent organisations such as the Independent Commission Against Corruption in New South Wales also investigate and expose corrupt conduct in the public sector.

Best practices

What best practices are advised to ensure compliance with the relevant anti-corruption rules?

Anti-corruption best practices include:

  • creating an organisational culture, values and standards that encourage and reward compliance with anti-corruption rules, supported by the organisation’s leadership;
  • developing organisational anti-corruption policies and procedures and ensuring that administrative systems support good governance; and
  • including anti-corruption or no-collusion clauses in tender documents and construction contracts.

Dispute resolution

Courts

What courts are empowered to hear construction disputes in your jurisdiction? Are there any specialist construction courts?

Construction disputes are often heard first by bodies established by the state or territory government (eg, NSW Fair Trading). Where these bodies are unable to resolve these disputes, the tribunal in the state or territory has jurisdiction to hear these matters. In instances where the dispute cannot be successfully resolved at the tribunal hearing, the district or supreme court would usually intervene. 

While rectification orders are the preferred outcome in residential building disputes, the order(s) given by the state’s or territory’s tribunal or the courts will depend on the facts of the dispute. 

In addition, the security of payment regimes in the various states and territories have established a legislative adjudication process through which the parties resolve disputes under this legislation.

Common disputes

What issues are commonly the subject of construction disputes?

Examples of issues that are commonly the subject of construction disputes include:

  • defective work/quality of work/workmanship;
  • time and completing by the contractual completion date;
  • variations and work that is out of scope;
  • payment for out of contract directed additional work;
  • latent conditions – additional claims for matters affecting the work not known at the time of contract;
  • interference by principal or principal’s representative;
  • repudiation of the contract (eg, ‘down tools’, ‘walk off site’ or ‘stop work’);
  • failure to satisfy progress payments;
  • non-payment of contract amount;
  • valuation of additional work;
  • determination of contractual entitlements to extensions of time;
  • continuity of key personnel; and
  • a party engaging in misleading or deceptive conduct.

Statute of limitations

What is the statute of limitations for filing construction-related claims?

Generally, the limitation period is six years for contract-based clams and 12 years for claims under a deed (15 years in Victoria). The time is generally from the date of the breach. In some jurisdiction there is a statutory longstop date of 10 years on construction claims (New South Wales and Queensland) and in others the contractual limitation period has been found to be extended from six years to 10 years (Victoria).

The relevant legislation is set out below:

  • the Limitation Act 1969 (NSW);
  • the Limitation of Actions Act 1958 (Vic);
  • the Limitation of Actions Act 1974 (Qld);
  • the Limitation Act 1985 (ACT);
  • the Limitation of Actions Act 1936 (SA);
  • the Limitation Act 1974 (Tas);
  • the Limitation Act 1981 (NT); and
  • the Limitation Act 2005 (WA).

Mediation

Is pre-litigation mediation required or advised for construction disputes?

Dispute resolution clauses are usually included in construction contracts and may stipulate that the parties are required to attempt mediation prior to commencing any litigation. Pre-litigation mediation is desirable as it may facilitate a non-adversarial and cheaper resolution to issues that arise between parties involved in the construction project. Failing mediation, parties may have other avenues of recourse before appearing before the courts, such as through the specialist building and construction commissions and tribunals established in each state and territory.

Arbitration

How often is arbitration used to resolve construction disputes? What arbitration forms and institutions are typically used?

Arbitration is a commonly used method of alternative dispute resolution in construction disputes in Australia.

Whether arbitration is used by parties to resolve a construction dispute will often depend on whether it is a pre-agreed form of dispute resolution under the construction contract. For example, some Australian Standard contracts (eg, the AS4000 and AS4300 (unamended)) require parties to participate in arbitration as part of the contractual dispute resolution process.

Arbitration clauses are prohibited in residential building contracts in certain Australian jurisdictions (eg, under the Domestic Building Contracts Act 1995 (Vic)).