Legal Basis For Acciona's Essay On Counterclaims By Transport For New South Wales.

1.What is the basis in law for the claim by Acciona?

2.What would have to be established by Acciona to support their claim?

3.What would Transport for New South Wales have to establish in opposition of their claim and any counterclaim?

4.What is required for each side to prepare for the hearing and what sort of witnesses are required?

5.Having regard to the problems encountered in this case, what procedures would you formulate to cover to avoid problems of amendments in the course of construction and advice about the resolution of technical disputes and use of experts?

Basis in Law for Acciona's Claim

According to Acciona, one of the essential terms of the contract with Transport for NSW had been the handling of utility services in the course of contraction of the light rail line by Ausgrid. Acciona claims that it would not have accepted the bid or proceeded with construction had it known that Ausgrid had not agreed to deal with the electricity cables beneath its route line.  Acciona states that it had been “led to believe” that Ausgrid would handle the electricity cables which suggest this term was an implication to the contract and not expressly worded.

One of the founding principles of contract law which are reflected in common law and in statute is that; in order for a contract to be valid, there should be acceptance (Bailey, 2011). According to Article 2.1 of the Unidroit Principles, the “a contract may be concluded either by the acceptance of an offer or by conduct of the parties that is sufficient to show agreement”. In Hayden Young Ltd v Laing O’Rourke Midlands Ltd [2008] EWHC 1016, the court was of the opinion that acceptance should occur through conduct which objectively reflected a final and unconditional assent to the offer made. Silence would not qualify as assent unless accompanied by the conduct from the parties that would be construed as acceptance.

Another issue to consider in determining the claim by Acciona is the concept of implied terms. A term can be implied by law, or based on the intention of the parties (Bailey, 2011). Implied terms may raise issues of ambiguity. In Codelfa Construction Pty Ltd v State Rail Authority NSW (1982) 149 CLR 337, the plaintiff won a tender to excavate tunnels for a new railway line from the Commissioner for Railways at the time. According to the contract, the plaintiff was obligated to work three shifts a day for seven days a week. The work in itself was noisy which led to several injunctions being raised by residents against the plaintiff and subsequently led to the reduction of workable hours leading to additional costs and lost profits. The plaintiff made a claim against the Commissioner citing that there was an implied term that the work would not be subject to injunctions and that the contract had been frustrated based on these injunctions. The High Court in the matter held that there was no implied term as it could not be determined whether the parties would have agreed if they had expressly considered the matter. As such, external evidence could not be relied on to adjust the written terms of the contract. In B& B Constructions (Aust) Pty Ltd v Brian A Cheeseman & Association Pty Ltd (1994) 35 NSWLR 22 however, the court held that extrinsic evidence could be used to determine the intent or parties where ambiguity arose.  

Establishing Acciona's Claim

The final issue to consider in determining Acciona’s claim is whether the acceptance reflected genuine consent to contract; that is it was not given based on a mistaken belief, a misrepresentation, under duress or undue influence or on the basis of unconscionable behaviour. According to section 18 of the Australian Consumer Law 2010(Cth), a business or individual in the in the course of trade should not engage in conduct that would mislead or deceive or is misleading or deceptive to another party as this would amount to unconscionable behaviour which is, in essence, a breach of contract. Unconscionable conduct refers to behaviour that is unfair, or unreasonable as was illustrated in Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447. In this case, the plaintiffs were aware that the defendants spoke little English and as such were not fully aware of the implications of acting as guarantors to a contract between the bank and their son. The plaintiffs’ knowledge and procession with the contract despite the knowledge of the disadvantage caused to the defendant amounted to unconscionable conduct prohibited under s 18. Behaviour is considered misleading or deceptive if it induces or is likely to induce an error on the parties that rely on it (Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd , (1982) ). Additionally, deceptive and misleading conduct can be considered as a breach of good faith which is a term implied under common law as illustrated in Burger King Corporation v Hungry Jack’s Pty Ltd [2001] NSWCA 187.

Based on the legislation and precedence above, Acciona’s claim against Transport for NSW is grounded on the fact that Acciona accepted the terms of the contract on terms which were implied by the defendant’s conduct which can be argued to be misleading or deceptive as it led to the plaintiff acting in a manner that generated extra costs and loss of profits.

The first step to supporting their claim is proving the existence of a contract by establishing the elements of a contract which include: the offer, acceptance, consideration, intent to be legally bound, capacity and legality (Bailey, 2011).

In order to support their main claim, Acciona has to prove that the term relied on was an implied term in order to establish that it was misleading or deceptive. The court in BP Refinery (Westernport) Pty Ltd v Shire of Hastings [1977] UKPC 13, outlined that for a term to be considered implied it must be reasonable and equitable, necessary to give the contract effectiveness, obvious, capable of clear expression and not contradictable to the contract’s express terms. Additionally, as aforementioned, in order to be used as a claim for damages, the innocent party must demonstrate that the misleading or deceptive conduct of the other party or their agent was relied upon and used in a manner that affected the innocent party’s behaviour with respect to the contract in question (Bailey, 2011). Additionally, the reliance must be reasonable; an objective test is employed to determine the reasonableness of the reliance (Campbell v Backoffice Investments Pty Ltd, [2009]; Bailey, 2011).

Opposition to Acciona's Claim and Counterclaims by Transport for New South Wales

As illustrated in Abigroup Contractors Pty Ltd v Sydney Catchment Authority [2004] NSWCA 270, a corporation can be found to have engaged in conduct that is misleading or deceptive even if it acts honestly and reasonably. Therefore, acting honestly cannot be construed as a defence or opposition to the claim if the plaintiff can satisfy the conditions required to prove that the conduct was misleading and deceptive. The defendant can however challenge the validity of the term as an implied term based on the criteria outlined in BP Refinery (Westernport) Pty Ltd v Shire of Hastings [1977] UKPC 13 as well as the reasonableness of the defendant’s reliance on said term and contract based on the test employed in Campbell v Backoffice Investments Pty Ltd, [2009].

As a counterclaim, Transport for New South Wales can rely on the doctrine of promissory estoppel to compel Acciona to complete the contract. As stated in the facts of the case, the delay by Acciona has dire consequences on the economic stability of the city due to the state of the CBD. The underpinnings of the concept of promissory estoppel in Australia can be illustrated in the case of Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 386. The plaintiff in the case sought to establish a store and as such entered into negotiations to demolish a building and build a  new one. The plaintiff’s legal party sent a redrafted lease to the defendant's team with the negotiated amendments. The building was subsequently demolished, the plaintiff, however, claimed that there had been no lease of exchange of contract. The court held that the plaintiff’s behaviour was unconscionable as they adopted a course of inaction despite knowing the detriment in cost that the defendant would incur by proceeding with construction. The court held that the defendant, Maher, could rely on promissory estoppel as both a sword and a shield and that Walton’s could be estopped from retreating from the promise to complete.

In the current case, the urgency for completion is illustrated by the financial an economic costs the city stands to suffer in the current state. Acciona has also refused to provide a reasonable timeline for completion to the Transport ministry. The Trasport for NSW can rely on this as an illustration of the unconscionability arising form Acciona’s behaviour and use the doctrine of promissory estoppel as a counterclaim to Acciona’s suit.

The claimant is required to file summons which are accompanied by a Statement summarising their issues of contention (Bailey, 2011). They should indicate whether other dispute resolution methods such as arbitration or mediation have been attempted. The defence files a defence and counterclaim if any. Each party should indicate their list of witnesses.

Preparing for the Hearing

In this case, expert witnesses are essential to explain procurement processes and construction management to the court in order to determine the detriment of the actions of either of the parties to the success of the contract. The construction manager would play an effective role as an expert witness as their essential role is managing and coordinating operations at the site which includes controlling performance and overseeing the adherence to contractual obligations at the site such as working hours or working manners (Bailey, 2011).

According to Victoria University of Manchester v Hugh Wilson & Lewis Womersley (1984) 2 Con LR 43 and Equitable Debenture Assets Corporation Ltd v William Moss Group Ltd (1984) 2 Con LR1, having a written document in clear, simple and straight to the point language which encompasses all the specification of the contract is essential towards protection against legal issues arising from ambiguity in contracts. The clarity and conciseness which accrues from adopting these qualifications in construction contracts ensure that the end results of the project in question can be realistically achieved by all the parties involved that is, the builder, the site architect, the proprietor or their agent. Therefore in order to avoid future problems of ambiguity and amendments, it is essential that the parties engage in the development of a clear and concise contract.

With respect to the resolution of disputes, there are various avenues of dispute resolution in construction law. These include Arbitration, Mediation, Adjudication, Expert Determination and Litigation (Bailey, 2011). Usually, standard construction contracts are equipped with an arbitration clause which requires that parties subject themselves to an arbitration process prior to engaging a court of law to solve the rising issues (George, 2016). Where parties include an arbitration clause in their contract, the construction contract and the Commercial Arbitration Act 2010 will inform the process of arbitration by defining the arbitrator’s role and the procedure (George, 2016). The advantage is that the parties can choose an arbitrator who has technical experience in construction. Another approach to dispute resolution with respect to technical disputes would be litigation. With the introduction of specialist construction and building lists in most State and Federal courts, courts have the expertise to undertake technical disputes in construction cases (Pickering, 2016).

In construction law, experts can be used for dispute resolution in expert determination or as expert witnesses. Expert determination is suitable in resolving issues between parties which are of a more specialist or technical nature. The process is consensual as parties determine before commencing the process whether they will be bound by the expert’s decision (Quick & Chenoweth, 2017).  Unlike arbitration, expert determination is purely a contractual creature established through an expert determination agreement and as such lacks statutory support (Bailey, 2011). Usually, the scope of issues brought before an expert is technical issues as aforementioned, however, the agreement may expand the scope to include non-technical issues such as costs for determination. It is essentially viewed as a faster and more effective way of resolving technical or specialised disputes (Heart Research Institute Ltd v Psiron Ltd , [2002]; Bailey, 2011) as opposed to litigation.

Procedures to Avoid Problems of Amendments and Technical Disputes

Summarily, in order to avoid future problems, a clear and concise written contract will be essential so as to curtail ambiguity. Additionally, an expert determination agreement should be considered as it is the most suitable and effective for technical disputes. Arbitration and litigation, however, are both relatively advantageous to technical dispute resolution.

The Building and Construction Industry Security of Payment Act (Vic) 2002, also known as the SOP (Vic) Act, is a piece of legislation enacted to ensure contractors and sub-contractors engaged in a contraction contract are duly paid (VBA, 2018). The SOP (Vic) Act was enacted to ensure a balance of power between contractors and principals as previously, the principle had enjoyed superior bargaining power which was illustrated through delays or dispute in payments which could culminate in contractors settling for lower amounts to ensure cash flow. The main concern of the SOP (Vic) Act as provided for under Paragraph 1 is to ensure persons who engage in construction work either directly or by providing necessary supporting goods and services receive their entitled progress payments.

Essentially, the right to payment is expressly provided for under s 9 of the SOP Act (Vic) 2002 which states that on and from each reference date, those who are engaged to carry out contraction work or supply related goods or services as defined by the Act are entitles to payment which is calculated in reference to the pre-determined date. The amount to be paid is calculated on the guidance of the contract based on the work carried out or the commodities supplied. Section 10B goes further to outline amounts that are excluded from the calculation of progressive payments. They include variations (except claimable variations), compensation for latent conditions, time-related costs and regulatory changes, claims in damages for breach of contract, claims arising in law other than those covered under the contract and any other amount considered as an excluded amount in regulations. In Dualcorp Pty Ltd v Remo Constructions Pty Ltd [2009] NSWCA 69, claims dealt with in adjudication over the same works are no longer valid payment claims and as such are excluded amounts.

The SOP (Vic) Act goes further to provide criteria to guide the nature and scope of details to be included in constructing and executing a payment claim under part 3. Section 14 (2) provides that a payment claim should be made in the prescribed form, with the prescribed information, if any is outlined in the contract. Further, the claim must identify the construction work or commodities supplied to which the payments are to be made. It should also indicate the claimed amount and expressly recognise that it was made under the SOP (Vic) Act 2002. Claims under s 29(4) with respect to suspension of work can also be made under this claim but not the excluded amounts described above.

Implied Terms in Contracts

In Gantley Pty v Ltd v Phoenix International Group Pty Ltd [2010] VSC 106, the court, although deciding the case under the old Act, highlighted some opinions with respect to the new Act. It outlined that the claim must describe the work or commodity adequately so that the principle can understand the basis of the claim. In reaffirming the criteria set in Gantley v Phoenix [2010], the court in Krongold Constructions (Aust) Pty Ltd v SR & RS Wales Pty Ltd [2016] VSC 94 challenged the details in the payment claim issued by the defendant stating that they had failed to meet the basic criteria under s 14 of the SOP (Vic) Act. This is because the construction work on which the claim was based had not been sufficiently described.

Once a claim has been made, the respondent who is served with the claim replies by way of a payment schedule identifying the claim it refers to and the amount to be paid, that is, the scheduled amount. The respondent reviews the claim and in the schedule outlines the amounts which they consider are excluded amounts and therefore not payable. The prescribed form and prescribed information if any should be included. If a respondent fails to provide a payment schedule within the stipulated time in the contract or within 10 business days after a payment claim is made, as provided for under s 12 of the SOP (Vic) 2002, the respondent is liable for the claimed amount.

In Lucas Stuart Pty Ltd v Hemmes Hermitage Pty Ltd [2010] NSWCA 283, it was held that if the defences to be raised within the payment schedule are not raised within the time stipulated in the Act, the responded will lose the right to raise them as a defence at an adjunction. An in-depth illustration of the payment process and the consequences of delay is illuminated in the Bitannia Pty Ltd & Anor v Parkline Constructions Pty Ltd [2006] NSWCA 238 case. In the course of construction, the defendant in the case had been submitting payment claims to an architect appointed by the plaintiff who oversaw the general administration of the contract as an agent for Bitannia. The first two claims were submitted to the architect who subsequently provided payment schedules rejecting the claims. The third claim, however, was issued to a general manager of a company in association with the plaintiff. Essentially, a payment schedule in reference to this claim was not issued and the time stipulated by law lapsed. The defendant, therefore, instituted a claim to recover the amount owed as debt. Essentially, the failure to issue a payment schedule would mean that the plaintiff had lost their right to dispute the claim and would be liable to pay. However, as the premise of the case before the court was misleading and deceptive conduct under s 52 of the Trade Practices Act the provisions of the TPA would prevail over the SOP (Vic) Act 2002 as commonwealth law prevailed over state law.

Misleading or Deceptive Conduct in Contracts

Any dispute arising as a result of the payment process should be referred to an adjudicator based on the provisions of ss 18 to 28 of the SOP (Vic) Act 2002. As illustrated in Hickory Developments Pty Ltd v Schiavello (Vic) Pty Ltd & Anor [2009] VSC 156, an adjudicator has the power and discretion to determine whether the claim for payment has been validly referred for adjudication based on the provisions of the Act. Additionally, Grocon Constructors v Planit Cocciardi Joint Venture [2009] VSC 339 outlines that, the adjudicator’s decision is not entirely final as it can be reviewed by a Court of law by a writ of certiorari which quashes the adjudicator’s decision.

Based on the discussion above, Acciona can make claims for progressive payment for construction work and any commodities supplied. As such, the claimable amount includes the construction cost of $1.07 billion and $ 175 million in overhead and management costs as these are expenses incurred directly from construction work. However, the claims for compensation in damages of up to $147 million would fall under excluded amounts. Acciona would formulate and send a detailed payment claim to the Transport for NSW detailing the amounts claimed and highlighting the statute under which the claims are being made. Transport for NSW is then expected to issue a payment schedule within the stipulated period citing how much it is willing to pay and why if it is less than the claimed amount. Where a dispute arises it will be subject to adjudication however as there is an ongoing claim for misleading and deceptive conduct, the respondent may not lose their defence against the claim for payment if the period for issuing a schedule expires.

Reference list

Abigroup Contractors Pty Ltd v Sydney Catchment Authority ([2004]) NSWCA 270.

B& B Constructions (Aust) Pty Ltd v Brian A Cheeseman & Association Pty Ltd ((1994) ) 35 NSWLR 22 .

Bailey, J., 2011. Construction Law. London: Routledge.

Bitannia Pty Ltd & Anor v Parkline Constructions Pty Ltd ([2006]) NSWCA 238.

BP Refinery (Westernport) Pty Ltd v Shire of Hastings ([1977]) UKPC 13.

Burger King Corporation v Hungry Jack’s Pty Ltd ([2001] ) NSWCA 187.

Campbell v Backoffice Investments Pty Ltd ([2009]) HCA 25.

Codelfa Construction Pty Ltd v State Rail Authority NSW ((1982) ) 149 CLR 337.

Commercial Bank of Australia Ltd v Amadio ((1983)) 151 CLR 447.

Dualcorp Pty Ltd v Remo Constructions Pty Ltd ([2009]) NSWCA 69.

Equitable Debenture Assets Corporation Ltd v William Moss Group Ltd ( (1984)) 2 Con LR1.

Gantley Pty v Ltd v Phoenix International Group Pty Ltd ([2010]) VSC 106.

George, E., 2016. What Regime Governs Arbitration of Construction Disputes in Australia?. [Online] Available at: https://legalvision.com.au/regime-governs-arbitration-of-construction-disputes/ [Accessed 10 May 2018].

Grocon Constructors v Planit Cocciardi Joint Venture ([2009]) VSC 339.

Hayden Young Ltd v Laing O’Rourke Midlands Ltd ([2008] ) EWHC 1016.

Heart Research Institute Ltd v Psiron Ltd ([2002]) NSWSC 646.

Hickory Developments Pty Ltd v Schiavello (Vic) Pty Ltd & Anor ([2009]) VSC 156.

Krongold Constructions (Aust) Pty Ltd v SR & RS Wales Pty Ltd ([2016]) VSC 94.

Lucas Stuart Pty Ltd v Hemmes Hermitage Pty Ltd ([2010]) NSWCA 283.

Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd ((1982) ) 149 CLR 191.

Pickering, M., 2016. Different Methods of Dispute Resolution in Construction Disputes. [Online] Available at: https://www.judicatelawyers.com.au/thinks/building-and-construction-law-different-methods [Accessed 10 May 2018].

Quick, G. & Chenoweth, J., 2017. Expert Determination in Australia. [Online] Available at: https://www.ashurst.com/en/news-and-insights/legal-updates/quickguide-expert-determination-in-australia/ [Accessed 10 May 2018].

VBA, 2018. Security of Payment (SOP). [Online] Available at: https://www.vba.vic.gov.au/practitioners/security-of-payment [Accessed 11 May 2018].

Victoria University of Manchester v Hugh Wilson & Lewis Womersley ((1984)) 2 Con LR 43.

Waltons Stores (Interstate) Ltd v Maher ((1988)) 164 CLR 386.