CHANTAL-AIMÉE DOERRIES QC
PROFESSOR DOUGLAS S JONES AO
A necessary consequence of the growth in the size and scale of construction projects is their increasing complexity. Significant challenges lie in negotiating vast legal terrain with a wide variety of participants. In Part 1 of the ICLR 2020 we place particular emphasis on the relationship between owners and sub-contractors. We further explore issues in security of payment and other barriers to dispute resolution. Separately, considerable discussion is devoted to recent decisions which have both clarified and complicated the legal landscape faced by the construction industry.
The first article, Tina Funge’s “‘Out-of-Pocket’ Security, Out of Control?” was highly commended in the Australian Society of Construction Lawyers 2019 Brooking Prize. Funge’s article addresses the pertinent question of who should bear the upfront costs in a dispute. In particular, Funge notes the increasing tendency for contractors to be made liable to owners for security, as well as numerous amendments made to standard form contracts providing additional entitlements, which often act as leverage in disputes. Funge’s discussion provides insight into the interaction of these advances with broader concepts in risk theory. The author raises some pressing questions with regard to the financial risk created by the provision of security which can be called upon on a seemingly arbitrary basis, where one party has the unilateral power to do so. Funge lays out the existing legal patchwork in this field which has led to uncertainty in outcomes and notes attempts made at common law and through legislation to provide additional protections in limited circumstances.
Next, we delve more specifically into the issues associated with subcontracting in construction projects in Louise Hall’s article “Security of Payment for Sub-contractors – Improvements for England from International Practices”. Hall’s discussion recognises the three strands of this topic. First, it acknowledges the fundamental contractual difficulties in the relationship between the employer and the sub-contractor in respect of payment obligations; secondly, the issue of attrition of cashflow – particularly common to the construction industry; and thirdly, the risks for contractors that arise when the main contractor defaults. In relation to each of these issues Hall analyses the foundations and the current position of the English approach together with the approach adopted by civil and similar common law jurisdictions. Finally, on the basis of this comparative analysis, she makes a range of recommendations for improvement in England.
William Marshall’s highly commended article from the 2019 Brooking Prize “The Early Resolution of Construction Disputes – Has the High Court Changed the Game?” acknowledges that effective dispute resolution in construction occurs when issues are resolved promptly. However, he notes recent decisions of the High Court of Australia have complicated the legal
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