Corrs Projects: In Scope | February 2025

We are pleased to share with you the next edition of Corrs Projects: In Scope, a monthly projects update from Corrs Chambers Westgarth.

In Scope will draw your attention to noteworthy news in the projects sector, from construction and engineering projects to developments in energy and infrastructure, along with relevant legal matters, and regulatory and legislative change.

We hope you find this edition of In Scope both informative and thought provoking.

Kind regards

Corrs Projects team

In the news

The Federal Government releases 2024 National Hydrogen Strategy, providing a framework to guide Australia’s production, use and export of hydrogen

The Australian Federal Government has released the 2024 National Hydrogen Strategy, which it hopes will position Australia to become a global hydrogen leader. The 2024 strategy is a comprehensive formal review and update of the 2019 iteration and focuses on accelerating growth of the clean hydrogen industry.

The strategy includes increased production incentives, specifically the Hydrogen Productive Tax Incentive and expansion of the Hydrogen Headstart Program.

The key objectives of the 2024 strategy are:

• supply: supply hydrogen that is globally cost-competitive;
• demand and decarbonisation: activate the most prospective domestic demand sectors for hydrogen-based decarbonisation;
• community benefit: raise community awareness of hydrogen and ensure that communities can realise the benefits of hydrogen; and
• trade, investment and partnerships: establish trade at scale and leverage purposeful partnerships.

Infrastructure Market Capacity Report 2024 released

Infrastructure Australia’s 2024 Infrastructure Market Capacity Report has been released and reveals a recalibration of national priorities as governments turn their focus towards the housing crisis and the energy transition.

The 2024 Infrastructure Market Capacity Report shows the nation’s A$213 billion five-year Major Public Infrastructure Pipeline — representing nearly a quarter of the country’s total A$1.08 trillion of construction activity — is growing across energy and social infrastructure projects.

Infrastructure Australia’s analysis shows there will be a six-fold increase in renewable energy projects across all construction activity in Australia over the next five years. This highlights the drive of governments and the private sector in this space.

Melbourne Airport’s third runway approved

Melbourne Airport has announced that its plans for a third runway, to be built parallel to the existing north-south runway alongside new taxiways and other enabling infrastructure, have recently been approved by the federal government.

Conditions of the runway project include the implementation of noise-sharing and noise amelioration plans, as well as a community health study into the impacts of noise before and after the establishment of the third runway. The runway project is estimated to add an additional A$6 billion a year to the Victorian state economy and is expected to open by 2031.

Melbourne Airport flags A$4.5 billion investment in international terminal

Melbourne Airport is bringing forward plans to expand its international terminal after a record December, with the expected cost to be around A$4.5 billion.

Lorie Argus, CEO of Melbourne Airport, said the plans were being developed in response to increasing passenger demand, with the existing international terminal often requiring bussing during peak periods. Ms Argus said, “we’re setting new records for international passenger numbers and as Melbourne’s population grows, it’s important that our infrastructure grows too.”

Vales Point B coal-fired power generator seeking exemption from energy market regulators for cash to be used as credit support

One of Australia’s oldest operating coal-fired power generators, Vales Point B, is intending to seek exemptions from the Australian Energy Market Commission to continue its operations. The generator is part of a 1320 MW facility near Lake Macquarie in New South Wales and is scheduled to close in 2033 after over 50 years of operation.

Delta Electricity, the owner of the generator, has revealed that it has been refused bank guarantees from 13 out of 15 members of its banking syndicate due to ESG constraints. It is now seeking an exemption from the regulator to allow cash to be used as credit support to manage any liabilities it has under the operation of the market.

The Commission plans to issue a consultation paper seeking comments from market participants and stakeholders.

Case updates

Pafburn Pty Ltd v The Owners – Strata Plan No 84674 [2024] HCA 49

Key takeaways:

By a narrow majority (4:3), the Full Bench of the High Court held that the duty of care under section 37 of the Design and Building Practitioners Act 2020 (NSW) (DBPA) is a non-delegable duty (in every relevant sense) to which section 5Q of the Civil Liability Act 2002 (NSW) (CLA) applies. The practical effect of this is that the Builder and Developer could not rely on the proportionate liability regime to reduce their liability.

A contractor, therefore, cannot discharge its duty owed under section 37(1) of the DBPA to exercise reasonable care to avoid economic loss caused by defects in a building merely by delegating or engaging another person to perform any part of the construction work.

The decision is significant in NSW, particularly when considering the NSW Government’s new Building Bill. However, the High Court’s decision is also relevant to other jurisdictions, including Victoria, that are considering implementing legislation that creates a statutory duty of care similar to that under NSW’s DBPA. 

Background

The owners corporations ( the OC) of a strata building commenced proceedings against Pafburn Pty Limited ( Builder) and Madarina Pty Limited ( Developer) for breach of the statutory duty imposed by section 37 of the DBPA. The OC sought to strike out the parts of the Builder and Developer’s pleading in which they assert the proportionate liability regime in Part 4 of the CLA applies to reduce their liability.

Section 37(1) of the DBPA provides:

“A person who carries out construction work has a duty to exercise reasonable care to avoid economic loss caused by defects—

(a) in or related to a building for which the work is done; and

(b) arising from the construction work.” Construction work is defined, for the purposes of the relevant part of the DBPA, as any of:

• building work (defined in this part of the DBPA to mean ‘includes residential building work within the meaning of the Home Building Act 1989’);
• the preparation of regulated designs and other designs for building work;
• the manufacture or supply of a building product used for building work;
• supervising, coordinating, project managing or otherwise having substantive control over the carrying out of any work referred to in (a)-(c) (Supervising Construction Work).

A person who owes a duty of care under section 37 is not entitled to delegate that duty (see s 39 of the DBPA).

The Builder and Developer pleaded that the claim was an ’apportionable claim’ as defined in section 34 of the CLA and named nine alleged concurrent wrongdoers, including:

• the waterproofing subcontractor;
• the manufacturer and/or supplier and installer of cladding;
• the architect;
• the principal certifying authority; and
• the local council.

The Builder and Developer further pleaded that each concurrent wrongdoer owed a duty of care to the OC under section 37(1) of the DBPA and/or at common law which, if the defects existed, they had breached. The Builder and Developer then sought to rely on section 35(1)(a) of the CLA to argue that any liability they have to the OC is limited to an amount reflecting the proportion of damage or loss that the court considers, just considering the extent of the responsibility of each of them for that damage or loss.

Decision

The High Court rejected the Builder and Developer’s argument that the non-delegable duty only applied to the construction work which they had in fact carried out (i.e. the Supervising Construction Work). The High Court held that a person who carries out Supervising Construction Work in relation to the whole of a building is liable for all defects in or related to that building resulting from all construction work, regardless of whether that person personally undertook any of that construction work.

The High Court said “overlaying this basic [proportionate liability] scheme are provisions concerning vicarious liability and non-delegable duties”.

The High Court had regard to section 39 of the DBPA, which provides that “[a] person who owes a duty of care under [Pt 4 of the DBPA] is not entitled to delegate that duty”, which in turn makes the duty owed under section 37(1) personal to each person "who carries out construction work”. The fact that Pt 4 of the DBPA, in which the section 37(1) duty of care is located, is subject to the CLA is also significant.

Section 5Q of the CLA relates to “a non-delegable duty”’. This imposes personal liability on a person so that they can delegate work to which the duty of care attaches but cannot discharge, limit or exclude that duty simply by exercising reasonable care in arranging for another person to perform that work. The effect of the non-delegable duty is that the person delegating the work must ensure that the person they delegated the work to takes reasonable care.

The High Court confirmed that the delegating person is then treated as if they are vicariously liable for the work carried out by that other person. The appellants were held to be 100% liable for any failure to exercise reasonable care to avoid economic loss caused by defects arising from the alleged concurrent wrongdoers. However, the High Court said that this does not prevent the appellants from bringing a cross-claim against those persons who they allege breached any duty of care owed to the appellants.

The key principles of the High Court’s decision are as follows:

• The statutory duty of care owed to owners by a person who carries out construction work under s 37(1) of the DBPA is personal and cannot be discharged, limited or excluded by delegating or entrusting that work to another competent person. For example, a person who supervises construction work performed by another can be 100% liable for economic loss caused by the defective work of that other person.
• A person who supervises, coordinates, project manages or otherwise has substantive control over another person who actually performs the construction work cannot discharge their duty of care merely by exercising reasonable care in delegating that work to the other person. It does not matter that the person supervising has no ability to perform the work itself. Rather, that person must ensure that the other person has themselves taken reasonable care in the work that they carry out.
• The scope of the statutory duty of care, and the resultant defective work that a person is liable for, depends on the scope of the building work for which they are responsible.

The key principles of the High Court’s decision are as follows:This case serves to highlight the increasing expansion of the scope of the duty of care in s 37(1) of the DBPA owed by persons who carry out construction work in NSW. This follows in the wake of two recent Supreme Court of NSW cases:

• Kazzi v KR Properties Global Pty Ltd t/as AK Properties Group [2024] NSWCA 143, in which the sole director of a builder was found personally liable for breaches of his duties under DBPA s 37, relating to the way he supervised the work; and
• Roberts v Goodwin Street Developments Pty Ltd [2023] NSWCA 5, which expanded the class of buildings to which the duty of care applies, finding that the type of ‘building’ to which section 36(1) of the DBPA applies is exhaustively defined by reference to the meaning of ‘building’ within the EPA Act.

The High Court’s conclusion was said to accord with the objective of the DBPA, which was enacted to combat a crisis of consumer confidence in the building industry, following the well-publicised failures in Opal and Mascot Towers. Moreover, the DBPA was intended to provide redress for apartment purchasers, particularly in light of the High Court’s decision in Brookfield Multiplex Ltd v Owners Corporation Strata Plan 61288.

The effect of the High Court’s conclusion that section 5Q of the CLA applied was that any liability the Builder and Developer had was to be determined as if they were vicariously liable for the negligent actions of those whom they had delegated construction work to. The burden of commencing legal proceedings to recover a proportionate share of the loss rests with the person who owes the statutory duty of care, rather than the building owner. This is good news for owners but bad news for developers and builders. In the absence of bringing a cross-claim, the effect of the decision in NSW is that it makes apportionment via the proportionate liability regime meaningless because, ultimately, the Builder and Developer would be liable for liability apportioned to others through that regime.

Access the case here.

Legislation updates

Proclamation of Property Law Act 2023 (QLD)

The Queensland Governor proclaimed that the Property Law Act 2023 (Qld) will commence on 1 August 2025.

The new Act will replace the current Property Law Act 1974 (Qld) to make several key changes to Queensland’s property law regime, as well as amending other legislation. Importantly, the new Property Law Act 2023 amends the Limitation of Actions Act 1974 to change the limitation period of deeds to six years instead of 12 years. This six-year period will apply to deeds entered into after 1 August 2025, with deeds entered into before the commencement date remaining subject to a 12-year limitation period.

The Act is available here.

Building Legislation Amendment and Other Matters Bill 2024 (VIC)

The Victorian State Government has recently released a draft bill, seeking to amend the Building Act 1993 (Vic), the Architects Act 1991 (Vic) and the Victorian Planning Authority Act 2017 (Vic), alongside enabling implementation of the Gas Substitution Roadmap.

Principally, the bill will allow offshore gas storage projects in the state to proceed and enable formal consultation on the energy transition in Victoria by amending the Building Act.

Other proposed amendments include:

• amendments to the Building Act to clarify the scope of a building surveyor’s power to issue building orders and ensure courts can extend the limitations period for building and plumbing actions;
• amendments to the Architects Act relating to registration of architects, approvals and fit and proper person test; and
• a new section in the Victorian Planning Authority Act relating to the limitation of action for proceedings for a summary offence under Division 4 Part 2 of the latter Act.

The second reading of the bill before the Legislative Assembly was moved on 12 September 2024.

The draft bill is available here.

Building and Construction Industry (Restoring Integrity and Reducing Building Costs) Bill 2024 (CTH)

The federal government has released a draft bill to re-establish the Australian Building and Construction Commissioner, which had been abolished in 2022 by the Fair Work Legislation Amendment (Secure Jobs Better Pay) Act 2022 (Cth).

The bill seeks to re-establish the Commissioner with substantially the same powers as it held under the Building and Construction Industry Improvement Act 2005 (Cth).

The draft bill is available here.

Journal articles

Corrs partner Jey Nandacumaran and associate Cameron Inglis, ‘How Will the New Unfair Contract Terms Regime Affect Construction Contracts?’, (2024) 39(5) Building and Construction Law Journal 480

The new unfair contract terms (UCT) regime, which came into effect through reforms to Australian Consumer Law in late 2023, marked the beginning of a new era. As the reforms significantly expanded the reach of the UCT law, many parties to standard form building contracts may now be subject to ’Australian norms of fairness’. This will impact the Australian construction industry, as some terms common to building contracts may be declared unfair and rendered void, causing project disruption and exposing parties to multimillion dollar penalties. Even if not declared unfair, contracting parties may seek to avail themselves of the regime if a particular term is thought to be unfair or if its enforcement causes detriment. This article explores how the UCT reforms will impact the Australian construction industry, how it may influence the behaviour and risk allocation of contracting parties, and whether it is beneficial for the industry or not.

Corrs senior associate Amanda Staninovski,‘For Better or for Worse? An Analysis of “Betterment” in the Assessment of Damages in Construction Claims’ (2024) 39(5) Building and Construction Law Journal 517

The traditional principle underpinning a measure of damages is the cost of rectification of the works which are necessary to achieve conformity with the plans and specifications. However, if the remedial works go beyond the scope and specifications originally stipulated by the contract, and thereby place a plaintiff in a better position than it had originally bargained for, a defendant may seek to reduce damages based on this ’betterment’. While the concept of betterment is clear, the legal principles underpinning betterment, and entitlement to this reduction in damages, are not so prescriptive. This article aims to provide a comprehensive review of the principles of betterment in Australia and its application to practical situations experienced in construction-related legal disputes.

Ian Thorpe, ‘Concurrent Delay and the Prevention Principle – Resolving the Conflicting Lines of Authority, (2024) 39(5) Building and Construction Law Journal 498

The author suggests that a preventative act by a principal that causes delay concurrent with a contractor’s delay will engage the prevention principle and set the time for completion at large. This is unless the contract provides for an extension of time for that concurrent preventative act. There is conflicting authority on this subject – the courts found otherwise in North Midland Building Ltd v Cyden Homes Ltd and Turner Corp Ltd (in liq) v Co-ordinated Industries Pty Ltd, but this submission is consistent with Wells v Army & Navy Co-operative Society and Perini Pacific Ltd v Greater Vancouver Sewerage and Drainage District and the characterisation of the prevention principle in Roberts v The Bury Improvement Commissioners, Dodd v Churton, Peak Construction (Liverpool) Ltd v McKinney Foundations Ltd, Trollope & Colls Ltd v North West Metropolitan Regional Hospital Board and Probuild Constructions (Aust) Pty Ltd v DDI Group Pty Ltd.

Mark C Sanders, ‘Junk science: the fallacy of retrospective time impact analysis’ (2024) 19(2) Construction Law International 

The author, an experienced civil engineer and project manager, argues in this article that retrospective time impact analysis (TIA), one of the most popular techniques of forensic delay analysis, takes a wrongheaded approach and is increasingly being recognised by courts as ‘junk science’. TIA relies on building mathematical models of the past, and discrepancies between those models and actual events are commonly explained away or ignored. Further, general confusion among the techniques available for delay analysis still makes it difficult to separate outdated retrospective TIA from more scientific approaches.

The author argues that the industry should continue to work to highlight the principal elements of each technique so that one can be differentiated from another. The differentiation of techniques based on their principal characteristics will help the industry and courts to separate reliable approaches from the ‘junk’.

Authored by Trevor Thomas, Partner, and Thomas Denehy, Special Counsel.