To a significant extent, parties involved in the building construction industry in Australia are allowed to allocate risk between themselves through a contract. There are some (growing) statutory protections in place to protect those with little or no bargaining power, or little knowledge of the building and construction industry; however, the reality remains that (between the parties) at the heart of building and construction matters is the contract. Therefore, it is critical when engaging in building and construction work that you get the contract right, understand what you have agreed to do and what it may mean if you do not do so properly or in the time allowed. Concepts such as extensions of time, variations, liquidated damages and defect liability regimes are almost entirely contractual concepts; so it is the terms of the contract that are most important.
Insofar as there are written and unwritten laws that may impact your work under the contract, it is vital that you understand how they work and how they may affect those works and the relationship between the parties. In particular, the role of the unwritten laws is often to ameliorate more onerous provisions of the contract or fill voids in allocations of risks not dealt with by the contract.
With respect to written laws that might affect the work or the relationship between the parties, from a State perspective, there are perhaps two tiers of legislative involvement. The first tier pertains to legislation that is overtly directed to, and impacts upon, building and construction work. The second tier pertains to legislation that may not be overtly directed at the building and construction industry, but which can directly impact it. The second-tier laws are a much broader body of laws than those in the first tier, which can make them more difficult to identify and understand.
The first tier of legislation in Western Australia includes the following legislation:
- Building and Construction Industry (Security of Payment) Act 2021 (SOP Act);
- Construction Contracts (Former Provisions) Act 2004 (CCA);
- Home Building Contracts Act 1991;
- Building Act 2011;
- Building Services (Registration) Act 2011; and
- Building Services (Complaints Resolution and Administration) Act 2011.
The second tier of Western Australia legislation includes the following:
- Planning and Development Act 2005;
- Environmental Protection Act 1986;
- Occupational Health & Safety Act 1984;
- Mine, Safety & Inspection Act 1994;
- Aboriginal Heritage Act 1972;
- Heritage Act 2018;
- Property Law Act 1969;
- Fair Trading Act 2010;
- Civil Liability Act 2002 (especially Part 1F); and
- Civil Judgment Enforcement Act 2004.
Some written laws, like SOP Act and the CCA, directly affect the relationship between the parties involved in the building and construction industry and, while they usually only become relevant when a dispute arises, they also need to be specifically considered when the relevant building and construction contract is prepared and executed.
Aside from the legislation referred to above, there is a significant body of employment law that is directed at the building and construction industry, and which is often picked up in building and construction contracts – especially in the energy and resources sector.
The above lists of legislation are not exhaustive, but represent a critical body of laws that impact on the building and construction industry which must be considered when preparing and negotiating building contracts, and also when disputes arise. To varying extents, the contract will remain relevant as to how, and to whom, various legislative rights and restraints will be applied.
There are a number of Commonwealth acts that may apply to building and construction projects depending on the nature of the project. One of the most commonly referred to Commonwealth laws is the Australian Consumer Law – especially with respect to allegedly misleading and deceptive conduct.
Commonwealth environmental laws, such as the Environmental Protection Biodiversity Conservation Act 1999, might also impact on the building and construction activity. Other legislation, such as the Corporations Act 2001 (especially with respect to insolvency) and the Personal Property Securities Act 2009 (PPSA), often impact on the building and construction industry. The PPSA is commonly expressly referenced in building and construction contracts and can provide vital protection in the case of insolvency of a client or subcontractor.
Arbitration
Where building and construction disputes are referred to arbitration, domestic arbitrations are subject to the Western Australian Commercial Arbitration Act 2012 and international arbitrations are covered by the Commonwealth’s International Arbitration Act 1974.
Before agreeing to arbitration, parties should be aware that there are many unintended consequences of doing so and the benefits are often over-stated.
Furthermore, some of the legislation referred to above can, and regularly does, give rise to criminal liability for builders and developers. This is especially the case in the Building Act 2011 and the Planning and Development Act 2005, where the penalties can also be very high – especially for corporations.
In most cases, criminal penalties apply to the relevant action and the parties to that action – regardless of who the relevant building contract says is responsible – but these questions are often only answerable at the time a criminal complaint is brought.
Aside from the contract itself (and the contract law which applies to it) and the various legislative instruments referred to above, there are a number of other areas of unwritten common law that will apply to parties involved in the building and construction industry such as:
- negligence (as well as other torts like nuisance);
- insurance law;
- administrative law;
- equity; and
- restitution for unjust enrichment.
Again, while these are areas of law that can often arise when a dispute arises, they can be dealt with, affected, or often excluded, by the terms of the contract. Further, many of these laws overlap, traversing the same issues. Detailed legal knowledge of these laws will maximise your ability to achieve what you want or need to achieve by the terms of the contract.
Even more so than Australia’s other major energy and resources state, Queensland, the Western Australian building and construction industry is dominated by energy and resources construction. This plays out both with respect to the standard terms and conditions that the big energy and resources companies insist their projects be delivered under (which are generally burdensome for contractors), and also with respect to the scale and types of disputes that arise. The strategic drivers for contract drafting, negotiating contracts and resolving disputes in Melbourne or Sydney simply do not apply in Western Australia, or at least not in the same way.
Indeed, and perhaps not surprisingly given the size of the energy and resources market in Western Australia, most of the non-energy and resources building and construction contracts in Western Australia now incorporate many of the particularly draconian aspects of their energy and resources counterparts, such as expansive warranty and indemnity provisions, non-remunerated free extension of time provisions and design liability in construction only contracts. Even State government contracts include many of these same draconian provisions that have come to characterise energy and resources contracts in Western Australia. Therefore, when reviewing any building and construction contract in Western Australia, it is vital that one has a deep understanding of what these provisions are, how they work and their impact.
