Allens

Infrastructure & Transport

Client Update: Breaking Ground

26 October 2012

In brief: Breaking Ground is a regular publication by the Allens Infrastructure and Construction group to keep you informed of the latest news and developments in this area. For more information or for legal advice, please contact one of the Partners listed below. We look forward to hearing from you.

Breaking news

Allens
Interactive: OPRA – Allens client 'on-site project risk assessment' program – October 2012

Managing and delivering projects according to contractual arrangements is a sizeable task, especially in the current economic climate. With this in mind, Allens has developed an on-site project risk assessment (OPRA) program designed to assist organisations to monitor project execution within the agreed contractual framework. Melbourne Partner Anthony Arrow outlines how OPRA can provide clients with a project 'health check'.

The Allens construction year in review seminar

The current difficult economic times have presented more challenges for projects in Australia. Parties, more than ever, are concerned to protect their legal rights while seeking to complete projects on time and on budget. We are running seminars in each of our Australian offices in November, looking at the latest developments in construction law that could affect your projects. Please register to attend a seminar in one of the following offices: Melbourne, Sydney, Brisbane, Perth.

Construction industry
GEG acquires Vertech – 19 October 2012

Scottish company Global Energy Group (GEG) has acquired Perth-based Vertech Group Pty Ltd. Vertech will be rebranded to tie in with GEG's international brand, but will retain its name and management.

Source: GEG news archive

Mount Gibson Iron cuts costs – 18 October 2012

Mount Gibson Iron is cutting a quarter of its workforce, including 270 employees and 140 contractors. Directors will also take a 10 per cent cut in their remuneration packages, in order to reduce discretionary spending. The cost-cutting measures are aimed at eliminating or deferring between $120 million and $150 million in capital and operating expenditure, in the face of volatile iron ore prices.

Source: Kim Christian, 'Mt Gibson Iron to axe 270 jobs', The Australian, 18 October 2012

RPG Group appoints administrators – 9 October 2012

Steel Manufacturers RPG Group has gone into administration, and closed its plants at Dalby and Richlands in Queensland, and Kilburn in South Australia.

Source: 'Mayor surprised by RPG's sudden end', Herald Sun, 9 October 2012

Calibre Group acquires G&S Engineering Services – 10 October 2012

Calibre Group Limited has acquired G&S Engineering Services Pty Ltd, a leading privately owned Queensland-based provider of operations, maintenance and asset management services to the coal sector.

Source: Calibre Group news

Energy and resources
Phoenix Energy power plant proposal referred to EPA – 19 October 2012

Phoenix Energy has referred its proposed $400 million, 80 megawatt power plant proposal in Kwinana to Western Australia's Environment Protection Authority. Construction will start late next year, with the plant expected to be operational in 2015. Phoenix announced in May that it had signed construction contractor John Holland as engineering, procurement and construction partner on the project.

Source: Alex Serpo, 'Phoenix submits massive WtE proposal to EPA', Business Environment Network, 19 October 2012

AGL suspends Dalton power station project – 19 October 2012

AGL Energy Limited (AGL) has announced that it is suspending development of the first stage of its 1000 megawatt Dalton power station in New South Wales. It stated that the economic viability of this project has been under review for several months, due to market conditions. Government approvals will remain valid for the next five years.

Source: AGL ASX release

Austal wins wind farm support vessels contract – 18 October 2012

Austal has secured a new contract for the design and construction of three wind farm support vessels for UK-based Turbine Transfers. The support vessels are part of Turbine Transfers' installation and maintenance activities in European waters.

Source: Austal media releases

Exxon chairman warns rising costs could threaten LNG boom – 11 October 2012

ExxonMobil Australia's chairman, John Dashwood, has expressed concern that the escalating cost of doing business in Australia threatens the anticipated success of Australia's LNG projects. He noted that high costs, including the carbon tax, and the explosion of unconventional shale gas production in the United States were making it difficult to attract investment to Australia.

Source: 'Rising Costs Threaten LNG Boom: Exxon Boss', Australian Business Journal, 11 October 2012

Tokyo Gas may buy stake in Curtis LNG project – 9 October 2012

Japanese utility Tokyo Gas is negotiating to buy a 10 per cent stake in BG Group's Queensland Curtis LNG project. BG has been searching for a partner to take up a 20 per cent equity stake in the project, but has not yet been successful, due to global economic volatility and a weakening outlook for commodities. The deal with Tokyo Gas would reduce the impact of the $5.4 billion increase in the estimated cost of the project, and require Tokyo Gas to buy 1 million tonnes of LNG from the project per annum.

Source: Bevis Yeo, 'Tokyo Gas eyes stake in Australian LNG project', Proactive Investors Australia, 9 October 2012

Mining
NRW awarded major contracts – 22 October 2012

NRW Holdings Limited has recently been awarded two major contracts. The first is for $90 million of bulk earthworks for Rio Tinto's Yandi Sustaining Project at Yandicoogina mine in the Pilbara, Western Australia. The second contract has been awarded to NRW's wholly owned subsidiary, Action Drill and Blast. This is a $100 million contract to supply explosives and blasting services to the John Holland Group at their Isaac Plains' operations.

Source: NRW Holdings Limited ASX Announcements

Joint venture awarded Abbot Point T3 Port Terminal contract – 19 October 2012

A joint venture between Korea's Samsung C&T Corporation and Australia's Smithbridge Group has been awarded a $2 billion contract for the construction of Queensland's newest coal terminal at Abbot Point. The deal forms part of Indian conglomerate GVK's $10 billion pit-to-port Alpha Project.

Source: Sophie Foster, 'Marine firm nets big fish with a share of billion-dollar port build', The Courier Mail, 19 October 2012

Sinosteel to delay Blue Hills mine – 19 October 2012

Sinosteel will delay its Blue Hills iron ore project, citing lowered prices in iron ore.

Source: Bret Balinski, 'Sinosteel to delay Blue Hills iron ore mine', Australian Mining, 19 October 2012

Fortescue Metals may recommence Kings expansion project – 15 October 2012

Fortescue Metals has successfully completed its refinancing, raising $4.9 billion. Due to the success of the debt raising, it will consider recommencing its expansion plans at the Kings deposit in WA as early as December 2012.

Source: 'Fortescue expansion back on the table after debt sale', ABC News, 15 October 2012

GVK cleared to build new coal terminal – 10 October 2012

GVK Power and Infrastructure has obtained Federal Government approval for a new coal export terminal in Queensland. The $10 billion project is now awaiting a mining lease from the State Government.

Source: 'GVK cleared to build Queensland coal terminal', NDTV, 10 October 2012

Toro Energy two steps away from commencing WA's first uranium mine project – 10 October 2012

WA Government environment approval has been granted to Toro Energy's proposed Wiluna uranium mine, meaning the project is now two steps away from becoming the state's first uranium mine. The project only requires federal environmental approval, and a decision to proceed by the company's board. If the project goes ahead, Toro will process 1.3 million tonnes of ore per year, in order to produce about 820 tonnes of uranium oxide concentrate.

Source: Rebecca Lemay, 'WA two steps away from first uranium mine', The Australian, 10 October 2012

Airports
Avalon airport set to build new terminal – 12 October 2012

The Federal Government has announced that it will amend the terms of Avalon airport's lease to allow it to build a new terminal. An international terminal of up to 10,000 square metres, costing up to $15 million, can now be built without the need for a major development plan. This development will make Avalon Victoria's second-largest domestic airport and newest international airport. Premier Ted Baillieu said the Government would welcome federal support to build an Avalon rail connection.

Source: 'Avalon airport to become international', The Australian, 12 October 2012

Prisons
Assure Partners Consortium to construct new prison – 17 October 2012

The Assure Partners Consortium has been appointed to design, construct and maintain the Eastern Goldfields Regional Prison replacement. The consortium consists of John Holland, Pindan, Capella Capital, and Honeywell. The $232 million project involves construction of a new 350-bed prison at Kalgoorlie.

Source: John Holland news

Housing
71-storey residential tower awaits Victorian Planning Minister approval – 10 October 2012

Melbourne's skyline may be dramatically altered if the Victorian Government approves the proposed 71-level residential tower, proposed by Singapore-based developers, to be built in the heart of Melbourne's CBD. Many of the apartments have already been sold off the plan, despite the project still awaiting approval from the Victorian Planning Minister. If approval is granted, construction will begin next year.

Source: Melissa Fyfe and Royce Millar, 'The new tower that has tensions rising', Sydney Morning Herald, 10 October 2012

Industrial relations
Fair Work regulators seek damages from CFMEU – 9 October 2012

The Fair Work Building and Construction regulators are seeking damages from the Construction, Forestry, Mining and Energy Union (the CFMEU) for losses incurred by Grocon and its subcontractors as a result of the recent union action that shut down central Melbourne for a fortnight. The regulators are alleging numerous breaches of the Fair Work Act 2009 (Cth) by the union and 10 of its representatives. The damages claim includes compensation for losses incurred by employees who were unable to work, overheads and the cost of idle equipment.

Source: Ben Schneiders and Clay Lucas, 'Federal watchdog pursues CFMEU', The Age, 9 October 2012

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Published reports and articles

Infrastructure Australia releases 'Australia's Public Infrastructure – Part of the Answer to Removing Infrastructure Deficit' – 18 October 2012

Infrastructure Australia has released a new report, Australia's Public Infrastructure – Part of the Answer to Removing Infrastructure Deficit, which calls on governments to examine the sale of commercially viable, publicly owned assets to the private sector, in order to fund critical new infrastructure. The report identifies that more than $100 billion of commercial infrastructure assets are on Federal Government balance sheets, including: airports; roads; water services; ports; freight rail; and electricity generation, transmission and distribution. The cost to governments of operating and maintaining these assets outweighs the benefits to the community of retaining these assets in government ownership. The report suggests that many of these assets could be sold relatively quickly under current policy settings. It also notes that the superannuation industry is well placed to purchase these assets.

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Recent cases

Thiess Pty Ltd v Warren Brothers Earthmoving Pty Ltd & Anor [2012] QCA 276 – 'Construction Contracts' and the mining exception under BCIPA

Although not unanimously agreeing that certain works were 'construction work' for the purposes of the Building and Construction Industry Payments Act 2004 (Qld), the Queensland Court of Appeal held that certain subcontracts relating to constructing dams and drains were 'construction contracts' within the meaning of the Act. This was on the basis that the mining exception under section 10(3)(b) of the Act should not be given a broad meaning. The section does not cover work in opening a mine or related prepatory work. Justice Philippides also held the phase 'works forming, or to form, part of the land' in s10(1)(b) should be given a wide meaning, to include the construction of an open-pit mine and not be restricted to permanent additions, although more than a mere effect on the land is required.

It was also unanimously agreed that an adjudicator will not exceed their jurisdiction by determining the extent to which a payment claim is made for construction work and related goods and services. A mistake of fact will not constitute jurisdictional error. Read more>>

Transfield Services (Australia) Pty Limited v Nortask Pty Ltd and Anor [2012] QSC 306 – adjudication and BCIP

The Supreme Court of Queensland has upheld the validity of an adjudication decision under the Building and Construction Industry Payments Act. This was despite the fact that the adjudicator breached the rules of procedural fairness by reaching an incorrect conclusion on an issue without having heard submissions on it from either party and failed to give reasons for preferring the evidence of one witness to another. Justice Douglas accepted that a denial of procedural fairness or failure to give reasons for a conclusion could affect the decision-making process. However, his Honour held that the overall decision could stand because both failures of the adjudicator were immaterial, given that the overall decision was not dependent on the adjudicator's incorrect conclusion, on which it had not received submissions, and was not affected by the adjudicator's preference of one witness over the other. Read more>>

Grave v Blazevic Holdings Pty Limited [2012] NSWCA 329 – agreements need not be in writing to be binding and enforceable

The NSW Court of Appeal has held that the terms of a settlement deed were binding and enforceable even though one of the parties had not executed the deed. A dispute arose when Dr Grave failed to pay the invoices for Blazevic's work in fitting out Dr Grave's dental surgery. Blazevic obtained default judgment, which was then set aside, the matter proceeding to the Supreme Court. Before the hearing, the parties reached an oral agreement, the terms of which were documented by Dr Grave's lawyers in a settlement deed, which Blazevic signed. Dr Grave did not provide an executed copy of the settlement deed to Blazevic in return, and later explained that this was due to his wife, a co-director of Dr Grave's company, being overseas. The court considered evidence of the conversations between the parties and the correspondence, and considered that the parties had informed the court that the matter was settled (rather than settled in principle) and abandoned the trial. The court held that, notwithstanding that the settlement deed was not properly executed, its terms were enforceable. This case affirms the proposition that an agreement does not need to be in writing to be binding and enforceable. Read more>>

Owners Corporation Strata Plan 61288 v Brookfield Multiplex [2012] NSWSC 1219 – duty of care to subsequential owners

Justice McDougall of the NSW Supreme Court confirmed that builders do not owe a duty of care to avoid causing economic loss to subsequent owners of non-residential buildings. In this case, the subsequent owner was the owners corporation (being the successor in title to the developer) for serviced apartments that were leased out for commercial gain.

His Honour considered that the imposition of such a duty of care would be the creation of a novel duty of care and not a duty of care under Bryan v Maloney.

Justice McDougall formed the view that in circumstances where the original parties (the owner, developer and builder) have negotiated a contract at arm's length, there is neither reason nor room to impose a duty of care as between those parties and, consequently, as between the subsequent owner and the builder. Further, his Honour considered that the legislature had decided, as a matter of policy, to exclude from the protection of statutory warranties (available to subsequent owners of defective residential property) developments that were always intended to be used for commercial purposes (such as in this case).

As a result, his Honour considered that there was no duty of care owed by the builder to the owners corporation, but left it open for a higher court to consider whether a novel duty of care should be imposed in such circumstances. Read more>>

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Recent legislation

Commonwealth
NSW
Queensland
South Australia
Victoria
  • Fire Services Property Levy Act 2012 (Vic) (assent) amends Victorian Managed Insurance Authority Act 1996 No 11 (Vic)
  • Justice Legislation Amendment (Miscellaneous) Bill 2012 (Vic)
  • Mineral Resources (Sustainable Development) Amendment Bill 2012 (Vic)
  • Offshore Petroleum and Greenhouse Gas Storage Amendment (NOPSEMA) Bill 2012 (Vic)
WA

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Allens publications

Audio: Major infrastructure planned for NSW, 18 October 2012

Major long-term plans regarding infrastructure in NSW have been released. Allens Partners Nigel Papi and Emma Warren speak to BRR Media about the plans and issues that need to be addressed.

Focus: When can a statutory corporation act through an agent? 12 October 2012

A recent Victorian Supreme Court decision emphasises the importance of making sure the decision-maker has the necessary authority, when working with statutory corporations. Subsequent ratification of agents' acts and exercising authority without a formal delegation have, in particular, been clarified. Partner Paul Kenny and Lawyer Tanya Thomas report.

Focus: Arbitration Quarterly, 10 October 2012

In this issue of Arbitration Quarterly, we look at a decision of the High Court of India that should make it easier to enforce foreign awards in that country; whether judicial acts are 'acts of state' for the purpose of the act of state doctrine; a notice of investment dispute that has been issued to the Mongolian Government under the bilateral investment treaty between Singapore and Mongolia; competition law as a 'mandatory' law for arbitration in Australia; and a decision to stay court proceedings in favour of arbitration made in the context of multiple agreements governed by multiple laws.

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Meet the team

Get to know Partner Stephen McComish and Senior Associate Tristan Iredell

Partner Stephen McComish is based in Perth, and primarily focuses on construction and engineering law, major projects, resources and commercial dispute resolution in the Asia region. Stephen has acted for several large mining, contracting and engineering corporations and government instrumentalities on a wide range of high-profile and complex construction-related disputes and negotiations for construction contracts. We asked Stephen to share some personal and professional insights.

What are some recent projects/matters in which you've been involved?

Together with Guy Foster, Kim Reid and others at the firm, I am assisting KUFPEC Australia in proceedings commenced by Alcoa against Apache Energy, Apache Northwest, Harriet (Onyx) and KUFPEC Australia, in connection with an explosion and fire on Varanus Island in June 2008. My team and I have also been helping several clients resolve a number of construction-related disputes in a range of sectors, including an international gold producer, DBNGP, regarding its project to expand the capacity of the Dampier to Bunbury NG pipeline; and MRWA, regarding a couple of roads. I've also enjoyed helping one of the world's largest cement producers with negotiations with contractors for the development of new plant, or the expansion of existing plant, in India, Thailand and Indonesia, and work with Partners in various Allens offices in Asia and Australia.

What's something interesting about you that we won't find on your CV?

In between lectures at UWA, I used to spend a bit of time bloodying my knees skateboarding at a nearby half pipe.

Senior Associate Tristan Iredell practises in all aspects of engineering, building and construction law. He has acted for clients in Australia and throughout the Asia region on major infrastructure projects, including in the resources and energy sectors, as well as in relation to construction and engineering disputes. We asked Tristan to share some personal and professional insights.

What are some recent projects/matters in which you've been involved?

For the past 12 months, I have been involved in preparing and negotiating contracts for the establishment and expansion of large-scale cement production plants for one of the world's largest cement producers. This challenging (but interesting) work has seen me travel to a number of places in South Asia, including India, Bangladesh, Sri Lanka and Thailand, and work with Partners in various Allens offices in Asia and Australia, as well as with an eclectic mix of local counsel.

If you weren't a lawyer, you'd be...?

A vintage-car mechanic. I have spent countless hours under the bonnets of old cars, including my own, and it is something I rarely have time for any more with the amount of travelling I do. However, I would have trouble giving owners back their prized possessions, so I would need to own and run my own fleet of old cars, which won't pay any bills!

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