Allens

Infrastructure & Transport

Client Update: Breaking Ground

28 September 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

Building Industry
Gunns' demise – 26 September 2012

The collapse, on Tuesday, 25 September, into voluntary administration of the once dominant Tasmanian forestry group Gunns Limited is yet another signal of growing economic troubles. The future of Gunn's Tasmanian pulp mill project is now in doubt. Shareholders have commenced a class action against the company, alleging Gunns sat on negative financial information for months.

Source: Ben Butler, 'Gunns bosses may face class action', The Age, 26 September 2012

Leighton Contractors to take SOPA dispute to Supreme Court – 22 September 2012

Leighton Contractors has taken its dispute with Arogen to the Supreme Court of New South Wales. Arogen, a horizontal redrilling company, claims it has not been paid for work done on the NSW 'Energy2U' project. Arogen initially tried to resolve the matter in August, by adjudication of monies owed under the Building and Construction Security of Payments Act 1999 (NSW). An independent adjudicator found in favour of Arogen, ruling it was owed $5.7 million by Leighton Contractors. The Supreme Court will hear the matter next month.

Source: Paddy Manning, 'Tunnel to nowhere hits electricity users in pocket', Sydney Morning Herald, 22 September 2012

Machmahon Holdings trading halt – 17 September 2012

Macmahon Holdings has placed its shares in trading halt, pending an update to earnings guidance. According to management, the trading halt is a result of deteriorating financial performance in the construction business and increased uncertainty about the outlook for new construction work.

Source: Tim Boreham, 'Early call catches out Macmahon', The Australian, 17 September 2012

IFS Construction Services goes into voluntary administration – 14 September 2012

International Formwork and Scaffolding Construction Services has gone into voluntary administration. The company operates, through several subsidiaries, in both Western Australia and south-east Asia.

Source: Patrick Stafford, 'ASX-listed scaffolding company IFS Construction Services placed in administration', Smart Company, 14 September 2012

Mining
NRW's Port Hedland contract reduced by $75 million – 24 September 2012

NRW Holdings' contract for work on the BHP Billiton inner harbour project at Port Hedland has been reduced from $120 million to approximately $80 million.

Source: Robb M Stewart, 'Port Hedland inner harbor contract downsized: NRW', The Australian, 24 September 2012

BHP suspends work on Red Hill coalmine – 20 September 2012

BHP Billiton ceased studies on the Red Hill underground coking coal mine near Moranbah and the Saraji East underground mine near Dysart. BHP is reviewing its coking coal development plans amid sliding commodities prices and lower growth expectations in China. Each mine was planned to produce up to 14 million tonnes of coal a year.

Source: Matt Chambers, 'BHP to shelve its Red Hill coalmine', The Australian, 20 September 2012

Increase in mining investment predicted – 18 September 2012

According to the Reserve Bank of Australia, there will be a major increase in mining investment in the coming years, despite recent falling commodity prices. It was also noted the big iron ore producers in Australia had achieved 'record levels of investment' in the first half of 2012.

Source: 'Rumours of boom's demise exaggerated: RBA', ABC News, 18 September 2012

Technip awarded Australian offshore commissioning contract by Inpex – 18 September 2012

French engineering company Technip has been awarded a $275 million offshore commissioning contract by Japan's Inpex, for the Ichthys liquefied natural gas project off north-west Australia.

Source: 'Technip lands Ichthys offshore role', Upstream international oil and gas news source, 18 September 2012

Rio Tinto awards contracts – 17 September 2012

Rio Tinto has awarded a $133 million contract to NRW Holdings, for stockyard, conveyor link earthworks, rail formation earthworks, and relocation of water pipelines work on its Cape Lambert port project. Rio Tinto also awarded Forge Group's subsidiary Cimeco a $70 million contract to design and construct fuel infrastructure at the West Angeles and Brockman iron ore mines in WA.

Source: 'Forge wins Pilbara building contract', Perth Now, 17 September 2012; Esmarie Swanepoel, 'NRW wins A$133m Rio contract', Mining Weekly.com, 13 September 2012

Iron ore mine development to proceed in western Tasmania – 14 September 2012

The Tasmanian Government has granted a lease to Shree Minerals to develop a magnetite and hematite mine on the state's west coast. The mine already has approval from the Environment Protection Authority and the Circular Head Council but still needs approval from the Federal Government.

Source: 'Green light for Tarkine mine lease', ABC News, 14 September 2012

Ports
Upgrade to WA water pump station to provide water to Hedland Water Supply Scheme – 19 September 2012

The upgrade to a Strelly Water Pump Station in WA has commenced. It is estimated that the upgrade will deliver up to three billion litres of water from the De Grey borefield to the Hedland Water Supply Scheme.

Source: WA Minister for Environment and Water media release

Rail
NSW looks to Chinese investment to finance critical infrastructure, including North West Rail Link – 15 September 2012

The NSW Government is reported to be looking to Chinese investment to help fund its debt needs and its infrastructure program. At a conference in Sydney, the Treasurer said the NSW Government had met with Chinese consortiums that were interested in building its proposed North West rail link 'from beginning to end.'

Source: Glenda Korporaal, 'Baird sees China as the answer', The Australian, 15 September 2012

Roads
Fulton Hogan awarded ACT Majura Parkway project – 13 September 2012

Fulton Hogan has been awarded the $288 million Majura Parkway project construction contract. Under the contract, Fulton Hogan will deliver 11.5 kilometres of dual carriageway, connecting the Federal Highway through to the Monaro Highway in the ACT.

Source: ACT joint media statement

Coalition will fund Pacific Highway upgrade by redirecting away funds from NSW rail – 15 September 2012

The Federal Government will finish the upgrade of the Pacific Highway between Sydney and Brisbane by altering the funding agreement between the Commonwealth and NSW. The agreement will be changed from a 50-50 funding split to an arrangement where the Commonwealth will provide 80 per cent of the funding and the NSW Government will provide 20 per cent. To achieve the new funding model, $2.08 billion in Federal Government funding for the Epping to Parramatta rail line in Sydney will be redirected to the Pacific Highway project.

Source: Max Blenkin and Sophie Tarr, 'Truss would take train money to fund road', Sydney Morning Herald, 15 September 2012

Industrial relations
Victorian Government to investigate unlawful conduct in the construction industry in the wake of CFMEU and Grocon dispute – 17 September 2012

The recent dispute by the Construction, Forestry, Mining and Energy Union (the CFMEU) with Grocon has prompted the Victorian Government to investigate the tolerance of unlawful conduct in the construction industry. The State Government has provided the Construction Code Compliance Unit with terms of reference to undertake a detailed investigation of, and report on, the current state of compliance with the law and applicable codes of practice in the Victorian building and construction industry. The terms of reference require the CCCU to report urgently on a number of matters, including: the use of violence and harassment in the industry; the obligations of employers whose workers took part in the Grocon blockades and breaches of industrial or other laws that occurred during the blockades; the effectiveness of current federal regulation of the building industry; and recommendations for immediate actions to strengthen compliance with the law and the guidelines. The possible involvement of organised crime elements within the industry will also be considered.

Source: Premier of Victoria media release

Other projects
Australian-Indonesian firms in JV to build new Australian Embassy in Jakarta – 18 September 2012

A joint venture between PT Leighton Contractors Indonesia and PT Total Bangun Persada has won a $230 million contract to build a new Australian embassy in Jakarta.

Source: Australian Embassy Indonesia media release

Thiess wins $154m Barangaroo contract – 14 September 2012

Leighton Holdings' engineering, construction and mining services subsidiary Thiess has been awarded a $154 million contract by Transport for NSW to build a walkway through Sydney's CBD to the Barangaroo development. The key pedestrian link will connect Wynyard Station with the multi-billion dollar waterfront development, and will include a pedestrian tunnel and bridge, allowing people to walk between the two sites in about six minutes.

Source: 'Thiess wins $154m Barangaroo contract', The Australian, 14 September 2012

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Published reports and articles

Infrastructure Partnerships Australia/BIS Shrapnel Civil Infrastructure Metric – September 2012

The release of the Infrastructure Partnerships Australia/BIS Shrapnel Civil Infrastructure Metric demonstrates that private mining related projects and the National Broadband Network roll-out are masking a continuing shortfall in public infrastructure investment. The metric draws on a survey of actual work won during the preceding quarter, with the survey capturing around 30 per cent of the market.

Source: Infrastructure Partnerships Australia, Infrastructure Partnerships Australia/BIS Shrapnel Civil Infrastructure Metric, September 2012

Building Commissioner's Report 2011-2012 – September 2012

The Building Commissioner's Report 2011-2012 is now available. The report states that the value and number of building permits issued in Victoria trended down through the 2011-2012 financial year, after sustained growth and record levels of activity in recent years.

Source: Building Commission, 2011-2012 Building Commission Annual Report, September 2012

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Recent cases

Walton Construction (Qld) P/L v Plumber by Trade P/L & Ors [2012] QSC 264

The Supreme Court of Queensland has held that a payment claim under the Building and Construction Industry Payments Act 2004 (Qld) (the BCIPA) was invalid and the adjudicator lacked jurisdiction to adjudicate upon it because the claimant was not licensed under the Queensland Building Services Authority Act 1991 (Qld) (the QBSA Act). Sections 42(3) and (4) of the QBSA Act provide that a person who carries out building work without holding the appropriate class of contractor's licence is not entitled to any monetary consideration for doing the work, other than recovering its costs for the work. The court held that while there is a statutory right to progress payments under s12 of the BCIPA, this could not override the statutory disentitlement in section 42(3) of the QBSA Act. Read more>>

CH2M Hill v State of NSW [2012] NSWSC 9637

CH2M entered into a head contract with Sydney Water Corporation for the design and construction of an upgrade to a Sydney Water sewerage facility. CH2M then entered into a sub-contract with the DOC for the design of three lagoons as part of this project. CH2M (a joint venture between Barclay Mowlem Construction Limited and CH2M Hill Australia Pty Limited) sued the Department of Commerce of the State of NSW (DOC) for breach of contract; breach of common law duties of care, including a duty to warn of issues with the longevity of the works; and for misleading or deceptive conduct. CH2M conceded that if it could not make out its case based on the terms of the contract, it was unlikely to succeed on the other bases.

CH2M alleged that the lagoons it had constructed had failed following heavy rains, as a result of deficiencies in DOC's design, including DOC's failure to provide underdrainage for the lagoons. Justice MacDougall, in the NSW Supreme Court, dismissed CH2M's case, finding that the failure of the lagoons was a result of deficiencies in CH2M's performance of its construction obligations: DOC's design of the lagoons had not been deficient in any way. In considering DOC's contractual duty of care, his Honour considered the question of whether an experienced and competent designer, exercising reasonable care and taking into account known and likely circumstances, could have made the decision to delete underdrainage. He found that exclusion of underdrainage could be justified, as the harm resulting from not providing for underdrainage was so remote as to not be a harm that DOC's design was required to guard against.

His Honour also restated the law on the entitlement to corporate overheads, noting that 'it must be shown that the breach of contract for which damages are claimed resulted in... 'the loss of opportunity to undertake profitable work, from which further work corporate overheads could have been defrayed'. Read more>>

Grocon Construction (Qld) Pty Ltd v CFMEU [2012] FMCA 245

Federal Magistrate Burnett considered Grocon's application for interim injunctive relief in relation to picketing by the CFMEU at three sites in Brisbane under ss 39 or 49 of the Building and Construction Industry Improvement Act 2005 (Cth) (the BCII Act ). It was alleged that the conduct prevented Grocon's subcontractors from accessing sites. Based on the evidence, Federal Magistrate Burnett granted injunctive relief, as there were serious issues for trial in relation both to matters of fact and of law and, in particular, as to:

  • whether the picketing included obstruction and besetting access to the site and was 'unlawful industrial action';
  • whether alleged restrictions on performance of building work imposed by the CFMEU, rather than the relevant employees themselves, was 'building industrial action' under s36(1)(c); and
  • whether the presence of CFMEU officials on site was sufficient to indicate CFMEU involvement in the picketing.

Federal Magistrate Burnett noted that the effect of the injunction on the CFMEU was minimal, as it was not prohibited from engaging in 'protected industrial action'. Read more>>

NB: The BCII Act has since been replaced by the Fair Work (Building Industry) Act 2012 (Cth).

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Recent legislation

Commonwealth
ACT
NSW
Queensland
South Australia
Victoria
WA

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Allens publications

Here is a snapshot of other developments Allens has recently reported on.

Focus: Draft NSW long-term transport plan released, 19 September

With the release of its draft long-term transport plan, the NSW Government has signalled that it will look to the private sector to assist in financing future transport projects. Partner Nigel Papi and Senior Associate Lixian Liang report.

Focus: Conditions on payment claims (remain) unenforceable, 17 September

Contractual conditions placed on a payment claim for construction work are at risk of being unenforceable under Queensland's security of payment legislation. Partner Adrian Baron explains, with reference to the recent case State of Queensland v T & M Buckley P/L [2012] QSC 265.

Focus: Historic High Court decision in Pilbara rail access dispute, 21 September 2012

The High Court has handed down its decision regarding FMG's application to have Rio Tinto's Pilbara rail lines declared subject to open access, referring the matter back to the Tribunal to redecide according to law. In doing so, the court has clarified the meaning of some of the criteria for declaration and, most importantly, decided that infrastructure should not be declared if it is privately profitable for anyone to duplicate it. Partner Ted Hill and Lawyer Rosannah Healy report.

Focus: Facilitating superannuation fund investment in Australian infrastructure, 27 September 2012

The recent Infrastructure Finance Working Group report Infrastructure Finance and Funding Reform continues the ongoing discussion around increasing the level of superannuation investment in Australian infrastructure. While this has primarily focused on lowering the existing barriers to investment, the changing economic landscape also provides opportunities. In the first of a series of articles exploring the role of superannuation funds in funding Australia's infrastructure needs, Partners David Donnelly and Robert Clarke, Senior Associate Geoff Sanders and Lawyer Fiona Borrelli provide an overview of some of the key issues framing the discussion.

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Meet the team

Get to know Partner Ren Niemann and Senior Associate Lixian Liang

Partner Ren Niemann is a procurement and construction specialist in our Brisbane office, focusing on infrastructure and major projects. We asked him to share some personal and professional insights.

What do you find most interesting about your areas of practice?

That they cover a range of transactional and contentious work; I find that this allows me to work closely with many other practice groups and jurisdictions. Over the past 12 months alone, I have worked in New Zealand, Mongolia, China and Hong Kong, and across practice groups such as Energy, Technology, Media & Communications, Banking & Finance and Insolvency & Restructuring.

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

A V8 supercar driver. I am a Craig Lowndes fan and will sit on my backside for eight hours on 7 October to watch Bathurst!

Senior Associate Lixian Liang is a front-end construction specialist in our Sydney office, with experience in infrastructure, general commercial and corporate work, acquisitions and litigation. We asked her to share some personal and professional insights.

What do you find most interesting about your areas of practice?

My areas of practice are broad, though I work mostly on front-end and advisory matters. I find that our clients and the work they do are the most interesting aspect of my areas of practice. Our clients operate in diverse industries, including mining, infrastructure and finance. They are each carrying out wonderful projects that will make a contribution to the community. Working with them on these projects keeps me inspired (and on my toes!).

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

I was born in Penang, which is a beautiful island in Malaysia with a rich history. I spent the first few years of my life there, living in a colonial bungalow that my grandfather built, and saw the construction of the Penang Bridge and Komtar (which remains the tallest building in Penang). Both Penang Bridge and Komtar changed things on the island for the better – and sparked my interest in projects and their power to improve lives.

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