December 1, 2023
Welcome to the December edition of Projects & Construction Monthly.
This edition addresses:
- Recent updates on Major Projects;
- Case Summary – Qantas Airways Limited & Anor v BMD Constructions Pty Ltd [2023] QSC 206;
- LPC Lawyers’ ‘Understanding Your Contracts’ series;
- LPC Lawyers’ ‘2023 – Case Year in Review’ series; and
- Opportunities to join the LPC Lawyers’ team.
Recent Updates on Major Projects
Rockwood Weir
Construction of central Queensland’s newest water infrastructure asset is now complete. The $568.9 million Rockwood Weir is the largest weir completed in Australia since World War II and the largest piece of new water infrastructure delivered in Australia since Wyaralong Dam in 2011.
It will yield 86,000 megalitres each year, allowing farmers, industry and households to share in more than 34,000 Olympic swimming pools of water every year.
The first water from the weir is expected to be available for use from early 2024.
Woolloongabba Revitalisation
The largest urban renewal since South Bank is underway with the Gabba Stadium Project Validation Report (PVR) complete, ready for design and construction procurement to commence. The project will see the rebuild of the Gabba Stadium, Cross River Rail, and the Brisbane Metro connect to South Bank, the CBD and new Brisbane Arena at Roma St via a walkable spine, an active travel corridor to South Bank and Brisbane City’s new green bridge.
Procurement processes for the Gabba Stadium rebuild are commencing with industry briefings in December and the design process will commence in 2024. De-construction will commence in 2025, with the new stadium expected to be ready for use in 2030 in time for the 2032 Brisbane Olympic and Paralympic Games.
MacIntyre Wind Farm
The construction of a 1,026-MW wind power complex is underway. With a total investment of $1.96 billion, the precinct is expected to comprise 180 wind turbines and will include 64 kilometres of new transmission lines to connect to the national grid.
Construction of the project commenced in June 2022 and is set to be completed in 2024.
Case Summary: Qantas Airways Limited & Anor v BMD Constructions Pty Ltd [2023] QSC 206.
Negligent damage to property typically gives rise to an immediate right to recover damages. However, the Supreme Court’s recent decision in Qantas Airways Limited & Anor v BMD Constructions Pty Ltd highlights that subsequent transactions involving damaged property can have an impact on the quantification of damages.
Background
In 2016, considerable damage was caused to a Qantas owned aircraft after a water tank (held in a storage area at Brisbane Airport by BMD) was blown across the tarmac and a set of passenger stairs during a storm, causing the stairs to collide with the aircraft. Qantas subsequently commenced proceedings against BMD for:
- the loss and damage incurred in repairing the aircraft; and
- general damages for the inability to use the aircraft until the completion of repairs.
In parallel (albeit unrelated) following the damage to the aircraft, Qantas Group underwent an internal restructure which mean that Eastern Australia Airlines (EAA) (a Qantas Group subsidiary), subleased the damaged aircraft from Qantas on an ‘as is’ basis, and took on the responsibility to maintain and repair the damaged aircraft.
Qantas subsequently amended its statement of claim to join EAA as a plaintiff, and pleaded that EAA was responsible for (and paid for) the repairs to the damaged aircraft. BMD argued that it did not owe a duty of care to EAA and was not liable for any damages. Qantas then further amended its statement of claim to remove EAA as a party, as well as the allegations that EAA were responsible for the repairs.
BMD sought to strike out these amendments on the basis that the questions of law and fact did not merit a trial, and due to the internal restructure, Qantas lost its entitlement to claim damages.
Direct Loss – Claim for damages for the cost of repairs
BMD relied on UI International Pty ltd v Interworks Architects Pty Ltd [2008] 2 Qd R 158 (UI International) to argue that Qantas was only entitled to compensation for loss it actually suffered (which was nil, as Qantas raised no factual basis supporting that it was liable to pay, or otherwise paid, the repair costs). The damaged aircraft was leased to EAA on terms not any worse due to the aircraft damage, and EAA accepted the aircraft on an ‘as is’ basis and took on the obligations of repair.
Qantas argued that UI International was not applicable to internal transactions (namely its sublease with EAA) because:
- UI international stood to make a windfall gain from the damages claim;
- The price obtained under the sublease with EAA for the aircraft was a fixed book value rather than true market value; and
- There would have been measurable diminution in the aircrafts market value due to the damage (unlike UI International, where the defect did not cause a diminution in market value).
Further, Qantas argued that the aircraft remained within the Qantas Group (as EAA is a subsidiary), and responsibility for its repair remained within the Qantas Group.
Consequential Loss – damage for loss of use
Qantas claimed that it was deprived of the use of the damaged aircraft between 13 November 2016 and 31 December 2016 (first period) and 1 January 2017 and 14 April 2017 (second period).
BMD argued that Qantas failed to plead that it would have been entitled to use of the aircraft (but for the damage), and had not established that it suffered loss from being deprived of its use, as:
- Qantas amended its pleading to refer to “the inability to use the aircraft” as opposed to “its inability to use the aircraft”, meaning there was now no allegation that Qantas would otherwise have used the aircraft in the first period; and
- In the second period, EAA was paying rent (without any deduction for the damage) to Qantas for the aircraft, and therefore, Qantas was no worse off when the aircraft was not operational.
Qantas contended this on the basis that:
- It was using the damaged aircraft as part of its fleet in the first period, and therefore lost the use of it;
- EAA was under Qantas Group’s effective control and the inability of any company in the group to use the aircraft was to the detriment of Qantas as the holding company; and
- The payment received was a neutral transaction as the value gained by Qantas was matched by the diminished value of EAA.
Decision
The court dismissed most of BMD’s application and held that while Qantas may have to overcome difficulties:
- It was arguable that Qantas suffered loss measured by the cost of repairs (notwithstanding the agreement with EAA);
- The damaged aircraft remained within the corporate group, and repairs remained to be done within the corporate group even if the terms of the lease and sublease agreements are enforceable;
- The UI International case is not accepted as there was a diminution in the value of the damaged aircraft as a result of the damage caused to it in 2016;
- However, there is no absolute right for damages to be measured according to the cost of repairs, and that subsequent events could affect the quantification of loss.
Whilst not tested at trial, this decision means there is a possibility that intra-group transactions could be distinguished from the general principal that subsequent transactions can affect a right to damages.
On the issue of consequential loss, the Court held:
- A damages claim for loss of use is not disbarred because EAA were paying Qantas rent if Qantas continued to use the damaged aircraft after it subleased it to EAA (but Qantas must prove that it is worse off from not having the damaged aircraft);
- Qantas can still claim consequential loss if it can show that the aircraft would have been utilised by or on behalf of Qantas, and how Qantas group operates its business would be relevant in that assessment; and
- For the second period, Qantas failed to plead sufficient facts to support a basis on which it was deprived the use of the aircraft, and therefore the relevant paragraph is to be struck out with liberty to replead.
Read the full case here.
LPC Lawyers’ Article Series ‘Understanding Your Contracts’ Series
Understanding Your Contracts: Part 1 – Unfair Terms in Standard Form Contracts
All’s fair in standard contracts… or is it? The month of November saw changes to the application of the “unfair contract terms” regime contained in the ACL, and the introduction of these changes serves as a useful reminder to revisit your contracts and really consider the impact and effect of every term used.
Over the three Parts, this article series discusses terms and wording which may (unknowingly) exist in your contract which may be unfair under the UCT regime; which may be included as standard provisions but have unintended consequences; and which may implement standards to a higher (or lower) level than intended.
Read more here.
Understanding Your Contracts: Part 2 – (Not So) Standard Contract Terms
When assessing a contract or terms proposed for a prospective project, it is typical that the first clauses parties often review or confirm as appropriate, are those relating to “quality”, “time”, and “cost”. Whilst these seem to be the most important in understanding your liability and obligations under an agreement, other, more “standard” clauses could still have a significant impact on the performance and operation of a contact, and should not be ignored.
Part 2 of this Series will discuss some of those more “standard” clauses which (because they often exist in every contract) may not be given the appropriate attention and consideration required; and if not reviewed (each and every time) may have a significant impact on the operation of the contract or the project.
Read more here.
Understanding Your Contracts: Part 3 – Reasonable or Best Endeavours & Good Faith
Various phrases commonly appear in construction contracts which impose an implicit threshold of obligation on a party the subject of that obligation – where that threshold may be unknown, misunderstood, or may otherwise be different to that intended to be imposed by the parties, disputes will likely arise.
The final Part of this Series will discuss some of those “common” phrases, to assist parties in understanding their obligations, and the necessary amendments / clarifications which may be required to ensure the contract’s wording represents the parties’ intended outcome.
Read more here.
LPC Lawyers’ Article Series ‘2023 – Case Year in Review’ Series
Part 1 – Price Escalation Clauses
This Series reflects on significant construction cases that have helped define crucial pieces of legislation in the construction industry. This series will wrap up the year with an exploration of some of those cases which serve as a useful reminder for contracts and projects heading into 2024.
If you’re thinking about repricing the job, you must ensure the price escalation clause complies with the requirements in the QBBC Act and it does not represent an unfair term under the ACL. This was emphasised in Perera v Bold Properties (Qld) Pty Ltd [2023] QDC 99.
Read more here.
Stay tuned for the next article in this series which will be posted on 4 December 2023.
LPC Lawyers’ Continued Expansion
LPC Lawyers is continuing to look to hire candidates as we head into 2024, with opportunities for growth in our expanding practice.
Litigation Lawyers (1-3 years PAE)
Working closely with an ex-top tier partner, this role is ideal for a candidate who is highly motivated and has experience in drafting correspondence, simple pleadings, briefs for Counsel, and some client advisory work.
Law Clerk
LPC Lawyers’ is looking to hire a law clerk in their third or fourth year of study. The role is for three days per week and includes preparation of legal documents and correspondence, working closely with our managing partner and assisting solicitors with case management, conducting legal research, and general administrative tasks.
For more information about our current career opportunities visit our website here or to apply, please email your resume and cover letter to [email protected].