Welcome to the October edition of Projects & Construction Monthly.
This edition addresses the following:
- Unfair Contract Terms – Upcoming Reforms;
- Case Summary – Niclin Constructions Pty Ltd v Robotic Steel Fab Pty Ltd & Anor  QSC 218;
- LPC Lawyers’ ‘Taking Statements’ series; and
- Opportunities to join the LPC Lawyers’ team.
Unfair Contract Terms – Upcoming Reforms
On 9 November 2023, changes to the current unfair contract terms (UCT) laws will come into effect. Essentially, the use of UTCs will be illegal from this date and may attract substantial penalties under the Competition and Consumer Act 2010 (Cth) (CCA).
According to the ACCC, the reforms aim to protect consumers and small businesses with limited bargaining power, expertise, and ability to negotiate or assess standard form contracts. To facilitate this, the changes provide additional guidance on determining whether a contract is a standard form by considering whether the party who prepared the contract has also made other contracts that are the same or similar and the number of times such contract has been used.
Further, these changes will give the Courts greater power to impose substantial penalties on individuals and businesses that use unfair terms in their standard form contracts, as opposed to only having the ability to declare a term as unfair and void.
Application of changes?
The UCT regime will continue to apply to standard form contracts with consumers or small businesses. However, the reforms expand the application of the regime by:
- Changing the current definition of “small business” to include businesses with 100 or less employees or any business with an annual turnover of less than $10 million; and
- Removing the contract value thresholds applied to small business contracts under the Australian Consumer Law (ACL).
Importantly, businesses will not be able to rely on a mischaracterisation of the other party falling outside the scope of the new UCT regime as a defence to any penalty under the CCA.
What is a “standard form” contract?
The upcoming reform to the UCT regime provides that, when considering whether a contract is “standard form”, the following factors will be considered:
- The repeated use of the contract, noting that where the same or similar terms are used across various contracts, it is more likely to be considered “standardised”;
- Whether a party had a genuine opportunity to negotiate the contract, this may not include instances where the other party negotiated minor changes, selected a term from a range of options, or if a party to separate contract successfully negotiated their contract.
What are unfair terms?
Broadly, a contract term will be unfair if it causes a significant imbalance in the rights and obligations of the parties under the contract, is not reasonably necessary to protect the legitimate interests of the party who gets the advantage of the term and would cause financial or other harm to the other party if enforced.
For example, if one party is unilaterally permitted to terminate the contract (without reason), avoid or limit their responsibility under the contract, or change the terms of the contract, the term may be unfair.
What this means for you
With the commencement of these new reforms only a month away, we recommend reviewing any standard form contracts used by your business to ensure they comply with the new laws. Some key points to turn your mind to may include whether the contract:
- Is to be used with businesses that have fewer than 100 employees or that have an annual turnover of under $10 million;
- Is partly negotiated or partly relies on standard form components (i.e., supply agreements);
- Includes terms (as negotiated by the other party) that are different from the typical standard form contract used;
- Uses industry standard terms and modifies or amends their application depending on the purposes of the contract;
- Adopts the same terms across different parties; or
- Includes any terms that may be considered “unfair”, including terms related to automatic renewals, imbalanced termination rights, one-sided limitation of liability or indemnity, unilateral variations, and unfair payment.
While the legal test for whether a term is unfair will remain unchanged, there is a greater risk of facing substantial penalties for those who use standard form contracts that include unfair terms. As such, we encourage all industry participants to review their current contracts and seek legal advice to ensure compliance with the new UCT regime.
Case Summary: Niclin Constructions Pty Ltd v Robotic Steel Fab Pty Ltd & Anor  QSC 218
This case is a reminder to ensure all documents referred to in a Payment Schedule in response to a Payment Claim are appropriately attached, regardless of whether both parties have knowledge of the relevant document.
Niclin Constructions Pty Ltd (Niclin) issued a Payment Schedule in response to a Payment Claim submitted by Robotic Steel Fab Pty Ltd (Robotic) for works carried out regarding the supply and installation of metal for a project. Niclin’s Payment Schedule advanced an argument for the set-off of an amount for liquidated damages and referred to reasons contained in a Statement of Claim, which was not attached.
The matter was subsequently referred to adjudication under the Building Industry Fairness (Security of Payment) Act 2017 (Qld) (BIFA).
Robotic’s Adjudication Application submitted that no reasons had been given in the Payment Schedule as Niclin had not attached the relevant document relied upon. In response, Niclin argued that the omission of the Statement of Claim did not matter as Robotic knew of the document, and it was open to substantiate the submissions in the Payment Schedule with information known to the parties but which had not been attached or included in its Payment Schedule.
Ultimately, the adjudicator rejected the set-off claim on the basis that Niclin had failed to attach the relevant Statement of Claim relied upon. Therefore, the alleged set-off could not be substantiated.
Supreme Court Proceedings
Niclin commenced proceedings submitting that the decision was affected by jurisdiction error and was void because the adjudicator failed to consider the argument advanced regarding its entitlement to set-off liquidated damages in accordance with section 88(2)(d) of BIFA which sets out matters which adjudicators are required to consider together with a Payment Schedule.
The question was whether the adjudication decision was void for jurisdictional error because of a failure to consider Niclin’s submissions or a failure to provide adequate reasons for rejecting the submissions.
In dismissing Niclin’s application, Justice Applegarth held:
- The adjudicator considered the issue of whether matters contained in the Statement of Claim were raised by the Payment Schedule in circumstances where the document was not attached to it and reached a conclusion. Therefore, the adjudicator had considered Niclin’s submissions about set-off;
- The reasons provided by the adjudicator adequately informed the parties that Robotic’s submissions had been accepted regarding the consequences of Niclin failing to attach the Statement of Claim to the Payment Schedule, which inherently involved the rejection of Niclin’s submissions; and
- The reasons were sufficient to reveal the adjudicator’s view that Robotic’s knowledge of the Statement of Claim was not sufficient to substantiate Niclin’s liquidated damages claim for the Payment Schedule; and
- Whether the adjudicator’s reasons errored in what must be included in a Payment Schedule and the possibility of incorporating another document by reference is a question of the correctness or otherwise of a decision made in the exercise of the adjudicator’s jurisdiction. Therefore, the reasons provided were not so deficient as to demonstrate jurisdictional error.
Read the full case here.
LPC Lawyers’ ‘Taking Statements’ Article Series
Part 1 – The Basics
Litigation and disputes will often require witnesses, both lay and expert, to provide evidence. The provision of such evidence will be dependent on the nature of the case, though will often involve the parties exchanging witness statements. LPC Lawyer’s latest series looks at how to take statements, what to keep in mind, and the specific requirements of both lay and expert witness statements. Read more here.
Part 2 – Lay Witnesses
Lay witnesses will often rely on a lawyer to help prepare their statement and ensure they comply with any relevant requirements. As such, lawyers must be acutely aware of such obligations, and ensure they convey all relevant information to the lay witness. The second article in this series looks at the important rules to follow when preparing lay witness statements, and ensuring the content complies with all relevant requirements. Read more here.
Part 3 – Expert Witness, Independence, Briefs, and Obligations to the Court
Cases will often require expert witnesses to provide evidence on specific matters that are particularly complex. As part of their engagement, an expert witness may be required to prepare a report, designed to provide an impartial assessment of the issue, based on their expertise and experience. Part 3 of this article series covers the basic requirements and rules that lawyers must keep in mind when dealing with expert witnesses. Read more here.
Stay tuned for Part 4 of this article series posted on 9 October 2023.
LPC Lawyers’ Continued Expansion
LPC Lawyers is continuing to look to hire candidates, 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 highly motivated candidate who is familiar with the Security of Payment Legislation and has experience in drafting correspondence, simple pleadings, briefs for Counsel, and some client advisory work.