The NSW Supreme Court recently considered an application of a local council to overturn a NSW Adjudication decision in favour of a civil contractor for approx.$3.3m, read here. The council alleged that:
1. the contractor engaged in misleading and deceptive conduct by not clearly stating the subject payment claim was a claim made under the NSW SOP Act and by not clearly stating the full amount claimed;
2. the amounts claimed did not relate to construction work or related goods and services under the NSW SOP Act; and
3. the amount payable for offsite overheads was not reasonably determined by the Adjudicator in good faith (i.e. contrary to the essential requirements under the Act).
The council engaged the civil contractor to undertake urgent repair works to a broken sewer line pursuant to a cost plus contract. The contract price was described as “Cost + 25%”.
The Adjudicator determined the contract entitled the contractor to payment of all costs reasonably referable to the construction work performed, including offsite overheads (i.e. office expenses, insurance, bank fees, software subscriptions, salary and allowances, etc). With the assistance of evidence from the contractor’s accountant, the Adjudicator apportioned the offsite overheads between the contractor’s different projects to determine the amount attributable to the urgent repair works contract.
In considering the council’s arguments, the Court quickly rejected the first allegation of misleading and deceptive conduct, finding the payment claim (particularly the electronic version) was marked with a statement that it was made under the Act and the summary tabs in the spreadsheets provided with the claim explained the calculation of the full claim amount.
The Court determined council’s second allegation was misconceived, the Adjudicator had simply construed the contract price and determined that it provided as payment for the construction work performed, all costs incurred plus margin which included payment of offsite overheads.
The Court also rejected the council’s final argument on the basis that the Adjudicator’s determination of offsite overheads payable represented a reasonable attempt to arrive at that proportion of offsite costs attributable to the project.
In the current tough construction environment, a loosely worded cost plus government contract offers a rare treat for contractors in NSW and QLD alike.
