Contracts, are they fair? Yes if you administer them properly, No if you don't but either way, they are legal.
The sooner subbies realise that fairness doesn't come into it, the sooner they will understand that they need to drive the contract legally and take fairness out of the equation.
Fairness or Legal?
Hardly a day goes by where I don't get a call from someone who has been screwed by a builder and needs help with their contract but unfortunately by then, it's too late. They did $50,000 worth of variations to the contract but didn't submit the appropriate paperwork so the builder refused to pay them for the extras.
He got 50k of your work for nothing. He administered his contract legally and he was within his rights to do that no matter how unfair it is. The courts do not look at what is fair, only what is legal.
If you fail to submit a proper progress claim, you get screwed.
This article by whojungle.com.au spells it out in no uncertain terms.
How You Got Screwed
The media, the internet and the courts are full of tales about people in the building and construction industry who got screwed and are upset because it is unfair.
What they fail to realise is:
- the law is a machine that must be driven;
- their contracts are machines that must be driven; and
- the courts do not look back at circumstances and make decisions on what is fair.
Driving the machine
Think of a scenario where you:
- Get into a car that is sitting on a country road;
- Start the engine;
- Put it in gear with your foot on the brake (it is an automatic);
- Put on a blindfold;
- Fold your arms; and
- Take your foot off the brake, slam it on the accelerator and hold it there.
Yes, of course the car is going to fail to take the first bend and it will most certainly hit one of those trees you tend to find out in the country.
You cannot say there is anything wrong with the car, the road or the tree. You simply failed to drive the machine.
Therefore, the court is not going to consider whether or not it is unfair that you hit the tree.
What is considered to be relevant by the courts?
The only thing the courts consider is how you drove the machines that are:
- the law; and
- your contract.
You must also have steered those machines to where they need to be.
Whether or not it is fair is irrelevant unless there are some very specific laws where deceit and its derivatives are relevant.
Playing the game hard in the commercial environment or enforcing contracts is not deceitful.
Because subcontractors and builders are not consumers it is the machine driving that is judged.
How does that work?
There are three examples that explain how this works. For a subcontractor, the last one is the best because it is about the subcontractor contractually screwing the builder.
The first example is Neuman Contractors Pty Ltd v. Peet Beachton Syndicate Limited  QSC 376 2 November 2009.
In that case, the subcontractor had not submitted a payment claim that sufficiently demonstrated the monies due because it had not done a reconciliation of payments it had received.
The builder could have sat down and worked it out with a bit of stuffing around but it was not set out in the progress claim.
The court held that the subcontractor was not entitled to the money awarded by the adjudicator.
The second example is KDV Sport Pty Ltd v Muggeridge Constructions Pty Ltd & Ors  QSC 178 (23 July 2019).
In that decision the progress claim submitted by the builder did not add up and there were obvious errors on the face of the document.
Once again the court found that the builder was not entitled to the money awarded by the adjudicator because the claim for payment was not a proper progress claim.
It was obvious to all that in both cases, the claimants were owed substantial sums of money. However, they had failed to drive the machine correctly to the necessary point. That was the only assessment the court made.
The court did not then give any consideration to what it considered was fair for the claimants to have been paid. They just threw the claims out.
The third example
The third example involves Lend Lease and a tiny subcontractor called Fogridge.
Lend Lease had incorporated some provisions in the written contract that had been negotiated out.
Fogridge amended the contract, signed the contract and sent it back with a notation on the covering email that the contract had been amended and signed.
Lend Lease did not read the email or the contract which was simply printed out, shoved in a drawer whereupon Fogridge was told to start work.
When things got messy and Lend Lease found out the bits had been excised, Lend Lease being Lend Lease adopted that position that was unfair and terminated the contract.
- Fogridge served a comprehensive progress claim on Lend Lease that had been strategically prepared on advice from a specialist consultant.
- Lend Lease failed to address all the contents of the progress claim.
- Fogridge applied for an adjudication.
- Lend Lease argued it had not read the contract and had been unable to address all the contents of the progress claim.
- That did not wash with the adjudicator and the subcontractor was awarded $345,352.96 (incl. GST) plus costs and 67P interest.
- The subcontractor was also happy because it did not have to do all the fiddly unprofitable stuff at the end of the job and had been claiming its profit as it proceeded through the project so it was well ahead.
Lend Lease thought that was unfair, commenced an action in the Supreme Court (Lend Lease Project Management & Construction (Australia) Pty Limited -v- Fogridge Pty Ltd & others QSC 5572 of 2012).
Unbelievably, Lend Lease argued that the subcontractor should not be entitled to the money because:
- Lend Lease failed to read the contract – Yes that is failing to drive the machine;
- It had not addressed all the items in the progress claim when it delivered its payment schedule – yes again, that is failing to drive the machine; and
- Lend Lease thought that it was unfair.
Lend Lease’s case was simply thrown out of court. The judge did not even bother to set out any detailed reasons and it was never reported.
Lend Lease was represented by an extremely large, expensive and competent law firm who instructed a very competent and expensive barrister to appear in court.
If Lend Lease with all of its resources cannot win an argument that it is unfair to have to pay a subcontractor because Lend Lease failed to drive the machine then it must be a fairly good indication that machine driving is what counts and whether or not it is unfair is irrelevant.
Should the law should be changed to suite subcontractors?
The applicable law in this context has been in place for a long time.
It is the basic contract law that covers everything from buying a bottle of sauce at the supermarket to buying space on a satellite.
It is also in place in a large proportion of the world (including the USA, Canada, UK and India) to the point where it covers the sale of a coconut in a market in small exotic nations.
The chances of dismantling that massive machine are zero.
The other aspect is that the law is double edged. If you remove all the safeguards it will eventually be used against you as well. In the examples above, if all the safeguards had been removed, the subcontractor would not have recovered its money from Lend Lease.
But I should not have to be a lawyer.
You do not have to be a lawyer.
The relevant contract rules are simple and are designed to be used by all and sundry including the common man. They are used all over the world by all sorts of people who are not lawyers.
The road rules are more complex. Even the rules of cricket are way more complex.
So, let us deal with the topic of this article.
|How did you get screwed?||You failed to drive the machine.|
|What can someone do for you about you being screwed?||Nothing because you failed to drive the machine.|
|But that is unfair!||Yep – that is what Lend Lease thought as well when it got beaten up by a subcontractor that knew how to drive the machine.|
|The machine should be changed!||Everyone else can drive it.|
|Someone should do something!||Yes, that someone is you.|
The bottom line is that you have to learn how to drive the machines. It is not hard. If you want to learn how to avoid crashing or being screwed, we can teach you.
If you need any further information contact us.
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