August Construction News
Published: August, 2020
Submission: September, 2020
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A range of news from the construction and infrastructure industries for August.
MinterEllisonRuddWatts in the Market
The operation of force majeure clauses in the COVID-19 era
On 26 August, Construction Partner Travis Tomlinson presented at Contract Law New Zealand’s virtual Contract Law Masterclass alongside other industry experts. Travis discussed the impact of COVID-19 on force majeure clauses and participated in a panel discussion around post-COVID-19 contractual trends.
COVID-19 is presenting significant risk and uncertainty for all industries and it is important that parties are aware of the contractual relief that may be available to them (and their counter-parties) in response. It is important to remember that most force majeure clauses provide relief from performance of their affected obligations, but no additional costs or compensation. The unique nature of COVID-19 also means that many standard force majeure clauses may not be fit for purpose for dealing with its effects. For example, given COVID-19 is already here, it is unlikely that the requirement for a force majeure event to be “unforeseeable” will be met. In light of this, Travis outlined some tips for how to draft effective pandemic clauses to specifically address the potential impacts of COVID-19 and front-foot the parties’ risks.
COVID-19 alert levels and the construction industry
Following the Public Health Response (Alert level 3 and 2) Order 2020 that came into force at 11:59pm on 12 August 2020, our team explored two key issues currently being discussed in the construction industry:
Read the article here.
Our team recently acted for Spotless Facility Services (NZ) Ltd (Spotless) inThe Fletcher Construction Company Limited v Spotless Facility Services (NZ) Limited NZHC 1942 where we were successful in arguing before the High Court that Fletcher Construction’s payment schedule was invalid due to a failure to explain how all deductions from the amount claimed for payment by Spotless were calculated and to provide reasoning for such deductions. Read our article summarising the decision and key takeaways regarding the importance of providing compliant payment schedules here.
Good time for good faith?
At the Society of Construction Law’s (SoCL) recent AGM, the 2020 Construction Law Essay prize winners were announced. Katie Keir, a solicitor in our front-end Construction Team, submitted her essay titled ‘Good time for good faith? Exploring the role of a duty to act in good faith in construction contracts' which was one of three essays recommended for publication by the judges.
Katie’s essay considers the duty to act in good faith and explores the benefits as well as potential disadvantages of explicitly incorporating such a duty into construction contracts. The essay sets out the case for and against expanding the use of a good faith duty, including the duty’s relationship to time bars and termination clauses. The essay goes on to recommend some practical ways in which a good faith duty can provide a useful springboard to address some of the inherent challenges facing the construction sector. This topic of good faith is particularly relevant in the context of the Construction Sector Accord, and the relational challenges arising from COVID-19.
To view Katie Keir’s essay (as published by SoCL), click here.
New building work that doesn’t need a building consent is almost here
From 31 August 2020, building consents will no longer be required for certain low-risk building work like sleep-outs, sheds, carports, and outdoor fireplaces. The new exemptions will save building owners a trip to their local Council for common building projects, saving time and money. It will also enable local Councils to focus on higher risk building work, thereby boosting productivity.
Government announces $350m fund to support housing and construction
The Government is establishing a $350m Residential Development Response Fund to support the housing and construction sectors aimed at minimising the economic impact of COVID-19. Housing Minister Megan Woods says this will provide assurance to ensure developers can keep building homes and workers employed. It is estimated that the fund will maintain around 15,000 jobs and the building of around 4,000 new homes that otherwise might not be built because of barriers to developers securing finance.
Fletcher confirms $196m annual loss, CEO pay falls 40%
Fletcher Building has confirmed an annual net loss of $196m due in part to the impact of COVID-19. This is in contrast to their 2019 net profit of $164m. Fletcher has announced 1,500 staff layoffs and other measures designed to lower their cost base by around $300m.
James Hardie ‘knew cladding not working’ High Court told
James Hardie, the Australian building products maker, is defending itself against a group of 144 property owners seeking multimillion-dollar damages for the cost of fixing leaky homes. The homeowners claim James Hardie was negligent and made misleading statements in relation to the manufacture and sale of its Harditex wall cladding system.
Lockerbie estate to add over 800 homes on Morrinsville farm site
79 hectares of a 12,000-hectare farm on Studholme Street in Morrinsville is about to undergo a 860 residential urban expansion. Known as ‘Lockerbie Estate’, the farmland has been rezoned for future residential use. The development will feature around $300m worth of housing, $100m in the retirement village, and $100m on civil works and land development.
Meridian suggests fresh Government talks on smelter underway as it contemplates $1.3b write-down
Meridian Energy may need to write down the value of its power stations by between $690m and $1.3b if the Tiwai Point aluminium smelter closes in August next year. Meridian’s CFO, Mike Roan, revealed that Meridian had set aside $5m to pay for any fallout from an Electricity Authority investigation into whether it manipulated electricity prices last year. The authority ruled that Meridian withheld hydro generation by unnecessarily spilling water from its South Island dams that it could have used to generate power.
Strengthening the Quay Street seawall for another 100 years
Over the last 18 months, strengthening of a 600m section of Auckland’s Quay Street seawall has been underway and lays the essential foundations for the downtown transformation. This critical strengthening work is aimed at securing the resilience of Auckland against seismic events and climate change for another 100 years plus. Completion is expected in early 2021.
Historical Wellington building to be demolished following fire
The Radical Social Centre and Community Whare on Abel Smith Street in Te Aro, Wellington is facing demolition after being destroyed by fire on 25 August. The house, commonly known as the ‘anarchist house' was a popular hang-out for political and community groups. It was raided by police as part of the Urewera raids in 2007.
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