QUESTION

The Security of Payment Act

a) Describe the purpose of the Security of Payment (SoP) Act.

b) How do Principals and Contractors benefit from this Act?

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Brief

On 26 July 2014 Coin Builders Ltd (Coin) entered into a contract with Rosen Supply & Services (Rosen) to demolish a 5 storey building known as the 'Rosen Building', and to regrade the site and do the preliminary civil works. The site is located in a suburb of Sydney, NSW. The project was to have been completed in 24 months and Coin was to be paid $4 million.

History of the Tender

In late May 2014, Coin had responded to an invitation to tender from Rosen for the demolition and site regrading for the Rosen Building. Specifically, the invitation to tender, which was advertised in the newspaper, read:

Project: Demolition of the Rosen Building, breaking up of the paved parking area, removal of all debris and filling of the basement void and other associated civil works.

On 10 June 2014 Coin received from Rosen the tender package, which included blueprints of the Rosen Building, 4 contract drawings, the specifications, the contract and the tender form. The 4 contract drawings were as follows:

a. Site Outline - a basic outline of the Rosen Building and existing conditions at the site prior to demolition.

b. Site Plan - rough grading, which indicated the rough grade elevations to which Coin was to grade the site and the final grade elevations.

c. Civil works- drawings indicating the associated civil works required.

d. Site Sections - which included an outline of some existing items to be demolished and removed from the site.

A pre-tender meeting was held on 3 July 2014. Rosen's project manager (Bill) and Coin's project manager (Dave) attended. At that meeting Dave asked how much of the retaining wall was to come down and were there any other problems with the site. He was told "no worries, mate it's a good site but you need to read the drawings". Dave also visited the site. Based on this conversation Coin decided to allow for normal excavation with rock not occurring above 3.0 meters from the surface.

In the tender document submitted by Coin, Coin certified that Coin had visited the site and become fully conversant with conditions required to perform the work of the contract; that it had satisfied itself of the suitability, quality and quantity of surface and sub-surface material to be encountered and that any failure to do so would not relieve it of the responsibility of performing the work. This certificate was attached as an appendix to the contract.

Tenders closed on 12 July 2014. Coin was the successful bidder

Extracts from the commercial conditions of contract are set out below:

18 Entire Agreement.

The parties intend that this agreement, together with all attachments, schedules, exhibits, and other documents that are referenced in this agreement and refer to this agreement:

a. represent the final expression of the parties' intent and agreement between the parties relating to the subject matter of this agreement,

b. contains all the terms the parties have agreed to relating to the subject matter, and

c. replaces all the parties' previous discussions, understandings, and agreements relating to the subject matter.

19 Direction of variations

The Subcontractor shall not vary Work under the Subcontract (WUS) except as directed in writing by the Subcontract Superintendent pursuant to this sub-clause 19. The Subcontract Superintendent, before the date of practical completion, may direct the Subcontractor to vary WUS by any one or more of the following which is nevertheless of a character and extent contemplated by, and capable of being carried out under, the provisions of the Subcontract (including being within the warranties):

(a) increase, decrease or omit any part;

(b) change the character or quality;

(c) change the levels, lines, positions or dimensions;

(d) carry out additional work;

(e) demolish or remove material or work no longer required by the Main Contractor.

No direction by the Subcontract Superintendent shall constitute a direction under this subclause 19 unless it is in writing and expressly states that it is a direction under subclause 19.

20. Waiver

Any waiver or relaxation by The Principal or The Superintendent partly or wholly of any provision of or right relating to the Subcontract is valid only if in writing and signed by The Principal. Any such waiver or relaxation is restricted to its written terms and unless expressly stated otherwise applies to a particular occasion only, is not continuing and does not constitute a waiver or relaxation of any other provision or right.

22. Subcontractor may give notice of Variation

If the Subcontractor considers that any Direction or other event or circumstance involves a Variation, then the Subcontractor must, as a condition precedent to any Entitlement arising out of, or in connection with, the relevant Direction, event or circumstance, within two (2) Business Days of receipt of the Direction or the occurrence of the other event or circumstance (as applicable), and in any event prior to acting upon the Direction, event or circumstance, so notify The Principal by a written notice titled "Clause 22 Notice of Claimed Variation". This notice must state the reasons for the Subcontractor's opinion. If the Subcontractor fails to satisfy the condition precedent referred to above, the Subcontractor shall have no Entitlement, and releases the Principal from any claim, arising out of, or in connection with, the relevant Direction, event or circumstance.

23 Claim for extension of time

Subject to the Subcontractor complying with its obligations under subclause and 23.1 and 23.2, the Subcontractor shall be entitled to such extension of time as the Superintendent assesses.

22.1 Form of claim for an extension of time

A claim for an extension of time must:

(i) be submitted by the Subcontractor to The Superintendent within the 3 Business Days of the commencement of the event, occurrence or matter causing the delay;

(ii) be titled "Extension of Time Claim"; and

(iii) identify in detail the following items:

(iv) the extent or likely extent of the delay;

(v) the cause of delay (including evidencing the facts of causation);

(vi) the critical activity or activities delayed or which may be delayed;

(vii) how the cause of delay impacted or is expected to impact upon the critical activity delayed; and

(viii) the measures which the Subcontractor has adopted or proposes to adopt to overcome or minimise the consequences of the cause of delay.

22.2 Conditions precedent to extension of time

It is a condition precedent to the Subcontractor's entitlement to an extension of time to the Date for Practical Completion that:

(a) the cause be a qualifying cause of delay;

(b) the Subcontractor has not caused or contributed to the cause of the delay;

(c) the Subcontractor has promptly, competently and prudently taken all practicablemeasures to avoid or minimise the cause and effects of the delay;

(d) if the delay continues for 10 working days the Subcontractor must provide a notice in the form outlined in clause 23.1 and entitled continuing claim for delay. The Subcontractorshall submit a similar notice for each subsequent 10 days the delay continues;

(e) have complied with clause 23.1;

22.3 Qualifying cause of delay

A Qualifying cause of Delay means:

(a) any default of the Subcontract Superintendent, the Main Contractor or its consultants, agents or other contractors; (b) any default of the Superintendent, the Principal or its consultants, agents or other contractors Subcontractor;

(c) An instruction, issued by the Superintendent ,including an instruction which is found to be a variation, which impacts on the critical path;

(d) other than:

(i) a breach or omission by the Subcontractor;

(ii) industrial conditions or inclement weather occurring after the date for practical completion;

Payment Claim Information

The date for submission of a progress claim is the 24th of each month and payment of this claim is required by the 15th of the next month.