OCTOBER UPDATE
The Pendulum of Power
As a young lawyer in 1996, following Keating’s recession, we had to have, I witnessed the swing in negotiation power from the developer to the contractor. At that time, the money flow had dried up, and the cashed-up contractors offered to finance, design and construct works as turnkey projects. Soon after, the contractors’ negotiation power evaporated as the money flow improved.
In 2000, at the height of Sydney’s preparation for the Olympics, the pendulum of power swung back again towards the contractor as no one was left to build. Within two years, the equilibrium in the number of contractors improved, and the developers once again had the upper hand.
During COVID, the contractors were the engine of the State, and the contractors were again on top. Since 2010, the power has swung towards the developer and stayed there.
Today, in 2024, the pendulum of power has swung again to the contractor. With yet another tier 3 contractor (Quasar Constructions Pty Limited) falling in Sydney, few competent contractors are left to build projects valued from $20 million to $100 million. With the current raft of residential construction legislation introducing extended personal liability for defective work, I cannot see a rush of new residential construction companies replacing fallen ones.
The developers are asking me, who is left to build? The answer is the developers will build. Consequently, we are beginning to see the emergence of a new form of creature – the developer builder.
Unsurprisingly, I have witnessed contract negotiations take longer to finalise and contractors holding firm to their extreme negotiated demands. They know there is no one else willing to take the risks.
Regards,
Brett Vincent, Founder & Partner Construction
CONSTRUCTION
Procurement from suppliers in China
AM Darlinghurst Investment Pty Ltd as trustee for AM Darlinghurst Investment Trust v Growthbuilt Pty Limited [2024] NSWSC 825
Australian builders often source their construction plant and materials from China, given China has a sizeable manufacturing base and a diverse range of competitively priced products.
However, when procuring from suppliers in China, Australian builders should be aware that they are entering contracts with a foreign company. When drafting the supply agreement, Australian builders should pay close attention to the following key issues.
COMMERCIAL & INSOLVENCY
PPSA Series: Do You Have A PPSA Security Interest?
In the matter of Qenos Pty Ltd (Administrators Appointed) [2024] NSWSC 483 is a helpful case which analyses when a security interest may or may not arise under the Personal Property Securities Act 2009 (Cth) (PPSA).
Ethylene is a petrochemical used to produce polymers, industrial chemicals and to ripen fruit.
Under a formal supply agreement, Qenos manufactured and supplied Indorama with ethylene for many years. Indorama used that ethylene to manufacture industrial chemicals.
PROPERTY & PROJECTS
Change To Duties Lodgement Rules Affecting Transaction Timeframes
From 8 October 2024 (Effective Date), an agreement or contract for sale of land with a dutiable value of $20 million or more must be submitted directly to Revenue NSW via the eDuties portal for assessment. This change applies to both residential and non-residential property transactions lodged after 8 October 2024.
Revenue NSW no longer permits these transactions to be self-assessed or assessed by an authorised agent via the Electronic Duties Return (EDR).
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