Rise and fall clauses have been largely overlooked in the Australian construction industry for over two decades. Interest has picked up in recent months due to rapid increases in materials prices. As we re-enter an inflationary environment, legal practitioners and Contractors should learn about or refresh their knowledge of rise and fall clauses and consider their inclusion in Construction Contracts.
In this article we cover:
- rise and fall clauses, also known as “fluctuation” or “price adjustment” clauses;
- how rise and fall clauses can be used; and
- important considerations when incorporating rise and fall clauses into standard contracts.
What are Rise and Fall Clauses?
Rise and fall clauses allow the price of a fixed-price or lump sum Construction Contract to increase (or potentially decrease) in accordance with fluctuations in supply prices and wages growth, for specific materials and labour, in the geographical region where construction occurs.
Rise and fall clauses introduce a level of price variance to a fixed lump sum. Price adjustments under a rise and fall clause must follow a pre-determined formula, typically in accordance with price indices published by institutions such as the Australian Bureau of Statistics (ABS).
Who is Likely to Use Rise and Fall Clauses?
Historically, any discussion about rise and fall clauses in Australia has largely centred around labour cost increases.[1] The most obvious contemporary application of a rise and fall clause is for Construction Contracts with a large portion of the Contract Sum relating to materials costs, as those contracts are more likely to be affected by building materials shortages that are currently being experienced worldwide.[2] Other situations in which rise and fall clauses are likely to be desirable are on projects:
- where construction commences a year or more after the date of the contract; or take more than two years to complete; and/or
- where the Contractor must preserve its profit margin in a high inflationary period.
In these situations, an unexpected increase in the cost of building materials or labour (also known as inputs) over the life of the building project may consume a builder’s potential profit. The recent demise of Privium Group[3] has clearly illustrated the difficulties faced by Australian builders during the last quarter, many of whom are experiencing a period of “profitless prosperity”.[4]
Historical Development of Rise and Fall Clauses
There is nothing particularly new about rise and fall clauses – it’s the kind of bread-and-butter construction law that falls out of the spotlight during stable market conditions, only to re-emerge when world events cause fluctuations in supply.
An example of this can be found in a now-historical edition of the “Builder” magazine published 12 February 1935, which reports a Council of Branches of the Master Builder’s Association of NSW’s decision to urge the re-inclusion of a rise and fall clause into the association’s endorsed Conditions of Contract, which “was formerly included in the conditions, mainly because of the unstable nature of the market following the war period”.[5]
Rise and fall clauses re-emerged in the 1970’s in Australia as it experienced an extended period of high inflation. During the 1980’s, rise and fall clauses were included in contracts as businesses feared further price increases could occur at any time, whether due to foreign military conflict impacting supply chains, or radical domestic policy depreciating the value of the Australian dollar on the global marketplace.[6] [7]
In 2021, following record low interest rates, economic commentators now forecast inflation to become a serious issue for Australians.[8] Inflation in the prices of building materials specifically has become a talking point among the Australian construction industry, caused by COVID-related shipping delays, and demand for materials outstripping supply due to a “global construction boom”.[9] Lendlease chairman Michael Ullmer recently warned of “systemic and underlying” inflation affecting major economies around the world.[10]
Overall, the average cost of materials inputs to the Australian housing construction industry has already (by September) risen by 7.7% in 2021 compared with overall increases of 1.8% in 2020, 0.7% in 2019, 3.1% in 2018 and 2.6% in 2017.[11]
Rise and Fall Clauses Today
These days legal practitioners are likely to have come across rise and fall clauses while reviewing public works contracts. A good example is in the GC21 Edition 2 which includes a standard schedule 7 “Costs Adjustment Formula”. The GC21 Edition 2 General Conditions of Contract provides a useful guide to structuring their own rise and fall clauses.[12]
Although rise and fall clauses are often considered contrary to the Principal’s interests, with inflationary pressures affecting building inputs many competent Contractors may be factoring additional risk into their lump sum tenders. Counterintuitively, by including rise and fall clauses into Construction Contracts, Principals may find that they receive more competitive tender prices.
Rise and Fall Clauses in Annexures and Special Conditions.
Due to the bespoke nature of rise and fall clauses, they are best dealt with by inclusion in the Annexures, or Special Conditions of a Construction Contract. Care should be taken when introducing a rise and fall provision to an amended or bespoke Construction Contract, as many draftspersons are in the habit of including “no rise and fall” provisions at various locations, which may cause uncertainty.
AS2124-1992 and AS4300-1995, two older standard form contracts, both were drafted during a time when rise and fall clauses were commonplace. These standard form Construction Contracts anticipate rise and fall clauses may be annexed to the General Conditions of Contract. Under both contracts, clause 41 relating to Daywork provides in part:
Amounts payable for Daywork shall not be subject to adjustment for rise and fall in costs notwithstanding that the Contract may provide for adjustment for rise and fall in costs. (Emphasis added)
For many young lawyers and contract administrators, this may be the first and only time they have heard of the phrase “rise and fall” in the context of construction contracts. Indeed, this obscure reference does not feature again in the subsequently released AS4000-1997 and AS4902-2000 standard form contracts. Nonetheless, all construction contracts can in principle be amended to include rise and fall clauses.[13]
Rise and Fall Formulae
Rise and fall clauses utilise mathematical formulae to determine how much a Contract Sum will change over time. Rise and fall formulae have four essential elements:
- affected price;
- applicable price index;
- risk buffer; and
- reference dates.
Affected Price
Rise and fall clauses rarely apply to the whole Contract Sum. Usually, the clause applies to specific materials and labour components, each fluctuating separately in accordance with each respective input cost measure.
Typically the a Contract Sum will be broken down with respect to each trade. The apportionment does not have to be accurate – it must merely be agreed by the parties. An example of apportionment would be, that 40% of the Contract Sum relates to on-site labour, while 15% of the Contract Sum relates to steel reinforcement products, 20% concrete etc. More sophisticated tenders may specify the apportionment in more detail.
Where a rise and fall clause applies to a schedule of rates, the apportionment task is not necessary, but each item on a schedule of rates will need to be assigned to a particular class of materials, such as, “concrete products”, or “timber products”, which will determine which relevant price index is to apply.
Applicable Price Index
Price indexes record overall changes in the value of a stated commodity/material. If the value on the index goes up, the price component for the relevant material forming part of the Contract Sum will also ‘rise’. In order to determine if a Contract Sum will ‘rise’ or ‘fall’, a comparison is made between the value of the chosen price index on two particular dates.
Today in Australia, the predominant price indices tracking cost fluctuations of building materials are the Producer Price Indexes (PPI) published quarterly by the Australian Bureau of Statistics (ABS). One such index is the “Input to the House construction industry”, which specifies overall trends in prices for various types of building materials in each of the capital cities.[14]
At present there is no index for commercial construction in Australia. However, for infrastructure contracts, indices such as the “Output of the Construction industries” may be used.[15] The use of “output” indices as opposed to “input” indices is appropriate where the Contractor subcontracts all work to independent subcontractors.
With respect to labour input portions of a Contract Sum, reference to national award rates may be used to accurately track changes in labour input costs.[16]
An important safeguard in drafting rise and fall clauses is to specify an alternative index if a particular index ceases to be published. A general measure of inflation like the Consumer Price Index (CPI) may suffice.[17] Rise and fall clauses can also use indexes published by industry groups, such as the Cordell Building Indices, which are published by CoreLogic.[18]
Risk Buffer
Rarely will a Principal agree to pass on the entire fluctuation in prices of material inputs or labour inputs to a Contractor. Instead, the rise or fall in a price index will be ‘buffered’, or reduced, by applying only a portion of the overall change to the Contract Sum for which the Principal is prepared to accept. The buffer may be significant, such that a 5% rise in the price index for steel, applied at 40% (representing a 40% risk of price fluctuations to be borne by the Principal), will only result in a 2% rise in the affected portion of the Contract Sum relating to steel.
In some instances, the Principal may accept 100% of the risk of price fluctuations. In those situations, the risk buffer will be absent from the formula. This is most commonly the case under public works contracts, where the government is perceived to be in a position of contributing to price fluctuations (either factually or allegedly) and may wish to avoid any arguments about the validity of the contract, by accepting 100% of any input price movement.[19]
Reference Dates
Not to be confused with reference dates under security of payment legislation, these dates determine the point/s in time from which the rise and fall of prices is to be calculated. The first reference date will typically be the date of the ‘base index’ or ‘commencement’ of the rise and fall regime. Depending on the formula used, the first reference date may be:
- the date of tender;
- the date of the contract;
- a date some number of months after the date a Contractor is given access to a site; or
- a floating date that is updated each time a new Price Index is published.
Getting the reference date wrong can result in unexpected inflation in the Contract Sum. An example is the case of Lewis Construction (Engineering) Pty Ltd v Southern Electric Authority of Queensland[20] where the difference between the parties’ positions based on a poorly drafted rise and fall clause was over $400,000.00. In that case, the formula was expressed in the following way:
The Contract price shall be deemed to have been calculated on the Building Materials index as published in the Monthly Review of Business Statistics published by the Commonwealth Statistician for the month in which falls the date of the tender.
The variation between the index at date of tender and the new index will be expressed as a percentage of the former.
For every one per cent, or pro-rata, variation in this index 85% of the uncompleted value of the Material content of the Contract amount at the date of the variation will be varied by one per cent. (Emphasis Added)
The Contractor argued that the “variation” of each newly published price index (referred to in the third paragraph quoted above) was to be calculated by reference to the value of the index at the date of tender. The Principal, on the other hand, submitted that the value of each month’s index should be compared with the previous month’s index, because the formula was adjusting the Contract Sum on a monthly basis.
Under the Contractor’s interpretation, the formula produced an unexpected result, increasing the value of uncompleted work every month, even in circumstances where the applicable price index decreased. The majority held that the Principal’s interpretation applied, and noted that the Contractor’s interpretation of the formula would have inflated the Contract Sum by a factor that was far out of proportion to actual increases in the cost of completing the work.[21]
Gibbs J said:
“…the language of the clause as a whole being open to two constructions, it is proper to construe it so as to avoid consequences which appear unreasonable and unlikely to have been intended, even when the more or less arbitrary nature of the provision is taken into account.”[22]
A similar reference date issue arose in Codelfa Construction Pty Ltd v State Rail Authority (NSW)[23] in which the formula provided in part:
(3) For each one cent increase or decrease in the average weekly wage (as hereinafter defined), or alteration in marginal rates of pay, or the equivalent variation due to alteration of standard working hours, there shall be charged against or allowed to the Department’s account as the case may be a sum representing 0.008 per cent of the value of the uncompleted portion of the Contract as at the date of any such variation…
The parties disputed whether “the value of the uncompleted portion of the Contract” referred to the value of the uncompleted portion as it was, at the date of the contract, or the periodically adjusted value at the time immediately prior to, or following, each adjustment, having regard to successive rise and fall throughout the project.
In each of the above cases, the formula was ambiguous enough such that each party considered it had a reasonable prospect of success in disputing the construction of the clause all the way to the High Court. In both cases, however, the majority took what could be considered the ‘common sense’ view, and did not allow a party to exploit the rise and fall clause to obtain an unfair benefit.[24] In constructing the contract, the Court:
- considered whether there was any ambiguity in the terms of the contract;
- considered, in light of all the relevant circumstances, what was the intention of the parties; and
- resolved any ambiguity in the contract in such a way that the resulting construction was consistent with the parties’ intentions.[25]
Model Rise and Fall Clause For Materials
A basic rise and fall clause applicable to the cost of materials can be included into most lump sum Construction Contracts. A simple clause[26] can have complex implications. Conversely, a formula that is too complicated may be prone to errors in its application. The following clause is given as an illustrative guide only (and does not constitute legal advice):
PRICE ADJUSTMENT FORMULA
If, after the parties enter the Contract, there occur increases or decreases in the costs of performing the Contract, arising from changes in the cost of an affected class of materials (as indicated by a change in the value of a relevant Price Index nominated in the Contract), the value of the work completed by the Contractor shall be adjusted in accordance with the following price adjustment formula:
$A = B% x $C x D% x E% x ((F-G)/G)
Where, for each portion or stage of the works:
A = the increase or decrease in the value (payable by the Principal to the Contractor) of WUC in that portion or stage of the works completed by the Contractor: after the date of a change in the applicable Price Index, and up to and including the next date (if any) that the Price Index changes;
B = the percentage of that portion or stage of the works completed during the relevant period, having regard to the materials supplied during the relevant period;
C = the nominated portion of the original Contract Sum representing the Contractor’s price to carry out that portion or stage of the works, as nominated by the parties in an annexed Affected Price Schedule;
D = the nominated percentage of the Contractor’s price to carry out that portion or stage representing the cost to the Contractor in supplying the affected class of materials, as nominated by the parties in an annexed Affected Price Schedule;
E = the nominated percentage of risk accepted by the Principal with respect to price changes;
F = the value of the relevant Price Index applicable to the date/s when the relevant WUC was carried out;
G = the value of the relevant Price Index applicable to the date of entering the Contract;
The Annexed Price Schedule must specify:
- the class/es of materials intended to be affected by the above Price Adjustment Formula;
- for each affected class of materials, the relevant Price Index, (and any alternative Price Index/es to be used in the event that a relevant Price Index ceases to be published);
- the percentage of risk accepted by the Principal with respect to price changes for each affected class of materials;
- for any defined portion or stage of WUC, a portion of the original Contract Sum that is to represent the Contractor’s price to carry out that portion/stage;
- for any defined portion or stage of WUC, a percentage of the Contractor’s price for that portion or stage of WUC that is to represent the supply of an affected class of materials;
Note: The Price Adjustment Formula can be applied at any time to determine an adjustment to the Contract Sum up to and including the date of the most recently published Price Index. The Price Adjustment Formula will not apply for periods when an applicable Price Index has not been published.[27]
Rise and Fall Adjustments Are Calculated Retrospectively
Price indexes are published on the basis of industry data collected during the period that the index applies. Most Australian price indexes are published quarterly. For progress claims issued prior to the relevant index being released, price adjustment will not be available, unless the contract provides for an interim measure (such as, allowing a previous published index to apply until an updated value is published).
Under most standard contracts, a Contractor is not entitled to monthly progress payments after practical completion is achieved. The contract should therefore make an allowance for a progress claim to be made after practical completion, when the applicable price index is published. Otherwise, the Contractor may be waiting until the end of the defects liability period to make a claim for rise and fall.
Monthly vs Quarterly Indexes
During high inflationary periods, a quarterly price index might not capture monthly changes accurately. A rise and fall provision that adjusts the value of work on the basis of an quarterly index may require that work performed in the first month of the quarter is adjusted separately to work performed in the latter months.
One method of doing this is called a “linear interpolation”, which produces a retrospective monthly index from quarterly values. This process progressively incorporates the total rise and fall recorded over three months, by deeming one third of the overall rise or fall to have occurred in the first month, and two thirds to have occurred by the second month. The full value of rise and fall is deemed to have accrued by the third month.[28]
Uncertainty or Capriciousness
A rise and fall clause must be consistent with other terms of a contract and produce a reliable mathematical result. The courts will be reluctant to strike out an entire contract on the basis of uncertainty of a simple clause,[29] and if possible will determine the operation of the contract in accordance with the ordinary rules of contractual construction. When a rise and fall clause contains an ambiguity, the function of the Court is to make the clause operate sensibly if possible, “within the reasonable confines of its language”.[30]
Where the rise and fall clause is unsalvageable, questions may arise as to whether the clause is to be severed, or whether the entire contract is void.[31] The usual questions of quantum meruit in respect of the entire Contract Sum will arise if the contract is held to be void – in that case the existence of a rise and fall clause in the void contract documents may be used by the Court to assess the degree of compensation that a Contractor may be entitled to. Where a formal contract fails to include a valid rise and fall clause, but the parties clearly intended for such a clause to apply, the Court may rectify the formal contract to include the rise and fall clause.[32] In some cases, the consequences of a contract being voided for uncertainty may be severe, such as where a poorly drafted arbitration clause fails with the rest of the contract, after the arbitration has already taken place.[33]
An important concept to consider when analysing the legal risk of uncertain rise and fall clauses is ‘capriciousness’, or arbitrariness. Courts will not apply a poorly drafted (or ambiguous) rise and fall clause if the result is clearly unfair or out of proportion to actual inflationary pressures. The Court is likely to read the clause down, on the basis that the parties to a commercial arrangement would not intend for a rise and fall clause to provide such a windfall to the Contractor.[34]
Unfair Windfalls and Upper Limits
A Contractor may receive additional payments under a rise and fall clause, regardless of whether the Contractor actually incurred increased costs due to inflation.[35] To avoid this possibility, some rise and fall clauses limit adjustments so that they do not exceed the amount of additional costs actually incurred.[36] Such an approach may require the Contractor to maintain (and share) very detailed and transparent records of costs incurred at each stage of the project.
Prohibitions on Rise and Fall Clauses (Residential Building Work)
In Western Australia, the Home Building Contracts Act 1991 prohibits the inclusion of rise and fall clauses in home building work contracts where the original Contract Sum of the work is between $6,000.00 and $200,000.00.[37] This prohibition is qualified by exceptions, such as a “rise” clause being permitted where the direct cause of the price increases is the imposition of a new law, tax or duty. A rise and fall clause is also allowable if drafted to apply only to actual increases in the cost of carrying out the construction work where the work is delayed solely as a result of circumstances outside of the Contractor’s control (not constituting a breach of the contract by the Contractor). If the price increases by more than 5% of the original Contract Sum, the owner may terminate the contract and compensate the Contractor for work performed up to the date of termination.[38]
In Victoria, the Domestic Building Contracts Act 1995 also prohibits the inclusion of rise and fall clauses (“cost escalation clauses”) in domestic building work contracts.[39] There are stated exceptions to this prohibition, such as where the original Contract Sum is above $500,000.00, however, the requirement that builders give owners a notice in an approved form effectively creates a blanket prohibition, where the Director of Consumer Affairs Victoria has not approved any form of notice.[40] Cost escalation clauses are allowed in relation to a domestic building work contract worth over $5,000.00 that is “for public construction”.[41]
No prohibitions currently exist in New South Wales, Queensland, South Australia, Tasmania, or in the Northern Territory for rise and fall clauses in residential or commercial Construction Contracts.
Price Increases Caused by New Laws, Taxes, or Duties
Both the Western Australian and Victorian Acts that prohibit rise and fall clauses have exceptions for provisions according to which the increase in Contract Sum is the result of the introduction of a new law, tax or other government-imposed charge, introduced after the contract was entered into. A residential builder wishing to rely on such a clause must provide a clear warning next to the Contract Sum.[42]
Rise (and fall) clauses relating to government-imposed tax increases may become particularly relevant for GST-inclusive lump-sum contracts in coming years, with the threat of an increased GST on the horizon. The OECD recently recommended that Australia increase its GST by 25%.[43] Although previous sales tax regimes allowed for increases in sales tax to be automatically passed on to consumers,[44] that is unlikely to be the case for any future GST increases.
Statutory Security of Payment
Having regard to the way that security of payment legislation works among Australian East Coast states,[45] it may be prudent to ensure the rise and fall clause adjusts the value of works performed under the contract, rather than merely providing a mechanism for allowing a superintendent to grant or withhold additional payments.[46]
Rise and fall adjustments are made retrospectively; a Contractor may find that the value of work performed in a previous month substantially increases when the relevant price index is published (even though no further construction work has been carried out). In those circumstances, jurisdictional issues with respect to the existence of a valid reference date may arise.[47]
Given the potential for rise and fall clauses to be interpreted in unexpected ways, Contractors may be warned to pay close attention to the interplay between the rise and fall clause and security of payment legislation, if they intend to utilise statutory adjudication to recover progress payments. It is at the intersection of laws that we may expect to see new developments.
What legal advice can be given?
Legal practitioners can be of great assistance when proposing or responding to rise and fall clauses in Construction Contracts, specifically:
- drafting a valid rise and fall clause, having regard to certainty of the clause in the operation of the contract as a whole, and also having regard to applicable local laws and regulations;
- identifying or scrutinising rise and fall clauses in a contract for tender, proposing or negotiating amendments to those clauses, or calculating unexpected consequences of a particular rise and fall clause; and
- resolving disputes regarding rise and fall clauses, their proper construction, and a party’s prospects of success should they wish to challenge a party’s interpretation of such clauses or seek to enforce the relevant clause in the Courts, or persuade an adjudicator as to the correct application of the clause.
(Annexure A to this article is available for download as a PDF at https://vincentyoung.com.au/wp-content/uploads/Annexure-A-Rise-and-Fall-Clauses-in-Construction-Contracts.pdf)
Article by Brett Vincent, Partner and James Gilronan, Graduate Lawyer.
[1] See for example: John Sharkey “Were You Underpaid Your Rise and Fall Entitlement? – See CC” (1994) Building and Construction Law Journal, Vol. 10 p86 at page 88, and John Tyrril “National Costs Adjustment Provision: NCAP2” (1988) Building and Construction Law Journal, Vol. 4 p123
[2] In Australia: “Infosheet Building Materials Shortage 2021” published by the Tasmanian Government, available at https://www.cbos.tas.gov.au/__data/assets/pdf_file/0003/618078/Infosheet-Building-Materials-Shortage-2021.pdf(Retrieved 15 November 2021), Hall and Wilcox “Supply chain delays and materials shortages in the construction industry” Lexology (2021), available at https://www.lexology.com/library/detail.aspx?g=863ad430-bcfc-4c1d-a3fd-e1daace640e0 (Retrieved 15 November 2021),
In the UK: LaToya Harding “UK construction sector shrugs off supply chain crisis” Yahoo!finance (2021), available at https://news.yahoo.com/uk-construction-sector-shrugs-off-supply-chain-crisis-110406037.html (Retrieved 15 November 2021), In North America: “Skyrocketing Lumber Prices Add Nearly $36,000 to New Home Prices” (2021) National Association of Home Builders https://www.nahb.org/news-and-economics/industry-news/press-releases/2021/04/skyrocketing-lumber-prices-add-nearly-36000-to-new-home-prices (Retrieved 15 November 2021).
[3] Privium Group, a Brisbane-based construction company recently entered voluntary administration: Nibir Khan “Major building group Privium collapses with future of its projects unclear” COVID Blog, ABC News, available at https://www.abc.net.au/news/2021-11-18/qld-privium-company-collapse-building-boom/100631852 (Retrieved 19 November 2021).
[4] Robert Gottliebsen “Cloud Over Home Building” (16 November 2021) The Australian (Nationwide News Pty Ltd).
[5] “Building Contracts: Rise and Fall Clause” Building: the magazine for the architect, builder, property owner and merchant (1935) Vol. 55, No. 330, 12 February 1935 (Available at https://trove.nla.gov.au/).
[6] Glenn Stevens, “Address by Deputy Governor of the Reserve Bank of Australia, to South Australian Centre for Economic Studies April 2003” Economic Briefing, Bureau of Industry and Adelaide, (2003), available at https://www.bis.org/review/r030416e.pdf (Retrieved 15 November 2021).
[7] See a brief discussion of the ‘fall’ of rise and fall clauses in John Tyrril “Cost Adjustment – Problems and Developments – Enterprise Agreements” (1993) Building and Construction Law Journal Vol. 9 p. 245, at page 247.
[8] Tarric Brooker, “US high inflation rate could leave Australia struggling like the 1970s and ‘80s” (2021) news.com.au, available at https://www.news.com.au/finance/economy/australian-economy/us-high-inflation-rate-could-leave-australia-struggling-like-the-1970s-and-80s/news-story/1034c5711af317651fa83cf4814fa06e (Retrieved 15 November 2021).
[9] Martin Kelly, “Building costs to run ahead of inflation across Australia” (2021) Australian Financial Review, available at https://www.afr.com/property/commercial/building-costs-to-run-ahead-of-inflation-across-australia-20210727-p58dct (Retrieved 15 November 2021).
[10] Ben Wilmot “Lendlease warns of inflation shock” (13 November 2021) The Australian (Nationwide News Pty Ltd).
[11] These values are obtained from ABS Catalogue 6427.0, Series ID A2390558X, see Sub. 11.
[12] See Annexure A to this article, Example 2, available at https://vincentyoung.com.au/wp-content/uploads/Annexure-A-Rise-and-Fall-Clauses-in-Construction-Contracts.pdf (Retrieved 19 November 2021)
[13] Stanwell Park Hotel Co Ltd v Leslie (1952) 85 CLR 189, see page 201.
[14] Catalogue 6427.0, Table 18, available at https://www.abs.gov.au/statistics/economy/price-indexes-and-inflation/producer-price-indexes-australia/latest-release (Retrieved 15 November 2021).
[15] See Annexure A to this article, Example 3, which uses Catalogue 6427.0, Table 17.
[16] As in the case of Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337. See Annexure A to this article, Example 2.
[17] Catalogue 6401.0, Table 1, available at https://www.abs.gov.au/statistics/economy/price-indexes-and-inflation/consumer-price-index-australia/latest-release#data-download (Retrieved 15 November 2021).
[18] Available at https://www.corelogic.com.au/reports/cordell-building-indices-chip-report (Retrieved 15 November 2021).
[19] See Annexure A to this article, Example 2.
[20] (1976) 50 ALJR 769.
[21] Ibid., per Stephen & Murphy JJ at page 257.
[22] Ibid., at page 254.
[23] (1982) 149 CLR 337.
[24] Ibid, per Aickin J at page 406, and per Brennan J at page 426 where he states “We were furnished with sample calculations by both parties which were intended to demonstrate the reasonableness of the contending views as to the meaning of the VUPC. Interesting though they were, the construction of cl G 28(3) in this respect is not so uncertain as to be aided by examples of its operation if one or other construction be adopted”.
[25] For a helpful review of the caselaw applicable to contractual construction, see Mason J’s judgment, Ibid., pages 369 to 376.
[26] See Annexure A to this article, Example 5.
[27] See Annexure A to this article, Example 1, for a work through of this rise and fall formula, including some calculations.
[28] See Annexure A to this article, Example 3, Cl 199.04(c).
[29] See for example, Brooking J’s comments in Toyota Motor Corporation Australia Ltd v Ken Morgan Motors Pty Ltd [1994] 2 VR 106, page 130.
[30] Hely v Sterling [1982] VR 246, per Lush J.
[31] Consider Denton v Ryde Municipal Council (1953) 19 LGR (NSW) 152.
[32] See for example, M.R. Hornibrook (Pty) Ltd v Eric Newham (Wallerawang) Pty Ltd (1971) 45 ALJR 523, per the Court on page 376.
[33] This occurred in Bevelon Investments Pty Ltd v Kingsley Holdings Pty Ltd [Unreported, 1971] Supreme Court of Victoria. In that case, Quantum Meruit was awarded to the builder in lieu of a valid written contract.
[34] The Court will not likely read down a clause unless it is drafted ambiguously. See (1976) 50 ALJR 769 per Gibbs J at page 251.
[35] See In the Matter of a Building Contract between Blandhurst Pty Ltd and Graham-Hall (Contractors) Pty Ltd [1984] QSC 242, whereby a builder was entitled to an additional $206,451 despite actual costs to complete being $71,000 less than originally estimated.
[36] See Annexure A to this article, Example 4.
[37] Home Building Contracts Act 1991 (WA) ss 3, 13.
[38] Ibid s13(4)(c), Schedule 1 cl 4.
[39] Domestic Building Contracts Act 1995 (Vic) ss 3, 5, 15.
[40] Ibid s15(2)(b), Domestic Building Contracts Regulations 2017 (Vic).
[41] Domestic Building Contracts Regulations 2017 (Vic) cll 11(1), 12(1).
[42] Domestic Building Contracts Act 1995 (Vic) s33
[43] OECD Economic Surveys: Australia (September 2021), available at https://www.oecd.org/economy/surveys/Australia-2021-OECD-economic-survey-overview.pdf (Retrieved 15 November 2021).
[44]Clayton Utz, “Hidden Rise and Fall Provision” Australian Construction Law Newsletter (1996) Issue 51, page 52.
[45] And now Western Australia, for Construction Contracts entered into from 26 June 2021, with the introduction of the Building and Construction Industry (Security of Payment) Act 2021 (WA).
[46] See for example, Transgrid v Siemens Ltd [2004] NSWCA 395, John Holland Pty Ltd v Roads and Traffic Authority of NSW [2007] NSWCA 19, and Plaza West Pty Limited v Simon’s Earthworks (NSW) Pty Limited [2008] NSWSC 753.
[47] See for example, Shape Australia Pty Ltd v The Nuance Group (Australia) Pty Ltd [2018] VSC 808. In that Victorian case, the Adjudicator determined that it did not have jurisdiction to award any payment to the applicant, finding that no work had been performed in the relevant period, and therefore concluding that no new reference date had arisen. Digby J declined an application to quash the Adjudicator’s decision.