Commercial Notes

No. 2
30 March 2001

Meeting Accommodation Requirements 'Off Budget'

Government agencies are coming under increasing pressure to identify alternative funding structures to satisfy their accommodation needs. On occasions, the private sector is called upon to fund the development in exchange for the agency agreeing to make a series of deferred payments following construction. A funding strategy which is both simple and effective is an agreement to design, construct and lease (a precommitment lease).

A precommitment lease usually results from a tender process in which developers are invited to offer a design and construction package on their land to satisfy design criteria specified by the tenant. The successful tenderer finances and takes responsibility for site acquisition, town planning approvals,
design, construction and defects. The design and construction package for which the developer is responsible can also be integrated with fitout.
The agency may engage project management services to ensure that design and construction proceed in accordance with the precommitment lease and that the agency is properly advised in relation to issues arising under that agreement. The agency's project manager certifies completion of the development which triggers the commencement of the lease.

The agency is not required to make any payment under the agreement prior to the commencement of the lease, following which payments are confined to rent calculated at the rate accepted in the tender. The agency is not exposed to the possibility of 'dead rent' as the lease does not commence until the accommodation is ready for use.

The benefits of adopting a precommitment lease strategy include:

  • Accommodation which satisfies the agency's functional criteria is delivered promptly and without the need for the agency to acquire the site or fund the design and construction.
  • Approvals under the Public Works Committee Act 1969 are not required as the agency agrees to lease rather than acquire ownership of the accommodation.
  • The risk the agency assumes prior to the completion of the development is limited to damages for delay it causes. Following completion, the agency's risk as tenant is less onerous than the risk of ownership.
  • The agency's outlays are limited to rent and building outgoings specified in the lease. These amounts are identified and accepted by the agency when it accepts the developer's tender.
  • The terms of the lease derive from a competitive tender process and therefore there is a fair balance of rights and obligations.

Contact for further information:

Robert Claybourn
Senior Government Solicitor
Tel: (07) 3360 5767
Fax: (07) 3360 5798

Defamation on the Web

Recent cases in the UK and United States have raised interesting issues about defamation occurring on the Internet, and its commercial importance, while also showing the caution needed when comparing judgments from different jurisdictions. There are unique problems in applying normal legal principles to the Internet. Its virtual and global nature means that the law to apply, presentation of evidence and how to enforce any judgments obtained are just some of the issues to be wrestled with.

Additionally, defamation throws up some unique characteristics of its own. This is because the essence of defamation is publication (to a third party - any third party in whose eyes the defamed could be denigrated) and the 'wrong' is committed wherever defamatory matter is accessed. On that basis, a defamed party could sue in any of the places around the world where access has been gained and which has similar defamation laws. It has even been suggested that this 'ubiquity' of defamation actions may 'spawn a new group of net surfers', who will comb the net for defamatory matter, which they will then report to those defamed in the hope of gaining some form of commission.

Demon and Prodigy

A recent British High Court case (Laurence Godfrey v Demon Internet Ltd) 1 demonstrates the potential liability for Internet service providers (ISPs), in that jurisdiction at least. An unknown person posted material to a news group via their ISP in the United States. That posting was duly disseminated to all other ISPs worldwide who carried that particular news group, including Demon in the UK. When he became aware of the posting, the plaintiff complained to Demon. Demon, however, did not accede to his request to remove the material. The material was found by the High Court to be 'squalid, obscene and defamatory of the plaintiff'.

In this case, when, following the plaintiff's complaint, the ISP failed to remove the posting, the ISP was found to have published it 'every time one of [their] customers accessed' it. The judge, though, commented that damages are likely to be 'very small'. Demon's costs are likely to be well over $1m.

However, a recent United States Supreme Court ruling involving the ISP Prodigy produced a different outcome. The facts were similar to those in Demon. The Court upheld the decision of a lower court that Prodigy was a 'common carrier', similar to a telephone company, rather than a publisher. 'The public would not be well serviced by compelling an ISP to examine and screen millions of email communications.'

The judge in Demon saw the effect of the First Amendment to the United States Constitution and other differences between legislation in the two jurisdictions as distinguishing that case from Prodigy. One practical lesson from Demon is that the ISP may avoid liability if it promptly removes an offending posting brought to its attention.


1 [1999] 4 All ER 342

Contacts for further information:

Paul Sykes
Principal Solicitor

Tel: (02) 6253 7050
Fax: (02) 6253 7302

Gene Technology Act 2000

The Gene Technology Act 2000 received Royal Assent on 21 December 2000. It is expected that the operative provisions of the Act will commence on
21 June 2001.

The Act may potentially have implications for Commonwealth agencies in two respects. It could have implications for those agencies that are themselves directly involved in carrying out gene technology research. It may also have implications for a range of existing regulators.

The Act will regulate all 'dealings' (eg. research, manufacturing, production, commercial release and importing) with genetically modified organisms (GMOs).1 Examples of matters that will be regulated by the legislation include:

  • the growing of crops and animals including fish that have been genetically modified
  • laboratory research involving the genetic modification of animals, plants, bacteria and viruses.

The legislation:

  • establishes a statutory officer, the Gene Technology Regulator (the GTR), for the purposes of performing functions under the Act (sections 26-27)
  • establishes three key committees (the Gene Technology Technical Advisory Committee, the Gene Technology Ethics Committee and the Gene Technology Community Consultative Group) to provide scientific, ethical and policy advice respectively to the GTR and/or the Ministerial Council established under an Intergovernmental Agreement on Gene Technology (sections 100, 106, 111)
  • prohibits persons from dealing with GMOs (eg. research, manufacture, production, commercial release and import) subject to certain exceptions (section 32)
  • establishes a scheme for the assessment of risks to human health and the environment associated with various dealings with GMOs which includes opportunities for extensive public input, and
  • provides for a centralised, publicly available database of all GMOs and GM products approved in Australia.

The legislative scheme will be administered by the GTR (sections 25-30).

Transitional Arrangements

The effect of the transitional arrangements is that if a dealing with the GMO received advice to proceed from the Genetic Manipulation Advisory Committee before the commencement of the licensing provisions of the Act, that dealing is deemed to be licensed under the Gene Technology Act. The licence is taken to be subject to any conditions imposed by the Genetic Manipulation Advisory Committee advice to proceed. During the transitional period, all of the other provisions in the legislation (including those relating to the imposition of additional conditions, reporting, monitoring and enforcement) also apply to these 'deemed' licences (section 190).

The 'deemed' licence continues to be in force until the period ending at the earliest of the following times: the time the advice to proceed expires, at the end of two years beginning at the commencement of Part 4 of the Act, or when the licence is cancelled or surrendered.
The legislation effectively revolves around a system of prohibitions and approvals. Every dealing with a GMO will need to be licensed by the GTR unless the dealing is an exempt dealing, a notifiable low risk dealing or on the GMO Register.


The Act contains a mechanism to prescribe certain types of dealings as exempt dealings. The Act does not prohibit exempt dealings.

Notifiable Low Risk Dealings

The regulations will also set out categories of dealings with GMOs which are very low risk and which may proceed provided that certain conditions spelt out in the regulations are observed.

The Act does not allow dealings which involve the intentional release of a GMO into the environment to be prescribed as a low risk notifiable dealing.


Dealings with GMOs (that are not exempt or low risk notifiable dealings) will require licensing by the GTR. The licensing system will be based on rigorous scientific risk assessment and extensive consultation with expert advisory committees, government agencies and the public.

Register of GMOs

Dealings with GMOs may be entered on the GMO Register once they have been licensed for a certain period of time, and once the GTR is satisfied that the dealings with the GMO are sufficiently safe that they can be undertaken by anyone without the dealings with the GMO being dependent on oversight by a licence holder. 2

The new system will operate alongside existing regulatory systems - for example, the existing systems for the regulation of food, therapeutic goods, agricultural and veterinary chemicals and industrial chemicals.

The legislation will require the GTR to take into account advice from other agencies and they too will be required to take into account the advice of the GTR when considering applications for products that have been genetically modified. A range of administrative arrangements such as shared databases will also be implemented.

These arrangements are encompassed generally within the provisions of the Gene Technology (Consequential Amendments) Act 2000.

Additional information on the Act can be obtained from the web address:


1 See Section 32, Gene Technology Act 2000. The term 'deal with' is defined in the Act to mean:

(a) conduct experiments with the GMO
(b) make, develop, produce or manufacture the GMO
(c) breed the GMO
(d) propagate the GMO
(e) use the GMO in the course of manufacture of a thing that is not the GMO
(f) grow, raise or culture the GMO
(g) import the GMO

and includes the possession, supply, use, transport or disposal of the GMO for the purposes of, or in the course of a dealing as described above.

2 Information Bulletin No.1 - Interim Office of the Gene Technology Regulator.

Contacts for further information:

John Scala
Chief Counsel, Commercial

Tel: (02) 6253 7223
Fax: (02) 6253 7301

Phil White

Tel: (02) 6253 7132
Fax: (02) 6253 7304

Application of State Building and Construction Laws to Commonwealth Construction Contracts

The commencement in 2000 of a NSW building Act highlights the potential implications for construction contracts entered into by the Commonwealth arising from state legislation. The Act in question is the Building and Construction Industry Security of Payment Act 1999 (NSW) ('the NSW Act').

The NSW Act provides, among other things, that a person who has contracted to carry out construction work or to supply related goods and services is entitled to progress payments under the Act.

The NSW Act sets out rules about the recovery of progress payments and the due date for their payment. These rules could have significant
financial or administrative implications for the Commonwealth and its project managers for Commonwealth construction contracts. For example, the NSW Act may require payments to be made within 2 weeks after a payment claim for a progress payment is made. This contrasts with Commonwealth purchasing policy under which amounts owed by the Commonwealth are normally paid within 30 days.

In light of the Henderson case (Re Residential Tenancies Tribunal (NSW); Ex parte Defence Housing Authority (1997) 190 CLR 410), it is likely that the NSW Act generally applies in relation to the Commonwealth and its construction contracts.

Accordingly, Commonwealth officers and project managers involved in construction contracts will need to be aware of the requirements of the NSW Act (and other relevant state building legislation) in undertaking their duties. In addition, the Commonwealth may wish to investigate whether there are ways to effectively exclude the provisions of the NSW Act (and any similar laws of other states) if the application of those provisions to Commonwealth construction contracts is inconvenient or undesirable.

In the Henderson case the High Court decided that the Crown in right of the Commonwealth is bound by a state Act in the same way as a subject of the Crown is bound where the state Act 'regulates activities' or 'governs transactions' engaged in by the Crown and its subjects alike, and the state Act extends as a matter of construction to the Crown in right of the Commonwealth, subject always to any inconsistency with a valid Commonwealth law.

Particularly in light of section 33 of the NSW Act, it seems that the Act is applicable, as a matter of statutory construction, to the Commonwealth and its construction contracts. That section provides that the NSW Act binds the Crown in right of New South Wales and, in so far as the legislative power of Parliament permits, the Crown in all its other capacities.

Also, the NSW Act appears to be a law of general application that 'regulates activities' or 'governs transactions' engaged in by the Commonwealth in the exercise of its executive capacities, rather than a law restricting or modifying the Commonwealth's executive capacities. Any inconvenience to the Commonwealth from the NSW Act would not necessarily mean that the Commonwealth's executive capacities have been affected in any way.

However the NSW Act (or other relevant state legislation) would not apply to Commonwealth construction contracts if the provisions of the Act are inconsistent with a law of the Commonwealth (by virtue of section 109 of the Constitution). So, for example, it may be that existing Commonwealth legislation is inconsistent with the NSW Act in a particular case, or an existing Commonwealth Act could potentially provide scope for regulations to be made which would provide the necessary inconsistency.

For example, the regulation-making power in section 65 of the Financial Management and Accountability Act 1997 (and the Finance Minister's power in section 63 of that Act to make Orders) may possibly provide scope for regulations or Orders to be made which would be inconsistent with provisions of the NSW Act. Regulations and Orders 'may make provision relating to...spending...public money'.

Unless and until the Commonwealth laws inconsistent with the NSW Act (and similar legislation of other states) are passed or made, Commonwealth construction contracts are likely to be caught by the state laws.

In the case of the NSW Act, however, another option may be to approach the relevant New South Wales authority in order to seek an exemption from the operation of the Act. Section 35 of the Act in broad terms enables regulations to be made for this purpose. In relation to state laws generally, however, exemptions (if available) should be sought only if the Commonwealth is likely to be bound by state law.

Relevant Commonwealth officers and project managers may need to seek legal advice in light of the NSW Act and similar legislation of other states that may potentially affect the negotiation or management of Commonwealth construction contracts.

Finally, it is worth noting, in relation to the Henderson case, that what remains of the Commonwealth's implied constitutional immunity from state laws is unlikely to be shared by most Commonwealth statutory corporations. Immunity for these bodies will need to derive from section 109 of the Constitution. Accordingly, unless the legislation establishing a Commonwealth statutory corporation is inconsistent with the NSW Act, it is likely that that Act (and other similar state laws) will apply also in relation to construction contracts entered into by the Commonwealth statutory corporation.

Contacts for further information:

Damian Page

Tel: (02) 6289 8517
Fax: (02) 6253 7304

Anne Kelly
Senior Government Solicitor

Tel: (02) 6253 7004
Fax: (02) 6253 7310

ISSN 1443-9549 (Print)
ISSN 2204-6550 (Online)

The material in these notes is provided for general information only and should not be relied upon for the purpose of a particular matter. Please contact AGS before any action or decision is taken on the basis of any of the material in these notes.

Back to Commercial Notes Index