Commercial Notes No. 2

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
E-Mail: robert.claybourn@ags.gov.au

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.

Note

1 [1999] 4 All ER 342

Contacts for further information:

Paul Sykes
Principal Solicitor
Tel: (02) 6253 7050
Fax: (02) 6253 7302
E-Mail: paul.sykes@ags.gov.au

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.

Exemptions

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.

Licences

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: http://www.ogtr.gov.au.

Notes

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
E-Mail: john.scala@ags.gov.au

Phil White
Counsel
Tel: (02) 6253 7132
Fax: (02) 6253 7304
E-Mail: phil.white@ags.gov.au

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
Counsel
Tel: (02) 6289 8517
Fax: (02) 6253 7304
E-Mail: damian.page@ags.gov.au

Anne Kelly
Senior Government Solicitor
Tel: (02) 6253 7004
Fax: (02) 6253 7310
E-Mail: anne.kelly@ags.gov.au

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.

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