For the Record - Records Management in the Building and Construction Industry
By its nature the Building and Construction industry involves a significant volume of records management and paper trails. Despite forever changing and improving technologies tailored towards the maintenance of records, there is still significant room for error for those involved in the industry. This article provides an overview of the obligations and common mistakes prevalent within the industry and how to structure your operations to achieve best practice.
The Law on Records Management
As we are all now aware, the new changes introduced under the provisions of the Building and Construction Industry Security of Payment Act 1999 (NSW) (SOPA) ensure that individuals who carry out construction work under a construction contract are entitled to receive, and are able to recover, progress payments in relation to the carrying out of that work. We are perhaps less mindful of the fact that an individual’s prospect of success under SOPA is largely influenced by the efficiency and quality of their record management processes.
In order to recover a progress payment, an individual claiming payment must make a payment claim. Similarly, an individual served with a payment claim may respond by providing a payment schedule to the claimant. The SOPA outlines strict requirements that must be included in this documentation in order for it to be considered in the Adjudication process. Challenges can arise where detailed records are not kept, and instructions, variations and approvals have been made orally and not recorded.
It is important to note that payment claims and schedules are often strengthened by the inclusion of records such as:
- statements detailing the extent of the work completed;
- completion certificates;
- delivery dockets;
- variation records and approvals;
- request for Information documentation; and
- other applicable contract document requirements.
Not only does recordkeeping allow you to identify the sum of money owed and the particulars required for the production of a payment claim – it also promotes time efficiency and secures your legal team’s ability to work within the tight time restraints applied in the SOPA process. The success of SOPA proceedings often turn on the quality and quantity of the evidence presented, and in turn, the standard of record management undertaken by the parties involved.
Other building specific legislation, such the Home Building Act 1989 (NSW), can also impact your recordkeeping requirements. For example, those covered by the Home Building Act must ensure they maintain adequate records of licences, insurances, any insolvency, winding up or deregistration matters and complying contracts.
Employment and Work Health & Safety
Employers within the Building and Construction Industry are bound by the Fair Work Act 2009 (Cth). Employers are legally obligated to keep time and wage records for all employees, which in most cases must be kept for seven years after production. These records must be legible and in English, accessible to workplace inspectors and capable of being computerised.
A range of information must be collected and kept for each employee as prescribed by the Fair Work Act 2009 and Fair Work Regulations 2009. This includes:
- general records;
- pay records;
- hours of work records;
- leave records;
- superannuation contribution records;
- individual flexibility arrangement records;
- guarantee of annual earnings records;
- termination records; and
- transfer of business records.
Employers are also legally obligated to issue each of their employees a written payslip within one working day of pay day, in either electronic or hard copy form.
It is important to note that there are consequences for not complying with your recordkeeping and payslip obligations. Employers can be served with an infringement notice for failing to meet their recordkeeping and payslip obligations under the Act. Further, if an employer’s failure to meet its obligations is seen to be serious, wilful or repetitive, Fair Work Inspectors may recommend the matter be taken to court.
The Fair Work Ombudsman has created various templates to help employers meet their recordkeeping and payslip obligations. You can download these templates at www.fairwork.gov.au.
Work Health & Safety Records
Work Health & Safety (WHS) is a paramount concern in the Building and Construction industry and is governed primarily by the Work Health and Safety Act 2011 (NSW). Effective recordkeeping is essential not only to ensure compliance with your legal obligations, but also to provide information to workers and monitor performance when it comes to health and safety.
It is essential that individuals responsible for construction projects retain records of induction training for the duration of employment and the construction project, and a further three years after the cessation of employment or completion of the construction project.
Similarly it is the responsibility of individuals undertaking induction training to keep their own copies of evidence of training to indicate to relevant parties that they have satisfactorily completed WHS induction training. These individuals should also provide copies of all relevant qualifications and licences to their employer or principal contractor for their records. Further information is available at www.fairwork.gov.au.
The Corporations Act 2001 (Cth) sets out various laws relating to businesses, which include but are not limited to corporations, managed investment schemes and partnerships. Almost invariably, those within the Building and Construction industry are either working for, or operate, a business entity. As such, the recordkeeping obligations as contained in the Corporations Act are likely to apply to you.
Section 286 of the Corporations Act sets out the obligation to keep financial records, which dictates that financial records must:
- be kept in written form;
- correctly record and explain the entities transactions, financial position and performance; and
- enable true and fair financial statements to be prepared and audited.
Your financial records must be maintained for 7 years after the date of the transaction to which they relate. Be cautious with the form, content and maintenance of your financial records – a failure to abide by section 286 of the Corporations Act will be deemed a strict liability offence.
When Disputes Occur
Why the World Needs Record Maintenance
It is quite simple, when something goes wrong on a project, big or small, there is usually no clear path of events, no singular recollection, no one point of view, to help understand the truth of the situation. The primary tool we can use to clear a murky past is the documentary evidence that parties leave behind along the way.
Maintaining proper records can help you settle a dispute before it gets to any formal dispute resolution process, or, should a formal process be instigated, help you and your legal representatives build a strong case.
So what are your records used for in a dispute? There is a myriad of uses for your records during a dispute, they will help your lawyers define the issues, prepare pleadings (formal written statement of a party’s claim or defence), provide the particulars i.e. the facts of a claim, prepare evidence, brief any experts and later, to examine witnesses. Without proper records the case will quickly turn into a messy and drawn out game of ‘he said, she said’.
The Laws of Evidence
There are various statutes and rules that will apply to the production and treatment of records during litigation and some other dispute resolution processes. As an example, because of the definition of a ‘document’ under the Evidence Act 1995 (NSW), the records that can form a part of the documentary evidence in a proceeding will include all electronic records, videos, photographs, drawings and email correspondence, and more, not just the physical hard copy records you maintain.
When you are involved in a litigated dispute, there may be an order for discovery, which allows the parties to obtain evidence from each other. Electronic discovery platforms are becoming increasingly popular in large construction disputes and it is important to ensure you are represented by a team with the right tools in place to cope with the review of large volumes of documents. Civil procedure laws and rules will dictate how records are provided to the Court and other parties during discovery. Where you provide documents in discovery, you will be required to prepare a list of documents discovered and accompany that list with a supporting affidavit and solicitor’s certificate. This means you will be required to swear or affirm to having made reasonable enquiries to find the required documents. Making incorrect statements in this affidavit can have serious consequences, including potential criminal penalties. You may also be cross-examined on your affidavit, which is never a comfortable experience, especially where some omission or mistake has been made.
It is important to remember that discovery is an ongoing obligation, this means that if you or someone in your business finds a bundle of documents that was not produced when it should have been, you must still produce those documents on discovering them. Earnest mistakes, or forgotten folders can be forgiven, it is where carelessness or purposeful omissions occurs that there is a likely penalty involved.
Even if you are not a party to a dispute you can be required to produce documents, namely under a subpoena. You are required to comply with a subpoena by providing all relevant and non-privileged documents covered by the subpoena. There is little room to argue against a subpoena, however, if a subpoena is overly vague and/or oppressive, your legal representative may argue against complying with the subpoena on these grounds. As a rule, you will receive conduct money to comply with the subpoena and may be able to retrieve any costs of compliance in certain situations. You will be in contempt of court if you fail to comply with a subpoena.
Ensuring compliance with a subpoena and discovery will often require you to seek legal assistance. This is because you must provide all relevant documents, unless those documents are privileged. It is often the case that the best person to assess relevance is your lawyer, and it is always the case that they are best positioned to assess privilege. Even if a document seems harmful or unflattering for you and your business, or seems unhelpful in your opinion, if that document is required to be produced, then you must produce it. There is a temptation to hide away harmful documents, or only half-heartedly search your records, but be warned; often the other parties will have reviewed documents on their end that may identify gaps in your production. So if you have made a mistake or knowingly omitted documents, the other parties are likely to be able to identify or even evidence your faults and/or omissions.
Records to keep
Contemporaneous records are the records made at the time of or just after an event. Contemporaneous records should record anything which was seen, done or heard, but it must be documented by the person who saw, did or heard the event. The longer the period of the delay the more significantly the truth becomes marred by hindsight, gaps in memory or bias, making the records less reliable in a dispute.
Examples of the contemporaneous records you should keep include site diaries, observations, instructions issued, meeting minutes and file notes of conversations or incidents. Make sure to record the people who are present, what orders or advice was given, what decisions were made and any thoughts expressed at the time.
Employment and WHS Records
As discussed above, it is the law to maintain certain records regarding your employment practices and WHS. These records are also incredibly important in the case of a dispute with an employee, subcontractor or compliance body.
Contracts and Agreements
These will form the base of an outsiders understanding of the relationships between the parties to a dispute. Your documented agreements will ideally identify all the rights and responsibilities the parties have agreed to in their bargain and the specifics of what was expected to be involved in a project and its processes.
Project Related Documentation
Maintaining records of the processes, procedures, methods and the specifications of a project is essential. Important project related documentation to produce and keep include but are not limited to; pre-construction documentation, variations, invoices, requests for information, drawings and their revisions, site directions, bulletins, documents provided by architects and designers and programming.
This is a big one, all correspondence, whether it is by letter, email, SMS, fax or carrier pigeon, must be stored correctly and kept easily accessible. Email chains are particularly important in a dispute process, so ensure that your document retention methods, whether electronic or otherwise, are up to date and easy to access.
Tips and Hints
Having been involved in numerous building and construction disputes, TressCox has had the opportunity to work with some of the best and much of the worst in records management from the industry. Below is a list of tips and hints based on some of the most common mistakes we have seen:
- Keep it clean – this particularly pertains to contemporaneous records where people often fail to foresee statements and/or scribbled notes may one day be before a judge in a crowded courtroom. Cussing, name calling, informal or inappropriate sentiment is often best left until knock off time.
- Don’t rely on others – your records management is your own responsibility. Pointing the finger will not relieve you of your recordkeeping requirements.
- Don’t collude – creating certain documents after an event by colluding with another party can be illegal, especially where that collusion is used to distort the truth.
- You have been subpoenaed – remember these documents include electronic records that may be stored in latent places and archived folders within your email accounts. You must produce all documents that are relevant to the subpoena and not privileged, not just those you feel like handing over or found in a quick search.
- You call that a contract – make sure you can identify the written agreements for any project you are working on and that those agreements encapsulate the contractual relationship in its entirety.
- Amendments, changes and revisions – put a system in place to deal with all amendments, changes and revisions to the contract and all the works. A big one to watch out for is the exchange of multiple revisions of drawings and specifications which can shift the project dramatically and confuse the chain of liability.
It is important to remember that there are no second chances when it comes to getting your records management right and often by the time you realise a gap or fault in your records it may be too late. With the significant consequences involved in failing to maintain adequate records, it is worth devoting the time and resources needed in order to get your record management system perfect the first time around. Whether this means seeking legal advice or performing a complete restructure of your operations – not only will you be thankful in the long term should a dispute arise, your construction operations will also undoubtedly benefit.
Whilst this article pertains primarily to those in the NSW Building and Construction Industry, similar legislation and rules have been enacted in all States and the general elements of proper records management will still apply to those outside of NSW.
Brian Ambler, Partner
Katherine Ashbolt, Solicitor