The recent Queensland Supreme Court decision of Walton
Constructions (QLD)Pty Ltd v Corrosion Control Technology
Pty Ltd & Ors  QSC 67 (Walton) arms
respondents with an additional defence to payment claims and
presents a new risk to claimants in further limiting their rights
to pursue payment under security of payment regimes.
Until recently, it was generally accepted that the termination
of a construction contract would not prevent a claimant from
exercising its statutory right (pursuant to security of payment
legislation) to claim progress payments. However, in Walton, it was
held that the termination of a construction contract deprives a
claimant from having recourse to the Building and Construction
Industry Payments Act 2004 (QLD) (BCIPA).
The position before Walton
Pursuant to the New South Wales Court of Appeal decision of
Brodyn Pty Ltd v Davenport (2004) 61 NSWLR 421
(Brodyn), it was accepted that the termination of
a construction contract would not prevent a claimant from utilising
security of payment legislation in pursuing progress payments.
Brodyn confirmed that under the Building and Construction
Industry Security of Payment Act 1999 (NSW)
(BCISPA), monthly reference dates, on which a
payment claim can be made, continue to accrue for 12 months after
the cessation of work, despite the contract having been
The facts of Walton
The decision concerned a contract (based on AS2545) between a
painting subcontractor, Corrosion Control Technology Pty Ltd
(CCT) and Walton Construction (QLD) Pty Ltd
Subsequent to the contract being terminated by Walton
Construction on 15 January 2010, CCT continued to submit payment
claims under the BCIPA in respect of reference dates that occurred
after the date of termination.
In respect of the last payment claim submitted on 22 March 2010,
CCT proceeded to adjudication under the BCIPA and received a
favourable determination in the amount of $225,856.92.
Walton Construction challenged the adjudicator's decision on
a number of grounds including that the contract's termination
deprived CCT of further reference dates and therefore the
entitlement to submit its last payment claim pursuant to the BCIPA.
CCT relied on Brodyn, arguing that reference dates continue to
accrue on a monthly basis after termination.
The Court upheld Walton Construction's argument on the
following two grounds:
1. Clause 44.10 of AS2545 (a clause
found in a number of Australia Standard contracts) provides that
upon termination of the Contract
the rights and liabilities of
the parties shall be the same as they would be at common law had
the defaulting party repudiated the Subcontract and the other party
had elected to treat the Subcontract as at an end and recover
The Court found this to mean that
while the subcontractor can pursue any common law causes of action
against the contract to recover any outstanding monies, its BCIPA
entitlements cease on termination of the contract.
2.The case of Brodyn was
distinguished as the definition of 'reference date' in the
BCISPA (NSW) was expressed 'in
relationto a construction contract'
whereas the definition of 'reference date' in the BCIPA
(QLD) was expressed as 'under a construction
contract'. It was held that the reference to 'under a
construction contract' meant that reference dates cannot occur
subsequent to termination.
The Walton decision means that contractors who enter
construction contracts in Queensland with clauses similar to clause
44.10 of AS2545 and who do not have reference dates accrued before
the contract was terminated, may not be entitled to rely on
security of payment legislation to enforce their rights. The
drafting of termination clauses within building and construction
contracts to ensure reference dates survive termination, can avoid
On the other hand, the Walton decision presents an opportunity
for disgruntled principals, anticipating large ambit claims from
contractors, to consider terminating a contract in an attempt to
force contractors to pursue payment through the more expensive and
time consuming means of litigation or arbitration. However, seeking
legal advice as to the right to validly terminate a contract is
This report does not comprise legal advice and neither
Gadens Lawyers nor the authors accept any responsibility for
We discuss whether certain clauses commonly found in ordinary commercial contracts could be considered to be penalties.
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