Most Read Contributor in Australia, September 2016
The Supreme Court decided on 10 October 2013 that in
McConnell Dowell v Heavy Plant Leasing that even if a
subcontract is not terminated - but the relationship to carry out
work is ended (for example, by taking the work out of subcontractor
hands) - then no further reference dates arise so Security for
Payment claims cannot be made.
Subcontractor payment claims and reference dates: what happens
once the subcontract is terminated?
In McConnell Dowell Constructors (Aust) Pty Ltd v Heavy
Plant Leasing Pty Ltd  QSC 269, McConnell subcontracted
earthworks and civil works to HPL. The subcontract gave McConnell
the right to 'determine' HPL's employment in a variety
of circumstances, including if HPL appointed an administrator,
receiver and manager, and if 'determined', then McConnell
would not have to make payment of any monies payable to HPL until
the subcontract works were complete.
Administrators were appointed to HPL, and McConnell exercised
its right under the subcontract to 'determine' the
employment of HPL and take over all of the plant, equipment and
After the date of determination, HPL served a payment claim on
McConnell under the Building and Construction Industry Payment
Act 2004 (Qld) (the Act), and was awarded
over $10million at adjudication. McConnell appealed to the Supreme
Court to set aside the decision on the basis that the adjudicator
did not have jurisdiction to decide the claim as HPL's
employment under the subcontract had been 'determined'
before the service of the payment claim, and that as a result,
there was no reference date available under the Act for this claim
or any other payment claim.
Justice Applegarth held that the use of the word
'determine' was used in the same sense as
'terminate' in the subcontract and that, as a result of the
'determination' of HPL's employment, the subcontract
had been terminated, and McConnell did not have to make any payment
to HPL until the subcontract works were completed.
Reference dates and termination
In considering whether the subcontract expressly made provision
for a reference date following termination, His Honour found that
the valuation exercise (to calculate any money owing) to be
performed under the subcontract following the termination did not
provide for the making of a 'progress claim' and did not
amount to a reference date for making a payment claim under the
His Honour said that, even if the 'determination' did
not have the effect of terminating the subcontract, it did
terminate the relationship by which HPL undertook to carry out
construction work and supply related goods and services –
reducing the subcontract to a modified version which was no longer
a 'construction contract' for the purposes of the Act, and
preventing entitlement to make a payment claim.
Because the subcontract did not expressly provide for a
reference date after termination (and there were no previous dates
available) then no reference date arose to support the payment
claim in question. As there was no reference date, the adjudicator
lacked jurisdiction and the adjudication decision was therefore
found to be void.
What does this mean for Contractors?
This case again affirms that a reference date will not arise
after the proper termination of a contract (or subcontract) –
unless the contract expressly provides.
Also for the first time the Supreme Court has found that there
will be no reference date once the "relationship to carry out
work" has ended – even if the subcontract is not
Contractors need to ensure head contracts are amended to provide
that reference dates survive termination, and that reference dates
cease on termination in subcontracts.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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