Australia: Commercial & Industrial Construction Group Pty Ltd v King Construction Group Pty Ltd & Anor [2015] VSC 426: Security of payment

Construction Law Update - October 2015

KEYWORDS: SECURITY OF PAYMENT; REFERENCE DATES KEY TAKEAWAY

A payment claim served in contravention of section 14(8) of the Building and Construction Industry Security of Payment Act 2002 (Vic) (Act) does not provide a basis for a valid adjudication under the Act.

The date work is performed under a contract is relevant to determining the correct reference date for a payment claim. It is, however, not the only factor for determining the validity of the payment claim.

The facts

Commercial & Industrial Construction Group Pty Ltd (the Plaintiff) in this case sought an order that an adjudication determination made under the Act be quashed or set aside because the relevant payment claim was invalid.

King Construction Group Pty Ltd (the Defendant) made the payment claim on 21 January 2015 (the 21 January Payment Claim), in respect of amounts it had previously claimed under the following invoices (the Earlier Invoices):

  • 1203 dated 21 November 2014;
  • 1206 dated 26 November 2014;
  • 1211 dated 28 November 2014; and
  • 1223 dated 23 December 2014.

The 21 January Payment Claim also included invoice 1226, for work performed but not claimed in previous payment claims (the Additional Invoice). The Defendant did not perform any further works for the Plaintiff after 17 December 2014. The Plaintiff had issued payment schedules in response to each of the earlier invoices for less money than the Defendant claimed.

The adjudicator's determination

The adjudicator found that the 21 January Payment Claim was valid because the reference date, calculated in accordance with section 9(2)(b) of the Act, was 3 February 2015.

The adjudicator found that the 21 January Payment Claim did not breach section 14 (8), and that section 14(9) permitted it to include the unpaid amounts from the Earlier Invoices. This was said to be because there does not need to be a relationship between the reference date and when the work is carried out.60

The plaintiff's claim

The plaintiff claimed the determination should be quashed because:

  • the correct reference date of the 21 January Payment Claim was 5 January 2015, the same reference date as invoice 1223;
  • the Defendant therefore served the 21 January Payment Claim in breach of section 14(8) of the Act, and that it was thus invalid; and
  • the adjudicator's acceptance of the 21 January Payment Claim was an error which invalidated his jurisdiction.

The Defendant's claim

The Defendant submitted that the adjudicator was correct in finding that the 21 January Payment Claim was valid, and that its reference date was 3 February 2015. In relation to the Additional Invoice, the Defendant submitted that the Act, properly construed, permits claims for earlier work undertaken prior to the last reference date which have not been the subject of any previous claim.61

The Defendant relied on Fyntray Constructions Pty Ltd v Macind Drainage & Haulage Services Pty Ltd62 and Spankie v James Trowse Constructions Pty Ltd63 as authority for the proposition that there is no necessary relationship between the reference date and when the relevant work was carried out.64

Findings

Was there a valid payment claim?

Reference date: Vickery J held that the 21 January Payment Claim should be applied to the immediately preceding reference date, 5 January 2015.65 This was because no further work was performed under the contract between 17 December 2015 and 21 January 2015.66 As a result, the adjudicator erred in determining that the correct reference date was 3 February 2015.67

Breach of section 14(8): It is a breach of section 14(8) of the Act to serve more than one payment claim in respect of a reference date. Vickery J held that the 21 January Payment Claim was in respect of the same reference date as Invoice 1223 (served on 23 December 2014). His Honour concluded that both payment claims were in respect of the same reference date because no work was performed after 17 December 2014.68

Did the exception in 14(9) apply?

Section 14(9) of the Act provides that a claimant may include an amount that has been the subject of a previous claim if the amount remains unpaid.

Vickery J held that section 14(9) applied to the unpaid portions of the Earlier Invoices claimed as part of the 21 January Payment Claim, but not the Additional Invoice, as this related to work which had not been the subject of any previous payment claim.69

Result

His Honour quashed the adjudicator's determination because a payment claim served in contravention of section 14(8) of the Act could not provide the jurisdictional basis for a valid adjudication.70

No new work: The plaintiff also submitted an additional ground that the 21 January Payment Claim was invalid because the Defendant carried out no further work between the previous reference date and the date of the 21 January Payment Claim. Although Vickery J was not required to determine this ground, he said that it could not succeed,71 because:

"the fact that an item of work could have been claimed as part of a payment claim served in respect of an earlier reference date, but was not, is not a bar to it being claimed in a later payment claim made in respect of a later reference date, provided that s 14(8) was not breached."72

http://www.austlii.edu.au/cgi-bin/ sinodisp/au/cases/vic/VSC/2015/426. html

Footnotes

60 At [37]
61 At [57]
62 [2002] NSWCA 238
63 [2010] QCA 355
64 At [58]
65 At [72]
66 At [70]
67 At [76]
68 At [86]
69 At [92]
70 At [98]
71 At [113]
72 At [100]

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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