Today the High Court of Australia unanimously held that the
existence of a "reference date" is a precondition to
making a valid payment claim under the Building and Construction
Industry Security of Payment Act NSW 1991 (SOP
Act). Any purported adjudication determination consequent
upon an invalid payment claim would be void and of no effect.
The decision in Southern Han Breakfast Point Pty Ltd (in Liq.) v
Lewence Construction Pty Ltd  HCA 52 highlights the
importance of including express provisions in contracts dealing
with critical issues such as when reference dates will arise,
whether reference dates will continue to arise following the
termination of the contract, and when rights to payments under the
contract may be suspended.
The case concerned a payment claim purportedly made by Southern
Han on 4 December 2014. The key issue before the High Court was
whether that payment claim was a valid payment claim.
The case before the High Court (as was the case in the lower
courts) was argued on two alternative hypotheses:
the contract had been either terminated by Lewence on 28
October 2014; or
Lewence's right to progress payments under the contract had
been suspended on 27 October 2014.
On either hypothesis, Southern Han argued that no reference date
arose after 8 October 2014 (being the last reference date) and
therefore the 4 December payment claim was not a valid payment
because there was no reference date available to support the
Lewence argued that the existence of a reference date is not a
precondition to there being a valid payment claim. Lewence's
argument was based on the premise that section 13(1) of the SOP Act
permits any person who has undertaken to carry out construction
work under the contract, or who has undertaken to supply related
goods and services under the contract, to make a claim.
The High Court's reasons in Lewence
This argument was rejected by the High Court, who agreed with
Southern Han's argument that only a person who, by operation of
section 8(1), is entitled to a progress claim could make a claim
(ie. a person who has undertaken to supply related goods and
services under a construction contract in respect of which a
reference date has arisen).
The High Court also held that:
if a contract makes express provisions for fixing the date for
making claims, then section 8(2)(b) could have no application;
clause 39 of the Contract (which provided Southern Han with the
right to suspend payment) also suspended Lewence's right to
make a progress claim under clause 37, and therefore prevented any
reference date from arising until the conclusion of the suspension;
clause 37 of the Contract (which provided Lewence with the
right to make progress claims) would not survive termination, and
therefore following termination Lewence's rights under the
Contract were limited to those which had already accrued.
What the Lewence decision will mean for construction
The decision in Lewence suggests that parties to construction
contracts may agree on the dates for making contractual claims for
payment under the contract, and the effect of section 8(1) of the
SOP Act is that such agreements will regulate when a reference date
will arise (and consequently, the availability of
However, it remains unclear how section 8(1) might interact with
the "no contracting out" provision in section 34, and to
what extent other clauses which regulate entitlement to payment
typically found in construction contracts (including for example
clauses which prescribe conditions precedents to payment) might
regulate the existence of reference dates.
Clayton Utz communications are intended to provide
commentary and general information. They should not be relied upon
as legal advice. Formal legal advice should be sought in particular
transactions or on matters of interest arising from this bulletin.
Persons listed may not be admitted in all states and
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
A lessee will need to demonstrate that the genuine interests of the lessor will be protected if relief is granted.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).