Australia: BCIPA: High Court confirms that a valid construction contract payment claim requires a reference date

At the end of last year, the High Court delivered its first judgment on security of payment legislation: Southern Han Breakfast Point Pty Ltd (In Liquidation) v Lewence Construction Pty Ltd [2016] HCA 52. The decision confirms that the existence of a reference date under a construction contract is a precondition to the making of a valid payment claim (and, in turn, a precondition to the making of a valid adjudication application and determination)

The facts

Southern Han Breakfast Point Pty Ltd and Lewence Construction Pty Ltd were parties to a contract for the construction by Lewence of an apartment block in New South Wales.

The Contract provided for Lewence to claim payment progressively from Southern Han by making a progress claim on the eighth day of each month for work completed up to the seventh day of that month.

On 27 October 2014, Southern Han gave Lewence a notice purporting to exercise its right under the Contract to take out of Lewence's hands all of the work remaining to be completed. Lewence treated the giving of that notice as repudiation of the Contract by Southern Han and, on 28 October 2014, purported to accept the repudiation and terminate the Contract.

On 4 December 2014, Lewence served a purported payment claim on Southern Han for work carried out under the Contract up to 27 October 2014. Southern Han responded by providing a payment schedule to Lewence indicating that the scheduled amount Southern Han proposed to pay was nil.

Lewence then attempted to make an adjudication application. In its response, Southern Han submitted that the adjudicator lacked jurisdiction to determine the application. This argument was rejected by the adjudicator and the adjudicator proceeded in determining the application.

Southern Han sought a declaration from the New South Wales Supreme Court that the adjudicator's determination was void. It argued that, as a result of the events of 27 and 28 October 2014, no reference date for making a progress payment could have arisen under the Contract after 8 October 2014 and therefore the document Lewence served on Southern Han on 4 December 2014 was not a valid payment claim under the Building and Construction Industry Security of Payment Act 1999 (NSW).

The primary judge at first instance made the declaration sought by Southern Han. Lewence appealed to the Court of Appeal, which set aside the Supreme Court's declaration. Southern Han then appealed to the High Court.

The High Court decision

The High Court allowed the appeal, confirming that the existence of a reference date under a construction contract is a precondition to the making of a valid payment claim under the Act and that, in the circumstances of the case, no reference date existed at the time Lewence made the payment claim.

The High Court rejected the argument that Lewence's right to make progress claims under the Contract survived either suspension or termination of the Contract. First, if the Contract was suspended by Southern Han, the High Court found that this included a suspension of all of the contractual rights and obligations in relation to payment under the Contract, which included Lewence's right to make a progress claim under the Contract for work carried out up to the time of the work being taken out of its hands. On the other hand, if the Contract was terminated by Lewence, the High Court found that there was nothing in the Contract to indicate an intention between the parties that Lewence's right to make progress claims survived termination, therefore preventing a future reference date from arising.

The High Court also rejected Lewence's argument that section 8(2) of the Act provided an alternative reference date from which Lewence could make the progress claim. Section 8(2) provides that a reference date means either a date determined by the contract or, if the contract makes no express provision, the last day of the month. The High Court found that, where a construction contract makes express provision for how reference dates are to be determined (i.e. when progress claims can be made), claimants cannot rely on this section of the Act to calculate alternative reference dates on and from which progress claims can be made, even where a reference date does not arise under the relevant clause in the contract. Because the Contract expressly provided for when progress claims could be made (on the eighth day of each month for work done to the seventh day of that month), Lewence was accordingly unable to argue that an alternative reference date had accrued pursuant to the Act.

The High Court therefore found that the adjudicator's decision was void as no new reference date existed to support the payment claim, making the adjudication application invalid.

Comment

The decision provides greater certainty as to when payment claims are valid and effective in triggering the adjudication process established by the Act.

In particular, the decision confirms that contractors will lose the ability make payment claims under the Act where:

  • the contract is terminated;
  • the contract provides for when progress claims can be made, but does not expressly state that the right to make progress claims survives termination; and
  • the right to make a progress claim has not yet accrued at the time of termination, in that a new reference date has not yet arisen at the time of termination.

In these circumstances, contractors will have to rely on other legal methods to receive payment, such as suing for damages under the Contract.

Contractors should take care when terminating or suspending contracts to ensure they are not compromising their rights under the contract, such as the right to make a progress claim for outstanding work. Correspondingly, principals should have regard to this case when considering how to deal with progress claims submitted by the contractor after the contract has been terminated or suspended.

The provisions of the Act considered by the High Court in this case are very similar to those in the Queensland security of payment legislation (the Building and Construction Industry Payments Act 2004 (Qld)), as well as other in other jurisdictions, and accordingly this decision is likely to apply.

© Cooper Grace Ward Lawyers

Cooper Grace Ward is a leading Australian law firm based in Brisbane.

This publication is for information only and is not legal advice. You should obtain advice that is specific to your circumstances and not rely on this publication as legal advice. If there are any issues you would like us to advise you on arising from this publication, please contact Cooper Grace Ward Lawyers.

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.

Authors
Similar Articles
Relevancy Powered by MondaqAI
Coleman Greig Lawyers
 
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”

Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Coleman Greig Lawyers
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
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).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions