The recent Federal Court decision in Protectavale Pty Ltd v K2K Pty Ltd [2008] FCA 1248 provides a valuable reminder of the minimum requirements for submitting valid payment claims under the Building and Construction Industry Security of Payment Act 2002 (Vic) (SoP Act).

The facts

Protectavale and K2K were joint venturers in a residential and retail development known as "Chadstone Gate". In April 2006 they engaged a contractor to carry out the construction work. The parties fell into dispute, an element of which concerned an invoice the contractor submitted to the joint venturers for monies it claimed it was owed under the contract. The contractor sought a summary judgment on the basis that the invoice was a valid payment claim under the SoP Act.

The invoice which was submitted a short time after practical completion was certified, claimed the entirety of the contract sum (as adjusted by variations and a prolongation claim), less amounts previously paid and less retention. While the invoice did attach a schedule providing details of the variations and the prolongation claim, no details were provided as to the outstanding contract sum claimed.

The decision

Finkelstein J considered whether the invoice met the requirements of section 14 of the SoP Act. Finkelstein J noted that while the test is objective, it should not be applied in an unduly critical manner given that the parties to the contract might understand more of the content of an invoice than a third party. An important factor in determining whether an invoice meets the requirement of section 14 is whether the claim enables

the principal to ascertain with sufficient certainty the work to which the claim relates in order to provide a meaningful payment schedule.

The payment claim was made in the usual way – the contract sum plus adjustments less amount paid. Finkelstein J held that the contractor's failure to identify the work to which the claimed amount of the contract sum related was fatal, despite the fact that practical completion had been achieved and as set out in the payment claim the amount was the contract sum less amounts previously paid by the joint venture. Finkelstein J said that without this information the joint venturers could not value the work to which the claimed amount related, make their own assessment of the amount payable or provide a payment schedule as required under the SoP Act. Accordingly, the contractor's application was refused.

The lesson

The decision highlights the importance of ensuring that, when submitting a payment claim, the requirements of the SoP Act are met, in particular that the work to which the claim relates is properly identified and explained to enable the principal to appropriately assess and respond. In some circumstances, a standard form invoice may simply not be enough.

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