Australia: Building and Construction: ‘From the reference date ’ means ‘on the reference date ’

Reference date

In simple terms, the 'reference date' is the date under the relevant construction contract by regard to which the contractor may serve a progress claim to its client. That may be, for example, the 25th day of each month, the last day of each month, fortnightly on the 15th and 25th of each month or upon the completion of a defined milestone. Because section 12 of the BCIP Act states that a party is entitled to a progress payment 'from the reference date', it was commonly thought that you can issue a payment claim 'on and from' the relevant reference date. For example, if the contract provided that the contractor was entitled to issue progress claims on the 25th day of each month, (because it is not possible to contract out of the BCIP Act or modify or exclude its provisions), the learned view was that a party could issue a payment claim on any day from the 25th day of the month up until the 24th day of the following month until the next reference date crystallised. This interpretation now appears to be incorrect.

Reed Constructions (Qld) Pty Ltd v Martinek Holdings Pty Ltd

In a recent Supreme Court of Queensland decision, the Court stated that a payment claim served after the reference date stated in the contract was an early payment claim and was deemed to be served on the next reference date.

In the matter of Reed Constructions (Qld) Pty Ltd v Martinek Holdings Pty Ltd [2009] QSC 345, the Court considered the validity of a payment claim made by the contractor on 3 April 2009. The contract between the parties provided that claims for payment can be made on the 'first day of each month' and that 'an early progress claim shall be deemed to have been made on the date for making that claim'.

The contractor submitted that section 12 of BCIP Act provided that payment claims are entitled to be made from each reference date and therefore its payment claim was valid. The developer submitted that the payment claim was not submitted on the reference date (ie the first day of April) and was therefore invalid or deemed to be served on the next reference date (ie 1 May 2009). In those circumstances, the payment schedule issued by the developer on 14 May 2009 was within the 10 business days required under the BCIP Act and accordingly valid.

The Court did not accept that the provisions of the BCIP Act allows for a payment claim to be made from each reference date. Such an interpretation, the Court said, would mean more than one progress claim could be served in relation to each reference date. It was further found that the provisions of the BCIP Act did not override the contract provisions and that section 12 only provides the entitlement to make a payment claim. The Court concluded The Building and Construction Industry Payments Act 2004 (Qld) (BCIP Act) sets in place a rapid adjudication process, where claims, schedules, applications and responses must contain required information and be served within tight time frames. The commencement of the process is the issuing of a payment claim from the 'reference date' and it is critical to the validity of any subsequent adjudication that the payment claim is issued at the correct time. In what represents a fundamental change, it appears that for a payment claim to be valid it must be served 'on' the reference date rather than 'from' the reference date. that entitlement is still governed by the terms of the contract, that there is nothing inconsistent between the claim procedure in the contract and the provisions of the BCIP Act and that the BCIP Act itself expresses adherence with the contract. Ultimately, the Court considered that the correct interpretation was that the contract contemplates that the progress claim be made on the first of the month and that the payment claim served on the 3 April 2009 was deemed to have been made on 1 May 2009.

In those circumstances, the contractor's entitlement to make a progress claim for the work in the month prior to 1 April 2009 was effectively lost.

The view of the Court was contrary to previous decisions in other jurisdictions, particularly New South Wales. Other courts had held that payment claims can be made from each reference date irrespective of the provisions of a construction contract that says payment claims are to be made on a particular day or date.

Implications for Claimants

Claimants should be very aware of the provisions of the contract as to when payment claims can be made and ensure the payment claim is made on that date, otherwise the opportunity for a payment claim for that month may be lost.

Implications for Respondents

The implications for Respondents, particularly head contractors are significant. It should be possible now for head contractors to ensure that payment claims under the BCIP Act from various subcontractors on a project arrive at the same time rather than throughout a month. This will limit to some extent the administrative burden already placed on contractors in responding to payment claims.

As referred to in the reasoning of the Court, it is also possible to adopt drafting that emphasises that payment claims must be provided on a specific day/date, such as:

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