Australia: Court of Appeal warning to payment claim respondents

Earlier this month, the Queensland Court of Appeal handed down a decision of critical importance to payment claim respondents. This is a significant decision that impacts on the scope of matters that should be raised by respondents in payment schedules.

You can read the full decision in Ausipile Pty Ltd v Bothar Boring and Tunnelling (Australia) Pty Ltd  [2021] QCA 223 here.

Facts

Bothar Boring and Tunnelling (Australia) Pty Ltd ('Bothar') engaged Ausipile Pty Ltd ('Ausipile') to carry out work associated with the installation of a pipe between Biggera Waters and South Stradbroke Island. Ausipile issued a payment claim for amounts that were still outstanding in respect of previous claims, as well as an amount for hiring a crane to Bothar. Bothar did not provide a payment schedule in response.

Given no payment schedule had been provided, Ausipile applied for summary judgment under section 78(2)(a) of the Building Industry Fairness (Security of Payment) Act 2017  (Qld) ('BIFA'). Bothar resisted the application, arguing that Ausipile's payment claim concerned two separate construction contracts, and as a result, was void. This argument was based on the crane hire arrangement being a second contract (rather than a variation of the existing contract).

The Court considered the circumstances under which the crane hire arrangement was entered and concluded that it did represent a second contract. Ausipile's payment claim therefore related to two contracts. Relying on authorities referred to by Bothar, the Court found that because the payment claim related to more than one contract it was not a payment claim within the meaning of the BIFA. Because the payment claim was invalid, it was not capable of giving rise to the statutory right for summary judgment. Ausipile's application for summary judgment was dismissed.

Ausipile appealed the Court's decision.

Findings

The Court of Appeal re-examined the context within which the crane hire arrangement had been entered and, disagreeing with the primary judge, found that the crane hire arrangement was a variation to the existing contract. Therefore, Ausipile's payment claim only concerned one construction contract.

The Court of Appeal went on to consider whether, if there had been two separate contracts, this would have rendered Ausipile's payment claim void. Importantly, it was noted that on its face, the payment claim referred to only one contract - there was nothing in the payment claim to suggest that the amount claimed for crane hire was otherwise than under a variation to the contract.

Relevantly, at paragraph [120] Morrison JA stated:

'A payment claim should not be treated as a nullity for failure to comply with s 75(1) of the Act, unless that failure is patent on its face. Where a payment claim purports to be made under one contract, it is not rendered invalid simply because at a later time (either during the adjudication or otherwise) it is determined that part of the claim was, in fact, a claim under a different contract. Provided a payment claim is made in good faith and purports to comply with s 75(1) of the Act, the merits of that claim, including questions as to whether it complies with s 75(1), is a matter for adjudication after having been raised in a payment schedule. A recipient of a payment claim cannot simply sit by and raise that point later, if it is not put in a payment schedule in response.'

(Emphasis added.)

The Court of Appeal found that, even if the crane hire fell under a separate contract, Ausipile's payment claim still complied with the BIFA because 'it made a claim, on its face, for amounts due under the one contract'.

The appeal was allowed and summary judgment was entered for Ausipile.

Lessons

Where a payment claim is made in good faith and purports to comply with the BIFA it will be difficult for a respondent to successfully argue that, based on a closer examination of its form, it is not a valid payment claim within the meaning of the BIFA.

While such technical arguments concerning non-compliance with the legislation may not render a payment claim void, they can still be used in some circumstances to significantly cut down the value of a claim. However, as the above extract from the Court of Appeal's decision indicates, it is important that these arguments are raised in the respondent's payment schedule.

Often respondents will not know whether there are any 'technical' arguments under the legislation available to them and how these should be articulated in a payment schedule. In such circumstances, it may be worthwhile engaging solicitors to assist with payment schedule preparation.

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.