A number of essential pre-conditions must be followed to ensure that a claim pursued through adjudication is considered by an adjudicator on its merits and not simply dismissed.
One pre-condition relates to when a payment claim can be issued. This issue is surprisingly complex and has been considered by the Courts a number of times.
This update answers a number of key questions that commonly arise, by reference to recent authorities.
Can I submit a payment claim after a reference date has accrued?
It is common for construction contracts to specify a date for issuing a progress claim each month (ie “on the 25th of each month”). On the face of this wording, it appears as though a claim submitted after the 25th will not be an effective payment claim under the Act.
However, s8 of the Building and Construction Industry (Security of Payment) Act 2009 (SA) (“Act”)[1] provides an entitlement to a progress payment “on and from each reference date”.
Reference date is defined in s4 of the Act as:
- a date determined by or in accordance with the terms of the contract as the date on which a claim for a progress payment may be made […], or
- if the contract makes no express provision with respect to the matter-the last day of the named month in which the construction work was first carried out […] and the last day of each subsequent named month.
There is a discrepancy between a contract providing for the issue of a payment claim on one date only and the wording of s8 of the Act (“On and from each reference date”).
This discrepancy is resolved by s33 of the Act (and the interstate equivalents) which provides a broad no contracting out provision that invalidates (for the purposes of the Act) any terms of agreement which restrict the operation of the legislation.
Terms of a contract which provide that a claim is to be issued on a particular date (when the Act specifies “on and from”) would therefore be likely to be void.
On the above example, the 25th of each month would therefore be the first date of the entitlement to issue a payment claim, not the only date.
How late can a payment claim be submitted?
There is, however, some limitation on how ‘late’ a payment claim can be.
Section 13(4) of the Act provides:
A payment claim may be served only within-
- the period determined by or in accordance with the terms of the construction contract; or
- the period of 6 months after the construction work to which the claim relates was last carried out (or the related goods and services to which the claim relates were last supplied),
whichever is the later.
The ‘end date’ under the Act is therefore at least 6 months after the construction work was last carried out. Only some work claimed needs to be performed in this period for the claim to be valid[2]. The period creating an ‘end date’ varies across the jurisdictions[3].
Is the date in the contract for the submission of progress claims the only ‘reference date’?
It is common for contracts to contain a monthly entitlement to payment, together with a right to submit a claim upon practical completion for the value of the contract works (minus retentions) and a right to submit a claim following the expiration of a defects liability period for the return of cash retentions.
These payment dates may (depending upon the contract wording) also be ‘reference dates’ and may provide an additional right to payment under the Act.
Are there disadvantages in submitting a claim ‘late’?
It is common for progress claim provisions in contracts to provide an entitlement “to submit a progress claim on the 25th of each month for work performed up to the end of that month”. A payment claim issued late (on this example, say, on 20 June using a reference date of 25 May) would limit the value of the claim to work performed up to the end of May, and not for the work performed during June.
Issuing a payment claim late may therefore limit the claim value to the value of the works performed to an earlier point in time.
Note that while a contract may limit the value of works, a contract which sets a valuation regime that attempts to unreasonably limit a claimant’s rights, for example, by allowing a claimant to claim only 1% of the value of works each month would likely fall foul of the no contracting out provision[4].
Can conditions be imposed which prevent or postpone a reference date?
While the Act leaves it open for construction contracts to resolve and determine reference dates, it is not an unfettered discretion.
In John Holland Pty Ltd v Coastal Dredging & Construction Pty Ltd [2012] 2 Qd R 435 (“John Holland”), the contract set reference dates but deferred those dates if certain conditions were not met, including in the event of a failure to provide a statutory declaration that all subcontractors had been paid. The Court found, as per Fraser JA at [19]:
Bearing in mind the statutory object and the role of s 12 and the definition of ‘reference date’ in giving effect to that object, those provisions are incapable of justifying an implication that the date upon which the statutory entitlement to a progress payment accrues may be qualified by contractual provisions other than those captured by the unambiguous terms of the definition of “reference date”
Accordingly, additional conditions imposed in a contract postponing a reference date are not permissible.
In Lean Field Developments Pty Ltd v E & I Global Solutions (Aust) Pty Ltd & Anor [2014] QSC 293 (“Lean Field”), the Court considered the validity of a contractual term which provided that a reference date only arose 14 days after the delivery of a draft payment claim.
In Lean Field the reference date had not arisen at all due to the non provision of a draft payment claim.
The Court in Lean Field ultimately held that the requirement for a contractor to submit a draft payment claim followed by a formal payment claim unjustifiably stopped a reference date from arising.
The Court in Lean Field left the door open for imposing pre-conditions to reference dates arising. However, the Court stated that each precondition would need to be examined as to whether it “facilitates or impedes the purpose of the Act”.
NT and WA
NT and WA similarly enable parties to specify in contracts when payment claims can be issued. However, if the contract is silent as to timing, the NT and WA Acts provide that a claim can be made “at any time after the contractor has performed any of its obligations” (NT – Schedule, s4; WA – Schedule 1, s4).
However, the differences in the WA and NT Acts also can give rise to obstacles for claimants.
First, the WA and NT Acts allow a contract to specify how a party must make a claim for payment (NT – s19, WA – s16), therefore providing a means for a principal/head contractor to impose requirements on what is to be contained in or annexed to a payment claim (such as statutory declarations) to constitute a payment claim under these Acts.
Secondly, in AJ Lucas Operations Pty Ltd v Mac-Attack Equipment Hire Pty Ltd (2009) 25 NTLR 14, the NT Supreme Court determined that a payment claim cannot include a claim for work performed that had already been claimed under a previous payment claim on the basis that:
“Section 8 of the Act does not contemplate the re-triggering of a payment dispute by the resubmission or reformulation of payment claims. The section makes no provision for repeat claims.”
No such limitation appears in the East coast system, apart from the ‘end date’ created by s13(4) of the Act, as described above, and the inability of claimants to make further payment claims which have been previously unsuccessfully adjudicated.
[1] Section 8 of the Act is in the same terms as the Victorian, NSW, ACT and Tasmanian legislation (with WA and NT dealt differently, as described further below).
[2] Estate Property Holdings Pty Limited v Barclay Mowlem Construction Limited [2004] NSWCA 393
[3] The period is also 6 months in Queensland, 3 months in Victoria and 12 months in Tasmania and the ACT.
[4] A statement to this effect was made by the Court in The Minister for Commerce (Formerly Public Works and Services) v Contrax Plumbing (NSW) Pty Ltd and Ors [2005] NSWCA 142 at [54]).
