Building and Construction Payment Claims

Developer successfully quashes adjudicator’s decision by confirming importance of the contract reference date

A prominent northern suburbs developer has succeeded in overturning an adverse adjudication decision after it was successfully argued that the existence or otherwise of an available reference date under the Building Contract constitutes a jurisdictional fact for the purposes of the Building and Construction Industry Security of Payment Act 1999, and can therefore be overturned by judicial review.

 

In this recent decision, the Supreme Court affirmed the proposition accepted by the Court of Appeal in Abergeldie Contractors Pty Ltd v Fairfield City Council [2017] NSWCA 113 that the Court must consider for itself whether the payment claim in question is supported by a valid reference date. Absent the existence of valid reference date there could not have been a valid payment claim upon which to lodge an adjudication application. Therefore, in deciding that the payment claim was valid, the adjudicator acted without jurisdiction.

The Building and Construction Industry Security of Payment Act 1999 provides that a contractor who has undertaken to carry out construction work is entitled to progress payments through the progression of the work. A ‘payment claim’ seeking a progress payment must be made on the ‘reference date’ in the Building Contract, or on a reference date according to the legislation. Only one payment claim may be served in respect of each reference date. The High Court affirmed in Southern Han Breakfast Point Pty Ltd v Lewence Construction Pty Ltd (2016) 260 CLR 340 that unless there is an available reference date, there can be no valid payment claim.

The present case concerned a payment claim of $142,140.51 served on the Developer by a Contractor on 20 November 2018. The claim was subsequently rejected by the Developer, who issued a payment schedule refusing to make any payment. The Contractor brought an adjudication application, reducing its claim to $120,654.50, which was determined by the Adjudicator in the Contractor’s favour. The Developer brought the case to the Supreme Court arguing that at the time the claim was issued there was no available reference date upon which the claim could be based. According to the Developer, the relevant reference date was 28 November. Therefore the payment claim issued on 20 November was premature and invalid.

The Contractor argued that the Adjudicator had made the correct decision, but also that the Supreme Court could not interfere, saying that the existence or otherwise of a reference date was a question solely for the Adjudicator, not the Court.

The Supreme Court disagreed with the Contractor and found that the existence of a valid reference date was indeed a jurisdictional fact, and therefore can be considered by a court. The court decided in the Developer’s favour, quashing the adjudication application. Parker J disagreed with the Contractor’s selection of 31 October as the reference date.

 

The Developer was represented by McLachlan Thorpe Partners, with Frank Hicks SC appearing as Counsel. Please contact Andrew Thorpe if you would like to discuss the issues arising in this case.

If you would like to contact Andrew, don’t hesitate to email directly to athorpe@mtpartners.com.au

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