Fairfield City Council v Abergeldie Contractors Pty Ltd

Significance

This case affirms the High Court's decision in Southern Han Breakfast Point Pty Ltd (in Liquidation) v Lewence Construction Pty Ltd [2016] HCA 53 (Southern Han) (analysed in our Roundup of 2016 security of payment cases) and illustrates some of the difficulties that may arise in practice in applying the outcome of the Southern Han decision.

Facts

The plaintiff, Fairfield City Council (principal) entered into a building contract with the first defendant, Abergeldie Contractors Pty Ltd (builder). The contract was an amended AS 4000-1997 contract which specified that only two reference dates would occur after practical completion – the first date for a progress claim arising immediately after practical completion and the final payment claim. Relevantly, the following occurred:

  • On 16 September 2016, the builder was of the opinion that practical completion had occurred and requested that the superintendent issue a certificate of practical completion.
  • On 28 October 2016, the builder submitted payment claim no. 15 to the principal.
  • At 10.32am on 25 November 2016, the builder submitted payment claim no. 16 to the principal as no certificate of practical completion had been issued by the superintendent.
  • Later that same day, the superintendent certified the Date of Practical Completion as having occurred on 16 September 2016.

In response to payment claim no. 16, the principal issued a payment schedule for $NIL on the ground that there was no reference date available for payment claim no. 16 as the immediate reference date following practical completion had already been used by payment claim no. 15.

Consequently the builder filed an adjudication application in respect of the payment claim. The adjudicator made a determination that the builder was entitled to some of the amount claimed and the principal brought an application before the Supreme Court of New South Wales to have the determination quashed on the basis that the relevant payment claim was not made in respect of a reference date.

Decision

The court found in favour of the principal and concluded that the purported payment claim was not a payment claim within the meaning of section 13 of the Building and Construction Industry Security of Payment Act 1999 (NSW) as it was not made in respect of a reference date under the building contract. Pursuant to a certiorari order, Ball J quashed the adjudication determination of the adjudicator.

This decision follows the High Court's decision in Southern Han. As the final reference date rested on when practical completion actually occurred (as opposed to the date that the certificate of practical completion was issued), the court analysed when practical completion actually occurred and came to the conclusion that it had occurred on 16 September 2016.

His Honour commented that having the final reference date depend on the occurrence of practical completion rather than the date of the certificate of practical completion is not unreasonable or uncommercial despite the fact that this may make cause practical difficulties in determining when final reference dates under the building contract were to occur.