Payment claims under the Building and Construction Industry Payments Act 2004 (Act) – whether conditions can be placed on when or whether a reference date arises under the Act
Section 99 of the Act invalidates any provision in a construction contract which unjustifiably prevents or inordinately delays a 'reference date' under the Act from arising.
Lean Field Developments Pty Ltd (applicant) contracted with E & I Global Solutions (Aust) Pty Ltd (respondent) for the supply of high voltage and fibre optic cables (contract).
Clauses 33.7 and 33.8 of the contract required the respondent to provide a draft payment claim at least fourteen days before serving a payment claim under the Act. The clauses specified that a 'reference date' did not arise under the Act until the respondent issued both the draft and actual payment claim. Under section 12 of the Act, a party is only entitled to a progress payment when a reference date arises. The Act also allows a reference date to be stated in, or 'worked out' under, a contract.
In April 2014, the respondent commenced adjudication proceedings regarding a disputed payment claim. In its adjudication response, the applicant argued that the respondent's claim was invalid because no reference date had arisen as the respondent had not provided a draft payment claim.
On 11 June 2014, the adjudicator decided that the respondent should be paid $527,783.08.
The applicant applied to the court, arguing that the adjudicator's decision was void for jurisdictional error. In response, the respondent argued:
- that a reference date could not be 'worked out' under clauses 33.7 and 33.8 of the contract because the clauses relied on events that occurred after contract formation. The respondent argued that the reference date arose on the default day prescribed by the Act (the last day of each month) as a consequence; or
- alternatively, clauses 33.7 and 33.8 of the contract were void because the clauses placed conditions on the respondent's statutory right to progress payments contrary to the provisions of section 99 of the Act.
Applegarth J dismissed the application.
His Honour held that a reference date may be worked out by applying a formula in a contract to facts which arise after contract formation.
However, his Honour held that contrary to the Act clauses 33.7 and 33.8 of the contract 'unjustifiably prevent or inordinately delay a reference date from arising'. Under section 99 of the Act, clauses which are contrary to the Act are invalid. His Honour recognised that not all clauses outlining the time at which a reference date arises are automatically contrary to the Act. Instead, his Honour stressed that only those clauses which place unjustifiable conditions on a party's statutory entitlement to progress payments would be invalid.