Catchwords

Payment claim – is payment on termination a 'progress payment' capable of supporting a payment claim– effect of termination before reference date arises 

Significance

Where the contract provides for a reference date which does not survive termination and the contract is terminated prior to the reference date, work done after the last reference date and prior to termination cannot be claimed under the Building and Construction Industry Security of Payment Act 1999 (NSW) (Act).

Facts

Patrick Stevedores (plaintiff) entered into a construction contract with McConnell Dowell Constructors (defendant) on 13 March 2014.  Clause 37.1 of the contract provided the reference date for payment claims as 'the last day of each month for WUC done to the second last day of that month'.

The plaintiff terminated the contract for convenience under the contract, and on 30 June 2014 the defendant served a payment claim stated to be made under the Act in respect of amounts for work carried out prior to the date of termination, cost of plant and materials reasonably ordered for the works, the reasonable cost of removing labour and plant from the site and a specified fixed amount (termination payment claim).  The contract was silent in relation to a reference date after termination.

The plaintiff provided a payment schedule, and on 28 July 2014 the defendant made an adjudication application in respect of the payment claim and the plaintiff issued its response. The adjudicator released the determination which determined a number of claims made by the defendant as 'zero' on the basis that there was no agreement to extend the date for the determination and there was insufficient time to address those items.

Following receipt of the determination, the defendant withdrew its adjudication application and made a new adjudication application.  The plaintiff served an adjudication response in respect of the second adjudication and took issue with the appointment of the second adjudicator. The second adjudicator released a determination.

The plaintiff sought a declaration that the determination of the first and second adjudicators were void because the payment claim was not a valid payment claim under the Act as there was no reference date and the claim was not a claim for 'progress payments' within the meaning of the Act.

Decision

Ball J held that the payment claim was invalid and the determinations of both adjudicators were void.

His Honour held that amounts included in the termination payment claim for the cost of plant and materials ordered by the defendant, and the costs of removing equipment from the site, were not construction work under the contract or the supply of related goods or services. The defendant was therefore not entitled to a progress payment for them under section 8 of the Act.

As part of the termination payment claim for construction work related to work done prior to the last reference date before termination but was not claimed at that time, the contract expressly provided for a reference date, so section 8(2)(b) of the Act did not apply.

In relation to work done between the last reference date before termination and termination, his Honour held that, as a matter of construction, the reference date in clause 37.1 did not operate after termination as there was no express survival provision.  His Honour considered that there was still a contractual reference date at the time the work was performed, so section 8(2)(b) did not apply.  The fact the contract was terminated before the reference date arrived meant that no reference date for that work could arise and therefore a payment claim under the Act could not be made in respect of that work.