Introduction

Victorian authorities establish that a premature payment claim under the Building and Construction Industry Security of Payment Act 2002 (Vic) (the Act) is not invalid, and becomes “enlivened” upon accrual of the relevant reference date. See: Metacorp Australia Pty Ltd v Andeco Construction Group Pty Ltd (2010) 30 VR 141 (at [71]–[114]); and Seabay Properties Pty Ltd v Galvin Construction Pty Ltd [2011] VSC 183 (at [130]-[138]).

Earlier New South Wales and Queensland authorities had found that premature payment claims were invalid. See: Walter Construction Group Ltd v CPL (Surry Hills) Pty Ltd [2003] NSWSC 266 and FK Gardner & Sons Pty Ltd v Dimin Pty Ltd [2007] 1 Qd R 10.

First Instance – Regal Consulting Services Pty Ltd v All Seasons Air Pty Ltd [2017] NSWSC 613

The date for making progress payments was specified in the construction contract as the 20th day of each month. For the purposes of s 8(2)(a) of the Building and Construction Industry Security of Payment Act 1999 (NSW) (NSW Act), the reference date was therefore the 20th day of each month. That is, the “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”.

The subject payment claim had been served on the 12th.

Clause 37 of the construction contract “deemed” that a premature claim would be taken as having been made on the 20th day of the month. Clause 37 was silent in relation to the operation of the NSW Act.

At first instance, McDougall J (at [16]-[22]) placed primacy on the High Court’s decision in Southern Han Breakfast Point Pty Ltd (in liq) v Lewence Construction Pty Ltd [2016] HCA 52 where their Honours stated that the s 8(1) entitlement under the NSW Act existed “only on and from each reference date under the construction contract” and that the existence of a reference date was a precondition to the making of a valid payment claim.

His Honour set out what the High Court said in Southern Han in relation to s 8(2)(a) of the NSW Act:

  1. The reference date for which s 8(2)(a) provides is a date set by contractual force as a date for making a contractual claim to be paid the whole or part of the contracted amount. The mention in s 8(2)(a) of “a date determined by or in accordance with the terms of the contract” is of a date fixed by operation of one or more express provisions of the construction contract. The mention is not of a date that is determined independently of the operation of the contract merely having regard to the contractual terms.

His Honour referred to the clear contractual purpose of the deeming provision but found that service of a valid payment claim under the NSW Act could not take place until the reference date had arisen:

[44] The important point, and in my view the one that disposes of the first issue, is that the entitlement to a progress payment given by s 8 arises not only because the claimant has undertaken to carry out construction work but, also, because a reference date has arisen. That is the point of the decision in Southern Han. If no reference date has arisen, there is no statutory entitlement to a progress payment. And it is the existence of that statutory entitlement that is the precondition of the operation of s 13, as again the decision in Southern Han makes clear.

[45] It is one thing to say, for the purposes of the contract, that a progress claim served ahead of time is deemed to have been served on the contractually required date. That does not alter the date. The required date remains (in this case) the 20th day of the month. It is not some floating or ambulatory date fixed by whim, or by the accident of service.

[46] It is quite another thing to say that a progress claim served ahead of time is, nonetheless, served “on and from” the contractually required date, which of course is also the reference date for the purposes of the Security of Payment Act.

The Court found that the premature payment claim was invalid.

New South Wales Court of Appeal – All Seasons Air Pty Ltd v Regal Consulting Services Pty Ltd [2017] NSWCA 289

The New South Wales Court of Appeal (Leeming and Payne JJA, White JA agreeing) dismissed the appeal.

Justices Leeming and Payne (at [13]) referred to the High Court’s statement in Southern Han (at [61]) that an entitlement to a progress payment only arises on and from each reference date under the Construction Contract. Their Honours concluded that the entitlement under s 8(1) and the service of a payment claim under s 13(1) can only occur on or from each reference date (at [14]).

Justices Leeming and Payne (at [34]-[36]) were not prepared to accept that clause 37 also operated to deem fictitious service of the payment claim under the NSW Act on the reference date and referred to service of the payment claim as being an essential precondition to validity in Southern Han (Southern Han at [44]).

In support of their conclusion, Leeming and Payne JJA also referred to:

  1. the difficulties with deeming given the strict timetabling that follows service of a payment claim under the legislation (at [35]);
  2. the tension with s 13(5) of the NSW Act (at [39]-[40]);
  3. the fact that the contrary construction would not promote the purpose of the NSW Act (at [41]).

There was no discussion in relation to earlier cases in relation to premature payment claims, including the Victorian decisions in Metacorp and Seabay.

Conclusion

The Supreme Court of Victoria is now likely to reconsider the issue of whether a premature payment claim is valid in the light of the weight of the recent authorities since Metacorp and Seabay.