Recently the NSW Court of Appeal (comprising 5 judges) in BSA Advanced Property Solutions (Fire) Pty Ltd v Ventia Australia Pty Ltd considered a Subcontractor’s appeal from the decision of a primary judge who declared the Subcontractor’s payment claim (and favourable Adjudication decision) void on the basis that the payment claim sought payment under more than one contract. This earlier decision is discussed at https://www.troylegal.com.au/articles/one-contract-rule/
The Subcontract in issue was an umbrella type agreement that prescribed work by separate work orders issued from time to time. The payment claim sought payment in respect of at least 3 separate work orders.
The Court of Appeal was asked to consider whether the ‘One Contract Rule’ was a precondition to a valid payment claim under the NSW SOP Act and whether the work orders issued under the Subcontract comprised separate contracts. The so-called ‘One Contract Rule’ describes a challenge to the validity of a payment claim (and jurisdiction of an Adjudicator) on the basis that it seeks payment under more than one contract.
The Court of Appeal considered the origin of the rule in the 2012 NSW decision of Nebax and clarified that Nebax did not hold that a payment claim under the Act must relate to only one contract, instead that there must be one adjudication application for one payment claim.
Referring to the diverse contracting arrangements adopted in the construction industry and considering the provisions of the former NSW SOP Act (prior to the 2019 amendments abolishing reference dates where the rule likely didn’t apply in any event), the Court of Appeal unanimously rejected the ‘One Contract Rule’ as a precondition to service of a valid payment claim under the Act.
The Court went further stating that it is strongly arguable there is no ‘One Contract Rule’ and a valid payment claim may be served in respect of more than one contract so long as it is referable to only one reference date.
After undertaking a detailed review of the terms of the Subcontract, and despite a clause stating work orders created separate contracts, the Court considered the balance of the Subcontract indicated that work orders did not create separate contracts and the payment clause itself contemplated progress claims made in respect of multiple work orders. The Court unanimously held (agreeing with the Adjudicator at first instance) the payment claim was not made under more than one contract and was valid.
The Court also ‘generally’ endorsed the recent Qld Court of Appeal decision in Ausipile suggesting if a payment claim on its face is made under one contract there is a presumption of validity until any contrary position is contended in a payment schedule with the issue to be determined by an Adjudicator.
In any event, the decision lays the framework for payment claims to be validly made in respect of more than one contract where supported by a single reference date. The decision likely better aligns with security of payment legislation in other States where reference dates persist.
