Short summaries of recent NSW & QLD Supreme Court and NSW Court of Appeal decisions below provide useful tips for all construction businesses in the contractual chain in relation to issue of payment claims and payment schedules under security of payment legislation.
Payment Claim Tips
The recent NSW Supreme Court decision in Acciona Infrastructure Projects Australia Pty Ltd v EnerMech Pty Ltd concerns the subcontractor EnerMech’s payment claim of over $10.1m under the electrical installation subcontract with Acciona on the Westconnex project in NSW and the subsequent Adjudication decision in the subcontractor’s favour in full. The payment claim almost entirely sought payment for security (over $10.1m) which security the head contractor previously had recourse to for amounts owed by the subcontractor.
Only a small proportion of the claimed amount (0.18%) related to construction work performed by the subcontractor. The Court held that the payment claim was not a payment claim for construction work and therefore was not a valid payment claim under the NSW SOP Act and the Adjudication decision void.
Ensuring the validity of payment claims, particularly high value claims, before issue is paramount and particularly prior to applying for Adjudication to avoid an expensive road of disappointment. This decision likely has application in Qld.
The recent QLD Supreme Court decision in Canadian Solar Construction Pty Ltd v Re Oakey Pty Ltd concerned a high value payment claim (over $4m) submitted by the contractor Canadian Solar, sent by email to 6 representatives of the principal, its project manager and agent and engineers under the Contract, which was received by 5 of 6 recipients (one email not operational at the time).
The principal argued it was a ‘common assumption‘ between the parties that, receipt by the one recipient that did not receive it, was essential to making a valid payment claim. The Contract did not provide a direction as to how payment claims under the BIF Act were to be issued.
Past payment claims were, in the most part, issued by the contractor in the same manner and receipt was acknowledged. The Court adopted a practical approach finding the contractor’s payment claim was effectively given under the Qld BIF Act.
Although for payment claims, the NSW SOP Act uses with word ‘serve’ as opposed to the word ‘give’ in the QLD BIF Act, contractors in both states have the option of also sending a hard copy payment claim to the principal’s registered office to avoid the issue entirely.
Payment Schedule Tips
A recent NSW Court of Appeal decision in Witron Australia Pty Ltd v Turnkey Innovative Engineering Pty Ltd considered whether an email given by the principal, Witron, in response to the contractor’s payment claim of approx. $800K was a valid payment schedule under the NSW SOP Act.
The payment claim was issued under an electrical installation contract for an automated distribution centre in Kemps Creek NSW and included claims for “base contract works” calculated as part of the fixed contract price and separately for “contract variation works” of approx. $300K relating to identified variations.
The principal’s email rejected the base contract works and advised the variations will be reviewed later. At first instance, the primary judge held the email was not a payment schedule because it failed to specify reasons for denying payment for variations. The principal appealed to the Court of Appeal.
The Court of Appeal agreed holding, because the email failed to consider a significant part of the claimed amount, it failed to satisfy statutory requirements for a valid payment schedule under the NSW SOP Act. This decision likely has application in Qld.
Principals and head contractors must be cautious when issuing email responses to payment claims because the response may be not be a valid payment schedule, or alternatively, may constitute the full extent of the reasons for withholding payment to be later be relied upon.
Further, the consequences of failing to issue a valid payment schedule are significant, resulting in an assumed debt with the options open for defending the payment claim significantly reduced.
