Payment Claims are not for Construction Work Alone
The NSW Court of Appeal recently considered a contractor’s appeal seeking to reinstate an Adjudication decision in its favour of approximately $10m after being voided by the primary judge.
The primary judge considered the subject payment claim was not a valid payment claim for the purposes of the NSW SOP Act because it was not a claim for construction work (rather a claim for security improperly recovered by the principal) and voided the Adjudication decision in favour of the contractor.
Troy Legal reported on this decision in February 2024 as potentially a new application of the law. However, that decision has now been overturned by the Court of Appeal.
The Court of Appeal considered key statements of the High Court in Southern Han, and in particular the wording of s13(1) of the NSW SOP Act and determined that where a construction contract provides for an entitlement to payment in connection with construction work, it is unnecessary for the subject payment claim to be ‘for construction work‘.
The decision is consistent with long established cases holding that a claimant is entitled to payment under the Act (assuming compliance of the form of payment claim) where 2 key factors are demonstrated: (a) a construction contract and (b) consideration or amounts are payable under it.
The amounts claimed need not be for construction work performed, rather need only concern amounts payable under the contract as part of the total contract price. Accordingly, it was held the payment claim was valid and the Adjudication decision reinstated.
This decision offers guidance to claimants to ensure they can demonstrate that a construction contract is in play and they have an entitlement to payment under it.
Misplaced Reliance on Without Prejudice Material
The NSW Supreme Court recently considered an appeal by a developer seeking to void an Adjudication decision in favour of a contractor. The contractor was awarded approx. $4m (in relation to a payment claim of $18m) and EOT’s entirely offsetting the developer’s liquidated damages claim of $7.4m.
The developer argued the Adjudicator had failed to consider its submissions duly made under the NSW SOP Act in the form of an expert report that referenced without prejudice correspondence and programs. It also argued the Adjudicator had denied it procedural fairness by not raising the fact that the expert report may be rejected.
The Court held the Adjudicator had not failed to consider the expert report, rather the Adjudicator had decided it was not practicable within the time allowed to try to distinguish which part of the report was without prejudice and which was not, giving the report no weight. This was within the Adjudicator‘s jurisdiction.
On the issue of an alleged denial of procedural fairness, the Court found it was common ground between the parties that without prejudice material could not be relied upon at Adjudication and based on the material before the Adjudicator, the developer ought to have anticipated the report may be rejected and should have made submissions to the Adjudicator to the contrary, which it had failed to do. The Adjudicator’s decision was upheld.
Unsurprisingly, without the express consent of the other party or an effective argument of waiver, without prejudice material will generally not be considered.
For details contact Julian Troy at Troy Legal, julian@troylegal.com.au.
