A Survival Course
On the new
Building and Construction Industry
Security of Payment Act 2009 (SA)
Robert Fenwick Elliott
Wake up Call
• Subcontractor – ignores an invoice from a
subbie
• Head Contractor – Payment Schedule but no
reasons
• Developer - certificate
UK Construction taxed costs statistics by
Professor Hazel Genn
Purpose of adjudication
Resolving disputes
effectively
Or shifting a politicocommercial balance?
UK v NSW
• All disputes
• Adjudication to
ascertain facts
• Free to agree on
adjudicator
• Oral hearings OK
• “Pay now argue later”
• Just payment claims
• Adjudicator limited to
default material
• Forbidden to agree
adjudicator
• Very limited scope for
conferences
• Loser could provide
security instead of
paying
Cole Report - 2003
WA + NT go with evaluative
In
•
•
•
•
Construction contracts
Subcontracts
Suppliers
Related services (architectural, QS etc)
Out
•
•
•
•
•
•
Oil & Gas
Mining
Banks
Domestic
Interstate
Quantum meruit cases
When?
• Commencement date – mid-2010?
• Contracts entered into from then
Act creates a new statutory right
• Contractual right to payment
• Price payable under Worker’s Liens Act 1893 –
triggered by WLA s10(2)(A) notice
• Progress payment – new statutory right
created by this Act
The new statutory right
•
•
•
•
•
•
No contracting out, or restriction
Arises on each “reference date”
Overreaches any certification provisions
Carries interest at at least 10% p.a.
? Limited rights of set-off
Sum claimed is effectively deemed due if no
payment schedule in 15 days: no other
defences allowed
The new statutory right
8—Rights to progress payments
On and from each reference date under a
construction contract, a person—
(a)
who has undertaken to carry out
construction work under the contract; or
(b)
who has undertaken to supply
related goods and services under the contract,
is entitled to a progress payment.
Reference date
reference date , in relation to a construction contract,
means—
(a)
a 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 in relation to work carried
out or undertaken to be carried out (or related goods and
services supplied or undertaken to be supplied) under the
contract; or
(b)
if the contract makes no express provision with
respect to the matter—the last day of the named month in
which the construction work was first carried out (or the
related goods and services were first supplied) under the
contract and the last day of each subsequent named
month;
Circular?
The reference to a progress payment here is
not to a progress payment as defined in the
Act, but to a progress payment provided for
by the contract; Quasar Constructions NSW
Pty Ltd v Demtech Pty Ltd [2004] NSWSC 116;
(2004) 20 BCL 27 at [19]-[21]; Thiess Pty Ltd
& Anor v Lane Cove Tunnel Nominee
Company Pty Ltd & Anor [2009] NSWCA 53 at
paragraph 44.
Set-off
• In law – a defence
• Three main types
– Contractual
– Common law (abatenment)
– Equitable
• Also statutory (insolvency)
Perform (NSW) Pty Ltd v MEV-AUS Pty
Ltd & Anor [2009] NSWCA 157
• 140 It is most doubtful whether adjudicators have the
right to consider any equitable rights and titles. I
adhere to what I said in Wooding v Estoe [2006]
NSWSC 277 that adjudicators cannot recognize
equitable assignments of contracts.
• 141 I do not wish to make any definite ruling as to
whether adjudicators can take account of equitable
set-off. I will content myself with saying: (1) it is
doubtful whether they can do so; (2) if they can do so,
it is doubtful whether the appellant’s claims in the
instant case would qualify for equitable set-off.
Section 13(2) – Payment claim
(2)
A payment claim—
(a)
must identify the construction work
(or related goods and services) to which the
progress payment relates; And
(b)
must indicate the amount of the
progress payment that the claimant claims to
be due (the "claimed amount"); and
(c)
must state that it is made under this
Act.
Take note that if you fail to serve a
payment schedule in the required form
within 15 days, then you are going to
have to pay up what we are claiming
regardless of whether the money is really
due or not. This 15 day period cannot be
extended, even for good reason
.
Protectavale Pty Ltd v K2K Pty Ltd
[2008] FCA 1248
... a payment claim must be sufficiently detailed to
enable the principal to understand the basis of
the claim. If a reasonable principal is unable to
ascertain with sufficient certainty the work to
which the claim relates, he will not be able to
provide a meaningful payment schedule. That is
to say, a payment claim must put the principal in
a position where he is able to decide whether to
accept or reject the claim and, if the principal
opts for the latter, to respond appropriately in a
payment schedule. ... That is not an unreasonable
price to pay to obtain the benefits of the statute.
9 Lorne Bay served a revised invoice on 2 May
2008. In terms it purports to be a payment claim
for the purposes of the Payment Act. The invoice
identifies the construction contract between the
parties and contains a revised claim of
$635,448.06. The invoice states that the
"construction work in respect of which this
Payment Claim is made and the amount claimed
... is listed below in the table (and attached
Schedule[s])". The table reads:
Contract Sum $6,295,000.00
Variations (See the attached Schedule 1) $232,772.45
Prolongation claim (See the attached Schedule 2) $129,058.00
Adjusted Contract Sum $6,656,830.05
Less
Retentions (0.125% of the Contract Sum - $6,300,000 ...)
$78,750.00
Payments Received $6,000,400.00
Subtotal $6,079,150.00
Claimed amount ... (Adjusted Contract Sum – Subtotal)
$577,680.05
GST $57,768.01
Claimed amount (incl GST) $635,448.06
The two schedules give details of the variations and
prolongation claims.
Neumann Contractors P/L v Peet
Beachton Syndicate Limited [2009]
QSC 376.
• Same point
• No sufficient identification of what was being
claimed, as a part of the total sum due
Contract Summary
Amount
Original Contract Sum
$ 4,250,601
Add – VARIATIONS
$ 715,660
Adjusted Contract Sum (to date) (excluding GST)
$ 4,966,261
Plus 10% GST
$ 496,626
Adjusted Contract Sum (including GST)
$ 5,462,887
Payment Claim Summary
Amount
Value of Work Completed to Date
$5,320,019.94
Less Retention
Nil.
Less Previous Claim (ex. GST)
$5,239,710.58
Payment Claim No. 12 Sub-Total
$ 80,309.36
Add previously claimed & unpaid
$ 467,775.37
AMOUNT NOW DUE (excluding GST)
$ 548,084.73
Plus 10% GST
$ 54,808.47
TOTAL AMOUNT THIS PAYMENT CLAIM (including GST)
$ 602,893.20
This is a payment claim made under the Building and Construction Industry
Payments Act 2004 (QLD) ”
The invoice under consideration in that case indicated
the amount claimed to be due by taking the contract
sum and making a number of adjustments. Whilst
certain items were set out in sufficient detail, his
Honour concluded that what was noticeably absent
was:
“... any identification of the work previously completely
and paid for and the work (apart from the variations) to
which the invoice relates.
... The only information provided is that the amount is
referable to the “Contract Sum” and “Payments
Received””.[26]
Mr Beacham argues, however, that the basis of the claim is
evident on the face of the document, that is, it is a claim for
all work for which Neumann has previously claimed save for
the work for which it has been paid. In order for Peet to
decide whether it should respond it would need to engage in
a careful analysis of the schedules exhibited to the summary
set out the work which was undertaken under the contract
over some 25 pages and marry the work with the amounts
paid on the progress certificates and arrive at the
outstanding items. Requiring a respondent to a payment
claim to undertake that kind of research which would be
subject to error and within the time constraint of 10 days
under the Payments Act[30] leads me to conclude that the
payment claim does not identify the construction work to
which that claim relates and does not fulfil the requirements
of s 17(2) of the Payments Act.
The Protectavale Issue
Jan
Feb
Mar
April
Work done in April?
Breakdown of April claim
unpaid and claimed
Foundations
5
10
12
13
1
5
Frame
0
2
8
8
0
0
Walls
0
0
3
7
4
3
External
0
2
3
4
1
0
Roof
5
5
8
12
4
2
Painting
0
0
0
5
5
0
Claimed:
Electrics
0
0
1
6
5
0
Total
10
19
35
55
20
10
Less paid
0
7
14
24
21
Balance claimed
10
12
21
31
-1
Paid:
Paid for re April
Foundations
4
7
8
8
0
Frame
0
2
3
8
5
Walls
0
0
3
4
1
External
0
2
3
4
1
Roof
3
3
6
10
4
Painting
0
0
0
5
5
Electrics
0
0
1
6
5
Total
7
14
24
45
21
Less previously paid
0
7
14
24
Balance paid
7
7
10
21
But consider alternative payment strategy:
Paid for re April
Monthly payment (no breakdown)
6.5
7.7
9.6
20.9
Total paid
6.5
14.2
23.8
44.7
?
Section 14 – Payment Schedules
(1) A person on whom a payment claim is served (the
"respondent") may reply to the claim by providing a
payment schedule to the claimant.
(2) A payment schedule—
(a)
must identify the payment claim to which it
relates; and
(b)
must indicate the amount of the payment (if any)
that the respondent proposes to make (the "scheduled
amount").
(3) If the scheduled amount is less than the claimed amount,
the schedule must indicate why the scheduled amount is
less and (if it is less because the respondent is withholding
payment for any reason) the respondent's reasons for
withholding payment.
•If the quantities claimed by the claimant is wrong,
that needs to be set out
•If the rates claimed by the claimant is wrong, that
needs to be set out
•If there are any defects in the claimant’s work, they
need to be set out
•If there are any other extents to which the
claimant’s work is incomplete, they need to be set
out
•If the claimants claim is premature, that
needs to be set out
•If the claimant has failed to give proper
credit for attention money, that needs to be
set out
•If the claimant has failed to give notice or
follow any other contractual procedure, that
needs to be set out
•If the paying party has any sort of cross
claim against the claimant, for example
because the paying party has failed to
complete his work in time, that needs to be
set out.
•There is no concluded contract between the
parties
•The claimant is not properly licensed as
required by the Building Work Contractors Act
•The claim is not for construction work or
related goods and services as defined by the
Act
•One of the other exclusions applies
•The payment claim was not properly served
Queensland ANAs
Adjudicate Today
Pty Ltd (1057877)
IAMA (1057859)
LEADR (1058005)
Queensland Law
Society (1061878)
RICS Australasia
Pty Ltd (1064504)
Adjudicate Today – Bob Gaussen and
Phillip Davenport
No fee for appointment
But 40% of the adjudicator’s fee goes back to
Adjudicate Today
$ for Claimant cf $ for
Respondent
$ Balance
8
7
6
5
4
3
2
1
0
0
50
100
150
200
250
Number of nominations
300
350
The Professional ANAs
Section 22 – the Decision
22—Adjudicator's determination
(1) An adjudicator is to determine—
(a) the amount of the progress payment (if any)
to be paid by the respondent to the claimant
(the "adjudicated amount"); and
(b) the date on which any such amount became
or becomes payable; and
(c) the rate of interest payable on any such
amount.
Timing
Litigation
West Coast
Weeks
East Coast
0
20
40
60
80
100
120
Suspend work
• Where paying party does not pay schedule
amount, or no payment schedule
• Claimant imunue from complaint
• Right rarely exercised
Section 11(2) - Interest
• 10% (Supreme Court Act rate)
• Or contract rate
(whichever is the greater)
Section 12 - Pay when paid
• Pay when paid banned under section 12
• Pay if paid banned under section 12
• Pay when certified irrelevant to statutory
claims
Section 33 – No contracting out
(1) The provisions of this Act have effect despite any provision to the
contrary in any contract.
(2) A provision of an agreement, whether in writing or not—
(a)
under which the operation of this Act is, or is purported
to be, excluded, modified or restricted, or that has the effect of
excluding, modifying or restricting the operation of this Act; or
(b)
that may reasonably be construed as an attempt to deter
a person from taking action under this Act,
is void.
UK Experience
Take up rates
Amounts awarded
NSW 1st Half 2006
Numbers of cases
250
200
Number s of cases
150
100
50
0
0 - 19%
20 - 39%
40 - 59%
%age awarded
60 - 79%
80 - 100%
Queensland stats
Example 1 – Walter v CPL(Surry Hills)
• The parties entered into an AS4300 contract,
with provision for certification of payments by
the Superintendent (#2)
• The claimant put in a payment claim for $14.9
million (#4)
• The Superintendent certified $952k (#5),
which was paid
• There was no payment schedule which
complied with the Act (#8)
• The claimant sued for the balance of his claim of
$13.9m (#9)
• The defendant failed in 5 arguments why he should not
have to pay:
– That the claim was premature (#26 and 52)
– That there was no certificate, not even due time for
certificate (#22 and 55)
– That The claim included claims for delay and disruption
which were not construction work (#33 and 61)
– That lump sum contracts are excluded (#42 and 70)
– That the claimant conduct was deceptive and misleading
(#45 and 80)
• The defendant was ordered to pay the $13.9 million,
plus interest
Example 2 – Pullar v Harrop
• A payment schedule case
• NB importance of detail in payment schedule
• No deduction allowed for LADs
Questions
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authorities.
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