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23 Jan 12
Security of payment: decisions that impacted the construction industry in 2011

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With the New Year having just begun, Partner Matt Bradbury looks back on some of the more significant cases handed down during the past 12 months in relation to the Building and Construction Industry Payments Act 2004 (Qld) (BCIPA) and the Building and Construction Industry Security of Payment Act 1999 (NSW) (BCISPA). This article gives you an overview of some of the important changes to the operation of the legislation from the year gone by.

The end of identical payment claims

Since the Queensland decision of Doolan v Rubikcon [2008] 2 Qd R 117, it was accepted that under BCIPA a party could not serve a payment claim which only included work that had been the subject of a previous claim, even after the arrival of a new reference date.

This ‘identical payment claim’ dilemma could have harsh consequences for claimants, particularly where a claim would lapse if the tight time frames established by BCIPA for pursuing the claim were not met. Claimants in this situation were left without recourse under BCIPA unless an unclaimed amount remained or further work was performed (but not defects rectification work).

This position was overturned in December 2010 as a result of the Queensland Court of Appeal’s decision in Spankie v James Trowse Constructions Pty Ltd [2010] QCA 355, in which it was held that upon the occurrence of a new reference date, a claimant could submit a payment claim which solely included work which had been the subject of a previous payment claim.

While this decision gives some relief to claimants, it also gives rise to new concerns for respondents. Under the Court’s current interpretation, a claimant could potentially continue to serve the same payment claim each reference date. Respondents must continue to be vigilant in responding to all payment claims with a valid payment schedule within the time frames allowed - even where a claimant has finished work on site and has issued payment claims for the work before. Failure to respond to any one payment claim can result in the claimant obtaining summary judgement for the claimed amount despite valid reasons for non-payment having been raised on previous occasions.

The effects of termination are now further reaching in Queensland

Until June of last year, it was believed that the termination of a construction contract would not prevent a claimant from having the ability to serve a payment claim pursuant to BCIPA.

This interpretation was adopted in relation to BCISPA by the New South Wales Court of Appeal in Brodyn Pty Ltd v Davenport (2004) 61 NSWLR 421 (Brodyn). In Brodyn, the Court held that the claimant’s entitlement to make payment claims pursuant to BCISPA survived termination, and that this right would only be lost when more than 12 months had elapsed from when the construction works or goods and services were last performed or supplied.

Given that BCIPA closely mirrors BCISPA, and their provisions are in most respects similar, it was believed that the approach in Brodyn would be followed in Queensland.

However, the Supreme Court of Queensland decision of Walton Construction (Qld) Pty Ltd v Corrosion Control Technology Pty Ltd & Ors [2011] QSC 67 (Walton) reversed the widely held belief about the operation of BCIPA following the termination of a construction contract. In Walton, Justice Peter Lyons held that the termination of a construction contract deprives a claimant of the use of BCIPA for work performed under the terminated contract. For further information on this case, please click here to refer to our earlier focus article.

The decision to terminate a construction contract should never be taken lightly or without legal advice. As a result of the decision in Walton, the consequences of termination are now further reaching. The divergence of views between the Courts in New South Wales and Queensland regarding reference dates post-termination must also be kept in mind when dealing with the equivalent legislation in each state.

Service on ordinary place of business

Given the tight legislative time frames for responding to payment claims, payment schedules and other notices under BCIPA and BCISPA, it is essential to regularly check the numerous potential service addresses available under these pieces of legislation - including a company’s registered office, principal place of business, other postal addresses, fax machines and emails.

The New South Wales Court of Appeal has recently demonstrated just how wide the net can be cast when it comes to potential service locations under BCISPA in the case of Downer EDI Works Pty Ltd v Parsons Brinckerhoff Australia Pty Ltd [2011] NSWCA 78 (Downer). The Court confirmed that a person or company can have more than one ‘ordinary place of business’ for the purposes of service under BCISPA, equating the term ‘ordinary’ to ‘usual’.

In Downer, a payment claim was sent by facsimile to the respondent’s Head Office in Melbourne, despite the claim relating to construction work performed in New South Wales with the administration of that work performed at a known office existing in New South Wales. The Court upheld the validity of service of the document, noting that the words ‘ordinary place of business’ should be given a broad interpretation, including any place at or from which the person or company usually engages in activities which form a not insignificant part of their business.

Conclusion

The past 12 months have seen a number of key changes to the operation of BCIPA and BCISPA alike.  It is imperative that participants in the construction industry remain up to date on these developments, and adapt their contract administration and systems accordingly. 

 

Focus covers legal and technical issues in a general way. It is not designed to express opinions on specific cases. Focus is intended for information purposes only and should not be regarded as legal advice. Further advice should be obtained before taking action on any issue dealt with in this publication.

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