Publications / Projects and Infrastructure
WHO SHOULD READ THIS
- Principals and contractors.
THINGS YOU NEED TO KNOW
- Payment claims under BCIPA are merely a statement of what is claimed and are not representations as to the truth of the matters contained in it.
- In effect, BCIPA is the basis of a Principal’s need to respond to a payment claim (valid or not), and
- A Principal may still incur unrecoverable costs in responding to an adjudication application even if the payment claim is invalid.
The decision of the New South Wales Supreme Court in The New South Wales Netball Association Ltd v Probuild Construction (Aust) Pty Ltd  NSWSC 1339 demonstrates the ‘opportunistic’ behaviour carried out by parties to a dispute under the BCIPA legislation and highlights that a payment claim under BCIPA is not a representation, but merely a statement of what is claimed.
Probuild Constructions (Aust) Pty Ltd (Probuild) contracted with The New South Wales Netball Association (Netball Association) to construct a new building known as the ‘Netball Centre of Excellence’ at Sydney Olympic Park.
Probuild sent the Netball Association ‘Payment Claim 23’ in which it claimed approximately $4 million. The Netball Association responded with a payment schedule which contended that Payment Claim 23 was not a valid claim for payment because Probuild had served the payment claim under the cover of a document which referred to ‘our draft claim #23 for December 2014 for your review’. Payment Claim 23 did not proceed to adjudication.
Instead, Probuild served Payment Claim 24 claiming approximately $10 million. The responsive payment schedule provided by the Netball Association stated that the scheduled amount was ‘Nil’, due to (amongst other reasons) the fact that Payment Claim 23 was valid (abandoning its earlier argument that Payment Claim 23 was invalid). Probuild then served an adjudication application on the Netball Association for adjudication of Payment Claim 24.
The Netball Association subsequently commenced proceedings seeking an injunction restraining the adjudication stating that the payment claim was invalid, as it contravened section 13(5) of the Building and Construction Industry Security of Payments Act 1999 (NSW) (Act). This was because Payment Claim 23 related to the same reference date to that of Payment Claim 24 and had not been withdrawn. Justice Ball refused to enjoin the adjudication process, but restrained Probuild from enforcing any adjudication certificate until further order.
The Adjudicator issued her determination and found that the adjudicated amount was $124,599.23.
Strategically, the parties then adopted the opposite position to what was argued before the Adjudication determination was handed down. Probuild admitted that Payment Claim 24 was invalid; that the Adjudicator had no jurisdiction to deal with it and that the determination was void. Conversely, the Netball Association sought, and was granted, leave to discontinue the proceedings in which it claimed that any determination by the Adjudicator in respect of Payment Claim 24 was void. The Netball Association only pursued its second cross-claim (for damages it incurred in responding to Probuild’s adjudication application arising from Payment Claim 24) on the grounds that, assuming the Adjudicator fell into jurisdictional error, the Court should withhold relief to Probuild, having regard to Probuild’s ‘bad faith and want of clean hands’ in admitting that Payment Claim 24 was invalid.
Decision - Invalid payment claim
Justice Stevenson stated that it was not appropriate to characterise Probuild’s behaviour as ‘acquiescence, delay, abandonment or bad faith’, and that up until it learned of the Adjudication determination, it had acted in good faith and advanced arguments which it genuinely believed were open to it on the facts. However, it was found that Probuild’s conduct, when faced with a substantial failure in the adjudication and subsequently abandoning its previous position, was ‘opportunistic’.
Further, it was held that Payment Claim 23 was a valid payment claim, that Payment Claim 24 arose out of the same reference date, and that Payment Claim 24 was served in contravention of section 13(5) of the Act. Therefore, the Adjudicator had no jurisdiction to deal with Payment Claim 24, and Probuild was granted the relief it sought (namely, a declaration that the Adjudication determination was void).
Decision – Misleading conduct
The Netball Association’s claim for damages depended upon the propositions that, in serving Payment Claim 24, Probuild represented to the Netball Association that it was entitled to issue the claim, that this representation was false and therefore Probuild engaged in misleading and deceptive conduct under section 18 of the Australian Consumer Law. Justice Stevenson held that Probuild did not, by serving Payment Claim 24, make any representations to this effect. It merely claimed to be entitled to the payment specified. In any event, the Netball Association did not rely upon any representation in Payment Claim 24. It expressly rejected the correctness of the adjudication application and responded because it did not agree with what was stated in the payment claim and because of the demands imposed on it by the Act.
- The service of a payment claim under BICPA does not involve the making of representations as to the truth of the matters contained in the payment claim. Such a proposition reconciles with the findings of the Court of Appeal in Britannia Pty Ltd v Parkline Constructions Pty Ltd  NSWCA 238 that it is not necessary that a claimant have a bona fide belief in its entitlement to the monies claimed under a payment claim.
- Although viewed unfavourably by the Court, it is not always considered bad faith to adopt contradictory arguments after learning of an adjudication determination, particularly if up to the point of the adjudication determination a claimant acts genuinely and in good faith.
- If a Principal is served with an invalid payment claim, it may still incur unrecoverable costs in responding to an adjudication application (even after attempting to injunct the adjudication of the invalid payment claim).
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.