In proceedings that have ducked and weaved faster than Preston Campbell, no sooner had Simcorp Developments and Constructions Pty Limited (Simcorp) won a $3 million adjudication determination under the Building and Construction Industry Payments Act 2004 (Qld) (BCIPA) the Supreme Court had taken it away from them.

Amongst a scrum of media attention, the decision in Simcorp Developments and Constructions Pty Limited v Gold Coast Titans Property Pty Limited [2010] QSC 162 represents an important clarification of the law governing BCIPA, and grants a principal under a construction contract greater freedom to place preconditions on payment claims.

In a much reported story, Simcorp had been engaged by the Titans NRL Club (Titans) to construct a multi-storey headquarters next to Skilled Park Stadium on the Gold Coast. On 17 February 2010, the Titans terminated the construction contract. On 10 March 2010, Simcorp served a payment claim under BCIPA claiming $5.2 million from the Titans for outstanding amounts alleged to be owed under the contract.

BCIPA is a vehicle for the rapid adjudication of payment disputes. It allows contractors and subcontractors to rapidly claim payment on account for outstanding sums. It has been relied upon successfully by many contractors and subcontractors. While adjudication decisions are not generally reviewable by the courts, they can be declared void in special circumstances such as where a payment claim is invalid.

The adjudicator initially found in favour of Simcorp, but the Supreme Court subsequently held that the adjudicator’s decision was void and unenforceable, and that the payment claim was not a valid claim for the purposes of BCIPA.

BCIPA requires that a ‘reference date’ must have arisen before a payment claim can be made. If the reference date has not yet arisen, the payment claim is premature and void. The reference date is simply the date for claiming payment under the construction contract.

The contract between the Titans and Simcorp was unusual because it imposed preconditions that had to be satisfied before the reference date would arise. It required Simcorp to first serve a ‘progress claim’ setting out the work done by Simcorp, importantly, however, the progress claim is not itself a claim for payment. The superintendent under the contract was then required to issue a ‘progress certificate’. Only after receiving this progress certificate could Simcorp make a claim for payment under the contract or BCIPA.

Simcorp sought to rely upon section 99 of BCIPA. This is an important provision within BCIPA which provides that:

• the provisions of BCIPA continue to operate in spite of any inconsistent clauses in a contract, and
• any clause in a construction contract is void if it is contrary to BCIPA, modifies the provisions of BCIPA or attempts to deter a claimant from making a claim under BCIPA.

The crux of Simcorp’s case was that the preconditions to making a claim were unduly onerous and therefore fell foul of section 99. If section 99 operated, the preconditions would be void and therefore (it was Simcorp’s contention) the payment claim would have been validly made.

The Supreme Court did not accept this contention but instead expressed the view that the relevant contract clauses were not contrary to BCIPA and did not purport to modify its provisions.

BCIPA has always left the timing and frequency of reference dates - and therefore the question of when payment claims can be made - in the hands of the contract. In this instance, the Supreme Court held that if the contract required particular preconditions to be satisfied before a reference date would arise (rather than the more usual state of affairs of merely nominating a monthly reference date) that in itself is not enough to attract the operation of section 99.

The Supreme Court did not say as much expressly, but arguably the decision leaves open the possibility that where the contractual preconditions are unusually onerous, there may be some scope for section 99, in that particularly harsh preconditions may be construed as an attempt to deter a claimant from making a payment claim. The preconditions in the present contract, however, were deemed not to be sufficiently onerous for this to become an issue.

Simcorp has further clarified the position with respect to the operation of section 17(5) of BCIPA, which states that a claimant may only make one payment claim for each reference date. In this regard, because all of the items of work claimed in Simcorp’s present payment claim had been the subject of earlier payment claims under BCIPA, the present payment claim necessarily related to the reference dates of the earlier claims. The Supreme Court held that Simcorp’s present payment claim had therefore been made in breach of section 17(5).

The decision in Simcorp swings the pendulum in favour of the principal. It compromises the right of a claimant to bring a payment claim under BCIPA in as far as it grants a principal further room to place limitations on when (and under what conditions) a payment claim can be made.

The lesson from Simcorp for contractors is that they cannot ignore preconditions to making a payment claim when they are negotiating a contract. Some contractors adopt the mentality that contract preconditions don’t matter, and that a claim under BCIPA will provide them with an appropriate remedy. Simcorp is evidence that preconditions do matter.

From a principal’s perspective, Simcorp is perhaps a welcome reminder that section 99 is not all encompassing. The best way to ensure that a precondition for making a payment claim has its intended effect is to tie it directly to the precondition that relates to the reference date. This was the strategy successfully adopted by the Titans. While Simcorp may have had an interim victory in the adjudication forum, their failure to comply with the preconditions meant that they could not convert. It will be interesting to see what transpires in the next round.

For further assistance or enquiries please contact Matt Bradbury on 07 3233 8972.