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Security of Payments

Deeming provisions doomed under the Building and Construction industry Security of Payment Act (1999) NSW (Act)

By 8 October, 2017October 22nd, 2024No Comments

Deeming provisions doomed under the Building and Construction industry Security of Payment Act (1999) NSW (Act)
  1. In All Seasons Air Pty Ltd v Regal Consulting Services Pty Ltd [2017] NSWCA 289, the Court of Appeal held that a payment claim served before a reference date will be invalid under the Act despite a provision in a contract deeming that the service of the payment claim is taken to have been made on the reference date. 

 

Facts

  1. Pursuant to a contract between All Seasons and Regal Consulting, reference dates would accrue on the 20th day of each month. Clause 37.1 of the contract stated (inter alia):

“… An early progress claim shall be deemed to have been made on the date for making that claim.”

  1. On 20 June 2016, All Seasons served Regal Consulting with a payment claim in respect of the 20 June 2016 reference date.
  2. On 12 July 2016, All Seasons served Regal Consulting with a further payment claim (2nd Payment Claim).
  3. The 2nd Payment Claim was ultimately the subject of an adjudication determination in favour of All Seasons.

 

First instance judgment

The Primary Judge dismissed All Seasons submissions and quashed the adjudication determination

  1. Regal Consulting challenged the validity of the adjudication determination on the basis that the 2nd Payment Claim was void of a valid reference date as it had been served prior to 20 July 2016 (i.e. the reference date).
  2. All Seasons submitted that pursuant to clause 37.1, the 2nd Payment Claim was deemed to have been served on 20 July 2016 and therefore a valid payment claim under the Act.
  3. The Primary Judge dismissed All Seasons submissions and quashed the adjudication determination.

 

Appeal

  1. All Seasons appealed the first instance judgment. On appeal, the parties’ submissions regarding the operation of the deeming provision under clause 37.1 of the contract were repeated.
  2. The NSW Court of Appeal unanimously rejected All Seasons’ submission. In delivering judgment, the Court of Appeal emphasised the importance (for both parties) in having certainty as to precisely when a payment claim was served:

“There is sound reason, given the consequences for both parties of engaging the regime established by the Act, for there to be certainty as to precisely when a payment claim has been served…  

Not lightly would we conclude that the time-critical regime established by the Act involving as it does a series of exchanges of claims and responses is engaged by the deemed or notional service of a document, rather than actual service…

… the appeal must be dismissed.”

 

Lessons learnt

  1. Payment claims must be served on and from each reference date under a contract and not beforehand. A payment claim served before a reference date will be invalid under the Act despite a provision in a contract deeming that a payment claim made earlier than the reference date is deemed to have been made on the reference date.