Payment Claims - Once is Enough

Wednesday, 18 November 2009

Payment Claims - Once is enough 

If, up until now it has been your practice to submit a payment claim, indeed any payment claim made under the Building and Construction Industry Payments Act (the Act) no matter how well prepared with the expectation that any deficiencies can be fixed in a subsequent payment claim, think again.

Section 27(2) of the Act prohibits a subsequent adjudicator from departing from the valuation of any construction work carried out in accordance with the Act by a previous adjudicator. In other words, once an adjudicator determines the value of certain construction work, it becomes binding on every subsequent adjudicator where the adjudicator is called upon to consider the same construction work.

The operative word here is “valuation”.

The valuation of any claim could involve questions of entitlement, quantification or both.

The obvious question is, does the Act in section 27(2) apply only where there has been quantification carried out or does it also include a situation where there has been a decision of entitlement against the Claimant and hence no need for any further valuation? 

The Court determined, until recently, that section 27(2) operates to bind any subsequent adjudicator only where there has been a quantification exercise carried out. In other words, where entitlement is determined against the Claimant and logically there has been no valuation, the Claimant is free to make the claim again in a subsequent payment claim and refer it to a new adjudicator: see Roghnere v Quasar & Ors [2004] NSW SCW151: John Goss Projects v Leighton Constructions & Anor [2006] NSW SC978: (2006) 66 NSWLR707.

In recent decisions made by the Court of Appeal in Dualcorp Pty Limited v Remo Construction Pty Limited [2009] NSW CA601 and the Supreme Court in Perform (NSW) Pty Limited v Mev-Aus Pty Limited t/as Novatech Construction Systems [2009] NSW SC416 and University of Sydney v Cadence Australia Pty Limited & Anor [2009] NSW SC635, the Court has extended the scope of claims that cannot be re-submitted.

The importance of getting it right

The Courts have held that in addition to section 27(2), consideration must also be given to section 17(5) and (6) of the Act which states as follows:

(5) A claimant cannot serve more than one payment claim in respect of each reference date under the construction contract.

(6) However, subsection (5) does not prevent the claimant from including in a payment claim an amount that has been the subject of a previous claim.” 

A common theme in the decisions is that a Claimant is not permitted to endlessly submit or re-agitate the same claim or the same issues. 

The purpose of the Act is to permit a Claimant one claim for work carried out during one reference period.

In other words, when a party has submitted a payment claim for work carried out in a reference period, that party is stuck with the claim even if there are flaws in the way in which the claim has been prepared and submitted. It cannot seek to rectify those flaws in any subsequent payment claim.

It seems that not only would a decision of the value of work carried out become binding but findings about “issues” will also be binding on future claims and adjudications. 

If this is the case, then, for example, if in an adjudication the adjudicator has to decide the terms of the contract in making the valuation, this suggests that for all future claims under the Act, the parties are bound by that finding as to the contractual terms. This would have far-reaching implications.

Indeed, it appears that the Courts would even be prepared to hold a payment claim to be invalid (that is not a payment claim for the purposes of the Act) if that payment claim has included elements of a previous payment claim in a way that cannot be conveniently excised by an adjudicator.

These recent decisions establish that:

The Act gives the Claimant one shot and only one shot at submitting a payment claim under the Act in respect of work that has been carried out during one reference period; constant re-agitation of the same claim or issues may be struck down for being an abuse of process; a previous claim re-submitted in a later payment claim may render the subsequent payment claim invalid.

Put simply, the lesson for Claimants is:

all progress claims must be prepared with great care, thought and with thoroughness; 

if there is any doubt about the thoroughness of a claim or its completeness, serious consideration should be made to whether a claim should be made under the Act at all. 

a Claimant should be careful about what issues it puts before an adjudicator, for example, interpretation of the contract or complex legal questions.

If the adjudicator gets it wrong, it would nevertheless be binding on how future claims may be construed.

Courtesy of:

Avendra Singh

Partner, Collins, Biggers and Paisley