February 12, 2024

In two recent judgments, the New South Wales Court of Appeal has provided a useful reminder of the requirements for a valid payment claim and payment schedule under the Building and Construction Industry Security of Payment Act 1999 (NSW) (SOPA).

In Total Construction Pty Ltd v Kennedy Civil Contracting Pty Ltd (subject to a Deed of Company Arrangement) [2023] NSWCA 306, the Court considered whether a letter issued by solicitors on behalf of a contractor, in administration, constituted a payment claim under SOPA.

Kennedy Civil Contracting (the Contractor) was placed into administration following which the solicitors for the appointed administrator sent a letter to Total Construction (the Principal) demanding payment of the total outstanding amount owing to the contractor for works performed pursuant to a contract. The letter attached various invoices which were created on or around the date of the letter.

The Court considered whether the letter and its attachments, when read together, had the expected features of a payment claim, by reference to the requirements of section 13(2) of SOPA.

The Court found that the letter “reads objectively, and obviously, as a letter of demand” and did not meet the requirements of a payment claim for reasons including that it:

  •    was drafted on solicitor letterhead and signed by the solicitors acting for the appointed administrator;
  •    required payment by the Principal within a shorter timeframe than was permitted under SOPA; and
  •    instructed the Principal to pay the amount owing into the solicitors’ trust account as opposed to the Contractor’s bank account.

Further, the Court found that notwithstanding each invoice claimed to be made under SOPA, it was “of no more than historical significance”. This was because some of the invoices recorded partially paid amounts as well as outstanding amounts due under previous security of payment claims issued by the Contractor.

The full decision can be found here.

In Witron Australia Pty Ltd v Turnkey Innovative Engineering Pty Ltd [2023] NSWCA 305, the Court considered whether an email from a principal sent in response to a contractor’s payment claim constituted a “payment schedule” under SOPA. The email in question stated that the principal would “review [the contractor’s] variations and new pricing after [it] see[s] real progress” and that the contractor may make a progress claim based on the original contract price.

In reaching its decision, the Court considered the SOPA requirements for a valid payment schedule which included that it:

  •    identify the payment claim to which it relates;
  •    indicate the amount of payment the respondent proposes to make; and
  •    indicate the reason for the amount claimed not being fully or partially payable if the respondent proposes to make a payment less than the amount claimed.

The Court held that while the principal’s email did provide a reason for rejecting that part of the payment claim relating to the original scope of works, it did not provide a reason for why it would not make a payment for the claimed variations. The email therefore did not meet the SOPA requirements and accordingly was not a valid payment schedule.

The full decision can be found here.

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