October 2, 2018

The Supreme Court of Victoria recently considered the provisions in the Building and Construction Industry Security of Payment Act 2002 (Vic) (the Act) relating to reference dates, in the case of Vanguard Development Group Pty Ltd v Promax Building Developments Pty Ltd & Anor [2018] VSC 386. The Court examined how these provisions operate following early contractual termination in circumstances where the underlying contract provides a reference date for a final payment claim.

Vanguard (the owner) entered into a construction contract with Promax (the contractor) for the construction of an apartment complex.

The contract was terminated before the works were completed. The contractor then served a purported ‘claim for final payment’ which was said to include:

  1. a ‘final claim’ for loss of profit and damages in accordance with the contractual termination provisions; and
  2. a claim for ‘final payment’ made pursuant to the Act (the Relevant Payment Claim).

The contract included a condition that detailed how the reference date under the Act for the purposes of a final payment claim would be determined (the Special Condition). The contract also separately prescribed that a final claim could only be made when certain requirements had been met (cl N11).

The owner issued a payment schedule under the Act proposing to pay “$nil” in respect of the Relevant Payment Claim. This led to the contractor lodging an adjudication application under the Act for payment of the Relevant Payment Claim. The adjudicator determined that a portion of the Relevant Payment Claim was payable, and the owner subsequently sought judicial review of this determination.

In order to determine whether a ‘reference date’ existed (which is a precondition to the making of a valid payment claim under the Act), the Court first considered whether the Relevant Payment Claim was truly a final payment claim as required to trigger the Special Condition. This required the Court to consider the ordinary meaning of a ‘final claim’, which can involve a final balancing of account, or the last payment claim to discharge a principal from further obligations to pay money under a construction contract.

The Court noted that ‘final payment claim’ is not defined by the Act and considered that, in the circumstances, the meaning of the term turned on the construction of the Special Condition. The Court implemented accepted principles of contractual interpretation and found that the Special Condition must be read in conjunction with cl N11, which contained specific preconditions for a final payment claim to arise.

The Court did not accept that the Relevant Payment Claim was a final payment claim because, amongst other things, it was made at a time when the requirements of cl N11 had not been met. As such, the Special Condition did not provide an applicable reference date for the Relevant Payment Claim.

The Court rejected the contractor’s submission that s 9(2)(d) of the Act, which provides for a default reference date for a final payment claim if the contract makes no such express provision, provided an additional reference date for a final payment claim under the Act over and above the express provisions in the contract. The Court noted that the contractor was still entitled to claim for certain losses in accordance with the termination provisions in the contract.

For the reasons outlined above, the adjudication determination was quashed.

This case makes clear that s 9(2)(d) of the Act does not operate to provide a default reference date if the contract makes an express provision with respect to this matter.

The full decision can be found here.

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