August 1, 2017

The Supreme Court of New South Wales in Regal Consulting Services Pty Ltd v All Seasons Air Pty Ltd [2017] NSWSC 613 has reaffirmed the importance of having a valid contractual reference date when submitting payment claims under the Building and Construction Industry Security of Payment Act 1999 (NSW) (the Act).

The case concerned a deeming provision in a contract which stated that:

  •   payment claims were to be made on the 20th day of each month; and
  •   any payment claim submitted before the 20th day was automatically deemed to have been made on the 20th day of that month.

The dispute arose when All Seasons Air (All Seasons) submitted a progress claim on 12 July 2016, being 8 days prior to the stated reference date. Regal Consulting Services (Regal) rejected the progress claim on the basis that a payment claim had previously been submitted on the reference date for that month, being 20 June 2016. In rejecting the claim, Regal argued that there was no available reference date under the contract to support the progress claim. The matter was referred to adjudication, where the payment claim was held to be valid.

Regal appealed the determination to the Supreme Court. On appeal, the court followed the recent High Court decision of Southern Han Breakfast Point Pty Ltd (in LIQ) v Lewence Construction Pty Ltd [2016] HCA 52 (Southern Han) and its application to section 8(1) of the Act. Relevantly, in Southern Han the Court held that the:

  •   existence of a reference date is a jurisdictional requirement for a valid payment claim; and
  •   relevant reference date is the date fixed by the terms of the contract (when stated).

In this case the court accepted that the effect of the deeming provision in the contract was that a payment claim submitted prior to the reference date, that being the 20th day of the month, was effective. However, following the decision of Southern Han, the Court stated that if “no reference date has arisen, there is no statutory entitlement to a progress payment.” That is, the jurisdictional requirement of a valid reference date had to be satisfied. The court found that in the circumstances, due to the submission of the earlier progress claim in June 2017, there was no reference date under the contract to support the 12 July progress claim.

This case highlights the need for parties to carefully consider whether a reference date has arisen before submitting a payment claim, and the importance of ensuring that parties are aware of the requirements of their contractual payment regime, by reference to the requirements of the legislation.

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