May 6, 2020

A recent decision of the NSW Supreme Court of Appeal has considered amongst other things the significance of a ‘reference date’ for a valid payment claim under the Building and Construction Industry Security of Payment Act 1999 (NSW).

In Brolton Group Pty Ltd v Hanson Construction Materials Pty Ltd [2020] NSWCA 63 the Principal (Hanson) and Contractor (Brolton) contracted to build a quarry processing plant for a maximum price of $85 million.

In relation to payment claims, the Contract provided Brolton with an entitlement to claim:

  •   monthly progress payments on the last Tuesday of each month; and
  •   upon termination, payment for the value of completed work.

On 3 October 2018, Hanson terminated the Contract. On 28 August 2019, nearly 12 months after termination, Brolton issued Hanson a payment claim titled ‘Progress Claim for September 2018’ claiming $6.3 million. The claim incorporated previously submitted payment claims and subcontractor invoices for work performed between 25 September and 10 October 2018.

On 10 September 2019, Hanson served a payment schedule on Brolton stating the amount owing was ‘nil’. In response Brolton lodged an adjudication application under the Act.

Under the Act, there cannot be a valid payment claim without an available ‘reference date’. Brolton’s payment claim did not identify the ‘reference date’ against which it was made. The adjudicator, adopting a reference date of 23 October 2018, determined an adjudication amount in favour of Brolton for approximately $2.8 million.

Hanson commenced proceedings seeking a declaration the adjudication determination was void as there was no 23 October 2018 reference date available under the Act or the terms of the Contract. The parties conceded this.

The Supreme Court of NSW held:

  •   it was not open to the adjudicator to determine an alternate reference date which was not available under the Contract or the Act; and
  •   it would be a denial of natural justice for an adjudicator to determine a dispute on a basis for which neither party had contended, being the 23 October 2018 ‘reference date’, without giving the parties the opportunity to make submissions on the relevant point.

Brolton appealed and the NSW Court of Appeal upheld the decision.

This case highlights the importance of an available ‘reference date’ under the relevant contract or the Act, not only for the validity of a payment claim, but also in order to take subsequent steps under the Act.

The full decision can be found here.

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