Building Industry Fairness Act Part 1: Issuing a Payment Claim

PART 1: ISSUING A PAYMENT CLAIM

This is the first article in our three-part series regarding the operations of the Building Industry Fairness (Security of Payment) Act 2017 (‘BIF Act’). The BIF Act was introduced primarily to simplify the procedure for recovering payments owing to contractors in the building and construction industry.

In this three-part article series, Ramsden Lawyers’ litigation team shares their insights on the procedural and dispute resolution aspects of the BIF Act.  In this part, the litigation team outlines how to issue a payment claim in accordance with the BIF Act.  Part two of the series will focus on issuing a payment schedule and part three of the series with focus on the adjudication process.

WHAT IS A PAYMENT CLAIM?

If you run a construction company or are a subcontractor, it is crucial that you understand how to request payment in a legally effective manner following the completion of construction work or following the supply of related goods and services. Upon the completion of building work, or delivery of relevant goods and services, it is necessary to properly issue a payment claim to the individual / company that owes money under the relevant contract. Under section 68 of the BIF Act, a payment claim:

• is a written document that identifies the construction work or related goods and services to which the payment claim relates;
• states the amount (the claimed amount) of the progress payment that the claimant consider is payable by the respondent; and
• requests payment of the claimed amount.

It is necessary for payment claims to reasonably identify the relevant work completed with sufficient specificity so as to enable the recipient of the payment claim to:

• determine whether the amount claimed is payable; or
• respond by way of a payment schedule further indicating the extent of payment (if any).

WHAT IS A REFERENCE DATE?

An important part of giving of a payment claim under the BIF Act is ensuring that it is given on a ‘reference date’. Section 67 of the BIF Act defines the term “reference date” as follows:

67 Meaning of reference date

 (1)  A reference date, for a construction contract, means––

       (a) a date stated in, or worked out under, the contract as the date on which a claim for a progress payment may be made for construction work carried out, or related goods and services supplied, under the contract; or

       (b) if the contract does not provide for the matter––

             (i) the last day of the month in which the construction work was first carried out, or the related goods and services were first supplied, under the contract; and

             (ii) the last day of each month later.

(2) However, if a construction contract is terminated and the contract does not provide for, or purports to prevent, a reference date surviving beyond termination, the final reference date for the contract is the date the contract is terminated.

For any payment claim, you must first determine whether you have a right to issue the payment claim under the relevant contract, or alternatively, under the BIF Act. The existence of a reference date under a construction contract within the meaning of the BIF Act is a precondition to the making of a valid payment claim. In the matter of Southern Han Breakfast Point Pty Ltd (in Liquidation) v Lewence Construction Pty Ltd,[1] the Court found that a claimant is only entitled to a progress payment on and from each reference date under the construction contract. In that way, if you serve a payment claim before the reference date arises, the payment claim is invalid.

Further, in Tailored Projects Pty Ltd v Jedfire Pty Ltd [2009] QSC 32, Justice Douglas found that ‘where more than one payment claim issues for a reference date, the first must be considered to be the payment claim for the reference period so that any subsequent claims for that reference period are invalid’.

Common problems claimants face when submitting their payment claims are:

• issuing more than one payment claim for a reference date (for example, where multiple stages of works are completed throughout the month); and / or
• submitting a payment claim prior to the reference date.

Variation Claims

Variation works are defined as ‘works which are not contemplated by the parties at the time of the execution of the contract’ … ‘but essential to the completion of the works’. Variation works may include alterations to the:

• sequence of work;
• working conditions;
• design of the project;
• quantities of materials; and
• quality of material and aesthetics.

Building and construction contracts generally contain specific procedures for claiming a variation to permanent works.  While a variation will alter the permanent works, the claim normally involves a change to the way in which the permanent works will be delivered.  Variation works are often a source of conflict in building and construction contracts. To minimise disputes, payment claims in relation to variation works should:

• clearly and comprehensively define the contractual scope of the variation works (with evidence of instructions in relation to those works);
• include comprehensive and detailed costings (in addition to other substantiating information for variation works);
• detail a register for all variation works including the:
  • date of variation;
  • party requesting variation; and
  • status of each variation request (pending, rejected, approved).

Remember, you can only serve one payment claim per reference date, so you must ensure that you include any variations on the same payment claim as the works completed and other related goods and services.

OUR ROLE IN LITIGATION

If you are looking to seek legal advice regarding a building or construction dispute, Ramsden Lawyers are able to assist you. We are happy to arrange an initial consultation to assist you in navigating the procedures set out under the relevant legislation for your circumstances.

With building and construction contracts, there may be strict timeframes that you must follow whether defending or bringing a claim, therefore you must act quickly to protect your interests, so contact our experienced litigation lawyers to schedule an initial consultation.

The content of this article is intended to provide a general guide to the subject matter and must not be relied on as legal advice.  Specific advice should be sought about your circumstances.

For further all things litigation at Ramsden Lawyers please follow this link.

[1] (2016) 260 CLR 430

[2] Barter v Mayor of Melbourne (1870) 1 ALJR 160

[3] Williams v Fitzmaurice (1858) 157 ER 709