Reference dates – Still important?

A recent decision of the New South Wales Court of Appeal[1] illustrates the role of reference dates under the Security of Payment system. The decision highlights some of the differences between the various States in relation to the Security of Payment legislation, despite the close similarities between each State’s respective Acts.

In the case, Hanson entered into a contract with Brolton for the construction of a quarry processing plant in New South Wales.

The contract provided for the making of monthly progress claims and for an entitlement to make a claim upon the termination of the contract. Both these could have been reference dates under the legislation.

The contract was terminated on 3 October 2018. On 20 August 2019, Brolton served a payment claim.

The payment claim did not identify the reference date. There is no need for a payment claim to identify the reference date relied upon, and there is clear Queensland authority for the proposition that the nomination of an incorrect reference date in a payment claim (where there is otherwise a valid reference date available) does not invalidate the payment claim[2].

The matter proceeded to an adjudication, at which both parties agreed that the reference date for the payment claim was the ordinary progress claim date and not the date that the contract was terminated.

In its submissions to the adjudicator, Brolton (despite being the applicant) did not argue for any particular reference date, but contended that there was an available reference date in both August 2018 and September 2018.

The adjudicator decided the reference date was in fact 23 October 2018, based on the entitlement to make a claim on the termination of the contract.

At the hearing before the court, both parties agreed that 23 October 2018 was not available as a reference date. However, Brolton sought to support the decision of the adjudicator on the basis that there was an available reference date, namely 25 September 2018.

The Court of Appeal rejected Brolton’s argument. The Court held it was not relevant that there might actually be a reference date available. The Court held that because the adjudicator had proceeded based on an unavailable reference date, he had committed a jurisdictional error which rendered the adjudication decision void.

In addition, the Court held the decision of the adjudicator void because he had breached the rules of natural justice, in that he had decided the case on a basis for which neither party had argued.

Hanson also argued that even if Brolton was correct and the reference date was 25 September, the claim was premature and invalid – the payment claim included a claim for work performed after that date.

The Court rejected this argument, confirming the position in New South Wales that a payment claim is valid even if it includes work performed after the reference date. That is also the position in Victoria[3] . However, in Queensland the law is that if a payment claim includes work performed after the reference date, it is invalid[4] . In Tasmania, the point has not been decided[5]. We are not aware of any decisions on the point in South Australia or the Australian Capital Territory.[6]

Take-away points

This is just one point of difference between the Security of Payment systems in the various states, which started out very much the same.

The difference between States on the question of reference dates has been expanded further by the fact that in New South Wales, in respect of contracts entered into after 21 October 2019, the concept of a reference date has been removed. The concept has been replaced in New South Wales with a new payment structure so subcontractors can make a payment claim at least once a month and make a final claim if a contract is terminated. The use of a contractual provision providing for the serving a payment claim is now optional.

There are no cases as yet under the new New South Wales provisions. It must be said that whilst the concept of a “reference date” has been removed from the New South Wales Act, it presumably remains the case that when you deliver a payment claim it will have to relate to an available date upon which you are entitled to make your claim. Therefore, the removal of the concept of a “reference date” is unlikely to avoid all the issues that arose out of that concept.

Whatever State you are in, you must pay very careful attention to ensure there is an actual entitlement to do deliver a payment claim under the law of the State where the work was performed. The case of Brolton discussed in this article is an illustration of the fact that in those states where the concept of a “reference date” still applies, the absence of such a date is fatal to any claim under the Security of Payment Legislation.

[1] Brolton Group Pty Ltd v Hanson Construction Materials Pty Ltd [2020] NSWCA 63

[2] McNab Developments (Qld) Pty Ltd v MAK Construction Services Pty Ltd & Ors [2013] QSC293 at para 18

[3] Metacorp Australia Pty Ltd versus Andeco Construction Group Pty Ltd (2010) 30 VR 141.

[4] FK Gardner & Sons Pty Ltd v Dimin [2007] 1 Qd R 10

[5] Skilltech Consulting Services Pty Ltd v Bold Vision Pty Ltd [2013] TASSC 3

[6] the Security of Payment systems in Western Australia and the Northern Territory make use of a different model from that used in the other States.

Queries

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Disclaimer
This article is general commentary on a topical issue and does not constitute legal advice. If you are concerned about any topics covered in this article, we recommend that you seek legal advice.

The Building and Construction team has extensive experience in dealing with the regulatory regime confronting the building industry. Our presence in Brisbane, Sydney and Melbourne means that we have detailed, ‘on the ground’ knowledge of the regulatory environment in the areas where we practice, and the ‘boots on the ground’ to deal with your matter in a timely and efficient manner. If you have a regulatory issue, we have probably seen it before, and can provide you with strategic advice to assist you in achieving outstanding outcomes.

The Author

Michael Cope

SPECIAL COUNSEL, BRISBANE

Key Contacts

Michael Cope

SPECIAL COUNSEL, BRISBANE

Ian Heathwood

PARTNER, BRISBANE

Paul McCann

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Richard Hutchings

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