Supreme Court clarifies identification of construction work for a valid payment claim

There are a number of things you absolutely must get right if you are to successfully use the Security of Payment Legislation, regardless of which jurisdiction you are in. 

One of those is that the payment claim must sufficiently identify the construction work for which payment is being claimed. Failure to do so will result in the payment claim being invalid, and you will not be able to pursue your rights for payment under the relevant Security of Payment Act.

Although the threshold is relatively low, a recent Supreme Court of Queensland case[1] casts some doubt on a common practice which is used across the country in the formulation of progress/payment claims.  Below is an extract from part of the payment claim in that case.

As can be seen, this claim is in a common format used in the building industry.

Why was the payment claim found to be invalid?

The Judge criticised the way that this particular claim had been put together. For example, item 19 was said to be 67% complete and the claim is for $97,421. The amount of $97,421 cannot be reconciled with the total amount of work ($811,840). The payment claim does not:

  1. specify the percentage of the total amount of work being claimed for;
  2. specify what proportion of the amount being claimed constitutes the amount claimed to date ($543,933); and
  3. enable the recipient to determine what construction work was actually undertaken for the amount claimed.

Although the judgement accepted that errors in individual items would not generally invalidate a payment claim, it was accepted that the lack of a description coupled with the inability to reconcile some of the claims, made the payment claim incomprehensible.  That was particularly so in relation to the variations (which were not described other than by reference to job numbers).

What implications does the decision have for the preparation of payment claims?

Does this mean that this quite familiar form of claim in the construction industry can no longer be used? Not necessarily.

First, the judge made it clear that you can deliver a payment claim that is a claim for the total percentage of work that has been undertaken at the time, less deductions for amounts already paid.

Second (and this argument was not raised in favour of the validity of the payment claim in this particular case), because it is well-established that payment claims are to be assessed in the context of the previous communications between the parties. In other words, a claim will be valid if it could be understood by reference to previous payment claims or other information.

Takeaway lesson

If you wish to use a payment claim in the format used in the case referred to above, you have to make sure it can be understood by reference to previous communications and make sense on its face.  Each item of work should be described in a clear way.  You should assume that a payment claim, if disputed, may need to be put before an adjudicator who will not be familiar with the project.  To that end, you should make the payment claim as simple as is reasonably possible for the adjudicator to understand.

If you think there is any chance a claim will be disputed, or the amount of the claim is significant, you should seek legal advice before you deliver the payment claim. Incorrect format and submitting payment claims on the wrong date is another very common problem causing payment claims to be invalid.

[1]  KDV Sport Pty Ltd v Muggeridge Constructions Pty Ltd & Ors [2019] QSC 178

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.

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