Claims for Variations under the Building and Construction Security of Payment Act 1999 - Where claimed payments are purported to arise pursuant to the Contract, the proper manner to challenge these will be through a Payment Schedule and Adjudication process and not on Appeal

11/08/2020

The NSW Court of Appeal recently handed down its unanimous Decision in TFM Epping Land Pty Ltd v Decon Australia Pty Ltd.  The case dealt with a few key issues relating to the validity of Payment Claims issued under the Building and Construction Security of Payment Act 1999 (SOP Act).

This article deals with one; whether a Payment Claim is invalid because it makes claims for variations not under the construction Contract.

The Court noted the established principle set down by the High Court in Southern Han Breakfast Point v Lewence Construction Pty Ltd, that the Building and Construction Security of Payment Act 1999 (SOP Act) only entitles you to Progress Payments for work done under a Construction Contract and does not permit claims by way of quantum meruit. (A quantum meruit claim is one which seeks reasonable remuneration for work undertaken without an enforceable Contract).

The Court considered the matter in which the claim for variations was made.  The claim explicitly used the words “works completed in the Project performed in accordance with the building and construction Contract”.  The Contract itself was a standard form Contract which had made provisions for variations.  The Court held the claim for variations was “thus in its terms, a claim for works completed under the Contract”.  It was therefore not a quantum meruit claim and was permitted under the SOP Act.

The Court also considered whether the result would be different if the variations did not properly arise under the Contract (eg where procedural steps were not followed or some other way in which variations did not properly arise).  The Court noted the SOP Act which had the effect of preventing the Respondents (the person against whom the claim was made) from raising the defence that the claimed variations were not payable under the Contract. 

The Court held that the proper way to challenge any claims for variations on the basis that it does not arise under the Contract is by way of a Payment Schedule which will then be determined by the Adjudicator whilst considering the Adjudication Application.  It is not possible on appeal to attempt to argue the variations were not variations under the Contract.

The Court further noted that where a Payment Claim is unclear with regards to what work it is claiming money for, the proper way to challenge this is again by way of a Payment Schedule and by stating that no payment is intended to be made and allowing the issue to be determined by the Adjudicator. 

A Payment Claim would only be treated as invalid if “the failure is patent on its face” meaning it fails in any reasonable way to identify the work for which payment is claimed.

Claims based on quantum meruit cannot be made under the Building and Construction Security of Payment Act 1999 and will not attract its protections.  However a Payment Claim which clearly states that the claimed amount is relating to works completed under the construction contract or other arrangement covered by the SOP Act and then makes a proper and reasonable effort to identify the works carried out, will not be held invalid on appeal. 

If a person wishes to challenge any claimed amount including on the basis that it does not arise under the Contract, then the proper way of doing so is by way of a Payment Schedule and raising the arguments before the Adjudicator.

If you have any concerns or queries relating to construction/building Contracts, Payment Claims, Payment Schedule or are proposing to make a claim or defend a claim you should seek assistance navigating these avenues with our experienced building and construction Solicitors who are adept at dealing with all matters relating to building and construction including Adjudications.  Do not hesitate to contact Richard Watson Accredited Specialist in Building and Construction or his Personal Assistant Shereen Da Gloria to discuss your concerns and seek the appropriate advice.