Executive summary
Section 76(1) of the Building Industry Fairness (Security of Payment) Act 2017 provides that a payment schedule must be given within the earlier of the period specified under the construction contract or 15 business days after receiving the payment claim.
In Allencon Pty Ltd v Palmgrove Holdings Pty Ltd trading as Carruthers Contracting [2023] QCA 6, the Queensland Court of Appeal found that a payment schedule was required to be provided within the time provided in the contract for issuing a “payment certificate”, a period shorter than the 15 business days.
The time for issuing the payment certificate was in calendar days, not business days, with the result the Respondent lost the benefit of the non-business days over Christmas. The late payment schedule resulted in the Claimant obtaining judgment in the amount of the payment claim.
Summary
The recent decision by the Queensland Court of Appeal in Allencon Pty Ltd v Palmgrove Holdings Pty Ltd trading as Carruthers Contracting [2023] QCA 6 is a pertinent reminder for parties to carefully consider its obligation to issue a payment schedule within time, or face judgment in the full amount of a payment claim.
What happened?
Allencon Pty Ltd (Allencon) engaged Palmgrove Holdings Pty Ltd trading as Carruthers Contracting (Carruthers) as a subcontractor to carry out certain roadworks (Subcontract).
Allencon achieved practical completion and on 24 December 2021, it submitted a payment claim under the Subcontract.
Section 76(1) of the Building Industry Fairness (Security of Payment) Act 2017 (BIF Act) provides that a payment schedule must be given in response to a payment claim within whichever of the following period ends first:
- the period, if any, within which the respondent must give the payment schedule under the relevant construction contract;
- 15 business days after the payment claim is given to the respondent.
The Subcontract, which incorporated the general conditions of AS2545-1993, provided that, within 21 days after receipt of a claim for payment, the Main Contractor’s Representative shall issue a payment certificate.
The Subcontract also included amendments to AS2545 which provided that Carruthers’ representative was:
- its agent for the purposes of accepting and assessing payment claims and providing payment schedules under the BIF Act; and
- authorised to issue payment schedules on Carruthers’ behalf.
On 28 January 2022, Carruthers’ representative issued a payment certificate. That period was within 15 business days (as defined by the BIF Act) of receiving the payment claim.
The BIF Act defines a ‘business day’ to exclude a Saturday, Sunday, public holiday, special holiday or bank holiday and also excludes the days from 22 December to 10 January (inclusive).
However, the period of 21 days in the Subcontract for issuing a payment certificate ended on 14 January 2022.
The question for the Court of Appeal was whether the Subcontract provided a period within which the respondent must provide a payment schedule.
Allencon’s position was that, because the Subcontract provided the payment certificate must be issued within 21 days, then the payment schedule was due on 14 January 2022.
Carruthers contended that the Subcontract did not provide a period within which the payment schedule was required to be given, with the result the 15 business day period applied. That was the constructed accepted in first instance before the District Court.
What did the Court decide?
While the Court acknowledged the requirements under the Subcontract for a payment schedule and a payment certificate were not identical, the Court looked beyond the names of the documents and found that the requirements of the Subcontract for each payment certificate, also satisfied the requirements of the BIF Act for each payment schedule.
The Court constructed that the operation of the provisions of the Subcontract with the BIF Act to find:
- a payment certificate issued by Carruthers’ representative under the Subcontract would satisfy the requirements of a payment schedule under the BIF Act; and
- Carruthers’ representative was authorised to issue payment schedules.
As a result, the parties had agreed that the 15 business day period of issuing a payment schedule had been replaced with the agreed period of 21 days.
Therefore in accordance with the Subcontract, the period for issuing a payment schedule expired on 14 January 2022 and by not issuing its payment schedule within that time, Carruthers had failed to give a payment schedule as required under section 76 of the BIF Act and became liable to pay the amount claimed.
Why is it important?
It is not the case that respondents always have 15 business days to serve a payment schedule. Parties must carefully consider if that period has been shortened by their agreement. The use of the term ‘payment schedule’ will not be determinative if that period has been shortened. If a payment schedule is served out of time, then it is invalid.
Furthermore, as demonstrated in the above case, many Australian Standards form of contracts refer to ‘progress certificates’. It is important to consider the requirements of a payment schedule under the BIF Act in conjunction with the contractual requirements of a progress certificate. Depending on the interpretation of the contract as a whole, the timeframe for providing a payment certificate under a contract could have the effect of shortening the timeframe for issuing a payment schedule under the BIF Act.
What do you need to do?
Parties should be aware of the obligation to provide a payment schedule, both under the BIF Act and the terms of the relevant contract. This should include being aware of who is entitled to issue a payment schedule under the contract and the timeframes for providing a response to a payment claim.
How can HWL Ebsworth Lawyers help you?
We have considerable experience in relation to the BIF Act and our lawyers can provide tailored advice at all stages, including the review of contract provisions and the preparation of payment schedules.
This article was written by Colin Harris, Partner and Kelly Brook, Associate.
