Summary
Denbrook Constructions Pty Ltd v CBO Developments Pty Ltd [2022] QDC 184 reiterates the importance of claimants ensuring payment claims satisfy the requirements of the Act.
In this case, the Queensland District Court dismissed an application to recover an unpaid amount finding that a purported payment claim was invalid because it failed to sufficiently identify the work to which it related.
What happened?
CBO Developments Pty Ltd (CBO) engaged Denbrook Constructions Pty Ltd (Denbrook) as the construction manager for the construction of three single-floor apartments (Contract).
On 19 February 2021, Denbrook delivered payment claim 26 (PC26). As implied by its title, PC26 was Denbrook’s 26th payment claim under the Contract and adopted a different format from the previous claims.
While Denbrook did deliver a payment schedule in response to PC26, it was delivered outside of the time provided by the Building Industry Fairness (Security of Payment Act) 2017 (Qld) (BIF Act).
CBO sought judgment against Denbrook for the amount claimed in PC26 pursuant to section 100 of the BIF Act.
The only defence advanced by CBO was that PC26 was not a valid payment claim because it failed to identify the construction work or related goods and services to which it related, as payment claims are required to do by 68(1)(a) of the BIF Act.
Denbrook argued that CBO’s payment schedule was evidence that a reasonable recipient of the PC26 in the position of CBO would have been able to identify the work to which the claim related.
What did the Court find?
The District Court of Queensland dismissed CBO’s claim and found that PC26 was invalid because a reasonable recipient could not have identified the work to which it related.
In considering the requirements under section 68(1)(a) of the BIF Act, and applying the principles from DV Sport Pty Ltd v Muggeridge Constructions Pty Ltd [2019] QSC 178, Judge Porter found:
“The test to determine whether the payment claim sufficiently identifies the construction work the subject of the claim is an objective one. The assessment is not made only by reference to the terms of the claim itself.”
“The focus must remain on the objective circumstances, not on the subjective intentions of the parties, although it is not wrong to examine the issue from the vantage point of the parties to the particular contract.”; and
“The purpose and necessary requirement of the payment claim is merely to identify the work to which the claim relates, sufficiently to allow the other side to make its own assessment as to what to pay. It does not have to go any further than that.”
His Honour did not accept that a payment schedule can be treated as evidence of how a reasonable recipient would have construed that claim and noted that the recipient of a payment claim is compelled by the BIF Act to quickly give the claim meaning and articulate that meaning in a payment schedule.
His Honour went on to say that is possible that the construction of a payment claim will not be based on anything more than a guess by the recipient as to what the claim might mean, based “on inference, speculation and hope rather than on any objectively clear meaning in the text in the payment claim.”
Judge Porter accepted that a reasonable recipient in the position of CBO would have assumed the ‘Cost of Works’ claim in PC26 was a reference to the total contract sum identified under the previous payment claim 25. However, his honour went on to reject that this assumption meant payment claim 25 was incorporated into PC26. Documents relied upon to sustain a payment claim must be included in the claim.
Why is it important?
This case demonstrates that where a payment claim fails to include sufficient identification of the work being claimed, the payment claim will be invalid and in the event of a challenge to the payment claim’s validity, claimants could be prevented from, or at least delayed in, obtaining progress payments for the works subject of the payment claim.
It also highlights that more care must be taken in preparing payment claims for contractual arrangements that require detail to ascertain the amount payable, such as with construction management contracts.
What do you need to do?
To obtain the protections afforded under the security of payment legislation, contractors must ensure that all payment claims meet the requirements of the BIF Act by including sufficient detail to identify the works to which it relates. Payment claims should avoid ambiguous wording or references to external documents or information.
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 or preparation of payment claims.
This article was written by Colin Harris, Partner and Kelly Brook, Associate.
