Rise of the Titans: the expanding scope of contractual preconditions to payment under BCIPA

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The Facts

Simcorp Development & Constructions Pty Ltd (Simcorp) was engaged by the Gold Coast Titans (Property) Pty Ltd (Titans) to construct a multi-story building next to Skilled Park Football Stadium. Issues arose and the Titans purported to terminate the contract by a letter dated 17 February 2010. On 10 March 2010, Simcorp delivered a document alleged to be a payment claim under the Act in the amount of $5.2 million which it claimed was outstanding under the contract.

Contractual process

The construction contract between the parties was novel, in that it provided that a reference date only arose once a contractual process for review of a progress claim by the superintendent was completed. The contractual procedure required Simcorp to first submit a ‘progress claim’ based on the work it assessed was due for payment on the 23rd of each month. The Superintendent was then required to issue a progress certificate “by the 30th day of the month after receiving such a progress claim”. If the Superintendent did not issue the progress certificate by that day, the progress claim was deemed to be the relevant progress certificate. It is only after receipt of such a certificate, or its deemed receipt, that the contract provided that a reference date arises and permits Simcorp to submit a payment claim under the Act.

Issues in Contention

At issue was whether Simcorp submitted a valid payment claim under the Act, despite non-compliance with the contractual pre-conditions for determination of a reference date. An associated question was whether the contractual preconditions for a reference date was void pursuant to section 99 of the Act as an attempt to alter the statutory right to a payment claim.

The Findings

Validity of contractual determination of reference date

The court examined Schedule 2 of the Act which defines a reference date as ‘a date stated in, or worked out under the contract, as the date on which a claim for a progress payment may be made for construction work…’

The court interpreted this definition in conjunction with section 12 of the Act which provides that a person is entitled to a progress payment from each reference date under a construction contract, section 13 which provides that the amount of a progress payment to which a person is entitled is the amount calculated under the contract and section 15 which relevantly provides that a progress claim becomes payable if the contract contains a provision about the matter ‘on the day on which the payment becomes payable under the provision’.

It was concluded by Douglas J that these sections contemplated that the ‘contract had a significant role to play in identifying when a payment claim under the act could be made’. His Honour further said:

Here it seems clear to me that the Act contemplates that the contract may contain provisions for working out a period for service of a payment claim intended to be used in fixing when such a claim may be made. This contract contains such provisions. Its terms are not inconsistent with the provisions of the Act and do not attract the effect of s 99.

Accordingly, the court held that the contractual process for determining a reference date was valid and not inconsistent or in contravention of the provisions of the Act.

Validity of payment claim

Given the validity of the contractual preconditions, the court held that a failure to adhere to the process precluded reliance on the special statutory rights available under the Act. The court also concluded that ‘the Act does not override the contractual provisions and stresses adherence to their terms’.

In refusing Simcorp’s argument that there existed a separate right under the Act to deliver a payment claim Douglas J said:

In this case under this legislation and this contract it seems to me that the issuing or deemed issuing of a progress certificate by the superintendent is a necessary precondition to the delivery of a payment claim under s 17 of the Act. If there were no provision in the contract fixing a date for delivery of a payment claim or deeming that a superintendent’s certificate had issued within a certain period after the delivery of a progress claim my conclusion would be different but that is not the case here.

Consequently, Simcorp did not serve a valid payment claim under the Act as it was served prior to a valid reference date.

Implications

The decision in Simcorp expands the scope of contractual preconditions that determine when a valid payment claim under the contract can be made.

This case will have important ramifications for both Principals and Contractors as the determination of a valid reference date under the contract may become an increasingly complicated clause in the contract, as opposed to the previously common ‘end of each month’ clause. Despite the expansion of contractual preconditions, care must be taken in ensuring that the contractual precondition is linked to the determination of a reference date.