When it comes to recovering money due under the Building and Construction Industry Security of Payment Act (SOPAct), it is not uncommon for Head Contractors to have issued multiple versions of a payment claim within the one reference date following a request by a QS or Principal to revise it following negotiations.
Can such payment claim survive attack under the Security of Payment Act?
This gives rise to a common problem when looking to recover payment under the Act in that section 14(8) of the Act does not allow a claimant to serve more than one payment claim in respect of each reference date under the contract.
The argument often run by a respondent is that where multiple payment claims have been issued with respect to one reference date only the first payment claim can be valid and each subsequent payment claim must therefore be invalid.
This very situation arose in Johns Lyng Commercial Builders Pty Ltd v Carrington International Pty Ltd , a case where Kliger Partners recently acted for the Head Contractor in a successful application for summary judgment under the SOPAct in circumstances where a revised payment claim was issued following a recommendation by the Principal’s bank’s QS that amount claimed be revised down. Taking into account the opinion of the QS, the Head Contractor revised down its payment claim and issued a revised payment claim to the Principal within the same reference date period.
As was anticipated, the Principal sought to argue that the revised payment claim was the second payment claim issued pursuant to the same reference date and was therefore void under section 14(8) of the Act. Citing a New South Wales Supreme Court case of NC Refractories Pty Ltd v Consultant Brick Laying Pty Ltd , this argument was rejected by the Court, stating that “[t]he second payment claim was a revised payment claim and, accordingly, should not be regarded as a nullity”.
The Court also noted that the defence that the Principal sought to run could have been, but was not raised in a payment schedule, and therefore it was not open to it now raise such a defence in the application for summary judgment.
The decision in Johns Lyng Commercial Builders Pty Ltd v Carrington International Pty Ltd  further demonstrates the Court’s reluctance to rely on highly technical defences to defeat the objects of the SOP Act, particularly in circumstances where the parties have agreed to a process whereby payment claims may be revised from an initial draft claim issued.
Despite this, it has always been preferable for clients to administer payment claims in a way that avoids giving defendants technical defences to attempt to avoid payment that would otherwise be due under the SOP Act.
KCL Law specialises in all aspects of construction law, including prosecuting and defending claims under security of payment legislation around Australia. To discuss how your company may be assisted by utilising security of payment legislation, please contact Darren Cain, Principal Lawyer and Head of Construction and Infrastructure, on (03) 8600 8835 for a confidential discussion.
Note: This update is a guide only and is not intended to constitute legal advice.