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Reference dates required for valid payment claims

Construction Law News | March 2017

Southern Han Breakfast Point Pty Ltd (in liquidation) –v- Lewence Construction Pty Ltd [2016] HCA 52

In this case the High Court has held that a ‘reference date’ under a construction contract is a required aspect of making a valid payment claim under the Building and Construction Industry Security of Payment Act 1999 (NSW) (“SOPA”).

Southern Han Breakfast Point Pty Ltd (in liquidation) (“Southern”) and Lewence Construction Pty Ltd (“Lewence”) were parties to a relevant construction contract. In October 2014 Southern issued Lewence with a notice purporting to exercise a right under the contract to take the remaining works away from Southern for breach. Lewence treated this notice as a repudiation of the contract and purported to accept this repudiation and terminated the contract. Lewence then served Southern with a claim for payment.

In these proceedings, the High Court had to determine whether it was necessary for a ‘reference date’ to have arisen under the contract in order for Lewence’s payment claim to be valid. The court held that a claim could only be made by a person entitled to a progress payment as defined under section 8 of SOPA. Under SOPA, a person was entitled to a progress payment only on and from each reference date as specified in the relevant contract. A ‘reference date’ was therefore necessary for the payment claim to be valid. Lewence’s payment claim did not contain any ‘reference date’, and so the High Court held that this claim for payment was invalid.

The High Court’s decision in these proceedings demonstrates how important it is to be aware of the content and consequences of each clause in a construction contract, including what must take place to ensure that a payment claim is valid or the termination of the contract is done correctly. This decision also confirms that an adjudication determination in relation to a payment claim can be declared as void where a court determines that a ‘reference date’ was essential for the payment claim to be valid.

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