March 2012

By David Rodighiero, Partner
and Marnie Carroll, Solicitor

Protect yourself against adverse interpretation: recommended
amendments to standard form construction contracts
Introduction Payments Act 2004 (Qld) (‘BCIP Act’) on 26 May
2008 and then a further payment claim on 31 July
With 2012 in full swing, it is an appropriate time to 2008 (‘July Payment Claim’). While Jedfire
consider two recent issues which have led us to disputed the July Payment Claim on the basis
recommend amendments to standard form that more than one payment claim had been
contracts. These issues are: served for the same reference date, it did not
serve a Payment Schedule within the time
the identification of reference dates (when stipulated under the BCIP Act.
payment claims may be made under security
of payment legislation) in a contract; and In response, Tailored Projects applied to the
Supreme Court for summary judgment with
a superintendent’s discretion to extend time respect to the July Payment Claim on the basis
for the benefit of a contractor. that a Payment Schedule had not been served
within the timeframe provided under section 18(4)
Time for Issuing Payment Claims the BCIP Act. In support of its application,
Tailored Projects submitted that clause 14 of the
After the unanimous decision of the Qld Court of QMBA Contract established a contractual regime
Appeal in Daysea Pty Ltd v Watpac Aust Pty Ltd, similar in effect to the statutory regime.
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it was commonly accepted that following the
issue of a progress claim upon practical Before Justice Douglas, Jedfire argued that more
completion under contracts in a form comparable than one payment claim had been made in
to AS 2124-1992, contractors were not entitled to respect of the same reference date (being the
issue further progress claims until final date of practical completion). Jedfire argued that
completion. this was contrary to section 17(4) of the BCIP Act,
which states:
However, a more recent decision of the Supreme
Court of Queensland demonstrates the “A payment claim may be served only within
uncertainty of this principle. the later of:
This issue was considered by His Honour Justice (a) The period worked out under the
Douglas in the matter of Tailored Projects Pty Ltd construction contract; or
1
v Jedfire Pty Ltd . The claim in that matter was (b) The period of 12 months after the
based on a Queensland Master Builders construction work to which the claim
Association LSC2 August 2006 form contract relates was last carried out or the related
(‘QMBA Contract’). goods and services to which the claim
Under the QMBA Contract, monthly progress relates were last supplied.'”
claims were to be submitted by Tailored Projects A 'reference date' is (in part) defined in Schedule
on the last day of the month. Clause 14(a) of the 2 of the BCIP Act as:
QMBA Contract provided:
“(a) A date stated in, or worked out under, the
“14. PAYMENT contract as the date on which a claim for a
(a) The Contractor shall submit payment progress payment may be made for
claims to the Proprietor by the following construction work carried out or undertaken to
reference dates: be carried out, or related goods and services
supplied or undertaken to be supplied, under
(i) the times stated in the Schedule (or, the contract…”
if any time stated in the Schedule is
not a Business Day, the next Accordingly, Jedfire submitted that the July
Business Day) or the last Business Payment Claim was invalid and that, on the basis
Day of each month, whichever is the of clause 14(a), the only relevant reference dates
earlier; and were the date of completion and the expiry date
of the defects liability period (in accordance with
(ii) on the Works reaching Practical clause 25 of the QMBA Contract). In reply,
Completion.” Tailored Projects argued that section 17(4)
Practical Completion was achieved on 12 May
2008. Tailored Projects submitted a payment 2
See Daysea Pty Ltd v Watpac Aust Pty Ltd [2001]
claim under the Building and Construction QCA 49 at [17]-[19] (which is discussed below).

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[2009] QSC 32

© Carter Newell 2012 www.carternewell.com

On that argument that multiple payment claims had been basis.1 of decision of Justice Douglas in the Jedfire case is the contract provided the right to issue monthly claims followed. but within the scope of the Building and date for practical completion under the contract. The contract in that case was based on payment claim was made in relation to the reference AS2124-1992.7. Isis argued that the contractual ability to make progress for instance.of the BCIP Act permitted payment claims to be substance in the submissions that Progress Claim no 18 submitted within a period of 12 months after the was invalid”. stating that the “claim in the New South Wales Supreme Court decision of Isis made in reliance on the Act fails as more than one 4 v Clarence . Clarence function of the clauses is similar.” practical completion. practical completion was achieved on 30 November 1999. if the contended that the proper construction of clause 42. submitted up to and upon the issue of a Certificate of Practical Completion. in light of the observations of Williams JA of circumstances in that case (namely. it is arguable that equivalent payment only continues until the issue of a certificate of practical provisions only provide for payment claims to be completion. It is apparent appears to be opposed to such argument and the from the leading decision of Williams JA in Daysea. the performance of the Queensland Court of Appeal in Daysea. due to the Contractor and such information as the In that decision. except for the final The reasoning in Daysea at paragraphs [26] to [28] payment claim submitted upon final completion. At the times for payment claims stated in the Daysea Pty Ltd v Watpac Australia Pty Ltd Annexure and upon issue of Practical Completion and within the time prescribed by Clause 42. the claims continued after practical completion. the and 22 February 2000.com . appeared to be in light of the specific surrounding factual However. the defects liability would be valid.7 Final payment claim In Daysea. At paragraph [17].carternewell. out by the Contractor in the performance of the The case concerned an application for summary Contract to that time together with all amounts then judgment for payment of a progress claim where a due to the Contractor arising out of or in connection Payment Certificate was not issued in accordance with with the Contract or for any alleged breach thereof. which extra works after practical completion). Contract differs to the equivalent payment provisions in. Claims for considered the validity of progress claims submitted payment shall include the value of the work carried after practical completion in relation to AS4300-1995. or where there is more than one. it requires consideration in light of the for payment supported by evidence of the amount 3 decision in Daysea Pty Ltd v Watpac Australia Pty Ltd . the contractor shall lodge with the payment included claims in relation to the performance superintendent a final payment claim and endorse it of variations directed by the superintendent after ‘final payment claim’. Macready M at [20] found that on the face of the The superintendent failed to issue a Payment Certificate above clauses. who delivered the leading judgment.1 of the contract. defects liability period.1 Payment Claims. who decision of Master Macready in Isis (which did not stated at [29] “In the circumstances there is no consider Daysea but in a reasoned decision came to the 3 4 [2001] QCA 49 [2004] NSWSC 73 © Carter Newell 2012 www. However. the Queensland Court of Appeal superintendent may reasonably require. Australian Standard form contracts. those claims for last to expire. AS2545-1993 stated at paragraph [27] that “given the fact that work and AS4300-1995 standard form contracts only provide had to be carried out at least on variations thereafter. followed. agreed that the court understood the completion of the relevant construction work. Calculations Final Payment Claim submitted at the expiry of the and Time for payment. it for payment claims to be submitted up to and upon was certainly not unreasonable to expect there would be practical completion.” Construction Industry Security of Payments Act 1999 Although the wording within clause 14 of the QMBA (NSW). clause 42. Justice Douglas determined that the Isis v Clarence relevant reference date should be determined in The issue was further considered by Master Macready accordance with the contract. Accordingly. Watpac issued progress claims Within 20 days after the expiration of the defects subsequent to practical completion on 3 December 1999 liability period. the While the decision of Justice Douglas in Jedfire is clear Contractor shall deliver to the superintendent claims on its face. Daysea argued that the progress claim was invalid because it was submitted after the date of practical Implication of the above decisions completion. issued after the issue a certificate of practical completion. it is arguable that AS2124-1992. If the decision of Justice Douglas in the Jedfire is Justice Williams. 42. Certificates. dates. there is nothing in them to give any for the claim made on 22 February 2000 within time and indication that multiple payment claims may not be Watpac sought full payment on that basis. Tailored Projects submitted that the two payment submitted after the date of practical completion and claims were made with respect to different reference dismissed it. except for the “42. No further payment claims within one further Progress Claim lodged”. A further progress claim issued The relevant provisions of the contract provided: after Practical Completion will be invalid.

a superintendent may be required to grant an extension of time where it is fair and reasonable to do so. costs for which extensions of time have not been The Court further determined that the power to extend granted and for which there was no entitlement to an time survived the termination of the contact. Peninsula Balmain involved an unmodified clause 35. Suggested amendments The judgment of Justice McMurdo in the matter of Hervey Bay (JV) Pty Ltd v Civil Mining and Construction As the above decisions all turned on the interpretation of 8 Pty Ltd provides that it is possible to draft extension of the contractual entitlements of a contractor to deliver a time provisions to remove the obligation placed on payment claim.same conclusion).5 A. the adjudicator. completion. Accordingly. the include delay costs if the Contractor was entitled to Court found that the superintendent’s power is not lost those extensions. This discretionary power specifically removed the clause 23 obligations from exists notwithstanding whether a contractor has a acting on the discretion to extend time unilaterally. even though a contractor has not complied with the notice and time requirements for extension of time 5 [2002] NSWCA 211 6 [2005] VSC 237 7 8 [2006] VSC 491 [2008] QSC 58 © Carter Newell 2012 www. This principle has entitlement only arises when the contractual been subsequently followed in Kane Construction Pty requirements have been complied with. So in the adjudicator’s time is capable of being exercised for the benefit of both calculation. unqualified power to extend time. the burden still remains Daysea and Isis would likely be followed. as time for completion where they are required to act he did. which the adjudicator confirmed that the superintendent under an Australian accepted. the obligation to exercise its discretion for not been made until after termination” [at 80]. contractual entitlement or has not made a claim. Justice McMurdo of the Supreme Court of of AS 2124-1992.com . ‘standing in the Over the past 10 years. However.5 or cl 35. who is given an favour) the position in Peninsula Balmain may prevail. Should a contract not be expressly amended to remove the The decision in Peninsula Balmain gave rise to the discretion of the Superintendant (in the Contractor’s principle that a superintendent.5.carternewell.5 of AS2124-1992 by extending the from the superintendent if the adjudicator concluded. was that the adjudicator was entitled to allow Standard form contract must exercise its discretion delay costs absent the grant of an extension of time under clause 35. on the contractor to prove its entitlement.e. The Hervey Bay contract had grant extensions of time. opining in any sense to an extension of time. The Court of Appeal agreed with the primary Absent such an obligation there was no entitlement judge’s acceptance of the Referee’s conclusion. Superintendent had refused or postponed consideration there must be a date of practical completion after of the extensions of time. The Court extension under cl 35.5 However. The case concerned an adjudicator’s determination of delay damages under an amended AS 2124-1992 Extension of Time Provisions contract. of time. A court.5A by which the Superintendent could be said to superintendent. Accordingly.” on termination. In that case. it would appear that the decisions of under the contract. 6 Ltd v Sopov and 620 Collins Street v Abigroup Pty 7 Limited (No 2) . that the Contractor was entitled to an extension honestly or fairly. In that case. the benefit of the Contractor is absolute.” reasoned that as the liquidated damages mechanism His Honour (in obiter) commented that “whether the expressly operates after the termination of a contract. “even if the claim for exercise of the power to extend notwithstanding non-compliance had Accordingly. “In my view there is no tenable construction of cl appointed Referee nevertheless found that a 35. acting honestly and fairly. GC 36 of AS 2124-1992) to ensure the with the requirements of a contract. While the superintendent did not grant extensions of time. if there had not that the superintendent’s power to grant an extension of been compliance with cl 35. the adjudicator was entitled to termination for that clause to operate. should have be under any obligation and in particular an exercised his discretion and extended time for obligation to extend time if it would be fair to do so. should (if required to act reasonably or in good faith) do so for the Principals may also consider amending any contractual contractor’s benefit even where the contractor has not provisions which may entitle a contractor to delay made a claim or has not otherwise strictly complied damages (i. it has generally been accepted shoes’ of the superintendent determined that the that Australian Standard form contracts provide the contractor was entitled to those extensions and awarded superintendent with a unilateral discretionary power to delay damages. a line of authorities have The Contractor’s argument. he was wrong to have included delay the contractor and principal. the contractor had not Queensland however said: made any claim for an extension of time. the superintendent was relieved from an Following on from the decision of the New South Wales obligation to exercise the discretionary power. it is recommended that contracts be superintendents to exercises their discretionary power. Court of Appeal in Peninsula Balmain v Abigroup 5 Contractors Pty Ltd . amended to expressly provide whether progress claims can be submitted during the defects liability period.

you should amend any Australian legislation (‘BCIP Act’) as the termination prevents the Standard form contract to ensure the contract expressly reference dates from occurring. . Marnie Carroll Solicitor Walton was further distinguished from its NSW counterpart. Justice Lyons noted that the subcontract contained a default clause common in Australian Standard form Authors contracts which provides that the parties rights will be the same as they would be at common law had the defaulting party repudiated the subcontract. independently of a reference date. Territory and Western Australian legislation. However.com demonstrates that contractual terms typically do not operate after termination.12while the Australian Capital BCISPA defines reference dates ’in relation to a Territory legislation uses the expression ’for a construction construction contract 10Until recently.9 where the Court of Appeal held that the NSW security of Queensland is the only jurisdiction which uses the expression payments legislation (‘BCISPA’) does not provide that ’under a construction contract’. provides for the issuing of payment claims following termination. Accrued rights survive David Rodighiero termination of a contract for repudiatory conduct. If you want to preserve deprives the claimant its entitlement to make a payment your right to issue payment claims following any termination claim under the Queensland security of payments of a construction contract. such as Partner those arising under an arbitration or liquidated damages clause. or that a reference date occurs after termination. The definition of reference reference dates cease on termination of a contract or date in Victoria. in Queensland alone a payment claim issued after (Qld) Pty Ltd v Corrosion Control Technology Pty Ltd & Ors termination of an Australian Standard form contract may be 11 held that the termination of a construction contract invalid for want of a reference date. Justice Lyons found that it was [at 58] Australian jurisdictions was that contractors were not prevented from issuing payment claims under security of “inconsistent with the statutory language to conclude that payments legislation following termination of the contract a statutory right to a final payment accrues regulating the works. Building and Construction 10 Building and Construction Industry Security of Payment Act 1999 Industry Security of Payment Act2009 (TAS) section 4. 13 (NSW) section 8(2) Building and Construction Industry Security Act 2009 (ACT) 11 [2011] QSC 67 section 10(30.10 of the contract was that reference dates ceased to accrue with the exercise of a right to terminate under clause 44 of the contract. For the past eight years. 13 A reference date is not defined in Northern reference dates was generally accepted in Queensland. at least where that would This position was based on the New South Wales case of be contrary to the effect of the contract”.com contract’: “the use of the expression “under a construction contract” found in the Queensland definition makes it 12 Building and Construction Industry Security of Payment Act 2002 (Victoria) section 9(2). this interpretation of contract’. Building and Construction Security of 9 [2004] NSWCA394 Payment Act 2009 (SA) section 4. There is no longer a upon termination contract “under” which there might be a reference date”. Accordingly. Justice Lyons found that while the NSW Act T (07) 3000 8484 defines a reference date ‘in relation to a construction E mcarroll@carternewell. Brodyn Pty Ltd t/as Time Cost and Quality v Davenport. somewhat more difficult to conclude that a reference A Contractor’s ability to issue payment claims date occurs after termination. South Australia and Tasmania is similar to cessation of work. Brodyn on the basis that the wording in the relevant Acts differed. unless the contract provides otherwise. The Supreme Court of Queensland in Walton Construction Therefore. Justice Lyons said that the existence of T (07) 3000 8376 contractual terms which specifically survive termination E djr@carternewell. the general consensus across all Ultimately. Justice Lyons found that the effect of clause 44. the New South Wales legislation.