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The Validity Of A Payment Claim Is Not Subjective

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This article deals with whether a payment claim under the Building and Construction Industry Security of Payment Act 1999 (NSW) (SOPA) is valid notwithstanding it is argued otherwise.

Australia Real Estate and Construction

The case of Taylor Construction Group Pty Ltd v Adcon Structural Group Pty Ltd [2023] NSWSC 723

This article deals with whether a payment claim under the Building and Construction Industry Security of Payment Act 1999 (NSW) (SOPA) is valid notwithstanding it is argued otherwise.

Background

Under section 13(1C) of the SOPA a claimant is entitled to make one payment claim after termination.

In Taylor Construction Group Pty Ltd v Adcon Structural Group Pty Ltd [2023] NSWSC 723, Taylor Construction Group Pty Ltd (Taylor) entered into two contracts with Adcon Structural Group Pty Ltd (Adcon). Following Adcon's failure to respond to default notices issued by Taylor, Taylor terminated both contracts.

Adcon proceeded to serve payment claims in respect of both projects, which Taylor asserted were invalid.

In view of Taylor's assertions of the validity of the initial payment claims, Adcon proceeded to submit a second payment claim for both projects without withdrawing the initial ones.

Issue

The issue was whether the second payment claims were valid under the SOPA noting that Adcon was only entitled to make one payment claim after termination.

Adcon submitted that:

it was entitled to accept Taylor's assertions that the initial payment claims were invalid; and
Taylor should not be permitted to "backtrack" from its assertions, at a later date, to then argue that the initial payment claims were valid under the SOPA.

Decision

The Court held that whether a payment claim is valid under SOPA is not subject to discretionary interpretation. In this instance, the Court found that the initial payment claims were valid under SOPA. Consequently, section 13(1C) of SOPA applied and the second payment claims were invalid.

Key takeaway

This case demonstrates that the validity of a payment claim under SOPA is not based on the interpretation of a party. After termination, a claimant is precluded from submitting a further payment claim even if a respondent asserts the first is invalid. To avoid such issues, a claimant should ensure that a payment claim is properly prepared to ensure its validity under the SOPA.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.