Has the Queensland Court of Appeal just decided that a common way of submitting payment claims is, in fact, invalid and contrary to the requirements of legislation?
While at first glance the decision we analyse below might seem like it requires claimants to overhaul their payment claim habits, what it really calls for is simply a diligent, contextual, contract-specific compliance with well known requirements of the legislation.
Putting in a claim for construction work, and getting paid for it, is supposed to be uncomplicated. That was/is one of the key purposes of the security of payment regimes – legislation which seeks to systematise and fast-track the process of recovering outstanding payments for construction projects.
Security of payment is (for the most part) concerned with the recovery of the amount claimed in a “payment claim”.
Therefore, while it might appear at first blush to be a simple question, “have I made my payment claim correctly?” becomes a pivotal consideration.
For Queensland claimants, the recent case of MWB Everton Park Pty Ltd as trustee for MWB Everton Park Unit Trust v Devcon Building Co Pty Ltd [2024] QCA 94 muddies these waters further.
THE ACT
Section 68 of the Building Industry Fairness (Security of Payment) Act 2017 (BIF Act) sets out the requirements of a payment claim for Queensland claimants. It requires that payment claims be written documents that:
- identify the construction work or related goods and services to which the progress payment relates (Requirement 1);
- state the amount of the progress payment that the claimant claims is payable by the respondent (Requirement 2);
- request payment of the claimed amount (Requirement 3); and
- include the other information prescribed by regulation.
At time of publishing, there is no “other information prescribed by regulation”.
THE FACTS
The case concerned whether the claim given by Devcon to MWB was a “payment claim” as the BIF Act requires.
The Court concluded in short order that despite the claim being the 17th claim submitted in the same format, for the same project, it failed to meet not just one requirement of section 68 but all of them. In doing so, the Court of Appeal’s decision identifies several flaws in “payment claims” that, until this case, may have been considered good practice.
STUMBLE AT REQUIREMENT 1
A claim must identify what it is for.
Devcon’s payment claim would have looked familiar to many builders.
Indeed, it was the 17th payment claim for this project and would also have looked familiar to its recipient, MWB. Although the claim itself is not available, the decision describes the section relevant to identifying what the claim is for as looking something like this:
(note the trades, values and amounts listed above are all made up for this article).
As in the example above, Devcon had elected not to include any detail in the “Summary of Work Complete This Claim” column. Even without that information, Devcon alleged that the claim met the requirement to identify the work because it:
- included a %complete column identifying how much of the total claim was being claimed; and
- was consistent with the claims submitted to date.
The Court disagreed, stating:
- With respect to (1):
The contract was for the construction of 56 townhouses. In those circumstances, it was all but meaningless to say that 5% of concreting or 12% of plumbing had been completed.
- With respect to (2):
…whether or not the document claimed to be a payment claim meets the statutory definition must be a matter of objective construction; the Court cannot be concerned with a subjective understanding of the principal.
Failing with respect to Requirement 1 was fatal to the payment claim in isolation, however, the Court went on to demonstrate issues with Requirements 2 and 3 as well.
TRIP AT REQUIREMENT 2
A claim must state the amount it claims.
The argument regarding Requirement 2 concerned a series of values in the payment claim that did not add up to the total amount of the claim. At a high level, the values on pages 2 and 3 of the claim did not appear to be included in the total on page 1.
Despite arguing successfully in the District Court that the page 2 and 3 values were unimportant to the otherwise clear “total” on page 1, the Court of Appeal was unconvinced. In summarising, the Court concluded that there was not one amount which was claimed for payment and that this was a failure of the payment claim.
FALL AT REQUIREMENT 3
A claim must request payment of the claimed amount.
It is easy to see how this requirement (which requires a party to request payment) might be mistaken for Requirement 2 (which requires a party to state the amount of the claim). Despite their similarity, the two requirements have been found to be distinct pre-requisites which must independently be satisfied.
In considering this requirement, the court stated that “something which amounts to a request for payment needs either to be express in the document or necessarily, and clearly, implied in the document”.
The claim in dispute here stated “amount due this claim”. That statement was found not to be a request for payment by the court of appeal, disagreeing with the earlier findings of a single judge of the Supreme Court in the process (Iris Broadbeach Business Pty Ltd v Descon Group Australia Pty Ltd).
Something more was required: a statement that the claimed amount was “requested” or the use of the term “invoice” (which, by the BIF Act, is deemed to be a request for payment).
A CAUTIONARY TALE
Many may be surprised by many of the conclusions in this case. That said, the decision is, for now, “good law” which prudent claimants would do well to learn some lessons from. Lessons like:
- check that your payment claim template includes the words “requests payment of”;
- double check that the claim makes sense mathematically; and
- if you think there is any chance you will want to take your payment claim through a process in the BIF Act – have it reviewed for compliance by someone who isn’t involved in the project and preferably someone legally trained.
Not included in that list of lessons is the statement: “do not use percentages in a payment claim”. That is not what this case (or any other) stands for.
Indeed, Dalton JA expressly clarified that point in footnote 5 in which Her Honour notes that percentages may be appropriate in certain circumstances.
Finally, it is also important to remember that, despite the Court of Appeal rejecting this claim, the District Court, months earlier, upheld its validity. This serves to highlight how razor thin the difference between valid and invalid can be.
