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Recent successes in adjudication of construction payment claims


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Our construction litigation team including Tony Mylne and Andrew Lambros has successfully resisted two
payment claims from a contractor seeking unjustifiable claims for
delay, payment for contract works and variations. The claimant was
directed to pay the full costs of adjudication. The following is a
note regarding the latest of these matters.

The Facts

The contractor sought $5 million as part of a claim for contract
works and delay costs. The delay claim was said to have been
supported by notices of delay which were claimed to have been
served upon the superintendent.

The contract works detailed in the payment claim were said to
have been completed in a general sense but only relied upon the
same description of that work said to have been completed in the
previous month, using a percentage complete to arrive at a figure
claimed.

Our client respondent contested that three of the four notices
of delay had been delivered or served on the superintendent
undermining any claim for delay. Our client also suggested that the
payment claim was invalid as it was not sufficiently detailed in
terms of s 68(1) Building Industry Fairness (Security of Payment)
Act “BIF” as the payment claim did not identify the
construction work to which the progress claim related.

The claimants, on being asked for further submissions did not
contest the facts surrounding the non-delivery of notices of
delay.

Not having been served with notices the principal respondent
argued he had no notice of the delay claims and was therefore even
more dependent upon the form of the payment claim to inform him of
the true nature of the claim.

It was clear that the payment schedule misconceived the true
components of the payment claim as was clear on receipt of the
adjudication application. The respondent was led into that error by
the lack of detail within the payment claim. The Payment schedule
itself only dealt with one of the extension of time claims which
was the only extension of time claim that the respondent had notice
(understandably).

The Decision

The parties had made long submissions about the various lines of
authority on the sufficiency of payment claims and in the end the
adjudicator was convinced that the comprehensibility of the payment
claim was key, taking into account the surrounding facts that a
respondent might know or be expected to know concerning the claims.
Importantly, the adjudicator agreed with much of the matters
outlined in KDV Sport Pty Ltd v Muggeridge Constructions Pty Ltd a
decision of the Queensland Supreme Court where that court took
account of the method of claiming a percentage of works completed.
As the Adjudicator set out :-

“105. The Payment claim must at least be reasonably
comprehensible and permit the respondent to respond within the
timeframe permitted under the Act in that it must reasonably
purport to identify the works done which is the subject of the
payment claim.

  1. I accept the respondent’s submissions in that the brief
    description of contract works in respect of what was carried out in
    the month the subject of the progress claim, where such description
    was given, did not provide sufficient detail as to what work was
    undertaken rather it was a broad range description and not broken
    down into any particulars at all
    .

  2. The three redlines for the EOT’s on a one-page
    construction program consisting of 84 separate line item claims
    that formed part of the progress claim and the consequent delay
    costs, being a one-page schedule of daily rates which the claimant
    applied to the whole claimed time for EOT’s did not provide
    sufficiently detailed particulars of either the EOT’s or the
    amount claimed for the consequent delay costs flowing from those
    EOT’s.”

Critically, while various iterations of the payment claims had
been dealt with by the superintendent (with some difficulty), the
adjudicator was prepared to accept the argument that the payment
claim was deficient and invalid on the basis that it was, to some
extent, not comprehensible.

With respect to the extension of time claims, on the face of the
material, it was clear that the respondent did misapprehend the
basis of the payment claim and with good reason, since it had not
previously received the extension of time notices relied upon. The
first real detail of the claim was only received on receipt of the
adjudication application. The program that accompanied the claim
was too difficult to decipher and without notices of extensions of
time were similarly not comprehensible.

The adjudicator further accepted that invalidity of the claim in
these respects meant the balance of any claims were also affected
with the adjudicator finding he had no jurisdiction in the
circumstances. While such matters are remedied by s 101(4) of BIF
should there be a review by a court of the adjudication decision,
no such remedy (partial invalidity) is available before an
adjudicator.

Takeaways

  1. Faced with a quick turnaround between payment claim and payment
    schedule a respondent should not ignore jurisdictional arguments
    concerning validity of the payment claim itself.

  2. These issues should still be reviewed on receipt of an
    adjudication application as jurisdictional issues can still be
    raised despite them not being raised in any payment schedule.

  3. While usually it is not difficult to comply with the
    requirements of the Act a description of the works completed since
    the last payment claim needs to be critically reviewed especially
    when reference dates may be at a premium towards the end of a
    contract.

  4. Should contractual notices be relied upon, proof of delivery
    can very often be critical. While delivery is conservative and is
    no doubt time-consuming and inconvenient, it will bring about a
    certain result. Otherwise the provisions of the contract should be
    reviewed to take advantage of any mode of acceptable delivery and
    deemed delivery of notices.

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.

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