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This case involved an application to recover a statutory debt for an unpaid payment claim, for which no payment schedule had been provided in response. The respondent resisted the application on a number of grounds, and was ultimately successful in doing so on the basis that the payment claim was invalid. The payment claim was invalid because it sought to recover amounts relating to two separate contracts, contrary to the Building Industry (Security of Payment Act) 2017.
5 March 2021
The respondent engaged the applicant to design and construct certain works at Biggera Waters. . The applicant issued a number of payment claims for those works. Initially those claims were paid in full. –. However, after some defects in the construction became evident, the respondent told the applicant that it would not be paying any further claims until those defects were resolved. –.
By this application the applicant sought to enforce unpaid payment claim #6 (which consolidated prior unpaid claims) as a debt, pursuant to ss 78 and 100 of the Building Industry (Security of Payment) Act 2017 (“the Act”).–, . The respondent resisted the application on the basis of defences that: (1) the applicant had engaged in misleading and deceptive conduct; (2) the applicant did not give a valid warning notice; and (3) that payment claim #6 was void because it concerned two separate contracts. .
Wilson J concluded that the respondent had established defence (3) (but not (1) or (2)). Her Honour’s reasoning in relation to that defence is the focus of this summary.
Why the payment claim was invalid
By April 2019 the respondent had completed the principal work under its subcontract with the applicant. . However, it still needed to complete certain other works under its head contract with John Holland. . For that purpose, it enquired about, and ultimately agreed to certain terms concerning, the hire of a crane from the applicant. . Payment claim #6 included a claim for monies owed for this crane hire. .
The respondent submitted that payment claim #6 was invalid because it included a claim for works under two separate contracts: (1) the subcontract; and (2) the crane hire agreement. . In contrast, the applicant contended that the crane hire should be seen as a variation to the subcontract and not a separate contract; further, in any event, it contended that having two contracts did not result in invalidity of the claim, and that the crane contract debt could be severed from payment claim #6. , , .
Wilson J accepted the respondent’s argument that payment claim #6 was invalid. In reaching that conclusion, her Honour first formed the view that the crane hire was pursuant to a separate contract, and not a variation to the subcontract. . That was because the crane hire was for a purpose wholly distinct from the works to be performed under the subcontract. , . Next, her Honour noted that in Matrix Projects (Qld) Pty Ltd v Luscombe  QSC 4, Douglas J had accepted that a payment claim “must relate to only one construction contract”. . While his Honour’s reasons considered provisions in predecessor legislation, “[b]roadly equivalent provisions” in the current Act did “not alter the underlying reasons”. .
As to whether the failure of the payment claim to be in relation to only one contract led to invalidity, her Honour noted that the correct test was summarised by Bond J in Acciona Agua Australia Pty Ltd v Monadelphous Engineering Pty Ltd  QSC 133 as being “whether the legislature intended that the valid exercise of power was conditioned in a particular way, such that failure to comply with the condition would invalidate the purported exercise of power”. . Her Honour considered that it was “the Legislature’s intention that a payment claim must only relate to one contract” and that if it concerned more than one, “that fact is fatal to its validity under the Act”, whether or not that error was patent on the face of the payment claim. . Her Honour distinguished cases that suggested otherwise on the basis that they related to “one contract or variations within the one contract” and did “not consider payment claims that relate to two contracts”. .
It was not possible to sever the crane hire so that payment claim #6 would otherwise be valid, because “[s]everance for partial invalidity does not apply where … the whole payment claim is invalid by reason of dealing with two distinct contracts” (as was the case here). .
In the result, because payment claim #6 was invalid under the Act, the application seeking to recover amounts due under it as a debt was dismissed. .