Is that a second payment claim? According to the Victorian Supreme Court, there's no room for confusion

By Frazer Moss, Kath Hallpike

07 Jun 2018

Discipline and strict observance of the Victorian security of payment scheme's technical requirements are key.

A recent decision has highlighted the need for clarity and certainty in submitting payment claims and supplemental information to avoid enlivening the prohibition on submitting more than one payment claim in respect of the same reference date.

Valeo Construction Pty Ltd v Pentas Property Investments Pty Limited [2018] VSC 243 is demonstrative of the fact that if the rights under the security of payment scheme are to be enlivened, there is little room for equivocation; your contract needs to be administered in a manner that effects compliance with the statutory regime.

In this case, the plaintiff contractor (Valeo) submitted a payment claim on the prescribed reference date (28 February), promptly followed on 1 March by what was described as a revision of that payment claim (relevantly the later claim was said to have been "updated" to include an amount omitted from the 28 February version). It wasn't until 6 March that Valeo, via its contract administrator, sent an email to the defendant (Pentas) stating that the 28 February claim was withdrawn and that, instead, it relied on the 1 March claim. 

The superintendent issued a payment schedule on 22 March, being later than 10 business days after receipt of the 1 March payment claim. Valeo therefore applied for immediate judgment in respect of that claim. Pentas countered that the 1 March claim contravened section 14(8) of the Building and Construction Industry Security of Payment Act 2002 (Vic) because, in effect, it constituted a second payment claim in respect of the same reference date.

While Valeo conceded the effect of section 14(8), it advanced the proposition that the revision, withdrawal, replacement or subsequent rectification of a payment claim is not inconsistent with the statutory regime, and noted that the Act is silent on this issue. At the same time, having regard to the 6 March email, Valeo submitted that it did not serve more than one payment claim in respect of the same reference date because it had been made clear that Valeo would rely exclusively on the claim served on 1 March.

Ultimately, the uncertainty that attended not only the manner in which Valeo had administered its payment claim, but also its own submissions, lead to its application in the proceedings being dismissed. Justice Digby concluded that Valeo had failed to "clearly and unequivocally communicate" to Petras the status of the 1 March claim, that is, whether it was to be received as a revision or correction, or a replacement resulting in the withdrawal or abandonment of the 28 February claim.

On this basis, Justice Digby held that the 1 March claim was a compliant payment claim under the Act, that it had been served in respect of the same reference date as the 28 February claim and that, in consequence, s 14(8) of the Act had been contravened. The belated email communication of 6 March did not cure the defect of multiple payment claims in respect of the same reference date. In reaching this conclusion, Justice Digby noted that the Act "imposes expedited times", making strict and unambiguous compliance in the application of the regime desirable.

While Valeo cited Amasya Enterprises Pty Ltd v Asta Developments (Aust) Pty Ltd No 2 [2015] VSC 500 as authority for the proposition that payment claims can be revised or supplemented by further information, Justice Digby pointed to the fact the quantum of the payment claim in that case was not adjusted by the supplemental material in issue. That factor, in Justice Digby's view, distinguished Amasya from this case.

Justice Digby further said that it could be "problematic" if it was legitimate for a payment claim to be revised or amended after service "unless the earlier payment claim served is clearly abandoned or withdrawn", that "if it were otherwise" questions such as the extent of permissible changes would likely arise. Strict adherence to the statutory scheme, however, would avoid a "plethora" of such "[u]ndesirable issues and uncertainties".

What transpired in this case is not unusual; the administration of construction projects is more often messy than forensic. But in the context of the application of the Act, the take-out for contracting parties and their administrators is that discipline and strict observance of the scheme's technical requirements are key.

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