Is a payment claim in Western Australia statutory or contractual (and why it matters)

The Building and Construction Industry (Security of Payment) Act 2021 (WA) (BCI Act) supplanted the existing security of payment regime in the Construction Contracts Act 2004 (WA) (CCA). Unlike the CCA which provided contractors with the right to adjudication of payment claims by way of statutory implied terms, the BCI entitles contractors to a variety of statutory rights that are intended to coexist with the rights arising from the construction contract.

Given that many of Australia's standard form contracts also provide a parallel framework for contractors to make payment claims, this gives rise to a predicament for contractors. They can either issue a payment claim that is either contractual or statutory in nature, or make a payment claim that purports to be made under both the BCI Act and the relevant contract simultaneously.

These possibilities give rise to the following fundamental questions:

• How should a payment claim be characterised under the BCI Act when it purports to be both a statutory and contractual claim?
• What are the implications of having a payment claim characterised as either statutory or contractual (or both)?

Although Western Australian courts are yet to consider how payment claims ought to be characterised, the relevant principles have been considered by the NSW and Queensland Courts of Appeal. Notwithstanding that these decisions concern statutory frameworks that differ slightly from the BCI Act, they provide useful guidance on what Western Australian courts are likely to consider when characterising a payment claim.

"Important elements" under the contract: the NSW position on payment claims

In Thiess Pty Ltd v Lane Cove Tunnel Nominee Company Pty Ltd [2009] NSWCA 53, the NSW Court of Appeal was required to determine whether a payment schedule issued in response to a payment claim was provided within the time permitted by section 14(4)(b) of the Building and Construction Industry Security of Payment Act 1999 (NSW).

This question arose in the context of the respondent issuing a payment schedule outside of the four-day deadline required by the construction contract, but within 10 days as prescribed by section 14(4)(b)(ii) of the NSW Act. In this case, the relevant construction contract provided an alternative definition of "Business Day" which came from the NSW Act: "any day on which banks are generally open for business in Sydney (other than Saturdays, Sundays and public holidays)".

The Court of Appeal rejected the appellant's contentions that section 14(4) was a "default provision" that was intended to "fill in the contractual gaps", and held that it is not relevant whether there was a contractual intention, by way of necessary implication, to supplant the statutory period of ten business days. It further rejected the appellant's submission that the deadline for contractual payment schedules under the contract should also apply to statutory payment schedules as the contractual provision "is analogous to the matter under the Act".

Instead, the Court held that, as a matter of construction, the first task was to determine:

"what time, if any, is required by the construction contract for provision of a statutory payment schedule, and then to see whether that time expires earlier than ten business days (as defined in the Act) after the payment claim is served."

The Court held that the four-day deadline provided under the contract applied to a payment schedule issued in respect to a contractual payment claim, not a payment schedule provided under the NSW Act. Central to its reasoning was that the deadline under the contract required the filing of an "Independent Verifier's Certificate", which was an "important element" of the contractual progress payment claim as it provided "a minimum for the amount to be stated in the payment schedule". Further, since the contractor's payment claim was not accompanied by the Independent Verifier's Certificate, it could not be characterised as a contractual payment claim.

The Court ultimately found that because "[a] complying payment claim is fundamental to determining the … obligation to pay it", the respondent was not contractually obliged to issue a payment schedule within the four-day period prescribed by the contract.

Avoiding inconsistency: Allencon Pty Ltd v Palmgrove Holdings Pty Ltd t/as Carruthers Contracting

Allencon Pty Ltd v Palmgrove Holdings Pty Ltd t/as Carruthers Contracting [2023] QCA 006 concerned a payment claim made by a subcontractor that was simultaneously issued under the relevant clause of the subcontract and section 68 of the Building Industry Fairness (Security of Payment) Act 2017 (Qld). Like the BCI Act and the NSW Act, section 76(1) of the Qld Act required that a payment schedule be given in response to a payment claim at the earlier of:

• the period as prescribed by the construction contract (if any); or
• a period of 15 business days after the delivery of the payment claim.

The subcontract in Allencon required that either a payment schedule or a payment certificate (which had identical requirements to a payment schedule) must be provided within 21 calendar days after receipt of the payment claim. Similar to the facts in Thiess, the respondent failed to issue a payment certificate outside the 21 calendar days required by the subcontract, but within the 15 business days provided by section 76(1)(b) of the Qld Act. For the purposes of identifying which deadline applied to the payment certificate pursuant to section 76(1) of the Qld Act, the Court of Appeal was tasked with determining whether the subcontract did in fact prescribe a period in which a payment schedule must be delivered in response to a payment claim.

Relevant to this determination, the respondent accepted that the "simple" elements of a payment claim under the subcontract could also satisfy the requirements of a statutory payment claim outlined in section 68 of the Qld Act, and that this is likely to be the case with any payment claim made under an Australian Standard form contract. An important difference between the subcontract and the Qld Act, however, was that a payment certificate issued by the respondent's representative may have a "conditional or suspended" effect in the event the respondent exercised its right to withdraw the Representative's authority to issue a payment certificate on its behalf.

By relying on section 200 of the Qld Act, the Court of Appeal favoured a construction that would avoid such an inconsistency, in ultimately finding that, provided the representative's authority was not revoked within 21 calendar days, a payment certificate given in response to a payment claim under the Qld Act would also constitute a statutory payment schedule. Consequently, the Court held that the applicable deadline was the 21 calendar days as provided by the subcontract, and ordered that the respondent pay the appellant the outstanding amount included in the payment claim.

In reaching this finding, the Court of Appeal distinguished Thiess on the basis that the subcontract contained "materially different" terms from those in that case. In particular, the Court referenced that the contract in Thiess required that a payment claim must be accompanied by a certificate from an "Independent Verifier" and did not mention the governing Act. It was these factors that resulted in the NSW Court of Appeal finding that the payment claim was "contractual in nature", and hence, the Court held that Thiess did not "provide significant support" for the respondent's case.