The limitation period under s 14(4)(b) of the Security of Payment Act

Levi Pty Ltd v Z&H Building Developments Pty Ltd & Anor. [2019] VSC 633

The Facts

In Levi Pty Ltd v Z&H Building Developments Pty Ltd [2019] VSC 633, the subcontractor made a payment claim under the Building and Construction Industry Security of Payment Act 2002 (Vic) for works totaling $67,906.03 with respect to the reference date of 28 July 2018 (the August Claim).

It appears that the head contractor did not pay the August Claim. The subcontractor made a further payment claim under the Act for the same works totaling $67,906.03 with respect to the next reference date of 28 August 2018 (the September Claim). In this claim, the subcontractor also claimed $17,053 for retention.

It appears that the head contractor again failed to pay the claim and on 28 December 2018, the subcontractor served a further payment claim including the amounts claimed in the September Claim (the December Claim). The subcontractor alleged that it had performed additional works after 28 November 2018 so as to trigger a further reference date on 28 December 2018.

The head contractor alleged that the last date upon which the subcontractor was entitled to claim the amount of $67,906.03 was 28 October 2018 (28 July 2018 + 3 months) and the last date upon which it was entitled to claim the amount of $17,053 was 28 November 2018 (28 August 2018 + 3 months).

The subcontractor applied for adjudication of the dispute after the respondent failed to pay the December Claim and the adjudicator found for the subcontractor in the amount of $77,687.92.

The head contractor applied for judicial review to quash the adjudication determination on the ground that, among other things, the December Claim was served outside the time limit prescribed in s 14(4)(b) of the Act as it included claims for works which were the subject of reference dates that had accrued more than three months earlier having, regard to the date when the works were in fact performed.

Section 14(4) of the Act provides, in substance, that:

1. a payment claim may be served only within the later of:
   1. the period determined by the construction contract (s14(4)(a)); or,
   2. three months after the reference date referred to in s. 9(2) that relates to that progress claim (s14(4)(b)).
2. s. 14(9) permits a claimant to include in a payment claim an amount that has been the subject of an earlier payment claim if that amount has not been paid.

The head contractor argued that works were “tied” or linked to the applicable reference date and that s14(4)(b) prohibited a claim for works more than three months after the relevant reference date applicable to these works. See [31] and [33(b)].

Judicial Review

His Honour, Digby J, relevantly found that:

1. Section 14 only restricts the period within which a payment claim can be served, that is,  three months after the reference date (at [45]);
2. Sections 14(4)(b) and 14(5)(b) of the Act do not prohibit a specific item of work being claimed in a payment claim even though the payment claim was made more than three months after the reference date applicable to the subject works, provided the payment claim being the vehicle for the claim is itself a valid and timely payment claim under the Act (at [46] – [48]). It is the payment claim rather than the amount or item of work which is the subject of the time limit under s 14(4) (at [53]).

In particular, his Honour said at [47]:

“Accordingly, a claim for an item of work and/or a claim for an item of goods and services, may be included again and again as components of successive payment claims, provided the payment claim for a progress payment is itself valid and timely pursuant to the SoP Act.”

Conclusion

This decision is a win for contractors making claims under the Act. It ensures that if amounts are properly claimed in payment claims made under the Act – but not paid – they can nevertheless be claimed again and again in later valid payment claims and the contractor will not lose its rights to recover those amounts at adjudication despite the 3-month limitation on claims in s 14(4)(b) of the Act.