Limiting exposure to ambush payment claims under the Building and Construction Industry Payments Act 2004 (BCIPA) is a serious issue for owners/developers and for main contractors.
Following the Jedfire decision in 2009, it was thought that using a formula of words which permitted progress claims to practical completion, at practical completion and at the final claim stopped reference dates (and therefore payment claims) arising during the defects liability period.
A recent NSW decision has created uncertainty as to whether this view is correct.
It is accepted law that a contractual modification of the relevant laws will not be effective unless it is clearly stated that the contract is to supplant the stipulations stated. The contractual modification cannot however contract out of BCIPA. If it does so, it is void to that extent.
In the decision of The City of Ryde Council v AMFM Constructions, the parties had entered into a construction contract based on AS4300. The effect of the words is substantially similar to the contract considered in the Jedfire decision.
The relevant wording of the payment clauses was unamended. The annexure provided for the time for payment claims is the “15th day of each month, payment by end of each month”.
The Court found that as the wording of the payment clauses was the pro forma contract, and more specifically, the progress payment clause did not contain a clear limitation on further claims, which was the case with the clause for the final claim, there was no inference that could be drawn that the achievement of practical completion (or the issue of the certificate of practical completion) would result in periodic payment claims coming to an end until the time for making the final claim.
To limit reference dates arising between practical completion and final claim, clear words are required. To be effective, these words have to be carefully drawn as to not fall within the ban on contracting out of BCIPA.
We can assist you to update your contracts to prevent reference dates arising during the defects liability period and to provide maximum contract protection against claims made under the Building and Construction Industry Payments Act 2002.
For more information call
Troy Lewis, Partner
T: +61 7 3135 0614
"The material contained in this publication is no more than general comment. Readers should not act on the basis of the material without taking professional advice relating to their particular circumstances”