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Have you properly identified your payment claim under the SoP Act?

15 July 2019

#Construction & Infrastructure

Kyle Siebel

Published by Kyle Siebel, Constantine Mimigiannis

Have you properly identified your payment claim under the SoP Act?

The Victorian Supreme Court in John Beever (Aust) Pty Ltd v Paper Australia Pty Ltd [2019] VSC 126 provided further guidance on serving valid payment claims under the Building and Construction Security of Payment Act 2002 (Vic) (SOP Act).

Requirements under the SOP Act

A payment claim made under the SOP Act will only be valid and effective if the formality requirements applicable to payment claims under section 14 of the SOP Act are satisfied. This case considered two of those requirements, namely:

  • section 14(2)(c), which requires that a payment claim “must identify the construction work or the related goods and services to which the progress payment relates
  • section 14(2)(e), which requires that a payment claim “must state that it is made under this Act”.

The plaintiff purported to issue three payment claims for unpaid mechanical installation work under a construction contract.

Allegedly invalid payment claims

The plaintiff sent the first and second payment claims via email, in the form of an invoices. The invoices, and the covering email to which they were attached, contained a statement to the effect that they were made under the SOP Act. The invoices referred to the relevant construction work by identifying the contract to which the work related and the relevant period of work.

The plaintiff issued a third payment claim on the same email chain in the form of a different document entitled “Progress Payment Claim Form”. That document and its covering email did not contain a statement that the document was issued under the SOP Act.

Supporting documentation for all of the claims describing the construction work in detail was issued separately in earlier emails.    

The defendant argued that the payment claims failed to satisfy the requirements in sections 14(2)(c) and (e) of the SOP Act.

Decision

The Court was required to balance the objects of the SOP Act, including facilitation of payment between parties to a construction contract without excessive legal formality, against the need for a recipients of payment claim to be aware that they have received such a claim under the SOP Act.

Lyons J stated for the purposes of section 14(2)(c) that a claim will be valid if it “reasonably identifies the construction work to which it relates such that the basis of the claim is reasonably comprehensible to the recipient party” and that in making this evaluation a court may consider the context, and to that extent, “…may go beyond the face of the document itself” (at [83]).

Lyons J held that the first and second payment claims, issued in a context in which the supporting documentation was attached emails previously issued, adequately described the construction work under section 14(2)(c), and were otherwise validly issued. 

However Lyons J held that the final payment claim failed to satisfy the requirement under section 14(2)(e) that it contain a statement that it was a payment claim under the Act. Lyons J held that “there was real doubt that a reasonable recipient in the shoes of the defendant would have reasonably concluded that the July claim was a payment claim under the Act”. This was decided despite earlier emails on the same chain containing a statement that the payment claims attached were made under the Act and that the defendant in fact treated the document as a payment claim by responding to it with a payment schedule.

The judgment indicates that whilst the formality requirements under section 14(2) of the SOP Act may be satisfied by looking to materials beyond the face of the document, care should be taken to ensure that payment claims clearly satisfy the formality requirements under section 14(2) of the SOP Act to ensure their effectiveness. 

Author: Kyle Siebel & Constantine Mimigiannis

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The information in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this publication is accurate at the date it is received or that it will continue to be accurate in the future. We are not responsible for the information of any source to which a link is provided or reference is made and exclude all liability in connection with use of these sources. 

Kyle Siebel

Published by Kyle Siebel, Constantine Mimigiannis

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