Payment Claims under the Security of Payment Act cannot be unilaterally withdrawn

Last year, in the case of?Argyle Building Services Pty Ltd v Dalanex Pty Ltd (No 2)?[2022] VSC 452, the Supreme Court of Victoria (Court) held that the?Building and Construction Industry Security of Payment Act 2002?(Vic) (the Act) does not contemplate the unilateral withdrawal and resubmission of a payment claim.

Background

Argyle Building Services Pty Ltd (Argyle) engaged Dalanex Pty Ltd t/as RK Basement and Structure Solutions (RK) to carry out concreting and basement works on a building project located at 68-74 Chapman Street, North Melbourne.

On 21 June 2021, RK issued to Argyle its payment claim numbered 8 in the sum of $379,723.15 (Payment Claim 8).?

On 2 July 2021, Argyle provided its payment schedule in response, rejecting Payment Claim 8 in full (Payment Schedule 8).?Payment Schedule 8 referred to there being no itemised claim breakdown provided by RK.

In response to Payment Schedule 8, on 2 July 2021, RK informed Argyle:

“We take on board the comments made by Argyle within the payment schedule dated 2 July 2022.

Accordingly, we formally withdraw claim 8.

We will shortly issue a new claim 8 addressing the comments raised by Argyle in the payment schedule responding to the now withdrawn claim 8”

Later that day (2 July 2021), RK issued to Argyle its payment claim numbered 8.1 in the sum of $379,723.15 (Payment Claim 8.1).

On 12 July 2021, RK issued to Argyle its payment claim numbered 9 in the sum of $465,586.68 (Payment Claim 9). Payment Claim 9 included a claim for $258,985.03 which was said to be outstanding under Payment Claim 8 plus new claims totalling $85,734.48.

On 9 September 2021, Argyle provided its payment schedule in response, rejecting Payment Claim 9 in full. One of the reasons why Argyle rejected Payment Claim 9 was because, according to Argyle, Payment Claim 9 constituted the service of multiple payment claims in respect of the same ‘reference date’, contrary to section 14(8) of the Act.

Section 14(8) of the Act

Section 14 (8) of the Act provides that a claimant cannot serve more than one payment claim in respect of each reference date under the construction contract.

Adjudication and appeal

On 15 October 2021, RK applied for adjudication under the Act and Argyle provided its response on 22 October 2021.??On 9 November 2021, the relevant adjudicator determined that the majority of the amount claimed by RK was due and payable by Argyle under the Act.

Dissatisfied with the adjudicator’s decision, Argyle applied to the Court (Appeal) for an order that the adjudication determination be quashed or, alternatively, be declared void.

In the Appeal, RK submitted that in the decision of?Valeo Construction Pty Ltd v Pentas Property Investments Pty Ltd?[2018] VSC 243, Digby J accepted (at [61]-[66]) that it was possible to withdraw a payment claim and to serve a replacement payment claim provided that the withdrawal was done in clear terms.

In contrast, Argyle submitted that a claimant has no entitlement or ability under the Act to unilaterally withdraw the service of a payment claim.?To this end Argyle relied upon the decision of Marks J in?Citi-Con (Vic) Pty Ltd v Punton’s Shoes Pty Ltd?[2020] VCC 804, where her Honour held (at [57]):

“the section does not say a claimant ‘cannot rely’ on more than one payment claim in respect of each reference date under the construction contract at a time. The prohibition is on service of more than one payment claim. I do not consider this section allows for unilateral purported withdrawal of a payment claim which has been served, and service of another payment claim using the same reference date”.?

The Court’s decision

The Court held that the Act does not contemplate the unilateral withdrawal and resubmission of a payment claim, stating (with citations omitted):

• (at [95]): “In?Valeo, the parties accepted that withdrawal and resubmission was permissible. It was not necessary Digby J to determine whether the statute permits unilateral withdrawal of a claim”; and
• (at [96]-[97): “In?Citi-Con?there was no acceptance or agreement between the parties about the right to withdraw and to resubmit a claim. Marks J determined there was no such right.?I agree with Marks J that, leaving agreement between the parties to one side, the statutory scheme does not contemplate the unilateral withdrawal or abandonment of a payment claim and the resubmission of a fresh claim in respect of the same reference date.?I consider that is the result that flows from the text of s 14 of SOP Act.”

As the Court had already determined that ‘reference dates’ arise under section 9(2)(b) of the Act, and not under section 9(2)(a) of the Act, the Court held that:

1. RK did not have power to unilaterally withdraw Payment Claim 8 and replace it with Payment Claim 8.1.
2. Payment Claim 8.1 was therefore a nullity;
3. Payment Claim 8 and Payment Claim 9 were both valid as they were made in respect of different reference dates; and
4. The service of Payment Claim 9 did not constitute the service of multiple payment claims on and from the same reference date in contravention of section 14(8) of the Act.

In its decision, the Court also separately held, in relation to a separate ground of appeal, that a construction contract that requires “significant surgery to its language” in order to arrive at a consistent and identifiable reference date is?not?a construction contract that makes express provision for a reference date.?My earlier case note on that part of the Court’s decision can be viewed?via my LinkedIn (article posted on 29 June 2023).

Key takeaways

The Act does not permit a claimant to unilaterally withdraw a payment claim and to then reissue a new payment claim.???

More information

For information on this case or advice please contact me on (03) 8600 8851 or?[email protected].

Note:?This?article contains general information only and is a guide which is not intended to constitute, and is not a substitute for obtaining, legal advice.