MWB Everton Park decision – Initiating payment claims under the Building Industry Fairness (Security of Payment) Act 2017 (Qld)

Key Takeaway Points

• The recent Queensland Court of Appeal decision in MWB Everton Park Pty Ltd v Devcon Building Co Pty Ltd deemed a builder’s purported payment claim invalid under the Building Industry Fairness (Security of Payment) Act 2017 (Qld) (‘BIF Act’).
• A builder’s ability to pursue a progress payment via either the statutory adjudication process or via a court process initiated under the BIF Act is contingent on their payment claim (a creature of the statute) complying with all requirements imposed by the legislation.
• A purported payment claim that does not comply with all statutory requirements will ultimately be deemed invalid for security-of-payment purposes, meaning that the building contractor will be unable to initiate the adjudication process or file a court application under the BIF Act.
• This subsequently has adverse implications for the contractor’s cash flow, as it leaves the contractor bereft of the dispute resolution efficiencies that the BIF Act offers.  To be clear, conventional litigation strategies such as an ordinary contractual common law claim would still be available, subject to the facts of a particular case.

Devcon Building Co Pty Ltd (‘Devcon’) entered into a contract with MWB Everton Park Pty Ltd (‘MWB’) to design and construct 56 townhouses, a project valued at over $17 million. The Queensland Court of Appeal ruled that Devcon’s payment claims failed to meet the statutory criteria imposed by the BIF Act. This case underscores the need for payment claims to clearly identify the detail of work completed, expressly state the claimed amount and explicitly request payment, to ensure contractors can rely on them to pursue payment under Queensland’s security-of-payment legislation.

The issue in conention was whether the documents submitted by Devcon constituted a ‘payment claim’ pursuant to the BIF Act. The Court was required to determine whether the progress claims were valid payment claims under section 68 of the BIF Act, which requires that a payment claim:

• identifies the construction work or related goods and services to which the progress payment relates;
• states the amount of the progress payment that the claimant claims is payable by the respondent;
  requests payment of the claimed amount; and
• includes the other information prescribed by the regulation.

Whilst the primary judge determined that a payment claim had been made, this was overturned on appeal.

Facts

• On 30 June 2023, Devcon sent an email to MWB seeking the payment of $149,485 from MWB in relation to a progress claim.
  • The substance of the email was as follows:
    “Please see attached claim 17 for the Elysium project. Also attached is the stat dec for this claim. If you have any questions let me know.”
  • Devcon attached a spreadsheet with the heading ‘Project Summary’ and ‘Progress Claim’ and a statutory declaration (‘30 June Documents’).
  • MWB did not treat this email as the payment claim, and subsequently did not issue a payment schedule.
• On 17 July 2023, Devcon sent an email to MWB with a second set of documents (’17 July Documents’) along with the previously provided spreadsheets.
  • The 17 July Documents were described as ‘Tax Invoices’, which explicitly stated the amounts claimed and requested payment.
    MWB treated the receipt of those invoices as a payment claim and responded with a payment schedule (per section 69 of the BIF Act).

District Court Decision

The primary judge determined that a payment claim had been made pursuant to the BIF Act and ordered that MWB pay the amount of that claim, together with interest, to Devcon.

Appeal

MWB successfully appealed the District Court decision, with Justice Dalton of the Queensland Court of Appeal deciding that the 30 June Documents did not meet the requirements of a payment claim due to three independent reasons:

(1) Section 68(1)(a) – Failure to identify the Construction Work

The 30 June 2023 Documents did not sufficiently identify the construction work or related goods and services in the manner that a payment claim must do, having regard to Section 68(1)(a) of the BIF Act. Justice Dalton stated that unless a payment claim which adequately meets the statutory definition is delivered to the principal, the principal has no statutory obligation to make a payment or respond with a payment schedule. Justice Dalton stated that more description was required and must be readily identifiable, with percentages not being sufficient for large scale projects. Further, Justice Dalton clarified that the Court is not concerned with whether the principal subjectively understands the payment claim. Rather, the claim must meet the objective construction of a payment claim pursuant to the BIF Act.

(2) Section 68(1)(b) – Failure to state the one amount of progress payment

Justice Dalton asserted that the 30 June Documents failed to state the amount claimed by Devcon, rejecting the argument that the claim of $149,485 at the bottom of the first table was the only relevant figure. Although the contract work was performed in several parts, Devcon failed to reconcile these amounts and state one figure which was the claimed amount of the progress payment. Consequently, the Court held that the 30 June Documents could therefore not be a payment claim having regard to Section 68(1)(b) of the BIF Act.

(3) Section 68(1)(c) – Failure to request payment of the claimed amount

Justice Dalton concluded that the 30 June 2023 Documents failed in requesting payment of the claimed amount, pursuant to Section 68(1)(c) of the BIF Act. Having emphasised that section 68(1)(c) must be interpretated against the whole of section 68, Justice Dalton explicated that meaning ought to be given to the words “requests payments of the claimed amount”. A contractor can fulfil this requirement through identifying the construction work to which the progress claim relates and stating the amount of the progress payment which the contractor claims is payable by the principal. Justice Dalton rejected the argument that the words “amount due this claim” were sufficient in requesting payment, stating that “something more” is required to satisfy the requirements of section 68(1)(c). A request for payment needs to be either express in the document (as was apparent in the 17 July Documents) or clearly and necessarily implied by the document. For example, Justice Dalton affirmed that if the word ‘Invoice’ was used instead of ‘Project Summary’, Devcon would have satisfied such requirements.

Outcome

In summation, the case emphasises the importance of understanding and navigating payment claims in accordance with the statutory requirements imposed under the BIF Act to avoid financial setbacks. Such statutory requirements are fixed. They cannot be said to have been waived by a party having treated an imperfect document as a payment claim in the past, in the manner that purely contractual requirements might be argued to have been waived, as a matter of contract law. To ensure that a payment claim is valid and enforceable, it is essential that detailed and specific descriptions are provided for the work with respect to which payment is sought, and the total claimed amount is clearly delineated and explicitly requested. It is essential that contractual and statutory procedures are not confused, informalities are avoided, and the payment claim is objectively compliant with legislation. Statutory claims are highly regulated and precise adherence to each requirement is paramount to support a payment claim.

Given the inherent complexity of the BIF Act and the adverse consequences of non-compliance, large-scale project participants should review the legal requirements when preparing payment claims, and seek legal advice if unsure.

Please contact our experts in RedeMont’s Commercialisation, Supply and Projects team for clarity and assistance with this issue or any other construction law queries you may have.