In a recent decision of the District Court of Allencon Pty Ltd v Palmgrove Holdings Pty Ltd
Judge Burnett had to determine when a payment schedule was due when the payment claim was served on Christmas Eve 2021.
The application before the court by the subcontractor was for summary judgement in default of delivery of a payment schedule within the time, the subcontractor submitted was a requirement of the Act.
This decision had to determine whether there was a triable issue or whether on a summary basis the matter could be determined without a trial.
Facts and relevant contractual Terms
- The contract required claims to be made by the 24th of the month;
- A claim was served on Christmas Eve;
- The contract provided for a payment certificate to be provided within 21 days;
- Any payment was due under the contract 35 days after a payment claim or 14 days after the payment certificate whichever was the earlier;
- A payment certificate was delivered on 28 January 2022;
- The claimant subcontractor relying upon the provisions of section 76 of BIFA submitted that the due date for any payment schedule was the 14th of January and as such the payment schedule was late and the contractor was in a default situation;
- The respondent argued that the alternative 15 business days provided in section 76 was the appropriate measure for the timing of a payment schedule which, allowing for the definition “business days” not including Christmas Day or indeed any day up to and including 10 January during Christmas break, meant that contractor was within time. The court actually suggested that the contractor had until the 31st of January so the contractor was in fact early. A closer look suggests that using the 15 business days in fact extended any period until early February given the Australia Day holiday;
- the contract provided that the subcontract was subject to the BIFA regime.
Provisions of BIFA
Section 76 (1) provides;-
If given a payment claim, a respondent must respond to the payment claim by giving the claimant a payment schedule within whichever of the following periods ends first (our emphasis):
(a) the period, if any, within which the respondent must give the payment schedule under the relevant construction contract;
(b) 15 business days after the payment claim is given to the respondent.
Section 200 provides: –
- (1) The provisions of this Act have effect despite any provision to the contrary in any contract, agreement or arrangement.
- (2) A provision of a contract, agreement or arrangement is of no effect to the extent to which it –
- is contrary to the Act; or
- purports to exclude, limit or change the operation of this Act; or
- has the effect of excluding, limiting or changing the operation of this Act; or
- may reasonably be construed as an attempt to deter a person from taking action under this Act.
Arguments and reasoning of the Court
The applicant, not surprisingly, relied upon the provisions of section 76 so as to argue any computation of the delivery of the payment schedule will rely upon the number of days and not “business days” and as a result any payment schedule due as required by the 14th January and the payment schedule actually delivered was late and could not be taken into account. In the absence of a payment schedule, its application was fairly simple and should be determined summarily given no real dispute as to the facts.
The respondent suggested that the two regimes (contractual and statutory) should be “harmonised by reference to BIFA in order to determine the correct timeframe”. It was suggested that the contract was qualified by BIFA and should prevail.
The court in reviewing the competing submissions was of the view that BIFA provides a “benchmark regime” by the operation of section 200. In the court’s view, if it were the case that the contractual provisions apply in preference to the alternative provision in the Act that plainly had the effect of limiting the operation of the Act and that conflict should be resolved in favour of the respondent by allowing the longer period 15 business days. The result was that the application for judgement failed and the matter would be determined by the court process and full hearing.
Central to the final resolution of this matter is the true meaning of the provisions of S 76(1). In our view, given its literal meaning, the result would have been expected to go the applicant’s way. Some meaning must be given to “within whichever of the following periods ends first”.
The Act itself determines which regime is applicable for the calculation of the date of delivery of a Payment Schedule. The alternative calculation under the contract is specifically provided for by the legislature. Using the Court’s reasoning there cannot be any less time period than 15 business days, under a contract that will prevail as a period ending first. That meaning is difficult to glean directly from the legislation.
While it may have been unwise for the contractor to execute a sub-contact that provided for such short time frames, it is the bargain that they reached and always had its risks during a Christmas shutdown. The Contractor had drawn the subcontract and so this was the timing it chose. Contactors are commonly advised of this problem and this case underlines the importance of review of these provisions in any proposed subcontract.
The Applicant has now appealed that decision to the Court of Appeal. It will be interesting to review that Judgement which is hopefully definitive on this issue to guide parties through the Christmas period.
If you would like to discuss this article in more detail, please contact Tony Mylne.
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