Which payment schedule is valid when the Superintendent and the Employer’s lawyers issue conflicting schedules?

Australia

In the recent decision of RHG Construction Fitout and Maintenance Pty Ltd v. Kangaroo Point Developments MP Property Pty Ltd & Ors[1], the Queensland Court of Appeal held that a payment schedule issued by the Superintendent on behalf of the developer under the contract, in circumstances where the developer’s solicitors had also purported to issue a payment schedule, was the payment schedule for the purposes of the relevant security of payment legislation in the State of Queensland (the Building Industry Fairness (Security of Payment) Act 2017 (BIFA)).

The case revolved around the issuance of two separate payment schedules – one issued by the developer via its solicitors and the other issued by the Superintendent.  Relevantly, the contract (based on the AS4902-2000 standard form of contract) contained a deeming provision that any payment schedule issued by the Superintendent was issued as the agent of the developer and constituted a payment schedule for the purposes of the security of payment legislation.

On appeal, the adjudication decision that relied upon the Superintendent’s payment schedule was held to be valid.    

Background

RHG Construction Fitout and Maintenance Pty Ltd (Contractor) was the builder of a development for Kangaroo Point Developments MP Property Pty Ltd (Developer). 

The background to the dispute was as follows:

  1. On 27 July 2020, the Contractor served a payment claim upon the Developer.There was no dispute between the parties about the validity of the payment claim.

  2. On 6 August 2020, the solicitors for the Developer sent a letter to the Contractor’s solicitors stating that they would issue a payment schedule and that anything from the Superintendent was not to be construed as a payment schedule for the purposes of the BIFA.

  3. On 10 August 2020, the Superintendent delivered a payment schedule which stated that this “Payment Schedule confirms that the Superintendent has assessed, calculated and certified the proper value of Work under the Contract”.The Superintendent’s assessment was that nothing was due.

  4. On 17 August 2020, the solicitors for the Developer sent a letter to the solicitors for the Contractor disputing that the Superintendent’s payment schedule was a payment schedule for the purposes of the BIFA.The Developer contended that its correspondence (which also asserted that no amount was due) was the relevant payment schedule for the purposes of BIFA.

  5. The Contractor made an adjudication application relying upon the Superintendent’s payment schedule as the payment schedule for the purposes of the adjudication application.

The adjudicator accepted that the Superintendent’s assessment had been correctly identified by the Contractor as the relevant payment schedule and determined that the Developer had to pay the Contractor the sum of $788,439.54 together with interest. 

The Developer commenced proceedings in the Supreme Court seeking a declaration that the adjudication decision was void because, inter alia, the adjudicator lacked jurisdiction on the basis that the Superintendent’s assessment was not a payment schedule as required by the BIFA.

The Supreme Court judgment

At first instance, the Court found in favour of the Developer and declared the adjudication decision void. 

Section 79 (2)(c) of BIFA requires that an “adjudication application must identify… the payment schedule…”.  Dalton J found that this was a mandatory obligation which the Contractor had not satisfied because the Superintendent’s assessment did not state “the amount of the payment… that the respondent proposes to make” which is one of the payment schedule requirements in section 69 (b) of BIFA.

Further, the Court found that the agency relationship between the Superintendent and the Developer had been expressly revoked by the Developer in the correspondence of 6 August 2020. 

The Court of Appeal judgment

In contrast with the Supreme Court’s decision at first instance, the Court of Appeal unanimously held that the adjudication decision was valid because:

  1. The Superintendent’s payment schedule was the relevant payment schedule as required by section 69 (b) of BIFA. The Superintendent’s assessment determined the Developer’s liability to the Contractor and read together with the content of the payment schedule stated “the amount of the payment… that the respondent proposes to make”;

  2. The contractual deeming provision was not “contracting out” of BIFA; and

  3. The agency relationship between the Superintendent and the Developer had not been revoked as the contract did not contain an express power allowing the developer to do so.

Conclusion and implications

This case demonstrates that despite the operation of dual statutory and contractual payment regimes, where a contractual deeming provision exists, a payment schedule issued by a superintendent or contract administrator may be deemed to be a payment schedule for the purposes of BIFA.

For claimants / contractors this provides clarity as to which payment schedule to rely upon when applying for statutory adjudication when faced with multiple payment schedules. On the other hand, for developers or principals, if a contractual deeming provision exists, they will most likely find themselves bound by the superintendent or contract administrator’s assessment regardless of whether they agree or disagree with that assessment.  



[1] [2021] QCA 117