John Holland Pty Ltd -v- Coastal Dredging and Construction Pty Ltd and ors [2012] QCA 150

Background facts

In about March 2010, Coastal Dredging and Construction Pty Ltd (CDC) entered into a subcontract with John Holland Pty Ltd (JH) to carry out construction work relating to dredging works in the Gladstone Harbour region. 

The effect of the schedule to the subcontract and BCIPA were that the subcontract reference dates (or dates on which the subcontractor could make a payment claim under BCIPA) fell on the 28th day of each month.

However, clause 12.6 of the subcontract also provided:

The Subcontractor may submit a Payment Claim to John Holland only on each Reference Date. The Subcontractor warrants to John Holland that Payment Claims will [subclauses (a) to (g) of clause 12.6 then set out several requirements relating to payment claims].

…..

The Subcontractor warrants and represents that if a Payment Claim does not comply with the conditions set out in this clause 12.6:

(h) that Payment Claim is void; and
(i) the Reference Date for the purposes of the Security of Payment Act shall be the same day on the following month.

The trial judge had considered that, although breaches of subclauses 12.6 (a) to (g) might or might not give John Holland valuable rights, these provisions did not change the fact that a reference date had occurred, and found that subclause 12.6(i) could not alter that fact.

Similarly, the Court of Appeal found that the effect of subclause 12.6(i) (and arguably (h)) was to defer the respondent's statutory entitlement to a progress payment from a reference date ascertained in accordance with BCIPA.  It followed that at least clauses 12.6(i) and 12.6(h) (if it also had that effect) were void under BCIPA s99 as provisions which "purport to modify or otherwise change the effect of a provision of [BCIPA] or would otherwise have the effect of modifying or otherwise changing the provision of [BCIPA]."

This decision demonstrates the importance of holistically considering the proposed contractual payment regime when a contracting party seeks to impose conditions upon or prerequisites to any obligation to make payments under a building or construction contract.  In particular, any criteria and / or milestones that must be satisfied before any reference date might come into existence must be identified.  Once a reference date exists, it can not be simply cancelled or postponed, and contractual payment processes will be subsumed within BCIPA processes.

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