KEYWORDS: BCIPA; PAYMENT CLAIMS; STATUTORY DECLARATIONS

KEY TAKEAWAYS

Construction contracts often require contractors to sign a statutory declaration affirming that all subcontractors have been paid. In a recent Queensland Supreme Court decision, Applegarth J found that non-compliance with the statutory declaration condition did not restrict a contractor's statutory right to make a payment claim. The contractual requirement that the contractor provide a statutory declaration before it could make a progress claim was void under section 99 of the legislation.

The facts

BRB Modular Pty Ltd (BRB) engaged AWX Constructions Pty Ltd (AWX) to construct a camp and accommodation village at an LNG processing facility.

AWX was entitled to make a progress claim on the 28th day of each month, subject to conditions in the contract. One condition required AWX to sign a statutory declaration in the following form: "to the best of my knowledge, all sub-contractors and suppliers who have at any time been employed by [AWX] for work under the Subcontract have as at the date of this declaration been paid all moneys due and payable to them in respect of their employment in relation to that work."

AWX submitted a payment claim under the contract and signed a statutory declaration, but the wording was qualified by the following words "other than those owed variations, payable to the head contractor."

BRB contended that the pre-condition for making a payment claim had not been complied with, and therefore the payment claim was not valid under the Building and Construction Industry Payments Act 2004 (Qld) (Act).

The matter proceeded to adjudication. The adjudicator determined the contractual precondition for a statutory declaration was void because of section 99 of the Act, which provides:

  • section 99(1): "the provisions of the Act have effect despite any provision to the contrary in any contract, agreement or arrangement."
  • section 99(2): "contractual provisions are void to the extent they are contrary to the Act or exclude, modify, restrict or otherwise change the effect of a provision of the Act."

BRB applied to the Supreme Court seeking a declaration that the adjudication determination was void for jurisdictional error, and an injunction restraining AWX from giving effect to it.

The decision

Applegarth J found that:

  • the contractual requirement to make a statutory declaration impedes rather than facilitates the object of the Act,31 which is to ensure cash-flow between the claimant and the other party;32
  • although the condition may encourage the payment of third parties, third parties are not the primary beneficiaries of the Act's provisions, and the Act does not purport to regulate relations between a contractor and third parties;33
  • there is a risk that an insolvent company that receives a progress payment may not be able to satisfy its creditors, but the Act shifts the risk of insolvency to the principal;34
  • the condition was not unduly onerous,35 but the consequences of non-compliance were disproportionate and extreme;36
  • as the subject matter of the statutory declaration did not relate directly to the proposed payment claim,37 the condition had no real utility in advancing the purpose of the Act;38
  • the condition impeded payment to which AWX would otherwise have been statutorily entitled, without any corresponding benefit,39 thereby excluding, modifying, restricting or otherwise changing the effect of the Act;40 and
  • this meant the condition was void under section 99 to the extent it affected rights and liabilities under the Act.41

Conclusion

Applegarth J concluded that the adjudicator had jurisdiction to determine AWX's payment claim.42 The contractual precondition BRB relied on to deny AWX a progress payment could not prevent AWX from making its payment claim.43

Footnotes

31 At [32]
32 At [31]
33 At [22]
34 At [44]
35 At [53]
36 At [55]
37 At [56]
38 At[70]
39 At [61]
40 At [62]
41 At [62]
42 At [69]
43 At [69]

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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