Adam Carlton-Smith
Michelle Hall
Peter Lamont
Rebecca Roylance
Andre Dauwalder

In Protectavale Pty Ltd v. K2K Pty Ltd, [2008] FCA 1248 the Federal Court of Australia considered the Victorian payment legislation and the provision of the Victorian Act which is equivalent to section 17 (2) of the Queensland Building and Construction Industry Payments Act 2004 which requires that a payment claim must "identify the construction work... to which the progress payment relates".

In Protectavale the Claimant issued a payment claim for the amount of $635,448.06 which stated that the "construction work in respect of which this Payment Claim is made and the amount claimed... is listed below in the table (and attached Schedules). The table provided:

Contract Sum $6,295,000.00
Variations (See the attached Schedule 1) $232,772.45
Prolongation claim (see the attached Schedule 2) $129,058.00
Adjusted Contract Sum $6,656,830.05
Less  
Retention (0125% of the Contract Sum - $6,300,000...) $78,750.00
Payments Received $6,000,400.00
Subtotal: $6,079,150.00
Claimed amount... (Adjusted Contract Sum – Subtotal) $577,680.05
GST $57,768.01
Claimed amount (incl GST) $635,558.06

The two schedules attached to the payment claim provided details of the variations and prolongation claims.

The problem with the payment claim was that the invoice did not identify any of the work previously completed and paid for and the work (apart from the variations) to which the invoice relates. The Court found that of the amount claimed there was no "breakdown or explanation of the work to which the claimed amount of $215,850.00 relates" (at 14). The sum of $215,850.00 was calculated by taking the contract sum of $6,295,000.00 and deducting the payment received of $6,000,400.00 and retentions of $78,750.00, leaving a balance of $215,850.00 plus GST.

Certainly, the Court considered that "payment claims are usually given and received by parties experienced in the building industry who are familiar with the particular construction contract, the history of the project and any issues which may have arisen between them regarding payment..." (Multiplex Constructions [2003] NSWSC 1140 at 76). But in this case, it was simply impossible to determine the basis of the claim for $215,850.

The Court confirmed that a Claimant must identify the construction work that is the subject of the payment claim. By simply issuing a payment claim based upon the original contract sum less payments received, the Claimant failed to satisfy the provisions of the payment legislation.

Finally, it is also important to note that Protectavale also considered the timing of the delivery of payment claims. Although the payment claim did not state that it was a "final payment claim" it did appear to have the characteristics of a final payment claim. The payment claim was issued before the expiration of the defects liability period and was therefore void. The lesson to be learnt for Claimants is to ensure that the contractual process regarding issuing of final payment claims is followed (which in most cases would provide for the final payment claim to be issued following the expiration of the defects liability period).

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