Making Payment Claims under more than one contract?

Acciona Infrastructure Australia Pty Ltd v Holcim (Australia) Pty Ltd [2020] NSWSC 1330

Introduction

A case was recently handed down concerning the issue of whether a claimant under the Building and Construction Security of Payment Act 1999 (NSW) (SOP Act) can make claims for construction-related works under more than one (1) construction contract.[1]

The case is significant because it serves as a reminder that a payment claim under the SOP Act (and under equivalent legislation in other states and territories) cannot claim for goods / services under more than one (1) construction contract. Care should always be taken when preparing payment claims and this case raises a further issue to consider by claimants prior to making a payment claim.

Background

1. Acciona was the design and construct contractor for the Sydney Light Rail Project (Project). Holcim was a supplier of ready mixed concrete to Acciona for the project.
2. On 9 September 2016 the parties entered into a Goods Supply Agreement for the supply and delivery of concrete by Holcim to Acciona (Agreement). The Agreement provided, among other things, that if Acciona wished to order concrete it would issue a purchase order and, upon the issue of a purchase order, ‘a separate contract’ would come into existence between Acciona and Holcim. (Significantly, the Agreement was therefore not a master agreement or a single contract governing the ongoing supply and delivery of concrete from time to time by Holcim to Acciona for the Project.)
3. Over the life of the Agreement, Acciona issued approximately 12,500 purchase orders and Holcim made approximately 26 payment claims on Acciona.
4. A dispute arose between the parties over a range of matters including the charging of plant opening fees and delay and cancellation fees by Holcim to Acciona. This dispute culminated in Holcim proceeding to adjudication and successfully obtaining an adjudication determination against Acciona in the sum of $2,953,035.57 (including GST) (Determination).

The Appeal against the Determination

1. Acciona appealed the Determination in the Supreme Court of New South Wales on several grounds. Acciona submitted that the Determination should be quashed because the adjudicator did not have jurisdiction to make the Determination. This submission was based on the argument that the payment claim submitted by Holcim impermissibly claimed payment for work done under two (2) or more construction contracts. (In New South Wales a claimant under the SOP Act cannot validly claim for work done under more than one contract – see Trinco (NSW) Pty Ltd v Alpha A Group Pty Ltd [2018] NSWSC 239 per McDougall J at paragraphs 55 to 61.)
2. The submission focused on the interpretation of the Agreement and the provisions in clause 2(c) of the Agreement that, upon the issue of a purchase order, a ‘separate contract will come into existence’.
3. Hammerschlag J accepted the submission and quashed the Determination. His Honour found that the adjudicator had no jurisdiction to make the Determination because the payment claim in question was ‘invalid and ineffective’. His Honour reasoned that this was the case because the payment claim claimed under more than one (1) contract as, under the terms of the Agreement, each separate purchase order created a separate contract (for discrete work / materials).

Key Points

The key lessons from Acciona v Holcim include that:

• Any company or individual wishing to make a payment claim under the SOP Act (or equivalent state legislation) should carefully consider the terms of the relevant construction contract before making a payment claim. A review should consider the scope of the contract and what construction related goods and services fall within that contract (and whether each separate supply is regarded as a separate contract). Importantly, a claimant cannot submit a payment claim for construction related goods and services under more than one (1) contract.
• If a claimant wishes to claim for construction related goods and services under more than one (1) contract, they must submit a separate payment claim for the goods / services under each construction contract. Failing to do so may result in the payment claim being found to be invalid by an adjudicator or by a court. This approach may be impracticable and unwieldly for suppliers who make many individual supplies of materials for a project or under an ongoing supply agreement where each supply may be of a relatively minor value.
• Suppliers of materials or construction related goods and services should closely consider the terms of their supply contracts / agreements and whether this case and principle may be applicable to payment claims.
• Some benefits may flow from a supplier of materials or construction related goods and services having a separate contract for each supply. However, these benefits should be weighed against the benefit of having an overarching agreement which provides that each supply of materials or construction related goods and services is governed by that contract which specifies the date for submitting payment claims (ie the reference date). Such an approach will benefit suppliers as it will simplify the making of a payment claim under the SOP Act: ie, one (1) payment claim can validly be made which ‘bundles’ or covers multiple supplies of construction goods and services under that agreement. This issue is significant as the SOP Act provides a very powerful tool for suppliers to seek and obtain payment of amounts owing to them.

[1] The case was Acciona Infrastructure Australia Pty Ltd v Holcim (Australia) Pty Ltd [2020] NSWSC 1330 (Acciona v Holcim).

Queries

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Disclaimer

This information and the contents of this publication, current as at the date of publication, is general in nature to offer assistance to Cornwalls’ clients, prospective clients and stakeholders, and is for reference purposes only. It does not constitute legal or financial advice. If you are concerned about any topic covered, we recommend that you seek your own specific legal and financial advice before taking any action.