Australian court confirms time for serving payment certificate sets time for serving statutory payment schedule

This decision, in a dispute between Allencon Pty Ltd (Allencon) and Palmgrove Holdings Pty Ltd (trading as Carruthers Contracting) (Carruthers) demonstrates the importance, in a practical sense, of ensuring that the date for serving a payment certificate or schedule under the contract reflects the time stated in the Building Industry Fairness (Security of Payment) Act 2017 (Queensland) (BIF Act) for serving a statutory payment schedule.

In Queensland, it would be sensible drafting to require a payment certificate or a payment schedule to be served within 15 working days of service of the payment claim. In other jurisdictions such as New South Wales and Victoria, that would be within 10 working days of service of the payment claim. When the contract, in effect, follows the statutory timeframe for serving payment schedule, contract administrators are less likely to find themselves in the unfortunate position Carruthers found itself in this case.

Statutory principles

Section 76 of the BIF Act provides that a respondent must issue a payment schedule in response to a claim by the earliest of the period prescribed by the relevant construction contract; or 15 working days from when the payment claim was given to the respondent.

Accordingly, the maximum amount of time that can be afforded to a respondent to issue a payment schedule is 15 working days from when the payment claim was given.

Schedule 2 of the BIF Act provides that a business day does not include weekends; or a public holiday, special holiday or bank holiday in the place in which any relevant act is to be or may be done; or importantly the period which is 22 December to 10 January of each calendar year.

Therefore, an inconsistency between contractual timeframes based on calendar days and the definition of the business day under the BIF Act could result in payment schedules being required to be issued within a reduced period. That is precisely the issue the respondent was faced with in this case.

The case

Allencon and Carruthers signed a subcontract under which Allencon agreed to construct roadworks for a lump sum of A$2.08 million.

Allencon asserted that it achieved practical completion of the works on 10 December 2021. It then issued a payment claim in the amount of A$955,079.48 on 24 December 2021. As a portion of that amount was paid by Carruthers, the amount ultimately in dispute before the parties was A$351,734.88.

Allencon then commenced proceedings seeking orders from the court that, among other things, the disputed amount was a debt due and owing under section 78(2)(a) of the BIF Act. It was unsuccessful in the District Court in the first instance and sought to appeal that decision.

Among others, the subcontract contained provisions to the following effect:

• Carruthers’ representative was required to issue Allencon a payment certificate within 21 days of receipt of a claim for payment which was to state the payment amount the Carruthers’ representative considered should be made.
• The parties agreed that Carruthers’ representative would be its agent for the purposes of accepting and assessing payment claims and providing payment schedules under the BIF Act.
• Carruthers’ representative was authorised to issue payment schedules on behalf of Carruthers with the reservation by Carruthers to issue payment schedules itself. If Carruthers did not issue a payment schedule and did not notify Allencon that its representative was unauthorised to issue a payment schedule, then the relevant payment certificate issued by Carruthers’ Representative was deemed to be the payment schedule for the purposes of the BIF Act.

The central issue before the Court of Appeal was whether the subcontract prescribed a period for the provision of statutory payment schedules.

Allencon contended that the subcontract required a payment schedule to be provided within 21 calendar days of receipt of the payment claim and that period expired on 14 January 2022, by which date Carruthers had not responded to the claim. 

Carruthers’ submission however was that the contract did not displace the usual statutory period of 15 working days after the claim was delivered to provide a payment schedule.  Carruthers contended that period expired on 28 January 2022 and by that time it had provided a payment schedule.

The Court of Appeal accepted Allecon’s argument that, based on an analysis of the contract and the Act, the payment schedule was required to be given within 21- calendar day period and held that period expired on 14 January 2022. The result was that Carruthers failed to give a payment schedule as required under section 76 and became liable to pay the amount claimed under section 77(2), plus interest.

Co-written by Carmen Maatouk and Jake Lengui of Pinsent Masons.