How do you attack the task of assessing requests for payment in a world without endorsements? Is any document requesting payment now a BIFA payment claim? How low is the bar now really?
The introduction of Building Industry Fairness (Security of Payment) Act 2017 (BIFA) brought about the removal of the ‘endorsement’ requirement and now there is a common expectation that the bar has been lowered as to what documents constitute payment claims. It seems now that while anything asking for payment COULD be a BIFA payment claim an adjudicator is likely to be extremely cautious in assessing if there is ACTUALLY a BIFA payment claim for consideration at adjudication.
This means that contract administrators are tasked with:
- evaluating any document that may possibly be considered a payment claim;
- determining on the face of that document what the actual work performed was and the amount claimed for that work; and
- making an assessment of the value of the work performed.
In the decision in KDV Sport Pty Ltd v Muggeridge Constructions Pty Ltd & Ors the Supreme Court again moved the bar as to if a claim for payment constitutes a valid payment claim when it comes to identifying the work the subject of the claim. The Supreme Court and subsequent adjudicators have essentially moved the bar higher so that those claiming through adjudication need to clearly identify the specific work the subject of the claim. If the claim doesn’t sufficiently describe the work so that the respondent can reasonably comprehend what work specifically relates to the claim, then the claim is likely to be considered without jurisdiction by an adjudicator.
In KDV Sport, the Supreme Court set aside an adjudication decision that awarded the claimant an amount of $802,189.59 plus interest as the payment claim was determined to lack sufficient identification of the construction work claimed.
In reaching her decision, Justice Brown commented that the test is ‘relatively undemanding’ and that ‘the task required is not an onerous one that requires particularity or precision, but it does require some description which identifies the work done.’
When assessing whether a document is a payment claim under BIFA, contract administrators, superintendents, principals and contractors should consider if the work claimed is identified by an adequate description. The background knowledge that the parties have from past dealings and previous exchange of documentation is still relevant but will not overcome clear deficiencies in identifying the work connected with the claim.
For example, the KDV payment claim, similar to many pro forma progress claims, consisted of a one page document with a six column table and a percentage claim to date indicating the works that were claimed to have been completed.
|Total Paid to Date||Total claim to date %||Total claimed trade to date||
Progress Claim 13
While the claim provided a number of trade breakdown categories, there was no benchmark or description of work done within that trade breakdown that represented the percentage of work claimed. The trade breakdown itself (together with the percentage completed) was not a sufficient description to identify what the actual work was and as stated by Her Honour Justice Brown:
“the lack of description, the provision of a percentage together with the fact that the number of items that cannot be reconciled on the figures provided demonstrates that the schedule is not reasonably comprehensible to a reasonable principal.”
It follows that when assessing a purported payment claim you should consider if there is sufficient certainty in the payment claim by asking:
- can I identify what actual work is being claimed by the description within each line item provided?
- can the percentages of work completed be reconciled with the amount claimed?
- have particulars of the works, evidence or other supporting documentation been given with the claim that can assist in my assessment?
If the claimant has failed to satisfactorily identify the work within each line item to enable understanding of the work for which payment is sought, then the claim may not be a valid payment claim under BIFA and any adjudication application made for that claim is likely to be considered outside of the jurisdiction of the adjudicator.
If you are charged with assessing a payment claim and responding with a payment schedule cast your mind to the key requirements of a valid payment claim and address any deficiencies in your schedule.Not intended as legal advice. Read full disclaimer.