ACT Supreme Court Confirms Strict Compliance for Payment Schedules Under SOP Legislation

Case note on Denham Constructions Pty Ltd v Islamic Republic of Pakistan (No 2) [2016] ACTSC 215

Executive Summary

The Supreme Court of the Australian Capital Territory has confirmed that for a respondent to validly issue a payment schedule under the Building and Construction Industry (Security of Payment) Act 2009 (ACT) (“ACT SOP Act”), the schedule must strictly comply with ss 16(2) – (3).

This case makes clear that:

• An email with minimal wording will not constitute a payment schedule unless it clearly:
  • identifies the payment claim,
  • states the scheduled amount, and
  • provides reasons for withholding payment.
• A response directed only to one component of a claim (e.g., a variation) is not enough.
• The ACT Act operates similarly to the NSW and QLD regimes, but this case is one of the leading ACT authorities confirming strict statutory compliance.

The decision is also significant because the Court confirmed that:

• The payment claim was not invalid,
• Repeated variation claims were not an abuse of process, and
• The ACT legislation does apply even where the work is performed on National Land (in this case, the Pakistani High Commission).

 

Background

• Denham Constructions performed building works on the High Commission of Pakistan in Canberra.
• The contractor issued Progress Claim 26 under the ACT SOP Act, seeking more than $1 million, including:
  • 15 previously rejected or partially allowed variations, and
  • A large time-related claim (DCV075).
• The architects emailed Denham stating that the claim was out of time under the contract.
• The principal argued that this email was a payment schedule.
• Denham commenced proceedings under s 16(4) after the respondent failed to issue a valid payment schedule within 10 business days.

Decision:

1. The Email Was Not a Valid Payment Schedule

The Court held the email failed all key requirements of s 16 because:

It did not identify the payment claim

• The email responded only to DCV075, not the payment claim itself.
• Payment Claim 26 was a separate document.

It did not state the scheduled amount

• The email did not say whether any money would be paid.
• Only one component of the claim was addressed.

It did not provide reasons for all withheld amounts

• Reasons were given only for the time-related item, not the other 15 components.
• As in Minimax (Qld), silence on part of the claim invalidates the entire schedule.

Result:
The Court ruled there was no payment schedule, meaning Denham could recover the claimed amount as a statutory debt.

 

2. The Payment Claim Was Valid

The respondent argued the payment claim was invalid because:

• Work had been completed, and
• The claim repeated amounts previously claimed.

The Court rejected this.

Reference Date Argument

• The contract permitted monthly progress claims.
• Reference dates continued even after work was completed.
• This aligns with NSW and QLD authority (e.g., Broadview, Spankie).

Repeating Variations Is Not an Abuse of Process

• Repeated claims are allowed unless previously adjudicated (s 15(6)).
• The contractor had not adjudicated earlier claims, so repetition was lawful.

 

3. Constitutional Arguments Rejected

The respondent argued the ACT Legislature:

• Had no power over National Land, and
• The High Commission site was within the seat of government, giving the Commonwealth exclusive power under s 52(i).

The Court rejected both arguments:

National Land

• ACT laws apply unless inconsistent with Commonwealth law.
• SOP Act does not conflict with any Commonwealth law about National Land.

Seat of Government

• “Exclusive” in s 52(i) excludes State laws, not laws of a self-governing Territory.
• Parliament intended the ACT to legislate for its whole territory unless specifically restricted.

Result:
The ACT SOP Act validly applied to the project.

 

Key Takeaways

1. Payment schedules in the ACT must:

• Identify the specific payment claim,
• State the scheduled amount (even if $0),
• Provide reasons for each withheld amount.

2. Respondents must address the entire claim

• If even one line item is not addressed, the schedule is invalid.
• Partial answers will render the schedule invalid, meaning the entire claimed amount becomes immediately recoverable as a statutory debt.

3. Emails can qualify, but only if they fully comply

• The ACT regime allows informal documents,
• But strict statutory content must still appear in the document itself.

4. Repeating claims is permissible

• If no adjudication has occurred, previous amounts can be re-claimed.

5. ACT SOP Act applies even on National Land

• Including diplomatic missions and federally controlled land.

 

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