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Keep Track of Time - SoP in NSW |
A Valid Reference Date is Essential for Payment Claims
The most important development regarding SoP in NSW during 2017 concerns Reference Dates.
While there may have been some questions remaining regarding the operation of Reference Dates, the High Court Case of Southern Han Breakfast Point Pty Ltd (In Liquidation) v Lewence Construction Pty Ltd [2016] HCA 52 (“Southern Han”) (decided in December 2016) has provided clear and indisputable guidance that:
- the existence of an ‘available’ reference date (i.e. a reference date that has not been used to make an earlier claim) under a construction project is a precondition of making a valid payment claim;
- any payment claim that is not made with respect to an ‘available’ reference date will not be a valid payment claim under the SoP Act and cannot be referred to adjudication;
- the ‘default’ reference date (being the last day of the month referred to under the SoP Act) is NOT applicable where the construction contract contains dates for reference dates;
- reference dates do NOT continue to arise after a construction contract is terminated – unless there is a clear express intention in the construction contract for the reference dates to ‘survive’ termination of the contract; and
- taking work out of the contractor’s hands suspends the contractor’s rights to payment, including payment for work carried out up to the time of the ‘take out’, unless there is a clear express intention in the construction contract that the contractor’s entitlement to payment will ‘survive’ the ‘takeout’.
Beware of Unfair Contract Terms
If you subcontract to businesses that employ less than 20 people and the subcontract price is less than $300,000 (or $1 Million if the contract is for more than 12 months) the unfair contract provisions of the Australian Consumer Law (ACL) will apply.
Many construction contractors appear to be unaware that a number of ‘normal’ provisions in ‘standard’ subcontracts will be void if challenged under the unfair contract provisions of the ACL which commenced operation in November 2016.
An ‘unfair’ provision is one that:
- creates a significant imbalance between the rights of the Contractor and the Subcontractor;
- is not reasonably necessary to protect the Contractor’s interests; and
- would cause significant financial damage to the Subcontractor if the Contractor sought to enforce the provision.
We recommend that you have all subcontracts reviewed and amended where appropriate to avoid the possibility of unwelcome challenges by disgruntled Subcontractors.
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