by Julian Troy, Special Counsel

An established principle under the Building and Construction Industry Payments Act 2004 (BCIPA), and similar legislation in other states is that “there can only be one adjudication application for any particular payment claim for any particular contract” [1]. Payment claims which include claims for work performed under separate contracts are invalid and can never be the foundation of a valid adjudication application [2].  These principles were recently applied in the NSW case of Trinco [3] affirming the earlier Queensland decision of Matrix Projects [4].

During the course of construction projects, the scope of work may develop and change on the run.  Changes to scope, scheduling of work and/or rates charged can easily be accommodated under all construction contracts commonly in use.  These matters are dealt with as variations, work program revisions and the like.  If there are multiple principals on the same project, where each is responsible for separate but related components of the work, multiple contracts may be necessary.

Sometimes, however, parties create separate contracts or side arrangements for discreet packages of work where it is not necessary to do so.  This often complicates project management and contract administration and may also unnecessarily complicate the ability of the contractor to recover payment under BCIPA.  Care must be taken to prepare payment claims to avoid offending the one claim, one contract rule.

Where possible, contractors should avoid multiple contracts or arrangements on the same project.  Contractors should consider negotiating separable portions under one contract.  A contract with a single principal may be varied in this way as the scope of work develops to incorporate, where necessary, other named principals.

The suggested approach is beneficial for contractors for two main reasons:

(a) firstly, it simplifies contract administration by allowing the contractor to issue claims and notices under one contract instead of multiple claims and notices under multiple contracts where different terms may apply; and

(b) secondly, it simplifies the preparation of a single payment claim under BCIPA for all work on the project and eliminates the one claim, multiple contract argument potentially rendering the payment claim invalid.

Added to this, the risk of non-payment for the contractor is reduced because multiple principals are liable to pay, and there is a presumption (unless otherwise expressly dealt with in the contract), that each named principal is jointly and severally liable for all amounts due and payable to the contractor.

These procurement considerations may offer significant savings to project management and contract administration on a project.

Should you require advice on procurement of your project, our construction team can assist you.

 

[1] Rail Corporation of NSW v Nebax Constructions Pty Ltd [2012] NSWSC 6 at [44], Matrix Project (Qld) Pty Ltd trading as Matrix Homes v Tony Jason Luscombe trading as Luscombe Builders & Ors [2013] QSC 4 at [17]; Trinco (NSW) Pty Ltd v Alpha A Group Pty Ltd [2018] NSWSC 239 at [56]
[2] Trinco (NSW) Pty Ltd v Alpha A Group Pty Ltd [2018] NSWSC 239 at [61]
[3] Ibid
[4] Matrix Project (Qld) Pty Ltd trading as Matrix Homes v Tony Jason Luscombe trading as Luscombe Builders & Ors [2013] QSC 4

 

This information is intended to provide a general summary only and should not be relied on as a substitute for legal advice.

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