Whether a 'reference date' as defined under the Building and Construction Industry Security of Payment Act 1999 (NSW) (Act) exists following the suspension of payment under a contract or the termination of a contract was considered in this case.  The case also highlights the consequences of accepting a repudiation of a contract since contractual rights (such as the right to progress payments) cease on termination.

Facts

Southern Han Breakfast Point Pty Limited (plaintiff) contracted Lewence (defendant) to build an apartment building. The construction work did not progress to schedule.

The plaintiff purported to exercise its right under the contract to take the works out of the hands of the defendant and suspend payment. The defendant treated that conduct as a repudiation and purported to accept the repudiation and terminate the contract.

The defendant then served a payment claim under the Act on the plaintiff that claimed payment for work done by the defendant up to the time the work was taken out of its hands. The claim went to adjudication and the defendant was awarded some of the claimed amount.

Under section 8 of the Act a person who has undertaken to carry out construction work is entitled to a progress payment on each reference date, being the date, if any, on which a claim for a progress payment may be made under the contract. The plaintiff applied to the NSW upreme Court to have the adjudication set aside for jurisdictional error on the basis that a reference date under the Act had not arisen as payment had been suspended under the contract following the plaintiff taking the work out of the defendant's hands. The defendant contended that under the Act it was entitled to claim for payment in respect of a reference date whether or not that reference date has actually arisen.

Decision

The court held that, under section 8 of the Act, the existence of a reference date was an essential pre-condition to an adjudicator's jurisdiction.

Therefore as the right to payment had either been suspended (and therefore there can be no date under the contract on which a claim for a progress payment can be made and consequently no reference date) or the contract had been terminated, no reference date had arisen under the contract and the adjudication was void.