Estate Property Holdings Pty Ltd v Barclay Mowlem Construction Ltd [2004] NSWCA 393

What the court decided

Hodgson JA gave the substantive reasons, and Mason P and Giles JA each agreed with him [1], [2]. On or about 15 November 2002 Barclay Mowlem Construction Ltd contracted with Estate Property Holdings Pty Ltd to design and build four residential towers in Gosford [5]. On 28 May 2004 Barclay served Estate with what purported to be a payment claim under the Act, totalling $4,900,497.34 [6]. The claim included $1,606,561.50 for piling work finished more than twelve months before service, while the rest of the work in the claim had been done within those twelve months [6].

Estate provided no payment schedule within ten business days, and Barclay sued for the claimed amount and moved for summary judgment [7]. Before the primary judge, Estate's only point was that the piling work had been "last carried out" more than twelve months before the claim was served, so the claim did not comply with section 13(4)(b) [10]. At the time, section 13(4) of the Act provided that a payment claim could be served only within the period fixed under the contract or within twelve months after the construction work "to which the claim relates" was last carried out, whichever was later [9].

The primary judge, Einstein J, identified three possible readings of the twelve-month limit [3], [11]. The first required only some work under the contract in the period, the second some of the work for which payment was claimed and the third some work on each item claimed [11]. As he had in his earlier decision in Leighton Contractors Pty Ltd v Campbelltown Catholic Club Ltd, Einstein J accepted the first reading [12]. Einstein J gave Barclay summary judgment and ordered Estate to pay interest and costs [3]. The Court of Appeal heard the leave application on the basis that, if leave was granted, no further hearing of the appeal would be needed, and granted leave [4].

Counsel for the appellant, Estate, argued that the third reading was correct [14]. The judgment at [13] and [14] refers to the grounds and the argument as Barclay's, but they were advanced for Estate as appellant [4], [10], [13]. Estate accepted that, where the work claimed for was a continuous process, it was enough that some of that work was carried out in the period [14]. But Estate submitted that the words "last carried out" did not authorise including discrete items of work completed in full more than twelve months before service [14]. Estate pointed to the definition of construction work, which included preparatory operations such as site clearance and laying foundations, as treating those operations as discrete parts of construction work [15]. On Estate's argument, including a discrete item completed more than twelve months before service made the claim invalid, or at least invalid as to that item [16].

Hodgson JA considered that, under section 13(2)(a), a payment claim had to identify the particular work for which payment was claimed, not merely the whole of the work being done under the contract [17]. He thought the words "to which the progress payment relates" indicated this [17]. He said that view was strongly confirmed because, without that identification, a respondent could not give a meaningful payment schedule with reasons, which in turn would make "wholly unreasonable" the bar in section 20(2B) on relying in an adjudication on reasons not in the schedule [17].

Consistently with that view, Hodgson JA read "to which the claim relates" in the twelve-month limit as also referring to the work for which payment was claimed, so that some of that work had to be carried out in the period [18]. Hodgson JA concluded that Einstein J's acceptance of the first reading, in this case and in Leighton, was incorrect [18].

Hodgson JA found no basis in sections 13 to 15 for splitting the claimed work into discrete items and testing each item against the twelve-month period [19]. He relied on the references in those sections to "the amount" of the progress payment, "the claimed amount" and "the unpaid portion of the claimed amount", which weighed against considering each item separately [19]. He added that the line between discrete items and continuous processes of construction was not clear-cut [20]. In his opinion there was no good reason to bring so unclear a distinction into the operation of the Act [20].

Hodgson JA concluded that the second reading was correct and the third was not [21]. He found that conclusion further confirmed by section 13(6), which suggested that items more than twelve months old could be included in a claim if they had been claimed before, so long as the claim related to some work done within the period [21]. Hodgson JA held that the payment claim therefore complied with the twelve-month limit [22]. The Court dismissed the appeal with costs [1], [2], [22]. The costs of the leave application and of a notice of motion about payment pending the appeal were to be included in the costs of the appeal payable by Estate [23].

Why it matters

The Court of Appeal tied the twelve-month limit in the Act, as it stood in 2004, to the work for which payment was claimed, not to the contract as a whole, holding the second reading correct [18], [21]. The Court also held that the limit did not apply item by item, so a completed item did not put a claim out of time while some of the claimed work fell within the period [19], [21]. The decision concerns the New South Wales Act, and Victorian readers should check the Building and Construction Industry Security of Payment Act 2002 (Vic) before relying on it.

Numbers in square brackets are paragraph numbers of the judgment. This note summarises a decided case for education and is not legal advice. See how the notes are written.