Claims under construction and works contracts require specialist legal expertise and advice. The team at HHG has unique and award winning construction law expertise for the benefit of both contractors and developers, engineers and architects.
Patrick Stevedore Operations No. 2 Pty Ltd v McConnell Dowell Constructors (Aust) Pty Ltd [2014] NSWSC 1413 concerns a contractor’s application for adjudication of progress payment claims. The Court held that termination of the contract puts an end to the contractor’s right to make progress claims unless the contract expressly preserves those rights after termination.
This finding appears to have caused some controversy but we consider it, with respect, to be a correct and orthodox decision. The Court dealt with the issue in a way that accords with the nature of security of payment legislation given:
(a) such legislation is facilitative of a contractual regime for interim payments on account only;
(b) the amount and timing of payments under the contractual payment regime is usually governed by a lump sum construction contract; and
(c) there has long been a presumption that such contracts impose an entire obligation on the contractor to complete substantially the whole of the agreed scope of works in consideration of the lump sum contract price.
On this analysis, where the contract is terminated before practical completion of the works under contract, no contractual right to payment will have accrued under the contract and security of payment legislation, being designed merely to facilitate enforcement of such contractual rights fall away.
The Contractor or the principal may well be entitled to damages arising out of the termination, depending on the circumstances. But damages claims are entirely different to contractual payment claims. The distinction is critical and getting the payment claim wrong can have serious consequences.