Construction Disputes – Is your payment claim valid?

Recently, ABKJ Lawyers were able to help yet another client achieve a positive outcome in what could be considered a landmark case in the area of construction law. [1] The Court’s decision in that matter set a precedent to assist in determining various principles that must be adhered to in order for construction payment claims to be considered valid.

Denbrook Constructions Pty Ltd v CBO Developments Pty Lts [2022] QDC 184

In late 2019, Denbrook (the Plaintiff) entered into a Construction Management Contract with CBO (the Defendant) for construction works on a property in Paradise Point. The Contract provided that progress payments for the construction works may be claimed by Denbrook at regular intervals throughout the construction process.

Throughout the construction process, payment claims were submitted by Denbrook in a consistent manner and form, which outlined the proportion of various works being claimed and provided an itemised summary of the costs associated with those works. The proportion of works being claimed in any given payment claim was identified by stating the total progress percentage of work completed as at the time of that claim, and the percentage of work that had been completed from the last claim to the current claim. The payment claims otherwise provided no further information to identify what goods and services were provided by Denbrook in relation to each respective payment claims.

In early 2021, a payment claim (“PC26”) was submitted by Denbrook for construction goods and services provided within the relevant period. Like previous payment claims, PC26 did not identify the goods and services provided as part of the claim. However, the format of PC26 was substantially different to previous payment claims, and it did not describe the proportion of works completed in the same manner as previous payment claims.

CBO provided Denbrook with a payment schedule for PC26 pursuant to the Act, but it was not provided within the required period of time after receipt of that claim. As a consequence, Denbrook sought summary judgement for payment of the amount being claimed in PC26. When the matter was heard in the District Court in December 2021, CBO did not dispute that they had failed to provide a payment schedule within the relevant time period, but instead argued that PC26 was not a valid payment claim under the Act and that they accordingly were not required to make a payment in respect of the claim.

In that instance, the Court was not convinced that CBO had no prospect of defending the claim, and the application for summary judgement was dismissed and the matter was listed for a further hearing. In April 2022, the matter was again heard in the District Court, where it was determined by the Court that PC26 was indeed an invalid payment claim.

Denbrook argued that the submission of a payment schedule by CBO, though outside of the required time period, evidenced that PC26 was a valid payment claim. This argument was dismissed by the Court, who determined that the format of PC26 was so different to previous payment claims that it relied upon reference to those previous payment claims in order to be interpreted correctly. The Court found that PC26 failed to sufficiently identify which works or related goods and services it was claiming payment for, and concluded it was essentially just a statement of works and not a valid payment claim for works done.

Valid Construction Payment Claims

In order for a payment claim for construction works to be considered valid, a recipient of that claim must be able to understand on the face of the claim what works had been performed for which the builder is claiming payment. It is therefore essential for builders and contractors to be prudent in recording when goods and services have been provided so that they are able to be easily identified in future payment claims.

If you have any questions or concerns regarding construction works or property issues generally, please do not hesitate to contact us on (07) 5532 3199 for more information.

[1] Denbrook Constructions Pty Ltd v CBO Developments Pty Ltd [2022] QDC 184.