Final payment claims – what are the time limits?

Contractors and subcontractors: what you need to know before submitting your final payment claim. 

The Building and Construction Industry (Security of Payment) Act 2021 (WA) (SOPA) helps contractors, subcontractors and suppliers get paid on time for their construction work or supply of related goods and services. These rights may be used whilst the work is underway – and they extend to helping you get paid once your work is completed, by giving you the right to make a final statutory payment claim. 

But this right to make a final statutory payment claim does not last forever. 

When can a final payment claim be made?

SOPA (at section 23(5)) says the latest date a final payment claim may be made is before whichever of the following is the latest:

1. The date provided for in the construction contract (if any);
2. The date that is 28 days after the end of the defects liability period (DLP);
3. The date that is 6 months after the completion of all construction work to be carried out under the construction contract; or
4. The date that is 6 months after the supply of all related goods and services to be supplied under the construction contract.

This has led to us being asked a number of questions:

• What if the contract says I have to submit my payment claim within 10 days of finishing work? 

In that regard, we say that section 23(5) says it’s the “latest” of the various dates that is relevant, and if the date that is 28 days after the expiry of the DLP is after the date stated in the contract, then the latter date is the relevant end date. 

• What does the expression “after the completion of all construction work to be carried out” mean?

The answer to this is a bit more complex.

There is no WA case law yet on the phrase, “the completion of all construction work to be carried out” but there has been judicial consideration of equivalent drafting in Queensland. 

In SHA Premier Constructions Pty Ltd v Niclin Constructions Pty Ltd[1] (SHA), the Court was required to consider when “the completion of all construction work to be carried out under the construction contract” occurred.

At paragraph [43], Justice Bond made the following observations:

• “Prior to termination, practical completion had been achieved for each of the contracts but extended defects liability periods were still running;
• While the contracts were still on foot, there was, at least potentially, construction work to be carried out under them, given the possibility of further rectification work being required. That was because rectification work constitutes “construction work” and the defects liability periods had not expired;
• Once the contracts had been terminated, Niclin had neither the obligation nor the entitlement to carry out any construction work under the contracts. Accordingly, once the contracts had been terminated, the proper assessment of the relationship between the parties in relation to each contract was that there was no longer any further construction work “to be carried out under the construction contract”. In every real sense, termination brought about the “completion” of all construction work to be carried out under the construction contracts. The final payment claims were given within six months of that date;
• It could, at least theoretically, be demonstrated that all construction work to be carried out under the contracts had been completed at an earlier date than the date of termination. Theoretically, a tribunal of fact might be persuaded that, on a particular earlier date, it was not possible that any further work was to be completed under the construction contracts because the works had been completed without defects. Thus, the six-month period might have commenced on an earlier date; and
• If the period provided by section 75(3)(c ) is the longest period and termination brought about the completion of all construction work, then SHA’s argument that the payment claims were given after the end of this period fails because all the payment claims were brought within the relevant six-month period.”

While these observations provide some clarity that termination may be indicative of construction work being “completed”, further issues arise in circumstances where termination is contested. 

Termination of a contract ≠ completion of all construction work

In Vantralia Pty Ltd v Redline Water Infrastructure[2] (Vantralia), it was found that the date that a contract was purportedly terminated, where the termination is ultimately held to be invalid, will not be accepted as the latest date when construction work under a contract is completed. 

In this matter, Vantralia purported to terminate the contract on 18 August 2022, and Redline purported to terminate on 30 August 2022. 

Redline submitted its final payment claim outside of Vantralia’s purported termination, but within six months of its purported termination. Each party argued that the termination by the other party was invalid. Redline proceeded to lodge an adjudication application in respect of the final payment claim, resulting in the adjudicator determining that Vantralia was to pay Redline the adjudicated amount. 

Vantralia appealed the adjudication decision on the basis that Redline’s final payment claim was out of time. Vantralia contended that, once the contract was terminated, Redline had neither the obligation nor entitlement to carry out any construction work under the contract. 

The Court considered that the prospective flavour of the expression “work to be carried out” indicated that it was designed to encompass work that may be carried out in the future. It is possible that the language is designed to ensure that the six month time period does not start until the completion of all work, even work not yet complete at the time of the final claim or the final payment. Demobilisation work, for example, may not occur until after the final claim or payment. 

One of Vantralia’s claims was that Redline had breached the contract by failing to proceed with the works expeditiously and without delay. The Court agreed with the adjudicator’s finding that Vantralia did not have a contractual basis to terminate the contract on 30 August 2022. Rather, there may have been a number of reasons why Redline was delayed in its works or had only claimed a portion of the contract price and was entitled to suspend works due to Vantralia’s failure to pay the full amount claimed in Redline’s payment claim. 

The Court found that Vantralia had not established the jurisdictional fact that the final claim was not given within 6 months after the completion of all construction work to be carried out under the construction contract. 

In delivering its decision, the Court highlighted that parties should not equate the termination of a contract with the completion of all construction work. 

Unfortunately, the parties did not descend into the evidence and did not put arguments based on evidence about the completion of the work, because their focus was on whether the contract was validly terminated by the other party. For example, it would have been helpful if the Court had the opportunity to consider whether the concept of ‘work under the contract’ included demobilisation or crew recovery costs. 

Key takeaways

The decisions of SHA and Vantralia are not binding on WA Courts. However, those cases provide us with some guidance on how a WA Court may assess the latest date a final payment claim can be made. 

SHA demonstrates that the date of the contract termination, whilst it implies cessation of work, may not in fact be the latest possible date when the construction work under the contract was complete. A cautious approach should be taken. The time limit is not necessarily six months from the date when the contract was terminated, rather the focus is on the end date of when work could be completed. Therefore, termination of the contract is strong evidence, or at least some evidence that the contract works are “complete”, however, it should not be treated as conclusive evidence. 

In some cases, such as in Vantralia, the date when the contract was validly terminated may be contested, such that it would be undesirable for the parties to focus entirely on whether and when the contract was validly terminated. 

The word ‘completion’ should be given its ordinary meaning, in the sense of the word ‘conclusion’ as in, no further work is required. The cases highlight that section 23(5) is prospective to ensure that the 6 month time period does not start prematurely until the completion of all construction work. 

If you are unsure whether you are in time to make your final payment claim, or need help with your progress claims, please contact Tom Jacobs or a member of our Projects, Infrastructure and Construction team. 
 

[1] [2020] QSC 307.

[2] [2023] QSC 291.