Security of Payment Act Update – Court Confirms Only One Payment Claim May be Made After Termination


In the recent Supreme Court of NSW decision of BCFK Holdings Pty Ltd v Rork Projects Pty Ltd [2022] NSWSC 1706 the Court has held that the Building and Construction Industry Security of Payment Act (the Act) only permits service of one payment claim after termination of a contract.

In this case Rork Projects (the Builder) had issued a payment claim (the First Payment Claim) after termination of a building contract. The First Payment Claim was served on the superintendent and not BCFK Holdings (the Principal) as required by the contract. It was therefore not validly served on the Principal as required by the Act.

The payment claim subsequently came to the attention of the Principal who issued a payment schedule asserting that the payment claim was not validly served and was therefore not a valid payment claim under the Act.

The Builder alleged that it relied on the Principal’s representation the payment claim was invalid when deciding to issue a new payment claim being the second payment claim issued post termination of the Contract (the Second Payment Claim).

The Court held that:

  1. Following recent decisions of the issue (see our article on the decision in Piety Constructions Pty Ltd v Hville FCP Pty Ltd [2022] NSWSC 1318) because the First Payment Claim was actually received by the Principal is was validly served
  2. The Builder made a tactical decision, relying on advice from its solicitor, to not pursue an adjudication application on the First Payment Claim and instead serve the Second Payment Claim. Therefore, the Court did not accept any misleading or deceptive conduct on behalf of the Principal caused the Builder to act to its detriment.
  3. Section 13(1C) of the Act provides that once a contract is terminated only one payment can me made. This was held by the Court to be the proper construction of Section 13(1C) as evidenced by the Parliament’s Second Reading Speech which says:“The final reform associated with progress payment entitlements is new subsection 13(1C). This subsection aims to establish an entitlement to make a payment claim for a progress payment in circumstances where a contract has been terminated. The payment claim may be served on and from the date of termination. This reform closes a loophole identified by the High Court’s decision in Southern Han Breakfast Point Pty Ltd (in liq) v Lewence Construction Pty Ltd.”
  4. The Second Payment Claim was of no effect and the Builder did not have any right to apply for adjudication of the Second Payment Claim. The Adjudication Determination was therefore quashed.

Key Takeaway

It is important for Builders and Contractors to be aware of this decision as the ability to apply for Adjudication of a claim post termination of a contract is a much quicker and cheaper avenue to facilitate payment then Court or dispute resolution proceedings. Builders and Contractors should carefully consider their position post termination and ensure they capture every possible claim available.