A Road less Travelled to Security of Payment?

On what is hopefully the last lap in completing the manuscript For Extra-Contractual Recoveries For Construction And Engineering Work, I am largely sticking to areas which have been considered by the courts. There are many of these. And they show that contractors often have routes to recovery which are not apparent from the express wording of the contract. But there are some routes which seem to be open, which has not been considered by the courts at all. Perhaps because nobody has ever tried them?

One of them concerns security of payment under the East Coast model. Is there any reason why the contractor should not seek to enforce its right to a progress payment by way of litigation or arbitration, i.e. outside the procedures established by the legislation? For the purpose of canvassing the point here, I refer to the sections in the South Australian Building and Construction Industry Security of Payment Act 2009, although the same point is available under other East Coast State regimes.

There are a number of reasons why a claim to a progress payment under section 8 of the Act[1] might be more attractive than a claim for interim payment pursuant to the terms of the contract. It is well established that the statutory right to a progress payment is parallel to and separate from the contractual right. A feature of the statutory right to a progress payment is, was the amount of the progress payment is prima facie calculated in accordance with the terms of the contract,[2] that it is not restricted by contractual mechanisms. Thus, whilst a contractual right might be limited by what has been certified, the statutory right is not so tethered. See for example Transgrid v Siemens Ltd [2004] NSWCA 395(2004) 61 NSWLR 521 at [35],  John Holland Pty Ltd v Roads and Traffic Authority of NSW [2007] NSWCA 140 at [37] and [38], Plaza West Pty Limited v Simon’s Earthworks (NSW) Pty Limited [2008] NSWCA 279 at [54].  At least arguably, such contractual mechanisms also include notice provisions, such that a particular claim might, if the contractual notice has not been provided, be barred as a contractual claim for interim payment, but permissible as a statutory claim to a progress payment under section 8 of the Act. Put another way, the amount of the statutory progress payment is to be calculated according to the underlying terms of the contract, and not according to the way that any contractual mechanisms have been administered. Continue reading