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Cashflow is the ‘Lifeblood’ of the Construction Industry: Has the High Court Applied a Tourniquet? Southern Han Breakfast Point Pty Ltd (in liq) v Lewence Construction Pty Ltd

By Matthew Bell

Southern Han Case Page

The December solstice of 2016 was celebrated in diverse ways around the world. At Stonehenge, druids and pagans greeted the mid-winter dawn. In Australia, construction lawyers were digesting the first High Court judgment on the Building and Construction Industry Security of Payment Act 1999 (NSW): Southern Han Breakfast Point Pty Ltd (in liq) v Lewence Construction Pty Ltd [2016] HCA 52.

The Court (Kiefel, Bell, Gageler, Keane and Gordon JJ in joint judgment) confirmed that the existence of a Reference Date under a Construction Contract is a precondition to the making of a valid Payment Claim (the capitalised terms are defined under the Act — more on that shortly). In doing so, the Court overturned the decision of the NSW Court of Appeal ([2015] NSWCA 288), effectively restoring the declaration by Ball J at trial ([2015] NSWSC 502) that the adjudicator had no jurisdiction to make a determination under the Act on a purported payment claim.

Ball J’s conclusion rested upon his Honour’s interpretation of the contract used here (AS4000-1997, a widely-used, construct-only form of construction contract) as having exhausted its capacity to generate ‘Reference Dates’ (which trigger the right to make a payment claim under the Act). This was based on alternate hypotheses: either the contract had been terminated for repudiation, or (if the contract remained on foot) the ‘show cause’ procedure then in effect suspended the right to claim payment.

The judgment is on a narrow point, but has wider significance. This is because the NSW Act has, as was noted by Senior Counsel for the appellants, Continue reading