Selected cases

High Court of Australia · [2016] HCA 52

Southern Han v Lewence

A High Court security of payment case about reference dates, payment claims and construction contract termination.

High Court of Australia21 Dec 2016

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Quick read

  • Security of payment claims depend on statutory timing.
  • A High Court security of payment case about reference dates, payment claims and construction contract termination.

Use this to check

  • Payment claim timing can determine whether adjudication is available.
  • Termination and repudiation can complicate progress payment rights.
  • Security of payment rules must be checked against the current legislation in the relevant jurisdiction.

Decision snapshot

  1. What happened

    • Southern Han and Lewence were parties to a construction contract for an apartment project.
    • The contract allowed monthly progress claims.
    • After Southern Han took work out of Lewence's hands and Lewence treated that as repudiation and termination, Lewence served a payment claim for work done before termination.
    • Southern Han argued there was no available reference date to support a valid payment claim.

  2. What the court had to decide

    • The High Court had to decide whether the existence of a reference date under the construction contract was a precondition to making a valid payment claim under the NSW security of payment legislation, and whether the relevant right survived termination.

  3. What the court decided

    • The High Court unanimously held that a reference date was a precondition to a valid payment claim under the legislation as it then applied.
    • The adjudication determination was therefore vulnerable because the statutory pathway had not been validly engaged.

Practical impact

Practical read

  • Security of payment claims depend on statutory timing.
  • Contractors and principals should check whether a valid reference date or current statutory trigger exists before assuming an adjudication pathway is open.

Useful next steps

  • Payment claim timing can determine whether adjudication is available.
  • Termination and repudiation can complicate progress payment rights.
  • Security of payment rules must be checked against the current legislation in the relevant jurisdiction.
  • Check the contract date for progress claims before serving a payment claim.
  • Review the current security of payment Act in the project jurisdiction.

Practical read

Southern Han is about timing, but timing in security of payment law is never a small detail. A contractor may have done real work and still lose the fast adjudication pathway if the payment claim does not meet the Act's statutory conditions.

The case has to be read carefully because security of payment legislation has been amended in some jurisdictions. For business owners, the evergreen lesson is to confirm the current legislation, the contract, the date work was done, the date the claim is served and whether the statutory preconditions are satisfied before pressing the button.

Checks to run

Key points

  • Check the contract date for progress claims before serving a payment claim.
  • Review the current security of payment Act in the project jurisdiction.
  • Get advice quickly after termination, suspension or work being taken out of a contractor's hands.
  • Keep payment schedules and adjudication deadlines in a controlled calendar.

Key takeaways

  • Payment claim timing can determine whether adjudication is available.
  • Termination and repudiation can complicate progress payment rights.
  • Security of payment rules must be checked against the current legislation in the relevant jurisdiction.

Related topics

Construction & TradesContracts & Commercial

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