Southern Han Breakfast Point Pty Ltd (In Liquidation) v Lewence Construction Pty Ltd [2016] HCA 52: Valid Payment for Construiction Contract

Today (21 December 2016), the High Court has unanimously allowed an appeal from the Court of Appeal of the Supreme Court of New South Wales in the case of Southern Han Breakfast Point Pty Ltd (In Liquidation) v Lewence Construction Pty Ltd [2016] HCA 52. The High Court held that the existence of a reference date under a construction contract is a precondition to the making of a valid payment claim under s 13(1) of the Building and Construction Industry Security of Payment Act 1999 (NSW) (the Act)

Background to the Case

The appellant (Southern Han) and the respondent (Lewence) were parties to a construction contract for the construction by Lewence of an apartment block (the Contract).

On 27 October 2014, Southern Han gave Lewence a notice purporting to exercise its right under the Contract to take out of Lewence's hands the whole of the work remaining to be completed. Lewence treated the giving of that notice as repudiation of the Contract and purported to accept the repudiation and to terminate the Contract. On 4 December 2014, Lewence served on Southern Han a purported payment claim, which claimed payment for work carried out by Lewence up to 27 October 2014.  Following the collapse of the Contract between the parties, an adjudicator ordered the appellant to make payments to the respondent in recognition of progress on the works. 

In the Supreme Court

In the case of Southern Han Breakfast Point Pty Limited v Lewence Construction Pty Limited [2015] NSWSC 502 (5 May 2015), Southern Han sought a declaration in the that the purported determination was void or, alternatively, an order in the nature of certiorari quashing the purported determination. The primary judge made the declaration sought, construing the Act as requiring a reference date to have arisen under the Contract as a precondition to the making of a valid payment claim, and finding that there was no reference date to support Lewence's purported payment claim.

In the Court of Appeal

In the case of Lewence Construction Pty Ltd v Southern Han Breakfast Point Pty Ltd [2015] NSWCA 288 (25 September 2015), their honours allowed Lewence's appeal, holding that the existence of a reference date is not a precondition to the making of a valid payment claim under the Act. By grant of special leave, Southern Han appealed to the High Court, claiming that a reference date is a jurisdictional precondition, that no reference date arose here, and that Lewence’s unlawful service of two payment claims meant the adjudicator had no jurisdiction to determine the later claim.

In the High Court

The High Court held that the existence of a reference date under a construction contract within the meaning of s 8(1) was therefore a precondition to the making of a valid payment claim under s 13(1). There was nothing in the Contract to indicate an intention that Lewence's right to make progress claims was to survive termination, thus preventing a future reference date from arising. The High Court allowed the appeal, set aside the orders made by the Court of Appeal and in their place ordered that the appeal to the Court of Appeal be dismissed.

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Southern Han Breakfast Point Pty Ltd (In Liquidation) v Lewence Construction Pty Ltd [2016] HCA 52

Lewence Construction Pty Ltd v Southern Han Breakfast Point Pty Ltd [2015] NSWCA 288

Southern Han Breakfast Point Pty Limited v Lewence Construction Pty Limited [2015] NSWSC 502

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