VIC: Reference Date
A reference date needs to be identified before a payment claim is made under the Act. This date is normally easy to identify but some contracts make the easy difficult!
What is a reference date and does this date comply with the Act?
Under a construction contract, a person who has undertaken to carry out construction work or supply related goods and services, is entitled to a progress payment on and from each reference date. In other words, the reference date marks the particular time on or after which a claimant may issue a progress claim to a respondent. Note that while the progress claim may be issued on a date after the reference date, the entitlements of the progress claim can only be calculated to the reference date.
How do I determine the reference date?
The reference date may be determined by a term in the construction contract or if there is no express term in the construction contract then the Act defines it as the last day of the month. So:
If the construction contract DOES stipulate a time (e.g. the 10th day of the month) that a progress claim can be made
|That date is the reference date.|
If the construction contract DOES NOT make any stipulation about when a progress claim can be made
|Then the reference date is 20 business days after construction work was first carried out or related goods and services first supplied. Each 20 business days thereafter is the reference date. In lengthy contracts, care must be taken with this calculation.|
|If the construction contract DOES NOT make any express provision dealing with final payment||Then the reference date for the final payment is the day after the defects liability period expires or, if the contract provides for a final certificate, the day after that certificate issues. If no defects liability period or final certificate, the reference date is the day after which construction work was last carried out or related goods and services last supplied.|
|In the case of a single or one-off payment, if the contract makes no express provision with respect to the matter||
Then the reference date is the date immediately following the day that- (i) construction work was last carried out under the contract; or (ii) related goods and services were last supplied under the contract.
Sometimes a construction contract requires progress claims to be made at different stages of work. This sort of contractual provision is usually referred to as milestone payments. The claimant must check the construction contract to establish reference dates when ‘milestone payments’ are relevant.
Once the reference date has been identified, a progress claim can be prepared and served for work performed (or related goods and services provided) to that date.
How many times can a progress claim be made with respect to a reference date?
The Act stipulates that only one progress claim can be served in respect of each reference date under the construction contract. However this does not prevent a claimant from including an amount in a progress claim which was part of a previous progress claim.
Note: A progress claim is not the same as a payment claim unless it satisfies certain requirements which activate the provisions of the Act (see next section - Claimant prepares and serves Payment Claim). Where a progress claim is served which is not a payment claim (meaning the Act does not apply) the reference dates remain available for future payment claims i.e. they are not "used up".
Suppose construction work is carried out or related goods and services provided under a construction contract, where:
- The construction contract DOES NOT stipulate a reference date on and from which a progress claim can be made; and
- The claimant carries out work or provides goods and services in January.
The reference date for the progress claim would be 20 business days after construction work was first carried out or related goods and services first supplied. Each 20 business days thereafter is the next available reference date
There are some qualifications:
- As stated above only one progress claim can be made in respect of one reference date for the making of a payment claim. This means multiple progress claims can't be made in relation to the same reference date. However a progress claim which was previously submitted and not paid in whole or part, can be resubmitted as part of a new progress claim in respect of a later reference date.
- Progress claims (or parts of progress claims), which are the subject of an adjudication application and are valued in the adjudication determination, are excluded and can't be resubmitted in a subsequent progress claim made in respect of a later reference date, unless additional work has been undertaken. How an adjudicator will value the work (or related goods and services) will be subject to the particular circumstances arising from the adjudication application.
- Unless the construction contract provides for a longer period, a progress claim must be made within 3 months after the construction work to which the claim relates was last carried out or the related goods and services were last supplied. This 3 months period is considerably shorter than the 12 months permitted in NSW and Queensland. Commonly when parties seek to negotiate resolution to a payment dispute, it acts as a barrier to negotiation as the claimant loses the right to to adjudication after 3 months. Some respondents have been known to deliberately extend negotiations beyond the 3 months cutoff period to prevent an adjudication application being made.
Once the reference date has been identified, a payment claim can be prepared and served for work performed to that date.
Please move to the next step on the flowchart being "Claimant prepares and serves Payment Claim".