Question 1: If the contract does not provide a rate of interest and the parties make no submission on interest, how would the Adjudicator decide the rate of interest under s.15?
The adjudicator must, in every adjudication, determine the rate of interest payable on overdue progress payments (Section 26(1)(c)).
The assumption in this exercise is that the construction contract does not provide a rate of interest.
If the claimant makes a submission (and the adjudicator is satisfied with that submission) that the construction contract is a “building contract” as defined in Part 4A of the Queensland Building Services Authority Act 1991 (“QSBA”), then section 15(3) applies and interest is payable at the “penalty rate” under section 67P of the QSBA.
That section provides a “penalty rate” of interest on progress payments that are late. The rate is the sum of 10% a year plus the rate comprising the annual rate, as published from time to time by the Reserve Bank of Australia, for 90 day bills.
In cases where the construction contact is not a “building contract” as defined by the QSBA, then section 15(2) prevails and the rate of interest to be applied is the rate prescribed under the Supreme Court Act 1995, section 48(1) for debts under the judgement order.
Where the parties make no submission of interest, an adjudicator should not try to work out whether the contract is one to which the QSBA section 67P applies. Unless a party submits that interest should be at the rate under section 15(3), the adjudicator should not try to assist the claimant and proceed to apply section 15(2).
The adjudicator is to determine the rate only – not the amount – of interest that is to be paid. This can be expressed by way of the following examples:
“The rate of interest payable in the adjudicated amount is the penalty rate prescribed under section 67P of the Queensland Building Services Authority Act 1991”
or
“The rate of interest payable on the adjudicated amount is the rate prescribed under the Supreme Court Act 1995, section 48(1) for debts under a judgement order.”
It is the authorised nominating authority that calculates the amount of interest due at the date of issue of the adjudication certificate.
Question 2: Assume that the payment claim includes an amount for interest on previous progress claims which are not paid on time. Assume that the claimant claims that the amount is payable under s.15(2) or s.15(3) of the Act. Is the claimant entitled to include such a claim in the payment claim?
What difference, if any, would it make if the previous progress claim were not claims under the Act but were duly made under the terms of the construction contract?
The claimant has a statutory entitlement to interest on progress payments that are not paid on time irrespective of what the contract provides.
A progress payment is defined in Schedule 2 to mean a payment to which a person is entitled under Section 12. Section 12 provides that from each reference date under a construction contract, a person is entitled to a progress payment if the person has undertaken to carry out construction work, or to supply related goods or services, under the contract.
Given that “interest is payable on the unpaid amount of a progress payment that has become payable” (section 15(2)), then interest is payable on a progress payment whether or not the progress payment has been claimed under the Act.
The claimant is entitled to include in the payment claim an amount of interest on previous progress claims which were not paid on time, and claim that the amount is payable under section 15(2) or section 15(3).
If any payment claim is not paid by the due date, the claimant should ensure that the next payment claim includes interest from the due date for payment of the earlier payment claim to the reference date for the new payment claim.
REFERENCES
- Davenport P, Adjudication in the Building Industry (2nd edn, Sydney, The Federation Press, 2004) p42
- Jacobs S J, Security of Payment in the Australian Building and Construction Industry (2nd edn, Sydney, Lawbook Co, 2007) s95.670
- Davenport P, Supplement to Adjudication in the Building Industry 2nd Edition by Philip Davenport, (2004), p2
- Davenport P, Guide for Adjudicators in Queensland, (2004), p6
- Davenport P, Adjudicate Today Adjudication Training – Examples of Decisions and Determinations, (2009), p13
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