“Business days” vs “calendar days” – How they affect payment terms

Recent Court of Appeal Decision highlights the importance of careful contract drafting and ensuring consistency, or at least an understanding, of the difference between the statutory and contractual definitions of “business days”, “calendar days” and “days”

The main purpose of the Building Industry Fairness (Security of Payment) Act 2017 (Qld) (BIF Act) pursuant to section 3(1) is to “help people working in the building and construction industry in being paid for the work they do”.

The BIF Act grants a statutory entitlement to a progress payment to a person if they have carried out construction work, or supplied related goods and services, under a construction contract irrespective of whether the construction contract makes provision for progress payments.

Once the person (claimant) has issued a valid payment claim for the progress payment under the BIF Act, section 76 of the BIF Act provides that the respondent must respond to the payment claim by giving the claimant a payment schedule within whichever of the following period ends first:

(a) the period (if any) within which the respondent must give the payment schedule under the relevant construction contract; or

(b) 15 business days after the payment claim is given to the respondent.

Relevantly, the definition of “business days” under the BIF Act specifically excludes a period which runs from 22 December to 10 January (inclusive) and therefore these days and are not included in calculating due dates. You can read our previous article on the “Christmas Shutdown” period here [https://constructlaw.com.au/christmas-shutdown-2022/]

The recent case of Allencon Pty Ltd v Palmgrove Holdings Pty Ltd trading as Carruthers Contracting [2023] QCA 6 (Allencon Appeal) considered the application of section 76 of the BIF Act and calculation of due dates for payment schedules in circumstances where the relevant construction contract provides a due date for payment schedule (progress certificate) that differed to that in the BIF Act. The judgement in this case highlights the importance of clarity within construction contracts, especially in relation to payment and due dates.

In the Allencon Appeal, the subcontract provided that payment schedules (progress certificates) were required to be given by Palmgrove (the contractor/respondent) within 21 calendar days of receipt of the claim for payment. Allencon (the subcontractor/claimant) applied for summary judgment for a debt it alleged was due on the basis that Palmgrove failed to provide a payment schedule within the correct timeframe. Allencon’s position was that the payment schedule was not given to it by Palmgrove in the lesser period of 21 calendar days (as provided by the subcontract) but was instead given to it in the longer period of 15 business days (as provided by the BIF Act). On this basis, Allencon contended that the payment schedule was given out of time.

The District Court at first instance found that the construction of the subcontract aimed to limit the operation of the BIF Act (by providing a longer period for the giving of payment schedules thus creating inconsistency between the terms of the BIF Act and the terms of the subcontract), and subsequently dismissed Allencon’s application for summary judgment.

On appeal, Justice McMurdo ultimately concluded that the relevant period for the payment schedule to be given was 21 calendar days (as set out under the subcontract), as:

  1. a claim for payment under the subcontract would also constitute a payment claim under the BIF Act;
  2. it cannot be said that the subcontract was inconsistent with the BIF Act as differing timeframes is a circumstance specifically provided for by the BIF Act wherein it gives the subcontract period a statutory effect depending upon whether that period ended earlier than the prescribed period of 15 business days; and
  3. a period of 15 business days from the delivery of a payment claim would be at least as long as a period of 21 calendar days, but due to the application of the Christmas shutdown (which adds 14 calendar days due to the definition of “business days” under section 76 of the BIF Act), 21 calendar days was the shorter period in which Palmgrove was to give Allencon its payment schedule.

As the payment schedule was issued after the 21calendar day time period, Allencon was entitled to summary judgment on the basis that a valid payment schedule had not been given by Palmgrove.

The Allencon Appeal affirms that both parties should ensure that careful consideration is given to the practical effect of payment terms in their contracts as well as the time requirements for the giving payment claims and payment schedules with reference to the BIF Act.

Construct Law Group regularly draft, review and advise on construction contracts on behalf of principals and contractors. We also provide contract administration advice to ensure compliance with the BIF Act.

This article provides general information and should not be taken to be legal advice. Each contract and set of facts are different and therefore you should obtain specific legal advice.

If you have any questions regarding contract reviews or would like us to assist with your current or future contract, please do not hesitate to contact our team on (07) 3139 1874 or at info@constructlaw.com.au.