Obtaining Judgement for a Certified and Unpaid Payment Certificate or Payment Advice

The general rule is that if a dispute arises in connection to the JBCC PBA or NSSA agreement, the parties cannot approach a court to resolve a dispute before they have followed the dispute resolution procedure prescribed in the agreement. There is one exception to this general rule, and it is found in the payment clause of the JBCC agreement.

The JBCC Principal Building Agreement (PBA) and JBCC Nominated Selected Subcontract Agreement (NSSA) have an Alternative Dispute Resolution Clause, which prescribes that any disputes that arise out of or that concern the agreement between the parties to that agreement, must be determined by means of adjudication or arbitration with an option to refer the matter to mediation.

This means that if a dispute arises in connection to the agreement, the parties cannot approach a court to resolve a dispute before they have followed the dispute resolution procedure prescribed in the agreement.

There is one exception to this general rule, and it is found in the payment clause of the JBCC agreement.

JBCC PBA and NSSA

In terms of the JBCC edition 6.1 clause 25.14 (NSSA) 25.15 (PBA) and edition 6.2 Clause 25.17, it says that “For the purposes of provisional sentence in relation to subcontract payment advice (NSSA) / payment certificate (PBA) only, the parties consent to the jurisdiction of any court of law of the country”

Subcontract payment advice is a defined term in the JBCC NSSA and is defined as “a document issued at regular intervals by the contractor stating the amount due and payable by the contractor to the subcontractor or vice versa using the JBCC subcontract payment advice format”.

A payment certificate is a defined term in the PBA and is defined as “a certificate issued at a regular agreed interval by the Principal Agent to the parties certifying the amount due and payable in terms of the JBCC payment certificate format”.

 What is a liquid document?

 A payment certificate or advice, which is signed by the principal agent (PBA) or the contractor (NSSA), is a liquid document that creates a debt and entitles the contractor (PBA) or subcontractor (NSSA) to payment.

A liquid document is a document presenting an express undertaking to pay an amount stated on it, which document does not require other evidence to prove the indebtedness of the person who signed it.

A liquid document must contain the following information:

1. An acknowledgement of indebtedness;
2. The amount of money due should be specified;
3. That payment is due to the Contractor (PBA) or Subcontractor (NSSA); and
4. Specify the details of the Contractor or Subcontractor to show that their identity is known.

The payment certificate or payment advice represents an obligation on the part of the employer (PBA) or contractor (NSSA) to pay the amount noted in the certificate.

Application for payment

In terms of the JBCC agreement, a Contractor (PBA) or Subcontractor (NSSA) can approach the Court for judgement in relation to a certified and unpaid payment certificate (PBA) or advice (NSSA) only. An application for payment (instead of provisional sentence) can be launched in the Court to obtain judgement against the Employer (PBA) or Contractor (NSSA)

What is an application for payment? It is a process whereby a Contractor (PBA) or Subcontractor (NSSA) who is in possession of a certified and unpaid payment certificate (PBA) or advice (NSSA) can approach the Motion Court to obtain judgement against the Employer (PBA) or the Contractor (NSSA) for the amount that is written on the document.

An application for payment follows the rules of application proceedings in Motion court. Application proceedings are based on the exchange of affidavits between the Applicant (party who is claiming payment) and Respondent (party against whom the application is brought). The affidavits set out all the facts and evidence upon which the Applicant’s claim or Respondent’s defence is based. The motion court roll provides for a speedier process than the trial court roll. At the hearing the legal representatives can only argue what is in the papers and, as a general rule, no oral evidence is allowed. The application procedure is followed in instances where there is said to be no dispute of facts and parties can only make submissions limited to what is contained in the documents.

Defences to the claim

There are instances where the Contractor (PBA) or Subcontractor (NSSA) will not succeed in obtaining application for payment. The Employer (PBA) or Contractor (NSSA) will have a valid defence in the following instances:

1. Contractor (PBA) or Subcontractor (NSSA) has cancelled the agreement; or
2. Contractor (PBA) or Subcontractor (NSSA) has been liquidated and the liquidator has elected not to complete the contract; or
3. Contractor (PBA) or Subcontractor (NSSA) has breached the agreement and there is a counterclaim for damages; or
4. The Contractor (PBA) or Subcontractor (NSSA) owes a larger amount to the Employer (PBA) or Contractor (NSSA) than their claim (set-off); or
5. A further defence based on the specific terms of the contract

The right to approach a court is also available to an innocent Contractor (PBA) or Subcontractor (NSSA) who is suing for a certified and unpaid previous payment certificates (PBA) or advice (NSSA) after cancellation of the agreement, which agreement was cancelled by the Contractor (PBA) or Subcontractor (NSSA) due to the breach by the Employer (PBA) or Contractor (NSSA), which right to remuneration survives the cancellation of the agreement.

There are certain instances where the Contractor (PBA) or Subcontractor (NSSA) can recover payment without a certificate or advice that has been issued. However, in this instance the Contractor (PBA) or Subcontractor (NSSA) will have to follow the Dispute Resolution Clause provided for in the agreement and a mediator’s opinion or adjudicators award, if final, will entitle the Contractor (PBA) or Subcontractor (NSSA) to payment. The dispute resolution process will also have to be followed if the amount is not clearly stated on the face of the certificate or if there is no certificate and the amount is uncertain or in dispute.

Conclusion

The general rule is that where a dispute arises in connection with the JBCC PBA or NSSA agreement, the parties cannot approach a court to resolve a dispute before they have followed the dispute resolution procedure prescribed in the agreement. However, where a Contractor (PBA) or Subcontractor (NSSA) has a claim for a certified and unpaid payment certificates (PBA) or payment advice (NSSA), which fulfils the requirement for a liquid document, they can approach a court by means of an application for payment for an order which will entitle them to payment. This process is not absolute as the Employer (PBA) or Contractor (NSSA) can have a valid defence against the claim for payment by the Contractor (PBA) or Subcontractor (NSSA).