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09 February 2018

How to make a payment claim under security of payment in NSW

This article explains how to make an effective payment claim under the Building and Construction Industry Security of Payment Act 1999 (NSW).

1. Make sure you are covered by the Act

The Act only applies to contracts, whether written or not, for construction work carried out or for related goods or services supplied in New South Wales. (You can read more about the NSW security of payment legislation here.)

Certain types of building contracts are excluded. These include:

  • contracts for residential building work where a party to the contract proposes to, or already lives in, the premises; and
  • construction work or related goods or services carried out or supplied more than 12 months ago.

You will not have any rights under the Act without a relevant construction contract. 

In addition, a corporation in liquidation will not be able to serve payment claims or take action to enforce them, including by making an application for adjudication.

2. Check there is an available date for making the claim

The Act gives contractors the right to claim progress payments on and from the date provided in the contract or on and from the last day of the month. A payment claim under the Act will be invalid if served at an earlier date. (You can read more about this, here.)

Usually your contract will identify when payment claims can be made. Ordinarily this will be once per month, and typically towards the end (or on the last day) of the month.

If the contract does not provide a date for serving payment claims, the relevant date will be on and from the last day of the month in which the construction work was first carried out or the goods or services were supplied. Where the contract has been terminated, the Act provides for a final payment claim, which may be served on and from the date of termination. 

Unless the contract otherwise provides, only one payment claim can be made in any particular named month. This can be a critical consideration if you only have one available date left.

3. Plan to serve the claim at the right time

A claim sent before the proper date will not be effective (see the Regal Consulting case).  You may have to wait for the next available date before you can make a claim.

A payment claim must be made within 12 months after the construction work or the goods or services to which the payment claim relates were last carried out or supplied. A contract may provide for a period longer than 12 months but it cannot seek to reduce the 12 month period.

4. Address the claim to the right person

A payment claim must be served on the person who, under the construction contract, is or may be liable to make the payment.

For example, you cannot serve your claim on a related entity of the entity (or person) with whom you entered the contract.

In a practical sense, you may have difficulty obtaining judgment or enforcing a determination unless the respondent's details on your claim match those in your contract.

The courts have found that service of a payment claim on a superintendent given authority to receive payment claims on behalf of a principal may constitute valid service under the Act (see the Consolidated Quality Projects case). Whether this is true for your contract will depend on the terms of your contract and how the contract has been administered.

The courts have also found that a payment claim directing payment to a third party debt factor is an invalid payment claim for the purposes of the Act.


5. Ensure the claim contains the correct information

The payment claim must expressly state that it is made under the Building and Construction Industry Security of Payment Act 1999.

The payment claim should contain enough detail and information so that the respondent is aware of the issues in dispute. In Multiplex v Luikens, the court stated:

"A payment claim and a payment schedule should not … be required to be as precise and as particularised as a pleading in the Supreme Court.  Nevertheless, precision and particularity must be required to a degree reasonably sufficient to apprise the parties of the real issues in the dispute."

Make sure your claim contains sufficient detail to enable the recipient to understand, with a reasonable degree of precision, what you are claiming for and how the amount claimed has been calculated.

6. If you are a head contractor, include a correctly completed Supporting Statement

A payment claim without a supporting statement will not be a valid payment claim for the purposes of the Act (see the Kitchen XChange case).

A supporting statement is a declaration to the effect that all subcontractors have been paid all amounts due and payable.

You can download an example of the Supporting Statement here.

7. Serve the claim properly

The time for the recipient to respond to your claim will not start until the claim has been served properly.

The safest way to serve the document is by hand (which can be done through a process server), but this will often be impractical.

The problem is that sometimes service by other means may not be effective.

For example, in a Queensland case (Conveyor & General Engineering v Basetec Services), service of documents by Dropbox was found to be ineffective as it was not contemplated by the contract. 

Email can be effective, subject to the terms of the contract. If your contract expressly prohibits email service of payment claims, this may not amount to valid service. If you are going to use email and it is not prohibited, make sure you obtain a delivery and (if possible) read receipt.

Sending a cover letter with the details of the claim on a USB key is not likely to be effective (see the Parkview case).

In all instances, check the contract and section 31 of the Act, as they will explain how you should proceed.

If you are sending the documents to a physical address, check the contract and, if necessary, conduct an ASIC search to make sure you have the correct address for your desired recipient.

8. Keep evidence of service

Finally, make sure you keep written evidence of service. If you are serving the claim by email, this means retaining the email and (ideally) obtaining delivery and read receipts.

If you are serving by courier, this means a delivery receipt signed by the recipient and any other records the courier may be able to provide.

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Turtons is a commercial law firm in Sydney with specialist expertise in the construction and technology sectors.

We specialise in helping businesses:

  • improve their everyday contracting processes,
  • negotiate large commercial contracts and other deals that fall outside of "business as usual", and
  • undertake strategic initiatives, such as raising capital, buying businesses, implementing employee share schemes, designing and implementing exit strategies and selling businesses.
Morgan McIntosh | Senior Associate


Morgan McIntosh | Senior Associate


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Morgan is a specialist construction lawyer in Sydney who helps companies navigate through large or unusual projects and streamline their contracting processes through simplified contracts.

morgan.mcintosh@turtons.com | (02) 9229 2901