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17 May 2019

How to respond to a payment claim under security of payment in Queensland

If you receive a payment claim under the Building Industry Fairness (Security of Payment) Act 2017 (Qld), you have limited time to prepare a payment schedule.  This article explains the process.


SOPA qld1. Be on the lookout for payment claims.

Payment claims made in Queensland no longer need to state that they are made pursuant to the Act. All that is required is a document that requests payment of an amount.  A simple invoice will suffice.

A payment claim is a document that:

  • is served on the person who, under the construction contract, is or may be liable to make the payment; and
  • identifies construction work or related goods and services to which the progress payment relates; and
  • indicates the amount of the progress payment.

Since you will have a limited amount of time to deal with the claim, you should have a system in place to ensure that any payment claim is promptly brought to the attention of someone who will be in a position to deal with it.

2. Determine when your response (payment schedule) is due

Before doing anything else, calculate when your response is due. Assuming the payment claim is valid, your payment schedule must be served within the earlier of:

  • 15 business days after you have received the payment claim; or
  • the time prescribed by the contract.

(See section 76 of the Act here.)

If you intend to pay the full amount of the payment claim on or before the due date for the progress payment to which the payment claim relates, you do not need to issue a payment schedule.

If you do not provide a payment schedule, you will forfeit your right to dispute the amount claimed during any adjudication process that may follow. 

If you do not provide a payment schedule in time, you will be liable to pay the full amount claimed under the payment claim. The claimant will be able to recover the full amount claimed as a debt in court or apply for adjudication if you do not pay by the due date (see section 77 of the Act here). It is therefore critical to ensure that your payment schedule is served on time. 

Failing to pay the amount in full by the due date, or failing to give a payment schedule within the response time if you do not propose to pay the full amount is an offence under the Act. It is also grounds for taking disciplinary action under the Queensland Building and Construction Commission Act 1991 (Qld).

3. Work out how and where your response will be sent

The manner of service is critical. Once you have worked out how your response must be sent, you can work out how long you actually have to consider and prepare your response to the claim.

You should not assume that service by email, Dropbox, USB key, document management system (e.g. Aconex) or website portal will be effective. (See for example the recent decision in Parkview Constructions for an example of service by USB key not being effective.)

Always check the terms of your contract to see what methods of service are permitted.

After you have worked out when and how your response will be sent, it is time to start considering the substance of the claim.

4. Consider whether the claim is in fact a valid payment claim under the Act

Just because a claim purports to be a payment claim under the security of payment legislation, does not mean that it is necessarily a valid claim.

If the claim is not a valid payment claim, the claimant will not have any rights (and you will not be exposed to any liabilities) under the Act.

A claim will not be a valid payment claim under the Act unless it:

  • is made pursuant to a construction contract covered by the Act;
  • is made in respect of a reference date, and made on or after that date; and
  • is served on the right person.

Determining whether a payment claim meets these criteria is not always a straightforward process. If in doubt, assume that it is a valid claim and that you are required to prepare a payment schedule.

Be aware that even if it is not a valid claim under the Act, it may still be a valid claim under the construction contract.

Further, some contracts will deem a payment claim to have been approved in full if a payment schedule has not been received within the agreed time frame. See, for example, clause 37.2 of AS 4000-1997, which states:

“If the Superintendent does not issue the progress certificate within 14 days of receiving a progress claim in accordance with subclause 37.1, that progress claim shall be deemed to be the relevant progress certificate.”

5. Include the prescribed details

A payment schedule must clearly identify:

  • the payment claim it is responding to; and
  • the ‘scheduled amount’, being the amount you propose to pay. (If you propose to pay nothing, the scheduled amount will be nil.)

If the scheduled amount is less than the claimed amount, you must set out your reasons for withholding payment.

6. Set out all of your reasons for withholding payment

If you do not intend to pay the full amount of the payment claim, for each item in the claim, you should set out:

  • the amount that is agreed (if any);
  • the amount that is not agreed; and
  • your reasons as to why you do not agree to pay the amount claimed, or part of the amount claimed.

Your reasons for withholding payment must be sufficient to enable the claimant to understand why you are withholding payment.

In Multiplex v Luikens, the Court said:

“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.”

When preparing your reasons for withholding payment, think about:

  • the substantial issues, such as whether certain work is claimable as a variation (by reference to the original scope), or the rates and quantities applied; and
  • the technical legal issues, such as time bars in your contract, or provisions that operate as preconditions for claiming payment (such as the giving of contractual notices).

If more than one reason applies to the same item, include them all. If you don’t include a reason for withholding payment in your payment schedule, but raise it later in an adjudication response if the claimant applies for adjudication under the Act, the adjudicator may require you to resubmit your adjudication response without the new reasons (see section 82 here).

7. Have the payment schedule signed by the right person

The person required to issue a payment schedule is the person upon whom the payment claim is served (i.e. the person liable to make the payment).

It’s possible for someone else to issue a payment schedule on behalf of that person, such as a superintendent or a solicitor, provided that person has been authorised to do so.

8. Serve the document properly and keep evidence of delivery

Following the principles discussed earlier, make sure the payment schedule is delivered in the right way and by the deadline.

If you are sending documents to a physical address, check the payment schedule and the contract to ensure you are sending the payment schedule to the right place. If you are dealing with a corporation, consider conducting an ASIC search to ensure the address is current.

If you have multiple addresses to choose from and you’re not sure which one to pick, it may be worth sending the payment schedule to all of them. Serving the document multiple times would be better than running the risk of not serving it properly at all.

When you arrange delivery, make sure you obtain evidence of service, such as:

  • a delivery and read receipt if sent by email (assuming email is permitted);
  • a transmission report if sent by fax; or
  • post or courier receipts.

9. Mark your diary and be ready for an application

If you think the claimant is likely to apply for adjudication, mark your diary for the date that you think an application is likely to be made. Section 79(2) of the Act sets out the time frames for making an adjudication application. The last date for making an application will vary from 20 to 30 business days.

If an adjudication application is made, you may only have as little as 7 business days to prepare your response. You can read more about adjudication responses here. However if you did not provide a payment schedule, you will not be entitled to submit an adjudication response. If it looks likely that you will receive an adjudication application, you should consider seeking legal advice at the earliest opportunity to ensure you have enough time to compile your best possible defence to the claim.

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About the Author

Bridgit Masson | Associate

Bridgit is a commercial lawyer whose practice is focused on transactional matters in the construction and technology space.


bridgit.masson@turtons.com | (02) 9229 2903

About Turtons

Turtons is a commercial law firm in Sydney with specialist expertise in privately owned construction and technology businesses.

Bridgit Masson | Associate

Author

Bridgit Masson | Associate

bridgit.masson@turtons.com

Bridgit is a commercial lawyer whose practice is focused on transactional matters in the construction and technology space.


bridgit.masson@turtons.com | (02) 9229 2903

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