Reading time: 5 minutes

If you have entered into a contract or other arrangement for construction work or goods/services related to construction, you should be aware of the application of the Building and Construction Industry Security of Payments Legislation. There are statutory schemes in every state and territory in Australia, but for our purposes, we’re looking at the NSW version of the legislation (the Building and Construction Industry Security of Payment Act 1999 (NSW)). You can read our FAQs for a general overview of the security of payments legislation. In this article, we are focusing on what constitutes a payment claim under the security of payment legislation and why it is so important to know what can constitute a payment claim.

What Constitutes a Payment Claim?

Our FAQs make the point that under the NSW legislation, the bar for what constitutes a payment claim is set pretty low. This means that it can sometimes be important to err on the side of caution when making a judgment about whether or not a contractor has made a payment claim. The legislation stipulates that a payment claim needs to:

  • Identify the work that has been carried out; and
  • Quantify the progress payment amount that is being claimed.

If the payment claim is coming from the head contractor, it also needs to include a statement in agreement with the regulations saying that all subcontractors have been paid.

Importantly, for contracts entered into after 21 April 2014, a payment claim doesn’t need to expressly state that it is a payment claim made under the relevant security of payments legislation unless it is a contract for the carrying out of residential building work under the Home Building Act 1989.

Finally, it is important to note that the legislation allows a person who claims to be entitled to a progress payment to serve a payment claim on the person who, under the relevant contract, “is or may be liable to make the payment”. So depending on the terms of a contract, a sub-contractor may be entitled to serve a payment claim on the principal directly.

What all of this means is that you may receive a payment claim that technically complies with the requirements of the legislation, but which doesn’t otherwise look like a payment claim. The language used in the legislation is broad enough to encompass things that don’t look like invoices in the traditional sense. For example, a payment claim from a sub-contractor could come in the form of an email that sets out very simply the work performed, and the amount claimed. It is important to be on the look-out for payment claims like this, as the implications of failing to answer a payment claim (even an informal one) can be very severe.

What Do I Have to Do if I Receive a Payment Schedule?

Let’s say you have received an email from a subcontractor relating to construction work that they have been carrying out for a project. If the email has identified particular work completed and then specifies the amount claimed, this is potentially a payment claim! Assuming it is, you now have ten business days (or a shorter period if specified in the contract) to prepare a payment schedule which sets out how much you propose to pay.

A payment schedule needs to identify the payment claim that has been made, set out how much you propose to pay, and set out any reasons you have for not paying the full amount claimed.

It may be a chore to respond to every email or that could constitute a payment claim under the Act. However, failing to set out a payment schedule within the time required will lead to the full amount claimed being owed to the contractor who has made the claim. If this amount goes unpaid, a contractor can seek to enforce its rights by applying to the Court for a summary judgment for the amount owed.

The Bottom Line

When you have entered into a contract relating to construction work or related goods and services, it pays to be vigilant. A few helpful points to remember when you’ve entered into an agreement for construction work or are otherwise having building works done:

  1. The contract you have entered may be relatively informal. It may even have been an oral agreement only – payment claims can still be made under such contracts;
  2. What constitutes a contract for construction or related goods and services can be very wide – the building of temporary structures can be construction that falls under the legislation, as can agreements for goods necessary for/incidental to construction projects;
  3. Payment claims can come in many shapes and sizes. Some payment claims can be formal (such as an invoice on the letterhead of the company you have contracted with). Some payment claims can be informal (such as an email).
  4. Serving a payment schedule on time and in the required form is crucial if you want to avoid payment of the entire amount claimed – in NSW you only have ten days to serve the payment schedule. Sticking your head in the sand is not an option!
  5. Talk to a lawyer if you are in doubt about what to do, and make sure you do it as soon as possible.

***

If you have received what you think to be a payment claim and need assistance responding or if you have any questions, get in touch with our building and construction lawyers on 1300 544 755.

Webinars

Redundancies and Restructuring: Understanding Your Employer Obligations

Thursday 7 July | 11:00 - 11:45am

Online
If you plan on making a role redundant, it is crucial that you understand your employer obligations. Our free webinar will explain.
Register Now

How to Sponsor Foreign Workers For Your Tech Business

Wednesday 13 July | 11:00 - 11:45am

Online
Need web3 talent for your tech business? Consider sponsoring workers from overseas. Join our free webinar to learn more.
Register Now

Advertising 101: Social Media, Influencers and the Law

Thursday 21 July | 11:00 - 11:45am

Online
Learn how to promote your business on social media without breaking the law. Register for our free webinar today.
Register Now

Structuring for Certainty in Uncertain Times

Tuesday 26 July | 12:00 - 12:45pm

Online
Learn how to structure to weather storm and ensure you can take advantage of the “green shoots” opportunities arising on the other side of a recession.
Register Now

Playing for the Prize: How to Run Trade Promotions

Thursday 28 July | 11:00 - 11:45am

Online
Running a promotion with a prize? Your business has specific trade promotion obligations. Join our free webinar to learn more.
Register Now

Web3 Essentials: Understanding SAFT Agreements

Tuesday 2 August | 11:00 - 11:45am

Online
Learn how SAFT Agreements can help your Web3 business when raising capital. Register today for our free webinar.
Register Now

Understanding Your Annual Franchise Update Obligations

Wednesday 3 August | 11:00 - 11:45am

Online
Franchisors must meet annual reporting obligations each October. Understand your legal requirements by registering for our free webinar today.
Register Now

Legal Essentials for Product Manufacturers

Thursday 11 August | 11:00 - 11:45am

Online
As a product manufacturer, do you know your legal obligations if there is a product recall? Join our free webinar to learn more.
Register Now

About LegalVision: LegalVision is a commercial law firm that provides businesses with affordable and ongoing legal assistance through our industry-first membership.

By becoming a member, you'll have an experienced legal team ready to answer your questions, draft and review your contracts, and resolve your disputes. All the legal assistance your business needs, for a low monthly fee.

Learn more about our membership

Need Legal Help? Submit an Enquiry

If you would like to get in touch with our team and learn more about how our membership can help your business, fill out the form below.

Our Awards

  • 2020 Innovation Award 2020 Excellence in Technology & Innovation Finalist – Australasian Law Awards
  • 2020 Employer of Choice Award 2020 Employer of Choice Winner – Australasian Lawyer
  • 2020 Financial Times Award 2021 Fastest Growing Law Firm - Financial Times APAC 500
  • 2020 AFR Fast 100 List - Australian Financial Review
  • 2021 Law Firm of the Year Award 2021 Law Firm of the Year - Australasian Law Awards
  • 2022 Law Firm of the Year Winner 2022 Law Firm of the Year - Australasian Law Awards