Is your payment claim valid?
Below are questions you should be asking to ensure your payment claim is valid:
- Am I covered by the Act?
The Building and Construction Industry Security of Payment Act 1999 (“SOP Act”) applies to the majority of construction contract, whether written or not, for construction work carried out or for related goods or services supplied in New South Wales.
Under the SOP Act certain types of building contracts are excluded. These include:
- construction contracts that form part of a loan agreement, a contract of guarantee or certain contracts of insurance which involve the lending or repayment of money or the guaranteeing of payment of money; and
- construction work or related goods or services carried out or supplied more than 12 months ago.
You must have an applicable construction contract to have rights under the SOP Act [s7].
Further a corporation in liquidation will not be able to serve payment claims or take action to enforce a payment claim, including by making an application for adjudication of a claim [s32B].
If the corporation goes into liquidation after an adjudication application is made but before a final determination is made by the adjudicator, the adjudication applicant is taken to have been withdrawn on the day the corporation goes into liquidation.
- Is there an available date for making a payment claim
The SOP Act provides contractors a right to claim progress payments:
- on and from the last day of the named month in which construction work was first carried out and on and from each subsequent named month; or if the construction contract provides for an earlier date in a month, on and from that date instead of on and from the last day of the month;
- if a construction contract is terminated, on and from the date of termination [s13].
As a valid date for making a payment claim is on and from the last day of the month (or on and from any earlier date in the construction contract), a payment claim under the SOP Act will be invalid if served at an earlier date.
Unless your construction contract otherwise provides, only one payment claim can be made in any particular named month for construction work carried out in that month.
- When can I serve a payment claim?
A payment claim may only be served within the period of 12 months after the construction work or the goods or services to which the payment claim relates were last carried out or supplied.
A construction contract may extend that timeframe but cannot reduce the 12 month period. [s13(4)]
- Who should the payment claim be addressed to?
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 construction contract.
If the terms of your construction contract allow service of a payment claim on a superintendent given authority to receive payment claims on behalf of a principal, the courts have found that it will constitute valid service under the SOP Act.
- Does my payment claim have all the required 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 must identify the construction work (or related goods and services) to which the progress payment relates and must indicated the amount you claim to be due.
Your claim needs to contains sufficient detail to enable the recipient to understand, with a reasonable degree of precision, what you are claiming and how the amount claimed has been calculated.
- Are you a head contractor, if so what else is needed?
A head contractor must not serve a payment claim on a principal without a supporting statement
Any payment claim served by a head contractor without a supporting statement is invalid for the purposes of the SOP Act.
A supporting statement is a declaration to the effect that all subcontractors have been paid all amounts due and payable.
A supporting statement can be downloaded here https://www.fairtrading.nsw.gov.au/__data/assets/pdf_file/0006/984993/Supporting-Statement_Constructions_Contract_Updated-V6.pdf
- How do a properly serve my claim?
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 payment claim is by hand, however, this is often impractical.
The main concern is to ensure that your method of serve is valid under the SOP Act and/or your construction contract. Service by means other than as permitted under the SOP Act or your construction contract may not be effective service.
The SOP Act allows service by email or other methods authorised by the construction contract. If you are going to send a payment claim via email, you must ensure that the email address you propose to use to serve the payment claim is an email address specified by the recipient for the service of payment claims.
If you email the payment claim to an email address that has not been specified by the recipient as an email address for service of payment claims, the service may be invalid.
We are here to help
CML Lawyers is a commercial law firm in Sydney and Cowra with specialist expertise in construction law.
Support and assistance from experienced construction lawyers can make all the difference to your project and business. If you need assistance with preparing or disputing a payment claim, call as for advice.