Playing with fire: Failure to properly respond to a Payment Claim can leave you burnt!
The Building & Construction Industry Security of Payment Act 1999 (NSW) (the Act) aims to provide for a fast and smooth debt recovery process for progress payments in relation to construction work. The legislation also sets out a framework for the assessment and determination of disputed progress Payment Claims, including providing specific timeframes that contracted parties must adhere to.
Generally speaking when a claimant performs construction work under a construction contract they will serve a ‘Payment Claim’ on a respondent setting out, amongst other things, the construction work performed and the amount claimed for that work.
It is what happens after this point that is subject to a significant number of disputes between parties.
In circumstances where the recipient of a Payment Claim (the respondent) doesn’t intend to pay the claim in full, they are required to serve a ‘Payment Schedule’ within 10 business days after receipt of the Payment Claim (or a shorter period if provided by the construction contract), even if they don’t believe the Payment Claim is valid.
The failure to serve a Payment Schedule within the requisite time period will result in the respondent effectively risking their right to defend any subsequent application served by a claimant.
Even if attempts are made to comply with the Act by serving a Payment Schedule in time, a purported Payment Schedule may be disregarded on the basis that it’s defective. The effect of this will be that the respondent may expose themselves to having the dispute determined on the basis that no valid Payment Schedule was served, resulting in a loss of the right to defend themselves.
In order for a Payment Schedule to be considered valid it must:
- Be in writing and addressed to the claimant;
- Identify the payment claim to which it relates;
- Identify the scheduled amount of payment that it is proposed be paid; and,
- If the amount the respondent proposes to pay is less than the amount claimed in the Payment Claim, the Payment Schedule should set out:
- The amount (if any) that the respondent agrees to pay;
- The amount the respondent agrees not to pay; and,
- Detail all reasons as to why the respondent intends to withhold any amount, including how the valuation of the withheld amount is calculated.
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