Avoiding an unhappy new year: the critical timeframes you need to know about in the silly season

Christmas season is fast approaching! You may already have plans to shut the doors to your business, turn off your emails, and head to the coast for the festive season.

But, before you take off, make sure that you have systems in place to deal with time-sensitive matters that could arise in your absence (and no, we’re not talking about your answering machine!).

Payment claims and statutory demands are frequently sent during the Christmas period, in the hope that they will be overlooked by the recipient and critical timeframes will be missed. We are sure that you would rather not start the New Year with a judgment being entered against you in relation to a debt that you dispute, or responding to a winding up application.

As an early Christmas present to you, this eBrief provides a timely reminder of the most critical time frames you need to think about.

What critical timeframes do I need to be aware of?

Payment claims under the Security of Payment Act

In our earlier eBrief we explained the timeframes for lodging a payment claim and a payment schedule under the Building & Construction Industry (Security of Payment) Act 2009.

The Christmas period poses a particular challenge in respect of payment claims, for two reasons.

First, in your haste to get out the door you might end up issuing a claim too early. If you have previously issued a claim in that period, your claim will be invalid.[1] If you have not previously issued a claim in that period, an early claim may either be invalid, or it might be deemed to be received on a later date. The case law in relation to claims made early is conflicting on this point.

Second, if you are away, you might miss responding to a valid payment claim in time. If you intend to dispute a payment claim made under the Act, you only have 10 business days from the day you receive it to respond with a payment schedule (unless your contract specifies a shorter period).

This time frame:

  • Does not include the day you received the payment claim.
  • Does not include Saturday, Sunday or public holidays.
  • Does not include 27,28,29,30 or 31 December.
  • Does include the remainder of any ‘shut down’ period, even if your contract says you do not have to respond to payment claims during that time.

If you do not respond to a payment claim issued under the Security of Payment Act with a payment schedule within 10 business days, the full amount of the payment claim is due and payable.

If you have not provided a payment schedule within time and the claimant sues you, you will only be able to defend the claim on very limited grounds. You will not be permitted to put forward arguments that the work is defective, already claimed for or not within scope. You will (in the vast majority of cases) be required to pay the claim and institute separate proceedings later if you wish to contest that the money was owed to the claimant.

Statutory demand under the Corporations Act

If your business is incorporated, you also need to keep an eye out for statutory demands. A statutory demand is a formal written demand issued pursuant to the Corporations Act, and it can be issued by any creditor of your company who is owed more than $2,000.00. It is regularly used by creditors as a scare tactic to collect debts.

If you intend to pay the claim in full, you have to do that within 21 calendar days (i.e. including Saturdays, Sundays and public holidays) of receiving the demand.

If you intend to dispute with debt, you have to apply to the court to have the demand set aside within 21 calendar days of receiving it.

If you do nothing, on the 22nd calendar day, your company will be considered ‘insolvent’ and the creditor can make an application to wind up. It will be very difficult (and expensive) to defend that application.

What should I do to avoid missing claims or demands?

Payment claims can be given to a respondent company in the ACT by:

  • delivering it personally to any of the company’s executive officers;
  • sending it by prepaid post to the company’s registered office or any of the company’s other business addresses;
  • faxing it or emailing it to a fax number or email address used by the company; or
  • leaving it at the company’s registered office or any of the company’s other business addresses with someone who appears to be at least 16 years old and to be employed at the address.

In NSW, however, a payment claim can only be served by email if that is expressly provided for in the relevant construction contract.

To avoid returning from holidays to discover you automatically owe money, make sure that all of your business addresses (including the registered office), any fax machine, mailbox or post office box related to your business, and any email accounts used by your business, are regularly attended to. A court will not care if you were overseas or at the coast when the claim was served.

Statutory demands can only be served either on a director of the company personally, or on the company’s registered office. [4] However, as long as the demand is delivered to the registered office (either by hand or by post), it is irrelevant whether anyone actually became aware of the demand. It is therefore important that you know where your company’s registered office is, and that the post box and premises are being checked over the silly season.

We can help you if a catastrophe strikes over the Christmas break – just send an email to Alisa and she will make sure that someone from our team gives you the assistance that you need. Don’t leave it until it’s too late!

Want more information?

Our Building and Construction Dispute Resolution Team can provide straightforward advice on strategies for getting paid, responding to payment claims, preparing adjudication applications or responses or responding to statutory demands.

Alisa Taylor — Partner — Construction Project Delivery & Disputes Team
(02) 6279 4388
alisa.taylor@mvlawyers.com.au

Kate May — Lawyer — Construction Project Delivery & Disputes Team
(02) 6279 4403
kate.may@mvlawyers.com.au