Critical timeframes under the scrutiny of payment legislation

Christmas is coming! But, before you dance on the tables at the office Christmas party, shut the doors and head down to the coast for the festive season, make sure you have systems in place to deal with payment claims received at the 11th hour or, even worse, those payment claims received when you have already left.

There are better ways to start 2014 than facing a high value payment claim under the Building and Construction Industry (Security of Payment) Act 2009 (ACT) (the “Act”) that you have missed during the shutdown period.

As an early Christmas present to you, this eBrief provides a timely reminder about the timeframes and limitation periods under the Act so that you can put systems in place to avoid unpleasant New Year’s surprises.

Why is this important to me right now?

The Act allows claimants to issue payment claims for construction work or related goods and services. It imposes strict timeframes for responding to those claims. It you do not intend to pay the claim in full (or at all), failing to respond within time excludes your right to respond to a claim on its merits, allows your subcontractor to stop work, and can even result in a judgment being entered against you. For claimants, not issuing a claim within time could mean that you cannot pursue a claim using the Act.

This eBrief sets out the relevant timeframes with reference to the ACT legislation, though similar provisions exist in the other States and Territories, with slightly different timeframes.

When can a payment claim be issued under the Act?

You can only issue one payment claim on and from each “reference date”, which is either:

  • the date set out in your contract (for example, the 15th of the month) for making contractual progress claims; or
  • if the contract doesn’t specify a date, the last day of each month.

If you issue multiple payment claims for one reference date, the payment claim is void. This is why it is sometimes better not to make every invoice a payment claim (see our earlier eBrief here) unless you are regimented about when the invoices are issued and all your contracts have matching reference dates. Otherwise, you may accidentally issue two claims within the same reference period resulting in the second one not being valid under the Act.

You can continue issuing payment claims on and from each reference date even after the date for the final claim under the contract, and even for work claimed previously, however a payment claim must include a claim for some work completed within the last 12 months.

What about defect rectification work?

In a recent Queensland case[1] the claimant argued that a payment claim could be made within 12 months from the end of the defects liability period. The argument was that the claim was for (amongst other things) return of retention monies and included a component for the defect rectification work. The Queensland Supreme Court rejected that argument. The maximum limit on issuing a payment claim is therefore 12 months from the date the works reach practical completion, provided always that the payment claim includes a claim for some work completed within the previous 12 months.

How long do I have to respond to a payment claim?

If you intend to pay the claim in full you need only certify and pay the claim according to your contract. If you intend to dispute the payment claim, you only have 10 business days from the day you receive it to respond with a payment schedule (a written document setting out why you are not intending to pay the full amount), unless your contract specifies a shorter period. In the Act, this timeframe:

  • Does not include the day you received the payment claim.
  • Does not include Saturday, Sunday or ACT public holidays.
  • Does not include 27, 28, 29, 30 or 31 December.
  • Does include the remainder of any “shut down period”, even if the contract says you do not have to respond to claims during that time.
  • Arguably (though the courts have not determined it definitively) means that your payment schedule needs to be issued within business hours (i.e. by 5.00pm) on the 10th business day.

If you do not give a payment schedule in time, the full amount of the payment claim is due and payable. If you give a payment schedule that says you will pay some amount (the “scheduled amount”) this amount must be paid. The time for payment is either the time set out in your contract or, if the contract is silent, 10 business days after you receive the payment claim.

If you do not pay on time the claimant can either: (a) go to adjudication or (b) sue you in court. If it sues you and you have not provided a payment schedule within time, you will only be able to defend the claim on very limited grounds, excluding arguments about the work being defective, already claimed for or not within scope. The claimant can also serve notice of an intention to suspend work. A suspension can start 2 business days after this notice is served, and will end 3 business days after the outstanding payment is received.

What should I do to avoid missing claims?

Respondents: make sure that if your shut down period exceeds the dates listed above, your office and any email accounts used by the business are manned so that you do not miss a claim served during the shutdown. Do not assume that your time for responding to claims served in the lead up to Christmas can wait until you come back from leave.
Claimants: ensure that any payment claims issued under the Act are issued on and from a reference date so that they are valid. If you are intending to issue claims close to the shut down period, note extensions apply and do not take enforcement steps until the modified 10 day period has expired.

Want to know more?

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

For more information or assistance, please contact:

Alisa Taylor — Senior Associate — Building and Construction Dispute Resolution
(02) 6279 4388
alisa.taylor@meyervandenberg.com.au

Kimberly Moore — Senior Lawyer — Building and Construction Dispute Resolution
(02) 6279 4339
kimberly.moore@meyervandenberg.com.au