Building and Construction Industry Security of Payment Act 1999 - Only one Payment Claim can be made for each month, unless the Contract provides differently

28/04/2020

One trap for Contractors issuing multiple invoices that are styled as Payment Claims under the Act is issuing more than one per month, where the construction Contract in question does not permit more frequent Payment Claims.

The Building and Construction Industry Security of Payment Act 1999 relevant provides:

“Except as otherwise provided for in the construction Contract, a claimant may only serve one Payment Claim in any particular named month for construction work carried out or undertaken to be carried out (or for related goods and services supplied or undertaken to be supplied) in that month.”

Recently, we considered a matter where a sub-Contractor was retained by a head Contractor for a principal to do construction work at various sites in New South Wales.

There was no detailed signed Contract, just an informal arrangement under which the construction work was undertaken from time to time and then invoices issued for the work undertaken to the head Contractor.

As it turned out, in any given month there were a number of jobs undertaken, and a number of invoices or “Payment Claims” issued. None were paid by the head Contractor.

A receiver was then appointed to the head Contractor. There was a real risk that it would go into liquidation, and that it would not be in a position to pay the sub-Contractor.

The sum total of the smaller invoices issued over a number of months was considerable.

Because of the inability of the invoices issued each month (other than the first) to constitute valid Payment Claims under the Act, the remedy was to await until the expiry of the current month, and then issue a single Payment Claim in respect of all the prior invoices or claims that had not been paid.

This is because:

s.13(1A) provides:

“A payment claim may be served on and from the last day of the named month in which the construction work was first carried out (or the related goods and services were first supplied) under the Contract and on and from the last day of each subsequent named month.”[1]

and s.13(6) provides:

Subsection (5) does not prevent the claimant from—

(a)    serving a single payment claim in respect of more than one progress payment, or

(b)    including in a payment claim an amount that has been the subject of a previous claim, or

(c)    serving a payment claim in a particular named month for construction work carried out or undertaken to be carried out (or for related goods and services supplied or undertaken to be supplied) in a previous named month.

The head Contractor would then have 10 business days in which to serve a Payment Schedule, pursuant to section 14(4), failing which it would become liable to pay the amount claimed in the Payment Claim on the due date for payment, which in this case would have been 20 business days after service of the Payment Claim, pursuant to s.11(1B).

The only difficulty with sending a new Payment Claim was that it delayed the process of being able to proceed to an Adjudication Determination, and enforcement of an Adjudication Determination as a judgment of a Court.

That delay could have been avoided if the sub-Contractor was aware of the provisions of the Act before it commenced work.

If an Adjudication Determination had issued and not been complied with by the head Contractor, the sub-Contractor could then invoke the provisions of the Contractors Debts Act 1997 to seek to obtain payment of the debt from the principal, or take advantage of the new provisions in Division 2A of the Building and Construction Industry Security of Payment Act 1999.

These processes will be the subject of another article shortly.

If you are looking for legal assistance in one of above categories or any other building or construction matter, please contact Richard Watson Accredited Specialist Building & Construction or Shereen Da Gloria his Personal Assistant to discuss your matter and seek timely appropriate advice.