A payment claim has landed. You have 10 business days.

The Building and Construction Industry Security of Payment Act 1999 (NSW) exists for one reason: to stop money getting stuck partway down the contractual chain. It does that by giving a person who carries out construction work a rapid, statutory right to be paid, and by making the consequences of ignoring a payment claim severe.

Most respondents we act for did not ignore the claim on purpose. They put it on the pile, intending to deal with it after the site meeting. That is the mistake.

What a payment claim actually is

A payment claim is a document served by the claimant on the respondent that identifies the construction work to which it relates, indicates the amount claimed, and states that it is made under the Act. It is served on or after a reference date. It does not have to be beautiful. It does not have to be right.

The payment schedule, and the ten business days

If you receive a payment claim and you do not propose to pay the full amount, you must serve a payment schedule. The schedule must identify the claim, state the amount you propose to pay, and, where that is less than the claimed amount, state the reasons for withholding.

You have ten business days from service of the payment claim, or the shorter period allowed by the construction contract, whichever comes first. Check your contract before you assume you have ten.

What happens if you do not serve one

Three things, all bad:

1. You become liable to pay the claimed amount on the due date. All of it, whether or not the work was done to that value.
2. The claimant can recover the amount as a debt in court, and in those proceedings you are not entitled to bring a cross claim or raise any defence in relation to matters arising under the construction contract.
3. If the claimant goes to adjudication instead, you cannot include in any late schedule the reasons for withholding that you never gave.

Read that second point again. The Act shuts the door on the argument you were saving.

Adjudication

Where a schedule is served but the scheduled amount is less than the claimed amount, or where the scheduled amount is not paid, the claimant may apply for adjudication. An authorised nominating authority appoints an adjudicator, the respondent lodges an adjudication response, and a determination follows on a compressed timetable.

The determination is interim. It does not finally decide your rights under the contract, and you can still litigate or arbitrate afterwards. But it is enforceable as a judgment debt, and in the meantime the money moves. In practice, that is what decides most projects.

Two things that catch people out

Residential owner occupiers are excluded

The Act does not apply to a construction contract for residential building work where the party for whom the work is carried out resides in, or proposes to reside in, the premises. If you are a homeowner renovating your own house, this regime is not the one that governs you. The Home Building Act 1989 and NCAT probably are.

Service is not the same as email

Whether a payment claim was validly served, and when, is one of the most litigated questions in this area. Check the notices clause in your contract. Check who received it. The date on the document is not necessarily the date that counts.

What to do today

• Diarise the response date the moment a payment claim arrives, and work in business days.
• Check the contract for a shorter period than ten business days.
• Write down every reason for withholding, including the ones you think are weak. You cannot add them later.
• If the deadline is inside a week, call a construction lawyer now rather than after.

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