When a payment claim lands in your inbox under the Building and Construction Industry Security of Payment Act 1999 (NSW), the clock starts ticking immediately. Missing critical deadlines can have serious financial consequences.
The construction industry moves fast, and payment disputes can escalate just as quickly.
When builders are served with a payment claim under the Building and Construction Industry Security of Payment Act 1999 (NSW) (the Act), they are immediately bound by strict statutory timeframes that need to be acted on.
Too often, we see builders and contractors who have waited too long to respond, only to discover they have lost the right to dispute the claim entirely. By the time they seek legal advice, they are already liable for the full amount claimed, regardless of whether the work was completed properly or the claim is even valid.
Here, we explain the steps a builder should take when served with a payment claim.
Understanding what you are dealing with
Before you do anything, you must verify that the payment claim you have received is valid under the Act. Not every invoice or demand for payment qualifies.
A compliant payment claim must contain three essential elements:
- A description of the construction work, goods, or services being claimed for,
- The dollar amount the claimant is seeking,
- A specific declaration stating: “This is a payment claim made under the Building and Construction Industry Security of Payment Act 1999 (NSW)”.
The courts have adopted a practical approach when assessing payment claims. Minor administrative errors or formatting issues won’t necessarily invalidate a claim, provided the core statutory requirements are met. This means you cannot simply ignore a claim because of small technical defects.
The critical deadline you cannot miss
Document the exact date and method of service as soon as you receive the claim.
Your deadline to respond depends on which timeframe expires first:
- The response period specified in your construction contract, or
- 10 business days from the date you received the claim.
If you miss this deadline, you may become liable to pay the entire claimed amount by the contractual due date, with limited ability to challenge it afterward.
Preparing your payment schedule: your one opportunity to dispute
A payment schedule is your formal response to reduce or reject the amount claimed. This document must be drafted carefully because it represents your defence position.
Your payment schedule must:
- Be in writing, addressed directly to the party who issued the claim,
- Identify which payment claim it responds to,
- State the amount you propose to pay (the “scheduled amount”), even if that is zero,
- Clearly state why you are withholding payment or paying less than the claimed amount, including your specific calculations for any deductions. These reasons are the only grounds you can rely on if the matter proceeds to adjudication. Any issues you fail to raise in the schedule are permanently waived – you cannot introduce new reasons for rejecting/reducing the payment claim during the adjudication.
Builders who respond to payment claims without legal advice may either miss critical deadlines or fail to include all reasons for rejecting/reducing a payment claim.
Once a valid payment schedule is served, and dependant on the nature of the payment schedule, the claimant has 20 business days to serve an adjudication application should the claimant dispute the basis for the reduced payment claim.
If you are planning to dispute any portion of a payment claim, contact Attwood Marshall Lawyers immediately. Our construction law specialists can review the claim, identify all available defences, and draft a payment schedule that protects your position.
What happens if you don’t respond in time?
Failing to serve a payment schedule within the prescribed timeframe means that you lose the opportunity to rely on a payment schedule, and the reasons in support of the payment schedule, at any adjudication. This may give rise to the full amount of the payment claim being claimed against you as a judgment debt.
You also forfeit your right to raise contractual defences, set-offs, or counterclaims that might otherwise have significantly reduced or eliminated your liability. This only applies to adjudication applications. In the event the claimant commences proceedings in the state courts / tribunal, you will be able to raise your defence/s in the ordinary course of the proceeding.
Your position after serving a valid payment schedule
If your scheduled amount reflects what you are genuinely willing to pay, you must make that payment by the due date specified in either your contract or the Act.
If you have reduced the claimed amount in your schedule and served it within the prescribed timeframe, and the claimant disputes the payment schedule, the claimant may proceed to adjudication under the Act or commence recovery proceedings in courts.
Responding to adjudication: another tight deadline
Should the claimant file for adjudication, you will be served with their application. From the date of service, you have exactly five business days to lodge your response.
This is a tight timeframe to compile all relevant documentation, review the claim thoroughly, and prepare a comprehensive response that addresses every element of the claimant’s case.
Attwood Marshall Lawyers’ construction litigation team has extensive experience preparing adjudication responses within these tight deadlines. We understand what adjudicators look for and how to present your position in the most effective way.
The binding nature of adjudication outcomes
An adjudicator will review both the application and your response before issuing a determination. This decision is binding and immediately enforceable. It’s also difficult to challenge except in very limited circumstances involving jurisdictional error.
The adjudication process moves rapidly, often concluding within weeks, and the financial consequences of an adverse determination can be substantial. This is not a process to approach casually or without experienced legal representation.
Why early legal advice makes all the difference
We’ve seen too many builders come to us after the deadline has passed, asking if there is anything we can do. Unfortunately, once you have failed to serve a payment schedule in time, your options are limited. The statute is designed to favour cash flow over ultimate justice, meaning you may be forced to pay now and argue later – if you still have grounds to argue at all.
Our construction law specialists can:
- Assess whether the claim is valid and has been properly served and help you with your response,
- Identify all contractual and statutory defences available to you,
- Draft comprehensive payment schedules that preserve every possible ground of defence, and
- Represent you throughout the adjudication process, if required.
The cost of getting expert legal advice at the outset is minimal compared to the potential cost of getting it wrong.
Recent matter
We were recently engaged by a builder who had received a payment claim from a sub-contractor.
The builder disputed the amount claimed on the basis that, among other things:
- the subcontractor was not entitled to claim GST;
- the subcontractor had, on multiple occasions, breached the agreement between the parties;
- the breaches caused significant loss to the builder.
After taking instructions, we determined that the payment claim should be reduce to $NIL and, as such, a payment schedule was issued in accordance with the Act identifying all the reasons for disputing the payment claim.
An adjudication application was not served within the statutory timeframe (20 business days). The claimant has now lost the opportunity to seek adjudication, and we did not receive any response from the solicitors for the sub-contractor.
Attwood Marshall Lawyers – experts in resolving building and construction disputes
We understand the pressures of the construction industry and can respond quickly to protect your interests. Don’t let a payment claim catch you off guard.
Attwood Marshall Lawyers has a dedicated commercial litigation team that is well-versed in building and construction law, including payment disputes between contractors and subcontractors.
Contact Attwood Marshall Lawyers Commercial Litigation Department Manager Georgia Trapp on (07) 5506 8257, email gtrapp@attwoodmarshall.com.au, or free call 1800 621 071.
