Security of Payment insight #1: Payment claims

Payment claims

  1. The validity of a payment claim is a threshold issue to any adjudication determination being valid. It is a jurisdictional issue. Without a valid payment claim, any adjudication determination made on the back of that invalid payment claim will in turn itself be invalid.
  2. There has been an amendment to the legislation in NSW, having effect to construction contracts entered into from 21 October 2019 which touches on this point. The amendments were made to address recommendations made by John Murray AM in his Review of Security of Payment Laws. Pre-amendments, the legislation provided that individuals were entitled to submit payment claims on and from ‘reference dates’. A claimant was only entitled to submit one payment claim on and from a reference date. That language was considered confusing and so the concept of reference dates was removed. It has been replaced with a statutory entitlement to make a payment claim once per month on the last day of the month, and a right to make an additional final claim after termination. This change applies to contracts entered into after 21 October 2019.
  3. A payment claim needs to sufficiently identify the construction work to which the payment claim relates. The payment claim also needs to be served within the time required time. If it is not, there will be a jurisdictional error, discussed further below.[1]

How to prepare a payment claim

  1. The best approach to preparing payment claims is to have an Excel sheet, which reconciles all contract sum amounts claimed to date and the amount of each contract sum item claimed in that payment claim.
  2. Variations and Extensions of Time should be set out separately, although still in an Excel sheet. All possible contractual entitlements to variations and EOTs should be identified, expressly, together with a short submission as to why the contractor is entitled to the monies under that clause identified. This will be the backbone of any subsequent adjudication application.
  3. A covering letter/submission can also be issued with a payment claim if the contractor is intent on adjudicating. Invariably such a submission with a payment claim will alert the respondent party that an adjudication is forthcoming however that will often be reasonably obvious to most contracting parties regardless of whether a covering submission is included. The covering submission can deal with categories of claims or each discrete claim with more detail than may be offered by the Excel submission. There is a strategic consideration here of whether the payment claim should be presented in a “legalistic” manner or not, which will again have the effect of alerting the respondent (or not) of future intentions to adjudicate, which will depend on the circumstances of each claim.

[1] EQ Constructions Pty Ltd v A-Civil Aust Pty Ltd [2021] NSWSC 1604.

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