Payment Schedules:

Under security of payment legislation, the recipient of the payment claim must either pay the amount claimed or respond by a payment schedule (within 10 business days in NSW) indicating the reasons why the proposed payment is less than the amount claimed. If the payment schedule proposes a payment of a lesser amount (or nil) then in any subsequent adjudication, the recipient will be limited to these reasons provided in the payment schedule.

Where no payment schedule is issued, the claimant is entitled to recover the amount of the payment claim as a debt due in a court of competent jurisdiction and may also suspend work under the contract.

Where a payment schedule is issued, the scheduled amount must be paid and the claimant is entitled to recover the amount of the payment claim as a debt due in a court of competent jurisdiction and may also suspend work under the contract.

Where a payment schedule states a lesser amount or ‘nil’ is proposed to be paid and the claimant disputes the schedule they can apply for adjudication within a certain time (in NSW this is 10 business days). The adjudicator then determines the amount to be paid by way of progress payment by reference to certain specified criteria and submissions made by the parties. The adjudication process is designed to be quick and the determination may not be the subject of review or appeal, although adjudication may be void on certain narrow grounds of fraud, or failure to comply with an essential requirement of the Act.

Following adjudication, the amount determined in respect of the payment claim must be paid. The claimant can recover this amount as a debt due and may suspend work until payment is made. It has been said that the legislation, once an adjudication is made, should be construed as intending to prevent repetitious re-ventilation of the same issues.

If a payment schedule is served and accepted by the contractor, but the principal does not make payment, the contractor may suspend work on 2 business days’ notice, pursuant to section 27 and is given statutory protection in relation to action taken by the principal under the contract in relation to such suspension. The contractor can also prepare and serve an adjudication application 20 business days from the due date for payment.

Also if the principal does not satisfy the payment claim or serve a payment schedule within the required timeframe, the amount claimed becomes a statutory debt. The contractor can suspend performance of the work, on 2 business days notice, commence court proceedings or prepare and serve a second opportunity adjudication notice.

It is impermissible to contract out of the legislation and contract terms under which the operation of the Act is, or is purported to be, excluded, modified or restricted. Also the Act voids provisions making payment conditional on the principal receiving payment from a third party, commonly known as “pay when paid” provisions or being conditional on action other under contracts.

Payment Claims and Schedules can be a complex component of Construction Law. If you require assistance with a building and construction legal matter, please contact us by telephone on (02) 9233 4048 or send an email to info@navado.com.au to make an appointment to see one of our Building and Construction Solicitors. 

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