TAS: Claimant Prepares Payment Claim

A payment claim is a progress claim which activates the provisions of the Act.

A payment claim must:

Be served by or on behalf of a claimant.
Contain the words: “This is a payment claim made under the Building and Construction Industry Security of Payment Act 2009 Tasmania” or words to that effect.
Adequately identify the respondent and the work performed. The work performed must be work covered by the Act.
Claim an exact amount. A claim for $10,000 + GST should be described as $11,000 including GST.
Relate to work performed prior to a reference date.

Who is a Claimant?

A Claimant is a person who has carried out construction work, or supplied related goods and services, and is or claims to be entitled to a payment claim under a construction contract. Any sub-contractor who renders an invoice (progress claim) for payment is a claimant.

However to be a claimant under the Act the person against whom the claim is made (the Respondent) must be advised that the Act is being utilised in relation to a payment claim. This is easily achieved by including on the invoice the notice: "This is a payment claim made under the Building and Construction Industry Security of Payment Act 2009 Tasmania" or words of similar effect.

Am I entitled to make a payment claim under the Act?

Those who can make a payment claim under the Act include:

contractors against clients (eg. principals, developers, owner-builders);
subcontractors against contractors;
suppliers of building components against purchasers;
architects, engineers, and others (eg. consultants) providing advice against clients;
plant and equipment hirers against clients.

Construction work and services can be claimed under the Act even if the contract is not written and/or does not provide for progress payments with only a single payment to be made when work is completed.

Unless the construction contract provides for a longer period, the claimant has 12 months to serve a payment claim on the respondent from the time construction work to which the claim relates was last carried out or the related goods and services to which the claim relates were last supplied.

What work is covered?

Construction work and the supply of related goods and services includes:

building work;
civil engineering;
demolition;
electrical;
hire of plant or equipment;
landscaping;
maintenance;
professional services such as architectural design, surveying and soil testing;
supply of building materials.

The supply of related goods in Tasmania extends to building or construction work carried out outside Tasmania.

Can the Act be used to secure payment from Homeowners?

Yes. Unlike other States, the Tasmanian Act covers residential building work. It is important to determine whether the payment claim is for residential or other work. For residential work, the Act allows the respondent 20 business days after the payment claim is served on the respondent to provide a payment schedule although the contract may specify a longer (but not shorter) period. For other work this is 10 business days. The statutory timeframe for other work (not residential) can't be increased by either the parties or the adjudicator (although the contract can decrease the number of business days). A payment schedule served after 10 business days in relation to work that is not residential work (where the contract has not decreased the number of business days) will be invalid and the claimant MUST serve a second opportunity (s.21.4) notice on the respondent in order for any adjudication application to be valid.

What is residential building work?

A respondent has 20 business days (or longer period if stipulated by contract) after a payment claim is received to provide the payment schedule, if

the claim relates to a residential structure to be built on land; and
the respondent is the owner of the land; and
the respondent is not a building practitioner.

A "Residential Structure" means a building or structure that is a Class 1 or a Class 10 building or structure within the meaning of the Building Code of Australia, as in force from time to time. A Class 1 building is a single dwelling, boarding house, hostel or the like. A Class 10 building is a non-habitable building or structure e.g. private garage, swimming pool etc. The Australian Building Codes Board publishes the Building Code of Australia and has provided Adjudicate Today with an extract of the Class 1 and Class 10 building classifications from the Code.

Download Extract from Building Code of Australia Class 1 and Class 10

Full details about obtaining the Building Code of Australia is available from www.abcb.gov.au.

Definitions of "owner" in relation to land and "building practitioner" are set out in Section 19 of the Act.

An "owner", in relation to land, means any one or more of the following:

the person in whom is vested a fee simple in the land;
if the land is not registered under the Land Titles Act 1980 and is subject to a mortgage, the person for the time being holding the equity of redemption in that mortgage;
if the land is held under a tenancy for life, the person who is the life tenant;
if the land is held under a lease for a term of not less than 99 years or for a term of not less than another prescribed period, the person who is the lessee of the land;
a person who has a prescribed interest in the land.

A "building practitioner" means any of the following persons:

a building practitioner, or an owner builder, within the meaning of the Building Act 2000;
a person who holds a practitioner's licence, or a contractor's licence, under the Occupational Licensing Act 2005, authorising the person to perform electrical work within the meaning of Part 1 of Schedule 2 to that Act;
a person who holds a subsisting certificate of registration under the Plumbers and Gas-fitters Registration Act 1951 to perform a class of plumbing work referred to in that Act;
a person who holds a certificate of competency under the Workplace Health and Safety Regulations 1998;
a person who holds a subsisting certificate of registration under the Plumbers and Gas-fitters Registration Act 1951 to perform a class of gas-fitting referred to in that Act;
a person who is registered as an architect under the Architects Act 1929;
a prescribed person.

In all other non-residential payment claim disputes, it is 10 business days after the payment claim is served on the respondent. The contract between the parties may specify a shorter period in which the respondent must provide the payment schedule. In this case the shorter period applies.

What can I claim for?

A claimant can make a payment claim on the respondent for:

Construction work done;
Construction materials or plant provided;
Consulting services provided;
Interest on overdue progress payments;
Losses and additional expenses due to work being deleted from contract while work is suspended under the protection of the Act;
Cash security and retention monies; and
At the end of contract, a claim can be made for the final payment.

What is excluded?

A construction contract between parties to the extent that it forms part of a loan agreement, a contract of guarantee or a contract of insurance under which a recognised financial institution undertakes to lend or repay an amount lent; guarantee payment of an amount owing or repayment of an amount lent; or provide an indemnity relating to construction work carried out or related goods and services supplied.
Contracts in which the consideration payable for construction work carried out or related goods and services supplied under the contract, is calculated other than by reference to the value of the work or goods and services supplied.

How do I make a payment claim?

A payment claim must:

Establish the reference date for making a payment claim. The reference date is either the time stated in contract or, if there is no time stated, the last day of the month.
Describe the construction work, related goods or related services performed under contract and state the amount that is claimed based on the value of that work to the reference date. The payment claim will usually be in the form of a Tax Invoice.
Include the notice "This is a payment claim made under the Building and Construction Industry Security of Payment Act 2009 Tasmania" or a similar statement with that meaning.
Be served on or after each reference date by delivering, posting or faxing it to the respondent. The contract or common practice may provide for other methods of service, such as email.

Download template of a Payment Claim

What should I include with the payment claim?

The payment claim may also include attachments containing:

Statements detailing the extent of the work completed;
Completion certificates;
Delivery dockets;
Photographs;
Other applicable contract documentation requirements.

How do I serve a Payment Claim

The payment claim is not served until it is delivered in person to the respondent or lodged during normal business hours at the respondent's ordinary place of business or posted or faxed to the respondent's ordinary place of business (or as otherwise provided by the contract).

Claimants are strongly advised to keep a record of the time, date and manner of service on the respondent. The time for the respondent to provide the payment schedule (response) runs from the date of receipt of the payment claim. A respondent may deny receipt of the payment claim in which case the claimant must be able to evidence the date of service.

In the absence of any contract provision, we suggest that service of the payment claim be performed in one of the following ways with the preferred option being personal delivery by courier service which requires a signature.

Courier - signature required
Fax - Print and keep full page fax journal report as evidence of transmittal
Mail - Express Post: keep express post tracking number for delivery verification
Platinum Post: signature required
Ordinary Post: make a statement verifying the address, date of postage and other relevant details
Email (only to an email address which has a history of usage between the parties and/or as an agreed method of service of notices) - In email options, tick both "request a delivery receipt" and "request a read receipt"
A method prescribed under the relevant construction contract.

Avoid pitfalls

At the request of parties we have prepared a list of common reasons that applications fail.

When should I receive payment?

The date by which a claimant is entitled to be paid is the "due date for payment".

The due date for payment under the Act is the date on which a payment claim becomes due and payable either in accordance with the terms of the contract or, if there is no such valid provision, 10 business days* after the payment claim is made. Proper calculation of this date is imperative as a number of milestones under the Act are calculated from this date.

*Note: a business day is any day other than a Saturday, Sunday or public holiday or 27,28,29,30 or 31 December. The public holiday must be a holiday for all of the day and in the whole of the State. If the contract provides that payment is due 28 days after invoice then, upon service of the payment claim, the due date for payment under the Act is 28 days later. Endorsing all invoices as a payment claim ensures that claimants don't need to wait for additional, often lengthy, periods before seeking recovery of debts under the Act. The due date of payment under the Act (regardless of any contract provision) can't occur prior to service of the payment claim. If the claimant is not paid by the due date, they have a right to interest at the greater of the rate, if any, in the contract or the rate on Supreme Court judgments. The Supreme Court rate changes from time to time but is usually around 10% per annum.

How long do I have to wait for a response?

The next step of our flowchart provides crucial information for both claimants and respondents. Up until this time the Act's time frames and procedures were the same. However they now diverge based on whether the respondent does or does not provide a valid payment schedule to the claimant.

The respondent who fails to provide a payment schedule must be given a second opportunity to provide one. If they fail a second time, the Act effectively punishes the respondent by denying them the right to participate in the adjudication process. This results in the two different procedures which affect the interests and actions of both claimants and respondents. These procedures are fully described in the next step on the flowchart.

Please move to the next step on the flowchart being "Respondent has 10 business days after receipt of the Payment Claim (20 business days in relation to a residential claim) or shorter period if provided by construction contract to prepare and serve a Payment Schedule".

What other rights do I have?

The Act also provides that a claimant may take a lien or charge over unfixed plant or materials supplied by the claimant to the respondent for or in connection with the carrying out of the construction work.

A lien is the right to seize and sell goods in order to obtain payment. If the goods are sold for more than the amount owed under the Act then the balance must be paid to the respondent. The lien granted by the Act does not give the claimant preference over a lien or charge existing before the date upon which the progress payment became due. It does not give the claimant any rights where a third party owns the items. Generally speaking, when a principal pays a contractor for items, they become the property of the principal.

Before exercising a lien, legal advice should be obtained to ensure that there is no trespass upon the rights of others and thereby incur a liability to a third party.