ACT: Claimant Prepares & Serves Payment Claim

A person who, under a construction contract, has undertaken to carry out construction work or to supply related goods and services is entitled to receive a progress payment for work performed.

The claimant (the person claiming a progress payment) may serve a payment claim on and from the last day of the named month in which the construction work was first carried out (or related goods and services were first supplied) under the contract and on and from the last day of each subsequent named month.

However, if the construction contract makes provision for an earlier date in a named month (e.g. 25th of the month), then that will be the applicable date rather than the last day of the month.

If a construction contract has been terminated, a payment claim can be served on and from the date of termination.

Unless the construction contract provides for a longer period, a progress claim must be made within 12 months after the 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. It is not uncommon for construction contracts to provide for longer periods. One example is a contract which provides for a 12 month defects liability period and that the final claim for payment should be made within 28 days after the end of the defects liability period. In this example, the contract has extended the period for the making of the final payment claim from 12 months to 12 months plus 28 days. A contract can't reduce the 12 month period allowed by the Act.

A claimant must not give more than one payment claim for each calendar month, unless the construction contract provides for more than one payment claim to be given in a calendar month. However, this does not prevent the claimant from:

1. including more than 1 progress payment in a payment claim; or
2. including in a payment claim an amount that has been the subject of a previous claim; or
3. giving the respondent a payment claim in a particular calendar month for work carried out, or related goods and services supplied, in an earlier calendar month.

What is a payment claim?

A payment claim is a progress claim (invoice) which allows recovery of money owed using the Act.
It must:

• be served by or on behalf of a claimant; and
• contain the words: “This is a payment claim made under the Building and Construction Industry Security of Payment Act 2009 Act (A.C.T.)” or words to that effect.
• identify the respondent and the construction work performed or related goods and services;
• indicate the amount. A claim for $10,000 + GST should be described as $11,000 including GST;
• describe the items and quantities of work done or related goods and services provided; and
• relate to work performed on or prior to the last day of the named month (or an earlier day if provided by contract). If the payment claim is served early, it can't be used to support an application for adjudication.

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. e.g. any subcontractor who renders a progress claim for payment is a claimant.

Identify the Respondent

Ensure the payment claim is addressed to the legal entity that the claimant contracted with (the respondent). It is no use seeking an adjudication decision against a respondent if the name and/or ACN/ABN is incorrect. Courts won't enforce decisions unless the name and ACN/ABN of the respondent match. Here are three examples (with names changed) of problems encountered.

1. A contract is entered into with "Respondent (ACT) Pty Ltd" but payments are received from "Respondent Pty Ltd" An adjudication application failed when the claimant applied for a decision against "Respondent Pty Ltd" which was not the company and ACN/ABN as identified in contract.
2. A claimant was engaged under contract by a consortium but all dealings and payments were with one individual company member of the consortium. As the contract was with the consortium, an application against the individual member of the group couldn't succeed.
3. A claimant contracted with Fred Smith (legal entity) trading as ABC Building (trading name) but the payment claim was issued to ABC Building. An adjudication decision can't be enforced against a trading name. The payment claim should have been issued to Fred Smith.

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 (e.g. principals, developers, owner-builders, government);
• subcontractors against contractors;
• suppliers of building components against purchasers;
• architects, engineers, and others (e.g. 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. e.g. a single payment to be made when work is completed.

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.

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 & retention monies.

Can the Act be used to secure payment from Homeowners?

No. The Act does not apply to homeowners if the homeowner is party to the contract and resides or intends to reside in the building.

However:

• If a contract includes work other than on the respondent's immediate residence, then that work is subject to the Act. e.g. work involving a residential investment property.
• If the owner did not contract directly with the claimant, then that work is subject to the Act. Examples include contracts with landlords, strata title bodies corporate, developers, builders, contractors, sub-contractors, consultants and suppliers.

Important qualification: The definition of resident-owner under section 9(7) of the Act does not include a person who is or should be licenced as an owner-builder under the Construction Occupations (Licensing) Act 2004. Therefore an owner-builder qualifies as a respondent and may be served with a payment claim.

For further information on Owner-Builders

What else is excluded by the Act?

• A construction contract that deals with construction work carried on outside ACT or related goods and services supplied for construction work carried on outside ACT. In this situation, an adjudication application should be made under the Security of Payment Act relevant to the State in which the work was performed.
• 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.
• Work performed under a contract made prior to 1 July 2010.

Claimed amount

An adjudicator can't decide an amount greater than claimed. If the claim is for $10,000 worth of work and all work performed is subject to GST, claim $11,000 inclusive of GST.

What information should be included with a payment claim?

A payment claim should include all information necessary for a respondent to both identify the work and how the sum claimed is calculated. During adjudication, some respondents have successfully argued that they could not approve payment because the work claimed was so vague as to make it impossible to be confidently valued.

Where available, payment claims should include attachments such as:

• statements detailing the extent of the work completed;
• completion certificates;
• delivery dockets;
• photographs;
• other contract documentation as may be required by contract.

Download template of a Payment Claim

How is a Payment Claim served?

Service should occur during normal business hours, at the respondent's ordinary place of business or as otherwise required by the contract. In the absence of a contrary contract provision, the safest way of ensuring service is to serve by courier with instruction to obtain a signed receipt. In our experience, below is the safest ranking to ensure service:

1. Courier - signature required
2. Mail - Express Post: keep express post tracking number for delivery verification
3. Platinum Post - Signature required
4. Ordinary Post - Make a statement verifying the address, date of postage and other relevant details
5. Fax - Print and keep full page fax journal report as evidence of transmittal. Do not use fax for colour photographs and plans as they are generally rendered unreadable. Lengthy faxes have been known to lose pages in transmission.
6. Email (only to an email address which is specified by the person for the services of notices of that kind - generally the respondent). In email options, we advise tick both "request a delivery receipt" and "request a read receipt"
7. In person - Ensure a receipt is obtained or
8. A different method only where such method is provided under the relevant construction contract.

Tips

1. 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.
2. When items are sent by ordinary post, allow sufficient time for them to be received. Generally, items sent by ordinary post are deemed to be received on the fourth working day after posting. We recommend against post as respondents have denied receipt.

Avoid pitfalls

Click here for a list of common reasons why adjudication applications by claimants fail.

When should I receive payment?

A claimant is entitled to be paid a valid progress payment claim by the due date for payment.

The due date for payment under the Act is the earlier of 15 business days** after a payment claim is given, or the day when the payment becomes payable under the contract. If the contract provides that payment is due 10 days after invoice then, upon service of the payment claim, the due date for payment under the Act is 10 days later. Any term of a contract that provides for a due date for payment later than 15 business days will have no effect for the purposes of the Act. Proper calculation of this date is imperative as a number of milestones under the Act are calculated from this date.

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 payment schedule in 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 (or shorter period if provided by construction contract) to prepare & 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.

Unless the construction contract provides for a longer period, a payment claim under the Act must be made within 12 months after the construction work to which the claim relates was last carried out or the related goods and services were last supplied.

**We note that the ACT Government has advised that the “the changes to the Building and Construction Industry (Security of Payment) Act 2009, which commenced on 11 March 2024 (and relevantly change the timeframe from 10 business days to 15 business days), apply to any progress claim made under the Act from 11 March 2024, regardless [of] when the contract was signed.” This issue will remain unsettled until it is considered by the Courts.