NSW: Respondent Responsibility to Prepare and Serve Payment Schedule

A payment schedule need only be prepared if the respondent does not intend to pay the full amount of a payment claim under the Act by the due date for payment.

HOWEVER IGNORING A PAYMENT CLAIM WITHOUT AN INTENTION TO PAY IN FULL BY THE DUE DATE MAY HAVE SERIOUS FINANCIAL CONSEQUENCES

As the respondent did not issue the payment schedule within 10 business days of receiving the payment claim nor pay the full claimed amount, the claimant has now served a second opportunity notice under s17(2) to advise of the intention to proceed to adjudication.

The respondent has only 5 business days in which to prepare and provide the payment schedule. A contract provision seeking to extend the period beyond 5 business days is void.

Failure to provide the payment schedule within 5 business days has the serious consequence of denying the respondent the opportunity to make any submissions (the adjudication response) to the adjudicator. Confronted with no submissions from the respondent, an adjudicator will often, but not always, determine that the claimant is entitled to the full amount claimed.

A payment schedule must:

• Be in writing and addressed to the claimant;
• Identify the payment claim to which it relates;
• Indicate the scheduled amount of payment that it is proposed be paid (it may be "nil");
• If the amount that the respondent proposes to pay is less than the amount claimed in the payment claim, the respondent should set out:
  • The amount (if any) that the respondent agrees to pay - the "scheduled amount";
  • The amount that the respondent does not agree to pay under the payment claim;
  • Detail all reasons in the attachment(s) as to why the respondent intends withholding any amount including how the valuation of the withheld amount is calculated.

Where available, payment schedules 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 example of a Payment Schedule

How is a Payment Schedule served?

Service should occur during normal business hours, at the claimant'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. Email (only to an email address which is specified by the person for the services of notices of that kind - generally the claimant). In email options, we advise tick both "request a delivery receipt" and "request a read receipt"
6. In person - Ensure a receipt is obtained or
7. A different method only where such method is provided under the relevant construction contract. Please note that service by fax is only valid if provided by the contract. If service by fax is permitted, print and keep full page fax journal report as evidence of transmittal.

Tips:

• Respondents are strongly advised to keep a record of the time, date and manner of service on the claimant. A claimant may deny receiving a payment schedule in which case the respondent must be able to evidence the date of service.
• When items are sent by ordinary post, allow sufficient time for them to be received. Generally, items sent by ordinary post are taken to have been effected on the seventh working day after the letter was posted. We recommend against post as claimants have denied receipt.
• Should fax be permitted by contract as a form of service, ensure you retain the full page fax receipt and refrain from sending colour photographs, and plans as they are generally rendered unreadable. Lengthy faxes have been known to lose pages in transmission.

What contract provisions are void by the Act?

A common reason for respondents not agreeing to a payment claim is that they have not been paid by the principal. Effectively the respondent is imposing on the claimant an extension of payment terms. This defence of "pay when paid" or "pay if paid" is expressly barred by the Act, even if such right is included in the contract. The policy behind the Act is that a respondent should not cause a claimant financial detriment because of its problems. In any case, respondents can seek a remedy under the Act by serving a payment claim on the principal and applying for adjudication.

Other void contract provisions include:

• Any provisions that are inconsistent with the Act;
• Clauses that attempt to "contract out" of the Act;
• Unjust penalty provisions;
• Clauses aimed to deter a person from taking action under the Act; and
• Any provision which limits interest on late progress payments at a rate less than the rate of interest on judgments of the Supreme Court.

What happens if the Payment Schedule is served within 5 business days of the second opportunity s17(2) notice?

If the respondent pays the full scheduled amount by the due date or some lesser amount is accepted in full settlement, the payment process under the Act is complete.

If the claimant receives the payment schedule within 5 business days of service but either:

• disagrees with the scheduled amount; or
• full payment of the scheduled amount is not made by the due date;

the claimant may proceed to adjudication. The application must be made within 10 business days from the date of expiry of the s.17(2) notice.

If the Payment Schedule is received within 5 business days of service of the s17(2) notice, then the next step on the flowchart moves to the area with the blue background for the payment schedule served process. This step is titled "Respondent serves Payment Schedule within 5 business days. As Payment Schedule now issued, process reverts to Payment Schedule Served".

What happens if the Payment Schedule is still NOT provided or provided after the elapse of 5 business days?

If no payment schedule is provided within the 5 business days of the notice, the claimant has 10 business days from the expiry of the s17(2) notice to apply for adjudication. Once this time has passed the claimant loses any right to adjudication with respect to this particular payment claim. Neither Adjudicate Today nor an adjudicator can extend these statutory stipulations. Effectively the payment claim has expired.

However any unpaid portion of the expired payment claim can be included in the payment claim for the next reference date, provided the new payment claim is valid.

Please move to the next step on the flowchart being "Respondent does not serve Payment Schedule within 5 business days of receipt of the Adjudication Notice [s.17(2) notice].