NSW: Payment Withholding Request

The Act allows subcontractors who make an adjudication application to freeze the payment amount in dispute from the principal contractor to the respondent while adjudication proceeds. This is called a payment withholding request.

A Payment Withholding Request is best explained by an example.

Assume that a subcontractor (the claimant) does $10,000 worth of work for a head contractor (the respondent) and at the end of the month the subcontractor makes a progress claim. About the same time the respondent will make a progress claim against the respondent's principal for payment for that work. If, within 10 business days after being served with the claimant's payment claim, the respondent gives the claimant a payment schedule for less than the claimed amount, the claimant can immediately apply to Adjudicate Today for adjudication. At the same time the claimant makes the adjudication application, the claimant can give a payment withholding request to the principal contractor.

Upon receipt of the payment withholding request, the principal contractor must retain $10,000 from moneys due or subsequently becoming due to the respondent for work carried out by the claimant. If the claimant moves quickly, the claimant should be able to serve the payment withholding request before the principal contractor has paid the respondent. When payment cycles are monthly, this should be easy. The effect is that the respondent will not be able to use the money which is under dispute for the respondent's own purposes.

A claimant wishing to serve a payment withholding request on a principal contractor must fill out the Payment Withholding Request form and a statutory declaration swearing genuine belief that the amount of money claimed is owed by the respondent. These two forms must be served on the principal contractor. Once the adjudication determination has been made, the claimant must provide a copy of the determination to the principal contractor within 5 business days.

Download: Payment Withholding Request form

Download: Statutory Declaration *Note: These forms are interactive. This means they can be EITHER filled out on screen and printed OR downloaded and printed for manual completion.

If the adjudication application is withdrawn, the claimant must advise the principal contractor within 5 business days.

There are penalties for claimants who make a false statutory declaration, or fail to notify the principal contractor of the adjudication determination or withdrawal of an adjudication application.

A principal contractor must act on any payment withholding requests that are received. This means that the principal contractor must retain unpaid money to the value of the adjudication application until:

• The adjudication application for the payment claim is withdrawn; or
• The respondent makes payment to the claimant under the payment claim; or
• The claimant serves a notice of claim on the principal contractor under the Contractors Debts Act 1997; or
• A period of 20 business days elapses after a copy of the adjudication determination is served on the principal contractor by the claimant.

If the principal contractor does not owe any money to the respondent, there is no requirement to retain the amount of the payment withholding request. However the principal contractor must inform the claimant within 10 business days of receiving the request. There are penalties for principal contractors who do not comply with these requirements.

A principal contractor is defined as "a person by whom money is or becomes payable to the respondent for work carried out or materials supplied by the respondent to the person as part of or incidental to the work or materials that the respondent engaged the claimant to carry out or supply".

A respondent may be required to provide information about the principal contractor to the adjudicator. This is to assist the claimant in identifying who and where the payment withholding request should be served. There are penalties for respondents who fail to provide this information when requested by an adjudicator.

Payment withholding requests do not apply to residential building work (within the meaning of the Home Building Act 1989) if the principal contractor resides in or proposes to reside in the premises.

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