NSW: Respondent Responsibility to Prepare and Serve Payment Schedule

IGNORING A PAYMENT CLAIM WITHOUT INTENTION TO PAY IN FULL BY THE DUE DATE FOR PAYMENT 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.

Your Lockbox

Adjudicate Today knows that responding to payment claims can be challenging. You need to provide a written response within 10 business days (the payment schedule) or lesser period if provided by contract, indicate the amount (if any) you propose to pay and indicate any reasons for withholding payment. If applicable, you may attach documents supporting your reasons for withholding any payments. While we encourage you to read below, our online wizard is available to walk you through each step in making and serving a valid payment schedule.

Our wizards are smart but to use them you need to establish a free and no obligation 'Lockbox'. The Lockbox is yours and can't be accessed by Adjudicate Today staff or anyone else without your express permission. Adjudicate Today does not charge for creating your Lockbox or using our wizards. Your Lockbox allows you to save and print the payment schedule. If generating your payment schedule via your Lockbox Wizard, a PDF document will be generated which contains a link to the files in your Lockbox for this particular payment schedule. If service of the payment schedule is agreed to between the parties by Lockbox or electronic link, then you may download and send this PDF document to the other party. If service of the payment schedule is agreed to between the parties by email, then you must download all files in the link in this PDF and send those files as an attachment to the email. You must otherwise download all files, print them and provide them to the Claimant, preferably by courier. The Lockbox can remind you when payments are overdue. To use your Lockbox and access Adjudicate Today wizards click here, otherwise continue to read below for manual assistance in making a payment schedule and/or clarification of any uncertainties in completing our online payment schedule wizard. In all cases, the Respondent MUST make its own enquiries to satisfy itself of the most suitable method of service.

Adjudicate Today and its staff can not access a payment schedule saved to your Lockbox unless the payment schedule is submitted with an adjudication application or adjudication response to the Adjudicate Today Lockbox.

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;
• dated photographs;
• other contract documentation as may be required by contract.

Download example of a Payment Schedule

How is a Payment Schedule served?

Unless otherwise agreed by the parties, service should occur on the claimant during normal business hours at the claimant's ordinary place of business or in accordance with the NSW Electronic Transactions Act 2000 Section 8. Your lockbox may be used to electronically serve documents in accordance with the NSW Electronic Transactions Act 2000.

In our experience, below is the safest ranking to ensure service:

1. Use your lockbox to send the payment schedule to the claimant if there is an agreement between the parties for service via lockbox or link
2. Courier - signature required
3. Mail - Express Post: keep express post tracking number for delivery verification
4. Platinum Post - Signature required
5. Ordinary Post - Make a statement verifying the address, date of postage and other relevant details
6. Email (only to an email address which is specified by the person for the services of documents of that kind - generally the respondent). In email options, we advise tick both "request a delivery receipt" and "request a read receipt". All documents must be downloaded and attached to the email as an attachment, unless there is an agreement to service by a link.
7. In person - Ensure a receipt is obtained or
8. 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 receipt of the 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 their 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 s17(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].