TAS: Respondent Responsibility to Prepare and Serve Payment Schedule
IGNORING A S21(4) NOTICE WITHOUT AN INTENTION TO PAY THE FULL CLAIMED AMOUNT IS LIKELY TO HAVE SERIOUS FINANCIAL CONSEQUENCES***
As the respondent did not issue the payment schedule within 10 business days of receiving the payment claim (20 business days for residential claims) nor pay the full claimed amount, the Act requires the claimant serve a second opportunity notice under s21(4) to advise of the intention to proceed to adjudication and give the respondent a second opportunity to prepare and serve a payment schedule.
The period in which the respondent can serve the payment schedule on the claimant is reduced to 5 business days. A contract provision seeking to extend the period beyond 5 business days is void.
***Failure to serve the payment schedule within the 5 business days has the serious consequence of denying the respondent the opportunity to make any submissions (the adjudication response) to the adjudicator. Often, but not always, an adjudicator confronted with no submissions from the respondent may 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;
- State the scheduled amount of payment that it is proposed to make (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;
- Detailed reasons in the attachment(s) as to why the respondent intends not paying any amount with respect to the payment claim;
- Detailed reasons in the attachment(s) as to why the respondent intends withholding any amount with respect to the payment claim including how the valuation of the withheld amount has been calculated.
- If that amount is less than the amount claimed, state all the reasons why. The Act precludes the adjudicator from considering issues not included in the payment schedule.
The payment schedule is not served until it is delivered in person to the claimant or lodged during normal business hours at the claimant's ordinary place of business or posted or faxed to the claimants ordinary place of business (or as otherwise provided by the contract), so that it reaches the claimant no later than 5 business days after receipt of the s21(4) notice. The contract or common practice may provide for other methods of service, such as email.
We recommend that a record of the time, date and manner of service on the claimant be kept. A claimant may deny receipt of the payment schedule or claim receipt after the expiry of 5 business days. In this case, the respondent must be able to evidence the date of service.
In the absence of any contract provision, we suggest that service of the payment schedule 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.
A common reason provided by respondents for not agreeing to a payment claim is that they have not been paid. Effectively the respondent is asking the claimant for an extension of payment terms. This defence and others to an adjudication application are expressly barred by the Act. The policy behind the Act is that a respondent should not cause a claimant financial detriment because of their problems. The Act provides a remedy to the respondent being to serve a payment claim on the principal and apply for adjudication of the dispute.
What happens if the Payment Schedule is served within 5 business days of the second opportunity s21(4) notice?
If the respondent pays the full scheduled amount by the due date to the claimant and this amount is accepted by the claimant, 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 adjudication application must be made within 10 business days from the date of expiry of the s21(4) notice.*
*Note: herein lies two traps for many a claimant and their advisers.
- If the respondent fails to pay the full scheduled amount by the due date of payment, some adjudication claimants have assumed (wrongly) that they have 20 business days from the due date of payment to make the claim as this is the entitlement when the respondent serves an adjudication application at the first opportunity and fails to pay it. However this is not what the Act provides. Fortunately, on most occasions, 10 business days from the date of expiry of the s21(4) notice falls after 20 business days from the due date of payment. Correct counting of business days is crucial.
- The time to make the application is within 10 business days from the expiry of the s21(4) notice. This means that an adjudication application made before the expiry of the s21(4) notice but after the second opportunity payment schedule is received is invalid and will need to be resubmitted after the notice expires at the end of the 5 business days.
If the Payment Schedule is received within 5 business days of service of the s21(4) notice, than 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 second opportunity 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 received or received after the elapse of 5 business days?
If no payment schedule is received within the 5 business days of the notice, the claimant has 10 business days from the expiry of the s21(4) 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 second opportunity Payment Schedule within 5 business days".