WA Applicant: Preparing & Serving the Payment Claim
An applicant can't make a valid adjudication application unless the payment process set out in contract has been followed. In many areas, but not all, the contract may substitute for information contained in this page. Therefore it is imperative to check the contract before relying on this information.
Where the contract is oral (not written) or does not contain provisions covering particular matters, the Act implies (bring in) terms into the contract.
Generally, a construction contract will contain express terms about the rights and obligations of the parties including:
- progress payment stages;
- final payment;
- payment (release) of retention sums; and
- return of money held in security.
Regardless of what is in contract, the Act specifically prohibits:
- pay if paid/when paid provisions. i.e. a contractual provision has no effect if payment by the respondent to the contractor is subject to the respondent being paid by another party;
- a contract provision that purports to require a payment to be made more than 42 days after the payment is claimed. In this case, the contract is to be read as requiring the payment to be made 42 days after it is claimed. Note the Act says 42 days not 42 business days; therefore counting of days continues on weekends, public holidays and over the Christmas shutdown period;
- terms in contract to render the operation of the Act null and void.
Where a construction contract is oral or does not have a explicit provision relating to any of the following than the Act implies (brings in) the applicable provision:
- Variations - than the contractor is not bound to perform any variation unless there is agreement on the nature and extent of the variations and the amount, or means of calculating the amount, that is to be paid for the variation.
- Entitlement to payment - than the contractor is entitled to be paid a reasonable amount regardless of whether or not the contractor performs all its obligations.
- Entitlement to claim progress payments - than the contractor is entitled to make one or more progress claims for work performed and not paid.
- When progress claims can be made - than the contractor can make a progress claim at any time after completing any of its obligations or make any other claim for moneys payable under or in connection with the contract.
- How a party is to make a payment claim - see next heading 'What is a payment claim?' and following.
- Responding to claims for payment - click in next flowchart box 'Party receiving Payment Claim (the respondent) has 14 days (OR OTHERWISE AS PROVIDED BY CONTRACT) from claim receipt to give the applicant Notice of Dispute.
- Time for payment - click in applicable box of flowchart. Either 'Respondent serves a Notice of Dispute within time' or 'Respondent FAILS to serve a notice of dispute within time'.
- Interest - than interest is payable on an unpaid amount from the day after the amount is due. Interest is that prescribed by the Civil Judgements Enforcement Act 2004 section 8(1)(a).
- Ownership of goods related to construction work supplied to the construction site and that was passed from the contractor - than ownership passes when the contractor is paid for the goods or the goods become fixtures.
- Duties as to unfixed goods, where the unfixed goods are related to construction work supplied to the construction site by the contractor, and the principal, or the person for whom the principal works, becomes insolvent - than the principal, or the person for whom the principal works, must not allow the goods to become fixtures, or under the control of another person except with the written consent of the contractor, and must allow the contractor a reasonable opportunity to repossess the goods.
- Retention money - than the money must be held in trust for the contractor until the money is paid to the contractor; or the contractor agrees, in writing, to give up any claim to the money; or the money ceases to be payable to the contractor by operation of the contract; or an adjudicator, or other approved decision maker, determines the money is no longer payable.
What is a payment claim?
A payment claim is a claim for a progress payment under a construction contract or a claim for payment by the principal in relation to to the performance or non-performance by the contractor of its obligations under the contract. It must identify the construction work or related goods and services and the amount that the applicant claims to be payable. It may include matters covered by a previous payment claim but not identical claims previously valued by an adjudicator.
Self evidently, a payment claim is not an estimate of costs nor is giving notice of a payment claim, a payment claim.
The Act implies the following terms into the contract with regard to how a payment claim should be made:
- be in writing;
- state the legal name of the applicant;
- provide the address, ABN (or, if known, ACN if no ABN), telephone and fax number of the applicant;
- state the date of the claim;
- be addressed to the party to which the claim is made with the legal name of the respondent;
- provide the address, ABN (or, if known, ACN if no ABN), telephone and fax number of the respondent;
- state the amount being claimed;
- itemise and describe the obligations that the contractor has performed relating to the claim (if the claim is made by the contractor);
- describe the basis for the claim (if the claim is made by the principal);
- be signed by the applicant; and
- be given to the party to which the claim is made (the respondent).
Regardless of any other specific requirements in the contract, it is wise to also include all the above information and information about the respondent (next heading below).
Identify the Respondent with care
Ensure the payment claim is addressed to the legal entity that the applicant contracted with (the respondent). If there is an address or email etc. in contract for service, it is that address or email etc. If there is no address in contract, send the payment claim to the registered office of the respondent or an email which the parties have agreed should be used for all correspondence. Also, it is no use seeking an adjudication determination against a respondent if the name and/or ACN/ABN is incorrect. Courts won't enforce determinations unless the name and ACN/ABN of the respondent match. Here are three examples (with names changed) of problems encountered.
- A contract is entered into with "Respondent (WA) Pty Ltd" but payments are received from "Respondent Pty Ltd" An adjudication application would fail if the applicant applied for a determination against "Respondent Pty Ltd" which was not the company and ACN/ABN as identified in contract.
- An applicant 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.
- An applicant contracted with Fred Smith (legal entity) trading as ABC Building (trading name) but the payment claim was issued to ABC Building. An adjudication determination 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) and clients against contractors;
- subcontractors against contractors and contractors against subcontractors;
- suppliers of building components against purchasers and purchasers against suppliers;
- architects, engineers, and others (e.g. consultants) providing advice against clients and clients against architects etc;
- plant and equipment hirers against clients and clients against plant and equipment hirers.
What work is covered?
Work performed on a site in WA, notwithstanding the contract containing any provision that the contract is governed by law of a place other than WA.
The detailed scope of construction work is found in section 4 of the Act. Generally, construction work and the supply of related goods and services includes:
- preparatory work;
- building work;
- civil engineering;
- hire of plant or equipment;
- professional services such as architectural design, surveying and soil testing;
- supply of building materials.
What can I claim for?
An applicant can make a payment claim on the respondent for:
- construction work done;
- construction materials or plant provided;
- consulting services provided (surveying, architectural, planning etc.) but not accounting, financial or legal;
- 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?
Yes. an applicant can make a payment claim on a homeowner.
An adjudicator can't determine 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;
- other contract documentation as may be required by contract.
How is a Payment Claim served?
Service should occur during normal business hours, at the respondent's head office 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:
- Courier - signature required;
- 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 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";
- 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;
- In person - Ensure a receipt is obtained; or
- A different method only where such method is provided under the relevant construction contract.
- Applicants 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 a response runs from the date of receipt of the payment claim. A respondent may deny receipt of the payment claim in which case the applicant 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 deemed to be received on the fourth working day after posting. We recommend against post as respondents have denied receipt.
Please move to the next step on the flowchart being "Party receiving Payment Claim (the Respondent) has 14 days (OR OTHERWISE AS PROVIDED BY CONTRACT) from claim receipt to give the applicant Notice of a Dispute".