WA Respondent: Preparing the Payment Response (Notice of Dispute)

Unless the contract otherwise provides, the Act implies that where a party receiving a payment claim (the respondent) believes the claim has not been made in accordance with the contract or disputes the whole or a part of the claim, a payment response (the Act calls this a notice of dispute) should be prepared by the respondent.

The default provision under the Act is that the notice of dispute must be provided within 14 days of receiving the payment claim but the contract may provide for any period up to 42 days. (Note the Act says 'days' not 'business days'; therefore counting of days continues on weekends, public holidays and over the Christmas shut down period).

When does a payment dispute arise?

• a payment claim is rejected or disputed (wholly or partly);
• payment in full has not been received by the time the amount claimed is due under the contract;
• any money retained by a party has not been paid by the time it is due under the contract; or
• any security held by a party has not been returned by the time it is due under the contract.
  

What is a notice of dispute?

A notice of dispute is the notice in writing which should be served on the applicant by the respondent if the respondent does not intend to pay the full or part of a claimed amount by the due date for payment. This applies even if the respondent believes the applicant is not entitled to make the claim or if the respondent denies being party to the contract.

What is the due date for payment?

The due date for payment is usually set out in the contract. It can be any period up to 42 days after receipt of the payment claim. In the absence of an explicit contractual provision, the Act implies the due date for payment is 28 days after receipt of the payment claim.

A notice of dispute must:

• be in writing and addressed to the applicant;
• provide the address, ABN (or, if known, ACN if no ABN), telephone and fax number of the applicant;
• identify the payment claim to which it relates;
• state the name of the party giving the notice;
• provide the address, ABN (or ACN if no ABN), telephone and fax number of the respondent;
• identify the amount of payment that it is proposed be paid (it may be "nil");
• if the claim is being rejected because it is not made in accordance with the contract, give reasons why;
• if the claim is being disputed, identify each item of the claim that is disputed and give reasons why; and
• be signed by the party giving the notice.

How is a notice of dispute served?

Service should occur during normal business hours, at the applicant'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:

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 documents of that kind). In email options, we advise tick both "request a delivery receipt" and "request a read receipt";
6. 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;
7. In person - Ensure a receipt is obtained; or
8. A different method only where such method is provided under the relevant construction contract.

What if no notice of dispute is served by the due date for payment?

In the event that no notice of dispute is served, and in the absence of a specific contractual provision, the payment claim must be paid within 28 days of it being received, however the contract may extend this period up to 42 days (the due date for payment). A contractor may also claim for payment of retention moneys or the return of security, if they have not been paid once the due date for payment has passed.

Tips:

• Respondents are strongly advised to keep a record of the time, date and manner of service on the applicant. An applicant may deny receiving a dispute notice 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 deemed to be received on the fourth working day after posting. We recommend against post as applicants have denied receipt.

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 applicant 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 an applicant 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, if not paid by the due date for payment, applying for adjudication.

What happens if the notice of dispute is served within time?

Click here to go to "Respondent serves a Notice of Dispute within time". The blue shaded background of the flowchart describes how to proceed in these circumstances.

What happens if the notice of dispute is NOT served within time?

Click here to go to "Respondent FAILS to serve a Notice of Dispute within time". The pink shaded background of the flowchart describes how to proceed in these circumstances.