Guide

Payment claims: what makes one valid

A document that looks like an invoice may not be a payment claim at all. If it is not, nothing has started, no reply is required, and no adjudication is available on it.

General information, not legal advice. This page sets out how the law generally applies. It does not take account of your circumstances, and you should get advice about your own situation before acting on it. The official sources this page is written from are listed on it; where they differ from anything here, they are the authority.

In short

Under the Building and Construction Industry Security of Payment Act 1999 (NSW), a payment claim must identify the construction work or related goods and services it relates to, state the amount claimed, and state that it is made under the Act.

A respondent who disputes any part of the claim replies with a payment schedule. One who provides no schedule within the period the Act allows can become liable for the full amount claimed and can lose the right to raise contractual defences or a cross-claim later.

Do this first: write down the date the document was served or received, and how. Every period in this process is counted from that date, and the periods are short.

Why the form of the document matters so much

The Security of Payment legislation is a fast statutory process, and fast processes work by being strict. The Act gives a person who has carried out construction work, or supplied related goods and services, a statutory entitlement to progress payments and a procedure for recovering them quickly.

The price of that speed is that the documents have to do what the Act says they do. A payment claim is not simply a request for money. It is the document that starts a statutory sequence, imposes a duty on the other side to respond, and opens the door to adjudication.

So a claim that does not meet the Act’s requirements is not a weak claim — it is not a claim under the Act at all. Nothing is triggered by it, the other side owes no statutory reply, and the consequences of silence do not apply to them.

This cuts both ways. A claimant loses the process. A respondent who assumes a defective document can be ignored, and is wrong about that, loses far more.

What a payment claim has to do

The Act sets out what a payment claim must contain. Three things, and each of them is worth checking on the document in front of you.

It must identify the construction work, or related goods and services, to which the progress payment relates. Enough detail that the respondent can understand what is being claimed for and respond to it.
It must state the amount of the progress payment that the claimant claims to be due. A figure, not an estimate or a running account balance.
It must state that it is made under the Act. This is the requirement most often missed, and it is the one that turns an ordinary invoice into a statutory payment claim.

There are further requirements in particular situations, including for claims by a head contractor and for claims made after a construction contract has been terminated. Those are matters to check against the Act and the NSW Government’s guidance for your own situation.

Service, and the date everything is counted from

A payment claim has to be served. How service may be effected is dealt with by the Act and often by the contract as well, and a claim served in a way neither permits can be argued about later.

The date of service is the single most important fact in the whole process, because the period for a payment schedule and the period for an adjudication application are both counted from it. Record the date, the method and, where you can, the proof: the email, the delivery record, the acknowledgement.

There are also rules about how often claims may be made and about the reference date a claim is made for. Serving two claims for the same reference date is a common error, and it is the sort of error that gets a claim knocked out.

If you are a respondent, do not wait until you have decided what you think of the claim before noting the date. Note the date first.

The reply, and what silence costs

A respondent who does not intend to pay the claim in full replies with a payment schedule. It has to identify the payment claim it relates to, state the amount the respondent proposes to pay, and, where that is less than the amount claimed, state the reasons for withholding payment.

All of the reasons. A reason left out of the schedule generally cannot be introduced later in the adjudication, so a schedule drafted in a hurry can quietly discard a good defence.

If no payment schedule is provided within the period the Act allows, the respondent can become liable to pay the full amount claimed on the due date, and in proceedings to recover it can be prevented from raising a defence arising under the construction contract or from raising a cross-claim. That is the trap the whole scheme is built around.

We do not publish the number of days here. It depends on the kind of claim and on the contract, and a wrong figure on a website is how a right gets lost. The NSW Government’s page on responding to a payment claim carries the current periods.

Adjudication, and what it decides

If the claim remains disputed, or the scheduled amount is not paid, the claimant may apply for adjudication within the period the Act allows for that situation. The application is lodged with an authorised nominating authority, which refers it to an adjudicator.

The adjudicator determines the amount of the progress payment payable, on the material before them, quickly. A respondent who provided a payment schedule may lodge an adjudication response, but generally cannot include reasons for withholding that were not in the schedule.

An adjudicated amount can be recovered as a debt. It is an interim answer about cash flow, not a final determination of the parties’ contractual rights: those can still be worked out afterwards in NCAT or a court, and money can be adjusted then. Challenging a determination in court is possible only on narrow grounds and has to be done immediately.

What to check on the document in front of you

Whichever side you are on, the same short list of questions gets you to the real issue faster than reading the whole file.

Does the contract count as a construction contract, and is the work construction work, for the purposes of the Act?
Does the document identify the work claimed for well enough to be responded to?
Does it state an amount, clearly, as the amount claimed to be due?
Does it say it is made under the Act?
When and how was it served, and does that match what the Act and the contract allow?
Has a claim already been made for the same reference date?
If you are the respondent, what date does the period for a payment schedule end, and who is drafting it?

If the answer to any of these is unclear, that is the point to get advice — not after the period has passed.

What usually happens

Record the date and the method of service

Before anything else. Every period in the process is counted from it, and a dispute about service is a dispute you can avoid by keeping the record.

Check the document against the Act's three requirements

Work identified, amount stated, and a statement that it is made under the Act. If one is missing, the position changes for both sides.

Draft the payment schedule with every reason in it

For a respondent, this is the step that preserves your defences. A reason left out generally cannot be added at the adjudication.

Decide on adjudication quickly

The period for an adjudication application is short and depends on what has happened so far. Take the documents to a lawyer in the same week, not the same month.

Common questions

I have been invoicing for months. Are those payment claims?

Only if each of them did what the Act requires: identified the work, stated the amount claimed, and said it was made under the Act. Many ordinary invoices do not. If they were not payment claims, no statutory periods ran on them, which is bad news for the process and not necessarily bad news for the debt — the contractual claim still exists.

Do I have to put the words from the Act on my invoices?

The Act requires the claim to state that it is made under the Act. How that is expressed is something to get right once and then use consistently. It is also worth checking what your contract says about how claims are to be made, because the two need to work together.

A payment claim arrived and I telephoned to say I disputed it. Is that enough?

No. A payment schedule is a written document that identifies the claim, states the amount proposed to be paid and gives the reasons for withholding. A telephone call is not one, and neither is a short email saying you disagree. Treat the reply as urgent and get it drafted properly.

What happens if I miss the payment schedule?

It is serious. The respondent can become liable for the full amount claimed and can be shut out of raising contractual defences or a cross-claim in the recovery proceedings. What remains available depends on exactly where in the sequence you are, so take the documents to a lawyer immediately rather than waiting to see what the claimant does.

Can I use this process for work on my own house?

The Act treats some residential situations differently from commercial construction contracts. Whether it applies to a particular arrangement is one of the first questions to answer, and it is answered from the contract and the Act rather than from general expectation.

The adjudicator decided against me. What now?

There is no general appeal on the merits. A determination can be challenged in court on narrow grounds only, and the timing is tight because the adjudicated amount can be recovered as a debt in the meantime. Separately, the underlying contractual dispute can still be run in NCAT or a court, where the money can be adjusted.

If a claim has just arrived

The date it arrived is the fact that matters most. Bring the claim, the contract and the date, and tell us how the document reached you.