Australia: Christmas: payment claims and SOPA

WHO SHOULD READ THIS

  • New South Wales construction industry participants.

THINGS YOU NEED TO KNOW

  • Beware of payment claims arriving just before Christmas and the potentially severe consequences of not responding to them.

WHAT YOU NEED TO DO

  • Ensure you have a plan in place to identify payment claims upon their arrival and respond within time.

With Christmas around the corner, beware of payment claims designed to catch you off-guard and the potentially severe consequences under the Building and Construction Industry Security of Payment Act 1999 (NSW) (SOPA) of failing to respond.

A Christmas reminder

The risk of failing to respond to a payment claim is heightened in the lead up to Christmas and during the holidays, as personnel are generally absent from offices and email accounts are checked less frequently. To avoid being caught off guard, ensure you have a plan in place to identify payment claims upon their arrival and respond appropriately within time.

We suggest some practical steps below to assist you to plan ahead for the Christmas and New Year period. In addition, we provide a refresher on the key time frames that apply to responding to payment claims under SOPA, and identify the critical date for responding to a payment claim served just prior to Christmas Eve.

SOPA time frames – the important basics

When a payment claim is received, if the respondent does not intend to pay the full amount of the claim, it must respond with a payment schedule within 10 business days after the payment claim is served or earlier, if a shorter time frame is stipulated by the construction contract for payment schedules. 'Business day' is defined under SOPA to mean any day other than Saturday, Sunday, a public holiday, or 27 to 31 December (inclusive) ('Black-out period'). Many construction contracts have been amended to adopt this definition of 'business day', including the GC-21 contracts. While the 'Black-out period' affords some breathing space during the festive season, to make the most of it, payment claims need to be identified as early as possible.

A payment claim is validly served whether it is delivered to the respondent personally, lodged during normal office hours at the respondent's registered office, sent by post to the respondent's ordinary place of business or emailed to a specified email address. The time limit for responding with a payment schedule will commence when the payment claim is served.

Failure to respond to a payment claim in time

If you fail to respond to a payment claim within the time frame outlined above, you will be liable to pay the full amount claimed to the claimant. If the amount claimed is not paid in full by the due date for payment, the claimant will be entitled to enforce the debt in a court by obtaining what is called summary judgment (i.e. judgment without a trial). In such court proceedings, you will be prohibited from bringing any cross-claim or raising any defences in relation to matters arising under the construction contract.

The claimant may also suspend works under the construction contract by giving at least 2 business days' written notice of its intention to do so.

If the claimant elects to apply for adjudication of its payment claim instead, you will be afforded a 'second-chance' to serve a payment schedule – but will only have 5 business days to do so. Failure to serve a 'second-chance' payment schedule will prohibit you from lodging an adjudication response to the claimant's adjudication application.

Practical steps

As Christmas nears, claimants may seek to take advantage of those who are winding-down for the year and away from the office or operating with reduced staff levels by serving a payment claim just prior or during the holiday season. To avoid falling victim to a surprise payment claim (which if unanswered may have dire consequences, as set out above) we recommend you take the following steps:

  • review the status of your projects and highlight any potential issues which may give rise to claims
  • identify progress claim reference dates to predict when a claim might be made – reference dates are the dates stated in or worked out under a construction contract on which claims for progress payments may be made
  • ensure that contract administrators and administrative personnel are aware of the critical importance of elevating anything that looks like a claim for payment to a nominated individual
  • confirm the location of your ASIC registered office (which may be your accountant's office) and principal place of business as claims for payment may validly be served there
  • ensure that project representatives divert their emails while on leave to a nominated person responsible for checking them regularly
  • check the address nominated in your construction contract for service of notices and claims, and ensure that it is regularly checked during the holidays, and
  • ensure your fax machines are stocked with paper and cleared regularly.

Critical date for responding to Christmas claims

For a payment claim served on Friday, 22 December 2017 (the last business day prior to Christmas Day), the payment schedule will be required to be served by 15 January 2018.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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