The following information is designed for potential claimants to get a basic grasp of the concepts and relevant requirements associated with being a ‘claimant’ under the Building and Construction Industry Security of Payments Act (NSW) (“BCISOPA”). This includes relevant definitions and other preliminary requirements before a claimant engages the adjudication procedures documented within the legislation.

The following information is not a substitute for professional legal advice and should not be taken as such. If in doubt about any of this information please consult with your legal advisor or contact the RICS DRS directly.

On this page:

• Who, or what, is a ‘claimant’?
• What is a construction contract?
• Who can a claimant claim against?
• Domestic building work and Owner-Builders.
• Licensing.
• What can a claimant claim? When can they claim it?
• What is the reference date?
• Formatting a payment claim.
• Serving a payment claim.
• What happens after the payment claim is submitted?
• How to recognise a valid payment schedule.
• Valid payment schedule has been provided.
• No payment schedule provided or invalid payment schedule provided
• Notice of intent to apply for adjudication.
• Suspending work.
• Choosing adjudication.
• Need more help?

Who, or what, is a ‘claimant’?

A claimant is generally defined as follows:

• A claimant is a person (or entity) who has carried out construction work or the supply of related goods and services under a construction contract. A construction contract may be written, oral, partially written and partially oral.
• A claimant may serve a payment claim on a respondent, the entity liable to make payment under the construction contract, and claim for an amount due relating to work performed under said contract.

What is a construction contract?

The legislation defines a construction contract as “a contract, agreement or other arrangement under which one party undertakes to carry out construction work for, or to supply related goods and services to, another party.”

A construction contract may be written, oral, partially written and partially oral.

Who can a claimant claim against?

As stated, the claimant may serve a payment claim on a respondent under the construction contract.

Typical claim scenarios may resemble the following:

• Contractors against developers/principals
• Contractors against Owner-Builders
• Subcontractors against contractors
• Suppliers against customers
• Consultants against customers
• Plant and Equipment hirers against customers.

Domestic building work and Owner-Builders.

Residential construction is excluded from the jurisdiction of both Acts if the respondent resides or intends to reside in the premises (typically a residential home).

This means that generally domestic building work is not covered in the Act.

However, this does not necessarily mean that a subcontractor working for a contractor on a residential house is barred from using the legislation.

What can a claimant claim? When can they claim it?

The claimant receives a right to a progress payment on and from each reference date under a construction contract provided they have undertaken to carry out construction work or supply related goods and services. The wording of the reference date section of each peice of legislation is slightly different and may have different implications.

Section 8 of the NSW act states “On and from each reference date…“

The claimant is entitled to the amount calculated under the contract, or, if the contract does not provide for the matter, on the basis of the value of the work carried out.

Strictly speaking, a claimant can claim for items they believe they are entitled to in relation to the construction work or supply of related goods and services that has been undertaken with respect to the construction contract. Entitlements may also include:

• Monies held in retention that are due for release
• Damages associated with the suspension of work (in reference to section 27(2A) of the BCISOP Act)
• Interest on overdue progress payments
• Monies claimed to be owing at practical completion
• Extension of times costs
• Variations and any other claims under the contract (i.e. insurance claims)

However, payment claims may only be served within the later period worked out under the construction contract OR the 12 months after the construction work or supply of related goods and services was last carried out. For example, if construction work was performed up to and including the 30th of September 2010, a payment claim for this work can be made at any time up until the 30th of September 2011.

What is the reference date?

The reference date is the date on which a payment becomes due to be paid under the contract. In many cases, this is simply the date stated in the contract for the service of payment claims or tax invoices on the entity liable to make payment.

For example, if your contract states that you are to submit a payment claim on the 25^th of each month. This means that you can submit a payment claim for all work done up to the 25^th of each month any day after the 25^th has occurred. In this specific scenario, the claimant may only submit one such claim per month period, however can include amounts from previous months.

If your contract does not have a provision for a specific reference date, the default provision is the last day of the month.

Formatting a payment claim.

Generally, a payment claim must adhere to the following rules in order to be considered valid and proper:

• The claim must identify the construction work or related goods and services to which the progress payment relates.
• The claim must indicate the amount of the progress payment that the claimant claims to be payable.
• The claim must state that it is made under the relevant security of paymnet legislation
• For a New South Wales payment claim, the following words should be used “This is a payment claim made under the Building and Construction Industry Security of Payments Act NSW 1999”

Such criteria can be adopted on a tax invoice and so a tax invoice may function as a payment claim.However, a payment claim doesn’t necessarily have to be a tax invoice.

As explained above, a claimant may only serve one payment claim per reference date under the appropriate contract.

Please feel free to examine the NSW adjudication forms and tools section of our website for some example payment claims specific to your relevant jurisdictions.

Serving a payment claim.

A payment claim must be served on the company or person liable to make payment.

The service of a payment claim should be done in conjunction with the terms set out in the construction contract.

Where the contract does not provide detailed with regards to service of documents, the relevant section of each act dealing with ‘service of notices’ should be consulted.

• In the case of the NSW act, the relevant section is section 31 of the Building and Construction Industry Security of Payment Act.

Unless it is specifically in your contract, it is not recommended to serve payment claims via email.

Also, it is recommended that the claimant keep a record of when payment claims were served, the method of service, and to whom they were served (if possible). It is also recommended that claimants investigate serving by more than one method.

Examples of evidence of service can include: signed registered post dockets, fax transmissions sheets, and the like.

These recommendations are applicable across all adjudication processes.

What happens after the payment claim is submitted?

Once a payment claim has been validly served upon a respondent by a claimant, the Act dictates a number of different potential scenarios.

• The claim is paid by the respondent without dispute on the due date for payment. In this specific case, there is no dispute, and therefore no need to continue through the adjudication process.
• The respondent does not pay the full amount by the due date for payment.
• The respondent does not pay the full amount by the due date for payment and serves on the claimant a payment schedule within ten business days of being served with the payment claim. This document identifies the payment claim, states the amount payable and the reasons why it less than the claimed amount.

If a respondent fails to pay the claimed amount by the due date for payment, nor provides a payment schedule in the required time, then the respondent is liable to pay the claimed amount.

The following sections expand on the list above.

How to recognise a valid payment schedule.

Recognising a valid payment schedule can often be difficult. The legislation requires the following criteria

• The document must identify the payment claim to which it relates. This can be as simple as stating something along these lines “‘with reference to your letter of the 10^th January 2009”. If it is clear that the document refers to your payment claim, then it most probably identifies your payment claim.
• The document must indicate the amount of the payment, if any, the respondent proposes to make. This is the scheduled amount. Usually payment schedules put the amount they propose to pay in the usual numeric currency format (i.e. Australian dollars) however they may scheduled the amount of zero or ‘nil’. If the amount the respondent intends to pay can be reasonable inferred from reading the schedule, it is most likely that they have indicated the amount.
• If the scheduled amount is less than the claimed amount, the document must indicate the reasons why the schedule amount is less. If the respondent is withholding payment for any reason, the reasons are to be included.

If you have any doubts or queries feel free to contact the RICS DRS to discuss, otherwise it is recommended to consult with your legal counsel.

Valid payment schedule has been provided.

If the respondent has provided a valid payment schedule but it is less than the claimed amount, the claimant has the following options with regard to the relevant legislation.

• The claimant may accept the scheduled amount. The respondent must pay the scheduled amount to the claimant on the due date without further deductions. Failure for payment of the scheduled amount will allow the claimant access to the adjudication process.
• The claimant may reject the payment schedule and apply for adjudication of the disputed payment claim.

If the respondent has provided a payment schedule but not forwarded the scheduled amount by the due date for payment, the claimant may,

• Apply for adjudication of the dispute.
• Suspend work once the required notices have been served upon the respondent.

No payment schedule provided or invalid payment schedule provided.

In the scenario where no payment schedule has been provided, the claimant may elect from the following three options.

• Put in motion the adjudication methods prescribed in the relevant legislation by serving a ‘Notice of Intent to Apply for Adjudication’ upon the respondent. For New South Wales the relevant section is Section 17.
• Recover the unpaid portion of the claimed amount as a debt owing in a court of competent jurisdiction.
• File a notice on the respondent of the claimant’s intention to suspect work or suspend supply of related goods and services.

If a document purporting to be a payment schedule is served upon the claimant that may or may not be a payment schedule, it is good practice to, if you believe it to be invalid, seek further advice.

RICS DRS can provide practical advice of a non-legal nature with regards to purported payment schedules. However, if you required absolute clarification, it is advised that professional legal opinion be procured.

Notice of intent to apply for adjudication.

The notice of intent to apply for adjudication in effect states the claimant’s intent to apply for adjudication if payment or a valid payment schedule is not supplied to the claimant within the necessary time frame.

This notice must be validly served on the respondent in the methods similar to that of the payment claim.

The notice must state that the respondent may serve a payment schedule on claimant within 5 business days after receiving the claimant’s notice.

Furthermore, this notice can only be given within 20 business days after the due date for payment

The RICS DRS have a sample Notice of Intent to Apply for Adjudication available for download in our adjudication forms and tools section of our website.

Suspending work.

The claimant gains the statutory right to suspend work if a valid payment schedule has not been provided, or a scheduled amount has not been paid.

In regards to the Act, any expense or loss in relation to the suspension can be recovered by the claimant. Also, a claimant who suspends work or the supply of related goods and services is not liable for any loss or damage suffered by the Respondent. For New South Wales the relevant section of the legislation is section 27.

Prior to suspension, a Claimant must provide the Respondent with written notice of their intention to suspend. Suspension may occur 2 business days after the notice has been receipted by the respondent. Furthermore, this right exists until the end of the period of 3 business days after the claimant received payment from the respondent.

The RICS DRS have provided several examples notices for suspending work. You can find these examples by clicking here.

Choosing adjudication.

The benefits of choosing adjudication can be tremendous. It is a relatively simply method of deciding construction disputes with an emphasis on allowing money to cascade throughout the construction industry hierarchy.

Detailed information on how the adjudication process operates and the requirements of both claimants and respondent during the process are set out in our adjudication knowledge base article. To read more, please click on the following link.

Need more help?

Throughout the year, the RICS DRS run regular training courses for potential claimants, respondents and other interested parties.

These give detailed information on how the security of payment and the BCISOP Act operates and how it can be utilised effectively. Visit our training schedule for more information by clicking here.

Alternatively, you can contact us.