No Payment Schedule? Enforce your rights under the Security of Payment Act.
Once a Payment Claim has been served by a Claimant on the Respondent under the Building and Construction Industry Security of Payment Act 2002 (Vic) (“SOP Act”), what is the next step? The answer to this question will turn on the particular circumstances of the case.
In this article, we will focus on the circumstance where the Respondent has not provided a Payment Schedule to the Claimant within:
the time required by the construction contract; or
10 business days after the Payment Claim is served;
whichever time expires earlier.
If the Respondent fails to provide a Payment Schedule within time, the Respondent becomes liable to pay to the Claimant the Claimed Amount as set out in the Payment Claim on the due date for the progress payment to which the Payment Claim relates.
What happens if the Respondent fails to make full payment of the Claimed Amount by the due date for the progress payment to which the Payment Claim relates?
If the full payment of the Claimed Amount is not made by the Respondent on or before the due date, there are effectively two (2) enforcement options available to the Claimant, which are:
The Claimant may recover the unpaid portion of the Claimed Amount from the Respondent as a debt due to the Claimant, in any Court of competent jurisdiction.
The Claimant may make an Adjudication Application under the SOP Act in relation to the Payment Claim.
The option that the Claimant elects to proceed with is a matter for them and there is no right or wrong answer.
However, the Claimant should be mindful that if it proceeds with Option 2, the Claimant must give a further opportunity to the Respondent to provide a Payment Schedule.
In addition to the above two options, or alternatively, the Claimant may elect to suspend the carrying out of the construction work under the construction contract or suspend supplying related goods and services under the construction contract (hereafter collectively known as “work”).
However, before suspending the work, the Claimant must give notice to the Respondent of its intention to do so. This notice period must be at least 3 business days.
For more information on suspending the work using the provisions of the SOP Act, please click here for an article we have previously prepared on point.
How can the Respondent respond?
Where the Respondent has failed to provide a Payment Schedule, it is generally at the mercy of the Claimant. The available defenses will essentially turn on which option that the Claimant has elected to proceed with.
Accordingly, it is essential for the Respondent to understand how it can respond to a Payment Claim to best protect itself to mitigate the risk that may come with an overzealous Claimant.
Although this may require some extra contract administration and training, the benefits may come in the form of minimising unnecessary payments to subcontractors, legal expenditure and the inherent distractions that litigation and adjudication applications bring.
If you wish to discuss either enforcing a Payment Claim where no Payment Schedule has been provided or understanding how to respond to a Payment Claim, please do not hesitate to contact Perry Thomas Lawyers on 03 8375 9638.