Is NSW Security of Payments Act Delivering for Subcontractors?

April 15, 2016 by Mark Pratt

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With the release of the Economics References Committee December 2015 report: “Insolvency in the Australian construction industry”, there has been a greater focus on current and future reforms and if they are making any positive impact for subcontractors and head contractors alike. We look at NSW current payment claim issues.

Why are Payment Claims are still resulting in disputes?

Payment Claim Issues

1. One Claim a Month

From a claimant’s point of view, the NSW Security of Payments Act limits them to one progress claim in relation to a given reference date (due date for payment). As a result, where a claimant inadvertently makes what is considered to be a claim by virtue of some form of casual email or written message, that would be his entire claim and any subsequent formal claim he or she wished to make in respect of that reference date would be invalid. This creates a situation in which a subcontractor’s claim could fall over by virtue of the fact that he or she sent an innocent email message prior to sending what was intended to be a payment claim.

This also creates problems for respondents, who may not realise that a claim is indeed being made and therefore may not provide a payment schedule. Where this happens, the Act allows the claimant to then go to either adjudication or court and forbids the defendant from bringing cross claims or raising any defences when in court. The upshot is that respondents can potentially be taken to court without any right of legal defence because they received a document which they did not realise was a payment claim. On the other side of the coin, respondents might become overly cautious and treat everything as a claim under the Act, thus wasting time and incurring additional administrative costs.

2. What is a Payment Claim

“The next issue associated with the removal of the endorsement is that it is now unclear what exactly a payment claim is,” Robert Sundercombe, a consultant at Sydney-based Security of Payment information provider Outcome Management said.

He added that an earlier issue revolved around claimants not having any option to opt out of making payment claims, which brought up technical issues regarding reference dates (due dates for payment) and time limits for payment claims.

“The threshold of a payment claim is that it has to indicate that the work has been carried out and state the claimed amount. If I send you an email saying ‘that plumbing work I did – you owe me ten grand,’ that is probably low end but meets the threshold of a payment claim,” he said. “So then when I get organised and say ‘here’s your plumbing bill for $10k’, all of a sudden, I could potentially have two payment claims under the one reference date.

“You can only put in one payment claim per month. So we’ve had this conversation about you owing me some money because we’ve done some work and then later we put our invoice in – a hard reading of the Act is that the invoice is no longer valid because we’ve already used up our reference date when I sent you my little reminder email.

“That’s the low end of the market. At the more complex end, you have got subcontractors submitting various sorts of variation claims and things like that. So a variation claim may also be a payment claim.

“That’s just created confusion where they didn’t have to be confusion.”

3. How Progressclaim.com Can Help

You can claim against all the work you have performed for the month, which is broken down into as many line items as you like. You can clearly see how far completed you are into your contract works with the blue bar representing previously claimed, and the green bar as the current claim value.

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When you go to Submit your Claim you can see your Previously Approved, Claimed to Date and Current Claim figures. This happens in a matter of seconds, along with calculating your Cash Retention Withheld figure. We keep everything simple to understand, clear to read, saving you time, money and a headache.

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Full article here: https://sourceable.net/nsw-security-payments-act-delivering-subcontractors/#

 

 

 

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"What used to take me two days, now takes me two hours. Because Progressclaim.com is online, adminstration of the monthly payment claim cycle is less time consuming and much easier to manage. No more processing everything on a spreadsheet prone to error, and the assessment can be carried out at the touch of a button."

PAUL LINKE

Contract Administrator, BUILT

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