What is a payment claim? This is a simple question, but not necessarily understood, and worth a refresher from time to time.
This article will address the requirements of the written document. There are other requirements for a valid payment claim (for example, it must be given pursuant to an available reference date).
The Building Industry Fairness (Security of Payment) Act 2017 (Qld) (BIF Act) provides that a payment claim is a written document that:
(a) identifies the construction work or related goods and services to which the progress payment relates;
(b) states the amount (the claimed amount) of the progress payment that the person giving the payment claim says is owed by the party receiving the payment claim;
(c) requests payment of the claimed amount; and
(d) includes any other information prescribed by regulation.
The requirements are in theory straightforward; yet disputes often arise – because in the matrix of projects and developments, sometimes it simply is not clear. Below is more information which should help ensure your payment claims are valid.
1. Identifies the construction work
This is the first issue a disgruntled recipient of your payment claim and their lawyers will examine to see if they can establish your payment claim is invalid.
A useful “checklist” is as follows:
- The payment claim should give an item reference which, refers to the contractual identification of the work;
- That reference should be supplemented by a single line item description of the work;
- Particulars should be given of the amount previously completed and claimed and the amount now said to be complete; and
- There should be a summary that pulls all the details together and states the amount claimed, including GST.
The payment claim must give enough detail of the work so that the person receiving the payment claim is clear exactly what work you are claiming for, such as is sufficient, that if they do not agree, they can respond with a payment schedule setting out what they and what work and claimed amount a dispute.
Avoid vague language and bundling items of work together. If the recipient of your payment claim does not understand what work you are claiming for, and the amount you are claiming, they are more likely to respond with a payment schedule refusing to pay anything, or to assert it is invalid. If you think an average high school student might not be able to understand your payment claim, try again. Your payment claim needs to give the other side enough detail to allow them to give you a payment schedule in response. If they cannot satisfy their obligation to give you a proper payment schedule because you have not provided a proper payment claim, this will become your problem.
While it may seem counterintuitive to give the other side more information which you believe they may use to dispute your claim, it is more secure than providing a vague description and hoping for the best.
2.States the amount
The best way to satisfy this criterion is to simply state the amount you are claiming you are owed, and remember to include the GST.
Courts are reasonably content with a straightforward method of calculating the amount claimed. For example, it is perfectly acceptable to set out the total value of an item of work, the percentage of that work you are claiming in that payment claim and the dollar value being claimed. For example, if the value of that item of work is $129,000 plus GST, you claim that 63% of that item has been completed, that only 50% has been paid to date for that item of work, you can claim in the current payment claim that you are entitled to 13% of $129,000, being $16,770 plus GST.
A word of warning though – if you adopt this method, be sure that your method of calculation works, and that your description is sufficient to express how you came to the percentage claimed. Courts have ruled against claimants where the maths in a payment claim did not add up.
When the BIF Act commenced, it did away with the previous requirement to specifically state in the payment claim itself that it is a payment claim.
Courts have found that it is enough to include words such as “Due date – 30 March 2020”. It is also enough to write something to the effect of “Please pay” or “Please make payment by [date]”. It is also enough to include the word “Invoice”.
4.Other information prescribed by regulation
Currently there is no other information prescribed by regulation, so for the moment, this requirement can be ignored. However, the Minister has intimated that this power may be used in the future. If it is, we intend to include that in a future newsletter, so keep an eye out for our monthly updates.
Timing of payment claims
Under the BIF Act, you have a right to make a progress claim “from each reference date”. A reference date is the date stated in or worked out under your contract as the date on which a claim for a progress payment may be made. If there is nothing in the contract to that effect, then it is the last day of the month (and if the contract is terminated and there is no reference date which survives termination, you get a final reference date which is the date the contract is terminated).
For example, if your contract says that you can make progress claims on the 25th day of each month, you can lodge a payment claim on the 25th or after the 25th. If you lodge it before then, it will probably not be valid (although it is possible that there might be an earlier reference date which is still available. That becomes complicated and we will go into more detail about reference dates in a subsequent article).
If there is nothing in the contract about when you can claim payment, then you can lodge a payment claim on the last day of each month in which you do work. If you lodge it before the last day, again it will probably be invalid.
So it is important to know what your contract has to say about when you can make a claim for payment.
It is always important to make sure each and every payment claim is valid because if your relationship with your client deteriorates, you may need to enforce payment and the starting point is you need a valid payment claim. Without one, you may not be entitled to use the BIF Act and at best, you will have to start again next month.
- Ensure you understand the requirements in the contract for making claims for payment, especially when you can make a claim;
- Make sure all your payment claims comply with those requirements and are otherwise valid;
- Make sure all your contract documents are as good as they can be. If they have not been reviewed lately, particularly in view of recent and upcoming legislative changes, get them reviewed and updated; and
- If in doubt, take professional advice by calling competent building and construction lawyers as not all lawyers know and understand this area.
If you have any questions about this article please get in touch with the author or a member of our Building & Construction team.
This information and the contents of this publication, current as at the date of publication, is general in nature to offer assistance to Cornwalls’ clients, prospective clients and stakeholders, and is for reference purposes only. It does not constitute legal or financial advice. If you are concerned about any topic covered, we recommend that you seek your own specific legal and financial advice before taking any action.