What makes a valid payment schedule for the purposes of the Building and Construction Industry Security of Payment Act (NSW) (the SOP Act) has been clarified in a recent NSW Supreme Court case where Thomson Geer successfully acted for a Contractor making a payment claim.

The decision in Turnkey Innovative Engineering Pty Ltd v Witron Australia Pty Ltd [2023] NSWSC 981 held that an email sent by the Head Contractor in response to the Contractor's payment claim did not constitute a valid payment schedule.  

In particular, the email did not indicate why the Head Contractor proposed to make no payment at all in response to the payment claim nor did it indicate reasons for withholding payment of the entirety of the amount claimed by the Contractor in the payment claim.

As a result of the Head Contractor's failure to provide a valid payment schedule within the prescribed timeframe, the Head Contractor became liable to pay the Contractor the full amount claimed together with interest and costs.

Legal principles

This decision reinforced that a payment schedule serves an important function of informing the claimant as to the metes and bounds of its dispute with the respondent, so that the claimant can make an informed choice as to whether to proceed with adjudication under the SOP Act.

Accordingly, it is not sufficient that a document purporting to be a payment schedule contains:

• vague, generalised objections to payment; or
• takes issue with part of the claim made in the payment claim but does not address the balance.

That is because “the whole purpose of such a document is to identify what amounts are in dispute and why”. ¹

The Decision

By failing to address a substantial part of the Contractor's claim, his Honour Justice Stevenson accepted the Contractor's submission that the Head Contractor's email did not indicate:

• why the Head Contractor proposed to make no payment at all in response to the Contractor's payment claim; and
• the Head Contractor's reasons for withholding payment of the entirety of the amount claimed by the Contractor in the payment claim.

The Head Contractor's email accordingly did not comply with the requirements of section 14(3) of the SOP Act.

What does this mean?

Developers and head contractors responding to payment claims must take care to ensure that, if withholding amounts, the payment schedule contains sufficient reasons that respond to all the items of work claimed in the payment claim so that the claimant can understand why payments are being withheld.

The consequences of failing to provide a valid payment schedule are severe as the claimant is entitled to recover the payment claim in full, in court, as a debt due against the respondent.

Authors

Simon Ralton | Partner | +61 2 8248 3426 | sralton@tglaw.com.au

Divya Chaddha | Senior Associate | +61 2 8248 3473 | dchaddha@tglaw.com.au

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¹ _{Minimax Fire Fighting Systems Pty Ltd v Bremore Engineering (WA) Pty Ltd & Ors [2007] QSC 333 at [27] (Chesterman J); cited with approval in Style Timber Floor Pty Ltd v Krivosudsky (2019) 100 NSWLR 133; [2019] NSWCA 171 at [52] (Leeming JA).}

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