Introduction
Security of Payment legislation provides a powerful framework for recovering progress payments, but only where a payment claim complies with the Security of Payment Act 1999 (NSW) (‘Act’). In practice, many claims fall short due to small mistakes that have significant legal consequences.
This article examines common payment claim errors and explains why careful preparation remains critical to preserving statutory rights.
Claiming too early
If a payment claim is served before the last day of the month in which the work was first carried out (or outside the contractual timing regime) it’s usually invalid – no entitlement, no adjudication, no leverage.
This catches out contractors who:
- rush claims to improve cashflow
- assume “monthly” means any day in a month
- make more than one claim in a month (unless the contract allows for more frequent claims)
- don’t align contract dates with statutory rights
Timing errors don’t reduce the claim, they erase it.
Using the wrong document as the “payment claim”
Invoices, spreadsheets, cost reports, or “Application for Payment” documents often fail to meet statutory requirements. Section 13 of the Act provides for these requirements, including that a payment claim must:
- identify the construction work to which the progress payment relates
- indicate the amount of the progress payment
- state that it is a payment claim made under the Act
Common issues including mixed contractual and statutory language and reliance on attachments without clarity. Accordingly, if it doesn’t clearly identify itself as a payment claim, you’re relying on goodwill, not the Act.
Bundling unparticularised variations
Bundling variations together without detail is a fast way to invite a nil or low schedule and lose ground in adjudication. Typical mistakes include:
- variations to date – $200,000.00
- no description, valuation method
- assuming the Respondent already knows what the claim is for
If the Respondent cannot understand from the payment claim alone, it is weak and may not hold up in the adjudication process.
Claiming amounts not yet payable or completed under the Contract
Security of Payment does not fix contractual entitlement gaps. Examples of claims which often survive scheduling but fail in adjudication include:
- damages or loss claims dressed up as variations
- acceleration costs without contractual entitlement
- claims subject to unmet preconditions
Internal inconsistencies
Payment claims with internal inconsistencies can destroy credibility and can easily justify a conservative payment schedule from the Respondent. Examples of inconsistencies include:
- totals not matching line items
- GST treated inconsistently
- different figures across attachments
Conclusion
Non-compliance by the Respondent does not fix a poor payment claim. If a payment claim is invalid or weak, adjudicators still scrutinise entitlement which can cause claimants to lose money. Most payment claim failures come from small, quiet errors that strip a claim of enforceability before the dispute even starts.
Attention to timing, clarity and contractual entitlement at the outset remains the simplest and most effective way to protect payment rights under security of payment legislation.