CONTRACTORS AND SUBBIES TAKE NOTE: CHECKLIST FOR ENSURING YOUR PAYMENT CLAIMS ARE VALID

QLD Security of Payment: Breaking down the requirements for payment claims

With contractors and subcontractors working on tight margins in a highly competitive market, you would be forgiven for assuming the SOP regime, supposedly in place to protect contractor and subcontractor payment down the chain, is one which promotes flexibility and avoids technical preconditions to payment. That is not the case.

In Queensland, payment claims must:

1. identify the relevant construction work or related goods and services (Requirement 1);
2. state the amount claimed (Requirement 2); and
3. request payment of the claimed amount (Requirement 3).

Requirement 2 and Requirement 3 are easily met: a written document which bears the word ‘invoice’ and includes a $ figure will satisfy those requirements under the Act.

Requirement 1 however, may create some hurdles in the ordinary course of your business. In following the Court’s interpretation of that provision, this requirement may render the “progress claims” you have been using for years under your contracts invalid as a “payment claim” under the Act. In particular, the Queensland Supreme Court accepted that:[i]

"...providing the percentage of work carried out in total is insufficient to reasonably identify the construction work in respect of the claim".

In light of that decision and to ensure your payment claims satisfy Requirement 1, we recommend your payment claims:

1. identify the contract works;
2. specify the relevant period;
3. provide all details regarding certified amounts; and
4. sufficiently identify any variation works claimed and include documents supporting the basis on which that work is a variation.

Identifying the contract works

To ensure you adequately identify the contract works, the payment claim should:

• include a description of the works that were carried out during the period the subject of the claim; and
• adequately identify the value for specific works claimed.

It may not be sufficient to simply include the percentage of the work carried out to date.

This means enough detail needs to be included so that an objective person, with zero knowledge of the works or the parties’ dealings to date, can understand what is being claimed.

To ensure your payment claims do not fall shy of identifying the contract works, we recommend you include line items of the work you are claiming for the relevant period and a brief description for each line item. Where interest is claimed, we recommend including a breakdown of how the interest was calculated.

Specifying the relevant period

Payment claims should specify the period for which the claimed works were carried out. Typically, payment claims must relate to works carried out prior to a reference date, unless your contract has been amended to expressly provide that works carried out after a reference date are claimable. Unless your contract so provides, you should ensure you have not inadvertently included works carried out after the reference date in your payment claim.

Detail regarding certified amounts

We often see disputes arise over whether specific amounts have been certified and/or paid, what works have been paid and when payment was made.

To avoid dispute in this regard, we recommend including with your payment claims a schedule that identifies your payments received to date and the dates on which payment was made.

Identifying variation works

The claimant bears the onus to establish its entitlement to payment for work the subject of a variation. Where variation work forms part of the claimed work, we recommend claimants include with their payment claims: 

• documentation identifying the original scope of work (drawings, tender documents, specs, etc);
• a description of the variation works and supporting documents (e.g. revised drawings); and
• a description of the additional work required to be carried out and the claimed cost of that work (including calculations if possible).

For your FREE payment claim template prepared in accordance with the above requirements, email [email protected] or [email protected]

[i] KDV Sport Pty Ltd v Muggeridge Constructions Pty Ltd & Ors [2019] QSC 178.

This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader’s specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed.