I often come across contractors who tell me about the claim they just served, or ask me questions about the claim they’re about to serve.
In the course of those conversations, I hear all sorts of weird and wonderful myths and misunderstandings about claims that have clearly taken root in the mind of many contractors.
It’s producing bad outcomes, including invalidly served claims, and increases to the amount of time contractors are waiting before making a claim. So here's an attempt to clear the air and set the record straight on payment claim essentials around the country.
“I have to wait until the invoice is actually overdue before I can serve a payment claim under the Act.”
This is such a common myth. You do not have to wait for any time to pass. The use of Security of Payment processes does not have to be some kind of ‘step two’. You can issue any invoice under the Act straight up and move toward adjudication straight away.
“I have to issue a letter of demand before serving a payment claim.”
No, you don’t! See above.
“Each month has to be claimed separately.”
Not true. At any time, you can combine all unpaid and part paid invoices into a new and single payment claim. That way you can wrap up all unpaid amounts into a single payment claim and resend it using previously issued invoices. And no, you don’t have to redate the invoices either.
“I’m serving the claim by email, which will be quick and effective.”
You can serve a claim by email, but if it is not acknowledged then you’ll have to prove your debtor got it. The Acts actually do not say anything about email as a way to serve something, so be careful here. Your best way forward, if you plan to take the matter to adjudication, is to serve the claim via express post or courier.
“The time limit in which to serve a claim starts from when I last sent an invoice.”
Not correct. The clock starts from when you were last carrying out work under the contract.
Hopefully that's cleared up a few basics. Now let’s look at the particulars of each state:
New South Wales
In New South Wales, you don’t even need to mention the Security of Payment Act on your invoice. Any invoice, if reasonably detailed, can be a valid claim made under the Act. The need to endorse it under the Act was removed in the last round of amendments. You can only serve a payment claim within 12 months of last carrying out work.
This state is currently the basket case state for Security of Payment and it's getting worse! There are a few things to keep in mind with the sunshine state. First you have a six-month limit on make a claim from last carrying out of work.
Second, you can only serve the claim on the specific location and in the specific way noted in the contract under any ‘service of notices’ provisions. If there is no such provision, then the claim must go to the actual office location of your debtor. That means post office boxes are out, as is any location that is not the physical office of the debtor. This rule arises out of a bizarre court decision that decided that the post box at the physical office of the debtor is valid, but the P.O box that is emblazoned on all the debtors’ collateral and website is not. Go figure.
The time limits on Victorian claims are so badly written in its Act that I can only generalise here. You can make your claim either within the time limits set out in the contract or within three months of last carrying out work. There are various interpretations and exceptions depending on the contract and the type of claim you are making.
Victoria also has two animals called ‘Excluded Amounts’ and ‘Claimable’ and ‘Not Claimable’ variations. There are also two types of variations; Class One and Class Two. So you need to make sure your claim does not contain ‘Excluded Amounts.’ If you think this Act sounds pretty tortuous, you’re right. You’ve got to navigate these waters carefully.
The main thing about this state's Act is that you are limited in making your claim in relation to a reference date in which work and goods were ‘last supplied’. This means that a reference date against which you can make a claim only arises in a month in which work is done. This is very important because if you complete work, you have only one opportunity to make a final claim under the Act as you can only use the last month in which you did work for the reference date. This silly restriction arises out of the uninformed drafting of changes to the Act that serve no purpose.
South Australia and ACT
The time limits for making claims under these Acts are six months and 12 months accordingly. These states are much the same as NSW.
The recent changes make this state ripe for claims as there is no time limit after completing work for making claims, and you can now claim for all unpaid work, and have 90 business days to take the matter to adjudication. The Act sets out a list of what has to be included in a claim in its Implied provisions in Schedule 1. Make sure you check these carefully.
These are the bare bones, but as you can see, each state has its own detail that you need to be aware of. Always make sure your debtor is correctly identified on your claim with formal name and applicable ABNs or ACNs included.