Payment schedules under the Security of Payments Act – top tips to ensure compliance

Have you received a payment claim under the Security of Payment Act? Experienced construction lawyer Roland Burt sets out five top tips that will put you on the right path.

If the payment claim is for more than the amount due, you will need to serve a payment schedule in accordance with the Security of Payment Act, or you could be forced to pay the full amount claimed.

Here are five top tips to ensure your payment schedule complies:

1. Check your deadline. This is critical. A payment schedule served out of time has no effect under the Act, and the recipient is automatically liable for the full amount claimed. The payment schedule must be served within the time required by the contract, or within 10 business days after the payment claim is served, whichever is earlier. Review the contract to ascertain whether it requires a payment schedule inside the 10 business day period. If not, you have 10 business days to prepare and serve your payment schedule.
2. The payment schedule must identify the payment claim to which it relates. State the project, the contract, the claimant, the date of the payment claim and the payment claim number. There is no prescribed form for a payment schedule (or a payment claim), but the sample payment schedule published by the Victorian Building Authority is useful – find it here.
3. The payment schedule must indicate the amount (if any) that you propose to pay. If that is less than the claimed amount, the payment schedule must set out the reasons for paying less. Best practice is for the payment schedule to list the items in the payment claim, setting out the amount to be paid beside each item, and the reasons for deductions, including calculations if applicable.
4. The payment schedule must identify any excluded amount in the payment claim. Excluded amounts are non-agreed variations, time-related costs, damages claims, claims relating to latent conditions or changes in regulatory requirements, and claims arising outside the contract.
5. Serve the payment schedule. The contract often provides that the Superintendent is the Principal’s agent for this purpose – if so, serve on the Superintendent. Check the contract – it may provide for means of service, including by email or within the project management platform. Unless the contract specifically allows service of payment schedules in these ways, avoid them. You can always rely on the means permitted by the Act – personal service, hand delivery to the Principal or Superintendent’s office, post or facsimile.

If your payment schedule complies with the Security of Payment Act, you must then pay the scheduled amount. The time for payment may be set out in the contract, but if not, it is 10 business days from the payment claim (the same time the payment schedule is due). Failure to pay means the claimant may seek judgment or serve a suspension notice.  If you serve a payment schedule for less than the claim, the claimant may seek adjudication.