Making a claim

A payment claim is a claim for a progress payment under the SOP Act.

Before making a payment claim

Before preparing a payment claim, you should ask the following questions.

Does the SOP Act apply to this contract?

The SOP Act applies to most contracts to carry out construction work or supply related goods and services. The contract may be written, oral or a combination of both.

It does not apply to contracts to carry out domestic building work with a building owner unless the building owner is in the business of building residences and the contract is entered into in the course of, or in connection with, that business.

When can I make a payment claim?

A payment claim must be served within three months after the reference date, or within the period specified in the contract – whichever is the later.

A reference date is the date on which a claim may be made. If the contract does not specify reference dates, the SOP Act provides for them as follows:

  • Progress payments – 20 business days after the work was first carried out or goods and services were first provided. Subsequent payment claims may then be made every 20 business days until the job is completed.
  • Single or one-off payments – The day after the work was last carried out or the goods or services were last supplied under the contract.
  • Final payments – The day after the end of any period under the contract for rectifying defects or omissions or the day after the final certificate is issued. If neither of these applies, the reference date is the day after the work was last carried out or the goods or services were last supplied under the contract.

Information required in a payment claim

The payment claim must:

1. Identify the construction work or related goods and services to which the payment relates

To find out what kinds of work and services are covered by the SOP Act, see Security of payment.

2. Indicate the amount of money that the claimant claims is due (the ‘claimed amount’)

The payment claim must take into account the contract price for the construction work or supply of related goods and services, any other rates or prices set out in the contract and the estimated cost of rectifying any defect.

Your payment claim may include claimable variations but not excluded amounts. For more information about these amounts, see the claimable variations and excluded amounts below.

3. Include the 'Security of Payment Statement'

The payment claim must notify the respondent that it is made under the SOP Act.

It must say: 'This is a payment claim under the Building and Construction Industry Security of Payment Act 2002'.

Serving a copy on the respondent

A copy of the payment claim must be served on the client or purchaser (the 'respondent') in one of the following ways:

  • delivered in person – it is served when the respondent receives it
  • lodged during business hours at the respondent's ordinary place of business – it is served when it is received at that address
  • sent by post to the respondent's ordinary place of business – it is served two business days after the day it is posted
  • faxed to the respondent's ordinary place of business – it is served at the time it is received unless it is received after 4 pm; if it is received after 4 pm, it is taken to have been served on the next business day
  • provided in any other manner specified in the contract.

Claimable variations

Under the SOP Act, a variation to a construction contract is defined as 'a change in the scope of work to be carried out or the goods or services to be supplied, under the contract.'

The SOP Act allows contractors to claim all payments for the original contract sum. The SOP Act specifies which variations may be claimed in a payment claim, and which may not.

Variations that may be claimed are called 'claimable variations'.

Variations on which the parties agree

All agreed variations may be claimed in a payment claim.

It is an agreed variation if both the claimant and the respondent agree on all the following things:

  • the claimant has carried out the work or supplied the goods orservices
  • the scope of work that has been carried out for the goods and services that have been supplied
  • the work or the supply of goods or services is a variation to the contract
  • the claimant is entitled to be paid for the variation
  • the value of the variation or the method of valuation
  • the time for payment.

Disputed variations

Some disputed variations may be claimed in a payment claim if the parties do not agree about one or more of the following things:

  • the work or the supply of goods or services is a variation to the contract
  • the claimant is entitled to be paid for the variation
  • the value of the variation or the method of valuation
  • the time for payment.

Limits on disputed variations that may be claimed on a payment claim

Contract sum less than $150,000

If the original contract value is less than $150,000, the SOP Act applies to all claims for disputed variations.

Contract sum between $150,000 and $5 million

If the contract sum is between $150,000 and $5 million, the SOP Act applies to claims for disputed variations up to 10% of the original contract sum. If the total value of the disputed variations amounts to more than 10% of the original contract sum, the dispute must be resolved by the dispute resolution methods specified in the contract. If the contract does not specify a method for resolving disputes, the SOP Act applies.

Contract sum more than $5 million

If the original contract value is more than $5 million, disputed variations must be resolved by the dispute resolution methods specified in the contract. If the contract does not specify a method for resolving disputes, the SOP Act applies.

Example

A building contractor enters into a construction contract. The consideration (contract sum) under the contract at the time the contract is entered into is $3 million. The contract contains a dispute resolution clause. The contractor undertakes work at the direction of the other party.

The contractor claims (the new claim) that the work is a variation to the contract for which they should be paid. The other party does not agree that the work is a variation (disputed variation). The contractor has already made a number of claims for disputed variations under the contract.

The new claim brings the total amount of claims for disputed variations under the contract to $350,000. This amount exceeds 10% of the contract sum.

As the contract sum is more than $150,000 and less than $5 million, and the contract contains a dispute resolution clause, the disputed variation in the new claim and all subsequent disputed variations under the contract will not be claimable variations under the SOP Act, and must be resolved by the dispute resolution process under the contract.

Excluded amounts

The SOP Act expressly excludes certain amounts from being claimed in a payment claim. These are called ‘excluded amounts’. An adjudicator may not consider an excluded amount in a payment claim, and their determination will be void to the extent they do so.

An excluded amount is:

  • any amount of the contract that is not a claimable variation as described above
  • compensation due to the happening of an event, such as latent conditions, time-related costs and changes in regulatory requirements
  • damages for breach of the contract or for any other reason related to the contract
  • any claim arising at law other than under the contract.

While a dispute about an excluded amount cannot be the subject of payment claim under the SOP Act, it may still be resolved in accordance with any dispute resolution provisions in the contract or by going to court.

Resources