Reminder that Informal Communications may be Valid Payment Schedules under Security of Payment Laws

builder with payment invalid payment schedule

A recent matter saw an unsurprising decision handed down in yet another Payment Schedule case before the NSW District Court. Joye Group Pty Limited v Cemco Projects Pty Limited [2021] NSWDC 151.

The Case

The matter was before Her Honour Justice Strathdee and concerned the defendant’s failure to pay four invoices issued by the plaintiff in March and April 2020 for tile and timber flooring work that the plaintiff performed pursuant to two written contracts. 

It was not controversial that all four of the invoices were Payment Claims within the meaning of section 13 of the Building and Construction Industry Security of Payments Act (“the Act”). 

It was uncontroversial that the defendant had not served Payment Schedules in respect of the first two of the four Payment Claims, and accordingly, judgment was entered for the plaintiff for the first two Payment Claims in the amount of $46,322.36.  

Controversy arose however, as to whether the defendant had served valid Payment Schedules in respect to the third and fourth Payment Claims.  

The third Payment Claim, served 27 April 2020 was in relation to the timber flooring contract and was in the amount of $112,043.11. 

The fourth Payment Claim, served 28 April 2020 was in relation to the floor tiling contract and was in the amount of $54,517.65. 

On 8 May 2020 the defendant sent an email to the plaintiff attaching the Payment Claims sent 27 and 28 April 2020. The plaintiff included the following text in the body of the email. “Please be advised that no payment for the above Invoices, until all works been completed.” [sic]. 

The issue before the Court was therefore whether the email sent by the defendant to the plaintiff on 8 May 2020 was, for the purposes of s 14 of the Act, a Payment Schedule. 

Within the judgment Her Honour sets out, in my view very patiently, the requirements of a valid Payment Schedule of section 14. I have recounted these below. 

What Must a Payment Schedule Include?

Payment Schedule must;  

  • identify the Payment Claim to which it relates; 
  • indicate the amount of the payment (if any) that the respondent proposes make (the ‘scheduled amount’); and 
  • if the scheduled amount is less than the claimed amount, the schedule must indicate why the scheduled amount is less and (if it is less because the respondent is withholding payment for any reason) the respondent’s reasons for withholding payment.  

The Decision

Further, Her Honour took the opportunity to remind the plaintiff that the requirements for a valid Payment Schedule had been set out in a number of authorities. In restating the principles from Clarence Street Pty Ltd v Isis Projects Pty Ltd (2005) 64 NSWLR 448, Her Honour noted that the function of a Payment Schedule is to set ‘the parameters for the matters that may be contested if an adjudication under the Act ensues’, and contrasted that function against a detailed and precise document that is particularised as a pleading.  

Did the plaintiff’s email identify the Payment Claim to which it related? Not in a precise way, but never the less it did in some way by referring to the “above invoices” that were attached, and that was enough for Her Honour. 

Was the defendant’s email sufficiently particularised to enable the plaintiff to understand the issues between the parties in broad terms? In Her Honour’s view, yes. The terms were “clear enough”. The words of the email stated not only the amount that the defendant proposed to pay, namely no payment, and the reason for the defendant withholding payment, namely that the payment was not then owed because the work was incomplete. 

Key Learnings

All in all, the decision is remarkable only in that the plaintiff probably spent tens of thousands of dollars in legal fees for the privilege of receiving judgment against their overly technical construction of section 14 of the Act, going out backwards overall to the tune of some $120,000.00 plus interest.  

The case serves well as a reminder that it is well settled law that Payment Schedules need be neither articulate nor precise, so long as they tick the section 14 boxes in a way that sufficiently informs the parties of the matters that may be contested if an adjudication under the Act ensues.  

Accordingly, claimants need to be on guard for anything in writing from a respondent to a Payment Claim that; 

  • identifies the Payment Claim,  
  • specifies an amount that the respondent agrees to pay (which can be nothing); and  
  • gives any reason that ought to be readily determinable by the claimant for the short payment. 

because that letter, email, SMS or note scrawled on the back of a bar coaster is very likely to be a valid Payment Schedule for the purposes of the Act.