Service of Payment Claims by Email

CAN it be done? SHOULD it be done?

With the increasing use of emails for communications, it is becoming commonplace for businesses to send tax invoices to clients via email for payment.

If the tax invoice relates to work performed under a construction contract, your business may have rights to prompt payment under the Building and Construction Industry Security of Payment Act 1999 (NSW) (“the Act“).

Often, businesses will engage a lawyer after having served a Payment Claim when payment is not forthcoming from the other party.  Where we are able to identify that the business has rights under the Act, we can prepare a detailed letter of demand which may shortcut negotiations and lead to an early, cost effective resolution of the matter without the need for Court proceedings.

All rights under the Act flow from service of a valid Payment Claim.  It is therefore critical that the tax invoice which is said to be the Payment Claim under the Act, has been validly served.  Once a Payment Claim has been validly served, there are very strict time frames for the other person to respond to it.

When a Payment Claim is sent by email, questions arise as to:

1. Whether you can validly serve a Payment Claim by email, and

2. Whether you should serve a Payment Claim by email.

Under the Act, a Payment Claim can be served by:

1. Delivering it to the person personally,

2. Lodging it during normal office hours at the person’s ordinary place of business,

3. Sending it by post or facsimile addressed to the person’s ordinary place of business, or

4. In such other manner as may be provided under the construction contract concerned.

While service by email is not listed as one of the methods of service in the Act, the construction contract itself may specify that Payment Claims can be sent by email to a specified person at a particular email address.  If the Payment Claim is sent by email in accordance with the contract, then it will have been validly served. (Questions may still arise as to precisely when it was served, however that is for another post!)

There is also the Electronic Transactions Act 2000 (NSW).  Under this Act, if a person is required or permitted to give information in writing, this can be done via electronic communication if:

1. At the time the information was given, it was reasonable to expect that the information would be readily accessible so as to be useable for subsequent reference, and

2. The person to whom the information is required to be given consents to the information being given by means of an electronic communication.

It is not always easy for the sender of an email to show the above requirements.  Unless email is clearly listed as a method of service in a construction contract, therefore, service by email may still be problematic as it may lead to arguments about when and whether it was readily accessible to the other person, and whether the other person consented to receiving Payment Claims by email.

In short, whilst you can serve a valid Payment Claim by email if the construction contract provides for it or if you can meet the requirements of the Electronic Transactions Act, the issues of whether email service is effective, and the precise time of service of documents by email, will continue to arise in relation to security of payment issues and construction contracts generally.

Therefore, it is much better to serve Payment Claims by facsimile, as this is a method specifically listed under the Act and it provides a “transmission receipt” confirming the precise time and date of service.

Tips for serving Payment Claims:

  • Always serve Payment Claims by one (or more) of the methods which are expressly permitted under the Act for example, by facsimile and post to the person’s ordinary place of business.
  • When serving by fax, always print and keep a copy of the facsimile transmission receipt in case you later need to prove the time and date of service.
  • If sending by email, always request a “Delivery Receipt.”  Be aware that the actual date of service by email may differ from that shown on the email.
  • Carefully review each construction contract you enter (or have entered) into, and if necessary obtain legal advice in relation to the permitted methods of service.
  • If your business wishes to serve Payment Claims by email, make sure this is clearly specified as a method of service in the construction contract.
  • Contact us to discuss our contracts solution which provides you with standard form Contracts and customised Terms and Conditions of Trade for your business to use time and time again (or see our website for details).

By Felicity Donald,
Special Counsel

Felicity Donald