The Construction Contracts Act 2002 (CCA) provides a framework which can assist construction contractors in obtaining timely payment of their accounts. It is a relatively simple framework which as, long as the process for claiming amounts owing is complied with, contractors may have a better chance of receiving timely payment. However, it is surprising how many payment claims do not comply with the requirements of the CCA and therefore are not afforded the benefits of the CCA.
The CCA applies to a contract between parties for the carrying out of construction work.
A contract can be written or oral (or a combination of both).
“Construction Work” has a broad definition in the CCA. In a nutshell it includes construction, erection, installation, carrying out, alteration, repair, restoration, renewal, maintenance, extension, demolition, removal or dismantling of works forming or to form part of land. It also includes the related design / engineering and quantity surveying work and cleaning.
The framework under the CCA
• A payment claim is issued to the payer for the amount claimed (a tax invoice may be issued at the same time).
• The payer must either pay the amount claimed in the payment claim by the due date, or issue a payment schedule in response and pay the amount provided as the scheduled amount in the payment schedule by the due date. The scheduled amount is the amount the payer assesses is payable. The final date for providing a payment schedule is the date provided for in the contract or if no such date is provided, the date which is 20 working days after the payment claim is served.
• If payment is not made of the claimed amount, or the payer fails to issue a payment schedule and/or fails to pay the scheduled amount, then the amount claimed (or scheduled amount as the case may be) will be a debt which is due and can be enforced by bringing proceedings (which may include statutory demand and bankruptcy notice procedures), despite any substantive issues which will need to be resolved at a later date (following payment).
• Failure to pay/respond as above, may also give rise to the right to suspend the works, even though the contract may not provide for such right).
• The construction contract may govern timeframes for payment and responding and the content to be included in a payment claim and payment schedule.
Payment claims – must be compliant
A payment claim must:
• Be in writing;
• Contain sufficient details to identify the construction contract to which the payment relates;
• State the claimed amount;
• State the due date for payment;
• Indicate the manner in which the claimed amount has been calculated;
• State that it is made under the CCA;
• Be accompanied by the “Form 1: Information that must accompany all payment claims”.
Payment Schedules – must be compliant
A payment schedule must:
• Be in writing;
• Identify the payment claim to which it is a response to;
• State the scheduled amount (the amount the payer proposes to pay, which may be nil);
• State the manner in which the scheduled amount has been calculated;
• State the reasons for the difference between the claimed amount and the scheduled amount;
• If the payer is withholding any amount for any reason, the reason for doing so.
How can Tom Evatt & Co help you?
If you are carrying out construction work, we can assist you with a review of your payment claims to ensure compliance with the CCA (and therefore to secure the benefits of the CCA timely payment regime).
We can also assist with the review of payment schedules you have received in response to payment claims. If payment schedules are not issued in time or not compliant then you will be entitled to recover the unpaid claimed amount as a debt due in any court, together with your costs of recovery, irrespective of any disputes raised.PRUE MILLERMAY 12, 2021