How to Deal with a Disputed Progress Claim: Procedure Under the NSW Security of Payment Act

5 min read

Navigating the complexities of construction payments can be daunting, especially when disputes arise over progress claims. Under the Building and Construction Industry Security of Payment Act 1999 (SOPA), there are specific provisions that homeowners and builders need to understand to effectively manage and challenge these claims. This article outlines the legitimate grounds for disputing progress claims and offers practical advice for both parties involved in the dispute.

Table of Contents

Grounds for Disputing Progress Claims under Security of Payment Act

Under the SOPA, homeowners have several grounds on which they can dispute a builder’s progress claim. These include:

  • Non-compliant Payment Claim: A homeowner can dispute a payment claim if it fails to meet the statutory requirements set out in SOPA. This might include issues with how the claim was formatted or delivered, or if it lacks necessary details as stipulated by the SOPA.
  • Dispute Over the Amount: If there is a disagreement over the amount stated in the progress payment claim, the homeowner has the right to challenge this through adjudication. The process provides a structured way to resolve disputes over claimed amounts without resorting to more formal legal proceedings.
  • Breach of Contract: A breach of contract by the builder provides a valid basis for disputing a progress claim. This might involve non-adherence to agreed timelines, specifications, materials, or other terms explicitly outlined in the contract.
  • Defective Work: If the construction work is found to be defective or substandard, the homeowner can dispute the progress claim. This argument can be used to withhold payment until the defects are rectified or to adjust the payment to reflect the reduced value of the work performed.

Each of these grounds requires the homeowner to provide substantial evidence to support their claim during the dispute resolution process, typically through the adjudication system provided under the SOPA.

What to do if Your Progress or Payment Claim is Disputed?

When your progress or payment claim is disputed, it’s crucial to approach the situation strategically to safeguard your interests and secure your rights under the contract. Here’s a detailed guide on what steps you can take:

  • Resolve the Dispute Amicably: Before taking formal steps, try to resolve the issue through direct communication with the homeowner. An amicable solution is often less costly and preserves the relationship, which could be beneficial for future projects.
  • Review the Contract Terms: Examine your building contract to understand your rights and obligations regarding progress claims and dispute resolution. This review will help determine the best course of action based on the contractual agreements between you and the homeowner.
  • Analyse the Dispute Grounds: Understand the reasons behind the homeowner’s dispute of the progress claim. Assess whether their claims have merit and prepare your response based on this analysis. This step is crucial for strategising whether to proceed with more confrontational measures like suspension or termination.
  • Consider Suspending Works: If your contract provides the right to suspend works due to unpaid valid progress claims, and it’s strategically sound, issuing a Notice of Suspension might prompt reconsideration by the homeowner. However, ensure that any suspension is legally justified to avoid potential breaches of contract on your part.
  • Consult Legal Experts: Engaging a lawyer early in the dispute can provide crucial insights into your legal rights and the feasibility of your intended actions. Our team can offer preliminary advice and guide you through the process, especially before taking significant steps like communicating with the homeowner or suspending works.
  • Issue Notice of Breach or Initiate Dispute Resolution: If the contract specifies procedures for handling unpaid claims, such as issuing a Notice of Breach or initiating dispute resolution, consider these as potential next steps. These formal actions often lead homeowners to reassess their stance on the payment issue.
  • Terminate the Contract: As a last resort, if the dispute remains unresolved and the homeowner’s breach of contract continues, terminating the contract may be necessary. Termination should be handled with legal guidance to ensure it’s executed correctly and to avoid any legal repercussions for wrongful termination.

How to Prevent Your Progress Claim from being Disputed?

To mitigate the risk of disputes over progress claims in construction projects, it’s essential to adhere to a set of best practices that enhance transparency and accountability. Here’s a structured approach to help you prepare and submit progress claims that are less likely to be contested:

  • Regular and Timely Submission: Always adhere to the payment schedule specified in your construction contract. Submit your progress claims regularly and on time to avoid any delays in payment. Delays in submission can lead to complications and slow down the approval process.
  • Detailed Documentation: Accompany your claims with comprehensive documentation that supports the work completed. This should include copies of relevant permits, invoices, timesheets, and any other records that substantiate the claim. Including high-resolution photographs of the completed work can significantly bolster your claim by providing visual proof of progress.
  • Accuracy in Measurements and Calculations: Before submitting your claim, double-check all measurements and calculations to ensure accuracy. Errors in quantities, rates, or totals can lead to disputes and delays while the discrepancies are resolved. It’s crucial to confirm onsite that the work has been completed as claimed.
  • Use of Photographic Evidence: Take multiple high-resolution photographs from various angles to document the progress comprehensively. Ensure these images clearly show completed work and include labels with details about the location on site and the specific work completed.
  • Provide a Logical Sequence: Arrange your photos in a logical sequence that depicts the progression of work, such as the stages of an installation process. This not only adds context but also demonstrates systematic adherence to the construction schedule.
  • Dated Evidence: Ensure all photographs are dated to provide a clear timeline of the work progress. This can be crucial if the timing or extent of the work is questioned during disputes.
  • Integration with Claims: Incorporate photographs into your progress claims by referencing them in your cover letter. Clearly describe each photo in the letter to direct the reviewer’s attention to the evidence provided.
  • Clear and Concise Cover Letters: Each claim should be accompanied by a cover letter that restates the details of the work completed and the total claim value. Reference the attached photos in your letter to ensure that the client notices the visual evidence you have provided.

By following these guidelines, you can enhance the credibility of your progress claims, expedite their approval, and reduce the likelihood of disputes. Employing photos effectively, alongside detailed documentation and precise calculations, serves as a robust defense against discrepancies and enhances the likelihood of receiving timely payments.

Stop Adjudication of Progress Payment Claim Disputes Before it’s Too Late: Contact Us Today!

Understanding the grounds for disputing progress claims under SOPA is crucial for maintaining the integrity and fairness of construction agreements. Whether you are a homeowner dissatisfied with the progress or a builder facing challenges with payment claims, knowing your legal rights and how to navigate these disputes can make a significant difference. If you find yourself needing further guidance or support in handling such disputes, do not hesitate to contact our law firm. Our experts are equipped to help you secure your interests and ensure that your construction projects proceed smoothly.

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Picture of Authored By<br>Raea Khan

Authored By
Raea Khan

Director Lawyer, PBL Law Group

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