An email refusing payment until all works were completed was not a payment schedule

What happened

Source: the judgment on NSW Caselaw. Numbers in [brackets] are the judgment’s paragraphs.

1. 30 July 2019 — Cemco, the builder, engages Joye, the subcontractor, under two subcontracts at a development in Alexandria: one for timber flooring and one for tiling. Joye makes progress claims on the 25th of each month [1], [17].
2. 27 April 2020 — Joye serves payment claim 7 under the flooring subcontract for $112,043.11. The claim covers about $59,000 of contract work and four variation items [2], [38].
3. 28 April 2020 — Joye serves payment claim 7 under the tiling subcontract for $54,517.65. That claim has ten items [3], [39].
4. 6 to 8 May 2020 — Cemco and its site foreman email Joye about incomplete and defective tiling, and set dates for completion [26], [40]–[42].
5. 8 May 2020 — Cemco emails Joye under the subject “Claim 7 for Alexandria job”, with both invoices attached. The email says: “Please be advised that no payment for above Invoices, until all works been completed.” [5], [43].
6. 30 April 2021 — the District Court reads the email together with the earlier site emails and holds that it was a payment schedule. The District Court dismisses Joye’s claims [8], [20], [44].
7. 9 September 2021 — the Court of Appeal allows Joye’s appeal. It gives judgment for Joye for $175,190.55 including interest, and orders Cemco to pay the costs of the trial and the appeal [30].

The rule

A payment schedule (the written reply to a payment claim) must identify the claim it answers and indicate the scheduled amount, which is the amount the respondent proposes to pay (s 14(2)). If the scheduled amount is less than the claimed amount, the schedule must indicate why it is less, and the reasons for withholding payment (s 14(3)) [9].

Cemco’s email met s 14(2), because it identified both claims and a nil amount [10]. It failed s 14(3). Saying when you will pay is not a reason for not paying [18]. The email did not say whether any of the claimed work had been done, even though each claim had several items [19].

A payment schedule must give reasons even when the respondent proposes to pay nothing [15]–[16]. A respondent cannot raise reasons in its adjudication response that it left out of its payment schedule (s 20(2B)) [12].

Another document becomes part of a payment schedule only if the schedule identifies that document with enough particularity. Cemco’s email identified no other document [22]–[23]. Other material can explain a term used in a schedule, but it cannot supply reasons that the schedule does not contain [24].

Macfarlan JA added a further point. If the email meant that Joye had no right to payment until completion, the email contradicted s 8 of the Act. Section 8 gives a right to progress payments whatever the contract says. A “reason” of that kind is not a reason for the purposes of the Act [32].

What it means for you

If you’re paying: give your reasons in the payment schedule itself, item by item, so the claimant can see what you dispute and why [19], [27]. If you rely on an earlier email or report, name it in the schedule [22]–[23].

If you’re the trade: on this decision, a reply that only says when the other side will pay is not a payment schedule. If no valid payment schedule arrives in time, the claimed amount becomes payable on the due date (s 14(4)) [9].