An email that gave no reason for $304,230 of variations was not a payment schedule

What happened

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

1. Witron engages Turnkey, the electrical contractor, to do electrical installation works at a distribution centre at Kemps Creek. The price was “a flat fixed price” of $11.4 million (ex GST), with variations “as mutually agreed by the parties” [6].
2. 22 March 2023 — The works are delayed. Witron says it is removing two group controls from the contractor’s scope [7].
3. 4 April 2023 — The contractor proposes a revised price of about $14.1 million. By 17 April the parties appear to have agreed the new price by email and text message. Witron disputes that they made a binding agreement [7].
4. 18–19 April 2023 — The contractor submits fifteen variation claims [8].
5. 1 May 2023 — The contractor serves progress claim 9 for $804,154.63 (ex GST). In very small type at the foot of the page, the claim says it is made under the Act. The claim has two parts: $499,924.63 for the base contract works at the new price, and $304,230 for variations [9], [10].
6. 3 May 2023 — Witron replies by email. The email says Witron will review the variations and the new pricing “after we see real progress on the handing over of GCs” (the group controls). It says the contractor can claim on the original contract price, and should adjust its claim and resubmit it [11].
7. 16 August 2023 — Stevenson J holds that the email is not a payment schedule ([2023] NSWSC 981) [3], [13].
8. 13 December 2023 — The Court of Appeal agrees with Stevenson J. It dismisses Witron’s appeal and orders Witron to pay the costs [50], [51].

The rule

Under s 14(2) and (3) of the Act, a payment schedule must identify the payment claim and say how much will be paid. If that amount is less than the amount claimed, the payment schedule must say why [16], [21]. A payment schedule does not need to be formal or to state a figure. It is enough to make clear that nothing will be paid [25], [40].

If no payment schedule is given in time, the respondent (the party the claim was served on) becomes liable to pay the claimed amount on the due date (s 14(4)) [22]. A reason that was left out of the payment schedule cannot be added later in an adjudication response (s 20(2B)) [23].

The court said that, in general, if a reply gives no reason for a distinct and substantial part of a claim, the reply is not a payment schedule [35]. Leaving out a part that is not significant in context may not matter [34]. The reasons do not have to be good ones. Whether they are good is for the adjudicator to decide [33].

Saying “we will not consider paying this until you do X” is not a reason. A reply in those words declines to deal with the claim [49]. By contrast, it would be a reason to say that the contract requires X before the claim can be made [49].

What it means for you

If you’re paying a claim: give a reason for every part of the claim. Witron’s reason about the price did not cover the variations [45], [47]. Saying the work is late is not a reason on its own. If you rely on liquidated damages (the amount the contract fixes for delay), say so [46].

If you’re the trade: set out each part of your claim separately. In this case the two parts were identified separately, and the variations were $304,230 of the $804,154.63 claimed [10], [45].

Either way: check whether a claim says it is made under the Act. In this case the claim said so in very small type, and the court said the person who wrote Witron’s reply did not seem to realise its significance [9], [39].