I’ve just received a Progress Claim. What now?

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If you have received a progress claim from the builder who is performing building work for you, it means they are seeking a payment from you for the work they have done recently, on account of the final price of the completed work.  

This is an important document requiring your prompt consideration as strict time limits apply under your contract with the builder, and/or the relevant legislation affecting the contract, to dispute the amount claimed if you do not agree with it.

If you do not respond to the progress claim within the required time, you may be relinquishing your right to a proper and independent determination of the amount that is payable.  

It is therefore imperative that you urgently seek professional advice if you have received a progress claim you dispute.

You should contact a lawyer whether or not you believe you owe the amount claimed in the progress claim if you are unsure of your rights, because an experienced building and construction lawyer (as you will see below) may be able to delay, set aside, dispute or otherwise invalidate the progress claim on technical legal grounds or assist you to negotiate a resolution of a disputed progress claim.

Information regarding Progress Claims

All standard form building contracts include a requirement for the builder to be paid progress claims at intervals throughout the building project. These may be monthly or at specific stages of the building work. This provides the builder with cashflow during the project.

A statutory right to progress payments for the builder also arises under Chapter 3 of the Building Industry Fairness (Security of Payment) Act 2017 (Qld) (BIFA). Those provisions extend to all commercial building work with some minor exceptions. They also do not apply to domestic building work for an owner who intends to reside in the completed works within six months of completion.

Time

Progress claims for standard form building contracts must be issued by the builder strictly according to the requirements of the contract: after the prescribed interval for issuing them has expired, or after the building work has reached a prescribed stage. Not before. Doing so will render the progress claim ineffective.

The builder’s right to a progress payment under the BIFA statutory scheme relies on the passing of a ‘reference date’ before a progress claim under the Act (payment claim) can be issued. Properly calculating the ‘reference date’ such that the payment claim is not issued prematurely is a precondition to a builder making a valid payment claim (Southern Han Breakfast Point Pty Ltd (in liq) v Lewence Construction Pty Ltd & Ors [2016] HCA 52).

Service

In order to enforce a progress claim, or a payment claim under the BIFA, the builder issuing it must be able to prove service. If the building contract provides a mechanism for effecting service, then the BIFA adopts that mechanism (section 102 (1) BIFA). Alternatively, general legislative requirements for service may need to be adopted (section 39 Acts Interpretation Act 1954 (Qld); section 109X (1) Corporations Act 2001 (Cth)), if the contract does not prescribe a means for serving notices or documents.

Alternative means of service using new technology has recently presented some challenges for builders pursuing payment claims. Service by electronic mail to which an internet link was attached from which the documents to be served could be accessed; and the delivery of a USB stick containing the documents to be served, were found not to constitute good service as the recipient can only become aware of them after downloading or accessing the documents (Parkview Constructions Pty Ltd v Total Lifestyle Windows Pty Ltd t/as Total Concept Group [2017] NSWSC 194). However, service of a payment claim using an electronic document exchange was upheld by the Queensland Supreme Court recently as the contract terms clearly allowed this method of service (Trust Company (Australia) Ltd atf the W H Buranda Trust v Icon Co (Qld) Pty Ltd [2019] QSC 87).

Consequences

Failing to dispute a progress claim issued under a standard form building contract within time may entitle the builder to a progress certificate from the contract superintendent entitling the builder to be paid the value of the work done and materials supplied.

Failing to contest a payment claim under the BIFA by not serving a ‘payment schedule’ on the builder within time may lead to an expedited adjudication of the claim by an independent adjudicator appointed under the Act if the progress claim remans unpaid.

Both the contractual and regulated outcomes for failure to adequately dispute a progress claim enhance the builder’s ability to seek summary judgment against the owner of the building works if the progress certificate or adjudication decision remain unpaid.

Important considerations

Because failure to respond to a progress claim has such serious consequences, the builder issuing it must have strictly complied with all legal formalities under the contract and/or the BIFA for issuing the progress claim. Some of these considerations are set out below.

How was the progress claim served?

How you received the progress claim is extremely important. You should make a note of how and when you received it and keep copies of all written communications you received with it.

Are the builder’s details correct?

Do you know the person or company who has sent you the progress claim? Compare the details on the progress claim with your building contract. Do they make sense or is there some confusion?

Are your details correct?

Has the person or company who sent you the progress claim correctly described your details in the document? Do these correspond with the building contract?

Were you aware there was a progress claim due?

The progress claim must not be issued by the builder prematurely. You should refer to the progress payment provisions of the building contract to confirm your obligations in relation to making progress payments. Has the builder complied with its obligations?

Do you agree with the amount of the progress claim?

According to your own records and understanding, do you owe the amount claimed in the progress claim to the builder? Does the amount being claimed correspond to the amount of work completed on site? You are not obliged to pay the builder in advance for work that has not been completed. Are there other reasons you consider you should not pay the amount being claimed to the builder?

You may have these options

As you can see, there are many important considerations to be examined before responding to a progress claim. Investigating these considerations and gathering information to identify any errors or oversights by the builder in compiling the progress claim takes time. We therefore urge you to consider those matters as soon as possible as they will determine your options as to how you respond to the progress claim.

In broad terms, your options are:

  • To pay the amount claimed in the progress claim within the time required under the building contract
  • To negotiate a resolution with the builder who issued the progress claim within that time
  • To seek an injunction against the builder claiming payment
  • To invoke the dispute resolution mechanism in the building contract
  • To prepare and serve a payment schedule under BIFA    

If the information in the progress claim is completely accurate, the first option is the appropriate one for you to act on. If you do not currently have the financial means to pay the progress claim an informal arrangement to settle that amount in terms of the second option may be available to you. You should keep in mind the strict time limits affecting progress claims when conducting such negotiations and ensure that any outcome is fully documented. It is therefore advisable to conduct such negotiations with the assistance of a lawyer.

Alternatively, if the progress claim is not accurate, or does not comply with the requirements of the building contract or the BIFA, or has not been served correctly, you should seek advice concerning the third, fourth and fifth options identified above.

This is not an exhaustive list. Building and construction is a technical and complex area of law and you should seriously consider obtaining legal advice if you believe that there may be grounds to question the validity of the progress claim you have received. Doing this may prevent substantial cost overruns in the building work being performed for you by ensuring that the builder is strictly complying with its contractual and legislative obligations.

Contact Gibbs Wright Litigation Lawyers

If you have recently received a progress claim and require assistance to urgently assess its ramifications for you, one of our experienced team of solicitors will be happy to help you. Contact Gibbs Wright Litigation Lawyers today for a free and confidential initial consultation to explore your options and legal rights.

The content of this publication is intended as general commentary only and may not be suitable or applicable to your personal circumstances. It is not intended to replace independent legal advice. You can contact us at our Brisbane Office for a free consultation on a range of litigation matters on (07) 3088 6364.
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