Don’t forget to give your reasons when challenging a payment claim – or risk the consequences

March 16, 2023

The importance of providing reasons when challenging a payment claim has been reinforced by a recent Supreme Court of Queensland decision.

The decision – Insite Construction Services Pty Ltd v Daniels Civil Pty Ltd & Anor [2023] QSC 33 –  considered an adjudication decision where the adjudicator awarded the full amount claimed in a payment claim without carrying out his own valuation.

The case highlights the importance for respondents to include detailed reasons in payment schedules to avoid implied admissions in relation to the valuation of amounts claimed.

If a respondent does not agree with the works claimed in a payment claim, it should specifically state in its payment schedule that the valuation of the works claimed is incorrect or unsubstantiated.  Otherwise, claimants could leverage from the relaxed requirements under building laws that may permit an adjudicator to award the amount claimed without carrying out any valuation of their own.

Before the decision is discussed, a brief summary of the relevant parts of the Building Industry Fairness (Security of Payment) Act 2017 (Qld) (BIF Act) is provided.

Relevant parts of the BIF Act

Under the BIF Act, a respondent (e.g. principal or head contractor) must serve a payment schedule in response to a payment claim issued by a claimant (e.g. head contractor or subcontractor) within 15 business days.  The timing to serve a payment schedule may be shortened under the contract.

If a payment schedule proposes that an amount less than the amount claimed is to be paid, the schedule must set out why the amount proposed is less, including reasons for withholding payment.

If the amount claimed in a payment claim is disputed, a strong payment schedule will:

  1. challenge the validity of the payment claim under the BIF Act (e.g. if the payment claim does not properly identify the works claimed);
  2. for each line item in dispute, raise that the claimant has no contractual entitlement to claim for the works (e.g. the claimant has not complied with time bars);
  3. for each line item in dispute, state that there has not been sufficient substantiation of the amounts claimed or that the quantum of the claim is excessive; and
  4. include set-offs, such as claims for liquidated damages or defects.

Under the BIF Act, a respondent is prevented from raising reasons for withholding payment in an adjudication response, if the respondent fails to:

  1. issue a valid payment schedule; or
  2. include in its payment schedule the reasons for withholding payment sought to be advanced in its adjudication response. It cannot raise new reasons.

Accordingly, issuing a detailed payment schedule is essential.  This is reinforced by the recent decision of Insite Construction Services Pty Ltd v Daniels Civil Pty Ltd & Anor [2023] QSC 33 as set out below.


On 15 December 2021, Insite Construction Services Pty Ltd (Insite) entered into a subcontract (Subcontract) with Daniels Civil Pty Ltd (Daniels), whereby Daniels was to construct new buildings at the Good Samaritan Catholic College at Bli Bli.

On 2 August 2022, Daniels served a payment claim on Insite (Payment Claim) seeking a progress payment of $138,387.16 (including GST).

On 11 August 2022, Insite purported to serve Daniels with a payment schedule in response to the Payment Claim (Payment Schedule), which scheduled “Nil”.  However, the only purported reason for withholding payment in the Payment Schedule was “We are still to confirm a sub-contractor to take over the balance of the scope of works… I’ll inform you next week of the status”.  This apparently related to a claim that Insite was seeking to pursue against Daniels due to the termination of the Subcontract.

Daniels escalated the matter by submitting an adjudication application, and Insite sought to submit an adjudication response.  The adjudicator decided that the substantive reasons of Insite’s adjudication response could not be considered because it did not provide a valid payment schedule, in circumstances where the statement concerning a future potential set-off was not sufficient to constitute a reason for non-payment under the BIF Act.

Subsequently, the adjudicator (without carrying out his own valuation process) accepted the “uncontested value” of the payment claim.

On 25 October 2022, Insite sought a declaration that the adjudicator’s decision was void for jurisdictional error on the basis that the adjudicator misapprehended his role in deciding the adjudicated amount.

The Supreme Court’s decision

In favour of Daniels, the Court held that it was open to the adjudicator to accept the full amount claimed in the Payment Claim without performing any valuation of his own, in circumstances where there was no payment schedule.

The Court stated that “in the absence of any reasons to challenge the valuation contained in the Payment Claim, the Adjudicator was permitted to accept Daniels’ valuation”.   Moreover, the failure to challenge the valuation of the amounts claimed in the Payment Claim was considered to result in Insite impliedly accepting the valuation of works claimed in the Payment Claim.

What does this mean for you?

The above decision is a reminder of the importance of firstly, providing a valid payment schedule and secondly, including reasons in a payment schedule challenging the valuation of amounts claimed in a payment claim.

If you’d like more information about payment claims, please contact our Construction team.


Andrew Kelly | Partner | +61 7 3338 7550 |

Harrison Cross | Associate | +61 7 3338 7902 |

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