Sunday 22 January 2012
We’ve not been paid
We’ve Not Been Paid
Question
We are a medium sized specialist plastering sub-contractor working for a contractor on a leisure project. We’ve been on site for about 6 months and everything was going well until the contractor refused to pay two of our interim applications for payment without good reason. I’ve tried speaking to the contractor but all I get is the usual “we’ll pay you when we get paid”. We haven’t received any paperwork from the contractor either. Can you please offer me some guidance?
Comment
Firstly, read your contract and ascertain the payment procedures. If there is a ‘pay-when-paid’ clause it is prohibited under the Construction Act; except in the situation where the contractor is not paid because of another’s insolvency further up the contractual chain. This is referred to as ‘upstream insolvency’. Payment conditional on the performance of obligations under another contract, such as ‘pay-when-certified’ and ‘pay-what-certified’ provisions are also banned (except in cases of upstream insolvency).
Secondly, work out the ‘Due Date’ for each interim payment. This is not the date when you receive payment, but the date from which the final date of payment (the date when you should actually receive payment) is established. The payment procedures should explain on which date the due date falls. For example, it might state that the first interim payment becomes due not later than one month after you started work on site, and payment due dates for subsequent interim payments become due on the same date in each month following the date of the payment for the first interim payment.
Thirdly, work out the ‘Final Date’ for payment for each interim payment; this is the date you should receive payment. The payment procedures should explain on which date the final date falls, for example it might state that the final date for payment of interim payments is 30 days after the date on which those payments become due.
Fourthly, work out the ‘Payment Notice’ date for each interim payment. This is a notice to be given by the contractor specifying the amount of the payment which is proposed to be made, and how it is calculated. The payment procedures should explain on which date the notice falls. For example, it might state that a payment notice be given not later than 5 days after the date on which an interim payment becomes due.
If the contractor wishes to set-off against sums due it must provide a compliant ‘Pay Less Notice’, specifying the amount to be withheld and the grounds for such withholding. The pay less notice must be served no later than the number of days stated in the contract before the final date for payment. For example, it might state that a pay less notice must be given not later than 5 days before the final date for payment of an interim payment.
If the contractor has not given you a written pay less notice at all or in time, then it is too late for the contractor to rectify the matter. A pay less notice cannot be issued retrospectively. Therefore, provided the amount you have claimed is a sum due under the contract, you should be entitled to payment. You may wish to write to the contractor explaining this and in addition stating that if payment is not made you will consider one or all of the following:
• Claiming interest on the outstanding balance;
• Suspending performance of just some of your obligations rather than all of them (i.e. by threatening to suspend an important item of work). And pointing out that (1) you are entitled to a reasonable amount in respect of your costs and expenses incurred (provided they are reasonably incurred) as a result of exercising your right to suspend. This would cover demobilisation, the period of suspension and remobilisation; and (2) you are entitled to an extension of time for the delay caused as a consequence of the suspension (i.e. de/remobilisation) and not just for the period during which you suspend performance;
• Referring your dispute to adjudication
Regards
Andrew
If you too are suffering payment problems or would simply like to improve payment please contact our Principal Consultant Andrew Milner
