How to Respond to Payment Claims in NZ Construction

Understanding Payment Claims Under the CCA

The adjudication, and suspension rights in construction">Construction Contracts Act 2002 establishes a statutory framework for payment claims in construction NZ. When you receive a payment claim, it triggers specific obligations and deadlines that cannot be ignored.

A valid payment claim must identify the construction work performed, the amount claimed for that work, and be served in accordance with the contract terms. The claimant can serve payment claims at intervals specified in the contract, or if not specified, monthly from the first claim date.

Your Response Options to Payment Claims

When you receive a payment claim, you have three response options under Section 20 of the CCA:

1. Pay the Full Amount

If you accept the payment claim in full, simply pay the claimed amount by the due date specified in the contract. This is typically 20 business days after receiving the claim, unless your contract specifies otherwise.

2. Serve a Payment Schedule

If you dispute any part of the payment claim, whether the amount, the work claimed, or the entitlement to payment, you must serve a payment schedule. This document must:

• Identify the payment claim it responds to
• State the amount you propose to pay (which can be zero)
• If paying less than the claimed amount, provide reasons for the difference
• Be served within 20 business days of receiving the payment claim

3. Do Nothing (Not Recommended)

If you fail to respond within 20 business days, you become liable to pay the full claimed amount. The claimant can then recover this as a debt, plus interest and costs, regardless of whether the claim was valid.

How to Prepare a Payment Schedule Response

A well-prepared payment schedule protects your position and provides a foundation for any subsequent dispute. Here's the step-by-step process:

Step 1: Review the Payment Claim

Examine the payment claim against the contract requirements and work actually performed. Check:

• Does the claim identify specific work performed?
• Are the quantities and rates correct?
• Is the work complete and compliant with contract requirements?
• Are there any set-off amounts you're entitled to claim?
• Has the claimant met their contractual obligations?

Step 2: Calculate Your Assessment

Determine what amount (if any) you believe is due. This should be based on:

• Work actually completed to the required standard
• Contractual rates and measurement methods
• Any variations properly authorised
• Less any amounts you're entitled to withhold or set off

Payment Schedule Element	Requirement	Purpose
Reference to payment claim	Mandatory	Links response to specific claim
Amount proposed to pay	Mandatory	States your position clearly
Reasons for difference	If paying less than claimed	Justifies your assessment
Supporting documentation	Recommended	Strengthens dispute position

Step 3: Document Your Reasons

If you're paying less than the claimed amount, you must provide reasons. These should be specific and reference:

• Contract clauses that support your position
• Technical standards or specifications not met
• Measurement discrepancies with supporting calculations
• Previous correspondence or instructions
• Set-off entitlements under the contract

Common Reasons for Disputing Payment Claims

Understanding typical grounds for dispute helps you assess payment claims construction NZ projects effectively:

Incomplete or Defective Work

You can withhold payment for work that doesn't meet contract specifications. However, you must identify specific defects and, where possible, quantify the cost of rectification.

Variations Without Approval

Work performed without proper variation approval may not be payable under the contract terms. Check your contract's variation clause requirements carefully.

Measurement Disputes

Quantity disputes are common. Ensure your measurements follow the contract's measurement methodology and retain supporting documentation.

Set-off Entitlements

You may be entitled to set off amounts for liquidated damages, overpayments, or other contract breaches. These must be properly calculated and documented.

Serving Your Payment Schedule Response

Serving your payment schedule correctly is as important as preparing it. The CCA requires service in accordance with the contract terms, or if not specified, by any method that ensures receipt.

Service Methods

• Email: Most contracts now specify email service. Ensure you use the correct email address and request a read receipt
• Registered post: Traditional but slower method. Allow extra time for postal delivery
• Hand delivery: Most reliable method with immediate proof of service
• Contract-specified method: Always check if your contract requires a specific service method

Timing Considerations

The 20 business day deadline is calculated from when you receive the payment claim, not when it was sent. Business days exclude weekends and public holidays. To avoid disputes over timing:

• Serve your payment schedule well before the deadline
• Keep evidence of service (delivery receipts, email confirmations)
• Consider time zones if serving by email to different regions

What Happens After You Serve a Payment Schedule

Once you've served your payment schedule, several outcomes are possible depending on the claimant's response:

Claimant Accepts Your Assessment

If the claimant accepts your payment schedule, pay the scheduled amount by the due date. This resolves the payment claim without further action.

Claimant Disputes Your Assessment

The claimant may initiate adjudication under Section 27 of the CCA. They have specific timeframes to do this, and you'll need to participate in the adjudication process.

No Response from Claimant

If the claimant doesn't respond, pay the scheduled amount. Your payment schedule becomes the final determination of the amount due.

Best Practices for Payment Claim Responses

Based on extensive project experience, these practices minimise disputes and protect your commercial position:

Implement a Payment Claim Register

Track all payment claims received with key dates: receipt date, due date for response, amount claimed, and status. This prevents missed deadlines and provides oversight of cash flow impacts.

Establish Review Procedures

Create a systematic process for reviewing payment claims that involves the site team, quantity surveyor, and commercial manager. Different perspectives catch different issues.

Maintain Contemporary Records

Keep detailed records of work progress, quality issues, and variations. Photos, daily reports, and correspondence become crucial evidence in disputes.

Communicate Early and Often

If you identify issues with claimed work, communicate these promptly to the claimant. Early communication often resolves disputes without formal processes.

Calculate Set-offs Carefully

Ensure any amounts you set off against payment claims are properly calculated and documented. Incorrect set-offs can backfire in adjudication.