Responding to a performance security claim under the SOP Act

If you receive a performance security claim under the SOP Act, you may respond to a performance security claim in one of two ways:

• If you agree with the claim, release the amount claimed in full, on or before the due date.
• If you do not agree to release the full amount by the due date, give the claimant a performance security schedule within 10 business days (or sooner, if the contract sets a shorter deadline) setting out what you are willing to release and why it is different from the amount claimed.

If you fail to do either of those things, the claimant may apply for adjudication or apply to a court to enforce release of the security.

A ‘pay when paid’ provision in a construction contract has no effect. You cannot delay the release of a performance security, or make release contingent on something set out in another contract.

Making a performance security schedule

A performance security schedule is a reply to a performance security claim when you do not agree to release the amount claimed by the due date. It states how much you will release (if any) to the claimant and why.

Required information

The performance security schedule must:

• identify the performance security to which the performance security schedule relates
• identify the amount (if any) that the respondent proposes to release
• indicate when the amount (if any) is proposed to be released
• provide any reason why the scheduled amount is less than the amount claimed and the respondent’s reasons for this.

10-business day deadline

You have 10 business days after being served with the performance security claim to serve the performance security schedule on the claimant, unless the contract allows less time.

The 10-business day deadline refers to when the performance security schedule must be ‘served’. How it is served determines when it is served. It may be served in any of the following ways:

• the manner of service provided by the contract, if reasonably practicable
• delivering it to the claimant – it is served when it is delivered to the claimant
• leaving it at the claimant‘s ordinary place of business – it is served when it is left at that address with a person who appears to be employed by the business
• sending it by post, addressed to the claimant, to the claimant’s ordinary place of business – it is served 7 business days after the day it is posted, or if delivered earlier (for example, by registered post) it is served on that earlier day
• in any other manner instructed by the claimant as an acceptable manner for service.

If you miss the deadline, you become liable to release the full amount claimed. The claimant can apply to a court to enforce the release of the performance security or apply for adjudication.

Failure to release or provide a performance security schedule

If you do not provide a performance security schedule and don’t release on time, the claimant can go to court to enforce release or apply for adjudication. For more information on the actions a claimant can take, see Options if a respondent doesn’t release the amount claimed or respond.

If you fail to provide a performance security schedule in response to a claim, the claimant must give you written notice of their intention to apply for adjudication before applying for adjudication. You then have 5 business days to provide a performance security schedule. The adjudication may still proceed whether you do or do not provide a performance security schedule within the 5 business days.

If the claimant applies for adjudication, a respondent who has not provided a performance security schedule may not submit an adjudication response.

Resource material