Can You Deduct Liquidated Damages While an EOT Claim Is Pending in NSW?
- John Merlo
- 8 hours ago
- 14 min read
Key Takeaways
Do not wait for the contractual EOT assessment period if a NSW Security of Payment Act payment schedule is due sooner.
Assess the pending EOT claim on the material available before applying liquidated damages in the payment schedule.
Avoid blanket or “holding” rejections of EOT claims. Identify the evidence considered and explain why time is accepted, rejected or only partly allowed.
Map the liquidated damages deduction to the EOT assessment by showing the adjusted completion date, period of culpable delay and LD calculation.
Remember that the statutory payment schedule obligation rests with the respondent, usually the principal, even if the superintendent or contract administrator prepares the assessment.
If a missed or defective payment schedule causes loss, the superintendent or consultant may face professional liability, apportionment and insurance issues.
A contractor submits a payment claim. The works are late, and the principal wants liquidated damages deducted. But the contractor has also lodged an Extension of Time (EOT) claim that has not yet been assessed.
In NSW, the respondent cannot safely wait for the contractual EOT assessment period if the Security of Payment Act payment schedule deadline arrives first. The practical task is to assess the EOT claim, at least provisionally, within the statutory timeframe, then explain how that assessment affects the liquidated damages deduction in the payment schedule.
Short answer: liquidated damages may be included in a NSW payment schedule while an EOT claim is pending, but the deduction should not be made by simply ignoring the EOT claim. The safer sequence is to assess the EOT claim on the material available, identify any missing particulars, grant or reject time with reasons, calculate the adjusted completion position, and then explain the liquidated damages deduction in the payment schedule before the statutory deadline expires.
This article is written for superintendents, contract administrators, project managers and principals dealing with a NSW payment claim where liquidated damages are proposed but an EOT claim remains unresolved. For project-specific EOT, liquidated damages and certification issues, early construction law advice can help align the contract administration process with the statutory payment schedule deadline. The statutory obligation to provide a payment schedule rests with the respondent, usually the principal, but superintendents and consultants often prepare the assessment and may face exposure if their delay or flawed certification causes loss.
The Problem: the SOPA Payment Schedule Deadline Does Not Wait for the EOT Process
The difficult situation is common. A payment claim has been served, the works appear to be in delay, and the principal wants liquidated damages deducted. At the same time, the contractor has submitted an EOT claim that the contract may allow a longer period to assess. The key point is that the contractual EOT assessment period does not extend the statutory deadline for serving a payment schedule.
Contractual Certification and Statutory Payment Schedules Are Not the Same Thing
When administering standard form contracts such as AS 4000, the superintendent may have a contractual period to assess an EOT claim. That contractual allowance does not pause the statutory payment schedule deadline under the Building and Construction Industry Security of Payment Act 1999 (NSW).
A superintendent’s progress certificate will not necessarily protect the respondent unless it also satisfies the statutory requirements for a payment schedule. The respondent should ensure that the document identifies the payment claim, states the scheduled amount, and gives reasons for any amount withheld, including the basis for any liquidated damages deduction.
For practical purposes, if the payment schedule is due before the contractual EOT assessment period expires, the EOT still needs to be addressed on the material then available. The payment schedule should not simply say that the EOT claim remains under assessment.
The Section 14 Trap: What Happens if No Payment Schedule Is Served?
Waiting for the contractual EOT assessment period to expire can materially prejudice the principal’s position if the payment schedule deadline is missed. Under section 14 of the Building and Construction Industry Security of Payment Act 1999 (NSW), if the respondent does not provide a payment schedule within time, the respondent becomes liable to pay the claimed amount on the due date for the relevant progress payment. Under section 15, if the respondent then fails to pay the whole or any part of that amount by the due date, the claimant may recover the unpaid portion as a statutory debt or make an adjudication application.
If the claimant commences debt recovery proceedings under section 15, the respondent is not entitled in those proceedings to bring a cross-claim against the claimant or to raise a defence in relation to matters arising under the construction contract. If debt recovery proceedings have already commenced, involve the litigation team early.
That result may prevent, or at least materially compromise, the principal’s ability to rely on a liquidated damages deduction in that payment cycle or in any later process concerning that payment claim. The immediate priority is therefore to serve a compliant payment schedule on time, with clear reasons for any amount withheld. Where the payment schedule deadline is live, obtain security of payment advice before the response period expires.
The Safest Sequence: Assess the EOT Before Applying Liquidated Damages
To deduct liquidated damages in a defensible way, the respondent should address the pending EOT claim before finalising the scheduled amount. That does not always mean a full and final EOT assessment is possible before the payment schedule deadline. It does mean the EOT claim should be considered on the material available, with reasons given for the assessment reached at that time.
A practical sequence is:
1. identify the current contractual date for practical completion;
2. identify each pending EOT claim and the delay period claimed;
3. assess the claim on the evidence available, including notices, programs, site records and correspondence;
4. request further particulars immediately if the claim lacks causation, critical path analysis or supporting records;
5. grant, reject or partly grant time with reasons;
6. calculate the adjusted date for practical completion;
7. apply liquidated damages only to the remaining period of culpable delay; and
8. record that reasoning in the payment schedule.
If the contractor’s EOT claim lacks necessary particulars, the payment schedule can say so. The respondent may assess the EOT at nil, or only partly allow it, for the purposes of the current payment schedule if that is justified by the available material. However, the reasons should identify what was considered, what was missing, and how that affected the liquidated damages calculation.
A Practical Payment Schedule Action Plan
Timing | Action | Purpose |
Day 0–1 | Record the date of service, calculate the payment schedule deadline and confirm who will issue the schedule | Avoid missing the statutory deadline |
Day 0–1 | Collect the contract, payment claim, EOT claim, notices, program, delay register, site records and key correspondence | Build the assessment file |
Day 1 | Request further particulars if the EOT claim lacks causation, critical path analysis or delay evidence | Identify evidentiary gaps and preserve procedural fairness |
Days 2–5 | Perform a provisional delay assessment using the available material | Determine whether any EOT should be allowed before LDs are applied |
Days 5–7 | Calculate the adjusted date for practical completion and the resulting LD amount | Ensure the deduction follows from the EOT assessment |
Days 7–9 | Draft and review the payment schedule reasons | Prepare an adjudication-ready explanation |
By the deadline | Serve the payment schedule with clear reasons and supporting calculations | Preserve the respondent’s position |
Valuing the Pending EOT to Withstand a SOPA Adjudication
Once it is clear that the payment schedule deadline arrives before the contractual EOT assessment period expires, the task becomes one of rapid but impartial assessment. A pre-determined rejection designed only to justify the liquidated damages deduction may be vulnerable in adjudication. Where the parties’ positions are becoming entrenched, an early dispute strategy may assist before the matter escalates further. The payment schedule should demonstrate a rational methodology, even if the assessment is necessarily based on incomplete material.
Why “Holding” EOT Rejections Are Risky
A blanket “holding” rejection of an EOT claim is risky if it is used merely to defer the issue and justify an immediate liquidated damages deduction. In an adjudication, the adjudicator may scrutinise whether the deduction is supported by the contract, the delay evidence and the reasons stated in the payment schedule.
If the EOT assessment relies on generic denials, or does not explain how the claimed delay was treated, the liquidated damages deduction may be disallowed or substantially reduced. A stronger approach is to state the assessment actually made, identify the material relied upon, and explain why particular days were allowed or rejected.
The Procedural Steps for an Impartial Delay Assessment
To assess an EOT within the statutory timeframe and prepare for potential adjudication, follow a structured process:
Identify the latest approved program and the critical path relied upon;
Compare the claimed delay events against notices, site records, program updates and correspondence;
Request further particulars immediately if the claim does not explain causation, critical path impact or the period of delay;
Separate principal-caused delay from contractor-caused delay and concurrent delay where possible;
Assess the EOT on the evidence available when the payment schedule is due;
Record the days allowed, days rejected and reasons for each outcome; and
Ensure the liquidated damages calculation follows from the adjusted completion position.
Recording the EOT Decision in the Payment Schedule
The EOT assessment should be clearly recorded in the payment schedule’s reasons for withholding payment. It is not enough to state that liquidated damages are being applied. The schedule should explain how the pending EOT claim was assessed, how many days were allowed or rejected, and how that assessment produced the liquidated damages deduction.
Example payment schedule reasoning:
> The respondent has considered the contractor’s EOT claim dated [date] when assessing Payment Claim [number]. For the purposes of this payment schedule, and based on the material presently available, the respondent allows [x] days of the EOT claim and rejects [y] days.
> The respondent accepts [x] days for [brief description of accepted delay event] because [brief reason, for example: the event is supported by the site records and is shown on the current program to have affected the critical path].
> The respondent does not allow the remaining [y] days claimed for [brief description of rejected delay event] because [brief reason, for example: the claim does not identify a critical path impact, is not supported by contemporaneous records, or overlaps with contractor-caused delay].
> On that assessment, the date for practical completion is adjusted from [original date] to [adjusted date]. The works remained incomplete after that adjusted date for [x] days. Liquidated damages are therefore deducted at the contractual rate of $[amount] per day, giving a total deduction of $[amount] in this payment schedule.
> This assessment is made for the purposes of the current payment schedule, having regard to the statutory deadline for responding to the payment claim. The respondent’s position may be reviewed if further material is provided, to the extent permitted by the contract and applicable law.
Example EOT Assessment Matrix
A simple assessment matrix can help ensure the payment schedule connects the EOT decision to the LD calculation.
EOT item | Contractor’s basis | Evidence provided | Evidence missing | Assessment | Days allowed | Effect on LDs |
Variation direction | Contractor says the variation delayed the critical path | Direction, emails and partial program update | Complete time impact analysis | Partly accepted
| 3 days
| LDs reduced by 3 days |
Wet weather | Contractor claims 5 days | Site diary entries | Weather records and critical path link | Rejected for current schedule | 0 days
| No reduction |
Late access | Access delay admitted in correspondence | Principal correspondence and site records | None material | Accepted | 4 days | LDs reduced by 4 days |
Do and Don’t Checklist
DO | DON’T |
Calculate the SOPA payment schedule deadline immediately | Wait for the full contractual EOT assessment period |
Assess the EOT claim on available material | Say only that the EOT claim is “pending” |
Request particulars early | Assume a request for particulars extends the SOPA deadline |
Explain the critical path assessment | Use a generic rejection |
Link the LD deduction to the assessed delay period | Deduct LDs without explaining the EOT position |
Keep an adjudication-ready file | Leave the reasoning to be reconstructed later |
Review consultancy and PI risk before appointment | Sign away apportionment rights without checking insurance |
If the Schedule Is Missed or Flawed: Superintendent and Consultant Exposure
If the payment schedule deadline is missed, or if a poorly reasoned EOT assessment undermines the liquidated damages deduction, the respondent may be required to pay more than it expected for that payment cycle. The principal may then consider whether that loss was caused by the superintendent’s or consultant’s administration of the payment claim, EOT assessment or certification process.
This is why the issue is not only one of contract administration. A missed or defective payment schedule may also create professional liability risk for those engaged to manage the assessment process.
Can the Principal Sue the Superintendent if the Deadline Is Missed?
Under section 15 of the Building and Construction Industry Security of Payment Act 1999 (NSW), where the respondent has become liable under section 14(4) because no payment schedule was provided within time and then fails to pay the whole or any part of the claimed amount by the due date, the claimant may recover the unpaid portion from the respondent as a debt due. The respondent is usually the principal, not the superintendent.
However, if the principal incurs that liability because the superintendent, contract administrator or consultant failed to manage the payment schedule process properly, the principal may consider a claim against the consultancy. That claim may allege breach of the consultancy agreement, breach of duty or professional negligence, on the basis that the consultant’s administration caused the principal to lose the opportunity to rely on the liquidated damages deduction in that payment cycle.
The risk is fact-specific. It will depend on the consultant’s role, the terms of engagement, who was responsible for preparing and serving the payment schedule, and whether the loss was caused by the consultant’s conduct.
Related Risk: DBPA Exposure for Superintendents
Separate from the payment schedule issue, superintendents should also be aware of potential exposure under the Design and Building Practitioners Act 2020 (NSW). The statutory duty of care under section 37, read with the definition of "construction work" in section 36 of the DBPA, may be relevant where a superintendent, project manager or consultant performs "construction work" within the meaning of section 36, including by supervising, coordinating, project managing or otherwise having substantive control over building work or other work captured by that section.
The duty is directed to avoiding economic loss caused by defects in or related to a building for which the construction work is done, where those defects arise from the construction work.
This risk is particularly important where the superintendent moves beyond pure contract administration and becomes involved in design coordination, regulated design issues, site directions or substantive control over building work. Section 40 of the DBPA may render ineffective contractual terms that attempt to annul, vary or exclude the statutory duty of care under Part 4 of the DBPA.
For this article, the immediate issue remains the SOPA payment schedule sequence. DBPA exposure should be treated as a related risk to be reviewed separately when considering the superintendent’s scope, consultancy agreement and insurance position. If the issue also involves Building Commission, Fair Trading or NCAT pathways, get advice on NSW building regulator issues.
Before You Sign the Consultancy Agreement: Check Apportionment and PI Cover
A superintendent’s exposure is not determined only by the construction contract. The consultancy agreement may contain clauses that alter liability, displace proportionate liability protections or require the consultant to accept responsibility beyond what would otherwise apply.
Those clauses matter because they can affect both the defence of a later claim and the consultant’s Professional Indemnity insurance position.
How Proportionate Liability May Reduce the Superintendent’s Exposure
If a principal alleges negligent EOT assessment or payment certification, the superintendent or consultant may be able to rely on proportionate liability principles. In broad terms, this may allow liability to be apportioned between concurrent wrongdoers according to their respective responsibility for the loss.
In NSW, those issues commonly arise under Part 4 of the Civil Liability Act 2002 (NSW).
For example, if the contractor was primarily responsible for the delay, but the superintendent’s delayed or flawed assessment caused the principal to lose an opportunity to deduct liquidated damages in a payment schedule, the superintendent may argue that any liability should reflect only its share of responsibility. The availability and value of that defence will depend on the facts, the pleaded claim and the terms of the consultancy agreement.
The Risk of Contracting Out of Apportionment
Some principal-drafted consultancy agreements include clauses designed to displace proportionate liability protections. If effective, those clauses may expose the consultant to more than its proportionate share of the loss, even where the contractor or another party contributed to the underlying delay.
Any attempt to contract out of proportionate liability should also be checked against section 3A of the Civil Liability Act 2002 (NSW).
Before accepting those terms, superintendents and consultants should check whether the agreement attempts to alter apportionment, remove net contribution protections, expand indemnities or impose liability that would not otherwise arise. That review may require commercial law advice before the consultancy agreement is signed.
Why These Clauses Can Affect Professional Indemnity Cover
Contracting out of proportionate liability can also create Professional Indemnity insurance issues. Many PI policies contain exclusions for liability assumed under contract that is greater than the liability the insured would otherwise have at common law or under general law. Some policies include limited writebacks, but the position depends on the precise policy wording.
The practical risk is that a consultant may accept broader contractual exposure than its PI policy is intended to cover. Before signing a consultancy agreement, the consultant should review the agreement and the PI policy together, particularly any indemnity, assumed liability, contracting-out, net contribution and limitation of liability provisions.
Need Urgent Advice Before the Payment Schedule Deadline?
Facing a payment schedule deadline with an unresolved EOT claim and a proposed liquidated damages deduction? Merlo Law can review the payment claim, EOT material, LD calculation and draft payment schedule reasons before the statutory deadline expires.
If you are already inside the payment schedule period, do not wait for the contractual EOT assessment deadline. Get legal advice on the EOT assessment and payment schedule wording.
Conclusion
When a payment claim and unresolved EOT claim arrive together, the SOPA deadline should drive the sequencing. The respondent should not wait for the contractual EOT assessment period before addressing the EOT’s effect on liquidated damages.
The safer course is to make a documented assessment on the information available, identify any evidentiary deficiencies, calculate any adjusted completion position, and set out the liquidated damages deduction clearly in the payment schedule.
For superintendents and consultants, the issue is not only contractual administration. A missed or poorly reasoned schedule can expose the principal to a statutory debt and may trigger professional liability, apportionment and PI insurance issues. If the deadline is live, urgent review of the EOT material and payment schedule wording is essential.
FAQs
Can liquidated damages be deducted while an EOT claim is pending?
Yes, but the respondent should not ignore the EOT claim. The safer approach is to assess the EOT claim on the material available, calculate any adjusted completion position, and explain how the assessment supports the liquidated damages deduction in the payment schedule.
Does the contractual EOT assessment period extend the SOPA payment schedule deadline?
No. A contractual period for assessing an EOT claim does not extend the statutory deadline for serving a payment schedule under the Building and Construction Industry Security of Payment Act 1999 (NSW).
Is it enough to say the EOT claim is still being assessed?
Usually not. If liquidated damages are being deducted, the payment schedule should explain how the EOT claim has been treated for the purposes of that payment claim. A bare statement that the EOT is “pending” or “under assessment” may leave the deduction vulnerable.
What should the payment schedule say about the EOT claim?
The payment schedule should identify the EOT claim, state whether time is accepted, rejected or partly accepted, give reasons, identify any missing evidence, calculate the adjusted date for practical completion and show how the liquidated damages amount has been calculated.
Can the EOT assessment be revised later?
Depending on the contract and the circumstances, further EOT assessment may occur later if additional material is provided. However, that does not remove the need to provide clear reasons in the payment schedule that is due now.
What happens if no payment schedule is served on time?
If the respondent fails to serve a payment schedule within the required timeframe, the respondent becomes liable to pay the claimed amount on the due date for the relevant progress payment. If the respondent then fails to pay the whole or any part of that amount by the due date, the claimant may recover the unpaid portion as a statutory debt or make an adjudication application. That may prevent the respondent from relying on the liquidated damages deduction for that payment cycle.
Can a superintendent be liable if the principal loses the ability to deduct liquidated damages
Potentially, yes. If the superintendent or consultant was responsible for managing the payment schedule, EOT assessment or certification process, the principal may allege that a missed deadline or flawed assessment caused loss. The outcome will depend on the consultancy agreement, the consultant’s role and the facts.
Can proportionate liability or PI insurance reduce the superintendent’s exposure?
They may, but they should not be assumed. Proportionate liability may assist where other parties contributed to the loss, but some consultancy agreements attempt to alter or exclude those protections. PI insurance may also be affected if the consultant assumes liability under contract beyond what would otherwise apply. Separately, any attempt to annul, vary or exclude the statutory duty of care under Part 4 of the DBPA should be considered in light of section 40.
This guide is for informational purposes only and does not constitute legal advice. For advice tailored to your specific circumstances, please contact Merlo Law
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