The Victorian Security of Payment Scheme
The Building and Construction Industry Security of Payment Act 2002 establishes a process to provide contractors with a quick and inexpensive way to get paid or recover money owed to them. It applies to construction projects in Victoria, whether private or public sector.
The Act came into effect on 31 January 2003 and was amended in 2006 to make it more effective in recovering payment claims. The amended legislation applies only to contracts entered into on or after 30 March 2007.
Similar legislation has been enacted in New South Wales, Queensland, Western Australia and the Northern Territory. The United Kingdom, Singapore and New Zealand also have Security of Payment legislation.
Key features
Contracts covered
The Act applies to most contracts for building work or for the supply of related goods and services in Victoria. The contract may be oral, written or a combination of both.
Domestic building contracts between a builder or supplier and the home owner are not covered. These come under the Domestic Building Contracts Act 1995. However, contracts between a home owner’s building contractor and any sub-contractor or supplier are covered.
Work covered
The Act applies to the following types of work:
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Types of payments covered
Claims may be made under the Act for ‘progress payments’ for work done or supplies made since a date determined by the contract or under the Act. For contracts entered on or after 30 March 2007, ‘progress payments’ include final, single and milestone payments.*
Statutory right to payment
Contractors have a statutory right to receive progress payments. If the contract does not specify when the contractor is entitled to be paid, the Act sets the date.
Any ‘paid when paid’ or ‘paid if paid’ clauses in the contract have no effect.
How it works
1. Payment claim
A person who has carried out work or supplied goods and services under a construction contract in Victoria (the claimant) can claim progress payments by giving a ‘payment claim’ to the relevant contractor, purchaser or client (the respondent). A payment claim specifies the work, goods or services supplied and the amount claimed and states that it is made under the Building and Construction Industry Security of Payment Act 2002.
2. Payment or payment schedule
The respondent can pay in full or, if they dispute the amount due, give the claimant a ‘payment schedule’. A payment schedule states how much the respondent is willing to pay and why it is any different from the amount claimed. A respondent who fails to provide a payment schedule within 10 business days or as required by the contract – whichever is earlier – is liable to pay the full amount claimed.
3. Adjudication option*
If there is a dispute about payment, the claimant can apply for adjudication by contacting an Authorised Nominating Authority (ANA). The ANA nominates an adjudicator with the necessary skills and experience to adjudicate the dispute. After accepting nomination, the adjudicator has 10 business days (or up to 15 business days if the claimant agrees) to determine what amount (if any) the respondent should pay, and when. In some cases, if the adjudicated amount exceeds $100,000 either party can apply for an adjudication review.
4. Court assistance
A claimant may choose to go to court to resolve a payment dispute rather than apply for adjudication. This is done by lodging a complaint in the Magistrates’ Court or a writ in the County Court or the Supreme Court, depending on the value of the claim.
The claimant can also go to court to enforce payment of an adjudicated amount. An adjudication certificate is filed in the court, with an affidavit attesting that the respondent has failed to pay, and the court can issue a warrant or other order requiring payment.*
In certain circumstances where a respondent has failed to pay the adjudicated amount or provide security for payment, the claimant may seek payment from the respondent’s principal.