Legal Insights
A long awaited inquiry into the Security of Payment Act: will there finally be changes in Victoria?
A recent parliamentary report into poor payment practices in Victoria’s construction sector makes a number of long-overdue recommendations for reform to the Building and Construction Industry Security of Payment Act 2002 (Vic) (Act), designed to bring Victoria into alignment with other States and Territories, and give subcontractors a ‘fair go’.
Background
The aptly-named report, ‘Employers and Contractors who refuse to pay their subcontractors for completed works’ (Report) was released in November 2023, and follows a comprehensive national review of Security of Payment (SOP) regimes conducted by Mr John Murray AM in 2017 (Murray Review).
While the national harmonisation of SOP laws recommended in the Murray Review has not yet eventuated, other States and Territories have since introduced reforms to their SOP regimes reflective of other recommendations in the Murray Review. The Report advocates for similar reforms in Victoria.
Problems with the Act in Victoria
The Report highlights several ‘problem areas’ required to be addressed to make the Act more ‘user friendly’, including:
- the ‘excluded amounts’ regime
- uncertainty around whether retention monies can be claimed under the Act
- unnecessary complexity associated with the accrual of ‘reference dates’
- limited time frames for making a payment claim
- ability for head contractors or principals to prescribe lengthy payment terms.
The Report also identifies a number of factors in the adjudication process under the Act that have caused it to become unduly complex and expensive – a far cry from the ‘quick fire’ process first envisaged by the Act.
Recommendations for change
The Report makes 28 recommendations, aimed at bringing Victoria into line with SOP regimes in NSW and Western Australia. We summarise eight of the most significant recommendations below:
| Recommendation[1] | Summary |
|---|---|
2 | Abolish ‘excluded amounts’ and ‘non-claimable variations’ The Report recommends the repeal of sections 10, 10A and 10B, relating to ‘excluded amounts’ and ‘non-claimable variations. These concepts are unique to Victoria and preclude claimants from claiming amounts due and owing under the construction contract. The effect of this proposed change is that the claimant can claim payment calculated in accordance with the contract or, if the contract does not provide for how to calculate payment, calculated on the basis of the value of the constriction work performed |
3 | Abolish ‘reference dates’ The Report recommends removal of the concept of ‘reference dates’ and introduction of a new provision which:
|
4 | ‘Business days’ The Report recommends that the definition of ‘business day’ (section 4 of SOPA) be amended to exclude:
|
7 | Time limit for making payment claim The Report recommends extending the time limit on submitting a payment claim from three months to six months after the works is performed (or later if provided for by the contract). |
9 | Retention monies claimable The Report recommends amendment section 14 to expressly provide an entitlement to claim retention money under the Act and empower an adjudicator to decide whether retention money is to be returned. The Victorian Supreme Court recently clarified that retention moneys may be claimable under the Act (Hunters Green Retirement Living Pty Ltd v JG King Project Management Pty Ltd [2023] VSC 536). |
15 | The opportunity to provide ‘new reasons’ The Report recommends that section 21 be amended so as to preclude a respondent from including new reasons for withholding payment in its response to an adjudication application that were not previously included in the payment schedule. |
17 | Extending the time for a determination The Report recommends that section 22 be amended to extend the timeframe within which an adjudicator has to make their determination and that time should run from when the adjudication response is received rather than the date of acceptance of the adjudicator’s appointment. |
26 | Simplifying the enforcement process The Report recommends simplification of the enforcement process where an adjudicated amount is not paid. The Report proposes that an adjudication certificate be enforceable as a judgment debt (to remove the need for court proceedings). |
What next?
Now that the Report has been tabled, the Victorian Government has six months to provide its response.
Stay tuned for construction updates
[1] The recommendation numbers in this table align with the recommendations in the Report.
By Anna Scannell, and Alice Dwyer
Recent articles
Legal Insights
Amendments to the ACT's Building and Construction Industry (Security of Payment) Act 2009
By Pria O'Sullivan, and Susan Guo
Recent updates to the Australian Capital Territory’s Building and Construction Industry (Security of Payment) Act 2009.
Legal Insights
Gomeroi v Santos: New guidance on good faith negotiation, and the relevance of climate change
By Susanne Rakoczy, and Larissa Svetlov
We explore Gomeroi People v Santos NSW Pty Ltd and Santos NSW (Narrabri Gas) Pty Ltd [2024] FCAFC 26 (Gomeroi Appeal).
Legal Insights
Building Legislation Amendment (Domestic Building Insurance New Offences) Act 2024
The Amendment Act passed both houses on 22 February 2024 and was proclaimed to commence on 28 February 2024.
Partner
Melbourne