Australian Solutions Centre - Victorian Amendments

The Victorian Building and Construction Industry Security of Payment Act 2002 was introduced in January 2003 to protect the rights of subcontractors who are being denied their right to payment.

In July of this year, a Bill was passed which will come into effect in early 2007, making significant changes to the current legislation. A commencement date is yet to be set, however, Australian Solutions Centre will keep you updated as information is released.

"The main purpose of this bill is to amend the Building and Construction Industry Security of Payment Act 2002 to make it more effective in enabling any person who carries out building or construction work to promptly recover progress payments."
(Mr. Hulls, Building and Construction Industry Security of Payment (Amendment) Bill - Second Reading Speech - VIC Hansard).

The new amendments recognise the need for improvements to the current Act. The new amendments will build on the current legislation by not only improving the existing provisions but also introducing new features to protect the rights of subcontractors in recovering outstanding payments. Claimants will now have the option of applying for Adjudication, as opposed to enforcing payment in a court or tribunal, which can be expensive and time-consuming.

OVERVIEW OF THE AMENDMENTS

Entitlement to a wider range of payments

Claimants will now be able to seek Adjudication for a wider range of payments including;

Final payments
Single payments
Milestone (key event) payments

Submission of Payment Claims

A payment claim must be submitted within three months from the reference date, for payment of each item of work carried out or goods provided, or such longer period as the contract may provide.

Claimable Variations

In regards to variations, claimants will only be entitled to include "claimable variations" when calculating the progress payment. There will be two classes of claimable variations. The first class includes agreed variations. The second class of variations is a variation where the work is completed and the respondent requested the work to be done, but the parties do not agree on the following;

that the work is a variation,
the claimants entitlement to payment,
the value of the work,
method of valuing and/or
time for payment.

Any matters that the Adjudicator determines but which are not considered 'claimable variations' will be deemed void and will have no effect. However, matters in the determination, which are within the power of the Adjudicator, will remain effective.

Excluded Amounts

Claimants will not be entitled to claim 'Excluded Amounts'. Excluded amounts include amounts that are not claimable variations, damages, delay costs, latent conditions, and changes in regulatory requirements.

Payment Schedules

Claimants may now apply for Adjudication even though the respondent has not provided a payment schedule. However, the claimant must notify the respondent within 10 business days of the due date for payment of the claimant's intention to apply for adjudication of the payment claim and the respondent has been provided with the opportunity to provide a payment schedule to the claimant within 2 business days after receiving the claimant's notice.

Adjudication Applications

The new amendments will extend the period within which an adjudication application can be lodged, following the issue of a payment schedule from 5 to 10 business days.

Interest

Claimants will have the right to claim interest from the date that the payment first becomes due.

Lien in respect of unpaid progress payment

The legislative changes will introduce the right to exercise a statutory lien or a right over unfixed goods to the value of the unpaid amount. This provision is subject to any pre-existing rights over the goods such as where the client has already paid for them.

Pay when paid provisions

Any provisions within a contract, which makes liability to pay money owing, or the due date for payment of money owing, contingent or dependant on the operation of another will be invalid.

Adjudication Responses

The Respondent has the right to lodge an adjudication response however should the adjudication response include reasons for withholding payment that were not included in the payment schedule, the claimant will have the opportunity to provide a response to those reasons within 2 business days of being served with those reasons by the adjudicator.

Appointment of Adjudicator

An Authorised Nominating Authority must make appointment of an Adjudicator. Parties will no longer be entitled to select and agree on an Adjudicator.

Review of Adjudication

A review process will be introduced for aggrieved parties to seek review of an adjudication determination however this will only be available in limited circumstances including; the adjudicated amount exceeds $100,000, a payment schedule has been provided, the Adjudicated amount includes an excluded amount and the excluded amount has been identified in the payment schedule or the Adjudication response.

An application for review can only be made by the respondent after the Respondent has paid the Adjudicated amount to the claimant excluding the alleged excluded amounts. The excluded amounts must also be paid into a designated trust account.

Adjudication Certificates & Consequences of

When a respondent does not pay the adjudicated amount by the due date for payment, the claimant will be able to request an adjudication certificate from the Authorised Nominating Authority, lodge this certificate with the court and recover the money as a debt due. This process is more cost effective and less time consuming then a court hearing.

The current legislation allows respondents to provide security of payment such as placing the money into a trust fund. The bill removes this provision making the respondent pay the adjudicated amount.

Suspension of Work

The bill introduces restrictions on the right to suspend work when payment is not made by the due date. Claimants will be required to return to work promptly after payment is made to minimise unnecessary delays to work on site. The bill will provide claimants with protection against any liability for losses resulting from the suspension of works.

Subcontractors will be able to use the adjudication process to access amounts clients or head contractors hold on trust for subcontractors until works are completed.

We will keep you updated !

If assistance or further information is required please contact us on 1300 722 624