The Building and Construction
Industry Security of Payment Act
2002 (Vic) made simple
Western Suburbs Law Association
Tuesday 4 June 2013
Michael Heaton QC
Introduction
 Purpose and object of Act
 Reasons for Act
 Dual regime
 Precedence of Act over contract
 Interim measure
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Reference Date
 S.9(2)(a((i): date under the contract on which a claim for a progress payment
may be made [in relation to specific items of construction work]
 S.9(2)(a)(ii): date under the contract by reference to which amount of payment
claim is calculated in relation to specific items of construction work
 In effect, date under contract for making of claims for progress payments
 S.9(2)(b): if contract does not make express provision then 20 business days
after construction work was first carried out and for second and subsequent
Reference Dates, 20 days after the previous Reference Date
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Reference Date continued…
 S.9(2)(c): single or one-off payment
 S.9(2)(d): final payment
 Reference Date is critical because entitlement to make a claim for a progress
payment is on and from each Reference Date
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Claimable Variations
 Class 1 variations: s.10A(2)
 Class 2 variations:
o work was carried out
o work was requested or directed
but no agreement as to entitlement value, method of valuing or time for
payment
 Subject to s.10(4), if contract price $5million or less - can claim:
s.10A(3)(d)(i)
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Claimable Variations continued…
 Subject to s.10(4), if contract price greater than $5million and contract
does not contain a dispute resolution clause – can claim: s.10(3)(d)(ii).
But if contract does contain dispute resolution clause – cannot claim.
Dispute resolution clause must be compulsory and determinative.
 S.10A(4): if Class 2 variations at any time exceed 10% of the contract
price then $5million is read as $150,000.
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Excluded Amounts
 If variation not a claimable: s.10B(2)(a)
 Any amount other than a claimable variation due to:
o latent conditions
o time related costs
o changes in regulatory requirements
s.10B(2)(b)

Damages for breach of contract or any other claim for damages arising under
or in connection with the contract: s.10B(2)(c)

A claim arising at law other than under the construction contract: s.10B(2)(d)

Any amount of a prescribed Class: s.10B(2)(e)

Reasons for s.10A and s.10B – protect VicRoads
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Due date for payment
 Date a progress payment is payable under the contract
 If no express provision, 10 days after payment claim is made
 Interest payable under s.2 of Penalty Interest Rates Act or at rate
specified under contract
 Cash flow
 Pay when paid provisions have no effect: s.13
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Examples of dual regime and
precedence of the Act
 Request or direction to change render
 Statutory Declaration requirements under construction contracts
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Payment claims and payment
schedules
 Payment claim:
o identify the construction work or related goods and services
o amount of progress payment claimed
o State made under Building and Construction Industry Security of Payment
2002: s.14(2)
o the same payment claim may serve as a payment claim under the contract
and under the Act
o must be served within the period determined by the contract or 3 months
after the Reference Date in s.9(2): s.14(4)(a) and (b)
o claimant cannot serve more than one payment claim in respect of each
Reference Date: s.14(8)
o claimant can claim in a payment claim, an amount not previously paid
under a payment claim: s.14(9)
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Payment claims and payment
schedules continued…

Payment schedule – must identify payment claim to which it relates
o amount of payment respondent proposes to make – scheduled
amount
o identify any amount alleged to be an excluded amount
o if scheduled amount is less state why
o payment schedule to be made within time required by contract or 10
business days after payment claim is served, whichever is the earlier
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Failure to deliver payment schedule
or pay claimed amount

Respondent liable to pay claimed amount on the due date for payment

If no payment of whole or any part of claimed amount, or the whole or any
part of a scheduled amount – the amount becomes a debt due to claimant

Claimant can then bring summary proceedings or make an adjudication
application

In summary proceedings respondent not entitled to raise any defence under
construction contract: s.16(4) and s.17(4)

Claimant is entitled to significant judgment under the Act on payment claims
even though respondent may have good defence under the contract, still
have to pay
o dual regimes and precedence of Act
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Adjudication Applications

Scheduled amount less than claimed amount: s.18(1)(a)

No payment schedule and no payment of the whole or any part of the
claimed amount: s.18(1)(b)

Application must be made within 10 business days of receipt of payment
schedule: s.18(1)(a)

Under s.18(1)(b) – 10 business days after due date for payment or 5
business days after time for respondent to respond under s.18(2)
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Adjudication Applications
continued…

Made to ANA chosen by claimant

If 3 ANA set out in contract claimant must choose one of them

Adjudication application may contain submissions relevant to the application

Must be accepted by adjudicator within 4 business days after application
made to ANA
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Adjudication Responses

Within 5 business days after receipt of adjudication application or 2
business days after adjudicator’s notification of acceptance of
adjudication, whichever is the later

Effectively, 5 business days to respond

Can contain submissions relevant to the response

Can only lodge adjudication response if payment schedule has been
provided

If adjudication response contains reasons for withholding not in payment
schedule, adjudicator has to give notice to claimant and give 2 business
days to claimant to respond – possible ambush

If adjudication response out of time, not to be considered by adjudicator
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Adjudications

10 business days subject to extension of up to 15 business days with
agreement of claimant

Adjudicator must consider only:
o provisions of Act and any Regulations
o subject to Act provisions of construction contract
o payment claim and submissions in support
o payment schedule and submissions in support
o results of any inspections carried out
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Adjudications
continued…

Act provides for only very limited reference to the contract

Reasons to be provided

Eastlink project

Costs – as agreed or fair and reasonable. If one party refuses to pay,
other party may elect to pay the non-paying party’s share and that
amount is added to the adjudicated amount
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Enforcement

If respondent fails to pay adjudicated amount, claimant can request
adjudication certificate from the ANA: s.28Q

Where ANA has provided adjudication certificate the claimant may
recover as a debt due, the amount in any Court of competent jurisdiction

Claimant to lodge adjudication certificate with an affidavit stating the
whole or any part of the amount payable has not been paid at the time
the certificate is filed: s.28R(2)

Judgment may be entered for the amount not paid: s.28R(3)
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Enforcement continued …

Quick summary procedure

If respondent applies to set aside judgement, respondent not entitled to
raise any cross claim or defence under the contract or challenge
adjudication determination except that the adjudication determination
included a non claimable variation: s.28R(6)

Provision for claimant to go against principal if respondent does not pay
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Conclusions

Act creates a dual regime. Dual regime may be inconsistent with
contractual regime

The regime under the Act takes precedence on an interim basis

A progress claim can be made under the Act and under the contract in
the one claim

The regime under the Act promotes cash flow, the lifeblood of the industry

Builders, contractors and subcontractors, that is, persons carrying out
construction work, ought make more use of the regime under the Act
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