Getting the most out of a Security of Payment Scheme

by Antoinette Daley - September 2010

The Building and Construction Industry Security of Payment Act 2002 (Vic) (Act) is very useful legislation to those operating in the building and construction industry as it provides a statutory right to progress payments. But, as usual, the devil is in the detail and claimants must adhere to strict timelines and processes to benefit from this statutory payment scheme.

Scope of the Act 

The Act applies to construction work and related goods and services performed within Victoria under a construction contract. A construction contract is broadly defined under the Act and includes arrangements that may be less than an otherwise legally enforce-able contact. The Act only applies to domestic building work in limited circumstances.

Notably, the provision of the Act cannot be excluded from a construction contract. 

Making a Payment Claim 

A payment claim is a claim for a progress payment for work done or supplies made un-der the Act including single, final and milestone payments. If a date on which a claim for a progress payment can be made is not specified under a contract, a payment claim can be made every 20 business days after the first day of works are carried out. 

To be a valid payment claim under the Act, a payment claim must:
  • identify the construction work or related goods and services; 
  • indicate the claimed amount due and payable; and 
  • state that it is made under the Act (This is a payment claim under the Building and Construction Industry Security of Payment Act 2002 (Vic)). 

A payment claim may include claimable variations but not excluded amounts.  

Responding to a Payment Claim 

If a valid payment claim has been served on a respondent, it should serve the claimant with a payment schedule setting out what payment it proposes to make (Scheduled Amount). A payment schedule must be served within 10 business days of receiving the payment claim or sooner if the contract prescribes a shorter period. 

Tough consequences 

If a respondent fails to pay the Scheduled Amount or fails to provide a payment sched-ule on time, the claimant is entitled to issue a proceeding for recovery of the debt from a court. Most importantly, the respondent is restrained from bringing any cross-claim against the claimant or raising any defence. In addition, the claimant can also suspend works and exercise a lien over any unfixed plant or materials.

As an alternative to a court order, claimants can apply for adjudication to enforce an entitlement to progress payments. Time limits apply to accessing the adjudication proc-ess. 

For a free audit of your invoices to check that they comply with this Act, please contact the writer.

Antoinette Daley 



This article is from the Hicks Oakley Chessell Williams newsletter In the Loop.  



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