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Who
can make a claim under the Security
of Payment Scheme?
What types of work or
services does the Act apply to?
What is a payment claim?
What is the 'Security of
Payment Statement'?
What types of payments can
be claimed?
What is a claimable variation?
What is an excluded amount?
When should I make a payment
claim?
How do I calculate my payment
claim?
Is interest payable on an
unpaid progress payment?
How do I serve a payment
claim?
What happens after I serve
my payment claim?
What happens if the respondent
does not provide a payment schedule?
When can the claimant apply
for adjudication?
How does the claimant apply
for adjudication?
What is an Authorised Nominating
Authority (ANA)?
What should be included
in an adjudication application?
How do I serve an adjudication
application?
What happens after I lodge
an adjudication application?
The right to suspend work
or the supply of goods and services
Recovery from the principal
Can an adjudicator's determination
be reviewed?
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).
The contract may be written, oral or
a combination of both.
A Security of Payment claim can be made
by:
- Contractors
- Subcontractors
- Suppliers of material or building
components in construction work
- Architects, engineers or others providing
building advice.
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The Act applies to the following types
of work:
- Residential and non-residential building
- Civil engineering
- Professional services (e.g. architecture,
design, surveying)
- Maintenance
- Mechanical/air conditioning
- Plumbing
- Demolition
- Hire of plant and equipment
- Supply of building materials
- Electrical
- Landscaping.
The Act does not apply to contracts
to carry out domestic building work with
a building owner unless the building
owner is in the business of building
residences and the contract is entered
into in the course of or in connection
with that business. These contracts 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.
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A payment claim is a claim for a progress
payment which is made under the Act. To
be valid, the payment claim must specify
the work, goods or services supplied
and the amount claimed and state that
it is made under the Building and
Construction Industry Security of Payment
Act 2002.
A client or purchaser who receives a
payment claim from a contractor must
either pay the contractor the claimed
amount when it's due, or give them a
payment schedule within 10 business
days (or less if the contract says so).
See
Fact Sheet 3: Making a payment claim
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To be valid under the Act, a payment
claim must say: 'This is a payment
claim under the Building and Construction
Industry Security of Payment Act 2002'. This
notifies the respondent that the claim
is made under the Act.
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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.
This includes final, single and milestone
payments.
The Act specifies which variations may
be claimed in a payment claim - these
are 'claimable
variations'.
The Act expressly excludes certain amounts
from being claimed in a payment claim. These
are called 'excluded
amounts'.
See
Fact Sheet 3: Making a payment claim
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All agreed variations and some disputed
variations may be claimed in a payment
claim.
If the original contract value is less
than $150,000, the Act applies to all
claims for disputed variations.
If the original contract value is between
$150,000 and $5 million, the Act applies
to claims for disputed variations up
to 10% of the original contract sum.
If the original contract value is more
than $5 million, disputed variations
must be resolved by the dispute resolution
methods specified in the contract.
See
Fact Sheet 4: Claimable variations
and excluded amounts
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The Act expressly excludes certain amounts
from being claimed in a payment claim. These
are called 'excluded amounts'. An
adjudicator may not consider an excluded
amount in a payment claim, and their
determination will be void to the extent
they do so.
- An excluded amount is
- Any amount of the contract that is
not a claimable variation as described
above
- Compensation due to the happening
of an event, such as latent conditions,
time related costs and changes in regulatory
requirements
- Damages for breach of the contract
or for any other reason related to
the contract
- Any claim arising at law other than
under the contract.
While a dispute about an excluded amount
cannot be the subject of a payment claim
under the Act, it may still be resolved
in accordance with any dispute resolution
provisions in the contract or by going
to court.
See
Fact Sheet 4: Claimable variations
and excluded amounts
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A payment claim must be served within
3 months after the reference date,
or within the period specified in the
contract - whichever is later.
A reference date is the date on which
a claim may be made. If the contract
does not specify reference dates, the
Act provides for them as follows:
Progress payments - 20
business days after the work was
first carried out or goods and services
were first provided. Subsequent
payment claims may then be made every
20 business days until the job is
completed.
Single or one-off payments - The
day after the work was last carried
out or the goods or services were last
supplied under the contract.
Final payments -
The day after the end of any period
under the contract for rectifying
defects or omissions or the day after
the final certificate is issued. If
neither of these applies, the reference
date is the day after the work was
last carried out or the goods or
services were last supplied under
the contract.
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The payment claim must take into account
the contract price for the construction
work or supply of related goods and services,
any other rates or prices set out in
the contract and the estimated cost of
rectifying any defect. It may include claimable
variations but not excluded
amounts.
The progress payment becomes due on
the date specified by the contract; or
if the contract does not specify, 10
business days after the payment claim
is made.
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Interest is payable on the unpaid amount
of a progress payment at the rate specified
under the construction contract, or at
the rate fixed under section 2 of the
Penalty Interest Rates Act 1983, whichever
is greater.
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A document may be served under the Act
in one of the following ways:
- Delivered in person. It is 'served'
when the respondent receives it.
- Lodged during business hours at the
respondent's ordinary place of business.
It is 'served' when it is received
at that address.
- Sent by post to the respondent's
ordinary place of business. It is 'served'
2 business days after the day
it is posted.
- Faxed to the respondent's ordinary
place of business. It is 'served' at
the time it is received unless it is
received after 4pm. If it is received
after 4pm, it is taken to have been
'served' on the next business day.
- Provided in any other manner specified
in the contract.
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Under the Act, the respondent may respond
to a payment claim in one of 2 ways:
- Pay the amount claimed in full, on
or before the due date.
- Give you a payment schedule within
10 days (or sooner, if the contract
sets a shorter deadline) setting out
what they are willing to pay and why
it is any different from the amount
claimed.
A 'paid when paid' provision in a construction
contract has no effect. You cannot
be required to wait until the respondent
is paid by someone else under another
contract.
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A respondent who does not provide a
payment schedule on time is liable to
pay the full amount claimed. If
it is not paid on time, the claimant
may go to court to recover the full amount
as a debt or apply for adjudication. The
respondent may be charged interest on
the unpaid claimed amount.
The claimant is also entitled to suspend
work or cease supplying related goods
and services under the contract until
the amount payable has been paid. The
claimant must give the respondent 3 days'
written warning of the suspension. A
claimant who exercises this right in
accordance with the Act is not liable
for any loss or expense suffered by the
respondent as a consequence of the suspension.
The claimant has the right to exercise
a lien in respect of the unpaid amount
over any unfixed plant or materials that
the claimant has provided in connection
with carrying out construction work for
the respondent. This means the
respondent may not fix, remove, sell
or otherwise deal with the plant or materials
until the claimant is paid the outstanding
amount. The claimant must serve
a Notice of Lien on the respondent in
a particular form. The form is
prescribed in the Building and Construction
Industry Security of Payment Regulations
2003.
See
Fact Sheet 12: Lien over unfixed plant
and materials
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Claimants may apply for adjudication
when they have served a payment claim
on a respondent under the Act and one
of the following circumstances has arisen:
- The respondent provides a payment
schedule which shows that the amount
that they propose to pay (the 'scheduled
amount') is less than the amount claimed
on the payment claim (the 'claimed
amount').
- The claimant can apply for adjudication
under section 18(1)(a)(i) of the
Act.
- The claimant has 10 business days
after receiving the payment schedule
to apply.
- The respondent provides a payment
schedule but does not pay any or all
of the 'scheduled amount' when it is
due.
- The claimant can apply for adjudication
under section 18(1)(a)(ii) of the
Act.
- The claimant has 10 business days
after the due date for payment to
apply.
- The respondent fails to provide a
payment schedule or pay any or all
of the 'claimed amount' when it is
due.
- The claimant can apply for adjudication
under section 18(1)(b) of the Act.
- The claimant has 10 business days
after the due date for payment to
notify the respondent that they intend
to apply and that the respondent
has 2 business days to provide
a payment schedule. After notifying
the respondent, the claimant has
a further 7 business days to lodge
the application - whether or not
the respondent provides a payment
schedule.
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The claimant applies
for adjudication by lodging an application
with an Authorised Nominating Authority
(ANA) such as BAV, which
then nominates the adjudicator.
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An ANA is an organisation that has been
authorised by the Building Commission
to nominate adjudicators under the Act. Before
authorising an ANA, the Commission must
have regard to guidelines issued by the
Minister. In carrying out their
functions, ANAs must comply with the
Act, the Regulations and Conditions of
Authorisation. A breach of any
requirement or condition may affect the
authorisation of the ANA. Authorisation
is generally for a period of three
years.
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The application must be in writing and
identify the payment claim and the payment
schedule to which it relates. It
should be lodged with any application
fee charged by the ANA. The claimant
may make submissions that are relevant
to the application, including the reasons
for disagreeing with the payment schedule,
and should attach copies of documents
that they want the adjudicator to take
into consideration.
There is no prescribed form for an adjudication
application. The Building Commission
has prepared a sample adjudication
application form which can be
filled in or used as a guide.
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A document may be served under the Act
in one of the following ways:
- Delivered in person. It is 'served'
when the respondent receives it.
- Lodged during business hours at the
respondent's ordinary place of business.
It is 'served' when it is received
at that address.
- Sent by post to the respondent's
ordinary place of business. It is 'served'
2 business days after the day
it is posted.
- Faxed to the respondent's ordinary
place of business. It is 'served' at
the time it is received unless it is
received after 4pm. If it is received
after 4pm, it is taken to have been
'served' on the next business day.
- Provided in any other manner specified
in the contract.
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The ANA will refer the adjudication
application to an adjudicator as soon
as practicable. The parties will be notified
within 4 business days that an adjudicator
has accepted the application. If parties
have not been notified by then, the claimant
may withdraw the application (by notifying
the ANA in writing) and make a new one.
A copy of the application must be given
to the respondent. The respondent
has up to 5 business days to give
the adjudicator a written response but
only if they have given the claimant
a payment schedule. The claimant
receives a copy of the adjudication response. After
agreeing to adjudicate, the adjudicator
has 10 business days (or 15 if the claimant
agrees) to reach a decision.
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The claimant is entitled to suspend
work or cease supplying related goods
and services under the contract until
the amount payable has been paid, if
the respondent:
- fails to pay in accordance with the
payment schedule or
- does not provide a payment schedule
and does not pay the claimed amount
by the due date.
The claimant must give the respondent
3 business days' written notice
of the suspension. The notice must
state that it is made under the Act. A
claimant who exercises this right in
accordance right in accordance with the
Act is not liable for any loss or expense
suffered by the respondent as a consequence
of the suspension.
The right exists until the amount
payable has been paid.
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If the adjudicated amount is for work,
goods or services that are incidental
to or part of a contract between the
respondent and a third party (the principal),
the claimant may recover the adjudicated
amount from the principal.
The claimant must obtain an order from
a court for the adjudicated amount. The
court will issue a Debt Certificate,
which must be served on the principal
with a Notice of Claim. The Notice
of Claim and Debt Certificate must be
in the prescribed forms, which are set
out in the Building and Construction
Industry Security of Payment Regulations
2003.
Service of the Notice of Claim assigns
to the claimant the debt owed by the
principal to the respondent. The
principal must then pay the claimant
the money that the principal owes the
respondent until the debt is discharged
or the principal is no longer required
to pay the respondent. If the principal
fails to make the payment as required,
the claimant may sue for recovery of
the debt.
This option is not available where the
principal is a homeowner, unless the
homeowner is in the business of building
residences and the contract is entered
into in the course of or in connection
with that business.
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The adjudication process established
by the Act is intended to provide a quick
and inexpensive way to resolve payment
disputes arising under construction contracts. In
support of this aim, adjudicator's decisions
are generally not reviewable. However,
an adjudicator's determination may be
reviewed by another adjudicator in limited
circumstances. This process is
available to both parties.
A determination may be reviewed only
where the contract was entered on or
after 30 March 2007, and the adjudicated
amount exceeds $100,000.
The grounds for review are limited. A
respondent may seek review of a determination
on the ground that the adjudicator wrongly
included in the determination amounts
which are 'excluded amounts'. A
claimant may seek review of a determination
on the ground that the adjudicator failed
to include in the determination an amount
or amounts wrongly identified as 'excluded
amounts'.
See
Fact Sheet 7: Adjudication review
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