Proposed Reform of the Security of Payment Act

Introduction

All Australian states and territories introduced legislative security payment legislation to address poor payment practices in the construction sector. Victorian security of payment law is established by the Building and Construction Industry Security of Payment Act 2002 (Act). 

The Act provides a statutory entitlement to claim payments for any goods or services provided under a construction contract and an adjudication procedure for the quick determination of payment claims and disputes without the need to commence court proceedings.

Reforms to the Act

However, there have been concerns regarding the operation of the Act over the last 21 years, since its enactment. As a result, the Victorian Parliament has appointed a committee which has issued a report setting out various proposed reforms to the Act as follows:-

1.     Firstly, the statutory right to claim payment should be strengthened by:

(a)   Empowering subcontractors to claim the entire value of a contract;

(b)   Redefining business days and when a payment claim can be made;

(c)   Limiting the use of unfair or onerous contract clauses;

(d)   Extending the time limit for claiming payment;

(e)   Standardising payment terms across the sector; and

(f)    Extending security payment law to residential construction.

2.    Secondly, the adjudication of payment disputes should be enhanced by:

(a)   Removing a respondent’s right to provide new reasons for withholding payment;

(b)   Ensuring adjudicator’s have sufficient time to determine a dispute;

(c)   Extending the review mechanism for adjudications;

(d)   Modernising service or notices provisions;

(e)   Addressing perceptions of adjudicator bias; and

(f)    Strengthening adjudicator’s capabilities.

3.    Thirdly, by mitigating the impact of insolvencies via an escrow/trust mechanism.

Upcoming Legislation

Finally, it will be interesting to see which proposed reforms are ultimately included in any upcoming legislation which amends the Act.

If you require legal assistance, please contact Chris Moshidis, Director and Principal Lawyer on +61 9521 7956 or chris@urbanlawyers.com.au