Building and Construction Industry Security of Payment Act 2002 (VIC)

The Building and Construction Industry Security of Payment Act (BACISOPA) was first introduced in New South Wales in March 1999 and has since been adopted by the other states and territories of Australia, most recently South Australia in December 2011. The purpose of this legislation is to ensure that progress payments (which are required to continue to carry out works on site) are easily and promptly secured without resorting to costly and time-consuming litigation.

General

Parties cannot include ‘paid when paid’ clauses in contracts, neither can they ‘opt out’ of the Act.

The Victorian legislation does not apply to:

  • domestic building works within the meaning of the Domestic Building Contracts Act 1995;
  • construction contracts that form part of a loan agreement, guarantee, or contract of insurance (in certain circumstances);
  • consideration payable for the construction work is calculated otherwise than by reference to the value of the work carried out;
  • party purports to supply works as an employee;
  • work carried out outside of Victoria (i.e. each state has its own legislative regime);
  • as prescribed by regulations; or
  • construction contracts entered before the commencement of the Act.

Making a claim

When?

A claimant is entitled to a progress payment on each Reference Date in relation to construction work or the supply of related goods and services. Reference Date, if not otherwise specified in the contract, means:

  • for single payments: 20 business days after work has started and every 20 business days afterwards.
  • for one-off payments: the day after work finishes.
  • for final payments: the day after work finishes, the period for the rectification of defects or omissions expires, or when a final certificate is issued.

If payment has not been made, a claimant may serve a Payment Claim.

How?

Payment Claims must:

  • identify the works to which it relates;
  • indicate what the claimed amount is; and
  • state that the Claim is made according to the BACISOPA.

Payment Claims must not include:

  • variations that are not claimable variations (see below);
  • amounts for compensation due to:
  • latent conditions;
  • time-related costs; or
  • changes in regulatory requirements;
  • amounts claimed for breach of the contract or damages relating to the contract; and
  • any legal claim not connected to the contract.

Claimable Variations

  • First Class Variation: parties are in agreement regarding the following: (1) work was carried out, (2) the scope of the works, (3), work was a variation to the contract, (4) value of that amount or the method of valuing that amount , (5) time for payment, and (6) the claimant is entitled to a progress payment.
  • Second Class Variation: parties are in agreement that that work was carried out on request of the respondent, and either:
  • the consideration under the Contract is $5M or less; or
  • the work exceeds $5M however the contract does not have a dispute resolution provision. If the amount of the progress claim exceeds 10% of the construction contract, substitute $5M above with $150,000.

A claimant cannot serve more than one payment claim in respect of the same reference date. However, a claimant can include amounts that have already been claimed if unless otherwise specified in the contract, the Payment Claim must be served within 3 months of the reference date.

Facing a claim

A respondent may dispute a payment claim by serving a Payment Schedule within the time specified in the contract, or 10 business days- whichever expires earlier.

Payment Schedules must:

  • state to which Payment Claim it relates;
  • indicate the amount of the payment that the respondent proposes to make;
  • identify any excluded amounts; and\

state the reason for which amounts should not be paid. If the respondent fails to serve a Payment Schedule within the above time frame, he or she is liable to pay the amount claimed in the Payment Claim, due on the same day as the Payment Schedule.

Failure to Pay

If the respondent fails to pay, the claimant may:

  • suspend work;
  • recover the amount as a debt in court; or
  • make an Adjudication Application.

Adjudication

Adjudication Application

If the claimant chooses to make an Adjudication Application, then the following time frame applies:

  • If the respondent did not serve a No Payment Schedule, the claimant has 10 days from due date for payment to notify respondent of intention to apply for Adjudication.
  • The respondent then has 2 business days to serve a Payment Schedule.
  • If no Payment Schedule is served after 2 days, the claimant has 5 business days to serve an Adjudication Application.
  • If the respondent serves a Payment Schedule, the claimant has 10 business days to serve Adjudication Application.

The claimant can apply by:

  1. Choosing an Authorised Nominating Authority (ANA) as an adjudicator;
  2. Lodging the application form with the chosen ANA; or
  3. Serving the same on the respondent at the same time.

Each ANA as its own application form and required submissions.

Adjudication Response

The respondent may then respond with an Adjudication Response containing relevant submissions, however cannot include reasons for withholding payment that were not included in the Payment Schedule.

The respondent may lodge an Adjudication Response at any time within-

  • 5 business days after receiving a copy of the application; or
  • 2 business days after receiving notice of an Adjudicator’s acceptance of the Application (whichever expires later).

If the Adjudication Response includes any reasons for withholding payment that were not included in the Payment Schedule, the adjudicator must serve a notice on the claimant-

  • setting out those reasons; and
  • stating that the claimant has 2 business days after being served with the notice to lodge a response to those reasons with the Adjudicator.

Process of Adjudication

  • Adjudicator has 10 business days to make a Determination from receipt of Application. However, if claimant agrees, the Adjudicator can make determination within 15 business days.
  • Adjudicator may request further submissions, call a conference between the parties and/or carry out an inspection of any matter to which the claim relates.

Determination of Adjudication

  • The Determination relates to the amount of the progress payment that is to be paid by the respondent and any interest. The Adjudicator must give reasons for the Determination and must nominate when the amount is to be paid.
  • If the respondent still does not pay, the claimant can suspend work, obtain an Adjudication Certificate from the ANA and enforce the Adjudication in court.
  • There are limited options for review of Adjudications Determination.

Claimant’s Rights Against Principal

A claimant who is a subcontractor may recover payments directly from the principal, rather than the head contractor against whom the adjudication determination was made. The subcontractor must apply to the court and obtain a ‘debt certificate’, and together with the a prescribed from, serve it on the principal.

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