Victorian Government endorses recommendations to amend Security of Payment Act

Excluded amounts and retention money (recommendations 2, 9 and 19): the SOP Act currently prohibits ‘excluded amounts’ from being the subject of a payment claim. This category of claims includes certain disputed variations and claims for time-related costs, those being claims for extensions of time or liquidated damages. The Committee recommended – and the Government supports – removing the concept of excluded amounts, to allow progress payments to be calculated in accordance with the contract, or otherwise on the basis of the value of construction work carried out. The adjudication review mechanism, which only allows for review of determinations involving excluded amounts, would also be removed. The Government also supports expressly allowing claimants to claim retention money under the SOP Act.

Reference dates (recommendations 3 and 7): removing the concept of ‘reference dates’, which can be difficult to navigate in the absence of legal advice and, if incorrectly identified, undermine otherwise valid payment claims. Instead, the Committee recommended – and the Government supports – enabling at least one payment claim to be submitted each month, and allowing payment claims to be made in respect of work performed in the last six months (rather than three).

Blackout period (recommendation 4): amending the definition of business day to exclude the end of year shutdown period from 22 December to 10 January inclusive. Victoria is currently the only Australian jurisdiction that does not include such a provision, allowing claimants to ambush respondents during the period where the building industry and legal practitioners are either closed or employ a skeleton staff.

Unfair time bars and other terms (recommendations 5 and 6): implementing similar provisions to sections 15 and 16 of the WA SOP Act, to allow certain contract provisions to be declared unfair and of no effect. This would include allowing nullification of notice-based time bar clauses in the context of the particular payment claim in dispute if an adjudicator, court or other similar body considers that compliance with the clause is not reasonably possible or would be unreasonably onerous, and also allow the Victorian Government to prohibit certain unfair contract clauses. This regime would operate in addition to the existing statutory prohibition on unfair contract terms in the Australian Consumer Law (with different consequences).

Payment times (recommendation 8): capping contract payment terms at 25 business days after the payment claim is made.

Extending regime to domestic context (recommendation 10): consider amending the SOP Act to encompass construction contracts with homeowners. Under the current regime, payment disputes between residential builders and homeowners are governed by the Domestic Building Contracts Act, while disputes between builders and their subcontractors are dealt with under the SOP Act.

In principle, the Government supports amendments that eliminate the DBC Act dispute resolution process but considers such issues should first be considered as part of the Minister for Consumer Affairs’ review of the DBC Act (currently in submissions review phase) and the broader building reform program led by the Minister for Planning.

Limiting opportunities to provide new reasons for withholding payment (recommendations 15 and 16): prohibiting respondents from including reasons in their adjudication response that were not previously included in the payment schedule (and removing the requirement for adjudicators to identify those new reasons and give the claimant two days to respond to them during the period they are drafting their determination), and instead providing respondents with five business days to provide a payment schedule in response to an adjudication application (instead of two).

Standardising timeframes for determinations (recommendation 17): altering the time for an adjudicator to provide their determination to 10 business days after the adjudication response is received or due (currently time starts from when the adjudicator accepts the adjudication application, encouraging adjudicators to delay acceptance to maximise the period in which they have all of the relevant material), subject to the parties being entitled to agree to extend this time by an additional 20 business days (instead of five).

Electronic service (recommendation 20): expressly allowing notices to be issued or served via email or other electronic means.

Retention trust scheme (recommendations 27 and 28): that the Victorian Government implement a retention trust scheme or a cascading deemed statutory trust scheme, to better protect subcontractors in the event of head contractor insolvency.

The Government supports both recommendations in principle, noting that more examination of competing models is necessary before legislative amendments can endorse any particular approach or alternative.