Australia: The Price To Pay For Victorian Payment Claims

Last Updated: 3 November 2008
Article by David Hand and Jane Hider

In the recent decision of Protectavale Pty Ltd v K2K Pty Ltd [2008] FCA 1248, the Federal Court has held that a payment claim under the Building and Construction Industry Security of Payment Act 2002 (Vic) must clearly identify the construction work as the subject of the claim, and include a breakdown of the amount previously paid. Alternatively, in the case of a milestone payment claim, the Act requires that the claimant has clearly stated that it is a milestone payment claim in its documentation.


Protectavale Pty Ltd (Protectavale) and K2K Pty Ltd (K2K) formed a joint venture for the construction of a residential and retail development known as 'Chadstone Gate'. Protectavale and K2K engaged Lorne Bay Pty Ltd (Lorne Bay) to carry out the construction work. A dispute arose over delays and variations.

Lorne Bay served an invoice under the Building and Construction Industry Security of Payment Act 2002 (Vic) (the Act)1 on Protectavale and K2K in the amount of $635,448.06. The invoice was said to cover the final payment under the construction contract and the balance of the contract amount and variations.

Protectavale responded asserting that the payment was not valid under the Act as it contained inadequate and incomplete information, and for that reason could not be properly responded to.

Lorne Bay then served a revised invoice purporting to be a payment claim under the Act stating that the 'construction work in respect of which this Payment Claim is made and the amounts claimed... is listed below.'

The table read:

Contract Sum




Prolongation Claim


Adjusted Contract Sum






Payments Received




Claimed Amount (+ GST)


The revised payment claim provided a short description of the variation claims and prolongation costs, but did not identify the work previously completed and paid for.

Protectavale did not provide a payment schedule. As a result, Lorne Bay sought summary judgment in the Federal Court under the Act.


The issue was whether the revised invoice was a valid payment claim and met the requirements of section 14 of the Act to identify the construction work to which the progress payment relates.

Federal Court Ruling

Justice Finkelstein considered that the Act was designed to protect those who perform construction work from inequitable practices in the building and construction industry whereby small contractors are not paid on time, or at all, for their work. He said that the premise that underlies the legislation is that cash flow is the lifeblood of the construction industry and the principal under a construction contract should 'pay now and argue later'.

His Honour concluded that a payment claim must be sufficiently detailed to enable the principal to understand the basis of the claim to respond with a payment schedule. If a reasonable principal is unable to ascertain with sufficient certainty the work to which the claim relates, he or she will not be able to provide a meaningful payment schedule. Justice Finkelstein said that the provision of adequate information to apprise the principal of the issues in dispute was not an unreasonable price to pay to obtain the benefits of the Act.

His Honour held that as the revised payment claim in this case did not identify what was previously paid, it was impossible for Protectavale to determine the basis of the claim. His Honour also held that if Lorne Bay intended to claim a milestone payment it should have clearly identified it as such.

Justice Finkelstein said that the omitted information was critical and, consequently, the revised payment claim did not satisfy the requirements of the Act by adequately identifying the construction work to which the claim related.

Interestingly and as an aside, his Honour noted that the delay costs did not need to be itemised as they were not (in a strict sense) costs for construction work.


This decision highlights the need for claimants under the Act to ensure that any payment claim provides sufficient particulars of the variation or other claims (excluding prolongation claims), together with a breakdown of the amounts previously paid.

These measures should enable the principal or respondent to identify the issues in dispute and respond with a meaningful payment schedule.

Alternatively, if the claimant is being paid on a milestone basis, the claimant must ensure that the payment claim clearly states that it is a milestone claim.

Failure to identify the construction work to which the payment claim relates will result in the payment claim not being made in accordance with the Act. This will, in turn, deny a contractor the remedies and protection afforded by the Act.

Accordingly, a claimant should carefully consider its pursuit of summary judgment.


1. The Act as in force before the amendments made by Act No. 42 of 2006. As at the date of this article there have not been any judicial rulings on the amended Act.

Phillips Fox has changed its name to DLA Phillips Fox because the firm entered into an exclusive alliance with DLA Piper, one of the largest legal services organisations in the world. We will retain our offices in every major commercial centre in Australia and New Zealand, with no operational change to your relationship with the firm. DLA Phillips Fox can now take your business one step further − by connecting you to a global network of legal experience, talent and knowledge.

This publication is intended as a first point of reference and should not be relied on as a substitute for professional advice. Specialist legal advice should always be sought in relation to any particular circumstances and no liability will be accepted for any losses incurred by those relying solely on this publication.

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