What you need to know about strict payment and dispute requirements as set out in the Building and Construction Industry Security of Payment Act 2002 (Vic) (Act).
Owners, developers, head contractors, subcontractors and suppliers in Victoria need to be aware of the strict payment and dispute requirements set out in the Building and Construction Industry Security of Payment Act 2002 (Vic) (Act).
The Act explained
Under the Act, there are strict procedures that need to be adhered to in the recovery of payments and any subsequent disputes.
If you are:
- an owner or developer and have engaged a head contractor to carry out construction work;
- a head contractor or subcontractor and have engaged a subcontractor to carry out construction work; or
- an owner, developer, head contractor or subcontractor and have engaged with a supplier of construction related goods or services,
the Act may apply to you.
The Act applies to construction work (and related goods and services) carried out in Victoria. Construction work is defined broadly and includes related goods and services. It does not apply to domestic building work where the owner intends to live in the building being constructed.
The object of the Act is to ensure that a person who carries out construction work (or who supplies related goods and services) under a construction contract recovers payment in relation to the carrying out of that work and/or the supplying of those goods and services.
For payments to be recovered under the Act, a valid and effective payment claim must be served.
In order to be a valid and effective payment claim, it must:
- identify the relevant construction work or related goods and services;
- indicate the amount claimed to be due; and
- indicate that it is made under the Act.
If you dispute the payment claim, you must respond, in writing, to the payment claim within 10 business days from the date of service of the payment claim – IF YOU DO NOT RESPOND WITHIN THIS TIME YOU WILL BECOME LIABLE TO PAY THE CLAIM.
In addition, the response (referred to in the Act as a "Payment Schedule") must also:
- identify the payment claim to which it relates;
- indicate the amount you propose to pay (if any);
- indicate the reasons for disputing payment; and
- state that it is made under the Act.
There is no time to waste in identifying and responding to a payment claim. The 10-day time period to respond is strict and consequences of responding outside this time period, even if by only one day, are severe.
It is therefore critical that you are fully aware of the method and address for service of documents in your construction contracts, and have a process in place to ensure that any documents served are identified promptly.
If you have any concerns in relation to a document that seeks to recover payment, obtain legal advice urgently to avoid a situation where your time to dispute payment has expired.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances. Madgwicks is a member of Meritas, one of the world's largest law firm alliances.