Commercial Law Update - Security of payment in Victoria: payment claims, adjudication & court intervention

Commercial Law
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Every state in Australia now has "security of payment" legislation, this is designed to provide for progress payments for those who carry out construction work (or provide related good and services), and a fast track interim adjudication procedure to resolve an dispute about the amount of any progress payment that is due and payable.

Because of the interim nature of the prescribed adjudication process, it has been described as a "pay now, argue later" regime. This means that the parties' legal rights are preserved and - while a party obliged to make a progress payment after adjudication must ordinarily do so - if either party is unhappy with the outcome of the adjudication then that party is entitle to bring court proceedings to finally determine the parties' rights. If court proceedings are initiated after adjudication, then the court will consider the matter afresh and not by way of appeal. 

The Building and Construction Industry Security of Payment Act 2002 (Vic) ( the "SoP Act"), came into operation in Victoria on 31 January 2003, and was amended by Act No 42 of 2006, which came into effect on both 26 July 2006 and 30 March 2007 (with more substantial amendments coming into effect on this later date). The SoP Act, as amended, applies to construction contracts entered into on or after 30 March 2007. Importantly, the SoP Act does not apply yo domestic building work which is covered by the Domestic Building Contracts Act 1995 (Vic): see s 7(2)(b) of the SoP Act.

The object of the SoP Act is as follows:

“to ensure that any person who undertakes to carry out construction work (or who undertakes to supply related goods and services) under a construction contract is entitled to receive, and is able to recover, specified progress payments in relation to the carrying out of that work and the supply of those goods and services.”

The SoP Act is modelled on the NSW Building and Construction Industry Security of Payment Act 1999, and the Victoria and NSW acts are quite similar (although not in all important respects). In Hickory Developments Pty Ltd v Schiavello (Vc) Pty Ltd [2009] VSC 156 (24 April 2009), Vickery J noted that a useful insight intot he operation of the NSW SoP Act (that applies equally in Victoria) was given by Minister Morris Iemma prior to introducing amendments to the NSW Act in 2002.

To read the remainder of this article, please click here

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Adam Rollnik practises in commercial law

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