Security of Payment Act (VIC) Update

The Christmas holiday period is a treacherous time for Respondents insofar as the service of payment claims under the Building and Construction Industry Security of Payment Act 2002 (Vic) (“Act”) is concerned.

Respondents should be aware that under the Act they may be served with, and have to respond to, a contractor’s payment claim whilst the industry is in shut-down over the Christmas holiday break.

Respondents that fail to respond within time to a payment claim leave themselves open to the possibility of the contractor claiming the amount as a debt due in Court.

Contractor’s service of a claim

Importantly, under the Act, a contractor’s claim may only be served by the later of:

  • the period determined by or in accordance with the terms of the relevant building contract; or
  • the period of 3 months after the date to be determined by or in accordance with the terms of the relevant building contract as the date on which a payment claim may be made or the amount of a progress payment is to be calculated (“reference date”).

In the case of a one-off payment, if there is no contractual provision, the reference date is the date immediately following the day that construction work was last carried out or goods or services were last supplied.

Service of a claim can be achieved by personal delivery, lodgement at the office, post or facsimile, or, significantly, in any other manner specified in the relevant construction contract.

Respondents are therefore strongly advised to monitor any possible addresses of service throughout the Christmas period to avoid any unnoticed service of a claim.  For postal delivery, service is deemed to have taken place, regardless of a principal’s knowledge, 2 business days after the day the claim was posted, and in the case of facsimile, on the date received, or if after 4pm, the next business day.

Responding to a claim

Payments are due and payable in accordance with the contract, or if no express provision is made, then 10 business days after a payment claim has been served.

Within at most 10 business days, principals must:

  • pay the amount claimed; or
  • serve a payment schedule on the contractor.

What days are excluded over the Christmas Period?

The only days that are excluded over the 2013/14 Christmas period in calculating the Respondent’s responsibility to respond to a payment claim are weekends and the following non-business days:

  • Wednesday, 25 December 2013;
  • Thursday, 26 December 2013; and
  • Wednesday, 1 January 2014.

By way of example, if a payment claim is served on a principal on Monday, 23 December 2013, then the principal must respond to the payment claim by Thursday, 9 January 2014.

Key point

In order to avoid that unwanted Christmas present over the holiday period, Respondents should carefully monitor when and where potential payment claims may arise and appropriately respond to such claims within the time limit.