In November 2023, the Legislative Assembly’s Environment and Planning Committee issued a report on its inquiry into employers and subcontractors who refuse to pay their subcontractors for completed works (Inquiry Report). The Committee made 28 recommendations primarily addressing the operation of the Building and Construction Industry Security of Payment Act 2002 (Vic) (Victorian SOPA). The proposed amendments included those designed to strengthen the statutory right to claim payment, improve the statutory adjudication process and to promote consistency with security of payment legislation in other Australian jurisdictions.

Recently, the Victorian Government expressed broad support for the reforms to the Victorian SOPA in its response to the Inquiry Report.

A number of the key recommendations endorsed by the Victorian Government are outlined below:

• Removing ‘excluded amounts’ (Recommendation 2): Repeal of the ‘excluded amounts’ regime, which is unique to the Victorian SOPA and currently prevents progress payment claims for amounts relating to:
  • non-claimable variations;
  • latent conditions;
  • time-related costs;
  • changes in regulatory requirements;
  • claims for damages in connection with the construction contract;
  • claims arising at law other than under the construction contract; and
  • classes prescribed by the regulations as an excluded amount.
• Removal of ‘reference dates’ and changes to time limits for payment (Recommendations 3, 7 and 8): The concept of ‘reference dates’, which are currently used to determine when a claimant becomes entitled to make a progress payment claim, will be replaced with a new statutory entitlement to claim at least one payment each month. The time limit on claiming payment will be extended from three months from the ‘reference date’ to six months after completion of the work. Section 12 will also be amended to ensure that the contract does not provide for payments to become due and payable more than 25 business days after the payment claim.
• Time bars (Recommendation 5): The Victorian Government supports adding new provisions to enable an adjudicator, court, arbitrator or other expert appointed by the contracting parties to declare that a notice-based time bar clause is ‘unfair’ where compliance with the clause is not reasonably possible or would be unreasonably onerous.
• Unfair contractual clauses (Recommendation 6): Including an amendment stipulating that the Regulations underlying the Victorian SOPA may prohibit certain unfair contractual clauses and thereby nullify their effect.
• Prohibition against new reasons for withholding payment (Recommendation 15): Section 21 of the Victorian SOPA currently enables respondents to submit new reasons for withholding payment that were not included in the payment schedule, in response to an adjudication application. Section 21 will be amended to expressly prohibit respondents from submitting new reasons for withholding payment in response to an adjudication application.
• Adjudication certificate to be filed as a judgment for a debt (Recommendation 26): The Victorian Government will amend Division 2B, which addresses payment and recovery of adjudicated amounts, to provide that an adjudication certificate may be filed as a judgment for a debt in court.

The Victorian Government has not provided indicative timing for the legislative amendments required to implement the supported reforms.

The Victorian Government’s full response to the Inquiry Report is available here.