Security of Payments Act (SoPA) – Following the Process and Getting Paid Now!

Contact the Constructive Legal Solutions team via telephone on 1300 972 092 or at admin@constructivelegalsolutions.com.au for more information on this topic or any other legal enquiry.

Time and time again, trades include the phrasing “This is a payment claim made under the Building and Construction Industry Security of Payment Act 2002 (Vic)” on their payment claims; and when they are asked what it means or whether it helps them, the response is often a shrug of the shoulder, or a confused look.

The Security of Payments Act (SoPA) could help save business, when used correctly and promptly – promptly being the operative word, due to the strict timeframes. Let us show you how!

What is the SoPA?

The SoPA, otherwise known as the Building and Construction Industry Security of Payment Act 2002, applies to construction contracts entered into on or after March 2007 and ensures that goods and services supplied by trades under a construction contract get paid. It does not take the place of a contract but is a quick and effective method for enforcing contract payments.[1] We have previously published an article looking at the 5 basic things you need to know about the SoPA, click here to find out more:

https://constructivelegalsolutions.com.au/5-things-to-know-about-the-sop-act/

So, what is the process?

We have linked a very detailed flowchart[2] in the footnotes of the whole process, but we are here to simplify it. There are 4 stages to the process:

STAGE 1 – Issue a Payment Claim

1. Once goods and/or services have been provided, a payment claim (i.e., invoice) should be issued with the phrasing “This is a payment claim made under the Building and Construction Industry Security of Payment Act 2002 (Vic)” included; and

2. The Payment claim should clearly detail the works, goods and/or services provided, and the amount being claimed.

STAGE 2 – Receive Payment or a Payment Schedule

1. The Respondent (the customer) is required to arrange for full payment OR if the amount is disputed, provide a payment schedule stating the amount the Respondent is willing to pay and their reasoning for the difference, including any complaints relating to defective works;

2. Payment or a Payment Schedule should be provided within ten (10) business days OR shorter if required by the contract governing the works (if the project is with a domestic building owner, the timeframe is twenty (20) business days);

3. It is important to note, that if a Payment Schedule is provided but does NOT include details of any reasoning or complaints of defective works etc. that matter cannot be raised later if the matter proceeds to adjudication;

4. Additionally, if a Payment Schedule is not provided and if full or any part of the claimed amount is not paid, then you have three options:

1. 1. You are entitled to suspend works by giving three (3) business days’ notice;
   2. You are entitled to proceed to Court and recover the unpaid portion of the claimed amount “as a debt due to the claimant”. The Respondent will not have a right to a defence (which Court you go to and costs involved, will depend on the value of the claim); or
   3. You are entitled to make an adjudication application under section 18(1)(b)[3].

STAGE 3 – Adjudication

1. Stage 2 (4)(a) and (b) are fairly self-explanatory, suspend the works until you receive payment or a payment schedule, and if you were to proceed to court then obtain judgement and enforce it. However, the adjudication process is a little more involved.

2. An Adjudication Notice regarding the no payment schedule received needs to be made within ten (10) business days from the due date for payment;

3. The Respondent has two (2) business days to prepare and serve a Payment Schedule;

4. If the Respondent continues to fail to provide the Payment Schedule, you have five (5) business days to prepare and serve an Adjudication Application (you will need to find an Authorised Nominating Authority and serve the application on them too);

1. 1. If you get to this stage, the Respondent has no right to serve a response!
   2. There is also a fee for the Adjudicator, however under the Act this fee is shared equally by the party unless the Adjudicator determines differently (usually 100% will be payable by the Respondent if the payment claim is wholly justified!)

5. An Adjudicator is to provide a determination within ten (10) days of the application being served on the Respondent.

STAGE 4 – Payment or Enforcement

1. The Respondent must pay any adjudicated amount within five (5) business days of service of the determination, failing which you can obtain an Adjudication Certificate, and have it registered in the relevant Court and proceed to enforcing it via multiple avenues, such as engaging the Sheriff to perform a Seize and Sale of Property.

Wherever you are in the debt recovery process, the team at Constructive Legal Solutions can help you at every stage of your claim. Contact the team via telephone on 1300 972 092 or at admin@constructivelegalsolutions.com.au today!

Constructive Legal Solutions hosted a Security of Payments Act webinar in 2021. You can watch this webinar here: https://register.gotowebinar.com/register/7128438863579433999

[1] Provisions in a contract can provide an additional layer of protection and is another avenue trades can utilise.

[2] https://securityofpaymentsact.com.au/wp-content/uploads/VIC.jpg

[3] Section 18 of the Building And Construction Industry Security Of Payment Act 2002 http://classic.austlii.edu.au/au/legis/vic/consol_act/bacisopa2002606/s18.html