The Building and Construction Industry Security of Payment Act 2002 (SOP Act) establishes a statutory right for a person who carries out construction work or supplies related goods and services in Victoria to promptly recover payment due under a construction contract. It can be used broadly, for example by head contractors, subcontractors, hire companies, materials suppliers and consultants.
The stated purpose of the SOP Act is to ensure participants are paid for works performed in a timely manner whilst avoiding the need for lengthy disputes. The SOP Act only provides this cash flow on an interim basis, meaning it doesn’t prevent a final determination of the merits in a Court, but it does allow a successful claimant the cash flow to continue its business in the short-term.
The SOP Act applies to most contracts for building work or for the supply of related goods and services in Victoria. The contract may be oral, written or a combination of both.
The SOP Act covers the following types of construction work:
The SOP Act states what kinds of work cannot be claimed, such as:
The SOP Act stipulates rapid and inflexible deadlines for payment claims and responses. Missing a deadline is generally fatal to the claim or response. As a result, the preparation of claims and responses needs to be done with close attention to both the SOP Act and the contract. The relevant steps involved are outlined below.
A valid claim under the SOP Act requires that the claimant give a payment claim to the relevant contractor, purchaser or client. A valid payment claim must:
In Victoria, a claimant cannot include the following ‘excluded amounts’ in a payment claim:
Within 10 business days of being served with a payment claim (or less if the contract provides otherwise), the recipient of the payment claim must issue a payment schedule, which must:
If a payment schedule is not issued within the time required, the respondent becomes liable to pay the entire amount claimed.
If the scheduled amount is less than the claimed amount, or the scheduled amount is not paid in full by the due date for payment, the claimant may apply to have the payment claim adjudicated by submitting an adjudication application. The process is quick and is typically concluded within 15-20 business days.
An adjudication application must:
The relevant ANA will appoint an adjudicator to determine the amount payable (if any).
The respondent may then file an adjudication response to the adjudication application within the later of:
The adjudicator must then deliver an adjudication determination stating the amount of any progress payment to be made, the due date for that payment and any applicable interest payable within 10 business days of accepting the appointment. This period may be extended by 5 business days with the claimant’s consent.
The adjudicated amount must be paid within 5 business days after the date on which the respondent is served with a copy of the adjudication determination. Where the respondent fails to pay any adjudicated amount, the claimant may pursue enforcement through the Courts or suspend work without risk of being in breach of the contract.
There are very limited avenues to appeal an adjudication determination. Common judicial review grounds include:
In 2023, the Victorian Government’s Environment and Planning Standing Committee (Committee) made significant recommendations to amend the SOP Act following its inquiry into non-payment of subcontractors. The recommendations focused on payment practices, strengthening the right to claim payment, improving adjudication of disputes, and addressing insolvency issues.
In late 2024, the Government responded to the Committee’s report, stating it would support 16 of the Committee’s recommendations in full, with the remainder either supported in part or in principle. Once enacted, the SOP Act changes will relax the Victorian payments regime, with the generally claimant-friendly amendments likely to increase the opportunity for claims.
We are highly experienced in dealing with claims under the SOP Act, including advising clients in the preparation of a claim, advising clients in anticipation of receiving a claim, bringing and defending claims before an adjudicator, judicial review applications in the Courts, and drafting contracts to manage SOP risks.
Please contact us if you require assistance with advice in relation to the SOP Act.
