Introduction to the Security of Payment Act
The Building and Construction Industry Security of Payment Act 2002 (Vic) (‘SOPA’) is a legislative framework that grants builders, contractors and suppliers statutory rights to recover payments owed under construction contracts and or agreements. The process for recovering unpaid payment claims and or invoices provided under SOPA is formulated to provide a streamlined and efficient process for resolving payment disputes through adjudication without the need for court proceedings which can take month or years before any payment may be made pursuant to them.
Key Benefits:
- Imposes strict timeframes for making and responding to payment claims.
- Enables efficient dispute resolution via adjudication avoiding Court or Tribunal (VCAT) delays.
- Limits the ability of payers to use delay tactics or unfair contract terms to withhold payment.
- Improves cash flow and reduces insolvency risks across the construction industry by offering a swift and reliable mechanism for recovering outstanding payments.
How to protect your business under SOPA
- Issue valid payment claims that comply with all legislative requirements (i.e. carries the specific wording that ensures it will be considered a valid payment claim for the purposes of SOPA);
- Respond properly to any claims received, using a compliant payment schedule;
- Maintain detailed records (e.g. contracts, variations, correspondence) to support any adjudication application (if required);
- Acting promptly to comply with SOPA’s strict deadlines, ensuring rights under the act are maintained; and
- Should you wish to make an adjudication claim or you are required to respond to an adjudication application made under the SOPA, consult lawyers with experience in acting in SOPA matters at the earliest opportunity. Adjudication applications can be very complex and technical and interpretation and application of the legislative frame work under SOPA is extremely nuanced.
Real example of KPA’s successful SOPA Claims
Here at KPA we practice in building and construction litigation and can assist in a variety of matters, including SOPA claims. In late 2024, KPA lodged an adjudication application in relation to a commercial construction project on behalf of one of our clients to recover monies owing under a payment claim which remained due and payable by the head contractor.
The head contractor asserted that they were entitled to delay costs, vaguely claimed damages and deductions, and on that basis, rendered only partial payment of the claim. In the application KPA successfully argued that these to delay costs, vaguely claimed damages and deductions are not claimable under SOPA. The Adjudicator determined that this position was correct. It was held that delay costs, damages and deductions should not have been deducted in the assessment of the payment claim, as such these amounts constitute an “excluded amount” and “damages for breach” within the meaning of section 10B(2) of SOPA.
The legislative framework of SOPA expressly excludes certain categories of claims such as damages and defects from adjudication as these matters are intended to be dealt with through the existing contractual mechanisms. This determination further reinforces SOPA’s underlying principle to ‘pay now argue later’.
KPA was able to assist our client in obtaining a successful outcome and receiving payment of the funds owed under the payment claim by the head contractor in approximately 12 weeks from the date of issue of the payment claim.
