Information for Claimants

The following information is designed for potential claimants to get a basic grasp of the concepts and relevant requirements associated with being ‘a claimant’ under the Victorian Building and Construction Industry Security of Payment Act (2002).

This includes relevant definitions and other preliminary requirements before a claimant engages the adjudication procedures documented within the respective legislation.

The following information is not a substitute for professional legal advice and should not be taken as such. If in doubt about any of this information please consult with your legal advisor or contact the RICS DRS directly.

On this page:

Who, or what, is a ‘claimant’?

Section 4 of the legislation defines a claimant as “a person who serves a payment claim under section 14”.

Furthermore, a claimant is a person who has carried out construction work or the supply of related goods and services under a construction contract.

A claimant may serve a payment claim on a respondent, the entity liable to make payment under the construction contract.

What is a construction contract?

Section 4 of the legislation defines a construction contract as “a contract or other arrangement under which one part undertakes to carry out construction work, or to supply related goods and services, for another party.”

A construction contract may be written, oral, partially written and partially oral.

Who can a claimant claim against?

As stated, the claimant may serve a payment claim on a respondent under the construction contract.

Typical claim scenarios may resemble the following:

  • Contractors against developers/principals
  • Contractors against Owner-Builders
  • Subcontractors against contractors
  • Suppliers against customers
  • Consultants against customers
  • Plant and Equipment hirers against customers.

Domestic building work.

In accordance with section 7(b) of the Victoria legislation, construction contracts which fall within the meaning of the Domestic Building Contracts Act 1995 are generally excluded.

However, if the owner is “in the business of building residences and that the contract is entered into in the course of, or in connection with, that business” OR falls under the meaning of section 6 of the Domestic Building Contracts Act 1995, then these contracts are included. A typical example of this type of contract may include a building developer.

See section 7 “Application of the Act” subsection (2) for further information on the application of domestic building work or consult a security of payment expert for clarification.

When can a claimant make a claim?

The claimant receives a right to a progress payment on and from each reference date under a construction contract provided they have undertaken to carry out construction work or supply related goods and services.

The following section contains further detailed information on the definition and interpretation of the term reference date.

However, there are some conditions on payment claims that constitute a final claim and single one of payments. These are detailed in section 9(c) and 9(d) of the act.

Strictly speaking, a claimant can claim for items they believe they are entitled to in relation to the construction work or supply of related goods and services that has been undertaken with respect to the construction contract. Entitlements may also include:

  • Monies held in retention that are due for release
  • Damages associated with the suspension of work.
  • Interest on overdue progress payments.
  • Monies claimed to be owing at practical completion.
  • Extension of times costs.
  • Variations and any other claims under the contract (i.e. insurance claims).

However, payment claims may only be served within the later period worked out under the construction contract OR the 3 months after the last reference date.

What is the reference date?

A reference date is the date a claimant may serve a payment claim on a respondent. Usually it is defined in the construction contract. It might refer to a specific day of the month, or a certain milestone. An example (adopted from an Australian Standard Contract) could be:

Time for Payment Claims: Day 20 of any given month.

In New South Wales and Queensland, where a reference date is not defined, the legislation allows for the last day of the month as the reference date. The Victorian act has provision which may have a different practical interpretation. Section 9(2)(b) of the legislation notes that:

“If the contract makes no express provision with respect to the matter, the date occurring 20 business days after the previous reference date or the date occurring 20 business days after (i) the construction work was first carried out under the contract or (in the case of the first reference date) (ii) related goods and services were first supplied under the contract.”

In the case of a single one off payment, the reference date is the day after the construction work or supply of related goods and services was effected.
For further clarification of reference dates it is recommended that you contact the RICS DRS.

Formatting a payment claim.

Progress payments made under the Victorian act may include specific claimable variations, and may not include specific excluded amounts.

  • Must identify the construction work or supply of related goods and services to which the claim relates.
  • Must indicate the amount of the progress payment that the claimant claims to be payable.
  • Must state that it is made under the Building and Construction Industry Security of Payment Act.
  • The claim may include amounts subject to liabilities incurred under suspension (see section 29 of the Act).
  • The claim must not include an excluded amount (see below).

Such criteria can be adopted on a tax invoice, and thus a tax invoice may function as a payment claim.

As explained above, a claimant may only serve one payment claim per reference date under the appropriate contract.

Please feel free to examine the adjudication forms and tools section of our website for some example payment claims specific to your relevant jurisdictions.

Claimable Variations.

The Victorian legislations provide specific rules on how variations are to be dealt with in regards to payment claims. Claimants are only allowed to claim for variations that fall under the definition of a ‘claimable variation’.

A claimable variation is defined in section 10A of the legislation and falls into two classes. Firstly, there is a variation that has already been agreed by the parties. This can be included on the payment claim.

Secondly, the claimant may include a variation where one of the parties to the contract does not agree to one of the following (reference section 10A, subsection (3) of the legislation):

  • That the work subject of the claim is a variation to the contract.
  • That the person undertaking the work or supply of goods and services is entitled to a progress payment that includes an amount in respect of the work or the goods and services.
  • The value of the amount payable
  • The method of valuing the amount payable
  • The time for payment of the amount.

These are referred to the “second class” of variations.

However, one only may include a claimable variation if the consideration under the construction contract at the time the contract is entered into (i.e. the original contract sum) is less than or equal to $5,000,000 or, should the contract exceed this amount, then only if the contract does not provide a method of dispute resolution under the contract.

However, the above comes with extra conditions. If at any time the total amount of claims under the construction contract under these second class conditions exceeds 10% of the consideration under the construction contract (at the time the contract was entered into), then the claimant must utilise the following logic:

One only may include a claimable variation if the consideration under the construction contract at the time the contract is entered into (i.e. the original contract sum) is less than or equal to $150,000 or, should the contract exceed this amount, then only if the contract does not provide a method of dispute resolution under the contract.

The RICS DRS understand that this particular section can be confusing. It is recommended that you seek professional assistance if this section proves difficult to fully understand. Contact the RICS DRS for further information on seeking professional assistance.

Excluded Amounts.

Amounts that cannot be included on a payment claim under the Victorian legislation, known as excluded amounts, include:

  • Any amount that relates to a variation that is not claimable under section 10A.
  • Compensation costs related to latent conditions, time-related costs and changes in regulatory requirements.
  • Amount for beach of the construction contract or for any other claim for damages arising under or in connection with the contract.

Section 10B of the legislation explains these items, plus more, in further detail.

Serving a payment claim.

A payment claim must be served on the company or person liable to make payment. The service of a payment claim should be done in conjunction with the terms set out in the construction contract.

Where the contract does not provide detailed with regards to service of documents, the relevant section of each act dealing with ‘service of notices’ should be consulted. In the case of the Victorian legislation, one should consult section 50. Generally, this section allows for the following methods of service.

  • Delivering to the person personally.
  • Lodging it during normal office hours at the person’s ordinary place of business
  • Sending it by post of facsimile addressed to the person’s ordinary place of business
  • In any other manner specified in the relevant construction contract.

One very important point to consider with serving notices via facsimile is that if a facsimile is received after 4.00pm on any day, it must be take to have been received on the next business day.

Unless it is specifically in your contract, it is not recommended to serve payment claims via email.

Also, it is recommended that the claimant keep a record of when payment claims were served, the method of service, and to whom they were served (if possible). It is also recommended that claimants investigate serving by more than one method.

Examples of evidence of service can include: signed registered post dockets, fax transmissions sheets, and the like.

These recommendations are applicable across all adjudication processes.

What happens after the payment claim is submitted?

Once the claimant serves a valid payment claim on the respondent, the respondent has the option of providing the claimant with a payment schedule, which details the amount they propose to pay with regard to that payment claim.

The respondent has the lesser of the following times to provide a payment schedule to the claimant.

  1. Within the time required by the relevant construction contract
  2. Within 10 business days after the payment claim is served.

If the respondent does not serve a valid payment schedule within the required time, they become liable to pay the claimed amount to the claimant on the due date for payment.

How to recognise a valid payment schedule.

Recognising a valid payment schedule can often be difficult. The legislation requires the following criteria:

  • The document must identify the payment claim to which it relates. This can be as simple as stating something along these lines “‘with reference to your letter of the 10th January 2009”. If it is clear that the document refers to your payment claim, then it most probably identifies your payment claim.
  • The document must indicate the amount of the payment, if any, the respondent proposes to make. This is the scheduled amount. Usually payment schedules put the amount they propose to pay in the usual numeric currency format (i.e. Australian dollars) however they may scheduled the amount of zero or ‘nil’.
  • The schedule must also identify any amount of the claim that the respondent alleges is an excluded amount.
  • If the scheduled amount is less than the claimed amount, the document must state reasons why the schedule amount is less. If the respondent is withholding payment for any reason, the reasons are to be included.

If you have any doubts or queries feel free to contact the RICS DRS to discuss, otherwise it is recommended to consult with your legal counsel.

Valid payment schedule has been provided.

If the respondent has provided a valid payment schedule but it is less than the claimed amount, the claimant has the following options with regard to the relevant legislation.

  • The claimant may accept the scheduled amount. The respondent must pay the scheduled amount to the claimant on the due date without further deductions. Failure for this to happen may mean the claimant can apply for adjudication of the dispute.
  • The claimant may apply for adjudication of the disputed payment claim.

If the respondent has provided a payment schedule but not forwarded the scheduled amount by the due date for payment, the claimant may,

  • Apply for adjudication of the dispute.
  • Suspend work once the required notices have been served upon the respondent.

No payment schedule provided or invalid payment schedule provided.

In the scenario where no payment schedule has been provided, the claimant may elect from the following three options.

  • Put in motion the adjudication methods prescribed in the relevant legislation by serving a ‘Notice of Intent to Apply for Adjudication’ upon the respondent.
  • Recover the unpaid portion of the claimed amount as a debt owing in a court of competent jurisdiction.
  • File a notice on the respondent of the claimant’s intention to suspect work or suspend supply of related goods and services.

If a document purporting to be a payment schedule is served upon the claimant that may or may not be a payment schedule, it is good practice to, if you believe it to be invalid, seek further advice.

RICS DRS can provide practical advice of a non-legal nature with regards to purported payment schedules. However, if you required absolute clarification, it is advised that professional legal opinion be procured.

Not paid in accordance with schedule.

Similar to the previous section, if the respondent provides a payment schedule but does not pay the claimant in accordance with the schedule, the claimant may engage any one of these actions:

  • Put in motion the adjudication methods prescribed in the relevant legislation by serving a ‘Notice of Intent to Apply for Adjudication’ upon the respondent.
  • Recover the unpaid portion of the claimed amount as a debt owing in a court of competent jurisdiction.
  • File a notice on the respondent of the claimant’s intention to suspect work or suspend supply of related goods and services.

Notice of intent to apply for adjudication.

The notice of intent to apply for adjudication in effect states the claimant’s intent to apply for adjudication if payment or a valid payment schedule is not supplied to the claimant within the necessary time frame.

This notice must be validly served on the respondent in the methods similar to that of the payment claim.

The notice must state that the respondent may serve a payment schedule on claimant within 5 business days after receiving the claimant’s notice.

Furthermore, this notice can only be given within 10 business days after the due date for payment

The RICS DRS have a sample Notice of Intent to Apply for Adjudication available for download in our adjudication forms and tools section of our website.

Suspending work.

The claimant gains the statutory right to suspend work if a valid payment schedule has not been provided, or a scheduled amount has not been paid.

In regards to the Act, any expense or loss in relation to the suspension can be recovered by the claimant. Also, a claimant who suspends work or the supply of related goods and services is not liable for any loss or damage suffered by the Respondent. For Victoria the relevant section of the legislation is section 29.

The process of being eligible to suspend work is complex, and you should consult specialist assistance should you consider this option.

The RICS DRS have provided several examples notices for suspending work. You can find these examples by clicking here.

Choosing adjudication.

The benefits of choosing adjudication can be tremendous. It is a relatively simply method of deciding construction disputes with an emphasis on allowing money to cascade throughout the construction industry hierarchy.

Need more help?

Throughout the year, the RICS DRS run regular training courses for potential claimants, respondents and other interested parties.

These give detailed information on how the security of payment and how the BCISOP Act operates and how it can be utilised effectively. Visit our training schedule for more information by clicking here.

You’re welcome to contact us should you have any further enquiries.

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