The Security of Payment Act has been around now for 20 years in NSW, and well past a decade elsewhere. The one thing that New South Wales has done better than any other state is keeping the Act on track with its stated intention.

When legislation starts functioning, there are various forces that act to shape it or act to avoid it. The effects of caselaw, unintended consequences, and abuses of process can neuter the operation of the Act and prevent it from doing its job. Interested legislators make changes to the Act to keep it sharp and ‘on mission’.

A sad exception is Victoria. It has not touched its Security of Payment Act since 2006. Yep….. 17 years. In that time, a heap of caselaw has stripped away aspects of its operation. Its tortuous drafting, when made to operate in the real world, has resulted in an Act where its intentions are constrained, highly modified, or blocked altogether. I have watched in amazement as the legislature has sat idly by and watched the trainwreck unfold.

But things may well change.

After a string of liquidations and construction company collapses, the Victorian Government has had a rebirth of interest in the Act, and what it does to promote cashflow. The Environment and Planning Standing Committee has called for submissions on the Act and what can be done with it to improve payment in the industry. Submissions closed on the 19^th of May 2023.

To the uninitiated, back in 2002 the Victorian Act was much like the NSW Act. The NSW Act has become the basis for all other Acts and no wonder; it is the best drafted and does the best job in fulfilling the intention of getting disputes resolved and payments moving. But in 2006 the Victorian Government bowed to pressure to have the Act changed in many ways. The changes followed and to the detriment of unpaid contractors.

Here are the things that I think need to change. In reading this you may get a picture of just how out of touch the Victorian Act is.

1. The Act does not apply to contract between contractors and homeowners. Change it so that it does. Work for homeowners should not be denied the Act’s protection.
2. Get rid of Reference Dates. These do nothing but make it harder to make a claim, and in many cases denies the ability to make a claim at all.
3. Explicitly allow the Act to apply to claims for retentions. Due to recent caselaw, many argue that retentions are not claimable under the Act.
4. Get rid of the 3-month default period in which a claim can be made under ss:14(4) and (5). Other states allow 6 months and 12 months. It is the shortest period of any Act in the country.
5. Adjudication Responses: Do not allow any new reasons in them. Again, Victoria is on its own here. No other state allows an Adjudication Response to an application to include new reasons for not paying.
6. Allow documents under the Act to be served by email. Right now, it’s only post or fax!
7. Get rid of the distinction between Claimable and Unclaimable variations as set out in s.10A which creates First and Second Class Variations. This is an unnecessary and pointless distinction that does not exist in any other state. Just let Variations be claimed and decided with the other work in the claim.
8. Cap contract payment terms: NSW has capped payment terms to 20 business days for subcontractors and 15 business days for head contractors. In Victoria terms such as “45 business days end of month” are still common.

There are some others, but let’s save that for the inquiry.

Victoria is at a cross-roads on this.

Let’s hope someone there has the stomach to get things done.