The Victorian SOP Act is well known for being unique in prohibiting the inclusion of certain categories of claims or entitlements, defined to be "excluded amounts", in payment claims or payment schedules. This results in certain contractual claims, such as:

• most entitlements relating to variations;
• latent conditions; and
• time related costs (i.e. delay costs as well as liquidated damages),

from being pursued and recovered under the SOP Act.  Because of the "excluded amounts" regime in the SOP Act, the position as to interim entitlement to payment under the SOP Act often deviates from the position as to entitlement to progress payments under the Contract, and compels parties to pursue (often more costly) final dispute resolution avenues to determine their contractual entitlements.

The Bill proposes to repeal sections 10A and 10B of the SOP Act, thus removing the concepts of "excluded amounts" and "claimable variations".  This change will substantially broaden the type of claims that can be referred to adjudication in Victoria. 

The issue of whether there is a valid "reference date", being a date on and from which a claimant has a right to make a progress payment, has been the subject of a large number of judicial review applications under the SOP legislation.

The Bill proposes to remove the "reference date" concept, and instead gives claimants the right to submit one payment claim on and from the last day of a month. 

The Bill further proposes that:

• a payment claim submitted early is not invalid, but the time within which the person may serve a payment schedule does not commence until the earliest date on which the payment claim could have been submitted; and
• a claimant's entitlement to serve a payment claim is not affected by the termination, or purported termination or the expiry of a construction contract.

A unique feature of the Victorian SOP Act is that new reasons for withholding payment may be raised by a respondent in an adjudication response, without those reasons first having been included in a payment schedule. The SOP Act then provides a mechanism for the claimant to have an opportunity to respond to any new reasons raised during the adjudication process.

The Bill proposes introducing a prohibition on respondents including new reasons in their adjudication response that were not previously included in the payment schedule, which would align Victoria's adjudication regime with the other jurisdictions.

The Bill proposes to extend the time within which a payment claim may be served to six months after practical completion of all construction work carried out under the construction contract or after the supply of all related goods and services supplied under the construction contract. 

The Western Australian legislature, as part of its significant rewrite of its security of payment laws in 2021, introduced a novel provision that empowers a decision maker (whether an adjudicator, a court, an arbitrator or expert determiner) to declare a notice-based time bar clause of a construction contract "unfair" in certain circumstances, which would result in that time-bar being of no effect in the particular instance that is the subject of the relevant proceeding in which it is declared "unfair". This provision applies beyond security of payment adjudications and can apply in all dispute resolution forums.

The Bill proposes to introduce a similar concept in Victoria through a new section 13A of the SOPA Act.

A notice-based time bar provision may be declared unfair if compliance with the provision is not reasonably possible or would be unreasonably onerous.  The Bill sets out matters which an adjudicator, court, arbitrator or expert must take into account in determining whether a notice-based time bar provision is unfair, which includes the relative bargaining power of each party entering into the contract. 

The Bill proposes to introduce new sections 17A to 17G to the SOP Act, which permit a person who claims to be entitled to the release of the whole or a part of a performance security to serve a claim on the person liable to release the performance security. 

A respondent who receives a performance security claim may serve a performance security schedule on the claimant. 

The bill proposes to give rights to claimants to seek release of a performance security by order of the court or through an adjudication application where a performance security schedule is not provided and the respondent does not release the performance security, or through an adjudication application where a performance security schedule is provided but the amounts scheduled to be released are less than the amount claimed. 

The Bill proposes to introduce a new s 17H to the SOP Act, which requires a party who intends to have recourse to the whole or part of a performance security under a construction contract to give a notice of intention to have recourse to the performance security at least 5 business days before doing so.  The notice of intention to have recourse must identify the construction contract and the provisions on which the party relies to have recourse, state the amount of the performance security to which the party intends to have recourse and describe the circumstances that entitle the party to have recourse. 

This change aligns the Victorian position with the recent changes in Western Australia.