Options if a respondent doesn’t pay or respond
A respondent who receives a payment claim must pay the amount claimed in full by the due date or give the claimant a payment schedule within 10 days (or sooner, if the contract sets a shorter deadline).
If you are the claimant, you can take action against a respondent if the respondent:
- neither provides a payment schedule nor pays the whole of the ‘claimed amount’ (the amount claimed in the payment claim) on time
- provides a payment schedule and the ‘scheduled amount’ (the amount the respondent proposes to pay) is less than the claimed amount
- provides a payment schedule but does not pay the scheduled amount by the due date.
You have several options, including:
- exercising a lien over unfixed plant and materials
- suspending work or the supply of goods and services
- applying for adjudication or going to court to recover the unpaid amount.
Lien over unfixed plant and materials
A lien is a form of security over property where one party retains ownership of the property as security for the performance of an obligation by the other party. A lien can only apply to property that is physically transferable, for example, unfixed goods and materials.
If a progress payment becomes due and payable, you are entitled to exercise a lien in respect of the unpaid amount over any unfixed plant or materials that you have supplied to the respondent for use in connection with carrying out construction work for the respondent.
As the claimant, you retain ownership of the unfixed plant or materials until the respondent pays any outstanding progress payment that is due.
Notice of intention to exercise lien
You need to serve a Notice of intention to exercise lien on the respondent in a particular form. The form is prescribed in the Building and Building and Construction Industry Security of Payment Regulations 2013 (the SOP Regulations).
How to serve the notice of lien
The Notice of intention to exercise lien can be served in any of the following ways:
- deliver it in person – it is served when respondent receives it
- lodge it during normal business hours at the respondent's ordinary place of business – it is served when it is received at that address
- send it by post to the respondent's ordinary place of business – it is served two business days after the date on which it is posted
- fax it to the respondent’s ordinary place of business – it is served at the time it is received, unless it is received after 4 pm; if it is received after 4 pm, it is taken to have been served on the next business day
- provide it in any other manner specified in the contract.
Please note that the information on this page is provided for general guidance only and must not be regarded as legal advice. Before exercising a lien, the claimant is advised to seek legal advice.
Contact the Law Institute of Victoria for referral to a solicitor.
Effect of the lien
Upon receiving the Notice of intention to exercise lien, the respondent is not entitled to fix, remove, sell or otherwise deal with the unfixed plant or materials identified in the Notice until you have received the outstanding progress payment.
As the claimant, you become a secured creditor. This means that the unfixed plant or materials will not be available for payment of unsecured creditors in any distribution of assets by an external administrator.
The lien does not give you any right against any third party who is, or has become, the owner of the unfixed plant or materials.
When does the lien cease?
The lien in respect of the unpaid amount ceases when you receive the progress payment.
Suspend work or the supply of goods and services
The claimant has a right to suspend work or the supply of goods and services to the respondent until the amount payable has been paid. You must give the respondent three business days’ written notice of the suspension. The notice must state that it is made under the SOP Act. A claimant who exercises this right in accordance with the SOP Act is not liable for any consequential loss or expense suffered by the respondent.
Apply for adjudication or go to court to recover the unpaid amount
Adjudication is a process created by the SOP Act to resolve a disputed claim for payment due under a construction contract. For more information see SOP Adjudication.
Instead of applying for adjudication, you may choose to go to court to recover an unpaid amount.
For example, if the respondent does not pay you in accordance with a payment schedule they gave you, or has given you a payment schedule showing they propose to pay less than the amount you claimed, you may decide to go to court rather than apply for adjudication.
You can commence proceedings in court for any payment dispute that may otherwise be adjudicated under the SOP Act.
This is done by lodging a complaint in the Magistrates’ Court or a writ in the County Court or Supreme Court (depending on the amount owed) and paying a filing fee, if any. Your lawyer can advise you about this process.