This decision comes as a relief to claimants who seek to use the Building and Construction Industry Security of Payment Act 2002 (Vic) (SOP Act) to be paid for ‘construction work’, where a respondent has previously made deductions to claims made under the SOP Act for liquidated damages. This decision has reinforced the interim nature of the SOP Act, by adopting a purposive approach to not restrict the ability of a claimant to be paid for work previously done.

The facts concerned a subcontract between Goldwind Australia (Head Contractor) and ALE Heavylift (Subcontractor) for the use of specialised cranes (Subcontract). While performing the works the Subcontractor submitted several payment claims. In response, the Head Contractor sought to set-off liquidated damages against under its respective payment schedules. These schedules which were not challenged by the making of an adjudication application (Uncontested Payment Claims).

In February 2021 the Subcontractor served a payment claim for works performed in that month as well as works previously claimed for in the Uncontested Payment Claims, but not paid for by the Head Contractor. This claim was endorsed as a payment claim under the SOP Act (Disputed Payment Claim). The reason for non-payment of the full amount in the Uncontested Payment Claims, was the application of the Delay Deduction by the Head Contractor, which was again applied in its payment schedule to the Disputed Payment Claim. On this occasion, the Delay Deduction was contested by the Subcontractor, which applied for adjudication of the Disputed Payment Claim.

Previously, Digby J’s decision in Shape Australia v The Nuance Group [2018] VSC 808 meant that parties who failed to challenge liquidated damages that had been set-off in previous payment schedules were at risk of being precluded from challenging such damages in future claims.[1] Claims to recoup those amounts may have previously  been considered claims for an ‘excluded amount’ under s10B of the SOP Act.

In this proceeding, Stynes J upheld the decision of the adjudicator and held that the claimant was entitled to bring a further claim for “construction work” performed and claimed, but not paid for. This right was maintained irrespective of whether the claimant failed to challenge prior off-setting deductions. In doing so, Stynes J confirmed that it may remain open to a claimant to challenge previously applied deductions of an ‘excluded amount’ in future payment claims. This was because the Court considered that the Subcontractor’s failure to challenge the Delay Deduction when it was first applied, did not change the character of the amount claimed in the Disputed Payment Claim. The Disputed Payment Claim was therefore properly characterised as a claim for construction work, which was performed, but not paid for by the Head Contractor.

Stynes J confirmed that this interpretation was consistent with the purpose and object of the SOP Act,[2] and in doing so distinguished the decision of Digby J in Shape.[3]

Further information / assistance regarding the issues raised in this article is available from the authors, Bill Papastergiadis – PartnerNathan Cutts – PartnerPhillip Vassiliadis – Senior Associate or your usual contact at Moray & Agnew.

[1] Shape Australia v The Nuance Group [2018] VSC 808.

[2] Building and Construction Industry Security of Payment Act 2002 (Vic), s1 and s3.

[3] Shape Australia v The Nuance Group [2018] VSC 808.