Background

Façade Designs International Pty Ltd (Façade) was engaged by Yuanda Vic Pty Ltd (Yuanda) to carry out installation works of façade elements under a supply and installation contract (Contract) on the commercial and residential towers at 447 Collins Street, Melbourne, Victoria, known as ‘the Arch on Collins’ (Project).

During the project, Façade provided a payment claim under the Act, setting out the amount which Façade, the claimant for the purposes of the Act, sought.[1] Yuanda did not provide a payment schedule within the time required under the Act.  As a result, Façade sought judgment against Yuanda in the amount claimed so as to recover the unpaid portion of the claimed amount as a debt due under the Act (First Proceeding).[2]

First Proceeding

The central question in the First Proceeding was whether Façade’s claim included a claim for an ‘excluded amount’ for the purposes of the Act,[3] and if it did, whether this amount could be severed by the Court in the summary judgment application in the First Proceeding.

In the First Proceeding, the Court entered judgment in favour of Façade. The Court held that under the Act it was permitted to reduce the claimed amount by the value of any ‘excluded amount’, and award judgment in favour of Façade for the balance.

This decision was challenged on appeal by Yuanda, on the basis that there was no ability for the Court simply to reduce the payment claim or claimed amount by the ‘excluded amounts’, and accordingly the First Proceeding should have been dismissed (Appeal Proceeding).

Appeal Proceeding

In the Appeal Decision, the majority of the Court allowed Yuanda’s appeal on the basis of that judgment could not be entered if Façade’s payment claim under the Act included an ‘excluded amount’.

Specifically, the Court held that the full amount claimed as part of a payment claim is considered as the ‘claimed amount’ for the purposes of s16 of the Act. Accordingly, if the Court is required to ascertain whether the claim included an ‘excluded amount’, it must do so ‘on the face of the payment claim’; that is, by reference to the documents comprising, or referred to in, the payment claim, and not any other material.

The majority further held that if the Court is not satisfied at the validity of the claim as a whole, the Court is precluded from entering judgment in favour of the claimant. To this end, the majority found that the Court could not sever the excluded amount from the claim and enter judgment for the balance.[4]

The Court notably affirmed the function of adjudicators in being able to sever ‘excluded amounts’ in payment claims and make a determination of any balance owing. This construction of the Act “confines the role of the Court and encourages disputes to be resolved through adjudication”.[5]

Conclusion

This decision has far reaching consequences for claimants seeking to enforce payment under the Act. The majority in the Appeal Decision summarised these consequences as follows:

“A tolerably clear statutory scheme emerges, by which, if there is a dispute about the extent to which excluded amounts are being claimed, that is a matter for adjudication. If there is no dispute, a claimant may proceed straight to court seeking recovery. At that point, the Court ‘is not to’ give judgment in favour of the claimant unless it is satisfied that the claimed amount does not include ‘any’ excluded amount. Consistently with the policy of the Act to prevent recovery of excluded amounts and the role of the Court in enforcing a liability determined by the statute, the natural meaning of those words is that, if the claimed amount includes any excluded amount, it is not to give judgment.”[6]

This strict approach underscores the Court’s reluctance to act in the capacity as valuer under the Act, and willingness to leave the task of assessing claims for payment to adjudicators. Accordingly, this decision is likely to see more disputes under the Act referred to adjudication.

Respondents who fail to serve a payment schedule within the prescribed period under the Act are likely to be assisted by this decision. Unless a claimed amount is entirely free of excluded amounts, a respondent in this situation would need to be given a ‘second chance’ to serve a payment schedule under s18(2) before the claimant applies for adjudication. Further, the claimant would need to progress the matter to adjudication within the time limits prescribed by the Act, or face being barred.

These observations echo the dissenting judgment of Sifris JA, who favoured an approach that was less restrictive based on the view that the Act was not intended to punish a claimant.

The majority view in the Appeal Decision sets a higher bar for claimants seeking to enforce an entitlement to payment under the Act, both in preparation of their progress claims and prompt enforcement of their rights.

[1] Building and Construction Industry Security of Payment Act 2002 (Vic), s14.

[2] Ibid, s16(2)(a)(i).

[3] Ibid, s10B(2).

[4] Yuanda Vic Pty Ltd v Facade Designs International Pty Ltd [2021] VSCA 44, 143.

[5] Ibid, 39.

[6] Ibid, 21.