Recouping earlier deductions under the SOPA

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Posted By and on 2/12/21 at 9:32 AM
Goldwind Australia Pty Ltd v ALE Heavylift (Australia) Pty Ltd [2021] VSC 625

In the recent decision in Goldwind Australia Pty Ltd v ALE Heavylift (Australia) Pty Ltd [2021] VSC 625 (the Goldwind Case), the Supreme Court of Victoria held that under the Building and Construction Industry Security of Payment Act 2002 (Vic) (the SOP Act), a claimant can recover an excluded amount deducted in a previous payment schedule, provided the subsequent payment claim can be characterised as one for work done.

Background

In January 2020, Goldwind engaged ALE under a subcontract to provide specialised cranes required for the construction of wind turbine generators.

In September 2020, ALE submitted Payment Claim 11 (PC-11) to Goldwind claiming $1,467,312.03 for work done in September 2020. PC-11 was not endorsed as a payment claim made under the SOP Act. In response, Goldwind provided a payment schedule which deducted $484,100.92 on the basis that the time taken by ALE to perform certain work was excessive (the Delay Deduction) and also deducted another amount which was not relevant to the proceeding.

In October 2020 ALE submitted Payment Claim 12 (PC-12) and in February 2021, submitted Payment Claim 13 (PC-13). Both PC-12 and PC-13 were made under the SOP Act and claimed (amongst other things) the unpaid part of PC-11 (the September Claim) despite the Delay Deduction in the payment schedule previously given by Goldwind. In response to both PC-12 and PC-13, Goldwind provided payment schedules which applied the Delay Deduction again.

ALE referred PC-13 to adjudication. The adjudicator found in favour of ALE by determining that the September Claim was for work done and that the Delay Deduction was an excluded amount under section 10B of the SOP Act.

Goldwind sought judicial review of the adjudicator’s determination, submitting that the September Claim was a claim to recoup the Delay Deduction and therefore an excluded amount which the adjudicator ought not to have taken into account.  Goldwind relied upon the obiter of Digby J in Shape Australia Pty Ltd v Nuance Group (Aust) Pty Ltd [2018] VSC 808 (the Shape Case), that an attempt to recoup an excluded amount deducted in a previous payment schedule, is itself an excluded amount under the SOP Act.

Decision of the Supreme Court of Victoria

The Court upheld the adjudicator’s determination and dismissed the application. In reaching that decision, the Court considered provisions of the SOP Act, its purpose, the decision in Seabay Properties Pty Ltd v Galvin Constructions Pty Ltd [2011] VSC 183 (the Seabay Case) (which it applied), and the obiter of Digby J in the Shape Case (which it did not apply). The Seabay Case held that liquidated damages are excluded amounts under section 10B of the SOP Act, that cannot be taken into account in calculating a progress payment.

The Court observed that:

  • there is no provision in the SOP Act which seeks to prevent a claimant from recovering a progress payment because of a failure to adjudicate a dispute in respect of an earlier payment claim; and
  • a claimant’s decision to adjudicate is “optional”, that section 9 of the SOP Act permits a claim in respect of work done up to and including a reference date, including work done before a preceding reference date, and that section 14(9) of the SOP Act preserves a claimant’s right to claim subsequently an unpaid part of a previous payment claim.
Impact of the Goldwind Case

The Goldwind Case provides clarification in relation to the operation of section 10B of the SOP Act, which had been the subject of some recent uncertainty. As a result of the obiter of Digby J in the Shape Case, it had been thought that an uncontested payment schedule created a “baseline” above which a claimant could not subsequently recover, even where an excluded amount had been claimed. The Goldwind Case has rejected that view and confirmed that a claimant can recover an excluded amount deducted in a previous payment schedule, provided the subsequent claim can be characterised as one for work done.

The practical effect of the Goldwind Case is that the door is now left open for claimants to submit payment claims under the SOP Act in respect of amounts for work done, which were previously subject to deduction for excluded amounts. Moving forward, those parties higher in the contracting chain may need to consider whether some additional security should be sought to protect against contractor delay, which cannot be recovered under the SOP Act. Claimant parties may also wish to obtain advice in relation to whether they are able to submit a payment claim under the SOP Act to recover amounts which were subject to deduction in previous payment schedules.

If you have any questions in relation to this case, please don’t hesitate to contact our Construction & Engineering team.

KHQ Lawyers - Jack Fry

Jack Fry Lawyer

Jack is a lawyer in our Construction & Engineering team. He has experience representing clients in a variety of disputes concerning commercial and domestic building defects, protection works, breach... Read More

KHQ Lawyers - Catherine Bell

Catherine Bell Principal Solicitor

Catherine leads our Construction & Engineering team.  She is recognised as a leading construction law practitioner, and has more than 20 years’ experience in construction and infrastructure... Read More