Court back SOPA ideals – Pay Now, Argue Later

There are two ways to enforce payments under the Security of payment legislation (SOPA):

Adjudication (private Adjudicator); or
Summary judgment (Court process).

When you receive a payment schedule, Adjudication is your only option.
When you do not receive a payment schedule, you can choose adjudication or summary judgment. Theoretically, summary judgment should be like kicking a goal with no goalie.
You can’t raise defects, you can’t raise % of incomplete works.

However, builders have tried to make summary judgment expensive by defending the application in a manner that raises highly technical arguments.

Both Adjudication and Summary Judgment applications should be a determination of the payment claim(s) in question, rather than bringing in all the project history.

Victoria has one of the more complex SOPA regimes and this is due to the concept of ‘excluded amounts.’ These are amounts that cannot be considered in a SOPA application.

What is an excluded amount?

• Latent conditions;
• Time related costs e.g. liquidated damages;
• Changes in regulatory requirements;
• Claims for damages for breach of contract or damages in connection with contract; and
• Variations that are not claimable under the Act

As you can see, these things can be very vague.
Grey areas create room for lawyers to argue and escalate legal costs.
The recent case of Façade Designs International Pty Ltd v Yuanda Vic Pty Ltd, is a win for those seeking to apply for summary judgment.

Facts of the case

In November 2018, Yuanda subcontracted Façade Designs to carry out the installation of façade elements for the commercial and residential towers of “the Arch on Collins” for the price of $14.5 million. Façade performed works under the contract from September 2018 until the contract was terminated in November 2019.

On 30 September 2019, Façade provided a payment claim for $4,584,820.68 (inclusive of GST). Yuanda failed to provide a payment schedule within 10 business days of receiving the payment claim and only part-paid $1,115,455 (inclusive of GST) of the payment claim on 2 October 2019.

Yuanda’s reasons for not paying the full amount:

The Payment Claim “did not sufficiently identify the construction work or related goods and services” to which the progress payments related to; and
The Payment Claim “included excluded amounts”.

Judgment

The Court was highly critical of the delays and substantial costs of the procedure being contrary to the purpose of the SOPA scheme. SOPA aims to provide a quick and cost effective manner for contractors and subcontractors to get paid. Complex legal arguments can be raised in subsequent litigation but the contractors and subbies need to be paid first!

Takeaway Points

1. The Victorian Courts confirmed that the purpose of SOPA is to allow contractors to exercise their legal rights in a summary, expedient and cost-effective manner.

2. The contents of your Payment Claim is extremely important when trying to recover successfully under SOPA.

What we can do for you

Using our industry experience and specialist legal knowledge, we help you draft a Payment Claim to optimise your success in recovery using SOPA.