Excluded amounts and payment claims under the Security of Payment Act (VIC)

CASE STUDY – Yuanda Vic Pty Ltd v Façade Designs International Pty Ltd [2021] VSCA 41

Facts of the Case

Facade Designs agreed to install façade elements manufactured and supplied by Yuanda as part of the construction of commercial and residential towers at 447 Collins Street known as ‘the Arch on Collins’ for the price of $14.5 million.
On 30 September 2019, Facade Designs served a payment claim under the Building and Construction Industry Security of Payment Act 2002 (the Act) for $4,584,820.68 (Payment Claim).  Yuanda paid Facade Designs $1,115,455, reducing the amount claimed to $3,469,365.58. The Payment Claim included an ‘excluded amount’ of $64,154.37 which related to interest.

Yuanda failed to provide a payment schedule to the respondent within 10 business days of receiving the Payment Claim.

Options for enforcing under the Act

As Yuanda failed to issue a payment schedule, Façade Designs could enforce payment via:

• A Summary judgment application under the Act; or
• An Adjudication application under the Act.

Excluded Amounts under the Act

Under the Building and Construction Industry Security of Payment Act 2002 (the Act), the following amounts are generally deemed ‘excluded amounts’:

• Variations that are not claimable variations;
• Amounts relating to latent conditions;
• Amounts relating to time-related costs;
• Amounts for changes in regulatory requirements; and
• Amounts relating to breach of contract (such as interest for late payment)

Judgment from the Supreme Court

The trial judge awarded judgment in favour of Façade Designs against Yuanda in the sum of $3,357,664.67 plus interest.

The judge severed the excluded amount from the Payment Claim and awarded Façade Designs the balance.

Judgment from the Supreme Court of Appeal

Yuanda appealed the decision to the Supreme Court of Appeal.
The majority of the judges held that as the amount claimed in the Payment Claim included an excluded amount, the Court could not enter judgment for any part of the Payment Claim.

Takeaway Points

If there is a variation claimed, make sure that the payment claim states that it is a variation and the documents it refers to suggests that it was (a) directed/requested by the Builder/Respondent and (b) completed;

Make sure that the payment claim does not include any excluded amount (e.g. interest, delay costs for idle time);

Do not reclaim and “roll forward” all variations, only unpaid variations. For example, if variation 1 has been paid, do not reclaim and adjust the payment received to deduct the amount of this variation.

What we can do for you

Using our industry experience and specialist legal knowledge, we can help you correctly prepare payment claims that are compliant with the Act.