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MTECC News 21.02 ||| Excluded amounts and summary judgment – making sure your payment claim is valid following Yuanda Vic Pty Ltd v Façade Designs International Pty Ltd [2021] VSCA 44

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The proceeding concerned an appeal from an application pursuant to s 16(4) of the Building and Construction Industry Security of Payment Act 2002 (Vic) (Act) for an order that the Defendant pay a debt arising from its failure to satisfy or otherwise issue payment schedules in respect of a purported payment claim.

The payment claim in question included excluded amounts within the meaning of the Act at s 10B. Prior to this decision, it was open to a court to utilise the common law doctrine of severance to sever from a payment claim any part of the claim that offended the Act, and making orders pursuant to s 16(4) of the Act on the balance of the claim.

McLeish and Niall JAA in a joint judgment and constituting the majority of the Victorian Court of Appeal, engaged in an exercise of statutory interpretation that looked to the power bestowed on the court in s 16(4), and how the power is to be exercised. In particular, the majority noted that the amount to be ordered was the ‘claimed amount’ which is a defined concept in s 4 of the Act. That definition refers in turn to s 14. Section 14(3) states that the claimed amount must not include an excluded amount, which is in turn, defined in s 10B of the Act.

The majority concluded that a court exercising the power conferred in s 16(4) could only make orders on the ‘claimed amount’ as defined in s 4, and to give meaning to the legislative text in that definition, the doctrine of severance was not available to cure an otherwise defective payment claim. Should a payment claim include an ‘excluded amount’, the court must not make an order pursuant to s 16(4) of the Act.

This was then contrasted to the statutory alternative available in circumstances where a respondent failed to make a payment schedule within the meaning of the Act, being to apply for adjudication. An adjudicator was not so limited in the use of the doctrine of severance and was obliged to determine an ‘adjudicated amount’ which required the assessment of the payment claim and ensuring that the ‘adjudicated amount’ does not include an ‘excluded amount’. The court discussed the distinction between ss 16(4) and 23(2A) of the Act on point.

Sifris JA in dissent observed that while he agreed with the majority that the doctrine of severance likely had no place in the application of section 16(4) of the Act, “[the] notion of a fixed judgment debt with no leeway or ability to adjust the debt in obvious and uncontested circumstances is contrary to the aim and purpose of the Act.” The uncontested circumstances his Honour referred to were that where the parties agreed that the payment claim included an ‘excluded amount’.

It is reasonable to expect that as a consequence of this authority, there will be a greater exercise of claimants’ power to apply for adjudication notwithstanding the absence of a payment schedule from any respondent.

Andrew Blair

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