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[2021] VSC 625
respondent. The Head Contractor's originating motion was dismissed. The Court found that the adjudicator did not err in characterising the September 2020 Claim as a claim for work done. The parties were to be...
Goldwind deducted an amount from an earlier payment for delay associated with moving a crane. ALE Heavylift later claimed payment for September work that remained unpaid. Goldwind argued that because ALE had not challenged the original deduction, the later claim was really an attempt to recover that excluded deduction. The Court rejected that characterisation. It treated the claim as one for work done and unpaid, and held that the adjudicator had not erred by considering it. Goldwind's application to set aside the determination was dismissed.
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2,316 words · generated 29/09/2026
Goldwind Australia Pty Ltd was the Head Contractor for the Stockyard Hill Wind Farm project. It engaged ALE Heavylift (Australia) Pty Ltd under a lifting contract dated 7 January 2020. ALE Heavylift was to use two specialised Kroll Cranes to erect wind turbine generators. The contract value was $11.2 million, plus $1.3 million for mobilisation, exclusive of GST [11].
2 cited instruments linked from this judgment.
The payment structure included a productivity adjustment linked to ALE Heavylift's rate of progress [12]-[13]. In May 2020, additional turbines were added to the work scope in the northern part of the site. The cranes were then in the southern part, about 40 kilometres away. The first crane took 18 days to relocate and the second took 40 days [14]-[16].
In September 2020, ALE Heavylift claimed $1,467,312.03 for work under the contract. Goldwind scheduled a lower amount and deducted $484,100.92, described as a Delay Deduction. Goldwind said that a 40-day relocation of the second crane was excessive and that 25 days was a more appropriate allowance [17]-[21]. The parties agreed the deduction was either a time-related cost or damages for breach of contract [21]. Both categories are addressed as excluded amounts by s 10B(2) of the Building and Construction Industry Security of Payment Act 2002 (Vic) (SOP Act) [49].
ALE Heavylift did not pursue an adjudication of the first deduction at that time. It later included the unpaid amount in subsequent payment claims. In Payment Claim 13 (PC-13), issued on 18 February 2021, it again claimed $552,450.92, including $484,100.92 for September 2020 work [22]-[27]. Goldwind again applied the deduction in its payment schedule [26].
The adjudicator determined that $1,094,545.40, inclusive of GST, was payable under PC-13, including the disputed September 2020 amount. The corrected determination was issued on 21 April 2021 [33]-[35]. The adjudicator treated Goldwind's Delay Deduction as an excluded amount, but regarded ALE Heavylift's claim as one for work done [35]-[36].
Goldwind applied to the Supreme Court of Victoria to quash or declare void the determination. Its central argument was that ALE Heavylift's failure to challenge the original deduction changed the character of the later claim: Goldwind said it was then an attempt to recoup a previously deducted excluded amount [3]-[5], [37]. Stynes J rejected that argument and dismissed the originating motion [90]-[91].
The Court focused on the distinction between the character of ALE Heavylift's claim and the character of Goldwind's deduction. The September 2020 Claim related to lifting work that had been performed and for which payment remained outstanding. The deduction was Goldwind's asserted answer to that claim. The fact that the same amount had earlier appeared as a deduction did not, without more, turn the claim for work into a claim for damages or delay costs [86].
The statutory setting mattered. The stated purpose of the SOP Act is to provide for progress-payment entitlements for people carrying out construction work or supplying related goods and services [39]-[41]. The Act does not displace other contractual entitlements or remedies [42]. The Court also noted that statutory and contractual payment regimes can have different rules about what is claimable and what can be deducted [43].
Sections 9 and 14(9) were important to the Court's reasoning. Section 9 ties entitlement to a progress payment to a reference date and permits a claim for work done up to that date, whether performed before or since the preceding reference date [44]. Section 14(9) preserves a claimant's ability to include an amount from a previous payment claim if it has not been paid [47]. The Court also observed that adjudication of a dispute about a particular payment claim is optional [84(a)].
Together, these provisions did not support Goldwind's suggested rule that an unchallenged payment schedule establishes a new baseline that changes the character of a later claim. Stynes J said there was no provision preventing a claimant from later seeking recovery of a progress payment because it had not adjudicated an earlier dispute [83]. The suggested rule would conflict with the statutory provisions and the Act's purpose of enabling recovery for construction work [85].
The Court considered Seabay Properties Pty Ltd v Galvin Constructions Pty Ltd [2011] VSC 183. In that case, the Court had held that excluded amounts could apply to deductions raised by a respondent, not only to amounts claimed by the claimant, having regard to the Act's purpose and the need for speedy adjudication [58]-[61]. In Goldwind, the parties accepted that the Delay Deduction was an excluded amount, and that it could not be taken into account if the September 2020 Claim was properly characterised as a claim for work done [88]. Seabay therefore supported the treatment of the deduction as excluded; it did not resolve whether ALE Heavylift's later claim was itself a recoupment claim.
Goldwind also relied on Shape Australia Pty Ltd v The Nuance Group (Australia) Pty Ltd [2018] VSC 808. There, the later payment claim included items previously claimed, and the relevant analysis treated the claim as one to recoup liquidated damages. The reasoning depended on the circumstances described by Digby J, including that other components of the adjusted contract sum had already been determined or paid and that no new work had been performed [63]-[71]. Stynes J described the relevant Shape reasoning as obiter and declined to apply it [79]. The key factual difference was that ALE Heavylift's claim remained a claim for work done that had not been paid.
The Court considered that the adjudicator's task, in these circumstances, was to determine the value of the work and what remained unpaid [81]. That did not require determining whether Goldwind had a substantive contractual entitlement to the Delay Deduction. The deduction could not be used to alter the character of the work claim.
The judgment applies the SOP Act as it stood in Victoria in 2021. It describes the Act as establishing a statutory entitlement to progress payments and a procedure for speedy determination of disputed claims [39]-[41]. It also explains that the statutory regime operates alongside contractual rights and remedies, rather than replacing them [42]-[43].
Before this decision, the authorities discussed in the reasons addressed two related points. Seabay held that an excluded amount could be raised by a respondent as a deduction in response to a payment claim, not just claimed by the claimant [58]-[61]. Shape addressed a later claim characterised on its facts as an attempt to recoup liquidated damages previously deducted. The judgment recounts that Shape's treatment of this issue was not necessary to its disposition and was obiter [67]-[71].
Goldwind clarifies the distinction between those situations. An excluded deduction does not necessarily make a later claim for a corresponding amount an excluded recoupment claim. The Court treated the nature of the underlying claim as decisive: here, the claim related to identified construction work that remained unpaid. It rejected the proposition that merely failing to adjudicate an earlier deduction permanently changed that claim's character [75]-[86].
The judgment does not purport to establish that every repeated claim following an earlier deduction is a claim for work done. Its reasoning turns on the factual characterisation that the September 2020 amount was for work actually performed and still unpaid. Shape remained relevant where a later claim is, in substance, a recoupment claim rather than a claim for unpaid work. The Court's decision is therefore best read as a fact-sensitive clarification, not as removing the s 10B exclusion or resolving every situation involving repeated payment claims.
The judgment also leaves the parties' underlying contractual dispute about the deduction unresolved. It accepted that the Delay Deduction was excluded for the adjudication analysis, but did not determine whether Goldwind had a contractual right to make it. The Court briefly questioned whether the deduction had any relevance to valuation under the SOP Act, but did not decide the point because it had not been addressed in submissions [89].
At [79], Stynes J said: “I am not bound by the obiter in Shape and I do not propose to apply it.” In plain English, the Court did not treat the relevant part of Shape as binding authority. It also did not extend that reasoning to circumstances involving a claim for identified work that remained unpaid.
At [81], the Court said the Subcontractor's later claim did not raise the complexity that s 10B was intended to avoid: “The Adjudicator was only required to determine the value of the work done and what remained unpaid.” In practical terms, the adjudication question as framed by the Court was a valuation and non-payment question, not an inquiry into liability for delay damages.
At [83], the Court stated: “There are no provisions in the SOP Act that preclude a claimant from seeking to recover a progress payment because of a failure to adjudicate a payment dispute arising in relation to an earlier payment claim.” This explains why the earlier decision not to adjudicate did not, by itself, prevent ALE Heavylift from claiming the outstanding amount later.
At [85], the Court rejected the suggested “baseline” effect of a payment schedule that had not been challenged. The Court considered that automatically recharacterising a later claim as recoupment would be inconsistent with the statutory provisions allowing claims for work and unpaid amounts.
At [86], the Court gave its central characterisation: “Properly understood, the September 2020 Claim is a claim for work done which remains unpaid. Against that claim the Head Contractor asserts an entitlement to the Delay Deduction.” In plain English, the claim and the deduction were separate things. The claim was for the work; Goldwind's deduction was an asserted response to it.
At [90], the Court concluded that the adjudicator did not err in characterising the September 2020 Claim as a claim for work done. That finding led to dismissal of Goldwind's originating motion [91].
The decision is most directly relevant where a contractor has performed identifiable construction work, claimed payment for it, and the amount remains unpaid after a deduction appears in a payment schedule. It is particularly relevant where the claimant later includes that unpaid amount in a further payment claim and the respondent argues that the claimant is trying to recoup an excluded amount because it did not challenge the earlier deduction.
The judgment supports distinguishing a claim for unpaid work from a claim whose substance is to recover amounts previously deducted as damages or time-related costs. The relevant question is not merely whether the later claim equals or resembles the amount of an earlier deduction. In Goldwind, the Court focused on what the later claim was actually for: September lifting work performed under the contract [25], [81], [86].
The decision is not a general ruling that all repeated amounts can be included in later payment claims, nor that all claims following an unchallenged deduction must be treated as claims for work. The judgment's contrast with Shape indicates that a claim may be characterised as recoupment where the evidence and reconciliation show that it is, in substance, seeking reimbursement of liquidated damages previously deducted, particularly where no new work has been performed and the underlying work amounts have already been paid or determined [69]-[71].
Relevant factual questions under the Court's reasoning include what work the later claim identifies, whether that work was previously performed, whether it remains unpaid, how earlier payment claims and schedules treated it, and whether the later claim can be explained as payment for work or only as recovery of a prior deduction. The judgment does not prescribe a comprehensive test, so those matters should be understood as issues suggested by its fact-sensitive comparison of the claims before it and in Shape.
The supplied judgment is dated 28 September 2021 and contains no account of later judicial treatment of Goldwind. On the material provided, it is not possible to state whether later courts have followed, distinguished, applied, or otherwise treated this decision.
Within Goldwind itself, the Court applied Seabay to the agreed character of the Delay Deduction as an excluded amount [88]. It distinguished the relevant reasoning in Shape because ALE Heavylift's claim was for work done that remained unpaid, rather than a claim to recoup liquidated damages [79]-[86]. Those are the relationships established by this judgment, not evidence of subsequent treatment.
The Court did not determine whether Goldwind had a valid contractual basis for the Delay Deduction. The judgment records competing positions on that matter but resolves the case by deciding that the September 2020 Claim was for work done and that the deduction was excluded from the adjudicator's calculation [5], [21], [86], [88].
The Court also did not decide its question at [89] about whether a deduction of this type has any relevance to the adjudicator's task of valuing construction work. Stynes J expressly left that issue alone because submissions had not identified or addressed it.
The judgment does not define the boundary between a claim for unpaid work and a claim to recoup a prior excluded amount for all circumstances. Its comparison with Shape indicates that the answer depends on the substance of the later claim and the payment history. Situations involving mixed claims, disputed work valuation, contractual adjustment mechanisms, or amounts that cannot be tied to identifiable unpaid work are not resolved in the supplied reasons.
Finally, the judgment does not decide the broader operation of s 10B in every type of payment dispute. It proceeded on the parties' agreement that the Delay Deduction was excluded and applied Seabay on that point [88]. Its core decision concerns whether the Subcontractor's claim itself became an excluded recoupment claim by reason of not challenging an earlier deduction.
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ADMINISTRATIVE LAW - Judicial review - Adjudication conducted under Part 3 Division 2 of the Act - Certiorari sought in relation to an adjudication determination - Whether payment claim, properly characterised, is for construction work done or is an attempt to recoup previously deducted liquidated damages - Building and Construction Industry Security of Payment Act 2002 (Vic) ss 1, 3, 9, 10B, 14 and 23, applied - Seabay Properties Pty Ltd v Galvin Constructions Pty Ltd [2011] VSC 183, applied - Shape Australia Pty Ltd v Nuance Group (Aust) Pty Ltd [2018] VSC 808, distinguished_._
1 The plaintiff (the Head Contractor) seeks to have the adjudication determination made by the second defendant (the Adjudicator) on 13 April 2021, corrected on 21 April 2021 (Adjudication Determination), quashed or otherwise declared void. The Adjudication Determination was delivered under the Building and Construction Industry Security of Payment Act 2002 (Vic) (SOP Act).
2 The issue for determination is whether the Adjudicator erred by taking into account an excluded amount (as defined in s 10B of the SOP Act).
3 Both parties submitted that the resolution of this proceeding depends on the answer to this question - does the fact that:
(a) the Head Contractor purported to make a deduction in a payment schedule, which was not the subject of an adjudication; and
(b) the first defendant (the Subcontractor), by a later payment claim, made a claim for work done ignoring the earlier deduction,
convert the Subcontractor's claim from one for construction work done to a claim to recoup the deduction?
4 The Head Contractor contends that as the Subcontractor failed to challenge the earlier deduction, the subsequent payment claim including that amount must be considered an attempt to recoup the earlier deduction and should not have been taken into account by the Adjudicator.
5 The Subcontractor contends that the earlier deduction was unlawful and/or lacked a contractual basis and therefore was of no effect. As a consequence, the Subcontractor's claim should be characterised as one for construction work done that has not been paid for.
6 For the reasons that follow I have determined that the Adjudicator did not err by characterising the Subcontractor's claim for $484,100.92 (exclusive of GST), included in PC-13, as a claim for work done and consequently taking it into account in determining the adjudication application.
7 The Head Contractor is a wind turbine technology provider, wind farm contractor and operator.
8 The Subcontractor is a heavy lift and transport contractor.
9 The project is known as the Stockyard Hill Wind Farm (the Project) and is located in Stockyard Hill, Victoria.
10 It involves the construction of 149 wind turbine generators (WTGs), four internal 33-132kV substations, 75km of overhead electricity transmission line as well as all associated infrastructure.
11 On 7 January 2020, the Head Contractor engaged the Subcontractor under a subcontract (the Lifting Contract) to use two specialised cranes (Kroll Cranes) to erect the WTGs. The value of the Lifting Contract was $11,200,000 plus a further $1,300,000 for mobilisation (exclusive of GST).
12 Clause 23.2(1)(b) of the Lifting Contract provided that the Head Contractor would pay the contract price in accordance with schedule 3. Schedule 3 set out a productivity adjustment formula that adjusted the monthly payments due to the Subcontractor according to the Subcontractor's rate of progress in executing the Lifting Contract.
13 If the Subcontractor lifted one or more WTGs per week it would receive a payment greater than its monthly costs, whereas if it lifted less than one WTG per week its monthly payment would be less than its monthly costs.
14 On around 4 May 2020, the Head Contractor added new WTGs to be lifted into the scope of works under the Lifting Contract. Those WTGs were located in the northern part of the Project site. At the time the additional WTGs were added to the scope of works, the two Kroll Cranes operated by the Subcontractor were located in the southern part of the site. Therefore the Subcontractor needed to move the two Kroll Cranes from the south of the site to the north of the site to begin lifting the added WTGs. The distance between the southern and the northern parts of the site is approximately 40km.
15 The first Kroll Crane was moved by the Subcontractor from the south to the north of the site in 18 days.
16 The movement of the second Kroll Crane took 40 days.
17 The Subcontractor delivered Payment Claim 11 (PC-11) to the Head Contractor in September 2020. By PC-11, the Subcontractor claimed, amongst other things, $1,467,312.03 under the Lifting Contract for work performed in September 2020.
18 PC-11 was not endorsed as a payment claim for the purpose of the SOP Act.
19 In response to PC-11, the Head Contractor provided Payment Schedule 11 (PS-11) on 14 October 2020. In relation to the claim of $1,467,312.03 the Head Contractor approved only $914,861.11. It deducted $552,450.92 comprising:
(a) a deduction of $68,350, which is not relevant to this proceeding; and
(b) a deduction of $484,100.92 (exclusive of GST) (Delay Deduction), which is the subject of this proceeding.
20 In relation to the Delay Deduction the Head Contractor stated in PS-11 that:
The original 40 day relocation of Kroll 2 at the time was excessive and a compromise of 25 days is more inline [sic] with site movements, hence the 15 days deduction from the PA (40-15=25) ($484,100.92).
21 The parties agree that the Delay Deduction is either a time-related cost or a claim for damages for breach of contract.
22 On 29 October 2020, the Subcontractor delivered to the Head Contractor, Payment Claim 12 (PC-12). By PC-12, the Subcontractor ignored the Delay Deduction levied in PS-11 and claimed, in relation to works done under the Lifting Agreement in September 2020, the sum of $552,450.92. That sum is equal to the sum the Head Contractor purported to deduct in the previous accounting period.
23 PC-12 stated that it was a payment claim made under the SOP Act.
24 The Head Contractor responded to PC-12 with Payment Schedule 12 (PS-12) on 12 November 2020. Amongst other things, the Head Contractor again applied the Delay Deduction against the sum claimed in PC-12 for works done in September 2020.
25 On 18 February 2021, the Subcontractor issued Payment Claim 13 (PC-13). By PC-13, the Subcontractor again:
(b) claimed the sum of $552,450.92, which had not been paid by the Head Contractor. That claim included a claim of $484,100.92 in relation to the works done under the Lifting Agreement in September 2020 which is the subject of this proceeding (the September 2020 Claim).
26 On 3 March 2021, the Head Contractor issued Payment Schedule 13 (PS-13) responding to PC-13. The Head Contractor again applied the Delay Deduction.
27 The Subcontractor referred PC-13 to adjudication.
28 On 18 March 2021, the Subcontractor issued an adjudication application in which it claimed $1,701,753.23 (inclusive of GST), which included the September 2020 Claim.
29 On 25 March 2021, the Head Contractor issued its adjudication response.
30 Further submissions were made by the parties as follows:
31 In its submissions to the Adjudicator, the Subcontractor:
amounts improperly deducted by [the Head Contractor] from earlier claims (i.e. the balance of the claims made between February and September 2020)
(b) submitted that the Delay Deduction in PS-13 responding to PC-13 was an excluded amount and should not be taken into account by the Adjudicator in determining the adjudication application.[3] It relied on the decision of Vickery J in Seabay Properties Pty Ltd v Galvin Construction Pty Ltd.[4] This case is addressed further below.
32 In its submissions to the Adjudicator, the Head Contractor noted that it first applied the Delay Deduction in response to PC-11. It submitted that a claim which attempts to recoup an excluded amount that had been previously deducted was itself an excluded amount which the Adjudicator ought not to take into account. It relied on the dicta of Digby J in Shape Australia Pty Ltd v The Nuance Group (Australia) Pty Ltd.[5] This case is addressed further below.
33 On 13 April 2021, the Adjudicator issued his initial adjudication determination. The Adjudicator determined the amount payable to the Subcontractor under PC-13 was $1,094,545.40 (inclusive of GST), which included the sum of $484,100.92 in respect of the September 2020 Claim.
34 On 21 April 2021, the Adjudicator issued a corrected determination, correcting an arithmetical error of approximately $2,636 in his original determination. The parties agree the corrected determination is the appropriate document to refer to and it is accepted that the arithmetical error does not affect the matter in issue in this proceeding.
35 In relation to the Delay Deduction, the Adjudicator first determined that it was an excluded amount under s 10B of the SOP Act.[6] This finding is not disputed by either party.
36 The Adjudicator then considered whether the September 2020 Claim was for work done under the Lifting Contract in the sum of $484,100.92 or was a claim to recoup the Delay Deduction. He concluded it was a claim for work done.
(a) conceded that the Delay Deduction, which was deducted from PC-11, PC-12 and again from PC-13 was an excluded amount;
(b) submitted that on a proper reconciliation, the September 2020 Claim is a claim to recoup the Delay Deduction and is therefore an excluded amount; and
(c) submitted that the Adjudicator erred in taking that excluded amount into account.
(a) properly characterised the September 2020 Claim in PC-13 was for lifting works performed in the month of September 2020 of which $553,450.92 had been previously claimed but not paid;
(b) by reason of s 14(9) of the SOP Act, the Subcontractor is not prevented from including in a payment claim an amount that has been the subject of a previous claim if the amount has not been paid;
(c) in the absence of an adjudication or an adjustment to the contract price by reason of a contractual procedure, there is nothing to prevent the first defendant from seeking payment of the full sum outstanding in a fresh payment claim;[7] and
(d) the circumstances of the Delay Deduction do not convert the September 2020 Claim into a claim for an excluded amount because the Delay Deduction was unlawful under the SOP Act or had no contractual force and was therefore ineffective. As a consequence, there was nothing to reverse or recoup.[8]
39 Section 1 of the SOP Act sets out its main purpose being to provide for entitlements to progress payments for persons who carry out construction work or who supply related goods and services under construction contracts.
40 Section 3 sets out the object of the SOP Act which is to ensure that any person who undertakes to carry out construction work or who undertakes to supply related goods and services under a construction contract is entitled to receive, and is able to recover, progress payments in relation to the carrying out of that work and the supplying of those goods and services.
(a) the granting of a statutory entitlement to that payment under the SOP Act; and
(b) the establishment of a procedure for the speedy determination of any disputed claim by an adjudicator.
42 However, the SOP Act is not intended to limit:[10]
(a) any other entitlement that a claimant may have under a construction contract; or
(b) any other remedy that a claimant may have for recovering that other entitlement.
43 Consequently, there are two regimes for the making of payment claims for progress payments: one under the relevant construction contract and the other under the SOP Act. Different rules may apply under each regime as to what is claimable and what may be deducted.[11]
44 Section 9 of the SOP Act sets out the entitlement to progress payments. The entitlement to a progress payment is to be calculated by reference to a reference date, which is defined in s 9(2). The entitlement extends to a progress payment for work done up to and including the relevant reference date whether or not it had been performed since the preceding reference date or prior to it.[12]
45 Section 14 of the SOP Act sets out the requirements with respect to payment claims. Section 14(3)(b) provides that a claimed amount must not include any excluded amount.
46 The rationale for excluding claims, defined as 'excluded amounts', is that they are often complex and time consuming disputes and have the potential to hinder the objective of the SOP Act for the speedy interim resolution of payment disputes.[13]
47 Section 14(8) of the SOP Act provides that a 'claimant cannot serve more than one payment claim in respect of each reference date under the construction contract'. However, s 14(9) preserves the entitlement of a claimant to include in a payment claim an amount that has been the subject of a previous payment claim if the amount has not yet been paid.
48 Section 23 of the SOP Act requires the appointed adjudicator to determine the amount of the progress payment, after considering the matters referred to in that section. In relation to excluded amounts it states:
(2A) In determining an adjudication application, the adjudicator must not take into account -
(a) any part of the claimed amount that is an excluded amount; or
...
(2B) An adjudicator's determination is void -
...
(b) if it takes into account any amount or matter referred to in subsection (2A), to the extent that the determination is based on that amount or matter.
49 Section 10B of the SOP Act defines 'excluded amounts' as follows:
(1) This section sets out the classes of amounts (excluded amounts) that must not be taken into account in calculating the amount of a progress payment to which a person is entitled under a construction contract.
(2) The excluded amounts are -
(a) any amount that relates to a variation of the construction contract that is not a claimable variation;
(b) any amount (other than a claimable variation) claimed under the construction contract for compensation due to the happening of an event including any amount relating to -
(i) latent conditions; and
(ii) time-related costs; and
(iii) changes in regulatory requirements;
(c) any amount claimed for damages for breach of the construction contract or for any other claim for damages arising under or in connection with the contract;
50 The two authorities addressed by the parties in some detail were the decisions of Seabay and Shape.
51 The issue that arose for determination by Vickery J in Seabay, relevant to the determination of this case, was whether liquidated damages claimed by a respondent was an excluded amount for the purpose of s 10B of the SOP Act.
52 A payment claim (PC-28) was made under the relevant contract and also concurrently and separately under the SOP Act. The claimant did not make any claim for delay costs under the SOP Act, although it did in its payment claim under the contract.
53 The superintendent assessed PC-28 and provided its payment certificate. The assessment included a deduction for liquidated damages in the sum of $540,150. The claimant did not serve any notice of dispute under the contract challenging the superintendent's certification of the liquidated damages as due and owing.
54 In responding to PC-28 served under the SOP Act, the principal did not rely on the superintendent's assessment. Instead it provided a payment schedule which contained significant differences including a deduction for liquidated damages of $770,250.
55 The claimant commenced an adjudication challenging the deduction of liquidated damages.
56 The central substantive question put to the adjudicator, as formulated by the parties, was whether the principal's claim for liquidated damages should have been excluded from the calculation as to what was due and payable to the claimant under PC-28.
57 The adjudicator found that the deduction for liquidated damages was an excluded amount.
58 Vickery J agreed with the adjudicator. His Honour found that the amount sought to be deducted fell squarely within the concept of an excluded amount. He did accept that a number of provisions of the SOP Act pointed in favour of the principal's contention that the excluded amounts referred to in s 10B(2) applied only to amounts claimed by the claimant and not to any amount claimed by the respondent. However his Honour noted that s 10B(2) must also be considered in the context of the overall purpose of the SOP Act and the manner in which that purpose is put into effect by the legislative machinery.[14]
59 In that regard his Honour noted the intention of the SOP Act that an adjudicator determine adjudication applications as expeditiously as possible and observed that classes of claims falling within 'excluded amounts' regularly arise in construction disputes and are often attended with considerable complexity and thereby defeat the prospect of a speedy resolution.[15]
60 His Honour also observed that if excluded amounts were only to apply to claims made by the claimant and not to any set-off or counterclaim raised by the respondent to a payment claim, then the operation of the SOP Act in a number of cases could be seriously compromised.[16]
61 For these reasons Vickery J held that, on the proper construction of s 10B of the SOP Act, excluded amounts applies not only to the statutory payment claim served by the claimant but also to amounts claimed by the respondent.[17]
62 The Subcontractor submitted that the facts in Seabay are analogous to the facts in this case. Specifically, the Subcontractor submitted that having regard to PC-13 and the responding payment schedule, it is apparent that the Head Contractor is purporting to deduct an excluded amount.
63 In Shape, a payment claim (PC-13) had been the subject of an adjudication determination which was later quashed by Digby J on the basis that the adjudicator failed to perform his basic and essential function as required under the SOP Act.
64 The next payment claim (PC-14) was then served by Shape on Nuance and included items that had previously been claimed in PC-13.
65 PC-14 became subject of an adjudication. The adjudicator determined that he did not have jurisdiction to hear the application and in any event determined that a nil amount was payable by Nuance to Shape. The matter came back before Digby J.
66 An issue that arose for consideration by the Court was whether a claim for reimbursement of liquidated damages in PC-14 was an excluded amount and therefore should not be taken into account by an adjudicator. By way of background, Nuance had levied liquidated damages over time and deducted them from sums otherwise due to Shape. Until PC-14, Shape had not pursued any adjudication process or otherwise sought to challenge the deduction of liquidated damages. It is not possible to discern from the decision itself the existence of, or Nuance's compliance with, a contractual basis for its asserted deductions of liquidated damages.
67 Having determined the application on other grounds, it was not necessary for Digby J to go on to consider this issue. Nevertheless, his Honour addressed it because of its potential relevance to Shape's claim for remitter and the exercise of his discretion on those applications.
68 Digby J addressed this issue in two stages. First, he considered whether the claim was properly characterised as a claim to recoup liquidated damages.[18] He then considered whether a claim to recoup liquidated damages is excluded under s 10B(2) of the SOP Act.
69 It was critical to his Honour's reasoning that the claim was characterised as a claim to recoup liquidated damages. Relevant to this characterisation were the undisputed facts that:
(a) liquidated damages had been levied over the course of the construction project; and
(b) other claims comprising the adjusted contract sum on PC-14 had been determined or paid through earlier payment claims.
70 Further, Digby J observed that when the individual items of work in PC-14 were adjusted and reconciled, PC-14 equated to the amount of the asserted entitlement to liquidated damages and could be explained on no other basis given no new work had been performed. His Honour determined that the PC-14 claims were in substance in the nature of a claim to recoup Nuance's asserted entitlement to liquidated damages.
71 Having made that determination, his Honour held that the adjudicator was correct to find that:
(a) Seabay supported his conclusion that claims to recoup liquidated damages that had been earlier levied were to be excluded;[19] and
(b) the language of sub-ss 10B(1) and (2) of the SOP Act is broad enough to support that conclusion.[20]
72 The Head Contractor relies on Shape in support of its case.
73 The Subcontractor, by its counsel, expressly reserved its position as to whether or not the reasoning in Shape was correct and did not go on to identify any error in the reasoning.
74 Instead, the Subcontractor sought to distinguish the decision in Shape. The points of distinction raised are not relevant to my consideration of this matter and therefore I have not addressed them further.
75 It falls to me to determine whether or not the Adjudicator erred by characterising the September 2020 Claim as a claim for work done and consequently taking it into account in determining the adjudication application.
76 More specifically, I am required to determine whether the fact that the Subcontractor failed to challenge the Delay Deduction when it was first applied had the effect of changing the character of the September 2020 Claim from a claim for work done to a claim to recoup the Delay Deduction.
77 The Head Contractor relies on the obiter of Digby J in Shape to submit that a claimant is not permitted to recoup an excluded amount that had been deducted in a prior payment schedule.
78 The practical effect of the Head Contractor's submission and reliance on Shape is that if a claimant fails to challenge an excluded amount in a payment schedule, it will not be able to recoup that amount in a subsequent payment claim. To put it another way, and as submitted by the Head Contractor, if a claimant does not refer the dispute about a deduction to adjudication, then the payment schedule creates a baseline against which the next payment claim will be assessed.
79 I am not bound by the obiter in Shape and I do not propose to apply it. In my view, the application of it to the facts of this case would operate to preclude the Subcontractor from recovering progress payments in relation to work performed in a manner contrary to the text and purpose of the legislation.
80 The obiter in Shape was reasoned on the basis that determining whether a party is entitled to liquidated damages or, juxtaposed to such an entitlement, whether a party is entitled to damages in relation to events causing compensable delay and time related costs, is a complex, time-consuming exercise that is inconsistent with the application of the SOP Act.
81 However, I find that in the circumstances of this case, the Subcontractor's decision to issue a subsequent payment claim for unpaid work previously done does not attract these concerns. In other words, the mischief sought to be addressed by s 10B of the SOP Act does not arise in relation to the September 2020 Claim. The Adjudicator was only required to determine the value of the work done and what remained unpaid.
82 As set out above, the primary purpose of the SOP Act is to ensure that any person who carries out construction work or provides related goods or services is able to promptly recover progress payments.
83 There are no provisions in the SOP Act that preclude a claimant from seeking to recover a progress payment because of a failure to adjudicate a payment dispute arising in relation to an earlier payment claim.
(a) the decision to adjudicate a dispute arising in relation to a particular payment claim is optional;
(b) s 9 permits a claimant to claim for all work done up to and including the relevant reference date regardless of whether or not the work had been performed since the preceding reference date or prior to it; and
(c) s 14(9) preserves a claimant's entitlement to include in a payment claim an amount that has been the subject of a previous claim if the amount has not been paid.
85 The suggestion that if the claimant fails to adjudicate a dispute about a payment claim:
(a) the disputed payment schedule will operate to shift the baseline against which subsequent payment claims are to be assessed; and
(b) therefore the claimant's subsequent claim for work done will be re-characterised as a claim to recoup the unchallenged deductions,
is entirely inconsistent with these provisions and the purpose of the legislation to ensure that persons who carry out construction work are entitled to receive progress payments in relation to it.
86 For the reasons set out above, I reject the submission that the September 2020 Claim is a claim to recoup the Delay Deduction. Properly understood, the September 2020 Claim is a claim for work done which remains unpaid. Against that claim the Head Contractor asserts an entitlement to the Delay Deduction.
87 The issue remains whether the Delay Deduction should be taken into account for the purpose of determining the amount of the progress payment to be paid under PC-13.
(a) applying Seabay, the Delay Deduction was an excluded amount; and
(b) if the September 2020 Claim is to be characterised as a claim for work done, the Delay Deduction should not be taken into account.
89 In any event, and putting to one side the decision of Seabay, I query whether the Delay Deduction has any relevance to the Adjudicator's task of determining the amount and timing of a progress payment because the SOP Act does not provide for deductions of that type to be accounted for in the valuation of the construction work carried out. However, as this matter was not identified or addressed in the submissions, I do not propose to take it further.
H.1 Did the Adjudicator err in taking the September 2020 Claim into account?
90 For the reasons set out above, I find that the Adjudicator did not err in characterising the September 2020 Claim in PC-13 as a claim for work done.
91 Accordingly, I order that the Head Contractor's Originating Motion be dismissed.
I will hear the parties in relation to the form of order and costs.
[1] First Defendant's Adjudication Application dated 18 March 2021 at 177 of the Court Book.
[4] [2011] VSC 183, [113] (Vickery J) (Seabay).
[5] [2018] VSC 808 (Digby J) (Shape).
[6] Corrected Adjudication Determination dated 21 April 2021 at 732 of the Court Book.
[7] Building and Construction Industry Security of Payment Act 2002 (Vic) s 14(9); Transcript of Proceedings, Goldwind Australia Pty Ltd v ALE Heavylift (Australia) Pty Ltd (Supreme Court of Victoria, Stynes J, 11 August 2021) 81.3-21 (Transcript).
[8] Transcript (n 7) 53-4, 74.28, 77-8, 81; Chris Young QC and William Stephenson, 'First Defendant's Outline of Submission', Submission in Goldwind Australia Pty Ltd v ALE Heavylift (Australia) Pty Ltd, S ECI 2021 01423, 13 July 2021, 5 [17].
[12] Ian Street Developer Pty Ltd v Arrow International Pty Ltd (2018) 54 VR 721, 752 [111]-[112] (Riordan J), quoting Commercial Industrial Construction Group Pty Ltd v King Construction Group Pty Ltd [2015] VSC 426, [101]-[102] (Vickery J).
Goldwind Australia Pty Ltd
ALE Heavylift
(2018) 54 VR 721
The Head Contractor's originating motion was dismissed. The Court found that the adjudicator did not err in characterising the September 2020 Claim as a claim for work done. The parties were to be heard on the form of order and costs.