Spentek Electrical Pty Ltd v 487 Whitehorse Road Pty Ltd [2025] VCC 399

(a) Payment claim 12, comprising invoice 21130 submitted on 28 March 2023 with a claimed amount of $61,603.71 (PC 12). The defendant paid the sum of $40,000.00 for PC 12 on 12 May 2023, and the plaintiff claims the balance of $21,603.71;

(b) Payment claim 17, comprising invoice 21161 submitted on 8 October 2023 with a claimed amount of $74,255.68 (PC 17). The plaintiff has not received any payment in relation to PC 17; and

(c) Payment claim 18, comprising invoice 21163 submitted on 28 November 2023 with a claimed amount of $20,233.06 (PC 18). The plaintiff's evidence appears to be that has not received any payment in relation to PC 18 (see discussion at paragraph 28 below).

1. The defendant, in written submissions prepared by its counsel, Mr Lithgow[2], has disputed the plaintiff's claim in this proceeding.
2. I have considered the submissions and evidence filed by each party. For the following reasons, the plaintiff's application is allowed in part, but I will require further submissions and calculations before finalising the orders.

1. The principles to be applied in determining proceedings commenced under s 16 of the Act are well established and I will not repeat them here. There was no disagreement between the parties that for the claim to succeed, the plaintiff must demonstrate the matters in s 16(1)(a) and (b) of the Act. In particular, the liability to pay and right to procure judgment is premised upon:

(a) the existence of a construction contract for the progress payment;

(b) the existence of a reference date for the progress payment;

(c) a valid payment claim for the progress payment;

(d) no payment schedule having been given; and

(e) that the respondent has failed to pay the whole or part of the claimed amount.

1. It is also well established that in a proceeding issued under s 16(2) of the Act, a defendant is not entitled to raise any defence in relation to matters arising under the construction contract, by reason of s 16(4)(b)(ii). The available defences must concern either the nature of the underlying contract, or the form and service of the purported payment claim, and thus whether the payment claim is effective to trigger the procedures established by Part 3 of the Act. More particularly, the defences to a payment claim enlivened by the formal requirements of the SOP Act are, in substance, that the payment claim:

(a) does not relate to a "construction contract" (including because it does not involve carrying out "construction work"), or it relates to a construction contract excluded from the operation of the Act under s 7 (for example, a construction contract that forms part of a loan agreement, or one that is a domestic building contract under the Domestic Building Contracts Act 1995);

(b) fails to satisfy the formal requirements of s14(2) of the Act (for example, by failing to identify the construction work, or failing to state that the claim is made under the SOP Act);

(c) was made when no valid reference date existed, including where it is served before an applicable reference date, or relies on a reference date that has already been used up by an earlier payment claim;

(d) includes variations that are "excluded amounts" under s 10B of the Act;

(e) was not validly served on the respondent under either the terms of the contract, or under s 50 of the Act; and

(f) in rare circumstances, where a defendant alleges that they are not party to, or are not liable under the contract.[3]

1. The defendant raised five main issues in response to the plaintiff's claim.
2. First, it disputes the claims for PC 12, PC 17 and PC 18 on the following grounds:

(a) In respect of PC 12, it concedes an amount of $21,603.71 remains outstanding.

(b) In respect of PC 17, the defendant says the claim was submitted out of time on 8 October 2023, that is not being on or before the 28th day of the previous month, and accordingly, no payment is due.

(c) In respect of PC 18, the defendant provided an email response on 28 December 2023 with an attached payment schedule, which states that the plaintiff is entitled to a credit in relation to PC 18 of $13,474.71.

1. Second, the defendant says it has no present obligation to pay any amount on account of retention to the plaintiff, because the plaintiff has not issued a Certificate of Practical Completion.
2. Third, the defendant suggests that the plaintiff has discontinued its claim in the first proceeding, and the defendant seeks an order for its costs of the defence of the first proceeding of $2,975.44, as well as orders to regularize and continue with the counterclaim in that proceeding.
3. Fourth, the defendant disputes the rate of interest claimed by the plaintiff, namely 10% pursuant to the Penalty Interest Rates Act 1983 (Vic). The defendant relies on the agreed rate in the Contract, which was 5% per annum (Contract clause 37.5 and schedule item 30).
4. Fifth, it says that if an order is made in favour of the plaintiff, there should be a stay on payment while the defendant's counterclaim in the first proceeding is determined.

Has the plaintiff satisfied the requirements of s 16?

Is there a construction contract for the progress payments?

1. In the present matter, there is no dispute that a construction contract exists for the progress payment, as discussed at paragraph 2 above.

Is there a reference date/s for the progress payments?

1. There appears to be no dispute about the existence of reference dates. The plaintiff say that it was entitled to a progress payment under the Contract and the Act on and from each reference date, which was specified in the Contract as the 28th day of each month:[4] Contract clause 37.1[5] and item 28,[6] and sections 9(1), 9(2)(a) of the Act.
2. PC 12 and PC 18 were submitted on the reference date (being the 28th of March and November 2023 respectively). PC 17 was submitted on 8 October 2023, being a date no later than 3 months after the relevant reference date of 28 September 2023, which is in accordance with clause 37.1 of the Contract.
3. The defendant's defence is not that there was no reference date, but that PC 17 was submitted out of time on 8 October 2023, that is, not being on or before the 28th day of the previous month.
4. The director of the defendant, Mr Princi, deposes that PC 17 was provided on 8 October 2023.[7] The director of the plaintiff, Mr Spencer, deposes that PC 17 was dated 28 September 2023 and agrees it was provided to the defendant on 8 October 2023.[8]
5. The defendant's argument is misconceived. Clause 37.1 of the Contract provides that:[9]

The Trade Contractor shall claim payment progressively in accordance with Item 28 and in any event no later than 3 months after the relevant 'reference date' as that term is defined in section 9 of the Security of Payment Act.

An early payment claim shall be deemed to have been made on the date for making the claim in accordance with subclause 37.1(b).

Times for progress claims: 28th day of each month for work done to the end of the month...

1. PC 17 states on its face that it is dated 28 September 2023. Clause 37.1 of the Contract allows the plaintiff 3 months after the relevant reference date of 28 September 2023 to make the claim. Having been issued on 28 September 2023 and been provided to the defendant on 8 October 2023, the plaintiff's claim was therefore in time.

Was there a valid payment claim/s for the progress payments?

1. The defendant does not argue the payment claims were invalid.

1. The defendant says it gave a payment schedule for PC 18. However on the evidence before me, PC 18 was sent to the defendant on 28 November 2023[11] and the payment schedule was sent on 28 December 2023.[12] The Contract provided that a payment schedule is due within 10 days of receiving a payment claim.[13] Accordingly, the purported payment schedule was out of time.

Has the respondent failed to pay the whole or part of the claimed amount?

1. The defendant in its submissions appears to concede it has not paid the claimed amounts.[14]
2. There is some confusion around PC 18. Mr Spencer originally stated that the defendant made a payment of $43,707.77 purportedly for PC 18 on 28 December 2023. This amount exceeds the amount of PC 18, which was $20,233.06. Mr Spencer clarified his evidence in his second affidavit, and said that the defendant's payment was in fact in relation to the plaintiff's claim for variations bearing the same date, which totalled $43,307.77.[15] The variations claim was not part of PC 18.
3. On the evidence before me, I am satisfied that the defendant has not paid the balance of PC 12, or all of PC 17 and PC 18.
4. Having said that, the amount claimed by the plaintiff in the proceeding is $72,384.68. This is less than the total outstanding of the three payment claims, being $116,092.45. The plaintiff has not explained how it has arrived at the figure of $72,384.68. I will give the plaintiff the opportunity to provide clarification on its calculation of the amount of $72,384.68.

1. For the reasons set out above, I am satisfied that the plaintiff has satisfied the requirements of s 16 of the SOP Act. I will now address the other grounds relied on by the defendant in opposing the claims.

1. The defendant argues that any claim by the plaintiff which includes an amount on account of retention should not be allowed, because the plaintiff has not requested the construction manager to issue a Certificate of Practical Completion and in these circumstances the defendant is not required or under any obligation to issue a Certificate of Practical Completion. It contends that in the absence of a Certificate, no payment is due to the plaintiff on account of retention monies pursuant to clause 5.4 of the Contract.
2. In my view, this is a matter arising under the construction contract. As noted above, s 16(4)(b)(ii) of the Act prevents a defendant raising such a defence. Accordingly, the issue of retention monies is not relevant in my consideration of the plaintiff's claim, which relies on the defendant's failure to issue a payment schedule in response to a valid payment claim.

1. The defendant's claims in relation to the costs of the first proceeding are not matters I can take into consideration in this proceeding. They must be dealt with in the first proceeding.
2. Further, the matters raised by the defendant in its counterclaim in the first proceeding are matters arising under the construction contract. For example, the counterclaim pleads breaches of the Contract, being delay, non-completion and defective works. As discussed, s 16(4)(b)(ii) of the Act prevents the defendant raising these matters in defence to the judgment sought.

1. Fourth, the defendant disputes the amount of interest claimed by the plaintiff. The Contract provides the interest rate on overdue payments is 5% per annum: clause 37.5, item 30. The plaintiff claims interest pursuant to s 2 of the Penalty Interest Rates Act 1983 (Vic), which is 10%.
2. Section 12(2) of the Act provides:

Interest is payable on the unpaid amount of a progress payment that has become due and payable in accordance with subsection (1) at the greater of the following rates -

(a) the rate for the time being fixed under section 2 of the Penalty Interest Rates Act 1983; or

(b) the rate specified under the construction contract.

1. As the Act allows for interest at the greater of the two rates, I am satisfied that the plaintiff is entitled to interest at 10% from the dates that each of PC 12, PC 17 and PC 18 were due to be paid.
2. The Contract does not appear to specify a date for payment of progress claims. However, each of the PC claims stated on their face the date payment was due. Each date is more than 28 days after the date of each claim, as follows:

(a) PC 12, dated 28 March 2023, due 30 April 2023;

(b) PC 17, dated 28 September 2023, due 30 October 2023; and

(c) PC 18, dated 28 November 2023, due 30 December 2023.

1. I will therefore allow interest at 10% from those dates.

1. The defendant requests that any order for payment in favour of the plaintiff should be stayed pending determination of its counterclaim in the first proceeding. It has provided no evidence in support of the application, and brief submissions with no authorities.
2. The principles for a stay in the context of an appeal involving the Act were set out by the Court of Appeal in Yuanda Vic Pty Ltd v Façade Designs International Pty Ltd[16] as follows:

...an applicant for a stay must demonstrate the existence of special or exceptional circumstances. Special circumstances may exist where there is a real risk that an appeal, if successful, would be rendered nugatory in the absence of the grant of a stay. In such a case, the Court will be required to balance the prospect that an appeal may be rendered nugatory in the absence of a stay, against the principle that the successful party in the proceeding should be entitled to the fruits of the judgment. Further, a stay should not be granted unless the applicant has demonstrated at least an arguable ground of appeal.

1. Although the first proceeding is not an appeal, I consider the same principles should apply. These were discussed by her Honour Judge Burchell in Diamond Builders Pty Ltd v Gilridge Investments Pty Ltd.[17] In that matter Burchell J had determined that the defendant was liable to pay the plaintiff under the Act. The defendant lodged an appeal to the Supreme Court of Victoria and applied to Burchell J to stay the order pending the outcome of the an appeal. Her Honour set out the principles, as follows:[18]

(a) the starting presumption is that successful litigant is entitled to the fruits of judgment in the absence of "special or exceptional circumstances;"

(b) the threshold for a stay under the Act is higher than an ordinary judgment - there must be "more than a 'real risk" (as opposed to the ordinary standard of a "real risk") that rights to recover amounts paid under the Act would be rendered nugatory before a stay would be ordered;

(c) given the "pay now, fight later" policy behind the Act, the legislature has imposed on the paying party the risk that the receiving party might not be able to refund money which is paid under the Act. The Court ought not reverse that allocation of risk lightly.

I accept that, given the public policy of the SOP Act and following the NSW lines of authority, [the paying party] is required to establish that there is more than a real risk that [the receiving party] might not be able to refund moneys such that [the paying party's] rights would be rendered nugatory in the absence of a stay.

1. I agree. It would be contrary to the policy of the Act to deprive the plaintiff of the fruits of its judgment while disputes arising under the contract are litigated in another proceeding. It is well established and unarguable that the intention and effect of the Act is to put a subcontractor in funds while they argue with the principal over the amounts due. That is exactly the outcome of the orders sought by the plaintiff this proceeding. The plaintiff will have the benefit of the payment pending the outcome of the first proceeding. If the defendant is successful on its counterclaim, then the plaintiff will be ordered to repay the defendant.
2. There is no evidence before me of either party's financial situation and so there is no basis to conclude that the other litigation may be rendered nugatory by a party's insolvency.
3. Accordingly I do not accept the defendant's submission.

1. I am satisfied that the defendant has not provided any basis to deny the plaintiff the relief it seeks under s16(2) of the Act.
2. However, I do not understand the amount claimed by the plaintiff. Accordingly I will allow the plaintiff an opportunity to clarify the amounts sought in relation to PC 12, PC 17 and PC 18, and the defendant the opportunity to reply.
3. The plaintiff should also provide interest calculations in relation to each of PC 12, PC 17 and PC 18, calculated as set out above.
4. I will also require the parties to provide proposed orders in relation to the future conduct of the first proceeding. It is important that the first proceeding be regularised, even though it is not directly part of this proceeding.
5. I will make the following orders:

(a) By 14 April 2025 at 4.00pm the plaintiff must file and serve a breakdown of the calculation of $72,384.68, by reference to each of PC 12, PC 17 and PC 18. If further evidence is relied on, it must be provided in an affidavit.

(b) By 14 April 2025 at 4.00pm the plaintiff must file and serve the amounts of interest claimed, calculated in accordance with these Reasons.

(c) By 21 April 2025 the defendant must file and serve any submissions or affidavits in reply.

(d) By 28 April 2025 at 4.00pm the parties must have consulted and must file proposed orders (preferably by consent, or if not agreed, each party's proposed orders) for the future conduct of the first proceeding, CI-24-00723.

I certify that these 14 pages are a true copy of the judgment of her Honour Judge Kirton delivered on 7 April 2025.

[1] Building and Construction Industry Security of Payment Act 2002 (Vic) s 7(2)(b) (the 'Act' or 'SOP Act').

[2] Defendant's Outline of Submissions dated 20 June 2024 and 22 July 2024.

[3] Diamond Builders Pty Ltd v Gilridge Investments Pty Ltd [2023] VCC 1527, 7 - 9 [38] - [40], citing Southern Han Breakfast Point Pty Ltd (in liq) v Lewence Construction Pty Ltd [2016] HCA 52; (2016) 260 CLR 340, [44], [61]-[62].

[4] Affidavit of Stephen Spencer, dated 8 May 2024, 1 [4] ('First Spencer Affidavit').

[6] Ibid, Exhibit SS-1, Part A, Annexure, 57, [item 28]. .)

[7] Affidavit of Joseph Princi, dated 11 June 2024, 3 [14] ('Princi Affidavit').

[8] Affidavit of Stephen Spencer, dated11 June 2024, 4 [15(c)], [18(c)], Exhibit SS-10 ('Second Spencer Affidavit').

[9] First Spencer Affidavit (n 4), Exhibit SS-1, 39 [cl 37.1].

[10] Ibid, Exhibit SS-1, Part A, Annexure, 57 [item 28].

[11] Second Spencer Affidavit (n 8), 4 [15(d)], [18(d)], Exhibit SS-11.

[12] Princi Affidavit (n 7), Exhibit JP-1, 46 - 48.

[13] First Spencer Affidavit (n 4), 1 [5]; Exhibit SS-1, 40, [cl 37.2].

[14] Defendant's Outline of Submissions dated 22 July 2024 [8].

[15] First Spencer affidavit (n 4), Exhibit SS-2, 113; Second Spencer Affidavit (n 8), 5 [23].

[16] [2020] VSCA 269, 7 [23].

[17] [2023] VCC 2418, 5-7 [17] - [24] (citations omitted).