Can a builder revise, correct or withdraw a payment claim made under the Building and Construction Industry Security of Payment Act 2002 (Vic) (Act)?
The answer is yes, and the recent decision in the Supreme Court of Victoria proceeding Valeo Construction Pty Ltd (Valeo) v Pentas Property Investments Pty Ltd (Pentas) has provided some welcome guidance on how a builder may do so.
The facts
The facts of Valeo v Pentas are as follows:
- Valeo was the builder, and Pentas the principal.
- On 28 February 2018, Valeo submitted a payment claim under the Act for $2,215,150.03 (Payment Claim 1) to Pentas.
- On 1 March 2018, Valeo submitted a revised payment claim under the Act for $2,240,160.13 (Payment Claim 2) to Pentas.
- Valeo referred to Payment Claim 2 as ‘Rev 1’ and ‘Updated’.
- Both Payment Claim 1 and Payment Claim 2 were in respect of the same reference date.
- On 6 March 2018, Valeo advised Pentas’ superintendent that Valeo had withdrawn Payment Claim 1 and had relied on Payment Claim 2.
- On 22 March 2018, a payment schedule was served on Valeo, beyond the time permitted under the Act.
- Accordingly, Valeo issued an application to the Victorian Supreme Court seeking a summary judgment for $2,240,160.13, being the amount claimed in Payment Claim 2.
Before the Court
Pentas opposed Valeo’s summary judgment application on the basis that, in contravention of section 14(8) of the Act, Valeo had made two payment claims in respect of the same reference date.
The submission of more than one payment claim in respect of the same reference date is prohibited by section 14(8).
Valeo submitted that it did not contravene section 14(8) of the Act, and that Payment Claim 2 was a revision of Payment Claim 1, and Payment Claim 1 was withdrawn.
The Act is silent on the revision, withdrawal or replacement of a payment claim. On this issue, Valeo and Pentas adopted very different interpretations:
- Valeo submitted that the silence meant that the revision, withdrawal or replacement of a payment claim is consistent with the scheme of the Act; and
- by contrast Pentas contended that silence meant that the Act precludes the revision, withdrawal or replacement of a payment claim.
The Court’s decision
His Honour Justice Digby determined that the revision, withdrawal or replacement of a payment claim made under the Act is permissible, however there are two fundamental requirements that must be satisfied:
- the builder must clearly and unequivocally convey to the principal that the payment claim is revised, withdrawn or replaced by another payment claim; and
- if the builder chooses to revise its payment or to replace its payment claim with another one, then the builder must provide the principal with the revised or further payment claim at the time the builder communicates to the principal that the payment claim is revised or replaced.
His Honour found that Valeo had failed to satisfy the fundamental requirements, and therefore Payment Claim 2 was served in breach of section 14(8) of the Act. Valeo’s summary judgment application was dismissed.
Lesson to be learnt
The lesson to be learnt from this case is that a builder who wishes to revise, withdraw or replace a payment claim under the Act must ensure that it fulfills the fundamental requirements, or risk falling foul of the Act.
More information
To learn more about the decision, or for advice, please contact Darren Cain, Principal Lawyer and Head of Building and Construction, on (03) 8600 8835 or dcain@kcllaw.com.au.
Note: This update is a guide only and is not intended to constitute legal advice.