High Court refuses leave on question of payment claim containing ‘excluded amount’

The High Court in Façade Designs International Pty Ltd v Yuanda Vic Pty Ltd [2021] HCATrans 169 has refused to grant special leave to appeal a decision from the Victorian Supreme Court of Appeal (the VSCA) regarding the enforcement of debt due under the Building and Construction Industry Security of Payment Act 2002 (Vic) (the Act) where the payment claim included an ‘excluded amount’ under the Act. The concept of “excluded amounts” is a unique characteristic of the Victorian legislation, which prohibits a party from including in a payment claim amounts which fall within this provision, such as costs incurred as a result of latent conditions and time related costs.

Façade Designs International Pty Ltd (Façade) entered into a supply and installation contract with Yuanda Vic Pty Ltd (Yuanda) to carry out façade works on the commercial and residential towers at 447 Collins Street, Melbourne (otherwise known as the ‘Arch on Collins’).

During the project, Façade served a payment claim under the Act for $4.58 million, including interest (the Claimed Amount). Shortly after submission of the payment claim, Yuanda paid Façade $1.1 million. However, as it failed to issue a payment schedule which notified the scheduled (reduced) amount which it proposed to pay, within 10 business days of receipt of the payment claim, Yuanda became liable to pay Façade the remainder of the Claimed Amount.

Façade sought to recover the unpaid portion of a claim as a debt due pursuant to section 16(2)(a)(i) of the Act. Yuanda contended that Façade was prohibited from seeking judgment for the Claimed Amount on the basis that the claim included interest, which is an excluded amount under the Act. The primary judge held that the Court could enforce the payment claim against Yuanda, provided that any excluded amounts were deducted from the Claimed Amount. Façade was awarded judgment on that basis. Yuanda appealed the decision to the VSCA.

The majority of the VSCA overturned the decision, finding that the Court was precluded from giving judgment in Façade’s favour where the Claimed Amount included an excluded amount. In reaching their decision, the majority considered the text, context and policies of the Act and held that:

•    the Court has a limited role when a respondent becomes liable to pay a Claimed Amount, confined to identifying and enforcing statutory liabilities (being the Claimed Amount in the payment claim);
•    the Act expressly requires that the Claimed Amount must not include any excluded amount and that judgment must not be given unless the Court is satisfied that the Claimed Amount does not include any excluded amount; and
•    where an excluded amount is included in a payment claim, the Court cannot award judgment or enforce any part of the claim as the Act provides that it is the role of an adjudicator to assess the statutory liability of the respondent.

Sifris JA disagreed with the majority, finding the primary judge was correct at first instance to award the payment claim less the excluded amount. In reaching this conclusion, Sifris JA noted that nothing in the Act prevents the Court from awarding an adjusted amount for a reduced and accurate judgement and doing so is “entirely in tune with the aim and the purpose of the Act”.

Façade sought leave from the High Court to appeal the Court of Appeal’s decision. It contended that the purpose of the Act was to ensure the rapid and expeditious processing of progress claims, which can be revisited in contested litigation or arbitration, and that the majority reasons in the Court of Appeal decision provided a perverse advantage to Yuanda who did not provide a payment schedule in accordance with the Act.

Counsel for Yuanda argued that allowing a summary judgment would contradict the express words of the Act, and that the proper avenue for recourse was for the claim to be referred to adjudication.

Façade’s application for special leave to appeal the Court of Appeal’s decision was dismissed by the High Court due to insufficient prospects of success.

The High Court’s transcript can be found here and the decision from the VSCA here.