Yuanda Vic Pty Ltd v Façade Designs International Pty Ltd [2021] VSCA 44

What the court decided

Yuanda Vic Pty Ltd (Yuanda) applied for leave to appeal in a case under the Building and Construction Industry Security of Payment Act 2002 (Vic) [50]. Façade Designs International Pty Ltd (Façade) agreed to install façade elements supplied by Yuanda on a Melbourne project, for a contract price of $14.5 million [53]. On 30 September 2019 Façade provided Yuanda with a payment claim under section 14 of the Act for $4,584,820.68, including GST [55]. It was common ground that the claimed amount included interest, which is an excluded amount [55]. Yuanda did not provide a payment schedule within the 10 business days allowed [58]. It therefore became liable under section 15(4) to pay the claimed amount on 30 October 2019 [59].

Façade sought judgment under section 16(2)(a)(i) for the unpaid portion of the claimed amount as a debt [60]. Under section 16(4)(a)(ii), the court may not give the claimant judgment unless satisfied that the claimed amount includes no excluded amount [3]. Excluded amounts were introduced by amendments made in 2006 [32].

The trial judge held that the question was to be assessed on the face of the claim and its supporting documents, and that judgment could still be given for a lesser amount if an excluded amount was included [64]. He entered judgment for Façade for $3,357,664.67 plus interest of $296,210.42 [51]. That judgment was for less than the claimed amount in the payment claim, which the judge held was permissible [122].

McLeish and Niall JJA, in joint reasons, would grant leave to appeal, allow the appeal, set aside the orders of the primary judge and order that the claim be dismissed [49]. Sifris JA would have granted leave and dismissed the appeal [203].

The second ground contended that judgment can be given only for the claimed amount, so that if it includes an excluded amount the proceeding must be dismissed [67]. McLeish and Niall JJA held that the "claimed amount" in section 16(4)(a)(ii) means the amount claimed in the payment claim, and that if it includes any excluded amount the court cannot give judgment for the claimant [27]. They said the court's role is to decide whether to enforce the statutory liability under section 15(4), while adjudication can revisit that liability [13], [14].

They said judgment for a reduced sum would take the court beyond enforcing a statutory liability and into potentially complex factual disputes [23]. Going straight to court is meant only for a clear case, and a claimant that bypasses adjudication risks failing to satisfy section 16(4)(a) [24]. The contrary construction would let a claimant include excluded amounts and abandon them after a trial of the issue [25]. A payment claim that includes an excluded amount is still valid, and adjudication offers a path to recover the claimed amount less any excluded amounts [26]. If the claimant goes to court instead, the claim will fail, but nothing prevents it from claiming the same work, without the excluded amounts, in a fresh payment claim [26].

Sifris JA dissented, disagreeing with the construction the majority adopted on this ground [140]. In his view the judge could enter judgment for a lesser sum than the claimed amount in the payment claim, where he was satisfied that the sum contained no excluded amount [131]. He considered the Act silent on the point and preferred the construction that promotes its purpose [136], [138].

McLeish and Niall JJA rejected Façade's notice of contention that any excluded amount could be severed from the claimed amount [28], [36]. Sifris JA did not decide the point, but thought the better view was that the doctrine of severance does not apply, for the reasons the majority gave [143].

On the first ground, Yuanda argued that the court must decide the question as an objective fact, if necessary by some "digging" beyond the face of the claim [66]. McLeish and Niall JJA said the other grounds need not be considered once the appeal succeeded, but it was desirable to say something about the first ground [37]. They found the text open to more than one interpretation and preferred the more limited construction the primary judge had adopted, as best according with the policy of the Act [44]. On that construction the court need only be satisfied on the face of the payment claim and the documents it refers to or that were served with it [45]. A respondent may identify alleged excluded amounts in a payment schedule on any material at all, and one that has not done so can hardly complain of unfairness [45].

Sifris JA also rejected the first ground [121]. He said a payment claim in proper form is assessed in the first instance by its face, and it is not necessary to go behind the claim [117]. It is for the respondent to identify an excluded amount and set adjudication in train [120].

McLeish and Niall JJA said the third, fourth and fifth grounds served no purpose once the appeal succeeded on the second ground, but agreed that leave should be granted and rejected them for the reasons of Sifris JA [47], [48]. Sifris JA held that the claims for site shutdowns were claimable variations of the second class, and so not excluded amounts [157]. On the alleged fraudulent settlement agreement used to support claim 1129, he held that the claim was regular on its face and the judge did not need to make findings of fraud [170]. In the alternative, he found that the work in claim 1129 comprised claimable variations apart from the settlement agreement [171], [199].

Why it matters

On the majority's reasoning, a claimant suing under section 16(2)(a)(i) of the Victorian Act, after the respondent failed to provide a payment schedule in time, cannot obtain judgment if its payment claim included any excluded amount, even an obvious claim for interest. Abandoning the excluded amount at trial does not cure the problem. The claimant's alternatives are to adjudicate rather than sue or, once the court claim has failed, to serve a fresh payment claim for the same work without the excluded amounts.

All three judges rejected the argument that the court must look beyond the payment claim and its supporting documents, although the majority did not need to decide the point. A respondent that wants to rely on wider material to show an excluded amount should identify it in a payment schedule.

The decision applied the Act in the form the Court set out, so readers should check the current text of the Act before relying on the decision.

Numbers in square brackets are paragraph numbers of the judgment. This note summarises a decided case for education and is not legal advice. See how the notes are written.