Companies in liquidation prevented from obtaining judgment for
interim entitlements under the Building and Construction Industry
Security of Payment Act 2002 (Vic)
Today the Victorian Supreme Court handed down a decision which
provides certainty for the construction industry as to whether
companies in liquidation can seek to recover interim entitlements
under the Building and Construction Industry Security of
Payment Act 2002 (Vic) (SOP Act).
In Facade Treatment Engineering Pty Ltd (in liquidation) v
Brookfield Multiplex Constructions Pty Ltd  VSC 41,
Justice Vickery held that the Plaintiff, being a company in
liquidation to which section 553C of the Corporations Act
2001 (Cth) applies, was precluded from obtaining judgment
under the SOP Act for unpaid payment claims.
The Plaintiff and the Defendant were parties to a subcontract
for construction works and the Plaintiff, now in liquidation,
sought judgment for the amount of two unpaid payment claims under
the SOP Act.
The Defendant said that despite any interim entitlements the
Plaintiff might have under the SOP Act, upon the final resolution
of the amounts owed under the Subcontract, the Defendant would be
owed a substantial amount by the Plaintiff relating to the
increased cost to complete the subcontract works and accrued
Section 553C of the Corporations Act applies "where
there have been mutual credits, mutual debts or other mutual
dealings between an insolvent company that is being wound up and a
person who wants to have a debt or claim admitted against the
The Defendant said that the provisions of the SOP Act were
inconsistent with the express right to set-off under section 553C
of Corporations Act and therefore, under section 109 of the
Constitution, the SOP Act was invalid to the extent of the
The Court agreed and held that a company in liquidation is
precluded from entering any judgment under section 16(2)(a)(i) of
the SOP Act and is further precluded from relying on section
16(4)(b) of the SOP Act, as a bar to a respondent bringing a
cross-claim or raising a defence by way of set-off.
Further, the judgment, citing previous authorities, found that
the relevant date for the purpose of section 553C(2) of the
Corporations Act was the date of entry into the subcontract. His
Honour therefore held that as the Defendant had no notice or
knowledge of the Plaintiff's insolvency at the time of entering
into the subcontract, section 553C(2) did not preclude the right to
In addition, on a separate argument advanced by the Defendant in
relation to one of the payment claims, the judgment reinforced
previous case law in support of the proposition that there ought
not be overly technical requirements as to whether or not a
document or email satisfies the requirements for a payment schedule
under the SOP Act. The Court found that the Defendant had met the
requirements of the SOP Act by stating in an email that it regarded
the payment claim as invalid and the reasons why.
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