Today in Victoria, the Court of Appeal handed down a decision
which provides greater 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)
and clarified the relationship between the SOP Act and the set off
provisions in the Corporations Act 2001 (Cth)
In Facade Treatment Engineering Pty Ltd (in liquidation) v
Brookfield Multiplex Constructions Pty Ltd  VSCA 247,
Chief Justice Warren and Justices of Appeal Tate and McLeish held
that the Applicant, being a company in liquidation, was precluded
from obtaining judgment under the SOP Act for unpaid payment
The Applicant and the Respondent were parties to a subcontract
for construction works and the Applicant, by then in liquidation,
sought judgment for the amount of two unpaid payment claims under
the SOP Act.
The Respondent asserted that despite any interim entitlements
the Applicant might have under the SOP Act, upon the final
resolution of the amounts owed under the Subcontract, the
Respondent would be owed a substantial amount by the Applicant
relating to the increased cost to complete the subcontract
The Court of Appeal held, in favour of the Respondent, that the
SOP Act does not create an entitlement to progress payments for
persons who are in liquidation, because such persons are no longer
carrying out construction work pursuant to a construction
In addition, the Respondent succeeded in its contention that the
provisions of the SOP Act were inconsistent with the express
automatic 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 inconsistency.
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 Court of Appeal upheld the decision of Justice Vickery, 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
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