Facts

Façade Treatment Engineering Pty Ltd (In Liq) (subcontractor) and Brookfield Multiplex Constructions Pty Ltd (contractor) were parties to a subcontract in relation to the Upper West Side Redevelopment. The contractor did not issue a payment schedule in response to payment claim 18 and informally responded to payment claim 19 by email on 5 October 2012 by asserting that the payment claim was invalid. The subcontractor was placed into liquidation on 6 February 2013.

The subcontractor commenced proceedings seeking payment of $1,193,469.20 (being the unpaid amounts in respect of payment claims 18 and 19) under section 16 of the SOP Act on the basis that the contractor had failed to issue a payment schedule. At first instance, Vickery J held that that the subcontractor had no entitlement to payment because:

• section 16 of the SOP Act was invalid to the extent that it was inconsistent with the set off provisions under section 553C of the Corporations Act 2001 (Cth) (Corporations Act);
• in any event, the email of 5 October 2012 was a valid payment schedule under the SOP Act.

Decision

Ultimately, the Victorian Court of Appeal held that as a winding up order had been made in respect of the subcontractor, such that the subcontractor only continued to exist for the purpose of being wound up, the subcontractor was no longer a claimant for the purposes of part 3 of the SOP Act.
In reaching this conclusion, the Court determined that:

• section 16(2)(b) of the SOP Act, which relates to the suspension of work, contemplates that a claimant under the SOP Act is 'still carrying out construction work or supplying goods or services';
• if part 3 of the SOP Act compelled payment to a builder in liquidation, such a payment would become final in effect, rather than provisional as is intended by the SOP Act; and
• cash flow problems, which underpin the SOP Act, cease to be a concern when a company enters into liquidation.

Although given its conclusion on part 3 of the SOP Act it was strictly unnecessary for the Court to consider the other issues raised on appeal, the Court upheld Vickery J's finding on inconsistency.

However, the Court overturned his Honour's decision on the 5 October 2012 email on the grounds that the email did not give the subcontractor an indication of the contractor's objections to the claims made in the payment claim so as to allow the subcontractor to determine whether or not to pursue the claim.