Recovering offset liquidated damages under the SOP Act in Victoria

2 minute read  04.10.2021 Nikki Miller, Tom Kearney, Alice Tyson

A recent judicial review has allowed claimants under the SOP Act to recover amounts previously deducted, such as liquidated damages, in subsequent payment claims.


Key takeouts


  • The Supreme Court of Victoria allowed the claimant to recover payment under the SOP Act for an amount that had been the subject of an offset for liquidated damages in an earlier payment schedule.
  • The Court allowed this because the claim was characterised as being for works performed, not as a recoupment of liquidated damages.
  • Goldwind v ALE significantly restricts the scope of Shape v Nuance, which had provided that a claim for recoupment of liquidated damages was itself an excluded amount.

The Supreme Court of Victoria has recently made a decision in Goldwind Australia Pty Ltd v ALE Heavylift (Australia) Pty Ltd [2021] VSC 625 (Goldwind). This involved a judicial review that was sought in relation to a previous adjudication determination. This determination included a finding regarding whether a claim is for construction work done, or is an attempt to recoup previously deducted liquidated damages.

This decision has implications for the recovery of offset liquidated damages under the Building and Construction Industry Security of Payment Act 2002 (Vic) (SOP Act). The result is that a claimant under the SOP Act can recover amounts previously deducted, that were themselves excluded amounts (such as liquidated damages), in subsequent payment claims. This is as long as the claim is properly characterised as being for work done.

What was under review?

The respondent (Goldwind) deducted liquidated damages for delay in a payment schedule that was issued to the claimant (ALE) in September 2020. The claimant issued a new payment claim under the SOP Act that ignored the delay deduction and made a claim for works performed in September 2020. These works were previously claimed, but unpaid as a result of the delay deduction. The respondent issued another payment schedule, again applying the delay deduction. The claimant then made an adjudication application under the SOP Act.

The adjudicator held that the claim was for works done, and the delay deduction was an excluded amount. The respondent then sought judicial review of the adjudication determination, relying on the statement made by Digby J in the previous decision in Shape Australia Pty Ltd v Nuance Group (Aust) Pty Ltd [2018] VSC 808 (Shape). In this case, Digby J considered (in obiter) that an attempt to recoup an excluded amount, that had been previously deducted, was itself an excluded amount under the SOP Act.

What was the outcome?

In the case of Goldwind, Stynes J determined that the adjudicator did not err by characterising the September 2020 claim as a claim for work done, and consequently taking it into account in determining the adjudication application.

Stynes J held that it was critical to Digby J's reasoning in Shape that the claim was characterised as a claim to recoup liquidated damages. In Goldwind, the claimant's claim was for unpaid work previously done, rather than an attempt to recoup liquidated damages.

Her Honour further noted that the practical effect of Shape was that if a claimant failed to challenge an excluded amount in a payment schedule, it will be prevented from recovering that amount in a subsequent payment claim. Stynes J said that such an outcome was contrary to the text and purpose of the SOP Act.

In light of this decision, it is critical that claimants characterise all claims as being for work performed.

If you would like further information or advice on any of the issues raised above, please reach out to a member of our Property, Infrastructure & Construction team.

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https://www.minterellison.com/articles/recovering-offset-liquidated-damages-under-the-sop-act-in-victoria

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