BCIPA Claim Fails for Contractor in Liquidation

Summary

The Building and Construction Industry Security of Payment Act 2002 (VIC) (BCIPA) is designed to protect contractors under a construction contract by ensuring that they get paid through a quick and inexpensive process.

In the 2016 Victorian Court of Appeal case, Façade Treatment Engineering Pty Ltd (in liq) v Brookfield Multiplex Constructions Pty Ltd, the court affirmed the decision of the Victorian Supreme Court that once a contractor is placed in liquidation, it can no longer obtain the benefit to claim payment under BCIPA.

Background

Façade Treatment Engineering Pty Ltd (Façade) and Brookfield Multiplex Constructions Pty Ltd (Brookfield) were parties to a construction contract where Façade supplied construction work to Brookfield. Façade submitted payment claims to Brookfield, which Brookfield failed to pay the full amount and did not provide a payment schedule pursuant to section 15(4) of BCIPA.

Façade went into liquidation and sought orders against Brookfield to recover approximately $1.2 million in unpaid works, relying on section 16 of BCIPA. Brookfield made a counterclaim for compensation costs and liquidated damages under the subcontract, alleging the value exceeded Façade’s claim.

How BCIPA works

BCIPA applies to parties to a construction contract where one party undertakes to carry out construction work, or supply related goods and service, to another party.

For a party take action for unpaid construction work, section 16 of BCIPA provides that if the respondent fails to provide the claimant a payment schedule and does not pay the whole or part of the claimed amount on or before the due date for the process payment, the respondent is liable to pay the claimed amount to the claimant.

The claimant can obtain a summary judgement against the respondent and the respondent is not permitted to bring a cross-claim or make a defence.

Essentially a failure to pay or respond to a payment claim in time deems the party liable for the claim.

Decision

The Victorian Supreme Court of Appeal unanimously upheld the Victorian Supreme Court’s decision that section 16 of BCIPA did not apply to Façade because once the order to wind up Façade had been made, Façade only continued to exist for the purpose of being wound up.

Thus, Facade ceased to satisfy the requirements as a claimant under BCIPA as they were no longer able to carry out construction work. Further, the Court explained the purpose of BCIPA is to provide cash flow to a contractor who continues to perform construction work, and once the contractor goes into liquidation, this is no longer a concern. 

The Court did, however, recognise an inconsistency with section 16 of the Act and the set-off provision under section 553C of the Corporations Act. Section 553C of the Corporations Act establishes rights for a contracting party to set-off debts owed by a company in liquidation against amounts owed to the company in liquidation. The Court held that section 16 of BCIPA is inoperative to the extent of the inconsistency. 

Key Takeaway

This case clarifies that contractors in liquidation no longer have rights to issue a payment claim or recover unpaid amounts under BCIPA. As such, if you have received a payment claim from a company in liquidation in accordance with BCIPA, you may not be required to comply with the claim (although the entity may be able to separately claim against you for breach of contract).

In the event that you wish to discuss this in greater detail, please contact one of our team members to discuss.

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