Punton’s Shoes Pty Ltd v Citi-Con (Vic) Pty Ltd  [2020] VSC 514

Peter Wood, Tom Kearney, Henry Chesterman

Key takeouts

A payment claim solely in respect of retention monies is not a valid payment claim for construction work or the provision of related goods and services under the Building and Construction Industry Security of Payment Act 2002 (Vic) (Act).

The position in Victoria is now that parties should assume that a payment claim which is limited to a claim for return of retention will not be validly made under the Act. This is contrary to obiter in Gantley Pty Ltd & Ors v Phoenix International Group Pty Ltd [2010] VSC 106, where Vickery J commented that payment claims under the Act ‘may’ include claims for payment of retention monies due under the contract.

This decision also represents a further Victorian departure from the NSW and Queensland security of payment regimes, where claims for retention moneys are expressly permitted by legislation.

Facts

In December 2016 Punton’s Shoes Pty Ltd (respondent) contracted Citi-Con (Vic) Pty Ltd (claimant) to design and construct a retail and residential building complex in Victoria.  The claimant agreed to provide security under the contract in the amount of 5% of the contract sum in the form of retention moneys, which were to be reduced by 50% upon the issue of the certificate of practical completion.

On 26 September 2019, following the issue of the certificate of practical completion, the claimant issued a payment claim under the Act in respect of the return of 50% of the retention money.  On 11 October 2019 the respondent issued a payment schedule recording the amount payable as ‘nil’ and scheduling a negative amount.

The claimant commenced an adjudication application in respect of its payment claim.  The adjudicator determined that the claimant was entitled to payment of the full amount claimed.

The respondent commenced the proceedings, seeking an order that the adjudication determination was void or liable to be quashed.

Decision

The court held the adjudication determination was void and must be quashed. It held that a payment claim for the return of retention moneys was not a valid payment claim in relation to construction work or the provision of related goods and services under the Act.

Digby J held that the separate and distinct character of the retention moneys, as security, was apparent from the terms of the contract, which established the purpose of the security fund, the contractual mechanism for its accumulation and reduction and the bases upon which recourse to it may be had by the respondent.  The contract did not make provision for a claim in respect of, or a payment to the claimant, for the retention monies.

Any implied right or entitlement of the claimant to return of a portion of the retention moneys was different in character and distinct from either a claim under the contract for the value of work carried out, or an entitlement under the Act for the value of construction work carried out and related goods and services.

Any implied entitlement to return of retention moneys upon the issue of the certificate of practical completion was not in the nature of a payment claim under the Act for construction work or related goods and services undertaken and provided under the contract.  It followed from that conclusion that there was no reference date under the Act. This was because a relevant reference date was determined on the basis of a progress payment entitlement in respect of construction work undertaken or the supply of related goods and services under the construction contract, and a claim for retention monies was not a claim for an entitlement of this type.