Case note: Nasseri v Wellington Builders Pty Ltd [2024] VSC 200
Featured in the Law Institute Jounal September Edition!
Background Facts
The plaintiff, Taraneh Nasseri, sought to redevelop her Kew East property into two townhouses for profit. To that end, she partnered with Ms Candice Hammer by way of a Memorandum of Understanding forming a joint venture to share profits upon sale of the redeveloped property. In October 2021, the parties formalised their arrangements through a development management agreement which set out to assign Martello responsibility over managing the development process, including approvals, funding, construction and sales. One year later, following a number of setbacks resulting in the development project being revised to a single, newly-built home, the plaintiff and Ms Hammer signed a building contract with Wellington Builders Pty Ltd with related building approvals and finances being secured early in 2023.
Adjudication History
On 22 May 2023, at a time when a dispute had arisen between the plaintiff and Ms Hammer, the builder issued a payment claim to the plaintiff and Ms Hammer following base works. When the builder received no Payment Schedule, it served a Section 18(2) notice of its intention to apply for adjudication under the Building and Construction Industry Security of Payment Act 2002 (Vic) (‘SOP Act’), proving the plaintiff two days to provide a Payment Schedule. In lieu of receiving a Payment Schedule, the builder applied for adjudication, following which the Adjudicator served notice of his acceptance on 27 June 2023. Subsequently, the Adjudicator accepted an Adjudication Response submitted by the plaintiff on 29 June 2023. Pursuant to section 21(2B) of the SOB Act, the Adjudicator notified the builder that the Adjudication Response included reasons for withholding payments not included in the Payment Schedule and provided it with two days to lodge a response to those reasons, which the builder did on 4 July 2023. On 6 July 2023, the Adjudicator issued a determination that the builder be paid, resulting in the plaintiff bringing originating motion of these proceedings to have the determination quashed and declared void.
Application of section 21(2B)
Section 21(2B) of the SOB Act provides that whereupon a respondent’s Adjudication Response includes reasons for withholding payments sought in the Payment Claim which were not included in the Payment Schedule, the Adjudicator must serve notice to the claimant setting out those reasons and providing the claimant with two business days to lodge a response to those reasons. It is important to note that, although under section 21(2A), a respondent who has failed to provide a claimant with a Payment Schedule will ordinarily have no right to lodge an Adjudication Response, in the present circumstances the Adjudicator accepted the plaintiff’s Adjudication Response for consideration despite her having failed to provide such a Payment Schedule.
Pursuant to section 21(2B), the Adjudicator served a notice upon the claimant that the Adjudication Response included reasons for withholding payment that were not included in the Payment Schedule (which had not been issued) and, pursuant to the provision, provided the builder with two business days to respond to the Adjudication Response. Consequently, the builder was effectively left with two business days to respond to any and all of the reasons the plaintiff maintained for withholding payment. The Adjudicator, citing an extra-curial paper and the decision of Vickery J in Amasya Enterprises Pty Ltd v Asta Developments (Aust) Pty Ltd (No 2), provided the necessity of ensuring natural justice is provided to all parties as his reason for accepting the Adjudication Response.
Analysis of this Application
Although the Adjudication Determination ultimately found in favour of the builder, the application of section 21(2B) in this case serves to demonstrate the asymmetry of the SOP Act in favour of respondents. Ordinarily, the presence of section 21(2A) should present a significant incentive for respondents to present claimants with Payment Schedules to avoid disqualification from later submitting an Adjudication Response. Moreover, the purpose of section 21(2B) is to allow claimants an opportunity to respond only to reasons in the Adjudication Response for withholding payment that were not included in the Payment Schedule.
However, the Adjudicator in this instance has allowed the plaintiff to submit an Adjudication Response despite the plaintiff having failed to perform the preliminary step of providing a Payment Schedule to the builder. In other words, the Adjudicator has enabled the plaintiff to skip the necessary step of responding to the builder’s Payment Claim and to provide her reasons for withholding payment until this late stage, resulting in the builder having only two days to respond to them.
Significance
Ultimately, the precedent set by the Adjudicator in this instance is a dangerous one indicating to respondents to SOP claims that a failure to provide a Payment Schedule may not result in the inability to later present reasons and submissions to the Adjudicator, in spite of this being an intended deterring result envisioned by section 21.
If you need legal assistance, please get in touch with Warlows Legal today using the contact information below.
