Significance

Money paid into a designated trust account under the section 28B(6) of the Building and Construction Industry Security of Payments Act 2002 (Vic) may be used 'to satisfy the claimant's entitlements' under section 28F(2) of that Act, even when there is no valid review of an adjudication determination under section 28B of that Act.

Read on for the rest of the analysis of Tom Kearney and Alyssa Dixon.

38 Williams Road Pty Ltd (owner) contracted May Constructions (Residential) Pty Ltd (contractor) for the construction of 7 apartments at 38 Williams Road, Prahran. In May 2016, the contractor submitted a payment claim for $128,502.32. The contractor made an adjudication application under the Building and Construction Industry Security of Payments Act 2002 (Vic) (Act) and in June 2016 the adjudicator determined that the owner was liable to pay to the contractor the whole of the payment claim.

The owner's solicitors, GPZ Legal Pty Ltd (solicitor), applied for review of the adjudication under section 28B of the Act on the basis that the adjudicated amount included an 'excluded amount' for liquidated damages. As a pre-condition of making the review application, the owner was required to pay the alleged excluded amount of $110,000 into a designated trust account. Amounts were paid into the solicitor's trust account on 24 June 2016.

The adjudication review did not proceed because the owner made a number of procedural errors in the application for review. In the interim, the court entered judgment for the amount of the adjudication pursuant to section 28R of the Act.

The contractor then sought a declaration that the money held in the solicitor's trust account was held on trust for the contractor pursuant to section 28F(2) of the Act and requested that those funds be paid to it.

The owner contended that because a valid adjudication review application had not been made, the funds in the solicitor's trust account were not held on trust under section 28F of the Act. Alternatively, the owner alleged that the statutory trusts ordinarily imposed by section 28F of the Act were never imposed because the adjudicated amount did not include any excluded amounts and it had been mistaken in pursuing a review.

Decision

The court held that, as the owner had intended to make a review application and had contended that its review application was valid and that money had been paid into trust for the purpose of the review application, the $110,000 was held on trust for the contractor pursuant to the trust created by section 28F(2) of the Act and should be applied, as contemplated by section 28F(2), to 'satisfy the claimant's entitlements'.

Further, the court found no evidence that the parties had agreed that the liquidated damages had already been paid and confirmed that the liquidated damages were an excluded amount under the Act and that the determination could have been reviewed on its merits if the owner and the solicitor had not made procedural errors in the review application.

Finally, the court noted that the owner and solicitor had variously argued over the course of events that the review application was both valid and invalid or mistaken and that the court will rarely permit a party to assert one position when it suits, and a contrary position when circumstances are perceived to have changed.