Construction and Infrastructure case note: VCAT sheds light on whether a failure to pay an adjudicated amount may constitute grounds for disciplinary action by the VBA

Oct 29, 2020

Earlier this month, the Victorian Civil and Administrative Tribunal (VCAT) ordered that building contractor APM Group (Aust) Pty Ltd (APM) should not be the subject of disciplinary action for failing to pay an adjudicated amount to subcontractor Morrow Plumbing Pty Ltd (Morrow) in accordance with the Building and Construction Industry Security of Payment Act 2002 (Vic) (the SOP Act) and instead be cautioned.

In the hearing APM Group (Aust) Pty Ltd v Victorian Building Authority (Review and Regulation) [2020] VCAT 1156, the presiding member, R. Tang AM, observed that while the Victorian Building Authority (VBA) does have the power to take disciplinary action against registered building practitioners for failing to pay an adjudicated amount due under the SOP Act, that power is discretionary and should not have been exercised in this instance.

Background

On 25 October 2017, Morrow issued a payment claim under the SOP Act for an amount of $28,828.73. Morrow subsequently applied for an adjudication of its payment claim and on 14 December 2017, the adjudicator issued an adjudication determination specifying an adjudicated amount of $44,328.73 (being the full amount of the payment claim, plus APM’s share of the adjudicator’s fees, interest and GST).

As APM failed to pay the adjudicated amount by the due date for payment, Morrow obtained judgement against APM in the Magistrates’ Court on 17 January 2018.

Disciplinary action taken by the VBA

The VBA can take disciplinary action against registered building practitioners. One of the grounds on which action can be taken (section 179(1)(n) of the Building Act 1993 (Vic)) is if: the practitioner has not paid an adjudicated amount due to be paid under the Building and Construction Industry Security of Payment Act 2002.

Following investigations, the VBA confirmed  that it was taking disciplinary action against APM and decided that APM should be reprimanded and penalised the sum of $16,119.

This was, apparently, the first time that disciplinary action was taken against a registered building practitioner for a failure to comply with the SOP Act.

The reason for imposing a reprimand and penalty in this instance was because the VBA considered that there was a need to ‘send a clear message’ to participants in the building industry that failures by registered building practitioners to comply with the SOP Act will not be tolerated.

VCAT determination

Dissatisfied with the VBA’s decision, APM applied for internal review of the decision with the VBA. As APM was also dissatisfied with the VBA’s internal review decision, APM subsequently applied to VCAT for a further review.

In that VCAT review proceeding, member Tang expressed a view that the VBA had the power to take disciplinary action against registered building practitioners due to a failure to pay an adjudicated amount under the SOP Act, but this power was discretionary and did not have to be exercised, even if a ground for taking disciplinary action had been established.

After weighing up a multitude of factors, member Tang ultimately ordered that the VBA’s internal review decision be substituted with a decision that the alleged ground has not been established and that no disciplinary action should be taken against APM. The main basis for this conclusion arose due to APM not being a 'registered building practitioner' at the time of the offending conduct (APM was registered after the offending conduct).

Take home message

While a failure to pay an adjudicated amount may have serious consequences for a respondent under the SOP Act, it may also constitute grounds for disciplinary action to be taken by the VBA.

If an adjudicated amount has been determined against a respondent, that party should seek legal advice from experienced construction and infrastructure lawyers, such as those at KCL Law, as a matter of urgency.

More information

To learn more about the decision, or for advice, please contact Darren Cain, Principal Lawyer, on (03) 8600 8835 or dcain@kcllaw.com.au, or Dominic Brown, Associate, on (03) 8600 8851 or djbrown@kcllaw.com.au.

Author

This Construction and Infrastructure update was authored by Dominic Brown, Associate.

Note: This update is a guide only and is not intended to constitute legal advice.

BACK