SOP claims and liquidated damages - No right to set off?

5 September 2011

In a judgment with implications for all companies engaged in construction contracting in Victoria, the Victorian Supreme Court has declared that liquidated damages cannot be set-off against, or deducted from, payment claims made under the Victorian Building and Construction Industry Security of Payment Act 2002 (Vic).

The judgment of Seabay Properties Pty Ltd v Galvin Construction Pty Ltd & Anor [2011] VSC 183, which was handed down by Justice Vickery on 6 May 2011, concerned payment claims made pursuant to a construction contract between Seabay Properties Pty Ltd (Seabay) and Galvin Construction Pty Ltd (Galvin) for the construction of certain works in Geelong.

Galvin had submitted a payment claim seeking a progress payment of just under $2 million pursuant to both the contract and the SOP Act. Seabay assessed the payment claim and deducted approximately $770,000 for liquidated damages claimed to be due from Galvin to Seabay.

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Ben Davidson

Partner. Melbourne
+61 3 9672 3500