Not Restricted









Case No. CI-13-02938










JUDGE: His Honour Judge Anderson

WHERE HELD: Melbourne

DATE OF HEARING: 28 March 2014

DATE OF JUDGMENT: 28 March 2014 (revised 31 March 2014)

CASE MAY BE CITED AS: Southon Constructions Pty Ltd v. Forstar Pty Ltd (No. 2)






Catchwords: Practice and procedure – Judgement upon a progress claim – Stay of execution pending determination of defendant’s claim in VCAT for defects on the project – Solvency of plaintiff in issue – Many subcontractors on project owed money by plaintiff – Stay granted to preserve monies placed in trust by the defendant – Building and Construction Industry Security of Payments Act 2002 (Vic)




APPEARANCES: Counsel Solicitors

For the Plaintiff Mr A McKellar (Solicitor) Moores Legal

For the Defendant Mr D Triaca E M McDonald & Co



1 On 21 March 2014, I adjourned the defendant’s stay application to allow the plaintiff to file further affidavit material “ deposing to its financial position, including a listing of all creditors, identifying those relating to its performance of the building contract with Forstar for the Chadstone project ”.


2 On 21 March 2014, I delivered reasons for my decision essentially rejecting the defendant’s submission that a stay was required to protect the defendant’s position if it were to succeed in proceedings at VCAT in relation to the plaintiff’s alleged defective work.


3 I considered that, consistent with the purpose of the Building & Construction Industry Security of Payments Act 2002 (Vic) (“ the Act ”), the plaintiff was prima facie entitled to the immediate payment of the progress claim. This would enable it, in turn, to meet its own commitments to sub-contractors on the project.


4 The further material filed by the plaintiff has shown that:


a. the plaintiff’s secured creditor, the ANZ Bank, is requiring the sale of properties to reduce indebtedness;


b. the plaintiff has listed 21 creditors who were sub-contractors on the project. The plaintiff admits that those creditors are currently owed over $450,000;


c. some of those creditors claim substantially more than the amount admitted as owning by the plaintiff. For example:


NP Interior Linings – admitted $86,857, amount claimed over $136,000;

Platypus Plumbing – admitted $1,977, amount claimed in VCAT about $55,000;

Abseal Pty Ltd – admitted $8,000, amount claim in the Magistrates’ Court $15,000.


d. no mention has been made of any indebtedness to the Australian Taxation Office;


e. few financial documents have been produced;


5 The plaintiff has said that, “If this honourable court determines that the stay of judgment should not be extended Southon will consent to an order that $240,000 be distributed to the contingent creditors of Southon in proportion to the amount Southon admits is payable to them” . This would involve a distribution of almost 50% of the amounts admitted as owing to the listed sub contractors.


6 In the circumstances, I am not satisfied that the stay should be lifted. Such an order, under the terms of the parties’ agreement, would result in the sum of $318,000 placed in trust by the defendant being paid to the plaintiff.


7 I am not confident that, even with the payment of that sum of money to the plaintiff, the company would be able to continue trading and to pay its debts as they fall due, unless all the creditors of the plaintiff agreed to the proposed distribution of the $318,000 and the basis for the continued trading of the plaintiff.


8 There would, in the absence of such agreement, be a likelihood that the plaintiff would be wound up with the need for the liquidator to recover payments made in the period leading up to the liquidation.


9 The plaintiff presently denies the claim alleged by the defendant in the VCAT proceedings in relation to alleged defective work. However, if that claim were pursued by the defendant, the plaintiff would need to consider whether contribution proceedings against its own sub-contractors would be warranted.


10 In the circumstances, I propose to make the following orders:


1. Provided the defendant:


a. by 4pm on 11 April 2014 pays the further sum of $11,077.03 into trust in accordance with the parties’ agreement;

b. takes action to reinstate the VCAT proceeding against the plaintiff and pursues the proceeding with reasonable diligence; the judgment entered by the plaintiff against the defendant on 5 July 2013 is stayed until the hearing and determination of the VCAT proceeding or further order.


2. The costs of the defendant’s summons filed 6 March 2014 are reserved for determination by VCAT in the proceeding instituted by the defendant against the plaintiff, or earlier by order of this Court.


3. Reserve liberty to apply.


11 This order will allow the plaintiff the opportunity, if it wishes, to notify all creditors and perhaps call a statutory meeting to advise them of its current financial position, including:


a. the money placed in trust by the defendant;


b. the claims made against the plaintiff by the defendant in the VCAT proceeding and how they might impact on the amounts owing to its sub-contractors;


c. the future contracting opportunities for the plaintiff.


12 If all creditors, or a majority of creditors at a properly constituted statutory meeting, agree to the basis upon which the plaintiff might continue to trade, including the distribution of the funds paid into trust by the defendant, it may be that an application to lift the stay might be made by the plaintiff pursuant to the liberty to apply reserved. Any such application, of course, would not be determined without the opportunity for all parties to make submissions to the Court.




I certify that these 3 pages are a true copy of the reasons for decision of His Honour Judge Anderson delivered on 28 March 2014 and revised on 31 March 2014.


Dated: 31 March 2014

Olivia Bramwell

Associate to His Honour Judge Anderson