Jennifer Raphael, Senior Legal Writer, Practical Guidance Construction, LexisNexis®
In 2024, several pivotal decisions were made across New South Wales, Victoria, and Queensland concerning Security of Payment legislation, which are crucial for construction lawyers to understand. This article provides a summary of four significant decisions and their implications.
Ceerose Pty Ltd v A-Civil Aust Pty Ltd (2023) 112 NSWLR 225; [2023] NSWCA 215 (Ceerose)
Key issue: Whether an adjudicator in NSW is required to consider the merits of the payment claim.
Initially, the NSW Supreme Court found that the adjudicator committed a jurisdictional error by awarding the claimed amount without assessing the claim's merits. However, the Court of Appeal overturned this decision, clarifying that the adjudicator's duty is limited to resolving imthe dispute based on the materials and submissions presented by the parties. The adjudicator is not required to determine the "true merits of the claim."
The Court of Appeal overturning this decision, deciding that the primary judge (and previously decided cases) had incorrectly applied the dicta of Hodgson JA in Coordinated Construction Co Pty Ltd v JM Hargreaves (NSW) Pty Ltd (2005) 63 NSWLR 385; [2005] NSWCA 228 (Coordinated).
Importance
As the Building and Construction Industry Security of Payment Act 1999 (NSW) (NSW SoP Act) prohibits the respondent from including “new reasons” for withholding payment in an adjudication response (s20(2B)), the decision in Ceerose highlights the importance of respondents comprehensively including all reasons for withholding payment in the payment schedule.
EnerMech Pty Ltd v Acciona Infrastructure Projects Australia Pty Ltd [2024] NSWCA 162 (EnerMech)
Key issue: Whether, as a precondition to the validity of a payment claim, the NSW SoP Act requires a payment claim to be for “construction work”. The Court of Appeal determined that it did not.
EnerMech supplied an unconditional undertaking as security under the terms of the subcontract with Acciona. Acciona called on the security. EnerMech subsequently served a payment claim and the matter went to adjudication which was decided in EnerMech’s favour.
Acciona argued that the adjudication determination should be quashed because the claim was not a claim for construction work, but rather a claim for a credit in relation to the security amount.
The Court of Appeal ruled that a progress payment claim does not need to be explicitly for "construction work." The adjudicator determines whether the claimant has satisfied the entitlement to payment for work done under a construction contract. The court cannot review the adjudicator's decision for non-jurisdictional errors of law.
Importance
The decision is significant in that it affirms that it is possible for a claimant to recover security called upon by the respondent in a carefully prepared payment claim.
MWB Everton Park Pty Ltd as trustee for MWB Everton Park Unit Trust v Devcon Building Co Pty Ltd [2024] QCA 94 (MWB)
Key issue: Whether the progress claim was a payment claim.
The Court of Appeal found that the progress claim did not meet the requirements of s 68(1) of the Building Industry Fairness (Security of Payment) Act 2017 (QLD SoP Act), as it failed to sufficiently identify the construction work and related goods and services. The claim also did not state the amount payable or request payment as required.
In particular, the court determined that the trade summary contained in the payment claim, which provided reference to a percentage of a category of work, was “all but meaningless”.
Importance
This case highlights the need for care and attention when preparing payment claims under the QLD SoP Act. Importantly, the form of payment claim considered in this case is one that many builders have used in the past. The decision demonstrates the need for claimants to carefully review the contents of the payment claim to ensure that the document meets all the requirements of the QLD SoP Act.
Roberts Construction Group Pty Ltd v Drummond Carpentry Services Pty Ltd & Anor [2024] VSC 246 (Roberts Construction)
Key issue: Grounds for setting aside an adjudication decision.
Roberts Construction disputed the validity of a payment claim, arguing that services were rendered under a contract with a different entity. The adjudicator ruled in favour of Drummond.
The Supreme Court dismissed Roberts' application for judicial review finding that the question of whether services were or were not rendered under the relevant contract was not a jurisdictional fact. Rather this was a matter to be determined by the adjudicator. The court followed the High Court’s decision in Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd (2018) 264 CLR 1, finding that a non-jurisdictional error of law on the face of the record is not available in relation to judicial review of a decision of an adjudicator.
Importance
This decision highlights the limited grounds for setting aside an adjudication decision.
Practical Guidance Construction Law
For legal practitioners, staying abreast of these recent Security of Payment case developments is essential. LexisNexis® offers extensive resources, including Practical Guidance Construction, to support lawyers in navigating the complexities of construction law. This tool provides step-by-step guidance, case law, legislation, and practical materials to aid in both commercial and residential construction matters.
Practical Guidance Construction contains comprehensive guidance in relation to all aspects of security of payment legislation in New South Wales, Queensland, and Victoria. In particular, Practical Guidance Construction’s Security of Payment case tracker records the decisions of the supreme court and appeal courts in New South Wales, Queensland and Victoria where parties have sought to set aside the adjudication decision. Learn more here.