Court cases clarifying Building & Construction industry security of payment act
Moray & Agnew
Moray & Agnew’s Building and Construction team are currently acting in three separate court matters involving the proper interpretation of the Building and Construction Industry Security of Payment Act (SOP Act).
Each matter will significantly clarify the operation of the Act and the legal landscape in this area.
Can adjudicator’s determination be reviewed for nonjurisdictional errors?
The first matter, to be decided in the NSW Court of Appeal, involves consideration on when an adjudicator’s determination can be challenged.
Our client was successful at adjudication for approximately $250,000. However, the respondent successfully challenged the determination in the Supreme Court, which in doing so reconsidered the long held authority on when an adjudicator’s determination could be reviewed. Previously, the Court held that an adjudicator’s decision could only be reviewed for jurisdictional error, not nonjurisdictional error of law.
The effect of the decision was to significantly widen possible challenges to an adjudicator’s determination. If the current decision stands, in our view, the SOP regime and the whole policy behind the operation of the Act of “pay now, argue later” will be significantly undermined.
Does the SOP Act apply to work done in a “Commonwealth Place”?
The second matter, in which our client was successful at adjudication for approximately $1m, raises constitutional issues on whether the NSW Act applies to a “Commonwealth Place”. In this instance the work was being undertaken at the RAAF base at Williamtown.
Because the matter gives rise to constitutional issues, the Attorneys General for each State and Federal government may seek to be heard.
The case is potentially significant for any contractor doing work for the Federal Government or its departments.
Does the enforcement under the Act defeat contracted assigned rights?
Finally, the third matter involves our client who was also successful at adjudication for approximately $240,000.
Our client sought to enforce the determination against the Principal (rather than the Respondent) by way of a Payment Withholding Request. That process involves serving a notice on the Principal and claiming the debt under the Contractors Debt Act.
However, another third party has claim an entitlement to those funds on the basis that they have assigned rights from the Respondent in contract.
Our client will assert that its Claim should be given priority because of the timing of the service of notices and the policy behind the operation of the Act.
Going forward Each of the above matters are likely to be determined within the next 6 months. We will keep you updated with those decisions. Moray & Agnew have a specialist team that practices extensively in this area. The strength of experience is derived from the fact that our team includes qualified civil engineers, a registered architect, and three registered adjudicators under the ‘Security of Payment’ legislation in New South Wales and many other states.