//
© 2026 Zoe. All rights reserved.
Zoe is a legal information platform. Always consult the Federal Register of Legislation for authoritative text.
[2025] NSWCA 273
respondent. Leave to appeal refused with costs.
The Court of Appeal did not grant All Civil permission to appeal. All Civil had received an assignment, under the Contractors Debts Act, of money the Club owed its head contractor. The Club argued that it could set off amounts it said were due under its contract with that contractor. All Civil argued that the Security of Payment Act prevented the Club from raising those matters. Ward P considered that provision inapplicable to All Civil's recovery proceeding, which was not a proceeding by the Club to set aside an adjudication judgment. She also considered that the assignment transferred the contractual payment obligation, not a judgment stripped of contractual defences. Those merits observations were conditional because leave was refused. McHugh JA agreed with the orders and explained separately that the assigned obligation remained a contractual debt even though adjudications had quantified it.
AI-generated legal information, not legal advice. Zoe can make mistakes. Check the cited source, and for advice about your situation consult a qualified Australian lawyer.
2,404 words · generated 06/10/2026
8 cited instruments linked from this judgment.
The dispute arose from a construction project involving three participants: Woonona-Bulli RSL Memorial Club Ltd (the Club), Warrane Design Construct Fit-Out (Warrane), and All Civil Solutions Group Pty Ltd (All Civil). Warrane was the head contractor engaged by the Club. In December 2023, Warrane engaged All Civil as a fixed-price subcontractor to carry out part of Warrane's work for the Club [5].
All Civil later served payment claims on Warrane under the Building and Construction Industry Security of Payment Act 1999 (NSW) (Security of Payment Act). Adjudications followed. All Civil obtained judgments against Warrane for adjudicated amounts and debt certificates under s 7(1A) of the Contractors Debts Act 1997 (NSW) (Contractors Debts Act), totalling $2,556,151.20 [6]. All Civil served the certificates and notices of claim on the Club. Under the Contractors Debts Act, service operated to assign to All Civil the Club's obligation to pay money owed under its contract with Warrane, up to the relevant certified debt [6], [33].
The Club paid some amounts to All Civil, but $1,200,670.24 remained outstanding under the debt certificates [7]. All Civil then sued the Club to recover the balance under s 11(3) of the Contractors Debts Act. The Club pleaded that it could set off claims against Warrane arising from their construction contract. The pleaded matters included alleged repayment claims relating to variations or delay costs said to have resulted from Warrane's breach [19].
The parties asked the primary judge to decide as a separate question whether the Club could raise those matters as a defence. The primary judge answered yes. All Civil sought leave to appeal, arguing in substance that s 25(4)(a) of the Security of Payment Act prevented the Club from raising contractual defences [21]-[23], [42].
The Court of Appeal refused leave to appeal with costs [77]. Ward P added that, if leave had been granted, she would have dismissed the appeal. McHugh JA and Griffiths AJA agreed with the orders [3], [78], [83]. The distinction matters: the Court's operative order was a refusal of leave, while the discussion of how the appeal would have been decided was conditional on leave being granted.
Ward P first addressed why the proposed appeal did not justify leave. All Civil said the appeal raised an important question about the interaction between s 11(4) of the Contractors Debts Act and s 25(4) of the Security of Payment Act. It also said the primary decision caused clear injustice because All Civil had lost a claimed benefit of s 25(4), and that an appellate decision could address an apparent conflict with observations by Rees J in related proceedings [25].
Ward P considered that the asserted general importance was substantially reduced by All Civil's concession in oral argument that its reliance on s 25(4) was “diluted” [26]. She also observed that All Civil's claim to have lost a substantial right was difficult to reconcile with its acceptance that s 25(4) might be irrelevant to construing s 11(4) [27]. Once the proposed appeal was narrowed to the proper construction of s 11(4), Ward P regarded its principle as less important for the leave decision. Taking account of the ongoing litigation and her view of the merits, she refused leave [28]-[29].
Ward P then explained why, if leave had been granted, she would have dismissed the appeal. Section 25(4) is framed for a particular type of proceeding: one commenced by “the respondent” to set aside a judgment for a debt obtained by filing an adjudication certificate [62]. The proceeding before the primary judge was different. All Civil, as the assignee, had commenced a recovery proceeding under s 11(3) of the Contractors Debts Act. It was not a proceeding brought by the Club to set aside the Builder's adjudication judgment [63]. Ward P therefore considered the emphasis on the interaction between s 11(4) and s 25(4) misplaced [64].
A further part of the reasoning concerned the nature of the assignment. All Civil's description of what it received as a “judgment unencumbered by contractual defences” put a gloss on s 8(1), Ward P said [65]. That provision assigns the principal's obligation to pay money owed under the contract to the defaulting contractor. The obligation is not described as an unqualified judgment debt detached from the contract [65]-[67]. Under s 9(2), payments are made to the unpaid person as they become payable under the contract, until the certified debt is discharged or the relevant contractual payments are no longer payable [34], [67]-[68].
For s 11(4), the relevant question was whether the Club would have had a defence against the Builder's recovery of the debt if there had been no assignment [70]. Ward P considered that, at the recovery stage, s 25(4) did not preclude the Club from raising a contractual or equitable set-off [74]. She concluded that set-off matters of that kind were potentially defences preserved by s 11(4), and that the primary judge had not erred in making the declaration [75]-[76]. These were conditional merits reasons, not a separate order deciding a granted appeal.
McHugh JA agreed with the result and supplied a distinct statutory analysis. He separated the head contractor's adjudicated debt against the subcontractor from the contractual obligation between the principal and head contractor. In his reading, s 7(1A) concerns a judgment in favour of the subcontractor against the head contractor, while ss 5 and 8 concern money payable under the contract between the principal and the head contractor [80]. He described what s 8(1) assigns as a common-law contractual obligation, not the statutory obligation to pay an adjudicated amount under s 23(2) of the Security of Payment Act [80]-[81].
The judgment does not purport to create a new statutory regime or comprehensively settle every possible relationship between the two Acts. Its formal outcome is procedural: leave to appeal was refused. Its merits reasoning, including the treatment of set-off, is conditional on the appeal having proceeded [77].
The relevant statutory framework, as set out in the judgment, starts with the Contractors Debts Act. Section 7(1A) allows a debt certificate to be issued where an adjudication certificate under the Security of Payment Act has been filed as a judgment for a debt [33]. A notice of claim and accompanying debt certificate can then operate under s 8(1) to assign the principal's obligation to pay money owed under its contract with the defaulting contractor [33], [65]. Sections 9(1) and 9(2) provide for payment to the unpaid person as money becomes payable under that contract [34].
Section 11 governs recovery. If the principal fails to make a payment required by the Act, the unpaid person may sue for the assigned debt, and proceedings can be taken in a manner available to the defaulting contractor had there been no assignment [35]. Section 11(4) makes the unpaid person's right of recovery subject to defences the principal would have had against the contractor's recovery of the debt, except a defence based on something the principal did after receiving the notice of claim [36].
The Security of Payment Act provisions addressed by the Court serve a different function. Section 25(4) restricts a respondent's ability to bring a cross-claim, raise certain construction-contract defences, or challenge the adjudicator's determination in proceedings the respondent commences to set aside an adjudication judgment [38]. Ward P considered that this wording did not make s 25(4) apply generally to a separate recovery action brought by an assignee under the Contractors Debts Act [62]-[64].
McHugh JA's analysis adds a conceptual distinction: an adjudication may quantify the contractual obligation assigned under s 8(1), but that does not make the assigned obligation itself the statutory right under s 23(2) of the Security of Payment Act [80]-[82]. The judgment thus explains how the statutes operated on the footing accepted in this case. It does not establish that every adjudication or assignment in every factual setting will be treated identically.
At [64], Ward P said: “The focus on the interaction between s 11(4) and s 25(4)(a) is therefore misplaced”. In plain English, the provisions address different procedural situations on the facts considered. The Club was not using a set-aside proceeding under s 25(4); All Civil was suing to recover an assigned debt.
At [65], Ward P identified what s 8(1) assigns: “the obligation of the principal ... to pay the money owed under the Contract to the defaulting contractor”. The practical significance is that the statutory assignment concerns the Club's payment obligation to Warrane. It is not described as transferring a judgment stripped of the contractual features of that obligation.
At [69], Ward P said there was nothing to suggest s 25(4) had “ambulatory effect”, meaning that it should inform the construction or operation of s 11(4). In plain language, she did not read s 25(4) as automatically travelling with the assigned obligation and changing which defences s 11(4) preserves.
At [74], Ward P distinguished recovery of the debt from the earlier proceeding to set aside the adjudication determination. She considered that s 25(4) did not prevent a contractual or equitable set-off at the recovery stage. At [75]-[76], she linked that conclusion to the statutory test in s 11(4) and the primary judge's declaration.
McHugh JA's statement at [81] is also important: the fact that adjudications quantified the common-law obligation “does not change the operation of the statute”. Put simply, the mechanism used to quantify an obligation does not necessarily change the legal character of the obligation that the Contractors Debts Act assigns.
These passages should be read with the procedural qualification that leave was refused. The Court did not issue a final appellate order after granting leave and determining an appeal; Ward P expressed her merits view conditionally.
The reasoning is most directly relevant to a fact pattern with the following features: a subcontractor has a debt certificate of the kind described in s 7(1A) of the Contractors Debts Act; it serves the principal with the required notice of claim and certificate; the statute assigns the principal's obligation to pay money owed under the head contract; and the subcontractor later sues the principal under s 11(3) after non-payment [33]-[36].
It is also relevant where the principal seeks to rely on a set-off said to have been available against the head contractor, and the unpaid person argues that s 25(4) of the Security of Payment Act prevents that defence. The procedural distinction is important: the judgment contrasts proceedings brought by a respondent to set aside an adjudication judgment with a recovery proceeding brought by the assignee [62]-[64].
The reasoning should not be treated as automatically resolving cases where the proceeding is in fact a set-aside application, where the alleged defence arises from events after service of the notice of claim, or where the assigned obligation differs materially from the obligation considered here. Section 11(4) itself contains an exception concerning something done by the principal after service [36]. The judgment does not decide every question about the scope of that exception or every possible relationship between adjudication judgments and assigned contractual debts.
The case also involved an accepted footing that the Security of Payment Act adjudications quantified the contractual obligation assigned under the Contractors Debts Act. McHugh JA expressly distinguished that footing from an assignment of the statutory obligation to pay an adjudicated amount [80]-[81]. A fact pattern disputing that premise may raise an issue not decided in the same way by this judgment.
The supplied judgment is dated 17 December 2025 and does not identify any later judicial treatment of its reasoning. It would therefore be unsupported to say that a later court has followed, distinguished, or rejected this decision.
The judgment does refer to earlier proceedings arising from the same broader dispute. These include the primary judge's decision, All Civil Solutions Group Pty Ltd v Woonona-Bulli RSL Memorial Club Ltd [2025] NSWSC 688 [1], and related proceedings between the Club and Warrane [15]-[18]. Ward P also records All Civil's reliance on observations by Rees J in Woonona-Bulli RSL Memorial Club Ltd v Warrane-Design Construct Fit-Out Pty Ltd (No 2) [2025] NSWSC 365 [16], [53]. Those references form part of the history and arguments in this proceeding; they are not later treatment of the Court of Appeal's decision.
The judgment says that the alleged “clash” with Rees J's observations was one reason All Civil sought appellate review [25]. Ward P's reasons instead focus on the statutory text and the type of proceeding before the primary judge [62]-[76]. That explains how this Court dealt with the asserted conflict in this case, but it does not provide evidence about how subsequent courts have applied the decision.
The judgment leaves open the precise application of s 11(4) to particular forms of set-off. Ward P described the question as whether the Club would have had a defence against the Builder's recovery of the debt and referred to contractual or equitable set-off [70], [74]-[75]. The judgment does not determine the factual validity, amount, or ultimate success of each pleaded set-off. It resolves the separate construction question that the Club was entitled to raise the identified matters as defences.
The distinction between an adjudication used to quantify a contractual obligation and a statutory adjudicated payment obligation may also require attention in other circumstances. McHugh JA explained the distinction on the footing that the parties accepted the adjudications in this case quantified the common-law obligation [80]-[81]. The reasons do not decide every possible case in which that footing is contested.
The effect of the s 11(4) exception for a defence based on something done by the principal after notice of claim was served is not analysed in detail in the Court's merits reasoning. Nor does the judgment determine how every possible order, payment, assignment, or set-aside proceeding may affect an unpaid person's recovery. Those questions would depend on the statutory provisions and facts applicable in a particular matter.
Finally, this decision is a refusal of leave, with conditional observations about the merits. The headnote characterises the discussion of s 11(4) and the interaction with s 25(4) as obiter. That procedural setting is important when describing the decision's precedential reach.
This is general legal information, not legal advice. Zoe can make mistakes. Before acting on or relying on this analysis, have it checked by a qualified Australian lawyer.
Source: NSW Caselaw (www.caselaw.nsw.gov.au). Converted to plain text by ZoeLaw. Not the official version.
Medium Neutral Citation: All Civil Solutions Group Pty Ltd v Woonona-Bulli RSL Memorial Club Ltd [2025] NSWCA 273
Hearing dates: 9 October 2025
Date of orders: 17 December 2025
Decision date: 17 December 2025
Before: Ward P at [1]; McHugh JA at [78]; Griffiths AJA at [83]
Decision: 1. Leave to appeal refused, with costs.
Catchwords: BUILDING AND CONSTRUCTION – claim by subcontractor against principal for recovery of amount outstanding in relation to debt certificates issued under Contractors Debts Act 1997 (NSW) – where obligation of principal (the Club) to pay money owed to contractor (Builder) under construction contract was assigned to subcontractor pursuant to s 8(1) of the Contractors Debts Act 1997 (NSW) – where defence by principal raised set-off – determination of separate question by primary judge as to construction of s 11(4) of Contractors Debts Act 1997 (NSW) – where subcontractor contended s 25(4)(a) of Building and Construction Industry Security of Payment Act 1999 (NSW) constrains operation of s 11(4) of Contractors Debts Act 1997 (NSW) such that principal not entitled to raise any contractual defences arising under the construction contract between principal and defaulting contractor – application for leave to appeal from decision of primary judge rejecting subcontractor’s contention – leave to appeal refused with costs – obiter dicta as to construction of s 11(4) of Contractors Debts Act 1997 (NSW)
Legislation Cited: Building and Construction Industry Security of Payment Act 1999 (NSW), ss 4, 8(1), 9, 10(1), 22, 23(2), 25, 25(4), 32
Building and Construction Industry Security of Payment Amendment Act 2002 (NSW)
Contractors Debts Act 1997 (NSW), ss 5(1), 6, 7(1), 7(1A), 8(1), 9, 11(2), 11(3), 11(4), 19(b)
Uniform Civil Procedure Rules 2005 (NSW), r 36.16
Cases Cited: All Civil Solutions Group Pty Ltd v Woonona-Bulli RSL Memorial Club Ltd [2025] NSWSC 688
Re Summit Design & Construction [1999] NSWSC 1136; (1999) 33 ACSR 301
Sam the Paving Man Pty Limited v Berem Constructions Pty Limited (in liquidation) [2010] NSWSC 868
The Age Company Ltd v Liu (2013) 82 NSWLR 268; [2013] NSWCA 26
Warrane - Design Construct Fit-Out Pty Ltd v Woonona-Bulli RSL Memorial Club Ltd [2025] NSWCA 223
Warrane Design Construct Fit-Out Pty Ltd v Woonona Bulli RSL Memorial Club Ltd [2025] NSWSC 123
Woonona-Bulli RSL Memorial Club Ltd v Warrane-Design Construct Fit-Out Pty Ltd (No 2) [2025] NSWSC 365
Woonona-Bulli RSL Memorial Club Ltd v Warrane-Design Construct Fit-Out Pty Ltd [2025] NSWSC 271
Woonona-Bulli RSL Memorial Club Ltd v Warrane-Design Construct Fit-Out Pty Ltd [2025] NSWCA 89
Category: Principal judgment
Parties: All Civil Solutions Group Pty Ltd (Applicant)
Woonona-Bulli RSL Memorial Club Ltd (Respondent)
Representation: Counsel:
DS Weinberger SC with NT Immidi (Applicant)
T Lynch SC with Ms F Clark (Respondent)
Solicitors:
CCS Legal Pty Ltd (Applicant)
Pigott Stinson Lawyers (Respondent)
File Number(s): 2025/00273034
Publication restriction: Nil
[This headnote is not to be read as part of the judgment]
In December 2023, Warrane Design Construct Fit-Out (the Builder) engaged the applicant, All Civil Solutions Group Pty Ltd (All Civil), as subcontractor to carry out part of construction work that the Builder was contracted to do for the respondent, Woonona-Bulli RSL Memorial Club Ltd (the Club).
In 2024, All Civil served payment claims on the Builder, resulting in adjudication determinations being made under the Building and Construction Industry Security of Payment Act 1999 (NSW) (Security of Payment Act). All Civil then obtained judgments against the Builder in the District Court of New South Wales in respect of the adjudicated amounts, together with debt certificates issued by the District Court pursuant to s 7(1A) of the Contractors Debts Act 1997 (NSW) (Contractors Debts Act), totalling $2,556,151.20. All Civil served those on the Club together with notices of claim under the Contractors Debts Act, the effect of which was to assign to All Civil the obligation of the Club to pay money owed by it to the Builder under its contract with the Club, to the value of the debt certificates. The Club made some payments to All Civil such that the final amount outstanding under the debt certificates was $1,200,670.24.
All Civil (as assignee by operation of the Contractors Debts Act of the obligation of the Club to pay money under its construction contract to the Builder) commenced proceedings in the Technology and Construction List to recover the debt pursuant to s 11(3) of the Contractors Debts Act. In those proceedings, one of the defences the Club raised in its Technology and Construction List Response was, in effect, a claimed set-off. The Club contended that because the claim by All Civil was, by operation of s 11(4) of the Contractors Debts Act, subject to any defence that would have been available to the Club if the Builder had sued the Club for the assigned amount, and, if so sued, the Club would have had available to it defences to the value of at least $3,426,571.27, the Club was not liable to All Civil for any amount under the assignments sued upon.
Peden J heard as a separate question whether the Club was entitled to raise such a defence to All Civil’s claim. All Civil contended that the defences available to be raised under s 11(4) of the Contractors Debts Act were constrained by s 25(4)(a) of the Security of Payment Act. Peden J declared that, on the proper construction of s 11(4) of the Contractors Debts Act, the Club is entitled to raise the said defence.
By summons dated 30 July 2025, All Civil sought leave to appeal from that decision. All Civil contended that the primary judge should have found that the Club was not entitled to raise (in defence of All Civil’s claim) any contractual defences arising under the construction contract between the Club and the head contractor, the Builder.
All Civil contended that: its application involves a question of principle (the proper construction of s 11(4) of the Contractors Debts Act) and an issue of general importance (there being a dearth of authorities on the Contractors Debts Act and its interaction with the Security of Payment Act); there is a reasonably clear injustice to it, in that, if the primary judge is correct, it will have lost a substantial right to enforce the debt “with the benefit of” s 25(4) of the Security of Payment Act; and an appellate decision will address a “clash” between the primary judgment and the obiter dicta of Rees J on this issue in a judgment in related proceedings.
(1) The asserted issue of general importance (being the interaction between s 11(4) of the Contractors Debts Act and s 25(4) of the Security of Payment Act) is largely (if not altogether) diminished by the concession in oral argument that All Civil’s reliance on s 25(4) was “diluted”. Further, complaint that All Civil has lost a substantial right to enforce the debt "with the benefit of" s 25(4) of the Security of Payment Act cannot be reconciled with All Civil's acceptance in its submissions that, on one view, s 25(4) of the Security of Payment Act is irrelevant to the analysis of the question as to the proper construction of s 11(4) of the Contractors Debts Act. Confined to the question of the proper construction of s 11(4) of the Contractors Debts Act, the issue of principle raised by the proposed appeal is of less import when addressing whether leave should be granted. In circumstances where this is yet another episode in the ongoing saga of litigation between the parties, and given the merits of the appeal, leave to appeal is refused with costs: [24]-[29], (Ward P), [78] (McHugh JA), [83] (Griffiths AJA).
(2) Section 25(4) of the Security of Payment Act in its terms is premised on proceedings being commenced by "the respondent" (in context, the principal in Contractors Debts Act terms – here the Club) to set aside the “judgment for a debt” obtained by the filing of an adjudication certificate. The proceeding which led to the pleading dispute determined by the primary judge was not a proceeding commenced by the Club to set aside the judgment for a debt obtained by the Builder and assigned to All Civil. The focus on the interaction between s 11(4) and s 25(4)(a) is misplaced, as is the submission by All Civil that it has been deprived of the benefit of s 25(4)(a): [62]-[64] (Ward P), [78] (McHugh JA), [83] (Griffiths AJA).
(3) Insofar as All Civil submitted that what it was assigned was a “judgment unencumbered by contractual defences” or “the fruits of judgment … together with an inability to raise any defences”, this puts a gloss on s 8(1) of the Contractors Debts Act. The suggestion that the primary judge erred in saying that what is assigned to the subcontractor is a chose in action cannot be accepted. The obligation of the principal which is assigned is the obligation “to pay the money owed under the contract to the defaulting contractor” until the earlier of either the principal receiving a notice or notices indicating that the certified debt has been fully discharged or the payments no longer being payable under the contract. Once the notices of claim were served on the Club, an assignment was effected whereby the Club became liable to pay to All Civil the money it owed the Builder (to discharge All Civil’s certified debt): [65]-[68] (Ward P), [78] (McHugh JA), [83] (Griffiths AJA).
(4) Since the obligation is to make the payments to the unpaid person “as they become payable under the contract with the defaulting contractor” (s 9(2)), when there was an adjudication determination in relation to the relevant payment claim, that amount was automatically assigned and payable to All Civil: [68] (Ward P), [83] (Griffiths AJA).
(5) There is nothing that suggests s 25(4)(a) of the Security of Payment Act is to have ambulatory effect i.e., to inform the construction or operation of s 11(4) of the Contractors Debts Act. As to the proper construction of s 11(4): where s 8(1) of the Contractors Debts Act refers to the obligation of the principal to pay the money owed under the contract, it identifies the contractual obligation between the head contractor (the Builder) and the principal (which might be quantified by an adjudication determination under the Security of Payment Act). At the point of recovery of a s 7(1A) debt (arising by filing an adjudication certificate under the Security of Payment Act), as opposed to the earlier proceeding in which the Club sought to set aside in part the adjudication determination, there is nothing in s 25(4) of the Security of Payment Act to preclude the Club raising a contractual (or equitable) set-off. Accordingly, matters of set-off must be defences that the principal would have had against "recovery of the debt" by the defaulting contractor (the Builder) but for the assignment. In those circumstances, her Honour did not err in making the declaration that was made: [69]-[76] (Ward P), [78] (McHugh JA), [83] (Griffiths AJA).
(6) As a matter of construction of the Contractors Debts Act, the common-law debt under the contract between the principal and the head contractor which s 8(1) of the Act assigns to the subcontractor has nothing to do with the Security of Payment Act or with statutory rights conferred by the Security of Payment Act. The fact that the parties proceeded on the footing that the Security of Payment Act adjudications in this case quantified that common-law obligation does not change the operation of the statute. Nothing in the Security of Payment Act requires a different conclusion: [80]-[82] (McHugh JA).
WARD P: By summons dated 30 July 2025, the applicant, All Civil Solutions Group Pty Ltd (All Civil) seeks leave to appeal from an interlocutory decision of Peden J declaring that, on the proper construction of s 11(4) of the Contractors Debts Act 1997 (NSW) (the Contractors Debts Act), the respondent, Woonona-Bulli RSL Memorial Club Ltd (the Club), is entitled to raise certain matters (referred to in [26] and Part 2 of its Technology and Construction List Response filed on 13 June 2025 (List Response)) in defence of All Civil’s claim against it in the Technology and Construction List. In those proceedings, All Civil sued for recovery of the amounts outstanding under debt certificates issued under the Contractors Debts Act (see All Civil Solutions Group Pty Ltd v Woonona-Bulli RSL Memorial Club Ltd [2025] NSWSC 688 (primary judgment)). All Civil had contended that the defences available to be raised under s 11(4) of the Contractors Debts Act are constrained by s 25(4)(a) of the Building and Construction Industry Security of Payment Act 1999 (NSW) (Security of Payment Act).
All Civil contends that the primary judge should have found that the Club was not entitled to raise (in defence of its claim) any contractual defences arising under the construction contract between the Club and the head contractor, Warrane Design Construct Fit-Out (the Builder).
For the following reasons I would refuse leave to appeal with costs. Were leave to be granted, I would have dismissed the appeal with costs.
The background to the dispute is set out by the primary judge at [1]-[8] of the primary judgment and may be summarised largely by reference to the primary judgment and the parties’ submissions as follows.
In December 2023, the Builder engaged All Civil as a (fixed price) subcontractor to carry out part (the Club says the great bulk) of the construction work that the Builder was contracted to do for the Club ([1] of the primary judgment). The Club notes that the contract between the Club and the Builder entered into on 7 December 2023 (Contract) was a cost plus contract for construction of a memorial and the upgrade of a car park at the premises of the Club (referring to an earlier decision of Stevenson J between the Builder and the Club - Warrane Design Construct Fit-Out Pty Ltd v Woonona Bulli RSL Memorial Club Ltd [2025] NSWSC 123) but nothing turns on this.
In 2024, All Civil served payment claims on the Builder, resulting in adjudication determinations being made under the Security of Payment Act. All Civil then obtained judgments against the Builder in the District Court of New South Wales in respect of the adjudicated amounts, together with debt certificates issued by the District Court pursuant to s 7(1A) of the Contractors Debts Act, totalling $2,556,151.20. All Civil served those on the Club together with notices of claim under the Contractors Debts Act, the effect of which was to assign to All Civil the obligation of the Club to pay money owed to the Builder under its contract with the Club, to the value of the debt certificates.
The Club made some payments to All Civil such that the final amount outstanding under the debt certificates was $1,200,670.24 ([3]).
In early 2025, after disputes between the Builder and the Club, the Builder itself obtained an adjudication determination against the Club under the Security of Payment Act (in the sum of $2,094,018.14) (which it subsequently entered as a judgment against the Club on 3 February 2025 in the amount of $2,141,780.73) ([4]).
Assigned obligations to pay money owed under the Contract become payable to an assignee “as they become payable under the contract” (s 9(2) of the Contractors Debts Act) and therefore the Club says that the balance due to All Civil under the second of its notices of claim ($1,020,980.40) was payable on 22 January 2025 (when the obligation arose on the part of the Club to pay the adjudicated amount in respect of the disputed payment claim by the Builder – P/C 13). The unassigned amount payable to the Builder in respect of that adjudication determination was $1,073,037.74 ($2,094,018.14 - $1,020,980.40).
Shortly thereafter (on around 24 January 2025 or 31 January 2025), the Builder and the Club agreed that $284,318.94 was the amount payable on a further payment claim (P/C 14), which amount was assigned to All Civil by operation of the earlier notices of claim. This amount was paid to All Civil on 31 January 2025 (with no net effect as to the amount owing to the Builder by the Club). Thus, the amount thereafter due to All Civil under the second notice of claim became $736,661.46 ($1,020,980.40 - $284,318.94).
Before turning to the grounds of appeal, it is convenient to deal with the application for leave to appeal (noting the general principles concerning leave to appeal (considered in The Age Company Ltd v Liu (2013) 82 NSWLR 268; [2013] NSWCA 26 at [13])).
All Civil says that: its application involves a question of principle (the proper construction of s 11(4) of the Contractors Debts Act) and an issue of general importance (there being a dearth of authorities on the Contractors Debts Act and its interaction with the Security of Payment Act); there is a reasonably clear injustice to it, in that, if the primary judge is correct, it will have lost a substantial right to enforce the debt “with the benefit of” s 25(4) of the Security of Payment Act; and an appellate decision will address the “clash” between the primary judgment and the obiter dicta of Rees J (referred to below). The respondent consented to the grant of leave insofar as leave to appeal was necessary.
Insofar as the submissions for All Civil emphasise that the matter involves an issue of general importance (being the interaction between s 11(4) of the Contractors Debts Act and s 25(4) of the Security of Payment Act), that asserted importance is largely (if not altogether), diminished by the concession in oral argument that All Civil’s reliance on s 25(4) was “diluted” (see AT 24.36-40). Although not expressly abandoned, All Civil’s position on the question of reliance on s 25(4) was said to fall somewhere between “dilution” and “abandonment”.
Similarly, the complaint that All Civil has lost a substantial right to enforce the debt “with the benefit of” s 25(4) of the Security of Payment Act cannot be reconciled with All Civil’s acceptance in its submissions that, on one view, s 25(4) of the Security of Payment Act is irrelevant to the analysis of the question as to the proper construction of s 11(4) of the Contractors Debt**s Act.
Confined to the question of the proper construction of s 11(4) of the Contractors Debt**s Act, the issue of principle raised by the proposed appeal becomes of less import when addressing whether leave should be granted. In circumstances where this is yet another episode in the ongoing saga of litigation between the parties, and given my view as to the merits of the appeal, I would refuse leave to appeal. As I explain below, were leave to be granted, I would have dismissed the appeal with costs.
I turn then to a consideration of the proposed appeal, to explain the conclusion reached above.
The parties accept that the Contractors Debts Act may be engaged whenever a contractor (referred to in the Act as the “defaulting contractor”) retained to do work has sub-contracted the doing of some or all of that work but has not paid the sub-contractor (referred to in the Act as the “unpaid person”) for the doing of some or all of the sub-contracted work; and that it permits the unpaid person to obtain payment from money that “is or becomes payable” to the defaulting contractor from some other person (referred to in the Act as the “principal”). All Civil, in reply submissions, points out that there is no requirement that the “unpaid person” be a party to any contract and says that it is therefore sufficient if the “unpaid person” entered into an arrangement or money is otherwise owed to the “unpaid person” (referring to s 5(1) of the Contractors Debts Act). The Club does not appear to demur from this.
There are two “pathways” by which the sub-contractor (the unpaid person) may obtain such payment, the second of which is relevant in the present case.
The first (see s 7(1)) involves the issue by the Court of a “debt certificate” after judgment is given or entered in any proceedings relating to the recovery of money owed to a person for work carried out or materials supplied.
The second, pursuant to s 7(1A), involves the issue of a “debt certificate” in circumstances where an adjudication certificate within the meaning of the Security of Payment Act has been filed as a judgment for a debt in accordance with s 25 of that Act. The debt certificate is issued “in respect of the debt under this section” (see s 7(1A)). The debt certificate evidences the amount of the judgment debt (arising on the filing of the adjudication certificate). Service of a “notice of claim” (see s 6), together with a copy of the debt certificate, on the principal operates to assign to the unpaid person the obligation of the principal to pay the money owed under the contract to the defaulting contractor (see s 8(1) of the Act).
After a notice of claim is served on a principal in accordance with Pt 2 of the Contractors Debts Act, the principal must pay to the unpaid person the money owed to the defaulting contractor (s 9(1)) and must make the payments to the unpaid person “as they become payable under the Contract with the defaulting contractor” until the certified debt has been fully discharged or the payments are no longer payable under the contract (s 9(2)).
If the debt is assigned to the unpaid person, and the principal fails to make any payment required by the Act, the unpaid person may sue for and recover the assigned debt (s 11(2) of the Contractors Debts Act) and proceedings for recovery of the debt may be taken “in any manner in which the defaulting contractor might have taken them had there been no assignment” (s 11(3) of the ).
11 Right of recovery if principal fails to pay
(4) An unpaid person’s right of recovery under this section is subject to any defence that the principal would have had against recovery of the debt by the defaulting contractor had there been no assignment, other than a defence based on something done by the principal after the notice of claim was served on the principal.
Section 19(b) provides that the Act does not affect any rights a defaulting contractor or principal may have except as expressly provided by the Act.
Section 25 of the Security of Payment Act deals with the filing of an adjudication certificate as a judgment for a debt and provides that it is “enforceable accordingly”. Section 25(4)(a) of the Security of Payment Act provides that:
25 Filing of adjudication certificate as judgment debt
…
(4) If the respondent commences proceedings to have the judgment set aside, the respondent—
(a) is not, in those proceedings, entitled—
(i) to bring any cross-claim against the claimant, or
(ii) to raise any defence in relation to matters arising under the construction contract, or
(iii) to challenge the adjudicator’s determination…
Her Honour (at [28]) rejected All Civil’s submission that the scope of defences available to be raised under s 11(4) of the Contractors Debts Act was constrained by s 25(4) of the Security of Payment Act. Her Honour noted that All Civil’s submission was that, because the Builder had obtained adjudication certificates and a resulting judgment against the Club and part of that debt was assigned to All Civil through the Contractors Debts Act, the Club would not be entitled to raise any defence if the Builder sought to enforce the adjudication/judgment and that All Civil (the subcontractor) should have the “flow on benefit” of s 25(4) of the Security of Payment Act. In oral submissions on this appeal, All Civil put this as being that the assignment of the debt was “unencumbered” by any contractual defences (AT 13.42).
Her Honour’s reasons for rejecting (at [28]) All Civil’s submission were as follows:
- Section 25(4) is a feature of the “pay now, argue later” policy of the SOP Act: Martinus Rail Pty Ltd v Qube RE Services (No 2) Pty Ltd [2025] NSWCA 49 at [8] (Payne JA, Gleeson JA and Griffiths AJA agreeing). That legislation creates an entitlement to payment that is to be determined informally, summarily and quickly, and then summarily enforced without prejudice to the rights of both parties to the construction contract which can be determined in due course: Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd (2018) 264 CLR 1 at [44] (Kiefel CJ, Bell Keane [sic], Nettle and Gordon JJ). The ability to take later proceedings to determine rights under the contract is enshrined in s 32.
- That policy is not replicated in the CD Act. There is no indication that the CD Act is intended to create an entitlement to payment divorced from or without prejudice to the substantive rights of the principal and contractor: see eg s 19. Rather, the subcontractor’s ability to recover under the CD Act depends on the existence of a liability by the principal to the head contractor under their contract. So much is clear from the reference in s 5(1) to money that is or becomes payable by the principal to the contractor under the contract, the fact that what is assigned under s 8(1) is the benefit of the obligation of the principal to pay the contractor money owed to the contractor under the contract, and the requirement of the principal under s 9(2) to make payments as money becomes payable under the contract with the contractor.
- Those provisions necessarily require that attention be directed to the contractual rights of the principal and contractor. As explained by Latham CJ in Barnes, in the context of the predecessor provision in the 1897 Act, the effect of s 11 is that “the liability of the [principal] to the [subcontractor] is limited by [the principal’s] liability to the contractor. If no moneys are due or to accrue due from the [principal] there is no liability which the [subcontractor] can enforce”: Barnes at 217-8. What is assigned to the subcontractor is a chose in action which is subject to, and can be limited by, the provisions of the contract between the principal and the contractor: see eg Re Summit Design & Construction [1999] NSWSC 1136 at [12] (Austin J).
- For that reason, if a principal does not have an obligation to pay money to its contractor under that contract or is entitled to a set-off, then it would be entitled to raise those matters as a defence under s 11(4).
- Section 11(4) entitles the Club to raise in defence of the Subcontractor’s claim matters of set-off available to the Club as against the Builder under the Contract, being the matters referred to at [26] above. Consistent with orthodox principles of assignment, the Club would not be able to raise a cross-claim against the Subcontractor so as to make it liable in damages to the Club in excess of the amount to which the Subcontractor may be entitled on its assigned claim: see eg Young v Kitchin (1878) 3 Ex D 127; Mitchell v Purnell Motors Pty Ltd (1961) 78 WN (NSW) 26.
…
- With respect, I do not consider that s 11(3) requires the proper construction of s 11(4) to be read in an equivalent manner to the SOP Act. In my opinion, the purpose of s 11(3) is to make clear the subcontractor’s ability to rely on causes of action available to the contractor and the court in which those causes of action could be pursued: see Barnes at 232 (Dixon J). The provisions of the SOP Act are peculiar to the parties to a construction contract and involve a procedure for speedy recovery of payments, which is inapplicable as between the Subcontractor and the Club because of the lack of privity of contract and because it is not picked up by the limited assignment effected by the CD Act. While the SOP Act and CD Act may operate in the same context, they are not equivalent; the SOP Act should not dictate the approach to interpreting the provisions of the CD Act. This is particularly so where the CD Act was created first in time and has only been amended to include limited references to the SOP Act, and not in a way that suggests the Subcontractor’s construction is correct.
- Further, if the CD Act was construed as suggested by the Subcontractor, then the Club would have no means of recovering any sum from the Subcontractor for defective works, whereas the right to bring proceedings against the Builder after a SOP Act adjudication determination is preserved: s 32 SOP Act. It seems unlikely that the legislature intended a principal to become liable under the CD Act procedure, without ever being entitled to be heard. On the Subcontractor’s construction, the only defence available to the Club would be to commence proceedings to challenge the adjudication determination obtained by the Builder. That construction presumes an interrelationship between the CD Act and SOP Act which, as I have explained, does not exist.
- The primary judge erred in finding and declaring that on the proper construction of s 11(4) of the Contractors Debts Act 1997 (NSW), the respondent is entitled to raise matters referred to in paragraph 26 and Part 2 of its Technology and Construction List Response filed on 13 June 2024, in defence of the Applicant’s claim (the Defences).
- The primary judge should have held that s 25(4) of the Building and Construction Industry Security of Payment Act 1999 (NSW) prohibited the respondent from raising the Defences.
All Civil contends that the primary judge incorrectly answered the question identified at [39] above in the negative, with the consequence that a debt which is obtained under the Security of Payment Act and which is subsequently assigned under the Contractors Debts Act, has the effect of extinguishing the benefit of the “pay now, argue later” policy of the Security of Payment Act recognised to be contained in s 25(4)(a) of the Security of Payment Act.
All Civil submits that the combined statutory regimes operate, in effect, so as to place the beneficiary/assignee of a debt in the same position as the assignor without modification (such that s 25(4) effectively applies to the debt assigned).
All Civil contends that the primary judge erred in the following three respects.
First, in finding (at [29]-[30]) that the “pay now, argue later” policy of the Security of Payment Act is not replicated in the Contractors Debts Act, on the basis that a subcontractor’s ability to recover under the latter depends on the existence of a liability by the principal to the head contractor under the contract between principal and head contractor. All Civil submits that, in so finding, the primary judge erred in treating a judgment obtained under the Security of Payment Act as not one that is payable by the principal (the Club) to the contractor (the Builder) under contract. All Civil argues that money payable under the Security of Payment Act is treated by that Act as money payable under contract (referring by way of example to ss 8(1), 9, 10(1) and 22 of the Security of Payment Act).
All Civil says that if the primary judge is correct it would be inutile to assign (under the Contractors Debts Act) a judgment debt obtained under the Security of Payment Act based on an “arrangement” within the meaning of a “construction contract” as defined by s 4 of the Security of Payment Act because there would never be a liability under any contract and such an assigned debt could never be enforced.
Second, in finding (at [31]) that what is assigned to the subcontractor is a chose in action which is subject to the contract between the principal and subcontractor. All Civil submits that that is not so in all cases; in particular, that it is not the case in respect of a judgment debt under the Security of Payment Act. All Civil accepts that it may well be the case if the debt assigned is founded in contract and divorced from the Security of Payment Act. All Civil says that the decision in Re Summit Design & Construction [1999] NSWSC 1136; (1999) 33 ACSR 301 (to which the primary judge referred (at [31]) by way of example of the proposition that what is assigned to the subcontractor is a chose in action which is subject to, and can be limited by, the provisions of the head contract), was not concerned with the assignment of a debt under the nor the operation of s 25(4) of that Act. All Civil says that, as such, reliance on that decision was misplaced.
Just over three years ago this Parliament enacted the [Security of Payment Act]. The Act was the first of its kind in Australia. It has set a benchmark for dealing with payment problems in the building and construction industry...
Reports received by my department indicate that the Act is proving very successful in reforming these practices. But changes can be made to make the Act even more effective. The purpose of this bill is to enact those changes...
By raising in court defences such as that the work does not have the value claimed or that the claimant has breached the contract by doing defective work, some respondents have been able to delay making a progress payment for a long time. Those respondents have forced claimants to incur considerable legal costs. They have effectively defeated the intention of the Act. To overcome the problem, the bill clarifies that in court proceedings by a claimant to enforce payment of the debt due under the Act, a respondent will not be able to bring any cross-claim against the claimant and will not be able to raise any defence in relation to matters arising under the construction contract.
…
To further enhance the remedies available to a claimant, the bill incorporates an amendment to the [Contractors Debts Act] to provide that the [Contractors Debts Act] covers all debts arising under the [Security of Payment Act]. The [Contractors Debts Act] establishes a debt recovery procedure that allows a claimant to whom money is owed to seek payment of that money from a principal who engaged the defaulting respondent. This amendment will ensure all claimants under the [Security of Payment Act] will be able to avail themselves of this procedure.
[New South Wales Legislative Assembly, Parliamentary Debates (Hansard), 12 November 2002 at 6541-6544]
- As earlier mentioned, s 11(4) of the Contractors Debts Act 1997 provides that an unpaid person may sue the principal and recover the assigned debt in their own name but, effectively, ‘standing in the shoes’ of the defaulting contractor. In any such debt recovery proceedings, the unpaid person’s right of recovery “is subject to any defence that the principal would have had against recovery of the debt by the defaulting contractor had there been no assignment”. It is important to bear in mind the nature of the debt recovery proceedings which the defaulting contractor could have taken, absent the assignment, but which the unpaid person may now take instead: s 11(3), Contractors Debts Act 1997.
- Once an adjudication certificate has been filed as a judgment, it is “enforceable accordingly”: s 25(1), Building and Construction Industry Security of Payment Act 1999. The subcontractor is now entitled to take such enforcement action, at least to the extent of the unpaid person’s certified debt: s 8(2), Contractors Debts Act 1997. I do not accept that the Club would be entitled to defend any enforcement action brought by the subcontractor on the basis of, say, alleged defects in the construction work. Consistently with this, the Club’s ability to resist enforcement of the judgment by having the judgment set aside is circumscribed by s 25(4) of the Building and Construction Industry Security of Payment Act 1999: the Club is not entitled to bring a cross-claim against the builder, or raise any defence in relation to matters arising under the construction contract, or to challenge the adjudicator’s determination. Where the Club has now failed in its application to set aside the judgment, it is hard to see how it could seek to do so again in answer to enforcement action brought by the subcontractor.
In summary, All Civil says that it was entitled to sue the Club for the debt, as it did (s 11(3)). It accepts that its right to sue for the debt was subject to any defence that the Club would have against the recovery of the debt by the Builder had there been no assignment (s 11(4)) but says that the Club would not have had any defence against the recovery of the debt by the Builder had there been no assignment.
All Civil thus submits that the primary judge should have held and declared that, on the proper construction of s 11(4) of the Contractors Debts Act, the Club was not entitled to raise the matters referred to in [26] and Part 2 of its List Response in defence to All Civil’s claim for recovery of the debt owed by the Club to it.
The Club notes that the primary judge considered that nothing in the Security of Payment Act expressed itself as operating in respect of an obligation assigned by operation of the Contractors Debts Act and nothing in the Contractors Debts Act gave ambulatory effect to any provision in the Security of Payment Act (referring to [30]-[33] of the primary judgment). In particular, the Club notes that her Honour did not accept that s 11(3) of the Contractors Debts Act, which provides that “[p]roceedings for recovery of the [assigned] debt may be taken in any manner in which the defaulting contractor might have taken them had there been no assignment”, gave ambulatory effect to s 25(4) of the Security of Payment Act (see [34]-[36] of the primary judgment).
The Club says that the notional premise for the operation of s 11(4) of the Contractors Debts Act (that a contractor has not been paid by the principal and is suing to obtain a judgment for the amount unpaid; i.e. that the contractor does not have, but is seeking, a judgment) is to be contrasted with that for the engagement of s 25(4) of the Security of Payment Act, which operates in proceedings where an adjudication certificate has been filed as a judgment for a debt (in other words where there is a judgment). The Club says that All Civil’s proceedings were not of the latter kind; that it sought, rather than had, a judgment.
The Club argues that All Civil’s right to bring proceedings (to recover the debt) arose upon money being (but for the assignment) payable by the Club under the contract to the Builder (i.e., a point in time prior to the Builder being enabled to obtain an adjudication certificate or judgment). It says that All Civil’s submission is premised on the contrary, namely that there is an assignment of a Security of Payment Act “judgment”. The Club points out that All Civil was not itself ever competent to apply for an adjudication certificate or judgment thereon; because it was not, in respect of P/C 13, “a claimant”.
The Club submits that All Civil’s construction is not required by the language of s 11(3) itself. The Club argues that the construction of s 11(3) advanced by All Civil (that a principal would be without a means of recovering from the subcontractor any overpayment of the amount finally determined as due under the construction contract – but the principal retains its rights to recover against a contractor any such overpayment) means that the position of an assignee of an obligation in respect of the satisfaction of that obligation is improved over that of the contractor whose entitlement is assigned. The Club says that this is a construction of s 11(3) which is inconsistent with the text and purpose of s 11(4) of the Contractors Debts Act. The Club submits that the fact that an assignment operates “subject to defences” is an indication that the assignee was to be entitled to payment on no different basis than the contractor would have been if it was itself suing for a judgment.
It is important to appreciate that s 25(4) of the Security of Payment Act in its terms is premised on proceedings being commenced by “the respondent” (in context, the “principal” in Contractors Debts Act terms – here the Club) to set aside the “judgment for a debt” obtained by the filing of an adjudication certificate.
The proceeding which led to the pleading dispute determined by the primary judge was not a proceeding commenced by the Club to set aside the judgment for a debt obtained by the Builder and assigned to All Civil. At the risk of stating the obvious, it was a proceeding commenced by All Civil (the “claimant” in Security of Payment Act terms) for recovery of the “debt” assigned to it, pursuant to s 11(3) of the Contractors Debts Act*.*
The focus on the interaction between s 11(4) and s 25(4)(a) is therefore misplaced, as is the submission by All Civil that it has been deprived of the benefit of s 25(4)(a).
Insofar as All Civil submitted that what it was assigned was a “judgment unencumbered by contractual defences” (AT 13.40; 16. 47) or “the fruits of judgment … together with an inability to raise any defences”, this puts a gloss on s 8(1) of the Contractors Debts Act*.* What that section makes clear is that service of a notice of claim (as defined in s 6(2) and which must be accompanied with a copy of the debt certificate) “operates to assign to the unpaid person [here, All Civil] the obligation of the principal [here, the Club] to pay the money owed under the Contract to the defaulting contractor [here, the Builder]”.
The suggestion that the primary judge erred in saying that what is assigned to the subcontractor is a chose in action (see [31]) cannot be accepted.
The obligation of the principal which is assigned is the obligation “to pay the money owed under the contract to the defaulting contractor”. “Contract” is defined in s 3(1) as meaning an express or implied contract, whether or not in writing (and hence may well encompass an “arrangement” cf All Civil’s contention at [47] above). The money in question is money “that is payable or becomes payable” to the defaulting contractor; and the obligation to pay the unpaid person (under s 9(2)) continues until the earlier of either the principal receiving a notice or notices indicating that the certified debt has been fully discharged or the payments no longer being payable under the contract.
As the Club points out, once the notices of claim were served on it, an assignment was effected whereby it became liable to pay to All Civil the money it owed the Builder (to discharge All Civil’s certified debt) and, since the obligation is to make the payments to the unpaid person “as they become payable under the contract with the defaulting contractor” (s 9(2)), when there was an adjudication determination in relation to P/C 13 that amount was automatically assigned and payable to All Civil (that being a point prior to the Builder being entitled to file an adjudication certificate as a judgment because, by reason of the assignment to All Civil, there was no failure to pay the adjudicated amount to the Builder). Hence, the Club points to the decision by Stevenson J (referred to above) (AT 27.15) staying enforcement of the adjudication certificate judgment by the Builder up to the amount that had been assigned to All Civil.
For the above reasons, I would refuse leave to appeal with costs but, were leave to be granted, would dismiss the appeal with costs.
McHUGH JA: I have had the benefit of reading in draft the President’s reasons for judgment. I agree with her Honour’s orders and, subject to what follows with respect to the interaction of the two legislative regimes, with her Honour’s reasons.
Assume three parties: a principal, a head contractor and a subcontractor.
As to the Contractors Debts Act 1997 (NSW):
Subsection 7(1) is concerned with a “judgment” in favour of the subcontractor against the head contractor. (It appears that the judgment need not arise out of a contract; it is enough that it arises out of “proceedings relating to the recovery of money owed to a person for work carried out or materials supplied”: subs (1).)
So too is subs (1A) concerned with a “judgment” in favour of the subcontractor against the head contractor. Subsection (1A) is engaged where “an adjudication certificate within the meaning of the Building and Construction Industry Security of Payment Act 1999 [(SOPA)] has been filed as a judgment for a debt in accordance with section 25 of that Act”.
The “debt certificates” which s 7 authorises the court to issue thus have nothing to do with the contract between the head contractor and the principal, or any judgment in favour of the head contractor against the principal.
By contrast, s 5(1) refers to the contract between the head contractor and the principal. The section provides that the subcontractor “can obtain payment of that money in accordance with this Act out of money that is payable or becomes payable to the defaulting [head] contractor … for work or materials that the principal engaged the defaulting [head] contractor to carry out or supply under a contract.” “Contract” here means (at least primarily, and perhaps exclusively) an ordinary common law contract: “an express or implied contract, whether or not in writing”: s 3(1).
Upon “[s]ervice of a notice of claim on the principal”, s 8(1) then operates to assign to the subcontractor the benefit of “the obligation of the principal to pay the money owed under the contract to the defaulting [head] contractor.” What is assigned by s 8(1) is a common-law contractual obligation owed by the principal to the head contractor. The Contractors Debts Act does not assign any statutory obligation to pay an adjudicated amount imposed by s 23(2) of SOPA referred to below.
The parties proceeded on the footing, so the Court was told from the bar table, that SOPA adjudications in this case amounted to a quantification of the common-law obligation which s 8(1) assigns. That is very different from saying that what s 8(1) assigns is the statutory obligation to pay an adjudicated amount pursuant to s 23(2) of SOPA. The application for leave to appeal is to be decided on that footing.
**********
Date change to orders on coversheet
All Civil Solutions Group Pty Ltd
Woonona-Bulli RSL Memorial Club Ltd [2025] NSWCA 273
(2013) 82 NSWLR 268
(2018) 264 CLR 1
Leave to appeal refused with costs.
The Club notes that the application by the Builder for judgment against the Club on the basis of the 30 January 2025 adjudication certificate (totalling $2,141,780.73) (see [8] above) did not address the consequences for the Builder of the assignment effected by service of the second notice of claim.
On 17 February 2025, All Civil served the Club with a notice of claim attaching a debt certificate for $464,008.78 (the third notice/debt certificate) which reduced the amount thereafter payable by the Club to the Builder to $656,791.55 (($2,141,780.73 - $1,020,980.40) - $464,008.78) and increased the amount payable to All Civil to $1,200,670.24 ($736,661.46 + $464,008.78).
On 20 February 2025, the Club applied to set aside, in part, the adjudication determination in respect of P/C 13.
On 25 February 2025, after becoming aware that the Builder had obtained and served a garnishee order attaching $2,141,870.41, the Club applied for a stay of enforcement of the judgment that the Builder had obtained. The Club’s application for a stay was heard by Stevenson J on 27 February 2025 (this resulting in the judgment referred to at [5] above). His Honour concluded that the service by All Civil of the debt certificates had the effect that the judgment obtained by the Builder overstated the amount due by the Club to the Builder by $1,200,670.24 and stayed the Builder’s judgment to that extent. His Honour ordered that the Club pay the balance under the judgment ($941,110.49) into Court pending determination of the Club’s challenge to the P/C 13 adjudication determination ([5]). That amount was duly paid into Court.
The Club’s challenge to the P/C 13 adjudication determination was heard by Rees J and the Club was unsuccessful (see Woonona*-Bulli RSL Memorial Club Ltd v* Warrane*-Design Construct Fit-Out Pty Ltd* [2025] NSWSC 271 which was handed down on 27 March 2025).
Rees J subsequently determined on 16 April 2025 (see Woonona*-Bulli RSL Memorial Club Ltd v* Warrane*-Design Construct Fit-Out Pty Ltd* (No 2) [2025] NSWSC 365 (Woonona (No 2))) that All Civil had no claim on the moneys paid into Court but was entitled to take proceedings against the Club to recover the balance outstanding under its debt certificates. Her Honour ordered that the parties bring in short minutes reflecting the amounts of the funds in Court which ought be paid to the Builder and the Club. Orders were made on 24 April 2025 that $859,134.02 of the funds in Court be paid to the Builder and that the balance (being part of the adjudicated amount which the Club had already paid to the Builder) be returned to the Club.
On 16 May 2025, those orders were amended in chambers by consent pursuant to r 36.16 of the Uniform Civil Procedure Rules 2005 (NSW) with the effect that the money held in Court ($941,110.49) was to be paid out as follows: to the Builder, the sum of $859,132.02 and to the Club, the sum of $81,978.47.
The Club filed a notice of appeal from the orders made by Rees J and applied for a stay of the order for payment of moneys out of Court. The application for a stay was dismissed by Griffiths AJA on 2 May 2025 (Woonona*-Bulli RSL Memorial Club Ltd v* Warrane*-*Design Construct Fit-Out Pty Ltd [2025] NSWCA 89). The Club subsequently discontinued its appeal but the Builder’s application for leave to cross-appeal concerning the money ordered to be returned to the Club remained on foot as at the time of the primary judgment. Leave to cross-appeal was refused on 8 October 2025 (Warrane - Design Construct Fit-Out Pty Ltd v Woonona-Bulli RSL Memorial Club Ltd [2025] NSWCA 223 (Bell CJ, Stern JA, Griffiths AJA)).
All Civil (as assignee by operation of the Contractors Debts Act of the “debt”) then commenced proceedings to recover the debt pursuant to s 11(3) of the Contractors Debts Act. In those proceedings, the Club raised in its List Response two defences, relevantly including, that, because the claim by All Civil was, by operation of s 11(4) of the Contractors Debts Act, subject to any defence that would have been available to the Club if the Builder had sued the Club for the assigned amount, and, if so sued, the Club would have had available to it defences to the value of at least $3,426,571.27, the Club was not liable to All Civil for any amount under the assignments sued upon (which the Club here refers to as the “s 11(4) Issue”). The primary judge referred to the allegation so raised by the Club as an entitlement by it to claim repayment by the Builder, as moneys had and received, of amounts paid for variations or delay costs said to have been caused by breach of the Builder’s obligations under its contract with the Club, which the primary judge characterised as a pleading of set-off (see [26] of the primary judgment).
All Civil, which contends that the pleaded “contractual” defence is not a defence which the Club would have had against recovery of the debt by the Builder had there been no assignment, invoking s 11(4) of the Contractors Debts Act, filed a notice of motion on 4 June 2025 seeking summary judgment.
On 4 June 2025, at the hearing of that summary judgment application, the parties agreed that the primary judge should (by way of the hearing of a separate question) determine the question of construction of s 11(4) of the Contractors Debts Act, which the parties agreed would resolve matters raised in the Club’s List Response as to matters of set-off in relation to the alleged breach of contract by the Builder and some payment of money into Court ([9]).
The primary judge rejected All Civil’s contention as to the unavailability of contractual defences and held that the Club was entitled to raise matters of set-off in defence to All Civil’s claim ([10]).
All Civil now seeks leave to appeal that decision. The application for leave to appeal was heard concurrently with the hearing of the appeal itself.
Section 11(4) of the Contractors Debts Act then provides:
Third, in finding as relevant (at [37]) that, if the Contractors Debts Act were construed as suggested by All Civil, the Club would have no means of recovering any sum from All Civil for defective work. While All Civil accepts the premise of that statement, it submits that the finding presupposes that the Club would be without remedy. All Civil says that the Club retains its rights against the Builder (referring to s 32 of the Security of Payment Act and s 19 of the Contractors Debts Act). All Civil says that the Club is in the same position as if it had paid the Builder and the Builder had voluntarily paid the subcontractor (All Civil); and that, in such a situation, the Club would not be able to recover any sum from it for defective works. All Civil says that the decision referred to by the primary judge at [38] (Sam the Paving Man Pty Limited v Berem Constructions Pty Limited (in liquidation) [2010] NSWSC 868) is obiter, ex tempore, and related to leave to proceed against a party in liquidation and so is readily distinguishable.
All Civil argues that s 19(b) of the Contractors Debts Act operates harmoniously with s 32 of the Security of Payment Act. All Civil says that s 19(b) does not trespass on the assignment in the sense that it does not put the assignor in a better position; rather, it does not permit the assignor to raise contractual defences which it would not have been entitled to raise absent an assignment.
All Civil submits that the finding at [36] that the provisions of the Security of Payment Act are peculiar to the parties to a construction contract supports its construction. It submits that it is unlikely that the legislature intended a subcontractor, in order to recover a debt created by the Security of Payment Act and assigned under the Contractors Debts Act, to be compelled to litigate contractual defences in respect of a contract to which it is not privy and devoid of the practical means of meeting a defence of the kind raised.
All Civil notes that s 7(1A) of the Contractors Debts Act was introduced as part of a widespread reform in 2002 to the Security of Payment Act (see Building and Construction Industry Security of Payment Amendment Act 2002 (NSW)). All Civil refers in this regard to the following statements in the second reading speech:
I note that, in response to the above submission, All Civil argues that on its construction an assignee is not placed in a “better position”. It says that in either event (whether or not there is an assignment) the principal retains its rights against the head contractor and the head contractor retains its rights against the subcontractor. All Civil argues that its construction leaves work for s 11(4) to do (for example, it says that where a debt obtained by the operation of a contract is assigned, contractual defences would be available in such circumstances).
All Civil embraces the proposition by the Club that an assignee was to be entitled to payment on no different basis than the contractor would have been if it was itself suing for a judgment, but All Civil maintains that the Club had no defence to the Builder’s attempt to recover the debt. All Civil says that it is for that reason that on 3 February 2025 judgment was entered in favour of the Builder against the Club for $2,141,780.73 (referring to Stevenson J’s judgment at [12]).
Finally, when looking at s 25(4)(a) of the Security of Payment Act, I agree that there is nothing that suggests it is to have ambulatory effect i.e., to inform the construction or operation of s 11(4) of the Contractors Debts Act.
Turning to the proper construction of s 11(4), and what has been described as the central or “critical” question in this proceeding, the question is whether the principal (i.e., the Club) would have had a defence of set-off “against recovery of the debt” by the defaulting contractor had there been no assignment.
The Club accepts that the Security of Payment Act provides a mechanism for the quantification of an entitlement of an amount payable for construction work done under a construction contract and that s 23(2) of that Act provides when that adjudicated amount must be paid.
However, where s 8(1) of the Contractors Debts Act refers to the obligation of the principal to pay the money owed under the contract, it identifies the contractual obligation between the head contractor (the Builder) and the principal (which might be quantified by the adjudication determination).
The Club argues that the proceedings that are notionally required to be considered when addressing s 11(4) are proceedings between the Club and the Builder where the Builder seeks recovery of the “debt” (i.e., the s 7(1A) debt arising by filing an adjudication certificate under the Security of Payment Act).
At the point of recovery of that debt, as opposed to the earlier proceeding in which the Club sought to set aside in part the adjudication determination, there is nothing in s 25(4) of the Security of Payment Act to preclude the Club raising a contractual (or equitable) set-off.
Accordingly, matters of set-off must be defences that the principal would have had against “recovery of the debt” by the defaulting contractor (the Builder) but for the assignment.
In those circumstances, her Honour did not err in making the declaration that was made.
Section 9(1) provides that “the principal must pay the money owed to the defaulting [head] contractor to the” subcontractor. In light of the opening words of subs (1) — “After a notice of claim is served on a principal” — that must be the same “money owed” as referred to in s 8(1): “the money owed under the contract to the defaulting [head] contractor”. There is no suggestion that s 9(1) creates any obligation to pay enforceable separately from the regime for recovery in s 11.
Section 11(1) provides that the assignment is “valid at law”. Where the principal fails to make a payment required to be made by s 9(1), s 11(2) permits the subcontractor to “sue for and recover the debt assigned to the [subcontractor]”. “[T]he debt assigned” is “the obligation of the principal to pay the money owed under the contract to the defaulting [head] contractor” assigned by operation of s 8(1). Again, it is not the statutory obligation to pay imposed by s 23(2) of the SOPA.
Section 11(3) permits the subcontractor to bring proceedings “for recovery of the [common-law contractual] debt … in any manner in which the defaulting [head] contractor might have taken them [i.e., against the principal] had there been no assignment.” The provision authorises the subcontractor to sue the principal in any court in which the head contractor could have sued the principal.
Section 11(4) then provides that the subcontractor’s “right of recovery under this section is subject to any defence that the principal would have had against recovery of the debt by the defaulting [head] contractor had there been no assignment …” The “right of recovery under this section” is the subs (2) right to “sue for and recover the debt assigned”, that is, the assigned common-law debt under the contract. The “defence[s]” which subs (4) preserves are any defences the principal might have had to a common-law claim in contract brought against it by the head contractor.
It follows, as a matter of construction of the Contractors Debts Act, that the common-law debt under the contract between the principal and the head contractor which s 8(1) of the Act assigns to the subcontractor has nothing to do with SOPA or with statutory rights conferred by SOPA. (The fact that the parties proceeded on the footing that SOPA adjudications in this case quantified that common-law obligation does not change the operation of the statute.)
Nothing in SOPA requires a different conclusion:
SOPA confers statutory rights against the principal on (relevantly) the head contractor: the right to receive a progress payment: s 8(1); the consequential right to serve a payment claim: s 13(1); where the payment claim is the subject of adjudication, the right to be paid the adjudicated amount: s 23(2); the right to file an adjudication certificate as a judgment for a debt in a court of competent jurisdiction, and the right to enforce the judgment (against the principal) “accordingly”: s 25(1). SOPA itself does not confer rights on a subcontractor directly against a principal.
Section 25(4) operates only where proceedings are commenced by the “respondent” (i.e., the principal, being the “person on whom a payment claim is served”: s 14(1)) “to have the [s 25(1)] judgment set aside”. No part of the present proceedings commenced by the subcontractor claims relief setting aside the s 25(1) judgment against the principal.
The “defence[s]” which s 11(4) of the Contractors Debts Act recognises and preserves are thus not affected by s 25(4) of SOPA.
GRIFFITHS AJA: I agree with the President.