All Civil Solutions Group Pty Ltd v Woonona-Bulli RSL Memorial Club Ltd

Legislation Cited: Building and Construction Industry Security of Payment Act 1999 (NSW)
Contractors Debts Act 1997 (NSW)
Interpretation Act 1987 (NSW)

Cases Cited: Concrete Constructions Pty Ltd v Barnes (1938) 61 CLR 209
Ex parte Road Maintenance & Contracting Co Ltd; Re Jordan (1936) 36 SR (NSW) 362
Martinus Rail Pty Ltd v Qube RE Services (No 2) Pty Ltd [2025] NSWCA 49
Mitchell v Purnell Motors Pty Ltd (1961) 78 WN (NSW) 26
Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd (2018) 264 CLR 1
Re Summit Design & Construction [1999] NSWSC 1136
Sam the Paving Man Pty Limited v Berem Constructions Pty Limited (in liquidation) [2010] NSWSC 868
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 [2025] NSWSC 271
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] NSWCA 89
Young v Kitchin (1878) 3 Ex D 127

Category: Procedural rulings

Parties: All Civil Solutions Group Pty Ltd (Plaintiff)
Woonona-Bulli RSL Memorial Club Ltd (Defendant)

Representation: Counsel:
D Weinberger (Plaintiff)
T Lynch SC with F Clark (Defendant)
Solicitors:
Tom Howard Legal (Plaintiff)
Pigott Stinson (Defendant)

File Number(s): 2025/00213642

Publication restriction: Nil

JUDGMENT

1. In December 2023, Warrane Design Construct Fit-Out (the Builder) engaged All Civil Solutions Group Pty Ltd (the Subcontractor) to carry out part of the construction work it was contracted to do for Woonona-Bulli RSL Memorial Club Ltd (the Club). This dispute is one of many between the parties. It concerns the Subcontractor’s claim against the Club for payment of money due to it from the Builder.

2. In 2024, the Subcontractor served payment claims on the Builder, resulting in adjudication determinations being made under the Building and Construction Industry Security of Payment Act 1999 (NSW) (SOP Act). Then, the Subcontractor obtained judgments against the Builder in the District Court of New South Wales in respect of the adjudicated amounts, together with debt certificates issued under the C**ontractors Debts Act 1997 (NSW) (CD Act), totalling $2,556,151.20. The Subcontractor served those on the Club together with notices of claim under that Act.

3. The Club made some payments to the Subcontractor, and now the final amount outstanding under those certificates is $1,200,670.24.

4. In and from December 2024, the Builder and the Club also fell into dispute in relation to payment claims and adjudication determinations under the SOP Act. In early 2025, the Builder obtained an adjudication determination against the Club, which it entered as a judgment against the Club in this Court in the amount of $2,141,780.73. The Club commenced proceedings seeking to quash part of the adjudication determination and separately sought to stay the judgment.

5. The Club’s application for a stay was heard and determined by Stevenson J: Warrane Design Construct Fit-Out Pty Ltd v Woonona Bulli RSL Memorial Club Ltd [2025] NSWSC 123. His Honour concluded that the Subcontractor’s service 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: at [17]. His Honour stayed the Builder’s judgment to that extent and ordered that the Club pay the balance under the judgment, $941,110.49, into Court pending determination of the Club’s challenge to the adjudication determination: at [21].

6. The Club’s challenge to the adjudication determination was dismissed by Rees J: Woonona-Bulli RSL Memorial Club Ltd v Warrane-Design Construct Fit-Out Pty Ltd [2025] NSWSC 271.

7. Her Honour was also asked to determine a question about what should occur with the monies that had been paid into Court by the Club: Woonona-Bulli RSL Memorial Club Ltd v Warrane-Design Construct Fit-Out Pty Ltd (No 2) [2025] NSWSC 365 (Woonona (No 2)). Her Honour found that the Subcontractor had no claim on that money but was entitled to take proceedings against the Club to recover the balance outstanding under its debt certificates: see [41]-[42]. Her Honour ordered that $859,134.02 of the funds in Court be paid to the Builder. The balance, being part of the adjudicated amount which the Club had already paid directly to the Subcontractor, was to be returned to the Club.

8. The Club filed a notice of appeal from the orders made by Rees J and sought a stay of the order concerning payment of the monies out of Court. That application was dismissed by Griffiths AJA: Woonona-Bulli RSL Memorial Club Ltd v Warrane-Design Construct Fit-Out Pty Ltd [2025] NSWCA 89. The Club has since discontinued its appeal, but the Builder’s application for leave to cross-appeal concerning the money ordered to be returned to the Club remains on foot.

9. The critical question here is whether, on its proper construction, s 11(4) CD Act permits the Club to raise certain matters contained in its Technology and Construction List Response in defence of the Subcontractor’s claim. Although the Subcontractor sought summary judgment by way of a notice of motion filed on 4 June 2025, at the hearing of that motion, the parties agreed I should resolve this question of construction on a final basis as a separate question, rather than simply dealing with the summary judgment motion. The parties agreed that the separate question would involve a determination of whether the Club was entitled to raise the matters summarised in Part 1 of its list response, concerning primarily matters of set-off in relation to the alleged breach of contract by the Builder and some payment of money into Court.

10. For the reasons that follow, the Club is entitled to raise, in defence of the Subcontractor’s claim, matters of set-off.

The Contractors Debts Act

11. The history and provisions of the CD Act were outlined by Rees J in Woonona (No 2) at [3]-[15].

12. Because the question of construction posed in this case was not addressed by her Honour, it is necessary to also address some aspects of the history of the legislation.

13. The predecessor to the current CD Act was enacted in 1879, based on an 1871 New Zealand enactment: see Concrete Constructions Pty Ltd v Barnes (1938) 61 CLR 209 (Barnes) at 227 (Dixon J). Its provisions were limited to “workmen” and permitted those employed by a contractor to have recourse to moneys accrued or accruing to the contractor to recover sums due for work and labour. It was extended in 1888 to allow “tradesmen” to recover sums found due for material, or for material and work and labour: see Barnes at 227; Ex parte Road Maintenance & Contracting Co Ltd; Re Jordan (1936) 36 SR (NSW) 362 at 367 (Jordan CJ).

14. The purpose of the CD Act, which consolidated the earlier statutes, was to facilitate payment of the wages of servants and workmen by the person for whom the work was done, where, for example, the contractor who contracted with the principal for the work and directly employed those workmen was unable or unwilling to pay: see Woonona (No 2) at [5].

15. The current legislation provides a mechanism for subcontractors, when faced with non-payment by the contractor who engaged them (referred to here for convenience as the “head contractor”, although which could be an intermediate contractor or subcontractor), to obtain payment from money that is or becomes payable to that contractor by the “principal” (who may be an intermediate contractor or a building or constructing owner) that engaged the head contractor to perform work under a contract: see s 5(1). Payment can only be obtained by the subcontractor in relation to work that was part of or incidental to work that the principal engaged the head contractor to do: s 5(2). The subcontractor must first obtain a judgment against the head contractor, including a default judgment or judgment obtained after filing an adjudication certificate in accordance with s 25 SOP Act, in proceedings “relating to the recovery of money owed … for work carried out”: s 7(1)-(1A). Then the subcontractor can seek a debt certificate under the CD Act from the same court for the sum of the judgment. The subcontractor must serve the debt certificate, together with a notice of claim, on the principal: s 6-7. Service of that notice of claim operates to assign to the subcontractor the benefit of the principal’s obligation to pay money owed under the contract to the head contractor, limited to the amount of the certified debt: s 8(1)-(2). Once assigned, the principal is obliged to pay any “money owed” to the subcontractor as those moneys become payable under the principal’s contract with the head contractor, until either the certified debt is fully discharged, or payments are no longer payable under the contract: s 9(1)-(2).

16. Under s 11, the subcontractor can take proceedings against the principal to recover the assigned debt. That section provides:

11 Right of recovery if principal fails to pay

(1) An assignment effected by operation of this Act is valid at law.

(2) Accordingly, if the principal fails to make any payment required to be made by this Act, the unpaid person [ie the subcontractor] may sue for and recover the debt assigned to the unpaid person, in the unpaid person’s own name.

(3) Proceedings for recovery of the debt may be taken in any manner in which the defaulting contractor [ie the builder] might have taken them had there been no assignment.

(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.

Note—

For example, if the principal continues to make the contract payments to the defaulting contractor, rather than the unpaid person, after having been served with a notice of claim, the unpaid person is still entitled to recover the money from the principal.

17. Section 19 provides that the CD Act does not affect any remedy a subcontractor may have against the contractor or any other person in respect of a debt owed to the subcontractor, nor “any rights a defaulting contractor, principal or other person may have under any contract or otherwise (except as expressly provided by this Act)”.

The Club’s defences

18. Section 11(4) permits the Club to raise, in defence of the Subcontractor’s claim, any defence that it would have had against recovery of the debt by the Builder, had there been no assignment, other than a defence precluded because it is something done by the Club after the Subcontractor served its notices of claim.

19. While the Club admits that service of the notices of claim obliged it to pay the Subcontractor money owed under its contract with the Builder, to the amount of the unpaid debt certificates of $1,200,670.74, it disputes that it is obliged to pay that amount to the Subcontractor immediately because of two “triable defences”:

20. its indebtedness to the Builder, which had been assigned to the Subcontractor under the CD Act, was reduced by $859,132.02 by reason of the release of those funds out of Court to the Builder (pursuant to Rees J’s orders), and it should not be required to pay that amount again to the Subcontractor; and/or

21. defences which it would have against recovery of that same debt by the Builder had there been no assignment, including “defences in the strict sense”, or “liabilities on a cross-claim”.

22. Each is considered below.

Reduction of indebtedness to the Builder

21. Senior counsel for the Club submitted that:

22. the monies paid into Court were the entirety of the money then payable by the Club to the Builder under their contract;

23. after the monies were paid into Court they ceased to be available to pay anyone;

24. the release of $859,132.02 to the Builder reduced the Club’s indebtedness to the Builder, such that there was no debt in that amount which could be assigned to the Subcontractor.

25. The somewhat confusing submission appeared to be that the release of $859,132.02 to the Builder meant that there no longer existed a debt in that amount, which could be assigned to the Subcontractor under the CD Act.

26. That submission cannot be accepted, for two reasons.

27. First, because the Club does not challenge the validity of the assignment effected by the notices of claim and debt certificates, any payment to the Builder after that assignment would not have the effect of discharging the assigned debt owed to the Subcontractor. Discharge of the assigned debt can only occur through payment to the Subcontractor.

28. Further, the payment of money into Court is “something done by the principal after the notice of claim was served on the principal”, and so is a matter that s 11(4) precludes the Club from raising in defence of the Subcontractor’s claim. That is made clear by the marginal note to s 11(4), which, although not part of the CD Act, may be taken into account “to confirm that the meaning of the provision is the ordinary meaning conveyed by the text of the provision”: Interpretation Act 1987 (NSW), s 34(1), 35(2). A payment by the principal, whether into Court or to the Builder, after the relevant notice of claim is served and the debt is assigned, is clearly something which the Club is prohibited from raising as a defence under s 11(4).

Defences available as against the Builder

26. In its list response, the Club contends that it has “defences” to any claim by the Builder “to the extent of at least $3,426,571.27”. The Club alleges that it would be entitled to claim repayment from 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. That is said to be a reason why the Subcontractor is not entitled to recover the debt it claims from the Club and so is, in effect, pleaded as a set-off.

27. Counsel for the Subcontractor submitted that the scope of defences available to be raised under s 11(4) is constrained by s 25(4) SOP Act. That provision applies to proceedings to set aside a judgment entered after the filing of an adjudication certificate and serves to preclude the person seeking to set aside the judgment from bringing any cross claim against the claimant or raising “any defence in relation to matters arising under the construction contract”. The 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 the Subcontractor through the CD Act, the Club would not be entitled to raise any defence if the Builder sought to enforce the adjudication/judgment and the Subcontractor should have the flow on benefit of s 25(4) of the SOP Act.

28. I do not accept that submission.

29. 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, Nettle and Gordon JJ). The ability to take later proceedings to determine rights under the contract is enshrined in s 32.

30. 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.

31. 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).

32. 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).

33. 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.

34. Counsel for the Subcontractor sought to rely in particular on s 11(3) CD Act, under which the Subcontractor may take proceedings against the Club to recover an assigned debt in any manner in which the Builder “might have taken them”, and the following observations of Rees J in Woonona (No 2) at [39]-[40]:

… [Section] 11(4) of the [CD Act] provides that a [subcontractor] may sue the principal and recover the assigned debt in their own name but, effectively, ‘standing in the shoes’ of the … contractor. In any such debt recovery proceedings, the [subcontractor’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 … contractor could have taken, absent the assignment, but which the [subcontractor] may now take instead…

Once an adjudication certificate has been filed as a judgment, it is “enforceable accordingly”: s 25(1) [SOP Act]. The subcontractor is now entitled to take such enforcement action, at least to the extent of the unpaid person’s certified debt… 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 [SOP Act]: 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.

35. Her Honour was not asked to finally determine the issue about the proper construction of s 11(4), as it was not relevant to the issues she was to resolve.

36. 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.

37. 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.

38. I note that matters of defective work, delay and other costs have been raised by a principal in defence of a subcontractor’s claim before, although without any determination of whether such a course was permissible as a matter of construction of s 11(4): see eg Sam the Paving Man Pty Limited v Berem Constructions Pty Limited (in liquidation) [2010] NSWSC 868 at [16]-[17] (White J).

Orders

39. For these reasons I make the following orders:

40. Declare that, on the proper construction of s 11(4) of the Contractors Debts Act 1997 (NSW), the defendant is entitled to raise the matters referred to in paragraph [26] and Part 2 of its Technology and Construction List Response filed on 13 June 2025, in defence of the plaintiff’s claim.

41. The plaintiff’s notice of motion filed on 4 June 2025 is dismissed with costs as agreed or assessed.

42. The matter is listed for directions on 18 July 2025 to make orders for the progression of the proceedings.

43. Liberty to apply on two days’ notice.

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