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[2012] NSWSC 546
defendant. Summons dismissed. The plaintiff was ordered to pay the defendant's costs; otherwise there was no order as to costs. Declarations were made in accordance with prayers 1 and 2 of the cross-claim,...
The Court held that an arrangement under the Security of Payment Act can qualify as a construction contract even if it is not legally enforceable. On the evidence, the builder had received and relied on Machkevitch's assurance that he would pay personally if the development company did not. The earlier adjudication against the company did not decide whether this wider arrangement existed, and the builder's later claim against Machkevitch was not an abusive attempt to relitigate matters already decided. The application to stop the claim failed.
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2,487 words · generated 01/10/2026
In Machkevitch v Andrew Building Constructions [2012] NSWSC 546, McDougall J considered whether a builder could pursue a Security of Payment Act claim against an individual associated with the company that had engaged it. The individual, Alexandre Machkevitch, sought to restrain the builder, Andrew Building Constructions Pty Limited, from pursuing a payment claim served on him. The key question was whether the dealings between the builder, Machkevitch and the development company, 873 NSHR Investments Pty Ltd, amounted to a “construction contract” under the (NSW) (the Act).
2 cited instruments linked from this judgment.
The builder and the proprietor had entered a written building contract and a “bonus deed” on or about 23 or 24 March 2010. The stated lump sum in the building contract was $4.5 million, excluding GST, although the builder’s negotiated quotation was $4.854 million, excluding GST ([42]). The builder’s case was that Machkevitch had said he would personally pay the builder if the proprietor lacked the resources to do so. The alleged assurance was given in discussions about the two contract documents and the funding available for the development ([43]–[46]).
The judge preferred the evidence of the builder’s witnesses, Andrew and Spiro Kladis, to that of Machkevitch and Michael Haldey where their accounts conflicted ([32]–[41], [48]–[50]). He found that Machkevitch assured the builder that he had personal resources available and would pay if the proprietor did not. The builder accepted and acted on that assurance when it executed the building contract and bonus deed ([51]).
The builder first served a payment claim on the proprietor in September 2011 for a little over $1.1 million. The proprietor scheduled nil, and the adjudicator determined an amount of about $453,000. The proprietor did not pay and went into liquidation ([53]–[54]). The builder later served a payment claim on Machkevitch, dated 23 March 2012, with most of the claimed amount overlapping the earlier claim ([54]).
Machkevitch sought to stop that claim, arguing that no relevant construction contract existed, that the earlier adjudication prevented the builder from advancing the claim, and that doing so was an abuse of process ([3]–[5]). The builder cross-claimed for declarations that the alleged arrangement was a construction contract and that its payment claim against Machkevitch was valid for the Act ([68]–[69]). The court dismissed the summons and made the declarations sought on the cross-claim ([72]–[73]).
The first issue was statutory interpretation. Section 4 of the Act defines a “construction contract” as “a contract or other arrangement” under which one party undertakes construction work or related supply for another ([15]). The Act does not separately define either “contract” or “arrangement” ([16]). The judge read “other arrangement” as extending beyond a legally enforceable contract. He reasoned that the legislature used both terms because some work may be carried out under arrangements that are not contracts in the legal sense, and that entitlement under the Act was not intended to depend on the formality of the parties’ arrangements ([17]–[19]).
McDougall J adopted and endorsed the reasoning in Okaroo Pty Limited v Vos Construction and Joinery Pty Limited [2005] NSWSC 45. In that case, as recounted and accepted here, “arrangement” was understood in context to include transactions or relationships that are not legally enforceable ([24]–[26]). The judge stated that the relevant arrangement must be more than a mere expectation. It must amount to an engagement, agreement or state of affairs under which one party undertakes construction work for another ([27]–[30]). Whether it also requires payment, and what payment obligation it involves, depends on the terms of the particular arrangement ([30]).
The factual application mattered. The judge found that Machkevitch’s assurance was not simply an expression of hope that the company would obtain more funding. He found that Machkevitch said he would pay from personal resources if the proprietor did not, and that the builder relied on this assurance in entering the construction documents ([43]–[51]). The resulting arrangement had three features: the builder undertook the work for the proprietor; the proprietor undertook to pay under the written building contract and bonus deed; and Machkevitch undertook personally to pay if the proprietor did not ([52]). On that basis, the arrangement qualified as a construction contract for the Act.
The estoppel argument did not succeed. The first adjudication concerned the builder’s claim against the proprietor under the building contract. The alleged personal undertaking and the wider arrangement were not put to the first adjudicator, so the adjudicator did not decide whether they existed ([61]). The judge therefore concluded that Anshun estoppel did not apply ([62]). The builder also accepted that, in any later adjudication, the previously determined common issues would not be decided differently ([59]). That position removed the practical concern that the same claim amounts would simply be relitigated.
The abuse-of-process argument failed for a related reason. The judge characterised the proprietor’s liability as primary and Machkevitch’s alleged liability as secondary. The builder had first sought payment from the proprietor; after it became clear that the proprietor could not pay, the builder pursued the alleged alternative liability ([66]). The judge held that pursuing the second claim in those circumstances was not unreasonable and would not require the builder to reagitate matters decided by the first adjudicator ([66]–[67]).
The judgment treated the relevant statutory question as one of interpretation of the word “arrangement” in the particular setting of the Act. The court did not construe the term as requiring a legally enforceable promise. Rather, it applied an understanding that an arrangement may be non-contractual in the strict legal sense, provided there is a sufficiently concluded and bilateral engagement involving an undertaking to carry out construction work for another ([24]–[30]).
Before this decision, the judgment identified Okaroo as the principal authority directly addressing the point. Nicholas J had held there that an arrangement under the Act could include a legally unenforceable relationship, and McDougall J expressly agreed with that reasoning ([21], [24]–[26]). The judgment also noted Newton v Federal Commissioner of Taxation and Australian Competition and Consumer Commission v CC (NSW) Pty Ltd (No 8) for broader observations about “arrangement” and “understanding”. As described by McDougall J, those authorities supported the distinction between a binding contract and something less, while indicating that an arrangement or understanding requires more than a mere expectation ([22]–[23]).
The decision applied those principles to a personal assurance given in the context of a building project. It did not hold that every assurance, relationship or expectation is an arrangement under the Act. Its stated threshold was a concluded state of affairs that is bilateral at least, with an undertaking by one party to another concerning construction work ([27]–[30]). The court’s finding that Machkevitch’s assurance was made and relied on was therefore essential to the result ([51]–[52]).
On adjudication, the judgment proceeded on the basis that determinations can give rise to narrow issue estoppel, and that Anshun estoppel may also be available in an appropriate case ([55]–[57]). It nevertheless found neither doctrine barred the later claim on these facts: the relevant broader arrangement had not been presented to or decided by the first adjudicator, and the builder accepted that common matters already determined would not be reopened ([59]–[62]). The judgment also reaffirmed that abuse-of-process principles may apply to attempts to reagitate matters determined in adjudication, while distinguishing a later claim based on alleged secondary liability that does not require such reagitation ([63]–[67]).
The judgment itself does not provide information about how later courts treated it. No conclusion about subsequent approval, limitation or departure can be drawn from this judgment alone.
At [17], the judge said the legislature intended a construction contract to include both a legal contract and “other arrangements” that might not be contracts in law. In plain English, the Act’s reach is not confined to formally binding contracts.
At [24], McDougall J endorsed the view that “arrangement” under the Act can encompass transactions or relationships that are not legally enforceable. This does not mean that any informal conversation qualifies. The judgment adds a threshold: there must be a real engagement or state of affairs involving an undertaking, not merely an expectation ([27]–[30]).
At [27], the judge described the required arrangement as something more than a mere undertaking, capable of giving rise to an engagement between parties even though it is not legally enforceable. Read with [28] and [29], the point is that the court looks for a concluded, at least bilateral arrangement in which one party undertakes construction work for another.
At [51], the judge made the factual finding that Machkevitch had assured the builder he would pay if the proprietor did not, and that the builder accepted and acted on that assurance. This was the bridge between the general statutory interpretation and the result in the case: the court found both a sufficiently definite assurance and reliance by the builder.
At [52], the judge set out the structure of the arrangement: the builder performed construction work for the proprietor, the proprietor undertook to pay under the written documents, and Machkevitch undertook or engaged personally to pay if the proprietor did not. In plain English, the court treated the personal undertaking as part of a wider arrangement connected with the construction work.
At [62], the judge concluded that Anshun estoppel had no application because the earlier adjudication had not decided whether the broader arrangement existed. The later claim was not barred merely because an earlier claim had been made against the proprietor.
At [66], the judge explained why the later claim was not abusive. The first claim pursued the proprietor’s primary liability; the later claim pursued Machkevitch’s alleged secondary liability after the company could not pay. The builder also accepted that it would not ask a later adjudicator to decide common issues differently from the first adjudicator.
The decision is most directly relevant where a party seeks to rely on the Act despite the absence of a conventional, legally enforceable contract with the person against whom a payment claim is made. The judgment indicates that the court may examine whether the parties had a sufficiently concluded arrangement under which construction work was undertaken, even if the arrangement was informal or legally unenforceable ([17]–[30]).
The factual features that mattered here were more specific. The court found that the alleged personal assurance was connected to the builder’s decision to enter the construction documents, was made in response to questions about how the builder would be paid, and was accepted and acted on by the builder ([43]–[51]). The decision therefore does not establish that a director, shareholder, developer or associate becomes part of a construction contract merely because of that status. The finding depended on the evidence of an undertaking by Machkevitch and the builder’s reliance on it ([51]–[52]).
The decision may also be relevant where a claimant first pursues the party primarily liable, obtains an adjudication, and later pursues another party said to have secondary or alternative liability. The court focused on whether the second claim would reopen matters already decided and whether it was unreasonable to advance the claims separately ([60]–[67]). The builder’s acceptance that common issues would not be determined differently was part of the circumstances considered ([59], [66]).
The judgment also illustrates that the precise formulation of the first adjudication claim can matter. The earlier claim relied on the building contract alone, while the later claim depended on a broader alleged arrangement including the personal undertaking. Because the existence of that broader arrangement had not been raised with or decided by the first adjudicator, the court found no Anshun estoppel ([61]–[62]).
The judgment supplies no account of decisions after 24 April 2012. It is therefore not possible, from the provided text, to say whether later courts followed, distinguished, limited or overruled Machkevitch. The decision’s own treatment of authority can be stated: McDougall J followed and endorsed Okaroo on the meaning of “arrangement” under the Act ([24]–[26], [70]–[71]); discussed Dualcorp and Watpac on estoppel and abuse of process in adjudication ([55]–[64]); and referred to Anshun as the source of the extended estoppel doctrine ([56]).
The judgment noted that Okaroo had stood unchallenged and had been followed at first instance for about seven years, and said that even if McDougall J had disagreed with it, he would have followed it in those circumstances ([71]). That statement describes the judge’s approach in 2012; it does not establish the subsequent status of the doctrine.
For research or professional use, the distinction between what this judgment decided and what later authority may have done is important. The text supports describing the 2012 holding and the authorities it applied or discussed. It does not support a claim about present-day treatment or the current state of the law beyond the judgment itself.
The judgment leaves some matters dependent on the terms and evidence in a particular case. It says that whether an arrangement creates an obligation to pay for construction work depends on the terms of the engagement, agreement or state of affairs ([30]). It does not provide a comprehensive checklist for deciding when an informal assurance becomes a concluded arrangement. Its formulation requires more than expectation and at least a bilateral engagement, but the application remains fact-sensitive ([27]–[30]).
The case also does not decide that a personal assurance will always make the person giving it a party to a construction contract. Here, the judge made a credibility-based finding that Machkevitch gave the assurance and that the builder relied on it when entering the building contract and bonus deed ([39]–[51]). The extent to which different wording, context, reliance or evidence would produce a different result is not answered in the judgment.
The interaction between adjudication estoppel and claims against a different alleged party also remains fact-dependent in this decision. The judge said there was no Anshun estoppel because the relevant broader arrangement had not been put to the first adjudicator ([61]–[62]). He did not need to decide every possible question about privity or the reach of narrow issue estoppel, because he considered there was no live issue in the circumstances and the builder accepted the practical constraint on revisiting common issues ([58]–[60]).
Finally, the judgment’s treatment of abuse of process turns on the relationship between the claims and the builder’s undertaking not to relitigate adjudicated matters ([59], [66]–[67]). It does not decide how the analysis would apply if a second claim sought to reopen issues actually determined, or if the claimant had no comparable basis for treating the later liability as secondary. Those questions require attention to the claims, the adjudication reasons and the position taken in any later proceeding.
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Judgment 1HIS HONOUR: On 23 or 24 March 2010, the defendant (the builder) entered into a written building contract and "bonus deed" with a company known as 873 NSHR Investments Pty Ltd (the proprietor). The builder claimed that the proprietor owed it a substantial amount of money. It took that claim to adjudication under the Building and Construction Industry Security of Payment Act 1999 (NSW) (the Act). The adjudicator made a determination in favour of the builder, although not for the full amount of the claim. The proprietor then went into liquidation. It has a substantial deficiency of liabilities over assets. 2The builder asserts that, in addition to the building contract and the "bonus deed", it made a "construction contract" for the purposes of the Act, to which it, the proprietor and the plaintiff (Mr Machkevitch) were parties. That construction contract is said to include the building contract and the bonus deed, and also an oral undertaking, given by Mr Machkevitch to, and relied upon by, the builder, that Mr Machkevitch would ensure that the builder was paid if the proprietor did not pay it. The builder has served a payment claim on Mr Machkevitch. In the likely event that he does not accept liability, it will take the claim to adjudication unless restrained. 3In these proceedings, Mr Machkevitch seeks an order restraining the builder from prosecuting any claim based on the payment claim served on him, and associated declaratory and other relief.
The real issues in dispute 4Mr Grieve QC, who appeared with Mr Kalyk of counsel for the builder, stated that the real issues in dispute were: (1) whether there was an "arrangement" amounting to a construction contact for the purposes of the Act, as alleged by the builder? (2) whether the builder is estopped, by reason of the determination of the first adjudicator, from pressing its claim under the alleged construction contract against Mr Machkevitch? (3) alternatively, whether the builder's attempts to press its payment claim against Mr Machkevitch is, in all the circumstances, an abuse of the processes of the Act? 5Mr Christie SC, who appeared with Ms Shaw of counsel for Mr Machkevitch, accepted that these were the substantial issues in dispute.
A preliminary issue 6In its written submissions provided prior to the hearing, the builder raised, as a preliminary question, whether the court should intervene, or whether it should leave the matter to be disputed before another adjudicator. Ultimately, Mr Grieve accepted that the matter should proceed in court. 7In my view, it is appropriate in the circumstances of this case for the court to deal with the matter. There are a number of reasons why this is so. 8First, the court has had the benefit of all the evidence that the parties wish to put on. That evidence includes both affidavit evidence from the principals of the builder, Mr Andrew Kladis and Mr Spiro Kladis, and from Mr Machkevitch and an associate of his, Mr Michael Haldey. Further, each of those witnesses has been cross-examined and the court has had an opportunity to form a clear impression as to credibility, and as to whose evidence should be believed where there is conflict. An adjudicator would not have that significant advantage. 9Secondly, even if the matter were left to an adjudicator, he or she (for convenience, from now I shall refer to one gender only) could not determine conclusively the question of jurisdiction. Thus, if an adjudicator were to determine (for example) that she did have jurisdiction, the court would not be precluded from re-examining that question on an application for relief in the nature of certiorari. Alternatively, if the adjudicator concluded that she did not have jurisdiction, the court would not be precluded from examining the matter upon an application for the determination to be quashed, on the basis that the adjudicator had failed to perform her statutory function. 10Thirdly, and as a consequence of the first two matters, the just, quick and cheap resolution of the real issues in dispute, in particular as to the existence or otherwise of a construction contract, suggests firmly that there should be one hearing only, and that it should be in this court. 11I wish to stress that this is a conclusion based entirely on the peculiar facts of this case and that it should not be taken as an invitation to press in court applications to prevent matters from going to adjudication. In the ordinary way, disputes arising under construction contracts, as to progress payments, should be dealt with by adjudicators. That is the particular method of dispute resolution that the legislature has intended.
First issue: was there a construction contract? The pleaded case 12The construction contract on which the builder relies is set out in paragraph 1 of its list response to Mr Machkevitch's contentions. That paragraph reads as follows:
The payment claims 53The builder served a payment claim on the proprietor dated 26 September 2011. The amount claimed was a little over $1.1 million. It included some ten or so variations and associated charges for related goods and services. The proprietor provided a payment schedule which proposed a scheduled amount of nil dollars. The dispute was referred to adjudication. Mr Sean O'Sullivan determined an adjudicated amount of, in round figures, $453,000. 54The proprietor did not pay. Instead, it chose the course of liquidation. The builder then served a payment claim on Mr Machkevitch, dated 23 March 2012. It is common ground that the bulk of the amount claimed replicates the payment claim served on the proprietor. Mr Grieve accepted that, to the extent of the overlap, the duplicated amounts should be determined as they had been determined, in the earlier adjudication, by Mr O'Sullivan.
Issue estoppel 55The Court of Appeal concluded in Dualcorp v Remo Constructions [2009] NSWCA 69 that the determinations of adjudicators attract limited issue estoppels, in the narrow sense. Their Honours (Macfarlan JA, with whom Handley AJA agreed) said that determinations of adjudicators made under the Act estopped the parties to the adjudication from disputing the entitlement to payment of a progress claim in accordance with the reasons and findings of the adjudicator. 56Further, for the reasons that I give in Watpac Constructions v Austincorp [2010] NSWSC 168 at [123] to [129], decisions of adjudicators attract also the extended doctrine of issue estoppel frequently described as "Anshun" estoppel (Port of Melbourne Authority v Anshun Pty Limited (1981) 147 CLR 589). 57In the present case, the parties were content to proceed on the basis that the decision of adjudicators could attract both narrow and "Anshun" issue estoppels. 58It is not entirely clear why the question of issue estoppel was raised. Presumably, Mr Machkevitch raised it because the payment claim that was served on him claimed the full amount that had been claimed from the proprietor in circumstances where, in the earlier adjudication, less than half this amount had been determined as the adjudicated amount. 59As I have indicated, Mr Grieve stated, at the close of his submissions, that his client would not put before any subsequent adjudicator that the amounts determined by the previous adjudicator should be determined in any different way. In other words, as I understood it, Mr Grieve accepted that in any subsequent determination the principle or spirit of s 22(4) of the Act should apply, even though (because the adjudication would not be between the same parties as the earlier adjudication) it might not, as a matter of construction, have any application. 60In those circumstances, I do not understand there to be any live question as to issue estoppel. If there were, I would accept, as Mr Christie submitted, that there is a sufficient relationship between Mr Machkevitch and the proprietor to make him its privy for the purposes of that doctrine. However, for the purposes of Anshun estoppel, I would not accept that it was not relevantly reasonable for the builder not to have brought its claim, in the alternative, against Mr Machkevitch in the earlier adjudication. I will give my reasons when dealing with the issue of abuse of process. 61I turn to the question of Anshun estoppel. That is asserted because the previous claim was one made under, and relying only on, the building contract. If the present dispute goes to adjudication, the builder will be relying on a different construction contract, of which the building contract forms part only. It was not put to Mr O'Sullivan that there was any such construction contract, and thus there was no point, as to the existence of any such construction contract, decided. 62It follows that Anshun estoppel has no application.
Third issue: abuse of process 63In Dualcorp, Allsop P agreed with Macfarlan JA as to the orders to be made, but preferred to rest his decision on the basis of abuse of process. Macfarlan JA was also prepared to recognise that considerations of abuse of process might be relevant to the domain of adjudications. 64I considered the question of abuse of process in Urban Traders v Paul Michael [2009] NSWSC 1072, and again in Watpac Constructions. For the reasons that I gave in those cases, I remain of the view that the doctrine of abuse of process is applicable to the determination of adjudicators, or more precisely, to attemps to reagitate matters that have been put before, and decided by, adjudicators. Since the parties appear to accept that this was so, it is not necessary to say more. 65The real question is whether there is, in this case, any repetitious and abusive reagitation of a claim. For the purposes of Anshun estoppel, the question may be taken to include also whether it is relevantly unreasonable for the two claims to be advanced separately. 66It is possible to state the conclusion very shortly. The construction contract alleged by the builder is one under which the proprietor had what might be called primary liability and under which Mr Machkevitch undertook to pay, by way of what might be called secondary liability, in the event that the proprietor did not. In my view, it was reasonable for the builder to have its claim against the proprietor adjudicated, and to see whether it would get paid. Once it became clear that it would not be paid (because the proprietor, after transferring out an asset at a very significant undervalue, went into liquidation and is unable to pay) it cannot be unreasonable for the builder to seek to enforce what it says is the secondary or alternative liability of Mr Machkevitch. Nor, in doing so, will the builder seek to reagitate any matters that were decided by the first adjudicator. On the contrary, as I have said, it now accepts that, in any subsequent adjudication, there should be no departure from the decision of Mr O'Sullivan, to the extent that he decides common issues that are pressed against Mr Machkevitch personally. 67In those circumstances, it is not necessary to go to a detailed, let alone line by line, comparison of the two payment claims. It is sufficient to say that it is only to the extent that they differ that any second adjudicator will be asked to deal with the issues.
The cross-claim 68Again late in the hearing, Mr Grieve sought leave to file a cross-claim. It sought declaratory relief, the effect of which was: (1) that there was a construction contract between the builder and Mr Machkevitch and the proprietor as alleged in para C1 of the builder's list response; and (2) a declaration that the payment claim addressed by the builder to Mr Machkevitch was a valid payment claim, for the purposes of the Act (with a rider, which need not be stated, intended to mimic the operation of s 22(4)). 69Mr Christie did not oppose the filing of that cross-claim. Further, Mr Christie attempted that, if I were to come to the conclusion that I have, it would be appropriate to define the position by granting declaratory relief in accordance with the cross-claim.
Other matters 70Mr Christie made a formal submission that the reasoning of Nicholas J in Okaroo from [44] to [55] was incorrect, to the extent that his Honour concluded that there was nothing in the definition of "construction contract" in the Act, or otherwise in the Act, which required that an "arrangement", for the purposes of the definition of "construction contract", must be legally enforceable. 71With respect, I think that his Honour's reasoning was correct. Even if I were of a different view, I would nonetheless follow it in circumstances where it has stood not only unchallenged and accepted but followed, at first instance, for some seven years. I indicated as much in the course of argument, which is why Mr Christie made the formal submission that I have recorded.
Conclusion and orders 72Mr Machkevitch has failed to sustain the proposition that the builder should be restrained from proceeding on the payment claim that it has served on him. The summons should be dismissed with costs. In addition, declaratory relief should be made as sought in the cross-claim. 73I make the following orders:
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 23 May 2012
Machkevitch
Andrew Building Constructions
(1958) 98 CLR 1
(1999) 165 ALR 468
(1981) 147 CLR 589
Summons dismissed. The plaintiff was ordered to pay the defendant's costs; otherwise there was no order as to costs. Declarations were made in accordance with prayers 1 and 2 of the cross-claim, and exhibits were to be returned ([73]).