Several recent Court decisions in New South Wales will have far reaching consequences for the 'security of payment' legislation in existence around Australia. This legislation provides a special statutory mechanism whereby a Claimant in the building and construction industry may make a payment claim and, if necessary, apply for a determination seeking payment of that claim.

Overview of the recent decisions

While the security of payment legislation is generally seen as 'pro-Claimant', the recent decisions tend to give greater scope to a Respondent in resisting a claim for payment.

In summary, the cases provide that a Claimant essentially has 'one shot' at adjudication in relation to an entitlement to a progress payment. The two streams of decisions illustrating this shift are as follows:

  • In the case of Dualcorp Pty Ltd v Remo Constructions Pty Ltd [2009] NSWCA 69, the Owner was able to defeat an application for summary judgment on the basis that the invoices served by the Contractor had been previously determined by an adjudicator. The Owner was successful, despite not serving a payment schedule on the Contractor in accordance with the legislation.
  • The subsequent cases of Perform (NSW) Pty Ltd v Mev-Aust Pty Ltd t/as Novatec Construction Systems [2009] NSWSC 416 and The University of Sydney v Cadence Australia Pty Limited & Anor [2009] NSWSC 635 re-affirmed the decision in Dualcorp but went one step further by allowing the Respondent in those cases to obtain an injunction against the Claimants restraining them from proceeding to adjudication of the payment claims. The injunctions were granted on the basis that the payment claims (or a large part of the payment claims) had previously been determined by an Adjudicator and were not entitled to be re-agitated.

Principles established by the decisions

Some of the key principles to arise from the cases are as follows:

  • The determination of an entitlement to a progress payment made by an adjudicator is final, and cannot be re-agitated in a subsequent adjudication. A Claimant essentially has one shot at an adjudication under the security of payment legislation for each particular progress claim; see Dualcorp Pty Ltd v Remo Constructions Pty Ltd [2009] NSWCA 69;
  • A Respondent may be able to obtain an injunction restraining a Claimant from proceeding to adjudication of its payment claim under the security of payment legislation, where the determination of an entitlement to a progress payment has been determined in a previous adjudication; see Perform (NSW) Pty Ltd v Mev-Aust Pty Ltd t/as Novatec Construction Systems [2009] NSWSC 416;
  • A Claimant seeking to have the same claim re-determined by an adjudicator may be considered to have engaged in an "abuse of process" and a Respondent may be able to obtain an injunction restraining the Claimant from proceeding to adjudication of that claim; see The University of Sydney v Cadence Australia Pty Limited & Anor [2009] NSWSC 635.

A dissatisfied Claimant is not entitled to engage in "Adjudicator shopping" as the Courts have effectively determined that the decision of an adjudicator as to the entitlement (or non-entitlement) to a progress payment, effectively cannot be "re-agitated" in a subsequent payment claim. As a result, a Claimant is not entitled to re-submit an identical (or similar) payment claim for adjudication which has been previously determined by an adjudicator.

However, this does not affect the parties ability to make a substantive claim in relation to their entitlements under the Contract generally.

Implications for the sector

Following these cases, the outcomes for the players in each key part of the sector are as follows:

  • For Principals - A Principal may be able to prevent a payment claim from proceeding to adjudication where a Claimant seeks to have a second attempt at pursuing a claim that has been previously determined by an adjudicator.
  • For Contractors - Contractors should ensure that payment claims and adjudication applications are properly prepared and supported as it is likely that a Contractor will only get one shot at a particular claim at adjudication.