The NSW Court of Appeal has granted leave to appeal from a recent decision of the NSW Supreme Court in which the NSW Supreme Court found that insolvent contractors have the benefit of Security of Payment legislation.
In Seymour Whyte Constructions Pty Ltd v Ostwald Bros Pty Ltd (in liq)  NSWSC 412, the NSW Supreme Court found that Ostwald Bros Pty Ltd, which had entered into a subcontract to perform works on the Pacific Highway with Seymour Whyte Constructions Pty Ltd (SWC), was a "claimant" for the purposes of the Building and Construction Industry Security of Payment Act 1999 (NSW) (NSW SOP Act) and was accordingly entitled to the benefit of the NSW SOP Act even though Ostwald had become insolvent.
SWC had relied upon the decision of the Victorian Court of Appeal in Façade Treatment Engineering Pty Ltd (in liq) v Brookfield Multiplex Constructions Pty Ltd  VSCA 247 in arguing that Ostwald, as an insolvent contractor, was not entitled to the benefit of the NSW SOP Act. In that case, the Victorian Court of Appeal held that insolvent contractors are not "claimants" and are not entitled to the benefit of the Building and Construction Industry Security of Payment Act 2002 (Vic) (Vic SOP Act) because the text, context and purpose of the Vic SOP Act indicates that the Vic SOP Act is only intended to protect persons who are capable of carrying out construction work.
However, the NSW Supreme Court found that the decision of the Victorian Court of Appeal was "plainly wrong" and that there was nothing in the provisions of the NSW or Vic SOP Acts that would compel the conclusion that a company ceases to be a "claimant" if it becomes insolvent and ceases to be capable of carrying out construction work.
SWC sought leave to appeal the decision of the NSW Supreme Court and the NSW Court of Appeal granted that leave, noting that the proposed appeal raises significant issues including the correctness of Victorian Court of Appeal's decision in Façade Treatments. It remains to be seen whether the NSW Court of Appeal will uphold the NSW Supreme Court's decision.