The Building and Construction Industry Security of Payment Act 1999 (NSW) (SOP Act) is a powerful statutory tool that allows those who carry out construction work or that provide construction related goods and services in New South Wales to claim payments due to them under their contracts. It can be used by head contractors, subcontractors, hire companies, materials suppliers and consultants who provide related goods or services to claim payments due to them.
The stated purpose of the SOP Act is to facilitate cash flow down the contractual chain, to stop the common practice of the larger players using those down the contractual chain to fund their projects. The SOP Act only provides this cash flow on an interim basis, it doesn’t prevent a final determination of the merits in a Court, but it does allow a successful claimant the cash flow to continue its business in the interim.
The Building and Construction Industry Security of Payment Act 1999 (NSW) (SOP Act) establishes a statutory framework designed to promote cash flow certainty and protect the rights of contractors, subcontractors and suppliers in the New South Wales construction industry. The SOP Act imposes strict payment obligations, provides mechanisms for resolving disputes on an interim basis and includes penalties for non-compliance.
This handbook serves as a practical guide to navigating the SOP Act, providing a structured analysis of its key provisions, compliance requirements and enforcement mechanisms. It outlines the rights and obligations of claimants and respondents, details the process for making and responding to payment claims, and examines the adjudication and enforcement pathways available under the Act. This resource is designed to assist industry professionals in mitigating risk, ensuring compliance and leveraging the Act’s protections to secure timely payment.
This handbook is for general informational purposes only and does not constitute legal advice. While every effort has been made to ensure accuracy, the content should not be relied upon as a substitute for professional legal advice. The application of the SOP Act depends on specific contractual and factual circumstances, and readers are encouraged to seek independent legal advice tailored to their individual situations.
The SOP Act applies to parties engaged in construction contracts for construction work performed, or goods and services supplied in New South Wales. The statutory protections extend to:
a. contractors and subcontractors engaged in construction work
b. suppliers of materials or goods used in construction
c. consultants providing related professional services, such as architects, engineers, building surveyors, quantity surveyors, project managers, interior designers and landscape designers.
The Act is contractually based, meaning it applies where a construction contract exists – whether written, oral or partly both.
However, a ‘construction contract’ is broadly defined in the SOP Act and there is no requirement for a formal, signed agreement. It specifically may apply to an ‘other arrangement’. Parties cannot contract out of the SOP Act’s provisions by agreeing to contract terms excluding, modifying or restricting the application of the SOP Act.
The SOP Act applies to a broad range of construction activities, including:
a. building work – constructing, altering, repairing, or demolishing buildings and structures;
b. civil engineering – roads, tunnels, railways, pipelines, reservoirs and other infrastructure;
c. trade work – plumbing, electrical, mechanical, and other specialized trades;
d. cleaning – externally or internally of buildings and structures, if conducted during the completion of construction, repair or maintenance work; and
e. land preparation – excavation, site clearing, laying foundations and creating access roads, erecting scaffolding and off-site prefabrication works.
The Act also extends to the supply of goods and services related to construction, including the supply of plant or materials used for the construction work and services including:
a. the provision of labour to carry out construction work;
b. architectural, design, surveying or quantity surveying services in relation to construction work; and
c. building, engineering, interior or exterior decoration or landscape advisory services in relation to construction work.
While the SOP Act is far-reaching, certain types of contracts and work are outside its scope, including:
a. employment contracts: Employees performing work under a contract of employment are
excluded from the SOP Act’s protections, as their rights are governed by employment law; and
b. mining, oil & gas operations: Some resource sector activities, including drilling for petroleum or mining operations, are excluded unless they involve construction work related to infrastructure, such as roads or buildings on a mine site.
a. A payment claim can only be served on and after the last day of the first month in which construction work was performed, unless an earlier date for submitting progress claims is specified in the construction contract.
b. Additional progress claims can be made on or after the last day of each subsequent month in which construction work is performed, or any earlier date in the contract.
c. A clause in a contract requiring an act to occur before a payment claim can be served, is likely to be invalid and not enforceable for the purposes of the SOP Act.
d. If the construction contract concerned makes provision for an earlier date for the serving of a payment claim in any particular named month, the claim may be served on and from that date instead of on and from the last day of that month.
S13 of the SOP Act provides that a person can serve a payment claim on and from the last day of the month in which the construction work was first carried out under the contract and on and from the last day of each subsequent month. However, if the construction contract provides for an earlier date for serving a payment claim in a month, the claim may be served on and from that date.
Many construction contracts include preconditions on the right to lodge progress claims or when progress claims will be valid. These include things such as:
a. provision of a statutory declaration that all subcontractors, employees and suppliers have been paid;
b. evidence that security has been provided; and
c. evidence that insurance has been taken out.
While these preconditions may be valid from a contractual point of view, they fall awry of S34 of the SOP Act, which prevents parties from contracting out of the Act.
This means that even if your contract has a precondition before a progress claim can be served, compliance with this precondition may not prevent the contractor from serving a payment claim under the SOP Act.
a. Strict compliance is required: Payment deadlines under the SOP Act are rigid and enforceable.
b. If a payment schedule is not provided, or an amount is scheduled in the payment schedule, the amount must be paid by the due date, which will be the date set out in contract (subject to any overriding statutory timeframes).
c. Adjudication decisions require payment within five business days of the receiving the decision or such later date as provided by the adjudicator. Non-compliance exposes respondents to enforcement proceedings and regulatory action.
The payment deadline for progress payments depends on whether the progress payment is made to a head contractor or subcontractor.
A progress payment made by a principal to a head contractor under a construction contract becomes payable 15 business days after the day a payment claim is made, or an earlier date provided for in the contract).
A progress payment made to a subcontractor under a construction contract (other than an exempt residential construction contract) becomes payable 20 business days after a payment claim is made, or an earlier date provided for in the contract.
The maximum payment timeframes under S(1A) and (1B) of the SOP Act will override any conflicting contractual terms.
Any “pay when paid” provisions will be void and unenforceable.
A respondent must issue a payment schedule within 10 business days of receiving a payment claim (or such earlier time as provided for in the contract – see Payment Schedules below).
If a payment schedule is not provided within this timeframe, the full amount claimed becomes due and payable on the due date for payment (as determined above). If the respondent does not pay the full amount:
a. the claimant may initiate court proceedings or adjudication to recover the full amount;
b. the respondent is not entitled to raise any defence or cross claim under the contract in those proceedings; and
c. the claimant may serve notice of intention to suspend the work (or supply) under the Act.
If an adjudicator determines that a payment is due, the respondent must pay the adjudicated amount within five business days of receiving the decision or such later date as allowed by the adjudicator.
Failure to comply with an adjudication determination exposes the respondent to significant enforcement risks, including but not limited to:
a. the claimant registering the determination as a court judgment for enforcement;
b. asset recovery actions, including winding-up proceedings or garnishee orders; and
c. the claimant may serve notice of intention to suspend the work (or supply) under the Act.
Failure to meet statutory payment deadlines can have serious legal and financial repercussions, including:
a. statutory interest accruing on overdue payments;
b. suspension of work by the claimant, without contractual penalty; and
c. adjudication and court enforcement, leading to potential asset seizure.
a. A payment claim must identify the construction work or related goods and services for which a progress payment is being claimed and request payment of the claim amount. A payment claim also must state that it is made under the SOP Act.
b. A payment claim may be served on and from the last day of the named month in which construction work was first carried out (and each subsequent month), unless the contract allows for an earlier date. Essentially, the claim longstop is either what the contract allows or 12 months from when the work was last done — whichever is longer.
c. If the contract has been terminated, a single payment claim may be served on and from the date of termination.
d. In terms of long stop, this is:
i. As specified in the construction contact (if any), or
ii. if the contract does not specify a period, within 12 months after the last date on which:
a. the relevant construction work was performed, or
b. the related goods and services were supplied. The longer of these two periods applies.
A payment claim is a written document which identifies the construction work or related goods and services, to which the progress payment relates, stating the claimed amount and requesting payment of the claimed amount.
Where a payment claim fails to include sufficient identification of the work being claimed, the payment claim will be invalid.
Payment claims need to identify the work “in a way comprehensible to the respondent to the claim.” In Clarence Street Pty Ltd v Isis Projects Pty Ltd (2005) 64 NSWLR 448, Mason P identified that the following would be sufficient to identify the construction to which the payment claim relates:
a. an item reference referring to the contractual identification of the work;
b. a single line item description of the work;
c. particulars of the amount previously completed and claimed, and the amount now said to be complete;
d. a summary that pulls all the details together and states the amount claimed.
Whilst payment claims (and payment schedules) are not required to be as precise and particularised as court pleadings, the preferred view in New South Wales is that precision and particularity must be required to a degree reasonably sufficient to apprise the parties of the real issues in dispute.
A payment claim must request payment of the claimed amount.
Terms such as “amount due this claim” have been held to not be a sufficiently clear request for payment.
S13(4) of the SOP Act provides that a payment claim must be given before the end of whichever of the following periods is the longest:
a. the period, if any, worked out under the construction contract; or
b. the period of 12 months after the construction work to which the claim relates was last carried out or the related goods and services to which the claim relates were last supplied.
A payment claim may be served on a person –
a. by delivering it to the person personally, or
b. by lodging it during normal office hours at the person’s ordinary place of business, or
c. by sending it by post addressed to the person’s ordinary place of business, or
d. by email to an email address specified by the person for the service of documents of that kind, or
e. by any other method authorised by the regulations for the service of documents of that kind, or
f. in the case of service by a party to a construction contract on another party to the construction contract—in the manner that may be provided under the construction contract.
However, this provision is in addition to the provisions of any other law about giving notices, such as s 109X of the Corporations Act 2001 (Cth).
Service by Aconex (or by some other document management software) is not specifically permitted by S31 of the SOP Act, however, this service is permissible if the contract permits this form of service. However, if something is uploaded to Aconex as ‘sent’, it does not automatically mean ‘served’. The authorities suggest that the person to be served becomes aware of the contents of the payment claim when the person logs in to the Aconex website to download or access the payment claim.
The SOP Act does not explicitly mention service via Dropbox, but courts in Queensland and South Australia have formed the view that Dropbox was simply not sufficient for the purposes of serving payment claims as it did not result in the ‘person to be served becoming aware of the contents of the document’.
This means that Dropbox, or any form of link where the recipient needs to click on a link to download a file, particularly so where the document needs to be served within a particular time, should be avoided when serving documents.
The SOP Act provides that a person is not entitled to progress payments if the person is required to and does not have the appropriate licence or insurance under S4 and 92 of the Home Building Act 1989 (NSW) (“HBA”).
Recent court decisions have confirmed that adjudicators will not have jurisdiction to determine adjudication applications for payment claims which relate to unlawful contracts such as contracts to perform “building work” for which a licence is required pursuant to the HBA but is not held by the claimant. This means that if a contractor is performing work for which they do not hold the appropriate licence, or which was not performed by others pursuant to any statutory exemption, they will not be able to avail themselves of the payment claim and adjudication regime set out in the SOP Act.
a. Upon receiving a payment claim under the SOP Act, the respondent has two options:
i. pay the amount claimed in full (however, a schedule is still required unless payment is made by the due date for payment); or
ii. respond to the claim by serving a payment schedule pursuant to s 14 of the SOP Act.
b. A payment schedule must identify the payment claim to which it responds, state the amount that the respondent proposes to pay and if the amount is less than the amount claimed in the payment claim, state why the amount proposed to be paid is less (including reasons for withholding any payment).
c. A payment schedule must be given within the earlier of the period specified under the contract or 10 business days after receiving the payment claim.
d. If a payment schedule is not issued within the timeframe, provided the payment claim was valid, the recipient becomes liable to pay the full amount claimed. In those circumstances, the claimant may apply to court to recover the unpaid amount or apply for adjudication of the payment claim, and/or suspend works.
A payment schedule is a written document where the respondent responds to a payment claim. S 14 of the SOP Act provides that a payment schedule must:
a. identify the payment claim to which it relates;
b. state the amount of the payment, if any, that the respondent proposes to make;
c. if the amount proposed to be paid is less than the amount stated in the payment claim – state why the amount proposed to be paid is less, including the respondent’s reasons for withholding any payment; and
d. include the other information prescribed by regulation (there is currently nothing prescribed).
S14(3) of the SOP Act requires the respondent, when submitting a payment schedule, to state all reasons for withholding payment.
New South Wales courts have addressed the extent of reasons for withholding payment required in a payment schedule. Specifically, where a payment schedule doesn’t include any reasons to challenge the valuation of the amounts claimed in the payment claim, this is considered to be an acceptance of the valuation of works claimed in the payment claim.
Additionally, where insufficient reasons have been provided, the respondent is not entitled to raise new reasons in an adjudication of that payment claim.
As expressly provided for in S14(4) of the SOP Act, if a payment schedule is not issued within time, the full amount becomes due and owing on the due date for the progress payment.
If the respondent provides a payment schedule which schedules an amount for payment, which is less than the claimed amount (but not $nil) the respondent is required to pay the scheduled amount by the due date for payment.
If the respondent fails to make payment of the amount owed by the due date for payment, the SOP Act provides three options. The claimant can either:
a. recover the unpaid portion of the amount owed, from the respondent, as a debt owing to the claimant, in a court of competent jurisdiction;
b. apply for adjudication of the payment claim under S17(1)(a)(ii) of the SOP Act; and/or
c. suspend works without consequence under the contract.
Judgment in favour of the claimant is not given unless the Court is satisfied:
a. (if payment schedule) that the respondent did not pay the amount to the claimant on or before the
due date for the progress payment to which the payment claim relates; or
b. (if no payment schedule) the respondent did not give the claimant a payment schedule within the time required and did not pay the claimed amount before the due date for the progress payment to which the payment claim relates.
If a claimant applies for judgment, the respondent will not be entitled to raise any defence or bring a cross-claim under the construction contract. The option of applying for judgment is less attractive when the works are still progressing due to the potential for the judgment to essentially be reversed in a subsequent payment schedule issued under the contract in response to a payment claim. By comparison, in that scenario it can be more beneficial to apply for adjudication, because the claims will be valued by the adjudicator (a task the court does not perform in a judgment application) and any subsequent adjudicator will be required to apply that same valuation.
It is important for claimants to understand the due date for payment under S11 of SOP Act otherwise they may be out of time to apply for adjudication or issue a second chance notice. It is also important for respondents, as they could unwittingly contravene the S16 of the SOP Act, by failing to pay by the due date.
For the purpose of S11 of the SOP Act, a progress payment is due and payable:
a. by a principal to a head contractor, 15 business days after the payment claim is issued; or
b. to a subcontractor, 20 business days after the payment claim is issued, in each case, unless an earlier date is specified under the contract.
Under S27 of the SOP Act, the claimant has a statutory right to suspend work if it has not been paid the amount owed by the due date for payment. The process for suspension is as follows:
a. the claimant must wait until after the due date for payment;
b. the claimant must issue a written notice of intention to suspend work, under S27(1) of the SOP Act, to the respondent, informing it of the intention to suspend carrying out construction work or supplying related goods and services under the contract due to non-payment;
c. after giving the written notice, the claimant must wait at least 2 business days before suspending the works; and
d. the suspension of work continues until the outstanding payment is made, and continues until 3 business days immediately following the date of payment of the outstanding amount.
Importantly, a suspension under S27 of the SOP Act does not depend on the existence or availability of a contractual right and arises without contractual penalty. A claimant who suspends construction work in accordance with S27(1) is not liable for any loss or damage suffered by the respondent as a consequence of the claimant not carrying out that work during the period of suspension (S27(3)).
a. A claimant can make an adjudication application if:
i. the scheduled amount for payment in a payment schedule is less than the amount claimed in the payment claim;
ii. the scheduled amount is not paid by the due date for payment; or
iii. no payment schedule is issued (either within time or at all) and a second chance notice has been served.
b. The time limit for an adjudication application to be made depends on the circumstances:
i. if a payment schedule is received, but the claimant disputes the amount, the application must be made within 10 business days after receiving the payment schedule;
ii. if a payment schedule is received, and the respondent fails to pay the whole or part of the amount, the adjudication application must be made within 20 business days after the due date for payment; or
iii. if no payment schedule is received, and a second chance notice has been served within the period of 20 business days following the due date for payment and the respondent has been given an opportunity to provide a payment schedule within five business days after receiving the notice, then the application must be made 10 business days after the end of the five-day period.
The right for a claimant to apply for adjudication arises where:
a. a respondent has scheduled an amount for payment in its payment schedule which is less than the amount claimed;
b. a respondent has scheduled an amount for payment in its payment schedule and the scheduled amount is not paid by the due date for payment; or
c. a second chance notice has been issued.
There is an application fee which must be paid upon lodgement. The fee payable depends on the value of the progress claim (inclusive of GST), rather than the value of the amount in dispute.
The period for lodging the adjudication application depends on whether the right to an adjudication arose due to S17 (1)(a)(i), (1)(a)(ii) or (1)(b). This is set out below:
| Scenario | Due date for filing application | |
| 17(1)(a)(i) | Respondent has provided a payment schedule less than the claimed amount. | Application must be lodged within 10 business days after the payment schedule was received. |
| 17(1)(a)(ii) | Respondent has provided a payment schedule but fails to pay the scheduled amount by the due date. | Application must be lodged within 20 business days after the due date for payment. |
| 17(1)(b) | Respondent has not provided a payment schedule or made payment by the due date for payment. | Claimant must first give the respondent a second chance notice, that is five business days' notice of intention to apply for adjudication. Following the completion of a five day period, the claimant may lodge the application within 10 business days. |
An adjudication application:
a. must be in writing;
b. must be made on time;
c. must identify the payment claim and the payment schedule, if any, to which it relates;
d. must be accompanied by the any application fee prescribed by the authorised nominating authority;
e. may be accompanied by submissions relevant to the application; and
f. must be served to the respondent.
Once a claimant has chosen an Authorised Nominating Authority (ANA) with which to lodge the adjudication application, that ANA can provide the claimant with an adjudication form.
The adjudication application must:
a. be in writing;
b. must be made to an authorised nominating authority chosen by the claimant;
c. be lodged with the ANA within the required time;
d. be served upon the respondent at the same time;
e. be accompanied by any ANA's application fee;
f. include a copy of the payment claim;
g. include a copy of the payment schedule (if any); and
h. include all information in support of the claim that you want the adjudicator to consider.
A list of ANAs can be found on the NSW government website.
This includes legal submissions, evidence to support the claim such as statutory declarations or witness statements, expert reports or other similar documents.
The New South Wales Supreme Court has found that a claimant cannot deprive a respondent of specific details in a payment claim and then seek to later provide these details in an adjudication application.
Therefore, submissions in the adjudication application need to be supportive of what is already in the payment claim.
The adjudication application and any submissions must be served on the respondent after the claimant has lodged the adjudication application.
The NSW Supreme Court has considered, but not clearly decided, whether service under S17(5) of the SOP Act is a precondition to a valid adjudication.
Once the adjudication application is lodged with the authorised nominating authority, it must be referred to an adjudicator as soon as practicable.
Once that referral has occurred, the adjudicator then may accept the adjudication application by causing notice of the acceptance to be served on the claimant and the respondent.
a. The respondent must respond to an application for a at any time within five business days of receiving a copy of the application or two business days after receiving notice of an adjudicator’s acceptance of the application;
b. The adjudication response must be in writing, identify the adjudication application to which it relates, and it may include submissions relevant to the response that the respondent chooses to include (taking into consideration any restrictions which apply);
c. The adjudication response must be served on the claimant.
The adjudication response may be lodged at any time within:
a. five business days after receiving a copy of the application; or
b. two business days after receiving notice of an adjudicator’s acceptance of application, whichever is the later.
An adjudication response must be in writing, identify the adjudication application to which it relates, and include submissions relevant to the response that the respondent chooses to include.
The respondent cannot include in the adjudication response any reasons for withholding payment which have not been included in the payment schedule provided to the claimant. However, this restriction does not apply to jurisdictional arguments.
The respondent must serve a copy of their adjudication response on claimant.
a. An adjudicator is not to determine an adjudication application until the end of the period in which the respondent may lodge an adjudication response.
b. An adjudicator cannot consider an adjudication response made out of time.
c. An adjudicator must decide an adjudication application no later than 10 business days after:
i. if the respondent is entitled to lodge an adjudication response, the date on which the respondent lodges the response, or if a response is not lodged, the end of the period within which the respondent was entitled to lodge a response;
ii. in any other case, the date on which the adjudicator’s acceptance of the application is served on the claimant and the respondent.
d. The Adjudicator may:
i. request the parties agree to allow the defendant further time for their decision;
ii. request further written submissions from either party and give the other party opportunity to comment on those submissions;
iii. set deadlines for further submission and comments;
iv. call a conference of the parties; and
v. carry out an inspection of any matter to which the claim relates.
e. Once a claim is valued by an adjudicator, the valuation is binding on subsequent adjudicators.
An adjudicator must determine, within the required time:
a. the amount of the progress payment, if any, to be paid by the respondent to the claimant (the adjudicated amount);
b. the date on which any amount became or becomes payable; and
c. the rate of interest payable on any amount.
In making the determination, the adjudicator can only consider the SOP Act as well as:
a. the relevant construction contract;
b. the payment claim to which the application relates, together with all submissions, including relevant documents, that have been duly made by the claimant;
c. the payment schedule, if any, to which the application relates, together with all submissions, including relevant documents, that have been duly made by the respondent; and
d. the results of any inspection carried out by the adjudicator of any matter to which the claim relates.
If the adjudicator does not consider submissions that were of significance, the adjudicator may have failed to comply with the essential requirements of the Act and the decision is liable to be set aside. The respondent may only lodge an adjudication response if the respondent provided a payment schedule to the claimant within the time specified in S14(4) or 17(2)(b) of the SOP Act. Section 20(2B) of the SOP Act also prohibits a respondent from including reasons for withholding payment in the adjudication response not included in the payment schedule.
In reaching this decision, the adjudicator may:
a. request the parties agree to allow the adjudicator further time for their decision;
b. ask for further written submissions from either party, and if they do so, must give the other party an opportunity to comment on those submissions;
c. set deadlines for further submissions and comments by the parties;
d. call a conference of the parties; and
e. carry out an inspection of any matter to which the claim relates.
Out of these options, it is most common for the adjudicator to further request submissions and set deadlines in respect of those.
Whether (and how) an adjudicator has ‘valued’ the construction work or goods and services is relevant to whether an adjudicator has fulfilled their duties set out in S22(4) of the SOP Act.
That section requires the adjudicator to value the construction work in accordance with the contract, if the contract provides for how the construction work or goods and services is to be valued.
If, on the other hand, a contract does not provide for how construction work or related goods and services supplied under the contract are to be valued, the Adjudicator must have regard to:
a. the contract price for the work
b. any other rates or prices stated in the contract
c. any variation agreed to by the parties to the contract by which the contract price, or any other rate or price stated in the contract, is to be adjusted by a specific amount
d. if any of the work is defective, the estimated cost of rectifying the defect.
The NSW Supreme Court has considered that an “adjudicator would be required to set off, from the claimed amount, whatever amount he reached as the estimated cost of rectifying those of the defects... that he might find were proved to his satisfaction.”
A common argument between parties relates to whether the contract actually does provide for how the construction work is to be valued in the first instance. If it does, the adjudicator simply needs to value the work or related goods and services in accordance with the contract rather than the matters set out in S10(2)(b).
The function required of an adjudicator under S22 of the SOP Act is to decide the adjudicated amount to be paid by the respondent to the claimant and the date on which the amount becomes payable, together with any interest payable.
Previously, case law suggested that an adjudicator is not discharged from considering the merits of the claim, simply because no payment schedule has been provided. Although, the New South Wales Court of Appeal altered this position in 2023 in Ceerose Pty Ltd v A-Civil Aus Pty Ltd [2023] NSWCA 215 (Ceerose).
The position in New South Wales based on Ceerose is as follows:
a. an adjudicator is only required to consider the submissions that have been provided by the parties which outline the material that is relevant;
b. this is because the payment claim and payment schedule define the scope of the dispute to be determined by the adjudicator, in addition to the provisions of the SOP Act which provides limits on what an adjudicator is obliged to consider. At [77], the court stated: ... It is the dispute between the maker of the payment claim and the recipient of that claim which is referred for adjudication. In the light of this express restriction on the contents of the adjudication response, an adjudicator is not required to go beyond the terms of the payment schedule, repeated in an adjudication response, in accepting all or part of the payment claim. The requirement in S22(1) [of the Building and Construction Industry Security of Payment Act 1999 (NSW)], that the adjudicator is to determine “the amount of the progress payment (if any) to be paid” by the respondent to the claimant, in context, is a requirement to determine the amount of the progress payment arising from the dispute submitted by the parties for adjudication. The notion that it is jurisdictional error for an adjudicator to fail to address what the adjudicator considers to be the “true construction of the contract” and the “true merits of the claim” outside the limited issues presented by the parties for determination is an invitation for the reviewing court to embark on an impermissible merits review.
c. the court considered that the views expressed by Hodgson JA in paragraph [52] of Hargreaves did not clearly establish that failing to consider the “true merits” always amounts to jurisdictional error, as Hodgson JA expressed that view only tentatively. It notes this is inconsistent with his clearer position in Coordinated Construction Co Pty Ltd v Climatech83, where an adjudicator’s role is to decide the claim within the dispute defined by the parties. That latter view better reflects the statutory role. The paragraph also clarifies that, although Minister for Commerce v Contrax Plumbing allows adjudicators in some cases to consider matters beyond those specified in the legislation, this is merely a permission, not a mandatory duty whose breach would constitute jurisdictional error. Payne JA held at [75]:
i. ... Certainly, it is not a jurisdictional error for an adjudicator, having decided all the reasons advanced by the respondent were invalid, to then and without more, determine the amount of the progress payment in favour of the claimant based on the payment claim.
d. Importantly, the result of Ceerose does not mean that the adjudicator is obliged to award the amount claimed without any consideration of the contract and merits. This was recognised by the Supreme Court of New South Wales in Paladin Projects Pty Ltd v Visie Three Pty Ltd & Ors [2024] QSC 230, where the court stated at [112]:
i. ...the decision [in Ceerose] does not in effect mean that the adjudicator must “rubber stamp” the claim if reasons in the payment schedule fall away.
e. Although there may be few instances in which the breach of the duty to consider required matters will be made out, it is not impossible. Failure to refer to a submission on a centrally important matter, clearly articulated and based on uncontested facts, may demonstrate a failure to consider at all.
The obligation of an adjudicator to decide an adjudication application in good faith has been considered by the NSW Court of Appeal. The court set out various bases on which an adjudication decision can be set aside, which included where the adjudication decision does not amount to an attempt in good faith to exercise their powers having regard to the subject matter of the legislation. It is necessary for an adjudicator to consider the matters set out in S22 if they are to fulfill their obligation of deciding an adjudication application in good faith. In the case of Perform (NSW) Pty Ltd v Mev-Aus Pty Ltd:
a. the adjudicator was held to not be acting in good faith, because:
ii. the adjudicator expended time and effort on a non-issue which indicated that they did not intellectually engage with the issues raised by the parties for determination;
iii. the adjudicator did not analyse the scope of work, which the court held was necessary to properly consider the arguments made by the claimant in the relevant context; and
iv. the adjudicator did not analyse the nature of the suspension of contractual rights and obligations, in circumstances where such issues were relevant to the arguments raised by the respondent;
b. the adjudicator had not considered one party’s submissions on a particular issue, with the court finding that had the adjudicator done so, they could not reasonably have arrived at the result they did.
Aside from the issue of good faith, this also goes to the validity of the decision. This principle was considered by the New South Wales Supreme Court when considering an adjudication decision, in which the adjudicator had allowed parts of the claim although the reasons provided no explanation, other than stating that the decision was made "after carefully considering the material and concerns”. The adjudication decision was ultimately set aside because the reasons did not demonstrate any analysis and were affected by jurisdictional error.
Inadequate reasons given in an adjudication decision may result in the decision being overturned in part or in full by the court. However, what is adequate will depend on the circumstances of the case.
An adjudicator is entitled to be paid an amount agreed between the adjudicator and the parties or an amount for fees and expenses that is reasonable having regard to the work done and the expenses incurred.
If the adjudicator has determined that the respondent is to pay any amount to the claimant, the respondent is required to pay that amount to the claimant within five business days after the day in which the adjudicator gives a copy of their decision to the respondent, or any later date determined by the adjudicator.
If the respondent fails to pay, the claimant can:
a. give at least two business days’ notice under the SOP Act of an intention to suspend work under the Act; and
b. file the adjudication certificate in a court of competent jurisdiction and enforce it as a court judgment, including by obtaining a warrant for seizure and sale of property.
Claimants generally only have one opportunity at adjudication in relation to any particular claim, provided that claim was valued by an adjudicator.
Once particular work or related goods and services has been valued by an adjudicator under a construction contract, a later adjudicator must give those claims the same value as previously decided, unless the claimant or respondent can satisfy the adjudicator that the value of the work or goods and services has changed since the previous decision.
For this to impact a later adjudicator, there first needs to have been a valuation of the particular claim in an earlier adjudication. The Court has said that it won’t be in all cases that there will have been a prior valuation. In that decision, despite the court finding that the adjudicator had not complied with the S22(4) of the SOP Act, the court did not consider that the adjudication decision was invalid as a result of
jurisdictional error, as it was not considered an essential precondition to jurisdiction.
Issue estoppel is the preference for finality which provides that parties are prevented from relitigating issues of fact or law which were already decided in prior proceedings.
In New South Wales, by operation of S22(4) of the SOP Act and the principle of issue estoppel, an adjudicator in a subsequent adjudication will be bound to follow previous adjudicators valuations and findings of fact which were essential to the determination of the earlier decision.
That is, unless a claim (for an amount or item) is a different claim and progressed on the basis of additional material and submissions, an adjudicator will be bound by issue estoppel, insofar as a subsequent adjudication seeks to re-agitate issues which were essential to those prior determinations.
The NSW Court of Appeal held that, in addition to the express words of the SOP Act, common law principles in the nature of issue estoppel and res judicata would also operate to place limitations on subsequent adjudicators.
The elements required to establish whether the doctrine applies, were endorsed by the New South Wales Supreme Court in 2010. Specifically, the party relying on the doctrine needs to prove:
a. whether the same question of fact or law has already been decided; and
b. whether the question was fundamental to the decision.
More recently, the New South Wales Supreme Court in SE Ware Street Dev Pty Ltd v Kwik Flo Pty Ltd [2025] NSWSC 1060 considered that whether the common law doctrine of issue estoppel applies in the security of payment context is “a matter of some controversy” (see [41]).
The adjudicator may, on their own initiative or if requested by one of the parties, correct the determination.
In New South Wales, it has been held that an accidental or erroneous omission to consider a particular submission or to deal with part of a claim may amount to a jurisdictional error if the failure to consider the submission is material.
Unless it is an error of jurisdiction or arises out of a breach of natural judice or procedural fairness, the decision will remain effective and cannot be declared void by the court.
The position of the courts was summarised in a 2020 New South Wales Supreme Court decision. That case reiterated the following principles:
a. the object of the SOP Act is to ensure prompt progress payments for construction work, and facilitating a fast-track adjudication process, suggesting a threshold of materiality for non- compliance by adjudicators, indicating decisions should not be invalidated for every error made in determining progress payment amounts and timing; and
b. the concept of materiality in the context of security of payment legislation focuses on the extent of non-compliance by an adjudicator, rather than their intent or good faith. It assesses whether an error is significant enough to render a decision invalid under the legislation, considering whether the error materially impacted the decision that was made.
In that decision, the court noted that, had a jurisdictional error been established, it would have affected only a small part of the decision. In that situation, and where the value of the adjudicated amount had been paid into court by the respondent, the preferred remedy was to release to the claimant the portion of the monies paid into court that corresponded to the unaffected parts of the decision. This approach is reflected in S32A of the SOP Act, which expressly allows the court to sever the affected part of a decision.
On occasion, after the adjudication application is lodged and served, the parties settle their dispute.
In that situation, there is a mechanism under S17A of the SOP Act for the claimant to withdraw their adjudication application by a written notice of discontinuance to both the adjudicator and the respondent.
There is a mechanism under S26 of the SOP Act for the claimant to remake their application in very limited circumstances. This applies if the claimant fails to receive an adjudicator’s notice of acceptance of the adjudication application within four business days after the application is made or if the appointed adjudicator doesn’t decide the application within the required time outlined in S21(3). After withdrawing, the claimant can make a new adjudication application.
In circumstances where the adjudicator has failed to make an decision on an adjudication application within the time allowed by S21(3) of the SOP Act, the adjudicator is not entitled to be paid any fees (S29(4) SOP Act).
The Act provides a claimant with rights against the principal contractor, in relation to payment withholding.
Under S26A, a claimant who has made an adjudication application may serve a payment withholding request on a principal contractor. This request requires the principal contractor to retain sufficient funds to cover the claim from money payable from the principal contractor to the respondent. The request must be in the approved form and include a statutory declaration by the claimant affirming their genuine belief that the claimed amount is owed by the respondent.
Under S26B, a principal contractor, upon receiving a payment withholding request, must retain, out of money owed to the respondent, the amount of money to which the payment claim relates. The amount is only required to be retained out of money that is or becomes payable by the principal contractor to the respondent for work carried out or materials supplied b the respondent to the principal contractor as part of or incidental to the work or materials that the respondent engaged the claimant to carry out or supply.
The obligation to retain money under S26B remains in force only until whichever of the following happens first:
a. the adjudication application for the payment claim is withdrawn and the claimant does not make a new adjudication application;
b. the adjudicator fails to determine the adjudication application and the claimant does not make a new adjudication application;
c. the respondent pays to the claimant the amount claimed to be due under the payment claim;
d. the claimant serves a notice of claim on the principal contractor for the purposes of section 6 of the Contractors Debts Act 1997 in respect of the payment claim; or
e. a period of 20 business days elapses after a copy of the adjudicator’s determination of the adjudication application is served on the principal contractor.
Once the claimant’s adjudication application is determined, the claimant has five business days to serve a copy of the determination on the principal contractor.
If a principal contractor fails to comply with the obligation to retain money as required by S26B, then they become jointly and severally liable with the respondent for the debt owed to the claimant, to the extent of the amount that should have been retained. Contravention of S26C requires a voluntary act or omission by the principal contractor, after receipt of the payment withholding request.
S26D provides that the obligation to retain money serves as a defence against recovery of the money by the respondent from the principal contractor. The principal contractor is also entitled to rely on a statutory declaration from the respondent stating that the claimed amount has been paid or that the adjudication application has been withdrawn.
S26E allows an adjudicator, at the request of the claimant, to direct the respondent to provide information about the identity and contact details of any principal contractor related to the claim.
The respondent must comply with this direction and must not provide information it knows is false or misleading.
