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

WARD P: By summons dated 30 July 2025, the applicant, All Civil Solutions Group Pty Ltd (All Civil) seeks leave to appeal from an interlocutory decision of Peden J declaring that, on the proper construction of s 11(4) of the Contractors Debts Act 1997 (NSW) (the Contractors Debts Act), the respondent, Woonona-Bulli RSL Memorial Club Ltd (the Club), is entitled to raise certain matters (referred to in [26] and Part 2 of its Technology and Construction List Response filed on 13 June 2025 (List Response)) in defence of All Civil’s claim against it in the Technology and Construction List. In those proceedings, All Civil sued for recovery of the amounts outstanding under debt certificates issued under the Contractors Debts Act (see All Civil Solutions Group Pty Ltd v Woonona-Bulli RSL Memorial Club Ltd [2025] NSWSC 688 (primary judgment)). All Civil had contended that the defences available to be raised under s 11(4) of the Contractors Debts Act are constrained by s 25(4)(a) of the Building and Construction Industry Security of Payment Act 1999 (NSW) (Security of Payment Act).

All Civil contends that the primary judge should have found that the Club was not entitled to raise (in defence of its claim) any contractual defences arising under the construction contract between the Club and the head contractor, Warrane Design Construct Fit-Out (the Builder).

For the following reasons I would refuse leave to appeal with costs. Were leave to be granted, I would have dismissed the appeal with costs.

The background to the dispute is set out by the primary judge at [1]-[8] of the primary judgment and may be summarised largely by reference to the primary judgment and the parties’ submissions as follows.

In December 2023, the Builder engaged All Civil as a (fixed price) subcontractor to carry out part (the Club says the great bulk) of the construction work that the Builder was contracted to do for the Club ([1] of the primary judgment). The Club notes that the contract between the Club and the Builder entered into on 7 December 2023 (Contract) was a cost plus contract for construction of a memorial and the upgrade of a car park at the premises of the Club (referring to an earlier decision of Stevenson J between the Builder and the Club - Warrane Design Construct Fit-Out Pty Ltd v Woonona Bulli RSL Memorial Club Ltd [2025] NSWSC 123) but nothing turns on this.

In 2024, All Civil served payment claims on the Builder, resulting in adjudication determinations being made under the Security of Payment Act. All Civil then obtained judgments against the Builder in the District Court of New South Wales in respect of the adjudicated amounts, together with debt certificates issued by the District Court pursuant to s 7(1A) of the Contractors Debts Act, totalling $2,556,151.20. All Civil served those on the Club together with notices of claim under the Contractors Debts Act, the effect of which was to assign to All Civil the obligation of the Club to pay money owed to the Builder under its contract with the Club, to the value of the debt certificates.

The Club made some payments to All Civil such that the final amount outstanding under the debt certificates was $1,200,670.24 ([3]).

In early 2025, after disputes between the Builder and the Club, the Builder itself obtained an adjudication determination against the Club under the Security of Payment Act (in the sum of $2,094,018.14) (which it subsequently entered as a judgment against the Club on 3 February 2025 in the amount of $2,141,780.73) ([4]).

Assigned obligations to pay money owed under the Contract become payable to an assignee “as they become payable under the contract” (s 9(2) of the Contractors Debts Act) and therefore the Club says that the balance due to All Civil under the second of its notices of claim ($1,020,980.40) was payable on 22 January 2025 (when the obligation arose on the part of the Club to pay the adjudicated amount in respect of the disputed payment claim by the Builder – P/C 13). The unassigned amount payable to the Builder in respect of that adjudication determination was $1,073,037.74 ($2,094,018.14 - $1,020,980.40).

Shortly thereafter (on around 24 January 2025 or 31 January 2025), the Builder and the Club agreed that $284,318.94 was the amount payable on a further payment claim (P/C 14), which amount was assigned to All Civil by operation of the earlier notices of claim. This amount was paid to All Civil on 31 January 2025 (with no net effect as to the amount owing to the Builder by the Club). Thus, the amount thereafter due to All Civil under the second notice of claim became $736,661.46 ($1,020,980.40 - $284,318.94).

The Club notes that the application by the Builder for judgment against the Club on the basis of the 30 January 2025 adjudication certificate (totalling $2,141,780.73) (see [8] above) did not address the consequences for the Builder of the assignment effected by service of the second notice of claim.

On 17 February 2025, All Civil served the Club with a notice of claim attaching a debt certificate for $464,008.78 (the third notice/debt certificate) which reduced the amount thereafter payable by the Club to the Builder to $656,791.55 (($2,141,780.73 - $1,020,980.40) - $464,008.78) and increased the amount payable to All Civil to $1,200,670.24 ($736,661.46 + $464,008.78).

On 20 February 2025, the Club applied to set aside, in part, the adjudication determination in respect of P/C 13.

On 25 February 2025, after becoming aware that the Builder had obtained and served a garnishee order attaching $2,141,870.41, the Club applied for a stay of enforcement of the judgment that the Builder had obtained. The Club’s application for a stay was heard by Stevenson J on 27 February 2025 (this resulting in the judgment referred to at [5] above). His Honour concluded that the service by All Civil 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 and stayed the Builder’s judgment to that extent. His Honour ordered that the Club pay the balance under the judgment ($941,110.49) into Court pending determination of the Club’s challenge to the P/C 13 adjudication determination ([5]). That amount was duly paid into Court.

The Club’s challenge to the P/C 13 adjudication determination was heard by Rees J and the Club was unsuccessful (see Woonona-Bulli RSL Memorial Club Ltd v Warrane-Design Construct Fit-Out Pty Ltd [2025] NSWSC 271 which was handed down on 27 March 2025).

Rees J subsequently determined on 16 April 2025 (see Woonona-Bulli RSL Memorial Club Ltd v Warrane-Design Construct Fit-Out Pty Ltd (No 2) [2025] NSWSC 365 (Woonona (No 2))) that All Civil had no claim on the moneys paid into Court but was entitled to take proceedings against the Club to recover the balance outstanding under its debt certificates. Her Honour ordered that the parties bring in short minutes reflecting the amounts of the funds in Court which ought be paid to the Builder and the Club. Orders were made on 24 April 2025 that $859,134.02 of the funds in Court be paid to the Builder and that the balance (being part of the adjudicated amount which the Club had already paid to the Builder) be returned to the Club.

On 16 May 2025, those orders were amended in chambers by consent pursuant to r 36.16 of the Uniform Civil Procedure Rules 2005 (NSW) with the effect that the money held in Court ($941,110.49) was to be paid out as follows: to the Builder, the sum of $859,132.02 and to the Club, the sum of $81,978.47.

The Club filed a notice of appeal from the orders made by Rees J and applied for a stay of the order for payment of moneys out of Court. The application for a stay was dismissed by Griffiths AJA on 2 May 2025 (Woonona-Bulli RSL Memorial Club Ltd v Warrane-Design Construct Fit-Out Pty Ltd [2025] NSWCA 89). The Club subsequently discontinued its appeal but the Builder’s application for leave to cross-appeal concerning the money ordered to be returned to the Club remained on foot as at the time of the primary judgment. Leave to cross-appeal was refused on 8 October 2025 (Warrane - Design Construct Fit-Out Pty Ltd v Woonona-Bulli RSL Memorial Club Ltd [2025] NSWCA 223 (Bell CJ, Stern JA, Griffiths AJA)).

All Civil (as assignee by operation of the Contractors Debts Act of the “debt”) then commenced proceedings to recover the debt pursuant to s 11(3) of the Contractors Debts Act. In those proceedings, the Club raised in its List Response two defences, relevantly including, that, because the claim by All Civil was, by operation of s 11(4) of the Contractors Debts Act, subject to any defence that would have been available to the Club if the Builder had sued the Club for the assigned amount, and, if so sued, the Club would have had available to it defences to the value of at least $3,426,571.27, the Club was not liable to All Civil for any amount under the assignments sued upon (which the Club here refers to as the “s 11(4) Issue”). The primary judge referred to the allegation so raised by the Club as an entitlement by it to claim repayment by 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, which the primary judge characterised as a pleading of set-off (see [26] of the primary judgment).

All Civil, which contends that the pleaded “contractual” defence is not a defence which the Club would have had against recovery of the debt by the Builder had there been no assignment, invoking s 11(4) of the Contractors Debts Act, filed a notice of motion on 4 June 2025 seeking summary judgment.

On 4 June 2025, at the hearing of that summary judgment application, the parties agreed that the primary judge should (by way of the hearing of a separate question) determine the question of construction of s 11(4) of the Contractors Debts Act, which the parties agreed would resolve matters raised in the Club’s List Response as to matters of set-off in relation to the alleged breach of contract by the Builder and some payment of money into Court ([9]).

The primary judge rejected All Civil’s contention as to the unavailability of contractual defences and held that the Club was entitled to raise matters of set-off in defence to All Civil’s claim ([10]).

All Civil now seeks leave to appeal that decision. The application for leave to appeal was heard concurrently with the hearing of the appeal itself.

Before turning to the grounds of appeal, it is convenient to deal with the application for leave to appeal (noting the general principles concerning leave to appeal (considered in The Age Company Ltd v Liu (2013) 82 NSWLR 268; [2013] NSWCA 26 at [13])).

All Civil says that: its application involves a question of principle (the proper construction of s 11(4) of the Contractors Debts Act) and an issue of general importance (there being a dearth of authorities on the Contractors Debts Act and its interaction with the Security of Payment Act); there is a reasonably clear injustice to it, in that, if the primary judge is correct, it will have lost a substantial right to enforce the debt “with the benefit of” s 25(4) of the Security of Payment Act; and an appellate decision will address the “clash” between the primary judgment and the obiter dicta of Rees J (referred to below). The respondent consented to the grant of leave insofar as leave to appeal was necessary.

Insofar as the submissions for All Civil emphasise that the matter involves an issue of general importance (being the interaction between s 11(4) of the Contractors Debts Act and s 25(4) of the Security of Payment Act), that asserted importance is largely (if not altogether), diminished by the concession in oral argument that All Civil’s reliance on s 25(4) was “diluted” (see AT 24.36-40). Although not expressly abandoned, All Civil’s position on the question of reliance on s 25(4) was said to fall somewhere between “dilution” and “abandonment”.

Similarly, the complaint that All Civil has lost a substantial right to enforce the debt “with the benefit of” s 25(4) of the Security of Payment Act cannot be reconciled with All Civil’s acceptance in its submissions that, on one view, s 25(4) of the Security of Payment Act is irrelevant to the analysis of the question as to the proper construction of s 11(4) of the Contractors Debts Act.

Confined to the question of the proper construction of s 11(4) of the Contractors Debts Act, the issue of principle raised by the proposed appeal becomes of less import when addressing whether leave should be granted. In circumstances where this is yet another episode in the ongoing saga of litigation between the parties, and given my view as to the merits of the appeal, I would refuse leave to appeal. As I explain below, were leave to be granted, I would have dismissed the appeal with costs.

I turn then to a consideration of the proposed appeal, to explain the conclusion reached above.

The parties accept that the Contractors Debts Act may be engaged whenever a contractor (referred to in the Act as the “defaulting contractor”) retained to do work has sub-contracted the doing of some or all of that work but has not paid the sub-contractor (referred to in the Act as the “unpaid person”) for the doing of some or all of the sub-contracted work; and that it permits the unpaid person to obtain payment from money that “is or becomes payable” to the defaulting contractor from some other person (referred to in the Act as the “principal”). All Civil, in reply submissions, points out that there is no requirement that the “unpaid person” be a party to any contract and says that it is therefore sufficient if the “unpaid person” entered into an arrangement or money is otherwise owed to the “unpaid person” (referring to s 5(1) of the Contractors Debts Act). The Club does not appear to demur from this.

There are two “pathways” by which the sub-contractor (the unpaid person) may obtain such payment, the second of which is relevant in the present case.

The first (see s 7(1)) involves the issue by the Court of a “debt certificate” after judgment is given or entered in any proceedings relating to the recovery of money owed to a person for work carried out or materials supplied.

The second, pursuant to s 7(1A), involves the issue of a “debt certificate” in circumstances where an adjudication certificate within the meaning of the Security of Payment Act has been filed as a judgment for a debt in accordance with s 25 of that Act. The debt certificate is issued “in respect of the debt under this section” (see s 7(1A)). The debt certificate evidences the amount of the judgment debt (arising on the filing of the adjudication certificate). Service of a “notice of claim” (see s 6), together with a copy of the debt certificate, on the principal operates to assign to the unpaid person the obligation of the principal to pay the money owed under the contract to the defaulting contractor (see s 8(1) of the Act).

After a notice of claim is served on a principal in accordance with Pt 2 of the Contractors Debts Act, the principal must pay to the unpaid person the money owed to the defaulting contractor (s 9(1)) and must make the payments to the unpaid person “as they become payable under the Contract with the defaulting contractor” until the certified debt has been fully discharged or the payments are no longer payable under the contract (s 9(2)).

If the debt is assigned to the unpaid person, and the principal fails to make any payment required by the Act, the unpaid person may sue for and recover the assigned debt (s 11(2) of the Contractors Debts Act) and proceedings for recovery of the debt may be taken “in any manner in which the defaulting contractor might have taken them had there been no assignment” (s 11(3) of the Contractors Debts Act).

Section 11(4) of the Contractors Debts Act then provides:

Section 19(b) provides that the Act does not affect any rights a defaulting contractor or principal may have except as expressly provided by the Act.

Section 25 of the Security of Payment Act deals with the filing of an adjudication certificate as a judgment for a debt and provides that it is “enforceable accordingly”. Section 25(4)(a) of the Security of Payment Act provides that:

The question raised in submissions (though not, as already explained, pressed as such in oral submissions) was whether the defences available to be raised under s 11(4) of the Contractors Debts Act are constrained by s 25(4)(a) of the Security of Payment Act (as All Civil contended).

Her Honour (at [28]) rejected All Civil’s submission that the scope of defences available to be raised under s 11(4) of the Contractors Debts Act was constrained by s 25(4) of the Security of Payment Act. Her Honour noted that All Civil’s 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 All Civil through the Contractors Debts Act, the Club would not be entitled to raise any defence if the Builder sought to enforce the adjudication/judgment and that All Civil (the subcontractor) should have the “flow on benefit” of s 25(4) of the Security of Payment Act. In oral submissions on this appeal, All Civil put this as being that the assignment of the debt was “unencumbered” by any contractual defences (AT 13.42).

Her Honour’s reasons for rejecting (at [28]) All Civil’s submission were as follows:

The draft notice of appeal raises the following two appeal grounds:

All Civil contends that the primary judge incorrectly answered the question identified at [39] above in the negative, with the consequence that a debt which is obtained under the Security of Payment Act and which is subsequently assigned under the Contractors Debts Act, has the effect of extinguishing the benefit of the “pay now, argue later” policy of the Security of Payment Act recognised to be contained in s 25(4)(a) of the Security of Payment Act.

All Civil submits that the combined statutory regimes operate, in effect, so as to place the beneficiary/assignee of a debt in the same position as the assignor without modification (such that s 25(4) effectively applies to the debt assigned).

All Civil contends that the primary judge erred in the following three respects.

First, in finding (at [29]-[30]) that the “pay now, argue later” policy of the Security of Payment Act is not replicated in the Contractors Debts Act, on the basis that a subcontractor’s ability to recover under the latter depends on the existence of a liability by the principal to the head contractor under the contract between principal and head contractor. All Civil submits that, in so finding, the primary judge erred in treating a judgment obtained under the Security of Payment Act as not one that is payable by the principal (the Club) to the contractor (the Builder) under contract. All Civil argues that money payable under the Security of Payment Act is treated by that Act as money payable under contract (referring by way of example to ss 8(1), 9, 10(1) and 22 of the Security of Payment Act).

All Civil says that if the primary judge is correct it would be inutile to assign (under the Contractors Debts Act) a judgment debt obtained under the Security of Payment Act based on an “arrangement” within the meaning of a “construction contract” as defined by s 4 of the Security of Payment Act because there would never be a liability under any contract and such an assigned debt could never be enforced.

Second, in finding (at [31]) that what is assigned to the subcontractor is a chose in action which is subject to the contract between the principal and subcontractor. All Civil submits that that is not so in all cases; in particular, that it is not the case in respect of a judgment debt under the Security of Payment Act. All Civil accepts that it may well be the case if the debt assigned is founded in contract and divorced from the Security of Payment Act. All Civil says that the decision in Re Summit Design & Construction [1999] NSWSC 1136; (1999) 33 ACSR 301 (to which the primary judge referred (at [31]) by way of example of the proposition that what is assigned to the subcontractor is a chose in action which is subject to, and can be limited by, the provisions of the head contract), was not concerned with the assignment of a debt under the Security of Payment Act nor the operation of s 25(4) of that Act. All Civil says that, as such, reliance on that decision was misplaced.

Third, in finding as relevant (at [37]) that, if the Contractors Debts Act were construed as suggested by All Civil, the Club would have no means of recovering any sum from All Civil for defective work. While All Civil accepts the premise of that statement, it submits that the finding presupposes that the Club would be without remedy. All Civil says that the Club retains its rights against the Builder (referring to s 32 of the Security of Payment Act and s 19 of the Contractors Debts Act). All Civil says that the Club is in the same position as if it had paid the Builder and the Builder had voluntarily paid the subcontractor (All Civil); and that, in such a situation, the Club would not be able to recover any sum from it for defective works. All Civil says that the decision referred to by the primary judge at [38] (Sam the Paving Man Pty Limited v Berem Constructions Pty Limited (in liquidation) [2010] NSWSC 868) is obiter, ex tempore, and related to leave to proceed against a party in liquidation and so is readily distinguishable.

All Civil argues that s 19(b) of the Contractors Debts Act operates harmoniously with s 32 of the Security of Payment Act. All Civil says that s 19(b) does not trespass on the assignment in the sense that it does not put the assignor in a better position; rather, it does not permit the assignor to raise contractual defences which it would not have been entitled to raise absent an assignment.

All Civil submits that the finding at [36] that the provisions of the Security of Payment Act are peculiar to the parties to a construction contract supports its construction. It submits that it is unlikely that the legislature intended a subcontractor, in order to recover a debt created by the Security of Payment Act and assigned under the Contractors Debts Act, to be compelled to litigate contractual defences in respect of a contract to which it is not privy and devoid of the practical means of meeting a defence of the kind raised.

All Civil notes that s 7(1A) of the Contractors Debts Act was introduced as part of a widespread reform in 2002 to the Security of Payment Act (see Building and Construction Industry Security of Payment Amendment Act 2002 (NSW)). All Civil refers in this regard to the following statements in the second reading speech:

All Civil submits that the obiter observations of Rees J in Woonona (No 2) at [39]-[40], set out by the primary judge at [34], reveal the correct application of the provisions in issue:

In summary, All Civil says that it was entitled to sue the Club for the debt, as it did (s 11(3)). It accepts that its right to sue for the debt was subject to any defence that the Club would have against the recovery of the debt by the Builder had there been no assignment (s 11(4)) but says that the Club would not have had any defence against the recovery of the debt by the Builder had there been no assignment.

All Civil thus submits that the primary judge should have held and declared that, on the proper construction of s 11(4) of the Contractors Debts Act, the Club was not entitled to raise the matters referred to in [26] and Part 2 of its List Response in defence to All Civil’s claim for recovery of the debt owed by the Club to it.

The Club notes that the primary judge considered that nothing in the Security of Payment Act expressed itself as operating in respect of an obligation assigned by operation of the Contractors Debts Act and nothing in the Contractors Debts Act gave ambulatory effect to any provision in the Security of Payment Act (referring to [30]-[33] of the primary judgment). In particular, the Club notes that her Honour did not accept that s 11(3) of the Contractors Debts Act, which provides that “[p]roceedings for recovery of the [assigned] debt may be taken in any manner in which the defaulting contractor might have taken them had there been no assignment”, gave ambulatory effect to s 25(4) of the Security of Payment Act (see [34]-[36] of the primary judgment).

The Club says that the notional premise for the operation of s 11(4) of the Contractors Debts Act (that a contractor has not been paid by the principal and is suing to obtain a judgment for the amount unpaid; i.e. that the contractor does not have, but is seeking, a judgment) is to be contrasted with that for the engagement of s 25(4) of the Security of Payment Act, which operates in proceedings where an adjudication certificate has been filed as a judgment for a debt (in other words where there is a judgment). The Club says that All Civil’s proceedings were not of the latter kind; that it sought, rather than had, a judgment.

The Club argues that All Civil’s right to bring proceedings (to recover the debt) arose upon money being (but for the assignment) payable by the Club under the contract to the Builder (i.e., a point in time prior to the Builder being enabled to obtain an adjudication certificate or judgment). It says that All Civil’s submission is premised on the contrary, namely that there is an assignment of a Security of Payment Act “judgment”. The Club points out that All Civil was not itself ever competent to apply for an adjudication certificate or judgment thereon; because it was not, in respect of P/C 13, “a claimant”.

The Club submits that All Civil’s construction is not required by the language of s 11(3) itself. The Club argues that the construction of s 11(3) advanced by All Civil (that a principal would be without a means of recovering from the subcontractor any overpayment of the amount finally determined as due under the construction contract – but the principal retains its rights to recover against a contractor any such overpayment) means that the position of an assignee of an obligation in respect of the satisfaction of that obligation is improved over that of the contractor whose entitlement is assigned. The Club says that this is a construction of s 11(3) which is inconsistent with the text and purpose of s 11(4) of the Contractors Debts Act. The Club submits that the fact that an assignment operates “subject to defences” is an indication that the assignee was to be entitled to payment on no different basis than the contractor would have been if it was itself suing for a judgment.

I note that, in response to the above submission, All Civil argues that on its construction an assignee is not placed in a “better position”. It says that in either event (whether or not there is an assignment) the principal retains its rights against the head contractor and the head contractor retains its rights against the subcontractor. All Civil argues that its construction leaves work for s 11(4) to do (for example, it says that where a debt obtained by the operation of a contract is assigned, contractual defences would be available in such circumstances).

All Civil embraces the proposition by the Club that an assignee was to be entitled to payment on no different basis than the contractor would have been if it was itself suing for a judgment, but All Civil maintains that the Club had no defence to the Builder’s attempt to recover the debt. All Civil says that it is for that reason that on 3 February 2025 judgment was entered in favour of the Builder against the Club for $2,141,780.73 (referring to Stevenson J’s judgment at [12]).

It is important to appreciate that s 25(4) of the Security of Payment Act in its terms is premised on proceedings being commenced by “the respondent” (in context, the “principal” in Contractors Debts Act terms – here the Club) to set aside the “judgment for a debt” obtained by the filing of an adjudication certificate.

The proceeding which led to the pleading dispute determined by the primary judge was not a proceeding commenced by the Club to set aside the judgment for a debt obtained by the Builder and assigned to All Civil. At the risk of stating the obvious, it was a proceeding commenced by All Civil (the “claimant” in Security of Payment Act terms) for recovery of the “debt” assigned to it, pursuant to s 11(3) of the Contractors Debts Act.

The focus on the interaction between s 11(4) and s 25(4)(a) is therefore misplaced, as is the submission by All Civil that it has been deprived of the benefit of s 25(4)(a).

Insofar as All Civil submitted that what it was assigned was a “judgment unencumbered by contractual defences” (AT 13.40; 16. 47) or “the fruits of judgment … together with an inability to raise any defences”, this puts a gloss on s 8(1) of the Contractors Debts Act. What that section makes clear is that service of a notice of claim (as defined in s 6(2) and which must be accompanied with a copy of the debt certificate) “operates to assign to the unpaid person [here, All Civil] the obligation of the principal [here, the Club] to pay the money owed under the Contract to the defaulting contractor [here, the Builder]”.

The suggestion that the primary judge erred in saying that what is assigned to the subcontractor is a chose in action (see [31]) cannot be accepted.

The obligation of the principal which is assigned is the obligation “to pay the money owed under the contract to the defaulting contractor”. “Contract” is defined in s 3(1) as meaning an express or implied contract, whether or not in writing (and hence may well encompass an “arrangement” cf All Civil’s contention at [47] above). The money in question is money “that is payable or becomes payable” to the defaulting contractor; and the obligation to pay the unpaid person (under s 9(2)) continues until the earlier of either the principal receiving a notice or notices indicating that the certified debt has been fully discharged or the payments no longer being payable under the contract.

As the Club points out, once the notices of claim were served on it, an assignment was effected whereby it became liable to pay to All Civil the money it owed the Builder (to discharge All Civil’s certified debt) and, since the obligation is to make the payments to the unpaid person “as they become payable under the contract with the defaulting contractor” (s 9(2)), when there was an adjudication determination in relation to P/C 13 that amount was automatically assigned and payable to All Civil (that being a point prior to the Builder being entitled to file an adjudication certificate as a judgment because, by reason of the assignment to All Civil, there was no failure to pay the adjudicated amount to the Builder). Hence, the Club points to the decision by Stevenson J (referred to above) (AT 27.15) staying enforcement of the adjudication certificate judgment by the Builder up to the amount that had been assigned to All Civil.

Finally, when looking at s 25(4)(a) of the Security of Payment Act, I agree that there is nothing that suggests it is to have ambulatory effect i.e., to inform the construction or operation of s 11(4) of the Contractors Debts Act.

Turning to the proper construction of s 11(4), and what has been described as the central or “critical” question in this proceeding, the question is whether the principal (i.e., the Club) would have had a defence of set-off “against recovery of the debt” by the defaulting contractor had there been no assignment.

The Club accepts that the Security of Payment Act provides a mechanism for the quantification of an entitlement of an amount payable for construction work done under a construction contract and that s 23(2) of that Act provides when that adjudicated amount must be paid.

However, where s 8(1) of the Contractors Debts Act refers to the obligation of the principal to pay the money owed under the contract, it identifies the contractual obligation between the head contractor (the Builder) and the principal (which might be quantified by the adjudication determination).

The Club argues that the proceedings that are notionally required to be considered when addressing s 11(4) are proceedings between the Club and the Builder where the Builder seeks recovery of the “debt” (i.e., the s 7(1A) debt arising by filing an adjudication certificate under the Security of Payment Act).

At the point of recovery of that debt, as opposed to the earlier proceeding in which the Club sought to set aside in part the adjudication determination, there is nothing in s 25(4) of the Security of Payment Act to preclude the Club raising a contractual (or equitable) set-off.

Accordingly, matters of set-off must be defences that the principal would have had against “recovery of the debt” by the defaulting contractor (the Builder) but for the assignment.

In those circumstances, her Honour did not err in making the declaration that was made.

For the above reasons, I would refuse leave to appeal with costs but, were leave to be granted, would dismiss the appeal with costs.

McHUGH JA: I have had the benefit of reading in draft the President’s reasons for judgment. I agree with her Honour’s orders and, subject to what follows with respect to the interaction of the two legislative regimes, with her Honour’s reasons.

Assume three parties: a principal, a head contractor and a subcontractor.

As to the Contractors Debts Act 1997 (NSW):

It follows, as a matter of construction of the Contractors Debts Act, that the common-law debt under the contract between the principal and the head contractor which s 8(1) of the Act assigns to the subcontractor has nothing to do with SOPA or with statutory rights conferred by SOPA. (The fact that the parties proceeded on the footing that SOPA adjudications in this case quantified that common-law obligation does not change the operation of the statute.)

Nothing in SOPA requires a different conclusion:

GRIFFITHS AJA: I agree with the President.