This case serves as a reminder of an alternative legal avenue for recovering unpaid debts: the Contractors Debts Act 1989 (NSW) (CDA).
Relevantly, the CDA allows an unpaid person (who has been awarded a judgement debt) to obtain payment of moneys owed out of moneys that are or will become payable to a defaulting contractor. In other words, a subcontractor can circumvent the defaulting contractor and redirect money so that it is paid directly from the client/principal to them (see sections 5 and 7 of the CDA).
This case also highlights the parallel operation of the Building and Construction Industry Security of Payment Act 1999 (NSW) (SOPA) and the importance of considering potential conflicts between claims under both statutes.
Warrane Design Construct Fit-Out Pty Ltd (Warrane), the plaintiff, entered into a building contract with Woonona Bulli RSL Memorial Club (the Club). Warrane subcontracted part of the work to All Civil Solutions Group Pty Ltd (Subcontractor). Later, the Club withheld payment from Warrane, citing defects and incomplete work, which in turn left the Subcontractor unpaid.
16 August and 13 December 2024 and 31 January 2025: The Subcontractor obtained and served debt certificates under the CDA, redirecting the sum of $2,556,151.20 (which was payable to Warrane by the Club) to the Subcontractor. At the time of this judgement, the sum of $1,200,670.24 was still owed to the Subcontractor.
3 February 2025: After Warrane secured an adjudication certificate against the Club in the sum of $2,094,018.14, it filed the determination and had judgement entered in its favour in the increased amount of $2,141,780.73.
20 February 2025: The Club initiated legal proceedings to partially quash the adjudication determination.
The Court ruled that the $1,200,670.24 sought by Warrane rightfully belonged to the Subcontractor under the CDA debt certificates, and so partially stayed (or paused release of) Warrane’s judgment debt obtained on 3 February 2025 by that amount.
In doing so, the Court noted that, to not partially stay Warrane’s judgement debt “would be to ignore the operation of the CDA. The SOPA and the CDA should, if possible, be construed in a way that achieves their harmonious interaction, and the Court’s processes should also be used to achieve that result.” (see [19]).
This case underscores the interplay between SOPA and CDA in construction disputes. Contractors pursuing SOPA claims must remain cautious of any concurrent CDA claims, as the latter can affect the distribution of payments and ultimately impact adjudication outcomes.
This case also brings to the forefront that an alternative avenue for debt recovery exists for subcontractors who are having difficulty obtaining payment from head contractors.
However, before going down the CDA route, a person should first obtain legal advice about whether that is the appropriate course of action.
excellence@kreisson.com.au
02 8239 6500
