April Security of Payment Wrap Up across Australia

Below, we outline the key takeaways from recent Security of Payment (SOP) decisions (across Victoria, Queensland and New South Wales) from March 2025 and the practical implications of these decisions for contractors/subcontractors and principals.

Victoria

Re Duke Ventures Wellington Street Pty Ltd [2025] VSC 75

In this decision, the Supreme Court of Victoria set aside a statutory demand issued to recover an unpaid amount awarded in an adjudication determination because the recipient of the demand / respondent in the adjudication determination had offsetting claims greater than the amount demanded. This decision underscores that establishing offsetting claims is a relatively low bar to meet to set aside a statutory demand.

Parties seeking to enforce an adjudication amount should carefully consider if the use of a statutory demand and resulting winding up procedures are the most effective enforcement option in their particular circumstances.

• Briefly, Duke engaged Cobolt to construct an apartment building. Cobolt issued a progress payment claim and successfully obtained an adjudication determination in its favour. Cobolt thereafter obtained judgment for the adjudicated amount and following non-payment, served a statutory demand on Duke.
• Duke applied to set aside the demand due to offsetting claims associated with rectification of defects, liquidated damages, and the estimated costs to complete the remaining works.
• The Court stated that in seeking to set aside a statutory demand for an amount awarded by an adjudicator, the debtor:
  • cannot argue there is a ‘genuine dispute’ as to the existence of the judgment debt;
  • cannot rely on an offsetting claim to the extent the adjudicator made an allowance for that claim in arriving at the figure that becomes the judgment debt;
  • however, can raise an offsetting claim that was rejected by the adjudicator, not raised before the adjudicator, or arose from separate transactions between the parties.
• Importantly, the Court also held that relying on offsetting claims to set aside a statutory demand does not subvert the SOP regime.

Queensland

Taringa Property Group Pty Ltd v Kenik Pty Ltd [2024] QSC 327

The Supreme Court of Queensland has looked at the balancing exercise required to be undertaken in determining whether to grant a stay on enforcing an adjudicated amount in potential insolvency situations. In line with the interim nature of SOP proceedings, the Court held that it is sufficient for the party to establish that there is a high risk that payment of the adjudicated amount in that context will, in effect, become a final payment due to the other party’s inability to repay it at a later date following intervening insolvency events.

• Having previously concluded that there was a valid payment claim in an earlier decision,[1] in this decision, Hindman J turned to the question of whether to grant a stay preventing enforcement of the SOP judgment debt pending determination of the substantive dispute between the parties.[2]
• Her Honour considered the principles relating to a grant of stay in the context of a proceeding under the Qld SOP Act as follows:
  • Caution must be exercised when granting a stay as this derogates from the policy objectives of the Qld SOP Act, and as such, stays are usually not granted. The Qld SOP Act is designed to improve cashflow for contractors and, generally, the principal or superior contractor must bear the risk of non-recovery of payments made under the Act as a consequence of the contractor’s financial failure after receipt of the SOP payment.
  • Established case law demonstrates the above position might be displaced in certain scenarios, including when the contractor is in liquidation or external administration at the time the SOP payment is to be made.
  • There is no express prohibition in Queensland for a company in liquidation to use the SOP regime. As such, based on the underlying rationale of the SOP regime and its interim nature, a stay may be granted where the contractor’s financial position would, in effect, make the SOP payment final.
• There is no fixed threshold, and a balancing exercise must be conducted between the risk of non-recovery by the payor and the consequences to the recipient of the payment if payment is not received in a timely manner.
• In this case, the evidence demonstrated the contractor Kenik’s perilous financial situation, and that the stay would result in its complete financial failure. However, her Honour held that the risk of irreparable damage to TPG needed to be very high if a stay was to be granted in light of the serious consequences for Kenik (but will not need to meet the threshold of external administration).
• Hindman J concluded there was a very high risk that if the stay was not granted, and Kenik was ultimately found not entitled to the adjudicated amount on a final basis, Kenik would not be able to repay the amount. A stay was therefore granted on certain conditions, including TPG: (1) making further payment into court (to account for interest), (2) providing an undertaking as to damages and (3) paying the adjudication costs plus interest to the contractor, Kenik.

York Property Holdings Pty Ltd v Tomkins Commercial & Industrial Builders Pty Ltd [2025] QSC 44

This was an exceptional case where the Court concluded there had been jurisdictional error sufficient to set aside a determination due to the adjudicator failing to consider material documents in making its determination. It was held that the failure to consider the relevant evidence and submissions was of such significance so as to constitute a failure to comply with the essential requirements of the Qld SOP Act.

• York (Principal) and Tomkins (Builder) entered into a construction contract to carry out development works.
• In August 2024, Tomkins served a payment claim for the sum of ~$43 million. York’s responsive payment schedule certified nil. Tomkins terminated the contract alleging breach by York. York disputed that termination and attempted to serve a contractual notice purporting to de-scope Tomkins.
• Tomkins lodged an adjudication application. The adjudicator determined that York was liable to pay Tomkins in excess of ~$16 million. York sought review of the adjudication determination. The Court considered the following two key grounds of review:
  1. First, York said the adjudicator misconstrued the terms of the contract: The adjudicator had held that the clause permitting York to take the works out of Tomkins’ hands was void as an attempt to contract out of the SOP regime. The Court reiterated that, given identification and interpretation of the construction contract is a matter for the adjudicator to determine under the Qld SOP Act, the incorrect construction of a contractual provision of this nature would not amount to a jurisdictional error.
  2. Second, York said that the adjudicator failed to consider the parties’ submissions as required under section 88(2) of the Qld SOP Act: they overlooked a concession that reduced a claim for facade work and a separate submission that the value of a deduction for defective facade work had increased. As to these, the Court held that a failure to consider submissions or evidence will constitute a jurisdictional error if such failure is material, with materiality being a factual threshold to be determined on a case-by-case basis. Here, given ~$3.7 million was omitted from the determination due to the failure to consider the submissions and related evidence, the Court concluded the sum so significant as to be a material failure.

New South Wales

Woonona-Bulli RSL Memorial Club Ltd v Warrane-Design Construct Fit-Out Pty Ltd [2025] NSWSC 271

In the next instalment of these proceedings,[3] the Court held that an adjudicator considering a payment claim from a head-contractor to a principal can take into account the findings of a previous determination of a payment claim between that head-contractor and its subcontractor.

• Briefly, the Club engaged Warrane to replace a bowling green and other works. Warrane subcontracted All Civil to complete some of those works. All Civil obtained an adjudication determination against Warrane, which included an award of delay costs (Subcontractor Determination).
• Warrane then issued a payment claim to the Club, which included a claim for the delay costs awarded in the Subcontractor Determination. The Club disputed the delay costs, and Warrane applied for adjudication. The adjudicator determined that the Club was liable for the full amount of the delay costs (among other amounts).
• The Club applied to Court to have the part of the decision that awarded the delay costs set aside. The Club argued that the adjudicator erred by, in effect, concluding that the Subcontractor Determination between Warrane and All Civil determined the value of the delay costs under the contract between the Club and Warrane.
• The Court rejected Warrane’s submissions. The Court found that the adjudicator was entitled to take into account the Subcontractor Determination as evidence to determine the value of the delay costs. The findings in the Subcontractor Determination were based on the same facts as those now asserted by Warrane.

Federal Government’s Response to the Murray Review

On 14 March 2025, the Federal Government released its response[4] to the National Review of Security of Payment Laws (Murray Review).[5] The Murray Review examined ways to improve consistency in security of payment legislation and enhance protections for subcontractors to be paid on time for their work. The final Murray Review report made 86 recommendations, with a key focus on the need to achieve nationwide consistency regarding SOP legislation by implementing a legislative model based on the ‘East Coast’ SOP laws.

While not every recommendation was addressed individually due to the ‘significant time’ that has passed since commencement of the Murray Review, the Federal Government expressed general support for its policy objectives, including for a nationally aligned SOP regime. The government’s response noted that many of the considerable changes in the different SOP regimes over the years have already improved national consistency and have generally been consistent with the Murray Review’s policy objectives. A notable development is the recent endorsement by the Victorian State Government of key recommendations to reform its SOP legislation, which would align the Victorian SOP Act more closely with the other states.[6]

In its response, however, the Federal Government has recognised the Commonwealth’s limited legislative authority over leading national reforms to SOP legislation and emphasised that the ultimate responsibility for addressing current issues within the SOP regime lies with the states and territories. The response, therefore, focused on practical policy interventions to support the outcomes outlined in the Murray Review, with the Federal Government committing to several actions, most of which are already being undertaken at the time the response was released. Those actions include:

• working with businesses and unions on a ‘Building and Construction Industry Blueprint’;
• improving payment practices in Commonwealth construction projects by setting clear, prompt payment expectations in the Commonwealth Supplier Code of Conduct;
• promoting prompt payment times for contractors and subcontractors for government construction by Government Business Enterprises; and
• proposing policies to further protect contractors against unfair contract terms.