In a significant development for the construction industry, the NSW Court of Appeal has confirmed that contractors cannot keep payments claimed under the Building and Construction Industry Security of Payment Act 1999 (NSW) (SOPA) when the work was never performed – even where a payment claim was approved by a construction manager or paid without dispute.
The decision in CBEM Holdings Pty Ltd v Sunshine East Pty Ltd [2025] NSWCA 250 strengthens the “pay now, argue later” framework and confirms that SOPA payments are always provisional, with principals retaining the right to seek restitution of overpayments.
Background
CBEM Holdings (the contractor) carried out bulk earthworks on a Dural development under a 2021 Trade Contract. Four SOPA payment claims were submitted. The construction manager (ASY) approved the first three, which the principals paid. Payment Claim 4 was not assessed, but because the principals failed to issue a payment schedule, CBEM obtained summary judgment for the full amount.
The relationship deteriorated and the contract was terminated. CBEM claimed that progress was at 53% completion. The principals later alleged CBEM had dramatically overstated progress and substantially less had been performed.
They sued in the District Court to recover the alleged overpayments, relying on restitution and misleading or deceptive conduct. The trial judge ordered CBEM to repay $452,961.44. CBEM appealed.
The NSW Court of Appeal dismissed the appeal.
What Was the Dispute About?
The core issues before the Court included:
-
-
- Whether the Trade Contract made ASY approved payments final.
- Whether statements of percentage completion were facts or opinions.
- Whether ASY’s alleged negligence broke the causal chain.
- Whether the principals could rely on money had and received to recover SOPA overpayments.
-
The Court of Appeal confirmed the principals’ right to restitution and clarified the operation of several key SOPA and contractual principles.
Key Takeaways from the Court of Appeal Decision
-
- SOPA Payments Are Provisional; Finality Clauses Won’t Protect Overpayments.
The Court confirmed that SOPA payments are never final, even if a contract manager signs them off or the contract suggests otherwise. Any clause that tries to make progress payments conclusive will be void. This means contractors cannot rely on approval processes to shield overclaimed amounts; principals can revisit payments and recover any excess.
-
- Payment Claims Must Accurately Reflect Contractual Obligations.
A construction manager’s approval, or the principal’s silence at the time, does not create an entitlement if the underlying claim overstates progress or value. In short: administrative approval does not cure non-compliant or inflated claims.
-
- Percentages of Completion Are Usually Opinions.
Statements like “53% complete” are generally treated as opinions, not as factual assertions. An honestly held opinion won’t usually be misleading. However, contractors also cannot rely on it to justify keeping money for work that wasn’t done. Even though this legal issue technically succeeded on appeal, it did not change the outcome: the overpayments still had to be returned.
-
- Contractors’ Overstated Claims Drove the Loss.
The Court accepted that the real cause of the overpayment was CBEM’s overstated claims, not any lack of diligence by the construction manager. Even if a superintendent or contract manager gets it wrong, the contractor is not insulated from liability.
-
- Restitution Was Available, Mistake and SOPA Compulsion Matter.
The principals were entitled to restitution because earlier payments were made by mistake, and the final payment was made under SOPA compulsion. Both are valid grounds to recover money that was never contractually owed. Importantly, principals do not need to plead a detailed narrative of how the mistake occurred. They only need to assert that the amount paid exceeded the contractual entitlement, which the contractor must then disprove.
-
- Poor Record-Keeping Carries Consequences.
The Court relied on the parties’ joint schedule because CBEM had inadequate records of the work allegedly performed. Contractors who keep poor or inconsistent evidence bear the forensic risk; courts will generally prefer the principal’s valuation.
Why This Case Matters
CBEM v Sunshine East is one of the most important SOPA restitution decisions to date because it:
-
-
- reinforces SOPA’s non-finality;
-
-
-
- protects principals from inflated or unsubstantiated claims; and
- underscores that restitution remains a robust remedy for overpayments.
-
Contractors should take this decision as a reminder that accuracy, transparency, and proper substantiation are essential, particularly when progress claims are expressed as percentages of completion.
Key contacts:
