NSW Security of Payment Act operates for the benefit of companies in liquidation

In yesterday’s decision in Seymour Whyte Constructions Pty Ltd v Ostwald Bros Pty Ltd (In liquidation) [2019] NSWCA 11, the New South Wales Court of Appeal unanimously held that the application of the Building and Construction Industry Security of Payment Act 1999 (NSW) (NSW SOP Act) is capable of operating for the benefit of builders that have entered liquidation.

This decision is in stark contrast to the position in Victoria, where the Victorian Court of Appeal has previously held that builders which have entered liquidation are prohibited from utilising the Victorian SOP Act.

The NSW Court of Appeal found that a right to a progress payment required the satisfaction of two conditions:

  1. a party has undertaken to carry out construction work under a construction contract; and
  2. a reference date has arisen under the construction contract.

The Court of Appeal held that:

  1. the first condition ‘is a reference to a contractual undertaking, not to the physical performance of work’; and
  2. in respect of the second condition, ‘a reference date can arise regardless of whether the claimant is actually continuing to carry out construction work under the contract on that particular date’.

Accordingly, the NSW Court of Appeal held that there was nothing in the language of the NSW SOP Act to support a finding that either of the two conditions could not be met where a company had entered into liquidation.

The effect of this decision will extend beyond the scope of the NSW SOP Act, and consequently, it is likely that companies in liquidation in Queensland will similarly be able to use the Building Industry Fairness (Security of Payment) Act 2017 (Qld) to recover progress payments.

However, the effect of this decision in NSW will be short-lived, as the imminent changes to the NSW SOP Act (under the Building and Construction Industry Security of Payment Amendment Act 2018 (NSW), which is currently awaiting official proclamation), will prohibit companies in liquidation from recovering payment under the NSW SOP Act.

This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader’s specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed.

Key contacts:

Stephen Pyman – Director | Principal
Christopher Rowden – Principal


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