The New South Wales Court of Appeal has decided “another episode in the ongoing saga” concerning construction work at the Woonona-Bulli RSL Memorial Club, in a series of litigation which has considered the interaction of the Contractor’s Debts Act 1997 (NSW) (the Debts Act) and the Building and Construction Industry Security of Payment Act 1999 (NSW) (SOPA).

Woonona-Bulli RSL Memorial Club Ltd, as Principal, engaged the head Contractor, Warrane Design Construct Fit Out Pty Ltd, to construct a memorial and upgrade a car park at the premises of the RSL Club. The Contractor subcontracted All-Civil Solutions Group Pty Ltd to carry out part of that work. A series of payment disputes followed.

We previously reported on the Supreme Court of New South Wales’ decision in Warrane Design Construct Fit-Out Pty Ltd v Woonona Bulli RSL Memorial Club Ltd [2025] NSWSC 123 (found here). In that decision, the Supreme Court stayed a judgment ordering the Principal to pay monies owed to the Contractor following a SOPA adjudication, on the basis that it failed to take into account amounts already paid directly to the Subcontractor on the Contractor’s behalf pursuant to the Debts Act.

In the present appeal, from a different Supreme Court decision, the Court of Appeal considered the differing defences available to the Principal under SOPA and the Debts Act.

After the Subcontractor obtained a debt certificate under the Debts Act for payments that the Contractor owed it, the Subcontractor served notices of claim on the Principal under the Debts Act. The effect of this was that if and when the Principal became liable to pay amounts to the Contractor under their construction contract, the Principal would instead pay those amounts directly to the Subcontractor up to the value of the Subcontractor’s debt certificates.

The Subcontractor commenced proceedings in the Supreme Court of New South Wales against the Principal to recover outstanding monies owed under the Debts Act. The Principal argued that no amount was owing to the Contractor, and therefore there was no money to be paid on to the Subcontractor, despite a SOPA adjudication in the Contractor’s favour. This was because the Principal had contractual set-off rights which exceeded the debt amount. The key question was whether the Principal was entitled to raise its contractual set-off defences against payment, in circumstances where SOPA would have prevented the Principal from raising such defences against the Builder in proceedings to enforce payment of the SOPA adjudication.

The Subcontractor argued, in effect, that the statutory regimes should operate in tandem to place the Subcontractor in the same position as the Contractor would have been. The New South Wales Court of Appeal unanimously refused leave to appeal, noting that had the appeal been allowed, it would be dismissed. The Court of Appeal found that:

• on the proper construction of the Debts Act, the Principal was entitled to bring any defences which were originally available against the Contractor;
• it is important to note the different purposes of the Debts Act and SOPA, including the interim nature of SOPA adjudication payments which does not translate to the Debts Act; and
• in general, SOPA does not operate to confine the Debts Act, and the Court of Appeal is not required to interpret the Debts Act by reference to SOPA requirements or principles.

This decision provides clarity to the operation of the two regimes, following various lower Court decisions.

The decision can be found here.