In EnerMech Pty Ltd v Acciona Infrastructure Projects Australia Pty Ltd [2024] NSWCA 162, the New South Wales Court of Appeal considered a challenge to an adjudication determination under the Building and Construction Industry Security of Payment Act 1999 (NSW) (Act) on the basis that a valid payment claim must be ‘for construction work’.

The Court of Appeal found that there is no essential requirement that a claim be ‘for construction work’ in order for the claim (and any adjudication determination of that claim) to be valid. Whether a payment claim meets the requirements of the Act in that respect is a matter for the adjudicator.

A joint venture known as ASBJV subcontracted EnerMech Pty Ltd to perform electrical works as part of the WestConnex project. During the project, ASBJV called on a guarantee provided by EnerMech under the subcontract, following alleged breaches of contract. EnerMech subsequently served a payment claim under the Act upon ASBJV and at adjudication was awarded the full amount claimed.

ASBJV challenged the adjudicator’s determination in the NSW Supreme Court. At first instance, the Supreme Court found the payment claim included an amount equal to the cashed security. Therefore, the claim was not a valid payment claim for the purpose of the Act (including the subsequent adjudication) because it was not a ‘payment claim’ ‘for construction work’.

EnerMech appealed to the Court of Appeal, contending that the primary judge erred because there is no pre-condition that a payment claim under the Act must be ‘for construction work’, or if there is such a rule, compliance with that rule is a matter for the adjudicator and not a matter that can be reviewed by a court.

The Court of Appeal agreed, holding that the language in the Act provides that a payment claim must be for an amount of money, and the claim must assert that the amount is for work done, goods supplied or services rendered, under a construction contract. The two critical elements are that there be a construction contract and that there be a consideration or amounts payable under it. Whether an amount is in fact payable under the construction contract is not a precondition to the validity of a payment claim but a matter for the adjudicator.

In interpreting the Act in EnerMech’s favour, the Court of Appeal emphasised established case law that:

• an adjudication determination under the Act may only be set aside where there has been jurisdictional error; and
• courts should take a restrained approach in interpreting the Act in such a way as to identify matters which are essential preconditions to the exercise of the adjudicator’s function (i.e. jurisdictional

facts capable of leading to jurisdictional error).
Consequently, any conditions said to be imposed on the claimant’s entitlement on this issue, including that a payment claim be ‘for construction work’ (or the supply of related goods and services), were properly within the adjudicator’s remit to determine.

In finding that there is no precondition that a payment claim must be ‘for construction work’ in order to be a valid payment claim under the Act, the Court of Appeal made comments on the Act’s requirements in that regard, which some have interpreted to mean that any amounts under a construction contract may be claimed under and have the benefit of the processes under the Act.

It is yet to be seen whether that interpretation is correct, noting for example the comments of the High Court in Southern Han Breakfast Point Pty Ltd (in liq) v Lewence Construction Pty Ltd (2016) 260 CLR 340. Industry participants operating under the East Coast security of payment model will undoubtedly be paying close attention to the treatment of comments made in EnerMech, and its implications for payment claims going forward.

The full decision can be found here.