NSW Supreme Court Clarifies Requirements for Valid Construction Payment Claims

The NSW Supreme Court’s judgment in Kumar v Frankies Cranes Pty Ltd [2024] NSWSC 1264 illustrates that a successful claim under the Building and Construction Industry Security of Payment Act 1999 (NSW) (SOPA) requires more than an asserted entitlement to payment. Before an adjudicator can determine a claim, the statutory pre conditions imposed by the Act must first be satisfied.

The matter concerned a crane left on Mr Kumar’s property after construction work undertaken by another builder had been completed. Frankies Cranes maintained that, following the completion of those works, Mr Kumar orally agreed to pay an ongoing weekly charge for the crane to remain on the site. Acting on that alleged arrangement, the company lodged a SOPA payment claim and later received an adjudication determination awarding it over $140,000.

Mr Kumar sought to set aside the adjudicator’s decision, claiming that the adjudicator was not empowered to determine the dispute in circumstances where no binding construction agreement had been formed under SOPA. 

The Supreme Court agreed. After considering the evidence, it was not persuaded that the alleged conversation giving rise to the agreement had occurred. The Court found that the claimed agreement did not fit with the commercial context of the parties’ relationship or the events leading up to the dispute.In the absence of a construction contract, the adjudicator had no authority to determine the payment dispute.

The Court also concluded that the payment claim had not been validly delivered. Although it had been emailed to an address appearing on Mr Kumar’s business card, the address had never been identified for the purpose of receiving payment claims, and Mr Kumar’s asserted that he did not receive the email. Because proper service is another essential jurisdictional requirement under SOPA, the adjudication determination could not stand.

The decision demonstrates that compliance with SOPA extends beyond establishing an entitlement to payment. Parties seeking to rely on the Act should ensure contractual arrangements are properly established and that payment claims are delivered in accordance with the statutory requirements, as a failure to satisfy either prerequisite may render an adjudication determination invalid.