Hedging your debt (certificates) – how much do you really owe?

When entering into a contract for the performance of building works, the roles and responsibilities of each party are generally defined well enough to ensure the contract can be performed in a mutually beneficial manner. Although, what happens when these responsibilities are affected by the interaction between two pieces of legislation?

In Warrane Design Construct Fit-Out Pty Ltd v Woonona Bulli RSL Memorial Club [2025] NSWSC 123, the Supreme Court of New South Wales considers this question, where payment obligations between a Builder, Principal and Subcontractor changed due to the simultaneous application of the Building and Construction Industry Security of Payment Act 1989 (NSW) (SOPA) and the Contractors Debts Act 1997 (NSW) (CDA).

Key facts

During December 2023, Woonona Bulli RSL Memorial Club Limited (the RSL Club) contracted with Warrane Design Construct Fit-Out Pty Ltd (the Builder) to undertake works to the RSL Club’s carpark and converting the bowling green to another parking space (the Works). Shortly after, to complete the Works, the Builder entered into a subcontract with All Civil Solutions Group Pty Ltd (the Subcontractor). In the following year, the Subcontractor subsequently obtained three debt certificates from the District Court of NSW each valued at $989,183.55, $1,102,958.87 and $464,008.78 for unpaid works which were then served on the RSL Club pursuant to sections 6 and 7 of the CDA.[i] These provisions effectively allow a subcontractor who was not paid and still owed for works that were carried out, to obtain that payment from the principal that engaged the contractor.

At the time, the RSL Club fully paid the first but only partially paid the value of the second certificate. It is important to note that these were monies that would have been paid to the Builder, not the Subcontractor, as the act of issuing the debt certificates effectively assigned the RSL Club’s requirement to pay the Builder under to the contract to the Subcontractor. [ii]

Following this, the Builder obtained an adjudication determination against the RSL Club pursuant to section 22 of SOPA, and successfully sought to enforce it by way of an adjudication certificate and garnishee order for just over $2 million.[iii] Throughout this process, the fact that the RSL Club had made payments to the Subcontractor was not raised as a contentious issue before the adjudicator.

In response to this, the RSL Club filed two separate sets of proceedings to quash the determination by $1,030,281.79, [iv] on the basis that they had already partly paid or at the very least remained liable to pay the Subcontractor under the CDA.[v] The RSL Club also sought to set aside the garnishee order until the conclusion of the first set of proceedings.

What did the Court say?

Justice Stevenson concluded that because the Subcontractors served the debt certificates onto the RSL Club and payments were made pursuant to the CDA, the $2,141,780.83 awarded overstated the amount the RSL Club owed the Builder by approximately $1.2 million. [vi]

His Honour concluded that it was proper for the garnishee order to be set aside as this would undermine the legislative purpose of sections 6 and 7 of the CDA.[vii] Justice Stevenson also affirmed that the interpretation and construction of both SOPA and the CDA should be done in a way that ensures their ‘harmonious interaction’.

What does this mean for you?

Occasionally, certain Acts interact with each other which create new implications for how contractors and principals are required to manage and undertake payments. Given the large role legislation plays in encouraging or requiring parties to fulfil their payment obligations, ensure you can keep track of these obligations or otherwise seek assistance.

[i] Contractors Debts Act 1997 (NSW) ss 6-7.

[ii]  Ibid s 8(1)-(2).

[iii] Building and Construction Industry Security of Payment Act 1989 (NSW) ss 22, 25.

[iv] Warrane Design Construct Fit-Out Pty Ltd v Woonona Bulli RSL Memorial Club Ltd [2025] NSWSC 123 [15] (Stevenson J) (‘Warrane’).

[v] Ibid [15]-[17].

[vi] Ibid [17].

[vii] Contractors Debts Act 1997 (NSW) ss 6-7.