Alliance Living Pty Ltd v Arch-System Fabrication Pty Ltd [2026] NSWCA 157

Andrew Hales |  Luke Sundercombe  |  Michael Sywak  |  Zachary O’Hara

Key takeouts

• The NSW Court of Appeal has confirmed that where a claimant has obtained a judgment debt by the registration of an adjudication certificate issued under the Building and Construction Industry Security of Payment Act 1999 (NSW), recalcitrant non-payment by the judgment debtor can be a factor supporting a court’s decision in granting a security for costs order.
• The decision in J Group Constructions Pty Ltd v PGA Rendering Group Pty Ltd [2015] NSWDC 438, which provided authority for the proposition that non-payment of a judgment debt was not to be considered by courts in making a security for costs order, should no longer be followed.

Facts

Alliance Living Pty Ltd (contractor) engaged Arch-System Fabrication Pty Ltd (subcontractor) to complete works at a commercial property in Double Bay in late 2023.

On 10 June 2025, following a dispute between the parties as to practical completion and several alleged defects, the subcontractor issued a payment claim for the balance of the subcontract sum under the Building and Construction Industry Security of Payment Act 1999 (NSW) (SOP Act). The subcontractor obtained an adjudication certificate and registered the certificate as a judgment debt under s 25 of the SOP Act for $112,029 (judgment debt). Despite enforcement attempts, the judgment debt remained largely unpaid.

The contractor commenced proceedings against the subcontractor for defective works and liquidated damages.  In response, the subcontractor sought an order for security for costs. The primary judge ordered the contractor to provide security of $166,000, relying on (amongst other things), the contractor’s failure to pay the judgment debt.

The contractor appealed this decision, arguing that the primary judge erred in relying on the non-payment of the judgment debt as a factor in deciding to grant a security for costs order.

Decision

The Court of Appeal dismissed the appeal, finding that consideration of non-payment of a judgment debt was not precluded by operation of s 32(2) of the SOP Act (which states that nothing done ‘under or for the purposes of’ Part 3 of the SOP Act affects any civil proceedings arising under a construction contract).

The Court arrived at this conclusion upon consideration of the following:

• Section 32 is directed at the substantive outcome of proceedings and not to procedural conduct, with s 32(2) making clear that the merits of any claim under a construction contract are unaffected by an adjudication determination or judgment obtained under Part 3. This is consistent with the legal rights / practical effect distinction identified by the Court of Appeal in TFM Epping Land Pty Ltd v Decon Australia Pty Ltd [2020] NSWCA 118.
• To give s 32(2) a broader meaning would undermine the policy purpose of Part 3, limiting the efficacy of the judgment debt mechanism.
• It is the non-payment of a judgment debt, and not the judgment debt itself, which has the capacity to affect civil proceedings, particularly where non-payment is not an action done under the SOP Act.

The Court also rejected the suggestion that a judgment debt obtained under the SOP Act is of inferior quality to a judgment debt obtained from order of a judge.

Consequently, the Court has now overturned the ruling in J Group Constructions Pty Ltd v PGA Rendering Group Pty Ltd [2015] NSWDC 438.