Sovereign Building Company Pty Ltd v Sheehan Group Pty Ltd [2025] WASC 11

Tom French | Penny Bond | Naoisa McNelis

Key takeouts

• The Construction Contracts (Former Provisions) Act 2004 (WA) (CCA) provides a mechanism for rapid adjudication of payment disputes (e.g. unpaid payment claims).

• Instead of applying for adjudication, contractors may make a statutory demand under the Corporations Act 2001 (Cth) (Corporations Act) for unpaid payment claims.

• The benefit of obtaining an adjudication determination under the CCA before making a statutory demand is that the principal will be unable to resist the statutory demand if the demand is based on an adjudication determination.

• Where the contractor has not obtained an adjudication determination and has instead sought a statutory demand for an unpaid payment claim, the principal may apply to set aside the statutory demand

Facts

Sovereign Building Company Pty Ltd (Sovereign) engaged Sheehan Group Pty Ltd (Sheehan) to carry out electrical works at various building sites across the Perth metropolitan region. The works were carried out under a series of quotations and purchase orders, not a formal written contract.

Sheehan had outstanding payment claims for works performed at four building sites. The payment claims stated they were issued under the implied terms in the CCA.

As Sovereign did not pay the payment claims within the 28 day time period implied by the CCA, a payment dispute arose under the CCA.

Instead of applying for adjudication of the payment dispute, Sheehan made a statutory demand under s 459E(1) of the Corporations Act for the unpaid payment claims.

Sovereign applied to set aside the statutory demand. Sovereign asserted there was a genuine dispute as to the statutory demand and that it had an offsetting claim which exceeded the total amount claimed in the statutory demand.

Decision

The court made orders setting aside the statutory demand. Lundberg J was satisfied Sovereign had a genuine dispute and had an offsetting claim.

The judgment contains a summary of the process available to a contractor under the CCA to recover an unpaid payment claim:

1. Under the CCA, if a payment dispute has arisen, the contractor may apply for adjudication within 90 business days.
   
2. If the contractor obtains a favourable adjudication determination, the determination is a debt due and payable.
   
3. The determination may be enforced by filing in court a certified copy of the determination and an affidavit stating the unpaid amount of the determination, which are taken to be orders of the court.
   
4. As orders of the court, the determination may be enforced under the Civil Judgments Enforcement Act 2004 (WA) or by statutory demand under the Corporations Act, which the principal would be unable to resist on the grounds of any ‘genuine dispute’.

Instead of applying for adjudication under the CCA, the contractor may make a statutory demand under the Corporations Act. If this occurs – as was the case in the judgment – the principal may resist the statutory demand by raising a genuine dispute or offsetting claim under s 459H of the Corporations Act.