Romeciti Macquarie Pavillion Pty Ltd v Watpac Construction Pty Ltd [2026] NSWSC 404

Andrew Hales | Sannan Tariq

Key takeouts

It is common, in the context of construction disputes, for the resolution of contractual claims to involve some form of settlement reached between the parties with the terms recorded in a deed. Such terms include, for example, an increase to the contract sum, an agreed date of practical completion, or the treatment of security under the construction contract. In this case a claimant served a payment claim that arguably arose, at least in part, from rights under a settlement deed. The respondent challenged the validity of the payment claim on the basis that it was not a progress claim under the construction contract and sat outside the security of payment regime.

This decision has clarified that an assertion of entitlement to a progress payment under the construction contract concerned is not a necessary precondition for service of a valid payment claim for the purposes of the Building and Construction Industry Security of Payment Act 1999 (NSW) (SOP Act).

Background

On 13 May 2019, Romeciti Macquarie Pavillion Pty Ltd (developer) and Watpac Construction Pty Ltd (builder) entered into a contract for design and construction works in respect of the ‘Natura’ residential development at 82–84 Waterloo Rd, Macquarie Park (contract).

In accordance with the contract the builder provided 2 securities totalling $7,500,294.

In February 2022, an occupation certificate was issued for the completed development.

In December 2022, an adjudicator determined Watpac was entitled to $5,717,413. Following that determination, the developer paid the adjudicated amount and simultaneously converted both securities to cash (totalling $7,500,294). 

In July 2025, the parties entered into a settlement deed which, among other things, acknowledged that practical completion of separable portion 2 under the contract (being the last separable portion) was achieved on 9 March 2022. Accordingly, the 2-year defects liability period under the contract expired on 9 March 2024.

In January 2026, the builder served its final progress claim pursuant to clause 37.4 of the contract, which was also said to be the final payment claim under the SOP Act. In the payment claim, the builder sought return of the cash security ($7,500,294) plus contractual interest of 8% per annum ($1,698,970), totalling $9,199,264 and asserted that its entitlement arose under the contract. The developer issued a payment schedule with a scheduled amount of $nil, contending that the settlement deed was void or subject to rectification and that the builder had no entitlement under the contract.

In February 2026, the builder lodged an adjudication application and the adjudicator determined in its favour. The developer commenced proceedings seeking to set aside the determination on various grounds, including (amongst other things) that the adjudicator lacked jurisdiction ‘because, on the proper characterisation of the payment claim… [the builder] did not assert a claimed entitlement to a progress payment under the ‘construction contract concerned’ within ss 8 and 13(1) of the Act‘ on the basis that:

sections 8 and 13 of the SOP Act require a payment claim to assert a claimed entitlement to a progress payment under the ‘construction contract concerned’; and

the payment claim did not assert a claimed entitlement to a progress payment under the ‘construction contract concerned’ and rather ‘asserted, or necessarily depended upon, a deed-conditioned entitlement concerning encashed Security and the consequences of Romeciti’s alleged non-performance of the Deed [the 2025 settlement deed], with the result that there was no valid payment claim under the Act and no jurisdiction to determine it’.

Decision

The court rejected the respondent’s challenge to the determination. In doing so, the court confirmed that:

• it was not necessary to assert ‘a claimed entitlement to a progress payment under the “construction contract concerned”‘ to serve a valid payment claim; and

• the phrase ‘under the construction contract concerned’ is not used in section 13 of the SOP Act to ‘qualify the claim that is made, or the entitlement that is asserted, but rather the person upon whom a payment claim may be served, namely, “the person who, under the construction contract concerned, is or may be liable to make the payment”‘.

Nixon J also observed that the adjudicator had reviewed the payment claim and determined that the builder’s claimed entitlement to the return of the cash amounts and interest was, in any event, based on the terms of the contract rather than the settlement deed as alleged by the developer. Consistent with earlier authorities, his Honour found that any error by the adjudicator in interpreting the payment claim, the contract or the settlement deed was not a jurisdictional error.