In the recent case of Patrick Stevedores Operations No.2 Pty
Ltd v McConnell Dowell Constructors (Aust) Pty Ltd , the
Supreme Court explored two very important features of the Security
of Payment Act (SOPA) legislation in NSW:
Can there be a valid payment claim if it is issued after the
contract has been terminated and the reference dates do not survive
Does plant and material on order/removed post termination by
the contractor fall within the meaning of construction work under
In both cases the Court answered 'No.'
Dowell was contracted by Stevedores to carry out upgrade works at
its Port Botany Container Terminal. Stevedores terminated the
contract before the work was completed.
Under the contract Dowell was entitled to claim for work
performed, as well as plant and material ordered up until the date
of termination, demobilisation costs and a fixed termination fee.
Dowell accordingly issued a SOPA claim for $55million which
Dowell took the dispute to adjudication, where the Adjudicator
decided on some items claimed in the Application in the amount of
$8million. The Adjudicator ran out of time to examine all items as
the parties failed to agree on an extension of time.
Dowell, in accordance with s26 of the SOPA, withdrew the first
Application and made a second. The second Adjudicator decided on
the amount of $23million. Stevedores filed proceedings in the
Supreme Court to have both Adjudication Determinations declared
Justice Ball agreed with Stevedores. The payment claims were
found to be invalid - the reference dates ceased to exist when the
contract was terminated and there was no survival clause about
reference dates surviving termination. The Adjudications were
Justice Ball also found that plant and materials ordered by
Dowell, the costs of demobilisation and the fixed termination fee,
didn't fit the criteria of construction work, or the supply of
related goods and services, under the SOPA in NSW.
His Honour found that the ordering of plant and materials was
done to put Dowell in a position to meet the contract. It was
prepatory in nature, not actual construction work or the supply of
related goods and services. Similarly, the removal of equipment was
the result of construction work coming to an end, not the
termination of the contract. The Court found that the $10 fixed
termination fee had no connection to the construction work
There are a couple of important lessons to learn from this
Firstly, in order to potentially avoid your SOPA Claim being
invalid, your contracts need to state that reference dates survive
Secondly, that construction contracts should clearly define
construction work to include demobilisation and prepatory works,
although, there is currently no certainty as to the
It is important that advice is sought from the time of contract
negotiation, during the term of the contract, and prior to
termination and that any action to exercise any rights under the
contract is taken early.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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