Australia: The Principal Strikes Back

Construction Update
Last Updated: 8 October 2007
Article by Richard Atkin and Andrew Kelly

The current shape of adjudication under the various security of payment regimes in Australia reflects the nature of its beginnings and its public perception as a ‘weapon put into the hands of the little guy’.

There is no doubt that the ‘pay now argue later’ mantra still dominates current thinking in the building and construction industry towards adjudication. However, this line of thought has been diluted recently by two cases in New South Wales and Queensland which have sought to redress the imbalance in the adjudication process away from the Contractor.

John Holland Pty Ltd v Roads and Traffic Authority of New South Wales [2007] NSWCA 140

The short version:

The NSW Court of appeal has affirmed that adjudication decisions under the Building and Construction Industry Security of Payment Act 1999 (the NSW Act) are interim. As such and provided the contract permits, the Principal is entitled to withhold or set-off amounts otherwise due to the Contractor including recovering an adjudicated amount previously paid by the Principal.


John Holland (JH) contracted with the Roads and Traffic Authority of New South Wales (RTA) for the construction of roadworks, providing security as required under the contract. While carrying out works, disputes arose over payment and JH made three separate adjudication applications arising from payment claims under the NSW Act. In each case the adjudicator determined in favour of JH.

Upon practical completion, the RTA refused to release half of the security on the basis that JH had no entitlement as a result of substantial disputes set out in payment schedules issued by the RTA.

JH claimed the nature of such actions were void under the NSW Act. JH was initially unsuccessful in the Supreme Court and appealed to the Court of Appeal.

The Court of Appeal

The Court of Appeal agreed with the RTA and found:

  • The NSW Act allowed for interim payments in the interests of progressing the works.
  • The Superintendent was able to come to different determinations from that of the adjudicator.
  • The position decided upon by the adjudicator remains but is interim and is ‘subject to a different position being established ...contractually or in proceedings’.

What does this mean?

  • Adjudication decisions are interim progress payments on account.
  • A Superintendent can take into account when issuing a final certificate amounts the Principal claims to be entitled to under the contract, including recovery of previous adjudication amounts and not offend an adjudicators determination.
    • The withholding of security to recover amounts owed to a Principal in a progress certificate or a final certificate is permissible and does not offend the contracting out provisions of the NSW Act.



    Principals can overturn adjudication determinations through the contract and have the ability to use progress certificates and final certificates to thwart the adjudication process. For instance, by issuing a final certificate, a Superintendent can overturn an adjudicator’s determination and certify in favour of the Principal, entitling the Principal to draw down upon security to ‘claw back’ the determination. Provided that there is no ability to issue another payment claim, the only recourse available to the Contractor after this is to commence costly and time consuming litigation.


    Contractors, on the other hand, need to be acutely aware of this development. There are two immediate strategic courses to take. One is for the Contractor to not make payment claims under security of payment legislation during the course of the project but make the payment claim, the final claim under the contract and adjudicate on that claim. The Principal’s payment schedule in response to the claim will ordinarily be the final certificate. Following this, the adjudicator will determine the claim. This tactic will obviously preclude the Principal, after the adjudication has been decided from using the certification procedure to set-off against such a determination.

    The second strategy is for Contractors to use as security retention monies rather than bank guarantees. Retention monies can form part of a payment claim under security of payment legislation, bank guarantees cannot. If a Contractor receives a successful adjudication determination during the course of a project, the prudent tactic would be to include the return of retention monies in the final claim under the contract (and make it a payment claim under the relevant Security of Payment Act). If the Principal seeks to overturn the determination in the final certificate, then the Contractor can refer the final payment claim (including the retention) to adjudication. Given that under SOP legislation an adjudicator is bound by a previous adjudication determination (unless there is subsequent evidence that the value of work has changed), it is extremely likely that the subsequent adjudication determination will be in the Contractor’s favour.

    Doolan and Anor v Rubikcon (Qld) Pty Ltd and Ors [2007] QSC 168

    The short version:

    The Queensland Supreme Court has held that a second or subsequent payment claim under the Building and Construction Industry Payments Act (the Qld Act) cannot be identical to any previous payment claim. Identical payment claims are not capable of founding the jurisdiction of the adjudicator and consequently any determination will be invalid.


    The adjudication application arose out of a building contract between Rubikcon and Doolan for the construction of eleven townhouses at Scarborough. Rubikcon sought payment of a ‘final’ claim for an amount of $43,533.82. The amount of the final claim had been previously claimed as a ‘final’ claim. Apart from the date, the second invoice was identical to the first. Doolan did not pay that claim.

    Rubikcon sought adjudication of the payment claim and the adjudicator determined that Doolan should be liable to Rubikcon for the claimed amount.

    There is a rule in the Qld Act that a Contractor cannot issue two payment claims in relation to the same reference date ie the date under the contract upon which a Contractor can issue a payment claim. There is a written rule that amounts in previous claims can be included in new claims. The adjudicator’s response on the issue of two identical payment claims was that the Contractor had not served two payment claims in relation to the one reference date and accordingly the claim was valid.

    The Supreme Court

    Doolan sought judicial review of the adjudicator’s decision on the grounds of an error of law and breaches of the rules of natural justice.

    Rubikcon submitted that section 17(5) of the Qld Act provides that a claimant cannot serve more than one payment claim in relation to each reference date. It does not say that a claimant cannot, on multiple reference dates, make the same payment claim.

    The Judge found that ‘there is a one to one relationship between the claim made and the reference date on which it is made’. His Honour also said the Qld Act ‘permits ... the inclusion of an amount which has been the subject of a previous claim but that does not mean that a previous claim can be the sole item included in the later claim’.

    In this case, the second claim was identical to the first and the Judge held the claim was not capable of founding the jurisdiction of the adjudicator and consequently the order made by him was invalid.


    A Contractor cannot continue to issue successive identical payment claims even if the reference date is different. It is not uncommon for Contractors to issue over and over again the same claim but not refer claims to adjudication.

    However, the following claims will be valid:

    • A payment claim that includes additional work plus amounts included in a previous claim - there is nothing preventing a Contractor from putting in a cumulative claim.
    • A payment claim that includes an amount that was previously omitted from the previous claim.
    • A payment claim that additionally includes loss and expense resulting from removal of work by the Principal under section 33 of the Qld Act.


    Principals need to identify in their payment schedules that a payment claim is identical to a previous claim. In particular, Principals can utilise this case to defeat a Contractor who issues payment claims for the same works month after month.


    Contractors are no longer able to issue the same claim over and over again. It is not possible for a Contractor to keep on issuing claims waiting for an administrative error from the Principal or refining their claims even though work on the project has finished and the claim is essentially the same. Contractors now have one chance to refer a claim to adjudication unless there is further work to be carried out on site or there is something additional to be included in the claim. This severely restricts the ability of Contractor’s to constantly bombard Principals with claims.


    The above cases may provide some ability for Principals to resist successive identical payment claims and ‘claw back’ adjudicated amounts in progress and final certificates. Effective and timely legal advice on these and other issues can assist Principals and Contractors in setting up and implementing a plan to get the very best result from the adjudication process.

    Phillips Fox has changed its name to DLA Phillips Fox because the firm entered into an exclusive alliance with DLA Piper, one of the largest legal services organisations in the world. We will retain our offices in every major commercial centre in Australia and New Zealand, with no operational change to your relationship with the firm. DLA Phillips Fox can now take your business one step further − by connecting you to a global network of legal experience, talent and knowledge.

    This publication is intended as a first point of reference and should not be relied on as a substitute for professional advice. Specialist legal advice should always be sought in relation to any particular circumstances and no liability will be accepted for any losses incurred by those relying solely on this publication.

    To print this article, all you need is to be registered on

    Click to Login as an existing user or Register so you can print this article.

    Some comments from our readers…
    “The articles are extremely timely and highly applicable”
    “I often find critical information not available elsewhere”
    “As in-house counsel, Mondaq’s service is of great value”

    Mondaq Advice Centre (MACs)
    Related Video
    Up-coming Events Search
    Font Size:
    Mondaq on Twitter
    Register for Access and our Free Biweekly Alert for
    This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
    Email Address
    Company Name
    Confirm Password
    Mondaq Topics -- Select your Interests
     Law Performance
     Law Practice
     Media & IT
     Real Estate
     Wealth Mgt
    Asia Pacific
    European Union
    Latin America
    Middle East
    United States
    Worldwide Updates
    Check to state you have read and
    agree to our Terms and Conditions

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    If you do not want us to provide your name and email address you may opt out by clicking here .

    If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.