In Re Nicolas Critini Pty Ltd (in Liquidation) [2022] NSWSC 1149, the New South Wales Supreme Court confirmed that a statutory debt for a disputed progress claim does not crystalise under SOPA’s^[1] distinct 'pay now, argue later' process until an adjudication determination is delivered.

The matter concerned a sub-contractor and principal that were awaiting an adjudication determination on a disputed progress claim made pursuant to the SOPA. Before an adjudication was made, the principal entered voluntary administration and, subsequently, liquidation. The principal’s liquidators disallowed the sub-contractor’s proof of debt in respect of the progress payment, which was the subject of the subcontractor’s appeal.

Hammerschlag CJ dismissed the subcontractor’s appeal. He held that since there was no determination before the principal entered administration, the debt was incurred after the “relevant date” within the meaning of section 553(1) of the Corporations Act 2001 (Cth) and was not admissible to proof. He reasoned that the statutory entitlement arising out of the SOPA could not be enforced other than in accordance with processes outlined in the SOPA. For example, where a progress claim is disputed, and the payment schedule is not accepted by the claimant, the amount in dispute must be the subject of an adjudication determination to give rise to an enforceable debt.

This decision suggests that liquidators may reject proofs of debt lodged in respect of payments claims under the SOPA if the claims are disputed and have not been determined by an adjudicator. Liquidators should, however, be aware of alternative claims in contract or restitution that may be admissible to proof.

Read the original article:
Construction in liquidation: the overlap between the Corporations Act and security of payment legislation