Background

In the case of Zadro Constructions Pty Ltd v Criniti (2021) NSWCA 92, the builder (Zadro Constructions Pty Ltd) was contracted by the developer (Nicolas Criniti Pty Ltd) in May 2017 to construct a residential apartment building in Westmead, New South Wales. During the construction, the builder made an adjudication application under the SOP Act for a progress claim. However, before the adjudicator made a determination, the developer appointed a voluntary administrator and was subsequently wound up by creditors’ resolution. The builder lodged a proof of debt based solely on the adjudicator’s determination, but the liquidator disallowed the claim. The builder appealed the liquidator’s decision, but the court held that the circumstances giving rise to the debt had not arisen because the adjudicator’s determination had not been made before the winding-up date.

Enforcing a Disputed Progress Claim

The case of Zadro Constructions Pty Ltd v Criniti highlights an important point for homeowners who may be in a similar situation. Under the SOP Act, a progress claim disputed by a principal or head contractor is not an enforceable debt until an adjudicator has made a determination of the disputed amount. This means that a claimant must rely on the relevant construction contract, as opposed to the SOP Act, to prove its debt if the adjudicator’s determination was not made before the winding-up date.

Related Content: Payment Disputes and Progress Payments in Home Building Contracts in NSW

Implications for Homeowners

If you are a homeowner who is engaging a builder or contractor to carry out construction work, it is important to be aware of the implications of the SOP Act and the limitations it places on the enforcement of progress claims. In particular, if a progress claim is disputed by the principal or head contractor, it may not be enforceable until an adjudicator has made a determination. This can have significant implications if the principal or head contractor becomes insolvent before the determination is made.

Conclusion

Enforcing a progress claim disputed by a principal or head contractor in New South Wales can be complex, as the recent case of Zadro Constructions Pty Ltd v Criniti highlights. Homeowners who are engaging a builder or contractor to carry out construction work should be aware of the limitations of the SOP Act and the importance of having a well-drafted construction contract. By understanding the potential risks and limitations of the SOP Act, homeowners can better protect their interests and ensure that they are not left with unpaid debts in the event of a dispute. 

Contact our Contracts Specialist today to learn more about how we can help you navigate the complexities of construction law and protect your rights as a homeowner.