Last Updated on 06/03/2026 by Damin Murdock
In the high-stakes environment of the Building and Construction Industry Security of Payment Act 1999 (NSW) (the Act), technicalities are not just red tape, they are the difference between a successful defense and a catastrophic judgment. As seen in the case of Sand Excavation Pty Ltd v Nahas Constructions Pty Ltd, even a valid legal defense is worthless if the Payment Schedule is not served correctly or if the builder fails to understand their own contract annexures.
Case Analysis: Sand Excavation v Nahas Constructions [2011] NSWSC 184
The Background: Sand Excavation (Sands) issued a Payment Claim via fax to Nahas Constructions for over $1 million. Under the Act, Nahas had a strict 10-business-day window to serve a Payment Schedule (a response disputing the claim).
The Failure of Service: Nahas alleged they served the Payment Schedule by sliding it “halfway under the door” of Sands’ former place of business.
The Judicial Decision on Service: The Supreme Court held that this did not constitute valid service. The Court reasoned that a document left halfway under a door is not within the “control and possession” of the recipient. Because a passing stranger could have taken it, the document was never properly “served” under the law.
The “Subcontractor Declaration” Trap
Nahas raised a secondary defense: Sands had failed to submit a subcontractor declaration in the prescribed form required by the Industrial Relations Act 1996.
However, the Court identified a fatal flaw in this argument based on the specific contract:
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Contractual Priority: The construction contract included a standard form annexure that specified its own requirements for declarations.
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Contracting Out: Because the parties had agreed to this specific annexure, the Court held they had effectively “contracted out” of the generic prescribed form requirements.
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The Result: The defense failed. Because the Payment Schedule was not served correctly, Nahas was unable to rely on any of its substantive defenses against the $1 million claim.
Applied Lessons for Principal Contractors and Subcontractors
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Service Must Be Absolute: Never rely on “informal” delivery methods like sliding documents under doors or leaving them in mailboxes without proof of receipt. Use registered post, process servers, or established electronic service addresses specified in the contract.
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Verify Your Annexures: Before signing a contract, audit the annexures. If your contract specifies a custom declaration form, that is the form you must use—and the form you must expect from your subcontractors.
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The 10-Day Clock is King: If you receive a million-dollar claim, your internal procedures must ensure a Payment Schedule is drafted, finalized, and correctly served well before the 10-day deadline expires.
How Leo Lawyers Can Help
Security of Payment disputes are often decided on the “mechanics” of the law rather than the “merits” of the building work. At Leo Lawyers, we provide the applied legal judgment to ensure your payment schedules are served legally and your contract annexures protect your interests.
Feel free to contact Damin Murdock at Leo Lawyers via our website, on (02) 8201 0051 or at office@leolawyers.com.au. Further, if you liked this article, please subscribe to our newsletter via our Website, and subscribe to our YouTube, LinkedIn, Facebook and Instagram. If you liked this article or video, please also give us a favourable Google Review.
DISCLAIMER: This is not legal advice and is general information only. You should not rely upon the information contained in this article, and if you require specific legal advice, please contact us.
Damin Murdock (J.D | LL.M | BACS - Finance) is a seasoned commercial lawyer with over 17 years of experience, recognised as a trusted legal advisor and courtroom advocate who has built a formidable reputation for delivering strategic legal solutions across corporate, commercial, construction, and technology law. He has held senior leadership positions, including director of a national Australian law firm, principal lawyer of MurdockCheng Legal Practice, and Chief Legal Officer of Lawpath, Australia's largest legal technology platform. Throughout his career, Damin has personally advised more than 2,000 startups and SMEs, earning over 300 five-star reviews from satisfied clients who value his clear communication, commercial pragmatism, and in-depth legal knowledge. As an established legal thought leader, he has hosted over 100 webinars and legal videos that have attracted tens of thousands of views, reinforcing his trusted authority in both legal and business communities."
