Can a Statutory Demand Be Set Aside After Construction Adjudication?

Last Updated on 06/11/2026 by Damin Murdock and Malak Amgad

Setting Aside Statutory Demands and Adjudication Decisions

Does a security of payment judgment shut down every other argument about money owed under a construction contract? In October 2026, the NSW Supreme Court said no. In the matter of Binah Constructions Pty Ltd [2026] NSWSC 1214, the Court accepted that an adjudication judgment under the Building and Construction Industry Security of Payment Act 1999 (NSW) gives an enforceable right to payment. But that judgment does not necessarily prevent the debtor from relying on its own contractual claims. Enforcing an adjudicated debt is one thing, and finally resolving the parties’ contractual disputes is another. It also provides guidance for parties involved in construction payment disputes about their rights and obligations.

The Dispute

In November 2022, Sunnice Pty Ltd engaged Binah Constructions Pty Ltd to design and build 354 residential apartments in Rouse Hill, NSW. 

After payment disputes, the parties entered into a deed varying their contractual arrangements. The deed required the consent of a secured party within a specified period, but that consent was obtained late. Sunnice subsequently disputed the deed’s enforceability.

An adjudicator found that Sunnice owed Binah approximately $3.52 million under SOPA, as a settlement under the deed. Binah registered the adjudication certificate as a judgment and served a statutory demand for approximately $3.56 million.

Sunnice applied to set aside the demand, relying on its claims for liquidated damages and restitution, which exceeded the amount demanded. By doing so, Sunnice did not dispute that the adjudication judgment debt was due and payable, but argued that its separate contractual claims constituted genuine offsetting claims under section 459H of the Corporations Act 2001 (Cth).

The Legal Framework: SOPA and Statutory Demands

Under section 25 of SOPA, an adjudicated amount that remains unpaid can be registered as a judgment debt and then enforced through the courts. In this case, the contract between Sunnice and Binah split the works into separable portions, each with its own completion date. If Binah missed the deadline for a particular portion, it was required to pay liquidated damages.

Over time, a number of payment disputes arose between the parties. Binah succeeded in adjudications under SOPA in October 2023, December 2024 and January 2025, and Sunnice paid each of those determinations.

The parties signed a Deed of Variation, and its purpose was to settle several disputes at once: whether Binah was entitled to extensions of time and adjustments to the contract sum, and whether Sunnice could claim liquidated damages, and who was responsible for the alleged defects. Neither side admitted liability. Instead, they agreed to vary the Contract and put those issues to rest.

It is important to remember that SOPA only creates an interim payment scheme. It does not finally decide what each party is owed under the contract. Section 32 makes this clear by preserving the parties’ contractual rights, which means those disputes can still be fought out in separate proceedings.

Section 459H of the Corporations Act 2001 (Cth) allows a company to apply to set aside a statutory demand if it can prove that there is a genuine dispute about the debt, or that it has a genuine offsetting claim. An offsetting claim can take many forms, like a a counterclaim, a set-off or a cross-demand, and it does not have to stem from the same transaction as the debt in the demand.

The key issue was whether Sunnice’s claims were genuine offsetting claims, or whether they were really an attempt to reopen an adjudication that had already become a judgment.

The Supreme Court’s Reasoning and Decision

Binah’s argument was that Sunnice’s claims were, in substance, a challenge to the adjudication determination, and so they cut across the enforcement scheme that SOPA establishes.

The Court did not accept this. It drew a line between denying that an adjudicated debt exists and bringing a separate contractual claim against the creditor. Sunnice was doing the second. It did not dispute the judgment debt. Its position was that it had its own claims, based on the enforceability of the Deed and on its rights under the contract.

The Court then looked at whether the adjudicator’s earlier findings stopped Sunnice from raising those claims. It held that they did not. Adjudication does not bar the parties from later asserting their contractual rights because it gives rise to no issue estoppel. This reflects SOPA’s interim character. The scheme exists to secure prompt payment, not to finally determine the parties’ rights. One is trying to relitigate what the adjudicator decided. The other is a genuine claim for damages or restitution, and Sunnice’s claims fell into this second category.

A decisive point was that Binah itself conceded that Sunnice’s offsetting claims had a genuine basis and were worth more than the amount in the demand. Consequently, the claimed amount was below the statutory minimum, and the Court set aside the statutory demand under section 459H(3).

It is worth being clear about what the decision did not do. Binah’s judgment debt from the adjudication still stands, and the Court made no finding on whether Sunnice will ultimately win its contractual claims. What the case does establish is that a genuine offsetting claim can undermine a statutory demand, even when the debt behind that demand has been confirmed by an adjudication judgment.

Practical Implications for Contractors and Developers

The decision matters in practice for construction businesses, both those chasing payment and those facing insolvency enforcement.

For contractors, an adjudication win is not always a safe basis for a statutory demand. Before serving one, check whether the debtor has genuine claims of its own, such as liquidated damages, defects, restitution or other contractual rights. If it does, the demand may be set aside, and the time and costs will have been wasted.

For developers and principals, the case shows that accepting an adjudicated debt does not stop them from relying on separate contractual claims. There is a limit, though. The offsetting claim has to be genuine, with a real legal and factual foundation. Simply disagreeing with how the adjudicator decided the matter is unlikely to be enough under section 459H.

The final lesson is about drafting. Settlement deeds and contract variations deserve close attention, particularly when a deed turns on conditions precedent or a third party’s consent. Those are exactly the details that can later determine whether the deed binds anyone at all.

Conclusion

The message from Binah Constructions [2026] NSWSC 1214 is clear. An enforceable security of payment judgment does not shield a statutory demand from challenge if the company has a genuine offsetting claim. SOPA gets money paid quickly, but the contract still decides who ultimately owes what. Contractors, developers and principals should all take stock of outstanding contractual claims before serving a statutory demand, and before responding to one.

If you have any questions, 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.