03 9041 4674

Case summary: Insolvent companies can still claim debts through Security of Payments Legislation.

Home | Blog |  | Case summary: Insolvent companies can still claim debts through Security of Payments Legislation.

The recent decision in the case of Kennedy Civil Contracting Pty Ltd (Administrators Appointed) v Richard Crookes Construction Pty Ltd shows that companies can still claim for unpaid debts even if they are insolvent.

This is case shows how powerful SOPA can be to claim debt. Even insolvent companies can be entitled to hundreds of thousands of dollars under the legislation. 

Facts

  1. Richard Crookes Construction (RCC) engaged Kennedy Civil Contracting (KCC) to carry out construction works. 
  2. KCC served several payment claims under the Building and Construction Industry Security of Payment Act 1999 (NSW) (SOPA). 
  3. RCC did not respond to some of these payment claims (no payment schedule).
  4. Shortly after, KCC became insolvent.
  5. KCC entered into a “Holding DOCA” which allowed them to pursue unpaid debts under the Security of Payments Legislation. 
  6. Kennedy Civil Contracting then filed a court claim for using the SOPA.

Holding DOCA (Deed of Company Arrangement)

A DOCA is an agreement reached between the company and its creditors. It is an alternative to liquidation and buys more time to resuscitate a company struggling financially to improve the return to creditors.

Result

The Court ultimately held that KCC’s Holding DOCA preserved the “pay now, argue later” spirit of the Security of Payments Legislation.  It stated that Kennedy Civil Contracting was allowed to organise its financial affairs in a way that let it claim for unpaid debts under SOPA.

Richard Crookes Construction was ordered to pay $719,519.82 including $35,591.33 interest to Kennedy Civil Contracting.

Key takeaways

SOPA is a powerful tool to claim debt. Even creditors of an insolvent company can create valid DOCAs to recover money owed.

Contractors becoming insolvent should continue to submit valid payment claims.

Companies administering contracts and subcontracts should ensure that they continue to comply with the Security of Payments Legislation to avoid any claims for unpaid debt, even from insolvent companies. 

Another Similar Case: Piety Constructions Pty Ltd v Megacrane Holdings Pty Ltd (Administrator Appointed) (No 2) [2023] NSWSC 682

Facts

On 30 June 2020, Piety entered into a sub-contract with Megacrane for the supply of tower cranes and associated labour. On 9 March 2022, Mr Liam Bailey was appointed as administrator of Megacrane.

On 28 June 2022, the second defendant issued his adjudication determination in favour of Megacrane for $108,828.05 which became a judgment debt.

Court Proceeding

On 20 September 2022, Piety commenced Court Proceedings seeking a stay on the enforcement of the judgment debt.

Result

On 21 June 2023, Richmond J handed down a judgment I favour of the Administrators refusing a stay on judgment. The Administrators agreed to hold the money in trust, allowing Piety to bring proceedings.

Key Takeaways

  1. In the current environment, parties need to be informed of the financial position of the parties both upstream and downstream.
  2. Construction businesses need to consider both practical and legal considerations before entering into head contracts and subcontracts.

RELATED POSTS

KIND WORDS FROM OUR CLIENTS

“They recovered debt for me that I honestly thought I would never see again.”
Ultan Molloy
“We have had success on every case we have contended when using the team at LPF.”
Ryan
We found them very professional and switched on, and easy to work with.
Shannon Driscoll

Schedule a Call with Our Team.

Schedule Call
Enquire

Address

17 & 18, 207 Buckley St
Essendon VIC 3040

Subscribe

Contact

Phone: (03) 9041 4674
Fax: (03) 8686 1478

© Copyright 2025 Level Playing Field Lawyers. All Rights Reserved.