Key findings
A payment claim under the SOP Act is based on what the issuing party claims to be entitled to and the claimant is not required to establish that the work was performed.
Background
The case of A J Portelli Medical Pty Ltd ATF A J Portelli Medical Trust v Black Sheep Building Pty Ltd [2026] NSWCA 99 was heard by the Court of Appeal, comprising Free JA, Ward P, and Griffiths AJA, on 27 May 2026.
The dispute arose from a construction contract between A J Portelli Medical Pty Ltd (Portelli) and Black Sheep Building Pty Ltd (Black Sheep) for the design and construction of physical support accommodation in Gosford, designed to house residents with disabilities.
The dispute centred on two payment claims, Payment Claim 3 (PC3) and Payment Claim 4 (PC4) (Payment Claims), issued by Black Sheep under the Building and Construction Industry Security of Payment Act 1999 (NSW) (SOP Act). Portelli did not pay the amounts claimed and failed to serve a payment schedule in response to either claim. Black Sheep subsequently sought to recover the unpaid amounts as a debt due under the SOP Act and was granted summary judgment for $3,822,378.26, including interest.
Grounds for Appeal
Portelli sought leave to appeal, raising two primary arguments:
- The Payment Claims were not validly served under section 13 of the SOP Act
Portelli argued that Black Sheep had not established, as a matter of objective fact, that the construction work was carried out within the relevant time period. Portelli also argued that the claims were served prematurely, contrary to the permitted times for service under subsections (1A) and (1B) of section 13.
- The development constituted ‘residential building work’ under the Home Building Act
Portelli argued that Black Sheep was not entitled to claim progress payments because the development involved “self-contained units” and therefore was not excluded from the definition of “residential building work” under the Home Building Act 1989 (NSW) (HBA). Portelli argued that Black Sheep lacked the required insurance for such work.
Decision
The Court of Appeal granted leave to appeal but ultimately dismissed the appeal.
As to Portelli’s first argument, the Court held that a payment claim under the SOP Act is based on the claimant’s assertion of entitlement and does not require proof of work performed as a precondition to validity of a payment claim and/or as a prerequisite to establishing an entitlement to payment. The Court also found that the Payment Claims were not served prematurely, as the contract allowed for payment claims to be served on the 21st day of each month.
As to Portelli’s second argument, the Court rejected Portelli’s argument that the accommodation constituted “self-contained units” under the HBA, finding that the individual bedrooms with ensuite bathrooms did not meet the statutory definition of self-contained units, as other facilities such as kitchens and living areas were shared. Therefore, the Court found that the works fell outside the definition of residential building work under the HBA.
The Court ordered that the appeal be dismissed, with costs awarded to Black Sheep. Additionally, the Court directed that the amount of $3,822,378.26 in relation to the Payment Claims, which had been paid into Court by Portelli, be paid out to Black Sheep immediately.
Implications
The decision is useful appellate authority on when a claimant becomes entitled to issue a payment claim pursuant to the SOP Act and the requirements for service of a valid payment claim.
The Court clarified that a payment claim under the SOP Act is based on what the issuing party claims to be entitled to, rather than requiring the claimant to establish as a matter of objective fact that the work was performed.
With respect to payment schedules, the original granting (and subsequent upholding) of the summary judgment in favour of Black Sheep emphasises the importance of serving a payment schedule if a recipient disputes a payment claim.
Further, the decision’s turning on the timing provisions of the contract between the parties highlights the necessity for clients to carefully draft and review contractual provisions regarding the timing of payment claims to ensure compliance with the SOP Act.