Takeaways from CBEM Holdings Pty Ltd v Sunshine East Pty Ltd [2025] NSWCA 250
The recent Court of Appeal decision in CBEM Holdings Pty Ltd v Sunshine East Pty Ltd [2025] NSWCA 250 reaffirmed some important legal principles regarding claims to recover overpayments made in progress claims.
Background
In the CBEM case, a principal engaged a contractor to carry out earthworks for a building project. The contractor submitted 4 payment claims in total. The first three payment claims were approved by the principal’s project manager. The fourth payment claim was not approved, but the principal had not issued a payment schedule, hence it was obliged to pay the claim in full.
In these 4 payment claims, the contractor claimed it had completed a total of 53% of the work under the construction contract.
The principal subsequently terminated the contract and contended that the total work done by the contractor was actually less than 53%. It commenced proceedings to recover the overpayment, relying on the following causes of action:
- restitution based on mistake, the mistake being the contractor claimed it performed 53% of total work under the Contract; and
- misleading and deceptive conduct under the Australian Consumer Law (ACL), i.e. the contractor had made an incorrect representation of fact that 53% of work was complete when it was not.
Court’s decision
The principal succeeded on both causes of action in the District Court. On appeal, the Court of Appeal disagreed with the District Court’s finding in the misleading and deceptive conduct claim because the Court of Appeal found that the contractor had not made a representation of fact in the payment claim. However, it upheld the claim for restitution.
Takeaway and observations
Here are some takeaways and observations:
- the Court of Appeal’s decision reaffirms that the security of payment legislation preserves the right of parties to a building contract to sue on the contract later to ascertain the correct financial position. If a principal has overpaid the contractor in progress payments (more than the contractor’s entitlement), it is entitled to recover the excess;
- an ACL claim is still a useful weapon to principals in disputes concerning the value of work done – a claim of misleading and deceptive conduct could be found on an incorrect representation made in a payment claim if the principal relied on the incorrect representation and suffered loss;
- while a payment claim is not of itself a representation, it may contain representations of fact or opinion. For example, a payment claim stating that the claimant has completed 100% of an item could be construed as a representation of fact that the item is complete. However, a percentage completion of say 50% or 75% may involve an evaluative judgment, so it is more likely to be found a representation of opinion;
- if the maker of the representation reasonably and honestly holds the opinion that the percentage of work claimed is correct, it would not be misleading or deceptive (even if that opinion turns out to be incorrect);
- the Court of Appeal rejected the argument that because the principal had engaged a project manager to assess the payment claim, the principal had not relied on the representation made in the payment claim;
- it is established law that where a respondent has paid more money in response to payment claims issued under the security of payment legislation than the claimant is entitled to receive under the contract, the respondent is entitled to restitution from the claimant for the difference; and
- noting that the principal may bring a claim after the contractor has left the site (especially in the case of early termination) and when the work in dispute has been covered up and no longer available for any inspection, the only evidence the contractor may rely on is its contemporaneous records. A failure by the contractor to keep records of the progress of the work certainly would not help the contractor in challenging the principal’s assessment of the value of work done.
If you would like to discuss this article with us, please contact Simon Mok, Partner on (02) 9261 5900.