On 4 August 2026 the NSW Court of Appeal delivered a judgment that put Security of Payment Act judgment debts back in play regarding security for costs and clarified the law from a previous NSW District Court decision.

Moray & Agnew Lawyers, together with Counsel Declan Byrne of Greenway Chambers, acted for the successful respondent/SOPA judgment creditor in the Alliance Living Pty Ltd v Arch-System Fabrication Pty Ltd [2026] NSWCA 157 proceedings.

Key Takeaways

If a SOPA judgment debtor sues their creditor, but fails to pay their SOPA judgment debt, the debt may still be leveraged to obtain security for the creditor’s legal costs, providing surety that the creditor will not be significantly out of pocket if the claim is defeated.

Facts in this case

Arch-System Fabrication, a subcontractor, obtained a Judgment Certificate under the Building and Construction Industry Security of Payment Act 1999 (NSW) (SOPA) against Alliance Living, the builder, in respect of amounts claimed under the parties’ construction works contract.

Alliance Living failed to pay the Judgement Certificate debt and commenced separate proceedings against Arch-System Fabrication, claiming that Arch-System Fabrication breached the construction works contract and Alliance Living was entitled to be paid damages due to the breach.

Arch-System Fabrication subsequently applied for an order that Alliance Living provide security for Arch-System Fabrication’s costs of the proceedings. In determining the application, the Honourable Justice Newlinds held that Alliance Living’s failure to satisfy the Judgment Certificate debt was a relevant consideration in determining whether an order for security for costs should be made.

Alliance Living sought leave to appeal to the NSW Court of Appeal. One of the proposed grounds of appeal was that the primary judge had erred in giving any weight to Alliance Living’s failure to pay the Judgment Certificate debt when determining whether there was a reason to believe Alliance Living would be unable to satisfy an adverse cost order.

In support of its position, Alliance Living relied upon a previous NSW District Court decision in J Group Constructions Pty Ltd v PGA Rendering Group Pty Ltd [2015] NSWDC 438. In that case, Justice Taylor SC held that s 32(2) of the SOPA prevented SOPA Judgement Certificate debts from being considered in any civil proceedings.

Decision

Justice Ball delivered the leading judgment, holding that:

1. The creation of a judgment debt following enforcement of an adjudication determination does not affect the civil proceedings for the purposes of s 32(2), because “the reference to “Nothing … affects any civil proceedings” must be read as a reference to anything that has a substantive effect on the proceedings”: at [36]–[37]
2. The decision in J Group Constructions Pty Ltd v PGA Rendering Group Pty Ltd [2015] NSWDC 438, which effectively held the opposite, should no longer be followed: at [47], and
3. The non-payment of the underlying SOPA Judgment Certificate debt provided a basis for reasoning that the appellant was unable to pay its debts, or that it may arrange its affairs in a way to avoid payment: at [38].

Consequently, Alliance Living’s appeal was dismissed. The order requiring Alliance Living to provide security for Arch-System Fabrication’s costs remained in force, and Arch-System Fabrication will be entitled to draw upon these funds to satisfy any costs order it achieves against Alliance Living in the proceedings.