ASD Corporation Australia Pty Ltd v Babicka [2026] VSCA 27

Best Hooper regularly acts in disputes under the Building and Construction Industry Security of Payment Act 2002 (Vic) (“Security of Payment Act”), including acting for claimants and respondents in adjudications, as well as in subsequent court proceedings to quash adjudication determinations.

We recently finalised a complex and long-running matter, in which we were engaged after the disputed claims had been referred to adjudications and determinations had been handed down. Although engaged at a later stage and without involvement in the earlier payment claim dispute, our Dispute Resolution team was ultimately able to secure a favourable outcome for the respondent property owners.

On 3 March 2026, the Victorian Court of Appeal dismissed a builder’s application for leave to appeal regarding that builder’s entitlement to claim progress payments under a commercial building contract and whether the requisite reference date had passed.

In making its decision, the Court of Appeal confirmed that the security of payment scheme as it applies to construction contracts may be supplemented by contractually agreed terms, highlighting the importance of and weight given to properly drafted terms and how a failure to strictly adhere to such contractual provisions may result in a claim under the Security of Payment Act being set aside.

The dispute

The dispute arose from three contracts between a builder and three separate property owners for the construction of warehouses in Coburg North.

Each contract entitled the builder to progress payments following the completion of contractually defined milestones (stages), in accordance with section 9 of the Security of Payment Act.

Section 9 of the Security of Payment Act (at the time of this decision) provided that:

(1)        On and from each reference date under a construction contract, a person—

(a)       who has undertaken to carry out construction work under the contract; or

(b)       who has undertaken to supply related goods and services under the contract—

is entitled to a progress payment under this Act, calculated by reference to that date.

(2)        In this section, reference date, in relation to a construction contract, means—

(a)       a date determined by or in accordance with the terms of the contract as—

(i)         a date on which a claim for a progress payment may be made; or

(ii)        a date by reference to which the amount of a progress payment is to be calculated—

in relation to a specific item of construction work carried out or to be carried out or a specific item of related goods and services supplied or to be supplied under the contract […]

The relevant stage of the works in this dispute was the ‘Structure Stage’, and the ‘reference date’ turned on the interpretation of that stage.

The ‘Structure Stage’ was defined by special condition 4 of the contracts as “the stage when a building’s structural steel frame and concrete panel works has been completed and approved by a building surveyor”.

The builder made a payment claim under each of the three contracts for works allegedly completed under the ‘Structure Stage’, and such payment claims were upheld on adjudication. The property owners (with the assistance of Best Hooper) subsequently sought judicial review of the adjudicator’s determinations by the County Court, for reasons including that the reference dates set by the relevant contracts had not yet been reached at the time the payment claims were made by the builder.

The decision of the Court below

The trial judge, His Honour Justice Garde, found that the builder’s entitlement to receive progress payments for the ‘Structure Stage’ was subject to the completion of the building’s structural steel frame and concrete panel works, and approval by a building surveyor, and that the concrete panels works had not been inspected or approved by a building surveyor, as the milestone clause required.

His Honour confirmed that a mandatory framework inspection carried out by an authorised building inspector on behalf of a building surveyor did not satisfy special condition 4 of the contracts as the wording of the ‘Structure Stage’ has a “clear commercial purpose […] intended to ensure that the works are completed to a standard which is approved by a building surveyor”, not a building inspector. His Honour determined that the payment claims in respect of the ‘Structure Stage’ were therefore prematurely made and quashed the determinations of the adjudicator.

His Honour also accepted the property owners’ submission that payment claims could similarly not be issued and claimed for a later stage before the earlier stages were completed (applying the principles in Cardona v Brown); therefore, two further payment claims for the later ‘Lock Up’ stage were also found to have been prematurely made by the builder in circumstance where the ‘Structure Stage’ had not yet been completed.

The appeal

On appeal, the builder contended that to the extent that any approval of works was required under the ‘Structure Stage’, the contracts required satisfactory completion of the mandatory inspection as were necessary under the building permits and the Building Act 1993 (Vic) (“Building Act”).

The builder sought to draw a nexus between the words “approved by a building surveyor” in special condition 4 of the contracts, and the mandatory inspection of the framework stage under the building permits and the Building Act.

The property owners submitted that the ‘Structure Stage’ is not tied to the framework stage of the Building Permit, and that it is the ordinary meaning of the text of the ‘Structure Stage’ in the contracts ought to be considered. The Court of Appeal ultimately held that it is the ordinary meaning of special condition 4 that is determinative.

His Honour Justice Donaghue observed that the Building Act does not require a relevant building surveyor to ‘approve’ particular work following mandatory notification and inspection. Section 34 of the Building Act merely requires that the relevant building surveyor “must cause the building work to be inspected in person”, which indeed may be done by an authorised building inspector on behalf of the relevant building surveyor. The builder relied on this to form the contention that the requirement of the ‘Structure Stage’ that the relevant works be “approved by a building surveyor” could be satisfied by the building surveyor simply not “disapprov[ing]” the mandatory framework inspection under the building permit.

Justice Donoghue accepted that a reasonable businessperson would have understood the definition of the ‘Structure Stage’, insofar as it pertained to the structural steel frame, to entitle the builder to a milestone payment upon satisfactory completion of the mandatory inspection of the structural steel frame (such as to avoid a duplicative inspection under the contract where one had already occurred in accordance with the building permit). However, the parties in this case did not agree to a milestone payment solely upon completion and approval of the structural steel frame; rather, the ‘Structure Stage’ under the contracts took things a step further, requiring completion and approval of the concrete panels as well, and the Court of Appeal found this to be a “contractual supplementation of the statutory scheme” which ought not be disregarded in light of reduced obligations under the Building Act.

The Court of Appeal dismissed the application for leave to appeal, finding that the wording of the ‘Structure Stage’ was unambiguous, even having regard to the overall context, and that the language of special condition 4 was sufficiently clear to provide that the builder was only entitled to the ‘Structure Stage’ payment when both the structural steel frame and concrete panel works had been completed and approved (it was a finding of the Court below that the concrete panel works had never been inspected). His Honour helpfully summarises as follows:

I do not accept that the objective intention of the parties in agreeing to that language was that the builder’s entitlement to the milestone payment turned solely upon completion of the inspection of the steel framework. Indeed, to construe SC-4 in that way would be to ignore its language. That language identifies the preconditions to entitlement to the Structure milestone payment in terms that partly correspond to steps that must occur under the Building Act, but also add further preconditions that arise from the contract itself (ie, the requirement that the concrete panel work has been completed and ‘approved by a building surveyor’).

This decision represents a striking win for Best Hooper’s clients, reinforcing that builders who fail to complete agreed milestones in accordance with the relevant the relevant contractual provisions will not be able to, or at least will have difficulty, claiming progress payments.

Our Disputes Team was successful in vindicating the respondent property owners, working closely with the clients to achieve a just and equitable outcome. For property owners facing construction payment disputes (including disputes under the Security of Payment Act), early engagement with experienced property litigation lawyers may be your strongest asset.  

Recent amendments to the Security of Payment Act

Relevantly, the Security of Payment Act has been amended effective from 15 April 2026, including to abolish the ‘reference date’ requirement in section 9. As such, a builder’s entitlement to a progress payment may no longer be invalidated by a payment claim served ‘prematurely’.

Section 14A of the Security of Payment Act now provides that if a claimant serves a payment claim on a person before the earliest date that a payment claim can be served under section 14A (“earliest day”), that the payment claim is not invalid. That payment claim (which has been served prematurely) will instead be taken to be served on the earliest day and the time within which the person may serve a payment schedule on the claimant does not commence until the earliest day.

Notwithstanding this, the decision of ASD Corporation Australia Pty Ltd v Babicka [2026] VSCA 27 remains an important decision of the Court of Appeal, which endorses that parties are free to set out contractual requirements which supplement the statutory regime (though there are, of course, limitations to this in the latest version of the Security of Payment Act).

The Security of Payment Act is an area of speciality, and it imposes straight and tight statutory timeframes on applicants and respondents. It is important to immediately contact a lawyer if you’re served with a payment claim, or responding to one, given the complexity of the area and the changing landscape of the statute.

For any queries in relation to the Security of Payment Act or building disputes generally, please feel free to contact our office on (03) 9670 8951 or email us at mail@besthooper.com.au.