In A J Portelli Medical Pty Ltd (ACN 669 583 475) ATF A J Portelli Medical Trust v Black Sheep Building Pty Ltd (ACN 665 735 197) [2026] NSWCA 99, the Court of Appeal held that a claimant is not required to prove that the construction work was objectively executed before issuing a payment claim under the Security of Payment Act 1999 (NSW) (SOPA). More importantly, the decision reinforces the principle that a missed payment schedule can turn a disputed claim into an enforceable debt.
Why does this decision matter?
The decision serves as a timely reminder of the significant consequences of failing to comply with the procedural requirements of SOPA. For developers and principals, a failure to issue a payment schedule can place them at a significant procedural disadvantage and expose them to liability for the claimed amount, even where there may be legitimate grounds for disputing the contractor’s entitlement to payment.
Background
In May 2025, Black Sheep Building Pty Ltd (Black Sheep) entered a design and construct contract with AJ Portelli Medical Pty Ltd (Portelli) for the construction of specialist disability support accommodation in Gosford for $14 million.
The dispute centred on two payment claims issued by Black Sheep under SOPA, referred to as Payment Claim 3 (PC3) and Payment Claim 4 (PC4). Although Portelli made partial payments, it did not serve a payment schedule in response to either claim. Black Sheep subsequently commenced proceedings seeking to recover the unpaid amounts as a statutory debt under SOPA.
At first instance, Peden J granted summary judgment in favour of Black Sheep in the amount of $3.82 million plus interest. Portelli appealed, arguing that the payment claims were invalidly served and that Black Sheep was not entitled to claim progress payments because the works constituted residential building work requiring insurance under the Home Building Act 1989 (NSW).
What did the court decide?
The Court of Appeal upheld the summary judgment in Black Sheep’s favour, finding no error in the primary judge’s conclusions on either of the issues raised on appeal.
In dismissing the appeal, the court confirmed that:
- Payment claims do not require proof that the work was performed
- The Court confirmed that a payment claim under the SOPA is founded on the claimant’s asserted entitlement to payment. Its validity does not depend on the claimant demonstrating that the work was objectively performed. Peden J rejected Portelli’s timing objection, finding that the contract gave Black Sheep a right to submit payment claims from the 21st day of each month.
- Disability accommodation with shared facilities is not considered “self-contained units” under the Home Building Act
- The Court rejected Portelli’s argument that the development constituted residential building work requiring insurance under the Home Building Act. It held that the specialist disability accommodation, comprising private bedrooms with shared kitchen and living facilities, did not fall within the meaning of “self-contained units” and was therefore excluded from the relevant insurance requirements.
As a result, the court ordered the amount of $3.82 million paid into Court by Portelli be released to Black Sheep.
What this means for developers and principals
The decision reiterates the importance of compliance the SOP Act’s procedural requirements and the significant consequences that can arise from failing to respond to payment claims within the prescribed timeframe.
Developers and principals should:
- Maintain clear contract administration systems to track payment claim and response deadlines throughout a project.
- Ensure processes are in place to assess payment claims upon receipt.
- Issue payment schedules within the prescribed timeframe.
- Consider application of the Home Building Act as to whether any insurance obligations arise.
If you require advice on responding to payment claims in light of this decision, please contact a member of Addisons’ Construction & Infrastructure team.