Overpayments 

Following our previous article "No More Excuses After Hours: Timing is Everything under the Building and Construction Industry Security of Payment Act 1999 (NSW)", which clarified service deadlines for payment claims, the NSW Court of Appeal has recently delivered another critical decision concerning the provisional nature of payments under the Building and Construction Industry Security of Payment Act 1999 (NSW) (SOPA).

In CBEM Holdings Pty Ltd v Sunshine East Pty Ltd [2025] NSWCA 250, the Court unanimously dismissed a contractor's appeal, confirming that contract principals retain certain rights to recover overpayments despite the “pay now, argue later” regime under SOPA. This decision has significant implications for payment claim disputes.

Background: overstated progress claims

CBEM performed earthworks for the principal contractor, Sunshine, under a trade contract (the Trade Contract). CBEM submitted four SOPA-endorsed payment claims totalling $985,859.48, asserting 53% completion. The first three claims were approved, but no payment schedule was served in respect of the fourth payment claim within the statutory timeframe. CBEM obtained a summary judgment against Sunshine in respect of the fourth payment claim. Sunshine disputed the assessment of the works.

Sunshine subsequently terminated the Trade Contract and brought proceedings against CBEM in the District Court of NSW seeking restitution based on money paid under a mistake and under compulsion of law, and damages for misleading and deceptive conduct under the Australian Consumer Law (ACL).

The District Court accepted Sunshine’s expert evidence that CBEM had only performed 25% of the works as opposed to 53%, awarding Sunshine $452,961.44.

CBEM appealed, inter alia, on the following grounds:

1. The Trade Contract exclusively governed the rights of the parties with respect to payment claims and once Sunshine had paid the claims, Sunshine had no further right to recover any overpayments.
2. The payment claims assessing 53% completion were representations of opinion, not representations of fact.
3. The restitution claim was an attempt to ‘side-step’ the Trade Contract or otherwise was not properly pleaded.

Court of Appeal’s decision

The NSW Court of Appeal unanimously dismissed CBEM’s appeal, making the following observations:

Issue 1: Trade Contract did not oust recovery rights

As to whether the Trade Contract ousted Sunshine’s rights to seek recovery of overpayments, the Court held:

• There were no express words in the Trade Contract precluding Sunshine from claiming restitution of any overpayment. In particular, the phrase ‘amount properly claimed’ used in clause 11(a) of the Trade Contract indicated that a payment made was not final but was subject to a right of restitution.¹  
• Against the SOPA's statutory context, progress payments remain provisional in nature (s32 of SOPA) and ’final payment’ clauses would be void pursuant to s34 of SOPA.²  

Issue 2: payment claims not representations of fact

As to the primary judge’s decision that the payment claims were misleading as they amounted to factual assertions of completion, the Court held:

• A payment claim is not, of itself. a representation per se, but it may contain representations of facts or opinions.³ 
• Claims of partial completion (e.g. ‘75% done’) typically constitute opinions requiring evaluative judgment. An honestly held opinion (reasonably formed) is not misleading, even if is erroneous, citing Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82.⁴  
• Although the Court found that the ACL claim had not been made out, the Court found that CBEM’s payment claims were an operative cause of overpayment and Sunshine’s project managers approving the payment claims did not break the causal link.⁵ 

Issue 3: whether the restitution claim was available  

As to whether the restitution claim for overpayment was available to Sunshine, the Court held:

• The common money count was valid in short form under UCPR r 14.12, as no notice was served on Sunshine requiring full particulars.⁶
• In any event, the particulars of the mistake, though not required to be formally pleaded, were sufficiently particularised (Sunshine made the payments under the mistaken belief that the claims reflected work performed by CBEM).⁷
• Payments made pursuant to SOPA are interim in nature, and s32 of SOPA preserves and acknowledges the existence of common law rights.⁸

Takeaways

Contractors face heightened risk when a progress claim lacks clear and reliable records, especially where a claim is expressed as a percentage. The decision serves as a reminder that while SOPA enforces a "pay now, argue later" regime, construction contracts cannot always exclude recovery rights for overpayments. In that regard, partial completion claims in payment schedules are likely to constitute opinions, not statements of facts for ACL purposes, and claims for restitution or recovery of overpayments remain available.

¹ Paragraph [46].
² Paras [48], [51] and [54].
³ Para [59].
⁴ Para [60].
⁵ Para [67].
⁶ Para [97].
⁷ Para [98].
⁸ Para [157].