Executive Summary

This article examines the Supreme Court of Western Australia’s recent decision in Sovereign Building Company Pty Ltd v Sheehan Group Pty Ltd [2025] WASC 11 (Sovereign v Sheehan).

Facts of the case 

Sovereign Building Company Pty Ltd (Sovereign) is a construction company that engaged Sheehan Group Pty Ltd (Sheehan) to complete electrical works at a number of job sites around the Perth metropolitan area.¹ The works were carried out under a series of quotations and purchase orders.²

A dispute arose between the parties when, due to the rising costs of materials and wages, Sheehan sought to increase its rates from those originally quoted for.³

Sovereign:

1. disputed the price increases under the terms of the purchase order(s), contending that the purchase orders(s) contained a term the effect of which was that the prices were fixed;⁴ and
2. treated Sheehan’s conduct relating to the price increases as repudiatory and subsequently terminated the contracts between them on that basis and sought damages in this regard.⁵

In response, Sheehan issued a number of payment claims for the amount unpaid by Sovereign, under terms implied into the relevant contracts pursuant to the Construction Contracts (Former Provisions) Act 2004 (WA) (CCA).⁶ Sovereign failed to respond to the payment claims by issuing a notice of dispute, as is required under the terms implied under the CCA.

The CCA applied, rather than the Building and Construction Industry (Security of Payment) Act 2021 (WA) (WA SOPA), because the construction contract in question was entered into before the commencement dated of WA SOPA, being 1 August 2022.

Pursuant to the CCA, the Court acknowledged that a payment dispute arises when a respondent fails to pay a payment claim within the prescribed timeframe. Upon the occurrence of a payment dispute, the claimant has 90 business days to lodge an application for adjudication.⁷ It was not in dispute that a payment dispute had arisen.

Sovereign submitted that the appropriate course of action by Sheehan at the time when the payment dispute arose was to lodge an application for adjudication.⁸

Instead, Sheehan issued a statutory demand for payment under s 459E(1) of the Corporations Act 2001 (Cth).⁹

In the proceedings, Sovereign applied to set aside the statutory demand, asserting, amongst other things, that there was a ‘genuine dispute‘ as to the amount under the statutory demand and that it had an offsetting claim which exceeded the total amount claimed.¹⁰

Lundberg J considered that Sheehan’s election not to adjudicate did not preclude it from issuing a statutory demand. It did, however, prevent it from asserting there was no genuine dispute.

Lundberg J ultimately came to the conclusion that Sovereign had established a ‘plausible contention requiring’ further ‘investigation’ meaning that there was a ‘genuine dispute‘ as to the amount demanded¹¹ because:

• there are several issues requiring investigation as the works performed by Sheehan and Sheehan’s entitlement to claim payment for those works;¹²
• Sovereign’s termination of the agreements following Sheehan’s contention that it would increase its rates was sufficiently arguably valid.¹³ Further, that Sovereign had a sufficiently arguably valid offsetting claim, based on the costs it incurred engaging a replacement contractor to complete / rectify Sheehan’s works following its alleged repudiation of the contract;¹⁴ and
• Sovereign’s failure to comply with the CCA, through not issuing notices of dispute, did not preclude it from claiming that there was a ‘genuine dispute’.¹⁵

Application Under WA SOPA

If the WA SOPA applied to the dispute, the outcome could have been different, due to the operation of the deemed liability regime pursuant section 29. Under this regime, where a respondent fails to issue a payment schedule within the prescribed time and payment is not forthcoming by the due date, provided the payment claim is compliant with the requirements of the WA SOPA,¹⁶ the respondent becomes statutorily liable for the full amount claimed. In that event, a claimant has the additional option of seeking summary judgment.

Conclusion

The decision of Sovereign v Sheehan reinforces the need for claimants to carefully consider the applicable legislative regimes – whether the CCA or WA SOPA – as this will significantly influence both the procedural steps required and the enforcement avenues available.

This article was written by Kate Morrow, Partner, Michael Harris, Special Counsel and Elizabeth Lester, Solicitor.

¹ Sovereign Building Company Pty Ltd v Sheehan Group Pty Ltd [2025] WASC 11 [28].

² Ibid.

³ Ibid [31].

⁴ Ibid [33].

⁵ Ibid [36].

⁶ Ibid [41].

⁷ Ibid [48].

⁸ Ibid [49].

⁹ Ibid [53].

¹⁰ Ibid [3].

¹¹ Ibid [148].

¹² Indi, [147], [148],

¹³ Ibid [131].

¹⁴ Ibid [10].

¹⁵ Ibid [132].

¹⁶ The cases of A&M Telecommunications Pty Ltd t/as SAWWA ACN 146873289 v WCED Pty Ltd [2025] NSWDC 7 and Re Roberts Construction Group Pty Ltd [2024] VSC 679 highlight the critical importance of ensuring that payment claims strictly comply with the statutory requirements, as failure to do so may fatally undermine the claimant’s ability to rely on the regime.