McDonald v MAK Constructions and Building Services Pty Ltd

The appeal concerned a dispute between a home owner, McDonald, and a builder, MAK Constructions and Building Services Pty Ltd. MAK Constructions had obtained a judgment debt against McDonald by filing an adjudication certificate under section 25 of the *Building and Construction Industry Security of Payment Act 1999* (NSW) (SOP Act). McDonald sought to pursue proceedings claiming damages against MAK Constructions, but MAK Constructions sought to stay these proceedings until the judgment debt was paid. The primary judge had ordered a stay of McDonald's proceedings.

The central legal issues before the Court of Appeal were the operation and effect of section 32 of the SOP Act, and whether McDonald's claim for damages could be characterised as a "cross-claim" for the purposes of Part 3 of the SOP Act. The court was also required to consider whether the primary judge had erred by failing to assess the strength of McDonald's case and by not taking into account MAK Constructions' delay in enforcing the judgment debt.

The Court of Appeal allowed the appeal, finding that the primary judge had erred in ordering the stay. The court reasoned that section 32 of the SOP Act preserves a party's common law rights, and that the policy of the SOP Act, which aims for prompt payment of progress claims, must be reconciled with the preservation of these rights. The court determined that McDonald's claim was not properly characterised as a cross-claim within the meaning of Part 3 of the SOP Act, and that the strength of McDonald's case and MAK Constructions' delay in enforcing the judgment were relevant considerations that had not been adequately addressed by the primary judge. Consequently, the orders of the primary judge were set aside, and McDonald's notice of motion was dismissed.