This was a decision of the New South Wales Court of Appeal in relation to the New South Wales adjudication legislation, the Building and Construction Industry Security of Payment Act 1999 (the “Act”).

John Holland Pty Ltd (“John Holland”) and the Roads and Traffic Authority of New South Wales (“RTA”) entered into a contract to construct a roadway and associated bridgeworks (the “Contract”). The terms of the Contract provided for security “for the purposes of ensuring the due and proper performance of the Contract and of satisfying the obligations of the Contractor under the Contract.”

In the course of the works adjudications were brought by John Holland and the adjudicator awarded amounts well in excess of the amount of security be paid by RTA to John Holland. RTA paid these amounts.

After the works reached practical completion John Holland asked for the RTA to return half the security and the RTA declined. By this stage, disputes had arisen between the parties whereby RTA sought to recover the amounts paid to John Holland.

John Holland brought proceedings for the return of half of the security. John Holland argued that to the extent that the Contract’s provisions sought to undo the adjudicators’ determination, they were void by reason of the Act. At first instance, the judge decided that the RTA was entitled to retain the securities. John Holland appealed.

Was the RTA entitled to retain the securities?