In Qube Re Services (No 2) Pty Ltd v Martinus Rail Pty Ltd [2026] NSWSC 7, Peden J determined that SOPA's ‘pay now, fight later’ framework does not provide a public-policy basis for refusing enforcement of a final arbitral award under s 36(1)(b)(ii) of the Commercial Arbitration Act (CAA). The partial awards were therefore enforced as judgments of the Court under s 35(1).

The decision provides important guidance for principals and contractors involved in final rights arbitrations following SOPA adjudications. This article examines the Court's approach to the enforcement of partial arbitral awards and the limits of the public policy exception under the CAA.

Background

Three adjudication determinations under the Building and Construction Industry Security of Payment Act 1999 (NSW) (SOPA) took place in 2023 and 2024. The outcome of these adjudications was that Qube Re Services (No 2) (Qube) was required to pay Martinus Rail Pty Ltd (Martinus) around $80m in relation to payment claims for work connected to the Moorebank Intermodal Terminal Project. Those amounts were paid by Qube.

Qube later commenced ‘final rights’ arbitration proceedings seeking recovery of alleged overpayments to Martinus. In the arbitration, Qube argued that many of Martinus' claims were barred by contractual time-bar provisions, which it considered ought to have barred some of the payment claims it has paid pursuant to the SOPA determinations. Qube claimed restitution of those amounts.

The arbitrator, the Hon. Robert McDougall KC, determined separate questions and issued three partial awards finding:

• many of Martinus' claims were contractually barred
• the relevant time-bar clauses were not penalties
• Qube was entitled to restitution of amounts paid for those barred claims.

Martinus was required to repay $26,439,281.58 (including interest). Qube commenced proceedings to enforce the three partial arbitral awards pursuant to s 35(1) of the CAA.

Arguments

Qube sought to enforce the three partial arbitral awards as court judgments pursuant to Section 35(1) of the CAA.

Martinus resisted the enforcement of the arbitral award on the public policy ground in Section 36(1)(b)(ii) of the CAA which provides that enforcement of an arbitral award may be refused if the Court finds that the enforcement of the award would be contrary to public policy of the State.

The ‘policy’ said to be offended is the ‘pay now, argue later’ policy under SOPA, which allows contractors to receive progress payments, pending the final resolution of any disputes as to their entitlement under the relevant contracts.

Martinus claimed that enforcing the partial awards would violate public policy because it would be required to repay amounts in respect of specific claims determined by the arbitrator, even though there are further arguments Martinus may wish to raise for subsequent determination relevant to the time bar provisions (namely, that they are void pursuant to s 34 of SOPA).

What were the issues considered by Peden J?

Peden J considered the following issues in her decision:

1. is the policy of SOPA a type of public policy caught by section 36(1)(b)(ii) of the CAA?
   
2. if so, would the policy of SOPA and therefore the public policy of NSW be offended by enforcing the awards?
   
3. what orders ought to be made?

Decision

Peden J held that the ‘pay now, fight later’ framework of the Building and Construction Industry Security of Payment Act 1999 (NSW) does not provide a public policy ground to refuse the enforcement of a final arbitral award under section 36(1)(b)(ii) of the CAA.

Orders were made enforcing the partial arbitral awards as if they were judgments of the Court pursuant to s 35(1) of the CAA.

Three main findings were articulated in the decision:

1. SOPA is not the kind of ‘public policy’ caught under section 36 which would prevent enforcement of an arbitral award
   
   

   Where the question is the enforcement of an international arbitration award under the International Arbitration Act 1974 (Cth) (ICA), the concept of ‘public policy’ is limited to where enforcement of an award would violate the most basic, fundamental principles of morality and justice in the forum. Peden J held that the public policy exception is similarly narrow in the enforcement of domestic arbitral awards and the same considerations that apply to international arbitrations apply to domestic arbitrations.

   It is not contrary to public policy to enforce an award that failed to apply (or incorrectly applied) a particular domestic law or statute. It is only where enforcing the award would ‘shock the conscience’, be ‘clearly injurious to the public good’, or be ‘wholly offensive to the ordinary reasonable and fully informed member of the public’ that the public policy exception can arise.

   The public policy relevant to section 36 must be limited to one of rights which are fundamental to our legal system and the threshold is high and not readily overcome.

   Peden J did not accept that SOPA embodies a ‘fundamental conception of morality and justice.’
   

   
   

2. Even if SOPA policy were relevant, enforcement would not offend it
   
   

   The Court found that SOPA's purpose had already been achieved:

   • Martinus received the benefit of the SOPA regime through interim progress payments
   • the arbitration constituted the final determination of the parties' substantive rights
   • SOPA expressly contemplates later restitution following final rights proceedings.
     

   The Court rejected Martinus' complaint that repayment should await determination of the s 34 argument. Martinus had chosen not to have that issue determined as part of the separate questions. It remained free to pursue that argument later in the arbitration.

   
   

3. The partial awards were final, not interim

Martinus also submitted that the Partial Awards ought not be enforced in circumstances where they were orders for ‘interim restitution’.

Peden J held that they are not “interim” orders; they are final and binding and cannot now be revisited, citing CBI Constructors Pty Ltd v Chevron Australia Pty Ltd (2024) 283 CLR 172 at [21]-[22] (Gageler CJ, Gordon, Edelman, Steward and Gleeson JJ) (Chevron).

The arbitrator had repeatedly told the parties that the separate questions would result in final partial awards that could not later be revisited. Both parties accepted that position.

Key takeaways: What this means for principals and contractors

This decision reinforces the finality of arbitral awards and confirms that the public policy exception under the CAA will be applied narrowly.

Partial awards in Arbitrations (akin to a separate question) finally determine the parties' contractual and other legal rights under the CAA subject to very limited appeal rights, for example, bias, procedural unfairness or if enforcement of the award would be contrary to public policy.

The public policy exception will be construed narrowly, framed in terms of ‘shocking the conscience’, ‘clearly injurious to the public good’ or ‘wholly offensive’.  Peden J did not accept that SOPA's statutory policy amounted to the necessary fundamental conception of morality and justice. In any event, the policy of SOPA had been fulfilled – money was transferred under the adjudication and there it lay until the final rights were determined in the partial awards.

Contractors seeking to maintain an adjudicator’s determination in an arbitration, should:

• appreciate that any award resulting in money paid back from the adjudication will be final and not capable of appeal, except on very limited grounds – public policy not being one of them; and
• be careful not to restrict the issues in a partial award given the finality of the partial award – for example if a time bar clause is considered ‘unfair’ and ‘void’, that issue should be raised in the arbitration, especially (as in this case), if the time bar issue is being determined in a partial (binding) award.  There was no ability to argue this issue later after the partial award was issued.