1155 Nepean Hwy v Promax Buildings (Final Orders)
[2020] VSC 471
•3 August 2020
| IN THE SUPREME COURT OF VICTORIA AT MELBOURNE COMMERCIAL COURT TECHNOLOGY, ENGINEERING AND CONSTRUCTION LIST | Not Restricted |
S ECI 2019 4246
| 1155 NEPEAN HIGHWAY PTY LTD (ACN 630 087 428) | Plaintiff |
| v | |
| PROMAX BUILDINGS PTY LTD (ACN 630 303 801) & ORS | Defendants |
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JUDGE: | Digby J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 30 July 2020 |
DATE OF JUDGMENT: | 3 August 2020 |
CASE MAY BE CITED AS: | 1155 Nepean Hwy v Promax Buildings (Final Orders) |
MEDIUM NEUTRAL CITATION: | [2020] VSC 471 |
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PRACTICE AND PROCEDURE – Form of final order – Application for indemnity costs, alternatively costs on a standard basis – Access to adjudicated amount pursuant to s 28 Building and Construction Industry Security of Payment Act 2002 (Vic) – Whether final orders should be stayed pending application to Court of Appeal – Right to assessment of damages pursuant to an undertaking to the Court.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr M Robins QC with Mr A Rollnik | Arnold Bloch Leibler |
| For the First Defendant | Mr J Twigg QC with Mr A Morrison | Corrs Chambers Westgarth |
HIS HONOUR:
Ruling in relation to final orders, orders as to costs and associated issues
Judgment in this matter was handed down on 7 July 2020 (the Judgment).[1]
[1][2020] VSC 398 was provided electronically to the parties pursuant to the Court’s COVID-19 protocol dated 20 March 2020.
The first defendant Promax Buildings Pty Ltd (Promax) was successful at the trial of this proceeding and 1155 Nepean Highway Pty Ltd’s (plaintiff) Amended Originating Motion and Amended Summons dated 1 October 2019 and Summons dated 3 March 2020 (as amended by Amended Summons dated 6 March 2020) will be dismissed.
On 7 July 2020 the plaintiff and Promax were given the opportunity to propose the form of orders which they consider to be most appropriate, including in relation to costs.
The parties respective proposed orders and submissions have given rise to the following issues for determination:
(a) whether there should be a stay of judgment (or injunction to restrain Promax from enforcing the Adjudication Determination in this matter) until the determination of the plaintiff’s proposed appeal of the above Judgment;
(b) what (if any) damages are payable, or to be assessed, in relation to Undertakings given to date in this proceeding;
(c) whether the plaintiff should pay Promax’s costs of this proceeding on a standard or an indemnity basis; and
(d) the final form of orders in this proceeding.
Promax
In support of the final orders which Promax seeks, the first defendant filed:
(a) Submissions dated 9 July 2020;
(b) Reply Submissions dated 10 July 2020;
(c) Further Submissions dated 23 July 2020;
(d) Affidavit of Ozan Girgin (Chief Operating Manager for Promax) sworn 9 July 2020 (First Girgin Affidavit);
(e) Affidavit of Ozan Girgin sworn 23 July 2020 (Second Girgin Affidavit);
(f) Affidavit of Timothy Leigh Twentyman (General Manager for Promax) affirmed 23 July 2020 (Twentyman Affidavit); and
(g) Affidavit of Nicholas Hampton Taylor (Finance Manager for Promax) affirmed 23 July 2020 (Taylor Affidavit).
Promax’s submissions dated 9 July 2020
In its submissions Promax seeks orders as follows:
(a) the plaintiff’s Amended Originating Motion and Summons dated 1 October 2019, together with the plaintiff’s Summons dated 3 March 2020 be dismissed, with liberty to apply in respect of Other Matters in the Orders made on 5 March 2020;
(b) the plaintiff pay Promax’s damages sustained by reason of the Orders and associated Undertakings given in relation to orders made on 20 September 2019, 14 October 2019, and 5 March 2020, including complying with and in relation to all Undertakings given in the proceeding by the first defendant in relation to those orders and also in relation to taking steps contemplated under Other Matters in the Orders made on 5 March 2020, such damages to be assessed by the Court;
(c) Promax be released from all Undertakings made to the Court in this proceeding, other than those referred to in the Orders of 5 March 2020;
(d) the sum of $2,041,582.15 (incl GST), being the amount of the September 2019 Adjudication Determination, and accrued interest, be immediately released to Promax and paid to Promax’s Solicitors’ Trust Account; and
(e) the plaintiff pay Promax’s costs of the proceeding (including all reserved costs) on a standard basis up to and including 2 October 2019 and thereafter on an indemnity basis or in the alternative on a standard basis to be taxed in default of agreement.
Promax argues that:
(a) In order to secure Promax’s undertaking on 20 September 2019 and 14 October 2019 not to take steps to enforce the September 2019 Adjudication Determination, the Adjudicated Amount of $2,041,582.15 was paid into a controlled moneys account (subject to Court order) rather than Promax being able to enforce payment of that sum pursuant to the Building and Construction Industry Security of Payment Act 2002 (Vic) (SoP Act). Promax submits that now the plaintiff’s challenge to the September 2019 Adjudication Determination has been dismissed, the plaintiff must pay to it the Adjudicated Amount and further the plaintiff is precluded by the SoP Act from raising any defence or counterclaim so as to resist such payment;
(b) The plaintiff acted unreasonably in refusing Promax’s offer of compromise, asserted to be made in accordance with the principles applied in Calderbank v Calderbank,[2] communicated to the plaintiff in the early afternoon of 1 October 2019 (Calderbank offer), because in the relevant context that offer was a discount on Promax’s entitlements of approximately $194,269 (incl GST). Promax also submits that it was not unreasonable that its Calderbank offer was open to be accepted for only one day because the September 2019 Adjudication Determination was given on 29 September 2019, the Originating Motion was amended on 1 October 2019 and the Amended Originating Motion was due to be heard on 3 October 2019. The SoP Act is intended to effect expeditious payment entitlements and the plaintiff did not ask for Promax’s Calderbank offer to remain open for longer or express any concern in relation to the time available to it to accept the Promax offer. Further, Promax’s proposed compromise effected interim rights only and the plaintiff was in a positon to appreciate the merits of the offer.
[2][1975] 3 All ER 333.
Promax’s reply submissions dated 10 July 2020
Injunction restraining enforcement of the Adjudication Determination
Promax submits that pursuant to s 20(18) of the SoP Act the plaintiff has since five days after 29 September 2019 been required to pay it the Adjudicated Amount and that this obligation to pay was not suspended by any undertaking given by the plaintiff; only Promax’s rights of enforcement were restrained.
Both the plaintiff and Promax seek orders dismissing the plaintiff’s application, accordingly Promax submits there is no lawful justification to restrain Promax from now recovering payment, including because there is no issue to be tried.
Promax further submits that until the plaintiff’s application was dismissed, Promax could not exercise its rights under s 28R of the SoP Act so as to obtain a Certificate.
In relation to the plaintiff’s submission that there is no Certificate issued under the SoP Act in respect of the Adjudication Amount, Promax submits that this ignores that Promax has earlier undertaken not to obtain a Certificate under the SoP Act and also ignores the plaintiff’s legal obligation to pay the Adjudicated Amount under s 28N of the Act. Promax further submits that the plaintiff’s obligation to pay the Adjudicated Amount, and Promax’s right to interest on the Adjudicated Amount, are not contingent upon the issue of a Certificate under the SoP Act.
Promax submits that it is entitled to immediate payment of the moneys held in the controlled moneys account to discharge the subsisting Adjudicated Amount and further submits that in the event that the plaintiff applies for leave to appeal then it should make proper application for a stay of judgment, including any order made in respect of money to be paid out of the controlled moneys account presently held on trust.
Promax submits that the plaintiff’s application for an injunction is without merit and legal principle, and that the appropriate course for the Court to take is not to restrain the first defendant from enforcing its lawful rights or withhold payment of the Adjudicated Amount.
Promax further objects to any leave to the plaintiff for further material to be filed and observes that the plaintiff has barely asserted its belief as to the financial standing of Promax in support of parts of its contentions in relation to its application for an injunction.
Finally, Promax also submits that the final claim made in early February 2020 was made at that time because such a claim may not have been able to made thereafter.
Promax’s further submissions dated 23 July 2020
In relation to the merits of the appeal, Promax submits that the plaintiff’s so called ‘construction error’ is self-evidently weak because Vickery J’s comments at SSC Plenty Road Pty Ltd v Construction v Construction Engineering (Aust) Pty Ltd[3] (SSC Plenty Road) should apply equally where a respondent has not provided a payment schedule. Further, and in any event, Promax submits that the Judgment of 7 July 2020 relies on a number of elements in its path of reasoning, of which the statements made by Vickery J in SSC Plenty Road is only one. Promax submits that the Court’s conclusions upholding the Adjudication Determination are justifiable on bases separate to Vickery J’s comments in SSC Plenty Road.
[3][2015] VSC 631.
Further, the plaintiff’s so called ‘valuation error’ is not expressed as an arguable ground of appeal or explained in any adequate detail, rather the plaintiff seeks to re-argue the facts.
If the plaintiff’s appeal were to succeed it would result in a remitter back to the Adjudicator for further determination and the plaintiff would again be precluded from lodging a responsive submission with the Adjudicator.[4]
[4]Promax Submission, 23 July 2020, [3].
Further, Promax argues that the ‘pay now and argue later’ principle enshrined in the SoP Act should result in the threshold for an injunction or stay in relation to the outcome of a judicial review upholding an adjudication determination being set higher than usual.[5]
[5]Ibid [5].
Promax submits that here the plaintiff should be required to establish more than ‘a real risk’ that rights to recovery will be rendered nugatory because the SoP Act is designed to give a claimant access to disputed progress payments pending determination of an underlying dispute.
Promax is prejudiced by being held out of the Adjudicated Amount of $2,041,582.15, where at the same time it has paid its subcontractors and suppliers in relation to the Highett Project.
The plaintiff has the heavy burden of providing special or exceptional circumstances sufficient to justify an injunction in respect of its entitlement to payment of the Adjudicated Amount.
Promax’s affidavit material addresses the plaintiff’s affidavit material which speculates in relation to Promax’s solvency and other suggested concerns raised by the plaintiff.
Promax’s credit and financial position is substantially the same as it was at the time the plaintiff entered into a $8.59 million building contract with it in respect of the Highett Project.[6]
[6]Ibid [7].
Promax is suffering additional prejudice because the interest accruing on the Adjudicated Amount held in trust is less than would be accruing under the SoP Act and further Promax is continuing to incur expenses complying with the present hold placed on it pursuant to agreed orders made on 5 March 2020 and further Promax itself has concerns about the plaintiff’s ability to satisfy any further undertaking.[7]
[7]First Girgin Affidavit, [22]-[35].
Promax seeks damages pursuant to the Undertakings set out in the Orders of 5 March 2020.
Promax refutes that no damages are payable in respect of the said Orders because they resulted from a compromise between the parties.
Promax submits that the plaintiff’s Undertakings as to damages were the ‘price of an injunction’ and that the same position applies with respect to the plaintiff’s Undertakings as to damages given in September and October 2019.
In support of Promax’s argument that it was unreasonable of the plaintiff to reject its offer of compromise of 1 October 2019, Promax submits that its offer represented approximately a 10 percent discount on Promax’s entitlements. Promax also submits that its 24 hour deadline for acceptance of its offer was necessary due to the expedited listing date of the underlying judicial review, and again submits that at no point did the plaintiff request Promax’s offer be extended or communicated that the plaintiff had difficulties with the 24 hour time line for acceptance.
Additional Submissions on 30 July 2020
In oral argument on 30 July 2020 Promax agreed, in substance, that the question of damages (if any) in respect of Undertakings given earlier in the proceeding, should be reserved to be argued (if necessary) and determined at a future date.
The Plaintiff
In support of the final orders which the plaintiff seeks, the plaintiff filed:
(a) Submissions dated 9 July 2020;
(b) Reply Submissions dated 10 July 2020;
(c) Further Submissions dated 16 July 2020;
(d) Reply Submissions dated 27 July 2020;
(e) Affidavit of Andrew Blyth affirmed 16 July 2020 (Blyth Affidavit);
(f) Affidavit of Uduwarage Kyle De Silva affirmed 16 July 2020 (Fourth De Silva Affidavit);
(g) Affidavit of Uduwarage Kyle De Silva affirmed 27 July 2020 (Fifth De Silva Affidavit).
Plaintiff’s submissions dated 9 July 2020
In its submissions dated 9 July 2020 the plaintiff submits that the final form of orders should be that:
(a) the plaintiff’s application is dismissed;
(b) the plaintiff pay Promax its costs of the proceeding on the standard basis to be taxed in default of agreement; and
(c) Promax be enjoined from taking any step to enforce the September 2019 Adjudication Determination, until determination of the plaintiff’s proposed appeal in this matter.
In aid of its application to restrain Promax enforcing the Adjudication Determination or accessing the $2,041,582.15 held in the plaintiff’s solicitors’ controlled moneys account, the plaintiff:
(a) outlines foreshadowed challenges to the Judgment which it submits will be included in its application for leave to appeal in respect of judgment in this proceeding;
(b) asserts that Promax has no assets and that if the Adjudicated Amount of $2,041,582.15 is paid to Promax prior to appeal, were the plaintiff to succeed in its appeal, it would be unlikely to recover the Adjudicated Amount from Promax because that amount would be likely to be dissipated before the appeal is heard and determined, in the absence of injunctive relief; and
(c) submits that the Adjudicated Amount is held in the plaintiff’s solicitors’ controlled moneys account and therefore Promax will not suffer any substantial prejudice if the orders sought are made in circumstances where those orders in substance seek a short extension of the undertaking given and recorded in the Orders made 20 September 2019.[8]
[8]Other Matters [A]: By its Counsel, the first defendant undertakes that subject to the payment by the plaintiff into a controlled interest-bearing account of any sum determined by the second defendant, upon his Adjudication Determination, to be due, and any costs determined by the second defendant, the first defendant will not take any step to enforce any such Determination until the hearing and determination of this proceeding.
Plaintiff’s reply submissions dated 10 July 2020
The plaintiff should not be ordered to pay indemnity costs because:
(a) the plaintiff was afforded only 24 hours in which to consider Promax’s Calderbank offer which was insufficient in the circumstances;[9]
(b) the compromise offered to the plaintiff was in the order of $41,500, in relation to a total adjudicated claim of $2,041,582.15, and does not represent a meaningful compromise;
(c) Promax’s offer of compromise was tactical rather than an effort to genuinely compromise the matter. The plaintiff submits that this can be inferred from the offer being made only two days before the matter was listed for hearing, the very short 24 hour period that the offer remained open to be accepted and the small discount affected by the offer compared with the total claim.
[9]Plaintiff also relied in oral submissions on 30 July 2020, on an email from Promax’s lawyer received on 1 October 2019 at 6.45pm attaching Promax’s submissions of 1 October 2020 and an affidavit.
Further, the plaintiff criticises Promax’s Calderbank offer on the basis that it does not offer any explanation as to why the plaintiff’s claim will not succeed. The plaintiff submits that Promax could not reasonably contend that the plaintiff’s claim was forlorn, or that Promax’s position was one of certain success.
The plaintiff submits that taking the above matters into account, it was not unreasonable for the plaintiff to reject Promax’s Calderbank offer, and therefore costs in the matter should be ordered on a standard basis.
Immediate release of $2,041,582.15 (plus interest)
The plaintiff resists Promax’s orders requiring the immediate release of the Adjudicated Amount ($2,041.582.15 plus interest). The plaintiff submits that the process which Promax should follow is that provided for under the SoP Act, namely the procedures under s 28 of the SoP Act relating to an Adjudication Determination and its enforcement.
Damages
The plaintiff submits that in relation to the Undertakings referred to in Other Matters in the Orders made 5 March 2020, no damages arise including because the Undertakings were part of a compromise position reached and agreed to by the parties.
The damages which the plaintiff agreed to pay (Other Matters [E]) do not relate to costs arising from compliance with the agreed ‘Other Matters’ but rather related to the loss of a right in Promax arising from the agreed Other Matters.
Plaintiff’s further submissions dated 16 July 2020
The plaintiff should be granted an injunction to restrain Promax from seeking to enforce the Adjudicated Amount or otherwise obtain payment thereof because the plaintiff has established a serious question to be tried in relation to the issues as affirmed or to be advanced in an application for leave to appeal to be issued on or before 3 August 2020, and that the balance of convenience is in favour of such an injunction being issued. Further, in this matter damages would not be an adequate remedy because of the existence of a real risk that Promax will not have the financial wherewithal to reinstate the Adjudicated Amount.
Further, the plaintiff submits that there are special or exceptional circumstances in existence constituted by the real risk that the appeal, if successful, would be rendered nugatory were Promax to be paid the Adjudicated Amount because, on the plaintiff’s submissions, the financial state of Promax would give rise to an unacceptable risk that those moneys could not be recovered upon the successful outcome of the plaintiff’s appeal.[10]
[10]Plaintiff Submission, 16 July 2020, [3].
Conversely, the plaintiff submits that if it were to fail on its planned appeal, Promax is assured of payment, plus interest, and for that reason any prejudice to Promax would be largely or entirely negated.
The plaintiff also argues that it can identify at least the grounds of appeal which are themselves at least arguable. The plaintiff submits that the Judgment of 7 July 2020 [203] relied upon the decision of Vickery J in SSC Plenty Road. The plaintiff submits that SSC Plenty Road was distinguishable from the present case because in SSC Plenty Road the respondent to the relevant payment claim had provided a payment schedule and that party was not precluded by operation of s 21(2)(A) of the SoP Act from responding in the adjudication proceeding, whereas the plaintiff could not do so in the adjudication in this matter.
Further, the plaintiff submits that the Adjudicator made an ‘valuation error’ in that he ordered the full amount claimed in respect of certain Items, although he had no material upon which to base independently value those awards.[11]
[11]Ibid [6]-[7].
Plaintiff’s reply submission dated 27 July 2020
The plaintiff highlights that Promax’s submissions do not assert that the plaintiff’s grounds of appeal ‘are not arguable’. The plaintiff also highlights that its opposed Written Case for the Applicant/Appellant is at Exhibit ‘UKD-27’ of the Fifth De Silva Affidavit.
The plaintiff contests that if its appeal was successful this would result in a remitter back to the Adjudicator and points out that whether or not it is appropriate to remit in such circumstances is unclear and also the subject of discretionary power and that it will oppose any remitter at the appropriate time.[12]
[12]Plaintiff Submission, 27 July 2020, [4].
The plaintiff submits that no more than a real risk that an appeal, if successful, will be rendered nugatory is required in Victoria to sufficiently establish the existence of special or exceptional circumstances to found a stay of execution.[13]
[13]Ibid [5].
The plaintiff refutes Promax’s assertion that it has taken a leisurely approach to prosecuting its case at the Victorian Civil and Administrative Tribunal concerning the underlying disputes between the parties in relation to the Highett Project.
The plaintiff submits that the evidence as to Promax’s lack of assets is compelling and further submits that usually to counter a claim of lack of solvency over the assets, a party exhibits company accounts from a balance sheet, profit and loss statement, etc, which Promax has not done in this matter.
Further, the plaintiff accepts that the price of an injunction is damages however it submits further that no injunction was granted by or in respect of the 5 March 2020 Order which reflected a compromise between the parties.
The plaintiff also submits that Promax’s Calderbank offer did not state that it was inclusive of the costs of the proceeding but stated instead that it did not limit ‘any other remedy either party may have’ and therefore did not limit Promax’s potential acceptance of the payment of $2 million for which it communicated it would resolve the challenge to the Adjudication Determination, and then in any event pursue its costs.
Further, the plaintiff submits that it had no basis to surmise that Promax’s costs were in the sum of $120,804.75 and on these and other bases argued by the plaintiff its rejection of Promax’s Calderbank offer was not unreasonable.[14]
[14]Ibid [9].
Additional Submissions on 30 July 2020
In oral argument on 30 July 2020 the plaintiff also agreed, in substance, that the question of damages (if any) in respect of Undertakings given earlier in the proceeding, should be reserved to be argued (if necessary) and determined at a future date.
Considerations
The following paragraphs address the issues which have arisen for determination in respect of the plaintiff’s and Promax’s proposed final Orders in this proceeding.
Orders in respect of the plaintiff’s amended originating motion and amended summons dated 1 October 2019 and summons dated 3 March 2020
Promax is entitled to orders dismissing the plaintiff’s Amended Originating Motion and Amended Summons dated 1 October 2019 and the plaintiff’s Summons dated 3 March 2020.
Promax seeks the above orders, and the plaintiff’s proposed orders provided 30 July 2020 are in substance the same.
Damages in relation to the Undertakings made 20 September 2019, 14 October 2019 and 5 March 2020
During argument on 30 July 2020 it became apparent that both Promax and the plaintiff were content, for the time being, to have the Court reserve all questions of liability for damages in relation to the Undertakings provided earlier in these proceedings, or any of them, and as to the quantification of any such damage. The parties in substance indicated that when convenient, they would approach the Court for directions in relation to the future management and determination of these issues.
Stay of Judgment or alternatively restraint on Promax’s immediate access to money in the plaintiff’s solicitors trust account
The plaintiff seeks a stay of the above Judgment, alternatively an order restraining the first defendant from taking any steps to enforce the September 2019 Adjudication Determination until, at the earliest, the hearing and determination of the plaintiff’s application for leave to appeal.[15] The plaintiff has also assured the Court that it will issue its application in the Court of Appeal for leave to appeal by 4 August 2020.
[15]Plaintiff’s proposed final orders [3] and [4] provided on 30 July 2020.
The plaintiff argues, relying upon authority including Cellante v G Kallis Industries Ltd (Cellante),[16] that special or exceptional circumstances exist in this matter constituted by the real risk that if the Adjudicated Amount, together with interest, was released to Promax, that sum would, because of Promax’s parlous financial situation, not be recoverable in the event that the plaintiff succeeded in its foreshadowed appeal. The plaintiff argues that its planned appeal would thereby be rendered nugatory.
[16][1991] 2 VR 653 at 657.
Alternatively, the plaintiff seeks to restrain enforcement of the Adjudicated Amount, submitting that there is a serious issue to be tried as to whether the Judgment of 7 July 2020 should stand and also argues, on the same bases concerning Promax’s parlous financial position, that the balance of convenience is in its favour and that damages would be illusory and therefore an inadequate remedy.
The grant of an injunction of the type sought requires the Court to consider whether there is a serious question to be tried together with where the balance of convenience lies and whether in the circumstances damages would be an adequate remedy.[17]
[17]See Australian Broadcasting Corporation v O’Neil (2006) 227 CLR 57.
A stay of execution will be granted where special or exceptional circumstances exist.[18] Such circumstances will exist where there is a real risk that the appeal, if successful, will be rendered nugatory.[19]
[18]Supreme Court (General Civil Procedure) Rules 2015, r 66.16; Cross Country Realty Victoria Pty Ltd v Ubertas 350 William Street Pty Ltd [2015] VSCA 347, [82]; Cellante v G Kallis Industries Pty Ltd [1991] 2 VR 653, 657.
[19]Cross Country Realty Victoria Pty Ltd v Ubertas 350 William Street Pty Ltd [2015] VSCA 347, [82].
A real risk of the type referred to in the preceding paragraph will ordinarily be sufficiently established if there is a basis for concluding that the financial position of the respondent to the appeal is likely to result in the appellant being unable to recover the sum paid to the respondent upon execution of the judgment below; here the payment of the money presently held in trust to secure the Adjudicated Amount during the plaintiff’s challenge to the Adjudication Determination.[20]
[20]Cross Country Realty Victoria Pty Ltd v Ubertas 350 William Street Pty Ltd [2015] VSCA 347, [82] relying on Federal Commissioner of Taxation v The Myer Emporium Ltd [No 1] (1986) 160 CLR 220, 223.
In Maher v Commonwealth Bank of Australia (Maher),[21] the Court of Appeal enunciated general propositions that apply to an application for a stay of orders pending the determination of an appeal.
[21][2008] VSCA 122.
In Maher, Dodds-Streeton JA, with whom Redlich JA agreed, identified established principles which governed the Court’s exercise of discretion to grant a stay of judgment. Her Honour noted that:
(a) prima facie, a successful party is entitled to the benefit of the judgment obtained below; and
(b) it is presumed that the underlying judgment is correct; and
(c) the party seeking the stay bears the onus of demonstrating a stay is justified.
In Maher, the Court also referred to the reasons of Young JA in Cellante, with whom Brooking J agreed, where his Honour quoted with approval the following comments of Mahoney JA in Re Middle Harbour Investments Ltd (in liq):
…where an applicant for a stay has not demonstrated an appropriate case but has left the situation in the state of speculation or of mere argument, weight must be given to the fact that the judgment below has been in favour of the other party.
In Maher Dodds-Streeton JA, referring to Young JA in Cellante, stated that:
(a) an applicant for a stay must show special or exceptional circumstances to take the case out of the general rule that an appeal does not operate as a stay, and that such special circumstances would exist where there is a real risk that a successful appellant would be unable to be restored to his or her former position were the stay refused; and
(b) the court has a wide discretion which is not circumscribed by rigid rules, and it should take into account all the circumstances of the case.
I recognise that in this case the controlled moneys account now containing the sum of the Adjudicated Amount was established as a condition of the restraint agreed by Promax in relation to enforcing the Adjudication Determination and to secure the Adjudicated Amount pending the outcome of the judicial review commenced by the plaintiff.
In the circumstances referred to in the last preceding paragraphs, subject to any other consideration, for example the stay of access to the money in issue pending appeal, or analogous restraint by way of injunction, (and any further orders of the Court of Appeal), I consider that the controlled moneys account representing the Adjudicated Amount, and interest thereon, should be immediately paid to Promax now that the plaintiff’s judicial review has been dismissed.
I also consider there to be some substance to Promax’s argument that in the special context of this matter which arises under the SoP Act, more than a real risk may need to be established to satisfy the requirement of a special or exceptional circumstance sufficient to justify a stay of execution pending an appeal.[22] Such an approach derives support from the statutory adjustment of risk effected by that legislation in favour of claimant contractors.
[22]Grosvenor Constructions (NSW) Pty Ltd (in administration) v Musico [2004] NSWSC 344, [31]; Herscho v Expile Pty Ltd [2004] NSWCA 468, [3] and Veolia Water Solutions v Kruger Engineering [No 3] [2007] NSWSC 459, [75].
However in the particular circumstances of this matter I am ultimately persuaded, for the reasons outlined below, that it is just and appropriate to stay the above Judgment for the relatively short period likely to be sufficient to enable the plaintiff to seek to extend that stay in the Court of Appeal. This is principally because I am satisfied that in this instance special circumstances exist by reason of there being a real risk that if the Adjudicated Amount was paid to Promax, that money may not be recoverable by the plaintiff if it succeeds in its foreshadowed appeal. Such a circumstance is likely to give rise to irreparable harm to the plaintiff, whereas Promax is secured by the money held in trust.
Further, were the Adjudicated Amount (plus interest) to be released to Promax this would in my view give rise to an unacceptable risk that Promax’s present interim entitlement to the Adjudicated Amount would, in reality, be converted into a final entitlement because on this scenario Promax will receive the Adjudicated Amount, and interest, and there is a real risk that those moneys will not be recoverable thereafter.[23]
[23]Grosvenor Constructions (NSW) Pty Ltd (in administration) v Musico [2004] NSWSC 344, [4] and [35] and Veolia Water Solutions v Kruger Engineering [No 3] [2007] NSWSC 459, [75].
Affidavit material concerning Promax’s financial position
Plaintiff’s affidavit material - Blyth Affidavit and Fourth and Fifth De Silva Affidavits
The plaintiff’s affidavit material includes affidavit material which seeks to establish that:
(a) Promax’s paid up capital in the sum of $120;[24]
[24]Blyth Affidavit, [4].
(b) the Promax Group is embroiled in a large number of proceedings in particular at the Victorian Civil and Administrative Tribunal as both claimant and respondent, and also in the Federal Court of Australia principally as claimant and in one instance as respondent;[25]
[25]Ibid [19] and [20].
(c) the Promax Group, being entities related to Promax, are in dispute with a subcontractor known as Australian Scaffolding Pty Ltd, in respect of subcontract works at the Bullen and Glen Huntly Projects owned by LDS Lifestyle Pty Ltd, the parent company of the plaintiff;
(d) a number of subcontractors and consultants have claimed that Promax owes them money, including GQ Windows and Doors Pty Ltd, and M&A Polimeni Plumbing Pty Ltd, in respect of various projects, other than the Highett Project;[26]
(e) the plaintiff refutes Promax’s individual statements in the Second Girgin Affidavit and statements by Mr Taylor and Mr Twentyman in their Affidavits of 23 July 2020.[27]
[26]Fourth De Silva Affidavit, [66]-[68].
[27]Fifth De Silva Affidavit, [5]-[37].
The plaintiff’s affidavit material also affirms that the plaintiff is concerned that if it pays the first defendant the Adjudicated Amount, it will never be able to recover that amount if its foreshadowed appeal is successful as a result of concerns stemming from the plaintiff’s corporate knowledge of Promax’s financial position as a company with very little paid up capital and one which is also in the nature of a special purpose vehicle incorporated to carry out the Highett Project but which does not otherwise carry on business.[28]
[28]Fourth De Silva Affidavit, [15]-[16].
Promax’s responsive affidavits – Second Girgin Affidavit, Twentyman Affidavit and Taylor Affidavit
Promax’s affidavit material, includes affidavits which seek to establish that:
(a) that it is not accurate that Promax is no longer carrying on business;[29]
[29]Second Girgin Affidavit, [8].
(b) Promax has paid subcontractors and suppliers on the Highett Project;[30]
[30]Ibid [9].
(c) the deprivation of $2 million from Promax’s cash flow has an effect on Promax’s capacity to conduct its general business activities and to actively procure further work;[31]
[31]Ibid [10].
(d) the Adjudicated Amount and interest held in a controlled moneys account is not recognised as a Promax asset by financial institutions, or for construction purposes;[32]
[32]Ibid [11].
(e) Promax will suffer prejudice by not having access to the funds of $2 million available particularly in difficult economic times because it ‘it is clearly of great utility to Promax Buildings’ business to have access to funds of this amount to assist in the procurement of future projects and for general business activities’;[33]
[33]Ibid [12].
(f) Promax is an active operating company with its own business portfolio within the Promax group of companies; it tenders for work and will perform work within its sector of the construction market and has recently secured two projects, and Promax is in the process of signing building contracts for these two projects;[34]
[34]Twentyman Affidavit, [11].
(g) Promax is in advanced stages of negotiations in respect of two further projects;[35]
[35]Second Girgin Affidavit, [15].
(h) no entity in the Promax Group has been wound up on grounds of insolvency;[36]
[36]Ibid [17].
(i) Promax is in no different a financial position as it was when it signed the Highett Project contract with the plaintiff;[37]
[37]Ibid [18].
(j) the extent of disputation and litigation in which the Promax Group is involved is normal for the construction industry and not excessive or unusual in this context;
(k) Promax considers there is a real risk that it will not be paid interest and costs to the extent there might be in excess of the funds held in the controlled moneys account;[38]
[38]Ibid [22]-[29].
(l) Mr Girgin himself has personally paid the sum of $55,000 approximately in legal fees in relation to the costs of Promax lodging, withdrawing and resubmitting an Adjudication Application in respect of the Highett Project;[39]
[39]Ibid [33].
(m) Promax’s costs associated with this matter amount to significantly more than the Adjudicated Amount plus interest held in the controlled moneys account and those costs will increase in the event that the plaintiff prosecutes its proposed appeal;[40]
[40]Ibid [34]-[35].
(n) Promax is not a special purpose vehicle only for the purposes of carrying out the Highett Project;
(o) Promax has actively tendered for project work;[41]
(p) Promax disputes amounts owing to subcontractors and subcontract disputes referred to by the plaintiff;[42] and
(q) Promax is currently in a sound financial position.[43]
[41]Second Girgin Affidavit, [6] and [7].
[42]Taylor Affidavit, [8]-[12] and [15]-[16].
[43]Ibid [13].
I consider that on the present untested affidavit material relied upon by both the plaintiff and Promax, including the particular facts and assertions referred to in summary above:
(a) Promax is a company which has undertaken only one construction project, namely the Highett Project (in relation to which it is no longer engaged by the plaintiff) and save for its paid up capital of $120 has no further assets which would be available to reinstate the moneys presently held in a secured money account, if that sum was to be released to it prior to the determination of the plaintiff’s proposed appeal in this matter;
(b) although the plaintiff asserts that it is tendering for work and has ‘successfully secured and is in the process of signing building contracts for two projects’, the plaintiff has not condescended to provide any but the vaguest general details of the two projects concerned, save to refer to the general nature of the work which may be involved with the two prospective contracts, and further Promax is not able to specify in respect of one of the two projects what the value of the prospective contract will be, beyond the broad assertion of between $5 million and $15 million.
Accordingly, I ascribe very little weight to such prospective work and note that neither of the vaguely described prospective contracts referred to above is the subject of a binding agreement pursuant to which Promax is engaged at this point of time.
(c) I am satisfied that Promax has undertaken no construction contract work since it left the Highett site and I am satisfied that Promax, at this point in time, has not entered a contract to perform construction work in the future;
(d) notwithstanding that well prior to Promax filing its responsive affidavit material on 23 July 2020 the plaintiff had squarely put in issue Promax’s financial strength and solvency, in my view shifting the evidentiary burden on this issue to Promax, Promax has not attempted to refute the plaintiff’s assertions as to its financial strength and solvency by identifying assets available to Promax to reinstate or secure the sum in issue if it was paid to Promax and wholly or partially defrayed between now and the outcome of the plaintiff’s planned appeal. Nor has Promax put forward any evidence of any available financial facility, nor has it exhibited any Balance Sheet or Profit and Loss Statement, nor indeed any other cogent and persuasive evidence of its ability to repay the sum in issue were it to be released to Promax prior to the outcome of the plaintiff’s proposed appeal;
(e) although it would appear that there is much litigation involving the Promax Group, including a number of claims and counterclaims in relation to subcontractors and suppliers to the Promax Group, those issues are refuted by Promax and not able to be reliably evaluated on present material at this stage of these proceedings. For these reasons no weight, one way or the other, is given to these claims and counterclaims in this application;
(f) similarly, and for the same reasons referred to in the last preceding paragraph, I have given no weight one way or the other to the issues addressed in the affidavit material concerning Promax’s alleged lack of registration as a builder pursuant to the Domestic Building Contracts Act 1995 at the time it entered the Highett contract, nor in respect of the defects in the Highett project asserted by the plaintiff or in respect of the plaintiff’s assertions about the extent to which the Highett Project subcontractors were companies related to Promax.
I also observe that although Promax’s ability to repay the Adjudicated Amount is in issue, if that sum were paid or recovered by Promax, and although that matter has been in issue for weeks, Promax has not proffered any sort of comfort to the plaintiff to secure repayment (if the plaintiff succeeds in its planned appeal) in exchange for immediate payment of the Adjudicated Amount, pending the outcome of the plaintiff’s appeal. Such comfort may have been offered in the form of a bank guarantee, or a charge on assets, or in some form of cross security or similar.
I also consider it to be troubling that Mr Girgin personally, and not Promax, paid the sum of $55,000 approximately in legal fees in relation to the costs of Promax lodging, withdrawing and resubmitting an Adjudication Application in respect of the Highett Project.
In the result I am, for present purposes, satisfied that Promax’s financial position gives rise to a real risk that, absent a stay on the above Judgment (or injunctive relief to the same effect), if Promax was paid the Adjudicated Amount together with interest to date, that sum may not be repaid to the plaintiff, if it succeeds in its appeal. On this scenario Promax’s present interim entitlement to the Adjudicated Amount will effectively be rendered final and the plaintiff will be correspondingly prejudiced.
Strength of the Appeal
As to the strength of the plaintiff’s prospective appeal on the grounds outlined by the plaintiff above, and Promax’s outline responses (in both instances referenced in the parties’ submissions), the plaintiff, in essence, submits that its foreshadowed appeal grounds are at least arguable and Promax submits that they are self-evidently weak. However, Promax does not submit that those grounds are unarguable.[44] Neither did Promax further develop its criticisms of the plaintiff’s prospective grounds of appeal in oral argument.
[44]Probax Submissions, 23 July 2020, [2]; T38.2-24.
I accept for present purposes that there is no issue that between the parties that the plaintiff’s foreshadowed grounds of appeal are arguable.[45]
[45]Erinford Properties Ltd v Cheshire County Council [1974] 1 Ch 261 at 267-268.
The current state of the interest bearing controlled moneys account
The said Adjudicated Amount, together with all accrued interest, in the sum of $2,041.582.15 is presently held in an interest bearing controlled moneys account established by Orders made in this matter on 20 September 2020.
Further, on 31 July 2020, subsequent to discussion during the course of argument on 30 July 2020, the plaintiff’s lawyers advised that:
We are instructed that since then our client has transferred the further sum of $290,166.18 into the controlled money account.
This amount is calculated as follows:
• $201,596.88 for interest on the adjudicated amount of $2,041,582.15 at a rate 10% per annum from 5 August 2019 to yesterday; less
• $11,430.07 for interest that has accrued on the amount already deposited; plus
• $100,000 for future interest pending determination of the appeal.
Prejudice
Prejudice to Promax
I consider that the evidence, referred to above in the Second Girgin Affidavit, the Twentyman Affidavit and the Taylor Affidavit, fails to sufficiently and meaningfully explain or establish any specific prejudice to Promax as a result of it presently, or for a further period, being deprived of the Adjudicated Amount and interest thereon.
In particular Promax does not attempt to specifically link its deprivation of the Adjudicated Amount (and interest) with an inability to undertake any particular commercial activity or to win, or to prosecute, any particular construction project at this time, or in the future.
Further, the Adjudicated Amount secured, including now an additional sum substantially securing all interest which may be payable to Promax in relation to the Adjudicated Amount, in my view protects Promax in relation to any risk of not being paid those moneys if it successfully resists the plaintiff’s planned appeal. This obviates any potential prejudice to Promax in that regard. This secured position also renders Promax’s assertions relating to the plaintiff’s inability to pay, of negligible or of no consequence.
Prejudice to the plaintiff
I consider that the plaintiff has sufficiently established an identifiable and real risk of prejudice if the Adjudicated Amount, together with interest, was to be released or otherwise paid to Promax before the outcome of the plaintiff’s proposed appeal, or further order. Such a scenario would, I consider, expose the plaintiff to the real risk that, if successful in its appeal, that appeal may be rendered nugatory because the sum in issue could not be recovered from Promax.
However, in my view, taking into account Promax’s present entitlement to the Adjudicated Amount, and interest thereon, any restraint on enforcement should be for the shortest practical time. This time is informed by the plaintiff’s assurance that it will issue its application for leave to appeal by 4 August 2020. There is however at present no advised date for the return of that application before the Court of Appeal.
Accordingly, I shall restrain the enforcement of the September 2019 Adjudication Determination dated 29 September 2019 for only 21 days to 4.00pm on Friday 21 August 2020, to afford a reasonable time within which the plaintiff may seek to extend the stay included in the orders below.
Promax’s Calderbank offer in the sum of $2 million
Promax seeks recovery of indemnity costs in relation to the above Judgment on the basis of a ‘Calderbank’ offer which Promax served on the plaintiff on 1 October 2019.
The First Girgin Affidavit deposes to the following matters of fact concerning Promax’s Calderbank offer:
(a) that the plaintiff did not formally respond to Promax’s Calderbank offer;
(b) that the plaintiff did not request an extension of time in which to accept the Calderbank offer;
(c) to the first defendant’s legal fees between 5 August 2019 and 1 October 2019 being in the sum of $121,000;
(d) that the interest which had accrued in respect of the Adjudication Amount from 5 August 2019 to the date of the Calderbank offer on 1 October 2019 was in the sum of approximately $32,000;
(e) that the total value of the compromise offered in the Calderbank offer was approximately $194,000 (incl GST), made up of the discount in respect of the Adjudication Amount ($41,000), legal costs ($121,000) and interest ($32,000);
(f) Promax’s Highett Project final payment claim made on 6 February 2020 under the SoP Act also refers to the plaintiff’s Summons dated 3 March 2020 seeking injunctive relief in respect of Promax’s February 2020 Payment Claim and notes that at the return of the plaintiff’s injunction application on 5 March 2020 Promax provided an undertaking to the effect that it would not ask Rialto Adjudications Pty Ltd (the third defendant) to refer an adjudication application in relation to its February 2020 Payment Claim to an adjudicator until jointly advised in writing by Promax and the plaintiff. To preserve its rights Promax was permitted to submit requests pursuant to s 23(3) of the SoP Act to the third defendant, until a joint written notification was advised to the third defendant by the plaintiff and Promax;
(g) to a series of adjudication applications to the third defendant, pursuant to s 28(3) of the SoP Act, made pursuant to the parties’ agreement and the first defendant’s undertaking on about 5 March 2020 reserving Promax’s rights to make such applications under the SoP Act; and
(h) generally to legal costs consequent upon both the plaintiff’s Summons dated 3 March 2020 and the series of steps taken by the first defendant pursuant to s 28(3) of the SoP Act; no quantum of such costs is detailed.
The Calderbank offer made by the first defendant in the sum of $2 million was an offer therefore to settle the September 2019 Adjudication Determination and in my view, as explained at paragraphs [18]-[20] of the First Girgin Affidavit, Promax’s entitlements in relation to the September 2019 Adjudication Determination, being $2,041,582.15 plus interest plus costs, were likely to exceed the sum of Promax’s Calderbank offer of $2 million made on 1 October 2019 by about $194,000.[46]
[46]First Girgin Affidavit, [20]; Promax Submission, 23 July 2020, [13].
The plaintiff argues that Promax’s Calderbank offer was ineffective, including because it failed to adequately explain the bases upon which Promax claimed that the plaintiff’s challenge to the September 2019 Adjudication Determination was forlorn and because the Calderbank offer was vague and confusing as to whether that offer was intended to be inclusive of costs, and was otherwise incapable of acceptance. The plaintiff also argues that Promax’s Calderbank offer was open to be accepted for an unreasonably short time.
Promax made its Calderbank offer some time prior to 1.28pm on 1 October 2019[47] stipulating that Promax’s offer would remain open until 1.00pm on 2 October 2019.
[47]First Girgin Affidavit, [12].
The plaintiff did not formally respond to the first defendant’s Calderbank offer which was expressly open to be accepted until 1.00pm on 2 October 2019.
At the time of Promax’s Calderbank offer of 1 October 2019, the parties had only the day before received the subject 29 September 2019 Adjudication Determination. The reasonableness of the timing of such an offer and the reasonableness of the time available to the offeree to accept an offer are matters relevant to the exercise of the Court’s discretion as to costs.[48]
[48]Hazeldene’s Chicken Farm Pty Ltd v Victorian Workcover Authority (No. 2) (2005) 13 VR 438.
Further, on 1 October 2020, at 6.45pm, the plaintiff was served with Promax’s submissions of about 100 paragraphs in length. These submissions contained extensive argument and authority addressing, among other matters, the reasons why the plaintiff’s attack on the September 2019 Adjudication Determination was unsustainable.
Furthermore, as at and during the approximate 24 hour period which the plaintiff was afforded to consider Promax’s Calderbank offer, the hearing of the trial of the plaintiff’s Motion and Summons to review the Adjudication Determination was only hours away; that trial was fixed to commence at 10.30am on 3 October 2019. Accordingly, the plaintiff and its legal team would have been heavily tasked and under considerable preparation related pressure during the short time Promax’s offer was open to be accepted.
I consider that the period of about 24 hours during which the Promax offer was open to be accepted, was unreasonably short for the plaintiff to assimilate the offer, seek and obtain advice in relation to the offer and respond to that offer, in these circumstances.
Those circumstances included that between about 1.00pm on the day of service of the offer and about 24 hours later, at 1.00pm the next day:
(a) afforded an unreasonably short period of time within which the plaintiff was able to appreciate the receipt of and be able to seek advice from its legal team, probably including counsel, assimilate the terms of the offer and that advice, make a decision on the Promax offer and formally respond to that offer;
(b) the day of the offer, 1 October 2019, was the day on which the plaintiff amended its Originating Motion and Summons and delivered lengthy written submissions in the proceeding challenging the September 2019 Adjudication Determination. In my view therefore it is likely that the plaintiff was, in the time available, unable to evaluate the nature and strength of Promax’s case in response to the plaintiff’s Amended Originating Motion and Amended Summons and submissions;
(c) The Promax Calderbank offer was served two days before the scheduled hearing of the plaintiff’s Amended Originating Motion and Summons of 1 October 2019 which was likely to be a time in which the plaintiff and its legal representatives were heavily occupied in, and distracted by, preparing for the Judicial Review scheduled for hearing on 3 October 2019.
For the above reasons, in my view, the very short period of time allowed to the plaintiff to assimilate, evaluate and make a decision in relation to and communicate that decision to Promax in respect of Promax’s Calderbank offer in the sum of $2 million was, in the circumstances, an unreasonably short and inadequate period of time for the plaintiff to assimilate, address, seek and absorb legal advice on and respond to the offer.
In my view it is of no moment in this particular instance that the plaintiff did not seek to have the period for acceptance of the Calderbank offer extended; there was no obligation upon the plaintiff to do so and the fact that it did not do so does not alter the unreasonable nature of the Promax offer.
The above finding renders it unnecessary to determine whether the form of the Calderbank offer dated 1 October 2019 also rendered that offer ineffective in the ways argued by the plaintiff. For the same reasons it is also unnecessary to attempt to undertake any assessment of the offeree’s prospects of success at the date of the offer in respect of the exercise of discretion as to costs.
For the above reasons I do not consider it to be just and appropriate that the plaintiff be required to pay the first defendant’s costs of the proceedings, including all reserved costs on an indemnity basis after 2 October 2019.
In my view the plaintiff should pay Promax’s costs on a standard basis, including all reserved costs on the basis that Promax has succeeded in resisting the plaintiff’s challenge to the Adjudication Determination.
Costs - plaintiff’s Summons dated 3 March 2020
The plaintiff’s Summons dated 3 March 2020 is to be dismissed.
In my view the costs associated with the plaintiff’s Summons of 3 March 2020 are subject to separate and distinct considerations not applicable to the plaintiff’s Amended Originating Motion and Amended Summons dated 1 October 2019. This is because part of the justification for the plaintiff’s Summons of 3 March 2020 was that Promax’s February 2020 Payment Claim sought to claim a sum asserted by the plaintiff to have already been claimed by Promax, and the subject of the September 2019 Adjudication Determination. That matter is referred to in the Judgment as follows:
The plaintiff contends that the work identified and the amounts claimed in the February 2020 Payment Claim are substantially the same as the work described and the amounts claimed in the July 2019 Payment Claim. The plaintiff submits that the amount of new work claimed in the February 2020 Payment Claim is $70,308.55 (excl GST) for ‘Preliminaries’, ‘Structural Engineering Fees’ and ‘Nature Strip Maintenance’.
In these circumstances I consider that Promax should recover costs on a standard basis in respect of the Summons dated 3 March 2020.
Orders
For the above reasons I shall orders as follows:
Upon
A.The plaintiff has advised the Court that it intends to appeal the decision of this Court and final Orders set out below and it undertakes, by its Senior Counsel, to file and serve its application for leave to appeal by 4.00pm on 4 August 2020, and to prosecute its appeal with due diligence.
B.The plaintiff undertakes to the Court, by its Senior Counsel, that upon the granting of the stay of the Orders identified in Order [2] below, to abide by any order that the Court may make as to damages if the Court is hereafter of the view that the first defendant suffered any loss by reason of Order [2] below.
C.The plaintiff undertakes to the Court, by its Senior Counsel, to deposit into the controlled interest bearing account (as identified in item A of the Other Matters to the Orders made by the Honourable Justice Digby on 20 September 2019) the further sum of $290,166.18 by 31 July 2020 (being the amount of $201,596.88 [interest on the adjudicated amount of $2,041,582.15 at 10% p.a. from 5 August 2019 to 30 July 2020] less $11,430.07 [interest already accrued in the controlled interest bearing account] plus $100,000.00 [for future interest that may accrue pending the determination of the plaintiff’s appeal]).
I order that
1.The plaintiff’s Amended Originating Motion and Amended Summons dated 1 October 2019 and the plaintiff’s Summons dated 3 March 2020 are dismissed.
2.The first defendant is enjoined from taking any step to enforce the adjudication determination, dated 29 September 2019, and made by the second defendant (Adjudication Determination), until 4.00pm on 21 August 2020, or further order.
3.Order [1] above is stayed until 4.00pm on Tuesday 21 August 2020.
4.The plaintiff pay the first defendant’s costs of the proceeding, including the costs of and associated with the Amended Originating Motion and Amended Summons dated 1 October 2019 and the Summons of 3 March 2020, including all reserved costs, on a standard basis, such costs to be taxed in default of agreement.
5.All issues arising under or in relation to whether any damages are payable in relation to Undertakings referred to in orders dated 20 September 2019, 14 October 2019, 5 March 2020 or hereunder, and as to the quantum of any such damages, are reserved.
2