Adelaide Interior Linings Pty Ltd v Romaldi Constructions Pty Ltd - [2013] SASC 110

SUPREME COURT OF SOUTH AUSTRALIA
(Civil: Miscellaneous Appeal)
ADELAIDE INTERIOR LININGS PTY LTD v ROMALDI CONSTRUCTIONS PTY LTD
[2013] SASC 110
Judgment of The Honourable Justice Anderson
5 July 2013
CONTRACTS - BUILDING, ENGINEERING AND RELATED CONTRACTS - REMUNERATION - STATUTORY REGULATION OF ENTITLEMENT TO AND RECOVERY OF PROGRESS PAYMENTS - ADJUDICATION OF PAYMENT CLAIMS
EQUITY - EQUITABLE REMEDIES - INJUNCTIONS - INTERLOCUTORY INJUNCTIONS - INJUNCTIONS TO PRESERVE STATUS QUO OR PROPERTY PENDING DETERMINATION OF RIGHTS
The appellant in this matter appeals from an interlocutory decision of a judge of the District Court. The respondent was found liable by an adjudicator under the Building and Construction Industry Security of Payment Act 2009 (SA) (`the Act') to pay the appellant money owed for work completed. The respondent sought an injunction from the District Court preventing the appellant from obtaining the adjudication certificate. It is alleged the appellant is impecunious and unable to repay the monies if the respondent is successful in its claim for damages. The judge granted an injunction restraining the appellant from obtaining an adjudication certificate under the Act, finding there was a high level of likelihood the appellant was insolvent.
The issues in the appeal are whether the court had the power to grant an injunction, whether the judge, in granting the injunction, circumvented the process prescribed by the Act for parties to obtain outstanding payments and whether the basis for the injunction being granted was reasonable in the appellant's circumstances.
Held: Appeal allowed - the grant of the injunction circumvents the objects of the Act, and further the appellant is not found to have a high risk of insolvency - the injunction is discharged.
Building and Construction Industry Security of Payment Act 2009 (SA); Corporations Act 2001 (Cth), referred to.
Taylor Projects Group Pty Ltd v Brick Department Pty Ltd & Ors [2005] NSWSC 571; Project Blue Sky Inc & Ors v Australian Broadcasting Authority [1998] HCS 28, applied.
Asian Pacific Building Corporation Pty Ltd v Aircon Duct Fabrication Pty Ltd & Ors [2010] VSC 340; Over Fifty Mutual Friendly Society Ltd & Anor v Smithies & Ors [2007] NSWSC 291; Grosvenor Constructions (NSW) Pty Ltd (in administration) v Musico & Ors [2004] NSWSC 344; ABC v O'Neil (2006) 227 CLR 57, considered.

ADELAIDE INTERIOR LININGS PTY LTD v ROMALDI CONSTRUCTIONS PTY LTD
[2013] SASC 110
Miscellaneous Appeal
ANDERSON J.
Introduction

This is an appeal from an interlocutory decision of a judge of the District Court. The judge granted an injunction restraining the appellant from obtaining an adjudication certificate under the Building and Construction Industry Security of Payment Act 2009 (SA) (“the Act”).
Various matters raised on appeal focus on the issue of whether the judge, in granting the injunction, effectively circumvented the process prescribed by the Act for subcontractors to obtain payment of outstanding amounts.
The judge in weighing up the matters relevant to the exercise of his discretion as to whether to grant an injunction, was swayed by what he…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Keep reading for free

Create a free CaseChat account to read Adelaide Interior Linings Pty Ltd v Romaldi Constructions Pt... and more:

Read every judgment in full
Ask AI and get answers linked to paragraphs
See how each paragraph was cited in later cases
Download judgments as PDF or Word

Continue with Google

One click creates your free account or signs you in.

By continuing you agree to the Terms and Privacy Policy.

Details

Case: [2013] SASC 110
Decision Date: 5 July 2013

CaseChat Overview and Summary

The appellant, Adelaide Interior Linings Pty Ltd, and the respondent, Romaldi Constructions Pty Ltd, were involved in a construction project at Burc College, with the appellant engaged to supply and install internal and external linings. The appellant submitted a progress payment invoice in September 2012, which was not paid by the respondent. Consequently, the appellant issued a payment claim under the Building and Construction Industry Payments Act 2004 (SA), leading to an adjudication in the appellant’s favour in February 2013. When the appellant prepared to enforce the adjudication by obtaining a certificate, the respondent sought an interlocutory injunction to preserve the status quo and prevent the issuance of the certificate, arguing the appellant was approaching insolvency. The appellant appealed the District Court's decision to grant the injunction.

The primary legal issues before the court were whether the District Court correctly exercised its discretion in granting the injunction and whether the appellant was at high risk of insolvency. The court also considered whether the injunction circumvented the statutory regime established by the Building and Construction Industry Payments Act 2004 (SA). The court examined the statutory framework, the objectives of the Act, and the circumstances leading to the District Court's decision.

The court held that the District Court erred in granting the injunction as it circumvented the statutory regime intended to expedite the recovery of progress payments by subcontractors. The court found that the Act provides a clear pathway for the enforcement of adjudication determinations and that the District Court's injunction obstructed this process. Additionally, the court concluded that the evidence did not substantiate a high risk of insolvency for the appellant. The court noted that the respondent had not followed the proper judicial review process but instead sought to circumvent the statutory process through an interlocutory injunction. The court emphasised the importance of adhering to the statutory objectives and found that the injunction was not warranted based on the evidence presented.

The appeal was allowed, and the injunction was discharged. The court instructed the parties to present any further orders they sought. The court underscored the importance of adhering to the statutory processes designed to protect the cash flow of subcontractors in the building industry.

Orders

Orders of the court

Held: Appeal allowed - the grant of the injunction circumvents the objects of the Act, and further the appellant is not found to have a high risk of insolvency - the injunction is discharged.

Background

Background to the litigation

The Act establishes a procedure to ensure a person is able to recover a progress payment. Under s 13, a person can make a payment claim against a person that may be liable to make the payment. Under s 14, the person on whom a claim is served may reply to the claim by providing a payment schedule, indicating the amount (if any) of any claim the respondent proposes to make. If a scheduled amount is less than claimed, or a payment schedule is not provided (as under s 15), or the respondent fails to pay the whole or part of the scheduled amount by the due date (under s 16), the claimant can apply for an adjudication decision under s 17. Under s 20 the respondent may lodge a response to the claimant’s adjudication application within a certain time limit. Under s 24, if the respondent fails to pay the whole or part of the adjudicated amount within the time limit set by the adjudicator, the claimant may request an adjudication certificate and serve notice on the respondent of their intention to suspend carrying out further work under the contract. The adjudication certificate may then be filed as a judgment debt in court and is thus enforceable under s 25. If the respondent then commences proceedings to have the judgment set aside, it is not entitled to bring a cross claim against the claimant, to raise a defence in relation to matters arising under the contract or to challenge the adjudicator’s determination.Background facts The appellant was engaged by the respondent in July 2012 in relation to a construction project at Burc College. The contract involved the supply and installation of internal and external linings. A subcontract agreement was entered into. In September 2012 the appellant rendered to the respondent an invoice for progress payments in the sum of $48,454.97. Under the terms of the subcontract payment of the amount specified in the invoice was required by 22 October 2012. The respondent did not pay the money. Accordingly the appellant on 5 November 2012 served a payment claim on the respondent in respect of that invoice pursuant to s 13 of the Act. The respondent responded on 23 November 2012 by serving a payment schedule on the appellant pursuant to s 14 of the Act. The appellant then made an application for an adjudication on 11 December 2012 pursuant to s 17 of the Act and on 13 February 2013 a determination was issued by the adjudicator pursuant to s 22 of the Act. The adjudication was in favour of the appellant in the sum of $51,219.83 including costs but in addition to interest. Pursuant to the adjudication determination the respondent was required to pay the appellant the adjudicated amount within five business days. If payment did not occur within that time, the appellant was entitled to apply for an adjudication certificate pursuant to s 24 of the Act and then proceed to file that certificate as a judgment debt pursuant to the provisions of s 25 of the Act. It was at that point, before the adjudication certificate was provided, that the respondent sought in the District Court to restrain the appellant by seeking in its application an order pursuant to the Rules of Court, r 248 for preservation of property.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

ANDERSON J

The affidavit from Mr Struck is unchallenged by any answering affidavit and in my view the judge was wrong in concluding that there was a sufficiently high likelihood of insolvency so that he should grant the injunction. In my view the facts deposed to do not support this. Moreover, no fresh facts are alleged since late February or early March 2013 and the appellant continues to trade.Conclusion The appellant succeeds both on its arguments as to the circumvention of the policy of the legislation and also as to the conclusion of the judge that it was approaching insolvency. In relation to the other grounds it is my view that although the application was made under the rule relating to preservation of property and no remedy regarding an injunction was pleaded, the parties knew in the argument before the judge that an injunction was sought, and moreover the court possesses an inherent power to grant an injunction in any event. In my view nothing turns on this. Although the decision by the adjudicator appears to be declaratory because it, of itself, is not enforceable in the court, the process prescribed by the Act envisages that there will be an adjudication certificate. This makes the adjudication executory in the sense that it later becomes enforceable. In relation to the propriety of a stay of proceedings, in a matter under this Act, it is my view that in an appropriate case when a stay is sought where there are proceedings on foot for a judicial review, a stay may be the appropriate way in which to achieve justice between the parties. This is not such a case for the reasons I have stated. I would therefore allow the appeal and discharge the injunction. I will hear the parties as to any other orders sought.

Ratio Decidendi

Legal Principle Established

Established by: ANDERSON J

Finally, Ms Clark submitted that there was ample evidence before the District Court as to the high risk of insolvency of the appellant. She submitted there were a number of submissions the appellant could have made about its financial position to demonstrate it is not close to insolvency, and she submits in any event the balancing exercise carried out by the District Court was approached correctly. She submitted this discretionary decision should not be interfered with by appeal.Consideration In my view the arguments by the appellant can be confined to two main points, even though the appellant argues other matters. Because this is an appeal from an interlocutory decision of a judge in the District Court I intend to deal in some detail with the main points because I have formed the view that they dispose of the appeal in favour of the appellant in any event. The first main point is simply that the judge has circumvented the operation of the Act by his order granting an injunction. The objects of the Act make it clear that the legislation was intended to create a regime for the payments of amounts owing to subcontractors. The Act sets out very precise steps as to the pathway by which an adjudication certificate can be obtained. In this matter the appellant’s attempts in following the natural progress contemplated by the Act have been thwarted by the order made by the judge. At the point when the appellant was about to register the adjudication certificate, thus making it a judgment debt, the respondent chose to issue proceedings in the District Court. I have set out earlier the judge’s reasons at [6] of his judgment. His Honour refers to an appeal both in the first and second sentence. If His Honour is regarding the process set out under the Act as an appeal then in my view that is an error. Under s 22(5) there is provision for either the adjudicator himself or either of the parties to correct the determination in the event that there is a clerical mistake, error from an accidental slip or omission, a material miscalculation of figures or a defect of form. Outside of those matters there is no mechanism providing an appeal. The judge may be referring to an application for judicial review. Many of the cases he cites relate to judicial reviews. However, the respondent in this matter has elected not to proceed by way of judicial review but instead has instituted proceedings seeking an order for preservation of property and an injunction to prevent the issue of an adjudication certificate. The respondent, having elected not to challenge the validity of the adjudication, cannot be permitted to circumvent the objects of the Act by taking its own action to prevent the adjudication certificate from being issued. It appears that the judge’s reasoning is that the respondent, in instituting the action in the District Court, is being efficient in bringing all issues between the parties before the court. The Act has clearly stated objectives as to its intended operation. The duty of a court is to give the words of a statutory provision the meaning that the legislation is taken to have intended as per Project Blue Sky Inc & Ors v Australian Broadcasting Authority (1998) 194 CLR 355 at [78]. Counsel for the respondent acknowledged before the judge that the only basis for the application for an injunction was because of the perceived insolvency of the appellant. His Honour deals with this in his reasons at [12]:[12]On behalf of the plaintiff, Ms Clark acknowledged that, were it not for the insolvency question, the plaintiff would not be in a position to make the application it has. Ms Clark acknowledged that a principal purpose of adjudications under the Act is to assist sub-contractors’ cash flows. The mechanism of adjudication says to builders in effect “pay now, argue later”. Ms Clark submits that, on the facts of this case, the “argue later” component would become illusory. There will be no point in arguing later because the defendant will be insolvent. The plaintiff will not be able to recover any monies it now pays pursuant to the adjudication.