Ceerose Pty Ltd v A-Civil Aust Pty Ltd

Case •

[2022] NSWSC 1487

•

02 November 2022

No judgment structure available for this case.

Supreme Court


New South Wales

  • Amendment notes
Medium Neutral Citation: Ceerose Pty Ltd v A-Civil Aust Pty Ltd [2022] NSWSC 1487
Hearing dates: 21 October 2022
Date of orders: 2 November 2022
Decision date: 02 November 2022
Jurisdiction:Equity - Technology and Construction List
Before: Rees J
Decision:

Refuse application to extend interim injunction.

Catchwords:

BUILDING AND CONSTRUCTION – adjudication determination – subcontractor entitled to some $190,000 – adjudicator makes finding for which neither contended – contractor seeks to quash determination and Grosvenor or Brodyn stay –suggested serious question has only modest prospects where no suggestion that finding was wrong and finding likely irrelevant – evidence to support stay slight – reluctant to continue interim injunction to permit contractor to obtain evidence to support stay in absence of serious question to be tried as to jurisdictional challenge – balance of convenience did not favour extension of injunction as, although the monies were in Court, the subcontractor was deprived of cashflow.

Legislation Cited:

Building and Construction Industry Security of Payment Act 1999 (NSW), ss 3, 12, 25, 32, 34

Cases Cited:

Acciona Infrastructure Australia Pty Ltd v Holcim (Australia) Pty Ltd [2020] NSWSC 1330

Anderson Street Banksmeadow Pty Ltd v JCM Contracting Pty Ltd [2014] NSWSC 102

A-Tech Australia Pty Ltd v Top Pacific Construction Aust Pty Ltd (No 2) [2019] NSWSC 624

Australian Broadcasting Corporation v O’Neill (2006) 227 CLR 57; [2006] HCA 46

Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618

Bellerive Homes Pty Ltd v FW Projects Pty Ltd [2018] NSWSC 1435

Brodyn v Davenport (2004) 61 NSWLR 421; [2004] NSWCA 394

Grosvenor v Musico [2004] NSWSC 344; (2005) 21 BCL 266

Hakea Holdings Pty Limited v Denham Constructions Pty Ltd [2016] NSWSC 1120

Maxcon Constructions Pty Ltd v Vadasz (2018) 264 CLR 46; [2018] HCA 5

McNab Building Services Pty Ltd v Demex Pty Ltd [2022] NSWSC 1441

Mineralogy Pty Ltd v Sino Iron Pty Ltd [2016] WASCA 105

Multiplex Contractors Pty Ltd v Luikens [2003] NSWSC 1140

MZAPC v Minister for Immigration & Border Protection [2021] HCA 17; (2021) 390 ALR 590

Nathanson v Minister for Home Affairs [2022] HCA 26; (2022) 403 ALR 398

Phoenix Builders Pty Ltd v Deca Australia Pty Ltd [2021] NSWSC 581

Probuild Constructions (Aust) Pty Ltd v DDI Group Pty Ltd (2017) 95 NSWLR 82; [2017] NSWCA 151

Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd (2018) 264 CLR 1; [2018] HCA 4

Samsung Electronics Co Ltd v Apple Inc (2011) 217 FCR 238; [2011] FCAFC 156

Shell Refining (Australia) Pty Ltd v AJ Mayr Engineering Pty Ltd [2006] NSWSC 94

Southern Han Breakfast Point Pty Ltd (in liq) v Lewence Construction Pty Ltd (2016) 260 CLR 340; [2016] HCA 52

TFM Epping Land Pty Ltd v Decon Australia Pty Ltd [2020] NSWCA 118

Trysams Pty Ltd v Club Constructions (NSW) Pty Ltd [2007] NSWSC 941

Trysams Pty Ltd v Club Constructions (NSW) Pty Ltd [2008] NSWSC 399

Warner-Lambert Co LCC v Apotex Pty Ltd [2014] FCAFC 59; (2014) 311 ALR 632

Texts Cited:

New South Wales Legislative Assembly, Parliamentary Debates (Hansard), 12 November 2022 at 6542

Category:Procedural rulings
Parties: Ceerose Pty Ltd (Plaintiff)
A-Civil Aust Pty Ltd (First Defendant)
Representation:

Counsel:
Mr S Robertson SC / Mr M Keene (Plaintiff)
Mr L Gor (Defendant)

Solicitors:
Salim Rutherford Lawyers (Plaintiff)
M&A Lawyers (First Defendant)
File Number(s): 2022/307139

Judgment

  1. HER HONOUR: This is an application to extend an interim injunction granted on the recent commencement of these proceedings. The first defendant, A-Civil Aust Pty Ltd, was restrained from taking steps to enforce a judgment entered in the District Court of New South Wales, based on an adjudication certificate filed under section 25 of the Building and Construction Industry Security of Payment Act 1999 (NSW). In addition, a bank was restrained from acting on a garnishee order in respect of the bank accounts of the plaintiff, Ceerose Pty Ltd.

  2. This application was argued at the end of a busy Commercial and Technology & Construction List, including after hours. Little time was thereby saved as, given the lateness of the hour, the transcript has only now come to hand. Without transcript, it was not possible to give proper consideration to the parties’ submissions.

  3. Ceerose relied on the evidence of its solicitor, Stephanie Saad, which comprised four lever-arch folders. A-Civil tendered the adjudication certificate. Notwithstanding the bulk of this material, only a partial picture emerged. No doubt the parties will adduce further evidence in this or other proceedings such that the following description of the facts may well be superseded.

FACTS

  1. A-Civil undertakes excavation, demolition and earthworks. The directors and shareholders of A-Civil are George Matta and Salim Matta. The directors’ father, Nasser Matta, is also involved in the company’s operations.

  2. From September 2021 to December 2021, Ceerose and A-Civil entered into contracts in respect of three building sites: in Alexandria, York Street Sydney and Elizabeth Bay.

Subcontract

  1. In March 2022 the parties entered into a second contract in respect of the Alexandria site. Whilst A-Civil had earlier contracted to undertake the demolition work, A-Civil now agreed to undertake excavation work for a subcontract sum of $2,840,210. It is this contract which brings the matter before the Court.

  2. The contract recorded Ceerose as the Main Contractor, which had entered into a head contract with the Principal, Alexa Development Pty Ltd. A-Civil was the Subcontractor. The contract incorporated the General Conditions of Subcontract for Design and Construct AS 4903-2000, of which Clause 5 dealt with Security. Sub-clause 5.1, together with Item 19, provided for security in the form of retention monies up to 5% of the subcontract sum. Clauses 5.2 and 5.4 provided:

5.2   Recourse

A party may have recourse to security:

(a)   Where the amount due to that party under the Subcontract or otherwise remains unpaid after the time for payment; and

(b)   In respect of any Claim to payment (liquidated or otherwise) that party may have against the other under the Subcontract or otherwise,

On the giving of written notice to the other party.

…

5.4   Reduction and release

Upon the issue of the certificate of practical completion under the head contract, a party’s entitlement to security … shall be reduced by the percentage or amount in Item 19(f) or 20(d) as applicable [Item 19(f) was blank and Item 20(d) was “Nil”], and the reduction shall be released and returned within 28 days to the other party.

A party’s entitlement otherwise to security shall cease 28 days after final certificate is issued under the head contract.

Upon a party’s entitlement to security ceasing, that party shall release and return forthwith the security to the other party.

  1. It appears that commercial relations between Ceerose and A-Civil rapidly unravelled. On 30 May 2022, A-Civil made a payment claim in respect of the York Street site in the amount of $3,556,466.80. On 31 May 2022, A-Civil made a payment claim in respect of the Elizabeth Bay site for some $360,000. On 2 June 2022, Ceerose served a payment schedule in respect of the Elizabeth Bay site in the amount of nil. On 14 June 2022, Ceerose served a payment schedule in respect of the York Street site, stating that Ceerose was owed $895,565.50.

  2. On 17 June 2022, A-Civil lodged an adjudication application in respect of the Elizabeth Bay site. On 21 June 2022, Ceerose served an adjudication response. On 28 June 2022, A-Civil lodged an adjudication application in respect of the York Street site.

  3. On 1 July 2022, Ceerose terminated the contracts for both the Alexandria and York Street sites.

  1. In respect of the Alexandria site, Ms Saad was instructed by Ceerose’s project manager, Jonathan Bayeh, that the value of demolition works remaining was $13,750, with the cost to complete these works estimated to be $62,100. In respect of the excavation subcontract, Mr Bayeh advised that $1,692,119.45 works remained outstanding, with the cost to complete such works estimated to be $2,544,506.

  2. In respect of the York Street site, Ms Saad was instructed by Ceerose’s project manager, Nigel Roper, that some $854,876.30 of works remained to be done, with the cost to complete these works estimated to be $2,150,759.

  1. On 18 July 2022, the adjudicator appointed to determine the adjudication application in respect of the York Street site requested further submissions in respect of amendments which had been made to the contract. Further submissions were provided by the parties from 18 to 20 July 2022, together with statutory declarations of Roy Massoud for Ceerose and Nasser Matta for A-Civil. Ms Saad is informed that Nasser Matta’s statutory declaration was false.

Payment claim

  1. On 29 July 2022, A-Civil made a payment claim in respect of the excavation subcontract for the Alexandria site in the amount of $709,940.74. The payment claim included a claim for Contract Works in the sum of $565,522.95, two variations totalling $28,840, and release of retention monies in the sum of $115,577.79.

  2. On 12 August 2022, Ceerose served a payment schedule in respect of both the Alexandria and York Street sites. In respect of the Alexandria site, Ceerose claimed to be owed $3,221,374.40. Ceerose stated that A-Civil was not entitled to return of the retention monies as it had not satisfied the contractual requirement for release of the retention monies. Ceerose set out Clause 5.4 of the subcontract and observed that A-Civil had not satisfied the definition of Practical Completion. Rather, Ceerose had “incurred costs, expenses and loss and damages significantly in excess of the retention sum including in engaging others to complete its works under the Subcontract.” Ceerose claimed to be entitled to recourse to the retention monies under Clause 5.2.

Other proceedings

  1. As adjudication determinations were issued in respect of the Elizabeth Bay and York Street sites, Ceerose commenced proceedings in this Court, which I understand sought similar relief to that sought in these proceedings. At the hearing of this application, A-Civil complained that final proceedings have yet been commenced in respect of either site; nor had Ceerose progressed either proceeding with due dispatch. Ceerose did not demur. Precise details in respect of these proceedings were, however, not in evidence.

Determination

  1. On 26 August 2022, A-Civil lodged an adjudication application in respect of the Alexandria site, joining issue with Ceerose’s contentions in respect of the retention monies. On 6 September 2022, Ceerose provided an adjudication response.

  2. On 27 September 2022, the adjudicator issued a determination. The adjudicator identified the four issues in dispute, being amounts claimed in respect of the Contract Works, variations, retention monies and deductions claimed by Ceerose. The adjudicator valued A-Civil’s claim in respect of Contract Works at $38,218.12 and, in respect of variations, at $4,835. The adjudicator valued the deductions claimed by Ceerose at nil.

  3. In respect of the claim for the release of retention monies, the adjudicator set out A-Civil’s claim, Ceerose’s reasons for assessing this item as nil, and the submissions made by the parties in their respective adjudication application and adjudication response. The adjudicator then summarised the import of Clause 5.4 and continued:

112   Clause 5.4 of the Subcontract links the Subcontractor’s entitlement to security to practical completion and issue of the final certificate under the head contract which I find is void for contracting out of the Act. Notwithstanding, the Subcontract has been terminated and, therefore, the Claimant is entitled to the release of its security.

113   Therefore, I value the claim for retention at $115,577.79.

  1. In total, the adjudicator concluded that A-Civil was entitled to be paid $152,700.79 (plus GST). On 30 September 2022, the adjudicator served his determination. A-Civil’s solicitors provided Ceerose’s solicitors with a calculation of the amount then owing, including interest and each party’s share of the adjudicator’s fees and expenses, totalling $189,490.36. On 6 October 2022, Ceerose’s solicitors sought A-Civil’s agreement not to take any steps to enforce the determination pending resolution of the two Supreme Court proceedings and resolution of substantive proceedings that Ceerose intended to commence against A-Civil, subject to Ceerose paying the adjudicated amount into its solicitor’s trust account. A-Civil did not agree to this proposal.

  2. On 11 October 2022, an adjudication certificate was issued in the amount of $189,095.53. Judgment was entered in the District Court in the sum of $189,297.53. On 12 October 2022, a garnishee order was made in the District Court.

These proceedings

  1. On 14 October 2022, Ceerose commenced these proceedings before the Duty Judge. Upon Ceerose giving the usual undertaking as to damages and an undertaking to the Court to pay the judgment sum into Court, Stevenson J made orders restraining the bank from acting on the garnishee order and restraining A-Civil from enforcing the judgment, such restraints to expire at 5.00 pm on 21 October 2022. (The monies have since been paid into Court.)

  2. A-Civil also appeared before the Duty Judge. The transcript records that its counsel agreed to these orders as an interim regime in order to understand the substantial amount of material which had been served “late last night”. However, A-Civil wished to revisit the matter once counsel had had an opportunity to review the material.

  3. As to final relief sought in these proceedings, Ceerose sought an order in the nature of certiorari quashing the adjudication determination on the basis that the adjudicator denied the parties procedural fairness when addressing the claim for retention monies. The Technology and Construction List Statement pleads at [18]-[19]:

18   The basis of the Adjudicator’s decision in respect of A-Civil’s claim for retention was the adjudicator’s conclusion that clause 5.4 of the Contract was an invalid pay when paid provision (Determination at [112]).

19   In respect of the Adjudicator’s conclusion that clause 5.4 of the Contract was an invalid pay when paid provision (the Error):

(a)   that was not a conclusion sought by either party in the adjudication;

(b)   the Adjudicator gave no advance notice that he was considering reach[ing] that conclusion;

(c)   the conclusion was reached in denial of procedural fairness.

  1. In addition, Ceerose sought a “Brodyn/Grosvenor stay” on the basis that it had a sufficiently arguable case that, on a final basis, none of the adjudicated amount will be found owing to A-Civil. The particulars in support of this contention referred not only to the payment schedule in respect of the Alexandria site, but also in respect of the York Street and Elizabeth Bay sites. Further, Ceerose asserted that it was ready, willing and able to commence final proceedings to vindicate its rights and, if the adjudicated amount was paid to A-Civil, there was a significant, material and sufficient likelihood that its final rights would be destroyed or impaired with a result that the interim rights held by A-Civil would become, in effect, final rights.

PRINCIPLES

  1. On an application for an interlocutory injunction, the question is whether the plaintiff has made out a prima facie case and whether the balance of convenience favours the grant of the injunction. As to whether there is a prima facie case, a plaintiff does not need to show that it is more probable than not that at trial the plaintiff will succeed. It is sufficient to show a sufficient likelihood of success to justify, in the circumstances, the preservation of the status quo pending trial. How strong the probability needs to be depends upon the nature of the rights the plaintiff asserts and the practical consequences likely to flow from the orders the plaintiff seeks: Mineralogy Pty Ltd v Sino Iron Pty Ltd [2016] WASCA 105 at [87].

  2. The second question is whether the inconvenience or injury which the plaintiff would be likely to suffer if an injunction were refused outweighs, or is outweighed by, the injury which the defendant would suffer if an injunction was granted: Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618; Australian Broadcasting Corporation v O’Neill (2006) 227 CLR 57; [2006] HCA 46. Whether an applicant for an interlocutory injunction has made out a sufficient prima facie case and whether the balance of convenience favours the grant of such relief are related, not independent, questions: Warner-Lambert Co LCC v Apotex Pty Ltd [2014] FCAFC 59; (2014) 311 ALR 632 at [70]; Mineralogy v Sino Iron at [87].

  3. Finally, in considering whether to grant an interlocutory injunction, the Court is entitled to take into account the apparent strength of the parties' substantive cases, as noted by Dowsett, Foster and Yates JJ in Samsung Electronics Co Ltd v Apple Inc (2011) 217 FCR 238; [2011] FCAFC 156 at [67]:

… when considering whether to grant an interlocutory injunction, the issue of whether the plaintiff has made out a prima facie case and whether the balance of convenience and justice favours the grant of an injunction are related inquiries. The question of whether there is a serious question or a prima facie case should not be considered in isolation from the balance of convenience. The apparent strength of the parties’ substantive cases will often be an important consideration to be weighed in the balance … [citations omitted]

  1. The application of these principles to cases involving the Act was helpfully summarised in Hakea Holdings Pty Limited v Denham Constructions Pty Ltd [2016] NSWSC 1120 by Ball J at [4]-[6], and particularly at [6]:

The factors that the court will take into account in balancing the competing policies include the following:

(a)   the strength of the applicant’s claim: see Veolia Water Solutions v Kruger Engineering Australia Pty Ltd (No 3) [2007] NSWSC 459 at [73]; Romaldi Constructions Pty Ltd v Adelaide Interior Linings Pty Ltd (No 2) [2013] SASCFC 124 at [95] (where Blue J (with whom Sulan and Stanley JJ agreed) described the factor as “an important criterion”); RJ Neller Building Pty Ltd v Ainsworth [2008] QCA 397 at [19], [36] per Keane JA (with whom Fraser JA and Fryberg J agreed);

(b)   the basis of the applicant’s claim. Obviously, an important factor is whether the applicant challenges the adjudicator’s determination. Another important factor is whether the applicant challenges the debt the subject of the adjudication determination. The absence of a challenge to the debt is a powerful factor against the grant of a stay: Romaldi at [110];

(c)   the likelihood that the contractor will be unable to repay the amount the subject of the determination. It is accepted in this context that the policy of the Act is generally to place the risk of insolvency on the applicant: R J Neller at [40]. However, where there are strong reasons for believing that the applicant will be unable to recover any amount paid, that fact favours granting a stay: Veolia at [36]-[39];

(d)   the risk that the contractor will become insolvent if a stay is granted: Romaldi at [101].

  1. As Ball J’s summary makes plain, the purpose of the Act is not unimportant. The object of the Act (section 3) is to ensure that any person who undertakes construction work under a construction contract is entitled to receive, and is able to recover, progress payments. A central tenet of the Act is a right to progress payments. The Act establishes a procedure for such a person to make a payment claim, the person from whom payment is sought to respond by a payment schedule, with any disputed claim to be determined by an adjudicator. The parties are at liberty to resolve their contractual entitlements on a final basis elsewhere, with the Act operating on a “pay-now-argue-later” basis. The Act is designed to provide an informal scheme to ensure that subcontractors can obtain cash flow: Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd (2018) 264 CLR 1; [2018] HCA 4 at [39], [43], [47] (per Kiefel CJ, Bell, Keane, Nettle and Gordon JJ). The legislation was designed to “reform payment behaviour in the construction industry” by “stamp[ing] out the practice of developers and contractors delaying payment to subcontractors and suppliers”: New South Wales Legislative Assembly, Parliamentary Debates (Hansard), 12 November 2022 at 6542; Southern Han Breakfast Point Pty Ltd (in liq) v Lewence Construction Pty Ltd (2016) 260 CLR 340; [2016] HCA 52 at [3]-[4] (per Kiefel, Bell, Gageler, Keane and Gordon JJ).

SERIOUS ISSUE TO BE TRIED

  1. Ceerose submitted there was a serious issue to be tried, both in respect of its claim for an order in the nature of certiorari and its claim for a “Brodyn/Grosvenor stay”.

  2. As to the first issue, Ceerose submitted that it was a denial of natural justice for the adjudicator to decide the case on a basis other than that advocated by the parties, without notifying them of his intention to do so and permitting them to be heard: Acciona Infrastructure Australia Pty Ltd v Holcim (Australia) Pty Ltd [2020] NSWSC 1330 at [53] (per Hammerschlag J, as his Honour then was). The adjudicator had determined that Clause 5.4 was a “pay when paid” provision, rendered of no effect by section 12 of the Security of Payment Act. Neither party advocated for such a conclusion. Further, the denial of procedural fairness met the threshold of “materiality” in order to constitute appealable jurisdictional error – or at least there was a serious question that it did – as “materiality” had recently been explained by the High Court in Nathanson v Minister for Home Affairs [2022] HCA 26; (2022) 403 ALR 398 (being “whether the decision that was in fact made could have been different” as a “matter of reasonable conjecture”) at [32]-[33] (per Kiefel, Keane and Gleeson JJ), [84] (per Gordon J), citing MZAPC v Minister for Immigration & Border Protection [2021] HCA 17; (2021) 390 ALR 590.

  3. To this, A-Civil submitted that the question to be tried could not be described as serious. The adjudicator did not conclude that Clause 5.4 was an invalid “pay when paid provision”; if anything, the adjudication determination referred to section 34 of the Act, entitled “No contracting out”. Even if the adjudicator was taken to have so concluded, any denial of procedural fairness must be material to the decision under challenge, that is, there were submissions which could have been put that, as a matter of reality and not mere speculation, would have affected the determination: Probuild Constructions (Aust) Pty Ltd v DDI Group Pty Ltd (2017) 95 NSWLR 82; [2017] NSWCA 151 at [99]-[101] (per McColl JA, with whom Beazley ACJ and Macfarlan JA agreed); Anderson Street Banksmeadow Pty Ltd v JCM Contracting Pty Ltd [2014] NSWSC 102 at [47] (per Ball J).

  4. As McDougall J observed in Trysams Pty Ltd v Club Constructions (NSW) Pty Ltd [2008] NSWSC 399 at [65]:

“… if the contractual provisions had the effect of denying Club’s entitlement to the retention fund, simply because no final certificate or special certificate had been issued, it might well be correct to say that those provisions restricted, or had the effect of restricting, the operation of the Act in relation to a final payment claim that included a claim for the retention sum. Clearly, the legislature intended that adjudicators should have power to determine such claims.”

  1. In doing so, his Honour followed Trysams Pty Ltd v Club Constructions (NSW) Pty Ltd [2007] NSWSC 941 at [93] (per Hammerschlag J). Here, A-Civil submitted that the problem was more acute, as certification was required under the head contract, not the subcontract. Had the adjudicator sought submissions from the parties, his decision as to invalidity of Clause 5.4 would have been reinforced by Maxcon Constructions Pty Ltd v Vadasz (2018) 264 CLR 46; [2018] HCA 5, where the High Court concluded that the payment of a retention sum, dependent on certification under a separate head contract, was a pay when paid provision which fell foul of the equivalent South Australia legislation: at [1], [2], [6], [7], [11], [13], [16], [17], [23]-[25] and [27] (per Kiefel CJ, Bell, Keane, Nettle and Gordon JJ).

  2. As to the second issue, Ceerose observed that its rights against A-Civil under the contract had yet to be finally determined: Security of Payments Act, section 32. As Einstein J concluded in Grosvenor v Musico [2004] NSWSC 344; (2005) 21 BCL 266, “where there is a certainty that the defendants’ rights will otherwise be rendered nugatory, and that it will suffer irreparable prejudice, the proper and principled exercise of the Court’s discretion is to grant a stay”: at [32]. To this, A-Civil submitted that there was a very high threshold for irreparable prejudice, given the legislative objections of the Act: TFM Epping Land Pty Ltd v Decon Australia Pty Ltd [2020] NSWCA 118 at [22], [25], [35], [50], [72], [78], [80], [81] and [85]; A-Tech Australia Pty Ltd v Top Pacific Construction Aust Pty Ltd (No 2) [2019] NSWSC 624 at [10], [14], [19], [25]-[28] (per Parker J); Bellerive Homes Pty Ltd v FW Projects Pty Ltd [2018] NSWSC 1435 at [48], [59]-[60], [62], [64], [66] and [68] (per N Adams J); Phoenix Builders Pty Ltd v Deca Australia Pty Ltd [2021] NSWSC 581 at [11] and [19]–[21] (per Rees J). It was submitted that Ceerose did not meet this threshold.

Conclusion

  1. As to whether there is a serious issue to be tried in respect of Ceerose’s claim for an order in the nature of certiorari, neither party submitted to the adjudicator that Clause 5.4 of the subcontract was invalid. Prima facie, making a finding which neither party asked the adjudicator to make, and in the absence of giving the parties an opportunity to be heard, is a denial of procedural fairness which may require the adjudication determination to be set aside: McNab Building Services Pty Ltd v Demex Pty Ltd [2022] NSWSC 1441 at [9] (per Black J and the authorities there cited). Whether the adjudication determination will be set aside depends upon whether the denial of procedural fairness was material, as that requirement has been elucidated in the authorities referred to by the parties.

  2. Turning to whether there is a serious question to be tried that the adjudicator’s failure to seek submissions from the parties on this issue was material, that is, whether as a matter of reasonable conjecture he would have made a different decision, I consider that Ceerose faces some difficulties. In this regard, whether the adjudicator made his finding as to the invalidity of Clause 5.4 by reason of section 34 of the Act – “No contracting out” – or section 12 – “Effect of “pay when paid” provisions” – does not much matter, for two reasons.

  3. First, Ceerose did not point to any particular reason why that finding was wrong, presumably in light of the binding High Court authorities cited by A-Civil.

  4. Second, as was repeatedly submitted by Ceerose, the adjudicator’s finding was irrelevant. On one view of it, Clause 5.4 benefited A-Civil by reducing the retention monies which could be held once practical completion was reached, with the excess to be remitted to the subcontractor. More importantly, the adjudicator was not being asked to determine A-Civil’s entitlement to a progress payment in context of either practical completion or the issue of a final certificate under the head contract. Rather, he was determining A-Civil’s entitlement in the context of early termination of the subcontract.

  5. As I read it, the first sentence of [112] of the adjudication determination is something of an aside, addressed to the first and second paragraphs of Clause 5.4. It was not the basis on which the adjudicator considered that A-Civil was entitled to the retention monies. Rather, the reason for his decision was the second sentence of [112], that is, A-Civil’s right to the retention monies followed termination of the subcontract, in respect of which the parties were in furious agreement. The subject of termination was an important topic in both parties’ submissions, including as to precisely how the termination had come about, who had terminated the contract and whether Ceerose’s purported termination of the subcontract was intentionally wrongful or well-founded.

  6. Where the subcontract was terminated and, thus, A-Civil’s payment claim was a final payment claim, the adjudicator determined A-Civil’s entitlement to payment in respect of the Contract Works and the variations. The adjudicator also determined that Ceerose’s entitlement to counter-payments was nil. In the result, the adjudicator considered that this gave rise to an entitlement by A-Civil to the release of the security. Whether the adjudicator was right or wrong in this regard, it was a matter on which he received submissions from both parties. Ceerose does not suggest that it was denied procedural fairness on this score.

  7. Whilst Ceerose may satisfy a Court on a final basis that the first sentence of [112] of the adjudication determination means something else, I am entitled to take into account the apparent strength of Ceerose’s claim for an order in the nature of certiorari, which I consider to be very modest.

  8. As to the application for a Brodyn/Grosvenor stay, the evidence before the Court was slight. The issued share capital of A-Civil is $2. Perhaps noteworthy, the company has been in existence for eight years. Nasser Matta had a bankruptcy petition filed against him in 2012, which was dismissed in 2013. He was said to be “the director of a string of deregistered companies”. As Nasser Matta is not a director of A-Civil, this evidence is of little assistance. The fact that a bankruptcy petition filed against him was dismissed a decade ago falls into the same category. Nor is there anything sinister per se with being a director of companies which have been de-registered.

  9. Ms Saad referred to two other companies, Rex Street Properties Pty Ltd and Eastwood Road Properties Pty Ltd, of which George Matta and Saleem Matta are directors and shareholders. Both companies own real property. The relevance of this is unclear.

  10. Finally, Ms Saad said on information and belief – in a section of her affidavit perhaps unfortunately entitled “Fanciful claim submitted by A Civil” – that Nasser Matta’s statutory declaration provided in the York Street adjudication was false. The basis of this serious allegation was not stated. Further, A-Civil had submitted a further payment claim in respect of the Elizabeth Bay site “where it plainly has no entitlement” to the amounts claimed. The inference the Court was asked to draw was that A-Civil “is in financial difficulties and … is advancing fanciful claims with a view to doing everything possible to get cash in the door.” I attach little weight to this evidence, to which A-Civil could rightly have objected.

  11. Ceerose does not suggest that it is entitled to a Grosvenor stay on the basis of the evidence presently to hand but, rather, submitted that there was a serious issue to be tried as to whether it is entitled to such a stay, including having regard to further evidence it may be able to obtain through the compulsory processes of the Court.

  12. I am troubled by the continuation of interim restraints to prevent the timely payment of the subcontractor until the contractor has explored the possibility that such a stay may be available, particularly in the absence of a strong prima facie case as to the veracity of the adjudicator’s determination. As Hodgson JA observed in Brodyn v Davenport (2004) 61 NSWLR 421; [2004] NSWCA 394, a judgment under section 25 of the Act can be stayed, “although the policy of the Act that progress payments be made would be a discretionary factor weighing against such relief”, where the possibility that the subcontractor’s financial difficulties had been caused by failure to make the progress payment good militates strongly against the granting of such a stay: at [85]-[88].

  13. I note that the policy underlying the Act is that contractors such as A-Civil should have their bills paid promptly as cash flow is the life blood of the industry: Shell Refining (Australia) Pty Ltd v AJ Mayr Engineering Pty Ltd [2006] NSWSC 94 at [14] (per Bergin J). The monies which A-Civil is prima facie entitled to be paid is some $190,000. In addition, it would appear that Ceerose is contesting its obligation to pay the adjudication determination in respect of the Elizabeth Bay and York Street sites. It would be unsurprising in these circumstances if A-Civil was experiencing cashflow difficulties. It will likely be difficult, however, to separate the cashflow difficulties caused by Ceerose’s non-payment and those referable to A-Civil’s underlying business. As such, I have reservations about both issues proffered by Ceerose.

BALANCE OF CONVENIENCE

  1. Ceerose submitted that the balance of convenience supported the continuation of the interim injunctions in circumstances where A-Civil’s position was protected as a consequence of the amount of the determination being paid into Court, together with the usual undertaking as to damages and an undertaking to prosecute the proceedings with due expedition. There was no evidence that A-Civil would suffer any prejudice by the continuation of the injunction. There was said to be a risk that the proceedings will be rendered nugatory if Ceerose succeeded in setting aside the adjudication determination and judgment debt. Ceerose also sought its costs of the application to extend the interim injunction.

  2. A-Civil submitted that the balance of convenience favoured the payment of the adjudicated amount, having regard to the object and purpose of the Act. Further, A-Civil submitted that Ceerose had not commenced substantive proceedings to vindicate its rights with respect to any of the three sites, notwithstanding its assertion that it was ready willing and able to do so. Finally, A-Civil observed that Ceerose did not challenge any other part of the adjudication determination. As such, even if the retention sum were excluded from the adjudication determination, then Ceerose would be obliged to pay $37,123.

Conclusion

  1. The judgment sum has been paid into Court. The problem is that the judgment sum has not been paid to A-Civil and thus cannot be used in the day-to-day operations of its business. Such a result is at odds with the purpose of the Act. Having regard to the apparent strength of Ceerose’s substantive case, together with the deprivation of subcontractor of its cashflow, I consider the balance of convenience favours the monies being paid to A-Civil in accordance with the “pay now, argue later” philosophy of the Act: Multiplex Contractors Pty Ltd v Luikens [2003] NSWSC 1140 at [96] (per Palmer J).

Orders

  1. For these reasons, I make the following orders:

  1. Refuse to extend the interim injunction in Order 4 made on 14 October 2022.

  2. Order the plaintiff to pay the first defendant’s costs of the application to extend the interim injunction.

  3. Stand the matter over for further directions before the Technology & Construction List Judge on 11 November 2022.

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Amendments

07 November 2022 - [36] - sentence 3 - 'arbitrator' amended to 'adjudicator'.

Decision last updated: 07 November 2022

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