Duzenli Developments Pty Ltd ACN 623 852 031 trading as Zen Group Constructions v Benuga Pty Ltd ACN 001 131 997

[2020] NSWSC 1667

Supreme Court

New South Wales

Medium Neutral Citation:

Duzenli Developments Pty Ltd ACN 623 852 031 trading as Zen Group Constructions v Benuga Pty Ltd ACN 001 131 997 [2020] NSWSC 1667

Hearing dates:

19 November 2020

Date of orders:

23 November 2020

Decision date:

23 November 2020

Jurisdiction:

Equity - Duty List

Before:

Slattery J

Decision:

Interlocutory injunction granted restraining the defendant from entering the site until resolution of the proceedings before NCAT. Costs of the interlocutory contest shall be each party’s cost in the proceedings. Liberty to apply to the duty judge granted.

Catchwords:

EQUITY – Equitable remedies – Injunctions – serious question to be tried – balance of convenience – plaintiff builder executes building work under a building contract with the defendant upon land owned by the defendant – plaintiff’s building work does not reach practical completion – disputes break out about allegedly defective work and the rate of completion of the work – defendant purports to terminate the contract and to exclude the builder from the site – the plaintiff commences proceedings in the NSW Civil and Administrative Tribunal (NCAT) seeking remedies under the Home Building Act1989 – NCAT gives directions, allowing both parties access to the site with their experts to prepare for a hearing before NCAT – the defendant seeks possession of the site on the basis that the plaintiff’s license to be on the site has been terminated – whether the defendant should be let into possession – whether the parties should both be excluded from the site pending resolution of the NCAT proceedings.

Legislation Cited:

Civil and Administrative Tribunal Act 2013, Schedule 4, s 5(3)

Home Building Act 1989, ss 18BA, 48MA, 48O(1)(c)

Supreme Court Act 1970, s 66(4)

Cases Cited:

Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199

Chermar Productions Pty v Prestest Pty Ltd (Supreme Court of Victoria (VIC), 5 May 1989, unrep)

Cowell v Rosehill Racecourse Co Ltd (1937) 56 CLR 605

Doherty v Allman & Dowden (1878) 3 App Cas 709

Francome v Mirror Group Newspapers Ltd [1984] 2 All ER 408

Graham H. Roberts Pty Ltd v Maurbeth Investments Pty Ltd [1974] 1 NSWLR 93

Linga v C & N Constructions Pty Ltd [2012] NTSC 8

Sigma Constructions (VIC) Pty Ltd v Maryvell Investments Pty Ltd [2004] VSCA 242

Texts Cited:

RP Meagher, JD Heydon, MJ Leeming, Meagher, Gummow & Lehane’s Equity: Doctrines and Remedies (5th ed, 2015, LexisNexis Butterworths)

Category:

Consequential orders

Parties:

Plaintiff: Duzenli Developments Pty Ltd ACN 623 852 031 trading as Zen Group Constructions
Defendant: Benuga Pty Ltd ACN 001 131 997

Representation:

Counsel:
Plaintiff: J. Mack
Defendant: T. Davie

Solicitors:
Plaintiff: Claudette Gazi, Eden King lawyers
Defendant: Peter Merity, Peter Merity Solicitors

File Number(s):

2020/324324

Publication restriction:

No

Judgment

1. The plaintiff, Duzenli Holdings Pty Limited (“the builder”), has until recently executed building work upon land in Bellevue Hill (“the site”), owned by the defendant, Benuga Pty Ltd (“the owner”). Disputes between the owner and builder about their building contract (“the contract”) under the Home Building Act 1989 are pending before the New South Wales Civil and Administrative Tribunal (“NCAT” or “the Tribunal”).

2. On 2 November 2020, the owner purported to terminate the contract and lock the builder out of the property. The builder contends this was an invalid termination, that the contract is still on foot and that the builder is entitled to possession of the site. The builder commenced proceedings in the Tribunal on 2 November 2020, disputing that the contract had been validly terminated and seeking payment of monies the builder claims are due to it under the contract.

3. On 13 November 2020, the Tribunal made orders for the parties to arrange to have interim access to the site for their experts to gather evidence. The builder says that the Tribunal made these orders so the parties’ experts could inspect the building works to assist their preparation for the Tribunal hearing.

4. The builder commenced these proceedings by Summons on 12 November 2020 in the Equity duty list. The builder’s claim for relief in its Summons was essentially defensive: it was seeking to preserve the access regime created in the Tribunal’s orders. The builder’s Summons sought an order that the owner be restrained from entering the site until the Tribunal had heard and determined an application to make interim orders for access to the site. On 13 November 2020, Parker J made interim orders by consent restraining both the builder and the owner from gaining access to the site until an interlocutory hearing could be held.

5. The proceedings in the duty list were adjourned for hearing to 19 November 2020. At that hearing, the owner sought orders that would give the owner access to the site and restrain the plaintiff from entering the site. In the builder’s Amended Summons, the builder sought orders that the owner be restrained from entering the site except on the terms ordered by the Tribunal.

6. The contest before the Court in the duty list on 19 November 2020 may be shortly stated. The plaintiff/builder was seeking to continue the orders of Parker J and to uphold the regime of orders imposed by the Tribunal. The defendant/owner was contending that by terminating the building contract and by placing security guards at the site to prevent re-entry, it had revoked the builder’s contractual licence to enter the site to undertake the building work. In consequence, the defendant/owner submitted that it was entitled to exclusive possession of the premises and could restrain the builder from hindering the owner’s access to the site.

7. On 19 November, Mr Mack of counsel appeared for the builder instructed by Eden King Lawyers. Mr Davie of counsel appeared for the owner instructed by Peter Merity Solicitors. There was debate between the parties as to whether the hearing would be on an interim basis or a final hearing. The parties did not ultimately agree upon a final hearing, so the Court is dealing with the matter on an interim basis. Although it is difficult to see what further contest, if any, remains between these parties in this Court, as distinct from the Tribunal.

8. Some further background to the dispute and the parties’ respective arguments is required in order to determine the matters in issue. This is an interlocutory hearing. The parties need to know quickly where they stand pending a final hearing in the Tribunal. It is not conducive to the rapid determination of the matters in dispute for the Court to do a full survey of all the background facts to this proceeding, or to record all the contentions advanced by each side. But the Court will record such salient facts and contentions as are necessary to determine the immediate dispute.

An Owner, a Builder and Disputed Access to a Residential Building Site

9. On 10 April 2019, the owner and the builder entered into a “Simple Works Contract” in the form approved by the Australian Institute of Architects and Master Builders Australia (ABIC SW 2018 H NSW) for the builder to undertake building works in accordance with certain architectural drawings, specifications, consultant specifications and engineering plans for a contract price of $1,499,475.63. The parties contemplated that the contracted work would be completed within about five months. The contract gave the builder possession of the site during the building works.

10. The scope of works varied in the course of construction. By November 2020 the amount paid under the contract, including for variations, was $2,679,011.05. In the Tribunal, the builder alleges that at the time the owner purported to terminate the contract, the builder was owed over $500,000 under the contract. The builder’s contention was also that at that time the builder was very close to achieving practical completion of the works. The builder says in this Court that it should be allowed to complete the works.

11. By October 2020, both the owner and the builder had begun to lose confidence in one another. The owner wrote to the builder alleging that there had been a failure to proceed with the works with due diligence and requiring completion within 10 working days. The builder issued a notice of dispute requiring the owner to make progress payments and to approve variation works, and contending the works had been carried out with due diligence.

12. When on 2 November 2020 the owner sought to terminate the contract, the builder responded in several ways. The builder’s lawyers contended that the termination was invalid and was a breach of the contract. The builder also commenced proceedings in the Tribunal seeking payment of $500,000 and alleging in its application:

“The respondent [owner] has sought to terminate the contract. The applicant [builder] disputes the notice of termination. The applicant seeks payment of its invoices, time delays and variations”

13. The commencement of proceedings heightened the stand-off on site. Representatives of the builder attended the site every day after 2 November 2020 but the owner denied the builder entry into the site with private security guards. Within the following week, both the owner and the builder engaged security guards to defend their respective interests and to prevent the other party from accessing the site. But attempts by one or other party to enter the site led to clashes, which in turn resulted in the police being called on a number of occasions. The police directed both sides to vacate the site in order to keep the peace.

14. The situation is tense, costly and potentially dangerous. Security guards at the site are being funded on both sides. Solicitors’ correspondence, trading allegations about conduct at the site, is passing between the parties. The builder says that the manner in which it was required to vacate the site means that much of its valuable stores, tools and equipment have been left at the site and the site contains safety hazards that might be dangerous for anyone coming into possession.

15. In the solicitors’ correspondence the builder contends that the contract had not been validly terminated and that it was still entitled to possession of the site under the contract. On 10 November 2020, the owner approached the Registrar of the Tribunal for interim orders allowing the owner access to the site. The Tribunal did not respond before 12 November 2020, and in the meantime, the builder commenced these proceedings.

16. But on 13 November 2020 the Tribunal made orders, including the following:

“4. To the extent that the respondent [the owner] asserts that it has terminated the contract and that the building works are incomplete and/or defective (either in a cross-application or by way of setoff), expert evidence will be required. This will require access to the building site by the parties' expert witnesses. If access has not already been provided, the parties are to negotiate times and dates for access to be provided prior to the directions hearing on 4 December 2020.”

17. The Tribunal expected the parties to negotiate mutually agreed access to the site to prepare their expert evidence for the hearing before the Tribunal. The orders did not purport to give one or other party control of the site, nor did they authorise one party to exclude the other. The apparent and reasonable assumption behind the Tribunal’s orders was that neither party would be in possession of the site in the short term but both would be able to visit it for purposes connected with preparing for the litigation before the Tribunal.

18. The Tribunal’s orders recognise there is a need for the owner to have access to the site to prosecute its case before the Tribunal. It has become evident in the proceedings before this Court that the owner alleges that to complete the work, including the rectification of what the owner alleges are defects, the owner claims damages of $234,886.24. The owner also indicates in this Court that it will claim liquidated damages of $90,358.95 against the builder due to the builder’s alleged delay.

19. The Tribunal’s orders do not settle the question of who was entitled to possession of the site before the Tribunal’s final hearing is to take place. This left a gap which was quickly filled by the parties’ active competition for the site. Each of the builder/plaintiff and the owner/defendant maintains in this Court that it is entitled to possession of the site.

20. By a further letter dated 18 November 2020, the owners confirmed that the builder’s licence to occupy the site had been revoked, if it was not already obvious from the owner’s conduct in locking the builder out.

21. Thus the final difference in the parties’ position at the hearing may be shortly stated. The owner contends it had terminated the contract, revoked the builder’s contractual licence to enter the site and is now entitled to exclusive possession of the site. The builder contends the contract was not validly terminated and that neither side should have possession of the site before the Tribunal’s decision in the dispute.

The Nature of This Hearing

22. The Court has power to grant interlocutory injunctions under Supreme Court Act 1970, s 66(4), if necessary in any case where “it appears to the Court to be just or convenient”. The Court must consider whether the plaintiff’s case presents a serious question to be tried and whether the balance of convenience, hardship and related factors warrant the grant of an interlocutory injunction: Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199; (2001) 185 ALR 1; [2001] HCA 93.

23. The parties have filed process before a specialist Tribunal in building disputes. The Court’s task here is not to undertake a preliminary trial and to give or withhold interlocutory relief upon some forecast as to the ultimate result of the dispute between the parties before the Tribunal, although the relative strengths of the parties’ cases are not irrelevant to the exercise of the Court’s discretion.

24. The Court’s task on an interlocutory hearing such as this one was well expressed by the English Court of Appeal in Francome v Mirror Group Newspapers Ltd [1984] 2 All ER 408; [1984] 1 WLR 892; (1984) 81 LSG 2225; (1984) 128 SJ 484 when Sir John Donaldson MR said (at 894H – 895A):

“The defendants now appeal. It is of paramount importance that everyone should understand the exercise upon which the judge was, and we are, engaged. There is to be a speedy trial at which the rights of the parties will be determined. That has not yet happened. We are concerned, so far as we can, to preserve the rights of the parties meanwhile. It is not our function to decide questions of fact or law which will be in issue at the trial. If they are arguable, that is the time and the place when they should be argued.”

25. Later in the same judgment his Lordship further explained the Court’s duty in the following terms (at 898E – 898G):

“What then should we do? I stress, once again, that we are not at this stage concerned to determine the final rights of the parties. Our duty is to make such orders, if any, as are appropriate pending the trial of the action. It is sometimes said that this involves a weighing of the balance of convenience. This is an unfortunate expression. Our business is justice, not convenience. We can and must disregard fanciful claims by either party. Subject to that, we must contemplate the possibility that either party may succeed and must do our best to ensure that nothing occurs pending the trial which will prejudice his rights. Since the parties are usually asserting wholly inconsistent claims, this is difficult, but we have to do our best. In so doing, we are seeking a balance of justice, not of convenience.”

26. These reasons now briefly analyse the owner’s contentions and the builder’s contentions in reply. In a number of respects the Court has found the builder’s contentions the more persuasive.

Analysis of the Parties’ Contentions

27. The owner’s submissions claim interlocutory injunctive relief, giving the owner exclusive possession of the site. The builder pointed out that the owner had filed neither a cross-summons nor a motion to found such a claim for positive relief. But the matter proceeded on the basis that the Court indicated that if it were to grant the relief that the owner sought that the Court would require the owner to file a cross-summons or a motion claiming such relief.

28. The owner challenged the availability of the remedy of injunctive relief that the builder sought upon a principle said to follow from Cowell v Rosehill Racecourse Co Ltd (1937) 56 CLR 605; [1937] ALR 273; [1937] HCA 17 (“Cowell”). The owner submitted that an injunction does not lie to restrain the wrongful revocation of a mere license not coupled with the grant of an interest in land, such as a license given to a builder to enter land to carry out building works. The owner cited the judgment of Latham CJ, where his Honour said (at 621):

“… an ordinary building contract enables the building contractor to go upon land for the purpose of conducting building operations so that he can perform his contract and earn his expected profit. This right continues to exist even if the building owner wrongfully repudiates the contract. But the only remedy of the building contractor for an infringement of the right is in damages. If he goes on the land against the will of the owner he may be treated as a trespasser.”

29. The owner cited other building contract cases including Graham H. Roberts Pty Ltd v Maurbeth Investments Pty Ltd [1974] 1 NSWLR 93, Chermar Productions Pty v Prestest Pty Ltd (Supreme Court of Victoria (VIC), 5 May 1989, unrep) and Linga v C & N Constructions Pty Ltd [2012] NTSC 8. The owner submitted that in these cases an owner had allegedly wrongfully revoked the builder’s license to be on the land, whereby the builder had become a trespasser but the Court had not granted injunctive relief to reinstate the builder’s licence to be on the land. The owner submitted that in the event that the owner’s termination of the contract here was invalid, the builder has a right to damages because of its consequent exclusion from the site and the builder is now not entitled to an injunction preventing the owner from accessing the premises which it owns.

30. But the law is more nuanced than is profiled in the owner’s submissions. It is well summarised in Meagher, Gummow and Lehane’s Equity: Doctrines and Remedies (5^th ed 2015, Lexis Nexis Butterworths) in its discussion of the remaining three “contentious questions” in this area of law concerning the grant of injunctions to restrain wrongful revocation of mere licences (at [21-275]):

“The first is whether Cowell v Rosehill Racecourse Co Ltd is correctly decided. The answer to this question is in the affirmative insofar as it decided: (a) that Wood v Leadbitter (1845) 13 M & W 838; 153 ER 351. is still good authority for the view that at law a contractual licence can be effectively revoked in breach of contract, whereupon the licensee becomes a trespasser; and (b) that Hurst v Picture Theatres Ltd [1915] 1 KB 1 was wrongly decided on its first two propositions. The answer to the question is in the negative insofar as Cowell's case decided: (a) that the wrongful termination of a contractual licence cannot be restrained by injunction unless the licence is coupled with the grant of an interest; or (b) that such a wrongful termination cannot be restrained by injunction unless the contract as a whole would be appropriate for a decree of specific performance; or (c) that, even if an injunction were available, the matter could not in New South Wales have been properly raised before 1957 by means of an equitable replication.

The second contentious question is whether there is any inconsistency involved in both denying that a mere contractual licensee has no proprietary interest in the land to which the licence extends and asserting that the licensee's occupation of the land can be protected by injunction. There is no inconsistency. What is meant by denying that the licensee has an interest in the land is to deny any estate or interest recognised as such by law or equity, anything the assignment of which would attract the Statute of Frauds. It does not follow that the licensee should necessarily be without curial remedies to remain on the land.

The third contentious question is whether there is any anomaly involved in equity granting an injunction in any circumstances for the purpose of protecting a trespasser. There is, it is submitted, no anomaly. When an injunction is granted in favour of a licensee, it is to enforce the licensor's implied stipulation not to treat the licensee as a trespasser until the licence has been lawfully revoked. After all, even in the case of a bare licence, once the licence is revoked and the licensee becomes a trespasser, presumably equity will protect the licensee's rights during the ‘packing up’ period. Moreover, there is nothing more inherently surprising in equity lending its aid to a trespasser in a case involving the wrongful revocation of a licence than there is in equity decreeing specific performance of a contract for the sale of land in favour of a purchaser who is in breach of a term in that very contract to settle on a named day (when time is not of the essence).”

31. In some circumstances, equity will protect a licensee by enforcing the licensor’s implied negative stipulation not to treat a licensee as a trespasser, until the licence has been lawfully revoked. So much is consistent with the principles in cases such as Doherty v Allman & Dowden (1878) 3 App Cas 709 (“Doherty v Allman”) authorising the grant of injunctive relief to support implied negative stipulations in contracts. But the Court will be cautious in applying a Doherty v Allman principle to ensure that it does not in substance specifically perform a contract which involves the provision of personal services.

32. Here, the interlocutory relief that the builder seeks to restrain the owner acting on the revocation of its licence to enter the site under the contract until the Tribunal’s determination of the lawfulness of that revocation is an arguable remedy on an interim and final basis. This conclusion is compatible with Sigma Constructions (VIC) Pty Ltd v Maryvell Investments Pty Ltd [2005] ANZ ConvR 108; (2005) ATPR 42-048; [2004] VSCA 242 at [29] to [33], which was referred to by the parties in the course of argument.

33. The owner next argued that the builder in its application before the Tribunal does not seek either final or interim orders in relation to access but rather merely seeks a money judgment. The owner argues that the Tribunal has made directions in relation to access for experts, but that is a different matter from claiming final relief.

34. But it is was made explicit in the builder’s submissions before this Court that it will seek all relief it can within the Tribunal’s jurisdiction under the Home Building Act beyond a money judgment, to allow it to complete the building work at the site itself. The builder points to the power under Home Building Act, s 48MA, a provision set out later in these reasons. The application before the Tribunal may need amendment to claim more than a money judgment, but there is no doubt that the builder seeks to complete the works, if the Tribunal will allow it.

35. The owner next argues that the matter presently before the Court is really the same matter as was the subject of the directions given by the Tribunal for the access of experts on both sides to the site. The owner submits that an issue therefore arises as to this Court’s jurisdiction. The owner points out that the Tribunal proceedings were lodged on 2 November 2020 and the builder’s summons in this Court is dated later in November 2020. The owner refers to s 5(3) of Schedule 4 of the Civil and Administrative Tribunal Act 2013, which provides:

“(3) Effect of application to Tribunal or court

If, at the time when an application was made to the Tribunal for the exercise of a Division function, no issue arising under the application was the subject of a dispute in proceedings pending before a court, a court has no jurisdiction to hear or determine such an issue.”

36. The owner says that, in substance, the issue presently raised by the builder sufficiently overlaps with the Tribunal’s directions as to access to the site for experts, that this Court has no jurisdiction to deal with it.

37. The owner’s argument is correct as far as it goes. This Court would be prevented by the Civil and Administrative Tribunal Act from embarking on what would be little more than a directions hearing covering the same issues as had been determined by the Tribunal in its 13 November orders. But the present application is rather more than that: the builder seeks to restrain the owner from taking possession of the site before the outcome of the Tribunal hearing. No such relief has yet been sought before the Tribunal. There is no impediment based in the Civil and Administrative Tribunal Act preventing this Court exercising jurisdiction over that question.

38. If the owner takes possession of the works under the contract before the architect issues a notice of practical completion the works are to be treated as having reached practical completion: contract, clause M8. At one level this might be thought to simplify the builder’s position but if possession is achieved by Court order whether clause M8 applies is an open question.

39. The builder advances a number of persuasive arguments based upon the balance of convenience. The builder submits that, unless the owner is prevented from re-entering the site, the builder will be at risk of another builder coming in to rectify the defects that will then be charged back to the builder, in circumstances where the builder may yet be granted the right in the Tribunal to go and fix any defects at the builder’s own cost. The builder points to the statutory directive to the Tribunal under the Home Building Act, s 48MA, which is as follows.

“[48MA] Rectification of defective work is preferred outcome in proceedings

A court or tribunal determining a building claim involving an allegation of defective residential building work or specialist work by a party to the proceedings (the "responsible party") is to have regard to the principle that rectification of the defective work by the responsible party is the preferred outcome.”

40. The Tribunal’s powers under the Home Building Act to order rectification by the builder are broad. The Tribunal may order a party whether or not the party has requested it in an application before the Tribunal, to “do any specified work or perform any specified service or any obligation arising under this Act, or the terms of any agreement”: Home Building Act, s 48O(1)(c). If so minded, the Tribunal could make orders under Home Building Act s 48MA and s 48O(1)(c) (upon the application as presently framed) with a view to reducing the cost of rectification works to both parties by requiring the builder to rectify any defects that were found to exist.

41. In the Court’s view, this is a persuasive consideration favouring the grant of the relief the builder seeks. If another builder comes onto the site to rectify defects, the Tribunal’s consideration of the statutory “preferred outcome” under the Home Building Act, s 48MA, will be foreclosed. The owner wants to engage another builder, if it is allowed back into the site. The owner points to other statutory obligations under Home Building Act, s 18BA, that require the owner to mitigate its loss. But the owner’s obligation to mitigate loss does compel the conclusion that the owner should be able to engage another builder. Home Building Act, s 48MA remedies may be the best way for the owner to mitigate loss.

42. Other practical considerations favour some restraint being put in place. Currently, the parties are expending their resources on two groups of security guards and the police have been called. A Court ordered regime will reduce the current waste of expenditure on unnecessary security and will reduce the risk of breaches of the peace. And with both builder and owner being off-site they both have a strong incentive to conduct the Tribunal proceedings expeditiously.

43. Some restraint being desirable, it is an important additional consideration that any restraint that this Court puts in place is compatible with, and not inconsistent with, the existing orders of the Tribunal. Any such restraint should support and not constrain the future exercise of the Tribunal’s jurisdiction. For that reason, it is undesirable to allow the builder to go back onto the site until the Tribunal makes its determination under the Home Building Act.

44. The owner argues that the need to have its tenant back in possession at the site supports it being let back into the premises on the balance of convenience. But there is no clear evidence that the tenant or the owner is suffering particular hardship on this account. Moreover, the most expeditious outcome in the tenant’s interests may yet be promoted by keeping parties out of the site and incentivising them to pursue expeditiously their remedies in the specialist Tribunal that they have chosen.

Conclusions and Orders

45. Ordinarily, upon the grant of an in an interlocutory injunction, the Court does not make costs orders against one or other party. Whether or not the costs expenditure on an interlocutory injunction is warranted will depend upon the outcome of the final hearing, which in this case may also include the outcome of the Tribunal proceedings. The Court will therefore make the usual order in this situation, that the costs of the application for the interlocutory injunction will be each party’s costs in the proceedings.

46. The matter will be adjourned for mention before the Registrar to a time when it can be expected that the Tribunal will have given its determination.

47. For these reasons the Court makes the following orders and directions:

1. Upon the plaintiff giving the usual undertaking as to damages, the defendant by itself, and by its employees or agents, is restrained from entering the site described in the Summons until the NSW Civil and Administrative Tribunal has heard and determined all applications before it between the plaintiff and the defendant in relation to building works at the site;

2. Order that each party’s costs of the present application for an interlocutory injunction will be that party’s costs in the proceedings;

3. Grant liberty to apply to the duty judge on one day’s notice;

4. Adjourn the proceedings for further directions before the Registrar in Equity at 9AM on 3 March 2021; and

5. These orders may be taken out forthwith.

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Decision last updated: 24 November 2020