Jamestown Operations Pty Ltd v Plympton Steel Pty Ltd

[2015] SADC 126

District Court of South Australia

(Civil: Interlocutory Application)

JAMESTOWN OPERATIONS PTY LTD v PLYMPTON STEEL PTY LTD

[2015] SADC 126

Judgment of His Honour Judge Stretton (ex tempore)

25 August 2015

PROCEDURE - JUDGMENTS AND ORDERS - ENFORCEMENT OF JUDGMENTS AND ORDERS

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

The plaintiff seeks an interlocutory injunction restraining the defendant from registering an adjudication it had secured pursuant to the Building and Construction Industry Security of Payment Act 2009 (SA) for the payment of a payment claim, pending a Supreme Court judicial review of the adjudication. The plaintiff also claims damages from the defendant. The plaintiff is concerned that if the adjudication is registered and enforced as a judgment and it is required to pay the defendant, the monies may be dissipated and the defendant may be unable to return them if the Supreme Court action quashes the adjudication, or the District Court damages claim succeeds.

The test is whether the plaintiff’s claims have sufficient prospects of success, and whether in that event there is a real risk that the defendant will be unable to repay the monies it has received. At this interlocutory stage, the court has only limited documentary material on which to make an assessment of these issues.

Held:

1.  On the papers the plaintiff has an arguable but weak case for judicial review.

2.  On the papers the plaintiff has a moderate potential claim for damages.

3.  On the papers there is currently no evidence indicating that in the event the plaintiff succeeds in any of its claims against the defendant that the defendant will be unable to satisfy such judgment.

4.  The application for an injunction is dismissed.

Consolidated Constructions Pty Ltd v Ettamogah Pub [2004] NSWSC 110; Built Environs Pty Ltd v Tali Engineering Pty Ltd [2013] SASC 84; Romaldi Constructions Pty Ltd v Adelaide Interior Linings Pty Ltd (No 2) [2013] SASCFC 124, considered.

JAMESTOWN OPERATIONS PTY LTD v PLYMPTON STEEL PTY LTD
[2015] SADC 126

HIS HONOUR:    This is an application by way of specially returnable interlocutory process by the plaintiff Jamestown Operations Pty Ltd. The plaintiff asks that the defendant Plympton Steel Pty Ltd be restrained from entering judgment against the plaintiff arising from an adjudication determination SA152 that it secured pursuant to the Building and Construction Industry Security of Payment Act 2009, (“the Act”).

In the alternative if judgment is entered the plaintiff seeks a stay of execution of that judgment. The plaintiff also seeks leave to file a statement of claim seeking damages arising out of the issues the subject of the adjudication determination.

I have had regard to all the affidavits tendered in the matter, namely the affidavit of Felix Christian Hoelscher of 13 August 2015, the affidavit of Adam Scott Rosser dated 18 August 2015 and the affidavit of James Raymond Foster dated 18 August 2015.

In brief outline the two parties entered into a contract whereby the defendant Plympton Steel Pty Ltd performed construction and building work at the request of the plaintiff Jamestown Operations Pty Ltd, and thereby constructed a solar array and related machinery.

The defendant purported to make a claim for a progress payment pursuant to the Act in respect of construction work the defendant claimed it had performed. The plaintiff responded with a payment schedule pursuant to the Act and ultimately the matter went to adjudication pursuant to the adjudication process provided in the Act.

The scheme pursuant to the Act sets up an easy process for the claiming of progress payments for building and construction work. The statutory aim is to ensure that a person who carries out construction work under a contract is entitled to claim and receive progress payments for work done, in a timely way and do so regardless of whether the contract makes specific provision for progress payments.[1]

[1]    Consolidated Constructions Pty Ltd v Ettamogah Pub [2004] NSWSC 110, Built Environs Pty Ltd v Tali Engineering Pty Ltd [2013] SASC 84.

The Act does this by providing that a person can make a progress claim whether or not the contract specifically allows it, requires the claim to be paid to the extent it is not disputed and, significantly, provides for a speedy method of administrative adjudication of any disputed amount. Here, all of that occurred and an adjudication was ultimately made.

More particularly, on 9 July 2015, pursuant to the Act the defendant filed an application for adjudication with an authorised nominating authority and an adjudicator was appointed. An adjudication purportedly occurred. I use the word 'purportedly' because the plaintiff claims that the adjudication was invalid.

In any event, in early August 2015, what purported to be an adjudication decision was made requiring the plaintiff to pay the defendant $161,284.80 plus GST. Shortly after that, the plaintiff applied to the Supreme Court seeking a judicial review of the adjudication decision. That review I understand is yet to occur. The grounds upon which the review is sought are extensive, but the plaintiff essentially asserts jurisdictional error on the part of the adjudicator in a range of ways outlined in detail by Mr Dal Cin in his submissions to me. The Supreme Court pleadings are exhbited to the affidavit of Mr Hoelscher.

The application before me is, in essence, to restrain the defendant from registering its adjudication decision as a judgment against the plaintiff, and hence prevent the defendant from enforcing the judgment against the plaintiff.

The plaintiff says by way of affidavit that it is concerned that if it is compelled to pay Plympton Steel the adjudicated sum and is later successful in the Supreme Court in overturning the adjudication or is successful in securing damages in this court for its foreshadowed damages claim, it may not recover the adjudicated sum that it has paid pursuant to the adjudication.

To succeed in an application of that nature in this court, the plaintiff must establish essentially two things. Firstly, that it has sufficient prospect of success in its judicial review application seeking to declare the adjudication invalid and/or sufficient prospect of success in its damages claim. Secondly, that there are sufficient prospects that the moneys the subject of the adjudication certificate and potential judgment, if enforced and paid, will be dissipated by the defendant and the defendant won't have sufficient means to repay the moneys to the plaintiff or, indeed, to pay the damages that may be assessed against it in the damages claim in this court.[2]

[2]    Romaldi Constructions Pty Ltd v Adelaide Interior Linings Pty Ltd (No 2) [2013] SASCFC 124.

I have regard to all the materials tendered in this court. Those materials comprise essentially the materials that were put before the adjudicator, together with a copy of the application made in the Supreme Court and materials filed in support of that. I appreciate that I have only seen documentary evidence and none of the disputed evidential issues have been the subject of oral evidence or cross-examination. Indeed, there is, it seems, a potentially substantial dispute as to the adequacy of the construction work. There is also an issue of whether if the resulting piece of equipment is faulty, nonetheless whether that is the fault of the defendant or, on the other hand, the fault of the designer, whoever that may be.

I have closely considered that material and also the detailed submissions of each counsel.

On the issue of the prospects of success of the judicial review claim, essentially, the plaintiff claims the adjudicator was sufficiently wrong so as to have fallen into jurisdictional error. The plaintiff argues that contractual completion was an essential precondition to the raising of an invoice and to any liability. Mr Dal Cin submitted that there was no completion and his client accordingly never became liable to the plaintiff for payment. The plaintiff submits that the adjudicator failed to assess the fundamental question of whether there had been contractual completion and accordingly, whether any claim for payment could be made pursuant to the contract.

I have closely considered the papers. The adjudicator has, on my interlocutory review, seemingly purported to address the issue of completion and has, where he did not resolve aspects of it, purported to give reasons for being unable to do so.

The defendant’s argument that the adjudicator did address the issue he is accused of not addressing has merit, at least on the material available at this interlocutory review stage, and whilst, in my view, the contrary is arguable, the contrary is not a strong argument. Accordingly, my interlocutory view is that the plaintiff's case for judicial review for jurisdictional error justifying a finding of invalidity in relation to the adjudication decision is arguable, but weak.

Turning to the claim for damages, material was tendered before the adjudicator as to the work done, and there is material which, if accepted, might give rise to a valid claim for damages against someone, and potentially against the defendant. I assess the strength of that claim as moderate, based on the expert evidence currently available. I appreciate, however, that I am not seeing the full matrix of evidence that would undoubtedly be called on both sides at a contested trial of that issue. All I have seen is the documentary material supplied for the administrative adjudication pursuant to the Act. However, on the limited material available, there is a moderate potential claim for damages.

I turn to the second important consideration, whether there are sufficient prospects that the money the subject of the adjudication certificate, if enforced and paid, will be dissipated and the defendant will not have sufficient means to repay them should the plaintiff be successful in either of its claims against the defendant.

I have regard to the evidence tendered relevant to that issue. The plaintiff's solicitor Mr Hoelscher, in his affidavit dated 13 August 2015, conveyed his client's concerns that the plaintiff may not be able to recover the moneys in question from the defendant. Mr Hoelscher exhibits a copy of the ASIC company extract of the defendant Plympton Steel Pty Ltd together with a printout of a search conducted by him at the South Australian Registrar of Lands Titles showing that no real property is held by the defendant in this State.

I also have regard to the affidavit of the defendant's solicitor Mr Foster, who conveys, based on information provided to him by Mr Modra, a director of the defendant, that Plympton Steel Pty Ltd:

1.Has been trading since 1998, ie for some 17 years;

2.Has 60 employees;

3.Has an annual turnover of $10 million;

4.Is currently engaged to complete work at the Royal Adelaide Hospital under a $5 million contract; and

5.Has 20 or 30 other current small project engagements.

An examination of the ASIC extract relating to Plympton Steel Pty Ltd indicates that it was registered on 15 January 1999, is based in South Australia, has a moderate quantity of fully paid capital and has been filing annual returns regularly since 1999. The register does not disclose any matters that would cause an observer any potential concern as to solvency.

Mr Dal Cin submits that in effect the defendant could have put on more evidence or provided more information than it has concerning its financial position. Indeed that is true. On the other hand the defendant has provided a fair amount of information about its business, its history and its current trading.

If the defendant is as its officers assert capable of employing 60 employees and has an annual turnover of $10 million the prospect of repaying a sum of $161,000 that it might soon receive, would not seem an objectively prohibitive, daunting or even risky one. In the final analysis, there is no indication whatsoever that the defendant may have any problem repaying the adjudication amount should it be required to do so at any stage in the future.

I also have regard to the clear policy of the Act that progress payments be made, subject only to adjudications, and that further issues and contests concerning liability over the subject work can be made in court at a later time but such claims ought not ordinarily hold up a progress payment which is either not disputed or which, if disputed, has been certified as payable by an adjudicator.

I do agree that if an adjudication is adjudged not an adjudication at all, as indeed the Supreme Court will consider, that will invalidate the adjudication that a progress payment be made. It is far from clear, certain or even likely, in my view, that such a decision will be forthcoming.

In final summary, in my view there is an arguable but weak case for judicial review. There is a moderate case for damages. There is however no indication whatsoever that the defendant is impecunious or that there is any real risk that it would not be able to repay the adjudicated sum, should it be paid to them at the present time.

Consequently, the application that the defendant be restrained from entering judgment against the plaintiff, arising from adjudication determination SA152 pursuant to the Building and Construction Industry Security of Payment Act 2009, is dismissed, as is the alternative application that any judgment be stayed until further notice, although I will hear counsel as to the appropriateness of a formal order to that effect, in circumstances where there has not yet been a judgment.

RULING COMPLETED 5.05 P.M.
RESUMING 5.22 P.M.

HIS HONOUR:  The defendant seeks an order for costs. The defendant has been successful in resisting the plaintiff's application to restrain it from entering the adjudication determination. The summons and application also foreshadow a claim for damages arising out of the construction work which I have no reason to suppose at this time won't be pursued in the ordinary course. There is no opposition to an order for costs nor a certification that the matter is fit for senior counsel.

The issue is whether I order that costs be payable forthwith. I have regard to the Rules of Court, the submissions of counsel and the nature of the application that's been made before me.

In the final analysis whilst it is finely balanced, I am not of the view that the court would be justified departing from the ordinary rule that costs are payable at the conclusion of the matter.

There will be an order for costs that the plaintiff pay the defendant's costs of the application and I certify the matter fit for senior counsel.

That decision is predicated on a belief that the matter will proceed in the ordinary way as foreshadowed by counsel. I grant liberty to the defendant to apply for payment of these costs forthwith if the plaintiff does not file its statement of claim on or before 11 September 2015, or if at any other time, the proceedings are not pursued by the plaintiff with reasonable diligence and timeliness.