Norwood Ponds v Merrion (4)
[2020] VSC 77
•7 February 2020
| IN THE SUPREME COURT OF VICTORIA AT MELBOURNE COMMERCIAL COURT TECHNOLOGY, ENGINEERING AND CONSTRUCTION LIST | Not Restricted |
S ECI 2019 5712
| NORWOOD PONDS OPERATIONS PTY LTD (ACN 617 071 977) | Plaintiff |
| v | |
| MERRION (4) PTY LTD (ACN 616 563 289) & ANOR | Defendants |
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JUDGE: | Digby J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 7 February 2020 |
DATE OF RULING: | 7 February 2020 |
CASE MAY BE CITED AS: | Norwood Ponds v Merrion (4) |
MEDIUM NEUTRAL CITATION: | [2020] VSC 77 |
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ADMINISTRATIVE LAW – Judicial review – Application for judicial review of determination of Adjudicator – Order sought to restrain the successful party to the Adjudication from enforcing an Adjudication Determination or seeking to issue an Adjudication Certificate or enter judgment or filing an Adjudication Certificate as a judgment in any court or serving a notice – Whether applicant required to provide security by way of payment into Court in respect of the sum of the Adjudication Determination – Exercise of discretion – Payment into Court ordered – Building and Construction Industry Security of Payment Act 2002 (Vic), ss 28Q, 28R, 28O(1)(b).
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr P Duggan of Counsel | Hope Earl |
| For the First Defendant | Mr K Ioulianou, Solicitor | HFW Australia |
| No appearance for the Second Defendant[1] |
[1]By letter dated 18 December 2019 the second defendant advised the Court he does not intend to take any active role in the proceeding and will abide the decision of the Court, save for any costs order being considered against him.
HIS HONOUR:
On 5 December 2019 and 20 January 2020 Adjudication Determinations were made under the Building and Construction Industry Security of Payment Act 2002 (Vic) (SoP Act) pursuant to which the second defendant (Adjudicator) determined that Norwood Ponds Operations Pty Ltd (plaintiff) was liable to pay Merrion (4) Pty Ltd (first defendant) an amount by way of progress payment and associated entitlements in the total sum of $553,088.98.
In this matter the plaintiff has issued an Originating Motion for Judicial Review seeking to impugn the abovementioned Adjudication Determinations and have them declared void and or quashed.
In its challenge to the Adjudication Determinations the plaintiff relies upon various grounds including that the Adjudicator lacked jurisdiction under the SoP Act because both the construction contract and the first defendant’s payment claim purportedly issued thereunder were void because they were contrary and or repugnant to s 29(3) of the Domestic Building Contracts Act 1995 as a result of the first defendant not being a registered building practitioner thereunder.
Upon the first return of this matter for interlocutory directions on 7 February 2020 the plaintiff sought orders including an order restraining the first defendant from seeking to enforce the Adjudication Determinations dated 5 December 2019 and 20 January 2020, pending the determination of its Originating Process.
At the hearing on 7 February 2020 the first defendant sought orders including that the plaintiff undertake to provide to the Senior Master of the Supreme Court of Victoria, by way of payment into Court or another form acceptable to the Senior Master, the amount of $553,088.98, and that such amount remain as funds paid into Court until further order or agreement, or otherwise, by the parties. Such an order is commonly made for the reasons I shall outline.
In support of the orders sought by it, the plaintiff generally asserted that it should not be obliged to pay the adjudicated amounts into Court pending the outcome of its judicial review.
Plaintiff’s submissions
The plaintiff stressed that at present no Adjudication Certificate has been provided under s 28O of the SoP Act, no judgment has been entered in reliance upon the said Adjudication Determinations pursuant to s 28R of the SoP Act and that the application on foot was not one to set aside judgment so entered.
The plaintiff argues that in the circumstances which exist, including the absence of material in relation to the financial status of the active parties, there is no precondition which would require or incline the Court to order any payment into Court to secure the first defendant until the outcome of this review proceeding, and that the usual undertaking on the part of the plaintiff to abide by any order of the Court as to damages is sufficient.
It is to be noted however that the plaintiff also sought an injunction to prevent the first defendant from making any application for judgment or otherwise seeking to take a further step to enforce the existing Adjudication Determinations, pending the outcome of judicial review.
First defendant’s submissions
In support of its application that the plaintiff provide security by way of payment into Court in respect of the sums of the Adjudication Determinations, and associated amounts, the first defendant highlights the plaintiff’s change of positon which until recently accepted that the sum in dispute should be paid into Court, and the first defendant also contends that the balance of convenience favours it in requiring that a payment into Court be made by the plaintiff so as to appropriately accommodate the first defendant in relation to the injunction sought against it. In these circumstances the first defendant submits that it is entirely appropriate that the Court exercise its discretion in making the order for payment into Court.
Although not established in this application, the first defendant also contends that judgment has been entered in relation to the Adjudication Determinations in the County Court of Victoria.[2]
[2]The plaintiff had initially submitted that no judgment had been entered on either of the relevant Adjudication Determinations (T2.11-13). However, during the course of argument on 7 February 2020 the first defendant submitted that judgment for the unpaid adjudicated amounts had been entered in the County Court of Victoria (T13.12-29).
Considerations
The SoP Act and other related discretionary considerations
The purpose and object of the SoP Act are clear. The SoP Act is to provide for entitlements to progress payments for persons who carry out construction work or supply of related goods and services and to ensure that any person undertaking such work, or associated supply, is entitled to receive, and able to recover, progress payments in relation thereto.
The SoP Act provides a clear and expeditious scheme by which a claimant may make a payment claim and the respondent, by means of a payment schedule, may define its position in response to such claim. In the event that a respondent by its payment schedule acknowledges that less is payable than the sum claimed, or in circumstances where the respondent fails to pay the whole or any part of a scheduled amount which it had earlier acknowledged as payable, or if the respondent fails to provide any payment schedule by way of response to a claim, the claimant may pursuant to the SoP Act initiate an adjudication of the dispute(s) which arise in that regard. Such a dispute may thereafter be referred to an adjudicator for determination pursuant to the defined and expeditious regime provided for in the SoP Act.
The SoP Act is based on a philosophy preserving the cash flow of contractors in the construction industry. It provides a mechanism for contractors to obtain progress payments and using the terminology employed by Vickery J in Hickory Developments Pty Ltd v Schiavello (Vic) Pty Ltd[3] to promote a ‘pay now and argue later’ approach to progress and final payment claims.[4]
[3](2009) 26 VR 112.
[4]Ibid 121.
The common approach to securing the adjudicated amount under challenge
In this case the first defendant is the beneficiary of the Adjudication Determinations now under challenge.[5] There is however no Adjudication Certificate and no judgment for the debt the subject of the existing Adjudication Determinations.
[5]Neither party to this application has put on material directed to raising any doubt about the capacity to pay or solvency of either the plaintiff or the first defendant.
It is common place in this jurisdiction, in New South Wales and elsewhere in Australia in relation to their respective security for payment legislation, that a plaintiff which disputes an Adjudication Determination by instigating a challenge to that Adjudication Determination by way of judicial review, is ordered to pay the adjudicated sum in dispute into Court pending the outcome of that review.
Usually such security by way of payment into Court is effected by initial orders in proceedings such as these. Such orders are commonly in the nature of consent orders sought by the active parties in the judicial review.
In that regard the provision of such security is analogous to the statutory requirement of s 28(5)(b) of the SoP Act which mandates payment into Court of the unpaid portion of any amount of a judgment entered in respect of an Adjudication Certificate as security pending the outcome of a challenge to such judgment in relation to an unpaid Adjudication Determination.
The common approach of requiring security by way of payment into Court in relation to the unpaid adjudicated amount under challenge does not elevate such approach to the status or effect of a requirement or practice. The question as to whether security ought be ordered in each judicial review proceeding, absent consent, is a matter in the discretion of the Court which is to be exercised upon evaluation of all relevant factors applicable to the particular case.
Power to require the adjudicated amount in issue to be paid into Court pending the outcome of a challenge by way of judicial review
The Court has clear power to make orders to the effect that the unpaid adjudicated amount be paid into Court pending final determination of judicial review seeking to challenge an underlying Adjudication Determination.
Such power is founded upon, amongst other bases:
(a) the Court’s inherent power to control its own processes;
(b) the statutorily analogous powers derived from s 47(1)(a) and 48(1) of the Civil Procedure Act 2010 (Vic);
(c) the well-recognised power to make such an order in conjunction with the issue of an injunction restraining a beneficiary of an Adjudication Determination from taking any steps to enforce an adjudicated amount;[6] and
(d) also founded upon the Court’s well recognised power to impose conditions upon a party which seeks to stay execution pending appeal or review.[7]
[6]Supreme Court (General Civil Procedure) Rules 2015 (SCR), r 38.
[7]SCR, r 38.
The SoP Act does not expressly or by implication limit the exercise of the relevant discretion. The SoP Act does however give rise to a number of discretionary considerations which support that discretion being exercised in favour of requiring payment into Court of the disputed adjudicated amount.
In addition to the previously mentioned object, purpose and scheme of the SoP Act, the aims of which include the expeditious establishment of enforceable rights in relation to progress and final payment entitlements under construction contracts in accordance with the outcome of the adjudication process. The SoP Act also seeks to ensure that a claimant who is the beneficiary of a favourable Adjudication Determination recovers the sum determined effectively and expeditiously. These objectives, and in particular the last object, are reflected in the express provisions of ss 28O and 28R of the SoP Act, which entitle a beneficiary of an adjudication to obtain a Certificate in respect of a successful adjudication and to enter judgment upon that Certificate.
The same object, purpose and scheme is reflected in s 28M of the SoP Act. That section similarly provides that the beneficiary of an adjudication is entitled to immediate payment of the adjudicated amount within five days of the Adjudication Determination, or such later date as may be determined by the Adjudicator.
Section 28M of the SoP Act thereby imposes an obligation on the respondent to immediately pay the adjudicated amount even where a claimant has not moved to obtain an Adjudication Certificate or enter judgment.
In this way the SoP Act seeks to elevate the beneficiary of an Adjudication Determination to a position whereby it is entitled to immediate payment and facilitates such a beneficiary moving to enforce its judgment. Concomitantly, the same provisions impose an enforceable obligation to pay the adjudicated amount on the unsuccessful respondent.
The proper exercise of the discretion to secure the adjudicated amount, in broadly analogous circumstances, has been earlier considered by influential courts. In Filadelfia Projects v EntirITy Business Services Pty Ltd,[8] (Filadelfia Projects) McDougall J stated:
In the ordinary way injunctive relief would be granted on condition that the amount in dispute, including the cost of the adjudication and some allowance for interest, be paid into Court pending a final resolution of the dispute. That is generally done firstly where s 25(4) of the Act applies, simply because that is a requirement of the section. Where (as here) s 25(4) does not apply in terms (and it does not apply in terms because there has been no adjudication certificate, and hence no judgment for a debt) the Court nonetheless, taking into account the clear objects of the Act and its underlying policy, generally orders payment into Court by analogy with s 25(4).[9]
[8][2010] NSWSC 473.
[9]Ibid [11].
Furthermore in Nazero Group Pty Ltd v Top Quality Construction Pty Ltd,[10] Hammerschlag J stated:
The policy of the Act, as reflected in s 25(4)(b), is that a claimant is to be given protection of payment into Court when a respondent seeks, whether by injunction or otherwise, to inhibit the claimant’s enforcement of an adjudication in its favour. Pendente lite, Top Quality is being held out of payment, with the risk attendant on delay, notwithstanding the statutory obligation on Nazero to pay. It is open to Top Quality to file the adjudication certificate, in which event Nazero would have little option but to seek to have the judgment set aside to protect its position, in which event, s 25(4)(b) of the Act would mandate payment into Court. Here, by happenstance, the section does not apply because the further step has not yet occurred. Top Quality would have to take that step to enforce its statutory right to payment. The only difference is that these proceedings have intervened. The policy of the Act is not served by removing Top Quality’s protection pending determination of Nazero’s challenge even though s 25(4)(b) of the Act does not apply in terms.[11]
[10][2015] NSWSC 232.
[11]Ibid [42].
His Honour ultimately concluded at [46]:
I accept as relevant that the challenge has reasonable prospects of success. Nevertheless, in my view and in all the present circumstances, it would be a manifestly unfair use of the Court’s process to permit Nazero to mount its challenge without having to pay the money into Court.
In Milburn Lake Pty Ltd v Andritz Pty Ltd & anor,[12] (Milburn Lake) J Forrest J accepted McDougall J’s observations above in Filadelfia Projects as both correct and fundamental. His Honour added that to grant an injunction restraining the beneficiary of the adjudicated amount from obtaining an Adjudication Certificate and then entering judgment, without ordering payment into Court, would frustrate the clear purpose of the SoP Act even though no Adjudication Certificate or judgment had at that point been obtained.[13]
[12][2016] VSC 3.
[13]Ibid [13].
In Raw Build Pty Ltd v JBK Industries Pty Ltd & Anor,[14] (Raw Build) Vickery J referred to a number of instances in Victoria where the Court’s discretion in this respect has been exercised so as to require payment into Court as security for the adjudicated amount in circumstances where a plaintiff sought to challenge an Adjudication Determination.[15]
[14][2016] VSC 547.
[15]See Grocon Constructors Pty Ltd v Planit Cocciardi Joint Ventures, [2009] VSC 339, Amasya Enterprises Pty Ltd & Anor v Asta Developments (Aust) Pty Ltd & Anor [2015] VSC 233 and Milburn Lake Pty Ltd v Andritz Pty Ltd [2016] VSC 3.
In Raw Build Vickery J also referred to J Forrest J’s decision in Milburn Lake,[16] and stated:
The Court, in such an instance, orders payment as a term of the injunction because if it did not grant the injunction, the Court could enter judgment upon application by the claimant under s 28R(5) of the Act and the respondent, if it considered it necessary in the given case, under that same section would be required to make payment-in as a precondition to having the judgment set aside. The balance of convenience is therefore resolved by payment-in.[17]
[16][2016] VSC 3.
[17][2016] VSC 547, [33].
In Raw Build his Honour however declined to exercise the Court’s discretion to order that the challenge to the Adjudication Determination in question should be conditional upon the challenging party making payment into Court. His Honour’s reasoning for declining to require a payment into Court in that instance included that there was not at that stage a valid judgment presently on foot. In that matter, which his Honour described as involving ‘unique circumstances’, an order had been made pursuant to s 28R(1) of the SoP Act in the Magistrates’ Court of Victoria, however subsequently this Court determined that the judgment below was irregular.
His Honour also expressly declined to require the payment of moneys into Court because Raw Build Pty Ltd did not seek any interim or interlocutory injunctive relief which in the usual course would have invited the Court to make the usual order requiring payment into Court of the contested sum.[18]
[18]Ibid [43] and [44].
His Honour also declined to order payment into Court because the proceeding before the Court was commenced by Raw Build Pty Ltd prior to any regular judgment being entered and because the proceeding before his Honour did not seek to set aside any judgment and therefore, in his Honour’s view, the circumstances of the matter did not engage the operation of s 28R(5)(b) of the SoP Act requiring payment into Court of the sum in issue.[19]
[19]Ibid [45].
Conclusions
It is wholly consistent with the above outlined object, purpose, policy and intent of the SoP Act and consistent also with the persuasive authority cited, that a claimant which has obtained an Adjudication Determination in its favour should also be afforded the protection of having the unpaid sum of any challenged Adjudication Determination paid into Court pending the outcome of such challenge.
The security so provided largely assures both the certainty and the speed of payment of the adjudicated amount in the event of an unsuccessful challenge to the Adjudication Determination; conversely any such delay may expose the claimant to heightened risk that at the end of a successful judicial review process the claimant’s entitlement is not recovered.
Such an order is also often appropriate in circumstances where the challenging party seeks orders restraining the beneficiary of the Adjudication Determination from enforcing its rights, or somehow otherwise staying execution pending the outcome of judicial review.
Balance of Convenience
Finally, in the circumstances of this matter the balance of convenience favours the first defendant because the refusal of an order requiring that the plaintiff pay into Court the sum of the challenged Adjudication Determinations may put the first defendant at risk that, in the event of a judicial review determination in its favour, there will be further delay in recovering the adjudicated amount from the plaintiff or such moneys may be unable to be recovered in part, or at all.[20]
[20]The plaintiff has in relation to balance of convenience considerations provided the usual undertaking as to damages; see Orders made 7 February 2020, Other Matters [B].
Orders requiring security for the adjudicated amount pending the outcome of judicial review are unlikely to prejudice the plaintiff which, if successful, will ordinarily obtain an order ensuring the return of the funds it paid into Court, together with any interest earned on those funds.
Decision
For these reasons I consider it just and appropriate in this instance to order the payment into Court of the sums in contention, so as to ensure the incumbent first defendant.
Order
Accordingly upon:
A.The plaintiff undertaking to -
(i) provide to the Senior Master of the Supreme Court of Victoria by a payment into Court, or in another form acceptable to the Senior Master, the amount of $553,088.98, with such amount to remain as funds paid into Court until further order or as otherwise agreed between the parties; and
(ii) abide by any order the Court may make as to damages in the case.
B.The first defendant undertaking that until the hearing and determination of this proceeding, or any further order of the Court, the first defendant, by itself, it servants, or agents will not take any further step to enforce the Adjudication Determinations dated 5 December 2019 and 20 January 2020 including by:
(i) requesting pursuant to s 28O of the SoP Act the provision of an adjudication certificate under section 28Q of the SoP Act;
(ii) filing any adjudication certificate as judgment for a debt in any court pursuant to s 28R of the SoP Act; or
(iii) serving a notice on the plaintiff pursuant to s 28O(1)(b) of the SoP Act.
The Court orders that:
1.The plaintiff have leave to file and serve the proposed amended Originating Motion for Judicial Review and Amended Summons substantively in the form provided to the Court and dated 7 February 2020.
2.The first defendant is restrained from seeking further to enforce or take action under the SoP Act in relation to the Adjudication Determinations dated 5 December 2019 and 20 January 2020 pending the determination of this proceeding.
3.By 4:00pm on 19 February 2020, the first defendant file and serve any affidavit(s) upon which it intends to rely in the proceeding.
4.By 4:00pm on 28 February 2020, the plaintiff file and serve any affidavit(s) in reply.
5.By 4:00pm on 13 March 2020, the plaintiff file and serve its submissions.
6.By 4:00pm on 20 March 2020, the first defendant file and serve its responsive submissions.
7.By 4:00pm on 27 March 2020, the plaintiff file and serve its reply submissions.
8.By 4:00pm on 31 March 2020, the plaintiff file and serve a Court Book (numbered sequentially and double-sided) containing all relevant documents filed in the proceeding.
9.The proceeding is fixed for trial and set down for hearing on Friday 3 April 2020 at 10:30am on an estimate of hearing of ½ to 1 day.
10.The parties have liberty to apply.
11.The parties’ costs are reserved.
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