Sass Developments Pty Ltd v Bivoltsis & Anor (Ruling)

[2024] VCC 1446

IN THE COUNTY COURT OF VICTORIA

AT MELBOURNE

COMMERCIAL DIVISION

Revised
Not Restricted
Suitable for Publication

BUILDING CASES LIST

Case No. CI-24-00515

SASS DEVELOPMENTS PTY LTD (ACN 123 036 028)

Plaintiff

v

PETER BIVOLTSIS

KATHLEEN BIVOLTSIS

First Defendant

Second Defendant

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JUDGE:	HIS HONOUR JUDGE FRAATZ
WHERE HELD:	Melbourne
DATE OF HEARING:	4 September 2024
DATE OF RULING:	19 September 2024
CASE MAY BE CITED AS:	Sass Developments Pty Ltd v Bivoltsis & Anor (Ruling)
MEDIUM NEUTRAL CITATION:	[2024] VCC 1446

RULING
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Subject:PRACTICE AND PROCEDURE

Catchwords:              Stay – application for stay of execution of judgment pending appeal – whether exceptional circumstances justify a stay – whether real risk of insolvency

Legislation Cited:      Building and Construction Industry Security of Payment Act 2002; County Court Act 1958

Cases Cited:Diamond Builders Pty Ltd v Gilridge Investments Pty Ltd (Ruling) [2023] VCC 2418; Talston Pty Ltd v Daisley [2004] VSC 23; Yuanda Vic Pty Ltd v Façade Designs International Pty Ltd [2020] VSCA 269; Grosvenor Constructions (NSW) Pty Ltd (in administration) v Musico [2004] NSWSC 344; A‑Civil Aust Pty Ltd v Ceerose Pty Ltd [2023] NSWCA 144; Roberts Construction Group Pty Ltd v Drummond Carpentry Services Pty Ltd (No 2) [2024] VSC 271

Ruling:  Application dismissed

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr A R Morrison	C & P Legal
For the Defendant	Mr B Reid	Keypoint Law

HIS HONOUR:

Introduction

1Sass Developments Pty Ltd is a commercial and domestic builder carrying on business with an unlimited registration in both commercial and domestic building. 

2By contract executed 2 November 2022 between it and the defendants, Peter and Kathleen Bivoltsis (“Bivoltsis”), Sass Developments undertook the construction of a childcare centre at 760 Toorak Road, Hawthorn East (“contract”).  Sass Developments left the site in early 2024 prior to completion, and the contract was terminated in June 2024.  The relationship has broken down.

3On 4 June 2024, Sass Developments obtained judgment against Bivoltsis in the sum of $428,606.93 plus interest and costs, pursuant to the Building and Construction Industry Security of Payment Act 2002 (“Act”),[1] in relation to four progress claims made under the contract.

[1]Sass Developments Pty Ltd v Bivoltsis & Anor [2024] VCC 798

4By summons dated 15 August 2024, Bivoltsis seek a stay of the judgment until the hearing and determination of their application for leave to appeal lodged on 16 July 2024. 

5Bivoltsis rely on the affidavit of Nicholas Pitliangas, sworn 14 August 2024, and its exhibits.

6The application was opposed.  The director of Sass Developments, Peter Siassios, swore an affidavit on 29 August 2024 referring to multiple exhibits including Sass Developments’ financial statements for the financial years ended 30 June 2023 (unsigned) and a draft of the financial statements for the year ended 30 June 2024. 

7In addition, pursuant to a notice to produce dated 2 September 2024, Sass Developments produced contracts for four of its current building projects.

Principles

8The summons proceeds by way of rule 66.16 of the County Court Civil Procedure Rules 2018, which states that the Court may stay execution of a judgment. 

9The principles governing a stay application are well settled and not in dispute, save in respect of one matter, to which I will return.  Those principles were set out recently by Judge Burchell in Diamond Builders Pty Ltd v Gilridge Investments Pty Ltd (Ruling).[2] 

[2][2023] VCC 2418 (“Diamond Builders”)

10I respectfully adopt the following principles, as stated by Kaye J in Talston Pty Ltd v Daisley:[3]

“10Rule 66.16 of the Rules of the Supreme Court is general in its expression and simply states that the court may stay execution of judgment. The authorities recognise that under that rule the court has a wide discretion: see, for example, Joskovitz v Bonnick. It is well recognised that the circumstances which relate to the issue of whether or not a stay should go must be matters relating to the enforcement of the order and must not be matters that go to the correctness of the order: see, for example State Bank v Parry (citation omitted).

…

17It is well established that prima facie a plaintiff who obtains successfully a judgment from this court is entitled to enforce it.  Otherwise the process of this court would be irrelevant to the citizens of this State which came before it.  The onus does lie on the defendant to satisfy the court, by proper material, that the defendant ought to be granted the indulgence of the stay to enable her to satisfy the rights of the plaintiff without prejudice to the plaintiff and without undue delay.”

[3][2004] VSC 23

11Further, as stated by the Court of Appeal in Yuanda Vic Pty Ltd v Façade Designs International Pty Ltd:[4]

“…an applicant for a stay must demonstrate the existence of special or exceptional circumstances. Special circumstances may exist where there is a real risk that an appeal, if successful, would be rendered nugatory in the absence of the grant of a stay. In such a case, the Court will be required to balance the prospect that an appeal may be rendered nugatory in the absence of a stay, against the principle that the successful party in the proceeding should be entitled to the fruits of the judgment. Further, a stay should not be granted unless the applicant has demonstrated at least an arguable ground of appeal”.

[4][2020] VSCA 269 at 23-26

12In summary, the power to order a stay is to be exercised only where special or exceptional circumstances exist justifying departure from the ordinary rule that a successful litigant is entitled to the fruits of the judgment and presumption that the judgment is correct; and where the applicant has demonstrated at least an arguable ground of appeal.  However, even in such circumstances, the grant of a stay remains discretionary.  All relevant factors should be considered. 

The issues

13Bivoltsis submits that a stay of the order is justified because:

(a)   the grounds of appeal are reasonably arguable;

(b)   there is a real risk that any money paid to Sass Developments under the judgment would be dissipated and would not be available to be returned to Bivoltsis if they are successful in their application for leave to appeal (the appeal would be rendered nugatory); and

(c)   as the contract came to an end in mid-2024, there is no longer a need to enable working capital or cash to be provided to Sass Developments and its sub-contractors.

14Sass Developments submits that the appeal has no prospect of success, and that there is no “real risk” of prejudice or damage if a stay is not granted, much less the near “certainty” required by the authorities.[5] It says that the principle that a successful plaintiff is ordinarily entitled to the fruits of judgment while an appeal is pending applies with extra force where the judgment has been obtained under the Act which seeks to impose the risk of the plaintiff’s insolvency onto the defendant.[6]

[5]citing Grosvenor Constructions (NSW) Pty Ltd (in administration) v Musico [2004] NSWSC 344 and A‑Civil Aust Pty Ltd v Ceerose Pty Ltd [2023] NSWCA 144, at [24]

[6]Plaintiff’s written outline of submissions, at [2]

15The issues which arise in this application for a stay are as follows:

(a)   Are there sufficiently arguable grounds for the proposed appeal?

(b)   Is there a real risk of insolvency such that monies paid to Sass Developments would not be able to be recovered in the event of a successful appeal?

(c) What are the principles which govern the grant of a stay in the context of an order obtained under the Act?

Appeal prospects

16The decision in first instance was determined on the papers. Bivoltsis submit that, as natural persons, they had a right recognised by s 24 of the Charter of Human Rights and Responsibilities to a fair and public hearing in a contested matter involving matters of fact. 

17By their grounds of appeal, Bivoltsis contend that s 36AA of the County Court Act 1958 is unconstitutional. That section authorises the Court to determine any matter in any proceeding, or determine any proceeding, without an oral hearing, entirely on the basis of written submissions and without the appearance of the parties if the Court is satisfied that it is in the interests of justice to do so and whether or not the parties consent to this course.

18It is not in dispute that both parties filed written submissions in this proceeding in relation to the question of whether the matter should be determined ‘on the papers’. 

19Both parties referred me to their written case on the appeal. 

20It is sufficient for the purposes of this application for a stay to observe that whilst they may be weak, I am not in a position to determine that the grounds are not sufficiently arguable grounds for a proposed appeal, and to refuse a stay on this basis.  The real issue in this application is whether the benefit of any proposed appeal would be rendered nugatory where a judgment sum, if paid over, would not be recovered due to the financial position or creditworthiness of the recipient.

Is there a real risk that the appeal, if successful, would be rendered nugatory?

21I am not satisfied that there is a risk of insolvency of Sass Developments.  Accordingly, Bivoltsis is not able to satisfy the burden of proof required to enliven the discretion to grant a stay.

22Sass Developments, on the evidence before me, is a going concern, with five projects that are ongoing or scheduled to commence shortly:

(a)   a $4.3 million construction of nine townhouses in Footscray, Victoria scheduled to be completed in October 2024;

(b)   an $800,000 construction of a residential house in Glen Iris, Victoria scheduled to be completed in November 2024;

(c)   a $4.4 million construction of a childcare centre located in Footscray, Victoria scheduled to be completed in October 2025;

(d)   an $8.8 million construction of 19 townhouses located in West Footscray, Victoria scheduled to be completed in February 2026;

(e)   a $4.5 million construction of residential townhouses located in Hawthorn, Victoria expected to be completed in March 2026 (contracts not signed),

and it is likely that Sass Developments will take on further projects in the near future.[7]

[7]Siassios affidavit, paragraph 22(d)

23Much of the argument at the hearing was centred on the weight of the evidence produced by Sass Developments in the form of the (unsigned) 2023 financial year statements and the draft 2024 financial statements.  Those financial statements record the following:

(a)   financial year 2023 – $437,042 equity, gross sales $4.9 million, and profit before income tax $371,241; and

(b)   financial year 2024 – $943,080 equity, gross sales $4.5 million, and profit before income tax $506,038.

24The principal factors relied upon by Bivoltsis were the disclosure of limited cash in the balance sheets, and a series of disputed transactions in relation to payment of various sub-contractor invoices towards the end of the underlying contract. 

25Bivoltsis also relies upon various issues relating to:

(a)   Sass Developments’ financial records including details of payments made by Sass Developments from funds paid by Bivoltsis and directors’ loans supporting its balance sheet;

(b)   alleged defects in Sass Developments’ construction work under the contract with Bivoltsis culminating in rectification claims in the sum of $1.5 million.  These claims are disputed by Sass Developments and are the subject of Federal Court proceedings between the parties (VID868/2024); and

(c)   a new entity incorporated by Mr Siassios giving rise to the prospect of a phoenix company.

26In answer to factual issues, Mr Siassios deposes that:

(a)   the 2023 financial statements exhibited to his affidavit are, “A true copy of [Sass Developments’] FY23 financial statements”;[8]

(b)   the 2024 financial statements

“have not been lodged yet. I have obtained however a draft copy of the Contractor’s profit and loss statement and balance sheet, which indicates $943,080.68 in equity;

A true copy of the Contractor’s draft FY24 profit and loss statement and balance sheet is produced at PS-4”

[8]Siassios affidavit, at 22(b)

(c)   Sass Developments issued a notice of intention to suspend under the contract in the circumstances of eight unpaid invoices totalling $662,689.  Further, Sass Developments has issued notices of dispute in relation to the negative certifications in progress claim certificates issued by Bivoltsis.  These matters remain unresolved and are the subject of proceedings in the Federal Court;

(d)   the extent of any structural issues associated with concrete works are disputed;

(e)   the issues with payments to subcontractor, Curvecrete, $30,504.38, have been resolved;

(f)    there are no known outstanding invoices between Sass Developments and El Dorado;

(g)   there are no outstanding invoices between Sass Developments and Steer Manufacturing;

(h)   an invoice for $839 in respect of carpentry materials incurred by a Mr Dimopoulos was expressly excluded from Sass Developments’ obligations under the contract; and

(i)    the new entity, Sass DC Pty Ltd, was incorporated for the purpose of future commercial projects outside of future domestic projects which will continue to be administered by Sass Developments.  The new entity was incorporated following advice from Mr Siassios’s accountant that the new entity would assist in tax minimisation for future commercial projects, not for any alleged phoenixing.  If he were to wind up Sass Developments, it may impact on his ability to procure registration of any other entity and there was a risk that the Victorian Managed Insurance Authority would refuse to provide warranty insurance, without which Sass Developments would not be able to undertake any domestic building.

27Mr Siassios was not required to attend for cross-examination, and for the purposes of this application, I accept his evidence.  There was no evidence of any contractor/supplier debt other than the hearsay evidence of Mr Pitliangas.

28I accept Sass Developments’ submission that the existence of any disputed transactions in relation to sub-contractors, which range from $869 to approximately $50,000, in the context of an ongoing concern with a turnover of over $4 million, are insufficient to establish any real risk of insolvency anyway. 

29Any broader dispute between the parties in Federal Court proceeding VID868/2024, including alleged defects, are not matters that go to Sass Developments’ solvency or the merits of the issues on the appeal.[9]

[9]See Diamond Builders, at [46] to [51]

30On the material before me, I am not satisfied that there is a real risk:

(a)   Sass Developments is insolvent; or

(b)   the proposed appeal would be rendered nugatory because Sass Developments would be unable to repay. 

31The evidence shows an ongoing trading business that has been in operation for a number of years, with significant turnover.  Although it does not appear to have significant assets, the evidence as a whole supports my finding that Sass Developments is an ongoing trading company that continues in operation consistent with the evidence of Mr Siassios.  I am not satisfied there is a real risk that the funds, if paid over, would be dissipated so as to prevent recovery in the event of a successful appeal.  Whilst there is always some commercial risk of that occurring, I do not consider that the risk is of such magnitude as to justify a stay.

What are the principles which govern the grant of a stay in the context of an order obtained under the Act?

32Sass Developments referred me to Grosvenor Constructions (NSW) Pty Ltd (in administration) v Musico,[10] in support of its submission that there must be “more than a ‘real risk’” that a right to recover amounts paid under the Act following a successful appeal would be rendered nugatory before a stay would be ordered.

[10][2004] NSWSC 344 at [31]-[32]

33In Grosvener, which considered a stay application in the context of very similar security of payment legislation in New South Wales, Einstein J stated:

“31... Whilst payments under the Act are interim, it nonetheless is the policy of the Act that successful claimants be paid. For that reason, there is a sound reason for making stays less readily available in relation to debts arising under the Act, in contrast to the position in relation to appeals arising from curial proceedings. For example, in cases such as the present, the Court might require more than a “real risk that [the respondent] will suffer prejudice or damage, if a stay is not granted”.

32 However I accept that in a case such as the present, where there is a certainty that the defendants’ rights will be otherwise rendered nugatory, and that it will suffer irreparable prejudice, the proper and principled exercise of the Courts discretion is to grant a stay.”[11]

[11]Ibid, at [31] and [32]

34Bivoltsis relied upon certain comments of Niall JA in Roberts Construction Group Pty Ltd v Drummond Carpentry Services Pty Ltd (No 2)[12] in support of their submission that relevant factors in this application included the contract having ended in June 2024.  Niall JA stated:

[12][2024] VSC 271

... I have also had regard to the nature of the proceeding. The purpose of the Act in respect of which the proceeding has been brought is to allow prompt payment to enable working capital to be provided to persons who provide building services during the life of a construction contract. The Act does not finally determine the rights under the contract but clearly evinces an intention that payments should be made, in effect on an interim basis, to preserve the cash flow of those who provide labour and materials pursuant to a building contract. An obvious purpose is to enable the parties supplying labour or materials to be able to pay its suppliers during the life of the contract, rather than having to wait until its completion. In one sense, the risk of non-payment is shifted in favour of the claimant.

It is not necessary to consider whether this factor is additional to the requirement to show special or exceptional circumstances justifying a stay.  Rather, it seems to be part of the matrix of circumstances which are relevant to assessing where the justice of the case lies.  And that is how I will treat it on the present application.[13]

[13]Ibid, at [30] and [31]

(emphasis added)

35In other words, because the contract was at an end, and Sass Developments was no longer providing building services under the contract, it no longer required working capital.  Accordingly, Bivoltsis submitted there was no basis to require evidence to establish “more than a real risk” that the appeal might be rendered nugatory in order for a stay to be granted.

36It was not in dispute that both parties retained rights under the contract, and it seems to me that the contract ending in June 2024 is simply part of the matrix of circumstances which are relevant to assessing where the justice of the case lies. It is not sufficient to displace the purpose of the Act, which requires prompt payment while preserving the parties’ contractual rights. Nor does it tip the balance in favour of the grant of a stay because Bivoltsis has not established there is a real risk that a right to recover amounts paid under the Act following a successful appeal would be rendered nugatory.

37My findings in [30] and [31] above are sufficient to dispose of this application for a stay in the context of an order under the Act. There is no need to determine whether or not the higher burden applied in several authorities since Grosvenor, and in Diamond Builders, because Bivoltsis has not established a “real risk” that the rights to recover the amounts paid under the Act would be rendered nugatory unless a stay is ordered.

Conclusion

38I am not satisfied that Bivoltsis has established grounds for a stay, and there are no special or exceptional circumstances that warrant it.

39The summons dated 15 August 2024 is dismissed, and I order the defendants pay the plaintiff’s costs of and incidental to the summons filed on 15 August 2024 on a standard basis to be taxed in default of agreement.