Seymour Whyte Constructions Pty Ltd v Ostwald Bros Pty Ltd (in liq)

[2018] NSWSC 412

Supreme Court

New South Wales

• Summary available
• Amendment notes

Medium Neutral Citation:	Seymour Whyte Constructions Pty Ltd v Ostwald Bros Pty Ltd (in liq); Ostwald Bros Pty Ltd (in liq) v Seymour Whyte Constructions Pty Ltd [2018] NSWSC 412
Hearing dates:	8 and 13 March 2018
Decision date:	05 April 2018
Jurisdiction:	Equity - Technology and Construction List
Before:	Stevenson J
Decision:	Contract to be rectified by deleting cl 9.1 of the Special Conditions; adjudication determination valid; any judgment obtained as a result to be stayed pending taking of accounts under s 553C of the Corporations Act 2001 (Cth)
Catchwords:	CONTRACTS – Rectification – Intention – Common intention – where contract comprised formal instrument and additional conditions – where special conditions contained clause purporting to replace clause in formal instrument – where clause in formal instrument was said to be “non-negotiable” prior to agreement – whether contract should be rectified by deleting clause in special condition BUILDING AND CONSTRUCTION – CORPORATIONS – where subcontractor wound up after obtaining adjudication determination under Building and Construction Industry Security of Payment Act 1999 (NSW) – whether Building and Construction Industry Security of Payment Act remains available to subcontractor – whether subcontractor remains a “claimant” after being wound up – whether decision of Court of Appeal of Victoria on this question is plainly wrong – effect of s 553C of the Corporations Act 2001 (Cth) on subcontractor’s rights – whether there should be a stay of any judgment obtained by subcontractor based on an adjudication certificate issued under the Building and Construction Industry Security of Payment Act pending the taking of accounts under s 553C of the Corporations Act
Legislation Cited:	Bankruptcy Act 1966 (Cth) Building and Construction Industry Security of Payment Act 1999 (NSW) Building and Construction Industry Security of Payment Act 2002 (Vic) Corporations Act 2001 (Cth) Judiciary Act 1903 (Cth)
Cases Cited:	Australian Securities Commission v Marlborough Gold Mines Ltd (1993) 177 CLR 485; [1993] HCA 15 Chase Oyster Bar Pty Ltd v Hamo Industries (2010) 78 NSWLR 393; [2010] NSWCA 190 Chase Oyster Bar Pty Ltd v Hamo Industries Pty Ltd [2010] NSWSC 1167 Ex parte Barnett; Re Deveze (1874) 9 Ch App 293, 297 Façade Treatment Engineering Pty Ltd (in liq) v Brookfield Multiplex Constructions Pty Ltd [2016] VSCA 247 Farah Constructions Pty Limited v Say-Dee Pty Limited (2007) 230 CLR 89; [2007] HCA 22 Fowler v Fowler (1859) 4 De G & J 250; (1859) 45 ER 97 GJ Coles & Co Ltd v Retail Trade Industrial Tribunal (1986) 7 NSWLR 503 GM & AM Pearce & Co Pty Ltd v RGM Australia Pty Ltd [1998] 4 VR 888 Grosvenor Constructions (NSW) Pty Ltd (in administration) v Musico [2004] NSWSC 344 Gye v McIntyre (1991) 171 CLR 609; [1991] HCA 60 Issa v Berisha [1981] 1 NSWLR 261 Jadwan Pty Ltd v Department of Health & Aged Care [2003] FCAFC 288; (2003) 145 FCR 1 Kell & Rigby Pty Ltd v Guardian International Properties Pty Ltd [2007] NSWSC 554 Plaintiff S297/2013 v Minister for Immigration and Border Protection (2015) 255 CLR 231; [2015] HCA 231 Rojo Building Pty Ltd v Jillcris Pty Ltd [2007] NSWSC 880 Rubana Holdings Pty Ltd v 3D Commercial Interiors Pty Ltd [2008] NSWSC 1405 Schokman v Xception Construction Pty Ltd [2005] NSWSC 297 Simic v New South Wales Land and Housing Corporation [2016] HCA 47 State of New South Wales v Kable (2013) 252 CLR 118; [2013] HCA 26 Veolia Water Solutions v Kruger Engineering (No 3) [2007] NSWSC 459
Category:	Principal judgment
Parties:	Seymour Whyte Constructions Pty Ltd (Plaintiff/Cross-Defendant) Ostwald Bros Pty Ltd (in liq) (First Defendant/Cross-Claimant) Doron Rivlin (Second Defendant) Adjudicate Today Pty Limited (Third Defendant)
Representation:	Counsel: M Christie SC with D Hume (Plaintiff/Cross-Defendant) S Robertson (First Defendant/Cross-Claimant)   Solicitors: K&L Gates (Plaintiff/Cross-Defendant) King & Wood Mallesons (First Defendant/Cross-Claimant)
File Number(s):	SC 2017/348623

Judgment

1. On 6 September 2016 the plaintiff, Seymour Whyte Constructions Pty Ltd, as contractor, entered into a contract with Ostwald Bros Pty Ltd (now in liquidation) as subcontractor, to perform road works on the Pacific Highway north of Grafton. The head contractor was Roads and Maritime Services.

2. On 24 August 2017, Seymour Whyte terminated that contract under cl 24 of the contract, which provided for termination without cause.

3. The following day, 25 August 2017, the directors of Ostwald resolved to appoint administrators.

4. Several weeks earlier, on 28 July 2017, Ostwald served on Seymour Whyte a payment claim for $6,351,066.08 pursuant to s 13 of the Building and Construction Industry Security of Payment Act 1999 (NSW) (the “Act”).

5. On 11 August 2017 Seymour Whyte served on Ostwald a payment schedule pursuant to s 14 of the Act which identified a “scheduled amount” for the purposes of s 14(2)(b) of the Act (being the payment that Seymour Whyte then stated it proposed to make) of $2,505,237.58.

6. Seymour Whyte has not paid Ostwald any part of the scheduled amount. There is a dispute as to when such payment was due.

7. On 27 September 2017, relying on Seymour Whyte’s failure to pay the scheduled amount, Ostwald made an adjudication application under s 17(1)(a)(ii) of the Act. In so doing, Ostwald relied on 16(2)(a)(ii) of the Act, to which I will return.

8. There is a dispute as to whether that purported adjudication application was made within the time prescribed by s 17(3) of the Act.

9. On 6 November 2017, the Adjudicator issued an adjudication determination pursuant to s 22 of the Act in which he determined that the amount due by Seymour Whyte to Ostwald was $5,074,218.27.

10. Seymour Whyte commenced these proceedings on 17 November 2017.

11. On that date, both parties appeared before Ball J as Technology & Construction List Judge.

12. Ball J:

1. granted Seymour Whyte leave pursuant to s 440D(1)(b) of the Corporations Act 2001 (Cth) to commence these proceedings on condition that Seymour Whyte not enforce any orders made in its favour against Ostwald without leave;

2. noted that Seymour Whyte gave the Court the usual undertaking as to damages and to pay into Court the adjudicated amount; and

3. noted Ostwald’s undertaking (without admissions) not to take steps to obtain an adjudication certificate under s 24 of the Act, or to file an adjudication certificate under s 25 of the Act, or to take any further steps to enforce the adjudication determination until after the determination of these proceedings or until released from the undertaking by order of the Court.

13. In its summons, Seymour Whyte seeks a declaration that the adjudication determination is void and a stay of any judgment arising from the filing by Ostwald of an adjudication certificate “until the final determination of the parties’ rights in accordance with s 32 of the Act”.

14. The summons has since been amended to seek further relief, to which I refer below.

15. The only basis upon which Seymour Whyte now asserts that the adjudication determination is void is that Ostwald’s adjudication application was not made within the time specified in s 17 of the Act and that, accordingly, the adjudicator had no jurisdiction to make the determination.

16. On 23 November 2017 the administrators of Ostwald reported to creditors that, in their opinion, Ostwald was insolvent, that no funds would be available to pay out secured creditors, and recommended that the company be placed in liquidation.

17. On 30 November 2017 the creditors of Ostwald resolved that it should be wound up under s 439C(c) of the Corporations Act.

18. By reason of ss 513B and 513C of the Corporations Act, its winding up is taken to have commenced on the day that administrators were appointed; that is 25 August 2017.

The issues

19. The first issue is whether the contract should be rectified in the manner I will describe below.

20. If the contract should be so rectified, the second issue is whether Ostwald made its adjudication application in time. Resolution of that question depends upon the proper construction of ss 16 and 17 of the Act.

21. If Ostwald was out of time to make the adjudication application, a further issue arises as to whether it remains entitled to seek summary judgment for the unpaid scheduled amount pursuant to s 16(2)(a)(i).

22. It is common ground that if Ostwald made the adjudication application within the time limit specified in s 17, the adjudication determination is valid.

23. In that event, the question is what are the implications for Ostwald now that it is in liquidation.

24. In that regard, Seymour Whyte advances two contentions.

25. The first is that Ostwald has lost the right to rely upon the provisions of the Act because, consistently with the decision of the Victorian Court of Appeal in Façade Treatment Engineering Pty Ltd (in liq) v Brookfield Multiplex Constructions Pty Ltd [2016] VSCA 247 (Warren CJ, Tate and McLeish JJA), Pt 3 of the Act is not available to companies in liquidation.

26. Alternatively, Seymour Whyte seeks a stay of the kind referred to at [13] above consistently with the observations of Einstein J in Grosvenor Constructions (NSW) Pty Ltd (in administration) v Musico [2004] NSWSC 344.

Decision

27. In my opinion, the contract should be rectified in the manner contended by Ostwald.

28. Accordingly, and because of my reading of ss 16 and 17 of the Act, Ostwald made its adjudication application in time.

29. The adjudication determination is, accordingly, valid.

30. I do not agree that Pt 3 of the Act is not available to companies in liquidation. I find that the decision of the Victorian Court of Appeal in Façade is “plainly wrong” and that I should not follow it.

31. However, now that Ostwald is in liquidation, and as it and Seymour Whyte have had “mutual dealings” of the kind referred to in s 553C of the Corporations Act, they must follow the procedure specified in that section. Accordingly, I propose to order that any judgment obtained by Ostwald arising from the filing of an adjudication certificate be stayed until that procedure is finalised.

Should the contract be rectified?

32. The contract comprises, relevantly:

1. the “Formal Instrument of Agreement”;

2. the “Special Conditions”; and

3. the “Subcontract Conditions”.

33. Clause 1.2 of the Formal Instrument of Agreement provides that, in the event of any inconsistency, the Special Conditions should be read as having “priority” over the Subcontract Conditions.

34. Clause 20.7 of the Subcontract Conditions provides that any payment claim must be paid by Seymour Whyte “within the time stated in the Particulars” to the Subcontract Conditions.

35. Those “Particulars” include:

“Item
…
21.	Due date for payment (clause 20.7)	□ 30 days after the Contractor receives the payment claim or ☑Within 30 days of the end of month of claim. Select whichever is applicable If nothing stated: ∙ if the head contract for the Project is the New South Wales Government GC21 (Edition 2) General Conditions of Contract (GC21): 15 Business Days; ∙ otherwise, 25 Business days.
…
23.	Head Contraction Conditions – GC21	Is the head contract for the Project the New South Wales Government GC21 (Edition 2) General Conditions of Contract (GC21)? Yes ☑ No □ If YES, the GC21 Special Conditions – All Subcontracts in Annexure C will apply. If YES, complete Items 24 and 25 of these Particulars.”

36. Thus, particular 21 noted that if there is “nothing stated” at Item 21, and if (as particular 23 confirmed to be the case) the New South Wales Government GC21 (Edition 2) General Conditions of Contract applied, the due date for payment would be 15 business days; otherwise it would be 25 business days.

37. But there is something “stated” at Item 21: namely that the due date for payments is to be “within 30 days of the end of month of claim”.

38. Clause 9.1 of the GC 21 General Conditions, which are included in the Special Conditions, provides:

“Clause 20.7 of the Subcontract Conditions is replaced with the following clause:

If the balance of the statement [after deducting the amount in clause 20.6(b) from the amount in clause 20.6(a)] is that an amount is payable to the Subcontractor then the Contractor must, within 15 Business Days after the Contractor receives the payment claim…”.

39. Ostwald claims that the latter provision was inserted in the contract as a result of the mutual mistake of the parties and, despite its terms, does not reflect the parties’ intention that Seymour Whyte had until 30 days from the end of the month following receipt of a payment claim to make payment.

40. Ostwald seeks an order that the contract be rectified by deleting cl 9.1.

41. Ostwald relies upon the evidence of Mr Jarrod McHugh, a civil engineer engaged by Ostwald to negotiate the terms of the contract.

42. Mr McHugh said that Ostwald prepared a “Departures Table” which set out the position Ostwald wished to negotiate in relation to the clauses in the contract. It records the position of the parties in relation to negotiations in respect of each of those clauses.

43. Mr McHugh negotiated these terms with, amongst other people, Mr Michael Demasi, Seymour Whyte’s Commercial Manager.

44. On 18 August 2016 Mr Demasi sent Mr McHugh what appears to be the final version of the Departures Table.

45. So far as concerns Item 21 in the Particulars to the Subcontract Conditions, the version of the Departures Table current on 18 August 2016 was in the following terms:

“Item	Clause	Ostwald Response	Seymour Whyte Position	Comment	Ostwald Secondary Response	SWC Final Response
32.0	Subcontract Conditions Annexure Cl21.0	Within…10 Business Days of the end of month claim. …	Departure Not Accepted	OBPL maintains its position for 28 day payment from date of payment claim. This is a common commercial position accepted, please advise why this is not reasonable as it is noted there is no SWCPL comment.	Payments are made in line with SWC payment runs. This is 30 days from end of month of claim. Non-negotiable.”

46. Mr McHugh said he had this exchange with Mr Demasi:

“Mr McHugh:   If we can’t have 10 days, can we have 28? Why isn’t that reasonable?

Mr Demasi:   The 30 days is non-negotiable, payments are made in line with Seymour Whyte’s payment runs. This is 30 days from end of month of claim”.

47. Mr McHugh said that the contents of the last two columns of the Departures Table reflect what occurred at that meeting.

48. Mr McHugh continued:

“I am not aware of any further negotiations between the parties regarding the due date for payment under the Subcontract. Given my role in the contract negotiation, I would expect to be made aware of any further discussions on this issue”.

49. That evidence was not challenged. Seymour Whyte did not call Mr Demasi or explain his absence. Mr McHugh was not cross-examined.

50. On 6 September 2016 (the day the contract was executed) Seymour Whyte sent Ostwald a pro forma “Provider Establishment Request Form” under cover of an email headed “Oswald [sic] Set up form” and which stated that Seymour Whyte required Ostwald to complete and sign the form.

51. In an internal email, Ostwald’s project manager told Ostwald’s accounts receivable department that the form was needed “in order for Seymour Whyte to pay us”.

52. Under the heading “Payment Details” the Provider Establishment Request Form stated:

“Stated Payment Terms are 30 Days from Month End unless otherwise arranged”.

53. The evidence does not reveal whether that form was sent by Seymour Whyte to Ostwald before or after execution of the contract.

54. The contract was executed on behalf of Ostwald by one its directors, Mr Matthew Ostwald, and by its secretary, Mr Dominic O’Brien. Neither gave evidence before me.

55. Mr McHugh gave unchallenged evidence that Seymour Whyte usually (but not always) made payments to Ostwald on or after the 30th day of the month following delivery of a payment claim.

Principles

56. The relevant principles were recently restated by the High Court in Simicv New South Wales Land and Housing Corporation [2016] HCA 47; as follows:

“[103]    Rectification is an equitable remedy, the purpose of which is to make a written instrument ‘conform to the true agreement of the parties where the writing by common mistake fails to express that agreement accurately’. For relief by rectification, it must be demonstrated that, at the time of the execution of the written instrument sought to be rectified, there was an ‘agreement’ between the parties in the sense that the parties had a ‘common intention’, and that the written instrument was to conform to that agreement. Critically, it must also be demonstrated that the written instrument does not reflect the ‘agreement’ because of a common mistake. Unless those elements are established, the ‘hypothesis arising from execution of the written instrument, namely, that it is the true agreement of the parties’ cannot be displaced.

[104]   The issue may be approached by asking — what was the actual or true common intention of the parties? There is no requirement for communication of that common intention by express statement, but it must at least be the parties’ actual intentions, viewed objectively from their words or actions, and must be correspondingly held by each party.” (Gageler, Nettle and Gordon JJ) (Citations omitted.)

57. Further, each of these matters must be established by clear and convincing evidence. As Kiefel J (as the Chief Justice then was) stated in Simic at [41]:

“[The] intention must be proved by admissible evidence and proved to a high standard. In a passage from Fowler v Fowler [(1859) 4 De G & J 250 at 265; (1859) 45 ER 97 at 103], which has been cited with approval by this Court, Lord Chelmsford said that:

‘a person who seeks to rectify a deed upon the ground of mistake must be required to establish, in the clearest and most satisfactory manner, that the alleged intention to which he desires it to be made conformable continued concurrently in the minds of all parties down to the time of its execution’.”

58. Rectification is concerned with the subjective and actual state of mind of the parties, objectively ascertained.

59. As Kiefel J explained in Simic (at [42]):

“What is necessary to be shown is the actual intention of each of the parties. This has often been referred to by intermediate appellate courts as the subjective intention of the parties. A court, in determining whether the burden of proof is discharged, may be said to view the evidence of intention objectively, in the sense that it does not merely accept what a party says was in his or her mind, but instead considers and weighs admissible evidence probative of intention.”

Should the contract be rectified?

60. I am comfortably satisfied that the actual and common intention of the parties was that Seymour Whyte have 30 days from the end of the month in which Ostwald served a payment claim to make payment.

61. Further, I am satisfied that the written agreement does not reflect the agreement because of a common mistake.

62. Mr Demasi told Mr McHugh that Seymour Whyte required “30 days from end of month” and that this was “non-negotiable”. This is reflected in the Departures Table, which provides a vivid insight into the parties’ negotiations. Mr McHugh, the person responsible for negotiations, conducted no further negotiations on this topic. The inference is irresistible that Ostwald accepted that Seymour Whyte meant what it said: the matter was not negotiable.

63. The particulars to the Subcontract Conditions confirm the common intention of the parties, as does Seymour Whyte’s “Provider Establishment Request Form” (see [50] above).

64. Seymour Whyte submitted that rectification should not be granted because “rectification would affect an innocent third party, the adjudicator” by “both giving him statutory powers and imposing on him statutory duties that he would not otherwise have had”.

60. I do not see that as a reason to refuse rectification in the circumstances of this case. The making of an order for rectification has the effect of confirming a matter that the adjudicator no doubt assumed; namely that the contractual timeline was such that a valid adjudication application could be made, and that he had jurisdiction to make his determination. That merely shows that there is utility in making the rectification order. It is not a reason to not make the order.

61. I find this a clear case where rectification should be ordered by deletion of cl 9.1 of the Special Conditions.

Consequences of rectification

67. A rectified document is treated as having been in its rectified form as from its execution: for example see Issa v Berisha [1981] 1 NSWLR 261, at 265 (Powell J).

68. The contract, as rectified, therefore has the effect that the due date for payment of the payment claim was 30 August 2017.

69. Seymour Whyte did not pay to Ostwald the amount referred to in the payment claim by that date. Nor did Seymour Whyte pay Ostwald the scheduled amount identified in its payment schedule by that date.

70. In these circumstances, s 16(1) of the Act is enlivened.

71. Section 16(1) of the Act provides:

“This section applies if:

(a) a claimant serves a payment claim on a respondent, and

(b) the respondent provides a payment schedule to the claimant:

(i) within the time required by the relevant construction contract, or

(ii) within 10 business days after the payment claim is served,

whichever time expires earlier, and

(c) the payment schedule indicates a scheduled amount that the respondent proposes to pay to the claimant, and

(d) the respondent fails to pay the whole or any part of the scheduled amount to the claimant on or before the due date for the progress payment to which the payment claim relates.”

72. Each of the requirements of s 16(1)(a), (b), (c) and (d) is satisfied.

73. In those circumstances, Ostwald was entitled to proceed under s 16(2) of the Act.

74. Section 16(2) provides, relevantly:

“[Where a respondent to a payment claim serves a payment schedule identifying a schedule amount but does not pay the scheduled amount before the due date], the claimant:

(a) may:

(i) recover the unpaid portion of the scheduled amount from the respondent, as a debt due to the claimant, in any court of competent jurisdiction, or

(ii) make an adjudication application under section 17(1)(a)(ii) in relation to the payment claim…”.

75. Ostwald chose to follow the course referred to in s 16(2)(a)(ii); namely, to make an adjudication application under s 17(1)(a)(ii).

76. Section 17(3)(d) of the Act provides that an application under s 17(1)(a)(ii) must be made within 20 business days after the due date for payment.

77. The due date for payment was 30 August 2017. Twenty business days thereafter is 27 September 2017. Ostwald made the adjudication application that day.

78. In those circumstances, my opinion is that the adjudication application was made in time.

79. Seymour Whyte contends that the provisions of s 17(1)(a) should compel a contrary conclusion.

80. I do not accept that is so.

81. The statutory regime directs a claimant, who wishes to make an adjudication application in the circumstances at s 16(2)(a)(ii), to s 17(1)(a)(ii).

82. In any event, s 17(1)(a) provides:

“(1) A claimant may apply for adjudication of a payment claim (an adjudication application) if:

(a) the respondent provides a payment schedule under Division 1 but:

(i) the scheduled amount indicated in the payment schedule is less than the claimed amount indicated in the payment claim, or

(ii) the respondent fails to pay the whole or any part of the scheduled amount to the claimant by the due date for payment of the amount…”.

83. Seymour Whyte submitted:

“[Section] 17(1)(a)(i) and (ii) are alternatives. If s 17(1)(a)(i) applies, then s 17(1)(a)(ii) does not. Where s 17(1)(a)(i) applies and s 17(1)(a)(ii) does not, an adjudication application can only be made under s 17(1)(a)(i) and cannot be made under s 17(1)(a)(ii).

On this analysis, one applies s 17(1)(a) sequentially. One first asks whether the scheduled amount is less than the claimed amount. If so, then s 17(1)(a)(i) applies. If s 17(1)(a)(i) does not apply – because, for example, the scheduled amount is the same as the claimed amount – then s 17(1)(a)(ii) may apply if the promised payment is not made on time.”

84. I do not see ss 17(1)(a)(i) and 17(1)(a)(ii) as being “alternatives” in this sense.

85. Section 17(1)(a)(i) refers to a circumstance where the respondent serves a payment schedule in which the scheduled amount is less than the amount claimed. As a practical matter, this would be every circumstance in which a payment schedule is served. There would be no reason for a party receiving a payment claim to serve a payment schedule in which the scheduled amount was the same as (let alone more than) the amount claimed. Doubtless, for that reason, the Act makes no provision for dealing with a payment schedule having those characteristics.

86. The circumstances identified in s 17(1)(a)(i) would invariably be present when a payment schedule is served. Section 17(3)(c) provides that, in those circumstances, an adjudication application must be made within 10 business days after the claimant receives the payment schedule.

87. Section 17(1)(a)(ii) contemplates a circumstance where the payment schedule not only contains a scheduled amount less than the amount claimed, but where the respondent fails to pay the whole or any part of the scheduled amount.

88. In that event, under s 17(3)(d) the claimant has 20 business days after the due date of payment to make an adjudication application.

89. There could well be circumstances where s 17(1)(a)(i), but not s 17(1)(a)(ii), is engaged; for example:

1. if the scheduled amount is nil (in which event s 17(1)(a)(ii) could not apply because there would be no scheduled amount that the respondent could fail to pay); or

2. if the scheduled amount is more than nil but the respondent has paid the scheduled amount (in which event s 17(1)(a)(ii) could not apply because the respondent paid the scheduled amount).

90. But, as a practical matter, there will never be a circumstance in which only s 17(1)(a)(ii) is engaged.

91. In my opinion, s 17(1) and (3) should be construed so that the 10 business days time limit in s 17(3)(c) applies if only s 17(1)(a)(i) is engaged, and the 20 business days limit in s 17(3)(d) applies when s 17(1)(a)(ii) is also engaged. Once s 17(1)(a)(ii) is engaged, the adjudication application should be seen as being made under s 17(1)(a)(ii), rather than under s 17(1)(a)(i).

92. So construed, s 17(1) is complementary to, and consistent with, s 16(2)(a)(ii).

93. The result is that Ostwald’s adjudication application was made under s 17(1)(a)(ii) and was within time.

The “fork in the road” point

94. As I have concluded that Ostwald’s adjudication application was made within time, and as there is no other challenge to the adjudication determination, the adjudication stands (subject to the Façade issue (see [126] to [157] below)).

95. It is therefore not necessary to consider Ostwald’s alternative contention that, assuming its adjudication application was not made within time, it would be entitled to proceed down the other “fork in the road” in s 16(2)(a) (to adopt the language used in argument) and, under s 16(2)(a)(i), recover the unpaid portion of the scheduled amount “as a debt due…in any court of competent jurisdiction”.

96. However, in deference to the detailed submissions both parties made on the topic, I shall deal with it.

97. In s 4 of the Act, “adjudication application” is defined as an application “referred to” in s 17.

98. Section 17(3) states that an adjudication application “must” comply with the various requirements there enumerated, including that it be in writing and made within the time limits specified, including those in s 17(3)(c) and (d).

99. In Kell & Rigby Pty Ltd v Guardian International Properties Pty Ltd [2007] NSWSC 554, Bergin J (as her Honour then was) drew attention to the observations of McHugh JA (as his Honour then was) in GJ Coles & Co Ltd v Retail Trade Industrial Tribunal (1986) 7 NSWLR 503, at 525:

“One of the basic doctrines of common law jurisprudence is the failure

to perform a mandatory condition imposed by statute invalidates the doing of

any act dependent on the fulfilment of that condition. In so far as such an act

imposes duties or creates rights, the effect of non-fulfilment of the condition

is that the act is totally incapable of creating legal consequences. For legal

purposes, the act has no effect and may be disregarded. Administrative and

constitutional law provide many illustrations of this basic doctrine.” (Emphasis in original.)

100. Applying that reasoning, a failure to comply with a mandatory requirement of s 17(3) “invalidates the doing of any act dependent on” compliance withs 17(3), namely invoking the provisions of the Act which are contingent on the making of an adjudication application.

101. This, in effect, was the conclusion to which Bergin J came in Kell & Rigby.

102. In Kell & Rigby, the subcontractor served on the contractor a payment claim but the contractor did not serve on the subcontractor a payment schedule within the time specified under s 14(4) of the Act.

103. The subcontractor made an adjudication application, purportedly under s 17(1)(b) of the Act but without complying with s 17(2) of the Act.

104. Her Honour concluded that the adjudication application was a nullity but that the subcontractor was not precluded from proceeding down the other “fork in the road” (not language her Honour used) to recover summary judgment.

105. Thus, her Honour concluded:

“[24] I am satisfied that the absence of the word ‘valid’ before the words ‘adjudication application’ in s 15(2)(a)(ii) of the Act does not mean that the legislature intended that a party could make an invalid application. This is particularly so having regard to the rights that are triggered when an adjudication application is made, including the right of the respondent to receive notice of the intention to make the application and the right of the respondent to have the fresh opportunity to file a payment schedule.

[25] I am of the view that the adjudication application was a nullity by reason of the plaintiff’s failure to comply with the mandatory condition imposed by s 17(2) of the Act. Accordingly the act of filing and serving that document was incapable of creating legal consequences, including the legal consequence of the making of an election under s 15(2) of the Act.”

106. In coming to that conclusion, her Honour said she did not feel “constrained” to follow an earlier decision of Einstein J in Schokman v Xception Construction Pty Ltd [2005] NSWSC 297, the correctness of which decision was assumed by McDougall J in Rubana Holdings Pty Ltd v 3D Commercial Interiors Pty Ltd [2008] NSWSC 1405 (at [24]).

107. In Schokman, the contractor did not serve a payment schedule in response to the subcontractor’s payment claim. The subcontractor purported to make an adjudication application under s 15(2)(a)(ii) of the Act. Einstein J held that it had done so out of time.

108. Einstein J held:

“[21]   I am able to deal with the cross-claim shortly. The holding is that upon the proper construction of section 15(2)(a) the sub-section makes provision for two separate and distinct alternatives that may be adopted by a claimant.

[22]   The whole of the relevant scheme is clearly to provide a fast track approach leading to a result but importantly never operating to the exclusion of "any other entitlement that a claimant may have under a construction contract" [s 4 (a)]. Hence it cannot have been the intention of the legislature to permit a claimant [in a circumstance where no payment schedule has been provided] to make an adjudication application in relation to the payment claim and later in the event that the adjudication miscarried, to pursue curial proceedings to recover the unpaid portion of the claimed amount from the respondent as a debt. This would expose a respondent not to one set of interim procedures aimed at a swift (albeit interim) result, but to two such interim sets of procedures.” (Emphasis in original.)

109. Bergin J declined to follow Einstein J and pointed out, at [21], “there was apparently no argument before Einstein J that the notice under s 17(2), as opposed to the adjudication itself, was itself a nullity”.

110. Nor does it appear that his Honour’s attention was drawn to the definition of “adjudication application” in s 4.

111. My attention has not been drawn to any decision doubting the correctness of Kell & Rigby.

112. Indeed, McDougall J appears to have accepted its correctness: see Rojo Building Pty Ltd v Jillcris Pty Ltd [2007] NSWSC 880 at [39] to [42] and Chase Oyster Bar Pty Ltd v Hamo Industries Pty Ltd [2010] NSWSC 1167 at [6]; and his Honour’s observations, as a member of the Court of Appeal, in Chase Oyster Bar Pty Ltd v Hamo Industries (2010) 78 NSWLR 393; [2010] NSWCA 190 at [216].

113. Seymour Whyte submits that an adjudication application, found to be a nullity, does not thereby cease to have a factual existence and is still capable of producing legal consequences. Seymour Whyte argues that the factual existence of the (invalid) adjudication application should nonetheless reflect an election by Ostwald under s 16(2)(a)(ii), such that 16(2)(a)(i) becomes unavailable to it.

114. Seymour Whyte points to cases concerning administrative decisions which, although void for jurisdictional error, were nonetheless recognised as being “decisions” that produced factual consequences for statutory decision making processes (JadwanPty Ltd v Department of Health & Aged Care [2003] FCAFC 288; (2003) 145 FCR 1, at [42] (Gray and Downes JJ); State of New South Wales v Kable (2013) 252 CLR 118; [2013] HCA 26, at [52] (Gageler J); Plaintiff S297/2013 v Minister for Immigration and Border Protection (2015) 255 CLR 231; [2015] HCA 231, at [29]-[32]).

115. So much may be accepted.

116. However, the question here is whether the words “adjudication application” in s 16(2)(a)(ii) should be construed as including a document purporting to be an adjudication application, but which does not satisfy the requirements specified in s 17(3), and which thus does not satisfy the definition of “adjudication application” in s 4.

117. In my opinion, the answer to this question must be “no”. Otherwise, there would be attributed to Parliament the intention that a term, defined in the Act, should take on a different and more expansive meaning than is stated in that definition. That cannot have been the intention of Parliament.

118. The gloss Seymour Whyte seeks to place on s 16(2)(a)(ii) would amount to a rewriting of that definition.

119. I do not see this as an alarming consequence or one unlikely to have been contemplated by Parliament. It would merely mean that, on the assumption I am making for the purposes of this part of the judgment, Ostwald did not make an adjudication application as it had intended, and may now enforce payment of the amount that Seymour Whyte indicated in its payment schedule it proposed to make.

120. For these reasons, had the adjudication determination been void by reason of the failure of Ostwald to make its adjudication application in time, I would have found it open to Ostwald to go down the other “fork in the road” and seek recovery of the unpaid scheduled amount under s 16(2)(a)(ii).

The consequences of the winding up of Ostwald

121. Several weeks after it obtained the adjudication determination, Ostwald was wound up.

122. This gives rise to a number of questions.

123. The first is whether the Act continues to apply. The particular question is whether Ostwald continues to be a “claimant” for the purposes of Pt 3 of the Act.

124. If Ostwald continues to be a “claimant”, the second issue is whether the statutory process for enforcing an adjudication determination as a judgment for debt under ss 24 and 25 should be stayed in light of the mandatory “set off” procedure under s 553C of the Corporations Act, which must operate where a company is in liquidation.

125. A third question is whether there is constitutional inconsistency between the Act and the Corporations Act; specifically, whether the filing of an adjudication certificate as a judgment for debt is inconsistent with the 553C set off procedure. For reasons I will explain, I do not find it necessary or appropriate to resolve this issue.

Does the Act apply? Construction of the term “claimant”

126. The first issue, whether the Act continues to apply to Ostwald now that it is in liquidation, depends upon the proper construction of the term “claimant” and whether a subcontractor in liquidation can be considered a “claimant” for the purposes of Pt 3 of the Act.

127. The Court of Appeal of Victoria has found that the answer to this question is “no”: Façade (see [25] above).

128. In that case, the Court of Appeal held that a “claimant” under the Building and Construction Industry Security of Payment Act 2002 (Vic) was a person who had “undertaken to, and continued to, carry out construction work” (at [84], emphasis added).

129. The Court of Appeal reasoned that a company in liquidation “cannot carry out construction work” and therefore could not fall within the meaning of the term “claimant” (at [84]), because:

“[O]nce a winding-up order is made in respect of a builder…it only continues to exist for the purpose of being wound up, it would cease to be a claimant for the purposes of Pt 3 of [the Act]…[and] would therefore lose the right to issue payment claims under [the Act]”. (At [79].)

130. I am obliged to follow the Victorian Court of Appeal’s decision in Façade unless I conclude that their Honours are “plainly wrong” (Australian Securities Commission v Marlborough Gold Mines Ltd (1993) 177 CLR 485; [1993] HCA 15 at 492; Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; [2007] HCA 22 at [135]).

131. The Victorian Court of Appeal’s reasoning is set out below. For reasons I will explain, I do think the Court was plainly wrong.

Their Honours’ Reasoning in Façade

132. With one exception, to which I will return, the wording of the relevant sections of the Victorian Act is the same as the Act, although the numbering of some sections differs. Accordingly, I will refer to the sections to which the Victorian Court of Appeal referred as: “Vic s X/NSW s Y”.

133. Façade, the subcontractor, served payment claims on the contractor, Brookfield. Brookfield did not serve a payment schedule in response to those payment claims and did not pay the amounts stated in the payment claims. Façade went into liquidation. Thereafter, Façade sought summary judgment pursuant to Vic s 16(2)(a)(i)/NSW s 15(2)(a)(i).

134. The Court held that Façade was not entitled to take that step and that:

1. the payment regime under Pt 3 “is not available to companies in liquidation” (at [84]); and

2. Vic s 9/NSW s 8 of the Act “does not create an entitlement to progress payments for persons who are in liquidation (that is, persons in respect of whom a winding up order has been made)” (at [90]).

135. The Court found that this conclusion followed from its interpretation of Vic s 9/NSW s 8 and that “the answer to the proper interpretation of the scope of [Vic] s 9 (1)/NSW s 8(1) lies in the text” of the Act (at [82]); although the Court also had regard to available extrinsic material.

136. The Court’s reasoning at [77] to [80] is as follows:

1. Vic s 9/NSW s 8 provides that a person who has “undertaken” to carry out construction work is entitled to a progress payment;

2. that was to be contrasted to Vic s 1 (which has no equivalent in the NSW Act) which states that the purpose of the Victorian Act is to provide for entitlements to progress payments for persons “who carry out construction work” (at [77]);

3. the word “‘undertake’ connotes an expectation of performance” (at [77]);

4. it was “open to interpret” Vic s 9/NSW s 8 in two ways;

1. the first was find it available to “any person who has undertaken to carry out construction work…under construction contracts”;

1. the second was to find it only available to “a person who not only has undertaken to carry out construction work…but also continues to perform such activities” (at [78]);

5. interpretation of Vic s 9/NSW s 8 “in the latter manner would have flow on effects for the availability of the Pt 3 procedure for recovering progress payments” because:

1. Vic s 14/NSW s 13 of the Act provides that “a person referred to in Vic s 9(1)/NSW s 8(1) who is or who claims to be entitled to a progress payment” may serve a progress claim;

2. “such a person is defined as ‘the claimant’”; and

3. “the term ‘the claimant’ is then subsequently used throughout Pt 3” to identify the party entitled to enforce rights arising from the service of a progress claim (at [79]);

6. the factors favouring the second, narrower interpretation are:

1. that Vic s 1 (which, as I have said, has no equivalent under the NSW Act) “focuses on persons acting pursuant to a construction contract” (at [80]);

2. that a “similar focus is evident” in Vic s 16(2(b)/NSW s 15(2)(b) which:

1. provides that where a respondent to a payment claim has failed to provide a payment schedule and to pay the amount claimed, a claimant may serve a notice of its intention to suspend work under the construction contract; and

2. thus “contemplates a claimant who is still carrying out construction work” (at [80]);

3. the repeated observation of the courts that the security of payment legislation is “intended to create an interim payment regime”;

4. the fact that by reason of Vic s 47/NSW s 32 the legislation “does not affect the rights of parties under the construction contract” and that “a respondent making a payment pursuant to Pt 3 may be entitled to claw back some or all of that payment in the future” (at [81]);

5. whereas if Pt 3 “was held to compel payment to a builder in liquidation, such a payment would become final in effect, rather than provisional as intended” by the Act (at [81]);

6. the second reading speeches of the NSW legislation (on which the Victorian legislation is based) indicated that a “driving concern underpinning the introduction of the respective Acts was cash flow problems within the construction industry” whereas “cash flow problems cease to be a concern when a company enters liquidation” (at [82]); and

7. a narrow interpretation of the Act rendered its provisions consistent with those in s 553C of the Corporations Act (at [189]).

Is the Victorian Court of Appeal “plainly wrong”?

137. The Court held that proper interpretation of Vic s 9(1)/NSW s 8(1) arose from its text.

138. However, and contrary to their Honours’ conclusions, I see nothing in that text to compel the conclusion that “undertake” means not only to undertake to carry out construction work, but to “continue to perform such activities”.

139. Nor is it correct to say that a person who has “undertaken to carry out construction work” for the purposes of Vic s 9/NSW s 8 is defined in Vic s 14/NSW s 13 as “the claimant”; cf [79] of the judgment and see [136(5)(b)] above.

140. Vic s 14(1)/NSW s 13(1) provides:

“A person referred to in section 9(1) [NSW s 8(1)] who is or who claims to be entitled to a progress payment (the claimant) may serve a payment claim on the person who, under the construction contract concerned, is or may be liable to make the payment”. (Emphasis in original.)

141. In that section, the person who is, or claims to be entitled to a “progress payment” is referred to parenthetically as “the claimant”.

142. But that is not the definition of “claimant”.

143. “Claimant” is defined in Vic s 4 as follows:

“‘Claimant’ means a person who serves a payment claim under section 14 [NSW s 13]” (Emphasis in original.).

144. In s 4 of the NSW Act the definition is to the same effect but expressed in the passive voice:

“Claimant means a person by whom a payment claim is served under section 13”. (Emphasis in original.)

145. Their Honours in Façade did not refer to this definition. Evidently, it was not drawn to their attention.

146. Thus a “claimant” is not “a person referred to in [Vic s9/NSW s 8] who is or claims to be entitled to a progress payment” (by reason of having “undertaken to carry out construction work” for the purposes of those sections).

147. Rather, a “claimant” is a person who “serves a payment claim” (Vic s 4) or “by whom a payment claim is served” (NSW s 4).

148. It may be accepted that it is implicit in this statutory wording that a “claimant” must not only be a person who in fact serves a payment claim, but who is also entitled to do so; that is, a person who is or claims to be entitled to a progress payment for construction work undertaken.

149. But a person’s status as a “claimant” does not depend on whether that person “undertook” in the narrow Façade sense, to carry out construction work. It depends, and depends only, on whether the person served a payment claim (and was entitled to do so in the sense I have described).

150. I see nothing in the text of the Act to compel the conclusion that a person who, by serving a payment claim, attains the status of a “claimant”, somehow loses that status by reason of (if a company) being wound up or (if a person) becoming bankrupt.

151. I do not see Vic s 16(2)(b)/NSW s 15(2)(b) (or the corresponding provisions in Vic s 17(2)(b)/NSW s 16(2)(b)) as having this effect.

152. Those provisions give a claimant the option, in the circumstances described, to suspend work.

153. It is true that a company in liquidation would not seek to suspend work. But it does not follow from that fact alone that the company should not be characterised as a “claimant”.

154. Another obvious, and no doubt very common, case where a person who has served a payment claim (and who thus satisfies the definition of “claimant” in Vic s 4/NSW s 4) would not, and could not, suspend work is where that person has completed the requisite construction work and vacated the site. That person’s work would be complete. It would not be “still carrying out construction work”. It could not suspend carrying out the work. But it would still be a “claimant” and entitled to serve a payment claim.

155. My opinion, which I advance without intending any disrespect, is that the Victorian Court of Appeal erred in it its consideration of the text of the statute. Its failure to have regard to the definition of “claimant” in s 4 of the Victorian Act led it to conclude that “claimant” was defined in Vic s 14/ NSW s 13 which, in turn, led it to conclude that its interpretation of the word “undertaken” in Vic s 9/NSW s 8 was determinative of the question of who was a “claimant”.

156. I do not agree with the Victorian Court of Appeal’s interpretation of “undertaken”. That is, perhaps, a matter about which minds might differ and not, itself, a reason to conclude the Court was “plainly wrong”. But the Court’s failure to consider the definition of “claimant” in Vic s 4, and its consequent misunderstanding of the definition of “claimant” leads me to conclude that it was “plainly wrong” and that I should not follow it.

157. Accordingly, my conclusion is that Ostwald remains a “claimant” notwithstanding it has been wound up. The Act, by its terms, continues to apply to Ostwald, notwithstanding that it is in liquidation and notwithstanding the matters to which the Court in Façade referred and which I have set out at [136(6)(c) to (g)] above.

158. However, it does not follow that Ostwald remains free to exercise the rights otherwise available under the Act to a “claimant”; for example to move for judgment and, in effect, convert an entitlement to an interim or provisional payment under the Act into a final payment. The role of s 553C of the Corporations Act must be considered.

The impact of s 553C - can Ostwald enforce the adjudication determination, or does the set off procedure apply?

159. Under the Act, a claimant may enforce an adjudication determination by obtaining an adjudication certificate and filing it as a judgment for a debt.

160. However, as Ostwald went into liquidation following the making of the adjudication determination, and before it moved for judgment, s 553C of the Corporations Act governs what happens next.

161. Section 553C provides:

“(1) Subject to subsection (2), where there have been mutual credits, mutual debts or other mutual dealings between an insolvent company that is being wound up and a person who wants to have a debt or claim admitted against the company:

(a) an account is to be taken of what is due from the one party to the other in respect of those mutual dealings; and

(b) the sum due from the one party is to be set off against any sum due from the other party; and

(c) only the balance of the account is admissible to proof against the company, or is payable to the company, as the case may be.

(2) A person is not entitled under this section to claim the benefit of a set‑off if, at the time of giving credit to the company, or at the time of receiving credit from the company, the person had notice of the fact that the company was insolvent.”

162. In Façade, the Court described the operation of s 553C of the Corporations Act as follows:

“[164] The effect of liquidation upon a corporation is that s 553C of the Corporations Act is automatically attracted to any mutual dealings between the parties. Gye v McIntyre [(1991) 171 CLR 609; [1991] HCA 60] confirmed this in respect of s 86 of the Bankruptcy Act 1966 (Cth), a kindred provision to s 553C:

Section 86 is a statutory directive (‘shall be set off’) which operates as at the time the bankruptcy takes effect. It produces a balance upon the basis of which the bankruptcy administration can proceed. Only that balance can be claimed in the bankruptcy or recovered by the trustee. If its operation is to produce a nil balance, its effect will be that there is nothing at all which can be claimed in the bankruptcy or recovered in proceedings by the trustee. The section is self-executing in the sense that its operation is automatic and not dependent upon ‘the option of either party’: see, per Lord Selborne LC, Ex parte Barnett; Re Deveze [(1874) 9 Ch App 293, 297].

[165] The automatic set-off operates whether the party seeking to make a claim is the company in liquidation (as here) or the other party.

[166] Gye v McIntyre was applied in the context of s 553C of the Corporations Act in GM & AM Pearce and Co Pty Ltd v RGM Australia Pty Ltd [[1998] 4 VR 888] where Batt JA (with whom Ormiston and Callaway JJA agreed) emphasised that the taking of the account and the balance produced by s 553C has the effect that the original claim ‘ceased to exist’. This is consistent with the understanding that ‘[w]hen set-off applies, s 553C applies automatically…so that only the balance between the claims is admissible to proof against the company, or is payable to the company, as the case may be.’ Section 553C operates at the date of the commencement of the liquidation. As was observed in the circumstances of Pearce, ‘a set-off occurred once and for all at the beginning of the administration and destroyed the claim on which the respondent later purported to sue’.”

163. There is no dispute before me as to the correctness of these propositions.

164. The effect of 553C here was automatic on the winding up of Ostwald. It is “self-executing” and not dependent on the “option of either party” (Façade at [164]).

165. Its effect is to substitute for the parties’ rights under the contract and for such rights as Ostwald retains by reason of the adjudication determination, the right to have an account taken under s 553C and:

1. in the case of Ostwald, to recover from Seymour Whyte any amount found following the taking of such accounts to be due by Seymour Whyte to it; and

2. in the case of Seymour Whyte, to be able to prove in the winding up of Ostwald for any amount found to be due by Ostwald to it.

166. Adapting the language of the Victorian Court of Appeal to the case here:

“Cross-claims and defences are protected, where relevant, as mutual dealings under s 553C. Without the protection afforded by s 553C, [a judgment obtained by Ostwald under s 25 of the NSW Act] would mean that [Ostwald] would receive from [Seymour Whyte] the full amount of the sum owed under the relevant payment claims, whereas [Seymour Whyte] would be left to prove in the liquidation of [Ostwald] in respect of its counterclaim.” (Cf [177].)

167. These are rights of the parties that are, in terms, preserved by s 32(1)(c) of the Act which provides, relevantly, that nothing in Pt 3 of the Act “affects any right that a party to a construction contract…may have apart from this Act in respect of anything done or omitted to be done under the contract”.

168. In those circumstances, I see no option but to stay any judgment that Ostwald obtains by reason of filing an adjudication certificate following the adjudication determination until the parties’ rights are finally determined by the account that must now be taken under s 553C.

169. I do not accept the submission advanced on behalf of Ostwald that the making of a stay would be beyond the relief sought by Seymour Whyte in its Further Amended Summons.

170. In prayer 9 of the Further Amended Summons, Seymour Whyte sought the following order:

Further, or in the alternative, noting the Plaintiff’s undertaking referred to below, an order staying any judgment arising from the filing of an adjudication certificate until the final determination of the parties’ rights in accordance with section 32 of the Act.”

171. The undertaking referred to in that prayer for relief is in the following terms:

“The Court notes that: if order 9 is made, the Plaintiff undertakes to do either of the following (at its election) within 14 days of receipt of the Court’s judgment:

(a)   lodge a proof of debt; or

(b) seek leave under s 500(2) of the Corporations Act…to commence proceedings in the Technology and Construction List in the Equity Division of the Supreme Court of New South Wales and, if leave be given, to commence proceedings against the First Defendant for the determination of claims under s 32 of the Act and/or s 553C of the Corporations Act… If such leave is refused, the Plaintiff further undertakes to lodge a proof of debt within 14 days of notification of the Court’s refusal to grant such leave.”

172. The wording in prayer 9 is less than felicitous, in that it speaks of determination of the parties’ rights “in accordance with” s 32. It would be more apt to speak of final determination of the parties’ rights “as contemplated” by s 32.

173. In my opinion, one of the matters that s 32 contemplates is that parties might have rights otherwise than as a result of a judgment delivered in civil proceedings between them (for example a building case) which remain unaffected by the Act. This includes “rights” to the benefit of an accounting under s 553C.

174. Although the parties made submissions as to whether a stay should be granted on the basis of the principle in Grosvenor Constructions, I prefer to express the terms of the stay by reference to the outcome of the process now mandated by s 553C.

Section 109 inconsistency

175. At the close of final submissions, Seymour Whyte sought leave to amend its Technology & Construction List Statement to raise an issue as to whether the Act is inconsistent with s 553C of the Corporations Act for the purposes of s 109 of the Constitution.

176. The Court of Appeal in Façade expressed the view in obiter that there is s 109 inconsistency. That assumed, contrary to their Honours principal conclusion, that the payment regime in the Victorian Act was available to companies in liquidation: at [99] ff and especially at [188] to [191].

177. I reserved my decision on whether such leave should be granted.

178. I have concluded that I should not grant such leave.

179. First, Seymour Whyte’s submissions are not yet fully developed and Ostwald has had no opportunity to reply.

180. Second, notices have not been served on the Attorneys General under s 78B of the Judiciary Act 1903 (Cth).

181. Third, I can resolve this case without deciding the issue.

182. However, I do offer some observations as to whether inconsistency does in fact arise.

183. First, the Victorian Court of Appeal does not seem to have considered what role Vic s 47/NSW s 32 might play in relation to this question.

184. Second, the Victorian Court of Appeal appears to have placed little weight on the opinion expressed by McDougall J in Veolia Water Solutions v Kruger Engineering (No 3) [2007] NSWSC 459 that there is no inconsistency between the operation of the Act and s 553C.

185. At [24], his Honour said:

“The effect of the application of s 553C (in a case where the offsetting claim exceeds the amount of the progress claim) is that the progress claim is satisfied by set-off. The person entitled to the progress claim has received the benefit of payment. That is so regardless of whether the progress claim has given rise to an adjudication determination or a judgment debt. Operation of the statutory scheme of set-off under the Corporations Act does not impeach the progress claim (or any adjudication determination or judgment founded on it). On the contrary, the effect of the progress claim is accepted, because its amount is brought to account in the process of set-off. It may be that the process of satisfaction through set-off rather than satisfaction through payment has an adverse effect on other creditors. But that is a necessary consequence of the application of the scheme of set-off that the legislature, in s 553C, saw fit to enact.”

186. In Façade, the Victorian Court of Appeal referred to Veolia at [129] to [137] but concluded that its relevance “to the constitutional issue in the present case is limited” because of a difference in the factual circumstances before McDougall J and those before their Honours.

187. These are matters that may require further consideration.

Orders

188. Accordingly I propose to make orders to the effect that:

1. the contract be rectified by deleting cl 9.1 of the Special Conditions;

2. any judgment obtained by Ostwald arising from the filing of an adjudication certificate following the adjudication determination of 6 November 2017 be stayed until an account is taken, pursuant to s 553C of the Corporations Act, of the amounts due from Ostwald to Seymour Whyte in respect of their mutual dealings under the contract.

189. I invite the parties to bring in short minutes to give effect to these reasons.

190. I will hear argument as to costs.

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Amendments

05 April 2018 - Typographical errors corrected in [73], [94], [99], [130], [134(b)], [136(3)]. [136(5)(b)], [147], [154], [166] and [188].

05 April 2018 - [147]