Shade Systems Pty Ltd v Probuild Constructions (Aust) Pty Ltd

Case •

[2018] NSWCA 33

•

28 February 2018

No judgment structure available for this case.

Court of Appeal


Supreme Court


New South Wales

  • Amendment notes
Medium Neutral Citation: Shade Systems Pty Ltd v Probuild Constructions (Aust) Pty Ltd [2018] NSWCA 33
Hearing dates: 26 February 2018
Date of orders: 28 February 2018
Decision date: 28 February 2018
Before: Payne JA
Decision:

(1)   The sum of $314,504.72 paid into Court on 6 January 2017, pursuant to the orders of Basten JA dated 23 December 2016, including any interest accrued thereon, be paid out to Shade Systems Pty Ltd.

 

(2)   Probuild Constructions (Aust) Pty Ltd must pay the costs of the 15 February 2018 motion filed by Shade Systems Pty Ltd.

 

(3)   The 15 February 2018 motion filed by Probuild Constructions (Aust) Pty Ltd is dismissed with costs.

 

(4)   In relation to the whether the costs of either motion dated 15 February should be ordered to be paid on a lump sum basis, direct that:

 

(a)   Shade Systems Pty Ltd and the Third to Sixteenth Respondents to file any further evidence or submissions (limited to five pages) by 4pm on 2 March 2018;

 

(b)   Probuild Constructions (Aust) Pty Ltd to file any further evidence or submissions (limited to five pages) by 4pm on 9 March 2018;

 

(c)   Shade Systems Pty Ltd and the Third to Sixteenth Respondents to file submissions in reply (limited to 2 pages) by 4pm on 12 March 2018; and

 

(d)   the question of costs be determined on the papers.

 

(5)   In relation to the motion dated 14 February 2018 filed by Probuild Constructions (Aust) Pty Ltd, direct that:

 

(a)   Probuild Constructions (Aust) Pty Ltd file any evidence together with submissions on the motion (limited to five pages) by
4pm on 2 March 2018;

 

(b)   Shade Systems Pty Ltd file any evidence together with submissions on the motion (limited to five pages) by 4pm on 9 March 2018;

 

(c)   Probuild Constructions (Aust) Pty Ltd file submissions limited to two pages by 4pm on 12 March 2018; and

 (d)   the motion be determined on the papers unless either party succeeds in persuading the Court in the five page submission that a further oral hearing is warranted.
Catchwords: PROCEDURE – release of funds paid into Court – Building and Construction Industry Security of Payment Act 1999 (NSW) – unsuccessful appeal to High Court of Australia – stay of recovery of progress payment on terms that progress payment be paid into Court – whether proceedings should be remitted to Equity Division or progress payment released to successful High Court respondent
Legislation Cited: Building and Construction Industry Security of Payment Act 1999 (NSW)
Supreme Court Act 1970 (NSW)
Cases Cited: Brodyn Pty Ltd v Davenport (2004) 61 NSWLR 421; [2004] NSWCA 394
Grosvenor Constructions (NSW) Pty Ltd (in Administration) v Musico & Ors [2004] NSWSC 344
Hakea Holdings Pty Ltd v Denham Constructions Pty Ltd [2016] NSWSC 1120
Probuild Constructions (Aus) Pty Ltd v Shade Systems Pty Ltd [2018] HCA 4
R J Neller Building Pty Ltd v Ainsworth [2008] QCA 397
Shade Systems Pty Ltd v Probuild Constructions (Aust) Pty Ltd (No 3) [2016] NSWCA 382
Thomson v Golden Destiny Investments [2015] NSWSC 1929
Veolia Water Solutions v Kruger Engineering [No 3] [2007] NSWSC 459
Texts Cited: None
Category:Principal judgment
Parties: Shade Systems Pty Ltd
Probuild Constructions (Aust) Pty Ltd
Doron Rivlin (Second Respondent)
G A Atkins (Third Respondent)
G T Connellan (Fourth Respondent)
J Cooper (Fifth Respondent)
L Gardner (Sixth Respondent)
S C Harris (Seventh Respondent)
M J Huckerby (Eighth Respondent)
M J Lee (Ninth Respondent)
P McCarthy (Tenth Respondent)
R McKenna (Eleventh Respondent)
S G O’Sullivan (Twelfth Respondent)
M A Pitt (Thirteenth Respondent)
P W Utiger (Fourteenth Respondent)
S Wallace (Fifteenth Respondent)
C A Williams (Sixteenth Respondent)
Representation:

Counsel:
M Christie SC / D Hume (Shade Systems Pty Ltd)
S Robertson (Probuild Constructions (Aust) Pty Ltd)

  Solicitors:
Moray & Agnew (Shade Systems Pty Ltd)
Maddocks (Probuild Constructions (Aust) Pty Ltd)
Moray & Agnew (Third to sixteenth respondents)
File Number(s): 2016/205479
Publication restriction: None

. .

Judgment

  1. PAYNE JA: On 26 February 2018, this matter came before me in the referrals list. The background to this matter is taken from the summary given by the plurality in the High Court (Kiefel CJ, Bell, Keane, Nettle and Gordon JJ) in Probuild Constructions (Aus) Pty Ltd v Shade Systems Pty Ltd [2018] HCA 4 at [19]-[24] which was delivered on 14 February 2018.

  2. Probuild Constructions (Aust) Pty Ltd ("Probuild") and Shade Systems Pty Ltd ("Shade Systems") were parties to a subcontract under which Shade Systems agreed to supply and install external louvres for an apartment development.

  3. On 23 December 2015, Shade Systems served on Probuild a payment claim pursuant to s 13 of the Building and Construction Industry Security of Payment Act 1999 (NSW) ("the Security of Payment Act") stating that a progress payment of $294,849.33 (excluding GST) was due.

  4. On 11 January 2016, Probuild provided a payment schedule pursuant to s 14 of the Security of Payment Act indicating that it did not propose to pay any of the amount claimed. Probuild relevantly contended that it was entitled to set off, against the amount in the payment claim, a considerably higher amount for liquidated damages ($1,089,900) which it asserted was owing because works were not completed before the "Date for Practical Completion" in the subcontract.

  5. Pursuant to s 17 of the Security of Payment Act, Shade Systems applied for adjudication of its payment claim. The adjudicator rejected Probuild's liquidated damages claim on the basis that liquidated damages could not be calculated until either "practical completion" (being actual completion of the works) or termination of the subcontract. The adjudicator determined that the amount of the progress payment payable by Probuild to Shade Systems was $277,755.03 (including GST).

  6. Probuild sought, under s 69 of the Supreme Court Act 1970 (NSW), an order in the nature of certiorari quashing the determination of the adjudicator. The primary judge (Emmett AJA) did not consider that the Security of Payment Act excluded the jurisdiction of the Supreme Court to make an order in the nature of certiorari for error of law on the face of the record. Emmett AJA made the order sought by Probuild on two bases: first, the adjudicator erroneously considered that no entitlement to liquidated damages arose until practical completion or termination of the subcontract; and second, the adjudicator erroneously considered that Probuild needed to demonstrate that Shade Systems was at fault for the delay for which it claimed liquidated damages.

  7. Shade Systems appealed to this Court. The only issue pressed at the hearing of the appeal was whether the Security of Payment Act excluded the jurisdiction of the Supreme Court to make an order in the nature of certiorari for error of law on the face of the record. Basten JA (with whom Bathurst CJ, Beazley P, Macfarlan and Leeming JJA agreed) held that the Supreme Court did not have jurisdiction to quash an adjudicator's determination for error of law on the face of the record.

  8. On 23 December 2016, Probuild applied to this Court for a stay, pending the appeal to the High Court. In Shade Systems Pty Ltd v Probuild Constructions (Aust) Pty Ltd (No 3) [2016] NSWCA 382, Basten JA said at [4]:

“[4] The question then is whether there should be some form of relief granted to avoid the payment being made in terms of the adjudicator’s determination and possibly dissipated before the matter is determined in the High Court. I am prepared to accept on the basis of the evidence of Mr Stulic and the annexed affidavit of the director of the appellant in this Court, Shade Systems, that there is a significant risk that some, if not all of the money, may be dissipated absent an undertaken not to do so, and absent any restraining order on the part of this Court. I accept that some form of relief should be granted if the subject matter of the litigation, which is the debt owing to Shade Systems, is to be preserved.”

  1. Basten JA made the following orders:

“(1) Upon the First Respondent undertaking to pay the sum of $314,504.72 into Court by 5pm on 6 January 2017, order that the Appellant is restrained from:

(a) requesting the provision of an adjudication certificate pursuant to s 24(1) of the Building and Construction Industry Security of Payment Act 1999 (NSW) (Act);

(b) filing an adjudication certificate as a judgment for a debt in any court pursuant to s 25 of the Act;

(c) serving a notice on the Plaintiff pursuant to s 24(1 )(b) of the Act,

in connection with the determination made by the Second Respondent dated 15 February 2016 until after the Relevant Date or until further order of this Court or of the High Court.

In this order, "Relevant Date" means:

(a) 5pm on 6 January 2017; or

(b) if an application for special leave to appeal to the High Court from the orders made by the Court of Appeal on 23 December 2016 is made on or before 6 January 2017:

(i) the date on which that application is refused; or

(ii) if that application is granted, the date on which the appeal is determined.

(2) Liberty to apply on two days' notice.

(3) Each party is to bear its own costs of the stay application.”

  1. On 14 February 2018, the High Court dismissed Probuild’s appeal: (per Kiefel CJ, Bell, Keane, Nettle and Gordon JJ at [54], Gageler J at [55] and Edelman J at [90], [109]). Accordingly, the restraint upon Shade Systems in the orders made by Basten JA is spent as the “relevant date” identified in order 1(b)(ii) has now passed. The sum of $314,504.72 (plus any interest which has accrued), however, remains in the control of the Court.

  2. On 15 February 2018, Shade Systems filed a notice of motion in this Court seeking the following orders:

“1. The sum of $314,504.72 paid into Court on 6 January 2017, pursuant to the orders of Basten JA dated 23 December 2016, including any interest accrued thereon, be paid out to the Appellant, Shade Systems Pty Ltd.

2. The First Respondent to pay the Appellant’s costs of this Notice of Motion in a sum to be specified by the Court.

3. Any further or other orders as the Court considers fit.”

  1. On 15 February 2018, Probuild filed a notice of motion seeking orders that the question of release of the funds paid into Court as a condition of the stay granted by Basten JA be remitted to the Equity Division or in the alternative a stay be granted.

  2. A third motion was also filed. On 14 February 2018, Probuild filed a notice of motion seeking orders that the subject matter of the costs orders made in this Court in 2016 be remitted to the Equity Division of the Supreme Court, and a stay of the costs order made in this Court on 23 December 2016. That motion is not urgent, pending the review panel’s determination of the review applications made by Probuild in relation to costs. It was agreed between the parties that this motion could await determination of the issues in the first two motions. I have made orders to finalise consideration of this motion below.

  3. The remitter sought by Probuild was to the Equity Division in relation to proceedings commenced there on 8 June 2017. On 20 June 2017, Probuild filed its evidence in those proceedings. On 9 October 2017, a Commercial List Response was filed by Shade Systems. Over Probuild’s objections, those proceedings were then effectively held in abeyance whilst the High Court considered Probuild’s challenge to this Court’s decision. To date no evidence has been filed by Shade Systems in the Commercial List proceedings, but I was informed from the bar table that no order has yet been made in the Equity Division for Shade Systems to file its evidence.

  4. Pending resolution of the present application in this Court, on 16 February 2018, Hammerschlag J made the following orders:

“The Court makes the following orders by consent [but without admissions]

1. Upon the Plaintiff giving the usual undertaking as to damages, ORDER that until after the next return date or until further order the Defendant is restrained by itself and by its servants and agents from doing any of the following in connection with the determination of Mr Doron Rivlin dated 15 February 2016 before the delivery of judgment in these proceedings or further order of the Court:

a. requesting the provision of an adjudication certificate pursuant to section 24(1) of the Building and Construction Industry Security of Payment Act 1999 (NSW) ("Act"); or

b. seeking to file an adjudication certificate (or purported adjudication certificate) as a judgment for a debt in any court pursuant to section 25 of the Act, or

c. serving a notice on the Plaintiff pursuant to section 24(1)(b) of the Act.

2. Order that the plaintiffs amended notice of motion filed 18 October 2017 and its notice to produce filed 28 September 2017 are stood over to 2 March 2018 [next return date] to the motions list.”

  1. Probuild led evidence on this application in two affidavits sworn 14 and 15 February 2018 by Mr Mathew Philip Stulic, together with two substantial folders of Exhibits.

  2. Probuild submitted that I have a very broad discretion about the release of funds held in Court: Thomson v Golden Destiny Investments [2015] NSWSC 1929 at [151] per Sackar J. I accept that I have such a discretion and I am content, subject to what appears below, to accept his Honour’s description of the discretion as “very wide.”

  3. Probuild’s principal submission was that, if the money held by the Court was released, Probuild is unlikely ever to be able to recover that money even if successful in the Commercial List proceedings, in which it claims as liquidated damages of $2,352,800, or in the alternative liquidated damages of $11,625,600. Probuild submitted that I should find that its case, at least in so far as it sought liquidated damages of $2,352,800, was strong or “very strong”, and that this was a matter tending strongly in favour of exercising the discretion to remit the matter to the Equity Division to await the outcome of the proceedings in the Commercial List. It was submitted that the order made by Hammerschlag J also tended in favour of making the order sought by Probuild.

  4. I should deal at the outset with this aspect of the matter. I do not think that any inference, either in favour or against the exercise of my discretion, should be drawn from a short term order made in the Commercial List by consent and without admissions where, to the knowledge of both parties, this Court was to be asked to determine the question of release of funds lodged with this Court a few days later.

  5. I reject Probuild’s submission that it has demonstrated that its claim for liquidated damages is strong or “very strong”. I am in no positon to assign a probability of success to the Commercial List proceedings commenced by Probuild, or to assess the likelihood that they will succeed in establishing an entitlement to the amount claimed in those proceedings, or any amount. On the state of the evidence before me, a judge of the Equity Division is at present in no better position than me to assign a probability of success to the Commercial List proceedings commenced by Probuild. The evidence discloses a properly articulated claim made by Probuild, supported by evidence. The evidence also discloses a properly articulated response filed by Shade Systems raising (at least two) important legal questions – the existence of a penalty and unconscionable conduct – and one complex question of fact and law – whether by its acts or omissions Probuild caused the failure to complete on time.

  6. In circumstances where the fixed contract price payable to Shade Systems was allegedly $898,687, the claim by Probuild for liquidated damages of over $2 million (or in the alternative over $11 million) seems to leave considerable scope for dispute. The likely outcome of the proceedings rests on findings about the contested facts. It is common ground that the time that Shade System must support its Response by evidence has not yet arrived. I do not accept, in those circumstances, that any reliable probability of success can be assigned to the Commercial List proceedings commenced by Probuild. The most that can be said is that, if Probuild is successful, there is a significant risk that Shade Systems might ultimately be required to refund the sum of the progress payment in circumstances where Shade Systems’ financial failure, and inability to repay, could be expected to eventuate.

  7. Probuild next submitted that the discretion being exercised by the Court here was akin to the discretion to stay execution of an adjudication certificate issued under the Security of Payments Act until proceedings about the underlying contractual dispute are resolved. Probuild called in aid in particular the principles explained by this Court in Brodyn Pty Ltd v Davenport (2004) 61 NSWLR 421; [2004] NSWCA 394 at [85]-[88] and by Ball J in Hakea Holdings Pty Ltd v Denham Constructions Pty Ltd [2016] NSWSC 1120 at [6].

  8. I doubt that the discretion that I am called upon now to exercise, to release funds paid into Court as a condition of a stay, after an unsuccessful appeal to the High Court, is governed by exactly the same principles as the discretion to stay enforcement of a certificate issued under the Security of Payments Act until proceedings about the underlying contractual dispute are resolved. Given the view I have reached, save in one respect arising from Brodyn v Davenport which I will address immediately below, it is not necessary to resolve that question now. I will proceed, as Probuild submitted, on the basis that the discretion should be exercised having regard to the same principles.

  9. The judgment in Brodyn v Davenport is a relatively early consideration by this Court of the Security of Payments Act. At the relevant passage ([85]), Hodgson JA identifies the existence of the discretion to grant a stay, and notices that “the policy of the Act that progress payments be made would be a discretionary factor weighing against such relief”. This observation is consistent with later authority I will address below. Hodgson JA also explains, particularly at [88], that it would be desirable that issues concerning stays be dealt with as case management issues in proceedings brought to obtain a final resolution of the rights of the parties. Whilst I do not doubt that general principle, this case is very different. It has now been conclusively determined that the progress payment the subject of dispute should have been made by Probuild to Shade Systems in early 2016. The funds the subject of these motions were paid into Court at the end of 2016 pursuant to an order of the Court of Appeal pending the outcome of the High Court’s decision and as a condition of the grant of a stay. That decision of the High Court has now been given. It is appropriate that, sitting in the Court of Appeal, I deal now with the consequences for the parties of the Court’s order otherwise being spent.

  10. It is also a factor strongly in favour of my determining this question now that (with the exception of the motion filed in September 2017 in the Equity Division) Probuild has taken no step in any proceedings to obtain a stay of the kind Hodgson JA was addressing. The High Court has now pronounced its orders and published its reasons. I accept, as Shade Systems submitted, that if the stay in effect now sought by Probuild had been agitated before the special leave hearing, special leave may not have been granted, except on terms. This delay by Probuild is an additional reason for me to deal with this issue now.

  11. The following passages taken from the judgment of the plurality in the High Court in Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd seem to me to be relevant to the discretion I am called upon to exercise:

  1. the object of the Security of Payment Act is "to ensure that any person who undertakes to carry out construction work (or who undertakes to supply related goods and services) under a construction contract is entitled to receive, and is able to recover, progress payments in relation to the carrying out of that work and the supplying of those goods and services" (at [4]);

  1. the means by which the Security of Payment Act ensures that a person is entitled to a progress payment is by "granting a statutory entitlement to such a payment regardless of whether the relevant construction contract makes provision for progress payments" (at [5]);

  2. where (as in the present case) under s 23(2), the adjudicator determines that the respondent is required to pay an adjudicated amount, the respondent must pay that amount to the claimant on or before the "relevant date" as defined in s 23(1). The "relevant date" is the date occurring five business days after the adjudicator's determination is served on the respondent, unless the adjudicator determines a later date (at [15]);

  3. where (as in the present case) the respondent fails to pay the whole or any part of the adjudicated amount to the claimant, the claimant may, under s 24, request the authorised nominating authority to whom the adjudication application was made to provide an adjudication certificate, and serve notice on the respondent of the claimant's intention to suspend carrying out construction work (or to suspend supplying related goods and services) under the contract (at [16]);

  4. under s 25(1), the adjudication certificate may be filed as a judgment for a debt in any court of competent jurisdiction and is enforceable accordingly. However, s 25(4) also provides that, if the respondent commences proceedings to have the judgment set aside, the respondent:

"(a)   is not, in those proceedings, entitled:

(i)   to bring any cross-claim against the claimant, or

(ii)   to raise any defence in relation to matters arising under the construction contract, or

(iii)   to challenge the adjudicator's determination, and

(b)   is required to pay into the court as security the unpaid portion of the adjudicated amount pending the final determination of those proceedings."

(at [17]);

  1. it is right to say that the Security of Payment Act creates an entitlement that is "determined informally, summarily and quickly, and then summarily enforced without prejudice to the common law rights of both parties which can be determined in the normal manner" (at [44]);

  2. where (as in the present case) it is contended that an adjudicator has made an error of law within jurisdiction, resulting in a progress payment that is excessive, the dispute may be resolved through civil proceedings under the construction contract. If necessary, a restitutionary order can be sought. The risk that the party placed at an advantage by an underpayment or overpayment may later become incapable of meeting such an order is a risk that is assigned to the other party (at [51]); and

  3. the reasoning of Keane JA, when his Honour was a member of the Queensland Court of Appeal, in R J Neller Building Pty Ltd v Ainsworth [2008] QCA 397 at 400-401 was correct [at [51]].

  1. In Neller, Keane JA said at [39]-[42], relevantly:

“[39]   It is evidently the intention of the BCIP Act, and, in particular, s 31 and s 100 to which reference has been made, that the process of adjudication established under that Act should provide a speedy and effective means of ensuring cash flow to builders from the parties with whom they contract, where those parties operate in a commercial, as opposed to a domestic, context. This intention reflects an appreciation on the part of the legislature that an assured cash flow is essential to the commercial survival of builders, and that if a payment the subject of an adjudication is withheld pending the final resolution of the builder's entitlement to the payment, the builder may be ruined.

[40]   The BCIP Act proceeds on the assumption that the interruption of a builder's cash flow may cause the financial failure of the builder before the rights and wrongs of claim and counterclaim between builder and owner can be finally determined by the courts. On that assumption, the BCIP Act seeks to preserve the cash flow to a builder notwithstanding the risk that the builder might ultimately be required to refund the cash in circumstances where the builder's financial failure, and inability to repay, could be expected to eventuate. Accordingly, the risk that a builder might not be able to refund moneys ultimately found to be due to a non-residential owner after a successful action by the owner must, I think, be regarded as a risk which, as a matter of policy in the commercial context in which the BCIP Act applies, the legislature has, prima facie at least, assigned to the owner.

[41]   The mere existence of the very kind of risk on which the provisions of the BCIP Act in favour of the builder are predicated would not ordinarily be sufficient of itself to justify a stay of an execution warrant based on the registration of a certificate of adjudication. There may, of course, be other circumstances, which, together with this risk, justify the staying of a warrant of execution based on the registration of an adjudication certificate. For example, the builder may have engaged in tactics calculated to delay the ultimate determination of the rights and liabilities of the parties so as unfairly to increase the owner's exposure to the risk of the builder's insolvency. Or the builder may have restructured its financial affairs after the making of the building contract so as to increase the risk to the owner of the possible inability of the builder to meet its liabilities to the owner when they are ultimately declared by the courts. In this case there are no such circumstances.

[42]   While addressing considerations relevant to the exercise of the discretion to order a stay, one may also mention the consideration that the adjudication of Neller's claim resulted in a favourable outcome for Neller. While this adjudication is provisional, and, indeed, may ultimately be held to be devoid of legal effect, it is not irrelevant that an independent and expert arbiter has assessed the merits of the building dispute between the parties and concluded that the merits of that dispute lie very much in Neller's favour. This is a consideration which tends to lessen the weight to be accorded to the concern that Ainsworth might be deprived of the fruits of ultimate vindication by the refusal of a stay.”

  1. As to the principles to be applied, strong reliance was placed by Probuild upon principles distilled by Ball J in Hakea Holdings Pty Ltd v Denham Constructions Pty Ltd [2016] NSWSC 1120 at [6]:

“The factors that the court will take into account in balancing the competing policies include the following:

(a) the strength of the applicant’s claim: see Veolia Water Solutions v Kruger Engineering Australia Pty Ltd (No 3) [2007] NSWSC 459 at [73]; Romaldi Constructions Pty Ltd v Adelaide Interior Linings Pty Ltd (No 2) [2013] SASCFC 124 at [95] (where Blue J (with whom Sulan and Stanley JJ agreed) described the factor as “an important criterion”); RJ Neller Building Pty Ltd v Ainsworth [2008] QCA 397 at [19], [36] per Keane JA (with whom Fraser JA and Fryberg J agreed);

(b)   the basis of the applicant’s claim. Obviously, an important factor is whether the applicant challenges the adjudicator’s determination. Another important factor is whether the applicant challenges the debt the subject of the adjudication determination. The absence of a challenge to the debt is a powerful factor against the grant of a stay: Romaldi at [110];

(c) the likelihood that the contractor will be unable to repay the amount the subject of the determination. It is accepted in this context that the policy of the Act is generally to place the risk of insolvency on the applicant: R J Neller at [40]. However, where there are strong reasons for believing that the applicant will be unable to recover any amount paid, that fact favours granting a stay: Veolia at [36]-[39];

(d) the risk that the contractor will become insolvent if a stay is granted: Romaldi at [101].”

  1. Factors (a) and (b) are here neutral. As to (a), I am not in a position to say more than determination of Probuild’s claim will involve contested propositions of fact. Those facts cannot be discerned and the time has not yet arrived for Shade Systems to file its evidence. As to (b), Probuild clearly challenges the adjudicator’s determination, so that matter cannot be taken into account in Shade System’s favour.

  2. The critical passage for present purposes is that contained in sub-paragraph (c). I have already set out the passages in Neller referred to. I do not agree that the decision of McDougall J in Veolia Water Solutions v Kruger Engineering [No 3] [2007] NSWSC 459, referred to in sub-paragraph (c), stands for so broad a proposition as “where there are strong reasons for believing that the applicant will be unable to recover any amount paid, that fact favours granting a stay”. In the passage referred to, at [36]-[39] of Veolia, McDougall J was explaining the earlier decision of Einstein J in Grosvenor Constructions (NSW) Pty Ltd (in Administration) v Musico & Ors [2004] NSWSC 344. In Grosvenor Constructions, Einstein J said, relevantly:

“in a case … 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 Court’s discretion is to grant a stay.”

  1. The acceptance, at [39], for the purposes of that case by McDougall J of the proposition advanced by Einstein J was subject to an important qualification:

“I adopt his Honour’s statement of the principles as being those that, in general, should be considered when deciding an application such as that before his Honour, or that before me. However, in any particular case, the application of those principles, and the balancing of the various considerations, will require careful attention. For example, each case will require close analysis of the extent or certainty of the risk of prejudice or damage, if a stay is not granted ….”

  1. Like McDougall J in Veolia, I am prepared to accept that where it is certain that the party in Probuild’s position will suffer irreparable prejudice, it would be a proper exercise of the Court’s discretion to grant a stay. It is also no doubt correct that the extent or certainty of the risk of prejudice must be closely examined in each case.

  2. Neller, in the passage approved by the plurality in the High Court in this case, however, makes clear that the risk that Shade Systems might not be able to refund moneys ultimately found to be due to Probuild must be regarded as a risk which, as a matter of policy in the commercial context in which the Security for Payments Act applies, the legislature has, prima facie at least, assigned to Probuild.

  3. There is an absence of factors in the present case of the kind identified by Keane JA in Neller at [41] which would make this an appropriate case in which to grant a stay and refuse to release the funds which Shade Systems has conclusively established, in the High Court of Australia, they are owed. This is an important factor in favour of releasing the funds held by the Court to Shade Systems.

  4. The evidence led by Probuild in this case persuades me that, as Basten JA found in 2016, that there is a significant risk that the money held by the Court may be dissipated if it is released to Shade Systems. I do not accept, however, that it is certain that Probuild will suffer irreparable prejudice if the funds held in Court are released to Shade Systems. No doubt Shade Systems’ financial position is precarious. There are ongoing negotiations with the Commissioner of Taxation about a substantial debt and there is evidence of a solicitors’ lien being claimed in a substantial amount, although that claim may relate only to funds the subject of existing and future orders for costs made in favour of Shade Systems, which are substantial and about which there is evidence. On the other hand, Shade Systems has continued to trade throughout a period where it has been subject to lengthy and no doubt expensive litigation, including an appeal to a five member bench of this Court and a further appeal, after a special leave hearing, to the High Court of Australia. It has succeeded, in whole, in relation to that litigation but on the evidence before me is still mired in challenges by Probuild to the assessment of costs before Emmett AJA and in this Court. Despite the likely cost of that litigation over a number of years, and the inability as yet to recover any costs it has been awarded of those proceedings, Shade Systems has continued to trade.

  5. I find that the risk identified in the evidence, and it is a significant risk, that Shade Systems might not be able to refund moneys paid as a progress payment which are ultimately found to be due to Probuild must be regarded as a risk which, as a matter of policy in the commercial context in which the Security for Payments Act applies, must be borne by Probuild.

  6. I also take into account that the evidence persuades me that absent the progress payment which the High Court has determined Shade Systems is entitled to, there is a risk that Shade Systems will become insolvent. This engages the principle at (d) identified by Ball J in Hakea. It is a factor in favour of releasing the funds held to Shade Systems.

  7. Weighing all of these matters, I have decided that the funds lodged with the Court as a result of Basten JA’s order should be released to Shade Systems. This is a case where it is contended that an adjudicator has made an error of law within jurisdiction. If Probuild succeed in the litigation in the Equity Division, resulting in a finding that the progress payment that is excessive, a restitutionary order will no doubt be made. The risk that Shade Systems may become incapable of meeting such an order is a risk that is, prima facie, assigned to the Probuild. There is nothing in the evidence in this case which persuades me that that prima facie entitlement on the part of Shade Systems to the progress payment should be stayed.

  8. Accordingly, I make the following orders:

  1. The sum of $314,504.72 paid into Court on 6 January 2017, pursuant to the orders of Basten JA dated 23 December 2016, including any interest accrued thereon, be paid out to Shade Systems Pty Ltd.

  2. Probuild Constructions (Aust) Pty Ltd must pay the costs of the 15 February 2018 motion filed by Shade Systems Pty Ltd.

  3. The 15 February 2018 motion filed by Probuild Constructions (Aust) Pty Ltd is dismissed with costs.

  4. In relation to the whether the costs of either motion dated 15 February should be ordered to be paid on a lump sum basis, direct that:

  1. Shade Systems Pty Ltd and the Third to Sixteenth Respondents to file any further evidence or submissions (limited to five pages) by 4pm on 2 March 2018;

  2. Probuild Constructions (Aust) Pty Ltd to file any further evidence or submissions (limited to five pages) by 4pm on 9 March 2018;

  3. Shade Systems Pty Ltd and the Third to Sixteenth Respondents to file submissions in reply (limited to 2 pages) by 4pm on 12 March; and

  4. the question of costs be determined on the papers.

  1. In relation to the motion dated 14 February 2018 filed by Probuild Constructions (Aust) Pty Ltd, direct that:

  1. Probuild Constructions (Aust) Pty Ltd file any evidence together with submissions on the motion (limited to five pages) by 4pm on 2 March 2018;

  2. Shade Systems Pty Ltd file any evidence together with submissions on the motion (limited to five pages) by 4pm on 9 March 2018;

  3. Probuild Constructions (Aust) Pty Ltd file submissions limited to two pages by 4pm on 12 March 2018; and

  4. the motion be determined on the papers unless either party succeeds in persuading the Court in the five page submission that a further oral hearing is warranted.

Amendments

01 March 2018 - Typographical errors on coversheet and in [38] amended.

21 March 2018 - Amended in accordance with Shade Systems Pty Ltd v Probuild Constructions (Aust) Pty Ltd (No 4) [2018] NSWCA 52 at [25]-[26].

07 November 2018 - Case citation in [17] amended.

Decision last updated: 07 November 2018

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