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Veolia Water Solutions v Kruger Engineering [No 3]

Veolia Water Solutions v Kruger Engineering [No 3]

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CITATION: Veolia Water Solutions v Kruger Engineering [No 3] [2007] NSWSC 459

HEARING DATE(S): 20 April 2007, 1 May 2007

JUDGMENT DATE :
14 May 2007

JURISDICTION: Technology & Construction List

JUDGMENT OF: McDougall J at [1]

DECISION: See paras [94] and [95] of judgment

CATCHWORDS: CONTRACT - building and construction - where defendant has recovered adjudication determination and judgment against plaintiff - where defendant subject to deed of company arrangement - where plaintiff asserts cross-claim for liquidated damages and defective and incomplete works - plaintiff seeks permanent stay and return of security given by it - whether Building and Construction Industry Security of Payment Act 1999 ceases to apply when contractor or subcontractor becomes insolvent - impact of external administration - where conflict exists between s 25(4) of the Act and ss 553, 553C of the Corporations Act - whether refusal of stay will cause irreparable prejudice

LEGISLATION CITED: Building and Construction Industry Security of Payment Act 1999
Corporations Act 2001
The Australian Constitution

CASES CITED: Brodyn Pty Ltd v Dasein Constructions Pty Ltd [2004] NSWSC 1230
Demir Pty Ltd v Graf Plumbing Pty Ltd [2004] NSWSC 553
Greenaways Australia Pty Ltd v CBC Management Pty Ltd [2004] NSWSC 1186
Grosvenor Constructions (NSW) Pty Ltd (in Administration) v Musico & Ors [2004] NSWSC 344
Hicks v Minister for Immigration and Multicultural and Indigenous Affairs [2003] FCA 757
Housing Grants, Construction and Regeneration Act 1996
Kalifair Pty Ltd and Another v Digi-Tech (Australia) Ltd and Others (2002) 55 NSWLR 737
Valentine v Eid (1992) 27 NSWLR 615

PARTIES: Veolia Water Solutions & Technologies (Australia) Pty Limited (Plaintiff)
Kruger Engineering Australia Pty Limited (subject to a Deed of Company Arrangement) (Defendant)

FILE NUMBER(S): SC 55067/06

COUNSEL: M Christie/V Culkoff (Plaintiff)
N A Nicholls (Defendant)

SOLICITORS: Thomson Playford (Plaintiff)
Wilkinson Building & Construction Lawyers (Defendant)

Veolia Water Solutions v Kruger Engineering [No 3] [2007] NSWSC 459

INDEX TO JUDGMENT

Para

The issues 4

First and second issues: the impact of administration 6

The DoCA 6

The decision in Brodyn v Dasein 11

No conflict in this case 16

Impact on securities given by Veolia 28

Conclusion on the first and second issues 32

Third issue: stay pending resolution of Veolia’s cross-claim 33

The decision in Grosvenor v Musico 33

Kruger’s financial position 40

Break up of the cross-claim 46

History of Veolia’s claims 54

Defective and incomplete work 59

The claim for liquidated damages under clause P35.9 67

Kruger’s offer of security 71

Analysis 72

No prejudice in this case 79

Alternative analysis 81

Conclusion on stay 91

Fourth issue: abuse of process 93

Conclusion and order 94

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
TECHNOLOGY & CONSTRUCTION LIST

McDOUGALL J

14 May 2007

(AUSTRALIA) PTY LIMITED v KRUGER ENGINEERING

AUSTRALIA PTY LIMITED (SUBJECT TO A DEED OF

COMPANY ARRANGEMENT) [No 3]

JUDGMENT

1 HIS HONOUR: The plaintiff (Veolia) and the first defendant (Kruger) were parties to a subcontract dated 22 March 2003 (the contract). That contract was…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2007] NSWSC 459
Decision Date: 14 May 2007

CaseChat Overview and Summary

The case between Veolia Water Solutions and Kruger Engineering concerns a dispute in the building and construction sector. Veolia, the plaintiff, had previously obtained an adjudication determination and judgment against Kruger, the defendant. Kruger had since entered into a deed of company arrangement, a form of external administration. Veolia sought a cross-claim for liquidated damages, as well as claiming that the works were defective and incomplete. The plaintiff further sought a permanent stay of all proceedings and the return of security given. The central legal issue was whether the Building and Construction Industry Security of Payment Act 1999 (the Act) ceased to apply when a contractor or subcontractor became insolvent and was subject to external administration. Additionally, the court needed to resolve the conflict between section 25(4) of the Act and sections 553 and 553C of the Corporations Act, which pertain to the rights of creditors in external administration. The court had to determine whether the refusal of a stay would cause Veolia irreparable prejudice.

The court found that the Act continued to apply to insolvent contractors, but that the effect of external administration must be considered. The court held that section 25(4) of the Act, which provides for an expedited review of adjudication determinations, was subject to the provisions of the Corporations Act governing external administration. The court emphasised that section 553C of the Corporations Act, which prevents the enforcement of judgments against insolvent companies, could override section 25(4) of the Act. However, the court noted that the decision to grant or refuse a stay under section 553 of the Corporations Act required a consideration of whether the refusal would cause irreparable prejudice to the applicant. The court found that Veolia had not shown that it would suffer irreparable prejudice if the stay was not granted, as Veolia could still pursue its claims through the external administration process. The court therefore refused Veolia’s application for a permanent stay and the return of security.

The court’s decision clarifies the interaction between the Act and the Corporations Act in the context of insolvent contractors. The court held that the Act continues to apply to insolvent contractors, but that the rights of creditors must be considered under the Corporations Act. The court also emphasised the need to balance the interests of the parties when deciding whether to grant a stay under the Corporations Act. The court’s decision may have significant implications for building and construction disputes involving insolvent contractors. The court ultimately refused Veolia’s application for a permanent stay and the return of security, leaving the parties to pursue their claims through the external administration process.

Orders