HIS HONOUR: The plaintiff builder has a judgment against the owner defendant in this Court in the sum of $264,575.99. The builder obtained the judgment by making a payment claim and following the procedures laid out in the Building and Construction Industry Security of Payment Act 1999 (unless otherwise referred to, when I refer to "an Act" or "the Act" in the judgment, that is the Act I am referring to).
The judgment was registered with the Court on 31 May 2024. The owner (Mr. McMenemy) applies, by a notice of motion filed on 2 September 2024, for orders staying the execution of the judgment by the builder pending a resolution of the owner's claim brought against the builder and two individuals in other proceedings in this Court in case number 2024/00250069.
It is common ground that the Court has power to order a stay, but the parties did not identify the source of the Court's power. The source of the Court's power to order a stay is found in s 135 of the Civil Procedure Act 2005, and more particularly, subs (2)(c). Section 135 provides in subs (1) that the Court may, by order, give directions with respect to the enforcement of its judgment and orders. Then in subs (2)(c), it says:
"Without limiting subs (1), the Court may make any of the following orders:
...
(c) an order prohibiting any other person from taking any further action, either permanently or until a specified day, to enforce a judgment or order of the court."
There is also a power given to the Court under s 67 of the Civil Procedure Act. Under that section, subject to the rules of the court, the court may, at any time and from time to time, by order, stay any proceedings before it, either permanently or until a specified day.
In the commentary to s 135 in Hamilton, Lindsay and Webster, NSW Civil Procedure Handbook 2024 (Thomson Reuters) at para [CPA135.35], the book sets out an extract from the judgment of Black J in Webuildem Pty Ltd [2012] NSWSC 708. The paragraph set out is para 13 where His Honour said:
"Section 67 of the Civil Procedure Act 2005 (NSW), provides that, subject to the rules of court, the Court may, at any time, by order, stay any proceedings before it, either permanently or until a specified day. Section 135 of the Civil Procedure Act permits the court to give directions as to enforcement, including an order prohibiting any person from taking any further action, either permanently or until a specified day, to enforce an order of the court. The court's power to grant a stay under s 135 of the Civil Procedure Act is exercisable where the interests of justice so demand; the person seeking a stay must satisfy the court that the requirements of justice require one; and the court has a wide discretion whether to grant a stay and whether terms should be imposed on the grant of such a stay."
His Honour then cites a number of authorities for those propositions.
The application for a stay is opposed by the plaintiff builder. An interim order has been made by the Judicial Registrar staying execution of the judgment until further order pending the determination of this application. The owner offers to pay the judgment sum into court as a condition of any stay.
These are the basic facts that have been presented to the Court. The owner is the registered proprietor of a residential property in Mosman. He entered into an agreement with the builder to undertake construction and renovation of an existing single‑level dwelling with the addition of upper level and roof frame. The agreement took the form of a written contract. It was a fixed‑price contract, the contract price being stated as $1,124,817.39 inclusive of GST.
It is common ground that the work being undertaken was residential building work within the meaning of the Home Building Act 1989. The builder started work in late 2022 or early 2023. By early September 2023, the work was nearing completion, and arrangements began to be made for the owner and his wife and two children to move into the property. The owner and his wife, Ms Webster, have sworn affidavits about what happened on what I will call moving in day. They have exhibited to their affidavits a number of emails exchanged on that day, and text messages exchanged with the builder, and the two persons who conducted the affairs of the builder those persons being Mr Joel Black, who has sworn affidavits that have been read before me, and is the sole director of the builder. The other person is Mr Dane Melcum, who is a site supervisor employed by the builder and was supervising work being done on the owner's property.
Ms Webster, the owner's wife, had more to do with the day‑to‑day workings of the arrangements that were made with the builder prior to entering into the contract, and then during the course of the building work being done. Both Ms Webster and the owner have described in their affidavits the events that took place after work under the contract was commenced, and then proceeding to what I have referred to as moving in day. The accounts given by Ms Webster and the owner are, as one would expect of a husband and wife, quite similar, but to a large extent, they are based on contemporaneous documents, and I will refer to those in detail in a moment.
They also set out in their affidavits some details of particular conversations that they had with the representatives of the plaintiff around moving in day, and Mr Black and Mr Melcum have, in their affidavits, denied that the conversations occurred or took place as set out in the owner's affidavit and Ms Webster's affidavit. I make no findings in this judgment about whether those conversations occurred. They have also set out in great detail, as I have mentioned, the events before and after moving in day, only the builder has chosen not to contest the facts by putting on affidavits in reply setting out a different account of what happened. As I say, the two people giving evidence for the builder have merely denied the conversations. That leaves the Court in the position of having some degree of confidence in accepting the accounts given by the owner and his wife in their affidavits, but I must stress again that for the purposes of these proceedings, I am not making findings of fact about what happened. That is something that needs to await a final hearing, if there is one, and I do not need to make findings on a final basis of disputed facts. Having said that, however, as I have mentioned, quite a deal of detail is contained in emails that were contemporaneous and exchanged between the parties, and I will refer to those. The Court can have greater confidence that they reflect accurate communications between the parties because they are contemporaneous and in documentary form.
In any event, I highlight these facts from the affidavit of Ms Webster, the owner's wife. She gives evidence that she is a co‑owner of the property, which is the family home of herself, her husband, and their two children. Her evidence is that from about October 2022 to about December 2022, she was involved in discussions with the plaintiff regarding renovation works to the home. On or about 5 December 2022, she provided the plaintiff with a detailed brief of works, including plans, schedule, and a list of materials, and she provided a further similar brief on or about 18 January 2023. On or about 4 January 2023, the plaintiff provided an agreement to supply the construction and renovation of the existing single dwelling with addition of upper level and roof frame. The contracted price was as I have mentioned earlier. There was a description of the works set out in the contract, which was in writing.
Her evidence is the main works started in about January 2023 with site preparation work having commenced in around December 2022. On or about 27 February 2023, the plaintiff produced a construction program estimating practical completion on 14 June 2023. Months later on or about 11 May 2023, about a month before the first estimated practical completion date, the plaintiff provided another construction program, pushing back the estimated practical completion by almost two months to 2 August 2023.
Her evidence is that under the arrangements between herself, her husband, and Mr Black, Mr Black had promised that the plaintiff would repay or reimburse Ms Webster and her husband for amounts that they paid third parties directly for the supply of materials for the home, including fixtures and fittings. These were items that were part of the quoted works under the contract. I pause there in referring to her evidence, and I note that that evidence is not disputed by the builder. Ms Webster goes on to say that the plaintiff failed to reimburse her and her husband for these quoted works, yet made a claim for the works in its statutory payment claim of 26 March 2024, which were then included in the adjudicated amount and certificate obtained by the builder, which was registered with the Court and forms the basis of the judgment.
Ms Webster gives evidence that there is some documentary support referring to and supporting her evidence, about the fact that those arrangements were made, and she has exhibited to her affidavit emails of 3 November 2022, which provide, in my view, independent contemporaneous support for her evidence of the arrangements. I will not quote from the emails, but they are exhibited to Ms Webster's affidavit at pp 61 and 62 of the exhibit. Going on with Ms Webster's affidavit evidence, she gives evidence that her and her husband did not receive repayment or reimbursement for any of the amounts owed to them and by the plaintiff as promised under that arrangement. She goes on in her affidavit at a subsequent point to list in detail the quoted works that were not supplied or completed and which had been included in the original contracted price of $1,124,817.39.
Returning to the chronological narrative in Ms Webster's affidavit her evidence is that on or about 31 July 2023, only two days before the revised estimated practical completion date of 2 August 2023, she sent an email to Mr Black asking if he had an updated schedule for likely completion. On 2 August 2023, Mr Black wrote back advising Ms Webster that he would work on an updated schedule that day. By 10 August 2023, an updated schedule had not been provided, and Ms Webster, again, requested from Mr Black an updated schedule, and time for practical completion.
Mr Black replied in an email that, "In terms of PC (meaning practical completion), we will be fine with 6 September." Ms Webster gives evidence that that date of 6 September 2023 was almost three months after the initial estimated practical completion of 14 June 2023, and on or about 7 September 2023, the day after the revised estimated date of practical completion, which obviously had not occurred, Ms Webster wrote to Mr Black stating, amongst other things, "The date when we need to move in is firm and set as 21 and 22 September, and there is no slack to push that back."
Ms Webster gives evidence that by this stage, Mr Black had already pushed back practical completion by almost three months, and Ms Webster and her husband and children had to move back home by 22 September 23, and Mr Black knew this. Ms Webster gives evidence that she was nervous because they were running out of time in their temporary accommodation, and her husband was travelling overseas for work on the Monday following the Friday 22 September 2023. She said that she also did not want to be left alone again on site, with Mr Black having regard to previous conduct in meetings on site, which she describes in her affidavit, which I will not elaborate on.
She gives evidence that on or about 8 September 2023, she and her husband made arrangements to move back home. There is exhibited to her affidavit an invoice from a removalist company which shows that the removalist received a deposit of 10% for their fee on 8 September 2023. Ms Webster says that prior to 22 September 2023, neither Mr Black nor Mr Melcum nor anyone else from the plaintiff informed her that her family could not move back home on that date, even though they knew from the email they were moving back. That evidence is not challenged by the builder.
Ms Webster then moves to moving in day, which was 22 September 2023. At 9.05am on moving in day, Ms Webster's husband received a text message from Mr Melcum saying, "Just wanted to check you have spoken to Joel about his email. I have a few trades here this morning tidying up a few things and just wanted to make sure everything is all good." Both the owner, and his wife say that they knew nothing about an email, before the text message was received from Mr Melcum. The email that Mr Melcum was referring to was an email that Mr Black sent to Mr McMenemy at 9.12am on 22 September 2023 in which he forwarded an email dated 20 September 2023 at 6.56pm from Mr Black to Mr McMenemy.
Mr McMenemy gives evidence that he did not know what email Mr Melcum was texting him about, and he called Mr Melcum at about 9.10am and said to Mr Melcum, "I have not seen or received the email you texted me about," and Mr Melcum said to him, "You need to speak with Joel." Mr McMenemy said he then telephoned Mr Black who told him, "I've sent you some documents that need to be sorted before you can move in." Mr McMenemy says that it was around then that he received an email from Mr Black, which is the email of 9.12am that I have just referred to.
In the email of 20 September 2023, which was forwarded with that email, Mr Black said to Mr McMenemy:
"Hi, Nick. With the request for an early move‑in to the house at 9 Erith Street, Mosman, we need to finalise the outstanding payment and how that will be sorted following practical completion. As you will know, at practical completion, we are to be paid the outstanding amount for the project. With this not possible due to your requirement for a refinance, could you please review the attached items and provide a response so we can close out and allow the move to occur on Friday 22 September?"
I pause there to note that this email was being sent to Mr McMenemy on that very day. Going on with the email, Mr Black said, "As you can understand, a large sum of money is owed to Black Label Developments, and this will ensure that it is handled in the appropriate manner. Your urgent attention is appreciated. Attached are the following items," the fourth one of which was "deed of variation".
Ms Webster, in her evidence, also says that the email of 20 September 23, which was forwarded on 22 September 2023, was not received before that later date. The receipt of that email led to discussions between Ms Webster and her husband, which it is not necessary to refer to, but at 10.09am on the same morning, Mr McMenemy replied by email to Mr Black and copied in his wife, Ms Webster. I will not set out that email in full, but the email included the following:
"Joel, thanks for sending this over. I have had a chance to read the deed, and at this stage, I am unable to verify the content of recital B and am relying on the commentary here as reflective of matters ‑ it appears to be aligned with my recollection, but I am unable to access paperwork to appropriately confirm matters, given I am in the midst of moving. However, I am sure this can be accommodated."
Mr McMenemy then listed a number of amendments he sought to the deed:
"1. Clause 1.1-Nominated Account will be Black Label developments unless agreed otherwise by the parties - Black Label Proposed
2. Clause 1.6 - value is different from the value in Recital C and Annex A - needs to be amended - needs to be $155k payable on occupation + an amount that both parties accept is payment upon review (see Point 5 below)
3. Payment clause 23(b) - refers to 90 days payment terms and then refers to a 60 day payment term - needs to be amended - 60 proposed
4. Both parties agree that a payment of $155k is payable on practicable completion and the owner confirms that such payment will be authorised for release of payment within 7 days of occupation, upon successful receipt of invoice.
5. Both parties accept that there have been variations to scope of the underlying contract, during the performance of the contract referred to in Recital B
a. The parties agree to review all invoices, variations related to the work undertaken at the Property and any other relevant documentation, within 30 days, following execution of this agreement.
b. The parties will enter into a deed of variation to this agreement, which will confirm the value of any outstanding amounts payable to Black Label Developments
c. Upon execution of the Deed of Variation, the payment clause 23(b) will be applicable.
6. The Clause 23 ( c ) iii - the charge clause doesn't read right… I get the intent - If I don't pay, you want a charge on the property so that your monies are secured against the property, and upon sale, you are paid - which I am fine with… the clause is clunky and doesn't read easily - needs a redraft to make it sharper.
7. The unpaid balance % rate at 15% made me smile - 12 p.a. is fine.
At 1.40pm that day, Mr Black replied to Mr McMenemy's email, copying in Ms Webster. Mr Black said in his email:
"Hi, Nick. Please find attached the revised deed as per our discussions, and the wording of the charging clause has been drafted applicable to remedies under the relevant property law. Could you please execute and send back to me, noting that moving into the house is not permitted until this deed has been executed? Kind regards."
In his email of 1.40pm that I have just referred to, Mr Black refers to "per our discussions". Mr Black has not given evidence of what those discussions were; however, in his affidavit, Mr McMenemy gives evidence that at about 10.30am on that day, he received a call from Mr Black, and they had a conversation. According to Mr McMenemy, Mr Black said, "Don't worry. The deed is all good. We will fix up the defects and true up any money owed to you." Then Mr McMenemy said:
"How can I sign the deed when I'm moving today...the only basis on which I could sign any paperwork is if both parties agreed to sit down, review the invoices Black Label have occurred, and mutually agreed on any moneys to be paid, but also for Black Label to finish off the work they have committed to actually do."
Mr Black then said, "If you don't sign the deed, you will be destitute, and I'll change the locks. I will print out a copy and come over, and you will sign it with Dane standing there. Until you sign the deed, you cannot take possession of the property." As I mentioned at the outset of these reasons, Mr Black denies saying those things, but he has not given evidence of what the discussions were that are referred to in his email of 22 September 2023.
According to Mr McMenemy, the next communication with Mr Black after the conversation I have just referred to was the receipt of Mr Black's email at 1.40pm. Both Mr McMenemy and his wife give evidence of what happened at the home at about 2pm. I will not refer to both of their accounts, but I will read from Ms Webster's account. She says that when they arrived at the family home at about 2pm, they were met by Dane Melcum who handed Mr McMenemy a new agreement titled "deed of variation", along with a pen, saying words to the effect Mr Melcum, "I know this is wrong, but you've got to sign this or you won't be moving in. This is what Joel does." Again, as I have mentioned already, Mr Melcum in his affidavit denies saying this. Neither Mr Black nor Mr Melcum have given any evidence of the circumstances which led to the physical signing of the deed of variation by Mr McMenemy and his wife, who witnessed his signature.
Mr McMenemy and Ms Webster say that at this stage after being told what they were told by Mr Melcum, Mr McMenemy signed the deed of variation, and Ms Webster witnessed his signature. In his affidavit, Mr McMenemy says:
"Under this extreme pressure of not being allowed to move back home, I was forced to execute the deed of variation, which was witnessed by Emily. Otherwise, we had no place to go, given we had planned to move back home that day (as Joel Black, Dane Melcum and the plaintiff knew) and all of our goods were in removals vehicles, waiting outside our family home."
Returning then to Ms Webster's affidavit and the chronology of events, I referred earlier to her evidence about an arrangement for the owner and Ms Webster to supply certain materials which have been included in the quoted works, and therefore, the contracted price. She lists those in her affidavit at para 73 and says that the plaintiff did not supply or complete a number of listed works in the contract. The list she gives at para 3, she says, is a list of examples.
Ms Webster gives evidence that, based on Mr Black's promises to repay or reimburse her and her husband, they paid third parties directly for the supplied materials, and the plaintiff did not transfer moneys back to them under the arrangement I have mentioned. In her affidavit, Ms Webster says that almost $200,000 was due to be paid by the plaintiff under this arrangement, which has not been paid. In her affidavit, she calculates the plaintiff remains liable to pay an amount for that reason calculated to be approximately $165,859.38.
In both Ms Webster's affidavit and her husband's affidavit, they include details of work that was required to be done under the contract but not done as at 22 September 2023, being such as the front fence and entry gate, a gas fireplace, landscaping work, by way of example. Those examples are supported by photographs exhibited to their affidavits which were taken on or about that day or, at any rate, after the builder left the site. It is common ground, as I understand it, that the builder has not returned to the site to do work since 22 September. Perhaps stating it as common ground is overstating it. At least that it what Mr McMenemy and his wife say. I have read the pleadings in the other proceedings, which I refer to in a moment, which do contest that fact and suggest that the builder did come back and do some more work. I am not deciding that one way or the other.
I will refer to the adjudication process under which the judgment was obtained later, but during the adjudication process, Ms Webster gives evidence that she was in hospital from about 3 May 2024, around the time her and her husband were being required to deal with that payment claim. Since the builder obtained judgment, it has taken some enforcement actions to secure the payment of the judgment, which are detailed in both Ms Webster's and her husband's affidavits. It is also referred to in the pleadings in the other proceedings, which I will refer to shortly. It is clear from Ms Webster's evidence that these enforcement applications have caused her and her husband some emotional distress, which is not surprising, given that sheriffs have attended the home and informed them that they have been asked to sell the family home in order to satisfy the judgment.
Ms Webster's evidence is that the builder has either been unable or unwilling to make any payments to the owner or Ms Webster to reimburse them for the fixtures and fittings they paid for under the arrangement they had with the plaintiff.
It is common ground that the deed of variation that was signed in the circumstances or alleged to have been signed in the circumstances described in the evidence of Ms Webster and Mr McMenemy formed the basis of the payment claim that was adjudicated and which forms part of the judgment of this Court. That was common ground in the hearing before me, but that, amongst a number of other matters, are admitted facts in the other proceedings, admitted on the pleadings in those proceedings.
The parties to those proceedings are the builder, Mr Black and Mr Melcum, who are the three defendants, and Mr McMenemy, who is the first plaintiff, and Ms Webster, the second plaintiff. In those proceedings, amongst other relief, Mr McMenemy and Ms Webster ask the Court to make an order permanently staying enforcement of the judgment obtained in these proceedings.
The first and second defendants, who are the builder and Mr Black, have admitted on the pleadings in those proceedings that on or about 27 February 2023, the builder prepared and provided a construction program which estimated practical completion by 14 June 2023. That is consistent with Ms Webster's evidence, and it is admitted that on or about 11 May 2023, the builder prepared and provided Mr McMenemy and Ms Webster with a construction program dated 11 May 2023, which estimated practical completion to be 2 September 2023. It is admitted that on or about 31 July 2023, Ms Webster requested an updated schedule with an indication of likely completion date. It is admitted that on or about 10 August 2023, Ms Webster and her husband, again, requested a schedule for practical completion date, and the further admissions are made, which are consistent with the evidence already referred to of Ms Webster about what happened on 10 August 2023, and similarly, about what happened on 7 September 2023.
In the other proceedings, Ms Webster and Mr McMenemy have pleaded in their statement of claim that the builder has claimed variations totalling $276,930.50, and the builder admits in its defence that it has claimed variations totalling that amount, and Mr Black also admits that. In their defence, the builder and Mr Black also admit in those proceedings that Mr McMenemy and Ms Webster paid the builder the amount of $1,089,960.49 inclusive of GST for works and variations. They also admit that they have garnisheed from the bank account of Mr McMenemy the sum of $25,060.47 in enforcing the judgment.
They have admitted as facts that on or about 26 March 2024, the builder submitted a payment claim. They have admitted that on or about 10 April 2024, Mr McMenemy submitted a payment schedule. They have admitted that an adjudication determination was made on 21 May 2024 in favour of the builder. This is the adjudication determination that forms the basis of the judgment. They have admitted on the pleadings that in making his decision, the adjudicator relied on the deed of variation executed by Mr McMenemy and the builder on 22 September 2023. They have agreed in those proceedings that the adjudicator ‑ when I say, "agreed", they have admitted on the pleadings ‑ considered the deed of variation as forming "part of the contract between the parties". They have admitted on the pleadings that in his adjudication determination, the adjudicator stated, "In respect of the reasons provided by the respondent, for example, duress and unconscionability, these are not the type of matters that I can make a determination on."
They have admitted on the pleadings in the other proceedings that on or about 30 May 2024, the builder filed a registration of certificate of determination based on the adjudication determination, and that on or about 31 May 2024, judgment was made by the Court for Mr McMenemy to pay the builder the sum of $283,956.93. They have admitted on the pleadings that enforcement proceedings have been taken, including an examination notice served on the plaintiff by hand on 7 June 2024, a notice of motion for garnishee order for debts in relation to Macquarie Bank Limited filed on 6 June 2024 and made by the Court on 7 June 2024, a second notice of motion garnishee for debts in relation to the Commonwealth Bank filed on 6 June 2024, made by the Court on 7 June 2024, and a notice of motion for writ for a levy of property filed on 6 June 24, produced by the Court on 7 June.
In the other proceedings, the builder has brought a cross‑claim against Mr McMenemy in which it alleges in para 6 that during the progression of the works, the parties agreed to variations totalling $251,755 plus GST, bringing the total value of the works performed by the cross‑claimant to $1,274,316 plus GST. Mr McMenemy denies that in his defence. It is alleged in the cross‑claim that on 13 August 2024, a writ for levy of property was subsequently registered as a dealing on the property - which means that the writ for levy of property has been registered at Land and Property Information or whatever the current designation of the keeper of land titles in New South Wales is, registered on the title to Mr McMenemy's and Ms Webster's home. Because the pleading refers to a dealing number, I infer and accept that that has actually happened.
Returning now to the deed of variation, the effect of the deed of variation was to increase the contract price stated on the contract. As I have mentioned, the contract price stated on the contract originally was $1,124,817.39 inclusive of GST. Under the deed of variation, that contract price was stated to be adjusted to the sum of $1,401,747.82. The deed of variation also fixed a payment of $155,000 to be made within seven days of the owner occupying the premises; that is by 29 September 2023.
The deed of variation also stated in the annexure to the deed, being the annexure that sets out the variations to the contract, that, "The parties agree to the following contract reconciliation of the builder's final rights and entitlements to payment under the contract." There are then set out the four bulleted points, two of which I have already mentioned. One was the increase in the contract price. Second was the payment of $155,000. The agreement states that the amount paid by the owner to date is $945,143.09, leaving an unpaid balance of $456,604.73 to be paid by the owner as follows: firstly, with the $155,000 payment I have mentioned; then a further payment of $150,000 within 90 days of taking possession, ie, by 21 December 23; and then the parties to negotiate the balance of $151,604.73 in good faith within 30 days of possession; and document any agreement in writing with both parties' signature. The final point was that the "unpaid balance of the contract price is adjustable to reflect the outcome of the above clauses".
As explained by counsel for the owner, these changes removed the existing contractual arrangements for variations under the contract for the work to be done, and how they were to be paid, to be assessed and adjusted and then paid, which are set out in cl 14. I might add that the written terms of the contract, before they were amended by the deed of variation, were in the form of the Residential Building Contract, BC4, October 2021, copyrighted by the Master Builders Association of NSW. Those clauses in the variation deed also worked changes to the previous terms of the agreement about payments required at or about and after the time of practical completion.
As counsel for the owner also pointed out, these changes were worked to the contract by entry into the deed of variation at a time when the builder had ceased doing work, and the evidence shows that the builder has not claimed for any work done after 22 September 2023, and that a submission is made which, in my view, must have some force that the builder provided no consideration for entry into this new agreement varying the terms of the existing contractual arrangements under which all of the work had already been performed by the builder for which the builder was claiming payment and continues to claim payment. No doubt, that is why the variations took the form of a deed of variation, which I also note was prepared by solicitors, namely the builder's solicitors on the record in these proceedings, but I will go into a little bit more detail about that shortly.
It is clear, the evidence shows, that the draft deed presented to Mr McMenemy on the moving in day in the emails I have referred to was prepared by solicitors for the builder. It is also clear that when Mr McMenemy returned his email suggesting or proposing changes to the draft, that the deed was then changed in some ways but not in the ways requested by Mr McMenemy, and the deed was, some hours later, returned to Mr McMenemy by email at about 1.40. Mr McMenemy and his wife give evidence that it seems obvious and clear that in the intervening period, the plaintiff took the deed back to its solicitors. In circumstances where they have given evidence about that, the inference is clearly open that that is what happened. In my view, the Court can infer, for the purposes of this application, that that is, indeed, what happened. The builder took the deed back to its solicitors on the same day, and then changes were made, and on the advice of the solicitors, the document was presented to Mr McMenemy and his wife at about 2pm that day in the way they have described.
This is relevant because of how the claims are formulated by Mr McMenemy, which I will come to in a moment, but Mr McMenemy and his wife's evidence, which I accept, is that they did not have the benefit of any legal advice when the deed of variation was presented to them before they signed it, particularly having regard to the circumstances in which that occurred.
Mr McMenemy, the owner, says that he executed that deed of variation under duress or by reason of undue influence or by reason of the builder's unconscionable conduct, either at general law or under statute, and by reason of the builder's misleading or deceptive conduct in representations and other conduct of the builder on 22 September 2023. He also says he is entitled to have the deed set aside or declared void for any of those reasons or pursuant to the Contracts Review Act 1980. He seeks that relief in the other proceedings in this Court.
Counsel for the owner accepted that some of those causes of action raise equitable claims that the Court may not have jurisdiction to determine. The equitable jurisdiction of the Court is laid out in s 134 of the District Court Act and is the subject of a couple of judgments by Leeming JA in the Court of Appeal, which I will not refer to.
As for the Contracts Review Act claim, there is a jurisdictional limit that may impact upon Mr McMenemy's right to pursue that claim in this Court, and that arises, in particular, from s 134B of the District Court Act 1973. Under s 134B, the Court has the same jurisdiction as the Supreme Court in proceedings in which relief under the Contracts Review Act is sought "Where the amount or value of the consideration that has passed or would, if the contract were fully executed, pass from one contracting party to another does not exceed the amount for the time being specified in s 44(1)(a)". The reference to the amount "specified in s 44" is the amount specified as being the monetary jurisdiction of the Court, which is $1.25 million. It seems to me that in circumstances where the deed of variation changes the contract price to an amount above that, in the order of $1.4 million, it may very well be the case that the Court does not have jurisdiction, and the other proceedings should be referred to the Supreme Court for that reason.
That needs to be read also with s 144 of the Civil Procedure Act, which deals with the jurisdiction of this Court, and subs (2) says:
"If, during proceedings to which this section applies, the District Court decides that it lacks or may lack jurisdiction to hear and dispose of the proceedings, the Court must order the proceedings be transferred to the Supreme Court."
That is a matter I raised with the parties, having heard submissions and read the papers. It is not a question that the parties have asked me to determine in these proceedings, and I am not determining that now; however, I raise it because it is something that must be addressed in relation to the other proceedings in which that relief is sought, and there may be very well equitable relief that is sought that does not fall within s 134 of the District Court Act. For those reasons, I will make an order at the end of this judgment when I make orders that both sets of proceedings be listed before the list judge in four weeks' time to allow the list judge or another judge of the Court to consider whether or not the proceedings need to be referred to the Supreme Court.
With that diversion, in the other proceedings in the Court, the owner also claims that he has overpaid the builder, and he seeks to have the overpayments returned by the payment of money to him in accordance with principles and restitution. That obviously would not be an equitable claim. It is common ground, as I have already mentioned, that the judgment the builder has obtained and is seeking to enforce and about which this stay is sought is based on or arises out of the deed of variation. As I understand it, the owner's case is that if the deed is set aside, then the builder had no right to obtain the judgment, and the owner has no obligation to pay it, or if he does pay it now, if the stay is not granted, then he would be entitled to have it repaid to him in the event that the deed of variation is set aside.
It is common ground between the parties that the Court needs to be satisfied that the owner has "a strong prima facie case" to the relief he seeks in the other proceedings, particularly the relief to have the deed set aside. That comes from the language of Hodgson JA, which is referred to by the Court of Appeal in a relatively recent decision that both parties relied upon in relation to stay application and the Building and Construction Industry Security of Payments Act. That case is TFM Epping Land Pty Ltd v Decon Australia Pty Ltd [2020] NSWCA 118. It is a joint judgment of Bell P (as the now Chief Justice was), Macfarlan and Leeming JJA. I will not go into all of the details of the decision, but at para 9, their Honours say:
"As is well established, the Act makes provision for payment, if necessary, enforceable by judgment of the builders or subcontractors relevantly uncontested claim for claimed but unpaid moneys in order to ensure continuity of cashflow, whilst not precluding the principal from seeking to reverse the effect of such a judgment in later substantive proceedings."
Their Honours go into more detail about that policy later in the judgment at para 22 and following. At para 22, their Honours referred to an earlier decision of the Court of Appeal in the case of Seymour Whyte, and they quote with approval from the summary given in that case by Sackville AJA.
[22] In Seymour Whyte Constructions Pty Ltd v Ostwald Bros Pty Ltd (in liq) (2019) 99 NSWLR 317; [2019] NSWCA 11 at [72]-[74], Sackville AJA (with whom the other four members of the Court agreed) summarised the Act as follows (omitting citations):
"The High Court has on two occasions quoted the explanation of the original design of the Security of Payment Act given by the responsible Minister when introducing amending legislation in 2002:
'The Act was designed to ensure prompt payment and, for that purpose, the Act set up a unique form of adjudication of disputes over the amount due for payment. Parliament intended that a progress payment, on account, should be made promptly and that any disputes over the amount finally due should be decided separately. The final determination could be by a court or by an agreed alternative dispute resolution procedure. But meanwhile the claimant's entitlement, if in dispute, would be decided on an interim basis by an adjudicator, and that interim entitlement would be paid.'
The Minister went on to say that cash flow was the 'lifeblood of the construction industry' and that the Government was:
'determined that, pending final determination of all disputes, contractors and subcontractors should be able to obtain a prompt interim payment on account, as always intended under the Act.'
Section 3(1) of the Security of Payment Act states that the object of the legislation is:
'to ensure that any person who undertakes to carry out construction work … under a construction contract is entitled to receive and is able to recover, progress payments in relation to the carrying out of that work…'
The means by which the Act ensures that a person is entitled to receive a progress payment 'is by granting a statutory entitlement to such a payment regardless of whether the relevant contract makes provision for progress payments' (s 3(2)).
Section 3(3) provides as follows:
'The means by which this Act ensures that a person is able to recover a progress payment is by establishing a procedure that involves:
(a) the making of a payment claim by the person claiming payment, and
(b) the provision of a payment schedule by the person by whom the payment is payable, and
(c) the referral of any disputed claim to an adjudicator for determination, and
(d) the payment of the progress payment so determined.'"
[23] In Style Timber Floor Pty Ltd v Krivosudsky (2019) 100 NSWLR 133; [2019] NSWCA 171 at [25] it was said:
"Part 3 specifies how the legislative purpose of achieving a prompt pro tem resolution of disputes and payment of monies, all without prejudice to the parties' rights at law, is to be effected. This reflects what Hodgson JA said (with the agreement of Mason P and Giles JA) in Brodyn Pty Ltd t/as Time Cost and Quality v Davenport (2004) 61 NSWLR 421; [2004] NSWCA 394 at [51]:
'The Act discloses a legislative intention to give an entitlement to progress payments, and to provide a mechanism to ensure that disputes concerning the amount of such payments are resolved with the minimum of delay. The payments themselves are only payments on account of a liability that will be finally determined otherwise: ss.3(4), 32.'"
[24] In particular, and focussing on the provisions applicable in the present case, if a claimant serves a payment claim and the respondent does not provide a timely payment schedule, then "the respondent becomes liable to pay the claimed amount to the claimant on the due date for the progress payment to which the payment claim relates": s 14(4). If the respondent which is liable to pay the claimed amount under s 14(4) fails to do so, then the claimant is entitled to the rights under s 15(2), one of which is an entitlement to recover the unpaid portion of the claimed amount as a debt in any court of competent jurisdiction (s 15(2)(a)(i)) while the respondent becomes subject to the disabilities in s 15(4)(b), namely, that it is not entitled to bring any cross-claim or to raise any defence in relation to matters arising under the construction contract.
[25] Thus the Act provides for a speedy but interim determination and enforcement of disputes arising out of construction contracts through the service of payment claims and payment schedules and adjudications, leading to an entitlement to payment, enforcement of the parties' entitlements by way of judgment, and ultimately if necessary by way of execution, but without affecting the parties' contractual rights as determined in the ordinary way in litigation.
Going on, I would emphasise the following: that Sackville AJA referred to the second reading speech of the responsible Minister when introducing amending legislation in 2002, and the point is that the payments referred to by the Minister, and the Minister makes the point, that the payments are on account on an interim basis decided by the adjudicator and can be disputed at a later point.
At para 72 in TFM, the Court of appeal referred to the decision of Grosvenor, which concerned a stay of execution of the judgment debt created pursuant to the Act in circumstances where there was a countervailing claim against the builder, and the builder might be unable to repay the amount in the event the claim proceeded. Their Honours then went on to discuss the decision in Grosvenor and referred to the judgment of McDougall J in Veolia. In that case, McDougall J said the exercise of discretion to grant a stay requires a balancing of the relevant factors. Two factors of particular significance in that case were:
"(1) On the one hand, the policy of the Security of Payment Act that successful applicants be paid promptly.
(2) On the other, the likelihood of irreparable prejudice, where that prejudice would flow from the refusal of the stay because cross‑claims would be rendered worthless."
At para 80 in TFM, the Court of Appeal said, after referring to the fact that a judgment might be obtained and a judgment debt created by using the process of making a payment claim under the Act
"There is nothing in the Act to suggest that a judgment thereby obtained is somehow any less enforceable ‑ in the sense that the ordinary options available to a judgment creditor or by way of execution are diminished or unavailable ‑ than any other judgment. To the contrary, all of the provisions are directed to permitting progress claims to be paid, including, if necessary, by execution of the judgment."
Their Honours then refer to a possible exception under s 32 of the Act.
In para 87 under the heading, "When may a stay of execution be ordered on the application of the judgment debt or i.e. debtor ," their Honour say this:
"None of the forgoing detracts from the principles applied by the primary judge that permit a stay of execution to be granted no differently from the fact that a stay of execution may, in an appropriate case, be granted in respect of any other judgment. We respectfully agree with N Adams J in a sentence immediately preceding a passage from her judgment in Bellerive Homes Pty Ltd v FW Projects Pty Ltd reproduced in the Developers' written submissions: 'A stay will generally be less readily available in relation to judgments entered following an adjudication under the SOP Act than in relation to appeals arising from curial proceedings.'"
Their Honours went on, at para 88, to say that:
"That must, with respect, be so. It is a consequence of the legislative purpose of giving cashflow to builders and subcontractors in advance of a final hearing in a court, which is absent in, say, a judgment arising on a debt owed to a bank or following an action for personal injury.
Then, para 89, they go on:
"As McDougall J said in Veolia at 75, a Court may nonetheless intervene where there is the likelihood of irreparable prejudice. In such a case, the Court will be cautious in light of the policy of the statute, but it may do so where the practical effect is to make permanent that which the legislature intended to be merely interim."
They go on to say, at para 90:
"The onus must rest on the party who seeks relief which will prevent the ordinary operation of the processes authorised by the Act, and it is to be borne in mind that a Court would be cautious when intervening, not least because to do so detracts from the primary purpose of the Act in enabling a builder to be paid."
The parties' common understanding that it is necessary for an applicant for a stay to demonstrate a strong prima facie case comes from the observation of Hodgson JA in Bitannia Pty Ltd v Parkline Constructions Pty Ltd [2006] NSWCA 238; 67 NSWLR 9 of para 5 were his Honour said:
"It may be that in those circumstances, the only remedy available is a remedy by way of stay or injunction, if the respondent can show a strong prima facie case to the effect that the result produced by the Act is unjust, and there is a substantial risk that money paid over would be irrecoverable, and that proceedings for a final resolution of the issues are being expeditiously pursued."
The context for the statement made by Hodgson JA in para 5 of Bitannia is in the preceding paragraph, in para 4. His Honour said there that:
"If, through no fault of a respondent, a payment schedule is not served, the Act can work harshly, and this would be particularly so in the case of an extravagant payment claim. It is true that the payment required by the Act for which judgment can be obtained is only a provisional payment which may later be adjusted through proceedings in which the final entitlements of the parties are determined, but this does not eliminate substantial detriment, particularly in cases where the claimant is impecunious, and there may be a real question whether later proceedings, involving substantial expense and delay, are worthwhile pursuing."
I address now the question of a strong prime facie case. The case presented by the owner relied heavily on there being duress arising out of the circumstances described in and around the execution of the deed of variation. The principles about duress are stated in Australia and New Zealand Banking Group Limited v Karam (2005) 64 NSWLR 149, as well as in the decision of the High Court in Thorne v Kennedy (2017) 263 CLR 85. In Thorne v Kennedy, the High Court left open the question of whether pressure to be has to be illegal or illegitimate. In Karam, the Court had said that the vagueness inherent in the terms "economic duress" and "illegitimate pressure" can be avoided by treating the concept of duress as limited to threatened or actual unlawful conduct. I will not read out what their Honours said, but what the Court said at para 66 in that decision appears to me to be very relevant.
It is not clear on the evidence that the conduct the owner complains of was unlawful. Counsel for the owners submitted that it was unlawful because the builder already had contractual rights to payment under the existing contract for the work it had already done, and that it was unlawful in those circumstances for it to refuse to allow the owner to take occupation, something which had, again, been provided for under the existing contract, without entering into the deed of variation. That sort of conduct may or may not be unlawful or conduct that can satisfy concepts of duress, but at para 66 in Karam, the Court of Appeal said:
"If the conduct or threat is not unlawful, a resulting agreement may nevertheless be set aside where the weaker party establishes undue influence (actual or presumptive) or unconscionable conduct based on an unconscientious taking advantage of his or her special disability or special disadvantage in the sense identified in Amadio. Thirdly, when a power to grant relief is engaged because of contravention of the statutory provision, the Court may be entitled to take into account a broader range of circumstances than those considered under the general law."
There are then also the considerations under the Contracts Review Act which deal with material inequality of bargaining power, and a number of other aspects that the Court considers on that sort of application.
It seems to me that the strongest position for the owner, in terms of the suite or smorgasbord of causes of action they put forward may lie in unconscionable conduct or relief under the Contracts Review Act.
Before I go any further on the question of strong prima facie case, both counsel provided written submissions but did not speak to them orally other than to make occasional references to them. The main points they made were oral ones in the re‑enforcing points made in the written submissions.
In general terms the counsel for the builder emphasised that the whole purpose of the Act is to ensure that builders maintain their cashflow, and that that purpose will be defeated if a stay is granted. The policy of the Act is to ensure the builder is paid promptly and requires or allows the parties to argue about it later.
Orally, the counsel for the builder referred to the policy of the Act to allocate risk to the owner rather than the builder so that if, having regard to progress payment made under the Act, and on a final reckoning, too much was paid, and the money has to be repaid, then the risk is with the owner to carry the risk that the builder may not be able to repay. I accept that that is definitely a policy of the Act and the way the Act proceeds. I will come back to the question of whether the purpose of the Act is defeated if a stay is granted. I am not accepting that submission for the moment.
In written submissions, counsel for the builder submitted that the onus rests upon the party who seeks relief when obtaining a stay. I accept that. He submitted the onus is not on the builder to prove it is not at risk of insolvency, and I accept that. He submitted a stay will generally be less readily available in relation to judgments entered following an adjudication under the Security of Payments Act than in relation to appeals arising from curial proceedings. I accept that. He submitted that the Court's reluctance to grant a stay in the context of the Act stems from a concern that the purpose of the Act would otherwise be undermined, and it is to be borne in mind that a Court will be cautious when intervening, not least because to do so detracts from the primary purpose of the Act in enabling a builder to be paid, and I accept that.
He submitted that a stay will only be granted where the claimant is either actually or very close to insolvent. Were it otherwise, then the stay itself may drive the claimant into the very insolvency which the interim payment regime of the Act is designed to prevent. He cites a reference to Bellerive Homes Pty Ltd v FW Projects for that proposition. In my view, that proposition is overstated, and to the extent that that may well be a ground when the Court will grant a stay, that is where the claimant is either actually or very close to insolvent, but it is not the only ground upon which the Court has a discretion to order a stay.
Counsel for the builder submitted that the defendants must show a strong prima facie case in the primary proceedings. That is common ground between the parties, and I accept that that is what must be shown. The builder's counsel also submits that a substantial risk that money paid over would be irrecoverable must also be shown. I am not convinced that that is something that must be shown in the sense that if it is not shown, the Court has no discretion. In my view, the discretion of the Court is not limited in that way. The same applies to the submission that it must be shown that the proceedings for a final resolution of the issues have been expeditiously pursued.
Counsel for the builder submitted that the defendant's evidence was hopelessly short of demonstrating that the plaintiff is actually or very close to insolvent. I accept that submission. Counsel for the owner submitted that that is not what the owners sought to prove in this case on this application, asking the Court to grant a stay in the special circumstances of this case.
Counsel for the builder submitted that it is irrelevant in terms of the policy of the Act whether or not the owner is an owner of residential property, an individual, a property developer, or a large company. I do not accept this submission. Counsel for the owner placed a great deal of reliance upon the fact that the work undertaken by the builder in this case was residential building work under the provisions of the Home Building Act, and he quite rightly drew attention to the historical fact that many of the principles stated in Courts of higher authority, including the Court of Appeal and the High Court, were made at a time when the Act did not apply to residential building work in an owner occupied property; that is to say someone's home, when work was done by a builder on someone's home which they living in or intending to live in. The Act has been changed.
In my view, this is a relevant consideration when it comes to the question of the exercise of any discretion that the Court may have because a change has been made as to the operation of the Act as it impacts owner occupied residential building work, and the reason for that change has not been made clear by the parliament or in a way that it would be possible to discern why the change was made.
I rely heavily for what I am about to say upon an article that is reproduced in Halsbury's Laws of Australia at para [202, 326], being an article by Philip Davenport, reproduced in Halsbury's at that paragraph. This is a paper that Mr Davenport prepared in 2020. In the paper, he traces the statutory changes which led to the change which occurred and begun to take effect from 1 March 2021 in relation to owner occupied building work, if I can put that crudely.
Mr Davenport explains that on and from 1 March 2021, the Act will apply to all residential construction under contracts under the Home Building Act entered on or after that date. This will make it easier and faster for contractors to recover payment, but it gives the person for whom the work is carried out no benefits, and often that person will not be aware of what they have to do to avoid liability under the Act. Mr Davenport suggests this was the reason for the exemption in the first place, and when first enacted, with the exemption for residential building work, it was a form of consumer protection. He says that the government has not explained why the protection was being removed.
Mr Davenport explains the Act, when first passed, originally provided that it did not apply a to construction contract for the carrying out of residential building work within the meaning of the Home Building Act on such part of premises as the party for whom the work is carried out resides in or proposes to reside in. Such a contract is referred to as an exempt residential construction contract still in s 4 of the Act. On 21 October 2019, the section that gave that exception, being s 7(2)(b) of the Act, was repealed by the Building and Construction Security of Payment Amendment Act 2018. I have looked at the second reading speech for that Act, and it does not explain why the exemption was taken out of the Act. The second reading speech for the 2018 Act given by Mr MacDonald in the Legislative Council on 24 October 2018 refers to this change in this way:
"The bill also contains a series of reforms that will be implemented through the regulations. First, the existing residential building work exemption will be transferred from the Act to the regulations. This will allow the exemption to be refined or removed following further stakeholder consultation."
Mr Davenport explains that the passing of that Act meant that on 21 October 2019, s 7(2)(b) was repealed, and parliament removed the exemption from the Act and allowed it to be continued by a regulation. This was done by the Building and Construction Industry Security of Payment Amendment Regulation 2019. It commenced on 21 October 2019. That inserted into the regulation a new regulation providing that, for the purpose of s 7(5) of the Act, owner occupier construction contracts are prescribed as a class of construction contracts to which the Act does not apply. Then that is read with the definition of owner occupier construction contract, which means the contract for the carrying out of residential building work within the meaning of the Home Building Act on such part of any premises as the party for whom the work is carried out resides or proposes to reside.
Mr Davenport explains the purpose of removing the exemption from the Act to the regulation was to enable the exemption to be amended or abolished without a need to amend the Act. That is clear from the second reading speech I have just referred to. He says, "From 1 March 2021, the Building and Construction Security of Payment Regulation 2020 repeals cl 4 and abolishes the exemption." That is the effective date on which there was a change removing the exemption that had existed up to that time since the Act was first passed in 1999, allowing for an exemption for owner occupied residential building work to be exempted from the provisions of the Act. That was the first time that sort of building work was caught by the provisions of the Act.
Again, as Mr Davenport explains, a contract who enters into an exempt residential construction contract on or after 1 March 2021 will be able to make use of the Act just as can be done under a contractor that is not an exempt residential construction contract. Mr Davenport offers the commentary that with the benefits provided to contractors by the extension of the Act to all New South Wales residential construction contracts, there is a commensurate risk to owners and occupiers who commission residential construction work. He then asks a series of rhetorical questions and ends with the comment, "The change places consumers at serious risk."
It seems to me that this change does effect a change in the risk calculation previously described, and commented upon by the Courts at a time when there was no capturing of owner occupied residential building work. This can be seen, for example, in the often quoted and referred to commentary of Keane JA in R J Neller Building Pty Ltd v Ainsworth [2009] 1 Qd R 390, in particular, at paras 40 and 41 where his Honour discusses the policy of the Act "in the commercial context in which the BCIP Act applies."
It was submitted by counsel for the builder that this was because in Queensland, that was the context. It was not a residential building work context in Queensland because the Act in Queensland did not cover that situation. The same is true for New South Wales up to March 2021, and this is a passage that has been referred to a number of times in subsequent cases and is consistent with the policy of the Act and the introduction of the Act in the first place being largely driven to ensure that people working in the construction industry, particularly small builders, contractors, and subcontractors, were dealt with fairly by those above them in the chain of cashflow from the person or institution paying the money that was being used to carry out the construction work.
Clearly, there is a commercial context in that sort of situation, and the cases and second reading speeches referring to cashflow being the lifeblood of the industry and so on, and one can see readily why the bigger players in the industry should not be concerned about having to wait and argue later. But the calculation there is very different when it comes to ordinary people dealing with a builder in respect of the building or renovations to their own homes. It is not clear that the policy previously articulated in cases applies so readily in those circumstances. This is a factor, in my view, that goes to a consideration or heightened consideration of any discretionary factors if the Court does have the power to grant a stay, which I think it does. I therefore do not accept the builder's submission that it is irrelevant that Mr McMenemy is the owner of residential property. In my view, it is a relevant consideration.
Counsel for the builder submitted that whilst, in theory, the power to make an order staying execution of the judgment is available as a matter of discretion, what he called "bespoke" principles applied to cases such as this where there is a context of a judgment being obtained under the Security of Payment Act, and that a stay would be granted only if the Court was satisfied there was a real risk the builder was or would become insolvent and so on.
In my view, whilst it is true to say that a significant body of case law has developed around the situation in which the Court might be permitted or might exercise a discretion to stay enforcement of a judgment obtained by means of the adjudication process under the Act, those principles are not "bespoke" to the extent that they stand alone and away from other principles developed by the Courts and provided for in statute. They do not cancel out or remove the power of the Court to make an order under s 135 of a different Act, being the Civil Procedure Act, which I mentioned at the outset of these reasons.
It was submitted by counsel for the builder, and in relation to the duress case being put forward by the owner, if one looked at the email sent by Mr McMenemy back to the builder proposing changes to the draft deed on moving day, it demonstrated that Mr McMenemy was not expressing disapproval or shock or any indication of duress or unhappiness about what was being proposed or complained in that regard.
In submissions in reply, however, counsel for the owner took me back to the same email and asked me to read it in context. The context was that that email set out proposed changes to the draft deed of variation, which itself was proposing changes to the existing agreement, so that the commentary by Mr McMenemy in his email response was directed to the proposed amendments in the variation deed, and his proposed changes to those proposed changes. He was not talking about the original building contract itself, and he was certainly not agreeing to the changes that were being put forward in the draft document. What the owner was really only agreeing to was that he should make a payment $155,000 upon taking occupation, and that the obligation to pay any further money should be explored and determined at a later stage once the builder had provided evidence in support, and an opportunity for Mr McMenemy and his wife to consider what was put forward.
Counsel for the owner also explained that under the original contract, in cl 13, the builder had the entitlement or right to claim for variations, and that there was a process under that clause for them to be claimed, quantified, and paid in addition to the contract price stated in the contract. As I mentioned earlier, by having the owner agree to the deed of variation, the builder was circumventing that process and going against what he had already agreed or his company had already agreed should take place. The same applied in relation to the payment to be made on taking occupation.
Counsel for the builder submitted that making it a condition of any stay that the money be paid into Court still defeats the purpose and policy of the legislation because the builder must wait for his money if he is proven right. There is indication in decisions, such as TFM in the Court of Appeal, whether or not money is offered to be paid into Court is a significant consideration and factor for the Court to take into account, which leads me to the view that it is possible to allow that the happen, and whilst it may not sit neatly with the purpose and policy of the legislation, it nevertheless is a factor, and it is sometimes done.
Counsel for the owners also provided a written outline of submissions and spoke to those at some length without precise reference to them but extensive reference to the evidence I have referred to. Counsel submitted that the adjudicator was correct in his approach as to the matters he could not determine, such as duress, unconscionable conduct and/or undue influence, among other things, and as I understand it, that is common ground by the end of submissions before me, but the consequence of that is that the Act created a judgment debt in circumstances where there is a real prospect, in my view, a serious prospect that the deed is void or voidable and not enforceable by the builder. He submitted that this is an unjust consequence of the operation of the Security of Payments Act and could not have been intended by the legislature. In other words, or in my words, it does not sit comfortably with the policy of the Act as it has been articulated by the Courts to date. That is even leaving aside the question of why the change was made bringing owner occupied residential building work into the sphere of the Act. I accept those submissions.
Further, counsel for the builder submits that the owner has offered and does offer to pay the judgment sum excluding moneys already elicited by the respondent via enforcement processes, which is a reference to the garnishee sum already obtained in the order of, I think, about $25,000, into Court pending the outcome of the separate but related proceedings arising from that work and the governing contractual arrangements. In my view, it is a very significant consideration on the exercise of any discretion that the owner is offering to pay that money into Court, and any order granting a stay would be conditional upon that happening.
In her affidavit, Ms Webster, the owner's wife, or she is, in fact, a co‑owner of the property, makes a number of points which I would read by way of submission, some of which have, in my view, some force. She says that where the plaintiff has been unable or unwilling to pay moneys it owes her and her husband in relation to the works, despite several promises to pay, and her reference there is to the arrangement or understanding about Mr McMenemy and Ms Webster providing materials which were included in the contract price, and the arrangement was to reimburse them for paying for those materials, Ms Webster asks the Court to stay enforcement of the adjudication until determination of the substantive proceedings so as to allow her and her husband to address the very concerning issues raised in the affidavit and "have our day in Court". Her reference to the very concerning issues raised in the affidavit is an obvious reference to the way in which the deed of variation came to be executed.
She submits effectively that if the payment is made to the plaintiff, there is a risk that Mr McMenemy, her husband, will not be able to recover the money in light of the peculiar facts of this case that the builder already owes this money under the arrangement, and given and considering the way in which the builder conducted itself in obtaining the deed of variation. Her concern, which I would read as a submission, is that if there is no stay, and even more moneys are paid to the builder, which from the point of view of Mr McMenemy and Ms Webster would be further overpayment to the builder, Ms Webster is concerned or the submission is made that there is a real risk that the owner may not see that money again if he succeeds in the other proceedings.
On Ms Webster's calculation and submissions, the overpayment to the plaintiff has been approximately $190,919, the calculations of which are set out in the judgment, which includes the garnisheed amounts. If one then adds the adjudication judgment of the balance of 283,956.93, in her submission, the plaintiff is looking to be overpaid by almost half a million dollars at least, including for works it has not done in the sense it has not finished ‑ there is photographic evidence before me, as I have mentioned, that work was not finished ‑ and the materials that they supplied. In my view, those submissions, as I said, carry some weight on discretionary considerations.
I turn then to whether or not I am satisfied that there is a strong prima facie case. I am satisfied that there is for a number of reasons, including when the facts are laid out in the form of the emails; added to that, the admissions on the pleadings about delays in practical completions; added to that, the arrangement about Mr McMenemy and his wife supplying materials included in the contract price, which the builder was meant to pay back but which it has not; add in the way Mr McMenemy and his wife describes the arrangements and factual situation in which pressure was applied at the last minute and in quite stressful circumstances without warning in a clear leveraging of the delicate position Mr McMenemy and his wife found themselves in, the arrangements to move having been made well in advance without any indication or warning that more money would be sought before the delivery truck that the builder knew was coming could be unloaded; with Ms Webster having health problems, at one stage in hospital of which the builder was aware; in circumstances where Mr McMenemy was due to travel overseas within a matter of days and needed to settle his family into the home before he left; and added the ordinary strains of moving home, which create stress on any family.
In all those circumstances, added to that, Mr Black and Mr Melcum simply deny the conversations to the extent that Mr McMenemy and Ms Webster have set out conversations, yet they have not sought to give evidence of a different account of how the deed of variation came to be entered into, and the builder relies heavily upon that document and used it to obtain the adjudication determination, and hence the judgment in question in this Court.
In my view, and I am satisfied, Mr McMenemy has established that he has a strong prima facie case to have the deed of variation set aside on one or other of the grounds upon which he seeks to do that, at the very least, the way in which the builder obtained the execution of that deed of variation was, in my view, sharp, very sharp practice. That is, of course, based on the acceptance of the account put forward by Mr McMenemy and Ms Webster which the builder has not contested and should be the basis upon which I give my decision.
I will then move to other discretionary considerations. I have already mentioned Mr McMenemy offers to pay the judgment sum into Court. The considerations mentioned by Black J in the case I quoted earlier come into play at this point about the general interests of justice. The builder leans heavily into the general considerations about the policy of the Act, and the underlying purpose to ensure that cashflow flows through the industry and to builders in his position, yet has made no submission or put on no evidence to suggest that the cashflow of the sum in question is particularly needed at this time or will have any detrimental effect on the builder if it is not provided, as opposed to being set aside by payment into Court and paid at a later date once the parties rights have been fully determined.
On the merits, if the owner is correct about already having been overpaid, and the plaintiff is entitled to enforce this judgment, obtained on the basis of a deed of variation which is ultimately set aside, then in the interim, the plaintiff builder will have succeeded in obtaining and using the benefits of its own wrongful conduct in the way it obtained the execution of that deed of variation. Counsel for the builder submitted that it was not right and unjust that the builder should be allowed to do that.
I would be very surprised if the policy of the Act was designed to permit that to occur once it has come to the attention of the Court in proceedings. No doubt, the general policy of the Act occurs in situations where contracts are negotiated and acted upon, and then whilst there may be arguments about the meaning of the contract or the obligations under the contract, the contract nevertheless provides the bedrock for the arrangements between the parties, and with the Act in the background, provides for the cashflow that is needed and required.
However, all of that is thrown out the window, in my view, if the parties have not agreed in the sense of entering into a legally enforceable agreement or one that can be or should be set aside. It strikes me that it is beyond the policy considerations or relevance of the policy considerations of the Act for the Court to stand by and allow for the possibility, in my view, a seriously prima facie case possibility, that the contract upon which the builder sues, being the deed of variation which varied the original contract, has been obtained by wrongful conduct. This, in my view, is a very serious and heavy consideration.
I fail to see why the Court should sit on its hands and do nothing if it has a power to stay the execution of the judgment and allow the parties to determine their rights in the usual way. For those reasons, I am satisfied that it is appropriate, as a matter of discretion, in the peculiar circumstances of this case, for the Court to grant the stay that the defendant, Mr McMenemy, the owner of the property, seeks.
I propose to make the order sought in the notice of motion, allowing, however, for the fact that some money has been paid under the judgment by way of the garnishee order, and obtaining of money from Mr McMenemy's bank account.
I make the following order:
1. On condition that the defendant pay into Court the judgment sum less the amount recovered already by the plaintiff under garnishee within seven days, that judgment and orders in New South Wales District Court proceedings 2024/00201168 be stayed pending resolution of New South Wales District Court proceedings 2024/00250069.
Unless someone wants to submit otherwise, ordinarily, costs would follow the event.
Does anyone want to make any submissions about that?
AYACHE: We object to costs being made.
ATTOH: Perhaps if we were allowed seven days on the papers to make submissions. We'd obviously seek costs to follow the event.
HIS HONOUR: Yes. I'll make the usual order, and I think if you look at the rules, there's a 14‑day period that allows you to seek a different order, but you have to make the application within that time.
2. I order the plaintiff to pay the defendant's costs of the motion.
3. I stand both sets of proceedings over for directions before the list judge on Friday 15 November 2024.
[2]
Amendments
20 November 2024 - paragraph 9 - started work in late 2020 changed to started work in late 2022
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Decision last updated: 20 November 2024