BRB Modular Pty Ltd v AWX Constructions Pty Ltd & Ors [2015] QSC 222

1. I have already mentioned the dates which are available and although there can be no guarantee that a judge of this Court might not need to reserve the matter for some time, it seems to me that this consideration is something that, on balance, tends to favour the applicant's argument.

2. The question of speed can also be balanced with the time that has been taken by the parties to get to the position of the adjudication outcome in favour of the first respondent and the recent legislative change in the policy of the Act for cases where an amount of the size that has been claimed in this case are to be dealt with.

1. All in all, I think the factor of timing tends to favour the applicant's case.

Second, the bank guarantee proffered by the applicant. Obviously, if a bank guarantee is proffered, that provides a substantial consideration that favours the grant of the injunction.

Third, there is the consideration of the usual undertaking as to damages.

1. In this case, the usual undertaking is offered but before me the first respondent challenged the worth of the undertaking and no evidence was before me as to the financial standing of the applicant.

2. The question of the worth of an undertaking can, in some injunction cases, loom very large.

1. In this case, although the absence of evidence is of some concern, it must be pointed out that the principal risk to the first respondent is the risk that it might not get paid its money if ultimately it succeeds. That risk and the interest component of that risk, namely the time value of money, would be secured by the undertaking to provide a bank guarantee.

1. So the consideration of any doubt that there might be as to the worth of the applicant is only relevant to such loss as might occur over and above being held out of the money for some period of time. There is no evidence before me that suggests any particular likelihood of such damages accruing, but of course it can't be completely discounted.

2. I'm inclined to regard this factor as sounding somewhat against the grant of the injunction, but I'm not inclined to give it a large amount of weight.

In dealing with the significance to this application of the offer of the usual undertaking as to damages, I think I have also dealt with the fourth point made by the applicant, namely that the applicant contends there is no prejudice to the first respondent if what the applicant characterises as the status quo is maintained. I am not sure characterising it as the status quo is correct, because the status quo really is that there is an adjudication determination that requires money to be paid. Rather, I would construe the submission as saying there is no prejudice to the first respondent of being held out of its money until the determination of the originating application, because its money will be secured by the offer of the bank guarantee. Interest may continue to accrue, but that is also covered by the quantum of the bank guarantee that is offered. The applicant pointed out that the first respondent has identified no pressing need for the money. For its part, counsel for the first respondent submits that the first respondent suffers loss merely by being held out of the money. I am prepared to accept that theoretical possibility, but am not prepared to accord it great weight in the circumstances of this case.

The next consideration is the risk, if there is one, that the first respondent would be unable to repay the adjudicated amount if the applicant succeeded on the originating application.

1. I will not rehearse the evidence in any great detail. I do have a balance sheet and a profit and loss account for the previous business year in respect of the first respondent. It does suggest that the net asset position of the first respondent is about $1.6 million, and the greater component of current assets contributing to that net asset figure is identified as about $6.6 million of receivables.

2. The concern adverted to by the applicant is that the fact that receivables comprise such a large component of assets might contribute to difficulty of recovery from the first respondent, if that should ever become necessary. The applicant points to the fact that title searches do not reveal any real property owned by the first respondent in Queensland, New South Wales and Victoria.

1. The highest that the evidence goes - at least so far as it relates to the first respondent by itself - is that the size of the amount in question when compared to the first respondent's overall net asset position suggests that it would at least involve a degree of dislocation for the first respondent to place its hands on an amount of money of that size. It does not seem to me to show a significant case of risk that the monies would not be recoverable.

1. Counsel for the first respondent has advised me that the first respondent's parent company, which is a company of significantly more substance than the first respondent, is prepared to guarantee the ability of the first respondent to pay those monies.

2. It seems to me that the highest that the question of risk could be characterised is that there may be some risk that is a little more than speculation. But it does not seem to be a compelling case, by any means.

I will move to the next point made by the applicant, which is that in considering where the lower risk of injustice lies I should also take account of the fact that entry of judgment against commercial entity carries with it a commercial stigma. I am not inclined to accord significant weight to this factor. Sometimes in cases of this nature, parties can point to significant adverse financial consequences of entry of judgment because various commercial instruments they have entered into define such events as events of default. There is no evidence before me that this is such a case, so as I say, I am not inclined to accord that consideration much weight.

I have already mentioned the significance of the amount in question. I have already mentioned that I think the question of time favours the applicant. The applicant says that a further factor in its favour is that it has acted promptly. I think that's more pointing to the absence of a consideration which might sound against it, as might have been the case if it had not acted promptly.

The applicant next contends that the fact that the first respondent continues to have a right to make progress claims under the building contract and to persuade a contractor's representative (who I assume is some form of certifier) of the merits of its claims. I am not inclined to accord that significant weight in determining what should happen in relation to rights that the first respondent would otherwise have under statute.

The applicant next points to the prima facie case. It suggested it should be regarded as having a good, arguable case. The concession made is that there is a prima facie case. I am not otherwise presently in a position to evaluate the strength of the prima facie case.

The remaining significant consideration is a matter that occupied a significant amount of the time of argument before me, namely the significance, in disputes of this nature, of the policy of the Act.

...the authorities are clear that [the risk that monies due under an adjudication decision, if paid, could not be repaid] is a risk which BCIPA squarely places on [the applicant] and not [the first respondent]. It is not a basis to justify restraining the enforcement of an adjudicator's decision under BCIPA.

It must be acknowledged that putting that submission as highly as the first respondent has put it, has the support of some authority.

1. The first respondent draws my attention to the Court of Appeal decision of R J Neller Building Pty Ltd v Ainsworth [2008] QCA 397; [2009] 1 Qd R 390 at [39] and [40], to the following effect (emphasis as per the submissions of the first respondent):

[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.

1. The significance of R J Neller in a case such as that before me today was examined by Daubney J in Wiggins Island Coal Export Terminal Pty Ltd v Sun Engineering (Qld) Pty Ltd [2014] QSC 170 at [32] and [34], as follows:

[32] In short, even before Kirk's case, a party disappointed by an adjudication decision could pursue relief based on contentions that the adjudicator's decision was void. That was the situation when the Court of Appeal decided R J Neller. The fact that, since 2010, it has been clarified that jurisdictional error can found a contention that an adjudicator's decision is void, in my view, does not detract from the strength and applicability of the observations made by Keane JA in R J Neller concerning the relevant legislative policy underlying BCIPA. If an adjudicator's decision, pursuant to which money has been paid by a contractor to a builder, is subsequently adjudged to be void (on whatever basis), the risk that the builder might not be able to refund those monies after a successful action by the contractor to have the decision declared void is the risk which, as Keane JA said, the legislature has prima facie assigned to the contractor.

[34] When one otherwise considers the arguments advanced in the present case concerning the balance of convenience, the arguments come down to this. Sun has a prima facie entitlement to be paid the money. WICET has the right to challenge the validity of the adjudicator's decision, and may well be regarded, for present purposes, as having strong grounds for contending that the adjudicator's decision is void. But, as a matter of policy, WICET carries the risk that monies paid over pursuant to the adjudicator's decision may not ultimately be refunded by Sun if the adjudicator's decision is ultimately adjudged to be void.

1. Justice Daubney's approach in WICET has been followed by Peter Lyons J in Sunshine Coast Regional Council v Earthpro Pty Ltd & Ors [2014] QSC 271 at [15].

A question arises as to whether I am obliged to apply his Honour's approach to the policy of the Act in a case such as this where it is conceded there is a prima facie case that the adjudication determination is void for jurisdictional error. I think the approach that I should take to that question is that identified by Holland J in Michael Realty Pty Ltd v Carr (1975) 2 NSWLR 812 at 820, where his Honour observed:

I do not think that I am relieved by the decision of Needham J of my duty to bring my own judgment to bear on the point in question. There is no rule of law which binds a Judge to abide by the decision of another Judge of coordinate jurisdiction; but a Judge of first instance will, as a matter of judicial comity, usually follow the decision of another Judge of first instance in the same jurisdiction, unless convinced that the judgment was wrong.

It is clear that the decision of an adjudicator under the Act may be reviewed on the basis of jurisdictional error. A decision attended with jurisdictional error is no decision at all, that is, it is void. As Gaudron and Gummow JJ observed in Minister for Immigration and Multicultural Affairs v Bhardwaj [2002] HCA 11; (2002) 209 CLR 597:

A decision that involves jurisdictional error is a decision that lacks legal foundation and is properly regarded, in law, as no decision at all. Further, there's a certain illogicality in the notion that although a decision involves jurisdictional error, the law requires that until the decision is set aside the rights of the individual to whom the decision relates are - or, perhaps, are deemed to be - other than as recognised by the law that will be applied if and when the decision is challenged.

I accept the observations (as I am bound to do) by Keane JA in R J Neller about the policy of the Act, but I think, contrary to Daubney J, that the observations by Keane JA in R J Neller at [39] and [40] were directed to circumstances in which there was a valid decision by an adjudicator. It does not seem to me to be correct to observe that there is anything in the Act which reveals a policy to attribute the risk to which Keane JA adverts in R J Neller at [40] as a risk that should be borne by the paying party in circumstances where there is a concession that there is a prima facie case that the adjudication decision is void for jurisdictional error.

The intention of the Act - and in particular the intention revealed in ss 31 and 100 of the Act, to which Keane JA adverted in R J Neller at [39] - must be taken to be an intention revealed in relation to decisions of an adjudicator, made within jurisdiction. The policy of the Act described by Keane JA in R J Neller only applies in its full force to valid adjudication decisions. To my mind, it could not possibly be intended to be the policy of the Act that the risk is so passed in relation to decisions which are void and liable to be quashed by the Courts.

It follows that I respectfully disagree with the approach taken by Daubney J in the WICET decision. It seems to me that the appropriate analytical significance of the Act's policy in cases such as the present is that the policy characterises the nature of the right that is in question in the interlocutory injunction application. So if, on an interlocutory injunction application of this nature, the applicant has established a prima facie case that the adjudication decision is void for jurisdictional error, in considering the question which arises on the balance of convenience, in considering where the lower risk lies, it is appropriate to consider the fact that granting an injunction would deny to someone a right, the nature of which is that described by Keane JA in R J Neller. The way in which this plays out in the exercise of the discretion is in the balancing process described by Hansen J in Kellogg Brown & Root Pty Ltd.

Counsel on behalf of the applicant developed another argument, in support of the proposition that the policy of the Act was not to be regarded in the way that Daubney J stated in WICET. Counsel pointed to the terms of s 31(4)(b) of the Act. Section 31 provides as follows:

31 Filing of adjudication certificate as judgement debt

(1) An adjudication certificate may be filed as a judgement for a debt, and may be enforced, in a court of competent jurisdiction.

(2) An adjudication certificate can not be filed under this section unless it is accompanied by an affidavit by the claimant stating that the whole or a part of the adjudicated amount has not been paid at the time the certificate is filed.

(3) If the affidavit states that part of the adjudicated amount has been paid, the judgement is for the unpaid part of the amount only.

_(4) If the respondent commences proceedings to have the judgement set aside, the respondent - _

(i) to bring any counterclaim 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 decision; and

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

1. The Act contemplates that a party who wishes to contend that an adjudication determination is void for jurisdictional error may so contend, and if the other party has already converted the adjudication determination into a judgment, the party contending for jurisdictional error could bring an application for a declaration that there was jurisdictional error and seek to set aside the judgment.

2. Section 31(4) would, in those circumstances, require that person to pay moneys into Court.

1. That gives an indication of the policy of the Act, namely the price to be paid by the moving party to have a Court hear and determine a challenge of that nature is to pay monies into Court as security for the unpaid portion of any adjudication amount.

1. Why - so it is put - would the policy of the Act be any different simply because the dispute comes before the Court at a stage antecedent to the adjudication outcome being converted into a judgment debt?

I find the argument compelling, and I note that support is found for it in observations made by:

1. McDougall J in Filadelfia Projects Pty Limited v EntirITy Business Services Pty Ltd [2010] NSWSC 473 at [11]:

[11] In the ordinary way injunctive relief would be granted on condition that the amount in dispute, including the cost of the adjudication and some allowance for interest, be paid into Court pending a final resolution of the dispute. That is generally done firstly where s 25(4) of the Act applies, simply because that is a requirement of the section. Where (as here) s 25(4) does not apply in terms (and it does not apply in terms because there has been no adjudication certificate, and hence no judgment for a debt) the Court nonetheless, taking into account the clear objects of the Act and its underlying policy, generally orders payment into Court by analogy with s 25(4).

1. Hammerschlag J in Nazero Group Pty Ltd v Top Quality Construction Pty Ltd [2015] NSWSC 232 at [42]:

[42] The policy of the Act, as reflected in s 25(4)(b), is that a claimant is to be given protection of payment into court when a respondent seeks, whether by injunction or otherwise, to inhibit the claimant's enforcement of an adjudication in its favour. Pendente lite, Top Quality is being held out of payment, with the risk attendant on delay, notwithstanding the statutory obligation on Nazero to pay. It is open to Top Quality to file the adjudication certificate, in which event Nazero would have little option but to seek to have the judgment set aside to protect its position, in which event, s 25(4)(b) of the Act would mandate payment into court. Here, by happenstance, the section does not apply because the further step has not yet occurred. Top Quality would have to take that step to enforce its statutory right to payment. The only difference is that these proceedings have intervened. The policy of the Act is not served by removing Top Quality's protection pending determination of Nazero's challenge even though s 25(4)(b) of the Act does not apply in terms.

Lesser but still some support for the argument is found in the decision of Henry J in Isaac Regional Council v Civil Mining and Construction Pty Ltd & Ors [2014] QSC 105 at [11]- [12]. His Honour acknowledged the existence of a policy of the nature of that for which the applicant has argued, but, did so in the context of rejecting an argument that it was necessary to require payment in. In other words, his Honour granted an injunction without requiring the adjudicated sum to be paid into Court.

The result is that I do not think the issue of policy is a factor strongly against the application for injunction as contended for by the first respondent.

Bearing those considerations in mind, where does the balance of convenience lie in this case? What course appears to carry the lower risk of injustice?

To my mind, the balance of convenience favours the granting of an injunction. The primary considerations that seem to me to amount to pointers in that favour are:

1. the certainty provided by the bank guarantee, as opposed to the uncertainty and attendant risks involved in leaving the applicant in a position where it might have to sue for the return of any monies it was required to pay over.

Accordingly, I am prepared to grant an injunction substantially in the terms sought by the applicant, although I will hear the first respondent as to the form of the order. I am also minded to set the originating application down for hearing on one of the days which I have indicated are available next week, and to make any other appropriate directions.