Goodwin Street Developments Pty Ltd v DSD Builders Pty Ltd

The issues

1. The owner seeks orders in the nature of certiorari quashing the determination. The summons, amended summons, and amended list statement raised a number of grounds of suggested invalidity. Only two of those are now pressed. The first ground asserts that the payment claim was invalid because it did not include the supporting statement referred to in s 13(9) of the Security of Payment Act.
2. The second suggested ground of invalidity is that the adjudicator did not exercise her statutory function, or did not perform it in good faith, because she did not value the construction work, and reach conclusions on the question of defects, as required by, in particular, s 10(1)(b)(iv) of the Security of Payment Act.
3. If those challenges fail, the owner submits that the Court should in any event prevent the builder from enjoying the fruits of its success in the adjudication, on the basis that if the builder does so, the owner may suffer irreparable prejudice by reason of the builder's financial position.

First challenge: supporting statement

1. I start with the first ground of challenge. Section 13 of the Security of Payment Act reads as follows: 13 Payment claims (1) A person referred to in section 8 (1) who is or who claims to be entitled to a progress payment (the claimant) may serve a payment claim on the person who, under the construction contract concerned, is or may be liable to make the payment. (2) A payment claim: (a) must identify the construction work (or related goods and services) to which the progress payment relates, and (b) must indicate the amount of the progress payment that the claimant claims to be due (the claimed amount), and (c) if the construction contract is connected with an exempt residential construction contract, must state that it is made under this Act. (3) The claimed amount may include any amount: (a) that the respondent is liable to pay the claimant under section 27 (2A), or (b) that is held under the construction contract by the respondent and that the claimant claims is due for release. (4) A payment claim may be served only within: (a) the period determined by or in accordance with the terms of the construction contract, or (b) the period of 12 months after the construction work to which the claim relates was last carried out (or the related goods and services to which the claim relates were last supplied), whichever is the later. (5) A claimant cannot serve more than one payment claim in respect of each reference date under the construction contract. (6) However, subsection (5) does not prevent the claimant from including in a payment claim an amount that has been the subject of a previous claim. (7) A head contractor must not serve a payment claim on the principal unless the claim is accompanied by a supporting statement that indicates that it relates to that payment claim. Maximum penalty: 200 penalty units. (8) A head contractor must not serve a payment claim on the principal accompanied by a supporting statement knowing that the statement is false or misleading in a material particular in the particular circumstances. Maximum penalty: 200 penalty units or 3 months imprisonment, or both. (9) In this section: supporting statement means a statement that is in the form prescribed by the regulations and (without limitation) that includes a declaration to the effect that all subcontractors, if any, have been paid all amounts that have become due and payable in relation to the construction work concerned.
2. As will be seen from subs (9), the form of the supporting statement is something that is dealt with in the Building and Construction Industry Security of Payment Regulation 2008 (NSW) (the Regulation). The form of supporting statement is set out in Sch 1 to the Regulation. I set out that schedule: Supporting statement by head contractor regarding payment to subcontractors This statement must accompany any payment claim served on a principal to a construction contract by a head contractor. For the purposes of this statement, the terms "principal", "head contractor", "subcontractor", and "construction contract" have the meanings given in section 4 of the Building and Construction Industry Security of Payment Act 1999. Head contractor: [business name of head contractor]ABN: [ABN] * 1. has entered into a contract with: [business name of subcontractor]ABN: [ABN] Contract number/identifier: [contract number/identifier] OR * 2. has entered into a contract with the subcontractors listed in the attachment to this statement. * [Delete whichever of the above does not apply] This statement applies for work between [start date] and [end date] inclusive (the construction work concerned), subject of the payment claim dated [date]. I, [full name], being the head contractor, a director of the head contractor or a person authorised by the head contractor on whose behalf this declaration is made, hereby declare that I am in a position to know the truth of the matters that are contained in this supporting statement and declare that, to the best of my knowledge and belief, all amounts due and payable to subcontractors have been paid (not including any amount identified in the attachment as an amount in dispute). Signature: Date: Full name: Position/Title: Attachment Schedule of subcontractors paid all amounts due and payable Subcontractor ABN Contract number/ identifier Date of works (period) Date of payment claim (head contractor claim)

Schedule of subcontractors for which an amount is in dispute and has not been paid Subcontractor ABN Contract number/ identifier Date of works (period) Date of payment claim (head contractor claim)

1. The document relied upon in the present case as a supporting statement states that the builder is the head builder and that it has contracted with BH Australia Constructions Pty Ltd (the subcontractor). It is established that this company is, at least in an informal sense, a related company of the builder. The supporting statement includes a statement by a director of the builder: That, to the best of [her] knowledge and belief, all amounts due and payable to subcontractors have been paid (not including any amount identified in the attachment as an amount in dispute).
2. There was no attachment to the supporting statement.
3. The submissions for the owner suggested that the subcontractor had to be identified in some form of supporting schedule. I do not agree. When one looks at the form of certificate as it is found in Sch 1 to the Regulation, it is quite clear that two alternatives are provided. The first alternative applies where there is only one relevant subcontract. The second alternative applies where there are multiple subcontracts. They are expressed to be disjunctive.
4. In the present case, so far as the supporting statement goes (and there is no evidence to suggest that it is incorrect, if that were a relevant consideration), there was only one subcontract. The supporting statement said so. It identified the name of the subcontractor. It said that no money was owing. That, it seems to me, is all that was required as a matter of form.
5. The second part of the submission relied on the parenthesised words in the supporting statement that was annexed to the payment claim. It was submitted that, in the absence of an attachment, there was no identification of whether anything was owing. Again, I do not agree. When one looks at the supporting statement as a whole, it is clear that nothing is said to be owing. That is because any amounts that were owing were to be identified by means of the attachment. In the absence of the attachment, it seems to me to follow necessarily that no amounts were (so far as the certificate goes), said to be owing.
6. I reach that conclusion as a matter of construction of the document in context. It seems to me, with great respect to the submission to the contrary, to be a common sense approach to what is essentially a practical matter.

Second challenge: valuation of the progress payment

1. The second ground of challenge is more troubling. It draws attention to the essential function that an adjudicator is to perform. That is set out in s 22(1) of the Security of Payment Act. What the adjudicator is "to consider" in performing that function is set out in s 22(2). I set out the whole of s 22: 22 Adjudicator's determination (1) An adjudicator is to determine: (a) the amount of the progress payment (if any) to be paid by the respondent to the claimant (the adjudicated amount), and (b) the date on which any such amount became or becomes payable, and (c) the rate of interest payable on any such amount. (2) In determining an adjudication application, the adjudicator is to consider the following matters only: (a) the provisions of this Act, (b) the provisions of the construction contract from which the application arose, (c) the payment claim to which the application relates, together with all submissions (including relevant documentation) that have been duly made by the claimant in support of the claim, (d) the payment schedule (if any) to which the application relates, together with all submissions (including relevant documentation) that have been duly made by the respondent in support of the schedule, (e) the results of any inspection carried out by the adjudicator of any matter to which the claim relates. (3) The adjudicator's determination must: (a) be in writing, and (b) include the reasons for the determination (unless the claimant and the respondent have both requested the adjudicator not to include those reasons in the determination). (4) If, in determining an adjudication application, an adjudicator has, in accordance with section 10, determined: (a) the value of any construction work carried out under a construction contract, or (b) the value of any related goods and services supplied under a construction contract, the adjudicator (or any other adjudicator) is, in any subsequent adjudication application that involves the determination of the value of that work or of those goods and services, to give the work (or the goods and services) the same value as that previously determined unless the claimant or respondent satisfies the adjudicator concerned that the value of the work (or the goods and services) has changed since the previous determination. (5) If the adjudicator's determination contains: (a) a clerical mistake, or (b) an error arising from an accidental slip or omission, or (c) a material miscalculation of figures or a material mistake in the description of any person, thing or matter referred to in the determination, or (d) a defect of form, the adjudicator may, on the adjudicator's own initiative or on the application of the claimant or the respondent, correct the determination.
2. The reference to "progress payment" directs attention back to s 9 of the Security of Payment Act. It also directs attention to s 10. The former says what the amount of a progress payment is to be. The latter says, in particular in subs (1)(b) for present purposes, how the valuation of that amount is to be carried out. I set out ss 9 and 10(1): 9 Amount of progress payment The amount of a progress payment to which a person is entitled in respect of a construction contract is to be: (a) the amount calculated in accordance with the terms of the contract, or (b) if the contract makes no express provision with respect to the matter, the amount calculated on the basis of the value of construction work carried out or undertaken to be carried out by the person (or of related goods and services supplied or undertaken to be supplied by the person) under the contract. 10 Valuation of construction work and related goods and services (1) Construction work carried out or undertaken to be carried out under a construction contract is to be valued: (a) in accordance with the terms of the contract, or (b) if the contract makes no express provision with respect to the matter, having regard to: (i) the contract price for the work, and (ii) any other rates or prices set out in the contract, and (iii) any variation agreed to by the parties to the contract by which the contract price, or any other rate or price set out in the contract, is to be adjusted by a specific amount, and (iv) if any of the work is defective, the estimated cost of rectifying the defect.
3. In this case, it is common ground that the contract made no express provision for the valuation of construction work. That concession, which in my view was correctly made, appears to reflect the view expressed by the Court of Appeal in John Holland Pty Ltd v Roads and Traffic Authority of New South Wales [1] at, in particular, [38]. I add that there are other authorities, both in the Court of Appeal and at first instance, that express a similar view.
4. It follows, cutting through the statutory undergrowth, that in this case the adjudicator was required, in performing her statutory function of determining the amount (if any) of the progress payment to be paid by the owner to the builder, to have regard to the matters set out in s 10(1)(b). The obligation to "[have] regard to" something requires, I think, that the specified considerations be given weight as fundamental elements in the determination; that they be considered as the focal points by reference to which the relevant decision is to be made. See Zhang v Canterbury City Council [2] at [71]-[73] (Spigelman CJ, with whom Meagher and Beazley JJA agreed).
5. It is to be noted, by reference to the same authority, that the requirement to "[have] regard to" something is effectively equivalent to the requirement to "consider" something. It seems to follow from this that the obligations to have regard to specified matters in s 10, and to consider specified matters in s 22(2), effectively involve a similar degree of intellectual application; they require the same intellectual exercise.
6. The adjudicator dealt with the claim for defective work at [147] to [156] of the reasons for her determination.
7. The first of those paragraphs is prefatory and need not be set out. The remaining paragraphs are critical to the argument. I set them out: 148. In the Payment Schedule, the Respondent details the following items as 'deductible': a. Cost of rectification of defective and incomplete work - $28,000.00 including GST (supported by the 'ball park' BB Estimate'); b. Cost of rectification damage/replacement of stolen items - $551,382.00 including GST (supported by Contract Administrator's Assessment of Damage Costs). 149. In the Contract Administrator's Assessment of Amount Payable to Owner Certificate under CQ9, the Respondent scopes a further head of claim, namely "Balance to complete to reflect "current day" industry standard rates". 150. First, it is evident from the material provided to me that the above costs are prospective, i.e. they are estimated future costs that may be incurred after the reference date, as opposed to retrospective actual costs incurred for this payment period, i.e. prior to 15 March 2018, in rectifying defects etc. Furthermore, the BB Estimate is indicative, and has been prepared by another builder to assist the Respondent with its budgeting. The Contractor's Assessment of Damage Costs is thorough in that it sets out the quantification and rate applied for each trade. However, there is no evidence within it indicating that another person has completed any of the alleged damage rectification works. In respect of the BB Estimate in particular, I am mindful of my comments in paragraph 77 above in regards to fairness and impartiality of the architect/Contract Administrator under the Contract. 151. Second, I consider the terms of the Contract to determine whether the Respondent [sic - Claimant] is entitled to the progress claim for the Contract works without deduction for the alleged defective work. 152. Item 22 of Schedule 1 and Clause M1 provide a Date for Practical Completion of 31 March 2018. Clause M11 provides that the contractor must correct any defects or finalise any incomplete work, whether before or after the date of practical completion within an agreed time as stated in an instruction from the architect. Under Clause M12, the owner is entitled to make a claim to adjust the contract pursuant to clause N4, if it is required to use another person to rectify the problem because the contractor fails to correct a defect or finalise incomplete work. Under Clause N4.e, the architect, when assessing a progress claim, is to take account of any claim by the owner for a set off of monies due under the Contract. 153. I acknowledge that in earlier certificates, the Contract Administrator included photographs of purported defective work and incomplete work. However, there is no clear evidence provided from the Respondent that persuades me that the Claimant was instructed by the architect to correct particular defects or finalise any incomplete work prior to the reference date, the Respondent failed to correct those particular defects or incomplete work, and because it failed to do so, the owner evoked its right to use another person to rectify the problem pursuant to Clause N4, and did so, and finally in by doing so, is entitled to offset the cost of it. 154. Furthermore, I can find no contractual mechanism that would permit the Respondent to offset monies for the replacement of stolen items. 155. Accordingly, I find the Respondent is not entitled to deduct rectification costs and for damage/replacement of stolen items under the Contract for the applicable reference period. 156. I value the Respondent's off-setting claims in amount Nil.
8. The fundamental problem in this part of the adjudicator's reasons is that it shows that she was well and truly aware of the claim by the owner that the work was in many respects defective, but she made no precise finding on the topic. She referred in one place to "alleged defective work" and in another to "purported defective work and incomplete work". The obligation to have regard to those matters required her to deal with them as a fundamental element of this part of her determination, or as the focal point of her analysis. In Laing O'Rourke Australia Construction Pty Ltd v H&M Engineering and Construction Pty Ltd [3] , I said at [34] that the obligation to exercise the statutory function in good faith "requires at least that adjudicators should turn their minds to, grapple with and form a view on all matters that they are required to 'consider'".
9. Vickery J gave a much more detailed analysis of what was required of an adjudicator in SSC Plenty Road Pty Ltd v Construction Engineering (Aust) Pty Ltd [4] , in particular [101]. I said in Suprima Bakeries Pty Ltd v Australian Weighing Equipment Pty Ltd [5] at [40] that his Honour's observations were directly applicable to determinations made by adjudicators in this State pursuant to the Security of Payment Act. Accordingly, I set out [101] of his Honour's reasons: [101] Drawing the threads together, the following may be said of an adjudicator's assessment of a payment claim under the Act in Victoria: (a) The adjudicator is required to determine and apply what the adjudicator considers to be the true construction of the Act in the light of the current case law. (b) The adjudicator is required to determine and apply what the adjudicator considers to be the true construction of the construction contract. (c) In addition to the matters to be determined and considered under ss 23(1) and (2), and excluded under s 23(2A) of the Act, an adjudication requires, as a minimum, the following critical findings to be made (the "critical findings"): (i) a determination as to whether the construction work the subject of the claim has been performed (or whether the relevant goods and services have been supplied); and (ii) the value of the work performed (or the value of the goods and services supplied). (d) Construction work carried out or related goods and services supplied are to be valued in accordance with the terms of the construction contract (if the contract contains such terms) pursuant to ss 11(1)(a) and 11(2)(a). (e) In the absence of any express provision in the construction contract providing a mechanism for an adjudicator to undertake the assessment of value, the valuation assessment is to be undertaken in accordance with s 11(1)(b) (for work) and s 11(2)(b) (for goods and services), having regard to the matters set out in those sub-sections, namely: (i) the contract price for the work or the goods and services; (ii) any other rates set out in the contract; (iii) if there is a claimable variation, any amount by which the contract price or other rate or price set out in the contract, is to be adjusted as a result of the variation; and (iv) if the work or goods are defective, the estimated cost of rectifying the defect. (f) If a construction contract contains a binding schedule of rates within the meaning of s 11(1)(b)(ii) (for work) and s 11(2)(b)(ii) (for goods and services), the adjudicator is required to have regard to the schedule in assessing value if s 11(1)(b) or s 11(2)(b) apply. Further, the adjudicator should state in the adjudication determination whether and how the schedule of rates was applied in the assessment of value, if it in fact was applied, or state why the schedule of rates was not applied. (g) However, without measures, evidence or submissions being provided to the adjudicator in a coherent fashion in respect of defined categories of work (or goods and services) the subject of a contractual schedule of rates, in most cases it would not be possible for an adjudicator to safely apply the schedule in assessing the value of the claim. In such circumstances the adjudicator may have regard to a schedule of rates, but would not be remiss in not applying it. (h) The adjudicator is obliged to make the critical findings on the whole of the evidence presented at the adjudication. (i) The adjudicator, having decided that the respondent's submissions and material should be disregarded, cannot simply adopt the amount claimed by the claimant (for example, in the payment claim or in the adjudication application). (j) The adjudicator must proceed to make the critical findings by: (i) fairly assessing and weighing the whole of the evidence which is relevant to each issue arising for determination at the adjudication; (ii) drawing any necessary inferences from the evidence, or from the absence of any controverting material provided by the respondent, including an inference that if there is no controverting material, no credible challenge can be made to the value of the claim advanced by the claimant. Such an inference may be considered in the context of the evidence as a whole; (iii) arriving at a rational conclusion founded upon the evidence; (iv) in so doing, is not called upon to act as an expert; and (v) is not entitled to impose an onus on either party to establish a sufficient basis for payment or a sufficient basis for withholding payment. (k) Pursuant to s 23(3) of the Act, the adjudicator must include in an adjudication determination both the reasons for the determination and the basis upon which any amount or date has been decided. In providing these reasons the adjudicator must summarise the central reasons for the making of the critical findings in the adjudication determination with as much completeness as the time permitted under the Act will allow.
10. It will be seen that the critical findings that his Honour thought should be made include findings as to whether the construction work had been performed and what was its value. That task requires the adjudicator to assess fairly and weigh the whole of the evidence, including by drawing necessary inferences from it, and arrive at a rational conclusion.
11. I do not perceive any difference in principle between the somewhat abbreviated statement I gave in Laing O'Rourke at [34] and the more detailed analysis that Vickery J gave in SSC Plenty. I do however wish to repeat what I said in Southern Cross Electrical Engineering v Steve Magill Earthmoving [6] at [30]. It is not correct to say that the requirements identified by Vickery J must be applied serially and mechanically in every case to see if what purports to be a determination is in law capable of meeting that description. There is, in my respectful view, a risk that overzealous attention to his Honour's formulation of the elements of the task that adjudicators are required to perform may lead a court into the error of straying from review of the kind that is permitted (which is essentially confined to aspects of jurisdictional error, want of good faith and the like) and into review on the merits. That is why, in some ways, I prefer the simpler and less ornate description of the fundamental requirement of good faith that I gave in Laing O'Rourke.
12. There was a substantial body of material before the adjudicator that dealt with the question of defects. That included what was said to be an instruction to the "contractor" (i.e. the builder) dated 15 January 2018. That document, which was signed on behalf of the owner but which apparently had been sent by the "Achitect" [sic] under the contract in his role as administrator of the contract, set out in very considerable detail defects that were said to exist as at its date. I think that this is what the adjudicator was dealing with at [153] of her reasons where she referred to "earlier certificates" that "included photographs of purported defective work and incomplete work".
13. There is a real question as to whether the so-called instruction complied with the contractual prerequisites. It would appear from what the adjudicator said that she did not think that it did. But she did not deal with it on that basis. She said, quite clearly, that there was no clear evidence that the purported defective and incomplete work shown in that earlier certificate remained defective or incomplete as at the date of the payment claim.
14. The question is really whether the adjudicator dealt with this in a way that shows that she grappled with the underlying factual issue. That is a very difficult question. I am not being critical of the adjudicator, but it would have been helpful had she expressed a clear view in clear terms as to what she found and why.
15. The task has been complicated because the adjudicator gave reasons that are not entirely logical for apparently downplaying the significance of the claim for defective work. I refer for example to what she said at [150]. It does not seem to me that the question, whether rectification work has actually been carried out in the reference period or as at the reference date, is relevant to the statutory task set out in section 10(1)(b)(iv). Nonetheless, if that were the only error, it is very hard to see how it could be jurisdictional.
16. I suspect that one of the problems that the adjudicator had was that she was dealing with the matter on the basis of the payment claim, payment schedule and adjudication application only. She had directed herself, correctly in my view, that it was not open to her to take into account the "merits" submissions made in the adjudication response, because that had been served out of time.
17. In the material that the adjudicator did have, there was a commentary from the builder that responded to the various complaints made in the so-called instruction of 15 January 2018. That response started with the proposition that the instruction was contractually invalid. Nonetheless, it turned to the merits of the matters, and dealt individually with each item. That I think is the foundation of the adjudicator's reasoning process at [153] where she referred to the lack of clear evidence to show that the position as to defects asserted in the earlier certificate remained current two months later, at the date the payment claim was to be valued.
18. In looking at adjudicators' determinations, it is essential to take into account the extremely compressed time frame within which they have to work and the subsequent pressure that this generates, and to take into account also the unhelpful way in which, all too often, material is put before them. In many cases, that includes provision of voluminous amounts of material, much of which may be irrelevant, and to which no clear key or guide is given.
19. In this case, it seems to me, when one reads the relevant part of the adjudicator's reasons as a whole and in context, she has shown a process of reasoning and she has reached a conclusion. It is obvious, and she proceeded on the basis, that it was the owner's "onus" - evidentiary, not legal - to satisfy her of the amount of any offsetting claim. Of course, it is the builder's responsibility to prove the value of the work comprised in its claim. If the owner challenges that valuation, then the builder's evidence must be sufficient to persuade the adjudicator that it should be accepted (either in whole or with modifications). But where an owner alleges, as a separate matter, that it has an offset for defective work, that I think is something for which the owner bears, as it were, the evidentiary onus.
20. To the extent that this may be thought to be inconsistent with the approach taken by Vickery J in SSC Plenty, I do not agree. Although his Honour did say that the adjudicator should not impose an onus on either party to establish a sufficient basis for payment or sufficient basis for withholding payment, that observation must be read in context. The context is that if the party who raises an issue adduces no evidence on it then it may be, as Vickery J recognised, appropriate for the adjudicator to draw inferences from the absence of supporting material. I think that is what the adjudicator tried to do in this part of her reasons.
21. Looking at the adjudicator's reasons in their entirety, and without any predisposition to find error or want of attention in them, I conclude that she did deal with the dispute put before her, and did in substance both say that she was not satisfied that there was defective work and say why.
22. There was a separate complaint made in this part of the case. It was in effect that the adjudicator had merely rubber stamped the payment claim. I do not agree. What the adjudicator did was say that the owner's approach, which was based on valuing work to be completed, was not an appropriate way of valuing past performance. In essence, what the owner did, as the adjudicator saw it, was look at the cost to complete the contract works and then use that to arrive at a valuation of the work already done. I do not think that the adjudicator erred in any way that is reviewable by doing so. The adjudicator then said at [113]: 113. In the absence of any clear contest from the Respondent that I am permitted to consider, and in consideration of the details provided in the Payment Claim of the works completed as at 15 March 2016, I value the contract works in total amount $1,967,897.00 excluding GST, this amount being the full amount claimed by the Claimant.
23. The adjudicator made it plain that she had considered the details provided in the payment claim. There is other material in her reasons that makes it extremely clear that she did so. Looking at the paragraph in a fair and open-minded way, the adjudicator is not simply rubber stamping the amount of the claim. She is saying, in effect, that she has considered the detail given and is satisfied by it.

Irreparable prejudice?

1. I turn to the third issue. It is necessary to consider this because I have concluded that each of the jurisdictional challenges must fail. The owner's case is that it has a substantial offsetting claim and that, if the builder is held entitled to recover the adjudicated amount, the owner may be prejudiced because it may not be able to recover the fruits of any judgment that it may get in its favour.
2. The relevant principles have been considered very recently by Payne JA in Shade Systems Pty Ltd v Probuild Constructions (Aust) Pty Ltd [7] . His Honour at [26] and following directed himself by reference to the earlier decision of the High Court in the same matter [8] and to the decision of Keane JA in R J Neller Building Pty Ltd v Ainsworth [9] at [39]-[42]. Payne JA pointed out, correctly, that the plurality reasons in Probuild at [51] approved the statement of principle made by Keane JA in R J Neller. I might add that Keane JA's reasons also obtained the approval of the Court of Appeal in Chase Oyster Bar Pty Ltd v Hamo Industries Pty Ltd [10] .
3. I set out what Keane JA (with whom Fraser JA and Fryberg J) said in R J Neller at [39] to [42]: [39] It is evidently the intention of the BCIP Act, and, in particular, s 31 and s 100 to which reference has been made, that the process of adjudication established under that Act should provide a speedy and effective means of ensuring cash flow to builders from the parties with whom they contract, where those parties operate in a commercial, as opposed to a domestic, context. This intention reflects an appreciation on the part of the legislature that an assured cash flow is essential to the commercial survival of builders, and that if a payment the subject of an adjudication is withheld pending the final resolution of the builder's entitlement to the payment, the builder may be ruined. [40] The BCIP Act proceeds on the assumption that the interruption of a builder's cash flow may cause the financial failure of the builder before the rights and wrongs of claim and counterclaim between builder and owner can be finally determined by the courts. On that assumption, the BCIP Act seeks to preserve the cash flow to a builder notwithstanding the risk that the builder might ultimately be required to refund the cash in circumstances where the builder's financial failure, and inability to repay, could be expected to eventuate. Accordingly, the risk that a builder might not be able to refund moneys ultimately found to be due to a non-residential owner after a successful action by the owner must, I think, be regarded as a risk which, as a matter of policy in the commercial context in which the BCIP Act applies, the legislature has, prima facie at least, assigned to the owner. [41] The mere existence of the very kind of risk on which the provisions of the BCIP Act in favour of the builder are predicated would not ordinarily be sufficient of itself to justify a stay of an execution warrant based on the registration of a certificate of adjudication. There may, of course, be other circumstances, which, together with this risk, justify the staying of a warrant of execution based on the registration of an adjudication certificate. For example, the builder may have engaged in tactics calculated to delay the ultimate determination of the rights and liabilities of the parties so as unfairly to increase the owner's exposure to the risk of the builder's insolvency. Or the builder may have restructured its financial affairs after the making of the building contract so as to increase the risk to the owner of the possible inability of the builder to meet its liabilities to the owner when they are ultimately declared by the courts. In this case there are no such circumstances. [42] While addressing considerations relevant to the exercise of the discretion to order a stay, one may also mention the consideration that the adjudication of Neller's claim resulted in a favourable outcome for Neller. While this adjudication is provisional, and, indeed, may ultimately be held to be devoid of legal effect, it is not irrelevant that an independent and expert arbiter has assessed the merits of the building dispute between the parties and concluded that the merits of that dispute lie very much in Neller's favour. This is a consideration which tends to lessen the weight to be accorded to the concern that Ainsworth might be deprived of the fruits of ultimate vindication by the refusal of a stay.
4. His Honour makes two points. The first is that the Security of Payment Act effects, in substance, a statutory transfer of risk pending final determination. Before the Security of Payment Act, the risk of insolvency was borne by the builder. Now, it is borne by the owner. The second point made by his Honour is that a risk that goes no further than the risk inherent in that statutory allocation is not sufficient to justify, without something more, a stay of enforcement of the adjudication. As his Honour said, something more must be found.
5. In the present case, the owner pointed to some evidence of the builder's financial position. That evidence did no more than suggest that the builder was modestly profitable and that it had, as at 31 December 2017, net assets of about $470,000.
6. I accept that if the owner commences proceedings (so far as the evidence goes, it has not yet done so) and recovers a substantial verdict (and there is no reason to think one way or the other), there is at least a possibility that the builder would be unable to satisfy that verdict. That could happen if, for example, the builder were to use its available assets to defend the claim. But that is precisely the risk that, as Keane JA pointed out in RJ Neller, is something to be borne by the owner pending the final determination of rights and liabilities under the contract.
7. There are no additional circumstances in this case that would lead to any different conclusion. There is no evidence that the builder has taken steps to arrange its affairs to defeat any claim that may be made against it. Nor is there any evidence that it has been engaging in delaying tactics. I accept, of course, that those are only two of the matters that may justify the imposition of a stay notwithstanding the statutory allocation of risk to which I have referred. But that really means no more than that they were the only features referred to in any way in this case. In truth, as I have said, there is nothing more than the risk that a judgment, if recovered, may not be enforceable. That is simply a consequence of the statutory risk allocation scheme.
8. It follows that I would not order a stay based on the third ground.

Orders

1. For those reasons the summons must be dismissed with costs. I so order. The money paid into court together with any interest accrued thereon should be paid out of court to the first defendant. I make no other orders as to costs.

[Counsel addressed.]

1. I stay until 5pm on 15 August 2018 the order for payment out of court.

Endnotes

1. (2007) 23 BCL 205.
2. (2001) 51 NSWLR 589.
3. [2010] NSWSC 818.
4. [2015] VSC 631.
5. [2016] NSWSC 998.
6. [2018] NSWSC 1027.
7. [2018] NSWCA 33.
8. Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd (2018) 92 ALJR 248.
9. [2009] 1 Qd R 390.
10. (2010) 78 NSWLR 393 at [207]. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 08 August 2018