Grindley Constructions Pty Ltd v Painting Masters Pty Ltd

EX TEMPORE JUDGMENT 1This is an application for an ex parte interlocutory injunction restraining the first defendant from filing an adjudication certificate obtained under s 24(1)(a) of the Building and Construction Industry Security of Payment Act 1999 ( the Act ) in any competent court under s 25 of that Act. 2Although the application was ex parte, the first defendant was on notice that the application would be made and I am informed by Miss Gleeson, who appeared for the plaintiff, that her instructing solicitor notified the first defendant that the application would be made this morning. 3The plaintiff is the head contractor on two building projects, one at Nambucca Heads and one at Port Macquarie. It entered into subcontracts with the first defendant to perform painting work at both developments. 4On 24 October 2011, the subcontract in respect of the Port Macquarie development was terminated by the plaintiff and on 25 October 2011 the plaintiff also terminated the subcontract in respect of the Nambucca Heads development. 5Immediately following service of the termination notices, on 25 October 2011, the first defendant served payment claims in respect of the work it had done on the two projects. 6Both payment claims were in a similar form and consisted of simple schedules setting out the contract value and deducting from that progress payments to date and a number of incidental amounts to arrive at the final payment claim. It is noteworthy that the covering letter including the schedule states: In September 2011 Painting Masters [that is the first defendant] completed the work at Nambacca as per the agreement and 100% of the contract value was invoice [sic] to your company in September 2011. 7On 9 November 2011, the plaintiff served payment schedules in respect of both claims. Both schedules, among other things, stated that the plaintiff claimed a right in accordance with cl 66.6 of the General Conditions of Contract to set off costs for rectification work of defects. 8Nothing further then happened in relation to either claim until 6 December 2011 when the first defendant issued two further payment claims. Those payment claims were in substantially the same terms as the payment claims made on 25 October 2011. 9It seems clear that the payment claims made on 6 December 2011 covered the same period and were in respect of the same work as was covered by the earlier claims. 10On 20 December 2011, the plaintiff served payment schedules in relation to the second payment claims. Again, those schedules claimed, among other things, a right of set off in respect of the costs of rectifying defects although that right was now put in terms of s 10 of the Act. 11On 9 January 2012, the first defendant made an adjudication application. The application form itself stated that the payment schedule date was 25 October 2011, although other material that was served with the application referred to the claims made on 6 December 2011. 12On 2 February 2012, the plaintiff provided the adjudicator with a response to the adjudication application and on 8 February 2012 the adjudicator, Mr Phillip Davenport, made a determination in each matter which allowed a substantial proportion of the first defendant's claim. 13The plaintiff says that there is a serious question to be tried that it is entitled to an injunction on a final basis for two broad reasons. 14The first is that the adjudicator did not have jurisdiction to determine the application. The plaintiff submitted that, insofar as the application was based on the payment claims made on 25 October 2011, the adjudication application was out of time. Insofar as the adjudication application was based on the payment claims dated 6 December 2011, those claims were invalid because the first defendant had already served payment claims in respect of the reference date covered by those claims, namely, the claims made on 25 October 2011. 15The second basis on which the application is put is that the adjudicator failed to comply with the requirements of natural justice in two respects. 16First, although the adjudication application identified the relevant payment claims as those of 25 October 2011 the adjudicator, without inviting submissions from the plaintiff, concluded: [I]t is apparent from the folder accompanying the application form that the claimant is seeking adjudication of its final payment claim dated 6/12/12. The respondent provided a payment schedule on 20/12/11 in response to that claim. I am satisfied that the claim to be adjudicated is the payment claim of 6/12/11. 17Secondly, the adjudicator concluded that, after analysing the contract, the contract did not provide a right of set off in respect of defective work. The plaintiff says that it was not given an opportunity to make submissions in relation to that conclusion in circumstances where it had put its right of set off on the basis of s 10 of the Act. 18I accept that the plaintiff has established that there is a serious question to be tried. 19In Chase Oyster Bar Pty Ltd v Hamo Industries Pty Ltd [2010] NSWCA 190, 78 NSWLR 393, the Court of Appeal held that determinations by adjudicators under the Act are in principle amenable to orders in the nature of certiori for jurisdictional error. Jurisdictional error will occur where the claim is not a claim that is made in accordance with the provisions of the Act. 20It is also well established that, to use the words of McDougall J in Watpac Constructions NSW Pty Ltd v Austin Corp Pty Ltd [2010] NSWSC 168 at [141] an adjudication determination will be void if among other things "there is a substantial denial of the measure of natural justice that the Act requires to be given." 21Section 17(3)(c) of the Act relevantly provides that an adjudication application in the case of an application under s 17(1)(a)(i) must be made within ten business days after the claimant receives the relevant payment schedule. It is clear that the adjudication application in this case falls within s 17(1)(a)(i). 22It is equally clear that the adjudication application was not made within ten business days after the first defendant received the plaintiff's payment schedule in respect of the claims dated 25 October 2011 and, indeed, it seems clear from the reasons given by the adjudicator that no reliance is placed on those claims. 23Section 13(5) provides a claimant cannot serve more than one payment claim in respect of each reference date under the construction contract. An exception is created by s 13(6), but that exception is not relevant here. 24Courts have interpreted s 13(5) and the other provisions of the Act to mean that "there should be only one application for adjudication of any one payment claim": Rail Corporation NSW v Nebax Constructions [2012] NSWSC 6 at [43] per McDougall J. 25In my opinion it is strongly arguable, based on these principles, that it was not open to the first defendant to serve a second payment claim and to seek an adjudication based on that second payment claim in circumstances where it had already served a payment claim in respect of the same reference dates and substantially the same work on 25 October 2011. 26So far as the claim based on the denial of natural justice is concerned, it seems to me at least arguable that the plaintiff was denied natural justice by the adjudicator when the adjudicator failed to give the plaintiff an opportunity to make submissions both on the question whether the adjudication application was based on the earlier or later payment claims and on whether the terms of the contract disentitled the plaintiff from setting off against the first defendant's claim the plaintiff's claim based on defective workmanship. 27That leaves the question of balance of convenience. 28I accept Miss Gleeson's submission that the balance of convenience is in favour of granting the injunction. I say that for two reasons. 29First, I accept the submission that there is risk that if a judgment is recorded against the plaintiff that could have an effect on its reputation which would be difficult to measure. 30Secondly, there is evidence before me that the first defendant has no assets and that consequently if the first defendant is able to enforce the judgment resulting from registration of the determination and the plaintiff subsequently succeeds there is a real risk that the plaintiff will not be able to recover the amount that it pays. In particular, it is relevant to observe that the managing director of the first defendant said in a letter to the adjudicator: I sincerely apologies [sic] to my employees and small businesses at this time that given there [sic] services in good faith and not been paid, if I owned a house I would sell it to rectify this problem, unfortunately I have nothing. 31Having regard to the conclusions I have reached, it is appropriate that I grant an injunction in the terms sought by the plaintiff.