Lanmac (NSW-ACT) Pty Limited v Andrew Bruce Wallace & Ors

Supreme Court of NSW|2010-08-27|Before: Einstein J, Smart AJ, Hammerschlag J

CITATION : Lanmac (NSW-ACT) Pty Limited v Andrew Bruce Wallace & Ors [2010] NSWSC 976

HEARING DATE(S) : 27/08/10 JURISDICTION : Equity Division Technology and Construction List

The injunctions issued by Smart AJ on 20 August 2010 and extended by Hammerschlag J on 27 August 2010 be dissolved. 2. Pursuant to s 67 of the Civil Procedure Act 2005 the proceedings commenced by summons filed 19 August 2010 be stayed until payment into Court by the plaintiff of the amounts of the two adjudication determinations the subject of these proceedings and the adjudicator's costs, or alternatively the provision of a bank guarantee in terms acceptable to the Court but payable to the third defendant for those amounts. DECISION : 3. The plaintiff pay the third defendant's costs of today. 4. Revoke the order made by Hammerschlag J that the proceedings be before the Court on Monday 30 August 2010. 5. Order that these orders be entered forthwith.

CATCHWORDS : Building and Construction Industry Security of Payment Act 1999 - Plaintiff against whom a judgment has been entered who brings proceedings seeking to prevent a party from relying on that judgment without seeking to set aside the judgment is aware that section 25 (4) of the Act requiring security will not be triggered - Court cautious to ensure justice between the parties but also to ensure that the legislation under which the application is brought is not circumvented

LEGISLATION CITED : Building and Construction Industry Security of Payment Act 1999 (NSW) Civil Procedure Act 2005 (NSW)

Filadelfia Projects Pty Ltd v Entirity Business Services Pty Ltd [2010] NSWSC 473 CASES CITED : Jem Developments Pty Ltd & Anor v Hansen Yuncken Pty Ltd [2006] NSWSC 1087 Tombleson v Dancorell Constructions Pty Limited [2007] NSWSC 1169

Lanmac (NSW-ACT) Pty Limited (Plaintiff) PARTIES : Andrew Bruce Wallace (First Defendant) Able Adjudication Pty Limited (Second Defendant) CMS Group Pty Limited (Third Defendant)

COUNSEL : Mr SA Wells (Plaintiff) Mr DT Miller, Mr Hutton (Third Defendant)

SOLICITORS : Lazarus Legal Group (Plaintiff) Massey Bailey (Third Defendant)

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

Friday 27 August 2010 ex tempore Revised 31 August 2010

2010/00275716 Lanmac (NSW-ACT) Pty Limited v Andrew Bruce Wallace & Ors JUDGMENT 1 The plaintiff's notice of motion filed on 19 August 2010 was heard on 27 August 2010:

On that occasion the Court made the following orders

i. Order that the injunction issued by Smart AJ on 20 August 2010 and extended by Hammerschlag J on 27 August 2010 be dissolved;

ii. Pursuant to section 67 of the Civil Procedure Act the proceedings commenced by summons, filed on 19 August 2010, be stayed until payment into Court by the plaintiff of the amounts of the two adjudication determinations, the subject of these proceedings, and the adjudicator's costs, or alternatively the provision of a bank guarantee in terms acceptable to the Court but payable to the third defendant for those amounts;

iii. The Court orders that the plaintiff pay the third defendant's costs of today. 2 The Court made clear that the reasons for the making of the orders would be handed down as soon as practicable. Those reasons follow.

3 The proceedings brought by the plaintiff under the Building and Construction Industry Security of Payment Act 1999 [the Act]

6 The second defendant is a nominating authority under the Building and Construction Industry Security of Payment Act 1999.

7 Each of the first and second defendants have filed a submitting appearance.

8 The third defendant is the CMS Group (NSW) Pty Limited. The orders sought by the plaintiff

An order that the third defendant be restrained from making a request pursuant to s.24(1)(a) of the Act to the second defendant to provide an adjudication certificate pursuant to s.24 of the Building and Construction Industry Security of payment Act 1999 (NSW) ("the Act") in respect of Adjudication Application no. 2010-ABLE-028.

An order that the first and second defendants be restrained from providing an adjudication certificate pursuant to s.24 of the Act in respect of Adjudication Application no.2010-ABLE-028.

An order that the third defendant be restrained from filing any adjudication certificate pursuant to s.25 of the Act in respect of Adjudication Application no.2010-ABLE-028.

An order that the third defendant be restrained from making a request pursuant to s.24(1)(a) of the Act to the second defendant to provide an adjudication certificate pursuant to s.24 of the Act in respect of Adjudication Application no.2010-ABLE-029.

An order that the first and second defendants be restrained from providing an adjudication certificate pursuant to s.24 of the Act in respect of Adjudication Application no.2010-ABLE-029.

An order that the third defendant be restrained from filing any adjudication certificate pursuant to s.25 of the Act in respect of Adjudication Application no.2010-ABLE-029.

10 Early in the piece the plaintiffs counsel Mr Wells, made clear that he did not have instructions to proffer any undertaking of the type that were proffered in Filadelfia Projects Pty Ltd v Entirity Business Services Pty Ltd [2010] NSWSC 473 where the matter was put by McDougall J in the following terms:

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).

12 In this case, Filadelfia has frankly conceded that it is not presently in a position either to pay into Court or to provide a guarantee for the amount in question. It has explained that its sole asset is in effect the relevant development. That development is said to be worth $41 million or more, and it is said that Filadelfia owes about $28 million to its financier. Filadelfia says, further, that it is likely that an occupation certificate will issue in the near future and that, once that happens, it will be able to complete sales and, thereby, improve its financial position.

13 In those circumstances, Filadelfia has offered an undertaking to the Court in substance not to dispose of its assets, or otherwise to charge or deal with them, to reduce the net amount available below an amount sufficient to secure the adjudicated amount, costs and interest. That, it submits, would preserve the status quo and in addition would give more protection to Entirity than Entirity would have if it obtained and proceeded to enforce a judgment.

11 As Mr Miller appearing for the third defendant contended:

The straightforward scheme of the Act is that an adjudication having been issued under 22, there then becomes a time clock ticking under 23 (of five days in which to pay and if there is not payment within those five days, 24 sets up the regime for the adjudication certificate being obtained and 25 then sets up the regime for that to immediately be filed as a judgment debt.

The whole point of that was that a party who was unsuccessful in an adjudication, having got the adjudication determination if they wanted to take issue with that which underlies the judgment, they had to put their money on the table while the wheel was spinning.

We were only in a position where we could not get a judgment in the usual course in this case because my friend moved with alacrity to get the matter before Acting Justice Smart last Friday.

Whilst that five days was ticking for payment before we could even get a judgment certificate. That period of time has now passed.

12 In Tombleson v Dancorell Constructions Pty Limited [2007] NSWSC 1169 Bergin J observed as follows:

17 I am satisfied that s 25(4) is not applicable because the proceedings are not proceedings to set aside a judgment. But let me return to the Summons. There are two applications for injunctions: the first preventing the defendant from taking any action to enforce the Determination; and the second preventing the defendant from taking any action in order to enforce any judgment based upon the Determination.

18 A plaintiff against whom a judgment has been entered who brings proceedings seeking to prevent a party from relying on that judgment without seeking to set aside the judgment, knows that s 25(4) of the Act requiring security will not be triggered. However, the Court is not only cautious to ensure justice between the parties, but also to ensure that the legislation under which this application is brought is not circumvented.

19 The plaintiff is attempting to prevent the defendant from enforcing the judgment by injunction rather than seeking to set aside the judgment. Pleadings may be analysed to see whether it is an abuse to seek those orders whilst not seeking to set aside judgment. If the Court is satisfied that such an application is for the purpose of getting around or circumventing the provisions of the Act then an order may be made staying the proceedings on the condition that such stay will remain unless money is paid into Court. Such an approach may diminish the drafting of innovative pleadings to ensure that s 25(4) is not triggered to obtain the benefit of proceedings in Court whilst the contractor loses the benefit of the Act.

20 Section 67 of the Civil Procedure Act 2005 provides that subject to the Rules 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. Section 56 of the Civil Procedure Act 2005 provides that the overriding purpose of that Act and of Rules in their application to civil proceedings is to facilitate the just, quick and cheap resolution of the real issues in the proceedings. I should emphasise the word "just".

21 Section 61 provides that the Court may give such directions as it thinks fit for the speedy determination of the real issues between the parties and may take action if those directions are not complied with. Section 61(4) provides relevantly: "That subsection (3) does not limit any other power the Court may have...". Another matter of importance is s 60 of the Act, that provides: "In any proceedings the practice and procedure of the Court should be implemented with the object of resolving the issues between the parties in such a way that the cost to the parties is proportionate to the importance and complexity of the subject-matter in dispute." …

23 The plaintiff has not proffered any undertaking of a bank guarantee or any other undertaking in respect of paying the contractor any amount and, as I have said, the judgment debt has been recognised by the plaintiff because she seeks to stay enforcement whilst she argues about the terms of the Determination. …

25 I am satisfied that the plaintiff's pleading seeks to avoid the triggering of s 25(4) of the Act. I am also satisfied that to ensure a just resolution of these proceedings I should exercise my discretion in favour of the defendant to stay the proceedings until the plaintiff provides a bank guarantee or pays money into Court in the amount of $300,000, reducing the amount of $366,091.26 to take into account an approximate figure for defects.

26 I order that these proceedings be stayed until the plaintiff provides a bank guarantee to the first defendant in the amount of $300,000, or pays money into Court or lodges with the Court a form of bank guarantee agreeable to the first defendant, for that amount. 13 Each of the matters the subject of the above observations of Bergin J is accepted as of substance. Indeed in Jem Developments Pty Ltd & Anor v Hansen Yuncken Pty Ltd [2006] NSWSC 1087 I alluded to the same factors where the proprietor had made no secret of the fact that its purpose was to outflank section (4) of the Act so as to avoid the requirement [were it to seek to have the judgment set aside] to pay into Court as security, the unpaid portion of the adjudicated amount pending a final determination of proceedings in that regard.

14 As earlier indicated these are the reasons for the making of the orders. The matter was a fortiori. ***************

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