MTR Corporation (Sydney) NRT Pty Ltd v Thales Australia Ltd

Judgment

1. BASTEN JA: The applicants (operating as a joint venture to construct the North West Rail Link in Sydney), entered into a contract with the respondent, Thales Australia Ltd, in August 2015.
2. On 17 March 2020 the respondent served a payment claim on the applicants. The applicants served a payment schedule, which resulted in the respondent making an adjudication application under the Building and Construction Industry Security of Payments Act 1999 (NSW). On 5 June 2020 the adjudicator made a determination, allowing the claim in an amount of a little more than $25.5 million. The bulk of the claim so allowed was for "input and output (I/O) points" of which, pursuant to the contract, there were said to be at least 4,000 hardwired points and 56,000 software points. [1] There was provision for counting the I/O points; there was also provision for modification orders under clause 57 of the contract. There was a dispute as to which provision, or both, formed the basis of the payment claim. The adjudicator resolved that dispute in favour of the respondent.
3. On 15 June 2020 the applicants commenced proceedings in the Equity Division seeking judicial review of the determination of the adjudicator. On 29 June they amended the Technology and Construction List Statement to include claims of misleading or deceptive conduct under s 18 of the Australian Consumer Law. The additional paragraphs alleged that the respondent made representations on or about 6 February 2018, each of which was misleading or deceptive. Further misrepresentations were said to have been made after that date and up to 18 June 2019. In so far as the representations led to a claim by the respondent that it had installed over 80,000 I/O points, it was asserted that the respondent had made misleading statements to the adjudicator. On the basis of the claims, the applicants sought an order quashing the determination and a permanent injunction restraining the respondent from taking any steps to enforce the determination. Other relief was sought in terms not presently reflected in the summons. It is not possible for the purposes of this decision to know the extent to which those claims were raised in the payment schedule.
4. On 28 July 2020 the primary judge, Stevenson J, identified a separate question which was, in effect, whether the adjudication determination was invalid on any of the grounds alleged in the judicial review proceedings. That question was the subject of a hearing on 11 August 2020 and, on 27 August 2020, the primary judge answered the question "No", thus rejecting the challenge under s 69 of the Supreme Court Act 1970 (NSW) to the validity of the adjudication determination.
5. On 31 August 2020, subject to certain conditions with respect to the commencement of proceedings seeking leave to appeal, the primary judge granted an interlocutory injunction restraining the respondent from enforcing the adjudication determination up until 5pm on 14 September 2020, including by obtaining an adjudication certificate under s 24(1)(a) of the Security of Payment Act, and by filing an adjudication certificate under s 25(1) of the Security of Payment Act. That stay was extended by agreement until 5pm on 21 September 2020, being the day on which the application for a further stay was listed before this Court. (At the hearing, the parties indicated that the Court should assume some further consensual arrangement could be made if there were to be a delay in delivering judgment.)
6. There are a number of factors which must be considered in determining whether to grant a stay of an adjudication determination where proceedings for judicial review, based on jurisdictional error, have been dismissed. The applicants submitted that the relevant principles were identified by Leeming JA in Lewence Construction Pty Ltd v Southern Han Breakfast Point Pty Ltd. [2]
7. The reasons were given in that matter in an ex tempore judgment where the existing stay was to expire in just under two hours' time. [3] Moneys had been paid into court shortly after the proceedings were commenced in the Equity Division. Leeming JA identified the relevant principles to be applied as those established in Alexander v Cambridge Credit Corporation Ltd. [4]
8. There will be varying factors to be considered in different cases, not all of which were relevant in Lewence. Important in many cases, is the policy of the Security of Payment Act, which allows a speedy adjudication of a payment claim in order to ensure that subcontractors and contractors are not deprived of cash-flow whilst building disputes are resolved. As has been said, one effect of the underlying policy of the Security of Payment Act is to transfer the risk of insolvency to the principal. [5]
9. The following factors are of particular relevance in the present case. First, it was conceded by the respondent that the applicants had a reasonably arguable case on appeal. It also appeared to be conceded that that was the appropriate test, in so far as merits were to be addressed on a stay application. Without cavilling with that approach in the present case, it is important to observe that there may be cases where some estimation of the prospects of success should be undertaken. On applications for leave to appeal generally, merely establishing a reasonably arguable case would not usually suffice to warrant a grant of leave. [6] In the present case, on one view, the reasoning of the primary judge turned on the relatively simply proposition that, where there was material before the adjudicator which could support a finding as to the basis on which the payment claim was made, it was a matter for her to determine whether or not to accept that material. The judge accepted that it was for her to determine the issue and that there was material upon which she could do so in the way that she did. [7]
10. Further, the summons seeking leave to appeal reduced the five grounds on which judicial review had been sought below to a single matter, which was, in short form, whether the adjudicator had erred in considering a basis for the claim which was not advanced in the payment claim (or, presumably, the adjudication application, made pursuant to s 17(3)(h)).
11. Secondly, it is difficult to identify prejudice to either party turning on the outcome of the present application. To the extent that the bank guarantee which is presently filed remains on foot (and there is no suggestion to the contrary) the respondent is protected against any risk of insolvency of the applicants. On the other hand, there is no significant likelihood that the respondent would be unable to repay the money if it were obtained by it, the only significant risk being that it would refuse to repay the money until any cross-claims it might have against the applicants had been resolved. Against that concern, the respondent has by its solicitors proffered an undertaking to the Court and to the applicants that it would not refuse to return the amount received on the basis of any assertion of other claims or setoffs.
12. Thirdly, although the applicants asserted there is a risk of reputational harm if payment is required, the stay not being granted, the respondent submits that such an assertion is entirely speculative and there is no evidence to support such an assertion in the present case. It submitted that general statements made by Campbell J in Australian Remediation Services v Earth Tech Engineering [8] do not apply. In that case, as Campbell J noted, the plaintiff company had few assets and protection could be provided by way of a bank guarantee. The other party required a fully secured undertaking as to damages to protect the position of the plaintiff, since it too was in a poor financial position. In the circumstances, I agree with the submission for the respondent that reputational damage in a commercial sense is not a relevant consideration in this case.
13. There are two factors which must ultimately determine the fate of the stay application. The first counts in favour of a stay. The matter is now to be set down for a concurrent hearing of the leave application and the proposed appeal in some five weeks' time, on 29 October 2020. Although I am told there are steps to be taken according to an agreed timetable, it appears that the most significant outstanding step is for the respondent to file its written submissions (perhaps with a potential reply from the applicants). It is no criticism that that step has not been taken. However, assuming it were undertaken expeditiously, it would be unlikely that an earlier hearing date could be obtained. Thus, although the applicants contend that they are ready to take a hearing at any time within the next five weeks, I give limited weight to that assertion. That is because it is in the interests of neither the court nor the parties to force an earlier hearing in order to avoid the grant of a stay.
14. The final consideration turns on the fact that the issue is being dealt with by way of an appeal from a separate question.
15. The purpose of formulating a separate question was to remove the bases of the judicial review proceeding from the claims of misleading or deceptive conduct under the Australian Consumer Law. That has happened. The effect of that, however, is contested. The applicants submit that if a stay were refused on the basis of the proposed appeal with respect to the judicial review proceedings, they would seek a stay on the basis of the separate claims under the Australian Consumer Law. They did not submit that that was an application which was before this Court, or that it could readily be dealt with at this stage of the matter. It was conceded that it might need to go back to the Equity Division on a very urgent basis, if this Court were to decline to award a stay this afternoon. The possibility of a limited stay for seven days to allow that to happen was mooted.
16. There are, however, serious issues as to the inter-relationship of the Security of Payment Act and the federal law, some of which were addressed in Bitannia Pty Ltd v Parkline Constructions Pty Ltd. [9] My incomplete consideration of the List Statement filed in the court below does not allow a ready assessment of how those factors might be addressed with respect to the operation of s 25(4) of the Security of Payment Act. For example, in part and on one view, they may challenge the adjudicator's determination on a basis not available in the judicial review proceedings, being the only proceedings available under State law.
17. Further, there are unresolved issues with respect to interlocutory steps to be taken with regard to those claims. The applicants have noted that, on 3 July 2020, the respondent sought to have the additional claims disallowed or, in the alternative, referred to arbitration pursuant to s 8 of the Commercial Arbitration Act 2010 (NSW). Although it can be said that the applicants should have considered obtaining a stay with respect to the Australian Consumer Law claims prior to the application for a stay in this appeal, there are probably complications which discouraged both parties from insisting that those interlocutory steps be addressed before the judicial review proceedings were determined. In short, although the separation of the proceedings appears superficially attractive, in practice it has given rise to complications and, potentially, significant expense by way of further interlocutory steps.
18. It is this consideration, coupled with the expectation of an early hearing and determination of the application for leave to appeal and the appeal, which tip the balance in favour of the grant of a stay until the determination of the proceedings listed for 29 October 2020. It does not appear that either party will be greatly prejudiced by such an order. However, it should be expressly stated, that, in my view, the Court should be reluctant to grant a stay in proceedings under the Security of Payment Act unless the applicants can establish clear grounds by way of prejudice or other considerations which warrant depriving the respondent of its statutory entitlements, upheld by a judge in judicial review proceedings.
19. The grant of a stay is an indulgence to the applicants: the respondent should not have to pay the costs of the applicants' success. The appropriate order is to make the costs of the application for the stay the respondent's costs in this Court.
20. Accordingly, the Court makes the following orders: 1. Upon the applicants giving to the Court the usual undertaking as to the damages, until the hearing and determination of the application for leave to appeal and, if leave be granted, any appeal - the first respondent is restrained from enforcing the Adjudication Determination No 2020058EA dated 5 June 2020, including by: 1. obtaining any adjudication certificate under s 24(1)(a) of the Building and Construction Industry Security of Payment Act 1999 (NSW) (the Act); 2. filing any adjudication certificate as a judgment debt in any court of competent jurisdiction under s 25(1) of the Act; and 3. seeking to obtain payment or otherwise claim moneys in respect of the determination. 1. Grant the parties liberty to apply on 48 hours' notice in the event that there is any change in circumstances. 2. Direct that the costs of the applicants' motion filed 8 September 2020 be the respondent's costs in the proceedings in this Court. 3. Fix the application for leave to appeal and, if leave be granted, any appeal for concurrent hearing on Thursday 29 October 2020. The Court notes that Mr Christie SC for the applicants gave the undertaking referred to in order (1).