Before the Court is an oral application by the plaintiff, Paul Kennedy McCullough trading as The Green Side Up, for the discharge of orders which were made by his Honour Judge Wilson SC in his capacity as the Civil List Judge on 15 December 2022.
The background to the matter is not entirely clear from the evidence before the Court but it appears that there was a contract between the plaintiff and the defendant for the provision by the plaintiff of services of a construction nature utilising labour supplied by the defendant.
In the related matter of New Start Australia Pty Ltd v The Green Side Up (2022/287814), an Amended Statement of Claim has been filed by New Start. That Amended Statement of Claim was filed on 30 January 2023, apparently in breach of an order made on 15 December 2022 by Wilson DCJ that it be filed and served no later than 31 December 2022. Accordingly, leave will be needed to file that Amended Statement of Claim. For the purposes of this application, I have reviewed the Amended Statement of Claim. It brings proceedings against Mr McCullough under the contract between the parties for moneys alleged to be owed to New Start. It is noted that the Amended Statement of Claim is not verified but was prepared apparently by the solicitor for New Start on instructions.
The existing Statement of Claim filed on 27 September 2022 was in short form and claimed $686,000 odd from Mr McCullough together with interest. The solicitor for New Start signed that document as having reasonable prospects but again it was not verified.
The further background to the matter is set out to some extent in the affidavits of Ms Lloyd read by New Start on the application dated 12 December 2022 and 15 December 2022.
It appears from the evidence that on 23 September 2022 an application was made by Mr McCullough for an adjudication against New Start Australia Pty Ltd ("New Start") under the Building and Construction Industry Security of Payment Act 1999 (NSW) ("the Act").
PAUL KENNEDY MCCULLOUGH TRADING AS THE GREEN SIDE UP v NEW START AUSTRALIA... [2023] NSWDC 82 | Case summary | Zoe
In due course, an Adjudication Certificate was granted by the Adjudicator Mr Wilson, on 8 November 2022, in the sum of $171,676.08 in favour of Mr McCullough. That is $202 less than the sum which the adjudication certificate was registered for, which occurred in November 2022. The difference can be explained by the filing fee of $202 which was added to the adjudicated amount.
The affidavits of Ms Lloyd show there to have been correspondence with the Adjudicator about seeking an adjournment of the adjudication but there is no evidence that such an adjournment was agreed to by the Adjudicator or by Mr McCullough.
There is also some evidence of some difficulty of New Start looking at the documents relied on by Mr McCullough but in due course Ms Lloyd got the documents and did not, on the face of it, seek a short period to put on submissions or responsive materials. It seems that Ms Lloyd, from her affidavits, expected there to have been an adjournment of the adjudication pending a potential resolution of both matters but again there is no evidence of any indication from the Adjudicator or Mr McCullough that that was agreed to.
Steps were then taken by Mr McCullough, following registration of the judgment, to enforce the judgment including with a garnishee notice. It was then that New Start made an application to Wilson DCJ to stay the judgment and the garnishee order.
The evidence in Ms Lloyd's second affidavit expresses in paragraph 6 that if the moneys under the garnishee order were released to the plaintiff there were "considerable and significant concerns that such funds would not be retrieved in the future whereby [Mr McCullough] would not be able to repay the Judgment ..." Reference was made by Ms Lloyd to the fact that no payments were made by Mr McCullough to New Start in accordance with the allegations in the Amended Statement of Claim.
Mr Simpkins, who appears for Mr McCullough, indicated to the Court that Mr McCullough intends to defend the proceedings 2022/287814.
Ms Lloyd in her affidavit refers to the fact that New Start relies heavily on its moneys to run its business and that it employs members of the community, including indigenous and disadvantaged members. It is said that to have funds removed from the account as per the garnishee order would "create irreparable damage to the business and the employees". I take all of those factors into account.
There is, however, no satisfactory evidence before me establishing, with the onus on New Start, that Mr McCullough is bankrupt or that his debts are greater than his assets or that he cannot pay his debts as and when they fall due. The issue therefore arises whether, in the light of the various matters I have referred to and are referred to in Ms Lloyd's affidavits, the orders made by Wilson DCJ should be discharged or not.
I have had the advantage of written submissions on behalf of the plaintiff, Mr McCullough, and on behalf of New Start by counsel appearing for them.
In Mr McCullough's submissions he relies heavily on the policy behind the Act and submits that a stay circumvents the clear policy of the Act which is to enforce adjudication determinations and to ensure that there is proper cashflow in accordance with the Act of building industry participants. It is submitted that the clear policy of the Act is that successful applicants for an adjudication should be paid promptly. Reference is made to the comments of Sackville AJA (with whom Leeming, Payne, and White JJA agreed) in Seymour Whyte Constructions Pty Ltd v Ostwald Bros Pty Ltd (in liq) (2019) 99 NSWLR 317: [2019] NSWCA 11 at [254] which is as follows:
"254. In the light of these principles, it has generally been accepted that a respondent which can establish that it has a seriously arguable claim arising out of the construction contract may be able to obtain a stay of execution of a judgment obtained under Pt 3 of the Security of Payment Act or equivalent relief (such as an order requiring a claimant to provide security). Such relief ordinarily may be granted only if:
"the failure to do so would have the practical effect of making permanent that which … the legislature intended [by the Security of Payment Act] to be only interim."
The decision of Sackville AJA has been referred to with approval in numerous later cases. See: Style Timber Floor Pty Ltd v Krivosudsky [2019] NSWCA 171 at [19]-[41]; TFM Epping Land Pty Ltd v Decon Australia Pty Ltd [2020] NSWCA 118 ("TFM"); Bellerive Homes Pty Ltd v FW Projects Pty Ltd [2018] NSWSC 1435; Shade Systems Pty Ltd v Probuild Constructions (Australia) Pty Ltd [2018] NSWCA 33 at [28] ‑ [36] per Payne JA. In the latter case, the financial position of the relevant party was described as "precarious" yet it continued to trade and was an active party to expensive litigation.
I particularly pay attention to the TFM case. There, the current Chief Justice, whilst President of the Court of Appeal, together with Justices Macfarlan and Leeming, referred to the relevant principles to be applied at paragraphs 87 to 90. Their Honours noted that a stay will generally be less readily available in relation to judgments entered following an adjudication under the Act than in relation to appeals arising from curial proceedings: at [88]. That is the case here. Their Honours referred to the legislative purpose of the Act of giving cashflow to builders and subcontractors in advance of a final hearing in a court.
However, their Honours, consistently with all of the authorities I have referred to, confirmed the decision of McDougall J in the case of Veolia Water Solutions & Technologies (Australia) Pty Ltd v Kruger Engineering Australia Pty Ltd (No 3) [2007] NSWSC 459, that the Court may nonetheless intervene to grant a stay where there is the likelihood of "irreparable prejudice". It is said that in such a case a court will be "cautious" in light of the policy of the Act but it may do so where "the practical effect is to make permanent that which the legislature intended to be merely interim": TFM at [89]. In para 90 it is noted that the onus rests on a party seeking such relief, here New Start.
Accordingly, the following principles apply:
1. The onus rests on the party seeking the relief to show the practical effect which I have indicated ‑ TFM at [90];
2. Pursuant to that onus that party must establish that the practical effect of allowing the adjudication certificate to be enforced is to make permanent that which the legislature intended to be merely interim: TFM at [89];
3. The policy of the Act and its legislative purpose is to facilitate cashflow to builders and subcontractors in advance of a final hearing in a court; TFM at [88];
4. A stay will generally be less readily available in relation to judgments entered following an adjudication under the Act: TFM at [87]‑[88]; and
5. However, the Court retains a discretion to grant a stay in an appropriate case.
Mr Simpkins submits in summary that Mr McCullough:
1. Has the clear benefit of the Act;
2. That it was not in dispute that the contract between the parties was a contract to which the Act applies;
3. The judgment was entered in accordance with the Act following an adjudication;
4. That Seymour Whyte makes clear that the two relevant issues are whether there is a seriously arguable claim and that an onus rests on the applicant for a stay to establish the presence of a significant risk of an interim payment being made permanent if it is paid.
As to the first issue, Mr Simpkins submitted that the Amended Statement of Claim was not verified and there was no affidavit from the solicitor or the client setting out and verifying the facts supporting the Amended Statement of Claim. As to the second issue, he submitted that there was no satisfactory evidence suggesting a significant risk that the interim payment would be made permanent and that risk could not be inferred from the Amended Statement of Claim;
1. That Mr McCullough had the benefit of the Act through the adjudication certificate;
2. That while the matters referred to by Mr Sonmez, who appears for New Start, could be taken into account, the payment of money into Court would circumvent the entire purpose of the Act which was to facilitate the cashflow of people in the industry.
Mr Sonmez, who appears for New Start, submitted as follows:
1. The discretionary factors referred to in his submissions and Ms Lloyd's affidavits were relevant;
2. The fact the pleading was unverified should be seen as an oversight and clearly the matter was put forward on instructions;
3. That the type of contract is unusual between the parties, as shown in the Amended Statement of Claim, must be taken into account;
4. That payments had already been made to Mr McCullough;
5. That there were serious concerns as to Mr McCullough's solvency;
6. The payment into Court would protect the position of Mr McCullough; and,
7. That the Court retains a discretion in all the circumstances.
I have taken into account all of those matters. It is clear that the Court does have a discretion in the matter. However, the appellate principles, which I have referred to, are binding on me. Although the evidence of a seriously arguable case is not strong, I have accepted for the purposes of analysis that there is an arguable case in the absence of other materials. However, the whole purpose of the Act would, in my view, in these circumstances be circumvented if the adjudication certificate was not given proper force consistently with its registration in accordance with s 25 of the Act. That is a powerful factor to be taken into account.
I am not satisfied on all of the evidence that New Start has discharged the onus of establishing a significant risk that any interim payment would be made permanent by the payment. I take into account the discretionary matters in Ms Lloyd's affidavits and referred to by Mr Sonmez in his submissions. These are matters properly to be taken into account but hardship often occurs when payments have to be made. Mr McCullough has the benefit of a registered judgment following an adjudication. I am not satisfied that the correspondence annexed to Ms Lloyd's affidavits is a proper explanation for the apparent inaction in relation to the adjudication. Ms Lloyd sought an adjournment of four months but there is no suggestion there was any agreement to it.
Taking into account all of the matters that I have indicated, including the appellate authorities I have referred to and the policy of the Act, in my view there is no proper basis for continuing the stay.
[After further submissions his Honour made the following orders:
1. The stay orders made on 15 December 2022 by Wilson DCJ are discharged.
2. The defendant is to pay the plaintiff's costs of the application on 31 January 2023 as agreed or assessed.
3. Order 1 is stayed for a period of 14 days to permit any application to the Court of Appeal, if advised.
4. Listed for directions before the List Judge on 21 February 2023 at 9:30am.]
[2]
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Decision last updated: 05 April 2023
Parties
Applicant/Plaintiff:
PAUL KENNEDY MCCULLOUGH TRADING AS THE GREEN SIDE UP