Plaintiff v Defendant

2 By originating motion dated 25 October 2015 (the 'Originating Motion'), the Plaintiff, Raw Build Pty Ltd ('Raw Build'), formerly known as Kubic Constructions Pty Ltd, seeks, inter alia:

(a) An order by way of certiorari to quash the adjudication determination of the Second Defendant, the Adjudicator, dated 16 October 2015 (the 'Second Adjudication Determination');

(b) A declaration that the Adjudication Determination is unlawful and void;

(c) A declaration that the payment claim dated 25 July 2015 (the 'Payment Claim') is not a valid payment claim under the Act and the Adjudicator lacked jurisdiction; and

(d) A permanent injunction enjoining JBK Industries Pty Ltd ('JBK'), the First Defendant, from relying upon the terms of ss 28O , 28R 29 and 31-41 of the Act.

3 Raw Build is a commercial and residential construction contractor. It was engaged as head contractor in the construction of a multi-storey residential development located at 486 Victoria Street, Richmond, in the State of Victoria (the 'Project').

4 On or about 26 March 2014, Raw Build entered into a subcontract with JBK, pursuant to which JBK was to undertake the mechanical works and services package for the Project. The subcontract sum was $130,000 (plus GST).

5 On or about 24 June 2015, JBK issued a payment claim to Raw Build for the sum of $7,795.70.

6 On 2 July 2015, JBK submitted an adjudication application under the Act with respect to the payment claim dated 24 June 2015 (the 'First Adjudication'). The adjudication determination in respect of the First Adjudication was delivered on 30 July 2015 and held that:

(a) The sum of $9,115.70 was payable by Raw Build to JBK (the 'First Adjudicated Amount'); and

7 Raw Build failed to pay the First Adjudicated Amount of $9,115.70 by the due date.

8 On 25 September 2015, JBK obtained an order against Raw Build in the Magistrates' Court of Victoria under s 28R of the Act for the amount in the First Adjudication inclusive of interest in the total sum of $9,212.73.

9 On 10 February 2016, JBK filed a Registration of Judgment/Order in the Local Court of Sydney in respect of the First Adjudicated Amount.

10 On 11 February 2016, the solicitors of JBK filed a Notice of Motion, and obtained Garnishee Orders against Raw Build for the First Adjudicated Amount in the Local Court of New South Wales.

11 On 26 February 2016, the solicitors of JBK received a cheque for the sum of $6,967.38 in response to the Garnishee Orders.

12 Raw Build therefore remains indebted to JBK in the sum of $2,747.46 in respect of the First Adjudicated Amount.

13 On 25 July 2015, JBK issued the Payment Claim under the Act.

14 Raw Build did not provide a payment schedule under the Act in response to the Payment Claim.

15 On 22 September 2015, JBK served a notice of its intention to proceed to adjudication pursuant to s 18(2) of the Act (the 's 18(2) Notice').

16 Raw Build did not provide a payment schedule under the Act in response to the s 18(2) Notice.

17 On 30 September 2015, JBK lodged an adjudication application with Rialto Adjudications Pty Ltd for an adjudication determination in relation to the Payment Claim. Mr Richard Hapgood (the 'Adjudicator') accepted the nomination.

18 On 16 October 2015, the Adjudicator delivered his adjudication determination (the 'Adjudication Determination') and determined that JBK was entitled to be paid by way of interim payment under the Act the sum of $81,415.00 (incl. GST and Adjudicator's fees).

19 On 22 March 2016, this Court made orders requiring Raw Build to make payment of $81,415.00 into an interest bearing trust account. Raw Build has not complied with this order.

20 On 31 March 2016, JBK obtained an adjudication certificate under s 28Q of the Act from Rialto Adjudications Pty Ltd.

21 On 1 April 2016, the solicitors of JBK applied for judgment pursuant to s 28R(1) of the Act in the Magistrates' Court of Victoria.

22 On or about 6 April 2016, what purported to be the 'order' of the Magistrates' Court of Victoria was delivered to the solicitors of JBK.

23 At the hearing of 3 May 2016, this Court determined that the purported judgment obtained by JBK in the Magistrates' Court of Victoria was irregular.

24 The principal issue for determination is whether, in the unique circumstances of this case, the proper exercise of the Court's discretion is to permit the Plaintiff to proceed with the hearing of the Originating Motion without requiring payment-in of the adjudicated amount (the 'Principal Issue').

25 JBK submitted that the requirement to 'pay now and argue later'[1] is enshrined in s 28R of the Act, which requires payment of the adjudicated amount into Court before a judgment can be challenged.

26 It further submitted that the Court has a discretion to require payment of the adjudicated amount into Court (or a designated trust account) where judgment has not been entered at the time the application comes before the Court. The discretion to require payment or secure the adjudicated amount has been exercised to require a plaintiff to make payment-in. The Court was referred to a series of decisions from New South Wales and Victoria, including Grocon Constructors Pty Ltd v Planit Cocciardi Joint Ventures,[2] Amasya Enterprises Pty Ltd & Anor v Asta Developments (Aust) Pty Ltd & Anor[3] and Milburn Lake Pty Ltd v Andritz Pty Ltd[4] where a payment into Court was made prior to the consideration of the real issues in dispute.

27 JBK pointed to strong statements about the importance of making payment. In Nazero Group Pty Limited v Top Quality Construction Pty Ltd[5] Hammerschlag J stated:

'[I]n my view and in all the present circumstances, it would be a manifestly unfair use of the Court's process to permit [the Plaintiff] to mount its challenge without having to pay the money into Court.'[6]

28 JBK also submitted that the only reason why the statutory obligation under s 28R of the Act to make payment of the adjudicated amount into court cannot be enforced by JBK is the decision of this Court of 3 May 2016, which determined that the judgment obtained by JBK on or about 7 April 2016 was not a judgment of the Magistrates' Court of Victoria. Therefore, it is submitted that the present circumstances are as follows:

(a) But for the ruling of this Court of 3 May 2016, JBK had a judgment to which s 28R of the Act applied, making the payment-in mandatory;

(b) JBK was, at the time of drafting its submissions, unable to obtain a further judgment; and

(c) The discretion to require payment-in (or at the very least secure the adjudicated amount) has been universally exercised to require the plaintiff to make payment-in.

29 JBK also submitted that, given the order of the Court made on 22 March 2016 that Raw Build make a payment into Court, which has not been complied with, it should be precluded from continuing further with its proceeding and appropriate orders should be made dismissing the proceeding.

30 Raw Build submitted that it is not in question that the Court has discretion to require, in certain circumstances, payment-in of an adjudicated amount where judgment has not been entered at the time the application comes before the Court. However, this discretion is not enlivened unless and until an interim injunction preventing a defendant from obtaining judgment is obtained and ordered.

31 Raw Build submitted that common to the authorities referred to by JBK in its submissions is the fact that the Court's exercise of discretion to order payment-in of an adjudicated amount was the necessary precondition to the granting of an interim injunction sought by a plaintiff to prevent the defendant from obtaining judgment. In each of those cases, the balance of convenience favoured the granting of the injunction but only on terms that the money be paid into Court or into an agreed fund.

32 In Milburn Lake Pty Ltd v Andritz Pty Ltd[7] Forrest J, after referring to various decisions from New South Wales, held:

'[T]his proposition, with respect, seems to be both correct and fundamental: to grant the injunction absolutely, without ordering payment into Court, would frustrate the clear purpose of the Act notwithstanding that all of its provisions had not yet been engaged. (...) The balance of convenience favours the granting of the injunction, but only on terms that the money be either paid into Court or into an agreed managed fund.'[8]

33 The Court, in such an instance, orders payment as a term of the injunction because if it did not grant the injunction, the Court could enter judgment upon application by the claimant under s 28R(5) of the Act and the respondent, if it considered it necessary in the given case, under that same section would be required to make payment-in as a precondition to having the judgment set aside. The balance of convenience is therefore resolved by payment-in.

34 Raw Build further submitted that s 28R(5) of the Act only requires a person to pay an adjudicated amount into court if that person commences proceedings to have a judgment set aside and in such proceedings wishes to challenge an adjudication determination. To date, JBK has not obtained a judgment that could be set aside if Raw Build considered that step necessary. At most, JBK has positively indicated that it is proceeding to seek to obtain judgment in the County Court of Victoria. Further, pursuant to s 28R(5), even if JBK obtained judgment, Raw Build would not be required to make payment-in unless it commenced proceedings in the County Court of Victoria to set that judgment aside.

35 Raw Build also submitted that, whilst the orders of the Court of 22 March 2016 requiring Raw Build to make payment-in by 30 March 2016 did not expressly include the granting of an interim injunction restraining JBK from seeking an adjudication certificate or to enforce the Adjudication Determination, it is clear that the parties nonetheless treated that order in that way because:

(a) JBK did not seek to enter judgment prior to 30 March 2016;

(b) On 31 March 2016, JBK obtained an adjudication certificate under s 28Q of the Act;

(c) On 1 April 2016, JBK applied for judgment pursuant to s 28R(1) of the Act in the Melbourne Magistrates' Court and obtained a notice of order;

(d) At the directions hearing of 3 May 2016, Raw Build did not seek to renew or apply for any further injunction;

(e) JBK has since positively indicated that it is in the process of seeking to obtain a judgment in the County Court of Victoria of the Adjudicated Amount; and

(f) Raw Build has not sought to renew or apply for any injunction restraining JBK from so entering judgment and will not be doing so.

36 Accordingly, in the absence of any further order for an interim injunction being ordered by the Court to enjoin JBK from taking steps to enforce the Adjudication Determination, let alone Raw Build no longer seeking any such order, coupled with the fact that JBK previously sought to obtain judgment in the Magistrates' Court of Victoria and has now indicated it will do so in the County Court of Victoria, the proper exercise of discretion favours RAW and the Court ought not to order payment-in of the adjudicated amount as a precondition to Raw Build proceeding with the Originating Motion.

37 Raw Build submitted that JBK is not precluded in any way from enforcing its extant rights under the Act to obtain judgment, and its actions to date exemplify this. In circumstances where Raw Build does not seek to interfere with that process and has indicated that no injunction is sought by it, the policy of the Act is not undermined by the relief now sought. Moreover, the proceeding has progressed to the stage where the parties have made all submissions relating to the Originating Motion and there are no further procedural orders required.

38 By reason of the determination of the Court that the 'judgment' of the Magistrates' Court of Victoria was irregular, there is no present judgment in place.

39 Section 28R of the Act is therefore not engaged because JBK is yet to obtain judgment pursuant to the Act of the adjudicated amount in the Adjudication Determination.

40 Further, Raw Build has not sought to have that judgment set aside, but rather seeks to have the Adjudication Determination set aside on jurisdictional grounds, as to which see Amasya Enterprises Pty Ltd v Asta Developments (Aust) Pty Ltd.[9]

41 I am satisfied that the proper exercise of the Court's discretion in this case is to not render Raw Build's entitlement to challenge the Second Adjudication Determination conditional upon it making payment into Court of the sum ordered.

42 This is so because this proceeding, initiated by Raw Build, does not seek to challenge any judgment in place. There is indeed no valid judgment presently on foot.

43 Secondly, Raw Build does not seek any interim or interlocutory injunctive relief, which in the usual course would have invited the Court to make the usual order as to payment-in of the contested sum.

44 Having considered the matter further, following the detailed submissions advanced in this application, I am satisfied that in the light of the judgment made in the Magistrates' Court of Victoria being found to be irregular, there was no proper basis for making the payment-in order, particularly because this was not an application for an interim or interlocutory injunction. Accordingly, any discretionary consideration founded on the non-payment falls away.

45 Further, by reason that the present proceeding was commenced by Raw Build prior to the time of there being in place any regular judgment, and by reason that the proceeding does not seek to set aside any judgment, any further attempt to enter judgment, whether in the Magistrates' Court of Victoria or any other court, will not engage the operation of s 28R(5)(b) to require payment into court of the sum in issue.

46 The Court will make the following orders on the Principal Issue:

1. The Order made by the Court on 22 March 2016 by paragraph 8 be vacated.

47 Raw Build relies upon five grounds in support of the relief sought:

(a) Contrary to s 12(1) of the Act, it was not open to the Adjudicator to find that the due date for payment of the Payment Claim was 14 September 2015 and he erred in so finding.

(b) The Adjudicator erred in finding that the s 18(2) Notice was a valid notice under the Act.

(c) It was not open to the Adjudicator to find in accordance with law or the Act that the Adjudication Determination was validly made when clause 12.6(a) of the Subcontract identified three authorised nominating authorities and JBK should have, pursuant to s 18(4) of the Act, made its Adjudication Application with one of those listed.

(d) It was not open to the Adjudicator to find in accordance with law or the Act that JBK was entitled to make the Payment Claim under s 14(7) of the Act in circumstances where he had also determined that JBK had previously made a final payment claim under the Act.

(e) It was not open to the Adjudicator to find in accordance with law or the Act that the Payment Claim was valid when it did not sufficiently identify the construction work or related goods and services to which the purported payment claim relates.

48 A relatively simple and straightforward ground of review advanced by Raw Build is that contained in ground (a).

49 Raw Build challenges the Adjudication Determination on the basis that it was not open to the Adjudicator to find that the due date of payment of the Payment In his Adjudication Determination, the Adjudicator found at paragraphs [74]-[75]:

1. The Subcontract in the Reference Schedule at Payment Date states that (...) payment will be made "within 45 days of the following month in which the Claim Date for the relevant claim fell".
2. In accordance with this term, I determine that the Due Date for Payment is 14 September 2015.

50 The Act provides how the due date of a progress payment is to be determined. Under s 12(1) of the Act:

(1) A progress payment under a construction contract becomes due and payable -

(a) on the date on which the payment becomes due and payable in accordance with the terms of the contract; or

(b) if the contract makes no express provision with respect to the matter, on the date occurring 10 business days after a payment claim is made under Part 3 in relation to the payment.

51 The Subcontract provides the following in relation to the Payment Date:

Subject to the Subcontractor satisfying its obligations under the Subcontract, [Raw Build] will pay the amount shown in the payment schedule within 45 days of the following the month in which the Claim Date for the relevant claim fell.

52 The Subcontract contains no term identifying the due date for payment in circumstances where no payment schedule is provided. In such a case, s 12(1)(b) determines that the due date of payment is 10 business days after the payment claim is made.

53 In my opinion, by reason of this issue being a narrow one and based on a narrow factual matrix, which can be determined on the basis of the present material before the Court, and having the potential to dispose of the whole proceeding without the necessity to hear argument and deliver judgment on the remaining four grounds, and in conformity with the overarching purpose of s 7 of the Civil Procedure Act 2010, I have determined that ground (a) should be the subject of a separate question pursuant to r 47.04 of the Supreme Court (General Civil Procedure) Rules 2015.

1. Was it open to the Adjudicator to find that the due date for payment of the Payment Claim was 14 September 2015, and if it was not, should the Adjudication Determination be set aside?

2. The following question is stated for hearing as a separate question pursuant to r 47.04 of the Supreme Court (General Civil Procedure) Rules 2015:

a) Was it open to the Adjudicator to find that the due date for payment of the Payment Claim was 14 September 2015, and if it was not, should the Adjudication Determination be set aside?

3. The trial of the separate question will be conducted on a date to be fixed, on an estimate of one hour.

4. The parties are to each file and serve written submissions as to the separate question, if they have not already done so in the course of this proceeding, not less than seven days before the date fixed for hearing of the separate question.

5. The date fixed for hearing of the separate question shall be that fixed by the Associate to the Honourable Justice Vickery after consultation with the legal representatives of the parties.

56 Further, I will make an order declaring the status of the purposed order of the Magistrates' Court of Victoria pursuant to the findings of irregularities made by the Court on 3 May 2016, as follows:

6. It is declared that what purported to be a judgment of the Magistrates' Court of Victoria pursuant to the application of the First Defendant dated 1 April 2016 pursuant to s 28R(1) of the Act, is irregular.

57 I will reserve the question of costs as follows:

7. The costs of the submissions made by the parties in this application will be reserved to the hearing of the separate question.

[1] Milburn Lake Pty Ltd v Andritz Pty Ltd [2016] VSC 3 [6].

[2] [2009] VSC 339.

[3] [2015] VSC 233.

[4] [2016] VSC 3.

[5] [2015] NSWSC 232.

[6] Nazero Group Pty Limited v Top Quality Construction Pty Ltd [2015] NSWSC 232 [46].

[7] [2016] VSC 3.

[8] Milburn Lake Pty Ltd v Andritz Pty Ltd [2016] VSC 3 [13], [17].

[9] [2015] VSC 233.