49 For the above reasons, and despite my general misgivings about the reliability of some of the information which Mr Warner relied upon, I cannot be satisfied with any certainty that Brick is either currently insolvent, or that it will be insolvent in the near term (when it is presumed that the District Court proceedings will be resolved). Although Brick is clearly a fair distance from being described as being in a comfortable financial position, applying the above-described 'proper approach' the evidence is insufficient to warrant a withholding of the funds.
Brick's alternative submissions
50 As will be seen from what follows Brick has addressed submissions on a number of fronts. A close technical analysis is based upon the proposition that until Brick files the adjudication certificate, there is no judgment the execution of which can be stayed. A further set of contentions is advanced to the effect that Taylor is presently pursuing interim relief and not substantive relief, Brick's proposition being that interim relief can only be given in support of final relief.
51 Whilst there may well be substance in a number of these submissions I prefer to deal directly with the basal question in terms of determining the probabilities described above as the proper approach. This requires close attention to the evidence before the Court as to 'the ultimate success factor' and as to the probabilities that if Taylor ultimately succeeds, Brick will prove unable to repay the moneys on the 'posited repayment date'.
Brick's financial position - placed into the correct perspective
52 The principle to be derived from Grosvenor is that where there is certainty that the defendants' rights will be otherwise rendered nugatory, and that it will suffer irreparable prejudice, because moneys paid would be irrecoverable as a result of the claimant's insolvency or liquidation, then the proper and principled exercise of the Court's discretion (under Part 44 rule 5) is to grant a stay (at [15] and [32]). Such a stay is to "prevent injustice" (at [17]).
53 As earlier observed, the Court is involved in the exercise of balancing the risk that a respondent's payment may be irrecoverable because of a claimant's insolvency, in the event the final rights are determined in the respondent's favour, against the policy of the Act that successful claimants be paid (Grosvenor at [31]).
54 Stays in relation to debts under the Act ought be less readily available than stays in relation to appeals from curial proceedings (Grosvenor at [31]; Herscho v Expile Pty Limited [2004] NSWCA 468 at [3]). In Herscho Hodgson JA suggested the risk of prejudice must be "a very high risk" and certainly more than merely a real risk to justify a stay (at [3] and [9]).
55 Since Grosvenor the Court of Appeal has emphasised that the policy of the Act militates against the grant of stays: Brodyn at [85]-[87]. [See also Transgrid v Siemens Ltd [2004] NSWCA 395 at [37] where the Court indicated that the fact that payments are provisional only would not normally be a ground for withholding relief.]
56 The present case is far removed, on a factual level, from Grosvenor. A refusal to pay out the funds in Court to Brick is not necessary to "prevent injustice" (cf Grosvenor at [17]). Based on the evidence before the Court their is neither "certainty" (to adopt the language used in Grosvenor at [32]) nor "a very high risk" (to use Hodgson JA's language in Herscho at [9]), that Taylor will not be repaid if it becomes so entitled.
57 In Grosvenor the compelling facts, not present in this case, were:
· the claimant was in administration (at [2]);
· the claimant had a deficit exceeding $4 million to unsecured creditors, and a projected return of 11 cents in the dollar (at [3]);
· the respondents' counter claim was for $550,839 (at [11]).
58 Conversely, in this case:
· Brick is not in any form of insolvency administration;
· Upon the necessary assumption that the funds held by the Court are included in the calculation, the evidence permits a finding that Brick is in a positive net asset position of at least $50,000;
· Taylor's counter claim, which is for $221,900, is disputed and being defended.
59 The principle in Grosvenor is only applicable where the claimant is either actually, or very close to, insolvent. Were it otherwise then the stay itself may drive the claimant into the very insolvency which the interim payment regime of the Act is designed to prevent. Such a result would be unjust in circumstances where:
· prima facie there is a debt due from the respondent to the claimant;
· the final amounts due between the parties may not be ascertained for weeks, months or years;
· the Court is in no position to assess the relative merits of the parties on the final claims;
· the financial situation of the respondent may itself deteriorate so that the claimant loses for all time the benefit of the right which is now prima facie enforceable;
· there is nothing in the Act which suggests a claimant's entitlement to receive the interim payments depends upon it establishing a capacity to repay those sums if there is a final determination unfavourable to it;
· the claimant is deprived of the very funds the Act contemplated would be made available to it to pay its own employees and suppliers.
60 As counsel for Brick case contended, to grant a stay in circumstances short of actual or imminent insolvency would be to turn the Act on its head. Rather than providing a statutory regime which ensures progress payments, and thus cashflow, to permit a person undertaking construction work to continue to do so, it may then operate to prevent cashflow and bring about the very result the Act is designed to prevent - persons not being paid promptly for the work which they have done.
61 Notwithstanding the fact that Brick's fortunes over the past few years appear to have waxed and waned, the fact is that Brick is neither under administration nor being wound up in insolvency. Nor has Taylor demonstrated that there is either certainty or a very high risk that it would not be repaid should Taylor succeed on the final determination of legal rights. In those circumstances there is no basis to apply, by analogy, the principles in Grosvenor so as to prevent Brick receiving the money paid into Court by Taylor.
Brick's remaining submissions
62 I earlier adverted to the fact that Brick had put submissions on a number of alternative bases. In deference to the care with which the submissions were formulated it is appropriate to set them out.
Taylor's failure to seek substantive relief
63 Brick has submitted that the following matters in terms of the formal position should not be overlooked:
· on 10 March 2005 Brick obtained an adjudication certificate in respect of the Adjudicator's determination dated 28 February 2005;
· on 11 March 2005, by consent, the Court restrained Brick from filing the adjudication certificate as a judgment until further order;
· on 5 May 2005 the Court found that the determination was valid. Consequently Brick now seeks on order lifting the restraint;
· Brick has a statutory entitlement to file the certificate as a judgment for a debt in a court of competent jurisdiction and to enforce it accordingly: s25 Building and Construction Security of Payment Act 1999 (Act). The interim restraint prevents it from doing so;
· Taylor has identified no basis, other than those articulated during the hearing, which have now been rejected, to disentitle Brick from filing the certificate. Brick's capacity to repay the judgment debt is relevant only to the issue of the release of the funds in court. It is not relevant to Brick's entitlement to file the certificate;
· nonetheless Taylor persists in seeking an interim injunction restraining Brick from filing the certificate. Taylor seeks no substantive relief.
64 Brick contends that interim relief can only be given in support of final relief: Australian Broadcasting Corp v Lenah Game Meats Pty Ltd (2001) 208 CLR 199 at [15-16] (Gleeson CJ).
65 Whilst this contention is accurate as a matter of principle it seems to me that in the present circumstances the Court in the principled exercise of that discretion, may well be in a position to, for example, order the payment of the funds which are presently in this Court to the District Court. This is less a question of interim relief than a question of management of funds paid into Court where other proceedings will be determinative of the final rights of the parties and depending upon the circumstances, should arguably, in determining those final rights, hold the funds paid into Court.
The reach of the Grosvenor decision - No judgment the execution of which can be stayed
66 Grosvenor concerned the stay of execution of a judgment after the certificate had been filed, under Part 44 rule 5 of the Supreme Court Rules. Brick's contention is that unless and until it files the adjudication certificate, there is no judgment the execution of which can be stayed.
67 Brick further contends that:
· Taylor could have refrained from commencing these proceedings until after the adjudication certificate had been filed;
· it could then have sought an order setting aside the judgment constituted by the filing of an adjudication certificate;
· such an application can be brought on the basis that the underlying determination is not an adjudicator's determination within the meaning of the Act: Brodyn Pty Ltd v Davenport [2004] NSWCA 394 [42] and [61];
· however in such proceedings the respondent must pay the disputed amount into court "as security";
· if the application to set aside the judgment fails, the money in court "would normally be paid out to the builder": Falgat Constructions Pty Ltd v Equity Australia Corp Pty Ltd [2005] NSWCA 49 at [19];
· had Taylor done so then the principles in Grosvenor may have been relevant - there would then have been a judgment to be stayed;
· however, having elected to proceed in the manner in which it has, namely to challenge the determination prior to the adjudication certificate being filed and to provide security to permit that challenge to proceed, Taylor cannot now obtain the benefit of the Court's discretion (to stay a judgment) which is available in different circumstances and which do not, and may never, exist. Thus the Court need not concern itself with the question of Brick's capacity to repay the funds in court to Taylor.
68 In my view the Court should be wary of eschewing the need to take Grosvenor into consideration presently. An analysis of the principles set out in Grosvenor against the facts presently before the Court, reveals for reasons given in the judgment, that it is appropriate for the Court to sanction the return to Brick of the funds paid into Court.