Team Dreegan Pty Ltd v Symich Building Pty Ltd

C. Background

1. Team Dreegan was contracted by Symich in relation to the construction of a service station at Mayfield. Nine payment claims were made and dealt with, apparently without incident. The tenth, in April 2021, produced from Symich a payment schedule which led to an adjudication. The amount claimed was significantly reduced on the adjudication, principally because a large part of the claim by Symich for liquidated damages was allowed. The adjudicated amount was not promptly paid by Symich and Team Dreegan then obtained judgment for the adjudicated amount, which was then largely and promptly paid by Symich.
2. The eleventh payment claim also resulted in a payment schedule from Symich and was the subject of an adjudication. The adjudicator certified an amount which was registered as a judgment in accordance with s 25 of the Act. This is the judgment sought to be stayed by Symich. The judgment is for $215,221.07, a significant reduction on the payment claim of $387,931.51.
3. The contract has been terminated. Team Dreegan is seeking recovery of retention moneys. Symich has filed a cross-claim for liquidated damages and damages for defective and incomplete work.

D. Principles applicable to a stay

1. The overriding principle governing a stay is what the interests of justice require.
2. Generally, a court will stay a judgment pending an appeal if there is a risk the appeal would be nugatory if a stay was not granted. [1] The onus is on the applicant to demonstrate a proper basis for a stay. The discretion as to whether a stay is granted, and on what terms, is informed by the balance of convenience and the competing rights of the parties. [2]
3. In the context of the Building and Construction Industry Security of Payment Act, these principles enliven the consideration of whether there is a real risk the judgment debtor will suffer irreparable prejudice. [3] In this case, that risk is informed by the strength and magnitude of Symich's cross-claim.
4. Because the policy of the Act [4] is that judgment debts arising under it are to be paid, a stay is less readily available when the debt arises under the Act. [5] The grant of a stay may require something more than "a real risk of prejudice". [6] This is because the risk arises from the regime under the Act that entitles the claimant to payment, and the legislature has assigned that risk ordinarily to lie with the judgment debtor. [7]
5. This increased judicial reluctance to grant a stay of a judgment obtained under the Act also finds some indirect support from the terms of the Act itself. Section 25(4) of the Act requires the judgment debtor to pay into Court as security the amount of a judgment debt in order to challenge the judgment. The subsection is not directly applicable because an application for a stay is not proceedings to set aside a judgment. The principle that payment into Court is required in order to set aside a judgment indicates that the same condition may be appropriate in an application for a stay, in order that the policy of the Act not be circumvented. [8]
6. The applicant, Symich, made reference to In the matter of Douglas Aerospace Pty Ltd. [9] That case concerned the setting aside of a statutory demand. Different statutory considerations, such as the existence and force of an offsetting claim, apply in that situation, [10] so the utility of that decision to the present case is limited.

E. The strength of Symich's cross-claim

1. While Symich's cross-claim seeks liquidated damages for delay, and damages for incomplete and defective work, only the former was pressed before me, perhaps because there was limited, if any, admissible evidence of the quantum of damages arising from the alleged incomplete and defective work.
2. The claim for liquidated damages was the significant component of the reduction at adjudication of Team Dreegan's tenth payment claim. Whilst this decision by the adjudicator is not determinative of the result in the pending contractual proceedings, it indicates that Symich has already received substantial credit for its liquidated damages claim. The parties agree that only about $80,000 of the liquidated damages claimed by Symich was not allowed by the adjudicator. In addition, there were reasons of substance - for some of the residual period, Team Dreegan was barred from the site - why only part of this reduced amount could be maintained. The residual amount of the liquidated damages claim is thus far less than the judgment sum sought to be stayed, even assuming that Team Dreegan's claim for the retention moneys has no merit.
3. Symich advances an alternative related argument. It submits that Team Dreegan did not comply with certain contractual provisions in issuing payment claim 10. [11] Whether only payment claim 10 (and not payment claim 11) was impugned in this allegation is not altogether clear. In any event, Symich maintained that the requirements in cl 37.1 of the subcontract needed to be satisfied in order to be a valid claim requiring payment.
4. Symich conceded that the matters in cl 37.1 of the subcontract do not preclude a valid payment claim under the Act. Section 13 of the Act alone identifies the requirements of a valid payment claim, and s 34 of the Act precludes any purported contractual modification. Symich argued that the contractual provision remains effective in respect of the pending proceedings in contract, and that by virtue of s 32 of the Act, nothing in Pt 3 of the Act, including s 13, affects those proceedings.
5. So far as the argument goes, this is correct, yet it suffers from two defects.
6. First, contractual provisions requiring additional features for a valid progress claim only have operation in respect of the very subject matter dealt with under the Act, namely interim payments. If cl 37.1 has no work to do other than to purport to render invalid a payment claim which the Act validates under s 13, then the provision offends the bar on contracting out of the Act in s 34. In this way there is a real question as to whether cl 37.1 purports to modify s 13, and thus be void under s 34 of the Act.
7. The second point is related. The existence of a contractually invalid progress claim does not, of itself, determine the rights and liabilities of the parties under the contract, and in this case, under a terminated contract. Symich was unable to identify any contractual provisions that identified how a party's contractual rights were affected by the payment of a progress claim validated by the Act, even if there was contractual non-compliance. Symich did not press the submission that it could recover all progress claims made and paid, validly under the Act, merely because there were, in the progress claim, omissions of some contractual stipulations. How the omissions led to any damage was not explained, once it is accepted that, for the purpose of progress payments, the Act cured any defects.
8. Ultimately, this issue about the form of the payment claims did not matter. I was not satisfied that there was any contractual defect in the payment claims or that payment claim 10, or any earlier or later payment claim, did not provide the contractual details required by Symich. The evidence indicates the contrary, [12] that the payment plan was in the form and provided the detail required by Symich. In that event, there appeared to be no force in the challenge to the moneys paid by Symich. Symich was left with a relatively small claim for liquidated damages, and then only if Team Dreegan's claim for the retention moneys is dismissed.

F. Irreparable prejudice

1. Once the claim by Symich is shown not to be substantial, the strength of the assertion of a risk of irreparable prejudice loses force.
2. Further, the evidence of the likely inability of Team Dreegan to meet any net amount owing on the cross-claim was weak. That Team Dreegan's contractors are being paid in accordance with agreements with Team Dreegan [13] is not evidence of insolvency, or a substantial risk of an inability to meet a future judgment. Symich's primary argument on this point was that Team Dreegan's financial records were not produced. But those financials were sought by Symich in respect of a proposed security for costs application by it in the contractual proceedings, [14] an application which never eventuated. Any inference from the non-production of financial statements by Team Dreegan for another application that was properly not pursued - Symich maintained a cross-claim and it was seeking to recover money in the proceedings - is of no assistance in proving the insolvency of Team Dreegan.

G. Conclusion

1. I am not satisfied that there is a risk of irreparable prejudice, or that there is any strength in Symich's cross-claim for other than a relatively small amount. There was also no evidence that Symich would be able to meet the amount of the judgment were a stay granted. It has failed to pay in full the judgment obtained resulting from payment claim 10, and it made no offer of payment into Court in respect of the subject judgment. To allow the risk of Team Dreegan not being paid a substantial judgment to be subordinated to the small risk that Symich might be deprived of a far less significant sum would be to ignore the policy and objects of the Act.
2. In the circumstances, the interests of justice favour the stay being refused.
3. If there is some reason why it is not appropriate that a standard costs be made against Symich, either party may email my associate within 14 days to seek an alternative order.

H. Orders

1. The orders of the Court are: 1. Notice of motion by Symich Building Pty Ltd filed 29 September 2021 dismissed. 2. Applicant on the motion to pay the respondent's costs. 3. Any application to vary order (2) be made by email to my associate within 14 days.

Endnotes

1. Alexander v Cambridge Credit Corporation Limited (1985) 2 NSWLR 685 at 694, Penrith Whitewater Stadium Ltd & Anor v Lesvos Pty Ltd & Anor [2007] NSWCA 103 at [19].
2. Penrith Whitewater Stadium Ltd at [19].
3. Grosvenor Constructions (NSW) Pty Limited (in administration) v Musico & Ors [2004] NSWSC 344.
4. Section 3.
5. Grosvenor at [31], J & Q Investments Pty Ltd v ZS Constructions (NSW) Pty Ltd [2008] NSWCA 203 at [23].
6. J & Q Investments Pty Ltd at [23].
7. RJ Neller Building Pty Ltd v Ainsworth [2008] QCA 397 at [40].
8. Tombleson v Dancorell Constructions Pty Limited [2007] NSWSC 1169 at [17]-[19].
9. [2015] NSWSC 167.
10. See ss 459G, 459H and 459J of the Corporations Act 2001 (Cth).
11. Defendant's submissions, 5 October 2021, at [12(d)].
12. See Exhibit A, pp 49-60.
13. Affidavit, Brian Oliver Evans, 12/10/21 and affidavit, Lebon Fajloun, 12/10/21.
14. Exhibit 1, p 244. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 26 October 2022