The Estate of Sikos v TBPL1 Pty Ltd

Judgment

1. On 2 February 2009, the late Mr Elias Sikos and Mistrina Pty Ltd (now in liquidation) entered a design and construction contract (the "Building Contract") with the defendant, TBPL1 Pty Ltd, formerly known as Jabbcorp Pty Ltd (the "Builder") in relation to a proposed development of land then owned by Mr Sikos and Mistrina at Brighton-Le-Sands in Sydney.
2. Work was suspended on the Brighton-Le-Sands site on 21 April 2010. Work was never recommenced. The Builder terminated the Building Contract on 24 September 2010.
3. On 13 May 2011, receivers appointed by Bankwest to the assets of Mr Sikos and Mistrina sold the site to a third party.
4. In these proceedings, commenced on 26 March 2021, more than 11 years after work ceased on the site and more than 10 years after the Builder terminated the Building Contract, Mistrina and those representing Mr Sikos's estate seek to agitate a dispute under the Building Contract.
5. By Notice of Motion filed on 19 July 2021, the Builder seeks orders: 1. that the proceedings be stayed under Uniform Civil Procedure Rules 2005 (NSW) r 12.4, by reason of the fact that Mistrina and Mr Sikos have not paid the Builder's costs of proceedings, now discontinued, brought by them in 2014 under the Building Contract (the "2014 Proceedings"); 2. striking out certain paragraphs of the List Statement; and 3. for security for costs.
6. The first plaintiff is presently described as "The Estate of Elias Sikos". Letters of administration were granted to Mr George Sikos who, I was informed during argument, is now also deceased. I was further informed that the executrix of Mr Sikos's estate is now Ms Helen Constantinou. Those representing Mr Sikos's estate should ensure that Ms Constantinou is substituted as the first plaintiff. I will consider the issues raised upon the motion before me upon the assumption that this will occur.
7. As did the parties in their written submissions, I will refer to Mr Sikos and Mr Sikos's estate simply as "Sikos", unless the context otherwise requires.
8. Mistrina, as second plaintiff, is represented by the same solicitors who represent Sikos. I assume this is on the instructions of the liquidator. Although a respondent to the motion, Mistrina did not appear on the motion. Mr Hume, who appeared for Sikos, informed me he did not appear for Mistrina. That is curious, but Mr Kidd SC, who appeared with Mr Salama for the Builder, did not seek to make anything of it.

What has happened

1. On 23 June 2010, the Builder served a payment claim under the Building and Construction Industry Security for Payment Act 1999 (NSW) (the "SOPA") on Mistrina and Sikos claiming an amount of $749,603.54. On 1 September 2010, an adjudicator determined an adjudicated amount owing by Mistrina and Sikos to the Builder of $749,603.54.
2. On 24 September 2010, the Builder obtained an adjudication certificate under s 24 of the SOPA which stated an amount of $776,855.34.
3. On 3 November 2010, the Builder purported to file that certificate as a judgment under s 25(1) of the SOPA (the "2010 Judgment").
4. The amount for which the 2010 Judgment was entered was $782,227.52. This was $5,372.18 more than the amount stated in the adjudication certificate. Sikos now contends this is fatal to the validity of the 2010 Judgment. I return to this below. [1]
5. On 1 August 2014, Sikos and Mistrina commenced the 2014 Proceedings against the Builder seeking damages for alleged breaches of the Building Contract. The alleged breaches concerned the allegedly defective design of the foundations of the development and the use of an unsuitable raft slab.
6. In December 2014, Sikos and Mistrina discontinued the 2014 Proceedings and thereby became liable to pay the Builder's costs of the 2014 Proceedings. [2]
7. In early 2015, the Builder demanded payment of its costs of the 2014 Proceedings. Sikos and Mistrina, through their then solicitor, indicated that they did not have the financial capacity to pay those costs.
8. In November 2016, Sikos and Mistrina commenced proceedings against Australian Consulting Engineers Pty Ltd ("ACE"), the structural engineers who designed the allegedly defective slab. The Builder was not a party to those proceedings.
9. On 22 November 2017, Mistrina was placed into liquidation.
10. On 8 October 2020, the Court of Appeal, following delivery of reasons on 24 September 2020, [3] entered judgments in the proceedings referred to at [16] above against ACE in favour of: 1. Mistrina in the sum of $3,560,642.83; 2. Sikos in the sum of $1,736,664.36.
11. The total amount of money in those judgments was $5,297,307.19 (the "Judgment Sum").
12. On 13 October 2020, the Builder served on ACE a garnishee order (the "Garnishee Order") based on the 2010 Judgment.
13. On 3 November 2020, the Court of Appeal ordered that the Judgment Sum be paid into Court "until a further order is made directing payment of the judgment sum out of court".
14. That order was made pending an application by ACE for special leave to appeal to the High Court of Australia against the decision of the Court of Appeal that led to the judgments.
15. ACE paid the Judgment Sum into Court on 10 November 2020.
16. On 11 March 2021, the High Court refused to grant ACE special leave to appeal against the Court of Appeal's decision.
17. On 16 March 2021, ACE filed a Notice of Motion seeking orders concerning the payment out of Court of the Judgment Sum. In effect, ACE's application was by way of interpleader, as it claimed no entitlement to the funds in Court.
18. On 26 March 2021, Sikos and Mistrina commenced these proceedings against the Builder.
19. I heard argument on ACE's Notice of Motion of 16 March 2021 and delivered judgment on 30 April 2021. [4]
20. On 25 May 2021, I made orders pursuant to UCPR r 41.11 that: 1. $2,829,350.48 be paid out of Court to Mistrina's solicitors in partial satisfaction of the Court of Appeal's judgment of 8 October 2020; 2. $976,164.77 be paid out to Sikos's solicitors in partial satisfaction of that judgment; and 3. a further amount of $100,000 be paid out to Mistrina's solicitors in partial satisfaction of ACE's costs liabilities in the Court of Appeal.
21. The balance of the Judgment Sum (currently an amount of $1,511,454.87) remains in Court.

Common ground that Mistrina's and Sikos's claim for damages under the Building Contract is statute barred

1. As I have mentioned, on 13 May 2011, Bankwest, as receivers of the assets of Mistrina and Sikos, sold the Brighton-Le-Sands site to a third party.
2. In those circumstances, it was common ground before me that any cause of action that Mistrina and Sikos had against the Builder that was founded on the Building Contract was not maintainable after 13 May 2017. [5]

The claims being made in these proceedings

1. In these proceedings, Mistrina and Sikos seek the following final relief: "Pursuant to section 32 of the [SOPA], s 23 of the Supreme Court Act 1970 (NSW) and any other enabling power of the Court, a final injunction restraining the Defendant from enforcing the [2010 Judgment]. Pursuant to section 32 of the [SOPA], s 23 of the Supreme Court Act 1970 and any other enabling power of the Court, a final injunction restraining the Defendant from enforcing any rights it has under s 23 of the [SOPA]. The [Garnishee Order] be set aside. A declaration that, on a final basis, there are no amounts owing from the Plaintiffs to the Defendant in respect of works carried out by the Defendant pursuant to the [Building Contract]."
2. In his written submissions, Mr Hume summarised the matters alleged in the List Statement in support of this relief as follows: 1. the amounts the subject of the 2010 Judgment are not owing because the Builder has already been paid amounts in respect of the claims the subject of the adjudication and the Builder "should not be entitled to enforce interim rights under the [SOPA] … which exceed its final rights"; 2. upon the commencement of the liquidation of Mistrina, s 553C of the Corporations Act 2001 (Cth) extinguished the Builder's rights under Pt 3 of the SOPA by operation of law; 3. the 2010 Judgment is "invalid" because it was not "properly procured"; because it is in an amount different to the adjudication certificate and "is infected by the error" identified by Black J in In the matter of Cooperbrown Pty Ltd [6] and by Gleeson J in In the matter of Ming Tian Real Property Pty Ltd [7] and is for that reason "infected by jurisdictional error, [and] is invalid ab initio without needing to be set aside"; 4. the 2010 Judgment should not be enforced because: 1. it, or the right to enforce it, was extinguished by s 553C; 2. it was discharged by the statutory set-off effected by s 553C; 3. it was not properly procured; 4. it was obtained ex parte and there was a failure to disclose material deficiencies in the application; and 5. on a final basis the claims the subject of the 2010 Judgment are not owing; 1. the Garnishee Order should be set aside and/or enforcement of it restrained because: 1. the 2010 Judgment on which it is founded is invalid and/or should not be enforced; 2. the 2010 Judgment has been discharged; and 3. the Garnishee Order invalidly seeks amounts from Mistrina, without leave under s 500 of the Corporations Act; 1. enforcement of the 2010 Judgment should be stayed in the exercise of the jurisdiction recognised in Grosvenor Constructions (NSW) Pty Ltd (in admin) v Musico. [8]

The strike-out application

1. I will deal first with the Builder's application to strike-out the various paragraphs of the List Statement, as this focuses attention on the cause of action upon which Sikos (and evidently, Mistrina, but as it did not appear on this application I will from now on refer only to Sikos when discussing the pleadings) relies in making the allegations in the List Statement that I have summarised above.

Paragraphs C26 to C35

1. The first group of paragraphs of the List Statement that the Builder seeks to strike-out are in the following form: "The parties' final rights 26. This section of the pleading addresses the final rights as between, on the one hand, Mistrina and Sikos and, on the other, [the Builder]. 27. Mistrina and Sikos' final rights are preserved by section 32 of the [SOPA]. 28. Mistrina and Sikos' contention is that, on a final basis, no amounts are owing to [the Builder] and the adjudicated amount was not and is not owing. 29. In this section of the pleading, Mistrina and Sikos use the claim labels used in the Payment Claim and the adjudication determination. 30. The slab design for the development was defective and was produced and implemented in breach of [the Builder's] Quality of Performance Obligations. Particulars Further particulars will be provided with the evidence. 31. As regards [variation number] CFV005 (concerning removal of encroachment of concrete), in respect of which the adjudicator awarded an amount of $46,872 (ex GST), [the Builder] has no entitlement on a final basis to that amount because: (a) the works the subject of this claim were not directed by the Superintendent or approved by the Superintendent in writing …; Particulars Amended Claim for Variation No CFV005 was not signed by the Superintendent. (b) the works the subject of this claim were caused by [the Builder's] defective slab design. 32. As regards [variation number] CVF005a (concerning delay damages), in respect of which the adjudicator awarded an amount of $105,000 (ex GST), [the Builder] has no entitlement on a final basis to that amount because: (a) the works the subject of this claim were not directed by the Superintendent or approved by the Superintendent in writing …; (b) [the Builder] was not granted an extension of time in respect of this asserted delay …; (c) [the Builder] had no entitlement to an extension of time in respect of this asserted delay because the delay was not beyond the reasonable control of [the Builder] …; (d) [the Builder] had no entitlement to an extension of time in respect of this asserted delay because there was concurrent delay …; Particulars The concurrent delay included the defective raft slab design. (e) the amount is greater than the expenses necessarily incurred by [the Builder] by reason of any delay …; and (f) [the Builder] has not established that the amount corresponds with the expenses necessarily incurred by [the Builder] by reason of any delay …; (g) any delay the subject of this claim was caused by [the Builder's] defective slab design. 33. As regards [variation number] CVF011 (concerning compaction of substrate to achieve structural engineer's requirements): (a) the Payment Claim called $21,372 (plus GST) (or $23,509.18 ex GST) on account of this variation; (b) the claim was paid in full by Mistrina and Sikos prior to service of the Payment Claim and formed part of the $200,912 of variations approved and claimed to date which the adjudicated included in the Adjudicated Amount; (c) [the Builder] had no entitlement to the $23,509.18 because: (i) the Amended Claim for Variation No CFV011 was not directed by the Superintended or approved by the Superintendent in writing …; and (ii) the works the subject of this variation were caused by [the Builder's] defective slab design. 34. As regards [variation number] CVF015 (concerning legal fees incurred in respect of Supreme Court litigation), in respect of which the adjudicator awarded an amount of $37,381 (ex GST), [the Builder] has no entitlement on a final basis to that amount because: (a) the works the subject of this claim were not directed by the Superintendent or approved by the Superintendent in writing …; (b) the invoices submitted with the claim include legal costs in relation to a matter other than the proceedings against Westpac; Particulars Invoice issued by Timothy Bland on 8 September 2010 in respect of [the Builder] & Mistrina (Controller appointed) Ace Engineering, Bay St Brighton Le Sands", covering advice on an application under the SOP Act. 35. As regards Contract Works, in respect of which the adjudicator awarded an amount of $350,000 (ex GST), [the Builder] has no entitlement on a final basis to that amount because [the Builder] has not substantiated that it did the claimed work, or that it did it in the value claimed."
2. By these paragraphs Sikos seeks to have determined "the parties' final rights" under the Building Contract.
3. The question is whether in so doing, Sikos is, as Mr Kidd submitted, propounding a claim "founded on contract" and is thus clearly out of time.
4. Mr Hume submitted that Sikos's claim was not "founded on contract". He pointed to the fact that Sikos does not seek damages for breach of the Building Contract.
5. Mr Hume submitted that the determination Sikos seeks of the "parties' final rights" is: 1. not to recover damages; 2. in aid of the declaration sought that there are "no amounts owing" from Mistrina and Sikos to the Builder in respect of the works carried out by the Builder under the Building Contract; 3. which declaration, in turn, is a "step along the way" to demonstrating that the Builder would be unjustly enriched were it to enforce the 2010 Judgment.
6. Mr Hume submitted that Sikos seeks to "enjoin apprehended injury" being the "unjust enrichment".
7. In argument, I pressed Mr Hume to identify what cause of action Sikos was relying upon.
8. Ultimately, Mr Hume submitted that Sikos claimed an equitable right to injunctive relief to prevent the Builder becoming unjustly enriched by enforcing the 2010 Judgment and thereby obtain the fruits of the determination under the SOPA in circumstances where, on Sikos's case, there is not in truth any amount owing to the Builder.
9. Mr Hume said that his argument gave rise to "a difficult" question of the "character of a claim for restitution of amounts paid under Pt 3" of the SOPA.
10. Mr Hume submitted: "There is no case that really goes through and articulates what the character of that claim is. Now it may very well arise at the end of these proceedings, but for present purposes it is a novel issue. So far as it arises in these proceedings, my submission is that the right that ‑ where someone has paid moneys under Part 3, the character of their right to have those moneys returned ‑ if it turns out to have been wrongly paid on a final basis ‑ is in the nature of a restitutionary claim, either because it was paid under a mistake of law, to what we all thought those were the rights but it turns out they are not. Alternatively, it is akin to a claim where moneys have been paid under a judgment, but the judgment turns out to have been invalid or set aside and there is an inherent, and now partly statutory, power to order restitution; or it is a sui generis statutory right of a restitution under section 32 [of the SOPA]".
11. Sikos is seeking to achieve this result without applying to set aside the 2010 Judgment.
12. This is a novel argument. Mr Hume was not able to point to a case that provides direct support for it. Nor, as Mr Hume submitted, was Mr Kidd able to point to a case that decides that the cause of action for which Mr Hume contends is not available.
13. Mr Hume submitted that it is at least arguable that a claim of the kind propounded is available. He submitted: "It would also, if Mr Kidd's argument is correct, it would have this, in my submission, quite perverse consequence: suppose a claimant obtains a section 25 judgment, sits on its hands for six years ‑ probably less if it is obtained after the completion of the contract works; they often are obtained a year after the works ‑ it sits on its hands for five to six years and it then decides to enforce the judgment and the respondent ‑ and that was just an interim right, that's just wrong. For Mr Kidd's client that argument would be the interim right inevitably becomes a final right after effluxion of time. That is just not the intention of this Act."
14. I did not understand Mr Hume to be contending that the Builder had sat "on its hands for six years" but rather that, were his submissions not correct, the result he posited would flow in the hypothetical circumstances he outlined.
15. On the other hand, acceptance of Mr Hume's submission about this matter will have the effect that the Builder will, in effect, have to resist a building case more than a decade after the Building Contract was terminated and in circumstances where Mistrina and Sikos commenced and then discontinued the 2014 Proceedings in which the same matters would be agitated.
16. The difficulties confronting the Builder in these circumstances are obvious and were summarised in the following passage from their solicitor's affidavit on this application: "I estimate that it will take 6 to 9 months for these Technology and Construction List proceedings to finalise. I anticipate that the Plaintiffs' claims set out from paragraphs [30] to [35] of the Amended Technology & Construction List Statement will require significant evidence, including witness statements to be obtained relating to execution of the works under the building contract in 2010, including relating to the claimed defective slab design, delay damages and variations. I believe that the preparation of that evidence will be difficult because the parties have not had commercial dealings since 2009 and 2010 and many of those records will have been destroyed, corrupted or lost. I also anticipate that significant time and expenses will be incurred in searching for and deposing witnesses. The technical arguments advanced by the Plaintiffs and the many varied arguments set out in the Amended Technology & Construction List Statement, are also likely to incur significant legal costs, including in respect of Senior Counsel, with respect to conducting research and preparing evidence."
17. These are matters to be taken into account.
18. However, I am not satisfied that the matters that Mr Hume seeks to agitate are "so obviously untenable that [they] cannot possibly succeed" or "manifestly groundless" or "so manifestly faulty that it does not admit of argument". [9] I do not propose to strike these paragraphs out.
19. However, I do find, for reasons I will set out further below, that the belated timing of Sikos's agitation of these matters is relevant to the question of whether I ought to order security for costs, that matter being relevant to the issue of whether or not these proceedings can be properly described as being "defensive".

Paragraphs C43 to C46

1. Paragraphs C43 to C46 of the List Statement are in the following terms: "43. On or around 22 November 2017, Mistrina commenced being wound up in insolvency. 44. On or around 22 November 2017, there were mutual credits, mutual debts or other mutual dealings between Mistrina and [the Builder], within the meaning of s 553C(1) of the Corporations Act 2001 (Cth). Particulars [The Builder] had a claim to discharge of the Section 25 Judgment and a claim to discharge of any obligation arising under s 23 of the [SOPA] ([the Builder's] Choses in Action). Mistrina had claims (inter alia) under section 32 of the SOP Act for the reversal of the [2010 Judgment], for declarations on a final basis as to the amounts owing under the [2010] Judgment, and as to the invalidity of the [2010 Judgment], and by way of defence to any attempt to enforce the [2010 Judgment]. 45. On 22 November 2017, section 553C of the Corporations Act 2001 (Cth) operated, in a self-executing manner, such that (inter alia): (a) an account was taken of what was due from Mistrina and [the Builder] in respect of mutual dealings; (b) the sum due from one party was set off against any sum due from the other party; and (c) only the balance of the account (if any) remained. 46. After the operation of section 553C: (a) [the Builder's] Choses in Action (if any) were extinguished; (b) [the Builder's] Choses in Action (if any) were replaced with a net balance, being a balance (if greater than zero) claimable in the liquidation of Mistrina; (c) the statutory set off effected by section 553C resulted in a net balance of $0 payable from Mistrina to [the Builder] in respect of [the Builder's] Choses in Action; Particulars The amounts due from [the Builder] to Mistrina in respect of Mistrina's claims exceeded the amounts due from Mistrina to [the Builder]. Paragraphs 26 to 36 are repeated. (d) the statutory set off effected by section 553C discharged any obligation of Mistrina to [the Builder] in respect of [the Builder's] Choses in Action; and (e) the statutory set off effected by section 553C discharged any obligation of Sikos to [the Builder] in respect of [the Builder's] Choses in Action, in the circumstance that Sikos was jointly and severally liable in respect of [the Builder's] Choses in Action."
2. Section 553C(1) of the Corporations Act is in the following terms: "Insolvent companies--mutual credit and set-off (1) Subject to subsection (2), where there have been mutual credits, mutual debts or other mutual dealings between an insolvent company that is being wound up and a person who wants to have a debt or claim admitted against the company: (a) an account is to be taken of what is due from the one party to the other in respect of those mutual dealings; and (b) the sum due from the one party is to be set off against any sum due from the other party; and (c) only the balance of the account is admissible to proof against the company, or is payable to the company, as the case may be."
3. Mr Hume sought to justify these paragraphs by reference to Mistrina's obligation to pay the Builder's costs in the 2014 Proceedings and by reference to Sikos's claim to restrain enforcement of the 2010 Judgment.
4. As to the former, Mr Hume submitted: "The significance is this. On 22 November 2017, Mistrina went into liquidation. Let it be assumed that, immediately prior to the liquidation, Mistrina and Sikos were jointly and severally liable to [the Builder] to pay [the Builder's] costs of the 2014 Proceedings. On 22 November 2017, s 553C(1) operated as between Mistrina and [the Builder]. It operated to extinguish any right in [the Builder] to costs of the 2014 Proceedings, and to replace that right with a net balance as between Mistrina and [the Builder]. In calculating that net balance, allowance was made for Mistrina's rights against [the Builder]. It is Sikos's case in these proceedings that Mistrina's rights against [the Builder] exceeded any rights [the Builder] had against Mistrina … The result was that there was a "payment" of the costs order on 22 November 2017. That payment operated to discharge any liability of Sikos to pay [the Builder] ..." Now, no doubt there will ultimately be an issue for final determination in these proceedings as to whether, as at 22 November 2017, Mistrina's claims against [the Builder] exceeded [the Builder's] claims against Mistrina. What is important for present purposes is that [the Builder] makes no attempt to discharge its onus of establishing that, as at 22 November 2017, its rights against Mistrina exceeded Mistrina's rights against it, such that there was no payment by Mistrina of the costs liability."
5. As to the latter, Mr Hume submitted: "[The Builder] seeks to strike out paragraphs 43-46 of the List Statement, but it makes no argument as to paragraphs 46(a) and (b). Its argument as to paragraphs 46(c)-(e) appears to be that the claims particularised at paragraph [44] of the List Statement are "not claims that sound in money that can be set-off against" [the Builder's] [2010 Judgment] … This is incorrect. Sikos' claim for reversal of the [2010 Judgment] (on the basis that it did not reflect the parties' final rights, such that if a cent was paid over there was an immediate right in restitution) is clearly a contingent claim sounding in money. Sikos' claims relating to the validity and enforceability of the [2010 Judgment] were also contingent claims sounding in money, for if correct they meant that any monies paid pursuant to the judgment were not properly owing."
6. The "contingent claim" to which Mr Hume referred was that assuming that: 1. the 2010 Judgment was valid and that Mistrina and Sikos had an existing obligation to pay money under the 2010 Judgment; and 2. once the "parties' final rights" under the Building Contract are determined, if it is revealed that Mistrina and Sikos had no obligation to the Builder under the Building Contract; then if Mistrina or Sikos did make any such payment, they would have an immediate right to restitution of the amounts so "overpaid".
7. In that regard, Mr Hume pointed to authorities which establish that amounts "due" from one party to the other for the purpose of s 533C includes amounts contingently due. [10]
8. Thus, Mr Hume submitted: "We say that on the assumption that the first [2010 Judgment] was valid ‑ and that's the assumption that you need to make ‑ then Mistrina had an existing obligation to pay moneys under that judgment to [the Builder]. As a result of the performance of that obligation Mistrina would immediately be entitled to receive back any cent it paid to [the Builder]. It had a contingent debt, of the kind described, the contingency being a cent is paid from Mistrina to [the Builder]".
9. Mr Hume and I then had this exchange: "HIS HONOUR: How does the set‑off, that 553C speaks of, work in that context? HUME: So the‑‑ HIS HONOUR: In other words, how do you achieve a balance? How do you find what the balance is? HUME: The balance is you start with ‑ probably in this case you have to start with [the Builder's] claims to the costs and the‑‑ HIS HONOUR: What do you set‑off against that? HUME: Mistrina's contingent claim to restitution. HIS HONOUR: Yes, but you have got to achieve a figure, don't you, because it speaks of a balance being admissible, so a balance being admissible at that time, so how do you calculate it? HUME: Through zero. The balance can be zero. HIS HONOUR: How do you calculate the balance? HUME: You work out ‑ you identify the amount paid, that if paid by Mistrina to [the Builder], would be an overpayment so as to give rise to a restitutionary right. Now it may be that the whole ‑ and this is my client's case in these proceedings ‑ the whole value of [the 2010 Judgment]".
10. Again, although these arguments may be novel, I am not persuaded that they are so lacking in substance that they should be struck out at this stage.
11. There is no suggestion that agitating these arguments will cause the Builder any difficulty beyond those with which it will be confronted by reason of the arguments arising from paragraphs C26 to C35.

Paragraphs C51 to C52

1. These paragraphs are in the following form: 51. If the Plaintiffs were to pay any amount in respect of any of the [2010 Judgment] to [the Builder]: (a) it would not be retained by [the Builder] and would instead be distributed to third parties; Particulars [The Builder] has refused, despite request, to indicate how (if at all) it intends to disburse any moneys received. It is to be inferred that it will not be retained within [the Builder]. (b) there is no real chance that the Plaintiffs could recover any part of the any amount paid to [the Builder] through final proceedings; Particulars To the best of the Plaintiffs' knowledge, [the Builder] is not trading, and has no business plans beyond receiving the [2010 Judgment]. (c) for practical purposes, the interim right (if any) given to [the Builder] by the [SOPA] would be rendered final. 52. The Plaintiffs have a sufficiently arguable case that: (a) on a final basis, none of the adjudicated amount, or [2010 Judgment] amount, is owing to [the Builder]; (b) upon the payment of any monies to [the Builder], the Plaintiffs would immediately acquire a right to restitution of those monies under section 32(3) of the [SOPA] or otherwise.
2. It was common ground that these paragraphs, in substance, rehearse the same arguments that arise by reason of paragraphs C26 to C35 and that the result in relation to paragraphs C51 and C52 follows from the result in relation to these earlier paragraphs.

Conclusion in relation to the Builder's strike-out application

1. For these reasons I am not prepared to strike out any of the paragraphs of the List Statement.

Stay application

1. UCPR r 12.4 provides: "12.4 Stay of further proceedings to secure costs of discontinued proceedings If-- (a) as a consequence of the discontinuance of proceedings, a plaintiff is liable to pay the costs of another party in relation to those proceedings, and (b) before payment of the costs, the plaintiff commences further proceedings against that other party on the same or substantially the same cause of action as that on which the former proceedings were commenced, the court may stay the further proceedings until those costs are paid and may make such consequential orders as it thinks fit."
2. The Builder seeks a stay of these proceedings upon the basis that Mistrina and Sikos in these proceedings seek to agitate the "same or substantially the same cause of action" as in the 2014 Proceedings.
3. For the reasons I have set out in relation to my consideration of paragraphs C26 to C35 of the List Statement, my opinion is that the cause of action that Mistrina and Sikos seek to agitate in these proceedings is, at least arguably, not the same as that in the 2014 Proceedings.
4. In the 2014 Proceedings, the cause of action upon which Mistrina and Sikos relied was a claim for damages under the Building Contract.
5. In these proceedings, as I have outlined, Mistrina and Sikos seek to invoke an equitable right to injunctive relief to prevent unjust enrichment of the Builder.
6. Although this will involve an examination, and indeed a determination, of the parties' rights under the Building Contract it is, at least arguably, not a cause of action founded in contract.

Security for costs

1. As I have said, Mistrina did not appear on this application and thus makes no submissions in response to the Builder's application for security for costs.
2. Mistrina is in liquidation and is insolvent. I see no basis to refuse the Builder an order for security of costs against Mistrina.
3. As against Sikos, the principal basis upon which the Builder sought security was that Ms Constantinou brings these proceedings in a representative capacity in circumstances where there is reason to believe that she will be unable to pay the Builder's costs from the assets of the Sikos estate if ordered to do so.
4. Mr Kidd pointed to the fact that Sikos has not paid the costs of the 2014 Proceedings and, through its then solicitors, indicated that it was not in a position to do so.
5. As I have set out above, on 25 May 2021, I ordered that there be paid out of the monies paid into Court by ACE the sum of $976,164.77 to the solicitors for Sikos in partial satisfaction of the judgment obtained in the Court of Appeal in the ACE proceedings.
6. However, as Mr Kidd pointed out, the proceedings brought by Mistrina and Sikos against ACE were funded by a litigation funder which is entitled to be paid from the proceeds of the litigation its costs together with 45% of the remainder. As Mr Kidd submitted: "Although the evidence does not reveal the amount of the litigation funder's outlays nor the amount of the plaintiffs' solicitor's costs of the ACE proceedings, it can readily be inferred that those amounts are very substantial, given that they included a contested trial in the Supreme Court, a contested appeal in the New South Wales Court of Appeal and an application to the High Court for special leave to appeal".
7. Mr Hume did not contest this aspect of Mr Kidd's submissions and did not suggest that the sum paid out of Court to the solicitors for Sikos on 25 May 2021 had any bearing on whether Sikos should now provide security for the costs of these proceedings.
8. Mr Kidd submitted that Sikos's only asset is its chose in action against ACE.
9. Mr Hume submitted that a further asset of Sikos is its potential entitlement to contribution from Mistrina were Sikos to be held liable to pay anything to the Builder pursuant to the 2010 Judgment.
10. Both Mr Kidd and Mr Hume drew attention to the Annual Administration Return filed by the liquidator of Mistrina which showed that, as at 21 November 2020, Mistrina's estimated total realisations were in the order of $2.5 million whereas its unsecured liabilities were in the order of $4.1 million.
11. Mr Hume submitted that were Sikos to pay the amount of the 2010 Judgment to the Builder, Mistrina's liabilities would decrease accordingly, leaving Mistrina's liabilities only slightly exceeding its assets, in which event Sikos could expect a healthy dividend on proving in the winding up.
12. However, as Mr Kidd pointed out, it is not clear whether, and it seems unlikely that, the liabilities recorded in the Annual Administration Return for Mistrina include its contingent liability to render contribution to Sikos in the event that Sikos satisfied the 2010 Judgment.
13. I think Mr Kidd was correct to submit that the value of any right of contribution that Sikos might have against Mistrina is unable, on this application, to be determined as having any value.
14. Mr Hume also sought to resist the Builder's claim for security by contending that these proceedings are, in substance, defensive in nature because "Sikos is not seeking damages against [the Builder]" but "just wants to stop the enforcement of [the Builder's] claims".
15. It may be that these proceedings can be seen to be defensive in that sense. But the proceedings are brought belatedly and Sikos offers no explanation for the delay. It may be that the pendency of the proceedings against ACE is part of the explanation. But the fact is that Sikos is seeking to avoid paying a judgment entered over 10 years ago but without moving to set aside the judgment (presumably because it has advice that it would be unlikely to succeed in achieving that result).
16. A further factor in favour of ordering security is that, not only is there reason to believe Sikos will be unable to meet the Builder's costs were it to be successful in these proceedings, but Sikos has not paid the Builder's costs of the 2014 Proceedings.
17. Sikos has given no explanation as to why those costs continue to be unpaid.
18. It is true that there is some $1.5 million still in Court from the sum paid into Court by ACE on 10 November 2020.
19. However, as my judgment of 30 April 2021 reveals, that amount is calculated by reference to the amount due to the Builder under the 2010 Judgment and does not provide protection to the Builder in relation to the costs of these proceedings.
20. In those circumstances, my conclusion is that this is a proper case in which to order the provision of security.
21. As to quantum, the Builder's solicitor, Ms Boustani, has estimated that the Builder's likely costs of the proceedings are in the order of $641,000 and that, an estimate of the Builder's likely recoverable costs is in the order of $581,000. On the other hand, Sikos's solicitor, Ms Holland, estimates the Builder's likely recoverable costs to be in the order of $371,000.
22. One reason for the difference in these estimates is that Ms Boustani has discounted the Builder's likely actual costs by 80% to reflect recoverable costs, whereas Ms Holland has discounted her estimate of actual costs by 70%.
23. Further, as Mr Kidd accepts, a part of Ms Boustani's estimate of actual costs includes the costs incurred by the Builder in dealing with ACE's Notice of Motion.
24. Overall, adopting the broad-brush approach that is appropriate in cases such as this, I propose to fix the amount that should be provided as security for costs at $450,000.
25. Mr Hume submitted that an order should be made for the security to be provided in tranches.
26. I invite the parties to confer and endeavour to agree on a timetable for the provision of the $450,000 security for costs in tranches.
27. If the parties cannot agree, they should confer and agree on a timetable for short submissions on the subject, which I will resolve on the papers.
28. As each party has had a measure of success on the motion, I propose to order that the costs of the motion be costs in the cause.
29. Otherwise, the parties should confer and agree on the orders necessary to give effect to these reasons and to progress the proceedings generally.

Endnotes

1. In June 2021, evidently to overcome whatever problem might exist by reason of the 2010 Judgment being for a different amount than the 2010 adjudication certificate, the Builder procured a further judgment to be issued by the Court. It is not necessary that I express any opinion as to its status. For the sake of simplicity, I will refer only to the 2010 judgment.
2. See UCPR r 42.19.
3. Mistrina Pty Ltd v Australian Consulting Engineers Pty Ltd [2020] NSWCA 223.
4. Australian Consulting Engineers Pty Ltd v Mistrina Pty Ltd (in liq) [2021] NSWSC 449.
5. Limitation Act 1969 (NSW) s 14.
6. [2019] NSWSC 1341 at [16].
7. [2020] NSWSC 212 at [33]-[39]; 145 ACSR 329.
8. [2004] NSWSC 344.
9. To quote the words from General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 129; [1964] HCA 69 (Barwick CJ).
10. For example, see, In the matter of Force Corp Pty Ltd (in liq) [2020] NSWSC 1842 at [84]; 149 ACSR 451 (Gleeson J). 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 November 2021