Xela Project Pty Ltd v Leralais Pty Ltd ACN 115 157 590 ATF Leralais Family Trust ABN 61 243 088 518

Representation: Counsel:
Plaintiff:
F Corsaro SC with M Hazan
Defendant:
R D Marshall SC with N Li
Solicitors:
Plaintiff:
Memcorp Lawyers Pty Ltd
Defendant:
Francom Legal

File Number(s): 2024/00228131; 2024/00299566; 2024/00365931

Publication restriction: None

JUDGMENT

1. These reasons concern the disposition of 3 notices of motion filed by the defendant Leralais Pty Ltd on 6 February 2026 in identical terms in related proceedings respectively numbered 2024/00228131, 2024/00299566 and 2024/00365931 seeking orders for a stay of enforcement steps presently in train concerning outstanding judgments in favour of the plaintiff Xela Projects Pty Ltd based on building contracts to which the provisions of the Building & Construction Industry Security of Payments Act 1999 (NSW) apply.

2. The evidence, which included a compendious Court Book, (Exhibit 1, pp 1 -1677), was read in respect of all 3 motions.

3. The matter at issue in these notices of motion is the sum of $776,160.26 plus interest, where those funds presently reside in the trust account of the defendant's solicitor. Previously, the plaintiff has unsuccessfully attempted to garnishee those funds, but that course was thwarted by the fact that the provenance of those funds turned out to be not from the defendant, but from a non-party to this litigation.

4. The relevant factual background to the dispute is a multi-million dollar building and construction project in the context of a dispute over those works involving a residential facility for seniors at 25 Oxley Drive Bowral, in circumstances where the plaintiff has entered summary judgment pursuant to the Act. The defendant asserts a cross-claim for a little over $1.6m for the cost of rectification work claimed to be necessary for defects where the plaintiff asserts the basis for that cross-claim comprises problematically flawed and unreliable 479 page expert report which will be contested at an ultimate hearing on the merits.

5. I have read the selected material to which I have been referred in the extensive 2 volume compendious court book: Exhibit 1, pp 1 -1677, the further Exhibits 2-4, including the transcripts of other related enforcement examination proceedings in this Court before the Registrar in this Court, and in the Equity Division of the Supreme Court, and the respective written submissions of the parties, as supplemented by oral argument.

6. The essential issue to be determined in these notices of motion, which were heard together, with the evidence in one being evidence in the others, is whether the judgment enforcement process presently in play at the behest of the plaintiff should be stayed pending the determination of the cross-claim the defendant has brought against the plaintiff. Those judgments were respectively dated 15 August 2024, 14 October 2024, and 3 October 2024.

7. Essentially, the defendant cross claimant argues that the stay it seeks to obtain should be ordered on the basis of the existence of its cross claim and its preparedness to pay the disputed sum of $776,160.26 presently in its solicitor's trust account into court pending the determination of the cross claim. The defendant cross-claimant in effect submits that course would sufficiently protect the plaintiff's interests pending the final determination of the proceedings where in the ordinary course of the plaintiff's business, there was a risk of those funds being dissipated if released to the plaintiff prior to the conclusion of the litigation.

8. In contrast, essentially, the plaintiff seeks a dismissal of the notices of motion on several bases, namely, that for the Court to exercise the discretion to order a stay as sought would be contrary to the spirit of the Building & Construction Industry Security of Payments Act 1999 (NSW); the defendant's procedural delay in seeking stay orders is a disentitling consideration; and the defendant's cross-claim is prima facie, problematic.

9. The applicable legal principles are not in dispute. Whilst s 67 and s 135 of the Civil Procedure Act 2005 (NSW) invests the Court with a discretion to make stay orders and to give facilitative direction at any time, that power must be exercised in the context of the legislation under which the enforcement processes have been enabled and invoked, where that legislation has been given the colloquial appellation "pay now argue later" in the interests of securing payments to building contractors in a climate where, in the past, experience shows that insolvencies in the building industry have at times frustrated that objective.

10. Relevant discretionary factors include, first, whether an irreparable prejudice may arise following an insolvency due to a likely dissipation of outstanding funds thus preventing a reimbursement to a successful party that might be required; secondly, whether the basis for the defendant's claim for a stay is founded upon a prima facie meritorious cross-claim; and thirdly, the requirements of the dictates of justice: s 58 of the Civil Procedure Act 2005 (NSW).

11. For the reasons that follow, I am not persuaded that the defendant has made good its claim for the stay orders that it seeks.

12. First, the delayed procedural conduct of a party, in this case, the defendant, is a relevant discretionary consideration. The plaintiff filed its originating process on 20 June 2024. The defendant's cross claim was filed 25 October 2025. The procedural events within that time frame were that the defendant filed its appearance in time on 17 July 2024, but contrary to the court’s procedural timetable as identified in the standard orders provided to the parties at the time of filing, the defence was filed to that statement of claim was filed late, on 15 October 2024. The plaintiff filed its amended statement of claim on 17 February 2025, and the defendant was late in filing its defence to that amended statement of claim. The defendant's cross claim was filed on 25 October 2024. It was in that procedural context that the judgments, including a consent judgment, were respectively filed on 15 August 2024, 14 October 2024, and 3 October 2024. The delays within that time frame are not satisfactorily explained by the existence of satellite litigation in another court. Once the basis of the plaintiff's claim had been identified to the defendant when the statement of claim was filed, the defendant ought to have acted with greater alacrity to file its cross claim and supporting evidence, that did not occur. Compliance with court imposed litigation timetables is not optional.

13. Secondly, although there may be a risk that if the plaintiff is provided with the disputed funds at this stage those funds might be dissipated and rendered unrecoverable, that must be seen to be a spurious argument in this instance. That is because the plaintiff, which actively trades as a builder, necessarily incurs expense in the ordinary course of that business, thus requiring the expenditure of its working capital, the balance of which necessarily fluctuates from time to time. That said, whilst it is recognised that there is an ever-present risk of insolvency in the building industry, that risk, of itself, is met by the existence of statutory insurance against for such risks. Accordingly, in my view, in those circumstances, no irreparable prejudice has been shown to arise for the defendant if such an insolvency happened to occur.

14. Thirdly, the proposition that the defendant has a prima facie meritorious cross claim is problematic and speculative in this instance, as the so-called expert evidence relied upon by the defendant to support its cross claim for alleged defects in the plaintiff's works is an unreliable basis for asserting a prima facie meritorious cross claim. This is because, on its face, the opinion relied upon by the defendant to enliven its cross claim is significantly qualified in that its standard conditions of issue by the expert (as identified for example at Exhibit 1, Tab 18, p 1039 and in other places), state that no representation is made in the report the inspections in question were in compliance with applicable building codes or standards. The report is "provided merely as a guide to the client to assess, manage, and mitigate risks of potential defects"; the inspection on which the report was based was limited to "readily observable areas and was based solely on a visual inspection" without further investigatory methods; the inspection was carried out by "a general building consultant" and "further investigation is recommended by experts in the relevant disciplines"; and materially, and tellingly, the opinions were expressed to be of a kind that "no party should rely upon to determine, consider or assume that the defects will prevail", and there were factors "not addressed in the report", which might be contributory to the determination of potential defects.

15. Fourthly, the tardy litigation conduct of the defendant in its non-compliance with prior procedural directions and orders of the court has contributed to the delay in the expected progress of the proceedings. This is a relevant discretionary factor to be considered and taken into account in determining the issues raised in these notices of motion: s 58(2) of the Civil Procedure Act 2005 (NSW). In this case the defendant's procedural delays were twofold, namely, the delay in filing its cross-claim, and delayed compliance with procedural orders, contrary to the requirements of s 56 of the Civil Procedure Act 2005 (NSW): TFM Epping Land Pty Ltd v Decon Australian Pty Ltd [2020] NSWCA 118, at [103] - [104].

16. Fifthly, in this case, I consider that an order for a stay would frustrate the Parliamentary intention behind the Building & Construction Industry Security of Payments Act 1999 (NSW): Martinus Rail Pty Ltd v Qube Re Resources (No 2) Pty Ltd (No 2) [2024] NSWSC 1223, at [354] - [357]. The discretion to order a stay, whilst generally available in such cases, must be founded upon satisfactory evidence of irreparable prejudice. Evidence to that effect is absent in this instance: Black Label Developments Pty Ltd v McMenemy [2025] NSWCA 114, at [71] - [73].

17. I therefore make the following orders:

18. The notices of motion filed by the defendant on 6 February 2026 in proceedings numbered 2024/00228131, 2024/00299566 and 2024/00365931 are dismissed;

19. The defendant is to pay the plaintiff's costs of the dismissed notices of motion filed by the defendant on 6 February 2026;

20. The exhibits may be returned;

21. Liberty to apply on 7 days' notice if further or other orders are required.

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