Supreme Court New South Wales

• Medium Neutral Citation: Go Electrical Pty Limited v Class Electrical Services Pty Limited [2013] NSWSC 517
• Hearing dates: 30 April 2013
• Decision date: 30 April 2013
• Jurisdiction: Equity Division - Technology and Construction List
• Before: Hammerschlag J

Decision

Plaintiff forthwith repay to the defendant the sum of $39,166.19 which includes interest to the date of judgment

• Catchwords: PRACTICE AND PROCEDURE - where monies recovered by a party under a judgment based on an adjudication determination - where adjudication determination is quashed and judgment set aside - right of the party from whom the monies were recovered to return of the monies - whether the Court has a discretion to not order repayment
• Legislation Cited: Building and Construction Industry Security of Payment Act 1999 (NSW); Corporations Act 2001 (Cth); Uniform Civil Procedure Rules 2005; Civil Procedure Act 2005 (NSW)
• Cases Cited: Production Spray Painting & Panel Beating Pty Ltd v Newnham [No 2] (1992) 27 NSWLR 659; TCN Channel 9 Pty Ltd v Antoniadis [No 2] (1999) 48 NSWLR 381; John Holland Pty Ltd v Roads and Traffic Authority of NSW (2006) 66 NSWLR 624; Proprietors of Strata Plan No 5399 v Feehan (1996) 9 BPR 97703
• Category: Principal judgment
• Parties: Go Electrical Pty Limited - Plaintiff; Class Electrical Services Pty Limited - Defendant
• Representation: Counsel: D.R. Pritchard SC with F.F.F. Salama - Plaintiff; B. DeBuse - Defendant; Solicitors: Marsdens Law Group - Plaintiff; HWL Ebsworth - Defendant
• File Number(s): 2013/64042

EX TEMPORE Judgment

These proceedings

1 On 19 February 2013 an adjudicator, Mr Davenport, purporting to act under the provisions of the Building and Construction Industry Security of Payment Act 1999 (NSW), made an adjudication determination that $1,892,028.27 plus adjudicator's fees and interest was payable to the plaintiff by the defendant.

2 On 25 February 2013 the defendant sued out of this list a Summons and Technology and Construction List Statement seeking to quash the determination.

3 On 11 April 2013 McDougall J quashed the determination.

4 However, between the date the proceedings were commenced and the date upon which the determination was quashed, the plaintiff had filed for, and on 1 March 2013 obtained, judgment against the defendant for $1,892,028.27. In addition, the plaintiff had procured the issue of garnishee orders in aid of enforcing its judgment, and a debtor of the defendant, responding to a garnishee order, had paid over $38,919.87 to the plaintiff.

5 On 17 April 2013 the defendant moved the Court by motion for orders that the judgment and garnishee orders be set aside and that any amount paid to the plaintiff in reliance upon or as a result of any such order or by any other means of enforcement be repaid to the defendant forthwith. There was no opposition to the making of orders setting aside the judgment and enforcement processes, and on 19 April 2013 I made orders accordingly.

6 The only issue remaining is whether the plaintiff should be ordered to pay back the monies it received as a consequence of enforcing the now set aside judgment.

The statutory demand proceedings

7 On or about 24 November 2012 the plaintiff served a creditor's statutory demand on the defendant pursuant to s 459E of the Corporations Act 2001 (Cth) ("the Act") claiming $1,824,551.88. The accompanying affidavit attests that the plaintiff supplied the defendant with goods and that the defendant had raised in correspondence that it had suffered loss because the plaintiff had not met delivery dates for some of the goods. The amount of the statutory demand was attested to be the balance said to be owing by the defendant after deducting that amount claimed by the defendant and adding interest.

8 On 13 December 2012 the defendant issued an Originating Process seeking an order under ss 459G and H of the Act that the statutory demand be set aside. The Originating Process is supported by an affidavit of a director of the defendant in which he deposes that the plaintiff has invoiced the defendant for goods which were not delivered and that the plaintiff failed to meet critical deadlines for the supply of other goods which resulted in the defendant suffering loss. The defendant seeks to raise an offsetting claim in its pursuit to have the statutory demand set aside.

9 The statutory demand proceedings are fixed for hearing on 14 May 2013.

Consideration

10 The defendant puts that upon the judgment being set aside it became unconditionally entitled for an order for the repayment of the sum paid to the plaintiff pursuant to it.

11 It is well established that the reversal of a judgment on appeal entitles the successful appellant to recover any monies paid under the reversed judgment. In the context of the quashing by a superior court of orders of an inferior court it has been held that the court has no jurisdiction to withhold such relief: Production Spray Painting & Panel Beating Pty Ltd v Newnham [No 2] (1992) 27 NSWLR 659 at 661 to 662.

12 Part 51 r 51.54 Uniform Civil Procedure Rules 2005 ("UCPR") (which applies to the Court of Appeal) provides that:

If any step has been taken for the enforcement of a judgment or order that the Court varies or sets aside, the Court may make such orders for reinstatement or restitution as it thinks fit.

13 It has been held that the power given by the rule should be seen as requiring the Court to make appropriate restitutionary orders and that the rule does not confer a discretion to refrain from making orders for repayment, for example, pending a retrial of the proceedings. The Court is, however, empowered to mould orders for restitution or on discretionary grounds to provide for matters such as the date of repayment or delivery of possession: TCN Channel 9 Pty Ltd v Antoniadis [No 2] (1999) 48 NSWLR 381 at 383.

14 Part 36 r 36.15 UCPR provides:

(1) A judgment or order of the court in any proceedings may, on sufficient cause being shown, be set aside by order of the court if the judgment was given or entered, or the order was made, irregularly, illegally or against good faith.

(2) A judgment or order of the court in any proceedings may be set aside by order of the court if the parties to the proceedings consent.

15 In setting aside the judgment, the Court exercised the power under this rule. The judgment was irregularly obtained in that it was based on a void adjudication determination which was ultimately quashed.

16 UCPR Pt 51 r 51.54 has no equivalent which applies expressly to the present circumstances. However, in my view, the same principles apply. The Court has inherent power to make orders necessary and ancillary to an order (whether under Pt 36 or otherwise) setting aside a judgment.

17 The plaintiff puts that ordinary restitutionary principles apply and that whilst the defendant might have a prima facie case to recovery, its right is based on notions of unjust enrichment. It puts that restitution may be withheld if to grant it would be unjust. It puts that an order to make restitution is unjust if it causes injury to a person.

18 It puts that to make the order sought here would cause injury to it because of the pendency of the statutory demand proceedings. It puts that if the defendant's attempt to set the statutory demand aside fails there will arise against the defendant a presumption of insolvency based on the existence of a money claim of which the amount recovered by it under the now set aside judgment forms part. It also says that if it is ordered to make restitution it will have a pro tanto claim of set off for the same amount.

19 Attention was drawn to s 21(1) of the Civil Procedure Act 2005 (NSW) which provides that if there are mutual debts between a plaintiff and a defendant in any proceedings, the defendant may by way of defence set off against the plaintiff's claim any debt that is owed by the plaintiff to the defendant that was due and payable at the time the defence set off was filed, whether or not the mutual debts are different in nature.

20 The plaintiff's submissions are manifestly unsustainable. I do not consider that the Court has a discretion to refuse relief in circumstances where the plaintiff has obtained payment based on a judgment in turn based on a void adjudication determination which has been quashed. The entire consideration for the payment has failed and a common money count lies: John Holland Pty Ltd v Roads and Traffic Authority of NSW (2006) 66 NSWLR 624 at 634.

21 The defendant's claim is not one in equity but at common law; Proprietors of Strata Plan No 5399 v Feehan (1996) 9 BPR 97703 at 16,212.

22 The pendency of the statutory demand proceedings is irrelevant. They will not determine the rights or obligations of the parties on a final basis. They will give rise to no res judicata or issue estoppel with respect to the existence of the primary debt or the offsetting claim asserted. They can do nothing more than give rise to a presumption of insolvency which, for all the Court knows, the defendant may be well able to rebut.

23 The proposition that there will be a set off is unsustainable. Firstly, as counsel accepted, set off is not being raised as a defence in these proceedings. Section 21 of the Civil Procedure Act does not apply. In any event, I do not think that any cognisable set off arises on the facts. The defendant was forced to make payment based on a judgment which has been set aside. The defendant's right to reclaim payment is hardly mutual with the alleged debt claimed by the plaintiff for which it has not sued, let alone obtained judgment. The statutory demand proceedings will not establish any such debt.

24 Far from it being unjust that the defendant should receive the money paid to the plaintiff under the now set aside judgment, I consider that justice dictates that the money be repaid and repaid forthwith.

25 The power to mould does not include the power to withhold.

26 I order that the plaintiff forthwith repay to the defendant the sum of $39,166.19 which includes interest to the date of judgment of $246.32.

27 The plaintiff is to pay the defendant's costs of the Motion.

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Amendments

09 May 2013 - amendment to first line
Amended paragraphs: Para 12

Decision last updated: 09 May 2013