Supreme Court New South Wales

• Medium Neutral Citation: Burrell v JGE Machinery [2014] NSWSC 19
• Hearing dates: 24/01/2014
• Decision date: 24 January 2014
• Jurisdiction: Equity Division
• Before: McDougall J

Decision

Injunction to restrain enforcement of adjudication determination granted on condition as to payment in of adjudicated amount.

• Catchwords: PROCEDURE - Interlocutory orders - Injunctions - whether to grant interlocutory injunctive relief to restrain enforcement of adjudication determination; BUILDING AND CONSTRUCTION - building contracts - remuneration - statutory regulation of entitlement to and recovery of progress payments - requirements of the Building and Construction Industry Security of Payment Act 1999 (NSW), s 13.; BUILDING AND CONSTRUCTION - building contracts - remuneration - whether ground for restraint of adjudication determination based upon risk of insolvency
• Legislation Cited: Building and Construction Industry Security of Payment Act 1999 (NSW)
• Cases Cited: R J Neller Building Pty Ltd v Ainsworth [2009] 1 Qd R 390
• Category: Procedural and other rulings
• Parties: Jennifer Burrell (Plaintiff); JGE Machinery Pty Ltd (First Defendant); Thomas Uher (Second Defendant)
• Representation: Counsel: A G Rogers (Plaintiff); Solicitors: Caldwell Martin Cox (Plaintiff); Ray Capner (First Defendant); Moray & Agnew Lawyers (Second Defendant)
• File Number(s): 2014/21298

Judgment (ex tempore - revised 3 february 2014)

1 HIS HONOUR: The plaintiff seeks interlocutory injunctive relief to prevent the first defendant from enforcing an adjudication determined in its favour given by the second defendant (the adjudicator). The adjudicator has filed a submitting appearance, as one would expect. The first defendant's appearance has been or will be filed. However, its solicitor indicated that he could not attend court today and sought "an adjournment of at least two weeks". There was no indication of whether this was on the basis that interlocutory relief would, or would not, be granted over that period.

2 As will be apparent from what I have said, the dispute between the plaintiff and the first defendant relates to what the first defendant says was a construction contract between it and the plaintiff to which the Building and Construction Industry Security of Payment Act 1999 (NSW) (the Act) applied. It is the plaintiff's case, although the evidence on the point is scanty, that there was no such contract.

3 The plaintiff does accept that some years ago, she engaged Mr Jim Godfrey, the principal of the first defendant, to cause a company then controlled by him to carry out what could well be construction work. That work was done some years ago and since then the company concerned has gone into liquidation. The claim that is made is by a successor which arose miraculously from the ashes of the liquidation of the original company.

4 For reasons which appear to be based on lack of understanding of the requirements of the Act, the plaintiff did not provide a payment schedule when any of the payment claims in this matter was served upon her. Nor did she provide a payment schedule when given a further opportunity to do so by the first defendant's election to take the matter to adjudication pursuant to s 17(1)(b) of the Act. Thus, to that extent, the plaintiff is in part the author of her present misfortune.

5 The extent of that misfortune can be assessed by considering the determination made. The adjudicator determined that the plaintiff is liable to pay the amount of $429,110.00, together with interest, and the costs of the adjudication.

6 There were three triable issues that were said to found the grant of interlocutory relief. Taking them in the order in which they were put, they were:

(1) whether the relevant s 17 notice meets the requirements of that section;

(2) whether there was any basis for the adjudicator to find (as he did) that work under the construction contract which he found had been made was last performed no more than twelve months before service of the relevant payment claim; and

(3) whether there was any construction contract made at all, let alone one with the plaintiff and first defendant as parties.

7 Mr Rogers of counsel, who appeared for the plaintiff, submitted also that there was some perception of lack of funds on the part of the first defendant, so that, absent a restraint, his client might be at risk of losing the fruits of any success in a challenge to the adjudicator's determination were she required to pay. As to that ground: given the paucity of evidence, and given the observations of Keane JA in R J Neller Building Pty Ltd v Ainsworth [2009] 1 Qd R 390 at [40] - to the effect that one of the legislative policies embodied in the Act is the transfer of the risk of insolvency pending final resolution of disputes - I do not think that there is any ground for restraint based on insolvency. I should note that his Honour's observations have been adopted and applied many times; I will not trouble to give further citations.

8 Before I turn to the issues, I should note a couple of matters of fact. One is that, on the plaintiff's evidence, such work as was done, was done, as I have said, several years ago. The plaintiff says in her affidavit that work was done in 2005 or 2006.

9 The second matter is that the first defendant has issued a confusing series of payment claims. The first one was sent under cover of a letter dated 21 December 2012. That letter attached "a copy of an updated invoice for works carried out...". The invoice was dated 21 December 2012 and bore the number 55039937.

10 A second payment claim was served on 16 April 2013, based on a purported reference dated 28 February 2013. That cannot be correct, because the payment claim attached exactly the same invoice: same as to number, same as to date, same as to elements claimed, and same as to total. It is apparent that no work had been done between the date when the invoice was first provided and the date when it was second provided.

11 In relation to the second payment claim, the first defendant gave notice under s 17(2) of the Act. Although that notice was addressed to the plaintiff, and referred to the relevant payment claim, it asserted a liability on "your company" (variously written with or without initial capital letters) and referred to the steps which "your company" could take, as well as to the consequences to "your company" of not taking those steps.

12 No action was taken on that payment claim or s 17 notice.

13 On 24 October 2013, the first defendant served yet another payment claim. The attached invoice had the same number and same date as the two previous invoices. However, the amount claimed was different ($429,110) and some of the elements of the claim, if not all of them, were different.

14 Again, there having been no payment schedule, the first defendant later provided a s 17 notice. Again, although addressed to the plaintiff, that notice referred throughout to "your company".

15 The dispute was referred to adjudication. The first defendant provided submissions in support of its claim. Attached to those submissions were job dockets which apparently referenced or supported some of the items of the claim. Although those documents are near illegible, it is apparent on the face of them that they relate to work done in, respectively, 2006, 2007 and 2008.

16 The first suggested triable question is as to compliance with s 17. Given that the matter has not been argued fully, and that there has been no contrary argument put, and given that these are ex tempore reasons given near to 4 o'clock during vacation, I think it better not to express even a tentative view on the s 17 point.

17 However, I will not take the same course in relation to the "12 month" point.

18 The adjudicator was clearly aware that he had to deal with the requirements of section 13(4)(b) of the Act. Section 13(4) sets out the periods within which (and only which) a payment claim may be served. The second of those periods, set out in para (b), is:

...the period of 12 months after the construction work to which the claim relates was last carried out...

19 The adjudicator addressed this at paras 25 and 26 of his determination. He said:

25. Tax Invoice 550399937 [sic] is dated 21 December 2012. Although the Claimant does not state when it completed the works under the Subcontract, given that the amount claimed in that Tax Invoice is for the entire scope of works, it seems to me that in most probability the Claimant would have issued that Tax Invoice shortly after completing the works. On that basis, I consider the present Payment Claim to satisfy the requirements of s 13(4)(b) of the Act.

26. In the absence of any evidence to the contrary, I am of the view that the Payment Claim also meets the remaining requirements of s 13 of the Act.

20 The adjudicator relied on "probability" for the purpose of satisfying himself that the requirements of s 13(4)(b) had been met. But with respect to the adjudicator, that reasoning process was circular. If it were open to infer, purely from the date of service, that the claim would have been issued "shortly after completing the works", there would be no need to take up time by considering whether s 13(4)(b) had been met. But more importantly, the invoice attached to and supporting the payment claim was dated 21 December 2012. That of itself might be thought to negate the drawing of the inference.

21 Further, a review of the materials submitted by the first defendant in support of its payment claim would have indicated a further, and very serious, question indeed as to whether the requirements of s 13(4)(b) had been met. That is because, as I have said already, job dockets (which were apparently relied upon to support the claim in some way) suggested that the work had in fact been done (or part of it had been done) many years ago.

22 The adjudicator's reasons are in effect that in the absence of evidence to the contrary, an inference from business practice supports a finding that the requirements of s 13(4)(b) have been met.

23 Without saying at this point that the adjudicator was incorrect to reason in that way (and I repeat that I have not heard from the first defendant), it does seem to me that there is a serious question to be tried as to whether there was any evidence whatsoever that could show that the requirements of s 13(4)(b) had been satisfied.

24 It is also (at least) seriously arguable that the time limitations set out in s 13(4) are, in the old language, mandatory: that is to say, that satisfaction of those conditions (whichever of them may apply in a particular case) is a condition of jurisdiction, or a necessary precondition of obtaining the benefits given to people by the Act.

25 Thus, as to the second of the points, I am satisfied that there is a serious question to be tried as to whether the adjudicator proceeded without jurisdiction.

26 There is also a real question as to whether there was any contract at all between the plaintiff and the first defendant. That can no doubt be addressed by further evidence. But in circumstances where it appears that such work as was done had been done by the now defunct company, and where the claimant (the first defendant) was not in existence at the time that it was done, there is, it seems to me, a real question to be tried as to this also.

27 I should have noted earlier that it is the plaintiff's case that in fact she paid the defunct company what she thought it was owed for the work done, and had no complaint from it. But since that cannot bear on the issues with which I have dealt, I say no more.

28 In terms of balance of convenience, taking into account the confusion that is evident in the way the first defendant has repetitiously dealt with the claim that it says it has, taking into account the confusion in its own documents, and taking into account also what appears to me to be strong reason to suspect that in fact no work was carried out at all by the actual first defendant for the plaintiff, I think that the balance of convenience does support the grant of some interlocutory relief. The plaintiff has indicated that she is prepared to pay into court by 4pm on Wednesday next, 29 January, the adjudicated amount. The availability of that money, to abide the final resolution of the issues, seems to me, at least in the first instance, to deal with the remaining issues of convenience.

29 I direct that these proceedings be entered into the Technology and Construction List. I stand them over to the motions list on 14 February 2014.

30 I note the undertakings given by the plaintiff through her counsel set out in the form of order amended and initialled by me and dated today's date. I make orders in accordance with paragraphs 1 and 2 of that document.

31 Those orders will lapse automatically and without the need for any further order by the court if the plaintiff does not comply with the first of the undertakings given by her to the court.

32 I direct that in the first instance notice of these orders may be given to the first defendant's solicitor by telephone or facsimile transmission.

33 I direct that these orders be entered forthwith.

[Counsel addressed further.]

34 HIS HONOUR: I will add to the reasons I have just given that, when I said that the present first defendant was not in existence back when the work was done and paid for (and the payment was at the direction of, not directly to, the company that actually did the work), I was wrong. However, in circumstances where it is not suggested that the first defendant did that work back in 2006 or 2005, that does not affect the conclusions to which I came.

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Decision last updated: 11 February 2014