Supreme Court New South Wales

• Medium Neutral Citation: N Moit & Sons (NSW) v Denham Constructions [2014] NSWSC 905
• Hearing dates: 03/07/2014
• Decision date: 03 July 2014
• Jurisdiction: Equity Division - Technology and Construction List
• Before: McDougall J

Decision

Application for interlocutory injunction dismissed with costs as between the plaintiff and the first and second defendants. No orders as to costs as between the plaintiff and the third defendant.

• Catchwords: PROCEDURE - application for interlocutory injunctive relief - where relief sought under s 26B, Div 2A of the Building and Construction Industry Security of Payment Act 1999 (NSW) - whether serious question to be tried - where relief sought under s 14 of the Contractors Debts Act 1997 (NSW) - whether sufficient evidence that defendant owes unpaid person money under- whether to grant injunction under court's general power where granting relief would be inconsistent with policy of Building and Construction Industry Security of Payment Act 1999 (NSW) - whether to grant injunction under court's general power where no real risk of detriment to applicant.
• Legislation Cited: Building and Construction Industry Security of Payment Act 1999 (NSW); Contractors Debts Act 1997 (NSW)
• Category: Procedural and other rulings
• Parties: N. Moit & Sons (NSW) Pty. Ltd. Trading as MOITS (Plaintiff); Denham Constructions Pty Limited (First Defendant); Denham Constructions Project Company 960 Pty Ltd (Second Defendant); FAL Management Group Pty Ltd as trustee for the TF Investment Trust (Third Defendant)
• Representation: Counsel: S A Wells (Plaintiff); M Christie SC / L Shipway (First and Second Defendants); G Sirtes SC / D Robertson (Third Defendant); Solicitors: Lazarus Legal Group Pty Ltd (Plaintiff); Crisp Legal (First and Second Defendants); Thomsons Lawyers (Third Defendant)
• File Number(s): 2014/193475

Judgment (ex tempore - revised 3 july 2014)

1 HIS HONOUR: The plaintiff (Moit) contracted with the second defendant (Denham 960) to carry out, as a subcontractor, certain excavation works and, in a second subcontract, piling and related earth works. The dispute concerns only the second of those subcontracts.

2 The subcontracts were made following a request by the first defendant (Denham Constructions) to Moit to provide expressions of interest. However, when what was in effect Moit's tender was accepted, the letter that issued confirming acceptance of the tender and proposing a subcontract for execution specified that Denham 960 was to be the "Contractor". The proffered subcontract was to the same effect. The subcontract was accepted on behalf of Moit by one of its directors.

3 There is some evidence that, at least on Moit's side, there was confusion and lack of understanding as to who was the other contracting party. However, looking at the documents, it is quite clear. To the extent that there was some subjective misunderstanding, there is nothing in the evidence as it is at present to suggest that it was induced by any unconscionable, or misleading or deceptive, conduct on the part of either Denham Constructions or Denham 960.

4 I should add that this matter is being heard on an interlocutory basis,

before any list statement has been filed and served. Accordingly, there is no articulation by way of a "pleading" of the bases on which Moit seeks relief.

5 The works in question were part of work which Denham Constructions undertook to perform for the third defendant (FAL). They relate, apparently, to a mixed residential and commercial development on the Pacific Highway at Hornsby.

6 Accordingly, on paper at least, the contractual chain is that there is a head contract between FAL and Denham Constructions, some unspecified (and not produced) contract or other arrangement between Denham Constructions and Denham 960, and what purports to be a subcontract between Denham 960 and Moit.

7 I have referred already to some aspects of the subcontract between Denham 960 and Moit. The document did not speak entirely with one voice. It included a "subcontractor's warranty" to be given by Moit to FAL. In that document (which formed an annexure to the subcontract), the head contractor was identified by the words "Denham Constructions". It may be thought, I suppose, that those words could apply either to Denham Constructions (as I have called it for the purposes of these proceedings) or Denham 960.

8 I am satisfied, on the state of the evidence, that there may be an amount in excess of $1,070,000.00 owing to Moit in respect of the second subcontract.

9 Moit has sought to have adjudicated, on the terms of the Building and Construction Industry Security of Payment Act 1999 (NSW) (the Security of Payment Act), a dispute between it and Denham 960 in respect of what is described as payment claim, or progress claim, 4. It does not appear that any adjudication has yet taken place; certainly, there is no evidence of any determination.

10 There was for some reason annexed to the adjudication application a "Payment Withholding Request" purportedly given pursuant to Div 2A of Pt 3 of the Security of Payment Act. Consistently with the form of the adjudication application, that document described the claimant as Moit, the respondent as Denham 960 (giving its name in full with the omission of "Project") and FAL as principal contractor. It was verified by a statutory declaration made by Mr Joe Vinci, the general manager of Moit. He declared that Moit had entered into a contract with Denham 960 for the relevant works. He said that the works had been done, that Moit was entitled to payment, and that Denham 960 had rejected the claim for payment.

11 The application today is for relief under one of three heads. The first head of relief seeks to protect Moit's rights under Div 2A of the Security of Payment Act. Specifically, it seeks to restrain FAL from paying out up to $1,070,000.00 Denham Constructions, pursuant to s 26B of the Security of Payment Act.

12 The second basis on which relief is sought is pursuant to the Contractors Debts Act 1997 (NSW).

13 The third basis on which relief is sought is pursuant to the Court's general power to grant interlocutory relief to preserve the status quo (as it was put), or to preserve the subject matter of a dispute pending a final determination.

14 For the reasons that follow, each of those bases for relief must fail.

15 As to s 26B, it is necessary to consider the terms of sections 26A and 26B of the Security of Payment Act. I set out those sections:

26A Principal contractor can be required to retain money owed to respondent

(1) A claimant who has made an adjudication application for a payment claim can require a principal contractor for the claim to retain sufficient money to cover the claim out of money that is or becomes payable by the principal contractor to the respondent.

(2) Such a requirement is made by serving on the principal contractor a request (a payment withholding request) in the form approved by the Director-General of the Department of Finance and Services.

(3) A payment withholding request must include a statement in writing by the claimant in the form of a statutory declaration declaring that the claimant genuinely believes that the amount of money claimed is owed by the respondent to the claimant.

(4) A principal contractor for a claim is a person by whom money is or becomes payable to the respondent for work carried out or materials supplied by the respondent to the person as part of or incidental to the work or materials that the respondent engaged the claimant to carry out or supply.

(5) A person who is served with a payment withholding request must, within 10 business days after receiving the request, notify the claimant concerned if the person is not (or is no longer) a principal contractor for the claim.

Maximum penalty: 5 penalty units.

Note. A person may no longer be a principal contractor as a result of money owed to the respondent having been paid by the person before the payment withholding request was served.

26B Obligation of principal contractor to retain money owed to respondent

(1) A principal contractor who has been served with a payment withholding request must retain, out of money owed to the respondent, the amount of money to which the payment claim relates (or the amount owed by the principal contractor to the respondent if that amount is less than the amount to which the payment claim relates).

(2) The amount is only required to be retained out of money that is or becomes payable by the principal contractor to the respondent for work carried out or materials supplied by the respondent to the principal contractor as part of or incidental to the work or materials that the respondent engaged the claimant to carry out or supply.

(3) The obligation to retain money under this section remains in force only until whichever of the following happens first:

(a) the adjudication application for the payment claim is withdrawn,

(b) the respondent pays to the claimant the amount claimed to be due under the payment claim,

(c) the claimant serves a notice of claim on the principal contractor for the purposes of section 6 of the Contractors Debts Act 1997 in respect of the payment claim,

(d) a period of 20 business days elapses after a copy of the adjudicator's determination of the adjudication application is served on the principal contractor.

(4) A part payment of the amount claimed to be due under the payment claim removes the obligation under this section to retain money to the extent of the payment.

(5) When the claimant's adjudication application is determined, the claimant must serve a copy of the adjudicator's determination on the principal contractor within 5 business days after the adjudicator's determination is served on the claimant.

Maximum penalty: 5 penalty units.

16 As can be seen from s 26A, a payment withholding request can be made by a claimant who has made an adjudication application for a payment claim, in circumstances where the respondent to that payment claim is or may be owed money by the principal contractor.

17 In this case, as I have said, the adjudication application was made in respect of a claim against Denham 960. The payment withholding request specified that company as the respondent. And the statutory declaration verifying the withholding request confirmed that the contract was one made between Moit and Denham 960.

18 It has not been suggested that there is any contractual relationship between FAL and Denham 960. On the contrary, FAL has asserted that the apparent action of Denham Constructions, in subcontracting to Denham 960, was itself a fundamental breach of the head contract. If any money is owed by FAL to a Denham company, it is owed to Denham Constructions.

19 It follows that the jurisdictional foundation specified in s 26A(1) has not been met. It follows from that that there can be no valid payment request sufficient to engage the operation of s 26B(1). Certainly, the payment withholding request that was attached to the adjudication application could not do so.

20 Accordingly, I am not satisfied that there is any serious question to be tried as to protection of Moit's rights under Div 2A of the Security of Payment Act. That is because, on the evidence, there are no such rights.

21 I turn to the Contractors Debts Act. Under s 5 of that Act, a subcontractor who is owed money by a defaulting contractor may obtain payment of that money from the head contractor, or principal, on the terms set out in the Act.

22 Further, by s 14, the Court may issue an attachment order if the unpaid subcontractor commences proceedings for recovery of a debt owed to it. Since it is necessary to pay close attention to s 14, I set it out:

14 Attachment order

(1) If proceedings are commenced by an unpaid person against a person (the defendant) for the recovery of money owed to the unpaid person by the defendant for work carried out or materials supplied by the person, the court may, on the application of the unpaid person, make an order under this section (an attachment order) against any other person from whom the unpaid person may be able to recover the debt under this Act.

(2) An application for an attachment order:

(a) may be made on the commencement of the proceedings or at any time before judgment is given in the proceedings, and

(b) may be heard in the absence of other parties, and

(c) is to be verified by oath or affirmation.

(3) The court may make an attachment order only if it is satisfied, on the basis of the application, that:

(a) the defendant owes the unpaid person money for work carried out or materials supplied by the unpaid person, and

(b) the work or materials are, or are part of or incidental to, work or materials for which the defendant is to be paid under a contract with the person against whom the order is sought.

(4) On service of a copy of the attachment order on the person against whom the order is made, any money that is payable or becomes payable to the defendant under the contract concerned, not exceeding the amount specified in the order, is attached for the purposes of the proceedings and is to remain in the hands of the person against whom the order is made until judgment is given in the proceedings or until the court otherwise orders.

(5) An attachment order:

(a) is to be in an approved form, and

(b) is to specify the amount that is attached for the purposes of the proceedings (being the amount sued for by the unpaid person or such other amount as the court considers appropriate).

(6) An attachment order may be varied or set aside on the application of any person.

23 In the present case, these proceedings have been commenced against both the Denham companies - Denham Constructions and Denham 960. On Moit's case, one or other of those companies owes it money. Although its subcontract was with Denham 960, Moit wishes to argue, among other things, that Denham 960 contracted as an agent for an undisclosed principal, namely Denham Constructions. In those circumstances, Moit wishes to argue, it may have a claim direct against Denham Constructions.

24 Once again, however, as appears from s 14(1), the attachment order relates only to money owed by the principal to the defaulting contractor (to borrow the terms of s 5). In the present case, as I have said, there may or may not be money owed by FAL to Denham Constructions. There is certainly no basis on which I could conclude that there is money owed by FAL to Denham 960.

25 However, it is necessary to look at subs (3). The court may only make an attachment order if it is "satisfied on the basis of the application that the defendant owes" money to the unpaid person, and that money is "part of or incidental to, work or materials for which the defendant is to be paid under" what might be called the head contract. In this case, the relevant defendant is Denham Constructions, because it is the only party who may have an entitlement to be paid by FAL. How can the Court be satisfied, in the requisite sense, that Denham Constructions owes money to Moit?

26 To my mind, the requirement for the Court to be "satisfied, on the basis of the application" imports a higher degree of satisfaction than, for example, is conveyed by the concept of "a serious question to be tried".

27 If the words "on the bases of the application" mean (as subs (2) might suggest) "on the basis of the evidence adduced on the application", that evidence shows very clearly that Moit has asserted that the party by whom it is entitled to be paid is Denham 960, not Denham Constructions.

28 There is no evidence that would support the claim that Denham 960 contracted as an agent for the undisclosed principal, Denham Constructions. Certainly, there is nothing that would enable the Court to attain the requisite degree of satisfaction.

29 Nor is there enough in the evidence to enable the Court to attain the requisite degree of satisfaction that the subcontract was made in the form it was through some unconscientious, or misleading or deceptive, conduct on the part of Denham Constructions. So far as the evidence goes, it is open to infer that when it was proposed to make a subcontract, the identity of the subcontracting party was clearly disclosed.

30 Thus, I conclude, the claim for relief, in so far as it is based upon the Contractors Debts Act, must fail.

31 I turn to the Court's general power. No doubt, the Court may act to preserve the subject matter of a dispute; and may do so even where that subject matter is money. But in this case, such money as may be payable will flow from FAL to Denham Constructions. At present, the reasons suggested as to why Denham Constructions may be liable are no more than articulated in the course of submissions. That is to say, they rely on the matters to which I have referred, of suggested unconscientious or misleading or deceptive conduct, or on the principle that Denham Constructions was the undisclosed principal of Denham 960.

32 There is really no evidence of those matters; certainly, not sufficient, in my view, to give rise to a serious question to be tried.

33 Further, there is no evidence to suggest that, if whatever is owed is paid across, there is a risk of dissipation, or of such other activity as might frustrate the execution of any judgment that Moit might obtain. In other words, it does not seem to me that there is any real risk of detriment.

34 Finally, and as to an aspect of balance of convenience, I note that whatever may be owed by FAL to Denham Constructions is owed pursuant to an adjudicator's determination of an application for adjudication made by the latter against the former. An adjudication certificate has been filed as a judgment in the District Court, for the balance owing. There is a clear policy, under the Security of Payment Act, for progress claims to be paid swiftly. In this case, it seems to me to that it would be inconsistent to allow the payment to be held up while the dispute between Denham Constructions, Denham 960 and Moit is sorted out on a final basis.

35 For those reasons, I conclude, as I have indicated, that the application for interlocutory injunctive relief should fail.

36 I discharge the interlocutory injunction granted on 30 June 2014. I order that the Notice of Motion filed on 30 June 2014 be dismissed. I order the plaintiff to pay the first and second defendants' costs of that Notice of Motion. I direct that the exhibits be handed out. I stand the matter over to the Directions List on Friday, 18 July 2014 for directions as to the future conduct of the proceedings. I will hear the parties on costs as between the plaintiff and the third defendant.

COUNSEL ADDRESSED ON COSTS

37 I note that there is no application for those costs and, accordingly, as between those parties, I make no order as to costs.

38 I direct that the costs payable by the plaintiff to the first and second defendants be payable forthwith.

39 I direct the plaintiff to file and serve its Technology and Construction List Statement by 16 July 2014.

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Decision last updated: 17 July 2014