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- RHG Construction Fitout and Maintenance Pty Ltd v Kangaroo Point Developments MP Property Pty Ltd[2021] QCA 57
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RHG Construction Fitout and Maintenance Pty Ltd v Kangaroo Point Developments MP Property Pty Ltd[2021] QCA 57
RHG Construction Fitout and Maintenance Pty Ltd v Kangaroo Point Developments MP Property Pty Ltd[2021] QCA 57
SUPREME COURT OF QUEENSLAND
CITATION: | RHG Construction Fitout and Maintenance Pty Ltd v Kangaroo Point Developments MP Property Pty Ltd & Ors [2021] QCA 57 |
PARTIES: | RHG CONSTRUCTION FITOUT AND MAINTENANCE PTY LTD ABN 67 159 703 349 (appellant/applicant) v KANGAROO POINT DEVELOPMENTS MP PROPERTY PTY LTD ATF FOR KANGAROO POINT DEVELOPMENTS MP PROPERTY UNIT TRUST ABN 80 283 808 292 (first respondent) CHERIDEN FARTHING (ADJUDICATION REGISTRAR) (second respondent/not a party to the application) NOEL EVAN JENSEN (ADJUDICATOR J1057076) (third respondent/not a party to the application) |
FILE NO/S: | Appeal No 2738 of 2021 SC No 13394 of 2020 |
DIVISION: | Court of Appeal |
PROCEEDING: | Application for Stay of Execution |
ORIGINATING COURT: | Supreme Court at Brisbane – [2021] QSC 30 (Dalton J) |
DELIVERED ON: | 26 March 2021 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 24 March 2021 |
JUDGES: | Morrison JA |
ORDERS: |
|
CATCHWORDS: | APPEAL AND NEW TRIAL – PROCEDURE – QUEENSLAND – STAY OF PROCEEDINGS – WHEN GRANTED – where the appellant and the respondent entered into a design and construction contract for the construction of a building – where the appellant served a payment claim on the respondent – where a dispute arose between the appellant and the respondent as to what constituted a payment schedule within the meaning of s 69 of the Building Industry Fairness (Security of Payment) Act 2017 (Qld) – where the adjudicator handed down a decision that an amount was payable to the appellant – where a Supreme Court judge found the adjudication decision was void and made orders for the payment out of the monies held in court – where the appellant seeks a stay of the orders, specifically focussing on those orders which would permit payment out of the sum held in court – where plainly the parties contemplated that whatever the outcome in the determination of the originating application below, an appeal might follow, with the consequence that a stay might be sought and the money continued to be held in court – where the appellant has demonstrated it has, within the scope an application for a stay, a good arguable case – where the material demonstrates that the appellant would suffer greater prejudice if a stay were not granted, than that which will be suffered by the respondent if a stay is granted – whether a stay should be granted Building Industry Fairness (Security of Payment) Act 2017 (Qld), s 68, s 79(2) Conveyor & General Engineering Pty Ltd v Basetec Services Pty Ltd [2015] 1 Qd R 265; [2014] QSC 30, cited Cook’s Construction Pty Ltd v Stork Food Systems Australasia Pty Ltd [2008] 2 Qd R 453; [2008] QCA 322, cited Elphick v MMI General Insurance Ltd [2002] QCA 347, cited McCarthy v TKM Builders Pty Ltd & Anor [2020] QSC 301, cited |
COUNSEL: | D Clothier QC, with F J Chen, for the applicant M H Hindman QC, with M J Steele, for the first respondent |
SOLICITORS: | CDI Lawyers acting as Town Agents for Jackson McDonald for the applicant McInnes Wilson Lawyers for the first respondent |
- [1]MORRISON JA: The appellant applies for a stay of orders made on 26 February 2021, pending the resolution of its appeal against orders made that day.[1] For present purposes the following is sufficient to indicate the background of the dispute between the two parties.
- [2]In September 2018 the appellant[2] and the respondent[3] entered into a design and construction contract for the construction of a building at Kangaroo Point. On 27 July 2020 the appellant served a payment claim on the respondent. There was no dispute before the learned primary judge that that was a valid payment claim within the meaning of s 68 of the Building Industry Fairness (Security of Payment) Act 2017 (Qld).[4]
- [3]A dispute arose between the appellant and the respondent as to what constituted a payment schedule within the meaning of s 69 of BIFA. The Superintendent on the project, who was appointed pursuant to the contract, issued his assessment as to what was due under the payment claim. That assessment was dated 10 August 2020.
- [4]On 13 August 2020 the appellant sent a letter expressing the view that the payment schedule issued by the Superintendent on 10 August was the payment schedule for the purposes of s 76 of BIFA.
- [5]The appellant decided to have the dispute adjudicated pursuant to chapter 3, part 4 of BIFA and for that purpose completed an adjudication application form as required by s 79(2)(a) of BIFA. In that part of the form which asked whether that party had been given a payment schedule, the appellant checked the box marked “Yes, attach copy”, and attached the Superintendent’s assessment of 10 August 2020.
- [6]Eventually the Adjudicator handed down a decision in which it was determined that an amount of $788,439 was payable to the appellant.
- [7]On 15 December 2020 the respondent filed an originating application seeking to have the adjudication decision declared void.
- [8]On 17 December 2020 Brown J ordered by consent that:
- (a)upon the respondent giving the usual undertaking as to damages, the appellant was restrained from filing the adjudication certificate as a judgment until the final decision in the originating application;
- (b)the respondent pay into court as security the sum of $839,992.62, constituted by the adjudicated amount ($788,439), interest and 50 per cent of the Adjudicator’s fees; and
- (c)that total amount was to be held by the court pending the final decision in the originating application or further order.
- (a)
- [9]On 26 February 2021 Dalton J delivered reasons, finding that the adjudication decision was void. Her Honour subsequently made orders for the payment out of the monies held in court.
- [10]The appellant has instituted the appeal challenging the decision of Dalton J and seeks a stay of the orders, specifically focussing on those orders which would permit the payment out of the sum held in court.
Appellant’s contentions
- [11]The appellant submitted that there were three matters to be considered on an application for a stay pending appeal, namely whether there was: (i) a good arguable case on appeal; (ii) any disadvantage to the appellant if a stay was not granted; and (iii) any competing disadvantage to the respondent which, if a stay was granted, outweighed the disadvantage to the appellant if a stay was not granted. In that respect the appellant referred to Elphick v MMI General Insurance Ltd[5] and Cook’s Construction Pty Ltd v Stork Food Systems Australasia Pty Ltd.[6]
- [12]I pause to note that there was no challenge to these propositions.
- [13]The appellant submitted it had a good arguable case on the appeal turning on the construction of clause 37.2 of the contract and the proper construction of s 79(2) of BIFA. In addition, the appellant attacked the finding of the learned primary judge that the Adjudicator had committed jurisdictional error in finding that the 10 August 2020 schedule was the payment schedule, and determining the adjudication on that basis. It pointed to various places in the adjudication application where an alternative payment schedule, namely a letter of 17 August 2020, was advanced for determination by the Adjudicator.
- [14]The appellant contended that the disadvantage it would suffer if the orders were not stayed was that the money in court would be paid out to the respondent and dispersed by it in a way in which it could not be retrieved if the appeal was successful. In this respect it pointed to evidence that the respondent was part of a construction group in which the pattern of business was that when a construction project was completed, the relevant company would be liquidated. It also pointed to evidence from the respondent that if the monies were paid out to it they would be immediately used to pay down various debts on the construction project and thus irretrievably dispersed.
- [15]By contrast, the appellant contended that the respondent would suffer no equivalent prejudice if the orders were stayed and the money remained in court pending determination of the appeal. In this respect it pointed to affidavits filed on behalf of the respondent which demonstrated, it contended, that the project could be completed without the funds in court, and that the likely prejudice might consist of an increased interest rate on an interim loan for a few months.
- [16]For the respondent it was contended that the relief sought on this application was the equivalent of a Mareva injunction and should not be granted. The principal points of contention made were:
- (a)the money paid into court was the agreed price paid for the appellant not to take steps to enforce its then right to payment under the adjudication decision; it was paid as security only for that interlocutory injunction and once the adjudication decision had been set aside there was nothing left to secure, and so the monies should not remain in court;
- (b)if the monies were paid out and the appellant succeeded in its appeal, the appellant would be in the same position it would have been in in any event; that is, it would be in the position of having a valid adjudication decision which could be enforced as an order of the court; that was all the appellant was ever entitled to, absent the agreement to put money in court as the price of the interlocutory injunction;
- (c)to require that the money remain in court would convert that money from the price paid for the interlocutory injunction into a greater form of security, and give the appellant greater protection than it had at the time the adjudication decision was made;
- (d)it was contended that the appellant did not have a good arguable case, essentially relying upon the analysis of the learned primary judge;
- (e)as to the question of prejudice, the respondent contended the appellant would suffer no real prejudice if the stay was not granted because if it was successful in the appeal it would have all of the enforcement mechanisms provided by BIFA, and would be able to pursue the adjudication certificate as a judgment;
- (f)the evidence as to the respondent’s conduct of construction projects was not sufficient to demonstrate a real risk that the money would be improperly dispersed; each project was embarked upon until completion; in each case the special purpose vehicles established for each project remained in existence until the project was completed; it was pointed out that the particular project in question in this case had not reached completion; and
- (g)if the monies were held in court the disadvantage suffered by the respondent was that it would be forced to go to the lending market to raise sufficient funds to ensure completion; there were risks attached to that in terms of securing the funds in the first place, and the likelihood of high rates of interest necessarily incurred to obtain it.
- (a)
Consideration
- [17]The orders made by Brown J on 18 December 2020 were by consent. Relevantly they provide as follows:
“1. Upon [Kangaroo Point Developments] giving the usual undertaking as to damages, [RHG Construction] be restrained … from filing the adjudication certificate … in a court of competent jurisdiction as a judgment for a debt … or otherwise to attempt to enforce or apply upon the Adjudication Decision in any manner, until the final decision in [Kangaroo Point Developments] originating application filed on 15 December 2020.
- It is recorded that [Kangaroo Point Developments] gives the usual undertaking as to damages.
- [Kangaroo Point Developments] is to pay into court as security the sum of $839,992.62 (Money), being the adjudicated amount of $788,439.54, interest thereon at the rate of 10% per annum from 18 August 2020 to 18 December 2020 (inclusive) and 50% of the Adjudicator’s fees, …
- The Money is to be held by the court pending the final decision in [Kangaroo Point Developments] Originating Application filed on 15 December 2020, or further order.”
- [18]In my view, the respondent’s contention that the money in court pursuant to that order was simply the price paid for the interlocutory injunction, expiring upon the learned primary judge’s determination of the adjudication was void, should be rejected. There are several reasons for that conclusion.
- [19]First, as is evident from the terms of the undertaking in paragraph 1, RHG Construction agreed to withhold any steps to enforce the adjudication certificate or to rely upon the adjudication decision, until the final decision in the originating application. That application was to declare the adjudication void. The parties must have contemplated that whichever party succeeded on that application might elect to test the outcome on an appeal. Success on the appeal would result in this court making the order that should have been made at first instance. In other words, success on the appeal will result in an order being made by this court that is the final order on the originating application.
- [20]Secondly, the money paid into court was not merely the adjudication amount, but included interest from 18 August 2020 to 18 December 2020. The latter date is the date of the orders by Brown J. The selection of the first date is less clear, but approximates the date of Kangaroo Point Developments’ payment schedule. In any event, the parties included a component reflecting the potential loss to RHG Construction from being held out of its normal enforcement process. Significantly, that money only covered the period to the date of the orders made on 18 December 2020, and not the (then unknown) date when orders would be made on the originating application. That suggests that the money in court should not be presumed to have been intended only as the price of the interlocutory injunction.
- [21]Thirdly, order number 4 on its face provides that the money is to be held in a way not limited to the decision of the learned primary judge on the originating application. It contains the words “or further order”. Plainly the parties contemplated that whatever the outcome in the determination of the originating application below, an appeal might follow, with the consequence that a stay might be sought and the money continued to be held in court.
Good arguable case on appeal
- [22]Central to the findings by the learned primary judge was the conclusion that the Superintendent’s 10 August 2020 assessment did not comply with s 69 of BIFA. There were two relevant parts of that assessment. In the opening words it stated that the assessment was a “Payment Schedule” which had been produced “pursuant to the Works Contract”. It then stated that: “This Payment Schedule confirms that the Superintendent has assessed, calculated and certified the proper value of Work Under the Contract”. Then, on the first page of the document there was a heading entitled “Payment Recommendation”. It then stated that “Payment is recommended for the following amount …”.
- [23]Her Honour found that the Superintendent only made a recommendation about payment and as a consequence the document did not state “the amount of the payment, if any, that the respondent proposes to make”, within the meaning of s 69(b) of BIFA.[7]
- [24]The appellant seeks to contend that because the 10 August schedule was given within 10 business days of the relevant payment claim, clause 37.2 of the contract operated to deem that response to be a payment schedule for the purposes of BIFA. The further contention is that without that deeming effect, the position would have been that the respondent would have contravened BIFA.
- [25]Clause 37.2 relevantly provides:
“37.2 Certificates
The Superintendent shall, within 10 business days after receiving such a payment claim, issue to the Principal and the Contractor:
- (a)a payment schedule evidencing the Superintendent’s opinion of the monies due from the Principal to the Contractor pursuant to the payment claim and reasons for any difference (‘payment schedule’); and
- (b)a certificate evidencing the Superintendent’s assessment of retention monies and monies due from the Contractor to the Principal pursuant to the contract.
…
The Principal shall within 5 business days after receiving both such certificates, or within 15 business days after the Superintendent receives the payment claim (whichever occurs first), pay to the Contractor the balance of the payment schedule …
…
Insofar as necessary to ensure compliance with the Security of Payment Act, the Superintendent is deemed to issue any payment schedule under clause 37.2 … as the agent of the Principal and each such schedule shall constitute a payment schedule for the purposes of the Security of Payment Act.”
- [26]The appellant points out that clause 37.2 was specifically drafted with the predecessor Act of BIFA in mind, and used terminology from the predecessor Act. Consistent with the fact that the terms of the contract were not altered notwithstanding that BIFA came into force, the parties should be presumed to have intended that references to the Security of Payment Act should be taken to include BIFA.
- [27]In my view, it is arguable that clause 37.2 does have the effect of deeming the Superintendent’s response on 10 August 2020 to be a payment schedule for the purposes of BIFA. As the appellant points out, the second response on 17 August 2020 was out of time, with the consequence that if the deeming provision did not operate Kangaroo Point Developments would have contravened BIFA.
- [28]Aside from that, it seems to me arguable that clause 37.2 operates in such a way that the response on 10 August 2020 did, in fact, state the amount of the payment that the respondent proposed to make, and was thus within the meaning of s 69(b) of BIFA. The essential steps of that reasoning are as follows. Clause 37.2 obliges the Superintendent to respond within 10 business days after receiving a payment claim. The response requires the Superintendent, acting as agent for the Principal, to issue notifications to both the Principal and the Contractor. Those notifications specifically include a response entitled “Payment Schedule”, which evidences the Superintendent’s “opinion of the monies due from the Principal to the Contractor”. That particular response is defined by clause 37.2 as a “payment schedule”. Then, within five business days of receipt of that document the Principal is contractually obliged to “pay to the Contractor the balance of the payment schedule”. Thus, as between the contracting parties, clause 37.2 had the effect that the Superintendent’s response giving the Superintendent’s “opinion of the monies due” had the consequence that the Principal was obliged to pay that sum. Thus it seems to be arguable that the Superintendent’s statement of “opinion of the monies due” was contractually understood as being the amount the respondent proposed to pay for the purposes of s 69(b) of BIFA.
- [29]Further, the penultimate paragraph of clause 37.2 has the effect that the payment schedule issued by the Superintendent constitutes a payment schedule for the purposes of the predecessor Act of BIFA. The parties, arguably, intended that provision would continue to operate by reference to BIFA.
- [30]The second basis upon which the appellant challenges the orders at first instance relates to the application of s 79(2)(c) of BIFA. This turns on the finding that the adjudication application was invalid because it did not identify the 17 August 2020 letter as a payment schedule in accordance with s 79(2)(c). The appellant’s contention is that the adjudication application includes all of the documents mentioned in s 79(2) including the submissions. For that proposition the appellant’s rely upon decisions in Conveyor & General Engineering Pty Ltd v Basetec Services Pty Ltd,[8] and McCarthy v TKM Builders Pty Ltd & Anor.[9] It contends that s 79(2)(c) does not provide that the “approved form” must identify the payment schedule, but rather that the “adjudication application” must do so. The appellant points to the fact that the submissions included in the adjudication application extended to the letter of 17 August 2020, which was Attachment 3 to the submissions and described as “second payment schedule”. It also points to the fact that those submissions extended to the merits of the matters in the 17 August letter, as an alternative submission to that based on the letter of 10 August.
- [31]Given that s 79(2) provides that an adjudication application can include submissions, it seems to me that the appellant has an arguable point concerning the inclusion of the letter of 17 August 2020.
- [32]For these reasons it seems to me to be correct to conclude that the appellant has demonstrated it has, within the scope of an application for a stay, a good arguable case on appeal.
Competing prejudice to the parties
- [33]In my view, the material demonstrates that the appellant would suffer greater prejudice if a stay were not granted, than that which will be suffered by the respondent if a stay is granted. There are several reasons for that conclusion.
- [34]First, the inevitable consequence of releasing the money from court is that it will be almost immediately disbursed by the respondent as part of its building project. So much is conceded in the affidavit material filed by the respondent, which outlines that the money will be used to pay down loans and fund further building works. Nothing improper is suggested by that course, but the inevitable consequence is that the money presently secured by payment into court will no longer be available or retrievable. The loss of that sum, sequestered as it is in court, is not balanced by the prospect that enforcement can be taken in the event that the adjudication is held valid. It is true to say that the appellant would then be in the same position as it would be had the money never been paid into court, but it was. Agreement was reached to provide a specific sum to be held pending the resolution of the challenge to the adjudication.
- [35]Secondly, I am unable to accept the characterisation that the granting of a stay should be equated with a Mareva injunction. Such an injunction acts as a general restraint on the disposal of assets, with stated exceptions. That is not this case. Here a specific sum has been sequestered in court. The respondent is free to trade otherwise, without restraint. Furthermore, the characterisation ignores the fact that it was plainly agreed by the respondent that the sum in court would be placed there by way of security pending the outcome of the challenge to the adjudication.
- [36]Thirdly, the risk to the appellant if a stay is not granted is that it may end up becoming an unsecured creditor in a liquidation of the respondent, or alternatively competing with other creditors for whatever funds are left as the project nears completion. That is a worse position than it currently occupies as a consequence of the agreement to put money in court. Part of the consideration for the money being in court was that the appellant would take no steps to enforce the adjudication decision. That would be negated if the appellant was left to enforce the adjudication decision but without the agreed sum in court.
- [37]Fourthly, the appeal can be brought on quickly. As discussed with the parties during the hearing of this application, the matter is able to be, and should be, set for hearing on 12 April 2021. That is only three weeks away. Such a speedy hearing means that any disadvantage sustained by the respondent will be of short duration, and insofar as it concerns any extra imposition by way of interest charges on the loans necessary to complete the building project, the impact will be greatly reduced.
Conclusion
- [38]For the reasons given above it is appropriate to grant a stay of the orders pending the determination of the appeal or further order by this Court. Therefore, I make the following orders:
- The appellant gives an undertaking as to damages, and the first respondent gives an undertaking that the first respondent, its officers, servants, agents or otherwise, will not seek payment out of Court pursuant to order 2 of Dalton J's order made on 9 March 2021 until the determination of the appeal or further earlier order.
- Orders 2 and 4 made on 9 March 2021 are stayed pending the determination of the appeal or further order by this Court.
- Costs reserved.
- The following directions apply to the appeal:
- (i)The appeal be heard on 12 April 2021;
- (ii)The appellant file and serve the appeal record book and its outline of submissions by 4.00 pm on 1 April 2021;
- (iii)The respondent file and serve its outline of submissions by 4.00 pm on 8 April 2021.
- (i)
Footnotes
[1]Kangaroo Point Developments MP Property Pty Ltd v RHG Construction Fitout and Maintenance Pty Ltd [2021] QSC 30.
[2]To which I shall also refer, when convenient to do so, as RHG Construction.
[3]To which I shall also refer, when convenient to do so, as Kangaroo Point Developments.
[4]To which I shall refer as BIFA.
[5][2002] QCA 347 at [8].
[6][2008] 2 Qd R 453 at [12].
[7]Reasons below at [13]-[14].
[8][2015] 1 Qd R 265 at [22].
[9][2020] QSC 301 at [18]-[19].