On Appeal from SUPREME COURT OF SOUTH AUSTRALIA (JUSTICE ANDERSON)

Appellant: ADELAIDE INTERIOR LININGS PTY LTD

Respondent: ROMALDI CONSTRUCTIONS PTY LTD

Hearing Date/s:

File No/s: SCCIV-13-522

A

SUPREME COURT OF SOUTH AUSTRALIA

(Full Court: Permission to Appeal)

ROMALDI CONSTRUCTIONS PTY LTD v ADELAIDE

INTERIOR LININGS PTY LTD

[2013] SASCFC 99

Judgment of The Full Court

(The Honourable Justice Sulan, The Honourable Justice Kelly and The Honourable Justice Blue)

26 September 2013

APPEAL AND NEW TRIAL - APPEAL - PRACTICE AND PROCEDURE - SOUTH AUSTRALIA - WHEN APPEAL LIES - BY LEAVE OF COURT APPEAL AND NEW TRIAL - APPEAL - PRACTICE AND PROCEDURE - SOUTH AUSTRALIA - STAY OF PROCEEDINGS

A Judge of the District Court granted an interlocutory injunction restraining the respondent, Adelaide Interior Linings Pty Ltd, from obtaining an adjudication certificate, filing it as a judgment or enforcing the judgment under the Building and Construction Industry Security of Payment Act 2009 (SA) ("the Act"). The basis for seeking the injunction was a claim that, if Romaldi was successful in the substantive action in the District Court, there was a sufficient risk that Romaldi would not recover from Interiors the amount of the adjudication.

A Judge of this Court allowed Interiors’ appeal and discharged the interlocutory injunction. His honour held that the District Court Judge had no power to grant the injunction and in any event a stay of the judgment based on an adjudication certificate would not have been warranted.

Interiors obtained an adjudication certificate and filed it in the Magistrates Court as a judgment. Romaldi sought a stay of the judgment. A Magistrate summarily dismissed the stay application, concluding that it was an impermissible attempt by Romaldi to circumvent the decision of the Judge discharging the interlocutory injunction.

Romaldi seeks permission to appeal from the decision of the Judge discharging the interlocutory injunction.

In separate proceedings, Romaldi appeals to this Court against the decision of the Magistrate.

Held (by the Court):

1. A question of general principle and public importance arises as to the criteria for and onus of proof in respect of an application for a stay of execution of a judgment based upon an adjudication under the Act (at [15]).

2. Given the decision of the Magistrate that Romaldi is precluded from seeking a stay of execution in the Magistrates Court due to the decision of the Judge, it is appropriate to grant permission to appeal (at [16]-[17]).

3. Permission to appeal granted (at [17]).

Building and Construction Industry Security of Payment Act 2009 (SA) s 17; Supreme Court Civil Rules 2006 (SA) r 288, referred to.

Citicorp Australia Ltd v Cirillo [2000] SASC 374, discussed.

Glenauchen Pty Ltd v Circuit Finance Pty Ltd [2001] SASC 61; Grindley Constructions Pty Ltd v Painting Masters Pty Ltd [2012] NSWSC 234; Grosvenor Constructions (NSW) Pty Ltd (In Administration) v Musico [2004] NSWSC 344; Kalifair Pty Ltd v Digi-Tech (Aust) Ltd [2002] NSWCA 383; (2002) 55 NSWLR 737; Musico v Davenport [2003] NSWSC 977; RSA (Moorvale Station) Pty Ltd v VDM CCE [2012] NSWSC 861; Taylor Projects Group Pty Ltd v Brick Dept Pty Ltd [2005] NSWSC 571; Veolia Water Solutions & Technologies (Australia) Pty Ltd v Kruger Engineering Australia Pty Ltd (No 3) [2007] NSWSC 459, considered.

ROMALDI CONSTRUCTIONS PTY LTD v ADELAIDE INTERIOR LININGS PTY LTD

[2013] SASCFC 99

FULL COURT: Sulan, Kelly and Blue JJ

CIVIL: Application for permission to appeal

THE COURT:

1 This is an application for permission to appeal against orders made by a Judge of this Court allowing an appeal against an interlocutory injunction granted by a District Court Judge and discharging that injunction. Permission is required under rule 288(1)(a)(ii) of the Supreme Court Civil Rules 2006 (SA) because the judgment subject of the appeal is a judgment given on appeal from an interlocutory judgment.

Background

2 The applicant Romaldi Constructions Pty Ltd (“Romaldi”) entered into a subcontract with the respondent Adelaide Interior Linings Pty Ltd (“Interiors”) to supply and install linings for $86,204.76. Interiors commenced performance of the work and submitted a progress claim for $44,049.98. Romaldi issued a responding payment claim assessing the value of work completed at $5,518 plus GST. A dispute arose as a result of which Interiors did not complete the work the subject of the contract.

3 Interiors applied for adjudication of its payment claim under section 17 of the Building and Construction Industry Security of Payment Act 2009 (SA) (“the Act”). On 13 February 2013, an adjudicator made a determination under section 22 that $43,813.48 ($48,194.83 including GST) was payable by way of progress payment by Romaldi to Interiors. Under section 23, the sum of $48,194.83 became payable on 20 February 2013. In default of payment by that date, under sections 24 and 25 Interiors was entitled to obtain from the adjudicator an adjudication certificate and file the adjudication certificate as a judgment for a debt in a court of competent jurisdiction.

4 On 20 February 2013, Romaldi instituted an action in the District Court against Interiors seeking damages for breach of contract of $61,840.06 (together with a further $43,813.48 if it became obliged to pay the adjudicated amount). Romaldi sought an interlocutory injunction preventing Interiors from obtaining an adjudication certificate, filing it as a judgment or enforcing the judgment until final determination of the action.

5 On 3 April 2013, a Judge of the District Court granted an interlocutory injunction in favour of Romaldi. His Honour held that he had power to grant an injunction in the circumstances, that the criteria for granting an injunction are the same as for grant of a stay of a judgment which has been filed under section 25 of the Act and that, on the evidence before him, those criteria were satisfied.

6 Interiors appealed to a Judge of this Court against the injunction. On 5 July 2013, a Judge of this Court in action no. 522 of 2013 allowed the appeal. He held that the District Court Judge had no power to grant an injunction. He held that in any event the criteria for grant of an injunction would have been the same as for the grant of a stay and that, on the evidence before the Judge, those criteria where not satisfied.

7 On 19 July 2013, Interiors obtained from the adjudicator an adjudication certificate for the adjudication amount together with interest and costs totalling $54,465.54.

8 On 25 July 2013, Interiors filed in the Magistrates Court a request for judgment for a debt constituted by the adjudication certificate. Romaldi responded by filing an application seeking a stay of execution of the judgment until determination of the District Court action.

9 On 26 July 2013, Romaldi filed a notice of appeal to a single Judge of this Court against the orders made by the Judge in action no. 522 of 2013 in which it sought permission to appeal.

10 On 8 August 2013, a Magistrate summarily dismissed the stay application on the basis it had no reasonable prospect of success. The Magistrate gave ex tempore reasons. He concluded that the stay application was an impermissible attempt by Romaldi to circumvent the outcome of the adjudication and the decision by the Judge of this Court discharging the interlocutory injunction.

11 On 9 August 2013, Romaldi filed in this Court a notice of appeal to the Full Court against the Magistrate’s orders (action no. 1047 of 2013).

12 In Citicorp Australia Ltd v Cirillo , Doyle CJ, Nyland and Williams JJ said:

We have considered whether the application for leave to appeal raises any question of general principle, whether the decision is likely to work a substantial injustice if it stands, and whether there is reason to doubt the correctness of the decision. These are the matters usually considered on such an application, although at the end of the day the Court's power to grant leave is unfettered.

Consideration

13 In this case, the question of permission to appeal against the orders made by the Judge in action no. 522 of 2013 is complicated by the existence of the appeal in action no. 1047 of 2013 and the fact that the Magistrate refused to grant a stay on the basis that the substantive issues had been decided by the Judge adversely to Romaldi. For this reason, we first address the issue raised in action no. 522 of 2013: whether, assuming the District Court Judge had power to grant an injunction and the criteria were the same as for a stay of execution of a judgment, the criteria for a stay were satisfied.

14 On the issue as to the criteria for a stay, there was a contest between the parties as to the correct approach as a matter of principle to an application for a stay. Interiors contended before the Judge of the District Court and the Judge of this Court that it was necessary for an applicant for a stay to demonstrate a high level of likelihood of insolvency and the onus of proof remained in all respects upon the applicant. Romaldi contended that the threshold was lower, involving a real risk of a defendant’s inability to repay and that, once an applicant adduced sufficient evidence of risk of insolvency of the respondent, the respondent bore an evidential onus to adduce evidence to demonstrate its solvency. Both parties cited decisions of single Judges of the Supreme Court of New South Wales which suggest differing approaches to the degree of risk of insolvency required to justify a stay.

15 This Court has not previously considered the criteria for a stay of execution in respect of a judgment resulting from an adjudication under the Act. A question of general principle and public importance arises as to the criteria for and onus of proof in respect of an application for a stay of execution in such circumstances.

16 Turning to the anterior issue of the power of the District Court Judge in the circumstances to grant an interlocutory injunction, it does not appear that that issue has arisen previously in the courts of South Australia or elsewhere. It is not necessary to decide whether the power of the District Court Judge in these circumstances is a question of sufficient importance, or whether the decision is of the Judge of this Court is attended by sufficient doubt, to justify the grant of permission to appeal. This is because Interiors relies upon the decision of the Judge of this Court on the merits of the application that the criteria for a stay of execution were not satisfied to create an issue estoppel or otherwise preclude Romaldi from seeking a stay of execution in the Magistrates Court and on appeal to this Court in action no. 1047 of 2013. If it should transpire that Romaldi is precluded from contesting that question on the merits in action no. 522 of 2013 due to the decision of the Judge in action no. 1047 of 2013, the decision of the Judge is likely to work a substantial injustice if it stands in the event that the Judge erred in the test which he applied and in the conclusion he reached that Romaldi had not established an entitlement to a stay of execution. That injustice would result from Romaldi being precluded from pursuing its appeal in action no. 522 of 2013 on the merits as to its entitlement to a stay by reason of the preclusionary effect of the Judge’s decision in action no.1047 of 2013.

17 Accordingly, it is appropriate to grant permission to appeal against the orders made by the Judge on 5 July 2013. We so order.

18 We note that the parties have agreed that, if permission to appeal should be granted in action no. 522 of 2013, the appeal in action no. 1047 of 2013 should be referred to the Full Court and heard and determined at the same time as the appeal in action no. 522 of 2013.