On Appeal from SUPREME COURT OF SOUTH AUSTRALIA (THE HONOURABLE JUSTICE ANDERSON) [2013] SASC 110

Appellant: ADELAIDE INTERIOR LININGS PTY LTD Counsel: MR B JENNER WITH MS K CLARK - Solicitor: CRAWFORD LEGAL

Respondent: ROMALDI CONSTRUCTIONS PTY LTD Counsel: MR P ADAMS WITH MR E

GUTHRIE - Solicitor: JOHNSTON WITHERS

Hearing Date/s: 16/10/2013

File No/s: SCCIV-13-522, SCCIV-13-1047

SUPREME COURT OF SOUTH AUSTRALIA

(Full Court: Civil)

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment. The onus remains on any person using material in the judgment to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court in which it was generated.

ROMALDI CONSTRUCTIONS PTY LTD v ADELAIDE

INTERIOR LININGS PTY LTD (No 2)

[2013] SASCFC 124

Judgment of The Full Court

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

19 November 2013

CONTRACTS - BUILDING, ENGINEERING AND RELATED CONTRACTS - REMUNERATION - STATUTORY REGULATION OF ENTITLEMENT TO AND RECOVERY OF PROGRESS PAYMENTS - ADJUDICATION OF PAYMENT CLAIMS

PROCEDURE - JUDGMENTS AND ORDERS - ENFORCEMENT OF JUDGMENTS AND ORDERS

EQUITY - EQUITABLE REMEDIES - INJUNCTIONS - INTERLOCUTORY INJUNCTIONS – JURISDICTION

An adjudicator determined under the Building and Construction Industry Security of Payment Act 2009 (SA) that the appellant, Romaldi Constructions Pty Ltd, was liable to pay a progress payment to the respondent, Adelaide Interior Linings Pty Ltd, for work performed under a construction contract. Romaldi sued Linings in the District Court claiming damages for breach of contract.

Romaldi sought and obtained an interlocutory injunction from a Judge of the District Court restraining Linings from obtaining an adjudication certificate for the adjudication amount. On Linings' appeal, a Judge of the Supreme Court discharged that injunction.

Upon Linings obtaining an adjudication certificate and filing it in the Magistrates Court as a judgment for debt, Romaldi sought a stay of execution until determination of its damages claim in the District Court. A Magistrate summarily dismissed the application for a stay.

Romaldi appeals against the discharge of the injunction by the Judge on appeal and against the refusal of the stay application by the Magistrate. The issues raised by the appeals are:

1. whether there was a juridical basis to grant an interlocutory injunction restraining Linings obtaining an adjudication certificate;

2. whether Romaldi made out a ground for grant of an interlocutory injunction restraining Linings from obtaining an adjudication certificate;

3. whether Romaldi made out a ground for grant of a stay of execution of judgment founded on the adjudication certificate;

4. whether the Judge of the Supreme Court erred in concluding that the proper exercise of discretion on the material before the Judge of the District Court would have been to deny a stay of execution of the judgment; and

5. whether the Magistrate erred in not hearing and determining the stay application on its merits.

Held by Blue J (Sulan and Stanley JJ agreeing) dismissing both appeals:

1. An interlocutory injunction generally may be granted to preserve the subject matter of the substantive action, to avoid the result of the substantive action being rendered nugatory or to protect the integrity of the court’s processes once set in motion (at [65]-[67]).

2. If there was a juridical basis for the grant of an interlocutory injunction in the present case, it must have been to avoid the result of the substantive action being rendered nugatory but it is unnecessary to decide the question whether this comprises a proper judicial basis for an interlocutory injunction (at [69]).

3. If no interlocutory injunction were granted, Romaldi would have remained at liberty to apply for a stay of execution of the judgment once the adjudication certificate were filed in court. There was no proper ground for the grant of an interlocutory injunction as Romaldi would not be prejudiced if the adjudication certificate were filed as a judgment. The Judge on appeal was correct to discharge the interlocutory injunction (at [73]).

4. To make out a ground for a stay of execution of judgment, Romaldi needed to establish that, if no stay were granted, there was a prospect that:

a. Romaldi would succeed in its damages claim; and

b. such success would be rendered nugatory due to Linings not having the means to repay the adjudication amount in that event (at [76]).

5. Romaldi failed to demonstrate that it had prospects of success in its damages claim and hence that it was exposed to a risk of prejudice if there were no stay of execution of the judgment. The Judge on appeal was correct in concluding that the proper exercise of the discretion was to deny a stay of execution of the judgment (at [81]-[83]).

6. Once a ground for a stay has been established, exercise of the discretion involves balancing all relevant considerations, giving each consideration the weight which it deserves. It cannot be said a priori that the risk of insolvency must be “very high” before the discretion can be exercised in favour of the applicant one the discretion has been enlivened. A factor to be taken into account in the overall discretion is the effect of the Act which, prima facie, places the risk that a sub-contractor will be unable to refund progress payments upon the final determination of the respective rights of the parties on the principal or head contractor (at [95]-[110]).

7. The Magistrate erred in refusing to hear and determine the application for a stay of execution of the judgment on the merits. Nonetheless, it was inevitable that the application for a stay be dismissed on the merits because Romaldi failed to establish that it had a viable claim for damages for breach of contract (at [113]-[117]).

Building and Construction Industry (Security of Payment) Act 2009 (ACT); Building and Construction Industry Security of Payment Act 1999 (NSW); Building and Construction Industry Security of Payment Act 2002 (Vic); Building and Construction Industry Payments Act 2004 (Qld); Building and Construction Industry Security of Payment Act 2009 (Tas); Building and Construction Industry Security of Payment Act 2009 (SA) s 3, s 4, s 5, s 8, s 11, s 13, s 14, s 17, s 18, s 19, s 20, s 21, s 22, s 23, s 24, s 25, s 32; Construction Contracts (Security of Payments) Act 2004 (NT); Construction Contracts Act 2004 (WA); District Court Civil Rules 2006 (SA) r 162; Supreme Court Civil Rules 2006 (SA) r 285, referred to. CSR Ltd v Cigna Insurance Australia Ltd [1997] HCA 33, (1997) 189 CLR 343; Jesasu Pty Ltd v Minister for Mineral Resources (1987) 11 NSWLR 110; Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia [1998] HCA 30, (1998) 195 CLR 1; R J Neller Building Pty Ltd v Ainsworth [2008] QCA 397, [2009] 1 Qd R 390; RSA (Moorvale Station) Pty Ltd v VDM CCE Pty Ltd [2012] NSWSC 861; Vadasz v Bloomer Constructions (Qld) Pty Ltd [2009] QSC 261; Veolia Water Solutions v Kruger Engineering (No 3) [2007] NSWSC 459, discussed. Alexander v Cambridge Credit Corp Ltd (rec appt) (1985) 2 NSWLR 686; Australian Broadcastine Corp v Lenah Game Meats Pty Ltd [2001] HCA 63, (2001) 208 CLR 199; Bacon v Jones (1839) 4 My & Cr 433, (1839) 41 ER 167; Brodyn Pty Ltd t/as Time Cost and Quanlity v Philip Davenport & Ors [2003] NSWSC 1019; Brodyn Pty Ltd t/as Time Cost and Quality v Philip Davenport & Ors [2004] NSWSC 394, (2004) 61 NSWLR 421; Cardile v LED Builders Pty Ltd [1999] HCA 18, (1999) 198 CLR 380; Chase Oyster Bar Pty Ltd v Hamo Industries Pty Ltd [2010] NSWCA 190, (2010) 78 NSWLR 393; Federal Commissioner of Taxation v Myer Emporium (1986) 160 CLR 220; Grosvenor Constructions (NSW) Pty Ltd (in admin) v Musico [2004] NSWSC 344, (2005) 21 BCL 266; Hadley v London Bank of Scotland Ltd (1965) 3 De GJ & S 63, (1839) 46 ER 562; John Arnold's Surf Shop Pty Ltd (in liq) v Heller Factors Pty Ltd and Allert (1979) 22 SASR 20; Lamprell v The Guardians of the Poor of the Billericay Union (1849) 3 Ex 283, (1849) 154 ER 850; Orion Property Trust Ltd v Du Cane Court Ltd [1962] 1 WLR 1085, [1962] 3 All ER 466; Over Fifty Mutual Friendly Society Ltd v Smithies [2007] NSWSC 291; Re Middle Harbor Investments Ltd (in liq) (unreported, New South Wales Court of Appeal, Mahoney JA, 15 December 1976); Re Sanders Constructions Pty Ltd v Eric Newham (Wallerawang) Pty Ltd [1969] Qd R 29; Spiel v Commodity Brokers Australia Pty Ltd (1983) 35 SASR 294; Taylor Projects Group Pty Ltd v Brick Dept Pty Ltd & Ors [2005] NSWSC 571; Wilson v Church [1878] W 81, (1879 11 Ch D 576; Wilson v Church (No 2) [1878 W 81, (1879) 12 Ch D 454, considered.

ROMALDI CONSTRUCTIONS PTY LTD v ADELAIDE INTERIOR

LININGS PTY LTD (No 2)

[2013] SASCFC 124

Full Court: Sulan, Blue and Stanley JJ

1 SULAN J: I would dismiss both appeals. I agree with the reasons of Blue J.

2 BLUE J: The appellant Romaldi Constructions Pty Ltd (“Romaldi”) entered into a subcontract with the respondent Adelaide Interior Linings Pty Ltd (“Linings”) for the supply and installation of linings at Burc College.

3 An adjudicator determined under the Building and Construction Industry Security of Payment Act 2009 (SA) (“the Act”) that Linings was entitled to an initial progress payment of $48,194 plus adjudication fees and interest.

4 Romaldi sued Linings in the District Court claiming damages for breach of contract. Romaldi sought and obtained an interlocutory injunction restraining Linings from obtaining an adjudication certificate for the adjudication amount.

5 Linings appealed. A Judge of this Court allowed the appeal and discharged the injunction.

6 Upon Linings obtaining an adjudication certificate and filing it as a judgment for debt under the Act in the Magistrates Court, Romaldi sought a stay of execution until determination of its damages claim in the District Court. A Magistrate refused the application for a stay on the basis that it was an attempt to circumvent the decision of the Judge on appeal.

7 Romaldi appeals against the discharge of the injunction by the Judge and against the refusal of the stay by the Magistrate. The appeals were heard together.

8 The appeals raise for determination three principal issues.

1. Was there a ground established for an interlocutory injunction restraining Linings from obtaining an adjudication certificate?

2. Was there a ground established for a stay of execution of the judgment founded on the adjudication certificate?

3. Did the Judge on appeal err in concluding that the proper exercise of the discretion on the material before the Judge at first instance would have been to deny a stay of execution?

1 Pursuant to permission to appeal granted by the Full Court.

Background

9 In late August 2012, Romaldi and Linings entered into a subcontract for the supply and installation of linings for the Burc College Project for a contract price of $88,398, subsequently adjusted to $94,825 (“the Subcontract”). It was a term of the Subcontract that Romaldi pay monthly progress claims submitted no later than the 25th day of the month by the end of the following month. Romaldi paid to Linings an advance payment of $10,000.

10 On 22 September 2012, Linings submitted to Romaldi a progress claim for September for $48,455.

11 On 21 October 2012, Linings submitted to Romaldi a progress claim for October for $10,746.

12 On 21 October 2012, Romaldi responded to Linings’ September progress claim by assessing the value of work to date at $6,070, being less than the $10,000 advance payment.

13 By October 2012, Linings was alleging that Romaldi was in breach of the subcontract by failing to pay the September progress claim and Romaldi was alleging that Linings was in breach of the subcontract by not complying with the program for progress of the works.

14 On 5 November 2012, Linings re-submitted its September progress claim as a payment claim under section 13 of the Act. In due course, Romaldi responded with a payment schedule asserting that no amount was due.

15 On 20 November 2012, Romaldi wrote to Linings stating that it intended to take the work out of Linings’ hands due to breaches of the Subcontract by non-compliance with the program. Romaldi thereafter obtained materials and engaged labour subcontractors to complete the works at a claimed cost of $151,949.

16 On 11 December 2012, Linings applied under section 17 of the Act for adjudication of its payment claim for September. Marisa Toffoli was appointed adjudicator.

17 On 13 February 2013, Ms Toffoli determined under section 22 of the Act that Linings was entitled to $48,194 plus interest from 5 December 2012 plus adjudication fees. Pursuant to the determination, Romaldi was required to pay Linings the adjudicated amount within five business days of 13 February 2013. If payment did not occur within that time, Linings was entitled to apply for an adjudication certificate and file it as a judgment debt pursuant to section 25 of the Act

18 On 20 February 2013, Romaldi instituted the District Court action. Romaldi claimed damages for breach of contract based on the difference between the adjusted Subcontract price ($94,825) and the total cost to complete the works comprising amounts paid or to be paid to Linings of $11,000 plus $48,194 (if paid) and amounts paid to third parties of $151,949.

19 On 20 February 2013, Romaldi filed in the District Court an interlocutory application seeking an interlocutory injunction. It was supported by affidavits by Mr Romaldi sworn on 20 February and Ms Visintin (Romaldi’s solicitor) sworn on 21 February 2013. Ms Visintin deposed to inquiries made on behalf of Romaldi of three suppliers to Linings and obtaining a financial risk report on the basis of which Mr Romaldi expressed serious concerns that Linings was insolvent.

20 On 22 February 2013, a Judge listed the application for hearing on 7 March 2013 and ordered that any answering affidavits by Linings be filed by 1 March 2013. No further affidavits by Romaldi were foreshadowed or provided for in the directions.

21 On 1 March 2013, Mr Struck, the director of Linings, swore an affidavit in response to the Romaldi and Visintin affidavits and testifying that Linings was solvent.

22 On 4 March 2013, Ms Visintin swore a second affidavit concerning inquires made of two other suppliers to Linings.

23 On 7 March 2013, a Judge in the District Court heard argument on the application. On 3 April 2013, he granted an interlocutory injunction restraining Linings from obtaining an adjudication certificate. The injunction was granted on condition that Romaldi pay the adjudication amount into Court which it did in April 2013.

24 On 23 April 2013, Linings appealed to this Court against the injunction. On 5 July 2013, a Judge of this Court allowed the appeal and discharged the injunction.

25 On 19 July 2013, Linings obtained an adjudication certificate for $54,465.

26 On 25 July 2013, Linings filed the adjudication certificate in the Magistrates Court as a judgment for debt.

27 On 26 July 2013, Romaldi sought permission to appeal to the Full Court against the orders of the Judge on appeal discharging the interlocutory injunction.

28 On 5 August 2013, Romaldi filed in the Magistrates Court an interlocutory application seeking a stay of execution of the judgment founded on the adjudication certificate.

29 On 8 August 2013, a Magistrate dismissed Romaldi’s application for a stay. He referred to the reasons for judgment of the Judge on appeal and held that the stay application was an attempt to circumvent the outcome of the adjudication and also the decision of the Judge.

30 On 9 August 2013, Romaldi appealed to this Court against the orders of the Magistrate.

The legislative regime

31 South Australia was the second last of the States and Territories to enact legislation addressing progress payments in the building and construction industry.

32 The operation of the Act is summarised by section 3:

(1) The object of this Act is to ensure that a person who undertakes to carry out construction work (or who undertakes to supply related goods and services) under a construction contract is entitled to receive, and is able to recover, progress payments in relation to the carrying out of that work and the supplying of those goods and services.

(2) The means by which this Act ensures that a person is entitled to receive a progress payment is by granting a statutory entitlement to such a payment regardless of whether the relevant construction contract makes provision for progress payments.

(3) The means by which this Act ensures that a person is able to recover a progress payment is by establishing a procedure that involves—

(a) the making of a payment claim by the person claiming payment; and

(b) the provision of a payment schedule by the person by whom the payment is payable; and

(d) the payment of the progress payment so determined.

(4) It is intended that this Act does not limit—

(a) any other entitlement that a claimant may have under a construction contract; or

(b) any other remedy that a claimant may have for recovering any such other entitlement.

33 It is common ground that the Act applies to the Subcontract and that Linings undertook to and did carry out construction work within the meaning of the Act.

34 Sections 8 to 11 create a statutory right to progress payments and define the value of construction work carried out and the amount and date for payment of the progress payment due. In broad terms, those matters are to be defined by the contract when it deals with those matters and otherwise the Act provides default provisions.

35 Under section 17, a claimant may apply for adjudication of a payment claim if, inter alia, the respondent in its responding payment schedule disagrees with the amount claimed. Sections 17 to 22 provide for the appointment of an adjudicator and determination of the amount of the progress payment (if any) to be paid by the respondent to the claimant (the adjudicated amount).

36 An adjudication determination is subject to judicial review and, if an adjudicator acts beyond jurisdiction or the determination is otherwise vitiated under judicial review principles, the relevant court has jurisdiction to declare the adjudication void.

37 The Act imposes a statutory obligation upon the respondent to pay to the claimant the adjudicated amount (subject only to any judicial review proceedings). If the respondent fails to pay, the claimant is entitled to request an adjudication certificate from the authorised nominating authority and file the adjudication certificate as a judgment for debt in a court of competent jurisdiction. The judgment is enforceable accordingly.

38 Once judgment has been granted, it may be subject to a stay of execution in accordance with ordinary stay of execution principles.

39 At common law, a progress payment is regarded simply as a payment by the principal to the contractor (or contractor to subcontractor) on account of the final contract price. The parties are at liberty to make contentions concerning the final contract price independently of progress claims and progress payments. The Act treats progress payments under the Act in the same way, ie they are payments on account of the final contract price.

The reasoning in the courts below

The Judge at first instance

40 Three issues were argued before the Judge at first instance.

41 First, Linings contended that the District Court had no power to grant an injunction restraining the obtaining of an adjudication certificate or filing thereof in a court as a judgment debt: there was no juridical basis for such an order. Linings contended that there was only power to grant an interlocutory injunction if Romaldi was capable of obtaining, and was seeking by way of final relief, a final injunction of the same nature. Romaldi argued that there was power to grant an interlocutory injunction when otherwise success by the plaintiff in the action would or may be rendered nugatory.

42 Secondly, Linings argued that there was no basis for the District Court, on the application of Romaldi, to interfere with or circumvent the operation of the Act entitling Linings to obtain an adjudication certificate and to file it as a judgment of a court. Romaldi argued that the grant of an injunction would not circumvent the operation of the Act.

43 Thirdly, assuming that there was a discretion to grant an injunction, Romaldi contended that the discretion should be exercised in favour of the grant. Romaldi contended that the discretion should be exercised in the same manner as discretion to grant a stay of execution of a judgment founded on an adjudication certificate. Linings contended that the discretion should not be exercised to grant an injunction unless at least discretion would have been exercised to stay execution of such a judgment. It was therefore common ground that the criteria for the exercise of discretion to grant a stay of a judgment had to be satisfied before an injunction could be granted.

44 On the first issue, the Judge held that the District Court had power to grant an injunction. The correctness of that decision need not be determined on this appeal for reasons explained below.

45 On the second issue, the Judge did not separately address the question of whether an interlocutory injunction would interfere with or circumvent the operation of the Act, other than taking it into account as one of the factors in the exercise of his discretion. The Judge did not identify a ground for the grant of an injunction to restrain Linings from obtaining or filing in court an adjudication certificate as opposed to leaving Romaldi to apply for a stay of execution once the adjudication certificate was filed as a judgment.

46 In relation to the third issue, the Judge first considered the merits and prospects of Romaldi’s claim as follows:

The defendant submits that it has good prospects of defeating the plaintiff’s claim and being successful in its cross-action in these proceedings. Further, it is likely to be many months before these proceedings will be finally determined. In that regard I find that it is not possible to predict the outcome of these proceedings on the basis of the material placed before me. On the other hand there is no question that there will be a long delay before these proceedings are finalised. That delay is a relevant consideration tending against the granting of an injunction.

47 In relation to potential prejudice to Romaldi if it were successful in the District Court action, the Judge referred to several decisions at first instance in the New South Wales Supreme Court and concluded that the question was whether there was a real risk of a defendant’s inability to repay the adjudication amount if the plaintiff were ultimately successful and a stay were not granted. His conclusion in this respect was as follows:

I conclude from the above authorities that despite an interpretation that might be placed on the words of Einstein J in Grosvenor and Taylor above there would have to be demonstrated a near certainty of a defendant’s insolvency before an injunction would be granted, that test might more accurately be described as there being a real risk of a defendant’s inability to repay. I reach that conclusion having considered the detailed analysis by McDougall J in Veolia and RSA and also the remarks of Ball J in Grindley

48 The Judge made an assessment of that risk. He concluded that there was a high likelihood of Linings becoming insolvent if required to repay the adjudication amount and, in that event, there was a real risk that Linings would be unable to repay it. He expressed that conclusion as follows:

... In those circumstances there would appear to be a high likelihood of the defendant becoming insolvent. If the defendant became insolvent then I think there is a real risk that the defendant would be unable to repay the adjudication sum. If the adjudication sum were paid to the defendant that sum would appear not to be sufficient to pay the defendant’s other (alleged) outstanding liabilities.

49 His Honour reached that conclusion based on the following findings and reasoning:

… I have to determine whether the plaintiff has demonstrated that there is a real risk that the defendant will be unable to pay the adjudication sum if the plaintiff has to pay it. I consider that the evidence of the defendant’s approaching insolvency is high. The plaintiff has really carried out all the investigations it reasonably can to demonstrate that the defendant is in an extremely difficult financial situation. The plaintiff has disclosed the results of those investigations. The plaintiff has sought the disclosure of financial records by the defendant. Those requests have been ignored. In these proceedings, the defendant has produced nothing in rebuttal of the plaintiff’s evidence beyond the denial of imminent insolvency and an assertion that it can pay its bills. I am willing to infer that, in the absence of rebutting evidence from the defendant, it is unable to produce evidence of a healthy financial situation. It is unable to deny the specific allegations of impecuniosity that have been made.

50 The Judge identified factors militating against granting an injunction as follows:

The policy of the Act is to assist subcontractors’ cashflows. The court should be slow to intervene so as to defeat the policy of the Act. It is also relevant to note that if an injunction is granted there will be a delay of many months before the present proceedings are concluded. That delay will disadvantage the defendant. It is precisely that sort of delay that the Act attempts to minimise.

51 The Judge concluded that, balancing the above considerations, he should grant the injunction.

The Judge on appeal

52 The contentions of the parties on the appeal to the Judge in the Supreme Court were similar to those before the Judge at first instance.

53 The Judge did not find it necessary to decide the first issue of power to grant an injunction because of his conclusions on the second and third issues.

54 The Judge allowed the appeal on the second issue, holding that the grant of the injunction circumvented the operation of the Act. His reasons for reaching that conclusion were as follows:

The first main point is simply that the judge has circumvented the operation of the Act by his order granting an injunction. The objects of the Act make it clear that the legislation was intended to create a regime for the payments of amounts owing to subcontractors.

The Act sets out very precise steps as to the pathway by which an adjudication certificate can be obtained. In this matter the appellant’s attempts in following the natural progress contemplated by the Act have been thwarted by the order made by the judge. At the point when the appellant was about to register the adjudication certificate, thus making it a judgment debt, the respondent chose to issue proceedings in the District Court.

...

… The respondent, having elected not to challenge the validity of the adjudication, cannot be permitted to circumvent the objects of the Act by taking its own action to prevent the adjudication certificate from being issued.

...

In my view the judge, by allowing the respondent the luxury of delaying payment by instituting an action in court under the guise of bringing all matters between the parties into a dispute in court, has permitted the respondent to circumvent the Act.

The respondent made a pre-emptive strike before the appellant obtained its adjudication certificate. Had it not proceeded in that way the appellant would have proceeded to enter the amount owing as a judgment debt which is the natural conclusion contemplated in the Act where an adjudication is conducted.

55 Given his conclusion on the second issue, it was not strictly necessary for the Judge to address the third issue. However, he concluded that, on a proper exercise of discretion, a stay would have been refused and hence an interlocutory injunction should have been refused.

56 In relation to the issue of potential prejudice to Romaldi, the Judge held that the appropriate question was whether there was a high level of likelihood of insolvency. He then referred to the affidavits of Mr Romaldi and Ms Visintin filed in support of the interlocutory application and the responding affidavit of Mr Struck. He did not refer to Ms Vistin’s second application filed after Mr Struck’s response. His conclusion in this respect was as follows:

Those cases make it clear that in the balancing act involved, where a payment made to a subcontractor may become irrecoverable because of a later insolvency, there has to be a “high level of likelihood of insolvency” as per Einstein J in Taylor Projects Group Pty Ltd v Brick Department Pty Ltd & Ors.

Applying the test of Einstein J it is my view that the evidence in this case does not go far enough to satisfy that test. I have read the affidavits exchanged between the parties as to the financial position of the appellant. The respondent makes certain allegations in its affidavit, many of them based on hearsay information. That is not to say that hearsay information cannot be used in such an application but its weight becomes relevant. Against the clear statements made by Mr Struck the sole director of the respondent in his affidavit, it is my view that the information does not approach a high level of likelihood of insolvency using that as the test.

(Citation omitted)

57 The Judge then summarised the affidavits of Mr Romaldi, Ms Visintin and Mr Struck and concluded:

The affidavit from Mr Struck is unchallenged by any answering affidavit and in my view the judge was wrong in concluding that there was a sufficiently high likelihood of insolvency so that he should grant the injunction. In my view the facts deposed to do not support this. Moreover, no fresh facts are alleged since late February or early March 2013 and the appellant continues to trade.

The Magistrate

58 Romaldi filed an affidavit by Ms Visintin sworn on 5 August 2013 in supports of its application for a stay of execution. Ms Visintin exhibited the reasons for judgment of the Judge at first instance and the Judge on appeal and said that Romaldi would seek to file an affidavit in support of its stay application if the stay was opposed. She said that the affidavit would replicate affidavit material already filed in the District Court.

59 At the first return date of the application for a stay, Romaldi requested that the application be listed for argument and a timetable be set for filing of affidavit material by both parties. Linings opposed such directions and applied for summary dismissal of the application. The Magistrate accepted Linings’ submissions.

60 The Magistrate said:

Mr Adams suggests, this is nothing but a repetition of the attempt by the defendant Romaldi Constructions Pty Ltd to circumvent the outcome of the adjudication and now also the decision made by Anderson J. I agree.

In my view – given that there can be no arguable defence promulgated by the defendant in these proceedings by reason of Section 25 of the Building Construction Industry Security of Payment Act , this application has no merit.

...

In my respectful view, to grant the stay is to do no more than what Anderson J has determined as a matter of law was unlawful, namely to prevent a successful subcontractor – who has following the adjudication process – lawfully registered its certificate in the manner the Act provides as a judgment. Liability to pay is now determined. ... I accept Mr Adams’ submission that the application filed on 5 August 2013 has no reasonable prospect of success ...

The appeal from the Judge on appeal

61 On the appeal against the judgment of the Judge on appeal discharging the interlocutory injunction, four issues arise:

1. Was there a juridical basis for an interlocutory injunction restraining the obtaining of an adjudication certificate?

2. Did Romaldi make out a ground for an interlocutory injunction to restrain the obtaining of an adjudication certificate?

3. Did Romaldi make out a ground for a stay of execution of such a judgment?

4. Did the Judge at first instance err in the proper exercise of discretion?

Power to grant injunction

62 On the appeal to this Court, it is not necessary to address the question whether there was a juridical basis for the Judge at first instance to grant an injunction restraining the obtaining or filing in court of an adjudication certificate.

63 That issue was not decided by the Judge on appeal and there is no notice of alternative contention from Linings that his decision should be upheld for reasons that differ from those which he gave. On the appeal to this Court, Linings did not persist with a contention that there could never be a juridical basis for an interlocutory injunction to restrain the obtaining or filing in court of an adjudication certificate. In any event, the appeal can be decided on the second and third issues argued in the courts below.

64 Nonetheless, for reasons which will appear, it is desirable to make some reference to the juridical basis upon which an interlocutory injunction or, more generally interlocutory relief, is granted. An interlocutory injunction is not the only form of interlocutory relief. Other forms include appointment of a receiver. Interlocutory relief is not a “free-standing” remedy: it is an adjunct to the substantive relief sought in the action.

65 One well established category in which interlocutory relief may be granted is to preserve the subject matter of the action. Within this category, commonly an interlocutory injunction is sought when the plaintiff is seeking final relief by way of injunction of a similar nature. However an interlocutory injunction may be granted to preserve the subject matter of the action when other final equitable relief, such as specific performance, is sought or the only relief sought is common law relief (the Court of Chancery having exercised an auxiliary jurisdiction in respect of common law claims). The category of preserving the subject matter of the action is capable of applying where the final relief sought is proprietary, in rem , involves the taking or not taking of action or is other non-monetary relief. It is not apposite where the plaintiff’s claim is simply for payment of a sum of money (by way of debt, damages or otherwise).

66 Another category in which interlocutory relief might be granted is to avoid the result of the action being rendered nugatory. This category includes injunctions pending the hearing and determination of an appeal and stays of execution of judgment pending hearing and determination of an appeal. In Jesasu Pty Ltd v Minister for Mineral Resources , the New South Wales Court of Appeal held that similar principles apply to the grant of an injunction pending an appeal as to the grant of a stay of a judgment pending appeal. While this category is generally described as applying to appeals, there seems no obvious reason in principle why it should not also apply in appropriate cases to an action at first instance provided that similar criteria are met. Unlike the subject matter preservation category, in principle this category is capable of applying to purely monetary claims.

67 A third common, more recently established, category includes the Mareva injunction (or Mareva order or asset preservation order), the anti-suit injunction and the Anton Piller order. In CSR Ltd v Cigna Insurance Australia Ltd , Dawson, Toohey, Gaudron, McHugh, Gummow and Kirby JJ regarded the doctrinal foundation for an anti-suit injunction or stay of proceedings as being the “power to protect the integrity of [the court’s] processes once set in motion”. In Cardile v LED Builders Pty Ltd , Gaudron, McHugh, Gummow and Callinan JJ adopted the same doctrinal foundation for a Mareva order, observing that the “integrity of [the court’s] processes extends to preserving the efficacy of the execution which would lie against the actual or prospective judgment debtor.”

68 It may be that there is a single unifying principle underlying all of the recognised categories in which interlocutory relief is available, namely ensuring the effective exercise of the court’s jurisdiction (in a positive sense) or preventing the abuse or frustration of the court’s process (in a negative sense). In Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia, Brennan CJ, McHugh, Gummow, Kirby and Hayne JJ said (in the context of addressing the power of the Federal Court to grant a Mareva order):

In a later passage of the judgment of Deane J in Jackson v Sterling Industries Ltd , his Honour said a power to prevent the abuse or frustration of a court's process should be accepted "as an established part of the armoury of a court of law and equity" … The Mareva injunction is the paradigm example of an order to prevent the frustration of a court's process but other examples may be found … The general principle which informs the exercise of the power to grant interlocutory relief is that the court may make such orders, at least against the parties to the proceeding against whom final relief might be granted, as are needed to ensure the effective exercise of the jurisdiction invoked..

69 In the present case, Romaldi’s claim against Linings in the District Court was for damages, being monetary relief. The category of preservation of the subject matter of the litigation was not applicable. There was no foundation for a Mareva order. In these circumstances, if there was any juridical basis for the grant of an interlocutory injunction, it must have been to avoid the result of the action being nugatory. As observed above, this appeal can be decided by assuming that the District Court had power under this category to restrain the obtaining or filing of an adjudication certificate if the requisite ground were established and granting the injunction was the result of a proper exercise of discretion, without deciding whether in reality such power existed.

Ground for grant of injunction

70 The question whether Romaldi made out a ground for an interlocutory injunction to restrain Linings from obtaining or filing an adjudication certificate must be considered against the background that there was a procedure available to Romaldi of applying for a stay of the judgment founded on an adjudication certificate once that judgment was obtained by Linings.

71 In the affidavits filed by Romaldi in support its application, no suggestion was made of any prejudice to Romaldi if an adjudication certificate were issued to Linings or if Linings were to file the adjudication certificate as a judgment. No such prejudice was identified in argument before the Judge at first instance or in his reasons for judgment. If no injunction were granted, Romaldi would have remained at liberty to apply for a stay of execution of the judgment once the adjudication certificate were filed in court (as indeed it did on 5 August 2013 in the Magistrates Court).

72 In these circumstances, there was no proper ground for the Judge to grant an interlocutory injunction. Prima facie, Linings was entitled under sections 24 and 25 of the Act to obtain an adjudication certificate and file it as a judgment. No challenge was made by Romaldi to the validity of the adjudication. While there might be circumstances conceivable in which a ground could be made out to restrain the obtaining or filing of an adjudication certificate in the absence of a challenge to the validity of the adjudication, no such ground was advanced or made out in the present case.

73 The Judge on appeal was correct to allow the appeal and discharge the interlocutory application. The appeal against the judgment of the Judge should be dismissed.

Ground for grant of stay

74 Given that there was no proper ground for the grant of an interlocutory injunction, it is not strictly necessary to consider whether Romaldi made out a proper ground for grant of a stay of execution of judgment.

75 However, the position is complicated by the summary dismissal by the Magistrate of Romaldi’s application for a stay. It is therefore desirable to consider the application by the Judge at first instance and the Judge on appeal of the principles applying to the exercise of discretion on an application for a stay. For this purpose, I will adopt the fiction that they were each considering the exercise of discretion on an application for stay of execution of a judgment founded on an adjudication certificate.

76 The first question the Judge at first instance was required to consider was whether Romaldi had made out a ground for grant of a stay of execution of the judgment. It was necessary for Romaldi to establish that, if no stay were granted, there was a prospect that Romaldi would succeed in the District Court action and that such success would be rendered nugatory due to dissipation of the monies representing the adjudication amount and Linings not having the means to meet a judgment in favour of Romaldi.

77 In considering this composite question, it is important to analyse the nature and consequences of the claim being made by Romaldi in the District Court. There are three relevant categories of claim. First, if Romaldi were claiming that the adjudication determination was invalid, success in the claim would remove the foundation for a judgment founded on the adjudication certificate in the first place. This is a paradigm case in which a court will grant a stay provided that there are sufficient prospects of success in establishing invalidity and sufficient prospects that the monies the subject of the adjudication certificate will be dissipated and the defendant will not have sufficient means to repay the adjudication amount. This has been the nature of the plaintiff’s claim in some of the cases in which an interlocutory injunction or stay has been sought in respect of an adjudication determination.

78 Secondly, when a plaintiff does not challenge the validity of an adjudication determination, the statutory debt resulting from the determination is not liable to be vitiated. However, under section 32 of the Act (and its counterparts), a plaintiff might claim in civil proceedings that, under the relevant construction contract there was no progress payment due by the plaintiff to the defendant on the merits . If successful in such a claim, the statutory debt resulting from the adjudication determination will effectively be negated. This has been the nature of the plaintiff’s claim in some of the cases in which a stay has been sought in respect of a judgment founded on an adjudication determination.

79 Thirdly, a plaintiff might not challenge either the validity of the adjudication determination or the merits of the entitlement of the defendant to a progress payment in the amount awarded by the adjudicator. Rather, the plaintiff might claim that it is entitled to set off a liquidated or unliquidated claim for breach of contract which does not directly impact the entitlement of the defendant to the progress payment. This was apparently the situation in Vadasz v Bloomer Constructions (Qld) Pty Ltd.

80 In the present case, Romaldi in its District Court action did not challenge the validity of the adjudication determination, nor did it claim that on the merits Linings was not entitled to payment of a progress payment for $48,194. Rather, Romaldi pleaded that it had a claim for damages for loss of bargain due to breaches of contract by Linings. The first question which the Judge at first instance was required to decide was whether Romaldi established by evidence in the District Court that it had a relevant prospect of success on its claim for damages.

The claim for damages for breach of contract

81 Romaldi’s statement of claim pleaded that Linings breached the Subcontract by failing to progress the work in accordance with the program. It provided particulars of the breaches by referring to five emails sent by Romaldi to Linings but did not identify the breaches in terms. Romaldi then pleaded that on 15 November 2012 it issued to Linings a notice requiring it to remedy its breaches and on 20 November 2012 it wrote to Linings stating that it intended to take the work out of Linings’ hands. It pleaded that on 26 November 2012 Linings ceased working on the project. It pleaded that it then completed the works using materials and third party labour for which it paid $151,849. Romaldi did not plead that it terminated the contract, although it claimed loss of bargain damages.

82 In his supporting affidavit, Mr Romaldi did not depose to any facts constituting the alleged breaches of contract by Linings in progressing the works between September and November 2012. He did not address the events of September to November 2012 relevantly at all. Romaldi did not adduce any evidence of breach of contract by Linings, any termination of the Subcontract by Romaldi or an entitlement of Romaldi to terminate the Subcontract.

83 Romaldi failed to demonstrate that it had an arguable case against Linings for damages for breach of contract. Linings failed in limine in establishing the necessary ground for grant of a stay.

Risk of inability to pay adjudication amount

84 As observed above, in order to make out a ground for a stay, it was also necessary for Romaldi to demonstrate that that there was a relevant risk that Linings would be unable to pay the adjudication amount if Romaldi established that it was entitled to set off damages against the adjudication amount.

85 In the context of whether Romaldi established a ground for the grant of a stay, it was sufficient that Romaldi establish a significant risk of Linings’ inability to pay in the postulated circumstances. Such a risk might be described as a “real risk” or a “not insubstantial risk”. Because it is part of establishing that, absent grant of a stay, there is a risk that the action will be rendered nugatory if the plaintiff is successful, it is not necessary that there be a “high level of likelihood” of inability to pay in the postulated circumstances.

86 The Judge at first instance concluded that there was a real risk of Linings’ inability to pay the amount of the adjudication determination if it were required to do so. The question whether that finding was justified by the evidence is complicated by the manner in which the evidence was adduced and the events at the hearing on 7 March 2013.

87 Romaldi filed in support of its application affidavits sworn by Mr Romaldi on 20 February and Ms Visintin on 21 February 2013. On 22 February 2013 directions were made for an answering affidavit by Linings on the basis that no further affidavits by Romaldi would be filed. On 1 March 2013 an answering affidavit by Mr Struck was filed and served.

88 On 4 March 2013, contrary to the directions which had been made, Romaldi filed and served a second affidavit by Ms Visintin. This affidavit was highly significant because it referred, on information and belief, to two large debts allegedly outstanding by Linings to creditors not mentioned in the original affidavits filed by Romaldi.

89 In its outline of submissions, Linings objected to the admissibility of Ms Visintin’s second affidavit on the ground that it contained hearsay evidence. Because the application was interlocutory in nature, the mere fact that the affidavit was based on hearsay was not necessarily a reason to exclude it. However, the Judge had a discretion in the circumstances not to receive the affidavit. The Judge did not rule on the objection during the hearing, nor did he do so in his reasons for judgment. He did not refer to the affidavit in his reasons for judgment, nor did he make an explicit finding about the alleged debts the subject of Ms Visintin’s first or second affidavits.

90 The Judge erred by not ruling on whether he should admit Ms Visintin’s second affidavit. There were competing considerations. On the one hand, the alleged debts referred to in the affidavit were significant and would have had a major bearing on an assessment of Linings’ ability to pay. On the other hand, in the case of one alleged creditor, no documents were exhibited and the affidavit was based solely on oral information and, in the case of the other alleged creditor, an email and recipient created tax invoices were exhibited but they raised various questions which were not addressed in the affidavit. The affidavit was filed and served late making it difficult for Mr Struck to respond adequately before the hearing. In the absence of a response from Mr Struck, it would have been difficult for the Judge to make factual findings about the alleged debts, given that Mr Struck was not cross-examined on his assertions of solvency and the Judge did not have available a clear joinder of issue in the absence of a response from Mr Struck or cross-examination of Mr Struck on his affidavit. The Judge also erred by not making explicit findings on the existence, amount and circumstances of the various debts alleged by Romaldi.

91 In his reasons for judgment, the Judge on appeal referred to Mr Romaldi’s affidavit, Ms Visintin’s first affidavit and Mr Struck’s responding affidavit. On the basis that those three affidavits comprised the relevant evidence, the Judge on appeal concluded that Romaldi had not demonstrated a sufficiently high risk of inability to pay. On the basis of those three affidavits, I agree with his analysis. The February affidavits referred to potentially three debts of Linings. An email from the first alleged creditor referred in ambiguous terms to a debt of approximately $15,300. Insufficient information was provided from which any finding could be made that there was any debt in existence at February 2013. In any event, Mr Struck’s evidence in his responding affidavit that a claim was made by Linings against that company, the dispute had been resolved at a conciliation conference and there was no debt owed by Linings was not challenged or contradicted. An email from the second alleged debtor referred merely to the creditor “having taken steps to start recovery of outstanding amounts”. There was no indication of the amount involved, when it was incurred or what steps had been taken by the creditor. The third creditor had obtained a judgment debt for $2,479. Mr Struck’s explanation in his responding affidavit that Linings had overlooked payment of that debt was not challenged or contradicted.

92 The Judge on appeal did not refer to Ms Visintin’s second affidavit. It is likely that this was because the Judge at first instance made no explicit reference to it in his reasons for judgment, and made no explicit factual findings on the alleged debts of Linings. Ms Visintin’s second affidavit referred to alleged debts due by Linings to two creditors not previously mentioned in amounts of $87,889 and in excess of $40,000 respectively. If debts in those amounts had been proved, they were highly significant to the risk of Interiors’ inability to pay Romaldi if Romaldi were ultimately successful in its District Court action. However, the status of Ms Visintin’s second affidavit was not resolved as described at [89]-[90] above.

Conclusion

93 Romaldi failed to establish a ground for the grant of a stay because it failed to establish that it had prospects of success on its claim for damages.

Exercise of discretion

94 Since Romaldi failed to establish a ground for the grant of a stay, the question of exercise of the discretion does not arise. However, because of the decision and approach of the Magistrate to the application in the Magistrates Court for a stay, it is desirable to address the criteria which were relevant on an application for a stay.

Strength of plaintiff’s claim

95 On an application for stay of execution of a judgment founded on an adjudication certificate, an important criterion is the strength of the plaintiff’s claim.

96 The Judge at first instance did not assess Romaldi’s prospects of success on its claim for damages for breach of contract. He said:

The defendant [Linings] submits that it has good prospects of defeating the plaintiff’s claim and being successful in its cross-action in these proceedings. Further, it is likely to be many months before these proceedings will be finally determined. In that regard I find that it is not possible to predict the outcome of these proceedings on a basis of the material placed before me. On the other hand there is no question that there will be a long delay before these proceedings are finalised. That delay is a relevant consideration tending against the granting of an injunction.

97 As observed above, Romaldi failed to adduce sufficient evidence to establish breach of contract by Linings or that it was entitled to loss of bargain damages. The Judge ought to have concluded that Romaldi had not established that it had any claim.

98 The Judge at first instance erred in determining that Romaldi had made out an entitlement to a stay of execution and in turn to an injunction restraining the obtaining or filing of an adjudication certificate.

Likelihood of inability to repay

99 Before the Judge at first instance and the Judge on appeal, there was a debate between the parties whether, in the exercise of the discretion, the relevant question is whether there is a real risk or a high level of likelihood of inability to repay.

100 Once a ground for grant of a stay has been established, the exercise of the discretion involves balancing all relevant considerations, giving each consideration the weight which it deserves. This is analogous to the discretion exercised on an application for security for costs. If a plaintiff has a very strong case and the defendant will suffer very little prejudice if a stay is granted, the risk of inability to pay might be relatively low and yet the discretion exercised in favour of grant of a stay. Conversely, if a plaintiff has a very weak case and the defendant will suffer substantial prejudice if a stay is granted, a relatively high likelihood of inability to pay may be required for grant of a stay or may not even suffice to justify grant of a stay. The level of risk of an inability to pay is simply another factor to be taken into account in the overall balancing exercise of the discretion, assuming that a ground for grant of a stay has been established.

101 The position was aptly summarised by McDougall J in Veolia Water Solutions v Kruger Engineering (No 3) as follows:

… in any particular case, the application of those principles, and the balancing of the various considerations, will require careful attention. For example, each case will require close analysis of the extent or certainty of the risk of prejudice or damage, if a stay is not granted …

and in RSA (Moorvale Station) Pty Ltd v VDM CCE Pty Ltd as follows:

I remain of the view that in considering whether or not to grant a stay, it is necessary to see what risk there is to the applicant for a stay, other than the simple and unquantified risk that the respondent to the application for a stay will become insolvent, if a stay is granted; to take into account the prejudice to the respondent to the application for a stay if the stay is granted; and to take into account the policy of the Act.

Potential prejudice to Linings if stay granted

102 In his affidavit, Mr Struck deposed to the fact that, for a relatively small business, the adjudicated amount was a significant sum and Linings required payment to replenish its own resources and for ongoing and future operations. In his reasons for judgment, the Judge at first instance referred to this factor.

Prima facie effect of the Act

103 As observed at [108] below, the Act proceeds on the basis that, prima facie , the risk that a contractor or subcontractor will be unable to refund progress payments upon the final determination of the respective rights of the parties is assigned to the owner or head contractor. This is a strong factor to be taken into account in the overall exercise of the discretion. The Judge at first instance referred to this factor.

Entitlement of Linings to the progress payment

104 The adjudicator, Ms Toffoli, determined that Linings was entitled to a progress payment of $48,194 from Romaldi. In its statement of claim, Romaldi pleaded as a historical fact that in September 2012 Romaldi had made an assessment of the value of work performed to date by Linings and issued a written assessment of that value at $6,069. However, Romaldi did not plead as an objective fact what the true value was of the work performed to date (as opposed to it historical assessment).

105 The objective value of work completed to date was not a material fact in Romaldi’s claim. In its statement of claim, Romaldi did not challenge Linings’ contractual entitlement to payment of a progress claim in that amount. The statement of claim rather proceeded on the basis that Linings’ acknowledged entitlement to payment of the progress claim would simply increase Romaldi’s damages for breach of contract as explained at [18], [80] and [81] above. 106 In Mr Romaldi’s supporting affidavit, he did not depose to any facts by reason of which Ms Toffoli’s determination was wrong on the merits or that, on the true facts, Romaldi had not been obliged to make a progress payment to Linings in that amount by the end of October 2012 under the terms of the Subcontract.

107 In most of the decided cases in which a stay has been sought, the plaintiff challenged the ultimate entitlement of the defendant on the merits to a progress payment under the contract or the relevant Act.

108 Romaldi did not contest in the District Court action that, under the terms of the Subcontract, it ought to have paid the progress payment to Linings by the end of October 2012. It relied upon a set-off of damages arising from events allegedly occurring subsequently in November 2012. Whenever a principal or head contractor pays progress claims, there is always a risk that subsequent events will result in claims against the contractor or subcontractor for amounts in excess of the progress claims paid and that they will not be recovered because of the financial position of the contractor or subcontractor. Where the contract provides for payment of progress claims, the contract assigns that risk to the principal or head contractor. Where the Act requires the payment of progress payments, likewise it assigns that risk to the principal or head contractor. The position was explained by Keane JA (as he then was) in RJ Neller Building Pty Ltd v Ainsworth :

It is evidently the intention of the BCIP Act, … that the process of adjudication established under that Act should provide a speedy and effective means of ensuring cash flow to builders from the parties with whom they contract, where those parties operate in a commercial, as opposed to a domestic, context. This intention reflects an appreciation on the part of the legislature that an assured cash flow is essential to the commercial survival of builders, and that if a payment the subject of an adjudication is withheld pending the final resolution of the builder's entitlement to the payment, the builder may be ruined.

The BCIP Act proceeds on the assumption that the interruption of a builder's cash flow may cause the financial failure of the builder before the rights and wrongs of claim and counterclaim between builder and owner can be finally determined by the courts. On that assumption, the BCIP Act seeks to preserve the cash flow to a builder notwithstanding the risk that the builder might ultimately be required to refund the cash in circumstances where the builder's financial failure, and inability to repay, could be expected to eventuate. Accordingly, the risk that a builder might not be able to refund moneys ultimately found to be due to a non-residential owner after a successful action by the owner must, I think, be regarded as a risk which, as a matter of policy in the commercial context in which the BCIP Act applies, the legislature has, prima facie at least, assigned to the owner.

The mere existence of the very kind of risk on which the provisions of the BCIP Act in favour of the builder are predicated would not ordinarily be sufficient of itself to justify a stay of an execution warrant based on the registration of a certificate of adjudication. There may, of course, be other circumstances, which, together with this risk, justify the staying of a warrant of execution based on the registration of an adjudication certificate. For example, the builder may have engaged in tactics calculated to delay the ultimate determination of the rights and liabilities of the parties so as unfairly to increase the owner's exposure to the risk of the builder's insolvency. Or the builder may have restructured its financial affairs after the making of the building contract so as to increase the risk to the owner of the possible inability of the builder to meet its liabilities to the owner when they are ultimately declared by the courts. In this case there are no such circumstances.

109 In that case, unlike the present case, there was a challenge to the validity of the adjudication and to the entitlement of the builder to the progress payment.

110 The lack of a challenge to the contractual debt was a powerful factor against grant of a stay. The Judge at first instance did not have regard to this factor.

Conclusion

111 On the evidence adduced, Romaldi failed to prove that it had a viable case for damages for breach of contract against Linings and hence that it was exposed to a risk of prejudice if there were no stay of execution of the judgment debt.

The appeal from the Magistrate

112 The Magistrate summarily dismissed Romaldi’s application for a stay. He did not exercise his own discretion to determine whether a stay should be granted. He held that the application for a stay was an attempt to circumvent the outcome of the adjudication and of the decision by the Judge on appeal.

113 The Magistrate erred in refusing to entertain and determine the application for a stay on the merits. He erred in his characterisation of the application as an attempt at circumvention. Any conclusion by the Judge on appeal that the application for an interlocutory injunction to restrain obtaining an adjudication certificate was an attempt to circumvent the outcome of the adjudication or to circumvent the Act had no application to an application for a stay of execution of the judgment. Nor could it be said that the application for a stay was an attempt to circumvent the decision of the Judge on appeal given that the primary reason for his decision was the lack of any ground to restrain Linings from obtaining an adjudication certificate.

114 The decision by the Judge on appeal was incapable of giving rise to res judicata or issue estoppel so as to preclude Romaldi from adducing evidence before the Magistrate and making an application for a stay on the merits. The doctrines of res judicata and issue estoppel generally do not apply to interlocutory determinations. In general, a party is at liberty to make successive interlocutory applications without being precluded by the doctrines of res judicata or issue estoppel (albeit the doctrine of abuse of process may have application particularly if repeated applications are made on the basis of the same evidence).

115 The Magistrate ought to have heard the evidence which the parties wished to adduce and made his own determination on the merits whether a stay should be granted. In making such determination, the Magistrate was entitled to give such weight as he thought appropriate to the reasoning of the Judge on appeal.

116 Although the Magistrate erred in his approach, Romaldi made it clear in the Magistrates Court that it intended to rely upon identical evidence to that adduced in the District Court. In those circumstances, it was inevitable that the application for a stay would be dismissed upon the merits because Romaldi failed to establish that it had a viable claim for damages for breach of contract.

117 It follows that, notwithstanding his error in approach, the appeal against the orders made by the Magistrate should be dismissed.

Conclusion

118 I would dismiss both appeals. I would hear the parties as to consequential orders.

119 STANLEY J: I would dismiss both appeals. I agree with the reasons of Blue J.