Supreme Court

New South Wales

Case Title: FAL Management Group v Denham Constructions

Medium Neutral Citation: [2014] NSWSC 747

Hearing Date(s): 04/06/2014

Decision Date: 04 June 2014

Jurisdiction: Equity Division - Technology and Construction List

Before: McDougall J

Decision: Application for interlocutory injunctive relief dismissed with costs.

Catchwords: BUILDING AND CONSTRUCTION – building contracts - adjudication determinations – whether plaintiff can appropriate payment made in respect of an earlier adjudication determination against a later payment claim

PROCEDURE - interlocutory injunctive relief - whether as a matter of discretion relief should be granted

PROCEDURE - costs - general rule costs follow the event

Legislation Cited: Building and Construction Industry Security of Payment Act 1999 (NSW)

Cases Cited: Pacific General Security Limited v Soliman & Sons Pty Limited [2005] NSWSC 378

Category: Procedural and other rulings

Parties: FAL Management Group Pty Ltd as trustee for TF Investment Trust (Plaintiff)

Denham Constructions Pty Ltd (First Defendant)

Navid King (Second Defendant)

Adjudicate Today Pty Limited (Third Defendant)

Representation

- Counsel: Counsel:

D S Weinberger (Plaintiff)

M Christie SC / J E Davidson (Defendants)

- Solicitors: Solicitors:

Thomsons Lawyers (Plaintiff)

Crisp Legal (First Defendant)

King Lawyers (Second Defendant)

Moray & Agnew (Third Defendant)

File Number(s): 2014/164889

JUDGMENT (EX TEMPORE - REVISED 4 JUNE 2014)

1 HIS HONOUR: The plaintiff and the first defendant are parties to a construction contract dated 16 October 2013. On 27 March 2014, the first defendant served payment claim number 5 on the plaintiff. On 9 April 2014, the plaintiff served payment schedule number 5 on the first defendant. There was a difference of some $266,606.25 between the claimed amount and the scheduled amount. On 23 April 2014, the plaintiff paid the first defendant the scheduled amount.

2 The residual dispute in relation to payment claim 5 was submitted to adjudication. The third defendant is the authorised nominating authority. It referred the application to the second defendant who accepted it and (in circumstances that are to some extent controversial) caused notice of his acceptance to be given to the plaintiff and the first defendant.

3 Before the second defendant prepared his adjudication determination, and on 29 April 2014, the first defendant served payment claim number 6 on the plaintiff. The claimed amount was $1,474,172.03. The plaintiff served its payment schedule number 6 on 12 May 2014. The scheduled amount was $796,173.27.

4 In the meantime, the second defendant was proceeding with his task under the Building and Construction Industry Security of Payment Act 1999 (NSW) (the Act). He took the view that the plaintiff had not provided an adjudication response in time, and accordingly dealt with the application without looking at the matters raised in the adjudication response. The view that the second defendant formed was based on enquiries made by him of the third defendant, which apparently revealed, according to the third defendant, that notice of the second defendant's acceptance of the adjudication application had been given to the plaintiff by fax on 5 May 2014.

5 The plaintiff's case is that it did not receive notification of the acceptance until 9 May 2014. If the plaintiff is correct, it had some short time thereafter within which to lodge the adjudication response and, on its case, it did so. If the second defendant's view were correct, the plaintiff was out of time when it did so.

6 The plaintiff complains that the second defendant had regard to material that was not properly before him and which he had obtained in an impermissible manner from the third defendant. It complains, more generally, that the second defendant applied the wrong test because he looked at what he understood to be the date when notice was given and not the date when notice was received.

7 In support of the latter point, the plaintiff relied on some observations made by me, in Pacific General Security Limited v Soliman & Sons Pty Limited [2005] NSWSC 378 at [25], on s 20 of the Act. I said, in substance, that receipt of the notice of acceptance was the fact that set the clock running and that provided the fact and the time of service, at least for the purposes of s 31(1)(c) of the Act.

8 Regardless, the plaintiff's underlying and fundamental complaint is that the second defendant did not perform his statutory task, and denied the plaintiff natural justice, because he did not consider its adjudication response.

9 Quite where this will go is an interesting matter in circumstances where, presumably, the payment claim and payment schedule had both been put before the adjudicator through the adjudication application. Presumably, the adjudicator carried out his statutory obligation to "consider" those documents (see s 22(2)(c)(d) of the Act). Since the adjudication response could not have gone further than the payment schedule, in terms of reasons for non-payment, it may be wondered whether, at a practical level, there was any real denial of natural justice. Given that this is an interlocutory application, that potentially interesting question has not been explored.

10 It may be - I do not know - that the effect of the second defendant's course was that although he remained bound to consider the reasons for nonpayment, he deprived the plaintiff of the opportunity to have its submissions duly made in support of those reasons, and relevant documentation in support of those reasons, before the adjudicator for his consideration.

11 The adjudicator made his determination on 19 May 2014. He determined that the adjudicated amount in respect of payment claim number 5 was $953,809: roughly $8,000 less than the claimed amount in the payment claim itself.

12 For whatever reason, the plaintiff did not challenge the determination. On the contrary, it paid the difference between the claimed amount and the scheduled amount, namely $266,606.27. It did so on 26 May 2014. So far as the evidence goes, it did not purport to do so "under protest" (I am not to be taken as expressing a view that this might have had any relevance on the interlocutory application). Nor did it seek to challenge the determination, including by way of seeking an interlocutory injunction restraining enforcement of it through the usual mechanisms (including the recovery of judgment in the circumstances contemplated by s 25 of the Act).

13 Notwithstanding that apparently considered and unforced decision, perhaps made for commercial reasons which have not been explained, the plaintiff now wishes in effect to have the determination quashed, by relief in the nature of certiorari. It wishes to do that, as I understand it, because it would like to have the amount paid by it in excess of the scheduled amount appropriated towards its obligations under payment claim 6 (in respect of which, also, there is likely to be an adjudication).

14 The application was argued on the basis that there was a serious question to be tried as to whether, in the circumstances that I have described, the plaintiff had been denied natural justice in respect of the adjudication conducted over payment claim 5. Whether or not there was a denial would depend on resolution of the question as to when notice of acceptance, for the purposes of s 20(1) of the Act, had been given to the plaintiff. That would involve first, perhaps, some issue of fact as to when the fax notification was sent and received (if it was received at all). It would involve, next, legal argument as to what it is - faxing or receiving – that starts time running. My tentative view is that what I said in this topic on Pacific General at [25] was correct. Certainly, it reflects the express language of s 20(1)(b) of the Act, which sets an outer time limit, for lodging an adjudication response, of "2 business days after receiving notice of...acceptance...".

15 However, it seems to me, there are compelling discretionary reasons why interlocutory relief should not be granted. I leave aside the width of the relief sought by the notice of motion, because, very sensibly, the plaintiff has abandoned three of the paragraphs in question. But in respect of the paragraphs that remain, what the plaintiff is seeking to do is in substance to have the Court cure, or reverse the consequences of, what on the evidence is a commercial decision made by the plaintiff, unconstrained by any misapprehension or coercion, to pay the balance due once the second defendant had given his determination on payment claim 5.

16 Taking into account the policy of the Act - that disputes as to progress payments should be settled swiftly but on an interim basis - and marrying this with the proposition that, so far as the evidence goes, the plaintiff was not influenced in any way, in the decision that it took, by anything attributable to the first defendant, I do not regard this as an appropriate case for the grant of interlocutory relief.

17 I accept that if there is to be a final hearing on the application (that is to say, the summons), that final hearing should occur as swiftly as the nature of the case and the availability of judicial resources permits. But I do not see any basis for using the Court's supervisory powers over adjudicators to undo the effects of the commercial decision that was made.

18 I should note that the relief sought extended beyond the determination and its consequences. It seems that, in relation to payment claim 6, the first defendant has both given a "show cause" notice under cl 44.7 of the contract and intimated an intention to suspend work, relying on s 16(2)(b) of the Act. In each case, the action was taken because the plaintiff has paid less than the scheduled amount in respect of payment claim 6. The stance taken by the plaintiff in effect assumed that it should be entitled, as it now seeks to do, to appropriate the payment made by it in respect of the determination against its obligations under payment claim 6.

19 Although the relief sought is distinct, in the sense that it relies on the contract as to one case and on a statutory but quasi-contractual remedy (suspension of work) as to the other, nonetheless, it seems to me, the discretionary considerations that I have outlined dictate that the plaintiff should not have relief in respect of those matters also.

20 I order that the notice of motion filed on 2 June 2014 be dismissed with costs.

21 I adjourn the matter to the directions list on Friday 6 June 2013.

22 I direct that the exhibits on the application be handed out.

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