Supreme Court New South Wales Medium Neutral Citation: Shotcrete Australia Pty Ltd v Libdy Developments Pty Ltd t/as Civil Transport [2021] NSWSC 783 Hearing dates: 15 June 2021 Decision date: 15 June 2021 Jurisdiction: Equity Before: Ward CJ in Eq Decision: Motion filed 16 March 2021 by T1 Constructions 1. Dismiss the notice of motion filed 16 March 2021 by T1 Constructions Pty Ltd for payment into court of the amount of $259,870. 2. No order as to costs of the motion filed 16 March 2021 by T1 Constructions Pty Ltd. Motion filed 18 February 2021 by Shotcrete 1. Order that T1 Constructions Pty Ltd pay the sums of $259,870 and $53,400 to the plaintiff Shotcrete Australia Pty Ltd. 2. Order that Libdy Developments Pty Ltd and T1 Constructions Pty Ltd be jointly and severally liable for the costs of Shotcrete Australia Pty Ltd of the motion filed 18 February 2021, such costs to be payable forthwith on the ordinary basis. Catchwords: JUDGMENTS AND ORDERS — Enforcement — Garnishee order — Discretion to make order absolute Legislation Cited: Building and Construction Industry Security of Payment Act 1999 (NSW), Div 2A, ss 14-16, 24 Civil Procedure Act 2005 (NSW), s 124 Uniform Civil Procedure Rules 2005 (NSW), rr 39.43, 39.34 Cases Cited: Brown v Forrest [2017] NSWSC 1810 Coshott v Coshott [2017] FCA 1239 Lewis v Lamb [2012] NSWSC 244 Re C & L Cameron Pty Ltd; Gazzana v Nadalan Enterprises Pty Ltd [2012] NSWSC 676 Re European Life Assurance Society (1869) LR 9 Eq 122 Westpac Banking Corporation v Morris [1998] NSWSC 666 Category: Procedural rulings Parties: Motion filed 18 February 2021 Shotcrete Australia Pty Ltd (Plaintiff/Applicant) Libdy Developments Pty Ltd (Defendant/Respondent) T1 Constructions Pty Ltd (Respondent) Motion filed 16 March 2021 Shotcrete Australia Pty Ltd (Plaintiff/Respondent) Libdy Developments Pty Ltd (Defendant/Respondent) T1 Constructions Pty Ltd (Applicant) Representation: Counsel: T Davie (Shotcrete) L Chapman (Libdy) D Byrne (T1 Constructions) Solicitors: Peter Merity Solicitor Pty Ltd (Shotcrete) Salim Rutherford Lawyers (Libdy) Dentons Australia (T1 Constructions) File Number(s): 2020/00069335 Publication restriction: Nil Judgment 1. HER HONOUR: Before me for hearing today are two notices of motion. 2. The first is a notice of motion filed on 18 February 2021 by the plaintiff, Shotcrete Australia Pty Ltd (Shotcrete), seeking payment pursuant to s 124 of the Civil Procedure Act 2005 (NSW) (Civil Procedure Act) by T1 Constructions Pty Ltd (T1 Constructions) of two sums of money, the first being $258,870 and the second being $53,400 in circumstances where a garnishee order had been served on T1 Constructions. The complaint made is that T1 Constructions has not paid those amounts which it is said the garnishee order operated to attach in respect of the judgment debt owing to Shotcrete by the defendant in the present proceedings (Libdy Developments Pty Ltd trading as Civil Transport) (Libdy Developments). 3. The second notice of motion is a notice of motion filed on 16 March 2021 by the applicant, T1 Constructions, seeking an order that the applicant pay into Court the sum of $259,870 claimed against the applicant, the applicant there invoking the interpleader provisions in the Civil Procedure Act and rules. Chronology 1. By way of background, by notice dated 21 January 2020, Shotcrete served on T1 Constructions a payment withholding request pursuant to Div 2A of the Building and Construction Industry Security of Payment Act 1999 (NSW) (Building and Construction Industry Security of Payment Act). That payment withholding request noted, amongst other things, that civil engineering work had been carried out by the claimant, Shotcrete, at a site in Mt Druitt and that Shotcrete had been engaged by Libdy Developments to perform works on the site, including shotcrete works, anchoring works and capping beam works under the subcontract. 2. On 2 March 2020, Shotcrete obtained an adjudication certificate in its favour under s 24 of the Building and Construction Industry Security of Payment Act in the sum of $1,224,034.13 against Libdy Developments. Judgment was issued in that amount in this Court. A garnishee order was then made on 24 June 2020 on Shotcrete's application attaching all debts due and accruing from T1 Constructions to Libdy Developments. 3. The terms of the judgment order issued on 24 June 2020 are as follows: All debts due and accruing from T1 Constructions Pty Limited of Unit 122 4 Mount Street MOUNT DRUITT NSW 2770 to LIBDY DEVELOPMENTS PTY. LTD. Trading as CIVIL TRANSPORT at the time of service of this order, other than any wage or salary, are attached, until the amount of $1224225.13, the judgment debt plus any interest which may accrue, is paid or until the Court otherwise orders. The Garnishee is ordered to pay any amount so attached to the judgment creditor within 14 days after the date on which the order is served on the garnishee, or if the debt attached is a debt that falls due after that date, within 14 days after the date on which the debt becomes due. 1. The garnishee order for debts issued on the same day states: 1. It is ordered that all debts that are due or accruing from the garnishee to the judgment debtor at the time of service of this order are attached to the extent of $1223225.13 together with interest in the sum of $25522.46 to answer a judgment in these proceedings. 2. You are ordered to pay any amount so attached to the judgment creditor within 14 days after the date on which the order is served on the garnishee or, if the debt attached is a debt that falls due after that date, within 14 days after the date on which the debt becomes due. 1. By letter dated 10 July 2020, the solicitors acting for Libdy Developments wrote to T1 Constructions asserting that there was no basis for T1 Constructions to continue to withhold payment of sums said to be due and payable to Libdy Developments in respect of work performed by Libdy Developments on the Mt Druitt project and demanding immediate payment of those amounts. 2. By letter dated 15 July 2020, the solicitors acting for T1 Constructions wrote to the solicitors for Shotcrete taking issue with the validity or efficacy of the garnishee order that had been served for a variety of reasons. The letter noted that T1 Constructions intended to comply with any garnishee order properly issued by the Court, but asserted that it had obligations to pay the amounts outstanding and certified as due and owing to Libdy Developments pursuant to the terms of the contract. That letter enclosed a payment schedule which identified all amounts certified as due and owing as at the date of service of the judgment and certified the amount said to be due and owing as $42,930 (exclusive of GST). The attached payment schedule included a payment summary that made reference to the total amounts claimed to date, variations claimed less amounts paid to date leaving a sub total of $355,930 less retention held in the sum of $263,000 and less back charges of $50,000, those back charges being described in the schedule as charges for outstanding or incomplete works. The notation in the payment schedule read: Libdy failed to undertake the work properly and in accordance with the Contract. Failed to rectify defective work in accordance with site instruction including but not limited to those identified in Procore defect list. Libdy indemnifies T1 in accordance with 1.28. Libdy breached the following clauses of the contract: 1.14 of Part D, 1.27 of Part D. 1. By letter dated 16 July 2020, the solicitor acting for Shotcrete wrote to T1 Constructions' solicitors attaching a sealed copy of the garnishee order issued on 24 June 2020 and seeking confirmation as to when the balance of retention moneys would fall due. Reference is made in this context to the provisions of r 39.43 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) which provides that: (1) If a garnishee order attaches a debt that is due for payment to the judgment debtor more than 28 days after service of the order on the garnishee, the garnishee must, within that period of 28 days, cause notice of that fact to be served on the judgment creditor. (2) The notice must specify-- (a) the date on which the debt is, or is likely to be, due for payment to the judgment debtor, and (b) if the amount of the debt is less than the unpaid amount of the judgment debt specified in the garnishee order, the amount of the debt. 1. On 29 July 2020, an amount of $42,930 was paid in respect of the judgment debt by T1 Constructions. 2. By letter dated 30 July 2020, the solicitors acting for T1 Constructions advised that their client had undertaken a contract reconciliation of all amounts due and/or accruing to Libdy Developments as at the date of service of the judgment and the garnishee order and asserted that their client had complied with its obligation pursuant to the judgment and garnishee order, having paid the amount of $42,930 to Shotcrete in accordance with the contract reconciliation. The letter noted that it was the position of Shotcrete that T1 Constructions was required to pay to it all future amounts which became due and/or accruing pursuant to the judgment and the garnishee order. It stated that it was T1 Constructions' current intention to pay all future amounts which become due and/or accruing to Shotcrete pursuant to the judgment and the garnishee order. 3. In the meantime, there appears to have been communication between Shotcrete and T1 Constructions, pursuant to which Shotcrete offered to complete the defect works free of charge. 4. By letter dated 9 October 2020, the solicitors acting for Shotcrete advised the solicitors for T1 Constructions that there had been a conversation between the principal of their client and a Mr Peter Kyrilos of T1 Constructions on 2 October 2020 in relation to the retention held in respect of Libdy Developments; and that Mr Kyrilos had agreed to release that retention on the understanding that doing so would satisfy Shotcrete's claims under the garnishees. Information was sought as to the proposed date of the release of the retention to Shotcrete. 5. By letter dated 12 January 2021, the solicitors for Shotcrete wrote to T1 Constructions' solicitors seeking an explanation as to why moneys had not been paid under the garnishee orders and setting out a history of the matter; as well as making reference to s 124 of the Civil Procedure Act and r 39.43 of the UCPR. Notice was given that, unless the whole of the retention sum of $313,000 was paid by a certain date, then an application would be filed seeking orders pursuant to s 124 of the Civil Procedure Act and costs would be sought on an indemnity basis. 6. On 13 January 2021, T1 Constructions terminated the contract between itself and Libdy Developments on the basis that the latter was not able to fill its time and resource commitment, referring to cl 1.20 of the subcontract and in the alternative asserting that it was the position of T1 Constructions that the inability of Libdy Developments to fulfil its time and resource commitment amounted to repudiatory conduct (which that T1 Constructions accepted as terminating the contract). The letter stated that T1 Constructions had engaged an alternative subcontractor to complete the work and would provide a final reconciliation and account for the subcontract shortly; and that any additional cost incurred in engaging an alternative subcontractor would be an amount due and owing by Libdy Developments to T1 Constructions. 7. By letter dated 14 January 2021, the solicitors acting for T1 Constructions wrote to the solicitors acting for Shotcrete again stating that their client intended to comply with any garnishee order properly issued by the Court, but this time asserting that any moneys which were required to be paid pursuant to any garnishee order could only be paid when moneys were certified as due and owing to Libdy Developments pursuant to the terms of the subcontract. 8. It was then noted that, on 8 January 2021, a final payment schedule had been issued by T1 Constructions to Libdy Developments certifying an amount of $259,870 (exclusive of GST) as due and owing to Libdy Developments and it was stated that T1 Constructions intended to pay the certified amount of $259,870 (exclusive of GST) to Shotcrete pursuant to the garnishee order "shortly". (As it transpired, this did not occur.) 9. The payment of schedule attached to the 14 January 2021 letter included as a deduction from the contract the sum of $53,400 which was comprised of four components outlined in the payment schedule and which appears to include amounts referable to legal expenses, management and administration costs and the like. (I interpose here to note that Shotcrete says that there was no contractual provision permitting this deduction and, in particular, there is nothing that says that formal certification is a precondition of payment of amounts due under the contract.) 10. T1 Constructions relies upon the indemnity provision in its contract with Libdy Developments contained in cl 1.28 which provides that: The Sub-Contractor shall indemnify and keep indemnified the Builder against all losses, costs, demands and expenses whatsoever arising which the Builder may sustain as a result of the breach of the warranty contained above. 1. Additionally, cl 1.27 provides that: Any damaged surfaces/sections caused by the works shall be rectified/restored by the Builder to match the adjoining surface with costs chargeable to the Sub-Contractor. 1. By email dated 20 January 2021, Libdy Developments asserted that T1 Constructions had no right or basis to release any moneys to Shotcrete. Faced with that assertion, T1 Constructions appears to have determined that it would make an application for payment into Court of those moneys in light of the dispute and made an offer to that effect. Shotcrete's position remains that it is entitled to payment of the moneys without deduction for the claimed back charges pursuant to the garnishee order. 2. By letter dated 4 February 2021, the solicitors acting for Shotcrete served on T1 Constructions the original garnishee order in respect of debts owed by Libdy Developments. That then led to the current applications being brought. Submissions 1. As to the application by T1 Constructions to interplead, the position of Shotcrete is that, while the interpleading process may be appropriate where the garnishee funds are the subject of a claim against the judgment debtor by a third party, that procedure is not appropriate where the fund is the subject of a claim by the judgment debtor. 2. Reference is made in this regard to Westpac Banking Corporation v Morris [1998] NSWSC 666 and to the decision of Parker J in Brown v Forrest [2017] NSWSC 1810. It is submitted that in circumstances where the fund or account garnishee is the subject of a judgment debt, and the dispute is one that is raised by the judgment debtor, the interpleader process is not appropriate. 3. T1 Constructions, on the other hand, claims that the interpleader relief it seeks is appropriate in circumstances where Libdy Developments has advised of its intention to bring proceedings against T1 Constructions if it complies with Shotcrete's demand for payment. It submits that, in circumstances where T1 Constructions had previously complied with the garnishee order and a new order has not been obtained by Shotcrete seeking a reduced payment after taking into account the payment previously made by T1 Constructions, there was uncertainty on the part of T1 Constructions as to the enforceability of that order. That said, no authority has been relied upon to suggest that the payment of the sum of around $42,000 in some way extinguished the operation of the garnishee order. I will come back to the submissions made by Libdy Developments in relation to this issue shortly. 4. The second issue in dispute is whether the amount of $53,400 the subject of the claimed "back charges" forms part of the debt due to Libdy Developments which was attached by virtue of the garnishee order. 5. It is submitted for Shotcrete that there is nothing in the contract to justify those amounts as reducing the amount to which T1 Constructions would otherwise be indebted to Libdy Developments and that the debt claimed is the amount before deduction of those amounts in circumstances where the $53,400 claim for back charges is a claim based on an indemnity clause under the contract. In relation to that amount, T1 Constructions' position is that, consistent with ss 14-16 of the Building and Construction Industry Security of Payment Act, T1 Constructions was obliged only to pay Libdy Developments in the amount that it certified in a payment schedule; that the amount it certified in the schedule dated 14 January 2021 was $259,870;, and that no other debts are owing to Libdy Developments. It is submitted that Shotcrete's claim for the $53,400 is really an assertion that T1 Constructions failed accurately to assess the amount owing to Libdy Developments under the construction contract and that any such claim would sound in unliquidated damages which are not attachable by garnishee order. 6. Turning then to the position of Libdy Developments in relation to the current application, Libdy Developments supports the bringing of an interpleader application by T1 Constructions. Libdy Developments emphasises that the underlying dispute between the parties (as articulated in a second further amended statement of claim filed on 30 June 2020) involves a claim by Mr Libdy to a third of the issued capital of Shotcrete; and it raises a concern as to what would happen to amounts paid or recovered under the judgment debt by Shotcrete in advance of the determination of the issues in the substantive proceedings. It was submitted that receipt of those amounts would in some way affect the value of the issued capital of Shotcrete, that being the subject of a claim for relief in the substantive proceedings. 7. Libdy Developments raises issues as to the validity of the garnishee notice which it says Shotcrete bears the onus of establishing as a pre-condition to the exercise of jurisdiction under s 124 of the Civil Procedure Act quoting from the decision of Beech-Jones J in Lewis v Lamb [2012] NSWSC 244 at [27]. 8. It is noted, and all parties accept, that there is a discretion in s 124(2) as to whether or not a judgment should be given on the application of a judgment creditor who considers there has not been compliance with a garnishee order. 9. Libdy Developments submits: first, that the garnishee notice dated 24 June 2020 operates only to attach to the payment which was made by T1 Constructions in the amount of $42,930 as it was only that amount which was due and payable by T1 Constructions to Libdy Developments at the time of service of the due notice and not the entirety of the judgment debt; second, that at the time the June notice was re-served in February 2021 this was in effect to attach an amount which was then claimed beyond the $42,500 because the notice referred incorrectly to the entire judgment debt, reference being made to r 39.34(3) of the UCPR in this context; and, third, that to the extent that the garnishee notice was effective to attach to amounts claimed beyond the first payment, judgment on those additional amounts should be declined having regard to the discretionary considerations raised in its submissions. 10. In particular, albeit raising as a discretionary matter the claimed misdescription of the last debt in the June notice, what was said by Libdy Developments in oral submissions was that it would suffer prejudice if a judgment were to be entered against T1 Constructions in respect of the June notice by reason of Libdy Developments' claim in the principal proceedings. The prejudice identified was that, as a consequence of a judgment in the present application, Libdy Developments would be held out of funds to which it is entitled and notes that its entitlement is not disputed by T1 Constructions. Libdy Developments says that there is fundamentally a dispute to be determined in the principal proceedings as to Shotcrete's entitlement to any of the funds that are the subject of the judgment. It is said that the judgment obtained under the Building and Construction Industry Security of Payment Act was interim in nature only, with the merits to be determined in the principal proceedings. It is submitted that in circumstances where Libdy Developments' claim to the funds presently held by T1 Constructions is accepted by T1 Constructions and not disputed by Shotcrete, it would be unjust and premature to require T1 Constructions to pay those funds at this time to Shotcrete and that the appropriate order is that the disputed amount be paid into court pending the outcome of the substantive hearing between the parties. It is submitted that in that way both of the parties to the substantive proceedings would not suffer prejudice in not having personal access to the disputed amount but that no party will be at an advantage by having access to the pool of disputed funds which ultimately form part of the competing claims in the substantive proceedings. 11. I was taken in the course of submissions to the decision of Bromwich J in Coshott v Coshott [2017] FCA 1239 at [43] where his Honour considered that for the purposes of the garnishee legislation the word "debt" was of wide application and quoted from Re European Life Assurance Society (1869) LR 9 Eq 122 at 127 where James VC defined the word "debt", in a garnishee context, as meaning "a sum of money which is now payable or will become payable in the future by reason of a present obligation". Determination 1. One of the unattractive aspects of the interpleader application is that it would simply lead to a claim for payment out of Court as between the parties based on a final judgment debt that nobody disputed is in existence. Thus, if one turned to the test applicable on an application for payment out of court, it would be difficult to see how such an application would not succeed (see, Re C & L Cameron Pty Ltd; Gazzana v Nadalan Enterprises Pty Ltd [2012] NSWSC 676 at [121]). That is why, in oral submissions, I made reference to the overriding statutory purpose of the just, quick and cheap resolution of the real issues in dispute (s 56 of the Civil Procedure Act) and ultimately why I dismiss the notice of motion filed 16 March 2021. 2. As to the second notice of motion, it seems to me that there are two separate issues to be determined in relation to the claim by Shotcrete in its notice of motion, the first being in relation to the approximate $259,000 sum, which it is not disputed is a debt due to Libdy Developments from T1 Constructions (and which T1 Constructions has no difficulty in paying if this be in accordance with an order of the Court) and to the relatively smaller amount of $53,400 claimed by way of back charges. As to the former, it seems to me that the response by Libdy Developments to the payment out of that amount which is the subject of a judgment debt in Shotcrete's favour is akin to an application for a stay of a judgment debt or an application for a freezing order in respect of proceeds which might otherwise be applied (or dissipated) in prejudice to its ability in due course to obtain the fruits of a judgment if it is ultimately successful in the overall proceedings, but neither of those applications has been brought at this stage. 3. In my opinion, where there is no dispute as to the judgment debt and where it is a debt that has been attached by operation of a garnishee order, the discretion under s 124 of the Civil Procedure Act to order that the recipient of the garnishee order pay that amount should be exercised. It cannot be said in my opinion that the amount the subject of the first part of the claim is so small as to give rise to a reason not to grant such relief and I am not persuaded that the circumstances are such that require that amount to be paid into court pending determination of the substantive claim between Shotcrete and Libdy Developments. 4. What is more problematic is the smaller amount of $53,400 the subject of the claimed back charges. That is because it turned on whether, under the terms of the contract, a claim for an indemnity (in respect of administrative, legal or management costs or the like by reason of a failure under a particular clause of the contract which might be able to be raised by way of a set-off) operates to reduce the debt claimed. I accept that the payment schedule has clarified the debt in a particular amount but I do not accept that that means that the underlying debt itself in the fuller amount does not exist and it seems to me that, properly characterised, the claim for indemnity is a claim for a set-off which presupposes the existence of that debt and that debt has been the subject of a garnishee order. 5. I gave some consideration to whether, because it is a relatively small amount compared to the principal amount claimed, the discretion should be exercised otherwise than to make an order for judgment. However, in all of the circumstances and considering: the lack of express provision for a set off, or reduction, of the debt in the contract, the absence of sufficient evidence to assess the strength of the set off claim, and that the indemnity can still be pursued notwithstanding that the moneys have been paid out, I am satisfied that the relief ought be granted. Orders 1. For those reasons, I make the following orders: Motion filed 16 March 2021 by T1 Constructions 1. Dismiss the notice of motion filed 16 March 2021 by T1 Constructions Pty Ltd for payment into court of the amount of $259,870. 2. No order as to costs of the motion filed 16 March 2021 by T1 Constructions Pty Ltd. Motion filed 18 February 2021 by Shotcrete 1. Order that T1 Constructions Pty Ltd pay the sums of $259,870 and $53,400 to the plaintiff Shotcrete Australia Pty Ltd. 2. Order that Libdy Developments Pty Ltd and T1 Constructions Pty Ltd be jointly and severally liable for the costs of Shotcrete Australia Pty Ltd of the motion filed 18 February 2021, such costs to be payable forthwith on the ordinary basis. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision 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 or Tribunal in which it was generated. Decision last updated: 30 June 2021