Supreme Court New South Wales Medium Neutral Citation: Smith v Impero Pacific Group Pty Ltd t/as Impero Constructions [2024] NSWSC 1234 Hearing dates: 26 September 2024 Date of orders: 26 September 2024 Decision date: 26 September 2024 Jurisdiction: Equity - Technology and Construction List Before: Stevenson J Decision: Proceedings stayed until the plaintiff pays into Court the sum of the adjudication determination Catchwords: BUILDING AND CONSTRUCTION – adjudication – adjudicated amount – where plaintiff commenced these proceedings seeking to quash an adjudication determination – where first defendant registered adjudication certificate – where judgment now entered against plaintiff – where first defendant seeks stay of these proceedings until plaintiff pays into Court the adjudicated amount – where plaintiff has no present ability to pay amount into Court – where plaintiff's assets exceed her liabilities – where secured creditor in possession and about to exercise power of sale over plaintiff's principal assets Legislation Cited: Building and Construction Industry Security of Payment Act 1999 (NSW) Cases Cited: Nazero Group Pty Limited v Top Quality Construction Pty Limited [2015] NSWSC 232 Surfabear Pty Ltd v GJ Drainage & Concrete Construction Pty Ltd [2009] QSC 308 Tombleson v Dancorell Constructions Pty Limited [2007] NSWSC 1169 Category: Procedural rulings Parties: Samantha Smith (Plaintiff/Respondent) Impero Pacific Group Pty Ltd trading as Impero Constructions (First Defendant/Applicant) John O'Brien (Second Defendant) Representation: Counsel: M Sheldon / J M Kadar (Plaintiff/Respondent) F Hicks SC (First Defendant/Applicant) Solicitors: ITC Law Pty Ltd (Plaintiff/Respondent) Construction Legal (First Defendant/Applicant) Lauderdale Construction Lawyers (Second Defendant) File Number(s): 2024/292680 EX TEMPORE JUDGMENT (REVISED) 1. The plaintiff, Ms Samantha Smith, owns a property in Northbridge. 2. On 3 April 2020, she entered a cost plus contract with the first defendant, Impero Pacific Group Pty Ltd, to demolish the home that then existed on the Northbridge property and to construct an alternative residence. 3. The original contract value was $4.4 million. Evidently, because of a large number of variations, the contract value increased to $8.3 million. 4. On 14 March 2024, Ms Smith's financier, Aura Loan Management Pty Ltd, exercised its "step-in" rights under a tripartite agreement between it, Ms Smith and Impero, and terminated the contract. 5. Aura is now in possession of the Northbridge property and has listed it for sale. 6. Following the exchange of a payment claim, payment schedule, adjudication application and adjudication response under the Building and Construction Industry Security of Payment Act 1999 (NSW) ("the Act"), Impero now has the benefit of an adjudication determination made on 23 July 2024 that Ms Smith pay it $419,183.16. 7. On 9 August 2024, Ms Smith commenced these proceedings seeking to quash that adjudication determination. 8. The first return date of Ms Smith's Summons was last Friday, 20 September 2024. Although Ms Smith's solicitors have encouraged Impero's then solicitor to proceed with the matter as quickly as possible, it has not yet served a List Response. 9. Impero recently engaged a new solicitor, and by Notice of Motion filed on 19 September 2024, now seeks an order that the proceedings be stayed until Ms Smith pays into Court the amount of the adjudication determination, or otherwise secures that amount. 10. On 16 August 2024, shortly after Ms Smith filed her Summons, Impero caused the adjudication certificate it had obtained to be registered at the District Court of New South Wales. Judgment was entered in favour of Impero against Smith in the total amount of $459,448.95. 11. In her Summons, Ms Smith did not seek any interlocutory relief to restrain Impero from exercising its rights under the Act, and has not taken any step to seek a stay of the District Court judgment now entered against her. 12. There was a delay by Impero in filing its motion. Their motion was filed some six weeks after the proceedings were commenced and over a month after it obtained judgment. However, it is for me now to decide what is to be done in relation to it. 13. In the course of argument today, I have heard competing submissions as to Ms Smith's prospects of quashing the adjudication. This is not the occasion for me to express any view about that, save to record that, as Mr Hicks SC for Impero accepted, Ms Smith's case is arguable. 14. The difficulty is that Ms Smith cannot, at the moment, pay any money into Court. She owns three properties. One is the Northbridge property which, as I say, is encumbered by a mortgage in favour of Aura, which company is now in possession. Ms Smith also owns a property at Wildes Meadow. Aura is also the mortgagee of that property, is in possession of it, and has listed that property for sale. Ms Smith also owns a property at Whyalla, which is also encumbered. 15. On the basis of Ms Smith's estimate of the value of all of those properties, and as is common ground for present purposes, her net equity in the properties is a little under $2 million. However, that net equity will only be available to Ms Smith once the sales proceeds of those properties are realised, presumably, in relation to Northbridge and Wildes Meadow, by Aura. 16. I accept that Ms Smith has no present ability to pay any money into Court or to pay into Court the amount of the adjudication. 17. Mr Sheldon, who appeared with Mr Kadar for Ms Smith, submitted that were an order to be made of the kind sought by Impero, the proceedings would be stultified. I think that overstates things a little. 18. Certainly, if I were to order that the money be paid into Court, the proceedings will be stayed until the money is paid into Court. That circumstance will exist for some time, presumably until at least such time as Aura exercises its rights as mortgagee, and Ms Smith is ultimately placed in funds as to the surplus. There is no indication in the evidence as to how long that process would take. But there is no reason to think, on the basis of the evidence before me, that the Northbridge property and Wildes Meadow property are unsaleable, and thus no reason to doubt that in due course the plaintiff will be placed in funds which would enable her to make the payment into Court that would customarily be made in circumstances like this. 19. The plaintiff's financial position has, of course, consequences for Impero itself. Were there to be no stay, and the matter to proceed to a hearing, estimated to be at least two days, Impero will incur costs which, if it be successful and obtains a costs order, would not be recoverable until such time as Ms Smith is in a position to pay. It may well be that, as a practical matter, Impero is in any event in a position where it would not be able to recover any such amount for costs nor enforce its current judgment until such time as Ms Smith's assets are realised, and she is placed in funds. 20. Notwithstanding the fact that the Act now applies to residential building work, this is the first case of which I am aware where an individual, claiming to be an owner of a residential building, seeks relief under the Act. 21. It is also the first case of which I am aware where an applicant for relief under the Act relies upon an inability to pay an adjudicated amount as a basis for resisting payment into Court. 22. Ms Smith is not in the Summons, or at all, seeking to set aside the judgment that Impero has obtained. For that reason, s 25(4)(b) of the Act is not engaged in terms. Nonetheless, it is common ground that I have a discretion to order that the funds be paid into Court and order a stay absent such payment. 23. My attention has been drawn to the decisions of Bergin J, as her Honour then was, in Tombleson v Dancorell Constructions Pty Limited, [1] and the judgment of Hammerschlag J, as the Chief Judge then was, in Nazero Group Pty Limited v Top Quality Construction Pty Limited. [2] 24. I do see this case as different from the circumstances before her Honour in Tombleson. Her Honour's reasons suggest that what was the primary motivation in her Honour's decision to order a stay was her concern that the plaintiff in that case had sought by its pleadings to "avoid the triggering of s 25(4) of the Act". [3] I do not see those circumstances obtaining here. 25. The circumstances in Nazero were similar to those here, save that there was no question of an inability to pay funds into Court. I agree with the observations that Hammerschlag J made at [40] of that judgment concerning the general policy aims of the Act, which reflect, here, Impero's prima facie entitlement to recover the fruits of the adjudication determination: "pay now, argue later". 26. It is also true, however, as Hammerschlag J pointed out: [4] "A principled approach as to whether a plaintiff should be required to pay money into Court (and if so, how much) where it challenges an adjudication determination, but there is no judgment, requires, because it involves the exercise of discretion, that regard be had to the particular circumstances of the case. For this reason, such orders should not be made by rote, and it is not correct to say that they are required whenever a person brings proceedings to challenge an adjudication and s 25(4)(b) of the Act is not in play; c.f. Surfabear Pty Ltd v GJ Drainage & Concrete Construction Pty Ltd." [5] 1. The circumstances before me are finely balanced. This is one of those cases where hardship will be caused to one party or other no matter what decision is made. 2. What has persuaded me, overall, to grant the relief sought by Impero and to stay these proceedings until such time as Ms Smith can pay the adjudicated amount into Court is that her financial position will, assuming her current estimates as to value and her indebtedness are correct, improve once her assets are realised. As I say, it is not clear by what time that will happen, but it will probably occur over the next six months or so. 3. My conclusion is that the preferable course in those circumstances is to stay the proceedings until such time as Ms Smith is in a position to pay the funds into Court and to thus demonstrate her ability to meet the adjudication determination were she to be unsuccessful in her application to quash it. 4. In those circumstances, I make the orders in accordance with pars 1 and 3 of the first defendant's motion of 19 September 2024. ********** Endnotes 1. [2007] NSWSC 1169. 2. [2015] NSWSC 232. 3. See [25]. 4. At [33]. 5. [2009] QSC 308 at [34]-[42]. 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: 01 October 2024