New South Wales Supreme Court CITATION : Rubana Holdings Pty Limited v 3D Commercial Interiors Pty Ltd [2008] NSWSC 1405 HEARING DATE(S) : 12 December 2008 JUDGMENT OF : McDougall J at 1 EX TEMPORE JUDGMENT DATE : 12 December 2008 DECISION : See paras [42] to [44] of the judgment. CATCHWORDS : BUILDING AND CONSTRUCTION - Adjudication application - whether determination void - whether adjudicator lacked jurisdiction to deal with application - abuse of process - whether a claimant under the Act can seek to enforce its claim concurrently by proceedings in court and by adjudication - Building and Construction Industry Security of Payment Act 1999. LEGISLATION CITED : Building and Construction Industry Security of Payment Act 1999 Brodyn Pty Ltd v Davenport (2004) 61 NSWLR 421 CASES CITED : Falgat Constructions Pty Ltd v Equity Australia Corp Pty Ltd [2005] NSWCA 49 Holdmark Developers v GJ Formwork [2004] NSWSC 905 Vince Schokman v Xception Construction Pty Ltd [2005] NSWSC 297 PARTIES : Rubana Holdings Pty Limited (Plaintiff) 3D Commercial Interiors Pty Limited (Defendant) FILE NUMBER(S) : SC 55064/08 COUNSEL : T Bland (Plaintiff) S Goldstein (Defendant) SOLICITORS : LAS Lawyers & Consultants (Plaintiff) Leonard Legal (Defendant) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION TECHNOLOGY & CONSTRUCTION LIST McDOUGALL J 12 December 2008 ex tempore (revised 12 December 2008) 55064/08 RUBANA HOLDINGS PTY LIMITED v 3D COMMERCIAL INTERIORS PTY LIMITED JUDGMENT 1 HIS HONOUR: The plaintiff (Rubana) and the defendant (3D) were parties to a construction contract made in about January 2007. Pursuant to that contract, 3D undertook to carry out construction work consisting of renovations to premises owned by Rubana known as the Westmead Tavern. Background 2 There are proceedings on foot in the District Court of New South Wales between Rubana as plaintiff and 3D as defendant. In those proceedings, Rubana claims damages for defective and incomplete work and other matters. 3D defends the proceedings on a number of bases. One of those bases is a defence by way of set-off, relating to a claim of (in round figures) $269,000 said to be outstanding for construction work carried out. 3D has also cross-claimed for essentially the same amount. (There is a difference of a few thousand dollars but there is no doubt that the subject matter of the cross-claim, the subject matter of the defence by way of set-off and the subject matter of the payment claims to which I shall turn in a moment are in substance the same.) 3 3D has served some five payment claims under the Building and Construction Industry Security of Payment Act 1999 (the Act). The first of those claims was served on about 2 August 2007. The second was served on about 24 September 2007. The third was served on about 25 October 2007. The fourth was served on about 14 March 2008. The fifth was served on about 3 June 2008. 4 The District Court proceedings to which I have referred were commenced by the filing of a statement of claim on 17 December 2007. The defence to which I have referred was filed on 17 April 2008. The cross-claim to which I have referred was filed on 26 June 2008. 5 As to the first payment claim: Rubana provided a payment schedule which asserted that no amount was owing by it to 3D; indeed, Rubana asserted, there was an amount owing to it by 3D. 3D purported to refer the dispute thereby constituted to adjudication. An adjudicator, Mr Stojanovksi, was nominated and accepted appointment. 3D sought to "withdraw" its adjudication application. Rubana protested that this could not be done. Nonetheless, Mr Stojanovski allowed, or purported to allow, 3D to withdraw the application. 6 Rubana provided payment schedules to each of the subsequent payment claims. Since the payment claims were either identical or substantially so, the payment schedule provided was in each case in effect the payment schedule originally provided. 7 As to the last payment claim and payment schedule: the dispute thereby constituted was referred to adjudication. An adjudicator, Mr O'Brien, was nominated and accepted appointment. He determined the matter in favour of 3D, by an adjudication determination that concluded that the entire amount sought (in round figures, $265,000) was payable. The issues 8 Rubana claims that Mr O'Brien lacked jurisdiction to deal with the adjudication application in question, and that his determination is void. Thus, it seeks a permanent injunction restraining 3D from filing an adjudication certificate based on Mr O'Brien's determination as a judgment in the District Court, and an injunction in effect preventing 3D from taking any step either to make yet another adjudication application or to enforce whatever rights it may have under Mr O'Brien's determination. 9 Although the summons sought relief against Mr O'Brien, he was not named as a party. It was inappropriate for him not to be a party in circumstances where the relief sought included not only declarations as to his want of jurisdiction and that his determination was void, but declarations relating to Rubana's liability (or absence thereof) to pay the costs of the adjudication and an order that Mr O'Brien refund anything paid. 10 When this point was raised in the course of argument, Mr Bland of counsel for Rubana sought and was granted leave to amend the summons by deleting therefrom all the prayers for final relief that involved Mr O'Brien. Mr Goldstein of counsel for 3D did not oppose that course. The summons will in due course be amended accordingly, pursuant to leave that I have granted to do so. 11 In substance, the grounds on which 3D seeks relief can be reduced to three, one of which contains two alternatives. The first I will call the "Holdmark" argument (Holdmark Developers v GJ Formwork [2004] NSWSC 905). The second I will call the s 16/abuse of process argument. As that name indicates, it is the argument that embodies two alternatives. The third I will call the authority argument. The Holdmark argument 12 It was common ground that no work had been done under the contract since 16 July 2007, and that for one reason or another the contract had come to an end by, at the latest, 31 July 2007. It was also common ground that the contract stated no "reference date" for the purposes of s 8 of the Act. 13 So far as it is relevant, s 8 works as follows. Firstly, by subs (1), it gives to a person who carries out construction work under a construction contract an entitlement to progress payments. (I omit, as of no present relevance, any reference now or later in the Act to the supply of related goods and services.) 14 Secondly, by subs (2), the section provides for identification of the reference date. As para (b) makes clear, where the contract does not state a reference date, it is "the last day of the named month in which the construction work was first carried out...under the contract and the last day of each subsequent named month". 15 It follows from what I have said that the first reference date was the 28th, 30th or 31st of whatever was the last day of the first month in which construction work was carried out and subsequent reference dates were the last days of subsequent months. 16 In those circumstances, it is common ground I think (and if it is not common ground I conclude) that 31 July 2007 was a reference date for the purposes of the contract. 17 Mr Bland submitted that the first adjudicator, Mr Stojanovski, had no jurisdiction to permit Rubana to withdraw its adjudication application within the ten business days laid down by s 21(3)(a) of the Act for its determination (there being no question of an extension of time under para (b)). Thus, Mr Bland submitted, there was no right in 3D to make a fresh application following the procedure laid down in s 26. Further, Mr Bland submitted, there was no other basis on which a further adjudication application could be made. 18 I am prepared to assume, although I do not decide, that it was not open to Mr Stojanovski to permit the application to be withdrawn during the ten business day period for its determination. I am prepared to proceed on that basis because a decision on that point is not necessary, and in my view difficult questions relating to the proper construction and application of the Act should not be decided unless their decision is essential for the resolution of a dispute. 19 The next step in Mr Bland's argument, and the key point, is that 3D had no right to serve a further payment claim because 31 July 2007 was the last reference date under the contract. That submission was founded on my decision in Holdmark. In that case, I concluded, where a construction contract had come to an end, the last reference date for the purposes of a payment claim under s 8 and s 13 was the last reference date following the last performance of work under the contract. If that conclusion were correct, then it was not open to 3D to serve further payment claims after August 2007, because there would not have been any more reference dates by reference to which they could be served and, by s 13(5), "[a] claimant cannot serve more than one payment claim in respect of each reference date under the construction contract". However, I do not think that it is open to me to proceed on the basis that what I said in Holdmark was correct. The issue was considered by the Court of Appeal in Brodyn Pty Ltd v Davenport (2004) 61 NSWLR 421 at 443-444 [62]-[66]. Hodgson JA (with whom Mason P and Giles JA agreed) there said that Holdmark was wrongly decided. His Honour held, in substance, that it was not correct to say "that reference dates cease on termination of a contract or cessation of work" (see 443[63]). His Honour said, in the same paragraph, that: the only non-contractual limit to the occurrence of reference dates is that which in effect flows from the limits in s 13(4): reference dates cannot support the serving of any payment claims outside these limits. 20 Mr Bland submitted that Hodgson JA had pointed to a possible distinction between the facts in Brodyn and the facts in Holdmark, and left open the possibility that Holdmark might continue to operate in circumstances where the contract was at an end. His Honour referred to that possible distinction at 444[65]. However, having referred to the distinction, his Honour noted that it was unlikely to be one that could be made out on the facts of the case before him and said that "[i]n any event in my opinion, Holdmark was wrongly decided, and it is not necessary to distinguish it". 21 I do not think it is possible to say, based on what Hodgson JA said of Holdmark at 444[65], that there is any room left for the operation of the view that I had expressed in Holdmark. His Honour's statement that it was wrongly decided must be taken at face and full value. 22 It follows that I do not accept the first argument. The section 16 / abuse of process argument 23 The first aspect of the second argument was based on the proposition that s 16(2) provides for two alternative methods of recovery, and that, 3D having elected (so Mr Bland said) to follow the path of recovery through proceedings in court, it was no longer open to 3D to pursue the very same rights through adjudication. He relied on the decision of Einstein J in Vince Schokman v Xception Construction Pty Ltd [2005] NSWSC 297. In that case, his Honour said at [21] to [24], s 15 of the Act provided two alternatives or, as his Honour put it, "separate and distinct alternatives", to be adopted by a claimant who fell within s 15(1). His Honour said that if a claimant adopted one of those alternatives it could not later go back and follow the other. 24 Mr Bland submitted that his Honour's reasoning was equally applicable to s 16. I think that is correct, and I am prepared to assume that it is so. 25 So far as it is relevant, s 16 provides as follows: 16 Consequences of not paying claimant in accordance with payment schedule (1) This section applies if: (a) a claimant serves a payment claim on a respondent, and (b) the respondent provides a payment schedule to the claimant: (i) within the time required by the relevant construction contract, or (ii) within 10 business days after the payment claim is served, whichever time expires earlier, and (c) the payment schedule indicates a scheduled amount that the respondent proposes to pay to the claimant, and (d) the respondent fails to pay the whole or any part of the scheduled amount to the claimant on or before the due date for the progress payment to which the payment claim relates. (2) In those circumstances, the claimant: (a) may: (i) recover the unpaid portion of the scheduled amount from the respondent, as a debt due to the claimant, in any court of competent jurisdiction, or (ii) make an adjudication application under section 17 (1) (a) (ii) in relation to the payment claim, and (b) may serve notice on the respondent of the claimant's intention to suspend carrying out construction work (or to suspend supplying related goods and services ) under the construction contract. 26 It may be compared with s 15, which so far as it is relevant provides as follows: 15 Consequences of not paying claimant where no payment schedule (1) This section applies if the respondent: (a) becomes liable to pay the claimed amount to the claimant under section 14 (4) as a consequence of having failed to provide a payment schedule to the claimant within the time allowed by that section, and (b) fails to pay the whole or any part of the claimed amount on or before the due date for the progress payment to which the payment claim relates. (2) In those circumstances, the claimant: (a) may: (i) recover the unpaid portion of the claimed amount from the respondent, as a debt due to the claimant, in any court of competent jurisdiction, or (ii) make an adjudication application under section 17 (1) (b) in relation to the payment claim, and (b) may serve notice on the respondent of the claimant's intention to suspend carrying out construction work (or to suspend supplying related goods and services ) under the construction contract. 27 The statutory alternatives given by subs (2) of each section apply in the circumstances laid down by subs (1) of each section. Thus, the s 16(2) statutory alternatives arise if the circumstances specified in paras (a) to (b) of subs (1) are met as a matter of fact. In this case, those factual preconditions have not been made good. That is because the payment schedule provided by Rubana to 3D indicated a scheduled amount that was negative: ie, an amount payable by 3D to Rubana. It did not indicate an amount that Rubana "proposes to pay to" 3D. Thus, there was no failure on the part of Rubana "to pay the whole or any part of the scheduled amount to [3D] on or before the due date for...payment". It follows that subs (2) has not been engaged. Abuse of process 28 The alternative argument asserts that it is an abuse of process for 3D, having sought to enforce its rights through a defence of set-off and a cross-claim in the District Court, to proceed to adjudication. 29 A somewhat similar situation was considered by the Court of Appeal in Falgat Constructions Pty Ltd v Equity Australia Corp Pty Ltd [2005] NSWCA 49. The facts in that case were somewhat different from the facts in the present, but they share a common feature: namely, that a claimant under the Act sought to enforce its claim concurrently by proceedings (in that case, as plaintiff) in the District Court and by adjudication. Handley JA (with whom Santow JA and Pearlman AJA agreed) said at [26] and [28] that it was open to a claimant, on the proper construction of the Act, to pursue concurrently its rights under the statute and at law. That was subject to a limiting case referred to by his Honour at [24] where "statutory proceedings [are] commenced shortly before a trial is due to start", with the result that "the statutory procedures would interfere with the orderly preparation and presentation of the parties' cases in the Court". That was not the case before the Court of Appeal, and it is not the case before me. A hearing date has not been obtained. As I understand it, the parties are working their way through compliance with the directions of the District Court to bring the matter to a state of readiness for hearing. 30 It seems to me to follow inevitably from the decision in Falgat that it is not, without more, an abuse of process for a person having (or claiming to have) rights both at law and under the Act to seek to enforce those rights concurrently. In this case, there being no suggestion of some additional circumstance that could generate an abuse of process, I think I am constrained by the decision in Falgat to conclude that the abuse of process aspect of the second argument must fail. The authority argument 31 The authority argument relates to the form of the payment claim in question. It was dated 3 June 2008. It was signed by one Anthony Veghelyi "for and on behalf of 3D Commercial Interiors Pty Ltd". On its face, it asserted that it was a "payment claim", made pursuant to the Act, from 3D Commercial Interiors Pty Ltd to Rubana Holdings Pty Ltd. 32 Subsequently, when the adjudication application was made, 3D provided with it a written authority signed by a director dated 2 July 2008. That written authority appointed (or purported to appoint) Mr Veghelyi "as an Executive Officer of the company...to act on behalf of our Company as its Authorised Representative in respect of" the payment claim and the adjudication application. 33 It was submitted on that basis that Mr Veghelyi was not authorised to sign the payment claim as he did on behalf of 3D. 34 Mr Bland submitted that this point had been taken in the payment schedule. The point that was taken reads as follows: No general entitlement to claim. Sections 3, 8 and 11 of the Act have the effect that the only person entitled to claim under s 13 is the person who has performed the work. Those provisions are to be interpreted strictly. If your company has not actually performed the work, see the definition of claimant in section 3, then it is not entitled to make a claim against our client. Your company is not entitled to be the claimant unless the claim is in response [sic] to work or materials actually paid for and incorporated into the works. (PX2 page 558). 35 It seems to me that the point that was taken was not that Mr Veghelyi lacked authority to sign the payment claim on behalf of 3D but that Mr Veghelyi himself was the claimant and that, as he had not done the work, he could not bring the claim. Indeed, that is the way the submissions were put (see for example the written outline of submissions provided by Mr Bland, dated 24 November 2008). However, on a fair - and I would have said only the rational - reading of the payment claim, Mr Veghelyi was not the claimant. He was not asserting that he had done the work. The claim was in form a claim by 3D. Mr Veghelyi did no more than purport to authorise it by signing it on behalf of 3D. 36 The requirements for a valid payment claim set out in s 13(2) are limited: 13 Payment claims … (2) A payment claim: (a) must identify the construction work (or related goods and services ) to which the progress payment relates, and (b) must indicate the amount of the progress payment that the claimant claims to be due (the "claimed amount"), and (c) must state that it is made under this Act. 37 It was not suggested that any of those requirements had not been met. In my view, a claim of the form made is a valid payment claim on behalf of 3D, and would be a valid payment claim even if not authenticated by signature. 38 There may be some underlying question of fact as to the actual authority of Mr Veghelyi to sign the payment claim. However, in circumstances where (it is common ground) he had signed prior payment claims and other documents on behalf of 3D, if it were necessary to consider the question of authority - and I do not think that it is - it must be concluded that he had at least ostensible authority. 39 Thus, the authority argument fails. Conclusion; stay 40 However it is put, the claim by Rubana for permanent injunctive relief cannot be sustained. There remains some question of a stay. There are two problems with that. The first is that, no judgment having been entered pursuant to the adjudication certificate, there is nothing to stay. The second is that any application for a stay should be made in the court in which any such judgment is given once that judgment is given. 41 Mr Bland asked that if I concluded that the summons should be dismissed and the existing interlocutory orders discharged, I should stay the operation of the discharge for seven days to permit his client to approach the Court of Appeal. In circumstances where it does not seem to me to cause any particular prejudice to 3D to do so, I am prepared to do so. I am conscious that the Act provides for the prompt and interim resolution of entitlements to payment, and that there is a strong presumption that the statutory rights should be left available and enforceable. Thus, for example, I would not be prepared to stay the discharge of the injunction over the period of the impending vacation. But in circumstances where a shorter stay, of the kind sought, does not seem to me to add a great deal in terms of prejudice to the stay that has existed hitherto, I think that it should be left open to Rubana, should it wish to do so, to seek to challenge what I have said. Orders 42 I order that the summons be dismissed. I order that the interlocutory injunction granted on 25 July 2008 and continued (by consent or otherwise) thereafter be dissolved. I stay the operation of that order up until and including 5.00pm on 19 December 2008. 43 I note that the plaintiff by counsel gives to the court the usual undertaking as to damages. 44 I order the plaintiff to pay the defendant's costs of the proceedings. I order that the exhibits remain with the file for twenty-eight days and that they be dealt with thereafter in accordance with the rules. *********** 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.