New South Wales Supreme Court CITATION : Filadelfia Projects v EntirITy Business Services [2010] NSWSC 473 HEARING DATE(S) : 13 May 2010 JURISDICTION : Equity Division Technology & Construction List JUDGMENT OF : McDougall J at 1 EX TEMPORE JUDGMENT DATE : 13 May 2010 DECISION : Plaintiff granted interlocutory relief. CATCHWORDS : BUILDING AND ENGINEERING CONTRACTS - adjudication - interlocutory injunction - requirement of construction contract for valid adjudication - denial of procedural fairness - interlocutory relief on the condition of an undertaking instead of payment into court. LEGISLATION CITED : Building and Construction Industry Security of Payment Act 1999 (NSW) CATEGORY : Procedural and other rulings CASES CITED : Brodyn Pty Ltd v Davenport (2004) 61 NSWLR 421 PARTIES : Filadelfia Projects Pty Limited (Plaintiff) EntirITy Business Services Pty Limited (Defendant) FILE NUMBER(S) : SC 2009/331921 COUNSEL : M G Rudge SC / I D George (Plaintiff) A S Kostopoulos / F P Hicks (Defendant) SOLICITORS : Veritas Legal (Plaintiff) Kreisson Legal (Defendant) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION TECHNOLOGY & CONSTRUCTION LIST McDOUGALL J 13 May 2010 (ex tempore – revised 14 May 2010) 2009/331921 FILADELFIA PROJECTS PTY LIMITED v ENTIRITY BUSINESS SERVICES PTY LIMITED JUDGMENT 1 HIS HONOUR: In these proceedings the plaintiff (Filadelfia) seeks relief in relation to a determination of the second defendant (the adjudicator) given on 23 March 2010 pursuant to the Building and Construction Industry Security of Payment Act 1999 (NSW) (the Act). 2 At least one of the matters in issue between Filadelfia and the first defendant (Entirity) was whether there was a construction contract in existence between them. In substance, it is Filadelfia's case that it was the developer of the project in question, that it had a head contract with a builder known as Zebicon Pty Ltd (Zebicon), and that Entirity was a subcontractor to Zebicon. 3 The adjudicator determined that there was a construction contract in existence between Filadelfia and Entirity. He was persuaded by "the weight of evidence" and "the contemporaneous evidence" that, he thought, supported this aspect of Entirity's claim (see paragraph 6.35 of his determination). 4 It is common ground that, in relation to the project in question, Mr Barlow of Entirity prepared a "subcontractor's statement" dated 4 September 2009 for the purposes of administration of the relevant contract. In that statement, Entirity asserted that it had entered into a contract with Zebicon in relation to the project in question. There was also a "Payment Declaration" prepared on 4 September 2009, again referring to the project in question, in which the contractual relationship between Zebicon and Entirity was asserted. 5 Those documents, it is common ground, were not put before the adjudicator. It seems to me to be at least arguable that if they had been put before him, he might have taken a different view as to whether or not the relevant construction contract was one between Entirity and Filadelfia or one between Entirity and Zebicon. 6 Further, Filadelfia says that the versions of the payment claim and adjudication application that were given to it did include the subcontractor's statement and payment declaration to which I have referred. That is not conceded, and it will be an issue for final hearing. However, there seems to be no doubt that Filadelfia made submissions to the adjudicator in support of its adjudication response based on its understanding that the relevant documents were before him. Perhaps not surprisingly, given that the documents were not before the adjudicator, he referred neither to them nor to the particular submission in his determination. 7 In those circumstances, I think, there is a serious question to be tried as to whether there was in existence a construction contract, to which the Act applies, between Filadelfia and Entirity. The existence of such a contract is one of the basic and essential requirements for the existence of a valid adjudication determination, as held by Hodgson JA (with whom Mason P and Giles JA agreed) in Brodyn Pty Ltd v Davenport (2004) 61 NSWLR 421 at 441 [53]. Since that is a basic and essential requirement for the existence of a valid determination, the Court is not constrained by the adjudicator's finding to the contrary. 8 In addition, it may be arguable that there was a substantial denial of procedural fairness if, as is Filadelfia's case, Filadelfia was given to understand that the relevant documents were before the adjudicator whereas in fact they were not. 9 Finally, taking into account in particular the pressures of time, and other constraints, for which the Act provides in relation to adjudication determinations, it may be arguable that for a claimant knowingly to withhold a material document is akin to an abuse of process. It may be arguable that, given the matters to which I have referred, it is incumbent on a claimant, in much the same way as it is incumbent on an applicant for ex parte relief in this Court, to ensure that all material matters are put before the adjudicator. That, however, is not the ground on which I rest my view that there should be some interlocutory relief in this matter. 10 In my view, there is a strong case for arguing that there is "Brodyn" error, and, if it matters, there is also an arguable case, although the strength of the case depends on a disputed question of fact, that there has been some denial of procedural fairness. In those circumstances it is appropriate that enforcement of the adjudicator's determination be restrained for the moment. 11 In the ordinary way injunctive relief would be granted on condition that the amount in dispute, including the cost of the adjudication and some allowance for interest, be paid into Court pending a final resolution of the dispute. That is generally done firstly where s 25(4) of the Act applies, simply because that is a requirement of the section. Where (as here) s 25(4) does not apply in terms (and it does not apply in terms because there has been no adjudication certificate, and hence no judgment for a debt) the Court nonetheless, taking into account the clear objects of the Act and its underlying policy, generally orders payment into Court by analogy with s 25(4). 12 In this case, Filadelfia has frankly conceded that it is not presently in a position either to pay into Court or to provide a guarantee for the amount in question. It has explained that its sole asset is in effect the relevant development. That development is said to be worth $41 million or more, and it is said that Filadelfia owes about $28 million to its financier. Filadelfia says, further, that it is likely that an occupation certificate will issue in the near future and that, once that happens, it will be able to complete sales and, thereby, improve its financial position. 13 In those circumstances, Filadelfia has offered an undertaking to the Court in substance not to dispose of its assets, or otherwise to charge or deal with them, to reduce the net amount available below an amount sufficient to secure the adjudicated amount, costs and interest. That, it submits, would preserve the status quo and in addition would give more protection to Entirity than Entirity would have if it obtained and proceeded to enforce a judgment. 14 There is, I think, substance in that submission, particularly where Entirity is at present an unsecured creditor and where its prospects of being paid appear to depend on Filadelfia's receiving the proceeds of sale of units in the development. 15 In those circumstances, I think in principle that it is appropriate to grant interlocutory relief on the basis of an undertaking of the kind to which Filadelfia has referred. That assumes among other things that Filadelfia is able to put on affidavit evidence verifying the matters that Senior Counsel put in submission yesterday. I hasten to say, as counsel for Entirity accepted, that I have no doubt that the submissions put reflected accurately the instructions given. It is, however, of importance both to Entirity and to the Court to have the factual basis for those submissions verified. 16 It is also, in my view, desirable that Filadelfia should give undertakings to the Court that will have the effect of requiring it to keep Entirity informed of the progress of sales of units in the development and of the disposition of the proceeds of those sales. 17 Finally, there are procedural matters to be attended to including the filing of a list statement and list response and the completion of the evidence. 18 I indicated at the conclusion of submissions that I would grant relief on the basis that I have outlined. The parties accepted that, in those circumstances, it was better for them to give careful attention to the drafting of appropriate undertakings, orders and directions rather than to put up with what otherwise would be done on the run. 19 In those circumstances, the only orders that I make at this stage are to stand the matter down to 2pm, and to direct the parties to bring in short minutes of order at that time to give effect to my reasons. ********** 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.