District Court New South Wales Medium Neutral Citation: Render Design (Aus) Pty Ltd v Sky Stand Plastering Pty Ltd [2014] NSWDC 317 Hearing dates: 9 May 2014 Date of orders: 09 May 2014 Decision date: 09 May 2014 Jurisdiction: Civil Before: P Taylor SC DCJ Decision: (1)Defendant's notice of motion filed 28 April 2014 is dismissed. (2)Defendant pay the costs of the notice of motion. Catchwords: CONTRACT – building work – owner claims for damages for defective work – builder has registered judgments resulting from adjudication certificates under security of payments legislation – builder seeks stay of proceedings until satisfaction of judgments – entitlement of party to bring proceedings for breach of contract irrespective of adjudication proceedings – not proceedings to set aside adjudication – no entitlement to stay Legislation Cited: Building and Construction Industry Security of Payment Act 1999, s 25, s 32 Civil Procedure Act 2005, s 67 Cases Cited: Bruce Maples v Siteberg [2012] NSWSC 435 Grant Constructions Pty Limited v Claron Constructions Pty Limited [2006] NSWSC 369 Jem Developments Pty Ltd and Anor v Hansen Yuncken Pty Ltd [2006] NSWSC 1087 Shellbridge Pty Ltd v Rider Hunt Sydney Pty Ltd [2005] NSWSC 1152 Tombleson v Dancorell Constructions Pty Limited [2007] NSWSC 1169 Texts Cited: Ritchie's Uniform Civil Procedure NSW Category: Procedural and other rulings Parties: Render Design (Australia) Pty Ltd (plaintiff) Sky Stand Plastering Pty Ltd (defendant) Representation: Counsel: Mr M Auld (plaintiff) Mr J Lee (defendant) Solicitors: Knight Lawyers (plaintiff) Ren Zhou Lawyers(defendant) File Number(s): 2013/375479 Publication restriction: None Judgment 1. The defendant seeks a stay of the present proceedings under s 67 of the Civil Procedure Act 2005 until the plaintiff has paid into court the amounts, the subject of two judgments in favour of the defendant, resulting from the filing of adjudication certificates. 2. The plaintiff, Render Design (Australia) Pty Ltd ("Render Design"), commenced proceedings against the defendant, Sky Stand Plastering Pty Ltd ("Sky Stand"), for damages for breach of a building contract. The issues to be canvassed in these proceedings are said to be the same as those canvassed in adjudication determinations made in favour of Sky Stand. Sky Stand has filed adjudication certificates and obtained judgments pursuant to s 25(1) of the Building and Construction Industry Security of Payment Act 1999 ("the Act"). Although Sky Stand has taken some enforcement procedures, the bulk of the monies owing under the judgments remain outstanding. Sky Stand seeks an order staying the proceedings until an amount equal to the sum of the judgments is paid into court. 3. Sky Stand relies on s 25(4) of the Act and the decision of Tombleson v Dancorell Constructions Pty Limited [2007] NSWSC 1169. Section 25(4) provides: "(4) If the respondent commences proceedings to have the judgment set aside, the respondent: (a) is not, in those proceedings, entitled: (i) to bring any cross-claim against the claimant, or (ii) to raise any defence in relation to matters arising under the construction contract, or (iii) to challenge the adjudicator's determination, and (b) is required to pay into the court as security the unpaid portion of the adjudicated amount pending the final determination of those proceedings." 1. In Tombleson at [2], the plaintiff sought orders: "in the nature of a writ of certiorari quashing the decision of the second defendant, the adjudicator. Declarations are sought that the determination is void, and there is also an application for an injunction preventing the first defendant from taking any action in order to enforce the adjudication determination (the Determination)." 1. Justice Bergin, as her Honour the Chief Judge in Equity then was, decided at [18]-[19], [25]: "[18] A plaintiff against whom a judgment has been entered who brings proceedings seeking to prevent a party from relying on that judgment without seeking to set aside the judgment, knows that s 25(4) of the Act requiring security will not be triggered. However, the Court is not only cautious to ensure justice between the parties, but also to ensure that the legislation under which this application is brought is not circumvented. [19] The plaintiff is attempting to prevent the defendant from enforcing the judgment by injunction rather than seeking to set aside the judgment. Pleadings may be analysed to see whether it is an abuse to seek those orders whilst not seeking to set aside judgment. If the Court is satisfied that such an application is for the purpose of getting around or circumventing the provisions of the Act then an order may be made staying the proceedings on the condition that such stay will remain unless money is paid into Court. Such an approach may diminish the drafting of innovative pleadings to ensure that s 25(4) is not triggered to obtain the benefit of proceedings in Court whilst the contractor loses the benefit of the Act. … [25] I am satisfied that the plaintiff's pleading seeks to avoid the triggering of s 25(4) of the Act. I am also satisfied that to ensure a just resolution of these proceedings I should exercise my discretion in favour of the defendant to stay the proceedings until the plaintiff provides a bank guarantee or pays money into Court in the amount of $300,000, reducing the amount of $366,091.26 to take into account an approximate figure for defects." 1. Sky Stand submits that the present proceedings are equivalent to Tombleson on the basis that the present proceedings raise the same issues as were raised in the earlier adjudications. However, it is apparent that there exist differences in the present proceedings to those of Tombleson. In the case before me, Render Design seeks damages. No relief is sought against the adjudicator in respect of an adjudication certificate, or the judgment resulting from it. Thus, these proceedings are not "proceedings seeking to prevent a party from relying on that judgment" (see Tombleson at [18]). In addition, the proceedings are not comparable with those under s 25(4) of the Act which are proceedings to have the judgment set aside. 2. The judgments resulting from the filing of the adjudication certificates are not referred to in the statement of claim. Thus, the proceedings are not within the ambit of s 25(4). Admittedly the proceedings in Tombleson were also not within 25(4). Justice Bergin said so expressly at [17]: "I am satisfied that s 25(4) is not applicable because the proceedings are not proceedings to set aside a judgment". But it is apparent that relief similar to setting aside the judgments was sought in Tombleson, namely, certiorari to quash the decision of the adjudicator, a declaration that the adjudication determination was void and an injunction to restrain the use of the determination. 3. The similarity of these forms of relief appeared to persuade Bergin J to order a stay. 4. Sky Stand submits that, like the plaintiff in Tombleson, Render Design is seeking to circumvent the Act. The basis of Sky Stand's submissions appears to be that the same matters are canvassed in the proceedings as were dealt with in the determinations. That is not surprising or itself sufficient to justify a stay. As both the adjudication and the proceedings concerned the same contract and works, common issues are to be expected. 5. Section 32 of the Act provides: "32 Effect of Part on civil proceedings (1) Subject to section 34, nothing in this Part affects any right that a party to a construction contract: (a) may have under the contract, or (b) may have under Part 2 in respect of the contract, or (c) may have apart from this Act in respect of anything done or omitted to be done under the contract. (2) Nothing done under or for the purposes of this Part affects any civil proceedings arising under a construction contract, whether under this Part or otherwise, except as provided by subsection (3). (3) In any proceedings before a court or tribunal in relation to any matter arising under a construction contract, the court or tribunal: (a) must allow for any amount paid to a party to the contract under or for the purposes of this Part in any order or award it makes in those proceedings, and (b) may make such orders as it considers appropriate for the restitution of any amount so paid, and such other orders as it considers appropriate, having regard to its decision in those proceedings." 1. Section 32 provides that the adjudication or the judgment resulting therefrom cannot preclude proceedings for damages for breach of the contract. No authority was identified indicating that these words in s 32 of the Act should not be given their ordinary meaning, which is to say that an adjudication or the resulting judgment does not affect the rights of Render Design to bring proceedings for breach of contract. 2. In Grant Constructions Pty Limited v Claron Constructions Pty Limited [2006] NSWSC 369, the plaintiff was successful in securing an adjudication determination and a judgment based thereon, although actions to enforce that judgment debt did not result in payment. The defendant commenced arbitration proceedings and the plaintiff sought to stay the arbitration on the ground that the defendant's contract "is seen to avoid or to circumvent [the Act]", a matter similar to the present case. The application for a stay was rejected in Grant being "clearly misconceived" (see [8]), being contrary to s 32 of the Act). 3. Einstein J also stated at [13]: "The proposition is flawed. The arbitration in no way delays nor frustrates the rights of the plaintiff to pursue conventional enforcement processes in relation to the judgment. The conduct of the arbitration cannot be said to circumvent the Act. The Act expressly preserves the rights of parties under the contract and, apart from the Act, in respect of anything done or omitted to be done under the contract." 1. His Honour at [14] referred to the provisions in s 25(4) of the Act and concluded, "none of these matters is engaged presently" and stated at [15]: "Notwithstanding the plaintiff's central contention that the conduct of the defendant appears to have the effect of outflanking what has been put as "the spirit and intent of the Act", the Court can only determine the present application by a principled exercise of the relevant discretion in terms of the statute in its present form." 1. In my view, this decision is indistinguishable from the present application. Arbitral rather that curial proceedings were involved, and the stay in the present case was sought on terms, but these are not matters of significance in the decision. In all respects the defendant in these proceedings remains free to take whatever steps it deems appropriate to enforce the judgments it has obtained. I agree with the observations of Einstein J and I propose to follow them. 2. Shellbridge Pty Ltd v Rider Hunt Sydney Pty Ltd [2005] NSWSC 1152 involved a different application to the present, but Barrett J made some comments generally about ss 25 and 32 that are pertinent. The observations of Barrett J were noted with approval by Einstein J in Jem Developments Pty Ltd and Anor v Hansen Yuncken Pty Ltd [2006] NSWSC 1087. Barrett J observed as follows at [37]-[38]: "[37] Matters of the present kind seem often to be approached on the footing that the s 25 result (filing of an adjudication certificate as a judgment for debt) must be resisted virtually at all costs. The limits imposed by s 25(4) upon attempts to have such a judgment set aside are referred to in that connection. But it seems sometimes to be not sufficiently appreciated that, although a judgment in debt may result from the adjudication process, there is no curtailing of contractual and other rights arising in relation to the performance of the relevant work. This is made clear by s 32. Thus, if the principal has a claim for defective work or can show that work charged for was not done or that there has been some other breach of contract or other actionable wrong by the contractor, the principal is free to pursue that claim in the ordinary way; and this is so regardless of the findings of the adjudicator. The principal might, if thought fit, institute proceedings seeking not only to advance the claim in question but also, perhaps, to obtain, by reference to a right of set-off, a stay of the judgment that s 25 has had the effect of creating. The s 25(4) limitations do not apply to an application for a stay, as distinct from an application to have a judgment set aside. [38] It was pointed out in Falgat Constructions Pty Ltd v Equity Australia Corp Pty Ltd (2005) 62 NSWLR 385 by Handley JA (with whom Santow JA and Pearlman AJA agreed) that a judgment entered under s 25 is, by reason of s 32(3)(b), effectively a provisional judgment, both in what it grants and what it refuses." 1. His Honour also stated (at [8]): "A builder can pursue a claim in the courts although it was rejected by the adjudicator and the proprietor may challenge the builder's right to the amount awarded by the adjudicator and obtain restitution of any amount it has overpaid. As Handley JA observed, the specific statutory context is one in which inconsistent judgments are contemplated and allowed." 1. The distinction between an application for a stay and an application to have a judgment set aside under s 25(4), referred to in the final sentence of Shellbridge at [37], indicates that the circumstances that led to a stay such as in Tombleson do not apply to all proceedings brought by a plaintiff who has suffered an adverse adjudication determination. The proceedings of the present plaintiff, not being proceedings for a stay, must lie outside the ambit of s 25(4) and are not in contravention of that provision. 2. In some cases unsuccessful parties are precluded from commencing proceedings unless the costs of earlier proceedings ordered against them are paid. This is not a universal rule. The principle requires that the plaintiff be the moving party in the earlier proceedings; see the observations at [s 67.35] of Ritchie's Uniform Civil Procedure NSW pertaining to s 67 of the Civil Procedure Act 2005. 3. In Bruce Maples v Siteberg [2012] NSWSC 435, McDougall J stated at [22]: "Here, whether or not Mr Maples is seeking to bring further proceedings 'in the same cause' as the earlier proceedings brought by him or Atco, he did not seek, in the proceedings in which the two orders for costs have been made on which the present application is founded, to bring any proceedings at all. On the contrary, they were proceedings brought against him. It cannot be said that Mr Maples is, in those limited and defined circumstances, seeking to have a second bite at the cherry without paying the costs of his first nibble." 1. The same is true of the plaintiff in these proceedings. It was not the moving party in the adjudication determinations. In any event, this application is different. The defendant is seeking a stay of proceedings pending payment of the judgments into court. It is not merely about costs. In effect, the application seeks to utilise the proceedings of the plaintiff to obtain security for or enforce the prior judgments. The circumstance that the plaintiff owes judgment debts to the defendant is not a sufficient reason to stay the plaintiff's proceedings pending provision of security for those debts without some statutory justification or other reason. For the reasons given, s 25(4) does not provide that statutory justification. 2. The orders of the Court are: 1. Defendant's notice of motion filed 28 April 2014 is dismissed. 2. Defendant pay the costs of the notice of motion. ********** Amendments 19 August 2015 - Solicitors' names incorrectly recorded as the parties on coversheet. Coversheet amended to correctly reflect the names of the parties. 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: 19 August 2015