It is a well a known principle that a respondent to an adjudication determination made under the Building and Construction Industry Security of Payment Act 1999 (NSW) (“SOP Act“) who claims that the determination is infected by a “reviewable error” may obtain interlocutory injunctive relief restraining the applicant from acting on the determination. However, there are obvious limits to the application of this principle. In the recent decision of Atlas Construction Group Pty Limited v Fitz Jersey Pty Limited [2017] NSWSC 72, the Court denied an application for injunctive relief on account of the respondent’s failure to act promptly.
Background
The Builder carried out design and construction work under “turnkey” contract arrangement, in relation to a large mixed uses development at Mascot. The contract provided that any final claim was to be made within a month of expiry of the defects liability period, being the end of October 2015. The Builder served a payment claim on the Principal in November 2016. The Builder applied for an adjudication application, with the Adjudicator ultimately making a determination in favour of the Builder in the sum of approximately $11,000,000. The Builder subsequently procured an adjudication certificate, and filed that certificate with the Supreme Court, together with a notice of motion seeking a garnishee order. Some 10 days later, the Court made the garnishee order, addressed to the National Australia Bank. The bank subsequently paid the amount in question, in excess of $11 million, to the Builder.
Atlas Construction Group Pty Limited v Fitz Jersey Pty Limited [2017] NSWSC 72
The Principal applied to the Court seeking an order that the amount paid to the Builder under the garnishee order be repaid to the Principal (so that it may be paid into court pursuant to s25(4)(b) of the SOP Act), or that it be paid directly into court by the Builder. In the alternative, it sought an order that the Builder swear and file an affidavit setting out, in effect, what happened to the money. The Builder opposed the making of those orders.
The Principal argued that the Builder’s payment claim was served outside the 12-month period contemplated by s13(4)(b) of the SOP Act, and thus the adjudication determination was void. On that basis, the Principal contended that it was entitled to the injunctive relief sought by the application.
The Court reviewed the key events leading up to the payment of the adjudication determination and, specifically, the steps taken by the Principal. The Court observed:
- the Principal did not at any time seek an undertaking from the Builder that it would not seek to enforce its rights under the determination, either until the dispute could be resolved or without giving notice, or some equivalent form of de facto stay.
- the Principal did not move the Court for an order restraining the Builder from recovering judgment or enforcing its rights under any such judgment.
- the Principal, prior to a directions hearing in the current proceedings, notified the Builder that it would not oppose an order requiring the Principal to lodge the sum comprising the adjudication determination with the Court until a judgment is issued on the substantive issues. The Builder did not respond.
- at the directions hearing of 3 February 2017, the Builder’s counsel advised the Principal’s lawyers that “the horse had bolted” because judgment had been recovered, a garnishee order issued, and the amount garnisheed had been paid.
The Court noted the well-established principles relating to the availability of injunctive relief where a respondent to an adjudication determination can demonstrate some prima facie “reviewable error” or where an applicant is unlikely or unable to repay some or all of the adjudication determination pending the outcome of any successful challenge to the determination. However, the Court observed that regard must also be had to the principle that “one who seeks equitable relief (and that is what the defendant seeks in this case) should move promptly.”
[22] It may be accepted that in the ordinary way parties should not rush into court unless there is some good reason to do so. In the present case, the defendant had no basis for thinking that the plaintiff would not seek to enforce its rights under the determination. It had not asked the plaintiff not to do so; and, as could be imagined, the plaintiff had not volunteered not to do so.
[23] In those circumstances, I have some difficulty in seeing why this court should now interfere to grant the relief the defendant seeks.
The Court recognised that there may be a legitimate basis for impugning the Adjudicator’s determination (that is to say, accepting that there is a serious question to be tried as to the validity of the determination). However, the Court held that the application for interlocutory injunctive relief should be refused due to the Principle’s failure to move promptly to stay the determination. The Court noted that the Principal’s rights, whatever they may be, remain available under s32 of the SOP Act.
Fitz Jersey Pty Ltd v Atlas Construction Group Pty Ltd [2017] NSWCA 53
The Principal appealed the judgment at first instance, arguing that the judge made a number of errors. The Principal submitted, amongst other things, that:
- the Builder was required to notify the Principal that an order for judgment debt had been obtained before taking steps to enforce it;
- in applying ex parte for a garnishee order with respect to the judgment debt, the Builder was required to notify the Court that the Principal had commenced proceedings to review the adjudication determination; and
- the primary judge erred in refusing to set aside the garnishee order.
The Court of Appeal rejected the submissions, finding that the Principal failed at a fundamental level to demonstrate that the discretion of the Primary Judge miscarried.
In relation to the garnishee order, the Court of Appeal observed that, although there is a discretion to issue a garnishee order, this discretion is not equitable in nature. The statutory evolution of garnishee orders may not engage a duty of candour. The Court of Appeal noted there was “no sound reason to engraft a further obligation upon the statutory regime in the way for which the developer contends.” The Trial Judge made no error in refusing to set aside the garnishee order and direct the return of the money recovered under the garnishee order.
The Court of Appeal further observed that, with all such “deemed” judgments made under the SOP Act, such judgments remain subject to any ultimate reconciliation available to the parties under s32 of the SOP Act.
The contents of this publication are for reference purposes only. This publication does not constitute legal advice and should not be relied upon as legal advice. Specific legal advice should always be sought separately before taking any action based on this publication.
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