The Building and Construction Industry Security of Payments Act legislation was enacted to ensure that any person who undertakes the task to carry out construction work or supply related goods and services under a construction contract is entitled to receive, and is able to recover, progress payments in relation to the carrying out of that work and the supplying of those goods and services. The Act ensures that a person is entitled to a progress claim by granting a statutory entitlement to such a payment regardless of whether the relevant construction contract makes provision for progress payments.
The recent case of Samadi Developments Pty Limited v SX Projects Pty Limited NSWSC 1571, again evidences the issues arise with the enforcement of a judgment following a favourable Adjudication Determination under the Building and Construction Industry Security of Payment Act 1999 (NSW) (“the Act”) when an allegation of an offsetting debt precludes the use of winding up. In addition, security for costs and the entitlement to a stay were considered.
Background
The proceedings arise as a result of a contract entered into between the parties dated 5 September 2013, whereby SX Projects Pty Limited (“SX”) undertook the task to perform design and construction work for Samadi Developments Pty Limited (“Samadi”) in relation to a residential and commercial development in Elizabeth Street, Surry Hills. On 16 June 2015, SX obtained a Judgment against Samadi in the sum of $1,402,419.63 in respect of progress claims it claimed under the contract based on an Adjudication Determination obtained in its favour under the Act.
In the proceeding which commenced on 29 May 2015, Samadi has sought to litigate the underlying contractual issues. In particular, it made claims for liquidated damages for delays in completion of the work, damages for defects and damages for the cost of completing the work after the work was taken out of SX’s hands.
To date, SX has been unsuccessful in seeking to enforce the Judgment it obtained. It submitted that there were difficulties in commencing winding up proceedings in order to recover the Judgment in its favour because, relying on this proceeding, Samadi will maintain that it has an offsetting claim within the meaning of s.459H of the Corporations Act 2001 (Cth).
By way of motion filed on 4 September 2015, SX sought a stay of the proceedings until Samadi pays SX the sum of $1,402,521.22 plus interest. In the alternative, SX sought security for its costs of these proceedings in the sum of $495,000 and a stay of the proceedings if security was not provided.
Judgment
SX failed on its application for a stay of proceedings, but succeeded on its application for security for costs. As a result of same, His Honour Ball thought fit that SX should recover half of its costs of the motion.
His Honour Ball provided the following orders:
- Samadi give security for SX’s costs of and incidental to the proceedings in the sum of $250,000 within 28 days;
- The proceedings be stayed if security is not provided in accordance with order (1).
- Samadi pay half the SX’s costs of and incidental to SX’s motion filed on 4 September 2015.
Summary
The above case again highlights the fact that an Adjudication Determination is an interim decision which is useful when determining the value of works completed on a project, however, both parties retain their legal rights under the contract to pursue any grievances whether it be by litigation or exercising any other dispute resolution rights as described in the contract.
The SV Partners team possess specialist construction expertise in relation to the Building and Construction Industry Security of Payments Act Legislation. Please contact a member of our team on 1800 246 801 if you would like any advice on this issue.