A-Civil Aust Pty Ltd v Ceerose Pty Ltd [2023] NSWCA 144
Catchwords: APPEALS – interlocutory appeal – leave to appeal – procedural order – notice to produce financial records – whether error demonstrated – whether issue of principle raised – purpose for which records sought not pursued – failure of judge to advert to lack of purpose – production otherwise not justified – practice of interlocutory stays likely to undermine statutory scheme BUILDING and CONSTRUCTION – adjudication of payment claim – payment of amount of adjudicator’s determination – injunction pending determination of contractual dispute – policy of Building and Construction Industry Security of Payment Act 1999 (NSW) – risk of insolvency of claimant – onus of proof – production of financial records of claimant
Court of Appeal
Supreme Court
New South Wales
Medium Neutral Citation:
A-Civil Aust Pty Ltd v Ceerose Pty Ltd [2023] NSWCA 144
Hearing dates:
20 June 2023
Date of orders:
29 June 2023
Decision date:
29 June 2023
Before:
Payne JA; Simpson AJA; Basten AJA
Decision:
(1)
Grant the applicant leave to appeal.
(2)
Direct that the applicant file within 7 days a notice of appeal in the form of the draft amended notice of appeal dated 18 June 2023.
(3)
Refuse leave to rely on the affidavit of Ms Saad sworn 9 June 2023.
(4)
Allow the appeal and:
(a)
Set aside the order made by the primary judge on 15 May 2023 that “the first defendant produce to the plaintiff’s solicitors a copy of the whole of the first defendant’s current MYOB file in the form of a .myox
file”.
(b)
Set aside par 22 of the Notice to Produce dated 20 April 2023.
(5 )
Order the respondent pay the applicant’s costs of the summons for leave to appeal and the appeal.
Catchwords:
APPEALS
–
interlocutory appeal – leave to appeal
– procedural order – notice to produce financial records – whether error demonstrated – whether issue of principle raised –
purpose for which records sought
not pursued –
failure
of judge to advert to lack of purpose – production otherwise not justified –
practice of interlocutory stays likely to undermine statutory scheme
BUILDING and CONSTRUCTION – adjudication of payment claim – payment of amount of adjudicator’s determination – injunction pending determination of contractual dispute – policy of
Building and Construction Industry Security of Payment Act
1999
(NSW) – risk of insolvency of claimant – onus of proof – production of financial records of claimant
Legislation Cited:
Building and Construction Industry Security of Payment Act 1999
(NSW) ss 13-15, 17, 20-25, 32, 32B
Civil Procedure Act 2005
(NSW)
ss 14, 61, 68, Pt 6
Supreme Court Act 1970
(NSW) s 75A
Uniform Civil Procedure Rules 2005
(NSW)
rr
34.1, 51.51
Cases Cited:
Australian Securities and Investments Commission v
Schlaepfer
[2017] NSWCA 247
Avon Downs Pty Ltd v Federal Commissioner of Taxation
(1949) 78 CLR 353;
[1949] HCA 26
Be Financial Pty Ltd as trustee for Be Financial Operations Trust v Das
[2012] NSWCA 164
Brodyn
Pty Ltd t/as Time Cost & Quality
v Davenport
(2004) 61 NSWLR 421 ; [2004] NSWCA 294
Ceerose
Pty Ltd v A-Civil Aust Pty Ltd
[2023] NSWSC 239
Ceerose
Pty Ltd v A-Civil Aust Pty Ltd (No 2)
[2023] NSWSC 401
Colbran
, in the matter of PBS Building Pty Limited (Administrators Appointed)
[2023] FCA 276
Grosvenor Constructions (NSW) Pty Ltd (in administration) v
Musico
[2004] NSWSC 344
Jaycar
Pty Ltd v Lombardo
[2011] NSWCA 284
Kennedy Civil Contracting Pty Ltd (Administrators Appointed) v Richard Crookes Construction Pty Ltd; In the matter of Kennedy Civil Contracting Pty Ltd
[2023] NSWSC 99
Lithgow City Council v Jackson
(2011) 244 CLR 352; [2011] HCA 36
Probuild
Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd
(2018) 264 CLR 1; [2018] HCA 4
R J
Neller
Building Pty Ltd v Ainsworth
[2009] 1
Qd
R 390;
[2008] QCA 397
Shade Systems Pty Ltd v
Probuild
Constructions (Aust) Pty Ltd
[2018] NSWCA 33
TFM Epping Land Pty Ltd v
Decon
Australia Pty Ltd
[2020] NSWCA 118
Veolia Water Solutions v Kruger Engineering [No 3]
[2007] NSWSC 459
Category:
Principal judgment
Parties:
A-Civil Aust Pty Ltd (Applicant)
Ceerose Pty Ltd (First Respondent)
John Tuhtan (Second Respondent)
ABC Dispute Resolution Service (Third Respondent)
Representation:
Counsel:
F Hicks SC with L Gor (Applicant)
S Robertson SC with J Wright (First Respondent)
Solicitors:
M&A Lawyers (Applicant)
Salim Rutherford Lawyers (First Respondent)
File Number(s):
2023/156651
Publication restriction:
Nil
Decision under appeal
Court or tribunal:
Supreme Court of New South Wales
Jurisdiction:
Equity
Citation:
[2023] NSWSC 508
Date of Decision:
15 May 2023
Before:
Stevenson J
File Number(s):
2022/217806; 2022/236818
[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]
HEADNOTE
[This headnote is not to be read as part of the judgment]
The applicant, A-Civil Aust Pty Ltd (A-Civil), was a subcontractor of the first respondent,
Ceerose
Pty Ltd ( Ceerose), in relation to two developments.
On 25 and 30 May 2022, A-Civil served
Ceerose
with separate payment claims under the
Building and Construction Industry Security of Payment Act 1999
(NSW) (Security of Payment Act). Both payment claims were disputed by
Ceerose.
An adjudicator was appointed and issued two separate determinations that
Ceerose
pay moneys to A-Civil.
Ceerose
challenged the determinations in the Technology and Construction List. The amounts the subject of the determinations
were
paid into Court. On 20 March 2023, Darke J found that each determination was affected in part by jurisdictional error, and on 20 April 2023, set each Determination aside in part. Appeal proceedings in this Court are listed for hearing shortly.
Ceerose
has sought a stay of any payment out to A-Civil of funds paid into Court by
Ceerose
on two bases; first, that payment out be stayed until completion of yet to be commenced contract proceedings contemplated by s 32 of the Security of Payment Act and, secondly, pending determination of the appeal from Darke J’s decision. A-Civil produced various documents in response to interlocutory orders made on
5 December
2022. On 20 April 2023,
Ceerose
served a notice to produce, which A-Civil sought to set aside. On 15 May 2023, the primary judge held that A-Civil should produce, subject to a confidentiality regime, the entirety of A- Civil’s
electronic financial records. A-Civil applied for leave to appeal from that order.
The Court, granting leave to appeal and allowing the appeal, held
:
1
The policy of the Security of Payment Act is to ensure that a contractor who carries out construction work for a principal receives progress payments for carrying out that work. The risk that the contractor might not be able to refund moneys ultimately found to be due to the principal after a successful action under the contract is a risk which is assigned to the principal: [19]-[20]. This policy is underlined by s 32B of the Act, which denies the benefits of the legislation only to companies in liquidation.
Probuild
Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd
(2018) 264 CLR 1; [2018] HCA 4;
R J
Neller
Building Pty Ltd v Ainsworth
[2009] 1
Qd
R 390;
[2008] QCA 397 at [40] applied.
2
Where money is paid into court at the commencement of a case seeking to set aside an adjudicator’s determination, the court has power to stay the payment out of that money pending resolution of proceedings seeking judicial review of that determination.
The court also has power to grant an injunction or stay pending final resolution of related contractual proceedings.
However, in exercising either of these powers, the principles governing the grant of interlocutory relief will be constrained by the need to give effect to the statutory policies of the Security of Payment Act: [21]-[22], [31].
Probuild
Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd
(2018) 264 CLR 1; [2018] HCA 4;
Veolia Water Solutions v Kruger Engineering
[No 3] [2007] NSWSC 459;
TFM Epping Land Pty Ltd v
Decon
Australia Pty Ltd
[2020] NSWCA 118;
Shade Systems Pty Ltd v
Probuild
Constructions (Aust) Pty Ltd
[2018] NSWCA 33;
Kennedy Civil Contracting Pty Ltd (Administrators Appointed) v Richard Crookes Construction Pty Ltd; In the matter of Kennedy Civil Contracting Pty Ltd
[2023] NSWSC 99;
Colbran, in the matter of PBS Building Pty Limited (Administrators Appointed)
[2023] FCA 276 applied.
3
The application of the principles set out above is a matter of general importance warranting the granting of leave to appeal.
The effect of the order for production of financial records by the party not bearing the onus of proof in relation to solvency is, or should be, unusual: [32]-[33].
Australian Securities and Investments Commission v
Schlaepfer
[2017] NSWCA 247:
Jaycar
Pty Ltd v Lombardo
[2011] NSWCA 284;
Be Financial Pty Ltd as trustee for Be Financial Operations Trust v Das
[2012] NSWCA 164 applied.
4
The notice to produce sought production of documents referred to in an earlier affidavit which A-Civil did not rely on.
Ceerose
was not entitled to investigate any doubt or question about those documents by conducting an enquiry into the solvency of A-Civil.
The primary judge fell into error by failing to address the fact that A-Civil did not rely on those documents: [37]-[38].
Avon Downs Pty Ltd v Federal Commissioner of Taxation
(1949) 78 CLR 353 ;
[1949] HCA 26
applied.
5
Further or fresh evidence which fails to assist in establishing the insolvency or risk of insolvency of a sub-contractor should not be admitted on appeal. The additional affidavit evidence which
Ceerose
sought to rely on would not achieve a different outcome on the re-exercise of the relevant discretion. Whether or not s
75A( 7) of the
Supreme Court Act 1970
(NSW) applies to an application for leave to appeal, to withhold evidence to the day of the hearing is not to be condoned: [41]-[45].
6
In re-exercising the discretion, no order should be made ordering the production of the entirety of the financial records of A-Civil.
Ceerose
did not establish an entitlement to the extensive documents sought in its notice to produce. To make out its claims for injunctive relief against the making of any payment to A-Civil pending the determination of other proceedings,
Ceerose
was required to establish a basis for finding that there was a real likelihood that it would not be able to recover from A-Civil any amount which ultimately proved to be an over-payment : it did not do so: [51]-[52].
Judgment
THE COURT
:
The respondent,
Ceerose
Pty Ltd ( Ceerose ) is a
building contractor .
The applicant,
A-Civil Aust Pty Ltd ( A-Civil ) ,
was a subcontractor of
Ceerose
in relation to a development in York Street ,
Sydney and a separate development in
Greenknowe
Avenue, Elizabeth Bay.
The present application for leave to appeal relates to an interlocutory judgment requiring A-Civil to produce extensive financial records to establish its solvency, failing which
Ceerose
seeks to prevent payment to A-Civil of moneys to which it is entitled, at least on an interim basis, under
the
Building and Construction Industry Security of Payment Act
1999
(NSW)
( “ Security of Payment Act ” ).
Contractual and procedural background
The contract between the parties in relation to York Street was entered into on about 6 October 2021.
On 30 May 2022 ,
A-Civil
served
Ceerose
with a payment claim under
the
Security of Payment Act .
The payment
claim
was disputed by
Ceerose . The second respondent, Mr
Tuhtan , was
appointed
as adjudicator .
On 2 August 2022, Mr
Tuhtan
issued a Determination that
Ceerose
pay A-Civil $2,045,453.97.
Proceedings were commenced in the Technology and Construction List of the Court seeking to set aside the Determination for jurisdictional error. Interlocutory and final injunctions
were sought seeking to
prevent A-Civil from taking any steps to enforce the Determination , pending resolution of
contractual
proceedings contemplated by s 32 of the Security of Payment Act which have yet to be commenced .
Pursuant to s 25(4) of the Security of Payment Act , as a statutory condition of commen c ing the challenge to the validity of the Determination ,
$ 2,045,453.97
was paid
into Court by
Ceerose .
The contract between the parties in relation to
Greenknowe
Ave
was entered into on about
2 December
2021.
On
25
May 2022 A-Civil served
Ceerose
with a payment claim under the
Security of Payment Act .
The payment claim was disputed by
Ceerose . The second respondent, Mr
Tu h tan , was appointed as adjudicator.
On
about
11 July
2022, Mr
Tu h tan
issued a Determination that
Ceerose
pay A-Civil $ 349,324.36 .
Proceedings were commenced in the
Technology and Construction List of the Court seeking to set
aside the Determination for jurisdictional error.
Interlocutory and final injunctions
were sought seeking to prevent
A-Civil from taking any steps to enforce the
D etermination ,
pending resolution of proceedings contemplated by s 32 of the Security of Payment Act which have yet to be commenced.
Pursuant to s
25(4) of the Security of Payment Act, as a statutory condition of commen c ing the challenge to the validity of the Determination,
$ 349,324.36
was paid into
c ourt by
Ceerose .
On 20 March 2023, Darke J found that each
D etermination was affected by jurisdictional error :
Ceerose
Pty Ltd v A-Civil Aust Pty Ltd
[2023] NSWSC 239.
On
20 April 2023, Darke J set aside each Determination, but only in part:
Ceerose
Pty Ltd v A-Civil Aust Pty Ltd
(No 2)
[2023] NSWSC 401.
An
appeal and cross-appeal from Darke J ’ s orders are listed to be heard in this Court commencing on 19 July 2023.
Following the decision of Darke J there has been a significant
number
of interlocutory
disputes .
Two are presently relevant:
Ceerose
has sought ( i )
i nterlocutory and final injunctions to prevent A-Civil taking steps to enforce the Determination, pending resolution of
foreshadowed but uncommenced contractual
proceedings , and ( ii)
a stay of any payment out to A-Civil of funds paid into Court
by
Ceerose
relating to those parts of the Determination not found to be affected by jurisdictional error ,
pending
determination of the app e al and cross - appeal from Darke J ’ s decision .
Two days , originally listed
in May 2023 ,
were set aside in the Equity Divi sion
to deal with the interlocutory disputes , including the stay applications just described.
In preparation for that interlocutory hearing,
on
5
December 2022
Richmond J made
the following
orders
by consent :
1.
By 31 January 2023 the Plaintiff
[Ceerose ]
provide to the First Defendant
[A-Civil] further and better particulars of paragraph 47 of the Amended Technology and Construction List Statement.
2.
The time for service of the First Defendant’s lay evidence be extended to 9 December 2022.
3.
By 16 December 2022, the First Defendant informally produce to the Plaintiff the documents responding to the Notice to Produce to Court of 26 October 2022 at annexure A to this Order, save and except:
(a)
where any such document is annexed as part of the First
Defendant ’ s witness evidence; and/or
(b)
so as to
redact any tax file number.
4.
Vacate the listing of the Notice to Produce to Court in the Return of Subpoena List on 5 December 2022.
...
7.
The matter be listed for directions on 10 February 2023.
ANNEXURE A
You are required to produce the following documents or things to the Court:
1.
Financial accounts for A-Civil Aust Pty Ltd (A-Civil) for the financial years ending 30 June 2022, 30 June 2021.
2.
Any current balance sheet for A-Civil and, if there be no current balance sheet, the most recent balance sheet prepared by A-Civil.
3.
Profit and loss statements for A-Civil covering the current financial year and the financial years ending 30 June 2022, 30 June 2021.
4.
Notice of Assessment for A-Civil for the financial years ending 30 June 2022, 30 June 2021.
5.
Business Activity Statements lodged by A-Civil in 2022 and 2021.
D ocuments were produced by A-Civil in response to those orders.
On 20 April 2023
Ceerose
served
a
wide-ranging
Notice
to
Produce , which , by a notice of motion dated 2 May 2023,
A-Civil
sought to set aside.
That motion was heard by
Stevenson J
on 5 May and
15 May 2023 ,
with
reasons
given
on
1 5 May
2023
together with a Redfern Schedule containing rulings about
documents sought by
the Notice to Produce.
This application for leave to appeal arises from one part of
that decision .
The effect of that part of the decision is that, in
pursuing
the stays described above,
Ceerose
was entitled to
require
A-Civil
to
produce, subject to a confidentiality regime,
the entirety of its
electronic financial
records, which if printed out would comprise 68 lever arch folders
of documents .
Critically,
paragraph
22
of
Ceerose ’
Notice to Produce
sought
“ raw
financial and other
data ”
underlying
certain
documents
produced by A-Civil in response to Richmond J ’ s orders .
A-Civil
did not rely on those documents before the primary judge and
undertook not to tender or deploy
them
in the stay hearings.
The impugned order of
Ste v enson J
(which on 22 May 2023 was stayed by the Registrar of this Court until further order) was in the following terms:
That [A-Civil] produce to [Ceerose’s]
solicitors a copy of the whole of [A- Civil’s] current MYOB file in the form of a .myox
file.
For the reasons that
follow,
there should be a
g rant
of
leave to appeal ,
the appeal
against the making of this order
should be allowed and the order set aside .
In re-exercising the discretion ,
par 22 of
Ceerose ’
Notice to Produce
of 20 April 2023 should be struck out .
The effect is that A-Civil is not required to produce its MYOB financial records.
To explain why this is so it is first
necessary to
outline
th e
statutory background
to
Ceerose ’
stay applications and documentary requests about those stay applications.
The
Security of Payment Act
Given the limited scope of this appeal, it is not necessary to address the statutory scheme by which the Security of Payment Act provides for the making of a payment claims by a contractor (s 13), the provision of a payment schedule in response (s 14), the immediate liability to pay the claim in the absence of a timely payment schedule (s 15), the referral by the claimant of any dispute to an adjudicator (s 17) or the truncated procedure to be followed by the adjudicator (ss 20, 21 and 22).
The post-adjudication provisions are, however, significant.
The respondent to a claim is required to pay the adjudicated amount within five days of being served with the adjudicator ’ s determination: s 23.
If the respondent fails to make the payment ,
the claimant may request an
adjudication certificate (s 24(1)(a)) and file it as a judgment, pursuant to s 25, which provides:
25
Filing of adjudication certificate as judgment debt
(1)
An adjudication certificate may be filed as a judgment for a debt in any court of competent jurisdiction and is enforceable accordingly.
….
(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.
Three aspects of s 25 are presently material.
First, although the section contemplates proceedings to have the judgment set aside, it does not contemplate pre-filing injunctive relief, as occurred in the present case.
Nevertheless, the respondent accepted, in accordance with established practice, that the constraints in s 25(4) apply to proceedings designed to forestall the filing of an adjudication certificate; hence the payment into court in compliance with s 25(4)(b).
Secondly, the respondent accepted that the prohibition on challenging the adjudicator ’ s determination, in s 25(4)(a)(iii), limits the grounds of challenge to jurisdictional error vitiating the determination.
Thirdly, no claim based on the construction contract, which might be raised in separate proceedings, can be relied on to set aside the interim rights which accrue under the adjudicator ’ s determination: s 25(4)(a)( i ), (ii).
To the extent that the respondent ’ s interlocutory relief relies on foreshadowed
contractual proceedings, it is convenient to note the terms of s 32 which recognises the availability of such proceedings:
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.
As
the High Court explained in
Probuild
Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd
(2018) 264 CLR 1; [2018] HCA 4 ,
t he policy of the
Security of Payment Act
is t o
ensure that any person who undertakes to carry out construction work (or who undertakes to supply related goods and services) under a construction contract is entitled to receive, and is able to recover, progress payments
for
carrying out that work and supplying those goods and services .
The
Act
is intended to
provide a speedy and effective means of ensuring cash flow to builders
and trade subcontractors
from the parties with whom they contract .
T he Security of Payment Act creates an entitlement that is
to be
determined informally,
summarily
and quickly, and then summarily
enforced without prejudice to the common law rights of both parties which can be determined in
due course .
T he risk that a
contractor
might not be able to refund moneys ultimately found to be due to a
developer
after a successful
civil
action by the
developer
under the contract
is
a risk which, as a matter of policy in the
Security of Payment
Act ’ s
commercial context, has, prima facie,
been assigned to the developer :
R
J
Neller
Building Pty Ltd v Ainsworth
[2009] 1
Qd
R 390;
[2008] QCA 397
at [40] , a
judgment
of Keane JA in the Queensland Court of Appeal
( Fraser JJA and Fryberg J
agreeing)
approved in
Shade Systems
and followed on numerous occasions in this Court.
A s
the High Court
further
explained
in
Shade Systems
at [51]
( Kiefel
CJ, Bell, Keane,
Nettle
and Gordon JJ )
about circumstances where
contractual
proceedings contemplated by s 32 of the Act conclude that a payment made pursuant to the Act should, on the correct construction of the contract, not have been made:
If necessary, a
restitutionary
order can be sought.
The risk that the party placed at an advantage by an underpayment or overpayment may later become incapable of meeting such an order is a risk that is assigned to the other party.
Principles regarding interlocutory
relief
W here money
i s
paid into Court
under s
25(4) at the commencement of a
case seeking to set aside
a
d etermination
for jurisdictional error , the
court has power
to stay the payment out of money to
the claimant
under the
determination
pending resolution of
the respondent ’ s judicial review
proceedings .
The re
is also power
to grant an
injunction
or stay pending final resolution of
contractual
proceedings contemplated by s 32 .
H owever,
in
both
case s
the power
must
be exercised in accordance with the
policy
of the
Security of Payment Act .
In both cases a stay or interlocutory injunction will impinge on the two statutory policies, namely, ( i ) to maintain the flow of money to the subcontractor, and (ii)
as an interim measure,
to place the risk of insolvency on the principal.
The application of the general principles governing the grant of interlocutory relief , including determining whether there is a serious question to be tried and where the balance of convenience lies,
will be constrained by the need to give
effect to these statutory policies.
Further, the principles will require separate application in each case.
For example, with respect to a judicial review challenge to the validity of an adjudicator ’ s determination, the risk of the principal ’ s insolvency is met by the payment into court.
The interruption to the money flow is likely to be for a relatively brief period, given the limited scope of the available judicial review proceeding and the ability of the Court to dispose of such proceedings expeditiously.
In contrast, contract proceedings will entail greater costs, greater delay, and may not confront the risk of the principal ’ s insolvency by a payment into court.
If such proceedings have not been commenced, the court has no means of judging
whether they raise a serious question or questions.
A
practice
has developed , adopted by the parties in the present case,
of referring to a stay in aid of possible
restitutionary
recovery following
contract
proceedings contemplated by s 32 as
a
“Grosvenor”
or
“Brodyn”
stay
.
Labels may tend to obscure the extraordinary nature of the relief being sought.
It is appropriate, therefore, to address the implications which the labels carry, by reference to the cases themselves and the circumstances in which they have been applied.
Grosvenor
Constructions (NSW) Pty Ltd (in administration
)
v
Musico
[2004] NSWSC
344
(
Grosvenor
)
was a case
under a n earlier
version of the Act
in which
Einstein J found, in relation to a
contractor
company in administration, that
a stay should be granted
where there
wa s a
certainty
that the
principal ’ s
rights
would be
rendered nugatory
in the absence of a stay .
Brodyn
Pty Ltd t/as Time Cost & Quality
v Davenport
(2004) 61 NSWLR 421 ; [2004] NSWCA 294
wa s a relatively early consideration by this Court of the
Security of Payment Act .
At
[85],
Hodgson
JA identifie d
the existence of the discretion to grant a stay and
note d
that
“ the policy of the Act that progress payments be made would be a discretionary factor weighing against such relief ” .
I n
Veolia Water Solutions v Kruger Engineering [No 3]
[2007] NSWSC 459
(
Veolia
) ,
approved
by
this Court
in
TFM Epping Land Pty Ltd v
Decon
Australia Pty Ltd
[2020] NSWCA 118
(
TFM Epping Land
)
at
[72] ,
McDougall J
said:
[36]
At paras [29] to [31]
[of
Grosvenor
] , Einstein J referred to decisions staying execution on judgments pending an appeal where there was a risk that the appellant might not recover its money if it succeeded on the appeal. In para [31], his Honour noted that “the analogy with appeals is not a perfect one”, because it did not
take into account
the evident policy of the Act requiring prompt payment of progress claims. Thus, his Honour said, “there is a sound reason for making stays less readily available in relation to debts arising under the [Security of Payment] Act, in contrast to the position in relation to appeals arising from curial proceedings.” His Honour said that one way in which this might be recognised was by requiring
“ more than a
‘
real risk
that [the respondent] will suffer prejudice or damage, if a stay is not granted.’”
(The internal quotation comes from the decision of the Court of Appeal in
Kalifair
Pty Ltd v Digi-Tech (Australia) Ltd and Others
(2002) 55 NSWLR 737 at 741-742 [18]; the emphasis comes from Einstein J.)
[37]
Thus, his Honour concluded at para [32], “in a case … where there is a certainty that the defendants’ rights will be otherwise rendered nugatory, and that it will suffer irreparable prejudice, the proper and principled exercise of the Court’s discretion is to grant a stay.” At para [33], his Honour drew comfort from the fact that the plaintiff’s entitlement under the judgment recovered by it was fully secured.
[38]
At para [35], his Honour observed that “if no stay is granted, an interim arrangement would be in practice converted into a final order.” He repeated that the effect of refusing the stay would be to render nugatory
Musico’s
rights, and thereby cause “irreparable prejudice”.
[39]
I adopt his Honour’s statement of the principles as being those that, in general, should be considered when deciding an application such as that before his Honour, or that before me. However, in any
particular case, the application of those principles, and the balancing of the various considerations, will require careful attention. For example, each case will require close analysis of the extent or certainty of the risk of prejudice or damage, if a stay is not granted (I refer to the question posed but not answered by his Honour in para [31]).
W here it is certain that the
principal
will suffer irreparable prejudice, it would
generally
be a proper exercise of the Court ’ s discretion to grant a stay.
It is also correct that the extent or certainty of the risk of prejudice must be closely examined in each case
and will depend in part on the merit of the principal ’ s claim under the contract .
It does not follow, however, that the policy of the
Security of Payment
Act is
to encourage
a searching examination
into
the solvency of
those who receive
payments made
pursuant to
the Act
when
contractual
proceedings
are
contemplated or
pending.
When dealing with
Shade Systems
upon remitter from the High Court,
Payne
JA
found that
even
in a case where the developer
established
a
significant risk
that
the contractor
might not be able to refund moneys paid
under the Act
hel d
to be repayable
in subsequent
contract
proceedings , that
was
not enough to
grant a
stay :
Shade Systems Pty Ltd v
Probuild
Constructions (Aust) Pty Ltd
[2018] NSWCA 33
at [36] .
This was because
the
policy of the
Security of Payment
Act
imposed
the risk of insolvency
on the principal .
The caution which the
power to grant interlocutory relief
should properly attract was recently emphasised
by
this Court in
TFM Epping Land
:
[87]
None of the foregoing detracts from the principles applied by the primary judge that permit a stay of execution to be granted, no differently from the fact that a stay of execution may in an appropriate case be granted in respect of any other judgment. We respectfully agree with N Adams J, in a sentence immediately preceding a passage from her judgment in
Bellerive Homes Pty Ltd v FW Projects Pty Ltd
reproduced in the Developers’ written submissions:
“A stay will generally be less readily available in relation to judgments entered following an adjudication under the SOP Act than in relation to appeals arising from curial proceedings.”
[88 ]
That must, with respect, be so. It is a consequence of the legislative purpose of giving cashflow to builders and subcontractors in advance of a final hearing in a court, which is absent in, say, a judgment arising on a debt owed to a bank or following an action for personal injury.
[89]
As McDougall J said in
Veolia
at [75], a court may nonetheless intervene where there is the likelihood of irreparable prejudice. In such a case a Court will be cautious,
in light of
the policy of the statute, but it may do so where the practical effect is to make permanent that which the legislature intended to be merely interim.
[90 ]
True it is that in such a case the Court will have regard to the practical effect upon the parties. But the onus must rest on the party who seeks relief which will prevent the ordinary operation of the processes authorised by the Act, and it is to be borne in mind that a Court will be cautious when intervening, not least because to do so detracts from the primary purpose of the Act in enabling a builder to be paid.
The conclusion that the policy of the Act is to place the risk of insolvency on the developer /principal contractor
is
further
underlined by s 32B which was introduced in 2018:
32B
Application of Part to a claimant in liquidation
(1)
A corporation in liquidation cannot serve a payment claim on a person under this Part or
take action
under this Part to enforce a payment claim (including by making an application for adjudication of the claim) or an adjudication determination.
(2)
If a corporation in liquidation has made an adjudication application that is not finally determined immediately before the day on which it commenced to be in liquidation, the application is taken to have been withdrawn on that day.
In
Kennedy Civil Contracting Pty Ltd (Administrators Appointed) v Richard Crookes Construction Pty Ltd; In the matter of Kennedy Civil Contracting Pty Ltd
[2023] NSWSC 99
at [34] Ball J said,
with respect correctly , that the purpose of
s 32B
is to deny
the
benefits of the legislation to companies in liquidation and not otherwise.
In
Colbran
, in the matter of PBS Building Pty Limited (Administrators Appointed)
[2023] FCA 276 ,
Halley J said ,
again with respect correctly, dealing with a claimant subject to a deed of company arrangement
(DOCA) :
[96]
The stated prime objective of keeping cash flowing in the contracting chain by enforcing timely payments cannot be construed as supporting any construction of the SOP Act that limits or qualifies its operation more generally to companies under external administration or that are the subject of a DOCA. Further, any weight that might be given to that prime objective in exercising a discretion to extend convening periods for the second creditors’ meetings must necessarily have regard to the text and operation of the SOP Act. The text of s 32B makes clear that
the legislature has chosen the liquidation of a corporation as the relevant event for excluding a person from taking any action under the SOP Act to enforce a payment claim, not the appointment of external administrators or entry into a DOCA.
These matters lend weight to
the
conclusion that
there is a heavy burden on a
party who seeks
injunctive
relief
or
a
stay
pending the outcome of proceedings contemplated by s 32
on the basis that a payment may
become
un recoverable
due to the possible or
even
likely insolvency of the payee
at a later date .
Considerable
caution should attend the
grant
of
such an
injunction or a stay ,
as to do so
may
detract from the primary purpose of the Act .
Leave to appeal
T he
applicant
requires leave to appeal
as t here is no appeal as of right against the
interlocutory
orders of
the primary judge.
Leave will only be granted where
there are
substantial reasons to allow appellate review :
Australian Securities and Investments Commission v
Schlaepfer
[2017] NSWCA 247 at [40] .
The
party seeking leave
will usually be required
to demonstrate that there
is an issue of principle, question of public importance or reasonably clear injustice going beyond something that is merely arguabl e :
Jaycar
Pty Ltd v Lombardo
[2011] NSWCA 284
at [46];
Be Financial Pty Ltd as trustee for Be Financial Operations Trust v Das
[2012] NSWCA 164 at [33] .
The application of the principles set out above is a matter of general importance.
On its face, not only does the degree of the time and expense created by the interlocutory regime under consideration warrant the attention of the Court, but the production of the records raises the likelihood of further interlocutory disputation.
In particular, the effect of the order for production of a swathe of financial records by the party not bearing the onus of proof in relation to solvency is, or should be, unusual.
The production ordered
here was of
a vast amount of material that
could
have no possible application to the purpose for which it
wa s sought , including
private information about
A- Civil ’ s
employees .
T here
are
thus
substantial reasons to allow an appellate review
and therefore leave should be granted .
Error on part of primary judge
Paragraph 22 of
Ceerose ’
N otice to Produce
dated 20 April 2023
sought production of :
The current version of the raw financial and other data on MYOB file (in the form of a .myox
file) including from which A-Civil generated the balance sheet, profit/loss statement and financial statement referred to
at
paragraph 9(a ),( b) and (c) of the Affidavit of
Rosyln
[sic] Anderson dated 23 December 2022
Paragraphs
9 ( a )-( c )
of Ms Anderson ’ s affidavit
read :
9
Exhibited at pages 1 to 38 of Exhibit RA-1 are copies of the following documents with respect to A-Civil’s
financial position:
(a)
Latest balance sheet for A-Civil as of June 2022 (dated 10 October 2022) (exhibited at pages 1 to 2 of Exhibit RA-1). This document was generated using the MYOB accounting and software system. Although this document is marked
Draft
, it is in final form. It will remain marked
Draft
until such time as the 2022 financials are ready to be submitted to the Australian Taxation Office (“ATO”) in about 31 March
2023;
(b)
Latest profit/loss statement for A-Civil for the period between July 2021 to June 2022 (exhibited at pages 3 to 6 of Exhibit RA-1). This document is also generated using the MYOB accounting and software system. It is marked
Draft
for the same reason as the above balance sheet; that is, it is in final form. The profit/loss will be submitted to the ATO in about 31 March
2023;
(c)
Financial statement for A-Civil for the year ending 30 June 2021, dated 23 March 2022 (exhibited at pages 7 to 13 of Exhibit RA-1). This is the latest financial statement for the company. The financial statement for the year ending 30 June 2022 is not due until 28 February 2023 and as such has not been prepared.
A critical matter in the present application was that A-Civil made clear
that
it did not
read
Ms Anderson ’ s affidavit or
tender
the documents referred to
in it .
A
n otice to
p roduce, provided it identifie s
a particular document or thing, may be appropriate where an opposing party relies
on
evidence and the document or thing
sought
is
referred to ,
or
is
necessary to understand or test
an
assertion ,
in that evidence.
Paragraph 22 of this Notice to Produce was framed as seeking documents to test or investigate the basis of financial information contained in
documents referred to in pars 9(a)-(c) of Ms Anderson ’ s affidavit .
Where, as here, A-Civil did not rely on the
relevant
documents and
bore no onus of proof
to
establish its solvency,
Ceerose
was not entitled to
investigate
any doubt or question about the documents referred to in p ars 9(a)-(c) of Ms Anderson ’ s affidavit ,
without pointing to more than a mere risk of financial difficulties.
T he fact that A-Civil did not rely on any of the documents
Ceerose
sought to interrogate
was a
consideration in addressing the application .
This conclusion applies to both bases on which
Ceerose
s ought
a stay , that is,
a stay pending the outcome of
contractual
proceedings
contemplated by s 32 of the Act
and
a stay pending
determination of
the appeal in this Court.
In these circumstances, the
compulsory processes of the Court are not to be used
by
a
developer /principal contractor
in Security of Payment cases to conduct wide - ranging enquiries into the solvency of their sub-contractors.
As
A-Civil was not relying on those documents,
Ceerose
was not entitled to
“ raw
data ”
to
investigate
whether these documents, which all showed A-Civil to be
solvent , were somehow incorrect.
Did
the primary judge
take
into account
the fact that
A-Civil did not
rely on
those documents and undertook not to tender them ?
T he fact that A- Civil
d i d not rely on the documents is not referred to in the judgment or the Redfern Schedule.
The
conclusion
in the Redfern Schedule
that the information sought
“ appears to be relevant ”
does not demonstrate that this matter was
properly considered .
The fact that there was no explanation of how the order
was
justified in circumstances which seemed to require its refusal is sufficient to infer that the fundamental consideration was not addressed, as in
Avon Downs Pty Ltd v Federal Commissioner of Taxation
(1949) 78 CLR 353
at 360 (Dixon J);
[1949] HCA 26 .
This is the essence of A- Civil ’ s
ground s
1(b)
[1]
and 2(f)
[2]
of its notice of appeal : the appeal should be allowed on this basis .
It is strictly unnecessary to consider the remaining grounds of appeal.
G round s
1 (a)
[3]
and 2(a)
[4]
raise a difficult issue.
There is much to be said for the proposition that
item 22 of the
N otice to
P roduce
did not require
the production of a
“ specified document or thing ”
pursuant to
the
Uniform Civil Procedure Rules 2005
(NSW) ( UCPR )
r
34.1 .
It
may be correct that
requiring production of
the
. myox
record of the MYOB file was akin to requiring production of a box or filing cabinet containing
numerous
unidentified documents.
No doubt it was true as affirmed by the computer expert,
Mr
Campey ,
that the MYOB file was a single
“ file ” .
It is
also
true, as
A-Civil
submitted, that
the primary judge ’ s
order
was
vastly
different
from that sought in
the Notice to Produce.
Ceerose
submitted, correctly, that the order ultimately made
b y the primary judge was not one
under
r 34.1
but could be supported under
either
s 61
or s
68 of the
Civil Procedure Act
2005
(NSW) , or both .
The argument about
the brea d th of
the phrase
“ a ny
specified document or thing ”
in the context of electronic e vide nce should await a case where
an order is
actually made
pursuant to
UCPR
r 34.1 .
For essentially the same reasons, this is not an appropriate case to determine whether
that which was sought under
par 22 of the Notice to Produce was a
“ record of information ” : Ground 2(b)
[5]
.
G rounds
1(e), 1(f), 1(g) ,
1(h) , 2(c), 2(d) and 2(g)
are variations on the same theme that if the MYOB file were to be produced it should have been after a request for discovery made in accordance with
Practice Note SC Eq 11 .
Given the
reasoning set out above , i t is unnecessary to consider
those grounds of appeal .
Further, t o do so would raise
an
unexplored implication that discovery could be
available
in such proceedings.
Application to
rely on
further evidence
In relation to leave to appeal and in relation to the re-exercise of discretion
(should it arise) ,
Ceerose
sought to rely on further or fresh evidence, contained
i n the affidavit of Ms
Stephanie
Saad
sworn
on
9 June 2023.
The admission of that affidavit was opposed
by A-Civil.
The evidence may be summarised as follows:
The
first
document at
wa s the final version of A- Civil ’ s
financial statements for the year ending 30 June 2021 : Ex STS-1, pp
1-8 .
That document shows a gross profit on trading in the millions of dollars, a net operating profit after tax of
a significant amount
and retained profits at
year end of millions of dollars.
The document is inconsistent with the suggestion of financial difficulties or insolvency.
The
second
document
wa s the final version of A- Civil ’ s
financial
statements for the year ending 30 June 2022 : Ex STS-1, pp 9-16 .
That document shows a gross profit on trading in the millions of dollars (and over a million dollars more than the previous year), a net operating profit after tax of
a considerable sum
and retained profits at year end of millions of dollars.
The document is inconsistent with the suggestion of financial difficulties or insolvency.
The
next set of
documents
we re insurance records and tax records containing no suggestion of financial difficulties : Ex STS-1, pp
17-42 .
The re followed
unredacted bank statements showing credit entries throughout : Ex STS-1, pp 43-63 .
To the extent that the bank statements show payments to a related company, A-Civil Contracting Pty Ltd, they cast no doubt on
the strength of
A- Civil ’ s
financial position.
The re w ere
also
a company search
and
a
credit report
relating to
A-Civil Contracting Pty Ltd : Ex
STS-1 pp 64-82 .
A - Civil Contracting Pty Ltd, a labour hire company, apparently experienced financial difficulty
during
t he COVID-19 pandemic and entered a
DOCA
on 21 November 2021.
The
a dministration ended on 18 December 2022.
The re
were copies
of a report and
a
Notice of Second Meeting of Creditors of A - Civil Contracting Pty Ltd : Ex STS-1, pp 83-162 .
At
their
highest, and making assumptions favourable to
Ceerose , those documents
contain some expressions of opinion about A-Civil given by the administrators of
A - Civil Contracting Pty Ltd
and show that
A-Civil Contracting
allegedly had a claim of $884,717 against A-Civil and A-Civil had a
counter-claim
of
approximately
$2.1 million.
A lthough a
DOCA was
entered into ,
the administrators have now been discharged.
Nothing in
these documents
raises a concern
that A-Civil may be in financial difficulties, let alone
that it is
insolvent.
The remaining document, Ex A on this application, was relied upon by A-Civil
in the event that
the Saad affidavit was admitted.
That document, dated 9 June 2023, provides support for the conclusion that A-Civil is not in financial difficulty and describes A- Civil
as
at
“ low risk ”
of credit default.
From
Ceerose ’
point of view, the most significant matters were some inadmissible expressions of opinion (
Lithgow City Council v Jackson
(2011) 244 CLR 352; [2011] HCA 36 )
made by administrators of
the
related company ,
A- Civil C ontracting.
It is clear, however, that the
administration
of that company is
at an end.
It may be accepted that most of the documents sought to be relied upon were not in the possession of
Ceerose
prior to 15 May 2023.
However, as the documents do not assist
Ceerose
in establishing insolvency, or even the risk of insolvency, of A-Civil, they should not be admitted.
No different outcome on the re-exercise of discretion would be achieved by the admission of those documents.
The defensive tender of Ex A should also be rejected.
As a matter of procedure, it may be observed that
Ceerose
produced the affidavit and sought to read it
in the course of
the hearing in this Court.
It was relied on in part in support of its opposition to a grant of leave.
This course did not
significantly disadvantage the applicant because the affidavit had been prepared and served more than a month before the hearing.
Nevertheless, where further evidence is sought to be adduced in this Court the procedure set out in UCPR, r 51.51 should be followed.
Whether
or not
s 75 A( 7 ) of the
Supreme Court Act 1970
(NSW) (dealing with further evidence on appeal) applies to an application for leave, and
even if limited
notice
was given
of the determination that there would be a concurrent hearing of the leave application and the appeal, to withhold evidence to the day of the hearing is not to be condoned.
The possibility that its reception could cause a hearing to be aborted is self-evident and would usually lead to its summary rejection.
Re-exercise of discretion
Power to order production
In principle it is necessary to identify the powers relied on to support the application for production of documents identified in the following terms in par
22 of
Ceerose ’
N otice to
P roduce:
The current version of the raw financial and other data on MYOB file (in the form of a .myox
file) including from which A-Civil generated the balance sheet, profit/loss statement and financial statement referred to
at
paragraph 9(a ),( b) and (c) of the Affidavit of
Rosyln
[sic] Anderson dated 23 December 2022
As appears from the grounds of appeal identified above, A-Civil assumed that production was sought under UCPR r 34.1, which relevantly provides
that
“ [a] party may, by notice served on another party, require the other party to produce to the court,
…
any specified document or thing. ”
There is a large question as to whether the description in par 22 of the
N otice to
P roduce could satisfy the constraints of that provision.
Against the possibility that the Court did not accept that the scope of that rule extended to the material contained on the USB stick created by Mr
Campey ,
Ceerose
called in aid two provisions of the
Civil Procedure Act 2005
(NSW).
The first, s 68, provides:
68
Attendance at court and production of documents and things to court
Subject to rules of court, the court may, by subpoena or otherwise, order any person to do either or both of the following—
(a)
to attend court to be examined as a witness,
(b)
to produce any document or thing to the court.
It may be doubted that this provision applies (or could apply, given the opening words of the chapeau) to a “document or thing” not covered by r 34.1.
The second, s 61, is more broadly expressed:
61
Directions as to practice and procedure generally
(1)
The court may, by order, give such directions as it thinks fit (whether or not
inconsistent with rules of court) for the speedy determination of the real issues between the parties to the proceedings.
(2)
In particular, the
court may, by order, do any one or more of the following—
(a)
it may direct any party to proceedings to take specified steps in relation to the proceedings,
(b)
it may direct the parties to proceedings as to the time within which specified steps in the proceedings must be completed,
(c)
it may give such other directions with respect to the conduct of proceedings as it considers appropriate.
The scope of this power is defined by its purpose, identified in subs (1).
The
power to give such directions as a court “thinks fit … for the speedy determination of the real issues between the parties to the proceedings” is not “an open-ended power to make any directions the court considers appropriate”:
McGuirk v University of New South Wales
[2010] NSWCA 104 at [139] per Sackville AJA (with whom Young JA agreed); approved in
Haselhurst
v Toyota Motor Corporation Australia Ltd
(2020) 101 NSWLR 890 at [5]
per Bell P with whom Macfarlan, Leeming and Payne JJA and Emmett AJA agreed.
There is undoubtedly power to dispense with requirements of the rules in particular circumstances (
Civil Procedure Act
, s 14) but not to simply disregard them.
It is sufficient to assume, favourably to
Ceerose , that par 22 could engage one of these powers, because the order should not in any event be made having regard to the statutory and forensic contexts, the scope of the disclosure required and the dictates of Pt 6 of the
Civil Procedure Act
to
facilitate the speedy determination of the real issues in dispute.
Burden of proof
The claims for injunctive relief against the making of any payment to A-Civil, pending determination of the two sets of proceedings ,
depended on
Ceerose
establishing
a basis for a finding that there was a real
likelihood
that it would not be able to recover from A-Civil any amount which ultimately proved to be
an over-payment.
The evidence in this regard was speculative.
The financial information disclosed by A-Civil did not demonstrate insolvency.
The
N otice to
P roduce was designed to
obtain
some basis for casting doubt on the available financials.
Absent some affirmative case suggesting insolvency, a successful payment claimant should not be required to disclose every financial record for a two-year period, nor anything approaching that exercise.
Basis of application
not established
Ceerose
failed to articulate or substantiate any basis for the contention that there was a sufficient likelihood that the applicant was , or might become,
insolvent to require production of the documents sought.
In the statutory context explained above, it was not sufficient for
Ceerose
merely to point to questions it wished to investigate about a possible risk of insolvency.
The Security of Payment Act deliberately allocated the risk of insolvency to
Ceerose .
The nature of this jurisdiction, in the context of
Ceerose ’ s
List Statements and evidence, should have resulted in the primary judge concluding that
Ceerose
had not established an entitlement to the extensive documents sought by par
22 of the
N otice to
P roduce in support of a stay pending determination of contemplated civil proceedings, or a stay pending appeal.
Ceerose
was engaged in a fishing expedition ;
its contentions and evidence failed to identify,
articulate
or substantiate any reasonable basis for finding it sufficiently likely that the applicant was insolvent or even that it was in financial difficulty.
Stay pending determination of contract case
Dealing with the stay in aid of yet - to - be - commenced proceedings
in contract , it bears emphasising that the
power
sought to be exercised is an extraordinary one .
The
statutory background
tends strongly against permitting
any wide - ranging
inquiry into the solvency of recipients of payments made pursuant to the Act .
This application assumes that
Ceerose
will fail to have the whole of the adjudication set aside on appeal from the judicial review decision of Darke J.
In
that sense it is premature, but it should now be disposed of
on the basis of
the
assumption .
To keep a payment claimant out of the interim entitlement conferred by the statute, not for the
very
brief period allowed for the adjudication to take place, but for months and possibly years after that process is concluded
must be difficult to justify where the circumstance provided for by s 32B is not engaged. As has been noted, no real likelihood of imminent insolvency has been established.
Even if
the rejection of the further evidence were erroneous, consideration of that material does not assist
Ceerose :
The three sub-paragraphs of the Anderson affidavit are responsive to the earlier notice to produce the subject of Richmond J ’ s orders.
Ms Anderson made no assertions about solvency.
The draft documents attached to her affidavit as part of Ex RA-1 are the basis of par 22 of the
N otice to
P roduce and were before the primary judge.
The document the subject of paragraph 9(a) (Ex RA-1, pp 1-2) is a draft balance sheet as
at
June 2022.
This draft balance sheet shows positive total equity in the millions of dollars.
A-Civil was not seeking to rely on the document and the document, on its face, is inconsistent with any suggestion of financial difficulty, let alone insolvency.
The document the subject of par 9(b) (Ex RA-1, pp 3-6) is a draft profit and loss statement for 2021-2022 showing profit in the millions of dollars.
The document on its face is inconsistent with any suggestion of financial difficulty, let alone insolvency,
The documents the subject of par 9(c) (Ex RA-1, pp 7-13) are draft financial statements for 2021-2022 showing profit in the millions of dollars.
Again, the document on its face is inconsistent with any suggestion of financial difficulty, let alone insolvency,
The remaining documents before the primary judge were equally remote from any possible issue of solvency.
For example, Ex RA-1, pp 14-26 were records of dealings with the tax office which show ed
regular payments of company tax, again inconsistent with any suggestion of financial difficulty.
Ex RA-1, pp 27-38 are redacted bank statements all showing positive cash balances.
The suggestion made at the hearing that a relatively small cash balance is somehow indicative of insolvency should be rejected.
Finally, because no
contractual
proceedings have been commenced it is impossible to assess the strength of any such case.
No order for production of the material sought in par 22 should be made in support of an application for injunctive relief pending determination of the foreshadowed claim in contract.
Stay pending determination of judicial review appeal
Dealing with the application for a stay pending resolution of the appeal to this Court, it cannot be right that a party in possession of such flimsy material as
Ceerose
can use the compulsory processes of the Court to obtain the entire accounting records of its opponent
to establish an entitlement to a stay pending appeal .
Real questions about
the application of
Pt 6 of the
Civil Procedure Act
would arise if
a
wide-ranging
inquiry into the solvency of
litigants in Security of Payment jurisdictional error cases, pending appeal, were to be permitted.
The same considerations a s
those applicable to production in relation to the contract case are relevant in this regard.
No basis has been shown
for the production of
the MYOB file the subject of par 22 of the
N otice to
P roduce.
The Court therefore
refuse s
to order the production of that file and set s
aside par 22 of the
N otice to
P roduce.
Orders
For the foregoing reasons
the Court makes
the
following orders :
Grant the applicant
l eave
to appeal .
Direct that the applicant
file within 7 days a notice of appeal in the form
of
the draft amended notice of appeal dated 18 Ju n e 2023 .
Refuse
leave
to rely on the affidavit of Ms Saad sworn 9 June 2023.
A llow the a ppeal
and:
S et aside the order made
by the primary judge
on
15 May 2023
that
“ the first defendant produce to the plaintiff ’ s solicitors a copy of the whole of the first defendant ’ s current MYOB file in the form of a . myox
file ” .
Set aside
par 22 of the Notice to
P roduce dated
20 April 2023 .
Order
that
the respondent pay the applicant ’ s costs of the summons for leave to appeal and the appeal.
**********
Endnotes
1.
The primary judge erred in failing to sider or address the affidavit evidence relied upon by the appellant as to the detail and content of the documents comprising its MYOB accounts software and business records which were sought by item 22 of the Notice to Produce.
2.
The primary judge ought to have concluded that item 22 of the Notice to Produce was irrelevant as the appellant had stated that it was not reading those parts of the affidavit referred to in item 22 and was not tendering the documents referred to.
3.
The primary judge erred in finding that item 22 of the notice to produce to court issued by the first respondent on 20 April 2023 (The Notice to Produce) , which required: (i) production of the whole of the appellant’s financial, trading and company accounts and records, including all employment, business and trading agreements and invoices and receipts on remote accounting software known as MYOB; and (ii) further that production be provided in the form of a “.myox file” was the production of a specified document or thing pursuant to and for the purposes of R34.1 of the UCPR.
4.
The primary judge ought to have concluded that item 22 of the Notice to Produce was not a specified document or thing pursuant to r34.1 of the UCPR.
5.
The primary judge ought to have concluded that item 22 of the Notice to Produce was not a record of information and, therefore, not a specified document or thing pursuant to and for the purposes of r 34.1 of the UCPR.
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Decision last updated:
29 June 2023
Official source: https://www.caselaw.nsw.gov.au/decision/188ff50b20f2a472d74c78d0