Fitz Jersey Pty Ltd v Atlas Construction Group Pty Ltd [2017] NSWCA 53

What the court decided

In December 2010 Fitz Jersey Pty Ltd, a developer, engaged Atlas Construction Group Pty Ltd to design and construct a development at Mascot in Sydney [5]. In November 2016 the builder served a final payment claim under the Act for more than $10.5 million plus interest [5]. The claim was made on 15 November 2016, and the developer's payment schedule said nothing was owing [25]. A major issue was whether any construction work had been done under the contract in the 12 months before the claim [25]. The adjudicator decided that it had and that the claim was payable in full [25]. The parties received the determination on 6 January 2017, and the time for payment ran out on 13 January 2017 [26].

The developer did not pay, but on the last day for payment it commenced proceedings challenging the validity of the determination, and sent the summons to the builder that day [26]. It brought those proceedings in the court's supervisory jurisdiction under section 69 of the Supreme Court Act 1970 (NSW) [17]. Its covering letter said it would not object if the builder sought an order that it lodge the adjudicated amount in court [32], [50]. It did not seek interlocutory relief, or an undertaking that the builder would not enforce the determination [6], [78]. On 17 January 2017 the builder filed the adjudication certificate, which resulted in a judgment, and applied for a garnishee order [27]. The order was issued on 27 January 2017 and served on the developer's bank the same day [27]. The bank paid the builder on the day before 3 February 2017, the return date of the developer's summons [28]. The amount paid by the bank was the full judgment debt of $11 million [5].

On 6 February 2017 the developer moved urgently to have the garnishee order set aside and the money repaid, and McDougall J dismissed the motion that afternoon [29]. He treated repayment as requiring a mandatory injunction, and refused that relief because the developer had not acted in time to protect its position and there was no evidence that the builder could not repay [7], [35]. The developer then sought leave to appeal to the Court of Appeal [8]. Basten JA gave the leading reasons and proposed the orders [4], [87], [127]. Leeming JA agreed with him and gave further reasons [88], [90]. Beazley ACJ agreed with the dispositive reasoning of both, and in particular with parts of Basten JA's reasons [2].

The first argument was that the builder had to give the developer reasonable notice before enforcing the judgment, so that it could apply to set the judgment aside and pay the amount into court under section 25(4)(b) [37]. The developer called the result of that payment a "statutory stay" [37]. Basten JA said that a requirement to serve or notify a judgment before enforcing it had no support in authority or principle, and would be inconsistent with the rule that service is not required [38]. He accepted that section 25(4) recognised an entitlement to seek relief that might lead to a judgment being set aside, although it conferred no right to have a judgment set aside [40]. He held, however, that it did not put a respondent to an adjudication in a better position than other judgment debtors, and that its apparent purpose was to restrict the grounds available [40]. A requirement of notice would also deny section 25(1) its full and ordinary meaning, under which the filed certificate "is enforceable accordingly" [45].

Leeming JA said "There is nothing in this point" [90]. In his view, an implied obligation of notice conflicted with section 25(1) and with rule 36.14 of the Uniform Civil Procedure Rules 2005 (NSW), under which judgments need not be served unless express provision requires it [90]. That rule has the force of statute under section 9(3) of the Civil Procedure Act 2005 (NSW) [91]. He described the idea of a "statutory stay" as inaccurate [92]. He also pointed out that section 25(4) itself contemplates that the judgment debt may already have been paid in part or in full [93]. Where the Act requires service, he observed, it tends to say so expressly [95].

The second argument was that, in applying for the garnishee order without notice, the builder should have disclosed that the developer had commenced proceedings challenging the determination [48], [49]. Basten JA said that an applicant for an order without notice must disclose circumstances that would disentitle it to the relief sought [55]. He added that a pending application for a stay should be disclosed, and that disclosure is generally necessary at least where an undertaking not to enforce has been sought without success and a stay application foreshadowed [56], [57]. Leeming JA agreed with those passages, noting that none of those matters arose here [105]. In observations of his own, he said that the absence of any duty to notify tended against treating the challenge as material, and that any duty of disclosure was lessened because such a judgment does not prevent a later final determination of the dispute [108].

In Basten JA's view, what is material depends on the nature of the proceeding and of the right affected [75]. He observed that garnishee orders are routinely made by registrars without a hearing, and that, where no undisclosed fact would have been likely to affect the outcome, setting the order aside is "an entirely penal exercise" and must be proportionate [77]. He doubted that the mere commencement of the section 69 proceedings was a material fact that had to be disclosed [81]. He did not, however, decide the appeal on the basis that there was no duty of disclosure [83]. Beazley ACJ said that there was no obligation in this case to disclose the proceedings, but did not decide whether refusing relief for non-disclosure has a penal purpose [2].

On the discretion, Basten JA said that the statement in Thomas A Edison Ltd v Bullock that an order obtained without full disclosure "must almost invariably fall" was not made about an order already executed and spent [84]. He reasoned that, if the developer had been dilatory so that a mandatory injunction for repayment would be refused, setting the order aside served no identified purpose [84]. The developer had not sought a stay and still had not shown the evidential basis on which a stay would have been granted [85]. No case was cited in which equitable relief had compelled repayment of money paid under an executed garnishee order, and no error of principle was shown in the judge's refusal [86]. Leeming JA added that the disclosure argument had been secondary before the primary judge, who had not decided it on a concluded basis [100], [105]. Beazley ACJ would have favoured refusing leave had the matter not been fully argued, and Leeming JA said there was much to be said for refusing leave on the disclosure grounds [3], [106]. Leave was granted, and the appeal was dismissed with costs [87].

Leeming JA also observed that the discretion to make a garnishee order is not an equitable discretion [112], [113]. He noted that the garnishee procedure had changed materially over time [109]. So far as he could see, until 2005 the procedure in New South Wales had involved two stages [122]. Under the procedure that applied when the case was decided, there were no longer two stages [125]. Without submissions on the effect of those changes, he preferred to decide no more than necessary [126].

Why it matters

Under the Act as it then stood, the Court of Appeal held that a claimant need not notify the respondent to the payment claim before enforcing a judgment obtained by filing an adjudication certificate. In this case, a developer that challenged the determination but sought no undertaking or interlocutory relief had the judgment enforced before its challenge was heard, and the refusal to order repayment was not disturbed. On disclosure, Beazley ACJ said there was no obligation in this case to disclose the challenge when the garnishee order was sought. Basten JA doubted that its mere commencement had to be disclosed, but did not decide the appeal on that basis.

The decision applied the Act and the rules as they then stood. Readers should check the current Act and later authority before relying on it.

Numbers in square brackets are paragraph numbers of the judgment. This note summarises a decided case for education and is not legal advice. See how the notes are written.