Warrane - Design Construct Fit-Out Pty Ltd v Woonona-Bulli RSL Memorial Club Ltd

1. [1]

   THE COURT: By cross-summons filed 21 May 2025 the applicant, Warrane Design Construct Fit-Out Pty Ltd (the Builder), seeks leave to appeal under s 101(2) of the Supreme Court Act 1970 (NSW) in respect of an order of Rees J on 17 April 2025, in substance reiterated on 24 April 2025 and slightly amended on 16 May 2025, subsequent to her Honour handing down judgment in Woonona-Bulli RSL Memorial Club Ltd v Warrane-Design Construct Fit-Out Pty Ltd (No 2) [2025] NSWSC 365 (the primary judgment). The order sought to be challenged is an order that, out of a total sum of $941,110.49 paid into Court by the respondent, Woonona-Bulli RSL Memorial Club Ltd (the Club), the sum of $81,978.47 should be paid out to the Club. The balance of the sum paid into Court was ordered to be paid to the Builder. The Builder contends that her Honour erred in ordering that the $81,978.47 be paid out to the Club, and that her Honour should instead have ordered that this sum be paid out of Court to the Builder. As that sum has now been paid out of Court to the Club, the relief sought by the Builder on appeal is an order that the Club pay that sum to the Builder.

2. [2]

   The context was that her Honour had, in an earlier judgment, dismissed the Club’s application to quash part of an adjudication determination in favour of the Builder made under Building and Construction Industry Security of Payment Act 1999 (NSW) (the Act): Woonona-Bulli RSL Memorial Club Ltd v Warrane-Design Construct Fit-Out Pty Ltd [2025] NSWSC 271. It was in the context of that application that the Club had been ordered to pay the sum of $941,110.49 into Court.

3. [3]

   Whilst on 23 April 2025 the Club filed a notice of appeal challenging the primary judgment, its appeal was discontinued by notice filed on 4 June 2025. Thus, the Builder’s application for leave to appeal was the only proceeding before the Court. The Club filed a submitting appearance in that proceeding.

4. [4]

   In circumstances where the Builder contended in its written submissions that the proposed appeal raised an issue of legal principle as to the interaction between the Act and the Contractors Debts Act 1997 (NSW), in the absence of a contradictor, Mr Karam of Counsel accepted a referral from the Court to appear as amicus curiae on the application. At the Court’s direction, Mr Karam filed and served written submissions and appeared (with the Court’s leave) with Ms Novo at the hearing of the Builder’s application, which was listed as a concurrent hearing of the application for leave to appeal and the appeal. The Court is grateful to Mr Karam and Ms Novo for their assistance and is indebted to the profession generally for providing pro bono assistance at the Court’s request.

5. [5]

   The unpromising context for this application for leave to appeal is that the primary judge commenced her judgment by identifying that one question before her was whether a portion of the monies paid into Court by the Club should be repaid to the Club given payments that it had already made to a subcontractor, All Civil Solutions Group Pty Ltd (the Subcontractor). The Builder contended that the entirety of the money in Court should be paid out to it. The Club contended that a sum should be paid out of Court to reflect what it had paid the Subcontractor. The primary judge found largely in favour of the Builder, but, as set out below, in her judgment which was published on 16 April 2025, at [44], her Honour raised whether the Club may be entitled to be paid $81,978.47 of the money in Court. Her Honour asked the parties to bring in orders to reflect the amounts of the funds in Court which should be paid to the Builder and the Club.

6. [6]

   On 17 April 2025 the solicitors for the Builder sent an email to the associate to Rees J responding to that request (the 17 April 2025 email). In that email, the Builder informed her Honour that it had been agreed between the Builder and the Club that the $81,978.47 “should not have been included in the money paid into Court”. The Builder also suggested short minutes of order, to reflect the primary judgment. Those short minutes of order were predicated upon the Builder not being entitled to $81,978.47 of the monies paid into Court (but seeking that some of that amount be paid out to the Builder as interest on the amount said to be owed to the Builder).

7. [7]

   In the light of its significance, it is unfortunate that the 17 April 2025 email was not provided to the Court in the White Folder prepared by the Builder for the purposes of its application for leave to appeal and that its existence was not adverted to by the Builder save for a partial extracting of its contents in the Builder’s written submissions in reply.

8. [8]

   On 17 April 2025 her Honour made orders including the order appealed against. Her Honour also stood the matter over to 9.30 am on 24 April 2025, and the order appealed against was made subject to the order that the matter be stood over. Implicitly, therefore, her Honour indicated a willingness to revisit the order appealed against should either party make submissions on 24 April 2025 in favour of that course. It does not appear that any such submissions were made, as the only issue of substance considered in her Honour’s short judgment on 24 April 2025 was whether there should be a stay of the orders. Following the hearing on 24 April 2025, her Honour restated the order appealed against, albeit in a different form, ordering that $859,134.02 of the money paid into Court be paid out to the Builder with the remaining sum to be paid out to the Club. The 24 April 2025 order was slightly amended on 16 May 2025 such that the sum to be paid out to the Builder was reduced by $2, to $859,132.02. As the amount in Court was $941,110.49, this meant that $81,987.47 was to be paid out to the Club. Thus, the restated order (as amended on 16 May 2025) had the same substantive effect as the order appealed against.

9. [9]

   Given this procedural history, we have treated this as an application for leave to appeal against the 24 April 2025 order relating to payment out of the monies in Court (as amended on 16 May 2025) rather than against the superseded 17 April 2025 order dealing with the same subject matter.

10. [10]

    A convenient recitation of the principles governing applications for leave to appeal where the amount in issue is less than $100,000 may be found in Cheng v Motor Yacht Sales Australia Pty Ltd t/as The Boutique Boat Company (2022) 108 NSWLR 342; [2022] NSWCA 118. Excluding many references to the cases relied upon, Bell CJ there explained:

11. [11]

    Given the matters set out above, a further matter of considerable resonance in this case is the principle, underscored by considerations of practical fairness and the importance of finality in litigation, that fresh arguments are not generally permitted to be advanced on appeal. In Whisprun Pty Ltd v Dixon [2003] HCA 48; 77 ALJR 1598 at [51], Gleeson CJ, McHugh and Gummow JJ said, referring to University of Wollongong v Metwally (No 2) [1985] HCA 28; 59 ALJR 481 at 483; Coulton v Holcombe (1986) 162 CLR 1 at 8-9; [1986] HCA 33; Liftronic Pty Ltd v Unver [2001] HCA 24; 75 ALJR 867 at [44]; and Water Board v Moustakas (1988) 180 CLR 491 at 496-497; [1988] HCA 12, that it:

12. [12]

    It is also trite that “[t]he adversarial system of litigation operates upon the basis that a party is generally bound by the conduct of counsel”: Smits v Roach (2006) 227 CLR 423; [2006] HCA 36 at [46], and the same principle would apply equally to the conduct of a party’s solicitor in making contentions to the Court as to its position on a particular issue (particularly where, as here, the 17 April 2025 email was copied to Counsel for the Builder before the primary judge). As this Court said in O’Conner v O’Conner [2022] NSWCA 97 at [68], “one question which is very largely left for the parties to formulate is the ambit of their own dispute”, and where a particular claim is admitted, “the court ordinarily has no role in determining whether the defendant was indeed liable while the concession is in place”.

13. [13]

    Having regard to these principles, for the reasons set out below this is a clear case in which leave to appeal should be refused.

Background

1. [14]

   In the circumstances set out above it is unnecessary to set out the background to this application in any detail.

2. [15]

   Broadly, the factual context in which this application arises is one where the Builder entered into a construction contract with the Club, but most of the construction works were in fact sub-contracted by the Builder to the Subcontractor. As might be expected, there were various claims for payment, both by the Subcontractor against the Builder, and by the Builder against the Club.

3. [16]

   One such claim by the Subcontractor against the Builder under s 13 of the Act, Progress Claim 9, sought payment in the sum of $1,591,446.78 including for Variation 31, which related to costs associated with delays to the contract works. Progress Claim 9 was ultimately the subject of an adjudication under s 22 of the Act and the adjudicator determined that the value of Variation 31 was $936,619.81. Following the adjudication the Subcontractor invoiced the Builder in the sum of $970,531.62 plus GST (being $1,067,584.78).

4. [17]

   On 29 November 2024, the Builder submitted Progress Claim 13 to the Club under s 13 of the Act in the sum of $2,203,564.59. The details of Progress Claim 13 included an item in the sum of $936,619.81 described as “Delay Costs – ACSG”. That is plainly enough a reference to Variation 31, as described above. The response of the Club to Progress Claim 13 was on 6 December 2024 to serve a payment schedule under s 14 of the Act that indicated that it only proposed to pay the sum of $81,987.47 in response to Progress Claim 13.

5. [18]

   On 13 December 2024, the Subcontractor served a notice of claim on the Club under s 6 of the Contractors Debts Act, supported by a debt certificate under s 7 of that Act in the sum of $1,102,958.87. Under s 8 of the Contractors Debts Act, the effect of that claim was to assign to the Subcontractor the obligation of the Club to pay money owed under the construction contract to the Builder.

6. [19]

   Shortly thereafter, on 20 December 2024, the Club paid the scheduled amount of $81,978.47 to the Subcontractor (at [17] above). In the primary judgment at [19] this is described as a payment under s 9(1) of the Contractors Debts Act, leaving $1,020,980.40 of the certified debt unpaid.

7. [20]

   On the same day, 20 December 2024, the Builder made an application under s 17 of the Act for adjudication of its Progress Claim 13. On 20 January 2025, an adjudicator determined under s 22 of the Act that the amount of the progress payment to be paid by the Club to the Builder for Progress Claim 13 was $2,094,018.14 (including GST). The front page of this adjudication noted that the “Scheduled Amount” in respect of this payment claim was $81,978.47 but there does not appear to have been evidence before the primary judge as to what the adjudicator was told about monies paid by the Club to the Subcontractor. For completeness, we note that Stevenson J, who considered a stay application shortly after the proceedings determined by the primary judge were filed, said in his judgment that he had been informed that “the effect of service of the Debt Certificates on the Builder’s entitlements under the Contract was not an issue agitated before the adjudicator”: Woonona-Bulli RSL Memorial Club Ltd v Warrane-Design Construct Fit-Out Pty Ltd [2025] NSWSC 123 at [11]. That is consistent with the adjudicator’s determination at [180]-[186] where the adjudicator indicated that he had been appointed to determine the value of performances and had not considered payments made by the Club in arriving at the adjudicated amount.

8. [21]

   On 20 January 2025 the adjudicator determined that, under Progress Claim 13, $2,094,018.14 should be paid to the Builder.

9. [22]

   Whilst counsel for the Builder made an oral submission that at the time of the adjudication the Builder was not aware that the sum of $81,978.47 had been paid by the Club to the Subcontractor, there is no evidence before this Court to that effect. At its highest, the evidence shows that this payment was not referred to in two emails, the first on 24 January 2025 from the Builder’s solicitors to the Club’s solicitors and the second on 6 February 2025 from someone at the Builder to someone at the Club. As is apparent, to the extent that the Builder sought to rely upon its own lack of knowledge of the payment of $81,978.47 in support of its application for leave to appeal (and it is not clear to us why this was relevant), that is a factual issue upon which evidence could have been (but was not) led, by both the Builder and the Club, before the primary judge. Similarly, to the extent that it might be relevant to the issues on appeal whether or not the amount which the adjudicator determined should be paid included the $81,987.47 which the Club had already paid to the Subcontractor, this factual issue again is something that could have been, but does not appear to have been, the subject of evidence before the primary judge.

10. [23]

    What is clear is that neither the Builder nor the Club has sought amendment of the adjudicator’s determination on the basis of a material mistake or miscalculation, as is an available option under s 22(5) of the Act.

11. [24]

    On 3 February 2025, the Builder filed the adjudication certificate in the Supreme Court of New South Wales under s 25 of the Act, with the effect that the adjudication certificate may be enforced as a judgment of the Court. Judgment was then entered in favour of the Builder against the Club for the full amount of the adjudication certificate, being $2,141,780.73. We were informed from the bar table that the Builder also filed an affidavit stating what proportion of the adjudicated amount remained outstanding. That affidavit was not put before this Court but given that judgment was entered for the full amount of the sum certified we would infer that this affidavit indicated that none of the certified amount had been paid.

12. [25]

    Attachment and garnishee orders were made on 20 February 2025, and on the same day the Club issued proceedings seeking to have the adjudicator’s determination quashed in part. On 25 February 2025, the Club sought an order staying the judgment and setting aside the attachment and garnishee orders, which came before Stevenson J as duty judge on 27 February 2025. On the same day his Honour made orders setting aside the attachment and garnishee orders. His Honour also ordered that the judgment entered on 3 February 2025 should be stayed to the extent of $1,200,670.24, to which his Honour found the Subcontractor, rather than the Builder, was entitled having regard to the debt certificates under the Contractors Debts Act served by the Subcontractor on the Club. In reaching this figure, his Honour reduced the amount of $1,102,958.87 (in the debt certificate served by the Subcontractor on the Club on 13 December, see [18] above) by the sum of $81,978.47, to reflect the amount that was actually “owing” as at 27 February 2025. His Honour then made further adjustments to reflect an additional amount paid by the Club to the Subcontractor in relation to an amount agreed to be owed to the Builder for Progress Claim 14 and an additional debt certificate served by the Subcontractor on 17 February 2025.

13. [26]

    Stevenson J also made an order on 27 February 2025 that the Club pay into Court the sum of $941,110.49, calculated by reducing the judgment sum of $2,141,780.73 to reflect his Honour’s order that $1,200,670.24 of the judgment be stayed. As is clear, in the exercise of his Honour’s discretion, his Honour made orders which varied the effect of s 25(4)(b) of the Act which requires that the unpaid portion of the adjudicated amount be paid into Court pending the final determination of proceedings seeking to set aside a judgment derived from an adjudicator’s determination. That was plainly done by his Honour to reflect his Honour’s understanding that some of the amount determined by the adjudicator should properly be regarded as payable to the Subcontractor rather than the Builder.

14. [27]

    The effect of his Honour’s orders was, however, that the portion of the judgment that was stayed reflected only the outstanding debt due to the Subcontractor pursuant to those certificates. Thus, the judgment was not stayed to reflect the $81,978.47 which had in fact been paid by the Club to the Subcontractor (and which was thus no longer outstanding as at 27 February 2025 when the matter came before Stevenson J).

15. [28]

    It is in these circumstances that, as adverted to above, her Honour raised the following issue at [44]:

Consideration

1. [29]

   The issue which her Honour was raising in her judgment at [44] was whether the judgment sum (and therefore the funds paid into Court) included the sum of $81,978.47 which the Club had already paid to the Subcontractor pursuant to the debt certificate referred to above at [18]. If that were the case, then the Court might exercise its discretion to reduce the amount to be paid out of Court to the Builder to take into account payments already made by the Club to the Subcontractor under the Contractors Debts Act, and therefore to direct that the sum of $81,978.47 be paid out of Court to the Club and not the Builder. That would reflect the fact (if it were the case) that that amount, reflecting work that was valued by the adjudicator in his determination, had already been paid by the Club to the Subcontractor. Conversely, if the judgment sum allowed for the payment of the $81,978.47 to the Subcontractor, and thus the figure in the adjudication determination did not include this sum, then it might be thought that there would be no good reason for this amount to be paid out of Court to the Club, as it would not reflect a part of the judgment sum which had been, in effect, already paid to the Subcontractor. Whilst the Builder submitted in its written submissions in reply and orally that her Honour erred in asking this question, we consider that there was no error in her Honour framing the issue in the way she did.

2. [30]

   We have set out the substance of the 17 April 2025 email, responding to her Honour’s request, at [6] above. In this email the Builder conceded that the sum of $81,987.47 should not have been included in the sum which Stevenson J ordered should be paid into Court. That concession is only explicable on the basis that the Builder accepted that the judgment sum included the amount of $81,987.47 which had already been paid by the Club to the Subcontractor. The orders proposed by the Builder (which, although described as consent orders, were not in fact agreed) invited the primary judge, subject to making allowance for interest (which allowance her Honour did not make), to pay the $81,987.47 out of Court to the Club.

3. [31]

   As already explained, the matter was dealt with by her Honour at a further hearing on 24 April 2025 and by making a slight amendment to the orders on 16 May 2025. There is nothing to suggest that on either occasion the Builder resiled in any way from the position it took in the 17 April 2025 email or sought orders that the $81,987.47 should be paid out to the Builder and not the Club.

4. [32]

   Given the matters set out above, including that the 17 April 2025 email plainly indicated to the primary judge that there was no dispute that the sum of $81,987.47 should be paid out of Court to the Club, the Builder should not be granted leave to challenge her Honour’s order to this effect on appeal. In any event, the primary judge was entitled to act upon the position as set out in the 17 April 2025 email and there was no error in her Honour having ordered that the sum of $81,987.47 be paid out of Court to the Club.

Conclusion

1. [33]

   It follows that leave to appeal should be refused.