Builtcom Constructions Pty Ltd v VSD Investments Pty Ltd as trustee for The VSD Investments Trust

By notice of motion filed on 1 May 2025, VSD Investments Pty Ltd as trustee for The VSD Investments Trust (VSD), seeks a stay of orders made by Peden J (the primary judge) on 2 May 2025 which required funds in Court to be paid out to Builtcom Constructions Pty Ltd (Builtcom) “immediately”. Her Honour stayed the operation of the order until the earlier of a further order, including by this Court, or 5pm on 6 May 2025.

VSD, as principal, entered into a building contract with Builtcom, as builder, for construction work in Burwood. On 22 November 2024, Builtcom served on VSD a payment claim pursuant to the Building and Construction Industry Security of Payment Act 1999 (NSW) (the Act) for an amount in the order of $30.6 million in respect of work alleged to have been carried out between 1 October 2024 and 22 November 2024. On 4 December 2024, VSD served a payment schedule under the Act. On 17 December 2024, Builtcom lodged an adjudication application in respect of its payment claim. The matter was referred to Chris Thompson, the second respondent (the adjudicator), of Australian Building & Construction Dispute Resolution Service Pty Ltd (the third respondent). The second and third respondents filed submitting appearances in the Court below and can be expected to do so on appeal, as the second respondent has already done.

The adjudicator made a determination dated 3 February 2025 (the determination), which was released to the parties and which awarded Builtcom an amount in the order of $8.5 million including GST. The statutory scheme pursuant to which the process occurred is evident from the terms of the Act and has been the subject of several judgments of this Court: see, for example, Hynash Constructions Pty Ltd v BRP Industries Pty Ltd [2025] NSWCA 14 at [21]-[26] and [40]-[42] (Adamson JA, Bell CJ and Basten AJA agreeing).

The adjudicator declined to address several of the items which Builtcom claimed, including the 12 claims referred to in the extract below, on the following basis:

In respect of the items for which this explanation was given by the adjudicator, there has been no actual adjudication on the merits as such. Rather, the adjudicator determined that the items must be valued at nil because Builtcom provided additional material in its adjudication application as to those items beyond that which it included in its payment claim.

On 5 February 2025, Builtcom commenced proceedings in the Technology and Construction List of the Equity Division of the Supreme Court. It claimed that the adjudicator had made a jurisdictional error in declining to consider its claims on the basis set out in the reasons (extracted above) and sought an order pursuant to s 32A of the Act “and any other enabling power of the Court”, setting aside those parts of the determination relating to those claims and seeking an order in the nature of mandamus, injunction or remitter, ordering the second respondent to determine these claims. On 6 February 2025, VSD commenced separate proceedings in the same list, challenging the determination in so far as it determined an adjudication amount in the order of $8.5 million in favour of Builtcom.

On 7 February 2025, Stevenson J ordered VSD to pay the amount of the determination (in the order of $8.7 million, which included adjudicator’s fees and interest) into Court, this being the usual consequence of a party seeking to challenge an adjudication.

The two proceedings were heard together by the primary judge, who, on 11 April 2025, dismissed both Builtcom’s and VSD’s summonses and ordered each party to pay its own costs: Builtcom Construction Pty Ltd v VSD Investments Pty Ltd atf The VSD Investments Trust; VSD Investments Pty Ltd atf The VSD Investments Trust v Builtcom Construction Pty Ltd [2025] NSWSC 250.

On 29 April 2025, the primary judge ordered the parties to confer on further orders necessary to give effect to the reasons.

On 2 May 2025, the primary judge made the following orders in both proceedings:

At the conclusion of the hearing of the stay application, I reserved my decision on the stay and set down the hearing of the appeal for 23 May 2025 for a single day to reflect the parties’ estimate of the time required. I also made the following directions:

The ambit and effect of s 32A of the Act, which was referred to in argument, is relevant to the appeal. Its significance also arises in the context of the stay application since it bears on the question whether the amount already awarded by the adjudicator to Builtcom could be reduced as a result of the appeal, thereby warranting a stay so as to protect VSD’s right to restitution, if it be found that it was not obliged to pay that amount.

Section 32A of the Act provides:

Mr Langshaw, who appeared on behalf of VSD in this Court, submitted that the balance of convenience, particularly given the early hearing date allocated, was in favour of the continuation of the stay granted by the primary judge. He submitted that, if this Court on appeal set aside the determination, it would be open to VSD to reiterate its challenge to the items which the adjudicator allowed in favour of Builtcom or rejected to the detriment of VSD (such as its claim for set-offs) in his determination which specified an adjudication amount in the order of $8.5 million. He contended that it would not be open to this Court to set aside the determination in part since there could only ever be a single determination in respect of a payment claim referred to adjudication. He described as “heretical” the concept that the Court could sever the otherwise valid part of a determination and make an order in the nature of mandamus in respect of the invalid part. Accordingly, he submitted that s 32A did not authorise an order along these lines.

Mr Langshaw also relied on evidence extracted from a credit report on Builtcom, which indicated that Builtcom’s credit risk had deteriorated substantially between November 2024 to the present day. He submitted that if the monies were paid out to Builtcom, it would be difficult for VSD to obtain restitution of the monies in whole or in part, if the scenario painted above ensued (that is, that VSD were permitted in a future adjudication to claw back the $8.5 million odd amount already determined in favour of Builtcom).

Mr Langshaw further submitted that Builtcom was the author of its present misfortune (not having the benefit of monies paid into court by VSD) since, if it were to discontinue the appeal, it would have an unassailable right to have the monies paid out.

Mr Hume, who appeared for Builtcom, relied on s 32A of the Act to contend that it expressly empowers the Court to set aside the whole or “any part” of the determination and that Mr Langshaw’s submission that the whole payment claim would have to be dealt with afresh if any part of it was infected by jurisdictional error ought be rejected. He submitted that there was no realistic prospect that, whether the appeal were dismissed or allowed, Builtcom’s entitlement to the $8.5 million odd would be reduced.

Builtcom did not give evidence in opposition to the stay application as to its financial position. It has paid out the sub-contractors which were identified as not having been paid by VSD in its initial submissions. It would be surprising if it did not have cash flow problems in circumstances where no part of its claim for payment for work done in October and November 2024 has been paid.

In A-Civil Aust Pty Ltd v Ceerose Pty Ltd [2023] NSWCA 144, this Court (Payne JA, Simpson AJA and Basten AJA) considered the principles concerning interlocutory relief in proceedings such as the present where a determination is sought to be set aside for jurisdictional error. The Court said, of present relevance:

There is considerable force in Mr Hume’s submission about the effect of s 32A. However, it need not be determined in the present context. It may arise for determination on the appeal. There are various possibilities: if this Court dismisses Builtcom’s appeal, Builtcom will be entitled to the monies paid into Court in full, together with interest; if it allows the appeal, then the matter will, presumably be dealt with by the adjudicator (or an adjudicator). This is neither the time nor the occasion to predict whether the scenario painted by Mr Langshaw will ensue. While it would, at first blush, seem curious that VSD could revisit items that formed part of the (presently unchallenged) figure in the order of $8.5 million, I cannot rule out that consequence at this stage since it depends on the construction of s 32A of the Act which will, in all likelihood, arise on the appeal. The construction arguments which Mr Langshaw outlined for me on the stay application will, no doubt, be augmented and developed on appeal. It is, however, noteworthy that VSD has not sought to appeal the dismissal of its claim before the primary judge that the determination of the amount in the order of $8.5 million was affected by jurisdictional error.

Although an early hearing date for the appeal has been allocated, it does not follow that a stay is warranted, having regard to the balance of convenience. It cannot be assumed that this Court’s decision will be given immediately, having regard to the need to address in its reasons the various arguments raised by the parties. While the appeal is likely to be determined relatively soon after the hearing date, I am not persuaded that it is appropriate to continue the stay. Builtcom’s challenge does not affect the $8.5 million adjudication amount and VSD has not filed an appeal or cross-appeal. If Mr Langshaw is correct that, notwithstanding neither party challenges this amount, it can nonetheless be revisited on remitter, it is consistent with the risk allocation in the Act that VSD bear the risk that restitution of any part of the monies paid out of court to Builtcom will be difficult or impossible.

As Mr Hume pointed out and I accept, Builtcom has been waiting to be paid for work done in October and November 2024 and ought not be required to wait any longer, having regard to the risk allocation evident from the Act, which is in favour of the contractor being paid the adjudicated amount determined by an adjudicator under the Act, in circumstances where there is no extant challenge to that amount.

For the reasons given above, I make the following orders: