Kuatro Build Pty Ltd v Elite Formwork Group Pty Ltd

1. [1]

   The plaintiff, Kuatro Build Pty Ltd (Kuatro), and the first defendant, Elite Formwork Group Pty Ltd (Elite), are parties to a building subcontract under which Elite agreed to provide concrete supply services for a residential development in Warriewood (the Subcontract), for which Kuatro is the main contractor.

2. [2]

   Kuatro and Elite are in dispute as to the amounts payable under the Subcontract.

3. [3]

   On 28 November 2024, pursuant to the provisions of Part 3 of the Building and Construction Industry Security of Payment Act 1999 (NSW) (the SOP Act), Elite issued a payment claim for a progress payment of $1,649,252.99. On 12 December 2024, Kuatro responded with a payment schedule contending that it did not owe Elite the amount claimed, and that Elite in fact owed it $965,129.40.

4. [4]

   On 3 January 2025, Elite lodged an adjudication application under the SOP Act, submitting the dispute to independent adjudication. The adjudicator was Mr Doron Rivlin, the second defendant. The adjudicator issued his initial determination on 28 January 2025. However, correcting an error identified by the parties, he issued an amended determination under the ‘slip rule’ in s 22(5) of the SOP Act on 4 February 2025. By this amended determination, he determined that Elite was entitled to a progress payment of $515,290.38 including GST and that the due date for payment was 12 December 2024.

5. [5]

   On 7 February 2025, Kuatro commenced proceedings in this Court against Elite in which it seeks judgment against Elite in the sum of $1,256,763.31. Those main proceedings concern the parties’ substantive, final entitlements under the Subcontract and are yet to be determined.

6. [6]

   On 10 February 2025, Kuatro filed the summons in these proceedings by which it seeks both interlocutory and final relief in respect of the adjudicator’s determination concerning the progress payment.

7. [7]

   So far as interlocutory relief is concerned, Kuatro seeks orders to restrain the defendants from taking any steps to obtain an adjudication certificate within the meaning of s 24(1)(a) of the SOP Act or to file any such certificate as a judgment pursuant to s 25 of the SOP Act. On 10 February 2025, interlocutory orders to that effect were made on an ex parte basis upon Kuatro giving the usual undertaking as to damages and upon Kuatro undertaking to pay the whole of the adjudicated amount into Court, which has occurred. Those interlocutory orders were of the kind described by Einstein J in Grosvenor Constructions (NSW) Pty Limited (in administration) v Musico & Ors [2004] NSWSC 344. That is, they restrained the payment of a progress payment otherwise due to the subcontractor in circumstances where it appeared that the subcontractor was insolvent and that there was a substantial risk that the subcontractor would be unable to repay the amount if required following a determination of the parties’ substantive dispute. By agreement between the parties, the stay remains in place until further order.

8. [8]

   So far as final relief is concerned, Kuatro seeks orders quashing the adjudicator’s determination or, alternatively, permanently restraining Elite from taking steps to enforce it. Kuatro’s Technology and Construction List Statement filed on 10 February 2025 in these proceedings identifies what it considers to be seven discrete jurisdictional errors in the determination, each of which is articulated as a separate ground.

9. [9]

   Kuatro now only presses for final relief on the basis of two of those seven grounds. However, it submits that even if the determination is not set aside or is only set aside in part, the stay should continue until the substantive dispute between the parties has been determined in the main proceedings.

Background

1. [10]

   The Subcontract to which Kuatro and Elite are parties was originally between Elite and another company, EQ Constructions Pty Ltd. However, that company went into administration and on 17 February 2023 the Subcontract (with some alterations) was novated to the present parties pursuant to a deed of novation.

2. [11]

   In May 2024, the Deputy Commissioner of Taxation issued a creditor’s statutory demand to Elite for the payment of debt for the amount of $171,156.02 in respect of unpaid taxes and interest. The unpaid amounts of tax and interest appear to have become due and payable from as early as April 2021. Elite did not comply with the statutory demand, nor was it set aside.

3. [12]

   In late 2024, the Deputy Commissioner of Taxation commenced winding up proceedings against Elite in the Federal Court of Australia in respect of, inter alia, the unsatisfied statutory demand. On 14 February 2025, the Deputy Commissioner of Taxation filed evidence to the effect that, as of that date, the total unsatisfied debt owed to him was $461,225.38. The winding up proceedings are presently listed for final hearing on 1 July 2025.

4. [13]

   I have already referred to Elite’s payment claim and Kuatro’s payment schedule. It is relevant to note that the payment schedule prepared by Kuatro was accompanied by supporting documents including correspondence.

5. [14]

   As mentioned above, Elite lodged an adjudication application under s 17 of the SOP Act on 3 January 2025. On 13 January 2025, Kuatro lodged its adjudication response under s 20. I will refer to some of the detail in these documents, and to documents attached to them, in due course.

6. [15]

   The determination as originally issued by the adjudicator contained an error. However, the error was quickly noticed and a revised determination was issued a few days later. Nothing turns on the error or the manner by which it was corrected.

The nature of Kuatro’s challenge to the determination

1. [16]

   Each of the two remaining grounds of challenge to the determination involves a contention that the adjudicator failed to consider matters he was required to take into account under s 22(2) and that the failure has the consequence that the determination is affected by jurisdictional error. In respect of one ground, Kuatro further contends that, having failed to consider a matter that he was required to take into account, the adjudicator determined the particular issue on a basis that neither party had advanced and to which Kuatro was not given an opportunity to respond. In this respect, Kuatro contends that there was a failure to provide procedural fairness amounting to jurisdictional error.

2. [17]

   These issues must be approached with an appreciation of the overall legislative scheme contained in the SOP Act. In this respect, I particularly note paragraphs [8] to [30] of the reasons of Payne JA in Ceerose Pty Ltd v A-Civil Aust Pty Ltd (2023) 112 NSWLR 225; [2023] NSWCA 215 (‘Ceerose’) (Ward ACJ and Basten JA agreeing). As Payne JA said in Martinus Rail Pty Ltd v Qube RE Services (No.2) Pty Ltd [2025] NSWCA 49 (‘Martinus’) (Gleeson JA and Griffiths AJA agreeing) at [57]:

3. [18]

   The particular challenges to the adjudicator’s determination involve a consideration of s 22 of the SOP Act. That section provides:

4. [19]

   In Ceerose, Payne JA said of such challenges at [31]:

5. [20]

   At paragraphs [62] to [69], his Honour explained the scope of the adjudicator’s obligation to ‘consider’ in s 22(2). His Honour said at [69]:

6. [21]

   In argument before me, Kuatro particularly referred to what Payne JA said about this same issue at paragraphs [65] to [69] of Martinus. At paragraph [69], his Honour repeated what he had said at paragraph [69] of Ceerose.

7. [22]

   Kuatro’s argument is that this is one of the ‘few’ and ‘rare’ examples contemplated by Payne JA at paragraph [69] of Ceerose. In relation to both remaining grounds of challenge, it says there is an inescapable inference that the adjudicator altogether failed to consider its submissions on their merits.

The liquidated damages ground

1. [23]

   The first error for which Kuatro contends concerns its claim for a set off for liquidated damages of $602,800. This figure was included in its payment schedule. It represents liquidated damages of $4,000 per day for 137 days, plus GST.

2. [24]

   The particular provisions of the Subcontract on which Kuatro relied to assert its claim for liquidated damages were clauses 34.7 and 39.2. Clause 39.2 provided that the main contractor could give the subcontractor written notice to remedy substantial breaches and outlined examples of such breaches. Kuatro relied particularly on two examples. These were contained in clauses 39.2(c): ‘any departure from a Subcontractor's Program without reasonable cause or the Subcontractor Superintendent's approval’ and 39.2(e): ‘failing to (in the opinion of the Subcontract Superintendent) employ sufficient resources (including but not limited to labour) to progress the [Works Under Subcontract] in a manner that will ensure that the works will reach Practical Completion by the Date of Practical Completion’.

3. [25]

   Clause 34.7 was as follows:

4. [26]

   It is also relevant to note clauses 37.7 and 55 of the Subcontract, being the clauses which relate to set offs more generally.

5. [27]

   In its payment schedule breakdown, Kuatro included a table under the heading ‘Variations – Formwork’ which referred to a number of variations and back charges, and described for each of them: the amount claimed by Kuatro (being the ‘Value Approved’); the amounts the subcontractor had claimed were owing (as applicable); and any reasons for the difference. One such entry was described as follows:

6. [28]

   However, the ‘Value Approved’ for this item was ‘- $548,000’. The amount claimed by the subcontractor was noted to be nil. In the column entitled ‘Reasons for Difference’, the table included the following:

7. [29]

   Although not referred to in that table or anywhere else in the payment schedule breakdown, the almost 700 pages attached to the breakdown included a 55-page series of documents that, on close inspection, must have been intended by the person who collated them to be read as four bundles or sets of documents relating to each of the periods of delay referred to in the table (although the correlation is not precise). That is, for each of those periods, there were (a) emails from representatives of Kuatro to representatives of Elite in which there was complaint about the time taken to remedy defects as well as WhatsApp messages among representatives of Kuatro in which they commented on the number of Elite personnel on site at particular times together with (b) for each period of delay, a printout of a ‘calculate days’ calculator on the ATO website showing how many days elapsed during that period.

8. [30]

   The almost 700 pages of attachments also included a schedule for ‘Claim #20’ which hyperlinked the aforementioned documents, though it is unclear in which order the ‘Claim #20’ schedule was produced or whether an electronic copy was provided to the adjudicator. The ‘Modification Reason’ set out in the ‘Claim #20’ schedule also differed slightly from the above ‘Reason for Difference’. The ‘Modification Reason’ was as follows:

9. [31]

   The ‘Claim #20’ schedule also included an ‘Attachments’ table at the end which contained hyperlinks to the four bundles of documents to which I have already referred.

10. [32]

    It appears that the ‘Claim #20’ schedule was included in the adjudication application. It was agreed between the parties that the four bundles of documents were also included in the adjudication application.

11. [33]

    In its adjudication application, Elite addressed the claim for liquidated damages as follows:

12. [34]

    In its adjudication response to ‘Points 75-84 – Liquidated Damages’, Kuatro referred to ‘Attachment 4 BACK CHARGE – Formwork’ and wrote ‘As provided under the previously issued payment schedule’, before reproducing what was said at [30] above.

13. [35]

    The plaintiff informed me that the relevant documents attached to the adjudication response were similar to but not quite the same as the four bundles attached to the payment schedule. Counsel for the plaintiff said that the documents included in ‘Attachment 4’ as at 13 January 2025 were those included in the exhibit to the 7 April 2025 affidavit of Joseph Zeitoun. Those documents consisted of emails but did not contain any WhatsApp messages or the ‘calculate days’ calculator pages. They also contained some additional correspondence. For example, in respect of at least one of the periods of alleged delay there was an email from Mr Turpeinen (the principal of Elite) in which he stated that the Subcontract was currently under suspension because of Kuatro’s non-payment.

14. [36]

    The adjudicator dealt with and rejected the liquidated damages claim at paragraph 38(g) of his determination. His reference to BC 8 is a reference to this claim. However, because of the way Kuatro puts its case, it is relevant to note the whole of paragraph 38:

15. [37]

    Kuatro put its argument in four steps. First, it pointed out that the principal conclusion in paragraph 38 was that Kuatro had not discharged its onus of demonstrating that it was entitled to a set off for back charges. As the adjudicator put it, there was ‘no evidence of a representative of [Kuatro] with knowledge of the back charges to support the underlying facts and matters relied upon to support [Kuatro’s] reliance on clause 37.7’. Kuatro particularly relied on what the adjudicator said at paragraphs 38(c)(ii)-(iv) in this respect.

16. [38]

    Secondly, Kuatro referred to the adjudicator’s overall conclusion in relation to the set off for liquidated damages in paragraph 38(g) of his determination, which I have already set out.

17. [39]

    Next, Kuatro submitted that what the adjudicator said in these two respects was plainly incorrect. It pointed out that contrary to what the adjudicator said at paragraph 38(g), there was evidence of ‘failure by [Elite] to provide sufficient resources to adhere to the project program’. It referred me to the contemporaneous emails and texts from Kuatro representatives in relation to delays which were referred to in the adjudication response. It pointed out that both Kuatro and Elite had made submissions to the adjudicator about this evidence.

18. [40]

    It also submitted that this documentary evidence was from ‘representative[s] of [Kuatro] with knowledge of the back charges’, despite what the adjudicator said at paragraph 38(c).

19. [41]

    Fourthly and relatedly, Kuatro pointed out that all of this contemporaneous material was before the adjudicator.

20. [42]

    Kuatro submitted that when all of these factors are taken together, the language of the determination leaves no room for doubt that the adjudicator did not have regard to the submissions and accompanying materials put to him by the parties in relation to the liquidated damages issue. In its submission, this is not a case in which the adjudicator merely failed to refer to documents in support of a claim; it is rather a case in which the adjudicator positively but wrongly stated that such documents did not exist.

21. [43]

    It is appropriate to note several things about the way in which the adjudicator dealt with the liquidated damages issue.

22. [44]

    First, there is no doubt that he well and truly appreciated the nature of Kuatro’s claim for liquidated damages. Paragraph 38(g) shows that he understood Kuatro’s case to be that it was entitled to an offset for liquidated damages in an amount that reflected four periods of ‘delays and defective works’ totalling 137 days. Secondly, he understood that the claim was advanced not only in the payment schedule but was also addressed in the adjudication response. I note that he footnoted a reference to that part of the adjudication response that dealt with this issue and which expressly included references to attached documents which, in Kuatro’s submission, evidenced both the delays and the defective works on which they relied. Thirdly, he appreciated that, for the claim to succeed, he needed to be persuaded of the merit of it. That is, he needed to be persuaded that Elite had caused delays through defective works for those periods. So much is clear from paragraph 38(g) itself, but it is relevant here also to note what he had said about other back charges in paragraph 38(c). In other words, despite the way in which Elite put its case on this issue (namely that the Subcontract did not permit liquidated damages at all in these circumstances, as to which see [33] above), the adjudicator nevertheless appreciated that Kuatro’s claim for liquidated damages could only succeed on the strength of its evidence that Elite had actually caused the relevant delays and defective works.

23. [45]

    These are all matters that make it very difficult to accept the submission that the adjudicator altogether failed in his obligation under s 22(2)(d) to consider Kuatro’s submissions on this issue and the documents on which it relied. Paragraph 38(g), although perfunctory, states the adjudicator’s reasons for rejecting the claim on its merits. In terms, he was not willing to ‘accept’ the case put forward by Kuatro.

24. [46]

    Kuatro submitted that paragraph 38(g) shows the adjudicator to have believed mistakenly that the liquidated damages claim was not supported by any material beyond what was stated in the body of the payment schedule breakdown and in the body of the adjudication response. It submitted that the adjudicator must have mistakenly thought that the four bundles of documents did not exist. It said that the reference to a lack of evidence from persons with knowledge of the delays and defects must mean that the adjudicator failed to notice the correspondence and WhatsApp messages from such persons, including the foreman.

25. [47]

    I accept that one possible explanation for the language of paragraph 38(g) is that the adjudicator failed to notice all of the evidence on which Kuatro relied. However, it is not the only explanation. The fact that the adjudicator did not explicitly refer to the documents attached to either the schedule or the adjudication response may equally reflect a conclusion the attached documents did not take matters any further than the bald assertions in the schedule and the adjudication response. As counsel for Elite submitted, the adjudicator may well have expected any ‘evidence or submissions’ on the question of ‘delays and defective works’ to be somewhat more persuasive than the emails and WhatsApp messages contained in the four bundles of documents. I note that this material did not contain pictures, inspection reports or other independent material concerning either the delays or the defects. The vast majority of the emails were one-sided, sent from Kuatro representatives to Elite representatives, and did not include Elite’s replies (if there were any).

26. [48]

    As to the submission that there was evidence of ‘failure by [Elite] to provide sufficient resources to adhere to the project program’ (as to which, see paragraph [39] above), I note that the four bundles of documents said almost nothing of substance about this proposition. There was, so far as I can tell, only a single reference to resourcing issues, but this was in the context of a statement that Elite must ensure sufficient resources to complete work in the future. It was not a statement about how insufficient resourcing had led to delay. In any event, these are all factual matters about which the adjudicator was entitled to form his own view.

27. [49]

    The WhatsApp messages did not go much further than to note the number of Elite personnel on site at particular times, which the adjudicator may have thought was very thin evidence. One rational explanation for the way in which the adjudicator expressed his conclusions in paragraph 38(g) is that he simply did not consider Kuatro’s material to be sufficiently persuasive. The final part of the paragraph commencing ‘and its reasons…’ could very well be a reference to these matters.

28. [50]

    Kuatro submitted that the adjudicator’s reference to an absence of ‘evidence of a representative of the Respondent with knowledge of the back charges…’ is explicable only by his failure to notice the attached correspondence which, it argues, was sent by persons with that knowledge. This submission assumes that the adjudicator was bound to regard the four bundles of documents as containing ‘evidence of a representative of [Kuatro] with knowledge of the back charges’. To this end, Kuatro pointed out that much of the correspondence in the four bundles does appear to have been sent by ‘[representatives] of [Kuatro] with knowledge of the back charges’. I agree, but that reflects nothing more than my own inexpert conclusion on a question of fact. It is a conclusion that does not take matters anywhere because the adjudicator may have seen the evidence differently.

29. [51]

    This submission also assumes that the adjudicator’s reference to a lack of ‘evidence of a representative of [Kuatro] with knowledge of the back charges’ should be understood as applying to the liquidated damages claim. In terms, however, it was an observation about back charge 4. His criticism of the evidence concerning the liquidated damages claim was more perfunctory.

30. [52]

    It is also relevant to bear in mind that the factual basis for Kuatro’s claim was not agreed. Although it did not put its position with complete clarity, the adjudication application at least made clear that Elite disputed that it had been responsible for ‘delay and defective works’, for some or all of the periods claimed by Kuatro. It submitted that there had been significant periods in which its works had been suspended for non-payment. Thus, at least for some of these periods, the adjudicator may have taken the view, rightly or wrongly, that the liquidated damages were being sought in relation to delays caused by Kuatro’s non-payment. As noted above, one of the emails attached to the adjudication response included a reply from Mr Turpeinen in which he said that the works were suspended for non-payment. This email was sent during one of the very periods during which Kuatro alleges it was entitled to liquidated damages.

31. [53]

    The rare case contemplated by Payne JA in Ceerose was one in which, among other things, the relevant claim was based on uncontested facts. As counsel for Kuatro submitted, his Honour was not thereby laying down a rule that jurisdictional error may only be inferred where the submission in question was based on uncontested facts. Nevertheless, his Honour’s reference to uncontested facts in that context was important. That is because when an adjudicator fails to refer to a submission based on contested facts, it will ordinarily be very difficult to dismiss the theory that the submission was rejected because of a conclusion which the adjudicator has reached about the facts.

32. [54]

    Kuatro submitted that the facts here were not seriously in dispute, in that Elite’s case was not so much that there had been no delay but that the Subcontract did not allow Kuatro to claim liquidated damages prior to the date of completion. To the extent it did address factual matters in relation to this issue, it was to argue that there had also been long periods of suspension. It did not argue that Kuatro’s claims for ‘delays and defective works’ were unsupported by evidence, which is a stance it took in relation to some other of Kuatro’s claims.

33. [55]

    However that may be, it does not follow that its claim was based on uncontested facts. As I have already noted, it is clear that the adjudicator approached Kuatro’s claim for liquidated damages on the footing that it involved a factual inquiry, which was appropriate. He did not have to accept the claims for ‘delay and defective works’ even if Elite said nothing about them at all.

34. [56]

    In my view, the adjudicator’s decision on the liquidated damages issue is not affected by error of the kind for which Kuatro contends. To the contrary, I find that the adjudicator did make a ‘bona fide attempt’ to deal with the issue on its merits (on the requirement of a ‘bona fide attempt’, see [55] of Brodyn Pty Ltd t/as Time Cost and Quality v Davenport & Anor (2004) 61 NSWLR 421; [2004] NSWCA 394, which decision was affirmed at [52] in Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd (2018) 264 CLR 1; [2018] HCA 4).

35. [57]

    Kuatro also submitted that it had been denied procedural fairness in relation to its liquidated damages argument. It pointed out that Elite had not made a ‘no evidence’ submission in relation to its liquidated damages claim and that, had it known that the adjudicator was proposing to deal with the claim in that way, it would have taken the opportunity to refer him to the four bundles of material on which its liquidated damages claim was based.

36. [58]

    In Ceerose at [51], Payne JA explained that because procedural fairness is concerned with the conduct of the adjudicator towards the parties, the question of whether he or she has complied with its requirements in a particular case will usually be determined by reference to the communications (or lack thereof) between the adjudicator and the parties: see also Martinus at [73]. At paragraph [74] of Martinus, Payne JA reproduced paragraph [32] of the Court of Appeal’s reasons in Demex Pty Ltd v McNab Building Services Pty Ltd (2023) 113 NSWLR 282; [2023] NSWCA 261 (‘Demex’), which was as follows:

37. [59]

    In this case, the material on which Kuatro relied – and which the adjudicator supposedly failed to consider – was unquestionably before the adjudicator. As I noted at paragraph [44] above, the adjudication determination specifically referred to those parts of the payment schedule and adjudication response which referred to that material. If, which I do not accept, the adjudicator did fail to appreciate the significance of some of the roughly 700 pages of material provided to him by the parties, it was not because of his failure to give the parties an opportunity to refer him to it.

38. [60]

    Nor was he duty-bound to tell Kuatro that he was proposing to deal with its claim for liquidated damages on a ‘no evidence’ basis. As I pointed out at paragraph [44], the adjudicator correctly appreciated that he needed to be satisfied about the merit of Kuatro’s claim. Whether or not Elite was relying on a ‘no evidence’ ground is therefore not to the point. Even if Elite had specifically made that submission, it is hard to see what Kuatro would have done other than refer to the same material to which it had already referred, and which it again expressly referred to in the adjudication response.

39. [61]

    In my view, the adjudicator was not required to telegraph his tentative conclusions about the merits of Kuatro’s liquidated damages claim in order to give Kuatro a further opportunity to refer him to the same material to which it had already referred him on that point.

40. [62]

    The problem, if there was one, was not a lack of procedural fairness. Much less was there a ‘significant departure’ from the requirements of procedural fairness: cf Demex at [32].

Variation 17

1. [63]

   The second alleged jurisdictional error concerns variation 17. In its payment claim, Elite claimed the amount of $109,831 ($99,846.36 plus a 10% administration fee) for ‘variation 17’ in respect of formwork for hobs and upstands. Kuatro’s payment schedule denied this variation for reasons that included the failure by Elite to comply with the provisions of clause 36 of the Subcontract. That clause is as follows:

2. [64]

   The payment schedule said:

3. [65]

   The adjudicator dealt with this issue as follows (at 48(f) of their determination):

4. [66]

   Kuatro’s submission in relation to this issue was straightforward. Whereas the adjudicator had clearly acknowledged Kuatro’s reliance on clause 36 in the context of other variation claims, he made no mention of this clause in dealing with variation 17. Kuatro submitted that the failure to refer to clause 36 was conspicuous and that there was a powerful inference that he overlooked it. It submitted that the absence of any reference to clause 36 in the context of variation 17 was not explicable on any basis other than a lack of consideration.

5. [67]

   Kuatro had relied on Elite’s failure to comply with clause 36 in the context of a number of other variations. In dealing with these, the adjudicator said at paragraph 37(d) of the determination:

6. [68]

   Kuatro submitted that these various references to its reliance on clause 36 only highlighted that the same submission must have been overlooked in dealing with variation 17. As to the suggestion that the adjudicator had implicitly rejected Kuatro’s reliance on clause 36 in dealing with variation 17, Kuatro submitted as follows:

7. [69]

   In my view, there was no jurisdictional error in the way the adjudicator dealt with Kuatro’s argument that it could rely on Elite’s failure to comply with clause 36 to defeat its claim concerning variation 17.

8. [70]

   At paragraph 37(d)(xi) the adjudicator explained that the question of whether Elite was entitled to payment for variations may be in any one of three ways: it may show that it has complied with clause 36; or it may show that Kuatro had waived compliance with clause 36; or it may show that it had ‘some other contractual basis to found an entitlement to a Variation and seek to by-pass clause 36 altogether’. This paragraph is important, because it shows that the adjudicator was not prepared to accept that the formal requirements of clause 36 necessarily applied to every variation claim.

9. [71]

   It is clear from the way he dealt with variation 17 that the adjudicator took the view that the parties had indeed agreed a variation in relation to upstand walls and hobs. In other words, as foreshadowed in paragraph 37(d)(xi), he took the view that Elite had ‘some other contractual basis’ to found its claim quite apart from clause 36. This is especially clear from paragraph 48(f)(iv) where the adjudicator referred to a submission made by Kuatro which, in his view, ‘would seem to confirm that the work is a variation and was required to be completed’. It is also clear from the balance of the paragraph where he expressly found that Kuatro’s submissions ‘support some understanding by [Kuatro] that a variation was required to some degree’.

10. [72]

    In my view, the fact that clause 36 is not mentioned in paragraph 48(f) of the determination does not demonstrate any jurisdictional error on the part of the adjudicator. On the view he took, he had no reason to mention it.

The stay application

1. [73]

   Kuatro contended that even if the adjudication determination is not set aside, or is only set aside in part, the interlocutory orders made by Stevenson J on 10 February 2025 in respect of the stay (and extended by his Honour on several occasions afterward) should continue until resolution of the main proceedings. Although described as a ‘stay’ of the determination, the orders are in the nature of injunctive relief to prevent Elite from taking the steps laid down in ss 24(1)(a) and 25 of the SOP Act in relation to the enforcement of the determination.

2. [74]

   The parties made submissions on this issue principally by reference to paragraphs [318] to [354] of Parker J’s judgment in Martinus Rail Pty Ltd v Qube RE Services (No 2) Pty Ltd (No 2) [2024] NSWSC 1223 and paragraphs [290] to [304] of Payne JA’s reasons in Martinus. I have approached the issue in the particular light of what Payne JA said at [292] to [297]. What his Honour said at [297] bears repeating:

3. [75]

   In addition to the matters set out at paragraphs [11] to [12] above, there was also other evidence in relation to Elite’s financial position.

4. [76]

   Mr Turpeinen is the sole director of Elite. He said that Elite has defended the winding up proceedings on the basis that it is solvent. In an affidavit sworn on 3 March 2025, he referred to 11 separate projects in respect of which Elite is entitled to receive, or at least anticipates receiving, gross payments totalling $2,390,978.19. One such project involves a company called Monarch Building Solutions (Aust) Pty Ltd (Monarch) and relates to a project at Cobargo. The contract sum is $707,857.70. Another involves a company called Calderwood SC Pty Ltd and relates to a project at Calderwood. A sum of $107,770.41 was paid to Elite in January 2025 and the remaining contract sum for the Calderwood project is $1,213,299.59.

5. [77]

   As to liabilities, Elite’s lease obligations, utilities and other regular expenses and outgoings are up to date. Elite’s payment arrangements with staff, subcontractors and unsecured creditors are all in accordance with agreed or adjusted terms. Elite has no overdue state taxes. None of its suppliers have placed it on cash-on-delivery terms or any other special terms. Mr Turpeinen’s unchallenged evidence was that other than the Deputy Commissioner of Taxation, ‘all creditors are being paid within agreed terms.’ Apart from the claim by the Deputy Commissioner of Taxation in the winding up proceedings, there are no outstanding demands for payment of proceedings on foot in respect of any liabilities of the defendant.

6. [78]

   Mr Turpeinen also said that if Elite is paid the money held in Court in these proceedings, it will be in a position to pay its tax debts and have the winding up proceedings dismissed. No other creditor has appeared or filed a notice of intention to appear as a supporting creditor in those proceedings.

7. [79]

   Kuatro did not challenge any of Mr Turpeinen’s evidence as to Elite’s financial circumstances. It did however tender documents to show that Mr Turpeinen had caused another company, Elite Form Pty Ltd (Elite Form) to be incorporated in December 2024 and that Elite Form had replaced Elite in the contract with Monarch. This, it submitted, was an instance of a ‘phoenix’ scheme. It submitted, in effect, that the incorporation of Elite Form was a device to defeat creditors.

8. [80]

   Mr Turpeinen was not cross examined about these propositions.

9. [81]

   Kuatro also provided a schedule in which it sought to demonstrate that the total amount which Elite could expect to receive in relation to current projects was far less than stated by Mr Turpeinen. In Kuatro’s submission, the total amount ‘outstanding’ from all projects was $82,715.83. Mr Turpeinen was also not cross examined about these propositions.

10. [82]

    Kuatro’s application for the continuation of the stay relied heavily, but not solely, on the fact of non-compliance with the statutory demand and the impending winding up application. It submitted that Elite is presumed to be insolvent under s 459C of the Corporations Act 2001 (Cth) by reason of its failure to comply with the statutory demand and that, as such, the situation is not one in which there is a mere risk of insolvency. It referred to the fact that the tax debts in relation to which the statutory demand was issued arose well prior to Elite’s entry into the Subcontract and that they could not be characterised as debts incurred in the ordinary course of its business.

11. [83]

    Kuatro also submitted that if Elite uses the funds in Court to pay its tax debts, then Kuatro will find itself in exactly the position of the Deputy Commissioner of Taxation vis a vis Elite, namely it will be a creditor of an insolvent company. It likened these circumstances to a game of musical chairs, the idea being that the music has now stopped but it is being made to stand up to allow the Deputy Commissioner of Taxation to sit down.

12. [84]

    I do not accept these submissions. The fact that the tax debts in question pre-date Elite’s entry into the Subcontract says nothing about the nature of those liabilities. They are all debts that were incurred in the ordinary course of trading and, in the ordinary course, would be discharged using cashflow from operations, namely progress payments from concreting work. They are precisely the kinds of expenses that a subcontractor would expect to be able to meet from cashflow.

13. [85]

    The fact that Elite would use a progress payment to pay out a circling creditor is also not a matter to which I am prepared to attach any weight. The evidence shows that the only creditor pressing for payment is the Deputy Commissioner of Taxation and that the funds in Court, if paid to Elite, would be sufficient to discharge that liability. Elite appears otherwise to be solvent, even according to Kuatro’s schedule of its expected revenues.

14. [86]

    I also do not accept that the effect of lifting the stay will be to put Kuatro in the very same position as the Deputy Commissioner of Taxation is now in. The Deputy Commissioner of Taxation has a debt that is currently due and payable by Elite. Kuatro has claims that have been rejected by the adjudicator and which will be the subject of dispute in the main proceedings. Elite may or may not be found to be liable to Kuatro. I accept that if Kuatro ultimately succeeds in its claim, there is a risk that Elite will be unable to meet it. But this is precisely the kind of risk that the SOP Act intends to place on a contractor in Kuatro’s position: see Martinus at [303], where Payne JA said the following:

15. [87]

    Lastly, I do not accept that there was necessarily anything deceptive about the incorporation of Elite Form or the fact that it has replaced Elite as the contractor in the arrangement with Monarch. Elite is presently subject to a winding up application but, according to Mr Turpeinen, has a strong case to demonstrate its solvency. One explanation as to why the contract was ‘moved’ to Elite Form may simply be that Monarch did not want to be a party to a contract with an entity that was subject to a winding up application. I note that the new contract with Elite Form seems to have been entered into prior to the commencement of any works in relation to the Cobargo project and, I infer, before the time for performance of either party’s substantive obligations. The documents tendered by Kuatro make it impossible to accept that Elite, as opposed to Elite Form, can expect to receive revenues from Monarch. In this respect, I am unable to accept that what Mr Turpeinen says about the Monarch contract is altogether reliable. But this does not affect the balance of Mr Turpeinen’s evidence in relation to Elite’s financial position generally, which was not the subject of any challenge save for the submission contained in Kuatro’s schedule.

16. [88]

    Even if I were to reject Mr Turpeinen’s evidence and instead entirely accept Kuatro’s submissions as to Elite’s financial position as set out in its schedule, I would conclude that Elite is still in fundamentally the same position so far as concerns its ability to demonstrate solvency. That is, it would still be able to pay its outstanding tax debts and continue to trade if it were to receive the funds paid into Court.

17. [89]

    I therefore refuse to continue the interlocutory orders.

    1. (1)

       Summons dismissed with costs.

    2. (2)

       The funds paid into court by the plaintiff be paid into the trust account of the first defendant’s solicitors.