Settling a dispute – Urgent advice and Court proceedings assisted early effective resolution

29/02/2020

We recently acted for a property Developer who had a dispute with a Builder.

Within 11 days from our initial conference with our client, we were able to achieve resolution of the dispute, after commencing urgent Supreme Court of New South Wales Equity Division proceedings, involving a solicitor from our office appearing twice as advocate before the Duty Judge.

Briefly the background was as follows:

The Developer (our client) had entered into a contract with the Builder to design and construct a development in the inner city of Sydney.

Towards the end of the project, the Builder had served a Payment Claim under s.13 of the Building and Construction Industry Security of Payment Act (“the SOP Act“) for just under $1 million.  In response, the Developer lodged a Payment Schedule under s.14 of the SOP Act, for which the scheduled amount that the Developer ascertained was owing, was approximately $40,000 having regard to the Developer’s claim against the Builder’s losses due to delay in completing of the building works.

The Builder then lodged an Adjudication Application under s.17 of the SOP Act claiming the unpaid amount of approximately $1,000,000 and the Developer lodged an Adjudication Response under s.20 of the SOP Act claiming the amount payable was $40,000.

A determination was made by the Adjudicator under s.22 as to the amount payable by the Developer to the Builder but not published to the parties at that time.

The following week, the parties agreed to resolve matters in dispute between them and capture the terms of the agreement by way of a Deed of Release which was not originally drafted or reviewed by us at the time it was prepared.  One provision of the Deed of Release stated that the rights of the Builder under the Building Contract included a right to have a sum of money (“the Settlement Sum”) paid to it.

After entering the Deed of Release the Adjudication Determination was released to the parties which disclosed the “Adjudication Amount” which was payable by the Developer.

Following our review, it appears that there was no “jurisdictional or other error” which would allow the Development to have the “Adjudication Determination” set aside.

As it happened, the Settlement Sum payable by the Developer "within 21 business days" of the date of the Deed of Release was about half “Adjudication Amount”.   The Deed of Release did not specifically define “Business Days”.

“Business days” was not defined in the Deed of Release.

If the definition in the Building Contract or if the definition under the SOP Act applied (rather than the undefined usual meaning of “business days”, then this gave the Owner 3 more days in which to pay the Settlement Sum.  

The Deed of Release also provided that the Builder release the Developer from the Payment Claim upon receipt of the Settlement Sum under the Deed of Release.

The Developer alleged that, before time was due for payment of the Settlement Sum (on any construction of the Deed), in a telephone conversation, the Builder agreed to extend time for payment of the settlement sum for 2 weeks.  The Builder disputed this.

The Builder having received the Adjudication Determination, asserted to the Developer that the time for payment had expired “yesterday” and that it had “not released the Developer from the Adjudication, as that was only to occur once the Builder was paid.

The Developer then paid the Settlement Sum the next day, which the Builder asserted was 2 days late. The Builder said that accordingly, the Builder was entitled to take the Settlement Sum that was paid in part reduction of the amount of the “Adjudication Amount” and that the release under the Deed did not apply.

We considered the matter as a result of which the Developer was prepared to argue as follows:

• That the definition of “business days” from either the Building Contract or the Act was incorporated into the Deed of Release, and hence that the payment was on time.
• Alternatively, time for payment of the settlement sun was not “of the essence”, and in the circumstances, payment made only 2 days outside the 21 days contended for by the Builder, was still valid.
• Alternatively, an agreement had been reached between the Builder and the Developer to extend time for payment, which had been complied with by the Developer.
• Alternatively, there had been a representation or conduct by the Builder towards the Developer making it unconscionable for the Builder to assert that the time for payment was earlier than when it was paid, when the Developer had relied on that representation or conduct to its detriment.

The Builder threatened that if the balance of the Adjudication Determination was not paid together with interest and the Adjudicator’s fees, it would apply for a Certificate of Determination, register that as a Judgment in a Court, and then enforce it against the Developer.

In accordance with our recommendation, we were instructed to commence urgent proceedings in the Equity Division of the Supreme Court of New South Wales to restrain the Builder from applying for issue of the Certificate of Determination from the Authorised Nominating Authority (ANA) who appointed the Adjudicator, and taking consequential enforcement steps.

We made application to the Supreme Court of New South Wales.  On our application the Summons was made returnable in the Supreme Court of New South on Friday of that same week.

At Court on Friday and following Court, the parties negotiated and agreed that involved a final injunction being issued against the Builder preventing it from applying to seek a Certificate of the Adjudication Determination, or otherwise seeking to enforce the Adjudication Determination, and noting those further terms confirming the settlement as set out in the original signed agreement reached between the parties.

Subsequently, the Court made orders in accordance with those Consent Orders.

This case highlighted amongst other things, the importance in particular, the need:

• To act promptly in relation to any claims or disputes arising under the Act.
• For clarity in drafting agreement for the resolution of disputes.
• For parties to understand what obligations and rights they have under agreement.
• For you to have experienced solicitors act for you including where the need arises, Solicitors who can appear as advocates on short notice in urgent matters.

At Watson & Watson the significant litigation experience of our Senior Solicitors provides the basis for our thorough approach to every matter and our ability to act promptly in aiding our clients’ right.  In the above case, our client would have had great difficulty from recovering from enforcement proceedings based on the “Adjudication Amount.  If you are seeking advice in relation to proposed litigation proceedings or have any concerns regarding your matter which is or likely to be before the Court, please do not hesitate to contact Richard Watson Accredited Specialist Commercial Litigation or Shereen Da Gloria Personal Assistant to discuss your matter and seek appropriate advice from our experienced lawyers.

This is only a preliminary view and is not to be taken as legal advice without first contacting Watson & Watson Solicitors on 9221 6011.