Financial Difficulties As A Basis To Stay Adjudication Decision

Financial Difficulties As A Basis To Stay Adjudication Decision

The primary purpose of the Building Industry Fairness (Security of Payment) Act 2017 (Qld) (the BIF Act) is to “help people working in the building and construction industry in being paid for the work they do.”

Broadly, it achieves this by:

1. Requiring the use of statutory trusts for particular contracts;
2. Granting an entitlement to progress payments whether or not a contract makes provision for progress payments;
3. Establishing a procedure for making payment claims, responding to those claims and an adjudication procedure for disputed claims and enforcement of certain claims; and
4. Enabling a statutory charge in favour of subcontractors.

Part of the BIF Act’s goals was to address the increasing number of insolvencies in the building industry by providing a mechanism through which head contractors and subcontractors could be paid sooner.

In the recent decision of Taringa Property Group Pty Ltd v Kenik Pty Ltd [2024] QSC 327, the Supreme Court granted a stay preventing a contractor from enforcing an adjudicated judgment, due to concerns over its financial viability despite it not being in liquidation.

Taringa Property Group (TPG) as the developer/owner and Kenik as the head contractor were parties to a contract whereby Kenik was to design and construct for TPG a retail complex that included a Coles supermarket and a Liquorland at Taringa, in Brisbane.

TPG and Kenik fell into dispute. After adjudication proceedings and a review of the adjudication determination in Taringa Property Group Pty Ltd v Kenik Pty Ltd [2024] QSC 298, Kenik was entitled to judgment in the sum of $4,218,787.02 (plus some subcontractors charges).

The power of the court to stay enforcement of a judgment is a discretionary one and has historically been applied with caution in BIF Act payment matters.

In RJ Neller Building Pty Ltd v Ainsworth [2009] 1 Qd R 390, the Court of Appeal considered there were two types of cases where the prima facie position not to grant a stay could apply:

1. Firstly, where the contractor has deliberately taken steps to make the task of recovering any BIF payment more difficult for the principal by way of restructuring its financial affairs; and
2. Secondly, where the contractor engages in tactics to delay the resolution of the substantive proceeding.

In Kenik’s case, the court departed from the traditional position and ordered a stay of the judgment debt until the outcome of other substantive proceedings between TPG and Kenik. The court considered that the evidence advanced in support of Kenik’s financial position (a one page document) was insufficient to establish that it would in fact be in a position to deal with the other proceedings and pay out its creditors even if it were to enforce the judgment sum.

As a consequence of that decision, and because of its inability to access funds, Kenik was then wound up in insolvency by the court in the decision of Barrett Group Pty Ltd v Kenik Pty Ltd [2025] QSC 25.

Whether the stay order is a one-off decision or whether it will become a precedent for parties to avoid enforcement of adjudication decisions due to financial difficulties remains to be seen.