Pay Now vs. Argue Later: Queensland confirms the right to final relief must be preserved even if it means non-payment of an adjudicated amount

The ambit of the Building Industry Fairness (Security of Payment) Act 2017 (Qld) (the Act) is often summarised by the phrase, ‘pay now, argue later’ because it provides a faster and cheaper mechanism for payment disputes to be resolved: through statutory adjudication which binds the parties on an interim basis.

The Act preserves the right for each party to seek a final determination of their rights (e.g. before a court or arbitral tribunal). However, the making of interim payments can give rise to problems in situations where the contractor’s financial difficulties may mean it is unlikely that the principal can recover those interim payments should the principal succeed in final proceedings. In these circumstances, should the contractor be able to enforce the adjudication determination so that at least money can go down the chain?

In the past, the Courts have only prevented contractors enforcing an adjudication determination if the contractor is:

1. in liquidation; or
2. arranging its financial affairs to make it more difficult for a principal to recover the adjudicated amounts in final proceedings.

However, in the recent case of Taringa Property Group Pty Ltd v Kenik Pty Ltd [2024] QSC 327 (Taringa), the Queensland Supreme Court for the first time granted a stay preventing a contractor from enforcing an adjudication determination due to concerns over its financial viability, despite the contractor not being in liquidation.

This decision is a significant departure from the long-standing position under the Act and may signal an increased willingness by the Courts to consider financial instability as a basis for preventing the enforcement of adjudication determinations obtained by contractors.

Below is a more detailed summary of the case.

Summary

Taringa Property Group Pty Ltd (the Principal), engaged Kenik Pty Ltd (the Contractor) for the design and construction of a retail complex in August 2020. The contract price was approximately $13.6 million.

The Contractor was awarded $4.2 million in an adjudication determination and subsequently obtained the $4.2 million as a judgment debt.

The Principal paid the $4.2 million amount into court and subsequently applied to the Supreme Court for:

1. judicial review of the determination (to set it aside in full for jurisdictional error); and
2. a stay preventing enforcement of the judgment debt obtained by the Contractor.

In March 2024, the Principal also applied to the Supreme Court for final relief under the Contract (substantive proceedings).

At the time of this decision, the substantive proceedings had commenced, but were in infancy – they were still subject to directions and management by the Supreme Court.

In December 2024, Hindman J upheld the validity of the determination (see Taringa Property Group Pty Ltd v Kenik Pty Ltd [2024] QSC 298).

Having found the determination was valid, Hindman J turned to the question of whether to grant the stay.

Hindman J noted that in most cases a stay on enforcing an adjudicated amount would not be granted, as it would undermine the purpose of the Act (to ensure cash flow down the chain).

In determining the threshold for granting a stay, Hindman J noted that a balancing exercise must be carried out between the risk of non-recovery by a principal in substantive proceedings and the consequence to a claimant if the interim payment was not received in a timely manner as contemplated by the Act.

In carrying out this balancing act, Hindman J first considered that the granting of a stay would likely result in the financial failure of the Contractor. As such, Her Honour considered that for her to grant the stay, the risk of irreparable damage to the Principal if the stay was not granted must be very high.

Importantly, Hindman J confirmed that this did not mean the Principal had to establish that the Contractor must actually be in external administration or must be positively proved to be otherwise insolvent.

Hindman J set out the following factors which she considered weighed against granting the stay:

1. the Contractor’s financial difficulties were largely due to the non-payment of the adjudicated amount;
2. access to the adjudicated amount would enable the Contractor to cover the legal costs of the substantive proceedings; and
3. the Contractor intended to pay its subcontractors if it received the funds.

However, Hindman J considered the evidence on the Contractor’s financial position and observed that the Contractor had net assets of approximately $268,000 but only $9,000 in cash, which was insufficient to cover the legal costs of the proceedings. It had no real property or chattels, had surrendered its building license in August 2024, and was not trading, with no clear income or assets. Furthermore, the Contractor’s director was personally funding it, and it had nearly $7 million in liabilities, many long overdue.

Her Honour also pointed out that creditors had moved to wind up the Contractor, and the Contractor did not attempt to argue in these proceedings that it was solvent. Nor did the Contractor explain how it planned to repay the adjudicated amount to the Principal if the Principal was successful in the substantive proceedings.

With the risk of non-payment of the adjudicated amount from the Contractor to the Principal in substantive proceedings being so high, Her Honour ordered the stay.

The consequence of the stay being granted was predictable. On 20 February 2025, a creditor applied for and obtained an order that the Contractor be wound up: Barrett Group Pty Ltd v Kenik Pty Ltd [2025] QSC 25.

It remains to be seen whether the decision in Taringa is a one-off driven by the particular circumstances of the case, or whether it will open the floodgates for respondents to avoid the enforcement of adverse adjudication decisions due to the actual or perceived financial difficulties of the claimant.

Key contacts:

Jason Pungsornruk – Principal