DBL Space Pty Ltd v Clynder Pty Ltd [2022] QSC 193

Julie Whitehead  |  Laura Berry  |  Claudia Lizzio

Key takeout

A court will intervene to return plant and equipment to a contractor if the principal is holding the contractor’s plant and equipment as security for a debt allegedly owed by the contractor and it can be demonstrated that the return of the property will prevent a diminution of its value.

Facts

DBL Space Pty Ltd (DBL) brought a claim against Clynder Pty Ltd (Clynder) seeking interlocutory injunctive relief for the recovery of construction plant and equipment held by Clynder. 

Clynder had engaged DBL to construct a building on Lizard Island.  After DBL had commenced work, Clynder alleged DBL breached the contract by failing to proceed expeditiously and without delay.  Clynder took steps under the contract to take completion of the construction out of DBL’s hands and locked DBL out, denying it access to its plant and equipment on site.

DBL claimed that it had performed work over $8 million in value, but had only been paid $4.5 million.  Further, it was unable to recover its plant and equipment, which it alleged was not being properly stored on site and was susceptible to corrosion and storm damage.  This, DBL argued, would lead to a diminution in value of the property.

In response, Clynder alleged DBL owed it $1.2 million.  Clynder relied on a provision in the contract which provided it could complete the work using DBL’s plant and equipment.  Further, after the work had been completed, Clynder could retain the plant and equipment until any debt DBL owed it was satisfied.  If the debt remained unpaid, the contract allowed Clynder to sell the plant and equipment.  Clynder had already given DBL notice that it intended to sell the plant and equipment. 

Clynder argued that the contract gave it a possessory security interest and submitted that an order for the return of the equipment should only be made in exchange for the creation of an equivalent security in lieu by DBL.

The parties agreed there was a serious question to be tried between them, therefore the decision before the court was whether the balance of convenience favoured returning the plant and equipment to DBL or letting it remain with Clynder.

Decision

The court granted DBL’s application and ordered the plant and equipment be returned to it. An undertaking was required that DBL would not sell, encumber or diminish the value of the property until the dispute between it and Clynder was resolved.  

Persuasive in granting the application was that the plant and equipment was valuable in its own right and in its value to DBL’s business.  As the plant and equipment was being stored in the open at Lizard Island, it was susceptible to the corrosive effects of salty air, the risks of storm and potential cyclone damage.  It would deteriorate in value if left on Lizard Island whereas if it was returned to DBL it would be used, maintained and stored in a way that would best preserve its value.  Clynder, which was threatening to sell the property, offered no assurance that it would safeguard the property if the sale was restrained and the property remained in its possession.  His Honour concluded that in this case, the court should intervene to return the plant and equipment to DBL, pending trial, so as to prevent the plant and equipment from diminishing in value.

As to Clynder’s position that the equipment should only be returned in exchange for the creation of an equivalent security interest in lieu by DBL, the court concluded that there was no act of bailment by DBL underlying the security interest claimed by Clynder. DBL did not deliver up the plant and equipment to Clynder.  Rather, Clynder took possession of the plant and equipment when it denied DBL access to site.  Any right Clynder had to the property was in the form of a contractual lien.  Although the entitlement Clynder derived from the contractual lien would be lost if the plant and equipment was returned to DBL, its position would be protected by the orders restraining DBL from selling, encumbering or diminishing the value of the property prior to the dispute being settled.