ACN 068 628 268 Pty Ltd v Dubsky Timber Pty Ltd No. Scgrg-00-315

[2000] SASC 166

ACN 068 628 268 PTY LTD v DUBSKY TIMBER PTY LTD
[2000] SASC 166

Magistrates Appeal:  Civil

1. DEBELLE J.     This is an appeal from the decision of a magistrate enforcing a lien registered under the Worker’s Liens Act 1893 (“the Act”).

2. On 6 August 1998 the appellant entered into an agreement with one Nicholas, a builder, to buy land and a dwelling to be constructed on the land.  The land is at Flagstaff Hill.  Nicholas was the owner of the land and he was to build the dwelling.  The contract provided that settlement was to occur on 31 October 1998.  However, settlement did not occur until 1 December 1998.

3. The respondent, Dubsky Timber Pty Ltd (“Dubsky Timber”) is a timber merchant.  Between 19 October 1998 and 10 December 1998 Dubsky Timber supplied Nicholas with timber.  A small part of that timber was not used in the construction of the dwelling.  The magistrate found that the total value of the timber supplied which was used in the construction of the dwelling was $10,149.47.  There is no appeal from those findings.  Nicholas did not pay for the timber.

4. On 14 December 1998 Mr Dubsky, the sole director and manager of Dubsky Timber, and Mr Fotia, the sales manager, met Nicholas to discuss payment of the sum due to Dubsky Timber.  Nicholas handed Dubsky a cheque for $9,000 and asked him not to bank it for a day or so.  The cheque was presented for payment but the cheque was not honoured.  On 17 December 1998 Dubsky Timber sent a statement to Nicholas for the amount outstanding.  It was not paid.

5. On 21 December 1998 Dubsky Timber caused a notice of lien to be registered on the certificate of title for the house and land at Flagstaff Hill. On the same day, notice of registration of the lien was sent by facsimile transmission to the registered office of the appellant. Notice of the lien was also given by the Registrar-General pursuant to s 11 of the Act.

6. On 5 January 1999 Dubsky Timber instituted this action to enforce the lien. The action was thus brought within the time prescribed by s 15 of the Act which provides that a lien under the Act will expire unless an action to enforce the lien is brought within 14 days from registration of the lien. On 1 February 1999 Nicholas was adjudicated bankrupt.

7. It is common ground that Dubsky Timber did not give notice pursuant to s 10(2)(a) of the Act. A notice of demand pursuant to s 10(2)(a) of the Act was not served on Nicholas until 7 March 2000, the day when the hearing of this action commenced. The appellant submits that Dubsky Timber’s failure to give notice pursuant to s 10(2)(a) before commencing this action has the consequence that the lien was unenforceable. This submission was put to the magistrate but he failed to deal with it.

8. Section 10 of the Act prescribes the procedure for registering a lien. The relevant subsections provide:

   “       (1)    A lien under this Act with regard to land shall be available only if registered before the expiration of twenty-eight days after the wages or contract price in respect of which such lien has arisen shall for the purposes of this section have become due.

   (2)    Any wages or contract price shall for the purposes of this section be deemed to have become due–

   (a)if unpaid for seven days after the same (being payable) shall have been demanded by notice in writing, signed by the person claiming the same and given to the person liable to pay the same, or posted in a registered letter addressed to him at his usual or last known place of abode in South Australia:

   (b)if either before or after the same shall have become payable, the person liable to pay the same shall have called a meeting of his creditors, or committed an act of bankruptcy, or executed a deed of assignment within the meaning of the Bankruptcy Act, 1924-1933, of the Commonwealth, or shall have taken or attempted to take the benefit of any law relating to bankrupts or insolvent debtors, or shall have suffered his goods to be taken in execution or seized under legal process or distress for rent.

   (3)    A lien shall be registered by the person claiming the same lodging in the General Registry Office a notice in the prescribed form and accompanied by the prescribed fee, which notice shall be signed by such person and attested.

   (4)    A lien may be registered after the wages or contract price have become payable, although the seven days mentioned in subsection (2) shall not have commenced to run.”

It is well settled that, if the person seeking to register a lien cannot rely on s 10(2)(b), that person must make a demand pursuant to s 10(2)(a): Marriott Industries Pty Ltd v Mercantile Credit Ltd (1991) 160 LSJS 288 per King CJ at 293:

“A lien may be registered pursuant to subsection (4) after the contract price has become payable, although the seven days mentioned in subsection (2) has not commenced to run, that is to say before the lien is ‘available’. Until the seven day period expires, the lien as it is not available cannot be enforced, in my opinion, and does not operate as a caveat pursuant to section 12. ... If a lien is registered under section 10(4) before it becomes available, it is not capable of enforcement until the section 10(2)(a) notice has been given and the seven day period has expired or one of the events specified in section 10(2)(b) has occured [sic]. I think that it is clear that the lien must be in an enforceable condition before legal proceedings for its enforcement are instituted. As the lien ceases if legal proceedings for enforcement are not brought within 14 days from registration, there is a practical requirement for the section 10(1)(a) notice to be given before or soon after registration, unless one of the section 10(2)(b) events has occured [sic].”

See also Olsson J at 308 – 310.  Observations to like effect had been made by King CJ in Longreef Pty Ltd v Leighton Contractors (South Australia) Pty Ltd (1991) 160 LSJS 270 at 276 but they were not necessary for the decision and, to that extent, were obiter dicta.  In reaching his conclusion in Marriott Industries (supra), King CJ disagreed with the decision of the Full Court of the Supreme Court of the Northern Territory in Leichhardt Development Co Ltd v Pipeline Properties Pty Ltd(No 2) (1989) 62 NTR 1 where it had been held, by a majority, that s 10(2)(a) was a facilitative provision and not a condition precedent to the enforcement of a lien. The decision in Leichhardt was reviewed by a specially constituted Full Court of the Supreme Court of the Northern Territory and overruled in Jovista Pty Ltd v Pegasus Gold Australia Pty Ltd (1999) 8 NTLR 171; 130 NTR 1. In that case, the court preferred the reasoning of King CJ in Marriott Industries. Thus, the absence of a demand made pursuant to s 10(2)(a) is fatal to the capacity of Dubsky Timber to enforce the lien.

1. As Dubsky Timber failed to serve a notice of demand pursuant to s 10(2)(a), its lien is unenforceable. That conclusion is sufficient to dispose of this appeal.

2. Mr Magarey, who appeared for Dubsky Timber, submitted that there was an alternative construction of s 10 which avoided that result. He relied on the fact that Nicholas was adjudicated bankrupt on 1 February 1999. So, he submitted, by reason of s 10(2)(b), the contract price was deemed to have been due on 1 February 1999. As the lien had been registered on 21 December 1998, that is to say, before 1 February 1999, he contended that s 10(1) had been satisfied. The effect of his contention is that, if the lien is registered before any of the events listed in s 10(2)(b) has occurred and one of those events does later occur, the lien is enforceable. In other words, s 10(1) simply represents the last day on which a lien can be registered. It does not fix a 28 day period, he said, but a more indefinite period which ends 28 days after the wages or contract price become due. Section 10(2)(b) speaks of an act of bankruptcy, not an order adjudicating a person bankrupt. But, for the reasons which follow, that distinction is not necessary to pursue.

3. This submission must be rejected since it gives s 10(1) an operation which is contrary to its terms. The period of 28 days specified in s 10(1) commences when the wages or contract price “shall for the purposes of this section have become due”. It does not commence at any earlier time. That conclusion is reinforced if Mr Magarey’s proposition is tested by reference to the terms of s 10(2)(a). That provision deems the wages or contract price to become due and payable after a demand has been served in accordance with the terms of s 10(2)(a) and not before. Thus, the period of 28 days to which s 10(1) refers, when such a demand is made, can only begin to run after the seven days allowed for payment. Section 10(4) provides an exception in that it allows the lien to be registered notwithstanding that the seven days have not commenced to run. That exception has been provided for the reasons expressed by Olsson J in Marriott Industries at 310.

4. It is, therefore, apparent that the construction for which Mr Magarey contends could on occasions result in two different periods of time for the purpose of s 10(1). One would be a period of 28 days measured from the service of a demand pursuant to s 10(2)(a). The other would be an indefinite period which would expire 28 days after any of the events named in s 10(2)(b). I do not think that Parliament intended to create two such periods. Only one, namely a fixed period of 28 days, was intended. That also accords with the meaning of the words used in s 10(1). Furthermore, had Parliament intended that a lien could be registered at any time before the wages or contract price became due, s 10(1) would have been expressed in different terms. It is, therefore, apparent that Mr Magarey’s construction of s 10(1) was incorrect and, for these reasons, I do not accept it.

5. The appellant relied on one other ground. It sought to challenge the magistrate’s finding that the appellant owed money to Nicholas at the time when the lien was registered. The magistrate grounded that finding on an admission made by Mr Farquhar, a director of the appellant. In my opinion, the magistrate was entitled to rely on that admission. In support of this contention, it was contended that the magistrate had reversed the onus of proof in that he had required the appellant and Nicholas to prove whether any amount remained unpaid by the appellant to Nicholas. Proof of the fact that any amount remained unpaid was required by s 6 of the Act. However, an examination of the magistrate’s reasons shows that the magistrate was at pains not to reverse the onus of proof. Instead, he was simply weighing the evidence. He had stated that he preferred the evidence of Dubsky and Fotia and that the evidence given on behalf of the appellant and Nicholas had not caused him to change his view. In other words, he was weighing the evidence in accordance with the principles in Blatch v Archer (1774) 1 Cowp 63, 98 ER 969. The appellant fails on this ground.

6. For these reasons, I would allow the appeal.