Goodacre v Romtra Pty Ltd

[1999] QCA 264

IN THE COURT OF APPEAL	99.264
SUPREME COURT OF QUEENSLAND

Appeal No. 3503 of 1998

Brisbane

[Romtra P/L v Goodacre & Maroochy SC]

BETWEEN:

ROMTRA PTY LTD (ACN 007 155 571)

(RECEIVER AND MANAGER APPOINTED)

(First Defendant) Appellant

AND:

ALLEN GOODACRE and SUSAN GOODACRE

(Plaintiffs) First Respondents

AND:

COUNCIL OF THE SHIRE OF MAROOCHY

(Second Defendant)	Second Respondent
de Jersey CJ Pincus JA Thomas JA

Judgment delivered 16 July 1999.

Separate reasons for judgment of each member of the Court, each concurring as to the order made.

APPEAL DISMISSED WITH COSTS.

section 11 of the Subcontractors' Charges Act 1974 considered - whether payment into court by employer is irrevocable admission that such money is payable to contractor - whether contractor had present entitlement to balance of fund after satisfaction of charge - possibility of different entitlements emerging as between the parties at different times.

Counsel:	Mr S J Keim for the appellant. No appearance on behalf of the first respondents. Mr A Looney for the second respondent.
Solicitors:	Macrossans Lawyers for the appellant. No appearance on behalf of the first respondents. Mr JD Hall, Maroochy Shire Council for the second respondent.
Hearing Date:	9 June 1999

IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND

Appeal No. 3503 of 1998

Brisbane

Before de Jersey CJ
Pincus JA
Thomas JA

[Romtra P/L v. Goodacre & Maroochy SC]

BETWEEN:

ROMTRA PTY LTD (ACN 007 155 571)

(RECEIVER AND MANAGER APPOINTED)

(First Defendant) Appellant

AND:

ALLEN GOODACRE and SUSAN GOODACRE

(Plaintiffs) First Respondents

AND:

COUNCIL OF THE SHIRE OF MAROOCHY

(Second Defendant) Second Respondent

REASONS FOR JUDGMENT - de JERSEY CJ

Judgment delivered 16 July 1999

1. I have had the advantage of reading the reasons for judgment of Thomas JA, with which I

   substantially agree.

2. As Thomas JA points out, the intended beneficiaries of the operation of the Subcontractors’ Charges Act 1974 are primarily subcontractors, not employers: that is a consideration important to the resolution of this appeal.

3. The Act establishes a mechanism for the diversion to subcontractors, in order to satisfy their

   claims against head contractors, of monies which would otherwise be paid directly by employers to

   head contractors. It is convenient to note what may seem trite, that s.11 is not intended to facilitate the

   payment of whatever claim a subcontractor may make, however excessive in amount. It is intended,

   obviously enough, to secure the payment of whatever is truly due to the subcontractor from the head

   contractor.

4. Here only $109,000.00 was due to the subcontractor, although by its notice of claim of charge,

   the subcontractor had claimed the larger amount, $179,197.19. Under s.11(1) of the Act, the employer

   was obliged to retain the amount necessary “to satisfy the claim”. In my view, that amount was not

   $179,197.19, but $109,000.00. That sum of $109,000.00 was, as it turned out, the amount the

   employer was entitled to pay into court under s.11(5), and it was to that amount that the discharge

   under s.11(6) related - that is, the amount “paid” to satisfy the claim. I agree with Pincus JA that

   s.11(6) operates to discharge an employer from all further liability in respect of the amount paid, both

   to the subcontractor and the head contractor. I would for my part identify the amount subject to that

   discharge in this case as limited to the amount of $109,000.00 in fact due.

5. That leaves the fate of the balance of some $70,000.00 still to be determined. Read in the way

   I have indicated, s.11 could not operate to elevate the employer’s initial concession, when making

   payment into court of the amount of $179,197.19 that that sum was or would become payable to the

   head contractor, into an irrevocable concession to that effect still binding in the current situation of claim
   and allegedly greater cross-claim.

   6   I agree that the appeal should be dismissed with costs.

   IN THE COURT OF APPEAL

   SUPREME COURT OF QUEENSLAND

   Appeal No. 3503 of 1998

   Brisbane

Before de Jersey CJ
Pincus JA
Thomas JA

[Romtra P/L v. Goodacre & Maroochy SC]

BETWEEN:

ROMTRA PTY LTD (ACN 007 155 571)

(Receiver and Manager Appointed)

(First Defendant) Appellant

AND:

ALLEN GOODACRE and SUSAN GOODACRE

(Plaintiffs) First Respondents

AND:

COUNCIL OF THE SHIRE OF MAROOCHY

(Second Defendant) Second Respondent

REASONS FOR JUDGMENT - PINCUS JA

Judgment delivered 16 July 1999

1                    I have read the reasons of Thomas JA in which the character of this dispute is explained.

The essential question is whether the payment-in provisions contained in s 11 of the

Subcontractors' Charges Act 1974, correctly construed, mean that the contractor is entitled to

the surplus of money paid in, after the subcontractor's claim is satisfied. The Act does not expressly

say so. But in a helpful argument Mr Keim gave two principal reasons for concluding that the

surplus must go to the appellant.

2 The first reason given was that if the Court holds that a payment in under s 11 is revocable,

where the payer alleges that it was not truly liable in the sum paid in, an important purpose of the

statute is defeated. It was pointed out that the subcontractor's charge attaches to the money in

court, which charge should not be held defeasible by a change in the state of accounts between the

principal and head contractor. The second reason was that under s 11(6) the payment discharges

the payer in respect of liability to the head contractor under the general law.

3                    For the sake of simplicity, I shall discuss the questions raised on the basis that the parties

involved are the principal, the head contractor and a subcontractor; the Act deals with other

relationships as well. As to the first reason, I agree that it would seem inconsistent with the tenor

and purpose of the Act to hold that money paid in under s 11 may, as against the claimant

subcontractor, be withdrawn on account of supervening circumstances. The proper construction

of s 11(6) is that, to the extent of the money paid in by the principal, the liability which might

otherwise attach to it under s 11(2) is negatived. One would expect that the circumstances in which

the money paid in could be ordered to be paid out in such a way as to defeat a subcontractor's

claim would be extremely limited and would not include the occurrence of circumstances after the

making of the payment in, giving rise to a new claim by the principal against the head contractor.

But it does not follow that the court would be similarly hampered, in ordering payment out to the

principal, where (as here) there is no question of defeating the subcontractor's charge.

4 As to the second reason, I agree with Mr Keim's contention that s 11(6) gives the principal

a discharge, to the extent of the amount paid in, of its liability to the head contractor. This must be

so because, if there were no such discharge, then the payment in would be no answer to an action

by the head contractor against the employer to recover an amount equal to the sum paid in. The use of the word "discharge" does not encourage the thought that Parliament intended a mere

suspension of the principal's liability to the head contractor; it suggests finality. Although a statutory

reference to discharging a liability is not necessarily "limited to absolute and permanent discharges

of liability" (Hamilton v Commonwealth Bank of Australia (1992) 9 ACSR 90 at 123), one

would not ordinarily read a statute which has the effect of making a payment, made by a debtor to

a person other than the creditor, a discharge of liability as intending that the discharge could be

undone at the instance of the payer. But there are countervailing considerations.

5 A purpose of s 11 is to give the principal a choice, where notice of claim of charge is given.

It can either retain or pay in. An advantage of the latter course is that, at least if the payment in is

held to be of the proper amount, the payer is protected against costs. When referring to the "proper

amount" I have in mind the amount due to the head contractor from time to time; I do not read the

words "or is to become" in s 11(1) as requiring a principal to anticipate the extent of future liability

to the head contractor. That is, the obligation to retain applies to sums due by the principal as and

when they become due. If a sum is retained under s 11(1) then under that provision the court may

direct "to whom and in what manner" it is to be paid; this entitles the court to dispose of the notional

or actual fund retained. There is nothing in that language to suggest that the court's power to direct

is so limited that it must order any surplus (in excess of the amount necessary to satisfy the

subcontractor's claim) to be paid to the head contractor; the natural interpretation of s 11(1) is that

the surplus is to be paid in accordance with the then legal entitlement of the head contractor,

whatever may have been its entitlement at the time of the retention. Acceptance of that view

supports the giving of a similar interpretation to s 11(7), one entitling the court to order payment out

in accordance with the true state of accounts between the parties at the time of the order. And

looking at the matter more broadly, it would be surprising if the statute required the court to order

payment out to a party who is not, at the time of the order, entitled to that sum; on Mr Keim's

argument, the court would be obliged to order payment out to the head contractor even if it were

clear beyond doubt that to do so would be inconsistent with the then rights of the parties, under the

general law.

6        Here it is impossible for the court to tell what is the true state of the accounts between the parties. This is so because of the employer's large claim for damages (not argued to be made in bad faith) which it asserts can be set off against the head contractor's entitlement. In my opinion to

decline to order payment out of a sum which the court could not presently be satisfied was properly

due to the head contractor was not a wrong exercise of discretion. This is so, in summary, because

the court is entitled to give consideration, in exercising its power to order payment to the head

contractor, to events occurring after the payment-in which are alleged to have reduced or eliminated

the debt due by the payer.

7                    For these reasons, I agree that the appeal should be dismissed with costs.

IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND

Appeal No. 3503 of 1998

Brisbane

Before de Jersey CJ
Pincus JA
Thomas JA

[Romtra P/L v Goodacre & Maroochy SC]

BETWEEN:

ROMTRA PTY LTD (ACN 007 155 571)

(RECEIVER AND MANAGER APPOINTED)

(First Defendant) Appellant

AND:

ALLEN GOODACRE and SUSAN GOODACRE

(Plaintiffs) First Respondents

AND:

COUNCIL OF THE SHIRE OF MAROOCHY

(Second Defendant) Second Respondent

REASONS FOR JUDGMENT - THOMAS JA

Judgment delivered 16 July 1999

1                    This case concerns the disposition of monies paid into the District Court pursuant to a notice

of claim of charge given by a subcontractor. The relevant persons involved are the employer, the

contractor and the subcontractor. There was no intermediate contract or interest. After receiving

the notice of claim of charge from the subcontractor the employer paid $179,197.19 into court. The subcontractor obtained a court order for payment out of that sum of $109,000.00 which it

accepted as its full entitlement. There remains a dispute between the contractor (the appellant) and

the employer (the second respondent), each claiming to be entitled to money from the other. The

contractor unsuccessfully applied to a District Court judge for an order that the balance of the

monies paid into court be paid out to it. It now appeals against the refusal of that application.

2                    By 6 September 1996 the subcontractor had given notices of claims of charge to the

employer totalling $179,197.19. The employer paid that sum into court soon after the

commencement of the subcontractor's action against the contractor and the employer claiming that

amount. The employer admitted in its defence that certificates had issued in favour of the contractor

for sums in excess of the amount in issue and that at the time of the giving of the notices such monies

had been payable to the contractor, but claimed that such entitlement was only provisional, and, in

the light of subsequent events including termination of the contract by the employer for breaches by

the contractor, that such provisional entitlements had been nullified. The defence alleged that the

employer on a balance of account was now entitled to money from the contractor. It accordingly

opposed the contractor's application for payment to it of the monies in court.

3 The statutory provisions most relevant to the present matter are contained in s11 of the

Subcontractors' Charges Act 1974, and in particular the following subparagraphs:

"(1)	Where a notice of claim of charge is given pursuant to section 10, the person to whom it is given shall retain, until the court in which the claim is heard directs to whom and in what manner the same is to be paid, a sufficient part of the money that is or is to become payable by the person under the contract to satisfy the claim.
(2)	A person who fails to retain the amount that the person is required to retain shall be personally liable to pay to the subcontractor the amount of the claim not exceeding the amount that the person is required by this section to retain.
...
(5)	An employer or superior contractor may, at any time after notice of claim of charge has been given to the employer or superior contractor, pay into court the amount that the employer or superior contractor is required to retain under this section.
(6)	A payment made pursuant to this section shall discharge the employer or superior contractor, as the case may be, of all further liability in respect of the amount paid and of the costs of any proceeding.
(7)	Money paid into court under this section shall not be paid out save under an order of the court ...".

4                    Mr Keim, counsel for the contractor, submitted that by paying the money into court the

employer acknowledged that that money was payable to the contractor. He pointed out that if the

notice of claim of charge had not been delivered, the money would have been paid to the contractor

and would have been available to it to use in its ordinary business activities. In his submission the

balance of the money paid into court over and above that to which the subcontractor was actually

entitled now belongs to the contractor and should be paid to it. The employer's payment into court,

on Mr Keim's submission, was a relinquishment of interest in those monies in exchange for the

discharge conferred by s11(5).

5                    It is common ground that the subcontractor's charge has been satisfied or discharged, and

that the appeal concerns competing rights between an employer and a contractor. That is not a

subject about which the Act is primarily concerned, but ss11(5), 11(6) and 11(7) give the court a

power to determine when and to whom money that has been paid into court should be paid. The

proper basis for exercise of that power will be considered in due course.

6        The contractor's submission is that the contractor has an entitlement to receive the balance of the money paid into court. It further submitted that from the moment when the employer paid the money into court, the contractor was entitled to it subject only to the charge in favour of the

subcontractor. It contended that the act of paying the money into court was a concession by the

employer that the money was so payable, arguing that if it were otherwise no charge could have

arisen in favour of the subcontractor (s11(1)). The contractor also submitted that its rights remained

unaffected by the occurrence of later events. In short the suggestion is that there is an irrevocable

admission made in favour of the contractor when an employer pays money into court, and that in

view of the advantage obtained by the party paying money into court (see s11(6)), the admission

ought not to be able to be retracted.

7                    Payment into court in these circumstances is certainly an admission by conduct that such

money is "money that is or is to become payable by the person under the contract"[1] and by

[1] Section 11(1).

necessary implication, payable to the contractor. The question is whether this is merely an

evidentiary concession which, like all other admissions, is capable of being shown to be incorrect.

8        The general rule is that an admission against interest may be contradicted or explained away by its maker, as it is for the tribunal of fact to determine the question of its truth and the weight to be attached to it[2]. Formal admissions in the course of court process are not so easily retracted, but

[2]            Hoad v Swan (1920) 28 CLR 258, 264-265.

even here a formal admission may in a proper case with leave of the court be withdrawn[3].

[3]            Hollis v Burton [1892] 3 Ch 226.

9                    The money here in court is a surplus fund not subject to any charge. It is difficult to identify

any particular character or purpose in this money once the primary statutory object of the exercise

has been achieved, namely satisfaction of the subcontractor's charge. If it is to be seen as an

overpayment by the employer prima facie it might ask for the return of its own money, and in that

event it would not have to stand in line with other creditors of the contractor if in due course it is

established that the contractor owes money to it. Conversely, if the contractor is entitled to the

money at this stage, it should be paid to it now, and later disputes between the parties will proceed

as they would have proceeded if the money had been paid to it when it was admittedly due. The

fact that the employer might subsequently suffer rateably with other creditors of the contractor in

the event of the contractor's insolvency is not to the point. If the contractor shows a present

entitlement vis a vis the employer, the employer is not to be given an advantage in relation to other

unsecured creditors through the indulgence of the court in preserving a fund for its benefit.

10                   In short if either party could show a present entitlement to that fund then it should be given

to that party now. Conversely if neither party can show such an entitlement, it would be a proper

exercise of discretion to keep the money in court, on the footing that it is not yet known which of

these parties will be owed money by the other, and therefore it is convenient to keep the money in

court until the outcome is known. The primary question is one of entitlement[4].

[4]            cf Caboolture Park Shopping Centre Pty Ltd v White Industries (Qld) Pty Ltd (1989) 90 ALR 589, 592-593; Hydronic Industries Pty Ltd (In Liq) v Taylor [1992] 2 Qd R 116, (1991) 5 ACSR 202.

11                   The difficulty in the present case arises from the possibility of different entitlements emerging

as between these parties at different times. The contract is a lump sum building contract with

provision for progress payments, and, prior to the time of payment of money into court by the

employer, the contractor was entitled through the issuance of appropriate certificates to payment

of a greater amount than the sums in respect of which the subcontractor had given notices of claims

of charge. Indeed amounts were specifically kept back by the employer for this purpose after the

employer received the subcontractor's notices. After the payment of these amounts into court,

claims have been made by the employer of damages of approximately $200,000.00 by reason of

breaches of contract and the termination by the employer of the contract on 2 May 1997 for the

contractor's breach. The employer has purported to set off such damages against any entitlement

under the progress certificates and further contends that in the light of subsequent events the provisional entitlement to payment has disappeared by reason of the non-completion of the lump

sum contract.

12                   It can thus be seen that arguable issues exist between these two parties and that it is

impossible at this stage to tell what the ultimate entitlements may be. At the same time, on the

undisputed evidence the contractor was entitled to receive the money at the time when it was paid

into court.

13                   It becomes necessary then to examine these facts in the light of the Subcontractors'

Charges Act.

14                   Upon receipt of a notice of claim of charge from the subcontractor, an employer may have

to make a difficult judgment not only with respect to what is then payable to the contractor but what

will become payable to a contractor. That is not a promising start for a submission that the act of

payment of money into court amounts to an irrevocable concession that money is or will become

payable to the contractor. Further, the employer will usually have no real knowledge whether the

subcontractor's claim against the contractor is overstated or even viable. The obvious intent of the

legislation is to require that money be retained by the employer or superior contractor so that it does

not reach the hands of the contractor by whom the money is payable to the subcontractor. This is

the initial means of securing of the subcontractor's position while entitlements are determined. The

Act is drawn to impose strict time limits to the end that quick determination of claims will occur so

that claimants will not be held out of their entitlements for an undue period. However the intended

beneficiaries of the legislation are subcontractors, the object being that they will not be hurt by

insolvency further up the line.

15 The primary position, protection of the subcontractor, has been achieved in the present case
and there remains a dispute between the employer and the contractor as to the balance of a

payment that, in hindsight, can be seen to have been excessive. It is true that to the extent of the

excess such monies should have been paid to the contractor by that time anyway, but the fact is that

they were not. I can find nothing directly or indirectly in the Act which gives to the contractor in this

situation an entitlement to the balance, or which deprives an over-paying employer from reasserting

a claim to excess monies of which the court has become the custodian.

16                   In my view the position of the contractor can only be maintained if the initial payment is

regarded as an irrevocable concession that those monies belong to the contractor subject only to

the charge in favour of the subcontractor. Some support might be found for that submission if

s11(6) is regarded as conferring a total discharge in favour of the employer in respect of claims

against it by the contractor or the subcontractor. However that subsection does not say so

expressly. It is limited to a discharge "of all further liability in respect of the amount paid and the

costs of any proceeding". While a different view is open, I would interpret the "liability in respect

of the amount paid" to be a reference back to s11(2) which provides that upon failure to retain the

appropriate amount the recipient of the notice "shall be personally liable to pay to the subcontractor

the amount of the claim."

17                   In the end, despite the able argument of Mr Keim, I am unable to conclude that the payment

into court was a relinquishment of future rights in relation to that money on the part of the employer.

The initial obligation created by the giving of a notice of claim of charge was an obligation to retain

money, and the act of payment into court was an authorised means of discharging that obligation.

When this is considered along with the fact that a retained fund (and in turn money in court) is provided for the benefit of the subcontractor giving the notice[5], it is difficult to find any particular

[5]            Re Radair Pty Ltd [1998] 2 Qd R 539, 540-541, 547.

interest conferred upon the contractor that could be regarded as an entitlement in specie to such

money. In the circumstances I conclude that neither party has a present entitlement to receive this

particular money. The contractor's argument that "if the notice of charge had not been delivered,

the money would have been paid to the contractor and available to it to use in its ordinary business

activities" is not persuasive, because a notice of charge was given, and the money was lawfully

diverted from that consequence.

18                   As earlier indicated, in the absence of any sufficient indication of entitlement to the monies

in court, discretionary considerations favour its retention until the final rights of these two parties are

established.

19                   The appeal should be dismissed with costs.