Hill v Dujmovic - [2013] SADC 146

District Court of South Australia
(Civil)
HILL v DUJMOVIC & ANOR
[2013] SADC 146
Judgment of His Honour Judge Tilmouth (ex tempore)
1 November 2013
INDUSTRIAL LAW - SOUTH AUSTRALIA - REGULATION OF PARTICULAR MATTERS UNDER PARTICULAR STATUTES - WORKMEN'S LIENS - ENFORCEMENT
INDUSTRIAL LAW - SOUTH AUSTRALIA - REGULATION OF PARTICULAR MATTERS UNDER PARTICULAR STATUTES - WORKMEN'S LIENS - ENTITLEMENT TO
Application to remove registered Worker's Lien refused on the merits.
Worker's Liens Act 1893 ss 4, 9, 10 and 32, referred to.

HILL v DUJMOVIC & ANOR
[2013] SADC 146
The issue

The plaintiff L D Hill Pty Ltd, holds a lien over the property situated at 100-102 Tapleys Hill Road, Royal Park, for building work it undertook by way of an extension to the premises. The defendants are the owners of the property. In an interlocutory application now before the court, they seek an order removing the lien to enable them to sell it.
The facts
In early 2009 the plaintiff tendered for proposed extensions to a business, Austria Meats Pty Ltd, situated on the subject land, at a price of just over $1 million. In early February a contract was executed by the plaintiff and the defendants to perform the works for $1.142 million, although it should be noted that the defendants deny an intention to enter binding contractual relations on their part. Between late January 2009 and early February 2010 invoices were progressively rendered totalling $1.13 million. The defendants made payments to the plaintiff thereon totalling $995,770.78 between February 2009 and early July 2012. Some $134,500 or thereabouts is alleged to remain outstanding.
On about 11 June 2013, the plaintiff served a Notice of Demand on the defendants for payment of the outstanding sum. The above contract provided for a lien over the property for monies due thereunder and a statutory lien arose under s 4 of the Worker's Liens Act 1893 (SA).Pursuant to s 10(1) thereof, the plaintiff obtained registration of the lien at the Lands Titles Office on 25 June 2013. That section of the Worker's Liens Act provides:
Part 2—Registration and discharge of liens
10—Lien to be registered
(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.
In the meantime the defendants contracted for the sale of the property at a price of $650,000, due for settlement on 31 October 2013. Hence they apply to remove the lien to enable the sale to proceed.
Further facts and issues
This ostensibly benign and simple statement of the facts rather obscures an underlying complexity touching the very heart of the relationship between the parties. The purchaser is the de facto partner of at least eight years standing of the second defendant, or otherwise has a close business relationship with her. She happens to be the sister of Mr Hill, a Director of the plaintiff. Relations between them have soured and grown quite acrimonious.
The property is subject to a registered mortgage to BankWest which, as of 28 October 2013, was owed just over $645,000 under the mortgage, now transferred to the Commonwealth Bank of Australia. Material submitted to the court demonstrates that it has served a Notice of Breach and has expressed an intention to exercise the rights of power of sale under the mortgage and of its intention to commence action to enable it to sell the property as mortgagee in possession.
It follows at first sight that the sale of the property for $650,000 is hardly likely to yield very much if anything by way of residual proceeds, so as to satisfy the plaintiff’s lien, given that the lien is subject to the mortgagee under s 9 of the Worker's Liens Act. What is more, should the mortgagee sale proceed, it is more than likely to realise even less than the current sale price. Either way, retaining the lien appears, on the basis of these bare facts, to be a futile exercise, on any view.
The defendants’ position
There is evidence before the Court by way of rate notices suggesting that the sale price is within the bounds of proper market value. There is also evidence by way of affidavit from a land agent who deposes to the fact that sale of the property proceeded by way of public auction, drawing a highest bid of $525,000. Subsequent negotiations with the highest bidder increased the offer to $650,000.
Furthermore the solicitors for BankWest have expressed the not unreasonable view that should a foreclosure sale proceed, there may well be a ‘small shortfall which will need to be paid to the bank at settlement’. Hence the defendants contend that to do other than remove the lien would be pointless and make no commercial sense. Expressed in another way, their case is that it is entirely appropriate to remove the lien because of prejudice to them within the meaning of s 32 of the Worker’s Liens Act, which provides:
32 - Claim or registration may be cancelled
Any person alleging that he is prejudicially affected by a claim, lien, or charge, or by registration under this Act, may at any time apply to the court to have such claim or registration cancelled or the effect thereof modified, and such order may be made as may be deemed just.
They submit the fact of the matter remains that the bank is merely enforcing its perfectly legitimate legal right to sell and if it did, they would be prejudiced in as much as a lesser sale price is likely to be thereby realised, thus causing them loss.
The plaintiff’s position
The plaintiff contends that the proposed sale is deeply suspicious. In the first place it does not appear to be at arm’s length. Secondly, associated with the sale and purchase agreement is a proposed lease from the defendant vendors to Austria Meats Pty Ltd which, as noted earlier, is located on the subject property. As it happens, the defendants are the sole Directors of the Company. Thirdly, this lease contains an arrangement by way of a special condition effectively granting the lessee, Austria Meats Pty Ltd, an option to purchase the property. Fourth, no evidence was put before the Court to explain the circumstances which bring about the situation in which BankWest proposes to foreclose for default under the mortgage. Mr Hill indicates through his counsel that he believes the defendants have the means to satisfy the mortgage, but there is no direct or circumstantial evidence to support that contention. Finally, the plaintiff has produced material suggesting the current market value of the property is in the order of $1.2 million, that is to say nearly double the contract price. That this figure is closer to the true market value, obtains collateral support from the fact that uncontested improvements were made to it in the order of $1 million, as well as from earlier valuations of the property commissioned by Austria Meats Pty Ltd.
Consideration of the merits
There is strong reason to suppose, based on the material that was submitted to the Court, that there is a serious issue at stake, namely whether the proposed sale is a colourable transaction designed to defeat the enforcement of the lien held by the plaintiff. It is plainly not one at arm’s length. Quite apart from that consideration, there is an uncanny coincidence between the sale price and the monies outstanding under the mortgage. Just how the default came about remains mysteriously unexplained. The current proposal makes little commercial sense unless it is seen, prima facie speaking, as a scheme designed to pre-empt the lien, whilst preserving to the defendants the option to resume effective control over the property. Given the recent valuation, there is sound reason to expect the plaintiff might recover a considerable and not insubstantial sum by way of the proceeds of sale, howsoever sold.
Conclusion and orders
The Court is driven to the conclusion that there is a seriously arguable case that the proposed sale of the property is no more than a colourable sham designed to defeat the plaintiff’s interests under the lien. There is very good reason to think that retaining the lien would not be futile and that there is a significant chance of recovery available to it.
The application to remove the lien is therefore refused. There is no reason to make an order other than that the plaintiff (respondent) is entitled to the usual order for costs on a party/party basis of and incidental to the interlocutory application, in accordance with 6 DCR 263(1) of the District Court Civil Rules 2006.