Lumbers & Anor v W Cook Builders Pty Ltd (in liquidation)
[2008] HCATrans 96
[2008] HCATrans 096
IN THE HIGH COURT OF AUSTRALIA
Office of the Registry
Adelaide No A39 of 2007
B e t w e e n -
MATTHEW LUMBERS
First Appellant
WARWICK LUMBERS
Second Appellant
and
W COOK BUILDERS PTY LTD (IN LIQUIDATION)
Respondent
GLEESON CJ
GUMMOW J
HAYNE J
CRENNAN J
KIEFEL J
TRANSCRIPT OF PROCEEDINGS
AT CANBERRA ON WEDNESDAY, 27 FEBRUARY 2008, AT 10.20 AM
(Continued from 26/2/08)
Copyright in the High Court of Australia
GLEESON CJ: Yes, Mr Reynolds.
MR REYNOLDS: Thank you, your Honour. At various stages yesterday I referred to the decision of the Court of Appeal of the United Kingdom in Craven-Ellis v Canons Ltd [1936] 2 KB 403. Your Honours will recall that I referred to a footnote by Professor Treitel suggesting that the decision in Boulton v Jones may have been different, in effect, if reference had been made to Craven-Ellis v Canons.
I would like to look at that decision briefly. It is a decision which is usefully discussed in a book by P D Maddaugh and J D McCamus, The Law of Restitution, which is a Canadian work, in particular at pages 525 through to 529. Those are pages to which we were referred by the Court prior to the matter coming on for hearing. Your Honours will see from the headnote that the plaintiff was appointed managing director of a company by an agreement:
By the articles of association of the company each director was required to obtain his qualification shares within two months -
That did not occur, so the contract was not technically binding on the company. The plaintiff then did work for the company and then sought to recover the remuneration on the agreement, and that was not successful, or alternatively on the basis of the quantum meruit.
Now, the leading judgment is by Lord Justice Greer and he starts at page 409 at about point 3, noting that:
The company, having had the full benefit of these services, decline to pay . . . Their defence to the action is a purely technical defence . . . and the company, would be in the position of having received and accepted valuable services and refusing, for purely technical reasons, to pay for them.
His Lordship then discusses that issue over the next three pages – from pages 410 to 412, which is useful, I suggest, relevantly, for at least two purposes. The first is that his Lordship discusses the notion of acceptance, and I will come to that in a moment. Second of all, he looks at the issue of where one party to the arrangement proceeds on a basis which turns out to be incorrect.
At page 410 at about point 4 his Lordship talks about an implied contract arising out of acceptance of work done upon an express request which turns out to be no request at all. He refers further down the page to an inference of a promise by a person accepting services or goods to pay on the basis of a quantum meruit. He then draws what I submit is an important distinction which I tried to draw yesterday and which is drawn by Sir Owen Dixon in the case of Steele v Tardiani. That is the distinction between what is sometimes called a quantum meruit, but may really be a contract implied from fact and, on the other hand, the imposition of a remedy as a matter of law. His Lordship says this at about point 7:
if the inference of a promise to pay on a quantum meruit basis were an inference of fact based on the acceptance of the services or of the goods delivered ‑
certain consequences would follow -
but in my judgment the inference is not one of fact, but is an inference which a rule of law imposes on the parties where work has been done or goods have been delivered under what purports to be a binding contract, but is not so in fact.
Over the page, page 411, at about point 6:
the implied obligation to pay is an obligation imposed by law, and not an inference of fact, arising from the performance and acceptance of services . . . It was impossible to say as a matter of logical inference from the facts that by accepting the advantage of the plaintiff’s work they had promised to pay him a reasonable sum therefore. Both parties assumed that there was a contract between them, and the acceptance of the work by the defendants could not in fact give rise to the inference of a promise to pay the reasonable value. For these reasons this case seems to me to show that the obligation is one which is imposed by law in all cases where the acts are purported to be done on notice the faith of an agreement which is supposed to be but is not a binding contract between the parties.
Further down the page at 412:
I accordingly think that the defendants must pay on the basis of a quantum meruit ‑ ‑ ‑
HAYNE J: Did his Lordship at any point deal with the illegality point that was argued?
MR REYNOLDS: I do not believe so, your Honour.
HAYNE J: It seemed to be front and centre in the argument as reported, but it vanishes.
GUMMOW J: There is a later decision in House of Lords in Guinness v Saunders [1990] 2 AC 663. It attracted a lot of comment at the time, I think.
MR REYNOLDS: Yes, it did, and I am aware that it is discussed in that case, but that is one of a number of things that I have not got to. The decision was referred to by Justice Brennan in Pavey & Matthews Pty Ltd v Paul. At the top of page 239 there is authority for the proposition that:
there is no difficulty in the way of recovery on a quasi‑contractual quantum meruit where the work is done in performance of what is believed to be, but what is not, a valid contract ‑
I would interpolate, or valid assignment.
GLEESON CJ: What was the point of Justice Brennan’s dissent in Pavey & Matthews? What was the point of departure?
MR REYNOLDS: My recollection is, and it may be incorrect, that his Honour felt that the section covered not only express contracts but also implied contracts of whatever sort.
GLEESON CJ: Question of construction of the section.
MR REYNOLDS: Yes, but again, arcing back into the basis for a quantum meruit claim. Now, this decision in Craven-Ellis v Canons was also referred to by Chief Justice Jordan in Horton v Jones (No 2) (1939) 39 SR (NSW) 305, particularly at – perhaps if I could read from the bottom of page 319?
GUMMOW J: What was the occasion for Horton v Jones (No 2) as distinct from (No 1)?
MR REYNOLDS: Well, this was a further amendment of pleadings, and the issue was whether or not the amendment, if it had been in the original pleading, would have been struck out on the ground there was no cause of action. That is my recollection, your Honour. But there is a brief discussion really at the top of 320 that:
if services are in fact afterwards rendered and accepted pursuant to the arrangement in circumstances which indicate that it is not intended by the parties that they are to be gratuitous –
again, that comes up –
the law implies a contract of employment . . . If persons attempt to contract for services by a purported contract which is for some reason void in law, and services are rendered and accepted under the void contract, the law imposes on the party who has had the benefit of the services an obligation to pay a quantum meruit. This obligation is imposed by law, and does not depend on an inference of an implied promise -
Your Honours will see, of course, why we like these passages because they deal first of all with the notion of acceptance in a similar situation to the present, and they also emphasise the importance of the basis upon which the provider of services is acting. Now, it may not only be the basis upon which the provider of the services is acting. In this case, there is also a mistake by the defendant as to who is performing the work. So, on one view, your Honours are dealing with what might be described as a cross‑purposes situation between the two parties to this appeal.
GLEESON CJ: There is no mistake by the plaintiff though, is there?
MR REYNOLDS: That is one way of putting what I am trying to get at, your Honour. If you look at the basis upon which he was acting, Mr Cook – and this is the evidence we went to yesterday about the changeover and his belief as to the nature of the obligation or responsibility – that this builder, who obviously is not a lawyer and who is not sophisticated, thinks that, put in colloquial terms, this is all okay what is happening here.
GLEESON CJ: Mistakes of law would not matter, would they? The kind of mistake that would be relevant would be a mistake of fact, would it not?
MR REYNOLDS: I submit that, for present purposes, a mistake of law would be sufficient.
GLEESON CJ: Whose mistake was it and what was the mistake?
MR REYNOLDS: The mistake is the belief of my client, per medium of Mr Cook that he was – the actual evidence talks about whether there was an obligation or responsibility which Builders had direct to Lumbers. One can read that a number of ways, or a lawyer would read that a number of ways. One is that there had been some form of effective assignment, another is that there had been a form of novation, another is that there is no difficulty with, if there is a contract between A and B, with C performing the contract if it is one of the companies in the same group.
I have to confess it is difficult for me to state with the sort of precision your Honour the Chief Justice would no doubt like what exactly the misapprehension is, but, I submit, that does not change the fact that there was a misapprehension about all this. I confess, I cannot be overly precise about it but there is evidence, which I took your Honours to yesterday, about Mr Cook’s belief as to the obligations and responsibilities of Builders direct to Lumbers which was not the subject of any challenge or cross‑examination.
GLEESON CJ: We know that there was a claim made by Builders against Sons for the price of this work that was frustrated in some way by a stay of proceedings. Because that claim never proceeded, we do not know whether, for example, Builders charged, that is, invoiced Sons for this work as it was being done, do we?
MR REYNOLDS: The evidence is, as I understand it either positively or negatively, that there were no such invoices by Builders to Sons. What happened, and the evidence was, is that Mr McAdam simply telephoned Mr Lumbers and said “We’re owed X dollars” and that was then paid.
GLEESON CJ: But what do we know about the claim, except that there was a claim which was stayed? What do we know about the claim by Builders against Sons?
MR REYNOLDS: We know that there is a finding by the trial judge in a couple of places, one I took your Honours to yesterday, that there was a proper concession by counsel for my client that there was no subcontract.
GLEESON CJ: Well, let me ask it this way. Do we know as a matter of historical fact, as a matter of the sequence of events, that the first entity that Builders looked to for payment of this amount was not the Lumbers, it was Sons?
MR REYNOLDS: Your Honour, my understanding of the evidence is that the first party to whom Builders looked for payment was the Lumbers by sending this demand under the Lien Act.
GLEESON CJ: How many years after the work had been completed?
MR REYNOLDS: It is about nine months, I think. I do not know the precise time, your Honour, but that is important because on one view that shows that in the mind of Builders it is the Lumbers that owe the money, rather than ‑ ‑ ‑
GLEESON CJ: A major problem about the deficiencies in the evidence in this case is that although we know that at some stage Builders asserted against Sons that Builders was entitled to be paid by Sons and took legal proceedings to enforce that entitlement, we do not know what was going on between Builders and Sons before the matter came to litigation, do we?
MR REYNOLDS: I think that is in general terms correct, your Honour, but Mr Cook was not cross-examined on this evidence and perhaps if we just explore what would have happened if that issue had been raised with him, that is, the statement of claim was filed in the name of Builders asserting a contract between Builders and Sons and it was then put to him, “Well, you did not really believe that Lumbers owed Builders the obligation, but rather you thought Sons owed Builders an obligation, which is why you brought the claim inter alios against Sons.
GLEESON CJ: That would have been a fairly relaxed form of cross‑examination. Perhaps counsel, instead of asking him what he believed about whom was liable to whom, might have asked him whether Builders ever sent an invoice.
CRENNAN J: Mr Reynolds, 486, paragraph 21 of the primary judgment suggests that the building works were completed in April 1995 and no invoices were sent to them nor was any claim made against them until 8 November 1999.
MR REYNOLDS: Yes, my learned juniors have given me a note that there are four years, late 1995 to late 1999. I am sorry, Chief Justice, I did not hear the conclusion of what you said to me a moment ago.
GLEESON CJ: I suppose there was delay because of a liquidation and I can understand that, but does the evidence simply show that the liquidator was making all possible claims or does the evidence indicate one way or the other what the state of accounts of Builders and or Sons was in relation to this matter?
MR REYNOLDS: I am not sure about the state of the accounts, your Honour.
HAYNE J: Well, page 496, paragraphs 55 and 56. We know at least what appears there. We know also what appears at 494, paragraphs 47 and 48 and what lies between, in which there are intercompany transactions recorded in the books of account of both entities showing dealings between Builders and Sons. Now, what is your submission about the consequence that should be understood as following from that evidence, ambiguous as it is, of the intercompany transactions?
MR REYNOLDS: That there was no subcontract between Sons and Builders at all, and we will be going to all of the evidence of that in due course.
HAYNE J: Can I say at once that that seems to me to require you to confront what appears at page 495 at the head of the page, the balance of paragraph 49, and perhaps paragraph 50, but deal with that at whatever point in your submissions appears to you to be best, Mr Reynolds.
MR REYNOLDS: Can I perhaps return to that, your Honour, but can I underline paragraph 50, that is, the concession by the Lumbers that the payments were made by Builders.
HAYNE J: Yes, Builders were paying the subbies.
MR REYNOLDS: Yes. Part of the difficulty in one sense about dealing with this issue is that it has to be taken, I concede, in conjunction with all of the evidence as to whether or not there was in fact a subcontract, which I am dealing with a little bit later on. Can I give your Honours a copy ‑ ‑ ‑
GUMMOW J: Have you left Craven-Ellis?
MR REYNOLDS: Pretty much, your Honour.
GUMMOW J: The point I was trying to recall, which comes from Guinness v Saunders (1990) 2 AC 663 at 693 is this, and it is a reflection in a way of what was said in argument in Craven-Ellis by the respondents at 407. If the plaintiff had been validly appointed as a director, the plaintiff would have had difficulty in recovering because he would have been profiting from his office.
MR REYNOLDS: Yes.
GUMMOW J: He is not appointed as director and he could claim a quantum meruit. It all seems pretty peculiar.
MR REYNOLDS: That may be a further difficulty with the decision.
GUMMOW J: That is what was upsetting the respondent. They were saying this person in effect is profiting from his illegality, to use that word.
MR REYNOLDS: That may be a further difficulty with the specific result in that case but in terms of general principle, that is, where services are provided and there are misapprehensions by the parties as to the circumstances and matters of either fact or law and I submit that may ground a restitutionary claim.
Now, can I give to your Honours just on that point a copy of where the – and I will not do any more than that – this is dealt with in the latest Restatement of the Law of Restitution, and in particular can I draw your Honours’ attention to paragraph h on page 6, and also to a lesser extent to paragraph g above it?
GLEESON CJ: Is this on the theory that Builders made a mistake?
MR REYNOLDS: Yes, in effect.
GLEESON CJ: What was Builders’ mistake?
MR REYNOLDS: Your Honour did raise this with me before.
GLEESON CJ: Yes, but you are going to answer me in terms of Mr Cook.
MR REYNOLDS: I am.
GLEESON CJ: I am directing the question to Builders. What was Builders’ mistake, your client’s mistake, which now has its own liquidator and its own creditors?
MR REYNOLDS: The relevant actor on behalf of that company, I submit, is Mr Cook.
GLEESON CJ: Joseph Cook?
MR REYNOLDS: Mr Jeffrey Cook.
GLEESON CJ: Jeffrey Cook. Mr Malcolm Cook is the one who said, “Take your bond and write that nothing is owing”?
MR REYNOLDS: That is right, as an executive of Sons. But I submit that it is sufficient for our purposes to show this misapprehension on the part of Mr Cook as the relevant agent and we do not know, I concede, exactly what his misapprehension is, that is, in juristic terms, whether it is that he believes that there has been an assignment or whether he believes that there is a new contract or that there is simply no problem with his client being able to claim thereafter against the Lumbers.
HAYNE J: So the proposition is it is enough for the plaintiff to show that the witness was confused.
MR REYNOLDS: Your Honour, that would not be enough. I concede that.
GLEESON CJ: But he might have had either of two quite different beliefs of fact. He might have believed – I am giving some resistance, as you might have seen, to relevance of his belief about the law – as a matter of fact that Mr McAdam had had a conversation with Mr Lumbers in the course of which Mr McAdam had said, “Builders will now take over this work” and Lumbers had said, “That is right. I understand and agree to that”. Or he might have had a belief that, as between Builders and Sons, Builders would perform this work and Sons would pay Builders for it.
MR REYNOLDS: That, I would submit, is inconsistent with the evidence I took your Honours to yesterday where he talks about obligation and responsibility, that is, Lumbers has the obligation to pay Builders. In other words, Builders looks to Lumbers, Builders does not look to Sons for payment. I have made some concessions about this evidence but your Honours will have seen that this passage includes a statement by counsel for my client that this evidence went to the issue of mistake. So we are in a situation where there is no doubt that the relevance of it was raised on that question. The precise nature of the mistake is, I concede, not clear but counsel for the Lumbers chose not to cross‑examine on this point.
GLEESON CJ: Is there any finding of fact by either the primary judge or by the Court of Appeal as to the mistake?
MR REYNOLDS: I have to take your Honours to that because there is a finding by the trial judge at page 505 at paragraph 103, second‑last sentence, that there was “no evidence at all as to the allegedly mistaken understanding of Builders”. That is reflected in the judgment of the Full Court at page 520 about five lines down where there is a notation that the trial judge concluded that there was no evidence of a mistaken understanding by Builders. While I am dealing with that issue, I should also say that, as I understand it, no submission was put to either the trial judge or the Full Court that there was this misapprehension and certainly no submission as to precisely what the misapprehension was. So those are, I concede, difficulties at some level for my client over and above the state of the evidence.
Your Honours are in a position where the relevance of the evidence was floated. It was noted to be relevant to a mistake. The evidence was given in the form your Honours have seen. There was no cross‑examination on it and yet the issue seems to have been let go at all stages prior to the matter being raised in this Court. But I submit that it would be open to your Honours to find that there was some misapprehension, notwithstanding the difficulties to which I have adverted.
KIEFEL J: Mr Reynolds, could you remind me just what proof there was that Builders actually did the work as distinct from the Sons?
MR REYNOLDS: There were several findings to that effect and I do not understand them to be challenged.
KIEFEL J: Could I just point to paragraph 103 of the trial judge’s reasons, line 3, which is the paragraph you took us to just before, which says “which covered the work said to have been undertaken by Builders” which does not appear to be a complete acceptance. Are there some clear findings by the trial judge which put that beyond doubt?
MR REYNOLDS: There are certainly some clear findings and perhaps I can ask one of my learned juniors to collect those for you and I can give them to your Honour in due course. But, importantly, that has not been challenged, as I understand it, in this case, that there have been payments made by Builders and that the work has been done by Builders.
KIEFEL J: No, well, the payment to subcontractors is one thing.
MR REYNOLDS: In particular, your Honours do not have this, there was no dispute – and this made clear in the opening – that the subcontractors were, in fact, paid by Builders. That was made clear on the transcript at page 13 at line 12. If your Honours would like that, I can have that forwarded to your Honours.
GLEESON CJ: That is a good idea, thank you.
MR REYNOLDS: Before I move to the next issue, can I just give your Honours a reference that I said I would give your Honours yesterday to the decision of Justice Rogers in Qintex Australia Finance Ltd v Schroders Australia Ltd (1990) 3 ACSR 267. There are two relevant passages. One is page 268 at about point 6 and following and the other is at page 269 at about lines 15 to 40.
I would like to move now to the next issue of the head contract and what its terms were. We have made a summary of the findings that have been made on that issue in the courts below and perhaps if I can hand that up to your Honours now. This shows how my client’s claim on damages has been found by the courts below. Essentially, all of the money paid to subcontractors both by Builders and Lumbers produces a figure of $928,873 and my client is entitled in item 6 to 10 per cent of that, which is $92,873. He is also entitled to the shortfall on the amounts that it has paid out to subcontractors, which is $181,904.
The reason that I give that to your Honours now is that I want to suggest that the terms of the contract, that is, the head contract between Lumbers and Sons, as established by the evidence and the findings of the trial judge in effect are a mirror image of that particular claim or, if not a mirror image, are substantially identical.
There may not be much dispute between my learned friend and I on this, except for one matter but can I take your Honours to the pleading which is in the appeal book at pages 5 to 9. The critical portion is at page 6 at paragraph 10(d)(i) and (ii) where the cost element in this cost‑plus arrangement is the cost charged to all the subcontractors and the cost charged for the supply of all the materials of the work in paragraphs (i) and (ii), which were the subject of admissions by the defendant in its defence at page 23 at paragraph 3.
I think my learned friend in his written submission said that the only issue in dispute was the question of the plus element of the cost, that is, what is the fee, how is that worked out and that is dealt with in the trial judge’s judgment at about pages 497 and following where he is dealing here with the contract. He only deals with restitution at the end of the judgment. At paragraph 60 on page 497 it is noted:
Warwick Lumbers admitted that he expected to pay a reasonable supervision fee on the total cost of the work.
There is reference at paragraph 61 to Mr Dalby’s evidence being accepted, in paragraph 62 that there be a fee of 7 per cent of all of the project costs and your Honours will see at paragraph 64 that he says:
In my opinion a total fee of $92,887 as claimed by the plaintiff and representing 10% of the project costs is a reasonable fee –
and your Honours can see at paragraph 65 how Builders formulated its claim. So, relevantly, I submit that that makes it clear what the head contract was and the only issue apparently, as I understand it, between my learned friend and me as to the terms of this contract is whether there was one additional term. The additional term which my learned friend formulated yesterday – I do not have the exact words – was that it was a matter for Mr McAdam to assess or certify the amount of the claim and that somehow is an extra term.
The difficulty is that, despite the very detailed pleading in this matter, that is not a matter that has ever been the subject of any argument previously. The defendant formulated very precisely in its defence, as your Honours will see at pages 23 and 24, what the various terms were and it did not include that nor, we submit, is that established by the evidence.
I will come back to that in due course. In the end, the existence of that head contract is not much of an issue but the reason that I need to set the ground work in relation to its terms is that, if that head contract is substantially identical to the claim that we had in restitution, then it is possible to demonstrate a windfall on the part of the Lumbers, that is, they have never paid money which on the contract, the head contract, they were obliged to pay to Sons. That is one of the points that I wish to raise on the question of, even assuming there is a subcontract, whether or not my client is entitled to a claim in restitution.
Now, the next issue I would like to deal with is whether or not there was in fact a subcontract between Sons and Builders. On that issue I need to take your Honours first to the trial judge, and this is at paragraph 97 of his Honour’s judgment, where it is noted that it was properly conceded that there was no subcontract claim. Also, his Honour makes the same point at paragraph 15 on page 484 in the second sentence “counsel quite properly conceded that Builders did not claim as a sub-contractor”.
The majority of the Full Court dealt with this issue at paragraphs 44 to 47, I concede, obliquely but we submit that when you look at the findings in paragraphs 45 to 47 that they are inconsistent with the notion of a subcontract existing. If there was a subcontract, then Sons would have performed its contract per medium of Builders doing the work and that is not ‑ ‑ ‑
GLEESON CJ: Could I just seek to understand a little better than I do at the moment the meaning of the concession that is recorded at the top of page 504? Builders is conceding that it does not claim as a subcontractor.
MR REYNOLDS: That is in the context – and this is perhaps what is concerning your Honour – you will see the heading on page 503 above paragraph 94?
GLEESON CJ: Yes.
MR REYNOLDS: That is the context of this.
GLEESON CJ: I understand that, but that is a concession, at least in terms as it is recorded. It is a concession about the character of a claim that is being made by Builders.
MR REYNOLDS: Your Honour, I concede that this is not what one might call a perfect finding on this point. I am taking your Honours to the consideration of this issue both by the trial judge ‑ ‑ ‑
GLEESON CJ: But you are not relying on that, are you? You are not relying on that concession to deny the contention by the other side that Builders was a subcontractor?
MR REYNOLDS: Only to a small extent and that is that the insertion of the word “properly” does tend to indicate that the trial judge was of the view that there was no subcontract.
GLEESON CJ: But let it be assumed that from beginning to end Builders asserted that it was not a subcontractor, what does that have to do with the contention by Builders’ opponent that Builders was a subcontractor?
MR REYNOLDS: One of the issues in this case – and this is an error we made in our submissions – is that it was submitted on behalf of the Lumbers that there was a subcontract and that was an issue both at first instance and in the Full Court. Now, it is in the context of an assertion at the trial by Lumbers that there was a subcontract and a concession by my client that there was not that the trial judge says what he says at paragraphs 97 and 15. Your Honour, I am not trying to turn this into some massive point in my favour but I am bound to take your Honours to what is said about these issues below and nor am I seeking to make some huge gain on the basis of the word “properly”.
GLEESON CJ: I just wanted to be satisfied that it would not be inconsistent with the way in which the proceedings were conducted by the Lumbers to conclude, as Justice Vanstone apparently concluded, that the case was one of a head contract between the Lumbers and Sons and a subcontract between Sons and Builders.
MR REYNOLDS: No, but let me concede – and, as I have said, there was a checking error in our written submissions on this point – that submission was advanced by the Lumbers at the trial and in the Full Court. All I am doing, perhaps too ponderously, is taking your Honours to the relevant references on the issue in the judgments below which I concede do not deal with the issue in any developed way at all.
Justice Vanstone deals with the matter at paragraphs 127 to 128 but at no stage makes any finding as to what the terms of the subcontract were. There were findings that the assignment case was not available because the evidence was too vague and that is referred to at page 486 by the trial judge saying the words were quite vague and the conclusion on the assignment case by the trial judge is at page 499 at paragraphs 68 to 69. There is also a statement at about line 8 that there is a matter which is inconsistent with the role of Builders as a subcontractor and that Sons in doing its joinery work is itself merely another subcontractor of Builders. At paragraph 69 at the end his Honour says:
I simply do not know and will not speculate –
on the basis of the evidence. At paragraph 92 says that:
I am left in a state of uncertainty as to whether there was an intention to assign the benefit of the contract and, accordingly, whether there was any assignment at all. [Importantly] There was no written agreement to assign and no minutes of meeting . . . On the state of the evidence I will not speculate and cannot be satisfied that there was an equitable assignment, let alone an effective assignment.
So what is happening here is, his Honour is looking at these dealings not to determine whether there is a subcontract, although there are remarks made saying that there did not appear to be, but saying it was all too vague for his Honour to determine that there was an assignment. Similar statements are made ‑ ‑ ‑
HAYNE J: Can I understand where all these statements are said to end up in your contentions? One, do you accept that there was a contract initially between the Sons and Lumbers?
MR REYNOLDS: Yes.
HAYNE J: Two, do you accept that that contract was not assigned to Builders?
MR REYNOLDS: Yes.
HAYNE J: Three, you say Builders is entitled to a quantum meruit against the Lumbers?
MR REYNOLDS: Yes.
HAYNE J: Four, you say Builders was not a subcontractor of Sons?
MR REYNOLDS: Yes.
HAYNE J: Because Builders had no contract with Sons?
MR REYNOLDS: Yes, but also, if I can put this in very general terms, that if there was some contract, it was not in the nature of a subcontract. But the main point is that when you look at the evidence, just as the trial judge below looked at the relevant conversations and pretty much threw his hands in the air and said, “Well, look, this is all way too vague. How can you say anything about this? There is no assignment”, and of course one of the points that I am attempting to make about whether there was a subcontract is that it was all way too vague, just as the trial judge found it was all way too vague to constitute an assignment.
KIEFEL J: It is starting to rather look as if the restitutionary claim is based upon some book entries which is rather why I was interested to know whether you could show that work was actually done. I mean, even the payment for the subcontractors, I do not think, was found to be a direct payment by Builders. It was something that was debited to Builders in the books of account.
MR REYNOLDS: There was a concession that I read out earlier that Builders made the payments to the subcontractors and I do not understand there to be any appeal on that, nor is there any ‑ ‑ ‑
KIEFEL J: Sorry, a concession not by the trial judge?
MR REYNOLDS: No, it was made very early on in the proceedings. There were various findings all the way through in this case that Builders did the work. I do not have them immediately to hand, but I will give your Honours the references in due course, and I do not understand that to be the subject of any appeal.
KIEFEL J: I am not sure about that. I might be quite wrong, but the case seems to have been largely conducted on the basis of proving an assignment. Perhaps these issues get a little lost.
MR REYNOLDS: They may have been, your Honour. It may have been that the defendant, for whatever reason, did not seek to take those two points but, I submit, (a) those points do not seem to have been put below, secondly, there are these findings and, third of all, I do not understand those two points to be the subject of this appeal.
The case which is now put on behalf of the appellant is for the first time formulated in the reply submissions at paragraph 19. We protested in our submissions in reply seeking to know what the terms of this contract were and what the evidence was in support of it. We are given the terms which we are told in paragraph 19 are very simple, but we are not given any evidence and my learned friend has not gone, as I said yesterday, to this evidence or even this aspect of the case in-chief. The three terms are said to be very simple and they are set out in the submissions at paragraph 19 and they are that:
The agreement between Sons and Builders was that the work which Sons had agreed to carry out was, thereafter to be carried out by Builders, Builders would pay Sons the $29k for work done so far and would be entitled to receive from Sons the amount Sons was entitled to receive from Lumbers.
So that apparently is the contract and formulated effectively for the first time in these submissions without any reference to any evidence, notwithstanding our request that that be isolated. In our submissions, respondent’s written submissions, we raise, paragraphs 67 to 80, a whole lot of points in relation to the evidence which we understand to be relevant to this issue, namely, the evidence given by Mr Cook of a conversation he had with Mr McAdam, and that is set out at appeal book pages 126 to 131. Your Honours will see the points that we have made there, 1 to 9, and there has been no response to that at all, or not much, in these submissions by the appellant.
We submit, if your Honours go to those passages at pages 126 to 131, is that there are very grave difficulties in showing the contract as alleged. Your Honours will recall, as I said before, that the trial judge found this all too vague. At the top of page 126 at about line 12 he says that he cannot recall the effect of a conversation that he is asked about. I am afraid I have to go through this in some detail because I do not know how exactly this is put against me. He says at line 12 that he cannot remember. Then over the page at 127 he says at line 6:
you mentioned about changing his companies over.
Then at line 9:
McAdam wanted to put me into a builders company and separate the building organisation from the joinery organisation, keeping the joinery part in W. Cook & Sons and transferring the building operation into W. Cook Builders of which I was the builder still for both companies.
At line 27 there are further observations about a licence. Over the page at 128 at line 16 there is talk about assumptions, reference at line 23 to book entries, at 31 to Mr McAdam being involved in a changeover and at 27 again the word “changeover” is used. At 36 again changeover. At page 129, line 10:
Q.So all building work, including the joinery before the changeover, was done by W. Cook and Sons Pty Ltd.
A.That’s correct.
Q.What change did the changeover affect.
GUMMOW J: The first reference to changeover is in 127, line 8, is it not? Line 7, “McAdam changed from – re‑instigated” itself.
MR REYNOLDS: I am sorry, it is 127, line 8?
GUMMOW J: Yes.
MR REYNOLDS: “McAdam changed from – re‑instigated W. Cook Builders”. But this is a conversation between two gentlemen who are directors of both of these companies, apparently, a discussion about a changeover. Then page 129 at line 14 he says:
A.It only affected – I was already a director of W. Cook Builders. I was a director of W. Cook & Sons and that never altered . . .
Q.After the changeover . . .
A.Yes, the joinery was done by W. Cook and Sons . . .
Q.After the changeover, that building work was done by Builders Pty Ltd.
Then, this is the closest, for what it is worth, that I can find of anything that could be said to be contractual – this is a passage from page 129 at about line 26 through to the following page:
Q.Who had the idea of changeover.
A.McAdam.
Q.Did he raise that with you, the idea of changeover.
A.He told me what the idea was.
Q.When.
A.In the beginning of ’94.
Q.Where were the two of you when he first raised that with you.
A.He walked into my office and told me. He told me and asked me if that was all right.
Q.What did he tell you.
A.He said that ‘We’re going to separate the joinery and the building in that way’.
Q.Did you agree.
A.I agreed, I said, ‘Yes’, I said ‘Okay’. I didn’t question it.
Q.Did he explain to you the reasons for his suggestion.
A.No, other than the separation, the two accounting separations, the joinery and the building accounting separation.
Q.Did he explain to you the consequences of the accounting separation.
A.No.
Q.Did he discuss with you the effect that that change would have on your ownership of the businesses.
A.No, he didn’t.
Q.Did you have an understanding about the effect.
A.I had an understanding that I was going into the ownership of the building part of it, but no understanding as to the difference of ownership of the other parts -
and further down the page about his understanding.
HAYNE J: Before you part from page 130, the answer he gives about “In the books it was W. Cook Builders” might be understood as revealing the nature of the arrangement, might it not?
MR REYNOLDS: I submit that is a lay person analysing ex post facto his understanding of the entries in the books and referring to that.
If you look at this conversation, it is a conversation between two people who are both directors of two companies, as it was put by my learned friends, as I understand it, all the way through this case, about internal management. So these are two directors, both of two companies, talking to each other about what they are going to do in very imprecise terms with these two companies.
HAYNE J: That is the proposition you are presently advancing that the evidence does not disclose the making of any arrangement between Sons and Builders sufficiently certain to admit an enforcement as a contract.
MR REYNOLDS: Yes.
HAYNE J: Do you go the further step, which I think you may have to go, of saying that what subsequently occurred in fact gave Builders no claim of any kind against Sons?
MR REYNOLDS: Relevantly, at the moment, what subsequently occurred does not prove the subcontract between Sons and Builders which my learned friend alleges. I understand your Honour is asking me more than that.
HAYNE J: Indeed. I am asking you in particular whether what subsequently occurred would found a claim by Builders against Sons as on a quantum meruit.
MR REYNOLDS: No. That is my submission; that the requisite elements for a quantum meruit by Builders against Sons are not to be found in these passages. As I said a moment ago, it is a bit like a discussion between directors at a boardroom table who are directors of a group of companies and they are talking about which companies are going to do what. I have made a number of submissions at paragraphs 72 through to 79 of our submissions which my learned friend has not really confronted. In particular, at paragraph 74 there is a difficulty in saying that one of these parties was acting for Sons and the other for Builders; they are both directors of each and as a fallback, even if there was some contract here, it is more likely to be a contract between these two gentlemen as individuals along these lines.
We have these two companies, why do we not look to reorganising them so that Builders does the building work, Sons does the joinery work? One of the parties will become perhaps – we do not know what the shareholdings are to be in this arrangement, which is another aspect of the uncertainty, but if it were the case that they were to be separated out so in effect – and, as I say, it is all too vague – that one of them was to become the sole shareholder of one of the companies and the other was to become the sole shareholder of the other and this is an agreement between the two of them as individuals to separate these companies out and divide the operations of the group in that way, then that, we submit, might be closer to the mark but for the fact that what occurs in this conversation is way too vague, as the trial judge said.
GLEESON CJ: Did anybody ask the Mr Cook who was the witness why Builders did not take out a building licence?
MR REYNOLDS: Yes. My recollection is that he said that he left this to McAdam, raised it with him more than once and that he was angry with McAdam because McAdam did not sort out that issue.
CRENNAN J: It did not need a licence beforehand, I assume?
MR REYNOLDS: No, because it was not conducting building work, as my learned friend said.
GLEESON CJ: This is another aspect of the evidence that is mysterious because of the absence of Mr McAdam.
MR REYNOLDS: Yes.
KIEFEL J: Mr Reynolds, could I just go back to my inquiry earlier. You have said that you rely upon the payments made to subcontractors by Builders as showing its participation in the building.
MR REYNOLDS: Made by Builders to subcontractors, yes.
KIEFEL J: I think in paragraphs 23 and 24 of the second more explicit statement of claim it is pointed out that Sons and Builders operated a common cheque account, but we will put that to one side, and it is said that “In and after March 1994, the building work continued”. It is not said who it was done by.
MR REYNOLDS: That may well be so, your Honour.
KIEFEL J: All I am really trying to ask you is, as matters of proven fact about Builders’ part in this, are you left with the payments to the subcontractors, some made by cheque, some raised in the books of account and that is it in terms of proof?
MR REYNOLDS: Together with the concession there was no issue that ‑ ‑ ‑
KIEFEL J: There is no finding by the trial judge though.
GLEESON CJ: There is one more fact, is there not? Is it not a fact that the evidence shows that Mr Jeffrey Cook commenced to be employed by Builders whereas previously he had been employed by Sons?
MR REYNOLDS: No, that is not my understanding. In fact, my learned friends said something about employment yesterday. My understanding is that everyone was employed by an entity known as Portrush Trades.
GLEESON CJ: Is that an entity or a firm name?
MR REYNOLDS: I think it is a company.
KIEFEL J: It was a management partnership that administered the – but there is a finding by the trial judge at paragraph 49 that the same employees, including Mr Jeffrey Cook, continued with the building work. So that does not really strongly suggest Builders doing the building work as distinct from anyone else.
MR REYNOLDS: It was definitely the same people and that is part of our case, same personnel from go to whoa. So that is why we say, picking up what Lord Justice Greer said ‑ ‑ ‑
KIEFEL J: But if you can only show the extent to which Builders have put themselves out is in the provision of cheques to some subcontractors and having some entries raised in their accounts, to the debit of their accounts, would it not follow that the action most obvious is against Sons for the recovery of those amounts if there is nothing else to connect use to the building itself?
MR REYNOLDS: That is not the way this case has been run, your Honour.
KIEFEL J: I am just looking at the trial judge’s findings.
MR REYNOLDS: One can imagine possibly that points of this kind might have been taken but there was a concession very early on that Builders pay the money to the subcontractors. So that is an issue which has not been agitated at all.
KIEFEL J: There are some findings by the trial judge to that effect about cheques.
MR REYNOLDS: There are also some findings and I am unable on my feet to ‑ ‑ ‑
KIEFEL J: You have not yet told me where it is to be found that Builders did the building work.
MR REYNOLDS: I am being plied with references to the trial judge at paragraphs 55, 56 and 50 and hopefully that may satisfy your Honour’s inquiry.
KIEFEL J: That is about the payments, not the building work.
MR REYNOLDS: Again, I have not understood that to have been in dispute and there are findings, certainly in the Full Court, that the building work was done by Builders.
GLEESON CJ: But related to that inquiry is this; a substantial part of the amount claimed was for supervision.
MR REYNOLDS: Yes, 10 per cent.
GLEESON CJ: Supervision is something that is done by a person with eyes and ears. What is it that shows that it is Builders that is entitled to the payment for that supervision if it is not that the person who is actually doing the looking and listening and measuring and counting was employed by Builders?
MR REYNOLDS: That is Jeffrey Cook who we say is the person that acted as the relevant actor or agent on behalf of Builders. Your Honours are getting into two aspects of the case which, as I said before, I do not understand really to have been much in dispute or in dispute at all.
KIEFEL J: I thought you were opening up the case for us, Mr Reynolds. You have taken us there.
GLEESON CJ: The problem is and it may be that the fact it was not in dispute is an explanation of why there is not clearer evidence about some aspects of the contractual situation. It may be that if there had been a dispute about this, just as it may be that if Sons had been alive and well and vigorously litigating, a lot of the facts would have emerged more clearly. We cannot do anything about that now but at least it is an explanation of why some of the information is so obscure.
MR REYNOLDS: In the end, the evidence was led by my client on this point from Mr Cook to try and prove an assignment of the contract, not, as the trial judge notes, in aid of a claim pursuant to a subcontract that Builders had with Sons. This is all, we submit, very exiguous and unclear evidence and even if my learned friend gets over that, there is certainly no discussion in particular about this project, that much is clear, and it is very difficult to say how this becomes a contract between these two companies. Further, we fall back to the position, as I said before, even if there is a contract, it is far more likely to be the sort of arrangement, or even contract, that two individuals might have about splitting up the companies, one taking control of one, one taking control of the other. Can I give your Honours some ‑ ‑ ‑
GUMMOW J: The reference to Portrush Trades in Mr Cook’s evidence is at appeal book 262. We are left in the dark as to the identity of the partners.
MR REYNOLDS: We are. There is also a reference to Portrush Trades in one of the judgments.
GUMMOW J: Yes, but that refers back to 262.
MR REYNOLDS: Obviously these persons, even if they are employed by Portrush Trades, must be the agents from time to time of these companies in various respects. I think that is probably where the matter lies.
GLEESON CJ: Probably the only person who could throw light on all this would be the tax adviser.
MR REYNOLDS: Possibly.
GUMMOW J: Do we know when your client went into liquidation and the nature of the liquidation?
MR REYNOLDS: No doubt others sitting to my right or behind me know that.
CRENNAN J: I think it was when the project was finished, fairly soon after that, was it not?
MR REYNOLDS: It might have been. If that is important, your Honours, I can ascertain that.
GUMMOW J: Was it a voluntary liquidation or a compulsory liquidation?
MR REYNOLDS: Voluntary.
HAYNE J: There are two species of voluntary liquidations, are there not?
MR REYNOLDS: Can I phone a friend, your Honour?
GLEESON CJ: A creditor’s or a member’s and it may or may not have been ‑ ‑ ‑
MR REYNOLDS: I do not know, your Honour.
HAYNE J: Depending on whether the directors can certify solvency.
MR REYNOLDS: Also on this aspect of whether there is a contract, again we do not know exactly how this was put on the evidence because we have not heard it. Even though I am the respondent in the High Court, we do not yet know exactly how the evidence supports this contract. In the small appeal book at pages 475 and 476 there is a lot of information. On page 475 from lines 10, particularly at the bottom, it is noted that although Sons supplied joinery products to Builders, under normal commercial circumstances it had no other input or influence on the operation of Builders and at line 21 that Builders operated as a separate entity independently from Sons. At about line 12 there is a restructuring whereby Sons took over all the building. Again this is separating out administratively the management of a company rather than some contractual arrangement between two companies.
GUMMOW J: Go to page 130, Mr Reynolds, this changeover and separating out. It just feels as if we are playing blind man’s bluff. Mr Cook says at line 22:
I understood it was going to be effective in relation to probably the separation and then the viability of keeping them separate to make them more financial.
MR REYNOLDS: That is his understanding.
CRENNAN J: So, Sons received the Lumbers cheques and Builders pay the subcontractors?
MR REYNOLDS: Yes, but again, we are looking at ‑ ‑ ‑
GUMMOW J: This “more financial” suggests a looming insolvency problem.
MR REYNOLDS: That is not something that has been the subject of any evidence, to my knowledge, your Honour. But his understanding, of course, if we are talking about a contract – it is difficult for my learned friend to say that his actual understanding generates the contract rather than the intention the parties objectively construed from this very vague evidence about all of this.
So, what my learned friend has done, I submit, very cleverly by not locking horns with this issue, is to set a hare running, your Honours thinking that we are dealing with what is in some quarters regarded as a paradigm case for no restitution where there is a head contract, that is clear, and there is a subcontract, and then got your Honours to the point where your Honours are probably thinking, well, that has got serious problems with it, which we concede it has as a general rule, but when you hunker down and look at the evidence – again, I do not know what my learned friend is going to pull out of his hip pocket in reply – but we raised it and we said, what is your evidence, in our submissions, and what are your terms. We know the terms, we do not know what the evidence is, and we have taken a number of points about this.
My learned friend, to state the obvious, bears the onus of establishing this contract, we submit, if he relies upon it, in defeasance of a claim and says that we ‑ ‑ ‑
HAYNE J: What, you as plaintiff in the restitution suit do not have to disclose, or prove more accurately, the contractual matrix within which you say this restitution claim lies?
MR REYNOLDS: Your Honour is raising a difficulty which I do not recall being discussed in the cases on this issue, which goes back to what we were ‑ ‑ ‑
HAYNE J: But surely, if we are going to use this language, you have to prove an unjust enrichment, do you accept that and the injustice is demonstrated, if at all, having regard to all of the relevant circumstances and in circumstances where there are known to be contractual dealings between the parties, how can you establish such a claim without demonstrating that contractual matrix?
MR REYNOLDS: Your Honour’s statement to me may well be correct but contains, as your Honour would concede, a number of assumptions.
HAYNE J: No, it contains a number of knives, Mr Reynolds, knives.
MR REYNOLDS: But your Honour has credited me, if that is not an inappropriate word, with a submission that this is all based on unjust enrichment and upon that predicate your Honour is asking me to shoulder the onus and prove my case.
There are issues here underlying this obviously which is deep water jurisprudentially on this question. For what it is worth, I am not aware of a case which has discussed this issue of onus. As my learned junior, Mr Kremer, reminds me, resort to Bullen and Leake under defences to these claims does allow for a defence that there was a special contract between the plaintiff and the defendant covering the work which, from recollection, may be pleaded in defeasance of the claim.
What your Honour is really raising with me is, leave aside what one might call the judicial reaction to the idea of a restitution claim when there is a head contract and a subcontract, what is the precise jurisprudential basis of my learned friend’s point that if there is a head contract and a subcontract, then my claim cannot be made out. My point is historically – and I say that is important – this has not been a matter which has been pleaded in defeasance of a quantum meruit claim.
To be very brutal about it, as your Honour Justice Gummow said, you have a request, you do the work as a result of the request, there is your quantum meruit claim and I say, well, and we rest. Where does this idea of, well, there is a head contract and a subcontract come in, that means you lose? What is the hook upon which that particular discussion is raised?
GUMMOW J: You have to prove the request and that gets you into all of this area and then you back off to some degree and say, well, we have acceptance.
MR REYNOLDS: To some degree, yes, fall back to that.
GUMMOW J: Yes, that is right.
MR REYNOLDS: But that is the difficulty. A number of possibilities implicit in your Honour Justice Hayne’s question, there are a number - one is, as your Honour says, that I have to make out at every level that the enrichment has been unjust. On another level I prove that work has been done with a request/acceptance and what have you and then it may be a matter for the defendant, given that there has been a windfall gain, then to establish matters which negative the justice of my client.
Another possibility, since we are drawing up a menu – I am assuming your Honour Justice Hayne wants me to deal with this issue – is that, just as was it once suggested, on my recollection, in relation to duty of care and negligence, that there is a naked intrusion of reference to policy considerations, there is a statement to that effect which caught my eye a little while ago in a speech of Lord Hoffmann on subrogation beginning Banque Belgium, something - I am sorry I cannot be more precise about that.
GUMMOW J: That is a controversial decision.
MR REYNOLDS: It is a very controversial decision and ‑ ‑ ‑
GUMMOW J: Mr Jackman wrote a very astute note in the Australian Law Journal on that case.
MR REYNOLDS: He may well have.
GUMMOW J: But I do not see how it helps us here.
MR REYNOLDS: But if your Honour Justice Hayne is looking to possibilities here, then there ‑ ‑ ‑
HAYNE J: Your answer, Mr Reynolds.
MR REYNOLDS: As a matter of principle they are the sorts of possibilities. Another one is that an aggregation of factors of the kind that Chief Justice Doyle looked at in the Angelopoulos Case that this would be imported at that level. So your Honour, with respect, is quite correct to pull me up on the implicit assumption made in the submission and to that extent I accept the correction. But I do submit that the proposition is still correct on whatever basis and that is that is up to my learned friend in the end to establish this contract.
GLEESON CJ: As a matter of principle, would it make a difference whether there was a subcontract between Sons and Builders or merely an entitlement in Builders to make a quantum meruit claim against Sons?
MR REYNOLDS: I submit yes, because we may be dealing with a situation, although I deny a remedy in quantum meruit by Builders against Sons, but putting to that to one side, one may be dealing with the possibility of a co‑ordinate liability by two parties on a quantum meruit with the possibility of contribution between them depending upon, if I may put it broadly, where the equities lie. Now, on that basis, the ultimate responsibility for the payment on these circumstances would lie with Lumbers. I am taking up more time than I ‑ ‑ ‑
GUMMOW J: We have got to know what your case is, I think, Mr Reynolds. At pages 16 to 18 of the appeal book, that is how your case was pleaded.
MR REYNOLDS: Again, your Honour knows that we backed off the subcontract argument entirely. This is a pleading ‑ ‑ ‑
GUMMOW J: I am just looking at paragraph 40 which seems to me put right there what Justice Hayne was asking you. It is not framed as a claim in quantum meruit actually; it is framed on a wider canvas. If you can get home on the narrow canvas, I suppose, you can say that is assumed within the broader notion of paragraph 40, but we need to know what we are being asked to decide as to these deep jurisprudential waters. We cannot just sit on the shore and say, gee, look, that looks steep and dark. We need to know.
MR REYNOLDS: Your Honour, with respect, I hope I made some progress on an issue which is not entirely clear, indeed, we say not clear at all, in the case law in trying to offer some jurisprudential hooks, if you like, upon which this issue is to be determined and it is not easy.
The statements that I took your Honours to yesterday in Pavey & Matthews v Paul, particularly at page 227 in Justices Mason and Wilson, and from Justice Deane at pages 255, 256 and 257, do point to some degree towards an embracement of this unjust enrichment concept in a case factually very much like the present.
Now, of course, your Honour Justice Gummow in the Roxborough Case found that the ultimate or basal principle behind the claim for moneys had and received lay in a notion of unconscientious behaviour. The examination of the factors in the Angelopolous Case to a slight degree at examination of the factors in the Pavey Case indicated that the courts are looking more broadly than purely to the question of the notion of request and acceptance.
Chief Justice Doyle expressed, as I recall, some difficulty about how to handle this issue in the post-Pavey world. I submit that his approach, which was adopted by the Full Court in this case, was an acceptable one. I also submit that the decision below is in accordance with Pavey, subject of course to what I will call the Boulton v Jones caveat, and, if necessary, to coin a phrase, I bite the bullet and say that the pleading in paragraph 40 is not an inapposite way of characterising the claim that if there is an unjust enrichment that raises things such as misapprehensions of the kind I have mentioned, it also raises the notion of a windfall.
The other factors that we have referred to in our submissions and the summary of facts, particularly from the Full Court at the beginning, this is a case where, looking at the merits of my client’s claim, there is an enormous amount to be said for recovery and that the points that are in the end taken against us are effectively the sort of technical points that Lord Justice Greer referred to in Craven-Ellis v Canons. They are leaving aside the notion that this is so-called free acceptance of Boulton v Jones, that principle about mistaken identity, second of all, that there is a contract and subcontract, and third of all, that there is prohibition under section 39 of the Builders Licensing Act.
Now, if one is looking more broadly to this case and its circumstances, my client can fairly be accused of being dilatory in sending an invoice off late and he can on one view be accused of being slack in relation to obtaining a licence, but when one looks at every other aspect of the case, particularly in the light of the findings that have been made about payments made, work being done, et cetera, it is a case which otherwise than possibly on technical grounds, is a very strong one.
As I said yesterday, this is the sort of thing which is bound to happen both as Justice Rogers referred to in the sophisticated corporate world where there are groups of companies, and it is also likely to happen to the average person in the street who uses, for example, a corporate entity or entities to conduct their businesses. That, on one view, is the tension in this case between the possibility of these arguments, essentially three arguments of law on the one hand, and against the strong entitlement that my client has when your Honours look to the justice of this case. It is going to be out of pocket on the findings below for a substantial portion of these payments made to subcontractors. It is going to be out of pocket for the supervision fee.
If, as I said yesterday, this argument is right in this case, it would mean that in a situation where all the money was payable at the end of the construction contract – and let us assume that involved, although it would be unlikely, a 50‑storey building – that it would be open to the owner, in my learned friend’s position, to say, “Sorry, wrong company”, and submit that that is a circumstance which is undesirable and obviously so.
Now, I am running out of time. Can I give your Honours just a few more references at pages 242 and 243 and 301 to 303, especially around page 302, line 30, on this issue of whether there is a subcontract. I think I have, your Honours, two more issues to deal with. The first is the question of whether or not, assuming there is a head contract and subcontract, whether restitution may still lie. Both Lord Goff in the Pan Ocean Case and your Honour Justice Gummow in the Roxborough Case talked about the possibility of such a claim lying in exceptional circumstances.
Now, I will not take your Honours to the Commonwealth authorities which are inconclusive on this, but we have compiled a list of decisions in the United States which deal with this situation, picking up some of the references to which we were referred by the Court prior to the case ‑ ‑ ‑
GUMMOW J: What do we do, read these 18 cases?
MR REYNOLDS: If your Honours would like more particular references to pages, then ‑ ‑ ‑
GUMMOW J: What do we get out of them?
MR REYNOLDS: These cases are all situations which tend to favour the – they are either decisions where the subcontractor has succeeded against the owner on a subcontract claim or where the court has refused to strike out such a claim or, importantly, where the subcontractor has failed because the owner has already paid the head contractor which, as your Honours ‑ ‑ ‑
GUMMOW J: So all of these are subcontractor cases?
MR REYNOLDS: I think that is correct, your Honour.
GUMMOW J: Are there any United Kingdom subcontractor cases?
MR REYNOLDS: Not in our submission. That is part of the difficulty in dealing with questions such as your Honour Justice Hayne raised with me.
GUMMOW J: That is partly, I suspect, because of that House of Lords case.
MR REYNOLDS: Possibly, although it does ‑ ‑ ‑
GUMMOW J: And the treatment of it in Hudson.
MR REYNOLDS: Lord Goff does talk about, as I recall, a windfall and that is another aspect of this case. Your Honours gave us a reference to, I think, the 1996 supplement of Professor Palmer’s work on the law of restitution. There is a 2007 cumulative supplement and there is discussion of these issues at pages 867 to 873, particularly we would refer you to pages 869 to 873.
GUMMOW J: Are we going to be supplied with it?
MR REYNOLDS: We will supply those, your Honour. Can I give your Honours just three further references, first of all to an article by Professor Rendleman in (2001-2002) 79 Tex L Rev 2055, particularly at pages 2080 to 2081 and page 2074 at footnote 83. Your Honours have seen the tentative draft of the American Law Institute on our list of authorities at page 8 point 3. Thirdly, in Professor Palmer’s work on The Law of Restitution there is a statement at pages 424 to 425 in volume 3 that in circumstances where the owner’s obligation to the general contractor will not be enforced restitution in favour of the subcontractor should be granted and finally, to Professor Dawson’s article “The Self‑Serving Intermeddler” (1973) 87 Harv L Rev1409 at page 1450, particularly at pages 1447.3 and 1447.2.
GUMMOW J: What do you at the suggestion in some of the American material, I think, that the only answer to this situation is an interpleader or an answer is an interpleader, otherwise there is this problem of discharge?
MR REYNOLDS: That may be a procedural way of the ‑ ‑ ‑
GUMMOW J: You cannot work out what is conscientious unless you have everything on the table.
MR REYNOLDS: It may be a procedural way of resolving the difficulty, your Honour. Coming to the particular factors that we point to here: one, the Lumbers have not paid the head contractor the sum owing, the shortfall, when you compare the head contract and our claim in restitution. Second of all, the head contractor, to use Professor Palmer’s words, “The owner’s obligation to the head contractor will not be enforced”. We know that from the letter. That is something Professor Dawson refers to also – that the owner’s obligation will not be enforced, as I recall.
Thirdly, the notion of this windfall gain: when one looks at the difference between what Lumbers would have to pay us in restitution and the moneys that have been paid out, let it be assumed notionally under the head contract. Fourthly, in particular, what I have referred to as the mistaken apprehension of those involved, and that is twofold, first of all the mistaken apprehension of Mr Lumbers and second of all of Builders.
I do not suggest that all those factors would have to be satisfied but I submit that they are factors which are supported by the American authorities and American scholarship that take this case out of the general rule which we accept – that is that, generally speaking, a subcontractor will not be able to recover against an owner. But to pick up Professor Rendleman’s views, in some circumstances, particularly if they are exceptional or unusual – and if this case is nothing else, it shows some unusual circumstances – then we submit that, in the very particular circumstances of this case, my client should succeed.
My learned friend floated a submission about there having been legislative intervention in this area and at one level that therefore your Honours should not – this is my understanding of his words – develop the common law in this area given the presence of statutory regimes. Again, that may not do the submission justice but that is the issue he raised. Can I draw your Honours’ attention to section 44 of the Worker’s Liens Act 1893 which states:
Nothing in this Act shall prejudice any other remedy which any person may have in respect of any contract price or wages payable to him -
words which we said should be looked at broadly rather than narrowly. The final issue I need to deal with ‑ ‑ ‑
GLEESON CJ: Just before you leave that, is Builders a worker within this Act?
MR REYNOLDS: No, I think it is a – well, on one view, if my learned friend is right, it is a subcontract within the meaning of section 5 rather than a worker. There is a separate regime for workers in section 4.
GUMMOW J: That is not the only statutory problem, is it? Do we not have to ask ourselves whether it would be conscientious to permit your recovery if that would achieve an indirect enforcement in the absence of a building licence?
MR REYNOLDS: That is the issue I am just coming to, your Honour. I have some matters to raise on that immediately. Can I then move to the final stage in the argument, which is section 39 of the Builders Licensing Act? If I can take your Honours just briefly back to its text, if your Honours could perhaps have that to hand.
GUMMOW J: The point I am putting to you is not confined to section 39. It is assuming that section 39 does not strike of its own force, but it is saying is it correct as a matter of restitutionary principle to permit this remedy when the result of the remedy is to achieve indirect enforcement of something which is not permitted by the builders’ licensing system.
MR REYNOLDS: Your Honour, I plan to deal ‑ ‑ ‑
GUMMOW J: It is not a question of illegality as such. Necessarily it is a broader question of indirect enforcement and the conscientiousness of that. Do not let me take you off what you were saying about section 39. I know you want to deal ‑ ‑ ‑
MR REYNOLDS: No, I am going to ‑ ‑ ‑
GUMMOW J: This is the elephant in the room in Pavey & Matthews, obviously.
MR REYNOLDS: I think I understand what your Honour is putting to me. It is not a matter, as your Honour appreciates, which has been live in the written submissions so far, but I am going to attempt to make a fist of a response to your Honour’s question when I deal with the elements of this section cognisant of the fact that it is an independent argument to some degree.
Your Honours have been told about the early decisions of the Full Court on this point and the first decision I want to take your Honours back to is Nunkuwarrin Yunti v AL Seeley Constructions Pty Ltd (1998) 72 SASR 21. As my learned friend said, there are now two Full Court decisions of the Supreme Court of South Australia rejecting his argument together with the decision of Justice Bollen in Tea Tree Gully Builders v Martin (1992) 59 SASR 344. Nor do we understand there to be any contrary decision in South Australia. This legislation has now been repealed.
I will come back to that in a moment. The policy of the legislation was discussed by Chief Justice Doyle in this decision of Nunkuwarrin at page 23, and he looked at that page at the purpose of the Act, the scheme of the Act, and the policy of the Act and that is from about point 3 on that page through to the end of the judgment. The Chief Justice’s assessment of the scheme of the Act, this is about point 4, is that it did:
not appear to require that the builder be denied a remedy in restitution in such a case”.
It appears to me that the purpose of the Act is, broadly, t protect building owners from incompetent builders by requiring a builder to obtain a licence which in turn depends upon proof of competence. Allowing a restitutionary claim means that the building owner will pay only reasonable remuneration for the work done. If the work is poorly performed, the entitlement of the builder will be reduced accordingly. To say this is not, of course, to free the building owner from all concerns, but to deny any right of recovery at all is a harsh and potentially erratic approach. An unlicensed builder who has received substantial progress payments, for example, might suffer little, whereas an unlicensed builder who has received no progress payments would lose everything.
So what his Honour is pointing there to is the potentially haphazard results which may arise on my learned friend’s construction of the provision. He refers to Justice Deane in the Pavey Case at pages 263 to 264 and concludes by saying that considering the language and the policy considerations, which he has dealt with, he concludes that it should not deny restitution.
HAYNE J: Bound up in that analysis is a construction of the statute ‑ ‑ ‑
MR REYNOLDS: It is.
HAYNE J: ‑ ‑ ‑ and fee or consideration is construed as being fee or consideration under the contract.
MR REYNOLDS: Essentially, yes. His Honour dealt with that at page 23, at about point 3, nothing that the words “fee or consideration” are:
suggestive of a contractual entitlement, although capable of being read more widely. I lean against the wider reading because of the consequences of giving that wider meaning.
GUMMOW J: But the drastic consequences referred to do not seem to give much weight to the closing words of section 39. “Inadvertence” may get the builder off the hook, may it not?
MR REYNOLDS: Well, there are many types of an adversion that may cover a very blatant, wilful disregard of the Act, but there are other sorts of advertence followed, for example, by a lapse of memory of the kind I would suggest that all humans are aware of. You advert to a problem perhaps more than once and for whatever reason you do not attend to it and later on it comes back to bite you. There is a whole scheme of notions involved here in this notion of advertence on the one hand or inadvertence on the other.
It is not just a wilful flouting, if you like, of the licensing regime. That is another aspect of the construction which I would put to your Honours. The words “fee or other consideration”, I do not suggest this is decisive, but something your Honours might take into account. The word “other” there, that could be read as any consideration whether by fee or otherwise. In other words, that the genus if you like is consideration and that fee is a species of that. That is a slight indicator in my favour.
GLEESON CJ: Why did you lose on the inadvertence issue? Because of the absence of Mr McAdam?
MR REYNOLDS: I will have to get your Honour some references on that. That is an issue which we have lost.
GLEESON CJ: It is not a current issue, I understand.
MR REYNOLDS: Your Honour is not suggesting this, but one would not say in this case, if it were the case, which I do not think it is, but because my client’s inadvertence was quite wilful and deliberate if you like, that there would be a different result for him rather than a situation where the advertence was slightly less unfavourable to the builder.
CRENNAN J: Mr Reynolds, sorry to take you back to the facts just for a second, but was there any evidence about Builders’ sources of income?
MR REYNOLDS: Other than in relation to this project, your Honour, I do not believe so.
CRENNAN J: The Lumbers sent all their cheques in relation to this project to Sons, did they not?
MR REYNOLDS: As I understand it, the cheques had Sons’ name on them, yes. This notion of harsh and draconian results referred to by Chief Justice Doyle at page 23 is also adverted to in the Pavey Case, that is, Pavey & Matthews v Paul. If I can take your Honours just very briefly back to that, it is referred to at page 229 at about point 4. There is also a reference in Justice Deane’s judgment to this same notion of harsh and draconian results. I will just have my learned junior try and turn that up in the judgment of Justice Deane. I also want to refer to another point his Honour made, that is, Justice Deane, in Pavey & Matthews v Paul, at the bottom of page 262 where his Honour characterised this claim under a quantum meruit as a common law right.
Your Honours know that line of country in the area of statutory interpretation, that is, that one needs to find clear language to oust a common law right. It is a little bit like, if I can use an analogy, one of my learned friend’s successes in the decision of this Court in Puntoriero v Water Corporation which we refer to that by way of analogy where the Court construed very strictly the statutory provision taking away the common law rights, as I recall, of Mr Puntoriero.
The final matter I want to turn to, I want to give your Honours a reference to the new Act because the new Act which repealed this Act made it clear that the claims in restitution would lie even if the plaintiff was unlicensed. That is in the Building Work Contractors Act 1995 at section 6(2)(b).
Finally, I want to try and answer your Honour Justice Gummow’s question and I want take you to a decision of this Court in Fitzgerald v Leonhardt (1997) 189 CLR 215. Given some of the questions your Honour Justice Gummow asked yesterday and relevantly today, I wanted to take your Honours to some passages in the joint judgment of Justice McHugh and your Honour Justice Gummow and, generally, the consideration is at pages 226 to 231.
Where this is ultimately heading is that on pages 230 and 231 Justices McHugh and Gummow refer to, particularly at page 230 at point 5, Pavey v Matthews being decided consistently with the principles outlined above and at page 231 at about point 6 the Justices say that “The use of the quantum meruit in Pavey & Matthews Pty Ltd v Paul may be seen as another example” of these principles. I need to go back and look at what those principles are. Your Honour Justice Gummow referred on page 229 to four principles from the judgment of Justice McHugh in Nelson v Nelson and then said:
Even if the case does not come within one of those exceptions, the courts should not refuse to enforce contractual rights arising under a contract, merely because the contract is associated with or in furtherance of an illegal purpose, where the contract was not made in breach of a statutory prohibition . . . Rather, the policy of the law should accord with the principles set out by McHugh J in Nelson v Nelson.
His Honour there says:
“Accordingly, in my opinion, even if a case does not come within one of the four exceptions to the Holman dictum to which I have referred, courts should not refuse to enforce legal or equitable rights simply because they arose out of or were associated with an unlawful purpose unless: (a) the statute discloses an intention that those rights should be unenforceable in all circumstances; or (b)(i) the sanction of refusing to enforce those rights disproportionate to the seriousness of the unlawful conduct; (ii) the imposition of the sanction is necessary, having regard to the terms of the statute, to protect is objects or policies –
again, necessary –
(iii) the statute does not disclose an intention that the sanctions and remedies contained in the statute are to be the only legal consequences of a breach of the statute or the frustration of its policies.
Now, of course, section 9 does establish a penalty of $10,000 – that is section 9 of the Builders Licensing Act – for performing without a licence. There are other relevant passages at pages 226 and 227 but they are the main ones and, as your Honour said, at pages 230 and 231 that statement of principles is in accordance with Pavey & Matthews Pty Ltd v Paul. If your Honours please, those are my submissions.
GLEESON CJ: Thank you, Mr Reynolds. Yes, Mr Jackson.
MR JACKSON: Your Honours, may I deal in these submissions with matters that fall into two categories, one matter is by way of reply and on the other some questions I was asked to which I said I would give some answers when I was dealing with our submissions in‑chief. The first of those, your Honours, concerns a question, what was the evidence that Lumbers would have rejected Builders. May I in that regard, your Honours, go first to volume 2, page 530, paragraph 84.
The question related, I think, to what was the evidence lying behind that part of paragraph 84. Could we in that regard refer your Honours to the evidence at page 368 in volume 1. It is a passage which commences about line 23 on the page and goes through to line 15 on page 369. Your Honours will see that evidence appears to have been accepted. One looks at the primary judge’s reasons in volume 2 at page 489, paragraph 40. Your Honours will also see similar matters referred to by the primary judge at page 502 in paragraphs 85 and 90.
If I could go back to one further piece of the evidence on that question. Your Honours will see in volume 1 at page 361 to page 362 the evidence that was given commencing at about line 34 on page 361 going through to line 20 on page 362 dealing with these reasons for choosing the company Sons.
The second matter, your Honours, concerns the evidence relating to whether there was any prior knowledge on the part of the Lumbers of any arrangement between the two companies, Sons and Builders, or of any rearrangement of that group before the letter of 1 February 1999, which is at page 475, was sent. That is the letter indicating nothing more due. The only evidence, your Honours, on the point is in volume 1 at page 405 and you will see that between about lines 12 and 29 and the reference to “August of ’98” at about line 18 appears to have been picked up by the primary judge at page 488, paragraph 30. It really does not go beyond that.
Could I go, your Honours, as a third matter to the question of the proper concession, if I could adopt that phrase that was used, that Builders was not a subcontractor. Your Honours, one does need to put that in the context in which it was made. I will come to it a little more precisely in a moment, but what it was was that the concession was properly made because the statutory claim in relation to which one sees the concession being made was one of the parts that had been excluded by the order which provided that the claim or derivative claims involving Sons were not to proceed.
Your Honours will see that that is so from volume 2, first at page 504, paragraph 97. You will see there it is said:
the plaintiff properly conceded that it did not claim as a sub‑contractor.
That is under the heading “Enforcement of Workers lien”.
Then, your Honours, if one goes back to page 484, one sees in paragraphs 13 through to 15 the orders that have been referenced, the orders made preventing those claims going ahead. One of the paragraphs of the statement of claim referred to in paragraph 14 of those reasons for judgment is paragraph 53. You will see paragraph 53 set out at page 20 in volume 1 and that is the commencement of the subcontractor’s charges claim. Your Honours, that, what I have said is correct, does actually appear from the terms in which the concession was made at the hearing. It does not appear in the present appeal books but it is in the original transcript of the hearing at pages 59 to 61. Your Honours, we will get copies of those pages to your Honours, if we may.
Your Honours, one of your Honours asked, and I think it was your Honour Justice Kiefel, was it or was it not put to Lumbers that it made no difference by whom it was carried out? I have given your Honours some references relating to that, but if one goes to page 401 in volume 1 you will see in a passage that commences, I think, at line 22 on page 401 and goes through to the bottom of page 402 and, your Honours, the material, the first two‑thirds of page 403, is marginally relevant. Then one goes through more particularly to lines 29 to 35 on page 403.
Your Honours, a question was asked whether the majority had formed any view that the Lumbers owed money to Sons. The answer, your Honour, is no. Your Honour Justice Gummow asked whether there was any provision in the Worker’s Liens Act which said directly that the liability to the head contractor or the principal was extinguished pro tanto by the lien. Your Honours, could I say that that seems the likely result intended by the Act. It does not appear to say so directly. It appears the likely result because it is a claim on the moneys that are payable and they are then paid.
Your Honours, yesterday I said to the Court, and one sees this at pages 628 and 629 that there had been in respect of Sons a liquidation and then deregistration. There was in fact no liquidation and we accept that at all the relevant times Sons was a company which was carrying on business. Your Honours, there is a question about whether our learned friend is prepared to have a say about the deregistration, but the company was alive at all potentially relevant times. Your Honours, could I go then to some matters by way of reply?
GLEESON CJ: How long do you expect to require for this, Mr Jackson?
MR JACKSON: Your Honour, I think I would be 15 minutes.
GLEESON CJ: Yes, go ahead, we will sit until 1.00.
MR JACKSON: Thank you, your Honour. Your Honours, first of all, I just wanted to say something about our learned friend’s references to Angelopoulos (1995) 55 SASR 1. Your Honours, one does need to note exactly what was said by Chief Justice Doyle in that case at page 13. What you will see is at the bottom of page 12. In the last three lines he referred to a number of factors, he said “first” and then “secondly” and then, your Honours, one sees in relation to what was said secondly at the top of page 13, he said:
They acted not only with the knowledge of Ditara, through its agents, but with the approval of Ditara. In my opinion there was more than passive acquiescence.
Add to that also, your Honours, what appears halfway down that same page where he says:
Seventh, Ditara by its agents approved of or agreed to the plaintiffs carrying out the work which they did. In addition, Ditara by . . . [having] plant and equipment installed –
and then selling that, adopted it. Your Honours will see at the penultimate paragraph above the heading “Amount of restitution” he says, “for those reasons this is a case of acceptance” and that is why in the next paragraph he refers to “specific facts”.
Your Honours, if one goes also to a decision, part of which was extracted by the majority in this case, of Justice Byrne in Brenner and Another v First Artists’ Management Pty Ltd [1993] 2 VR 215. Your Honours will see that at the bottom of page 259 going through to the end of the first paragraph on page 260 that at page 260 one sees a passage commencing in the fourth line “In my opinion the appropriate enquiry”. Your Honours, that goes through then to the reference to Jones.
Now, could I just pause at that point, your Honours. Up to that point that is the part that was picked up by the Full Court in the present case. What one sees, however, is that they did not pick up what immediately follows and what your Honours will see is that his Honour had said – and I will not read the sentence out, your Honours, but it is the last four lines of that paragraph that indicate the matters that his Honour thought would satisfy such a test.
Your Honours, could I deal then with the question whether there was a finding that there was a subcontract. Could I go first to volume 2, page 483, paragraph 9 and the observation that was made there, your Honours, that the possibilities were subcontractor or assignee is correct, but of course the claim as assignee failed. If one goes to what was said by Justice Vanstone in her Honour’s reasons at page 538, paragraph 27 ‑ ‑ ‑
GLEESON CJ: Is what is said in paragraph 9 on page 483 quite accurate? Is there a third possibility, which was that Builders performed the work not under a contract with Sons but on a basis that would give Builders a claim in quantum meruit against Sons?
MR JACKSON: The answer is that is a possibility, your Honour, but my reasons for my hesitating in answering that is that there will be many circumstances in which a person would have a claim in quantum meruit against a head contractor but at the same time be a subcontractor because the means of remuneration was on the basis of quantum meruit. So the fact that the scope for remuneration or the nature and manner of remuneration may have been by reference to quantum meruit or a form of quantum merit, would not mean they were not a subcontractor. But your Honours will see that in our written submissions we have said “subcontractor” or “third party”. Perhaps the exact classification may not matter, but they are in a position very, very similar to that of a subcontractor.
What Justice Vanstone said at page 538 in paragraph 27 is, in our submission, accurate where she said:
On the present facts, it seems that the position of Builders is very much that of a sub‑contractor. It was delegated building work by Sons, although McAdam remained responsible for determining what payments would be sought from the owner. Those payments were made to Sons, consistent with its position as the main contractor. Although the terms of the arrangement were left more open than in typical sub‑contracting situations, this does not change the essential fact that Builders’ work on the Lumbers project was performed under obligations owed to Sons as part of that arrangement.
Your Honours will see the remainder of that paragraph.
GLEESON CJ: I am inclined to doubt whether the primary judge, when using the expression “as a subcontractor” was intending to advert to the difference between a situation where there is a sufficiently certain contract to be enforced or whether there would be a claim in quantum meruit.
MR JACKSON: Your Honour, that may be so. Can I come back to the question of certainty in a moment, but what I was going to say in relation to that was that it was apparent, in our submission, that the circumstances in which the arrangement existed was one which, if one had to classify it, was that there was a contract between Builders and Sons where each was to perform various things.
GLEESON CJ: I just had in mind that if the bricklayer who turns up for a week and lays bricks does not have a sufficiently certain agreement, nevertheless the bricklayer would probably still be called a subcontractor even if his only claim were in a quantum meruit.
MR JACKSON: That is so, your Honour, yes. But what we would say, your Honours, is subcontractor for relevant purposes, the relevant purposes being the determination whether there was a cause of action arising as between the bricklayer and the principal.
In relation to that, your Honours, I have referred to paragraph 53 of the statement of claim and they are quite properly conceded and so on, but could I just add one further thing about this. It does seem implicit, your Honours, in the finding by the primary judge at page 505 in paragraph 103 that he took the view that for relevant purposes, if I can use that expression again, that Builders was a subcontractor. Your Honours will see that where he says in the second sentence:
Insofar as a claim ought to have been made by Builders it ought to have been made against Sons.
You will see there, your Honours, also a reference in the last sentence:
In my opinion Builders could not succeed against the Lumbers under this alternative claim.
Those observations are referred at footnotes 42 and 43. The cases that he is referring to are ones saying the subcontractor has to sue the head contractor and cannot claim. So, your Honours, that is the area which his Honour had in mind. Your Honours, could I say in relation to the pleading as to restitution, the statement of claim deals with the claim in restitution against us in paragraphs 35 to 42 commencing at page 16 in volume 1. That claim is one based, it would seem, on acceptance only. There is no element of mistake or anything of that kind alleged.
Your Honours will also see in looking at the document, if there is any – it hardly seems that one would have much difficulty in saying that the terms of the subcontract were pretty readily identifiable – you see them all pleaded in paragraph 18 and following where all the terms are alleged of a contract between those parties, 18 and following.
Your Honour Chief Justice Gleeson asked, what difference would it make if BHP or some other company were the subcontractor? Our submission is it would make no difference in principle if, on the respondent’s argument, if Builders had a case so too would any other person in its position irrespective of a relationship between the companies and any other person further down the chain. Your Honours, it was said in this regard we requested that the work be carried out, so we did, but the request, your Honours, was one that we made to Sons and we had no dealing at all with the respondents.
Your Honours, may I just mention one matter in passing. There is an error in the primary judge’s reasons. It is perhaps an inexact way of describing it, but there is a quotation in the primary judge’s reasons for judgment which is potentially misleading. Your Honours will see at page 493 a quotation from pages which around pages 129 and 130 to which you have been taken. Now, in particular, your Honours will see at about line 37 a few dots after the word “financial” which shows that something has been left out. Then you will see, your Honours, the question:
QUntil the changeover which company carried out the work on the Lumbers’ house..
A In the books it was W Cook Builders.
In fact, that leaves out a question and answer which are at page 130 and an answer of some significance. It is page 130 at line 31. The answer is actually:
A. W Cook & Sons Pty Ltd.
Then the next question has also been left out:
Q.After the changeover, which company carried out the work on Lumbers’ house.
A. In the books it was W. Cook Builders.
Now, I mention that, your Honours, because if one just goes back to that passage one misses out an important answer.
Could we just say something about Boston Ice and Boulton v Jones. There is nothing in our submission that is particularly wrong with those decisions. If one takes, for example, Boston Ice, assume that today that one conducted a cocktail bar and required quantities of party ice but you stopped taking it from a particular supplier because the ice bags had the occasional cockroach in them and if the former supplier whom you had rejected then replaced the one to whom you made orders occasionally without your knowledge and responded to an order that you had placed with the first one, why should they recover? There seems no particularly good reason why they should. In any event, your Honours, the supposed error in those cases is irrelevant to a case like this where you have a binding contract to perform the works with a particular company and any request is pursuant to that contract.
Could I come then to the question of the head contract. The role of Mr McAdam – my learned friend said this is a new term – was referred to by the primary judge at page 489 in paragraph 41 and by the Full Court at page 514 at paragraph 17. That seems to have been part of the contract. It does not really seem to matter very much whether it was or was not but it seems to have been a relevant factor. Could I go then to the question of the shareholdings in the companies. Your Honours will see the actual shareholdings referred to in the primary judge’s reasons at page 487, paragraph 23.
There is, your Honours, a reference also there to the liquidation of Builders and the circumstances of it so far as they appeared and the composition of the Portrush Group, three companies, is referred to in volume 1 of the appeal books at pages 282 and 283 and in particular, I think, at page 283.
Your Honours, there are only two more things I wanted to say. The first concerns the claim in relation to section 39. Your Honours, one is not talking in the present case about the ability to pursue other causes of action which are not covered by section 39. That is only true if one says that section 39 is not to be given the meaning which its terms suggest and, in our submission, the terms of section 39 do suggest an inability on the part of a builder not complying with it to recover. Your Honours, could we say that the exception provided for at the end of the section on which the burden lies on the builder and concluded by the word “only” militates against the contention that section 39 is not intended to mean what it says. That is the first thing, your Honours.
The second thing is in relation to the cause of action relied on by our learned friends, it does end up a rather curious and in some respects extraordinary situation that if the position be that a subcontractor stricto sensu is not able to recover against the principal, and there is a fair body of authority to support that proposition, that a person should be able to do so of, first, whose intervention in the matter there is no knowledge on the part of the principal and, secondly, a person who is there because an arrangement made with the head contractor again of which there is no knowledge by the principal and, thirdly, because the arrangement that they have made is one which is of less formality than would obtain in the case of a subcontract.
The position which would obtain if that were so is that it is in a kind of charter to avoid contract on the part of a subcontractor or other person and to have a system of law in the general area which is extremely
uncertain. I am sorry, there is one factual matter I should have referred to. At page 414 in volume 2 your Honours will see that the workmen’s lien claim was directed to the Lumbers and also to W Cook and, your Honours, the claim was one referring to a particular contract price and it was a claim that seemed to relate to a position as a subcontractor. Your Honours, those are our submissions.
GLEESON CJ: Thank you, Mr Jackson. Yes, Mr Reynolds.
MR REYNOLDS: With the Court’s leave, may I just raise a couple of administrative issues. The first is that that there have been various documents referred to by us in argument which we said we would provide or lists or otherwise. May we have seven days in which to provide that?
GLEESON CJ: Yes.
MR REYNOLDS: More specifically, could that also include two matters not raised. First, my learned friend referred to the notion of properly conceded and derivative claims. That is dealt with by Master Rice in his judgment of 12 November 2003 and we provide a copy of that to the Court because we do not agree with my learned friend’s construction of those orders.
Finally, my learned friend referred at appeal book 16 to the pleading at paragraph 35. There was an oral amendment of that in the opening at page 56 of the transcript and we would also like to provide that as part of our list, if your Honours please.
GLEESON CJ: Thank you.
MR JACKSON: If anything arises under these matters, may we have leave to make some response within seven days?
GLEESON CJ: Yes.
MR REYNOLDS: Are we to assume, just to clarify this, that these are lists only, not submissions of any kind, please?
GLEESON CJ: Yes. We will reserve our decision in this matter and we will adjourn to be reconstituted at 2.15 pm.
AT 1.02 PM THE MATTER WAS ADJOURNED
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