Peri Pty Ltd v Calcutt, Christopher K

[1996] FCA 1058

IN THE FEDERAL COURT OF AUSTRALIA  )
  )
NEW SOUTH WALES DISTRICT REGISTRY  )     No NG 759 of 1996
  )
GENERAL DIVISION                  )

BETWEEN:PERI PTY LTD

First Applicant

ROBYN DAVID STEWART

Second Applicant

MARY GALE PETERSON

Third Applicant

MICHAEL JOHN LUSTY
  Fourth Applicant

EVALYNE MAE LUSTY
  Fifth Applicant

AND:CHRISTOPHER K. CALCUTT and

ROBYN A CALCUTT

Respondents

CORAM:    HILL J
PLACE:    SYDNEY
DATED:    23 SEPTEMBER 1996

REASONS FOR JUDGMENT

By notice of motion the first applicant, Peri Pty Limited ("Peri"), moves the Court for an order that the respondents, Mr Christopher Calcutt and Ms Robyn Calcutt, their servants and agents, be restrained from preventing the applicants obtaining possession of a 65 foot Rick James designed fishing vessel and ancillary equipment in the course of construction by the respondents.  In addition to the usual undertakings as to damages, Peri offers to provide to the respondents an irrevocable bank guarantee in the sum of $53,051.44 payable on the direction of the Court.

The dispute arises in the following circumstances.  On 10 April 1996 an agreement was entered into between Peri and the respondents for the construction of a 65 foot steel Rick James designed fishing vessel to the survey requirements of the Department of Transport and/or Australian U.S.L. Code.  That contract superseded an earlier agreement dated 26 October 1995 between the individual applicants on the one part and the respondents on the other for the same work.

The April contract provided that the works were to be carried out for a lump sum consideration of $427,140 payable by instalments, nine in number, over a period of eight months.  Seven of those instalments have been paid, although it is alleged that there may have been some late payments.  The eighth instalment of $60,000, if otherwise legally due, was due and payable seven months after commencement of construction and is unpaid.  The final instalment has not on any view yet become payable.

The contract provides:

"Payments of the above progress payments shall at all times be subject to Works to the value of such payments having been carried out by the Builder by the date each payment is due.  Should the Owner consider Works to the value of the progress payments (taking into consideration all previous payments by the Owner to the Builder) has not been carried out and the Builder disputes the Owners [sic] opinion then such disputes shall be determined by a Marine Consultant, who shall be deemed to be acting as an expert and not as an arbitrator and whose decision shall be binding by (sic) both parties.  The Owners shall pay the Builder forthwith upon the decision being given by the above Marine Consultant the amount he has determined to be payable."

In the contract Peri is described as the owner.  Although Peri has consulted a marine surveyor it is not suggested that the outcome of that consultation constituted a determination by the marine surveyor of the matters referred in the clause set out above.  In other words, there has not yet been a reference to an expert in accordance with that clause.

A dispute has arisen between the parties, inter alia, as to the quality of the work.  Peri claims that the work has not been carried out in an appropriate and workmanlike manner and that it would be entitled to damages.  That claim is denied strenuously by the respondents.  It suffices to say that there is an issue between the parties to be tried on this matter.  Although usually a contract for the construction of a ship will be regarded as a contract for the sale of goods, the present contract is framed on the basis that it is a contract for work and labour and the parties agreed before me that title in the ship passes progressively to Peri as and when work is performed upon it.  The work has been performed at least to the stage that the ship can be slipped and, subject to some matters relating to hatch covers and the like, is seaworthy.

There is a good deal of evidence which I will not traverse here as to conversations that took place prior to the April contract being entered into, concerning matters such as hourly rates for labour and the time it would take to perform the contract.  These conversations do not seem to me to change the legal effect of the contract, namely, that there is a lump sum fee for the work to be performed and that that fee is (subject to any reference to an expert), at least, payable by fixed instalments.

Put briefly, the present legal situation, and it is subject to any determination by an expert, is that the respondents are entitled to be paid $60,000.  They are entitled to a lien over the ship to secure the amount to which they are entitled.  The question whether or not there is a lien is a question which ultimately will depend on whether any moneys are owing to the respondents.  That question in turn depends upon the outcome of the reference to the expert.  There have been a number of attempts to have the present dispute settled.  It is inappropriate for me to go into these in any detail, but they have concentrated to some extent upon payment of an amount of approximately $53,000 in one way or the other.

As I understand it, the respondents are still prepared to give Peri possession of the ship provided they receive the sum of approximately $50,000.  The respondents for their part have indicated their preparedness to give an undertaking that they would not, other than in the ordinary course of business or for necessary personal expenditure, dispose of assets pending the ultimate litigation between the parties and the determination of whether any damages are payable by them to Peri.

The correspondence, affidavits, and to some extent submissions, have proceeded on the basis that there is some correlation between the payment owing on the one hand (and I use the word "owing" without judging the ultimate merits), between Peri and the respondents, and amounts which are due between the respondents and subcontractors on the other.  So it was submitted that although the respondents had indicated that they owed moneys to subcontractors of approximately $50,000, when those figures were properly analysed in accordance with the evidence before the Court, either amounts were not yet owing because work had not yet been completed or, alternatively, the amounts owing related to work for which Peri had already paid in earlier instalments.

With respect, that tends to confuse the manner in which the respondents may wish to deal with the moneys to which they are entitled on the one hand, and their entitlement to those moneys on the other.

If the respondents be entitled to any moneys at all, a matter which ultimately must be litigated, that entitlement will arise by virtue of the obligation on the part of Peri to make progress payments.  If the requisite value is there in the work done, then those progress payments are payable.  They are payable, irrespective of any obligations that may exist between the respondents and subcontractors.

In substance Peri seeks from me an order which has the effect of directing the respondents to give up possession of the vessel and accordingly the lien which they may have over it, in exchange for a bank guarantee which would not be able to be called upon until the litigation is determined.  The respondents, in effect, submit that in law they have the possession of the vessel.  They are entitled to a lien over it and there is nothing in the case put at this stage by Peri which brings about the result that that lien ceases to exist.

In other words, the Court is being asked to make an order, the effect of which is to deprive the respondents of a lien, in exchange for giving them some other remedy, namely a claim against a bank guarantee in the future.  That may or may not be an equivalent commercial remedy, but that is not to the point.  The applicants have not made out at this stage a case for the Court to order, if it has power to do so in an interlocutory manner, the surrender up of possession of a ship, the subject of a lien, when there is really a dispute between the parties as to whether the circumstances are such that the lien should be held ultimately to exist.

No doubt the practical consequence of the lien will be to provide an incentive on the part of Peri to pay outstanding moneys, so that the vessel can be recovered.  It is that incentive which I am asked to order the respondents to give up.  From the point of view of Peri two matters clearly need to be taken into account.  The first is that its financing arrangements with the Australian Guarantee Corporation do not permit it, so it is said, both to pay out in advance the amount of the claimed lien, and to have carried out some $90,000 worth of work which it is said is necessitated by virtue of the respondents not adequately performing their part of the bargain.

There is another matter to which some evidence is addressed.  That is the ability, practically, to release the vessel so that it can be launched and commence earning revenue for Peri.  Apparently, if the vessel is not released on the 24 or 25 September, it cannot be slipped until some time later in the middle of October.  Some questions have been raised as to whether it is dangerous to have the vessel slipped without hatch covers and the like.  Those are matters which I have taken into account.

At the end of the day it seems to me that on the evidence at it stands at the moment, Peri are prima facie in default of their obligations to pay money to the respondents in the sum of $60,000.  If that prima facie default is not overcome by virtue of a reference to an expert on the question of valuation, the respondents are entitled to a lien in the sum of $60,000 over the vessel.  If the respondents are entitled to a lien, this Court has no jurisdiction to require them to give up that lien.

The Supreme Court Act 1970 (NSW), which has no application in the present proceedings, does give specific jurisdiction to the Supreme Court to order recovery of property that is the subject of a lien, upon payment up of money. There is no comparable provision in the Federal Court of Australia Act 1976. In any event, even if there were power I would not think it was appropriate on an interlocutory basis to make such an order in the present circumstances. The dispute between the parties is one where a lien either does or does not exist, depending upon the view of the expert.

Once the expert has made a report, if that course is to be taken, it will be clear whether a lien exists and, if so, that lien can be removed by the payment of the appropriate amount of money owing to the respondents.  In the circumstances, I would refuse the relief sought by Peri in its notice of motion and I would direct that Peri pay the costs of the motion.

There are other matters which have been touched on by the parties, particularly going to questions such as whether the matter is properly in this Court or whether it should have been brought in a State Supreme Court, and further whether the matter should be removed to Queensland, if it is to stay in this Court.  I have not dealt with these matters at this stage, although I have indicated to the parties that if the matter is to stay in this Court it would be convenient for interlocutory matters to be dealt with, if the parties so desire, by video link with Brisbane, so that the respondents can continue to be represented by Queensland solicitors and counsel and the applicants represented by Sydney solicitors and counsel, pending at a later stage, when the evidence has been filed and it becomes apparent whether the balance of convenience lies with the matter being heard in Queensland or in New South Wales.

I would propose to stand the matter over until 9 October for directions at 9.30am.  If the respondents desire those directions to be held by video link, then I would request the respondents to advise my associate when that will be arranged.

I certify that this and the
preceding nine (9) pages
are a true copy of the Reasons
for Judgment herein of his Honour
Justice Hill.

Associate:

Date:  4 December 1996

Counsel and Solicitors      G Nell instructed by

for Applicants:             Thomson Rich O'Connor

Counsel and Solicitors      L Aitken instructed by

for Respondents:            Corser Sheldon Gordon by their agents Holman Webb

Date of Hearing:            23 September 1996

Date Judgment Delivered:         23 September 1996