Re A & P Constructions Pty Ltd (in liq)

[1997] QCA 372

IN THE COURT OF APPEAL	[1997] QCA 372
SUPREME COURT OF QUEENSLAND

Appeal No. 10882 of 1996

Brisbane

[Central Electrics (Contracting) P/L & Anor. v. A&P Constructions P/L (in liq)]

BETWEEN:

CENTRAL ELECTRICS (CONTRACTING) PTY. LTD. ACN 010 543 987

(Third Respondent) Appellant

and

QUEENSLAND WINDOWS PTY. LTD ACN 009 801 050

(Tenth Respondent) Appellant

AND:

A & P CONSTRUCTIONS PTY. LTD. (IN LIQUIDATION) ACN 010 764 548

(Applicant) Respondent

UNIVERSITY OF CENTRAL QUEENSLAND

(First Respondent)

Davies J.A.
Derrington J.

de Jersey J.

Judgment delivered 24 October 1997

Judgment of the Court

1.          ORDERS MADE BELOW ON 1 DECEMBER 1996 AND 20 DECEMBER 1996 SET ASIDE.

2.          OUT OF THE MONEYS PAID INTO COURT BY CENTRAL QUEENSLAND UNIVERSITY:

(a)	THE APPELLANT CENTRAL ELECTRICS (CONTRACTING) PTY. LTD. BE PAID THE SUM OF $62,477.35 TOGETHER WITH PROPORTIONATE ACCRETIONS THEREON (IF ANY);
(b)	THE APPELLANT QUEENSLAND WINDOWS PTY. LTD. BE PAID THE SUM OF $14,101.07 TOGETHER WITH PROPORTIONATE ACCRETIONS THEREON (IF ANY).

3.          THE RESPONDENT TO PAY THE APPELLANTS' COSTS HERE AND BELOW.

CATCHWORDS:	STATUTORY INTERPRETATION - dispute between the appellants and respondent concerning a sum of money paid into court pursuant to s.11(5) of the Subcontractors' Charges Act 1974 - the appellants were subcontractors to the respondent who was a contractor of Central Queensland University for the construction of a building - whether the moneys were moneys payable to the contractor (respondent) under the building contract within the meaning of s.5(1) of the Act.
Wood Hall Ltd. v. Pipeline Authority (1978) 141 C.L.R. 443 Subcontractors' Charges Act 1974, ss.5(1), 11(5)
Counsel:	Mr. J. K. Bond for the appellants Mr. F. G. Forde for the respondent
Solicitors:	Hunt & Hunt for the appellants Dunhill Madden Butler for the respondent
Hearing Date:	9 September 1997

IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND

Appeal No. 10882 of 1996

Brisbane

Before Davies J.A.
Derrington J.
de Jersey J.

[Central Electrics (Contracting) P/L & Anor. v. A&P Constructions P/L (in liq)]

BETWEEN:

CENTRAL ELECTRICS (CONTRACTING) PTY. LTD. ACN 010 543 987

(Third Respondent) Appellant

and

QUEENSLAND WINDOWS PTY. LTD ACN 009 801 050

(Tenth Respondent) Appellant

AND:

A & P CONSTRUCTIONS PTY. LTD. (IN LIQUIDATION) ACN 010 764 548

(Applicant) Respondent

UNIVERSITY OF CENTRAL QUEENSLAND

(First Respondent)

REASONS FOR JUDGMENT - THE COURT

Judgment delivered 24 October 1997

The appellants were subcontractors to the respondent who was a contractor of Central

Queensland University ("the University") for the construction of a computer and information technology

building pursuant to a building contract dated 1 February 1993 ("the building contract"). The dispute

between the parties, here and below, concerns a sum of $192,699.40, moneys paid into court by the University pursuant to s.11(5) of the Subcontractors' Charges Act 1974 ("the Act") on 5 December

1994 and 19 July 1995. A notice of claim of charge pursuant to s.10 of the Act had been given by each

of the appellants on 27 January 1994. The amount claimed by the first appellant was $37,211.00. The

amount claimed by the second appellant was $164,870.04. The learned primary Judge ordered that

the moneys be paid out to the respondent and it is against that order that the appellants appeal.

The question is an apparently simple one; whether the moneys were moneys payable to the

contractor, the respondent, under the building contract within the meaning of s.5(1) of the Act. If they

were, or to the extent that they were, the appellants' charges attached to them and the appellants were

entitled to have a proportionate share of those moneys paid out to them. The learned primary Judge

held that no part of the moneys were moneys payable to the contractor under the building contract. It

is necessary to explain how this question arose.

Under the building contract, if the respondent defaulted in performance and failed within a

specified period of notice thereafter to show cause why certain powers should not be exercised by the

University, the University could take over the whole or any part of the work remaining to be completed.

However by letter dated 31 January 1994 to the University ("the 1994 agreement") the respondent

agreed to the University taking over the works under the building contract upon certain conditions.

The amount of $192,699.40 is a balance arrived at by a process of addition and subtraction

in consequence of the 1994 agreement. It is common ground that that process was as follows. The

amount of unpaid contract moneys under the building contract at the time the University took over the

work was $168,175.51. There were then three unconditional bank undertakings, one for the security

deposit under the contract of $53,786.00 and two for the total of retention moneys of $258,928.00 all

of which the University called up on 1 February 1994. Those three sums added together amounted to

$480,889.51. From that sum was then deducted the cost of completing the contract, presumably after 1 February, which was $288,190.11 leaving the above balance. There is no dispute between the

parties as to the correctness of these sums.

The question, in the end, is whether the character of the sums of $53,786.00 and $258,928.00,

precludes the balance sum or some part of it from being moneys payable to the respondent under the

building contract.

Clause 5.1 of the building contract provided:

"Security, retention moneys and performance undertakings shall, when the same or any of them are required, be provided and given for the purpose of ensuring the due and proper performance of the Contract and of satisfying the obligations of the Contractor under the Contract."

Clause 5.2 then provided that the contractor should give security to ensure the due and proper

performance of the contract in accordance with a formula which yielded the sum of $53,786.00. Clause

5.3 provided that the security could be in the form of an unconditional bank undertaking.

Clause 5.6 provided that retention moneys would be retained by the University from moneys

due under progress certificates. However cl.42.8 provided that, if the respondent elected to provide

an unconditional bank undertaking in lieu of retention moneys, it should be for five percent of the

contract price. The sum of $258,928.00 was five percent of the contract price.

Inexplicably, both the security and the retention moneys were initially provided by the

respondent in cash. Unconditional bank undertakings were substituted in August 1993. However

nothing turns on this, it being accepted, as appears plainly to be the case, that the unconditional bank

undertakings were provided pursuant to cll.5.3 and 42.8 respectively.

Subject to a condition which is not material, upon completion of the work by the respondent

the University would have been obliged under the building contract to release the security to the

respondent within one month of the issue of the certificate of practical completion: cl.5.2. The term "release" was plainly intended to include payment of money where the security was in cash: cl.5.3.

Similarly, upon completion by the respondent the retention moneys would have been payable to it:

cl.42.7. This latter clause had, in its original standard form, also obliged the University to return the

security to the respondent upon completion but, no doubt because of the inclusion of the above

provision in cl.5.2, this obligation was deleted.

Upon default by the respondent, the University was empowered under the building contract to

complete the work and recover from the respondent the cost of completion or deduct that cost from

moneys owing by it to the respondent, including retention moneys and, if those were insufficient, the

security: cll.44 and 46. It is implicit in these provisions that, in the case of deduction, the balance of

such moneys was payable to the respondent. Moreover, whatever the position may be under the Act,

the parties' intention under the building contract was that "retention moneys" and "security" should

include the proceeds of any unconditional bank undertakings given therefor. The University was entitled

to realise those undertakings at any time whilst it had a right to retain retention moneys and security.[1]

[1]            Cf. Wood Hall Ltd. v. Pipeline Authority (1979) 141 C.L.R. 443 at 453-4.

Under the 1994 agreement the University became entitled to complete the remaining work and

any rectification work and, for that and other purposes, to utilize:

"... so much of any moneys otherwise due under the contract to A. & P. Constructions,

including:

- any outstanding or further progress claims
- retentions
- security deposit."

It is also implicit in the 1994 agreement that, subject to the rights conferred on the University

under that agreement, retentions and security deposit were "moneys otherwise due under the [building]

contract to [the respondent]". The reference to "retentions" and "security deposit" in the 1994

agreement must also have been intended to refer to sums paid pursuant to the unconditional bank

undertakings for those undertakings were then the only means of producing moneys capable of being

described as retentions and security deposit and it is likely that, on 31 January, it was contemplated that

payment of those sums would be required as they were the following day.

In the present case, of course, the University, in completing the work, was not acting under

cl.44 of the building contract and, in deducting moneys owing to it by the respondent from the unpaid

contract moneys, the retention amount and the security deposit, it was not acting under cl.46. In both

cases it was acting pursuant to the 1994 agreement. That agreement provided that the conditions of the

building contract, not inconsistent with the 1994 agreement, should remain on foot with only such

modifications as were necessary to accommodate the 1994 agreement. In this respect, however, the

two were consistent: that in the event that the University took over and completed the work and

deducted from the moneys itemized in the 1994 agreement the cost of completion, the balance was

payable to the respondent under the building contract. Moreover it is common ground that, as between

the University and the respondent, that balance is payable to the respondent; and there can be no doubt

that the building contract is the source of that obligation. It is therefore, in the ordinary sense of those

words, payable to the respondent under the building contract.

It does not necessarily follow from the fact that the balance is, in the ordinary sense of those

words, money payable to the respondent under the building contract, that it can be characterized as

such within the meaning of s.5(1) of the Act. Nevertheless unless there is some basis for reading down the phrase "money payable to the contractor ... under the contractor's ... contract" in that subsection it

should be given its ordinary meaning.

The learned primary Judge read down the above phrase in s.5(1) to exclude the above balance

or, at least that part of it which included moneys paid pursuant to the unconditional bank undertakings.

The respondent supports that narrow construction, submitting that the phrase is limited to moneys

payable under progress certificates. Alternatively it submits that the respondent's entitlement to these

moneys arises, not because they are payable under the contract but because of an equitable right, albeit

related to its contractual rights.

In our view there is nothing in the context of s.5 or in the general context of the Act or in the

Act's evident purpose which requires any such limitation on the ordinary meaning of the phrase. Indeed

the immediate context of s.5 gives a contrary indication. In contrast with s.5(1), subs.(2) refers to

money " ... payable ... to the subcontractor for work done by the subcontractor under the subcontract".

It is unnecessary to consider whether retention moneys or the proceeds of an unconditional bank

undertaking in substitution therefor are moneys payable for work done under a contract. It is sufficient

to note that the limitation which the respondent seeks to impose, by implication, in subs.(1), or one

which is similar, is specifically imposed in the underlined words in subs.(2). There is no authority in

point. Road Surfaces Group Pty. Ltd. v. Brown,[2] Wood Hall Ltd. v. Pipeline Authority[3] and

[2] [1987] 2 Qd.R. 792.

[3] (1979) 141 C.L.R. 443.

Australasian Conference Association Ltd. v. Mainline Constructions Pty. Ltd. (in liq.)[4] were referred

[4] (1978) 141 C.L.R. 335.

to but none of them decides or even relevantly discusses the central question in issue here. For the
reasons we have given, the phrase should be given its ordinary meaning in subs(1).

We would therefore conclude that the balance sum of $192,699.40 was money payable to the

respondent under the building contract within the meaning of s.5(1). Once that conclusion is reached

the parties have agreed that the following orders should be made:

1.          set aside the orders made below on 1 December 1996 and 20 December 1996;

2.          order that out of the moneys paid into court by Central Queensland University:

(a) the appellant Central Electrics (Contracting) Pty. Ltd. be paid the sum of $62,477.35

together with proportionate accretions thereon (if any);

(b) the appellant Queensland Windows Pty. Ltd. be paid the sum of $14,101.07 together

with proportionate accretions thereon (if any).

We would accordingly make those orders. The parties could not agree on appropriate orders as to

costs. However we would order that the respondent pay the appellants' costs here and below.