Re Kemp

[1993] QCA 9

IN THE COURT OF APPEAL	[1993] QCA 009
SUPREME COURT OF QUEENSLAND

Appeal No. 171 of 1992

BETWEEN:

GARY JOHN KEMP

(Applicant) Appellant

AND:

COASTAL CONSTRUCTIONS PTY. LTD.

(Respondent) Respondent

JUDGMENT OF THE COURT

Delivered the Eleventh day of February 1993

This is an appeal from an order of the Supreme Court dismissing an application for leave to commence an action against the respondent, a corporation to which provisional liquidators were appointed on 19 March 1992. The application was made under s.471(2) of the Corporations Law which reads as follows:

"Where an order has been made for the winding up of a company, or a provisional liquidator has been appointed in respect of a company, no action or other civil proceeding may be commenced or proceeded with against the company except:

(a) by leave of the Court; and

(b)  in accordance with such terms as the Court imposes".

The action the subject of the application was one begun in the District Court on 6 May 1992, seeking relief under the Subcontractors' Charges Act 1974 ("the Act") and the ground upon which the order was made was that the suit had no prospect of success.

The appellant, according to the evidence, completed a subcontract for the respondent ("the contractor") which was part of work which the contractor had agreed to perform for the principal, Queensland Meat Export Co. Pty. Ltd. ("the employer"). On 13 February 1992, the appellant gave notice of intention to claim a charge against the employer on moneys "that are now or will be payable" by the employer to the contractor. That notice was given under s.10 of the Act, the effect of which is, so far as relevant, set out below. On 19 March 1992, provisional liquidators were appointed to the contractor, as we have mentioned and on 9 April 1992, a plaint was issued out of the District Court, Townsville by the appellant against the contractor in respect of the sum the subject of the charge. The judge from whom this appeal is brought held that that action was not properly constituted, in that the appellant should have sued the employer. His Honour held that the charge was therefore extinguished and the correctness of that view is challenged in this appeal.

Section 5 of the Act gives a person in the position of the appellant - a subcontractor - a charge for the performance of work of the kind here in question on the money payable to the contractor. Under s.10, a subcontractor who intends to claim such a charge must give notice to the employer containing certain information and also a notice of having made the claim to the contractor to whom the money is payable. Under s.11, where such a notice is given, the person to whom it is given must retain money to satisfy the claim; that is, in circumstances such as those with which the Court is presently concerned, the employer must retain enough out of the money due to the contractor to satisfy the applicant's claim. Under s.11(2), if the employer does not do so, he is personally liable to pay the amount of the claim, not exceeding the amount that he was required to retain. Section 12 reads in part as follows:

"(1) Where the person to whom notice of claim of charge has been given does not pay or make satisfactory arrangements for paying to the claimant the amount claimed, the subcontractor may recover the amount of the charge from the person by whom the money subject to the charge is payable.

(2) Claims and all other matters arising under this Act between a person claiming a charge and any other person alleged to be liable to pay an amount claimed or otherwise interested in money that may be affected by a charge or claim of charge and between persons or classes of persons claiming a charge may be heard, determined and enforced by proceedings pursuant to this Act in a Court of competent civil jurisdiction".

The suit which was begun on 9 April 1992 ("the first

action") was not a claim of the kind contemplated by s.12(1).
Under it, the appellant claimed the relevant sum:

"... due to the plaintiff pursuant to the provisions of [the Act] by Queensland Meat Export Company from monies which are now or will be payable by Queensland Meat Export Company to the defendant in respect of work done ...".

The claim was not for judgment in respect of that sum against the employer, which was not joined; the first action was brought against the contractor only. What appears to us to have been contemplated by the draftsman of the claim made by the plaint was that an order would be made in respect of the fund constituted by money due from the employer to the contractor. The evidence discloses that shortly before the first action was begun, there were discussions between solicitors in consequence of which a letter dated 1 April 1992 was written on behalf of the employer advising that it intended to pay into court the money it had retained "so as to be discharged of all further liability and costs of any proceedings". The employer had, under s.11(5), a right to pay into court, at any time after notice of claim of the charge was given, the amount it was required to retain in response to the notice. By s.11(6), such a payment discharges the employer from all further liability in respect of the amount paid and costs. It appears that the appellant's knowledge of the intention of the employer to pay into court prompted the form of the first action; it did not seek to "recover the amount of the charge from the person by whom the money subject to the charge is payable", as it might have done under s.12(1).

Rather, it brought an action within the broader description in s.12(2), namely a claim "between a person claiming a charge and any other person ... interested in money that may be affected by a charge or claim of charge ...".

The importance of the considerations just discussed is that it was argued on behalf of the contractor that, as had been held below, the appellant's charge was extinguished under s.15(3) of the Act; sub-ss.(1) and (3) of s.15 read as follows:

"(1) A proceeding in respect of a charge
under this Act -

(a)  in the case of a claim of charge in respect of retention money only, shall be commenced within four months after such retention money or the balance thereof is payable and no later;

(b) in all other cases, shall be commenced within two months after notice of claim of charge has been given pursuant to section 10 and no later;

(c) shall be brought by way of action.

...

(3) Every charge shall be deemed to be extinguished unless the subcontractor duly commences a proceeding under this section to enforce it".

It will be noticed that the charge is extinguished unless "a proceeding under this section to enforce it" is duly commenced; sub-s.(3) does not say that the proceeding must be one of the kind mentioned in s.12(1), to recover the amount of the charge from the person by whom the money subject to the charge is payable. In our view the first action was within the description "a proceeding under this section" in s.15(3). That expression appears to be a reference back to s.15(1), which speaks of "a proceeding in respect of the charge under this Act".

It seems clear that it would have been, to put the matter broadly, inappropriate if the appellant had sued the employer after it had paid into court the money it was required to retain. At that stage, there could have been no possible claim under s.12(1). Here, the payment into court was foreshadowed about 1 April, but made on 15 April, six days after the first action was begun. What the appellant did was to institute a proceeding to determine the fate of the moneys payable by the employer; rightly, as events showed, he expected that the money retained would be paid into court and that it would therefore be unnecessary to involve the employer in the litigation.

Counsel for the respondent, in support of the judge's decision, referred to S & S Contractors (a firm) v. Gold Coast Co-operative Plantation Society Limited (in liquidation) [1981] Qd.R. 228 and to Stumann v. Spansteel Engineering Pty. Ltd. [1986] 2 Qd. R. 471 as authority for the view that unless the employer is joined, it cannot be said that a proceeding under s.15 has been duly commenced. The more directly relevant case is the latter, in which the subcontractor sued the contractor and one I.G. Harrison, the latter apparently being intended to stand in the place of the employer. The report does not disclose what claim was made in the action, but it seems clear that the unsuccessful appellant sought to support the proposition that a proceeding in respect of the charge had been brought only on the basis that the claimant had sued under s.12(1): see at p.474. Presumably, then, the action was one in which the subcontractor sought to recover the amount of the charge from the employer; such an action could not properly be brought unless the employer were joined as a defendant. Here, there was no claim against the employer and, in particular, no claim to recover money from it. In the Stumann case, it was held that failure to join the employer was fatal, extinguishing the charge, but the case appears to be an authority only on the way in which s.12(1) claims must be brought.

The authority which was followed in that just discussed, namely S & S Contractors v. Gold Coast Co-operative Plantation Society Limited [1981] 2 Qd.R. 228, was one in which the question of joinder of the employer was not directly in issue. There, the question was whether failure on the part of a subcontractor to join the contractor in the first instance was fatal; it was held it was not, on the ground that failure to join a necessary party does not mean that the action is not "duly commenced" (232). The Court held that the employer was also a necessary party (230, 231) and some of what was said may imply that failure to join the employer, a necessary party, is fatal, whereas failure to join the contractor, also a necessary party, is not. It is our opinion that an action of the present kind, designed to obtain orders disposing of a fund in which the employer claims no interest and not seeking any judgment for payment of money by the employer, may be "duly" commenced, even if the employer is not joined; of course, circumstances may necessitate the later joinder of an employer who has not joined in the first place.

On 1 May 1992, the appellant gave a further notice of

charge, substantially in the same form as had been given on 13 February 1992 and followed that by issuing further proceedings in the District Court. The second action, begun on 6 May 1992, was substantially in the same form as the first except that the employer was made a defendant. It is a reasonable inference that this course was taken because of apprehension that the charge the subject of the first notice had been extinguished by failure to bring, in order to enforce it, an action to which the employer was a party. The second action was brought without leave having been obtained, under s.471 of the Corporations Law quoted above, to sue the contractor. As we have explained, leave was refused and it is that refusal which is the subject of this appeal. We are of opinion that the basis on which the matter was decided below, namely that the charge was extinguished by a failure to bring such an action as s.15(3) required was in error. The judge held that because of that failure, the second action could not succeed and leave would therefore not be given.

His Honour's conclusion was sought to be supported on an alternative ground, namely that if the charge was still good, then there was no need for the second action. On the face of it, there is something in that contention, but we are reluctant to give effect to it. No defence has been delivered in either action. It appears that the respondent may wish to raise questions not dealt with to date, some of them of a quite technical kind; an example is that, as counsel for the respondent explained, it was proposed to argue that the first action, which also required leave under s.471 of the Corporations Law, was defective for want of such leave, because the relevant order granting leave was defectively drawn. The respondent's attitude appears to be that it will not necessarily disclose its answers to the claim of charge until it has to. Counsel for the contractor informed us that it disputes liability to pay the amount the subject of the claim;

it appears, then, that the contractor is presently in breach of its obligation to give notice under s.11(3)(b) which requires that, in those circumstances, notice of dispute be given.

The provisional liquidators are no doubt using funds which might otherwise go to creditors, including perhaps the appellant, to pay for this litigation. It seems to us to be undesirable that there be any further fragmentation of the issues, leading to the expenditure of inordinate sums of costs on what is, after all, a fairly small dispute. The respondent is in the hands of provisional liquidators who will, no doubt, do nothing to inhibit the early and economical final disposition of the appellant's claim to the charge. It is unfortunate that there have been at least four hearings related to the claim, with no final resolution.

The respondent's contention that leave should be refused on the ground that the second action has become unnecessary must be rejected. Both the actions should be heard together, to minimise expense; it will therefore be ordered that the two actions we have mentioned, Plaint No. 147 of 1992 and Plaint No. 182 of 1992, both pending in the District Court at Townsville, be consolidated. The appeal is allowed, the orders made by the learned primary judge set aside and in lieu it will be ordered that the appellant have leave nunc pro tunc to commence Action No. 182 of 1992 in the District Court, Townsville, that the costs of the proceedings below be costs in the consolidated proceeding and the costs of this appeal be taxed and paid by the respondent.

IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND

Appeal No. 171 of 1992

BETWEEN:

GARY JOHN KEMP

(Applicant) Appellant

AND:

COASTAL CONSTRUCTIONS PTY. LTD.

(Respondent) Respondent

_______________________________________________

The Chief Justice
Mr. Justice Pincus

Mr. Justice McPherson

_______________________________________________

Judgment of the Court delivered on 11th

February, 1993.

_______________________________________________

THE TWO ACTIONS PLAINT NO. 147 OF 1992 AND
PLAINT NO. 182 OF 1992, BOTH PENDING IN THE
DISTRICT COURT AT TOWNSVILLE, BE CONSOLIDATED.
APPEAL ALLOWED.
ORDERS MADE BELOW ARE SET ASIDE AND IN LIEU IT
IS ORDERED THAT THE APPELLANT HAVE LEAVE NUNC
PRO TUNC TO COMMENCE ACTION NO. 182 IN THE
DISTRICT COURT TOWNSVILLE.
COSTS OF PROCEEDINGS BELOW TO BE COSTS IN THE
CONSOLIDATED PROCEEDING.
COSTS OF THIS APPEAL TO BE TAXED AND PAID BY THE

RESPONDENT.

_______________________________________________

IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND

Appeal No. 171 of 1992

Before the Court of Appeal
The Chief Justice
Mr. Justice Pincus

Mr. Justice McPherson

BETWEEN:

GARY JOHN KEMP

(Applicant) Appellant

AND:

COASTAL CONSTRUCTIONS PTY. LTD.

(Respondent) Respondent

JUDGMENT OF THE COURT

Delivered the Eleventh day of February 1993

MINUTE OF ORDER:  1. The two actions, Plaint No. 147 of 1992 and Plaint No. 182 of 1992, both pending in the District Court at Townsville, be consolidated.

2. The appeal is allowed.

3.   The orders made below are set aside and in lieu it is ordered that the appellant have leave nunc pro tunc to commence Action No. 182 in the District Court, Townsville.

4.    Costs of the proceedings below are to be costs in the consolidated proceeding.

5.   Costs of this appeal are to be taxed and paid by the respondent.

CATCHWORDS:	BUILDING AND ENGINEERING CONTRACTS - SUB- CONTRACTOR'S CHARGES - Appeal from dismissal of application for leave to commence action against respondent company in provisional liquidation - whether action against employer properly constituted - whether charge extinguished per s.15.
Corporations Law, s.471(2), Subcontractors' Charges Act 1974, ss.5, 10, 11, 12, 15
Counsel:	C.A. White for the Appellant R. Derrington for the Respondent
Solicitors:	Nehmer Davenport Dean McKee t/a for Cooper Grace & Ward for the Appellant Carter Newell for the Respondent
Hearing Date(s):	19 November 1992