Riteway Constructions P/L v Baulderstone Hornibrook P/L
[1997] QSC 236
•12 December 1997
IN THE SUPREME COURT
OF QUEENSLAND
No. 1987 of 1997
[Riteway Constructions P/L v. Baulderstone Hornibrook P/L]
BETWEEN:
RITEWAY CONSTRUCTIONS PTY LTD
Plaintiff
AND:BAULDERSTONE HORNIBROOK PTY LTD
First Defendant
AND:
THE CROWN IN RIGHT OF THE STATE OF QUEENSLAND
THROUGH THE DIRECTOR-GENERAL,
ADMINISTRATIVE SERVICES DEPARTMENT
Second DefendantJUDGMENT - DERRINGTON J
Judgment delivered 12 December 1997
CATCHWORDS:
Counsel:Mr R. Perry for the Plaintiff
Mr R. Wensley QC for the First defendant
Solicitors:McCullough Robertson for the Plaintiff
Minter Ellison for the First Defendant
Hearing date: 23 May 1997
IN THE SUPREME COURT
OF QUEENSLAND
No. 1987 of 1997
[Riteway Constructions P/L v. Baulderstone Hornibrook P/L]
BETWEEN:
RITEWAY CONSTRUCTIONS PTY LTD
Plaintiff
AND:BAULDERSTONE HORNIBROOK PTY LTD
First Defendant
AND:
THE CROWN IN RIGHT OF THE STATE OF QUEENSLAND
THROUGH THE DIRECTOR-GENERAL,
ADMINISTRATIVE SERVICES DEPARTMENT
Second DefendantJUDGMENT - DERRINGTON J
Judgment delivered 12 December 1997
This is an application by the first defendant, a contractor, under s. 21(1) of the Sub-Contractors Charges Act ("the Act") for cancellation or modification of the plaintiff's claim to a lien under the Act. The section provides that "the Court shall hear and determine summarily an application made pursuant to this section and may make such order as it thinks fit."
On 21 February 1997 the subcontractor gave a notice to the principal of a claim of charge in respect of the sum of $657,337.87 and on 7 March the contractor delivered notices of dispute of the claim pursuant to s. 11 of the Act alleging that the amount claimed in the charge "is not payable and will not become payable". The principal has retained the amount claimed in the notice from progress payments otherwise due to the contractor, and has since paid it into court.
The subcontractor now concedes that the quantum of the charge should be reduced to $520,289.08, and accordingly the balance may now be paid to the contractor without opposition. As the contractor is providing an unconditional bank guarantee for the balance at the usual commercial cost of such a security, for that reason it is "a person prejudicially affected" by the claim so as to have standing to bring an application under s. 21.
The plaintiff's claim has a number of components, which will be discussed separately, but there are some matters of general principle which should be decided first as a key to a number of the specific issues.
Many of the claims have a common factor in that the amount claimed is disputed either in whole or as to an as yet undetermined part because of the need for determination of an issue by measurement or by the decision of an intermediary appointed under the contract. The sub-contractor says that the charge should apply to the amount claimed, for otherwise the remedial provisions of the Act could be rendered nugatory by a deliberately wrongful challenge of a claim by the contractor that would delay the attachment of the lien until after payment of the money by the principal to the contractor. Conversely, the contractor says that a sub-contractor could oppressively and for an ulterior motive delay the contractor's receipt of payment from the principal by making excessive claims in areas that would need to be measured or which would require intermediate determination, and so the security should be limited to the case where the amount payable has been finally determined in accordance with the contract.
It is argued for the contractor that because the Act creates an unusual remedy in favour of a restricted class of persons, the courts have adopted a strict literal approach to its interpretation. In support of this, it has cited Re Queensland Tiling Service Pty Ltd [1978] Qd R 142 at 143 and ex parte Peter Fardaulys Pty Ltd [1983] 1 Qd R 345. Those authorities do not support the proposition. They merely say that the remedy is a statutory one and must be found within the four corners of the statute: ex parte Peter Fardaulys Pty Ltd at 347. While it is true that the Act gives preferential security to a particular class of person, there is good reason for that, and because the Act is of a remedial nature, it should not be constructed in a limited fashion. The scope of the protection it affords and the interference with contractual relationships that it authorises are limited by the language employed, but that does not mean that the language itself should be given a strict construction.
The relevant provisions of the Act are as follows:
"5. (2) The charge of a subcontractor shall secure payment in accordance with the subcontract of all money that is payable or is to become payable to the subcontractor for work done by the subcontractor under the subcontract."
"10. (1A) The claim shall be in respect of -
(a)money payable to the subcontractor at the date of the notice;
(b)money to become payable to the subcontractor after the date of the notice for work done by the subcontractor prior to that date.
(2) A notice of claim of charge may be given although the work is not completed or the time for payment of the money in respect of which the charge is claimed has not arrived, but where the work is completed shall be given within 3 months after such completion."
Emphasis should be placed on the reference in s. 5.(2) to "all money that is payable or is to become payable to the subcontractor for work done by the subcontractor under the contract." This means that security is designed to enforce only sums payable or to be payable under the subcontract for work done under it, and this excludes, for example, damages that might be payable for its breach: Grout Co (Australia) Pty Ltd v. Theis Contractors Pty Ltd [1985] 1 Qd R 238. This is made clear by s. 5.(2) where it says that the charge shall "secure payment in accordance with the subcontract". Accordingly, in order that the security apply, the payment must be provided for by the contract itself. In addition the word "debt" is used in ss. 9 and 23 of the Act to describe the money payable or secured. This identifies and limits the nature of the sum payable or to become payable that is to be covered by the security.
This does not mean that the amount be due and owing at the time of the notice, for it is clear from the sections set out above that it may include amounts that are to become payable; and s. 10.(2) confirms that it is not necessary that the time for the payment of the money in respect of which the charge is claimed has not arrived, provided that the work is completed. For this reason, Merritt Cairns Constructions Pty Ltd v. Wulguru Heights Pty Ltd [1995] 2 Qd R 521, 526 is of little assistance because it was dealing with the expression "money due".
It is of some relevance to note that in the standard form of contract, there is provision for payment by the contractor to the subcontractor within a nominated time after the certification of the amount due by the contractor's representative. Accordingly, when a certification is made, the amount is typical of an amount that would become payable within the description of the Act. This explains the thrust of that reference to futurity, and it is not necessary to go further to try to discover some other basis to justify it.
The resolution of the matter is to be achieved, not by the importation of concepts from the general law but by reference to the words of the Act itself and the limitations that are expressly or implicitly applied there. This is what was meant by Douglas J in Re Queensland Tiling Service Pty Ltd (supra) where he said that the scope of the Act had to be determined ex visceribus actus.
Because the Act refers to money that is to become payable, there is clearly no limitation of security to any money that is presently determined and payable. However, to the extent that the effect of the Act is to impose a security that is limited to a particular amount of money in the hands of the principal, as a matter of ordinary understanding, the reference to "money to become payable" must refer to a specific sum that will become payable. That specific sum must be objectively determinable at the date of the charge by reference to the contract.
For example, if work were to be done in a certain way and on completion to be valued by a certifier, upon which the certified value would be payable, it would not come within the Act, even though the value of the work might be capable of assessment otherwise.
The concept is an integrated one that includes the provision of a security in respect of a specific sum that is payable or will become payable, and this predicates the identification of the sum payable under the contract. Accordingly, if the amount payable depends upon the assessment of any factor within the judgment of an intermediary, the specific sum cannot be identified until that determination is made. The present contract has a number of provisions relevant to the present claim in which this is effective. It is desirable to move to the specific components and to discuss each according to this principle.
On the other hand, in determining these matters, it is relevant to consider whether the contractor defends the claim upon the basis that for some other reason it is not payable. The words of the Act refer to the claim when discussing the question of payability of the amount, and so it is irrelevant whether the claim is controverted. This is reasonable, for if it were otherwise a contractor could defeat the security by raising defences to the claim.
Re-levelling Claim - $287,965.84
This matter has been referred to arbitration. It is a claim for variations in accordance with the terms of the contract. The contractor denies that it is a variation and claims that the work done was by way of rectification. The contractor also invokes a time limitation in respect of the provision by the subcontractor of notice of the claim, but does not appear to have challenged the amounts. However, there does not appear to have been agreement of the pricing of the variation, and under cl. 40.3 of the contract, there must be valuation of the work under cl. 40.5. This means that the amount has not been determined and so there is no sum payable or to become payable, but only an indeterminate figure. Accordingly this item does not come within the security.
Had the amount been otherwise payable, then because the claim would have been for a sum that was payable or to become payable if it were successful, the security would probably have operated, and not have been affected by the contractor's defences, for according to the way in which the section is framed it is necessary only to look at the claim in order to determine that issue and it does not matter whether the claim is challenged.
It might be remarked in passing that some aspects of this claim clearly amounted to aspects of a damages claim, which are outside the scope of the Act.
Variations - $8278
The subcontractor has conceded that this sum is probably part of the re-levelling claim, and falls with it.
Payment to Northwest - $66,225.58
This is a sum deducted from retention money held by the contractor against the subcontractor. It is related to re-levelling work done by Northwest on the instructions of the contractor, allegedly in rectification of faulty workmanship by the subcontractor. That allegation is in dispute, and the subcontractor denies the contractor's entitlement to make such a deduction from the retention moneys. But for the contractor’s defence, at this time the retention moneys would be an amount that will become payable in the future, for it seems that the contractor is making no other claim against them.
As they come within the description of the Act, the security validly applies to it. As it has been discussed above, it is the claim that is considered, and here it refers to a future sum that is determinable under the contract. It does not matter that there is a dispute as to the amount whereby the contractor claims that it was entitled to make a deduction from it. If the contractor is wrong, it is within the obvious purpose of the Act that the subcontractor be protected.
Other retention - $22,257.07
The same comments apply to this as to the last item. It does not matter that the subcontractor is entitled to the retention money only when the work is finished without defects or omissions: Hoening v. Isaacs [1952] 2 All ER 176, 181 per Denning LJ. The claim is for a specific sum that is payable in the future under the contract, and it does not matter that there is the potential for reduction of the sum on the possibility of defects or omissions. If there were a suitable case on the merits for the reduction of the security, then the contractor may apply to the Court for a modification of the charge accordingly, but apart from that, there is no good reason why retention money should not be the subject of the remedy provided for by the Act.
Remeasure Claim - $143,181.98
This arises out of a claim for an adjustment of the contract price if the priced bill of quantities is in error. The amount of the adjustment is to be determined in a manner provided for by the contract by way of valuation by the contractor's representative.
Until that occurs, the amount of the subcontractor's entitlement under the contract is unknown and as such cannot be payable even if the factor of futurity is included, since an unknown sum cannot now be payable even in the future. When a sum is determined, then it will become capable of being payable. This therefore does not come within the provision.
Unapproved Variations - $2,504.97
This claim is still being evaluated, and as the amount has not been determined in accordance with the contract, it cannot be the subject of the security.
Monarch Internal Wall Variation
With the approval of the subcontractor, the contractor reduced the scope of the work. This required a reduction in the sum payable under the contract. That amount has been calculated by the contractor as $22,323 while the subcontractor values it at $12,295.75, making a difference of $10,027.25.
As the contractor's claim is for an amount that is claimed to be due under the contract, it should not lose its security because the contractor claims to deduct a sum in excess of the amount agreed to by the subcontractor. To the extent that the subcontractor admits a particular sum, then the contract price is reduced by that amount, but in respect of the reduced contract price, the claim of the subcontractor is for an amount said to be payable. Accordingly, the security should continue to apply against the disputed amount.
Provisional Sums
These items are required by cl. 11(a) of the contract to be valued under cl. 40.5. This has not yet been done and until it is done, the dispute between the parties as to the amount of the adjustment to be made has not been determined in accordance with the contract, and accordingly the security cannot apply.
Conclusion
In the result, the charge validly applies only against $98,509.90 of the amount for which the contractor has provided security, being $66,225.58 in respect of the payment to Northwest, $22,257,07 in respect of other retention moneys, and $10,027.25 in respect of the Monarch Internal Wall Variation, and the amount of that security should at least be reduced to that sum. It is argued that the size and stability of the contractor is such that the charge should be lifted altogether, but that is a risk which should not be thrust on the subcontractor. If the charge is subsequently proved to be claimed without reasonable grounds, then the contractor may recover appropriate damages in respect of the costs of the security being provided while the matter is pending.
It is ordered that the charge claimed by the respondent contractor be modified by reduction to the sum of $98,509.90.
Costs
Because the parties were about equally successful as to issues, no order for costs should be made.
There will be liberty to apply.
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