Transfield Pty Ltd v Fondside Australia Pty Ltd (Receivers and Managers Appointed) (In Liquidation)

[2000] QSC 480

SUPREME COURT OF QUEENSLAND

CITATION:

Transfield Pty Ltd v Fondside Australia Pty Ltd (Receivers and Managers Appointed) (In Liquidation) [2000] QSC 480

PARTIES:

TRANSFIELD PTY LTD (ACN 000 854 688)
(first applicant)
and
WILLBROS INTERNATIONAL PTY LTD
(ACN 002 699 318)
(second applicant)
and
MACMAHON CONTRACTORS PTY LTD
(ACN 007 611 484)
(third applicant)
v
FONDSIDE AUSTRALIA PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION)
(ACN 074 399 045)
(respondent)

FILE NO:

S9956 of 2000 Brisbane Registry

DIVISION:

Trial Division

DELIVERED ON:

21 December 2000

DELIVERED AT:

Brisbane

HEARING DATE:

11 December 2000

JUDGE:

Mullins J

ORDER:

1.  The applicants be granted leave nunc pro tunc pursuant to section 500(2) of the Corporations Law to proceed against the respondent; and
2.  The respondent's form 1 notice of claim dated 13 October 2000 be cancelled.

CATCHWORDS:

BUILDING AND ENGINEERING CONTRACTS – SUBCONTRACTOR'S CHARGES – whether Subcontractors' Charges Act 1974 (Qld) applicable to subcontract where work is performed on land outside Queensland.

Acts Interpretation Act 1954

Corporations Law

Subcontractors' Charges Act 1974
Subcontractors' Charges Act Amendment Act 1976

Amin Rasheed Shipping Corporation v Kuwait Insurance Co [1984] AC 50
Barcelo v Electrolytic Zinc Co of Australasia Ltd (1932) 48 CLR 391
Re DA Story Pty Ltd [1993] 2QdR 355
Douglas Financial Consultants Pty Ltd v Price [1992] 1QdR 243
Dowstress (Qld) Pty Ltd v The Mission Congregation Servants of the Holy Spirit [1987] 1 QdR 150
Re Gradeline Contracting Pty Ltd [1998] 2QdR 251
Groutco (Australia) Pty Ltd v Thiess Contractors Pty Limited [1985] 1QdR 238
Jumbunna Coal Mine NL v Victorian Coal Miners' Association (1908) 6CLR 309

COUNSEL:

AJH Morris QC and K B Varley for the applicants
S H Couper QC and S E Brown for the respondent

SOLICITORS:

Barwicks Wisewoulds for the applicants
Blake Dawson Waldron for the respondent

1. MULLINS J:  The applicants (to whom I shall refer as the applicant) conduct a joint venture known as "Transfield Willbros MacMahon Joint Venture" in respect of the construction of the Eastern Gas Pipeline that runs from Longford, Victoria to Horsley Park, New South Wales for Duke Australia Operations Pty Ltd ("Duke").   

1. The applicant entered into a subcontract dated 16 December 1999 with the respondent in relation to the construction of part of that pipeline on land within  New South Wales. 

1. The respondent claims to have carried out work under the subcontract between 22 October 1999 and 27 August 2000, that the sum of $9,730,823 is payable by the applicant to the respondent for that work and that the sum is unpaid. 

1. Receivers and managers Mr John Greig and Mr Robert Duff were appointed to the respondent on 2 August 2000.  The respondent was also wound up on 5 September 2000.  By notice dated 13 October 2000 the receivers and managers on behalf of the respondent gave notice of intention to claim charge in form 1 to Duke in respect of the money that was then or would be payable by Duke to the applicant in respect of work done by the respondent in respect of Duke's contract with the applicant.  The notice is in respect of the sum of $9,730,823. 

1. The applicant seeks an order pursuant to section 21 of the Subcontractors' Charges Act 1974 ("the Act") that the respondent's form 1 notice of claim dated 13 October 2000 be cancelled. It is not in issue that the applicant is prejudicially affected by the claim of charge and therefore has standing pursuant to section 21 of the Act to bring this application.

1. The preliminary issue argued at the hearing of the application was whether the Act applied to the subcontract between the applicant and the respondent.

1. Section 5 of the Act provides:

"5.(1)  Where an employer contracts with a contractor for the performance of work upon or in respect of land or a building, or other structure or permanent improvement upon land or a chattel, every subcontractor of the contractor shall be entitled to a charge on the money payable to the contractor or a superior contractor under the contractor's or superior contractor's contract or subcontract.
(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.
(3)  The total amount recoverable under the charges of subcontractors shall not exceed the amount payable to the contractor or subcontractor under the contract or subcontract, as the case may be."

1. Relevant definitions contained in section 3(1) of the Act are:

"'contractor' as regards an employer, means a person who contracts directly with the employer to perform work and, as regards a subcontractor, means a person with whom the subcontractor contracts to perform work;

'employer' means a person who contracts with another person for the performance of work by that other person, or at whose request or on whose credit or behalf, with the person's privity and consent, work is done, and includes all persons claiming under the person whose rights are acquired after the work is commenced, and in relation to a subcontractor includes the contractor or other subcontractor with and under whom the person has contracted, but a mortgagee who advances money to an employer shall not be deemed to be an employer by reason thereof;

'subcontractor' means a person who contracts with a contractor or with another subcontractor for the performance of work;

'work' includes work or labour, whether skilled or unskilled, done or commenced upon the land where the contract or subcontract is being performed by a person of any occupation in connection with-

(a)the construction, decoration, alteration or repair of a building or other structure upon land;  

(b)the development or working of a mine, quarry, sandpit, drain, embankment or other excavation in or upon land;

(c)the placement, fixation or erection of materials, plant or machinery used or intended to be used for a purpose specified in paragraph (a) or (b);

(d)        the alteration or improvement of a chattel;

and includes also the supply of materials used or brought on premises to be used by a subcontractor in connection with other work the subject of a contract or subcontract but does not include-

(e)the mere delivery of goods sold by a vendor under a contract for the sale of goods, to at or upon land;

(f)         work or labour done or commenced by a person-

(i)        under a contract of service;

(ii)in connection with the testing of materials or the taking of measurements or quantities;

(g)the supply under a contract of hire of materials, plant or machinery not intended to be incorporated in the work."

1. Clause 5 of the subcontract provides:

"The Subcontract shall be governed by, construed and enforced in accordance with the Laws of the State of Queensland Australia, without giving effect to the principles of conflict of laws."

Clause 21.8 of the general conditions of the subcontract is in identical terms.  It appears that there is a similar provision in the general conditions of the head contract between Duke and the applicant.

1. It was submitted on behalf of the applicant that the Act did not apply on the ground that there is no express statement or clear implication in the Act that it was intended to apply to work performed outside Queensland. It was submitted that at most the effect of the choice of law clause in the subcontract is that Queensland law determines the validity of the contract and the obligations assumed by the parties to the contract, but that the parties cannot extend the application of the Act to contracts and work to which it would not otherwise apply.

1. It was submitted on behalf of the respondent that the express adoption by the parties in the subcontract of the law of Queensland is sufficient to establish the necessary nexus between the subcontract and the Act. Reliance was placed on Barcelo v Electrolytic Zinc Co of Australasia Ltd (1932) 48 CLR 391 and Douglas Financial Consultants Pty Ltd v Price [1992] 1QdR 243, 248-250.

1. The starting point is to consider the nature and effect of the Act. The Act provides for the creation of a statutory charge in favour of a subcontractor in respect of a sum of money owed to the subcontractor under a subcontract by a contractor. In its simplest form the charge is imposed on moneys which are owing to the contractor by the employer. Some background to the Act is set out in the judgment of Campbell CJ in Groutco (Australia) Pty Ltd v Thiess Contractors Pty Limited [1985] 1QdR 238 at 242-245.

1. The Act therefore creates rights in favour of the subcontractor against the employer where there is otherwise no contractual relationship between them.  The charge is a statutory means to enable the subcontractor to have recourse to funds due to the contractor by the employer. 

1. The critical provision in the Act for determining its operation is section 5(1). The first condition is that there must be a contract between an employer and the contractor pursuant to which the employer has contracted with the contractor for the performance of work "upon or in respect of land or a building, or other structure or permanent improvement upon land of a chattel". Because of reference in section 5(1) to performance of "work", the definition of "work" in section 3(1) of the Act is taken into account in determining whether the contract between the employer and the contractor is of a type which falls within section 5(1) of the Act. It is this first condition that is relevant to the preliminary issue in this matter. For completeness, I will mention the second condition for the operation of section 5(1) of the Act which is that there must be money payable to the contractor under the contractor's contract with the employer (using the simplest application of the Act).

1. Because of the definition of "work" which is used in the definition of "subcontractor", the subcontractor with the entitlement to lodge a charge must have a contract with the contractor for the performance of work upon the land where the head contract is being performed:  Dowstress (Qld) Pty Ltd v The Mission Congregation Servants of the Holy Spirit [1987] 1 QdR 150 at 157 per Moynihan J with whom Kelly ACJ agreed and ReGradeline Contracting Pty Ltd [1998] 2QdR 251, 252-254. The respondent submitted that the better view is that the subcontract work need not be performed upon the land where the head contract was being performed, relying on the decision of Ryan J in ReDA Story Pty Ltd [1993] 2QdR 355, 358-359. For the reasons expressed by Byrne J in Re Gradeline Contacting Pty Ltd, I will follow the construction adopted by the majority in Dowstress.  That construction gives effect to the words "upon the land where the contract or subcontract is being performed" in the definition of "work" as applicable in all cases, even though the definition is expressed in terms which are inclusory.  It is consistent with the legislative history of this definition referred to below that the definition is intended to apply in all cases.

1. The Act does not purport to modify either the terms of the subcontract or the terms of the head contract.  It is not concerned with importing implied obligations into either the subcontract or the head contract.  Its operation is superimposed over the existing two sets of contractual arrangements without altering them as such.

1. The only provision in the Act which touches on the operation of the actual terms of either the subcontract or the head contract is section 24 which provides:

"A contract or agreement by an employer or a contractor or subcontractor that, if it were valid, would have the effect of disentitling the employer, contractor or subcontractor to the benefits conferred by this Act shall to that extent be void."

The purpose of that provision is to invalidate any attempt by a subcontractor, head contractor or employer to contract out of the imposition of the statutory charge. 

1. It is common ground between the parties that the proper law of the subcontract is the law of Queensland.  The parties adopt different approaches to the consequences of that. 

1. The proper law of a contract determines what law is applied in relation to the meaning, validity and effect of the contractual obligations:  Amin Rasheed Shipping Corporation v Kuwait Insurance Co [1984] AC 50. The purpose of the proper law of a contract is also reflected by the express terms of clause 5 of the subcontract.

1. Except to the limited extent provided for in section 24 of the Act which I do not consider to be determinative, the Act has nothing to do with the construction, validity, method of performance or enforcement of the subcontract. The imposition of the charge on the moneys payable by the employer under the head contract does affect the method of performance of the head contract by means of the imposition of the statutory charge.

1. The submission of the respondent assumes that it follows merely from the proper law of the subcontract being the law of Queensland that the Act, as part of the law of Queensland, must apply to the subcontract. The two authorities relied on by the respondent do not support this proposition. They support the proposition that where a statute by its general words may have extra territorial effect, it is a matter of construction of the statute whether it does have that extra territorial effect and whether it applies to the relevant transaction.

1. Barcelo concerned the application of the Financial Emergency Act 1931 (Vic).  It had the effect of reducing the interest payable pursuant to a contractual obligation.  The statute was in general terms.  It was held as a matter of construction to apply to debentures where the governing or proper law of the obligation was Victorian, even if the interest were not payable under the debentures in Victoria. 

1. The determination of the question in Douglas Financial Consultants of whether section 26 of the Motor Vehicles Securities Act 1986 applied to the purported sale in Queensland of a vehicle situated in Queensland, so as to extinguish the title of an interstate owner who had failed to register his interest in Queensland under that statute was determined as a matter of construction of section 26 of the Queensland Act.

1. The Legislature has selected as a condition for the creation of the charge, even when the performance of the work is on a chattel, that it be upon the land where the head contract is being performed.  The insertion of the words "upon the land where the contract or subcontract is being performed" in the definition of "work" was inserted by the Subcontractors' Charges Act Amendment Act 1976 for the purpose of restricting the operation of the Act. That is not only apparent from the effect of the insertion of those words, but by reference to the speech in reply on the motion that the Amendment Act be read a second time: Queensland Parliamentary Debates, Hansard, 14 April 1976, p3755.

1. The reference in a Queensland Act to "land" must prima facie be taken to be a reference to land within the jurisdiction:  Jumbunna Coal Mine NL v Victorian Coal Miners' Association (1908) 6CLR 309, 363. In any case, section 35(1)(b) of the Acts Interpretation Act 1954 provides that in an Act a reference to a locality, jurisdiction or other thing is a reference to such a locality, jurisdiction or other thing in and of Queensland. The reference to "land" in both section 5(1) and the definition of "work" in section 3(1) of the Act must be a reference to land in Queensland. There are no other indications in the Act as to any other basis for giving some territorial limitation to its operation. It is not logical to choose the proper law of the subcontract as the nexus, when the statutory charge affects the performance of the head contract. It is logical that the territorial nexus is that condition for the creation of the charge which has been given critical importance by the Legislature.

1. As a matter of construction of the Act, I find that the Act applies where the land upon which the work under the head contract is being performed is within Queensland. As the construction of the pipeline the subject of the head contract in this matter was performed in New South Wales, the Act has no application to the respondent's claim under the subcontract. The choice of Queensland law as the proper law of the subcontract cannot give effect to the Act as between the parties to the subcontract and the employer, if the Act by its own terms does not apply to the subcontract.

1. The applicant sought leave pursuant to section 500(2) of the Corporations Law to bring this application.  As the bringing of this application is the only effective way of cancelling the charge, it is appropriate that the leave be granted.  That leave was not opposed by the respondent.

1. There were other grounds argued by the applicant in support of the application.  In view of the conclusion I have reached on the preliminary issue, it is unnecessary to deal with those grounds.

1. I therefore order:

1.The applicants be granted leave nunc pro tunc pursuant to section 500(2) of the Corporations Law to proceed against the respondent; and

2.The respondent's form 1 notice of claim dated 13 October 2000 be cancelled.

1. I will hear submissions on the question of costs.