W Cook Builders Pty Ltd v Lumbers & Ors
[2005] SADC 153
•15 November 2005
DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
W COOK BUILDERS PTY LTD v LUMBERS & ORS
Judgment of His Honour Judge Beazley
15 November 2005
EQUITY - GENERAL PRINCIPLES - ASSIGNMENTS IN EQUITY - EFFECT OF EQUITABLE ASSIGNMENT AND RIGHTS OF ASSIGNEE - RIGHT OF ASSIGNEE TO SUE IN OWN NAME
Effect of equitable assignment of benefit of a bilateral executory building contract for consideration - right of assignee to sue in own name - effect of stay of proceedings against the assignor for failure to comply with order for security for costs - assignment of Contract involving personal trust - effect of failure to call witness - Jones v Dunkel inference - whether claim may be made against owners who were unaware that assignment had occurred - whether notice required before action.
Builders Licensing Act 1986 s39; Workers Liens Act 1893 ss2, 7, 10 and 16, referred to.
Pavey and Matthews Pty Ltd v Paul (1987) 162 CLR 221; Angelopoulos v Sabatino (1995) 65 SASR 1; Southway Group Ltd v Wolff (1991) 57 BLR 33; Thomas v National Australia Bank [2000] 2 Qd R; Linden Gardens Trust Ltd v Lenesta Sludge Disposals (1994) 1 AC 85; Tolhurst v Associated Portland Cement Manufacturers (1902) 2 KB 660 at 688; Nunkuwarrin Yunti v A L Seeley Constructions (1998) 72 SASR 21, considered.
CONTRACTS - BUILDING, ENGINEERING AND RELATED CONTRACTS - REMUNERATION - RECOVERY ON QUANTUM MERUIT
Equitable assignee an unlicensed builder - effect of Builders Licensing Act 1986, s39 - "inadvertence" - claim in restitution - free acceptance - unjust enrichment - quantum meruit - Workers Liens Act, s10 - is assignee a "contractor" - assessment of quantum of plaintiff's claim - equitable set off.
W COOK BUILDERS PTY LTD v LUMBERS & ORS
[2005] SADC 153Introduction
This action arises out of the construction of a quite distinctive house at Gulf Point Drive at North Haven, between the months of November 1993 and May 1995. The cost of the construction exceeded $1,000,000.
It concerns the entitlement of a building company (now in liquidation) to be remunerated for the work it alleges it performed with respect to the construction of the house, notwithstanding that it was neither a party to the building agreement nor the holder of a licence pursuant to the Builders’ Licensing Act 1986. It claims the sum of $274,791 alleged to be the balance outstanding with respect to the construction.
The plaintiff W Cook Builders Pty Ltd (in liquidation) (“Builders”) commenced proceedings against Matthew Lumbers and Warwick Lumbers (“the Lumbers”) and W Cook and Sons Pty Ltd (“Sons”) claiming the balance alleged to be owing on a mixed cost plus and construction management basis, in connection with the construction of the house.
The parties to the oral building agreement entered into in September or October 1993 (“the Lumbers agreement”) were the respective defendants “Sons” and “the Lumbers”. Sons, a licensed builder and joinery operator, undertook preliminary work pursuant to the Lumbers agreement between November 1993 and February 1994. Builders asserts that a re‑organisation of the business of Sons occurred in late February 1994 having the effect of restricting the operations of Sons to a joinery and carpentry business; and vesting in Builders all building and construction work. The legal effect of that re‑organisation was the dominant issue in the trial. Builders asserts that Sons assigned the benefit of the Lumbers agreement, and delegated the performance of Sons’ obligations under that agreement to it.[1]
[1] See Linden Gardens Trust Ltd v Leresta Sludge Disposals Ltd (1994) 1 AC 85 at 106.
Builders claims that between late February 1994 and late 1995, it completed the building work under the Lumbers agreement and that it is entitled to recover the cost of that work from the Lumbers in its own name.[2] It was common ground that:
(i) There was no novation of the Lumbers agreement.
(ii) The alleged assignment was not in writing and did not comply with the requirements of Section 15 of the Law of Property Act, 1936.
(iii) Neither Sons nor Builders informed the Lumbers of the alleged assignment of the benefit of the contract or of Builders’ involvement in the construction work.
(iv) At all relevant times the Lumbers assumed that Sons had continued as the building contractor for the duration of the Lumbers agreement.
[2] HEB Contractors v Verrissimo (1990) 3 NZLR 754 at 762-763; Tolhurst v Associated Portland Cement [1902] 2 KB 660 at 668 and [1903] AC 414 at 417.
At issue is whether the re‑organisation arrangements constitute an effective equitable assignment of the benefit of the Lumbers agreement to Builders.[3]
[3] See Justine Kirby "Assignments and Transfers of Contractual Duties; Integrating Theory and Practice". [2000] VUWL Rev 21
The Lumbers deny the entitlement of Builders to bring the action. They assert that there is insufficient evidence to conclude that the re‑organisation arrangements constitute an equitable assignment.[4] They further assert that, whatever the effect of the re‑organisation, the Lumbers agreement obliged Sons to provide services which were personal in nature and thereby incapable of assignment at law.[5] As a further alternative, the Lumbers plead, by way of equitable set off, the cost of remedying defective building work. There was no plea of laches nor any other matter which would or might deny equitable relief in the event that there was an effective equitable assignment.
[4] Nokes v Doncaster Amalgamated Collieries Ltd [1940] AC 1014 at 1019.
[5] Knight v Burgess (1864) 33 LJ Ch 727; Southway Group Ltd v Wolff (1991) 57 BLR 33 at 47; Modern Weighbridge & Scale Services Pty Ltd v ANRC (unreported decision, Millhouse J (6/9/95) BC 9503784); Moore v Collins (1937) SASR 195; Tolhurst v Associated Portland Cement Manufacturers [1902] 2 KB 660 at 668; Kemp v Baerselman (1906) 2 KB 604.
Background
While the facts for the most part were not in dispute, the action involves issues of law that carry some complexity. It is appropriate to say, at the outset, that this is yet another case where the complexity has arisen from the casual basis upon which the parties have chosen to deal with each other, and indeed in the manner in which they have conducted the litigation.[6]
[6] See Corradini v Lovrinov Crafter (2000) 77 SASR 125 at 139.
The action ought to have been a relatively simple claim. The construction work, between late February 1994 and May 1995 was either performed by Builders or by Sons. Insofar as it was performed by Builders, it either performed that work as a sub-contractor to Sons or alternatively as an assignee of the benefit of the contract having been delegated the performance of the building work. There was a dearth of evidence about the internal arrangements of what is called “The Cook Group of Companies”. It seems that the administration of the Group was conducted by a partnership “Portrush Trades”, which received payments for the Group, and paid the wages.[7] By inference an employee of Portrush Trades, David McAdam would enter into the respective company journals, the sums to be allocated to individual companies. Thus Sons and Builders shared common staff, administration and bank accounts at least until the completion of the Lumbers’ Agreement.
[7] See evidence of Mr Cook XN P281.
Builders joined Sons as a defendant claiming in the alternative as a sub-contractor, judgment against it for the monies outstanding on the Lumbers agreement; and as assignor, a declaration that any monies due by the Lumbers to Sons be held on trust for the benefit of Builders.
Sons however took no part in the trial, thereby adding to that complexity.
On 20 October 2000, Builders was ordered to provide security for Sons’ costs of the action, however, that security was not provided by Builders. In the ordinary course of events the failure to comply with such an order would operate to stay the proceedings against the Lumbers as well as Sons.
Orders made by a Master of the Court stayed the action only as against Sons, but permitted Builders to continue the action against the Lumbers.[8] The stay did not constitute a dismissal of the claim against Sons, but leaves it in a static condition.
[8] Orders made on 19/8/03 and 12/11/03. See R 100.3 c.f. Remm Constructions SA Pty Ltd v Allco Newsteel (1992) 57 SASR 180 at 191; Wiltshire-Smith v Leighton Hill Pty Ltd (No 2) per Lander J (unrep. decision 14 July 1995).
The Orders were however conditioned so that Builders could not pursue any derivative claims in respect of paragraphs 33, 34, 43-52, and 53 of the Statement of Claim. Builders could therefore no longer claim that, if Sons were the correct plaintiff, Builders was beneficially entitled to any sum owed by the Lumbers to Sons. Nor could it argue that Sons was entitled to recover the balance outstanding on Builders behalf in the event of “a legal black hole”.[9]
[9] See Alfred McAlpine Constructions Ltd v Panatown Ltd [2001] 1 AC 518 at 528-531; Rolls Royce Power Engineering v Riccardo Consulting Engineering [2004] EWHC 2871 at [100, 108 and 129] and Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd [1994] 1 AC 85 at 114-115.
One issue raised with respect to that order was whether Builders could seek relief pursuant to the Workers Liens Act as a sub-contractor of Sons. The plaintiff’s counsel quite properly conceded that Builders did not claim as a sub-contractor of Sons, and that its claim was a direct claim as assignee against the Lumbers for the balance owing to it.
It is not necessary to consider the long line of authority which requires the equitable assignee of a chose in action to join the assignor either as a plaintiff or a defendant.[10] Its purpose is to prevent multiple claims against the Lumbers. The absence of the assignor does not render the proceedings void, and it seems that the general rule may be dispensed with.[11] By letter dated 1 February 1999 to the Lumbers, Sons denied that it was owed any sum by them, and referred obliquely to the February 1994 re-organisation of the Cook Group.
[10] See Performing Right Society Ltd v London Theatre of Varieties Ltd [1924] AC 1 cf Jennings v Credit Corp Australia Pty Ltd [2000] NSW SC 210 and Thomas v National Australia Bank (2000) 2 Qd R 448.
[11] See Raiffeisen Zentral Bank Osterreich v AN Feng Steel [2001] EWCA 68 at [60]; Weddell v J A Pearce [1988] 1 Ch 26; Jennings v Credit Corp Australia Pty Ltd (2000) 48 NSW LR 709, 719-722; Thomas v National Australia Bank (2000) 2 Qd R 448 and G J Tolhurst "Equitable Assignment of Legal Rights, a Resolution to a Connundrum" (2002) 118 LQR 98.
At the commencement of the trial, all issues were in dispute, including the quantum of Builders’ claim, and the alleged building defects pleaded by the Lumbers by way of equitable set off. In the end there was not much dispute about the reasonableness of the quantum claimed by Builders, and the quantum of the building defects was agreed in the sum of $13,076, to be set off against any award to which Builders may be entitled. Builders abandoned its pleadings with respect to the Limitations of Actions Act, and the Lumbers abandoned their plea of a settled account.
Six volumes of documents forming part of a notice to admit were eventually tendered after early objections and admitted as Exhibit P4.
Principal Issues
(i)Did Sons intend to assign the benefit of the Lumbers agreement to Builders in late February 1994.
(ii)If so, was the benefit of the Lumbers agreement capable of assignment to Builders?
(iii)if so, whether there was, in fact, an equitable assignment of the benefit of that agreement to Builders.
(iv)In the event that such assignment was ineffective, whether Builders could succeed against the Lumbers for restitutionary remedies?[12]
(v)What is the effect of the failure of Builders to be licensed pursuant to the Builders Licensing Act?
(vi)Whether Builders is entitled to claim from the Lumbers monies paid by Builders to the assignor Sons.
(vii)What percentage of the building costs is a reasonable figure for supervision.
(viii)The quantum of the plaintiff’s claim.
[12] ABB Power Generation Ltd v Chapple (2001) 25 WAR 158.
The resolution of those disputes has been made all the more difficult due to the passage of time - nearly ten years since the building work was completed - which has understandably affected the memory of witnesses. In Savril Contractors Limited v Bank of New Zealand the Court of Appeal noted research to the effect that:
a fair judicial decision is unlikely by the time 10 years has passed after the occurrence of the events on which a claim is based due to the deterioration of the evidence of the true facts … at this point adjudication will as likely result in a judicial remedy for a claimant with a spurious claim as one with a meritorious claim.[13]
[13] [2004] NZCA 4 at [18].
The major complication has been the absence of at least one witness, David McAdam who played a vital part in important events, from the witness box. Consequently it has been necessary to draw inferences from the vast number of documents admitted into evidence without the benefit of that testimony as to events to which the documents refer. The building project commenced on an informal basis between friends and family members. There was no written contract and the arrangement was quite vague. The parties did not employ the traditional form of progress claims and payments, choosing instead, ad hoc, lump sum payments, so that the value of the work and, ultimately, the final cost could not be monitored. The reconstruction of the Cook Companies in the month of February 1994 was similarly informal. There was no evidence of any directors’ meetings, nor were any minutes produced at trial. The only evidence was of some brief conversations between directors and some journal entries in the books of Builders[14]
[14] Cf the reconstruction in Lewis v Doran (2005) 219 ALR 555 at 561.
The consequence for the Lumbers is that following the completion of building work in the month of April 1995 no invoices were sent to them nor was any claim made of them until 8 November 1999. This delay of four years undoubtedly constrained the Lumbers in their assessment of the merits of Builders’ claim. Warwick Lumbers suggested in his evidence that the claim may well have been considered differently had he been provided with a bundle of invoices rather than a notice of demand under the Workers Liens Act on 8 November 1999.[15]
[15] See XXN P419.
The Parties
The third defendant, Sons, was incorporated in 1964, however the Cook family in one guise or other had established a significant reputation in the building industry since about 1910. Until the month of February 1994 the business operated by Sons included building and construction works together with a joinery. Sons has always held an unrestricted builders licence; and Jeffrey Cook has at all relevant times been a director of Sons, and the holder of a supervisors licence. David McAdam had been appointed secretary of Sons on 1 July 1964; and director between 3 July 1972 and 1 September 1994.
The plaintiff, Builders, was incorporated in July 1975. Jeffrey Cook has at all relevant times been a director of Builders, having been appointed upon incorporation. David McAdam was also appointed a director upon incorporation, however retired as a director on 10 March 1994. Apart from some minor development work in the early 1980’s, Builders was effectively a moribund company until the re-organisation of the Sons’ business in the month of February 1994. Builders’ shares at all relevant times had been held entirely by Jeffrey Cook’s immediate family, in contrast to their effective 20% shareholding in Sons. Builders was placed into voluntary administration on 26 May 1998 and eventually into liquidation on 22 June 1998.
For relevant purposes between the month of February 1994, and its eventual liquidation, Builders did not hold a builder’s licence as required by the Builders Licensing Act1986; and the Building Work Contractors Act 1995.
Matthew Lumbers (“Matthew”) has at all times been the registered proprietor of the North Haven land. His father, Warwick Lumbers, negotiated the Lumbers agreement and financed that building work. The arrangement between Warwick Lumbers and Matthew was that the land had been placed in Matthews name as a part distribution under the terms of a family trust, however Warwick Lumbers was granted an unregistered lease for his life over the property.
It would appear that Matthew had little or no involvement in either contracting with Sons or the design of the house, and he was not called as a witness at the trial. In the Amended Defence the Lumbers admitted that they both contracted with Sons. Warwick Lumbers has at all relevant times held a restricted builder’s licence. He engaged his brother in law, Michael Fielder, an Architect, to undertake the design work on an informal basis. He prepared plans and specifications well prior to the appointment of Sons by the Lumbers. Mr Fielder was not called as a witness at the trial and no criticism was made of his absence.
Witnesses
Warwick Lumbers chose Sons to build his home. The only persons who took part in the negotiations leading to the appointment of Sons, were Warwick Lumbers and David McAdam. Whatever the formal position with respect to his directorships in Sons and Builders, it appears common ground that David McAdam was in de facto control of the administration of both Sons and Builders until at least 1997. Jeffrey Cook, by contrast, had little or no involvement in administration and worked in the building and joinery operations of the Cook Companies.
Much of the confusion, which has occurred in this case, is the direct result of neither Builders nor the Lumbers calling Mr McAdam as a witness. He would have been expected to give evidence as to the terms of the Lumbers agreement; the basis upon which the request for lump sum payments was calculated; the basis of the re-organisation of the Cook Companies in February 1994; the alleged assignment of the benefit of the Lumbers agreement as between Sons and Builders; the personal nature of the building work as between the Lumbers and Sons; and the failure of Builders to obtain at any relevant time the appropriate builder’s licence pursuant to the Builders Licensing Act1986.
Principal witnesses
Before turning to the facts relevant to the issues between the parties it is appropriate I say something about the principal witnesses Jeffrey Cook on behalf of Builders, and Warwick Lumbers.
I was favourably impressed by Mr Lumbers, as a witness of truth. I have no doubt that the claim in November 1999 came as a shock to him, being some 4 years after the completion of the building work, as had the first indication in about August 1998, that there had been a restructuring of the Cook Group in 1994.[16] I accept his evidence unreservedly.
[16] XXN P424.
Jeffrey Cook presented as a person who was extremely proud of both his and his family’s history in the building industry. I am sure that for the most part he did his best to accurately recall and relate events relevant to the issues. In many instances he was unable to do so due to the fact that he had so little involvement in the administration side of the Cook group at the relevant time. Mr Cook was unable to give any evidence about the terms of the Lumbers agreement negotiated by David McAdam; and was able to give only scant evidence with respect to “administration issues”, including the alleged assignment of the benefit of the Lumbers agreement from Sons to Builders and the failure to render invoices to the Lumbers. There was however one issue which caused me to reflect upon the accuracy of his evidence, and this was whether the failure of Builders to obtain a builder’s licence as and from the month of February 1994 was due to “inadvertence” within the meaning of s39 of the Builders Licensing Act.[17]
[17] Tea Tree Gully Builders v Martin (1992) 59 SASR 344 at 346; Nunkuwarrin Yunti v A L Seeley Constructions Pty Ltd (1998) 72 SASR 21.
That section provided:
An unlicensed person who performs building work in circumstances in which a licence is required under this Act shall not be entitled to recover any fee or other consideration in respect of the building work unless the Tribunal or any Court hearing proceedings for recovery of the fee or consideration is satisfied that the person’s failure to be licensed resulted from inadvertence only.
In evidence in chief Mr Cook was adamant that he had directed David McAdam to procure a builder’s licence for Builders in the month of May 1994 and that in late 1994 he had informed Mr McAdam that he would have preferred to shut Builders down and go back the way it was in the event that no licence was procured.[18]
[18] XN p 143-146.
When confronted by an affidavit sworn by him on 8 April 2001 which suggested that there had been no such conversations, and that he had been unaware that Builders required its own builder’s licence, Mr Cook was unable to say which of the two versions was correct.[19]
[19] XXN p 336-340.
Mr Cook and Mr McAdam had known each other for 50 years, however, it is apparent that they had a strained relationship, for reasons which are set out in the transcript[20], and that that strained relationship has caused Mr Cook to blame Mr McAdam for the circumstances in which Builders found itself in 1998. Ultimately Mr Cook conceded that from May 1994 he knew and, thereby Builders knew, that it had no licence. He asserted that Mr McAdam had told him to continue to use the Sons licence.[21] I cannot conclude on the state of the evidence that the failure of Builders to obtain a Builders Licence at the relevant time was due to inadvertence. In all other respects, however, I accept his evidence.
[20] XXN P301.
[21] XXN P343-344.
The narrative of the facts in these reasons reflects my findings. In reaching my conclusions I have had regard to all of the arguments and submissions of counsel.
Facts
Mr Warwick Lumbers was the only party to the formation of the Lumbers agreement who was called as a witness by either party.
In or about the month of September 1993 Warwick Lumbers telephoned David McAdam to engage Sons to undertake the construction of his home.
Warwick Lumbers stated that he chose Sons because of its reputation and the need for “a pedigree for my house”.[22] He also chose Sons because of his knowledge of the competence of David McAdam.
[22] XN P381
Mr Lumbers said further that he regarded Mr McAdam’s personal involvement as essential as Mr Lumbers needed to trust someone to look after his interests during absences overseas. This included entrusting Mr McAdam to assess and approve the value of invoices.[23] He emphatically stated that he would never have agreed to any assignment whereby work would be undertaken by an unlicensed builder, as that “would have voided the policy of insurance”.
[23] XXN P405-406; 412-413.
The terms of the Lumbers Agreement
The arrangement between the Lumbers and Sons was not committed to writing. Warwick Lumbers gave evidence that David McAdam agreed on behalf of Sons to undertake the building work contained in the specifications and plans prepared by Mr Fielder, on the basis that some of the work and in particular the steel work would be performed direct by Warwick Lumbers. He said that he reached agreement with Mr McAdam whom he assumed was the principal director of Sons.[24]
[24] XN P381.
AThe agreement was recorded that W Cook and Sons would commence the building, do the foundations, the brick work and all those sorts of things. I would do structural steel work. There was a combination of various things in W Cook and Sons doing one side and myself doing the other.
QDid you discuss how they would be paid for the work.
AI would pay to David McAdam – I would pay David McAdam directly or W Cook and Sons, I would pay the money to them and he would pay on my behalf to sub-contractors that were paid by W Cook and Sons and for my work W Cook and Sons did. As to the work, some of the sub-contract work paid directly myself.
QDid you talk about the quality of what you wanted?
AYes.
QWhat was that?
AThe best.
QWhat about the price?
AThe price was never – because I was doing half the work we couldn’t really determine price. I mean, that generally speaking, I think David mentioned to me that if they did all the work it would be about $750,000, my architect said something a little bit less than that. But – you know, that was a budget figure that I had in mind.
QWas there anything discussed about the supervision – the fee for the supervision?
ANo – yes there was, I am sorry. We discussed the fee and … it was pretty hard to determine an exact figure because depending on the amount that we did, as I did as a sub-contractor and depending on the amount of work that W Cook and Sons did, their portion, I would leave it to David to consider what was fair. A lot was left to David.
Jeffrey Cook was unable to give any evidence as to the terms of the agreement. He simply had not been told about the detail of the arrangements reached between Warwick Lumbers and David McAdam. Indeed throughout the building work, Jeffrey Cook did not discuss either the terms of the agreement or the cost of the work with either of the Lumbers.[25] In his evidence Mr Cook stated that he had prepared an estimate, based upon plans prepared by the architect Mr Fielder in the sum of $665,050 in October 1993. That estimate was not provided to the Lumbers. In paragraphs 3 and 4 of the Amended Defence the Lumbers admit that the price payable to Sons included the cost charged for work performed by Sons and by sub-contractors and for the supply of materials by them respectively together with an additional charge for supervision and management. No agreement was reached with respect to the additional charge, save that in answer to the Builders’ plea of 10%, the Lumbers pleaded that 5% was reasonable. Nothing was agreed between Sons and the Lumbers about progress payments. In fact as it transpired no invoices were ever rendered by either Sons or Builders to the Lumbers. Throughout the building work, David McAdam would telephone Warwick Lumbers and state that “he” needed a certain sum of money and this sum was paid by Mr Lumbers by cheque directed to Sons. It is common ground that the payments bore no direct relationship to actual expenditure in respect of the building work.
[25] XN P119; 141.
Commencement of work
Preparation of the site began in November 1993. The representative of Sons on site was Jeffrey Cook, who was the registered building supervisor for Sons.
The building was very difficult to construct. It had “totally curved walls and was of a most unusual design”. The building work commenced in the month of February 1994 at which time the reconstruction of the business of Sons was apparently the subject of discussion between Mr McAdam and Jeffrey Cook. By late February 1994 no request had been made by Sons to the Lumbers for any progress payments. At that time the apparent re-organisation of Sons’ business took place.
Plaintiff’s pleaded case on assignment
Builders pleaded case is that in or about the month of February 1994, by agreement entered into between Jeffrey Cook on behalf of Builders and David McAdam on behalf of Sons it was agreed that Sons would assign the benefit of its building contract with the Lumbers to Builders as and from the first day of March 1994. The vagueness of the plaintiff’s plea on this issue and the importance of David McAdam as a witness is disclosed by paragraph 16 – 18A of the Statement of Claim:
16. In February 1994 or thereabouts, David McAdam, as an employee and financial administrator of W Cook & Sons Pty ltd, orally proposed new arrangements as between W Cook & Sons Pty Ltd and the plaintiff for the carrying out of building work, such arrangements to apply from 1 March 1994.
17. The proposals by David McAdam were put forward by him on behalf of W Cook & Sons Pty Ltd and accepted by Jeffrey Cook on behalf of the plaintiff. Such acceptance was oral and occurred in about February or March 1994. The proposal and acceptance constituted a contract between W Cook & Sons Pty Ltd and the plaintiff.
18. The oral proposals by David McAdam were made in various conversations on various dates, which the plaintiff is not able to specify other than that they occurred in February 1994 or thereabouts. The effect of the oral proposals was as follows:
(a)As between W Cook & Sons Pty Ltd and the plaintiff, all future costs of the building work were to be charged to the plaintiff rather than W Cook & Sons Pty Ltd.
(b)The plaintiff would pay to W Cook & Sons Pty Ltd the cost of the work to date paid for by W Cook & Sons Pty Ltd, such amount being $29,984.00.
(c)Jeffrey Cook would continue to supervise all building work on the land and manage the building work on behalf of the builder.
(d)David McAdam would continue to carry out the financial administration work on behalf of the builder.
(e)The plaintiff would be entitled to recover all amounts payable by the contracting party in respect of the building work, including the additional charge of 10% for the supervision of the building work and management of the building contract.
18A. Legal effects of such contract were that the plaintiff became contractually bound to W Cook & Sons Pty Ltd to perform the obligations set out in paragraph 18(a) and (b) hereof, and to supervise all building work on the land and manage the building work. Further legal effects of such contract were;
(a)the benefit of the building contract was assigned by W Cook & Sons Pty Ltd to the plaintiff; and, or in the alternative,
(b)the future property comprising the chose in action for the price to be paid by the contracting party was assigned by W Cook & Sons Pty Ltd to the plaintiff.
The assignment, if it existed, could only be an equitable assignment. Although no formalities are required for an equitable assignment three issues raised in this case are: Firstly, whether there was found an intention to assign the benefit of the Lumbers’ Agreement as opposed to a mere direction to perform the work; secondly, whether there was clear indication of the chose in action to be assigned; and thirdly, whether there was some act by the assignor Sons establishing that it was passing the chose in action to the alleged assignee.[26]
[26] William Brandt's Sons & Co v Dunlop Rubber Co [1905] AC 454 at 462; Phelps v Spon Smith & Co [2001] BPIR 326.
The evidence as to the Re-organisation of Sons
The only witness called on the question of the re-organisation was Mr Jeffrey Cook, whose evidence was that the re-organisation was entirely Mr McAdam’s idea. Mr Cook had very little understanding as to the purpose or the basis of the re-organisation. He was asked:[27]
[27] XN PP146, 148; XXN PP321-322.
XN
QSorry, you mentioned about changing his companies over.
AYes, McAdam changed from – re-instigated W Cook Builders. W Cook and Sons was the building contracting company. McAdam wanted to put me into a builder’s company and separate the building organisation from the joinery organisation, keeping the joinery part of W Cook and Sons and transferring the building operation into W Cook Builders of which I was the builder still for both companies….
QAfter the changeover, that building work was done by Builders Pty Ltd.
ABuilders, yes.
QWho had the idea of changeover?
AMcAdam.
QDid he raise that with you, the idea of changeover?
AHe told me what the idea was.
QWhen?
AIn the beginning of ’94.
QWhere were the two of you when he first raised that with you?
AHe walked into my office and told me. He told me, asked me if that was all right.
QWhat did he tell you?
AHe said that “we’re going to separate the joinery and the building in that way”.
QDid you agree?
AI agreed, I said “yes”, I said “okay”. I didn’t question it.
QDid he explain to you the reasons for his suggestion.
ANo, other than the separation, the two accounting separations, the joinery and the building accounting separation.
QDid he explain to you the consequences of the accounting separation?
ANo….
QWhat did you understand to be the effect of the changeover to your ownership of what was now the building company, which was W Cook Builders Pty Ltd?
AI understood it was going to be effective in relation to probably the separation and then the viability of keeping them separate to make them more financial …
QUntil the changeover which company carried out the work on the Lumbers’ house.
AIn the books it was W Cook Builders.
QDid you tell Michael Fielder about the changeover?
ANo.
QDid you tell Warwick Lumbers about the changeover?
ANo.
QDid you tell Matthew Lumbers about the changeover?
ANo.
XXN
QAt the time of this arrangement in March 1994 W Cook Builders hadn’t done any of the building work.
ANo.
QThen it commenced doing that building work as a result of the arrangements that were entered into in March 1994?
AThe arrangements Mr McAdam directed.
QThe arrangements with W Cook and Sons?
ANo, with Mr McAdam. He did it. Whatever direction it took. It wasn’t my suggestion or wishes to do it. He made those arrangements, he called the action. I agreed with it.
QBefore March 1994 it was W Cook and Sons doing all the building work?
AThat’s right.
QAnd then after March 1994 it was W Cook?
AThat’s correct.
QThat was as a result of the arrangements that had been entered into?
ANo, not entered into, directed by McAdam.
Events following the “Re-organisation”
It is clear that on 1 March 1994 an invoice was rendered by Sons to Builders for the sum of $29,984.[28] This invoice had been prepared by Mr McAdam. Mr Cook gave evidence that this sum reflected the cost for work done by Sons to the date of the re-organisation, and “transferred to the ledgers to create a true cost and invoiced to … Builders”.
[28] See Ex P4, vol 1, P356 and XN P169.
The invoice in the sum of $29,984 was entered in the journal of Builders by Mr McAdam as a sum owing by Builders to Sons.
By inference it appears that the Portrush Trades administration of the Cook Group continued after the re-organisation. Jeffrey Cook stated that while he and his son had 100% of the shares in Builders, it was starting from scratch holding no assets. As I have previously said, there is a dearth of evidence about the internal workings of the Cook Group of Companies. I do not know whether the payments made to sub-contractors were made from Cook Group funds, with the payments being debited through journal entries to the Builders accounts or whether they were paid from Builders own separate accounts. It is clear that David McAdam resigned as a director of Builders on 10 March 1993. Externally however nothing appeared to have changed. The same employees, including Mr Jeffrey Cook, continued with the building work. Mr McAdam continued to occupy an office adjoining that of Mr Cook, and maintained direct contact with Mr Warwick Lumbers. Neither Mr Jeffrey Cook nor Mr McAdam made any mention to the Lumbers or the architect Mr Fielder of the existence of Builders, or even the re-organisation. One might have expected that this topic would have been raised had an assignment been intended by the Cook Group. At that stage no payments had been requested by Mr McAdam from the Lumbers. While there is no necessity for notice of the assignment to be given to the Lumbers, it would presumably, have been commonsense for Mr McAdam to request that cheques be made payable to Builders rather than Sons. It was not until 30 April 1994 that the Lumbers were requested to and did pay an initial sum of $42,000. If Builders had indeed “started from scratch” and paid out $66,150.63 at that time, then indeed the Lumbers ought to have been requested to pay directly to Builders. In fact every payment made by the Lumbers between 30 April 1994 and 16 May 1995, totalling $407,000, was by cheque payable to Sons.
After the re-organisation all payments to sub-contractors were at least debited to Builders’ accounts. The Lumbers, through their counsel conceded both that the payments had been made by Builders and that they would not dispute that the invoices rendered by the independent sub-contractors for work and materials were properly incurred and were reasonable.
The building work was undoubtedly complex. The project underwent several major variations which added significantly to the cost of the project, and delayed its completion. One of those variations involved the relocation of the garage of the house and the incorporation of a games room. This added substantially to the costs. The structure involved three levels of approximately 350 to 4002 metres.
The management and supervision component of the project was increased by the unusual arrangement that the Lumbers would supply part of the materials. It was necessary for Mr Cook to ensure that the steel work supplied by the Lumbers was suitable and that it could be connected and fitted into the project. There were also other materials ordered directly by the Lumbers which had to be accommodated within the project.
Again one might have expected that Jeffrey Cook would have spoken to the Lumbers about the terms of the agreement and costs. After all it is that plaintiff’s case that it was Builders which performed the work and was entitled to the payments made by Lumbers and the management fee. In effect it was said to be Builders’ contract. Mr Cook did not discuss the builder’s fee even with the architect at any time during the work.[29] I have already referred to the fact that Builders did not have a licence. It did not seek to re-insure the Lumbers’ project. It was Mr McAdam, who was neither a director nor shareholder of Builders, who determined what sums ought to be requested of the Lumbers. There is now no need to consider the difficulties which arose during the construction work. In November 1994 Sons provided estimates for the supply of cupboards and other carpentry work. Both Mr Fielder and Warwick Lumbers inspected the cupboards at the joinery in mid December 1994.
[29] XN P124.
The Lumbers occupy the house
On Christmas Day 1994 Warwick Lumbers occupied the house. This was not a decision made by Mr Cook. He stated that he had been given an instruction by Mr McAdam. At that stage all of the first fixing and much of the second fixing had been completed. Thereafter cupboards were installed, second fixing was completed together with painting and a list of defects was prepared.
The payments and receipts
In the month of February 1995 Sons rendered invoices totalling $116,670 for the joinery work and those sums were paid by a Builders’ cheque. Numerous other sums for work apparently performed by Sons were either paid by a Builders’ cheque or by journal entry. Mr Lumbers complained about the cost of that joinery work. Despite its large cost, it is clear that Mr Lumbers ordered that material and did not, apparently, enquire as to its cost,
A schedule summarising the payments made to the sub-contractors and suppliers, including those paid to or the subject of a journal entry in favour of Sons, and the receipt of payments from the Lumbers was admitted as Exhibit P3. As can be seen from that exhibit, to 31 September 1995, sums totalling $559,676.83 had been entered in the accounts of Builders for the Lumbers work. Of this sum, $369,328.87 had been paid by Builders’ cheques to independent sub-contractors and suppliers, and the balance of $190,348.46 either paid to or credited in Builders’ journal to Sons. By the same date the Lumbers had paid by cheques payable to Sons a total of $407,000.
Summary
As at 30 September 1995, the difference between the sums recorded as incurred on the building project and those received from the Lumbers, was the sum of $152,676.83 (presumably representing most of the above balance either paid to or credited to Sons). This sum was not the subject of any request by Mr McAdam to the Lumbers for payment. The previous request for payment had been made by Mr McAdam for the sum of $50,000 on 16 May 1995. A final sum of $12,309 was paid by the Lumbers on 15 December 1997.
These payments followed requests from Mr McAdam for ad hoc sums, rather than the common form of progress claims.
Payments by the Lumbers
Date By cheque payable Amount 30/4/94 To Sons $42,000 21/7/94 To Sons $30,000 9/8/94 To Sons $50,000 1/9/94 To Sons $30,000 11/11/94 To Sons $15,000 22/11/94 To Sons $15,000 23/12/94 To Sons $30,000 4/1/95 To Sons $20,000 /1/95 To Sons $25,000 24/2/95 To Sons $25,000 3/3/95 To Sons $25,000 13/4/95 To Sons $50,000 16/5/95 To Sons $50,000 15/12/97 To Sons $12,309 Total $419,309 Subsequent claims
When Builders finally sent a notice of claim to the Lumbers in 1999, the claim included the sum of $42,700 being direct labour costs for employees. Although a great deal of time was devoted to this topic in the evidence of Mr Cook, it seems that ultimately there was little dispute about that sum. In any event I accept that the sum was properly incurred and represents a reasonable sum. The deficiency at that time totalled $181,904. There was no adequate explanation as to why that sum or any of it had not been requested of the Lumbers until 1999.
I infer that no claim was made to Sons, which remained the contracting party. By letter dated 1 February 1999 Sons advised the Lumbers that nothing was owing. At least at that time there appeared to be no debt. Warwick Lumbers admitted that he expected to pay a reasonable supervision fee on the total cost of the work. This total cost would include the sum paid or incurred directly by Sons as the contractor (which Builders claims as delegated to it, totals $602,376.83) and those costs paid direct by Lumbers. The latter sum was estimated by Builders at $327,660. Warwick Lumbers admitted in evidence that the estimate was lower than what in fact was paid direct by him.
Reasonable fee for supervision
Builders called as a witness a very experienced builder, Donald Dalby, as to the matters to take into account for the assessment of a reasonable fee for supervision. He provided a report (Exhibit P7) and gave oral evidence. I accept Mr Dalby’s evidence in its entirety.
While he conceded that the fee to be charged is very much a matter of negotiation, he stated that the unusual nature of the Lumbers’ Agreement required a greater deal of supervision. He opined that an allowance for supervision at the rate of $60 per hour coupled with a fee of 7% of all of the project costs constituted a reasonable fee.
Having heard the evidence of Mr Cook as to the enormous number of hours devoted to the supervision during the 18 month construction period, a combination of the two sums would have exceeded $200,000. It was Mr Cook’s evidence, which I accept, that his supervision had saved the Lumbers approximately $60,000 over the length of the project. In my opinion the assessment of the fee ought have regard to the increased supervision required by this particular project with the need to accommodate materials provided by the Lumbers.
In my opinion a total fee of $92,887 as claimed by the plaintiff and representing 10% of the project costs is a reasonable fee for the project lasting over 18 months.
Quantum of Builders’ claim
Builders’ claim was calculated as follows:
1. The sum representing the deficiency $181,904
2. A sum representing a fee for supervision being
10% of the total building costs 92,887
Balance $274,791
Less the quantum of the building defects agreed to
be set off against any award to which Builders may
be entitled 13,076
Final balance $261,715What inferences can be drawn from the Re-organisation
Mr Cook did not understand the effect of the re-organisation in 1994. Certainly he appreciated that Builders would thereafter be a construction company, and probably expected that it would be named contractor for all new building contracts.
It is unclear whether he turned his mind, on behalf of Builders, to the performance of and the proceeds of the pre-existing Lumbers Agreement. His evidence was to the effect that Builders did the work “in the books”. There is documentary evidence, in the form of the Builders’ journal, suggesting that Sons delegated the performance of its obligations under the Lumbers’ Agreement to Builders. This of itself does not necessarily mean that the benefit of the contract was assigned to Builders.
It is a significant step for any organisation to absolutely assign the right to a payment. It is not to be lightly inferred. The plaintiff was unable to tell me whether the payments credited to Sons in the Builders’ journal including the initial journal entry of $29,984, were ever paid to Sons. If, as appears, they had not been paid, it was very much in Sons interests, not to absolutely assign the right to payments to Builders. Once notice had been given to the Lumbers by Builders, all payments would have been made to it. Sons would not only have lost control of the receipt of funds from the Lumbers, but would have remained liable to the Lumbers for any breach of contract. Mr McAdam would also have lost the right to negotiate with the Lumbers as to quantum and payment as it transpired the liquidation of Builders came fairly quickly. It would still have been open for Sons to claim the contract price from the Lumbers and pay Builders as a sub-contractor. While it did not do so in 1999, this was after the liquidation of Builders and no invoice had been rendered to the Lumbers. Sons did continue to receive the payments from the Lumbers. What is inconsistent with the role of Builders as a sub-contractor is the journal entry for the sum of $29,984 in March 1994, and the payments made by Builders to Sons throughout the project. These acts are consistent with the delegation of the burden and possibly the assignment of the benefit, on the basis that Sons was now merely another sub-contractor of Builders. The question is whether I should draw the inference that the benefit of the contract was assigned.
The only person who could give evidence on these topics was Mr McAdam. He made the journal entries and he drew the cheques. He ought to have been called as a witness. Throughout the trial I brought his absence from the trial to the attention of the parties, but to no avail. There may have been some other explanation for those entries. After all Builders still remained part of the Cook Group with the same administration. There may have been commercial or tax reasons for ensuring that all “notional” building costs be placed in the Builders accounts and all joinery accounts remain in Sons. I simply do not know and will not speculate.
I find it extraordinary that there were no minutes of meetings and little or no evidence of any directors’ meetings at all. No one sought to call Mr Malcolm Cook, the managing director of Sons, as a witness. From the little evidence available I doubt very much that Mr McAdam would have contemplated the circumstance where a company controlled entirely by Mr Jeffrey Cook could determine the price to be paid by the Lumbers, and to issue proceedings against the Lumbers.
Ultimately whether there has been an assignment, as opposed to some other type of transaction such as a sub-contract depends on the intention of the parties.[30]
[30] Vickery v Woods (1952) 85 CLR 336 at 345.
Balanced against the journals is the conduct of Jeffrey Cook. He did not speak to Mr McAdam, Warwick Lumbers or Mr Fielder about the terms of the contract which he and his immediate family were apparently taking over in Builders. He did not raise the question of price despite the fact that all of the major variations took place after the re-organisation. He had no involvement in quantifying the amounts to be requested of the Lumbers, despite the large sums being debited to Builders’ accounts for the work.
I have already discussed the failure of Builders to obtain a licence. Jeffrey Cook did not request the Lumbers to make payments direct to Builders rather than Sons. All administrative and accounting functions were apparently left to Mr McAdam, who still seemed to be able to direct Jeffrey Cook despite the suggested assignment to a company entirely controlled by the latter.
Finally when the building work was completed, Mr Cook appears to have made no attempt to quantify what was outstanding or seek payment from the Lumbers. It was only well after the liquidation of Builders that anyone put the Lumbers on notice that any sum was outstanding, and suggested a direct claim as an equitable assignee.
The proceedings as issued by Builders pleaded a claim as sub-contractor in the alternative. Nothing was allocated in the books of Builders for the supervision fee until well after the liquidation. I repeat, this uncertainty has been the direct result of the failure to call David McAdam as a witness.
Jones v Dunkel inference
The question which arises is how the failure to call David McAdam might impact upon the parties. The ultimate question is whether in the absence of David McAdam as a witness, Builders is able to prove its case. One issue is whether the rule in Jones v Dunkel should be applied.[31] The general rule is that the unexplained failure by a party to give evidence, to call witnesses, or to tender documents, may – not must - in appropriate circumstances, where it is natural for the particular party to call such evidence, lead to an inference that the uncalled evidence would not have assisted that party’s case.[32] The question is whether the absence of David McAdam should be regarded as telling against one party rather than the other. In the ordinary course of events one might have expected Builders to call Mr McAdam, who had been an employee of the Cook group of companies for some 45 years. Both counsel however were anxious to show that Mr McAdam fell into the other party’s camp. Builders pointed to the breakdown in the relationship between Mr McAdam and Mr Cook which had led to other litigation; that Mr McAdam had some ill defined personal relationship with Warwick Lumbers; that Mr McAdam had left the Cook group of companies on unhappy terms, and had sworn two affidavits to assist the Lumbers in interlocutory proceedings in the action.
[31] Jones v Dunkel (1959) 101 CLR 298.
[32] Spence v Demasi (1988) 48 SASR 538 at 547.
The Lumbers assert that Mr McAdam cannot be placed in their camp, and point to the Liquidator of Builders having obtained an order for Mr McAdam’s examination. I conclude that Mr McAdam was equally available to Builders and the Lumbers. This conclusion is not always sufficient to avoid a Jones v Dunkel in force against either.[33] Although I do not draw any adverse inference against either party, the question remains whether the plaintiff can prove its case in the absence of evidence from Mr McAdam.
[33] Manly Council v Byrne (2004) NSWCA 123.
Was there an assignment of the Lumbers’ debt?
It is well established that while a party to a building contract may usually assign the benefit of a contract (namely the right to be paid), whether it be accrued or to accrue in the future, it cannot assign the burden.
In this case Sons could not, without the consent of the Lumbers, have assigned the burden to Builders and the Lumbers could not be required to accept performance by Builders or anyone other than Sons.[34]
[34] See Southway Group Ltd v Wolff (1991) 57 BLR 33 and Linden Gardens Trust Ltd v Levesta Sludge Disposals (1994) 1 AC 85 at 103.
Sons may however assign the benefit, being the right to payment, and delegate the performance of the building work, unless the contract expressly or implicitly prohibits any such assignment, or if the rights and corresponding obligations are of such a personal nature or so vague that the benefits are not assignable.[35]
[35] Kemp v Baerselman [1906] 2 KB 604 and Southway Group (supra)
Where an equitable assignment is effective, the assignee has the right to payment, but subject to equities affecting the rights assigned – here the payment of the Lumbers equitable set off for defects. It is equally well established that an assignment may be effected informally and be inferred from acts and conduct. Contrary to the submissions of the Lumbers there is no need for notice to have been given to the Lumbers before an equitable assignment is effective, or proceedings can be issued.[36] The Lumbers submit that there is insufficient evidence to establish that there was any intention by Sons to dispose of the chose in action, and that the arrangement was for purely internal purposes. There was scant evidence of any discussions on the topic of the assignment of the benefit of the Lumbers’ Agreement.
[36] Thomas v National Australia Bank [2000] 2 Qd R 448.
One issue raised was whether the benefit of the Lumbers’ Agreement was properly to be treated as future property. Various authorities, reviewed in Booth v The Commissioner of Taxation[37], state that consideration is required for the assignment of future property.
[37] (1987) 164 CLR 159.
I do not need to determine whether the debt is future property or a present debt payable in the future. In my opinion there was consideration namely the agreement of Builders to take over Sons’ obligations to the Lumbers[38].
[38] Mountain Road Ltd v Edgley [1999] 1 NZLR 335 at 340.
The Lumbers submitted that even if an assignment was intended, the arrangement with Sons was personal and not capable of assignment. While it is true that if Sons had gone into liquidation the very same people would have performed the work for Builders, Warwick Lumbers would never have approved an unlicensed company completing the work. I do not now need to consider the issue of the burden of the contract as the building work has been completed, and satisfactorily so.
Further the benefit was to vest in a company in which Mr McAdam had no interest. It was obvious that Warwick Lumbers put his trust in David McAdam to look after his interests. It was because of that trust that the terms of the contract were never formalised. Mr Lumbers expected to be able to negotiate with Mr McAdam on various matters including defects and the fees to be charged for the construction work.
Albeit Builders was part of the same Cook Group, the effect of an assignment was to vest in the directors of Builders the right to determine a price and institute proceedings.
There are numerous examples where Courts have held such contracts incapable of assignment.[39] The principle has been extended to building contracts where the parties can be shown to have intended to deal only with each other, as such contracts can be “pregnant with disputes: some employers are much more reasonable than others in dealing with such disputes”.
[39] Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd [1994] 1 AC 85 at 105, where there was an express term prohibiting assignments; Southway Group Ltd v Wolff (1991) 57 BLR 33 and Modern Weighbridge & Scale Services Pty Ltd v ANRC (1995) BC 9503784.
In general, it is clear that a building contract involving complex work will be personal to the contracting parties. That applies particularly if detailed administrative or management work is called for, or if elements of design are involved. The house was a complex building project, with significant elements of design. The Lumbers had a genuine commercial interest in seeking to ensure that they were in contractual relations only with a company which they had selected.
I have been most concerned with whether the benefit of the Contract could be assigned because of its personal nature. I have no doubt that had the Contract been made with Mr McAdam personally, it would have been incapable of being assigned without the consent of the Lumbers. I equally have no doubt that the agreement could not have been assigned by Sons to other builders generally. This would be so even though Mr McAdam was an employee who may have resigned at any time. See Southway Group Ltd v Wolff (1991) 57 BLR 33. It is clear that if there was an assignment, the assignee was part of the same group with the same employees, including Mr McAdam, available in some capacity. In Kemp v Baerselman (1906) 2 KB 604, the purported assignment to a corporate entity controlled by the initial contracting party was held to be ineffective because of its personal nature.
The fact remains that the re-organisation involving future building contracts was not some small re-arrangement. It was intended that the operations would be split. Thereafter, all building work would be done by Jeffrey Cook’s family and Malcolm Cook would run the joinery. This gave rise to the practical consequence which arose here namely that Jeffrey Cook quite independently of Mr McAdam would decide the price to be paid by the Lumbers. This could never have been contemplated by the Lumbers nor by inference by Mr McAdam. This also goes to the question whether Sons did intend to assign the benefit of the agreement.
There is no question that Builders would ultimately be paid through Sons from payments received from the Lumbers. This does not mean that the right to that payment was assigned by Sons. There are many reasons, as indicated above, why Sons and McAdam would not want that right to have been assigned. A decision not to assign would have left Mr McAdam in control of negotiations with Lumbers.
Conclusion
In the absence of Mr McAdam, I am left in a state of uncertainty as to whether there was an intention to assign the benefit of the contract and, accordingly, whether there was any assignment at all. As I have said it is not an inference which ought be made lightly. There was no written agreement to assign and no minutes of meeting. Only Mr McAdam could provide the necessary evidence. On the state of the evidence I will not speculate and cannot be satisfied that there was an equitable assignment, let alone an effective assignment.
If I am wrong in this conclusion and the equitable assignment was intended and effective, I would need to consider the effect of the failure of Builders to hold a licence and whether it would be entitled to claim relief under the Workers Liens Act.
Enforcement of Workers lien
On 8 November 1999 Builders served the Lumbers with a notice of demand for payment of the sum of $274,791. On 11 November 1999 Builders caused a workers’ lien, presumably pursuant to s10 of the Workers Liens Act (“the Act”) to be registered upon the title of Matthew Lumbers. The notice of lien (Exhibit P19), did not describe the manner in which Builders claimed. It claimed the sum as “the balance of the contract price”.
Under the Act only a contractor (in this case Sons) or a sub-contractor as defined in s5 of the Act is entitled to a lien. A sub-contractor is entitled to a charge under s7(2) for any money payable to the contractor (Sons).
It may be that Builders falls within the definition of a sub-contractor, being “employed by a contractor … to do work or furnish materials for the purpose of the contract made by such contractor”, when it was delegated the work by Sons.
However, in this matter the plaintiff properly conceded that it did not claim as a sub-contractor. Further in consequence of the orders previously referred to, it does not claim to be entitled to relief in the name of Sons.
In my opinion its claim as assignee of the benefit of the Lumbers/Sons contract does not fall within the definition of “contractor”.
Accordingly, irrespective of the question of a valid assignment the plaintiff’s claim for relief under the Act must fail. Matthew Lumbers is entitled to seek a memorandum from the Registrar-General that such lien cease pursuant to s16 of the Act.
Builders Licensing Act 1986
I have already referred to the failure of Builders to obtain a licence and concluded that the failure was not due to inadvertence. Here Builders is not merely an assignee of the debt, but a builder. It was necessary for Builders to assert not merely that the debt was assigned to it but that it provided consideration for that assignment namely the performance of the building work. The question which arises is whether Builders is an unlicensed person which performed building work, and which seeks to “recover any fee or other consideration in respect of the building work”. In this case the building agreement was between a licensed builder “Sons” and the Lumbers. All Builders seeks to do is claim a debt being the contractual sum owing to a licensed builder.
In my opinion s39 ought not be construed to defeat the claim of an assignee of the debt enforceable by a licensed assignor. If I am in error in that construction of the section, then Builders ought be able to claim in restitution as assignee. It would be odd if it could claim in restitution as an unlicensed builder who contracted directly with the Lumbers but not be able to claim where it is the assignee of a licensed builder. In my opinion if there were a valid and effective assignment, Builders would be entitled to a claim in restitution for reasonable compensation for the work done. In this case there was a common benefit to Sons and the Lumbers and the quantum would be the same as claimed by Builders. I have already found it to be a reasonable sum.[40]
[40] Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221; Nunkuwarrin Yunti v A L Seeley (1998) 72 SASR 21 and Corradini v O'Brien Lovrinov (supra).
Alternative claim in restitution
Mr Ross-Smith who appeared for Builders submitted that if there had been no valid assignment of the benefit of the Lumbers’ Agreement, then Builders is entitled to fair and just compensation for the benefit or enrichment accepted by the Lumbers. He referred to the decision of the Full Court in Angelopoulos v Sabatino (1995) 65 SASR 1 and of the Western Australian Full Court in Abb Power Generation Ltd v Chapple (2001) 25 WAR 158. Both are distinguishable on their facts. In Angelopoulos there was no contract extant. The plumber and builder to the knowledge and approval of the owners’ agents expended labour and money to the benefit of the owner. Doyle CJ identified nine circumstances which imposed, in that case, an obligation to make fair and just restitution. ABB Power Generation Ltd v Chapple has been the subject of critical academic comment.[41] It involved a building dispute in which the plaintiff had a contract with another party. It claimed from the defendant which had received the benefit of the work. In fact the decision is explicable on conventional grounds. The work was additional work undertaken outside the terms of the Contract between the plaintiff and the other party. It had been expressly requested by the defendant who was aware of the party undertaking the work.
[41] See "Circumventing Contracts - So Much for Privity" (2002) 18(3) BCL 162 and (2002) 14(9) ACLB 103 and see Christani & Neilsenv Goliath Portland Cement (1993) 2 Tas R 122.
By contrast Builders has not established that the Lumbers even knew of its existence. At all times there was extant an agreement between the Lumbers and Sons which covered the work said to have been undertaken by Builders. Insofar as a claim ought to have been made by Builders it ought to have been against Sons.[42] Sons remained liable under the Contract with the Lumbers. It cannot be said that the Lumbers have an obligation to make restitution to Builders, irrespective of whether Builders was mistaken as to its position when allegedly constructing the house. There was of course no evidence at all as to the allegedly mistaken understanding of Builders. In my opinion Builders could not succeed against the Lumbers under this alternative claim.[43]
[42] See Update Constructionsv Rozelle Child Care (1990) 20 NSWLR 251.
[43] See Marriott Industriesv Mercantile Credits (1991) SASC 2874.
Conclusion
Not without some hesitation I have concluded that I cannot be satisfied that there was a valid equitable assignment to the plaintiff of the benefit of the building agreement between the Lumbers and the third defendant W Cook & Sons Pty Ltd. To paraphrase the Court of Appeal in Southway Group v Wolff & Wolff, if it seems unfair that Builders should suffer loss, it is because the action has been stayed against W Cook & Sons and there is “no general discretion to procure the result which loose notions of equity may favour”. The plaintiff’s case is dismissed. I will hear the parties as to the question of costs.
18
1