COLMUP v MECAIR

Supreme Court of the Northern Territory of Australia Martin J.
2, 15 December 1988, 10, 23 March, 8 May 1989

WORKMAN'S LIEN - Charge - Action to enforce - Application to strike out - Commencement of action to enforce charge - 7 day period post demand for contract price unexpired - Whether action to enforce charge a nullity - Workman's Liens Act 1893 ss. 7(3), 10(2)

WORKMAN'S LIEN - Charge - Action to enforce - Leave to discontinue - Discretion of Court to grant - s. 7(3) Workmen's Liens Act - Action to enforce declared a nullity - Existence of discretion - Workmen's Liens Act 1893 ss. 7(3), 10(2)

PRACTICE AND PROCEDURE - Summary judgment - Principles applicable discussed

Cases applied:

Pipeline Properties Pty Ltd v Leichhardt Development Pty Ltd, Kearney J. unreported 31 January 1989 Wenlock v Moloney [1965] 2 ALL ER 871
Dey v Victorian Railways Commissioners (1949) 78 CLR 62 General Steel Industries Inc v Commissioner for Railways (1964) 112 CLR 125

Counsel for the Plaintiff Solicitor for the Plaintiff

Counsel for the First Defendant Solicitor for the First Defendant

Counsel for the Second and Third Defendants
Solicitor for the Second and Third Defendants

B Cassells
Morris Fletcher & Cross
J Reeves
David Edward Francis, Town Agents for Buckley & Stone
T Fong Lim Poveys

mar890059

' .

rnar890059

IN THE SUPREME COURT
OF THE NORTHERN TERRITORY OF AUSTRALIA

No. 571 of 1988

BETWEEN:

COLMUP PTY LTD
Plaintiff

AND:

MECAIR ENGINEERING PTY LTD
First Defendant

AND:

SITZLER BROS PTY LTD

Second Defendant

AND:
SITZLER BROS (DARWIN) PTY LTD
Third Defendant

CORAM:	MARTIN J.

REASONS FOR JUDGMENT
(Delivered 10 March 1989)

The Statement of Claim alleges that -

In about October 1987 one Drew Pearson contracted with the first defendant (Mecair) to carry out certain building works as sub-contractor to a contract entered into between Mecair and the second defendant.

Pearson commenced carrying out the·work shortly before Christmas 1987.

In late December 1987 or early January 1988 Pearson advised Mecair that "he was acquiring a corporate structure for the purpose of conducting his business" including carrying out the contract between Pearson and Mecair.

Mecair "consented to an assignment of the right and obligation of Pearson to the new company structure", the plaintiff ("Colmup").

Mecair subsequently, at the request of Colmup, made payment direct to Colmup's bank account at the ANZ Bank at Rapid Creek.

By June 1987 (sic) the works under the sub-contract had progressed to the stage where 75% of the value of the work had been completed.

On 27 June 1988 Mecair informed Colmup that it would make no further payments, amounting to a repudiation of Mecair's obligation to Colmup pursuant to the contract between the parties.

Colmup elected to treat the contract as repudiated.

Colmup issued Notice to Contractor of Claim of Charge and Notice of Claim of Charge to Colmup (sic) and the second defendant ("Sitzler"), pursuant to the provisions of the Workmen's Liens Act ("the Ac ") (I think the reference to Colmup was meant to be to the first defendant).

(j)		Colmup suffered a prolongation of its contract due to a number of particularised defaults of Mecair; as a result of which Colmup incurred additional expense.

As against Mecair, Colrnup sought "monies due pursuant to the terms of the contract and damages for breach of contract".

As against Mecair and Sitzler "enforcement of a Claim of,Charge pursua;nt to the provisions" of the Act. Sitzler paid the amount claimed under the Notice, $65,800 into Court (s. 26(2) of the Act).

In September last Mecair sought an order cancelling the charge, alternatively an order that the charge did not exist.	Kearney J. in his unreported decision of
29 September, dealt with the issues raised on that summons. They did not include, as His honour noted, any question relating to the fact that Colmup, and not Pearson, was the

plaintiff, nor as to when the Writ should have issued in accordance with the scheme provided for in the Act.	The argument on behalf of Mecair then advanced went to certain aspects of the validity of the demands made by Colrnup pursuant to the Act, (they being signed by its solicitors and without express authority under the company's seal), and to the prejudice it allegedly suffered (s. 32 of the Act).
His Honour found against Mecair, but took the opportunity of making some observations on the Act, concluding that weight of authority is that a charge comes into existence "when portion of the contract price becomes payable to the
sub-contractor, and so the existence of the charge does not depend on the making of a Demand under s. 10(2)(a) of the Act.	The person entitled to the charge cannot bring an action to enforce it until a Demand has been made under s. 10(2)(a) or the situation envisaged bys. 10(2)(b)obtains".

Mecair, now approaches the Court to hav_e entry of

judgment against Colmup upon the ground that its claim does not disclose a cause of action (r. 23.01(1)(a)), alternatively , that the Statement of Claim be struck out.
Further, Mecair seeks an order that the charge be cancelled and the sum of $65,800 paid into Court by Sitzler be paid to the solicitors for Mecair.

Both Mecair and Colrnup have further applications before the Court but it was agreed that they would not be

further pursued pending my determination of the applications now under consideration.

Mecair's application was supported by an affidavit sworn 23 November 1988 by Mr Mutton, a director of the company.	He referred to an affidavit of Mr Kistenkas, another director, sworn on 13 September 1988, in support of Mecair's original application.	Counsel for Mecair relied upon the contents of both affidavits and referred to the evidence in the affidavit of Mr Pearson sworn on
21 September 1988, in opposition to that application. Counsel for Colmup also referred to that evidence.	No deponent was called for cross-examination.

I was accordingly invited to look at the Statement of Claim, as it stands, and take into account the evidence contained in the affidavits.	It is not usually open to a defendant, applying to stay proceedings or to obtain summary judgrnent upon the ground that a claim does not disclose a cause of action, to invite the Court to try any issue of fact arising upon the Statement of Claim.	The only question is whether or not a cause of action is disclosed, not whether the plaintiff can support its allegations by evidence or whether the defendants evidence is likely to be accepted and therefor defeat the claim as formulated in the Statement of Claim.	To hold otherwise would be to enable parties to have the facts in issue, or likely to be so,

tried on an interlocutory application.	That is not  the object behind the Rules relating to an application for summary judgment of this nature (Wenlock v Moloney [1965] 2 All ER 871).	All that is required to be looked at is the plaintiff's claim, as disclosed by the Statement of Claim, with a presumption that the plaintiff will be able to prove facts in support of its allegations.	That does not, of course , mean that the contending parties may not present arguments on questions of law, based upon those allegations. However, if, as a result of argument, "the court reaches a clear conclusion which could not be altered by any evidence which could be adduced at the trial, then it is proper in the interests of both parties to dismiss the action instead of allowing the parties to incur completely useless expense" per Latham C.J. Dey v Victorian Railways Commissioners (1949) 78 CLR 62 at p 85.	Barwick C.J., in General Steel Industries Inc v Commissioner for Railways (1964) 112 CLR
125 at pp 128 - 129, summarised the case law on the subject as follows:

"The plaintiff rightl y points out that the jurisdiction summarily to terminate an action is to be sparingly employe d and is not to be used except in a clear case where the Court is satisfied that it has the requisite material and the necessary assistance from the parties to reach a definite and certain conclusion.	I have examined the case law on the subject, to some of which I was referred in argument and to which I append a list of references.	There is no need for me to discuss in any detail the various decisions, some of which were given in cases in which the inherent jurisdiction of a court was invoked and others in cases in which counterpart rules to Order 26,

18,	were the suggested source of authority to deal summarily with the claim in question.	It is sufficient for me to say that these cases uniformly adhere to the view that the plaintiff ought not to be denied access to the customary tribunal which deals with actions of the kind he brings, unless his lack of a cause of action - if that be the ground on which the court is invited, as in this case, to exercise its powers of summary dismissal - is clearly demonstrated.	The test to be applied has been variously expressed; "so obviously untenable that it cannot possibly succeed"; "manifestly groundless"; "so manifestly faulty that it does not admit of argument"; "discloses a case which the Court is satisfied cannot succeed"; "under no possibility can there be a good cause of action"; "be manifest that to allow them" (the pleadings) "to stand would involve useless expense".
At times the test has been put as high as saying that the case must be so plain and obvious that the court can say at once that the statement of claim, even if proved, cannot succeed; or "so manifest on the view of the pleadings, merely reading through them, that it is a ca.se that does not admit of reasonable argument"; "so to speak apparent at a glance".
As I have said, some of these expressions occur in cases in which the inherent jurisdiction was invoked and others in cases founded on statutory rules of court but although the material available to the court in either type of case may be different the need for exceptional caution in exercising the power whether it be inherent or under statutory rules is the same.	Dixon J. (as he then was) sums up a number of authorities in Dey v Victorian Railways Commissioners (1) where he says (2): "A case must be very clear indeed to justify the summary intervention of the court to prevent a plaintiff submitting his case for determination in the appointed manner by the court with or without a jury.	The fact that a transaction is intricate may not disentitle the court to examine a cause of action alleged to grow out of it for the purpose of seeing wheth er the proceeding amounts to an abuse of process or is vexatious.	But once it appears that there is a real question to be determined whether of fact or law and that the rights of the parties depend upon it, then it is not competent for the court to dismiss the action as frivolous and vexatious and an abuse of process."	Although I can agree with Latham C.J. in the same case when he

said that the defendant should be saved from the vexation of the continuance of useless and futile proceedings {1), in my opinion great care must be exercised to ensure that under the guise of achieving expeditious finality a plaintiff is not improperly deprived of his opportunity for the trial of his case by the appointed tribunal.	On the other hand, I do not think that the exercise of the jurisdiction should be reserved for those cases where argument is unnecessary to evoke the futility of the plaintiff's claim.	Argument, perhaps even of an extensive kind, may be necessary to demonstrate that the case of the plaintiff is so clearly untenably that it cannot possibly succeed."

Counsel for Mecair argued that the Statement of Claim failed to disclose a cause of action in that the purported assignment by Pearson to Colmup was not effective as a matter of law, and thus Colmup had no claim against Mecair.	The Statement of Claim asserts that there was a contract between Pearson and Mecair, that Pearson advised Mecair that he was acquiring a "corporate structure" for the purpose of carrying out that contract and that Mecair consented to an assignment of the rights and obligations of Pearson to Colmup.	Nowhere is it expressly asserted that Pearson had assigned the contract but that is implicit.	The assignment alleged is not restricted to the benefits or rights due or to become due to Pearson.	The plea also refers to the obligations.	It is not an assignment of a chose in action and thus the provisions of s. 70 of the Supreme Court Act do not apply so as to render the assignment ineffective for lack of the formalities there
required.

In the Fifth Australian Edition of Cheshire and Fifoot's Law of Contract at paragraph 1750 appears the following:

"Burden of contract cannot be assigned without consent of creditor.	The question that arises here is whether B can assign the obligation that rests upon him by virtue of his contract with A to a third person C, so that the contractual liability is effectively transferred from him to C.	Can he substitute somebody else for himself as obliger?
This question has received a judicial answer unhesitatingly in the negative.	In the words of Collins MR:

It is, I think, quite clear that neither at law nor in equity could the burden of a contract be shifted off the shoulders of a contractor on to those of another without the consent of the contractee.	A debtor cannot relieve himself of his liability to his cieditor by assigning the burden of the obligation to somebody else: this can only be brought about by the consent of all three, and involves the release of the original debtor: Tolhurst v Associated Portland Cement Manufacturers (1900) Ltd [1902) 2 KB 660 at
668.
However, this principle may not necessarily apply to the case of an  assignment  of  a  contract, invo lving both benefits and burdensome obligations; the assignee may be taken to have accepted the burdens as well as the benefits by taking the assignment; see Tito v Waddell (No 2) [1977) 1 Ch
106 at 289 et seq; [1977] 2 All ER 129 at 280 et
seq."

That was an exceptional case in many ways and I do

not think  that it assists the defendant.	At p.  282 Megarry v.c. observed  "if matters such as novation are left
on one side, it is clear that in general contractual burdens are not assignable, though contractual benefits are" (see

9

also the-<liscussion at par-a .i 310	25th Edition, Chitty on

Contracts).

. ·--

However, it is plea.dea· that Colmup consented to the assignment of the benefits and.obligations.	It is not for
me to decide whether it did so or not.	Tha·t is a matter to

be determined on the evidence at trial, but the allegation that such consent was given is, I think, sufficient to admit a reasonable argument to support Colmup's assertion of there having been an effective assignment to it.

At para 14.6 of Brooking, Building Contracts authority is put forward for the propositions that where there is consent, there is a novation, which may be inferred from conduct and that what is described as an assignment may be found to be a novation (see also Cheshire & Fifoot
para 1752).

The assertion that Colmup consented to the assignment , also disposes of the submission that the contract was not capable of being assigned because it was based upon personal skill or confidence.

I now turn to Mecair's application by which it seeks to have paid to it the sum of $65,800 paid into Court by Sitzler.	It is common ground that Sitzler was the head contractor for the construction of building works at Darwin,

10

portion of that contract had been subcontracted to Mecair which in turn subcontracted portion of the works entrusted to it to Pearson.	I will assume for these purposes that Colmup stands in the place of Pearson.	Sitzler was thus a "contractor", Mecair a "sub-contractor" to Sitzler, and Colmup a "sub-contractor" to Mecair within the meaning of the definitions ins. 2 of the Act.

The material provisions of the Act, in so far as charges are concerned, as opposed to liens, are as follows:

2
""Contract price" means the money payable to any contractor or sub-contractor for any work, or materials furnished or to be furnished in connection with work , under any contract, and whether such price has been fixed by express agreement or not.

s.	7'(2)

A sub-contractoshrall have a charge on any money payable to the contractor or sub-contractor with whom he shall have contracted for that portion of the contract price payable to the first-mentioned sub-contractor in respect of work done or materials furnished or manufactured for the purposes of the contract of such contractor or secondly mentioned
sub-contractor.
s.	7 (3)
A charge under this section shall attach only to money payable under the contract for the purposes of which the work or materials have been done, supplied, or manufactured, and shall lapse unless an action be brought to enforce the same within twenty-eight days after the wages or contract price in respect of which such charge has arisen shall have become due within the meaning of section 10, sub-section (2).	Such action shall not be discontinued without the consent of the defendant

or an order of the Court, and the Court on making such order may declare that any charge claimed does not exist or order that it shall forthwith lapse, or that the plaintiff have further time to bring a fresh action to enforce the charge.
s.	10(2)

s.	21

s.	23

Any wages or contract price shall for the purposes of this section be deemed to have become due -
(a)		If unpaid for seven days after the same (being payable) shall have been demanded by notice in writing, signed by the person claiming the same and given to the person liable to pay the same, or posted in a registered letter addressed to him at his usual or last known place of abode in South Australia.

Any person entitled to a lien or charge under this Act may bring an action to enforce such lien or charge, or to recover any amount deposited under section 16, in any Court in which the wages or contract price in respect of which such lien or charge is claimed could have been recovered against the person primarily liable therefor.

In every action to enforce a lien or charge or to recover an amount deposited under section 16, the person primarily liable for the wages or contract price may be joined as a defendant unless judgment has already been obtained against him, and judgment in such action shall be given against the person primarily liable for the full sum due by him, and an order shall be made for the enforcement of the lien or charge, or the payment of the money deposited or otherwise in relation thereto as shall be just, but shall not prejudice the right of the plaintiff to enforce any other lien or charge to which he shall be entitled under this Act.

s.	26 (2)
In case of an action to enforce a charge the person against whom such charge is sought to be enforced may by payment into Court of the amount claimed in respect thereof relieve himself of all further liability in respect of such charge or in respect of the costs of further proceedings.

s. 32
Any person alleging that he is prejudicially affected by a claim, lien, or charge, or by registration under this Act, may at any time apply to the Court to have such claim or registration cancelled or the effect thereof modified, and such order may be made as may be deemed just."

The remedies in relation to charges, provided for by the Act, are tied to procedural requirements which have temporal limitations, and in this matter those limitations assume dominant significance.	The first sentence of s. 7(3) incorporating reference to s. 10(2) is critical.	Whatever may be the judicial concerns, often expressed, as to the interpretation and application of much of the Act (which I share), I do not think that they arise in this context.	I have not been referred to any differing judicial opinion impinging upon the issue for determination in this application.	That may well be because the answer is clear enough.	Subsection (3) of section 7 relevantly provides that a charge, under that section, shall only attach in certain circumstances, and shall lapse unless an action be brought to enforce the same within 28 days after the monies sought to be made the subject of the charge shall have become due within the meaning of s. 10(2).

Subsection 7(3) incorporates the provisions of
ss. 10(2) for the purposes of subsection 7(3).	That is, any contract price shall, for the purposes of s. 7(3), be deemed

to have become due if, relevantly, those monies are unpaid after the same (being payable) shall have been demanded in the method prescribed and remain so for seven days.

The demand under the Act was made on 28 July 1988 and Writ issued on the same day.

In Pipeline Properties Pty Ltd v Leichhardt Development Pty Limited (unreported 31 January 1989) Kearney J. held that, in the case of a lien, the effect of
s. 10(2)(a) of the Act "is that the contract price is deemed to have become due for the purposes of s. 10(1) only when it remained unpaid at the expiration of 7 days after it has been demanded".	The incorporation of s. 10(2) into s. 7(3) has the same effect in respect of a charge.	His Honour went
on to hold that the action to enforce the lien, having been
brought prior to the expiry of that period, was a nullity.  I see no reason why the same reasoning should not be applied to enforcement of a charge.

Other arguments were put to me by counsel for Mecair going to the validity of the charge and its enforcement, but on the view I have taken above it is not necessary for me to deal with them.	Indeed it may be better that I do not, in that some of the matters raised may remain on foot and ought not to be determined summarily.

I am disposed to dismiss Mecair's application in so far as it seeks to have the Statement of Claim struck out for failing to disclose a cause of action for debt and damages against it, but strike out those parts of the Statement of Claim as relate to the charge and the remedies sought in that regard.

There remains the question of what is to become of the monies paid into Court by Sitzler.	Section 26(2) of the Act provides that in case of an action to enforce a charge the person against whom such charge is sought to be enforced, may by payment into Court of the amount claimed in respect thereof, relieve himself of all further liability in respect of such charge or in respect of the costs of further proceedings.	I have held that the action to enforce the charge in this case is a nullity, and thus the payment of the monies into Court was a mistake.	I think that an order should be made to have that sum paid out to Sitzler.	It would then be at liberty to dispose of those monies in accordance with its obligations and without regard to the purported charge.

In all the circumstances I also consider that the second and third defendants should be removed as parties.

I will hear counsel further as to the orders to be made and direct that a copy of this judgment be delivered

forthwith by the solicitors for Mecair to the solicitors for the second and third defendants so that they may have the opportunity to be heard when the matter is resumed.

mar890074
IN THE SUPREME COURT
OF THE NORTHERN TERRITORY OF AUSTRALIA

No. 571 of 1988

BETWEEN: COLMUP PTY LTD
Plaintiff

AND:
MECAIR ENGINEERING PTY LTD
First Defendant

AND:

SITZLER BROS PTY LTD
Second Defendant

AND:
SITZLER BROS (DARWIN) PTY LTD
Third Defendant

CORAM:	MARTIN J.

REASONS FOR JUDGMENT
(Delivered 8 May 1989)

In my reasons for decision delivered on 10 March 1989, I found that the action to enforce the charge claimed by the plaintiff on monies due by the second defendant to the first defendant, having been brought prior to the expiry of the period of 7 days provided for ins. 7(3) and s. 10(2) of the Workmen's Liens Act, was a nullity to that extent.
However, since there were other matters to be dealt with, I

. ' ' ·-

made no formal order and stood the matter over for further consideration.

I now deal with the plaintiff's application that it have leave to discontinue  so much of the action as relates to the enforcement of the charge and that it have further time to bring a fresh action in that regard.

Section 7(3) is set out in full in my earlier reasons.	It requires an action to be brought to enforce a charge within 28 days after the expiry of the period of 7 days referred to ins. 10(2).	It goes on to provide that such action shall not be discontinued except by consent of the defendant or an order of the Court which is empowered to make consequential orders, including granting further time to bring a fresh action.

Much was put to me as to the purpose lying behind this provision and the circumstance in which it may fall to be applied, but in the view that I take it is not necessary to go into those matters.	In my opinion the action which might be discontinued is the action referred to at the commencement of the subsection, that is, one brought within the period of 28 days.	The action in this case was not such an action.	I do not consider that in those circumstances the Court has any discretion.	The plaintiff's application is dismissed.

. ' .. .

Order that those parts of the Statement of Claim as relate to the charge and the remedies sought in respect thereof be struck out.

The money paid into Court by Sitzler Bros should be disposed of.	There is no specific power in that regard but I regard it as being a procedural matter where the Rules are wanting.	Pursuant tor. 1.11 I direct that those monies be paid out to Mecair at the expiry of 28 days from today's date, unless otherwise ordered.

Certified fit for counsel.

Costs are reserved.