COLMUP PTY LTD V MECAIR ENGINEERING PTY LTD & ORS
Supreme Court of the Northern Territory of Australia Kearney J.
22, 26 and 29 September 1988 at Darwin

COMPANIES - entitlement to assume due appointment of agent - whether company can rely on entitlement - Companies (Northern Territory) Code, s.68A(3)(c)

WORKMAN'S LIEN	Subcontractor's charge - nature of charge - whether subcontractor a secured creditor of the contractor for the purposes of	the Bankruptcy Act 1966 (Cth)
WORKMAN'S LIEN - distinction between existence of charge and its enforcement - effect of an invalid demand - Workmen's Liens Act ss.7(2), 7(3), 10(2)(a)

WORKMAN'S LIEN - whether formal demand necessary for creation of charge - whether charge created when work is done under the subcontract - whether demand necessary before charge can be enforced
- Workmen's Liens Act s.10(2)

WORKMAN'S LIEN - whether demand valid when not signed by lienor - effect of signature by	lienor's agent - requirements for authorization of agent - whether appointment under common seal of company required - authority of directors to appoitn agent - Workmen's Liens Act s.10(2)(a), Companies (Northern Territory) Code s.80(7)

WORKMAN'S LIEN	Subcontractor's charge causing lack of liquidity - whether thereby "prejudicially affected" - Workmen's Liens Act s.32

Cases referred to:
Albert del Fabbro Pty Ltd v Wilckens & Burnside Ptv Ltd (Receiver & Manager Appointed) (1971) SASR.121
Braden v Brown (1917) 3 WWR 90(: (B.C.C.A.)
J. J. Craig Ltd v Gillman Packaging Ltd (19 2) NZLR
201
Re Dalle Nagore (1964) 6 FLR 277
Miller's Lime Ltd v Royal Agricultural & Horticultural Society of South Australia & Or	(1936) SASR 306
Pitt Limited v The Corporation of the Town of Glenelg
( 1927) SASR 501

Cases followed:

195 Crown Street v Hoare (1969) 1 NSWR 193
Re Corazon Pty Ltd (1987) 5 ACLC 1059
Re Kieran Byrne & Associates Geotechnical Consultants Pty Ltd (1988) 6 ACLC 76
Motel Marine Pty Ltd v I.A.C. (Finance) Pty Ltd
(1964) 110 CLR 9

Cases applied:
W. Curl & Sons Regd v Buck Industries Pty Ltd (1972)
2 SASR 335
Stapleton v F.T.S. O'Donnell Griffin & Co (Q'land) Pty Ltd (1961) 108 CLR 106
A.R. Wright & Son Ltd v Romford Borough Council (1957)
1 QB 431
Henry F. Moss Ltd v Wilson (1915) 34 NZLR 311 Grahame v Commissioner for Railways (1946)
46 SR(NSW) 430

Counsel for the applicant Solicitor for the applicant

Counsel for the respondent Solicitors for the respondent

D. Trigg
David Francis &
Associates
:		B.J. Cassells Morris, Fletcher & Cross

kea880l42
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 Defer.d nt
and:

SITZLER BROS PTY LTD
Second Defendant

and:

SITZLER BROS (DARWIN) PTY LTD
Third Defendant

CORAM:	Kearney J.

REASONS FOR DECISION
(delivered 29 September 1988)

In	its	Summons	of	14 September the fir	defendant

sought the following	relief.	F	st,	under	s	2	of	Th,

Workmen's Liens		1893

(S.A.,	adopted),

n	"the

Act") it sought an order cancelling the	charae this	action	by	the plaintiff over mon		s due fendant to the f	st defendan	to the ext		t

claimed the third
,f	$65,800.

Alternatively and by leave, it sought an order that the charge claimed did not exist; most of the argument was directed to this aspect. It also sought consequential orders. On 26 September I refused to grant the relief sought; I now publish the reasons for that decision.

Mr Trigg of Counsel for the first defendant, moved on the affidavit of 14 September of Mr Kistenkas, a director of the first defendant. In brief, he deposed that in 1987 the first defendant had entered into a contrac (herein ''the head contract") with the third defendant, to carry out certain works. The first defendant sub-contracted part of that work to a Mr Pearson. Subsequently Mr Pearson formed the plaintiff company; no point was taken before me on the fact that that company and not Mr Pearson is the plaintiff. Mr Kistenkas alleged that the plaintiff had failed to fulfill its obligations under the sub-contract, despite agreed variations thereto. The plaintiff contests that allegation. Eventually on 28 June 1988 the plaintiff's solicitors alleged that the first defendant had wrongly repudiated the sub-contract. The next crucial date is
28 Ju Mr Kistenkas deposed that th1 : t defend t d completed 28 July 1 88 the  gre tc  part of tl1   Lead contract; and as at that date there was s01 ,e $76,000 due to it from the third defendant under the head contract.

On 28 July the third defendant was served with a "Notice of Claim of Charge" in which the plaintiff claimed a charge on any money payable by the third defendant to the first defendant under the head contract, to the extent of
$65,800.	This Notice was signed in the following fashion:-

"Morris	Fletcher	&	Cross,	solicitors	and	duly	
appointed agents for	Colmup Pty	Ltd."			

As a result of receiving  this Notice, the	third defE',ndant on
30 August paid the sum of $65,800 into Court in this action, thereby obtaining for itself the advantages of s.26(2) of the Act. Mr Kistenkas deposed that the first defendant had now completed the head contract.   He  stated  that because
$65,800 of the monies due to it under the head contract was now held in Court, its liquidity was adversely affected since it still owed money to other sub-contractors and suppliers as a result of the head contract.

On the same day, 28 July 1988, the plaintiff served on
the	first	defendant	a	'Demand' that it pay the plaintiff
$65,800.	This was clearly for	the	purpose	of		triggering s.10(2)(a)			of	the	Act.	The D	an was signed in the same way as	the Notice to the third defendant fE:nc  iint.	On	t!tc		same	day the	plaintiff	also served on the first defendant a "Notice to  Contractor  of Claim of  Charge"  in the amount	of		$65,800 "being		a		portion of  the contract  price due  and  payable" by

the first defendant to the plaintiff, and stating that it had "this day delivered a Notice of Charge" to the third defendant. This document was signed in the same way as the other two.

On	the	same day the plaintiff issued its Writ herein against the first and third defendants and another, claiming as	against	the	first		defendant $65,800 as monies due for ork done and materials supplied under the sub-contract, and damages; and as against the third defendant, the enforcement of a charge under the Act.	No submissions were made	before me as to when a Writ should have issued, in the light of the date	of	the	Demand	and	the	provisions	of	s.7(3)	and s.10(2)(a) of the Act, and I do not deal with that question.

Against	that charge claimed		did

background	Mr Trigg submitted that the not	exist,		the	sum	of	$68,500	had

therefore	wrongly been paid into Court, and as that sum was money due to the first defendant under the head contract,	a

matter clearly conceded by the third de now be paid out to the first defendant. argument ran as llows.

ant, it should His	supporting

The plaintiff's claim 10  a charge on ''money payable" to the first defendant under tl e head contract arises under s.7(2) of the Act.  Section 7(3} of the Act provides that the charge lapses un ss an ac ion to en e it is brought

within 28 days "after the ..• contract price in respect of which such charge has arisen shall have become due within the meaning  of  Section   10,   sub-section   (2)". Section 10(2)(a) of the Act provides that the contract price shall be deemed to have become due "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

II	{emphasis mine).	Th0 Demand had been	signed	by	th

plaintiff's	solicitors.	This	did	not	accord	with	the

requirements of	s.1O (2)	(a)
reasons.

of	trH,	Act,

for	one	of	t 0

First, it is not a sufficient compliance with s.1O(2)(a) of the Act that the Demand be signed by an agent; it must be signed by the sub-contractor itself. Second, and alternatively, if the Demand may be signed by an agent, the agent must be properly authorized, and in this case that requires that the agent be appointed under the common seal of the plaintiff, whic had not been done. If either of
these	submissions	were	accepted,	Mr Trigg	argued,	it

followed	that	the	Demr	under s.1O(2)(a) of the Act was

invalid, hence no ar.c,	t

s   "deeme	t

have	become	du

from thf		first defenda t to the plaintiff within the meaning of s.1O(2); and accordin1ly, as he put it,		"the claim		to	a charge	under s.7 does wt	arise - has not commenced" and s the	plaintiff can have   nc,   claim under the	Act	to the	mon	s paid into Court.

I	note that the argument may perhaps be put in a more fundamental way:	in		Miller's Lime Ltd v Royal Agricultural and Horticultural Society of South Australia and Ors		(1936) SASR 306 Murray CJ considered	that	no	charge	comes	into existence		under		the		Act until the amount due for the work done has been ascertained in the manner set out	in	s.10(2) of	the	Act.	On		this	approach,	an inv	id Demand s.10(2)(a) means that. no charge has ever		existed.	I		11
return to this later.
Mr Trigg's alternative submission was that, assuming the charge was valid and on foot, it should be cancelled because the first defendant was "prejudicially affected" by the charge in terms of s.32 of the Act in that, by being thereby prevented from obtaining payment of monies due to it under the head contract, it was suffering the problems arising from lack of liquidity to which Mr Kistenkas had deposed.  I do not consider that there is any  substance in
this	submission;	:i	is almost inevitable in practice that
any contractor will be affected in the	way	described	when involved	in	liti92tion	with	a subcontractor who claims a

charge	under
 sions	of	th,

11.ct.
Act.

An	judice	flows	from	the

s	more must be shown to

establish prejudicE which warrants relief. Section 32 has more scope for cperation i relation to persons in the position of the thjrd defendant, who have no interest in the dispute between ontractor and his sub-contracto .

Mr Cassells	of		Counsel	for		the plaintiff submitted that although s.10(2)(a) of the Act required that the Demand be	"signed	by		the	person claiming the same" this did not mean that the demand had to be	executed	under	the	common seal		of	the	plaintiff.		It	could		be signed by a person authorized to do so by the plaintiff.		Mr Cassells relied on the common law rule 1 qui facit per alium, facit		r se'.		He submitted that lhe rule was not excluded	by	the			words		of s.10(2)(a);	he		relied		on the observations of Jordan CJ in Grahame v Commissioner for Railways	(1946)		46   SR		(NSW)	430 at p.435. Hjs Honour there  said that, prima facie, the common law rule was not excluded. I respectfully agree, and see nothing in the language or subject matter of the Act which indicates that a claimant itself must· sign the Demand. Contrast, for example, the legislative provision which gave rise to the decision in Motel Marine Ptv Ltd v I.A.C. (Finance) Pty Ltd (1964) 110 CLR 9.  Accordingly, I uphold Mr Cassells' submission.
This	l aves	the	qu stion	whether	Messrs	Morris

Fletcher Certainl somewhat

an		Cross	were	in	fact	properly	authorized. ence of 2 th	ization is required; see, in	a
p	llel	C	Re Kieran Byrne and Associates

Geotechnical 2onsultants Pty Ltd	(1988)	6	ACLC	76.	At
common	law	company could only appoint an agent under its

common (1957)

sea.'Ll     ;
1

A.R. Wright & Son Ltd v Romford Borough Council
431.	Mr Cassells submitted tb2t s.80 of the

Companies (Northern Territory) Code (herein "the Code") overrode this common law rule. Section 80(7} of the Code provides that a document requiring authentication by a company may be authenticated by the signature of an officer of the company and need not be authenticated under the company's  common seal.  Section 80(8) requires that where a
deed	is	to	be	executed	on	behalf	o	a	company,	the
authorization must be under the company's common seal; it is clear that no deed is in question here.
To	stablish the facts relating to	authorization
of	Messrs		Morris Fletcher and Cross, Mr Cassells relied on his own	affidavit		of		22 September.	He	deposed		to	the circumstances		surrounding	the	execution		of	a	document entitled "Appointment of Agent of Colmup Pty. Ltd." by which Messrs Morris Fletcher & Cross were purportedly appointed as agents for the plaintiff "for		the		purpose		of	taking	all necessary			steps		to	claim, register and enforce a lien" in respect of matters		arising	under		the		sub-contract.	The document		is		undated		but I am satisfied from the affidavit that it was prepared on 26 June 1988 and signed on that	day  t sole director and shareholders of the plaintiff, Mr
and Mrs Pearson, i1 th t capacity. There can be no question but th t the sole directors had authority to sign for the plainti:::f the document appointing Messrs Morris Fletcher and
Cross   s  agents;  see  s.80(7)  of  the Code and 195 Crown

..)

Stre t Pty Ltd v Hoare (1969) 1 NSWR 1- .O., -:i

per	Asprey JA	at

p.202. The authority given is sufficient I consider, despite the reference to "lien" and not to "charge", to warrant the signing of the 2 Notices and the Demand in question by Messrs Morris Fletcher and Cross. It was not arguE,d that no formal resolution had en proved but, had it been, I would have held that the pres nee of all directors giving the necessary authority was .cf.icient, and no formal rescllution was necessaryi see Re Corazon Pty Ltd (1987) 5 ACLC 1059 at p.1061.

In the result I am satisfied that Messrs Morris Fletcher & Cross were duly authorized as agents of the plaintiff to sign the Demand under s.10(2) of the Act. It follows that the Demand was val°id; this was the keystone of Mr Trigg's argument and the rest of his case falls with it. The approach corresponds with that in New Zealand under corresponding legislation; see Henry F. Moss Ltd v Wilson (]915) 34 NZLR 311.

As the first defendant has failed to establish any bc1sis for the relief it claims in its Summons of

1  S	tt   is sufficient   dispose of  the  matters r ised  be  e		however, I should deal briefly with three o her matters which arose in the course of the hearing.

Mr Cassells relied in the alternative	on	s.68A(3)(c)
cF   the  Code,  which provides that a person having dealings

with a company is entitled to assume that a person held out by the company to be its agent, has been duly appointed. However, I consider that this provision does not bear on the matter in issue; it is directed to the entitlement of a person having dealings with a company, and does not mean that the company itself is entitled to rely on the assumption.

Mr Cassells	moved,	by	leave,	by	Summons	dated

22 Sc   r  1988,   for an order pursuant to s.539(4)(a) of the Code that the charge claimed by the plaintiff was not inva1id by reason of any failure to comply with any provision of the Code. Mr Cassells developed  this submission in considerable detail. As I understood it, the limited purpose of this application was to meet any finding that Messrs Morris Fletcher and Cross had to be appointed under the seal of the plaintiff. I was referred to many authorities bearing upon s.539(4).  It is however in my view

unnecessa

to	rule	upon	the	plaintiff's

Summons	of

22 September,	since	the	first defendant has failed in its

applicati

of	14 September.	I	consider

that

the

approp ic:t.	order is that th	further hearing of the summons of 22 s		be adjourned		thout day fixed.

Last, some observations upon s.7 of the Act. It contemplates a  transact  in  which there are at least 3 part sand at least 2 contracts at different levels.

Speaking generally, and in terms of a sub-contractor, contractor and building owner, the Act gives the sub-contractor the right, by giving notice to the building owner that he claims a charge on money payable by the owner to the contractor, to pay'ment of the monies due to him out of monies due by the owner to the contractorr see  s.7(5). The Act creates a cha e on the money payable, in the true sense. The effect is somewhat similar to a garnishee order. The sub-contractor becomes a secured creditor of the contractor for the purposes of the Bankruptcy Act, 1966 (C'th). He has a proprietary interest in the chose in action constituted by the contractor's debt to him and, by his giving notice to the owner, the sum charged is bound in the owner's hands, and the contractor becomes disentitled to

receive	it.	So	much	seems
F.T.S. O'Donnell, Griffin & Co.

to be clear from Stapleton v (Q'land) Pty Ltd (1961)	108

CLR 106. That decision involved a Queensland Act, but is applicable a fortiori to the Act: see Re Dalle Nagore (1964) 6 FLR 277 at 283.

Reference	was	made	at	p.6	to the view favoured by

\' CJ in Miller's L		Ltd	(supra).	It	is	arguable, ontra,	that	a	charge	exists		under s.7(2) of the Act i
favour of a sub-contractor once there are monies presently aue and payable  by  the contractor to the sub-contractor, even though the charge attaches under s.7(3) only when there is	sum present due and payable to the contractor under

' I

his contract-with the owner. A distinction is thus drawn between the existence of  the charge and its enforcement. The argument runs that the words "money payable to the contractor" in s.7(2) are words used simply to designate a fund and not to indicate that the money must be presently due and payable at the time when the charge is claimed to arise; see W. Curl & Sons Regd v Buck Industries Pty Ltd (1972) 2 SASR 335 at pp.39-345. If this be so, the charge exists once work is done or materials furnished or manufactured under the sub-contract irrespective  of s.10(2) {a), which is relevant only to the enforcement of that charge under s.7(3). The invalidity of a Demand under s.10(2), on this approach, would not go to the existence of the charge but would render its enforcement under s.7(3) ineffective.

The reason for this fundamental difference of opinion as to the significance of s.10(2) really stems from the fact that, as Richards J said in Pitt Limited v The Corporation of the Town of Glenelg (1927) SASR 501 at 505:-

"It would be difficult to find legislation affording greater scope for argument than [the Act]. Efforts seems to   been made to avoid prolixity rather than to secure clarity."

As Hogarth J  it   W. Curl &   Sons Regd v Buck Industries Pty Ltd (supra) at p.340: "The mental gymnastics necessary to construe the legislation are not inconsiderable".

' l

In Pitt Ltd (supra) Richards J examined at great length the South Australian Act and New Zealand authorit s on corresponding legislation, and concluded that the charge was created by the Act (and not by a notice claiming the charge) and came into existence as soon as any work had been done or materials provided under the sub-contract. The fact that no money had "become due" to the sub-contractor in terms of s.10(2) of the Act, no notice had been given under s.7(5), and no money was presently "payable" to the contractor in terms of s.7(2) did not go to the existenc of a charge, though until notice of the charge was given, it was of a·floating character; it did not "attach" except in accordance with s.7(3). His Honour rejected the other possible interpretation, that s.7(2) merely gave a ri t to acquire a charge, and no charge existed until money had "become due" to the  sub-contractor accordance  with s.10(2) and here was money presently "payable to the contractor" in terms of s.7(2). On his Honour's approach, s.10(2) did not go to the existence of the charge, but was -

"... the step ... necessary in benefit from an existing right"

order	to (p.515).

obtain	any

In Miller's Lime Ltd (supra) Murray CJ (at fi.3- 5-316) considered that no charge came into existence unt the amount due for the work done had been ascertained n the manner set out in s.10 2) of the Act. Richards J adhtred to the views he had expres in Pitt Limited v The Corpc,ra tion

of the Town of Glenelg (supra); his Honour observed (at p.331) that the reference in s.7(3) to s.10(2) related to the lapse of an (existing) charge, and had nothing to do with the question whether the charge had come into existence; he considered that "money payable" in s. (2) was

descriptive	of	a	fund,	irrespective	of	the payable.

it was

In	Albert del Fabbro Pty Ltd v Wilckens and Burnside Pty Ltd (Receiver and Manager Appointed)		(1971)	SASR		121 Bray CJ noted			at		p.126			that		"certain		formali ies"	were necessary	for			the "perfection" of a charge.		The appellant had	argued		that		the	charge			did	not		exist,			except potentially,		until the contract price had become due to the sub-contractor under	s.10(2)	of	the		Act.		The		argument failed on the facts, but his Honour expressed "grave doubts" at p.127 whether it was "necessary for the perfection of the charge	that		a			demand		should have been made within the meaning of s.10(2)". At p.129 his Honour considered that there was much to be said for the proposition that the reference in s.7(2) to "money payable to the contractor" merely  des the  fund,  and  found   t    ff    ult believe that the statutory r given to a s :,-contractc · could be destroyed by, for example, a simple assignment by
the contractor, "even if no demand had at that	te yet beeL

made	within	the	terms	of	s.10(2)

. . . II .

Chamberlain J,

dissenting in the result, considered (at p.13 ) that -

"Until the events which		bring		it	into	effect	have happened	[the		charge]		may	in a sense be said to be 'floating' or	perhaps	more	accurately	'potential'.
The events required to 'crystallize' or bring into effect,and the extent of the operation of, a lien or charge, are prescribed by the Act...".

Zelling J did not consider the question of the existence of the charge, because in his view all the necessary ingredients to enable a charge to be claimed under s.7 had been made out. His Honour did, however, consider the 3 possible times at which a lien could take effect as a security, and was of opinion (at p.138) that it constituted a charge on the land, though not necessarily enforceable, at the time the work was done and a portion of the contract price of the sub-contractor had "accrued due" under s.5, that being a time earlier than the time it was deemed "to have "become due" in terms of s.10(2).

In W. Curl & Sons (Regd (supra) Hogarth J concluded at
p.342:-

"		in order to claim a charge			on		moneys		'payable' under		a		head	contract,	a		sub-contractor must have moneys		presently	payable			to	tim		under		his sub-contract, whether or not the .c e r c neys have, by	U,a t time become 'due' within the m			Dinc of	s.10(2);		but he	must		take	action	to		enforce		the chargr within twenty-eight days of their becoming 'due'		within		the meaning of that section."

His	Honour	agreed with the views of RicLards J that moneys 'payable to the contractor" in terms of s.7(2) need	not	be

presently payable for the charge to exist, though it is not enforceable as against moneys which, at the time it is sought to enforce it, had not become due and payable; see pp.342-5.

From this brief review it is by no means comprehensive it appears that the weight of authority is that the charge comes into existence when portion of his contract price becomes payable to the sub-contractor, and so the existence of the cl1arge 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 by s.10(2)(b) obtains. This seems generally to accord with the approach in New Zealand and in some

Provinces of Canada, where		there	is substantially	different	legislation;

corresponding	though see J.J. Craig Ltd v

Gillman Packaging Ltd	(1962)	NZLR	201
216-219.

at	208-212	and

It	seems	desirable	that	th	obscurities	of	this

ancient Act be c		ified by mor it	reaches	its	cen	the

legis	ti

eds of th	c

before truction

industry of the late 20th century shJuld be met. I note that Queensland took this ac_ion in 1 74, in the Subcontractors' Charges Act passed that year.