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  • Unreported Judgment

State of Queensland v Walter Construction Group

 

[2005] QSC 241

Reported at [2006] 1 Qd R 376

 

SUPREME COURT OF QUEENSLAND

 

CITATION:

State of Queensland v Walter Construction Group & Ors [2005] QSC 241

PARTIES:

No BS2028 of 2005

EHS LANDSCAPING PTY LTD ACN 101 392 689
(plaintiff)
v
WALTER CONSTRUCTION GROUP LIMITED (ADMINISTRATORS APPOINTED) ACN 008 390 074
(defendant)
and
STATE OF QUEENSLAND
(second defendant)

No BS3026 of 2005

READY MIX ROADS GROUP PTY LIMITED ACN 099 733 445 and VACUUM ROAD SERVICES PTY LTD ACN 006 673 481 TRADING AS EMOLEUM ABN 14 374 315 641
(plaintiffs)
v
WALTER CONSTRUCTION GROUP LIMITED (IN ADMINISTRATION) ACN 008 390 074
(first defendant)
and
THE STATE OF QUEENSLAND, ACTING THROUGH THE DEPARTMENT OF MAIN ROADS
(second defendant)

No BS4287 of 2005

STATE OF QUEENSLAND
(employer)
v
WALTER CONSTRUCTION GROUP LTD ACN 008 390 074
(contractor)
and
SIMPSON & SONS CONSTRUCTION PTY LTD ACN 076 613 600
(first subcontractor)
and
NOEL KELLY PTY LTD ACN 050 411 893
(second subcontractor)
and
J & K GRADER HIRE PTY LTD ACN 067 992 394
(third subcontractor)
and
D & M PLANT HIRE PTY LTD
ACN 010 542 506
(fourth subcontractor)
and
GRACEDOM PTY LTD
(fifth subcontractor)
and
MILLBROOK CONSTRUCTIONS PTY LTD ACN 095 680 336
(sixth subcontractor)
and
CONCRIB PTY LTD ABN 40 010 410 484
(seventh subcontractor)
and
EHS LANDSCAPING ACN 101 392 689
(eighth subcontractor)
and
IAN HENNING ABN 675 978 373 98
(ninth subcontractor)
and
CHEMAINUS PTY LTD ABN 95 576 278 591
(tenth subcontractor)
and
LCR LINDORES GROUP PTY LTD ACN 098 626 798
(eleventh subcontractor)
and
FLYNN GRADER HIRE ABN 34 411 721 093
(twelfth subcontractor)
and
MULTIFIX CONSTRUCTIONS PTY LTD ACN 078 951 229
(thirteenth subcontractor)
and
COBIA CONSTRUCTIONS PTY LTD ACN 075 233 082
(fourteenth subcontractor)
and
AVIHAM INVESTMENTS PTY LTD ABN 81 089 205 872
(fifteenth subcontractor)
and
L & M CONCRETING PTY LTD ACN 009 677 679
(sixteenth subcontractor)
and
APPLETON TRAFFIC EQUIPMENT PTY LTD ACN 009 677 098
(seventeenth subcontractor)
and
IMPROVED CONCRETE PUMPING PTY LTD ACN 009 908 801
(eighteenth subcontractor)
and
PRICE RITE CONCRETE PTY LTD ACN 092 250 890
(nineteenth subcontractor)
and
EMOLEUM ABN 14 374 315 641
(twentieth subcontractor)
and
TENIX ALLIANCE PTY LTD BY WAY OF ASSIGNMENT FROM POWERCO AUSTRALIAN HOLDINGS ACN 098 080 221
(twenty-first subcontractor)
and
CASA ENGINEERING (BRISBANE) PTY LTD ABN 28 099 919 990
(twenty-second subcontractor)
and
G & B ROOFING (QLD) PTY LTD ACN 091 634 294
(twenty-third subcontractor)
and
L.Y.P. PLANT HIRE PTY LTD
(twenty-fourth subcontractor)
and
WEBFORGE AUSTRALIA PTY LTD ABN 13 009 419 756
(twenty-fifth subcontractor)
and
QUALITY ASSURED BOLT & STEEL FABRICATION ABN 91 951 094 574
(twenty-sixth subcontractor)
and
HYMIX AUSTRALIA PTY LIMITED ACN 000 582 221
(twenty-seventh subcontractor)
and
INDUSTRIAL GALVANIZERS CORPORATION TRADING AS INGAL CIVIL PRODUCTS ABN 40 000 545 414)
(twenty-eighth subcontractor)

FILE NOS:

BS 2028 of 2005

BS 3026 of 2005

BS4287 of 2005

DIVISION:

Trial Division

PROCEEDING:

Application

DELIVERED ON:

31 August 2005

DELIVERED AT:

Supreme Court, Brisbane

HEARING DATE:

8 July 2005

JUDGE:

Wilson J

ORDER:

 

CATCHWORDS:

CONTRACTS – BUILDING, ENGINEERING AND RELATED CONTRACTS – REMUNERATION – SUBCONTRACTORS’ CHARGES ACT (Q) – where the employer paid money into court in respect of 28 notices of intention to claim charge – where a number of subcontractors gave notices claiming charges and commenced proceedings within one month of doing so – where contractor in administration when charges claimed and now in liquidation - whether subcontractors who did not commence proceedings within one month of filing their notices of claim still have a valid charge – whether to grant leave to commence proceedings to subcontractors who did not commence proceedings within one month of filing their notices of claim

Corporations Act 2001 (Cth), ss, 435C, 439C, 440A, 440B, 440C, 440D, 451D, 459R(1), 500(2), Part 5.3A

Subcontractors’ Charges Act 1974 (Qld), ss 10, 12, 15

Brian Rochford Ltd v Textile Clothing Footwear Union (NSW) (1998) 47 NSWLR 47, cited

Ex parte Collinsville Backhoe & Truck Hire [1985] 1 QdR 233, considered

Foxcroft v The Ink Group Pty Ltd (1994) 15 ACSR 203, followed

Milankov Nominees Pty Ltd v Roycol Ltd (1994) 52 FCR 378, discussed

Re Bird [1993] 2 Qd R 130, followed

Re QMT Constructions Pty Ltd [2000] 1 QdR 284, cited

Re Queensland Tiling Service Pty Limited  [1978] QdR 142, considered

COUNSELS:

J McKenna SC and P Hastie for the twentieth subcontractor

P Hay for the eighth, twenty-first, twenty-fifth and twenty-eighth subcontractors

M Lee (sol) for the second, third, eleventh, twelfth, thirteenth, fourteenth, fifteenth, seventeenth, nineteenth and twenty-fourth subcontractors

D Thomae for the first and eighteenth subcontractors

S Keliher for the fourth subcontractor

M Dearness (sol) for the fifth and seventh subcontractors

D Cronin (sol) for the sixth subcontractor

M Cope (sol) for the ninth, tenth, twenty-third and twenty-sixth subcontractors

G Sawers (sol) for the sixteenth subcontractor

M Browning (sol) for the twenty-second subcontractor

ST Bohan (sol) for the twenty-seventh subcontractor

SOLICITORS:

Minter Ellison for the twentieth subcontractor

Allens Arthur Robinson and Blake Dawson Waldron for the twenty-first, twenty-fifth and twenty-eighth subcontractors

Dibbs Abbott Stillman for the second, third, eleventh, twelfth, thirteenth, fourteenth, fifteenth, seventeenth, nineteenth and twenty-fourth subcontractors

James Conomos Lawyers for the for the first and eighteenth subcontractors

McAuliffe & Associates for the fourth subcontractor

Carswell & Company for the fifth and seventh subcontractors

Tucker & Cowen for the sixth subcontractor

McKays Lawyers for the ninth, tenth, twenty-third and twenty-sixth subcontractors

Lambert & Ho Lawyers for the sixteenth subcontractor

Broadley Rees Lawyers for the twenty-second subcontractor

Patane Lawyers for the twenty-seventh subcontractor

  1. WILSON J:  These proceedings involve challenges to charges claimed under the Subcontractors’ Charges Act 1974 by a number of subcontractors of Walter Construction Group Ltd which is now in liquidation.
  1. Background

On or about 1 August 2003 the State of Queensland (“the employer”) entered into a written agreement with Walter Construction Group Ltd (“the contractor”) for a project referred to as the Mt Lindesay Highway duplication. On 2 February 2005 the contractor was placed into voluntary administration, and on 30 March 2005 it was placed into liquidation.

  1. The various charges the subject of these proceedings were claimed after the contractor went into administration.
  1. On 26 May 2005 the employer paid $1,682,430-10 into Court in respect of 28 notices of intention to claim charge (BS 4287/05).

Amendment of the Subcontractors’ Charges Act

  1. The Subcontractors’ Charges Act provides a scheme whereby the payment of moneys payable to or to become payable to a subcontractor may be secured by a charge on money payable by the employer. Section 10 provides for the giving of a notice of claim of charge within certain time limits, and by s 12(1) the subcontractor may recover the amount of the charge from the person by whom the money subject to the charge is payable. The charge comes into existence when the notice claiming it is given. By s 15 the charge is deemed to be extinguished unless the person claiming it commences a proceeding in respect of it within a prescribed time, relevantly within 1 month after the giving of the notice of claim of charge pursuant to s 10.
  1. In Re Bird [1993] 2 Qd R 130 the Court of Appeal considered the interaction of s 15 and s 12(3) which then provided –

“(3)(a)  An action to enforce a charge under this Act may be brought by or on behalf of any number of subcontractors claiming charges.

      (b)  Every action brought by a subcontractor to enforce a charge shall be deemed to be brought on behalf also of every other subcontractor who has given notice of claim of charge pursuant to section 10 and who in accordance with rules of the court and this Act becomes a party to the action. Subject to any rules of the Court, every such subcontractor may become a party at any time before the date appointed for the hearing or any adjournment thereof (whether or not he has given a notice of claim of charge) by filing in the Court and serving on all other parties in the same manner as if he were commencing the action a statement of claim endorsed with a request that he be joined as a party in the proceedings.”

In that case a subcontractor gave a notice of claim of charge but did not commence a proceeding in respect of it within 2 months (which was then the relevant time prescribed in s 15). Another subcontractor gave a notice of claim of charge a few days later and commenced a proceeding on a date which was not only within 2 months of its own notice but also within 2 months of the first subcontractor’s notice. More than 2 months after giving its notice of claim of charge, the first subcontractor applied to be joined as a party in the proceeding commenced by the second subcontractor. The Court of Appeal ordered that it be joined. At p 134 the Court said –

“As for the scheme of the legislation, there appears to be no compelling reason why s. 15 should be treated as the dominant provision.  At least that is so where more than one subcontractor has given notice of claim of charge under s. 10 and one of them commences proceedings in accordance with the time limits prescribed in s. 15(1). In that event ‘A proceeding in respect of a charge under this Act’ in s. 15(1) would include an action ‘brought on behalf also of every other subcontractor’ within s. 12(3)(b); with the consequence that, provided a claimant has given notice of claim of charge pursuant to s. 10 and becomes a party to the action pursuant to s. 12(3)(b), the limitations stated in s. 15(1) apply to that action in respect of that claimant. It is irrelevant, on this construction, whether that claimant becomes a party to the action within the time stated in s. 15(1) for commencement of the action.”

  1. Subsequently s12 (3)(b) was broken up into s12 (3A) and s 12 (3B) without any substantive change.
  1. But in 2002 there were some substantive amendments to ss 12 and 15. Those sections now provide –

 

12 Enforcement of charge

(1) If the person to whom notice of claim of charge has been given does not pay or make satisfactory arrangements for paying to the claimant the amount claimed, the subcontractor may recover the amount of the charge from the person by whom the money subject to the charge is payable.

 

(1A) To remove any doubt, it is declared that a person who is an employer or superior contractor makes satisfactory arrangements under subsection (1) if the person pays into court under section 11(5) the amount the person is required to retain under section 11.

 

(2) Claims and all other matters arising under this Act between a person claiming a charge and any other person alleged to be liable to pay an amount claimed or otherwise interested in money that may be affected by a charge or claim of charge and between persons or classes of persons claiming a charge may be heard, determined and enforced by proceedings pursuant to this Act in a court of competent civil jurisdiction.

 

(2A) Notwithstanding subsection (2), the Supreme Court has jurisdiction in all matters arising under this Act.

 

(3) An action to enforce a charge under this Act may be brought by or on behalf of any number of subcontractors claiming charges.

 

(3A) Every action brought by a subcontractor to enforce a charge is deemed to be brought on behalf also of every other subcontractor who has given notice of claim of charge pursuant to section 10, whose charge has not been extinguished under section 15, and who in accordance with rules of the court and this Act becomes a party to the action.

 

(3B) Subject to any rules of the court, every such subcontractor may become a party at any time before the date appointed for the hearing or any adjournment thereof by filing in the court and serving on all other parties in the same manner as if the subcontractor were commencing the action a statement of claim endorsed with a request that the subcontractor be joined as a party in the proceedings.

 

15 Proceedings in respect of charges

(1) A proceeding in respect of a charge under this Act –

 

(a) in the case of a claim of charge in respect of retention money only - must be commenced within 4 months after such retention money or the balance thereof is payable and no later; and

 

(b) in all other cases - must be commenced within 1 month after notice of claim of charge has been given pursuant to section 10 and no later; and

 

(c) must be brought by way of action.

 

(2) For the purposes of a proceeding under this section, it is sufficient if the subcontractor proves that the charge in respect of which the proceeding is brought attached to money payable or a security in existence on any date prior to the date of hearing.

 

(3) Every charge is deemed to be extinguished unless the subcontractor duly commences a proceeding under this section to enforce it.”

 

The basis of the challenges

  1. In the present case a large number of subcontractors gave notices claiming charges and commenced proceedings within 1 month of doing so. Those whose charges are in issue because they did not do so are in 2 categories.
  1.  The 20th subcontractor served its notice of claim of charge on 15 February 2005. It commenced its own proceeding against the contractor on 13 April 2005 (BS 3026/05). It contends that its claim has not been extinguished because -

(i)  The time allowed in s 15 of the Subcontractors' Charges Act was extended by s 451D of the Corporations Act 2001, and it commenced its proceeding within the extended time;

  1.  Alternatively, the proceeding commenced by another subcontractor (the 8th subcontractor) on 9 March 2005 (BS 2028/05) was within the 1 month allowed to the 20th subcontractor, and is deemed by s 12(3A) of the Subcontractors' Charges Act to have been commenced on behalf of the 20th subcontractor.

(b)  The 9th, 10th, 23rd and 26th subcontractors gave notices of claim of charge on 14 February 2005, 15 February 2005, 1 March 2005 and 24 March 2005 respectively. None of them has commenced its own proceeding against the contractor. They all claim that proceedings commenced in timely fashion by other subcontractors against the employer are deemed to have been commenced on their behalf:

(i) The 9th, 10th and 23rd subcontractors contend that proceeding BS 2028/05 (commenced on 9 March 2005) is deemed to have been commenced on their behalf; and

(ii) The 26th subcontractor contends that proceeding BS 3026/05 (commenced on 13 April 2005) is deemed to have been commenced on its behalf.

  1. There is also a challenge to the charge claimed by the 1st subcontractor, but on another basis. It gave notice claiming the charge on 4 February 2005 and commenced a proceeding on 3 March 2005. The notice claiming the charge was in form 1 of the approved forms. The subcontractor was required to give notice to the contractor that it had claimed a charge (s 10(1)(b)). It did so in form 2, but there was an error in completing the form. The claim had been certified as correct by Peter Knight, a registered professional engineer; in error, the 1st subcontractor stated that it had been certified as correct by the contractor. I shall consider the effect, if any, of this error in due course.

 

Effect of administration of contractor

  1. In 1992 Part 5.3A ("Administration of a company's affairs with a view to executing a deed of company arrangement") was introduced into the Corporations Law to provide an opportunity for the rehabilitation of companies in financial difficulties. It has been re-enacted in the Corporations Act 2001. The object of Part 5.3A is set out in s 435A -

 

435A Object of Part

The object of this Part is to provide for the business, property and affairs of an insolvent company to be administered in a way that:

 

(a) maximises the chances of the company, or as much as possible of its business, continuing in existence; or

 

(b) if it is not possible for the company or its business to continue in existence—results in a better return for the company's creditors and members than would result from an immediate winding up of the company.”

  1. The period during which a company is under administration is designed to be relatively short: see ss 435C and 439C. As counsel for the 20th subcontractor said in their written submissions, to permit the administrator to undertake his duties during this short period, a moratorium period is created. For example, a company under administration cannot generally be wound up voluntarily (s 440A), and without leave of the Court or the consent of the administrator, a charge cannot be enforced (s 440B) and an owner or lessor of property cannot take possession of property used or occupied by the company (s 440C).
  1. Section 440D provides -

 

440D Stay of proceedings

(1) During the administration of a company, a proceeding in a court against the company or in relation to any of its property cannot be begun or proceeded with, except:

 

(a) with the administrator's written consent; or

 

(b) with the leave of the Court and in accordance with such terms (if any) as the Court imposes.

 

(2) Subsection (1) does not apply to:

 

(a)a criminal proceeding; or

 

(b)a prescribed proceeding.”

In Foxcroft v The Ink Group Pty Ltd (1994) 15 ACSR 203 Young J of the NSW Supreme Court rejected a submission that on an application under s 440D the Court should proceed along similar lines to an application for leave to sue a company in liquidation. He said at pp 204 - 205

 

“There is, however, quite a big difference between a company in administration and a company in liquidation. A company in administration is seeking to continue to trade and is, in accordance with s 435A, seeking to maximise the chance of it remaining in business. A company in liquidation is one where the liquidator is seeking not to trade but to realise the company’s assets as soon as possible for the best price, in order to be able to distribute the net available funds to the creditors and in some circumstances, the members. 

 

The provisions of Pt 5.3A, as exemplified in sections such as 437C, 437F, 440C and 440D, provide that there shall be a complete freeze of proceedings against the company during the administration so that the administrator can have time to assess the situation, and the company’s creditors have an opportunity to work out the net position and adopt an attitude under s 439C which will be in their common interest.  To allow one creditor or potential creditor to proceed would not only take the administrator’s attention from what he needs to do under the division in a relatively short period of time, but it would also involve costs in running the legal action on behalf of the administrator, as well as perhaps giving the claimant some advantage over the other creditors or potential creditors. 

 

Accordingly, it seems to me that an application under s 440D will rarely be granted. It may be that where the company is insured against the liability the subject of the proceedings, the administrator will ordinarily consent or the court will give conditional leave, but outside this field it is hard to see situations where it would be proper to grant leave, though doubtless there are such situations.”

 

See also Brian Rochford Ltd v Textile Clothing & Footwear Union (NSW) (1998) 47 NSWLR 47 at 54. Thus a Court exercises great caution before granting such leave, and good reasons are necessary prior to its departing from the general intention of Part 5.3A.

  1. A number of subcontractors asked the administrator for his consent to their commencing proceedings to enforce their charges. He apparently gave his consent readily and promptly in all cases where it was sought. The 20th subcontractor did not ask for the administrator's consent or seek leave of the Court under s 440D.
  1. Section 451D of the Corporations Act provides -

 

451D Time for doing act does not run while act prevented by this Part

Where:

 

(a) for any purpose (for example, the purposes of a law, agreement or instrument) an act must or may be done within a particular period or before a particular time; and

 

(b) this Part prevents the act from being done within that period or before that time;

 

the period is extended, or the time is deferred, because of this section, according to how long this Part prevented the act from being done.”

As counsel for the 20th subcontractor submitted, the purpose of this provision is obviously to preserve the rights of a creditor, whilst at the same time ensuring that the benefits of the regime established by Part 5.3A are achieved.

  1. The 20th subcontractor can rely on s 451D if the effect of s 440D was to "prevent" it commencing a proceeding to enforce its charge while the contractor was in administration. Counsel for the 20th subcontractor submitted that it was enough that it was prima facie prevented from commencing a proceeding and that the application of s 451D does not depend on hypothetical inquiries into whether the administrator would have given consent or the Court would have granted leave. 
    They relied on Milankov Nominees Pty Ltd v Roycol Ltd (1994) 52 FCR 378. Counsel for the 8th, 21st, 25th and 28th subcontractors argued that s 451D may apply where consent is refused, but not where it was not even sought.
  1. In Milankov on 22 December 1993 the applicant applied to wind up the company (Roycol) in insolvency. While the winding up application was pending, the company appointed an administrator. A month later creditors (other than the applicant) resolved to accept a deed of company arrangement, which required (inter alia) directors of the company to pay a sum of money to the administrator by 16 June 1994. The money was never paid. During this time the application to wind up the company in insolvency was adjourned on various occasions. By section 459R(1) of the Corporations Law an application to wind up a company in insolvency had to be determined within 6 months of its being made. The question was whether s 451D applied to extend that time.
  1. Upon the appointment of the administrator to Roycol, s 440A(2) came into play. It provided -

 

440A Winding up company

 

(2)The Court is to adjourn the hearing of an application for an order to wind up a company if the company is under administration and the Court is satisfied that it is in the interests of the company's creditors for the company to continue under administration rather than be wound up.”

Lee J said at p 382 -

 

“If a company is under administration the discretion of the Court to make an order under s 459A of the Law is curtailed by s 440A(2) of the Law which requires the Court to adjourn the hearing of an application for an order to wind up a company if the Court is satisfied that it is in the interests of the company’s creditors for the company to continue under administration rather than being wound up. It may be said that in such a case determination of an application to wind up under s 450P of the Law would be restricted rather than prevented.” 

He went on (at p 383) -

 

The powers of the Court are further circumscribed, albeit indirectly, if a company moves from a company under administration to a company administered under the terms of a deed of company arrangement.”

Section 444E provided -

 

444E Protection of company's property from persons bound by deed

(1) Until a deed of company arrangement terminates, this section applies to a person bound by the deed.

 

(2) The person cannot:

 

(a) make an application for an order to wind up the company; or

 

(b) proceed with such an application made before the deed became binding on the person.

 

(3) The person cannot:

 

(a) begin or proceed with a proceeding against the company or in relation to any of its property; or

 

(b) begin or proceed with enforcement process in relation to property of the company;

 

except:

 

(c) with the leave of the Court; and

 

(d) in accordance with such terms (if any) as the Court imposes.

 

(4)  In subsection (3):

 

‘property’, in relation to the company, includes property used or occupied by, or in the possession of, the company.”

Lee J said -

 

“Pursuant to s.444C of the Law upon a resolution by creditors that a company execute a deed of company arrangement a creditor is bound by s.444E of the Law and cannot make, or proceed with, an application to wind up the company.  The creditor may apply to the Court pursuant to s.445D of the Law for an order terminating the deed of company arrangement on one of the grounds specified in that section, or may apply to the Court under s.447A of the Law for any order that is appropriate in the circumstances.  Under the latter provision such an order may include an order restraining the company and administrator from executing the deed, or an order varying the terms of the deed of company arrangement if it appears to the Court that it is in the interests of creditors to do so.  In the exercise of the unfettered power provided by s.447A an order that the deed be varied would not be subject to the limitation imposed by sub-s.445G(4) of the Law where an order to vary the deed may only be made with the consent of the administrator of the deed.

 

But unless such an order was made by the Court directing how Pt.5.3A was to operate, determination of an application to wind up a company in insolvency made under s.459R could not be effected in any real sense whilst the applicant was restrained by sub-ss.444C(2) and 444E(2) of that Part from prosecuting the application.

 

By reason of the operation of sub-s.444E(2) which prevented Milankov Nominees from moving the Court to make an order under s.459A of the Law between 25 February 1994 and 16 June 1994, the Court, in turn, was prevented from exercising the discretion vested in it by that section.  Exercise of the discretion to make an order under s.459A of the Law in a proceeding instituted under s.459R was fundamental to the determination of the application and was also an ‘act’ which may be done within a particular period, namely, the period specified in sub-s.459R(1), for the purpose of the Law and was a circumstance to which s.451D of the Law applied.

 

I am unable to discern any intention in the Law that s.459R is to be construed as a provision to which s.451D does not apply.  Part 5.3A was introduced as an express modification of the winding up in insolvency provisions in Pt.5.4 in which s.459R appears.”

And (at p 384) -

 

“Parts 5.3A and 5.4 of the Law are intended to operate in an interlocking manner and it is not intended that the provisions of one Part operate to the exclusion of the other.

 

Certainly, s.459R is concerned to see that applications to wind up a company in insolvency are disposed of promptly, but it also recognizes that the need for promptitude may be modified by special circumstances.  On the other hand, s.451D acknowledges that the provisions in Pt.5.3A, which have the effect of imposing a moratorium on the exercise of rights by creditors, the purpose of that moratorium being to maximize any prospect of rehabilitation of a company, may prejudice the interests of creditors on some occasions.  To minimize the prospect of prejudice, the terms of s.451D provide, effectively, for time not to run where an act or thing must be done within a period of time that has been affected by any restraint on action imposed by Pt.5.3A.

 

I do not see any disharmony between the provisions of ss.459R and 451D in that regard.  Section 451D is directed to returning a person to the position that person would have been in but for other provisions of Pt.5.3A and to restoring the full value of periods of limitation that would otherwise be compressed, or rendered nugatory, by Pt.5.3A.  In other words, in respect of s.459R, s.451D ensures that the period available to the creditor to prosecute an application, and have it determined, is restored to six months.”

  1. It is correct that s 440A(2), unlike s 440D, does not provide an opportunity for a creditor to obtain the consent of the administrator or the leave of the Court, and so despite Lee J's description of it as restricting rather than preventing the determination of a winding up application, it does indeed effect a prevention for the duration of the administration. But, in the submission of counsel for the 20th subcontractor, the period the company was subject to a deed of company arrangement is more analogous to the facts of the present case: while s 444E(2) provided that the creditor could not proceed with the winding up application it had made before the deed became binding on it, the creditor could have applied to the Court under s 445D for an order terminating the deed (just as in the present case the 20th subcontractor could have sought the consent of the administrator or the leave of the Court to commence a proceeding to enforce its charge). There was no suggestion in Milankov that because that avenue had not been explored, the creditor was not be "prevented" from proceeding with the winding up application.
  1. Given the role of an administrator in trying to save an ailing company within a relatively short time frame, and given the legislative intent to provide a moratorium during the period of the administration, I accept the submission of counsel for the 20th subcontractor that the application of s 451D does not depend on hypothetical inquiries into consent of the administrator or leave of the Court.
  1. I do not consider that there is inconsistency between s 451D of the Corporations Act and s 15 of the Subcontractors' Charges Act. They can and should be read together.
  1. The 20th subcontractor gave its notice of claim of charge during the period of the administration.  I am satisfied that it was "prevented" from commencing a proceeding to enforce its charge during the period of the administration. The 1 month period allowed by s 15 of the Subcontractors' Charges Act did not commence to run until the conclusion of the administration on 30 March 2005. The 20th subcontractor commenced its proceeding on 13 April 2005 - ie within sufficient time to prevent its charge being extinguished by force of s 15(3).
  1. On 30 March 2005 the contractor was placed into liquidation by its creditors. By s 500(2) of the Corporations Act -

 

500 Execution and civil proceedings

 

(2) [Stay of civil proceedings] After the passing of the resolution for voluntary winding up, no action or other civil proceeding is to be proceeded with or commenced against the company except by leave of the Court and subject to such terms as the Court imposes.”

 

Leave was not sought before the commencement of proceeding BS 3026 of 2005. However, leave may be granted nunc pro tunc, and given the existence of a fund in Court out of which the 20th subcontractor's claim will be paid if it succeeds in its proceeding, this is a proper case in which to grant leave: Re QMT Constructions Pty Ltd [2000] 1 QdR 284.

 

Effect of amendment of s 12(3A) of the Subcontractors’ Charges Act

  1. I have already referred to the Court of Appeal's decision in Re Bird, and to subsequent amendment of ss 12 and 15 of the Subcontractors' Charges Act. The question for determination in these proceedings is the effect of the addition of the words "whose charge has not been extinguished under section 15" in s 12(3A).
  1. Counsel for the 8th, 21st, 25th and 28th subcontractors submitted that if a subcontractor who has given notice claiming a charge does not either commence its own proceeding or do what is required under s 12(3B) to join in an existing proceeding within 1 month thereafter, its charge is extinguished by s 15(3).
  1. Counsel for the 20th subcontractor and the solicitor for the 9th, 10th, 23rd and 26th subcontractors submitted that their clients' charges were saved from extinguishment by the commencement of proceeding BS 2028/05 in the case of the 20th, 9th, 10th and 23rd subcontractors and of proceeding BS 3026/05 in the case of the 26th subcontractor, because those proceedings were commenced before their charges were extinguished by s 15(3), and that it does not matter that they were not joined in those proceedings before the expiration of 1 month from claiming their charges.  (In so far as the 20th subcontractor is concerned, this was put forward as an alternative basis for upholding the validity of its charge.)
  1. In Re Bird the Court of Appeal overruled 2 earlier single judge decisions on the effect of ss 12(3)(b) and 15 in their earlier form: Re Queensland Tiling Service Pty Limited  [1978] QdR 142 (JA Douglas J) and Ex parte Collinsville Backhoe & Truck Hire [1985] 1 QdR 233 (Kneipp J). Those 2 cases, like Re Bird (and like the present case), involved the commencement of a proceeding by another subcontractor while time was still running for the commencement of a proceeding in relation to the subject subcontractor's charge. The single judges held that the subcontractors could join in the existing proceeding only if the time in s 15 had not expired. In Ex parte Collinsville Backhoe & Truck Hire Kneipp J gave 2 principal reasons for this conclusion - (i) that s 15 was the dominant provision and s 12 was procedural only, being designed to avoid a multiplicity of actions rather than to give additional rights to a subcontractor, and (ii) that if the contrary interpretation were adopted, "a charge which has been extinguished by the operation of s 15(3) may be revived at any time thereafter by the fortuitous circumstance that the subcontractor has found that there is another action to which he can become a party." The Court of Appeal rejected both of these reasons.
  1. There are 3 criteria laid down in s 12 (3A), all of which must be fulfilled if a subcontractor who has not commenced its own proceeding within time is to be allowed to take the benefit of a proceeding commenced by another subcontractor. The subcontractor must be one -

(i) who has given notice of claim of charge pursuant to s 10;

(ii) whose charge has not been extinguished under s 15; and

(iii) who in accordance with rules of court and the Act becomes a party to the existing proceeding.

The first 2 criteria are expressed in the past tense, and the third criterion is expressed in the future tense. I accept the submission of counsel for the 20th subcontractor that past and future are to be judged from the time the other subcontractor's proceeding is commenced. In other words a subcontractor may claim the benefit of a proceeding commenced by someone else if, when that proceeding is commenced, it has already given notice claiming its charge and the 1 month allowed in s 15 has not expired, and so long as it thereafter takes steps to be joined in the proceeding.

  1. If another subcontractor did not commence a proceeding within the 1 month allowed under s 15 for the first subcontractor to commence a proceeding, then the first subcontractor's charge would be extinguished, and it could not be revived by a proceeding commenced by another subcontractor outside that 1 month period. The possibility of such a revival was what concerned Kneipp J in Ex parte Collinsville Backhoe & Truck Hire, although that was not the factual situation before him (or before the Court of Appeal in Re Bird). The amendment to s 12 (3A) has made it clear that such a revival cannot occur. This interpretation of the amendment is consistent with the Explanatory Notes which accompanied the Subcontractors' Charges Amendment Bill 2001 and which described the amendment in this way -

 

"Section 12(3A) does not operate to revive a charge that has been extinguished under section 15."

  1. Accordingly I find that the charges claimed by the 20th, 9th, 10th, 23rd and 26th subcontractors are valid, and have not been extinguished under s 15(3).
  1. The contractor is now in liquidation, and these subcontractors should have leave nunc pro tunc to be joined in the existing proceedings in which they respectively seek joinder.

 

The 1st subcontractor's charge

  1. Under s 10(1), (4) and (5) –

 

10 Notice of claim of charge

(1) A subcontractor who intends to claim a charge on money payable under the contract to the subcontractor's contractor or to a superior contractor –

 

(a) must give notice to the employer or superior contractor by whom the money is payable, specifying the amount and particulars of the claim certified as prescribed by a qualified person and stating that the subcontractor requires the employer or superior contractor, as the case may be, to take the necessary steps to see that it is paid or secured to the subcontractor; and

 

(aa) if a person other than the employer or superior contractor holds a security for the contract - must give notice in the approved form of having made the claim to the person holding the security; and

 

(b) must give notice of having made the claim to the contractor to whom the money is payable.

 

(4) If notice is not given pursuant to this section, the charge does not attach.

 

(5) A notice of claim of charge may be in the approved form, but the validity of the notice is not affected by any inaccuracy or want of form if the money sought to be charged and the amount of the claim can be ascertained with reasonable certainty from the notice.”

Then under s 11(1), (2) and (3) –

 

11 Consequences of notice of claim of charge

(1) If a notice of claim of charge is given pursuant to section 10, the person to whom it is given must retain, until the court in which the claim is heard directs to whom and in what manner the same is to be paid, a sufficient part of the money that is or is to become payable by the person under the contract to satisfy the claim.

 

(2) A person who fails to retain the amount that the person is required to retain is personally liable to pay to the subcontractor the amount of the claim not exceeding the amount that the person is required by this section to retain.

 

(3) Within 14 days after the notice of the claim of charge mentioned in subsection (1) is given under section 10(1)(b) to the contractor to whom the money is payable, the contractor must give to the employer or superior subcontractor by whom the money is payable, and to the subcontractor giving notice of the claim of charge, a notice (contractor's notice) in the approved form that the contractor –

 

(a) accepts liability to pay the amount claimed; or

 

(b) disputes the claim; or

 

(c)accepts liability to pay the amount (the stated amount) stated in the contractor's notice, but otherwise disputes the claim.”

  1. It is upon the giving of a notice to the employer containing the information in s 10(1)(a) that the charge attaches. There is no particular statutory requirement as to the contents of the notice to the contractor under s 10(1)(b) and in particular no requirement that the notice to the contractor recite that the claim has been certified under s 10(1)(a). It would have been immediately obvious to the contractor that the 1st subcontractor’s notice to it contained an error, in that it must have known that it had not certified the claim. In these circumstances I consider that the error in this notice did not invalidate the 1st subcontractor’s charge.

Appropriate orders

  1. I have endeavoured to resolve the substantive questions raised on these applications. I have concluded –

(a) that none of the impugned charges is invalid; and

(b) that leave to commence or continue proceedings against the contractor which is now in liquidation should be granted to the 9th, 10th, 20th, 23rd and 26th subcontractors.

  1. There were applications by various subcontractors for payment out of Court of the amounts of their charges. There should be declarations as to the validity of the impugned charges, but because there is still the possibility of other charges being claimed, I think the applications for payment out of Court should be adjourned to a date to be fixed.
  1. I will hear the parties on the form of the orders and on costs.  
Close

Editorial Notes

  • Published Case Name:

    State of Queensland v Walter Construction Group & Ors

  • Shortened Case Name:

    State of Queensland v Walter Construction Group

  • Reported Citation:

    [2006] 1 Qd R 376

  • MNC:

    [2005] QSC 241

  • Court:

    QSC

  • Judge(s):

    Wilson J

  • Date:

    31 Aug 2005

Litigation History

EventCitation or FileDateNotes
Primary Judgment[2006] 1 Qd R 37631 Aug 2005-

Appeal Status

No Status
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