Isakka v South Australian Asset Management Corporation
[2002] QCA 549
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- Notable Unreported Decision
- Isakka v South Australian Asset Management Corporation[2002] QCA 549
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Isakka v South Australian Asset Management Corporation[2002] QCA 549
Isakka v South Australian Asset Management Corporation[2002] QCA 549
SUPREME COURT OF QUEENSLAND
PARTIES: | BENJAMIN ISAKKA (plaintiff/appellant) v SOUTH AUSTRALIAN ASSET MANAGEMENT CORPORATION (non registered entity) (defendant/respondent) |
FILE NO/S: | Appeal No 2759 of 2002 SC No 848 of 1991 |
Court of Appeal | |
PROCEEDING: | General Civil Appeal |
ORIGINATING COURT: | Supreme Court at Brisbane |
DELIVERED ON: | 23 December 2002 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 12 November 2002 |
JUDGES: | McPherson and Jerrard JJA and Dutney J Separate reasons or judgment of each member of the Court, each concurring as to the order made |
ORDER: | Appeal dismissed with costs |
CATCHWORDS: | CONTRACTS - BUILDING - REMUNERATION - SUBCONTRACTORS’ CHARGES ACT (QLD) - financier of developer made loan payments to developer after notice of claim of charge served by subcontractor - financier was unaware of claim - whether financier induced breach of contract between developer and subcontractor - whether financier became an “employer” under the Act - whether financier liable for damages for conversion of subcontractor’s “proprietary interest” in payments to developer EQUITY - TRUSTS - CLASSIFICATION - IMPLIED - CONSTRUCTIVE - whether some part of the credit in bank account of financier can be held in trust - whether breach of fiduciary duty EQUITY - PRINCIPLES - UNJUST ENRICHMENT - whether doctrine requires that same work be paid for more than once Subcontractor Charges Act 1974 (Qld), s 3, s 5, s 10, s 11, s 15 Christiani & Nielsen Pty Ltd v Goliath Portland Cement Co Ltd (1993) 2 Tas R 122, followed Lake Eerie Pty Ltd v Knight & Flair Reality Pty Ltd [1992] FC 001; Appeal No 1651 of 1990, 11 February 1992, followed Re Kemp [1994] 1 Qd R 285, followed Stapleton v FTS O'Donnell Griffin & Co (Qld) Pty Ltd (1961) 108 CLR 106, distinguished Stumann v Spansteel Engineering Pty Ltd [1986] 2 Qd R 471, followed |
COUNSEL: | P Hastie for the plaintiff/appellant E J Lennon QC, with P J Flanagan, for the defendant/respondent |
SOLICITORS: | Ian Prentice Solicitors, for the plaintiff/appellant Clark and Kann for the defendant/respondent |
[1] McPHERSON JA: In 1989 J C Scott Developments Pty Ltd owned land in the Brisbane suburb of Bardon on which it planned to build a multistorey block of units. On 10 November 1989 it entered into a contract with J D and J C Scott Nominees Pty Ltd, trading as J C Scott Constructions to build those units. The two companies had the same directors and shareholders, who were Mr J D and Mrs J C Scott. Scott Constructions engaged Sange Holdings Pty Ltd to carry out the formwork for the building. The plaintiff is Mr Benjamin Isakka, who is the former principal of Sange, which is now in liquidation.
[2] Finance for the project was provided by Beneficial Finance Corporation, which has since been succeeded under statute by South Australian Asset Management Corporation, which is the defendant in this action brought by the plaintiff Mr Isakka as assignee of Sange’s claims. BFC entered into a deed of loan dated 17 November 1989 with Scott Developments by which it undertook to lend to the latter an amount originally of $10,780,000 increased on 1 February 1991, under a deed of variation executed on 26 March 1991, to $13,000,000 on which Scott Developments was authorised to draw to pay amounts due to Scott Constructions under the building contract. The loan to Scott Developments was secured by a mortgage debenture dated 17 November 1989 in the form of a fixed and a floating charge granted in favour of BFC over the present and future assets of Scott Developments and by a registered mortgage under the Real Property Act 1861 over the land at Bardon on which the units were to be built. It incorporated the covenants in registered memorandum J923811F (ex 23). The loan was guaranteed by Mr and Mrs Scott and by Scott Constructions, which also granted a mortgage debenture secured by a similar charge over its corporate assets.
[3] Work began in January 1990. Things went wrong with the building construction, and disputes arose between the formwork subcontractor Sange and the builder Scott Constructions. Progress claims by Sange under the subcontract were not met and Sange gave notices of intention to claim charges under the Subcontractors Charges Act 1974. The notices were issued and served on Scott Developments on: (1) 10 September 1990, for $218,784.54; (2) 10 October 1990, for $368,386.50; (3) 5 October 1990, for $417,110.00; and (4) 6 November 1990, for $148,866.50, totalling in all $1,153,148.54. Notices of the claims were also served on Scott Constructions as required by the Act, and on 7 November 1990 an action was commenced in the Federal Court by Sange against Scott Developments and Scott Constructions in respect of the amounts claimed in the notices together with some other claims. By November 1990, Sange had left the building site and in the same month its formwork contract with Constructions was terminated.
[4] The action in the Federal Court was not defended, and on 10 April 1991 Sange obtained judgment against Scott Constructions for $1,053,482.00, and on the following day against Scott Developments for $755,836.04 in respect of the unpaid claims of charges under the Act. The judgment sums were never paid to Sange. On 5 April 1991, BFC appointed a Mr Jefferson as receiver and manager of the assets of Scott Developments and Scott Constructions. Acting on behalf of Scott Developments he terminated the building contract with Scott Constructions in April 1991, and both companies went into liquidation on 28 May 1991. The work was later completed by Balderstone Hornibrook.
[5] The present proceedings against BFC were instituted in the Supreme Court by action no S848 of 1991. What is claimed in the action is in substance the sum of $1,153,148.54 representing the total amounts of the claims of which notices were given by Sange to Scott Developments and Scott Constructions in September, October and November 1990 that were never paid to Sange. The claim in the action is formulated in various ways, which in the appellant’s written outline on appeal are identified as follows. First, it is submitted that at the relevant time in late 1990 Sange had, by virtue of the notices given under the Subcontractors Charges Act 1974, a statutory charge over the money payable by BFC to Scott Constructions, and that in making those payments as it did, BFC converted that money, which was claimed to be the property of Sange, to its own use. Then it is said that BFC was liable in damages for inducing a breach of contract between Scott Constructions and Sange. Alternatively, there was a relationship between Scott Constructions, Scott Developments and Sange “which justified the imposition of a fiduciary relationship” to which BFC became a party and which it disregarded by not ensuring that the money was paid to Sange. As an alternative to that formulation, BFC was trustee for Scott Constructions of the money. Finally, it is submitted that, if all else fails, BFC is liable to Sange in unjust enrichment for the value of the work done by it on the Bardon site.
[6] It is necessary to begin by referring to the structure and provisions of the Subcontractors Charges Act 1974. The Act is predicated on the existence of a building contract in respect of which the contractor has engaged a subcontractor to do work. Section 5 provides so far as material that:
“(1) If an employer contracts with a contractor for the performance of work upon … land … every subcontractor of the contractor shall be entitled to:
(a) a charge on the money payable to the contractor …under the contractor’s … contract; and …”.
In the present context the “employer” in s 5(1) was Scott Developments, the “contractor” was Scott Constructions, and the “subcontractor” was Sange. This conclusion is derived both from s 5(1) and the definition of “employer” in s 3(1), by which it means, primarily “a person who contracts with another person for the performance of work by that other person … or at … whose credit … work is done”. Standing on its own, that definition of employer might be wide enough to include a lender like BFC, but the definition expressly excludes “a mortgagee who advances money to an employer, who is “not to be deemed to be an employer by reason thereof”. BFC was a mortgagee who advanced money to Scott Developments, and so on the face of it satisfied that description.
[7] Having in s 5(1) conferred on the subcontractor an entitlement to a charge on money payable to the contractor under its contract, the Act in 10(1) goes on to prescribe what must be done by the subcontractor to establish that charge. By s 10(1)(a) notice must be given to the employer by whom money is payable specifying certain matters and amounts and requiring the employer to take steps to see that it is paid or secured to the subcontractor. If the notice is not given, then by s 10(4) the charge does not attach. In addition, and within one month after the notice is given, proceedings must be brought in respect of the charge: s 15(1), otherwise the charge is extinguished: s 15(3). That is the consequence that ensues unless these provisions are strictly complied with. See Stumann v Spansteel Engineering Pty Ltd [1986] 2 Qd R 471, 477, as explained in Re Kemp [1994] 1 Qd R 285. Within 14 days, notice must be given by the contractor to the employer and to the subcontractor stating whether or not the claim is accepted or disputed : s 11(3). In the present case each of the statutory requirements was satisfied by Sange in giving notice of claim of charge to Scott Developments and in instituting the proceedings in the Federal Court against both it and Scott Constructions. The notices under s 11(3) were duly given by Scott Constructions.
[8] The object of the Act is to ensure that, from money payable by the employer of the contractor, the subcontractor is paid what is due or payable to it. The way in which this is designed to be achieved is, as is provided in s 5(1), by conferring entitlement to a charge over that money, and more specifically, by providing in s 11(1), that, once notice of claim of charge is given under s 10, the person to whom it is given “must retain … a sufficient part of the money that is or is to become payable by the person under the contract to satisfy the claim”. Failure to retain the required amount is visited with personal liability to pay the subcontractor that amount: s 11(2). In other words, despite having already paid the contractor an amount that was due to the contractor on account of the subcontractor’s work, the employer, which in this case was Scott Developments, may be liable to pay again if the obligation to retain under s 11 is disregarded. In this regard, the operation of the Act no doubt makes use of the practice adopted in building contracts of a substantial kind of ensuring that progress payments by the employer or building owner are made only for work that is certified to have been done by nominated subcontractors, and by obtaining declarations from the contractor to that effect. This practice was followed in the present case, although on the facts proved at trial, the amount in fact paid to Sange appears to have been overstated by Scott Constructions.
[9] At the trial one formulation of Sange’s claim was that in the course of carrying out the work BFC had become the “employer” under the contract for performance of the building work on the Bardon land, and that BFC was therefore personally liable under s 11(2) of the Act. The first two payments by BFC, or “drawdowns” by Scott Developments of the loan facility, were made in March and July 1990 by cheques in favour of Scott Developments as the borrower under the loan agreement. The third, which was made on or about 10 September 1990, was, at the direction of Mr Scott as principal of both Scott companies, made not to Scott Developments but direct to Scott Constructions. This cannot, however, have had any legal effect on the rights or liabilities of any of the parties either under the contract or the Act. The amount of the payment that was made was debited to the Scott Developments loan account with BFC, and it remained, both before and after its payment, money that was, or was to become, payable under the contract for the work within the meaning of s 5 of the Act. For failing to retain it as required by s 11(1), Scott Developments became personally liable to Sange under s 11(2) of the Act. September 10, 1990 was the date on which the first of the notices of claim of charge was served by Sange on Scott Developments. That circumstance may have influenced Mr Scott to give the direction for payment to be made to Scott Constructions; but the trial judge found as a fact that BFC did not connect that conduct with any purpose of the Scott companies bearing on the rights of Sange as creditor of Scott Constructions; and, further, that BFC had no reason to so connect it. Her Honour’s factual finding to that effect disposes of Sange’s claim that BFC induced a breach of contract between Scott Constructions and Sange, or that BFC participated jointly with the Scott Companies in a contravention of the Act.
[10] The second stage at which it is suggested that BFC became the “employer” under the contract for performing the work at Bardon was on and from 4 March 1991. At that date it was submitted that BFC entered into a new contractual arrangement with Scott Developments and Scott Constructions under which BFC constituted itself the employer in relation to the work. March 4, 1991, was the date on which BFC crystallised its charges over the assets of Development and Constructions and imposed a new arrangement for regulating the loan agreement, by which payments by BFC were made into a bank account in the name of Scott Constructions. Money in that account was expressly held on behalf of and at the direction of BFC for paying selected subcontractors, suppliers and employees who were needed to complete the project. Sange was not one of them. Her Honour held that, in making those payments on or after 4 March 1991, BFC was doing so not as “employer” but as mortgagee under its securities over the land and assets and, from 5 April 1991, through Mr Jefferson as receiver and manager under the company charges given by both Scott Developments and Scott Constructions and the registered mortgage over the land. In all of this, BFC’s purpose was to complete the building and so save something from the financial disaster that the project had by then become.
[11] Considered as findings of fact, none of these conclusions was, as I understand the appeal before us, directly challenged by Sange on appeal. In any event, in so far as they turn on matters of fact, her Honour’s findings should not be disturbed. What happened on and from 4 March 1991 was that BFC, either itself or through the receiver it appointed on 5 April, paid some creditors, not including Sange, whose services were necessary in order to complete the building. For this purpose, BFC provided fresh funds the amount of which was then debited to the account of Scott Developments. This course BFC was authorised to take under the registered mortgage and the company charges. In so far as her Honour’s conclusions represent determinations of law, I consider them to be supported by the analysis of the position of a mortgagee in possession undertaken in Lake Eerie Pty Ltd v Knight & Flair Realty Pty Ltd (no 1651 of 1990) and the decision of the Full Court (McPherson JA, Thomas and Byrne JJ) in that case delivered on 11 February 1992. As was said by Starke J in Australian Mutual Provident Society v Geo Myers & Co Ltd (1931) 47 CLR 65, 74, in a passage referred to in Lake Eerie, the position of the receiver “was rather that of a protector or supervisor of the Company’s business for the benefit of the Bank”, which was the mortgagee in that case, just as BFC is in this. As mortgagee, it fell outside the ambit of the expression “employer” by reason of the definition of that term in s 3(1) of the Act that specifically excludes a mortgagee from its ambit.
[12] It seems to me that, as was submitted by Mr Lennon QC, the express exclusion from that definition of a mortgagee is uniformly fatal to all of Sange’s attempts to present BFC as the “employer” under and within the meaning of the Act. It is true that, as her Honour acknowledged in her reasons, it is possible to envisage circumstances in which a lender may so act as to constitute itself the principal or “employer” under a building contract like this. There is, however, no proper basis on which the actions or conduct of BFC in this case can be characterised in that way. Furthermore, as Mr Lennon QC pointed out and her Honour also accepted, it would be necessary, in order for a charge to attach in such a case or to prevent its being extinguished, for the claimant to satisfy the requirements of s 10(1)(a) of giving the statutory notice to the employer, and also of commencing proceedings against it in accordance with s 15. No such notice was given to BFC, nor were any proceedings commenced against it within the time specified in s 15(1)(b) of the Act. The truth is that, although at times the Act speaks, as in s 11(1), rather broadly or loosely of a notice being given, and in s 6 of money being paid in reduction of the contract price, it is, as her Honour said, s 5(1) of the Act that identifies the person against whom the charge operates, and s 10(1) that identifies who is to be given notice of claim of charge. Those persons are the “employer” as defined and the contractor by whom or, as the case may be, to whom money is payable under the contract for performance of the work. Unless something more is proved, a lender of money on mortgage is expressly taken to be and remains outside the Act by virtue of the definition of “employer” in s 3(1).
[13] It is possible to turn now to Sange’s submission that BFC is liable for damages at common law for conversion of what it claims to have been its proprietary interest in the payments due or becoming due to Scott Developments that were made by BFC to Scott Constructions or others on or after 10 September 1990, when the first of the notices of claim of charge was given. Whether a subcontractor who complies with the specifications of the Act has, by virtue of a charge conferred by s 5(1), a proprietary interest in the money payable to the contractor is a question that has not yet been authoritatively determined in relation to the Subcontractors Charges Act 1974. The decision of the High Court in Stapleton v FTS O'Donnell Griffin & Co (Qld) Pty Ltd (1961) 108 CLR 106 tends to support a conclusion that there is such an interest. It was, however, a decision given with respect to The Contractors and Workman’s Liens Act of 1906 that was repealed in 1964, which was before the current statute was enacted. The Act of 1974 is a successor to the Act of 1906, but it omits some provisions that, on a close reading of the reasons, appear to have been critical to the decision of the High Court. See Stapleton v FTS O'Donnell Griffin & Co (1961) 108 CLR 106, at 115, where references are made to the lien conferred on land, which is no longer a feature of the current Act.
[14] For present purposes, however, it will be assumed, without deciding, that a charge acquired by following the procedure under the Act of 1974 confers on a subcontractor a proprietary interest of some kind in what s 5(1)(a) describes as “money payable to the contractor … under the contractor’s … contract”. The first problem then confronting Sange in its claim for damages for conversion against BFC is that it is settled law that such a claim is available only for conversion of a chattel to which the plaintiff has a right of immediate possession. On this point textbooks throughout the common law world are at one. See, for example, Fleming, The Law of Torts, 9th ed, at 60; Balkin & Davis, Law of Torts, 2nd ed, at 74; and 18 Am Jur 2d §9, at 51, where, conformably with those other sources, it is said that “an action will not lie for the conversion of a mere debt or chose in action”. That is the reason why, in the case of a cheque, a conversion is alleged not of the chose in action of which it is evidence but of the instrument or piece of paper constituted by the cheque itself, which for that purpose is regarded as having a value equal to the amount for which it is drawn. See Lloyds Bank v Chartered Bank of India Australia & China [1929] 1 KB 40, at 55, and Parsons v The Queen (1999) 195 CLR 619, 631-632.
[15] Sange as the plaintiff here had no title to any chattel, but (as is being assumed here) no more than a proprietary interest in a sum of money that was payable to Scott Developments as “employer” under the building contract. As a sum of money that was “payable”, it amounted only to a chose in action, which could not be the subject of an action at common law for the damages for conversion. The decision of the Court of Appeal in International Factors Ltd v Rodriguez [1979] QB 351 suggests that a right in equity to immediate possession of a chattel (in that case consisting of the cheques themselves) may in some circumstances suffice to sustain a claim in conversion; but, having regard to the detailed provisions of ss 11, 11A and 12 of the Act regulating what is to be done with money that is the subject of a subcontractor’s charge, it is impossible to regard Sange as having at any time in this case a right to immediate possession of the amount of money that was payable to the contractor Scott Constructions under its contract with Scott Developments, either at all or before one of those companies was paid that money by BFC.
[16] In attempting to avoid this difficulty by claiming that it was “money” that was converted, Sange relied on s 5(2) of the Act, which provides:
“(2) The charge of a subcontractor shall secure payment in accordance with the subcontract of all money that is payable or is to become payable to the subcontractor for work done by the subcontractor under the contract.”
Fastening on the words “all money that is payable or is to become payable to the subcontractor”, Sange submits that the charge in this case attached not merely to the chose in action but to the money that BFC intended to pay to Scott Developments or Scott Constructions, and that it attached to it from the moment at which the directors of BFC formed an intention of so paying it. The difficulty is that it was not then money. The procedure followed by BFC in making payments under the loan agreement or, later on, under the regime that prevailed after 4 March 1991, was that a credit control committee of BFC authorised payment of a particular sum or sums to be used by Scott Developments or Scott Constructions to discharge liabilities accruing in respect of the building work. The source and method of making payments was not spelled out for us in much detail on the appeal; but it may fairly be assumed to have been effected by cheques drawn by BFC on its banker in favour of Scott Developments or Scott Constructions or, after 4 March 1991, in favour of Scott Constructions to the credit of the account established in the name of that company, which required countersigning by BFC.
[17] It is an elementary principle of banking law that the customer does not “own” the money in a current account with the bank. The bank owns the money, but is indebted in that amount to the customer, who has a chose in action against the bank measured by the extent that the account is in credit from time to time. See Joachimson v Swiss Bank Corporation [1921] 3 KB 110, 118, 127-128; Croton v The Queen (1967) 117 CLR 326, 330-331; National Australia Bank Ltd v KDS Construction Services (1987) 163 CLR 668, 676. An uncommunicated decision on the part of the customer to pay someone out of a particular bank account has no legal effect on this state of affairs. It is not until a cheque is drawn, delivered, presented and honoured by being paid or credited to the drawee of the cheque that any “money” is paid from the customer's account. Property in the cheque itself passes only on delivery. To say that at some point in this series of steps (any of which is capable of being effectively countermanded by the customer before payment is made) the amount for which the cheque is drawn, or intended to be drawn, becomes “money” that is payable to the subcontractor, and hence subject to the charge conferred by the Act, calls for some novel form of tracing retrospectively to the source of the money that is eventually paid. Nothing in the Act or in any known rule or principle of law or equity warrants taking such a step. To argue that the “money” came into existence when the directors or, in this case, the credit control committee of BFC, resolved to make a payment in a particular amount is nothing short of absurd. So it remains even if, as Sange submitted on the appeal, the amount of money for which the cheque is subsequently drawn is capable of being described as then “dedicated” to the purpose of making such a payment. The credit committee’s resolution did not appropriate or identify any particular part of the credit or money in BFC’s bank account so as to make it “money” payable or “to become payable” to the contractor or the subcontractor. It is not until a cheque is presented and paid that there is any money to which the statutory charge is capable of attaching. Before then, it is simply a chose in action vested in BFC against its bank in which a subcontractor like Sange has no proprietary or other right or interest. This remains so whether payments were made, as they were initially, to Scott Developments or, as they were under the arrangement that was later introduced, direct to Scott Constructions. It was only when or as the money was paid to the employer Scott Developments or to the contractor Scott Constructions that there was any “money” to which the charge was capable of attaching in the character of an interest of a proprietary kind under the Act for the benefit of Sange.
[18] For these reasons, Sange’s claim for damages for conversion by BFC of the interest it claims under the statutory charge is not maintainable. For much the same reason, the claim against BFC based on the existence of a trust must also fail. It too involves reaching back into the bank account of BFC in a vain attempt to identify some part of the credit in that account as money that is or was payable, or was to become payable, to the subcontractor for work done, to which the charge is capable of attaching. There was plainly no intention on the part of BFC to constitute a trust of money in its account for the benefit of Sange, and indeed the fact that Scott Constructions was required to declare it was trustee of the account opened on 4 March 1991 demonstrates, if evidence is needed, a clear intention to the contrary. What has been described as the “hallmark duty” of a trustee of keeping trust moneys separate (Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd (2000) 202 CLR 588, 605) is altogether lacking here. Equally, to argue that, because of the total absence of any of these features, the court should now impose a constructive trust on BFC would serve only to relegate that useful equitable concept to the level of a universal panacaea for legal ills, and so endanger its very existence.
[19] The same is true of the submission that BFC somehow undertook fiduciary duties towards Sange. In no way did it assume to act on behalf of that or of any other subcontractor of Scott Constructions. In providing finance for the project, BFC was throughout acting only in its own interests as a lender of money or, later on, as a mortgagee seeking to recover its loan by realising to best advantage the security for that loan. In no sense was it acting or exercising powers, or undertaking or professing to do so, on behalf of another or others, or indeed in anyone else’s interest but its own. Cf Pilmer v Duke Group Ltd (2001) 207 CLR 165, 196-197. This is not a case where, like the financier in Catt v Marac Australia Limited (1986) 9 NSWLR 639, BFC can be regarded in any sense as a promoter of the building project at Bardon.
[20] This leaves for consideration the claim that BFC was unjustly enriched. Saying that it was enriched flies in the face of the fact, as it proved to be, that in the end BFC sustained a loss of more than $6,000,000 on the project. Still, its loss might have been even greater had Sange not contributed the formwork to the building. It is, however, impossible to say that for doing that work, it received nothing for what it did. The original estimated price or cost of the formwork was $650,000. Butler Wright & Partners, quantity surveyors, made an estimate of the cost to complete the project at 25 September 1990, which showed that, of the original allowance of $650,000 for that item, work to the value of $633,750 had been completed, with formwork to the value only of $16,250 remaining to be done. At that stage, BFC’s records show that $633,750 had been advanced to Scott Developments to pay for or on account of formwork, of which in the Federal Court Sange proved it had received only $366,216.46. Where the balance had gone has not been explained. Presumably it was used to pay other subcontractors. In its invoice dated 30 August 1990 to Scott Constructions, Sange claimed $953,387.50. As has been mentioned, in the undefended Federal Court proceedings, to which BFC was not a party, Sange recovered judgment for $1,053,482 against Scott Constructions and $755,836.04 against Scott Developments.
[21] In the Supreme Court proceedings before us, to which BFC is a party, a defence is raised in para 29(c) that the work performed by Sange under its subcontract with Scott Constructions was such that it ultimately required substantial rectification to be carried out on the project (it needed alterations to be made to the design and construction of the building), and that in consequence the value of Sange’s work, if any, to the defendant BFC was reduced by not less than $400,000, which was the direct cost to the defendant of that rectification. This and other issues of quantum were not determined at the trial, the parties having, in the interests of economy and convenience, agreed to postpone determination of those matters to a later hearing, and to proceed at trial on the assumption that some unspecified amount remained due and unpaid to Sange. That was no doubt a prudent course to adopt having regard to the expense that would have been involved in proving this aspect of the claim; but it has the consequence that Sange is not able to establish a basic element of its cause of action against BFC for restitution, which is that it was unjustly enriched by the formwork carried out by Sange at the site.
[22] The point in issue raises the question whether, when a subcontractor does work under a subcontract for which it is entitled to be but is not paid by the contractor, the subcontractor is entitled to recover restitution from the building owner or principal even though the latter has already paid the contractor for that work and has done so perhaps to its full value. Does the doctrine of restitution or unjust enrichment contemplate that the employer may be required to pay for the same work more than once? The decision of the High Court in Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221 does not provide an immediate answer to that question. It was, however, considered by the Full Court of Tasmania in Christiani & Nielsen Pty Ltd v Goliath Portland Cement Co Ltd (1993) 2 Tas R 122, 171, where Zeeman J, with whom Crawford J agreed, said:
“What was pleaded fell far short of alleging all the necessary facts to maintain that there was any enrichment or that such enrichment from which Goliath has benefited is unjust. The mere fact that Christiani did work at Goliath's premises does not establish enrichment. There was no allegation that Goliath did not pay for the work. The contractual obligation to pay for such work was an obligation to pay the first defendant. It was not alleged that Goliath failed to discharge that obligation. If it did, then there was no enrichment. The mere request by Goliath and the mere non-payment by the first defendant of Christiani cannot give rise to a conclusion that such enrichment as there was [was] unjust.”
[23] The Full Court in that case (in which Goliath was the building owner, the first defendant was the contractor, and Christiani the subcontractor) considered a number of American authorities, as well as a paper published in (1991) 29 Duquesne Law Rev 661. Having done so, Zeeman J concluded that, even on the basis of the most liberal of those American decisions, the claim before the Court as pleaded appeared to lack essential elements of the cause of action as recognised in the United States. That was because those decisions were founded on a principle “that a party receiving a benefit desired by him under circumstances rendering it inequitable to retain it without making compensation” was bound to make such compensation. (Paschall’s Inc v Dogier (1966) 407 SW 2d 150, 154). In the present case, I am with respect, unable to identify any circumstance making it inequitable for BFC as mortgagee to retain the benefit of the formwork constructed by Sange, in the absence of evidence (of which there is none here) that BFC in that way received more than it paid to Scott Developments and Scott Constructions for the value of that work. The case is emphatically not one in which it has been demonstrated that BFC has gained something for nothing, or even that it has received something more than it has paid for. In the absence of evidence that BFC paid less than the value of what it received, the common assumption made by the parties at the trial that something was still owing to Sange for the work it had done at the site is not capable of establishing that element in its claim against BFC for restitution or unjust enrichment.
[24] The Subcontractors Charges Act 1974 was designed to protect Sange as subcontractor against the possibility that it would be paid less than it was entitled to receive for work done. But it is of little utility where, as in this case, the building owner or “employer” as well as the contractor have both become insolvent, and, in the course of doing so, have ignored the provisions of the Act requiring them to retain an amount equal to what is payable to the subcontractor in order to satisfy its charge. That, however, is something for which a lender of money is not made accountable under the Act. Had BFC held back the money it had promised to lend to Scott Developments, it might well have been liable to either or both of the Scott companies for damages for breach of contract. The Act does not set out to interfere with the contractual relations that prevail between a lender of finance and an “employer”, but only with those between employer, contractor and subcontractor. BFC was none of these.
[25] In my opinion the appeal should be dismissed with costs.
[26] JERRARD JA: I have read and respectfully agree with the reasons for judgment and proposed order of McPherson JA.
[27] DUTNEY J: I have read and agree with the reasons for judgment and proposed order of McPhreson JA.