The South Australian District Court has refused to strike out a lien registered under the Workers Liens Act 1893 (SA) in the case of Ian Wood Homes v Langsforde.

In his reasons for his decision, Master Norman noted that the application was brought following a termination of the contracts as a result of repudiatory breach by the owner. The Defendants relied on the fact that one of the ways that the claim was put was by way of damages, but that was a claim that alternative to the primary claim for the contract sum, giving credit for the saving to the builder of not having to complete the balance of the work.

Robert Fenwick Elliott, instructed by Fenwick Elliott Grace, was counsel for the successful plaintiff.

The judgment is as follows:

IN THE DISTRICT COURT                                                           Decision No 3 of 2012

OF SOUTH AUSTRALIA

ACTION NO 1966 of 2011

 

IAN WOOD HOMES PTY LTD

-and-

Susanne LANGSFORDE

 

REASONS FOR DECISION OF DISTRICT COURT MASTER

POSTED TO PARTIES ON 6 JANUARY 2012

 

 

1           This is an application of the defendant dated 12 September 2011 (FDN 5) seeking orders that the court cancel liens 11620481 and 11620485 registered on the defendant’s land and that the plaintiff’s claim for enforcement of these liens be struck out pursuant to Rule 104.

2           Judgment is sought to be entered for the defendant in respect of the claim for enforcement of the liens. An order is sought that the Registrar General remove the liens from the Certificates of Title of the Land.

3           The application is made pursuant to s32 of the Worker’s Liens Act 1983 (“the Act”) and DCR 101, 104, 131 and 232. It is supported by an affidavit of the defendant sworn on 12 September 2011 (FDN 6) and the plaintiff, who opposes the application, has filed affidavits of Mr Tom Meldrum, a contract administrator, sworn on 5 December 2011 (FDN 7) and of Mr Neil Scarce, the director of the plaintiff, sworn on 5 December 2011 (FDN 8).

4           The application came on for hearing before me on 7 December 2011 when Mr Fenwick Elliott of counsel appeared for the plaintiff and Mr Turner of counsel appeared for the defendant.

Background

5           The proceedings were issued on 11 August 2011. A statement of claim (FDN 2) was filed on the same day. A defence (FDN 4) was filed on 24 August 2011.

6           It appears that the plaintiff is a registered builder which entered into contracts with the defendant, who owned land at Glengowrie, in October 2010 to build two units on the land.

7           The defendant was borrowing the entire amount, but the costs of building the units, and having regard to an existing loan; the total amount to be secured by mortgage over the land was $830,616.

8           Both contracts were in the same terms. They are before the court.  I refer to pages 1 and 5 (relating to finance conditions) and clause 24 and particularly clauses 24.3 and 24.4 as to reasonable efforts to obtain finance. The second contract contained terms as to obtaining first mortgage finance, and clauses 24, 24.3 and 24.4 are similar to those in contract one.

9           It appears that the defendant had pre-approval from her bank for the loan and sought the finance but was advised that due to changes brought about by the new National Credit Code, she was no-longer entitled to the loan that had been pre-approved. She also found out that as she was not earning an income, she would not be able to borrow that money based solely on the equity in the land. The defendant’s mortgage broker was not able to find the required finance for her, she said.

10        She advised the plaintiff of this by letter dated 5 January 2011.

11        The parties then spoke about the matter and the plaintiff suggested a mortgage broker that he knew. She agreed to try this mortgage broker but the best that she was able to obtain using this broker was $434,800. This was not enough to proceed with the building of the two units, let alone to deal with the first mortgage.

12        The defendant then cancelled the contract.

13        In its claim, the plaintiff alleges that the defendant did not use every best endeavour to obtain finance.

14        The plaintiff claims that it then did work by delivering fill to the site and that it commenced work. Photographs have been provided of earthworks and fill on the land.

15        The plaintiff has placed liens on the land in relation to each contract. Each lien claims monies payable by the defendant arising from the termination of the contract and for work done and materials supplied to the land.

16        By letter dated 8 August 2011 the defendant’s solicitors wrote to the plaintiff’s solicitors requesting details of the work done and materials supplied to the land. It appears the plaintiff has not responded to this request or supplied any detail.

17        The defendant seeks cancellation of the liens and orders that the plaintiff’s claims pleaded in paragraphs 27, 28, 29 and 30 of the statement of claim be struck out, together with paragraphs one and two of the plaintiff’s prayer for relief.

18        The plaintiff claims damages for alleged breach of the two contracts, the payment of two invoices totalling $8,800 and for orders enforcing the liens to secure these payments.

19        The defendant’s application only relates to the liens. It acknowledges that the plaintiff is entitled to proceed with its claim for breach of contract although this claim is disputed. This claim will need to be determined after a trial.

20        In his submissions, Mr Turner referred to the provisions of the Act, to the decision of Judge Robertson in Cubelic & Sons Pty Ltd v Civil Works Group (SA) Pty Ltd [2008] SADC 41 and to an article on Workers Liens by Michael Hutton dated 11 May 2005. Mr Turner submitted that there was no claim for a lien based on quantum merit or an award of damages. The plaintiff’s lien had claimed for

“…monies payable by the lienee arising from the termination of a building contract dated 14 October 2010 and for work done and materials supplied to the said land…”

21        Mr Turner analysed the statement of claim which claimed for two unpaid invoices for contract one and contract two and he said there could be no claim for a lien based on these invoices as these were accounts for deposits only.

22        A lien was also sought in respect of contract one in the amount of $59,179.12 but paragraph 29 of the statement of claim stated that the amount claimed under lien number one was money due and payable under contract number one by reasons of the express terms of the contract entitling the plaintiff to register a lien in respect of the monies claimed and by the plaintiff’s election to accept the repudiation of the contract by the defendant and her subsequent election to exercise her rights either as a claim for damages arising from the contract or a s a claim in quantum merit arising from the unlawful termination of the contract by the defendant.

23        Mr Turner referred to paragraphs 33 and 5.2 of the statement of claim relating to the defendant’s anticipated profit margin and the contract price and submitted that there could be no doubt that the plaintiff was claiming either damages or quantum merit. He said that although the defendant had sought details of amounts claimed for material or work done to the land, the plaintiff had never responded. He said that as the plaintiff had not made claim in the statement of claim any amount for materials or work done to the land, the plaintiff’s claim for a lien must fail.

24        As an alternative argument, Mr Turner referred to the plaintiff’s claims in 29.1 and 30.1 of the statement of claim for a lien arising by way of an express term of the contract. The only term of the contract which dealt with this was term 32. However looking at the contract, he said, it did not create a right to put a lien for any amount howsoever incurred. He submitted the plaintiff could not create a right outside the scope of the Act or of common law.

25        Mr Turner then analysed the plaintiff’s affidavits and I refer to his written submissions at paragraphs 53-61. He said there was no evidence to show that any work was done in the relevant period, that materials were ordered in the relevant period, or that there was any cost for these.

26        Mr Turner referred to Mr Hutton’s paper and noted that under the Act a lien was available for a contract price so far as the amount due had accrued (s5) but that it would not extend beyond that proportion of the contract price payable by the owner and unpaid at the time the owner or occupier received notice of the lien or its registration.

27        Mr Turner referred to Longreef Pty Ltd v Leyton Contractors 159 LSJS 414 where the Court held that no lien existed because no part of the contract price had accrued due.

28        That applied here, Mr Turner submitted, as no part of the contract price had accrued due.

29        In summary, Mr Turner submitted that the plaintiff could not establish a lienable interest so the liens should be cancelled and the appropriate clauses of the statement of claim struck out. He said the defendant had sought to ascertain from the plaintiff if work had been done in order to ascertain whether there was a lienable interest but the plaintiff had not responded, even in his affidavits. He said that if there was an amount of work which had been done, the defendant would have the option to pay this money into Court or the Lands Titles Office and for the lien to be removed. The plaintiff would have security for this amount and the defendant could then deal with the land. However, the plaintiff had chosen not to respond and provide this information.

Plaintiff’s submissions

30        Mr Fenwick Elliott opposed the application. He observed that it was an application for final relief so that proceedings were not interlocutory – Settlement Wine Company Pty Ltd v National and General Insurance Co Ltd (2008) 143 LSJS 398. He referred to the provisions of s32 of the Act and said that an application under that section must be decided at a trial of the matter – Aberdine Pty Ltd & Anor v Vineyard Estate Management Pty Ltd [2001] SASC 442 per Lander J. He said the Court could only strike out a pleading in circumstances where that pleading did not comply with the rules or which the Court regarded as an abuse of process or it prejudiced the proper conduct of the action. He submitted that the statement of claim complied with the rules and it could not be said that it was an abuse of process.

31        As the defendant’s claim was for summary judgment, the onus was on her to show that the plaintiff’s claim could not succeed and that there was no real question to be tried.

32        Mr Fenwick Elliott referred to Chapman and Chapman v Australian Broadcasting Corporation [2000]SASC 146; Royal Australia Finance v Xenophou Corp Pty Ltd SASC Olsson J, No S3526, 22 July 1992, unreported and to Williams v Reid and Ors [2010] SASC 264.

33        Mr Fenwick Elliott said there were numerous and substantial questions to be tried so the defendant’s application was untenable. The issues for dispute, he said, included whether there was a failure of precondition of finance approval; whether there was any written notice as required by clause 24.3 of the contract; why the contracts did not proceed; and whether there plaintiff had performed work on site.

34        He addressed each of these in turn.

35        On the issue of precondition of finance approval, he said the defendant had relied on a letter to her from Wendy Higgins of Montague Choice of 11 July 2011 but this letter was not frank because the finance had been obtained not through Ms Higgins but through a Mr Heineike. He said the defendant was seeking to conceal the true position regarding finance. He noted that in her affidavit the defendant had conceded that she had obtained an offer of finance organised by Mr Heineike.

36        On the issue of whether there was any written notice as required by clause 24.3 of the contract, Mr Fenwick Elliott referred to page 5 of the contracts and the notice provision, Clause 24.4. It referred to “written notice” ending the contract, but, paragraph 12 of the statement of claim pleaded that there was no such written notice. The defendant had denied this, asserting that there was a clause 24.4 notice. However, Mr Fenwick Elliott submitted, the defendant could not possibly be right about this because she was continuing to do things required under the contract long after February 2011. Further, the letter of 5 January 2011 could not be a clause 24.4 notice for it did not purport to end the contract.

37        On the issue of why the contracts did not proceed, Mr Fenwick Elliott referred to Mr Meldrum’s evidence in paragraph 8 of his affidavit making clear that the defendant had acknowledged that the real reason why she would not honour a contract was, not the issue of finance, but rather her view that the market had changed.

38        On the issue of whether the plaintiff had performed work on site, Mr Fenwick Elliott said the defendant’s assertion that the plaintiff had done no work to the land was plainly wrong because it was contradicted by paragraph 19 of the same affidavit acknowledging that soil had been placed on the land and by evidence including photographic evidence verifying this work.

39        Mr Fenwick Elliott referred to s5 of the Act defining “contract price” and said that in the present case the contractual price for the two contracts was fixed. In each case some of the work was done but much of the contract was not done because it was terminated following the repudiatory breach of the defendant. In these circumstances, he said, the legal position was that the whole of the contract sum became payable subject to a credit for the work or balance no-longer requiring to be carried out. In the present case he said, the plaintiff was entitled to avail itself of the liens because on any analysis at least some of the work was done and had to be paid for. In the present case there did not appear to be a dispute about the quantum of the liens because the defence contained no positive case or that the contract price payable was anything other than as claimed in the statement of claim. Instead the defendant’s case seemed to be a combination of paragraph 20 of the defence and paragraph 27 of the affidavit, that the claim for damages could not sustain a lien. This misunderstood the claim that had been made which was for enforcement of the lien by way of contract price. Mr Fenwick Elliott noted that there was an alternative claim for damages for breach of contract but the primary claims were as set out in paragraphs 29 and 30 of the statement of claim, namely for money due and payable under the two contracts. Mr Fenwick Elliott submitted that the defendant’s case was that the contracts had been terminated so there could be no contract price due and payable but the fact was that the defendant had unlawfully terminated the contracts herself. The defence was obviously wrong and contrary to authority – Henry Walker Contracting Pty Ltd v Pegasus Gold Australia Pty Ltd (Administrator Appointed) 1998 NTSC 98.

40        Finally, Mr Fenwick Elliott addressed issues on the merits. He said the defendant had developed land as a trade and had signed contracts for the development work and committed herself to pay the contract price. She had then reneged on the contract and had sought to sell off the land without paying the plaintiff in respect to the work which it had done. She had been less than frank and the Act was designed to give builders the protection of a lien in such circumstances. As an experienced developer, the defendant should have been aware of the terms of clause 32.1 of the contracts expressly confirming the plaintiff’s right to a lien.

Principles

Strike out

41        The court may only strike out a pleading where it does not comply with the rules or it is regarded as an abuse of process or prejudices the proper conduct of the Action. On a claim for summary judgment, the onus is on a defendant to show that a plaintiff’s claim cannot succeed and that there is no real question to be tried – Chapman and Chapman v Australian Broadcasting Corporation; Royal Australia Finance v Xenophou Corp Pty Ltd.

42        The test is as cited by Gray J in Williams v Reid and Ors [2010] SASC 264:

43               “In General Steel Industries Inc v Commissioner for Railways (NSW) Barwick CJ set out, in an appendix to his reasons, a list of authorities dealing with the test to be applied in determining whether to terminate an action summarily before trial.  As Barwick CJ observed:

The test to be applied has been variously expressed; “so obviously untenable that it cannot possibly succeed”; “manifestly groundless”; “so manifestly faulty that it does not admit of argument”; “discloses a case which the Court is satisfied cannot succeed”; “under no possibility can there be a good cause of action”; “be manifest that to allow them” (the pleadings) “to stand would involve useless expense”.

At times the test has been put as high as saying that the case must be so plain and obvious that the court can say at once that the statement of claim, even if proved, cannot succeed; or “so manifest on the view of the pleadings, merely reading through them, that it is a case that does not admit of reasonable argument”; “so to speak apparent at a glance”.

44              The above statements referred to by Barwick CJ were all made in relation to the summary determination of a proceeding without trial.  Although the expressions employed varied, they all may be seen to be different ways of saying that a court should not exercise its powers of summary determination of a proceeding except in clear cases.”

Section 32 of the Worker’s Liens Act

45        This provides:

‘32—Claim or registration may be cancelled

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

46        In Aberdine Pty Ltd & Anor v Vineyard Estate Management Pty Ltd Lander J stated as follows:

‘Whether the plaintiff has a lien will, of course, depend on whether or not any of the contract price has accrued due within the meaning of s5. The second defendant of course asserts that no sum has accrued due, because no sum was payable under the contract by reason of the plaintiff’s breach of contract. Indeed, it is the first defendant’s contention that the plaintiff is indebted to the second defendant. That is not, of course, a matter that can be decided on an interlocutory application. That is a matter which has to be decided at the trial.’

S5 of the Worker’s Liens Act

47        This provides:

‘5—Lien of contractor or sub-contractor

A contractor or sub-contractor shall have a lien for the contract price, so far as accrued due, on the estate or interest in land of any owner or occupier in each of the following cases:

(a)        Where the work is done, with the assent, express or implied, of the owner or occupier to the land or to any fixture thereon:

(b)        Where the materials are, with the assent, express or implied, of the owner or occupier, used or intended to be used in or about work done, or intended to be done, to the land or to any fixture thereon.’

48        “Contract price” is defined by s2 as follows:

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

Issues relating to termination of the contract

49        In Henry Walker Contracting Pty Ltd v Pegasus Gold Australia Pty Ltd (Administrator Appointed) Angel J made the following observations as to a contract price accruing following termination of a contract:

No contract price could accrue due following termination of the contract

[27] This fourth ground of attack upon the validity of the plaintiff’s liens is opposed to accepted and fundamentally sound legal principle. The defendant argued that the defendant’s termination of the contract on 15 November 1997 avoided any obligation on the defendant to pay for work performed by the plaintiff, which obligation had accrued due prior to the termination, from being characterised as being part of the contract price.

The Workmen’s Liens Act provides the following definition of “contract price”:

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

[28] In McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457 at 476-477 Dixon J said:

“When a party to a simple contract, upon a breach by the other contracting party of a condition of the contract, elects to treat the contract as no longer binding upon him, the contract is not rescinded as from the beginning. Both parties are discharged from the further performance of the contract, but rights are not divested or discharged which have already been unconditionally acquired.”

[29] This statement accurately reflects the position at common law.

[30] In any event, cl31.4 of the contract itself provides:

“The Company may by written notice addressed to the Contractor terminate this Contract at any time if in the Company’s reasonable opinion the continuation of the Mt Todd Project is not economically viable, for any reason whatsoever. If the Company exercises its right to terminate this Contract pursuant to this cl31.4 the Contractor shall be entitled to payment of the contract value of all Work carried out in accordance with the Contract to the date of Termination (less amounts previously paid to the Contractor in respect thereof).” (emphasis added).

[31] The defendant’s argument is quite untenable.

Contract price so far as accrued due

50        s5 is set out above. In Longreef Pty Ltd v Leyton Contractors a lien claimed by the contractor was challenged by the owner on the basis that no monies were due pursuant to the building contract. The court held that no lien existed because no part of the contract price had accrued due. This was because the contract required that the architect certify that a payment was due but this had not occurred.

Consideration and findings

51        In her application, the plaintiff is seeking summary judgment on that part of the claim relating to the liens and strike out of the claim for enforcement of the liens. However, the Court may only strike out a pleading if it does not comply with the rules or is an abuse of process of prejudice to the proper conduct of the action.

52        In my view, the statement of claim complies with the rules and it cannot be said that it is an abuse of process.

53        The onus is on the defendant to show that the plaintiff’s claim cannot succeed and there is no real question to be tried before the Court can summarily dispose of the whole or part of the plaintiff’s claim. This test was articulated recently by Gray J in Williams v Reid & Others and His Honour made it clear in that case that a Court should not exercise its power of summary determination except in clear cases.

54        As analysed by Mr Fenwick Elliott, there appear to be numerous and substantial questions to be tried in this Action. Indeed, Mr Turner conceded, at the outset of his submissions, that the matter will have to proceed to trial anyway on the contract issues (see transcript page 2, line 10).

55        The defendant has asserted at paragraph 26 of her affidavit of 12 September 2011 that the plaintiff has done no work to the land. However, this appears to be contradicted by paragraph 19 of her affidavit where she says that some soil had been dumped onto the land, and in Mr Scarce’s affidavit (Exhibit “NAS8”) there is a photograph showing soil on the land. The defendant’s submissions are that the plaintiff cannot establish a lienable interest but the fact is that there is evidence that work as been done on the land and I refer to the above analysis of this evidence.

56        Under s5 of the Act liens are available for the contract price. This is as defined in s2 and includes money payable to any contractor or sub-contractor for any work or materials furnished or to be furnished in connection with the work under any contract. The contractual price for the two contracts was fixed at $268,996 for contract one and $273,620 for contract two. There is clear evidence that in each case some of the contract work has been done although it is conceded that much of the contract has not been done. This is because the contract was terminated following their repudiatory breach of the defendant.

57        The legal position is that the whole of the contract sum becomes payable subject to a credit by reason of work or balance of work not being requiring to be carried out. Accordingly, on any analysis, the plaintiff is entitled to avail itself of the liens, for at least some of the work was done and must be paid for, and the plaintiff is entitled to security.

58        Mr Fenwick Elliott acknowledges that there is an alternative claim for damages for breach of contract – paragraph 32 of the statement of claim – but the primary claims are as set out in paragraphs 29 and 30 of the statement of claim and that the money due and payable under the two contracts.

59        The defendant’s case is that because the contracts had been terminated there can be no contract price due and payable. However, the defendant herself terminated the contracts, on the plaintiff’s case, and an argument similar to that raised by the defendant was rejected in Henry Walker Contracting Pty Ltd v Pegasus Gold Australia Pty Ltd (Administrator Appointed) (see analysis above).

60        Further, I bear in mind the observations made by Perry J in AJU Pty v Pupello [2001[] SASC 402 [22] where His Honour expressed the common sense view that there is no point dismissing some causes of action when there remains a common factual dispute that has to be determined at trial in any event.

61        I have accordingly come to the conclusion that on the plaintiff’s case there is clearly an entitlement to liens and to maintain and enforce the liens and it would be inappropriate in the circumstances to make orders either for their cancellation or for the striking of the claim for enforcement of them and for judgment for the defendant on that claim.

62        However, I am conscious of the evidence that the plaintiff has refused to particularise details of when the work was undertaken to the defendant’s property by the plaintiff and what work was done, which is not particularized in paragraph 16 other than superficially.  These particulars might assist the defendant in exercising her option of paying appropriate monies into Court pursuant to s26 and having the liens removed so that the plaintiff can obtain security for its appropriate claims but the defendant will have the option of being free to deal with the land.

63        Although the plaintiff has apparently declined to provide this information, there has been no application by the defendant for particulars, so if such a claim is brought it can be expeditiously considered by the Court.

Summary of orders

1.         I refuse the defendant’s application for orders 1-5 of her application (FDN 5)

2.       I fix a directions hearing on Tuesday 24 January 2012 at 10:30am when I will hear from the parties as to the further conduct of this action and consider any applications issued by the parties.

 

Counsel for the plaintiff:          Mr R Fenwick Elliott

Solicitors for the plaintiff:        Fenwick Elliott Grace

Counsel for the defendant:      Mr F Turner

Solicitors for the defendant:    Scales and Partners