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[2009] QSC 429
plaintiff. The plaintiff was permitted to amend its claim to include GST; the charge was to be modified to secure the amended claim, and $193,556.22 was to be paid to the first defendant by agreement, with...
The Court rejected the first defendant's argument that the subcontractor lost part of its statutory charge because its original court claim was for less than the amount paid into court. The relevant provision extinguished a charge if enforcement proceedings were not commenced, but the subcontractor had commenced proceedings. Any concern about the amount secured could instead be dealt with by modifying the charge. The Court also held that GST was covered because the subcontract required a GST payment connected to a taxable supply made under the agreement. The amendment was to be allowed, with further submissions still required on the formal orders and costs.
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In Mulherin Rigging & Cranes Australia Pty Ltd v Roberts and Schaefer Australia Pty Ltd & Ors [2009] QSC 429, the Supreme Court of Queensland considered a dispute about the scope and continued operation of a subcontractor's statutory charge over money paid into court.
2 cited instruments linked from this judgment.
Mulherin Rigging & Cranes Australia Pty Ltd, the plaintiff and subcontractor, claimed amounts under a building subcontract. The second defendant, Kogan Creek Power Station Pty Ltd, was served with a notice of charge under the Subcontractors' Charges Act 1974 (Qld) on 24 July 2007. It paid $3,960,920.04 into court on or about 31 October 2007. The judgment says that sum was calculated as $3,600,820.04 plus GST [3].
The subcontractor commenced proceedings on 24 August 2007, claiming $3,424,876.20. It had to commence proceedings to avoid the charge being deemed extinguished under s 15(3) of the Act [4]. Later, it sought leave to further amend its statement of claim, increasing its claim to $3,767,363.82 by including a GST amount [2]. It said the omission of GST from the original court claim appeared to have been an oversight, noting that its earlier notice of claim had included the subcontract amount plus GST [7].
The first defendant, Roberts & Schaefer Australia Pty Ltd, contended that the charge was extinguished to the extent that the original court claim was less than the amount paid into court. It also argued that the amendment could not revive that part of the charge, and that GST was not an amount secured by a charge under the Act [6]. It sought payment out of $536,025.84. The judge recorded a different calculation of the difference, $536,043.84, and noted that the plaintiff accepted that the first defendant was entitled to $193,556.22, the difference between the amount in court and the amount of the proposed amended claim [5].
Douglas J concluded that the charge had not been partially extinguished, and that GST was covered on the terms of the subcontract. The Court indicated that the charge should be modified to reflect the plaintiff's claim and that $193,556.22 should be paid to the first defendant [21]. Further submissions were still required about the form of the orders and costs [22].
There is a numerical inconsistency in the judgment that should be kept visible in any use of the decision. Paragraphs [2] and [5] state the proposed amended claim as $3,767,363.82, while [21] states the modified charge amount as $3,767,363.72. The reasons do not explain that ten-cent difference.
The statutory structure was central. Section 5(2) provides that a subcontractor's charge secures payment, in accordance with the subcontract, of all money payable or to become payable to the subcontractor for work done under that subcontract. Section 15(3) provides that every charge is deemed extinguished unless the subcontractor duly commences a proceeding to enforce it. Section 21(1), in turn, allows a person alleging prejudice from a claim of charge to apply for cancellation or modification of the claim [9].
The first defendant's argument treated the gap between the amount paid into court and the original claim as an automatic partial extinguishment under s 15(3). Douglas J did not accept that construction. The plaintiff had commenced the enforcement proceeding. In the judge's view, s 15(3) dealt with extinguishment where proceedings were not commenced in time. It did not say that a charge would be partly extinguished whenever a proceeding was commenced for an amount lower than the sum secured [12]-[13].
The separate power in s 21(1) supported that reading. A person who considered the charge prejudicial could apply to have its effect modified. That mechanism addressed the possibility that the amount secured might change without treating the charge as extinguished in part. Douglas J considered modification under s 21(1) the appropriate route for addressing the first defendant's concern [13]. On that reasoning, there was no need to decide whether an amendment could revive an already extinguished charge, because the charge had not been extinguished [14].
The GST question turned on the statutory words “for work done” in s 5(2), read with cl 47.3 of the subcontract. That clause provided for a GST amount in addition to a primary payment where the primary payment was for, or connected with, a taxable supply made by the subcontractor under the agreement. The GST amount was to be paid at the same time and in the same manner as the associated primary payment [15].
The first defendant argued that GST was not itself payment “for work done”. It also relied on the Act's distinction between amounts payable under a contract and amounts payable for work done, and on the treatment of contract price in s 3A(a) [16]-[19]. The judge considered those arguments less persuasive than the particular wording of s 5(2). The GST obligation arose because the subcontractor made a supply under the agreement and was therefore connected with performance of the subcontract. In the Court's view, that connection was enough for the GST sum under cl 47.3 to be money payable for work done [20].
Finally, the amendment was allowed because the Court rejected the arguments that it would revive an extinguished charge or claim an unsecured GST amount. The judgment records that no other prejudice was advanced by the first defendant [7]. The reasons therefore support the amendment in the circumstances before the Court, not a general conclusion about amendments in all charge proceedings.
Before this decision, the relevant statutory provisions distinguished between the existence and enforcement of the charge, on the one hand, and an application to modify its effect, on the other. The reasons refer to prior authorities in discussing when a charge arises and the consequences of extinguishment. In particular, Douglas J referred to Re QMT Constructions Pty Ltd for the proposition, advanced by the plaintiff, that the charge came into existence when the notice of claim was given [11]. The judge also relied on Stumann v Spansteel Engineering Pty Ltd for the characterisation of extinguishment as equivalent to the charge no longer existing [12].
The decision's contribution, on its face, is its construction of the interaction between ss 15(3) and 21(1). It rejects the proposed interpretation that s 15(3) automatically extinguishes the part of a charge exceeding the amount claimed in timely enforcement proceedings. Instead, it treats s 15(3) as addressing failure to commence proceedings, while s 21(1) supplies a means of seeking modification where the charge's effect is said to prejudice someone [13].
The GST holding is also tied to the particular contract language. The Court did not state that every GST amount in every subcontract is secured by a statutory charge. Its reasoning depended on cl 47.3, which expressly made the GST amount payable alongside a primary payment for a taxable supply under the agreement, and on the relationship between that obligation and work performed [15], [20].
The decision also noted the limits of the statutory charge. In discussing the first defendant's arguments, the Court referred to s 5(6)(b)(i) and earlier authority concerning damages for breach of contract [16]. The judgment's reasoning distinguishes the GST amount, which was contractually payable because of a supply under the subcontract, from damages for breach. The supplied text does not support treating the decision as extending charges to all sums that may be claimed under a construction contract.
At [13], Douglas J said that “it is not appropriate to construe s. 15(3) as effecting a partial extinguishment of the charge simply because the proceeding commenced to enforce the charge claims less than the amount charged.” In plain English, filing a timely enforcement case for a smaller sum did not automatically remove the rest of the charge. The Act's separate modification process was available to address the effect of the charge.
At [14], the judge stated that “the charge has not been partially extinguished” and remained in place for the amount in the proposed amended claim. This resolved the first defendant's premise that amendment required revival of a lost portion. Since, on the Court's construction, that portion had not been lost, revival was not an issue the judge needed to determine.
At [20], Douglas J concluded that the GST obligation “should, in my view, be construed as money payable to the subcontractor for work done by it under the subcontract.” The explanation was that cl 47.3 made GST payable because a primary payment related to a supply made under the agreement. The GST amount was therefore dependent on work under the subcontract, rather than an unrelated or independent payment.
At [21], the judge stated that the charge “should be modified pursuant to s. 21(1)(b)” and that $193,556.22 should be paid to the first defendant as agreed. The formal orders were not yet settled: the Court expressly required further submissions on their form and on costs [22].
The statutory construction is most directly relevant where a subcontractor has given a notice of charge, commenced proceedings to enforce that charge within the applicable period, and initially pleaded an amount smaller than the sum secured or paid into court. The case addresses whether that difference is automatically extinguished under s 15(3). Its answer was no, where proceedings to enforce the charge had been commenced [4], [13].
It is also relevant where a party alleges prejudice from the continuing scope of a charge. The Court identified s 21(1) as the statutory mechanism through which a prejudicially affected person may seek modification, rather than relying on a theory of automatic partial extinguishment [9], [13]. The judgment concerns that statutory route and the circumstances of the application before it. It does not set out a general test for what amounts to prejudice under s 21(1).
For GST, the fact pattern involves a subcontract clause that expressly requires an additional GST amount when a primary payment relates to a taxable supply by the subcontractor, with the GST payment linked to the primary payment [15]. The Court relied on this contractual arrangement to find the amount within s 5(2). The reasoning may not transfer without examination of the actual contract wording and the statutory provisions applicable to a different claim.
The supplied judgment does not identify any later court decisions that applied, distinguished, or questioned its holdings. It would therefore be unsupported to describe how later courts have treated Mulherin Rigging & Cranes based only on this material.
The judgment does refer to earlier cases. It cites Stumann v Spansteel Engineering Pty Ltd in relation to the effect of extinguishment [12], and Re QMT Constructions Pty Ltd on when a charge comes into existence [11]. It also refers to Re A & P Constructions Pty Ltd and Multiplex Constructions Pty Ltd v Abigroup Contractors Pty Ltd in the discussion of what counts as money payable for work done and the treatment of damages [16]. The judgment notes that the 2004 Queensland Supreme Court decision in Multiplex was affirmed by the Queensland Court of Appeal in 2005 [16].
Those references show the authorities Douglas J considered, but they do not establish later treatment of this 2009 decision. The text supplied does not provide a subsequent citation history or any later judicial assessment of its reasoning.
The decision does not determine whether an amendment would revive a charge if the relevant part had already been extinguished. Douglas J expressly said that the issue did not need to be considered because the charge had not been extinguished [14]. The judgment therefore should not be cited as deciding the revival question in the abstract.
Nor does the decision state a comprehensive test for deciding when a GST amount is “for work done” under s 5(2). Its conclusion depends on the connection created by cl 47.3 between the primary payment, the taxable supply, and the GST amount [15], [20]. A different clause or payment structure could require separate analysis.
The judgment also leaves the final formal orders and costs unresolved. Paragraph [22] records that further submissions were to be heard. The text reports what the Court considered the appropriate modification and payment, but does not provide the later orders or any costs determination.
Finally, the numerical discrepancy remains unexplained. The proposed amended claim is $3,767,363.82 in [2] and [5], while the amount stated for the modified charge in [21] is $3,767,363.72. The judgment also records different calculations of the difference between the original claim and the court funds: $536,025.84 as the first defendant's claimed figure and $536,043.84 as the judge's calculation [5]. Those figures should be quoted with care rather than silently reconciled.
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[1] Douglas J: The plaintiff's application to further amend its amended statement of claim is not resisted, at least if the first defendant's application for payment out of court of the sum of $536,025.84 were also ordered.
[2] The amendment to the pleading sought by the plaintiff increases the amount claimed by it in a dispute under a building contract by including a sum said to be payable to the plaintiff as a subcontractor "on account of GST"[1]. The result is to increase the amount claimed by ten percent from $3,424,876.20 to $3,767,363.82.
[3] The complicating factor arises from the fact that the second defendant was served with a notice of charge under the Subcontractors' Charges Act 1974 (Qld) on 24 July 2007 and paid $3,960,920.04 into court on or about 31 October 2007. That was calculated as $3,600,820.04 plus GST.
[4] The only parties now claiming any entitlement to that money are the plaintiff and the first defendant. The plaintiff sought to enforce its claim by instituting these proceedings on 24 August 2007, but then claimed only $3,424,876.20. It was obliged to commence the proceedings to avoid the charge being deemed to be extinguished under s. 15(3) of the Act. The first defendant's argument is that the charge was extinguished in respect of the difference between the amount of $3,960,920.04 paid into court and the amount of $3,424,876.20 claimed in the proceedings instituted on 24 August 2007.
[5] The difference is said to be $536,025.84 but on my calculation it is $536,043.84. Of that amount, the plaintiff admits that the first defendant is entitled to $193,556.22. That is the difference between the amount paid into court and the amount now sought to be claimed by the proposed second amended statement of claim of $3,767,363.82.
[6] The first defendant's arguments for seeking payment out of court of the sum of $536,025.84 rather than just $193,556.22 are, as I have said, that the delivery of the claim for the lower amount of $3,424,876.20 rather than the full amount paid into court of $3,960,920.04 had the effect of extinguishing the charge for the amount of the difference. It also argues that the amendment to increase the sum claimed to $3,767,363.82 does not revive the charge to that extent. It also submits that, if the proposed amendment would re-enliven the charge over the sum of $536,025.84, then the amendment should not be allowed and, in any event, and as a last resort, it argues that GST is not an amount that can be made the subject of a charge under the Act as it is not money payable "for work done" by a subcontractor under the contract pursuant to s. 5(2) of the Act.
[7] The plaintiff's case was that its failure to claim an amount payable on account of GST originally appears to have been an oversight. The original notice of claim lodged before these proceedings began claimed the amount owing under the subcontract plus GST. So, the plaintiff argues that no prejudice is shown to the first defendant by allowing the amendment. There was no argument from the first defendant that it would suffer prejudice except to the extent that it might be found that an amendment would re-enliven the charge over the sum of $536,025.84.
[8] For reasons I shall develop it does not seem to me that the charge was ever extinguished, accordingly it does not need to be re-enlivened and, therefore, I shall permit the plaintiff to further amend its statement of claim in the manner proposed. The questions that remain are what effect, if any, that has in respect of whether any amount in court should be paid out in excess of the figure of $193,556.22.
[9] To answer this question it is necessary to consider a number of sections of the Act, particularly s. 5(2), s. 15 and s. 21(1). They are as follows:-
(2) The charge of a subcontractor secures 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 subcontract.
(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
(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.
21 Application to court by person prejudicially affected
(1) A person who alleges that the person is prejudicially affected by a claim of charge under this Act may at any time make application to the court for an order -
[10] The first defendant's cross application is that the effect of the plaintiff's claim be modified so as to charge the monies paid into court only to the extent of the original claim for $3,424,876.20 and for payment out to it of $536,025.84. In making the submission that the effect of the plaintiff's original claim, made for an amount less than that charged, was to extinguish the charge in respect of any amount greater than $3,424,876.20, the first defendant encountered several problems.
[11] The plaintiff relied, for example, on the terms of s. 5(2) providing that the charge of a subcontractor secures payments in accordance with the subcontractor of all money that was payable or was to become payable to the subcontractor for work done by the subcontractor under subcontract to argue that the Act clearly distinguishes between the statutory charge and the payment obligations that the charge secured. Mr O'Donnell QC submitted that the charge came into existence when the notice of claim of charge was given[2] and continues until the charge is satisfied or extinguished pursuant to s. 15(3).
[12] He argued further, and it seems to me plausibly, that the monies secured by the charge can change during the life of the charge. If, for example, the subcontractor reduced the amount it claimed, then the amount secured by the charge can also reduce and the charge can be modified by using the powers available under s. 21(1). He characterised the first defendant's argument made in reliance on s. 15(3) that there had been a partial extinguishment of the charge as unsustainable, partly because s. 15(3) provides only for extinguishment to occur if proceedings to enforce the charge are not commenced. Here such proceedings have been commenced. He also drew my attention to a statement by Thomas J in Stumann v Spansteel Engineering Pty Ltd[3] where his Honour spoke of the effect of extinguishing a charge as equivalent to it no longer existing.
[13] Where extinguishment is able to be effected under s. 15(3) only because proceedings are not commenced in time, but a charge can be cancelled or its effect modified under the separate statutory power available under s. 21(1) and the Act envisages possible modification of the amount secured by the charge, it is not appropriate to construe s. 15(3) as effecting a partial extinguishment of the charge simply because the proceeding commenced to enforce the charge claims less than the amount charged. In that situation s. 21(1) provides the appropriate remedy to the person prejudicially affected.
[14] Accordingly, it is my view that the charge has not been partially extinguished and that it remains in place to secure the amount now claimed by the plaintiff in its second amended statement of claim. There is no need, therefore, to consider whether the amendment could have had the effect of reviving the charge as it has not been extinguished. There are no limitation issues relevant to affect this position.
Can payment of GST be secured by a charge under the Act?
[15] As another reason for ordering that $536,025.84 should be paid out of the monies in Court in favour of the first defendant Mr Derrington SC also argued that the liability to pay GST was not secured by the charge. I have already set out the terms of s. 5(2) of the Act by which a charge secures payment of all money payable under the subcontract to the subcontractor for work done by it. Mr Derrington SC's argument was that GST was not an amount payable under the contract "for work done" by the subcontractor. It is certainly, however, an amount payable under cl. 47.3 of the contract and the obligation to pay arises because the subcontractor has made a supply under the contract giving rise to an entitlement to payment of an amount on account of GST as well as to the primary payment due. This follows from the terms of cl. 47.3 of the contract which reads:
"If any Primary Payment is for, or is in connection with, a Supply made by the Subcontractor under this Agreement, which is a Taxable Supply on which the Subcontractor is liable to pay GST in accordance with the GST law, then, in addition to such Primary Payment the Contract (sic) is also entitled to an amount on account of GST (GST Amount). The GST Amount is to be the actual GST liability of the Subcontractor under the GST Law in respect of the relevant Taxable Supply. The GST Amount shall be paid to the Subcontractor at the same time and in the same manner as the relevant Primary Payment is otherwise required to be paid or given."
[16] The argument for the first defendant was that a payment "for work done" is different, for example, from "money payable...under...the...subcontract" referred to in s. 5(1)(a).[4] It also argued that money payable for work done was different from amounts payable "in respect of" work done under the contract which might otherwise permit a claim for damages for breach of the contract. It is clear, however, that money payable for work done under a subcontract does not include damages for breach of contract because of the explicit provision to that effect in s. 5(6)(b)(i) of the Act.[5] Accordingly, the submission went, the amount payable for work done was limited to the primary payment due under the contract, and it did not include the amount on account of GST.
[17] That was also said to follow from the terms of s. 3A(a) of the Act which provides:
"3A References to amount payable under contract and to completion of work specified in subcontract
In this Act save where a contrary intention appears -
(a) references to the amount of money payable under a contract or subcontract are deemed to include all amounts that, under the contract or subcontract, are to be credited or allowed in complete or partial satisfaction of the contract price otherwise than upon payment in money, and references to the payment of any moneys in reduction of the contract price include amounts so credited or allowed; and..."
[18] The argument was that what was payable under a contract for work done was properly identified as the contract price, defined in s. 3 as including "the money payable for the performance of work under a contract or subcontract ... whether or not the price is fixed by express agreement". Here, it was said, the subcontract price was pleaded in para. 11(b) of the amended statement of claim to be a contract sum of $3,912,000.00 excluding GST and, therefore, GST was not an amount which, under the contract, was to be credited or allowed in complete or partial satisfaction of the contract price. That definition in s. 3A(a), however, applies unless a contrary intention appears. It seems to me that the expression in s. 5(2) focusing on money payable for work done does suggest a contrary intention. Further, although the subcontract sum may have been pleaded as excluding GST, the subcontract made it perfectly plain in cl. 47.3 that the plaintiff was also entitled to payment of an amount on account of GST.
[19] The first defendant also argued that GST was calculated under s. 9-70 of A New Tax System (Goods and Services Tax) Act 1999 (Cth) as ten percent of the "value of the taxable supply" and was not expressly payable "for" the taxable supply.
[20] All of these arguments seem to me, however, to be distractions from the particular focus imposed by the language of s. 5(2), namely, whether this charge secures payment of money "payable to the subcontractor for work done" by it under the subcontract. Mr O'Donnell QC's submission was that the word "for" required a connection between the amount payable under the subcontract and the work done. Clause 47.3 of the subcontract makes the GST amount payable explicitly because a primary payment is to be paid for a supply made by the subcontractor under the agreement. That obligation, is, therefore, dependent on work having been done, is made pursuant to the subcontract and should, in my view, be construed as money payable to the subcontractor for work done by it under the subcontract.
[21] The plaintiff should be permitted to amend its statement of claim to include the amounts to which it claims an entitlement on account of GST. The charge over the money in court has not been extinguished but should be modified pursuant to s. 21(1)(b) of the Act by reducing the amount of the sum charged from $3,960,920.04 to $3,767,363.72 and ordering, as the parties agreed, that the sum of $193,556.22 be paid out to the first defendant from the amount paid into court.
[22] I shall hear further submissions as to the form of the orders and as to costs.
[1] See cl. 47.3 of the amended conditions of subcontract (AS 4901:1998).
[2] See Re QMT Constructions Pty Ltd [1999] QSC 2; [2000] 1 Qd R 28.4, 285 - 286 at [12].
[3] [1986] 2 Qd R 471, 475.
[4] See Re A & P Constructions Pty Ltd [1999] 1 Qd R 228, 231 -232.
[5] See, e.g. Multiplex Constructions Pty Ltd v Abigroup Contractors Pty Ltd [2004] QSC 198 at [36], [58] per Chesterman J, a decision affirmed in Multiplex Constructions Pty Ltd v Abigroup Contractors Pty Ltd [2005] QCA 61; [2005] 1 Qd R 610.
Mulherin Rigging & Cranes Australia Pty Ltd
Roberts and Schaefer Australia Pty Ltd & Ors
The plaintiff was permitted to amend its claim to include GST; the charge was to be modified to secure the amended claim, and $193,556.22 was to be paid to the first defendant by agreement, with further submissions reserved on the form of orders and costs.