West Tankers Pty Ltd v Scottish Pacific Business Finance Limited

1. [1]

   HIS HONOUR: West Tankers Pty Ltd (West Tankers), the plaintiff, supplies diesel fuel. Scottish Pacific Business Finance Pty Limited (Scottish Pacific), the defendant, is a financier.

2. [2]

   This is a contest, as to who between them is entitled to the amount of $184,128.71 paid into the District Court of New South Wales by a third party, the McConnell Dowell OHL Joint Venture (the joint venture).

3. [3]

   Prior to February 2016, West Tankers supplied fuel to a company styled Ealwin Pty Ltd (Ealwin) to a value of $236,363.79 including GST. West Tankers invoiced Ealwin accordingly but Ealwin failed to pay.

4. [4]

   Ealwin, in turn, supplied fuel and associated services to the joint venture, to the value of $184,128.71, and invoiced the joint venture. The invoices were payable 30 days from the end of the month of issue. They were all payable by the end of March 2016. I shall refer to the debt owed by the joint venture to Ealwin as the Ealwin debt.

5. [5]

   In 2009, Ealwin had entered into a written Invoice Discounting Facility Agreement (the Discounting Agreement) with Allianz Pty Ltd (Allianz) under which Ealwin sold to Allianz, debts owed to it for goods sold and services performed by it. Debts purchased were transferred to Allianz “completely and unconditionally”. Allianz appointed Ealwin to be its undisclosed collecting agent. Debts sold and transferred to Allianz included the Ealwin debt.

6. [6]

   On 15 April 2013, Allianz assigned its rights under the Discounting Agreement to GE Commercial Corporation Australia Pty Ltd (GE). GE gave notice of the assignment to the joint venture on 31 March 2016. GE assigned its rights to Scottish Pacific on 3 May 2016.

7. [7]

   West Tankers invoked the procedures provided under the Building and Construction Industry Security of Payment Act 1999 (NSW) (the SoP Act) and the Contractors Debts Act 1987 (NSW) (the CD Act) against Ealwin in respect of the $236,739.79 owed to it by Ealwin. More about the relevant specific provisions of these enactments is said later.

8. [8]

   On 18 February 2016, West Tankers delivered a payment claim. Ealwin did not deliver a payment schedule. On 4 March 2016, West Tankers served notice under s 17(2) of the SoP Act of its intention to apply for adjudication of its payment claim. Ealwin still did not deliver a payment schedule. On 17 March 2016, West Tankers applied for adjudication of its payment claim.

9. [9]

   On 17 March 2016, West Tankers served on the joint venture a payment withholding request under s 26A of the SoP Act.

10. [10]

    On 11 April 2016, West Tankers obtained an adjudication determination. The adjudication certificate was filed as a judgment debt in the District Court of New South Wales at Newcastle on 21 April 2016 for $241,813.02. A debt certificate for that amount was issued under s 7 of the CD Act on 26 April 2016.

11. [11]

    On 5 May 2016, West Tankers served on the joint venture a notice of claim pursuant to s 6 of the CD Act for the amount.

12. [12]

    Under s 26A of the SoP Act, the joint venture was required to retain the money by it owed to Ealwin. Under s 8(1) of the CD Act, service of the notice of claim on the joint venture operated to assign to West Tankers the obligation of the joint venture to pay the money owed to Ealwin.

13. [13]

    Faced with competing claims for the money owed to Ealwin, from West Tankers and Scottish Pacific respectively, the joint venture paid the amount held by it into the District Court pursuant to Interpleader Summons. On 24 March 2017, the proceedings in that Court were transferred to this Court and listed for hearing on 20 April 2017.

14. [14]

    Scottish Pacific claims entitlement to the money in Court on the footing that it is the legal owner of the Ealwin debt as a consequence of the legal assignment to it under the Discounting Agreement perfected by the notice it gave the joint venture on 31 March 2016. West Tankers claims entitlement to the money in Court as the assignee of the Ealwin debt brought about on 5 May 2016 by s 8(1) of the CD Act. The question is which assignment prevails?

15. [15]

    For the reasons which follow, Scottish Pacific’s assignment prevails.

The Building and Construction Security of Payments Act 1999 (NSW)

1. [16]

   The SoP Act contains provisions under which a person who undertakes construction work under a construction contract is entitled to receive, and is able to recover, progress payments. It contains provisions for the making of progress claims and for their adjudication by eligible adjudicators who are appointed by an authorised nominating authority.

2. [17]

   Under s 24 of the SoP Act, if a respondent to a payment claim fails to pay an adjudicated amount, the claimant may obtain from the authorised nominating authority an adjudication certificate which, under s 25, may be filed as a judgment for a debt in any court of competent jurisdiction and is enforceable accordingly.

3. [18]

   Section 26A of the SoP Act provides:

4. [19]

   Section 26B provides:

5. [20]

   Section 26C provides:

6. [21]

   Section 34 provides:

The Contractors Debt Act 1997 (NSW)

1. [22]

   Section 5 provides:

2. [23]

   Section 6 provides:

3. [24]

   Section 7 provides:

4. [25]

   Section 8 provides:

5. [26]

   Section 9(1) provides:

6. [27]

   Section 11(1) of the CD Act provides:

7. [28]

   The following matters are common cause:

8. [29]

   GE became legal owner of the Ealwin debt on 31 March 2016. If s 8(1) of the CD Act operated to assign to West Tankers the obligation of the joint venture to pay Ealwin, that occurred on 5 May 2016. On ordinary principles, GE would prevail because its assignment had already occurred by 5 May 2016. Faced with this difficulty, West Tankers put that:

9. [30]

   I reject this submission.

10. [31]

    The obligation on the joint venture under s 26B was to retain money and no more, until any of the events described in s 26B(3) occurred. The SoP Act does not restrict the respondent referred to in s 26A (Ealwin) from lawfully dealing with its property including choses in action, whether after the service of a payment withholding request or at all. The words of the SoP Act do not impose any such restriction either expressly or by necessary implication.

11. [32]

    It is to be observed that it is a matter entirely for the claimant referred to in s 26A (West Tankers) whether or not to serve a notice of claim under s 6 of the CD Act, and thereby to work an assignment and that the obligation to retain money otherwise lapses on the occurrence of three specified events including the mere effluxion of time. Section 26A of the SoP Act, to the extent that it requires a withholding, is an interference with the respondent’s property rights in any event and further interference is not to be inferred without clear words to that effect.

12. [33]

    Ealwin was, at the material times, relevantly powerless, because the Discounting Agreement had been signed years earlier. That instrument operated later according to its tenor, first to work an equitable, and then a legal assignment to GE of the debt owed by the joint venture to Ealwin. There is no suggestion of any transaction intended to defraud creditors: cf Conveyancing Act 1919 (NSW) s 37A.

13. [34]

    Service on 17 March 2016 on the joint venture of the payment withholding request under s 26A of the SoP Act, did not create any obligation on the joint venture to pay West Tankers or create any charge over the money which the joint venture, as principal contractor, was obliged under s 26A of the SoP Act to hold; see NSW Land and Housing Corporation v DJ’s Home and Property Maintenance Pty Ltd (in liquidation) [2013] NSWSC 1167 at [58] – [68].

14. [35]

    Whatever its status prior to 31 March 2016, on that date, upon service of the notice of assignment, GE became the legal owner of Ealwin’s chose in action against the joint venture and Ealwin no longer had any interest, legal or beneficial in it. Thenceforth Ealwin had no legal entitlement to payment.

15. [36]

    Put another way, and to use the terminology of s 8(1) of the CD Act, from that time there was no obligation on the principal to pay the money owed under the contract to the defaulting contractor.

16. [37]

    Thus, at the point at which s 8(1) of the CD Act would have operated to bring about an assignment of that obligation, there was no longer any such obligation.

17. [38]

    The parties addressed submissions with respect to the effect of the equitable assignment of the debt to GE brought about by the Discounting Agreement before notice of assignment was given to the joint venture. It is not necessary to consider that issue for resolution of the present contest.

18. [39]

    I record that it was put on behalf of West Tankers that the provisions of the Discounting Agreement, to the extent that they worked an equitable and then legal assignment, had the effect of excluding, modifying or restricting the operation of the SoP Act, or purporting to do so. I reject this submission. The SoP Act has operated in its terms and nothing in or brought about by the operation of the Discounting Agreement has subverted or purported to subvert its operation.

19. [40]

    It follows that the assignment to Scottish Pacific was effective and there was no assignment to West Tankers. Scottish Pacific therefore wins.

20. [41]

    Submissions were addressed on the possible effect on the outcome of this contest of the Personal Property Securities Act 2009 (Cth). The parties were agreed that there is none.

21. [42]

    The monies standing in the District Court are forthwith to be paid out to Scottish Pacific.

22. [43]

    I provisionally order that West Tankers is to pay the costs of Scottish Pacific of the proceedings. This order will take effect unless within 7 days either party notifies my Associate in writing that some other order is sought and states the ground replied upon, in which event the parties are to make arrangements with my Associate to relist the matter.