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This is a part of The Worker’s Liens Casebook, by Robert Fenwick Elliott. Copyright © 2010

Copies of text of no more than 500 words may be made, provided they are accompanied by due attribution.

Take Up Rates

20. The extent to which the Act is used is moderate: about 125 cases a year. The usage appears to have been fairly stable in recent times: the number of registrations per year at the Land Titles Office is as follows[1]:

The Case for Reform

21. The Act is highly technical. Neither repeated reforms, nor more than a century of case law has shined much clarity on key issues. Its drafting has been the subject of judicial criticism many times, which is hardly surprising since it is virtually unintelligible on a first reading. In particular:

• Pitt v Glenelg (1927): “difficult to find legislation affording greater scope for argument”[2];
• W Curl v Buck Industries (1972)[3]: “The mental gymnastics necessary to construe the legislation are not inconsiderable”;
• Albert Dell Fabbro v Wilckens & Burnside(1971): “the … Act presents many difficulties”[4];
• Katherl v Official Trustee in Bankruptcy and Walker (1986)[5]: “The draftsmanship of the Workmen’s Liens Act has not infrequently been subject to criticism”;
• Parob v Pipeline Properties (1988): “a thoroughly discredited piece of legislation”[6]; “chorus of judicial protest about the ambiguities and uncertainties attending so many aspects of this legislation”[7]
• Pipeline Properties Pty Ltd v Leichhardt Development Co Pty Ltd (1988) ; “…a provision enshrouded in the fuliginous obscurity typical of the Act”[8];
• In the appeal in that case (1989); “conflicting judicial opinions as to the meaning of its sometimes puzzling language”[9]
• In Marriott Industries Pty Ltd (1991): the Act “has become notorious for its difficulties of rational construction”[10];
• In the course of the application for leave to appeal in that case, Justices Deane and Brennan were minded to observe during the course of submissions by counsel that the Act had reached “scandalous proportions”[11]
• Henry Walker Contracting Pty Ltd v Pegasus (1998): “the notorious difficulty many judges have had over the years arising from the enigmatic language of the Act”
• Jovista v Pegasus Gold (1999): “the enigmatic language of the Act…the muddy state of the authorities”[12]; “the obscure and unsatisfactory nature of the antiquated (Act)”[13]; “small sample of adverse judicial comment on the Act’s Delphic drafting”[14]
• Excelsior v Alan Sheppard (2012): “The proper construction of the worker’s liens legislation is notoriously obscure”.

22. There remains judicial disharmony on some key issues, and in particular whether in the trilateral scenario, there needs to be money payable by the owner to the head contractor as at the time the lien is claimed, or whether it is sufficient that that money will or may become payable at some later time. There has in the past been a major divergence of judicial opinion on another fundamental question, namely whether a notice under section 10(2) is a condition precedent to the enforceability of the lienor’s right to a lien, although this divergence has now been resolved.
23. Part of the difficulty is that the Act seeks to do several things at the same time, interweaving bilateral scenarios with multilateral scenarios, rights in rem with rights in personam, individual workers with corporations and contractual relations with the insolvency scheme.
24. Not only its poor drafting, but also its purpose has been criticised. Thus for example,

• In Advanced Civil v Wyara (1986)[15] Asche J concluded his judgment:

it may be appropriate to remark that this rather complicated Act has probably now outlived its usefulness

• In Leichhardt v Pipeline Technologies, he again said:

I remain of the view that this Act has long outlived its usefulness[16]

25. The Act runs entirely counter to the modern wisdom that litigation is best avoided. On the contrary, it virtually ensures litigation except in those rare cases in which the parties, or more often their lawyers, are able to untangle not only the complexities of the underlying contractual rights and obligations, but also those of the Act, before the dispute becomes burdened by litigation.

Reform in South Australia

26. In 1990, a Select Committee of the South Australian House of Assembly reviewed the operation of the Workers’ Liens Act 1893 (SA). The following summary is given in the later NT discussion paper[17]:

It reported that both the South Australian Attorney-General’s Department and Department for Public and Consumer Affairs had been requested by “people disadvantaged by its operation” to amend or repeal it. In recommending that the legislation should be repealed, the Committee found that the legislation no longer reflected the needs or operation of the building and construction industry. Reflecting the concerns earlier expressed in the Territory by Asche J in Advanced Civil Engineering Pty Ltd v Wyara Pty Ltd, the Committee concluded:

When the Act was of relevance, labour costs were often considerably lower than the costs of materials, and four weeks wages [sections 4(3) and 7(4)] … was reasonable. The original intent of protecting the wages of workers is no longer being met. The reorganisation of the industry so that most of the work is being done by sub-contractors and not workers employed by a builder also has nullified the original intent. The Act is now being used in the main by sub-contractors, many of them large organisations, rather than individual workers.

Indeed, the Committee found not only that “the Act no longer serves the purpose for which it was intended”, but that its operation was actually “imped[ing] the rational resolution of an insolvent builder’s affairs” in “stopping the supply of money to building projects, the consequent reduction of payment to unsecured creditors and the disruption to the projects affected”:

The major assets an insolvent builder has are the works in progress and the debtors. However, once the liens are placed on the titles of properties, banks and mortgagees are not prepared to advance further money as the liens take precedence over floating charges and any prior arrangement with the owner unless the mortgage has already been registered on the certificate of title.

The Committee found that the “builder in effect loses major assets and is prevented from trading out of difficulty, thus reducing any payments to unsecured creditors”. The Committee also noted the irony that if the lienor ultimately failed to recover the amount claimed (where, for example, the owner had already paid the builder or the money was not due), the lien “has achieved nothing except to worsen each party’s position”. This concern is exacerbated by the fact that “[i]n many cases, it is only after liens are registered that the lienor finds out that either the owner has already paid the builder or that money is not due under the terms of the contract”.

In fact, evidence to the South Australian Select Committee was that only a small number of liens are legally successful, perhaps as low as 5%. That Committee also found that the “[l]egal costs are such that many solicitors advise sub-contractors against registering liens unless the amount to be recovered is in excess of $2,000″.[18] Indeed, it is understood that the Act is not used by employees at all as legislation such as the Workplace Relations Act 1996 (Cth) offers a more speedy and efficient means of obtaining unpaid wages from an employer.

Although South Australia is the only jurisdiction other than the Northern Territory which currently makes provision with respect to contractors’ liens, the South Australian Select Committee recommended the repeal of the legislation, while also noting that various other jurisdictions[19] had then recently rejected the possibility of enacting similar legislation.

27. Notwithstanding this recommendation, the legislation has not been repealed in South Australia.

Reform in the Northern Territory

28. In August 2002, a discussion paper[20] was prepared by the Northern Territory Department of Justice Review Team dealing with the review of the old Workmen’s Liens Act and the new security of payment legislation elsewhere. It included the following passages:

2.2              Outline of possible reforms

In the Northern Territory it is generally accepted that the Workmen’s Liens Act has not been particularly successful in protecting the interests of subcontractors…

9.2              How useful is the Workmen’s Liens Act?

It is not only in relation to the ambiguity of expression in the legislation that concerns have been expressed. In Advanced Civil Engineering Pty Ltd v Wyara Pty Ltd, Asche J commented that:

this rather complicated Act has probably now outlived its usefulness.[21] … It has obviously lost any effectiveness so far as enforcement of claims for wages is concerned. It must have been a very long time since a workman sought the protection of the Act; for no amendment to section 4(3) has ever been promulgated and that subsection limits a workman’s lien for wages to a sum ‘not exceeding twelve pounds’ [although this was amended by Act No.55/1991]. A vast mass of industrial law since 1893 has given workers protection in other ways more efficient than this rather cumbersome procedure. The Act now seems mainly used by corporate bodies against other corporate bodies, no doubt usually of comparable financial strength, to obtain a special form of security not available otherwise than in the Northern Territory and South Australia.[22]

Consistent with this view, Asche CJ noted in Leichhardt Development Co Ltd v Pipeline Properties Pty Ltd that the Act was there being used in circumstances having “nothing to do with exploitation of the economically weak by the economically strong”.[23] In that case, one company resorted to the Act in respect of a claim by it to monies from another company for work done on the land of a third. The effect of doing so is that “the registration of a lien pursuant to section 10(3) is akin to the registration of a caveat, that is, a lien or caveat remains on the title until removed by one of the statutory methods”[24]:

If it be complained that serious commercial harm may be inflicted on an owner or occupier of land, where a lien is registered on the land which can only be removed after protracted litigation between third parties (and sometimes not even then), the courts have only the gloomy satisfaction of pointing to the sort of warnings already referred to ….[25]

Review of Contractors’ Security of Payments (including Workmen’s Liens Act)

This is in no sense an indictment of a company that may seek the protection of the legislation; it is merely “taking advantage (successfully or unsuccessfully as events may prove) of a procedure properly open to it under the present legislation”.[26] However, it calls into question whether the Act is currently achieving its intended objectives and/or is causing unforeseen difficulties in its operation.

On another occasion, the outcome of the application of the Act attracted the judicial comment that the “injustice which may be thought to result can be laid squarely at the feet of those who control legislative initiative in this Territory: they have ignored a chorus of judicial protest about the ambiguities and uncertainties attending so many aspects of this legislation, protest which was first mouthed over 60 years ago and to which the Chief Justice added his voice in the Advanced Civil Engineering case“.[27]

In respect of legislation such as the Workmen’s Liens Act the WA Taskforce observed:

Some other jurisdictions have enacted legislation that enables a contractor to place a charge or lien over assets in order to recover unpaid monies. This type of legislation has generally proven ineffective and some jurisdictions have repealed, or are considering repealing, their Acts.[28]

9.3              Judicial calls for Reform

In 1988, it was judicially suggested that it “seems desirable that the obscurities of this ancient Act be clarified by more modern legislation before it reaches its centenary; the needs of the construction industry of the late twentieth century should be met”.[29] The Northern Territory Law Reform Committee in its discussion paper noted that the Act achieved its centenary some years now past.

It is noteworthy that related legislation in Queensland, The Contractors’ and Workers’ Lien Act 1906 (Qld), judicially described as “a lawyer’s nightmare” which should “be repealed’,[30] was repealed in 1964. On the other hand, the Northern Territory legislation “has been subjected to an astonishing amount of judicial criticism which has so far been ignored by the Parliament”.[31]

12.1           First Option – Reform the current Act – “The Modern Liens Act”

The Modern Lien’s Act option is to retain the current legislation but update it so as to clarify its operation. That is, maintain the concept of liens for outstanding monies with the liens being able to be registered against the land.

This option is not supported because it does nothing to encourage processes that prevent problems or which permit problems to be addressed as early as possible.

12.2           Second option – “Statutory Right for Payments”

The second main option is to give subcontractors the right to progress payments modelled on the proposals outlined by the Western Australian Taskforce. See Part 11.2.

12.3           Preferred Option

At this stage it appears that the most practical option is that mentioned in the previous paragraph. The reasons are:

It is based on what appear to be sensible business practices – without any undue government intervention;

It provides no unfair advantage for one sector of business over another; and

It is consistent with the direction of reforms that are occurring elsewhere in Australia.

29. Following this discussion paper, when the Northern Territory introduced a modern adjudication system two years later by its Construction Contracts (Security of Payments) Act 2004, commencing on 1 August 2006 and following the Western Australian model, it took the opportunity to repeal its workers’ liens legislation.

Success Rates

30. Notwithstanding the extent of the legal recourse that has been put into pursuing Worker’s Liens claims over the last 115 years, the success rates for enforcement have not been good.
31. As noted above[32], the South Australian Select Committee noted that the success rate may be “perhaps as low as 5%”. An analysis of the cases contained in this book suggests that that figure is an overestimate. Depending on precisely how the data are interpreted, it appears that, of the totals claimed, only about 2% was found by the court to be claimable under the Act.
32. This is not to say, of course, that the cases which have been subjected to this judicial scrutiny are necessarily typical, and there are no doubt many unreported cases by parties who have been prompted into paying sums that are due as a result of a claim made under the Act. Nevertheless, the extremely low percentage of challenged claims which are sustained strongly suggests that the procedure is subject to widespread abuse.

[1] Figure provided by Land Services Group, Department for Transport, Energy and Infrastructure

[2] Paragraph 1 of the judgment at page 583 below.

[3] See page 702 below.

[4] Paragraph 74 of the judgment at page 199 below.

[5] See page 410 below.

[6] Paragraph 1 of the judgment at page 565 below.

[7] Ibid, paragraph 18

[8] 58 NTR 17, Kearney J at 20

[9] Paragraph 1 of the judgment of Angel J at page 429 below.

[10] Paragraph 65 of the judgment of Olsson J at page 481 below.

[11] Noted by Mildren J in Stadal v Skykym; see page 679 below.

[12] Angel J on 26th November 1998

[13] Bailey J on 4th February 1999

[14] Paragraph 42 of the judgment of Kearney J at page 399 below.

[15] See page 142 below.

[16] See paragraph 1 of the judgment at page 353 below.

[17] See page 45 below.

[18] S.A. Select Committee at 6. The number of notices of liens lodge in recent years has been: 18 (1995/96), 41 (1996/97) and 21 (1997/98).

[19] Western Australia, New South Wales and Victoria. But also noting that New South Wales was to take a different position later on.

[20] “Reform Of Law Concerning Payments Due To Contractors: Review Of The Operation Of The Workmen’s Liens Act – How To Better Protect Payments Due To Subcontractors In The Northern Territory”; see

http://www.nt.gov.au/justice/docs/news/workmens_liens_review2002draft8.pdf

[21] See also Leichhardt Development Co Ltd v Pipeline Properties Pty Ltd (1989) 62 NTR 1 at 2-3, per Asche CJ.

[22] (1986) NTJ 715 at 756-7.

[23] (1989) 62 NTR 1 at 3.

[24] (1989) 62 NTR 1 at 5.

[25] (1989) 62 NTR 1 at 6.

[26] Leichhardt Development Co Ltd v Pipeline Properties Pty Ltd (1989) 62 NTR 1 at 6, per Asche CJ.

[27] Parob Pty Ltd v Pipeline Properties Pty Ltd and Anor (1988) NTJ 1546 at 1560.

[28] WA Taskforce Report, page 14

[29] Colmup Pty Ltd v Mecair Engineering Pty Ltd & Ors (1988) 58 NTR 9 at 16.

[30] Terrazzo Tile Co v Willis & Sons Ltd [1960] Qd R 475 at 479.

[31] Stadal Pty Ltd v Skykym Pty Ltd & Anor (1994) NTJ 627 at 632.

[32] See paragraph 26 above.