The Notice of Demand

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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.


201A. In the great majority of cases, it is a notice of demand, given by the lienor under section 10(2)(a), which kicks the whole process off. This is the notice given by the lienor to his paymaster requiring payment; for the purposes of the Act, payment is deemed to have become due 7 days after this notice:

        (2)         Any wages or contract price shall for the purposes of this section be deemed to have become due—

(a)         if unpaid for seven days after the same (being payable) shall have been demanded by notice in writing, signed by the person claiming the same and given to the person liable to pay the same, or posted in a registered letter addressed to him at his usual or last known place of abode in South Australia:

201B  A couple of points should be noted immediately:

  • Section 10 (2) says “for the purposes of this section” but it is clear that the deeming provision is for the purposes of the whole Act;
  • The provision looks like a facilitative provision, but as discussed below, in the absence of an insolvency event under section 10(2)(b), a notice of demand under section 10(2)(a) is the only way that the contract price is treated as having fallen due for the purposes of the Act.

Can a section 10(2)(a) notice be given before the money is contractually due to the claimant?

  1. No. The Act says that the notice must be given in respect of money “being payable”, and the cases are consistent on this point: the money must be then payable. The uncertainty about whether the word “payable” in section 6 means presently payable or payable in the future does not extend to its meaning in this section; see Longreef at page 506 below.

Does there need to be a section 10(2) event for the lien to be available for enforcement?

  1. It seems to be clear that a lien can be registered before a section 10(2) event[1] has taken place; section 10(4) says as much. And so there can be registration without a section 10(2) event. And it is clear that the lien is only available for enforcement in the courts if it has been registered. But what of the case where a lien has been registered without a section 10(2) event having occurred? Is the lien available for enforcement in the courts in those circumstances? The point is of real practical importance, because even though temporary protection is achieved for the lienor by registration, unless he can commence proceedings in the courts to enforce the lien within 14 days from registration, the lien will cease[2]. If the lienor issues proceedings for enforcement when it can be shown that he was not so entitled, then the registration may be cancelled[3].
  2. To put the same point another way, the Act contemplates a sequence of events:

(i)    The money becomes payable under the contract

(ii)   The money becomes deemed to be due under section 10(2), either by virtue of section 10(1)(a) (the money still not being paid within 7 days of a written demand) or section 10(2)(b) insolvency event

(iii) The lien is registered, either before or within 28 days after step (ii)

(iv)  The claimant issues proceedings in court, within 14 days after step (iii)

  1. There are no words in the Act saying that step (ii) is necessary before step (iv). But is such a requirement implicit in the Act?
  2. This issue has arisen more than once in the decided cases[4]. For a number of years there was a divergence of authority between South Australia and the Northern Territory on identical wording, but since the Northern Territory full court decision in Jovista v Pegasus Gold[5] in 1999 the point has been settled, and the law is now clear that there does need to be a section 10(2) event before proceedings are issued.

Does a section 10(2)(a) notice need to be given promptly?

  1. It is clear from the Hansard record that the legislature intended that the time scale was originally intended to be prompt[6]. But does the Act in fact constrain to serve his section 10(2)(a) notice within any particular time?
  2. It seems not. There was a suggestion in Malady v Colstar[7] that once the contract price has become presently payable under the contract, the 28 day time for registration runs from that moment. However, that decision was overturned by a Full Supreme Court of the Northern Territory in Jovista v Pegasus Gold[8]. Thus the notice can be given many months or even years after the sum claimed has in fact fallen due[9].

Can more than one notice be given?

  1. Once a notice is given, time starts running. Section 10(1) requires that the lien be registered within 28 days of expiry of the 7 days notice[10], i.e. 35 days in total, or 5 weeks. What if the claimant fails to register within this 5 weeks? Can he serve another notice, thereby setting time running again?
  2. The answer is no; See Blythe Green and Jordain v Sienna [11], followed in Advanced Civil v Wyara [12]; Ambir v Paspalis[13], Jennings v Burgundy[14] and Stapleton[15]. RD Elliott came to the same conclusion. See also Excelsior v Alan Sheppard [2012] SASCFC 84 per Stanley J at paragraph 117.
  3. What if the first notice is obviously wrong, as where it is addressed to the wrong party? The same principle applies; Parob v Pipeline Properties[16].

Can a section 10(2)(a) notice be given inadvertently?

  1. There is no prescribed form for a section 10(2)(a) notice, but once that notice has been given, then that sets time running for the purpose of registration; the registration has to be effected within 28 days from such a notice. The question therefore arises, can such a demand notice be given inadvertently?
  2. It would seem that the answer is “yes”. If the claimant does in fact demand payment by notice in writing which he has signed and either posted by registered letter or (more probably given to the addressee) then that would appear to satisfy the requirements of section 10(2)(a), and the 28 days will start running, regardless of whether the claimant intended that effect or not.
  3. Hitherto, this has not arisen as a practical problem; indeed there are no reported cases where the point has been argued out. However, now that security of payment legislation has introduced to South Australia, payment claims under that legislation will become a very regular occurrence, and these might well inadvertently constitute notices of demand under section 10(2)(a) and thus set time running.

Does the sum claimed need to be accurate?

  1. It is not uncommon for a claimant to serve a section 10(2)(a) notice for the wrong amount. Sometimes he will claim a different amount in the court proceedings, sometimes he will amend the sum claimed in those proceedings, and sometimes the court will find that the sum properly claimable is different from the sum claimed. Is the notice nevertheless valid in such circumstances?
  2. Section 10(2)(a) provides that the “contract price shall for the purposes of this section be deemed to have become due if unpaid for seven days after the same”[17] is demanded. Does the expression “the same” merely identify the chose in action in question, or does it mean the quantative amount, such that a demand has to be for the same amount as is actually due as the contract price? The intent of the legislation here is, as elsewhere, obscure[18], and different courts have reached different conclusions:
  • In Pitt v Glenelg (1927)[19], Richards J remarked that is was arguable that the statement of too large a sum in a notice of lien invalidates the registration of the lien, but the point was not argued, and the court suggested that the more reasonable view is that lien would survive for the correct amount.
  • Similarly, in Wormald v Altrevor(1981)[20], the court considered obiter, and without hearing the defendant, that an amendment to reduce the sum claimed was not fatal to the validity of the notice
  • Again, in MSP Group v Fernleigh (1996 District Court), Judge Lunn found that the mere over-statement of the amount claimed does not of itself require discharge of the lien under section 32[21].
  • In Henry Walker v Pegasus Gold (1998), the court struck out certain of the claimant’s claims, and did not at that strike out stage treat the balance as thereby fatally flawed. The judgment suggests was no argument on this point, and Angel J declined to be drawn on whether “the remaining issues on the pleadings now reflect the lien as it is registered”.
  • Conversely, in Ambir v Paspalis(2003)[22] Martin CJ was clear that the notice must correctly identify the sum due, otherwise the demand is not a demand within the meaning of the section.
  • In Eichler v Speke Hall (2009)[23], Master Bampton summarily removed a lien under section 32 because the demand contained two sums which were admitted not due.
  1. It is worth noting that many section 10(2)(a) notices claim sums that are not the amount actually found due at the end of the day, or that include interest, which is not lienable[24] The point is thus of some importance, notwithstanding that it is not a point that is often taken.
  2. Which view is correct? The following observations are offered:
  • None of the above authorities are strictly binding on a South Australian Supreme Court;
  • Ambir v Paspalis ought perhaps to be regarded as the most persuasive, not only because it comes from a Chief Justice (albeit of a neighbouring state) but because it is the most considered;
  • Bearing in mind the massive weight of judicial criticism of the Act (see paragraph 41 above), policy considerations would likewise suggest that the scope of the Act ought now to be restricted, not expanded, and in particular that “ambit” claims should not be allowed;
  • Similarly, a measured reading of section 10(2)(a) would suggest that the words “the same” mean “quantatively the same” and not merely “the thing that has just been referred to”;
  • Accordingly, Ambir ought to be preferred, such that if the amount claimed in a section 10(2)(a) notice is not for the same amount as is actually payable by way of “contract price”, then the notice is ineffective;
  • Conversely, if in tripartite or multipartite cases, the amount of the lien is restricted by the amount payable under the head contract (section 6), then a notice is not invalidated by the amount of that section 6 restriction being less than the amount claimed in the notice (this being a matter of policy, since there is typically no way for a subcontractor to know what is payable under the head contract – he has to “take a punt”);
  • However, South Australian courts have often shown remarkable loyalty to this old dog of an Act, and may be reluctant to see it regularly spiked by the Ambir principle.
  • There have been a number of cases in which the point has not been taken (at any rate, so far as appears from the judgment); by way of example:
    • In Calabrese v Najar & Anor [2012] SADC 146, Judge Cole found that the plaintiff was entitled to judgment for the full sum claimed in the Notice of Lien of $52,216, but of that sum, but the lien was only enforced in the sum of $26,108, being the element of the claim that related to materials used and the defendant’s land. There was no suggestion that that discrepancy invalidated the lien.It appears that the court’s attention was not drawn to the Ambir v Pasalis  decision;
    • Neither was the point taken in Exclesior Land Holdings v Alan Sheppard, either before the single judge [1] or the full court [2]. In the full court, the court’s attention was drawn to the Ambir v Pasalis  decision, but not on htis point.


What consequences flow from an invalid notice?

  1. An invalid notice is ineffective to trigger the lien process, but that is not to say that is entirely without legal impact.
  2. In practice, the biggest downside to a claimant of serving an invalid section 109 notice is likely to be that it prevents him from serving a subsequent valid notice; see paragraph 211 above.
  3. The Act provides various express sanctions where a lien has been claimed improperly; see the discussion at paragraph 316 et seq below.

Formal requirements for a notice of demand

The form of the Notice

  1. There is no prescribed form. See page 916 below for a suggested precedent.

Signing the Notice

  1. The Act requires the Notice to be “signed by the person claiming the same”. That is clear enough where the claimant is an individual. Where the claimant is a company, we look to the Acts Interpretation Act 1915; section 52 provides:

52-Bodies corporate and signing or execution of documents

If an Act requires or authorises a document to be signed or executed by a person and the person is a body corporate, the Act will be taken to require or authorise the affixing of the common seal of the body to the document, or the signing of the document on behalf of the body, in accordance with the Act (whether or not of this State) under which the body is incorporated.

  1. The Corporations Act 2001 (Cth) says at section 127(1):

A company may execute a document without using a common seal if the document is signed by:

(a)              two directors of the company; or

(b)              a director and a company secretary of the company; or

(c)               for a proprietary company that has a sole director who is also the sole company secretary – that director.

Accordingly, the prudent thing for most companies to do is to get the notice signed by two directors, or a director and the company secretary.

  1. But, whilst this is prudent, it is probably not necessary. In Colmup Pty ltd v Mecair Engineering[1] the Supreme Court of the Northern Territory found that there was nothing in the language of the Act to exclude the usual rule[2] that an agent may sign on behalf of his principal, if authorised to do so.[3] The court went on to find, as a matter of fact, that the solicitors who had signed the notice of demand on behalf of the claimant in that case were in fact authorised, and so the challenge to the form of notice failed. Had the notice been signed in accordance with section 127(1) that enquiry of fact would not have been avoided.
  2. However, note the different approach taken by the District Court in Rascehella v Ginos[4], where it was held that a demand by a partnership was invalid because it was not in the name of and signed by all partners. The court did not refer to Colmup, and the decision may probably thus be regarded as per incuriam.

Delivering the Notice

  1. The notice of demand must be “given to the person liable to pay the same, or posted in a registered letter addressed to him at his usual or last known place of abode in South Australia”
  2. In Wormald, it was regarded as doubtful whether an incorporated company can have a “place of abode”[5]. For this reason, where the person liable is a limited company, it is probably prudent for these notices to be served by hand at its registered office.

[1] See page 200 below.

[2] qui facit per alium, facit per se.

[3] See paragraph 12 of the judgment.

[4] (1998); see page 618 below, and in particular paragraph 10 of the judgment at page 621 below.

[5] Thereby gainsaying RD Elliott’s statement at page 97 of The Artificer’s Lien that, “A company’s place of abode is its registered office”.

[1] Usually expiry without payment of a section 10(2)(a) notice

[2] Section 15.

[3] Section 32; see paragraph 42 below.

[4] In Pitt v Glenelg [1927] SASR 501 at 515; see paragraph 20 of the judgment at page 602 below, Richards J remarked in passing that

The natural meaning of [section 10(1)] seems to be that the step thereby prescribed is necessary in order to obtain any benefit from an existing right

The remark is obiter, and does not appear to have been prompted by any argument before him on the point.

In Albert Del Fabbro v Wilckens & Burnside, Bray CJ said [1971] SASR 121 at 127; see paragraph 94 of the judgment at page 213 below.

So, if it is necessary for the perfection of the charge (although with great respect to the views of Sir George Murray CJ in the Miller’s Lime Case I have grave doubts whether it is), that a demand should have been made within the meaning of s. 10(2), that has been done also.

In Parob Pty Ltd v Pipeline Properties Ltd Page 466 below, the Supreme Court of the Northern Territory found obiter that no section 10(2) demand was necessary before registration.

In Leichhardt v Pipeline Properties, the Court of Appeal of the Northern Territory held

  • that if a lienor elects, as he is entitled by section 10(4), to register without a section 10(2) notice, then he is thereafter always within time for registration because, by inescapable definition, that registration must necessarily have been before expiry of the 28 time period,
  • That in these circumstances, the lienor has an indefinite time to make a section 10(2)(a) demand
  • That section 10(2)(a) lays down no mandatory procedure to be observed in every case, but is merely facilitative.

Underlying these dicta is the point that the Act plainly allows registration without any section 10(2) event, and contains no words making a section 10(2) event a condition of enforcement by way of litigation.

However, in Marriott v Mercantile Credits, the Full Court in South Australia declined to follow Leichhardt, and found that there must be implied into the Act an additional pre-condition, that a section 10(2) event is required before the lien may be enforced. King CJ concluded (at paragraph 22 of his judgment, see page 480 below) that such implication was necessary in order to give “intelligible purpose” to section 10(2)(a). But such that conclusion is hard to support as a matter of logic: section 10(2)(a) provides a function in crystallising the time when the money is treated as being due, and hence when the 28 day period begins, and also of course a practical function of a “warning shot” that the Act’s mechanism is about to be applied. Olsson J (with whom Mohr J agreed) said that subsection (4) merely permits registration during the 7 day period envisaged by section 10(2)(a). But that analysis is also hard to sustain, since section (4) permits registration not only during that 7 day period, but before that 7 day period has started to run. In other words, the section clearly allows registration without a section 10(2) event having been triggered.

[5] See page 388 below.

[6] See paragraph 357 et seq at page 729 below.

[7] See page 462 below.

[8] See the Judgment of Kearney J at paragraphs 23 and 57.

[9][9] See Vineyard Estate v Aberdine at page 701 below for an example.

[10] Or, if there is a section 10(2)(b) insolvency event, within 28 days of that.

[11] See page 184 below.

[12] See page 101 below.

[13] See page 141 below.

[14] See page 299 below.

[15] See page 548 below.

[16] See page 467 below. Parob was disapproved on another point (the need for a notice) but appears to remain good law on this point.

[17] See page 68 below.

[18] The draftsman appears to use the word in both senses elsewhere in the Act.

[19] See paragraph 90 of the judgment at page 605 below.

[20] See page 604 below.

[21] See paragraph 25 of the judgment at page 531 below, and also paragraph 27.

[22] See page 143 below, and in particular paragraph 23 of the judgment.

[23] See page 351 below.

[24] See Sarah v Phillips at page 629 below.

[1] [2012] SASCFC 84

[2] [2011] SASC 25

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