Agripower Australia Limited v J & D Rigging Pty Ltd and Ors [2014] HCATrans 106 (16 May 2014)

Last Updated: 16 May 2014

[2014] HCATrans 106

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Brisbane No B7 of 2014

B e t w e e n -

AGRIPOWER AUSTRALIA LIMITED (ACN 132 823 226)

Applicant

and

J & D RIGGING PTY LTD (ACN 075 350 140)

Respondent

ADJUDICATE TODAY PTY LIMITED (ACN 109 605 021)

Respondent

HELEN DURHAM

Respondent

Application for special leave to appeal

KIEFEL J
GAGELER J

TRANSCRIPT OF PROCEEDINGS

FROM CANBERRA BY VIDEO LINK TO BRISBANE

ON FRIDAY, 16 MAY 2014, AT 11.49 AM

Copyright in the High Court of Australia

____________________

MR J.D. McKENNA, QC: May it please the Court, I appear with MR D.B. O’SULLIVAN for the applicant. (instructed by TressCox Lawyers)

MR R.N. TRAVES, QC: May it please the Court, I appear with MR N. ANDREATIDIS for the first respondent. (instructed by Boulton Cleary and Kern Lawyers)

KIEFEL J: Yes, Mr McKenna.

MR McKENNA: Your Honours, there are submitting appearances from the second and third respondents. There are three matters I wish to briefly expand upon this morning. The first concerns the importance of the short issue that arises in this case. The second concerns how readily one can see from the Court of Appeal’s reasoning and conclusion that the error of the kind we contend for exists. The third concerns the four subsidiary areas of law which the Court will have occasion to consider when analysing this matter.

May I begin with the issue and its importance? Your Honours, in each Australian State or Territory whenever a dispute arises concerning payment under a construction contract, the legislation which both parties reach for is the security of payment legislation. Your Honours, in this Court, have never had an opportunity to consider the meaning and effect of that legislation to date, but if you had occasion to look to the citators you will see that there are literally hundreds of Australian cases considering this legislation and its operation and behind these are many more cases where the legislation is invoked to refer matters to independent adjudication.

The legislation is not new. It was first enacted in New South Wales 15 years ago and since then the New South Wales model has been adopted with some variation by each of the other Australian States and Territories. The effect of the legislation, where it applies, is to override the contractual rights of the parties concerning payment and to impose a mandatory regime, progress payments, statutory payment claims and binding interim adjudications.

GAGELER J: We would be looking only to one paragraph of one definition.

MR McKENNA: You will be looking, your Honours, to the phrase “forming or to form part of land” which is the key phrase in the first three subparagraphs of the definition and if your Honours read to the rest of the definition you see that most paragraphs build on that definition. So, it is really the central concept, the nexus concept that is used to decide whether this regime applies. That is the short point in the case.

Your Honours will see that statutory phrasing context in the appeal book or the application book at page 6 in the judgment of Justice Wilson where her Honour has underlined or emphasised the expression - you will see in section 10(1)(a), (b) and (c) the expression “forming, or to form, part of land” and your Honours will see how the rest of the definition builds upon that concept.

KIEFEL J: Given that the statute is concerned with payment for construction work, what is the point in the definition of - what is being undertaken being connected to the land?

MR McKENNA: It is used, your Honour, we would respectfully submit, to create a test to decide in the whole universe of construction work what is to be governed and what is not to be governed. In a sense, it is the classic indication of building work. Building work is building houses, building office blocks, building shopping centres and so it has been used in the statute as the key determinant of what is within and what is without the statute.

If your Honours look at – see the judgments below, you will see that – and there was a lot of analysis below about anomalous results that that produces – cabinet work for shipping, cabinet work for office buildings. One is within the Act, one is without the Act. The courts below accept that that is the consequences of using a criterion like this to decide whether the Act applies or not. But, in our respectful submission, the reason for choosing it was that it was a settled and relatively certain criterion so that people could decide whether it was in – work was inside or outside the Act because it is a concept that the common law has been considering for a couple of hundred years and developing.

GAGELER J: So your point is that the law of fixtures applies?

MR McKENNA: That is so, your Honour. We would say the common law concept of “land” as adopted by the statutory definition of “land”, of which fixtures is one subset.

GAGELER J: Is there not just a difficulty with the language of section 10(1)(a), the reference to “structures, whether permanent or not”?

MR McKENNA: In our respectful submission, that phrase, “whether permanent or not”, is really a neutral factor because whether - the proper construction is the construction that Justice Applegarth in the Court of Appeal adopted, or the one we contend for. No one is contending that an improvement needs to be permanent. It does not need to be the pyramids before the Act applies. In relation to the law of fixtures, it is perfectly clear that improvements that are made for an indefinite period of time can constitute land. On Justice Applegarth’s approach, similarly there is no suggestion that permanence is a requirement.

So it appears to be – and may I point out, your Honour, it is only present in subsection (1)(a), nowhere else, and in the New South Wales Act from which this derives, those words appear in brackets as if to say - to remove any doubt, “whether permanent or not”. That phrase itself is actually quite telling. The “whether or not” is really pointing out that that is an irrelevant consideration in this area and it certainly does not detract from our contentions.

Your Honours, you will see that the term “land” is obviously a critical term here and all the judges below accepted that “land” in the statute is used in its ordinary statutory sense which derives from Lord Brougham’s Act of 1850. You will see that the Court of Appeal accepted that at page 47 of the application book at paragraph [56]. So that was common ground both at first instance and amongst the judges on appeal.

That definition, your Honours, you will find in the application book at page 15 at paragraph [47], and the meaning of the expressions in that definition have been explained in the authorities and you will see the conventional explanation for them in paragraph [49] on that page. So it includes things – so it is an inclusive definition: “land” is defined as including; and “messuages”, which are physical things - a house and its curtilage, subparagraph (b), “tenement”:

“everything in which a man can have an estate of freehold and which is connected with land”; and

(c) “hereditament” denotes such things as might formerly be the subject matter of inheritance.

All those terms build in common law concepts of what is land and include the concept of “fixtures”. So that is the definition that this builds upon.

GAGELER J: But it is not just that, is it? You took us to paragraph [56], page 47. It has the extended meaning in the Acts Interpretation Act as well as the ordinary meaning.

MR McKENNA: Because the statutory definition begins with the word “including” and so land, his Honour held – and we do not contest – includes land in its ordinary sense – the earth – and includes these other things that are added on. So there is no controversy about that. But that definition, your Honours, was critical in the trial judge’s analysis for this reason. If the statute supplies the test to determine what constitutes land itself, then it was clear, according to her Honour, what test was to be applied to determine whether something formed part of that land.

It is easy to understand this view, because even in ordinary language, it is difficult to speak of an object forming part of a larger object if its lies wholly outside the definitional scope of that larger object. Take a simple example: a television set. If a television set is the larger object, the question of whether the screen forms part of the larger object is answered by the definition of what the larger object is. But the television might be plugged into the wall. It does not make the socket part of the television, because you ask what is the definitional boundary of the television and the mere fact that it is attached to something else does not make the thing it is attached to part of the thing itself.

That is the fundamental difference between the primary judge and the judges of appeal. On appeal, they seem to have construed the phrase “forms part of” as if it simply meant attached to, rather than understanding that the word “part” tells you that it is a component of a whole, and once you have a definition of what the whole is, that also tells you the question of how you determine whether something is a part.

The Court of Appeal’s approach appears to have involved identifying first, what is relevantly land in the statutory sense, then examining the physical nexus between the land and the thing – the building, the fitting, whatever is to be considered – and then undertaking the inquiry that your Honours will see in the application book at page 44, at paragraph [37].

What your Honours will see, when your Honours read that paragraph, is that it is a discussion of an inquiry that one might make, but it does not contain a test. It is difficult to detect, from this judgment, what question one has to ask, other than whether the thing forms part of something else in the ordinary sense of the word. The test and the inquiry itself varies depending upon where in the judgment you read of it. So [37] emphasises the degree of annexation, but if you go back to [24], paragraph [24], on page 41 of the application book, you will see in the second line some of the things that the inquiry may involve.

So there is real uncertainty as to – if we are not going to adopt the certain test of what is – forms part of land at common law, and under the statutory meaning, knowing what test is to be applied is quite uncertain on this new approach. So the first question to address to your Honours is why does it matter? Why is this difference of opinion of any importance to this Court, and there are three main reasons.

Firstly, the difference of approach directly affects the legal status of a significant segment of contracts in the construction industry. Your Honours can see from the facts of this case that it is a case concerning relocatable or temporary structures in the mining industry, and structures of this kind – relocatable and temporary structures in the mining industry – is a significant segment of the construction industry. But, it is not just confined to that, because, really, any work that involves installing industrial plants, cabinet work, matters of that kind – all raise the same question: Do you have to ask whether that work forms part of land, in the classic common law sense, or is it some new test to be applied, and if it is a new test, what is it?

KIEFEL J: It seemed to be influential in the reasons of Justice Applegarth that there would be difficulties in ascertaining intention if the common law test was to be applied.

MR McKENNA: We take issue with that, your Honour, because the authorities dealing with this, which are very neatly collected in our learned friend’s written outline at pages 72 and 73 of the application book point to the long history of authorities that deal with the test of objective intention. In particular, you will see at about line 12 on page 72, the test, that is:

that the relevant intention is to be determined objectively from such facts and circumstances that are “patent for all to see” –

So for example, there is a case further down that page, called Hobson v Gorringe referred to at paragraph [32], which concerned a hire purchase agreement which said in terms between the owner and the hirer that the relevant equipment was not to form part of land. That was held to be irrelevant in the determination of whether something was a fixture or not, because that question was to be determined objectively from what was patent for all to see, not from what parties might have said to each other.

KIEFEL J: Well, the test then is degree of annexation, and that is a common sense test. How far different is that from the test that Justice Applegarth posed?

MR McKENNA: The key difference is that the common law for many years examined degree of annexation as a test in itself, and that was not really a test. It was just an inquiry. Degree of annexation does not tell you how much annexation is required before you get there - - -

KIEFEL J: But it is obvious to the eye if it is an objective test, though, is it not?

MR McKENNA: Well, your Honour, that is why the courts adopted the test of the objective intention. Was it objectively intended that it formed part of land? That provided the test for which degree and object of annexation were indicia.

KIEFEL J: The objective test would be what is obvious to the eye of what - - -

MR McKENNA: Yes, yes.

KIEFEL J: How far different is that from what is posed by Justice Applegarth at paragraph [25]?

MR McKENNA: Justice Applegarth specifically disavows the test of objective intention. He explicitly disavows that - - -

KIEFEL J: But he is talking about a practical inquiry into the physical state of things.

MR McKENNA: Yes, and that is the difficulty, your Honour. It is an inquiry, and the nature of the inquiry differs depending upon where in the judgment you read about it, but you do not know a test. The inquiry does not tell you how you decide whether something is on one side of the line or the other. The common law confronted precisely this question, and resolved the question by adopting the test of the objective intention. What this judgment does is unwind that and go back to the days where you just look at the things that are available to you, and ask some undefined test. That is the mischief of - - -

GAGELER J: Whose objective intention would we be concerned with? It would not always be the parties who are bound by the Act, would it?

MR McKENNA: No, it is an objective intention about the installation of the statute.

GAGELER J: On your view, you introduce the notion of intention. It has to be somebody’s intention. Those bodies would not necessarily be the people bound by the Act.

MR McKENNA: No, that is certainly true, and the common law authorities are conscious of that because even a common law the change in status of something from chattel to realty affected third parties. To answer your Honour’s question, the intention is the person who owned the chattel that was a chattel - at one point in time it was owned by them, when it was then installed, if I can put it that way, on the land. Under the common law, it changed its status from chattel to realty, and it was the objective intention of that act of installation that is critical, so the intention of the installer.

KIEFEL J: It is just an inference to be drawn about how the object appears to be attached to the land?

MR McKENNA: Yes, with a test.

KIEFEL J: That is then a practical assessment of the physical relationship between the thing and the relevant land?

MR McKENNA: With a test that helps you decide which of the two it is.

KIEFEL J: But when his Honour said that at paragraph [20], the physical relationship between the thing and the relevant land, he could have only meant the connection that is obvious to the eye. That must be what he meant.

MR McKENNA: That is true, your Honour, but his Honour also says that purpose of annexation is relevant. So it is not just physical annexation, it is purpose, and - - -

KIEFEL J: But that too, from what his Honour says, would have to be a test by the eye.

MR McKENNA: Yes, but if your Honour is a practitioner being confronted with the application of this Act how does that help you determine which side of the line a particular contract is in? If you have the test of fixtures, you have the test. Objectively, was it intended to form part of land indefinitely and not on a temporary basis? His Honour, your Honour will see, accepts that temporary installations can form part of land. That is a key difference between the two approaches.

KIEFEL J: Well, judges often might be a little spare with language when they think it is self-evident in a particular case. His Honour was concerned with a large treatment and storage plant constructed by bolting its steel structures onto concrete footings. It sounds pretty attached.

MR McKENNA: Well, it was bolted, your Honour. These problems often arise when something that is small or large is not cemented in but actually bolted down, which gives rise to the inference that it is to be removed at some point in time. His Honour certainly accepts that temporary - - -

KIEFEL J: Or it is the method of annexation which engineers suggest is the best method.

MR McKENNA: Yes. The facts of this case in relation to the fixture side of the case were uncontroversial. Her Honour did not go into the question of what people were saying to each other or what they were actually intending at the time this thing was installed. Her Honour just looked at the title, the physical thing and reached a conclusion, and that is why, in our respectful submission, the concern that his Honour expressed in the Court of Appeal that this was an unworkable test is really belied by the way this case was resolved at first instance.

The difference is that the approach taken at first instance actually pays regard to the words of the Act, which is forming part of land where land has a certain test, there is a certain test of what constitutes land, and her Honour applied that to determine whether a fixture is or was not. His Honour said “I accept that land has a statutory sense”, but one simply inquires about connection, physical connection to land without paying any regard to the test of what actually is land.

Your Honours will see the point where this goes wrong, in our respectful submission, in the judgment at the appeal book at page 40 at paragraphs [17], [18] and [19]. At paragraph [17] his Honour accepts that land is one of the building blocks of the law of property and that it is commonly used as a criterion of this kind. Then his Honour frames the question at [18] as to whether in this context the legislature should be taken to have not only used the land in its technical sense but also imported rules about fixtures and that, in our respectful submission, was the wrong question because it frames it as if the law of fixtures has nothing to do with the meaning of land.

The law of fixtures is simply one facet of what constitutes land, so they were not separate tests. Because of that, in our respectful submission, this step, his Honour then goes on to inquire about consequences, about context, asking rhetorically why rules about fixtures and the law of real property would be applicable in this context. Where that was really a false inquiry, the inquiry should have started and analysed the use of the concepts used here in the phrase “forming part of land” and then considered other matters such as consequences as further aspects of that issue.

So, in our respectful submission, the right question to have asked was if land is used in its statutory sense and “form” has the meaning that is in paragraph [23], that is:

To . . . constitute” or “make one or part of –

does that not mean that an object cannot form part of land unless it falls within the definitional boundaries of land and that is really what the case is about. Your Honours, if your Honours take this matter on, not only will the ultimate question be something to consider, but the incidental questions to be considered are the history and content of the common law concept of “land”. The importance of that is that you can see in his Honour’s judgment that land and fixtures were seen as something quite different where, in fact, they are really part of the same concept. There are other issues, too, but I see that the time is up.

KIEFEL J: We will not need to trouble you, Mr Traves.

In our view, an appeal would have insufficient prospects of success to warrant the grant of special leave. Special leave is refused with costs.

The Court adjourns to 10.15 am on Wednesday, 21 May in Canberra.

AT 12.10 PM THE MATTER WAS CONCLUDED