SUB-CONTRACTORS AND THE LIEN LAW
reprinted from the Nelson Evening Mail of New Zealand, March 25, 1886
(Otago Daily Times)
In this Colony we now congratulate ourselves upon the possession of a most liberal workmen's lien law; but this provision, useful and satisfactory as it is, has not exhausted legislative requirements in this direction. The workmen employed by a contractor upon any building are duly protected as respects their wages in case of the insolvency of their employer; but as a general rule large portions of contracts are sub-let by the original tenderer, and these sub-contractors are still, according to our law, left absolutely dependent upon the honesty and solvency of the man with whom they contract. They have no lien upon the building for either the materials or the labour they have supplied and paid for out of their own pockets. If the original contractor has taken the job at a price that will pay him, well and good. Sub-contractors will perhaps do nearly all the work for him, but they will be duly paid, and a profit mad all round. But supposing the contractor to have put in an unwisely low tender, or to be previously in an unsound position, the outlook for those holding sub-contracts is gloomy. The contractor has a lien upon the building, and consequently upon any materials they may put upon the ground, but they themselves have none. When, as sometimes happens, a contractor fails, it is a heavy blow to those who hold sub-contracts, who are generally men in a smaller way of business and ill able to afford severe losses. Not many months ago a particularly hard case of the kind occurred in Dunedin on the bankruptcy of a contractor who had nearly completed the building of a private residence. A tradesman who had not long started business accepted a considerable contract under him, and had all but finished his work when the insolvency of the original contractor became known. The sub-contractor had in this case to provide his materials, to pay all his own workmen in full, and to pay away such sums as £40 for extra work in the shape of glass embossing, which had been included in his sub-contract but which he had to let as an outside job. This unfortunate sub-contractor found himself saddled with a dead loss of over £200, bound to pay all under him the uttermost farthing, and yet not ranking himself on a level with the wages men in the original contractor's estate. Wages come before sub-contractors' claims. This man's labour and material were all represented in fair value in the newly-erected building, but he had not one halfpennyworth of right therein. His only relief was a claim, and not even a preferential claim, upon an almost worthless estate.
If such occurrences as this are frequent, it is difficult to understand how the system of letting sub-contracts can be continued under the present law. There is, in fact, very considerable shyness on the part of many tradesmen who have a safe and well established business without laying themselves out for this sort of thing. Inquiring of a firm whose business premises are not 100 yards from those of the last mentioned sufferer, the writer was informed that they made a rule of doing little or nothing in the way of sub-contracts. It was too risky. They had been victimized too often. Of course such a rule was irksome, and caused them to occasionally miss good business; but it was the only safe alternative in the present state of the law.
Another man in business in Dunedin, who does a good deal in the way of sub-contracts, said: "I have been 'had' often enough, and now I generally make it a practice to ask the contractor plainly how much he is getting for the job before I take a sub-contract. Of course some do not like it. I remember some time ago I supplied stuff for the building of a house at Nevada to a small contractor. The job was just completed - it was the last day, - when I found the contractor had gone. I was bound to let my materials - paper, white lead, oil, etc. - remain on the ground. I dare not move them from the premises once they are there. In this case I accused the proprietor of winking at the contractor going away, and asked whether he had paid his passage. I have known men building a house which they knew would cost £450 call for tenders and let it at for, say, £300. It would pay them then, when the work was about done, to give the contractor £50 to make himself scarce. I have known such a thing as that to happen. In the case I just referred to I never got a sixpense for all my labour and materials, and the proprietor had paid the contractor for the work within £10. Contractors are paid up to 75 per cent, as the work progresses, and sub-contractors are supposed to be paid the same, but they are constantly put off by the contractors. If the latter are working in harmony with the owner, they do pretty well as they like. If the law obliged a man to pay a fair price for the building of his house, it would of course be all right; but it does not. Only to-day I tendered for an advertised job, and meeting the contractor, I made a point of asking him what price he was getting, and I asked him casually as to whether he still held certain property that I knew he owned. This kind of thing will not do with everyone, but it is the only way to protect one's self. If I send up materials and the contractor goes, I must just stand and look at them. I dare not take them away again, because directly they are put upon the ground they become the property of the proprietor. If the contractor comes to grief the proprietor gets all the best of it, just because he has let the work to a man who would not finish it. Sometimes we sub-contractors go to the proprietor and get his guarantee, and then likely enough the contractor cuts up rough over it, and an unpleasant feeling is caused over the job. If there were such a law in force as there is in America, it would be the proprietor's place to look and see how many liens had been filed against the building. In a case which came under my brother's notice in Chicago, a friend of his who was taking up a sub-contract was in doubt as to the contractors position. His lawyer therefore told him to simply file a lien for the amount of his own claim to the building, and the thing was done. It would be the proprietor's place to ascertain how many liens there were and to consider these in making payments to the contractor. That is the kind of law we want here." Bricklayers, plumbers, decorators, carpenters, &c., all have pretty nearly the same tale to tell, and complain of the injustice which places them at a disadvantage compared with even the contractor's wages men.
The kind of protection our sub-contractors want is that which is afforded by the lien law of America, and it may not be amiss to say a few words concerning that. In America, as a general rule, the contractor is entitled to what is called "mechanics' lien," but his lien is subject to that of the material men and mechanics employed by him if such people at the proper time file their claims in the prescribed manner. In the States of Illinois, Vermont, and Connecticut, however, the contractor alone has the lien, and under the Indiana statues of 1838, also the lien was only given to those contracting with the owner. But as regards the majority of the States, i will be seen that although material-men are in a sense of the word mechanics their rights are protected under the American Mechanic' Lien Laws, and they have a lien for all material furnished. Their liens in most States are of equal force with those of labourers, although there are certain States in which no one but the contractor or builder is so secured. But these cases are the exception, and in some States it seems to be not even necessary that the materials furnished be actually used in the building in order to secure the lien.
The American law as it affects sub-contractors and artisans is not easy to bring under exact headings, but it is certain that sub-contractors in nearly all the States are entitled to a lien; and from an examination of all the statutes it is laid down as a general rule that in every case where the sub-contractor has a lien the artisan or day labourer also is protected. But the system in force in New Zealand of protecting original contractors and workmen, but leaving the sub-contractors entirely uncovered seems entirely foreign to the law of any State. The American Legislature has apparently regarded it as a sound and just principle that all those who have by consent of the owner or in pursuance of contracts contributed to increase the value of his property should have an interests in it until their respective claims for such services shall have been paid or discharged. As regards the sub-contractor especially - viz., the man who, under contract express or implied, performs all or a certain part of the principle contract for another - his claim is for work for which the original contractor would have had a lien had he performed it himself. His right are secured in nearly every State, the exceptions being Vermont, Illinois, Iowa, Michigan. In Connecticut the lien is only provisional upon the consent of the owner or employer. The principle (stated by a good American authority) upon which this sub-contractor's lien is founded is on a contract with the owner, either directly or indirectly, or by subrogation, for it is only thus that one man can ever acquire a lien upon the property of another. The owner contracts with a builder to erect a house on certain terms, and the builder makes a sub-contract with material man or master mechanic to supply the material or do the work. The chain of relationship consists of but two links, the second of shich hangs by teh first and will be of no greater weight. The sub-contractor comes in by reason of his direct relation to the builder, and the right of lien of the former for his claim is
pro tanto, substitutionary to that of the latter. As against the owner, the terms of the principal contract, and as against the builder, the terms of the sub-contract ought to limit and qualify the lien of the sub-contractor and the artisan, so as to prevent the claim from abating the terms of either contract.
Of course there are other interests than those of the sub-contractor to be taken into consideration of the sub-contractor to be taken into consideration in framing a lien law, but it should surely not be a matter of great difficulty to hedge around a law to protect sub-contractors with provisions guarding such privileges from abuse. American legislators seem to have been fully alive to this. If the law gave the sub-contractor or artisan a lien upon the property of the owner or employer for the entire amount of the sub-contract, without any regard to the amount of the principal contract, a very curious anomaly would exist, and the whole property of the owner might be placed at the discretion of the contractor to be encumbered by him as he chose. But the allowance of a lien to sub-contractors and artisans is a special privilege, granted only in the case of building, and it is not unreasonable to require them to look to the principal contract to ascertain whether it is such as to justify them in becoming contractors under it. In a word, the original contract alone is the measure of the owner's liability. The agreement between the contractor and sub-contractor cannot, and should not, affect the extent of his liability. There can be little doubt that sub-contractors in New Zealand would be only too ready to fulfil more stringent requirements than this in order to secure their own safety. The caution which they have at present often fruitlessly to exercise before taking contracts is a far more serious matter.
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