Action Fabrication and Welding Pty Ltd ACN 163 735 546 v Liso (Civil Dispute)

[2020] ACAT 6

ACT CIVIL & ADMINISTRATIVE TRIBUNAL

ACTION FABRICATION AND WELDING PTY LTD ACN 163 735 546 v LISO (Civil Dispute) [2020] ACAT 6

XD 453/2019

Catchwords:               CIVIL DISPUTE – contract for the purchase of building materials and services not paid for – whether the builder or the foreman liable – application of the doctrine of the ‘undisclosed principal’ applied

Legislation cited:        Building Act 2004 ss 37, 89, 90, 91, 92, 93, 94, 95

Cases cited:Hyundai Merchant Marine Co Ltd v Dartbrook Coal (Sales) Pty Ltd (2006) 236 ALR 115

Lewis v Nicholson (1852) 18 QB 503
Mooney v Williams (1905) 3 CLR 1
Stanley Yeung Kai Yung & Anor v The Hong Kong and Shanghai Banking Corporation [1981] AC 787

List of

Texts/Papers cited:     Carter, Peden and Tolhurst, Contract Law in Australia (LexisNexis Butterworths, 5^th ed, 2007)

Tribunal:  Senior Member A Anforth

Date of Orders:  22 January 2020

Date of Reasons for Decision:      22 January 2020

AUSTRALIAN CAPITAL TERRITORY          )

CIVIL & ADMINISTRATIVE TRIBUNAL     )          XD 453/2019

BETWEEN:

ACTION FABRICATION AND WELDING PTY LTD ACN 163 735 546

Applicant

AND:

PETER LISO

Respondent

TRIBUNAL:Senior Member A Anforth

DATE:22 January 2020

ORDER

The Tribunal orders that:

1.The respondent is to pay the applicant the sum of $10,922.49 on or before 30 April 2020.

………………………………..

Senior Member A Anforth

REASONS FOR DECISION

Introduction

1.The applicant operates a business in the ACT supplying and fitting metal framework. The respondent is a licensed builder in the ACT who was undertaking work on the construction of a new house in Lawson in the ACT. The house was owned by his ex-wife. The work was undertaken as part of a separation agreement between the respondent and his ex-wife.

2.On 24 August 2016 the applicant provided the respondent with a quote for the supply and erection of framework the new house in the sum of $9,559.00; and on 26 August 2016 the respondent placed the order by phone with the applicant for the materials and erection work. All the dealings were between Mr Sun for the applicant (director) and Mr Liso, personally.

3.The history of the dealings between the parties is set out in a statement by Mr Sun dated 19 April 2019 annexed to the application filed in the Tribunal. In the course of these dealings, the respondent did not represent to the applicant that he was contracting on behalf of any third party. The applicant had no knowledge of any third party involvement and understood that he was dealing directly with respondent as the contractual party. The respondent denies this and alleges that he informed the applicant that he was speaking in the capacity of an employee of It’s a Bargain Building Services Pty Ltd (Bargain Building) who was the licensed builder of the house.

4.The order was placed verbally and all dealings between the applicant and the respondent were by phone or by sms. There was no written order placed with the applicant and hence no letterhead of any kind that would alert Mr Sun to the involvement of Bargain Building.

5.The applicant delivered and erected the framework and the house proceeded to completion. On the 12 March 2017 the applicant sent an invoice to the respondent in the agreed sum of $9,559.00. The respondent ignored the invoice and the follow up communications from the applicant on 1 September 2017 and 12 October 2017. The applicant commenced debt recovery action in the Tribunal on 15 April 2019 in the sum of $10,922.49 inclusive of interest and filing fee.

6.Copies of the quote, invoice and follow up communications were provided to the Tribunal and there is no dispute concerning their authenticity. All the communications were with Mr Liso personally and none made any reference to the involvement of any third party, including Bargain Building.

7.Before the Tribunal the respondent asserted that he was only the employee of a building company called It’s a Bargain Building Services Pty Ltd which has been in liquidation from 23 November 2018.

8.On 23 November 2016 the respondent left the employ of Bargain Building and commenced employment with Geocon Contractors (ACT) Pty Ltd. Mr Liso said that he did not work on the house after this time.

9.In the course of the proceedings the applicant filed:

(a)A statement dated 11 April 2019 by Mitchell Leonard, director of Leonard Constructions Pty Ltd. Mr Leonard said that his company was contracted by Mr Liso to do work on the same house. He said:

… I was engaged by Peter Liso who I understood to be an owner builder. He told me he was the owner of the House and that he wanted me to carry out some carpentry work for him.

…

I sent invoices to Peter Liso for my work and have been paid in full by him and no one else.

I am not aware of any other licensed builder being engaged on that project.

(b)A sequence of sms messages between Mr Sun and Mr Liso about the work and payment. At no point does Mr Liso refer to the involvement of any third party.

(c)An ASIC report on Bargain Building Services Pty Ltd showing a liquidator was appointed on 23 November 2018.

10.Mr Liso filed a response on 20 May 2019 in which he denied personal liability for the debt on the basis he was only an employee of Bargain Building. He further said:

I was working and corresponding under the building company of ‘It’s a Bargain Building Services’…The Lawson project is one of many I worked on and liaised directly with the tradespeople on behalf of It’s a Bargain Building Services’.

The company had a builder’s contract with the client of Lawson and it is with my understanding that progress claims/payments were in place for the entirely of the build…

11.Mr Liso filed a copy of an undated building contract between Tresna M Liso and Bargain Building. The undated contract referred to a quote of 24 August 2016 and contained a signed guarantee by Ms Liso dated 12 October 2016. It is not apparent what purpose the guarantee served. Ms Liso was already personally liable on the contract itself without any guarantee.

12.The matter first came on for hearing on 14 August 2019. Mr Ahern appeared with Mr Sun for the applicant and Mr Liso appeared in person.

13.The Tribunal confirmed that the sole issue for resolution was the identity of the proper respondent to the applicant’s claim for the unpaid invoice. Mr Sun gave evidence that he had only dealt with Mr Liso and had no knowledge of any third party or employer of Mr Liso. Mr Liso said he was “strictly only an employee of the company” and that he had “no financial interest in the business or the house”.

14.The effects of the corporate veil were discussed, and Mr Ahern raised the applicability of the contractual doctrine of the ‘undisclosed principal’. The Tribunal explained both concepts to the respondent.

15.The statement by Mr Liso that he had “no financial interest in the business or the house” appears to be at odds with his previous statement that he was doing the construction work for his ex-wife, Ms Liso, as part of a separation agreement. No copy of the separation agreement was produced to the Tribunal and its other contents were not explored in evidence. If that were the case, then the cost of any work not paid by Ms Liso was part of the consideration or value given by Mr Liso. It is also difficult to reconcile Mr Liso’s assertion that he was employed and paid by the Bargain Building for his work on the house. If this were the case then either the company did not bill Ms Liso for the work undertaken by Mr Liso; or if it did, then Ms Liso obtained no value from Mr Liso’s work that could form consideration in the separation agreement. The point was not pressed with Mr Liso.

16.Mr Liso asserted that Ms Liso paid Bargain Building for the applicant’s invoice. Mr Ahern challenged this assertion and noted that there was no evidence of what Ms Liso paid, or did not pay.

17.The issue of home warranty insurance was discussed. Given that the contract price was in excess of $400,000, the Building Act 2004 mandates that they have home warranty insurance (sections 90-104). That insurance, if it exists, survives the liquidation of the insured company. Mr Ahern said he did not know whether there was home warranty insurance or not. The Tribunal raised with Mr Ahern the prospect of issuing a subpoena to the ACT Planning and Land Authority to obtain the building record which would show the licensed builder and insurance details.

18.The matter was adjourned for the applicant to issue a subpoena to Ms Tresna Liso, and Mr Clinton Dotta, the sole director of Bargain Building and the liquidator of Bargain Building. The subpoena to Ms Liso was aimed at determining whether she in fact paid the applicant’s invoice to Bargain Building. The subpoena to Mr Dotta (director of Bargain Building) was aimed at the same issue and to determine whether the building was in fact carried out in an arm’s length commercial manner with Ms Liso paying for the work undertaken by Mr Liso for the company. The subpoena to the liquidator sought the accounting records of Bargain Building to cross check these matters. The subpoenas were duly issued.

19.The Tribunal raised with Mr Ahern the benefit of joining Ms Liso and the company in liquidation as parties. Joining Ms Liso would also facilitate obtaining relevant evidence from her.

20.The Tribunal noted to Mr Ahern that if Ms Liso had in fact paid the applicant’s invoice to Bargain Building which was now in liquidation, and if Mr Liso were found to have been acting solely in an employee capacity, then the applicant’s remedy may be with the liquidator as a creditor and/or the home warranty insurer. The need to press the case against Mr Liso would depend on the outcome of these matters. Mr Ahern undertook to keep Mr Liso informed of the outcome of these further investigations and whether Mr Liso was needed at the next hearing. The Tribunal told Mr Liso that at this point in time he stood in ‘no man’s land’ in terms of his further participation in the case.

21.The matter was relisted for hearing on 5 November 2019. Mr Ahern and Mr Sun appeared but there was initially no appearance by the respondent. The respondent was contacted by phone and participated throughout the hearing in this manner. There was no return of the subpoena to Ms Liso or the liquidator. Mr Ahern had decided not to join Ms Liso or the liquidator. There was no return of the subpoena to Mr Dotta and the applicant was informed by the liquidator that Mr Dotta personally entered bankruptcy on 24 November 2017.

22.Mr Ahern tendered a written submission which repeated the matters raised above on behalf of the applicant. The submission specifically alleged that Mr Liso was part owner of the house upon which the work was done, but no certificate of title was produced to evidence this. Mr Liso denied that he was ever a part owner or that he had ever lived in the house. The work was a ‘new build’ and so there was no house to live in until it was finished in mid-2017. Mr Liso’s work on the house finished when he left Bargain Building in late November 2016.

23.Mr Ahern pressed his claim on the undisclosed principal argument. He went so far as to allege that the building contract between the Ms Liso and Bargain Building was a recent fabrication. He pointed to the fact that it was unsigned and that it referred to the quote of 24 August 2016. From this he inferred that it unlikely that the contract was signed by 26 August being the date when the order with the applicant was placed. He argued that it was unusual for a builder operating in a commercial manner to obtain quotes and order material before a building contract was in place.

24.Mr Liso became aggressive and attacked the capacity of Mr Sun to speak and read English. He argued that the Tribunal should infer that Mr Sun’s lack of capacity with English is the reason why Mr Sun did not know who he was dealing with. The Tribunal informed the parties that it found no merit in this submission.

25.Both parties were asked whether there was any further evidence they wish to put before the Tribunal or submissions they wished to make. Both said no.

26.The Tribunal reserved its decision and made an order giving the respondent until 5 December 2019 to file any submission in reply. The Tribunal urged Mr Liso to consider consulting a solicitor to assist him with his submissions. No submission was received from the respondent notwithstanding a reminder from the registry.

The issues

27.The issue is a narrow one of fact and law, namely whether the respondent is personally liable on the contract with the applicant, or whether the applicant’s remedy only lies against Bargain Building (in liquidation).

Consideration of the issues

28.The Tribunal does not find that Mr Liso was a part owner or that he lived at the house. Neither party produced a certificate of title which would have resolved the issue of joint ownership. In the absence of this evidence, and evidence from Ms Liso, the Tribunal accepts Mr Liso’s assertion that he had no financial interest in the house, at least to the extent that he was not a co-owner. The Tribunal does not accept that he had no financial interest in that he was undertaking work on the house as part of a separation agreement on a quid pro quo basis. This suggests that Ms Liso was not being billed by Bargain Building for his work, but it does not necessarily mean that she did not pay for the company’s out of pocket costs, including those of the applicant. The absence of the company records and the absence of evidence of its director, precludes the Tribunal coming to any finding that the sum for the applicant’s invoice was not paid to the company by Ms Liso.

29.Mr Liso’s evidence that he was doing the work for his ex-wife as part of the separation agreement is inconsistent with the timeline of events. The framework was ordered on 26 August 2016 prior to the signing of the contract between Ms Liso and Bargain Building no earlier than 12 October 2016. It is not usual for a builder to start work and spend money on materials prior to the building contract being executed and deposits paid. Mr Liso said that he left Bargain Building on or before 23 November 2016 and moved to Geocon. He said he left on bad terms, although the nature of those bad terms was not explored. Mr Liso said that he did no further work on the house after he moved to Geocon. The framework for the house was not completed until early March 2017 and most of the other construction work could not have been undertaken until the framework was done. This means that Mr Liso could only have done a small percentage of the construction work on the new house. The suggests that Bargain Building completed the majority of the work itself without Mr Liso’s involvement. This finding then raises the inconsistency referred to at paragraph [15] above. Access to the records of Bargain Building may have resolved this issue.

30.Section 37(4) of the Building Act2004 provides that a building commencement notice cannot be issued in respect of residential building unless the identity of the licensed builder is disclosed and a home warranty insurance policy is provided:

37(4) If the application is for insurable residential building work, the application must be accompanied by—

(a)a residential building insurance policy for the work; or

(b)a certificate issued by an approved insurer stating that the insurer has insured the work under a residential building insurance policy; or

(c)a fidelity certificate for the work issued by the trustees of a scheme approved under division 6.4 (Approved fidelity fund schemes).

31.The details of the home warranty insurance are addressed at sections 89 to 95 of the Building Act 2004.

32.It is not possible for building approval, building commencement, or a certificate of occupancy at completion to be issued without the presence of a licensed builder and home warranty insurance disclosure. A search of the building file or a subpoena for the file, would have revealed this information. This would have revealed whether Bargain Building was in fact the builder, who the certifier was and who the insurer was.

33.The Tribunal is troubled by the inconsistencies in Mr Liso’s evidence including:

(a)that at paragraph [15] above the work being part of the separation agreement with his ex-wife;

(b)the failure of Mr Liso to place any written order on letterhead;

(c)the undated contract that on any view post-dates the supply and erection of the framework by the applicant, that is, the commitment undertaken by the builder before any contract was entered;

(d)the undated contract is largely empty. It is in standard form, but the various schedules are not completed. This would it make it difficult to determine the details of the house and its inclusions. There were no approval plans, no progress payments and other things that would normally be expected to be included in the contract; and

(e)the evidence of Mr Leonard at paragraph [9] above which again contains no reference to the company as the builder.

34.The Tribunal understands and shares the suspicions harboured by Mr Ahern concerning the truth of the arrangements between Mr Liso, Ms Liso and Bargain Building. But suspicions are not evidence. Mr Ahern could have addressed these issues by joining Ms Liso and the liquidator, and the matter was adjourned for this purpose. This is a choice made and may have been made for good reason, but the net result is that the Tribunal is left with the evidence in the above state.

The principle of the undisclosed principal

35.Where an agent discloses both the existence and the name of the principal they are acting on behalf of when making the contract, the agent is generally not liable on the contract to the other contracting party.[1]

[1] Lewis v Nicholson (1852) 18 QB 503

36.Where an agent enters into a contract on behalf of an undisclosed principal, either the agent or the principal can be sued on the contract.[2] An undisclosed principal can also be sued on a contract made by an agent who has authority to enter into the contract on the principal’s behalf.[3]

[2] Hyundai Merchant Marine Co Ltd v Dartbrook Coal (Sales) Pty Ltd (2006) 236 ALR 115; Stanley Yeung Kai Yung & Anor v The Hong Kong and Shanghai Banking Corporation [1981] AC 787

[3] Mooney v Williams (1905) 3 CLR 1

37.Carter, Peden and Tolhurst in Contract Law in Australia at [16-06] set out the relevant law as follows:

When an agent enters into a contact for a principal the principal will be benefited by that contract. But this is not a qualification of the general privity rule since the agent contracts ‘on behalf of ‘the principal. What is clearly exceptional, however, is the agency doctrine of ‘the undisclosed principal’. An undisclosed principal is a person for whom another acts as agent, where that person’s existence and identity is not disclosed to the other contracting party. In Teheran-Europe Co Ltd v ST Belton (Tractors) Ltd Lord Denning MR described the doctrine of the undisclosed principal as an anomaly which was justified by business convenience and said;

It is well established rule of English law that an undisclosed principal can sue and be sued upon a contract, even though his name and even his existence is undisclosed…

38.The Tribunal is satisfied that Mr Liso did not disclose his role as an employee of Bargain Building to Mr Sun who thought he was dealing with Mr Liso personally. The Tribunal is satisfied that Mr Sun had no reason to know of Mr Liso’s role as an employee of Bargain Building. It is strange that the whole of the transaction was done orally or by sms with no written order on the letterhead of Bargain Building.

39.It is true that Mr Sun’s actions in not making due inquiries on the point was careless, and the Tribunal made this point in the hearing. This of itself does not obviate the duty on Mr Liso to be transparent about his capacity when contracting for the supply and erection of the framework. Mr Liso could, and should, have placed or confirmed the order in writing on the letterhead of the company, and this would have removed any doubt.

40.Assuming that Mr Liso was in fact acting within the scope of duties as an employee of Bargain Building, then the applicant has the choice of suing either or both of Mr Liso and/or the company. The building contract between Ms Liso and Bargain Building (assuming it to be bona fide) supports the contention that the company was the ultimate principal. This appears to be consistent with the evidence that Mr Liso left the company’s employ on 23 November 2016 at which time the work at the house was only partly completed. Presumably Bargain Building finished the work without Mr Liso’s involvement. This would be consistent with (but not definitive of) the contention that Ms Liso paid the applicant’s invoice to Bargain Building.

41.The Tribunal considerations on these issues would have been considerably assisted if either party had joined Ms Liso or the liquidator or just obtained evidence from Mr Dotta and Ms Liso and the building file. It was open to either party to take this action but neither did.

42.On the basis of Mr Liso’s evidence and in the absence of potentially available evidence to the contrary, the Tribunal finds that the company, Bargain Building, is ultimately liable on the debt save for the fact that it is in liquidation.

43.The company is not a party to these proceedings and so no order to the above effect is formally made. This finding is a finding of fact necessary for the purpose of resolving the claim against Mr Liso.

44.This finding does not mean that Mr Liso is not also jointly liable on the undisclosed principal basis.

45.On the principle set out at paragraphs [35] to [37] above, when the transaction is viewed objectively, Mr Liso was contracting personally with the applicant. The facts of this case fall within the doctrine of the ‘undisclosed principal’. He is liable for the applicant’s materials and work in the sum of $10,922.49.

………………………………..

Senior Member A Anforth

HEARING DETAILS

FILE NUMBER:	XD 453/2019
PARTIES, APPLICANT:	Action Fabrication and Welding Pty Ltd
PARTIES, RESPONDENT:	Peter Liso
COUNSEL APPEARING, APPLICANT	N/A
COUNSEL APPEARING, RESPONDENT	N/A
SOLICITORS FOR APPLICANT	N/A
SOLICITORS FOR RESPONDENT	N/A
TRIBUNAL MEMBERS:	Senior Member A Anforth
DATES OF HEARING:	5 November 2019