Gambetta Holdings Pty Ltd v City & Suburban Group Pty Ltd
[2010] WADC 124
•26 AUGUST 2010
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL
LOCATION: PERTH
CITATION: GAMBETTA HOLDINGS PTY LTD -v- CITY & SUBURBAN GROUP PTY LTD [2010] WADC 124
CORAM: EATON DCJ
HEARD: 12-13 AUGUST 2010
DELIVERED : 26 AUGUST 2010
FILE NO/S: CIV 648 of 2009
BETWEEN: GAMBETTA HOLDINGS PTY LTD (ACN 932 149 986)
Plaintiff
AND
CITY & SUBURBAN GROUP PTY LTD (ACN 054 920 795)
Defendant
Catchwords:
Contracts - General contractual principles - Identification of parties - Construction of contract - Application of the parol evidence rule?
Legislation:
Nil
Result:
Judgment for the plaintiff in the sum of $51,649.95 with interest pursuant to s 32 of the Supreme Court Act 1935
Representation:
Counsel:
Plaintiff: Mr J N D'Angelo
Defendant: Mr H R Robinson
Solicitors:
Plaintiff: PSB Legal
Defendant: Haydn Robinson
Case(s) referred to in judgment(s):
Air Tahiti Nui Pty Ltd v McKenzie [2009] NSWCA 429
Dennis Pethybridge v Stedikas Holdings Pty Ltd [2007] NSWCA 154
El‑Kazzi v Kassoum [2009] NSWSC 99
JS Robertson (Aust) Pty Ltd v Martin (1956) 94 CLR 30
Kriketos v Livschitz [2009] NSWCA 96
EATON DCJ: By writ of summons filed on 6 March 2009 the plaintiff began an action against the defendant. On 24 March 2009 the defendant entered an appearance.
The amended papers for the judge comprise a re‑amended statement of claim dated 29 April 2010, a defence and counterclaim dated 25 August 2009, a reply to defence and answers to a request for further and better particulars of the statement of claim dated 14 January 2010.
There is no issue that the plaintiff was a company carrying on business in Wangara in the State of Western Australia and was at all material times a company engaged in the manufacture, supply and installation of chafers and piles for marine installations. There is no issue that the defendant is a company with a registered office in Ascot, Western Australia.
The plaintiff claims that by a contract, partly oral and partly in writing, made between it and the defendant in or about October 2006 the plaintiff agreed to manufacture and supply chafers and piles for use in the construction of a marina at Exmouth and that, in consideration, the defendant would pay to the plaintiff the sum of $1,040,693.51 plus GST. The plaintiff pleads further that it was an express term of that contract that the plaintiff would deduct 5 per cent from the contract price in consideration for which the defendant would pay invoices within seven days of the date of invoice so as to enable the plaintiff to secure equivalent discounts from its suppliers. The plaintiff says that it manufactured, and supplied chafers and piles for the project and invoiced the defendant for the sum of $988,658.83 plus GST being the contract price less 5 per cent. The plaintiff says that the defendant, in breach of the contract, paid a lesser amount leaving a shortfall of $56,814.94 and further, that it failed and/or refused to pay within five days of the respective invoices rendered but sought, notwithstanding that failure, to take advantage of the discounted amount. In total the plaintiff claims from the defendant the sum of $96,442.19.
By its defence the defendant broadly denies the bulk of the plaintiff's statement of claim and says that on or about 17 November 2006 the plaintiff agreed to supply to Exmouth Marina Holdings Pty Ltd assembled chafers and piling for the Exmouth marina project plus extra unassembled chafers as spares and Exmouth Marina Holdings Pty Ltd agreed to pay $986,644.06 plus GST. The defendant denies that the plaintiff is entitled to the relief claimed or any relief.
In its reply to defence the plaintiff pleads that, to the extent that the defendant purports to allege a novation of the contract from the defendant to Exmouth Marina Holdings Pty Ltd, the plaintiff denies such novation. The plaintiff re‑asserts that the contract was as between the plaintiff and the defendant.
In its written submissions the defendant contends that it is not a party to the contract, the contract being between the plaintiff and Exmouth Marina Holdings Pty Ltd.
At trial, the plaintiff relied on the evidence of Leno John Cilia and Mary Rose Styles. The defendant relied on the evidence of Jonathon Ross Warren and Stephen Eric Lubich.
Jonathon Ross Warren was the first witness called by the defendant. He gave evidence that he was a director of both Exmouth Marina Holdings Pty Ltd and City & Suburban Group Pty Ltd. He said that he was the sole director of the former and a co-director of the latter, along with one Rachel Kadir. Mr Warren said that he was the sole shareholder in Exmouth Marina Holdings Pty Ltd and a shareholder of the defendant.
Exmouth Marina Holdings Pty Ltd, he said, is a trustee company with only one undertaking, that being the development of a 170 lot canal sub‑division at Exmouth in the Gascoyne region of Western Australia.
Mr Warren said that the defendant is a project management company, engaged by Exmouth Marina Holdings Pty Ltd to manage the canal development at Exmouth. He explained that Exmouth Marina Holdings Pty Ltd, being the developer of the project, had loan facilities with a bank from which funds for the project could be drawn down.
Mr Cilia described himself in evidence as a sole director of the plaintiff which, he said, was a company which builds and installs marinas and makes equipment for marina projects. He said that the plaintiff came into contact with the defendant in 2006. In particular, he met with Mr Warren and Mr Lubich, described by him as a director of the defendant and its project manager or engineer, respectively.
Kevin Smith is an employee of the plaintiff. On 4 April 2006, Mr Warren contacted Mr Smith by email in the following terms:
"We would be pleased to meet with you to discuss you're (sic) products and ideas in due course. Please call myself or Stephen Lubich on 0418889486 to arrange a time."
The email came from [email protected].
Mr Lubich, by facsimile message of 19 April 2006, forwarded to Mr Smith what he described as "tables and calculations as discussed". That material was sent on the letterhead of City & Suburban Group Pty Ltd described therein as "project managers and developers". The technical material which accompanied the facsimile came with the heading "Exmouth Marina Village Super Lot B Vessel excursions and chafer clearances".
It is clear that in 2006, there was a meeting at the Dome Café at Hillarys Marina attended by Mr Cilia, Mr Warren and Mr Lubich. That may not have been the first meeting between the plaintiff and the defendant. Mr Cilia recalled an initial meeting in a café at Cloisters Square in Perth city and thereafter "a couple of meetings at Hillarys Marina at the Dome Café". In cross‑examination Mr Cilia said that his first meeting with Mr Warren and Mr Lubich was in a café at Cloisters Square.
It is clear that the plaintiff had carried out some work at the Hillarys Marina and that at least one of the meetings there was for the purpose, in part, of inspecting that work.
Mr Lubich gave evidence that he was, by profession, an architect in the employ of the defendant and that he had been involved in the Exmouth project for about four years. He thought that his first meeting with Mr Cilia was in about May 2006. The defendant, he said, was exploring the use of a particular mooring system. That interest led to contact with the plaintiff which developed, he said, into a relationship and, in due course, the plaintiff providing pricing for work to be done at Exmouth. Specifically, the pricing was for the production of chafers and piling required for the first stage of that project. His initial contact was with Mr Smith. He had been at a meeting at the Dome Café at the Hillarys Marina with Mr Warren and Mr Cilia. The primary purpose of meeting there was to inspect parallel mooring systems recently installed by the plaintiff at that marina. There was discussion about the Exmouth project.
The plaintiff carried on business as "Engineered Water Systems", abbreviated to "EWS". On 3 July 2006, Mr Cilia sent an email to Mr Lubich at [email protected]. The body of the email advised:
"We will be doing a job in Exmouth at some stage. We discussed that we may have our barges up there at some stage and we could off set some barge cost between both projects if we were to win your work. I think our last discussion was that you were going to send a scope of works with amounts of fabricated items required to give you a sharper cost."
On the same day, Mr Lubich from the email address [email protected] replied as follows:
"You are correct. We are currently putting together the information we discussed and will have something for you early next week, including probable start dates."
On 27 September 2006, Mr Cilia wrote to Mr Lubich, again by email as follows:
"Please find breakdown of cost relating to chafers on canals. We can trim 5% off materials if we were paid with in 7 days of invoice when materials were delivered to our workshop. We can also get extra discount from our suppliers if we paid them earlier. So we can pass this on to you. … If you are happy with our quote we will then be happy to continue on quoting to install chafers at exmouth. Please advise to were (sic) we stand with the quote so we know."
On 5 October 2006, Mr Cilia, by email, provided Mr Lubich with an updated quote. He said:
"How are we looking? Am I wasting my time to quote for the installation as well? Sorry about being blunt but you can appreciate the time it takes to do the castings and I have many other quotes to do."
During the remainder of October 2006 there were a series of emails between [email protected] and [email protected], the latter being Mr Cilia's email address. On 27 October 2006, Mr Lubich ([email protected]) forwarded an email to [email protected] as follows:
"Leno.
Further to our conversation this morning, I can confirm that based on your e-mailed price of 24th October you are our preferred contractor for the supply and install of chafers/piles. The most likely scenario is that you would act as a nominated subcontractor to the main contractor Barry Hughes. The details of this will be discussed next week at the fortnightly site meeting. We will keep you informed. We have looked at the programme and would think late January would be a likely start date for installation."
In evidence, Mr Lubich explained that the term "preferred contractor" meant that it was, at that stage, the defendant's intention to continue to negotiating with the plaintiff only. He explained further:
"Well, we, at that time, had a – a contract with Barry Hughes to construct part of the canal system in Exmouth and originally within his contract was an amount for the supply and installation of chafers and piles so at that time there was a possibility that we would be forwarding a contractor to Barry as a nominated sub-contractor and that was what I referred to in there, that was a possible scenario."
On 17 November 2006, Mr Lubich from [email protected] forwarded an email to Mr Cilia advising:
"In spite of our conversation yesterday, Exmouth Marina Holdings will order the materials as quoted in your new spreadsheet directly. Based on your spreadsheet contained in the e-mail below, please proceed with the order with the following conditions:
1)We are ordering the following extra chafers as spares, to be kept down here, unassembled, for use as spare parts if required. 150 x 9 SHS x 1/200 x 9 x SHS x 1/250 x 9 (‑ 3.70 canals) x 1
2)Total cost excluding exclusions detailed below, and additional chafers described above is $957,962.43 ex GST.
3)Liabilities for errors, if any, within the spreadsheet will be EWS's.
A separate price for installation will be forwarded as soon as possible. If you have any questions, give me a call."
It does appear to be clear that the negotiations which had been on foot for several months were between the plaintiff and the defendant with no mention of Exmouth Marina Holdings Pty Ltd at all. An exchange of emails between [email protected] and [email protected] in mid-November 2006 suggests that negotiations between the parties continued as to the detail. On 18 November 2006, Mr Cilia sent an email to Mr Lubich as follows:
"Thanks for the order. Apologies for the amount of changes that we have done in the spread sheets over the course of time. This is because we have gone in at a low margin. Costs of accuracy is more important we do get it right (sic). Plus other changes that have been done on the way through. The second spread sheet I sent yesterday is correct cost. This is $973,464.43 plus GST. Plus extra chafers. One of each length of chafers. Total including these four chafers will be $998,061.35. We except (sic) the terms. I will send you terms of payment for the project now price has been finalised …"
It seems there was no reply because the email was re-sent on 25 November 2006.
It is apparent from the forgoing that the negotiations involved an ongoing conversation, at least via email and telephone, if not face to face, between Mr Cilia for the plaintiff and Mr Lubich for the defendant. The exchange of emails between them on 17 and 18 November 2006 would suggest that an agreement had been reached in that Mr Lubich, on 17 November 2006, told Mr Cilia "please proceed with the order with the following conditions" and Mr Cilia replied on the following day "thanks for the order". Uncertainty appeared to remain as to costs with Mr Lubich, on 17 November 2006, stipulating "total cost excluding exclusions detailed below, and additional chafers described above is $957,962.43 ext GST" whereas, on the following day, Mr Cilia referred to the cost, exclusive of GST and the four extra chafers as $973,464.43.
The email of 17 November 2005 from Mr Lubich to Mr Cilia refers to "our conversation yesterday" which must refer to a conversation on Thursday, 16 November 2006. When asked as to that conversation, Mr Cilia said:
"There were still discussions on who the payments would come through, whether it was Barry Hughes or City Suburban. Up to that point I – I've never heard of Exmouth Marina Holdings, and my concerns were always – and I discussed this with Stephen Lubich is – is payment for our job. And he always assured me that City Suburban …"
At that point the witness was interrupted by an objection from counsel for the defendant. Mr Cilia continued:
"I did – I was concerned about who was – who would actually be paying us, because I always get concerned when we're dealing with a company and then all of a sudden someone else takes over the job. … The only recollection I have of that phone conversation before this email is who would be paying us for the job, because it was – the conversation included whether it was coming through City Suburban or Barry Hughes at that point."
Mr Cilia said that the email from Stephen Lubich of 17 November 2006 was the first time there had been any mention of "Exmouth Marina Holdings". He said that he was still dealing with City & Suburban Group Pty Ltd. In evidence-in-chief he was asked:
"In the conversation you had with Mr Lubich that's referred to in that email, did Mr Lubich make any mention that Exmouth Holdings was going to be the contractor with you?"
He replied "No. Not at all." He said that, in that conversation, his concern was as to who would be making payment and that Mr Lubich assured him that the defendant would pay the plaintiff for the materials and work.
In cross-examination, counsel for the defendant referred Mr Cilia to the email from Mr Lubich to him of 17 November 2006 and, in particular, to the passage:
"In spite of our conversation yesterday, Exmouth Marina Holdings will order the materials as quoted in your new spread sheet directly."
When asked as to his understanding of that passage, Mr Cilia said:
"Well, originally, all my dealings had been with City Suburban. So unless I got an official order to come through Exmouth Marina, then I would take that – I wouldn't even consider that."
When asked what he meant by the reference to an order he said:
"A formal order would be on Exmouth Marina Holdings order – official order."
He added:
"All – in my opinion, all this meant is that the payments would come through this entity … Exmouth Marina Holdings."
He explained that, at that stage of negotiations, as far as he was concerned, he wasn't contracting with Exmouth Marina Holdings adding that the reference in the email of 17 November 2006 to that entity was the first time he had ever heard of such an entity. He said:
"City Suburban was still my contractor – main contractor."
Further in cross-examination by counsel for the defendant, Mr Cilia agreed that the price negotiated was finalised as at 28 November 2006 in the sum of $998,061.35. That price included the extra chafers.
Once the work was underway, the plaintiff sent a series of invoices in accordance with the agreement reached. The first of those, according to Mr Cilia, was forwarded to the defendant. He said that, upon receipt of that invoice, Mr Lubich called him on the telephone, requesting that the invoice be reissued to Exmouth Marina Holdings. The original invoice was sent in hard copy form by post in late January 2007. Upon receipt of the request from Mr Lubich to change the invoice, Mr Cilia, in evidence-in-chief, said that he spoke to the plaintiff's accountant, Mary Styles, and asked her to telephone Mr Lubich to discuss the invoice with him. When asked, in evidence‑in‑chief, to elaborate on his telephone conversation with Mr Lubich in that regard he said:
"Yes. He – he – my concerns again was the – the identity of Exmouth Marina Holdings, because I didn't know much about it, and he assured me that City Suburban would pay the bills."
Mary Rose Styles, the plaintiff's second witness, said that, as an employee of the plaintiff, she was responsible for accounts payable, receivables and ensuring the completion of all account documentation up to income tax stage. She recalls that in the first week of February 2007 Mr Cilia came to her regarding an invoice rendered to City & Suburban Group, asking if the invoice could be altered and directed to Exmouth Marina Holdings. The original invoice had been forwarded to the defendant by post. Her evidence was that she queried the need for the change and expressed her concerns in that regard. Before making the change she telephoned Mr Lubich on the day the request was made to her. He wasn't available so she left a message. He returned her call. She asked why there was a need to change the invoice. Her recollection is that he explained that it was for internal reasons. He needed the invoice to be directed to Exmouth Marina Holdings rather than City & Suburban Group. She asked "What guarantee do we have if I do change the name that the invoice is – it was even going to be paid?". He assured her that if Exmouth Marina Holdings did not pay, City & Suburban Group would. She gathered, from her discussion with him, that Exmouth Marina Holdings was a part of the City & Suburban Group. She said: "And I was concerned about internal things as long as I had been guaranteed that either Exmouth Holdings, or whatever the name is, and City & Suburban Group would pay because the contract was with City & Suburban". She told Mr Lubich that she would make the change because the plaintiff's business activity statement had not, by then, been prepared. She asked for an address for the replacement invoice and was given a post office box number.
When asked in cross-examination about the change of that first invoice, she replied:
"No, because we – its not the first time we have a contract with a client and they say, 'for internal purposes could you have the invoice made out to this name'. As long as they reassure me that we're going to get paid by someone then if we go to that client in MYOB it will have Exmouth Marina Holdings. But all the details are Stephen Lubich. The phone number is for City & Suburban. Everything is for City & Suburban. Everything is City & Suburban. The only thing that is Exmouth Marina Holdings, so that it comes out in the invoice, is the name on the card."
When asked why she would make an invoice out to an entity other than the customer, she replied:
"It – it happens quite a bit, especially in a group of companies where they have got a particular job and they have it under this particular name, and for tax purposes or whatever or accounting purposes, they want the invoice in that name. Alright? So as long as they can reassure – and they can do that legally. So long as they reassure me that we're getting – going to be paid. Alright? What their internal accounting structure is isn't my concern. My concern is that we are – do get paid."
She said further:
"To me at the end – like I said, I – I don't – didn't really know much about Exmouth Marina Holdings except its the title on the invoice. All my dealings is City & Suburban. I had no contact with Exmouth Marina Holdings. I wasn't concerned because Stephen had assured me that we were going to get paid, that the invoice just happened to be in the name of Exmouth Marina Holdings."
Later in cross-examination Ms Styles said:
"No, sir. Because I did speak to Stephen. He was nice over the phone. He reassured me it was an internal thing and that – I didn't doubt him when he said, you know, either – he guaranteed me that if Exmouth didn't pay, City & Suburban would because its all just sort of in the same group. The only contact information I had was City & Suburban. So – and like I said, because its an internal thing, it had nothing to do with me. If I felt that it wasn't going to be paid, I – and I hadn't realised until I went back to get it because of this, that the original invoice hadn't even been kept."
Counsel for the defendant put to Ms Styles that Mr Lubich had never, at any stage, asked her to change an invoice. She replied that he had.
Stephen Lubich told counsel for the defendant, in evidence-in-chief, that he had no recollection of seeing an invoice from the plaintiff addressed to the defendant. When asked what involvement he had with payments made by Exmouth Marina Holdings to the plaintiff he replied that he approved them. He provided Rachel Kadir with documents and she processed the payments. In cross-examination he confirmed as much, saying:
"Look, invoices were provided to me from EWS made out to Exmouth Marina Holdings. Those invoices were approved and they were passed on to Rachel Kadir from our office."
Counsel for the plaintiff put to Mr Lubich in cross-examination that an original first invoice issued by the plaintiff to the defendant was changed so that it was rendered to Exmouth Marina Holdings as the result of a request by him to that effect in a telephone conversation with Mr Cilia. He denied that proposition. When asked whether he had at any time asked Mr Cilia to change any of the invoices from City & Suburban to Exmouth Marina Holdings he said that he had not. There was, he said, no such telephone conversation. Counsel for the plaintiff put to Mr Lubich that he had spoken with Mary Styles on the telephone about that very matter. He said that he could not recall such a conversation.
It is the case that, in evidence-in-chief, Mr Lubich was asked by counsel for the defendant whether, apart from Mr Cilia and Mr Smith, he could recall having discussions with any other representative of the plaintiff relating to the work. He replied:
"I had a couple of conversations with a lady. I think her name, and forgive me if I'm wrong, I think Nyree, I think, from – from the office."
Nyree Lally was an employee in the plaintiff's accounts department under the supervision of Mary Styles. She had prepared the original invoice to City & Suburban Group. Mary Styles changed it, she said, following discussions with Mr Cilia and Mr Lubich. In cross-examination Mr Lubich said he couldn't recall having a discussion with any other female employee of the plaintiff and denied, as mentioned, any recollection of a conversation with Rose Styles.
Having heard all the evidence, I have no reason to regard either Mr Cilia or Ms Styles as being other than truthful witnesses. To the extent that Ms Styles gave evidence of a conversation with Mr Lubich regarding the changing of the first invoice, a conversation of which Mr Lubich has no recollection, I conclude that there was such a conversation in the terms described by Ms Styles. It follows that I accept also that the matter was brought to her attention by Mr Cilia as a result of a conversation between he and Mr Lubich following receipt of the first invoice from the plaintiff addressed to the defendant. Notwithstanding that the original invoice is either no longer in existence or cannot be found in the plaintiff's records, I conclude that it was sent by post to the defendant, that it was seen by Mr Lubich and gave rise to his telephone call to Mr Cilia with the request that it be altered.
In evidence, there are 10 copy invoices, all issued by the plaintiff and all directed to Exmouth Marina Holdings Pty Ltd, Post Office Box 388, Belmont, WA, 6984. All relate to the Exmouth project. The first, being that said to have been redirected from the defendant to Exmouth Marina Holdings Pty Ltd, is dated 31 January 2007 and the last is dated 30 November 2007. The last four remain unpaid.
On 25 January 2008 Mr Lubich, in an email describing himself as "Project Director, City & Suburban Group Pty Ltd", wrote to Mr Cilia with copies to Nyree Lally, Mary Styles and another on the subject of "Exmouth Super Lot B outstanding invoices". He wrote as follows:
"Leno
We received a telephone call from your office yesterday chasing payment for outstanding invoices. I currently have 5 outstanding EWS invoices, those being 3138/3140/3141/3155 (dated 7/11/07) and 3155 (dated 30/11/07) totalling $57,474.94 including GST. Unfortunately, during the course of the contract, our contractor has accrued significant costs as a result of the following:
•Additional transport costs brought on by the inconsistent, unreliable availability of piles and chafers from Zinco, several months longer than the original timeframe agreed. (Variation No 72 - $17,671.50)
•Additional work required modifying the piles/chafers on site fabricated incorrectly, for example, piles delivered to site with the lower brace fixed to the wrong side (Variation No 63 - $25,275.96)
•Additional work required for the assembly of the chafers. The agreement was to deliver chafers, not a number of items requiring assembling. (Variation No 64 - $64,280.62)
This resulted in additional costs totalling $107,229.08 including GST. I attach a copy of the abovementioned variations as evidence of these costs. The net result is that City & Suburban Group are out of pocket $49,754.14. In the interest of moving forward, and continuing to work with EWS on other projects, we are not going to pursue this amount. If you have any questions in respect of this issue please give me a call."
Apparently unable to obtain payment of its last four invoices, the plaintiff placed the debt in the hands of debt collection agents, "Upper Class Collections". That firm, by letter of 4 February 2008, wrote to Exmouth Marina Holdings Pty Ltd at Post Office Box 388, Belmont, WA, 6104 advising that the plaintiff had placed a debt of $56,468.44 including costs in its hands for recovery. It demanded payment.
By letter of 6 February 2008, Mr Lubich replied on the defendant's letterhead. It displayed the defendant's address as: "PO Box 388, Belmont WA 6984". He advised that the claimed amount was in dispute and that the basis of the dispute had been advised to the plaintiff by email of 25 January 2008, a copy of which was attached.
In the absence of payment the plaintiff or its recovery agents, placed the matter of the debt in the hands of solicitors, PSB Legal, of Wangara. On 2 June 2008, that firm, on behalf of the plaintiff, issued a written demand for payment.
The defendant's solicitors replied by 19 June 2008 in the following terms:
"RE: City and Suburban Group Pty Ltd
We act for the above company and are instructed about the demand issued by your firm on behalf of Engineered Water Systems dated 2/6/08.
There is a dispute. It focuses firstly on the right of City and Suburban to the discount and secondly on additional costs referred to by City and Suburban to assemble the chafer parts provided by EWS, the chafers being provided unassembled. Our client contends there is as distinction between 'installation' and 'assembly' costs. Third, delay in performance by EWS.
We need 28 days to obtain documents and take detailed instructions from our client, with the result we request EWS defer issuing a writ for that period, within which the writer will discuss the dispute with Mr Bates to attempt to settle without litigation. However, if EWS insists on issuing a writ in the interim, we will accept service for City and Suburban."
That letter was copied to the defendant.
On 31 July 2008, the defendant's solicitor wrote to the plaintiff's solicitor disputing the amount claimed and stating, inter alia, "our client has paid $988,530 plus GST, a total of $1,087,383". The letter details various complaints about the plaintiff's conduct of its contractual obligations and concludes "The delay in performance by EWS has put the project many months behind schedule, causing our client additional losses. It is not possible at this time to quantify the amount, but, if this dispute is not settled as referred to below, then in addition to the counterclaims evidence by Variation Orders Nos. 63, 64 and 72, our client will claim further compensation for delay."
The dispute remained unresolved and the debt remained unpaid. On 6 March 2009 the plaintiff filed its writ of summons. On 25 June 2009 the defendant, through its solicitors, advised the plaintiff's solicitors and contended, seemingly for the first time, that the contract was not made with the defendant but rather with Exmouth Marina Holdings Pty Ltd.
The principal issue between the parties as defined by the pleadings is not as to the existence of a contract pursuant to which the plaintiff agreed to supply assembled chafers and piling for a marina project at Exmouth plus unassembled chafers as spares for that project. The principal issue is as to the identity of the other contracting party. The plaintiff says that its contract was with the defendant. The defendant says that its contract was with Exmouth Marina Holdings Pty Ltd.
In Dennis Pethybridge v Stedikas Holdings Pty Ltd [2007] NSWCA 154 the Court of Appeal in New South Wales dealt with an appeal requiring judgment on the question of whether a building contract was made with a company, or with the man who stood behind the company. The trial judge in the District Court of New South Wales had held that the contract in question was made with the man who stood behind the company, the appellant to the Court of Appeal. Campbell JA, with whom Beazley JA and Basten JA agreed, said at [54]:
"Identification of the parties to the contract must be made in accordance with the objective theory of contract: Ryledar Pty Ltd & Anor v Euphoric Pty Ltd [2007] NSWCA 65 at [262] – [266] and cases there cited."
The court accepted that it was permissible, in order to identify the parties to the contract, to have regard to the antecedent conduct and associated correspondence passing between negotiating parties. As to subsequent conduct Campbell JA said (at [59]):
"There was some argument about whether it was permissible to have regard to subsequent communications for the purpose of deciding with whom the contract was entered. The present state of the law throughout Australia on whether and if so when it is possible to use post‑contractual conduct as an aid to construction of the contract is not yet settled: see the authorities cited in Cheshire v Fifoot's Law of Contract, 8th Australian Edition, p 392 – 393; Cross on Evidence, 7th Australian Edition, para [39290]; Royal Botanic Gardens & Domain Trust v South Sydney City Council [2002] HCA 5; (2002) 186 ALR 289 at 318 [109], per Kirby J. The more restrictive view, favoured in this court, is that subsequent communications cannot be looked to as an aid to construction of a contract, but can be looked to as an aid to deciding whether a contract has been entered into at all. … It was argued that, in the present case, even on that more restrictive view, it is permissible to look to the subsequent communications because the question of whether the contract was entered into with the appellant, or with Torpoint, is, in substance, no different to a question of whether there was a contract entered into with the appellant at all. It is not necessary to form a view about the correctness of the argument I have just mentioned. That is because, even if one did look to the subsequent communications, they would not lead to any different conclusion."
Campbell JA's words in that regard were considered in El‑Kazzi v Kassoum [2009] NSWSC 99 in a matter before Ward J in the equity division of the Supreme Court of New South Wales. His Honour referred to the passage quoted above and (at [25]) said:
"In my view it would be permissible here to take into account the subsequent communications between the Moujallis and Mr Estephan in relation to the 'Charbel' loan, for the reason that the communications in late 2005 appear to amount to an acknowledgement not just of the debt but also the entity or person to whom it was owed (Film Bars Pty Ltd v Pacific Film Laboratories Pty Ltd (1979) 1 BPR 9251; Barrier Wharfs Ltd v W Scott Fell & Co Ltd [1907] HCA 79; (1908) 5 CLR 647 at 668‑9, 672."
In Kriketos v Livschitz [2009] NSWCA 96 the New South Wales Court of Appeal dealt with an appeal from the District Court of New South Wales where the respondent to the appeal had brought proceedings against the appellant to enforce a contract he alleged had been concluded by an exchange of three letters between the parties legal representatives. He allege that pursuant to the contract the appellant was to pay him a sum of money in the event the appellant purchased shares held by another in a company called Rehab Associates Pty Ltd. The respondent contended that the three letters demonstrated a legally binding agreement to pay money, the agreement being made on or about the date of the last letter from his solicitor, 6 May 2002. He also sought to rely on the lack of a response from the appellant's solicitor to the last of the three letters and subsequent conduct of the appellant in filing an affidavit in certain proceedings as being conduct consistent with the proposition that the appellant had accepted the agreement in the terms set out in the correspondence. The primary judge found that the parties had made a legally binding agreement by the exchange of the three letters. His Honour concluded that the appellant's conduct after 6 May 2002 was consistent with the agreement the respondent propounded as having been made.
In upholding the appeal both Allsop P and McColl JA, with whom MacFarlan JA agreed, found that the primary judge had erred in finding that the subsequent conduct was evidence that a consensus had been reached on or about 6 May 2002. McColl JA at [151] said:
"Read as a whole, and taking the circumstances into account, the correspondence did not manifest the mutual assent necessary to establish the parties had reached a consensus."
Allsop P (at [15]) said:
"In my opinion, whether one assesses the three letters, or the three letters read in their context, or the three letters read in their context and with all later conduct considered, one is led to the conclusion that there was no contract formed between the parties."
As to the question of whether subsequent conduct can be examined to assist in the resolution of the question of whether a contract was made at an earlier date, both Allsop P and McColl JA were of the view that it could.
McColl JA observed that whether a contract has been formed and identification of the terms of any contractual arrangement, requires objective determination, obliging the court to consider the text of relevant documents, the surrounding circumstances known to the participants and the genesis, purpose and object of the transaction, but not the participants' subjective beliefs. The surrounding circumstances include the parties' relationship to one another [108]. Post‑contractual conduct is, she said, admissible on the question of whether a contract is formed. In doing so she referred to several authorities including Pethybridge v Stedikas Holdings Pty Ltd (op cit).
The question of whether a contract is formed must necessarily involve identification of the parties to the contract.
Finally, in Air Tahiti Nui Pty Ltd v McKenzie [2009] NSWCA 429 Allsop P and Handley AJA said (at [28]):
"The identity of the contracting party is to be determined looking at the matter objectively, examining and construing any relevant documents in the factual matrix in which they were created and ascertaining between whom the parties objectively intended to contract. This is, to a point, a process of construction similar to the task of identifying whether a clearly contractual document, such as a bill of lading is made with one party or another (such as a shipowner or time charterer): The Starsin at 770 and the cases considered in Wilford et al Time Charters (5th Ed, Informa Publishing, 2003) Ch 21. Where the documents are silent or ambiguous, but there is undoubtedly a contract, the identity of the parties must be determined objectively from the surrounding circumstances: see Barroora Pty Ltd v Provincial Insurance Ltd (1992) 26 NSWLR 170 at 174; Protean (Holdings) Ltd v American Home Assurance Co (1985) 4 ANZ INS Cas 60-683 at 74,055‑74,056; Coulls v Bagot's Executor & Trustee Co Ltd [1967] HCA 3; 119 CLR 460 at 477, at 478 – 479 and 486."
In the matter before me there is no one contractual document. In its pleadings the plaintiff asserts the existence of a contract, partly oral and partly in writing made between the plaintiff and the defendant in or about October 2006. The defendant meets that assertion with a bald denial. As already observed, there was a contract which appears to have been concluded in November 2006. The first invoice rendered by the plaintiff by way of progress claims for chafers and piles was rendered in January 2007 and paid on 8 March 2007. The second invoice relating to the work appears to have been rendered on 15 March 2007 and paid on 30 April 2007. Clearly, the contract was in execution.
Counsel for the defendant, in his closing address, invoked the parol evidence rule. Under that rule extrinsic evidence is generally inadmissible when it would, if accepted, have the effect of adding to, varying or contradicting the terms of a document constituting a valid and effective contract. (See "Cross on Evidence" JD Heydon, 8th Australian Edition at [39,145]). The author continues at [39,145 – 39,155]:
"Evidence of antecedent negotiations is relevant and admissible if they retain their contractual effect or legal significance after the writing has been brought into existence. The court may also receive extrinsic evidence of prior negotiations for the purpose of identifying the subject matter of the contract. Such evidence is always admissible if tendered to establish the existence of a contract collateral to the writing, or the conclusion of a contract which is partly oral and partly in writing."
The rationale for the rule is explained by the author at [39,160] in the following terms:
"The application of the parol evidence rule to written contracts pre‑supposes that the parties have agreed to reduce their bargain to writing. The effect of this in the eye of the law is to put an end to the uncertainties that often attend an agreement which is made up of conversations, exchanges of correspondence and inferences from these. Once a written document is brought into existence which on its face indicates that it is the record of the bargain it will be taken to be just that unless evidence is led to displace this presumption."
On the subject of post‑contract conduct the author said at [39,290]:
"The post‑contract conduct of the parties may, of course, be relevant to matters other than the construction of the document. It may show that the parties varied the terms of the contract, or that one of them waived a right under it; it may be relied on to raise an estoppel or to expose illegality; it may be relevant to show the true intention of the party insofar as that it is relevant to a claim for rectification. And where there is a dispute as to the existence of a contract or the contract is oral, or there is a question as to how the contract is to be characterised or there is a question of whether a term was incorporated into a contract, or where there is a question of an implied term, the parties subsequent conduct may be relied upon to establish the existence of that contract, and what the terms of the contract were, but these are not, properly speaking, cases concerning the interpretation of a document."
The principal issue between the parties is not one of the interpretation of a document but rather a determination as to the parties to a contract clearly in existence, albeit partly oral and partly in writing. In my view, I may have regard to the conduct of the parties, before, during and after November 2006 in order to determine who it was that the plaintiff contracted with. I should take an objective approach, the law being concerned with the interpretation which would be placed upon the words and actions of the parties by a reasonable person rather than upon their subjective intentions. ("Contract Law in Australia", 5th Edition by Carter, Peden and Tolhurst at [3-06]).
In his final speech, counsel for the defendant disputed the proposition that the contract was partly oral. Based on the proposition that the contract was wholly in writing, counsel for the defendant, as mentioned, invoked the parol evidence rule to exclude consideration of extrinsic material. I do not accept that the contract was wholly in writing. On the issue of determining who the parties to the contract were, I do not regard the parol evidence rule as applicable.
The defendant appears to rely upon the exchange of emails on 17 and 18 November 2006 and associated spreadsheets as expressly comprising the contract in written form in its totality. In Mr Lubich's email to Mr Cilia of 17 November 2006 there is the first written reference to Exmouth Marina Holdings in the passage:
"In spite of our conversation yesterday, Exmouth Marina Holdings will order the materials as quoted in your new spreadsheet directly. Based on your spreadsheet contained in the e‑mail below please proceed with the order with the following conditions; …"
That passage suggests that the conversation which took place between Mr Lubich and Mr Cilia on 16 November 2006 was to the effect that Exmouth Marina Holdings would not be involved. The suggestion is advanced that Exmouth Marina Holdings "will order the materials as quoted". In the following sentence Mr Lubich, on behalf the defendant, requested the plaintiff to "proceed with the order". On 18 November 2006, without any reference to Exmouth Marina Holdings, Mr Cilia thanked Mr Lubich for the order. As mentioned, that email was directed to Mr Lubich who had, throughout the negotiations over several months, been representing the defendant. In my view, having regard to all of the evidence, the objective intention of the plaintiff was to contract with the defendant and not with any other party. It was not open to the defendant, at the conclusion of the negotiations, to unilaterally nominate another entity as the contracting party. I do not accept that Mr Lubich, in the conversation of 16 November 2006, told Mr Cilia that the plaintiff's contract would be with Exmouth Marina Holdings Pty Ltd or that Mr Cilia, on behalf of the plaintiff, agreed then, or later, to such a proposition. Mr Lubich, in the execution of the contract and subsequently, it seems, continued to act on behalf of the defendant in circumstances where, objectively speaking, the parties which had negotiated the contract were engaged in its execution pursuant to the terms agreed and were later in dispute as to whether they were in compliance with those terms.
I do find, as a matter of fact, that, in accordance with the contract, the plaintiff rendered its first invoice to the defendant. I find that Mr Lubich, on the defendant's behalf, contacted Mr Cilia for the plaintiff requesting that the invoice be altered and forwarded to Exmouth Marina Holdings Pty Ltd. I accept the evidence of Ms Styles to the effect that, when she queried the matter with Mr Lubich in a telephone conversation, he re‑assured her that the request had been made for internal reasons relating to the defendant and that the defendant remained liable to the plaintiff in accordance with the contract. Ms Styles gave evidence to the effect that such requests were not uncommon. The plaintiff, to oblige the defendant, altered and reissued the first invoice. All subsequent invoices were directed to Exmouth Marina Holdings Pty Ltd. It is noteworthy in that context that, with respect to a later invoice, Mr Lubich contacted the plaintiff and again, apparently for internal reasons, requested that the particular invoice be withdrawn and replaced by two successive invoices in equal amounts, each being one half of the amount claimed in the replaced invoice.
Later, when the last four invoices remained unpaid and the plaintiff sought to recover the debt, it was the defendant and, subsequently, the defendant's solicitors which responded.
The evidence of Mr Warren suggested that the relationship between Exmouth Marina Holdings Pty Ltd and the defendant was that of developer and project manager, respectively, with the latter contracting with the former for the Exmouth marina project. It does appear that, in that capacity, the defendant negotiated with and contracted with the plaintiff.
To the extent that it might be said that the defendant acted as the agent of Exmouth Marina Holdings Pty Ltd and was, in consequence, not liable on the contract made with the plaintiff, the law of agency stipulates that whether an agent is liable where the agent contracts for a named or unnamed principal is a question of the intention of the parties to be deduced by construing the terms of the particular contract as a whole and in their context and with regard to the surrounding circumstances including any binding custom. (See "Law of Agency" by Dal Pont at [23.10]). In the absence of specific terms a court must infer the requisite intention. To that end a person or entity which enters into a contract without any qualification is prima facie a contracting party and thus liable upon it. That presumption can be rebutted by clear evidence, either from the body of the contract or from a qualification appended to an individual signature or common seal that the party contracts on behalf of some other person, in which case it will not be personally liable and could neither sue nor be sued on the contract.
In JS Robertson (Aust) Pty Ltd v Martin (1956) 94 CLR 30 at 56 Williams J said:
"The proper way for a person who signs the contract for a principal and who wishes to exclude any personal liability is to sign as agent: Universal Steam Navigation Co Ltd v James McKelvie & Co [1923] AC 492. But a person who is really an agent may still save his personal liability although he signs the contract without qualification if it is clear from the body of the contract that he contracted only as agent, per Archibald J in Gadd v Houghton (1876) LR 1 Ex D 537. 'Prima facie a party is personally liable on a contract if he puts his unqualified signature to it. In order, therefore, to exonerate the agent from liability the contract must show, when construed as a whole, that he contracted as agent only and did not undertake any personal liability': Halsbury's Laws of England (3rd Ed) Vol 1, p 228; Bowstead on Agency (11th Ed) (1951), p 246."
The contract in this matter does not show, when construed as a whole, that the defendant contracted as agent only and did not undertake any personal liability. To the contrary the defendant is liable to the plaintiff. In my view, the defendant's plea in that regard fails. In consequence, the second issue arising out of the precise terms of the contract, falls to be decided.
In par 6 of its re‑amended statement of claim the plaintiff asserts that it was an expressed term of the contract that the plaintiff would deduct 5 per cent from the contract price in consideration for which the defendant would pay invoices within seven days of the date of invoice so as to enable the plaintiff to secure equivalent discounts from its suppliers. The claim is particularised by referring to the total amount invoiced to the defendant being $988,658.83 (plus GST) as the contract price of $1,040,693.51 less 5 per cent, an amount of $52,034.68. The genesis of this claim is found in an email sent by Mr Cilia to Mr Lubich on 27 September 2006 which included the passage:
"We can trim 5 per cent off materials if we were paid with in 7 days of invoice when materials were delivered to our workshop. We can also get extra discount from our suppliers if we pay them earlier. So we can pass this on to you."
That email was accompanied by a spreadsheet. It is apparent that the various spreadsheets provided by the plaintiff to the defendant made no specific reference to the total amount or individual amounts being reduced by 5 per cent. It would not have been apparent to a reader of those documents that a 5 per cent discount had been applied. Certainly, the conversation of 16 November 2006, the email from Mr Lubich to Mr Cilia of 17 November 2006 and the reply from Mr Cilia to Mr Lubich of 18 November 2006 discloses no reference to a 5 per cent discount. In the latter Mr Cilia advised that he would send "terms of payment for the project". On the evidence the plaintiff never did forward any terms of payment to the defendant. None of the invoices rendered by the plaintiff to Exmouth Marina Holdings Pty Ltd makes mention of a 5 per cent discount being applied. To the contrary, each carries an endorsement in the following terms:
"If the above amount is not paid within our normal credit terms, interest will be charged."
Apart from the reference in the email referred to, Mr Cilia, in his evidence‑in‑chief, touched upon the matter of a 5 per cent discount. He referred to meetings at Hillarys Marina and a café at Cloister's Square early in negotiations and said, in that regard:
"Generally the discussions at the meetings were to discuss pricing and spreadsheets. All prices that I have given them regarding the project, and to discuss how we could reduce costs and – and – and basically do the job. … one of the discussions was regarding the discount of the – the – one of the spreadsheets that we initially gave them and one of the ways that we could reduce the costs, which we offer some of our customers where we can, is supply – give them a discount in their spreadsheet … so the discussion was how we could reduce the costs. And I offered to give them a 5 per cent discount on the materials if they would pay within the 7 days. And then that discount would be passed on to our suppliers to be able to give them that 5 per cent discount. And it was agreed on. That's what was agreed on."
In cross‑examination Mr Lubich was asked about that alleged agreement at a meeting in early September. He denied that there was such an agreement. He denied any mention of that proposal prior to reference being made to it in the email from Mr Cilia of 27 September 2006. There is no evidence before me of any acceptance of that proposal either orally or in writing, apart from the passage quoted above.
It might be expected that, if there was such a term of the contract, costings during the course of negotiations and invoices in the course of execution of the contract might reflect the gross amount being charged to the defendant with a stipulation or endorsement to the effect that, if the invoice were paid within seven days of issue, the plaintiff would accept 95 per cent of the invoiced amount so far as materials were concerned. That did not occur in this case. Given the nature of the contract in this case, it being partly oral and partly in writing, and the absence of any formal contractual document I am able to have regard to extrinsic material in order to determine the precise terms of the contract as best I can. I must do so objectively. In doing so, I conclude that there was no term of the contract as alleged by the plaintiff. It follows that the plaintiff can recover the amount of its unpaid invoices but not the additional claimed 5 per cent.
In its amended statement of claim the plaintiff alleges that in breach of the contract the defendant paid only $937,008.88 (exclusive of GST) leaving a shortfall in the invoiced amount of $51,649.95 (exclusive of GST). The amount claimed by the plaintiff in its prayer for relief is an amount exclusive of GST. Pursuant to par 9 the plaintiff seeks an amount of $52,034.68 (exclusive of GST) in breach of the alleged express term concerning the 5 per cent discount. Given my conclusion in the foregoing paragraph, I propose that there be judgment for the plaintiff in the sum of $51,649.95 and that there be interest at the rate of 6 per cent per annum pursuant to s 32 of the Supreme Court Act 1935 from 8 December 2007 until the day of judgment. I will hear the parties as to the precise amount of interest and the question of costs.
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