Isabella Shop Fitout and Design Pty Ltd v Tan Republic Pty Ltd

[2014] NSWCA 192

Court of Appeal

Supreme Court

New South Wales

Medium Neutral Citation:

Isabella Shop Fitout & Design Pty Ltd v Tan Republic Pty Ltd [2014] NSWCA 192

Hearing dates:

20 March 2014

Decision date:

16 June 2014

Before:

Beazley P; Emmett JA

Decision:

Summons seeking leave to appeal dismissed with costs.

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

Catchwords:

APPEAL - leave to appeal - applicable principles - whether applicant suffered injustice - where applicant's case on appeal inconsistent with applicant's evidence at trial

CONTRACTS - general contractual principles - parties - sham corporate entities

CORPORATIONS - identification of - Australian Business Numbers (ABNs) and Australian Company Numbers (ACNs)

Cases Cited:

Hudson v State of New South Wales [2012] NSWCA 319
Lee v New South Wales Crime Commission [2012] NSWCA 262

Category:

Principal judgment

Parties:

Isabella Shop Fitout & Design Pty Limited (First Applicant)
Bill Issa (Second Applicant)
Tan Republic Pty Limited (Respondent)

Representation:

Counsel:
J Johnson (Second Applicant)
R Freeman (Respondent)
Solicitors:
Kazi Potolesi Lawyers (Second Applicant)
Harbourside Legal Services (Respondent)

File Number(s):

2013/371203

Publication restriction:

No

 Decision under appeal 

Jurisdiction:

9101

Date of Decision:

2013-06-21 00:00:00

Before:

Gibson DCJ

File Number(s):

2011/351285

Judgment

1. THE COURT: The applicants sought leave to appeal from the judgment of Gibson DCJ in which her Honour awarded damages to the respondent against the second applicant (Mr Issa) in the sum of $69,694.82 together with interest and costs. The first applicant is now in liquidation and does not press its claim for leave to appeal.

1. The respondent's claim related to two contracts for the design and fit out of shop premises that the respondent had leased for the purposes of carrying on the business of a beauty and tanning salon. The claim was for damages for breach of contract, negligence in the provision of the design and fit out services, and contraventions of the Trade Practices Act 1974 (Cth), the Fair Trading Act 1987 (NSW) and the Australian Consumer Law (Schedule 2, Competition and Consumer Act2010 (Cth)). The trial judge held that Mr Issa was personally liable to the respondent for breach of the design contract, in negligence in respect of the design work and for misrepresentation.

1. The central question in issue is whether her Honour, at [139], erred in finding that the respondent had entered into a contract with Mr Issa for the design of the salon. The trial judge's error is said to derive from her finding, at [138], that the design contract was entered into with a non-existent entity, Bella Retail Design Pty Ltd, of which Mr Issa held himself out to be managing director. As the company was non-existent, her Honour reasoned that Mr Issa could not be its managing director and that the respondent was therefore dealing with Mr Issa personally. Mr Issa contended on appeal that this finding was in error, in that the contract had been entered into with a corporation and that he had only ever acted as director of that corporation. The generality of that last observation is due to a change in the case put by Mr Issa on appeal, which will be explained below at [13]-[19].

The corporate and business entities

1. It is convenient to begin by identifying the corporate and business entities that were relevant to this appeal, namely:

• Isabella Australasian Pty Ltd;
• Bella Retail Design Pty Ltd;
• Isabella Shop Fitout & Design Pty Ltd.

1. Isabella Australasian Pty Ltd was an incorporated entity with ACN 128 689 314 and ABN 78 128 689 314. It was placed into liquidation on 1 February 2011. Mr Issa was its sole director. There is no registered corporation with the name Bella Retail Design Pty Ltd. However, as at 19 November 2010, Isabella Australasian Pty Ltd was the holder of the registered business name Bella Retail Design.

1. Isabella Shop Fitout & Design Pty Ltd was an incorporated entity with ACN 147 193 815 and ABN 93 147 193 815. It was incorporated on 4 November 2010, however did not commence business until 5 February 2011. Mr Issa was never a director of Isabella Shop Fitout & Design Pty Ltd.

The letter of appointment

1. The trial judge held that one of the key contractual documents was a letter received by the principal of the respondent on 19 November 2010 (the letter of appointment). For ease of identification, the various entities referred to in the letter of appointment are in bold print.

1. The letter of appointment was sent following a meeting between the principal of the respondent and Mr Issa on 13 November 2010. It was addressed "Dear Valued Client" and signed by Mr Issa, thanking the client for appointing "Bella Retail Design to your new project". It stated that the "total amount of design fee less the GST will be credited to your build offer if Isabella Australasia is awarded the fit out".

1. The header of the document, which her Honour described at [142] of her judgment as "bogus", bore the following details of the sender:

"Bella RETAIL DESIGN PTY LTD

3/44 Smithfield Road, Smithfield NSW 2164

p. 9757 2221

f. 9757 1223

acn. 128 689 314

abn. 46 602 142 945"

1. The letter also gave directions how to pay, as follows:

"BY DIRECT DEBIT PAYMENT

NAB Business Cheque account

Account name: Isabella Shop Fitouts & Design

BSB No: 082-366 Account No: 183238679"

1. In fact, the ACN set out in the details on the front page of the letter of appointment below the name Bella RETAIL DESIGN PTY Ltd was the ACN of Isabella Australasia Pty Ltd. Isabella Shop Fitouts & Design, to whom payment was directed, was neither an incorporated company nor a registered business name. Isabella Shop Fitout & Design Pty Ltd (that is, without the pluralised version of "Fitout") was an incorporated entity, but at the date of the letter of appointment had not commenced business operations. Further, the holder of the account listed in the letter was, at that time, Isabella Australasian Pty Ltd. Attached to the letter was a document headed "Architectural & Design Offer", which bore the same details as were on the letterhead of the letter of appointment.

1. Her Honour found, at [139], that the company Bella Retail Pty Ltd, with which the plaintiff had purportedly entered into a design contract, was fictitious, and so in reality the contract was with Mr Issa. This finding was the basis for her Honour's subsequent findings that Mr Issa was liable in his personal capacity for the breach of contract, negligence and misrepresentations.

The proceedings before this Court

1. A preliminary observation needs to be made as to the manner in which the matter proceeded before the Court. On 20 March 2014, in oral argument on the hearing of the summons seeking leave to appeal, Mr Issa narrowed the basis upon which he challenged the trial judge's decision, by submitting that he would be content to conduct the appeal if leave was granted only on the question whether there was a contract with him or with Isabella Australasian Pty Ltd.

1. Mr Issa's oral submission was disarmingly simple. Under the corporations legislation, a company is relevantly identified by its ACN. He argued that her Honour failed to recognise that the sender of the letter of appointment was the entity with the ACN 128 689 314, namely, Isabella Australasian Pty Ltd, notwithstanding that a differently named company appeared in the header of the letter. It followed that the respondent entered into the contract with Isabella Australasian Pty Ltd.

1. It followed, on this submission, that if the contract was entered into between the respondent and Isabella Australasian Pty Ltd, any representations made by Mr Issa were made in his capacity as its sole director and therefore on behalf of the company. As no accessorial liability had been pleaded against him, there was no basis upon which he could be held to be personally liable.

1. The appellant's change in argument resulted in the Court directing Mr Issa to file an amended draft notice of appeal and an amended summary of argument, with the summons seeking leave to appeal to be heard on the papers. These documents were filed on 3 April 2014.

1. The draft amended notice of appeal contained the following proposed ground 1 of appeal:

"The learned it Trial Judge any circumstances [sic] of the pleaded case against the defendants in the Court below having identified the valid existence of Isabella Shop Fitout and Design Pty Ltd as:

(a) having been incorporated on 1 February 2010 with ACN 128 689 314 ...

(b) being the holder of the business name 'Bella Retail Design'...

(c) directions as to payment of all monies under the design contract were required to be paid to the account of Isabella Shop Fitout and Design ...

erred in determining as she did that the design contract was entered into with a fictitious company ... and ought to have determined that the design contract was in fact entered into between the respondents and Isabella Shop Fitout and Design Pty Ltd and, on the pleaded case ought to have dismissed the contractual claim maintained against the Appellant." (emphasis added)

1. Ground 2 of the draft amended notice of appeal pleaded that any representations were made in Mr Issa's capacity as director of Isabella Shop Fitout and Design Pty Ltd, rather than in a personal capacity.

1. This was a substantial departure from the case advanced in oral argument, where it was asserted that Isabella Australasian Pty Ltd was the contracting party to the design contract. In the first place, there is no company registered as Isabella Shop Fitout and Design Pty Ltd, as opposed to Isabella Shop Fitout & Design Pty Ltd. Assuming the latter name to have been intended, paragraphs (a) and (b) of ground 1 and the assertion in ground 2 that Mr Issa was a director of Isabella Shop Fitout & Design Pty Ltd are all factually incorrect. Presumably, Mr Issa's change in position as to who the relevant contracting party was results from a typographical error. However, it has caused confusion about which the respondent has rightly complained.

1. The respondent, in opposition to the grant of leave, addressed both the case put by Mr Issa in oral argument and the case in their amended notice of appeal. If the grounds in the amended draft notice of appeal are correct and Mr Issa intended to refer to Isabella Shop Fitout & Design Pty Ltd, then the respondent submitted that there is no evidence to support a finding that it was the contracting party. In particular, there was no name recognisable as being referable to that entity in the contractual documents, which the trial judge held were the letter of appointment on 19 November 2010 and the Architectural & Design Offer. Further, those documents did not include an ACN or ABN number of Isabella Shop Fitout & Design Pty Ltd, or the ABN number of a trust of which Isabella Shop Fitout & Design Pty Ltd was a trustee, or a business name, registered or otherwise, under which Isabella Shop Fitout & Design Pty Ltd traded. Finally, neither document indicated that Mr Issa was the managing director of Isabella Shop Fitout & Design Pty Ltd.

1. The respondent submitted that there were further factual matters that make the case that Mr Issa now seeks to present untenable. First, Mr Issa was not a director of Isabella Shop Fitout & Design Pty Ltd. Secondly, Mr Issa conceded in his evidence that he had been trading under the corporate entity named Bella Retail Design Pty Ltd, which he knew did not exist. Thirdly, Isabella Shop Fitout & Design Pty Ltd did not commence to trade until 5 February 2011, long after work under the design contract had been completed, which was on 18 December 2010 with the completion of the construction plans. Fourthly, Mr Issa conceded in his evidence that the only company with which he traded as at the date of entry into the design contract was Isabella Australasian Pty Ltd. Next, Mr Issa had conceded that the only entity that operated a bank account with the National Australia Bank into which payments relating to the design contract were made was Isabella Australasian Pty Ltd. Finally, Mr Issa conceded that he had represented to the respondent that it would be contracting with Isabella Australasian Pty Ltd.

1. Alternatively, if the amended notice of appeal was intended to refer to Isabella Australasian Pty Ltd, the respondent submitted that at trial Mr Issa denied that the respondent had contracted with that entity. This submission is returned to below.

Consideration

1. The grant or refusal of leave to appeal lies within the discretion of the Court. It is ordinarily only appropriate to grant leave where the appeal would raise a question of principle, or a matter of public importance is involved, or it is reasonably clear that there has been an injustice in the sense of going beyond it being reasonably arguable that the primary judge was in error: Lee v New South Wales Crime Commission [2012] NSWCA 262 at [12] per Bathurst CJ; Hudson v State of New South Wales [2012] NSWCA 319 at [5] per Meagher JA. It should be noted that Mr Issa relies only on the last-mentioned of these reasons for granting leave. In oral argument, counsel for Mr Issa stated:

"We say her Honour got it wrong to the extent that she found that Mr Issa entered into, what I might call 'the design fitout contract' [which] we say would support at least on a leave application, being allowed to have leave."

1. Mr Issa further submits in his written submissions that the errors of law and fact that he has identified have caused substantial injustice to him.

1. If it is assumed that the amended draft notice of appeal is correct, such that we understand Mr Issa's submission to be that the relevant contracting party was Isabella Shop Fitout & Design Pty Ltd, then the respondent's submissions should be accepted. There are insurmountable factual barriers to accepting that contention.

1. If, as is more likely, Mr Issa intended to submit that the relevant contracting party was Isabella Australasian Pty Ltd, as contended in oral submissions, it is necessary to refer to the cross-examination of Mr Issa at trial as follows:

"Q. ... As at 19 November, Mr Issa, the company that was carrying out the design works was Australasian, correct?

A. Bella, wasn't it?

Q. Well Bella doesn't exist, does it?

A. Sure.

Q. It doesn't exist, does it?

A. Bella's for Isabella, obviously."

1. We understand the reference to "Isabella" to be to Isabella Shop Fitout & Design Pty Ltd, which was how the various companies were referred to at trial. The significance of that exchange is that Mr Issa would not accept that the design contract was with Isabella Australasian Pty Ltd.

1. Mr Issa's refusal to accept that the design contract was with Isabella Australasian Pty Ltd is consistent with his responses in further cross-examination in relation to another document, entitled "Terms and Conditions of Design Offer", which he submitted was part of the design contract. That document was apparently relied on to support a submission that the design contract was with Isabella Shop Fitout & Design Pty Ltd. That position was maintained by Mr Issa in cross-examination despite it being put to him that the document contained numerous inconsistencies, including, relevantly, that its title referred to Isabella Australasian Pty Ltd. The following further exchanges occurred in cross-examination:

"Q. And you say at that time you concede the only company trading at that time was Australasian, correct?

A. Yes.

Q. So with that concession in place, how is it that you are able to introduce into this document matters concerning a company [Isabella Shop Fitout & Design Pty Ltd] which you weren't trading in?

A. I'm not sure.

Q. I am going to give you one opportunity sir. Would you like to retract your evidence regarding this document?

A. No."

And later:

"Q. So this document provide [sic] an accurate description of the company Australasian, correct?

A. Correct.

Q. It does not provide any correct description of a company Isabella Shop Fitout & Design Pty Ltd does it?

A. No.

Q. I am going to suggest to you one last time sir, this document's been fabricated by you to be included in your evidence to create a false bit of evidence for her Honour to make a decision on. That's the case isn't it?

A. Disagree."

1. There is some merit in the submissions put by counsel for Mr Issa in oral argument that a company should be identified by its ACN and ABN. However, we are of the opinion that, even if counsel for Mr Issa identified an arguable mistake in the reasons of the primary judge, this would be insufficient reason to grant leave to appeal. More is needed. Mr Issa did not establish that there had been an injustice in the sense of going beyond being reasonably arguable that the primary judge was in error: see at [23]. Mr Issa has suffered no injustice where his own evidence at trial was that the design contract was not with Isabella Australasian Pty Ltd.

1. Accordingly, the summons seeking leave to appeal is dismissed with costs.

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Decision last updated: 16 June 2014