Jong v New World Construction Pty Ltd
[2014] QCAT 132
| CITATION: | Jong v New World Construction Pty Ltd & Anor [2014] QCAT 132 |
| PARTIES: | Kim Jong (Applicant) |
| v | |
| New World Construction Pty Ltd (First Respondent) Nelson Leon (Second Respondent) |
| APPLICATION NUMBER: | BDL204-12 |
| MATTER TYPE: | Building matters |
| HEARING DATE: | 23 September 2013; Submissions by 21 February 2014 |
| HEARD AT: | Brisbane |
| DECISION OF: | Member Burke |
| DELIVERED ON: | 7 April 2014 |
| DELIVERED AT: | Brisbane |
| ORDERS MADE: | 1. The Second Respondent, Mr Nelson Leon, make payment to the Applicant the sum of Nine Thousand Eight Hundred and Sixty-Four Dollars and Ninety-nine cents ($9,864.99) on or before 7 May 2014. |
| CATCHWORDS: | Building matter – parties – identification of party liable for work done – where second respondent claimed that he contracted as agent for a corporate entity – where respondent did not specifically identify the agency or the identity of the principal – where agent personally liable for the agreement Burnitt v Williams [2013] QDC 157 |
APPEARANCES and REPRESENTATION (if any):
| APPLICANT: | Mr Kim Jong in person |
| RESPONDENT: | Mr Nelson Leon on behalf of the First and Second Respondents |
REASONS FOR DECISION
This application arises out of an agreement alleged to have been entered into between April 2011 and November 2011 for the construction of a house at 26 Harbourvue Court Helensvale Queensland (“the property”).
The application dated 14 June 2012 was initially commenced by the Applicant (“Mr Jong”) against New World Construction. The amount sought in the application was $41,353.00 being the costs alleged to have been incurred for the rectification of defective work and incomplete work at the property.
A decision was delivered by the Tribunal on 8 October 2013 (“joinder of parties decision”) identifying the First Respondent as New World Construction Pty Ltd (“New World”) and joining the Second Respondent (“Mr Leon”) as a party to the application.
The relevant facts of the dispute are set out in the joinder of parties decision. The material initially relied upon by the parties at the oral hearing is set out at paragraph 8 of that decision.
Pursuant to directions made by the Tribunal on the 8 October 2013, further material was delivered by Mr Leon on 19 December 2013. This material included an unsigned statement by Mr Leon with attached documents, including invoices and emails.
In the statement provided by Mr Leon, it was claimed by Mr Leon that he personally had entered into an agreement with Mr Jong whereby Mr Jong agreed to pay to Mr Leon the sum of $25,000.00 for project management services associated with the construction at the property. Mr Leon claims the outstanding amount of $17,500.00.
On 12 February 2014, the Tribunal issued further directions to the parties requesting Mr Jong to provide a response to Mr Leon’s claim for project management services by 21 February 2014.
The only material provided by Mr Jong was a one page letter responding in the following terms:
I Kim Jong of 26 habourvue court helensvlale want to conform (sic) I did not have any contract with new world construction. Vertigrated construction or nelson leon to supervision to build my home I did myself with my licence.
Mr Jong has amended his claim the subject of the application and seeks the sum of $27,364.99 being the amount he alleges he incurred as a result of incomplete and defective works carried out on the property.
Further material was provided by Mr Leon on 27 March 2014. This material was purported to support the contention that New World never undertook any works for Mr Jong and that all works were carried out by Vertigrated Contracting Pty Ltd (“Vertigrated Contracting”). The material included correspondence relating to the provision of timber frames works and trusses at the property.
Evidence of the Applicant
At the hearing of the application, both Mr Jong and Mr Leon conceded that no written contract was entered into between the parties.
Mr Jong says that he was introduced to Mr Leon by a person by the name of Steven who was aware that Mr Jong was intending to build a house at the property. He gave evidence that the meeting occurred in about April 2011.
It was Mr Jong’s intention that he would engage Mr Leon to be the builder.
An HIA contract was drawn up by Mr Leon but Mr Jong was unable to obtain the requisite finance. As a compromise, it is Mr Jong’s recollection that Mr Leon offered to help Mr Jong with the supply of subcontractors if Mr Jong undertook the works as an owner/builder.
The design of the works was contained in documents provided by Image+ Design. The works proceeded on the basis that Mr Leon would provide subcontractors and the works were to be carried out in about October/November 2011.
It is Mr Jong’s recollection that payments were made by him to Mr Leon, often before the works were performed and also upon receipt of various invoices.
The invoices were issued by Mr Leon on invoices headed by either New World or Vertigrated Contracting or Vertigrated Group Pty Ltd (“Vertigrated Group”) as follows:
a) Vertigrated Group tax invoice dated 23 September 2011 - $42,634.
b) New World tax invoice dated 4 October 2011 - $56,768.00 payable to Vertigrated Contracting
c) New World tax invoice dated 4 October 2011 - $21,725.00 payable to Vertigrated Contracting
d) New World tax invoice dated 6 October 2011 - $32,670.00 payable to New World
e) New World tax invoice dated 8 October 2011 - $32,032.33 payable to New World
f) New World tax invoice dated 23 October 2011 - $28,820.00 payable to Vertigrated Contracting
g) Vertigrated Contracting tax invoice dated 31 October 2011 - $20,500.00 payable to Vertigrated Contracting
h) Vertigrated Contracting tax invoice dated 31 October 2011 - $21,500.00 payable to Vertigrated Contracting
i) Vertigrated Contracting tax invoice dated 3 November 2011 - $14,784.00 payable to Vertigrated Contracting
j) Vertigrated Contracting tax invoice dated 28 November 2011 - $7,000.00 payable to Vertigrated Contracting
The majority of the invoices directed payment to be made to Vertigrated Contracting although some directed that payment be made to New World.[1]
[1]Invoices in (d) and (e) at [17] above directed payment to New World.
By May 2012, Mr Jong became concerned that the works were not progressing and there were obvious defects in the works.
By letter dated 9 May 2012 addressed to Mr Leon, Mr Jong advised Mr Leon of his concerns:
Nelson Leon
Unfortunately I am now resorting to written communication as you do not answer my phone calls nor respond to my texts. There is over $20,000 + GST in value of unfinished work you owe me on my “under-construction” dwelling at 26 Harbourvue Crt, Hope Island, Gold Coast 4212.
I am asking you again to please complete the work owing.
Deliver, fix and plaster remaining Gyprock
Certify the engineering/flooring mistake you made
Complete carpentry.
Rectify leaking roof.
If I do not hear from you I will be forced to seek legal counsel. I paid you in full prior to Christmas and have receipts from Vertigrated Contracting Pty Ltd. I now believe this company has been closed down and you are now operating/trading as New World Construction Pty Ltd.
Owner – Kim Jong
On 25 May 2012, Mr Jong obtained a report from consulting engineers Structerre. The report from Structerre identifies in detail the defects in the timber framing, wall bracing and structural steelwork which were evident from various inspections carried out during the works between 8 November 2011 and 16 May 2012.
Subsequently, Mr Jong obtained quotations from Whitehaven Homes Pty Ltd, Go Design & Build, Gold Coast Ceilings Pty Ltd, PT & KM Basnett Drywall Plastering and Top Qs Residential Depreciation to identify the costs involved in the necessary rectification works and works required to complete the construction.
By letter dated 25 June 2012, Mr Jong, through his lawyers MCA Lawyers & Migration Agents, advised Mr Leon and New World that the works required rectification, identifying concerns with the delays in completion and the standard of workmanship. The letter set out the problems identified by the Structerre report and attached the quotations obtained by Mr Jong.
The lawyers for Mr Jong advised that due to the failure of Mr Leon to attend to the defects in April 2012, Mr Jong would commence rectification and completion of the works.
A Queensland Building Services Authority report, obtained at the direction of the Tribunal on 28 August 2012, concluded that the works have been rectified and completed by the owner.
Mr Jong gave evidence that the amount he is claiming relates to the following:
a) the erection of timber trusses and supervision claimed by New World in its invoice #NWC-2011-10-005 dated 23 October 2011 in the sum of $28,820.00 was defective. Rectification carried out by Whitehaven Homes cost $4,114.99 per invoice 11494 from Whitehaven Homes.
b) the supply of materials and labour to sheet, set and sand and prepaint internal walls and ceiling were invoiced by Vertigrated Contracting for the sum of $20,500 in invoice #VC-LOG-1305 on 31 October 2011 and paid in full. A QS Residential Depreciation report concluded that this work was only completed by 12%. The cost of completing the works by Gold Coast Ceilings Pty Ltd was $22,350.00 per quotation #1745-1. The cost of obtaining the report to assess the value of works completed was $900.00.[2]
[2]See undated statement by Mr Jong filed in the Tribunal on 1 May 2013.
The only evidence given by Mr Jong regarding Mr Leon’s claim for the cost of project management services is a statement stating that no such services were provided as he was the owner/builder.[3]
[3]See [8] above.
Evidence of the Respondents
Mr Leon contended in oral evidence that any contract with Mr Jong was between Vertigrated Contracting and Mr Jong. There was no contract, written or oral, between New World and Mr Jong.
In oral evidence, Mr Leon contended that Mr Jong was aware that the contract at all times was with Vertigrated Contracting. The basis for this conclusion was an HIA contract provided by Mr Leon to Mr Jong wherein the parties were identified as Vertigrated Contracting and Mr Jong and subsequent correspondence between Mr Leon, on behalf of Vertigrated Contracting, and Mr Jong.
Mr Leon was unable to provide any documents at the oral hearing which supported any written contract entered into between Mr Jong and any other party.
Mr Leon did file with the Tribunal on 13 November 2013 further material which it was submitted showed that Vertigrated Contracting was engaged by Mr Jong. This material included a document dated 18 January 2011 which was a tender submission for the construction of the proposed residence at lot 801 Harbourvue Court Riverlinks. The revised fixed price was $568,002.05. The tender submission was on Vertigrated Contracting letterhead.
Mr Leon’s version of events is that he entered into the oral contract on behalf of Vertigrated Contracting after the contract between Vertigrated Contracting and Mr Jong did not go ahead because of Mr Jong’s inability to obtain bank finance.
Mr Leon gave evidence that New World was not in existence at the time of the initial discussions with Mr Jong and thus any contract was obviously with Mr Leon as agent for the disclosed principal, Vertigrated Contracting.
In an unsigned statement provided to the Tribunal in February 2014, Mr Leon provided the following further evidence:
a) The initial contact with Mr Jong was in late 2010/early 2011. Mr Stephen Cone was the person who introduced the parties.
b) Subsequent to the termination of the HIA contract by Mr Jong in mid 2011, a meeting was held between Mr Jong and Mr Leon regarding continuation of the works, with Mr Jong proceeding as an owner/builder.
c) It was agreed between Mr Jong and Mr Leon, on behalf of Vertigrated Contracting, that the works would be completed by Mr Jong as owner/builder and that he would subcontract the services of Vertigrated Contracting as and when such was needed.
Mr Leon contended that, on the basis of documentation issued by Vertigrated Contracting to Mr Jong and to Vertigrated Contracting by various suppliers,[4] the agreement relating to construction on the property was between Vertigrated Contracting and Mr Jong and not between New World and Mr Jong.
[4]See paragraphs 15 to 22 of the Statement of Evidence of the First and Second Respondents.
In addition to the above, Mr Leon states that it was agreed directly between him and Mr Jong that Mr Leon would assist with project management services on site for a fee, being $25,000.00 for project management services.
Mr Leon alleges that, to date, Mr Jong has only paid the sum of $7,500.00 to Mr Leon for the project management services and that the amount of $17,500.00 is outstanding.
Agency Issues and Discussion
The threshold question for determination is the capacity in which Mr Leon contracted with Mr Jong.
The answer to that question involves the application of well-established legal principles to the relevant facts.[5]
[5]Taylor v Johnson (1983) 151 CLR 422 at 429; Smith v Hughes (1871) LR 6 QB 597, 607 per Blackburn J.
The law in Australia has always favoured the objective theory of contract which is concerned with the outward manifestations of the intentions of the parties. This was formulated by Blackburn J in a classic formulation in Smith v Hughes (1871) LR 6 QB 597, 607:
If, whatever a man’s real intention may be, he so conducts himself that a reasonable man would believe that he was assenting to the terms proposed by the other party, and that other party upon that belief enters into the contract with him, the man thus conducting himself would be equally bound as if he had intended to agree to the other party’s terms.
The absence of a written agreement leads to the necessity to interpret the terms of the agreement between the parties arising from their words and conduct. This exercise entails ascertaining what each party by words and conduct would have led a reasonable person in the position of the other party to believe.
In determining the existence of a contract, words should be interpreted in the light of surrounding circumstances and according to the view of a reasonable person in the position of the person to whom they are addressed. The interpretation of a contract can, however, never be entirely objective as the essence of a contract is an agreement between the parties. [6]
[6]Burnitt v Williams [2013] QDC 157.
Lord Diplock explained in Paal Nilson & Co A/S v Partenreederei Hannah Blumenthal [1983] 1 AC 854:
… What is necessary is that the intention of each [party] as it has been communicated and [reasonably] understood by the other (even though that which has been communicated does no represent the actual state of mind of the communicator) should coincide.[7]
[7]At 915; See also: Air Great Lakes Pty Ltd v K S Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309 at 336.
Extrinsic evidence is admissible and relevant to determine the identity of the parties to the contract: GR Securities v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631.
It is well settled that a person is liable for his engagements even though he acts for another, unless he can show that by the law of agency he is to be held to have expressly or impliedly negatived his personal liability.[8] The rights and obligations of principal and agent are not joint, but, subject to the superior right of the principal, alternative.[9]
[8]Yeung Kai Yung v Hong Kong and Shanghai Banking Corp [1981] AC 787 at 795.
[9]Maynegrain Pty Ltd v Compafina Bank [1982] 2 NSWLR 141 at 149 to 150.
The mere fact that a person acts as an agent and is known to do so does not necessarily negate his involvement in the transaction.[10]
[10]F.Reynolds (ed), Bowstead & Reynolds on Agency (Sweet & Maxwell, 19th edition, 2012) Art 97 [542].
An agent can contract on behalf of a principal in one of three ways as set out by Donaldson J in Teheran-Europe Co Ltd v S.T. Belton (Tractors) Ltd [1968] 2 QB 53 at 59-60:[11]
(a)By creating privity of contract between the third party and his principal without himself becoming a party to the contract. The principal need not be named but the contract must show clearly that the agent was acting as such. Familiar examples are contracts made by X as agents and signed by X, the signature being claused “as agents only”. The consequence of such an arrangement is that the third party can only sue, and be sued by, the principal.
(b)By creating privity of contract between the third party and his principal, whilst also himself becoming a party to the contract. The consequence of this arrangement is that the third party has an option whether to sue the agent or the principal, although this is of little practical value if he does not know of the principal’s existence…..
(c)By creating privity of contract between himself and the third party, but no such privity between the third party and his principal. In other words, in relation to the third party he is a principal, but in relation to his principal he is an agent. The consequence of this arrangement is that the only person who can sue the third party or be sued by him is the agent.
[11]Approved in Australian Trade Commission v Goodman Fielder Industries Ltd (1992) 36 FCR 517.
An agent may become liable in circumstances applicable to the doctrine of an undisclosed principal which permits an undisclosed principal to sue and be sued on a contract to which the undisclosed principal is not a party. It is an exception to the principle of privity of contract and thus enables a third party to sue either the undisclosed principal or the agent on the contract.
In Siu v Eastern Insurance Co Ltd [1994] 2 AC 199 at 207 the Privy Council summarised the law relating to undisclosed principals in these terms:
(1)An undisclosed principal may sue and be sued on a contract made by an agent on his behalf, acting in the scope of his actual authority.
(2)In entering into the contract, the agent must intend to act on the principal’s behalf.
(3)The agent of an undisclosed principal may also sue and be sued on the contract. [Italics mine].
(4)Any defence which the third party may have against the agent is available against the principal.
(5)The terms of the contract may, expressly or by implication, exclude the principal’s right to sue, and his ability to be sued. The contract itself, or the circumstances surrounding the contract, may show that the agent is the true and only principal.[12]
[12]See Pico Holdings Inc v Wave Vistas Pty Ltd & Anor [2003] QCA 204 at [69].
According to Mr Leon, he holds no personal responsibility to Mr Jong, having contracted with Mr Jong as an agent on behalf of Vertigrated Contracting only.
Mr Leon submits that he disclosed the existence of Vertigrated Contracting from the outset particularly earlier on when it was agreed that the building work would be carried out by Vertigrated Contracting and then subsequently by the issue of invoices on Vertigrated Contracting letterhead with direct payment to Vertigrated Contracting. Thus it would be Mr Leon’s submission that this is not a case concerning an undisclosed principal.
Mr Leon was a director of Vertigrated Group from its inception in April 2010 and also a director of New World from 9 September 2011. Mr Leon also has held a licence in his own right since May 2010.[13]
[13]It is noted from a licence search of the Queensland Building and Construction Commission licence search site that licence number 1189188 referred to on the Vertigrated Contracting invoice is that of Vertigrated Group Pty Ltd. There is no licence number for a company Vertigrated Contracting Pty Ltd. Mr Leon’s licence in his own right is licence no. 1132569.
At the time of initial discussions between Mr Leon and Mr Jong, it is relevant that Mr Leon was a director of Vertigrated Group and it is assumed he had authority as a director to act on behalf of Vertigrated. Group or Vertigrated Contracting.
At the time of the discussion which led to the oral agreement, which is about mid 2011, it is the case that Mr Jong was aware that Mr Leon was a director of a company or companies. This is an obvious inference from the dealings between the parties in early 2011. The provision of a tender submission from Vertigrated Contracting supports this inference.
There is no evidence, however, that Mr Jong was aware of the structure of any such companies associated with Mr Leon. There is no evidence identifying the structure of the companies including Vertigrated Group and Vertigrated Contracting.
Without perusing the HIA contract which both parties agree came into existence before mid 2011, I am unable to ascertain whether that contract referred to Vertigrated Group or Vertigrated Contracting as a party to that contract.
Mr Jong gave evidence that he considered Mr Leon had the ability to and was undertaking to give effect to the agreement, whether personally or through a corporate entity. He was not certain of the exact name of the corporate entity at the time of entering into the agreement but he knew that it was a company with which Mr Leon was involved as a director.
Once construction started, Mr Jong became aware that one of the companies with which Mr Leon was involved was New World. This became obvious to Mr Jong as the signage on the property referred to “New World Construction”.
Mr Jong was also aware of the existence of Vertigrated Group as the first invoice which was submitted to Mr Jong for payment was on Vertigrated Group letterhead. On the other hand, subsequent invoices were submitted on letterhead bearing the identity of Vertigrated Contracting and New World.
Mr Jong also gave evidence that Mr Leon asked for payment in advance of invoices being provided but he was unaware at the time to whom those payments were to be made.
In considering who the parties were to the agreement, the relevant time to consider is the time period after mid 2011 when Mr Jong discovered that he could not obtain bank finance. It is the relevant time when Mr Jong and Mr Leon negotiated the basis upon which the proposed construction would continue.
It is at this stage, one must analyse what Mr Leon lead Mr Jong to believe and what a reasonable man would be lead to believe by any words or actions of Mr Leon.
There is no evidence that Mr Leon, at this relevant stage, identified himself as acting solely as an agent for Vertigrated Contracting. Nor is there evidence that Mr Leon identified himself as acting as an agent for Vertigrated Group. Further, there is no evidence that Mr Leon identified himself as acting as an agent for New World. In fact, the only offer by Mr Leon, accepted by Mr Jong, was that Mr Leon would help Mr Jong source subcontractors if Mr Jong constructed the house as an owner/builder.
In addition to this lack of evidence regarding the identification of a principal other than Mr Leon, there is Mr Leon’s evidence that he, in fact, entered into an agreement with Mr Jong for payment for project management services.
It is perplexing that this distinction which Mr Leon advances, that is that he was acting as agent for Vertigrated Contracting in relation to the main agreement but personally in relation to the project management fee, was not perceived by Mr Jong at all.
The fact that Mr Leon may have had the authority to act on behalf of Vertigrated Contracting at the time of the initial HIA contract with Mr Jong is not determinative of whether Vertigrated Contracting was, in fact, a party to the agreement entered into between the parties at a later stage. Such evidence however may be indicative of the fact that Mr Jong may have been aware of a corporate entity with which Mr Leon was associated.
Unless it can be established that Mr Leon conveyed to Mr Jong that he was making the agreement with Mr Jong on behalf of Vertigrated Contracting, a reasonable person in the position of Mr Jong could not have construed Mr Leon’s offer as being on behalf of Vertigrated Contracting.
The facts do not support the conclusion that Mr Leon, expressly or by implication, excluded himself from responsibility for the agreement. Mr Leon did not at any relevant time specifically make it clear to Mr Jong that he was acting as an agent for any corporation. Nor did he make it clear to Mr Jong that he would bear no personal liability under their agreements.
I have formed the view that the present circumstances fall into the category of case of the second kind set out in the Teheran-Europe Co Ltd case[14] based on the following factors:
a) Prior to mid 2011, Mr Jong was aware that Mr Leon was associated with a corporate identity. I am not convinced that Mr Jong was aware of the distinction between Vertigrated Contracting and Vertigrated Group.
b) Prior to the relevant agreement, Mr Leon did not inform Mr Jong about the existence or extent of the company structure.
c) There was no specific mention by Mr Leon that Vertigrated Contracting or Vertigrated Group would be the contractor for the works.
d) Mr Leon did not tell Mr Jong that he was acting only as an agent for Vertigrated Contracting and that he would bear no personal liability under their agreement.
e) The facts support the scenario that Mr Leon assumed liability on his own account as well as acting as agent for a corporate entity in negotiations.[15]
[14][1968] 2 QB 53 at 59-60.
[15]It is open on the evidence that the corporate entity was Vertigrated Group or Vertigrated Contracting.
Claim for Rectification work
Mr Jong relies upon the report prepared by Structerre consulting engineers dated 25 May 2012 as evidence that the work carried out at the property was both defective and incomplete.
No evidence was provided by Mr Leon disputing the details contained in the Structerre report. Instead, Mr Leon relied upon the report dated 28 August 2012 prepared by the Queensland Building Services Authority.
The Queensland Building Services Authority report was prepared at the direction of the Tribunal after the rectification works had been carried out.
In the absence of evidence to the contrary, I accept that:
a) the rectification work was necessary;
b) the works which required rectification were carried out by subcontractors engaged by Mr Leon;
c) the cost of the rectification work was reasonable.
Claim for Project Management Services
In relation to the agreement regarding the provision of project management services, I accept the evidence of Mr Leon that an agreement was reached between Mr Leon and Mr Jong whereby Mr Leon was to assist with the project management of the construction and that Mr Leon would be paid for those services.
In light of Mr Jong’s dependence on Mr Leon’s building expertise and for the provision of subcontractors for the construction, I think it is reasonable to infer that Mr Leon would have offered his services with the expectation that he would be paid for those services. Despite Mr Jong’s denial that anyone other than he was to supervise the construction, I accept that an agreement was entered into between Mr Jong and Mr Leon according to which Mr Leon would be reimbursed for his project management services.
In emails sent by Mr Leon to Mr Jong, Mr Leon refers to further payment for his project management services.[16] There is no response from Mr Jong denying that any amount is owed.
[16]See emails from Mr Leon to Mr Jong attached to the unsigned statement by Mr Leon filed 19 December 2013.
Mr Leon has admitted that he has been paid in part for the project management services. I accept that he has not been paid in full. There is no information available to me to refute the figure of $17,500.00 claimed by Mr Leon.
I am satisfied that, in relation to the agreement to provide project management services, Mr Leon assumed personal liability for those services and that Mr Jong agreed to pay for those services. No evidence was provided that Mr Leon was acting as an agent in that capacity. Based on the analysis above, however, it would, in any event, be open to this Tribunal to conclude that Mr Leon entered into the agreement on the same basis as the agreement to source subcontractors.
I am satisfied that, in relation to the agreement to assist Mr Jong in sourcing subcontractors and the agreement to provide project management services, Mr Leon assumed personal liability to Mr Jong when he entered into both agreements. To hold otherwise would be contrary to the weight of evidence given by the parties. Further, this conclusion is supported by an objective consideration of the conduct of the parties.
Orders
It follows from the above findings of fact that Mr Leon is responsible for the necessary rectification works required at the property in the sum of $27,364.99 and Mr Jong is responsible for the unpaid fees owing for project management services, being $17,500.00.
Accordingly, the order of the Tribunal is that Mr Leon make payment to Mr Jong the sum of $9,864.99 being the difference between the two amounts owing by each party.
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