North South Construction Services P/L v Construction Pacific Management P/L

[2002] NSWSC 120

CITATION:	NORTH SOUTH CONSTRUCTION SERVICES P/L v CONSTRUCTION PACIFIC MANAGEMENT P/L [2002] NSWSC 120 revised - 10/04/2002
CURRENT JURISDICTION:	EQUITY
FILE NUMBER(S):	SC 3793/01
HEARING DATE(S):	30 & 31/01/02 & 18/02/02
JUDGMENT DATE:	6 March 2002
PARTIES :	North South Construction Services Pty Ltd - Plaintiff Construction Pacific Management Pty Ltd - Defendant
JUDGMENT OF:	Bryson J at 1

COUNSEL :	R. Newton - Plaintiff S. Epstein S.C. - Defendant
SOLICITORS:	The Law Partnership - Plaintiff Baron and Associates - Defendant
CATCHWORDS:	DETENTION OF GOODS - Plaintiff claimed return of formwork brought onto defendant's building site by building subcontractor which was under same control as plaintiff - plaintiff's case depended on showing that a practice was followed of transferring to the plaintiffs ownership all formwork acquired by companies in a Group - the claim failed on the facts as it was not shown that there was such a practice, or that it was followed.
CASES CITED:	_
DECISION:	On the plaintiff's claim, give judgment for the defendant with costs.

- 15 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

BRYSON J

WEDNESDAY 6 MARCH 2002

3793/01 NORTH SOUTH CONSTRUCTION SERVICES PTY LTD v CONSTRUCTION PACIFIC MANAGEMENT PTY LTD

JUDGMENT

1 HIS HONOUR: The plaintiff commenced these proceedings by Summons on 30 July 2001. The proceedings have been heard with expedition. The plaintiff seeks declaratory orders and injunctions which would protect the plaintiff’s claim of entitlement to ownership of a quantity of construction formwork equipment, principally metal formwork components, clamps and timber and plywood sheets, which had been used in building work at a building project called Bardwell House Nursing Home at 18-20 Bardwell Road, Mosman. The orders claimed would establish that the plaintiff is entitled to the formwork equipment and the defendant is not. There are claims for injunctions to restrain use or disposition by the defendant, and for an order for delivery up of the equipment. There are also claims for damages for detinue and other ancillary claims. Quantum of damages was not dealt with at the hearing and it would be necessary to order inquiries to establish in an exact way what equipment the plaintiff’s claim relates to and to ascertain any damages. There is a cross-claim, but the cross-claim was not dealt with at the hearing.

2 Mr Phil Bianco is the principal figure in the plaintiff’s affairs and with his wife he is one of its two directors. Mr Phil Bianco’s true forename is Serafino but in business he is always known as Phil. In the defendant’s case the defendant is entitled to retain the equipment on site and dispose of it so as to set the proceeds of realisation against liabilities or alleged liabilities of the subcontractor. Otherwise the defendant has no positive case to own the formwork equipment or to retain possession of it, but the Court will not disturb its possession, however good or bad its claim, unless the plaintiff shows a better claim. The plaintiff’s claim is based on alleged ownership of the formwork equipment, arising under many transactions in which equipment was made available by the father of Mr Phil Bianco, or purchased in many transactions from other persons operating in the formwork equipment field, or purchased from other companies under Mr Bianco’s control, referred to loosely as the “Bianco Group”. These transactions have not been proved in detail. The contention was to the effect that it was Mr Bianco’s business method to gather ownership of all formwork equipment in the group into North South Construction Services Pty Ltd and for that company to hire out equipment for use by other members of the group as required, and also sometimes by unrelated parties.

3 The particular pieces of formwork equipment delivered to and used on the Bardwell House project cannot be related to any particular acquisition. The plaintiff’s claim depends on establishing, on the balance of probabilities, that all items of formwork equipment used by companies in the Bianco Group and delivered to building sites had been acquired by or transferred to the ownership of the plaintiff. Such a finding must depend on further findings about the existence and observance of practices on the basis of which it can be inferred, as a matter of probability, that any such formwork equipment had passed into the ownership of the plaintiff. Certainty of proof is not required, and the plaintiff’s case would not be defeated by showing that there were minor irregularities or infrequent departures from the practice, if the irregularities and departures did not disturb the overall probabilities about ownership of the stock of formwork equipment generally by the plaintiff.

4 The defendant, which carries on business as a builder and was referred to as the builder in the subcontract, entered into a form of subcontract agreement in writing dated 5 April 2001 (Exhibit A) with an entity described as “Bianco Constructions Pty Ltd (ACN 054 540 055)”; Mr Phil Bianco signed the subcontract on behalf of the subcontractor. The difficulty is that a company which had that ACN number and had formerly had that name existed, but it had changed its name to Filcon Pty Ltd on 18 May 1999. Although the plaintiff’s counsel contended to the effect that the purported subcontract had no effect because no such company as the purported subcontractor existed at the time the subcontract was made, I am of the view that it is unmistakably clear that the subcontractor was Filcon Pty Ltd; its identity is established by the use of its former name and of its ACN number.

5 There is ample room for confusion in the identification of the particular company by which any particular piece of business under Mr Bianco’s control was conducted. Mr Bianco was the sole director and also the Secretary of Bianco Construction Services Pty Ltd, a company formed on 29 September 1997 which passed into Mr Bianco’s control on that day; its ACN number is 080 230 217. Its name was changed to Millstone Construction Services Pty Ltd on 3 April 2001 and passed into liquidation in a Creditors’ Voluntary Winding-up on 14 June 2001. Mr Bianco is the sole director and secretary of a company formed on 30 April 1999 with the name Bianco Hire Pty Ltd on 30 April 1999 which changed its name to Millstone Hire Pty Ltd on 3 April 2001 and also passed into liquidation in a Creditors’ Voluntary Winding-up on 14 June 2001. Mr Bianco is the sole director and Secretary of another company also bearing the name Bianco Constructions Pty Ltd, ACN 096 236 734, which was formed on 16 March 2001. It was Mr Bianco’s evidence that the second company to bear the name Bianco Constructions Pty Ltd was incorporated for a new project, a development at Liverpool, which has not yet proceeded, and the company has not undertaken any business.

6 The subcontract required Bianco Constructions Pty Ltd ACN 054 540 055 to “supply all labour, materials and equipment necessary for the completion of: supply, erection and stripping of formwork” at the construction site. The general conditions of contract included General Condition 7 dealing with termination of the subcontract and the builder was empowered by subcl.7(b), in case a subcontractor defaulted in stated respects, to specify the default by a written notice, state the intention of the builder to determine the employment and if default continued for three days forthwith determine the employment. Then subcl.7(c) stated rights and liabilities of the builder and subcontractor in the event of the employment of the subcontractor being determined pursuant to Condition 7. The rights prescribed included a right of the builder to employ and pay other persons to carry out and complete the works and use equipment on site to do so, a duty of the subcontractor to assign the benefit of all agreements to supply of materials for the execution of work, and subcl.7(c) in these terms:

c. In the event of the employment of the Subcontractor being determined pursuant to this clause, the following shall be the respective rights and liabilities of the Builder and the Subcontractor: -
(i) The Builder may employ and pay other persons to carry out and complete the Works and the Builder and such aforesaid persons may enter upon the Works and use all temporary buildings, plant, tools, equipment, goods and materials intended for delivery to and placed on or adjacent to the Works and may purchase all materials and goods necessary for the carrying out and completion of the Works in accordance with this agreement and neither the Subcontractor nor any person claiming under him shall remove from the site of the Works any such temporary buildings, plant, tools, equipment, goods and materials.
(ii) The Subcontractor if and when so required by the Builder shall assign to the Builder without payment the benefit of any Agreement for the supply of materials or goods and/or for the execution of any work for the purposes of this agreement but on the terms that a Supplier or Sub-contractor shall be entitled to make any reasonable objection to any further assignment thereof by the Builder. In any case the Builder may pay the Supplier or the Sub-contractor for any materials or goods delivered or work executed for the purposes of this agreement (whether before or after the date of determination) insofar as payment has not been made by the subcontractor. The Builder’s rights under this paragraph are in addition to his or the Architect’s rights to pay nominated Subcontractors as provided in this or the Head Contract and payments so made may be deducted from any Sum due or to become due to the subcontractor.
(iii) The Subcontractor as and when required in writing by the Builder so to do (and not before) shall remove from the Site any temporary buildings, plant, tools, equipment, materials and goods. If within a reasonable time after receipt of such request the Subcontractor does not comply therewith then the Builder may not less than 7 days after notifying the Subcontractor in writing of his intention (but being responsible for any loss or damage) remove and/or sell any such property of the Subcontractor holding the proceeds less all reasonable costs incurred to the credit of the Subcontractor but subject to any counter claim that the Builder may have against the Subcontractor on any account whatever.

7 On 6 June 2001 the defendant in a letter directed to Bianco Constructions Pty Ltd threatened to terminate the subcontract. In a more formal letter of 15 June the defendant purported to terminate the subcontract for breaches which were stated and requested removal of materials; then on 20 June 2001 by letter withdrew the request to remove the materials and denied access to the site; and then on 9 July 2001 stated an intention to deal with the goods in accordance with Condition 7(c)(iii). There was a mistaken reference to Condition 6(c)(iii) but there is no such clause in the subcontract, and, given the subject matter of the letter, the intended reference to cl.7(c)(iii) must have been obvious and the mistake can have caused no difficulty. Solicitors representing the plaintiff requested access to remove the chattels by a letter on 10 July; there was then correspondence requesting evidence of ownership and a purported reply which did not cause the defendant to change its position; then the Summons followed on 30 July.

8 The plaintiff’s request for access to remove the goods raised several difficulties for the defendants including that companies associated with Mr Bianco had passed into liquidation, and one of these was the company formerly named Bianco Construction Services Pty Ltd, the former name of which had been used in some commercial documents relating to the subcontract. The defendant was exposed to risk if it delivered goods to one claimant but it was later to appear that another had a better right. The difficulty of the defendant’s position also included the misnomer of Bianco Constructions Pty Ltd as the subcontractor and the fact that another company with that name but a different ACN number had come into existence by the time of the subcontract. Whether or not all the grounds were then fully known to the defendant, there were ample grounds for the defendant to take a cautious view about accepting the plaintiff’s claim and delivering the formwork equipment to the plaintiff.

9 Mr Phil Bianco’s evidence is to the effect that before about 1989 he worked for Bianco & Sons Pty Ltd which was controlled by his father Mr Giovanni Bianco, and that company used formworking materials which were owned by his father. That company ceased operation about 1989, Mr Giovanni Bianco retired and gave the form-working materials he then had available to Mr Phil Bianco and his brother; Mr Phil Bianco says “I later made those materials available for use by the plaintiff.” He does not explain what happened to the interest of his brother and does not say that he ever transferred ownership of the materials to the plaintiff. Mr Phil Bianco’s evidence continued that he did formwork and concrete work in the building industry, that in about 1991 he caused Bianco Constructions Pty Ltd to be incorporated and he acquired the plaintiff about 1995 and “Initially I left it more or less dormant”. Then he says “From approximately 1997 I made a conscious decision to start accumulating form-working materials and to establish North South as a hire company but was separate from any other entity which I used to trade. In other words I felt that the best way to structure my affairs was to have a hire company which did no more than hire out the gear.” He went on to say that from that time on the plaintiff acquired materials “… in very much a piece meal fashion. Some materials have been obtained by word of mouth by which I mean that surplus or cheap materials would become known to me from contacts in the industry. In such cases I would attend at a site and negotiate a price for whatever materials were available, generally writing out a cheque on the spot. As a general rule the only form of documentation that would be brought into existence was an invoice and cheque butt. On many occasions however I have paid cash for small purchases. I have also acquired materials at various stages from various formwork materials brokers, in particular Mr Robert Gorges, who traded as Robbie’s Form Supply Pty Ltd.” Mr Bianco described the general course of business in which he has acquired equipment from Mr Gorges from time to time; no particular transactions were proved in detail and the evidence does not relate to any particular quantities or description of equipment. He also gave evidence of his practice in acquiring timber and plywood, which are less durable than metal formwork. He also gave evidence of acquiring materials from advertisements placed in newspapers such as the Herald, the Trading Post and a monthly publication called Plant and Equipment.

10 In the ways of doing business Mr Bianco described, many of the transactions would not produce significant documentary records, and records could be expected to be informal when they were produced. When dealing with the source of the funds used for purchases Mr Bianco said “If possible I have used funds in North South’s account” but went on to say to the effect that when other companies had more favourable cash flow and had funds available in their accounts he purchased materials using those accounts, and also that he used accounts with timber suppliers which had been established by entities which were trading before North South became active. He also said that North South had established a loan or overdraft facility with Guardian Financial Services Pty Ltd and had used moneys made available by Guardian to purchase materials, generally from one of Mr Bianco’s trading entities.

11 Mr Bianco gave evidence, which was not challenged by cross-examination, that North South and other companies in the Bianco group operated from premises at 132 Francis Street Lidcombe and that the premises were burgled on 23 January 2001; most of the computer equipment which stored the company’s records was stolen and the offices were ransacked and vandalised. Records strewn about the office were collected and packed away in boxes and not sorted through and re-categorised for many months. It was his evidence that on making search for the purpose of this litigation he has found instances of North South issuing invoices to companies within the Bianco group and others on account of rental of formwork and material. His evidence is to be understood as indicating that because of the confusion of written records and the loss of computer records through the burglary, he is not in a position to present a complete and comprehensible picture based on records of North South’s acquisitions. He referred to and produced cheque books and examples of “original invoices and other documents recording purchases by Bianco Constructions Pty Ltd and Bianco Construction Services Pty Ltd of formwork and other materials. I say that all of the formwork purchased by these companies has been paid for by North South and acquired by that company.”

12 In my view acceptance of the plaintiff’s case involves acceptance of Mr Bianco’s evidence about a course of business in which he intended to bring about the result that the plaintiff was the owner of formwork equipment already held within the group when the plaintiff became active, and of equipment acquired later, notwithstanding that some commercial documents record other companies within the group as the purchasers, and notwithstanding that purchases were paid for by whatever funds were to hand in any of the companies at the time funds were required. The plaintiff does not produce and Mr Bianco does not claim that there ever were any documents recording, even in an informal way, transactions among companies which he controlled by which ownership of formwork passed, or by which one company acted on behalf of another in entering into agreements for acquisition, or making arrangements for one company to make payments on behalf of another and later to be repaid. The significance of Mr Bianco’s account of the loss of records and disturbance of records as a result of a burglary is heavily qualified by his making no claim that there ever was a practice of recording transactions between the companies. The plaintiff’s claim depends very heavily, for practical purposes entirely, on the credibility of Mr Bianco’s evidence relating to his working methods and the nature of the transactions which would have had to take place if the intention which he claims to have had were to be fulfilled. An important part of the context is that some companies which might have to come under consideration as possible acquirers and owners of some of the formwork equipment have passed into liquidation, whereas the plaintiff has not and remains under Mr Bianco’s control.

13 Mr Bianco’s evidence shows that he is far from meticulous in establishing which company he wishes to engage in any particular piece of business. A forceful illustration is that he executed the subcontract in the name of Bianco Constructions Pty Ltd ACN number 054 540 055, although that company had changed its name almost two years earlier and was active in its new name Filcon Pty Ltd, and he was the principal of another company also named Bianco Constructions Pty Ltd but ACN 096 236 734 which his evidence shows that he did not intend to involve in the subcontract. His evidence seems to mean that the subcontract work was actually carried out by Bianco Construction Services Pty Ltd, the name of which appears in abbreviated form on some progress claims and other commercial documents. It will be remembered that Bianco Construction Services Pty Ltd had ceased to have that name on 3 April 2001. The depth of Mr Bianco’s difficulty is shown by the fact that in his first affidavit in the proceedings sworn on 30 July 2001 his opening statement was “I am a director of Bianco Constructions Pty Ltd (ACN 054 540 055). Bianco is a company which specialises in the erection of formworks for large commercial and residential buildings.” He went on to deal at length with the participation of that company in the subcontract work. With that affidavit he produced what he says was “A copy of the delivery document of materials hired by Bianco …” and that delivery document shows the party to which the formwork equipment was delivered as “Bianco Construction Services”. He also produced what he said was an invoice dated 5 April 2001 from the plaintiff to Bianco Construction Services for $6,355.60 for hire of the equipment for six days and another invoice dated 5 May 2001 for $31,778.10 for hire of the equipment for 30 days and an invoice dated 5 June 2001 for $32,837.30 for hire of the equipment for 31 days and an invoice dated 5 July 2001 for hire of the equipment for 30 days for $31,778.10.

14 By the time these progress claims were made, Bianco Construction Services Pty Ltd in whose name they were made had itself changed its name to Millstone Construction Pty Ltd, under a resolution of 14 March 2001, upon advice given to Mr Bianco that as it had a lot of liabilities it probably would be better if that company was placed in liquidation under a different name. This advice had been given to Mr Bianco by 28 February 2001, and he did not know whether the company was solvent; in the circumstances it was very irresponsible of him to treat that company as carrying on business in connection with the Bardwell House subcontract.

15 Mr Tomlin is a manager employed by the plaintiff, for some years on a contract basis but more recently as a full time employee, and responsible for administration, overseeing clerical matters and the use of the plaintiff’s computer systems. It is rather striking that Mr Tomlin in his first affidavit also of 30 July 2001 did not avert to any anomaly relating to the use of Bianco Constructions Pty Ltd as the subcontractor. Mr Tomlin produced a bundle of invoices “from three suppliers that the plaintiff uses to obtain its goods.” Mr Tomlin prepared a summary of what he said were materials hired by the plaintiff in relation to the Bardwell House project and said of these materials that they “… were acquired by the plaintiff essentially from three sources being

(i) Robbie’s Form Supplies
(ii) Reid Johnston Pty Ltd
(iii) Hatch Timber Group”

16 Mr Tomlin did not deal in detail with acquisition of the goods in question. Mr Tomlin did not deal in his affidavit with the apparent anomaly that the plaintiff’s invoices for hire charges were rendered to Bianco Construction Services and not to Bianco Constructions. Mr Tomlin produced with his first affidavit a bundle of invoices Exhibit D which appeared to show acquisitions of formwork by the plaintiff from Hatch Timber Group in 1999 and 2000. With his second affidavit he produced many more documents which he said were invoices from various suppliers relating to purchase of materials by the plaintiff, with cheque requisition forms; these are Exhibits JT1 and JT2 forming part of Exhibit E and include invoices some of which name the plaintiff as the purchaser, and many other commercial documents relating to payments, some of them related to such invoices but many of them not appearing to relate to purchases at all. Mr Tomlin’s affidavit of 17 August 2001 para 2 appears to treat Bianco Construction Services Pty Ltd and Bianco Constructions Pty Ltd as the same entity.

17 In the course of negotiations which led to the subcontract the defendant called on Mr Bianco for currency certificates for Workers Compensation and Public Liability insurance and received back a Certificate of Currency Relating to Contract Works, Material, Damage and Public/products Liability showing the insured as Bianco Constructions Pty Ltd for a period from 19 July 2000 (before the second company of that name was formed) and a Certificate of Currency for Workers Compensation Insurance also showing Bianco Constructions Pty Ltd as insured for a period commencing on 2 April 2001; these certificates did not show an ACN number for the insured. The defendant was also given confirmations of employer contributions relating to superannuation dealing with the positions of a number of employees whose employer was shown as Bianco Hire Pty Ltd. The identity of the proposed subcontractor as Bianco Constructions Pty Ltd appeared not only from the form of subcontract forwarded by the defendant for completion by Mr Phil Bianco, but also from several references in the covering letter. If Mr Bianco regarded the identity of the particular company involved in any particular piece of business as of significance I do not find it possible to understand how he could have failed to observe the name of the subcontracting company, or to give his attention to its identity including whatever may have been indicated by the ACN number. While work continued under the subcontract, invoices for progress payments were rendered to the defendant in the name of Bianco Construction Services Pty Ltd, whereas progress claims on one occasion referred to Bianco Constructions Pty Ltd and on others to Bianco Construction Services Pty Ltd. Mr Bianco made and submitted declarations on forms appropriate for statutory declarations (although not according to their terms declared before a Justice of the Peace) dated 1 May 2001 and stating that the contractor was Bianco Construction Services Pty Ltd (giving that company’s correct ACN number) and later submitted several more to the same effect which had been declared before a solicitor.

18 It was Mr Bianco’s evidence that he did not know to which company the Public Liability insurance related; he said that he arranged the Certificate of Insurance, that the company referred to was not Filcon Pty Ltd, and he did not know which company it was. Nor could he explain why the certificate relating to workers compensation insurance named Bianco Constructions Pty Ltd although in his understanding the labour was employed by and supplied by Bianco Hire Pty Ltd which by the time of the work on Bardwell House had become Millstone Hire Pty Ltd.

19 These events and documents establish that Mr Bianco and his organisation did not treat the identity of the company engaged in any particular piece of business as of real significance.

20 In correspondence before action solicitors representing the plaintiff, in response to a call for evidence of ownership, produced what was described as “… a series of invoices provided to our client at the time of purchase of previous material.” Included in the bundle were documents which appeared to be sold notes and do not identify the purchaser, and documents which purport to be invoices rendered by Robbie’s Integrated Building Services and quoting an ACN number for that company, which invoices are earlier in date than the formation of the company which uses that business name and hence earlier in date than the allocation of the ACN number to the company. Some invoices in evidence from Hatch Timber Group exist in two forms, one of which names North South Construction Services as the purchaser and one of which does not. Defendant’s counsel contended that some of the invoices submitted in support of the plaintiff’s case were bogus documents; and in my finding it is clear, to a very high degree of probability, that the plaintiff did attempt to support its claim with documents which were not genuine but, in all probability, were brought into existence only for the purpose of supporting the claim.

21 Mr Banks, a witness called by the plaintiff, was not involved in the conduct of business transactions for companies in the Bianco Group but was concerned with the financial administration of the companies and work mainly on invoices, delivery documents and other primary records which came through the office. He had a very minimal role in the affairs of the plaintiff and his main role was concerned with the formwork and concreting activities. He said “I had very little reason to question the financial arrangements within North South. As I said earlier my main role was with Bianco Company.” Mr Banks did some work for Bianco Constructions Pty Ltd as of June 2000; he was aware that the company’s name had been changed to Filcon Pty Ltd but the name Filcon Pty Ltd was not used in any transactions to Mr Banks’ knowledge.

22 Mr Banks who placed the order with Hatch Timber could not explain the existence of two invoices evidently representing the same transaction and both dated 19 June 2000, one directed to North South Construction Services and one directed to Bianco Constructions Pty Ltd (t9-11). The amount charged in both versions in the invoices appears on a later statement directed by Hatch Timber to Bianco Constructions Pty Ltd. The delivery address given on one version of the invoice is a site on which Bianco Construction Services was carrying out operations.

23 Mr Banks’ understanding was that North South Construction always had ownership of formwork equipment because at the start of his business arrangement with Mr Bianco, Mr Bianco told him that the equipment that he owned was held by North South Constructions and not by Bianco Constructions Pty Ltd nor by Bianco Construction Services Pty Ltd. However Mr Banks said “I was aware that in many cases the contracting company would procure for convenience with arrangements in place for the equipment or materials to be transferred to the other company, North South” but that he did not see any evidence of the transfer occurring except that he sometimes thought that there were deposits of money by North South into the bank account of Bianco Constructions.

24 A business cheque account was maintained at the National Australia Bank, Silverwater, by Bianco Constructions Pty Ltd; the account existed before 8 September 1999 and continued until it was closed on 27 August 2001, according to the statements in Exhibit 3. Significant sums were paid into that account while work was proceeding on the Bardwell House project, and may well have included progress payments on that job. The bank account of Bianco Constructions Pty Ltd continued to be conducted in that name after the change of name. Banking records of North South Constructions and of the bank account conducted in the name of Bianco Constructions in evidence, while very incomplete in detail, include very few records which could relate to any such event as a payment by North South Constructions to Bianco Constructions to recompense for a payment made for purchase of goods; and Mr Banks could not give any specific instances (t16) of such payments. The records do not show anything which is likely to be a flow of funds to the plaintiff as revenue of a business of hiring out formwork. Mr Banks did not take part in any transactions in which North South paid an amount to another Bianco company in respect of supplies bought in similar documents dealing with those transactions and to his knowledge there were no such documents. Moreover he was not involved in any board functions, or directors’ minutes. Mr Banks did not ever see any invoices raised by North South Construction Services, to external hirers or to anybody. Mr Banks did not see or know of any document in the nature of invoices or other documents recording acquisitions of equipment by North South Construction Services from other members of the group; although it was his understanding that all plant equipment and material used by the contracting companies were required by North South Construction Services, he did not know of any records of any such acquisitions, or of any event which constituted acquisitions from other companies in the Bianco group or which could have the effect of transferring ownership.

25 In view of the nature of the work which Mr Banks carried out I regard his evidence as showing that, while Mr Banks was working in the organisation, there were no such transactions, and the only events which might have constituted them took place wholly in Mr Bianco’s mind and consisted of no more than his intention that North South Construction Services should own the equipment. Mr Bianco was not in a position to transfer ownership of property acquired by one company to another company simply by forming an intention. The closest Mr Banks came to giving evidence of any knowledge of such event was the following at t.20: “Did you know anything of the manner in which North South Construction Services was remunerated by other members of the group? A. I know that various amounts were transferred from the Bianco companies to North South. I’m also aware of reverse transactions. My understanding was that it was the accountant’s role at the end of the financial year to effectively balance the transactions. Q. Did you ever see any paper work which lay behind those transactions? A. Other than deposit slip or may be a cheque or remittance.”

26 This passage of his evidence means that so far as Mr Banks’ knowledge extended, sums were transferred back and forward between companies in the course of the year, and at the end of the financial year the accountant’s role was to balance them; Mr Banks never saw any paper work which constituted transfers of ownership of equipment between companies, and in the inference which I draw, there was no paper work, and that at the end of the financial year the transactions of transfers of money were balanced without any paper work relating to transfers of ownership.

27 It was Mr Bianco’s evidence that after the name of Bianco Constructions Pty Ltd ACN 054 540 055 was changed to Filcon Pty Ltd in May 1999 business activity under the name Bianco Constructions Pty Ltd continued but was minor activity of completion of previous jobs under the company name. However the evidence generally showed that this is quite incorrect and there was extensive use of the name Bianco Constructions or Bianco Constructions Pty Ltd after May 1999, and not in relation to the company of that name which was formed in the year 2001. In this instance Mr Bianco was not careful in using the name of a particular company and did not have appropriate regard to the interests of persons dealing with his organisation. The distinction between one company in his group and another and the identification of the particular company through which he was doing any particular piece of business was not, in the respect shown by this use of the name Bianco Constructions, careful or meticulous, and it is unlikely that distinctions of that kind were carefully observed in any part of his business. The opening passages of his first affidavit demonstrate very clearly the lack of importance for him of attention to detail in identifying a company when he speaks of one. Transitions between identifying the company doing the subcontract work at Bardwell House as Bianco Constructions and Bianco Construction Services further illustrate this difficulty. He accepted that it was the practice within the Bianco group to deposit funds into whichever account was in need of funds, so that the company to the account of which funds were deposited was not necessarily the company to which the funds were payable; the decision which company received which funds was made by an employee in the office and not by Mr Bianco.

28 Mr Bianco said in cross-examination (t.50), in relation to some plywood which he said was bought specifically for the Bardwell House project.

“Q. It was plywood that North South Construction Services purchased?
A. Possibly.
Q. And possibly not?
A. If I didn’t purchase it with North South Construction Services I would have purchased it with another company, Bianco Constructions.
Q. It is possible that this plywood belonged to Bianco Constructions?
A. No, because you would square up at the end of the year.
Q. You would?
A. Yes, I would. The general rule is to have all your materials in North South, all your assets in North South.
Q. That happens what, on 30 June 2001, does it?
A. There is no specific time.
Q. Did it ever happen?
A. I left that, to square up the books at the end, that was left to the accountants.
Q. You don’t know whether they ever got around to it?
A. No.
Q. For all you know Bianco Constructions Services may have paid for this plywood, and is that the company which owns the plywood?
A. Possibly.
Q. Was it completely random as to which companies within your organisation paid for particular equipment?
A. Sir, the practice was that some of the contracting companies enjoyed a more favourable cash flow, so providing which ever company had the funds would purchase the materials needed to complete the job, and then there was, as I say, I left it to the accountants to square up or balance the books.”

29 There cannot be an agreement for sale between two companies, even two related companies, and a transfer of property, constituted by leaving it to the accountants to balance the books, even if the accountant did balance the books, which has not been shown to have happened. Mr Bianco’s evidence in cross-examination at pages 54 and 55 means that he acknowledged that one group of invoices were bogus; he said “The second version would be myself duplicating that invoice for the purpose of a little bit of say colourful accounting” and went on to explain the manoeuvre in which he used fabricated invoices in support of a progress payment in order to get cash to pay bonuses to employees. In his explanation for this conduct, the false documents were not prepared for the purpose of supporting the plaintiff’s case in the present litigation. However the passage does show that the invoices in question were bogus documents, and of course the episode and Mr Bianco’s explanation are strongly adverse to his credit generally.

30 Mr Bianco stated in evidence that he did not have knowledge relating to some information and documents which were altogether basic to the conduct of business by companies he controlled; his replies characteristically were to the effect that he left it to the people who worked in the office to attend to such matters. In my finding he had a low level of advertence to the organisation of companies he controlled and the structure of the group, and it is very unlikely that he consistently maintained, or maintained at all, practices under which ownership of formwork equipment was directed into North South Construction and transactions were structured to bring that about. He did not have the knowledge with which to deal with questions relating to the compliance of companies in his control with obligations to file tax returns of various kinds, including Business Activity Statements under the New Tax System which came into effect on 1 July 2000. The documents produced in evidence by the plaintiff went no distance at all to showing either that all formwork equipment acquired by companies controlled by Mr Bianco was transferred into the ownership of the plaintiff, or that the plaintiff dealt with supplier companies and retained ownership; some of the documents which the plaintiff did put in evidence were shown, to my satisfaction, to be bogus documents and attempts by the defendant to compel production of further material produced no significant results. Plainly the plaintiff is not in a position to produce documents corroborating, in a significant way, the claim that there was a practice of transferring ownership to the plaintiff, and the evidence of Mr Bianco himself about what he intended and about measures he took to bring it about does not show in any clear way that any such practice was followed. I regard Mr Bianco’s evidence as inherently unreliable but, as far as it goes, as tending to show that next to no regard was paid to the significance of the particular corporate personality involved in the particular piece of business or to the details of transactions between companies.

31 I conclude that in fact there was no practice of arranging matters so that all formwork equipment used in the hire business was acquired by North South Constructions Services, either by that company being the purchaser from an outside supplier or by agreements for transfer of ownership between companies where other companies controlled by Mr Bianco purchased the equipment; nor was there any event in which equipment already in use when the operations of North South Construction Services began was transferred into the ownership of that company. It was the plaintiff’s case that Mr Bianco intended there should be such transfers; I do not have enough confidence in Mr Bianco’s evidence even to find that he did so intend, but it is altogether clear that there was no actual practice of acting in accordance with that intention and bringing about intercompany transactions by which ownership was transferred. There were no clear proofs in support of the plaintiff’s case, and some documents put in evidence purportedly in support of it were, as defendant’s counsel contended they were, bogus documents, not genuinely produced contemporaneously with the transactions which they purported to record. The endeavour to support the plaintiff’s case with bogus documents was very adverse to acceptance of that case. An important circumstance in addressing the plaintiff’s case is that in 2001, after all the acquisitions which could be relevant to ownership of goods used on the Bardwell House site, some companies controlled by Mr Bianco passed into liquidation and out of Mr Bianco’s control, while others including the plaintiff did not. With this circumstance there came a strong motivation for maintaining that effect of actually been given to an idea or intention of moving ownership of formwork equipment into the name of the plaintiff.

32 The form of subcontract was prepared by Mr McDonald, who was employed by the defendant. Mr McDonald was not able to establish from what source he obtained the information that Bianco Constructions Pty Ltd was to be the subcontractor, or from what source he obtained the name and ACN number of that company; it may have been from an inquiry of someone connected with Bianco Group of companies, or it may have been information in the defendant’s computer from business conducted earlier. Mr McDonald was unaware of the change of name, and as he had not conducted the search it should be understood that he was unaware of the existence of a company formed later, also having named Bianco Constructions Pty Ltd but a different ACN number. In no sense can Mr McDonald or the defendant be treated as responsible for Mr Bianco’s decision to adopt the draft and enter into the subcontract on behalf or purportedly on behalf of the company which had earlier been named Bianco Constructions Pty Ltd but had changed its name to Filcon Pty Ltd. It is clear that Mr Bianco did not simply follow the form of draft contract and execute it in some way in reliance on an indication from the defendant, because the defendant’s requirement for insurance certificates was met by insurance certificates in the name of Bianco Constructions Pty Ltd.

33 The position of the defendant is rather bare of merit, except in the sense that it is in the possession of formwork equipment which formerly was on the Bardwell House site, and remedies for detention or conversion of the property can only be awarded to someone who has been proved to have ownership of the property or a better right to possession than the defendant has. The defendant is not in a position to make out a contractual right to possession arising under cl.7(c)(iii) of the subcontract because the evidence does not show that the course of conduct and notices which would lead to an entitlement under that subclause was followed, and does not show that Bianco Constructions Pty Ltd now named Filcon Pty Ltd, which purportedly conferred the contractual entitlement under cl.7(c)(iii) owned the equipment or was in any position to confer the rights purportedly conferred by cl.7(c)(iii) on the defendant. Slight as the defendant’s position is, it could only be overcome by the plaintiff if the plaintiff establishes that the plaintiff is the owner of the formwork equipment. The defendant had not received any rival claim.

34 Mr Bianco’s part in executing the subcontract disposes of some submissions by the plaintiff’s counsel which were based on the proposition that entering into the subcontract of which cl.7 was a part, and later committing breaches of the subcontract which appeared to confer an entitlement on the defendant to retain the formwork equipment, were breaches by the bailee of the terms of the bailment. Nothing or next to nothing has been established about the terms of any bailment which might be supposed to have taken place between the owner of the formwork equipment and Filcon Pty Ltd the subcontracting company, but whatever it should be taken that those terms were, it could not be understood that entering into the subcontract including cl.7 was a breach of the terms of the bailment when Mr Bianco was the controlling mind of any company which might be considered as possibly being bailor or bailee. The submission was that bailment came to an end when the bailee parted with possession to the defendant, as this was inconsistent with the terms of the bailment. In my opinion there was no basis for this contention. They were alternative contentions to the effect that the bailee was Bianco Construction Services Pty Ltd or (as its name had become by the relevant time) Millstone Construction Services Pty Ltd and that the bailment was terminated with effect on the ground of non-payment of hire charges by Bianco Construction Services, by a letter written by the plaintiff on 4 August 2001, or by Bianco Construction Services going into liquidation. In my view it should not be found that Bianco Construction Services Pty Ltd was the bailee; references to it as the subcontractor and documents such as invoices for hire charges and claims for progress payments using its name indicate the general state of confusion, but do not indicate that it was in some way substituted for Bianco Constructions Pty Ltd as the subcontractor. This group of arguments depended for a basis on its being shown that North South Construction Services owned the formwork equipment bailed, and this has not been established.

35 If it had been shown that North South Construction owned the equipment in question, the defendant’s claims under cl.7 of the Subcontract might have been assisted in some way by the fact that Mr Bianco who executed the subcontract containing cl.7 and was sole director of Filcon Pty Ltd at that time was also director of North South Construction; but this could have little force as the defendant did not follow the procedure in cl.7. It is plain that the formwork equipment now in the possession of the defendant is owned by some entity or interest associated with Mr Bianco; it is unlikely to be the case that it is all owned by one entity. The distinction between one potential owner and another is important, among other reasons because some are in liquidation, and, faint though the merits of the defendant’s position are, the plaintiff cannot succeed and overcome the defendant’s position unless it is established, on the balance of probabilities, that the plaintiff is the owner of the formwork equipment.

36 In my judgment the plaintiff is not entitled to any remedy, and there is no occasion to address further questions whether the remedy should be damages or an order for specific delivery under s.93 of the Supreme Court Act 1970, or whether a reference or inquiry should be ordered to ascertain precisely what goods are held by the defendant, or the amount of any damages.

37 Order: On the plaintiff’s claim, give judgment for the defendant with costs.

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Last Modified: 04/10/2002