Cincotta v Russo

1. [1]

   The plaintiffs, Mr John and Mrs Rosa Cincotta, are the registered proprietors of a property in Concord West (“the Property”). Without intending any disrespect or over familiarity, I will refer to Mr and Mrs Cincotta as “the Cincottas”.

2. [2]

   At all relevant times:

3. [3]

   Mr Russo is an equal shareholder in Bespeak. His wife is the other shareholder. Mrs Russo is the sole director.

4. [4]

   On 2 January 2014 the Cincottas entered into a contract (“the Contract”) with Mr Russo to do residential building work at the Property for a contract price of $610,000. They claim that the work was not done in accordance with the Contract, nor in accordance with the warranties implied by the HBA, and that they have suffered damage as a result.

5. [5]

   The Cincottas contend that:

6. [6]

   The reason the Cincottas seek to have damages assessed is that, during the hearing, it became clear that they were not in a position to prove what damage they have suffered as a result of the contractual breaches for which they contend. I was persuaded that, if the Cincottas were otherwise successful, I should accede to that request and refer out the quantification of their claim.

7. [7]

   Although Mr Russo filed a Technology and Construction List Response, he served no evidence and did not appear at the hearing.

8. [8]

   Bespeak is in liquidation. On 4 March 2019 I granted Mr and Mrs Cincotta leave, pursuant to s 500(2) of the Corporations Act 2001 (Cth) to proceed against Bespeak on the basis of their undertaking to the Court not to enforce any judgment obtained by them against Bespeak otherwise than by proving in that company’s winding up. The liquidator of Bespeak has indicated that neither he nor the company proposed to defend the proceedings. Neither appeared at the hearing.

9. [9]

   There were numerous difficulties with the residential building work carried out at the Property. Those defects are described, in great detail, in an expert report prepared by a registered building consultant, Mr Vince Shamieh, dated 4 September 2015.

10. [10]

    The defects included that:

11. [11]

    Mr Shamieh reached the following conclusions:

12. [12]

    There is no contest to any of these matters. I am satisfied the Cincottas are entitled to damages against one or other of Mr Russo and Bespeak for breach of contract and will make orders referring the quantification of those damages out to an appropriate expert.

13. [13]

    The remaining matter for consideration is whether, as the Cincottas contend, they are entitled to relief against Mr Russo.

14. [14]

    That question requires consideration of events leading up to, and after, the Contract.

The course of events

1. [15]

   In about November 2013 Mr Cincotta had this conversation with Mr Russo:

2. [16]

   On 27 November 2013 Mr Russo gave Mr Cincotta a “Quotation Report” headed “S.E.R Constructions”. Evidently, Mr Russo’s initials are “SER”. The document stated that “SER Constructions” was “a nominee of Bespeak Pty Ltd”. The Quotation Report was for new additions and alterations including a swimming pool at the Property. The “total construction cost” specified in the quotation was $610,000 including GST.

3. [17]

   The quotation concluded with the words “Kind Regards Sam Russo” although the copy in evidence does not bear Mr Russo’s signature. The Cincottas signed the document.

4. [18]

   On 2 January 2014 the Cincottas met Mr Russo at his home in Abbotsford. The following conversation occurred:

5. [19]

   Mr Cincotta said:

6. [20]

   Adjacent to the provision in the Contract for “BUILDER”, Mr Russo wrote his name, “Saverio Russo”. Adjacent to the provision for “LICENCE NO”, Mr Russo wrote his supervisor certificate number. Adjacent to the provision for “ABN NO” Mr Russo wrote Bespeak’s ABN.

7. [21]

   In the schedule to the Contract Mr Russo answered “yes” to the question:

8. [22]

   That answer was incorrect. Mr Russo did not hold a builder’s licence. He was, rather, a nominated supervisor of the party that did hold the relevant licence, Bespeak. In his Response, Mr Russo admitted that his qualified supervisor certificate stipulated that he could not contract directly with consumers.

9. [23]

   Mr Russo and the Cincottas then signed the Contract. The work was described in the Contract as “new house and swimming pool”. The contract price was $610,000.

10. [24]

    The following conversation then occurred:

11. [25]

    Mr Cincotta said that:

12. [26]

    On 10 January 2014 Mr Cincotta drew a cheque in favour of “S.E.R Cons” for $30,000.

13. [27]

    On 11 February 2014 QBE Insurance (Australia) Ltd issued a Certificate of Insurance for Home Warranty Insurance. The Certificate was addressed to the Cincottas and named the “builder” as Bespeak and recorded Bespeak’s Builder’s Registration number (which corresponds to its Contractor Licence number). Mr Russo did not cause that document to be given to the Cincottas. The Cincottas’ solicitor received a copy of the document over a year later, on 25 May 2015.

14. [28]

    On 15 May 2014 Mr Russo gave Mr Cincotta a further Quotation Report of an amount of $19,800 including GST in relation to the supply and installation of materials to build an attic. That document was on the letterhead of “S.E.R. Constructions”. The footer read “A Nominee of Bespeak 3 Pty Ltd” and set out Bespeak’s ABN.

15. [29]

    Thereafter the Cincottas received a series of invoices from “S.E.R Constructions” each of which recorded a “Builder Licence” of 266447C, the number of Bespeak’s Contractor Licence.

The law of agency

1. [30]

   The general principle, which is founded in privity of contract, is that “if a [person] signs a written contract, [that person] is to be considered as the contracting party, unless it clearly appears that [that person] executes it as agent only”: G E Dal Pont, Law of Agency (3rd ed, 2014, LexisNexis Butterworths) at [23.3] quoting Cooke v Wilson (1856) 1 CBNS 153 at 164; (1856) 140 ER 65 at 69. This principle has been cited recently in the Court of Appeal: see Taheri v Vitek (2014) 87 NSWLR 403 at 412; [2014] NSWCA 209 at [31].

2. [31]

   Whether an agent is liable where he or she contracts as agent for a named or unidentified principal will turn on the facts of each case, as that determination depends on the intention of the parties. The intention of the parties, in turn, is to be deduced by construing the terms of the particular contract as a whole and in their context, with regard to the surrounding circumstances: see Law of Agency at [23.10].

3. [32]

   These principles of the law of agency were succinctly summarised and applied by Kiefel J (as her Honour then was) in Hyundai Merchant Marine Co Ltd v Dartbrook Coal (Sales) Pty Ltd [2006] FCA 1324 at [105]-[106]; (2006) 236 ALR 115 at 139-140:

4. [33]

   The relevant inquiry is what a reasonable person, with the knowledge of the communications between the parties and the surrounding circumstances, would conclude that the parties had intended: Pethybridge v Stedikas Holdings Pty Ltd [2007] NSWCA 154 at [54].

Consideration

1. [34]

   Mr Russo executed the Contract as “Builder”. Prior to executing the contract he informed Mr Cincotta that he had a builder’s licence and that he was the person with whom the Cincottas would be dealing under the Contact.

2. [35]

   Those representations were false.

3. [36]

   Mr Russo intended that the building work be carried out by Bespeak. But he did not disclose this to the Cincottas and, in my opinion, there was no reasonable basis upon which the Cincottas could have concluded that this was so.

4. [37]

   It is true that the 27 November 2013 quotation referred to Bespeak, and that it follows that the Cincottas were aware of the existence of that company.

5. [38]

   It is also true that Mr Russo placed Bespeak’s ABN on the Contract.

6. [39]

   But I see no reason to conclude that reasonable people in the position of the Cincottas would have thereby understood that Mr Russo was intending to execute as agent for Bespeak.

7. [40]

   This is not a case where the identity of the principal that was to carry out the building work was not disclosed. This is a case where the fact that a principal, Bespeak, was to carry out the building work was not disclosed. The fact that Bespeak, under the business name “S.E.R. Constructions”, carried out the work, and invoiced and was paid for that work, indicates that Mr Russo entered the Contract as agent for Bespeak. Bespeak was in fact the principal. But it was an undisclosed principal.

8. [41]

   It follows that the Cincottas are entitled to judgment, for damages to be assessed, against Mr Russo.

9. [42]

   The Cincottas accept that once such judgment is entered, they are not entitled to a judgment against Bespeak. As explained by Gibbs and Mason JJ in Marginson v Ian Potter & Co (1976) 136 CLR 161 at 169; [1976] HCA 35 at [12]:

10. [43]

    Thus, entry of judgment against Mr Russo will preclude entry of judgment against Bespeak.

11. [44]

    I enter judgment in favour of the plaintiffs against the first defendant for damages to be assessed.

12. [45]

    I order that the first defendant pay the plaintiffs’ costs of the proceedings to date.

13. [46]

    I invite the legal representatives of the plaintiffs to prepare short minutes to provide for the question of quantification of damages to be referred out.