Cantar v Harper Project Management (Civil Claims) [2007] VCAT 650

Order the First Respondent and Second and Third Respondents to pay the Applicant the sum of $34,529.67.

1 The Applicant in this matter - D & J Concrete - is a smallish concern carrying on business as a concreter. The Applicant was represented at the hearing on 16 April 2007 by Ms Ines Dalstine and Mr Dan Canta - neither of whom is legally qualified.

2 The Respondent is named as "Fran and Keith Harper" and in the name of the Company/business box is "Harper Project Management Pty Ltd". Mr E. Riegler of Counsel appeared for this party at the hearing.

3 I heard sworn evidence from Ms Dalstine, Mr Canta, Ms Harper and Mr Harper. Each was cross-examined. Cross-examination of Ms and Mr Harper was, at times, accusatory and unhelpful. However, I allowed a degree of informality to prevail at the hearing as I sought to explain to Counsel - who, perhaps, had expected something more rigid and formal. I saw this as consistent with the Tribunal's duties, in a civil matter, where a party was unrepresented, having regard to ss97 and 98 of the Victorian Civil and Administrative Tribunal Act 1998.

4 The Applicant's claim is for $34,529.67 with interest. This is made up of three invoiced amounts: $14,520.00 invoiced on 27 November 2006; $14,976.30 invoiced on 20 December 2006; and $5,033.37 invoiced on 19 January 2007. None of those sums has been paid. That is admitted. No point is taken about the quality of the Applicant's workmanship. The position is simply that the sum is due and owing and unpaid.

5 There was no contest on this point. I can well understand, then, the frustration of Ms Dalstine and Mr Canta. Money is owed to their business for work done properly and skilfully. But it has not been paid. And no reason - except a lack of funds - is given for this. I consider this most unfair. Especially since, at some point, the work may have been done or commissioned when it was known funding was in serious doubt.

6 It was not disputed, either, at the hearing, that such money is owed by Harper Project Management Pty Ltd. I was asked, if I should make an order against that company, to bear in mind that a matter is due on in the Tribunal in late June 2007. Should I order the sum to be paid forthwith, it could affect the outcome of the compulsory conference which has been fixed. In effect, I apprehend I was being told that the company could go out of business if I should order that the sum be paid immediately - and that way, no creditors might get any money they are owed. That would certainly be very hard on them. It is not a very helpful attitude.

7 The real dispute at the hearing was whether I should also order Mr and Ms Harper to pay the amount involved. They contended, by their Counsel and in evidence, that the debt was the company's and not theirs'. Therefore, it was submitted, I should not be making any order against them. This is a defence taken by many, especially in building matters, it seems.

8 This notion, that a company is a different and separate legal entity apart from its directors, has long been the law. And it underlies many of the provisions of the Corporations Act 2001 and other Acts. A foundational authority on the separateness of the company is Salomon v Salomon & Co Ltd [1895-9] A11 ER Rep 333. At p35 Lord Halsbury LC says: "it seems to me impossible to dispute that once the company is legally incorporated, it must be treated like any other independent person with rights and liabilities appropriate to itself ...". At p 43 Lord Herschell says: "I am at a loss to understand what is meant by saying that A Salomon & Co Ltd is but an alias for A. Salomon. It is not another name for the same person; the company is ex hypothesi a distinct legal person ...". At p50 Lord Davey says: "... but here, as one of your Lordships has already observed, we have, ex hypothesi, a duly formed legal persona, with corporate attributes, and capable of incurring legal liabilities".

9 It may fairly be said that the notion of the separateness of the company is at the heart of much of company law. Yet, it is not a doctrine which is supportable - as far as directors are concerned - in all cases from a moral perspective. Perhaps it was a satisfactory doctrine two centuries ago, but today may be different. It is a fiction - of a kind that was rejected by the House of Lords in Republic of India v India Steamship Co Ltd (No 2) [1997] UKHL 40; [1998] AC 878 (esp at p913 per Lord Steyn) in respect of ships as being persons in law. In Freeman and Lockyer (a firm) v Buckhurst Park Properties (Mangal) Ltd [1964] A11 ER 630 at p645, I note, Diplock LJ also drew attention to the fact that a corporation is nothing "but a fictitious person".

10 The notion gives rise to unconscionable results in many cases. It is instrumental, too often, in enabling debtors to escape their true liabilities. It frequently happens that the debtor (who is a director) says that he or she is not liable but the company is. Then, when judgment is ordered against the company, the debtor, sometimes overnight, puts the company out of business. Or, puts the company out of business to escape an order for costs. Or, a case is pleaded against the individual debtor only to be defeated at the end because it should have been pleaded against a company. Or negotiations in mediation are frustrated by this very point being taken. Too often, separate legal personality has become the cover for fraud and deception. In so many ways, the rule, in its present form, as far as directors are concerned, has long outlived its usefulness. It now works injustices. Frequently, those it hurts most are least able to afford it.

11 The legislatures have seen through this fiction and have provided for accessorial liability under the Trade Practices Act 1974 and under the Fair Trading Acts of the States and Territories. In Victoria see the Fair Trading Act 1999.

12 Disquiet over the notion has also been expressed from time to time in the courts (see Johnson Matthey (Aust) Pty Ltd v Dascorp Pty Ltd [2003] VSC 291) and in VCAT itself (see Brien v Brighton Pool Shop [2006] VCAT 1810). Compare, however, Tamas v Victorian Civil and Administrative Tribunal [2003] VSCA 113.

13 If the notion is to be continued, the conscionable rule should be that a director of a company is liable personally on a contract (along with the company) if nowhere in his or her dealings with the other party or parties did he or she specifically say or make clear in some unambiguous way that he or she was acting solely on behalf of the company. If this is in dispute, the onus should be on the director, in his or her defence, to establish the point by evidence called. Otherwise, I consider the conscionable rule should be that both the company and the directors are liable jointly and severally. For, the company is only a legal artificiality acting via its directors. This is discussed at length by Diplock LJ in Freeman and Lockyer, above.

14 I am, however, able to decide this case without reference to any such proposed rule. It seems plain to me on the evidence that there were two contracts to do the same work - one between the Applicant and Mr and Ms Harper and one between the Applicant and Harper Project Management Pty Ltd. More than one contracting party can enter into an agreement with one Applicant. More than one contracting party can undertake liability to pay for work and labour to be done. There is nothing absurd in a party carrying out work for two other parties jointly and severally liable to pay for it - even though it is the same work involved. There is nothing absurd in those two other parties consisting of both a legal person and a natural person.

15 In this particular use I find on the evidence there were quotations provided by the Applicant to Mr Harper. See those dated October 30 and November 9 2006. They are addressed to (or for) "Mr Keith Harper Director Harper Design & Construct". But "Harper Design & Construct" is a business name, the proprietors of which are Mr and Ms Harper. I am satisfied therefore that Mr Harper was acting on behalf also of Ms Harper. It is incorrect to call him "Director" but I regard that mistake as immaterial. It is only an appellation. The fact is that the quotations are not addressed to (or for) "Harper Project Management Pty Ltd". That seems to me to mean that that company is not a party to this transaction. It is out of the picture altogether.

16 I regard those quotations as having been accepted by conduct - by the Applicant being allowed to carry out, and carrying out, the work and labour in question for a sum to be paid.

17 In this particular case also, I find on the evidence that there was a subsisting co-extensive contract between the Applicant and Harper Project Management Pty Ltd. I refer to the purchase orders of the latter addressed to the Applicant. They order, in effect, the same work to be carried out with some differences. There was nothing to show that Harper Project Management Pty Ltd took over the first contract from Mr Harper in his capacity (along with Ms Harper) as proprietor of "Harper Design & Construct" or ratified it, in some fashion. Or, that the first contract was terminated by agreement in some way.

18 I regard the Applicant as having adopted or accepted this second contract again by conduct - by the Applicant carrying out and being allowed or directed to carry out the work and labour in question for a sum to be paid.

19 I cannot regard those purchase orders, as was submitted to me, as a counter offer. A counter offer by a party arises where that party has rejected an offer already made and makes another one usually in substitution. But the quotations of the Applicant I have referred to did not constitute offers made to Harper Project Management Pty Ltd. They were directed to Mr Harper of "Harper Design & Construct" which is not "Harper Project Management Pty Ltd". So the purchase orders could not constitute a counter offer by the Company. But I agree they did constitute at the least an offer - by Harper Project Management Pty Ltd - which was accepted.

20 In finding that both Harper Project Management Pty Ltd and Mr and Ms Harper are jointly and severally liable to the Applicant - as I do - I have taken into account the terms of an acknowledgement written by Ms Harper and signed by Mr Harper. That is, it involves both of them and both of them and Harper Project Management Pty Ltd as well. It reads as follows:

We acknowledge that we owe D + I Concrete in the sum of 34K - We also acknowledge that we are current in dispute with the Nicolas and Andrew Fedaravicz for the final progress claim which has not been paid to us. We are attending VCAT on the 15th March to attempt to resolve this issue. Contrary to the Architects advise our claim including your work has not been paid.

Extra footings + paid work was not signed off until the 29th January + has not been paid for.

I have relied also on s97 of the Act requiring me to proceed fairly and to have regard to the "substantial merits" of the case. The "substantial merits" require me, I consider, to have regard to the terms of the acknowledgement.

21 I am unable to read the references in that acknowledgement to "we" and "us" as meaning other than both Mr and Ms Harper together and Harper Project Management Pty Ltd. Those references cannot be read singularly - as referring only to the company. They would then be lacking meaning.

22 It was submitted I should not rely on that acknowledgement because to do so would be to construe the contract with Harper Project Management Pty Ltd by reference to subsequent conduct. There plainly is a rule to the effect - that subsequent conduct may not be relied on in this way: see FAI Traders Insurance Co Ltd v Savoy Plaza Pty Ltd [1993] 2VR 343 at 350 per Brooking J. But I am not relying on the acknowledgement to resolve an ambiguity in an instrument at all. There is not, in my view, any ambiguity in an instrument I am resolving. I am very clear that there were two subsisting co-extensive agreements - one with Mr and Ms Harper and one with Harper Project Management Pty Ltd - accepted in a similar way. The acknowledgement simply confirms me in this view. It is not a document I am relying on for contractual purposes. It is a document of relevance for evidentiary purposes. Perhaps even, in a court of pleadings, Mr and Ms Harper would be forbidden to raise the defence they are relying on, by virtue of this acknowledgement.

23 It was submitted to me also that I should not take the acknowledgement into account because it was prepared in circumstances of duress. I am unclear about what the submission was in law which was being made to me. Duress may be an element in a contractual defence but as I understood it I was being asked by Mr Riegler to hold that the acknowledgement could not be relied on to interpret the agreement between the parties. How can the acknowledgement, however, be both a document amenable to a contractual defence yet not be a document I can rely on to interpret an agreement? In any event, I consider the evidence of duress was unsatisfactory and weak. I was not persuaded at all that Mr and Ms Harper were subjected to any force or compulsion to prepare and sign the acknowledgement. This is not, moreover, a criminal proceeding. It is true, it seems, that the police were present when the acknowledgement was written up. But they were called by Mr and Ms Harper - not by Ms Dalstine or Mr Canta, as I understand it. The situation was obviously a heated one - but that does not, of itself, mean the acknowledgement was the product of duress. Indeed, perhaps duress is ruled out by the presence of the police. I was not persuaded, in any event, that the acknowledgement did not assert simple truths and matters of fact.

24 I am satisfied I may rule that the sum of $34,529.67 must be paid by Mr and Ms Harper and by Harper Project Management Pty Ltd jointly and severally. It is admitted as I say that the money is owing by the latter. But in my view it is owing (jointly and severally) by them also. I am able to reach this conclusion without direct reliance on the Fair Trading Act 1999 and its accessorial liability provisions. Both contracts in my view are supported by consideration. Each subsists - relating to the same subject matter. Obviously, though, there could be many such cases occurring where there are, arguably, two contracts: one with the company and one with the directors of the company also. Consideration for one could be entry into the other. Analysis of this nature simply recognizes realities - that directors should not be able to use the subterfuge of the corporate veil.

25 In reaching my decision I have not taken into account the faxed copy of a business card sent subsequent to the hearing by the Applicant.

26 I am not persuaded I should deprive the Applicant of the fruits of their victory by staying payment. The money due has been outstanding for a long time and the work was done satisfactorily and in a tradelike way by all accounts.

27 I order that the money be paid forthwith.

28 Interest also was claimed. I was given nothing to go on by which I might order interest. Usually interest is payable on outstanding amounts but if a party wants to claim it they should clearly specify the basis for it being ordered. I decline to order it.