Cincotta v Russo

The course of events

1. In about November 2013 Mr Cincotta had this conversation with Mr Russo: "[Mr Cincotta]: Hi Sam, our daughters go to school together and we've met before. I'm interested in renovating a house at Concord West. Would you be interested in quoting the job? [Mr Russo]: Yes, I am interested. [Mr Cincotta]: Great. I will get you the designs."
2. 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. 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. On 2 January 2014 the Cincottas met Mr Russo at his home in Abbotsford. The following conversation occurred: "[Mr Russo]: I have prepared a contract for the job. I will fill out the details now with you so you are clear and comfortable with everything. [Mr Cincotta]: No problem. [Mr Russo]: Look, I don't have my builder's licence with me right now, I am told it is in the post, as it is being transferred from Sydney Building & Carpentry Services to my personal name. As soon as this Christmas period is over I should have my licence. [Mr Cincotta]: Okay, no problem - as long as we are dealing with you, it's fine. [Mr Russo]: I am licenced under my former company, Sydney Carpentry & Building Service, which was in partnership with Mr Mario Cantale. I will be receiving my new building licence in my personal name after commencing works on the Property because I am in the process of terminating my partnership with Mr Cantale of Sydney Carpentry & Building Service. [Mr Cincotta]: Okay - as I said, as long as we are dealing with you, we don't have a problem. We are not the professional builders, so we trust that you have everything sorted to do the job."
5. Mr Cincotta said: "I then saw Mr Russo make hand written amendments to a document which appeared to be a booklet or a contract. The document was a template form MB4 Construction Contract prepared by the MBA."
6. 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. In the schedule to the Contract Mr Russo answered "yes" to the question: "Does the contractor Builder hold a current Builder's licence?"
8. 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. 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. The following conversation then occurred: "[Mr Cincotta]: This is all fine. I really want to be [in] the house before Christmas this year. Do you think we can do that? [Mr Russo]: For sure - that won't be a problem. I have included that I will need 200 days. [Mr Cincotta]: Don't you have to get some sort of compulsory insurance? [Mr Russo]: Yes, I will have that. [Mr Cincotta]: When you can, please send to me the insurance paperwork for our records. [Mr Russo]: Okay, will do."
11. Mr Cincotta said that: "At no time during any discussion with Mr Russo did he tell me or my wife that Mr Russo would be undertaking our works on behalf of a company or that we were entering a contract with Mr Russo's company. If my wife and I had known that we were not dealing with Mr Russo personally (as opposed to his company), we would not have engaged Mr Russo. It was important to us that Mr Russo was the builder because that would mean that Mr Russo had some 'skin in the game', so that we were comfortable that he was less likely to go bust than if it was a company. I knew that Mr and Mrs Russo sent their children to good schools and I presumed therefore that Mr Russo was a financially secure individual."
12. On 10 January 2014 Mr Cincotta drew a cheque in favour of "S.E.R Cons" for $30,000.
13. 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. 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. 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. 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. 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. 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: "Generally speaking, where a party signs a contract without qualification as to the capacity in which they are signing, they are taken to be contracting personally. This may be otherwise where disclosure of the agency is made, but it needs to be clear that the party is acting as agent in the legal sense: [G] Treitel, [The Law of Contract (11th ed, 2003, Sweet and Maxwell) at] 727. In Universal Steam Navigation Co v James McKelvie and Co [1923] AC 492 an agent was not held personally liable where they had signed 'as agent'. The question was what that meant. Lord Sumner (at 501-502) considered that, in the circumstances of the case, the words could only mean: 'I am not liable but someone else is and he only'. On the other hand the words 'This vessel was chartered on behalf of … for account of …' was not held to mean that the parties intended the agent not to be liable as charterer: Tudor Marine Ltd v Tradax Export S.A. (The Virgo) [1976] 2 Lloyd's Rep 135. In the present case there was no qualification made by Dartbrook [the agent] as to the capacity in which it contracted. The knowledge of a third party of the existence of the principal is not sufficient to excuse an agent from liability: Stanley Yeung Kai Yung v Hong Kong and Shanghai Banking Corporation [1981] AC 787 at 795. To do otherwise would permit oral evidence to contradict the written agreement: Basma v Weekes [1950] AC 441 at 451. In the present case there is nothing to suggest that the parties intended that Dartbrook not be liable as charterer. Even if one were to have regard to Hyundai MM's state of knowledge, it could not be assumed that it understood Dartbrook was not intended to have that liability. It merely knew that it was acting for the joint venture in connexion with its sale."
4. 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. 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. Those representations were false.
3. 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. 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. It is also true that Mr Russo placed Bespeak's ABN on the Contract.
6. 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. 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. It follows that the Cincottas are entitled to judgment, for damages to be assessed, against Mr Russo.
9. 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]: "[O]nce a third party has sued the agent to judgment he cannot thereafter, without setting aside that judgment, sue the undisclosed principal even if the existence of the principal was now known to the third party at the time when the judgment was obtained. This proposition rests not on the doctrine of election which depends in general upon knowledge of relevant facts but on another principle, namely that when judgment is obtained on a cause of action the cause of action merges in the judgment."
10. Thus, entry of judgment against Mr Russo will preclude entry of judgment against Bespeak.
11. I enter judgment in favour of the plaintiffs against the first defendant for damages to be assessed.
12. I order that the first defendant pay the plaintiffs' costs of the proceedings to date.
13. 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.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 15 March 2019