Cuaresma v Delta Constructions Australia Pty Ltd and Nasr

JURISDICTION

1. There was no dispute that the work the subject of the claim is residential building work for the purposes of the Home Building Act 1989 or that Tribunal has jurisdiction pursuant to the provisions of the Civil and Administrative Tribunal Act 2013 Part 3 and the Home Building Act 1989 s 48K to hear and determine the application.

APPLICANT'S SUBMISSIONS

1. The applicant relied on the following matters as relevant to the issue of whether the first respondent authorised the second respondent to act on its behalf.
2. Christine Nasr was a director of the first respondent Delta Constructions Australia Pty Ltd (Delta Constructions) at the time the contract was entered into in July 2013 and is a cousin of the second respondent, Mr Fred Nasr. Mr Fred Nasr has over 15 years' experience in the building industry and was appointed as subcontractor and manager of Delta Constructions in early 2012. Christine Nasr was aware that Fred Nasr had engaged in negotiations with the applicant and had performed work for the applicant and she was also aware that a payment of $4,800 was made by the applicant into the Delta Constructions bank account.
3. Christine Nasr is no longer a director of Delta Constructions but remains the only shareholder of that company.
4. Fred Nasr was a signatory to the Delta Constructions bank account at St George bank and had a Delta Constructions business card identifying him as "general manager" and caused a large sign with Delta Construction's name to be erected on the applicant's property at the time the works commenced.
5. Fred Nasr held the Delta Constructions Licence Card (No 252373C) and showed it to the applicant's husband. That licence number was the same as that provided on the contract dated 17 July 2013 and on the progress claim dated 2 December 2013.
6. Fred Nasr provided to the applicant a signed contract dated 17 July 2013 on a Delta Constructions letterhead.
7. Payment claims submitted to the applicant and certifications provided to the applicant were in the name of Delta Constructions.
8. Payments were made by the applicant from time to time to Delta Construction's suppliers for invoices issued by those suppliers on Delta Constructions.
9. As well as cash payments made by the applicant for which receipts were issued, a payment of $4,800 made by the applicant was deposited in the St George bank account of Delta Constructions.
10. In addition to the above matters the applicant's written submission raised the issue of the conviction in the Local Court on 28 January 2016 of the first respondent for breaches of s 7A and of s 92(2) of the Home Building Act 1989. Reliance was placed on the Evidence Act s 92 which provides that evidence of the conviction is admissible in these proceedings and the decision of Campbell J in Gonzales v Claridades [2003]58NSWLR 188 for the principle that the burden of proof is on a person disputing the correctness of the conviction to produce evidence of its incorrectness. No such evidence was produced.
11. Further, reliance was placed on the decision of The Prothonotary of the Supreme Court of New South Wales v Sukkar [2007]NSWCA 341 for the principle that the evidence of the conviction is also evidence of the elements of the offences for which the company was convicted.
12. That is, the convictions referred to were evidence of Delta Constructions having contracted with the applicant and having demanded or received payment from the applicant under the contract for residential building work.
13. Neither Christine Nasr nor Fred Nasr was called by Delta Constructions to give evidence. The failure to call either of them is unexplained and the applicant submitted that she is entitled to rely on the principle set out in Jones v Dunkel [1959]101 CLR 298 which was explained by the Court of Appeal in RHG Mortgage Limited v Rosaria Ianni [2015]NSWCA 56 in the following terms 75 The rule in Jones v Dunkel is that the "unexplained failure by a party ... to call witnesses ... may in appropriate circumstances lead to an inference that the uncalled evidence ... would not have assisted that party's case": Cross on Evidence ("Cross"), LexisNexis (at [1215]). Any "explanation" such as unavailability or absence of recollection for the failure to call the witness must be established by evidence: West v Government Insurance Office (NSW) [1981] HCA 38; (1981) 148 CLR 62 (at 70) per Murphy J; Rowell v Larter (1986) 6 NSWLR 21 (at 24 - 25) per Young J (as his Honour then was). The "rule cannot be applied to the non-calling of a [non-party] witness unless it would be natural for the party to call the witness, or the party might reasonably be expected to call a witness": Cross (at [1215]); O'Donnell v Reichard (at 729) per Newton and Norris JJ. The circumstances for drawing a Jones v Dunkel inference are found where the uncalled witness is "a person presumably able to put the true complexion on the facts relied on [by a party] as the ground" for any inference favourable to the plaintiff: Jones v Dunkel (at 308) per Kitto J; Australian Securities and Investments Commission (ASIC) v Hellicar [2012] HCA 17; (2012) 247 CLR 345 ("ASIC v Hellicar") (at [168]) per French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ.
14. That is, the reasonable inference to be drawn from the failure of the first respondent to call either of Christine Nasr or Fred Nasr as witnesses is that the evidence each of them could have given would not have assisted Delta Construction's case.
15. The applicant relied on the following evidence;

• Statutory declaration of Cecelia Cuaresma dated 10 November 2015,
• Statutory declarations, with attachments, of Antonio Nuqui dated 10 November 2015 and 15 March 2017,
• Statutory declaration of Nicholas Blaker dated 15 March 2017,
• Expert report of Tony Ransley dated 14 October 2015,
• Expert report of Charles Blunt dated 30 September 2015.

1. The applicant relied on the principles set out by the High Court in Crabtree-Vickers Pty Ltd v Australian Direct Mail Advertising and Addressing Company Pty Ltd [1975]133 CLR 72, Pacific Carriers Ltd v BNP Paribas [2004]218CLR 451 and the decision of the Victorian Supreme Court in Flexi Rent Capital Pty Ltd v EDS Consulting Pty Ltd [2007]VSC 158.
2. The applicant's submission was that it is unclear whether Fred Nasr was working with or for Delta Constructions but that Delta Constructions, by failing to take proper safeguards to prevent misrepresentation, equipped Mr Fred Nasr with everything necessary to hold himself out as being a person with the authority to contract on behalf of Delta Constructions.
3. Reliance was also placed on the provisions of the Corporations Act (Clth) s 128, 129 the effect of which is to entitle the applicant to assume Fred Nasr had been duly appointed and had the authority to exercise the powers and perform the duties of an officer or agent of the company.
4. In regard to the evidence of Mr Micallef, it was the applicant's submission that the Tribunal cannot place any reliance on anything Mr Micallef said unless it was corroborated by uncontroversial business records or was conceded by the applicant.
5. Specifically Mr Micallef's evidence in relation to the following matters was given without regard to whether it was true or not.

• His knowledge and awareness of Fred Nasr,
• Fred Nasr being an authorised signatory to the Delta Constructions St George bank account,
• His ability to contact Christine Nasr,
• Whether St Mary's Sand and Soil was a contractor for Delta Constructions,
• His knowledge of the payment of $4,800 by the applicant to Delta Constructions.

1. The applicant's further submission was that in the circumstances the Tribunal should make a money order in favour of the applicant rather than an order pursuant to the Home Building Act s 48MA for the following reasons,

• The work performed so far is uninsured and any further work is also likely to be uninsured,
• The contract in place between the applicant and Delta Constructions is not compliant with the Home Building Act and any further work would not be the subject of a complying contract,
• Delta Constructions has been convicted of offences under the Home Building Act in relation to performing the work under the contract,
• Previous orders for rectification were ignored by Delta Constructions and given the scope of the necessary remedial work and the unsatisfactory evidence of Mr Micallef the Tribunal could have no confidence that a rectification order would be complied with.

FIRST RESPONDENT'S SUBMISSIONS

1. The first respondent did not contract, either directly or through the existence of any agency, with the applicant for the subject residential building work.
2. The contract relied on by the applicant is in the name of "Delta Constructions" whereas the correct name for the first respondent company is Delta Constructions Australia Pty Ltd.
3. Mr Micallef is the nominated supervisor and licenced builder for Delta Constructions Australia Pty Ltd and is a director of that company and was not known to the applicant prior to these proceedings. A search conducted by the applicant prior to entering into the contract would have disclosed as much.
4. The applicant was an "owner/builder" for the subject residential building work and the second respondent Fred (or Fadi) Nasr was at all material times fraudulently representing himself as the general manager of Delta Constructions by use of the contract document, payment claims made on the applicant and the business card produced in evidence.
5. At no time was the first respondent aware of any acts nor did it endorse in any way, any actions of the second respondent in regard to the subject residential building work.
6. At no time was the second respondent an officer of the company or have any authority, express or ostensible, to act on behalf of the first respondent and the first respondent is not bound by any representations made by the second respondent.
7. The absence of an ABN number from the contract document supports the first respondent's contention that the actions of the second respondent were fraudulent.
8. The Tribunal should not draw any inference from the absence of Christine Nasr and is not bound by the factual decisions of another tribunal in relation to similar issues.
9. Reliance was placed on the provisions of the Corporations Act 2001 (Clth) s 126(1) which is in the following terms A company's power to make, vary, ratify or discharge a contract may be exercised by an individual acting with the company's express or implied authority and on behalf of the company. The power may be exercised without using a common seal.
10. It was submitted that the second respondent did not have the first respondent's express or implied authority to act on it's behalf.
11. Reliance was also placed on the decision of Freeman v Buckhurst (Mangal)Ltd [1964]2QB for the circumstances in which a company can indirectly enter into a contract through an agent acting with apparent authority.

RELEVANT LAW

1. The excellent textbook on contract law, Cheshire and Fifoot "Law of Contract" by Starke and Higgins (Second Australian Edition) Part 6 deals with privity of contract and the place of agency in Australian law, at p 620 et seq where the following points are made

• A principal is bound by every contract made by it's agent with the actual authority of the principal,
• Actual authority may be express or implied,
• A principal may be bound by the unauthorised act of a person acting with the apparent or ostensible authority of the principal,
• Apparent authority refers to instances where the agent would normally be expected to have authority to act,
• Ostensible authority refers to instances in which a principal acts in such a way as to appear that he has conferred upon his agent the authority to make the contract. In those circumstances the principal is estopped from denying the validity of the transaction as against a person who dealt with the agent in the bona fide belief that the authority had actually been given.

1. Reference was made in the applicant's submission to the decision of the High Court in Crabtree-Vickers Pty Ltd v Australian Direct Mail Advertising & Addressing Company Pty Ltd [1975]133 CLR 72 where it was said: There are circumstances where the actual representation of authority may be made by the agent but in such cases it will be found that the relevant representation was made by the principal…..or by putting the agent in a position or by allowing him to act in a position from which it can be inferred that his actual representation of authority in himself is in fact correct.
2. The following principles for determining when a principal may be bound by the unauthorised actions of another were extracted from the Victorian Supreme Court decision of Whelan J in Flexi Rent Capital Pty Ltd v EDS Consulting Pty Ltd [2007]VSC 158: (a) Apparent authority operates as an estoppel preventing a principal from asserting that the principal is not bound by a contract where the principal has held the agent out as having authority. (b) The holding out may be of a general character, arising for example out of an office or position in which the principal places the agent, or it may be specific to a particular transaction. The holding out may take the form of the setting up of an organisation or structure which presents to outsiders an appearance of authority in the agent. (c) The holding out must be conduct by the principal, not the agent. A third party cannot rely upon the agent's own representation as to authority. But this does not mean that the agent's conduct is to be ignored. The principal may hold out the agent as having authority by permitting the agent to act in a certain way or to make representations about himself or herself, or the principal may hold the agent out by equipping or arming the agent with a document or thing which enables the agent to assert authority with the hallmark of authenticity. (d) The holding out may also result from permitting an agent to act in a certain manner, or by equipping or arming the agent, or by a failure to take proper safeguards against misrepresentation by the agent. (e) The principal's conduct is to be assessed as a whole and in its totality.
3. It is noted that the first respondent's conduct as a whole is to be considered and that it is the conduct of the first respondent that is relevant to the issue of whether or not an agency of ostensible authority existed.

MR MICALLEF'S EVIDENCE

1. Mr Micallef, under cross-examination, agreed that Christine Nasr was, at the time of entering into the contract, a director of the first respondent.
2. Initially Mr Micallef denied that Fred Nasr had been appointed a manager of the company but on being shown a copy of Christine Nasr's Statutory Declaration he acknowledged that he was unaware of that fact and has had no recent contact with Christine Nasr.
3. Mr Micallef claimed to have been unaware of how Fred Nasr had come into possession of the letter heads and invoices in the name of the company and was unaware of the fact that the applicant had deposited $4,800 into the company's bank account.
4. Although it was demonstrated to Mr Micallef that Fred Nasr must have had access to the company licence and other company documents he was unable to explain how that access had occurred.
5. Mr Micallef claimed to have been unaware of the proceedings against the company in the Local Court which were, on his evidence, dealt with by the other director (at that time), Christine Nasr.
6. Mr Micallef acknowledged that the company had opened an account with St George bank in May 2013 and that he, Christine Nasr and Fred Nasr were authorised signatories to that account. Although that account was closed in March 2017 Mr Micallef's evidence was that steps had not been taken to change the authorised signatories to the account.
7. Although the first respondent's submission was that the second respondent had fraudulently misrepresented the company Mr Micallef acknowledged that he had not taken up the matter with the police.
8. Mr Micallef was evasive and his evidence implausible in regard to his awareness of Fred Nasr and the role he played in the company. His evidence about recent contact with Christine Nasr (no longer a director but still the only shareholder in the company) that he had simply deleted her phone number was also implausible. His knowledge of company suppliers subsequently used by Fred Nasr was unreliable.
9. At best Mr Micallef was remiss in his duty as a director to remain aware of the activities of the company. It is difficult to accept that Christine Nasr was solely responsible for appointment of Mr Nasr as a manager and for making him a signatory to the company bank account and arming him with business cards in the name of the company, the company building licence, company invoices and letterheads and company signage to erect on building sites.

FACTS

1. It is not in dispute that at the time of entering into the contract 17 July 2013 Christine Nasr was a director of the company.
2. On Christine Nasr's evidence Mr Fred Nasr was made a manager of the company in early 2012. No evidence was provided on when his role as manager ended. That is, the second respondent was appointed manager of the first respondent in 2012 and the Tribunal is unaware of when that appointment ended.
3. On Christine Nasr's evidence the company was aware that Fred Nasr was in negotiation with the applicant and that a deposit of $4,800 had been made on behalf of the applicant into the first respondent's bank account.
4. On Mr Micallef's evidence Mr Fred Nasr was a signatory to the company's bank account from May 2013 to March 2017. That is, the first respondent armed the second respondent with the means of accessing the company's bank account.
5. Mr Fred Nasr had access to the company building licence, he was equipped with business cards in the company name, he had access to company documentation (invoices, letterheads) and he had access to site company identification signage. No explanation was given as to how and when he was permitted to have such access and there was no evidence of any attempt by the company to prevent or limit such access even after the company became aware of Mr Nasr's negotiations with the applicant.

Was the applicant's belief that she was dealing with the company reasonably held?

1. The respondent's submission suggested that the applicant ought to have done a company search on "Delta Constructions" and a search with the Office of Fair Trading to determine whether she was genuinely contracting with the company.
2. I do not accept that argument.
3. In circumstances where a person presents a business card in the company name, a building licence in the company name and provides a contract on a company letterhead it is reasonable for the consumer, in the absence of any evidence to the contrary, to assume that she is dealing with the authorised representative of the company.
4. The subsequent actions on behalf of the company (acceptance of payment to a company bank account, provision of invoices on company letterheads, erection of company signage and dealings with company suppliers) were all calculated to confirm in the mind of the applicant that she was indeed dealing with the company.
5. I am satisfied therefore that the applicant held a bona fide belief that she was contracting with Delta Constructions.

Did the company equip Fred Nasr to hold himself out to be a representative of the company?

1. Ultimately Mr Micallef's knowledge and involvement with Fred Nasr doesn't matter. The relevant consideration is the activities of the company and the issue for determination is whether those activities amounted to "holding out" that Fred Nasr was authorised to enter into contracts on behalf of the company.
2. The company building licence is an important piece of company property that enables it to contract for residential building work. One would expect that a careful and prudent company director or manager would keep it, if not under lock and key, then in a safe place such as in the custody of the licensed supervisor or under the supervision of a director or manager of the company. If Fred Nasr was armed with the company licence at some stage because he had been appointed manager of the company then it would be prudent to retrieve the licence from him when his duties in that role ceased. The first respondent provided no explanation of how the second respondent came to be in possession of the company licence or how he retained it beyond his period of involvement with the company.
3. Similarly there was no explanation of how the second respondent came to be in possession of the company stationery or signage or why he remained a signatory to the company bank account.
4. Considering all of the actions of the first respondent in their totality I am satisfied that the second respondent's unexplained access to all of the above company property was facilitated by the actions or inactions or lack of appropriate procedures by the first respondent and that amounted to a holding out by the first respondent that the second respondent was authorised to enter into contracts for the performance of residential building work on it's behalf.
5. In those circumstances I am satisfied the second respondent had and exercised the ostensible authority of the first respondent in entering into the building contract with the applicant.

THE CONVICTION IN THE LOCAL COURT

1. Even in the absence of a finding of agency of ostensible authority I am satisfied it was the first respondent who was the contracting party with the applicant.
2. The contract itself named "Delta Constructions" as the contracting builder. Mr Nicopoulos argued that is not the correct name of the legal entity that is the first respondent, which is correct. However, the contract bore the company licence number and the applicant held a bona fide belief that Fred Nasr was acting on behalf of Delta Constructions Australia Pty Ltd. The lack of accurate description of the builder's name did not alter the fact that it was the company the applicant believed she was contracting with and it was the company that Fred Nasr put forward as the contracting party.
3. In January 2016 the company was convicted in the Local Court of two offences under the Home Building Act 1989. Those offences involved the company having contracted to do residential building work for the applicant in circumstances where the requirements of s 7, 7AAA and 7E were not complied with and the company having contracted with the applicant to do residential building work in the absence of relevant statutory insurance.
4. The evidence is that the company was well aware of the charges but elected not to defend them in the Court. Further, with the departure of one director of the company the remaining director has taken no steps to appeal the decision of the Local Court and would appear to be now well out of time to do so.
5. The applicant's submission is correct that the convictions themselves are admissible in the Tribunal and are evidence not only of the convictions but also of the truthfulness of the elements that made up the facts upon which the company was convicted.
6. No attempt was made by the first respondent to refute the accuracy of the convictions or the circumstances in which they occurred. Both convictions involved a finding of fact that Delta Constructions Australia Pty Ltd had contracted with Cecilia Cuaresma to carry out residential building work.
7. I am satisfied therefore that the company, at the time of the convictions and subsequently, accepted the truthfulness of the proposition that it was the company that was the contracting party with the applicant.
8. The above reasoning may or may not operate as an estoppel to the company now denying the existence of a contract with the applicant but it is strong evidence that the company has hitherto accepted the existence of such a contract.

THE SOLATIUM

1. Item 1 of the Scott schedule prepared by Mr Ransley included an allowance of $12960 being a solatium in respect of alleged departure from the plan dimensions.
2. It was not disputed that there had been a departure by the builder from the dimensions of the agreed plans.
3. At the hearing I raised the issue with the parties of whether the Tribunal continues to have the power to award a solatium in view of the provisions of the Civil Liability Act 2002 and the subsequent decisions of the Supreme Court and Court of Appeal and invited written submissions on that issue. Neither party's submission addressed the issue.
4. The Civil Liability Act 2002 (CLA) s 3 defines non-economic loss in the following terms: "non-economic loss" means any one or more of the following (a) pain and suffering, (b) loss of amenities of life, (c) loss of expectation of life, (d) disfigurement.
5. Section 16 of that Act relevantly provides 16 Determination of damages for non-economic loss (1) No damages may be awarded for non-economic loss unless the severity of the non-economic loss is at least 15% of a most extreme case.
6. The Supreme Court in Flight Centre v Janice Louw[2011]NSWSC132 determined that inconvenience, distress and disappointment are elements of "pain and suffering" as defined under the CLA.
7. In Insight Vacations Pty Ltd v Young [2010]NSWCA 137 the Court of Appeal confirmed that reasoning and concluded that grief, anxiety, distress and disappointment were all elements of "pain and suffering" under the CLA and are therefore subject to the provisions of s 16, above.
8. A solatium is a remedy long relied on in building law. It is intended to give some recompense to the homeowner in circumstances where there has been a failure by the builder to build in accordance with the contract but the failure is not such as to justify demolition and reconstruction and cannot otherwise be readily corrected. The classic example is to be found in the case of Ruxley Electronics and Construction Ltd v Forsyth[1994]1WLR 650 where a swimming pool had been constructed slightly too shallow but otherwise entirely usable. The cost of replacement was prohibitive and the error could not be remedied. In those circumstances the Court awarded a "solatium" which was simply to make the homeowner feel better. It was never intended to have any relationship to the cost of remediation or replacement.
9. I am satisfied that a solatium awarded in a building claim falls into exactly the same category as those elements mentioned in Insight Vacations as being elements of "pain and suffering" as defined under the CLA and is therefore subject to the provisions of s 16 of the CLA.
10. The "most extreme case" is a sum that varies but is now well in excess of $500,000. Hence 15% of the most extreme case is at least $75,000. In this case the non-economic loss alleged to have been suffered is well short of that amount and therefore, pursuant to the CLA s 16, there is no power for the Tribunal to award the damages claimed for a solatium.
11. In calculating the sum to be paid I have therefore deducted the amount claimed for the solatium from the amount set out by Mr Ransley in the Scott schedule.

SECTION 48MA

1. The Home Building Act 1989 s 48MA provides A court or tribunal determining a building claim involving an allegation of defective residential building work or specialist work by a party to the proceedings (the "responsible party") is to have regard to the principle that rectification of the defective work by the responsible party is the preferred outcome.
2. I am obliged therefore to consider whether it is preferable to make an order that the company return to site to carry out remedial work rather than to make an order for monetary compensation.
3. On this issue the applicant's submission was that it is not appropriate to make an order for rectification for the reasons set out at [32], above.
4. The first respondent made no submissions at all on this issue.
5. Given that there has been no acknowledgement by the first respondent at any time that it is in any way responsible for the defective work and given the lack of candour of the remaining director of the company as a witness in these proceedings and the lack of involvement in these proceedings of the previous director I am satisfied that it is unlikely that the first respondent would perform the necessary remedial work or that, in the circumstances, a reasonable working relationship between the parties could be established.
6. Furthermore, in view of the lack of statutory insurance throughout the work and the finding of extensive defects it is unlikely the first respondent would be able to obtain necessary statutory insurance for the remediation.
7. In these circumstances it is appropriate to make a money order rather than a rectification order.

THE ORDERS

1. It follows from the determination that the second respondent acted with the ostensible authority of the first respondent that the first respondent is estopped from denying the contract entered into on it's behalf and is therefore responsible for damages arising from any breach of the warranties provided under the Home Building Act 1989 s 18B.
2. The existence of the defective and incomplete work and the value of the remediation of that work was not in dispute and is established by the expert evidence of Mr Ransley relied on by the applicant. After deducting the sum claimed for the solatium from the sum set out in the Scott schedule I arrive at the figure of $212,286.00.
3. The applicant sought orders against one or the other of the respondents, in the alternative. Hence, as the first respondent has been found liable for the damages the order shall be that the first respondent is to pay the applicant the sum of $212,286.00. I allow until 31 August 2017 for payment to be made.

COSTS

1. The applicant has been entirely successful in this application against the first respondent.
2. Accordingly it appears that the applicant should be entitled to her costs. However, in the event that there are circumstances of which I am unaware or the parties are unable to reach agreement I have made directions to deal with that issue.

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I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar 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: 08 September 2017