Was Entirity's contract with Filadelfia?
8On 5 February 2008, Filadelfia, as owner, and Zebicon, as builder, signed a building contract substantially in the form of the Housing Industry Association Limited's Plain Language Building Contract for New Home Construction. Filadelfia was 50 percent owned by Mr Tony Merhi through a company known as Stabla Pty Ltd and 50 percent owned by Zebigroup Pty Ltd, whose shareholders were Mrs Silvana Zerilli and Mr Frank Bilotta. It had two directors, Mr Merhi and Mr Bilotta. Its principal place of business at the time was at premises in Toongabbie. Zebicon was owned by Mrs Zerilli and Mr Bilotta. Mr Emanuel Zerilli, Mrs Zerilli's husband, was its sole director. Its principal place of business was at premises in Leichhardt. At the time, Mr Bilotta was employed as a construction manager with it. An administrator was appointed to Zebicon on 22 March 2010, although the administration is likely to finish shortly as a result of a deed of company arrangement.
9Clause 22.2 of the building contract provides:
The Builder may subcontract any part of the Building Works but remains responsible for all of the Building Works .
"Building Works" is defined in cl 1.1 to mean "the Building Works to be carried out, completed and handed over to the Owner in accordance with this Contract as shown in the Contract Documents and including Variations ". The work is described in the contract as:
The construction of the three (3) residential flat buildings comprising fifty (66) [sic] Apartments in accordance with Development Consent No. 10732 of 2006, and the approved DA & CC plans and specifications.
10It is clear from these provisions that Zebicon was responsible for building the development. It could either do so itself or it could engage subcontractors to do so on its behalf. However, if it did the latter, it was still responsible for the work done by those subcontractors. This is not a case where Zebicon was engaged by Filadelfia to supervise contractors who were engaged directly by Filadelfia.
11The building contract was for a lump sum of $15,620,000. The total cost of the project was to be funded by ING Bank, which took a mortgage over the property.
12Mr Paul Barlow is the sole director and shareholder of Entirity. He, with leave, appeared on Entirity's behalf at the hearing. There is no suggestion that he or anyone else from Entirity knew of the terms of the building contract between Filadelfia and Zebicon.
13The possibility of Entirity performing the electrical works at the Wahroonga development was first raised by Ms Natalie Werch. Ms Werch was Zebicon's bookkeeper, although she also did bookkeeping work and other administrative tasks for Filadelfia and, in fact, the address given by Filadelfia as its principal place of business at the time was also Ms Werch's residence. Ms Werch also owned a company known as ACA Communications Pty Ltd. It appears that Ms Werch was a friend of, or acquainted with, Ms Hyde, who is Mr Barlow's sister and who is employed as Entirity's office and administration manager.
14In March 2008, Entirity was doing some work for ACA Communications on the NSW central coast. While Mr Barlow was working on that project, Ms Werch suggested to him that Entirity may be interested in doing the electrical work for the Wahroonga project and subsequently she spoke both to Mr Bilotta and Mr Zerilli about that possibility.
15On 4 April 2008, Ms Werch telephoned Mr Barlow and asked if he could arrange for a technician from Entirity to do some preliminary work at the Wahroonga site, which he did.
16On or about 9 April 2008, Ms Hyde prepared an invoice for the preliminary work performed by Entirity. Originally, the draft invoice was addressed to ACA Communications. However, at about the time the invoice was prepared, Ms Werch telephoned Ms Hyde and asked her to address the invoice to Zebicon. Ms Hyde amended the draft invoice by hand. A final invoice was prepared from that amended draft. It is dated 9 April 2008 and is addressed to Zebicon.
17On 18 April 2008, Ms Werch emailed Mr Barlow a set of tender drawings for the project. It is unclear whether Mr Barlow met with either Mr Bilotta or Mr Zerilli before that time. In addition, there is a dispute about whether Mr Zerilli at some point also handed Mr Barlow a copy of the tender drawings. Nothing, however, turns on the resolution of these matters.
18At the time that Mr Barlow was provided with a copy of the drawings, Filadelfia had lodged an amended development application to combine two of the buildings that comprised the project into one. The amended DA did not involve any significant changes to the carpark for the development or alter the number of units to be built. Ultimately, the amended DA was the subject of an application by Filadelfia to the Land and Environment Court which failed and the amended development did not proceed. However, at the time the electrical works were put out for tender, it was expected that the amended DA would be approved. Consequently, the plans provided to Mr Barlow were the amended plans. Those plans indicated that they had been prepared for Filadelfia.
19Entirity submitted four proposals for the electrical work in all. Each proposal was described as being "for Filadelfia Pty Ltd". Mr Barlow gave evidence, which I accept, that he handed a copy of the first version of the plans to Mr Bilotta at the offices at Leichhardt at a meeting which occurred on 16 May 2008. The likelihood is that Mr Zerilli was also present at that meeting. That was Mr Bilotta's evidence, and Mr Zerilli gave evidence that he attended a number of meetings with Mr Barlow. The meeting was held in Zebicon's offices. Mr Zerilli had overall responsibility for the contractual administration of the project whereas Mr Bilotta was the project manager on site. It is natural in those circumstances that Mr Zerilli would attend a meeting in which an important contractor presented its proposal.
20Following discussion of the proposal, Mr Barlow agreed to submit an amended proposal. There is a dispute about what happened next and, in particular, the extent of Mr Barlow's dealings with Mr Bilotta and Mr Zerilli. Mr Barlow says that he dealt principally with Mr Bilotta and that it was Mr Bilotta who was responsible for awarding the contract for the electrical work. On the other hand, both Mr Bilotta and Mr Zerilli say that Mr Zerilli was principally responsible for awarding the contract for the electrical works and that it was Mr Zerilli who had most of the meetings with Mr Barlow. In my opinion, little turns on the resolution of this dispute. Mr Barlow attached significance to the issue because it was his submission that he dealt with Mr Bilotta as a representative of Filadelfia. But even if Mr Barlow dealt principally with Mr Bilotta, it does not follow that Mr Barlow was dealing with Filadelfia. Mr Bilotta was employed as the project manager for the Wahroonga site by Zebicon. It is to be expected that he would have dealings with subcontractors in that capacity. On the other hand, if the true position is that Zebicon was a project manager acting on Filadelfia's behalf, then there is nothing surprising if Mr Zerilli had extensive dealings with Mr Barlow as the director of Zebicon acting in that capacity. In any event, the likelihood is that Mr Barlow had significant dealings with both Mr Bilotta and Mr Zerilli. Each played an important role in relation to the project and each had an interest in the selection of the contractors who were going to perform the work. It is also relevant that Mr Barlow had some contact with Mr Sanchez who described himself in emails he sent to Mr Barlow as "Construction Manager Zebicon Pty Ltd", although there is also evidence that, on occasions, Mr Sanchez sent correspondence to others on behalf of Filadelfia.
21There are two other events that occurred before or at the time the contract was awarded to which particular significance was attached during the course of the hearing.
22The first of those is that Mr Barlow says that, when he presented the first version of Entirity's proposal to Mr Bilotta, Mr Bilotta gave him a copy of a quote for the electrical work at Wahroonga dated 18 September 2007 from Citigroup Electrical Pty Ltd. That quote described the "customer" as "Filadelphia P/L" [sic]. It was for an amount of $675,000 plus GST. Mr Barlow says that Mr Bilotta told him that he needed to do better than that quote. Mr Barlow places some significance on this evidence because according to him it points to Filadelfia being the contracting party. Mr Bilotta disputes that evidence. As I have said, Mr Zerilli does not refer to this meeting specifically in his affidavit. I prefer the evidence of Mr Bilotta on this issue. The quote from Citigroup Electrical was an old one which was given before Filadelfia entered into its contract with Zebicon. Mr Bilotta had sought or had been given quotes by a number of other entities at about the time Mr Barlow presented his first quote. In particular, on 13 May 2008 (3 days before Mr Barlow presented his first quote), Multi Purpose Electrical Services Pty Ltd faxed Mr Bilotta its quote. That quote, which was addressed to Zebicon, was for an amount of $625,000 plus GST. It strikes me as implausible that Mr Bilotta would provide Mr Barlow with an out of date quote for an amount that was more than a recent quote that had been provided to Mr Bilotta and would ask Entirity to better that out of date quote.
23The second matter is of much greater significance. On 6 June 2008, Mr Barlow attended the Leichhardt offices to present the final version of his quote. Some time between then and 25 June 2008, when Entirity commenced work at the site, Mr Zerilli says there was a meeting with Mr Barlow at which Ms Werch may also have been present and at which Mr Zerilli told Mr Barlow that Entirity had been successful in tendering for the work. Mr Zerilli says that, during that meeting, there was a conversation to the following effect:
Mr Zerilli You keep putting Filadelfia on the proposal, you need to change that. You are aware that if you are to be engaged, you are to be engaged as a subcontractor by Zebicon, the builder. Filadelfia is the developer.
Mr Barlow I have Filadelfia on the proposal as the drawings are in the name of Filadelfia and not Zebicon.
Mr Zerilli It's common for the plans to be in the name of the developer, Entirity is being engaged by Zebicon, the builder. You need to change it.
Mr Barlow Okay.
24Mr Barlow denies this conversation. He does not explain in his evidence the circumstance's in which he says Entirity's quote was accepted except that he says it was accepted by Mr Bilotta.
25I prefer Mr Zerilli's evidence in relation to this issue. There are a number of reasons for that.
26First, Mr Zerilli's evidence is consistent with the objective facts. There is no doubt that Zebicon had entered into a building contact with Filadelfia. Mr Barlow submitted that that contract was a sham. The basis for that submission was that the contract called for a development of three buildings whereas the work for which Entirity was asked to tender called for two. But that does not make the contract a sham. Zebicon was required under the contract to build three buildings. It was hoped by Filadelfia that there would be a variation to that contract following the approval of an amended DA. That approval was never granted and, as a consequence, Zebicon proceeded to build the project in accordance with its contractual obligations. That, of course, entailed a revision to the work that Entirity was required to do and, on 3 October 2008, Ms Werch sent Mr Barlow revised plans describing that work. Mr Barlow also submitted that these facts meant that Entirity's contract could not be with Zebicon because the work that Zebicon was required to perform was different from the work that Entirity was required to perform. But again, when looked in context, I do not think that that demonstrates that Zebicon did not engage Entirity. Entirity was engaged on the basis of an anticipated change in the building work; and it is clear that, as between Filadelfia and Zebicon, that changed work would be performed by Zebicon. It is entirely consistent with that that Zebicon would give Entirity a copy of the plans that reflected the work that Zebicon would be required to undertake either directly or through its subcontractors.
27Second, and connected to the first point, I think that the likelihood is that Mr Zerilli would have been conscious of the contractual relationships between the parties and that he would have regarded them as being of some significance. It is clear that Mr Zerilli had substantial experience in the construction industry. He, no doubt, would have wanted Zebicon to get paid and he would no doubt have been conscious that Zebicon would need to establish not only to Filadelfia but, more importantly, ING Bank that Zebicon had performed its work in accordance with the construction contract and its legal obligations. Consequently, I think that it would be of some significance to Mr Zerilli that Zebicon received invoices addressed to it so that it could submit those invoices in support of any payment claims it made; and it would be natural for him to raise that issue with Mr Barlow at the time that he told Mr Barlow that Entirity had been awarded the contract. On the other hand, at the time, it would have been of no significance to Entirity whether it was engaged by Zebicon or Filadelfia, and consequently it would not be surprising if Mr Barlow paid little attention to the issue.
28Third, the contractual relationships between the parties would also have been of some significance to Mr Bilotta. He, like Mr Zerilli, had substantial experience in the construction industry. He was no doubt aware that Filadelfia was obliged to pay Zebicon under the construction contract and relied on ING Bank to fund those payments. It seems unlikely that he would have said anything to Mr Barlow that committed Filadelfia to paying Entirity. Again, it seems natural in those circumstances that he would have left the final contractual negotiations to Mr Zerilli.
29Fourth, it is clear that Mr Barlow was aware of Zebicon. He had received emails from Mr Sanchez who described himself as a construction manager with Zebicon. He attended meetings at Zebicon's offices. He accepts that he was told by Ms Werch that Entirity should make its invoices out to Zebicon, which is what it did. Ms Hyde gave evidence that Ms Werch made a similar request of her. However, neither Mr Barlow nor Ms Hyde suggest that they queried this instruction. On the contrary, it seems clear that Entirity had no difficulty in complying with it. The most plausible explanation of this fact is that Mr Barlow had been told that Zebicon was the builder.
30Fifth, it is clear that the other electrical contractors who tendered for the work were told that Zebicon was the builder, since they addressed their quotes to it. In those circumstances, it seems likely that Entirity was given the same information.
31After the contract was awarded, Entirity commenced work in late June 2008. The first part of the work was performed on the carpark while Filadelfia was waiting for approval to its amended DA. Work was then suspended for approximately three months pending that approval. When that approval was refused work recommenced some time in October 2008 in accordance with the original plans. As I have said, all Entirity's invoices were addressed to Zebicon. All payment schedules and remittance advices were sent by Zebicon and all payment certificates were issued by Entirity to Zebicon except one. The exception was that on 1 September 2009 Entirity issued a payment certificate certifying a payment "from Leading Ceramics Pty Ltd for Zebicon Pty Ltd". Leading Ceramics was Mr Zerilli's company and it made the payment in circumstances where, by that time, Zebicon was in financial difficulties for reasons unassociated with the Wahroonga project. In addition, Mr Barlow signed a number of statutory declarations which formed part of the subcontractor's statements provided under the Workers Compensation Act 1987, the Payroll Tax Act 2007 and the Industrial Relations Act 1996. In those statutory declarations, Mr Barlow certifies that Entirity had a contract with Zebicon.
32On 15 September 2009, Zebicon served notice of termination of the contract on Entirity. Entirity replied to that letter on 17 September 2009 in a letter drafted by its solicitors. That reply disputed Zebicon's right to terminate the contract. Entirity sent a further letter to Zebicon on 22 September 2009, again drafted by its solicitors, asserting that Zebicon had repudiated the contract and giving notice that Entirity accepted the repudiation and terminated the contract itself. Nowhere do the letters sent by Entirity say that Entirity's contract was with Filadelfia and not Zebicon.
33Mr Barlow tried to deal with this material principally in two ways.
34First, he submitted that Entirity was forced to provide the documents it did in order to get paid; and Ms Hyde gave evidence to that effect.
35Second, Mr Barlow said that it only became apparent to him after Entirity sent its letters dated 17 and 22 September 2009, and after examining all the facts, that the contract was with Filadelfia and not Zebicon. Underlying this submission was the view that Entirity had made its proposals to Filadelfia, the last of those proposals had been accepted and that, as a result, the contract must have been with Filadelfia.
36I do not accept either of these submissions.
37I do not think that Entirity was forced to provide documents that it knew to be false in order to get paid. There is no contemporaneous evidence that suggests that that was the case. In addition, the submission is inconsistent with Mr Barlow's evidence that he did not appreciate that the contract was with Filadelfia until after it was terminated.
38There are two principal difficulties with Mr Barlow's second submission. First, it is inconsistent with the finding that I have made that Mr Zerilli explained to Mr Barlow that Zebicon was the builder. Second, it is clear that post-contractual conduct can be taken into account in determining whether a contract was formed: see, for example, Geebung Investments Pty Ltd v Varga Group Investments (No 8) Pty Ltd (1995) 7 BPR 14,551 at 14,569-70 per Kirby P; Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; (2001) 53 NSWLR 153 at [25]. Necessarily, that extends to the question whether it was formed between particular parties, since contracts do not exist in the abstract. It is equally clear that the question whether there is a contract is to be determined objectively and not by reference to the subjective intention of the parties: see, for example, Ryledar Pty Ltd v Euphoric Pty Ltd [2007] NSWCA 65; (2007) 69 NSWLR 603 at [262]-[265] per Campbell JA. Looking at the position objectively, and even leaving aside the conversation between Mr Zerilli and Mr Barlow at the time that Mr Barlow was told that Entirity had been successful, the position was that Entirity performed work on the site at Wahroonga. It was paid by Zebicon for that work and it acknowledged that Zebicon was paying it for that work. It complied with the obligations imposed on a subcontractor. In my opinion, that evidence points clearly to the existence of a contract between Entirity and Zebicon.
39Having regard to the conclusions I have reached, it is strictly unnecessary for me to express a view on the other issues in the case. However, since I heard evidence and submissions in relation to them, I think that I should say something about them.