Citystar International Pty Ltd v Elite 100 Australia Pty Ltd [2019] NSWDC 454 | Case summary

Citystar International Pty Ltd v Elite 100 Australia Pty Ltd [2019] NSWDC 454 | Case summary | Zoe

[4]

Plans to develop the Mascot property: February 2013 - September 2014

Not long after its purchase in 2013, Citystar engaged A Plus Design Group to prepare a Development Application for the Property.
Early indications were that the development application might proceed smoothly, in a positive fashion. On 17 December 2013 and again on 11 February 2014, Botany Bay Council informed Citystar of its view (at those dates) that the floor space ratio (FSR) was "not a determining factor" for the success of any development application to be lodged.
A development application (with an accompanying Statement of Environmental Effects) was lodged by A Plus, on Citystar's behalf, on 11 June 2014. It was an integrated development proposal for an eight storey mixed use development containing 272 square metres of retail floor space, providing for 65 residential apartments, for basement levels of car parking (for 112 vehicles) and a demolition of existing structures and site remediation.
The DA included a floor space ratio (the ratio of the gross floor area of all buildings within the site to the site area) of 2:99:1; which exceeded the FSR stipulated in the LEP of 2:5:1. This circumstance would lead to much negotiation with the Council and discussion and delayed progression and acceptance of the DA. It was put to Mr Liu under cross-examination that at the date the DA was lodged he did not think that the Council would raise any issue about the FSR. Mr Liu's response was not all that responsive.
Because of the capital investment value ascribed to the development (over $28 million) ultimately it was the Sydney East Joint Regional Planning Panel (JRPP) - not Botany Bay Council, that would determine the application. Nevertheless, the Council provided a preliminary assessment and acted as something of an intermediary before the main part of the process that was handled by the JRPP.
In his first affidavit, Mr Liu deposed to having met Mr Lui for the first time in June and July 2014, having been introduced to him by a friend. He deposed to having met Ms Bai (Mr Lui's then fiancé) when sharing a meal with Mr Lui in September and October.
On Mr Lui's version it was on 30 August 2014 when Mr Liu and Mr Lui met. By this point, Citystar's architects had not received any formal response to the DA lodged over two months before. Mr Liu sold some quilts to Mr Lui and Mr Lui outlined his background experience as a property developer and involvement with a substantial Broadwater Marine Project, and his employment by Elite 100. Mr Liu mentioned Citystar's ownership of a Property at Mascot.
Under cross-examination, Mr Lui was challenged as to his description of his title and his qualifications. He described himself as a 'strategic planner and convenor'. Although he had studied town planning, those studies were not complete or, at any rate, he had not obtained any town planning qualification. He had no legal qualifications. He said he had carried out many (up to 85) property developments in New South Wales. His evidence under cross-examination plainly exposed his ignorance of several fundamental planning concepts, such as LEPs, SEPPs and requirements for floor space ratios and height control which were in issue in respect to the development of the subject property in this proceeding.
On 15 September 2014, Botany Bay Council sent a letter referring to its 'preliminary assessment' of the DA and identifying certain "issues" with the development application. The Council identified the complaint that the planned eight story building was to the north of homes and would have a direct impact upon the amount of light filtering through, as well as the ability to reduce the value of properties. It was said that the proposal had not been aesthetically designed to be compatible with the dwellings at the rear, with no tapering and a "sheer eight storey monstrosity overshadowing them" and apart from the overshadowing, the traffic problems of parking and volume would become "unmanageable". Specifically, and amongst other things the Council pointed out that the site was permitted an FSR of 2:5:1 (pursuant to the BBLEP) whilst the proposed FSR of 2:99:1 represented a variation of approximately 20%. The letter concluded by indicating that if no response was received within 21 days it would be assumed by the Council that Citystar wished to proceed upon its application and the application would be determined on the basis.
Under cross-examination, Mr Lui denied that he was surprised by the Council's reference to the FSR given previous indications supplied to his architect that it was not going to be an issue. Be that as it may, Counsel for the defendant/cross-claimants submits, and I agree, that to this point, there was not much controversy in the parties' versions of events.
Counsel for the defendant put to Mr Liu that this indication that his investment in the purchase of the Property might, to some extent, be jeopardised provided the context for Mr Liu to approach Mr Lui. Mr Liu's response was that he was not worried. His answers conveyed a view that the correspondence with the Council was normal, or part of a negotiating process, that was to be expected.
On 10 October 2014, on behalf of Citystar, its architects sent a letter, and enclosed amended plans; in response to the Council's letter of 15 September, whilst foreshadowing further amendments to deal, pertinently, with the issue concerning FSR. That further information was provided on 16 October 2014.

[5]

The alleged first consultation agreement: October 2014 - March 2015

Mr Lui, in his affidavit, deposes (and Mr Liu denies) that in October 2014 Mr Liu asked him to help him out with his development at Mascot after Botany Bay Council had "refused" his proposal. He recalled Mr Liu telling him the next day, in a conversation at the Shangri-La Hotel, that there was some floor space ratio and height control and basements issues.
Under cross-examination, it was put to Mr Lui that his recollection was erroneous - he could not have had a conversation in October 2014 about the Council's decision to 'refuse' a DA as, objectively, there had been no indication by that time that the Council had refused anything.
Mr Lui also deposed in his affidavit that at this time, Mr Liu had asked him to work his connections. He recalled telling Mr Liu that he could help him get the 'pre-DA approval' (by Council) but he would have to spend a lot of time and effort and use contacts for this to be done. He asserted that his charge for helping him do this was $100,000. He deposed that Mr Liu agreed to pay that sum. That being so, Mr Lui deposed that he told Mr Liu that he would ask his contacts in AECOM, reiterated the $100,000 charge and indicated that after approval has been granted, Elite would provide an invoice. To this, Mr Liu agreed that it would depend upon acceptance being granted: if it failed Elite would not get paid. Mr Lui acknowledged this and described the payment as a "success fee". These matters were all put to Mr Liu under cross-examination, and he denied them. Thereafter, Mr Lui said that he met with two individuals, Mr James Rosenwax and Ms Norma Shankie-Williams of AECOM.
Under cross-examination, Mr Lui struggled to identify the work he actually performed in relation to this first consultation agreement. He had referred, in his primary affidavit, to a single meeting with AECOM, but said he had no contract with that entity, received no invoice from that entity, nor any written indication as to what advice AECOM had provided to him. The best that he could recall was that he had verbally passed on to Mr Liu the (purely) verbal advice that he had received from AECOM, whose content he could not recall. Mr Lui confirmed that he had had no communications with Botany Bay Council. There was some confusion between whether he had been told by Mr Liu in March 2015 as to whether the DA had been approved (which it had not been by that stage) or only whether there had been only 'Pre-DA' acceptance. It was generally put to Mr Lui that he was unqualified to give any advice about how to facilitate the DA process, because he did not know about the planning framework, whether the advice was 'strategic' or otherwise.
Mr Lui did not annex or exhibit to his affidavits any invoice in connection with his services pursuant to this consultancy agreement; though he said in his primary affidavit that he had provided one to Mr Liu in March 2015. This was explained in his primary affidavit, in the sense that he had lost an electronic device storing it whilst travelling in France. Nevertheless, there was no invoice to support the Second Consulting Agreement, Amended DA Agreement (which had been claimed until it was abandoned just before he gave evidence) or the 'Marketing Agreement' either. This, it was ultimately put, rendered his evidence about losing the invoice of the First Consulting Agreement implausible.
In his affidavit in response, Mr Liu simply denied that Mr Lui had any involvement whatsoever in the DA process (or, as was claimed at that point, the Amended DA process). I took this denial to extend to any aspect of the DA process from 2014 until December 2015. Mr Liu deposed to his belief that the work that was carried out in connection with the process was managed and carried out solely by Tony Leung and Karen Chow, of A Plus Design. Nevertheless, he deposed that from time to time he did discuss with Mr Lui the progress of the DA for the site, but those conversations were general in nature, as between "business acquaintances and friends". It was possible that he may have mentioned that the Botany Bay Council had raised concerns about the floor space ratio or some other issue. Nevertheless, he never requested Mr Lui's assistance with the DA and never agreed to pay Mr Lui for any such assistance.
More generally, Mr Liu deposed that in over 25 years' conducting business in Australia, it is his general practice that any commercial agreement he enters is in writing and signed, especially for those transactions involving 'high monetary value' (a concept which he did not specifically define).
From September 2014 to 9 February 2015, Citystar's architects ('A Plus') had close contact with and exchanged correspondence with Botany Bay Council; culminating in the submission of revised sketch plans for a floor space ratio of 2:7:1.
In his primary affidavit, Mr Liu's narrative of events concerning his dealings with Mr Liu essentially commenced in early 2015, when he says Mr Lui offered him the opportunity to invest in projects. His affidavit in this regard (at paragraph 5) was no more specific than that.
On 6 March 2015, Botany Bay Council indicated to Citystar's architects ('A Plus') that revised plans, submitted on Citystar's behalf, were "acceptable". Mr Liu disputed that he had mentioned this to Mr Lui. Mr Lui deposed that after being told of the news that the 'DA has been accepted', he reminded Mr Liu of Citystar's obligation to pay him for his success fee, but Mr Liu had informed him that, financially, he was not in a position to pay and asked whether he could pay later. Mr Lui told him he could pay when his 'financials got better.' Mr Liu denied this conversation in his affidavit.
In cross-examination, it was put to Mr Lui that Mr Liu could not have said that the "DA had been accepted". In response, Mr Lui explained that he interpreted Mr Liu as having told him that 'pre-DA approval' had been granted by Botany Bay Council. It was put to Mr Lui, and Mr Lui denied, that this conversation had never occurred.
In March 2015, Mr Lui deposed to meeting with Mr Liu at the Shangri-La Hotel when he presented an invoice to Mr Liu for $100,000. Again Mr Lui requested payment of the fee, but again Mr Liu indicated that he was a bit tight with money, but would organize payment when his financial situation improved. It was put to Mr Liu in cross-examination that he was already thinking about selling the property but Mr Liu denied this and Mr Lui's account of this conversation. Mr Liu denied this conversation.

[6]

Lead up to the alleged second consultation agreement: July 2015 - December 2015

On or about 13 July 2015, Botany Bay Council somewhat appeared to backtrack from the position indicated in March: during a meeting Council informed A Plus that it would be "reluctant" to approve the current proposal. Council indicated (relevantly) its concern about the precedent set if it approved the then proposed FSR of 2:7:1. It was put to Mr Liu in cross-examination that this news would have surprised Mr Liu. Mr Liu denied that it did.
Mr Lui deposed in his affidavit to a conversation with Mr Liu at about this time in which the latter asked for Mr Lui's help, as the Botany Bay Council had "terminated" the DA. According to Mr Lui, Mr Liu attributed what appeared to be a change of position by reference to political issues and discrimination (against him as a Chinese developer). Mr Liu (and Ms Chow) denied this evidence.
Mr Lui deposed to a further meeting with Mr Liu and Ms Chow at the Vienna café in the QVB building. Mr Lui's account of what was said at this meeting was to the effect that Elite 100 would charge a further $100,000 to assist Citystar to apply for formal Council approval. If Citystar was successful, and approval was received, it would need to pay Elite 100 another $100,000. To this, Mr Liu was alleged to have responded "I will pay these $200,000 altogether. After approval the value of the property is increasing three or four times of the current value and so it will be no problem". In another part of the conversation, in the presence of Ms Chow, Mr Lui generally advised that there was no reason for Council to terminate the DA, and, in his experience, the only way for Citystar to get back its DA was to sue Botany Bay Council. He continued on by saying that Citystar should gather all these documents, all your minutes, or your DAs, "everything"; and, at Citystar's forthcoming meeting with the Council, Citystar should tell the Council that it was ready to fight. In effect, on this version, Mr Lui was advising Mr Liu to call the Council's bluff. This was partly because the Council would not want to go to court: it did not have the money.
It was put to Mr Liu in cross-examination that Mr Lui's account was logical - Mr Liu did not want to risk losing a sizable capital gain and payment of a success fee, or fees, in the sum of $200,000 was a small price to pay for smoothing the process of DA approval; particularly given that the fees were conditional upon the success of the DA approval. Mr Liu maintained his denial that these things were said, or agreed.
Elite 100 says it was no co-incidence that two days later, on 15 July 2015, A Plus told Council that no further changes would be made to the currently submitted plans; and requested that Botany Bay Council finalises assessment report on the basis of the plans and sketches only recently submitted to the council and to advise of the next available JRPP hearing.
On 10 August 2015, A Plus requested that the Council provide a date for the Joint Regional Planning Panel - Sydney East Region.
In his primary affidavit, Mr Liu did not give any account of dealings with Mr Lui from early 2015, until August September 2015 when he deposed to going to the Gold Coast, at Mr Lui's invitation, to inspect AWF's project on the Gold Coast (although he addressed this in his affidavit in reply). He deposed to Mr Lui informing him that the project was worth $160 million and explaining how that had been financed by AWF's investors.
On 7 October 2015, there was a meeting of the Sydney East Joint Regional Planning Panel. Mr Liu and Citystar's architect (Mr Leung from the A Plus Design Group) both attended. (Mr Leung did not give evidence about this topic in his affidavit). The Panel relevantly determined that the proposal exceeded both the LEP controls for Building height and FSR. The height non-compliance related to the lift overrun at the Gardeners Road frontage and Botany Bay Council's assessment report suggested that compliance should be achieved and that this could be done by removing the proposed 7th level. The removal of that level would also resolve the breach in the FSR. Nevertheless the panel formed the view that the height variation may be acceptable, in streetscape terms, as the proposal was similar in its wall to an adjoining recently approved DA, and there may be a better planning outcome achieved by retaining a similar outcome than by removing the floor which would affect the symmetry of the streetscape. The panel noted that the proposed building included multiple levels at the rear of the structure, near to the southern with units on levels 1-4 looking directly over properties to the rear. The panel formed the view that it may be more appropriate to remove floor space from that part of the building, provide a justification to the Gardeners Road frontage from breach of the building height standard could be sustained.
The Panel unanimously resolved to defer the Development Application, pending submission of amended plans to reduce the proposed building so that it could comply with the LEP, if any breaches of the required building height or FSR standards remain, and amended request to vary the applicable standard should also be submitted. The Panel relevantly indicated that the applicant should lodge required amended plans and associated documentation by close of business on 21 October 2015, only two weeks away.
On or about 16 December 2015, the JRPP - Sydney East Region, granted (conditional) consent to a Development Application (No.14/129) in respect to the Property.

[7]

Evidence from Mr Leung and Ms Chow about Mr Lui's involvement in the DA process

Affidavit evidence about the DA process was also given by Mr Tony Leung and Ms Karen Chow. Mr Leung was not required to attend for cross-examination. Ms Chow gave evidence at the trial.
Mr Leung gave uncontested evidence that prior to the granting of the DA in December 2015 he had no involvement with Mr Lui in the DA process for the development of the Property. Further, he never spoke to Mr Lui about process during that period of time nor received any email or other communications from him about process during the period. He recalled only meeting Mr Lui on two occasions in 2016 and 2017.
In her affidavit, Ms Chow deposed to her survey and consideration of A Plus' file for the DA process, including all events from December 2013 to December 2015. As with Mr Leung, she said she had no involvement whatsoever with Mr Lui in this period; never having spoken to him or received emails or any other communications from him about the process during that period of time. She also deposed that she had only met him in about 2016. She specifically refuted Mr Lui's evidence about what he had said of his knowledge and involvement in the DA process.
Ms Chow was challenged as to her recollections when cross-examined, about events (some of which) went back nearly 5 years ago. It was put to her that in July 2015, Mr Liu had expressed concern to her about yet another revision to the FSR urged by Council and what that might mean for the value of the property. She said that she could not remember him expressing concern. It was suggested to her that she was in attendance at a meeting with Mr Lui and Mr Liu at the QVB in July 2015. There was no note of any such meeting on A Plus' file and Ms Chow indicated that, unless there was a casual meeting with a client, she took notes of client's meetings (T 169.5). I would have thought that a meeting involving Mr Lui to which she was privy would not fall into the category of a causal meeting. She adhered to her evidence that she did not meet him until 2016. This meant that when Counsel for Mr Lui put to her, as correct, Mr Lui's account of what he said, she naturally denied that account. It was put that she was mistaken in her recollection. Her riposte was that one (of three) meetings that she recalled attending with Mr Lui had indeed taken place at the QVB, but this was in connection with the construction certificate process well after DA had been approved. This aspect of her evidence was consistent with what Mr Liu had said (at paragraph 58) in his affidavit in response.

[8]

Lead up to entry into the share purchase agreement - January 2016

Mr Liu deposed to telling Mr Liu in late 2015 that Elite 100 was a shareholder of Australian Wattle Fund Pty Ltd (AWF) and that AWS was involved in various large-scale commercial property development projects around Australia.
Mr Lui deposed in his affidavit that around October to December 2015, he facilitated introductions between Mr Liu and AWF investors. On one occasion, he deposed, he took AWF investors to the Mascot site. This aspect of the evidence was not disputed by Mr Liu.
AWF was, at that time, involved in negotiations for the purchase of the Sheraton Mirage on the Gold Coast. Mr Lui deposed that in November 2015, whilst visiting him in the Gold Coast, Mr Liu told Mr Lui indicating an interest in purchasing some of Elite 100's shares in AWF. Mr Lui responded to this by saying that shares belonged to Elite (and his wife) and that he would also need to speak with other AWF investors (Mr Lingyue and Mr Chiu). Mr Liu denied this conversation, although he agreed he had travelled to the Gold Coast (although possibly earlier in August or September). According to Mr Liu, it was Mr Lui who had offered to sell shares in AWF to Mr Liu.
It was put to Mr Liu that he was impressed by what he saw at the Sheraton Mirage (and another AWF project in Melbourne) and that this influenced his decision to seek to invest in AWF. Mr Liu disputed this.
In his primary affidavit, Mr Liu deposed to meeting with Mr Lui, Mr Ge and Mr Chi, other AWF investors, for the first time in late 2015 at the Shangri-La Hotel. There, Mr Liu deposed, Mr Lui outlined the proportions of shareholding of these investors and inviting him to express interest in becoming a member himself by purchasing his shares in AWF.
In the same affidavit, Mr Liu deposed to flying to Melbourne in early January 2016 in order to inspect AWF's project in that city. He recalled Mr Lui informing him how that project had been finalised, which was mainly from an investment foundation in China. He indicated that the price of the project was $55 million and AWS had invested $3 million as a 5% deposit. He deposed that in a conversation short time thereafter, Mr Lui asked him whether Mr Liu still wanted to join the investment together.

[10]

The Share purchase agreement

There was a dispute as to the precise circumstances by which agreement was made by which Elite 100 would sell shares in AWF to Citystar. In or about January 2016, Mr Lui (for Elite 100) and Mr Liu (for Citystar P/L) verbally agreed that Citystar would pay $4million to Elite 100 in consideration for Elite 100 transferring to Citystar International its 500 ordinary shares it owned in AWF. They verbally agreed that an initial transaction regarding an initial instalment would occur by Citystar paying $200,000 to Elite and for Elite to transfer 25 ordinary shares it held in AWF to Citystar. But Elite 100 says that it was also agreed that a term of the verbal agreement was for the share transfer to be made at a single time after payment of the purchase price in full. Elite 100 also agreed to sell to Citystar shares in AWF instalments as agreed by the parties in writing from time to time. Elite 100 also says that at this time, Mr Lui (for Elite 100) had been informed by Mr Liu that the latter had expressed at his intention to join Mr Ge and Mr Chui (in AWF) and seek their investment in and/or their funds to purchase Mr Liu's development project in Gardeners' Road, Mascot (the 'Project').
Under cross-examination, Mr Liu rejected the proposition that he was aware he was liable to pay $4 million to receive all of Elite 100's shares in AWF. So far as he was concerned, Mr Liu said that he only wanted to take things 'step by step' - that is, he only sought a limited transaction of paying $200,000 for 25 of Elite 100's shares in AWF.
On 22 January 2016 a written share transfer form was executed, by Ms Bai, in respect of 25 shares that Elite 100 had in AWF. It was signed by Ms Bai, as officer of Elite 100 and Mr Liu, as officer of Citystar. There was a dispute as to whether it was Mr Lui who provided him with the document or vice versa. There was no evidence to suggest that the transfer was registered.
Mr Lui deposed in his affidavit that on 23 January 2016, Mr Liu presented him with a document, a Share Sale and Purchase Agreement, and told Mr Lui that he had the Mascot site (purchased for $4 point something million) and after the DA approval, the project would be worth more than $18-$20 million and that he would have the capacity to buy the shares. To this, Mr Lui responded that Mr Liu would need to pay $4 million in full, before Elite 100 would transfer the shares. Mr Liu's response was that this was no problem.
This account of what was said was denied by Mr Liu. Mr Liu's position was that although there was an agreement to pay $4m to Elite 100 for all of its shares in AWF, there was also an interim agreement whereby it would agree to pay $200,000 for 25 of the ordinary shares. His view was that on payment of $200,000 he was entitled to have transferred to Citystar the 25 shares.
On the same day, Citystar and Elite 100 executed a Share Sale and Purchase Agreement, which formalised the verbal agreement that had been reached. The relevant terms of the Operative part were expressed to be in the following terms: "The parties agree, in consideration of, among other things, the mutual promises contained in this agreement as follows: The Vendor (Elite 100) agrees to sell to the purchaser (Citystar) and the purchaser wishes to purchase a total of 500 ordinary shares, being 5% of AW total issued capital, in AWF only for the sum of AUD $4 million. The Vendor agrees that the Purchaser will purchase the 500 ordinary shares in AWF, in instalments, as agreed by the parties in writing, from time to time. The parties agree that the sale and purchase of 500 ordinary shares in AWF in accordance to paragraph 2 above, will be completed simultaneously."
In his primary affidavit, Mr Liu deposed to Mr Lui asking him to make payment as soon as possible. He explained that the project in the Gold Coast was going to settle soon and AWF needed to make the payment before settlement.
Apparently influenced by Mr Lui's request, on 16 May 2016, Citystar deposited a cheque for the sum of $120,000 into Elite 100's Bank account for the purpose of purchasing its AWF shares.
On 15 July 2016, Citystar issued a further cheque for the sum of $80,000 to Elite 100 for the purpose of purchasing its AWF shares.
On 18 July 2016, Mr Lui, in the capacity of Chief Executive Officer, signed a notation on the photocopy of this cheque that the payment was the balance of the $200,000 for Citystar to acquire Elite 100's ordinary shares in AWF. The notation was provided to Mr Liu. Elite 100 says that, by this time, Mr Lui had informed Mr Liu that the purchase of the 25 shares was conditional upon Citystar paying off Elite 100's success fees for its assistance in procuring DA approval for the project.
Unbeknown to Mr Liu, by at least 14 February 2016, Elite 100 had ceased to be a shareholder of AWF. This circumstance was never disclosed to Mr Liu. Elite 100's shares in AWF has been transferred to Mr Lui.

[12]

Termination of the Share purchase agreement

As indicated in the introduction of these reasons, it is common ground that Citystar paid and Elite 100 received the total sum of $200,000 and that those sums have not been repaid; notwithstanding Mr Liu's repeated requests to have 25 shares transferred or to having the money repaid.
According to Mr Lui, the circumstances of the termination of the share purchase agreement were linked to both the alleged offsetting agreement as well as the alleged marketing agreement.
As noted earlier, the MOU for a proposed joint venture was terminated on 10 May 2017.
Eventually, on or about 30 May 2017, the share purchase agreement was terminated by consent. In his affidavit, Mr Lui deposed to a conversation with Mr Liu, preceding the signing of a document, by which Mr Liu requested the cancellation since his wife was treating him badly, that he was putting the property on sale and expected a profit of $10 million. Mr Liu, it was said, had told Mr Lui that he would pay him the $200,000 for introducing potential clients but the money he had paid could be offset against the amounts that he (Mr Liu) owed Mr Lui and Mr Lui would have an additional $200,000 after the action. Mr Lui's response was that he would help Mr Liu out (though he was not the 'authorised person'), but this was for Mr Liu's family's sake and not for business' sake.
In cross-examination, Mr Liu said that the termination of the share purchase agreement was his decision. Curiously, he added that he felt scared at Mr Lui at this point, without elaborating the cause of this curious state of mind.
The termination of the Share Purchase Agreement was in the form of a written cancellation of the 'First Instalment Agreement' signed by both Mr Lui and Mr Liu. Notations on the document, made, respectively by both Mr Liu and Mr Lui read: "We both agreed to cancelling this agreement and refund the full amount to Citystar within one month"
In cross-examination, Mr Lui was referred to the handwritten notation signifying termination of the share purchase agreement. But he said that he applied his signature to what was written without reading it. In answer to a question from me, he said he believed that the share purchase agreement was on foot. Later, however, he acknowledged that he did not occupy any managerial role within Elite 100 or was in any relevant position of control.

[13]

The alleged marketing agreement

Mr Lui explained that documents were signed when he met Mr Liu at Chatswood Chase on 30 May 2017. Mr Lui deposed that Mr Liu had told him that he was selling the Mascot site and sought Mr Lui's help to find a potential investor or developer. Mr Lui says that during the conversation, they agreed that if Mr Lui arranged a potential purchaser to attend the auction and that if there was a bid exceeding $15 million, Mr Liu would pay Mr Lui the sum of $200,000. Mr Liu denies this account of the conversation.
Under cross-examination, Mr Lui was referred to his solicitor's response (by email dated 27 April 2018) to Mr Liu's solicitor's letter of demand. Mr Lui's solicitor recorded that his entitlement to receive a $200,000 payment was conditioned upon a bid for the property exceeding the reserve price. The objective evidence, from Cooley Auctions, suggested that the reserve was either $18 million or (as a revised reserve price) $17 million. This evidence was used as a platform for Counsel for Citystar to put to Mr Lui that his claim in relation to the marketing agreement was made up, but Mr Lui denied this.
In his affidavit in response, Mr Liu deposed that he decided to sell the Mascot site after the proposed joint venture with AWF and terminated on or about 10 May 2017. For this purpose he retained to real estate agents, Knight Frank and Colliers International, to market the property for sale. The property was auctioned on 15 June 2017, but was passed in as no bids had surpassed the reserve price - this was indicated to be $17 million (with an original reserve of $18 million). Mr Liu denied making any request of Mr Lui to help find a purchaser or bidder at the option. Mr Liu accepts that Mr Justin Chan attended the auction and said that had no knowledge of whether or not he had bid at the auction.
Mr Chan was not called by the defendant to give evidence. According to Mr Lui it appears as though he is located in New South Wales and was in good health.

[14]

The alleged Offsetting Agreement

In his affidavit, Mr Lui deposed that in August 2016, in a meeting with Mr Liu at Melbourne's Crown Casino, Mr Lui asked Mr Liu when was DA approval given to the development at Mascot; implying that he had not been previously informed by Mr Liu. But under cross-examination, Mr Lui was referred to a Heads of Agreement he had executed, on AWF's behalf, with Mr Liu in February 2016 in which one of the recitals indicated that (an erroneously identified entity) Harwey Pty Ltd had successfully obtained DA from the Council over the property.
Mr Lui also deposed to reminding Mr Liu during this meeting of the $200,000 owing as a result of the alleged first and second consulting agreements and, in view of the value of the project, Citystar should honour its promise to pay $200,000 for his consulting services. But since those consulting agreements had been entered into in 2015, the share purchase agreement had been entered into (in January 2016). Accordingly, Mr Lui deposed that he proposed to Mr Liu that an offsetting arrangement should be made. Mr Liu said he thought that approach should be okay.
Mr Lui also deposed to this arrangement being mentioned again on 30 May 2017, at the time that Mr Lui executed the agreement to terminate the share purchase agreement.
Under cross-examination, Mr Lui evinced some difficulty understanding what was meant by the concept of an 'offset', but ultimately, he accepted that as at 30 May 2017, he believed that what Mr Liu owed him exceeded what he owed Mr Liu.
On 20 April 2018, a letter of demand was sent to Elite 100. It elicited a response a week later in which a counter-claim was flagged. By its terms, the response did not deny that Elite 100 was obliged to repay Citystar $200,000 arising from the payment made for shares. It only referred to claims in respect to other agreements which, Mr Lui's solicitor indicated, justified withholding repayment of the $200,000. This proceeding commenced on 6 July 2018.

[21]

Position of Mr Lui and Elite 100

Despite a submission by Counsel for Mr Liu to the contrary, there is no material difference in the statutory claims against Mr Lui and Elite 100 on the statutory claim
The pleaded claim against Mr Lui and Elite 100 is in substance that, contrary to the share purchase agreement (and the representations conveyed within it) entered into on 22 or 23 January 2016, at the time when Citystar paid the $200,000 as the first instalment for the purchase of the shares in May and July 2016, Elite 100 did not own shares in AWF - it had previously transferred its shares to Mr Lui.
Counsel submits that I should find that Mr Lui personally engaged in misleading or deceptive conduct by failing to disclose, when the circumstances reasonably required him to disclose to Mr Liu, prior to him making part payment of the shares, that the shares had in fact been sold to Mr Lui. This conduct was said to have engaged the principles of Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357. In that judgment, in their concurring judgment, and after their consideration of the observations of Gummow J in Demagogue v Ramensky (1992) 39 FCR 31, French CJ and Kiefel J (as her Honour then was) said: "[19] The language of reasonable expectation is not statutory. It indicates an approach can be taken to the characterisation, for the purposes of s 52, of conduct consisting of, or including, non-disclosure of information. That approach may differ in its application according to whether the conduct is said to be misleading or deceptive to members of the public, or whether it arises between entities in commercial negotiations… [20] In commercial dealings between individuals or individual entities, characterisation of conduct will be undertaken by reference to it circumstances and context. Silence may be a circumstance to be considered. The knowledge of the person to whom the conduct is directed may be relevant. Also relevant … may be the existence of common assumptions and practices established between the parties or prevailing in the particular profession, trade or industry in which they carry on business. The judgement which looks to a reasonable expectation of disclosure as an aid to characterising non-disclosure as misleading or deceptive is objective. It is a practical approach to the application of the prohibition in s 52. [21] To invoke the existence of a reasonable expectation that if a fact exists it will be disclosed is to do no more than direct attention to the effect or likely effect of non-disclosure unmediated by antecedent erroneous assumptions or beliefs or high moral expectations held by one person of another which exceed the requirements of the general law and the prohibition imposed by the statute."
Counsel for Elite 100 and Mr Lui invited me to construe the Share Purchase Agreement as being constituted by the two documents of 22 and 23 January 2016. In effect, it was an agreement by Citystar to purchase all of Elite 100's 500 shares in AWF for $4million with such purchases made in instalments as agreed; with the first instalment being $200,000, representing 25 shares; but that transfer would only occur upon the payment of $4 million that Elite 100 was obliged to transfer any shares. Before that time (ie when the full purchase price was paid), Elite 100 contends, it could do what it liked with the shares; even transferring them to Mr Lui.
Counsel for Elite 100 and Mr Lui drew my attention to the judgment of the Supreme Court of New South Wales in Concrete Constructions Group v Litevale & Ors [2002] NSWSC 670, where Mason P (at [163]-[168]) approved observations made by Ormiston J in Futuretronics International Pty Ltd v Gadzhis [1992] 2 VR 217 (at 239-241), concerning the circumstance when representations as to future matters (capable of sustaining conduct, for the purposes of the consume protection provisions) could be implied from a contractual promise. The relevant passage from Concrete Constructions, in which Mason P summarised his views, was as follows: "[166] But this provision (the former s 51A of the Trade Practices Act 1974 (Cth)) does not say in what circumstances a representation as to a future matter shall be implied for a contractual promise ... A fortiori, it does not import into every contractual promise an implied representation as to intent and capacity to perform; nor does it prove that any such implied representation was relied upon by the other contracting party. [167] I readily accept that will be comparatively easy to establish that a contracting party is implicitly representing a present intention to perform according to its tenor. If the other party can establish causation and loss then damages should ensue, although there is usually little point in addressing such a claim because the law of contract will compensate the innocent party of the consequences of non-performance without even having to prove misleading intent from the inception. [168] But when one turns to an alleged implicit representation as to capacity to perform things are not so simple, nor should they be. There are policy reasons for restraint. The law arms the parties to a contract with rights to damages and other forms of relief if breach occurs or is threatened. A complex set of common law, equitable and statutory rights are superimposed on the terms of the bargain chosen by the parties. That bargain may have the simplicity as a contract to sell a loaf of bread or the complexity of a building agreement … [169] Why should the parties be found or presumed to have intended more by what they expressly represented and understood? Of course s52 (of the Trade Practices Act) goes beyond intentionally misleading or deceptive conduct but it does not follow that the innocent party understood or relied upon anything more than the express representations and the usually adequate consequences stemming from breach of them stemming from the law touching the mutually chosen regime, i.e. contract."
The last part of this passage was cited, with approval, by the Court of Appeal, in Secure Parking Pty Ltd v Woollhara Municipal Council [2016] NSWCA 15 (per Meagher JA, with whom Beazley P and Ward JA agreed) at [95]-[99] (as well as the Victorian Court of Appeal in RCR Energy Pty Ltd v WTE Co-Generation Pty Ltd [2017] VSCA 50 at [60]-[65]). These latter decisions were delivered after the High Court's judgment in Miller & Associates v BMW Australia Finance Limited, upon which Citystar relies.
In Secure Parking, Meagher JA quoted with approval observations made by Allsop J (as his Honour then was) (in McGrath v Australian Naturalcare Products Pty Ltd (2008) 165 FCR 230 (at [138]) that the divining of representations from promises was to be treated with caution, with an eye to all the facts and not by implying representations mechanistically from equivalent promises.

[22]

Consideration of statutory claim

By executing the documents, there were at least implied representations by Elite 100 that it had an intention and the capacity, as at 22 or 23 January 2016, to perform its promise to transfer its 500 shares in AWF. A peculiar feature of the share purchase agreement was that it made no provision for a date by which Elite 100 was obliged to transfer the shares. Elite 100 says that the obligation to transfer shares was only enlivened when it had been paid $4 million. Citystar says that each time a payment for an instalment was made, Citystar was entitled to have transferred to it a parcel of shares.
It is unnecessary to resolve this debate. In my opinion, taking into account the authorities I have referred to, Citystar's complaint is that, by entering into the Share Purchase Agreement in January 2016, there was an implied future representation to Citystar that when it paid its purchase price (whether in an instalment, or in total - it matters not for this analysis), Elite 100 would (in the future) have the intention and capacity to transfer shares. Since Elite 100 transferred its shares to Mr Lui in February, prior to Citystar making any payment, it was reasonable to expect Elite 100 to disclose that circumstance to Citystar prior to Citystar making the payments for shares that it did in May and July 2016.
In my view the authorities referred to by Elite 100 indicate that no such representation should be implied.
If, however, I am wrong, I would arrive at the same result by another route - being the principle of non-disclosure referred to in Miller v BMW. That, is in circumstances where, as at 22 or 23 January 2016, no dates were fixed for the simultaneous payment of money and share transfer (in whatever amount and for whatever number of shares), Elite 100 was at liberty to do what it liked with the shares. If, when Citystar advanced money to purchase shares upon a date agreed, Elite 100 did not have the capacity to transfer the shares, then Citystar had its remedy in contract. In other words, in my view it was not reasonably to be expected that Elite 100 needed to account to Citystar for what it did with its shares prior to the time when its obligation to transfer the shares had actually crystallized.
The statutory claim against Elite 100 therefore fails.
Counsel for Citystar (and Mr Liu) separately submitted that the principles I have referred to have no application to Mr Lui's personal position. It was not submitted that it was not Mr Lui who made the promise to transfer shares in consideration for Citystar paying money.
In my view, although there is a distinction, it makes no difference. Mr Lui would be said to be making a non-contractual promise, in the nature of a representation of future fact, that if and when Citystar made payment to his principal (Elite 100), Elite 100 would transfer a number of shares. But that promise contained the same contingency (the payment of a certain amount of money). Until that contingency had come to pass, Elite 100 could do what it liked with its shares. It was not reasonable to require Mr Lui to disclose that Elite had transferred shares to him prior to the moment when (by arrangement) Citystar paid money for those shares.
Accordingly, there is no misleading or deceptive conduct by Mr Lui and the statutory claim fails.
These findings relieve me of the necessity to consider the issue of causation. Prima facie, however, it appears to me that at the point when Citystar paid its money for the shares, enlivening Elite 100's obligation to transfer shares, there was no demonstrable incapacity in Elite requiring Mr Lui to re-convey to it his AWF shares, if required. I accept Mr Lui's evidence that, if called upon, he could and would have transferred his shares in AWF to Elite 100 so as to enable the latter to meet its contractual obligation to Citystar. That means that if Elite 100 did not convey the shares, it was liable in contract and that the causal connection between any misleading conduct by Mr Lui (and/or Ms Bai) and Citystar's loss would have been severed by Elite 100's conduct.

[23]

General

Elite 100 acknowledges that its case on the cross-claim, based as it fundamentally is upon undocumented agreements entered into, in some cases, up to 5 years ago (in comparison with the plaintiff's case) relies heavily upon my acceptance of the credit of Mr Lui. As I have noted above, that case is substantially undermined by what I have said about Mr Lui's credit. But it is also to be acknowledged that my findings of the credit of Mr Liu are also adverse. In this context, Counsel for Elite 100 says that Mr Lui's versions of events are supported by some contemporaneous documents and, more to the point, (retrospectively) have the force of logic to support them.
Counsel for the defendant acknowledged that Mr Lui may not have had the expertise he had represented and that Mr Liu might subsequently, and subjectively, felt that he had made a bad bargain with Mr Lui in agreeing to pay him sizeable success fees. That, he submitted, was not to the point: it was what Mr Liu thought about Mr Lui, and how he acted, in late 2014 and 2015. Counsel submitted that the documentation generated in the period between September 2014 and July 2015 would likely have generated a real concern in Mr Liu's mind about the likely success of Citystar's DA process; and it was this concern which, with Mr Liu's beliefs about Mr Lui's abilities at the time, would incline him to seek Mr Lui's advice. Counsel also added that in weighing Mr Lui's evidence of whether Mr Liu had actually said to Mr Lui the words the latter had attributed to Mr Liu in October 2014 and July 2015, it is not enough to reject Mr Lui's recollection that certain statements made by Mr Liu were in fact wrong. An example of this is the statement Mr Lui attributed to Mr Liu that the DA had been 'refused' or 'terminated'. What mattered was what Mr Liu believed back in October 2014 and July 2015. Further, it was submitted that Mr Lui did not intend to suggest that Mr Liu was relying upon Mr Lui to the exclusion of his continuing reliance upon the advice of his architects or town planner, who were dealing with Council on Citystar's behalf; but that Mr Liu felt that he needed more. This was in the context of a large investment.
In relation to the two consultation agreements, the defendant submits, initially, that Council's letter of 15 September 2014 (Ex 3), sent to Citystar's architects within a matter of weeks from when Mr Lui and Mr Liu had met each other provided a reason for why Mr Liu might wish to consult Mr Lui; since in the former's mind, there was a real concern that Council might reject the DA.
Counsel for Elite 100 and Mr Liu then submitted that the content of documents produced on subpoena by Botany Bay Council was consistent with Mr Lui's evidence that in about October 2014, Mr Liu had indicated that he was in trouble (and therefore had reason to seek his aid). Another example was Mr Lui's evidence that in July 2016 Mr Liu had told him that the DA had been 'terminated' which was consistent with the chain of events that had occurred between June 2014 and July 2015. A final example, for present purposes, was the apparent change of tack taken by Mr Liu in the middle of 2015, between his architect, A Plus, trying to conciliate (even appease) Council's requirements, to a more assertive posture, in insisting that the application be determined as it presently was. This change occurred after Mr Lui's 'strategic' advice had been given.
The defendant also relies upon the probabilities arising from a combination of circumstances, including the difference in commercial property development experience, as between Mr Liu and Mr Lui and the position that Mr Liu felt that his investment in the property was unexpectedly threatened by the Council after it had initially minimized the significance of the FSR ratio. Payment of a success fee to Mr Lui for his strategic advice might be a small price to pay for easing the passage of the application.
In relation to the Marketing agreement, the defendant submits that this transaction reflected commercial common sense. Mr Lui said that having played a valuable role in procuring the development consent, it actually makes sense for Mr Liu turn to him again in relation to the sale of the property. This was especially so where Mr Lui had introduced to Mr Liu certain AWF investors (including Mr Yuan).
In relation to the disbursement agreement, it was common ground that the payments were made. The defendant pointed to Mr Liu's evidence, which it submitted was implausible that Mr Lui should on the one hand say that he could not afford to repay Mr Liu the sum of $200,000, but on the other, that Mr Liu would be prepared to accept his offer to pay some of Citystar's bills and remain in a position to repay the $200,000.
In relation to the 'Final' agreement, the defendant acknowledged that the Court's acceptance of this depended upon its findings as to the other suggested agreements.

[24]

The First Consultancy Agreement

Counsel for Citystar submitted, and Counsel for Elite 100 agreed, that for purely verbal contracts to be enforceable, no less than written contracts, it is necessary for Elite 100 to establish that: "... the terms of the contract, or at least the essential or critical terms, have been agreed. Therefore there is no binding contract where an essential or critical term is expressly left to be settled by future agreement between the parties, or whether language used is so obscure and incapable of any precise or definite meaning that the court is unable to attributed to the parties any particular contractual intention" [1] . Where, in a verbal contract, the words spoken are unclear or uncertain, that circumstance is an indication that the parties did not intend to create contractual relations [2] .
I am not persuaded by Mr Lui about the existence of this agreement. This is primarily due to the nebulous content of the putative agreement and the objective circumstances in which the agreement was said to be reached. But, alternatively, I would have found that Elite 100 did not perform any contract for the provision of services.
I accept, and Mr Liu admitted through the period, that there had been discussions between them as to the progress of Citystar's DA application. That is a circumstance which, to some degree, takes Elite 100 some of the way to proof of the first and second consulting agreements. It is another thing to say however, that what Mr Lui said to Mr Liu during the course of those discussions amounted to the supply of strategic advice pursuant to a contract for which it would receive very substantial success fees. It is not unknown for professionals, or even business persons, to provide informal advice, by way of favour or to generate goodwill, to friends or associates without expecting substantial remuneration for doing so. Where there is a question of whether parties intend to create legal relations, the onus is on the party asserting a contract to show that there was such intention [3] .
But there are many reasons why I am not persuaded by Elite 100 about the existence of such agreement, in the pleaded terms. In no particular order, they are as follows:
First, Mr Liu and Mr Lui demonstrated their propensity to enter written agreements. This occurred with the share transfer and share purchase agreements (the last of which was also terminated in writing). It also occurred with the documentation preceding a potential joint venture. Mr Liu needs to persuade the Court that the consulting agreement(s) he asserts were entered into four or five years ago ran contrary to this trend, and tried to do so from a standpoint where, on his own evidence, he has a poor memory.
Secondly, the scope of the advisory services was unclear. This was demonstrated when, during his cross-examination, Mr Lui sought to clarify that when he referred to Council's approval, he was intending to refer to 'pre-DA' approval. The ambiguity shows up the unlikelihood of Mr Liu agreeing to pay for services that were ambiguously described or ill-defined. What was ultimately paramount was the approval of the JDPP- not Botany Bay Council; even if the council would provide a preliminary assessment and act as a conduit to the JDPP. Council was only the 'Assessment Authority' whereas the JDPP was the 'Approval Authority'. It was not clear to me why, in the commercial context, the agreement for the supply of strategic advice would only be limited to the approval of the Council and not the JDPP. It seems to me fairly extraordinary (and therefore, for the purposes of proof, inherently improbable) if Mr Liu agreed to provide instalment payments of $100,000 for each step along the way to getting ultimate approval from the relevant development authority.
Mr Liu described himself, in part, as a 'convenor'. I understood him to mean, by that term, that he was something of a co-ordinator for marshalling all the resources required to convince the Council (and thereafter the JDPP) to approve the development. But an obvious resource in this connection was Mr Liu's architects, A Plus, and Mr Leung and Ms Chow gave evidence, which I accept, that they had had nothing to do with Mr Lui until after development consent had been granted. Another resource was LJB Urban Planning, the town planning expert. But Mr Lui gave no indication to Mr Liu, at the point of entry into the posited agreement, of his intention to use those resources.
Thirdly, and as a related point, Mr Liu was, to put it bluntly, exposed during the course of his cross examination as someone who did not have extensive training or at least qualifications to provide strategic or specific advice in terms of dealing with the Botany Bay Council. He was entirely unfamiliar with such basic concepts as local planning restrictions applied to a development of this magnitude. He had no demonstrable connection, or 'track record' with Botany Bay Council. Counsel for Mr Lui sought to address this by saying that this matter has only appeared in retrospect, and it is only recently that Mr Liu has felt that he made a bad bargain. To the contrary, I did not regard Mr Liu to be so naïve or gullible, even bedazzled, as to be willing to pay a sum of $100,000 for services that were inadequately defined from the outset from someone who had given what appeared to be the most general account of his expertise and experience and had provided no indication of any dealings with Council or development consent authorities (identified in paragraph 7 of Mr Lui's affidavit of 4 April 2019).
Fourthly, there was no indication of whether the $100,000 success fee was reflective of the services that someone in Mr Lui's position could supply in the market. To reiterate a point that I have made earlier is that Mr Liu impressed me as someone who would be unlikely to pay money unless it was for fair value (I have noted earlier my view that Mr Liu understated the impressions he formed of investing from seeing the development on the Gold Coast and in Melbourne. To the contrary, I consider this demonstrate that these particular circumstances tended to demonstrate a tendency to inquire before parting with his money). I doubt that he would have agreed to pay a success fee of that sum of money without being convinced that the amount represented fair value from someone who he had met only a couple of weeks before.
This was so even if, as Counsel for Mr Lui and Elite 100 submitted, he was concerned, at various points through the DA process, that the application might fail. It was not obvious that the concerns identified by the Council - FSR and height control - could not have been capably addressed by the Mr Liu's architects or town planner. These issues did not require 'strategic' advice; but practical advice by trained professionals familiar with Council's planning laws. There was no evidence of any advocacy by Mr Lui of the services that he could provide which could not have been provided for by the architects and planner; nor any indication by him of 'connections' that he would be able to deploy with the Council that the architects and planner did not have. Mr Lui's case, in my view, tends to overlook, if not under-estimate, the likelihood that where any 'trouble', or perhaps turbulent events occurred during the DA process, he had others to turn to.
Fifthly, contrary to his evidence, I do not accept that an invoice was handed to Mr Liu. It was not clear to me why the content of electronic devices of a businessman like Mr Lui would not have been regularly backed up so that they could be retrieved. No invoice was delivered to Mr Liu in relation to the other agreements that Mr Lui sues upon. This point about the invoice relates also to the question of whether the promised services were actually performed; considered further below.
Sixthly, the cross examination of Mr Liu served to create serious doubt upon what Mr Lui actually did. He had said that he had dealt with AECOM, but accepted that no contract had been entered for AECOM to provide a service; nor any invoice rendered to Mr Lui for such service. Mr Liu said, in effect, he had a 'special relationship' with AECOM, in which he could effectively walk into its offices and have a private room, but the details of such extraordinary association were not referred to in his affidavits; and no one was called from AECOM to corroborate such association. AECOM, to my knowledge, does not customarily act as a charity when it comes to providing advice on Council planning issues. This point again is relevant to performance of the services, but it also cast severe doubt upon Mr Lui's credibility and hence the likelihood of his account that this agreement was reached.
Seventhly, there were other contextual issues which throw doubt upon such arrangement. Mr Lui's advice that Mr Liu had told him that the Council had "refused" the DA plainly was wrong (and no suggestion was made that Mr Liu had a motive to misrepresent what the Council had done to that point). Mr Lui's evidence was also that Council had wanted Citystar to 'amend' its DA submissions. Mr Lui's belief that this had occurred was also erroneous. I do not regard Counsel for Mr Lui's submission that Mr Liu did not know what he was talking about to Mr Lui (that he 'felt' that the DA had been terminated) as convincing. Although he may have been a newcomer, relative, to Mr Lui, to property development, Mr Liu was sufficiently experienced as a businessman to know when Council had 'refused', or was on the verge of 'terminating' a DA. Mr Lui's case, in this regard, would impute fairly extreme ignorance to Mr Liu about his awareness of the process which I do not consider is warranted.
The Council's documents of October 2014 indicate that Citystar was in a stronger position than the dire position that Mr Lui recalled being informed (by Mr Liu) was the position at that time. To the contrary, Counsel for Mr Liu referred me to documents produced on subpoena by the Bayside Council which showed that, certainly to the point of October 2014 (which is when Mr Lui says that the discussion underlying the first consultation agreement occurred) the DA process was not in any trouble.
The letter of 15 September 2014 did not foretell that the DA was doomed. It referred to, if not reproduced, in substance, an objection to which a number of people made. I agree that Council was not representing its own view, in this respect. It issued a conventional 'Stop the Clock' letter to invite a response. All that had materially happened by the time Mr Lui says he had been approached by Mr Liu was that in response to Council's 'Stop the Clock' letter of 15 September 2014, Citystar's architect had produced and supplied amended plans and information and a detailed letter (dated 10 October 2014). The objective likelihood is that Mr Liu was not in the panicked mood that Mr Lui attributed to him.
Eighthly, the inherent unlikelihood of such agreement being reached is indicated by the circumstance that it was not until Mr Liu had procured solicitors to send a letter of demand to Mr Lui in April 2018 that Mr Lui, through his solicitors, asserted, in writing, the existence of such consulting agreement.
Ninthly, I generally accept Mr Liu's evidence that, as a businessman, he would wish to reduce the terms of significant commercial arrangements to writing. The transactions by which he was required to pay substantial success fees fitted this description.
Tenthly, and following the last point, the circumstance that the share purchase transaction was terminated in writing in May 2017 reinforces Mr Liu's evidence of his pre-disposition to only enter into written agreements. Even informal understandings were reduced to 'Heads of Agreement' or 'Memorandum of Understanding'. The absence of written agreements on the various transactions relied upon in the cross-claim is indicative of the likelihood that there were no other agreements involving expenditure for 'success fees' than those recorded in writing.
All that I have said, so far, concerns my reasons for why I have found no enforceable agreement came into effect, as alleged.

[26]

The Second Consultancy Agreement

Virtually of the matters leading me to reject the existence of an enforceable First Consultancy Agreement apply also to my consideration of the Second Consultancy Agreement. It is not necessary to repeat them.
Mr Lui's evidence as to what was discussed in July 2015 was shown to be factually inaccurate. For example, it was clearly wrong to attribute the words to Mr Liu that Council had "terminated" the DA. I reiterate the point made above in response to Elite 100's Counsel saying that what mattered was not the objective accuracy of what Mr Liu told Mr Lui but how he subjectively felt: as I have said, however, I do not accept that in July 2015, Mr Liu subjectively believed that the DA had been "terminated" or that he 'felt' like it was terminated. I do not find that he had this belief in any unilateral sense and do not believe he would have articulated such belief without having previously received advice from his architect which would have shaped such belief. At its highest, in the meeting of Council that had occurred on 13 July, Council had expressed "reluctance" to approve the proposal; but in a context where it was supplying Mr Liu further opportunity to amend plans or provide further information or arguments. There was no 'review board approval' and there was no need to "get your DA back". I agree with the submission for Counsel for Mr Lui and Citystar, further, that the advice to sue, if it was given (by someone who was not a lawyer) was erroneous. Finally, Mr Lui's attribution of words to Ms Chow (even if I was to find that she attended - which I do not) that there was going to be another meeting with Council 'soon' was also wrong. Records show that there was only 1 meeting with Council in July 2015. Indeed, there was no further meeting before Botany Bay Council published its assessment report on 29 September 2015.
The unlikelihood that such enforceable agreement was entered is also indicated by the circumstance that, at the point where it appeared that there were problems with the Council, there was an even greater need for technical advice to deal with the issues of FSR and height control of the kind that Mr Lui was not qualified to give. There was no clear issue as to what Mr Lui could do that Mr Liu's architects (or town planner) could not do.
Secondly, the scope of the services needed to be identified before Mr Liu could be taken to have accepted that he would pay the $100,000. This did not occur, or if it did, the scope of the work was vague and lacked precision. What actually occurred was generic (and not especially 'expert') advice being followed by a claim for a substantial payment being made, retrospectively, after such 'advice' had been given. If it was true, as Counsel for Elite 100, Mr Lui and Mr Liu were virtual strangers as at October 2014, the situation had moved on as at July 2015 when, as Counsel for Citystar submitted, they were each interested in each other's business concerning property developments. If what Mr Lui says he told Mr Liu at this time was true, I would not be convinced that it was advice provided pursuant to an agreement by a professional; as distinct from some helpful practical advice from a business associate gratuitously passed on to another with whom, it appeared at the time, there may be mutually advantageous business opportunities.
Thirdly, the only work that was cited as having been done by Mr Lui pursuant to this particular agreement was, Mr Lui's advice, which, at a stretch, could be regarded as strategic (although, on another level, it might just have been the tactical 'advice' of a fledgling business acquaintance and friend), of stiffening Mr Liu's resolve - to suggest that he indicate to Council that after two earlier revisions of the FSR, Mr Liu would not be prepared to go any further. The problem for Mr Lui is that, aside from Mr Liu's denial of this conversation, Ms Chow, who was said to be privy to this conversation, also denied it. As I have indicated, I prefer Ms Chow's evidence generally over Mr Lui. Had she been privy to the meeting at the time identified by Mr Lui, I would have expected some record to be made of that. No such record was established.
There is some force in the submission of Counsel for Mr Lui that there was a change of 'tack', or approach, by or on behalf of Mr Lui towards the Council. In my view however, it cannot be ruled out that this was attributable to the influence of Mr Liu's architects. Mr Leung's letter of 10 August 2015 to Council asserted that although the process had been 'constructive' (a reference to the past), 'we believe that the time (had) come for Council to finalise its assessment and report' (a statement of the present and future). As indicated, the uncontradicted evidence of Mr Leung, the author of this letter, was that he had nothing to do with Mr Lui to this point in time. To the extent, therefore, that Mr Leung was conveying Mr Liu's instructions, it is not clear on the evidence whether such instruction was influenced in any way, or partly, as a result of whatever Mr Lui might have said to Mr Liu. I do, however, consider that it is very likely that any instruction that Mr Liu had conveyed to Mr Leung would have been at least attended by discussion between Mr Liu and Mr Leung. In other words, the causal significance of anything said by Mr Lui (which is in doubt) has not been established.
I reject the existence of this agreement.

[27]

The Disbursements Agreement

I find that the sum of $55,995 was paid by Elite 100 for disbursements of Mr Liu, or entities with which he was associated. The pleading broke down the disbursements in a way that indicated that a component sum of $30,702.60 was paid to A Plus in the period from August to November 2016; that is, after DA approval had been given. One of the payments to A Plus appeared to relate to its assistance in seeking modification of the development consent.
During this period in which disbursements were paid, Harwey Holdings was the owner of the site.
The sum of $5,292.65 was paid to the Council on 1 December 2016. It was common ground, as between Counsel, that this component is to be attributed as a disbursement for the benefit of Harwey Holdings.
The final payment $20,000, to Citystar, was made in 2 June 2017. Mr Lui said that this was paid to Citystar, although the beneficiary was intended to be Mr Liu's brother, who was said to have been suffering from ill-health (and, specifically, was said to be in a Chinese hospital). Again, Mr Liu did not respond to this evidence and I accept it.
Mr Liu submits that Mr Lui, or Elite 100 is not entitled to receive repayments of these sums: they were made because Elite 100 could not repay the full $200,000 to Citystar and Citystar was entitled to receive that amount, in full, whilst Mr Liu was entitled to having his disbursements, or those of his corporate entities, paid. It was said that such arrangement practically benefited Elite 100 in two ways: first, it involved Citystar's forbearance from suiting Elite 100; secondly, it meant that Elite 100 would receive (or at least Mr Lui anticipated that Elite 100 would receive) tax deductions for the payments. I do not accept this argument. The notion of forbearance to sue was not the subject of evidence from Mr Liu. It is dubious that tax benefits would have been obtained - any benefit might have been overridden by a decision by Citystar to sue on the debt, upon which interest (at Court rates) would likely have been sought. It generally lacked commercial sense. I agree, also with the submission of Counsel for Elite 100 that had the conversation been as Mr Liu recalled it, it is unlikely that Elite 100's admission of its inability to pay would have encouraged Citystar to enter into an understanding (informal or otherwise) with Elite 100 for a joint venture agreement.
None of these payments were made gratuitously. Elite 100 is entitled to receive repayment, or reimbursement, for them. Specifically, it is entitled to receive $35,995.25 from Harwey Holdings and $20,000 from Citystar. The latter sum should be deducted from Citystar's judgment amount against Elite 100 for $200,000 by way of set-off.

Citystar International Pty Ltd v Elite 100 Australia Pty Ltd

At a glance

Court

Decision date

Source

Judgment (32 paragraphs)

Parties

Legislation Cited (4)

Cases Cited (10)