Mansfield Corporation Pty Ltd v Chengcheng [2018] NSWDC 12 | Case summary

District Court of NSW|2017-10-17

Solicitors: Frank Legal (Plaintiff) Jurisbridge Legal (Defendant) File Number(s): 2016/00238217

Judgment

The plaintiff, Mansfield Corporation Pty Ltd ("Mansfield"), seeks to recover from the defendant, ChengCheng (Aust) Enterprise Melbourne Pty Ltd, an amount which the plaintiff says is owed to it by the defendant pursuant to a contract entered into between the parties relating to the refurbishment and renovation of restaurant premises located at 9 Aquatic Drive, Albert Park in Melbourne ("the Contract"). The amount claimed which is $123,750 and applicable interest was calculated at 45 times $2,750 for alleged delays of 45 days resulting from variations to the Contract said to have been requested by the defendant.
No issue has been raised in relation to the jurisdiction of the Court to determine the matter. The Contract also indicates that it is governed by the law of the place of performance which was in Victoria. No party submitted that there was any relevant difference between the law of New South Wales and the law of Victoria which was applicable.

The pleadings

The plaintiff relied on a Statement of Claim filed on 8 August 2016. In the Statement of Claim, the plaintiff: 1. Asserts that the parties entered into a written contract for the plaintiff to undertake building and construction works to the premises at 9 Aquatic Drive, Albert Park in Victoria dated 20 July 2015; 2. Says it was a term of the Contract that the plaintiff was entitled to reimbursement for loss or expense as a result of delay or disruption including due to a variation at the rate of $2,500 per day, relying on Clause 10.6 of the Contract; 3. Alleges that as a result of various variation works requested by the defendant there were delays with performance of the Contract; 4. Asserts that the variations in question fell within the definition of "Variation" in the Contract; 5. Alleges that the parties agreed that practical completion under the Contract would be extended to 6 February 2016; 6. Alleges that the variation works were completed by the plaintiff by 6 February 2016; 7. Alleges that the plaintiff issued a tax invoice dated 28 March 2016 for the sum of $123,750 to the defendant for reimbursement pursuant to Clause 10.6 of the Contract; 8. Alleges that the defendant has not paid the tax invoice dated 28 March 2016 which constitutes a breach of the Contract; 9. Claims that the plaintiff is entitled to damages for breach of contract in the sum of $123,750.
The defendant filed an Amended Defence dated 13 October 2017. The defendant: 1. Disputes the plaintiff's interpretation of Clause 10.6 of the Contract; 2. Says the date for practical completion under the Contract was varied to 8 February 2016 as part of the Contract; 3. Says that the plaintiff was not entitled to issue the invoice in the sum of $123,750 under the Contract; 4. Denies that the plaintiff has suffered any loss or expense; 5. In the alternative, says that if the defendant is obliged to pay the additional sum of $2,500 per day then Clause 10.6 of the Contract is unenforceable as being a penalty clause (paragraph 8(e)); 6. Alleges that the plaintiff represented to the defendant at a meeting on 5 November 2015 that a cost quoted in respect of the three variations requested would be the total cost of the variations, that the defendant relied on that representation and that the plaintiff is estopped from resiling from the representation (paragraph 8(f)); 7. Denies that the plaintiff is entitled to the relief claimed in the Statement of Claim.

The Contract

The Contract in issue in these proceedings is entitled "DECON 2013 Design and Construct Contract - Lump Sum". It is dated 20 July 2015. It may be found as an exhibit to the affidavit dated 17 February 2017 of Mr Bruce Mansfield who is the sole director of the plaintiff. The Contract was executed in counterparts. There is no issue that the counterparts are identical and that the Contract became the document which governed the commercial relationship between the parties. There is also no issue that the persons who executed the Contract had authority on behalf of the contracting parties to do so.
The relevant provisions in the Contract would appear to include the following: SECTION 1 GENERAL 1.1 DEFINITIONS AND INTERPRETATIONS 1.1.1 In this Agreement the following words and phrases must, except where the context requires otherwise, mean as follows: "Agreement" - the entire concluded agreement between the Principal and Contractor relating to the Project which is constituted by this document, the documents listed in Schedules 1,2,3, and any other document or thing expressly incorporated in this document. … "Contract Sum" - the sum stated in Schedule 6 as adjusted by the terms of this Agreement. … "Practical Completion" - the stage of being reasonably fit for use and occupation. … "Project" - all of the work under this Agreement including Variations and the design and construction of the Works and temporary works. … "Variation" - any: (i) change in the Principal's Project Requirements or the Project which makes necessary the alteration or modification of the design, quality or quantity of the Project as described by or referred to in the Principal's Project Requirements or in the Design Documents including: (a) increases or decreases in or omissions from the Project; (b) changes in the character or quality of the materials or Works; (c) changes in the levels, lines, position or dimensions of any part of the Works; or (d) the execution of additional work; and/or (ii) addition, alteration or omission of any obligation or restriction imposed by the Principal in the Principal's Project Requirements or as stated in the Design Documents or this Agreement in regard to: (a) access to the Site or any specific parts of the Site; (b) limitations of working space; (c) limitations of working hours; or (d) the method of working or execution or completion of the work in any specific order. … "Work" - includes the provision of materials and design. "Works" - the works shown upon the Design Documents as they may be varied from time to time in accordance with this Agreement and briefly described in Schedule 1. … 1.2 CONTRACTOR'S OBLIGATION The Contractor must carry out and complete the Project in accordance with this Agreement. 1.3 PRINCIPAL'S OBLIGATIONS 1.3.1 The Principal must pay to the Contractor the Contract Sum in accordance with this Agreement. … 1.8 APPLICABLE LAW This Agreement is governed by the laws in force in the State or Territory in which the Works are being carried out. … SECTION 4 SUBCONTRACTS 4.1 SUBCONTRACTING The Contractor may subcontract any part or parts, but not the whole, of this Agreement. The Contractor, by subcontracting, is not relieved of any of the Contractor's obligations under this Agreement. 4.2 NOVATION If this Agreement states that a Preliminary Design is to be novated to the Contractor then, when directed by the Principal, the Contractor must execute a deed of novation in the form of Schedule 30 between the Principal, the Contractor and the party stated In Schedule 5 in respect of that Preliminary Design, without being entitled to compensation. … SECTION 6 EXECUTION OF THE WORKS 6.1 COMPLIANCE WITH DRAWINGS AND SPECIFICATIONS The Contractor must, with due care, skill and diligence and in accordance with this Agreement, carry out and complete the Works to accord with the Design Documents. 6.2 SUPERINTENDENCE The Contractor must retain a competent person on the Works to superintend them during their progress. … 6.6 VARIATIONS At any time prior to the date for Practical Completion the Principal may direct the Contractor in writing to carry out a Variation which is within the general scope of the Works. SECTION 9 TIME 9.1 DATE FOR BUILDING COMMENCEMENT The Contractor must commence the carrying out of the Works within 20 days of the last to occur of the: 9.1.1 Principal producing evidence of the Principal's title to the Site required by clause 1.4; 9.1.2 Principal producing evidence of the Principal's capacity to pay the Contract Sum required by clause 1.5; 9.1.3 granting, by Authorities, of all Approvals necessary to commence the Works; 9.1.4 signing of this Agreement; or 9.1.5 granting, by the Principal, of exclusive possession of the Site to the Contractor. 9.2 NUMBER OF DAYS FOR PRACTICAL COMPLETION 9.2.1 The Contractor must bring the Works to Practical Completion within the number of days stated in Schedule 15 from the actual date of commencement. 9.2.2 In the event that the Contractor fails to commence within the terms of clause 9.1, the Contractor must bring the Works to Practical Completion within the number of days stated in Schedule 15 from the day following the last day of the 20 day period referred to in clause 9.1. 9.3 PRACTICAL COMPLETION 9.3.1 When In the opinion of the Contractor the Works have reached Practical Completion, the Contractor must give the Principal written notice to this effect. 9.3.2 Within 10 days after receipt of a notice under sub-clause 9.3.1, the Principal may give to the Contractor written notice of any matters or things required by this Agreement to be done for Practical Completion. 9.3.3 The Contractor must within a reasonable period do all the things as may be necessary for Practical Completion and give to the Principal written notice of Practical Completion and the Defects Liability Period must commence to run from the date of the notice under this sub-clause. 9.3.4 If the Principal fails to comply with sub-clause 9.3.2 then the Works are deemed to have reached Practical Completion on the date on which the Contractor gave notice under clause 9.3.1. 9.3.5 If the Principal takes possession of the Works or any part without the written agreement of the Contractor then the date of Practical Completion is the date possession is taken unless Practical Completion has already occurred. 9.3.6 When the Works have reached Practical Completion they are at the risk of the Principal in respect of damage, loss or theft and in all other respects. 9.4 DELAYS 9.4.1 If the progress of the Works Is delayed by any matter, cause or thing beyond the control of the Contractor then the Contractor is entitled to a reasonable extension of time for Practical Completion. 9.4.2 The Contractor must, after becoming aware of such delay, Promptly forward written notice to the Principal specifying the cause and the likely period of the delay. 9.4.3 Within 10 days after receipt of the Contractor's notice under clause 9.4.2 the Principal must direct a reasonable extension of time for Practical Completion. 9.4.4 If the Principal fails to comply with sub clause 9.4.3 then the time for Practical Completion of the Works will be deemed to be extended by the period claimed in the notification. … 10.4 VALUATION OF VARIATIONS 10.4.1 Unless otherwise agreed by the parties in writing, Variations must be valued by the Contractor on a fair and reasonable basis and must include the value of pricing work, time-related costs and expenses arising from the Variation. 10.4.2 If any Variation results in increased cost then such cost together with the percentage stated in Schedule 20 must be added to the Contract Sum. 10.4.3 If a Variation results in decreased cost then such cost is to be deducted from the Contract Sum. … 10.6 COSTS OF DELAYS If the progress of the Works is delayed or disrupted by: .1 a Variation; or .2 a Latent Condition; or .3 a dispute with an adjoining or neighbouring owner or resident; or .4 compliance with any changed or unforeseen requirement, condition, notice or order of any Authority; or .5 delay in the issue of any necessary Approval by an Authority; or .6 a breach by or act of prevention on the part of the Principal; and/or .7 delay caused by the Principal, then the Contractor will be entitled (in addition to the extension of time referred to in Clause 9.4) to reimbursement of loss or expense as a result of the delay or disruption at the daily rate set out at Schedule 23 or if nothing is set out there, in an amount ascertained in accordance with common law principles. Within a reasonable time of the delay the Contractor must give written notice to the Principal of the amounts and items of loss or expense and, should the Principal not disagree with the amounts by written notice within 10 days of receipt of the notice, the Contract Sum is to be adjusted accordingly. 10.7 LIQUIDATED DAMAGES 10.7.1 If the Works do not reach Practical Completion by the date for Practical Completion as extended in accordance with this Agreement then the Contractor must pay or allow to the Principal by way of liquidated and ascertained damages a sum calculated at the rate stated in Schedule 23 from that time until the date of Practical Completion. 10.7.2 Liquidated damages payable under clause 10.7.1 are a cap on the liability of the Contractor in respect of delay, The Principal is not entitled to recover any other monies from the Contractor arising from delay other than as stated in this clause. SECTION 18 SPECIAL CONDITIONS See Schedule 31. SCHEDULE 6: Subcontract Sum Clause 1.1 The Contract Sum $2,478,333 inclusive of GST. (see detailed budget attached) … SCHEDULE 15 deleted … SCHEDULE 20: Percentage Margin on Variations Clause 10.4.2 Percentage margin on Variations: 8.0% SCHEDULE 23: Liquidated and Ascertained Damages Clause 10.6 Daily rate of delay loss and expense: $1,000.00 $2,500.00 per day Clause10.7 Liquidated and Ascertained Damages: $1,000.00 $2,500.00 per day … Section 18.3 - Commencement of Work Notwithstanding any other clause in this Agreement, the Principal and the Contractor agree that the Works shall commence by 27 July 2015. Should this clause be inconsistent with any other clause in this Agreement, the former will prevail and the latter will be invalid to the extent of the inconsistency. Section 18.4 - Completion of Work (a) Notwithstanding clause 9.2 in this Agreement, the Principal and the Contractor agree that the Contractor shall: (i) bring the Works for the level 1 function space and associated areas, the level 1 kitchen area, and the level 1 restroom and toilet to Practical Completion by 1 September 2015; and (ii) subject to clause 18.4(b), bring all Works to Practical Completion by 27 November 2015. (b) If the necessary Approvals for the construction of the curved glass wall, the balcony on level 1 and the associated works are obtained after 27 September 2015, then the date these Works must reach Practical Completion will be postponed by one day for each day the Approval is delayed. However, the date to achieve Practical Completion for all other Works shall not be affected. (c) Should this clause be inconsistent with clause 9.2 of this Agreement, the former will prevail and the latter will be invalid to the extent of the inconsistency. … Section 18.6 - Shipping Delays The Contractor agrees that for the purposes of clause 10.6 of this Agreement, a delay or disruption in the progress of the Works which is caused by a delay or disruption in the shipping of the Chinese fixtures, fittings and furniture shall not entitle the Contractor to any reimbursement of any loss or expense resulting from such delay or disruption. The Contractor acknowledges that the shipping of the Chinese fixtures, fittings and furniture is entirely out of the Principal's control. Section 18.7 - Approval Authority (a) The Contractor estimates the construction of the curved glass wall, the balcony on level 1 and the associated works can be completed within 2 months from the date the necessary Approvals for these Works are obtained from the Authorities. (b) The Contractor and the Principal agree that so long as the Approval from` the Authorities for the construction of the curved glass wall, the balcony on level 1 and the associated works are obtained by 27 September 2015, then the Contractor cannot rely upon clause 9.4 or clause 10.6 to claim that the progress of the Works was delayed or disrupted by reason of the Authorities not providing the Approval sooner.

Applicable contractual construction principles

In Cordon Investments Pty Ltd v Lesdor Properties Pty Ltd [2012] NSWCA 184 Bathurst CJ (with whom Macfarlan and Meagher JJA agreed) stated at [52] as follows: "[52] The principles underlying the construction of written contracts are well established and it is not necessary to deal with them at length. A contract is to be construed by reference to what a reasonable person would understand by the language in which the parties have expressed their agreement having regard to the context in which the words appear and the purpose and object of the transaction: Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 at [22]; Toll (FGCT) Pty Ltd v Alphafarm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 at [40]; International Air Transport Assn v Ansett Australia Holdings Ltd [2008] HCA 3; (2008) 234 CLR 151 at [53]. At least in the case of ambiguity, resort can be had to the surrounding circumstances known to the parties in interpreting the particular provision: Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24; (1982) 149 CLR 337 at 352; Western Export Services Inc v Jireh International Pty Ltd [2011] HCA 45; (2011) 282 ALR 604."
In Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7, the majority of the High Court said the following at paragraph [35]: "[35] Both Verve and the Sellers recognised that this court has reaffirmed the objective approach to be adopted in determining the rights and liabilities of parties to a contract. The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding "of the genesis of the transaction, the background, the context [and] the market in which the parties are operating". As Arden LJ observed in Re Golden Key Ltd, unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption "that the parties … intended to produce a commercial result". A commercial contract is to be construed so as to avoid it "making commercial nonsense or working commercial inconvenience" [emphasis added].
In Caringbah Investments Pty Ltd v Caringbah Business & Sports Club Ltd (In Liquidation) [2016] NSWCA 165, Bathurst CJ (with whom McColl and Macfarlan JJA agreed) stated as follows at [93]: "[93] The relevant principles of construction are well established. In Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; 251 CLR 640, the plurality reaffirmed that the meaning of the terms of a commercial contract is to be determined by what a reasonable business person would have understood them to mean. It requires consideration of the language used, the surrounding circumstances known to the parties and the commercial purposes or objects to be secured by the contract: at [35]; see also Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; 89 ALJR 990 at [46]-[52]."
In WIN Corporation Pty Ltd v Nine Network Australia Pty Ltd [2016] NSWCA 297, Barrett AJA (with whom McColl JA and Sackville AJA agreed) stated as follows at [56]-[59] in relation to pre-contractual dealings: "[56] As a preliminary, however, there is a need to consider the extent to which evidence concerning the course of dealings and negotiations between the parties before the making of their contact may properly be taken into account in determining the commercial purpose and objects. [57] Evidence of prior negotiations is admissible to the extent that it establishes objective facts known to both parties and the subject matter of the contract. Conversely, evidence reflecting the subjective intentions of the parties is, in accordance with long-standing authority, necessarily inadmissible for the purpose of determining the meaning of the contract (unless it demonstrates knowledge of surrounding circumstances). In recent times, the High Court has revisited the distinction between impermissible recourse to the parties' subjective intentions and expectations and permissible regard to objective matters known to the parties. In Victoria v Tatts Group Ltd [2016] HCA 5 ; (2016) 90 ALJR 392 at [51], the Court unanimously approved the formulation of principle advanced by three members of the Court (French CJ, Nettle and Gordon JJ) in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104 ; [2015] HCA 37 (at [46]-[51]) that, as a general principle of construction, the rights and liabilities of parties under a contractual provision fall to be determined by objective consideration of its text, context and purpose. The relevant enquiry is to be conducted on the footing of what a "reasonable businessperson" would have apprehended the terms to mean in light of the particular language used by the parties, the circumstances addressed by the contract and its commercial purpose. Although the Court was of the view that this process would not uncommonly be possible without reference to evidence of surrounding circumstances, it acknowledged that regard could be had to such evidence if, for example, it assisted in establishing the objective facts known to the parties and thereby elucidated with greater precision the commercial purpose or subject matter of the contract. [58] In Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd at [48], the Court also referred with approval to the view of Mason J (Stephen and Wilson JJ agreeing) in Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337 ; [1982] HCA 24 at 352. Mason J there observed: The true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning. [59] A potential tension that inheres in this proposition is that to recognise words as bearing a "plain meaning" is merely to state a conclusion arrived at by some process of interpretation which cannot, as a matter of logic, exclude context. As Leeming JA noted in Mainteck Services Pty Ltd v Stein Heurtey SA (2014) 89 NSWLR 633; [2014] NSWCA 184 at [77], to state that a legal text is "clear" does no more than recognise that "there is nothing in the context which detracts from the ordinary literal meaning". It therefore becomes clear that the notion that it may first be necessary to consider context when construing a contract is not inconsistent with Mason J's "true rule". On this footing, it does not follow that the task of assessing whether a phrase or expression is ambiguous or susceptible of more than one meaning must be undertaken without regard to evidence of surrounding circumstances. This position corresponds with the approach of the High Court in Victoria v Tatts Group Ltd where the relevant contract was construed by reference to its text, context and purpose without any anterior finding of ambiguity as a precondition to a consideration of surrounding circumstances as an aid to discovering or elucidating context and purpose." (emphasis added)
In Zhang v ROC Services (NSW) Pty Ltd [2016] NSWCA 370 Leeming JA (with whom Sackville AJA agreed) stated as follows at [79]-[81]: [79] There has been a debate whether the effect of what was said in Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337at 352 concerning the "true rule" that "evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning". The position has now been clarified by the High Court's decision in Victoria v Tatts Group Ltd [2016] HCA 5 ; 90 ALJR 392 as was recently observed by Barrett AJA in WIN Corporation Pty Ltd v Nine Network Australia Pty Ltd [2016] NSWCA 297 at [59]: the notion that it may first be necessary to consider context when construing a contract is not inconsistent with Mason J's 'true rule'. On this footing, it does not follow that the task of assessing whether a phrase or expression is ambiguous or susceptible of more than one meaning must be undertaken without regard to evidence of surrounding circumstances. This position corresponds with the approach of the High Court in Victoria v Tatts Group Ltd where the relevant contract was construed by reference to its text, context and purpose without any anterior finding of ambiguity as a precondition to a consideration of surrounding circumstances as an aid to discovering or elucidating context and purpose. [80] The same point was also made in Calvo v Ellimark Pty Ltd [2016] NSWCA 136 at [55] and in Todd v Alterra at Lloyds Ltd (2016) 239 FCR 12; [2016] FCAFC 15 at [73]-[75]. A different view was expressed by one member of the Victorian Court of Appeal in Apple and Pear Australia Ltd v Pink Lady America LLC [2016] VSCA 280 at [91]-[138]. However (presumably because the hearing of that appeal predated it) no reference was made to Victoria v Tatts Group Ltd, and there is thus little to be gained from analysing that reasoning in any detail. Of course, on no view does it follow that the evidence of surrounding circumstances will be of assistance and therefore ultimately relevant: evidence of surrounding circumstances did not assist in Mainteck and in WIN Corporation. It is true that this may in some cases lead to an expansion of the evidence tendered on an issue of construction, although ordinarily it may be expected that parties will confine their tender to material which will bear on the meaning of the contract. Indeed, a party seeking to tender a document as evidence of surrounding circumstances and for no other purpose ought to be able, readily and precisely, to identify how it is said that its reception will bear on the process of ascertaining the legal meaning. [81] But this is not a case where there is any legal difficulty - whatever view be taken of Codelfa and ensuing decisions - in resorting to evidence of matters extrinsic to the contract. Indeed, it is not even a question of evidence. The only question raised by the parties is whether regard may be had to the legislation governing compulsory motor vehicle insurance, as to which evidence is not necessary: Evidence Act 1995 (Cth), s 143(1)(a) read with s 5. As will be seen below, binding authority requires regard to be had to that legislation." (emphasis added)
It is also accepted that a contract must be construed as a whole with the aim wherever possible of giving a degree of internal coherence to the various components of the commercial contract: Wilkie v Gordian Runoff Ltd (2005) 221 CLR 522; [2005] HCA 17 at [16]; HP Mercantile Pty Ltd v Hartnett [2016] NSWCA 342 at [142]. In the Zhang decision, above, Leeming JA stated as follows at [89]: "the Contract is to be read as a whole. It is not only permissible but mandatory to have regard to how the potential legal meanings fit in with other provisions of the Contract."

Matters not in dispute

It appeared that a number of matters were not disputed by the parties. These matters were as follows: 1. The date of Practical Completion under the Contract as executed was 27 November 2015: clause 18.4 of the Contract; 2. Variations were requested on a number of occasions on behalf of the defendant for additional works; 3. Mr Bruce Mansfield on behalf of the plaintiff provided documents to the defendant dated 5 November 2015, 10 November 2015, 25 November 2015 and 8 December 2015, referring to additional works requested by the defendant and the total number of additional days required to complete those works. The document dated 10 November 2015 replaced that dated 5 November 2015; 4. These documents sought a total of 44 additional days for the Variations; 5. On 17 December 2015 Mr Bruce Mansfield sent a letter to Mr Yee, of the architects' firm dealing with the project, submitting an application for an extension of time claim for consideration and approval of 45 additional working days with a revised contract completion date of 8 February 2016; 6. This was approved by Mr Yee on 17 December 2015 following a discussion with Mr Xiao. There was no issue in the proceedings that Mr Yee and Mr Xiao had authority on behalf of the defendant to approve the Variations requested; 7. There was no dispute that the plaintiff forwarded the 28 March 2016 invoice to the defendant in the sum of $123,750 and that the sum was not paid by the defendant.

Evidence of Mr Bruce Mansfield

The plaintiff read two affidavits from Mr Bruce Mansfield sworn 17 February 2017 and 15 October 2017.
Mr Mansfield exhibited to his first affidavit a company search of the plaintiff which showed that at all relevant times he was the only director of the plaintiff.
In his first affidavit sworn 17 February 2017, Mr Mansfield gives evidence that he is a director and principal of the plaintiff company which was a Sydney-based construction company. Mr Mansfield stated that he had been in the construction industry for over 20 years and over the past 10 years had extensive experience in conducting projects of the same or similar scope and size to the one in these proceedings being The Point Redevelopment Project. Mr Mansfield gives evidence that Mr Matthew Mansfield, who is his son, is an employee of the plaintiff and was the Construction Manager on The Point Redevelopment Project. Mr Mansfield states that the plaintiff was selected as the successful tenderer to undertake the refurbishment of The Point Restaurant and Function Centre.
In his affidavit Mr Mansfield gives evidence in relation to the selection process as tenderer and his inspection of the premises. He also gives evidence of pre-contractual conversations in which Mr Xiao, on behalf of the defendant, emphasised that the defendant wanted everything finished by 27 November 2015 so that the defendant could "catch the Christmas trade in December" (paragraph 18). Mr Mansfield also gives evidence in relation to his execution of the Contract.
In paragraphs 27 and 28 of his first affidavit, Mr Mansfield states that the plaintiff commenced work on the project on or about 27 July 2015 and finished The Point Redevelopment Project on 5 February 2016.
Mr Mansfield then deals in his affidavit with the defendant's requests for variations to the scope of works. In paragraph 29 of his affidavit, he states that from the beginning and throughout the course of The Point Redevelopment Project, the defendant requested numerous variations and additions to the scope of works which were usually made in site meetings by representatives of the defendant. Mr Mansfield gives evidence of a statement made by Mr Xiao in early November 2015 during a site meeting where Mr Xiao stated that the defendant was very concerned that the project would not be finished in time for Chinese New Year 2016 on 8 February 2016 as the defendant had planned a grand official opening for the restaurant with a number of important guests and officials coming from Australia and China. It was emphasised that the defendant wanted the task finished by Chinese New Year 2016.
Mr Mansfield then gives evidence of the various summary documents being forwarded to representatives of the defendant dated 5 November 2015, 10 November 2015, 25 November 2015 and 8 December 2015. These documents, according to Mr Mansfield, included an estimate as to the expense for the requested variations and the number of additional days that such variations required.
Mr Mansfield states that at a site meeting on 8 December 2015, Mr Xiao emphasised again the defendant's concern about finishing the project by Chinese New Year and the importance because of the proposed grand opening. Mr Mansfield said that the plaintiff could do what it could but it would need to put on more contractors and work significant overtime from 8 December 2015 until Chinese New Year if the plaintiff was to have any chance of finishing the project by then. Mr Xiao said he would attempt to limit further requests for variations.
Mr Mansfield gives evidence in his affidavit in relation to forwarding the request for variations which is not disputed was approved (paragraphs 41-44). One email referred to which became significant in the proceedings was that from Mr Mansfield to Mr Yee dated 17 December 2015 which included: "Extension of Time Claim as at 18 December, 2015…Revised Contract Completion Date - 8 February 2016."
In the remainder of his affidavit, Mr Mansfield refers to there being yet further requests for variations by the defendant. The defendant also sought a reduction in the cost of at least one variation which Mr Mansfield said the plaintiff could not meet.
In an email dated 23 December 2015 to Mr Yee of the architect's firm, Mr Mansfield stated the following: "My price for this works has already been reduced and does not include our expenses for remaining on site for the additional time to complete these works. This is costing our company $15,000 per week. Also, given the urgency and the need to get this completed I've had to pay a premium to have contractors and suppliers undertake works over the industry shutdown period, so that the necessary materials will be available when we returned to site on 4 January."
Mr Mansfield gives evidence that additional Melbourne-based contractors were engaged by the plaintiff and considerable work was completed in the period between December 2015 to 5 February 2016 by or on behalf of the plaintiff in relation to the project including weekends and additional hours during the week. Mr Mansfield notes that on or before 5 February 2016 the plaintiff completed The Point Redevelopment Project including the variations requested by the defendant and "a grand and impressive opening of The Point" occurred on 8 February 2016.
Mr Mansfield in paragraphs 55-62 of his affidavit gives evidence in relation to the plaintiff's expenses for the project. In paragraph 55 he notes that in the period July 2015 to 5 February 2016, the plaintiff only worked on The Point Redevelopment Project. The evidence of Mr Mansfield is in essence that the plaintiff incurred significant costs associated with having to stay on site and work on The Point Redevelopment Project in the period from 27 November 2015 to 5 February 2016 in the order of $15,000 per week.
In his second affidavit sworn 15 October 2017 Mr Mansfield, after making some minor corrections to his first affidavit, responds to the affidavits of Mr Xiao, the defendant's then Operations and Marketing Director and the affidavit of Mr Li, the plaintiff's General Manager. In the course of the hearing counsel for the defendant said that the person with authority to make decisions on behalf of the defendant was Mr Xiao and Mr Li had no authority.
In his second affidavit, Mr Mansfield disputed a number of aspects of the affidavits of Mr Xiao and Mr Li (a further representative of the defendant).
Mr Mansfield in his second affidavit gives detailed consideration to paragraph 9 of the affidavit of Mr Xiao affirmed 16 June 2017 which contains the conversation relied upon by the defendant to support its estoppel pleading (see paragraphs 37-50). Mr Mansfield confirms that he attended the meeting on 5 November 2015 and agrees that during the meeting he presented the summary of additional works requested dated 5 November 2015 which is at pages 175-183 of the exhibit to his first affidavit. Mr Mansfield agrees that during the meeting Mr Xiao said words to the effect that the sum quoted in the summary was a very substantial amount and that he responded in words to the effect: "Yes, but it fairly reflects the price for the work and materials needed for each of the variations you have requested." Mr Mansfield accepts that there was discussion between himself and Mr Xiao about a number of the components of the variations. Mr Mansfield also agrees that Mr Xiao said words to the effect: "this project has already gone beyond our initial budget. We were not expecting these additional costs." (paragraph 47).
Crucially, Mr Mansfield expressly denies in paragraphs 48-50 of his second affidavit that part of paragraph 9 of Mr Xiao's affidavit where Mr Xiao states that Mr Mansfield confirmed, in response to the summary and a question as to whether it included all the costs and expenses of the plaintiff and that there would not be any further amount payable by the defendant to the plaintiff, a statement to the effect: "Yes. All figures provided on the summary include all our fees, costs and expenses. You won't need to pay any further amount on top of this." Mr Mansfield states that he responded to Mr Xiao in words to the effect: "Well, this summary fairly reflects all of our fees, costs and expenses to perform the particular variations listed which we are discussing today." Later Mr Mansfield agreed that the 5 November 2015 variation summary document was amended and updated by the 10 November 2015 document (paragraph 51).
In relation to paragraph 14 to Mr Xiao's affidavit, Mr Mansfield agrees that there was a meeting in mid-December 2015 and that he gave Mr Xiao a quote of $138,105 in relation to certain modification works. Mr Mansfield also agrees that he said to Mr Xiao words to the effect: "This will be the full extent of it. You won't need to pay more money to us", but says he was referring to the defendant not being required to pay more than $138,105 plus GST for the modification works only not the variations (paragraph 61).
In paragraph 67 of his second affidavit, Mr Mansfield notes that the defendant continued to ask for variations to the Contract after 8 December 2015 right up until early February 2016 which were achieved by the plaintiff.
In paragraphs 100-106 of his second affidavit, Mr Mansfield responds to paragraph 9 of Mr Li's affidavit. In particular, in paragraphs 105-106 Mr Mansfield denies that version of the conversation relied upon by the defendant as founding the estoppel which is in similar, but not the same, terms as that set out in Mr Xiao's affidavit.
Mr Mansfield was subject to detailed cross-examination.
Mr Mansfield confirmed that he was the principal decision maker in the plaintiff company with his son Matthew who was part of senior management.
In relation to the period July 2015 to February 2016, Mr Mansfield confirmed that he flew back and forth from Sydney during the project as did his son Matthew. Whilst they were in Melbourne they stayed in rented accommodation.
Mr Mansfield confirmed that the contract sum under the Contract was $2,478,333 inclusive of GST (see Schedule 6). He said this was a lump sum contract subject to requests for Variations by the defendant.
Mr Mansfield was asked questions about a document relating to the project budget which became Exhibit 1 in the proceedings. He said this document was prepared recently and was an expansion of the budget which was annexed to the Contract (see page 136 of the exhibit to Mr Mansfield's first affidavit). Mr Mansfield confirmed that the amount in Exhibit 1 of $2,253,030 was the contract price less GST and the price in the contract budget document. He said this was the budget contractually agreed to between the parties. In answer to the question as to whether the budget contained all of the costs to be met in relation to the project, Mr Mansfield confirmed that it set out all of the costs under the Scope of Works under the Contract and included a profit margin of between 4% and 5%. In relation to the project management fee of $47,644 in Exhibit 1, Mr Mansfield said this was for management fees for managing the overall project as not all overheads were included in the contract price. He agreed that other overheads were built into the contract price.
Mr Mansfield agreed that the budget did not include many overheads such as salaries, superannuation, flights to and from Sydney, accommodation, parking, taxis, fuel, book-keeping and the purchase of groceries during the stay in Melbourne. He agreed that the expenses were apportioned to the project and allowed for in the project budget.
Mr Mansfield was then asked some questions about the document which appears at page 230 and following of the exhibit to his first affidavit which he agreed came from MYOB which was an accounting package used by the plaintiff. He said it was used to manage cost and expenses and the document included non-specific expenses incurred by the plaintiff in relation to the project from November to February 2016. He also agreed that it included wages/salaries, superannuation, book-keeping, flights and accommodation to 10 February 2016. He agreed this was after the date of practical completion but he attended the function on 8 February 2016 and also there were items which had to be addressed on the project. Mr Mansfield agreed that the non-specific expenses referred to in the MYOB document were not charged to the client.
Mr Mansfield was then asked questions about a document entitled "Job Activity [detail]" which became Exhibit 2 in the proceedings and which provided a breakdown of the plaintiff's expenses in relation to the period of the project. The expenses were listed in the document as totalling $1,905,836.17. He agreed that these expenses included notional salaries, superannuation, travel, taxis and similar expenses. Mr Mansfield asserted that there were other expenses relating to the project not included in Exhibit 2. Mr Mansfield denied that the plaintiff received a profit of 27% for the project. He also denied that the plaintiff's non-specific expenses were factored into the contract price. He accepted that the salary costs to the defendant were taken into account in relation to the cost of the original scope of works and the timeframe proposed.
Mr Mansfield was then asked questions in relation to meetings with representatives of the defendant. He said that the meetings occurred either weekly or fortnightly but sometimes more often and that the purpose of the meetings was to report on the progress of the project and respond to the defendant's queries or for the plaintiff's representatives to raise their own queries. He agreed that concerns would be raised as well as other matters at the meetings. Mr Mansfield accepted that some variations were sought by the defendant which involved additional cost but added no further time to the programme completion date: see the documents at pages 172-173 of the exhibit to Mr Mansfield's first affidavit. Mr Mansfield denied that variations were proposed by the plaintiff. He said that he pointed matters out to the defendant's representatives and they made the decisions as to whether they wanted a variation in relation to the issue discussed.
Mr Mansfield was asked questions about the 8% variation margin referred to in the Variations (see also Schedule 20 to the Contract). Mr Mansfield said that this was an amount which allowed for management time expended due to the variation. A variation had to be prepared, sometimes designed and costed and this may involve obtaining multiple quotations sometimes with long lead times in relation to the supply of items. This amount of 8% was meant to compensate the plaintiff for management costs including the day-to-day management of the site.
Mr Mansfield gave evidence that by November 2015 there had been about 30 to 40 variations requested by the defendant, some of which did not impact on the then end date for completion. He stated that the defendant requested numerous variations almost on a daily basis in the period between November 2015 and February 2016. The process adopted by the plaintiff was to evaluate the variation requested, to price it and then present it to the architect or the defendant for approval. Sometimes the variations sought did not then go ahead.
Mr Mansfield agreed that the variation Summary of Additional Works Requested document dated 5 November 2015 at page 175 to the exhibit to his first affidavit was given to the defendant on or about 5 November 2015 and discussed at the meeting on 5 November 2015: T80.45-.48. Mr Mansfield denied that Mr Xiao was shocked at the additional costs: T81.47. Although Mr Mansfield initially did not recall that Mr Xiao said in the meeting words to the effect "this is a very substantial amount you have quoted on the summary", he agreed that it was said when taken to paragraph 42 of his second affidavit: T82.19. In answer to the suggestion that he did not recall much of what was said at the 5 November 2015 meeting, he indicated that he recalled that he said the price reflected the work and materials needed for each of the Variations requested: T82.30.
Mr Mansfield agreed that the document dated 10 November 2015 at page 184 of his exhibit to his first affidavit superseded the document dated 5 November 2015: T83.44. Mr Mansfield also agreed that he understood the cost of the project had gone beyond the original budget and the defendant's representatives were concerned but he stated that the increased costs were as a result of the variations requested.
Mr Mansfield was then asked questions in relation to Mr Xiao's and Mr Li's versions of the conversation stated to have occurred on 5 November 2015 which is relied upon by the defendant for the purposes of its estoppel. He denied those versions. He said what was in Mr Xiao's and Mr Li's affidavits was simply not true and he did not seek to reassure them that the total costs involved would have no more "nasty surprises": T85.46. Mr Mansfield agreed that he did not say to the representatives of the defendant at the 5 November 2015 meeting that variations would cost them another $2,500 per day: T86.13. He also agreed that this additional cost was not referred to in his emails in late December 2015 or in any meetings with the representatives of the defendant in November/December 2015 or thereafter: T86.28-.46. Mr Mansfield denied that the reason he sent the 28 March 2016 invoice two months after the completion of the project was because of a dispute with the defendant in relation to them not releasing the second component of the retention amount under the Contract: T88.21.
In re-examination, Mr Mansfield gave evidence that he estimated that there were about 80 items in the variations in total. Some variations were significant which were sought by the defendant and others were minor. He said that the plaintiff wished to finish the project as soon as possible and the variations requested caused a significant degree of delay. Mr Mansfield said that the variations caused time pressures on the plaintiff particularly in the light of the fact that the construction industry in Melbourne shut down over the summer break. Mr Mansfield said that there had been an abnormal number of variations on the project which had not been experienced by him previously: T88-89.
Mr Mansfield confirmed that not all variations caused a delay in the project. Some variations could be completed without affecting the "critical path" in the project being tasks which had to be performed before a next task could be done. Mr Mansfield gave evidence that when the critical pathway of the project was affected that this caused delays in the project. He referred to problems he had securing tradesmen over the summer holiday period when the Victorian construction industry generally shutdown: T90.15.
Mr Mansfield struck me as an intelligent and careful witness. Although on occasions he took the opportunity to emphasise matters which assisted his case, particularly in relation to the number of variations and the delays and pressures which this caused to the plaintiff, overall I found him to be a witness of truth who gave his evidence honestly and who made concessions where appropriate. In particular, he was not shaken in relation to his denial of the evidence of Mr Xiao and Mr Li concerning what was alleged to have been said in the 5 November 2015 conference. In general terms I accept Mr Mansfield's evidence. I set out my views in relation to Mr Xiao and Mr Li below concerning the significant issue of the conversation alleged to have occurred on 5 November 2016.

Evidence of Mr Feng (Frank) Xiao

The defendant read in the proceedings an affidavit of Mr Feng (Frank) Xiao affirmed 16 June 2017. Between 2012 and 2016 Mr Xiao was employed by the defendant in the position of Operations and Marketing Director. He was the main representative of the defendant at meetings with representatives of the plaintiff, particularly Mr Bruce Mansfield.
Mr Xiao gives evidence in relation to early discussions with Mr Bruce Mansfield concerning the renovation works proposed to The Point Restaurant and Function Centre. Although there are differences in his affidavit compared to the affidavits of Mr Bruce Mansfield, it seems clear that Mr Xiao expressed concern to Mr Mansfield about the project being completed before Christmas 2015 because of the Christmas period being a busy trading period for the restaurant.
Mr Xiao, consistently with Mr Mansfield, gives evidence about the execution of the Contract and the plaintiff performing construction works at the site between July and November 2015. Also consistently with Mr Mansfield, Mr Xiao gives evidence that in that period there were a number of variations from time to time made to the original construction plans.
The more important part of Mr Xiao's affidavit is in paragraph 9 as it is the paragraph relied upon by the defendant in support of its pleading of estoppel.
It seems clear from all the evidence that this meeting occurred on or about 5 November 2015. The persons attending the meeting were Mr Li, Mr Yee from the architect's office, Mr Bruce Mansfield, Mr Matthew Mansfield and Mr Xiao. The purpose of the meeting was to discuss the 5 November 2015 Summary of Additional Works Requested document. The evidence from all witnesses seems to confirm that there was discussion about the amount quoted in the Summary for the works and some concern was expressed by Mr Xiao in relation to the amount for the proposed Variations. Some of the items referred to in the Summary were discussed. Mr Xiao gives evidence that in the course of the meeting a conversation occurred to the following effect with Bruce Mansfield: "Mr Xiao: This project has already gone beyond our initial budget. We were not expecting these additional costs. Can you confirm this summary you prepared has included all your costs and expenses and there won't be any further amount payable by us to you? Bruce Mansfield: Yes. All figures provided on the summary include all our fees, costs and expenses. You won't need to pay any further amount on top of this. Mr Xiao: What about these additional dates referred to in your summary? Can you still complete the project on time? Bruce Mansfield: Don't worry. We will complete the project on a date to be agreed by the parties."
Mr Xiao, consistently with the evidence of Mr Mansfield, gives evidence about the 5 November 2015 document being amended and updated by the plaintiff with the 10 November 2015 Summary document. Later, Mr Xiao confirms further Variations being requested between 27 November 2015 and 8 December 2015.
Mr Xiao gives evidence in his affidavit about the defendant being notified by the Albert Park Authority on 27 November 2015 that the construction plans needed to be modified, including the reconstruction of the glass fence and canopy columns on the ground floor of the restaurant. Mr Mansfield and Mr Xiao met and had a discussion in relation to this and a quote was requested.
Mr Xiao gives evidence that in mid-December 2015 he had a meeting with Mr Mansfield where Mr Mansfield handed a quote for the modifying works requested by the Albert Park Authority being $138,105 plus GST. Mr Xiao said that a conversation occurred to the following effect: "I said to Bruce "This is a lot of money. I have no authority to make the call now. I will need to speak with my boss and come back to you later." Bruce replied "Sure". For confirmation I asked him "Has your quote included the entire amount we need to pay you in relation to the modification works?" Bruce replied "Yes. This will be the full extent of it. You won't need to pay more money to us."
Mr Xiao gives further evidence in relation to the course of the project and the approval of the 45 days extension for the Variations.
In his oral evidence in chief, Mr Xiao was asked questions about his receipt of the proposed contract from Mr Mansfield. He said that he did not review the document himself as it had lots of terms which he did not understand. However, he took the document to the defendant's lawyer and obtained advice in relation to it. He had further negotiations with Mr Mansfield after speaking to his lawyer. In these discussions, the issues of when the project would be finished and the price for the works were covered.
In cross-examination, Mr Xiao, who appeared to have a reasonable but not strong command of the English language, and who gave some evidence with the assistance of a Chinese interpreter, confirmed that he had many discussions with Mr Bruce Mansfield which were held in English. Mr Xiao candidly confirmed that he did not use a translator for these discussions and that he preferred communications to be in writing. Mr Xiao confirmed that while he remembered conversations with Mr Bruce Mansfield he was unable to recall the exact words used. When asked whether, upon hearing a piece of English, he was able to remember it exactly with the passage of time, Mr Xiao said that he could remember some conversations if they are in relation to an important matter.
Mr Xiao agreed that it was important to the defendant to finish the renovation of the restaurant by Christmas 2015. He confirmed that once it became clear that it could not be opened for Christmas, the defendant tried to ensure that the restaurant was opened for Chinese New Year on 8 February 2016. Mr Xiao accepted that at a meeting in July 2015 he expressed the desire to Mr Bruce Mansfield that the project be finished by Christmas. In relation to some matters, Mr Xiao candidly admitted that he could not recall the detail of particular conversations. However, Mr Xiao gave evidence that he remembered matters which he regarded as important.
Mr Xiao was taken to paragraph 20 of Mr Mansfield's first affidavit in which there was a discussion on the proposed Clauses 10.6 and 10.7 of the Contract and the defendant requested to increase the daily rate referred to in those clauses from $1,000 per day to $2,500 per day and this was agreed by Mr Mansfield. This evidence of Mr Mansfield was only admitted in relation to the penalty point issue. In relation to this matter, Mr Xiao confirmed that there was a discussion in the meeting on 22 July 2015 on this issue and that if a delay was caused by "our problem" the defendant had to pay a fee: T111.16. The defendant, according to Mr Xiao, wanted the project to finish on time although there were a lot of uncertainties according to Mr Xiao at that time: T111.18. Mr Xiao confirmed that the defendant's "team" asked for the daily rate to be increased from $1,000 to $2,500: T111.33.
Mr Xiao was asked questions in relation to the 5 November 2015 and 10 November 2015 proposed Variations and confirmed that he had discussions with Mr Yee in relation to them but could not recall what Mr Yee said: T113.44; T114.4.
It was put to Mr Xiao that paragraph 9 of his affidavit was incorrect in relation to the conversation relied upon to found the defendant's estoppel argument. Mr Xiao confirmed that the document that was being discussed at the meeting was the 5 November 2015 document at page 175 of the exhibit to Mr Mansfield's first affidavit (it was not in issue that this was later replaced by the 10 November 2015 document). Mr Xiao could not recall if he had discussions with Mr and Mrs Cheng, the owners of the defendant, in relation to the discussion with Mr Mansfield on 5 November 2015: T116.1.
Mr Xiao was asked questions about his 22 December 2015 email (pages 222 to 223 of the exhibit to Mr Mansfield's first affidavit) where he stated: "… we really concern when we can get the whole project done. For the hidden jade grand opening, we start to do the plan already, including a long list of premium guests invitation, media, and designing the invitation cards, progress of the party etc. Too many things we need to prepare now. So it will be really helpful if we can finish the project as mentioned on the attached timeframe … We will not try to stop adding any more work."
Mr Xiao confirmed that he sent the email and that he was trying to limit the number of variations requested from the plaintiff by the defendant. However, he said that he thought the defendant was allowed to make variations for the project. Mr Xiao's 22 December 2015 email appears to provide some support for the argument that the completion of the project by Chinese New Year was a significant point for the defendant. See also T106.35.
When challenged on the more significant part of paragraph 9 of his affidavit, Mr Xiao confirmed that the discussion occurred and that Mr Bruce Mansfield said words to the effect: "Yes. All figures provided on the summary include all our fees, costs and expenses. You won't need to pay any further amount on top of this".
In relation to the discussion referred to in paragraph 14 of Mr Xiao's affidavit about the modification works resulting from the notification by the Albert Park Authority, Mr Xiao confirmed the conversation but he agreed that he thought Mr Mansfield was only talking about the Albert Park modification variation and nothing else: T131.9. This excludes the possibility that Mr Xiao thought it related to the other Variations requested earlier.
It was clear to me from his oral evidence and his reaction to questions asked, that Mr Xiao had reasonable but not good English. He expressed his English slowly but clearly in the witness box and on occasions consulted with the interpreter in relation to matters which he did not understand. Other matters were clarified to him by the Court.
Mr Xiao impressed the Court as an honest witness who was doing the best he could to give complete, truthful and forthright evidence. On many occasions he made concessions when he did not recall matters. Mr Xiao candidly admitted that he did not recall various things including the detail of his discussions with Mr and Mrs Cheng, the owners of the defendant, and Mr Yee, from the architect's firm.
Although I have no hesitation in accepting Mr Xiao as an honest witness, I was concerned about his capacity to understand the subtleties of English in discussions with a native English speaker like Mr Bruce Mansfield, particularly in the context of a meeting in which complex issues were discussed. Mr Xiao admitted on occasions that he probably did not understand some documents. Examples include the draft contract and the 5 November 2015 summary document at page 175 of the exhibit to Mr Mansfield's first affidavit.
For these reasons, I think some caution should be exercised in reviewing Mr Xiao's affidavit and oral evidence including the crucial conversation set out in paragraph 9 of that affidavit. This issue will be considered in further detail below.

Evidence of Mr Yang (Larry) Li

The defendant read an affidavit of Mr Yang (Larry) Li affirmed 16 October 2017 which replaced a similar affidavit affirmed 21 June 2017 which had been incorrectly affirmed. The two affidavits had the same content.
In his affidavit, Mr Li states that between March 2013 and April 2016 he was employed by the defendant as its General Manager at The Point Restaurant. Although there was some suggestion in the evidence of Mr Mansfield that another person was the General Manager, nothing turned on this.
Mr Li is a native Chinese speaker and also gave his evidence with the assistance of an interpreter although most of the evidence which he gave was in English. Mr Li impressed the court as having slightly better English comprehension skills than Mr Xiao.
Mr Li in paragraph 4 of his affidavit gives evidence about a discussion in July 2015 prior to the Contract being signed. In his version of the discussion between Mr Xiao and Mr Mansfield, he makes no reference to the desire of the defendant for the project to be completed by Christmas which is in the evidence of Mr Xiao and Mr Mansfield.
In paragraph 9 of his affidavit, Mr Li gives his version of the 5 November 2015 meeting conversation. Mr Li says in the paragraph that he cannot recall all the discussion at the meeting but states that he clearly remembers Mr Xiao saying words to the effect "These variations are very expensive and the project has gone well beyond our initial budget. Can you confirm the amount calculated on the summary is the final figure that is payable to Mansfield?" According to Mr Li, Mr Bruce Mansfield replied: "Yes, absolutely. This is a comprehensive summary of the cost of all the variation works to be carried out. There won't be any further amount payable by you".
Mr Li gave evidence in cross-examination that he had not read Mr Mansfield's first affidavit: T132.33. In answer to the suggestion that Mr Li knew that his "boss" wanted the restaurant to be opened by Christmas Mr Li denied that: T133.46. He said that he understood that his "boss" wanted the project to be finished in a "reasonable time" and as soon as possible but as it was a high-end restaurant the owners wanted everything to be completed "perfectly": T133.48-134.3; T134.38.
In relation to the crucial conversation set out in paragraph 9 of his affidavit, Mr Li confirmed that he could not recall the detail of what was said in the entire meeting: T136.14. However, Mr Li said that although English was his second language he had to use English in the meeting and stated that when something was important he focused on it and made sure he remembered it: T136.17.
Mr Li conceded that although he prepared the affidavit his lawyer helped translate parts of it from Mandarin but not all parts of it. He said that in relation to the statement by Mr Mansfield in paragraph 9 he recalled that part in English because of the need to focus on what Mr Mansfield said: T136.24-137.1.
Mr Li emphasised in cross-examination that the case in his view had nothing to do with him and he just wanted to say the truth and what he recalled: T138.24.
As indicated above, Mr Li appeared to me to have reasonable English comprehension skills which were slightly better than the English comprehension skills of Mr Xiao. He appeared to me to give his evidence truthfully and he made concessions where appropriate particularly in relation to his incapacity to remember all of the detail of what was said at the 5 November 2015 meeting.
Whilst Mr Li's English was reasonable, Chinese is clearly his first language and he had the need to have one question clarified. Although I accept him as a witness of truth, some caution should be exercised in relation to the reliability of his evidence because of his limitations with English despite his evidence that he focused on certain conversations because he thought they were important. These matters are relevant to the issue of who should be accepted in relation to the conversation in the 5 November 2015 meeting.

The issues according to the parties

The parties each presented schedules of issues. In the end, there did not appear to be any issue between the parties that the Variations approved by the defendant caused a 45 day delay in the project, that the plaintiff sought approval under Clause 9.4 of the Contract for an extension of time for Practical Completion arising from the delays caused by the Variations and that the defendant approved the plaintiff's request under Clause 9.4 for a reasonable extension of time of 45 days to the date Practical Completion. The other issues raised in the plaintiff's Amended Schedule of Issues in paragraphs 5 to 6 were as follows: 5. Is the Plaintiff entitled under Clause 10.6 to reimbursement for its loss or expense caused by the delay at the $2,500 a day rate specified in Schedule 23? 6. Alternatively, a. As per paragraph 4(f) of the Amended Defence, did Plaintiff's quotes for the requested variations include, not only the value of the materials and labour required, but also the Plaintiff's loss or expense arising from the delay, so that Clause 10.6 and Schedule 23 have no operation? b. As per paragraph 6(b) of the Amended Defence, did the Plaintiff and Defendant agree on 17 December 2015 to vary the contract by pushing back the date specified for practical completion? Consequently, was there an implied term that such a variation to the contract could be effected orally? c. As per paragraph 8(e) of the Amended Defence, has the Defendant fulfilled its onus of establishing that the operation of Clause 10.6 and Schedule 23 was a penalty? Consequently, i. Can the operation of Clause 10.6 and Schedule 23 even be a penalty when the $2,500 a day rate was asked for by the Defendant and agreed to by the Plaintiff during pre-contractual negotiations? ii. Can the operation of Clause 10.6 and Schedule 23 even be a penalty when those clauses are capable of applying against either the Plaintiff or Defendant depending on who causes a delay? d. As per paragraph 8(f) of the Amended Defence, is the Plaintiff estopped by its alleged oral representation, set out in paragraph 9 of the affidavit of Feng Xiao dated 16 June 2017, from enforcing its strict legal rights under Clause 10.6 and Schedule 23? e. Did the Plaintiff waive its rights under the Contract?
Although paragraph 6(e) above raises an issue of waiver, this was not pleaded by the plaintiff and cannot be raised. No written submissions were made on this point.
In relation to the defendant's schedule of issues, the defendant submitted that the issues were as follows: 1. What is the proper construction of clause 10.6 of the Design and Construct Contact - Lump Sum (a standard form contract known as 'DECON 2013' copyright to Master Builders Australia) executed by the plaintiff and the defendant on or about 20 July 2015? 2. Does clause 10.6, on its proper construction, mean that the Contractor (ie. the plaintiff) was entitled to be paid the full amount of the cost of Variations valued under clause 10.4.1 'on a fair and reasonable basis and must include the value of pricing work, time-related costs and expenses from the Variation' PLUS the additional 'daily rate of delay loss and expense' amount specified in Schedule 23 of $2,500 + 10% GST per day? 3. What was the legal effect of the Principal (ie. the defendant) agreeing Variations that had been costed by the Contractor under clause 10.4.1 and which specified the number of additional days that would be required to complete the relevant work? In particular, was the effect of the acceptance of the proposed Variations that the parties thereby agreed to vary the date required to bring all Works to Practical Completion from the date of 27 November 2015 specified in Schedule 31: Special Conditions? 4. If the date required to bring all Works to Practical Completion was varied by agreement of the parties to 8 February 2016 as a result of acceptance of the proposed Variations, was there then any 'delay' within the meaning of clause 10.6? 5. If, on its proper construction, clause 10.6 entitled the Contractor to be paid $2,500 + 10% GST per day in addition to the full amount of the cost of the Variations valued under clause 10.4.1 in respect of 'loss or expense as a result of the delay or disruption', is clause 10.6 unenforceable as being a penalty clause? 6. Did Mr Bruce Mansfield, a director and the principal of the plaintiff, represent at a meeting in or about early November 2015 with Mr Feng Xiao (known by the anglicised name 'Frank') and Mr Yang Li (known as 'Larry) of the defendant and Mr Wing Shain Yee, the defendant's architect, words to the effect: All figures provided on the summary [prepared by the plaintiff of the proposed Variations] include all our fees, costs and expenses. You won't need to pay any further amount on top of this. 7. If Mr Mansfield made the representation referred to in paragraph 6 above, is the plaintiff estopped from now departing from that representation?
Taking into account the issues raised by the parties and the conduct of the trial, it would appear that the issues to be determined by the court are as follows: 1. Is Exhibit B admissible, and if so, should any limiting order be made under section 136 of the Evidence Act 1995? 2. What was the legal effect of the defendant agreeing to Variations that had been costed by the plaintiff under Clause 10.4.1 of the Contract and which specified the number of additional days that would be required to complete the relevant work in the Variations? 3. Was the acceptance of the proposed Variations such that, in the circumstances, the parties thereby agreed to vary the date of Practical Completion from 27 November 2015? 4. If the date of Practical Completion was varied by agreement of the parties to 8 February 2016 as a result of acceptance of the proposed Variations, was there any "delay" within Clause 10.6 of the Contract; 5. Is the plaintiff entitled under Clause 10.6 of the Contract to a reimbursement for its loss or expense caused by any delay at the rate of $2,500 a day plus GST in addition to the amount for performing the Variations put forward by the plaintiff? 6. If, on its proper construction, Clause 10.6 of the Contract entitled the plaintiff to be paid $2,500 plus GST per day in addition to the cost of the Variations valued under Clause 10.4.1, is Clause 10.6 unenforceable as being a penalty? 7. Is the plaintiff estopped by the alleged oral representation made by Mr Bruce Mansfield of the plaintiff to Mr Xiao in front of Mr Li as set out in the affidavits of Mr Xiao and Mr Li, from claiming its contractual rights under Clause 10.6 to be paid $2,500 plus GST per day in addition to the cost of the Variations valued under Clause 10.4.1 of the Contract?

Submissions on behalf of the parties

The parties relied on detailed written and oral submissions. It is unnecessary for the purposes of these reasons to set the submissions out in detail as they involve multiple alternative submissions particularly on the contract construction issues.

The plaintiff's submissions

The plaintiff's submissions, in brief summary, were as follows: 1. Exhibit B should be confirmed as admitted into evidence; 2. The Contract was signed in counterparts and the counterparts were the same; 3. Mr Yee was authorised to approve variations but not to amend the contract; 4. Clause 6.6 of the Contract gave the defendant the right to require variations provided they fell within the general scope of the works; 5. The defendant requested all the relevant Variations; 6. Clause 10.4.1 of the Contract and the Variations' Summaries did not include the plaintiff's loss or expense arising from the delay. It only includes costs directly referable to a particular Variation: reply written submissions paragraphs 12-14. Clause 10.6 separately handles, if a variation causes a delay, the issue of the plaintiff being required to stay on site longer; 7. The existence of clause 10.6 (1) means that its subject matter is different to "time-related costs" in Clause 10.4.1; 8. Clause 10.4.1 should not be read in a way so that no effect is given to Clause 10.6; 9. The plaintiff complied with Clause 10.4.1 by sending the Summaries; 10. There was no contractual variation of Clause 18.4(a)(iii). Clause 10.7 by its words "as extended in accordance with this Agreement" does not refer to a contractual variation: see reply written submissions at paragraphs 19-22; 11. In any case, no contractual variation occurred on the evidence; 12. Clauses 9.4 and 10.6 are directly linked; 13. Australia Capital Financial Management Pty Ltd v Linfield Developments Pty Ltd [2017] NSWCA 99 correctly sets out the current law on penalties; 14. Here, only a penalty in equity is arguable; 15. The plaintiff's maximum loss includes a loss of profit from being unable to do the next job; 16. The rate in Schedule 23 is not out of all proportion to the protection of the plaintiff's legitimate interests. Its purpose is not just to punish and it is not exorbitant or unconscionable; 17. The defendant bears the onus of showing the clause is a penalty; 18. The very structure of Clause 10, particularly Clauses 10.6 and 10.7 is relevant; 19. There is disentitling conduct of the defendant in equity; 20. The fact all the plaintiff's expenses were taken into account in determining the Contract price did not mean that it had to be, or was, deployed for the variations, particularly in relation to delay in moving on to the next construction job; 21. The estoppel alleged should be rejected. If accepted it only related to the 5 November 2015 Summary which became obsolete; Mr Mansfield's evidence should be preferred to that of Mr Xiao and Mr Li who had less reliable English; the representation was not confirmed in writing; and there was no relevant reliance.

The defendant's submissions

The defendant's submissions, in brief summary, were as follows: 1. On its true construction, Clause 10.6 did not allow the plaintiff to claim an amount for a Variation as sought; 2. When the Variations were approved, this had the effect of amending the date for Practical Completion from 27 November 2015 to 8 February 2016 and the project reached Practical Completion on 5 February 2016. This amounted to a contractual variation. Therefore, for the purpose of Clause 10.6.1, there was no "delay" to the Works by a Variation; 3. Even if Messrs Yee and/or Xiao did not have actual or ostensible authority to agree to a contractual variation, the defendant had adopted their act by submitting that a variation of contract occurred in the defence of these proceedings; 4. In relation to the penalty issue, the principles in Australia Capital Financial Management Pty Ltd v Linfield Developments Pty Ltd [2017] NSWCA 99 were applicable; 5. The penalty here was equitable in nature as a delay caused by a Variation was not a breach of the Contract; 6. Clause 10.6 was penal in nature as the plaintiff was already fully compensated under Clauses 10.4.1 and 10.4.2; 7. Further, on the evidence the court should not be satisfied the plaintiff has actually suffered any loss; 8. In relation to the estoppel, the evidence of Messrs Xiao and Mr Li should be preferred to that of Mr Mansfield; 9. The estoppel affected not only the 5 November 2015 document but also the later variation documents; 10. Reliance is established as the defendant "may well have not gone ahead with the Variations or have sought to have reduced the scope or cost of any changes to the original design": paragraph 75 of submissions dated 30 November 2017.

Admissibility of Exhibit B

Exhibit B in the proceedings is a document provisionally admitted entitled "Contract Review" which appears to be a document prepared by the solicitors for the defendant. It does not indicate who the document was prepared for. The document has at the top right hand corner of each page the words "JURISBRIDGE LEGAL 2015". The document includes the following: "Based on the concerns raised in our conference on 20 July 2015 we have prepared the following summary of the Design and Construct Contract".
The document then proceeds in two columns to refer to subject headings including clauses and provides a comment in relation to the relevant clauses.
Initially, privilege was claimed by the defendant in relation to this document. That claim for privilege was challenged on the basis that if any privilege attached to the document at some stage it was waived by the document being presented to the parties which included representatives of the plaintiff at a conference in mid July 2015 before the final Contract was executed: see Mansfield first affidavit paragraph 16; Mansfield second affidavit paragraph 5; T101-102; T109-110. The document was admitted subject to objection and it was agreed that the parties would make written submissions in relation to the admissibility of the document to be determined by the court in its reasons for decision: T144.1.
It is clear from the document that the comments in it relate to a draft of the final Contract. This is clear from the analysis of Clause 10.6 which refers to a payment of $1,000 per day whereas the amount for Clause 10.6 was altered by the parties in the final Contract to $2,500 per day (see Schedule 23).
The plaintiff submitted that the document was admissible and was relevant. It is submitted that the document is relevant both to the penalty issue and the construction of contract issue: undated written submissions paragraph 1. It is submitted, in effect, that the parol evidence rule as to the admissibility of extrinsic evidence for the construction of a contract in writing, is not relevant to an ambiguity and is also not relevant to an assessment of a contractual term as a penalty where the court must assess whether the term imposes an additional detriment that is out of all proportion to the loss suffered by the party claiming the benefit of the term in deciding whether the term is inordinate or extravagant or oppressive.
The defendant submitted that the document was irrelevant, added nothing to the contractual terms and did not fall within any exception to the normal rules of admissibility, including the rules as to the relevance of the surrounding circumstances: see written submissions dated 1 November 2017.
In my view, the document does not assist on the construction issue. I cannot see that it is of any relevance in relation to the subject and surrounding circumstances of the Contract within the relevant appellate authorities which I have set out above. The document appears merely to reflect the subjective views of the defendant's solicitors as to the draft Contract. It does not relate to the surrounding circumstances. I accept the defendant's written submissions on this issue.
I turn to consider its relevance to the penalty issue.
In Grocon Constructors (Qld) Pty Ltd v Juniper Developer No 2 Pty Ltd [2015] QSC 102, Lyons J stated as follows at [113]-[116]: "[113] The rules limiting the use of extrinsic evidence for the interpretation of a written agreement have been developed by courts over the years to identify the meaning of the words used by the parties in a document which they have chosen as a record of their agreement. It is not surprising, therefore, that there is a disposition to rely primarily upon the parties' written expression. The doctrine of penalties, however, is not primarily concerned with the identification of that to which the parties agreed; rather it is concerned with the question whether they should be held to their agreement, including in some cases an agreed characterisation of a liquidated damages clause. It seems to me that the equitable origin of the jurisdiction, and its concern with unconscionability suggest the limitations on the use of extrinsic evidence may not be the same as they are when determining the meaning of a written document. Lord Dunedin's characterisation of the question as one of "construction" may have been intended to emphasise that what is required is a conclusion about the effect of the liquidated damages clause, reached by a court, and not by the parties, by reference to principles which the courts have developed. There are likely to be cases where the explanation for such a clause will only be known to one party; and that explanation may well demonstrate that the amount payable under it is, or is not, out of all proportion to the likely damages. It is difficult to see how a court could reach a sound conclusion about the unconscionability of enforcement of the clause, without such evidence. In those circumstances, since it is necessary to choose between authorities which are not consistent, and bearing in mind in particular that Philips is a decision of the Privy Council, it seems to me appropriate to accept the submissions made by Juniper and Norton Rose. Nevertheless, the general limitations on the use of evidence to construe a document apply if any question of the meaning of the clause arises; including whether it is in truth ancillary to some other obligation or stipulation. [114] Since writing the above, as previously indicated, the judgment in the Paciocco appeal has come to my attention. There, in a passage which seems to me to state better what I have been trying to convey, Allsop CJ described the task of the court as "one of construction in a wide sense", and continued … this involves the related tasks of ascription of meaning and content to the relevant clause by the process of contractual construction and interpretation, and also any necessary characterisation of the clause with that legal meaning in its full context." (emphasis added) [115] Allsop CJ later made the following statement: If, however, the clause properly construed provides for a payment upon breach or pursuant to a stipulation that is collateral or accessory to a primary stipulation in the relevant sense, all the circumstances and evidence tending to illuminate all the circumstances will be admissible to assist with the process of characterisation as to whether the clause is penal or is a genuine pre-estimate of damage in the relevant sense. [116] In my view, therefore, on the question whether a clause, whose meaning has been determined, nevertheless is penal, extrinsic evidence may be used, even where the evidence would not be admissible for determining the meaning of the clause."
The decision of Lyons J was upheld on appeal in the Queensland Court of Appeal: Grocon Constructions (Qld) Pty Ltd v Juniper Developer (No 2) Pty Ltd [2015] QCA 291 particularly at [11]. There was no criticism by the appeal court of the reasoning of Lyons J on this issue.
In PT Thiess Contractors Indonesia v PT Arutmin Indonesia [2015] QSC 123 Jackson J stated as follows at [188]-[192]: [188] The defendant submits that the evidence of the negotiation is not admissible on the question of whether the increased interest rate terms are a penalty because that question is one of construction of the contract and evidence of negotiations is irrelevant to a question of construction. [189] In Paciocco, Allsop CJ dealt with the nature of the questions of extravagance and exorbitance as a matter of proof and the associated questions of construction. His Honour's description of the task of the court informs the answer to the present questions: It is to be recalled that the task of the court is to assess whether the clause in question is penal in character. The task (or technique) is one of construction in a wide sense, falling to be decided by the meaning and content of the words and on the inherent circumstances of each particular contract, judged at the time of its making: Dunlop at 86-87. As discussed later, this involves the related tasks of ascription of meaning and content to the relevant clause by the process of contractual construction and interpretation, and also any necessary characterisation of the clause with that legal meaning in its full context. That is the technique; the requisite character involves the essential features of penalty: the secondary stipulation is, as a matter of substance, collateral or accessory to a primary stipulation in favour of the obligee and upon failure of which, the secondary stipulation imposes an additional detriment for the benefit of the obligee: Andrews (HC) at [10]; the secondary stipulation is in the nature of security for, and in terrorem of, the satisfaction of the primary stipulation: Andrews (HC) at [10]; and (as an essential element) the secondary stipulation imposes an additional detriment that is out of all proportion to the loss suffered by the obligee on the failure of the primary stipulation or that is inordinate or extravagant or oppressive: Ringrow 224 CLR 656 at [21], [28], and [32]. The adjectival description of the disproportion varies in expression in the cases, but for present purposes "extravagant", "exorbitant", "oppressive", "inordinate" and "unconscionable" can be seen to be broad synonyms: see Ringrow at 667-669, [26]-[32]. The question is to be assessed as at the time of entry into the contract. It is not a mechanical task. (emphasis added) [190] In my view, it is an error to treat the question of inordinateness, extravagance or oppression as subject to the parol evidence rule as to the admissibility of extrinsic evidence for the construction of a contract in writing. [191] This is supported also, in my view, by Allsop CJ's lucid explanation of the relationship between extravagance and unconscionability on the one hand and a genuine pre-estimate of damage on the other as previously set out in my summary of findings on the penalty doctrine. [192] Accordingly, in my view, it is relevant to take into account how the increased interest terms were agreed between the parties and evidence of that is admissible."
It would appear therefore as stated by Jackson J, that it is relevant to take into account how the provision said to be a penalty was agreed between the parties and evidence of that is admissible, particularly in determining whether the clause in question imposes an additional detriment that is out of all proportion to the loss suffered or that is inordinate or extravagant or oppressive. Further, as Lyons J stated in Grocon at first instance, extrinsic evidence may be used on the issue of whether a clause is penal even where the evidence would not be admissible for determining the meaning of the clause.
In my view, I should follow these authorities, particularly as Lyons J followed the decision of Allsop CJ in Paciocco v ANZ Banking Group Ltd [2015] FCAFC 50 at [212].
Exhibit B on page 2 states the following in relation to Clause 10.6 of the contract: "If the Works is delayed by: 1. Variation; or 2. Latent Condition; or 3. Dispute with an adjoining or neighbouring owner of resident; or 4. Compliance with any changed or unforeseen requirement, conditions, notice or order of any Authority; or 5. Delay in the issue of any necessary Approval by an Authority; or 6. A breach by the Principal; or 7. A delay caused by the Principal then the Contractor is entitled to payment of $1,000 per day in addition to the grant of extension of time and the right to claim additional costs if there is a Variation."
In my view, this document is of questionable relevance. It records advice apparently given to the defendant by its solicitors. It was tabled at the meeting on or about 22 July 2015. There was discussion on the draft of Clause 10.6 at this meeting: see paragraph 20 of Mr Mansfield's first affidavit. There is no satisfactory evidence that the document was read by Mr Mansfield before the discussion or that it formed the basis of the parties' agreement as to clause 10.6. The document also does not assist as to reason why the original figure of $1,000 or the altered figure of $2,500 was arrived at by the parties. For these reasons I do not consider it falls within the authorities discussed above and I reject the admissibility of the document. The document marked Exhibit B will not be considered part of the evidence before the court.

Proper construction of Clause 10.6

I turn to consider the contract construction issue between the parties in these proceedings.
The Contract between the parties must be considered in its context and surrounding circumstances as the appellate authorities which I have referred to above make clear: see for example the Electricity Generation case, above at [35]. These surrounding circumstances include: 1. It was a commercial contract for substantial renovations to a commercial building intended to be used as a restaurant of a high standard; 2. The evidence suggests that a draft of the Contract was provided by the plaintiff to Mr Xiao of the defendant: T101.31; 3. Mr Xiao then took the draft Contract to his lawyers for advice. He conceded that there were a number of terms in the draft Contract which he did not understand, no doubt because of his limitations in the English language: T101.31-36; 4. A meeting occurred in mid-July 2015 at which Mr Xiao, Mr Li, Mr Mansfield and representatives of the defendant's lawyers attended: T104.11-.30.; first affidavit of Mr Mansfield paragraphs 14-15; 5. It appears that at or prior to the conference, Mr Xiao had discussions with his solicitors in relation to the draft Contract: T110.11; T110.32; 6. It may accordingly be seen that the draft Contract prepared by the plaintiff and forwarded to the defendant was subject to consideration by Mr Xiao as the representative of the defendant with the apparent assistance of the defendant's solicitors.
On the face of the Contract, there were handwritten variations suggesting review by the parties of the draft: see the changes or deletions to Clauses 2.3.1, 5.3, 8, 17, and Schedules 14, 15 and 23.
Under the Contract, and subject to Clause 18.4(b), which appears not to be presently relevant, the plaintiff was obliged to bring all Works to Practical Completion by 27 November 2015. "Works" is defined in the Contract in Clause 1.1.1 as the works shown upon the Design Documents "as they may be varied from time to time in accordance with this Agreement…".
It is clear that Variations were contemplated by the parties in the Contract to the "Works". See the definition of "Variation" in Clause 1.1.1, together with the definition of "Principal's Project Requirements" also in Clause 1.1.1. The definition of "Variation" included a change in the "Project" which is widely defined. The definition of "Project" in Clause 1.1.1 included "all of the work under this Agreement including Variations…" (emphasis added).
It is clear that a "Variation" may either diminish the time necessary to complete the Works or, more likely, may increase the time.
I have already quoted Clause 6.6 of the Contract above but I repeat it here for convenience: "6.6 VARIATIONS At any time prior to the date for Practical Completion the Principal may direct the Contractor in writing to carry out a Variation which is within the general scope of the Works."
In my view, the definitions of "Variation" and "Project" in Clause 1.1.1 of the Contract together with Clause 6.6 of the Contract, indicate an objective intention that, provided the requirements of Clause 6.6 of the Contract are complied with, particularly that the Variation proposed is within the general scope of the Works, the plaintiff was obliged to carry out the Variation to the Works. This seems clear to me from the wording of the clauses referred to. I accept paragraph 7 of the plaintiff's written submissions in chief.
As indicated above, a requested Variation may cause a delay in Practical Completion because of a delay in the completion of the Works as defined in the Contract. It may also increase cost.
Clause 9 of the Contract deals with time issues. However, this Clause must be read in the light of Schedule 31 which contains Special Conditions being Clause 18 which alters the effect of some parts of Clause 9 of the Contract. See in particular Clause 18.4 (c).
Clause 9.4 of the Contract deals with the time impact of delays in the progress of the Works beyond the control of the Contractor. In particular, Clause 9.4.1 of the Contract provides that if the progress of the Works is delayed by any matter, cause or thing beyond the control of the plaintiff then the plaintiff is entitled to "a reasonable extension of time for Practical Completion". That is, an extension of the date for Practical Completion set out in Clause 18.4(a)(ii) of the Contract being 27 November 2015.
Does this include a delay in the progress of the Works caused by a proposed Variation which the defendant directed the plaintiff to carry out within the general scope of the Works? It appears that it does. This is provided for in relation to the costs of any delay in Clause 10.6 of the Contract. In other words, the consequences of a delay in the progress of the Works in relation to time are dealt with in Clause 9.4 but the consequences in relation to costs are dealt with elsewhere in the Contract particularly in Clause 10. In the present case, the defendant agreed to an extension of time due to Variations requested of 45 working days with the result that the date for Practical Completion was extended to 8 February 2016: see the documents at pages 219, 220 and 221-223 of Mr Mansfield's first affidavit. I accept paragraph 10 of the plaintiff's written submissions in chief. See also paragraph 7 of the defendant's written submissions: "It is not disputed that all of the variations in issue in these proceedings were mutually agreed and performed by the plaintiff."
It is noted that the commencing words of Clause 9.4.1 being "If the progress of the Works is delayed by any matter, cause or thing" are similar to the commencing words of Clause 10.6 being "If the progress of the Works is delayed or disrupted by …". A Variation is specifically referred to as an event or thing which may cause a delay or disruption in the progress of the Works: Clause 10.6.1 of the Contract.
In relation to the cost of the plaintiff performing the Variations requested by the defendant, this appears to be dealt with in Clause 10.4 of the Contract. Again, I set out this clause for convenience: "10.4 VALUATION OF VARIATIONS 10.4.1 Unless otherwise agreed by the parties in writing, Variations must be valued by the Contractor on a fair and reasonable basis and must include the value of pricing work, time-related costs and expenses arising from the Variation. 10.4.2 If any Variation results in increased cost then such cost together with the percentage stated in Schedule 20 must be added to the Contract Sum. 10.4.3 If a Variation results in decreased cost then such cost is to be deducted from the Contract Sum. …"
Clause 10.4 contemplates that a requested Variation may result in either an increased contract cost or a decreased contract cost. This is similar to the time involved as a result of a Variation, which may either increase or decrease the time taken to complete the Works. Clause 10.4 contemplates that a Variation may either add to or deduct from the Contract Sum: see Clauses 10.4.2 and 10.4.3. Often, in construction contracts, a Variation will increase the cost to a Principal with the result that the contract sum is increased also.
Clause 10.4.1 of the Contract provides guidance in relation to the valuation and costing of a requested Variation under Clause 6.6 of the Contract. Unless otherwise agreed by the parties in writing, Clause 10.4.1 of the Contract states that Variations must be valued by the defendant on a fair and reasonable basis and must include: 1. The value of pricing work arising from the Variation; 2. Time-related costs arising from the Variation; and 3. Expenses arising from the Variation.
In my view, the words "arising from the Variation" in Clause 10.4.1 clearly qualify each of the items before it as I have set out above in the preceding paragraph. This was accepted by counsel for the defendant in the course of final oral submissions. It was also the position of the plaintiff.
The plaintiff submits that this clause (Clause 10.4.1), on its proper construction, is intended to include the time spent in pricing the work and time-related costs and expenses specifically involved in performing the Variations as a matter of time on an hourly basis to perform the construction work and the expenses specifically involved in that work. It is not intended to include non-specific expenses arising from the delay such as the overheads of the defendant and time spent in supervision of subcontractors, other management expenses and other general overhead expenses of the plaintiff. The defendant submits that "time-related costs and expenses arising from the Valuation" are intended to include all expenses of the plaintiff including all relevant additional overheads. In paragraph 17 of the defendant's written submissions it is submitted that the clause requires the total value of the Variations notified by the plaintiff "to be for the entirety of the plaintiff's additional costs occasioned by the Variation" (emphasis in the original).
In my view, the plaintiff's submission on this point should be preferred. I read "time-related costs and expenses" as being the specific costs and expenses arising from the Variation. That is, it refers to actual labour costs and materials' costs arising from the Variation not costs arising from the delay in the progress of the Works which is dealt with by Clause 10.6. Otherwise, it would appear that Clause 10.6 would have a limited operation. In my view, a proper reading of Clause 10.4 is that it concerns the cost of the Variations only whereas Clause 10.6 concerns the cost of delay in the progress of the Works as a result of Variations. The defendant's interpretation may lead to further delays and complexities in pricing Variations which could lead to greater extension claims. The plaintiff complied with Clause 10.4.1 of the Contract by forwarding the various Summaries which included the additional amounts and days claimed. I accept the plaintiff's submission on this point: see paragraph 13 of the plaintiff's written submissions in chief.
Clause 10.6 of the Contract has been set out above. In essence, it relevantly provides that if the progress of the Works is delayed or disrupted by a Variation then the plaintiff "will be entitled (in addition to the extension of time referred to in Clause 9.4) to reimbursement of loss or expense as a result of the delay or disruption at the daily rate set out at Schedule 23…". The daily rate set out at Schedule 23 is $2,500 per day.
The defendant submits that where the date of Practical Completion has been extended at the request of the contractor due to a delay caused by a Variation then there has been a contractual variation involving an extension of time for Practical Completion under Clause 9.4 of the Contract. If the date for Practical Completion has been extended, then it is submitted that there cannot be a delay due to a Variation under Clause 10.6: see written submissions paragraphs 20-22 and 41-43. The defendant points to the particular facts in the present case as supporting a contractual variation: submissions paragraphs 31-40.
In my opinion, this submission should be rejected. It is clear that Clause 10.7 of the Contract contemplates an extension of the date of Practical Completion under the Contract. If the date for Practical Completion has been extended then provided the plaintiff completes the Works by that extended time the plaintiff will not be exposed to the daily rate payment under the liquidated damages clause being Clause 10.7. The words "as extended" in Clause 10.7 are not in my view equivalent to a contractual variation. Having regard to the Contract as a whole, including Clause 10.6 in the context of Clause 10.7 and the wording of Clause 10.6, it is clear in my view that a delay can be caused by a Variation. That is a matter which is both obvious practically and in my view falls within the Contract. Clause 10.6 itself contemplates a delay in the progress of the Works caused by a Variation. However, Clause 10.6 does not necessarily involve itself with the date of Practical Completion. A contractor may be very efficient in completing the Works under the Contract. This could involve the contractor finishing prior to the date of Practical Completion in the Contract. As Mr Mansfield made clear in his oral evidence, it is in the interest of the plaintiff to have completed the Works under the Contract as soon as possible, no doubt so it could proceed to take on other paying work.
Clause 10.6 contemplates a delay in the progress of the Works due to a Variation and costs which are incurred as a result of that. As indicated above, often a delay caused by a Variation will result in a delay in the date of Practical Completion. However that is not always the case. Here, the delay caused by the Variations requested by the defendant resulted in a 45 day approved delay. I can see no reason for construing Clause 10.6 in a way so as to limit an entitlement which may otherwise exist because the date for Practical Completion has been extended. Clause 10.6, in my view, in referring to "the progress of the Works is delayed" is referring to a delay in the progress of completion of the Works by the plaintiff. If I am wrong in that conclusion, it must at least be referring to a delay in the date of Practical Completion under the Contract being 27 November 2015.
In the present case, the evidence is clear that the delay considered and approved was for 45 days. That, in my view, does not involve a contractual variation to the date of Practical Completion being 27 November 2015. That date is maintained but the parties' entitlements under Clauses 10.6 and 10.7 are assessed in the light of any extensions granted (or deemed to be granted) under Clause 9.4. I generally accept the plaintiff's submissions in paragraph 41 of its written submissions in chief on this issue. An extension of the date of Practical Completion under the machinery provisions in Clause 9.4 of the Contract does not of itself involve a variation to the Contract.
I turn to consider the defendant's submissions relating to the correspondence between the parties and whether this correspondence causes a variation to the contract Completion Date. Clearly a contract can be varied by correspondence or by conduct: see New South Wales Land and Housing Corporation v Diab [2015] NSWCA 133 at [26] and [34]. In my view, the conduct of the parties referred to in paragraphs 31-42 of the defendant's written submissions, viewed in its context, did not constitute objectively a variation to the Contract within normal contractual principles but was merely the plaintiff seeking approvals of the amounts and delays for the Variations under the applicable machinery provisions in the Contract. I have carefully reviewed the matters raised including the emails dated 10 November 2015 (CB 298) and 17 December 2015 (CB 260). This includes in relation to the 17 December 2015 email sent at 12.36pm, the use by Mr Mansfield of the phrase "Revised Contract Completion Date": see CB 260/Exhibit page 219. The email correspondence occurred in the context of Mr Mansfield submitting an extension of time claim for 45 days. See Mr Mansfield's second email of 17 December 2015 sent at 12.48pm at CB 262 (Exhibit 220). That process appears contrary to the parties allegedly agreeing a contractual variation. It merely involved the following of the contractual machinery provisions. I reject the defendant's submission that there was a contractual variation arising from conduct and the correspondence.
A further issue was whether Mr Yee had actual or ostensible authority to agree on behalf of the defendant to a contractual variation as opposed to an extension of time for Practical Completion arising from an approved Variation. The evidence suggests he did not have actual authority: see Exhibit A, CB 387. There is no suggestion that he had implied or usual authority. In relation to apparent or ostensible authority, there is in my view no evidence establishing ostensible authority in Mr Yee to vary the Contract on behalf of the defendant in the way suggested. The defendant did nothing to hold Mr Yee out as having authority: see Crabtree-Vickers Pty Ltd v Australian Direct Mail Advertising and Addressing Co Pty Ltd (1975) 133 CLR 72 at 80. The defendant counters this by submitting that even where a person does not have ostensible authority to perform an act, a party can be bound by it if the principal expressly adopts it by taking the benefit of it, or by ratification: Halsbury's Laws of Australia paragraph 15-260 quoting English authority. It is said that by relying on the variation in its Defence (paragraph 4) and the conduct of the trial, the Defendant has adopted it. I accept these submissions. The defendant has adopted the act of Mr Yee done outside his ostensible authority. However, for the reasons given above I consider that there was no contractual variation as submitted.
What meaning should be given to the words in Clause 10.6 "the Contractor will be entitled (in addition to the extension of time referred to in Clause 9.4) to reimbursement of loss or expense as a result of the delay or disruption at the daily rate set out in Schedule 23"?
In my view, on the proper construction of the clause, it is not limited to actual proved loss or expense but rather the parties' contractual assessment of what the loss or expense will be to the plaintiff as a result of a delay due to the Variation. That amount was assessed by the parties at the time of contract at the daily rate of $2,500 per day.
The plaintiff also places particular reliance on Clauses 18.6 and 18.7 which are within Schedule 31 to the Contract. Those clauses limit the power of the plaintiff to claim under Clause 10.6 in certain scenarios being a particular shipping delay or a delay in approval from "Authorities" as defined in Clause 1.1.1 of the Contract. It is said that the parties have expressly turned their minds to carve out of the general contractual liability under Clause 10.6 those two scenarios. It is submitted by the plaintiff that this adds more force to the argument that absent either one of those scenarios arising, the defendant is liable to pay the plaintiff for the daily rate arising as a result of a delay from a Variation being directed. See paragraph 35 b) of the plaintiff's written submissions in chief.
In my view, there is some force in this submission. It adds to the conclusion which I had otherwise arrived at, that the proper construction of Clause 10.6 in the circumstances of the Contract as a whole, is that the plaintiff is contractually entitled to be compensated for any delay caused by a Variation at the daily rate of $2,500.
For the above reasons, the construction advanced by the plaintiff in relation to Clause 10.6 of the Contract is to be preferred. I accordingly find that the plaintiff is contractually entitled to an amount in relation to the 45 days of delays due to the Variations approved at the rate of $2,500 per day. To this sum must be added GST, as it arises from an invoice for loss or expenses resulting from the provision of services arising from the Variations.

The penalty issue

The defendant has pleaded that any contractual entitlement of the plaintiff to a daily rate of $2,500 per day plus GST for each day added as a result of the approved Variations constitutes a penalty clause which is not enforceable against it.
It will be recalled that Clause 10.7 of the Contract is a liquidated damages clause in the event that the plaintiff is delayed in reaching Practical Completion within the Contract by the date for Practical Completion as extended in accordance with the Contract. Clause 10.6 relates to the position of the plaintiff due to reasons not connected with its own conduct. Under it, if the progress of the Works is delayed by a Variation then the plaintiff is entitled, in addition to the extension of time referred to in Clause 9.4 of the Contract, "to reimbursement of loss or expense as a result of the delay or disruption at the daily rate set out at Schedule 23…"
I have found above, that the proper construction of the Contract is that the plaintiff is contractually entitled to the amount as referred to in Clause 10.6 on the basis that the objective intention of the parties as evinced in the Contract is that the additional daily rate is to be paid as well as the amount of the costs of performing the Variations and the extension of time granted.
Although there is evidence, from the cross-examination of Mr Mansfield, that the plaintiff's original contract price as agreed included a profit component, there is no evidence that the profit component for items such as salaries, superannuation, accommodation and the like was part of the Variation amounts set forth in the relevant Variation Summaries.
Clause 10.6 of the Contract refers to the reimbursement "of loss or expense as a result of the delay or disruption at the daily rate set out at Schedule 23". The daily rate set out at Schedule 23 was originally $1,000 per day and was amended by hand to $2,500 per day.
Is this a penalty within contractual penalty principles?
The plaintiff submits that it is not a penalty as: 1. Clause 10.6 must be considered with Clause 10.7. The parties appear from the Contract to have been looking at their circumstances when the Contract was agreed if there was a delay. If the delay was due to the acts of the plaintiff, then this would probably cause a loss of potential revenue from the restaurant which is reflected in the liquidated damages clause in Clause 10.7 at $2,500 per day. The flip side of this is in Clause 10.6 of the Contract. If the delay in the completion of the Works is due to the acts of the defendant including in seeking Variations, then the plaintiff should be entitled to the daily rate which is described as a reimbursement of its loss or damage. The parties had objectively clearly looked at the situation of both parties and the potential losses involved and it was apparently a commercially agreed compensation depending on the cause of the delay; 2. Clause 10.6 refers to "reimbursement". This clearly suggests not a punishment but a reimbursement of the plaintiff for its expenses and loss incurred as a result of the delay. This includes a loss of not being able to move on to the next project; 3. The evidence shows the very extensive overheads which the plaintiff had in performing the Works under the Contract. This was reflected in the contract sum agreed. That, effectively, is the result of the cross-examination of Mr Mansfield. The proper construction of Clause 10.4.1 of the Contract is that this was not to be included in the amount proposed for the Variations but was a separate sum to be reflected in Clause 10.6; 4. The amount in Schedule 23 relating to Clause 10.6 was not an amount which was there to punish the defendant and was not inordinate or excessive or objectionable. The sum was there to compensate the plaintiff for the delay of the Works and its continuing commitment to the project. It therefore protects, and is not out of all proportion to, the plaintiff's legitimate interests including a delay in being able to proceed to the next job; 5. The onus rests on the defendant of establishing a penalty: written submissions in chief paragraph 45; 6. There is disentitling conduct in equity as the defendant asked for the increase of the amount in Schedule 23 from $1,000 to $2,500 per day.
The defendant submitted as follows: 1. The amount should properly be seen as a penalty. It was not calculated by a precise measure of loss or damage caused by the delay but at a set amount of $2,500 per day. It was not connected to the plaintiff's actual loss; 2. The cross-examination of Mr Mansfield and Exhibits 1 and 2 establish that the amount of $2,500 per day bore no clear relationship to additional costs and expenses incurred by the plaintiff. There was no satisfactory evidence that the plaintiff suffered any actual loss or damage as a result of the Variations which was not already covered under Clause 10.4.1; 3. The amount could only have been there to punish the defendant in the circumstances where Variations were requested. Accordingly, Clause 10.6 if read as imposing the $2,500 per day in addition to the amount for the Variations and the 8% management fee, amounted to a contractual penalty; 4. An alternative submission as to actual losses was also made.
Clearly, a builder has an interest in completing construction works under a contract as soon as possible. If the works are completed early by the builder, the builder is then able to rectify any defects promptly and is available to look to obtain other paying work. The longer a builder is involved in a project, the more there is a cost to the builder even if it is only in the value of the loss of opportunity to pursue further paying work which may have an extended duration. Also, a builder may have agreed a price with the principal which does not cover all overheads. In his evidence, Mr Mansfield stated at T88.45: "Now, just in terms of context, it's in our interest to finish the project as soon as possible. Every day we spend on a job it's another cost, additional cost to us, so we are wanting to get out of there as soon as we possibly can".
Under the Contract, Clause 6.6 allows the defendant at any time prior to the date for Practical Completion to direct the plaintiff in writing to carry out a Variation provided the Variation is within the general scope of the Works as defined. While, of course, the plaintiff is entitled to be paid for the cost and expenses arising from the Variation requested, that does not necessarily mean that the plaintiff is fully compensated even with the additional 8%, for example, for the loss of opportunity of seeking other work or for all overheads. In addition, with the date of Practical Completion being 27 November 2015, any extension due to additional Variations could well oblige the plaintiff to work over December-February when there are issues in securing skilled labour. Mr Mansfield described the position as follows in his evidence at T89.8: "When we returned, don't forget there was compounding this situation not only was there significant time pressures on us, but we are operating in the time where the industry shuts down". Mr Mansfield added at T89.22: "As I said, it was our effort to get out of there as soon as possible but, however, we continued to be barraged by more and more requests for variations, none of which were instigated by us"; see also T90.14-.24. Whilst Mr Mansfield used the term "barraged", the defendant was entitled to seek further Variations under Clause 6.6.
One then turns to the principles which are applicable as to whether a contractual provision amounts to a penalty. This area has been considered in detail by appellate courts, including the High Court, over the last several years. The most recent consideration of the authorities in this State by an appellate court is in the helpful Court of Appeal decision of Australia Capital Financial Management Pty Ltd v Linfield Developments Pty Ltd [2017] NSWCA 99. In the Linfield case, the main judgment was given by Ward JA with whom McColl and Gleeson JJA agreed. At [312]-[315] Ward JA referred to relevant authorities where the courts made a distinction between penalties at common law and in equity. At common law there is required a breach of a non-promissory primary contractual obligation whereas in equity the penalty doctrine is "not conditioned to an anterior breach of contract": Andrews v Australia and New Zealand Banking Group Ltd (2010) 247 CLR 205 at [10]. As the obligation to pay under Clause 10.6 does not depend on an anterior breach of contract, the defendant in the present case is relying on the penalty doctrine in equity: see the defendant's written submissions paragraph 46. However, as Ward JA stated at [315] in the Linfield case, the principles as to what constitutes a penalty do not relevantly differ according to whether or not the doctrine has been triggered by an anterior breach of contract. See paragraphs 44 b) and c) of the plaintiff's written submissions in chief.
In relation to the relevant time to make an assessment as to whether a clause is a penalty clause, this was considered by Ward JA. Her Honour stated as follows: "[323] As to the relevant time at which the assessment as to whether the clause is penal should be made, there was no error by his Honour. It is clear that whether a stipulation amounts to a penalty is a question of construction to be decided upon the terms and inherent circumstances judged as at the time of the making of the contract (Dunlop Pneumatic Tyre Company Ltd v New Garage & Motor Company Ltd [1915] AC 79 at 86; Arab Bank at [74]). … [325] …The penalties doctrine requires characterisation of an impugned stipulation by reference to the circumstances as at the time of entry into the contract (Dunlop at 86; Paciocco (FCAFC) at [95]; [103]; [147]; [148]; [173]; [187]; Paciocco (HCA) at [62]; [169]; Arab Bank at [74]) but the forfeiture doctrine focuses upon the nature of a forfeiture which occurs ex hypothesi after the time of entry into the contract."
In the present case, the penalty doctrine is not considered in relation to a clause which obliges the transfer of property but rather the payment of money: see Ringrow Pty Ltd v BP Australia Pty Ltd (2005) 224 CLR 656.
At [329]-[331], Ward JA noted that an analysis has to be made at the time and take into account the circumstances applicable when the contract was made not at the time of breach. The impugned stipulation in order to be a penalty must be out of all proportion to the legitimate interests that a party had in enforcing the contract. See also the plaintiff's written submissions in chief paragraph 44 e).
Ward JA summarised the principles applicable in paragraphs [357]-[376] which are as follows: "[357] Generally speaking, all cases involving a question of penalties require consideration of three broad issues: first, whether the penalties doctrine is engaged; second, whether the impugned stipulation is penal; and, third, the consequences of a determination that a stipulation is penal. By contrast, in a case involving the doctrine of relief against forfeiture, it is necessary first to identify whether relief is sought pursuant to statute (for example, under s 129 of the Conveyancing Act 1919 (NSW)) or the general law and, if the latter, whether the provision for forfeiture is either meant to secure performance of a primary stipulation or whether reliance on the forfeiture by the party entitled to its benefit is coloured by fraud, accident, mistake or surprise (Shiloh Spinners Ltd v Harding [1973] AC 691 at 722). There then follows a series of questions: first, as in the context of penalties, as to the availability of compensation capable of restoring the status quo ante; second, whether the plaintiff is in fact ready, willing, and able to perform its side of the bargain and to pay the required compensation; third, whether there exists any equitable defence or other discretionary reason why relief should be refused; and, finally, the question of the appropriate relief arises (see generally, MGL at [18-270]). In both situations, the burden rests with the party in the position of the Guan appellants to demonstrate that the impugned stipulation was a penalty (or, alternatively, constituted an impermissible forfeiture of property) in respect of which equity will grant relief. [358] Despite the invocation of the doctrine of relief against forfeiture in ground 10(b) of the grounds of appeal, the Guan appellants largely approached their challenge to the primary judgment by reference to the doctrine of penalties. The conclusion that I have reached in relation to the claim for relief against penalties (set out below) is that the clause is not penal in operation for the reason that the option price is not out of all proportion to the legitimate interests of Linfield intended to be protected by the impugned stipulation (in particular to the maximum conceivable loss that it might be expected could be suffered as a result of the occurrence of an Insolvency Event). As to the claim for relief against forfeiture, I do not accept that compensation is available to make good the loss to Linfield of the development opportunities which the Call Option was clearly intended to preserve, such as to call into operation the forfeiture doctrine. [359] Turning first to whether the penalties doctrine is engaged at all, at first instance in Paciocco v Australia and New Zealand Banking Group Ltd (2014) 309 ALR 249 ; [2014] FCA 35 (Paciocco (FCA)), Gordon J, then in the Federal Court, proposed (at [15]) a framework for resolving a case involving penalties, which is, with respect, a useful point of reference. Her Honour posited (at [15] in questions 3 and 4) the anterior analysis, namely the "identification of those criteria by which the penalty doctrine is engaged" (Andrews at [15]); the relevance of that being that at common law the penalties doctrine is engaged where there is an anterior breach of contract whereas the equitable doctrine of penalties can apply where the primary stipulation to which a penalty is collateral consists of the occurrence or non-occurrence of an event which is neither a breach of contract nor another event which it is the responsibility or obligation of the party subjected to the penalty to avoid (see Paciocco (HCA) at [119] Gageler J). [360] In Paciocco (HCA), the reasons of Gageler J (at [118]-[127]) lend support to an interpretation of Andrews as envisioning a common law penalties doctrine, applicable in most circumstances, modified by a flexible equitable doctrine in certain circumstances. Such an interpretation is consistent with that adopted by Gordon J in Paciocco (FCA) at first instance (at [13]-[32]) and with the approach adopted in this Court in the recent decision of Arab Bank, a case in which the alleged penalty was triggered by a breach of contract (though I note the criticism of such an approach - see, for example, J Carter et al, "Contractual Penalties: Resurrecting the Equitable Jurisdiction" (2013) 30 Journal of Contract Law 109). [361] In circumstances where there is no express obligation in the Development Agreement for SXG to avoid the commission of an Insolvency Event (though implicitly it was one that the parties did not want to occur) and where the Call Option (exercisable in the circumstances contemplated in cl 18.8) is more comfortably seen as a stipulation, collateral to a primary stipulation in favour of Linfield, in the sense considered in Andrews, imposing on SXG (on the Guan appellants' case) an additional detriment on the failure of the primary stipulation to the benefit of Linfield then the penalty doctrine in equity is engaged. [362] Turning then to the question whether cl 18.8 is a penalty (which corresponds to question 5 of the framework proposed (at [15]) in Paciocco (FCA)), it should be noted that the principles for determining whether a clause constitutes a penalty (as distinct from the principles relating to the consequences of amounting to a penalty) do not relevantly differ depending upon whether the penalties doctrine is engaged at law or in equity (see Arab Bank at [73] and [74]). [363] Relevantly, Lord Dunedin's proposition that "the essence of a penalty is a payment of money stipulated as in terrorem of the offending party" (Dunlop at 86) remains a useful starting point (see also, Legione v Hateley at [32]). In Andrews, the Court described (at [10]) a penalty as being "in the nature of a security for and in terrorem of the satisfaction of" a primary stipulation (see also Paciocco (HCA) at [51]-[56] (Kiefel J); [165] (Gageler J); [259] (Keane J); cf Cavendish at [28]; [31]; MGL at [18-025]). In Paciocco (HCA), Gageler J described (at [166]) a penalty as being a stipulation that had "no purpose other than to punish". To similar effect in the same case, Keane J identified (at [253]) the "real objection" to a penalty clause as a matter of public policy as being that "it is no part of the law of contract to allow one party to punish the other for non-performance". [364] The High Court has endorsed the continuing relevance of the decision in Dunlop on numerous occasions (see, for example, Ringrow at [12]; Arab Bank at [71]-[73]). That said, in Paciocco (HCA), Kiefel J (as her Honour then was) noted (at [32]) that Lord Dunedin's proposed "tests" (Dunlop at 87-88) were "couched in the language of their time and were intended as guidance only" and that tests "tend, over time, to encourage literal application" (see also the warning sounded at [18-070]) in MGL). Similarly, Gageler J denied that the Dunlop propositions were "rules of law" (Paciocco (HCA) at [143]; [147]). [365] Characterisation is "a legal question which does not depend upon an evidentiary inquiry into the parties' motivation or subjective intention, purpose or calculations" (Paciocco (HCA) at [243] (Keane J)). In Andrews, the High Court described (at [75]) the critical issue determined in Dunlop as being "whether the sum agreed was commensurate with the interest protected by the bargain". In Cavendish, the correct approach for identifying a penalty was said (at [48]) to be as follows: The true test is whether the impugned provision is a secondary obligation which imposes a detriment on the contract-breaker out of all proportion to any legitimate interest of the innocent party in the enforcement of the primary obligation. The innocent party can have no proper interest in simply punishing the defaulter. His interest is in performance or in some appropriate alternative to performance. In the case of a straightforward damages clause, that interest will rarely extend beyond compensation for the breach, and we therefore expect that Lord Dunedin's four tests [in Dunlop] would usually be perfectly adequate to determine its validity. But compensation is not necessarily the only legitimate interest that the innocent party may have in the performance of the defaulter's primary obligations. [my emphasis] [366] Earlier, in Paciocco (FCAFC), Allsop CJ had adopted a similar approach in the Full Court of the Federal Court. In remarks quoted (at [151]-[153]) with approval by Lord Mance in Cavendish, Allsop CJ said the following (at [103]): The object and purpose of the doctrine of penalties is vindicated if one considers whether the agreed sum is commensurate with the interest protected by the bargain: Andrews (HC) at [75]; Dunlop at 91-93; Clydebank at 15-17, 19 and 20; Public Works Commission v Hills at 375-376. This is not to say that the enquiry is unconnected with recoverable damages; but the question of extravagance and unconscionability by reference, as Lord Dunedin said in Dunlop, to the greatest loss that could conceivably be proved to have followed from the breach, is to be understood as reflecting the obligee's interest in the due performance of the obligation: Public Works Commission v Hills at 375-376. One only needs to reflect on the facts of Dunlop and the justification for the payment that was found to be legitimate to appreciate these matters. [367] The different approaches of the High Court to this question in Paciocco (HCA) may be summarised as follows. Kiefel J (as her Honour then was), with whom French CJ agreed (at [2]), identified (at [29]) the test as being "whether a provision for the payment of a sum of money on default is out of all proportion to the interests of the party which it is the purpose of the provision to protect" and noted that this interest "may be of a business or financial nature". Gageler J framed the enquiry (at [166]) in terms of whether the impugned stipulation "is properly characterised as having no purpose other than to punish", stating that this compelled "a more tailored" enquiry than the legitimate interest approach adopted in Cavendish. His Honour expressly noted (at [166]) that this was not to say that the differently framed enquiries "might not lead to the same result". Keane J stated (at [270]) that "the question to be addressed in order to distinguish a penalty from a provision protective of a legitimate interest" was "whether the sum or remedy stipulated as a consequence of a breach of contract is exorbitant or unconscionable when regard is had to the innocent party's interest in the performance of the contract". Nettle J, though in dissent as to the application of the relevant principles, took a broadly similar approach to that of Keane J. His Honour said (at [319]) that "the Andrews and Cavendish formulations accord with Dunlop" and viewed (at [322]) the matter as turning on whether the case was a straightforward case in which the Dunlop tests would be perfectly adequate to resolve the issues on appeal, or whether the case "should be seen as one of the more complex types of cases referred to in Cavendish which necessitate considerations beyond a comparison of the agreed sum and the amount of recoverable damages". His Honour concluded (at [334]) that there was "no reason why the matter should not be determined in accordance with the Dunlop tests" and proceeded on that basis. [368] With that in mind, it is necessary, first, to identify the interests which are sought to be protected by the impugned stipulation; and, second, to ask whether the impugned stipulation was a stipulation collateral or accessory to another stipulation (the primary stipulation) which imposed an additional detriment upon SXG to the benefit of Linfield in the sense that (consistently with Andrews) it was in the nature of a security for and in terrorem of the satisfaction of the primary stipulation in a manner that (consistently with Paciocco (HCA) and Cavendish) was out of all proportion to the interests of Linfield intended to be protected by the primary stipulation. [369] As the judgments in both Cavendish and Paciocco (HCA) make clear, in identifying the legitimate (or "commercial" - see Paciocco (HCA) at [172]-[176] (Gageler J)) interests of Linfield in the present case, one is not precluded from looking beyond Linfield's interest in compensation for loss caused directly by the failure of the primary stipulation. [370] The submissions by the Guan appellants that a breach founding an Event of Default might be trifling and might not cause SXG to lose control over the Auburn land and that, conversely if SXG's breach was repudiatory, Linfield would be entitled to loss of bargain damages, do not in my opinion properly take into account that if (as here occurred) there was an Insolvency Event (or, which did not occur, a non-remediable event of default), then Linfield would be in the position where it might lose the opportunity to develop the land and share in the profits of that development (in circumstances where it had already invested considerable funds and effort towards the proposed development). The loss of that opportunity would not be recoverable as damages arising from the fact that SXG had failed to avoid the commission of an Insolvency Event, nor could it be assumed that such loss would be readily quantifiable. [371] In the circumstances, I am not persuaded that his Honour erred in concluding that the Call Option was not penal in its operation. In my opinion it was not disproportionate (or "out of all proportion") to the protection of Linfield's legitimate interests in relation to the proposed development, even though with the benefit of Linfield's efforts in progressing the proposed development application at the time of entry into the Development Agreement it might readily have been appreciated that the value of the land might increase in the period between that date and the date on which any development approval were to be granted (at least to some extent). Contrary to the submission made by the Guan appellants, the impugned stipulation does secure Linfield's interest in the project in the sense that Linfield would not then lose the benefit of the opportunity to progress the development project and to obtain the benefits from a successful development project, which opportunity it would necessarily lose if the project were not able to be pursued through no default of its own but through SXG's insolvency. The fact that it might choose instead to sell the property for reward is not to the point. [372] As I have concluded that the impugned stipulation does not constitute a penalty, the issues as to what consequences would flow had it been identified as penal and as to the divergent views taken in Australia (see Andrews and Paciocco (HCA)) and England (Cavendish) do not arise. For completeness, however, I note that insofar as the Guan appellants contend (at ground 10(a)) that, were the clause properly characterised as a penalty, it would have been "void", this is not the case (cf Citicorp Australia Ltd v Hendry at 39-40 (Priestley JA); Integral Home Loans at [8] (Brereton J)). A penal clause is not void ab initio; rather, it is unenforceable (AMEV-UDC at 189, 191-2 (Mason and Wilson JJ); 195, 203 (Deane J); Jobson v Johnson [1989] 1 WLR 1026 at 633 (Nicholls LJ); Andrews at [10]; Cedar Meats (Aust) Pty Ltd v Five Star Lamb Pty Ltd (2014) 45 VR 79; [2014] VSCA 32 at [55]; Paciocco (HCA) at [122] (Gageler J); [330] (Nettle J)). In equity, the pre-Judicature position was stated (at 357) concisely by Ashburner (see W Ashburner, Principles of Equity (2nd ed, 1933, Butterworth)) as follows: Relief was granted before the Judicature Act in two ways. First, the court … recalled the penalty, if it had been exacted. Secondly, the court restrained the prosecution of an action at law … to recover the penalty [373] Pomeroy provides (at 593) some further explanation (see John Norton Pomeroy, A Treatise on Equity (2nd ed, 1892, vol 1)): The original practice in such cases was for the court of equity to retain the bill, direct an issue to ascertain the amount of damages, and to grant relief upon payment of the damages thus assessed by the jury. … While the two jurisdictions at law and in equity were kept distinct … the form of the remedy in which relief was obtained against a penalty was that of a suit brought by the debtor party to procure the agreement to be surrendered up and cancelled … upon payment of the debt or damages; and this decree would often be accompanied by an injunction restraining an action at law upon the agreement brought or threatened by the creditor party. [374] The modern position in Australia is confirmed (at [10]) in Andrews: If compensation can be made … for the prejudice suffered by the failure of the primary stipulation, the collateral stipulation and the penalty are enforced only the extent of that compensation. The first party is relieved to that degree from liability to satisfy the collateral stipulation. [375] This approach was recognised earlier in the dissenting judgment of Deane J in AMEV-UDC at 195: [It] was a fundamental doctrine of equity that relief in Chancery against the enforcement of a penalty was only available where the quantum of the damage for which the impugned payment would be compensatory could be ascertained and upon the terms that the claimant did equity by paying the amount of the true damnification. … The equitable jurisdiction did not … cease to exist and the terms upon which equitable relief against penalties would be granted remain directly applicable in those comparatively rare cases in which the party asserting unenforceability is constrained to seek positive relief (whether primary or ancillary) which is purely equitable in character, such as an order for reconveyance. In such a case … such relief should be refused unless the plaintiff … submits to the terms on which equitable relief is available and does, or undertakes to do, equity by paying the amount of the actual loss suffered. [376] Thus if the impugned stipulation were to have been properly characterised as penal it would be "unenforceable at common law" (Paciocco (HCA) at [122] (Gageler J)) except (assuming that compensation is available) to the extent that equity would permit "scaling"; and if positive relief which was purely equitable in character were to be sought in respect of that penal stipulation then, as Deane J noted (at 195) in AMEV (to which Gageler J in Paciocco (HCA) at [124] referred with apparent approval), it would (or might) be necessary for the obligor to submit to any terms on which equitable relief were to be made available. In any event, this issue does not presently arise." (emphasis added)
Accordingly, the relevant principles are as follows: 1. The essence of a penalty is a contractual provision for the payment of money in terrorem, stipulated to intimidate or punish the offending party; 2. A penalty is a stipulation that has no purpose other than to punish. The real objection to a penalty clause as a matter of public policy is that it is not the part of the law of contract to allow one party to punish the other for non-performance; 3. A critical issue is whether the sum agreed to be paid is commensurate with the interests protected by the bargain. The test is whether the impugned provision is a secondary obligation which imposes a detriment on the defendant out of all proportion to any legitimate interest of the innocent party in the enforcement of the primary obligation. The reasoning is that the innocent party can have no proper interest in simply punishing the other party; 4. In determining whether the agreed sum is commensurate with the interest protected by the contractual bargain, whether the sum or remedy stipulated is exorbitant or unconscionable when regard is had to the innocent party's interest in the performance of the contract is relevant
In my opinion, applying these principles, the provision in Clause 10.6 of the Contract is neither a penalty at common law nor in equity for the following reasons: 1. As stated above, as the obligation to pay arises even if there is no breach of contract, it is properly characterised as a possible penalty in equity rather than at common law; 2. The interest of the plaintiff which Clause 10.6 of the Contract appears to protect is the interest of the plaintiff to complete the Works under the Contract by the contractual date for Practical Completion so that it can proceed to other paying work and limit its continuing overheads unless it is properly compensated for the delay the Variation as requested has caused; 3. Clause 6.6 of the Contract in my view allows the defendant to direct further works by Variation prior to the date of Practical Completion under the Contract; 4. With the plaintiff then obliged to undertake the Variations, it has an interest in being properly compensated for the delays in the completion of the Works; 5. The amount in the present case does not appear to me to be disproportionate or out of all proportion to the protection of the plaintiff's legitimate interests in completing the Contract by the date of Practical Completion. The plaintiff wishes to complete the works as soon as possible and then to remedy any defects and proceed to other paying work. Further directed Variations under Clause 6.6 of the Contract delay its completion of the Work. The defendant has failed to satisfy the onus it bears to establish the clause is penal in nature. I reject paragraphs 49-51 of the defendant's written submissions; 6. The cross-examination of Mr Mansfield did not, in my view, establish that all of the plaintiff's overheads and other costs (let alone a loss of income from potential new work) were covered by the Variation costs where the Variations requested caused delays beyond its control. Further, the loss of an opportunity to seek further work is not considered in paragraphs 58-60 of the defendant's written submissions; 7. The amount involved of $2,500 per day for each day of delay due to the Variations does not appear to me to be exorbitant or unconscionable when taking into account the contract price, the fact the Project is for a high-end restaurant and is therefore a commercial project and the fact that any delays due to the Variations would delay the project beyond 27 November 2015 and into the period close to and potentially after Christmas; 8. Relevant, in my opinion, is the amount that the parties agreed the plaintiff to pay the defendant in the event that the plaintiff caused a delay. The structure of Clause 10 is therefore relevant even though the interests protected are different. As the plaintiff submits in chief, the Contract included in Clause 10 "a double edged mechanism': paragraph 50. This was in the same amount of $2,500 per day. However, even without the benefit of Clause 10.7 of the Contract, I would still have found the payment in Clause 10.6 not to have been a contractual penalty as it was objectively intended to protect the plaintiff's legitimate contractual interests; 9. Although the defendant relied on paragraph 20 of Mr Mansfield's first affidavit as supporting its penalty argument, in my view it did not. There is nothing to suggest that the plaintiff agreed with the comments of the other persons referred to in this paragraph; 10. Accordingly, the Clause is not penal in operation for the reason that the daily rate is not out of all proportion to the legitimate interests of the plaintiff intended to be protected by the clause as it is limited by the extent of the Variations requested by the defendant itself: see Linfield at [358].
For these reasons, I reject the submission of the defendant that Clause 10.6 of the Contract is a penalty.
It is accordingly unnecessary for me to consider the defendant's submissions as to the quantum of the alleged indirect expenses in paragraphs 52-60 of its written submissions. However, I note Mr Mansfield's evidence that there were other costs beyond those specified in the MYOB Job Activity Detail (Exhibit 2): T71.25. This was not explored or challenged further in cross-examination.
The plaintiff also submitted that the defendant committed disentitling conduct in equity "because it was the one who asked for the increase to $2,500": plaintiff's written submissions in chief paragraphs 51-53. I reject this submission. I cannot see any relevant connection between the defendant asking for the amount to be increased for Clauses 10.6 and 10.7 and the doctrine of penalties applying to clause 10.6 so as to amount to disentitling conduct in equity. In particular, I cannot see that the alleged disentitling conduct is immediately and necessarily related to the penalty finding the defendant now seeks or is indeed conduct which is disentitling in equity.

The alleged estoppel

In its Defence, the defendant relies on an estoppel allegedly preventing the plaintiff from relying on its contractual rights under Clause 10.6 of the Contract in the event that the Court determines the construction question in favour of the plaintiff.
The conversation relied on in support of the estoppel is contained in paragraph 9 of each of the affidavits of Mr Xiao and Mr Li.
In Ashton v Pratt [2015] NSWCA 12 Bathurst CJ (with whom McColl and Meagher JJA agreed) stated the following: "[109] As I indicated, the estoppel pleaded was described as an equitable estoppel. In Waltons, Brennan J described the elements of such an estoppel in the following terms at 428-429: In my opinion, to establish an equitable estoppel, it is necessary for a plaintiff to prove that (1) the plaintiff assumed that a particular legal relationship then existed between the plaintiff and the defendant or expected that a particular legal relationship would exist between them and, in the latter case, that the defendant would not be free to withdraw from the expected legal relationship; (2) the defendant has induced the plaintiff to adopt that assumption or expectation; (3) the plaintiff acts or abstains from acting in reliance on the assumption or expectation; (4) the defendant knew or intended him to do so; (5) the plaintiff's action or inaction will occasion detriment if the assumption or expectation is not fulfilled; and (6) the defendant has failed to act to avoid that detriment whether by fulfilling the assumption or expectation or otherwise. [110] Earlier in his judgment Brennan J appeared to reject the proposition that such an equitable estoppel can only be used defensively and was essentially negative in effect. His Honour stated at 416 that equitable estoppel, unlike estoppel in pais, is a source of legal obligations arising on an actual state of affairs. He stated that whilst it is possible that the estoppel may be used to compel a party to fulfil another's expectations, that was not the object of the estoppel. He stated at 423 that the object was to avoid the detriment which would be suffered by the party who has been induced to act or to abstain from acting thereon. He stated that if that object is kept in mind, the concern that a general application of the principle of equitable estoppel would lead to non-contractual promises becoming enforceable as contractual promises would be allayed. … [112] In Commonwealth of Australia v Verwayen [1990] HCA 39 ; (1990) 170 CLR 394 each of Mason CJ, Brennan J and Deane J adhered to the broad view of the scope of equitable estoppel at 413, 428-429 and 440 respectively. [113] In Giumelli, a case of proprietary estoppel, at [32]-[34] and [48]-[52] the plurality appeared to reject the proposition that the relief in the case of equitable estoppel must be confined to the minimum required to avoid the detriment: see also Sidhu at [85]. Notwithstanding, the plurality in Giumelli did not seek to limit what was said by the majority in Waltons concerning the potential scope of equitable estoppel. … [141] The relevant detriment is that which the party asserting the estoppel would suffer, as a result of her original change of position, if the assumption which induced it was repudiated by the party estopped: Delaforce v Simpson-Cook [2010] NSWCA 84 ; (2010) 78 NSWLR 483 at [42] (Delaforce), Grundt v Great Boulder Proprietary Gold Mines Ltd [1937] HCA 58 ; (1937) 59 CLR 641 at 674-675 and Sidhu at [81]. [142] What now appears clear is that there is no need to mould any remedy in the case of equitable estoppel to reflect the minimum relief necessary to remove the detriment: Giumelli at [48], Delaforce at [56]-[57] and Sidhu at [75]. Prima facie the courts should enforce a reasonable expectation which the party bound created or encouraged. However, relief will be limited where the enforcement of a plaintiff's expectation would be out of all proportion to the detriment: Delaforce at [62] and Sidhu at [85]. This is because in those circumstances good conscience does not require the promisor be held to his or her promise. … [147] As was stated by Gageler J in Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd [2014] HCA 14; (2014) 88 ALJR 552 at [150] the detriment or harm required to ground an estoppel can be any material disadvantage. Such material disadvantage must be substantial, although it need not be quantifiable in the same way as an order of damages. In the present case Ms Ashton suffered no material disadvantage, certainly not one which could be described as substantial."
The first issue to be determined is whether I should prefer the evidence of Mr Bruce Mansfield as to the conversation relied upon by the defendant to that of Mr Xiao and Mr Li.
I have found that all of those witnesses gave their evidence honestly and to the best of their recollections. None of the persons was shaken in cross-examination in relation to their evidence on this issue. Accordingly, the question must be determined as to who is a less reliable witness and/or who may be mistaken in relation to their evidence.
Having carefully considered this issue and observed each of the three witnesses giving evidence, I prefer the evidence of Mr Mansfield on this issue for the following reasons: 1. Mr Mansfield appeared to me to have a reasonably good recollection of events concerning the project. He made concessions where appropriate and was clear in his evidence. The defendant's attack on Mr Mansfield in relation to an area where he had a limited recollection does not affect my general conclusion as to Mr Mansfield's reliability: see paragraph 64 of the defendant's written submissions; 2. Mr Mansfield appeared to be an intelligent man with a good grasp of detail. His first language was English; 3. The first language of both Mr Xiao and Mr Li was Chinese. I formed the view that the English comprehension skills of Mr Li were slightly better than those of Mr Xiao. However, Mr Xiao had better spoken English. The accounts given by Mr Xiao and Mr Li of the relevant conversation are different but similar; 4. The wording used in paragraph 9 of each affidavit contains a degree of sophistication with English which was not reflected in the oral evidence of either Mr Xiao or Mr Li (I have taken into account that the words in the affidavits are to the effect of those spoken). In addition, the email evidence of Mr Xiao which was before the Court showed that Mr Xiao's English, whilst reasonable, was not good; 5. In my view, there was a real prospect of misunderstanding by Mr Xiao and Mr Li having regard to their English language skills or a failure to appreciate precisely what was being said by Mr Mansfield. The exchanges relied on occurred in English. There is no suggestion they were translated; 6. Mr Xiao and Mr Li both said they remembered the conversations apparently because the subject matter was important: eg T103.10; T124.39. Mr Xiao was a frequent user of emails on the evidence. He said he preferred exchanges in writing: T102.46. He said he "always confirm in writing" but there was no relevant confirmation in the present case: T102.46. The lack of confirmation on what was claimed to be an important matter is a relevant factor in whether to accept his evidence on the estoppel issue. Its absence suggests the conversation did not occur in the form claimed; 7. Whilst there had been numerous previous Variations requested, there was no evidence that the defendant's representatives had indicated there was a funding ceiling 8. I take into account the delay between the alleged representations and the recording of the accounts of the defendant's witnesses as a relevant factor bearing on the reliability of their recollections: see Watson v Foxman (1995) 49 NSWLR 315 at 319; ACN 151 368 124 v Pro-pac Packaging (Aust) Pty Ltd [201] NSWSC 913 at [78]; 9. The above analysis is no criticism at all of Mr Xiao and Mr Li who were undertaking their tasks, it appears, carefully, loyally and diligently. In the end, I prefer the evidence of Mr Mansfield on this issue for the reasons which I have set out.
Accordingly, I do not accept that a representation was made in the terms alleged by either Mr Xiao or Mr Li.
This is enough to determine this aspect of the proceedings. However, I also note some additional matters on the estoppel issue.
As to paragraph 66 of the defendant's written submissions where it is submitted that as Mr Li's evidence of the question Mr Xiao had asked was never challenged it should therefore be taken by the plaintiff to be accepted, I reject that submission. First, Mr Mansfield denied Mr Li's evidence in paragraph 9 of his affidavit in paragraphs 100-106 of Mr Mansfield's second affidavit sworn 15 October 2017. The parties were clearly at issue on the matter. Secondly, it was quite clear from the cross examination of Mr Li that his account of the meeting was being put in issue by the plaintiff. There was no unfairness to the defendant.
Any comments made by Mr Mansfield were in the context of the 5 November 2015 document. This was replaced by the 10 November 2015 document and later documents. There is a real issue, accordingly, as to the degree of relevance of any representation made as to the 5 November 2015 document. I find that the representation if accepted was limited to the 5 November 2015 Summary not the later Summaries. I prefer the submissions in chief of the plaintiff on this issue: see paragraphs 70-71 cf paragraph 72 of the defendant's written submissions. The representation, if accepted, was specific and was limited to the particular document being considered at the meeting. It could not reasonably be seen to apply to all later Variations. This is another reason for rejecting the defendant's estoppel claim.
There is also a question as to whether the defendant has acted or abstained from acting in reliance on the assumption or expectation caused by the alleged representation. In Sidhu v Van Dyke [2014] HCA 19; (2014) 251 CLR 505 at [58] the majority stated: "…Reliance is a fact to be found; it is not to be imputed on the basis of evidence which falls short of proof of the fact." Whether reliance is established by a party must be determined in the context of all the evidence." See also the comments in Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd [2016] HCA 26 at [39] and [158] and the decision of the Court of Appeal in Miller Heiman Pty Ltd v Sales Principles Pty Ltd [2017] NSWCA 106 at [1], [45]-[49] and [62]. This seems to be inconsistent with paragraph 75 of the defendant's written submissions where it is submitted that if the defendant had been told the true cost with the Clause 10.6 amount "it may well have not gone ahead with the Variations or have sought to have reduced the scope or cost of any changes to the original design." In his oral submissions, counsel for the defendant said he could put this submission no higher having regard to the evidence.
The evidence establishes: 1. Mr Xiao was initially concerned that the project would be finished at least partly by Christmas to secure some of the Christmas trade; 2. Later evidence shows that the defendant was particularly concerned to ensure that the project was finished for a grand opening for Chinese New Year; 3. Mr Li said that those controlling the defendant were concerned that the renovation was completed to a state of "perfection"; 4. What was involved in the project was a renovation of a restaurant which was intended to be a high-end restaurant; 5. The plaintiff had been the builder on the project for a considerable period of time at the time of the 5 November 2015 meeting. The defendant was seeking a considerable number of Variations. It was important to the defendant to have the project completed including with the Variations as soon as possible and particularly in time for Chinese New Year.
In the light of all of these factors, I am not satisfied that if Mr Mansfield on behalf of the plaintiff had indicated that the plaintiff was relying on its rights under Clause 10.6 of the Contract in relation to the Variations to charge the further amount now claimed, that the defendant would have adopted any different approach. See paragraphs 90 and 92 of the plaintiff's written submissions in chief. It seems inconceivable to me at that late stage and with the defendant desiring the project to be completed as soon as possible and particularly for Chinese New Year where a grand opening was proposed, that the defendant would not have paid the additional sum sought for 45 days at $2,500 per day to ensure that the project was completed on time. Whilst the defendant was clearly interested, as was to be expected, to limit costs, the additional amount represented only about 5% of the cost of the entire project. For this reason in my view the estoppel argument would also fail.

Determination

For the above reasons, the Court makes the following orders: 1. Judgment for the plaintiff. 2. The parties are to bring in agreed short minutes of order within 7 days reflecting these reasons including any claim for interest. 3. The defendant to pay the plaintiff's costs of the proceedings as agreed or assessed. 4. Liberty to apply within 14 days to vary the costs order set out in (3) above. 5. The document marked Exhibit B is rejected and is not part of the evidence admitted in the proceedings. 6. Exhibits to be returned after 28 days.

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: 12 February 2018

Mansfield Corporation Pty Ltd v Chengcheng

At a glance

Court

Decision date

Catchwords

Source

Catchwords

Judgment (19 paragraphs)

Parties

Legislation Cited (2)

Cases Cited (55)

Cited By (3)