Plaintiff v Defendant

EVIDENCE - Privilege - Where vendor objected to evidence as evidence of settlement negotiations under s 131(1) of Evidence Act 2008 (Vic) - Whether communication was between 'persons in dispute' and 'in connection with an attempt to negotiate a settlement of the dispute' - Where dispute existed but had not yet been articulated - Purpose of legislation to encourage settlement negotiations - Evidence inadmissible - Evidence Act 2008 (Vic) s 131 - Interpretation of Legislation Act 1984 (Vic) s 35.

1 On 24 July 2019, LBA Capital Pty Ltd ('LBA Capital'), the defendant, signed a contract with Thousand Hills Property Pty Ltd ('Thousand Hills'), the plaintiff, for the purchase of 14 lots at 47 and 49 McIntyre Street, Burwood, together with any improvements on those lots.[1] The Burwood property was undeveloped land. Under the contract, Thousand Hills promised to construct apartments on the property in accordance with plans that were annexed. Settlement was to occur 14 days after Thousand Hills gave notice of the registration of a plan of subdivision or the issue of an occupancy permit, whichever was later.

2 A deposit of $883,200 was paid. The proposed sale has not proceeded. This case concerns who should get the deposit. Thousand Hills contends that it accepted a repudiation by LBA Capital and so it is entitled to retain the deposit. LBA Capital contends that, when the various communications are seen in their full context, it is apparent that it did not repudiate the contract and that Thousand Hills must now return the deposit with interest. In order to resolve this dispute, Thousand Hills seeks, pursuant to s 49 of the Property Law Act 1958 (Vic), an answer to the question:

Did the defendant [LBA Capital] repudiate, and has the plaintiff [Thousand Hills] accepted the repudiation of the Contract.

3 A party repudiates a contract, and gives the counterparty a right to accept that repudiation and thereby bring the contract to an end, if that party evinces an intention no longer to be bound by the contract.[2] A party may also repudiate a contract if it conveys that it is unable to meet its contractual obligations even if it wished still to do so,[3] and a party may convey such an intention or inability in advance of the date upon which its performance is required.[4] Consistently with the objective theory of contract,[5] the question is not what the party intended to convey, but instead is what that party's words and actions, in the circumstances, would convey to a reasonable person in the situation of the other party.[6] This all makes good sense: a party contractually obliged to engage in ongoing activities, such as constructing a building, should be able to free itself from the obligation on it to continue to build if the other party conveys that it will not meet its obligations when the time for settlement arrives.[7] That said, an intention not to be bound by a contract will not be found lightly.[8] An expression of a desire not to comply with a future contractual obligation or a request to be relieved from that obligation, as part of a renegotiation or otherwise, is not the same as the expression of a firm intention not to comply with that obligation. For this reason, the language of 'renunciation' of a contract has been used to convey the 'seriousness' required before the counterparty should be entitled to terminate in advance of the date for performance.[9]

4 Finally, the other party must be, at the time of termination, willing, ready and able to perform its own obligations if it wishes to accept the repudiation.[10]

5 Thousand Hills relies on an email that Mr Demetrios Charisiou, known as James, of LBA Capital sent on 7 October 2020 to Mr Xiaoyu Liu, known as Scott, of Thousand Hills that was in the following terms:

Dear Scott

Unfortunately our company is in the process of winding down, as we are unable to continue operating. As such the company will not be in a position to settle on the contract.

My suggestion is that we rescind the contracts, and reach an agreement on how the deposit moneys are used to settle the matter.

Looking forward to your thoughts on this matter.

6 Mr James Charisiou was a director of LBA Capital. It is clear that he had authority to communicate on its behalf, notwithstanding that, for the most part, it was his brother, Mr Mario Charisiou, who engaged with Thousand Hills. At the time that this email was sent, the development was well short of being complete.

7 Without meaning any disrespect, for convenience I will hereafter not use the prefix 'Mr' when referring to Scott Liu or to James or Mario Charisiou.

8 Five months later, on 10 March 2021, Thousand Hills' solicitors wrote to LBA Capital's solicitors in the following terms:

Our client has passed to us a copy of the email dated 7 October 2020 from Mr James Charisiou addressed to Mr Scott Liu of our client company.

The email informs that the purchaser company will not be in a position to settle on the contract of sale.

On the basis for full reservation of legal rights, our client now formally accept the repudiation of the contract by your client.

9 The statement in LBA Capital's 7 October 2020 email that LBA Capital 'will not be in a position to settle on the contract' could, certainly, convey to a reasonable person in Thousand Hills' position that LBA Capital would not be able to pay for the lots when the apartments were complete or otherwise that it did not consider itself bound by the contract. Whether it did convey that, however, requires the email to be evaluated in the context of the surrounding circumstances. LBA Capital relied on what it contended were written and oral communications that, it said, provided the context in which the above two emails had to be seen and by which it should be concluded that LBA Capital did not repudiate the contract.

D. The persons involved and their authority to act for the contracting companies

10 Thousand Hills was incorporated as a joint venture for the purpose of the Burwood development. One director, Mr Guozheng Weng, was based in China and does not speak English. He did not have any direct communications with LBA Capital or anyone acting on his behalf. He provided the funding for the development. The other director, Scott Liu, referred to above, was an experienced builder, spoke English, and was based in Australia. He managed the project and represented Thousand Hills in its dealings with LBA Capital.

11 As noted above, LBA Capital's only director was James Charisiou. His brother, Mario Charisiou, worked for the company.[11] Mario Charisiou is a licenced builder and he negotiated the contract with Thousand Hills. With one important exception, being the email referred to in para 5 above, he was the person who communicated with Thousand Hills on behalf of LBA Capital. I am satisfied that Mario Charisiou at all times had actual or ostensible authority to act for LBA Capital in his dealings with Thousand Hills.

12 In late October 2020, Scott Liu was removed as a director of Thousand Hills and replaced with Mr Weng's wife, Ms Li Guo. Ms Guo does not speak English and had no dealings with LBA Capital. She expressed a belief that Scott Liu's removal as director had been communicated to LBA Capital by Thousand Hill's lawyers, but, despite LBA Capital's counsel calling for any such correspondence when cross-examining her, no such communication was produced. Equally, no evidence was otherwise given that Thousand Hills ever nominated any other person to act on its behalf in its dealing with LBA Capital. Mario Charisiou said, and I accept, that he thought Scott Liu 'was' Thousand Hills. In those circumstances, I am satisfied that Scott Liu at all relevant times had actual or ostensible authority to act for Thousand Hills in his dealings with LBA Capital.

13 Thousand Hills called Mr Weng and Ms Guo to give evidence. Neither of those witnesses had communicated with LBA Capital, and Thousand Hills based its case that LBA Capital had repudiated the contract essentially on the written communications.

14 LBA Capital called both Mario and James Charisiou. LBA Capital also called:

(a) Scott Liu, even though he had been, as noted, a director of Thousand Hills and its agent; and

(b) Mr Xiaoxi Sun (known as Nicholas), even though he was the architect engaged, through Embrace Architects, by Thousand Hills.

15 LBA Capital engaged its own architect with expertise in building NDIS apartments, Mr Thomas Lui. Correspondence to and from him was put in evidence, but he was not called. For convenience, and without meaning any disrespect, I will hereafter refer to him as Thomas Lui.

16 To the extent that the parties relied on oral communications, credit was in issue. As noted above, Mr Weng and Ms Guo did not themselves have any communications with LBA Capital and so I put to one side what they assert about the communications that were made. James Charisiou gave evidence from prison, where he is serving a 12-year sentence having pleaded guilty to fraud charges regarding unrelated building projects. As noted below, Thousand Hills alleges that Scott Liu, its former director, had defrauded it.

E. The contractual requirement to build to the NDIS standards

17 To understand the difficulties that arose with the building of the apartments, it is necessary first to understand the role that the National Disability Insurance Scheme ('the NDIS') played.

18 The contract required Thousand Hills to build apartments on the lots being bought by LBA Capital in accordance with attached plans. The plans relevantly provided for 11 apartments on level one and 3 apartments on level three. LBA Capital intended to lease the apartments it was buying to persons funded by the NDIS. The plans that were attached to the contract had not been prepared in a way that would meet the NDIS's requirements.[12] For this reason, the contract included a special condition that Thousand Hills provide apartments that complied with the 'spatial parameters' and 'fixtures and fittings specifications' of the NDIS's 'High Physical support (highest disability category)' and 'Platinum Level (highest standard)'.[13] Presumably because the build would differ from the plans attached to the contract, the special condition also stated:

Any variation cost (addition or subtraction) agreed between the Vendor's Project Architect and the Purchaser's Superintendent are to be agreed to within 14 days.

19 This should be emphasised: although some of the written terms required Thousand Hills to build apartments in accordance with attached plans, the contractual intention, as emerging from the special condition, was instead that:

(a) those plans would, at some later time, be modified to ensure that the apartments LBA Capital was to buy were compliant with the NDIS's requirements for its highest level of physical disability; and

(b) the purchase price would or could then be varied, having regard to any costs or savings associated with those modifications, in a subsequent agreement.

20 In this way, the contract anticipated, if not required, that the parties would have to come to a further agreement. Neither party argued that the contract was void for uncertainty and, presumably, if required, terms could be implied that the parties act reasonably. The actual NDIS requirements were not in evidence.

F. The difficulties that arose in relation to the need to build to the NDIS standards

21 As the below chronology will show, the special condition requiring Thousand Hills to build the apartments that it was to sell to LBA Capital to the NDIS standards caused problems. The parties were not able to agree on what was required both in relation to the 'Class' that would apply to the building as a whole, and whether the third floor could or should be built as a 'boarding house'.

22 By early April 2020, Embrace Architects (for Thousand Hills) had prepared some amended plans for the first floor and sent them to Thomas Lui (for LBA Capital) for approval. Things seemed to be progressing. Then, on 26 May 2020, Embrace Architects advised Mario Charisiou and Thomas Lui by email that the building surveyor had taken the view that the building had to be a 'Class 3 building' (rather than a 'Class 2 building') because it provided accommodation for people with a disability, and asked Mario Charisiou to sign a letter that could be used by Thousand Hills to try to persuade the building surveyor that the building should instead be a 'Class 2 building'.

23 The evidence as to what the difference in classification meant to how the building had to be designed or constructed was lean, to say the least. As noted above, the NDIS requirements were not in evidence and no expert evidence was given as to the requirements. However, on the basis of an attachment to one of the emails from Thousand Hills, it seems that a 'Class 2' building is a building containing two or more sole-occupancy units, and a 'Class 3' building is a residential building providing long-term or transient accommodation for certain types of people and includes a 'boarding house', a residential part of a hotel, motel, school, detention centre or health-care building, and 'accommodation for the aged, children, or people with disability'.[14] Again, neither party led any expert evidence on this point.[15] Mario Charisiou said that if the building were treated as a 'Class 3 building' there would have to be some modifications to the common areas to improve accessibility. Scott Liu thought that the major difference was to do with 'fire protection'. Nicholas Sun thought more parking spaces might be required, and also said in his affidavit, after stating that the apartment layouts themselves would likely have been able gain approval:

However, it is unclear if the project could have proceeded without major amendments and costs implications, if the level 1 and level 3 apartments had to be assessed as class 3 buildings by the building surveyor.

24 I accept that if the obligation to make the apartments sold to LBA Capital NDIS compliant meant the building would be treated as a 'Class 3' building, changes would have to be made to the building as a whole and not just to the individual apartments to be sold to LBA Capital, and that the cost and other implications of that happening were uncertain but not insignificant. That would explain why Thousand Hills did not want the building to be categorised as Class 3.

25 On 4 June 2020, Scott Liu for Thousand Hills emailed Mario Charisiou and Thomas Lui asking again that they sign the letter for the building surveyor. Mario Charisiou was not prepared to sign the letter. On 28 July 2020, Mario Charisiou replied, saying:

It is clear under the BCA, the apartments will fall under the class 3 be use highlighted below. We have yet finalise our design for the top floor which is to be designed for a boarding house for NDIS hence will also fall under the class 3.[16]

26 This letter indicates that LBA Capital was proposing itself to design the third floor, rather than have Thousand Hills modify their own designs for that floor. This letter also seems to be the first time that the idea that the top floor would be a 'boarding house' was referred to in correspondence. The evidence as to what making the third floor a 'boarding house' would mean for the building was, again, unclear. Mario Charisiou said that two tenants sharing the same residence amounted to a 'boarding house' and that because three-bedroom apartments would or might involve separate arrangements with two people (possibly plus a carer) they were 'technically under a boarding accommodation'. If this were right, then the third floor could still be constructed as three, three-bedroom apartments. That evidence, however, was in tension with the terms of an email sent by him on 4 August 2020 referred to in para 29 below that indicated that the top floor could not be apartments. Scott Liu believed that building the third level as a boarding house was significantly different from building it as three apartments. A boarding house, he said, would be like 'student accommodation' or like 'studio by studio rather than the - the typical apartment'.

27 On 28 July 2020, Scott Liu responded to Mario Charisiou and Thomas Lui contending that Thomas Lui had previously said that there would be no changes to the third floor. Scott Liu also asserted by an email that day that the 'whole team' had been waiting for the letter for two months and indicating that the project had 'stopped' accordingly. On 29 July 2020, Mario Charisiou asserted again that he was not prepared to sign the letter for the building surveyor because two of the criteria for a Class 3 building, namely the provision of a 'boarding house' and 'accommodation for people with a disability', 'will be occurring', that this was 'clear from the start and was made conditional in the contract of sale', and he didn't want a later 'challenge'. Later on 29 July 2020, Scott Liu asserted on behalf of Thousand Hills that Mario Charisiou and Thomas Lui had previously said, on behalf of LBA Capital, that level three would not be changed, and that to build to Class 3 standards would impose 'special requirements on the common area about fire and fire engineering'. He followed up with another email to Mario Charisiou on 30 July 2020 asking, among other things:

if you change your mind that making whole level three to be a boarding house, are you agree for the variation cost?

28 This latest email revealed another still-undecided issue: what would it cost (or save) to make the modifications under consideration, and who would meet that additional cost or benefit from any reduction in cost?

29 On 4 August 2020, Mario Charisiou sent a more detailed email to Scott Liu that reveals why LBA Capital sought to have the top floor treated as a 'boarding house'. He said:

To be clear, the top floor was all to be NDIS high physical support boarding home. The top floor cannot be full NDIS apartments because the maximum full apartments per building is 10, with a spare for overnight carer, hence the 11 down stairs. Our contractor special conditions can't be met on the top floor as NDIS apartments because they won't obtain construction certification as NDIS apartments however will do so as boarding house Platinum level boarding homes. On that basis the building will need to classified as class 3 as per your building surveyor advise. Can you please confirm you will be doing so, so I can have my architect designed the top floor to meet the special conditions of the contract.

I will need to have you confirm the classification as Class 3 and that you will comply with the special conditions by COB this Friday 7th August, otherwise I will need to advise LBA Capital the special conditions can't be met hence the purchase is now void and deposit returned to them.

30 Later the same day, in response to Scott Liu's assertion that Thomas Lui had said that no changes would be required to the third floor, Mario Charisiou wrote:

Thomas is and never [has] been the representative to decide whether there is a change in the contract. Unless there is a signed variation by LBA then the contract conditions still stand. As I have advised and as per the special conditions. The top floor can only be NDIS boarding house and not three individual apartment managers due to the max allowable single dwellings in one cluster hence the pre design certificate cannot be achieved and or final approval. On that basis the building needs to be a class 3 as per the building Serveyor advise.

Please advise that this will occur and you will be able to comply with the special conditions otherwise your non conforming will give LBA capital no option but to exercise its rights under the contract conditions and cancel the contract.

We will require your decision by COB by 7th August.

31 In light of these emails, I reject Mario Charisiou's evidence to the effect that the requirement that the third floor be designed as a 'boarding house' did not require that it differ substantially from the plan that it be three separate apartments. It is apparent that a substantial re-design was sought.[17]

32 These communications indicate that LBA Capital was asserting that it was entitled under the contract to have the top floor modified to be a 'boarding house' so that the special conditions could be met. Scott Liu for Thousand Hills said he held the view, at the time, that Thousand Hills was not required to provide a 'boarding house' and that it would not be 'deliverable' to construct the apartments on level 3 to 'Class 3' standard: that that 'can't be done'. He believed that Thousand Hills was only required to build to Class 2. Further, Scott Liu said, and I accept, that Mr Weng did not want to build level 3 of the Burwood development to the NDIS standards, certainly if that required building to Class 3.

33 This evidence reveals the impasse that had arisen. I conclude that the situation, by August 2020 was, in summary:

(a) LBA Capital wanted to proceed with the contract, but only the basis that the building be built (in accordance with its view of the contract) as a 'Class 3 building' and the third floor be built to a boarding-house design; and

(b) Thousand Hills:

(i) did not consider itself obliged to build the third floor as a boarding-house design and did not consider that the building should be a 'Class 3 building'; and

(ii) did not want to continue with the contract if that were what it was required to build, or, perhaps, unless the purchase price paid by LBA Capital was adjusted to account for any increased costs.

34 I note, too, that at this stage the building works had not yet commenced. WeChat communications between Scott Liu and Mr Weng in August 2020 reveal that Scott Liu was seeking to have his building company appointed as the builder and that the finance for the development had not yet been fully finalised.

35 There was little clear evidence as to what occurred to progress the project after the August 2020 emails above. It seems that little happened. By September 2020, Mr Weng had become 'frustrated and disappointed' with Scott Liu's management of the project, and on or by 9 September 2020 engaged Robert Fan as a project manager. Mr Fan was not called to give evidence. There was no evidence to the effect that the parties had resolved their conflicting positions on the classification of the building or the design of the third floor. Indeed, a building permit was not obtained until after the contract had been terminated in 2021.

F.3 The proposal to purchase other apartments in substitution for the apartments at the Burwood development

36 Importantly, by September 2020, Mario Charisiou and Scott Liu had started to explore an arrangement whereby LBA Capital would purchase some apartments to be built by Scott Liu in Mentone, that could be used for NDIS clients, instead of purchasing the apartments to be built in Burwood. On 7 September 2020, Scott Liu sent Mario Charisiou an email in which he referred to a meeting they had had the previous day and identified 8 apartments at the Mentone project that would be built to NDIS requirements that Mario Charisiou had discussed purchasing for $4,268,000. Scott Liu suggested by email that he purchase two more. Scott Liu ended his email with:

If you are happy to proceed, we will get the contracts ready next week, i can then come to you and sign the contracts.

37 Immediately after that email, Scott Liu sent a rather ambiguous follow-up email in which he said:

And, the top-level will sure be sorted out for you.

38 At trial Scott Liu thought, without being sure, that this was a reference to the Burwood development.

39 As noted above, there was little evidence as to what transpired in the balance of September 2020. A month later on 7 October 2020 at 2:58am, Scott Liu emailed Mario Charisiou indicating that he wanted to 'touch base for NDIS apartments' and 'get everything going forward'. It became clear that the purchases then under consideration were to be in substitution for at least some of the Burwood apartments. At 7:28am on 7 October 2020, Mario Charisiou emailed Scott Liu in the following terms:

Hi Scott,

Yes I am keen however as we can't proceed on the Burwood apartments because of the top floor we need to first Cancell that contract and design the fist floor apartments as individual contracts. We can also then sign the mentone apartments. i can have a letter issued to you to advise of the cancelation and you have the letter of acceptance and at the same time we sign all the new contracts for Burwood and Mentone. Im free around 12 pm today if you want to come by to discuss.

Have you got your funding through for Burwood?

40 When giving evidence about this email, Scott Liu said:

'Cause, ah, we actually want Mario cancel contract because the NDIS apartments requirements is hard to deliver, so by that time I thought Mario may want to buy another NDIS apartments. That's why we gave them another apartments to buy.

41 As it turns out, the Mentone apartments were not being developed by Thousand Hills. Thousand Hill's other director, Mr Weng, did not know that Scott Liu was proposing to divert LBA Capital at least in part from Thousand Hill's Burwood project to his own Mentone project. However, there is nothing in the correspondence to suggest that Scott Liu ever conveyed to Mario Charisiou that the alternative development was not a development of Thousand Hills and I accept Mario Charisiou's evidence that he thought that Mr Scott Liu 'was' Thousand Hills when proposing the other projects.

42 In response to the 7:28am 7 October 2020 email set out above, Scott Liu emailed Mario Charisiou at 9:20am the same day saying:

Hi Mario,

Can we have meeting tomorrow?

...

But, for the contract, that should be okay. I think you can send us the cancellation letter at first and request to change the name as well as nomination for the first floor. I need the solicitor to review contracts

For the Camberwell, are you interested to buy some for your NDIS? I just found that the government announced higher budget for NDIS from news yesterday, rally a great news for you

...

43 At 9:49am that day, Mario Charisiou replied saying 'Great let's meet tomorrow' and advising that he was interested in Camberwell (being another NDIS apartment building venture Scott Liu and Mario Charisiou had discussed).

44 The existence of these proposed alternative arrangements was also supported by other evidence. Mario Charisiou swore in an affidavit that Thousand Hills became concerned that it could not meet the NDIS requirements without substantial additional cost and indeed that it 'could not meet the requirements of the special condition', and clarified in oral evidence that this what Scott Liu had told him. He then said that in this context there were discussions about LBA Capital buying 'other apartments [Thousand Hills] was developing to satisfy [LBA Capital's] interest in this type of accommodation.' Scott Liu said that he told Mario Charisiou:

'If you want cancel contract ... and if you want to buy ... another apartments to do the NDIS business, so I can sell ... another ... to him to do the NDIS apartments.'

45 Mario Charisiou said that, prior to his sending the email to his brother set out in

para 50 below, Scott Liu told him that Thousand Hills 'could not complete the contract because it could not meet the requirements of the special condition relating to the NDIS and SDA apartments' and, in that context, LBA Capital was looking instead to buy other NDIS apartments from Thousand Hills.

46 Scott Liu did not accept that he said that Thousand Hills could not complete the Burwood contract. He did say, however, that Mr Weng had told him he wanted to cancel the contract, and that he had also heard the new project manager, Mr Fan, wanted to cancel the contract.

47 Mario Charisiou said in his oral evidence that the discussions also involved the Burwood property deposit, that had already been paid, being applied or 'reallocated' towards the new purchases. This was not put in terms to Scott Liu. I doubt that there would have been oral discussions to that effect given that there was no reference to the treatment of the deposit in the emails. However, I accept that, consistent with ordinary common sense in circumstances where one contract was to be replaced by agreement with another, the unspoken assumption was that the deposit would not be forfeited but would be applied, subject to some other agreement being reached, towards the substituted purchases.

48 It is also relevant that the Burwood development was becoming financially unattractive to Thousand Hills at least in part due to the delays. Mr Weng said 'the disability issue delayed my project by over a year'. The designs had not yet been finalised. Ms Guo accepted that the costs of building went up after the COVID pandemic, that 'construction costs have been increasing dramatically' and that 'the NDIS specifications have not been worked with us, and the project is delayed'. Mr Weng said: 'Overall, it had been delayed by over a year, and we have encountered big losses.'

49 Accordingly, I conclude that, as at 7 October 2020, and immediately prior to the sending of the email relied on by Thousand Hills as a repudiation justifying its retention of the deposit:

(a) LBA Capital had not conveyed that it was unprepared to or was not able proceed with the contract for the Burwood project, but was instead asserting an obligation on the part of Thousand Hills to complete and to sell to it the apartments at Burwood in the way it thought the contract required Thousand Hills to do;

(b) Thousand Hills believed that it was not required to build in the way that LBA Capital asserted it was required to build;

(c) The construction of the Burwood apartments had stalled;

(d) Both sides were dissatisfied with the Burwood contract and would have been happy to get out of their contractual obligations in relation to it;

(e) Scott Liu, with ostensible authority to act on behalf of Thousand Hills:

(i) had conveyed to Mario Charisiou that Thousand Hills did not wish to build the apartments in the manner that LBA Capital said they had to be built;

(ii) was engaged in negotiations with Mario Charisiou directed at achieving an agreement whereby the contract for the Burwood apartments would be cancelled or at least substantially modified and other apartments bought in substitution for the apartments provided for in that contract;[18]

(iii) had invited LBA Capital, as the first step in that process, to forward a letter cancelling the contract for the Burwood apartments; and

(f) It was an unspoken assumption that if an alternative agreement were reached then the deposit would be applied to the purchase of the new apartments, rather than forfeited.

50 Consistently with the above, on 7 October 2020 at 12:23pm Mario Charisiou sent an email to his brother James Charisiou, who was the director of LBA Capital, that said as follows:

James

Can you email Scott below as the director of LBA Capital and advise that the contract of sale for the apartments can not be satisfied by the vendor and by mutual consent both parties agree to terminate the contract and forgo the deposit. Can you do this today

51 It was not made clear what was meant by 'forgo the deposit', given that the email otherwise referred to the vendor (Thousand Hills) not being in a position to complete the contract. I do not take it to mean that LBA Capital had agreed that Thousand Hills could simply retain the deposit. It seems more likely that it reflects an intention on Mario Charisiou's part that the deposit would become available to LBA Capital for use in the other purchases at the Mentone and/or Camberwell developments.

52 Then, at 1:04pm, and still on 7 October 2020, James Charisiou sent the key email referred to in para 5 above, which I will set out again:

Unfortunately our company is in the process of winding down, as we are unable to continue operating. As such the company will not be in a position to settle on the contract.

My suggestion is that we rescind the contracts, and reach an agreement on how the deposit moneys are used to settle the matter.

53 James Charisiou gave evidence. He was unable to explain why he sent an email that diverged in the substantial way it did from the email sent to him by Mario Charisiou earlier that same day. At 11:22pm, Scott Liu replied to this email in terms that, again, appear surprising. He wrote:

Hi James

That should be ok, could you please ask your solicitor to contact my solicitor to arrange the change as nomination?

54 At 9:32am the next day, that is, on 8 October 2020, James Charisiou sent another email to Scott Liu. It seems that he had developed some concerns about the wording of his previous email. In this email, he wrote:

Scott

Irrespective of LBA's circumstances the contract of sale for the apartments can not be satisfied by the vendor. We need to arrive by mutual consent by both parties agree to terminate the contract and determine how the deposit is to dealt with.

I have copied in my solicitor, Nick Galatas and his assistant who can follow up with the vendor's solicitor on this matter.

55 There was no immediate response to this communication in evidence. Scott Liu and Mario Charisiou continued to communicate in relation to LBA Capital purchasing apartments other than the Burwood development. On 19 October 2020, Scott Liu sent a text message to Mario Charisiou saying that his architect was 'still working on the NDIS layout for Camberwell'. Mario Charisiou replied asking 'How about Mentone'. Scott Liu replied that he was 'working on it'. Further, Scott Liu did not forward James Charisiou's 7 October 2020 email to Mr Weng until around March 2021 (although Mr Weng said he became aware of it in December 2020). This is consistent with Scott Liu's understanding that LBA Capital was seeking to bring the contract to an end by agreement, rather than conveying that it no longer considered itself to be bound by the contract or conveying that it simply would not comply with the obligations under it.

56 Thousand Hills did not purport to accept what it contended was the repudiation constituted by the 7 October 2020 email until 10 March 2021. As noted above, there is little evidence as to what happened in the meantime. Mr Weng accepted that between October 2020 and February 2021, Thousand Hills and persons engaged by it continued to undertake work on the project. As noted above, the building permit for the Burwood project was not obtained until after 10 March 2021. It seems likely that the parties were distracted by other issues:

(a) First, Mr Weng lost confidence in Scott Liu. Mr Weng had placed trust in Scott Liu and had thought, at least by September 2020, that Scott Liu was 'cheating' him. On 27 October 2020, Scott Liu was removed as a director and replaced with Mr Weng's wife, Ms Guo because, in Mr Weng's words, 'he misappropriated my money over one million and without any receipts.' As noted above, Thousand Hills then engaged Mr Fan to manage the project, and legal proceedings were later taken against Scott Liu; and

(b) Second, Mr Weng became aware by the end of November 2020 that LBA Capital had been accused of defrauding other investors.[19] Reports appeared in the media on 7 October 2020. Mr Weng became concerned that LBA Capital would not be able to settle on the contract. Mr Weng also said that he was worried that LBA Capital were trying to defraud him.

57 Notwithstanding these concerns, on 24 December 2020, Thousand Hills' solicitors wrote to LBA Capital's solicitors in the following terms:

Can you please provide your client's instructions as to whether or not they still intend to proceed with the purchase.

As discussed, we have been advised that your client does not wish to proceed with the purchase of some of the lots and seek your assistance in determining which Lots (Level 3?) in particular.

Once we have confirmation we can seek our clients instructions for a Deed of Cancellation.

Please advise.

58 This communication is revealing in two respects. First, it indicates that Thousand Hills was then unsure as to whether LBA Capital intended to proceed with the contract. In this way, it is inconsistent with Thousand Hills genuinely holding the view, at that time, that LBA Capital had already conveyed, in a manner that would amount to a repudiation justifying the forfeiture of its deposit, that it would not or could not complete the contract. Second, it is consistent with my conclusion, expressed above, that the parties were working towards a consensual variation of the contract.

59 On 10 March 2021, Thousand Hills purported to accept what it said was a repudiation constituted by the 7 October 2020 email. Thousand Hills has since built the apartments other than to the specified NDIS standards, and has sold, or is in the process of selling them, to other purchasers. Part of Thousand Hills' 10 March 2021 email was redacted and privilege was claimed over the redacted part and an attachment to the email. I address this at Part H below.

60 It was put to James Charisiou that because of the allegations of fraud that had been made as described in para 56(b), LBA Capital simply would not have been able to meet its obligations under the contract for the Burwood development, and that this was consistent with the statement in the email that LBA Capital was 'winding down' and would not be in a position to 'settle on the contract'. James Charisiou disagreed. He said that the 'business case' for the apartments was very good and that the contract for the construction of the NDIS apartments was 'an attractive deal'. He accepted that LBA Capital would have had to borrow funds to pay the purchase price and that the fraud allegations were such that Thousand Hills would probably have had difficulty raising funds from the major banks, but expressed confidence that funds could have been obtained from private investors. This makes sense to me. Just as the obligation to build NDIS apartments in 2021 for the contracted price was burdensome for Thousand Hills, it seems that their value to LBA Capital if completed may well have exceeded the balance of the amount owed under the contract (bearing in mind that a 10% deposit had already been paid).

61 As noted above, Thousand Hills has since constructed the apartments (not to NDIS specifications) and sold them to other purchasers. Counsel for LBA Capital asserted that they were sold for a higher price than the price payable by it under the contract, and called for the sale contracts. The parties later agreed any party wishing to adduce a copy of any contract of sale was to do so by way of a confidential exhibit. There was talk of the contracts being relevant only as to their dates of sale. Ultimately, no contracts were put in evidence before me. In all the circumstances, I am not satisfied that the fraud allegations made in late 2020 meant that LBA Capital could not have completed the contract.

62 When the 7 October 2020 email is seen in its full context, it is apparent that, despite its unfortunate and largely-inexplicable wording, it would not in the unusual circumstances of this case have conveyed to the reasonable person in Thousand Hill's position that LBA Capital did not consider itself bound by the contract or that LBA Capital simply would not be able to complete the contract. It was sent at the express request of Thousand Hill's agent as the first step towards a mutual variation or cancellation of the contract. The statements that LBA Capital was 'unable to continue operating' and 'will not be in a position to settle' were somewhat weakened by the next sentence that proposed that the contract be rescinded and the treatment of the deposit be determined by agreement. But they are also to be seen in the following context: the contract was constructed with a special condition providing that in effect the plans would need to be varied by further agreement; a dispute had arisen in relation to the contractual obligations on the parties; Thousand Hills did not want to proceed with the contract if it were obliged to do what LBA Capital said it was obliged to do, and LBA Capital did not want to proceed if Thousand Hills were not obliged to do what LBA Capital said it was obliged to do; there was a plan to replace this contract (at least in part) with another contract by which LBA Capital would instead purchase some apartments in another development; Thousand Hills[20] had invited LBA Capital to commence that process by sending a letter terminating the Burwood contract; LBA Capital did not have to pay the balance owing for the apartments at Burwood until they had been built; the apartments would likely be worth at least the settlement amount owing; and a substantial deposit had been paid. Consistently with these surrounding communications and circumstances, the email conveyed instead that LBA Capital wanted to escape the contract by agreement in accordance with suggestions to that effect made by Thousand Hill's agent.

63 Further, LBA Capital sent a second email less than 24 hours afterward clarifying that 'Irrespective of LBA's circumstances the contract of sale for the apartments can not [sic] be satisfied by the vendor. We need to arrive by mutual consent by both parties agree to terminate the contract and determine how the deposit is to [be] dealt with.' This was sent prior to any acceptance of the purported repudiation and, consistently with my conclusion expressed above, indicates that LBA Capital was in truth not indicating that it could not or would not comply with the contract if need be but was instead seeking to have the contract terminated by agreement.

64 In reaching these conclusion, I have not overlooked the fact that the 7 October 2020 email was sent on the same day that the articles about the fraud allegations appeared in the press. I reject James Charisiou's evidence that those articles had nothing to do with his writing of that email. Even so, my conclusion remains unchanged. The public emergence of the fraud allegations, in my view, likely encouraged Thousand Hill's and James Charisiou's wish to escape from the contract. But that did not alter the quality of the communication: as noted, LBA Capital conveyed that it wanted to escape from the contract, but did not convey a belief or assert that it was not bound by the contract.

65 Accordingly, the deposit was not forfeited and must be repaid.

66 The 10 March 2021 email referred to in para 59 above from Thousand Hills' solicitors to LBA Capital's solicitors by which Thousand Hills purported to accept what it said was LBA Capital's repudiation of the contract included some sentences and an attachment over which Thousand Hills claimed 'without prejudice' privilege under s 131 of the Eviden[21] Act 2008.21 In those sentences, Thousand Hills proposed to return some but not all of the deposit, and the attachment was a 'Deed of Cancellation of Contract' that was to the same effect and otherwise included mutual releases. LBA Capital disputed that those sentences or the attachment were privileged. The parties did not ask that I rule on their admissibility in advance but agreed that I could decide their admissibility in these reasons.

67 The issue comes down to whether the email was between 'persons in dispute' and 'in connection with an attempt to negotiate a settlement of the dispute'.[22] If so, then s 131(1) provides that evidence of those communications and of the proposed deed is not able to be 'presented'. If, contrary to LBA Capital's submissions, s 131(1) is engaged, LBA Capital contends that various exceptions apply.[23]

68 I have reached the conclusion that LBA Capital did not repudiate the contract without reference to the disputed communications or to the proposed release. Accordingly, it is not strictly necessary for me to decide whether those communications were privileged or whether, as LBA Capital submits, I am able to rely on them. I will, however, make the following observations.

69 First, LBA Capital contends that the email and the attached deed are relevant because it 'discloses Thousand Hills true belief about its entitlement (or lack thereof)' to the deposit. However, the test for repudiatory conduct is, as noted, an objective one. It is not clear how any subjective uncertainty on the behalf of Thousand Hills' directors or agents as to whether the test for repudiation had been met would be relevant to determining what, objectively, was the case. Just as it would, probably, strictly be inadmissible for Thousand Hills's directors to give evidence about their own beliefs in relation to Thousand Hills' right to retain the deposit, it would, probably, strictly be inadmissible for evidence to be led to the effect that they were uncertain in relation to Thousand Hills's rights to retain the deposit. It is the Court's view, and not theirs, that matters. At the least, it is difficult to see how any weight could be given to those subjectively-held beliefs unless they were said to be inconsistent with other evidence given as to what was otherwise previously said or done by them.

70 Second, the communications were made at a time when no dispute as to the treatment of the deposit had yet crystallized in the sense that the parties had not set out conflicting positions on that issue, but they were made in circumstances and at a time where it was reasonably expected that a disagreement in relation to treatment of the deposit would arise. The fact that this case has been litigated establishes that a dispute about the return of the deposit did arise and the offer made, had it been accepted, would have avoided this proceeding. In that sense, LBA Capital's argument comes down to one of timing. Is there a 'dispute', for the purpose of s 131 of the Evidence Act 2008, when parties disagree on who is entitled to a deposit but that disagreement has not yet been communicated? And in those circumstances, is an offer to accept part of the deposit in exchange for mutual releases 'prepared in connection with an attempt to negotiate a settlement of a dispute'? In my view, the answer is yes. The purpose of this privilege is to encourage parties to resolve, rather than to litigate, disputes by making offers to compromise claims without those offers later being used against them.[24] Only an answer of 'yes' to the question posed would further that statutory purpose.[25] In my view, the word 'dispute' where used in s 131 of the Evidence Act 2008 should be interpreted as applying to a situation where the parties are in actual disagreement but that disagreement has not yet been articulated. Where one party makes an offer to resolve what it reasonably anticipates will be a dispute, and that offer is not accepted and that same dispute is then litigated, then that offer falls within the provisions of s 131(1) of the Evidence Act 2008.

71 Having reached that conclusion, it is not necessary to consider whether s 131(1) of the Evidence Act 2008 is enlivened on the grounds that the parties were in disagreement relating to aspects of the contract other than the treatment of the deposit.

72 Finally, I do not accept LBA Capital's submission that the exceptions in s 131(2)(a) to (c) of the Evidence Act 2008 apply. Section 131(2)(a) provides that s 131(1) does not apply if the people in dispute consent to the evidence being presented. Thousand Hills necessarily relied on the 10 March 2021 email as it was by that email that it sought to accept the alleged repudiation, but it also sought to redact the 'privileged' part. I do not accept LBA Capital's submission that by relying on the email in part, Thousand Hills consented to the disputed evidence being presented, or that, in LBA Capital's words, '[e]ither the email is admitted in full, or not at all.' Equally, the fact that James Charisiou exhibited an unredacted version of the email to his affidavit, and that this document appeared on a tendered exhibit list, does not mean that Thousand Hills (as compared to LBA Capital) consented to the full email being 'presented'.[26] Section 131(2)(b) provides that s 131(1) does not apply if the substance of the evidence has been disclosed with the consent of all the people in dispute. As before, Thousand Hills has repeatedly contended it does not consent to the substance of the evidence being disclosed. Section 131(2)(c) provides that s 131(1) does not apply if the substance of the evidence has been partly disclosed with the consent of all the people in dispute and full disclosure is 'reasonably necessary to enable a proper understanding of the other evidence that has already been presented'. The settlement proposals are not reasonably necessary to enable a proper understanding of the balance of the 10 March 2021 email, so this provision also does not apply.

73 Thousand Hills did not call its project manager Mr Fan. No explanation was given for its failure to call him, and I infer that his evidence would not have assisted Thousand Hills.[27] But I have not had to rely on this inference in reaching the conclusions above.

(a) whether Thousand Hills was obliged to build to 'Class 3' specifications, who was to pay any variation in costs, or any other dispute relating to whether Thousand Hills was ready, willing and able to perform the contract;

(b) whether Thousand Hills was required to but did not comply with termination provisions in the contract;

(c) whether, if LBA Capital did repudiate the contract, Thousand Hills nonetheless elected to continue with the contract;

(d) whether Thousand Hills is estopped from asserting that it accepted a repudiation; or

(e) whether Thousand Hills would be 'unjustly enriched' if it were to retain the deposit.

75 As noted at the beginning of these reasons, Thousand Hills seeks an answer to the question:

'Did the defendant [LBA Capital] repudiate, and has the plaintiff [Thousand Hills] accepted the repudiation of the Contract.'

77 I will otherwise hear the parties on the form of order and on the question of costs.

[1] The land is more particularly described as Lot 1 on TP214992X in Certificate of Title Volume 09361 Folio 984 and Lot 3 on TP186129R in Certificate of Title Volume 10887 Folio 406. The 14 lots identified are lots 101, 102, 103, 104, 105, 106, 107, 108, 109, 110, 111, 301, 302 and 303 on proposed plan of subdivision PS 830727U. Although neither party addressed this in oral or written submissions, the contract of sale seems to incorrectly refer to a 'Lot 2 on TP186129R in Certificate of Title Volume 10887 Folio 406' rather than the 'Lot 3' identified in the relevant title search and the attached plan of subdivision.

[2] Shevill v Builders Licensing Board [1982] HCA 47; (1982) 149 CLR 620, 625-6 (Gibbs CJ).

[3] Foran v Wight [1989] HCA 51; (1989) 168 CLR 385, 416 (Brennan J).

[5] See, eg, Taylor v Johnson [1983] HCA 5; (1983) 151 CLR 422, 428-429 (Mason ACJ, Murphy and Deane JJ).

[6] Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd [2007] HCA 61; (2007) 233 CLR 115, 135 [44] (Gleeson CJ, Gummow, Heydon and Crennan JJ).

[7] See, eg, Woodar Ltd v Wimpey Ltd [1980] UKHL 11; [1980] 1 WLR 277 per Lord Keith at 296-7: 'The doctrine of anticipatory breach is largely founded upon considerations of convenience and the opportunities it affords for mitigating loss .... It enables one party to a contract, when faced with a clear indication by the other that [they do] not intend to perform [their] obligations under it when the time for performance arrives, to treat the contract, if [they] so [choose], as there and then at an end...'. Also see The Progressive Mailing House Pty Ltd v Tabali Pty Ltd [1985] HCA 14; (1985) 157 CLR 17 per Brennan J at 46: 'The principles relating to anticipatory breach are intended to avoid the necessity for useless performance...'.

[8] The Progressive Mailing House Pty Ltd v Tabali Pty Ltd [1985] HCA 14; (1985) 157 CLR 17, 32 (Mason J), referred to in Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd [1989] HCA 23; (1989) 166 CLR 623, 643 (Brennan J).

[9] See Hochster v De La Tour [1853] EngR 760; (1853) 2 El & Bl 678; 118 ER 922, 926 per Lord Campbell CJ: 'The declaration in the present case, in alleging a breach, states a great deal more than a passing intention on the part of the defendant which he may repent of, and could only be proved by evidence that he had utterly renounced the contract, or done some act which rendered it impossible for him to perform it.' See also Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd [2007] HCA 61; (2007) 233 CLR 115, 135 [44] (Gleeson CJ, Gummow, Heydon and Crennan JJ).

[10] Foran v Wight [1989] HCA 51; (1989) 168 CLR 385, 408 (Mason CJ), 430-1 (Brennan J), 452-3 (Dawson J).

[11] On 2 August 2024, James Charisiou ceased to be a director of LBA Capital, but this was well after the events relevant to this proceeding had taken place.

[12] The plans attached to the contract stated that 'any areas, measurements and dimensions' set out in the plans were approximate only and were, unless otherwise specified, 'calculated in accordance with the Property Council of Australia's Method of Measurement for Residential Property.' They made no reference to any requirements of the NDIS.

[13] The special condition was contained on a separate page of paper that was attached to the contract and was not paginated.

[14] Although neither party lead evidence to this effect or addressed this in submissions, it seems these classes refer to standards set by the National Construction Code ('NCC'). See NCC (2022) Volume One - Building Code of Australia (1 May 2023), at Section A Part A6 'Building Classifications'.

[15] On the limited evidence on the point put before me, it seems highly likely that the units on both the first and third floors had to be 'Class 3' because they were to be used by persons on the NDIS. It remained a mystery how a building as a whole would be categorised where different floors were used for different purposes, or whether each floor could have a separate categorisation. Also, on my reading of the attachments to the emails, the third floor would justify a Class 3 rating because it was to be used for NDIS recipients, regardless of whether it was properly to be called a 'boarding house'. It is not necessary, however, for me to make findings on those matters.

[16] I have not corrected typographical errors in this or other passages I quote from email communications.

[17] Scott Liu asserted that LBA Capital was considering purchasing the apartments on level three as 'normal apartments', rather than as NDIS apartments. It then turned out that this was based on what he had been told by someone else who had been at a meeting that he had not attended.

[18] Possibly, having regard to the terms of the 9:20am email, the purchase of the first floor apartments at Burwood would continue.

[19] On 23 August 2019, this Court, on an ex parte application, froze LBA Capital's assets in circumstances where it was alleged that it had defrauded some Korean investors of many millions of dollars in relation to another development project. See JB Asset Management v LBA Capital Pty Ltd [2020] VSC 629.

[20] Through its ostensible agent Scott Liu.

[21] Section 131 of the Evidence Act 2008 (Vic) talks in terms of evidence not being 'presented' and does not use the word 'privilege'. However, the parties, as is commonly done, used the phrase 'without prejudice privileged' and I will do the same.

[22] Evidence Act 2008 (Vic), s 131(1).

[23] It relies on the exceptions contained in s 131(2)(a)-(c).

[24] Australian Law Reform Commission, Evidence (Interim Report, 1985) vol 1, [891], quoted in Odgers, Uniform Evidence Law (Lawbook, 16th ed, 2021) [EA.131.60].

[25] Interpretation of Legislation Act 1984 (Vic), s 35(1).

[26] LBA Capital cited ASIC v Union Standard International Group Pty Ltd (Trial Ruling No 1) [2023] FCA 169 for the proposition that the act of including documents in a list of documents which a party intends to tender at trial is sufficient to support the inference that the party at least impliedly consented to the disclosure of the documents. However, in that case, the Court found that there was no suggestion that, when the party claiming privilege produced the relevant documents, they did not consent to the disclosure of the documents or their contents. Whereas here, Thousand Hills has consistently maintained its contention that the communication was privileged.

[27] Jones v Dunkel (1956) 101 CLR 289.