Valmont Interiors Pty Ltd v Giorgio Armani Australia Pty Ltd

Court of Appeal (NSW)|2021-05-03|Before: Bell P, Macfarlan JA, Leeming JA

ay (1998) 192 CLR 330; [1998] HCA 3 S & E Promotions Pty Ltd v Tobin Brothers Pty Ltd (1994) 122 ALR 637 Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387; [1988] HCA 7 Category: Principal judgment Parties: Valmont Interiors Pty Ltd (Appellant) Giorgio Armani Australia Pty Ltd (Respondent) Representation: Counsel:

R D Marshall SC with D A Moujalli (Appellant) M Green SC with M Klooster (Respondent)

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

HEADNOTE [This headnote is not to be read as part of the judgment] The appellant, Valmont Interiors Pty Ltd (Valmont) entered into a contract with the respondent, Giorgio Armani Australia Pty Ltd (Armani) on 8 January 2016 (the works contract), by which Valmont agreed to provide construction and fit-out works (the project) for a new Emporio Armani store at the Sydney Kingsford Smith Airport in Mascot (Sydney airport). The contract sum of $989,819.00 (GST exclusive) was described as a "fixed project price inclusive of all items - excluding those supplied by client". The works contract specified four "Client Supply Items", one of which was "joinery (as specified)." As a consequence of its status as a "Client Supply Item", the parties agreed that the joinery was to be supplied by Armani without allowance from the contract sum. Armani indicated to Valmont that it would engage a Chinese firm, Sun Bright Construction Co Ltd (Sun Bright), to supply the joinery for the project. The project was to be completed within a tight timeframe, with works originally due to commence on 11 January 2016 and to be completed on 5 March 2016. On 1 February 2016, Sun Bright indicated to Armani that it could not meet the schedule for delivery of all the necessary joinery. Consequently, on the same day, Armani directed Valmont to supply those items of joinery which Sun Bright was not able to supply. Valmont supplied the balance of the joinery that Sun Bright did not supply but Armani refused to pay for it, claiming that Valmont was precluded from claiming for it by reason of its failure to adhere to the procedure specified in cl 15 of the works contract as a result of which Valmont was taken to have released or waived any claim, including to quantum meruit. Armani also refused to pay for the other variations on the basis that Valmont had not followed the cl 15 procedure. Valmont commenced proceedings in the District Court of New South Wales seeking damages for breach of contract or alternatively quantum meruit. Armani cross-claimed in relation to certain allegedly defective work performed by Valmont. The primary judge entered judgment for Valmont in the amount of $130,973.00 and for Armani, on its cross-claim, in the amount of $235,611.29. The judgment sum in favour of Valmont included an amount in relation to certain variations in respect of the store's façade incurred prior to 11 April 2016. The primary judge held that these costs were recoverable by Valmont notwithstanding its failure to comply with the variation procedure specified in cl 15 of the works contract on the basis that Armani was estopped from relying on cl 15 in relation to work performed up to 11 April 2016. After that date, however, the primary judge held that Armani was able to rely on Valmont's failure to adhere to the cl 15 procedure. The primary judge rejected Valmont's claim in respect of the joinery, holding that the costs for the joinery were almost exclusively incurred after 11 April 2016 when any estoppel had ceased to operate. The significance of 11 April 2016 was that, in an email of that date, the primary judge considered that Armani had made it clear that it would rely on the cl 15 procedure being followed thereafter. Valmont appealed from the decision of the primary judge. The principal issue on appeal was whether the estoppel which precluded reliance by Armani on the contractual waiver and release in cl 15 of the works contract continued to operate after 11 April 2016 in respect of the supply and installation of joinery by Valmont. The Court held (Bell P, Macfarlan and Leeming JJA agreeing), allowing the appeal in part: 1. The estoppel which precluded reliance by Armani on the waiver and release in cl 15 of the works contract continued to operate, at least as far as the joinery was concerned, after 11 April 2016 and did not come to an "abrupt halt" as at that date: [87] (Bell P); [127] (Macfarlan JA); [128] (Leeming JA). 1. email correspondence on 11 April 2016 did not displace an assumption that had been induced by Armani that Valmont would be compensated for the cost of supplying the balance of the joinery that Sun Bright could not supply: [87] (Bell P); [127] (Macfarlan JA); [128] (Leeming JA); 2. the statement in the 11 April 2016 email that "there are no variations on this project" conveyed Armani's understanding that its instruction to Valmont on 1 February 2016 to supply the balance of the joinery was not in fact a variation but a separate, extra-contractual request to supply those items: [90] (Bell P); [127] (Macfarlan JA); [128] (Leeming JA); 3. Valmont, having received such an instruction, was entitled to expect to be paid for the supply of the balance of the joiner unless and until it was disabused of that reasonable understanding. That it continued to incur liabilities in respect of the joinery after 11 April 2016 demonstrated that it had not been disabused of that understanding: [91] (Bell P); [127] (Macfarlan JA); [128] (Leeming JA). 1. The 11 April 2016 email was not sufficiently clear to have had the effect that it was no longer reasonable for Valmont to assume that Armani would meet the cost of the balance of the joinery. That email correspondence did not refer to or address the topic of the joinery, but was sent in the context of variations to the façade in relation to which written approval had been sought: [98] (Bell P); [127] (Macfarlan JA); [128] (Leeming JA). Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387; [1988] HCA 7, applied. S & E Promotions Pty Ltd v Tobin Brothers Pty Ltd (1994) 122 ALR 637; Mortgage Acceptance Nominees Ltd v Australian Thoroughbred Finance Pty Ltd (1996) 69 SASR 302, referred to. 1. The fact that, on the evidence, Valmont never sought Armani's written approval to supply the balance of the joinery, in circumstances where it did seek approval in respect of other work in relation to the façade, is consistent only with Valmont proceeding on the assumption that Armani's approval was not required because that approval was implicit in its original direction to Valmont to supply the joinery: [104] (Bell P); [127] (Macfarlan JA); [128] (Leeming JA). 2. It was in all the circumstances unconscionable for Armani to resist payment for the provision of the balance of the joinery by Valmont: [107] (Bell P); [127] (Macfarlan JA); [128] (Leeming JA). 3. Observations by Bell P on the need for clarity if an assumption as to a state of affairs which gives rise to an estoppel is to be departed from: [97]; [127] (Macfarlan JA); [128] (Leeming JA). Commonwealth v Verwayen (1990) 170 CLR 394; [1990] HCA 39; Fels v Rural Bank [2020] WASCA 151, referred to.

Judgment

BELL P: This appeal concerns a contract (the works contract) executed by the appellant, Valmont Interiors Pty Ltd (Valmont), and the respondent, Giorgio Armani Australia Pty Ltd (Armani) on 8 January 2016, by which Valmont agreed to provide construction and fit-out works (the project) for a new Emporio Armani store at the Sydney Kingsford Smith Airport in Mascot (Sydney airport).
In particular, the appeal relates to a claim for the cost of the provision of joinery in relation to the project. As will be seen, this was originally to be a "Client Supply Item" under the works contract and, to that end, Armani had indicated to Valmont that it would engage a Chinese firm, Sun Bright Construction Co Ltd (Sun Bright), to supply the joinery for the project.
The project had a tight time frame with works originally due to commence on 11 January 2016 and to be completed on 5 March 2016.
Within less than a month of the works contract being executed, on 1 February 2016, Sun Bright indicated to Armani that it could not meet the schedule for delivery of all the necessary joinery. It provided Armani with a marked-up copy of its original quotation and the plans, noting in handwriting on the quotation those items which it could supply and those items that would need to be supplied by Valmont.
On the same day, Armani's Store Development Manager, Ms Camilla Brown (Ms Brown), directed Valmont to supply those items of joinery which Sun Bright was not able to supply. This direction did not purport to be a formal variation under cl 15 of the works contract.
In due course, Valmont supplied the balance of the joinery, having sub-contracted its fabrication, and sent invoices to Armani in relation to this expense. Armani's refusal to meet these invoices was part of a dispute that was resolved over some six days of hearing in the District Court. Whilst many aspects of the dispute were resolved at first instance or between the parties, the current appeal relates principally to the dispute in relation to the payment for the joinery supplied by Valmont. This issue is the subject of appeal grounds 1-6. Appeal grounds 7 and 8 relate to two discrete defect issues having a value of $16,528 and $51,288.28 respectively.
The primary judge rejected Valmont's claim in relation to the provision of the balance of the joinery which it had supplied to Armani: Valmont Interiors Pty Limited v Giorgio Armani Australia Pty Limited [2020] NSWDC 395 (the primary judgment or PJ). His Honour held that, subject to a limited promissory estoppel, Armani was entitled to rely on the provisions of cl 15 of the works contract by way of defence to Valmont's claim: PJ [133]. This clause related to both formal and purported variations and specified a procedure which had not been followed by Valmont in relation to purported variations. Pursuant to cl 15.2, failure to follow the prescribed procedure generated a release and waiver of subsequent payment claims, including those based on quantum meruit.
The qualification to the primary judge's conclusion in relation to the operation and effect of cl 15 of the works contract was that, prior to 11 April 2016, his Honour held that Armani was estopped from relying on that clause. This, however, was of no assistance to Valmont in relation to its claim in respect of the joinery because, as the primary judge also found, that work was performed almost exclusively after 11 April 2016: PJ [139]. This factual finding was challenged on appeal.
To understand the dispute a little more fully, it is necessary to set out some further background to the works contract, to note its key terms and to understand the alteration of plans with regard to the supply of joinery and the significance of certain correspondence which passed between the parties, including correspondence in April 2016 upon which the primary judge placed great reliance: see PJ [106]-[116].

Further background

In 2015, Sydney Airport Corporation Ltd (SACL) decided to increase the presence of high-end fashion stores, such as Emporio Armani, within the international airport. SACL offered Armani a lease of larger premises at the airport and the opportunity to break the lease of its then current premises with the intention that Armani close its old premises over the Christmas period and re-open in the larger premises in early 2016. Armani accepted this proposal and started preparing plans for the fit-out of the new premises.
Armani engaged a firm of architects to prepare those plans and invited a number of firms including Valmont to quote on the work as defined by the plans.
On 2 November 2015, Sun Bright sent Armani a quotation for the supply of the joinery required for the fit-out.
Valmont submitted its initial quotation for the work on 1 December 2015, in the sum of $1,121,005 excluding GST. After receiving this quote, Ms Brown spoke to Mr Marcel Zalloua, a director of Valmont (Mr Zalloua), as follows: "Brown: The cost of joinery is too expensive. I have a quote for joinery to be manufactured and assembled in China. You will only need to have it installed. Zalloua: I'm not comfortable using a company to manufacture and assemble joinery overseas. Brown: I have worked with this company previously on another Armani store and they were reliable. I will get them to give me a cheaper price. Zalloua: Ok."
There was a further conversation some time before 9 December 2015, as follows: "Zalloua: We can procure the joinery locally. It can be completed within the time you require and it will probably be better in quality. Brown: No. It will be too expensive, and we need to save as much money as possible. I will organise and buy the joinery from China using an existing supplier who recently just completed a store for us [Armani] in Melbourne. I trust them. You will just be required to supply the labour to install all joinery supplied."
On 9 December 2015, Valmont sent Armani a revised quotation for the work. Although a number of items in the quotation (including the joinery) were specified as "provisional sums", in a subsequent email to Valmont dated 8 January 2016, enclosing a signed copy of the works contract for the contract sum of $989,810 plus GST, Ms Brown noted: "Please find attached the signed contract for EA Sydney Airport project for Giorgio Armani. Please be note [sic] the dates and capped off cost which was agreed upon. … Site handover will be the 15th January, 2016. … GA [Armani] are supplying the floor tiles, part joinery and security items. All other items are under the umbrella of Valmont. I have the contact details of suppliers for specific information …"
The works contract was executed on 8 January 2016. The primary judge noted that, as executed, it made no provision for the adjustment of provisional sums (PJ [18(2)]) and that Valmont's quotation formed no part of the executed works contract: PJ [36]. His Honour also held that, to the extent that in later correspondence Mr Zalloua made reference to provisional sums under the works contract, he was mistaken: PJ [115].
The works contract recited that Armani had requested, and Valmont had agreed, to execute the work under the contract and to complete the work in accordance with the terms and conditions of the works contract. The contract sum of $989,819.00 (GST exclusive) was described as "a fixed project price inclusive of all items - excluding those supplied by client" (emphasis added). One of four "Client Supply Items" specified in the works contract was "[j]oinery (as specified)". The contract noted that the joinery would become "available" on 27 February 2016.
As a "Client Supply Item", the primary judge noted that the parties agreed that the joinery was to be supplied by Armani without allowance in the contract sum: PJ [30]-[35].
By cl 2, the works were due to commence on 11 January 2015 and to be completed on 5 March 2015. It was accepted by both parties that the reference in the works contract to "2015" in the identification of the "Start Date" and "Date for Practical Completion" should have been to 2016 and not 2015.
Central to this appeal is cl 15 of the works contract which was in the following terms: "15. Variations 15.1 [Armani] is entitled to direct [Valmont] to increase, decrease or change the Works, the sequence in which the Works are performed or the materials or classes of work specified (Variation) by issuing a written direction to perform a Variation stating the direction is being issued pursuant to clause 15 (Variation Direction). [Valmont] must not perform a Variation until the price of the Variation, and any effect on [Valmont's] Program, has been confirmed in writing. 15.2 If [Valmont] considers that a Direction of [Armani] is a Variation but [Armani] has not issued a Variation Direction, [Valmont] must give notice of the purported Variation to [Armani] within 5 Business Days after the Direction by [Armani] that constitutes the purported Variation and clause 15.1 will apply to the purported Variation. If notice is not provided by [Valmont] in accordance with this clause 15.2, [Valmont] releases and waives any entitlement it may have to a Claim against [Armani] in connection with, or arising from, the purported Variation. 15.3 Within 5 Business Days of receipt of a Variation Direction or provision of a notice under clause 15.2, [Valmont] must provide its price for the value of the Variation. 15.4 The parties must use their best endeavours to agree in writing on a reasonable value of a Variation. 15.5 If the parties fail to agree on a reasonable value of a Variation [Valmont] will be entitled to the direct costs reasonable incurred in performing the Variation plus an additional 10 percent. 15.6 If [Armani] directs a Variation which involves the deletion or omission of any part of the Works, [Armani] may itself, or have another person, carry out that work and [Valmont] shall have no Claim, and releases and waives any entitlement it may have to a Claim arising out of [Armani] or another person carrying out that work."
The following terms were defined in cl 1.6 of the works contract: "'Claim' means any claim, demand, action, proceeding, arbitration or suit which [Valmont] may make or bring against [Armani] or any of its employees relating to the construction of the Contract or as to any fact, matter or thing arising out of or in connection with the Contract or the Works including pursuant to the Contract on a quantum meruit, pursuant to quasi contract, for unjust enrichment, in tort and insofar as is permitted by law pursuant to any other principle of law. … 'Direction' includes agreement, approval, authorisation, certificate, decision, demand, determination, explanation, instruction, notice, order, permission, rejection, request or requirement. … 'Works' means the whole of the work required to be performed by [Valmont] pursuant to the Contract as described in the Details and including variations provided for by the terms and conditions."
Construction did not commence until 24 February 2016, following the issue of a building certificate. As noted at [4] above, Armani's Chinese joinery supplier, Sun Bright, had indicated to it on 1 February 2016 that it could not meet the schedule for delivery of all the necessary joinery, noting in an email of that date the items that it could supply and those which should be supplied by Valmont. It did so by annotating a PDF copy of its original quotation, noting by hand the items it could supply and those which should or would be required to be supplied "by GC", GC referring to Valmont as the general contractor (the PDF Quotation).
On the same day, namely 1 February 2016, Ms Brown forwarded a copy of the PDF Quotation to Mr Zalloua and Mr Alan Takach (Mr Takach), Valmont's contract administrator, with the slightly delphic message: "Dear Team, Please see the revised quotation and if it works with your summation. Let me know if you need anything from me."
This is the email that was identified in the particulars to [120B] of the Further Amended Statement of Claim in these proceedings as supporting the allegation that Armani did not provide Valmont with all joinery for the fit-out works and directed Valmont to supply the balance. Notwithstanding Armani's denial of this allegation, the primary judge held that this direction or instruction had been given to Valmont: PJ [21] and [95]. This finding was not challenged on appeal.
At [133] of his first Affidavit, Mr Zalloua deposed to the following conversation with Ms Brown, following his receipt of the PDF Quotation on or about 1 February 2016: "I am not in any position to clarify the cost of completing the joinery until the joinery being supplied by Sun Bright on Armani's behalf is received. Once I receive the joinery, I can assess it and determine what works are in fact required to be completed by us."
Ms Brown did not give evidence in the proceedings.
The conduct of the works and their timeline was governed by an amended construction program issued by Valmont on 22 February 2016 (the construction program). Although this program stipulated a practical completion date of 7 April 2016, it was subsequently agreed between the parties that the date of practical completion was 21 April 2016: PJ [149].
According to Mr Zalloua's first Affidavit (at [132]), the joinery that was sent from China did not arrive until the week commencing 1 March 2016, and he audited it on 7 March 2016.
On 16 March 2016, under the subject heading, "Emporio Armani - Variation Calculation", Mr Takach sent an email to Ms Brown attaching a variation calculation spreadsheet and relevant quotations "for your review and approval". None of these related to the joinery that Sun Bright could not supply. In his email, Mr Takach asked Ms Brown to note that the structural steel variation would require a seven day extension of time. The variation spreadsheet comprised five items and the email also attached variation quotations for each item. Each quotation set out a description of the work involved, the "variation value" and made provision for Armani's formal acceptance by the statement "Should you wish Valmont Interiors to proceed with the above quotation, please sign below and return to Valmont as soon as possible". The total value of these variations was calculated to be $68,698.63.
Ms Brown responded to Mr Takach on the same day, saying: "Thank you Alan, All items are approved, the structural steel will be address[ed] when I have a look at the files and a discussion with Marcel [Zalloua]".
The primary judge recorded that a project meeting was held on 11 April 2016 which was attended by representatives of both Valmont and Armani: PJ [107]. His Honour noted that the minutes of this meeting recorded that a number of variations were referred to and noted. On the same date, at 6.06 pm, Mr Takach sent to Ms Brown an email attaching a "contract variation spreadsheet". The email read: "Hi Camilla, Please see attached contract variation spreadsheet for Armani. Can you please review and confirm your acceptance. I will be sending through a progress claim shortly for these variations. Please feel free to contact me if you have any questions." This spreadsheet contained some 14 items, five of which were recorded in the spreadsheet supplied on 16 March 2016, although the amounts in respect of some of the repeated items had increased slightly. Again, none of these variations related to joinery.
Approximately 18 minutes later, at 6.24pm, Ms Brown replied to Messrs Takach and Zalloua as follows: "Hi Alan and Marcel, There are no variations on this project. It is a capped off cost which means items cannot be issued under variation and it is a lump sum amount which covers the project. I am happy to discuss this anytime. Please see the original paperwork which secured you the project 11th December. If you would like to deviate from this original agreement - lets discuss what and why." (emphasis added)
On 12 April 2016, Mr Zalloua sent the following email to Ms Brown at 5.00pm under the subject heading "Variations and Final Construction Program": "Dear Camilla, Please find attached the variations that still require approval. Please note that the major variation is in the change of façade design from the drawings issued for construction on the 24th November 2015 which is reflected in the contract quotation rev j. The new pricing reflects the drawings issued for construction on the 22nd January 2016. This is reflected in a credit being issued under CV 5 and the cost of the new façade under CV 6. We have proceeded with the structural steel works which will commence installation as of tomorrow evening. We require approval of the remaining variations for the façade design prior to these works being completed. Further to this please find attached the revised program which captures the delays incurred to the projects around the variations. We are working through suitable solutions to assist in meeting the dates you have submitted regarding the stocking of the store and the proposed opening date of the 28th April, however at this time we are only in a position to hand the store over on the 5th May 2016. We have been working extremely hard to minimising this delay especially the structural steel and we will continue to do so. This is the realistic time frame we require to complete the project to the required quality. Finally, I would just like to confirm that payment for progress claim 2 still has not been received. Please advise if there is any issues with having this paid by COB tomorrow."
Attached to this email were eight Variation Quotations. One of these was in fact a credit for works on the façade and shopfront in the sum of $142,800. Variation 6 quoted a variation value of $227,780, stating: "We submit our quotation excluding GST for the following amendment to our contract documents. Facade & Shopfront cost based on revised structural drawings (refer Variation Calculation 11.4.16)". It also contained provision for formal acceptance and agreement.
Also attached to the email was a "revised program", in the form of a Gantt chart issued on 12 April 2016. It showed that the joinery template had been measured by the end of February, was installed on 4 and 5 March 2016, and that the installation of joinery and furniture had commenced on 4 or 5 April 2016.
Mr Zalloua's email of 12 April 2016 prompted the following response by Ms Brown on the evening of 13 April 2016: "I do not understand why you are sending variations on a project that has a fixed price? To be sending variations at this late stage is not in line with a collaborative approach. It was agreed on 7/12/15 at your offices that this sum was to be a 'capped off' cost. No additional project costs or provisional sums can be applied, this was the agreement. I think if you check your correspondence and records you will find that you were in possession of the updated drawings (see attached email) prior to 1 - agreeing on a sum and 2 - signing the contract of agreed sum so the agreement stands as was intended. Additionally you want to refer to the original quote - the initial façade design with glass and steel - is far more expensive than the one we are using - so logically additional costs would not be applicable. You are contracted for completion of the project and are aware you cannot stop works. I hope that you can see reason and recall the agreed terms as they were and we can complete the project as we started out - with your goal of long term benefit to Valmont in a new sector and a quality project for us. I am happy to meet you tomorrow not to agree on additional costs but to discuss the schedule of works."
At 10.25pm that same evening, Mr Zalloua replied to Ms Brown's email as follows: "Clearly we are at odds with this situation. Firstly you have already approved in writing that the Structural steel variation was approved, so I don't understand your reasoning that there can be no variations and it was a fixed cost contract. Secondly the contract both parties has signed is not a fixed price contract with no variations allowed so I am a little baffled as to why you feel there is no variations on this project. Valmont was happy to agree terms on the drawings that were issued and priced on, Valmont is not in a position to absorb costs of a complete redesign of the façade which had to be completely redesigned both structurally and in finishes. We are not talking about a $10,000 variation. This is significant and Valmont has continually made you aware of the costs long before now. The façade was noted as a provisional sum on our quotation due to the lack of detail around what was being completed, the standard practice is the provisional sum is adjusted to suit the new drawings that were issued. Unfortunately Valmont is not in a position to continue to proceed with these works without written approval, we will complete the structural steel works as we have been issued an approval for this, however no further works will be completed until we have a resolution to the variations. Valmont has continued to work in good faith and with Armani's best interest at heart and it is hard to fathom that we are in this situation when all our correspondence has been so clear from the outset. I am not willing to meet to discuss the schedule tomorrow morning if you are not willing to discuss the variations as it will be of no benefit to either party."
At 10.26am on 14 April 2016, Ms Brown wrote to Mr Zalloua as follows: "From our conversation this morning it seems we are both on the same page and want the same outcome. In keeping with this Armani agree to pay the full contract sum of the project as per our conversation this morning no variations will apply to works. 'The contract sum is a fixed project price inclusive of all items - excluding those supplied by client'. I am happy with our agreement to work together moving forward for a collaborative approach to the completion of works."
Mr Zalloua replied to this email at 3.53pm that afternoon: "Thanks Camilla, for the clarification on the contract, however the variations are allowed under clause 15 of the contract. Regardless the offer we discussed this morning is as below; ● Valmont receives its full contract sum of $989,810.00 exc GST ● Armani pays all costs associated with the joinery received from Sunbright Construction Company totalling $1,334,545 which is as per the contract. Confirmation that Armani will not reduce or alter the contract amount to fund the payment of Sunbright or any other associated costs with the furniture ordered from China. ● Valmont will pay all costs associated with rectification and completion of the joinery received from Sunbright. This will be paid from the payment of the full contract sum as stipulated in point 1. ● Valmont will complete the façade works and will complete all unapproved variations on the basis of the above. Written confirmation is required prior to Valmont proceeding on this basis."
The primary judge noted that there was no reply to that email in evidence: PJ [114].
On 11 May 2016, Armani was issued with a certificate of compliance for occupancy in respect of the premises and took possession of the premises on the same day. The store was opened for business the next day but Valmont attended to certain further work until September 2016.
On 17 May 2016, Mr Zalloua sent a further Variation Calculation spreadsheet and invoices to Ms Brown. The variations related principally to works in relation to the façade of the premises. None related to joinery. The email stated: "As discussed at our meeting late last week, please find attached the variation spreadsheet and invoices and quotations received to date. As agreed we are happy to provide an open book on these variation and we are happy to waive the 10% profit and overheads. Further to this can you please provide a payment date for the agreed 90% of the contract sum. We really need to ensure this payment comes in so we can ensure the defects get rectified quickly as we need to keep up with the payments for the contractors. See you this afternoon."
Ms Brown responded within the hour as follows: "Thank you very much for this. We just had a sit down meeting with the head of Japan. The result is we are happy to agree upon additional payment on the project but we would like this to be addressed upon completion of works. We have opened the store for commercial reasons prior to what we would consider complete works. Can we discuss this, this afternoon? I am meeting the airport at 3.30 and am meeting you at 4pm. Let's go through what is left to make this project complete. I want to iterate we are addressing the request for additional moneys and I'm sure you will be happy with the outcome." (emphasis added)
There was a further flurry of email correspondence on 18 May 2016. At 11.10am, Mr Zalloua wrote to Ms Brown as follows: "HI Camilla, It was agreed at our meeting with Federico that we would receive 90% now with the remainder to be withheld until completion including the variations. The agreement below doesn't really work now as I have promised contractors that they will receive payment for their works in order to ensure we can get them back to complete the remaining works. Further to this we still do not have a definitive response on the variations and whether they are approved and when they will be paid. I understand that there are issues with the project and I am sure you will agree that they are all not ours. We are committed to completing the project perfectly but I would like to keep the agreement Federico and I made and move forward on that basis. You will receive a detailed program and information on all the items on when and how they will be rectified as soon as we receive the defects report from you. We have arranged a contractor meeting for Monday to finalise this program and will issue it on Tuesday morning. Happy to discuss further."
At 12.46pm, Ms Brown replied: "Dear Marcel, I have just spoken to Federico who is onsite with the head of Japan. They are not happy to make a payment until building works are complete as is the standard agreement. I know that you are requesting 90% payment instead as a special exception in order to pay your staff but the standard in all our projects is 95% at completion of works. At this stage the store is not completed with no finished fitting rooms or central display shelving. Upon completion of this we will pay as agreed. I understand your situation with the contractors but this is a project management issue which is a part of the undertaking in a project. Thank you for rallying the team to finish the project to the high standard. The fitting rooms are a priority! I We must do this at the soonest as they are not able to be used by high end clients. Federico has requested a return of final completed works date by this Friday and a detailed schedule of works by Monday. Is this possible?"
At 1.30pm, Mr Zalloua responded: "Thanks Camilla, However I can't help but feel that these goal posts have changed again. The glass shelving units are late not due to Valmont and should not be used to delay our payments. Further to this I would like confirmation that the variations will be paid as you have not made reference to this and I would like to understand our position on these."
Then, at 1.51pm, Ms Brown responded further: "HI Marcel, The goals posts have not changed. The standard and original agreement is to complete the job and get paid. You have requested to change this, Federico has said he would consider it, this has not been approved. The glass shelves are part of the Project Management of the work and were not addressed until we were onsite. I can put in consideration for payment prior to their installation but all works have to be complete and I need a date for the complete store works and the glass shelves installation to put this forward as another option. I have said in a previous email discussion and confirmation of extra moneys for the project will come at the end. You must understand we have a process and that getting extra money for a project with an already allocated budget is hard. It is even harder when the work is not finished. I'll get that document to you tonight. We are almost there!" (emphasis added)
On 23 May 2016, Valmont received an invoice (Invoice 3597) from Boys Projects, which was a joinery subcontractor. This invoice read as follows: "SUBCONTRACT AGREEMENT: 16_547/1 Net Amount SUPPLY AND INSTALLATION OF DETAILED JOINERY PROJECT: ARMANI SYDNEY AIRPORT PROGRESS CLAIM NO 1 $150,000"

No more detailed narrative of the work performed was identified on the face of the invoice. This invoice was, however, accompanied by a Subcontractor's Statement (regarding workers compensation, payroll tax and remuneration) which included, in compliance with s 127 of the Industrial Relations Act 1996 (NSW), a notation that the Statement applied for work performed between 1 April 2016 and 23 May 2016.
A second invoice from Boys Projects (Invoice 3611) dated 24 June 2016 was also received by Valmont. The narrative to this invoice appeared below a reference to the same subcontract agreement as appeared on the 23 May invoice (16_547/1) and under the heading "Supply and Installation of Detailed Joinery". It provided as follows: "Net Amount GST Amount PROGRESS CLAIM NO. 2 BALANCE APPENDIX (A) 28,930.00 2,893.00 JOINERY AS PER ATTACHED SCOPE APPENDIX (B) JOINERY 22,480.00 2,248.00 ADDITIONAL IN-HOUSE WORKS AS PER ATTACHED SCOPE APPENDIX (C) JOINERY WORKS 55,105.00 5,510.50 SUPPLIED BY ARMANI AS PER ATTACHED SCOPE"

The associated Subcontractor's Statement regarding workers compensation, payroll tax and remuneration included a notation that it applied for work performed between 24 May 2016 and 21 June 2016.
Appendices A, B and C referred to in the narrative to Invoice 3611 are annexed to these reasons for ease of reference. In relation to Appendix A, although it totals $178,930 (excluding GST), Invoice 3611 only records $28,930 as owing. This is described as a "balance" amount. It may readily be inferred that $150,000 of the amount of $178,930 was the subject of Invoice 3597, both because $150,000 plus $28,930 totals $178,930 and also because Invoice 3597 is described as the first "progress claim". This powerful inference suggests that the identification of the period of work to which Invoice 3611 related (see [51] above) cannot have been entirely correct, or that only $28,930 of the $178,930 worth of work referred to in Appendix A was undertaken in the period from 24 May 2016 to 21 June 2016.
The other feature of Appendices A and C is that each refers to item numbers. Some of these correspond to item numbers on the PDF Quotation that had been supplied by Sun Bright and forwarded to Valmont by Ms Brown on 1 February 2016: see [22] above.
There was no issue in the proceedings below that Valmont supplied joinery to Armani and installed it in the new premises. Installation was Valmont's responsibility under the works contract: PJ [30].
In addition to the two Boys Projects invoices already referred to, Valmont relied upon a number of other invoices in respect of joinery issued by a number of suppliers. These were referred to in [134] of Mr Zalloua's first Affidavit. In the course of the hearing of the appeal, Valmont's legal representatives were directed to identify from these and the Boys Projects invoices which items of work correlated to the items annotated by Sun Bright on the PDF Quotation as works to be performed by "GC", namely Valmont. This resulted in the provision of the following table: Item Code (Sunbright Quotation) Work Description Subcontractor Invoices Amount stated in Tax Invoices (Excluding GST)
EA01A 1. Boys Projects Tax Invoice No. 3611 dated 21.06.2016 (Appendix A) 1. $18,980.00
Laminated panels not noted on the Sunbright Quotation. 1. Hang bars display 2. (One item in) Boys Projects Tax Invoice No. 3611 dated 21.06.2016 (Appendix B) 2. $ 2,230.00 Total: $21,280.00 EA02A and EA02B Eyeware/ Watches display Cavan Glass Tax Invoice No. 4465 dated 22.05.2016 $11,800.00 EA02B EA03A Boys Projects Tax Invoice No. 3611 dated 21.06.2016 (Appendix A) $36,700.00 EA05A EA03A Foulards, Scarves, Belts and Ties Display Boys Projects Tax Invoice No. 3611 dated 21.06.2016 (Appendix A) $6,650.00 EA04B Extraclear Glass Display Boys Projects Tax lnvoice No. 3611 dated 21.06.2016 (Appendix A) $4,660.00 EA04B-SP Boys Projects Tax Invoice No. 3611 dated 21.06.2016 (Appendix A) $25,730.00 EA04B-SP Boys Projects Tax Invoice No. 3611 dated 21.06.2016 (Appendix A) $10,880.00 FR08D Fitting Room Boys Projects Tax Invoice No. 3611 dated 21.06.2016 (Appendix A) $6,820.00

The amounts in this table total $124,520.

Armani did not call into question the correlation exercise performed by Valmont as reflected in the above table although it was given an opportunity to do so by way of supplementary submissions.
Valmont vacated the site in September 2016, amidst a continuing dispute between the parties over payment in relation to a number of items as well as in relation to various alleged defects.
On 24 March 2017, as admitted on the pleadings, Valmont claimed payment from Armani in the sum of $188,696.81 in respect of the joinery works.
It was also admitted on the pleadings that, at the time of commencement of proceedings, Armani had paid Valmont 90% of the contract sum, that is to say $890,829 of the contract sum of $989,810.

The proceedings

On 20 June 2017, Valmont commenced proceedings in the District Court of New South Wales seeking damages for breach of contract or, alternatively, quantum meruit. The amounts claimed comprised a number of separate components including the balance of the contract sum, payments in respect of what were alleged to be a number of variations and payments in respect of the joinery. As will be seen, the joinery claim was made in a number of alternative ways. Armani cross-claimed seeking damages for breach of contract for work performed by Valmont that it claimed was defective.
The specific claim in respect of joinery was contained at [118]-[122] of Valmont's Further Amended Statement of Claim as follows: "118. The Quotation identified joinery as a provisional sum item in the sum of $354,000. 119. The actual costs incurred by Valmont in respect of the joinery was $525,542.55. 120. On 24 March 2017, Valmont claimed payment from [Armani] in the sum of $188,696.81 in respect of the joinery works. 120A. The Details to the Contract provided that [Armani] was to provide Valmont with the joinery for the Fit-Out Works. 120B. [Armani] did not provide Valmont with all joinery for the Fit-Out Works and directed Valmont to supply the joinery which was not provided by [Armani]. Particulars Email from Camilla Brown of [Armani] to Marcel Zalloua of Valmont sent 1 February 2016 at 3.43pm. 121. In the event that the Court determines that: (a) joinery was a provisional sum item, Valmont is entitled to payment of $188,696.81, being the difference between the actual costs incurred in respect of joinery and the provisional sum amount for joinery; or (b) alternatively, the supply of joinery was a variation to the Contract, or (c) alternatively, the supply of joinery was out of Contract works. Valmont is entitled to payment of $578,096.80, being $525,542.55 in respect of direct costs incurred for the supply of Joinery which was additional to or a variation to the work specified in the Contract plus 10 percent in accordance with clause 15.5 of the Contract. 121A. [Armani]: (a) had actual knowledge that the joinery works as they were being done by Valmont (b) knew that the joinery works were outside of the Contract; and (c) knew that Valmont expected to be paid for the joinery works. 121B. In the premises, [Armani] agreed to pay Valmont reasonable remuneration for undertaking the Additional Works. Particulars The contract is inferred from the conduct of the parties 122. [Armani] has failed to pay either of the above amounts to Valmont in breach of the Contract, or alternatively the Contract and the Collateral Contract, or otherwise." (emphasis in original)
Something should be said at this juncture in relation to the figure of $578,096.80 referred to in [121] of the Further Amended Statement of Claim, noting that it significantly exceeded the claim for $188,696.81 which had been made in respect of the joinery on 24 March 2017: see [58] above. No part of the evidence that was contained in the appeal books disclosed any attempt on Valmont's part to prove that it had incurred costs amounting to $578,096.80 in respect of the supply of joinery or the balance of the joinery that Sun Bright was to have supplied. True it is that some invoices were referred to by Mr Zalloua in his first Affidavit which were said to relate to joinery costs, although no attempt appears to have been made at first instance to relate particular aspects of these invoices to the joinery that Sun Bright was to have supplied but which Valmont was directed to source on 1 February 2016. That was the point and purpose of the direction made in this Court, as noted at [55] above, for this exercise to be done.
Armani denied Valmont's claim in relation to joinery costs in its Defence. In particular, it relied upon cl 15 of the works contract (see [20] above) and maintained that cl 15.2 operated as a release by Valmont of any claim (which included a claim to quantum meruit) in relation to the joinery. Armani did not claim that Valmont did not supply it with joinery that, under the works contract, was originally to be supplied (through Sun Bright) and paid for by Armani.
By way of Reply, Valmont contended that Armani was estopped from relying on cl 15 of the works contract. It relied upon a number of matters in support of its claim including:

the fact that, in relation to early variations to the façade works, the cl 15 procedure was not followed and Ms Brown simply approved the additional works in question by informal email without any reference to that clause: see [29]-[30] above;
the statement in the email of 17 May from Ms Brown to Mr Zalloua that Armani was "happy to agree" upon further payment to Valmont for additional work or variations under the works contract upon completion of the works, and the fact that there was no stipulation in this email of any requirement for strict compliance with cl 15 as a requirement for such additional payment: see [43] above; and
Armani's apparent confirmation on 18 May 2016 to Valmont that there would be "extra moneys" made available for additional work or variations under the works contract, and the fact that there was also no stipulation in this email of any requirement for strict compliance with cl 15 of the works contract for such extra payment: see [47] above.

Armani countered this estoppel claim in a Rejoinder which placed heavy emphasis upon the emails from Ms Brown to Mr Zalloua of 11 April 2016 (6.24pm), 13 April 2016 (7.48pm), 14 April 2016 (10.26am) and 18 May 2016 (1.51pm): see [32], [36], [38] and [47] respectively above.
Following a trial heard over six days, the primary judge entered judgment for Valmont in the amount of $130,973.00 and for Armani, on its cross-claim, in the amount of $235,611.29. The judgment in favour of Valmont included an uncontested amount in relation to the unpaid balance of the contract sum together with some variation costs relating to the façade of the premises which were incurred prior to 11 April 2016. The primary judge held that these were recoverable by Valmont notwithstanding non-compliance with the cl 15 procedure. To this effect, his Honour held that Armani was estopped from denying Valmont's entitlement to these costs up to 11 April 2016. The primary judge effectively held that the estoppel ceased to run and indeed came to an "abrupt halt" after 11 April 2016: PJ [106].
His Honour rejected Valmont's claim that the joinery works were "out of contract" (PJ [46]-[47]), noting that: "46 Valmont's argument relies on the summary of the decision of the High Court in Liebe v Molloy [1906] HCA 67; (1906) 4 CLR 347 by Justice Priestley in Update Constructions Pty Ltd v Rozelle Child Care Centre Ltd (1990) 20 NSWLR 251 at 272: 'The High Court ... said (at 354), that if the proper inferences from the facts were (i) that the employer had actual knowledge of the extra works as they were being done, (ii) knew that they were outside the contract and (iii) knew that the builder expected to be paid for them as extras then a contract to pay for them could properly be implied. ...' 47 Importantly, the Court in Liebe explained further (at 354): '... Such an implication of course arises from an express request to do work made under such circumstances as to exclude the idea that the work was covered by a written contract. ...'"
The primary judge held, however, by reference to the breadth of the definition of "Direction" as used in cl 15, that "any direction given by Armani that related to the subject matter of the contract (i.e. the fit-out of the EA retail store at the Sydney International Airport) was intended to come within the scope of the written contract": PJ [49]. Subject to Valmont's estoppel argument, the primary judge took the view that the broad terms of cl 15, and Valmont's non-compliance with it, had the effect of precluding Valmont's "variations" claims which included that made in respect of the joinery.
The primary judge upheld the estoppel argument but, as has already been noted at [68] above, only up until 11 April 2016. His Honour said that, whatever had been the position as to variations which had not followed the cl 15 procedure up to that date, it came to an "abrupt halt following Ms Brown's email of that day": PJ [106]. This in substance meant that Armani could not rely upon the non-compliance with cl 15 to defeat Valmont's variation claims up until 11 April 2016 but could do so thereafter. As the joinery work for which a claim had been made was undertaken, in his Honour's view, "almost exclusively … after 11 April 2016" (see PJ [139]) without the cl 15 procedure being followed, his Honour held that it was not recoverable because Valmont was not entitled to assume that additional works would be paid for after that date without fulfilling the requirements of cl 15.

The Notice of Appeal

The Notice of Appeal filed by Valmont raised eight discrete grounds of appeal, which were classified under of the following three headings: 1. "[e]stoppel in relation to clause 15 of the Contract"; 2. "[t]he respondent's claim for defective work in relation to the hanging rail height"; and 3. "[t]he respondent's claim for defective work in relation to the display cabinets".
Grounds 1-6, which related to an estoppel in respect of joinery costs, were as follows: "1 The Court below erred in law in determining that the respondent could resile on and from 11 April 2016 from its representation or encouragement to the appellant that it would be paid for variation work without strict compliance with clause 15 of the Contract in circumstances where: (a) The respondent had induced a belief or assumption on the part of the appellant that it would be paid for variation work without strict compliance with clause 15 of the Contract as determined by the Court below in paragraph [137] of the reasons for decision below; (b) The appellant carried out variation work on the basis of the belief or assumption identified in sub-paragraph (a) above as determined by the Court below in paragraph [137] of the reasons for decision below; and (c) As at 11 April 2016, the appellant had commenced the joinery variation work. 2 The Court below erred in misconstruing the email of 11 April 2016 from the respondent to the appellant referred to in paragraph [109] of the reasons for decision below as conveying a representation to the effect that the appellant would only be paid for variation work if there was strict compliance with clause 15 of the Contract. 3 The Court below erred in determining that Mr Zalloua of the appellant knew that the appellant would not be paid for the joinery variation work without written confirmation by reference to Mr Zalloua's email of 14 April 2016 (referred to in paragraph [113] of the reasons for decision below) in circumstances where Mr Zalloua's email sought written confirmation in relation to the façade variation works. 4 The Court below erred in law determining whether the respondent was estopped from insisting on strict compliance with clause 15 of the Contract by reference to the Mr Zalloua's subjective understanding of the provisions of the Contract (as indicated in paragraph [115] of the reasons for decision below) in circumstances where the relevant issue for determination was whether the Respondent had induced or encouraged, or acquiesced in, a belief on the part of the appellant that the respondent would not insist of strict compliance with clause 15 of the Contract. 5 The Court below erred in failing to have regard to communications after 11 April 2016 in determining whether an estoppel operated to prevent the respondent from insisting on strict compliance with clause 15 of the Contract. 6 In the event that the Court below was correct in determining that no estoppel operated to prevent the respondent from insisting on strict compliance with clause 15 of the Contract after 11 April 2016, the Court below erred in failing to determine the portion of the joinery variation work which was carried out before 11 April 2016 and to award any amount to the appellant in respect of work carried out before 11 April 2016."

Grounds 1-6 - joinery costs

The starting point for analysis is the primary judge's unqualified findings that Armani directed or instructed Valmont to supply the joinery items which Sun Bright had indicated it would not supply (PJ [21] and [95]), and that this direction or instruction was not a direction in accordance with cl 15.1 of the works contract: PJ [95]. In this context, it may be recalled that cl 15.1 required any written direction to state that the direction was being issued pursuant to cl 15. This was not merely a formal requirement but was important because such a direction imposed a negative obligation on Valmont, namely not to perform the variation until its price and the effect on the construction program had been confirmed in writing.
Although the primary judge held that the direction given by Ms Brown to Valmont on 1 February 2016 to supply the balance of the joinery was not a direction in accordance with cl 15.1 of the works contract, it is implicit in his reasons that this direction was a "purported Variation" within the meaning of cl 15.2 of the works contract, and that this was so notwithstanding that the works contract identified that joinery as a "Client Supply Item". The consequence of this was that if Valmont considered that the instruction was a variation within the meaning of the works contract, it was obliged to issue a notice under cl 15.2 to Armani within five business days, and that, if such notice was not provided, Valmont "release[d] and waive[d] any entitlement it may have to a Claim against [Armani] in connection with, or arising from, the purported Variation".
There was no challenge on appeal to what must have been at least implicit in the primary judge's acceptance of Armani's defence of release and waiver, namely that Valmont "considered", at the time it was made, that Ms Brown's instruction of 1 February 2016 that Valmont supply the balance of the joinery was a "Direction" within the meaning of the works contract, thereby engaging cl 15.2.
As noted at [70] above, the logic of the primary judge's reasoning that Armani was estopped up until 11 April 2016 from relying upon the legal effect of cl 15.2 in relation to what was characterised as the "claimed variations" supports appeal ground 6 insofar as it can be shown that the primary judge erred in his conclusion that almost all of the joinery costs had been incurred after 11 April 2016. His Honour appeared to base this conclusion on the invoices relied upon by Valmont. He referred in this context to a number of invoices issued by subcontractors to Valmont in June 2016. His Honour did not refer to Invoice 3597 for $150,000 from Boys Projects, which was dated 23 May 2016, was said to relate to work undertaken in the period 1 April 2016 to 23 May 2016 and which had been referred to by Mr Zalloua in his first Affidavit: see [48] above.
The primary judge's factual conclusion as to the date of the joinery work was challenged in Valmont's written submissions on appeal as follows: "The date of an invoice is not a sound basis for determining the date of the performance of the work to which the invoice relates. As Valmont was entitled to rely upon an equitable estoppel in relation to work performed before 11 April 2016, his Honour erred in failing to determine the portion of the joinery variation work which was carried out before 11 April 2016."
Whilst as a matter of logic it is correct that the mere date of an invoice does not determine in any precise sense the date(s) on which the work to which the invoice related occurred, in the case of Boys Projects' Invoice 3611, it was accompanied by a Subcontractor's Statement that the work to which the invoice related was carried out in the period from 24 May 2016 to 21 June 2016. Although one of the Appendices to the invoice (Appendix A) was a separate invoice for $178,930, the actual tax invoice issued by Boys Projects only included an amount of $28,930 in respect of Appendix A. As explained and for the reasons given at [52] above, this was because $150,000 worth of the work to which Appendix A referred was the subject of Invoice 3597 which was accompanied by a Subcontractor's Statement to the effect that it applied to work performed between 1 April 2016 and 23 May 2016. The inference therefore is that some of the $150,000 the subject of invoice 3597 was incurred prior to 11 April 2016.
It was not however possible from the material before the Court on the hearing of the appeal to ascertain the extent of the particular joinery work that was undertaken prior to 11 April 2016 and the value of that work. What can be said, however, is that consideration of Invoice 3597, read together with Appendix A, calls into question the correctness of the primary judge's statement at PJ [139] that the joinery work in respect of which Valmont made its claim was "almost exclusively performed after 11 April 2016."
As to when the work to which the invoices that were in evidence related was performed, and whether this was before or after 11 April 2016, the date of the invoice(s) does not of itself say anything to resolve this issue. On the one hand, it may be expected that tradespeople working on providing the joinery would issue their invoices as soon as possible after the work had been done. This consideration would support an inference that the work was undertaken shortly before the dates in late June 2016 on which the invoices were issued. On the other hand, the proximity of the invoices to the end of the financial year may suggest that the invoices were issued at that time so that payment would be made in the following financial year, thus reducing the trade's income for the financial year ending 30 June 2016 (assuming that accounts were being prepared on a cash rather than accruals basis).
Ultimately, for reasons which are expressed more fully below, it is not necessary to determine when the work in relation to the joinery was undertaken because, contrary to the primary judge, I consider that the estoppel which precluded reliance by Armani on cl 15.2 continued to operate, at least as far as the joinery was concerned, after 11 April 2016 and did not come to an "abrupt halt" as at that date. Ms Brown's email on that day did not displace an assumption that had been induced by Armani that Valmont would be compensated for the cost of supplying the balance of the joinery. This was joinery that Armani had insisted on supplying itself (and then promised to do so) but which it ultimately could not supply because of the position taken by Sun Bright on 1 February 2016.
The subject matter of the email correspondence of 11 April 2016 upon which the primary judge placed such reliance in reaching his conclusion as to the extent of the estoppel relied upon by Valmont did not relate to the joinery at all. This correspondence, and the variations to which it related, principally concerned work to be done to the façade of the premises. To the extent that other matters were dealt with, they did not involve, or relate to, joinery.
It is not difficult to see how an estoppel may have ceased to operate in the context of claims for additional payments in relation to the façade of the premises. Valmont had sought Armani's express written approval in relation to that work and, although approval had been given for some variations on 16 March 2016, Armani had declined to give the approval sought on 11 April 2016 in relation to the more extensive variation schedule. The correspondence of 11 April 2016 shows that Ms Brown evidently considered that the work for which variations were being claimed was within the scope of a fixed price contract and that no further amounts would be paid for it. Valmont was plainly at risk of incurring costs in relation to that work performed thereafter.
Ms Brown's statement in her email of 6.24pm on 11 April 2016 (see [32] above) that "[t]here are no variations on this project" implicitly conveyed her understanding that Armani's instruction of 1 February 2016 to Valmont to supply the balance of the joinery was not in fact a variation but a separate, extra-contractual request to Valmont to supply those items. This was reinforced by her statement that "it is a lump sum amount which covers the project" (emphasis added). The lump sum amount she was referring to was the contract sum and the project was one in which Armani was to supply the joinery through Sun Bright, having rejected Valmont's earlier offer to include it in its own contractual obligations: see [12]-[14] above.
Valmont, having received such a direction (which did not purport to be issued under cl 15 of the works contract) was entitled to expect to be paid for the supply of the balance of the joinery unless and until it was disabused of that reasonable understanding. These were commercial parties and Valmont was not a charity. In the context of the balance of the joinery being items which Armani had undertaken to pay for under the works contract, it would have been commercially irrational for Valmont to incur and to continue to incur liabilities to the subcontractors who performed the fabrication work had Valmont been of the understanding that Armani would not pay for the joinery. That it continued to incur these liabilities after 11 April 2016 demonstrates that it was not of that understanding.
The email correspondence of 11 April 2016 did not make it clear to Valmont expressly or by necessary implication that Armani, having instructed Valmont to supply the balance of the joinery which it was Armani's contractual obligation to supply, no longer intended to pay for that joinery, either because of non-compliance by Valmont with cl 15.2 or for any other reason. It was incumbent on it to do so had this been its intention.
In this context, Valmont referred to and relied upon the following observation of Gaudron J in Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 at 462-463; [1988] HCA 7 (Waltons Stores) where her Honour said: "Whatever the actual knowledge or belief of the appellant as to the state of mind of the respondents once it came to the appellant's knowledge that demolition work had commenced it ought then to have been aware that there was a real possibility or likelihood that the respondents had commenced work in the reasonable expectation that exchange would take place. That being so, the appellant came under a duty to inform the respondents that the situation had materially changed. An expectation by the respondents that exchange would take place was eminently reasonable in the light of all the facts known to them. … Whatever may have caused the respondents to make their assumption that exchange had taken place, the evidence clearly supports the inference that the failure of the appellant to inform them that its attitude had changed was a proximate cause of their adopting and acting upon the faith of that assumption. Indeed such a finding is implicit in the finding of Kearney J. that 'by the [appellant's] action in doing nothing to complete the exchange the [respondents] were lulled into a sense of false security'." (emphasis added)
This passage was referred to with approval by the Full Court of the Federal Court of Australia in S & E Promotions Pty Ltd v Tobin Brothers Pty Ltd (1994) 122 ALR 637 at 653-656 and by a majority of the Full Court of the Supreme Court of South Australia in Mortgage Acceptance Nominees Ltd v Australian Thoroughbred Finance Pty Ltd (1996) 69 SASR 302 at 307.
The duty referred to by Gaudron J in Waltons Stores, namely, to inform a party labouring under a particular assumption that the basis for that assumption had "materially changed", is one which must be discharged clearly. Unless there is a sufficiently clear communicated correction or a withdrawal of the basis for an assumption which has been made by another party, considerations of conscience may dictate that an estoppel based upon that assumption has continuing effect.
In its written submissions, Armani pointed out that other members of the Court in Waltons Stores did not use the language of "duty" as employed by Gaudron J. So much may be accepted but the use by her Honour of the term "duty" in the passage extracted above does not seem to me to be critical to the point that was being made, namely that there had been no communication to the respondents in that case as to the appellant's change of attitude. In any event, Armani's own written submissions in this Court at [22] were expressed in the language of obligation: "[i]n promissory estoppel it is Armani's knowledge of the potential for Valmont to incur detriment if it remains silent that may impose on Armani an obligation to speak" (emphasis added).
The need for clarity if an assumption as to a state of affairs is to be departed from also accords with the need for reasonable notice to be given of an intended departure: Commonwealth v Verwayen (1990) 170 CLR 394 at 442; [1990] HCA 39. Where the departure from an assumption has not been flagged in sufficiently clear terms to the party who was acting in accordance with it, continuing reliance upon that assumed state of affairs may well lead to detriment which, as a matter of conscience, equity will not permit to be visited upon or to remain with the party who has not been sufficiently clearly disabused of the intended departure. In Fels v Rural Bank [2020] WASCA 151 at [39], the Western Australian Court of Appeal observed that "whether giving notice of a departure from an assumed state of affairs will avoid a conclusion of unconscionability depends on all the circumstances of the case." Those circumstances will include the clarity with which the notice of a departure has been given.
Contrary to the submissions of Armani and the view of the primary judge, I do not consider that Ms Brown's email of 11 April 2016 was sufficiently clear to have had the effect that it was no longer reasonable for Valmont to assume that Armani would meet the cost of the balance of the joinery which it had requested Valmont to supply. This was principally because that email and those to which it responded did not refer to or address the topic of the joinery. Rather, it was sent in the context of variations to the façade in relation to which approval had been sought. The topic of joinery, and who was to pay for it, was simply not addressed by Ms Brown. Still less was there any statement that Armani would not pay for the additional joinery and expected Valmont to do so.
That Ms Brown's 11 April 2016 email was understood by Mr Zalloua as relating only to the façade works may be seen in his email of 5.00pm on 12 April 2016 (see [33] above) where he said "We require approval of the remaining variations for the façade design prior to these works being completed" (emphasis added). None of the variations in respect of which approval was sought and which were attached to this email related to joinery works.
Moreover, it was implicit in Ms Brown's (incorrect) assertion in the 11 April 2016 email that the works contract did not allow for variations that she did not consider that Armani's direction on 1 February 2016 that Valmont supply the balance of the joinery was a variation. That mistaken view of the works contract did not implicitly convey that Armani no longer agreed to cover the additional cost to Valmont of supplying the joinery which Armani had contractually undertaken to provide; alternatively, if it did, it did not do so with the requisite clarity. Nor, contrary to [27] of Armani's written submissions and at least as far as the supply of joinery was concerned, did Ms Brown's 11 April 2016 email convey that Armani intended to revert to its strict rights under cl 15. Insofar as it asserted that there were no variations under the contract, that email showed that Ms Brown had no understanding or appreciation of cl 15 of the works contract at all.
The fact that the email of 14 April 2016 showed that Mr Zalloua was aware of cl 15 does not, contrary to the primary judge's view, demonstrate that he understood that the 1 February 2016 direction or instruction by Ms Brown that Valmont supply the balance of the joinery fell within the reach of that clause. Indeed, had he held that understanding on or around 11 April 2016, that would not have availed him as cl 15.2 required Valmont to issue a cl 15 notice within five days of Armani issuing its direction. In doctrinal terms, this meant that the detriment that Valmont sustained by not giving the requisite notice under cl 15.2 when it was requested to supply the balance of the joinery could not have been reversed or arrested as at 11 April 2016 because, by that time, it was too late contractually to issue the cl 15.2 notice.
This fact also answers Armani's contention (at [30(b)(ii)] of its written submissions on appeal) that it was unreasonable for Valmont not to utilise cl 15 after 11 April 2016. It could not have done so effectively because the notice that was required to be issued in respect of "purported Variations" had to be issued within five business days of that purported Variation having been made: see cl 15.2 of the works contract.
There was also irreversible detriment to Valmont because it may readily be inferred that, even if invoices had not been issued to it by subcontractors in relation to joinery prior to 11 April 2016, Valmont is likely to have incurred liability to pay for the joinery prior to that date. As noted by reference to the Gantt chart of 12 April 2016 noted at [35] above, the installation of joinery was scheduled to have commenced prior to 11 April 2016. The premises opened for business three weeks later.
The fact that, on the evidence, Valmont never sought Armani's written approval to supply the balance of the joinery, in circumstances where it did seek approval in respect of other work in relation to the façade, is consistent only with Valmont proceeding on the assumption that Armani's approval was not required because that approval was implicit in its original instruction to Valmont to procure the joinery.
There is also force in Valmont's criticism of the primary judge's failure to refer to the correspondence of 17 and 18 May 2016 which it had relied upon as part of its estoppel claim in its Reply: see appeal ground 5 at [76] above. Those emails, it will be recalled, contained statements by Ms Brown that "[t]he result is we are happy to agree upon additional payment on the project but we would like this to be addressed upon completion of works" and that "I have said in a previous email discussion and confirmation of extra moneys for the project will come at the end": see at [43] and [47] above.
These emails constituted further encouragement to Valmont that additional payments in respect of the joinery work would be made. These encouragements came at a time when the new premises were open but further work was still being done. If Armani is correct in its submission that a large part at least of the claimed joinery costs were incurred after 11 April 2016, they were incurred in a context where, as the string of emails on 17 and 18 May 2016 show, Armani was positively encouraging Valmont to complete outstanding works in relation to essential joinery which Armani knew that it had originally undertaken to procure from Sun Bright.
It was in all the circumstances unconscionable for Armani to resist payment for the provision of that joinery, and the primary judge should have so held. The estoppel precluding Armani from relying on cl 15 which his Honour found ceased to operate on 11 April 2016 continued, as far as the subject of payment for the joinery was concerned, after that date.
It follows that Armani could not rely on cl 15 as releasing or waiving Valmont's claim in relation to the joinery.
A question remains as to the value of that claim, bearing in mind that this Court is exercising jurisdiction under s 75A of the Supreme Court Act 1970 (NSW). Section 75A(10) authorises this Court to make any finding or assessment, give any judgment, make any order or give any direction which ought to have been given or made or which the nature of the case requires.
Valmont seeks payment in the sum of $229,718, being the sum assessed by the primary judge by reference to an adjusted third party quotation and expert evidence: see [74] above.
I have real reservations about awarding this sum in circumstances where the primary judge was rightly critical of the fact that, apart from the invoices, there was no evidence of precisely what work was done by Valmont as far as the joinery was concerned, and the figure also indirectly incorporated a component for installation which Valmont had no entitlement to claim: PJ [100]. No explanation was proffered as to why this was. The figure of $229,718, moreover, exceeded by a considerable amount that which had been claimed by Valmont in relation to the additional joinery prior to commencement of the proceedings: see [58] above.
The exercise carried out by Valmont's legal representatives as reflected in the table produced at [55] above, which matches the actual invoices relied upon by Valmont with items for which responsibility was effectively assigned to Valmont by Armani through the annotated PDF Quotation, discloses joinery costs of $124,520.
As noted at [56] above, Armani was given the opportunity to respond to this exercise but devoted its supplementary written submissions to the issue as to whether joinery costs were incurred prior to or after 11 April 2016. In my opinion, Valmont should be awarded $124,520 as reflected in the invoices in respect of the joinery costs that were in evidence and which could be related to the PDF Quotation.

Ground 7 - hanging rail height defect

This issue was dealt with by the primary judge briefly at PJ [213]-[214] as follows: "213 The hanging rails in issue were supplied by Sun Bright and installed by Valmont. There is no issue that they contained incorrect pre-drilled holes that resulted in the shelf height being incorrect. It may be that the origin of this item was not Valmont's fault: it was not required to, and did not, supply the hanging rails. However, its obligation was to install the hanging rails so that they complied with the drawings that formed part of the contract, as varied by the later drawings. In those circumstances, Valmont should have taken sufficient care on installation to ensure that there was no discrepancy in shelf height between the drawings and the rails as constructed. For that reason, the responsibility for the defect lies with Valmont. 214 There is no issue that the reasonable cost of repairing the defect was $13,329.20 or that 24% should be allowed for preliminaries. The total for this defect is $16,528."
Appeal ground 7 was as follows: "The Court below erred in determining in paragraph [213] of the reasons for decision below that the appellant should have taken sufficient care in relation to the pre-drilled holes in the hanging rails in circumstances where the Court could not identify any action, or further action, which the appellant could have taken in relation to this defect."
Valmont noted that neither party's civil construction expert had identified any steps which Valmont could reasonably have taken to rectify this defect. It referred in this context to the statement of Gummow J in Pyrenees Shire Council v Day (1998) 192 CLR 330; [1998] HCA 3 at [166], relying on the judgment of Isaacs ACJ in Metropolitan Gas Co v City of Melbourne (1924) 35 CLR 186 at 194; [1924] HCA 46, that "no conclusion of negligence could be arrived at until, first, 'the mind conceives affirmatively what should have been done'".
Armani did not cavil with the primary judge's finding that the defect in the height of the hanging rail did not arise through any fault of Valmont. However, it submitted that the question of reasonable care was irrelevant in view of the warranty given by Valmont at cl 4.1 of the works contract which was in the following terms: "4. Materials, Workmanship and Utility Services 4.1 The Contractor warrants that the Works, all materials and the standard of workmanship used in the Works will: (a) be fit for the Intended Purpose; (b) be in conformity with the provisions of the Contract and be new; (c) be in accordance with best industry standards and practices; and (d) comply with the requirements of all Legislative Requirements, unless otherwise specified in writing."
The defect required a replacement hanging rail with holes drilled at the appropriate height. The defect identified by the primary judge was not in substance one of installation but related to the joinery that had been supplied by Armani, through Sun Bright. The installation of the rail at the wrong height was not defective because of the installation but defective because of the manufacture of the joinery by Sun Bright.
In my opinion, Valmont's objection should be sustained and Armani's reliance on cl 4.1 rejected. This is because the definition of "Works", although broad, was nevertheless confined to the "works required to be performed by the Contractor": see [21] above. Those works did not extend to the supply of joinery by Armani through Sun Bright. If the defect was in the joinery that Sun Bright supplied, Valmont could not be made responsible for that defect by cl 4.1 of the works contract.
Armani's judgment on its cross-claim should therefore be reduced by $16,528.

Ground 8 - display cabinets defects

Appeal ground 8 challenged the primary judge's finding that Valmont was liable for defective work in the installation of display cabinets in the new store and was as follows: "The Court below erred in determining in paragraphs [221] and [222] of the reasons for decision below that the appellant was liable for the defects in the display cabinets in circumstances where: (a) the supply of the cabinets was not within the appellant's scope of work; and (b) no direction as issued in relation to the cabinets which complied with clause 15.1 of the Contract (as determined by the Court below in paragraph [61] of the reasons for decision below) so as to bring the supply of the cabinets within the appellant's scope of work."
This defect related to four glass display units located at the rear of the store. Having conducted a comparison against the relevant contract drawings, Mr Zakos (the expert engaged by Armani) noted the following issues with the display cabinets (PJ [217]): "the drawings required the shelves to be made of glass but perspex shelves were installed; there should have been black coloured edges but there were not; and the dimensions of the cabinet are wrong."
The primary judge held that Valmont was liable in relation to this defect in the sum of $51,288.38 and in my opinion was correct to so hold. Unlike the hanging rails the subject of appeal ground 7, the display cabinets, although originally to have been supplied by Sun Bright, were in fact supplied by Valmont. They were required to be supplied by Valmont as a result of Ms Brown's instruction of 1 February 2016, and this instruction brought them within the scope of "Works" for the purposes of the works contract and thus attracted the warranty provision in cl 4.1.
Appeal ground 8 should therefore be rejected.

Conclusion

The orders made by the primary judge were as follows: 1. Judgment for the plaintiff in the amount of $130,973.00. 2. Judgment for the defendant on the cross-claim in the amount of $235,611.29. 3. The plaintiff to pay 50% of the defendant's costs as agreed or assessed.
The result of my conclusions is that there should be judgment for Valmont in the sum of $255,493 (being the amount originally awarded plus $124,520) and that Armani's judgment on the cross-claim should be reduced by $16,528 to $219,083.29.
In my view, Armani should be ordered to pay Valmont's costs of the appeal. My present view is that there should be no order for costs at first instance on the basis that the parties had broadly equal success. The parties will, however, be given leave to file any submissions of no more than 3 pages each within 7 days if an order as to costs at first instance is sought by either party, with any reply to be filed within a further 7 days.
Accordingly, the orders I propose are as follows: 1. Appeal allowed with costs. 2. Set aside the orders of the primary judge and in lieu thereof, make the following orders: 1. Judgment for the plaintiff in the amount of $255,493. 2. Judgment for the defendant on the cross-claim in the amount of $219,083.29. 1. Leave be granted to both parties to file any submissions of no more than 3 pages each within 7 days if an order as to costs at first instance is sought by either party, with any reply to be filed within a further 7 days.
MACFARLAN JA: I agree with Bell P.
LEEMING JA: I agree with Bell P.

Annexure (appendices A-C Boys Projects Invoice 3611) (603902, pdf) 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: 19 May 2021

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