Yisheng Construction Pty Ltd v City Garden Australia Pty Ltd

JUDGMENT

1. MEAGHER JA: I have had the advantage of reading Basten AJA's judgment in draft. I agree with his Honour's reasons and proposed orders.
2. MITCHELMORE JA: I agree with Basten AJA.
3. BASTEN AJA: The appellants, Yisheng Construction Pty Ltd (YSC) and Yisheng Air Con Pty Ltd (YSA), were subcontractors on a major residential development at North Rocks. In mid-2019 the builder encountered financial difficulties, as a result of which a number of payment claims lodged by subcontractors were not met. The respondent, City Garden Australia Pty Ltd (City Garden), which was the owner and developer of the site, intervened when the subcontractors threatened to suspend work on the site until the outstanding payment claims were met. On 20 September 2019, a site meeting was held at which a principal of City Garden undertook to meet the outstanding claims and pay for future work.
4. By April 2020, the appellants had completed work on the site. However, they asserted that not all outstanding and further payment claims had been met and, on 19 May 2020, the appellants sent a letter of demand to City Garden.

Procedural background

1. On 24 June 2020, the appellants (as plaintiffs) commenced proceedings in the Equity Division, Technology and Construction List, seeking damages from City Garden. Their claim was put in two ways, namely an enforceable contractual arrangement based on representations made both prior to and at the site meeting on 20 September 2019, and a promissory estoppel precluding City Garden from denying its obligation to make payments to the subcontractors, who in reliance on the representations, resumed work following the meeting.
2. The trial judge, Ball J, accepted that a contractual claim had been made good and, if it were necessary, that the plaintiffs were entitled also to rely upon promissory estoppel. The form of the contractual undertaking accepted by the trial judge did not include the implied term pleaded and contended for by the plaintiffs (see [16] below). That term was rejected on the basis of the inconsistency with the express term. However, when it came to assess damages, the judge found that the plaintiffs had failed to establish that there were amounts payable on the basis claimed in their pleadings, or based on the way the case was run at trial. He therefore dismissed the proceedings. [1]
3. Although the appellants' notice of appeal originally challenged an aspect of the basis on which the judge upheld liability, that ground was not pressed. Indeed, as senior counsel accepted, the case presented in written submissions was not directed to the 13 grounds in the notice of appeal, but rather sought to establish three propositions, namely that the trial judge erred in (i) determining the basis upon which the amounts payable under the agreement could be calculated, (ii) finding that the appellants had failed to prove that any amount was due to them under the agreement, and (iii) failing to adopt the appellants' approach to the quantification of their claim, using payment schedules provided by the builder and deducting amounts paid into the appellants' bank accounts.
4. In the event that the appeal was successful, the first appellant (YSC) sought a judgment against the respondent for $667,140 or such other sum as the court may determine; the second appellant (YSA) sought a judgment against the respondent for $113,255, or such other sum as the court might determine. In the alternative, the appellants sought a remittal to the Equity Division for assessment of damages.
5. For the reasons set out below, the appeal should be allowed and the judgment below set aside. There was extensive evidence presented to the trial judge upon which the claims could be assessed. Written and oral evidence was provided by key witnesses and the judge made sufficient findings as to their reliability and credibility to allow this Court to determine the appropriate awards. The Court is well-placed to form its own view as to the quantum of the damages sought. Accordingly, as the matter can be disposed of finally by this Court, that should be done.

Trial judge's findings

1. Before addressing the manner in which the trial judge dealt with the question of loss, it is convenient to set out the findings as to the contractual agreement between the appellants and the respondent. In doing so, it is also convenient to refer to the proposed implied term which the judge rejected as inconsistent with the terms of the express agreement in order to identify the practical significance of the inconsistency as that bore upon the reasoning of the judge in finding that the case relied on in final submissions departed from the case as pleaded and as opened by the plaintiffs at trial.
2. The sole director of both appellants was Fei Biao Ji (referred to in the judgment by his English first name, Billy). Although he gave approval for key steps, such as the suspension of work, he had limited direct involvement in the events in dispute. Mr Ji gave evidence, but it was not critical to any finding made by the trial judge. The principal witness for the appellants was their assistant general manager, Dechao Liu (Leon). Mr Liu was directly involved in key events and gave detailed and extensive evidence as to the financial arrangements of the appellants with the builder and with City Garden.
3. The principals of City Garden were Jian Wei Liang (Victor) and Meng Dai (Adam). Mr Dai retired as a director of City Garden on 27 November 2019. He was at all relevant times the sole director of the company engaged by City Garden to build the North Rocks project, Ming Tian Real Property Pty Ltd (sometimes referred to as MTRP and sometimes as the builder). The principal source of evidence for the respondent was Mr Liang. Mr Dai did not give evidence.
4. The case pleaded by the plaintiffs in their Technology and Construction List Statement (List Statement), relevantly for present purposes, had three elements. The first was described as the "WeChat representation" and was as follows: "21. On 6 September 2019 City Garden told [YSC] and [YSA] that it would pay for the works undertaken in respect of the Development."
5. The second element was described as the "site meeting representation", referring to the site meeting held on 20 September 2019 and was identified as follows: "25. At the Site Meeting City Garden told the subcontractors including [YSC] and [YSA] that if work continued on the Development, City Garden would pay the outstanding amounts owed by Ming Tian in respect of the works as well as paying for the works required to complete the Development."
6. These representations were pleaded as amounting to a contractual offer from City Garden to pay the outstanding invoices and for ongoing works, which offer was accepted by the appellants by resuming work and incurring further expenses, and was referred to as the "City Garden Contract".
7. The third element was that which was described as the implied term pleading by the trial judge and read was as follows: "29. It was an implied term of the City Garden Contract that City Garden would make payment in the amounts and in the time required according to payment schedules issued by Ming Tian, or in the absence of payment schedules, according to payment claims issued by [YSC] and [YSA]."
8. After a careful and comprehensive review of the evidence with respect to the representations, including the evidence of Mr Liang, the trial judge concluded that although Mr Liang had said he checked reports prepared by the quantity surveyors appointed by the financier (Westpac), the judge was not satisfied as to what exactly Mr Liang did, and, further, was not satisfied that "payment to the subcontractors was conditional on certification by the quantity surveyors". [2] The judge then made his finding as to the terms of the agreement: "70 … Although the evidence is that [Mr Liang] said that he would pay amounts assessed by the Builder that statement must be understood in context. At the time the statement was made the position was that the Builder had entered into certain subcontracts for work necessary to complete the Development in accordance with the terms of the building contract between City Garden and the Builder. The complaint of the subcontractors was that they had not been paid the amounts properly due to them under their subcontracts for the work that they had done. I do not think [Mr Liang] could reasonably have been understood as saying that City Garden would pay whatever amount was certified by the Builder, making the Builder the sole arbiter of what was due under the subcontracts. Rather, [Mr Liang] must be understood as saying that City Garden would pay amounts that were properly payable under those contracts, relying on assessments by the Builder of the amount of work that had been done since the last claim. That left open the possibility that City Garden would not pay an amount that it did not believe was properly payable to the relevant subcontractor."
9. Some further clarification was provided in two further passages: "72 The WeChat Representation can be put to one side. On the findings I have made, the Site Meeting Representation was not made in the precise terms in which it is pleaded. Rather, what was represented was that if the subcontractors returned to work City Garden would pay the amounts properly due to them under their respective subcontracts for the work that they had done and would pay for future work in accordance with the relevant subcontract as assessed by the Builder. As I have explained, that representation did not carry with it the implication that the Builder was to be the sole arbiter of what was payable under the subcontract. Rather, assessment by the Builder was part of the process of establishing what was properly owing. … 75 On the other hand, I can see no basis for implying into the contract the term pleaded by the plaintiffs. … The pleaded implied term is inconsistent with the express representation that was made. On the findings I have made, [Mr Liang] agreed to pay amounts that were assessed by the Builder and were properly payable under the relevant subcontract. He did not agree to pay whatever was claimed by the plaintiffs in their payment claims, which is the effect of the implied term. Moreover, the plaintiffs no longer seek to advance a claim based on the payment claims. Consequently, that aspect of the implied term at least is irrelevant."
10. The relevant term of the contract was thus that City Garden would pay the amounts agreed to by the builder in its payment schedules, subject to the implied qualification (identified by the judge at [70]) that they were, in the view of City Garden, properly payable. As events turned out, as will be noted below, the implied qualification had little, if any, practical significance.

The appellants' subcontracts with the builder

1. Mr Liu provided evidence of six subcontracts entered into by YSC with the builder and one further subcontract between the builder and YSA. The contracts were subject to the provisions of the Building and Construction Industry Security of Payment Act 1999 (NSW) (Security of Payment Act), which provided, relevantly, for payment claims to be made by a subcontractor for progress payments for work undertaken under the subcontract: ss 8(1), 13. The Security of Payment Act further provided for the builder to serve a "payment schedule" in reply to a claim, indicating the amount of the payment, if any, that the builder proposed to make: s 14(1). If the builder did not serve a payment schedule in accordance with s 14, it became liable to pay the whole of the claimed amount on the due date for the progress payment to which the payment claim related: s 14(4). Where a payment schedule was served, but in an amount less than the amount of the claim, the claimant was entitled under the Act to apply for adjudication of its claim: s 17(1)(a)(i).
2. It is true that the present proceedings were not seeking to enforce rights under the Security of Payment Act. Nevertheless, the payment regime under that Act provided the context for the formation of the City Garden Contract. The Security of Payment Act provided the trigger for the creation of the City Garden Contract. Under the Security of Payment Act, the subcontractors had a right to suspend work if progress payments were not made [3] and had done so. That was why the site meeting was called.
3. The subcontracts between the appellants and the builder remained on foot and the builder's contract with City Garden also remained on foot. It was assumed that the City Garden Contract was not itself a construction contract and the subcontractors continued to serve payment claims on the builder. The builder continued to issue payment schedules. City Garden made some payments directly to the subcontractors, although payments also appear to have been made by the builder. (These arrangements had some potential for confusion as the builder, City Garden and YSC and YSA were all involved in other projects.) Importantly, if the full amounts agreed by the builder under its payment schedule were not paid by the specified due date, the right to serve a notice giving two business days' notice of an intention to suspend work would again be triggered. [4] Failure to provide a timely payment schedule would trigger the same right if the full amount claimed were not paid. [5]
4. Whether or not the agreement found by the trial judge allowed City Garden to reject claims for which the builder had issued a payment schedule, there was no evidence that Mr Liang, as the principal of City Garden, sought to exercise such a right. Nor did his evidence seek to demonstrate that claims were resisted on any basis other than prior payment. Nor was there any submission in this Court that any of the claims which had not been paid were not properly payable. The submissions focused on the evidence as to whether claims had been paid or not. That evidence will be addressed shortly.
5. Further, that fact is unsurprising. When the agreement was reached in September 2019, the two directors of City Garden were Mr Liang and Mr Dai. Mr Dai was also the sole director of the builder. It is clear from Mr Liang's affidavit that Mr Dai continued as the principal of the builder in September 2019. [6] The close relationship between the individuals and the companies made it likely that Mr Liang would, as he stated in his affidavit, rely upon Mr Dai to know whether the work for which payment was claimed had been carried out. (In that affidavit Mr Liang says that after September 2019 Mr Dai submitted payment requests for the subcontractors' invoices and would sometimes provide copies of the invoices; that he (Liang) was assisted in that task by an accountant, Monica; and that he authorised payments to be made by City Garden. [7] ) There was no suggestion in this Court that there had been a challenge at any stage to the carrying out by the subcontractors of works under the subcontracts.
6. On the basis that the evidence established that the amounts claimed, or some part thereof, had not been paid, the appellants were entitled to judgment for those amounts, subject to a procedural challenge upheld by the trial judge, and the primary focus of the appeal. It is convenient to address that issue next.

Did the appellants radically change their case at trial?

1. The primary reason for the trial judge's rejection of the appellants' claims was the proposition that the appellants had originally pleaded a different case, which had been abandoned in final submissions in favour of an alternative case which had not been pleaded and had not been run at trial. The judge identified the issue in the following passages: "79 The plaintiffs originally sought to prove the amount they then claimed by identifying specific payment claims that had not been paid, tendering a number of payment schedules issued by the Builder stating the amount said to be owing in respect of those payment claims and, where payment schedules were not available, by tendering the relevant payment claims themselves. Put in that way, the claim relied on the term said to be implied in the contract between the parties. That claim was abandoned in final submissions. 80 As I have explained, instead the plaintiffs now seek to prove different figures by proving the total amount said to have been approved by the Builder in payment schedules and deducting from that amount the total amounts paid by [sic - to?] the plaintiffs as disclosed in their bank statements. It is noteworthy that no witness has given evidence about these documents. Rather, the plaintiffs simply rely on them as business records. Put in this way, the claim raises two issues. The first is whether the plaintiffs should be entitled to amend their claim in the way they seek to do. The second is whether, even if they are, they have provided adequate proof of their claims. 81 In my opinion, the plaintiffs' claim must fail on both bases."
2. As to the first point, the change was identified in these terms: "84 … The case that was originally put was that the relevant payment schedules (in response to a payment claim) showed the amount that the Builder would allow in respect of that payment claim; and that was the amount that the plaintiffs were entitled to recover from City Garden in respect of that claim. However, the plaintiffs now seek to rely on the final payment schedules in respect of each subcontract to prove the total amount paid or payable by the Builder in respect of that subcontract …."
3. The amount claimed as payable to YSC in respect of subcontracts with the builder, including GST, was $4,703,929.16. YSC stated that the total amount paid as shown in its bank accounts was $4,036,788.40. The balance due was thus $667,140.76. The judge then stated: "86 I accept that this is a radically different case. As the claim was originally put, the task for City Garden was to satisfy itself that each payment claim on which it was sued was properly payable and then to consult its records to determine whether it had paid it. City Garden served evidence directed at those matters. As the case is now sought to be put, an essential issue is whether the sum of $4,036,788.40 is the total amount that YSC has received in respect of the Development. Until the case was put in final submissions, City Garden had no reason to investigate that question. Moreover, I accept that had it known that that was the way the case was going to be put, it would have wanted to investigate that question. That is particularly so when the plaintiffs were doing other work for the Builder, raising the question whether past payments had been properly allocated between the jobs on which the plaintiffs were working. 87 It follows that the amendments should not be permitted and the plaintiffs should not be permitted to advance the case that they now do."
4. The appellants challenged the finding of the trial judge that there had been a radical change in their case. They also complained that the trial judge had failed to explain in his reasons how he reached that conclusion. The latter complaint (as to reasons) leads to a sterile exercise: the trial judge clearly explained why he took the view that he did - the real question is whether he was correct in forming that view. That is the question which should be addressed.

The pleading

1. First, as the contractual arrangements were pleaded, and as accepted by the trial judge, City Garden promised to pay for the works undertaken by the appellants in respect of the North Rocks project. Those works were to be undertaken under the terms of the subcontracts with the builder. The subcontracts provided for work to be done for a fixed price, together with authorised variations. Although the trial judge rejected the implied term identified in par 29 of the List Statement, the question as to how the value of the work undertaken and to be undertaken was to be assessed was not in doubt. The appellants' claim, as pleaded, was that it was to be assessed by reference to the payment schedules and, in the absence of payment schedules, by reference to the payment claims.
2. The plaintiffs' pleading identified payments made by City Garden to YSC totalling $311,745.23. [8] The amount outstanding was said to be $785,683.72. [9] With respect to YSA, the pleading alleged that an amount of $120,755.06 had been outstanding on 25 May 2020, of which $20,000 had been paid by the builder on 10 June 2020, leaving a debt of $100,755.06 payable to YSA. [10]
3. In its Response, City Garden identified each of the relevant subcontracts, together with the amounts of the fixed price in each case. It identified the payments which had been made by it and pleaded a number of payments additional to those acknowledged by the plaintiffs. [11] It denied that any amount was outstanding to either of the plaintiffs. City Garden further alleged that YSC had been paid $3,635,096.26 for work done on the North Rocks project and that YSA had been paid $1,324,749.78 for work done on the North Rocks project. [12]

Evidence at trial

1. The primary evidence led by the appellants at trial was to be found in affidavits of Mr Liu affirmed on 14 October 2020, 26 July 2021 and 18 February 2022. In his first affidavit, Mr Liu identified six subcontracts entered into by YSC for (i) internal carpentry, (ii) painting, (iii) internal lining, (iv) staircase work, (v) framing work and (vi) cladding. Mr Liu gave evidence as to the details of those six subcontracts with YSC. With respect to each subcontract, Mr Liu annexed copies of "all payment schedules issued by Ming Tian (in consecutive order)" or, where a payment schedule was not issued, a copy of the payment claim. Further, in each case Mr Liu annexed the "final payment schedule". The relationship between the progressive payment schedules and the final payment schedule became a matter of some importance in determining whether there had been a change in the case presented on behalf of the appellants. It will be necessary to return to that issue. For present purposes it is sufficient to note that Mr Liu provided not only a final payment schedule, but also the individual payment schedules.
2. On 22 December 2020, Mr Liang (for the defendant) affirmed an affidavit which, amongst other matters, gave details of the payments made to YSC and YSA. Three payments identified by Mr Liang became the subject of an affidavit in response from Mr Liu dated 26 July 2021. One payment was an amount of $82,000, made by City Garden to YSA, according to Mr Liang, on 13 June 2019. It will be convenient to deal with this issue below, as it was addressed in the appeal as warranting a reduction of any judgment in favour of YSA, should the appeal otherwise succeed. As to two other payments identified by Mr Liang as having been made to YSC by City Garden, Mr Liu noted that the payments had in fact been received by YSC, not from City Garden, but from the builder, and in relation to a progress claim on two different projects, not North Rocks. He attached contemporaneous emails from the builder in support of his claim that they did not relate to North Rocks.
3. The present relevance of these disputed matters is that Mr Liang had investigated the amounts claimed by the appellants and the total payments he understood had been made by City Garden to the appellants on account of the North Rocks project.
4. As to the manner in which the matter was run at trial, the plaintiffs filed an outline of submissions on 17 February 2022 in which it stated briefly with respect to quantum: "63. The plaintiffs calculate their claim by reference to the payment schedules issued by Ming Tian, and in the absence of payment schedules, by the payment claims issued by the plaintiffs."
5. In opening, counsel for the plaintiffs (Mr Duggan) took the judge to "the relevant payment schedules" noting that there were separate schedules with respect to payment claims under each subcontract. [13] The judge asked whether it was correct that "none of these are in dispute" and was advised by counsel for City Garden that they are "all in dispute". Counsel for City Garden (Mr Pritchard SC) continued: [14] "Their case is entirely, 'here are some invoices we say we give the builder. Here are some outstanding', and list it in their evidence. 'Here's a series of documents. We say these invoices relate to those approvals.' And they haven't attempted to establish by evidence, by a quantity surveyor or otherwise, the works being claimed, works they've done or the value of them."
6. Counsel for the plaintiffs agreed that this was not a normal building case and that they were not seeking to prove, "that on a particular day we did those works and they have a particular value". [15] He continued: [16] "The upshot of that is that, in essence, our case is relatively simple, apart from the factual dispute, you add up the total of amounts assessed, and you work out from the bank statements what my clients have been paid over the course of the project, and you come to our claim."
7. Evidence was called during the rest of the first day. At the beginning of the second day, Mr Pritchard raised a procedural issue in the following terms: [17] "Your Honour, my friend and I have had a discussion this morning, and I want to bring to Your Honour's attention the following: my friend opened his case materially differently to the way the case is pleaded in relation to quantum, and he's been kind enough to do a schedule this morning."
8. The schedule that was handed up was subsequently amended and became Appendix A to the plaintiffs' closing submissions. Appendix A was as follows:
9. Mr Pritchard explained his client's position in the following terms: [18] "So as I understand, my friend says, 'No, don't worry about the pleading. Let's just look at this document, and this is how I now put my claim ... Don't worry about the invoices that we've completed on. Don't worry about what each individual contract says. Just have regard to the totality of all contracts, and the total of all contract amounts, total amounts assessed, total amounts, payments received and we'll come back to this point'. Ignore the fact that these claim statements relied on by my friend say, 'Payments made', and I'll come back to that, Your Honour, in due course, because I appreciate it's - you just can't ignore that in the case, and then he says, 'Well, the figure is now $880,000'. Now, that's not the case we came to meet. We came to meet a case based on these invoices, and the case was, I have to say, hopeless on the way it was pleaded out on the evidence before the Court, because you simply can't rely on those invoices referable to the payment of claims relied on."
10. In response, counsel for the plaintiffs stated that the case he was putting fell within the pleading, and he sought to explain why that was. He did not seek to amend the pleading.
11. In the course of closing submissions, counsel for City Garden took the judge through a number of the payment schedules which were in evidence, with respect to the separate subcontracts. After raising an issue as to the fact that a particular payment schedule relating to "framing" was dated 25 May 2020 although the claim related to work done in January 2020, counsel then turned to the summary document identified as Appendix A, [19] to explain the relationship of that figure to the final payment schedule for the "framing".
12. The main focus of the final submissions was upon the exchanges which were relevant to the issue of liability, namely whether there was a contractual arrangement between City Garden and the plaintiffs, and whether there was a promissory estoppel arising from the representation made by Mr Liang that City Garden would meet the outstanding bills and pay for future work, acted upon by the appellants by continuing to work on the project. There was little by way of elucidation in final submissions as to the supposed change in direction on the part of the plaintiffs. There were, however, further discussions as to whether the plaintiffs should amend their List Statement, which they sought to do, but only to vary the total amounts claimed. The judge rejected the proposed amendments (which reduced the amount payable to YSC and increased the amount payable to YSA to the amounts presently claimed) on the basis that the proposed amendments obscured the real change in course a shift from individual payment schedules to reliance on a calculation of the total amounts claimed and unpaid.

Did the plaintiffs change the basis of their claims?

1. The change in direction identified by the trial judge at [86] was a change from identifying each payment claim and determining whether it had been paid or not, to determining the total amount that YSC had received. Since the total amount YSC had received must have been the sum of the payment claims which had been paid, it is not easy to understand why these were two different exercises, nor how, if they were, City Garden was prejudiced.
2. The judge stated that it was not until the case was put in final submissions that City Garden had reason to investigate "the total amount that YSC has received". That was not entirely accurate, for several reasons. First, the document which became Appendix A to the closing submissions had been discussed at the beginning of the second day of the hearing. Secondly, the pleaded claim was clearly the amounts claimed less payments made, either by the builder or directly by City Garden. Thirdly, Mr Liu had undertaken that exercise in respect of each of the builder's payment schedule amounts which was said not to have been paid. Fourthly, with the benefit of Mr Liu's affidavit, Mr Liang's affidavit responded in respect of payments made by City Garden to the plaintiffs. Thus, to imply that City Garden had not identified amounts it had paid to YSC was also incorrect. Mr Liang had sought to identify with precision each payment made and the date on which it was made. Bank statements of City Garden for the relevant period were in evidence. Unsurprisingly, he totalled the amounts that he said YSC and YSA had received from City Garden.
3. The judge also noted that "[n]o attempt has even been made to prove how much has been paid in respect of each subcontract". [20] With respect, that was not correct. First, Mr Liu's first affidavit, under the heading "Debts Outstanding" (par 198) provided a summary in two columns of the amounts claimed, (identified by reference to a payment schedule) and the amounts unpaid. Each payment schedule was specific to an identified subcontract. In fact each column contained the same amounts as the other, with the exception of a particular payment schedule with respect to YSA, which identified the late payment of $20,000 (which had been referred to in the List Statement).
4. At the hearing of the appeal, senior counsel for City Garden handed up a copy of Appendix A identifying, for each subcontract, the amounts claimed to have been paid. The total of the payments to YSC was said to be $4,324,234.68. If correct, that would reduce the amount claimed ($667,140) to $287,446.28. The amounts of the previous payments were derived from the final payment schedule for each subcontract. Whether those amounts were in fact amounts which had previously been paid was a matter in dispute. For present purposes, the question is not what the correct figure was, but whether the plaintiffs had in some radical way changed their claim so as to prejudice City Garden. City Garden's complaint that they had done so should have been rejected.

Assessment of outstanding payments

1. The second basis upon which the trial judge dismissed the plaintiffs' claims was that the payment schedules failed to establish any loss. The judge concluded: "90 In addition, mere proof that the Builder assessed particular payment claims in the way that it did is not proof that the amounts now claimed are properly payable under the relevant subcontracts. The evidence is that work on the Development is now complete. It might be inferred from that that the plaintiffs are entitled to be paid the balance of the full amount due under each relevant [subcontract]. However, tender of the final payment schedule is not proof of that amount. At a minimum, the plaintiffs would need to prove the amount due under each subcontract (including the amount of each variation) and the amount that they have been paid. They have not sought to do the former and the mere tender of the plaintiffs' bank accounts do not prove the latter. These points highlight the fact that the evidence given by the witnesses was directed at proving damages in one way, whereas the plaintiffs now seek to do so in another. 91 As I have said, the plaintiffs no longer seek to advance the case that they advanced originally - that is, the case that specific invoices which are properly payable under their subcontracts have not been paid. Accordingly, the plaintiffs have failed to prove that any amount is due under the contract on which they sue or that they have suffered any loss arising from their reliance on the representation made by City Garden. It follows that their claim must fail."
2. The judge was unwilling to accept the payment schedules as evidence of the amounts payable. He noted at [89] that "[t]he plaintiffs seek to prove the total amount owing to them by tendering the final payment schedules issued by the Builder". In the remainder of that paragraph, the judge raised four concerns as to the provenance and content of the final payment schedules. First, as to provenance, he observed that there was "no evidence concerning how these payment schedules came to be issued". He stated that "[i]n order to place any weight on the payment schedules, more information is required about how they were prepared and the circumstances in which they were issued and received". Secondly, as to provenance, the judge stated that '[t]he mere tender of what purport to be payment schedules signed by a representative of the Builder (usually [Mr Dai]) is not sufficient".
3. Although it is true that the admissibility of the payment schedules was not in issue, these observations had a flavour of the reasoning of Bryson J in National Australia Bank Ltd v Rusu, [21] rejected by this Court in Capital Securities XV Pty Ltd (formerly known as Prime Capital Securities Pty Ltd) v Calleja [22] and expressly overruled in Gregg v R. [23] Although ultimately the question of weight was one for the trial judge, pursuant to s 183 of the Evidence Act 1995 (NSW) he was entitled to "draw any reasonable inferences" from the documents. No basis was disclosed upon which it was open to doubt the authenticity of the payment schedules, or their sufficiency for whatever representations they included.
4. As the appellants observed, the payment schedules were admissible as business records and were tendered without objection. They did not need to be proved extraneously. Further, to infer (without evidence) that there might be some doubt about their execution ignored the fact that Mr Dai, the sole director of the builder, was the other principal of City Garden, and the further evidence given by Mr Liang in his affidavit that Mr Dai "would submit payment requests online" and that he, Mr Liang, would "review those payment request[s] before I authorise those payments." He continued: "[s]ometimes if I have concerns about the payment requests submitted by [Mr Dai], I would ask [Mr Dai] to explain or send to me the invoices claimed for those payment requests". [24] That procedure continued after September 2019 - "[Mr Dai] submitted payment requests for the subcontractors' invoices. [Mr Dai] would sometimes provide payment copies of the invoices upon our request but sometimes he would not provide. Then I authorised payments to be made from City Garden." As to whether the amounts paid were consistent with the value of work certified by the quantity surveyor, Mr Liang trusted "[Mr Dai] and MTRP". [25] In that ongoing exercise "from September 2019 up to now", he also had the assistance of the City Garden accountant (Monica). [26]
5. Thirdly, as to content, the judge noted that two of the schedules were dated 26 May 2020, that is after the plaintiffs had sent their letter of demand to City Garden. Why that should give rise to a concern is by no means clear. It was not submitted that no work had been done in the period to which the payment claim related, nor was it submitted that the builder could not properly issue a payment schedule in relation to a payment claim made four months after the period or work to which it related. (The Security of Payment Act permitted a claim to be made within 12 months of completion of the work the subject of the claim: s 13(4)(b).) The fact that a letter of demand had been made on City Garden prior to the last two payment schedules was raised, but not meaningfully explored in cross-examination of Mr Liu. [27] There was no finding that the letter of demand included amounts which had not at that point been the subject of a payment claim.
6. Had there been a basis to doubt the genuineness of those payment schedules, the proper result might have been to reduce the payment schedules by $45,520 (being the final carpentry framing payment authorised) and $7,131 (being the final internal carpentry payment authorised). Given that Mr Liang did not take issue with these amounts and given that each of them as authorised by the builder is less than the amount claimed (the differences principally due to the adjustment of an hourly day labour rate), there is no basis in the evidence to reject Mr Liu's evidence in that regard. The judge found Mr Liu to be an impressive and creditworthy witness. [28]
7. Fourthly, as to content, the judge raised an issue which identified a substantial dispute between the parties. Thus, City Garden submitted that if the final payment schedules were to be relied upon, the amount outstanding should be calculated as the difference between the total amount assessed less the "Previous Payment", understood as describing an amount previously paid.
8. To understand the point being made, it is convenient to set out one of the payment schedules for a specific subcontract. The one addressed as an example in the course of submissions was a document entitled "Summary Subcontract Payment Schedule" for carpentry framing. The question was whether the item identified as "Less Previous Payment" referred to an actual payment which had been made, or the progressive total of previous payment claims which had been approved or authorised. There are a number of reasons for thinking that it did not refer to actual payments.
9. First, it may be seen that the heading over the items is "Payment Calculation" and the heading over the figures is "Authorised". There are three calculations then set out. The first identifies the amount authorised under the original subcontract ($1,130,000) and the variations approved ($481,680.81). The sum of those two amounts is the "Gross Payment Authorised". From that the retention amount is removed to give a figure described as "net payable". The "Net Payable" is the sum of the "Previous Payment" and "This Payment Authorised". In that context, it makes sense to treat the item "Less Previous Payment" as referring to previously authorised payments. It is certainly not referring to a single payment (although it is expressed in the singular); nor is it referring to the previous payment (that is the last payment made).
10. Secondly, this document is a summary of outcomes. It does not relate only to the payment claim in question. That claim is identified as the second item in the right-hand column, namely a claim for $50,872.31. What is approved is a payment of $45,520.01. Whether or not previous claims which have been authorised have been paid is not relevant in this context: calculation is undertaken by identifying the total amount authorised for payment and deducting previous authorised payments in order to achieve the payment amount under the present claim.
11. Thirdly, as the respondent noted in the course of the appeal, the total amount of all "Previous Payments", in relation to the six subcontracts, with GST, was an amount of $4,324,234.68. It was not part of the respondent's case that that sum had in fact been paid. Nor was it in dispute that there was a significant amount which became outstanding after the meeting on 20 September 2019, following which most of the final payment schedules were issued.
12. Mr Liang calculated the amount which had been paid by City Garden to YSC between August 2018 and March 2020 as an amount of $3,488,258.14. [29] He said that a further payment had been made by him in October 2019 because Mr Ji (the principal of the appellants) had been "chasing" him for payment. Adding that amount of $146,838.12 to the payments identified in City Garden's bank accounts, Mr Liang reached a total amount paid to YSC for work done on the North Rocks project as $3,635,096.26. [30] This figure did not take account of payments made by the builder directly to YSC. Nevertheless, it provided no basis for thinking that every payment other than the final payment referred to in the final payment schedules had in fact been paid.
13. Fourthly, with respect to YSA, Mr Liang was able to do no more than provide a table of payments made to YSA since February 2019. His affidavit did not state that they were payments made with respect to the North Rocks project. They were clearly not so limited. The total contract sum with respect to YSA, for the North Rocks project, including variations, was $454,550. The amount paid to YSA, according to Mr Liang, was $1,324,749.78. [31]

The appellants' case

1. The figures put forward by Mr Liu for the appellants were precise, were based on records, and were not the subject of cross-examination. They were, concededly, inconsistent with the assumption that every payment other than the payment claim identified in the last payment schedule for that subcontract (and identified in the last payment schedule as "Previous Payment") had been paid. However, for the reasons explained above, that reading of the reference to "Previous Payment", in context, was implausible.
2. Neither side called Mr Dai. It followed that, on its own case, City Garden was not in a position to contradict Mr Liu's evidence. Accordingly, Mr Liu's calculation should have been accepted as evidence of the loss suffered by the plaintiffs.
3. With respect to the calculations, two other matters should be noted. First, counsel for City Garden complained to the trial judge that there were six subcontracts relied upon in Appendix A, the first being identified as "AAC Panel Trade". Counsel understood that to refer to the cladding subcontract, but said that it had not been raised in the evidence previously. That, as counsel for the plaintiffs noted, was incorrect. Mr Liu had identified and included a copy of the cladding subcontract, a summary of the payment claims and a copy of the final payment schedule. [32] In identifying outstanding debts, that subcontract was not included, indicating that there were no payments outstanding under it. Appendix A also indicated that the only amount outstanding was in fact half the retention fee, or 5% of the assessed amount. That was the only case in which it appears that the figure for "Previous Payment" was also the figure for payments actually made. Although Mr Liu did not explain the makeup of the total claim for half the retention payment, an amount identified by Mr Liu as $118,470.99, it is likely that it included the amount under the cladding contract. (Because no issue was taken with respect to the claim for the retention amount, the documents annexed to Mr Liu's affidavit which might have answered that question were not included in the materials available on the appeal.)
4. Secondly, in the course of the appeal, the only specific payment issue raised was Mr Liang's evidence of a payment of $82,000 to YSA on 13 June 2019. As has been noted, Mr Liu's response was that YSA did in fact receive such an amount on that or the following day, but that it had come from Ming Tian and that he had checked with his principal, Mr Ji, who had advised him that Mr Dai from Ming Tian had said to apply the $82,000 payment to outstanding payments owed by MTRP to YSA in respect of jobs located in other suburbs. That evidence was admitted without objection. Further, as was noted by the Court in the course of argument, Mr Liu had included three payment claims made by YSA, the earliest of which was dated 25 December 2019. It is therefore implausible that the payment of $82,000 (made six months earlier) related to any payment claim upon which YSA was suing.
5. Given that nothing turns on Mr Liu's oral evidence, he not having been cross-examined as to the outstanding payments, the judge's assessment of him as a witness is of limited relevance. Nevertheless, when dealing with the complex and uncertain evidence concerning the oral communications, his finding that Mr Liu was a "credible witness" [33] and that his evidence was in several respects "plausible" [34] removes any obstacle that this Court might have in accepting unchallenged portions of Mr Liu's affidavit evidence.

Conclusions

1. For the reasons set out above, the appeal by each appellant should be allowed and orders 2 and 3 made by the trial judge on 9 March 2022 set aside. The appellants should have judgments in their favour in the amounts claimed in the notice of appeal. City Garden should pay the appellants' costs at trial and in this Court.
2. The Court should therefore make the following orders: 1. Allow the appeal from the judgment and orders made in the Equity Division on 9 March 2022. 2. Set aside orders 2 and 3 made and entered on that date. 3. Give judgment in favour of Yisheng Construction Pty Ltd against City Garden Australia Pty Ltd in the amount $667,140. 4. Give judgment for Yisheng Air Con Pty Ltd against City Garden Australia Pty Ltd in the amount of $113,255. 5. Order that City Garden Australia Pty Ltd pay the costs of Yisheng Construction Pty Ltd and Yisheng Air Con Pty Ltd of the proceedings in the Equity Division against City Garden Australia Pty Ltd. 6. Order that the respondent pay the appellants' costs in this Court.

Endnotes

1. Yisheng Construction Pty Ltd v City Garden Australia Pty Ltd [2022] NSWSC 221 ("Primary judgment").
2. Primary judgment at [68].
3. Security of Payment Act, s 27.
4. Security of Payment Act, s 16(2)(b).
5. Security of Payment Act, s 15(2)(b).
6. Affidavit, Jian Wei Liang, 22 December 2020 (Liang affidavit), par 20.
7. Liang affidavit, pars 20, 47.
8. List Statement, 24 June 2020, pars 30, 31.
9. List Statement, pars 35, 38.
10. List Statement, pars 41-44.
11. Response, 21 February 2022, pars 15, 16.
12. Response, par 32.
13. Tcpt, 21/02/22, pp 6(5)-7(3).
14. Tcpt, p 7(21).
15. Tcpt, pp 7(50), 8(10).
16. Tcpt, p 8(12).
17. Tcpt, p 47(25).
18. Tcpt, p 49(10).
19. Tcpt, p 258(13).
20. Primary judgment at [85].
21. (1999) 47 NSWLR 309; [1999] NSWSC 539 at [17], [28].
22. [2018] NSWCA 26 at [100]-[101] (Leeming JA).
23. [2020] NSWCCA 245 at [362]-[372] (Bathurst CJ); [713]-[716] (Leeming JA); see also Maaz v Fullerton Property Pty Ltd [2021] NSWCA 79 at [20]-[23] (in my judgment, Gleeson JA agreeing); [42] (Brereton JA).
24. Liang affidavit, par 20.
25. Liang affidavit, pars 47, 48.
26. Liang affidavit, par 20.
27. Tcpt, p 117.
28. Primary judgment, [25], [62].
29. Liang Affidavit, par 52.
30. Liang Affidavit, pars 53, 54.
31. Liang Affidavit, par 56, 57.
32. Affidavit, Dechao Liu, 14 October 2020, pars 97-102.
33. Primary judgment at [62].
34. Primary judgment at [65]. 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: 15 December 2022