Yisheng Construction Pty Ltd v City Garden Australia Pty Ltd

The Claim

1. The plaintiffs seek to put their claim on two bases (a third claim based on what was said to be unjust enrichment was not advanced in submissions and should be taken as having been abandoned).
2. First, the plaintiffs claim that by the WeChat messages sent by Victor on 6 September 2019 City Garden represented that "it would pay for works undertaken in respect of the Development" (defined as the "WeChat Representation"). Second, they claim that at the 20 September 2019 meeting City Garden represented through Victor that "if work continued on the Development, City Garden would pay the outstanding amounts owed by [the Builder] in respect of the works as well as paying for the works required to complete the Development" (defined as the "Site Meeting Representation"). They contend that those two representations amounted to a contractual offer from City Garden to pay the outstanding invoices and to pay for the ongoing works. The plaintiffs are said to have accepted that offer by continuing to work on the Development and not exercising their right of suspension. The plaintiffs also contend that it was an implied term of that contract that "City Garden would make payment in the amounts and in the time required according to payment schedules issued by [the Builder], or in the absence of payment schedules, according to payment claims issued by [YSC and YSA]".
3. Second, the plaintiffs claim (in a pleading that follows closely the requirements for a promissory estoppel as explained by Brennan J in Waltons Stores (Interstate) Limited v Maher (1988) 164 CLR 387 at 428 - 9) that (1) as a result of the WeChat Representation and the Site Meeting Representation, they assumed that City Garden would pay any monies owing to them in respect of the subcontracts, (2) relying on that assumption they continued to work on the Development, (3) City Garden induced this reliance, (4) City Garden knew they would and intended them to rely upon the assumption, (5) it would be unconscionable for City Garden to take the benefit of the work performed by the plaintiffs and not fulfil the assumption, and (6) therefore City Garden is estopped from denying the assumption and making payment in accordance with it.
4. It is convenient to address first the question whether the representations on which the plaintiffs rely are made out, then the question whether they gave rise to a contract or promissory estoppel and finally the question whether the plaintiffs have proved that they are entitled to recover the amount they claim.

Were the representations made?

1. It is difficult to understand how the WeChat Representation could arise from the WeChat messages sent on 6 September 2019. The relationship between the parties was typical of the industry. City Garden was the developer. It had arranged to borrow money from a bank to finance the Development. It engaged the Builder to build the Development, who in turn engaged subcontractors to undertake work in specific trades. The Builder was responsible for paying subcontractors but depended on payment by the developer (City Garden) to be able to do so, which in turn depended on advances from the bank. So much must have been understood by Billy when he approached Victor. In that context, Victor's text message must have been understood as saying that City Garden had sufficient money to pay the Builder so that there would be no problem in the plaintiffs getting paid; and that the delay was caused by the fact that the bank was slow in advancing money.
2. Victor's voicemail message does not advance the position. It reinforced what was said in the text message - namely, that City Garden would have sufficient money to complete the Development and, in particular, sufficient money to pay the Builder to enable the Builder to pay subcontractors. It could not be read as bringing about a fundamental change in the contractual relationship between the parties.
3. The plaintiffs submit that the words "our accountant now has moved it to my side" must mean that City Garden had taken over control of the Development from the Builder. Those words cannot reasonably bear that meaning. Rather, all Victor appears to be saying is that City Garden's accountant had completed her analysis and given it to Victor (moved it from her side to his). Much clearer words would be required to justify a conclusion that Victor was to be understood as saying that City Garden had taken over responsibility for paying the subcontractors.
4. Victor's WeChat message of 9 September 2019 was not pleaded. In any event, there is now substantial agreement on what it says. Plainly, it does not convey the impression that City Garden would take over responsibility for paying the plaintiffs' payment claims.
5. One difficulty with the Site Meeting Representation is the way in which it is framed. It has two limbs. One is that City Garden would pay the outstanding amounts owed by the Builder. The other is that City Garden would pay for works required to complete the Development. The second limb, in particular, appears to suggest that Victor represented that City Garden would pay whatever was necessary to complete the Development or that it would pay whatever was claimed by the plaintiffs (to adopt a version that seems consistent with the plaintiffs' pleaded implied term). But a representation in those terms is not supported by any evidence and seems inherently improbable. On the plaintiffs' case, amounts were due to them by the Builder under the subcontracts. It was those amounts that they were seeking to have paid. It would make no sense for Victor to promise to pay amounts that were not properly payable by the Builder; and the evidence that was given on the question does not suggest that he did.
6. The essential question is whether during the meeting Victor said words to the effect that City Garden would pay directly invoices approved by the Builder and, if so, whether he added an additional requirement that the invoices be certified by the "QS". City Garden contends that Victor did not say anything along those lines at the meeting in English, that he did say words to that effect (including the QS qualification) to some but not all subcontractors in Mandarin after the meeting involving everyone, but that the Court cannot be satisfied that Billy was present at that conversation. I do not accept that submission.
7. By the time the meeting was called, Victor was aware that at least some subcontractors, including the plaintiffs, had not been paid amounts owing to them. It appears to be common ground that by this stage both Victor and Billy had lost confidence in the Builder. The purpose of the meeting was to establish how much was owing to subcontractors and to convince them that they would be paid and that therefore they should resume work. It is plausible that in that context Victor would offer to take steps to ensure that the subcontractors would be paid the amounts they were owed. That is, in fact, what he did following the meeting. It is implausible that the subcontractors would be happy to return to work (which is what they did) simply on the basis that Victor would take up the payment of their invoices with the Builder, when the Builder had not paid their claims for several months. The likelihood is that the Builder had run into financial difficulties and that that was the reason the subcontractors were not being paid. The only way that City Garden would be able to solve that problem was to pay the subcontractors directly. That was the context in which the meeting occurred.
8. It was Leon's evidence in effect that Victor said at the meeting that City Garden would take over responsibility for paying subcontractors provided they did the work, that it would pay outstanding invoices once the figures had been checked and that future progress claims would need to be sent to the Builder for assessment and that once assessed City Garden would make the payment.
9. City Garden advances various reasons for why that evidence should not be accepted. First, it submits the evidence is inconsistent with evidence given by Mario, who was the only independent witness. Second, it submits that Leon was not a credible witness. Third, it submits that Leon's account is inherently implausible, since by then Victor had lost confidence in Adam. It is not plausible in those circumstances that Victor would have relied on the Builder to certify the amount payable to the plaintiffs.
10. I do not accept these submissions. It is true that Mario is more independent than the other witnesses. However, in his affidavit evidence, he said virtually nothing about what Victor said at the meeting, despite the fact that Leon's account of the meeting would have been available to him. He denied specific matters put to him in cross-examination. However, that is as far as his evidence went. City Garden submitted that some weight should be put on the fact that Mario was not cross-examined vigorously on his account of the meeting. But it was not for the plaintiffs through cross-examination to fill in the gaps in Mario's evidence in chief. Mario had limited interest in what Victor said and he was sacked at the end of the meeting. That matter is likely to have weighed more heavily on his mind.
11. In my opinion, Leon was a credible witness. City Garden submitted that his credibility was undermined by his poor contractual management and the fact that, despite suggesting in the witness box that there were other documents recording the terms of the subcontracts between the plaintiffs and the Builder besides those in evidence, he was only able to produce one. No doubt, the contractual arrangements could have been better managed. The fact that they were not, at least in part, is explained by the fact that the plaintiffs had worked for the Builder (and Victor) on a number of jobs in the past and they trusted one another at the time. In any event, I do not accept that any inadequacies in Leon's contractual management reflect on his credibility as a witness.
12. City Garden points to the fact that Leon asserts that Monica made statements which she denies and which, given her position, she is unlikely to have made. However, in my opinion, Leon's evidence of his conversation with Monica was credible. He volunteered the view that Monica could not be understood as making some representation on behalf of City Garden herself. The words he attributes to her are "I need to check with Ming Tian about all of the invoices … If the figure is genuine then we will make the payment." In my opinion, it is plausible that she spoke words to that effect. Most of the payments were processed through the City Garden Business One Account. Victor was a signatory to that account. On any view, it seems clear that City Garden was going to take on a greater role in processing payments. In those circumstances, it would have been natural for Monica to have said "we" will make payment without necessarily intending to convey the position that City Garden would become responsible for the payment. The effect of Leon's evidence is that that is how he understood what she said.
13. As to City Garden's last point, it primarily goes to the question whether Victor also mentioned the role of the quantity surveyors. I return to that question below.
14. The reference to the quantity surveyors aside, Leon's evidence is plausible in the context in which the meeting occurred and is consistent with evidence given by Victor. City Garden takes issue with this last point on the basis that Leon's evidence concerns Victor's presentation in English whereas Victor's evidence concerns what he said in Mandarin in a conversation to which Leon says he was not a party. There are two difficulties with this submission. First, as I have said, it is not obvious that Victor's evidence is limited to what he said in Mandarin. Second, it does not seem plausible that Victor said different things in English and in Mandarin. It is far more plausible that Victor repeated in Mandarin what he had already said in English particularly for the benefit of those present whose English was poor.
15. City Garden submits that Billy was not a satisfactory witness. I accept that there are problems with his evidence. One problem is that he did not give evidence of the conversation in Mandarin in chief, although clearly that conversation was important to his case. Another is that he recalls Leon as being present during the conversation, whereas the likelihood is that he was not. A third is that he maintained that Victor had already promised in the WeChat messages of 6 September 2019 that City Garden would pay the plaintiffs, whereas that is not what those messages say. A fourth is that he appeared to have a poor recollection of what was said and ultimately gave evidence that suggests that he could only recall the gist of what was said, which was to the effect that "You can send the past invoices and future invoices to me and keep working". However, these problems are not fatal to the plaintiffs' case. I have explained why I think it is likely that Billy was present when Victor spoke in Mandarin. On any view, Victor made important concessions about what he said at that time. The fact that Billy had a poor recollection of what was said does not undermine the evidence given by Leon, who was primarily responsible for the job on behalf of YSC and YSA.
16. The question remains whether Victor said words to the effect that any payment claim would need to be certified by the quantity surveyor. I am not satisfied that he did. His evidence on that issue is not corroborated by any other witness, while Leon, Billy and Kai all deny that he said words to that effect. The role of the quantity surveyors was to certify the work completed by the Builder to enable drawdowns to be made under the Facility. There is no evidence that they performed some other function. It seems more plausible that Victor agreed to pay amounts that were owed by the Builder rather than proposing some separate mechanism by which subcontractors were to be paid. Shortly after the meeting, City Garden paid money into the City Garden Business One Account and a number of amounts were then paid from that account to YSC and YSA. There is no suggestion that those payments were certified by the quantity surveyors.
17. Victor did give evidence in cross-examination that he checked the reports prepared by Construction Consultants before making payment. But just what he did is unclear. The reports prepared by Construction Consultants contained a detailed breakdown of trades, City Garden's budget for each of those trades, the percentage of work completed and therefore the budget allowance that had been used in respect of each trade. However, no explanation was given of how City Garden's classification of trades and budgets for them related to the subcontracts entered into by the Builder, and the fact that Victor checked the reports before making payment does not itself establish that payment to the subcontractors was conditional on certification by the quantity surveyors.
18. City Garden relies on the WeChat exchange between Monica and Leon in April 2020 in which Monica said "Our team will conduct auditing according to QS" as corroborating Victor's account of the conversation. However, little weight can be placed on Monica's WeChat message. What City Garden was proposing to do in April 2020 says nothing about what Victor said in September 2019. Moreover, Monica does not suggest that payment was conditional on approval by the quantity surveyors. All it suggests was that City Garden was going to check the plaintiffs' claims against the Construction Consultants' reports.
19. One other point should be made about the representation relied on by the plaintiffs. Although the evidence is that Victor 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 Victor 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, Victor 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.

Did the representation give rise to a contract or promissory estoppel?

1. The plaintiffs' case is that the WeChat Representation and the Site Meeting Representation together constituted an offer that was accepted by conduct - that is, by YSC and YSA in effect returning to work.
2. 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.
3. The question is whether that representation can be characterised as a contractual offer capable of acceptance by performance: see Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256. In my opinion, it can. The relevant principles were set out by Gaudron, McHugh, Hayne and Callinan JJ in Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95; [2002] HCA 8 at [24] - [25] in these terms: [24] "It is of the essence of contract, regarded as a class of obligations, that there is a voluntary assumption of a legally enforceable duty." To be a legally enforceable duty there must, of course, be identifiable parties to the arrangement, the terms of the arrangement must be certain, and, unless recorded as a deed, there must generally be real consideration for the agreement. Yet "[t]he circumstances may show that [the parties] did not intend, or cannot be regarded as having intended, to subject their agreement to the adjudication of the courts". [25] Because the inquiry about this last aspect may take account of the subject-matter of the agreement, the status of the parties to it, their relationship to one another, and other surrounding circumstances, not only is there obvious difficulty in formulating rules intended to prescribe the kinds of cases in which an intention to create contractual relations should, or should not, be found to exist, it would be wrong to do so. Because the search for the "intention to create contractual relations" requires an objective assessment of the state of affairs between the parties (as distinct from the identification of any uncommunicated subjective reservation or intention that either may harbour) the circumstances which might properly be taken into account in deciding whether there was the relevant intention are so varied as to preclude the formation of any prescriptive rules. Although the word "intention" is used in this context, it is used in the same sense as it is used in other contractual contexts. It describes what it is that would objectively be conveyed by what was said or done, having regard to the circumstances in which those statements and actions happened. It is not a search for the uncommunicated subjective motives or intentions of the parties. (footnotes omitted)
4. In the present case, the terms of the arrangement are sufficiently certain to be enforceable, and the circumstances in which the promise was made strongly suggest that the parties intended their arrangement to be legally enforceable. The purpose of the arrangement was to deal with what and how the subcontractors would be paid if they returned to work. City Garden does not seriously contend that the circumstances in which the representation was made could not give rise to a binding contract. Rather, its submissions are directed to the question whether the pleaded representations were made.
5. On the other hand, I can see no basis for implying into the contract the term pleaded by the plaintiffs. It is unnecessary to discuss the precise requirements for the implication of a term in a unilateral oral contract such as the one in this case and, in particular, whether all of the five conditions identified by the Privy Council in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 at 282 - 3 need to be satisfied. The pleaded implied term is inconsistent with the express representation that was made. On the findings I have made, Victor 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.
6. On the conclusions I have reached, it is unnecessary to consider whether City Garden is estopped from denying that it is liable to pay the plaintiffs the amounts certified by the Builder as being payable under their subcontracts. However, in my opinion, all the requirements of a promissory estoppel are met in this case. Those requirements were identified by Brennan J in Waltons Stores (Interstate) Limited v Maher (1988) 164 CLR 387 at 428 - 9 in these terms: In my opinion, to establish an equitable estoppel, it is necessary for a plaintiff to prove that (1) the plaintiff assumed that a particular legal relationship then existed between the plaintiff and the defendant or expected that a particular legal relationship would exist between them and, in the latter case, that the defendant would not be free to withdraw from the expected legal relationship; (2) the defendant has induced the plaintiff to adopt that assumption or expectation; (3) the plaintiff acts or abstains from acting in reliance on the assumption or expectation; (4) the defendant knew or intended him to do so; (5) the plaintiff's action or inaction will occasion detriment if the assumption or expectation is not fulfilled; and (6) the defendant has failed to act to avoid that detriment whether by fulfilling the assumption or expectation or otherwise.
7. Each of those requirements is satisfied in this case. The plaintiffs assumed that City Garden would pay them if they resumed work. That assumption was induced by what Victor said at the meeting. The plaintiffs resumed work on that basis and City Garden intended that they would do so. The plaintiffs suffered detriment because they forewent the opportunity to suspend work and instead resumed work at the site. On the plaintiffs' case, City Garden has failed to pay them.

The amount claimed

1. The primary relief sought by the plaintiffs is an order that City Garden pay YSC the sum of $667,140 and pay YSA the sum of $113,255. Those figures are the figures contained in the proposed amened summons and amended list statement that the plaintiffs sought leave to file on the last day of the hearing. The amendments to the summons and list statement principally seek to substitute the new amounts for the original amounts claimed. But those simple amendments do not reveal the true extent of the change in the plaintiffs' case.
2. 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.
3. 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 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.
4. In my opinion, the plaintiffs' claim must fail on both bases.
5. The plaintiffs submit that the case they now seek to put falls squarely within the pleaded case because that case was that it was an implied term of the agreement relevantly that "City Garden would make payment in the amounts and in the time required according to the payment schedules issued by [the Builder]" and all the plaintiffs now seek to do is prove the relevant amounts by tendering the payment schedules. There are, however, two problems with that submission.
6. First, I have already rejected the case that the relevant term can be implied in the agreement.
7. Secondly, the way that the plaintiffs seek to make use of the payment schedules is not consistent with the implied term. 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. To take an example, the final payment schedule for framing was dated 26 May 2020. It contained relevantly the following information: Gross Claims by Subcontractor Previous claims to 25/07/19 1,576,496.51 This claim to 04/01/20 (Including Retention) 50,872.31 S/C Claim Reference NRDL07 Total Claimed 1,627,368.82 Payment Calculation Authorised Original Subcontract 1,130,000.00 Variations Approved 481,680.81 Variations Unapproved 0.00 Materials on / off Site 0.00 Rise and Fall 0.00 Gross Payment Authorised 1,611,680.81 Less Retention 90,198.98 Net Payable 1,521,481.83 Less Previous Payment 1,480,100.00 This Payment Authorised 41,381.83 Plus GST 4,138.18 Payment Amount 45,520.01

1. The plaintiffs seek to rely on that document to prove that the total amount owing to YSC in respect of framing was $1,611,680.81. It seeks to prove the total amounts payable in respect of the other subcontracts in the same way. The total of those amounts is $4,276,299.24. Adding GST, the total is $4,703,929.16. According to YSC, the total amount it has been paid as shown in its bank accounts is $4,036,788.40, leaving a balance of $667,140.76, which is the amount YSC claims. No attempt has even been made to prove how much has been paid in respect of each subcontract. The analysis for YSA is similar, except that there is only one subcontract.
2. 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.
3. 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. That conclusion is sufficient to dispose of the plaintiffs' amended claim. However, in my opinion, there is another difficulty with it.
5. The plaintiffs seek to prove the total amount owing to them by tendering the final payment schedules issued by the Builder. There is, however, no evidence concerning how those payment schedules came to be issued. That is significant because two of the schedules (in respect of framing and internal carpentry) are dated 26 May 2020 - after the plaintiffs had sent their letter of demand. Moreover, in order to calculate the amount payable the payment schedules deduct an amount described as "Previous Payment". Yet, the plaintiffs claim that that amount should be ignored in calculating the amounts owing to them, since it represented the amount the subject of previous schedules and not the amount actually paid. In my opinion, the payment schedules themselves are an inadequate basis to justify that conclusion. In 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. The mere tender of what purport to be payment schedules signed by a representative of the Builder (usually Adam) is not sufficient.
6. 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 subcontracts. 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.
7. 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.

Orders

1. The plaintiffs have been wholly unsuccessful. There is no apparent reason why they should not pay City Garden's costs.
2. Accordingly, the orders of the Court are: 1. Refuse leave to the plaintiffs to file the amended summons and amended technology and construction list statement; 2. Proceedings dismissed; 3. The plaintiffs pay the first defendant's costs of the proceedings.

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: 09 March 2022