Agape Investments Pty Ltd and Eighth Natro Pty Ltd v Chen
[2012] VCC 1323
•20 September 2012
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE CIVIL DIVISION | Revised Not Restricted Suitable for Publication |
COMMERCIAL LIST
GENERAL DIVISION
Case No. CI-10-01378
| AGAPE INVESTMENTS PTY LTD (ACN 119 768 311) | First Plaintiff |
| and | |
| EIGHTH NATRO PTY LTD (ACN 006 619 165) | Second Plaintiff |
| v | |
| JI YUAN CHEN | First Defendant |
| YI MAN EUNICE LAI | Second Defendant |
| REGISTRAR OF TITLES | Third Defendant |
JUDGE: | HIS HONOUR JUDGE SHELTON | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 14 - 17, 20, 21, 29 and 30 August 2012 | |
DATE OF JUDGMENT: | 20 September 2012 | |
CASE MAY BE CITED AS: | Agape Investments Pty Ltd & Eighth Natro Pty Ltd v Chen & Ors | |
MEDIUM NEUTRAL CITATION: | [2012] VCC 1323 | |
REASONS FOR JUDGMENT
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SUBJECT – BREACH OF CONTRACT
CATCHWORDS – Damages for delay – liquidated damages – penalty clauses - rectification
LEGISLATION CITED – Transfer of Land Act 1958, s89A(3)
CASES CITED – Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2004) 218 CLR 471; Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336; Moobi v Les Gunn Properties [2008] NSWSC 719; Mrocki v Mountview Prestige Homes Pty Ltd [2012] VSCA 74; Ringrow Pty Ltd v BP Australia Pty Ltd & Ors (2005) 224 CLR 656; Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd [1915] AC 79; AMEV-UDC Finance Ltd v Austin [(1986) 162 CLR 170; Ange v First East Auction Holdings Pty Ltd [2011] VSCA 335; Browne v Dunn (1893) 6 R 67
JUDGMENT – The first plaintiff’s claim against the first defendant dismissed. Judgment for the second plaintiff against the first defendant in the sum of $28,550.00. Counterclaim dismissed.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr D K Carlile | Cliffords Lawyers |
| For the First and Second Defendants | Mr F Lim | Francis Lim Solicitors |
| For the Third Defendant | No appearance | - |
HIS HONOUR:
Introduction
1 In this proceeding, the first plaintiff claims against the first defendant damages of just over $400,000.00 for alleged delay in the completion of renovation works at 305-307 Swanston Street, Melbourne (“305 Swanston Street”). The claim is based upon a written agreement dated 13 June 2006 made between the first plaintiff and the first defendant (“the Agape Agreement”). It is common ground that in the Agape Agreement the date of execution should read “13 June 2008” and that the Agape Agreement was executed on or about that date.
2 The first defendant counterclaims against the first plaintiff for the sum of $128,784.85 for the balance of the cost of work done by him at 305 Swanston Street plus a management fee of 10 per cent of the cost of the work done.
3 The second plaintiff has a somewhat similar claim against the first defendant for damages of $57,908.05 for alleged delay in the completion of renovation works at 4/48 Darling Street, South Yarra (“Darling Street”). This claim is based upon a written agreement made between the second plaintiff and the first defendant dated 13 June 2008 and executed on or about that date (“the Eighth Natro Agreement”). The Eighth Natro Agreement is in very similar terms to the Agape Agreement. Again, there is a counterclaim by the first defendant against the second plaintiff for the sum of $48,996.00 for the balance of the cost of work done by him at Darling Street, plus a management fee of 10 per cent of the cost of the work done.
4 The Agape Agreement reads as follows:
“AGREEMENT
THIS AGREEMENT is made the 13th day of June 2006.
BETWEEN
AGAPE INVESTMENTS Pty. Ltd. A.C.N. 119 768 311 a company incorporated in Australia and having its registered address at Shop 1, 409 Victoria street Abbotsford Victoria and a place of business at 305-307 Swanston Street Melbourne 3000 (hereinafter referred to as ‘The First Party’) of the one part;
AND
Ji Yuan Chen of 22 Centaur Grove Doncaster East. Vic. 3109 T/A ERA DESIGN STUDIO (ABN 52 942 533 980 and having its place of business at 22 Centaur Grove, Doncaster East. Vic. 3109 (hereinafter referred to as ‘The Second Party’) of the other part.
RECITALS
WHEREAS:-
·The First Party engaged the Second Party to renovate, refurbish and fitout their premises at 305-307 Swanston Street Melbourne Australia (hereinafter referred to as the said Premises) for a sum of $156,500.00.
·It was agreed by the Second Party that the said said (sic) renovation, refurbishment and fitout of the premises would be completed by the 20th day of December 2008.
·The said renovation of the said premises has been delayed by the Second party and the delay is still continuing.
·The Second Party has agreed to enter into this agreement with the First Party to compensate the First Party for this delay.
·The First Party is represented by Cliffords Lawyers of 1st Floor, 270 Blackburn Road, Doncaster East Vic. 3109.
·The Second Party was advised to seek legal opinion on the terms of this agreement and has agreed to do so prior to signing this agreement.
·NOW THE PARTIES HEREBY AGREE, ACKNOWLEDGE, COVENANT AND DECLARE AS FOLLOWS:
1. CONSIDERATION
In consideration of the First Party granting the Second Party an extension of time to complete the said renovation, refurbishment and fitout of the said Premises the Second Party hereby agrees to the following terms and conditions:
To pay to the First Party as agreed liquidated damages:
(a) The loss of rental and outgoings for 5 months calculated at $20,000.00 per month.
(b) Loss of profits calculated at $12,000.00 per week and still continuing.
(c) Interest at the rate of 10% per cent per annum.
2. To execute such documents as is necessary to give effect to the following:
(a) To charge the property at 22, Centaur Grove, Doncaster East Vic 3109 (Volume 08894 Folio 881) (hereinafter referred to as the said property) in favour of the First Party as security for the due performance of the contract to complete the renovation and for the settlement of the losses as stated in clause 1 a, b, and c above.
(b) To permit the first Party to register a caveat on the title of the said property at 22, Centaur Grove. Doncaster East Vic 3109 as security for the due performance of the renovation of the said Premises.
(c) To permit the First Party to charge, caveat and or encumber any other properties or assets which is owed or registered in the name of ERA Design Studio and or the Guarantor.
3. The Second Party’s Covenants
The Second Party hereby covenants, undertakes, warrants and represents to and with the First Party-
·that the Second Party shall not during the continuance of this Agreement without the prior written consent of the First Party assign or create of suffer to be created any assignment of his rights and titles to and interest whatsoever in the said Land.
·execute and deliver all relevant Documents to the First Party’s Solicitors in order to effectuate the Charge.
·that there is no previous sale or agreement for the sale of the said Property or any part (s) thereof which is still subsisting and which has not been validly and lawfully terminated or rescinded.
·that there are no persons who may have any rights of whatsoever nature to the said Property or any part (s) thereof whether as a donee of a Power of Attorney or otherwise.
4. SERVICE OF DOCUMENTS
1. Any notice, request or demand required to be served by either party hereto to the other under this Agreement shall be in writing and shall be deemed to be sufficiently served:
(a)if it is sent by the party or his solicitors by registered post addressed to the other party’s address hereinbefore mentioned and in such case it shall be deemed to have been received at the time when such registered letter would in the ordinary course of post be delivered:
or
(b) if it is given by the party or his solicitors by hand to the other party or his solicitors.
2. Any change of address by either party shall be communicated to the other.
5. COSTS
The costs and expenses of and incidental to this Agreement shall be borne and paid for by the Second Party.
[Signed et cetera]”
5 The Eighth Natro Agreement reads as follows:
“AGREEMENT
THIS AGREEMENT is made the 13th day of June 2008.
BETWEEN
EIGHTH NATRO PTY LTD a company incorporated in Australia and having its place of business c/o Cliffords, 1st Floor 270 Blackburn Road (hereinafter referred to as ‘The First Party’) of the one part;
AND
JI YUAN CHEN of 22 Centaur Grove, Doncaster East Vic 3109 T/A ERA DESIGN STUDIO (ABN 52 942 533 980) and having its place of business at the above address (hereinafter referred to as ‘The Second Party’) of the other part.
RECITALS
WHEREAS:-
·The First Party engaged the Second Party to renovate their premises at 4/48 Darling Street, South Yarra Melbourne Australia (hereinafter referred to as the said Premises) for a sum of $15,300.00
·It was agreed by the Second Party that the said said (sic) renovation of the premises would be completed by the 15th day of January 2008.
·The said renovation of the said premises has been delayed by the Second party and the delay is still continuing.
·The Second Party has agreed to enter into this agreement with the First Party to compensate the First Party for this delay.
·The First Party is represented by Cliffords Lawyers of 1st Floor, 270 Blackburn Road, Doncaster East Vic. 3109.
·The Second Party was advised to seek legal opinion on the terms of this agreement and has agreed to do so prior to signing this agreement.
·NOW THE PARTIES HEREBY AGREE, ACKNOWLEDGE, COVENANT AND DECLARE AS FOLLOWS:-
1. CONSIDERATION
In consideration of the First Party granting the Second Party an extension of time to complete the said renovation of the said Premises the Second Party hereby agrees to the following terms and conditions:
To pay to the First Party:
(a) The loss of rental and outgoings calculated at $850.00 per week plus outgoings on Body Corporate fees, Council and Water rates and other expenses not specifically mentioned herein from the 10th of December 2007 and still continuing.
(b) Loss of profits calculated at $850.00 per week and still continuing.
(c) Interest at the rate of 10% per cent (sic) per annum.
2. To execute such documents as is necessary to give effect to the following:
(a) To charge the property at 22, Centaur Grove, Doncaster East Vic 3109 (Volume 08894 Folio 881) (hereinafter referred to as the said property) in favour of the First Party as security for the due performance of the contract to complete the renovation and for the settlement of the losses as stated in clause 1 a, b, and c above.
(b) To permit the first Party to register a caveat on the title of the said property at 22, Centaur Grove. Doncaster East Vic 3109 as security for the due performance of the renovation of the said Premises.
3. Second Party’s Covenants
The Second Party hereby covenants, undertakes, warrants and represents to and with the First Party
·that the Second Party shall not during the continuance of this Agreement without the prior written consent of the First Party assign or create or suffer to be created any assignment of his rights and titles to and interest whatsoever in the said Land.
·execute and deliver all relevant Documents to the First Party’s Solicitors in order to effectuate the Charge.
·that there is no previous sale or agreement for the sale of the said Property or any part (s) thereof which is still subsisting and which has not been validly and lawfully terminated or rescinded.
·that there are no persons who may have any rights of whatsoever nature to the said Property or any part (s) thereof whether as a donee of a Power of Attorney or otherwise.
4. SERVICE OF DOCUMENTS
1. Any notice, request or demand required to be served by either party hereto to the other under this Agreement shall be in writing and shall be deemed to be sufficiently served:
(a) if it is sent by the party or his solicitors by registered post addressed to the other party’s address hereinbefore mentioned and in such case it shall be deemed to have been received at the time when such registered letter would in the ordinary course of post be delivered:
or
(b)if it is given by the party or his solicitors by hand to the other party or his solicitors.
2.Any change of address by either party shall be communicated to the other.
18.COSTS
The Costs and expenses of and incidental to this Agreement shall be borne and paid for by the Second Party.
[Signed et cetera]”
6 The first plaintiff’s claim in respect of 305 Swanston Street is based upon Clause 1 of the Agape Agreement. The second plaintiff’s claim in respect of Darling Street is based upon Clause 1 of the Eighth Natro Agreement.
7 I was told that pursuant to Clause 2(b) in each of the Agape Agreement and the Eighth Natro Agreement, caveats were lodged on 1 September 2008 on the title to the property at 22 Centaur Grove, Doncaster East, of which the first defendant and second defendant, who were then husband and wife, were proprietors. I have not sighted copies of a title search of the property nor of the caveats.
8 The first and second defendants lodged applications in the office of the third defendant pursuant to s89A of the Transfer of Land Act 1958 seeking removal of the caveats. The third defendant gave notice to the plaintiffs pursuant to s89A(3) of the Transfer of Land Act 1958 requiring the abandonment of the application, or alternatively, the issue of proceedings. As a consequence, the plaintiffs issued this proceeding. The third defendant has indicated that it does not intend taking part in these proceedings.
Background
9 The shareholders in the first plaintiff were, in the latter half of 2007, Fee Hin Fong (“Fong”) as to 25 per cent, and the brother, sister and brother-in-law of Clifford Say Khoon Qwah (“Qwah”) as to the remaining 75 per cent of the shares. Qwah is the proprietor of Cliffords Lawyers, which is acting for the plaintiffs in this proceeding.
10 Qwah and his wife are the sole directors and shareholders of the second plaintiff.
11 The first defendant carried on business under the name ERA Design Studio.
12 Fong and her husband, Kevin Siak Kong Chi (“Chi”), operated a food court at 305 Swanston Street. This food court did not prosper and Chi and Fong set up a restaurant at 305 Swanston Street known as Hong Hong Restaurant. Chi was bankrupted in May 2006. Hong Hong Restaurant did not prosper either and Chi and Fong decided to establish a Vietnamese grill bar at 305 Swanston Street. It is not in issue that, in about July or August 2007, Chi discussed with the first defendant the design of a renovation at 305 Swanston Street to change it into a Vietnamese grill bar with a similar layout to Your Thai Restaurant, a few doors away, which the first defendant had designed. From 2005, the first defendant had been involved with Chi on other projects in assisting in the obtaining of planning and building permits. It was common ground that the first defendant had particular expertise in obtaining such permits speedily. In August 2007, the first defendant provided Chi with preliminary drawings for the proposed renovations.
13 Meanwhile, since April or May of 2007, Chi had been discussing with Qwah the possible sale of the Hong Hong Restaurant business to interests associated with Qwah. A contract of sale of the business was entered into on 28 August 2007 with the purchase being made in the name of the first plaintiff. Settlement occurred in November 2007.
14 The first defendant stated that in about August 2007, he gave a preliminary estimate of $170,000.00 as the cost of carrying out the works provided for in the preliminary drawing. He stated that he provided this estimate with a breakdown of the costs involved on a handwritten piece of paper. He stated later in evidence that it was Chi rather who provided the projected cost of $170,000.00. Chi stated that the estimate was not handwritten but typewritten.
15 Qwah stated that he first met the first defendant in July or August of 2007. Chi and Qwah stated that the first defendant indicated that the works could be carried out within a period of eight weeks. Chi stated that another estimate of $190,000.00 was obtained with a duration period of ten weeks. Chi and Qwah then decided to engage the first defendant to carry out the works at 305 Swanston Street.
16 To finalise arrangements, a meeting was held on Sunday evening, 28 October 2007, where a group were playing cards upstairs at 305 Swanston Street. Qwah and Chi stated that a written agreement between the first plaintiff and the first defendant in relation to the proposed works at 305 Swanston Street was entered into on that occasion. Chi stated that he kept a signed copy of the agreement but that he had moved premises on a few occasions since and had mislaid the signed agreement. He produced an account from Lim Whalen & Co, lawyers, dated 2 December 2007 for the preparation of this agreement. He produced what he said was an unsigned copy of the agreement, which was in the following form:
“AN AGREEMENT made on the day of 2007
BETWEEN
AGAPE INVESTMENTS PTY LTD A.C.N. 119 768 311 the registered address of which is Shop 1, 409 Victoria Street, Abbotsford, in the State of Victoria
(“the Customer”)
AND
JI YUAN CHEN TRADING AS ERA DESIGN STUDIO A.B.N. 52 942 533 980 of 22 Centaur Grove, Doncaster East in the Said State
(“the Contractor”)
WHEREAS
A. The Contractor is in the business of designing and fitting out of shops and premises in Victoria.
B. The Customer operates a restaurant business conducted from 305 Swanston Street, Melbourne, Victoria (“the Premises”).
C. The Customer requires to refurbish and fitout its Premises and has requested the Contractor to provide a quotation which the Contractor has submitted.
D. The Contractor has represented and warranted to the Customer that the refurbishment and fitout works required by the Customer and as designed and quoted by the Contractor including but not limited to all demolition, removal of existing fitout and fittings, preparatory works and installation of new fitouts and refurbishments (“the Works”) will be completed and finished by the Contractor in full and the Premises handed back to the Customer for commencement of trading within eight (8) weeks from the commencement of the Works (“the Fitout Period”).
E. The Contractor acknowledges that the Customer will suffer significant loss and damages if the Works are not completed within the Fitout Period and has agreed to compensate the Customer for loss and damages as set out in this Agreement.
IT IS AGREED as follows
1. COMPLETION OF THE WORKS WITHIN THE FITOUT PERIOD
The Contractor represents and warrants to the Customer that the Works will be completed within the Fitout Period commencing from the date that any works, including removal of any existing fitouts are commenced at the Premises which is anticipated to start on Monday, 29th October 2007.
2. COMPENSATION IF WORKS NOT COMPLETED WITHIN THE FITOUT PERIOD
The Contractor agrees that in the event the Works are not completed within the Fitout Period then without prejudice to any other rights of the Customer:
(a)the Contractor will pay to the Customer by way of liquidated damages the sum of FIVE THOUSAND DOLLARS ($5,000) for each week or part thereof (“Agreed Liquidated Damage”) that the Works are not completed past the Fitout Period; and
(b) if completion of the Works are delayed and not completed within four (4) weeks of the last day of the Fitout Period then the Customer shall have the right to terminate the services of the Contract and appoint and engage another contractor (“the New Contractor”) and the Contractor must pay and reimburse the Customer for all costs incurred by the Customer in relation to the New Contractor to complete the Works in addition to the Agreed Liquidated Damage.
For the avoidance of any doubt, completion of the Works shall be deemed to have occurred upon the following:
(i) when a certificate of final inspection, or occupancy permit, if such is required to be issued in relation to the Works are issued by the relevant building surveyor or regulatory authorities; or
(ii) when an independent architect issues a certificate of completion regarding the Works.
3. LAW GOVERNING AGREEMENT
This Agreement shall be deemed to have been made in the State of Victoria, Australia and shall be governed in all respects of the law for the time being enforced in that State.
4. EXCLUSION OF IMPLIED TERMS
This Agreement embodies the entire understanding of the parties and there are no promises, terms, conditions or obligations oral or written express or implied other than those contained herein.
5. NOTICES
Any notice required to be given hereunder shall be sufficiently given to the Contractor if forwarded by registered post to the usual or last known place of business or abode of the Contractor and shall be sufficiently given to the Customer if similarly forwarded to its address on this Agreement or its last known address.
[Signed et cetera]”
17 The first defendant stated that he signed a document at the meeting on 28 October 2007 but he could not recall if it was in the form of this blank agreement. Chi stated that there was a witness to this agreement, one Lam, who was now in Vietnam.
18 Strangely, this agreement does not state a price for the works to be carried out by the first defendant. There was no evidence before me of an exchange of parts of the allegedly executed agreement even though Qwah, a solicitor, was involved.
19 There was strong disagreement between the first plaintiff and the first defendant as to the precise role performed by the first defendant.
20 The first plaintiff alleges that the first defendant agreed to carry out the renovations works at 305 Swanston Street for a fixed price of $170,000.00, whereas the first defendant asserts that he was only “the manager” for the project and was entitled to be paid the cost of the works plus 10 per cent.
21 Certainly, the unsigned agreement supports the first plaintiff’s assertion that the first defendant was engaged as a builder rather than as a mere “manager” of the project to carry out the works. He is referred to as “the Contractor”. He has provided “a quotation”.
22 The first defendant stated that Qwah have him a cheque for $12,500.00 at the meeting on 28 October 2007 and requested him to organise demolition works.
23 In the event, there is no need for me to determine whether in fact the first defendant executed an agreement in the form of the unsigned copy.
24 It was common ground that demolition works commenced in early November 2007 and the first defendant stated that these works were completed by the end of November 2007.
25 The first plaintiff was anxious to have the works completed before Christmas 2007 so that it could take advantage of the pre-Christmas holiday trade business.
26 A planning permit was issued on 14 November 2007. A building permit was issued by one, John Haycox, on 23 November 2007. The cost of the works was stated to be $90,000.00. The builder is stated to be one, H Lam. I understand he is the alleged witness to the agreement allegedly signed on 28 October 2007. Strangely, there was no evidence before me of any payments being made to Lam or of his involvement on 305 Swanston Street. I note that the first defendant was not a registered builder. This may explain why Lam, presumably a registered builder, has his name on the building permit.
27 The following payments were made by the first plaintiff to the first defendant:
Date Amount Notation on First Plaintiff’s Cheque Butt 2 October 2007 $9,000.00 Architect’s fees 28 October 2007 $12,500.00 Demolition fees 2 November 2007 $20,000.00 Electrical - $10,000
Plumbing - $10,000
13 November 2007 $25,000.00 Renovation costs – mezzanine floor and front door glass – first instalment 13 November 2007 $25,000.00 Renovation costs – mezzanine floor and front door – second instalment 22 November 2007 $30,000.00 Air conditioning, cool room and canopy 17 December 2007 $15,000.00 Stairs, concrete, wages 7 January 2008 $20,000.00 Wooden floor mezzanine - $15,000
Floor tiles and wages - $5,000
Balance for mezzanine floor - $5,000
28 The making of these payments would seem inconsistent with the first defendant being a mere “manager” for the first plaintiff.
29 Quotations and invoices were forwarded to the first defendant by various trades and he attended to payment of them. Again, this is more consistent with the role of a builder. There were, however, occasions when invoices and quotations were forwarded directly to the first plaintiff. For example, on 12 November 2007, Keeair Refrigeration Pty Ltd forwarded a quotation for the sum of $78,310.00 plus GST directly to the first plaintiff. It is not in issue that the cheque for $30,000.00 dated 22 November 2007 was paid by the first plaintiff to the first defendant as a deposit for Keeair Refrigeration Pty Ltd and that the first defendant paid this sum to Keeair Refrigeration Pty Ltd.
30 Chi gave evidence that works at 305 Swanston Street slowed down during December. He was not able to say whether most of the works were completed by the end of December 2007 but conceded that most of the works were completed by 31 January 2008.
31 On 8 January 2008, the first defendant forwarded to the first plaintiff a tax invoice for 305 Swanston Street, Melbourne, which stated:
“Deposit for the following items
- Design Fees
- Demolition Fees
- Permit Fees
- Cool Room
- Air Conditioning
- Plumbing
- Mezzanine Floor
- Shopfront
Total Deposit: $142,272.73
G.S.T. $14,227.27
__________
Amount: $156,500.00
=========”
32 The first defendant stated that the first plaintiff requested that this invoice be provided for GST purposes.
33 Chi stated that around the end of February or early March 2008, he contacted the electrician and the plumber, who stated that they had not completed the works required of them since they had not been paid. He stated that he therefore engaged them directly to complete the works on behalf of the first plaintiff. On 8 March 2008 he paid the electrician $5,000.00 and on 3 April 2008, he paid the plumber $8,000.00. The first defendant stated that he had not paid these trades since he had not been provided with funds by the first plaintiff.
34 Meanwhile, Qwah, on behalf of the second plaintiff, had requested the first defendant in November 2007 to carry out renovations at Darling Street, an investment unit. This arrangement was not documented. The first recital of the Eighth Natro Agreement refers to a fixed price contract for the sum of $15,300.00. On 8 February 2008, a tax invoice was provided by the first defendant to the second plaintiff, as follows:
“Job 1: Kitchen $4,100.00
- Remove existing wall
- Box up & install steel beam & support
- Engineering report
Job 2: (Paid $5,000 deposit) $12,000.00
- Painting (wall & Ceiling)
- New toilet & bathroom
- Wall Panel w Fabric
- Mirror wall
- Kitchen cupboard only
Job 3: (Optional)
- Smeg Cooking Equipment $2,500.00
- Dishwasher TBA
Total Amount: $18,600.00
Deposit: $5,000.00
__________
Total Amount Due: $13,600.00
========”
35 Again, the first defendant stated that the first plaintiff requested that this be provided for GST purposes.
36 On 13 June 2008, Chi, Qwah and the first defendant met over a late supper at the Ocean King Chinese restaurant in Glen Waverley. Chi produced the Agape Agreement and the Eighth Natro Agreement. The Agape Agreement had already been executed on behalf of the first plaintiff by Fong. Surprisingly, Qwah also signed it on behalf of the first plaintiff. Chen signed the Agape Agreement on behalf of the first defendant and initialled each page of it. The signatures were witnessed by Chi. I note that the first plaintiff is referred to as “the Purchaser” in the execution clause – the Agape Agreement was a very poorly drafted document. The Eighth Natro Agreement was signed by Qwah on behalf of the second plaintiff. The first defendant executed the Agreement and again initialled each page of it. Again, the signatures were witnessed by Chi.
37 Qwah stated that the first defendant read the Agape Agreement before executing it. He stated that the terms of both the Agape Agreement and the Eighth Natro Agreement were discussed in Cantonese.
The Role of the First Defendant
38 It is my view that the first defendant, even if only the “manager” rather than the “contractor” for the works at 305 Swanston Street and Darling Street, could take the risk and agree that the works would be completed by a certain date. The first defendant has in fact done this in the Agape Agreement and the Eighth Natro Agreement. There is therefore no need for me to determine his precise role on each project.
The Agape Agreement
39 Mr Lim, who appeared for the defendants, submitted that on the basis of the second recital in the Agape Agreement, the time for completion of the works at 305 Swanston Street had not been reached and therefore there was no basis for claiming damages for late completion. At the conclusion of evidence, I allowed the plaintiff, over the objection of Mr Lim, to amend its Statement of Claim to seek rectification of the second recital so that the date referred to would be “20 December 2007” and not “20 December 2008”.
40 I turn to deal with the application for rectification.
41 A useful starting point is Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2004) 218 CLR 471, at 483, where the Court stated:
“The respondents each having executed a loan agreement, each is bound by it. Having executed the document, and not having been induced to do so by fraud, mistake, or misrepresentation, the respondents cannot now be heard to say that they are not bound by the agreement recorded in it. The parol evidence rule, the limited operation of the defence of non est factum and the development of the equitable remedy of rectification, all proceed from the premise that a party executing a written agreement is bound by it. Yet fundamental to the respondents' case that the operative agreements between the parties were wholly oral, and reached earlier than the execution of the written agreements, was the proposition that the written agreements subsequently executed not only may be ignored, they must be. That is not so. Having executed the agreement, each respondent is bound by it unless able to rely on a defence of non est factum, or able to have it rectified. … .”
[my emphasis]
42 So far as rectification is concerned, in Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336, at 350, Mason J stated:
“… the purpose of the remedy is to make the instrument conform to the true agreement of the parties where the writing by common mistake fails to express that agreement accurately. …. .”
43 A useful statement of the applicable law in case of alleged common mistake, as here, is contained in Moobi v Les Gunn Properties [2008] NSWSC 719, where Gzell J stated:
“[33] In Pukallus v Cameron (1982) 180 CLR 447 at 452, Wilson J stated the essential elements constituting an entitlement to rectification for common mistake as, first, while there need not be a concluded antecedent contract, there must be an intention common to both parties at the time of contract to include in their bargain a term which by mutual mistake was omitted. Secondly, the plaintiff must advance convincing proof that the written contract does not embody the final intention of the parties. Thirdly, the omitted ingredient must be capable of such proof in clear and precise terms. The court must not assume for itself the task of making the contract for the parties.
[34] The requirements for rectification for common mistake were described by Tipping J in Westland Savings Bank v Hancock [1987] 2 NZLR 21 at 29-30 in the following terms:
‘Having considered these decisions and the cases I am of the view that some outward expression of accord is not necessary but that before rectification can be ordered the Court must be satisfied that the following points are established:
(1) That, whether there is an antecedent agreement or not, the parties formed and continued to hold a single corresponding intention on the point in question.
(2) That such intention continued to exist in the minds of both or all parties right up to the moment of execution of the formal instrument of which rectification is sought.
(3) That while there need be no formal communication of the common intention by each party to the other or outward expression of accord, it must be objectively apparent from the words or actions of each party that each party held and continued to hold an intention on the point in question corresponding with the same intention held by each other party.
(4) That the document sought to be rectified does not reflect that matching intention but would do so if rectified in the manner requested.’
[35] This statement of the principles was adopted by Hodgson J in Bush v National Australia Bank Ltd (1992) 35 NSWLR 390 at 405–406.”
44 Relevant considerations are:
· The Agape Agreement was drafted by the plaintiff’s solicitors – Qwah gave evidence that he instructed a solicitor in his employ to prepare it.
· Chi gave evidence that he had the Agape Agreement for two or three days prior to taking it to the meeting and, as mentioned, he had his wife execute it before the meeting. He had ample time to consider its terms.
· The first defendant was in no way responsible for the date of 20 December 2008 being included in the Agape Agreement.
· The first defendant stated that “20 December 2008” was the correct date in the second recital.
· The first defendant stated that Qwah told him that the Agape Agreement was to be executed by the first defendant so that he could show it to “his shareholders”, that is, his family members, and that it would not be acted upon. This is consistent with 20 December 2008 being the correct date in the second recital.
· Qwah stated that the date in the second recital should be “20 December 2007”. Chi’s evidence upon the second recital was somewhat equivocal. His evidence-in-chief on this issue was as follows:
Q:“On the second dot point, it says that the renovation, refurbishment and fit-out would be completed by 20 December 2008. Is that again as you recall it?---
A:--- (Direct) Yes.
Q:Sorry, was the work supposed to be done by 20 December 2008?---
A:They supposed to be done it before the date.
Q:It had to be done before the date?---
A:Yes, it had to be done.
Q:This document says it is done on 13 June 2006. Is that right?---
A:I just recall some time on June.
Q:I’m not making myself clear on the question. The document says it was signed on 13 June 2006. In relation to 13 June, do you say that’s about the correct day?---
A:(Through Interpreter) Yes.
Q:What about the year 2006, is that correct, or not?---
A:No, it should be 2008.
HIS HONOUR:
Q:Mr Qwah, if you wouldn’t prompt the witness, please.
MR CARLISLE:
Q:So it should be in 2008?---
A:(Direct) Yes.
Q:Let me just clarify then for you. You said that the works had to be completed before this agreement was signed. Do you remember saying that just before?---
A:(Through Interpreter) Right.
Q:Do you remember saying that?---
A:(Direct) Yes.
Q:So let me just clarify then. In relation to the date that the works had to be completed by, it was 20 December 2008, do you say that the year 2008 is correct or incorrect?---
A:Yes, 2008 is the correct.
Q:I’d like you to turn to p.75. Does your signature appear on that page?---
A:(Direct) Yes.
Q:Are you able to identify the other two signatures that appear on that page?---
A:Yes, it is Clifford.
Q:And the other one?---
A:Is Era Chen.
Q:Now, this document says it was signed on 13 June 2008?---
A:Yes.
Q:Is that date about what you remember?---
A:(Through Interpreter) Yes, 2008 is correct.
Q:Was it signed at the same time, on the same meeting as the Other document?---
A:(Direct) Which document?
Q:The one we just went to before, the document at 67?
A:(Through Interpreter) Right.
Q:This particular company, Eighth Natro Pty Ltd, you don’t have any involvement in that?---
A:No, nothing.
Q:That’s to do with Clifford?---
A:Yes.
Q:Just to be clear, in relation to the first document, the document with Agape, just clarifying, the works were supposed to be done before this document was signed, is that right, this is in relation to 305 Swanston?---
A:Yes.
Q:Yes, thank you. This agreement - sorry, this is the Agape agreement – was that also signed after the opening of the shop?---
A:(Through Interpreter) Right.
Q:When was the shop opened again?---
A:End of April.
Q:When were the works supposed to be completed in relation to that shop?---
A:(Through Interpreter) December of 2007.”
[my emphasis]
[T 49, L16 – T 51, L6].
I note that Chi gave his evidence through an interpreter and there may have been some problems with interpretation with respect to the evidence referred to above – on many occasions non-responsive answers were given via interpreters in the course of the trial.
· Under cross-examination, the following exchange occurred:
Q:“Mr Chi, if you look at p.197, dot point 2, you have stated, ‘It was agreed by the second party,’ that is Mr Chen, ‘that the said renovation, refurbishment and fit-out of the premises would be completed by 20 December 08’. Is that right?---
INTERPRETER:
A:He ask me to translate this.
MR LIM:
Q:Yes, go ahead?---
A:Right.”
[T 116, L26 – T 117, L1].
Again, this passage is somewhat equivocal and it may well be that Chi was only agreeing that what was stated to be in the second recital had been correctly expressed.
· In the Statement of Claim annexed to the Writ in this proceeding, which was drawn by Senior Counsel and which was issued on 1 April 2010, it is pleaded in paragraph 6 that the Agape Agreement was mistakenly dated 13 June 2006. By contrast, it was not pleaded that the date for completion of the works at 305 Swanston Street should be 20 December 2007 and not 20 December 2008.
· In his Defence filed on 15 October 2010, the first defendant pleads, in paragraph 11(c):
“Alternatively, there was no consideration to support the purported agreement because time for completion of the works was extended to 20 December 2008 and at the material time it had not lapsed.”
Here, the first defendant asserts that the completion date for the works was 20 December 2008 yet rectification was not sought until during the trial, twenty two months later.
· The third recital of the Agape Agreement states that the delay is still continuing, as does Clause 1(b). Clause 2(a), likewise, refers to the works at 305 Swanston Street as being uncompleted. This is consistent with a December 2008 completion date.
· The fourth recital of the Agape Agreement refers to compensation for delays which have already occurred which is inconsistent with a completion date of 20 December 2008.
· It was common ground that the works at 305 Swanston Street were completed on 23 April 2008, prior to the execution of the Agape Agreement.
· The agreement allegedly executed on 28 October 2007 provides for an eight-week period to execute the works, giving a completion date of approximately 20 December 2007. The first defendant stated that the first plaintiff extended the scope of the works required after 28 October 2007.
45 Mr Carlile, who appeared for the plaintiffs, submitted that it was somewhat unreal that the first defendant signed the Eighth Natro Agreement knowing that monies were payable by him under it and at the same time signed the Agape Agreement knowing that no monies were payable under it. I have grave doubts as to the extent to which the first defendant, who also gave evidence through an interpreter, read and fully understood the two agreements which he signed on 13 June 2008. In any event, the evidence of the first defendant that Qwah told him that the Agape Agreement would not be acted upon provides an explanation.
46 Taking all these matters into account and applying the relevant legal principles, it is, in my view, inappropriate to grant rectification of the second recital to the Agape Agreement.
47 The effect of this is that since the completion date has not been reached, no claim can be made for damages for late completion. Such a conclusion makes the fourth recital and Clause 1 meaningless. So be it. It is not the role of the Court to re-draft a very badly drawn agreement.
48 I am entitled to look at “the matrix of facts surrounding the making of the agreement and its commercial purpose” to resolve ambiguity – see Mrocki v Mountview Prestige Homes Pty Ltd [2012] VSCA 74 at paragraph 25 per Buchanan JA. However, a consideration of the surrounding circumstances cannot alter the fact that the completion date is 20 December 2008.
49 Mr Carlile submitted that were I not to grant rectification, the fact that the date of 20 December 2008 appeared in a recital should not affect the operative Clause 1 of the Agreement. I do not agree. Effect is to be given to the second recital.
50 In any event, so far as Clause 1(a) is concerned, the first plaintiff was required to pay rent and outgoings irrespective of when the works at 305 Swanston Street were completed. Further, a period of approximately four months and not five months elapsed between 20 December 2007 and 23 April 2008, the agreed date upon which the works at 305 Swanston Street were completed.
51 So far as Clause 1(b) is concerned, the Agreement which Chi and Qwah state was executed on 28 October 2007 by Chen provides for liquidated damages of $5,000.00 per week only. Qwah stated that the loss of profit figure of $12,000.00 per week was mentioned to him by Chi. Given Chi’s previous struggling ventures at 305 Swanston Street, his opinion must be questionable.
52 The first plaintiff’s claim against the first defendant fails.
The Eighth Natro Agreement
53 The main challenge by the first defendant to the Eighth Natro Agreement was that the damages stated in Clause 1 were a penalty and therefore were not enforceable.
54 In Ringrow Pty Ltd v BP Australia Pty Ltd & Ors (2005) 224 CLR 656, at 662, the Court stated:
“The law of penalties, in its standard application, is attracted where a contract stipulates that on breach the contract-breaker will pay an agreed sum which exceeds what can be regarded as a genuine pre-estimate of the damage likely to be caused by the breach.”
55 The Court then referred to Lord Dunedin’s speech in Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd [1915] AC 79 at 86-87, where his Lordship stated:
“2. The essence of a penalty is a payment of money stipulated as in terrorem of the offending party; the essence of liquidated damages is a genuine covenanted pre-estimate of damage …
3. The question whether a sum stipulated is penalty or liquidated damages is a question of construction to be decided upon the terms and inherent circumstances of each particular contract, judged of as at the time of the making of the contract, not as at the time of the breach …
4. To assist this task of construction various tests have been suggested, which if applicable to the case under consideration may prove helpful, or even conclusive. Such are:
(a) It will be held to be penalty if the sum stipulated for is extravagant and unconscionable in amount in comparison with the greatest loss that could conceivably be proved to have followed from the breach …
… .”
56 The Court concluded:
“It is therefore proper to proceed on the basis that Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd continues to express the law applicable in this country … .”
57 At page 669, the Court stated:
“The law of contract normally upholds the freedom of parties, with no relevant disability, to agree upon the terms of their future relationships. As Mason and Wilson JJ observed in AMEV-UDC Finance Ltd v Austin [(1986) 162 CLR 170 at 190]:
‘[T]here is much to be said for the view that the courts should return to … allowing parties to a contract greater latitude in determining what their rights and liabilities will be, so that an agreed sum is only characterized as a penalty if it is out of all proportion to damage likely to be suffered as a result of breach.’
Exceptions from that freedom of contract require good reason to attract judicial intervention to set aside the bargains upon which parties of full capacity have agreed. That is why the law on penalties is, and is expressed to be, an exception from the general rule. It is why it is expressed in exceptional language. It explains why the propounded penalty must be judged "extravagant and unconscionable in amount". It is not enough that it should be lacking in proportion. It must be "out of all proportion. … .”
58 The following transcript is relevant. Under cross-examination Qwah stated:
“Q:If you look at p.214, it says, ‘In consideration of the first party granting the second party an extension of time to complete the said renovation works of the said premises, the second party hereby agrees to the following terms and conditions: 2. To pay to the first party the loss of rental and outgoings calculated at $850 per week, plus outgoings on body corporate fees, council, water rates and other expenses not specifically mentioned herein from 10 December 07 and still continuing; loss of profit calculated at $850 per week and still continuing; interest.’ In this proceeding, the second plaintiff is only claiming $850 per week. Is that right?---
A:That’s right.
Q:You are not relying on this?----
A:Yes.
Q:So what’s happened here, there is a duplicity here, what the lawyer, Jose, must have done he has actually, you know, put in, whether it is for good measure or whether he has overlooked it or in the end I overlooked it as well, was the loss of profits there.
HIS HONOUR:
Q:There is a duplication, isn’t there?---
A:It is loss of rents, the profit anyway. It is self-explanatory anyhow. It is not as if I’ve a profit from other ways in the investment property and it should be also, you know, noted that the ‘plus outgoings there’, it should be ‘including outgoings’, okay, that’s another mistake I’ll pick up for you if you want to.
Q:It should be ‘including outgoings’?---
A:Yes, so the lawyers have made a couple of errors there.
Q:Not the most carefully drafted document?---
A:I know.
Q:And it’s come out of your office?---
A:I noted that and I’m embarrassed by it and I’m sure I would be the first lawyer, as Mr Lim has said, to make typo errors. I think in his years of practice he must not have made any mistake with paperwork or any type of errors himself, Mr Lim right?”
[my emphasis]
[T 211-213].
59 From this exchange, it is clear that paragraph 1(b) is substantially a duplication of Clause 1(a).
60 Qwah gave evidence that Darling Street had been vacant since August 2007. He stated that the previous tenant had not cared well for Darling Street. This tenant was also in arrears in paying rental. In May 2008, an arrangement was come to with the agent for Darling Street whereby it reimbursed the second plaintiff for lost rental from August 2007 for a period of six months. Significantly, the amount of compensation was $1,300.00 per month ($300.00 per week).
61 The Eighth Natro Agreement refers to damages for delay in respect of the period before 13 June 2008, as well as the period after that date. The fourth recital and Clause 1(a) and (b) relate to alleged delays prior to 13 June 2008. There is reference in the second recital to a completion date of 15 January 2008. The third recital and Clauses 1(a) and (b) in using the words “still continuing”, refer to delays which may occur after 13 June 2008.
62 The liquidated damages set out in Clauses 1(a) and (b), namely $1,700.00 per week plus outgoings, are, in my view, “extravagant and unconscionable in amount” and “out of all proportion”. An appropriate measure for damages would, in my view, have been $300.00 per week, the sum accepted by the second plaintiff for the six-month period from August 2007. Qwah stated in evidence that he was hoping to obtain the sum of $850.00 per week rental after renovation works were completed at Darling Street. He stated he had discussed this figure with Chi. This figure seems somewhat unrealistic to me and there was no expert evidence to suggest that it was attainable.
63 So far as damages for delay after 13 June 2008 are concerned, those set out in Clauses 1(a) and 1(b) are therefore a penalty and unenforceable. It was not in issue that in this situation damages were at large. In my view, an appropriate measure for damages is $300.00 per week.
64 Mr Carlile submitted that damages for delay should run until 15 January 2009 when the second plaintiff engaged an alternate contractor. The first defendant stated in evidence that he was still carrying out works at Darling Street after June 2008, although they were external works which, it would seem, would have had minimal if any effect on the letting of Darling Street. He also stated that the internal works at Darling Street were 99 per cent completed by 13 June 2008 with works only required on two cupboard doors. In the circumstances, the second plaintiff should, in my view, have taken steps after four months to mitigate its losses and engage another contractor.
65 I therefore allow the sum of $5,600.00, being four months at $1,300.00 per month for damages for delay after 13 June 2008.
66 For the period prior to 13 June 2008, the question of whether or not the damages stated in Clause 1 are a penalty does not arise, the law on penalties only applying to quantification of losses which might arise in the future. As indicated in the extract highlighted in Qwah’s cross-examination, he is only claiming $850.00 per week. I am prepared to allow this figure in respect of the period from 10 December 2007 to 13 June 2007. (It would seem that the date “10 December 2007” should read “15 January 2008” – see second recital). Although the sum of $850.00 per week is excessive compensation for this period, as was said by Sifris AJA in Ange v First East Auction Holdings Pty Ltd [2011] VSCA 335, at paragraph 91:
“… it is not the role of the court to relieve a party from a bad bargain.”
67 For the period prior to 13 June 2008, the first defendant is to pay the second plaintiff the sum of $850.00 per week from 10 December 2007 until 13 June 2007, a period of twenty seven weeks, totalling $22,950.00.
68 Pursuant to the Eighth Natro Agreement, the first defendant is required to pay the second plaintiff the total sum of $28,550.00, being $22,950.00 for the period prior to 13 June 2008 and $5,600.00 for liquidated damages after that date. Interest is also payable pursuant to Clause 1(c) of the Eighth Natro Agreement.
The Counterclaim
69 As mentioned, the first defendant counterclaims against the first plaintiff the sum of $128,784.85 plus a management fee of 10 per cent in respect of 305 Swanston Street and the sum of $48,996.00 plus 10 per cent management fee for Darling Street.
70 In considering the validity of the Counterclaim, relevant factors, in my view, are:
· There is nothing in writing evidencing the alleged cost plus 10 per cent arrangement.
· The tax invoices of 8 January 2008 and 8 February 2008 are inconsistent with the alleged arrangement, in that there is no reference in them to the 10 per cent fee.
· The Agape Agreement and the Eighth Natro Agreement in their first recital refer to fixed price contracts, not a cost plus 10 per cent arrangement.
· In his Counterclaim dated 15 October 2010, the first defendant pleads, at paragraph 4(b):
“There were terms of the First Agreement, among others, as follows:
(a) …
(b)The First Defendant by Counterclaim would pay the contractors/ workmen as building works progressed when Tax invoices are received by the Plaintiff by Counterclaim, for work done.”
[my emphasis].
It was common ground that the service of this Counterclaim in October 2010 was the first occasion upon which the plaintiffs became aware that a claim was being made on a cost plus 10 per cent-basis. This delay in making claims is totally inconsistent with a cost plus 10 per cent arrangement.
71 In all the circumstances, I am not satisfied that the first defendant was entitled to be paid in respect of 305 Swanston Street and Darling Street on a cost plus 10 per cent-basis.
72 Mr Lim submitted that if I did not find that the first defendant undertook to manage the works at 305 Swanston Street and Darling Street on a cost plus 10 per cent-basis, then a claim could still be brought for the cost of works done less the 10 per cent fee. The first defendant has not pleaded nor presented its case on this basis. The first mention by the first defendant of this alternate basis for his claim was made during final submissions. I cannot accept that the first defendant, whatever his precise role was, would carry out works for no remuneration.
73 The counterclaim fails.
Browne v Dunn
74 Mr Carlile submitted that there were several breaches of the rule in Browne v Dunn (1893) 6 R 67. These related to the precise nature of the works carried out by the first defendant and instructions given to him which, in the event, have no relevance in this judgment.
Conclusion
75 The first plaintiff’s claim against the first defendant fails.
76 There will be judgment for the second plaintiff against the first defendant in the sum of $28,550.00. The counterclaim fails.
77 I will hear from the parties on the question of interest, costs and any other orders sought.
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