Brighton Flooring Pty Ltd v Bi Liang
[2022] VMC 7
•22 March 2022
IN THE MAGISTRATES’ COURT OF VICTORIA
AT MELBOURNE
Case No. M10708349
| BRIGHTON FLOORING PTY LTD (ACN 608 025 270) | Plaintiff |
| v | |
| BI LIANG | Defendant |
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MAGISTRATE: | T W Greenway |
WHERE HELD: | Melbourne Magistrates Court (Online) |
DATE OF HEARING: | 21 – 22 March 2022 |
DATE OF DECISION: | 22 March 2022 - Ex Tempore |
CASE MAY BE CITED AS: | Brighton Flooring Pty Ltd v Bi Liang |
MEDIUM NEUTRAL CITATION: | [2022] VMC 7 |
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CONTRACT — Identification of parties between owner, builder and sub-contractor — Quantum meruit in the alternative.
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APPEARANCES: | COUNSEL | SOLICITORS |
| For the Plaintiff | Mr P. Tatti | Aitken Partners Pty Ltd |
| For the Defendant | Ms K. Wangmann | Murati Lawyers |
HIS HONOUR:
The Plaintiff, Brighton Flooring Pty Ltd (Brighton Flooring), carries on a floorboard and carpeting business.
In August 2020, Brighton Flooring performed works at 2 - 4 Canterbury Place, Brighton, (Property) a property owned by the Defendant, Mr Bi Liang (Liang).
At the same time, a building company engaged by Liang, Lifestyle by Design Pty Ltd (Lifestyle By Design), was constructing units at the Property.
Brighton Flooring alleges that, by an agreement formed on or around 12 August 2020, it contracted with Liang, to provide flooring goods and services in exchange for payment in the sum of $77,878.57.
The Agreement was said to have been formed by an authorised agent of Liang, a man named Mr Felix Kung (Kung).
The agreement was said to be comprised of a series of email in August 2020, together with a series of conversations between Mr Felix Kung and Mr Ali Azad (Azad) of the Plaintiff, and Azad and Lilly Liang (Lilly).
In particular, in a conversation on 12 August 2020, Brighton Flooring alleges that:
If the builder, Lifestyle by Design, did not make payment to Brighton Flooring of the contracted sum, Liang guaranteed that it would make payment to Brighton Flooring.
Brighton Flooring clarified that the word ‘guarantee’ was not used in its strict legal sense but was to the effect that Liang said he would make payment directly to Brighton Flooring.
On or around 14 August 2020, the scope of works under the Agreement was varied by omitting works. This lowered the quantum of works to $59,782.36.
Lifestyle by Design then paid a 50% deposit. At some earlier time, Lifestyle by Design had also paid a deposit of $8,000.
After receiving the 50% deposit, Brighton Flooring carried out the works from 17 August 2020 to 20 August 2020.
It has not been paid for the balance of $20,843.08.
Regrettably for all parties concerned, Lifestyle by Design entered liquidation on 9 September 2020.
In his defence, Liang denies he was a party to the contract as alleged. His position that the contract was between Lifestyle by Design and Brighton Flooring.
He also denies:
(a) that any renegotiation in relation to paying Brighton Flooring directly took place;
(b) that Kung was his authorised agent; and
(c) that he made any guarantee to pay Brighton Flooring.
Liang asserts that he asked Lifestyle by Design to use Brighton Flooring to provide carpeting and floorboarding goods and services.
Issues for resolution
In the above circumstances, the primary issue for the Court to determinate is the identity of the parties to the agreement.
The background leading to the performance of the works was as follows.
Azad, Lilly and Liang all agreed that a month before the current agreement, Brighton Flooring had supplied tiles to Liang. Lilly had acted as her father’s translator on that occasion.
After this, there were communications regarding giving the ‘flooring business’ to Brighton Flooring.
On 19 February 2020, Lilly sent a text message to Azad and requested a quote for timber. On 20 February 2020, she wrote a further SMS following up the updated quote so she could send it to the builder.[1]
[1]Court Book (CB) 44.
The job then seemed to be placed on hold for several months.
Brighton Flooring issued a tax invoice to Lilly in the sum of $77,878.57. [2]
[2]CB 57.
This invoice showed that a deposit of $8,078.40 had been paid. Azad gave evidence that this was paid by way of cheque in the name of Lifestyle By Design and that Lilly had delivered it to Brighton Flooring around that date.
On 10 June 2020, Azad sent a text message to Lilly asking “how she went with the builder”. Lilly responded:
I have told them that the one in your display room is the specific floorboard we want. And we recommend to get from your store but I don’t know what they are going to do with the installation. Brad (builder) has asked for a contact person in your store and I have passed your store phone number and email to him.[3]
[3]CB 49.
The invoice was then forwarded by Brighton Flooring’s automatic messaging service to Kung on 27 July 2020. Upon receipt, Kung emailed Azad asking him to please forward to Lifestyle By Design instead of the client.[4]
[4]CB 59.
On 3 August 2020, quote 1390 for carpet provided by Brighton Flooring, was sent directly to Dale Harvey of Lifestyle By Design. The quote appears to have been filled out by Lilly. [5]
[5]CB 74.
Between 4 and 6 August 2020, Dale Harvey of Lifestyle By Design and Azad had an email exchange regarding when the floorboarding would be installed.[6] The job was locked in for the week commencing 17 August, for the floor boards of unit 2 and 4.[7]
[6]CB 73.
[7]CB 71.
On 6 August 2020, Azad emailed Dale Harvey and stated: “we require further payment. Please make payment so there’s no delays in installation”.[8]
[8]CB 105.
Dale Harvey responded to Azad on 7 August 2020:
Hey Ali
That’s fine can you please send through a invoice with the amount payable. We have already paid a deposit to keep the floor in stock a while ago. Please keep all the carpet separate we will book in a date for that in a few weeks. [9]
[9]CB 70.
On 7 August 2020, Azad forwarded the invoice to Dale Harvey, Brad Schram, managing director of Lifestyle By Design, and accounts:
Please find attached Tax Invoice.
Amount payable is $55,258.50.
Due to Covid 10 and many clients and builders going bust we have changed our policy in regards to payment.
Full payment is required 48 hours prior to installation.[10]
[10]CB 69.
The tax invoice was issued in the name of Lifestyle By Design.[11] It showed a deposit of $8,078.40 having been paid.
[11]CB 95.
On 10 August 2020, Brad Schram, managing director of Lifestyle by Design, replied to Azad’s email at 8:21am. He said:
Hi Ali,
I will have to get approval from the client to release that amount of money prior to anything on site.
Felix, I think that this is completely unreasonable. We have made several request to get the invoice amended. For Brighton Flooring to request that we pay for materials and installation prior to the materials even being delivered is unheard of and LBD will not be held accountable if this all goes wrong or the materials are wrong when delivered. Only last week we had a bad batch of carpet delivered to one of our sites.
FYI the Deposit that we paid was 35% for the timber flooring from memory. It would make more sense that we pay a deposit for the carpet to hold and I’m happy to pay for the materials prior to deliver and installation upon completion, but I’m not releasing money for them to pay their subcontractor for installation when they don’t pay them for the work until its done. It make no sense.
Please have a chat and come to an agreement with Ali and let me know what you want us to do. If you want us to release the full amount we will but as soon as that’s done I will be invoice the clients the amount plus margin to put the responsibility back on them as I don’t agree with the terms and this is not our contractor. [12]
[12]CB 68 – 69.
At 10:07am, Azad wrote a response which amongst other things said the following:
Hi Brad,
Firstly, deposit was paid on $8,078.40. and we kept the timber since march without any excess charges. No-where near the 35% you have calculated.
Even though my company policy was 50% on invoice amount, as we had a good relationship with Lilly and her father we didn’t make a big fuss…
… I’m not here to finance projects and risk my company under the Covid 19 situations unfortunately.
Please keep in mind I would never jeopardise my multimillion dollar company for a 77k invoice. [13]
[13]CB 67.
On 12 August, Kung wrote an email to Azad, Brad Schram, Dale Harvey, Lilly and accounts @ Lifestyle By Design. In that email he said:
Hi Ali,
As per our telephone conversation this morning I would like to confirm the followings:
Brighton Flooring agreed to commence the timber floor board laying at the captioned site on 17th August 20.
Payment arrangement:
1. BF issue an invoice to LBD for 50% as per the quote ($70,798.7 + GST) for supply & laying French Oak Floor board and VCC Ninth island carpet for the captioned project. At the moment LBD had paid $8,078.40
2. LBD will pay the different to BF Account before 17th Aug.
3. BF will issue invoice to LBD for installation portion after complete floor board laying and payment shall be arranged as normal with the works satisfy by LB
4. Same as carpet laying shall follow item 3 above.
LBD will forward other paper works or site induction requirement to BF later today.[14]
[14]CB 66 – 67.
On 13 August 2020, Azad wrote a further email at 12:35 pm:
Hi Felix
As discussed over the phone, payment terms as follows.
Please forward the remittance thanks
Total invoice amount $77,878.57
Deposit Paid $8,078.40
Deposit required 50% $38939.28
Difference due today $30860.88
Upon completion of Timber - $27628.75
Upon completion of carpet $113310.03
SWMS and insurances will be submitted on Sunday.
Sometime between 12 August 2020 and 12:35pm on 13 August 2020, Azad gave evidence that he had a conversation with Kung and Lilly regarding ‘payment terms’.
Azad says the genesis of this conversation was that the email from Kung[15] did not record the agreement as previously discussed.
[15]CB 66 – 67.
Azad’s evidence of the 13 August 2020 conversation was to the following effect:
Azad had a conversation with Lilly and Kung, her father agreed to Lilly who then translated back to Kung to say as discussed over the phone payment terms, customer paying me directly.
Azad spoke to Lilly and said this is ridiculous, not what we discussed, then Kung said ok give me another 10 minutes, I’m going to call Lilly again. After Kung spoke to Lilly, Kung said Lilly said “if the builder does not pay, we will pay you” and agreed with the payment terms.
Lilly’s evidence on this question was to the following effect:
She could not remember having three-way conversation with Kung, Azad and herself simultaneously. She said, she could only dial one person. Normally, she would call Kung and he would relay the message to Mr Azad.
When asked whether he had a conversation with Azad that ‘if the builder doesn’t pay, Liang would pay Brighton Flooring directly’, she said:
I can’t remember, I don’t think I said that, no I never said that.
Kung was not called to give evidence. The reason for this, provided Liang in evidence, was that:
The project has been stopped for 1-2 years, since then I couldn’t get hold of him. I did try and talk to him on WeChat I couldn’t’ find him.
In the circumstances, Brighton Flooring seeks to rely upon the well-known principles set down in Jones v Dunkel[16] and relied upon a recent decision of Archer v Garcia[17].
[16](1959) 101 CLR 298.
[17][2022] VSC 57, 74 – 76 (Incerti J).
The prerequisites for drawing such an inference are as follows:
(a) The missing witness would be expected to be called by one party rather than the other;
(b) The missing witness’ evidence would elucidate a particular matter;
(c) Missing witness absence is unexplained. [18]
[18]Payne v Parker [1976] 1 NSWLR 191, 201 (Glass JA).
Plainly, Kung is within Liang’s camp. He was his translator and conveyed messages for him.
I also find that Kung’s oral evidence would have elucidated and been relevant to what happened in the 13 August conversation.
Further, I consider Liang’s explanation to be unsatisfactory in the circumstances. This proceeding has been on foot since 7 April 2021, and Liang was on notice that Mr Kung’s evidence formed a substantial basis of Brighton Flooring’s allegations in its complaint.
In my opinion, an unexplained failure of a party to call a witness may in appropriate circumstances allow the trier of fact to infer that his or her evidence would not have assisted that party’s case.
The failure may also allow a trier of fact to draw an adverse inference with greater confidence.
However, a Jones v Dunkel[19] inference does not enable the trier of fact to infer that the evidence of the absent witness would have been positively adverse to that party. Nor does the rule enable the absence of a witness to make up any deficiency of evidence. It will not support an adverse inference unless the evidence otherwise provides a basis on which that unfavourable inference can be drawn.
[19](1959) 101 CLR 298.
In the circumstances, I am prepared to draw the inference that the evidence of Kung would not have assisted Liang’s case.
Applicable Legal Principles - Identification of Parties
Identification of the parties to a contract must be in accordance with the objective theory of contract. That is the intention that a reasonable person, with the knowledge of the words and actions of the parties communicated to each other, and the knowledge that the parties had of the surrounding circumstances, would conclude that the parties had.
The process of construction requires consideration not only of the text of the documents, but also the surrounding circumstances known to the parties and the purpose and object of the transaction. This in turn presupposes knowledge of the genesis of the transaction, the background, and the context in which the parties are operating.[20]
[20]Lederberger v Mediterranean Olives Financial Pty Ltd (2012) 38 VR 509, 19.
Brighton Flooring submitted that, considering the oral evidence of Azad and the background facts set out previously, the Agreement was between Brighton Flooring and Liang. It draws attention to the following matters:
(a) Liang and Lilly, on his behalf, engaged Brighton Flooring directly to provide tiling for the job;
(b) Liang made the first approach to obtain the timber floorings; as Lifestyle By Design was not able to source the necessary timber; and
(c) Liang obtained the initial quote.
On the events leading up to 13 August, it was submitted that:
(a) The invoice provided by the Brighton Flooring was addressed to Liang, not the builder.
(b) On 7 August, Azad requested full payment 48 before installation.[21]
[21]CB 69.
The email to Brad Schram (10 August Schram Email) says, rhetorically, why is Kung having any discussions with Azad if it was the Lifestyle by Design who engaged and was responsible for paying Brighton Flooring. [22]
[22]CB 67.
That email makes the statement that the Brighton Flooring is not Lifestyle By Design’s contractor.
This email was said to set the scene for the 13 August conversation; where Kung and Lilly agreed to pay Brighton Flooring if Lifestyle By Design did not.
In response, Liang provided nine matters which demonstrated that the contract was between Lifestyle By Design and Brighton Flooring.
Liang obtained a quotation from Brighton Flooring and referred the quotation to Lifestyle By Design. He was not involved in the final pricing and it was a matter for Lifestyle By Design to agree to.
(a) Lifestyle By Design paid the deposit;
(b) Lifestyle By Design paid the second deposit on or around 13 August;
(c) Liang gave evidence that the contract was between Lifestyle By Design and Brighton Flooring because otherwise Lifestyle By Design would not be responsible for ensuring quality of the works;
(d) there were requests by Brighton Flooring to Lifestyle By Design to pay the invoice.[23];
[23]CB 69.
(e) on request, Brighton flooring issued invoices to Lifestyle By Design on at least 2 occasions;
(f) in the 10 August Schram Email, Lifestyle By Design told Brighton Flooring, that it would pay it, but would charge Liang plus a margin. On 12 August, Kung told that the builder would pay. In the response by Azad, there is no mention Liang would pay.[24];
(g) Liang paid the invoice issued by the Builder, which contained item for the flooring; and
(h) Brighton Flooring is recorded as a creditor in the report to creditors.
[24]CB 67 – 68.
Applying the test as set down in Lederberger[25], in my opinion, the objective intention of the parties involved was that the Agreement for the supply of the flooring and carpet was between Brighton Flooring and Lifestyle By Design.
[25]Lederberger v Mediterranean Olives Financial Pty Ltd (2012) 38 VR 509, 19.
In particular, the following matters:
(a) Lilly requested the initial quote and told Azad she would be following up the builder on 20 February. Azad was aware of this when he enquired on 10 June, ‘how did you go with the builder’. Lilly responded that the builder had asked for a contact person in Brighton Flooring’s store and had passed the phone number and email to him;
(b) the deposit of approximately $8,000 was paid by Lifestyle By Design;
(c) the initial quotation was sent to Kung, who informed Azad on 27 July 2020 to forward it to Lifestyle By Design instead of the client;
(d) the 4 - 6 august emails, show dealings exclusively between Dale Harvey and Azad concerning access to the site; and
(e) on 6 August 2020, Azad sought payment from Lifestyle By Design and Dale Harvey requested an invoice from Brighton Flooring.
The 7– 10 August emails are also instructive.[26] They show:
[26]CB 66 – 71.
(a) Brighton Flooring wanted full payment before the installation;
(b) Lifestyle By Design disagreed would not pay 100% before delivery; and
(c) counter proposer that it would pay for materials prior to delivery and installation after.
I agree with Liang’s submission that, read in context, the Schram 10 August email is more indicative of a contractual relationship between Lifestyle By Design and Brighton Flooring. It evidences a relationship where Lifestyle By Design would invoice Liang for the work. I do not consider the reference to ‘this is not our contractor’ as referring to any contractual relationship but rather that Brighton Flooring was unknown to them prior to the job.
The email sent by Kung on 12 August 2020 at 2:07 pm (The Kung 12 August Email)[27] also refers to payment by Lifestyle by Design to Brighton Flooring – for the initial deposit, and for 50% of the quote (less the initial deposit), and finally the balance after completion of the floorboard installation.[28]
[27]CB 66 – 67.
[28]CB 66 – 67.
Azad’s response email of 13 August 2020 is also of critical importance in my view. It does not reference any liability or agreement by Liang to make any payment to Brighton Flooring. [29]
[29]CB 65 – 66.
The email of Kung on 13 August at 12:56 pm is entirely consistent with the agreement being between Lifestyle By Design and Brighton Flooring.[30]
[30]CB 98.
I accept that Liang paid Lifestyle By Design the sum of $104,868.20 on 3 September in relation to Lifestyle by Design’s invoice dated 27 August 2020.
Alleged 13 August Conversation
Azad also conceded in cross examination, that the agreement was firstly between Lifestyle By Design and Brighton Flooring. His evidence was that Liang had agreed to pay only if Lifestyle By Design did not pay.
This was entirely consistent with Azad’s evidence of the 13 August Conversation; it was that - if the builder does not pay, Liang will pay Brighton Flooring. This was also reflected in the particulars to paragraph 4 of the Complaint.
In my opinion, this evidence does not establish a primary liability between Brighton Flooring and Liang – or that a contract had been formed between them.
On the contrary, it strongly suggests that an agreement had been concluded between Lifestyle By Design and Brighton Flooring.
It is the language of a guarantee, or a secondary liability. As it is not evidenced in writing by Liang, it infringes s 126 of the Instruments Act 1958[31] and is unenforceable.
[31]Instruments Act 1968.
Alternatively, Brighton Flooring bears the legal onus to prove that the agreement had been made as alleged. I accept that both parties were endeavouring to give truthful evidence. However, in weighing and examining the oral and documentary evidence, I am not satisfied that the 13 August conversation took place as alleged by Brighton Flooring.
In my opinion, the most pertinent evidence to this question are emails between Kung and Azad on 12 - 13 August 2020.[32]
[32]CB 65 – 67.
Azad’s email of 13 August (said to have been written after the 13 August conversation)[33], is in my opinion, entirely consistent with The Kung 12 August Email.
[33]CB 65 – 66.
Had Liang agreed (through Kung or Lilly) to pay Brighton Flooring directly, a reasonable person would consider that Azad would have referred to in this email. Particularly given Azad’s significant concerns as to Lifestyle By Design’s solvency at that time. There is no reference to a guarantee or a direct payment.
Next, Kung’s email of 13 August[34] directs Azad’s attention to the fact that an invoice should be made in the name of Lifestyle By Design. In other words, that the contract was between Brighton Flooring and Lifestyle By Design.
[34]CB 98.
In response, Azad does not raise any objection to this course, or make reference to a guarantee or direct payment by Liang. On the contrary, he complies with the request and issues a revised invoice in the name of Lifestyle By Design.
For those reasons, I am not satisfied that the 13 August conversation took place as alleged by Brighton Flooring.
Quantum Meruit Claim
Turning to Quantum Meruit Claim, Brighton Flooring submits that if the Court were to conclude that the contract was between Lifestyle By Design and Brighton Flooring, it was entitled to restitution in the sum of $20,843.08.
It relies upon the principles set down by the High Court in Pavey & Matthews v Paul[35], namely:
[35](1987) 162 CLR 221.
(a) That Liang has been enriched by the works carried out by Brighton Flooring;
(b) Liang’s enrichment was at the expense of Brighton Flooring; and
(c) Liang’s enrichment was unjust.
In response, Liang states that the principles of restitution are no engaged here.
First, unjust enrichment is not enlivened in circumstances where there is a contract between Brighton Flooring and Lifestyle By Design. That contract was not terminated or rescinded. It was submitted the court cannot undermine the contractual bargain that those parties had struck.
Secondly, there had not been any request for the works. Properly construed it was the builder that made the request. Liang chose the materials and referred Brighton Flooring to the builder.
Thirdly, there must be some unconscionable factor. Liang submitted that he had paid Lifestyle By Design for the works in full plus margin.
In Reply, Brighton Flooring submitted that:
(a) the contract with Lifestyle By Design was not unenforceable as Brighton Flooring had entered liquidation. Brighton Flooring was precluded by the Corporations Act from enforcing its right, it could only lodge a proof of debt;
(b) that Liang had requested the works through Lilly and Kung, on his behalf; and
(c) stated that Liang had accepted, or constructively accepted the benefit, and fell within the principles set out in Branner v First Artists’ Management Pty Ltd.[36]
[36][1993] 2 VR 221, 222.
For the reasons advanced by Liang, I am not satisfied that the principles of restitution are engaged in the present circumstances. The finding of a contract between Lifestyle By Design and Brighton Flooring in my view precludes an order for quantum meruit. I do not accept that the liquidation of the Lifestyle By Design changes that characterisation.
Further, I do not consider that any enrichment by Liang is ‘unjust’ in circumstances where he has paid amounts for the flooring to Lifestyle By Design, as his builder.
In those circumstances, Brighton Flooring claim for quantum meruit is also dismissed.
I will hear parties on costs and other orders.
MAGISTRATE GREENWAY
22 March 2022
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