City Garden Australia Pty Ltd v Yisheng Construction Pty Ltd & Anor

[2023] HCATrans 102

[2023] HCATrans 102

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S10 of 2023

B e t w e e n -

CITY GARDEN AUSTRALIA PTY LTD (ACN 604 911 800)

Applicant

and

YISHENG CONSTRUCTION PTY LTD (ACN 118 284 281)

First Respondent

YISHENG AIR CON. PTY LTD (ACN 608 964 398)

Second Respondent

Application for special leave to appeal

KIEFEL CJ
GORDON J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA AND BY VIDEO CONNECTION

ON FRIDAY, 11 AUGUST 2023, AT 9.30 AM

Copyright in the High Court of Australia

KIEFEL CJ:   In accordance with the protocol for remote hearings, I will announce the appearances for the parties.

MR J.C. HEWITT, SC appears with MR H.R. FIELDER for the applicant.  (instructed by Lawside Lawyers)

MR B.A.J. COLES, KC appears with MR D. NEGGO for the respondents.  (instructed by Hicksons Lawyers)

KIEFEL CJ:   Yes, Mr Hewitt.

MR HEWITT:   May it please the Court.  Your Honours, the primary special leave question that we have framed is whether payment schedules issued under the Building and Construction Industry (Security of Payment) Act (NSW) were evidence of amounts properly payable under the construction contracts to which the payments schedules related.  An aspect of that question which, we say, involves matters of public importance and of general application is this issue:  for the purposes of the Evidence Act, what are the reasonable inferences that may be drawn from a payment schedule prepared pursuant to the Security of Payments Act? Now that, in turn, calls for close consideration of the Act and we will draw attention, in particular, to sections 14 and 32 in due course.

Can I start firstly by indicating how the question arose from the judgments below.  I invite your Honours, please, to come over to page 50 of the application book, which is where the relevant findings of the primary judge are set out.  Firstly, I should indicate that the claim in question was based on an oral contract, the terms of which are not the subject of appeal.  The parties to that contract are the applicant, who was the developer of a residential property development, and the respondents, who were engaged by the builder of the development as subcontractors.

At trial, the applicant was found to have agreed to take responsibility for the payment of amounts due by the builder to the respondents as subcontractors.  At page 50 of the application book, as I indicated, are there set out the relevant findings made by the primary judge as to the terms of relevant contract.

KIEFEL CJ:   A critical finding by the trial judge is that:

City Garden would pay amounts that were properly payable under those contracts –

The question is:  how is it shown to be properly payable?

MR HEWITT:   Exactly, your Honour.  That comes from 75 of the primary judge’s judgment, which is there set out.  The critical question, as your Honour has indicated, was for the respondent to prove what amounts were properly payable.  So, then can I come, please, to identify the manner in which that issue was addressed both by the primary judge and on appeal by inviting your Honours to turn, please, to page 61 of the application book.  Again, there is set out – in this aspect or this part of the Court of Appeal’s judgment – the relevant findings made by the primary judge.  What the Court of Appeal said at paragraph 49 is that:

The second basis upon which the trial judge dismissed the plaintiffs’ claims was that the payment schedules failed to establish any loss.

At paragraph 90, the primary judge had said:

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.

Then, dropping down four lines further:

tender of the final payment schedule is not proof of that amount.

The conclusion in the second‑half of paragraph 91 of the primary judge’s judgment is there set out.  The primary judge said that:

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.

What the Court of Appeal then said at 50 was that:

The judge was unwilling to accept the payment schedules as evidence of the amounts payable.

We submit that the primary ‑ ‑ ‑

KIEFEL CJ:   The Court of Appeal held that was just wrong, was it not?

MR HEWITT:   That is right.  The Court of Appeal ‑ ‑ ‑

KIEFEL CJ:   They were business records, and they were tendered without objection.

MR HEWITT:   That is the way the Court of Appeal approached it.  Now, we submit that the primary judge was correct, and the Court of Appeal was wrong in the approach that the Court of Appeal took.  The relevant part of the Court of Appeal’s judgment, which your Honour the Chief Justice has just made reference to, is over the page – application book, page 62, paragraph 52 of the judgment – where the Court of Appeal observed that:

the payment schedules were admissible as business records and were tendered without objection.

In the previous paragraph 51, which is significant, we submit, the Court of Appeal said that:

Pursuant to s 183 of the Evidence Act 1995 (NSW) he was entitled to “draw any reasonable inferences” from the document. No basis was disclosed upon which it was open to doubt the authenticity of the payment schedules, or their sufficiency for whatever representations they included.

We emphasise those words, “sufficiency for whatever representations they included”, because our submission is that the key question really is:  what were the reasonable inferences that were capable of being drawn from the payment schedules that had been admitted as business records?  To see how the Court of Appeal drew the threads together, can I invite your Honours to turn over to page 66 of the application book, please.

GORDON J:   Before you do that, Mr Hewitt, can I raise two questions with you.  One is that the term of the contract, which you do not challenge, which you took us to, was that the payments would be made by reference to these payment schedules, subject to the implied qualification that was imposed on them.  So, that is the term of the contract.  Payment schedules are then produced.  What do we make of what is at paragraph 54, where there was no challenge to the evidence given to Mr Liu, so there was no basis to doubt the genuineness of the payment schedules?

MR HEWITT:   In relation to the first of those questions, your Honour Justice Gordon, can I invite your Honour, please, to come back to application book 50 to identify precisely the term of the contract that was found by the primary judge.  That is at paragraph 75 of the primary judge’s judgment at application book 50.  In the fourth line of that paragraph, what Justice Ball said is that:

On the findings I have made, [Mr Liang] agreed to pay amounts that were assessed by the Builder and were properly payable under the relevant subcontract.

So, that is the key term.  We say that the term is not a term whereby they agreed to pay amounts that were payable pursuant to the payment schedules; it was an agreement to pay amounts that were assessed by the builder and were properly payable.  That is a critical distinction, because our submission is that amounts that were properly payable fell to be determined by reference to the rights and terms of the subcontracts themselves, and the payment schedules could not be used as evidence to prove amounts that were properly payable.

In relation to the second question and the status of Mr Liu’s evidence, can I firstly invite your Honours, please, to come to paragraph 47 of the Court of Appeal’s judgment, application book 60.  There is there set out a description by the Court of Appeal of the contents of Mr Liu’s affidavit.  On the third line, it was said that:

Mr Liu’s first affidavit, under the heading “Debts Outstanding” (par 198) provided a summary in two columns of the amounts claimed (identified by a reference to a payment schedule) and the amounts unpaid.

But there was a critical limitation placed by the primary judge on that evidence.  Can I invite your Honours, please, to turn to pages 80 and 81 of the application book – that is paragraph 32 of the special leave application.  At the top of page 81 of the application book, we there set out the limitation that was placed by the primary judge on the critical point of Mr Liu’s affidavit – paragraph 198 – and the transcript there recorded the primary judge ruling that his Honour was not going to admit these paragraphs as proof that they are due and payable, but only as summaries.

The position, insofar as Mr Liu’s affidavit is concerned, is that they went no higher than being summaries of payment schedules which then takes one back to the critical question of, what were the representations that were made by those payment schedules?  Or, to put it another way, what were the reasonable inferences that could be drawn from those payment schedules?

The way in which we say that question had to be addressed, with respect, was by reference to the terms of the Security of Payments Act, because the payment schedules had been prepared pursuant to that Act.  What we have done at pages 78 and 79 of the application book is to set out what we say are the relevant provisions of the Security of Payments Act and the relevant High Court authorities which have touched upon the purpose of the statutory regime.  So, coming then, please, to page 78 of the application book, we there set out the terms and effect of section 14 of the Security of Payments Act, most significantly, section 42 ‑ ‑ ‑

KIEFEL CJ:   Mr Hewitt, in attempting to identify a question of public importance, I understand your need to rely on the Security of Payments Act, but no question actually arises as to the operation of the Act itself.  It is just a question of whether or not the “context” – as the Court of Appeal described it – which that Act provides for this contract gives certain evidentiary value to the fact of the charges, and what inferences can be drawn.  I have some difficulty in seeing that they are questions of public importance.  They arise with respect to a particular contract made between the parties ‑ ‑ ‑ 

MR HEWITT:   Yes, your Honours, we accept that the City Garden contract itself was not governed by the Security of Payments Act, but the way in which the Security of Payments Act becomes relevant, we submit, is because the critical term of the City Garden contract was referrable to amounts that were properly payable pursuant to the subcontract which was governed by the Security of Payments Act.  The payment schedules were prepared pursuant to section 14 of that Act.

The Court of Appeal’s reasoning depended on reasonable inferences that could be drawn from the payment schedule.  Our submission is that in order to determine the reasonable inferences that could be drawn from those payment schedules, it is necessary to look to the underlying or the background statutory regime, because that informs the reasonable inferences that can be drawn from the payment schedule itself.  Most particularly, section 14(2), which is set out there at page 78 of the application book, provides that:

A payment schedule—

(a)must identify the payment claim to which it relates, and

(b)must identify the amount of the payment (if any) that the respondent proposes to make –

Our submission is that the only inference that could be drawn from the payment schedule was the amount of the proposed interim payment to be made by the builder and not an inference as to the underlying rights in respect of the subcontract.  That position is confirmed, we submit, by section 32 of the Act, which is set out at on the same page, further down at paragraph 22 of the application.  Section 32, in terms, provides that the Act does not affect:

any right that a party to a construction contract—

(a)     may have under the contract –

So, the issue of public importance, we say, is firstly:  it gives rise to the consideration of these questions under the Security of Payments Act – and in Probuild, the High Court noted that this Act has been replicated across Australia, and so the question will have nation-wide importance to that extent.

KIEFEL CJ:   Mr Hewitt, it is only going to arise, though, when you have a contract of this nature, is it not?

MR HEWITT:   In that scenario, or in another situation where, for whatever reason, attempts are made to rely upon a payment claim or a payment schedule as a business record.  That is the context in which the precise question would arise.  But in the course of consideration of that question, we do submit that it will call for consideration of the relevant provisions of the Act.

GORDON J:   It comes back, does it not, though, to the term of the contract to which the Chief Justice has directed your attention.  It is the only context in which it can arise, and it turns on the specificity of that term.

MR HEWITT:   That is certainly true in the specifics of this case, but a similar question could arise in another case where attempts are made to rely on a payment claim or a payment schedule.  We also submit in this case that, as well as there being a question of public importance, it is in the interests of the administration of justice for leave to be granted in light of what we submit to be the error made by the Court of Appeal in the way in which the payment schedules were treated.

A second aspect of the question of public importance is that we say that the treatment of the payment schedules in the manner that was undertaken by the Court of Appeal does have the capacity to undermine important objectives of the statutory regime as described by the High Court in Probuild.  Most particularly, and firstly, the procedure is designed to operate quickly by the imposition of what were described in Probuild as “brutally fast” deadlines.  Secondly, payments under the Act were designed to be interim payments only with disputes about the final determination of rights under construction contracts to be determined separately.  We have identified in paragraph 35 of the special leave application what we submit are potentially undesirable consequences of the Court of Appeal’s reasoning in undermining the statutory regime in the manner I have described.  So that deals with what we say is the first special leave point and appeal grounds 1 and 2.

The primary judge found for the applicant on two separate grounds – and the second special leave point we framed relates to the second of those two grounds.  That question, as we have framed it, is whether an appellate court is permitted to interfere with a primary judge’s exercise of a judicial discretion concerning a procedural matter when no House v The King error is established.  We submit that the Court of Appeal erred by overturning the primary judge’s ruling that the respondents were not permitted to amend their claim, nor advance the proposed amended case late during the trial.

We submit that an aspect of this error was the way in which the Court of Appeal treated paragraph 198 of Mr Liu’s affidavit, which I have already drawn your Honours’ attention to, because we submit that it appears that the Court of Appeal may not have had appropriate regard to the limitation that was placed on that evidence by the evidentiary ruling made by the primary judge, which I have drawn your Honours’ attention to.

KIEFEL CJ:   Mr Hewitt, I am reminded that an extension of time is required, and it is opposed as not justified.

MR HEWITT:   Yes, I was turning to that question, your Honour.  The applicant seeks an order that compliance with the time limited by rule 41.02.1 be dispensed with.  We set that application out at page 73 of the application book.  The affidavit explaining the failure to comply is at application book page 101.  We have summarised the relevant matters in our reply submissions at application book 120.

In essence, the relevant facts are these:  the Court of Appeal hearing was on 7 December 2022; the Court of Appeal’s judgment was handed down very promptly on 15 December 2022 which, obviously, was closely in the lead‑up to the Christmas break; the sole director of the applicant is not a native English speaker and he decided to seek new legal representation, but the difficulty was that the time for filing the application fell on 30 January 2023 – right in the middle of the January break.  So, the result was that the application was filed on 8 February 2023, which was 26 days after the deadline provided in the Rules.  But in circumstances where we say there is no prejudice that has been identified by the respondents, we would respectfully submit that the application that the time limited by rule 41.02.1 be dispensed with, be granted.

May it please the Court.  Your Honours, those are our submissions.

KIEFEL CJ:   Thank you, Mr Hewitt.  The Court will adjourn briefly to consider the course that it will take.

AT 9.50 AM SHORT ADJOURNMENT

UPON RESUMING AT 9.52 AM:

KIEFEL CJ:   We need not trouble you, Mr Coles.  This application for special leave requires an extension of time.  The proposed appeal does not raise any question of public importance.  The issues sought to be agitated concern the terms of the particular contract between the parties.  The extension of time is therefore not justified.  The application for extension is refused with costs.

Adjourn the Court to 10.30 am.

AT 9.53 AM THE MATTER WAS CONCLUDED