Hu v Sunshine Investments Group (Aust)
[2024] VCC 1546
•7 October 2024
| IN THE COUNTY COURT OF VICTORIA | Revised |
| AT MELBOURNE | Not Restricted |
| COMMERCIAL DIVISION | Suitable for Publication |
| GENERAL LIST | |
| Case No. CI-19-00280 | |
| Jinfu Hu & Anor | Plaintiffs and Defendant to |
| (according to the attached schedule) | Counterclaim |
| v | |
| Sunshine Investments Group (Aust) Pty Ltd | Defendants and Plaintiff to |
| (ACN 168 380 112) & Anor | Counterclaim |
| (according to the attached schedule) |
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| JUDGE: | His Honour Judge Trapnell |
| WHERE HELD: | Melbourne |
DATE OF HEARING: | 10-14, 18-21, 25-28 and 31 August 2020; 1-4, 7-10, 22-25 and 29 September 2020; 1 October 2020; 11 December 2020. |
| DATE OF JUDGMENT: | 7 October 2024 |
| CASE MAY BE CITED AS: | Hu v Sunshine Investments Group (Aust) |
| MEDIUM NEUTRAL CITATION: | [2024] VCC 1546 |
REASONS FOR JUDGMENT
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| Subject: | SALE OF UNIT ‘OFF THE PLAN’ |
Catchwords: | Sale of unit off the plan – Purchaser alleges vendor’s agent procured his signature on 17 loose pages rather than entire bound contract – No vendor statement under s 32 of Sale of Land Act 1962 provided – Contract consists of the 17 loose pages together with oral assurances or warranties provided by vendor’s agent – Oral warranties or assurances not fulfilled – Purchaser refusing to settle following registration of plan of subdivision – Vendor serving notice of rescission – Purchaser not obliged to settle – Service of rescission notice constituted repudiation by vendor – Oral assurances by vendor’s agent also constituting misleading or deceptive conduct – Purchaser entitled to recover deposit together with statutory interest |
Legislation Cited: | Building Act 1993; Competition and Consumer Act 2010 (Cth); Environmental Planning and Assessment Act 1979 (NSW); Penalty Interest Rates Act 1983; Property Law Act 1958; Sale of Land Act 1962; Subdivision Act 1988; Supreme Court Act 1986; Trade Practices Act 1974 (Cth) |
Cases Cited: | Aliotta v Broadmeadows Bus Service Pty Ltd (1988) 65 LGRA 362 Argy v Blunts & Lane Cove Real Estate Pty Ltd (1990) 26 FCR 112 Australian Competition and Consumer Commission v Simply No- |
| Knead (Franchising) Pty Ltd (2000) 178 ALR 304 |
!Undefined Bookmark, I
Australian Competition and Consumer Commission v Wizard
Mortgage Corporation Ltd [2002] FCA 1317
Batey v Gifford (1997) 42 NSWLR 710
Beard v Wratislaw [1993] 2 Qd R 494
Benlist Pty Ltd v Olivetti Australia Pty Ltd & Anor (1990) ATPR 41-043
Blomley v Ryan (1954) 99 CLR 362;
Blue v Ashley (No 2) [2017] EWHC 1928
Bowler v Hilda Pty Ltd (1998) 153 ALR 95
Brett v Cumberland Properties Pty Ltd [1986] VR 107
Brighton Australia Pty Ltd v Multiplex Constructions Pty Ltd [2018]
VSC 246
Brown v Jam Factory Pty Ltd (1981) 35 ALR 79
Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592
Clarke (as trustee of the Clarke Family Trust) v Great Southern
Finance Pty Ltd (Receivers and Managers Appointed) (in liq) [2014]
VSC 516
Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447
Commissioner of Taxation v Reliance Carpet Co Pty Ltd (2008) 236
CLR 342
Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64
Country and Metropolitan Homes Surrey Ltd v Topclaim Ltd [1996] Ch
307
Curtain v Aparo (1988) V Conv R 54-316
Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31
Director of Consumer Affairs Victoria v Scully (2013) 303 ALR 168
Dormer v Solo Investments Pty Ltd [1974] 1 NSWLR 428
Dougherty Bros Pty Ltd v Garde (1976) 2 BPR 9206
Douglas v Simons Builders Pty Ltd [2015] VSC 118
Dovaenda Pty Ltd v Pagliari [2007] QSC 216
Downing v Lau [2018] VCC 33
DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 19 ALR 223
Electricity Generation Corporation v Woodside Energy Ltd (2014) 251
CLR 640
Fiorelli Properties Pty Ltd v Professional Fencemakers Pty Ltd (2011)
34 VR 257
Flash Lighting Company Ltd v Australia Kunqian International Energy
Co Pty Ltd (No 3) [2018] VSC 711
Flight v Booth (1834) 131 ER 1160
GA Nominees Pty Ltd v Barden Motors Pty Ltd (1985) ATPR 40-519
Given v Pryor (1979) 39 FLR 437
Golding v Vella [2001] NSWSC 567
Hadley v Baxendale [1854] EWHC J70
Henderson v McSharer [2015] FCA 396
Hexiva Pty Ltd v Lederer & Ors (No 2) [2007] NSWSC 49
Heyman v Darwins Ltd [1942] AC 356
Higgins v Statewide Developments Pty Ltd [2010] NSWSC 183; 14
BPR 27293
Hobartville Stud v Union Insurance (1991) 25 NSWLR 358
Jobbins v Capel Court Corporation Ltd [1989] FCA 538
Johnston v Delata Pty Ltd, unreported (FCA, Einfield J, G767/88, 10
March 1993)
Jones v Dunkel (1959) 101 CLR 298
Kannane & Ors v Demian Developments P/L [2005] NSWSC 1193
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Kennedy v Collings Construction Company Pty Ltd (1989) 7 BCL 25
Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007)
233 CLR 115
Kyren Pty Ltd v Wunda Projects Australia Pty Ltd & Ors [2012]
SASCFC 23
Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989)
166 CLR 623
Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494
Martorella v Innovision Developments Pty Ltd [2011] VSC 282
Mirvac (Docklands) v La Rocca [2006] VSC 48
Murphy Corp Ltd v Acumen Design & Development (Qld) Pty Ltd
(1995) 11 BCL 274
National Australia Bank v Walter [2004] VSC 36
O’Donnell v Reichard [1975] VR 916
Portbury Development Co Pty Ltd v Ottedin Investments Pty Ltd
[2014] VSC 57
Premier Building & Consulting Pty Ltd v Spotless Group Ltd (2007) 64
ACSR 114
Prenn v Simmonds [1971] 1 WLR 1381
Pryor v Given (1980) 30 ALR 189
R v Lao (2002) 5 VR 129
Raphael Shin Enterprises Pty Ltd v Waterpoint Shepherds Bay Pty Ltd
[2014] NSWSC 743;
Re Fawcett and Holmes’ Contract (1889) 42 Ch D 150
Rossco Developments Pty Ltd v O’Halloran (1980) 29 ACTR 1
Shevill v Builders Licensing Board (1982) 149 CLR 620
Simcevski v Dixon (No 2) [2017] VSC 531
Sunland Waterfront (BVI) Ltd v Prudentia Investments Pty Ltd [2013]
VSCA 237
Tenji v Henneberry & Associates Pty Ltd (2000) 98 FCR 324
Tynan & Anor v Filmana Pty Ltd & Ors [2013] QSC 32
Union Carbide Australia Ltd v Duracell Australia Pty Ltd (1986) 7 IPR
481
Victorian Economic Development Corporation v Clovervale Pty Ltd
[1992] 1 VR 596
Wait v Reed (1997) ANZ ConvR 455
Watson v Foxman (1995) 49 NSWLR 315
Wollert Epping Developments Pty Ltd v Batten (2019) 60 VR 92
Woodar Investment Development Ltd v Wimpey Construction UK Ltd
[1980] 1 All ER 571
| Judgment: | 1. Within 14 days the parties must bring in short minutes to give effect to these reasons |
| 2. Costs reserved |
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| APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs and Defendant | Mr P J Adams | Xiao Lawyers |
| by Counterclaim | ||
| For the Defendants and Plaintiff | Dr K Weston-Scheuber | Logie-Smith Lanyon |
| by Counterclaim |
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Table of Contents
Introduction .......................................................................................................................... 3
Pleadings and submissions ................................................................................................. 6
| Issues | .................................................................................................................................. 6 |
Overview............................................................................................................................ 11
Evidence and Analysis ...................................................................................................... 12
Breach of contract – Plaintiffs’ claim .................................................................................. 13
1. What constitutes the Agreement between the parties made on 14 October 2016? . 13
The signatures on the contract ............................................................................. 16
The bound contracts ............................................................................................. 19
Didi Li’s credibility ................................................................................................. 31
Time of contract .................................................................................................... 35
2. Whether terms of the Agreement existed: ............................................................... 35
a. Lot G4 had approval for a 30-seat café which would be constructed by (café term); ........................................................................................................... 35 b. Lot G4 could also be used as a restaurant (restaurant term); ........................... 41 c. The car parking spaces allocated to Mr Hu would be opposite the lift in the basement and would not be in car stackers? ........................................................ 42
3. If the terms existed, was there a breach of those terms: ......................................... 44
a. In terms of the ceiling height? ........................................................................... 44 have the requisite DTS height clearance .............................................................. 51 Further rectangular ducting would need to be installed in the area immediately beneath the ceiling of Lot G4 along with the exposed pipes ................................. 52 c. In terms of the car spaces being arranged as car stacker spaces? (Para 7 SFASOC) .............................................................................................................. 53
b. In terms of other alleged defects? ..................................................................... 50
No sewer connection on the plans for the café to have appropriate toilet facilities
.............................................................................................................................. 50
Cold shell .............................................................................................................. 54
4. Did the first defendant repudiate the Agreement by failing to rectify the alleged
defective works? (Paras 9 and 10, SFASOC) ....................................................... 72
No defect and not capable of rectification ............................................................. 79
Contractual conditions precluding demand for rectification/refusal to settle .......... 80
Further contractual provisions ............................................................................... 84
5. If there were terms of the Agreement as alleged, and they were breached, what loss
or damage was suffered by the Plaintiffs? (Para 11 SFASOC) ............................. 86
Damages for payment of interest .......................................................................... 87
Section 32 of the Sale of Land Act 1962 ........................................................................... 89
6. Did the first defendant fail to provide a vendor statement in accordance with s 32 of the Sale of Land Act 1962 to the first plaintiff prior to him signing the Agreement? (Para 12 SFASOC) ............................................................................................... 89
7. If the first defendant failed to provide a vendor statement to the first plaintiff, can the first plaintiff avoid the Agreement on that basis? (Para 13 and 14 SFASOC) ....... 90
Misleading and deceptive conduct ..................................................................................... 95
8. Did the Defendant/s make representations in the terms alleged (Para 15 SFASOC)
.............................................................................................................................. 95
10. If these representations, or any of them, was made, were they misleading or deceptive? (Para 17 and 18 SFASOC) ................................................................. 95 Section 30 ........................................................................................................... 104 Constructed as a cafe ......................................................................................... 111 Mr Hu’s credibility ................................................................................................ 116 Cathy Li’s credibility ............................................................................................ 122 Restaurant representation .................................................................................. 130 Car parking spaces representation ..................................................................... 131 Allegations of misleading conduct by silence ...................................................... 134 Remarketing of the property ............................................................................... 135
9. If the Representations, or any of them, was made, were there reasonable grounds
for making them? ................................................................................................ 135
11. If the representations, or any of them, were: ....................................................... 144 a) made; b) made without reasonable grounds; and c) misleading or deceptive, did it cause the plaintiffs loss and damage, and if so, what was the loss or damage?
(Para 19 SFASOC) ............................................................................................. 144
12. If the Representations, or any of them, was: ....................................................... 146 a) made; b) made without reasonable grounds; and c) misleading or deceptive, is the first plaintiff entitled to a declaration that the Agreement was void ab initio? (Para 20 SFASOC) ............................................................................................. 146
13. Is the first plaintiff entitled to an order for repayment of the deposit pursuant to s 49(2) of the Property Law Act 1958? (Para 21 SFASOC) ................................... 147
Unconscionable conduct ................................................................................................. 149
14. Did the Defendants engage in unconscionable conduct within the meaning of s 20 of the ACL? (Para 18 SFASOC) ......................................................................... 149
Counterclaim issues ........................................................................................................ 156
15. What constitutes the Agreement between the parties that was made on 14 October 2016? .................................................................................................................. 156
16. to settle on 14 August 2018, or by failing to rectify his default as set out in the
Notice of Default and Rescission dated 17 August 2018, or alternatively by
Did the First Plaintiff breach the Agreement, or repudiate the Agreement by failing Breach by failing to settle on 14 August 2018 ..................................................... 157 Alternative – the plaintiff’s repudiation ................................................................ 161
Plaintiffs’ submissions ......................................................................................... 164 17. If the first plaintiff breached the Agreement or repudiated the Agreement, what loss and damage was suffered by the first defendant? (Para 32A and 33 Counterclaim) ............................................................................................................................ 164
Further damages................................................................................................. 165 Other relief .......................................................................................................... 167
Plaintiffs’ submissions ......................................................................................... 167
Conclusion as to counterclaim ......................................................................................... 171
Conclusion ....................................................................................................................... 171
HIS HONOUR:
Introduction
1 This case concerns claims by a purchaser of a commercial property for damages suffered from the vendors’ breach of a sales agreement. In the alternative, the purchaser claims the vendor breached s 31 of the Sale of Land Act 1962 (Vic) (SLA) by failing to provide a vendor statement to the purchaser prior to the purchaser signing the contract, and that the purchaser was entitled to rescind the sales agreement. Further or in the alternative, the purchaser claims, contrary to the Australian Consumer Law (ACL),[1] the vendor engaged in misleading and deceptive conduct,[2] unconscionable conduct,[3] made false or misleading representations concerning the characteristic of the land,[4] and that the purchaser is entitled to recover the loss or damages pursuant to s 236 of the ACL and a declaration that the Agreement was void ab initio. Further or alternatively, the purchaser claims he is entitled to an order for repayment of the deposit pursuant to s 49(2) of the Property Law Act 1958 (Vic) (PLA).
[1] Competition and Consumer Act 2010 (Cth), schedule 2.
[2] Contrary to s 18 of the Australian Consumer Law (‘ACL’).
[3] Contrary to s 21 of the ACL.
[4] Contrary to s 30 of the ACL.
2 The vendors counterclaim that the purchaser breached the contract of sale by failing to settle by the settlement day, or by failing to rectify his default as set out in the notice of default and rescission, or by seeking to terminate the Agreement.
3 The first defendant Sunshine Investment Group (‘Sunshine’) was the owner of property being Lot G4, 340 Whitehorse Road, Balwyn, Victoria (‘Lot G4’). The second defendant H S Property Investment Group (‘Ausgood’) was an estate agent engaged by Sunshine to market and sell Lot G4. Cathy Li[5] was an employee of Ausgood who was involved in the marketing and selling of Lot G4.
[5] The witness’s Chinese name is Ying Li, which is how she is referred to in the trial transcript (T1955 L20-23). However, throughout the proceedings the parties referred to the witness by her English name of ‘Cathy’, which is how she is referred to in this judgment.
4 On or about 14 October 2016, the first plaintiff (‘Mr Hu’) entered into an agreement with Sunshine to purchase Lot G4 for $2,260,000.00 off the plan (‘the Agreement’).[6] The terms of the Agreement are in dispute.
[6] The second plaintiff, HM 168 Pty Ltd (ACN 624734069), played no effective role in the proceedings.
5 On 14 October 2016, Mr Hu paid the deposit of $226,000.00. Upon the completion of the construction of Lot G4, Mr Hu obtained a building condition report from Rohan Saunders, a registered domestic and commercial building practitioner and consultant, who inspected the property on 25 July 2018. Mr Saunders gave evidence on behalf of the plaintiffs. Mr Hu alleges Sunshine breached the Agreement and the works were defective.
6 On 2 August 2018, Mr Hu’s solicitor emailed Sunshine regarding the issues revealed during the inspection and attached the inspection report.[7] Sunshine did not respond to this email.
[7] Court Book (‘CB’) 1377.
7 On 7 August 2018, Sunshine’s solicitor emailed Mr Hu’s solicitor for details required for executing the transfer of land. In reply, Mr Hu’s solicitor provided the details requested and inquired again regarding the issues uncovered during inspection.[8] On 9 August 2018, Sunshine’s solicitor made brief reply to the issues raised by Mr Hu.9
[8] CB 1409. 9 CB 1412. 10 CB 1426.
8 On 8 August 2018, Mr Hu’s solicitor sent an urgent request to Sunshine advising that resolving the issues which arose out of inspection was essential prior to settlement, and that Mr Hu would not accept a property which does not comply with commercial property occupancy requirements. Sunshine did not respond to this urgent request.
9 The settlement date was 14 August 2018.
10 On 14 August 2018, Sunshine’s solicitor emailed Mr Hu’s solicitor noting that Mr Hu had not booked settlement. Mr Hu’s solicitor replied that Mr Hu did not give instructions to proceed with settlement.10 On the same day, Mr Hu instructed a different solicitor to email Sunshine that he required seven days to further investigate and receive advice regarding the property.
11 On 17 August 2018, Sunshine issued a Notice of Rescission after Mr Hu failed to complete the payment on the settlement date.[11] On 24 August 2018, Sunshine’s solicitor sent relevant plans of Lot G4 to Mr Hu’s solicitor. On 30 August 2018, Mr Hu’s solicitor sent a letter to Sunshine’s solicitor listing alleged defaults by Sunshine and sought to terminate the contract and for Sunshine to return the deposit paid by Mr Hu.
[11] CB 1443. 12 CB 1480. 13 CB 1493. 14 This document simply amended the order of the first plaintiff’s names. Otherwise, it is identical with the further
12 On 1 September 2018, Sunshine claimed the Notice of Rescission had expired and the contract was terminated.
13 On 4 September 2018, Sunshine’s solicitor emailed Mr Hu’s solicitor denying any defaults alleged by Mr Hu.12
14 On 1 October 2018, Mr Hu’s solicitor sent Notice of Default and Rescission to Sunshine, demanding Sunshine remedy the defective works within 14 days or the Agreement would be rescinded.13 Sunshine did not remedy the alleged defaults and allegedly repudiated the Agreement.
15 Further, Mr Hu alleges Sunshine did not give him a signed statement as required by s 32 of the SLA when he signed the contract. Mr Hu claims, pursuant to s 32K(3) of the SLA, he was entitled to rescind the Agreement, the Agreement was avoided ab initio and he is entitled to the return of the deposit paid.
Pleadings and submissions
16 The plaintiffs rely on their second further amended statement of claim dated 28 August 2020 (‘SFASOC’).14
17 The defendants rely on their further amended defence and counterclaim dated 10 December 2020 (‘FADC’).[15]
[15] This document simply amended the order of the first plaintiff’s names. Otherwise, it is identical with the amended defence and counterclaim dated 13 January 2020.
18 The plaintiffs then rely on their reply to the defendants’ defence and amended defence to the first defendant’s counterclaim dated 17 February 2020 (‘RDDADC’).[16]
[16] This document had the first plaintiff’s name in the correct order and, therefore, did not require later amendment.
19 Finally, the defendants rely on their amended reply to defence to counterclaim dated 10 December 2020 (‘amended reply’).[17]
[17] This document simply amended the order of the first plaintiff’s names. Otherwise, it is identical with the reply to
20 After the close of evidence, written closing submissions were made. The defendants filed closing submissions dated 22 October 2020. The plaintiffs filed closing submissions dated 24 November 2020. The defendants filed closing submissions in reply dated 8 December 2020.
Issues
21 The agreed issues in this matter are set out in the summary of issues in dispute, emailed to my chambers on 7 August 2020. The issues are in terms of a set of questions set out below, together with my answers to each question. The reasons and findings leading to those answers are detailed below in the balance of my judgment.
Breach of contract – Plaintiffs’ claim
1. What constitutes the Agreement between the parties that was made on 14 October 2016?[18]
[18] Paragraph 4 of the Second Further Amended Statement of Claim dated 28 August 2020 (‘SFASOC’).
2. Were there terms of the Agreement that:
a. Lot G4 had approval for a 30-seat café which would be constructed by Sunshine in a manner that was fit for use as a café that could seat up to 30 people (‘café term’). Answer: Sunshine was not obliged to construct a 30-seat café. It was a term of the Agreement that Sunshine would construct Lot G4 in a manner fit for use as a 30-seat café based on the representation made by Cathy Li, the planning permit and marketing material shown to Mr Hu prior to him entering into the Agreement.
b. Lot G4 could also be used as a restaurant (‘restaurant term’). Answer: There was no such term.
c. The car parking spaces allocated to Mr Hu would be opposite the lift in the basement and would not be in car stackers (‘car park term’).[19] [19] Paragraph 5 of the SFASOC.
Answer: There was a term of the Agreement that the car parking spaces allocated to Lot G4 and hence to Mr Hu as its purchaser would be opposite the lift in the basement and would not be in a car stacker.
3. If there were terms of the Agreement as alleged, was there a breach of those terms:
a. In terms of the ceiling height? Answer: Yes, the defendants breached the terms of the Agreement introduced by Ms Cathy Li’s representation that Lot G4 would have flat ceilings with a clearance of only 2.2 m between floor and ceiling and with a need for uneven ceiling materials to cover up protruding pipes.
b. In terms of other defects? Answer: Yes. There was no sewer connection provided for the provision of toilet facilities required for the operation of a café. As to the exhaust outlet on the eastern wall of the inner core of Lot G4, whilst it does not meet the ‘deemed to satisfy’ standard in the Building Code of Australia (‘BCA’), there are other workable solutions available. There was no defect relative to the need to install further rectangular ducting.
c. In terms of the car spaces being arranged as car stacker spaces?[20] [20] Paragraph 7 of the SFASOC.
Answer: The defendants breached the term as to parking for Lot G4 which required the car parks allocated to that allotment to be opposite the lift in the basement, rather than by means of car stackers.
4. Did Sunshine repudiate the Agreement by failing to rectify the alleged defective works?[21]
[21] Paragraphs 8, 9 and 10 of the SFASOC.
Answer: Yes.
5. If there were terms of the Agreement as alleged, and they were breached, what loss or damage was suffered by the plaintiffs?[22]
[22] Paragraph 11 of the SFASOC.
Answer: Interest on the unrepaid deposit of $226,000 calculated from the date of repudiation until the date of judgment at the rate from time to time laid down by the Penalty Interest Rates Act 1983 pursuant to s 58 of the Supreme Court Act 1986.
S 32 Sale of Land Act
6. Did Sunshine fail to provide a vendor statement in accordance with s 32 of the SLA to Mr Hu prior to him signing the Agreement?[23]
[23] Paragraph 12 of the SFASOC.
Answer: Yes.
7. If Sunshine failed to provide a vendor statement to Mr Hu, can Mr Hu avoid the Agreement on that basis?[24]
[24] Paragraphs 13 and 14 of the SFASOC.
Answer: Yes.
Misleading and deceptive conduct
8. Did the defendants make representations in the terms alleged, namely:
a.
Lot G4 had approval for a 30-seat café which would be constructed by Sunshine in a manner that was fit for use as a café that could seat up to 30 people (‘café representation’);
Answer: No.
b. Lot G4 could also be used as a restaurant (‘restaurant representation’); Answer: No.
c. The three car parking spaces allocated to Mr Hu would be opposite the lift in the basement and would not be in car stackers (‘car park representation’) (collectively, ‘the representations’)?[25] [25] Paragraph 15 of the SFASOC.
Answer: The only alleged representation that might be said to constitute a representation as to the future is the representation that Lot G4 would be constructed in a manner that was fit for use as a café that could seat up to 30 people. There were no reasonable grounds for making that representation.
9. If the representations, or any of them, was made, were there reasonable grounds for making them? Were they misleading or deceptive?[26]
[26] Paragraphs 17 and 18 of the SFASOC.
10. If the representations, or any of them, was:
a. made;
b. made without reasonable grounds; and c. misleading or deceptive;
did it cause the plaintiffs loss and damage, and if so, what was the loss or damage?[27] Is Mr Hu entitled to a declaration that the Agreement was void ab initio?28
[27] Paragraph 19 of the SFASOC. 28 Paragraph 20 of the SFASOC. 29 Paragraph 21 of the SFASOC. 30 Paragraph 18 of the SFASOC. 31 Paragraph 24 of the FADC.
Answer: Mr Hu is not entitled to a declaration that the Agreement was void ab initio. There is no evidence of loss or damage suffered by Mr Hu other than his entitlement to recover interest upon the unrefunded deposit.
11. Is Mr Hu entitled to an order for repayment of the deposit pursuant to s 49(2) of the PLA?29
Answer: Yes.
Unconscionable conduct
12. Did the defendants engage in unconscionable conduct within the meaning of s 20 of the ACL?30
Answer: Unnecessary to answer.
Counterclaim issues
13. October 2016?31
What constitutes the Agreement between the parties that was made on 14 plaintiff’s house on the night of 14 October 2016 together with her oral representations that Lot G4 could be used as a 30-seat café with basic fit-out and that the first plaintiff, Mr Hu, would receive three car parks in the basement level opposite the lift and not on stackers.
14. Did Mr Hu breach the Agreement, or repudiate the Agreement by failing to settle on 14 August 2018, or by failing to rectify his default as set out in the Notice of Default and Rescission dated 17 August 2018, or alternatively by seeking to terminate the Agreement?[32]
[32] Paragraph 28, 29 and 31 of the FADC.
Answer: No.
15. If Mr Hu breached or repudiated the Agreement, what loss and damage was suffered by Sunshine?[33]
[33] Paragraph 32A and 33 of the FADC.
Answer: Does not arise.
16. My findings regarding each of these issues are set out below.
Overview
22 For the reasons that appear below, I have concluded that the contract entered into between the parties referred to as the ‘Agreement’ was constituted by the 17 pages delivered by Ms Cathy Li to Mr Hu at his home on 14 October 2016. Aside from the text of the pages delivered, the contract also included conditions based on the assurances or representations given by Ms Li as the agent of the defendant Sunshine. Those oral assurances were to the effect that Lot G4 could be used as a 30-seat café with basic fit- out and that as purchaser of that lot, Mr Hu would receive three car parks in the basement level opposite the lift, not parking spaces using car stackers. The oral terms of the contract were not fulfilled by Sunshine. Sunshine’s action in giving notice to settle and purporting to discharge the contract on the basis of Mr Hu’s justified refusal to settle constituted a repudiation. Further, or alternatively, Sunshine’s failure to provide a vendor statement under s 32 of the SLA entitled Mr Hu as purchaser to rescind the sale of land agreement. Sunshine did not make out the defence established under s 32K(4) of the SLA because it could not be said to have acted ‘honestly and reasonably’ and therefore ought not to be excused for its contravention.
23 The deposit paid by Mr Hu is recoverable by him either as damages for repudiation or on restitutionary grounds with the contract terminated without any transfer of property. Alternatively, it is recoverable under s 49 of the PLA. This section in some circumstances has been held to entitle recovery of a deposit even where a contract for the sale of land has been found to be enforceable at common law if not in equity. A fortiori, it authorises the recovery of a deposit by a purchaser following a vendor’s repudiation of contract.
24 The non-fulfilment of the oral contract terms or representations also constitutes misleading or deceptive conduct. Aside from statutory interest on the deposit, no additional loss or damage has been proven in this respect.
25 I have found it unnecessary to reach a conclusion on whether, in the circumstances, Sunshine and its agent engaged in unconscionable conduct contrary to the ACL.
26 Since, on my findings, Sunshine was in the wrong, it was the party that repudiated, not Mr Hu. The counterclaim must fail.
Evidence and analysis
27 In considering the evidence – much of it about events which took place approximately four years prior to the oral evidence – I take the following principles into account.
28 In Watson v Foxman,[34] McLelland CJ in Equity observed:
[34] (1995) 49 NSWLR 315.
[H]uman memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the process of memory are overlaid, often subconsciously, by perceptions or self-interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience.[35]
[35] Ibid 319.
29 In Blue v Ashley (No 2),[36] Leggatt J said:
[36] [2017] EWHC 1928 (Comm).
I expressed the opinion in the Gestmin case (at para 22) that the best approach for a judge to adopt in the trial of a commercial case is to place little if any reliance on witnesses’ recollection of what was said in meetings and conversations, and to base factual findings on inferences drawn from the documentary evidence and known or probable facts.[37]
[37] Ibid [67].
30 However, to a great extent, the factual disputes in this case turn on the recollection of the witnesses. The credibility of the witnesses is significant to my assessment of their evidence in this case. To the extent where there is documentary evidence available, I relied on it to draw inferences to assist with my factual findings.
31 In my analysis, I refer to the defendants’ closing submissions dated 22 October 2020, the plaintiffs’ closing submissions dated 24 November 2020, and the defendants’ submissions in reply dated 8 December 2020.
Breach of contract – Plaintiffs’ claim
1. What constitutes the Agreement between the parties made on 14 October 2016?
32
The plaintiffs claim the Agreement is partly in writing, partly oral and partly implied.
33
Insofar as the Agreement was in writing, the plaintiffs say the Agreement comprises of:
(a)
A ‘signing page’ of a Law Institute of Victoria (LIV) / Real Estate Institute of Victoria (REIV) Contract of Sale of Real Estate form, signed by Mr Hu;
(b) Two pages headed ‘Particulars of Sale’; (c)
Six pages of floor plans and elevations prepared by CHT Architects (‘CHT’) (‘the plans’);
(d)
Seven pages entitled 'CHT Architects outline of specifications for apartments dated 08/07/2016 Revision 3' (‘the specifications’); and
(e)
A 'signing page' of a LIV Vendor Statement version 1 October 2014, signed by Mr Hu.
34 The plaintiffs allege on 14 October 2016, Cathy Li brought 17 loose pages to Mr Hu’s house. Mr Hu gave evidence that Cathy Li said that she came in a hurry and only brought the ‘material documents’ for him to sign, which she would reorganise at a later time. Cathy Li took both copies of the signed pages with her. Subsequently, Cathy Li made copies of the loose signed pages, on white paper, and inserted those white copies into an existing set of contract and vendor statement papers, which were then bound. After copying, the two sets of signed originals were also bound into sets of contract and vendor statement documents held in the defendant’s offices (‘the bound contract’). One set was sent to Mr Hu in 2017.
35 The parties dispute whether Cathy Li brought the 17 loose pages or the bound contract to Mr Hu’s house on 14 October 2016. Mr Hu’s conveyancer[38] and the other two sets were retained by the defendants until one copy was sent to Mr Hu in February 2017.[39]
[38] Hereafter referred to as the ‘plaintiffs’ original version’ (Exhibit (‘Ex’) 9) a copy of which is at CB 28 (Vendor Statement)
[39] The defendants’ copy if hereafter referred to as the ‘defendants’ original version’ (Ex 6) a copy of which is at CB 30. The third version sent to Mr Hu in February 2017 is hereafter referred to as the ‘plaintiffs’ copy version’ (Ex 10). It is not in the Court Book.
36 The plaintiffs say this dispute does not affect their primary contention, which is that there was a contract for the construction and sale of Lot G4 which would be capable of use and fit for purpose as a council-approved 30-seat café as both versions incorporated this term, either expressly or by implication, by reason of Cathy Li’s statement and offer, or the content of the bound contract.
37 Two matters turn on whether the loose pages or the bound contract represent the contract. Firstly, whether the defendant can rely on the Special Conditions in the bound contract. Secondly, whether the vendor statement was provided to Mr Hu prior to him signing on 14 October 2016.
38 The defendants submit the contract comprises the contract of sale, together with annexures.[40] Two copies of the contract in this form, together with the vendor statement, bound by black plastic spiral binding, were taken by Cathy Li to Mr Hu’s house on the evening of 14 October 2016 for Mr Hu to sign. The vendor’s copy and the purchaser’s copy were signed by the directors of Sunshine, Mr Qin (‘William’) Du (‘Mr Du’) on 2 September 2016 and by Ms Xiaoping (‘Sunny’) Wu (‘Ms Wu’) a few days after Mr Hu had signed them.
[40] CB tab 30.
39 Insofar as the Agreement was oral, the plaintiffs say it comprised of statements made on 5 October 2016 and 8 October 2016 by Cathy Li on behalf of Sunshine to Mr Hu.
40 The plaintiffs claim Cathy Li told Mr Hu that if he purchased the café, the defendants would construct Lot G4 in a manner fit for use as a council- approved 30-seat café, which could also be used as a restaurant. They allege Cathy Li told Mr Hu he would be allocated three car parks opposite the lift in the basement, which would not be in car stackers. Mr Hu agreed to these terms and offered to pay $2.26m and a 10% deposit. Cathy Li confirmed acceptance by the defendants of Mr Hu’s offer on 14 October 2016 and brought papers recording the Agreement to Mr Hu’s house for signing.
41 Insofar as it was implied, the plaintiffs say it was implied by a need to give business efficacy to the Agreement or alternatively was implied ad hoc.
The signatures on the contract
42 The plaintiffs say the copies held in the office were unbound so the signature pages could be inserted, or in the case of the vendor statement, inserting new pages, such as an amended plan of subdivision.
43 It is not in dispute that Mr Du and Ms Wu had both signed the vendor statement page on 28 July 2016. This document appears to be a pre-signed page, photocopied after it was signed, with no original copy bearing the vendor’s signatures. The signing page of the REIV contract of sale also has a date of signature for the vendor, signed on 2 September 2016. The defendants claim 2 September is only the date for Mr Du’s signature, not when Ms Wu signed it.
44 However, the plaintiffs allege the pages in the vendor statement were changed after the vendors signed it, by purporting to affirm the contents of the document as an accurate statement in accordance with s 32 of the SLA at the date they signed the statement on 28 July 2016. Furthermore, Mr Du signed multiple blank copies of contracts before the details of a purchaser or a price were written. Those signed copies were available in the defendants’ offices for use by the agents without informing Ms Wu that they had been signed by a buyer until, in this case, Cathy Li gave it to Ms Wu to sign.
45 The very fact Cathy Li sought to obtain pre-signed copies of the vendor statement from Ms Wu and Mr Du suggests that it was useful to her practice to have pre-signed copies available to advance negotiations and close deals.
46 Part of this ‘usefulness’ was logistical, in the sense that it would be difficult to obtain signed copies when Mr Du was overseas, but this practice was probably also a product of the expediency required in the real estate business, as Cathy Li was capable of unilaterally updating the vendors statement when needed, reducing delays and allowing Cathy Li to get the paperwork out to the client for finalisation as soon as possible. I do not accept that despite having these pre-signed copies on hand, she did not update the vendor statement and rely on the signatures to affirm its contents when required. If after every change to the vendor statement Cathy Li sought the approval and signature of the vendors, there would be no point in arranging anything to be pre-signed, as almost all contracts would be subject to revision before being handed out to purchasers.
47 Cathy Li gave conflicting evidence as to whether both directors’ signatures were on the contract when she took it to Mr Hu’s house, at times saying she could not remember[41] and at other times saying Ms Wu did not sign the contract until the week after it was signed by Mr Hu. [42]
[41] T1996 L9-10.
[42] T2054 L3-28.
48 Cathy Li’s recollection of details relating to what occurred on 8 and 14 October was poor. She was unable to remember if telephone calls took place between her and Didi Li and could not remember details of the $5000 reservation offer. I found her recollection of the exact date on which she claimed Ms Wu signed the contract is unreliable in the context that she said she did not know whether both directors had signed the documents when she took them to Mr Hu’s house on 14 October.
49 Cathy Li claimed she did not know whether the other offer of $2.37 million made by another person had been withdrawn on 14 October,[43] despite being in the same office as Ms Wu.[44] This means, while Ms Wu had not signed the contract during the 3-day cooling off period Cathy Li claimed she had offered to Mr Hu, a contract might not yet be formed and the other offer of $2.37 million was still live and might be accepted.
[43] T2235 L16-29.
[44] T2236 L1-10.
50 Cathy Li denied she had amended or changed the composition of the contract documents provided by Logie-Smith Lanyon (‘LSL’). Yet the plaintiffs say clearly either she or someone else in the office did, in order to create the conveyancer copy.
51 On cross-examination Cathy Li minimised the extent to which she knew anything, had any responsibility for any decisions or had knowledge of changes or the source of marketing information forming the basis of the various marketing documents she had available to her at the display suite. However, evidence shows Cathy Li was directly involved in the preparation of the marketing materials. Cathy was involved in the sales meetings and correspondence with the marketing team,[45] and agreed she was overseeing the floorplan.[46]
[45] CB 4167, 4206, 4162, 4252, 4164; T2183 L16-T2184 L17.
[46] T2156-2157.
52 In relation to the vendor’s signatures on the contract, Mr Du gave evidence that he signed a number of contracts in bound form on 2 September 2016, together with other contracts, as a matter of convenience.[47] It was customary for Mr Du to do that because he would sometimes return to China. The purchaser would sign on the contract where Mr Du had already signed, and Mr Wu would sign afterwards.[48]
[47] CB 200-201, 3030-3031; T1841 L28-T1845 L5 (William Du XN); T1919 L29-T1920 L1 (William Du XXN). The number
[48] T2341 L21-27 (Wu XN).
53 Mr Du referred to the contract as a normal standard sale of contract, perhaps 4cm in diameter.[49] While he did not look at the other pages in the bundle, they were in bound form, consistent with the evidence that the solicitors delivered pre-bound copies of the contract to the vendor.
[49] T1844 L13-16, T1846 L5-15 (William Du XN).
54 Ms Wu signed the contract on 19 October 2016 after Cathy Li had presented it to her.[50] Ms Wu did not recall an exact date, but gave evidence that she signed a few days after Mr Hu had signed, and the contracts were a ‘thick booklet’ that was produced by Sunshine’s solicitors.[51]
[50] T2054 L7-17 (Cathy Li XN).
[51] T2343 L12-21 (Wu XN).
55 Both the vendor’s and purchaser’s copies of the contract have the Ausgood sticker on the signature page. Cathy Li said she placed the stickers on the two contracts before taking them to Mr Hu’s house.[52]
[52] T1992 L22-1993 L6 (Cathy Li XN).
56 Cathy Li stated she filled out the details for the conveyancer using the business card that Didi Li had forwarded her and took the two copies of the contract back to the office on Monday.[53]
[53] T2053 L18-25 (Cathy Li XN).
The bound contracts
Plaintiffs submissions
57 The plaintiffs say the most compelling evidence that supports Mr Hu and Didi Li’s claim that Cathy Li only brought around loose pages (and not the entire contract) for Mr Hu to sign, can be seen from the copies of the contract which were received by the plaintiffs’ solicitors after the conclusion of the trial. Those copies of the contract are of two types. One is an original version of the bound contract (‘plaintiffs’ original version’)[54] with all blue pages for the REIV Contract of Sale and Vendor Statement, on which is an original ink signature by Mr Hu and original ink pen writing and markings. The second version of the bound contract (‘plaintiffs’ copy version’)[55] is identical, with the same pen markings, signature and writing, but contains what the plaintiffs submit is a copy, on white paper, of the signature and original pen marked pages. These pages have replaced only those pages of the blue REIV Contract of Sale and Vendor Statement pages which require writing and signatures on them. The plaintiffs’ original version was sent by the defendants to Mr Hu’s conveyancers and the plaintiffs’ copy version to Mr Hu.
[54] Ex 9.
[55] Ex 10.
58 The plaintiffs’ original version contains blue pages for the four pages of the REIV Contract of Sale of Real Estate. These are the pages Mr Hu says were brought around to his house. The plaintiffs’ copy version contains colour photocopies of these pages on white paper. The plaintiffs say that ‘tellingly’, these photocopies show no sign of any plastic spiro binder. The photocopies show the punched square holes made to insert a binder spine, but do not show the binder spine in place.
59 In the plaintiffs’ submission this demonstrates these pages were clearly photocopied as loose pages, not as part of the bound plaintiffs’ original version.
60 By way of comparison, a colour photocopy of the original blue pages made from the bound plaintiff’s original version with the binding in place, is attached to the plaintiffs’ submissions. The plaintiffs submit the copy clearly shows the presence of the plastic binder. The white page copies in the plaintiffs’ copy version show no such presence of the plastic binder, indicating that the copies were not made when the pages were bound into the bound contract.
61 The plaintiffs submit this establishes that either Cathy Li, or someone else in the defendants’ office, was familiar with a method to remove pages from spiro bound copies of a bound contract, and was prepared to do so, and to then have those loose pages signed, and copied, and then reinserted into the bound contracts held in the defendant’s offices. The plaintiffs submit this also indicates the blue signature pages were loose when copied for the plaintiffs’ copy version and that after copying the original loose blue pages, the plaintiffs’ original version was bound and the white paper copies were hole punched and bound into the plaintiffs’ copy version.
62 The plaintiffs further submit any claim by Cathy Li that she would never extract, insert or put together a bound contract bundle is simply not supported by the evidence of the white paper copy pages in the bound plaintiffs’ copy version.
63 The plaintiffs note only the signed pages were photocopied for the plaintiff’s copy version. The plaintiffs point out that the copy still contains the original blue paper for the last of the four blue signature and completion pages at the start of the REIV Contract of Sale of Real Estate pages. Only the signature page of the Vendor Statement in the conveyancer’s copy has been inserted, with the remaining pages in this copy being original blue pages on which there was no new writing/signatures. In the plaintiffs’ submission, this is consistent with the evidence that the defendants had multiple copies of the bound contract, originally prepared by LSL, which they used, recycled and augmented where necessary to create additional copies of ‘signed’ bound contracts.
Defendants submissions
64 The defendants submit the ‘punched square holes’ referred to by the plaintiffs are also visible on the plaintiffs’ original version at CB 30, and argue these markings are consistent with the pages being removed from the binding for the purpose of photocopying for the court book.
65 The defendants submit it is inconsistent to claim on the one hand that Cathy Li removed pages from the bound contract, while on the other hand claiming the copies held in the office were apparently unbound for insertion of signature pages. In other words, there would be no need to remove pages if the contracts were unbound.
66 The defendants further submit the signature pages of the plaintiffs’ original version were removed from it after signing (at a time when the pages already had spiral punch holes) and the photocopied signature pages were later spiral hole-punched for insertion into another copy of the contract, which was later sent to Mr Hu, thereby creating a second spiral punch hole alongside an image of the original spiral punch hole. According to this scenario, when the pages were photocopied for inclusion in the court book, the two sets of spiral binding punch holes show up on the copies of the signature pages, compared with only one spiral punch hole on the other pages.
67 The defendants submit the vendor’s original version of the contract (‘vendor’s original version’)[56] shows pages printed in pink and blue. The signature pages of the contract are blue, as are the four vendors’ statement pages. Ms Wu recalled the signature pages for the contract were a light blue colour. The defendants also point out it was suggested to Cathy Li that she printed signature pages of the vendor statement and contract onto blue paper for taking around to Mr Hu’s house. The defendants submit this suggestion is implausible, but necessitated by the plaintiffs’ continued pursuit of a case that Mr Hu did not sign a full, bound contract on 14 October 2016.
[56] Exhibit 6.
68 The defendants submit the plaintiffs attempted to create a rationale for Cathy Li having taken loose pages to Mr Hu’s house by suggesting that, in late July 2016, 40 copies of a previous version of the contract of sale were delivered to Ausgood, following which a series of amendments were made, necessitating changes to the pages.
69 Cathy Li gave evidence that, as a real estate agent, she would not unilaterally make changes to a s 32 statement prepared by a solicitor unless instructed by the developer to do so. The defendants submit she would never make changes to the bound contract, and she gave evidence she considered it would be illegal to do so. The defendants submit it is entirely unreasonable to suggest that part of the function of a real estate agent is to monitor emails between a vendor and its solicitor, and make unilateral decisions as to the replacement of pages in a legally binding document. This was clearly not something Cathy Li was, or could be, expected to do.
70 The defendants submit the plaintiffs overlook the fact the amendments to the contract were notified to LSL shortly after the contracts were printed, and the evidence was that, rather than being delivered to Sunshine in July 2016, those printed contracts remained at LSL, where they were updated on 25-26 August 2016 following receipt of the final plans from the architect and the updated Plan of Subdivision. The defendants observe Cathy Li gave evidence there was only one version of the hard copy contracts received by her office, which means the contracts that were still at LSL in August and being updated were the ones that were delivered. It was copies of this contract that were signed by Mr Du, Mr Hu and Ms Wu.
71 The defendants submit Mr Hu’s original copy of the contract sent to his conveyancer, Advanced Choice Conveyancing (‘ACC’), is in all respects identical to the vendor’s copy version, including the original signatures, binding and coloured pages referred to above. A further copy of the contract, which appears to be the copy provided to Mr Hu in February 2017, is a bound copy of the contract with photocopied signature pages inserted.
72 Moreover, the defendants submit there are a number of differences between the evidence of Cathy Li on the one hand, and that of Mr Hu and Didi Li on the other, regarding the conversation that took place at Mr Hu’s house on 14 October. Cathy Li recalled meeting Mr Hu’s wife but said that she then went somewhere else, while Mr Hu and Didi Li gave evidence that Didi Li stood in the kitchen with Mr Hu’s wife while Mr Hu and Cathy Li sat at the dining table.
73 The defendants submit that while Didi Li gave evidence consistent with Mr Hu’s version of events about Cathy Li bringing a ‘thin bundle’ of documents to the house, this is inconsistent with her actions at the time. She agreed that the following day she opened the attachments to the email Cathy Li sent her containing the full contract of sale and the vendor’s statement and saw that there were hundreds of pages of documents. The defendants submit she agreed that she was aware that contracts contain important information about the land being purchased, however she took no steps to contact Mr Hu or the conveyancing solicitor notwithstanding her alleged belief that there were many more documents in the contract than Mr Hu had signed.
74 The defendants also point out that Mr Hu’s affidavit at [34] and [35] is almost identical in content to Didi Li’s proof of evidence at [23] and [24]. Mr Hu agreed that he and Didi Li had discussed their recollections of what Cathy Li said on 14 October 2016 but denied having seen Didi Li’s outline of evidence or discussing it when preparing his affidavit. Didi Li did not provide any explanation as to why the passages at [35] of the Hu affidavit and [24] of her proof of evidence were identical. The defendants submit there was no logical response to the question of why the conversation may have stuck in Didi Li’s memory.
75 The defendants also observe Didi Li denied having discussed her evidence with Mr Hu on this point. Her evidence was that she first attempted to record in writing her recollection of events in late 2019. Given that, and the length of the two paragraphs that are strikingly similar, it is even more implausible that they reflect a true and uncontaminated account of each person’s recollection.
Findings
76 I accept that given that the margins on the plaintiffs’ copy version of the contract reveal holes punched for binding, but not the presence of a binder, that this suggests that these copies were not made at a time when the pages were bound in the bound contract. The pages therefore were loose at the time of being photocopied, and so it follows that they were subsequently hole punched and bound into the plaintiffs’ copy version. I accept this establishes that contrary to Cathy Li’s evidence, it was common practice to remove pages from the bound contract, photocopy them, and then use them for other purposes.
77 I am also persuaded that the contracts had been manipulated due the fact that the last page of the four signature and completion pages in the REIV Contract of Sale of Real Estate is in the original blue paper, whereas the previous signature pages are white and therefore have been copied and inserted.
78 The above indicates with a high level of probability that Cathy Li took pages out of bound contracts, and re-inserted them at different points during the finalisation of the transaction.
79 I am not persuaded by the defendants’ theory that the punched holes in the plaintiffs’ copy version were made for the purposes of collating the court book given that they are also present in the original contract at CB 30. As the defendants submitted, this theory would require my accepting these pages had been removed from the original after signing, and were then re-hole- punched for insertion into another contract which was later sent to Mr Hu – and subsequently included in the court book. However, even if I did find this to be the case, this does not negate my above finding that the pages were themselves loose at the time Mr Hu signed, and then re-bound into the contract, it simply requires that I accept that it was this re-bound contract that was photocopied for the purposes of the court book.
80 The differences in evidence between Mr Hu, Did Li and Cathy Li regarding the conversations that took place at Mr Hu’s house and the nature of the contracts that were taken to his house can be explained by reference to my adverse findings against Cathy Li’s credibility and my favourable findings of Mr Hu and Didi Li’s credibility. As is discussed in more detail in those portions of my judgment, I am more persuaded by Mr Hu’s and Didi Li’s version of events that only a thin bundle of documents was brought to Mr Hu’s house, as had been extracted from the original contract, for Mr Hu to sign on the night of 14 October 2016.
81 As I previously observed, the plaintiffs allege Cathy Li brought 17 loose pages to Mr Hu’s house on the evening he signed the Agreement, rather than signing pages within a bound contract.
82 Mr Hu gave evidence Cathy Li brought two sets of papers to his house, consisting of:[57]
[57] See CB 2351-2367.
(a) An REIV Contract of Sale of Real Estate signature page on blue paper; (b) Two Particulars of Sale pages on blue paper; (c) Six pages of floor plans and elevations prepared by CHT on white paper; (d) Seven pages entitled ‘CHT Architects outline of specifications for apartments dated 08/07/2016 Revision 3’ on white paper; and (e) A signing page of a Law Institute of Victoria Vendor Statement on blue paper. 83 Both Mr Hu and Didi Li gave evidence about what papers they recall Cathy Li brought to Mr Hu’s house.[58] Both said there was no bound document in plastic spiral binding. They also gave evidence Cathy Li told them she had not had time to put together all relevant documents but that she would do so when she went back to the office. This was why she needed to take both copies of the papers away with her. Mr Du’s signature was already on the REIV Contract of Sale page, dated 2 September 2016, and on the vendor statement, dated 28 July 2016. The plaintiffs say there was no reason for Cathy Li to take both sets away and ordinarily, absent the reason provided by Cathy Li to Mr Hu, usual practice would have been to leave one original copy with Mr Hu for his records.
[58] T623 L2-4, T623 L23-30, T624 L18-T625 L7 (XN Mr Hu); T1066 L15-16 (XN Didi Li).
84 In reply the defendants submit there is no evidence this is usual practice, as opposed to providing a signed copy to the purchaser’s conveyancer. Moreover, Cathy Li had to take the contracts with her to obtain Ms Wu’s signature.
85 In my view Cathy Li’s recollection of events in 2016 is unreliable. Cathy Li repeatedly said she could not remember details or answer questions because it was so long ago.[59] She insisted the pages Mr Hu signed were white, despite prompting in examination in chief and when specifically asked if they were blue, assertively denied they were and said she clearly remembered they were white.[60] The evidence unequivocally establishes all pages signed by Mr Hu were on blue paper.[61]
[59] T1984 L11, T1987 L23-27, T1988 L10-13, T1989 L29-30, T1990 L12-13, T1990 L19-20, T1990 L27-28, T1992 L20,
[60] T1997 L4-12.
[61] Exhibit 6 Vendor’s original copy of the bound contract. The original of the bound contract sent to Mr Hu in Feb 2016,
86 The plaintiffs submit Cathy Li’s evidence in relation to informing Ms Wu about having obtained a signed contract from Mr Hu was illogical and inconsistent.[62] She appeared to want to maintain an impression of having waited for three days after Mr Hu signed, by way of an unsolicited cooling off period, during which she claimed that Ms Wu had no knowledge of and did not sign, the contract. This was despite both Ms Wu and Cathy Li being in the same office and there being a competing offer made on the property for a higher amount. This evidence makes no sense and indicates Cathy Li was prepared to tailor her evidence for what she thought would best serve an appearance of having acted in accordance with her obligations as a sales agent.
[62] See generally, T2207-T2217.
87 The plaintiffs submit that where the evidence differs Didi Li’s version of events should be preferred to Cathy Li’s. The defendants submit this overlooks the fact that Didi Li failed at any point prior to proceedings being instituted to tell her ‘friend’ Mr Hu that Cathy Li had allegedly attempted to offer her money to facilitate the transaction with Mr Hu.
88 Cathy Li’s evidence as to the directors’ signatures was inconsistent. She said she could not recall whether both signatures were on the contracts that she took to Mr Hu’s house. However, she immediately clarified that she could not recall whether Mr Du’s signature was on them, but knew that Ms Wu signed the following week.[63]
[63] Cf Plaintiffs’ submission at para 98. T2054 L3-28.
89 The plaintiffs submit there is no documentary record to establish that Ms Wu signed the contract on 19 October 2016. However, the defendants submit the messages between Cathy Li and Didi Li clearly show Cathy Li was checking with Didi Li as to whether she had spoken to the solicitor prior to taking the contract to Ms Wu.[64]
[64] CB 284.
90 The defendants made the following submissions regarding whether the contract was bound or loose when Mr Hu signed it.
91 In her evidence Cathy Li denied only bringing 17 loose pages to Mr Hu’s house. She said Ausgood had pre-printed copies of the contract, which were available in the display suite, and she brought two copies with her, bound in black plastic, about two fingers wide.[65] The vendor’s solicitors had been instructed to print and drop off a number of copies to the real estate agent.[66]
[65] T1984 L9-T1985 L2 (Cathy Li XN); T2184 L31-T2185 L25 (Cathy Li XXN).
[66] T1462 L14-T1464 L5 (Raynor Li XN); CB tab 200-CB tab 201 (emails re binding of contracts).
92 The defendants’ original version[67] shows pages printed in pink and blue. The signature pages of the contract are blue, as are the four Vendors’ Statement pages.[68] Ms Wu recalled that the signature pages for the contract were a light blue colour.[69] It was suggested to Cathy Li that she printed signature pages of the vendor statement and contract onto blue paper for taking around to Mr Hu’s house.[70] The defendants submit this is implausible.
[67] Ex 6.
[68] T2069 L8-T2076 L3 (Cathy Li XN).
[69] T2420 L27-29 (Wu XXN).
[70] T2185 L18-25 (Cathy Li XXN); T2228 L21-26 (Cathy Li XXN).
93 I accept Cathy Li could not have printed the signature page of the contract in the manner suggested by the plaintiff because this page already had Mr Du’s signature on it at the relevant time. In my opinion, it is much more likely the pages were removed from bound contracts prior to Didi Li attending Mr Hu’s house.
94 Mr Hu’s original copy of the contract sent to ACC is in all respects identical with the defendants’ original version, including the original signatures, binding and coloured pages referred to above.
95 Mr Hu’s and Didi Li’s version of events as to what happened at Mr Hu’s house on 14 October is different from Cathy Li. Cathy Li recalled meeting Mr Hu’s wife but said she then went somewhere else, while Mr Hu and Didi Li gave evidence Didi Li stood in the kitchen with Mr Hu’s wife while Mr Hu and Cathy Li sat at the dining table.[71]
[71] T1989 L31-T1990 L6 (Cathy Li XN).
96 While Didi Li gave evidence consistent with Mr Hu’s version of events about Cathy Li bringing a ‘thin bundle’ of documents to the house, the defendants say this is inconsistent with Didi Li’s actions at the time. Didi Li agreed the following day she opened the attachments to the email Cathy Li sent her containing the full contract of sale and the vendor statement and saw there were hundreds of pages of documents.[72] She agreed she was aware contracts contain important information about the land being purchased,[73] however she took no steps to contact Mr Hu or his conveyancer notwithstanding her alleged belief that there were many more documents in the contract than Mr Hu had signed.[74]
[72] T1103 L5-T1103 L31 (Didi Li).
[73] T1102 L15-T1103 L4 (Didi Li).
[74] T1137 L14-24 (Didi Li). 75 T1119 L19-23 (Didi Li). 76 T755 L29-T756 L8 (Hu XXN); T856 L8-12 (Hu XXN); T880 L3-22 (Hu XXN); T881 L14-T882 L31 (Hu XXN).
97 The defendants also submit Mr Hu and Didi Li’s evidence is not reliable because they have discussed what they remembered happened. The defendants rely on the almost identical content of Mr Hu’s affidavit at [34] and [35] and Didi Li’s witness outline at [23] and [24]. Mr Hu agreed that he and Didi Li had discussed their recollections of what Cathy Li said on 14 October 2016,75 but denied having seen Didi Li’s outline of evidence or discussing it when preparing his affidavit.76 Didi Li did not provide any explanation as to why the passages at [35] and [24] were identical.[77]
[77] T1174-T1177 (Didi Li).
98 Didi Li also denied having discussed her evidence with Mr Hu on this point. Her evidence was that she first attempted to record in writing her recollection of events in late 2019.[78]
[78] T1117 L6-9 (Didi Li XXN).
99 The defendants submit the document set out at CB 30 is the contract that should be accepted, for the following reasons:
(a)
It is consistent with the objective evidence, namely the defendants’ original version (Ex 6), the purchaser’s original version (Ex 9), and the emails concerning printing and delivery of contracts from LSL.
(b)
The original signatures of all parties that appear on Ex 6, and the purchaser’s original version, and Mr Du’s evidence he signed when the contract was in a bound form. If Mr Du’s evidence is accepted, Cathy Li would have had to extract Mr Du’s signed pages from two bound volumes to insert into separate bundles of pages taken to Mr Hu’s, something that is both unlikely and was not put to her.
(c)
It is highly unlikely that Cathy Li printed separate signature pages onto blue paper and then also printed or extracted other documents like the Architectural Plans, Elevations and Apartment specifications to take to Mr Hu, which would have required her to identify and print specific documents only, and in different colours;
(d)
The timing of Didi Li’s email to Cathy Li and Cathy Li’s attendance at Mr Hu’s house mean Cathy Li did not have time to print out separate pages of the contract as suggested to her.
(e) Cathy Li should be accepted as a credible witness; (f)
The extreme similarities between the evidence of Mr Hu and Didi Li give rise to serious doubts in relation to their credibility.
Didi Li’s credibility
100 Didi Li was called as a witness for the plaintiffs. I find she is an honest and reliable witness. I accept her evidence particularly where it is supported by the evidence of Mr Hu or other evidence.
101 Didi Li gave evidence that on 14 October 2016 Cathy Li called her many times and constantly, and asked her to convince Mr Hu to increase his offer by at least $10,000.[79] Cathy Li suggested that Didi and Cathy could split that $10,000. Cathy Li would give her a $5,000 gift card. This was the first time Cathy Li offered a $5,000 commission to Didi Li. Didi Li said she declined the offer because such suggestion by Cathy Li was wrong, and she did not need the money. Didi Li told Cathy Li if Cathy wants to give Didi the commission, then Cathy can just deduct the amount from the contract price so Mr Hu can pay less.[80] Didi Li told Cathy Li that Mr Hu was not prepared to increase his offer and he was leaving for China early the following morning. Didi Li admitted she did not tell Mr Hu about the gift card offer until the current proceedings were commenced.
[79] T1137 L25 – T1138.
[80] T1141 L12-16.
102 Conversely, Cathy Li and Ms Wu gave evidence that Didi Li called Cathy Li and requested $5,000 as a reward for introducing Mr Hu to the defendants.
103 The gift card goes to the credibility of both Didi Li and Cathy Li. The defendants say it demonstrates Didi Li asked Cathy Li for $5,000 for introducing Mr Hu to Sunshine, that Didi Li actively concealed this from Mr Hu until he initiated these proceedings, and she was effectively forced to reveal that she had obtained the promise of a benefit for her involvement.
104 Didi Li gave evidence Cathy Li mentioned the commission again on 19 October 2016 in a phone call.[81] Cathy Li asked Didi Li if her cheque can be deposited. Didi Li said she was very busy and did not have time to visit a bank. Cathy Li said if Didi Li does not put money in the cheque account in time, Mr Hu will fail to purchase of the property. Cathy was aware Didi Li was getting money out of her term deposit to put in the cheque account and said if Didi Li can deposit the money soon, the developer will still pay her the $5,000 commission. Didi Li said she did not need the commission but needs time to deposit.
[81] CB 284; T1089
105 On 12 January 2017, Cathy Li forwarded to Didi Li a letter acknowledging Didi Li would be given a $5,000 gift card from Ausgood upon settlement.[82] In the email, Cathy Li stated to Didi Li to ‘keep this email as confidential’.[83]
[82] CB 647-648 (gift card and email).
[83] Ibid.
106 The defendants submit this supports Cathy Li’s evidence that in January 2017, Didi Li contacted her and asked her for a $5,000 payment for ‘referral’ of Mr Hu to Ausgood.[84] Cathy spoke to Ms Wu about it and Ms Wu agreed to give Didi Li a gift card.[85] Ms Wu said she agreed to the gift card and giving it is a ‘way of Chinese thinking … a way to show appreciation’.86
[84] T2059 L10-T2062 L15 (Cathy Li XN).
[85] T2357 L1-21 (Wu XN). 86 T2379 L13-26 (Wu XN). 87 T1135 L1-6.
107 Didi Li never received the gift card.
108 Didi Li said she did not intend to accept the gift card. Even if Cathy Li had given her the gift card in the end, she would have given it to Mr Hu.87 Didi Li said if the gift card was intended for her for the referral of Mr Hu to Ausgood, it would have been given to her in 2017, rather than after the settlement.[88]
[88] T1136 L21-25.
109 The defendants say the reference in the letter to ‘please keep this confidential’ is consistent with Cathy Li’s evidence that Didi Li asked her to keep the existence of the commission from Mr Hu.[89] Conversely, Didi Li gave evidence Cathy Li’s email instructed her to keep the letter confidential and not to tell anyone.[90] Therefore, despite knowing Cathy Li’s suggestion was wrong, Didi Li did not mention the gift card to Mr Hu.
[89] T2063 L21-T2064 L1 (Cathy Li XN).
[90] T1136 L7-8.
110 I reject Cathy Li’s evidence on the issue of the $5,000 introduction fee or commission. I find Cathy Li’s version of the events is not credible. The letter and email from Cathy Li to Didi Li clearly show Cathy Li’s initiation of the commission payment scheme and her intention for it to be confidential. Cathy Li and Ausgood also each had clear motives to offer the $5,000 gift card to promote the sale and settlement of Lot G4.
111 I consider the evidence concerning the offer of the gift card enhances Didi Li’s credibility because she was willing to admit her error and accepted she had done the wrong thing. She did not prevaricate or seek to excuse her conduct.
112 I accept Mr Hu and Didi Li’s evidence that Cathy Li brought a thin bundle of loose pages to Mr Hu’s house for signing on the night of 14 October 2016 and explained she was in hurry. I was impressed by Didi Li’s evidence that when she arrived Cathy Li had a very small bag with her,[91] not a satchel or a brief case; certainly not something that could hold two spiral bound copies of the contract and vendors statement. To me, the evidence of this simple observation had the ring of truth about it.
[91] T1062 L12-13 (Didi Li XXN).
113 Through the inducement of an extra car park space – increasing this from two to three, the exercise of pressure by sending an email with attached photograph of a competing offer with cash deposit to Mr Hu,[92]and offering a $5,000 commission to Didi Li to promote a better offer from Mr Hu, Cathy Li was eager to secure Mr Hu’s purchase before he returned to China the next morning.
[92] CB 276-277; T1982 L26-1983 L15 (Cathy Li XN); T2224 L21-23; T2225 L17-2226 L5 (Cathy Li XXN).
114 In my view, on the balance of probabilities, Mr Hu did not receive the full contract or vendor statement before he signed the contract and relied on Cathy Li’s representations regarding Lot G4 when he agreed to the purchase of that lot. Accordingly, I conclude the Agreement between the parties was constituted by the ‘thin bundle’ of 17 loose pages brought by Cathy Li to Mr Hu’s house on the night of 14 October 2016, supplemented by her oral representations that Lot G4 could be used as a 30-seat café with basic fit-out and that Mr Hu would receive three car park spaces in the basement level opposite the lift as owner of Lot G4 and not be required to resort to car stackers for parking facilities.
Time of contract
115 Both Cathy Li and Ms Wu believed there was no binding contract until Ms Wu signed the contract as the second director of Sunshine, and the deposit was transferred.[93]
[93] T2282 L21-24 (Cathy Li XXN); T2341 L5-19 (Wu XN), T2344 L26-30 (Wu XN).
116 The defendants say as a matter of law, it is likely that the contract was in fact binding on 14 October 2016, at the time Mr Hu signed the contract, by which time Mr Du had already signed. However, no issue in dispute turns on the date of signature, therefore this is not a matter the Court needs to determine.
2. Whether terms of the Agreement existed:
a.
Lot G4 had approval for a 30-seat café which would be constructed by Sunshine in a manner that was fit for use as a café that could seat up to 30 people (café term)
117 The plaintiffs allege there were terms of the Agreement that Lot G4 had council approval to be a 30-seat café and Sunshine would build it in a manner fit for use as a 30-seat café.
118
The plaintiffs submit Mr Hu was initially introduced to the project by Sissi and Cathy as a café.[94] The suitability of the commercial premise to operate as a café was Mr Hu’s intention and reason for entering the contract. The premise being able to operate as a café was confirmed by Cathy Li at each of her meetings with Mr Hu on 5, 8 and 14 October and in acceptance of this term, Mr Hu signed the contract. This term was also confirmed in the floor plan photographed by Mr Hu which clearly marks Lot G4 as ‘CAFÉ 30 SEATING’,[95] and the CHT ground floor plan provided to Mr Hu on the evening of 14 October with the pages he signed.[96]
[94] T599.
[95] CB 251.
[96] CB 2355. CHT Architects ground floor plan showing Lot G4 ‘Café 30 Seating’.
119 The defendants acknowledge it was an implied term that the café would be constructed as a council approved 30-seat café. The defendants then seek to introduce a new term to the admitted implied term, which they claim provided that the description and character they gave to Lot G4 would only be reached following fit-out of Lot G4. The plaintiffs respond by saying nothing in the contract documents contains any such reference or implication and to the contrary, the planning permit made the defendants wholly responsible for constructing and bringing to operation a café within two years of the development completing. Nothing in the contract documents transferred or subcontracted this obligation to the purchaser, introduced a shell only provision or limited the defendants construction obligations.
120 The plaintiffs submit marketing material provided to Mr Hu, and at each of the meetings held on 5, 8 and 14 October, Cathy Li reassured Mr Hu Lot G4 was being constructed by the defendants and sold as a café which had council approval for use as a 30-person café.[97] The defendant’s marketing material clearly stated: ‘The property features a ground-floor café, … generating a mini-hub atmosphere and enriching the immediate area around the residence’.[98] The defendants’ ‘Price List of 340 Whitehorse Road’99 described Lot G4 as a 265m2 café. The marketing brochure provided to potential purchasers to take away, featured two full page pictures of the ground floor café.100 The ‘flip book’ at the display suite showed a picture of the ground floor café.[101] The area plans at the display suite described Lot G4 as a café with an area of 265m2.102
121 The wall plans shown and photographed by Mr Hu at the display suite, showed Lot G4 with a toilet and described Lot G4 as a ‘CAFÉ 30 SEATING’.103 The CHT ground floor plan described Lot G4 as ‘CAFÉ 30 SEATING’. Cathy Li gave evidence she told Mr Hu Lot G4 had council approval as a Café seating 30 people. The defendants admit the contract referred to Lot G4 having planning approval for use as a 30-seat café. By reason of this fact, the defendants in their submissions accept there was an implied term that Lot G4 would be constructed in such a way that it would be capable of use as a 30-seat café.
122 The defendants seek to qualify the admitted implied term by inserting the words ‘upon being appropriately fitted out by the purchaser’. The plaintiffs respond by submitting there is no basis in any of the documents, plans, brochures or other material given to Mr Hu prior to 14 October 2016, for the addition of these words to the clear words used in the documents set out above.
123 The defendants submit it was implied in the contract that Lot G4 would be constructed in such a way that the purchaser could fit it out as a 30-seat café. They say it was not a term of the contract that Lot G4 would be constructed so that it could immediately (upon taking possession) be used as a café. The property was constructed as a raw shell or cold shell, with fit-out to be provided by the plaintiffs. This type of construction is typical in commercial properties, and allows purchasers to fit-out the property according to their particular requirements.
124 It is not at all ‘uncontroversial’ that Mr Hu was told the defendants would construct and provide on settlement a council approved 30-seat café. The defendants say Mr Hu was told that the premises could be used as a café, not that it would be ‘constructed as’ a café.104 In other words, the lot had, as at the time of sale, council approval for use as a café. This was consistent with the plans that Mr Hu was shown, which clearly showed a blank canvas for the space, by comparison with the plans for the apartments. While a blank canvas, the permit and the plans show, at the time of sale, Lot G4 was intended to be constructed to be fit for purpose as a 30-seat café.
125 I agree it is inaccurate to say, as the plaintiff do, that the defendants had a legal obligation under the planning permit to construct a cafe.[105] The planning permit gave permission for use of the Lot G4 as a café, nothing more. If the lot was not constructed within a certain period, then the permission would lapse. A planning permit does not serve the function of requiring a land owner to construct a property in a particular way.
126
Moreover, the building surveyor in issuing the building permit was required to consider consistency with the planning permit pursuant to s 24(1)(d) of the Building Act 1993. The building surveyor issued the building permit, and was not called by the plaintiffs to suggest that he should not have done so. ‘Consistency’ in this context does not mean that the plans for the planning permit and building permit are identical.[106]
[106] Premier Building & Consulting Pty Ltd v Spotless Group Ltd (2007) 64 ACSR 114 [645].
127 Cathy Li said her understanding of what Lot G4 would look like when provided by the developer at settlement was a concrete space with pipes but with no fit-out, fixtures or floor covering.[107] While these were not the descriptions Cathy Li gave to Mr Hu, she gave evidence she told Mr Hu Lot G4 would be ‘wei zhuangxiu’, meaning ‘empty without fit-outs’.108 Cathy Li said her understanding was based on her experience as a sales agent.109 She gave evidence she had never been involved in the sale of commercial space before 2016[110] but she was involved in roughly ten sales of commercial space in 2016.111
128 I do not accept the initial sales pitch made to Mr Hu by Cathy Li was to the effect he was being sold a property that had the potential to be turned into a 30-seat café. I do not accept a commercial offer of this kind, had it been made, would have been sufficiently attractive to induce Mr Hu to enter into the Agreement. Given his hands-off approach to investing, and the fact he was relying on advice from others (including Cathy Li) to make up his mind, I do not accept he would have been willing to pursue this transaction had it been made clear to him that it would be up to him to fit-out and make usable Lot G4 as a café. Mr Hu was clearly in the market for a finished space that he could lease out or run himself. In my opinion, this is how the Lot G4 was sold to him.
129
I am not persuaded by the fact it might be ‘usual practice’ for similar cafes or hospitality businesses to be sold as a cold-shell, whereby the fit-out is left in the hands of the purchaser. Mr Hu was not a usual investor. He was not looking for an overly involved project, and he had no interest in personalising the lot for his purposes. He was attracted to the marketing material and the prospect of purchasing a finished product; a café that he could use for his own purposes. At no point in the negotiations did he mention he was interested in altering the design as displayed in the marketing material. I do not believe this can be attributed to his investing strategy, rather, in my opinion, this is how the café was marketed to him.
130 By extension of my reasoning above, I do not accept there was an implied term in the contract that Lot G4 was sold subject to fit-out and renovation by Mr Hu. This implied term would undermine the sales pitch which I have identified above, and would therefore directly contradict the product that was being sold to Mr Hu.
131 The defendants have not been assisted by the fact that on their own version of events they provided Mr Hu with mixed messaging regarding the approval granted for the premises. The defendants accept Lot G4 was sold as having planning approval for a café seating 30 people, but then, as noted above, state that this was qualified by an implied term that this was the case only after Mr Hu’s fit-out. I find it inconsistent, and therefore difficult to believe, that on the one hand the café was sold as essentially a ready to use space that had been approved for 30 people, but at the same time was being qualified by a provision which stated this wouldn’t be the case until Mr Hu renovated it and made it useable.
132 Why would the defendants have represented the premises had approval for a 30-seat café, only to undermine this sales pitch with the renovation qualification? If Lot G4 wasn’t being sold in a form that had approval as a 30- seat café, this would not have been part of the sales pitch, and therefore would not have been mentioned to Mr Hu.
133 The marketing material provided to Mr Hu supports the finding that Lot G4 was being sold as a completed 30-seat café. Importantly, the defendant’s marketing material clearly stated: ‘The property features a ground-floor café, … generating a mini-hub atmosphere and enriching the immediate area around the residence’.112 The defendants’ ‘Price List of 340 Whitehorse Road’[113] described Lot G4 as a 265m2 café. These are two instances where it was represented to Mr Hu that Lot G4 would be finished as a café.
134 Any purchaser reading the description of the ground floor café would immediately conjure up images of a functional café, not a ‘cold-shell’. The defendants have gone to lengths to describe the very ‘atmosphere’ of this café, this is clearly an effort to sell the vision of a finished café. Moreover, the ‘flip book’ at the display suite showed a picture of the ground floor café.114 I believe this artist’s rendering was not included simply as inspiration for Mr Hu as to what the café might look like after he completed renovating and fitting it out. Consistent with the other images for the rest of the building, this was designed to portray what the café would look like on completion. The obvious purpose of images in an off-the-plan purchase is to demonstrate what the product will look like, so as to entice the purchaser to pursue the investment, not to merely suggest what it might look like.
135 Finding: While I do not find Sunshine was obliged to construct a 30-seat café, I do find there was a term Sunshine would construct Lot G4 in a manner fit for use as a 30-seat café based on the representations made by Cathy Li and the planning permit and marketing materials shown to Mr Hu prior to him entering into the Agreement.
b. Lot G4 could also be used as a restaurant (restaurant term) 136 The plaintiffs submit Cathy Li told both Mr Hu and Didi Li that Lot G4 could be used as either a café or a restaurant.
137 Whether it was promised to be a ‘commercial shop’, (a description both Cathy Li and Ms Wu admitted to commonly describing the property as during the sales process), or specifically, a restaurant, Lot G4 as constructed and registered was not capable of such use as it did not meet the ‘deemed to satisfy’ requirement (‘DTS’) of the Building Code of Australia (‘BCA’) for a habitable room and the legal title prevented expansion of the area into common property, even if a performance solution were possible.
138 Mr Hu and Didi Li both gave evidence that Cathy Li described the characteristics of Lot G4 and its uses as being for a café, but that it could also be used as a restaurant if Mr Hu wanted. Cathy Li also gave evidence that she described Lot G4 as a ‘commercial shop’, using the Chinese word ‘Shang Pu’, which she said was a place where you sell your goods and services and was used to distinguish the lot from the residential apartments.
139 Ms Wu gave evidence the defendants were unaware of what the purchaser wanted to do with the commercial premises; either they were going to run a cafe or some other business. Based on this evidence, the defendants say it is more probable than not Cathy Li described the property as a café, but said it was capable of use as a restaurant if the purchaser so wished.
140 The defendants say there was no term of the contract that Lot G4 could be used as either a café or a restaurant. While the architectural plans referred to a ‘café’, as did the planning permit, there is no reference in any of the contract documents or other materials to a restaurant. It may have been possible to use Lot G4 as a restaurant if planning permissions were given by the council, however this did not exist as a term of the contract.
141 I accept the defendants’ contention there was no term of the Agreement to the effect that Lot G4 could be used as a restaurant.
c.
The car parking spaces allocated to Mr Hu would be opposite the lift in the basement and would not be in car stackers?
142 The plaintiffs submit it was a term of the Agreement the car parking spaces allocated to Mr Hu would be opposite the lift in the basement and would not be in car stackers.
143 The car parking spaces were used as an inducement for Mr Hu to purchase Lot G4. Cathy Li originally offered two ground level car parking spaces.115 This was later increased to three.
144
Mr Hu and Didi Li both gave evidence that Cathy Li told them at the meeting on 8 October 2016 that the car parking spaces which came with Lot G4 were near the lift, stairs and the large storage facility which belonged to Lot G4. Cathy Li pointed Mr Hu and Didi Li to the car parking spaces directly opposite the lift and stairs labelled ‘Café/Disabled Carpark’ on the CHT plans at the display suite, which were provided to Mr Hu on the night of 14 October 16.[116] Cathy Li represented the car parking spaces were easily accessible from the café and were convenient for unloading supplies into the storage facility.[117] Nothing on the plans showed car stackers allocated to Lot G4.
145
Didi Li gave evidence Cathy Li described the car parking spaces as being on the ground and staff and customers of the café could use them.[118] Cathy Li never mentioned to Didi Li or Mr Hu that the car parking spaces were in car stackers.[119]
[116] CB 2354.
[117] T673 L14-20.
[118] T1161 L8-9; T1160 L11.
[119] T1160 L9; T666 L30.
146 Didi Li gave evidence she heard Cathy Li say to Mr Hu on the night he signed the contract that an extra car parking space would be made available to Lot G4, bringing the total to three car parking spaces not in car stackers. According to Didi Li, at Mr Hu’s dining room table before he signed the contract, Cathy Li offered him ‘a surprise’ of one extra car parking space as an incentive for him to sign the contract that night.[120]
147
Cathy Li had an extremely poor recollection of the specific details concerning all of the three meetings she had with Mr Hu. She repeatedly said she could not remember when asked about details and she gave very brief descriptions of what was said at each meeting. She could not elaborate on her representations to Mr Hu in relation to the car parking spaces.
148 While the defendants submit there was no term of the contract to the effect the car parking spaces allocated to Mr Hu would be opposite the lift in the basement and would not be in car stackers, I accept such terms were introduced by Cathy Li’s representation to Mr Hu prior to the Agreement being signed.
149 While the defendants submit the contract was clear in specifying the car parking spaces were car stacker spaces,[121] and the plan of subdivision specifically set out the car stacker spaces allocated to Lot G4, which were behind the lift,[122] I do not accept these plans were provided to Mr Hu prior to him signing the Agreement.
3. If the terms existed, was there a breach of those terms: a. In terms of the ceiling height? 150 The plaintiffs submit the Agreement was breached by virtue of having a ceiling height of 2.2m from finished floor to ceiling, which is less than the DTS requirement of the BCA. Such height was significantly less than the DTS of the BCA and rendered Lot G4 incapable of being a council approved 30-seat café.
151 The defendants submit the height from ground floor slab to first floor slab was set out in the architectural drawings at Schedule 5 to the contract as 2,860mm. From this the width of the slab (270-300mm) needed to be deducted.[123] The distance between the top of the ground floor slab and the underside of the soffit was 2,585mm. While the contract provided that heights and measurements were subject to change, this distance was constructed as per the plans and entirely in accordance with the contract. It would have been readily apparent from a cursory look at the architectural drawings at Schedule 5 that this was the floor to floor height.[124] The elevations at Schedule 5 did not reflect a finished ceiling height.[125] However, I do not accept the architectural plans were provided to Mr Hu prior to his signing of the contract.
152 I accept the defendants’ submissions there was no agreement between the parties to have a false or flat ceiling in the property. I also accept there is no requirement under the BCA to have a flat ceiling or for exposed pipes to be concealed.[126] Moreover, I accept the Boroondara Council guidelines do not require a uniform ceiling (as opposed to an impervious ceiling) in a food preparation area.[127]
153 The plaintiffs relied upon the fit-out to the Chinese massage centre which subsequently occupied Lot G4 as the ‘real-life, practical application of dealing with the pipes’.[128] The occupier of those premises installed a ceiling in some parts of Lot G4. Where the ceiling was not installed, exposed pipes are visible. The fit-out comprises a low uniform ceiling height with obscured windows and doors with modified heights.
154 While I accept these reflections are attributable to the particular fit-out chosen for Lot G4 by the Chinese massage centre, they show the limits of the ceiling height imposed on the possible performance solution.[129] The question is whether this ceiling height would allow Lot G4 be appropriately fitted out as a café.
155 The defendants submitted a proposed fit-out prepared by CHT to demonstrate one such possibility.[130] Alan Lorenzini, a building surveyor called by the plaintiffs, agreed this specific proposed fit-out would normally get approval for a café.[131] However, being limited by the cold shell as constructed, the proposed fit-out is highly specific in terms of different levels of ceiling height in different areas. In Mr Lorenzini’s view,[132] the problem with the cold shell is that it limits what the purchaser can do with the fit-out. The purchaser could not put the kitchen in places where pipes project into the 2.4m. The purchaser would have to use a very specific and limited fit-out to conform with the limitations of the shell. These were not terms agreed by Mr Hu when he signed the contract.
156 Moreover, Mr Hu did not receive the plans or drawings. Cathy Li never mentioned to Mr Hu the restrictive ceiling height or the need for exposed pipes. On the contrary, she pointed Mr Hu to the marketing materials depicting the café with a high flat ceiling and large floor to ceiling windows.[133] Whilst there was a disclaimer associated with the architect’s rendering, it was on a different page from the photo Cathy Li showed Mr Hu.[134] Moreover, the disclaimer was in English and in small font which Mr Hu could not read. I accept the evidence that when Mr Hu asked Cathy Li if the actual building will look the same as what was depicted in the picture, she answered ‘yes’.[135]
157 Expert witnesses gave conflicting evidence in relation to whether the construction of the cold shell would result a ceiling height that was below the minimum requirement for the ceiling height of a café.
158 It is not in dispute the ceiling height of the cold shell and the arrangement of the pipes resulted in the limitation that a continuous suspended flat ceiling could not be installed to conceal the pipes while complying with the DTS to allow Lot G4 to be used as a café.
159 Mr Saunders gave evidence that council would not grant approval for a food premises or café to be operated at Lot G4 given the state of the shell.[136] Mr Saunder’s view was based on his expertise in building inspections, experience gained by looking at a vast array of building problems, experience in carrying out approximately 3,500 inspections, and the close inspection he had conducted in Lot G4.[137]
160 Geoffrey Woolcock, a building surveyor called by the plaintiff, opined it was unlikely a performance solution which included bulk heads constructed to cover pipes and services running across the centre of an open space area such as a café at 2.2m would be approved.[138]
161 Shane Leonard, a registered building practitioner, building surveyor and building inspector gave evidence on behalf of the defendants. He prepared four reports. At paragraph 4.5 of his first report, he expressed the view it would be possible to develop a performance solution to permit Lot G4 to be fitted out as a café with clearance under the built-in bulkheads of only 2.1m.[139] That solution would require vertical battens and plasterboard fixed into the common property, which would require approval from the owners corporation (‘OC’). In cross-examination, he conceded approval of such a scheme depended upon his subjective opinion.[140] He conceded another surveyor may not approve a performance solution with heights below DTS at 2.1m and the purchaser of Lot G4 would be left carrying the risk as to whether any particular surveyor would share his view.[141]
162 Even if it were possible for Lot G4 to be approved as a café with a specific performance solution, I do not accept, at the time of signing the contract, Mr Hu had agreed to carry out the specific performance solution significantly limited by the condition of the cold shell so that Lot G4 could be used as a council approved 30-seat café.
163 The finished product Mr Hu was provided, the cold shell, was not simply a blank canvas for Mr Hu to fit-out and upgrade as he pleased (regardless as to whether or not it was incumbent on him to do so in the first place). The cold shell had a number of restrictions and as it existed at the time of completion could not immediately be brought to code under the BCA.
164 Moreover, even if Lot G4 could somehow have been brought to code, there were still clear functional restrictions on its use. For example, Mr Hu would not be able to place the kitchen equipment in areas where the pipes project into the 2.4m space available. These kinds of restrictions diminish the useability of the space, and place limits on any design and fit-out. Floor plan is an essential element in the enjoyment of any commercial or residential property, and it is possible that navigating the kitchen around any protruding pipes would lead to a less attractive, less functional café – one that was not in line with standard industry practice, and which did not facilitate ease of use by employees.
165 The performance solution that has been offered as a means of bringing Lot G4 to code would result in different ceiling heights, different ceiling materials, and different ceiling fit-out in different areas. The performance solution put forward by Mr Leonard required vertical battens and plasterboard into the common property, as bulk heads would be required over the protruding pipes. Even if I were to accept this performance solution as a legitimate avenue for bringing Lot G4 to code, these adjustments would be, at the very least, unsightly and appear unusual to customers.
166 One has to consider that part of the bargain was to provide Mr Hu with a functional space that also looked and acted like a regular café, not a compromised and peculiar design that would put off customers. Simply because these structures might prove the space had the potential to be approved for use as a café, one has to consider at what cost? It is possible that the design of the ceiling might result in Lot G4 being practically unusable, in the sense that it would not present as a regular, desirable café. The unattractive configuration of the space as eventually set up as a Chinese massage centre demonstrates the point.
533 The plaintiffs submit it would be unconscionable for the defendants to maintain a term of ‘cold shell’ could be implied into the Agreement or contract, given the circumstances in which the contract came about, the information provided by the defendants and the fact Lot G4 was an off-the- plan development.
534 The defendants submit they did not engage in unconscionable conduct. Unconscionable conduct requires an element of moral obloquy and taking unconscientious advantage of another’s disadvantage. There is nothing about the factual circumstances to suggest Mr Hu was the victim of such conduct.
535 In Amadio[513] Mason J said relief on the ground of unconscionable conduct will be granted when unconscientious advantage is taken of an innocent party whose will is overborne so that it is not independent and voluntary, or where advantage is taken of an innocent party who, though not deprived of any independent and voluntary will, is unable to make a worthwhile judgment as to what is in his or her best interest.
[513] Amadio 464.
536 ‘Unconscionability’ involves more than conduct which might be thought otherwise to be unfair or unreasonable. It requires ‘moral obloquy’.[514] The concept of unconscionability in ss 20 and 21 ACL goes beyond what would constitute unconscionability in equity.[515]
[514] Director of Consumer Affairs Victoria v Scully (2013) 303 ALR 168 [59].
[515] Australian Competition and Consumer Commission v Simply No-Knead (Franchising) Pty Ltd (2000) 178 ALR 304 [31];
537 The defendants submit there is no ‘higher duty’ on a vendor’s representative by virtue of the fact that they are dealing with a purchaser who does not speak English.[516] This is particularly the case where the person making the representations (Cathy Li) communicated with the purchaser in Chinese.
[516] Cf Plaintiffs’ opening submissions at T37-38.
538 Section 22 of the ACL sets out a non-exhaustive list of matters that the court may have regard to for the purpose of determining whether s 21 has been contravened. One of these is ‘the relative strengths of the bargaining positions of the supplier and the customer’. Another is ‘whether the customer was able to understand any documents relating to the supply or possible supply of the goods or services’.
539 The defendants submit that neither of these, applied to the circumstances of this case, assists Mr Hu. Given his business and investment experience, he was certainly not at a disadvantage compared to Sunshine. Further, he had the capacity to know and understand the contents of the contract by asking Didi Li, or seeking the advice of his solicitors. Cathy Li also spoke to Mr Hu in Chinese. In Mirvac (Docklands) Pty Ltd v La Rocca,[517] it was found that a purchaser was not at a special disadvantage when his lack of understanding of the contract was brought about by ‘his own failure to look out for his own interests by reading and trying to understand the contract of sale and, if he could not do so, obtaining advice or assistance so as to enable him to understand it’.
[517] Mirvac (Docklands) v La Rocca [2006] VSC 48 [191].
540 National Australia Bank v Walter[518] illustrates the fact of a non-English speaking background does not constitute a special disability where that person has access to competent translation, professional advisers and extensive business experience.
[518] National Australia Bank v Walter [2004] VSC 36.
541 A further factor under s 22 is ‘whether any undue influence or pressure was exerted on, or any unfair tactics were used against, the customer’. Mr Hu was neither a party whose will was overborne, nor a person of whom advantage was taken. The fact of his not speaking English does not in and of itself make him an object of unconscionable conduct. He is the owner of multiple properties, and owner/manager of a factory in China that has at times employed more than a hundred people.[519]
[519] T732 L4-6 (Hu).
542 Mr Hu was already an experienced property investor at the time of his dealings with Cathy Li, being the owner of a farm and a $2 million residence in Melbourne.[520] He owns a residential property, a factory and an office in China.[521] He has also purchased a property with a friend as a subdivision for a housing development.522
[520] T699-700 (Hu XXN).
[521] T701 (Hu XXN). 522 T703 (Hu XXN). 523 T850 L8-T851 L1 (Hu XXN).
543 Mr Hu admitted that Cathy Li did not pressure him and there was no hurry for him to buy the property.523
544 Mr Hu’s evidence contains a largely incredible assertion of statements made by him to Cathy Li based on his being impressed with her hard work and coming to his house late and for that reason, and because he was returning to China the next day, he would sign the contract. His evidence was that Cathy Li said, ‘We are all Chinese Mr Hu, and I will not deceive you’.
545 It is clear from the communications that occurred between Mr Hu and Cathy Li in May and June 2018 that Mr Hu had made particular assumptions about being able to use Lot G4 in any way that he saw fit, which were not based on any representations made by Cathy Li. In fact, Cathy Li took great pains to assist Mr Hu to understand what Australian planning law required and how this differed to the position that may pertain in China.
546 Despite attempting to avoid the question, Mr Hu admitted there was nothing to stop him from requesting a copy of the contract from Cathy Li,[524] and if there was any issue in relation to the contract or its terms, there was every opportunity for that to be raised in the period immediately following the signing of the contract.
[524] T850 L10-19 (Hu XXN).
547 Cathy Li’s evidence was that she allowed for an informal ‘cooling off’ period following Mr Hu’s signing of the contract. She applied this term to a period following the purchaser’s signing of the commercial contract, as she considered the formal cooling off period did not apply to a commercial space following signature by both parties.[525] However, I find this was never communicated to Mr Hu.
[525] T2284 L25-T2286 L2 (Cathy Li XXN); T2300 L2-18 (Cathy Li RXN).
548 Mr Hu and Didi Li gave evidence of Cathy Li making statements to the effect, ‘We are all Chinese’. There was no need for Mr Hu to ‘trust’ Cathy Li, a real estate agent he had met briefly three times. He had enlisted the assistance of family friend, Didi Li, to assist with the purchase. He engaged a conveyancer to assist with the purchase. He had every means at his disposal to review the contract and ensure he was happy with its terms. Accordingly, the defendants submit it is nonsensical to suggest Mr Hu relied upon Cathy Li in these circumstances.
549 The defendants make the further point the plaintiffs appear to rely upon a formulation of the unconscionable conduct claim that was not pleaded. At paragraph 30.6 of the plaintiffs’ closing submissions, it is submitted that the defendants engaged in unconscionable conduct ‘by insisting on settlement and then retaining the plaintiff’s deposit, despite knowledge of the misdescription and failure to construct Lot G4 for occupation and use as a café’. Paragraph 49 refers to Cathy Li’s ‘failure to disclose any of the pertinent facts concerning the finished ceiling height or requirements for further construction works, permits, certification and council approvals’.[526]
[526] See to similar effect para 78 in relation to no disclosure in the marketing materials, contract or representations.
550 At paragraph 253 it is submitted it would be unconscionable for the defendants to ‘maintain that an implied term of “cold shell” could be implied into the Agreement’. The defendants submit these assertions are completely outside the pleaded allegations of unconscionable conduct expressly referenced at paragraphs 15-17.[527]
[527] FASOC B2:19-20.
551 In light of the plaintiffs’ success on other causes of action it is unnecessary for me to express a concluded view as to the allegation against the defendants of unconscionable conduct.
Counterclaim issues
15. What constitutes the Agreement between the parties that was made on 14 October 2016?
552 As I found in Issue 1, I accept that only a thin bundle of 17 loose pages was brought by Cathy Li to Mr Hu’s house on the night of 14 October 2016. The Agreement consists of the 17 loose pages and Cathy Li’s oral representations Lot G4 can be used as a 30-seat café with basic fit-out and Mr Hu would receive three car parking spaces in the basement level opposite the lift which would not be in car stackers.
16. Did the First Plaintiff breach the Agreement, or repudiate the Agreement by failing to settle on 14 August 2018, or by failing to rectify his default as set out in the Notice of Default and Rescission dated 17 August 2018, or alternatively by seeking to terminate the Agreement? (Paras 28, 29 and 31 Counterclaim)
553 By counterclaim Sunshine alleges Mr Hu breached the contract by failing to settle on 14 August 2018. Alternatively, Sunshine claims Mr Hu repudiated the contract by failing to rectify his defect by 1 September 2018, or alternatively, by the Notice of Default and Rescission of 30 August 2018, which he was not entitled to issue, or by seeking to terminate the contract.
554 The defendants say Sunshine’s counterclaim is based on Mr Hu’s breach of contract by failing to settle within 14 days of Sunshine giving notice to the plaintiffs that the Plan of Subdivision had been registered on 31 July 2018. It is submitted the contract was validly terminated by Sunshine on 1 September 2018, the day after the date on which Sunshine’s Notice of Rescission of 17 August 2018 expired.[528]
[528] CB 1443 (Defendant’s Rescission Notice).
555 Alternatively, it is submitted Mr Hu repudiated the contract by failing to comply with Sunshine’s Notice of Rescission, or by Mr Hu’s letter of 30 August 2018 seeking to terminate the contract.[529]
[529] CB 1473 (30 Aug 2018 Lewenberg letter).
Breach by failing to settle on 14 August 2018
556 The defendants make the following submissions regarding the alleged breach by failing to settle on the settlement date.
557 Sunshine wrote to Mr Hu enclosing the certificate of final inspection on 27 July 2018; it was referred to as the occupancy permit.[530] The vendor’s expectation was the certificate of final inspection was the equivalent of the occupancy permit for that purpose.[531] There was nothing further the vendor was required to do pursuant to the contract to complete the construction of the commercial space.[532]
[530] CB 1359 (27 July 2018 letter).
[531] T1677 L3-8 (Raynor Li XXN); T2361 L20-27 (Wu XN); T2419 L31-T2420 L4 (Wu XXN).
[532] T1502 L7-T1503 L29 (Raynor Li XN).
558 On 31 July 2018 Sunshine wrote to the first plaintiff advising the plan of subdivision had been registered and calling for settlement to occur by 14 August 2018.[533]
[533] CB 1371 (31 July 2018 letter).
559 The defendants submit, while SC14.1 marries the setting of the settlement date to the later of the registration of the plan of subdivision and the issuing of an Occupancy Permit, a commercial interpretation of this provision clearly indicates that in the context of the commercial property, ‘Occupancy Permit’ must be interpreted as being constituted by the ‘Certificate of Final Inspection’.[534] A commercial contract should be construed by reference to the surrounding circumstances known to the parties and the commercial purpose or objects to be secured by the contract, in order to avoid a result that would work commercial inconvenience.[535]
[534] T1501 L17-T1502 L2 (Raynor Li XN).
[535] Electricity Generation Corporation v Woodside Energy (2014) 251 CLR 640; 306 ALR 25, 33-h34.
560 The Court may admit evidence of surrounding circumstances in the form of ‘mutually known facts’ to identify the meaning of a descriptive term and may admit evidence of the ‘genesis’ and objectively the ‘aim’ of a transaction in order to show a strict legal interpretation would make a transaction futile.[536] The defendants submit, the Court can consider the objective evidence as to the transaction that indicate Sunshine was to provide a space that was to be fitted out by Mr Hu. Sunshine relies upon this evidence to demonstrate ‘occupancy permit’ should be given an interpretation consistent with that transaction.
[536] DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 19 ALR 223, 228 (‘DTR’), citing Prenn v Simmonds [1971] 1
561 Section 45 of the Building Act 1993 provides that an occupancy permit must
specify:
(a) the prescribed classification of the building; (b) the proposed use of the building; and (c) the maximum number of people to be accommodated within the building. 562 While the prescribed classification and proposed use were Class 6 and café, if one looks at the permitted use under the planning permit Sunshine did not know what use Mr Hu planned to make of the property, nor whether he intended to vary the maximum number of people to be accommodated within the building, if it were to be used as a café. Indeed, Cathy Li had been told on a number of occasions Mr Hu wanted to be able to do a range of other things with the lot.
563 In cold shell construction it is customary to provide a certificate of final inspection which verifies the works have been completed to the satisfaction of the building surveyor and comply with the Building Act and regulations. An occupancy permit is granted following the fit-out and once sanitary facilities are installed.[537] While a sanitary facility is a requirement in order to use a property as a café, it need only be installed at the occupancy permit stage, not prior to delivery of the cold shell.[538]
[537] CB 146 (Leonard Second Report); T2497 L10-31 (Leonard XN).
[538] T2522 L17-T2523 L1, T2529 L4-12 (Leonard XXN).
564 An occupancy permit is granted once use is determined and a fit-out is designed and constructed.[539] Even where it is assumed the property will be used as a café, there is still a need to know the design for the fit-out before a performance solution can be assessed.[540] An owner would not design a performance solution and then find out the occupier wants something completely different to that design.[541] This was why it was not possible to grant the purchaser of the commercial space an occupancy permit prior to settlement.[542]
[539] T1240 L31-T1242 L6 (Woolcock XXN); T1358 L31-T1359 L18, T1364 L8-T1365 L11; T1366 L2-20 (Lorenzini XXN).
[540] T1305 L19-30 (Woolcock XXN).
[541] T1299 L24-30 (Woolcock XXN).
[542] T2422 L4-18 (Wu XXN).
565 It is not common practice to consider a performance solution in relation to ceiling heights prior to an application for the fit-out building permit to the tenancy. Without knowing the design and position of components of the fit- out, the building surveyor can have no idea how (if at all) the exposed pipes will affect the amenity of the space.[543]
[543] CB 211 (Leonard Fourth Report).
566 The assessment of a performance solution will take into account a range of factors including average heights in the population and whether there is furniture fixed in place and whether people are likely to be sitting down.[544]
[544] T1244 L4-21 (Woolcock XXN).
567 The defendants submit their interpretation is consistent with the definition of ‘Occupancy Permit’ in the building contract. ‘Occupancy Permit’ is defined as ‘the certificate of occupancy and any other Approval(s) required under the Building Legislation which are required to enable the Works lawfully to be used for residential purposes in accordance with the Principal’s Project Requirements’.[545]
[545] Standards Australia, ‘Australian Standard – General conditions of contract for design and construct’ CB 2613 (emphasis added).
568 The defendants note the issue of an occupancy permit not having been granted was not referred to by L&L in its lengthy letter of 30 August 2018 or its notice of default issued on 1 October 2018.[546] It is implicit in the absence of reference to it, the plaintiffs understood and accepted the certificate of final inspection stood in place of the certificate of occupancy in terms of the contractual requirements for settlement.
[546] T1503 L9-29 (R Li XN).
569 Sunshine was not put on notice the issue of a certificate of occupancy in accordance with the terms of clause 14.1 was in issue. Further, there was no utility for Mr Hu in Sunshine obtaining an occupancy permit, as he would have had to obtain one in any case following the carrying out of any of his own fit-out to the premises.
570 Mr Hu failed to settle by the settlement date. Sunshine then issued a Notice of Rescission on 17 August 2018. The default notice referred to the failure to pay the balance of the contract price.[547]
[547] CB tab 99 (Notice of Default); T2360 L29-T2361 L1 (Wu XN).
571 Sunshine submits that by failing to settle by the due date and failing to rectify the defect within 14 days, the plaintiffs triggered clause 28, automatically effecting the termination of the contract. However, as I have found, this clause did not form part of the Agreement.
Alternative – the plaintiff’s repudiation
572 In the alternative, Sunshine submits Mr Hu repudiated the contract by:
(a) failing to settle on 14 August or further by 1 September 2018; or (b) writing to Sunshine Investments on 30 August 2018 seeking an agreement to terminate the contract and return of the deposit.
573 The defendants submit even if this Court were to find the formal requirement for settlement was not met because an occupancy permit was not obtained, the matters relied upon by the plaintiffs to avoid settlement did not entitle them to refuse to complete.[548]
[548] CB tab 104 (30 Aug 2018 Lewenberg letter); CB tab 109 (Plaintiff’s Notice of Default and Rescission).
574 For the reasons outlined above, the defendants submit these issues were not defects that would entitle the purchaser to repudiate the contract. A purchaser is not entitled to rescind a contract on the basis there is a threat as to restriction of use or defect in title that may arise in the future.[549]
[549] Brett v Cumberland Properties Pty Ltd [1986] VR 107, 110.
575 The defendants submit by relying upon these matters as the purported basis for non-compliance with the contract, the plaintiffs evinced an intention not to comply with the contract and therefore repudiated it.
576 While a host of other issues has been raised by the plaintiffs at trial including compliance with town planning drawings, lack of insulation, and lack of fit- out, none of these issues was raised by Mr Hu at the time he purported to terminate the contract.
577 Moreover, it is likely the issues raised would have fallen within the scope of the provisions in the contract excluding the plaintiffs’ right to refuse to settle on the basis of various defects. While the rule in Flight v Booth would apply, the failure to supply (for example) insulation or a toilet are not substantial defects, and are matters that could have been rectified by Sunshine if they had been raised at the time. The fact the plaintiffs did not raise those issues at the time of settlement prevented Sunshine from being able to respond to those issues.
578 Sunshine cannot have repudiated the contract by failing to deliver a fitted-out café, or by serving the default notice of 17 August 2018, in the event that this Court finds its interpretation of SC14.1 was incorrect. An intention to repudiate cannot be inferred where a party is acting on an incorrect interpretation of a contract, unless it is informed of its error and persists in the face of that.[550]
[550] DTR 230.
579 Because the plaintiffs failed to draw Sunshine’s attention to the issue of the occupancy permit,[551] Sunshine cannot be said to have persisted in the face of its wrongful interpretation. The defendants submit Sunshine representatives continued to try to contact Mr Hu and offered to assist him if he had an alternative design for the exhaust, however his response was to tell Mr Zheng to speak to his lawyer.[552] Ms Wu said, ‘If Mr Hu raised any reasonable request, we would very much like to help him achieve it.’[553]
[551] T318 (Defendants’ opening submissions); CB tab 109 (Lewenberg Notice of Default).
[552] T2463 L15-21 (Wu XXN).
[553] T2464 L5-6 (Wu XXN).
580 If the absence of an occupancy permit had been raised at the time settlement was called for, there was not much further work that would have been required to obtain one. Mr Woolcock noted it ‘very nearly meets the standard to get an occupancy permit’ but just lacked a few of the finishing things like toilet and ventilation.[554]
[554] T1240 L4-30 (Woolcock XXN).
581 Ms Wu gave evidence if she had been told in 2018 that an occupancy permit was required, she would have discussed the matter with her team.[555]
[555] T2468 L11-13 (Wu XXN).
582 The defendants submit the plaintiffs repudiated the contract by issuing their notice of default on the invalid basis, and the repudiation was accepted by Sunshine.
583 The defendants submit at the time settlement was due it is apparent the developer was attempting to address Mr Hu’s concerns. This included by offering to assist with alternative location of the exhaust duct and also offering an additional parking space as a sign of goodwill.[556] After supplying drawings in response to Mr Hu’s request, Mr Zheng continued to contact Mr Hu seeking to resolve the issues he had raised.[557]
[556] Message from Kevin Zheng (CB1145); T2361 L28-T2362 L7 (Wu XN).
[557] CB 1273 (message from Kevin Zheng).
584 Sunshine accepted the repudiation on 17 October 2018.[558]
[558] CB 1516 (Sunshine’s acceptance of repudiation).
585 The defendants submit if the Court were to find Sunshine was not entitled to issue its default notice of 17 August 2018, the Court should find Mr Hu repudiated the contract by his conduct, including issuing the letter of 30 August 2018 manifesting an intention not to comply with the contract.
586 The defendants submit, in these circumstances, Sunshine remains entitled to forfeit the deposit pursuant to common law principles for default by the purchaser in completion. The deposit is not a penalty for breach of contract; rather a 10% deposit constitutes an earnest for performance.[559] The vendor is also entitled to forfeit the deposit pursuant to s 9AF(1)(a) of the SLA.
[559] Commissioner of Taxation v Reliance Carpet Co Pty Ltd (2008) 236 CLR 342; Fiorelli Properties Pty Ltd v Professional Fencemakers Pty Ltd (2011) 34 VR 257 [32].
Plaintiffs’ submissions
587 The plaintiffs made the following submissions on the breach and repudiation allegations made by counterclaim.
588 The plaintiffs claim the defendants were in breach. Accordingly, it was the defendants who rescinded the contract and there is no entitlement to a counterclaim. The defendants failed to construct or deliver Lot G4 in a form which conformed to the description and characterisation the defendants had given to it.
589 Moreover, the plaintiffs claim they were entitled to annul the contract by reason of the defendant’s misdescription (at common law) of the property.
590 Accordingly, the contract came to an end by reason of the defendant’s breaches and the defendant has no cause of action for a counterclaim.
591 The defendants’ claimed cause of action for damages arising from an alleged failure to complete has no basis in fact under the Agreement. In relation to the Agreement, the defendants failed to construct and/or register or transfer a lot which was capable of use as a council approved 30-seat café. The consequence of this is that the defendants never reached a stage where they were entitled to call for completion.
17. If the first plaintiff breached the Agreement or repudiated the Agreement, what loss and damage was suffered by the first defendant? (Para 32A and 33 Counterclaim)
592 By counterclaim, the summary of defendants’ position is that Sunshine is entitled to damages pursuant to GC 28.4 of the contract, together with damages at common law.
593 Since I have found the contract of sale does not form part of the Agreement Sunshine is not entitled to damages pursuant to GC 28.4.
Further damages
594 Sunshine claims it is entitled to common law damages, in the following amounts, referred to in the particulars to paragraph 36 of the Amended Counterclaim:
(a) Additional owner’s corporation fees in the sum of $12,805.63.[560] (b) Council rates in the sum of $952.53.[561] (c) Land tax in the sum of $1,587.35.[562] (d)
Loss of opportunity costs in the sum of $140,514.19 calculated on the balance owing at settlement of $2,034,000 at 8% interest, being the rate at which the first defendant would have lent to its related entity Grand Land Investments Pty Ltd to refinance its existing loan.[563]
[560] Calculated on a pro rata basis from 15 August 2018 to 5 September 2019 (date before property resold) based on
[561] CB 3038 (statement of adjustments);.
[562] Attachment to CB tab 88, calculated on a pro rata basis from 15 August 2018 to 5 September 2019 at an annual rate of
[563] CB 2016-2017 (company search Chan Kwan); CB 2008-2009 (Aurum Estate); CB 675-728 (Contract of Sale Cranbourne); CB 834-887 (Mortgage to Qi Yong); CB 1100 (title search Cranbourne); CB 1470-1472 (Deed of Variation to Mortgage); CB 1539 (Capital Connect Solutions Loan); CB 2028-2030 (payments of interest by Grand Land Estate); CB 2031-2034 (payment of interest by GrandLand); CB3 644-646 (loan agreement Chan Kwan and Aurum – example of inter-group loans).
595 These further damages total $155,859.70.
596 The defendants’ submit Sunshine is entitled to obtain these damages at common law, the object of which is to place it in the same situation with respect to damages as if the contract had been performed. It is not confined to a claim pursuant to GC28.4(c)(ii) because the subject property has been sold. It is permitted to claim liquidated damages as permitted by cl 28.4(c)(ii) and also to claim unliquidated damages for breach of contract that do not fall within the scope of ‘resulting expenses’.[564]
[564] Victorian Economic Development Corporation v Clovervale Pty Ltd and Others [1992] 1 VR 596, 604-5.
597 The defendants’ submit council rates and land tax are recoverable on an assessment of general damages, on the basis the land is considered as security for making good the vendor’s expectation of money.[565]
[565] Rossco Developments Pty Ltd v O'Halloran (1980) 29 ACTR 1, 7; Dovaenda Pty Ltd v Pagliari [2007] QSC 216 [79].
598 Loss of opportunity costs are recoverable on the basis Sunshine would have had money available to it had Mr Hu not breached the contract, which it would have been entitled to invest or otherwise use. There is a reasonable and proper inference to be drawn, that if Sunshine had had the money available to it, it would have applied it to reduce borrowings or invested the money for a return.[566]
[566] Hexiva Pty Ltd v Lederer & Ors (No 2) [2007] NSWSC 49 [14].
599 In Hobartville Stud v Union Insurance,[567] it was held it is necessary to undertake a factual investigation into loss suffered through being held out of money. The loss is to be assessed based on the evidence, and not assumed from withholding of the money and automatically assessed by the application of current market rates of interest.
[567] Hobartville Stud v Union Insurance (1991) 25 NSWLR 358.
600 In this case Sunshine has presented evidence of the lost opportunity that it suffered due to the plaintiffs’ failure to settle. As part of an inter-connected group of companies,[568] Sunshine would have lent the money from settlement (via Ms Wu’s family trust account) to GrandLand Estate for the purpose of paying out its loan in relation to the Gippsland property.[569] The money would have been transferred from Sunshine to Ms Wu’s family trust account and on-lent from there.[570]
[568] T1430 L30-T1432 L15 (Raynor Li XN); T2320 L17-21 (Wu XN).
[569] T2369 L24-T2371 L3 (Wu XN).
[570] T2370 L27-T2371 L3 (Wu XN).
601 The standard rate of interest is lower than the market rate and in 2018 the rate that would have been charged would have been 8%.[571] Sunshine therefore claims damages in the amount of $140,514.19. In total, Sunshine claims damages of $197,331.31.
[571] T1549 L24-T1565 L21 (see in particular at T1561 L4-5) (Raynor Li XN) (12%); T2371 L24-T2372 L5 (Wu XN) (8%).
602 Sunshine’s loss of opportunity claim is reduced in proportion to the moneys paid by the new purchaser Niu & Y Pty Ltd which were paid in staged deposits.[572]
[572] CB 4609 (trust ledger); Contract of Sale (CB 1598); T2369 L13-22 (Wu XN).
Other relief
603 Sunshine also seeks a declaration that the deposit of $226,000 has been validly forfeited to it; such an order was sought and made in, for example, Douglas v Simons Builders Pty Ltd.[573]
[573] Douglas v Simons Builders Pty Ltd [2015] VSC 118 (Derham AsJ).
Plaintiffs’ submissions
604 The plaintiffs make the following submissions as to Sunshine’s counterclaim
for damages.
605 Regardless of how the contract between the parties is defined, or the Court’s determination on the question of whether the facts support any cause of action for a counterclaim, on the evidence, the defendant has suffered no loss.
606 The defendant’s alleged diminution in value on the resale of $110,000[574] cannot succeed in circumstances where any such diminution arose because Lot G4 as constructed was incapable of being occupied and used as the café that had been sold to the plaintiffs. Lot G4 was not able to be sold as a café when, post completion, it was openly marketed for four months by Savills, which is a specialist and experienced marketing agency engaged by the defendants.
[574] Calculated as the difference between the plaintiff’s $2.26m and $2.15m -CB 2077 – contract of sale to Nui & Y Pty Ltd.
607 Savills could not achieve a sale of Lot G4 as a café or as any commercial space requiring a ceiling height above 2.2m. Savills’s marketing report disclosed negative feedback from potential purchasers which identified the low ceiling heights, and the associated car parking spaces being in a car stacker, as the most common negative views of the property.[575] The ultimate purchaser was prepared to accept Lot G4 with its height limitations[576] for use as a Chinese massage centre which did not require standard height ceilings.
[575] CB 527 (Savills sales campaign update); T1950 L30-31 (William Du XXN).
[576] CB 2100 – Letter from Kangwen Nui (purchaser) to Nextgen Building Surveyors dated 3 November 2019 stating: ‘I am
608 Indeed, in some of the photographs provided by the defendants, the ceilings are shown with bars attached for masseuse to hold whilst performing particular types of massage. This was a different purpose and use from a café, and the prospective purchasers, with the assistance of the defendants, obtained a change of use approval from the council, along with special dispensation for the low ceiling heights, by reason of the change of use. The plaintiffs submit that change of use is further confirmation Lot G4, as constructed by the defendants, was not fit for use as a café that could seat up to 30 people.
609 Moreover, the plaintiffs submit the cost and expenses claimed are inflated and unsupported by objective evidence. The alleged commission and marketing expenses were charged by a related party (Ausgood) at significantly higher than market rates,[577] and comprised an intercompany charge.
[577] T2443 L17-30 (Ms Wu XXN); Savills commission at CB1498 was 1.8% of sale price to $2.25m and 30% above $2.25m; CBRE commission at CB 1507 was 3% flat fee or 2.25% and 10% on amounts above $2m.
610 The plaintiffs also submit the alleged returns or income by way of interest from engaging financial services by way of either equity funding or inter- company loans was not made out. The defendants claimed ‘loss of opportunity of further investment’ of $210,000 was unsupported by the evidence.[578] Raynor Li confirmed Sunshine was a special purpose vehicle set up for the Balwyn T project which did not reinvest into another project and was not in the business of providing financial services.[579]
[578] Described as ‘loss of interest $2,034,000*12% from 1 September 2018 (being the date after the defendant’s purported
[579] T1567 L9-13 (Raynor Li XXN).
611 Ms Wu was evasive and uncertain as to where the $935,000 received by the defendant from the ultimate purchaser, Niu & Y Pty Ltd, between March and July 2019 was paid, other than it went to her family trust account.[580]
[580] T2370 L30-31-T2371 L1-2 (Ms Wu XN); T2447 L7-31-T2448 L1-6 (Ms Wu XXN).
612 Moreover, no evidence was produced to substantiate the assertion a reinvestment would have occurred. Raynor Li did not give evidence these funds were ever lent out in the manner claimed. Mr Du was similarly vague and uncertain as to what if anything happened with the proceeds from the sale of the Balwyn T project.[581] The plaintiffs submit it is appropriate for the Court to draw a Jones v Dunkel[582] inference that the relevant documentary material establishing profits and returns and cash flows for Sunshine would not have supported its claims of loss, if they had been disclosed.
[581] T1944 L13-21 (William Du XXN).
[582] (1959) 101 CLR 298.
613 Further, the plaintiffs submit any claimed property holding losses must be offset by the defendants’ legal entitlement to rental of about $63,000 (plus outgoings) between 15 Feb 2019[583] and 5 Sept 2019.[584] The defendants have a positive duty to mitigate their loses. This proposition was put to and acknowledged by Raynor Li and Ms Wu. Ms Wu admitted the Sunshine decided to ‘support’ the tenant while they did their renovation by not charging rent.[585] William Du also acknowledged that the lease and ultimate sale were arranged by Ms Wu to a party that was required to accept Lot G4 with its known limitations.[586]
[583] Lease commencement date see CB119:1547-1582.
[584] Settlement date on sale of Lot G4 to Niu & Y Pty Ltd (about seven months).
[585] T2381 L16-29 (Ms Wu XN).
[586] T1950 L30-31 (William Du XXN).
614 In any event, the alleged losses were acknowledged to be primarily intra- company transfers, for which records and documentation were not disclosed, and accordingly, the defendant has failed to establish the claimed losses were in fact suffered.
615 The plaintiffs seek the orders set out in its SFASOC prayer for relief, being, in summary, the return of the deposit sum of $226,000, along with statutory interest in the amount of $85,786.18, to the first date of trial and thereafter until Judgment.
616 The defendants make the following submissions in reply.
617 They reject the plaintiffs’ claim the diminution of value on resale of $110,000 arose because Lot G4 was not capable of being occupied and used as a café. First, whether or not the property was capable of being used as a café is a matter to be determined in relation to other issues raised in the proceeding. Secondly, the plaintiffs did not adduce any evidence that anything to do with the property was the reason for the diminution in value, particularly in circumstances where there had been a downturn in the market.[587]
[587] T1563 L14-22 (Raynor Li XN).
618 It is unclear what documents the first defendant could or should have provided to support its claim for damage that would warrant the drawing of an inference pursuant to Jones v Dunkel.[588]
[588] Cf Plaintiffs’ submissions para 274.
Conclusion as to counterclaim
619 Since, on the findings that I have made, Sunshine was the party which repudiated and was therefore the party aggrieved, the counterclaim fails in its totality.
Conclusion
620 I will direct the parties within 14 days to file short minutes to give effect to
these reasons.
621 I have heard no argument on the question of costs, and so I will reserve
them.
---
Certificate
I certify that these 171 pages are a true copy of the reasons for judgment of his
Honour Judge Trapnell, delivered on 7 October 2024.
Dated: 7 October 2024
7 October 2024
Madeleine Stevens
Associate to his Honour Judge Trapnell
SCHEDULE OF PARTIES
| BETWEEN Jinfu Hu | First Plaintiff |
| and HM 168 Pty Ltd (ACN 624 734 069) | Second Plaintiff |
| and Sunshine Investments Group (Aust) Pty Ltd (ACN 168 380 112) | First Defendant |
| and H.S Property Investment Group Pty Ltd (ACN 164 026 715) Second Defendant and between Sunshine Investment Group (Aust) Pty Ltd (ACN 168 380 112) Plaintiff By Counterclaim and Jinfu Hu | Defendant by Counterclaim |
amended statement of claim dated 18 December 2019.
defence to counterclaim dated 9 June 2020.
and CB 29 (Contract of Sale).
signed was described as between one and nine (T1924 L12-14).
T1996 L9-10, T1996 L23-24, T1997 L4-12. See evidence T2209 L13-23.
only recently received and not yet given an exhibit number, also has blue paper signed pages. Only the copied pages
of the signature pages inserted for the conveyancer’s copy are white paper.
the construction of the lots on the Plan including the commercial space.
Solutions); T1435 L28-T1436 L8 (Raynor Li XN).
(30.7.16 email); CB 3660, 3747, 3746, 3805 (2.8.16 email); T1811-T1817 (Raynor Li RXN).
26), this was inconsistent with his earlier evidence that he allowed $30-$50,000 as a ‘back-up’: T768 L16-21.
Ltd [2014] NSWSC 743 [154]-[158].
(in liq) [2014] VSC 516 [4248] citing Jobbins v Capel Court Corporation Ltd [1989] FCA 538.
the recording and I am satisfied this was the evidence given by Mr Hu. 325 Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592, [47]-[50].
338 T1454 L11-19 (Raynor Li XXN).
(2002) 5 VR 129, 139 (Buchanan JA).
XN).
the table having brought over the cheque after Mr Hu signed the contract). Put to witness: T1188 L26-29 (Didi Li).
works were required. T2186-T2190 Cathy Li identifies all the characteristics of Lot G4 she did not disclose to Mr Hu.
396 [882], [885] (‘Henderson’).
Australian Consumer Law, s 21(4).
WLR 1381, 1384-5.
quarterly rates of $3,027.24. CB 1537; CB 1583; CB 1951-1952; CB 1990 (quarterly invoices).
$1,501. CB 3038, CB 3040; CB 2026.
confirming that I can accept the proposed ceiling height and ensure that no corridor will be lower than 2100mm H and
no rooms will be lower than 2200mm’.
notice of rescission to settlement on 5 September 2019 – adjusted to take into account staged receipt of deposits by
purchaser Niu & Y Pty Ltd.
0
64
0