Zoo Property Wealth Builder Pty Ltd v; Qiyan Investments Pty Ltd and Anor
[2020] VCC 167
•11 March 2020
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
Case No. CI-18-05574
| ZOO PROPERTY WEALTH BUILDER PTY LTD (ACN 145 738 870) | Plaintiff |
| V | |
| QIYAN INVESTMENTS PTY LTD (ACN 607 395 844) | First Defendant |
| AND | |
| QIYAN REAL ESTATE DEVELOPMENTS PTY LTD (ACN 610 80 701) | Second Defendant |
| AND BETWEEN | |
| QIYAN INVESTMENTS PTY LTD (ACN 607 395 844) & ANOR | Plaintiffs by Counterclaim |
| and | |
| NELSON ZHOU & ORS (according to the attached schedule) | Defendants by Counterclaim |
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JUDGE: | HER HONOUR JUDGE A RYAN | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 25, 26 and 30 September 2019, 1 to 4 October and 18 October 2019 | |
DATE OF JUDGMENT: | 11 March 2020 | |
CASE MAY BE CITED AS: | Zoo Property Wealth Builder Pty Ltd v | |
MEDIUM NEUTRAL CITATION: | [2020] VCC 167 | |
REASONS FOR JUDGMENT
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Subject: CONTRACT – CONSUMER LAW
Catchwords: CONTRACT: Construction of terms of agreements for the purchase and development of land – privity of contract – whether agreements repudiated – loss of opportunity to earn a success fee
CONSUMER LAW – misleading and deceptive conduct – whether alleged representations made – whether loss proved – break in chain of causation
Legislation Cited: Competition and Consumer Act 2010 (Cth); Australian Consumer Law; Business Names Registration Act 2018 (Cth)
Cases Cited:Australian Competition and Consumer Commission v Get Qualified Australia Pty Ltd (in liquidation) (No 2) [2017] FCA 709; Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; Dennis Pethybridge v Stedikas Holdings Pty Ltd [2007] NSWCA 154; Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd (No.3) [2012] VSC 99; Lederberger & Anor (as executors of the deceased estate of Lederberger) v Mediterranean Olives Financial Pty Ltd & Ors (2012) 38 VR 509; MA & J Tripodi Pty Ltd v Swan Hill Chemicals Pty Ltd [2019] VSCA 46; Malec v JC Hutton Pty Ltd (1990) 169 CLR 638; March v Stramare (A. and M.H.) Pty Ltd (1991) 171 CLR 506; Naxakis v Western General Hospital (1999) 197 CLR 269; Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191; Parsons & Rochella v Vance App. 7/1984, unreported, Queensland Full Court; Play Australia Pty Ltd v Papadimitriou [2014] VSC 608; Varma v Varma [2010] NSWSC 786; Watson v Foxman (1995) 49 NSWLR 315
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff and Defendants by Counterclaim | Mr J A Castelan | Lawsmith Legal |
| For the Defendants and Plaintiffs by Counterclaim | Mr M J Campbell | Berrigan Doube Lawyers |
SCHEDULE OF PARTIES
| ZOO PROPERTY WEALTH BUILDER PTY LTD (ACN 145 738 780) | Plaintiff |
| V | |
| QIYAN INVESTMENTS PTY LTD (ACN 607 395 844) | First Defendant |
| AND | |
| QIYAN REAL ESTATE DEVELOPMENTS PTY LTD (ACN 610 800 701) | Second Defendant |
| AND BETWEEN | |
| QIYAN INVESTMENTS PTY LTD (ACN 607 395 844) | First Plaintiff by Counterclaim |
| and | |
| QIYAN REAL ESTATE DEVELOPMENTS PTY LTD (ACN 610 800 701) | Second Plaintiff by Counterclaim |
| and | |
| NELSON ZHOU | First Defendant by Counterclaim |
| and | |
| LI PING HUANG | Second Defendant by Counterclaim |
| and | |
| ZOO PROPERTY WEALTH BUILDER PTY LTD (ACN 145 738 780) | Third Defendant by Counterclaim |
HER HONOUR:
1 The claims in this proceeding arise from the purchase and proposed development of two residential properties in Brisbane. The plaintiff (“Zoo Property”) is a company engaged in the business of managing and developing property sites on behalf of investors. The director of Zoo Property is Li Ping Huang (“Huang”). Her husband, Wei Zhou (“Zhou”),[1] is the company’s chief executive officer. Zoo Property trades under the name of “My Wealth Builders” (“MWB”) and has done so since Zoo Property was incorporated on 12 August 2010. MWB was not registered as a business name, however, until 18 March 2016.
[1]Also known as Nelson Zhou.
2 Zoo Property assists its clients, who are mostly Chinese migrants, by identifying and project managing properties for redevelopment, including the construction of townhouses. In return for its services in locating and project managing a development to completion, Zoo Property charges its clients a fee representing 30 per cent of any profit made from the project.
3 Qiyan Xiao (“Xiao”)[2] migrated from China to Australia in 2009. Xiao became acquainted with Huang and Zhou through mutual acquaintances in around 2013. Zhou invited her to consider various investments which he was promoting and to that end, sent her several emails regarding suggested projects.
[2]Also known as Janet Xiao.
4 Subsequently, Xiao decided to invest in four projects which had been proposed by Zhou. The critical ones for the purposes of this litigation are as follows:
(1)24 Jones Road, Carina Heights, Queensland (“the Carina Heights property”); and
(2)9 Olivia Street, Northgate, Queensland (“the Northgate property”).
5 Whilst there is some debate between the parties about the precise terms upon which they conducted their business affairs, they did enter a contractual relationship. The two properties above were recommended by Zhou and purchased by companies associated with Xiao. Zoo Property project managed the two properties and Xiao’s companies paid various project expenses when asked to do so.
6 In around September 2016, the parties parted ways. There is a dispute on the evidence as to which of the parties terminated the agreements relating to the two properties. Zoo Property’s case is that the first and second defendants repudiated the agreements in an email dated 27 September 2016.[3]
[3]Court Book (“CB”) 1029.
7 In consequence of the alleged repudiation of those agreements by the defendants, which Zoo Property says it has accepted by the issue of this proceeding, Zoo Property seeks loss and damage. The loss and damage claimed is the loss of opportunity to earn a 30 per cent success fee had the two properties proceeded to completion and generated a profit. An amount of $97,594 is claimed for the Carina Heights property. The sum of $139,611 was sought for the Northgate property. This figure was increased to $166,217, following a correction made during trial excluding GST from the estimated construction costs of a hypothetical development.[4]
[4]See paragraph 88 of plaintiff’s written closing submissions.
8 The defendants allege somewhat different terms of the agreements for the two properties, which they describe as joint venture agreements. They contend Zhou, Huang and/or Zoo Property repudiated those agreements on 26 September 2016. Therefore, they argue Zoo Property is not entitled to any loss and damage because of its breach. The defendants seek damages for breaches of contract, being net losses incurred in the development of those two projects. The sum claimed by the first defendant, Qiyan Investments Pty Ltd (“Qiyan I”), for the Carina Heights property is $68,124.83. The sum claimed by the second defendant, Qiyan Real Estate Developments Pty Ltd (“Qiyan RED”) for the Northgate property is $132,415.43.
9 The defendants also counterclaim because of misleading and deceptive representations which are said to have induced the defendants to enter into the agreements. But for those representations, the defendants say they would not have entered into the agreements and that that being so, they are entitled to recover all the wasted expenditure they incurred which otherwise would not have been spent. The damages sought for the misrepresentation claim are the same as the breach of contract claim.
10 Zoo Property, Zhou and Huang deny they made any of the alleged misleading representations. Further, if the Court were to find such representations were made, they contend the defendants’ counterclaim should fail because there was a break in the chain of causation. This break is said to be caused by the defendants refusing to accept an offer made to purchase the Northgate property and by choosing to withdraw from both projects before completion.
11 For the reasons that follow, I find the defendants repudiated the Carina Heights and Northgate property agreements. That being so, Zoo Property lost the opportunity to recover a success fee for those projects. Having regard to the evidence put before me, including expert evidence, I have assessed the loss of opportunity for the Carina Heights property at $58,000 and $98,000 for the Northgate property.
12 I was not satisfied that the misleading and deceptive claim was proved. The remaining claims in the counterclaim relating to alleged breaches of contract were also not established.
Key issues
13 The parties helpfully agreed on the issues which need to be resolved, namely:
(a)What were the terms of the agreement (“Carina Heights Agreement”) as between Zoo Property and Qiyan I in respect of the development of the Carina Heights Property and in particular:
(i)does the agreement contain terms as alleged by Qiyan I?;
(ii)are Zhou and Huang (the first and second defendants by counterclaim) parties to the Carina Heights Agreement?;
(b)What were the terms of the agreement (“Northgate Agreement”) as between Zoo Property and Qiyan RED in respect of the development of the Northgate Property and in particular:
(i)does the agreement contain terms as alleged by Qiyan RED?;
(ii)are Zhou and Huang parties to the Northgate Agreement?;
(c)Which party, if any, has acted in breach of or repudiated:
(i)the Carina Heights Agreement?; and/or
(ii)the Northgate Agreement?;
(d)Are either of the parties entitled to damages as a result of any such breach of agreement?;
(e)If a party is entitled to damages, how are such damages quantified?;
(f)Is Qiyan I or Qiyan RED entitled to any damages on their counterclaim for misleading or deceptive conduct pursuant to the Australian Consumer Law?
Credibility of witnesses
14 It is necessary to make some preliminary remarks about the evidence given by the principal witnesses. This is particularly so, when the resolution of some of the key issues in dispute will turn upon whose evidence I prefer in circumstances where there is conflicting oral evidence.
15 Xiao gave evidence through an interpreter as her English is limited. Despite this, I formed the view whilst observing her evidence that she had a better understanding of spoken English than she was prepared to acknowledge. Allowing for the fact that Xiao gave evidence through an interpreter, I was of the view that she was at times an unsatisfactory witness as:
(a)She was often evasive and would not make concessions that were obviously warranted. As an example, Xiao’s unwillingness to admit that she had been a director of several companies and only conceded when an ASIC search[5] produced in cross-examination revealed this to be so.
(b)She tended to make self-serving statements. For example, Xiao’s unsolicited statement that a witness for the plaintiff, Chen Li, had supposedly agreed with her outside Court that he had never seen her before[6] (which was consistent with her version of events) but contrary to the sworn evidence Li gave in Court.
(c)At times, Xiao appeared to be a witness whose evidence was rehearsed, such as her oft repeated and frequently non-responsive statements reciting the various representations said to have been made to her by Zhou and/or Huang.
[5]Exhibit “P6”.
[6]T437.
16 Accordingly, I have treated Xiao’s evidence with some caution, particularly where there were no contemporaneous documents or other objectively demonstrated facts which would corroborate her evidence.
17 Zhou for that matter was also not an entirely satisfactory witness. He was often argumentative and prone to hubris. His answers at times were evasive. An example of this is the exchange between himself and counsel for the defendants where it was put to him that he had purported to witness Xiao’s signature on a Contract of Sale of Land without having seen her sign the document.[7] Zhou’s response was not particularly credible in my view. His refusal to answer questions about there being a variation to building costs in a contract between a company associated with him and Youja Investments Pty Ltd in May 2019[8] was telling, because it displayed a consciousness, in my view, that answering the question might not assist his cause.
[7]T242 and ff.
[8]Exhibit “D3”.
18 Zhou served time in jail following a conviction for tax fraud in 2000. There was little evidence about the circumstances of this offending. There have been no other convictions or reported misconduct since that time. When questioned about his conviction, Zhou’s unprovoked response that he never owed any tax to the tax department that led to his jail term and he was compelled to enter a plea was revealing. It showed a complete lack of insight or remorse regarding his offending. I did not find him to be a particularly impressive witness and therefore treat his evidence with a degree of caution in the absence of contemporaneous documents or other demonstrated facts.
19 The evidence of Mr Michael Pan (“Pan”), a witness called on behalf of the defendants, was the subject of much criticism by counsel for Zoo Property. He was described as an impressive witness by counsel for the defendants, a view I am unable to share. Pan did seem keen to downplay the extent of his business dealings with Xiao as well as his knowledge relating to property matters. Pan was not forthcoming on a range of topics, such as the number of companies he was involved in and why he gave his address as a director as being Xiao’s home address. I formed the view he was tailoring his evidence to assist Xiao where he could. But ultimately, his evidence does not have much bearing upon the critical issues for determination.
Factual narrative
20 In around 2013, Xiao first met Zhou and Huang at MWB’s premises at 15 Glenvale Crescent, Mulgrave. She was introduced to them by a mutual friend, Hao Jiang, who was assisting her regarding a pink batts business she operated which had run into some difficulty.
21 MWB’s office premises at that time had the logo “MWB” displayed in large letters on the outside of the building.[9] Huang gave evidence that the logo of MWB was displayed inside the building at the reception office, and on the material available there, such as business cards and brochures. After they met, Huang invited Xiao to attend social gatherings that she organised for Chinese women at her home and other places. Xiao subsequently attended many of these functions.
[9]The logo is clearly depicted in a photo of the Mulgrave office building at CB 1407.
22 On 22 March 2014, Zhou emailed Xiao a feasibility report for a proposed development in Yeronga. He subsequently sent her more feasibility reports in respect of other proposed developments.
23 The first defendant, Qiyan I, was incorporated on 31 July 2015 with Xiao as its sole director. The incorporation was arranged by an accountant, Mr Bossio, of F. Bossio & Co Pty Ltd, who was the accountant for Zoo Property and Huang’s personal accountant. Huang accompanied Xiao when the latter visited Mr Bossio to organise the incorporation of Qiyan I.
24 In early October 2015, Xiao attended MWB’s offices at Mulgrave. On that occasion, the parties discussed the proposed development of the Carina Heights property.
25 Sue Xiu, an employee of Zoo Property, sent an email to Xiao on 9 October 2015 enclosing a Contract of Sale of Land for the Carina Heights property. Xiu asked Xiao to sign and return the contract, which Xiao did by return email.
26 On 22 October 2015, Zhou emailed Xiao and attached a feasibility report for the Carina Heights property. The feasibility report predicted a return on investment in the project of 35.73 per cent based on the construction of 4 x 3-bedroom units.
27 Sue Xiu sent an email to Xiao on 23 October 2015 asking her to re-sign the Contract of Sale of Land for the Carina Heights property due to a change in format. Xiao re-signed the Contract of Sale and returned it to Xiu.
28 Zoo Property alleges Qiyan I entered into a service agreement in respect of the Carina Heights property. A service agreement between Zoo Property and Qiyan I which bore the typed date 25 October 2015 was produced into evidence. Schedule A to the service agreement contains a formula whereby Qiyan I has agreed to pay 30 per cent of any profits made to Zoo Property. There is no dispute that Xiao did not sign this service agreement despite being asked to do so. However, Zoo Property’s case is that the terms of this agreement were incorporated by reference and by the parties’ conduct. There was also a dispute in the evidence about when a copy of this service agreement was provided to Xiao. She denied receiving it in October 2015, whereas Sue Xiu, who was dealing with Xiao on behalf of Zoo Property at this stage, maintained she had provided a copy to Xiao then. She said she provided Xiao with further copies subsequently, accompanied by requests to Xiao to sign the document. Zhou also gave evidence that he had provided a number of similar template service agreements to Xiao prior to her investing. Xiao’s evidence was that she was only given a copy of the service agreement for the Carina Heights property in May 2016.
29 On 26 October 2015, Sue Xiu wrote to Xiao enclosing a final executed copy of the contract for the Carina Heights property and asking her to arrange payment of the deposit of $40,000. This deposit was paid by Qiyan I on 27 October 2015.
30 On 5 November 2015, a Contract of Sale for the Northgate property was sent by MWB to a Ms Judy Zhu, the original purchaser of this property, who is unconnected to Xiao.
31 Sue Xiu assisted Xiao on 14 January 2016 with documents regarding a loan application for the Carina Heights property.
32 A meeting was held at the Mulgrave offices in early February 2016. Xiao attended, together with Zhou and Huang. The purpose of the meeting was to discuss Xiao taking over the Northgate Property from Zhu. Xiao did agree to invest in that property and incorporated Qiyan RED for that purpose. This company was incorporated on 17 February 2016 with Xiao as its sole director.
33 On 22 February 2016, Zoo Property moved its offices from Mulgrave to 1221 Toorak Road, Camberwell. On the same day, settlement of the purchase of the Carina Heights property took place.
34 On 7 March 2016, Xiao met Zhou at MWB’s Camberwell office. On that occasion, Xiao or a nominated company agreed to enter into a joint venture for the purpose of developing 70 Cracknell Road, Annerley, Victoria (“the Annerley property”). On 7 March 2016, the Contract of Sale for the Annerley property was signed and Xiao was asked to make a deposit payment by Sue Xiu.
35 A Contract of Sale was signed by Qiyan RED on 8 March 2016 for the Northgate property for $750,000 providing the transfer to Qiyan RED as the nominated purchaser in place of Zhu. At about the same time, there were discussions between Zhou and Xiao at the offices of MWB at Camberwell. This concerned the prospect of developing a property at 12 Middleton Street, Mount Gravatt in Queensland (“the Mount Gravatt property”). Xiao was asked to make a deposit payment for the Contract of Sale for Mount Gravatt on 9 March 2016, which she attended to and paid a deposit of $32,000.
36 Chen Li was the employee at Zoo Property who liaised with Xiao in respect of the management of the Northgate property. He sent an email to Xiao on 18 March 2016 enclosing a feasibility report for the Northgate property. The return on investment in the report was estimated at 31 per cent. Chen Li gave evidence that he had given Xiao a hard copy service agreement for the Northgate property and accepted he had not forwarded one to her by email. He said he had followed her up about it but not in emails. Zhou said Chen Li had given the Northgate service agreement[10] to Xiao at MWB’s office. Xiao was adamant that she was never given a service agreement for the Northgate property. Again, it is common ground that the Northgate service agreement was not signed by Xiao.
[10]CB 342.
37 On 22 March 2016, settlement of the Northgate property occurred and Qiyan RED became the registered proprietor.
38 During May 2016, there were discussions between Xiao and Zhou whereby she told him that she wished to transfer the project at Mount Gravatt.
39 Xiao flew to Brisbane to inspect the Carina Heights property on 8 May 2016. She travelled there with her friend, Pan. She gave evidence that she was disappointed when she saw the site, particularly, as it was on a steep slope which she considered to be bad feng shui. She also spoke to an unidentified local real estate agent, who informed her that the purchase price she paid of $800,000 was too high and that a more realistic price should have been in the order of $600,000 to $700,000. Xiao said she rang Zhou from Brisbane to discuss her misgivings, but he had reassured her a sloping property would not cause any difficulties with construction.
40 Xiao wanted to raise her concerns in person and to that end, rang Huang to arrange a coffee meeting. A meeting took place at a coffee shop in Toorak Road, Camberwell. There is a dispute as to when that occurred. Zoo Property contends the meeting took place before Xiao went to Brisbane and that it occurred on 30 April given phone records produced in evidence. The defendants’ case was that it took place in mid-May and after the Brisbane visit. Regardless of the date, the parties agree that Huang and Zhou did meet Xiao at the coffee shop. Xiao informed them that she had divorced her husband some six months ago. Some short time later, approximately 10 minutes into the meeting, they were joined by Pan. There is a conflict on the evidence about what was discussed at this meeting. On Huang and Zhou’s case, Pan presented as an aggressive individual who complained about the way that Xiao’s affairs were being managed and said words to the effect that Xiao had put in all the money, but Zhou was making all the decisions. They also said that Pan told them he had extensive experience in property development, particularly on the Gold Coast. This was denied by Pan although Xiao referred to him saying he had experience in property management.
41 Xiao’s evidence was that she told them about her concerns about the bad feng shui aspect relating to the Carina Heights property and that she had paid too much as the market value was less than $800,000. Zhou and Huang accepted that Xiao expressed concerns about the Carina Heights property, but Zhou thought this occurred after the coffee shop meeting. Xiao said she told them she was considering withdrawing from all the projects that she was undertaking. Zhou and Huang deny Xiao said this. Xiao claimed that Huang and Zhou had made various representations about how profitable the Northgate project was going to be to encourage her to stay in that project. Huang and Zhou denied doing so. What does seem to be agreed upon is that the meeting did not go well, and the atmosphere was strained.
42 After that meeting, Xiao sent an email to Sue Xiu, which was in English, dated 19 May 2016. It said as follows:
“Dear Nelson,
Following our phone conversation this morning, I wish to confirm what we have discussed in writing:
1.I will keep 9 Olivia Street, Northgate, Qld, for development;
2.Regarding 24 Jones Road, Carina Heights, your company will assist transfer this property to another clients (sic) after obtaining the planning permit.
3.Regarding 70 Cracknell Road, Annerley, your company will assist transfer to another client as it is.”[11]
[11]CB 390-391.
43 By this stage, Xiao decided she was not going to continue with the Carina Heights property because of her concerns about the site but she would retain the Northgate property. The Annerley and Mount Gravatt properties were transferred to other clients of Zoo Property at Xiao’s request. Xiao and her companies were refunded the deposit monies she had paid for those two properties.
44 After this time, Zoo Property, through either Sue Xiu or Chen Li, continued to correspond with Xiao regarding the progress of the various developments and asking her to attend to payment of invoices.
45 On 5 August 2016, Sue Xiu sent an email to Xiao.[12] The email stated that the final land transfer price for the Northgate property would be $835,000. The figure was said to comprise the land purchase fee, all engineering costs and company establishment fees. Xiu said in the email that “We propose to settle on October 21st”. It appears by this stage that Xiao was now contemplating divesting herself of the Northgate property as well as Carina Heights.
[12]CB 417-418.
46 Xiao replied on 7 August 2016 by email. She said:
“9 Olivia project is not in a rush; could you please prioritise the transfer of 24 Jones Street first?”
47 On 15 August 2016, Sue Xiu emailed Xiao and attached accounts for the Carina Heights property and suggested drafting papers for a transfer.
48 Sue Xiu wrote again to Xiao on 30 August 2016[13] and said:
“Hi Qiyan,
Attached is the service agreement for 24 Jones Road. I have given the original copy to you early this year. You said you were going back to China and would like to read it through. We’re going to transfer this project for you, but could you please sign the agreement and send it back to me? Thanks.”
[13]CB 341 and 348.
49 As already noted, Xiao did not sign the service agreement sent to her. She gave evidence that she asked Pan to translate the service agreement for her. She said it was not a full translation as she only asked him to identify the promises, whether these verbal premises have been reflected in the written document. When asked if she ever told Zhou or Huang that she would not sign the agreement, she replied “I thought if I were to initiate the questioning against them on this I’ll become very passive in my acts.”[14]
[14]T444-445.
50 A critical telephone discussion took place on 26 September 2016 between Zhou and Xiao. The telephone records reveal this conversation lasted for approximately 50 minutes. Xiao alleges that in this telephone conversation, Zhou said that he was not going to continue to act for her. Zhou denies he said this to her. His version of the conversation is that Xiao said she did not want to continue with Zoo Property any longer. There was also a WeChat text message sent by Xiao to Zhou on the same day.[15] The exchanges that took place over these two days are dealt with more fully in Section C below, dealing with repudiation.
[15]Exhibit “P3”.
51 There was, as revealed by the telephone records, a further telephone discussion which took place on 27 September 2016 between Xiao and Zhou and lasted some 27 minutes. Surprisingly, neither witness gave evidence about this discussion.
52 Later that day and some hours after the 27-minute telephone discussion, Xiao sent an email to Zhou at 10:04pm which stated as follows:
“To Mr Nelson Zhou, Ms Liping Huang,
I wish to notify you and your company to discontinue all business activities associated with my following two properties. Please note from today forward, any business activities organised by you and/or your company without my permission are unauthorized and will not get paid . This notice takes effects on 28 September 2016.
24 Jones Rd, Carina Heights
9 Olivia Street, Northgate
From 2013, you and your company have been providing property/financial/banking/tax/legal advise to myself and other Chinese investors, to secure our investment safety, could you please provide all relevant licenses which you are qualified to provide those advises/consultancy. Also, if you and/or your company received any commission from selling those investment and/or refering business to business providers as below, you are legally required to disclose your commission to myself and other investors.
- Setting up company, family trust
- Purchasing land/house/other property
- Apply for planning, building permit and other permit/reports
- Referring builder to construct building project
- Organizing property sales
Your prompt response is appreciated and a cordial resolution is preferred before we report to all relevant governing authorities, including Comsumer Affairs, ASIC, APRA, BLA, and notify all other investors.
Regards,
Qiyan Xiao.”[16]
[16]CB 1029.
53 Xiao gave evidence that this email was drafted by Pan at her request. The email was written in English.
54 On 28 September 2016 at 10:53am, Xiao sent a long and accusatory WeChat message to Zhou listing her various complaints. Zhou did not respond, and the parties had no further dealings thereafter.
55 Qiyan I subsequently sold the Carina Heights property on 9 October 2017 by Contract of Sale signed between Qiyan I and Deep Blue Queensland Pty Ltd.[17] The property was sold for $900,000. Prior to that, Qiyan I had leased the property since 25 May 2017.
[17]CB 1089-1102.
56 On 1 June 2018, Qiyan RED leased the Northgate property. This property was subsequently sold on 14 December 2018 for $715,000. Settlement occurred on 17 January 2019.
(A)Carina Heights Agreement
(i) what were the terms of the Carina Heights Agreement?
57 There was considerable agreement about the various terms of the Carina Heights Agreement. These were helpfully set out in a table provided by counsel for Zoo Properties, which is reproduced below:
Claim
Term
Defence
Term
5(e)
Qiyan I would pay to Zoo Property a fee of equivalent to 30% of the net profit before income tax (plus GST) of the development.
21(c)
Zhou and Huang and/or Zoo Property would receive 30% of the net profit on completion of development, if a profit was made.
5(b)(i)
Qiyan I was responsible for providing funds for the purchase of the Carina Heights Property, as well as for construction and holding cost purposes.
21(a)
Qiyan I would fund the purchase of the Carina Heights property and outgoings.
5(b)(ii)
Qiyan I was responsible for making payment of all outgoings, including rates, taxes, land tax and utilities with regard to the Cairns Heights Property.
21(a)
Qiyan I would fund the purchase of the Carina Heights property and outgoings.
5(b)(iii)
Qiyan I was responsible for making all payments of interest and capital in respect of the mortgage, if any, secured over the Carina Heights Property to cover the developmental costs.
21(a)
Qiyan I would fund the purchase of the Carina Heights property and outgoings.
5(c)(i)
Zoo Property was responsible for engaging a licensed builder to construct townhouses on the Carina Heights Property in accordance with approved plans and permits.
21(b)
Zhou and Huang and/or Zoo Property would (i) engage agents to obtain Developmental Approval;…(iii) supervise and arrange the construction of townhouses to be built on the Carina Heights Property; (iii) supervise and arrange sale of the townhouses as constructed.
5(c)(iii)-(iv)
Zoo Property was responsible for obtaining a survey of the Carina Heights Property and providing architecture and planning drawings with respect to the design and development of the Carina Heights Property.
21(b)
Zhou and Huang and/or Zoo Property would (i) engage agents to obtain Development Approval; (ii) supervise and arrange the construction of townhouses to be built on the Carina Heights Property; (iii) supervise and arrange the sale of the townhouses as constructed.
5(c)(v)-(vii)
Zoo Property was responsible for lodging and obtaining permits for the development including building and planning permits, appointing contractors and supervising the development of the Carina Heights Property.
21(b)
Zhou and Huang and/or Zoo Property would (i) engage agents to obtain Development Approval; (ii) supervise and arrange the construction of townhouses to be built on the Carina Heights Property; (iii) supervise and arrange the sale of the townhouses as constructed.
58 The defendants maintain that there were further terms agreed upon as set out in paragraph 21 of the further amended defence and counterclaim dated 20 September 2019.
59 The contractual terms which are said to have been breached are referred to in paragraph 23 of the amended defence. The breach pleaded is that upon Qiyan I’s decision to withdraw from the Carina Heights development, Zhou and Huang, alternatively Zoo Property:
(a)did not find a substitute investor to replace Qiyan I; or
(b)did not buy out Qiyan I’s investment;
in the development at a price that included all costs incurred by Qiyan I in purchasing and funding the development together with a 15 per cent profit margin, or at all.
60 Further and in the alternative, it is then pleaded in paragraph 24 of the amended defence that Zhou on behalf of himself and Huang and/or on behalf of Zoo Property repudiated the Carina Heights joint venture agreement which Qiyan I had accepted. By the time of final addresses, the focus of the contractual claims revolved around the issue of which party had repudiated.
61 Dealing with the breach alleged in paragraph 23(a), although Zhou and Huang gave evidence to the effect that they would endeavour to “flip” projects in order to assist their clients if needed, and it is clear that this did occur from time to time, I do not consider the state of the evidence went so far as to establish that they positively agreed to accept a legal obligation to find a substitute investor in the event that Qiyan I withdrew from the investment. It also makes no commercial sense that they would agree to a term. The incorporation of such a term is dependent solely upon the oral evidence of Xiao as there are no documents which corroborate her testimony. I am not persuaded on the balance of probabilities that this term was incorporated.
62 There is no dispute that Zhou and Huang, alternatively Zoo Property, did not buy out Qiyan I’s investment in the Carina Heights Property. The issue then is whether there was a binding contractual term that they would do so if an alternative investor could not be found, being the breach referred to in paragraph 23(b) of the amended defence. There is no written term to this effect. The question then is whether such a term was agreed upon orally between the parties. This term was denied by Zhou and Huang. The incorporation of such a term depends upon me being satisfied of the evidence given by Xiao on this topic. As I have said, I have concerns about her credibility as indeed I do for Zhou, but Xiao bears the onus of proof on this matter. I am not persuaded on the state of the evidence before me that such a term was agreed upon and formed part of their contractual dealings. It also makes no commercial sense that Zhou and/or Huang, as experienced businesspeople, would agree to such a term.
63 I reject Xiao’s oral evidence that these terms were agreed upon by Zhou and Huang and/or Zoo Property. Nor was I satisfied that an objective bystander would understand these to be terms of the Carina Heights Agreement.
64 That being so, the cause of action relied upon relating to a contractual breach of these terms fails. The issue of repudiation is dealt with later in the judgment.
(ii) who were the contracting parties to the Carina Heights Agreement?
65 The defendants’ case is that the agreements were entered into by the defendants’ companies with Zhou and Huang and/or Zoo Property. The plaintiff denies that Zhou or Huang were contracting parties.
66 Although counsel for the plaintiff contended the defendants had pleaded that Zoo Property was a party to the agreements, counsel for the defendants maintained the plea that Zoo Property was a party was pleaded in the alternative and that their primary case was that the contractual arrangements were made with the individuals, namely Zhou and Huang.
67 Counsel for the defendants said at paragraph 45 of his submissions that an analysis of this issue of privity begins with the presumption that a person intends to contract with the person to whom he or she is addressing the words of the contract. He referred to the following passage of the decision of McPherson J in Parsons & Rochella v Vance[18]. His Honour said:
“The presumption is one of fact so may be displaced by evidence of a contrary intention. Such an intention must be ascertained by an objective assessment of the words and deeds of the parties in light of all of the evidence, as well as the actual knowledge of the parties seeking to enforce the promise against the individual. He cannot of course insist upon a contract with the individual if he in fact knows that that individual was acting as the representative of another, whether or not that other is a corporate entity or an actual person or firm. But it lies with the person seeking to avoid that liability to show that there are circumstances, including such knowledge, sufficient to displace the prima facie inference that he is the one liable on the contract.”
[18]App. 7/1984; unreported, Queensland Full Court.
68 In a similar vein, counsel referred to a passage in the New South Wales Court of Appeal decision of Pethybridge,[19] where Campbell JA (with whom Beazley JA agreed):
“Identification of the parties to the contract must be made in accordance with the objective theory of contract: Ryledar Pty Ltd & Anor v Euphoric Pty Ltd [2007] NSWCA 65 at [262]-[266] and cases there cited. It was the Respondent who bore the legal onus of proving that the Appellant was the other party to the contract that had undoubtedly been entered for the performance of the work on the two carparks. It was relevant, for that purpose, to establish who was carrying on business under the name C & D Asphalt Service. That is because the correct conclusion to draw from the objective evidence is that a reasonable observer of the communications that led to the entering of the contract, together with a background of facts known to the parties, would conclude that the parties intended that the contract would be with whomever it was that was carrying on the business under the name C & D Asphalt.”
[19]Dennis Pethybridge v Stedikas Holdings Pty Ltd [2007] NSWCA 154 at [54].
69 More recently, in the Victorian Court of Appeal in Lederberger & Anor (as executors of the deceased estate of Lederberger) v Mediterranean Olives Financial Pty Ltd & Ors[20] stated as follows regarding the determination of parties to a contract:
“That is the intention that a reasonable person, with the knowledge of the words and actions of the parties communicated to each other, and the knowledge that the parties had of the surrounding circumstances, would conclude the parties had. The process of construction requires consideration of not only the text of the documents, but also the surrounding circumstances known to the parties and the purpose and object of the transaction. This, in turn, presupposes knowledge of the genesis of the transaction, the background, and the context in which the parties were operating.”
[20](2012) 38 VR 509, 515-516 at [19]-[22].
70 In considering the issue determining the identity of contracting parties, counsel for the defendants noted it was permissible to look at post-contractual conduct. He relied upon the authorities referred to in paragraph 48 of his submissions.
71 In Nurisvan Investments Ltd & Anor v Anyoption Holdings [2017] VSCA 141, the Victorian Court of Appeal stated at [77] that there is no settled view in the authorities whether post-contractual conduct may be relied on to found or support an inference as to the identity of the party to the contract, but their Honours did accept it was permissible to use post-contractual conduct to determine the parties to a contract, depending on the circumstances of the case. At paragraph 84, their Honours noted:
“As we have mentioned, the authorities make it clear that post-contractual conduct is admissible to determine the existence and formation of the contract. In that way, the judge was correct to take into account the post-contractual conduct of the relevant parties, in order to determine whether Nurisvan was a party to the Heads of Agreement.”
72 For his part, counsel for the plaintiff submitted the test for determining the identity of the parties was an objective one, and for that reason, Xiao’s knowledge must be judged objectively, and her limited English should not be considered when analysing this issue. He referred to the various factual circumstances that he relied upon to show that Zoo Property was the contracting party for both the Carina Heights and the Northgate property agreements.
73 The matters relied upon by counsel for the plaintiff as demonstrating that Xiao ought to have been aware she was dealing with a corporate entity, as opposed to Huang and Zhou in person, are as follows: –
(i) Xiao attended at Zoo Property’s premises in Mulgrave where the MWB’s logo was prominently displayed on the outside of the building and also inside. The evidence reveals she had been there on several occasions. Huang’s evidence was that there were business cards and other documents at reception bearing the MWB logo, as well as a sign inside that referred to MWB;
(ii) Xiao was given Zhou’s business card at their initial meeting at MWB’s offices at Mulgrave - the card expressly referred to Zoo Property by name;
(iii) Xiao had also attended Zhou and Huang’s home on several occasions, so it was said she ought to know the difference between their personal home and the business premises;
(iv) Throughout 2014 and 2015, Xiao received multiple emails from Zhou from the address [email protected]. These emails contained feasibility studies that all had the MWB letterhead and emblem;
(v) Zoo Property traded at all times under the name “My Wealth Builders”;
(vi) Zoo Property registered the trading name “My Wealth Builders” on 18 March 2016;
(vii) Xiao had also dealt with Sue Xiu and Chen Li, so she was aware that there were other persons with whom she was dealing apart from Zhou and Huang. The emails from Sue Xiu and Chen Li also referred to MWB. On 19 May 2016, Xiao emailed Sue Xiu (not Zhou or Huang), a critical email, when she stated in English she wanted to transfer the Carina Heights and Annerley projects, but keep Northgate;
(viii) Xiao used the term “your company” twice in her email of 19 May 2016;
(ix) Xiao again used the term “company” on numerous occasions in the text exchange on WeChat over 26 and 27 September 2016 (see Exhibit “P3”).
74 Counsel also pointed to the fact that Xiao knew that companies were involved as she had to set up companies in order to invest. As a company director of many companies previously, she was aware of the nature of a corporate entity.
75 By way of opposition, the defendants’ stance was that: –
(i) Xiao neither read nor understood English and therefore was unable to appreciate the significance of signs and logos in English, together with other documents, including a template service agreement and a business card in English;
(ii) it was disputed that a template service agreement was ever provided to Xiao;
(iii) it was said that there was no evidence that Zhou or Huang ever referred specifically to Zoo Property or My Wealth Builders in the conversations they had with Xiao;
(iv) neither Zhou nor Huang had ever described themselves in any document provided to Xiao, including numerous emails attaching feasibility studies, as a director or the proprietor of a business name, nor was there any reference to an ACN;
(v) the nature of the relationship was primarily personal as evidenced by the family gatherings and Huang’s inclusion of Zhou in her friendship group;
(vi) there was a high degree of personal trust and friendship that merged with the commercial interest of the parties that underlines the objective fact that Xiao was doing business with Zhou and Huang and not some company that was never mentioned;
(vii) emails and correspondence effecting engagement of town planners, architects, builders et cetera in performance of obligations under the agreement, never referred to Zoo Property;
(viii) the mere fact that a business name was used is equally consistent with it being used by a corporation, natural person or a partnership;
(ix) the mere fact of registration did not establish that Zoo Property was the contracting party. Counsel noted further that the extract from ASIC did not state to whom the name was registered, but even if it was registered to Zoo Property, it was only from 18 March 2016, which was after both the Carina Heights and Northgate Agreements had been entered into. But in closing submissions, counsel acknowledged that a search in the Court Book showed the business was registered by Zoo Property as trustee for the Zoo Property Trust. Counsel also noted that there was a requirement for the name to be registered and if it had been used, then Zoo Properties would be in breach of s18 of the Business Names Registration Act 2018 (Cth) and be subject to a penalty of up to 30 penalty units.
76 Having regard to the foregoing, I am not persuaded that Huang and Zhou were contracting parties. In my view, the evidence clearly demonstrates that the entity with whom Xiao and her companies were dealing with was MWB. This was a matter that was known to her by reason of the several visits she made to MWB’s offices at both Mulgrave and later at Toorak Road, Camberwell. She had been given a business card by Zhou early on which referred to Zoo Property by name. Although Xiao said that she did not have much English, she was able to recognise simple words. Xiao disputed she had been given copies of templates of service agreements by Zhou which bore the name of Zoo Property. Her evidence was that the first one she got was for Carina Heights in May 2016. All of the emails that were sent to her were sent on behalf of MWB. She was also aware that she was dealing with employees such as Sue Xiu and Chen Li in respect of the various projects that she was undertaking. Their names on the emails always ended with the term “mywealthbuilders.com.au”. She did refer to “your company” in emails and texts with Zhou, which is indicative of the fact that she was aware that she was dealing with a corporate entity as opposed to individuals.
77 Zhou gave evidence that Zoo Property’s business was conducted by MWB. There was no evidence that led to contradict this assertion. Although Zoo Property may have been in breach of its statutory obligations in not having registered the business name at an earlier time, this does not detract from the evidence that Zoo Property conducted itself under the business name MWB and had done so since 2010. Accordingly, I am not persuaded on the evidence that it has been demonstrated that Huang and Zhou were contracting parties to the agreements entered into with either Qiyan I or Qiyan RED. I find that the relevant contracting party for each property was Zoo Property, trading under the business name of MWB.
(B) The Northgate Agreement
(i) what were the terms of the Northgate Agreement?
78 Similarly, in respect of the Northgate Agreement, counsel for the plaintiff prepared a table setting out the various terms, which is set out below.
Claim
Term
Defence
Term
12(e)
Qiyan RED would pay to Zoo Property a fee of equivalent to 30% of the net profit before income tax (plus GST) of the development.
35(c)
Zhou and Huang and/or Zoo Property would receive 30% of the net profit on completion of development, if a profit was made.
12(b)(i)
Qiyan RED was responsible for providing funds for the purchase of the Northgate Property, as well as for construction and holding cost purposes.
35(a)
Qiyan RED would fund the purchase of the Northgate property and outgoings.
12(b)(ii)
Qiyan RED was responsible for making payment of all outgoings, including rates, taxes, land tax and utilities with regard to the Northgate Property.
35(a)
Qiyan RED would fund the purchase of the Northgate property and outgoings.
12(b)(iii)
Qiyan RED was responsible for making all payments of interest and capital in respect of the mortgage, if any, secured over the Northgate Property to cover the developmental costs.
35(a)
Qiyan RED would fund the purchase of the Northgate property and outgoings.
12(c)(i)
Zoo Property was responsible for engaging a licensed builder to construct townhouses on the Northgate Property in accordance with approved plans and permits.
35(b)
Zhou and Huang and/or Zoo Property would (i) engage agents to obtain Development Approval;… (iii) supervise and arrange the construction of townhouses to be built on the Northgate Property; (iii) supervise and arrange the sale of the townhouses as constructed.
12(c)(iii)-(iv)
Zoo Property was responsible for obtaining a survey of the Northgate Property and providing architecture and planning drawings with respect to the design and development of the Northgate Property.
35(b)
Zhou and Huang and/or Zoo Property would (i) engage agents to obtain Development Approval; (ii) supervise and arrange the construction of townhouses to be built on the Northgate Property; (iii) supervise and arrange the sale of the townhouses as constructed.
12(c)(v)-(vii)
Zoo Property was responsible for lodging and obtaining permits for the development including building and planning permits, appointing contractors and supervising the development of the Northgate Property.
35(b)
Zhou and Huang and/or Zoo Property would (i) engage agents to obtain Development Approval; (ii) supervise and arrange the construction of townhouses to be built on the Northgate Property; (iii) supervise and arrange the sale of the townhouses as constructed.
79 The defendants contended that there were different terms in respect of the Northgate Agreement. The relevant terms are pleaded in paragraph 35 of the amended defence. As with the Carina Heights Agreement, the relevant contractual breach pleaded is that Zhou and Huang, alternatively Zoo Property, did not find a substitute investor to replace Qiyan RED or did not buy out Qiyan RED’s investment in the development at a price calculated that included all costs incurred by Qiyan RED in purchasing and funding the development together with a 15 per cent profit margin, or at all. This again depends upon whether these terms can be established, being the terms that are set out in paragraph 35 (g), (h) and (i). For these terms to be found, I need to be persuaded that there was an oral agreement in the absence of there being any written document to support these terms. I was not persuaded that there was an oral agreement between the parties in respect of the terms pleaded. As mentioned previously, regarding the Carina Heights Agreement, there were discussions about the willingness of Zhou and Huang to endeavour to flip projects and find substitute investors should a client wish to withdraw. However, in my view it has not been established that there was a positive term agreed upon to the effect that there was a contractual obligation upon Zhou and Huang to find a substitute investor if Qiyan RED decided to withdraw. As noted by counsel for the plaintiff in his written submissions, there can be no binding contract if one party has a right to walk away from a contract.[21]
[21]See paragraph 55 of the plaintiff’s outline of closing submissions and the authority relied upon.
80 Similarly, I am not persuaded on the evidence that there was an agreement between the parties that Zhou and Huang and/or Zoo Property would buy out Qiyan RED’s investment in the development if an alternative investor could not be found. I reject Xiao’s oral evidence that these terms were agreed upon by Zhou and Huang and/or Zoo Property. Nor was I satisfied that an objective bystander would understand these to be terms of the Carina Heights Agreement.
81 As with the Carina Heights Agreement, it is alleged that Zhou on behalf of himself and Huang and/or Zoo Property repudiated the Northgate joint venture agreement or alternatively the Northgate Agreement. It was pleaded that the acceptance of the repudiation was contained in Xiao’s email to Zhou dated 27 September 2016. The issue of repudiation is dealt with in Section C below.
(ii) who were the parties to the Northgate Agreement?
82 For the reasons already given in respect of the same argument made concerning the Carina Heights Agreement, I am of the view that Huang and Zhou were not parties to the Northgate Agreement. The relevant contracting entity was Zoo Property as it always was dealing with Xiao and her companies under the business name of MWB.
(C) Which party, if any, has acted in breach of or repudiated the Carina Heights Agreement and/or the Northgate Agreement?
83 Arising out of the events on 26 and 27 September 2016, the issue for determination is which, if any, of the parties repudiated the agreements. Xiao’s case is that the repudiation had already occurred in the telephone conversation between herself and Zhou on 26 September and that her email of 27 September 2016 was merely accepting Zoo Property’s repudiation. Zoo Property’s case is that the conversation between those two on 26 September did not amount to an act of repudiation on the part of Zoo Property, but that the email sent on 27 September by Xiao clearly evinces an intention to be no longer bound by the agreements and that it was she and/or her companies who repudiated the agreements.
84 Counsel for the defendants relied upon passages from Heydon on Contract[22] setting out the principles relating to repudiation as follows:
[22]Law Book Co 2019 at [24.240].
“A promisee may terminate the parties' obligations under a contract if the promisor reveals a lack of readiness, willingness or ability to perform. This is described as ‘repudiation’. ‘Repudiation’ in this sense differs in conception from termination for breach, which centres on breach of condition or breach of an intermediate term with a sufficiently serious consequence. And it differs in conception from termination under an express contractual power, which depends on the language of the power.
In Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd, a majority of the High Court distinguished between two senses of the word ‘repudiation’. One concerned any breach of contract by the promisor justifying termination by the promisee. When repudiation is used in that sense, it is used to describe the effect of breaches of conditions or intermediate terms. The other sense of repudiation referred to conduct evincing an unreadiness, unwillingness or inability to render performance of the contract. In Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd, Mason CJ described this as conduct evincing an intention no longer to be bound by the contract, or to fulfil it only in a manner substantially inconsistent with the promisor's obligations and not in any other way. In Heyman v Darwins Ltd, Lord Parker called this conduct an instance of “renunciation”. The High Court said, citing Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd, that the test is whether the conduct of one party is such as to convey to a reasonable person in the situation of the other party, renunciation of the contract as a whole or of a fundamental obligation under it.
(citations omitted)
Further, at [24.380], he deals with proof of unreadiness or these terms:
The ‘repudiation of a contract must appear clearly and without ambiguity’. Unreadiness or unwillingness to perform exists if the promisor's conduct would lead a reasonable person to the conclusion that the promisor does not intend to perform. Thus, a want of willingness or readiness to perform can be established by the promisor's express language to that effect. It may be established by a promisor's express language even before a condition precedent to the promisor's performance has been fulfilled. It can also be established by drawing an inference from the promisor's express language and conduct that there is ‘an intimation of an intention to abandon and altogether to refuse performance of the contract’ – that is, ‘to decide whether the acts and conduct of the party evince an intention no longer to be bound by the contract’.
(emphasis added)
At [24.410], the significance of acceptance of repudiation is explained:
Repudiation by the promisor does not terminate the obligations under the contract. That only happens when the promisee decides to terminate performance by accepting the repudiation. Acceptance also perfects the promisee's cause of action for damages in cases of anticipatory breach (that is, repudiation before the time for performance). And acceptance is also significant in relation to withdrawal of repudiation (of which reasonable notice has to be given), for it prevents the repudiation being withdrawn.”
85 For the defendant’s part, it is alleged that Zhou repudiated the agreements in a telephone call on 26 September 2016 at 5:34pm.[23] Xiao’s evidence was to the effect that Zhou had said to her, “You are not suitable to work with me. He said I don’t want to help you anymore. You go and solve all these problems”, without giving her any opportunity to explain. He then hung up.
[23]CB 741.
86 Zhou’s evidence was to the following effect, “I think from that day onwards I got a very clear message from her she wanted disengaging from us. She want to go alone. I said to her, you know, ‘If you want to take our good work re Northgate (property) you know and take away our good work and it means we got a lost opportunity I'm going to sue you.’”
87 The defendants also relied upon Pan’s evidence which was said to be a contemporaneous account of what Xiao told him about the phone call. His evidence was that she said: “Nelson and Liping will no longer help her to take over the project and were no longer going to help her with anything, not to keep it going, the construction of the… He also said very bad words or whatever, I can’t remember exactly. But the main thing is that Nelson said he will not help her to find other investors to take over the projects.” Although Pan’s evidence was relied upon by the defendants, he was not a party to the telephone conversation or present when it occurred. His account of what was allegedly said by Zhou to Xiao, as relayed to him by Xiao, is not probative of the matters discussed in the telephone discussion.
88 There was a phone call the next day, 27 September 2016 at 4:23pm between Zhou and Xiao which went for 27 minutes.[24] Neither of them gave evidence about this telephone call so the content of the discussion remains unknown. At 5:00pm there was an exchange on WeChat. There was a message from Xiao to Zhou which says, “So disgusting and don’t blame me for being unkind”.[25] Zhou’s response was, “People who don’t know how to show gratitude are no better than animals. But people with no intention to abide by contract spirit, legal action will be the way to go”. Xiao then replied saying, “I will play with you” which was referred to as being more accurately translated in Chinese by Zhou as meaning: “I will take you on”.
[24]CB 742.
[25]Exhibit “P3”.
89 The email dated 27 September 2016 sent from Xiao to Nelson was sent at 10:04pm.[26] The content of this email is set out above in paragraph 52. It is the only written evidence that either party repudiated the agreement. As was pointed out by counsel for the plaintiff, the importance of documents in this case is particularly relevant when there are credibility issues involved. The plaintiff also noted the email did not make any reference to the agreements being repudiated by Zhou as alleged by Xiao in the telephone conversation on the preceding day. It is significant in my view that the email makes no reference to this conversation whatsoever.
[26]CB 1029.
90 Xiao was particularly concerned at this stage about the invoices that kept coming in and that she wanted them to stop. Pan’s evidence corroborates this because he said he helped her to write the email mainly to stop the bills coming in. This, the plaintiff contended, was not the evidence of a party who wanted to cooperate with Zoo Property and being told by Zhou that Zoo Property will not do so. It was submitted the evidence about wanting the bills to stop was more consistent with a finding that Zhou never stated that Zoo Property intended to stop working for Qiyan I or Qiyan RED. I agree.
91 Counsel for the plaintiff submitted that the Court could infer from the change of the company address Qiyan RED made on 12 September, whereby it changed its address from Frank Bossio’s office to Xiao’s home address, that Xiao was putting measures in place to remove herself from any connections with Zoo Property. No such change was made for Qiyan I, the company involved in the Carina Heights property which Xiao was keen to off load. It can be inferred that Xiao wanted to disassociate the development of the Northgate Property from Zoo Property so that she and Pan could develop it themselves. It was also argued that Xiao in conjunction with Pan had deliberately decided to exclude Zoo Property and take over the developments for themselves. Both denied this to be the case. But ultimately, whether there was such a motivation did not affect the critical events which occurred on 26 and 27 September 2016.
92 I am not persuaded on the evidence that Zhou did evince an intention to be no longer bound by the agreements towards the end of the 50-minute phone call on 26 September 2016. I accept by this stage that matters had become heated between the parties and there was a degree of animosity. But to find for the defendants would require me to find that I should accept, without reservation, what Xiao says about this conversation. For reasons already given, I do have concerns about her credit. I am not persuaded that she has satisfied the onus of proof that Zhou repudiated the agreements in the course of this telephone discussion based on her oral and uncorroborated evidence. I am fortified in this view by reason of the fact that:
(a) No mention is made in the written email of 27 September 2016 to the telephone discussion of the preceding day whereby it is claimed that Zhou said he would no longer act – this omission is surprising and lends credence to the plaintiff’s argument that it was Xiao who repudiated;
(b) The unexplained telephone call on 27 September 2016 where the parties spoke for 27 minutes and Zhou or Xiao may have said other things which might have borne on the issue of repudiation such that their positions changed from the preceding day – the fact that they spoke for 27 minutes runs counter to the suggestion that Zhou had in effect already washed his hands of her;
(c) Pan’s evidence that the main thing was that Nelson said he would not help find other investors – even if this were true, such a statement alone would not result in a finding that Zoo Property had evinced an intention to be no longer bound to complete the projects with Xiao’s companies;
(d) The tenor of Zhou’s response in the WeChat message on 27 September 2016 saying that, “people with no intention to abide by contract spirit”, is more consistent with Xiao having said she was going to withdraw rather than the other way around;
(e) The failure by Xiao to mention in the long list of complaints in the WeChat message on 28 September 2016 (only two days later), their telephone discussion on 26 September and Zhou’s supposed statement to her that he would no longer act for her – further, her statement in that WeChat message which said, “reason for the dispute is nothing more than the fact that I bought four and returned two, which affected your income”, is revealing where one would have expected her to be complaining about Zhou ceasing to act for her as being the reason for the dispute.
93 The defendants sought to rely upon an email to Wake Energy sent by Chen Li on 1 September 2016. It was said that in this email Zhou told Wake Energy not to provide services to the owners of Carina Heights and Northgate properties in the future, which exposed Zhou and Huang’s nascent intent to be no longer bound by the agreements that found its full expression in the 26 September 2016 telephone conversation. By this stage, Xiao had expressed concern about paying invoices and this had obviously been a problem. This was confirmed by Pan as being an issue for her. But when one examines the email of 1 September, MWB was going to meet the payments to Wake as far as cash flow went. The email is reflective of the fact that the parties were now in dispute. I am not persuaded the email proves an intention, even a nascent one, by Zoo Property to be no longer bound by the agreements with Qiyan I and/or Qiyan RED. As already stated, the critical events relating to repudiation are those that occurred on 26 and 27 September 2016.
94 Considering all the evidence surrounding this issue, I was not satisfied the defendants proved it was Zoo Property who repudiated the agreements. In my view, it was Xiao who repudiated the agreements when she sent the email on 27 September 2016. The email is in unambiguous terms and clearly contains an unequivocal statement by Xiao that she and her companies no longer wished to be bound by the agreements. The repudiation of the agreements was accepted by Zoo Property upon the commencement of this proceeding.
(D) Are either of the parties entitled to damages as a result of any such breach of agreement?
95 For the reasons which are stated above, Qiyan I and Qiyan RED failed in their breach of contract claims with the result that they have no entitlement to damages.
96 I have found the defendants repudiated the agreements. That being so, then Zoo Property is entitled to claim damages as result of the breach on the part of the defendants, which leads to the next key issue below.
(E) If a party is entitled to damages, how are such damages quantified?
97 Zoo Property claims as damages its loss of opportunity to have derived a 30 per cent success fee from the Carina Heights and Northgate Properties on the assumption that had those developments been successfully completed and a profit made, Zoo Property would have derived a 30 per cent success fee. The right to charge such a fee if a profit was made is not in dispute given the admissions in the defence. Further, Xiao acknowledged many times in her evidence that she was aware that a 30 per cent fee would be charged from any profits made if a development was successfully completed.
98 The legal principles for claims for loss of opportunity are well established. They were referred to by the Victorian Court of Appeal in the recent decision of MA & J Tripodi Pty Ltd v Swan Hill Chemicals Pty Ltd.[27] They were also considered at length by Dixon J in Wilson v Bauer Pty Ltd.[28]
[27][2019] VSCA 46.
[28][2017] VSC 597, [161] and ff.
99 In Malec v JC Hutton, [29] the plurality of the High Court referred to the level of satisfaction required when assessing damages for future or hypothetical events as:
“When liability has been established and a common law court has to assess damages, its approach to events that allegedly would have occurred, but cannot now occur, or that allegedly might occur, is different from its approach to events which allegedly have occurred. A common law court determines on the balance of probabilities whether an event has occurred. If the probability of the event having occurred is greater than it not having occurred, the occurrence of the event is treated as certain; if the probability of it having occurred is less than it not having occurred, it is treated as not having occurred. Hence, in respect of events which have or have not occurred, damages are assessed on an all or nothing approach.
But in the case of an event which it is alleged would or would not have occurred, or might or might not yet occur, the approach of the court is different. The future may be predicted and the hypothetical may be conjectured …
If the law is to take account of future or hypothetical events in assessing damages, it can only do so in terms of the degree of probability of those events occurring. The probability may be very high — 99.9 per cent — or very low — 0.1 per cent. But unless the chance is so low as to be regarded as speculative — say less than 1 per cent — or so high as to be practically certain — say over 99 per cent — the court will take that chance into account in assessing the damages. Where proof is necessarily unattainable, it would be unfair to treat as certain a prediction which has a 51 per cent probability of occurring, but to ignore altogether a prediction which has a 49 per cent probability of occurring. Thus, the court assesses the degree of probability that an event would have occurred, or might occur, and adjusts its award of damages to reflect the degree of probability. The adjustment may increase or decrease the amount of damages otherwise to be awarded. The approach is the same whether it is alleged that the event would have occurred before or might occur after the assessment of damages takes place.”
[29](1990) 169 CLR 638.
100 In Naxakis v Western General Hospital,[30] Gaudron J said, when referring to a loss of opportunity for a breach of contract:
“It is well settled that, where a breach of contract results in the loss of a promised chance, that is an actual loss for which damages will be awarded “by reference to the degree of probabilities, or possibilities, inherent in the plaintiff succeeding had the plaintiff been given the chance which the contract promised.” So, too, damages may be recovered for a commercial opportunity that is lost in consequence of a breach of contract...”
[30](1999) 197 CLR 269, at 278.
101 The loss claimed is the loss of the benefit to derive a success fee had the defendants not repudiated the agreements. In that sense, the damages claimed are expectation damages, being the fees that Zoo Property might have received had the defendants performed their side of the bargain. Counsel for the defendants argued it was incumbent upon Zoo Property to lead evidence in order to prove its loss that other third-party investors would have successfully completed the two projects. I do not accept this submission. The relevant loss of opportunity is the loss of the benefit to have the agreements performed by Xiao’s companies.
102 Having regard to the principles above, I am satisfied there was more than a speculative chance that Zoo Property would have completed the developments had the defendants not repudiated the agreements.
103 The lost success fee for the Carina Heights Property is assessed at $97,594. A table was provided by counsel for the plaintiff which set out the relevant calculations. A similar exercise was conducted for the Northgate Property. The loss of profit claimed for this property is $166,217, which took into account an adjustment made for GST during the trial relating to construction costs.
104 The Court was greatly assisted by the provision of comparison tables prepared by counsel for the defendants for each property. These were shown to Mr Fraser during his expert evidence who was called on behalf of Zoo Property. The tables list the figures set out in the plaintiff’s further amended statement of claim and then provides the corresponding figures, where applicable, of the comparable calculations made by Mr Fraser and Mr Collins, the valuer called on behalf of the defendants.
Carina Heights
105 In assessing the loss of opportunity for the Carina Heights Property, it is significant, in my view, that there is evidence before the Court that the development subsequently did occur. Four townhouses were built on the site and sold. This lends support to the likelihood that had Zoo Property been able to continue on with this development, but for the fact that Qiyan I repudiated the agreement, then it is likely that it would have proceeded to successful completion and a profit would have been earned. The issue of course then, is what is that profit?
106 Carina Heights was subsequently developed by another developer after Qiyan I sold the property. Four townhouses were sold for the prices identified in Zoo Property’s table of damages.[31] The total was $2,422,000. Mr Fraser valued the townhouses at $2,375,000. Mr Collins valued the townhouses as at 2017 at $2,325,000 and as at 2019, in the sum of $2,415,000. Consequently, there was little variation between the parties on the assessment of value of the townhouses.
[31]Exhibit “P4”.
107 The main dispute came down to the discrepancy relating to the quantum of the construction costs claimed. Zoo Property listed those costs at $840,000. Mr Collins assessed the construction costs as at 2017 in the sum of $1,150,000 and $1,200,000 in 2019. If he accepted the land value for Carina Heights was $800,000 when purchased by Qiyan I, the result of his calculations, taking into account other expenses, was that no profit would have been achieved in either 2017 or 2019. If he applied his assessment of the value of Carina Heights at $600,000 in 2017, the result of his calculation was a net profit of $73,950. Allowing $700,000 for Carina Heights as at 2019, he assessed the figure of a net profit at $61,020.
108 The figure Mr Collins applied for interest payable was almost double the sum claimed by Zoo Property. His oral evidence was that he allowed around 10 per cent, being a figure familiar to him from his dealings with mortgage brokers. The figures he allowed for marketing costs were also higher than the amount listed by Zoo Property.
109 Criticism was made of the evidence given by Mr Max Collins, the expert for the defendants. Mr Collins is a registered valuer. It was said that Mr Collins had failed to disclose in his report that prior to his appointment he had done work for Qiyan I.[32] In his evaluation for Carina Heights, he did not refer to the earlier sale price of $800,000. He was also aware that the property later sold for $900,000 on 21 December 2017 but had not referred to that in his report. He did not accept the best valuation of the property was the actual sale price of that property. Further, he had not included details of other units for sale in Carina Heights in his valuation. The first valuation he conducted in October 2016 was for a house and land for people to live in and the second one for a development site. Zoo Property argued it was unclear as to why this was done or what this was supposed to mean.
[32]CB 142; T398.25-399.2. See earlier reports from Collins at CB 746 and 752.
110 Zoo Property contended Mr Collins did not have the relevant expertise to give an opinion on matters under the heading “Hypothetical Development Feasibility”. The reason for this was that his only qualification with respect to building costs was that he was a registered builder from the mid-1970s to the mid-1980s, although he had never conducted a business as a builder. It was said this was obviously inadequate to give evidence as an expert. Mr Collins had relied upon a publication known as “Rawlinson’s Building Costs” and had not spoken with a quantity surveyor. As a result of this, his opinion could not be received as an expert and he was not qualified to estimate the costs associated with the development of the properties, and therefore his evidence ought to be rejected.
111 Zoo Property contended the evidence of Zhou ought to be preferred on the construction costs claimed having regard to Zoo Property’s experience in developing townhouses in Queensland. Zhou did give evidence that he had extensive experience in developments in Brisbane and had developed over a hundred properties.[33] It was submitted that there were very good prospects that the development would have been completed and sold.
[33]See CB 447-449; T177.6.
112 I accept the arguments put by counsel for Zoo Property that Mr Collins lacked sufficient expertise to give evidence about the building costs he identified. Mr Collins had been a registered builder but not since the 1970s or 1980s. Further, Mr Collins did not state in his report, the facts or matters upon which he had considered when assessing the construction costs. It was only in his oral evidence that he said he had referred to a hard copy service to assess those costs and was unsure as to the date of the edition he looked at or its current name. Counsel for Zoo Property called for the edition, but it was not produced. The factual matters he relied upon were not proved nor was there a statement of reasoning relating these facts to the opinion he gave.[34] Given all these matters, I am not persuaded I should accept Mr Collins’ evidence relating to the estimated construction costs in preference to the costs assessed by Zoo Property.
[34]Being the requirements under s 79 of the Evidence Act 2008 as referred to by Dixon J in Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd (No.3) [2012] VSC 99.
113 Zhou has had considerable experience in this area. He was cross-examined about the likelihood of building costs going up as a result of variations and it was pointed out that a margin of 10 per cent was factored in by lending banks. Zhou accepted that as a possibility but noted he would first have to agree to any variation. It was also pointed out that he had claimed $9,200 for marketing costs in the Carina Heights feasibility report but was now only claiming $2,600. He then said that figure was too low and sought to estimate a higher figure in the course of his evidence.
114 Counsel for the defendants submitted that of the six comparative projects that Zhou referred to when considering the likely building costs that an adverse inference could be drawn because of the two completed, Zoo Property did not lead evidence proving the amounts spent. The failure to do so it was said meant the Court could assume such evidence would not have assisted Zoo Property. I am not persuaded that Zoo Property was required to lead such evidence. In my view, the evidence led by Zhou was enough to support his estimate of the likely construction costs to be incurred in the hypothetical development of the two projects. No challenge was made by the defendants to the accuracy of the sums claimed in any meaningful way other than the issue raised about the possibility of variations increasing the costs claimed.
115 That then leaves evaluation of the sums claimed by Zoo Property. In my view, it would be reasonable to increase the sum claimed for construction costs allowing for the likelihood that there would be variations sought by the builder. I consider an amount of 10 per cent should be allowed as a margin for this contingency. Having given instructions for the marketing costs set out in the table, I am not inclined to revise that upwards based on Zhou’s oral revised estimate. I will allow the figure he claimed for interest costs given his experience. I was not persuaded by Mr Collins, based on his remarks about mortgage brokers, that his assessment of the interest to be charged should be preferred. I was also not persuaded that the lower figures given for Carina Heights of $600,000 and $700,000 by Mr Collins had any sound basis such that those figures should be preferred to the actual sale price of $800,000.
116 The result is that I accept the calculation of loss put forward by Zoo Property save that I consider there should be allowance made for the possibility of a variation in building costs upwards of 10 per cent. Applying that to the sum claimed of $840,000, I would assess construction costs in the sum of $924,000. This then reflects a project profit of $241,132 of which 30 per cent is $72,339.60. Doing the best I can, I consider there was an 80 per cent probability that this development would have been successfully developed had Zoo Property been able to complete the project. I would reduce the sum of $72,339.60 by 20 per cent to arrive at a figure of $57,871.68 which I will round off to $58,000.
Northgate
117 As for the Northgate Property, Zoo Property submitted that the expert evidence of Mr Fraser, real estate agent, should be accepted in respect of the values of the units that would have been built at the Northgate Property.[35] This project had development approval but has not been built. The difference between the two experts on the values was in the order of $400,000. This is to be contrasted with Carina Heights where the experts were in substantial agreement on the values. I found Mr Fraser to be a compelling witness with extensive knowledge of the relevant market for townhouses in inner city Brisbane. I prefer his evidence to that of Mr Collins about the values to be ascribed. Mr Collins had used old town houses as a method of valuation instead of new. Mr Fraser flatly rejected the figures suggested by Mr Collins for townhouse 1 of $450,000 and for townhouse 2 of $440,000 as being unrealistic and said they could not be bought for those amounts.
[35]Fraser report CB 142-166.
118 For the reasons already given, I do not accept Mr Collin’s evidence about the estimated construction costs. Nor am I persuaded his estimate of the interest payable should be accepted. I will allow an increase in the building costs claimed by Zoo Property to allow for variations of up to 10 per cent. The effect of this is to arrive at a net profit of $465,371 of which 30 per cent is $139,611.
119 Again, doing the best I can, I assess the probability that Zoo Property would have successfully completed the Northgate property at 70 per cent. I have arrived at a slightly lower figure than Carina Heights to reflect the fact that this property has not yet been developed. This then brings it to a total of $97,727.70 which I will round off to $98,000.
120 Accordingly, having found that Zoo Property has established a loss of opportunity in respect of both projects, I assess the damages for the Carina Heights property at $58,000 and for the Northgate property at $98,000.
(F) Is Qiyan I or Qiyan RED entitled to any damages on their counterclaim for misleading or deceptive conduct pursuant to the Australian Consumer Law?
121 In paragraph 26 of the amended defence, it is alleged the following representations were made to Xiao by Zhou and Huang and/or Zoo Property; namely:
(a)Qiyan I would make a net profit of not less than 15 per cent upon obtaining grant of development approval for the Carina Heights Property;
(b)Qiyan I would make a profit of not less than 30 per cent upon completion of the project;
(c)Qiyan I would have the right to withdraw from the Carina Heights Property development at any stage;
(d)In the event that Qiyan I decided to withdraw from the development, Zhou and Huang would find a substitute investor to replace it;
(e)In the event that an alternative investor could not be found, Zhou and Huang would buy out Qiyan I’s investment in the development;
(f)The price to be paid by a substituted investor, alternatively, Zhou and Huang for Qiyan I’s stake in the development would be calculated to include all costs incurred by Qiyan I in purchasing and funding the development together with any profit margin applicable; and
(g)The Carina Heights Property was worth $800,000.
122 The representations made regarding the Northgate Property are contained in paragraph 40 of the amended defence and are in the same terms, save for the representation pleaded in paragraph 40(g) that the Northgate property was worth $750,000.
123 For both properties, it is alleged that in reliance upon the representations, Qiyan I and Qiyan RED entered into the respective developments. As far as any of the representations made related to future matters, it is pleaded that Zoo Property and/or Zhou and Huang did not have reasonable grounds for making them. Reliance is made upon the presumption of s 4 of the Australian Consumer Law (“the ACL”). It is then pleaded that the representations were false and untrue in respect of both developments and consequently, Zhou and Huang or alternatively, Zoo Property engaged in misleading and deceptive conduct in breach of s 18 of the ACL.
124 The same loss and damage claimed under the ACL claim is the same as the breach of contract claim. Qiyan I claim losses which are alleged to have been, in effect, the costs thrown away by reason of its entry into the Carina Heights Agreement. The amount claimed is $68,124.83. This is set out in paragraph 33 of the amended defence. On one of the rare occasions that the parties were able to agree upon anything, the quantum claimed was accepted as being accurate, but the entitlement is disputed. Similarly, in respect of the Northgate Property, the quantum set out in paragraph 47 of $132,415.43 is agreed upon but not the entitlement.
125 Section 18 of the ACL, contained in Schedule 2 to the Competition and Consumer Act2010 (Cth), provides:
“A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.”
126 A person who suffers loss or damage because of the contravening conduct of another person can recover the amount of that loss or damage under s 236 of the ACL against the other person or any person involved in the contravention.
127 In this case, the misleading or deceptive conduct relied upon depends entirely upon what was said during oral discussions prior to Xiao investing her money with Zoo Property. The words spoken need to be proved with a suitable degree of precision, and that those words were misleading and deceptive in the circumstances. There are no contemporaneous documents or other corroborative evidence concerning the oral representations alleged to have been made to Xiao.
128 In Watson v Foxman, McLelland CJ in Equity said, in respect of alleged oral misrepresentations, the following:[36]
“Where, in civil proceedings, a party alleges that the conduct of another was misleading or deceptive, or likely to mislead or deceive (which I will compendiously describe as “misleading”) within the meaning of s 52 of the Trade Practices Act 1974 (Cth) (or s 42 of the Fair Trading Act), it is ordinarily necessary for that party to prove to the reasonable satisfaction of the court: (1) what the alleged conduct was; and (2) circumstances which rendered the conduct misleading. Where the conduct is the speaking of words in the course of a conversation, it is necessary that the words spoken be proved with a degree of precision sufficient to enable the court to be reasonably satisfied that they were in fact misleading in the proved circumstances. In many cases (but not all) the question whether spoken words were misleading may depend upon what, if examined at the time, may have been seen to be relatively subtle nuances flowing from the use of one word, phrase or grammatical construction rather than another, or the presence or absence of some qualifying word or phrase, or condition. Furthermore, human 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 processes 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.”
[36](1995) 49 NSWLR 315, at 318-19.
129 In Play Australia Pty Ltd v Papadimitriou, Daly AsJ considered a claim for misleading and deceptive conduct largely based upon alleged oral representations and limited contemporaneous documents, and noted the associated difficulties of proof as follows:[37]
“All of the above claims and the submissions regarding their potential impact upon the credit of the parties have merit. Indeed, it could be said that each of the main witnesses have a track record of making statements and engaging in conduct which indicates a willingness to be loose with the truth when it is in the perceived commercial interests of the parties and their associates to do so.
In these circumstances, it can be difficult to make a judgment as to which party, or which witness, is more or less creditworthy than another, such that it would not be possible to determine that on every issue where there is a dispute of fact, the evidence of one party or witness is to be preferred over that of another. Rather, it is necessary to evaluate the evidence in the context of the evidence as a whole, the inherent plausibility of the evidence concerned, including its plausibility in the context of the subsequent statements and pleadings of the parties, the existence and weight of corroborative evidence, and the likelihood that the evidence is likely to be at least in part shaped through the prism of self‑interest. That task is made just that more difficult by the paucity of contemporaneous documents, which in turn is consistent with the rather free‑wheeling approach to business shown by the parties.”
[37][2014] VSC 608, [244]-[45].
130 Similarly, in Varma v Varma,[38] Ward J commented on the fallibility of human memory and the need to persuade a court to a level of actual persuasion that an event had occurred:
[38][2010] NSWSC 786.
“[424] Adding to the need for close scrutiny of claims made in respect of arrangements with deceased persons who are unable to give their own account of events, is the recognition as to the fallibility of human memory as explained by McLelland CJ in Eq (as his Honour then was) in Watson v Foxman (at 318), as follows:
‘... human 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 processes 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.’
[425] His Honour noted (at 318–319) that:
Each element of the cause of action [there for misleading and deceptive conduct though his Honour expressly noted that the principles so espoused were true also for claims based on contract and equitable estoppel] must be proved to the reasonable satisfaction of the court, which means that the court “must feel an actual persuasion of its occurrence or existence”. Such satisfaction is “not ... attained or established independently of the nature and consequence of the fact or facts to be proved” including the “seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding”: Helton v Allen (1940) 63 CLR 691 at 712.
Considerations of the above kinds can pose serious difficulties of proof for a party relying upon spoken words as the foundation of a cause of action ..., in the absence of some reliable contemporaneous record or other satisfactory corroboration.
[426] In Hoy Mobile Pty Ltd v Allphones Retail Pty Ltd (No 2) [2008] FCA 810; [2008] ATPR 42–240 (at [41]) Rares J cited the above passage and noted that his Honour’s observations were just as apposite in a case where the question arises as to what oral terms of the contract were agreed in the course of negotiations.”
131 I need to be reasonably persuaded that Zoo Property and/or Zhou and Huang made the alleged representations to Xiao, being the first requirement to show that the conduct occurred, being a question of fact. The next step is to decide the characterisation of such conduct in order to determine whether it was misleading, deceptive or likely to mislead or deceive.[39]
[39]Australian Competition and Consumer Commission v Get Qualified Australia Pty Ltd (in liquidation) (No 2) [2017] FCA 709.
132 The characterisation usually requires consideration of whether the impugned conduct viewed tends to lead a person into error. It also involves assessing the notional cause and effect between the conduct and on the state of mind of the person who claims to have been misled. The test is an objective one.[40] Irrespective of whether the conduct is likely to produce confusion, it cannot be characterised as misleading unless in all the circumstances it leads the representee, in this case Xiao’s companies, into error.[41]
[40]Per French CJ in Campbell v Backoffice Investments Pty Ltd [2009] HCA 25 at [25].
[41]Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191, 198.
133 If the defendants to the counterclaim made the representations as alleged, I am satisfied that they would be regarded as having been made “in trade or commerce”, as they relate to transactions conducted for commercial gain.[42]
[42]Millers Australian Competition and Consumer Law (annotated edition 2018), ACL 18.60, CCA .4.540.
134 Counsel for Zoo Property argued it was significant that none of the representations relied upon by the defendants found their way into a lengthy affidavit sworn by Xiao on 22 February 2017. This affidavit was relied upon by Xiao to seek an order that proceedings issued by Zoo Property in Queensland should be stayed as Victoria was the correct forum. Her affidavit did go into some detail about her dealings with Zhou and included some representations which were made to her. The omission of the relevant representations in this affidavit could be explained because either they are a recent invention or that Xiao’s legal representatives decided what was needed to be included in the affidavit. Given the purpose for which the affidavit was filed, I am not persuaded that the inference of recent invention put forward by Zoo Property can be drawn.
135 Dealing with the pleaded representations in order, it is pleaded that:
(a) Qiyan I would make a net profit of not less than 15 per cent upon obtaining development approval.
Xiao gave evidence that this representation was made to her by Zhou at their meeting in October 2015. This was denied by Zhou. He said the first time he had heard the figure of 15 per cent was during this litigation.
There is no reference to the 15 per cent in any of the documents that have been provided, nor was there any document emanating from Xiao in which she sought to confirm this figure or mention it at all. Additionally, when given a copy of the service agreement, which she asked Pan to translate for her, she did not ask why the document did not include this alleged representation or, indeed, some of the others which are relied upon.
As I have already indicated, I have reservations about the credit of both Xiao and Zhou. In the absence of any corroborative evidence, I am not persuaded, on the balance of probabilities, that this representation was made in the terms alleged by Xiao.
(b) Qiyan I would make a profit of not less than 30 per cent upon completion of the project.
Xiao gave evidence that this representation was made to her by Zhou in October 2015. She also said several times that Zhou and Huang had guaranteed this level of profit would be made.
Zhou gave evidence that he would not recommend a project to any of his clients unless he believes it will make a profit of more than 30 per cent. This is also consistent with the feasibility studies that he provided to Xiao for the Carina Heights Development, which referred to a return on investments in excess of 30 per cent. But both he and Huang denied that they said this profit would be made as a matter of certainty or that they guaranteed it. It seems common ground that they only recommend projects where this level of profit was likely to be achieved but this is not the same as saying that this level would be made. Both Zhou and Huang are experienced businesspeople and it is unlikely they would guarantee a certain level of profit would be made.
I am prepared to accept that as part of the sales pitch made by Zhou, he said that levels in excess of 30 per cent were achievable but he did not guarantee such a profit would be made. But assuming the representation alleged had been made, this then leads into the issue of whether the representation was misleading or deceptive. The defendants rely upon s 4 of the ACL as this representation related to a future matter. Consequently, the onus then falls upon the representor to show that it had reasonable grounds when making the representation.
Zhou gave evidence about his extensive experience in the area of property development. He had done over a hundred developments in Queensland. Zhou was adamant that he would not recommend any project where the profit would be likely to be less than 30 per cent.
Having regard to his evidence, I am satisfied he has shown that he had a reasonable basis for making such a statement and an honest belief for doing so and this onus was not displaced by the defendants. There was no evidence led to rebut or disprove Zhou’s assertion that the projects in which he had been involved had been successful and had achieved profits in excess of 30 per cent. In the absence of any evidence to prove that Zhou’s representation that a 30 per cent profit margin would not occur, I am not persuaded that this representation, assuming it was made, was in fact misleading or deceptive.
(c) Qiyan I would have the right to withdraw from the Carina Heights Property Development at any stage.
Xiao gave evidence to the effect of this pleaded representation. Zhou and Huang denied that this representation was made. For the reasons given in respect to the following representation, the evidence disclosed that Zhou and Huang had told Xiao that if she wanted to withdraw from a development, they would endeavour to find her a substitute investor so that she could “flip” investments.
The evidence in this regard did not, in my view, extend to a positive representation that Qiyan I had a “right” to withdraw at any stage. For obvious reasons, commercially that would not make much sense. It was unlikely, being experienced businesspeople, that Zhou and Huang would have agreed to do so.
(d) If Qiyan I decided to withdraw from the development, Zhou and Huang would find a suitable investor to replace it.
Xiao gave evidence in respect to this representation. Zhou ‘s evidence about this was he told Xiao; “Before settlement, if any circumstance change, we are willing to help”. Counsel for the defendants submitted this was untrue as attempts to find alternative investors were made by Zhou and Huang after settlement of both Carina Height and Northgate. This appears to be correct on the evidence.
The evidence disclosed that Zhou and Huang were willing to accommodate their clients should they wish to withdraw and would do whatever they could to find a substitute investor, such that there was a degree of flexibility. The fact that this occurred is demonstrated by Xiao withdrawing from the Annerley and Mount Gravatt projects.
On balance, I find that a representation to this effect was made. But Zhou and Huang did in fact endeavour to find substitute investors, such that a statement made to that effect was not actually misleading and deceptive. By the time the agreements were terminated in September 2016, Zhou and Huang had been trying find a substitute investor for the Carina Heights property and the Northgate property. The reason that did not occur was because Xiao’s companies repudiated the agreements before a replacement could be found.
(e) If an alternative investor could not be found, Zhou and Huang and/or Zoo Property would buy out Qiyan I’s investment in the development.
Xiao gave evidence in respect of this representation. This representation was denied by both Zhou and Huang. Again, there is no document or email, or anything in writing, which would corroborate Xiao’s evidence on this point.
I am not persuaded on the state of the evidence that Zhou and Huang represented they would buy out Qiyan I’s investment in the event an alternative investor could not be found. It would make no commercial sense for them to do so. I am not persuaded, based on Xiao’s oral evidence alone, that they did make such a representation.
(f) The price to be paid by substituted investor, alternatively Zhou and Huang and/or Zhou Property for Qiyan I’s interest would be calculated to include all costs incurred by Qiyan I in purchasing and funding the development together with any profit margin applicable.
Xiao gave evidence regarding this representation. The representation was denied by Zhou and Huang. Again, there is no evidence in writing whatsoever to corroborate the oral representation as alleged by Xiao. As with some of the earlier representations, one would have thought with such an important matter, that Xiao would have sent an email or questioned in writing this representation. Even more so when she was provided with the service agreement which did not refer to such terms and was translated for her by Pan at her request.
I am not persuaded on the evidence that this representation was made to Xiao.
(g) The Carina Heights property was worth $800,000.
Xiao’s evidence was that Zhou had told her the purchase price of $800,00 was suitable.
Xiao was provided with a copy of the contract of sale of land for the Carina Heights property which had a purchase price of $800,000. Zhou’s evidence was that this was the price at which the vendor was willing to sell. As has been seen from subsequent events, the Carina Heights property was sold by Qiyan I for $900,000.
I am not persuaded that Zhou made a representation that the property was worth $800,000 as this was simply the price at which the vendor was willing to sell. There was no suggestion that the vendor was implicated in overvaluing the property. Even if it could be said that some misrepresentation was made as to the value of the property, I am not persuaded that it was misleading and deceptive in circumstances where the property has since sold for a greater figure.
Nor does the evidence provided by Mr Collins or the throwaway hearsay line from a real estate agent that Xiao allegedly spoke to when visiting Brisbane, leads me to the conclusion that the property was not worth $800,000. In my view, this representation is not made out and, even if it were, it was not misleading and deceptive.
136 The same representations were made in respect of the Northgate property. It was put on behalf of Xiao that her evidence in relation to the Northgate agreement was similarly clear, and her record of the meeting in February 2016 was cogent. It was said Zhou had virtually no recall of the meeting concerning the Northgate property. It was also claimed that Huang’s evidence was vague and exiguous. The difficulty for the Northgate representations case is that they do entirely depend upon the acceptance of the oral evidence of Xiao in the absence of any corroborating evidence.
137 The Northgate representations are as follows:
(a) Qiyan RED would make a net profit of not less than 15 per cent upon obtaining development approval.
Xiao gave evidence that this representation was made to her by Zhou. This was denied by Zhou. He said the first time he had heard the figure of 15 per cent was during this litigation.
There is no reference to the 15 per cent in any of the documents that have been provided, nor was there any document emanating from Xiao in which she sought to confirm this figure or mention it at all. Additionally, when given a copy of the service agreement, Xiao did not seek to query that document and ask why the document did not include this alleged representation or, indeed, some of the others which are relied upon.
As I have already indicated, I have reservations about the credit of both Xiao and Zhou. In the absence of any corroborative evidence, I am not persuaded, on the balance of probabilities, that this representation was made in the terms alleged by Xiao.
(b) Qiyan RED would make a profit of not less than 30 per cent upon completion of the project.
Xiao gave evidence that Zhou guaranteed she would be making a 30 per cent profit if the project was completed.
Zhou did not remember much about what was said in February 2016 about this investment. He said, “If anything I would have said to her, this site the development plan is about to be approved. It’s a good site. You know you should be able to make good money on that project.” Both he and Huang denied making the representation alleged.
For the same reasons as given for Carina Heights, I consider it likely Zhou mentioned this figure as part of the sales pitch. But assuming he did so, it was not misleading and deceptive because he had reasonable grounds for doing so given his level of experience.
(c) Qiyan RED would have the right to withdraw from the Carina Heights Property Development at any stage.
Xiao gave evidence to the effect of the pleaded representation. Zhou and Huang denied they made this representation. For the reasons given in respect to the following representation, the evidence disclosed that Zhou and Huang had told Xiao that if she wanted to withdraw from a development, they would (as they called it) “flip” investments. They would endeavour to find her a substitute investor.
The evidence in this regard did not, in my view, extend to a positive representation that Qiyan RED had a “right” to withdraw at any stage. For obvious reasons, commercially that would not make much sense. It was unlikely, in my view, being experienced businesspeople, that Zhou and Huang would have made such a representation.
(d) If Qiyan RED decided to withdraw from the development, Zhou and Huang would find a suitable investor to replace it.
Zhou gave evidence in respect to this representation. There was, as I have already stated, a discussion concerning the ability to “flip” investments.
The evidence disclosed that Zhou and Huang were willing to accommodate their clients should they wish to withdraw and would do whatever they could to find a substitute investor. The fact that this occurred is demonstrated by the withdrawal in respect of the Annerley and Mount Gravatt projects.
Even if this representation were made, Zhou and Huang did in fact endeavour to find substitute investors, such that the statement made to that effect was not misleading and deceptive. By the time the agreements were terminated in September 2016, Zhou and Huang had been endeavouring to find a substitute investor in respect of the Carina Heights and Northgate properties.
(e) If an alternative investor could not be found, Zhou and Huang and/or Zoo Property would buy out Qiyan RED’s investment in the development.
Xiao gave evidence that Zhou told her that, “if you wish to transfer this project, I will cover your costs, I will not let you lose any money”. The representation that she would be bought out was denied by both Zhou and Huang. Again, there is no document or email, or anything in writing, which would corroborate Xiao’s evidence on this point.
I am not persuaded on the state of the evidence that Zhou and Huang agreed to buy out Qiyan RED’s investment in the event an alternative investor could not be found. It would make no commercial sense for them to do so, and I am not persuaded, based on Xiao’s oral evidence alone, that they did make such a representation.
(f) The price to be paid by substituted investor, alternatively Zhou and Huang and/or Zhou Property for Qiyan RED’s interest would be calculated to include all costs incurred by Qiyan RED in purchasing and funding the development together with any profit margin applicable.
Xiao’s evidence on this representation did not exactly match the representation pleaded. Her evidence was to the effect that she was told she would not lose money. The representation pleaded was denied by Zhou and Huang. Again, there is no evidence in writing whatsoever to corroborate the representation as alleged by Xiao. As with some of the earlier representations, one would have expected with such an important matter, that Xiao would have sent an email or in writing at some stage the correctness of this representation. Even more so when she was provided with the service agreement which did not refer to such terms.
I am not persuaded on the evidence that this representation was made to Xiao.
(g) The Northgate property was worth $750,000.
Xiao’s evidence was that Zhou told her there was a small project which was about $700,000. Even on her evidence, it was not said that Zhou said the property was worth $750,000.
I am not persuaded that Zhou made a representation that the property was worth $750,000 as this was simply the price at which the vendor was willing to sell. There was no suggestion that the vendor was implicated in overvaluing the property. This property had been bought for that sum by the previous buyer, Lucy Zhu, another investor with Zoo Property.
In my view, this representation is not made out factually and, even if it were, it was not established it was misleading and deceptive.
This property was sold by Qiyan Red for $715,000. No evidence was led about the circumstances of this sale. This is less than the amount which Qiyan RED paid but this fact alone does not prove that there was a misleading representation made about the original purchase price. Property values can fluctuate and there may have been a scarcity of willing buyers and/or Qiyan RED was simply desirous of selling the property at whatever price it could get. All of this is speculative in the absence of evidence about the subsequent sale. I am not persuaded that there was a misleading representation made about the price that Qiyan RED paid when acquiring the Northgate property.
138 As I have found that no misleading and deceptive representations were proved, it is unnecessary to deal with the submissions about the loss and damage claimed in the counterclaim. But for the sake of completion, I will deal briefly with the matters raised by counsel in their submissions.
139 The defendants must satisfy the court that they have suffered loss and damage “because of” conduct in breach of the ACL. Whether or not the causal connection exists is essentially a question of fact to be determined by reference to common sense and experience.[43] Xiao did give evidence that had the representations not been made, she would not have entered into the investments. Counsel for the defendants referred to the case as being a “no transaction” case. This is because had Xiao known the true position, she would not have invested her money and is therefore entitled to recover the costs for which her companies are out of pocket.
[43]March v Stramare (E. and M.H.) Pty Ltd (1991) 171 CLR 506.
140 The plaintiff argues, assuming there was any loss and damage caused as a result of any misleading and deceptive conduct (which is denied), then there was a break in the chain of causation.
141 The first matter relied upon was that an offer was made to purchase the Northgate property which was contained in an email from Sue Xiu sent on 19 August 2016. The defendants say that when properly considered, it was not an offer at all. Xiao did respond to that email and said that she was more concerned with finding another investor for the Carina Heights property as a priority rather than dealing with the Northgate property.
142 I am not persuaded the email did in fact contain an offer which was capable of being accepted. The email referred to a price which was hoped to be achieved at the projected settlement date. There is no mention of who the putative purchaser might be. I do not regard the email as constituting a firm offer which Qiyan RED was capable of accepting. I do not regard the non-acceptance of Qiyan RED of this supposed offer amounts to a break in the chain of causation as alleged by Zoo Property.
143 The other matter raised by Zoo Property in respect of the break in chain of causation is the repudiation of the agreements by the defendants. As I have found, the defendants did repudiate the agreements by way of the email sent on 27 September 2016. I accept this did cause a break in the chain of causation.
144 As has been seen, the Carina Heights property was developed by another developer and was successfully completed. The losses which are now claimed by the defendants are not, in my view, as a result of damage suffered in consequence of any misleading or deceptive representations but arise out of the defendants’ own conduct in repudiating the agreements before completion of the projects. Had they not done so, then it remains speculative as to whether any losses would have been sustained. If Zoo Property’s feasibility studies proved correct, then the defendants stood to gain 70 per cent of any profit made.
145 Accordingly, for all these reasons, I will dismiss the counterclaim made in relation to misleading and deceptive conduct.
Conclusion and orders
146 Zoo Property has succeeded in its breach of contract claim against both Qiyan I and Qiyan RED. Accordingly, there will be judgment in favour of Zoo Property against Qiyan I in the sum of $58,000 and as against Qiyan RED in the sum of $98,000.
147 I will dismiss the counterclaim.
148 I will hear from the parties regarding the form of orders to be made consequent upon these reasons, including the question of costs and interest.
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Certificate
I certify that these 59 pages are a true copy of the Reasons for Judgment of Her Honour Judge A Ryan delivered on 11 March 2020.
Dated: 11 March 2020
Associate to Her Honour Judge A Ryan
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