District Court New South Wales Medium Neutral Citation: Wonderful Ornamentation Pty Ltd v Sweet Lu (City) Pty Ltd [2024] NSWDC 312 Hearing dates: 24 – 27 October 2023 22 November 2023 Date of orders: 26 July 2024 Decision date: 26 July 2024 Jurisdiction: Civil Before: Waugh SC DCJ Decision: See paragraphs 238 to 248. Catchwords: BUILDING AND CONSTRUCTION – Contract – Terms – Instalments payable by effluxion of time – Work "suspended" – Repudiation – Damages – Defects and omissions Legislation Cited: Nil Cases Cited: Baltic Shipping Company v Dillon (1993) 176 CLR 344 Bellgrove v Eldridge (1954) 90 CLR 613 Cordon Investments Pty Ltd v Lesdor Properties Pty Ltd (2013) 29 BCL 329, [2012] NSWCA 184 Dominion Coal Co Ltd v Dominion Iron & Steel Co Ltd [1909] AC 293 Foran v Wight (1989) 168 CLR 385 Fox v Percy (2003) 214 CLR 118 Hoenig v Isaacs [1952] 2 All ER 176 Hyundai Heavy Industries Co Ltd v Papadopoulos [1980] 1 WLR 1129, [1980] 2 All ER 29 Jones v Dunkel (1959) 101 CLR 298 Kuhl v Zurich Financial Services (2011) 234 CLR 361 Mann v Patterson Constructions Pty Ltd (2019) 267 CLR 560 Mann v Patterson Constructions Pty Ltd (2019) 267 CLR 560, [2019] HCA 32 Mertens v Home Freeholds Company [1921] 2 KB 526 Nguyen v Luxury Design Homes Pty Ltd [2004] NSWCA 178, (2005) 21 BCL 46 Probuild Constructions (Aust) Pty Ltd v DDI Group Pty Ltd [2017] NSWCA 151; 95 NSWLR 82 Sunbird Plaza Pty Ltd v Maloney (1988) 166 CLR 245 Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165, [2004] HCA 52 Texts Cited: Carter's Breach of Contract by J W Carter (3rd ed., 2024) Chitty on Contracts (35th edition, 2023) by H Beale Category: Principal judgment Parties: Wonderful Ornamentation Pty Ltd (Plaintiff) Sweet Lu (City) Pty Ltd (Defendant) Representation: Counsel: Ms A Lim (Plaintiff) Mr A Macauley (Defendant) Solicitors: Juris Cor Burwood (Plaintiff) Du & Associates Lawyers (Defendants) File Number(s): 21/236139 Publication restriction: Nil Judgment A. The context (some basic facts) 1. The parties' dispute is about the fit-out of a dessert and cake shop in 2020. The shop is in Dixon Street, Haymarket, not far from the Court. 2. The plaintiff, Wonderful Ornamentation, is a commercial shopfitter. It trades under the name TD Shopfitting. It is a private company with 3 directors. The director who dealt with the defendant at all points along the way was Mr Jian Hua Wang, who was known also as Mr James Wang ("Mr Wang"). Wonderful Ornamentation's project manager on the job was Mr Yibin Lu, known as Robin ("Robin"). 3. The defendant, Sweet Lu, took a lease over the premises in January 2020 with a view to opening a dessert and bakery business. Sweet Lu has one director, who is also the company secretary: Mr Tiansong Hou, known as Mr Steve Hou ("Mr Hou"). Mr Hou was the person at Sweet Lu who dealt with Mr Wang and Robin. Mr Hou's wife, Lucy Xi Lu ("Lucy" or "Ms Lu") also had some involvement. 4. Sweet Lu engaged an interior designer, Mr Shao Guo, also known as Tony ("Tony"), of GC Studio Pty Ltd in early 2020 to draw up plans for the fit-out. It was Tony who suggested to Mr Hou that he might use Wonderful Ornamentation to do the work. Tony regularly referred clients to Wonderful Ornamentation. Sweet Lu and Wonderful Ornamentation had not done business together before. 5. Mr Wang and Mr Hou first met in January 2020, although they give different accounts of precisely when that meeting was and what was discussed. 6. In their meetings, Mr Wang and Mr Hou spoke to one another in Mandarin Chinese. They also communicated with one another via WeChat, and there are many WeChat messages in evidence, in Mandarin Chinese together with English translations. Sometimes there was more than one English translation of the same message. 7. On 19 February 2020, Mr Hou sent Mr Wang a copy of the "Interior Concept Design" prepared by Tony. In his affidavit, Mr Wang described this as the design plan for the project. In his WeChat message acknowledging receipt, Mr Wang referred to them as the conceptual design drawings and the CDC drawings. They consist of 46 pages (Court book pages 532 – 577) with computer generated render images, typed pages of "general notes", a material schedule, plans and drawings. They are quite detailed. 8. It is admitted on the pleadings that Wonderful Ornamentation and Sweet Lu entered into an agreement on 2 March 2020. The agreement was in writing, signed by Mr Wang for Wonderful Ornamentation on 28 February 2020 and by Mr Hou for Sweet Lu on 2 March 2020. It came about as follows. 8.1 On 28 February 2020, Wonderful Ornamentation provided a written offer (or quotation) to Sweet Lu to do the work "based on the drawings and onsite observation" for a price of $190,000 plus GST. The quotation was signed by Mr Wang. It took the form of a five-page letter written in Mandarin Chinese addressed to Mr Hou, together with 2 pages of "Terms & Conditions of Trade" written in English. Most of the letter consisted of a table in 10 sections setting out a description of the work to be done and materials to be provided, with an 11th section setting out work excluded. After the table, a number of "Rules and regulations" were stated. Because of the significance they assume in the case, I will set them out in full: Rules and regulations 1. Extra charges apply apart from work in the work plan. 2. TD is expected to complete all work relevant to the work schedule 8 weeks after the commencement of the onsite work (Products processed in China shall be delivered to the work site two weeks before the completion of the work. Had there been any delay, the project shall be delayed accordingly. Starting from the arrival of the products onsite, all relevant work shall be completed within two weeks, including all onsite checking before acceptance through relevant authorities.). 3. TD guarantees for 6 months for all work relevant to the contract. 4. Payment period: A: 15% when signing the contract. B: 20% 2 weeks after TD's onsite work. C: 20% 4 weeks after TD's onsite work. D: 20% 6 weeks after TD's onsite work. E: 20% 8 weeks after TD's onsite work. F: 5% when TD has completed all relevant work according to the contract and submitted the OC to the shop owner. 8.2 When Mr Hou signed the quotation on behalf of Sweet Lu on 2 March 2020, he signed under the Chinese words translated into English as "Authorisation confirmed: We Sweet Lu (City) Pty Ltd hereby accept and grant this price offer and payment period. When the payment is made to your designated bank account, please start your work.". 1. On 2 March 2020 Sweet Lu paid $3000 to Wonderful Ornamentation by electronic transfer. This was much less than 15% of contract price of $190,000 plus GST. 2. It is common ground on the pleadings that work commenced on 2 March 2020. 3. On 13 March 2020, Mr Wang, Robin, Mr Hou, and his wife Lucy met at the shop to discuss some additional work Wonderful Ornamentation would like to have done. Robin took minutes of the meeting and circulated them afterwards. 4. After some further discussions, on 17 March 2020 Wonderful Ornamentation prepared and submitted to Sweet Lu an updated written quotation to do all of the work, that is to say to do the previously quoted and agreed and the additional work, for a price of $200,000 plus GST. The updated written quotation took the same form as the written quotation of 28 February 2020. 5. Mr Hou says that after receiving this updated quotation, on the same day (17 March 2020) he had a telephone conversation with Mr Wang. Sweet Lu claims (per its amended defence paragraph 3) that this conversation resulted in an oral agreement with Wonderful Ornamentation that Sweet Lu will make payment for fit-out works actually completed by Wonderful Ornamentation from time to time and upon receipt of the relevant tax invoice or payment request from Sweet Lu. Mr Wang denies the conversation and Wonderful Ornamentation denies the agreement. 6. It is common ground that by 19 March 2020 the written contract of 2 March 2020 had been varied and the new price of $200,000 plus GST had been agreed, but the parties are at issue over the precise terms of what was agreed. The difference relates to the work agreed to be done. They each put forward different versions of the updated written quotation said to have been agreed. Both versions set out the same unchanged "Rules and regulations" contained in the initial offer of 28 February 2020 accepted on 2 March 2020, although the English translation of rule and regulation number 4 in Sweet Lu's version is slightly different, it says "after TD starting the construction", instead of "after TD's onsite work". No one submitted that anything turns on the difference. 7. It is common ground that on 7 October 2020 Sweet Lu "suspended" all work. This followed what appears to have been a tense meeting the day before. 8. By this time, Sweet Lu had paid, by various instalments, a total of $130,000 inclusive of GST of the varied price of $220,000 inclusive of GST (or $200,000 plus GST) under the varied agreement. The instalments had been paid between 2 March and 12 August 2020 in amounts of $3000 (2 March 2020), $3500 (16 March 2020), $45,000 (19 March 2020), $23,500 (20 March 2020), $15,000 (13 May 2020), $20,000 (16 July 2020) and $20,000 (12 August 2020). 9. On 13 October 2020 Sweet Lu began to engage a number of different companies and tradesman, including Multione Construction Pty Ltd ("Multione"), to undertake work at the site. 10. The shop opened and Sweet Lu commenced trading on 20 December 2020. 11. Wonderful Ornamentation did not return to the site to undertake any work after 7 October 2020, and Sweet Lu did not pay it any more money. B. Wonderful Ornamentation's claim 1. Wonderful Ornamentation claims the sum of $90,000 inclusive of GST plus interest, which represents the unpaid balance of payments A, B, C, D, E and F under the rules and regulations of the contract. It has abandoned a claim for a further $7,150 inclusive of GST said to have arisen from an "Agreement Additional" made on 6 October 2020 pleaded in its statement of claim. 2. In its statement of claim, Wonderful Ornamentation says it is entitled to the $90,000 because Sweet Lu breached the agreement by failing to make the payments it was obliged to make, which entitled Wonderful Ornamentation to suspend work pursuant to clause 18.1, that Sweet Lu "repudiated" the agreement "by engaging a third party to continue fit out work", and that the full amount has become payable under clause 18.3. In the statement of claim, the $90,000 is claimed as damages. 3. At the hearing, Wonderful Ornamentation submitted that each instalment became a debt due upon the passing of the relevant number of weeks after it had commenced work. 4. In its statement of claim, Wonderful Ornamentation claimed the sum of $86,150 in the alternative on a quantum meruit basis. That claim was not pursued or sought to be proved at the hearing. 5. Sweet Lu says that Wonderful Ornamentation is not entitled to be paid because it was an entire contract and Wonderful Ornamentation did not complete the work. 6. Wonderful Ornamentation answers this by saying that it was not an entire contract, but even it if was there had been substantial performance, and that in any event the money had become payable as a debt or debts due under the contract, and so was owing. C. Sweet Lu's cross-claim 1. Sweet Lu also brings a claim against the Wonderful Ornamentation for damages for (a) the costs of rectifying Wonderful Ornamentation's defective works, (b) lost profit by reason of having to delay the opening of the store, and (c) the costs of engaging a further shop fitter to complete the fit out and remedial works necessary to enable the shop to commence trading (cross-claim paragraph 33). All up it claims damages of $165,809.65. 2. Sweet Lu calculates its loss by reference to: 1. The cost of the work done by different companies and tradesmen between 13 October 2020 and 6 December 2020 to complete the unfinished work and to rectify defects in the work Wonderful Ornamentation actually did. The amount claimed is $51,269. 2. The cost of work not yet done to rectify further defects in the work Wonderful Ornamentation actually did. The amount claimed is $19,198.08. 3. Damages for defective work in relation to a grease trap which overflowed. The amount claimed is $14,755.75. 4. Rent paid by Sweet Lu to its landlord and not recovered from trading during the period from 15 September 2020 (when Sweet Lus says the shop would have been opened if Wonderful Ornamentation had completed the work on time, as required by the contract) to 20 December 2020 (when the shop actually opened). The amount claimed is $61,665.20. 5. Loss of profit (over and above rent paid and not recovered) for the same period. The amount claimed is $18,921.62. 1. Wonderful Ornamentation disputes Sweet Lu's claim. 2. It also says, which Sweet Lu accepts, that if Sweet Lu is entitled to damages for the cost of completing the work, it must give credit to the Wonderful Ornamentation for the unpaid balance of the contract price (: Nguyen v Luxury Design Homes Pty Ltd [2004] NSWCA 178, (2005) 21 BCL 46 at [51]-[54] per McColl JA). D. An issue not raised or pursued: whether the contract was terminated and if so how, why and by whom 1. It is important to recognise that neither party asked the court to make findings that they terminated the contract for the other party's breach or repudiation of the contract so to discharge both from the further performance of the contract and to give the innocent party an entitlement to loss of bargain damages. Both sides positively eschewed mounting such a case. 2. In Sunbird Plaza Pty Ltd v Maloney (1988) 166 CLR 245 at 260, Mason CJ (Deane, Dawson & Toohey JJ agreeing) explained that, "Loss of bargain damages are recoverable only if the contract is at an end. Once termination due to the defendant's wrongful conduct is established the plaintiff is entitled to damages for loss of bargain", citing Dominion Coal Co Ltd v Dominion Iron & Steel Co Ltd [1909] AC 293 at 311 - where the Privy Council had said "the plaintiffs are entitled, owing to the wrongful repudiation of the contract by the defendants, to treat the contract itself as at an end and to recover damages for the loss of it, in addition to damages in respect of those breaches of it which may have been committed before repudiation". 3. A repudiation does not affect the subsistence of the contract unless the innocent party elects to terminate the contract or, as used to be said, rescind. Absent an election by the innocent party, both parties remain bound by the contract. See for example: Foran v Wight (1989) 168 CLR 385 per Brennan J at 416-417 and Dawson J at 441; and "Carter's Breach of Contract" by J W Carter (3rd ed., 2024) at [10-01] and [10-02]. 4. Where a party elects to accept the other party's repudiation of the contract, both parties are released from contractual obligations which are not yet due for performance, but existing rights and causes of action remain unaffected: Mann v Patterson Constructions Pty Ltd (2019) 267 CLR 560, [2019] HCA 32 per Nettle, Gordon & Edelman JJ at [176]. 5. In its statement of claim, Wonderful Ornamentation pleaded that Sweet Lu had "repudiated" the contract, but it did not plead that it had accepted the repudiation and elected to terminate the contract. Nor has Sweet Lu pleaded that it terminated the contract. Neither side sought to prove that the contract had been terminated due to the other's wrongful conduct, to use the language of Mason CJ. 6. Both sides were alleging that the other was in default before Wonderful Ornamentation "suspended" all work on 7 October 2020: see minutes of meeting 6 October 2020; and Mr Wang's and Mr Hou's differing affidavit accounts of the meeting; WeChat message from Mr Wang to Mr Hou and Ms Lu 7 October 2020 (CB857); WeChat messages from Ms Lu to Mr Wang 9 October 2020. 7. In its written closing submissions (paragraph 8), Sweet Lu submitted that there is no doubt that one party or the other had terminated the contract and it is not on foot, but that it was not necessary for me to address the question. 8. In oral closing submissions in reply (T426), in the dying minutes of the hearing, counsel for Wonderful Ornamentation submitted that Sweet Lu was not entitled to damages for completing the unfinished work because it had repudiated the contract. The submission failed to recognise that repudiation of itself does not bring the contract to end. I will return to the submission when considering Sweet Lu's cross-claim. 9. I can only decide the issues raised by the parties. Those issues do not include whether the contract was terminated and if so how, why and by whom. E. Issues 1. Having regard to those matters, the issues raised by the parties may be summarised as follows. 2. When the parties varied their contract around 18 March 2020, what did they agree? In writing? Orally? 3. Is there a debt due to the plaintiff by the defendant for the unpaid balance of payments A, B, C, D and E in clause 4 of the "Rules and regulations" of the written contract? The parties say that answering this question involves considering: 41.1 Whether, as the defendant submits, the contract was an entire contract such that no more money is payable to the plaintiff because it did not complete the work. 41.2 Whether, as the plaintiff submits, even if it was an entire contract the plaintiff is nonetheless entitled to be paid because it substantially completed the work. 1. Is the defendant entitled to damages for the cost of completing the work and rectifying defects? If so, how much? 2. Is the defendant entitled to damages for the plaintiff's delay in doing the work? If so, how much? 3. What orders should the court make? 4. I will address the issues in that order. F. When the parties varied their contract around 18 March 2020, what did they agree? In writing? Orally? 1. The issues here are whether there was an oral agreement reached on 17 March 2020 about the terms of payment (as alleged by Sweet Lu), and which version of the amended written quotation or offer the parties adopted. 2. I will start with the evidence. The affidavit evidence of the oral agreement 1. Sweet Lu asserts that the oral agreement arose out of one conversation between Mr Hou and Mr Wang on the telephone. 2. Mr Hou (Steve) gave evidence in his affidavit that after he received the varied offer on 17 March 2020, he had a telephone conversation with Mr Wang on 17 March 2020 with words to the effect of (CB 102): Me: "James I got the updated contract. Everything looks ok but I just want to confirm again that you are still happy with the payment arrangement we discussed earlier? I see that the new contract still has the same payment schedule as the first contract but as I told you I cannot keep to that schedule. You agreed that I can just pay as we go. I will pay whatever Robin asks me to pay as the work progresses." James: "Yes that is fine. We are still happy with that arrangement. You can pay as we go. Robin will ask you for funds." Me: " Ok great." 1. Mr Hou's evidence that "as I told you I cannot keep to that schedule. You agreed that I can just pay as we go" is a reference to his account of what he says was an earlier conversation on or about 1 March 2020 after he had received the written quotation or offer of 28 February 2020. Mr Hou gave evidence in his affidavit that on 1 March 2020 he had a telephone conversation with Mr Wang with words to the effect of (CB 100): Me: "Hi James thanks for sending through the contract. I see that the contract says we need to pay 15% deposit and then by instalments of 20% of the total costs every 2 weeks. I don't think I can meet this schedule. Can we discuss this arrangement?" James: "That is our standard payment schedule but you don't need to worry too much about it." Me: "At the moment I do not have enough funds. I have just sold one of my properties in order to raise funds to pay for this fitout. Settlement will happen soon and I will have enough money to pay for the work. But at the same time I have other expenses I need to pay for. I can 't commit to the payment schedule listed on your contract. Can I pay when you need me to pay from time to time?" James: "Yes no problem. My project manager Robin is in charge of the day to day on this project I will let him know. He manages payments. He will ask you to pay from time to time to cover anticipated work. He will let you know in advance what work is coming up and how much he needs. You can pay as we go ." Me "Ok great!" 1. In his affidavit evidence, Mr Wang (James) denied the conversation of 17 March 2020 set out in Mr Hou's affidavit (reproduced above). 2. Mr Wang gave a different account of the telephone conversation he had with Mr Hou on the telephone on 1 March 2020. In his affidavit (CB 51) Mr Wang says the conversation he had with Mr Hou was in Mandarin in words to the following effect: Steve: "We have received the quotation, unfortunately there has been some issues with my property sales settlement and it's getting delayed. We can't afford to pay a 15% deposit, but we would really like to proceed with our contract, is there anything that we can do?" Me: Without a deposit we cannot commence work for you. Plus, you have to cooperate with us and Tony to obtain a complying development certificate also known as CDC, otherwise works cannot commence. Steve: But if commencement does not take place, we still have to pay rent. Can you at least start demolishing works for now? Me: Demolishing cost money and if you don't pay us, we still can't commence the work. Steve: We will make future payment on time as I will have more cash flow after property sale. We really hope that this project can proceed, this is our first cooperation but it won 't be the last. Me: When is the settlement of your property? Steve: Probably within 2 weeks' time. How about we pay the deposit and first instalment as soon as we reach settlement to provide you with some security? I can pay you $3000 now. Me: All right, since we have both put a lot of effort into this already, I will start organise demolishing some interiors with $3,000 deposit. But please update us once your funds have come through. My colleague Robin, the project manager, will be working on Sweet Lu with us and he will be in charge with the arrangements onsite. Please contact him for in regards to works and payment. I have given him your contact details and he should get in touch with you soon. Steve: No problem, thank you! I will speak to Robin as well. 1. Mr Hou denied the conversation set out by Mr Wang and specifically denied that he said "We will make future payment on time". Mr Hou does say in his affidavit, however, that Robin rang him the next day and said words to the effect "Steve, can you pay $3000 first so that we can start demolition works tomorrow" and he replied "okay I will transfer $3000 today". 2. It is common ground that Sweet Lu paid $3000 to Wonderful Ornamentation on 2 March 2020. The contemporaneous WeChat records of messages between 17 and 19 March 2020 1. The contemporaneous WeChat records of messages between 17 and 19 March 2020 establish that the parties had the following communications with one another. Some of these messages were written and others were left as voicemails. 2. There are multiple English translations in evidence for a number of these messages. Some of the messages were exhibited to affidavits included in the Court Book with English translations. Some of those same messages were subsequently duplicated as part of Exhibits D and E, as part of Exhibits 3 and 4 or as in the annexures to Mr Hou's affidavit of 23 October 2023, but with different English translations. To the extent that some of the translations of particular text or voice messages are duplicated and are materially different relating to the issues raised by the parties I will set out the different translations. I am not equipped to and was not asked to decide which translation was correct in the event of a material difference. 3. On 17 March 2020, in sequence: 57.1 At 12:07 PM Mr Wang sent Mr Hou a new quotation. Wonderful Ornamentation says this is the version ultimately adopted by the parties. It is the version at CB 190 – 203. 57.2 At 12.10 PM Mr Wang sent a message to Mr Hou referring to the document as "the revised contract", asking whether anything was unclear or needed to be modified. 57.3 Mr Hou left 3 voicemails for Mr Wang (Exhibit D p.2-4): 1. In the first, he told Mr Wang that he had received the document and that he and his wife Lucy would read it as soon as possible today "and will send it over then". 2. In the second, he said (Exhibit D p.4) "… regarding the way of payment, I think if we could have it amended. That is, according to the situation that actually happens that is written down. That is, we would pay $120,000 before the opening of the business and pay $75,000 at the beginning pay according to the construction progress. Then see how to pay the balance. Then the remaining see to pay at what stage. And will be paid in one instalment. Think it all carefully, then write it down clearly. Then we can do according to what we agree upon.". There is another translation of this voicemail annexed to Mr Hou's affidavit of 23 October 2023 (page 14-15), according to that translation he said: "Also, Teacher Wang, I feel like, can we modify the payment method. Just write it down according to what actually happened. That is, we pay 120,000 before opening and pay 70,000 in advance according to the progress of the project, and then we will pay the rest at some point, see how to pay the final payment, and just directly pay it all. Let's think everything through clearly and then write it down clearly, and then we can do it as agreed.". 3. In the third, he said (Exhibit D p.4): "and about that $120,000, to be honest, Mr Wang, this is the smallest, smallest, smallest figure. Now honestly speaking, our business is running very well. Now I have the feeling that high chance will be in advance, that is to clear all outstanding. This, I do not like owing money to others. It is meaningless, really. This.". According to the translation in the annexure to Mr Hou's affidavit of 23 October 2023 he said: "And that 120,000, to be honest, teacher Wang, this is the smallest number. To be honest, our business is very good now. Now I feel that there is a high probability that it will get ahead of schedule, that is, all the money will be paid. I really don't like owing money, this". 57.4 At 6:06 PM Mr Hou returned photographs of 2 pages of the document to Mr Wang with handwritten amendments, and with the message "Mr Wang, I was quite busy during the day and have just finished reading the contract. Basically good except a few minor details would like to check with you". 57.5 Mr Hou left 10 voicemails for Mr Wang and sent a photograph of one page of the drawings. He commenced the first voicemail by saying "Mr Wang, I'm not texting any messages. Instead, I will leave you a voice message to see if you can understand. If it doesn't work, I will talk with you. …". The voicemails are set out in Exhibit D at pages 8 through 18. In them, Mr Hou raises questions about the number of matters, including the bathroom door, whether there will be 5 doors or 6 doors on the façade, the light in the kitchen, the air-conditioner, the plumbing, electric pump, floor drain, decoration of the hall room, the exhaust fan cover, the platform under the working bench and the payments. Because of the significance they assume in submissions I will quote only 2 of them: 1. In the 5th message (on page 12 and 14), Mr Hou said "The stainless equipment and the exhaust fan panel, it is rose gold. This is not reflected here in ours. That's not rose gold … The stainless equipment and the exhaust fan cover at the bottom, it is rose gold. This is not reflected here in our stuff. That's not rose gold colour steel. Perhaps it could be added here.". In the annexure to Mr Hou's affidavit of 23 October 2023 (page 20) the translation is given as: "The stainless steel equipment below and the exhaust hood the rose gold. We don't seem to reflect this here. That is the rose gold-coloured steel. Maybe we can add them here.". 2. In the 7th message (on pages 14 and 16), Mr Hou said "There is no problem with other things. Mainly about the following payments, if we say, pay $120,000 before finish, this contract, now it writes the weekly payments 2, 4, 6, 8 weeks definitely cannot meet this standard. So I am thinking whether we should leave it and sign first or according to what we have agreed, that is to write clearly it's up to Mr Wang." In the annexure to Mr Hou's affidavit of 23 October 2023 (page 21) the English translation is given as: "The main thing is the payment at the end. If we are saying to pay 120,000 before delivery, the 2, 4, 6, 8 weekly payments written in this contract will definitely not meet this standard. So, I'm thinking whether we should leave this and sign first, or should we just agree on, that is, right this clearly. I will leave this with Teacher Wang.". 57.6 At 8:33 PM Mr Wang replied to Mr Hou. 1. Mr Wang started by saying that he had "just listened to your voice messages". According to the English translation in the Court Book he then said "This edited contract is the best option based on the agreed payment amount in the contract.", whilst in the translation in exhibit D he said "The revised contract is the optimal construction plan with the precondition of the contractual price agreed upon.". 2. He then discusses a number of the specific matters raised by Mr Hou in his 10 voicemail messages. 3. At the end of his reply, Mr Wang says, according to the translation in the Court Book (CB 216-217) "The industrial standards and the contract format in the company are regulated; legally the individual sponsoring agreement to delay payment needs to be drafted by the lawyer and signed by representatives of both parties and is a separate file, containing specific payment time and method, which could be reached later when necessary.", whilst in the translation in Exhibit D (page 22) he said "the personal guarantee agreement to postpone the payments is a separate document that needs to be drafted by a solicitor and signed by the representatives of both parties under the law. It entails the specific payment timelines and method of payment, can be dealt with separately some time at a later stage.". 57.7 Mr Hou replied to Mr Wang, according to the translation in the Court Book (CB 219) "Oh right, the matter regarding payment is understood. Thank you, Mr Wang. Thank you also for texting about other details. It's quite late today so I wouldn't keep you up. Tomorrow I'll make a phone call to you to make sure, and it should be fine.", according to the translation in Exhibit D he said (pages 22 and 24) "Ok. All right. The payment terms are understood. Thank you, Mr Wang. Thank you for listing other details. It is late today so won't disturb you further. In the daytime tomorrow we will call you to confirm. Shouldn't have any problems.". 57.8 At 8:38 PM Mr Wang and Mr Hou exchanged the following messages: 1. According to the translation in the Court Book (CB 219): Mr Wang: "Tomorrow morning I'll arrange the office to add the mentioned work details in the contract and send to you after finishing." Mr Hou: "Thank you really very much, Mr Wang. I just think that tomorrow we can check all these as soon as possible and carry on." Mr Wang: "Yes."; 1. According to the translation in Exhibit D (page 24): Mr Wang: "I will arrange the office to add the relevant construction details you mentioned into the contract. Will forward to you once it's done." Mr Hou: "Thank you so much Mr Wang. I hope all of these can be confirmed as quickly as possible tomorrow so it can move on." Mr Wang: "Yes.". 1. On 18 March 2020, in sequence: 58.1 At 9:53 AM Mr Hou sent a message to Mr Wang: "Mr Wang, when are you available, I will call you, OK?". 58.2 At 10:17 AM Mr Wang sent a message to Mr Hou: "Steve: Good morning! Yes. I will call you now.". 58.3 At 10:27 AM Mr Wang sent a message to Mr Hou: "Can't reach you. Call me back when you are free.". 58.4 Mr Hou sent a message to Mr Wang: "sorry Mr Wang, I was on another line just now. Call now. Called the land line. My mobile signal here is poor.". 58.5 At 2:14 PM Robin sent Mr Hou a PDF document described as "Sweet Lu Project Contract.pdf". The document is at CB 600 – 612. This is the version Sweet Lu says the parties adopted. 58.6 At 4:12 PM Mr Hou and Mr Wang had the following exchange: Mr Hou: "Are you free now, Mr Wang?" Mr Wang: "I am calling you now from my land line." Mr Hou: "OK". 58.7 At 4:49 PM Mr Hou left a voicemail message for Robin, saying "Hello Robin. I have received this document. I didn't have time to read it yet. But I just finished the telephone conversation with Mr Wang. I will update you when I have more news.". (The document Mr Hou was referring to was obviously the one that Robin had sent him at 2.14 PM, being the version Sweet Lu says the parties adopted.) 1. On 19 March 2020, in sequence: 59.1 At 6:04 PM Mr Hou left a voice message for Mr Wang saying (per Exhibit D translation) "Hello. Hello Mr Wang. The drawings you drew, and the contract Robin sent to me yesterday. To be honest, I was too busy and had no time to touch the mobile. But, on my side, I'll transfer the fund to Robin, I'll tell him.", or (per Exhibit 3 translation): "Hello, hello teacher Wang, about this drawing of yours, and the contract Robin gave me yesterday, to be honest, I was so busy that I didn't even have time to touch my phone, but well, and my site, I will transfer the money to Robin first tonight, and then ask him, tell him, after the transfer is completed.". The message continued (per exhibit D translation): "I trust your side and be familiar with you. All no problem. This is called contract design whatever, any amendment, we can talk about it again no problem.". 59.2 At 6:05 PM Mr Hou left a voice message for Robin saying (per Exhibit E): "Hello Robin. I just left a message with Mr Wang. That Mr Wang updated all the drawings today. Plus the contract you sent me yesterday. I am too busy today and I didn't even have the time to touch the mobile phone at all. However, when I get home this evening,…, I will transfer this fund first and send you the screenshot. It's that all the people at Mr Wang's side are trustworthy. No problem. If there are any minor changes, they are to be discussed. Everything is all right. … Give you a heads-up first. If you want to make some work arrangement, there is no problem. But I will transfer this fund to you this evening.". 59.3 At 7:27 PM Mr Wang sent Mr Hou a message saying (per Exhibit 3 translation): "Steve: Good evening! Thank you for the trust, understanding and support! Let's continue to work together in a pleasant atmosphere to create the perfect Sweet Lu.". 59.4 At 7:34 PM Mr Hou left a voice message for Robin saying (per exhibit E): "hello Robin. I just arrived home now. I will transfer you $45,000 when I get home. There is a limit of transfer. I will transfer you the balance tomorrow morning.". 59.5 At 9:36 PM Mr Hou sent a message to Mr Wang saying (per Exhibit 3) "Yes, Teacher Wang, thank you for your blessing. I believe our early communication and detailed preparations will definitely be of great help to the subsequent work." 59.6 At 9:41 PM Mr Wang sent Mr Hou a message saying (per exhibit D): "It's going to be very helpful. Xiao Lu has told me that the payment for the construction from you has been received. Thank you for your trust and support!". 59.7 Mr Hou replied to Mr Wang: "Thank you, Mr Wang for letting me know. We will complete the work perfectly.". 59.8 At 9:56 PM Mr Wang sent Mr Hou message, which commenced: "Have informed 'Sweet Lu' construction group to assemble at the factory tomorrow morning to start processing work. We'll come back to the site Monday morning …". 59.9 Mr Hou replied to Mr Wang: "Thank you, Mr Wang, for your great support and arrangement …", and asking Mr Wang if Robin could be there in the morning to open the door for someone sent by the landlord to make some measurements. 59.10 At 10:06 PM Mr Wang replied to Mr Hou: "OK. I will arrange Xiao Lu to wait for the landlord on site at 10 o'clock. He can also bring along some semi-products that have been processed. You don't need to come over. Keep in touch.". 59.11 Mr Hou replied to Mr Wang: "Great. Thank you, Mr Wang, for the arrangement. If inconvenient, I am ok. Don't stay up too late. Good night.". 59.12 At 10:12 PM Mr Wang sent a message to Mr Hou: "don't mention it. Rest assured and do other work. When it is done, Xiao Lu will report to you the details of the work.". 59.13 At 10:20 PM Mr Hou sent a message to Mr Wang: "You are so supportive, Mr Wang.". 59.14 At 10:25 PM Mr Wang sent a message to Mr Hou: "This is what I am supposed to do.". 1. I infer from the messages exchanged late on 19 March 2020 that when Mr Hou is referring to "Robin" and Mr Wang is referring to "Xiao Lu" they are referring to the same person who is also known as Yibin Lu. 2. On 20 March 2020 Mr Hou sent Robin a message at 7:39 AM (CB 634) saying "Good morning, Robin. Transfer is done, 7.5w (75,000) in total". Some other relevant contemporaneous documents 1. There were a number of messages exchanged on 19 and 20 March about payment and receipt of money. I have underlined the relevant entries. Contemporaneous banking records in evidence bear out what is stated in the messages. The banking records show, and it is common ground, that Sweet Lu transferred $45,000 to Wonderful Ornamentation on 19 March 2020 and a further $23,500 the next day. 2. Those 2 payments add up to $68,500. The reference in Mr Hou's message to Robin of 20 March 2020 of a transfer of $75,000 in total is clearly a reference to those 2 payments together with the 2 earlier payments that had been made on 2 March ($3000) and 16 March ($3500). Those 4 payments add up to a total of $75,000. 3. It is relevant to recognise that under the terms of the written contract, on every version, the price was to be paid in instalments of 15% upon signing the contract and a further 20% 2 weeks after. Bearing in mind that the contract was first signed on 2 March 2020, 2 weeks after would be 17 March 2020. On that basis, under the terms of the written contract 35% of the contract price would have been due as at 17 March 2020. With a contract price of $220,000 inclusive of GST, 35% would be $77,000. The total of the actual payments made by Sweet Lu ($75,000) is remarkably close to that figure. Further affidavit and oral evidence 1. Apart from the affidavit evidence I have set out above in relation to the alleged oral agreement of 17 March 2020, neither Mr Wang nor Mr Hou say that they had any conversations in person or on the telephone during the relevant period except for one conversation set out by Mr Wang in his affidavit of 1 August 2022 at paragraph 38. He said this conversation occurred on 19 March 2020. He does not say whether the conversation occurred on the phone or in person. Mr Hou does not address it in his affidavit. Otherwise, the communications between Mr Wang and Mr Hou are contained in the contemporaneous WeChat records I have already set out or referred to in detail. 2. The WeChat records show that the version of the updated quotation Sweet Lu relies upon was sent by Robin to Mr Hou as a PDF document at 2:14 PM on 18 March 2020. 3. Mr Wang gave oral evidence that Wonderful Ornamentation had a company rule that all contracts to external parties must be sent by directors or the shareholder of the company. Mr Wang said that it was against the company rule for Robin to send the contract because, whilst he was the project manager for the job, he was not a director. 4. Mr Quifeng Zhu, also known as Elton, one of the other directors of Wonderful Ornamentation, gave oral evidence. He did not give evidence of the "company rule" described by Mr Wang. 5. Neither side called Robin to give evidence as a witness in the proceedings. Mr Zhu said that in 2020, Robin was one of 3 project managers out of 28 employees of Wonderful Ornamentation. Mr Zhu said that Robin stopped being an employee of Wonderful Ornamentation around the end of October 2020. Mr Zhu gave some details of the circumstances in which Robin resigned, which it is unnecessary to recount in this judgment. The exhibit to Mr Wang's first affidavit includes a number of records of WeChat communications between Robin and Mr Hou. Mr Zhu gave evidence that in preparing the exhibit he had communications with Robin and was able to get many documents from him, and that Robin had been cooperative. Mr Zhu had asked Robin to provide site photos and WeChat conversations. Mr Zhu said he had spoken to Robin about providing an affidavit, and he thought Wonderful Ornamentation had a draft copy of an affidavit from Robin. Mr Zhu said he did not talk to Robin about asking him to come to court. My analysis and findings ~ alleged oral agreement 17 March 2024 1. In closing submissions, Sweet Lu submitted that the oral agreement was that monies were only required to be paid as demanded by the plaintiff in tandem with the progress of the works. This is probably materially the same as the agreement pleaded in its defence, which I have already referred to. 2. In any event, the critical question here is whether I should accept Mr Hou's evidence of what he said was discussed in the telephone conversation he had with Mr Wang on 17 March 2020 (which I set out earlier). 3. I cannot place too much weight on Mr Wang's denial of the conversation. He demonstrated in his oral evidence that he did not have a good memory for conversations. 4. However, I need to test Mr Hou's evidence of the conversation as far as possible against contemporary materials, objectively established facts and the apparent logic of events (: Fox v Percy (2003) 214 CLR 118 at [31] per Gleeson CJ, Gummow and Kirby JJ). 5. The first, and in my view, most important consideration is that the account Mr Hou gives of the conversation is directly contradicted by the contemporaneous WeChat messages Mr Hou and Mr Wang exchanged on 17 March 2020 at 6.06 PM (the 7th message) and at 8:33 PM. I have already set these out and highlighted some of the relevant parts. Those messages show that Mr Hou asked Mr Wang if they could change the payment terms in the written document – he suggested paying $120,000 before the work was finished. Mr Wang insisted on the written payment terms. He explained that if the payments were to be delayed or postponed, then Mr Hou would need to give a personal guarantee which would need to be drafted by a lawyer and include specific payment times and methods. Mr Hou responded, not by offering to provide a personal guarantee, but by saying that "the matter regarding payment is understood" or "the payment terms are understood". 6. Not only does this exchange of WeChat messages directly contradict Mr Hou's evidence of the conversation, showing that his proposal to change the terms of payment was rebuffed, but it shows that he was putting forward a different proposal about payment at the time. His suggestion in the WeChat exchange was to pay $120,000 before the work was finished, not "just pay as we go… whatever Robin asks me to pay as the work progresses" as he says in his affidavit. 7. Having regard to the way in which the parties were communicating by WeChat, if the proposal was as Mr Hou says it was in his evidence of the conversation, one would expect to find it recorded in the WeChat messages, but it is not. 8. Further, it is unlikely that the parties would agree orally and not record it in writing when they had taken such care to document the original agreement and were in the process of documenting the variation. 9. Finally, bearing in mind that the parties had not dealt with one another before, it is unlikely that they would have sufficient trust to agree orally on such an important matter as payment for the work, without recording it, at the same time knowing that it contradicted the written agreement they had signed and were going to sign. 10. For all those reasons I am unable to accept Mr Hou's evidence of the conversation. 11. I am not satisfied that there was an oral agreement on 17 March 2020 about payment as alleged by Sweet Lu. My analysis and findings ~ the version of the amended written quotation or offer the parties adopted 1. As I have mentioned already, it is common ground that the parties varied the contract by 19 March 2020. What is in issue is whether they did so by reference to the version of the updated written quotation advocated by Wonderful Ornamentation or the version put forward by Sweet Lu. 2. In addressing that question, it is necessary to look at all of the communications of the parties objectively, from start to finish. When doing that, "What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe": Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165, [2004] HCA 52 at paragraph [40]. 3. Once all of the contemporaneous communications passing between the parties are laid out in full in their chronological sequence, it can be seen that the parties adopted the version put forward by Sweet Lu. I have set out those communications earlier and referred to other objectively ascertained facts in the chronological sequence. 4. They show, by way of summary, that the process started with Mr Wang sending Wonderful Ornamentation's version (i.e. the one it is saying was ultimately adopted) to Mr Hou; Mr Wang and Mr Hou then discussed (by way of exchange of WeChat messages) making changes to Wonderful Ornamentation's version; by 8.38 PM on 17 March 2020 the stage had been reached where it was proposed to make some changes to the quotation but not others and Mr Wang said he would arrange for the quotation to be changed the next morning and send it to Mr Hou; the next morning, Robin sent Mr Hou a new different version of the updated quotation (i.e. the one Sweet Lu says the parties adopted); later that day Mr Hou told Robin that he had received the document but had not had time to read it yet; the next day Mr Hou referred to "the contract Robin sent to (him) yesterday" and told Mr Wang, and Robin, that he will transfer the money; Mr Hou transferred the money, which as I have explained earlier was a sum of $68,500, bringing the total payments made to that date to $75,000 which is remarkably close to the 35% stated in the written quotation; Mr Wang told Mr Hou that Robin had told him that "the payment for the construction from you has been received" and Mr Wang thanked Mr Hou for his "trust and support"; Mr Wang then made arrangements for work to commence the next morning in the factory. 5. I am fortified in reaching this conclusion by the fact that Robin was an active participant in these events and Wonderful Ornamentation failed to call him as a witness. I infer that Robin's evidence would not have assisted Wonderful Ornamentation's case: Jones v Dunkel (1959) 101 CLR 298 at 308, 312, 320-321; Kuhl v Zurich Financial Services (2011) 234 CLR 361 at 384-385 [63]-[64]. 6. In my view, it is not necessary to analyse the parties' words and conduct with a view to considering whether there was an offer and acceptance leading to the formation of a contract because it is admitted on the pleadings and common ground that they did in fact enter into a contract, or technically agreed to vary their existing contract; what is in issue, as I have already said, is on what terms they did so. The resolution of that issue emerges very clearly from their words and conduct for the reasons I have already given. 7. To the extent it may be necessary to analyse the position in terms of offer and acceptance, I accept and embrace the analysis of the evidence set out by Mr Macauley, counsel for Sweet Lu, at paragraphs 38 to 40 of the Defendant's Closing Submissions. 8. The submissions of counsel for Wonderful Ornamentation, who also sought to analyse the matter in terms of offer and acceptance, failed to have regard to all of the contemporaneous communications and conduct from start to finish. It is clear that the communications started with Mr Wang sending Mr Hou Wonderful Ornamentation's version of the amended quotation on 17 March 2020 and ended with Robin confirming to Mr Wang that the payment had been made and Mr Wang telling Mr Hou that the construction group would assemble at the factory in the morning to start processing the work. 9. For those reasons, I find that when the parties varied their contract they adopted the version of the updated written quotation put forward by Sweet Lu. For the avoidance of any doubt, that is the version at pages 600 to 612 of the Court Book. G. Is there a debt due to Wonderful Ornamentation by Sweet Lu for the unpaid balance of payments A, B, C, D and E in clause 4 of the "Rules and regulations" of the written contract? The facts 1. The contract provided for the payment of the price by instalments. Each of the first 5 instalments (A, B, C, D & E) was payable upon the occurrence of an event, as opposed to the performance of any particular work or the completion of any particular stage of the work. 2. The first payment of 15% was payable upon signing the contract. The next payment of 20% was payable within 2 weeks of starting on site work or starting the construction. The next payment of 20% was payable within 4 weeks of starting, the next payment of 20% within 6 weeks, the next payment of 20% within 8 weeks. 3. The sixth and final payment of 5% (F) was different. It was payable "when (Wonderful Ornamentation) completes all work related to the contract, and delivers the OC to the store owner". 4. The contract was first signed on 2 March 2020, and then varied on or about 18 March 2020. It is common ground, as I have already said, that construction started on 2 March 2020. 5. It is also common ground that Wonderful Ornamentation had not completed all work related to the contract when it suspended work on 7 October 2020. 6. Mr Hou set out in his affidavit of 20 May 2023 (paragraph 127) the work that had not been completed when Wonderful Ornamentation stopped work. Mr Wang did not respond to this, nor was it challenged in cross-examination. I therefore accept Mr Hou's evidence on this aspect. Evidence of the work that had not been completed is also provided by the minutes of meeting taken by Robin on 6 October 2020 (CB430-431). 7. Mr Wang gave evidence in cross-examination that in his opinion Wonderful Ornamentation had completed 95% of the work, but I am unable to accept that evidence because it was a bald statement without any reasoning or reference to objective records. My analysis 1. The parties invited the court to determine Wonderful Ornamentation's contractual rights by reference to principles referred to in case law and general commentary about "entire contracts" and "substantial performance". In my view, in the circumstances of this case, attempting to start there and fit the facts within those principles is not very helpful. 2. One obviously has to start with the terms of the contract in this particular case. 3. The contract provided that the first instalment was payable upon the signing of the contract. The next 4 instalments were payable by the effluxion of time. Once the contract had been signed and the time for each payment had passed, there was, in my view, an accrued right to receive the payment which had become a debt due under the terms of the contract. Although the accrued right to receive payment of the debt arises out of the contractual obligation to pay, it does not represent a claim for damages for breach of contract. See Mann v Patterson Constructions Pty Ltd (2019) 267 CLR 560, [2019] HCA 32 at [10] (Kiefel CJ, Bell & Keane JJ), [42] (Gageler J) and [176] (Nettle, Gordon & Edelman JJ); "Chitty on Contracts" (35th edition, 2023) at paragraph 30-010. 4. By the time 8 weeks had passed from the time it started the work on 2 March 2020, Wonderful Ornamentation had an accrued right to receive payment of the first 5 instalments, and, if necessary, recover any shortfall in payment as a debt due. On my calculations, the 8 weeks passed on 28 April 2020. The first 5 instalments represented payment of 95% of the price, that is to say $209,000. By 12 August 2020, Sweet Lu had paid instalments totalling $130,000. The shortfall at that point was $79,000. 5. Under the terms of the contract, the final instalment of 5% has not fallen due because Wonderful Ornamentation did not "complete all work related to the contract" and did not "deliver the OC to the store owner". 6. The question arises whether Wonderful Ornamentation retains the right to recover the balance of the due but unpaid instalments as a debt ($79,000), or whether it has lost the right because it did not complete the contract. In my view, the answer to this question is not supplied by attempting to analyse and apply the "entire contract" or "substantial performance" cases, but by an application of the principles considered by the High Court in Baltic Shipping Company v Dillon (1993) 176 CLR 344. 7. In Baltic Shipping, Ms Dillon had paid the full price of her fare before embarking upon her ill-fated voyage on the "Mikhail Lermontov". The cruise commenced in Sydney on 7 February 1986 and was scheduled to end there on 21 February, however on 16 February the ship struck a shoal off the coast of New Zealand, was holed and sank. Ms Dillon had paid the full price for her cruise but it had not been completed. 8. The lower courts accepted that Ms Dillon was entitled to a full refund because there had been a total failure of consideration. The High Court rejected that conclusion because the failure of consideration was partial and not total, essentially because Ms Dillon had already enjoyed part of the cruise before the ship sank. However a number of members of the Court also considered the principles to be applied, as a matter of contract law, when the price under a contract has been paid in advance of receiving performance. 9. Under those principles, the right of one party to retain money paid in advance may be conditional upon that party's performance of their obligations under the contract: Mason CJ (176 CLR at 351-353), Brennan J (at 367) and Toohey J (at 383) agreeing with Mason CJ, Gaudron J (at 385) and McHugh J (at 388, 391-393). 10. Mason CJ put the principle this way (176 CLR at 351): An alternative basis for the recovery of money paid in advance pursuant to a contract in expectation of the receipt of the consideration to be provided by the defendant may arise when the defendant's right to retain the payment is conditional upon performance of his or her obligations under the contract. This basis of recovery has a superficial, but not a close, resemblance to the concept of an entire contract. In this class of case the plaintiff may be entitled to recover so long as the payment remains conditional. 1. And (176 CLR at 352-353), omitting the citation: The question whether an advance payment, not being a deposit or earnest of performance, is absolute or conditional is one of construction. In determining that question it is material to ascertain whether the payee is required by the contract to perform work and incur expense before completing this performance of his or her obligations under the contract. If the payee is so required then, unless the contract manifests a contrary intention, it would be unreasonable to hold that the payee's right to retain the payment is conditional upon performance of the contractual obligations. 1. In discussing the same principles, McHugh J differentiated between a conditional payment and one that "should be regarded as having been made unconditionally, or no longer the subject of a condition, if the payee has performed work or services or incurred expense prior to the completion of the contract" (176 CLR at 391). 2. Gaudron J stated the principle as (176 CLR at 385): "Quite apart from entire contracts, the parties may provide, expressly or impliedly, that the obligation to pay or the right to retain moneys paid in advance is conditional upon completion of the contract.". It is significant that her Honour expressed the principle in terms of both "the obligation to pay" and the "right to retain" money. 3. In the first passage above, Mason CJ said that this basis of recovery has a superficial, but not close, resemblance to the concept of an entire contract. Gaudron J said much the same (176 CLR at 386). McHugh J was a little more expansive. His Honour said that focusing on the question of whether the contract was "an entire contract" was not the real issue to address. His Honour said (176 CLR at 393): If no advance payment had been required, and Baltic had sued to recover the whole of the fare notwithstanding the sinking of the "Mikhail Lermontov", the question whether the contract was an entire one would have had relevance. If the contract was characterized as an entire contract, Baltic would not have been able to recover the price of the fare. But where a payment is made in advance of the completion of a contract, the critical issue is the reason or basis for the payment and not whether the contract was an entire one. A finding that a contract is an entire contract does not necessarily mean that an advance payment is recoverable. Conversely, a finding that a contract is not an entire contract does not necessarily mean that an advance payment is irrecoverable. 1. On the facts, Mason CJ was of the view that there was not an acceptable foundation for holding that the advance payment of the cruise fare created in the appellant no more than a right to retain the payment conditional upon its complete performance of its entire obligations under the contract. It was significant that the contract called for performance by the appellant of its contractual obligations from the very commencement of the voyage and continuously thereafter. His Honour said that the advance payment should be regarded as the provision of consideration for each and every substantial benefit expected under the contract (176 CLR at 353). 2. Once again, McHugh J was a little more expansive in his elaboration of the principles, referring to the decision of the House of Lords in Hyundai Heavy Industries Co Ltd v Papadopoulos [1980] 1 WLR 1129, [1980] 2 All ER 29 by way of illustration, and the application of those principles to the facts. I will not repeat what His Honour said other than the general rule. His Honour put it this way (at 391): Whether or not a payment is the subject of a condition at the time a contract is discharged depends upon the express and implied terms of the contract. As a general rule, however, absent an indication to the contrary, a payment, made otherwise than to obtain the title to land or goods, should be regarded as having been made unconditionally, or no longer the subject of a condition, if the payee has performed work or services or incurred expense prior to the completion of the contract. If the payment has been made before the work has been performed or expense incurred, it should be regarded as becoming unconditional once work is performed or expense incurred. In that situation, the advance payment is ordinarily made in order to provide a fund from which the payee can meet the cost of performing the work or services or meeting the expenditure incurred or to be incurred before the completion of the contract. 1. Applying those principles to the facts, under the contract Sweet Lu was required to pay the first instalment upon signing the contract, before Wonderful Ornamentation had undertaken any work. This payment was undoubtedly paid in advance. None of the subsequent 4 instalments were tied to or conditioned upon Wonderful Ornamentation undertaking any specific work. No doubt it was anticipated that some or all of the subsequent 4 instalments would be paid in advance of work being done. It is clear, however, that Wonderful Ornamentation was required to perform work and incur expense before completing the contract. In my view it can fairly be said that the purpose of paying the instalments, or being obliged to pay the instalments, was to provide a fund to enable Wonderful Ornamentation to meet the cost of providing benefits associated with the contract without the necessity of using its working capital to meet the outgoings involved. There is no indication in the contract that the instalments were conditional on Wonderful Ornamentation's performance of its obligations under the contract. In those circumstances, Wonderful Ornamentation's entitlement to receive or retain the instalment payments was not conditional upon performance of its obligations under the contract. 2. It follows, in my view, that Wonderful Ornamentation has not lost the accrued right to recover the shortfall in the due and unpaid instalments (i.e. $79,000) because it did not complete the work. I find that it is entitled to this sum as a debt payable under the contract. 3. However, at the same time, Sweet Lu's remedy in respect of Wonderful Ornamentation's non-performance of its promise to complete the work is an action for damages for breach of contract: Baltic Shipping at 389, 390 and 392 (per McHugh J), at 387 (per Gaudron J). The measure of the damages is the difference in value between what was promised and what was provided: Baltic Shipping at 377 (per Deane and Dawson JJ), and at 387 (per Gaudron J). 4. Or as it was put in Hoenig v Isaacs [1952] 2 All ER 176, the measure is the amount which the work is worth less by reason of the defects and omissions, and is usually calculated by the cost of making them good (at 181 per Lord Denning). H. Is Sweet Lu entitled to damages for the cost of completing the work and rectifying defects? If so, how much? 1. Sweet Lu claims damages for Wonderful Ornamentation's failure to perform and to complete the work in accordance with the contract. 2. This is the sort of claim identified by McHugh J in Baltic Shipping (at 47) as the remedy for breach of contract for non-performance of the promise. See too Gaudron J at 387. The measure of the damages is the difference in value between what was promised and what was provided: Baltic Shipping at 377 (per Deane and Dawson JJ), and at 387 (per Gaudron J). 3. It is what in Hoenig v Isaacs [1952] 2 All ER 176 (at 181) Lord Denning called "a cross-claim for defects and omissions" where "the measure is the amount which the work is worth less by reason of the defects and omissions, and is usually calculated by the cost of making them good". 4. Counsel for Sweet Lu quoted the well-known passage in Bellgrove v Eldridge (1954) 90 CLR 613 at 617 (per Dixon CJ, Webb & Taylor JJ) about the measure of loss: "In the present case, the respondent was entitled to have a building erected upon her land in accordance with the contract and the plans and specifications which formed part of it, and her damage is the loss which she has sustained by the failure of the appellant to perform his obligation to her. This loss cannot be measured by comparing the value of the building which has been erected with the value it would have borne if erected in accordance with the contract; her loss can, prima facie, be measured only by ascertaining the amount required to rectify the defects complained of and so give to her the equivalent of a building of her land which is substantially in accordance with the contract." 1. As a matter of general principle, on a claim for damages for failure to complete building works in the manner required by the contract, the measure of damages recoverable is the cost to the owner of completion of the work less any amount that would have been payable to the builder had it complied with its obligations under the contract: Mertens v Home Freeholds Company [1921] 2 KB 526 per Lord Sterndale MR at 535. Bathurst CJ (Macfarlan and Meagher JJA agreeing) referred to this statement of principle as uncontroversial in Cordon Investments Pty Ltd v Lesdor Properties Pty Ltd (2013) 29 BCL 329, [2012] NSWCA 184 at [202]. 2. Sweet Lu breaks its claim down into 3 parts. The first is what I referred to earlier as the cost of the work done by different companies and tradesmen between 13 October 2020 on 6 December 2020 to complete the unfinished work and to rectify defects in the work Wonderful Ornamentation actually did, or as it is described in the cross-claim, the costs of engaging a further shop fitter to complete the fit-out and remedial works necessary to enable the shop to commence trading. The second part is for the cost of work not yet done to rectify further defects in the work Wonderful Ornamentation actually did. The third is the costs and expenses incurred caused by an overflowing grease trap in February 2022. Part 1 – the claim for work already undertaken 1. Sweet Lu claims $51,269 for the cost of work already undertaken. This sum is in turn broken down into 6 separate components. I will deal with each one in turn. Multione Construction Pty Ltd ($37,780) 1. This claim is for the $37,780 Sweet Lu paid to Multione for work it did between 13 October and 6 December 2020 to enable Sweet Lu to obtain a final occupation certificate and commence trading. 2. Multione had provided a "defects" report to Sweet Lu on 13 October 2020. The report consisted of a series of photos and brief commentary. Whilst the commentary was not admitted as the truth of what was stated, it did describe work that Multione considered needed to be done to rectify, and in some respects finish, work already undertaken by Wonderful Ornamentation. 3. Having obtained the "defects" report from Multione, Sweet Lu then engaged Multione to undertake the work. 4. Much of the work that Multione did, and did not do, was identified by Mr Hou in paragraph 127 of his affidavit, which I accept for reasons I have already given. He said: When Wonderful Ornamentation stopped work, they had not completed the following: a. Hidden LED light strips between kitchen tiles and ceiling - clause 3.8 of the Updated Contract. (Sweet Lu did not eventually complete this item as it was not essential for shop opening.) b. Incomplete kitchen tiles (one kitchen wall was not tiled. Sweet Lu did not eventually complete this work.) c. Install flat hinged doors in toilets - clause 3.9 of Updated Contract (Sweet Lu did not eventually complete this work.) d. Electric water pump for in lift area - clause 5.3 of Updated Contract. (MultiOne completed this work) e. Installation of CCTV equipment - clause 6.3 of Updated Contract. f. Installation of speakers - clause 6.4 of Updated Contract. g. Incorrect and incomplete heated dessert display cabinet - clauses 7.1 and 9 .6 of Updated Contract (The incorrect front glass panel installed by Wonderful Ornamentation was removed and new glass panel ordered and installed by Chris Glass . Chris Glass also fixed the uneven installation by Wonderful Ornamentation as set out in paragraph 120 of my affidavit above). h. Unfinished banquette seat - clause 7.3 of Updated Contract. (As a temporary measure and in order to save time for the Retail Shop to open for trade, MultiOne fixed the replacement metal frame, cut down pieces of floor tiles to make a seating bench and installed tiles into the metal frame to make up the right section of the seat. To date, this banquette seat has not been properly rectified) . i. Display shelf on wall facing kitchen - clause 7.6 of Updated Contract. (MultiOne completed this work). j . Painted hinged wooden door - clause 8.3 of the Updated Contract (MultiOne completed this work). k. Workbench with single zinc sink - clause 9.3 of the Updated Contract (MultiOne completed this work). I. Site cleaning and approval paperwork - clause 1 0 and 11 of Updated Contract (I obtained the various certificates after work completed and MultiOne lodged and obtained the final occupation certificate). 1. The "Updated Contract" Mr Hou refers to is the one that I have found the parties adopted when they varied the contract. 2. In paragraph g, Mr Hou referred to what he had set out at paragraph 120 of his affidavit. He said there, which I accept: The dessert display cabinet was finally installed on about 25 September 2020. However the cabinet did not have glass sliding doors as required and was also missing the top glass panel. The cabinet was also installed incorrectly such that the curvature of the glass panel was not in line with the curvature of the supporting benchtop . At pages 346 - 347 of exhibit TH-1 are two photos I took of the installed glass cabinet which I measured the distance from the glass cabinet to the edge of the benchtop. As is evident from the photos, the distance at one point of the cabinet to the edge of the benchtop is around 5.6cm and at the end of the cabinet to the edge of the benchtop is around 7.6cm. 1. Wonderful Ornamentation submitted that because the contract between Multione and Sweet Lu is not in evidence, all the court knows is that they were paid a certain amount but not what work they were paid for. 2. In response Sweet Lu accepted that the Multione contract was not in evidence, but there is a "defects" report and the Multione invoices. Sweet Lu submitted that in circumstances where Sweet Lu was seeking to finish the shop, got someone to identify the outstanding work and then gets the same person to undertake the work the court would infer the money expended was spent on addressing the issues identified. 3. There was some evidence from Mr Hou about the work Multione actually did. I have set it out above (from paragraphs 127 and 120 of his affidavit). 4. Some of the invoices also provide some information: "patching of shopfront", "replace skirting to bronze skirting", "OC collection". 5. Having regard to that other evidence, as well as the facts referred to by Sweet Lu, I am satisfied that the work carried out and invoiced by Multione was undertaken to rectify defects in the work previously done by Wonderful Ornamentation and to otherwise complete work that Wonderful Ornamentation had promised to do under the varied contract. 6. Wonderful Ornamentation submitted that it was necessary to apportion the Multione costs between work done to rectify defects in Wonderful Ornamentation's work and work done to complete the work Wonderful Ornamentation had promised to do. 7. It submitted that Sweet Lu is not entitled to damages for completion because it had repudiated the contract. It submitted that Sweet Lu could only lump together the cost of completion and the cost of defects only if demonstrated that this is an entire contract as a set off. It submitted that it was not an entire contract, that it was entitled to a claim in debt under the contract, then Sweet Lu is only entitled to the defects in the work that Wonderful Ornamentation had done, not its costs to complete. 8. Unfortunately I do not have the benefit of a response from Sweet Lu because these are the submissions that I referred to earlier as being made in oral submissions in reply in the dying minutes of the hearing. 9. I do not accept those submissions for the following reasons. 10. First, they are based on the proposition that because Sweet Lu repudiated the contract the contract came to an end for Sweet Lu's wrongful conduct. As I have explained earlier, a repudiation does not bring the contract to an end automatically. The contract stays on foot until the innocent party elects to terminate it. Wonderful Ornamentation has not sought to plead or prove that it did that. It has not pleaded that it terminated the contract at all. The allegation of repudiation in the pleading therefore went nowhere. In my view it is not open for me to make a finding that the contract came to an end because of Sweet Lu's wrongful conduct, in light of the way the case has been pleaded and conducted. 11. Secondly, if the contract was not terminated, then Wonderful Ornamentation failed to perform its promise to undertake the work, and finish it, in accordance with the varied contract. In those circumstances Sweet Lu is entitled to bring a claim for breach of contract for non-performance of the promise (as it was put by McHugh J in Baltic Shipping) or for omissions and defects (as it was put by Lord Denning in Hoenig) or to have a result that is "substantially in accordance with the contract" (as put in Bellgrove). In those circumstances there is no need to differentiate between what were omissions and what were defects. 12. Thirdly, in effect Wonderful Ornamentation is saying in this submission that it can have 95% of the price paid to it as a debt, and perhaps have an allowance in its favour for 100% of the price because Sweet Lu is claiming damages, but that it does not have to make any allowance or give any credit itself for the work it left unfinished and did not do. As a matter of general principle if the builder is to be paid the full price it must make some allowance to the owner for the cost of finishing the work it promised to do but did not. Otherwise the builder is being put in a better position than if the contract had been performed, or is taking the full benefit of the contract without having to bear its full burden. 13. For those reasons I find that Sweet Lu is entitled to damages in the sum claimed for the cost of the work done by Multione, $37,780. L Y Electrical and Data Services ($2,820) 1. According to the invoice dated 6 November 2020, this work was for "electrical shop fittings work" at the shop. According to Mr Hou, as for the other items in this part of the claim, it was done to rectify some of the remaining defects and complete some of the unfinished works so as to enable Sweet Lu to commence trading. Sweet Lu submitted that it was work required to be done under clauses 6.1 and 6.2 of the varied contract. 2. The amount claimed does not seem to be in issue. 3. I therefore allow the full amount claimed, $2,820. 8light LED Specialists ($1,045) 1. According to the invoice dated 29 October 2020 this was for 34 LED downlights. According to Mr Hou it was to supply and install them. 2. Sweet Lu submitted that it was required to be done under clauses 6.2 and 6.5 of the varied contract. 3. The amount claimed does not seem to be in issue. 4. I therefore allow the full amount claimed, $1,045. Chris' Glass & Glazing ($5324) 1. This claim is contentious. 2. According to the invoice dated 13 December 2020, this was for the cost of supplying and installing a "curved glass counter display. The glass is in 10mm toughened and laminated starfire glass with polished edges, and silicone sealed to the bench. Size 260mmH x 2500mmG x 650mmD" and supplying and installing "free standing curved glass in 10mm starfire toughened polished edges 260mm x 1004mmG". 3. Mr Hou describes the work Chris' Glass & Glazing did in some detail in the sub-paragraph g. of paragraph 127 of his affidavit and paragarph 120, both of which I have set out above. 4. Counsel for Sweet Lu dealt with this claim in his written closing submissions at paragraphs 142 and 143. 5. As I understand it, counsel for Wonderful Ornamentation responds at paragraphs 70 to 74 of her written closing submissions. 6. Clause 7.1 of the varied contract stipulated "colourless white glass". In their discussions, as recorded in the minutes of a meeting of 26 August 2020, the parties appear to have referred to it as "ultra-white glass". 7. Sweet Lu complained that the curved glass installed by Wonderful Ornamentation was not colourless, colourless white or ultra-white, but that the glass had a green hue. That certainly appears to be case on the photos I was taken to, including the 2 referred to in Ms Lim's submissions for Wonderful Ornamentation - the photos at CB847 and CB849. She submitted that the hue was only on the edge of the glass, and the glass was clear and transparent when considered from a normal viewing angle. I am unable to accept the submission that the glass Wonderful Ornamentation installed did not have a green hue. The green hue in the glass is shown in the photos. Regardless of whether there is a difference between colourless white, ultra-white or starfire, the glass was not meant to be green. On that basis, I find that it did not comply with the contract. 8. Sweet Lu also complained that the curved glass was in 2 pieces, instead of being in a single piece. That it was in 2 pieces is shown clearly in the photo at CB 849, and even more clearly in the one at CB367, taken by Mr Wang on 11 August 2020 – which also shows a green hue. Sweet Lu submits that the contractual obligation to supply and install a single piece comes from the drawings because under clause 7.1 "the location, materials and craftsmanship shall follow the drawings". Sweet Lu relied in particular on the document at CB237, which shows a computer generated image. It is stated to be "Render Image 03", "Drawing Number 102" and to have the "Drawing Status: FOR CONSTRUCTION". It is shown again in "Render Image 02" at CB236. 9. Wonderful Ornamentation submitted that these render images did not have any contractual status and were not "drawings" for the purposes of the contract. I am unable to accept that submission. Although they include computer generated images they are unambiguously described as drawings on their face. They are what Mr Wang himself described as "conceptual design drawings" in his WeChat message of 19 February 2020. 10. Otherwise, I accept Sweet Lu's submissions in relation to this claim. 11. I therefore allow the full amount claimed, $5,324. Dai ($3,300) 1. This claim is for floor levelling and polishing. 2. Sweet Lu submits that the work was required to be done under clauses 3.4B, 3.4C and 3.4D of the varied contract. Clause 3.4B seems particularly relevant. It refers to "levelling the floor with cement bonded sand". 3. The amount claimed does not seem to be in issue. 4. I therefore allow the full amount claimed, $3,300. Dai ($1,000) 1. This claim is for kitchen tile cleaning and Sweet Lu submits that the work was required to be done under clause 10 which provided "Cleaning work after the project is done". 2. There does not seem to be any issue about the amount claimed. I allow it in full, $1,000. Part 2 – the claim for rectification work not yet done 1. There are 4 items claimed in respect of this work. They are set out in the table at paragraph 145 of Sweet Lu's written closing submissions with references there to the parties' expert evidence on each claim. Sweet Lu relied upon the expert evidence of Mr Bruce Frizzell of Tyrells Building Advisory. He inspected the premises on 23 February 2022 and provided a report on 3 May 2022. Wonderful Ornamentation relied upon the expert evidence of Mr Gordon Xue of Jim's Building Inspections. He inspected the property on 26 September 2022 and provided a report on 22 May 2023. Mr Frizzell and Mr Xue gave concurrent oral evidence at the hearing. 2. I will deal with each of the 4 claims in turn. Kitchen door rectification 1. Sweet Lu submitted that the contract required the kitchen door to seamlessly integrate with the surrounding wall, with no handle on its exterior or visible hinges. Clause 3.2 of the contract provided for a "hinged flat door" and that clause 8.3 provided "paint hinged wooden door (the side facing the store shall have the same effect and craftsmanship as the wall surface)". All drawings displayed the kitchen door as seamlessly integrating with the surrounding wall with no handle on its exterior or visible hinges. 2. The door Wonderful Ornamentation installed is shown in the photograph included in Mr Xue's report (that CB 911). The photograph shows quite clearly that there are 2 visible hinges on the right-hand side at the door. In his oral evidence, Mr Xue explained that on the left-hand side the flush pull had been installed, which is also visible in the photo. 3. Wonderful Ornamentation submitted, and Mr Xue offered the opinion, that the door that had been fitted complied with the contract because the render images were "indicative only" and did not form part of the contract. 4. I have already explained why in my view the render images do form part of the contract. Further, the combination of clause 3.2, clause 8.3 together with the render images establish that the contractual requirement was that the kitchen door should seamlessly integrate with the surrounding wall with no handle (or flush pull) on its exterior or visible hinges. 5. I therefore find that the door installed by Wonderful Ornamentation did not comply with the contract. 6. Mr Frizzell and Mr Xue had a difference of opinion over what was required to rectify the defect. In Mr Frizzell's opinion the way to comply with the contractual requirement was to use a pivot hinge. He explained that a pivot hinge is completely invisible, with a pivot in the top and the bottom allowing the door to swing either way without the need for a handle. In Mr Xue's opinion it was appropriate to use concealed hinges. However he explained that even using "concealed" hinges, the knuckles of the hinges would still be visible. Presumably using his method it would still be necessary to have a handle or flush pull. 7. In my view, the solution offered by Mr Xue would still not comply with the contract. I accept that Mr Frizzell's solution is the more appropriate alternative. 8. I find that Sweet Lu is entitled to the amount claimed as quantified by Mr Frizzell, being $1,890. Rectifying finishes, joints and trims 1. Clause 3G of the contract required Wonderful Ornamentation to "make 2 windows on the curved wall of the kitchen (location, size, and modelling shall follow the drawings)". The drawing stipulated that there was to be "new antique brass panel around the opening window edge". The material schedule stipulated that the skirting/edging/wall edge should be finished with "337 aged brass panel" supplied by that metal company with a note "please provide the sample to designer for confirmation". 2. The expert evidence established, which emerged most clearly during their oral evidence, that the trim installed by Wonderful Ornamentation was made of 2 materials. The middle strip of the trim, according to Mr Xue, was made of aluminium. Mr Frizzell was not so sure. He had been instructed that it was made of wood, and thought as much when he carried out his inspection. Mr Xue was of the very firm view that the 2 strips either side of the middle strip were made of painted plastic. Mr Frizzell said that he was instructed it was timber, but agreed that it could be plastic. 3. Both experts agreed that neither of the materials were antique brass. 4. Wonderful Ornamentation made no attempt to prove, whether by testimonial or documentary evidence, that it had used the material stipulated in the material schedule. 5. In any event, it is clear that the contract did not provide for the use of painted plastic. 6. I therefore find that the trim that Wonderful Ornamentation installed did not comply with the contract. 7. In his report, Mr Xue allowed for patching and touch-up of the trim, whilst Mr Frizzell said that it should be removed and replaced. 8. In my view, Sweet Lu is entitled to have the trim removed and replaced so as to make it conform to the contract. 9. I therefore allow the amount claimed and quantified by Mr Frizzell, $6,595. Uneven finishes to bottom of walls 1. I am not satisfied that Sweet Lu has made out an entitlement to this claim. 2. In his report Mr Frizzell states that there is a failure to comply with the contract because "as the base of the walls have an even finish visible from a normal viewing position, in my opinion the work has not been carried out with due care and skill". 3. I accept that photographs 35 to 40 inclusive in Mr Frizzell's report do show an uneven finish and are evidence of work being done to an unacceptable standard. 4. However, it is common ground that this work was patching and painting work undertaken by a different builder after Wonderful Ornamentation "suspended" work on 7 October 2020. It is most likely then that the work was undertaken by Multione. If Multione did not undertake the patching work properly because it should have painted the whole wall, as Mr Frizzell proposes should now be done, then Sweet Lu has a remedy against Multione, or whoever did that work without due care and skill. 5. Sweet Lu calls in aid principles about mitigation of loss. In my view questions of mitigation do not arise in the present circumstances: Having the wall completed or repaired by someone else was not an action taken in an attempt to lessen the extent of damage, which is when the principles come into play: see "McGregor on Damages" (22nd edition, 2024) at paragraph 10-004 and 10–014. 6. For those reasons I do not allow the amount claimed for rectifying finishes, joints and trims. Blocked floor waste 1. I am not satisfied that Sweet Lu has made out an entitlement to this claim. 2. Mr Frizzell was instructed to assume that the floor waste was blocked. He did not investigate the matter himself to establish that the drain was actually blocked, or I might add that it was not draining properly. On the assumption that the drain was blocked, Mr Frizzell allowed for the cost of engaging a licensed plumber to assess the drainage and unblock the drains as required using a water jetter or similar. 3. In response, Mr Xue took the precaution of having a licensed plumber inspect the drain with a CCTV camera. Mr De Souza, plumber, carried out a CCTV inspection on 13 February 2023. He found that all drains were running and not blocked. He did find, however, that the opening to the main line is "holding a small amount of water". 4. Mr De Souza's observation that the drainage line was holding a small amount of water was consistent with the evidence of Mr Hou who said that he observed water in the pipe when looking down through the floor waste. His evidence was that the water accumulated in the pipe and attracted fruit flies, attracted by the foul smell. This led Mr Hou to have a plastic cover put over the floor waste. Since putting the cover on it has "improved a lot" in relation to the fruit fly problem. 5. Having regard to the investigation by Mr De Souza, Mr Xue concluded, and Wonderful Ornamentation submits, that the floor waste is not blocked, such that Sweet Lu is not entitled to the damages sought. I have to agree. 6. Counsel for Sweet Lu sought to establish in cross-examination that the floor waste may not be draining properly for some other reason, other than a blockage, for example because of the orientation of the pipes. He submitted that as both experts had accepted that a blockage could arise from these either a physical impediment or from the orientation of the pipes, it does not matter what the cause is if it is accepted that water is not draining from that floor waste in that water is accumulating and attracting fruit flies. It was submitted that the drain was not operating as required. That may well be right, but it is not the defect alleged and sought to be rectified by applying Mr Frizzell's solution. His solution was to unblock the drain. If some other solution is required because the drain is not operating efficiently, there is no evidence before the court of what that solution may be or its cost. 7. For those reasons I do not allow the amount claimed for the blocked floor waste. Preliminaries, builder's margin and GST 1. Both experts agreed that a margin of 28% should be added to the above figures for preliminaries and builder's margin, and a further 10% added to the total for GST (T130 – 131). 2. The margin and GST should therefore be added to the 2 claims I have allowed in this part of Sweet Lu's case. Part 3 – the claim in relation to the overflowing grease trap 1. On 18 February 2022, Mr Hou discovered waste water leaking through a wall in the shop which led to the discovery that foul looking and smelling waste had been overflowing from what was thought to have been a disused and disconnected grease trap. In order to address the issue, Sweet Lu incurred emergency plumbing fees and other expenses to unblock the drain and install the pump system. Sweet Lu claims those fees and expenses as damages for breach of contract by Wonderful Ornamentation. 2. There is no issue about the quantum of the claim. Sweet Lu claims the sum of $14,755.75, the details of which are set out in its written closing submissions, paragraph 161. 3. The following facts, relevant to the claim, are either established by my previous findings, are common ground, or established by the evidence: 203.1 Clause 5.1 of the varied contract provided that Wonderful Ornamentation was to "Supply and install 2 floor drains in the kitchen area (including the arrangement of related piping systems)". 203.2 Clause 5.2 of the varied contract provided that Wonderful Ornamentation was to "Supply all equipment and water supply and sewerage system related to the drawings according to the requirements of the drawings. (Complete all relevant construction according to the requirements of the drawings)". 203.3 Clause 5.3 of the varied contract provided that Wonderful Ornamentation was to "Install the electric pump provided by the store in the lift area and arrange the drainage pipe system", "the store" being Sweet Lu. 203.4 It is the obligation under clause 5.3 that Sweet Lu relies upon most heavily. Clause 5.3 was not included in the original agreement or in the version of the varied agreement put forward by Wonderful Ornamentation. 203.5 Wonderful Ornamentation did not install an electric water pump provided by Sweet Lu in the lift area before it "suspended" work on 7 October 2020. 203.6 What Wonderful Ornamentation did was to install a grey pipe which connected directly into the grease trap. It also installed pipes for running water (shown as red and black in photographs) next to the grey pipe. 203.7 As at 20 August 2020 (when he gave an assurance by email to the landlord), Robin (Wonderful Ornamentation's project manager for the site) was of the view that the grease pit had been emptied and there were "no active connections of any type to it". Whether or not Wonderful Ornamentation had installed the grey pipe prior to or after this date is not disclosed on the evidence. There is no doubt, however, that the grey pipe provided a connection to the grease pit. 203.8 Whilst under the contract Wonderful Ornamentation was required to install an electric pump provided by Sweet Lu and arrange the drainage pipe system, it was not required under the contract to install a sink to be connected to that system. 203.9 Subsequently, after Wonderful Ornamentation had "suspended" work, another builder or plumber installed a sink, in the process connecting the wastewater from the sink into the grey pipe installed by Wonderful Ornamentation. That conclusion follows from the direct observations of Mr Frizzell who inspected the pipes and connections on 22 February 2022, within days of Mr Hou's discovery. It also seems to have been accepted by Wonderful Ornamentation in closing submissions. 203.10 Over time, wastewater draining from the sink filled up the grease trap until it overflowed and was discovered by Mr Hou on 18 February 2022. 203.11 Following that discovery, the connection of the sink to the grease trap via the grey pipe was removed and in its place a pump out system was installed to the shop's drainage system using an electric water pump, as envisioned by clause 5.3 of the contract. In the process the grey pipe was either removed entirely or cut down to floor level, and the entry point to the grease trap was capped. 1. Sweet Lu submits that under clause 5.3, Wonderful Ornamentation had the obligation to "install the electric water pump provided by the store in the lift area and arrange the drainage pipe system". What it had to do therefore was put in the grey pipe, or perhaps a pipe, but it was then meant to do the associated drainage works to provide for that pipe, with the pump, to work so that when it was connected to a sink – to be done by someone else – it operated properly. It did not. If they had done the work they were obliged to do under the contract, the grey pipe would not have been connected to the grease pit and the entry to the grease pit would have been capped, with the result that the grease pit would not have overflowed into the shop. 2. Wonderful Ornamentation submits that whoever installed the sink to the grey pipe was responsible. It submitted that failure to comply with clause 5.3 of the contract would not lead to an action for damages against it if the contractor Sweet Lu engaged to install the sink did so incorrectly or negligently. It submitted that because the grey pipe Wonderful Ornamentation installed was so long, and therefore so high above the level of the floor, the court could infer that it was not meant to be used as a drainage pipe because it was too tall and that its purpose was to serve as an air vent for the grease trap. 3. The starting point is, and I find, that the grey pipe was not installed in accordance with the contract. There was no requirement under the contract to install an air vent to the grease trap. There was no requirement to make any connection to the grease trap at all. It was not part of Wonderful Ornamentation's compliance with their contractual obligations "to arrange the drainage pipe system" to install a pipe connected to the grease trap. The grey pipe should never have been connected to the grease trap. It is highly likely that the grey pipe was connected to the grease trap by mistake. That seems all the more likely given what Robin told the landlord about the grease trap having been emptied and having no active connections of any type to it. 4. Considered from the point of view of causation, Wonderful Ornamentation's installation of the grey pipe and connection of it to the grease trap created the conditions in which the plumber who installed the sink could plumb the sink into the grease trap. But for Wonderful Ornamentation installing the grey pipe, a plumber could not have used it to connect the sink to the grease trap. 5. I am not prepared to infer that the grey pipe was not meant to be used as a drainage pipe simply because it was too tall. Nor do I accept that its purpose was to serve as an air vent for the grease trap. An air vent was not required by the contract and it makes no logical sense to install an air vent to discharge foul air from a grease pit into a closed area to be used as part of the shop. 6. For those reasons I find that Sweet Lu is entitled to the amount it claims, $14,755.75. I. Is Sweet Lu entitled to damages for Wonderful Ornamentation's delay in doing the work? If so, how much? 1. The English translation of Clause 2 of the "rules and regulations" of the varied contract provided that: TD will complete all the work related to the project schedule within 8 weeks after starting the construction. (Products processed in China should be delivered to the construction site two weeks before the end of the project. If it is delayed, the project will be postponed. Using the time when the product is delivered to the site, all relevant work will be completed within two weeks, including all on-site acceptance by relevant authorities). 1. This is different to the English translation of Wonderful Ornamentation's version of the varied contract. It has been translated as: TD is expected to complete all work relevant to the work schedule 8 weeks after the commencement of the onsite work (Products processed in China shall be delivered to the work site two weeks before the completion of the work. Had there been any delay, the project shall be delayed accordingly. Starting from the arrival of the products onsite, all relevant work shall be completed within two weeks, including all onsite checking before acceptance through relevant authorities.). 1. The English translation of Wonderful Ornamentation's version of the varied contract is the same as the translation of the original contract. 2. As I understand it, no one suggested that anything turns on the change in wording of the English translation I have highlighted. As I understand it there is no suggestion that this clause was changed when the contract was varied. The difference seems to be explained by the fact that the translations were done by 2 different translators. 3. In written closing submissions (paragraph 103) counsel for Sweet Lu referred to clause 2 as providing for an 8-week forecast which is only an estimate, capable of being "postponed". 4. I will therefore treat the phrases I have highlighted in bold as being interchangeable. 5. The parties did not address the interpretation of the clauses in full. There was common ground that completion of the project would be delayed or postponed until 2 weeks after products processed in China were delivered to the site. 6. The clause is not well drafted, and it may well not matter too much given the common ground I have just mentioned, however it seems to me that the clause contemplates that completion is expected within 8 weeks of commencing on-site work; that products processed in China should be or shall be or are expected to be delivered 2 weeks before that, that is to say 6 weeks after commencing on-site work; but if there is any delay in products processed in China being delivered on-site, that is to say delay beyond the expected 6 weeks after commencement, then the time for completion of the work is to be delayed until 2 weeks after the products processed in China have been delivered on-site. 7. Both translations refer simply to "products processed in China". The provision about delay would therefore seem to apply to any and all products falling within that category. 8. Sweet Lu submitted that the words "Using the time when the product is delivered to the site, all relevant work will be completed within two weeks, including all on-site acceptance by relevant authorities" imposed a contractual obligation. It submitted that the two-week deadline was not an aspiration, or an approximate or estimated date of completion. It submitted that once all "products processed in China" had been delivered, there was a hard and fast obligation to complete the fit-out within 2 weeks of that delivery date. Breach of that obligation, it submitted, like any other contractual obligation would sound in damages. 9. Wonderful Ornamentation submitted that given that more than 8 weeks had elapsed since the commencement of works, the contractual promise must be that the works would be completed within 2 weeks of all products arriving from China. It seems to me to be the same interpretation given to the clause as Sweet Lu. 10. However Wonderful Ornamentation submitted that by reason of an application of the "prevention principle" referred to by McColl JA (Beazley ACJ and Macfarlan JA agreeing) in Probuild Constructions (Aust) Pty Ltd v DDI Group Pty Ltd [2017] NSWCA 151; 95 NSWLR 82 at [114]-[116] because of the delay, in the absence of a contractual mechanism for the substitution of a new date in the events which have occurred, then the time for performance is "at large", although it should be undertaken within a reasonable time. 11. The idea that the time for performance is "at large" and should be undertaken within a reasonable time in the circumstances comes from what McColl JA said at [116]. Her Honour was speaking specifically in the context of a liquidated damages clause. Sweet Lu is not seeking damages under a liquidated damages clause. I do not accept that the time for performance was "at large" and to be undertaken within a reasonable time as submitted by Wonderful Ornamentation. 12. Nevertheless, Sweet Lu appeared to accept that the prevention principle could have some operation in the circumstances. 13. In paragraph [114] of Probuild McColl JA referred to the essence of the prevention principle as being that a party cannot insist on the performance of a contractual obligation by the other party if itself is the cause of the other parties non-performance. Her Honour explained at paragraph [117] that the operation of the prevention principle can be modified or excluded by contract. 14. In the present case, the parties have made some provision for the consequences of delay in clause 2 of the contract (delay in products processed in China arriving on site), but not delay for other reasons. It is in the case of delay for other reasons that the prevention principle may have some operation. As I understand it, Sweet Lu accepted that. 15. In the circumstances that happened, both parties submitted (and it was therefore common ground) that clause 2 required Wonderful Ornamentation to complete the fit-out within 2 weeks of all products processed in China being delivered to the site. 16. Sweet Lu submitted that under the varied contract, the only products processed in China for the fit out shop were (a) the banquette seats and the ceiling mesh-decorations/finishes and (b) a cake fridge. Wonderful Ornamentation did not cavil with this. 17. Sweet Lu submitted that the banquette seats and the ceiling mesh-decorations/finishes were delivered to the shop on 28 July 2020. It submitted that the cake fridge had also been delivered by that time ,and had been installed by 19 August 2020. 18. Wonderful Ornamentation submitted that "the remaining ceiling mesh" and the rebuilt banquette seats was still to arrive from China "at the date of the contract coming to an end". I reiterate that the I have not been asked to make any findings about when the contract "came to an end" or the circumstances in which that happened. I take it that the submission relates to the date when Wonderful Ornamentation "suspended" work or sometime thereafter. In any event, there is an issue between the parties as to whether or not all the products being processed in China had been delivered to the site. 19. On that question, the objective contemporaneous evidence before me, particularly the WeChat communications, establishes that: 230.1 The banquette seats were ordered by Sweet Lu from China. 230.2 They arrived on site on 28 July 2020, but they were damaged and had the wrong dimensions (they were too short). 230.3 A decision then had to be made as to whether to have the banquette seats made again in China and shipped to Australia again, or to repair the damage in Australia. Various options were discussed in the WeChat communications. 230.4 Ultimately, Sweet Lu decided to have the banquette seats repaired in Australia by Wonderful Ornamentation. 230.5 By 6 October 2020 Wonderful Ornamentation had repaired the seats and installed them: 6 October 2020 and oral evidence of Mr Wang (T217). There was no evidence of when the repairs were actually done or how long they took. 230.6 The minutes of meeting of 6 October 2020 also record as item number 3 "stone chair repairment materials arriving by air with stone chairs to fixate using steel square tube". I infer that the "materials arriving by air" were being sent from China. It is not clear to me whether the reference to the "stone chair" is a reference to the banquette seats or some other seating. The important point is that materials to be used by Wonderful Ornamentation in fitting out the shop were still to arrive from China. 230.7 The ceiling mesh was ordered by Sweet Lu from China. 230.8 It arrived on site on 28 July 2020. 230.9 The ceiling mesh that arrived on 28 July 2020 was installed by 4 August 2020, but there wasn't enough and Sweet Lu ordered more to be processed in China and sent to Australia. 230.10 As at 6 October 2020, it was anticipated that the additional ceiling mesh would arrive on site on 20 October 2020. 1. It follows from the above, and I find, that products processed in China were still yet to be delivered on site as at 6 October 2020. Further it was anticipated that some of those materials (the ceiling mesh) were not anticipated to arrive on site until 20 October 2020. Under clause 2, Wonderful Ornamentation would at least have 2 weeks after that date to complete its work. 2. It is not stated when the "materials arriving by air" for the "stone chair" were expected to arrive. They were possibly arriving at the same time, but by the same token, possibly later – the evidence does not allow me to make a finding. However it does allow me to make a finding that further materials, in addition to the ceiling mesh, were still to make their way to the site from China as at 6 October 2020. 3. As to matters which might bring into play the operation of the prevention principle, one matter that was raised was work to be done in relation to tiling. The evidence before me establishes that: 233.1 The tiles to be used in the fit out had to be chosen and supplied by Sweet Lu. 233.2 On 21 August 2020, Mr Hou told Robin that payment for the wall tiles had been made and they could be picked up the next Monday. 233.3 In the minutes of meeting of 26 August 2020 it was recorded that the designer (i.e. Tony the designer engaged by Sweet Lu) was to provide mosaic pattern on tiles in open kitchen. 233.4 Between 27 August 2020 on 1 September 2020 Robin and Mr Hou exchanged messages about the collection of the tiles from the supplier. 233.5 On 1 September 2020 Robin asked Mr Hou to provide details of the layout design of the tiles. Tony (the designer) was yet to provide the details. 233.6 The tiles were picked up from the supplier on or around 2 September 2020. 233.7 On 8 September 2020 Robin informed Mr Hou that he had just made arrangements for all kinds of trades to attend the site, including the tiler who is due to arrive on site on Friday, 8 September being a Tuesday. 233.8 On 19 September 2020 Mr Hou instructed Robin to purchase particular types of waterproof grouts, which Robin did on the same day. 233.9 The tiling work had been completed by 21 September 2020. 1. Sweet Lu submitted that under the contract, the fit out of the shop should have been completed on 11 August 2022, being 14 days after 28 July 2020 when it says the ceiling mesh-decoration/finishes were delivered to the shop. 2. Wonderful Ornamentation submitted that under the contract the time for completion had not arrived because products were still to arrive from China. 3. I do not accept Sweet Lu's submission in light of the factual findings I have just made. The evidence establishes that as at 6 October 2020 products processed in China were still to arrive on site. In those circumstances clause 2 of the contract operated to delay the requirement for Wonderful Ornamentation to complete the fit out until 2 weeks after those products arrived on site. When those products arrived on site has not been established on the evidence, but on the evidence before me it was not anticipated to arrive before 20 October 2020 at the earliest. Two weeks after that would have been 3 November 2020. That date, I find, was the earliest date by which Wonderful Ornamentation could have been obliged to complete the work. I say could have been because the evidence did not establish when in fact the additional ceiling mesh and "stone chair repairment materials" did actually arrive from China to the site. Without knowing that it is not possible to fix the time for when Wonderful Ornamentation was required to complete the fit out. I find that Sweet Lu has failed to prove this necessary element of establishing the claimed contractual right to damages for failure to complete in the time provided for by the contract. 4. For those reasons I am not satisfied that Sweet Lu is entitled to damages for delay. J. What orders should I make? 1. On Wonderful Ornamentation's statement of claim, I have found that it is entitled to be paid $79,000 as a debt due under the contract. It is therefore entitled to judgment against Sweet Lu in that amount. 2. On Sweet Lu's cross-claim, I have found that it is entitled to damages for: 1. Multione (par. 142 above) $37,780.00 2. L Y Electrical and Data Services (par. 145 above) 2,820.00 3. 8light LED Specialists (par. 149 above) 1,045.00 4. Chris' Glass & Glazing (par. 160 above) 5,324.00 5. Dai (par. 164 above) 3,300.00 6. Dai (par. 166 above) 1,000.00 7. Kitchen door rectification (par. 176 above) 1,890.00 8. Rectifying finishes, joints and trims (par. 177 above) 6,595.00 9. Builder's margin of 28% on items 7. & 8. (par. 200 above) 2,375.80 10. GST on items 7, 8 & 9 (par. 200 above) 1,086.08 11. Overflowing grease trap (par. 209 above) 14,755.75 TOTAL $77,971.63 1. Because Sweet Lu is receiving damages for the cost of completing the work left unfinished, the balance of what it would have had to pay Wonderful Ornamentation under the contract, i.e. payment F (5% of the price), ought to be deducted. The deduction is 5% of $220,000 inclusive of GST, i.e. $11,000. 2. On its cross-claim therefore, Sweet Lu is entitled to judgment against Wonderful Ornamentation in the sum of $66,971.63. 3. Wonderful Ornamentation claimed pre-judgment interest in its statement of claim, calculated by reference to terms in the contract or alternatively pursuant to s.100 of the Civil Procedure Act 2005. 4. Neither of the parties addressed either the entitlement to or calculation of pre-judgment interest in their submissions. 5. I therefore propose to give the parties the opportunity to make submissions about the entitlement to and calculation of pre-judgment interest before entering judgment. K. Costs 1. Ordinarily costs would follow the event on the statement of claim and on the cross-claim. 2. However Sweet Lu asked to make submissions on costs after the delivery of my judgment. L. Orders 1. I will list the matter for directions before me at 9.30 am on Friday 2 August 2024 for the purpose of making arrangements to hear from the parties about pre-judgment interest, costs and final orders. 2. I make the following order: 1. List the matter for directions before me at 9.30 am on Friday 2 August 2024. ********** Amendments 26 July 2024 - removal of additional paragraph number DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 26 July 2024