Metroland Funds Management Ltd v Skyrise Consultants Pty Ltd [2011] NSWSC 343

Supreme Court New South Wales

Medium Neutral Citation: Metroland Funds Management Ltd v Skyrise Consultants Pty Ltd [2011] NSWSC 343 Hearing dates: 19 April 2011 Decision date: 19 April 2011 Jurisdiction: Equity Division Before: Windeyer AJ Decision: 1. Judgment for the plaintiffs against both defendants for $332,714. 2. Defendants to pay the plaintiffs' costs. Catchwords: CONTRACT - variation of contract - defence that a written agreement between the plaintiffs and the defendants was varied orally prior to the written agreement being entered into - oral agreement contrary to the terms of the subsequent written agreement - whether it is possible to have a variation of a contract before it comes into existence Legislation Cited: Environmental Planning and Assessment Act 1979 (NSW) Category: Principal judgment Parties: Metroland Funds Management Ltd (first plaintiff) Heng Ji Australia Investments Pty Ltd (second plaintiff) Skyrise Consultants Pty Ltd (first defendant) Vincent Pang (second defendant) Representation: K Dawson (plaintiffs) R Winfield (defendants) Elson Pow & Associates (plaintiffs) Excelsior Lawyers (defendants) File Number(s): 2010/106014

EX TEMPORE Judgment 1This is a claim by the plaintiffs for return of $300,000 paid as a deposit under a contract entered into with the first defendant, Skyrise Consultants Pty Ltd ( "Skyrise" ). The plaintiffs were joint venturers trading as Metro Plaza Chinatown. They intended to develop a site at 68-71 Quay Street, Haymarket. It was proposed that Skyrise would provide advisory services for the development. 2Mr Frank Shien is a director of Metroland Funds Management Ltd ( "Metroland" ), the first plaintiff. There were negotiations between Mr Shien and Mr Vincent Pang, who was a director of the first defendant and who was responsible for its day-to-day operations. Mr Yong Zhang is a director of the second plaintiff, Heng Ji Australia Investments Pty Ltd. It is accepted that Mr Shien was authorised to make decisions on behalf of the joint venturers. It is clear that there were some negotiations between Mr Shien and Mr Pang, as they had a number of meetings prior to 26 March 2009. The intention was that Skyrise would provide some advisory services to assist with the planning of the proposed Haymarket building and to assist with obtaining a development approval for what was proposed for the site and to give some assistance in obtaining a higher floor space ratio for that development. 3There was a meeting between Mr Shien and Mr Pang on 26 March 2009. There is some dispute about what happened at that meeting, but there is no dispute that a letter from Metro Plaza Chinatown addressed to Skyrise was signed by Mr Shien and Mr Zhang on behalf of the plaintiff companies, and by Mr Pang on behalf of Skyrise, and also on his own behalf as guarantor of the obligations of Skyrise, which would arise under the letter if that letter was a contractual document ( the "Letter" ). The Letter, so far as is relevant, is in the following terms: " 68-71 Quay Street, Haymarket ("Site" ) We confirm that we wish to retain Skyrise Consultants Pty Ltd ( "Skyrise" ) as consultant to provide us with advisory services on town planning, design, feasibility and development and marketing strategies for our proposed development of the Site ( "Services" ). In order to demonstrate our intention to proceed with this development, we are paying a good faith deposit in the amount of $300,000 ( "Deposit" ) to Skyrise on the following terms: 1. Skyrise will not be entitled to the Deposit or any of it until and unless Skyrise performs the services. 2. Skyrise must not commence performing any of the Services unless and until we give Skyrise written notice expressly referring to this letter and directing Skyrise to commence performing the Services ( "Commencement Notice" ). In this regard, it is acknowledged by Skyrise that our purchase of the Site has not yet been completed and for this and other reasons we have absolute discretion in deciding whether or not to issue the Commencement Notice and as to when we are to issue the Commencement Notice. 3. Within 7 days after receipt by Skyrise of the Commencement Notice properly given by us pursuant to paragraph 2 above, Skyrise must give to us a properly issued tax invoice for an amount equal to the Deposit plus GST, such amount to be considered a fee for the Services ( "Fee" ). Skyrise will be entitled to the Fee absolutely upon Skyrise giving to us such tax invoice. Within 10 days after Skyrise gives such tax invoice to us, we will pay the balance of the Fee, being the amount of $30,000, to Skyrise. 4. The Fee will represent the full amount payable by us for the Services and no other fee or money will be payable by us. 5. The Deposit will be repayable by Skyrise to us in full immediately if: 5.1 a period of 12 months has elapsed from the date of this letter and no Commencement Notice has been given by us; or ..." 4The Letter, which was signed by Mr Pang, stated that he accepted the terms and acknowledged that he understood them, and it contains in paragraphs 6 and 7 a guarantee by Mr Pang of the obligations of Skyrise under the Letter and an indemnity against any loss arising out of a failure by Skyrise to repay the deposit. 5The crucial part of the Letter is paragraph 2 which provides that Skyrise was not to commence performing any of the services until written notice referring to the Letter and directing Skyrise to commence performing the services was given ( "Commencement Notice" ). It is accepted that no such notice was given. It is accepted that a period of twelve months has elapsed from the date of the Letter and since no Commencement Notice has been given, paragraph 5.1 of the Letter requires the deposit to be repaid in full immediately. As I said, that has not happened. It is for that reason that these proceedings have been commenced. 6The evidence of Mr Pang is that when he went to the meeting at Mr Shien's Pyrmont office on 26 March 2009, Mr Shien gave him a document, which is the Letter. Mr Pang recalled reviewing it, but before he started doing so he said Mr Shien said to him words to the effect: "It is just a formality. It's only Mr Zhang who wants it", and that Mr Shien then said: "Please start the work ASAP", to which Mr Pang said: "Ok, Ok, let's start work". Mr Pang said he then signed the Letter. The Letter was signed on behalf of the plaintiffs by Mr Shien and Mr Zhang, and by Mr Pang for Skyrise and in addition for himself as guarantor. There is no doubt the Letter is a contractual document. 7After that, there were some subsequent meetings, but there is limited evidence of what happened at them. However, at the first meeting after 26 March 2009, there was a meeting between Mr Shien, Mr Steam Hei Ming Leung, who is apparently the son of Mr Zhang, and Mr Yassine of a company called Sydney Consultants Pty Ltd, and it is apparent that Mr Shien had sent to Skyrise some feasibility costings for the Quay Street site. There was discussion about Part 3A of the Environmental Planning and Assessment Act 1979 (NSW), presumably because the project would not otherwise have complied with the ordinary Sydney City Council development guidelines. There is no evidence of the specific conversations which occurred at the meetings. There is no evidence of work being carried out by the defendants after 26 March 2009. 8Mr Shien, in affidavit evidence and in oral evidence, denied the statements which Mr Pang claims that he made at the meeting of 26 March 2009. There was a final meeting which took place on 26 June 2009 at the Fisherman Wharf Chinese Restaurant. Mr Pang, Mr Shien and other people, including Mr Yassine and Mr Zhang, were there. Mr Pang says that during that meeting Mr Zhang said words to the effect: "We would like to stop the project because the progress is too slow", and that he, Mr Pang, had said words to the effect: "It was only a few months and we have done a lot of work. This kind of project normally takes 9 to 12 months to finish. We are half way through the process". Mr Zhang said: "I don't care and I want full amount of money back". Mr Shien accepted the second and third statements were made. Mr Pang made a diary note referring to the fact that it was a bad day for him. He accepted this was because he knew that he would have to return the deposit. 9It is necessary to point out the boundaries of this dispute. The claim is that the contract between the parties was contained in the Letter of 26 March 2009. The defence is that the contract which did not exist at the time was varied. There is no claim there was no contract. There is no claim of a collateral contract and, in fact, there could not be, as it would contradict the written contract. There is no defence of estoppel by representation. There is no claim for rectification of the written contract. There is no claim for estoppel by enticement or encouragement. There is no cross-claim by way of quantum meruit for work done or any real evidence of that work. There is no defence of set-off relying on any such cross-claim. 10I have come to the conclusion that it is impossible to accept the defendants' claim of variation. It is possible to vary a contract after it comes into existence and it is possible to vary it by a subsequent oral agreement. It does not seem to me to be logically possible to vary a contract before it comes into existence; neither I think is it possible to say that there was an oral contract which contradicts the written contract yet somehow the two agreements must stand together. In other words, it seems to me to be clear that it is the terms of the written document which must prevail as the oral agreement claim cannot stand with the written document. Support for this is, I think, given by the acceptance by Mr Pang that the writing was security for the deposit if the notice to commence work was not given and for the return of the deposit in those circumstances. 11It follows that while I do not think that the parol evidence rule is really relevant to this matter, in that it is possible to have a contract which is partly written and partly oral, that is not possible where the basic terms of those documents are contradictory and it, therefore, seems to me to be clear that the written document comprised the full agreement. Mr Pang read the Letter. He knew its terms. He did not ask for any alteration. 12In those circumstances, it does not really matter whether or not the disputed conversation took place and whether I should prefer the evidence of Mr Shien or that of Mr Pang, but I will quickly deal with this. There are some matters which lead to the conclusion that Mr Pang's evidence of the conversation on 26 March 2009 is not correct. One is the note Mr Pang wrote on 26 June 2009 and another is his acceptance that the purpose of the Letter was to provide security for the deposit; further, it seems quite unlikely that Mr Shien would have presented the Letter, which had as its major term the proviso that no work would be done until a Commencement Notice was issued and say that Mr Zhang required it, yet go on to say to get on with the work anyway. I did not think that either Mr Shien or Mr Pang was shown to be unreliable in the witness box, but in circumstances such as those which exist here, if it were necessary to find for one or the other, I would have accepted the evidence of Mr Shien. As I have said, it seems to me to be clear that the position was that even if those words were said, they could not form a basis for claiming there was a variation quite contrary to the terms of the subsequent written agreement and I so find. It is not suggested that if the first defendant is liable to the plaintiffs for return of the deposit, it having failed to do so, Mr Pang is not liable as a guarantor. 13In those circumstances, there should be judgment for the plaintiffs against both defendants in the sum of $300,000 plus interest. The parties should, I assume, be able to calculate the interest. I will be able to, then, give judgment for the full amount in a short time. 14Interest has now been agreed to amount to $32,714. Judgment for the plaintiffs against the defendants for $332,714. The defendants are to pay the plaintiffs' costs.