Abigroup Contractors Pty Limited v Sydney Catchment Authority - [2006] NSWCA 282 - NSWCA 2006 case summary — Zoe

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Abigroup Contractors Pty Limited v Sydney Catchment Authority

[2006] NSWCA 282

Court of Appeal (NSW)|2006-03-09|Before: Beazley JA, Ipp JA, Tobias JA, McDougall J

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Source facts

Court

Court of Appeal (NSW)

Decision date

2006-03-09

Before

Beazley JA, Ipp JA, Tobias JA, McDougall J

Source

Original judgment source is linked above.

Judgment (52 paragraphs)

[1]

Introduction 2 The appellant was the successful contractor for the construction of a spillway at Warragamba Dam. The contract was a lump sum contract under which the appellant bore all risks, including the cost of work not included in the contract but which was necessary to be done to bring the project to completion. It was within the scope of the contract 'risk' clause that additional work might need to be carried out because of site conditions. 3 As it turned out, the appellant was required to undertake additional excavation and refilling work because the rock level, in one area of the site known as Folly Creek, was substantially lower than indicated in the respondent's Concept Design Drawings and detailed specifications. The appellant claimed that it suffered a loss as a result of having to do the extra work and that that loss was caused by the respondent making a representation that it had no plans of an outlet pipe that drained water through an embankment over Folly Creek. There was in fact such a plan. The appellant contended that if it had known of the existence of the plan, further enquiries would have revealed the rock levels, shown in the Concept Design Drawings and detailed specifications, to be seriously flawed. 4 The appellant brought proceedings claiming that the respondent had engaged in misleading and deceptive conduct contrary to s 52 of the Trade Practices Act. The appellant contended that having been induced to enter into the contract by the respondent's misrepresentation which committed it to do significantly more work than was allowed in the lump sum contract, it was entitled to damages, being the cost of doing the additional work, pursuant to s 82 of the Trade Practices Act. Claims for relief were also pleaded under s 87 of the Trade Practices Act and for damages for breach of contract. 5 The proceedings were referred out to a Referee pursuant to Pt 72 r 13 of the Supreme Court Rules on all issues. The Referee found against the appellant on all issues. The appellant applied to the Supreme Court for the rejection of the Report. The respondent cross-motioned for its acceptance. Nicholas J heard those applications and made an Order adopting the Referee's Report. The appellant successfully appealed: see Abigroup Contractors Pty Limited v Sydney Catchment Authority (2004) 208 ALR 630; [2004] NSWCA 270 (Abigroup No 1), and the matter was remitted for rehearing in accordance with the Court's reasons. 6 The remitted applications were heard by McDougall J. His Honour ordered that the Referee's Report be rejected in so far as (a) the Referee had found that the respondent had not engaged in misleading or deceptive conduct and (b) insofar as the Referee found that the appellant had not relied upon the misleading and deceptive conduct. His Honour ordered that the Report otherwise be adopted and ordered judgment for the respondent. 7 The appellant appeals against that part of his Honour's Orders adopting the Report. That gives rise to the damages issue before the Court. The respondent has cross-appealed against that part of the Order rejecting the Report in so far at it related to reliance and causation. The respondent abandoned its cross-appeal relating to the finding against the respondent in respect of misleading and deceptive conduct. 8 The effect of his Honour's judgment was that the appellant had failed before the Referee because it had failed to establish that it had suffered loss. In essence, on his Honour's reasoning, the appellant was required to prove that it had suffered loss on the whole of the contract. It had not done so. 9 The appellant had claimed damages on the basis that it had suffered loss on entering into the contract in circumstances where it was bound under the lump sum contract to do work in Folly Creek that was greater than the work for which it had allowed in its tender. The appellant contended that the appropriate measure of its loss was the actual cost of doing the extra work. That cost, including overheads and margin at a rate of 7.1 per cent, was $7,499,930. The appellant also claimed for the cost of finance (at an agreed rate of 9.5 per cent) plus interest. 10 The appellant further contended that, as a result of having to undertake a greater scope of work then that allowed for in its tender, it was delayed in the completion of the work. It claimed damages suffered as a result of the delay and also seeks to avoid the payment of liquidated damages for delay as required by the contract. 11 The respondent accepts that if, as a matter of principle, the appellant is entitled to damages on the basis of being entitled to a discrete loss on the additional Folly Creek work, then, subject to the issue of causation raised on the Notice of Contention, the appellant is entitled to succeed on its claim. The respondent contends, however, that that basis for claiming damages is not open to it as a matter of law and that the appellant is only entitled to damages if it proves a loss on the whole of the contract. It submits that the appellant failed to prove this case. 12 As the question of reliance and causation raised by the respondent on the cross-appeal is logically anterior to the question of damages, it will be convenient to deal with that issue first. Before doing so it is appropriate to refer to the nature of the appeal from a Pt 72 r 13 application. It is also necessary to provide a brief background of the facts.

[3]

Background facts 15 The background facts are fully canvassed in this Court's decision in Abigroup No 1 and also in the judgment at first instance. It is sufficient for the purposes of this appeal to refer to those facts in brief terms only. 16 On the 24 December 1998, the appellant entered into a contract with the Sydney Water Corporation (Sydney Water) to design, develop and construct an auxiliary spillway for Warragamba Dam in the vicinity of Folly Creek. The contract price was approximately $86m. Under the Sydney Water Catchment Management Act 1998 (NSW), the respondent is responsible for any liability Sydney Water may have in relation to this claim. 17 The contract was entered into following a tender process. The appellant engaged Snowy Mountains Engineering Corporation (SMEC) to provide it with geotechnical assistance in the preparation of the tender. A representation was made in the tender documents that no plans were available of an embankment of some 20m height at Folly Creek when the creek had been filled in during the original construction of Warragamba Dam, nor were there plans of any outlet pipe in that locality. The specific representation was contained in cl DS-59.2.14(c) of the Detailed Specifications and in cl 2.10.2.3 of the Concept Design Report: see Abigroup No 1. 18 Approximately 12 months after the contract was entered into, the respondent discovered that it had in its possession a cross-section dated 30 November 1951, which showed an outlet pipe that drained water through the embankment on Folly Creek. The cross-section had at all times been held by the respondent in its Central Plan Room at Warragamba Dam but the personnel responsible for the preparation of the tender documents were not aware of its existence. 19 In its tender, the appellant had allowed for excavation of approximately 24,300m3 in Folly Creek, based upon information contained in a geological investigation report provided to the appellant by the respondent as part of the tender documentation. However, once the 1951 cross-section became available to it, the appellant ascertained that the rock level was substantially lower than had been represented in the geological investigation report. Due to the substantially lower rock level, the extent of excavation actually required was approximately 130,033 m3, a difference in the order of 105,733 m3. Under the terms of the contract, the additional cost of undertaking the additional excavation and the additional fill was at the appellant's risk. 20 The specific circumstances surrounding the entry into the contract were usefully summarised in more detail by his Honour at [77] (reproduced below). (This summary was made in the context of his Honour's dealing with an estoppel defence that had been raised. That is not in issue on the appeal. However, both parties accepted that the matters referred to by his Honour were factually accurate). "(1) [The respondent] prepared, or supervised the preparation of, the tender documents.

[16]

Reliance and Causation 21 The trial judge held that the representation that there were no plans of any outlet pipe in the locality of Folly Creek was misleading and deceptive. The representation in terms is a negative representation. 22 The appellant contended that but for the respondent's misleading conduct, it would not have been fixed with having to bear the increased cost of the excavation and refill as it would have protected itself by qualifying its tender and requiring payment for the extra work in Folly Creek on a provisional sum basis. 23 The appellant explained its position as follows. First, it accepted the representation made in the tender documentation as true and took it into account in its estimating process. Had the true position been known, that is, had the respondent revealed that it had the 1951 cross-section in its possession, it would have compared it to other information that was available as to the geological conditions and rock levels and would have thereby discovered that the information contained in the Concept Design Drawings was wrong: see evidence of Gray, Lehmann, Braybrooke, Havercroft and Jordan. In those circumstances, it would have required the respondent to clarify the differences: see the evidence of Havercroft; and protected itself by not entering into the contract at the price that it did, and would only have entered into a contract if the tender was qualified or accurate information provided so as to allow for an appropriate increase of its tender price. 24 Having been induced by the belief that there was no plan of the outlet pipe, it tendered for and entered into a contract for a lump sum with a fixed date of completion which did not adequately allow for the extent of work actually required in the Folly Creek area. Had it known the correct position, the appellant would not have entered into the contract it in fact entered into. 25 The appellant thus sustained loss in having to do the extra work under a fixed price contract. Had it entered into an appropriately priced contract, it would have avoided such loss. Alternatively, it would not have entered into the contract at all and likewise would have avoided that loss. The appellant said that it had proved that case, including the quantum of its loss. The appellant further contended that the respondent bore an evidentiary onus to establish that the appellant would have agreed to do the additional work in an amount less than what the actual cost came to be and had not discharged that evidentiary onus. 26 The respondent submitted that the correct test to apply where the court has found a negative representation that is misleading or deceptive is to determine what would have happened but for the contravening conduct: see Marks v GIO (1998) 196 CLR 494. This was not a case of an advertent non-disclosure: see s 4(2) of the Trade Practices Act. It followed that the only question to be decided on the causation issue was whether the appellant would have acted differently had the misleading statement not been made. 27 Putting that question in a positive form, the relevant question, on the respondent's submission, was: what would the appellant have done if the statement "that there are no plans of the outlet pipe" had not been made. The question was not whether it would have acted differently if it had been told that there was a plan of the outlet pipe. The respondent contended that a case premised upon the correct question was never proved by the appellant. 28 The respondent further contended that if no representation had been made about the existence or otherwise of plans, it was obvious that the appellant would have entered into the contract on the same terms that it did. The obviousness in the proposition was that the appellant would not have known otherwise so as to cause it to modify or act differently in relation to the tender. It followed on that submission that the appellant would then have assumed the risk of the rock level specified in the Concept Design Drawings being erroneous and thus would have suffered no recoverable loss. 29 This was the position for which the respondent had contended before his Honour on the Pt 72 r 13 application and which his Honour rejected. His Honour, at [115], considered that the enquiry on causation was what was the correct representation that would have been made - that is, in order for the respondent not to have engaged in misleading or deceptive conduct, what representation would it have made. His Honour determined that that non-misleading representation would have been one that disclosed the existence of the 1951 cross-section showing the outlet pipe. 30 The respondent submitted that this approach by his Honour was erroneous. It submitted that the test for causation was not what the position would have been if the representee had been informed of the correct position. Rather, the question was what would the position have been had the wrongful conduct not occurred. Specifically in relation to the circumstances here, it was submitted that the question to be determined was whether the appellant would have acted differently if the representation had not been made. That approach, which does not involve a search for the "correct representation", or a different representation, is an exemplification of the 'but for' test. It was submitted that that approach was consistent with Chappel v Hart (1998) 195 CLR 232 and Henville v Walker (2001) 206 CLR 459. 31 On the respondent's case, because the appellant had not proved what it would have done had the tender documents made no representation about the existence or otherwise of plans, it failed at the causation point. 32 The focus of the arguments of the parties in relation to the reliance/causation issue was in relation to causation. The respondent's challenge to reliance was that the trial judge had erred in holding that he was bound by a finding made by this Court in Abigroup No 1 that there was evidence of reliance, that reliance had been established by that evidence or that reliance was capable of being inferred from the evidence. 33 McDougall J dealt with this issue in his judgment at [50]-[56]. He referred to this Court's judgment in Abigroup No 1, especially at [78], [80], [84], [86] and [87]. In those paragraphs, the evidence of reliance was reviewed from which I said, at [86], "reliance could be inferred". I concluded at [87]: "It follows … that the respondent's contention that the appellant cannot demonstrate that it relied on the representation or treated it as material has not been made out and therefore does not provide a reason to dismiss the appeal" 34 McDougall J, having referred to this material and having quoted the last mentioned paragraph, stated at [55]-[56]: "I take that as a finding, binding on me, that there was evidence of reliance. Even if it is not to be so understood, the evidence to which Beazley JA referred (the content of which was proved, and the subject of submissions, before me) is clearly capable of supporting a conclusion of reliance. If it were necessary for me to reach an affirmative conclusion of reliance (i.e. if I were not bound to do so by the finding of the Court of Appeal) I would do so on the basis of that evidence.

[22]

42 McHugh J said at [96] that Wardley did not mean that the common law concept of causation was to be applied rigidly without regard to the terms or objects of the Act. His Honour observed that s 82 applies to many different kinds of case, not only those involving a breach of s 52 and it should not be given a narrow or inflexible construction, noting that the question of causation could not be divorced from the legal framework that gave rise to the cause of action. He observed that there were some circumstances where, despite a causal connection in a physical sense between breach and damage, there was no causal connection at law. There were also circumstances where the legal framework might dictate a finding of a causal connection where no more was established than that damage followed after a breach of a legal norm. In that circumstance, his Honour said, at [103]: "…. the damage will not have occurred because of the laws of nature but because a person has acted to his or her detriment by reason of or following some conduct of the defendant. The conduct may be an act, an omission , a statement or a suggestion. But it will not be regarded as causally connected with the detriment if it provides no more than the reason why the person acted to his or her detriment. If the defendant intended the person suffering a detriment to act in the general way that he or she did, the common law will invariably hold that a causal connection existed between the conduct and the detriment. But if the conduct merely provides the reason why the person acted, it will not be sufficient to establish a causal connection unless the purpose of the legal norm that the defendant has breached is to prevent persons suffering detriment in circumstances of the kind that occurred… " (Emphasis added) 43 Hayne J considered that where there was more than one cause of a loss the 'but for' test was an inappropriate test of causation. As he observed, If that test was applied, it could not be said that 'but for' the contravening conduct, the appellant suffered the whole of the loss. His Honour considered that in such circumstances, it was necessary to identify the loss sustained by the contravention: [160]-[162]. In that regard, the Trade Practices Act did not require the contravening conduct to be the sole cause: Gould v Vaggelas (1984) 157 CLR 215. Provided that it could be demonstrated that the contravening conduct was a cause of the loss, recovery of the whole loss was permitted. 44 Gummow J agreed with both McHugh and Hayne JJ on these points: [152]-[153].

[24]

As [was said] in Fitzgerald v Penn (1954) 91 CLR 268 at 277-278 'it is all ultimately a matter of commonsense' and '[i]n truth the conception in question [ie causation] is not susceptible of reduction to a satisfactory formula'". 47 To the extent that March v Stramare was then picked up as a postulate of causation for the purposes of s 82, it was undoubtedly because of the wide variety of circumstances in which a cause of action under s 82 could arise. This is apparent from Wardley (at 525). However, in Henville v Walker McHugh J observed that the statutory context was important in determining the approach to causation. This now appears to be accepted. Thus in Allianz Australia Insurance Ltd v GSF Australia Pty Ltd (2005) 221 CLR 568; [2005] HCA 26, McHugh J noted at [54] that, relevantly, in a statutory context, "causality is determined in light of the subject, scope and objects of the Act". See also Gummow, Hayne and Heydon JJ at [99]. 48 This is now the accepted approach. As Gleeson CJ observed in Tambree at [30]: "In recent cases, this Court has pointed out that, in deciding whether loss or damage is 'by' misleading or deceptive conduct, and assessing the amount of the loss that is to be so characterised, it is in the purpose of the statute, as related to the circumstances of a particular case, that the answer to the question of causation is to be found." 49 Gummow and Hayne JJ emphasised at [45] that the answer to a question of causation will differ according to the purpose for which the question was asked. Their Honours referred to the statement of Gummow J in Chappel v Hart at 256, where his Honour said: "[63] In Environment Agency v Empress Car Co (Abertillery) Ltd [1999] 2 AC 22, the leading judgment in the House of Lords was given by Lord Hoffmann. His Lordship stressed that whilst 'the notion of causation should not be overcomplicated', it should not 'be oversimplified'. He went on to emphasise that (a) the legal issue is not what caused the result complained of, but did the defendant cause it, and (b) 'common sense' answers to questions of causation will differ according to the purpose for which the question is asked and the rule by which responsibility is being attributed. In particular, 'one cannot give a common sense answer to a question of causation for the purpose of attributing responsibility under some rule without knowing the purpose and scope of the rule'.

[25]

[64] Lord Hoffmann illustrated these points by the following discussion of Stansbie v Troman [1948] 2 KB 48: 'A decorator working alone in a house went out to buy wallpaper and left the front door unlocked. He was held liable for the loss caused by a thief who entered while he was away. For the purpose of attributing liability to the thief (eg in a prosecution for theft) the loss was caused by his deliberate act and no one would have said that it was caused by the door being left open. But for the purpose of attributing liability to the decorator, the loss was caused by his negligence because his duty was to take reasonable care to guard against thieves entering.' His Lordship concluded: 'Before answering questions about causation, it is therefore first necessary to identify the scope of the relevant rule. This is not a question of common sense fact; it is a question of law. In Stansbie v Troman the law imposed a duty which included having to take precautions against burglars. Therefore breach of that duty caused the loss of the property stolen.'" 50 Callinan J (with whose reasoning on this point Kirby J agreed) endorsed the approach in March v Stramare. However, he did so in terms that do not detract from the focus in the other judgments on the statutory context. In particular, his Honour, at [79] endorsed the comment of the Chief Justice that the scope and objects of the relevant legislation were critical in determining questions of causality. At [81], his Honour observed that common sense could not be discarded in reaching a conclusion as to whether contravening conduct was causative of loss. 51 None of these cases have involved an express negative representation. However in Smith v Noss [2006] NSWCA 37 this Court looked at the question of causation in the context of a failure to disclose a material matter. Giles JA (Beazley and Ipp JJA agreeing) at [25] noted that in such a case it was not a natural use of the notion of reliance to say that there was reliance on the failure to disclose. His Honour considered that causation could be found where it was established that disclosure would have caused inaction or action different from that which was in fact taken. His Honour referred to Smith v Moloney (2005) 92 SASR 498 at 514-5 where Besanko and Vanstone JJ took the same approach in the case of a failure to advise. Their Honours there said: "[I]n a case where there has been a failure to advise, as distinct from the provision of incorrect advice, it is somewhat artificial to formulate the test of causation in terms of real inducement because the court is required to consider a hypothetical question, namely, what would the plaintiff have done had the defendant provided the advice he was bound to provide." 52 Giles JA added, at [26], that even in the case of making a false representation, that is, an express, positive representation, causation will be established if it is shown that a person would have taken no action or some other action if it was known that the representation was false. 53 This Court in its earlier decision in this matter expressed, in obiter remarks, the same approach: see Abigroup No 1 at [78] and [86].

[26]

Conclusion on causation 54 It will be apparent from the discussion above that there is not a single immutable test for causation for the purposes of s 82. Marks v GIO and Henville v Walker both involved an express positive representation. In the case of Marks, the representation was likely to have been deliberate. In Henville v Walker, the representation appears to have been negligent. However, s 52 is not confined to deliberate or negligent misrepresentations. Contravening conduct includes both express misrepresentations and non-disclosure and there may be a contravention of the section even though the conduct is innocent. 55 The respondent relies upon the statement in Marks v GIO as requiring a comparison between the position in which a party that allegedly has suffered the loss occupies on the one hand and the position that that party would have occupied "but for the contravening conduct". According to the respondent's submission, that requires a comparison of the position in which the party who has suffered loss would have been had the misrepresentation not been made. In this case, on that submission, if the misleading statement had not been made, the appellant would have entered into the contract at the tender price and borne the risk of any discrepancy between the likely extent of excavation indicated in the tender documents and the actual extent of excavation required. In short, on this submission there would have been no change of position and causation could not be established. 56 In order to establish its entitlement to damages the appellant has to establish that it suffered a loss by conduct which contravenes the Act. The contravening conduct has been established - the respondent in stating in the tender documents that there was no plan of the outlet pipe made a negative representation which was misleading. It was misleading for the simple reason that there was a plan of the outlet pipe. If that misrepresentation was simply excised from the contract so that the appellant bore the risk that additional work might be required, as the respondent contends, then the misleading conduct would be neutralised. However, the appellant did not agree to bear the contractual risk in the face of a misrepresentation. But in any event s 82 does not operate so simplistically. As Gleeson CJ said in Tambree the question of causation is to be found in the "purpose of the statute" as "related to the circumstances of the particulars of the case". 57 The purpose of the statute, inter alia, is to provide relief for persons who suffered loss by contravening conduct. In this case the question of causation is not answered by merely excising the contravening conduct from consideration and asking what the position would have been if nothing had been said. As I said in the preceding paragraph, that may have the effect of neutralising the contravening conduct in circumstances where the legal norm breached by the respondent is one that is directed to preventing persons suffering detriment in the particular circumstances of the case: see Henville v Walker per McHugh J at [133], in the passage set out below at [106]. 58 In this case, the respondent made a misleading negative representation upon which the appellant relied in entering into the contract. The circumstances of entering into the contract as found by his Honour are set out at [20] above. In particular, the appellant had no opportunity to undertake any geological or geotechnical investigation of its own. Against that background, the question for determination is whether the appellant suffered loss by the respondent's contravening conduct. That question is not answered in this case by the application of a "but for" test: viz, what would the appellant have done "but for" the representation. That test would involve excising the contravening conduct in a way which in this case I consider to be impermissible. 59 Rather, what has to be done is to ascertain what would have occurred for the respondent not to have engaged in conduct which was misleading. In my opinion that would require that the existence of the plan be disclosed. This can be tested, in my opinion, by contrasting that response with the response argued for by the respondent - namely, saying nothing about the plan. In the latter case, a number of possibilities emerge, including that the appellant might have had a claim for non-disclosure, or there being no statement about plans in the tender document, might have insisted upon undertaking its own investigations. But the Court does not need to, not should it engage in, speculation as to the possibilities: see generally Downs v Chappell [1996] All ER 344 where Hobhouse LJ said at 441 that it was: "[I]n general, irrelevant to inquire what the representee would have done if some different representation had been made to him or what other transactions he might have entered into if he had not entered [into] the transaction in question. Such matters are irrelevant speculations: see, for example, United Finance Co v Addison & Co Ltd [1937] 1 All ER 425, 429."

[28]

Damages 64 The central question on the damages issue is whether the appellant is entitled to recover damages calculated by reference to the amount spent in undertaking the additional excavation and fill work or whether, as a matter of principle, it is only entitled to recover damages on the basis of a loss, if any, suffered on the entire contract. 65 The appellant contended that it suffered loss on the entry into the contract because it was bound to do work in the Folly Creek area which inevitably was going to be greater than had been allowed for in the tender and which was probably going to take it outside the fixed completion date under the contract so as to invoke the penalty clause in the appellant's favour, and having established loss, it then had to establish the quantum of its loss: see Sellars v Adelaide Petroleum NL at 348. 66 Its case was that it was entitled to the discrete loss it suffered in having to undertake the additional work by way of damages under s 82. The parties each called expert evidence as to the quantum of that loss. Mr Blunden, the appellant's expert, calculated the loss on the basis of the actual cost incurred by the appellant in undertaking the additional work. That involved the cost of excavating down to the rock surface as required by the contract. The amount of loss calculated on that basis was the sum of $7,499,930 referred to at [9] above. In the jargon of this litigation that approach was referred to as "Scenario 1". 67 Mr Meredith, the respondent's expert, assessed the loss on the basis that the appellant was entitled to the extra cost of excavation down to the line of the original 1951 surface level. The original 1951 surface level was not at rock level. Mr Meredith quantified the costs of the excavation down to the original 1951 surface level based upon the contract rate in a total sum of $3,967,408. This was referred to as "Scenario 3". The rationale of this approach seems to be that the appellant bore the risk under the contract and as it had not been permitted to carry out any geotechnical testing, it would have had to assess its tender price knowing that the rock level was at least as low as the 1951 surface level, but without knowing its precise level. 68 An intermediate quantification was agreed upon between the parties based upon the actual quantities excavated by the appellant, but costed at contract rates. This was "Scenario 2". The quantum based upon that approach was $5,936,730. 69 If the appellant is only entitled to a loss on the whole contract, then the respondent contends that the appellant has failed to prove that loss. The appellant accepts that it did not prove a loss on the whole contract. It contends, however, that if, as a matter of law, it is only entitled to a loss on the whole contract, it should have been given leave by the trial judge to adduce evidence of such loss, as both parties had conducted the matter before the Referee on the basis that if the appellant proved its entitlement to damages, the quantum was the amount of the discrete loss assessed in accordance with one of the above three scenarios.

[29]

Findings of the trial judge 70 The trial judge considered that the appellant had conducted its case before the Referee on the basis that had the correct information been known, there would have been revised tender documents and an alternative contract entered into (the 'alternative contract' case). His Honour noted that the Referee had also considered the claim on the alternate basis that if the correct representation had been made, no contract would have been entered into (the 'no contract' case). His Honour therefore proceeded to review the Referee's reasoning on the 'no contract' case as well. 71 On the 'alternative contract' case, his Honour concluded that the Referee was correct to proceed on the basis that consideration had to be given to what alternative form of tender documents would have been provided and what alternative contract would have been made: see Referee at 491, 493, 497 and 499. 72 His Honour held that the appellant had failed to prove what the terms of such alternative tender and contract would be and thus had failed to prove its loss: see [116]. His Honour found that there was nothing in the manner in which the Referee dealt with that question that required intervention or reconsideration and there was no basis for the court to reject that aspect of the Report in accordance with Supreme Court Rules Pt 72 r 13: trial judgment [125]. 73 His Honour also found that the appellant had not proved its loss on a 'no contract' case. His Honour accepted the Referee's starting point that the first step on the 'no contract' analysis was that the appellant would have suffered no relevant loss because it would not have entered into the contract. On his Honour's view, the 'no loss' position then had to be compared with the actual position under the contract as it was performed. His Honour held that a comparison of a 'no loss' position with the position under a discrete part of the contract was not a comparison of "like with like" and was not an approach authorised by Marks or Henville: see judgment at [132]-[133]. Rather, the loss that had to be proved was a loss on the 'whole contract'. 74 The appellant contended that even if its case had been conducted on the 'no contract' basis, his Honour's approach to the question of loss was directly contrary to the High Court's decision in Murphy & Anor v Overton Investments Pty Limited (2004) 216 CLR 388 at [31] and [47]-[52]. Likewise, it is contended that his Honour erred in his understanding of HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd (2004) 217 CLR 640; [2004] HCA 54 at [40], [41], [45], [63]-[65]. 75 The appellant's essential challenge, however, to his Honour's judgment on this aspect of the appeal, was that it had not confined its case before the Referee to an 'alternative contract' case or a 'no contract' case, as found by his Honour. 76 In developing its submissions on this aspect of the appeal, the appellant directed the Court's attention, in detail, to the case as it was formulated and conducted before the Referee. It has become unnecessary to go to the details of that challenge as the respondent approached the appeal on the basis that the appellant was not confined to a case based on either the 'alternative contract' or 'no contract' case. It contends, however, that the loss that the appellant claims, namely, the loss to it, or doing the additional work, unrelated to any loss or profit on the complaint as a whole, is not, as a matter of law, available under the Trade Practices Act. 77 Both parties agreed that the starting point of the argument was Marks v GIO. Before turning to a consideration of that and the other authorities two matters should be kept in mind. First, it is well established that damages under the Trade Practices Act are not limited by analogy to the law governing the award of damages under contract, tort, deceit or equitable remedies: see Marks per Gaudron J at [17]], the joint judgment at [38]-[40], Gummow J at [103]; Henville v Walker at [130]. However, that is not to say that, in an appropriate case, an analogy may not be useful. Certainly, an applicant should not be worse off merely because analogies are not always useful or appropriate. This is clear from the comment in Marks at [38] in the joint judgment of McHugh, Hayne and Callinan JJ: "…Indeed, the very fact that ss 82 and 87 may be applied to widely differing contraventions of the Act, some of which can be seen as inviting analogies with torts such as deceit (eg, s 52) or with equity (eg, s 51AA) but others of which find no ready analogies in the common law or equity, shows that it is wrong to limit the apparently clear words of the Act by reference to one or other of these analogies."

[31]

Marks v GIO 79 I have already referred to Marks in relation to causation. However, for the purposes of considering damages, an understanding of the facts is necessary. A number of borrowers had entered into loan facilities with a public company financier in reliance on written representations that interest would be at a specified rate plus a margin, "set" at 1.25 per cent per annum. Contrary to the representation, the contract enabled the financier to vary the margin. The lender gave notice of an increase in the margin to 2.25 per cent per annum but gave the borrowers an opportunity to refinance without penalty. None of the borrowers took up that opportunity. Further, none of the borrowers gave evidence that if the true terms had been known he or she would not have borrowed at all or would have entered into alternative arrangements. It was conceded that even with the increased margin, the facility was more advantageous than other available lending arrangements. 80 The appellants claimed damages under ss 82 and 87, calculated on the difference between the represented margin rate and the rate that was subsequently charged. The Full Court of the Federal Court dismissed the damages claim on the basis that the claim was for 'expectation' damages which were not available under ss 82 and 87. Those sections, on that Court's view, allowed for the recovery of 'consequential loss' only. The High Court dismissed the borrowers' appeal, essentially on the basis that a discretionary order for damages should not be made given that the financier had not sought to hold the borrowers to their contracts. The Court did not however, endorse the reasoning of the Full Court of the Federal Court. 81 Gaudron J, at [18], before embarking upon her analysis of whether the appellant had established loss, summarised the position taken in each of the judgments of the Court. It is appropriate to set this out: "In the view taken by McHugh, Hayne and Callinan JJ, the appellants did not establish that they were worse off as a result of entering into loan agreements with the GIO. Gummow J is of the view that it may be assumed that they would or would likely have been worse off but for the GIO's allowing them to elect to refinance without penalty, while Kirby J is of the view that the appellants were worse off and are thereby entitled to recovery. For the reasons which follow, I am in substantial agreement with the approach taken by Gummow J." 82 Gaudron J pointed out at [19] that an applicant for relief under ss 82 or 87 had to establish, relevantly, what he or she has lost and that it depended on the circumstances how that was established. Her Honour explained at [15] that it was: "…irrelevant to inquire as to the appropriate measure of damages for the purposes of ss 82 and 87 of the Act [as is done in the case of contract and tort]. Rather, the task is simply to identify the loss or damage suffered or likely to be suffered and, then, to make orders for recovery of that amount under s 82 or to compensate for or prevent or reduce that loss or damage under s 87 of the Act."

[32]

Gummow J agreed with her Honour's reasoning on this point. 83 As already indicated, her Honour considered that on the facts in Marks, if an applicant established that but for the misleading and deceptive conduct, he or she would have entered into a contract that would have returned the very benefit that was represented, damages will be the same as if the representation had been contractual. On that basis, the applicant had to establish that another contract could and would have been entered into: see Collings Construction Co Pty Ltd v Australian Competition and Consumer Commission (1998) 43 NSWLR 131. 84 Her Honour said that there might be cases where an applicant proved that but for the misleading and deceptive conduct, the applicant would not have entered into the contract in question or into any other contract or arrangement of that kind. In that case the loss could be the same in money terms as it would have been if the representation were contractual, but that result was not inevitable: see at [20]. 85 It is apparent from these passages that Gaudron J considered that appropriate approaches to the question of loss included an 'alternative contract' basis: [19], and a 'no contract' basis: [20]. The respondent relies upon these passages as support for its argument that regardless whether the approach to loss was on an 'alternative contract' basis or a 'no contract' basis, what is claimable is only a loss on the contract as a whole. On the respondent's submission, there was nothing in her Honour's judgment to indicate that damages could be claimed for a discrete loss within a larger contract, without having regard to the loss or otherwise on the whole. The effect of the submission was that a discrete loss was not, as a matter of principle, recoverable. 86 I do not agree that her Honour's judgment can be interpreted so as to confine relief to recovery of loss on the contract as a whole. The loss under consideration in Marks was a loss on the contract as a whole. However, as her Honour observed, at [24], "s 87 allows for relief which is tailored to the particular case" (emphasis added). 87 McHugh, Hayne and Callinan JJ in the joint judgment stated at [42] that when determining whether, and to what, damages a party was entitled under the Trade Practices Act it was necessary to make a comparison between the position in which the party is in and the position in which that party would have been but for the contravening conduct. Thus for the purposes of s 82 it was necessary to establish a causal link between the loss or damage claimed and the contravening conduct. Their Honours further stated at [48]: "A party that is misled suffers no prejudice or disadvantage unless it is shown that that party could have acted in some other way (or refrained from acting in some way) which would have been of greater benefit or less detriment to it than the course in fact adopted …"

[34]

Murphy v Overton 91 The appellant submitted that Murphy v Overton established that there could be separate heads of loss under s 82 of the Trade Practices Act and that each could be compensated. 92 In Murphy v Overton the appellants, a husband and wife, were prospective lessees of a lease of a unit in a retirement village. The developer provided information in a brochure stating that there would be an ongoing management and maintenance program and specified the cost of weekly outgoings on present budget indications. The estimate given did not adequately provide for all the expenditure then actually being incurred in the operation of the village. The appellants entered into the lease. Some years later, the developer decided that it would charge residents for all the expenditure incurred in the operation of the village. 93 The trial judge held that the estimate of outgoings provided to the appellants implied that all expenditure that could properly be taken into account in forming the estimate had been taken into account and that as it had not, the developer's conduct was misleading or likely to mislead in contravention of s 52 of the Trade Practices Act. His Honour found that if the truth had been revealed, the appellants would not have entered into that lease, but concluded that they had not proved that they had suffered any loss or damage because there was no evidence of difference between the price paid under the lease agreement and the value of the property at the date of agreement, and there was no evidence that the lessees were not receiving value for the maintenance fees they were paying. 94 The High Court held that the lessees had suffered loss because the continuing financial obligations they undertook when they entered into the lease proved to be larger than they had been led to believe. 95 The Court emphasised that damages assessed under the Trade Practices Act were not confined by analogies drawn from claims made under the general law and that the reference to "loss or damage" in ss 82 and 87 could not be given a narrow meaning: see [45]. The Court pointed out that s 87 provides for a wide range of orders that, relevantly, might be made to compensate for the loss or damage suffered or to reduce the loss or damage: see [47]. The analogy of capital and revenue losses was used to illustrate the point. The Court also said that it should not be assumed that loss or damage suffered as a result of contravention of the Act was necessarily singular, observing that within the range of orders that might be made, the Court was not confined to making an award of damages by way of a single capital sum: see [49]. Their Honours pointed to the need to mould relief to avoid double compensation and noted at [52] that loss or damage may take several forms and may be incurred at different times. 96 The respondent nevertheless contended that it is apparent from this analysis that in order to ensure against double compensation it was necessary to look at the position that the appellant found itself in at the end of the contract and in doing so it was necessary to look at both sides of the ledger, that is, the profit on one side of the ledger as distinct from losses on the other. It was submitted that that approach inevitably invited attention to be drawn to the whole contract. It was submitted that this was clear from the manner in which the Court dealt with the question of quantification of the appellants' loss in Murphy v Overton. 97 The Court had dealt with that question at [66]. It said: "The appellants had been induced by the respondent's conduct to undertake an obligation which may, but need not, have been more onerous than the respondent's representation led them to believe. When the respondent started to charge all the outgoings it was entitled to charge, the appellants suffered a loss. The amount of that loss was not to be determined ... only by comparing the financial position of the appellants according to whether they entered this lease or took some other accommodation. The appellants did not contend that they had suffered loss in that way. The appellants suffered loss because the continuing financial obligations they undertook when they took the lease proved to be larger than they had been led to believe. The question then became: how much larger was that burden?" 98 The Court did not resolve that question, stating that the answer was not easy, but remitted the matter to the trial judge for determination. In doing so, the Court discussed a number of the considerations that might be relevant to the determination of loss. Relevantly for present purposes, the Court looked at the question whether it was necessary to consider, once the contingency of significantly increased outgoings that had been hidden by the representation came to pass, whether it was reasonable for the appellants to remain in that retirement village or rather whether they should have moved elsewhere. Their Honours pointed out that, assuming that might be a relevant consideration, it was for the respondent to raise it as it was a matter going in answer to the appellants' claim to damages: see [70]. 99 The respondent contended that contrary to the appellant's assertion, Murphy v Overton provided no authority that in the case of a lump sum contract it was possible to recover a discrete loss separately from the profit or loss made under the contract. To the extent that the respondent's argument on this point refers to the ratio, it is correct. However, the tenor of the Court's judgment is to emphasise the flexibility of the orders that can be made to compensate for loss or damage 'caused' by the contravening conduct.

[35]

Henville v Walker 100 The appellant further submitted that not only were these authorities not against the proposition for which it contended, but that its position was supported by Henville v Walker. I have already discussed the facts of that case above. Insofar as the proper approach to the question of damages is concerned, the Court emphasised the flexibility of the relief available under ss 82 and 87. As McHugh J said at [131]: "Indeed, general principles for assessing damages may have to give way altogether in particular cases to solutions best adapted to give the injured claimant an amount which will most fairly compensate for the wrong suffered." 101 Gleeson CJ considered that the trial judge was entitled, in principle, to reject the appellant's claim that the whole of his loss flowed from the contravention of s 52. He considered that the trial judge was entitled to take into account the fact that some of the losses were caused by the miscalculation of costs. His Honour used, by way of comparison, a large multi-storey office block development. He considered that in such a case, it was likely to be inappropriate for the assessment of damages said to flow from a misrepresentation to be made simply by calculating the net financial outcome of the project: at [36]. 102 Gaudron J took a slightly different view. Her Honour said loss or damage recoverable under s 82(1) was not confined to loss that flowed directly from the contravening conduct. She said at [68] that: "To require a claimant to prove which component of [their] loss or damage is referable to the contravening conduct would be to impose limitations on relief which the terms of that subsection do not require." 103 Her Honour was of the view that if a party wished to establish that a component of loss was not referable to the contravening conduct, it was for that party to establish it. 104 McHugh J considered (at [132]) that the most appropriate approach to the calculation of damages in that case was to identify what the appellant architect "had suffered by way of prejudice or disadvantage". His Honour said: "The measure of that loss is not determined by reference to what he would have received if Mr Walker's representations had been true. As the New Zealand Court of Appeal pointed out in Cox & Coxon Ltd v Leipst 123 [1999] 2 NZLR 15., a case concerned with s 43(1) of the Fair Trading Act 1986 (NZ), a representation can give rise to a claim for a lost benefit or loss of expectation only where there is an obligation to perform the representation. The Court of Appeal held that s 43(1) was directed against the making of a false representation, as opposed to the failure to perform it. Similarly, the wrong which s 52 of the Act prohibits is the making of, not the failure to honour, the false representation." 105 His Honour observed that by entering into the project Mr Henville had lost $319,846.51. The misrepresentations had induced the appellant to proceed with the project under the belief that it would produce a substantial profit. If there had been no misrepresentation, he would not have embarked on the course that he did and thus would not have suffered the loss that he did. In those circumstances his Honour considered that the loss was the direct result of the misrepresentations. The loss in fact suffered was the loss on the whole project. 106 In this regard, his Honour, whilst acknowledging that damages under the Trade Practices Act were not confined by notions of damages in other areas of the law, considered that the appropriate measure of damages in the case was that which was applicable in an action for deceit at common law. His Honour explained this at [133]-[135]: "[133] If the action were one of deceit at common law, I see no reason why, subject to the issue of remoteness, the whole of the loss of $319,846.51 would not be recoverable … In an action for damages for deceit, the damages are measured by reference to how much worse off the plaintiff is as a result of being fraudulently induced to take the course of action that he or she did. The loss that the plaintiff can recover includes consequential losses flowing directly from the misrepresentation including losses from opportunities forgone.

[37]

[135] Nor do I see any reason why the principles applicable in an action for deceit at common law should not be applied in the present case. The purposes of the [ Trade Practices Act ] included promoting fair trading … Those purposes are more readily achieved by ensuring that consumers recover the actual losses they have suffered as a result of contraventions of the Act . Where a person contravenes the Act and induces a person to enter upon a course of conduct that results in loss or damage, an award of damages that compensates for the actual losses incurred in embarking on that course of conduct best serves the purposes of the Act and should ordinarily be awarded." (Footnotes omitted) (Emphasis added) 107 The Full Court had held that the appellant had not established his loss because the cost overruns and delay in work were relative causes of the appellant's overall loss in the sense that they each made a contribution to those losses. As it was impossible to segregate the effect of those losses, the Full Court held that it was necessary for the appellant to prove their quantum. The appellant had not done so. McHugh J held that this approach was erroneous. In the absence of evidence that the cost overruns and delays were unreasonable, the absence of evidence enabling those costs to be identified did not affect the appellant's right to be compensated for his actual loss. As I have indicated, his Honour considered that that loss was on the whole project. 108 Gummow J agreed with the reasons for judgment of both McHugh and Hayne JJ. The focus of the reasoning in the judgment of Hayne J was whether, in circumstances where there was more than one cause of the loss, the appellant was entitled to the whole of the loss suffered on the contract. The judgments were, relevantly, directed to that question. It is simplistic to merely view the division between the majority and minority in the Court as being a division as to whether the loss on the whole or part only of a contract was recoverable. In my opinion, there is nothing in any of the judgments that indicates that the loss or damage for the purposes of ss 82 and/or 87 is limited to the loss, if any, proved on the contract as a whole. Rather, the various judgments of the members of the High Court reflect what had previously been said by the Court in Marks v GIO, that the entitlement to damages under ss 82(1) and 87 is not confined by an enquiry as to the appropriate "measure of damages" as is the case in contract and tort. See especially the discussion by Gaudron J in Marks v GIO at [15]. 109 This, in my opinion, is confirmed by HTW Valuers, where the Court emphasised the width of available approaches to the assessment of damages under s 82 "so long as they work no injustice" (at [65]). A similar approach has been taken to the assessment of damages for negligent or fraudulent advice. In County Personnel (Employment Agency) Ltd v Alan R Pulver & Co [1987] 1 WLR 916 Bingham LJ said that no single approach to the assessment of damages was to be applied inflexibly. See also Downs v Chappell referred to above at [59].

[38]

Conclusion on damages 110 The fundamental proposition advanced by the respondent in this case was that the appellant could not segment its claim from the contract as a whole (Transcript day 1, 50 (20-25)). The respondent conceded that if that contention was wrong as a matter of principle, the appellant was entitled to succeed on its claim, subject to proving the amount of that discrete loss. The acceptance of that position by the respondent also depended on whether the causation issue was resolved on the basis that no representation was made or the true position was known. I have resolved both these questions, that is, the causation question and the discrete loss question, in favour of the appellant. It follows, as the respondent accepted, that the appellant is thereby entitled to succeed. 111 I would only add that the respondent also argued that the effect of not accepting its proposition was to elevate the representation made to a warranty - that is, that it warranted that there was no plans of an outlet pipe. It was submitted that Henville v Walker had found that approach to be impermissible. It was the detriment suffered by the alteration of position that was relevant, not what would have happened if the warranty had been true. That submission was based on the statement of McHugh J at [132] set out above at [104]. 112 For the reasons I have already given, such an argument is misplaced. As has been pointed out continuously by the courts, and as I have already sought to demonstrate, claims for contravention of s 52 cover a wide range of situations. Sometimes a claim will have the same features as or be similar to a claim for breach of warranty, or for a claim in deceit. In such cases, it may be appropriate to make an award of damages which is in the same measure as the analogous claim. Again, I merely reiterate what was said in this regard by McHugh J in Henville v Walker at [135]. 113 In this case, the appellant relied on a negative representation for the purposes of tendering for the contract. The appellant tendered on the basis that the excavation and refill in Folly Creek was to an indicated depth as disclosed in the tender documentation although it bore the risk that the indicated depth might be greater than appeared in the tender documents (and the benefit should it be less). Whatever the position, the appellant had no opportunity to itself make an assessment of the amount of work involved and was thus especially reliant on the information provided by the appellant. 114 The plan of the outlet pipe would have provided information to the appellant that would have enabled it to assess that the rock levels indicated by the respondent were seriously flawed. The consequence of not having that information was that its tender was, in that respect, affected as the appellant had not factored into its tender price the undertaking of work of a significantly different order. This is the direct illustration of what I have already said, namely that the appellant did not agree to bear all risks under the contract in the face of a misrepresentation. In not having the information, it incurred a cost (ranging between approximately $4 million and $7.5 million - a matter to which I refer below). It relied upon the respondent to provide it with information and had no opportunity to check that information itself. This additional cost is a loss recoverable by way of damages under s 82 because it is the "prejudice or disadvantage" that the appellant suffered by entering into the contract on the basis that it did. 115 In approaching the matter that way, the Court is not concerned with "irrelevant speculations", to use the phrase of Hobhouse LJ in Downs v Chappell. Nor does it involve an enquiry as to what the appellant would have done if some different representation was made. For the reasons I have already given, in the circumstances of this case the respondent should have disclosed that there was a plan of the outlet pipe. That does not involve elevating the representation to a warranty as alleged by the respondent. By not knowing or having a means of knowing the likely depth of fill the appellant was obliged to undertake work under the contract that was not in the contemplation of the parties. That cost was not recoverable as a matter of contract because of the risk clause. As I have already said, it was, however, a prejudice or disadvantage that the appellant sustained by the respondent's conduct in making the misrepresentation. 116 The authorities are clear in my opinion that in order to be able to recover damages for its loss, the appellant was not required to prove that it had suffered a loss on the whole contract. Provided it had otherwise proved its cause of action, it was entitled to recover damages on the basis of the discrete loss it sustained in undertaking the additional work at Folly Creek, subject, of course, to proper proof of such loss. 117 It is apparent from the way in which the appeal was conducted that the respondent accepted that if it did not succeed in establishing that loss on the whole contract had to be proved, then McDougall J erred in accepting the Referee's report on the damages issue. As I have sought to explain above, subject to questions of causation, with which I have already dealt, and proof of damage and remoteness, the damages recoverable are "the actual losses they have suffered as a result of contraventions of the Act": Henville v Walker per McHugh J [133]-[135] set out at [106] above. Subject to the precise quantification of damages, this is not a case that involves speculation. The loss suffered by the appellant is known. It was the cost of carrying out the additional work. 118 I have already referred above to the three bases upon which the parties approached the calculation of damages. There has not yet been a determination is to which of those approaches was correct. Those differing approaches themselves reveal that there may still be a question as to the proper measure of damages in this case. In the normal course, given the nature of this appeal, it would be necessary to remit the matter for the determination of quantum of damages to which the appellant is entitled. However, given the extraordinary litigious history of this matter, the parties should have the opportunity to assess whether there is any basis upon which they can resolve that matter between themselves. 119 Before leaving this issue, it is appropriate that one final thing be said. The appellant had complained, in an early part of its submissions, that, in the proceedings before the Referee, the respondent had not ever submitted that the appellant could not claim damages on the discrete basis advanced. On this appeal, senior counsel for the respondent said that its position was that a discrete loss was not recoverable as a matter of principle. That issue should have been raised directly before the Referee. As it was, considerable time was spent as between the experts determining the correct methodology in relation to the appellant's discrete loss. If the respondent's contention was correct, the experts should have been directed to deal with that issue, at least in the alternative.

[40]

Reasons relating to delay given by the Referee 124 The Referee observed that a central factor in determining whether or not the appellant was entitled to damages for delay was whether the works in Folly Creek were critical. The experts had adopted a different approach to that question. The appellant's expert adopted a prospective methodology, whereas the respondent's expert looked at the matter retrospectively. Each reached his conclusion based upon the appellant's documents as well as the evidence of Mr Hoskins who was responsible for the appellant's programming of the project. So far as the appellant's documentation was concerned, the work in Folly Creek was not critical. Notwithstanding that, Mr Hoskins gave evidence in chief that the Folly Creek work became critical during the course of the works. He gave that evidence notwithstanding that he had not taken any steps during the course of the work to amend the documentation to reflect the change in the criticality of Folly Creek in the work programme. 125 The appellant contends that the Referee failed to deal with this evidence. 126 This is not entirely correct, as the Referee dealt with this aspect of Mr Hoskins' evidence in his Report at [544]. In doing so, the Referee referred to Mr Hoskins' statement of 24 April 2002. Mr Hoskins had been cross-examined about this issue in which he confirmed his view that the Folly Creek works became critical during the course of the works. The Referee did not refer to this evidence given in cross-examination. However, in circumstances where it was not suggested that any different evidence emerged in cross-examination to that given by Mr Hoskins in his statement, I am of the opinion that there was no error in failing to refer to it. 127 The next way in which the appellant sought to argue this point focused upon the approaches taken by each of the experts. The appellant's expert, Mr Hammond, adopted, as I have said, a prospective methodology. On that methodology Mr Hammond considered that the appellant had suffered 120 critical days of delay. Mr Senogles, the respondent's expert, adopting a retrospective methodology considered that there was delay of between 47 and 55 days but concluded that that delay was not critical. 128 Mr Hammond criticised Mr Senogles' approach on the basis that it did not allow for a determination as to whether acceleration took place. If the works had been accelerated, then the extent of delay would have been reduced. The reduction in the delay that would otherwise have been sustained, may thus have affected questions of criticality. Mr Hammond had also undertaken the task of determining whether there was delay by using Mr Senogles' methodology and again had found critical delay but fewer days than that which he had concluded using his preferred methodology. 129 The Referee did not refer in his Report to any of these matters. Rather, the Referee relied significantly upon the submissions made to him by senior counsel for the respondent, Mr Donaldson. I do not propose to set out all those references, which were quite extensive. There is one particular reference however that should be adverted to. At [548], Mr Donaldson pointed out that Mr Hammond in his Report had not compared the progress of works with the appellant's actual program but rather had modified the programme by reducing the duration and bringing forward the completion date by 15 per cent, by utilising anticipated duration and completion dates, which were not contemplated by anyone. Presumably, this is how Mr Hammond dealt with the question of acceleration, although the Referee does not indicate that that is how he understood it. I will return to this point later. 130 The Referee referred to the submissions of senior counsel for the appellant, Mr Corsaro, in a single paragraph. Again, as I understand this submission, it was that the minimal reference to the appellant's counsel's submissions indicated that the Referee had failed to give proper and independent consideration to both sides of the argument. 131 There was no dispute between the parties as to the relevant principles to be applied in determining whether the Referee had given adequate reasons. McDougall J explained the obligation in these terms at [12]: "Referees should give reasons for their opinion so as to enable the parties, the Court and the disinterested observer to know that the conclusion is not arbitrary, or influenced by improper considerations; but that it is the result of a process of logic and the application of a considered mind to the factual circumstances proved. The reasoning process must be sufficiently disclosed so that the Court can be satisfied that the conclusions are based upon such an intellectual exercise."

[43]

Where the dispute involves something in the nature of an intellectual exchange, with reasons and analysis advanced on either side, the judge must enter into the issues canvassed before him and explain why he prefers one case over the other." 133 In Archibald v Byron Shire Council (2003) 129 LGERA 311; [2003] NSWCA 292 Sheller JA (with whom I agreed) reiterated what was required by way of reasons in the case of competing expert evidence. His Honour said (at 323, [54]): "Where a dispute, such as this one, involves something in the nature of an intellectual exchange with reasons and analysis advanced on either side, the parties are entitled to have the judge enter into the issues canvassed before the court and to an explanation by the judge as to why the judge prefers one case over the other. This is particularly so where there is disputed expert evidence. In the present case, the parties were entitled to be told if Dr Button's estimates were to be accepted, on what basis they were to be accepted, in preference to those of Mr Loomes and Mr Thompson. This had to be done if the court was properly to perform the duty of stating with certainty the extent to which the respondent was entitled to rely upon continued use." 134 In Wiki v Atlantis Relocations (NSW) Pty Limited (2004) 60 NSWLR 127; [2004] NSWCA 174 Ipp JA (Bryson JA and Stein AJA agreeing) reviewed these and other authorities where the obligation to give reasons have been discussed. Ipp JA concluded at [61] in that case, which involved a work related injury, that where there were no questions of dishonesty or bias on the part of the experts and the issue in dispute between them "was capable of being resolved rationally by examination and analysis ...", it was incumbent upon the trial judge to undertake that examination and analysis. 135 In this case, the experts identified seven issues in relation to the claim in respect of delay and acceleration and prepared a summary of agreements and disagreements in relation to those issues in which they identified agreed facts, the main areas of difference and their respective reasons for the differences. 136 The Referee dealt with this aspect of the claim substantially by reference to the submissions of the respondent. In places, the Referee referred independently to the evidence of the experts and in his conclusion stated that he had given careful consideration to the competing views of the experts, which he had done "in light of the evidence ... [that had] been carefully analysed in the submissions of counsel". As I have already indicated, his only reference to the submissions of senior counsel for the appellant was in one paragraph. 137 On the appeal in this matter, the parties prepared an extensive submission in which they set out their countervailing contentions as to whether the Referee had adequately dealt with the issues which had been identified by the experts and in particular whether he had dealt with the differences that the experts themselves had identified. It was those differences that needed to be resolved by the Referee. 138 I do not consider it necessary for this Court to itself analyse the expert evidence. Rather, there are three considerations which I consider to be determinative of this issue. Before going to those considerations, however, I consider it appropriate to make some general observations, further to those above as to the extent of the obligation to give reasons. 139 The obligation to give reasons can be satisfied in a variety of ways. The fulfilment of the obligation is not dictated by the necessity to go to all aspects of the evidence or to give extensive reasons. Brevity is not necessarily a sacrificial lamb to adequacy. In dealing with matters of evidence, it is appropriate for a Referee to focus upon the evidence that the parties indicate is relevant. The Referee is not required to state all of the evidence relevant to an issue and it might be appropriate for him to rely upon summaries of the evidence given to him by the parties. If those references and summaries are in any way wrong or inadequate, the opposing party has the obligation to correct them to its peril. 140 It is apparent from the way in which the Referee dealt with this aspect of the matter that he was persuaded by the respondent's submissions. However, the Referee did not explain why that was so. The experts were fundamentally in dispute as to methodology. It was necessary for the Referee to apply an intellectual process of examination and analysis in resolving that dispute. He did not do so. This is apparent from [543]-562] and the conclusion at [570] where the Referee states: "Essentially for the reasons I have sought to give in dealing with the evidence of Mr Hammond and the submissions made by [senior counsel for the respondent], I have come to the conclusion that the [appellant], which carries the onus of proof, has not established that it is entitled to any delay costs either pursuant to the requirements of the contract or, as a matter of fact. Nor, am I satisfied that the plaintiff has established any entitlement to acceleration costs. Finally, in my opinion, the approaches taken by Mr Senogles were more satisfactory for resolving the problems posed and, overall, I prefer to his evidence to that of Mr Hammond." 141 That is the first consideration. 142 The Referee to the extent that he did deal separately with the evidence appears to rely upon errors in Mr Hammond's evidence: see particularly at [550], but overlooked that this matter had been corrected in the joint conference of the experts with the Referee. Not every factual error will undermine a determination nor necessarily be relevant to an argument based upon the adequacy of reasons. However, it may do so where the accuracy of the evidence is relevant, or even critical. In my opinion, this was the case here as is apparent from the Referee's comment in this paragraph, where he said: "[Senior counsel for the respondent] made detailed submissions as to why this approach was flawed in significant respects, noting, in particular, that the assessment was not based upon the tender rate for excavation nor was the placement of additional [fill]."

Parties

Applicant/Plaintiff:

Abigroup Contractors Pty Limited

Respondent/Defendant:

Sydney Catchment Authority

Legislation Cited (8)

Suitors Fund Act 1951(NSW)

Referee Fair Trading Act 1987(NSW)

Sydney Water Catchment Management Act 1998(NSW)

Trade Practices Act 1974(Cth)ss 4(2), 52, 82, 87

Trade Practices Act 1974(NSW)

Under the Sydney Water Catchment Management Act 1998(NSW)

Supreme Court Rules 1970(NSW)

Fair Trading Act 1987(NSW)

Cases Cited (31)

CITATION: Abigroup Contractors Pty Limited v Sydney Catchment Authority (No. 3) [2006] NSWCA 282

Abigroup Contractors Pty Limited v Sydney Catchment Authority (2004) 208 ALR 630; [2004] NSWCA 270 Allianz Australia Insurance Ltd v GSF Australia Pty Ltd (2005) 221 CLR 568; [2005] HCA 26 Archibald v Byron Shire Council (2003) 129 LGERA 311; [2003] NSWCA 292 Chappel v Hart (1998) 195 CLR 232 Collings Construction Co Pty Ltd v Australian Competition and Consumer Commission (1998) 43 NSWLR 131 County Personnel (Employment Agency) Ltd v Alan R Pulver & Co [1987] 1 WLR 916 Downs v Chappell [1997] 1 WLR 426 Elna Australia Pty Ltd v International Computers (Aust) Pty Ltd (No 2) (1987) 16 FCR 410 Etlis v New Age Constructions (NSW) Pty Ltd [2005] NSWCA 165 Flannery v Halifax Estate Agencies Ltd [2000] 1 WLR 377 Gould v Vaggelas (1984) 157 CLR 215 Henville v Walker (2001) 206 CLR 459 CASES CITED: HSH Hotels (Australia) Ltd v Multiplex Constructions Pty Ltd [2004] NSWCA 302 HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd (2004) 217 CLR 640; [2004] HCA 54 Joice v Permanent Trustee Co Ltd [2004] NSWCA 262 March v E and MH Stramare (1991) 171 CLR 506Marks v GIO (1998) 196 CLR 494 Moylan v Nutrasweet Co [2000] NSWCA 337 Murphy & Anor v Overton Investments Pty Limited (2004) 216 CLR 388 Nine Network Pty Ltd v Kennedy Miller Television Pty Ltd (unreported, NSWCA, 8 June 1994) Sellars v Adelaide Petroleum NL (1994) 179 CLR 332Smith v Moloney (2005) 92 SASR 498 Smith v Noss [2006] NSWCA 37 Travel Compensation Fund v Tambree (2005) 80 ALJR 183; [2005] HCA 69 Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 Wiki v Atlantis Relocations (NSW) Pty Limited (2004) 60 NSWLR 127; [2004] NSWCA 174

LOWER COURT MEDIUM NEUTRAL CITATION: Abigroup Contractors Pty Ltd v Sydney Catchment Authority [2005] NSWSC 662

(2004) 208 ALR 630

(2005) 221 CLR 568

(2003) 129 LGERA 311

(1998) 195 CLR 232

(1998) 43 NSWLR 131

(1987) 16 FCR 410

(1984) 157 CLR 215

(2001) 206 CLR 459

(2004) 217 CLR 640

(1991) 171 CLR 506

(1998) 196 CLR 494