Abigroup "submitted a tender and entered into the Contract containing a lump sum price which did not take into account the true nature and extent of the Folly Creek Excavation Work and CSF Work. The price tendered and contracted for did not allow for those matters referred to in the Schedule … ".
87 The "matters referred to in the Schedule" were the items of work actually performed by Abigroup over and above the items allowed for in its tender.
88 The case that was propounded in Abigroup's statement of contentions was neither a "no contract" or an "alternative contract" case. The claim for damages comprising the value of the work actually done over and above the value of the relevant items of work allowed for in the tender could be referable to either. Thus, although it is correct to say that Abigroup did not plead a no contract case, I think it is equally correct to say that it did not plead an alternative contract case; and that its pleadings are either consistent, or not inconsistent, with either approach to assessment of loss.
89 In this context, I think the fundamental rule is that a plaintiff should be compensated, so far as money can, for loss actually suffered; and that the various approaches to the task of quantification are "second order" rules: see Lord Steyn in Smith New Court Securities Ltd v Scrimgeour Vickers (Asset Management) Ltd [1997] AC 254, 284; approved by the High Court of Australia (in a somewhat different factual context) in HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd (2004) 79 ALJR 190 at 204 [63].
90 Abigroup's "pleaded" case on damages being either consistent, or not inconsistent, with the "no contract" mode of analysis, it is necessary to look at the way in which that case was argued. For the reasons that I shall give, I think that the referee makes it clear that Abigroup propounded its case as an alternative contract case. As I understand the report, it was because the referee so understood Abigroup to propound its case, and because he thought that an essential element of the case had not been proved, that he concluded that even if (contrary to his primary conclusion) Abigroup had been induced to enter into the contract by misleading or deceptive conduct on the part of Sydney Water, it had suffered no loss.
Abigroup's approach to causation
91 Abigroup's case was that, as a result of the misleading or deceptive conduct, it submitted a tender, and contracted to do the work, for a lump sum which did not take into account the true nature and extent of the excavation and stabilised fill required in the site of the embankment in Folly Creek. See the particulars to para 22 of the statement of contentions in its amended summons.
92 Abigroup sought to support this case by contending that, had the 1951 cross-section been made available at the time its tender was prepared, it would have realised that there was a serious discrepancy between the information disclosed in the tender documents and the information available from the 1951 cross-section, and drawn that discrepancy to the attention of Sydney Water. It said that, unless the discrepancy were resolved by the provision of further reliable information clarifying the amount of excavation and fill needed, it would have submitted a non conforming tender stating that it was not prepared to take the risk on that aspect of the work. The evidence of Sydney Water's witnesses, accepted by the referee at R 489 and 490, was that a tender so qualified would not have been accepted.
93 Thus, Abigroup submitted, the relevant test was to compare its position under the contract actually made with its position had there been no contract. This, it submitted, required only a comparison of the excavation work comprised in the tender with the excavation work actually required to be undertaken. In other words, the comparison assumed that all other elements of the contract could be excluded from consideration (or, perhaps, treated as neutral for the purposes of causation and assessment).
The Authority's approach to causation
94 The Authority submitted that Abigroup had not pleaded or prosecuted before the referee a "no transaction" case, and that it was too late for it now to seek to do so. Further, the Authority submitted, Abigroup had failed to prove that there would have been no contract (had the misleading or deceptive conduct not occurred) - ie, had failed to prove the basis of a "no transaction" case; and had likewise failed to prove, on the same assumption, what alternative contract would have been made.
95 Thus, the Authority submitted, Abigroup's submissions did not address the question of loss suffered by reliance on the relevant representations.
96 Underlying the approach taken by the Authority was the analysis by McHugh, Hayne and Callinan JJ in Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494 at 512-513 [42] and 514 [48].
97 At 512 [41], their Honours pointed out that common law tests might assist - in some cases might coincide with - the process of assessment required under s 82. However, their Honours concluded, the question was "not what would be allowed in deceit" but "what loss or damage has been caused by the conduct contravening the Act." Their Honours said at [42] that it followed that the comparison to be made was "between the position in which the party that allegedly has suffered loss or damage is and the position in which that party would have been but for the intervening conduct". Their Honours qualified this by cautioning that the "but for" test may not be "an exclusive test of causation in this area".
98 At 514 [47], their Honours said that damage was not shown merely because "a contract has been made which confers rights or imposes obligations that are different from what one party represented to be the case". Thus, their Honours said at [48], it was necessary for the party misled to show that it "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."
The referee's approach
99 At R 489, the referee stated Abigroup's case as being that if the apparent conflict between the 1951 cross-section and the geological information provided in the tender documents had not been resolved, it would have submitted a non conforming tender which would not have been accepted. On that basis, Abigroup would have suffered no loss (because it would not have contracted to do the works for a lump sum that was, in respect of the Folly Creek work, grossly underestimated). The referee then said:
"Thus the question arises whether the plaintiff has established … any loss. Certain of its submissions, to which I shall refer, support this view of its case. If this be the correct view then I do not consider that the plaintiff has established any loss. The position in which it would have been, but for the contravening conduct, would have been [sic] that it did not undertake the work, ie it would have acted differently from the way in which it did."
100 At R 490, the referee noted a submission for Abigroup that if the 1951 cross-section had been made available to Abigroup before it entered the contract, the misleading and deceptive nature of the tender information would have been obvious and the tender would have been on substantially different terms, so that "the parties would not have made the Contract, on the terms that were agreed". (The submission referred to other information, but for present purposes it is necessary to refer only, as I have done, to the 1951 cross-section.) The referee said:
"If that be so the plaintiff has not sought to prove on what basis, whether qualified or unqualified, it would have tendered, nor that an unqualified tender in whatever the different terms may have been, would have been accepted. The evidence does establish, to my satisfaction, that a tender qualified by not accepting the Folly Creek risk would not have been accepted. On this approach no damages have been proved."
101 At R 491, the referee dealt with an alternative formulation of Abigroup's case. This suggested, and the referee appeared to accept, that once Abigroup drew the 1951 cross-section to Sydney Water's attention, there would have been some alteration to the Concept Design Drawings so that "[t]he question of a qualified tender would not, in all probability, have arisen in those circumstances". The referee noted that there were still problems with this approach, but he rejected it because:
"But the evidence is silent as to what changes the defendant would have made, whether they would have been acceptable to the plaintiff, what tender the plaintiff would have made and whether it would have been acceptable to the defendant. Thus, one would return to the position that the plaintiff has not established loss."
102 At R 493, the referee reinforced this conclusion. He referred to a submission for the Authority that Abigroup had not proved damage because "[i]n particular, it has not sought to adduce any evidence as to how its tender would have been affected or was likely to be affected, by the additional information." The referee accepted this proposition. He said:
"… I regard this as a critical deficiency in the plaintiff's case. It sought to overcome the problem by submitting that it was adopting the position consistent with Henville v Walker , ie that it is entitled to the actual cost of doing the work. But that submission, in my opinion, must be rejected when the plaintiff's case is that it would have acted differently in the particular circumstances of this case. The difficulty with this submission also is that the plaintiff bears the onus of proving damages and, accordingly, that, but for the alleged contravening conduct, it would have been in a different and less financially advantageous [sic presumably, "disadvantageous" or "more financially advantageous"] position."
103 At R 495 and following, the referee dealt with the problem that the excavation in fact required was even greater than that indicated by the additional information, with a consequent impact on the amount of stabilised fill also required. On this basis, the referee concluded at R 496, "the correct measure of damages … [would be] the amount of the tender price of excavating to the 1948 line and refilling to that line with CSF, together with any ancillary costs made necessary by having to do that work. This accords with the approach taken by Mr Meredith. So far as the balance of the excavation is concerned, that is work for which the plaintiff would have been responsible pursuant to its responsibility for latent conditions."
104 The "1948 line" to which the referee referred is a line established by some other information that was, ultimately, disclosed by Sydney Water. For present purposes, the difference between the natural rock level shown by that line and the natural rock level that might be inferred from the 1951 cross-section can be ignored; the point of principle is clear either way. Mr Meredith was a quantity surveyor called by the Authority
105 The referee then dealt with Abigroup's answer to that proposition. The submission put by Abigroup was "that if the proscribed conduct had not occurred", the plaintiff "would most likely have been tendering on an entirely different concept". The referee said of this, at R 497:
"This is the type of submission to which I referred and as I have said, there was no evidence, to support this, nor was there any evidence to support on what "entirely different concept" the plaintiff would have been tendering and at what price it would have tendered. The acceptance of that submission would require speculation … . It would lead to my conclusion that no loss would have been proved."
I think that the reference in the first line is a reference back to what was said at R 490 and 491.
106 The referee returned to the point at R 499, 500. He referred to another submission put for Abigroup:
"In other words, if the misleading and deceptive conduct had not occurred, Abigroup would most likely have been tendering on an entirely different concept design. This is one basic factor that militates against the Meredith rationale".
107 At R 500 the referee said that this was important "because the plaintiff's case proceeded on the basis that it had established damages by reference to the additional work it had to do, the delay it experienced and the further expenses it incurred by way of "inefficiencies"."
108 For these various reasons, the referee concluded that the plaintiff had not "provided any measure of its alleged damage". However, he then considered the various submissions put on the quantification of the loss claimed by Abigroup. I shall return to that.
The authorities relied on
109 The parties referred in their written and oral submissions to a great many authorities on the question of causation and measure of loss. Without wishing to be disrespectful, either to the parties' submissions or to the authorities relied upon, I do not propose to deal separately with the authorities. I have referred to some; and I shall refer to others at what seem to me to be appropriate points in my analysis.
The "correct" representation
110 It is apparent that, underlying at least Abigroup's submissions on damages, there is the proposition that the "correct", or "non misleading or deceptive", form of the representation would have disclosed the existence of at least the 1951 cross-section. But that is not the only way in which tender documents that were not relevantly misleading or deceptive could have been formulated. At least in circumstances where Sydney Water had no knowledge, and perhaps no reason to know, of the existence of the 1951 cross-section, a representation that simply omitted the words "or the [any] outlet pipe" might also have been not misleading or deceptive. In the latter case, Abigroup would presumably be in precisely the situation it is in today. Its case therefore depends on the proposition that the former is the more likely "correct" form of representation.
111 Once Sydney Water embarked upon the process of disclosure, I think that the better view is that, had it been aware of the existence of the 1951 cross-section, Sydney Water would have disclosed it in the Concept Design Report and the Detailed Specification. It is clear, I think, that when Sydney Water issued the tender it did not know of the existence of the 1951 cross-section. But the question may be tested by assuming that Sydney Water did know, when it issued the tender drawings, of the existence of the 1951 cross-section and of what, to an engineer, it would have indicated.
112 Geological investigation suggested that a certain amount of excavation and fill, involving the removal and replacement of a certain quantity of material, would be required: based on the assumed pre-fill levels. On the evidence, the 1951 cross-section would have shown that substantially more excavation and substantially more fill were required. Had Sydney Water issued the tender documents without any representation as to plans of the outlet pipe (ie, omitting from the forms of the representation the words "or of the [any] outlet pipe"), but on the basis that the amounts of excavation and fill required were in accordance with the assumed levels in the geological reports, would it have been guilty of misleading or deceptive conduct when, by hypothesis, it knew of the existence of the 1951 cross-section and that the information conveyed by that document would falsify the assumed levels on which the quantities of excavation and fill were based? One would think that the answer must be "yes".
113 As I have said, it was in Sydney Water's interest that tenders be based on as much information as available, and with as little padding for risk as possible. It no doubt appreciated that the extent of excavation and fill in Folly Creek around the area of the embankment was a significant matter for tenderers. No doubt, that is why it informed tenderers that there were no plans of the embankment or the outlet pipe. It is therefore unlikely that, had Sydney Water been aware of the existence of the 1951 cross-section, it would not have disclosed it. Firstly, as I have indicated, that would be likely to make the tender documents misleading or deceptive in a material respect. Secondly, it would be inconsistent with the desire to obtain tenders based on all available information, so as to minimise the inflation of the tender prices for risk. There was evidence, which the referee appeared to accept, that a competent engineer looking at the 1951 cross-section would have realised that it was highly relevant to the estimation of quantities of excavation and fill in the Folly Creek area. I have no doubt that engineers in the employ of Sydney Water or Public Works would have so understood the significance of the 1951 cross-section.
114 This analysis assumes that Sydney Water knew, or had reason to know, of the existence of the 1951 cross-section. If, however, it did not (as would appear to be the case) then the alternative form of "but for" representation - ie, simply omitting the reference to "or the [any] outlet pipe" would not have been misleading or deceptive. In this context, one needs to bear in mind that the referee rejected Abigroup's alternative case - that the tender documents and contract expressly or by implication represented that the material supplied was complete - and that Nicholas J upheld this aspect of the referee's report, and that the Court of Appeal did not disagree with this aspect of his Honour's reasons. But, on the hypothesis of ignorance, I do not think that the representation should be taken to have omitted the offending words.
115 The reason is that the form of the representation reflecting want of knowledge of the 1951 cross-section is that actually made. There is thus no need to speculate. The knowing, or informed, representation is, for the reasons I have given, likely to be one that disclosed in some adequate way the existence of the 1951 cross-section. Since the question of the appropriate "but for" representation necessarily assumes knowledge of the existence of the 1951 cross-section (because, as I have said, there is no need to speculate about the innocent form of the representation), I conclude that it is more likely than not to have been one that disclosed the existence of the 1951 cross-section.
No contract or alternative contract
116 This is a key issue on the question of damages. If the correct analysis is that the alternative, or "but for" world would have been that another contract on different terms was made, then Abigroup has failed to prove its loss. That is because, as the referee said, it has failed to prove the terms of that contract. It has therefore failed to prove what its position would have been had it performed that alternative contract.
117 At this point, it is necessary to remember that the question for my decision is whether or not the report should be adopted, rejected or varied; it is not a hearing or rehearing of the issues heard and dealt with in his report by the referee. The referee considered the various ways in which Abigroup put its case on damages. The question is whether his analysis is vitiated by any of the flaws to which I referred in paras [12] and [13] above: overlooking, or patent misapprehension of the evidence, error of law and the like.
118 The referee considered the "no contract" case at R 489 and 490. I have some difficulty with his analysis. He accepted that a qualified tender would not have been accepted, so that Abigroup would not have sustained the loss that it did in performing the contract. He therefore concluded correctly that it would have been in a different position because it would have acted differently from the way in which it did. He did not analyse the outcome of that, unless the concluding sentences of R 490 - repeating that a qualified tender would not have been accepted and stating that "on this approach no damages have been proved" is the outcome of that analysis. If it is, then it seems to omit the fundamental step of comparing Abigroup's no contract position with its actual position. That would be an error of analysis sufficient to justify intervention and, in an appropriate case, reconsideration. However, in the present case, I do not think that it does.
119 The referee did not stop at the "no contract" point because, as clearly appears from R 490, what he was asked to consider was an alternative contract case. That is reinforced in R 491 and following. He concluded in R 491 that, had what he called the "Additional Information" (which included, but was not limited to, the 1951 cross-section) been drawn to the attention of Sydney Water, there would have been alterations to the Concept Design Drawings. If I may say so, that is not only a conclusion that was, on the evidence, open to the referee; it was the correct conclusion. Abigroup's evidence showed what disclosure of the Additional Information would have caused it to do; and the point would be the same if the disclosure were limited to the 1951 cross-section. The inference is clearly available that any competent engineer considering the matter on behalf of a prospective tenderer, or any competent prospective tenderer considering the matter, would have viewed the 1951 cross-section in the same way. That is to say, the inference is clearly open that, had Sydney Water disclosed the existence of the 1951 cross-section, tenderers would have realised that it, or the information contained in it, appeared to be inconsistent with what was disclosed, and would have sought some reconciliation, or revision of the concept drawings. That inference is supported by the evidence (of the Authority's witnesses) referred to in para [76(12)] above.
120 It is highly unlikely that Sydney Water would have refused such a request. It wanted the spillway built, for reasons that the referee made clear at R 4: that "developments in rainfall and flood estimation have shown that [Warragamba Dam] could encounter floods much larger than originally anticipated" which "could overtop it and cause it to fail". That "would cause significant damage to natural and man made features and place many lives in the Hawkesbury Nepean Valley at risk." The spillway was constructed "[i]n an attempt to avoid such a catastrophe".
121 Inevitably, Sydney Water and its advisers in Public Works and AWT would have considered how to deal with the problem, apparently indicated by the 1951 cross-section and other information, that the scope of works in the Folly Creek area was significantly greater than suggested by the geological investigation. The likelihood is that Sydney Water and its advisers would have revised the concept design and other material. They may have carried out further geological investigation in the embankment. It is likely that they would have revised the tender documents. No doubt, tenderers would still be required to assume the risk of latent conditions. However, to some extent, the risk of this particular latent condition would have been addressed.
122 Thus, I think, the referee was correct to proceed on the basis that the correct analysis required consideration of what would have been the alternative form of tender documents, and what alternative contract would have been made. It is of course possible that Abigroup would not have retendered. Perhaps it may still have thought that its concerns had not adequately been addressed. In that situation, Mr Havercroft's evidence was that it would still have submitted a qualified tender; and the Authority's evidence was that a qualified tender would not have been accepted.
123 Again, however, if the situation were not sufficiently clarified for a contractor such as Abigroup, it is likely that other experienced and competent contractors, assisted by competent engineers, would have come to a similar conclusion. Indeed, one might think, if one aspect of the concept design and geological investigation had been shown to be very substantially wrong, it is less rather than more likely that prospective tenderers would have been inclined to accept the risk that, with the correction of that aspect, there was not likely to be any further problem.
124 In any event, it is not necessary to speculate. That is because the likely approach - that there would have been revised tender documents and an alternative contract - was not adequately addressed by Abigroup, even though (as the referee said at R 491, and again at R 493, 497 and 499) that was the way in which it put its case.
125 I see nothing to justify intervention and reconsideration in the way the referee dealt with the "alternative contract" case. Since that was the way in which Abigroup put its case before the referee, it follows that there is no basis for the Court to reject that aspect of the report and to take one of the consequential steps authorised by Pt 72 r 13.
Alternative analysis: no contract case
126 In case I am wrong in the view that I have expressed as to the way in which Abigroup put its case before the referee, and the referee's conclusion on that case, I shall deal briefly with the no contract alternative.
127 The Authority submitted that, even if it were open to Abigroup to argue (on the adoption hearing) a no contract damages case, it must fail because it had not proved that case. The Authority submitted that this was so because Abigroup had not proved the outcome of the contract that in fact it undertook.
128 Abigroup submitted that it was not necessary for it to do so because it had proved (so it said) the relevantly different outcome, namely the outcome in relation to the Folly Creek excavation and fill works. It submitted that the balance of the contract works were in effect neutral: ie, that one could assume that there would have been the same outcome, for better or worse, on the balance of those works.
129 I return to what McHugh, Hayne and Callinan JJ said in Marks at 512 [42]: that the relevant comparison is "between the position in which the party that allegedly has suffered loss or damage is and the position in which that party would have been but for the contravening conduct." I accept, as their Honours there pointed out, that "even this enquiry may not conclude the question." In the context of that case, as their Honours pointed out at 514 [48], the relevant comparison might require a comparison of the value of that which was acquired (by reason of the misleading or deceptive conduct) with the amount actually paid for it; and it might as well require an investigation of other heads of loss, including consequential loss.
130 It follows that the primary investigation, in a no contract case, requires comparison of the position that the plaintiff is actually in (as a result of the misleading or deceptive conduct) with the position that it would have been in had it not entered into the contract. See also Henville v Walker (2001) 206 CLR 459 at 502 [132] where McHugh J, with whom Gummow J agreed, stated that "the most appropriate approach is to identify what Mr Henville has suffered by way of prejudice or disadvantage in consequence of altering his position by reason of breach of the Act … . The measure of that loss is not determined by reference to what he would have received if Mr Walker's representation had been accurate." Again, at 503 [134], McHugh J compared the situation of Mr Henville because of what he was induced to do by the misrepresentations to his position had there been no misrepresentations. In the latter case, his Honour said, "[t]he loss that he suffered would have been avoided" so that "his loss [on the transaction] was a direct result of the misrepresentations and would have been recoverable in an action for damages for deceit." Further, "in a general way the loss was a reasonably foreseeable consequence of the misrepresentations."
131 In the same case, Hayne J (with whom also Gummow J agreed) said at 509 [162] that to conclude that the appellants had suffered loss, there must be a "comparison between the position in which the appellants found themselves after the project was finished, and the position in which they would have been if, instead of relying on what they were told by the respondents, they had not undertaken the project. It does not invite attention to what would have been their position if an accurate estimate of selling price had been given by the respondents … Moreover, the conclusion that the appellants suffered loss neither requires nor permits consideration of some third or intermediate position in which the appellants undertook some project or transaction other than the one they did."
132 On a no contract analysis, the starting point is, as the referee rightly recognised at R 489, that if Abigroup had submitted a non conforming tender, it would not have been accepted and Abigroup would have suffered no loss. (The referee referred to the possible loss arising from preparing the qualified tender, but this was not pleaded or particularised as a head of damage.) In other words, on the no contract analysis, one of the two things to be compared is a situation of no loss.
133 That which is to be compared with the no loss position is, in my judgment, the actual position of Abigroup under the contract as it was performed. A comparison of the no loss position with the position under part only of that contract - even if, factually or legally, it were a discrete part - is not a comparison of like with like. It is not a method of assessment of the kind authorised by Marks or Henville.
134 Nor does such a comparison quantify the loss actually suffered by Abigroup. Abigroup's case that it was induced to enter the contract by reason of the misleading or deceptive conduct of Sydney Water, not that it was induced to undertake part of the works comprised in the contract by reason of that conduct. Conceptually, therefore, the loss sustained by that conduct is the loss flowing from undertaking the induced contractual obligations. An analysis of the outcome of part only of the contract, or a comparison of the loss sustained thereby with the no contract position, is not in truth a no contract analysis; it is an alternative contract analysis.
135 In short: if the measure of Abigroup's loss is the detriment to it from performing the contract compared to the detriment to it of having its tender rejected, then it is the outcome of the whole of the performance that must be measured.
136 The Authority submitted that Abigroup had not proved the loss to it flowing from (or its position as a result of) performance of the contract that it made. Abigroup did not suggest that it had. Its case was that it was not required to do so. It relied on the decision in Murphy & Anor v Overton Investments Pty Limited (2004) 78 ALJR 324..
137 The Court held in Murphy that lessees who entered into a lease on the basis of misleading or deceptive representations as to outgoings were entitled to recover, by way of damages, damages to compensate them for outgoings greater than those represented to them. That was so even though there was no evidence that the amount that they paid for their leasehold interest was greater than its true value at the time, or that its true value was diminished because of the greater outgoings (compared to those represented) that were charged.
138 The core of the Court's reasoning is found at 333 [54]-[55]. Their Honours said that the statement of estimated outgoings given to the plaintiffs was misleading because it did not take account of all amounts that could be charged as outgoings. That meant, as their Honours said, that the obligation undertaken by the plaintiffs to pay outgoings might be larger than they had been led to believe would be the case. Their Honours said that the plaintiffs did not suffer loss until the contingency - that the defendant would charge outgoings in accordance with its actual entitlement, and not in accordance with the representations - was realised. It might never have done so. It was only when it decided to do so that the adverse risk eventuated. Their Honours said:
"In the present case, the finding that the appellants had been induced to enter the lease by a statement of estimated outgoings that was misleading, because it did not take account of all amounts that could properly be charged as outgoings, meant that the appellants undertook an obligation which may, but need not, have proved to be larger or more costly than they had been led to believe. There may be cases in which a person misled in this way suffers loss upon entering the agreement. That may be so if it could be shown that the sum paid exceeded the market value. But that was not this case. No evidence at trial suggested that they had paid more than market value. There was no misrepresentation about the nature or quality of the property being acquired. The first appellant knew and understood that the lease obliged the appellants, as tenants, to pay outgoings in amounts which the lessor was to determine.
What the appellants did not know was that the estimate of outgoings they were given did not provide for all the outgoings that were then being incurred. Here, therefore, the appellants suffered no loss as a result of undertaking the obligations they did unless and until the contingency which the misrepresentation hid (that items other than those used to form the estimate were then being incurred and could be charged as outgoings) was first realised. That was a contingency in the sense that the adverse risk might never have eventuated. When the lease was entered in 1992, the respondent was charging levies in relation only to limited categories of the overall outgoings. The respondent might have chosen to continue to charge the appellants only for those limited categories. On the other hand, it was possible that after 1992 it might decide to charge for wider categories. It was only from the time when it in fact decided to depart from the 1992 position and charge for the wider categories that the adverse risk eventuated. When it did but only then, the appellants suffered loss and damage. …".
139 On that analysis, there is a crucial distinction between the facts in Murphy and the facts in this case. In this case, the true rock level was at all material times the same. The amount of excavation required was at all material times the same. The amount of stabilised fill required was at all material times the same. When Abigroup entered the contract with Sydney Water, it undertook the obligation to excavate (including in and around the Folly Creek embankment) to rock, so as to provide a sound base for the stabilised fill, and to place stabilised fill to the design level required for the base of the spillway. Further, it undertook that obligation at its risk, in that it bore the risk of latent conditions. Thus, when Abigroup entered the contract, it was bound at its own cost and risk to remove between 4 and 5 times more material than was allowed for in its price, and (presumably) to place between 4 and 5 times more stabilised fill than was allowed for in its price. Abigroup suffered loss, in respect of the excavation and stablilised fill in the Folly Creek region, when the contract was entered, although the extent of that loss was not known until the work was completed. Loss suffered was because, due to the latent conditions, the volume of work that Abigroup became obliged to perform on entering the contract was vastly greater than that allowed for in the price.
140 In this sense, there is no question of contingency. This is not a case where loss might or might not occur, depending on a decision taken by a third party. It is a case where loss was bound to occur upon, and by virtue of the terms of, the contract; and in turn because of the misleading or deceptive conduct that induced Abigroup to make that contract.
141 I think that my analysis of the decision in Murphy, and my distinguishing it from the facts in this case, is supported by the decision in HTW Valuers. In that case, the defendant (appellant) valued a shopping centre, the purchase of which the plaintiff (respondent) was considering. The plaintiff agreed to buy the shopping centre induced (among other things) by the defendant's valuation. There was a new shopping centre under construction nearby. The defendant knew of that. The trial judge found that the defendant should have qualified its valuation advice by cautioning the plaintiff about the uncertain effect the new shopping centre would have on the profitability (and, therefore, value) of the shopping centre that the plaintiff bought.
142 The Court considered that the plaintiff suffered damage on entering the contract to buy the shopping centre. It was then worse off because, on that day, the purchase price exceeded the market value. The Court said at 197 [28]:
"[28]…If the plaintiff had learned the day after entering the contract to buy the Plaza, or the day after completing that contract, that the defendant's conduct had been misleading in the sense ultimately found by the trial judge, it could have started proceedings then and there. There was unchallenged evidence from Mr Dodds that on either of those dates the plaintiff was in fact worse off as a result of the defendant's breach, since the market value was less than the price. It was not necessary to wait for nearly two years to ascertain that some loss had been suffered. The plaintiff could have found out at once that it had bought something which was worth less than that which it had agreed to pay and did pay. It could have recovered at least the difference between the price paid for, and the market value of, the Plaza. The limitation period would have begun to run."
143 Thus, the Court said 197 [29], the case before it could be distinguished from Wardley Australia Ltd v State of Western Australia (1992) 175 CLR 514. Wardley was a case where the plaintiff sustained only the risk of loss, or the contingency of loss, when it entered into the contract. HTW Valuers, on the Court's analysis, was a case where the plaintiff sustained actual loss on entering the contract.
144 For similar reasons, their Honours at 197 [30] distinguished the case before them from Murphy. That was because, in Murphy, loss was contingent on the respondent's exercising its discretion to increase the charges; and that contingency might or might not occur. But in HTW Valuers, the risk to which the defendant, by its misleading or deceptive conduct, had not alerted the plaintiff had its impact on the plaintiff when the plaintiff entered the contract. The Court said (omitting citations):
"[29] It is incorrect to treat this case as being like Wardley Australia Ltd v Western Australia , on which the trial judge relied. That case held that a risk of loss is not itself a category of loss, and that if a plaintiff enters a contract exposing it only to a contingent loss or liability, the plaintiff "sustains no actual damage until the contingency is fulfilled and the loss becomes actual". The plaintiff was not exposed to a contingent loss; it had suffered an actual loss.
[30] Nor is the present case one like Murphy v Overton Investments Pty Ltd. There the applicants had been induced to enter into a lease and incur an obligation to pay charges for outgoings. Whether the charges would rise above the level stated before the applicants entered the lease was contingent in the sense that it was not inevitable: the contingency could never eventuate unless the respondent exercised its discretion to increase the charges. There was thus a contingency hidden by the respondent's conduct which might or might not come to pass. But in this case the risk of the catastrophic effect on rent levels of the Plaza after March 1999, to which the defendant had not alerted the plaintiff, had already had an impact on the value of the Plaza by April 1997. That, on the evidence, was not the case in Murphy v Overton Investments Pty Ltd . . The impact of the Beach Rd Shopping Centre, unlike the contingency in Murphy v Overton Investments Pty Ltd , was not hidden and did not rest on any discretionary decision by anyone."
145 Thus, their Honours said at 198 [32], the case resembled "cases where a wrong results in the immediate loss of a chance or commercial opportunity which had some value, although the process of measuring the worth of that chance or opportunity depends on estimating the significance of events which are, or may be, yet to come." And at 198 [33], their Honours confirmed that "[t]here is no doubt, then, that from the moment it contracted to buy the Plaza, the plaintiff suffered a loss."
146 I regard the reasoning in HTW Valuers, and the basis on which the Court there distinguished its decisions in Wardley and Murphy, as supporting the approach that I have taken in this case to Abigroup's "no contract" case in so far as Abigroup sought to support that case by relying on the decision in Murphy. Accordingly, I do not understand the decision in Murphy to require that the no contract analysis should lead to any outcome different to that set out in para [135] above.
147 Thus, if it were necessary to consider the matter on the basis of a no contract analysis, I would conclude that Abigroup has not proved that it suffered loss. It follows, on this hypothesis, that I would adopt the referee's conclusion although not his reasoning.
Sixth and seventh Issues
148 It follows from what I have just said that these issues do not require consideration.
Eighth and ninth Issues
149 Abigroup claimed to have been delayed in its completion of the works by reason of the additional work required in the Folly Creek area. If there were a relevant delay in achieving practical completion then the question of extension of time would be raised. If Abigroup were entitled to an extension of time then it might be entitled to delay costs. If there were no entitlement to an extension of time (because of the answers to issues 10 or 12) then there might be a claim for damages. In this context, Abigroup sought the cost of the alleged delay either as damages under s 82 or as damages for breach of contract.
150 Logically, the starting point in a consideration of these issues is the question posed by issue 8 relating to delay in achieving practical completion. However, because of the view to which I have come on other issues, and for the reasons that follow, I do not need to give a concluded answer to issue 8. That is because (as will be seen) I conclude that issues 10 and 12 should be answered adversely to Abigroup. On that basis, the contract provides a complete answer to any claim for an extension of time; and my conclusion in respect of the fifth issue necessarily means that Abigroup can have no discrete claim for damage in respect of the alleged delay in achieving practical completion. Any such claim must be recoverable (if at all) either under the alternative contract analysis that, seemingly, was pressed before the referee, or alternatively under the no contract analysis that was pressed before me. Since neither basis is made good, the components that might be thought to bear on the quantification of the claim (because they form part of the actual cost incurred by Abigroup in performing its obligations) go nowhere in terms of damages. Just as my answer to the fifth issue disposed of the sixth and seventh issues (see para [148] above), it disposes of any claim for damages in respect of the eighth issue.
The s 82 Case
151 As to the claim under s 82, Abigroup submitted that Sydney Water's misleading or deceptive conduct required it both to complete for a fixed sum that made allowance for the extra work required in the Folly Creek area and to complete by a fixed date which, again, made no allowance for that work. The conclusions to which I have come on Issue 5 means that (as with Issues 6 and 7) I do not need to consider this aspect of Issue 8. Thus, Abigroup's complaint that the referee failed to consider this aspect of its claim under s 82, even if it be correct, goes nowhere.
The contractual case
152 The Authority contended that Abigroup's claim under the contract was barred by cl 35.5.5 of the general conditions. Clause 35 deals with "times for commencement and practical completion"; subcl 35.5 deals with "extension of time for practical completion". Relevantly, it reads as follows:
"35.5 Extension of Time for Practical Completion
35.5.1 When it becomes evident to the Contractor that anything, including an act or omission of the Principal, the Superintendent or the Principal's employees, consultants, other contractors or agents, may delay the work under the Contract, the Contractor shall promptly notify the Superintendent in writing with details of the possible delay and the cause.
35.5.2 If the Contractor is or will be delayed in reaching Practical Completion by prescribed event listed in Clause 35.5.4 and within 28 days after the delay commences the Contractor gives the Superintendent a written claim for an extension of time for Practical Completion, the Contractor shall be entitled to an extension of time for Practical Completion provided that the Contractor gives all notices required under Clause 35.5.5.
….
35.5.5 Provided that the Contractor gives to the Superintendent notice in writing of the claim not less than two working days after the commencement of the occurrence of the cause of delay, the Contractor shall be entitled to the extension of time. Where circumstances causing delay last more than one day, a separate notice must be given for each day. The notice in writing of the claim must detail the circumstances causing delay and the duration and extent of the delay.
…."
153 Abigroup appeared to accept (subject to what it contended in relation to cl 23, which I consider below in relation to Issue 12) that cl 35.5 is a bar to its claim in contract (either for damages for breach of contract or for an extension of time under the contract). However, it contended, there was an oral agreement made between Abigroup and Sydney Water's Superintendent that the Superintendent would consider a delay claim following completion of the excavation for the spillway, and that if the Superintendent considered that there had been a delay within the contract, he would grant an extension of time notwithstanding that Abigroup had not submitted the required notices (see R 527).
154 The referee concluded that no such agreement had been made (see R535 and 541). He concluded further that Abigroup should not be permitted to raise an alternative, unpleaded and unparticularised, reply of waiver (see R 539); and that, in any event, he was not satisfied that the Superintendent or his representative did not act in good faith in deciding not to allow the claim (see R 538).
155 Abigroup challenged the referee's conclusion on the alleged agreement. I discuss this in the next section of these reasons (dealing with Issue 10). Because I conclude that the challenge fails, and that this aspect of the report should be adopted, it is unnecessary for me to spend further time on issues 8 and 9.
No entitlement in any event
156 Nonetheless, if it were necessary for me to do so, I would uphold the referee's report on the question of delay. On that question, the principal dispute was between the experts called for Abigroup (Mr Hammond) and the Authority (Mr Senogles): whether the works in the Folly Creek area were on the critical path to completion. Messrs Hammond and Senogles were experts in the science, (or art) of construction programming. They held conflicting views; and they were unable to resolve their conflicts even after they had conferred and produced a joint report. The referee considered their evidence, relatively briefly, at R 543-570. He preferred the approach taken by Mr Senogles. He concluded that Abigroup had not on the facts made out any case of delay that would (assuming compliance with the contract) entitle it to an extension of time.
157 Abigroup attacks the referee's reasoning. If it were necessary for me to do so, I would conclude that the referee reviewed the evidence and the issues in a way that gives me the required level of confidence in his conclusion. Were it necessary for me to consider the matter, I would not conclude that this aspect of the referee's reasons should be rejected; on the contrary, because I hold a degree of comfort sufficient to enable me to conclude that those reasons should be adopted, I would so conclude.
Tenth issue
158 The referee referred to the evidence for and against the alleged agreement at R 378 and 379. The witnesses were Mr Walton (of Abigroup) and Mr van Breda (of Sydney Water). The referee did not in those paragraphs express a conclusion. However, at R 380 the referee referred to Mr van Breda's account of what he said at a pre-tender meeting held on 4 September 1998. The referee accepted that Mr van Breda at that meeting referred to the inability of Sydney Water to guarantee the geological information; the "risk exposure" that tenderers would have to carry; and the desirability of tenderers carrying out their own investigations. The statement of Mr van Breda at that meeting could not be regarded as consistent with the statement attributed to him by Mr Walton, from which the alleged oral agreement is said to arise.
159 The referee analysed the claim, and the evidence, at R 528 and following. He considered the alleged conversation in the light of two subsequent items of correspondence (R 531 and 533) and concluded at R 535, that there was no agreement as alleged by Abigroup.
160 In my judgment, this conclusion was open to the referee. Further, as the referee noted, the conversation itself was not in terms indicative of agreement; as he put it in R 528 "at best Mr van Breda agreed to look at the issues when the excavation was complete." Having regard to Mr van Breda's comment, in the same conversation, that Abigroup had to bear some risk for latent conditions, including rock levels (i.e. that variations in rock level were Abigroup's risk and not Sydney Water's), I do not think that the referee erred in his analysis of the conversation.
161 Certainly, having regard to the principles that I have set out above as to the approach that this Court should take when considering the question of adoption, I do not think that the referee's conclusion shows patent misapprehension of the evidence or perversity or manifest unreasonableness in fact finding. Nor do I think that the referee's conclusion on this issue is one that no reasonable tribunal of fact could have reached. Indeed, as I have said, I conclude to the contrary: that the conclusion was open to the referee on the evidence.
162 I therefore conclude that Issue 10 should be answered by adopting the referee's finding on this point.
Eleventh issue
163 The phrasing of Issue 11 is unfortunate, in that it refers to the answer to question 10 being "yes" (and Issue 12 refers to the answer being "no") whereas Issue 10 is not a "yes/no" question but an "adopt/reject" question. However, I understand, contextually, that in Issue 11 "yes" means "reject", and that in Issue 12 '"no" means "adopt".
164 On that understanding, Issue 11 does not arise for consideration.