The Alleged Findings Contrary to Suggested Uncontradicted Evidence of Mr Huntstead
119 I turn then to examine in more detail, the submission that the critical finding by the referee that ADC would have entered into a similarly underpriced contract with ACT for concrete ('the critical finding'), was contrary to the uncontradicted evidence.
120 The referee's finding here was that there would have been an alternative contract with ACT for concrete and that it would have been underpriced and therefore non-viable to at least the same degree as the contract in steel, so that the contract for concrete would probably have failed in precisely the same way as the contract for steel and caused the same loss.
121 The finding at page 84 is in terms:
'If there had been no breach of s. 52 of the Trade Practices Act , it seems to me that, on the balance of probabilities, ADC would have entered into a similar contract with ACT for the construction of the residential tower in concrete for about the same price and that, in the circumstances, ADC suffered no loss as a consequence of WIL's breach of s. 52.'
122 The position before the referee was that there were two witnesses called by WIL on the topic of WIL's hypothetical price for a contract in concrete. The first was Mr Huntstead, WIL's Manager Central Engineering, also being Mr Amman's immediate superior, who was responsible for recommending to the directors the offer to be submitted to ADC, including the hypothetical offer under consideration.
123 The other witness was Mr Amman, who was a senior estimator but was not the person responsible for submitting tenders to ADC and was not responsible for recommending to WIL's directors that any offer be submitted to ADC.
124 Only Mr Amman's evidence was referred to by the referee and there was no reference anywhere in the report to the evidence given by Mr Huntstead.
125 At page 74 of the report, the referee first sets out a section of Mr Amman's evidence and then states that he accepts that evidence. The section of evidence so accepted read as follows:
'From mid 1985 until March 1987, I was employed as a senior estimator in the construction division of White Industries Limited.
In the period between 5 January 1987 and 28 January 1987, I was engaged full time in the preparation and review of the tender for the Quadrant project.
That tender was based on a concrete car park, steel frame residential tower and a steel framed office building.
The concept of constructing the residential tower in structural steel rather than in reinforced concrete was conceived by me in or about late December 1986 or early January 1987.
I calculated the tender price of $18,485,000 submitted by White Constructions (ACT) Pty Ltd ("Whites (ACT)") on 28 January 1987. That price was subsequently increased on 3 February 1987 by $1,050,000 to produce a final contract sum of $19,535,000 . . .
If I have been instructed to calculate the tender price on the assumption that the residential building was to be constructed using reinforced concrete rather than structural steel, but with the building otherwise being the same in all respects . . . the tender price which I would have calculated would have been lesser than the tender price submitted to ADC by $66,710".
126 ADC submitted before me as follows:
'Mr Amman said what he would have done if he had been instructed to recalculate for concrete instead of steel. For this purpose, he carried out only a "quick calculation" [transcript 243 line 24], adjusting the actual steel tender by deletion of items referable to the use of steel and substitution of items referable to the use of concrete. He did not purport to say, and was not in a position to say, what (if any) price WIL would have submitted had ADC declined to proceed with the ACT contract in steel, either because Mr Fischer had not received the assurances he wanted or because he had not been sufficiently persuaded by them.'
[ADC's submissions paragraph 12]
127 ADC submitted before me in relation to Mr Huntstead inter alia as follows:
'He was WIL's manager, central engineering, Mr Amman's immediate superior and responsible for recommending to the directors the offer to be submitted to ADC including the hypothetical offer under consideration. [Huntstead transcript 23912, Amman transcript 2428 line 5.]
His evidence was that, if WIL were asked to change back from steel to concrete, he would not have recommended Mr Amman's figures be submitted to ADC; rather, he would "certainly" have retendered the entire project in concrete from "square one", "from scratch", he would not have been content merely with adjustments either from the steel price, or indeed from the concrete price which had been submitted by WIL back in 1985: Transcript 2393 lines 27-35, 2394 lines 20-22, 2400 lines 39-45, 2401 lines 36-57, 2403 lines 7-22. [Note that in re-examination at transcript 2407-2409, Mr Huntstead was asked a number of questions about what he had meant by 'going back to scratch' in a different context, namely in the context of working up the actual price in steel, as distinct from the hypothetical alternative price in concrete if steel had been rejected. The only evidence in re-examination on what he meant by 'going back to scratch' in the latter context is (at the most) at transcript 2409 line 45; 2410 line 2, which does not in any way detract from the evidence in cross-examination].
Mr Huntstead regarded Mr Amman's exercise as only a '15 minute exercise in logic' which might have been carried out only if ADC had asked how much extra concrete would cost 'as a guess' [transcript 2401 line 44-54].
The exercise carried out for the purpose of making an alternative offer to ADC would have been carried out very carefully, properly costing all direct costs, allowing an appropriate amount for overheads (5%), and being very careful to make sure that items of cost did not slip through the cracks in this hypothetical situation of suddenly being asked to go back to an all concrete building - indeed WIL would have been better placed to provide a proper price in concrete then in steel [transcript 2400 lines 47 - 2401 line 31].
Having done this and submitted the price to ADC, [Mr Huntstead] would have had no hesitation in supporting it as an adequate one [transcript 2403 lines 24-33].
Mr Huntstead's evidence was not contradicted by other evidence. It was not referred to in the WIL submissions 'adopted' by the referee.'
[ADC's submissions paragraphs 13-14]
128 As has already been noted, the manner in which the referee proceeded here was to set out ADC's submissions in his report from pages 74 to 78 and then to set out WIL's submissions from pages 78 through to 83 and then to follow at the top of page 84 with a paragraph reading:
'I agree with the WIL submissions set out above and I adopt the same. If there had been no breach of s. 52 of the Trade Practices Act , it seems to me that, on the balance of probabilities, ADC would have entered into a similar contract with ACT for the construction of the residential tower in concrete for about the same price and that in the circumstances ADC suffered no loss as a consequence of WIL's breach of Section 52.'
129 In purporting to quote from ADC's submissions, the referee at page 77 of his report made some important omissions. Exhibit P2 before me was an extract of ADC's submissions in chief to the referee and this may be compared to page 77 of the referee's report.
130 To enable a reader of this judgment to follow the omission, I shall set out hereunder a section from page 77 of the referee's report and I shall include in square brackets the sections from ADC's submissions which are not to be found at page 77 of the report:
'Even if WIL had had a further chance, there is no basis for finding that it would have put in a price for a concrete project significantly lower than other tenderers.
[Mr Huntstead, who was responsible at the time, would have "gone back to square one and had the job retendered from scratch", properly costing all direct costs, allowing an appropriate amount for overheads and a 5% profit margin, being very careful (as one would expect, if his first proposal had been rejected as not viable). He would not merely have made adjustments from the 1985 concrete tender, nor from the under-priced steel tender; transcript 2393.27, 2400.39-2401.54. In that event, WIL is likely to have tendered more than the estimates of Mr Copping and Mr Makin ($22.48m and $22.42m respectively), which allowed only 3% margin. Thus, there is no reason to think that, after a careful re-pricing, WIL would have had any significant price advantage over other tenderers.]
If [(contrary to Mr Huntstead's evidence)] WIL had merely adjusted its under-priced steel tender, and come up with an under-priced concrete tender, ADC would have viewed it with understandable suspicion, and would have required to be satisfied that Whites this time knew what they were doing and could do what they said and would have required WIL to give sufficient assurances to that effect [ ( Mr Fischer Exhibit P6 paras 5, 6; Mr Ward Exhibit P9 para 2, transcript 857.21-.48 ) ]. Would Mr Fischer have been satisfied, and would he have received the assurances? This is conjecture upon conjecture.
One is on much firmer ground finding on the balance of probabilities that, if Mr Fischer had not received or accepted WIL's assurance about the viability of its steel proposal, he would have lost confidence in WIL, and looked elsewhere.'
131 Mr Gyles submitted that the referee's failure to advert to Mr Huntstead's evidence compounded by his selective quotation from ADC's submissions omitting the references to Mr Huntstead ought be regarded as follows:
1. As showing that there was no factual foundation for the findings.
2. As giving rise to legitimate apprehension by ADC as to the referee's conduct.
3. As extraordinary.
4. As showing that the referee did not deal with Mr Huntstead's evidence and reject it but just ignored it.
5. As showing that the referee failed to deal with a crucial piece of evidence without explanation.
6. As showing that the referee failed to deal with all of the evidence on the relevant point, namely the evidence of Mr Amann and Mr Huntstead, in statements and in cross-examination.
7. As showing that by selectively quoting, the referee had omitted from the Record any reference to evidence.
8. As showing that the referee edited ADC's submissions in a way which does not properly reflect the submission and omits a submission which is contrary to his finding.
9. As amounting to an irregularity sufficient in itself to cause the Court to set aside the referee's report or findings.
10. As a course of conduct by the referee to avoid a serious embarrassment.
132 Mr Gyles submitted that if a referee sets out to give an accurate account of one party's submissions and omits a particular section and there is no rational explanation for this, this is a matter which raises a serious question of natural justice.
133 On Mr Gyles' submissions, all the Court requires to find here is that there was a patent misapprehension of the evidence and that the omission to refer to the evidence shows perversity or a manifest unreasonableness in fact finding and that on these bases the Court need go no further.
134 Mr Gyles' submission was that it was inappropriate conduct for a referee to deliberately omit material in coming to a finding without explanation and that this renders that finding unsupportable.
135 If a referee or judge was required to make a finding as between evidence given on a particular topic by witnesses A and B (a matter which would depend on the significance of the issue to the ultimate question for decision in the proceedings), and if there were no other evidence on that topic before the Court, then it would generally be necessary, it seems to me, for the Court to treat with the respective accounts given by such witnesses and to make appropriate findings as to reliability, or to make plain what were the respective contentions of the witnesses as to fact and what are the reasons for the referee or judge's findings. It might not always be necessary for the referee or judge to expressly refer to the evidence given by witness B, if the referee or judge's findings in favour of the version of fact given by witness A was supported by other evidence before the referee or judge which could explain that approach. But absent there being any other evidence before a referee or judge which could explain why the referee or judge had accepted witness A's version, it would seem to me to have been failure by a referee or judge to give reasons, for the referee or judge to simply completely omit any reference to witness B.
136 I note that in ECC Lighting Limited v McGurk [Unreported, Supreme Court of NSW, 22 December 1995, McClelland CJ,] his Honour expressed the view that 'It is sufficient to say that it is not necessary for a judicial officer to deal with every factual issue which is thrown up in a case, a fortiori every factual issue which relates only to the credibility of a witness. The desirability of resolving any particular issue will depend on an assessment by the judicial officer of such matters as the significance of that issue to the ultimate questions for determination in the case and the degree of confidence with which a decision on that issue can be reached'. I do not read this passage as inconsistent with my view stated above.
137 Mr Rayment QC took the Court closely through the precise circumstances in relation to the submissions and evidence which had been before the referee.
138 Mr Copping, a quantity surveyor, had been the main expert called before Giles J by ADC. Giles J had referred to Mr Copping's evidence of the reasonable cost of the work at pages 366 and 367 of the reported judgment.
139 Mr Copping had worked out what the prices of the parties who put in tenders in 1985, translated to, for a price in concrete in January 1987. Mr Copping had, in short, given adjustments to prices which each party had put in, in 1985, to work out a notional price for each in concrete - that is to work out what the reasonable price in concrete would have been.
140 Paragraphs 9 to 14 of Mr Copping's statement of 21 April 1996 had been in the following terms:
'Likely Cost in Concrete - Based on Earlier Tenders
9. Further, I have been asked by the plaintiff to provide an opinion of an indicative cost of the works based on the tenders received by the Plaintiff on an early design concept of the Quadrant project in 1985 ("the Dysart" scheme).
10. Specifically, I was requested to:
(i) adjust the tenders for inflation or other price adjustment between 1985 and February 1987;
(ii) make allowance for the modifications to the "Dysart scheme" contained in Group Architects' drawings referred to in the Annexure marked "B" hereto ("the Group Architect's scheme").
(iii) make an allowance for my assessment of the likely cost to carry out and complete provisional sum items; and
(iv) make an allowance for the likely cost of the design work.
11. I have been advised by the plaintiff that seven tenders were received on or about 28 June 1985 by the plaintiff ranging from $17,900,000 to $22,855,246 and that all tenders included a provisional sum allowance of $3,863,700.00.
12. I have examined the drawings and design of the Dysart scheme that relate to the 1985 tenders together with the Group Architects' scheme modifications. I have not prepared a measured estimate, however, the scope of modifications in the Group Architects' scheme indicate potential savings in the order of 6-8% of the tender figures. The actual saving would likely be dependent upon the negotiation skills of the parties and the contractor's need for the project.
13. During the period June 1985 and February 1987, significant increases in building costs occurred. The National All Works Index issued by the then Department of Housing and Construction indicated that the index for the Australian Capital Territory rose from a level of 88 at 1 July 1985 to 103 at 1 January 1987, an increase of 17% for the period. Annexed hereto and marked "C" is a true copy of the published ACT indexes for 1 July 1985 and 1 January 1987.
14. Accordingly, in my opinion, an indicative cost estimate for February 1987 based upon the Dysart scheme tenders in 1985 (other than white Industries Ltd's tender) as adjusted by:
(i) the modifications referred to in the Group Architects' scheme;
(ii) escalation in building costs
(iii) the likely cost of provisional sum items; and
(iv) design costs
is as follows:
Second lowest tender:
(Leighton Contractors) $20,945,148.00
PLUS design fees 5% $1,047,257.00
SUB-TOTAL $21,992,405.00
LESS Provisional sum allowance (3,863,700.00
SUB-TOTAL $18,128,705.00
LESS savings @ 7% ($1,269,009.00)
SUB-TOTAL $16,859,696.00
PLUS escalation @ 17% $2,866,148.00
SUB-TOTAL $19,725,844.00
PLUS Provisional sums as per clause 4 $4,456,012.00
TOTAL $24,181,856.00
Highest Tender:
(Costains) $22,855,246.00
PLUS Design Fees, say 5% $1,142,762.00
SUB-TOTAL $23,998,008.00
LESS Provisional sum Allowance ( $3,863,700.00)
SUB-TOTAL $20,134,308.00
LESS Savings, say 7% ($1,409,402.00)
SUB-TOTAL $18,724,906.00
PLUS Escalation @ 17% $3,183,234.00
SUB-TOTAL $21,908,140.00
PLUS Provisional Sums as per clause 4 $4,456,012.00
TOTAL $26,364,152.00
Accordingly, the range of indicative adjusted tender costs (other than White Industries Ltd's tender) is $24,181,856.00 to $26,264,152.00.'
141 When one applied to Mr Copping's reasoning the same adjustments to White's prices of 1985, the result is a figure of approximately $20m, being the equivalent of White's 1985 price for the work to be completed in concrete.
142 At pages 51 to 52 of the second defendant's submissions before me entitled 'Overview of Submissions of Exxon', a section of Mr Rayment's oral submissions for ADC to the referee shortly before the referee reserved was set out. That section read as follows:
'There's a lot of transcript on this matter that gives difficulty to the case now made by ADC. Could we have a look, just before I go into it, at Mr Copping's reworking of the tender prices of 1985 in the light of the changes made other than the change to concrete. The document that I want to put before you is exhibit P17, Patrick Copping's report, where he has reworked the 1985 tenders in the light of the changes that were made to the project to make it cheaper. In that statement he's compared the 1985 tenders. He's taken the second lowest tenderer, Leightons, and then, for the sake of comparison, the highest tenderer, Costains. In paragraph 14 of this statement he said:
Accordingly, in my opinion an indicative cost estimate for February 1987 - that's the critical time -
-- based upon the Dysart scheme tenders in 1985 . . . design cost is as follows.
And he then starts off with the Leighton contractors amount. He allows 5 per cent for design fees, providing a subtotal of $21m, takes off the original PC sum, then he says that the savings have amounted to 7 per cent, so he takes the 7 per cent off. He then allows escalation at 17 per cent and brings back provisional sums as per paragraph 4 of this statement at $4,456,000, which then becomes a constant in the next analysis as well.
It so happens, Mr Referee, that if you apply the same analysis as Mr Copping there uses to the Whites original tender of $17,900,000, you produce a total figure of $20,702,760. These figures are all on the transcript. It's just arithmetical. I think my learned friend mentioned that he had checked this. At page 2981, Mr Liney helpfully said, "I have done it and come up with the same figure as Mr Goldstein". That same figure is $20,702,760. Just so that we may have it completely clear, I'll quickly put those figures on the transcript, if I may, so that we have a full record of them.
The White figure corresponding to the Leighton contractors figure of $25,945,148 is $17,900,000. 5 per cent for design fees is $895,000. The subtotal of those two figures is $18,795,000. You then subtract the same PC allowance of $3,863,700 to produce a subtotal of $14,931,300. You then take off 7 per cent of that figure by way of savings and that comes to $1,045,191, producing a subtotal of $13,886,109. You then add escalation of 17 per cent, or $2,360,639, to produce a subtotal of $16,246,748. Then you add back provisional sums as per paragraph 4 of the statement, $4,456,012, to produce a total sum of $20,702,760. That figure is the Whites constructed contract price, in our submission. It's a very similar figure when you change the PC sum that was included in the final Whites price to the price that was allowed for the construction in steel, as it happens.
If Whites were asked to give their concrete price in January 1987 and they went through the exercise described by Mr Copping, the figure they would have come up with on that basis would be, including his PC sums, $20,702,760, or, if you took the actual PC sums used in the Whites contract, it would come to $20,160,748.
Against that is the Leightons price, which remember was unavailable. Leightons had told Mr Ward that they were not interested at all in doing this job in January 1987. Mr Ward rang them and asked them whether they would give him a second price just before he entered into the contract with Whites, and he wrote a couple of letters to them. But he gave evidence that they said that they were not interested in quoting.'
143 Thus, before Mr Huntstead and Mr Amann had given evidence before the referee, there had been some evidence to support the referee's finding that the White's price would have been approximately that which Mr Huntstead and Mr Amann later gave evidence that the price would have been for concrete. Mr Rayment pointed out that the same evidence would simply have required Whites to be consistent with the prices Whites had been informing ADC of for the previous eighteen months.
144 The referee referred to Mr Copping's evidence in his report at pages 78 to 79. This was a section where the referee set out a segment of WIL's submissions. That section of WIL's submissions had read, inter alia:
'Another important matter was that Whites were the only builders in the field in 1986 and in early 1987. A belated attempt was made in January 1987 to obtain a check price from Leightons but that company would not provide a price. In any event, Fischer was not too enamoured with Leighton. ADC had time imperatives. It faced the prospect that the Commonwealth might forfeit the Lease unless there was a contract with an approved builder prior to 31 March 1987. ADC's second cheapest builder from 1985 was no longer interested. ADC did not wish to forfeit the Lease from the Crown. Another builder would need time before being able to (sic) a lump sum price. This project was not fully designed in 1987. Since detailed measurements were unavailable, other builders might have included a larger premium for contingencies. ADC has not found one builder to give evidence as to the price at which it would have offered to build this project in 1987. Mr Copping's adjustments to the 1985 prices produce a figure similar to the Whites price. That tends to confirm the reliability of Mr Copping's indicative prices as to the lump sum prices which the other tenderers would have quoted. A mid range figure is $25m. Tenders from others it called in 1987 would not have been for less than the range suggested by Mr Copping of $24-26m. At those levels, all would have been rejected by ADC. The only builder whose price was likely to have been acceptable to ADC on a lump sum basis was Whites; if not in steel, then for a similar sum in concrete.'