Alcatel Australia Ltd v Scarcella - [2004] NSWCA 270 - NSWCA 2004 case summary — Zoe

NSWNSWCA

Alcatel Australia Ltd v Scarcella

[2004] NSWCA 270

Court of Appeal (NSW)|2004-08-09|Before: Beazley JA, Ipp JA, Tobias JA, Nicholson J

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Source facts

Court

Court of Appeal (NSW)

Decision date

2004-08-09

Before

Beazley JA, Ipp JA, Tobias JA, Nicholson J

Source

Original judgment source is linked above.

Judgment (55 paragraphs)

[1]

CITATION : ABIGROUP CONTRACTORS PTY. LTD. (ACN 000 201 516) v. SYDNEY CATCHMENT AUTHORITY [2004] NSWCA 270 HEARING DATE(S) : 29/03/04, 30/03/04 JUDGMENT DATE : 9 August 2004

[2]

JUDGMENT OF : Beazley JA at 1; Ipp JA at 104; Tobias JA at 105 DECISION : 1. Appeal allowed; 2. Set aside the orders made by the trial judge on 23 July 2003; 3. Order that the Referee's Report be rejected; 4. Remit the matter to the trial judge for rehearing; 5. The respondent is to pay the appellant's costs of the appeal; 6. The costs of the hearing before the trial judge are to abide the outcome of the rehearing.

[3]

CATCHWORDS : PROCEDURE - Supreme Court Rules Pt 72 r 13 - Adoption of Referee's Report. - APPEALS - Nature of Appeal from a hearing under Pt 72 r 13 - An appeal from a judge's decision pursuant to this rule is limited to review of the judge's decision to adopt, vary or reject the referee's report - Failure to deal with party's case - Appealable error. - TRADE PRACTICES - Causation - Reliance - Whether information merely passed on - Loss or damage "by" conduct of another person - Causation is the common law practical or common-sense conception of causation - Reliance is an aspect of causation - Express negative statement that something does not exist - It is not necessary in order to prove reliance for there to be an evidentiary statement to the effect that the representation was relied on. Fair Trading Act 1987 (NSW) LEGISLATION CITED : Sydney Water Management Act 1998 (NSW) Trade Practices Act 1974 (Cth). Alcatel Australia Ltd v Scarcella [2001] NSWCA 401 Flender (Australia) Pty Ltd v Warman International Ltd (unreported, 18 June 1998) Gardam v. George Willis & Co. Limited (1988) 82 ALR 415 Gould v Vaggelas (1985) 157 CLR 215 at 236 Hanave Pty Ltd v LFOT Pty Ltd (1999) 43 IPR 545 Henville v Walker (2001) 206 CLR 459 Jarvan Pty Ltd (in liq) v Seery (unreported, 1 December 1998) John G Glass Real Estate Pty. Limited v. Karaw: Constructions Pty. Limited (1993) ATPR (Digest) 41-249 CASES CITED : March v Stramare (E & MH) Pty Ltd (1991) 171 CLR 506 Miba Pty. Limited & Ors. v. Nescor Industries Group Pty. Limited & Anor. (1996) 141 ALR 525 Mulligan v Benton [1999] NSWCA 339 Multicon Engineering Pty Ltd v Federal Airports Corp (1997) 47 NSWLR 631 Nine Network Pty Ltd v Kennedy Miller Television Pty Ltd (unreported, 8 June 1994) Super Pty Ltd v SJP Formwork (Aust) Pty Ltd (1991) 29 NSWLR 549 Theiss Contractors Pty Ltd v Grogan (unreported, 24 July 1996) Wardley Australia Ltd v State of Western Australia (1992) 175 CLR 514 Yorke v. Lucas (1985) 158 CLR 665 PARTIES : Abigroup Contractors Pty. Ltd. (ACN 000 201 516) (Appellant) Sydney Catchment Authority (Respondent) FILE NUMBER(S) : CA 40784/2003 COUNSEL : D.F. Jackson QC/S.A. Kerr (Appellant) S.R. Donaldson SC/M. Dempsey (Respondent) SOLICITORS : Clayton Utz (Appellant) Phillips Fox (Respondent)

[23]

9 August 2004 ABIGROUP CONTRACTORS PTY. LIMITED v. SYDNEY CATCHMENT AUTHORITY Judgment 1 BEAZLEY JA: The appellant was the successful tenderer for a contract to design, develop and construct an auxiliary spillway (the spillway) for Warragamba Dam for a contract price of $85,709,094.55. The contract was entered into on 24 December 1998 with the Sydney Water Corporation (SWC). Under the Sydney Water Management Act 1998, the respondent is responsible for any liability the SWC may have in relation to this claim. 2 Warragamba Dam itself had been constructed over a 24 year period between 1948 and 1962. The purpose of the spillway was to increase the capacity of the Dam to withstand major flooding. In brief, the spillway was to consist of three portions, an upstream portion, a middle portion and a downstream portion. The construction of the middle portion and, more particularly, the design concept documents that relate to that portion of the spillway, are the only aspects of the contract relevant to the issues on the appeal. 3 The middle portion of the spillway was to be constructed from reinforced concrete in an area over and adjacent to Folly Creek. Folly Creek runs in a generally north-easterly direction across the proposed spillway alignment towards the Dam proper. The contract provided that the contractor was not permitted to change the design nor the configuration of specified elements of the Concept Design without approval (clause DS3.4). This restriction included the overall geometry of the spillway which meant that the spillway level could not be changed without approval. 4 Under the contract, the contractor was required to excavate down to a solid rock base and refill with cement stabilised fill to the level necessary to support the spillway. The extent of fill, or conversely the level of the rock base, in the Folly Creek portion of the proposed spillway was of particular relevance to a tenderer as the proposed contract was a lump sum contract under which the contractor bore responsibility for dealing with latent conditions. Thus, if the level of fill was greater than assessed by the successful tenderer, that party bore the increased cost of both the excavation and the amount of refill required to support the spillway at the design level. 5 The risk of errors in the Specifications also lay with the contractor. Accordingly, the need for a tenderer to have accurate information available to it at the time of preparing the tender, was of critical importance. This was particularly so as, whilst tenderers were entitled to go on site and carry out their own investigations, there was no effective opportunity for them to do so. In the first place the time for the lodgement of tenders was relatively short - a period of 7 weeks. More particularly, however, there was no encouragement for tenderers to go on site. This was explained by the respondent's project manager Mr. Alaeddin. He said "[I]t could be a disaster on site" if each of the tenderers sought permission to carry out geotechnical investigations before submitting a tender. Senior counsel for the respondent also conceded before the trial judge that this was the case. The Tender 6 Included in the documents that comprise the Invitation to Tender were:

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11 The matter upon which the appellant relied to base its claim that the respondent had engaged in conduct that was misleading and deceptive was the fact that the respondent had in its possession at the time that it issued the Tender documents, but failed to make available to the tenderers, additional documents and, critically for the purposes of this appeal, a plan dated 30 November 1951 entitled "Folly Creek Disposal Area Fill over 30" Pipe" (the 1951 cross-section). It was alleged this showed a cross-section of the outlet pipe. The cross-section also showed the level of fill above the original rock level at Folly Creek. The respondent accepted that if the 1951 cross-section was available, then, with other material, the appellant could have identified the location of the pipe which in turn would have provided information from which the underlying rock level could have been checked or deduced. 12 For the reasons stated at [4] above, this information was important to tenderers to enable them to accurately assess the amount of fill to be excavated and the amount of refill required so as to appropriately cost their tenders. As this information was not available to the appellant as the successful tenderer, it relied upon the information provided in the geotechnical report as to the rock level in Folly Creek. There was no dispute in the proceedings but that this information was "wildly wrong". 13 The appellant commenced proceedings in the Common Law Division of the Supreme Court claiming damages for the losses it claimed it thereby suffered. The proceedings were referred to a Referee under Pt.72 r.2(1) of the Supreme Court Rules. The Referee made his report on 8 August 2002. The appellant failed on all claims before the Referee. The essence of the reasoning of the Referee was that whatever is shown on the 1951 cross-section it did not reveal a pipe that had been laid to carry water through the embankment for the simple reason that the embankment was not then constructed. The appellant argues however that the question that should have been addressed is whether the cross-section depicted the outlet pipe. 14 Pursuant to Pt.72 r.13, the appellant moved for the rejection of the whole of the report. The respondent cross-motioned for its adoption. Both motions came before Nicholas J who accepted the Referee's findings and conclusion and made an order adopting the report. This appeal is from that order. Application of Pt.72 r.13 15 The nature of applications under Pt.72 r.13 has been considered in a number of cases. In Super Pty Ltd v SJP Formwork (Aust) Pty Ltd (1991) 29 NSWLR 549, the Court determined that such an application is not an appeal either by way of a hearing de novo or a more limited re-hearing. Rather, the judge's task under Pt.72 r.13 in deciding whether to adopt, vary or reject the report involves the exercise of a judicial discretion. As Gleeson CJ said at p. 563: "…it is undesirable to attempt closely to confine the manner in which the discretion is to be exercised…The nature of the complaints made about the report, the type of litigation involved, and the length and complexity of the proceedings before the referee, may all be relevant considerations. The purpose of Pt 72 is to provide, where the interests of justice so dictate, a form of partial resolution of disputes alternative to orthodox litigation, and it would frustrate that purpose to allow the reference to be treated as some kind of warm-up for the real contest. On the other hand, if the referee's report reveals some error of principle, some absence or excess of jurisdiction, or some patent misapprehension of the evidence, that would ordinarily be a reason for rejecting it…So also would perversity or manifest unreasonableness in fact-finding." See also: Alcatel Australia Ltd v Scarcella [2001] NSWCA 401; Jarvan Pty Ltd (in liq) v Seery (unreported, 1 December 1998); Multicon Engineering Pty Ltd v Federal Airports Corp (1997) 47 NSWLR 631 and Theiss Contractors Pty Ltd v Grogan (unreported, 24 July 1996).

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16 In Nine Network Pty Ltd v Kennedy Miller Television Pty Ltd (unreported, 8 June 1994) the question of an appeal from a judge's decision under r.13 was considered. Gleeson CJ stated at pp.11-12: "In the exercise of the power of review given by the rules, the judge at first instance may fall into appealable error. If that can be demonstrated to the Court of Appeal, then ordinarily the judgment at first instance will be set aside and consequential relief granted. However, what the Court of Appeal is concerned with is error on the part of the judge…If the point at issue is one of law, it may not be difficult to demonstrate such error. If the judge can be shown to have made an error in the approach taken to the exercise of the discretion conferred by the rules...then that also may constitute a ground for setting aside the judgment. It may even, in a given case, be possible to demonstrate that the judge's decision to adopt, or vary, or reject, the report was based upon appealable error of fact made by the judge. An example might be a case where the judge embarked upon a consideration of new evidence, or a fresh consideration of evidence that was before the referee and could be shown to have reached a wrong conclusion. The important point is that it is the judge at first instance who reviews what the referee did; the Court of Appeal, within the limits of the ordinary rules governing appeals, reviews what the judge did." See also Mulligan v Benton [1999] NSWCA 339; Jarvan Pty Ltd (in liq) v Seery (supra); Flender (Australia) Pty Ltd v Warman International Ltd (unreported, 18 June 1998). Further background facts 17 As I have said the original dam was built over a lengthy period, construction being completed in about 1962. In the early part of the construction, a road was built over Folly Creek. Some fill was deposited in the Creek at this time. A 30 inch drainage pipe was also laid in the Creek. On the basis of ordinary engineering principles that pipe would have been laid at about the level of the rock surface and, it would follow, before the fill was deposited. Later, and it would seem in 1963, a more permanent road (described as a land road or land bridge) was built across Folly Creek (AT 68). That road was built by placing a significant quantity of fill in the Creek, thereby creating a major embankment (the embankment). As a result, there was a damming effect on the upstream side of the embankment, creating what was referred to in the evidence as a "retention basin". The retention basin then needed to be drained through the embankment into the creek. 18 There was no dispute in the proceedings that there was a pipe which provided this drainage. There was a question, however, whether the 30 inch pipe shown in the 1951 cross-section was the pipe used to drain the retention basin. The appellant's contention was that it was the same pipe. The respondent did not directly deny this. Rather, its position was that there was no evidence that it was the same pipe, there being no evidence which demonstrated that the outlet pipe shown on the 1951 cross-section extended as far upstream as the known location of the drain entry point. The respondent submitted that whilst it did not know of any other pipe, it would be a "striking coincidence" if the pipe used to drain water through the fill placed there in about 1960 at the time of the construction of the road, finished "at the same point where ultimately an inlet was required to drain the retention basin that was built when it was decided to build the land bridge across Folly Creek". More specifically, it contended that the 1951 cross-section did not depict the pipe that drained the embankment for the simple reason that the embankment was not then built. I will return to this issue later as it throws up the essential point raised by the appellant on the appeal. 19 There were a number of references to the fill in Folly Creek in the tender documents. In Clause 4.3 of the Geological Investigation it was noted that there were deposits of fill from the original construction of the dam and associated works distributed around the site and that the most extensive of those deposits occurred near Folly Creek. The clause continued: "In Folly Creek there are extensive fill deposits that mantle the valley base. Some 120 m upstream of the hairpin bend in Valve House Road, an embankment of fill has been placed across the creek. A 0.78 m diameter concrete pipe passes creek flow beneath this embankment and well downstream, with its outlet occurring near a footbridge across the creek … ." (emphasis added) It is to be noted that 0.78 m is the metric equivalent of 30 inches. 20 There were two other references to the embankment and the outlet pipe in the tender documents. In the Detailed Specifications, under the heading "Surface Water", clause DS-59.2.14(c) provided: "The Contractor is to design and construct surface water drainage systems as follows: … (ii) Folly Creek Drainage During the closing phases of the original Warragamba Dam construction Folly Creek was filled in just upstream of the right side of the auxiliary spillway alignment forming an embankment of some 20m height. No plans are available of this embankment or of the outlet pipe … . Detailed design development will include the following main issues: · … · If the existing pipe is located and is unsuitable to incorporate into the final design it shall be blocked off and any potential piping of the fill material via the inside or outside the drain shall be eliminated. The design and construction of this drainage system must prevent fill material piping along any new pipe drain." (emphasis added) 21 A similar statement was made in clause 2.10.2 of the Concept Design Report. Subclause 2.10.2.3 then stated: "Folly Creek Drainage During the closing phases of the original Warragamba Dam construction Folly Creek was filled in just upstream of the now proposed auxiliary spillway forming an embankment of some 20m height. No plans are available of this embankment or of any outlet pipe but allegedly local runoff from the surrounding areas is piped away from this detention basin … The catchment area is about 40 hectares. … If the existing pipe is located and is unsuitable to incorporate into the final design it shall be blocked off and any potential piping of the fill material via the inside or outside the drain shall be eliminated"

[28]

The emphasised portions of these clauses comprised the material that the appellant contended contained the representations upon which it based its claim. I will refer to these two statements as the representational material. 22 In late 1999, the existence of the additional documents was discovered. Of those only the 1951 cross-section is relevant to the issues on the appeal. As I have mentioned the cross-section is dated 30 November 1951. There is a date stamp on the top right hand corner containing the notation "work as executed 11 Nov 1963". There are two lines drawn on the cross-section - a top horizontal line bearing the notation "road under construction", which then slopes sharply to the right and bears the description "slope of fill as at 25/11/51". There is then a lower line, which also slopes down to the right, marked "original surface". At a point marked 300 feet (which corresponds to 92 chains) a 30 inch pipe is depicted. 23 On the appellant's case the 1951 cross-section depicted the outlet pipe referred to in the representational material. 24 As a result of the information contained in the additional documents, the appellant discovered that the rock level was substantially lower than represented in the geological investigation report. This meant that the extent of fill was greater than the appellant had assessed in its tender. The appellant had allowed for excavation of approximately 24,300 m3. However, 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. 25 The appellant contends that had the 1951 cross-section and the other additional material been available at the time of tender, it would have been able to determine the natural rock level in Folly Creek and thus the depth of excavation required. From that, the appellant would have realised that the respondent's geotechnical information relating to the rock level was erroneous by a significant margin and either sought further information from the respondent, or tendered on a different basis than it did. It contends that having tendered on the basis of the information provided by the respondent, it suffered a significant loss as it was required under the contract to absorb the increased cost of excavation and refill. The increased cost to the appellant was, on its claim, $8,294,000. The appellant made other associated claims and sought damages in a total sum of approximately $14.5 million. The pleaded representations 26 I have already set out the representational material. 27 The appellant pleaded that: "15A. The Concept Design Documents represented: (a) that during the construction of the original Warragamba Dam an embankment of fill was placed in the Folly Creek area over Folly Creek; and (b) a pipe had been laid to carry Folly Creek through the embankment (' outlet pipe '). 16. The Concept Design Documents represented (a) during the closing phases of the original Warragamba Dam construction, Folly Creek was filled in just upstream of the auxiliary spillway alignment forming an embankment of some 20m height; (b) SWC had no plans of this embankment or of the outlet pipe. Particulars **(i) Clause DS-59.2.14(c) of the Specification. (see [17] above) (ii) Concept Design Report para. 2.10.2.3. [see [18] above] " … 21A. Further and in the alternative, by issuing the documents and drawings comprising the Invitation to Tender, including the Concept Design Documents, in circumstances where: … SWC represented that: (i) the documents and drawings comprising the Invitation to Tender, including the Concept Design Drawings, issued to the Plaintiff contained all investigations and all necessary information to enable the Plaintiff to determine a tender price for the Works; … (vii) there were no plans of the embankment or the outlet pipe ..." 28 Although the pleadings do not specify a date, the appellant asserts that para. 15A(a) related to work done in about 1960 and that the relevant date for the laying of the pipe referred to in para 15A(b) is 1951 and this was the case that had been run before the Referee and the trial judge. No point was taken at any stage by the respondent that the pleadings could not bear this meaning. Nor did the respondent dispute that the appellant had so conducted its case.

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Mr. Lehmann 30 Mr Lehmann, the appellant's survey manager, gave the following evidence in respect of the 1951 cross-section: "I have been shown a copy of [the 1951 cross-section] which I have been asked to assume comes from the Defendant's documents and which is described as ' Folly Creek Disposal Area fill over 30 pipe section 290 U.S. [Up Stream] of horseshoe bend sump to accompany report of inspection carried out on 25.11.51 ' … . It is also stamped as follows ' Apparently work as executed … 11-11-63 '. I was aware from general discussions at the time I started on site that there was a pipe which had been layed (sic) under Folly Creek when Warragamba Dam was originally constructed. I have also been referred to clause DS-2.9.14(c)(ii) 'Folly Creek Drainage' in the Detailed Specification in which the Defendant states ' during the closing phases of the original Warragamba Dam construction Folly Creek was filled in just upstream of the right side of the auxiliary spillway alignment forming an embankment of some 20m height. No plans are available of this embankment or of the outlet pipe ' . In my opinion, the [1951 cross-section] shows the location of that embankment and pipe, the original surface level, the road under construction and slope of fill as at 25 November 1951 . I say this because the reference to Folly Creek being filled in ' just upstream of the right side of the auxiliary spillway alignment ' appearing in the Detailed specification is a reference to the same location as is represented in the [1951 cross-section] which drawing is described as showing the ' Folly Creek Disposal Area fill over 30 pipe section 290 U.S. [Up Stream] of horseshoe bend sump '. … annexure 'L1'." (emphasis added) 31 Mr. Lehmann said that had he had the additional documents including the 1951 cross-section at the time of tender "I would have formed the view that it was more than likely that the … rock level in the Concept Design Drawings was incorrect". 32 Mr. Lehmann supported his opinion by a diagram upon which he located in digitised form the existing design and excavation surfaces in 1999, the original and rebuilt surfaces in 1951 as well as the existing surface in 1950. The diagram indicated that the rock level was significantly lower than that depicted in the respondent's tender documents. 33 Mr. Lehmann's methodology was not challenged and the Referee accepted his evidence.

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He also said: "… an engineering company in the position of SMEC is entitled to assume that [the geological] investigations were done to allow a reasonable interpretation of the rock contour levels so that estimates of the quantity of material to be excavated can be made. In relation to this project SMEC made that assumption. … he said that there was nothing in the documentation provided to SMEC, which indicated that the rock level interpreted by DPWS was not an appropriate interpretation of its depth …" 35 In his view he was entitled to make the assumption because he considered that the concept design report and the geological investigation were adequate and there appeared to be nothing "untoward" on the information provided. Specifically in relation to the 1951 cross-section and the content of the representational material, he said: "… that he read that no plans were available 'of this embankment or of the outlet', and that having done so he: - 'formed the view that there was no other information that could be provided to him in relation to the embankment or the outlet pipe. In preparing or causing to be prepared the estimates which were provided to Abigroup, I relied upon this statement'. 36 He said, without qualification, that the 1951 cross-section "does show the outlet pipe". He also said that the cross-section depicted the location of fill above the original surface level. He agreed that the cross-section was not a plan of the fill embankment constructed in the early 1960s. 37 Mr. Gray also gave evidence that if the additional documents including the 1951 cross-section had been available at the time of preparing the tender he would have asked the appellant if there was any other information or sectional plans available. He said that had the additional documents been available: "I would have therefore realised that there were significant differences between the information contained in those documents and the information interpreted from the other documentation provided at the time of tender. I would have requested Abigroup to request the client to resolve those differences."

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43 The appellant's case on appeal was put simply. It had sought to make a case before the Referee that the respondent had made an express representation that it had no plans of the embankment or of the outlet pipe whereas in fact it did have a plan of the outlet pipe. I will refer to this issue as the "Representation issue". It submitted that the Referee had not considered that case, or alternatively, had misunderstood the case it was putting. The trial judge, by making an order adopting the report, had made the same error. The appellant submitted that if it makes good this point, it followed that the appeal should be allowed. 44 The respondent submitted that not only was the Referee's finding open to him, the appeal should not be allowed because there were other issues upon which the appellant had failed and in respect of which there was no appealable error, so that even if the appellant made good its first point, it could not ultimately succeed on its claim. In particular, the respondent drew attention to the finding by both the Referee and the trial judge that the appellant had not established reliance. The respondent argued that the finding on reliance could and, on the evidence, had to stand. I will refer to this as the "Reliance Issue". 45 The respondent also submitted that there was no error in the trial judge's adoption of the Referee's finding that the respondent had not adopted the statements contained in the representational material, but had only passed them on and as such was not liable for them. I will refer to this as the "Passing On Issue". It followed that if the representation had not been made by the respondent, the appeal should be dismissed because there was no representation for which the respondent was responsible. The representation issue 46 The Referee's findings in respect of the representation are to be found at [R261], [R435], [R463] and [R464]. 47 The Referee accepted Mr. Lehmann's evidence, which he noted was not challenged. On the basis of that evidence he found that had the additional documents, including the 1951 cross-section, been available to the appellant as part of the tender documents, it would have shown that the rock surface levels were lower in the Folly Creek area than shown in the tender documents. Notwithstanding this he found at [R261] that "These plans…were prepared long before the completion of the dam and could not have been plans of the embankment then created" 48 At [R435], the Referee reiterated that the representation in the representational material was an express representation. He found however that: "…there is no evidence that any plans brought into existence at about 1960 showed the matters referred to [in the representation] and indeed no such plan was included in the Additional Information" (emphasis added) 49 The Referee repeated this finding at [R463] stating that there was an express representation "as to the absence of certain plans" but that there "was not a skerrick of evidence that any such plans existed." 50 In reaching this conclusion the Referee accepted three essential submissions made by the respondent as to what had been established on the evidence. First, he accepted that "the plans included in the Additional Material were created before the fill embankment was constructed and they are not and do not purport to be plans of something which did not yet exist". 51 Next, he accepted that the appellant had not shown that the outlet pipe depicted in the 1951 cross-section was the outlet pipe referred to in the Concept Design report and the Detailed Specification. Finally, he accepted that there was no suggestion that the 1951 cross-section purported to depict the fill near the river. The acceptance of the respondent's case on these two points led the Referee to accept the respondent's ultimate submission that it had not thereby been shown that the representation alleged was false and misleading. See [R464] - [R465]

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54 This conclusion, according to the appellant indicated that the trial judge, like the Referee, had simply failed to deal with the case it had advanced or had misapprehended it. In relation to the latter point, it was argued that this was not a case that merely involved the trial judge assessing whether the Referee had weighed all the evidence and reached a determination on the evidence as evaluated. Rather, the appellant had established that the respondent had in its possession a cross-section of the outlet pipe and that it had adduced unchallenged evidence by Mr. Lehmann and others that the pipe depicted in the cross-section was the same pipe as referred to in the respondent's tender documents. The appellant pointed out that the Referee found there was an express representation, and made the further finding that the cross-section showed that the rock levels were lower than represented in the tender. This was critical and, the appellant submitted, established the misrepresentation. It was submitted that for his Honour to have rejected the appellant's case he must have overlooked that the Referee accepted Mr. Lehmann's evidence and failed to understand that its case was that there had been a representation as to the now non-existence of the outlet pipe. 55 The respondent submitted however, that the representations upon which the appellant relied related, by their express terms, to the absence of plans of the fill embankment and of the pipe that was used to pass water from one side of the embankment to the other. The respondent contended that it was open to the Referee to conclude that the representations were not proved to be false by the existence of a cross-section created some 9 years earlier because as a matter of chronology, the cross-section could not have depicted a pipe used to pass water through the embankment built in the early 1960s. The effect of this submission was to place a particular interpretation upon the alleged representation - that there were no plans of an outlet pipe that was either laid at the same time as the embankment was built or, alternatively, was laid for a particular purpose, namely, to pass water through that embankment, regardless of when the pipe was laid. 56 The balance of the respondent's submissions on the representation issue were essentially directed to the appellant's failure to prove that the representation, so construed, was, misleading or deceptive. For example, the respondent contended that the appellant had not established how long the pipe was, so that it may or may not have been long enough to carry Folly Creek through the embankment when it was constructed some 9 to 10 years later. The respondent also contended that the effect of the evidence was that the 1951 cross-section depicted the location of a pipe, which was profoundly different from saying "this is a plan of the outlet pipe". The respondent conceded - "… that when a pipe was ultimately built to serve as an outlet for the detention basin built nine years later the point at which the pipe passed through the cross section … would no doubt be very close to the pipe that's depicted on [the 1951 cross-section], the location." 57 The respondent's real point was then summarised in the submission - "But my point is we're not drawing a fine distinction when we say there's a distinction to be drawn between a witness saying this shows the location of the outlet pipe and this is a plan of the outlet pipe and that's illustrated by the fact that Mr. Lehmann says in the same breath this shows the location of the fill embankment."

[39]

Senior counsel reiterated that all that was known was " that there was a pipe at that particular point in space ". Thus, whilst it was possible that the outlet pipe shown on the 1951 cross-section was located at the same point as the outlet pipe that drained the retention basin through the embankment, nothing more had been established. 58 The respondent further sought to make its point by reference to a contour plan prepared by Australian Water Technologies (AWT). This plan was prepared from information provided by a "Mr Tom Lucas of SWC Wholesale Supply" who, it appears, was the only person who had any knowledge or anecdotal history of the drainage of the retention basin. From the information obtained from Mr Lucas, AWT was able to mark on the contour plan (the AWT Contour plan) a drain inlet and drain outlet point. The respondent submitted that there was "nothing on [the 1951 cross-section] which locates the pipe at the drain point entry shown on [the contour] plan or which would indicate that the pipe went that far upstream…" Consistently with its position on the appeal the respondent did not concede that the pipe represented by the inlet and outlet points on the contour plan and the pipe shown on the 1951 cross-section were the same pipe. 59 The respondent contended that in any event the Referee's acceptance of its submissions that the appellant had not established that the drainage pipe placed beneath the fill was the outlet pipe referred to in the tender documents, was a finding of fact that was open to the Referee on the evidence. It followed, on the respondent's submission, that there was no error in the Referee's report. As there was no error, no basis had been established for its rejection by the trial judge under Pt 72 r 13 and no appealable error was discernable in the trial judge's reasons in adopting the report. 60 However, the evidence was more specific than conceded by the respondent. Mr Gray, Mr Braybrooke and Mr Alaeddin all gave evidence that the pipe shown in the 1951 cross-section was the outlet pipe referred to in the representational material. Further, there was no cross-examination of any of these witnesses to the effect that the 1951 cross-section or any cross-section showing a pipe, in engineering terms, could not be a plan - and in this case a plan of the outlet pipe. Further, to the extent the AWT contour plan was relevant, the appellant demonstrated that when it is compared with the 1951 cross-section, the position of the inlet and outlet points is such that the outlet pipe depicted on the cross-section is located at a point along the pipe that flows between the inlet and outlet points. 61 These matters, however, relate to whether the representation was misleading and deceptive. That issue however can only be determined in the context of the terms of the representation. The Referee did not, in his report, expressly determine what the representation was. Rather, as I have indicated, he proceeded upon a particular basis, namely, that the case concerned the question whether the 1951 cross-section depicted an outlet pipe flowing through the embankment. However, the appellant's case, based directly on the representational material, was that the representation related to the absence of plans of any outlet pipe. The Referee did not at any stage address that case. 62 This appeal is not an appeal from the Referee's finding. It is an appeal from the trial judge's order adopting the report. The question for this Court's consideration is whether the trial judge erred in so doing on the principles referred to earlier. 63 The trial judge at [J38]-[J62] considered the appellant's claim that the Referee erred in finding that the representation that the respondent did not have any plans depicting the Folly Creek embankment and/or the outlet pipe, was not false and misleading. 64 At [J38] his Honour referred to the representation issue. He said: "The first error complained of related to statements contained in the tender documentation that there were no plans showing the Folly Creek embankment or the/any outlet pipe." 65 His Honour at [J43] identified the embankment noting that it was "formed during the closing phases of the original Warragamba Dam construction". His Honour then at [J44] referred to the appellant's argument, which he said was: "… that the statements represented firstly, that no plan existed showing the embankment, and secondly, that no plan existed showing the outlet pipe ." (emphasis added) 66 Of itself this is an accurate enough statement of the way the appellant sought to put its case. However, his Honour then made the observation at [J45] that: "On Abigroup's case, this was a plan of the embankment, partially constructed , and depicted the outlet pipe."

[40]

And further at [J47]: "[The appellant] contended that there was ample evidence before the Referee to have enabled him to find that [the 1951 cross-section] was [a plan] of the partially constructed embankment, and that the pipe depicted thereon was the same pipe that remained after the folly Creek area was filled, that is, the outlet pipe or any outlet pipe, and he should have done so." 67 The appellant contends that these two statements reflect a fundamental misunderstanding of its case and that his Honour's findings thereafter related to the wrong issue. The misunderstanding was that his Honour viewed the issue as being whether the 1951 cross-section showed the partially constructed embankment and the outlet pipe through that embankment. This is apparent from his Honour's statements at [J48] and [J49]: "48. The [appellant's] submission is put against some factual findings of the Referee. He found that there was no evidence that any plans brought into existence in about 1960 showed the embankment and/or the associated outlet pipe identified in the representation and, in particular, that those matters were not depicted in the plans included in the additional information (R435). His conclusion was given emphasis when he said (R463): 'As I have said, there was an express representation as to the absence of certain plans, but there was not a skerrick of evidence that any such plans existed.' 49. Further, he accepted the submission on behalf of the [respondent] that there was no evidence to support a finding that a statement that no plans were available of the fill embankment in Upper Folly Creek was inaccurate. He accepted the further submission that each of the plans described as the additional information was created before the fill embankment was constructed, and they are not and do not purport to be plans of something which did not yet exist (R462)." 68 His Honour then set out [R464] and [R465] from the Referee's report to which I have referred. 69 In my opinion, the appellant's submission is correct. It is apparent from these passages that his Honour linked the representation as to the construction of the embankment with the existence of the outlet pipe, then proceeded to determine the matter on the same basis as did the Referee, namely that the case concerned representations about "plans brought into existence in about 1960". 70 His Honour's findings and conclusions thereafter are based on that premise. At [J56], for example, his Honour said: "In short, it is plain that the Referee was firmly of the view that there was no evidence that the plans, in particular the cross-section, showed the embankment and/or outlet pipe. Put another way, the Referee was simply saying that [the appellant] had failed to prove the essential fact which it undertook to prove." 71 At [J60] his Honour again dealt with the case on the basis that the embankment and the outlet pipe were to be considered together. There is also an emphasis in this paragraph on the embankment itself, as if it was the focal point of the representation. Thus, he said: "In any event, when the cross-section itself is examined it seems to me far from self-evident that, on its face, it depicts the relevant embankment and outlet pipe. If it is studied with regard to the passages in the Detailed Specification and Concept Design Report which contain the statements which convey the representation sued upon, it seems to me entirely reasonable to fail to be persuaded that the words and markings thereon describe an embankment of some 20m in height formed during the closing phases of the original Warragamba Dam construction when Folly Creek was filled in just upstream of the proposed auxiliary spillway or to conclude that they do not. In any event, even if I came to a different view (which I do not), that would not be a basis for rejecting the report."

[45]

77 The Referee's approach to the question of reliance was to set out the respondent's submissions and then to conclude that reliance had not been established. Those submissions were to this effect. First, there was no evidence that the appellant had complained about the representational material nor, secondly, had it treated the representation as material. Thirdly, and it is convenient to quote from the relevant portion of the Referee's report at [R 466]: "[Senior Counsel for the respondent] submitted … there was no evidence from anyone associated with the plaintiff's tender to the effect that the statements were interpreted as indicating that no pre-construction contour plans showing natural surface levels in Folly Creek existed or may be available for consideration; or that the statements were read and interpreted as indicating that cross-sections of fill embankments showing surface levels and assumed natural surface levels as they existed in 1951 just downstream from the fill embankment did not exist or were not available." 78 Although the Referee relied upon and adopted these submissions, I am of the opinion that they fail to grapple with the true nature of the appellant's claim. In the first place, it might be asked rhetorically, how can a party complain about an express representation that it does not know is misleading or deceptive? Alternatively, it might be asked what were the factors that should have led the appellant to question the accuracy of the representation. The respondent referred to none. Likewise, the argument that there was no evidence that the appellant treated the representation as material fails to take account of the evidence from which a finding could be made or an inference drawn that the appellant treated the representation as material. In this regard, the appellant gave evidence that it accepted the representation at face value, but had it known it to be false or misleading or deceptive it would have acted differently. Such evidence could clearly be sufficient to establish materiality. 79 The third submission has two difficulties. In the first place the appellant's argument was that the representation was that there was no plan of the outlet pipe, not that there were no pre-construction plans showing the embankment. Secondly, it misunderstands the argument. The appellant's point is that had the 1951 cross-section been available to it, it would have realised that the respondent's information as to the level of fill was questionable and probably wrong. In other words, the availability of the cross-section would have led to a chain of inquiry being instigated by the appellant. 80 The appellant says that, in any event, on its case as properly understood, there was direct evidence of reliance. Mr. Alaeddin said: "[The 1951 cross-section] does show the outlet pipe. In my opinion, that document depicts the location of fill above the original surface level. I have also been shown [the additional documents] … Had I received those documents … at the time we were assisting Abigroup to prepare its tender, the first question I would have asked of Abigroup was whether there was any other information accompanying those documents or whether there was (sic) any other sectional plans which had not been provided to SMEC. Assuming the answers to those questions were no, SMEC would then have used those documents in conjunction with the other information that was provided to SMEC. In my opinion, the [additional documents] …show the ground levels on the right hand side of the spillway which are lower than the anticipated bedrock level shown in the Concept Design Report (and the documents referred to in that report) and on the Concept Design Drawings. I would have therefore realised that there were significant differences between the information contained in those documents and the information interpreted from the other documentation provided at the time of tender. I would have requested Abigroup to request the client to resolve those differences."

[46]

This evidence seems to have been overlooked by the Referee, presumably because of his misunderstanding of the appellant's case. 81 The trial judge accepted the Referee's reasoning. In doing so, he referred to portions of the evidence considered by the Referee, in particular that of Mr. Havercroft, Mr. Coffey, Mr. Gray and Mr. Jordan. 82 In relation to Mr. Havercroft's evidence, his Honour said: "Mr. Havercroft did not suggest that any cross-check of the information furnished should be made by reference to contour or other plans, or that he assumed that Abigroup or DPWS had done so. As the risk of latent conditions was to be borne by Abigroup, had it thought previous plans were significant it would be expected enquiry would have been made as to whether any existed, and whether any check of them had been made ." (emphasis added) 83 In my opinion, this reasoning is dependent upon the correctness of his Honour's finding as to the representation. If the representation as to there being plans available of the (or any) outlet pipe related to the 1951 cross-section (or any other pre-1960 construction plan), then his Honour's finding is unsustainable in the sense that on that understanding of the representation, the appellant was faced with a direct statement that no plans existed. In my opinion, proof of reliance in this situation does not require the appellant to ask whether such plans existed in the face of an express statement that they did not. 84 Next, his Honour's finding that neither Mr. Jordan nor Mr. Gray gave any evidence of reliance is incorrect. Mr. Gray gave evidence that had he been informed there were inconsistencies between the information in the 1951 Contour Plan and the Concept Design Document, he would have informed Abigroup. Mr. Jordan said he assumed the information was correct and proceeded on that basis. He also said: "We had to use the information supplied in the tender documents because there was nothing else" 85 It has to be remarked that, in the case of an express negative statement that something does not exist, which is accepted at face value, it is not necessary in order to prove reliance for there to be an evidentiary statement to the effect that the representation was relied on. Reliance can be inferred from all the circumstances, including from a party's conduct: see Hanave Pty Ltd v LFOT Pty Ltd (1999) 43 IPR 545 where the court held that causation does not have to be established by direct evidence of the part the relevant representation played. It is open to the court to determine "what effect must be taken to have resulted" (per Kiefel J at p. 556). 86 In this case, the evidence was all to the same effect. The representational material was contained in the Invitation to Tender, from which it could and probably would, be inferred was intended as an inducement to submit the tender in the terms the appellant did. The appellant's witnesses accepted that the geotechnical information contained in the Invitation was accurate and that they considered it was reasonable for them to proceed on that basis (absent any other available information such as historical plans to indicate to the contrary, or at least to raise a question in the minds of those charged with considering the material). The appellant treated the information as accurate, even though it bore the risk of any inaccuracy, but it did so in circumstances where it had no practical opportunity to do its own site inspections. All of those factors were matters that should have been taken into account by the Referee, and in turn the trial judge. In my opinion, they were all factors from which reliance could be inferred. 87 It follows, in my opinion, 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. The passing on issue 88 The respondent next contended that it was not responsible for the geotechnical information which had been prepared by DPWS as it had only passed it on to the tenderers "for what it was worth".

[48]

See also John G Glass Real Estate Pty. Limited v. Karaw: Constructions Pty. Limited (1993) ATPR (Digest) 41-249; Miba Pty. Limited & Ors. v. Nescor Industries Group Pty. Limited & Anor. (1996) 141 ALR 525. 90 The Referee held that the report had not been "adopted" in the sense referred to in these authorities. 91 However, the appellant submitted that in order to determine whether information is adopted or merely passed on, it is necessary to consider the matter from the perspective of the recipient of the information - in this case the persons to whom the Invitations to Tender were given: see Gardam v. George Willis & Co. Limited (1988) 82 ALR 415 per French J at 427 where his Honour said: ".. when, however, a representation is conveyed in circumstances in which the carrier would be regarded by the relevant section of the public as adopting it, then he makes that representation." 92 There was no evidence that the respondent expressly made known to he tenderers its alleged position that it was merely passing on the information. However, the Referee made the following findings, which were accepted by the trial judge. First, the respondent had no input into the documents. Secondly, at [R164] it was not shown that the respondent had taken responsibility for them. It is worth noting immediately however that that is only relevant if the respondent made that known to the recipients of the information: see Gardam. Thirdly, there was no basis upon which it could be said that the respondent could believe the work was not done properly. Again, I pause to make the observation that that does not assist in determining the question whether the respondent adopted the information prepared by DPWS. 93 The Referee further found at [R420] that the respondent had only turned its mind to the sufficiency of the information so as to enable the tenderers to fulfil their tasks. He noted that the respondent made it known to the tenderers that they were to make their own enquiries and carry out their own investigations. However, in making this finding his Honour failed to make any reference to the clear evidence that it had not been possible, at a practical level, for the tenderers to make their own on-site investigations. Nor did the Referee grapple with what a tenderer could or would do in the face of an express representation that there were no available plans of the (or any) outlet pipe. 94 The trial judge, after referring to the above findings, said at [J96]: "… when the documents are actually read it is apparent on their face that they are the work of DPWS and convey no representation otherwise. In my view, it would be quite unrealistic for a reader to conclude from their contents other than that they had been prepared by DPWS pursuant to a brief or retainer from SCA, and were in fact provided to tenderers as the work of DPWS." 95 In my opinion, the fact that it was apparent on the face of the documents, and otherwise made known to the tenderers, that DPWS had prepared some of the information is not to the point unless the respondent made it known, expressly or impliedly, that it was merely passing on information from an expert for assistance and consideration. In this case, that did not happen. To the extent there was any evidence, it pointed in the other direction. It is sufficient to refer only to the tender documents themselves to make the point: Clause DS3.3 in the Detailed Specification states: "DS3.3: The Principal has prepared a concept design for the works which is documented in the following documents: concept design Report, concept design drawings" 96 Clause DS-16.1 in the Detailed Specification includes the statement: "Notwithstanding that the Principal has provided or provides to the Tenderer/Contractor information concerning the site, the Existing Facility, the Concept Design, detailed design of the Works or other information attached hereto, this information could be incomplete or include errors." 97 The appellant submitted that the words "the Principal has prepared" and "the Principal has provided" could only mean that the principal was putting forward the documents as its own. In my opinion, this is correct. 98 More significantly however, is that the Invitation to Tender stated that the two documents containing the Representation would (and they subsequently did) form part of the Contract between the respondent and the successful tenderer. The Referee's finding on this issue therefore, is one which might be characterised as unreasonable on all the evidence, or alternatively, his conclusion is such that it must have been reached without fully considering all the evidence, or in applying a wrong legal principle to those facts. I have adverted to such matters when considering the facts found by the Referee in [R164] and [R420]. 99 Once that is accepted, it follows that the trial judge's discretion miscarried in adopting this part of the report.