Austin Engineering Pty Ltd v DA Story Pty Ltd & Douglas George Arundel Story and Marilyn Story [2000] QSC 97

[2] The action was commenced by writ issued on 1 October 1991. A precis of the issues in the applicant's amended statement of claim is that the applicant contends that it joined with the first respondent in a contract of partnership or joint venture under which each did different parts of the subcontracted steel fabrication and erection of steelwork for a superior contractor; that the project was delayed; that the superior contractor settled a large claim made by the first respondent (on behalf of the applicant and the first respondent) by paying $2 million to the first respondent; and that the respondent has failed to account to the applicant for its one-half of the net proceeds of the $2 million settlement received by the first respondent.

[3] The defences raised in the amended defence and counterclaim delivered 4 June 1997 were that it was the first respondent that had entered into the contract with the superior contractor for the fabrication of structural steelwork and the first respondent made an agreement with the applicant to carry out part of that fabrication; there was neither a partnership nor joint venture agreement between the applicant and the first respondent; and that by letter dated 10 August 1991 the first respondent had terminated the agreement on the basis that test results by an ultrasonic testing company Intico (Qld) Pty Ltd ("Intico") retained by the first respondent established that the applicant had seriously breached its contractual obligations as to the quality of its welding.

[4] The testing that was carried out by Intico was described in par 5(b) of the amended defence and counterclaim as follows:

"(b) say that such testing was carried out pursuant to an express term of the head contract which provided that the steelwork fabricated was to comply with minimum quality requirements analysed by quality assurance testing, namely:

(i) 5% ultrasonic examination on all special purpose welds thereon;

(ii) 2% magnetic particle inspection on all special purpose welds thereon;

(iii) 5% lamination checking of portal knee and crane (mixing);

(iv) 100% visual inspection on all special purpose welds."

[5] In pars 5(c), (d) and (e) of the amended defence and counterclaim the respondents alleged that Intico carried out that testing of the steelwork fabricated by the applicant which was the box trusses, there was a significant level of failure upon such testing of the box trusses and that such failures still existed, almost in whole, upon repeated testing of the box trusses.

[6] In its amended reply and answer delivered 3 June 1997 the applicant alleged that Intico failed to carry out the testing in a proper, workmanlike and professional manner.

[7] After the alleged termination of the arrangement between the applicant and the first respondent, the first respondent engaged another testing company SGS Australia Pty Ltd ("SGS") to test 100% of the welds. Prior to SGS's testing, the applicant had agreed to replace any welds which SGS marked "DNC". SGS marked certain welds "DNC". Those welds have been replaced. The first respondent intended to rely at trial upon SGS's test results as evidence supporting Intico's test results. The applicant complained that SGS's test were badly done and its recorded test results vastly overstated any imperfections in the welds.

[8] On 16 May 1997 Moynihan SJA ordered that the applicant deliver a list of issues/questions to be referred to the special referee on or before 4 pm on 3 June 1997. The parties were also ordered to attempt to agree a list of technical questions/issues which arise in the action, a date for the reference and the identity of the referee within 14 days of the delivery of the applicant's amended reply and answer and list of issues.

[9] The parties liaised and agreed upon 23 questions which dealt with the technical issues in the action concerning the applicant's welding. The questions went to the quality of the applicant's welding work and the quality of testing works undertaken by the testing firms Intico and SGS.

[10] On 16 July 1997 the court by consent appointed an engineer, Mr Ken Hinds, as special referee to inquire into and report upon those questions under s 255(1) of the Supreme Court Act 1995.

[11] Pre-trial directions by the referee for the exchange of reports were made. There were some seven directions hearings before the referee. There were 25 hearing days between 18 August 1997 and 15 June 1999 and 191 exhibits were tendered. Both sides were represented by solicitors and counsel. Twelve or 13 experts gave evidence and were cross-examined. There were meetings of experts from each side to attempt to resolve the issues.

[12] The 191 page report of the referee dated 24 August 1999 was delivered to the court on 25 August 1999. It provided detailed answers to the questions asked of the referee.

[13] On 15 October 1999, upon the parties agreeing that answer #6(b)(ii) of the report of the special referee should be read and construed as:

"The majority of those butt welds marked DNC by SGS were suitable for their intended purpose. I would estimate that most likely about 95% by number of all butt welds were always suitable for their intended purpose."

it was ordered by Derrington J that the report of the special referee be accepted and adopted by the court for the purposes of the proceedings.

[14] Section 255 of the Supreme Court Act 1995 is the relocation of s11 of the Judicature Act 1876. In order to work out the effect of s255 of the Supreme Court Act 1995, it is useful to compare ss256 and 257 of that Act which are the relocation of ss12 and 13 of the Judicature Act 1876.

[15] Whereas s255 deals with the referral of any question for inquiry and report to a special referee, s256 deals with the ordering of any question or issue of fact to be tried before a special referee to be appointed by the court or judge. Section 257(2) provides that the report of any referee upon any question of fact on any such trial shall "unless set aside by the court" the equivalent to the verdict of a jury. Section 257(2) therefore relates to the effect of a trial before a referee under s256.

[16] It is clear from s255(1) itself that for the report of a special referee under that section to be enforced as a judgment by the court, that it must be adopted either wholly or partially by the court. This is different to the effect which is given to a report of a referee upon the trial of a question or issue of fact under s256(1) by virtue of s257(2). Reference to that distinction in respect of equivalent provisions in the Judicature Act 1873(UK) is made by Brooking J in Nichols v Stamer [1980] VicRp 46; [1980] VR 479, 487. There is a similar discussion in the judgment of Lee J in Netanya Noosa Pty Ltd v Evans Harch Constructions Pty Ltd [1995] 1 QdR 650, 653-655.

[17] The last mentioned decision was in respect of an application by one party for an order pursuant to s11 of the Judicature Act 1876 that certain questions be referred to a special referee for inquiry and report. The statement at p654 of the report:

"The object of the report being to better enable the Court to decide the ultimate issues; Longman at 159 per Cotton L.J., s.11 does not permit the court to abdicate its fact finding function in favour of reference to some external tribunal. That function always remains a function of the Court, it being given the sole discretion to decide what assistance, if any, is to be derived from the referee's report."

must be understood in that context. It was a reference to the status of the report, before it is adopted by the court. The discretion to decide what assistance is derived from the report is a reference to the discretion exercised by the court in deciding whether to and to what extent to adopt the report.

[18] To the extent that the report under s255 is adopted by the court, it becomes the findings of the court in respect of the matters the subject of the report.

[19] The report in this case is the answers to the 23 questions referred to the referee and the discussion of the evidence and reasons which resulted in those answers (against the background of the evidence and submissions made to the referee).

[20] The order of Derrington J made on 15 October 1999 therefore had the consequence that the findings of fact in the referee's report became the findings of the court on those facts.

[21] It is therefore relevant to consider the amendments in the context of part of the evidence of the proceedings being heard and findings made in respect of that evidence with the rest of the trial due to take place at a subsequent date.

[22] Mr Douglas SC who appeared for the respondents relied on State of Queensland v JL Holdings Pty Ltd [1997] HCA 1; (1997) 189 CLR 146 to support the amendments and, in particular, the principle that amendments are ordinarily allowed so as to ensure the court decides the rights of the parties.

[23] Mr Fraser QC who appeared with Mr Collins of Counsel for the applicant submitted that the approach in State of Queensland v JL Holdings Pty Ltd had no application in a case where the application for amendment was made after the trial of the relevant issues.

[24] Although the facts of State of Queensland v JL Holdings Pty Ltd are distinguishable from the facts of the present case, the overriding principle adopted by the High Court on the making of amendments to pleadings remains applicable. Dawson, Gaudron and McHugh JJ stated at p 155:

"Justice is the paramount consideration in determining an application such as the one in question. Save in so far as costs may be awarded against the party seeking the amendment, such an application is not the occasion for the punishment of a party for its mistake or for its delay in making the application. Case management, involving as it does the efficiency of the procedures of the court, was in this case a relevant consideration. But it should not have been allowed to prevail over the injustice of shutting the applicants out from raising an arguable defence, thus precluding the determination of an issue between the parties. In taking an opposite view, the primary judge was, in our view, in error in the exercise of her discretion."

[25] In that judgment reference was made to the particular litigation being of a commercial nature, so that there was nothing to indicate any personal strain which would justify the conclusion that costs were not an adequate remedy for prejudice caused by the amendments sought to the pleadings.

[26] In this matter Mr Austin has deposed to the litigation and the trial of the technical issues before the referee having taken a great personal toll on himself and Mrs Austin. Mr and Mrs Austin are both directors of the applicant. With or without the amendments, Mr and Mrs Austin will have to endure the balance of the trial in this matter. The personal strain that may flow from any additional evidence required as a result of any amendments must therefore be considered in the context of what it would add to the trial that was already anticipated.

[27] In general terms, the applicant describes the essence of the amendments as the allegation in par 5(k) that the applicant evinced an intention not to be bound and was not ready, willing and able to perform the agreement which is based on a large collection of detailed allegations involving technical issues about the applicant's welding. The applicant points out that at the time of the reference there was no allegation about repudiatory conduct and that par 5 of the amended defence and counterclaim at that time made it clear that the first respondent's purported termination was based upon allegations of actual breaches of specific terms which the pleading identified.

[28] In general terms, the respondents seek to make amendments which incorporate the content of the referee's report. There are other amendments which the respondents seek to make which have arisen out of evidence given in the course of the hearing before the referee, but which is not the subject of findings by the referee.

[29] The respondents acknowledge that they are now seeking to plead repudiatory conduct for the first time, but rely on the principle (which is not disputed by the applicant) that a party seeking to vindicate a termination is entitled to rely upon grounds which were unknown to it at the date of termination: Shepherd v Felt & Textiles of Australia Ltd (1931) 45 CLR 359.

[30] Consistent with the overriding principle of achieving justice between the parties when considering whether amendments to a pleading should be allowed, as espoused in State of Queensland v JL Holdings Pty Ltd, the amendment of a pleading to include an alternative basis for terminating a contract, even at a late stage, is not necessarily objectionable. Generally, the test must be what additional factual matters are raised by the amendment and whether that causes prejudice to the other party which cannot otherwise be accommodated.

[31] Because of the report of the special referee in this case, there is the complication that the raising of factual matters at this stage which are either covered or could have been covered by the report must be considered in the light of the report.

[32] Mr Douglas submitted that the issue as to whether or not the first respondent was entitled to terminate the "arrangement" with the applicant was an issue that was always to be determined by the trial judge and that the reference of issues to the referee for inquiry and report was not intended to conclude the cause or matter or even finally determine the rights of the parties or issues in dispute between them.

[33] It is true that the findings of the referee on the technical issues do not result in the determination of any ultimate issue in the action which involves mixed questions of fact and law. Each ultimate issue has been left to the trial judge. To the extent that those technical issues are steps in the ultimate finding process, the adoption of the report in this matter has disposed of those technical issues. That does not necessarily preclude further technical issues now being raised. It depends on whether doing justice between the parties permits amendments to be made at this stage which would have the effect of raising further technical issues. The question of justice must taken into account all relevant considerations, as they affect both parties. One of the relevant considerations is that the original intention of the parties and the court was that the technical issues in the action were to be dealt with by the referee.

[34] If the factual matters raised by any of the amendments were disposed of by the report, as the report has been adopted, those factual matters cannot now be raised, except as found in the report. This raises the issue of whether it can be determined on this application whether and how a factual matter has been disposed of by the report. It is implicit in the applicant's submissions that it can be done. On the other hand, it is submitted on behalf of the respondents that the question of the amendments is being considered on an interlocutory basis and it is a matter for the trial judge to consider what any particular part of the report means.

[35] The report is extremely comprehensive. In relation to each question, the referee has set out each party's proposed answer, the submissions and evidence put forward by each party, a full discussion of that evidence and the reasons of the referee and, finally, the answer to the question which accords with the discussion on evidence and reasons.

[36] Even though this is an interlocutory application, where the respondents rely on the report for making the amendment and it is clear that the amendment is not supported by the report, the amendment should not be allowed.

[37] I shall deal with each of the amendments in the same order and groupings as set out in the applicant's written outline of submissions (Exhibit 1).

[38] Firstly, the respondents foreshadowed in their solicitors' letter dated 2 February 2000 to the applicant's solicitors that they propose to replace the word "failure" in par 5(d) and the word "failures" in par 5(e) with the words "'does not comply' results" in addition to the amendment which is shown on the further amended defence and counterclaim of inserting the words "recorded by Intico" in par 5(d) and the word "recorded" in par 5(e). During oral submissions, Mr Douglas stated that it was intended that par 5(d) refer to Intico's test when engaged by the applicant and that par 5(e) was a reference to testing undertaken by Intico at the request of the respondents.

[39] Secondly, Mr Douglas sought leave to make a related amendment to par 5(k) by substituting "sub-paragraph (gi)" for "sub-paragraphs (a) to (gi)".

[40] Without that amendment to par 5(k), the facts pleaded in pars 5(d) and (e) were relied on for supporting the allegation of repudiatory conduct on the part of the applicant set out in par 5(k). As a result of that related amendment, the allegations in pars 5(d) and (e) are not relied on in relation to termination. That is also consistent with par 5(l).

[41] Mr Douglas also sought leave to amend par 5(l) to rely on the repudiatory conduct pleaded in par 5(k) to justify the alleged termination. This was a technical amendment necessary in order to give some effect to par 5(k).

[42] Mr Douglas submitted that the allegations in pars 5(d) and (e) were relevant to the allegation against the second respondents, made against them as directors of the first respondent, that they acted in disregard to their duties as directors of the first respondent, as pleaded in par 20 of the amended statement of claim. It was submitted that the respondents wished to rely upon the fact of what the Intico reports on their face recorded, irrespective of the findings of the referee as to whether these recorded results were correct or not.

[43] Mr Douglas also submitted that the amendments in pars 5(d) and (e) did not raise any new technical issue.

[44] The applicant relied on the referee's answers to questions #7(a), #7(b)(ii) Extent, #7(b)(iii) Significance, #8(a) and #8(b)C and made the submission that pars 5(d)-(e) were inconsistent with the referee's answers.

[45] The justification put forward by the respondents that the amendments to the allegations in pars 5(d) and (e) are required to meet the issue of the mala fides of the second respondents is not reflected by the amendments. One difficulty with the amendments is that the respondents have tried to keep the wording changes to a minimum. Even changing the word "failure" to "does not comply result" leaves the description of the test results referred to in both pars 5(d) and (e) as being a significant level of "does not comply results". That does not accord with the referee's answer #7(b)(iii).

[46] There would be no difficulty making an amendment that did not raise technical issues, but relied historically on the test results recorded by Intico in respect of the second respondents actions' in relation to termination, but the present amendments to pars 5(d) and (e) do not effect what is intended and, as presently worded, are inconsistent with the answers in the report relied on by the applicant. The amendments to pars 5(d) and (e) will not be allowed.

[47] During the course of submissions Mr Douglas obtained instructions to give an undertaking that in respect of the amendments proposed to par 5(gi)i to viii, the respondents would not lead any further evidence at trial, other than to rely on the referee's report.

[48] One of the bases on which the applicant opposed the amendment to par 5(gi)i was that it would be manifestly unjust to allow the respondents to now call contrary evidence to that called before the referee. The undertaking not to call further evidence at trial on the issue raised by the amended par 5(gi)i overcomes this objection.

[49] The other basis for objecting to this amendment was that the applicant considers that the allegation is contradicted by the report. The respondents rely particularly on the second and third paragraphs on page 60 of the report to support the allegation made in the amendment.

[50] The second and third paragraphs on page 60 of the report relate to answer #4B(b) which is set out on pages 60-61 of the report. The answer accepts that "... a percentage of the total butt welds carried out by Austin may have contained imperfections which, upon appropriate testing and assessment in accordance with AS1554.1, would have been found to have exceeded the levels in Table 6.3 of AS1554.1-1985". It is then relevant to consider the subsequent discussion of the evidence by the referee in dealing with question #4B(c) and the statement in the second last paragraph on page 95:

"I accept that a reasonable interpretation of AS1554, consistent with my experience, is that Austin are not non-compliant just because the maximum level of imperfections permitted by Table 6.3 of AS1554.1 is exceeded."

[51] The allegation in par 5(gi)i therefore does not accord with the report and should not be allowed.

[52] The applicant's complaint is about the use of the words "at least" when the finding in the report (as modified by the order made on 15 October 1999) at answer #6(b)(ii) is that "I would estimate that most likely about 95% by number of all butt welds were always suitable for their intended purpose". The respondents rely on the final paragraph on page 134 of the report:

"I am of the opinion that a figure of 95% being suitable for the purpose, on the balance of probability, is likely to be correct given the facts, but, on any reasonable view of the evidence a figure greater than 90%."

[53] The corollary of the findings as incorporated in answer #6(b)(ii) is that about 5% by number of all butt welds were not suitable for their intended purpose.

[54] The other objection which the applicant had to par 5(gi)ii was that it would require experts and lay witnesses to be called to give evidence about the significance of the level of unfit welds. That objection is met by the respondent's undertaking not to call any further evidence in relation to this amendment.

[55] In the light of that undertaking and provided the words "at least" are substituted with the word "about" or similar words, par 5(gi)ii should be allowed to remain.

[56] Par 5(gi)iii reflects answer #1 in the report. Par 5(gi)iv reflects the first paragraph on p31 of the report. In the light of the undertaking not to call further evidence, they should be allowed.

[57] During oral submissions Mr Douglas sought leave to further amend par 5(gi)v by deleting the word "permit" and substituting the word "require". That would make par 5(gi)v read as follows:

"the approved workshop drawings did not require reinforcement but complete penetration full strength butt welds;"

The use of the word "require" rather than "permit" makes par 5(gi)v accord more closely with the statement in par 2 on p 29 of the report. It is then appropriate to allow that amendment, having regard to the undertaking not to call further evidence.

[58] Paragraph 5(gi)vi reflects the statement made by the referee in the first sentence of the last paragraph on page 131 of the report:

"I accept the evidence of Austin that reinforcement was present in the vast majority of welds but not on all welds."

In the light of the undertaking not to call further evidence, it is appropriate to allow the amendment to par 5(gi)vi.

[59] Paragraph 5(gi)vii is based on the first sentence of the third paragraph on page 28 of the report. It is apparent, however, from the balance of that paragraph and the following paragraph that the referee considered that full strength could also be achieved with reinforcing of the butt weld as an alternative to complete penetration of the butt weld. As par 5(gi)vii does not reflect the report, it should not be allowed.

[60] Paragraph 5(gi)viii appears to be based on the second last paragraph on page 28 of the report. The statement made on that paragraph has been taken out of context in the manner in which it has been incorporated in par 5(gi)viii. Paragraph 5(gi)viii purports to be a statement that all butt welds fabricated by the applicant were welded with reinforcement to compensate for lack of fusion. That is not consistent with the evidence accepted by the referee that despite Mr Austin's considering that the term FSBW did not require complete penetration, complete penetration welds were being attempted by Austin (second last paragraph on page 148 of the report).

[61] The statement made in the second last paragraph on page 28 is made in the context of answering the question #3 about the meaning of the FSBW which stands for full strength butt welds. The statement which is the genesis of par 5(gi)viii is not a finding that all butt welds were not complete penetration butt welds. It is a statement that if a butt weld was not complete penetration, it could have lack of fusion which could not be classed full strength without reinforcing. As par 5(gi)viii does not reflect the report, it should not be allowed.

[62] Mr Douglas conceded that evidence may need to be led on these issues at the trial. He submitted, however, that it did not involve opening any issue on the sufficiency of the welding, but evidence on sufficiency of procedures. Each paragraph clearly raises technical issues.

[63] In relation to par 5(gi)ix, the respondents relied on lines 12 to 15 of page 1305 of the transcript of the examination-in-chief of Mr Austin. In relation to par 5(gi)xi, the respondents rely on pages 1342, 1351 to 1355 of the transcript of the cross-examination of Mr Austin. There is therefore no finding of the referee which is the basis for including these two paragraphs.

[64] The applicants submits that the evidence given by Mr Austin about these issues was in a context in which there was no allegation of breach or conduct evidencing repudiation. The applicant relied on the statement made by Griffith CJ in Gordon v Macgregor (1909) 8CLR 316, 321:

"... it is a very dangerous thing after the close of the evidence to allow an amendment to raise a point founded on some oral statement by a witness, which may be perfectly complete so far as it is relevant to the issues which are being tried, but which if it were given with reference to entirely different issues would be incomplete. It is like allowing a party to rise a new case on appeal when the Court has not all the materials before it."

[65] The reliance on that passage from Gordon v Macgregor would have greater significance, if there were no further opportunity for evidence on these issues. What is more critical is whether a technical issue should be allowed to be raised by an amendment to the pleading at this stage, after the technical issues in the action have been dealt with by the referee.

[66] There is no material from the applicant to suggest that the technical evidence required in respect of these two new paragraphs would be significant. The personal strain on Mr and Mrs Austin of having to put on further technical evidence in respect of the further hearing of this matter must be weighed up against the need to afford the respondents the opportunity to pursue factual matters which arose out of the evidence of Mr Austin.

[67] Notwithstanding that pars 5(gi)ix and 5(gi)xi raise technical issues which could have been the subject of questions directed to the referee, if raised at an earlier stage, on balance I consider that the justice of the matter favours allowing these amendments.

[68] Paragraph 5(gi)x is based on page 1342 of the transcript of the cross-examination of Mr Austin. The applicant objects to this paragraph on the basis that it must raise technical issues, and that the evidence about the ETRS test at the hearing before the referee was given in a context other than that the ETRS test result evidenced repudiation by the applicant. The applicant also submits that the referee's other answers are inconsistent with the proposition that the alleged "non-compliance" rate of 30-40% on the ETRS test was an accurate reflection of the quality of the applicant's welding.

[69] The allegation in par 5(gi)x links to the allegation made in par 5(gi)xi. For the same reasons that I have allowed pars 5(gi)ix and xi, I consider par 5(gi)x should be allowed.

[70] The respondents rely on pages 1357 and 1366 of the transcript of the cross-examination of Mr Austin for the allegations set out in par 5(gi)xii. The respondents wish to say that Mr Austin on behalf of the applicant by adopting the position that the butt welds marked FSBW were not required to be complete penetration full strength butt welds amounted to the applicant repudiating the arrangement with the first respondent.

[71] The applicant relies on the fact that at the hearing before the referee the first respondent accepted (and relied upon for a different purpose) and the referee found (at the second last paragraph of page 148 of the report) that the applicant despite Mr Austin's belief nevertheless set out to achieve complete penetration butt welds.

[72] It is therefore inconsistent with the course adopted by the respondents at the hearing before the referee and with the referee's finding that complete penetration welds were being attempted by the applicant for the respondents to now allege that Mr Austin's belief about the meaning of FSBW amounted to repudiatory conduct.

[73] The particulars of the contentions in par 5(gi)xii are stated to be those set out in pars 5(h),(i) and (j). The applicant relied on the matters set out in pars (h),(i) and (j) being events which occurred after the alleged date of termination. Mr Douglas conceded that the matters set out in pars 5(h),(i) and (j) postdated the alleged date of termination, but submitted that evidence both before and after termination was relevant to whether Mr Austin prior to the alleged date of termination had the belief and contention set out in par 5(gi)xii. The applicant submitted that it was the work undertaken by the applicant, rather than any uncommunicated belief of Mr Austin which was relevant.

[74] The finding made by the referee that complete penetration welds were being attempted by the applicant makes irrelevant an allegation now based on a belief of Mr Austin that was uncommunicated prior to the alleged termination. Paragraph 5(gi)xii should not be allowed on the basis that it is inconsistent with the report of the referee.

[75] The respondents submit that no technical issues are involved in the allegations in par 5(gi)xiii-xiv and that they are questions of fact which would never have been referred to the referee now can be dealt with by the trial judge. Mr Douglas conceded that further evidence would be required on these issues and there may need to be evidence about whether the time limit mentioned in par 5(gi)xiii could be complied with. Mr Douglas suggested that there might need to be the evidence of a fabricator, but that it was more likely that expert evidence would be required.

[76] The applicants submitted that a great deal of evidence was led in the reference about what was involved in the applicant's work and in the testing and repairs and that the time within which the fabrication (including and necessary testing and repairs) could have been achieved raises new technical issues which could have been the subject of questions in the reference.

[77] There is no material from the applicant to suggest that the technical evidence required in respect of par 5(gi)xiii would be significant. For similar reasons to my decision in respect of pars 5(gi)ix and 5(gi)xi, I consider that, on balance, the justice of the matter favours allowing these amendments, even though technical issues may be raised by par 5(gi)xiii.

[78] Mr Douglas conceded that this amendment will entail expert evidence being led at the trial.

[79] The applicant submitted that this paragraph incorporates assumptions that the previous paragraphs are permissible and contain accurate allegations and raises new and extensive technical issues which should have been the subject of specific questions to the referee.

[80] It is difficult to see how the allegation incorporated in this amendment about an engineer is one of the facts now relied on as repudiatory conduct of the applicant.

[81] The problem with par 5(gi)xv is that it does incorporate statements that are inconsistent with the referee's report. In particular the allegation implicit in this amendment that the box trusses fabricated by the applicant contained butt welds which did not comply with the requirements of AS1554-1985 is not consistent with answer #4B(b) of the report and the allegation that the butt welds were not fit for their intended purpose is not consistent with the finding in answer #6(b)(ii), as adopted by the court.

[82] On the basis of inconsistency with the referee's report, paragraph 5(gi)xv should not be allowed.

[83] This amendment follows on from pars 5(gi)xiii and xiv. It therefore should be allowed.

[84] As I have allowed some of the amendments to par5(gi) which form the basis of the allegation in par 5(k) and the amendment to par 5(l), these amendments should also be allowed. The amendments to these paragraphs for which leave was sought during the oral submissions should also be allowed.

"it was an express term of the head contract that welding of structural steelworks was to be in accordance with certain Australian Standards including AS1554-1985;"

[86] The applicant objects to this amendment on the basis that it is irrelevant, except to support the contentious amendments to par 5.

[87] Having regard to the stage at which this action has reached, when a further hearing is due to take place and that this amendment raises a question of fact, the amendments should be allowed.

[88] Paragraph 2(f) deals with the implied terms alleged by the respondents in respect of the arrangement between the applicant and the first respondent. Paragraphs 2(f)ii (2) and (3) are new allegations. They are that the steelwork fabricated by the applicant would be "suitable for its intended purpose under the head contract" and "in accordance with approved workshop drawings". Particulars are given of the circumstances by which the terms were implied. They are set out as pars A to H. The applicant objects that particulars B, D, E and F also raise previously unpleaded technical issues.

[89] The respondents rely on evidence of some of the expert witnesses at the hearing of the reference to support the matters alleged in pars B, D, E and F. The ambit of the issues raised by those paragraphs does not appear significant and was not suggested to be so by the applicant. Otherwise, the matters raised by amendments are factual matters which were not the subject of findings by the referee.

[90] Doing justice to both parties favours allowing the amendments to par 2(f)ii.

[91] Although the applicant objects to the amendments to par 5(a)-(c), the only amendment which appears to have been made is to par 5(a).

[92] In the amended defence and counterclaim, the allegation in par 5(a) was that on various occasions in 1990 and 1991 the first respondent engaged Intico to carry out quality assurance testing in respect of the steelwork fabricated by the applicant. The amendment made to par 5(a) has substituted the applicant for the first respondent, ie the allegation is now that the applicant engaged Intico to carry out the quality assurance testing

[93] That is a factual matter which can still be dealt with at the future hearing in this action. It was not a matter which was the subject of a finding by the referee. The amendment should therefore be allowed.

[94] I am therefore prepared to order that leave be given to amend:

(a) paragraph 5(gi)v by deleting the word "permit" and substituting the word "require";

(b) paragraph 5(k) by deleting "sub-paragraphs (a) to (gi)" and substituting "sub-paragraph (gi)";

(c) paragraph 5(l) by deleting "sub-paragraph (gi)" and substituting "sub-paragraphs (gi) and (k)".

[95] I propose to disallow the amendments made to pars 5(d), 5(e), 5(gi)i, 5(gi)vii, 5(gi)viii, 5(gi)xii and 5(gi)xv of the further amended defence and counterclaim dated 10 December 1999.

[96] I note that I have allowed the amendments to pars 5(gi)ii-5(gi)vi on the basis of the undertaking given by Mr Douglas on behalf of the respondents that the respondents will not lead any further evidence at trial in respect of those issues other than to rely on the referee's report.

[97] The three amendments foreshadowed during all oral submissions for which I am prepared to give leave may now not suit the respondents in the light of my disallowance of some of the amendments made in the defence and counterclaim dated 10 December 1999. The respondents may also wish to consider whether they wish to proceed with all the amendments which I have allowed, in the light of my disallowance of some amendments. In addition, my allowance of par 5(gi)ii is dependent on an appropriate wording change to the words "at least".

[98] I will therefore allow the parties an opportunity to submit an order which reflects these reasons which is acceptable to both parties or I will otherwise entertain submissions on a convenient date to the parties as to the appropriate form of orders and an appropriate order for costs.

[99] I therefore order that the application be adjourned to a date to be fixed for submissions on appropriate orders and costs.