Ciccarelli v Cavasinni Developments

FRANK CICCARELLI & ANOR v CAVASINNI DEVELOPMENTS PTY LTD & ANOR 55046/01

Paragraph The issues 2 Factual background 4 The reference 19 Adoption of referee's report: relevant principles 24 The extent of a referee's obligaton to give reasons 32 Cavasinni's challenges 34 Shrinkage and cracking 37 Repair of cracks 48 Drainage 52 Bowing and tilting in the Ciccarelli retaining wall 58 Distortion of the portal frames and crane rail 63 Onus of proof 71 Conclusions on challenges to report 76 Costs 80 Costs up until the making of the order for reference 84 The order for reference 105 The costs of the reference 110 Indemnity costs 117 The position of the second defendant 129 Time taken to report 131 Conclusions and orders 138

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION TECHNOLOGY AND CONSTRUCTION LIST

55046/01 FRANK CICCARELLI & ANOR v CAVASINNI DEVELOPMENTS PTY LTD & ANOR JUDGMENT 1 HIS HONOUR: The plaintiffs ("the Ciccarellis") and the first defendant ("Cavasinni") own adjoining properties in Wetherill Park. The Ciccarellis say that construction work carried out by Cavasinni on its land in the latter half of 2000 and the early part of 2001 caused damage to a building on their land. They obtained an interlocutory injunction to restrain what they said was the commission of a nuisance. Eventually, the injunction was dissolved on terms to which I shall return. There remained the Ciccarellis' claim for damages. That was referred for inquiry and report under SCR Pt 72 r 2 to a referee. The referee concluded that the Ciccarellis had suffered damage amounting in total to $77,490. The Ciccarellis move for adoption of his report and seek costs. Cavasinni moves for rejection of the report. The issues 2 Cavasinni attacks seven separate aspects of the report. It submits that, in relation to each of those sections, the referee did not demonstrate a thorough, analytical and scientific approach (Chloride Batteries Australia Ltd v Glendale Chemical Products Pty Ltd (1988) 17 NSWLR 60). Further, it said, he did not apply his mind to the task of fact finding in a careful manner consistent with legal principle and, in fact, he acted perversely or manifestly unreasonably (Super Pty Ltd v SJP Formwork (Aust) Pty Ltd (1992) 29 NSWLR 549). Further, Cavasinni submits, no reasonable tribunal of fact could have reached the impugned findings (Foxman Holdings Pty Ltd v NMBE Pty Ltd (1994) 38 NSWLR 615). 3 Further, as to one finding, Cavasinni submits that the referee erred in law because he found that Cavasinni bore an evidentiary onus to establish the existence of pre-existing damage if it contended that damages ought to be discounted on this basis. Accordingly, Cavasinni submitted, the Court is entitled and bound to correct the error (Homebush Abattoir Corporation v Bermria Pty Ltd (1991) 22 NSWLR 605). Factual background 4 The Cavasinni land lies immediately to the west of the Ciccarelli land. There were a number of factory units erected on the Ciccarelli land. One of those (unit 2) has its western wall close to the boundary between the Ciccarelli land and the Cavasinni land. It was excavated (at least at the western end) to a depth of approximately three metres. The soil to the west of the excavation is retained by a cast-in-situ concrete retaining wall about 2.8 metres high ("the Ciccarelli retaining wall"). The balance of the western wall is constructed of pre-cast concrete panels. There is a Jointex filler between the retaining wall and the pre-cast panels above it. 5 Within the walls of unit 2 and (on the western side) directly against the inner face of the retaining wall there are a number of steel columns. Those columns support a portal frame. Crane rails have been attached to the top of the columns. A travelling crane runs on wheels back and forth along the crane rails. 6 Cavasinni began building work on its land in about mid 2000. That work included the construction of a concrete block retaining wall along the eastern boundary. That wall ("the Cavasinni retaining wall") was about 5.2 metres high. It was located approximately ½ metre from the outside face of the western wall of unit 2. 7 Cavasinni placed compacted fill behind (ie, to the west of) its retaining wall. Before that had been done, the Cavasinni land was about 3 metres higher than the Ciccarelli land adjacent to unit 2 (because of the excavation undertaken during the construction of unit 2). This height differential was exacerbated when fill was placed behind the retaining wall on the Cavasinni land. 8 In early 2001, Mr Ciccarelli and the tenant of unit 2 became aware of the ingress of mud and water into unit 2. Investigations revealed that mud and water were penetrating both through joints in the floor slab and through cracks in the Ciccarelli retaining wall. Mr Ciccarelli said that he had not observed any of those cracks in his wall before this time. 9 In about July 2001, Mr Ciccarelli said that he observed distortion or deflection in the retaining wall in a particular place. This, he said, had caused the columns and crane rails to be displaced, as a result of which the overhead crane jumped or slewed when it travelled. Mr Ciccarelli said that he had not observed those problems earlier. 10 Mr Ciccarelli's evidence was corroborated, to some extent, by Mr Marcello Digirolama. He was an electrician who had worked in unit 2 in 1996 and 1997, commissioning and maintaining the overhead crane. At that time, he said, the span between the crane rails was consistent (ie, there was no deflection) and the crane had no problem running on its rails. However, in September 2002, Mr Digirolama observed an inwards displacement of the crane rail at a particular point, which had not been there before. 11 Other witnesses gave evidence that, in some respects, was inconsistent with Mr Ciccarelli. The referee did not regard those other witnesses as satisfactory. He accepted Mr Ciccarelli's evidence. Cavasinni did not submit, in these proceedings, that it was not open to the referee to prefer the evidence of Mr Ciccarelli over that of the other witnesses, or to accept it. 12 When Mr Ciccarelli noticed the ingress of mud and water, he contacted Mr Enrico Beretta. Mr Beretta is a structural engineer. Mr Beretta confirmed that mud and water had entered unit 2 both through joints in the floor slabs and through cracks in the retaining wall. 13 Mr Beretta reported on 8 February 2001 that the Ciccarelli retaining wall was exhibiting extensive cracking and that there was mud and water penetration through those cracks. He expressed the opinion that the work being carried on by Cavasinni was the cause of those problems. It was his opinion that the fill placed behind the Cavasinni retaining wall was imposing lateral forces on the Ciccarelli retaining wall sufficient to cause it to collapse. He said that there was "a disaster waiting to happen". 14 Mr Ciccarelli contacted the local council, Fairfield City Council ("the council"). Council became involved. It served notice on Cavasinni, advising that it proposed to order demolition of what it called the "unauthorised retaining walls" (which I understand to refer to the Cavasinni retaining wall). Mr Alan Wright, a structural engineer retained by council, carried out investigations. He recommended the immediate removal of the fill placed behind the Cavasinni retaining wall. On 29 March 2001, council issued an emergency order requiring Cavasinni to remove fill adjacent to its retaining wall. 15 Cavasinni did not comply with the order. They ignored it. Indeed, they carried out further filling and compaction work thereafter. This was observed by Mr Beretta and by Mr Andrew Shirley, a geotechnical engineer retained by the Ciccarellis. Mr Beretta told Cavasinni to stop building and to remove the fill because the fill "imposes intolerable forces on the Ciccarelli retaining wall". Mr Shirley wrote a report in July 2001, concluding that the Ciccarelli retaining wall had moved and that parts of it had "undergone flexural failure" as a result of substantial lateral pressures from the Cavasinni retaining wall and fill placed behind it. Mr Beretta reported at the same time to similar effect. 16 Thereafter, there were negotiations between the Ciccarellis and Cavasinni, and between their respective consultants. The Ciccarellis wanted details of the Cavasinni retaining wall. They were not provided. Mr Beretta was concerned that it was proposed to recommence construction work on the Cavasinni land, including both the placement of fill behind the retaining wall and the construction of a concrete floor slab suspended on the wall with another boundary wall built on top of that. Mr Beretta was concerned that, unless the strength of the Cavasinni retaining wall could be demonstrated, the proposed works could cause the Ciccarelli retaining wall to fail completely. The result would be, in substance, the destruction of unit 2. 17 For reasons that remain unclear, council issued a certificate on 4 October 2001, the effect of which was to enable Cavasinni to resume its work. The Ciccarellis sought urgent injunctive relief. Barrett J concluded that there was threat of serious damage to unit 2 and to people within it. He adverted to the unwillingness of Cavasinni to address the dangers to which the Ciccarellis' expert evidence pointed, and to what could be called at best (or neutrally) an attitude of inertia on the part of council. In those circumstances, his Honour granted interlocutory relief, the effect of which was to restrain Cavasinni from carrying out the works in question, to maintain the area to the west of their retaining wall dry, and to produce all drawings and other details of the construction of their retaining wall to the Ciccarellis. 18 In negotiations thereafter, the parties agreed that Cavasinni should remove further backfill, to a point where Mr Garry Mostyn, a geotechnical engineer retained by it, was prepared to certify in effect that there was no longer a risk of the transfer of lateral loads from the Cavasinni land onto the Ciccarelli retaining wall. That work was undertaken (the existing injunction was varied to permit this). Mr Mostyn was not prepared to certify in the terms sought, but was prepared to certify that there would be no transfer of adverse lateral loads. When he so certified, the existing injunction was dissolved. The reference 19 An order for reference was made on 26 July 2002. It required the referee to report by 25 October 2002. 20 The referee held a preliminary conference on 2 August 2002. After a further preliminary conference and a view, the hearing commenced on 9 September 2002. It continued for 12 (not continuous) days between 9 September and 23 December 2002. The parties addressed the referee on 10 January 2003. The referee did not report until 12 April 2004. I was informed from the Bar table, without objection, that both the parties and the Court had requested the referee to expedite the completion and delivery of his report. It was said that the report was delivered within a relatively short time of the Court's intervention. 21 The parties agreed that the referee was required to consider some eleven issues. They were (paraphrased):

(1) Whether the Cavasinni works transmitted lateral loads onto the Ciccarelli land and, if so, whether that was a nuisance, or was the result of negligence?

(2) Was the cracking and tilting in the Ciccarelli retaining wall consistent with its age and construction and the loadings on it before Cavasinni began work?

(3) If yes to (1), did the transmission of those lateral loads cause or exacerbate damage to unit 2?

(4) If yes to (1) and (3) and no to (2), what is the extent of the damage, what is the appropriate method and cost of rectification, and will there be a loss of rental income?

(5) What information did Cicarelli's lawyers and engineers have available to them, in relation to the Cavasinni works, as at 10 October 2001?

(6) Was that information sufficient to satisfy a reasonable engineer that the Cavasinni works would not have given rise to the risk of failure of the Cavasinni retaining wall or the transmission of lateral loads onto the Ciccarelli retaining wall so as to give rise to an actionable nuisance or, on the balance of probabilities, cause unit 2 to collapse?

(7) Given the information that the Ciccarelli's engineers had as at 8 October 2001, would a reasonable engineer in their position have required the provision of as-built drawings and other details in order to assess the risk of failure or the transmission of lateral loads?

(9) If yes to (8), what information was provided and was it accurate and reliable?

(10) Did Cavasinni do what it was required to do pursuant to the Court's orders made on 10 October 2001 and, if so, when?

(11) Did Cavasinni do what was required of it pursuant to the Court's orders of 14 December 2001 and, if so, when? 22 The reference to 14 December 2001 is a reference to the occasion on which the orders granted on 10 October 2001 were modified to permit Cavasinni to remove fill from behind its wall in accordance with the requirements of Mr Mostyn, so as to enable Mr Mostyn to certify as to the impact (or lack of it) of Cavasinni's works on unit 2. 23 The referee answered those questions as follows:

(1) Yes. The work did transmit lateral loads and did constitute a nuisance.

(4) The extent of the damage was outlined in the report, as was the method of rectification. The estimated cost was $77,490. There will be no loss of rental income.

(11) Yes: on 4 April 2002. Adoption of referee's report: relevant principles 24 The principles to be applied, in exercising the discretion conferred upon the Court by Pt 72 r 13 to adopt, vary or reject in whole or in part the report of a referee, are now well established. In Super, Gleeson CJ said at 563-564 (omitting citations): "What is involved in an application under Pt 72, r 13 is not an appeal, whether by way of a hearing de novo or a more limited re-hearing. This is consistent with the right of the referee to conduct the reference as the referee thinks fit and unconstrained by the rules of evidence. Rather, the judge, in reviewing the report and deciding whether to adopt, vary or reject it, has a judicial discretion to exercise in a manner that is consistent both with the object and purpose of the rules and with the wider setting in which they take their place. That wider setting is a system for the administration of justice according to law. In so far as the subject matter of dissatisfaction with the referee's report is a question of law, or the application of legal standards to established facts, then a proper exercise of discretion would require a judge to consider and determine that matter afresh. … Subject to what has just been said, 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. … On the particular question, relevant to the present case, of the approach to be taken to disputed findings of fact, where there is shown to be evidence available to support such findings, or the issue involves a choice as between conflicting evidence, I agree with the views of Giles J as expressed in the extracts from his reasons for judgment quoted earlier. I also agree with what was said by Cole J in Chloride Batteries of Australia Ltd v Glendale Chemical Products Pty Ltd." 25 As appears from the judgment of Gleeson CJ at 553-554, Giles J (from whose decision to adopt the report the appeal was brought) had said:

"For my own part, in the circumstances of this case I do not think that the referee's findings of fact should be generally re-agitated in the court. As a broad proposition, depending upon the circumstances of each case, the court will not reconsider disputed questions of fact where there is factual material sufficient to entitle the referee to reach the conclusions he did, particularly where the disputed questions are in a technical area where the referee enjoys an appropriate expertise. … [His Honour then referred to an unreported judgment of Rolfe J.] Rolfe J went on to say that he was satisfied from a reading of the report as a whole that it was reasoned and that there was factual material upon which the findings by the referee could properly be made. Noting that it had not been put that there was insufficient evidence to support the findings, but rather that the referee had come to the wrong conclusion, his Honour said that he was not so satisfied, and that to require the court to reconsider disputed questions of fact would render the purpose of the referee reporting to the court futile. It seems to me that is an approach appropriate to this case." 26 In the same case, Mahoney JA said at 567 that "[t]he right to be heard does not involve the right to be heard twice". 27 In White Constructions (NT) Pty Ltd v Commonwealth of Australia (1990) 7 BCL 193, 195, Cole J said (in a passage referred to in that part of the judgment of Giles J at first instance in Super that was extracted in the judgment of Gleeson CJ on appeal): "The purpose of referees reporting to the court on disputed questions of fact is rendered futile if the court is to reconsider disputed questions of fact in circumstances where it is conceded that there is factual material sufficient to enable the referees to reach the findings they did. In circumstances where the court, having scrutinized the referees' report, has a comfortable feeling of satisfaction that the factual issues have been properly explored and considered, in my view the court should adopt the referees' report on findings of fact." 28 In Chloride Batteries, Cole J referred at 68-69 to the unreported judgment of Marks J in the Supreme Court of Victoria, Integer Computing Pty Ltd v Facom Australia Ltd (10 April 1987). Again, as I read the judgment of Gleeson CJ in Super, his Honour accepted as correct what Marks J had said, which included the following: "The plaintiff had the opportunity and took advantage of it, to put before the special referee all the matters put to me. It would be mischievous and, indeed, wrong to allow, certainly at the great expense which inevitably would be involved, the parties to put at nil so much of the exploration already done. Even if I was persuaded, which I am not, that this Court might well reach a different conclusion in some respects from that of the special referee, it would not be proper to allow territory to be re-explored by qualifying adoption of the reports." 29 In Chloride Batteries, Cole J said at 67 "that the Court should not automatically adopt a report received". However, he said, the Court should "have regard to the futility of a process of re-litigating an issue determined by the referee in circumstances where parties have had an opportunity to place before the referee such matters as they desire". His Honour said further that the court should have regard to cost. He then said: "If the report shows a thorough, analytical, and scientific approach to the assessment of the subject matter of enquiry, the Court will have a disposition towards acceptance of the report, for to do otherwise would negate the purpose of and the facility of referring complex technical issues to independent experts for enquiry and report. This disposition may be enhanced in circumstances where the parties … have had the opportunity to place before the referee such evidence and technical reports as they may wish." 30 In Foxman Holdings, Cole J said at 620 that the principles enunciated in Super did not require the court to revisit all the evidence, nor did they contemplate that the court, when considering adoption, should have regard merely "to some selected portions favourable to the party opposing or supporting applications": particularly where there were credit-based fact findings. 31 His Honour then referred to what Gleeson CJ had said in Super, relating to misapprehension of the evidence or perversity or manifest unreasonableness in fact finding. Cole J said that "patent misapprehension of the evidence" referred to lack of understanding as distinct from according different weight to different aspects. He said that the reference to perversity or manifest unreasonableness in fact finding relates "to the exceptional case where it can be clearly demonstrated that no reasonable tribunal of fact could have reached the decision achieved." This was, he said, a higher standard than "unsafe and unsatisfactory". It appears that his Honour thought that perversity or manifest unreasonableness could not be found where there was material that could support the impugned findings of fact. The extent of a referee's obligation to give reasons 32 In Xuereb v Viola (1988) 18 NSWLR 453, Cole J said at 469: "Quite apart from Pt 72, r 11(c), natural justice requires that a referee give reasons for his opinion. This is not just to permit the court better to exercise its functions under Pt 72, r 13. The deeper reason is that it enables the parties and the disinterested observer to know that the opinion of the referee is not arbitrary, or influenced by improper considerations but is the result of a process of logic and the application of a considered mind to factual circumstances. I adopt, with respect, the passage in the judgment of Samuels JA in Strbak v Newton (Court of Appeal, 18 July 1989, unreported), in speaking of the requirements for reasons in the judgment of a District Court judge, as being an appropriate statement of principle applicable to the statement of reasons required by a referee: … "it is going too far to suggest that in every case a judge must submit the material before him or her to the most meticulous analysis and carry into judgment a detailed exposition of every aspect of the evidence and the arguments. What is necessary, it seems to me, is a basic explanation of the fundamental reasons which led the judge to his conclusion. There is no requirement, however, that the reasons must incorporate an extended intellectual dissertation upon the chain of reasoning which authorises the judgment which is given. In the present case, the reasons are certainly succinct; but that is often to be regarded as a judicial virtue. Trial judges must always endeavour to balance their duty to explain with their duty to be brief"." 33 In Hughes Bros Pty Ltd v Minister for Public Works (55011/1991, 17 August 1994, unreported; BC 9402885), Rolfe J said (adopting the BC pagination) at 13-14: "In my opinion the Court must be able to see and follow a reasoning process. That does not, in my view, impose an unnecessary burden upon the Referee. The nature of what is required is that a reasoning process be disclosed, or sufficiently disclosed, to satisfy the Court that the finding was one based upon such an intellectual exercise. The performance of that task is not fulfilled by ultimate conclusions unsupported by reasoning. … In the case of reports to the Court where it is necessary for the Court to decide what should be done with the report to give it legal effect, there should be, at least, sufficient reasons indicating what has led the Referee to the conclusion. In the absence of reasons the Court is left to speculate how the Referee arrived at a decision." Cavasinni's challenges 34 Mr M G Rudge SC, who appeared with Mr C C Dwyer of counsel for Cavasinni, submitted that although the report on its face appeared to show a thorough analytical and scientific approach to the assessment of the relevant subject matter, closer analysis showed that it did not meet that standard. He submitted that the analysis was in fact superficial and that the referee had overlooked evidence which was not the subject of serious contest before him. 35 Cavasinni sought to make good that submission by referring in some detail to seven separate aspects of the report. I shall deal with each of those attacks in turn, although it should be borne in mind that there was a substantial overlap between some of them. 36 With one exception, Cavasinni did not submit that there was no material to support the referee's conclusions. Nor was it submitted that the parties had been deprived in any way of the opportunity of putting before the referee such evidence and submissions as they wished. It is apparent that they had had, and had availed themselves of, ample opportunity to do so. Shrinkage and cracking 37 There was evidence of cracking in the Ciccarelli retaining wall. The parties' experts agreed, and the referee (who possesses qualifications both as a structural engineer and as a lawyer) agreed that a concrete structure, such as the wall in question, was likely to contain shrinkage cracks. The key point of difference between the parties' experts was whether the observed cracking was attributable to shrinkage, or to some externally imposed force. 38 For the Ciccarellis, Messrs Beretta and Shirley gave evidence. But their principal structural engineering witness was Mr David Smee. He appears to have first inspected unit 2 on 9 April 2002. He produced a report setting out his observations and opinions. He inspected the property on a number of occasions thereafter and produced further reports. 39 Cavasinni's expert witness was Mr Mostyn. He, of course, had been retained before proceedings were commenced. He inspected unit 2 on a number of occasions both before and after the date of Mr Smee's first inspection, and produced a number of reports. 40 At the referee's direction, Messrs Smee and Mostyn inspected unit 2 together. They produced a joint record of their observations. They then engaged in a conclave with the referee of which, unfortunately, there is no official transcript. 41 Mr Mostyn said that the observed cracks, on both the eastern (internal) and western (external) faces of the Ciccarelli retaining wall, were consistent with shrinkage cracks. He supported this by calculations performed by him based on certain observations and certain assumptions. Mr Smee, on the other hand, said that the cracks were either caused by the lateral loads imparted from the Cavasinni property as a result of the activities carried out, or were exacerbated by those loads. He pointed to a number of features of the cracks which, he said, supported his opinion. 42 The referee (who, as I have mentioned, had had a view) accepted Mr Smee's view. In doing so, he placed weight on the lay evidence that the cracks had not been observed prior to the commencement of the relevant works and that they, and their effects (the ingress of mud and water), were observed after the commencement of those works and while they were being carried on. The referee relied further on lay evidence as to the appearance of, at a particular point, an inward bow in the Ciccarelli retaining wall, consistent with the application of lateral force from the Cavasinni land. He relied on the evidence as to deformation of the crane rails and malfunction of the crane, which had not been observed before the commencement of work on the Cavasinni land and which were observed after that work had commenced. 43 The referee reasoned that the lay evidence was consistent with Mr Smee's opinion. 44 There was no doubt that the work undertaken on the Cavasinni land had transmitted loads onto the Ciccarelli retaining wall. Mr Mostyn acknowledged that this was inevitable. The question was whether the transfer of lateral loads from the Cavasinni land to the Ciccarelli retaining wall as a result of the work undertaken by Cavasinni caused the damage of which the Ciccarellis complained. 45 The referee concluded that the observed cracking was not consistent with what would be expected from shrinkage alone. On balance, he preferred Mr Smee's evidence and opinions to those of Mr Mostyn. He concluded that whilst there may have been pre-existing shrinkage cracks, the observed damage had been "predominantly caused by the transmission of a lateral loading from the Cavasinni property onto the Ciccarelli wall" (report paragraph 78). 46 Cavasinni submitted that the referee failed to consider Mr Mostyn's unchallenged evidence that the measured crack widths were less than the width that would be expected (according to his calculations) from shrinkage cracking. It is correct to say that the referee did not explicitly refer to this evidence. However, the obligation on a referee to give reasons does not require that he consider, analyse and accept or reject every piece of evidence, every expression of opinion, and every argument put before him. The referee did deal with the difference between Messrs Smee and Mostyn as to the significance of the cracks. He accepted Mr Smee's evidence that the cracks had opened up more recently as the result of external pressure: an opinion based on observations that Mr Smee had made of the relationship between the cracks on the interior and exterior faces of the wall. The referee was entitled to prefer that practical evidence to Mr Mostyn's theoretical analysis. In paragraph 77 of the report, he did so. 47 In my judgment, the referee analysed the relevant factors on this issue with sufficient particularity to show that he applied his mind in an analytical way to the essential differences. Undoubtedly, he applied his own expertise, as he was entitled to do. He reached a conclusion that was supported by, and open to him on, the evidence. Applying the principles that I have stated, I see no basis for rejecting his conclusion on this issue. Repair of cracks 48 In essence, Cavasinni's complaint was that although Mr Smee (it said) had acknowledged that only a limited number of the cracks were consistent with the application of external force, the referee allowed the cost of repair of a greater number. 49 This criticism overlooks the referee's findings in relation to the causes of the cracks. In substance, he found, they were either caused by, or exacerbated by, the application of lateral forces from the Cavasinni land as a result of the works carried out. On that basis, it was open to the referee to reach the conclusion that he did as to the number of cracks that required repair as a result of Cavasinni's activities. 50 The actual costing was carried out either as a result of applying rates or costs agreed between the relevant experts retained by the parties (Mr Edward Brincat for the Ciccarellis and Mr David Plaister for Cavasinni) or, in some cases, upon a preference for the evidence of one over the other for reasons given by the referee. No challenge was made to the actual method of quantification (in this or any other case); where a challenge was raised, it was on the basis that the items should not have been allowed at all or, (as in this case) should only have been allowed to a much smaller extent. 51 There is no basis for rejecting the referee's conclusions in relation to the repair of cracks. Drainage 52 The Ciccarellis submitted before the referee that the necessary rectification included the installation of an effective drainage line behind (ie, to the west of) their retaining wall. It was thought that such a drain had been installed when the wall was built, but that it was likely to be damaged either as a result of the transmission of lateral loads from the Cavasinni property, or as a result of rectification work to the exterior of the Ciccarelli retaining wall. In fact (and contrary to the understanding of, among others, Mr Beretta - who had designed the Ciccarelli retaining wall) the installed drain was located on the eastern side of the wall and was protected, both from lateral loads and from the effects of any repair work, by concrete footings under the western edge of the slab. 53 The only evidence on this point came from Mr Smee. In paragraph 8.3 of his report dated 30 April 2002 (exhibit P5 in the reference), he said: "During sealing of cracks the ground would be excavated behind the retaining wall and it should be possible to check the existence of, and/or the condition of the sub soil drain behind the wall. If the sub soil drain is in existence and operating effectively then this does not become an issue. If the sub soil drain is in existence but has been damaged by adjacent works then its repair/replacement should be at the cost of Cavasinni. If the sub soil drain is not in existence or is installed but obviously has not been installed in an effective and workmanlike manner, then the sub soil drain cost rests with Ciccarelli." 54 Both Mr Rudge and Mr D T Miller of counsel, who appeared for the Ciccarellis, agreed that there was no other relevant evidence. 55 It is apparent from Mr Smee's report that he did not say, as the referee concluded, that it would be necessary to install an effective drainage line to the west of the Ciccarelli retaining wall as part of the rectification works. That may be an available inference from what he did say. However, it would appear that the referee has simply applied his own expertise in forming the conclusion to which I have referred. Whilst a referee is undoubtedly entitled to apply his or her expertise in assessing the evidence of expert witnesses, I do not think that a referee is entitled to use his or her expertise as a substitute for evidence. Thus, if there had been a contest between (say) Mr Smee and Mr Mostyn as to the necessity for a drain, it would have been open to the referee to prefer the evidence of one over the other. But when there is no evidence of the necessity for drainage, I do not think that the referee should have supplemented the deficiency in the way that, apparently, he did. 56 I therefore conclude that this aspect of the report should be rejected. 57 Since there was no evidence before the referee, I do not think that it is open to me to reconsider the matter. Nor do I think that there is any point in sending the matter back to the referee. It will be necessary for the referee to give the Ciccarellis leave to reopen, and for the Ciccarellis to adduce further evidence on, the point. Having regard to the cost of this item (the referee allowed $19,855), I do not propose to take this course. Bowing and tilting in the Ciccarelli retaining wall 58 There was bowing and tilting (from the vertical) in the Ciccarelli retaining wall. The question between Messrs Smee and Mostyn was whether the observed bowing and tilting was due to the application of lateral loads from the Cavasinni land, or whether it was the way the wall was built. Mr Mostyn carried out a theoretical deformation analysis. The referee concluded in paragraph 86 that "the assumptions inherent in Mostyn's analysis and its theoretical nature render his calculations of limited value". He concluded at paragraph 87 "that the measured tilting and bowing … was not pre-existing and is, on the balance of probabilities, attributable to lateral loading from the Cavasinni property onto the Ciccarelli wall." 59 Mr Smee gave evidence of observations made by him that, he said, were consistent only with the imposition of lateral loads on the wall from the Cavasinni land. They included that the Jointex filling between the top of the retaining wall and the pre-cast concrete panels showed evidence of sliding damage consistent with there having been relative movement between the two components of the wall. Mr Smee also placed significance on the nature and relative shapes and sizes of the cracks. 60 There was a conflict of evidence in an area in which the referee possessed expertise. He analysed the evidence in an appropriate way. He preferred the opinion of Mr Smee, based on physical observations, to the theoretically-based opinion of Mr Mostyn. He paid attention also to the observations and opinions of Mr Beretta. 61 I am satisfied that the referee's analysis paid appropriate regard to the principal points in issue. The conclusion to which he came was open to him on the evidence. I do not think that it can be regarded as unreasonable or perverse simply because he preferred the evidence of one expert to that of another: particularly where, as here, the preferred evidence is consistent with lay evidence (see para [9] above). 62 In my judgment, there is no basis shown for rejecting this aspect of the report. Distortion of the portal frames and crane rail 63 It is clear that the referee was influenced by the evidence, which he accepted, from Messrs Ciccarelli and Digirolama (see para [10] above). That evidence supported the conclusion that the distortion in the portal frame, and impact on the crane rail, had not been present in unit 2 when it was built. It supported the conclusion that the problems had only become apparent in about mid-2001. 64 There was again a conflict between the experts. That related both to the causes of the distortion of the portal frame structure and as to the ability of any distortion that was caused to be transferred to the crane rails. Mr Smee gave evidence of a mechanism by which this could happen. It is apparent that the referee accepted his evidence. 65 The referee's conclusion was expressed in less than clear terms in paragraph 93 of the report: "93. The evidence as outlined above does not overwhelmingly illustrate a causal link between the deflection of the Ciccarelli wall and the distortion of the steel frames. However whilst it is possible there may have been other factors involved, there is nothing more than speculation to rely on. Accordingly, I am persuaded that on the balance of probabilities, the damage to the roof of the building and the out-of-alignment crane rails should be attributed to the movement of the Ciccarelli wall under loads transmitted from the Cavasinni property." 66 It was said that his conclusion was perverse, having regard to some snippets from the cross-examination of Messrs Beretta and Smee that were proffered in written submissions. 67 Alike with Cole J, I do not think that it is appropriate to have "regard to some selected portions favourable to the party opposing … adoption" of the whole of the evidence before the referee. I see no reason in the referee's discussion of the evidence to think that he overlooked any significant part of the evidence of the witnesses. The conclusion to which he came was consistent with the observations of lay witnesses. Even without that support, it would have been open to the referee, by the application of his own knowledge and experience, to prefer the evidence of one expert to another. When the conclusion to which the expert came is consistent with accepted evidence of lay observations, I find it almost impossible to see how the conclusion can be said to be perverse. 68 Cavasinni submitted that the expert, having found that there may have been other factors involved, could not be persuaded on the balance of probabilities that the relevant problems should be attributed to loads transmitted from the Cavasinni property without discussing and discounting those other factors. It said that it had a "legitimate expectation" that he would do so. 69 I do not agree. I refer to what I have said in paras [32], [33] and [46] above as to the content of the obligation to give reasons. In any event, I think, the submission is based on a misreading of what the referee said in paragraph 93. He was admitting as a possibility that there may have been other factors involved. He said that, having already concluded that there was no overwhelming case of a causal link. However, he characterised the other factors as "nothing more than speculation". I cannot understand how a referee could be required to discuss, let alone that a party should have a legitimate expectation that the referee was required to discuss, speculative theories. 70 Whilst I accept that paragraph 93 could have been more clearly expressed, I do not find anything in it suggestive of error. In my judgment, it has not been shown that the referee's finding was perverse. No basis has been shown for rejecting his conclusion on this issue. Onus of proof 71 In paragraph 106 of the report, the referee dealt with who it was that had the obligation to identify pre-existing damage. He accepted the submission for the Ciccarellis that if Cavasinni contended that the damages should be discounted to allow for pre-existing damage then it bore an evidentiary onus which it had not discharged. Cavasinni says that this demonstrates error. 72 I do not agree. What the referee said needs to be placed in context. The context includes that in substance the accepted evidence from Mr Ciccarelli (supported by other evidence) was that there had been no observed problems prior to some time early in February 2001. Mr Ciccarelli's evidence was that he attended the premises on a weekly basis; clearly enough, the tenant who reported the problem to him would have attended the premises (as the referee found he did) on a daily basis. The referee rejected other evidence that suggested that problems had manifested themselves before work began on the Cavasinni land. 73 In addition, there was the expert evidence of (in particular) Mr Smee, to which I have already referred, that the damage observed was consistent with the application of lateral loads. As I have already said, Mr Smee supported that opinion by reference to his observations of the physical attributes of the cracks in the Ciccarelli retaining wall (and, I add, his observations on other matters). Whilst neither those observations, nor Mr Smee's opinions based on them, could show that there had been no pre-existing damage, they were consistent with the conclusions, to which the referee came, that the damage in question was either caused or exacerbated by the transmission of lateral loads as a result of activities carried out on the Cavasinni land. 74 It was incumbent on the Ciccarellis to prove, on the balance of probabilities, that the damage of which they complained, and for the cost of repair of which they sought compensation, was caused by the activities carried on by Cavasinni on its land. The combination of the lay and expert evidence that they had called satisfied the referee that this was so. In those circumstances, if Cavasinni wished to argue that the damages otherwise payable should be discounted to allow for the pre-existing state of disrepair of unit 2, I think it was correct to say that the persuasive, if not the legal, onus had shifted to them. I do not read what the referee said in paragraph 106 of the report, in his acceptance of the Ciccarellis' submissions on this point, as demonstrating any erroneous approach in law. Once it was accepted that (as apparently the referee accepted) the evidence shows that prior to 2001, unit 2 had been constructed and operated within normal tolerances and had not required any damage rectification, the proposition accepted by the referee follows inexorably. 75 I do not regard Cavasinni's submissions on this point as demonstrating any error of principle in the report, let alone error sufficient to justify its rejection. Conclusions on challenges to report 76 In my judgment, of the eight challenges (seven factual and one as to principle) advanced by Cavasinni, only one succeeds. That is the challenge to the referee's conclusion that drainage was required to the west of the Ciccarelli retaining wall, and his allowance of $19,855 for that work. 77 The total cost of the work found by the referee to be necessary was (before overheads, profit and GST) $58,705. From that, the amount of $19,855 must be deducted. That produces a cost of work of $38,850. To that there should be added 20% for overheads and profit (as the referee did). That gives an amount of $7,770 and a sub total of $46,620. To that there must be added 10% GST, or $4,662. That gives a total of $51,282. 78 I conclude that the report should be adopted except for paragraph 126, which I reject, and except for the quantification in paragraph 134, which will need to be adjusted to reflect what I have just said. 79 The plaintiffs should have judgment in the sum of $51,282. As the parties did not address me on interest, they should have leave to do so if desired. Costs 80 The Ciccarellis sought:

(2) a special costs order as to part of those costs, by reason of offers of settlement that were made. 81 Cavasinni submitted that:

(1) that the Ciccarellis should not have their costs (referring to SCR Pt 52A r 33(2)(f)(ii)); and

(2) necessarily from the foregoing, that there should be no special order for costs. 82 Accordingly, Cavasinni submitted, there should be no order as to the costs of the proceedings (including, as I understand it, the reference). 83 I propose to deal with the issues by looking first at the question of costs up until the order for reference was made, second, at the question of costs thereafter until (but excluding) the hearing before me, and third, at the question of indemnity costs. Costs up until the making of the order for reference 84 Cavasinni's case is that these proceedings should have been commenced in the District Court. It submits that, by s 134(1)(h) of the District Court Act 1973, that Court could have granted both interlocutory and final relief. 85 I do not agree that s 134(1)(h) would have enabled the District Court to grant injunctive relief (whether interlocutory or final). That section appears in Division 8 (Miscellaneous jurisdiction) of Part 3 (The civil jurisdiction of the Court) of the District Court Act. It reads as follows: " 134 Jurisdiction in equity proceedings (1) The Court shall have the same jurisdiction as the Supreme Court, and may exercise all the powers and authority of the Supreme Court, in proceedings for: … (h) any equitable claim or demand for recovery of money or damages, whether liquidated or unliquidated (not being a claim or demand of a kind to which any other paragraph of this subsection applies), in an amount not exceeding $750,000. … ". 86 Paragraph (h) was inserted into s 134(1) of the District Court Act by the District Court Amendment Act 1997. In the Second Reading Speech on the Bill for that Act, the Minister said (Parliamentary Debates, Legislative Council, 26 June 1997 at 11, 246): "… the bill extends the equity jurisdiction of the District Court over claims involving money in the form of debt and damages to the extent of its new monetary limit of $750,000. This will allow the District Court to deal with those ancillary equitable issues which may arise from time to time in cases coming before the court involving a claim for debt and damages. Currently, petty nuisance and trespass cases involving injunctive relief must be tried in the Supreme Court, minor obligations cannot be specifically performed [sic] and actions at law cannot be defended by cross-claiming for equitable relief without transferring the matter to the Supreme Court." (emphasis added) 87 Although it is the wording of the Act that must be construed and not the wording of the Second Reading Speech (Re Bolton: Ex parte Bean (1987) 61 ALJR 190), I think that s 131(1)(h) means in substance what the Minister said it was intended to mean. In other words, in cases that fall within it (which, as the paragraph makes clear, exclude cases falling within any of the prior paragraphs of the sub section), the Court has power to enforce an equitable claim for recovery of money or damages. Thus, it would apply to a claim for accounts as between mortgagor and mortgagee, or a claim for equitable damages or equitable compensation (Commonwealth Bank of Australia v Hadfield (2001) 53 NSWLR 614). It does not mean that the District Court has the power of the Supreme Court for any equitable claim (including to an injunction) and any equitable demand for recovery of money or damages. 88 In the present case, damages were claimed in negligence or nuisance (see prayers 6 and 7 of the summons, and paragraph 15 of the statement of contentions in that summons). Claims for damages for negligence or nuisance are not within s 134(1)(h). 89 Cavasinni also relied on s 140 of the District Court Act. That section deals, as its heading suggests, with temporary injunctions. By s 140(1)(a), the District Court has jurisdiction to grant a temporary injunction to restrain a threatened or apprehended trespass or nuisance in the same manner as this Court might grant an interlocutory injunction in the like circumstances. By sub s (2), a temporary injunction may not continue beyond 14 days (and, if it is renewed, the total period must not exceed 14 days). By sub s (3), a temporary injunction may be renewed for a total period exceeding 14 days if the District Court is satisfied that the additional time is required to enable proceedings to be commenced or heard in the Supreme Court in relation to the matter. 90 There are two things to be said about s 140. The first is that it does not authorise the grant of a permanent injunction. In this case, the relief sought by the Ciccarellis included a permanent mandatory injunction (prayer 5; it may also be noted that, by prayer 4, declaratory relief was sought). The second is that, in the circumstances of this case, even if proceedings had been commenced in the District Court for a temporary injunction, the effect of s 140(2) and (3) is that proceedings would have to have been commenced and heard in this Court once the 14 day limit had expired. 91 Cavasinni did not refer to s 46(1) of the District Court Act. Nonetheless, for completeness, it requires consideration. That sub section reads as follows: "46 Ancillary equitable relief: injunctions (1) Without affecting the generality of Division 8, the Court shall, in any action, have power to grant any injunction (whether interlocutory or otherwise) which the Supreme Court might have granted if the action were proceedings in the Supreme Court." 92 It may be noted that by s 4(1), "action" is defined to mean "action in the Court", but specifically said not to include "any proceedings under Division 8 of Part 3". 93 In my judgment, the effect of s 46(1) is to empower the District Court, in an action properly before it, to grant such injunctive relief as the Supreme Court could grant in equivalent proceedings before it. That must include both interlocutory and final injunctions. It seems to follow, when ss 46(1) and 44(1) of the District Court Act are read together, that the power conferred by s 46(1) is a power to grant an injunction only in those circumstances where the Supreme Court would grant an injunction by way of ancillary relief in proceedings assigned to the Common Law Division. 94 By s 44(1)(a) of the District Court Act, the District Court (after the commencement of the 1999 Amendment Act), has jurisdiction to hear and dispose of any action of a kind which, if brought in the Supreme Court, would be assigned to the Common Law Division of that Court and in which the amount claimed does not exceed $750,000 (the exceptions in respect of motor accident claims and proceedings transferred to the District Court are irrelevant for present purposes). 95 The combined effect of s 53 of the Supreme Court Act 1970 and SCR Pt 14A rr 4, 5 is that, by virtue of the requirement for entry of these proceedings in the Technology and Construction List, they are proceedings assigned to the Equity Division. They are not, under s 53(1) of the Supreme Court Act, proceedings that are assigned to the Common Law Division (see, in particular, s 53(1)(d)). 96 It therefore appears that the proceedings are not among those that, by virtue of s 44(1) of the District Court Act, the District Court has jurisdiction to hear and dispose of. On that basis, s 46(1) could not confer jurisdiction on the District Court to grant either interlocutory or final relief as claimed in these proceedings. 97 For these reasons, I reject Cavasinni's submission that it was open to the Ciccarellis to have commenced proceedings in the District Court. 98 In any event, I think that it was appropriate (quite apart from the jurisdictional issues that I have just discussed) for the proceedings to be commenced in this Court. At the time they were commenced, the Ciccarellis had advice, which they were entitled to rely upon, that there was a significant risk of destruction to unit 2. If that risk eventuated - ie, if the transfer of lateral pressure from the Cavasinni land to unit 2 caused in substance the collapse of unit 2 - then there would be a very substantial claim for damages. That claim would include both the cost of rebuilding unit 2 and loss of rent whilst it was being rebuilt. It was also a real possibility, on Mr Beretta's advice, that persons within unit 2 might have been killed or seriously injured. Whilst I have no evidence as to the likely cost of rebuilding unit 2, or as to the likely loss of rental whilst rebuilding was undertaken, it is difficult to understand why the Ciccarellis should have been required to assume that the likely damage (even putting aside any liability for death or injury) would be less than $750,000. 99 The evidence, both as recounted by Barrett J on the application for an interlocutory injunction and as recounted by the referee, shows that the Ciccarellis sought to obtain information and reassurance as to the risks posed by the building work undertaken on the Cavasinni land. They were rebuffed both by Cavasinni and by council. In those circumstances, I think, it was appropriate for them to commence proceedings for interlocutory relief: a consideration that is confirmed both by the decision of Barrett J to grant it and by his Honour's reasons for that decision. 100 The injunction was not dissolved until the Ciccarellis obtained from Mr Mostyn certification that the works being undertaken on the Cavasinni land would not transfer adverse lateral loads to unit 2. That was a vindication of their position. 101 The referee's answers to questions 5, 6, 7 and 8 (see para [23] above) confirm that it was reasonable for these proceedings to be commenced. The answer to question 6 shows that the information available to the Ciccarellis was insufficient to satisfy a reasonable engineer that there was no risk of collapse of unit 2. Further, it shows that a reasonable engineer would have required what was in substance the information sought by prayer 3 of the summons (which, I interpose, was not provided until after these proceedings were commenced) to enable him or her to be satisfied that there was no risk of collapse of unit 2. 102 Once the claims for injunctive relief were dealt with, by Mr Mostyn's certification, the only remaining issue was that of damages. That was dealt with expeditiously. The injunction was finally dissolved on 5 April 2002. The matter came back before the Court on 24 May 2002, when a timetable for its further conduct was directed. It then came back before the Court on 26 July 2002, when the Court (McClellan J) made the order for reference. 103 Cavasinni also submitted that there should be no order as to costs in relation to the interlocutory proceedings because there had been a compromise and because the compromise did not include agreement on costs. It is not entirely clear what the compromise was. In substance, Cavasinni remained restrained until it undertook works sufficient to enable its expert, Mr Mostyn, to provide certification that effectively removed the need for continuing interlocutory, or permanent, injunctions. In any event, when the orders made by Barrett J were varied on 14 December 2001 to enable Cavasinni to carry out the requisite works, the consent orders propounded by the parties included that the Court note, among other things, that costs remained unresolved. In those circumstances, I do not think that the partial compromise is of any dispositive relevance on the question of costs. 104 I am satisfied that the Ciccarellis should have their costs of the proceedings up until and including 26 July 2002. The order for reference 105 The transcript of proceedings before McClellan J on 26 July 2002 is brief. It reads, relevantly: "(Mr Miller [counsel for the Ciccarellis] also indicated that the parties sought that the proceedings remain in this Court, although the jurisdictional limit would not now be reached.)" 106 By then, it was apparent that the damages in issue were, at most, about $155,000. 107 In its written submissions, Cavasinni "emphatically denied" that what I have just set out was "an accurate record of what was said". However, on the hearing before me, Mr Miller said: "There is some debate in the submissions about what McLelland J [sic: clearly McClellan J] was told at the time it was referred out. I appeared at that time before McLelland J [sic]. There was reference to Mr Easton, by consent. I mentioned the matter on behalf of the defendants and I indicated to McLelland J [sic] that at that time the report having been proposed to quantum it would not meet the Court's jurisdictional limit. His Honour said not to worry at that stage. It was not the subject of any letter from our side to the other side to say that was a submission, to keep it within this Court. It [sic] as a matter of courtesy I raised the matter with McLelland [sic] so he could raise it in his list in the way that he saw fit." 108 Mr Rudge, with his customary frankness and propriety, said: "We accept that is what occurred." 109 It is clear that both parties were aware, at the time the order for reference was made, that the amount claimed was about $155,000. It is clear that this was specifically drawn to the attention of McClellan J when his Honour made the order for reference. It is clear that neither his Honour nor the parties sought then to transfer the matter to the District Court. The costs of the reference 110 Cavasinni relies on SCR Pt 52A r 33. It refers, in particular, to sub r 2(f)(ii), pointing out that the Ciccarellis have recovered substantially less than the amount there specified of $225,000. 111 If my analysis, that the District Court could not hear this case, is correct (see paras [85] to [96] above), then r 33 in its entirety does not apply because the proceedings could only have been brought in this Court: see Pt 52A r 33(1)(b)(ii). It is also arguable that the rule does not apply because the proceedings are not simply "a claim for debt, damages or other money" - although they included such a claim. 112 But even if my analysis of the District Court's jurisdiction is not correct, and even if, contrary to what I have just said, r 33 is applicable, I would conclude that Cavasinni had sufficient reason for commencing proceedings in this Court. 113 It may be said that, once the claim for permanent injunctive relief had been disposed of, then there was no reason to continue the proceedings in this Court and that they should have been transferred to the District Court. In principle, they could have been transferred at that point. However, as I have pointed out in para [109] above, neither party sought to do this although, apparently, both were aware of the relevant circumstances. Had the proceedings been transferred to the District Court, then presumably the parties' legal costs might have been assessed in a lesser amount than would be the case if they were assessed in this Court. But there is no reason to think that there would have been any difference in the legal costs actually incurred. The difference would affect only the assessed amount that the unsuccessful party might be ordered to pay. Further, what must undoubtedly be substantial items of expense - namely, the actual costs of the reference (ie, fees payable to the referee, venue hire, transcript services and the like) and fees paid to expert witnesses - would be no different, and presumably would be recoverable in the same amounts either in this Court or in the District Court. 114 Cavasinni complains, in effect, that it has been deprived of the opportunity of paying costs at a lesser rate because the proceedings were not transferred to the District Court. However, not only did Cavasinni fail to make any application for transfer - although it was aware of the relevant circumstances - it consented to the matter being referred out by this Court. Although there is some dispute as to whether the transcript accurately records what was said to McClellan J on 26 July 2002, there is no doubt (see para [107] above) that this Court was asked by consent to refer the matter to the referee. It follows necessarily that the parties must be taken to have consented to the proceedings remaining in this Court. 115 In my judgment, if SCR Pt 52A r 33(2) does apply, the circumstances in which the matter was referred out by consent provide sufficient reason for the Ciccarellis continuing the proceedings in this Court. 116 I therefore reject Cavasinni's submissions in support of the proposition that the Ciccarellis should be deprived of their costs of the reference by the operation of Pt 52A r 33. Indemnity costs 117 Ciccarelli relies on a number of Calderbank letters (Calderbank v Calderbank [1976] Fam 93). The first was written on 17 September 2002 - after there had been some 3 days of hearing. It noted "that the parties' costs will likely exceed the amount in dispute". (The written submissions show that this was a masterpiece of understatement. At that time, the Ciccarellis' estimated costs, including disbursements, were in excess of $250,000; and Cavasinni's written submissions note that it had itself already incurred costs and disbursements in excess of that amount when the offer was made.) The letter offered to settle the proceedings on the basis that Cavasinni pay the Ciccarellis $25,000 within 28 days and "the costs of the proceedings on a party/party basis" as agreed or assessed. On 25 September 2002, the offer was extended for a further two days. On 8 October 2002, the offer (having by then lapsed) was renewed for a further two days. 118 A Calderbank letter is an alternative to the making of an offer of compromise under the Rules (SCR Pt 22). Where the offer of compromise mechanism is utilised, the consequences of non-acceptance are provided by the Rules (SCR Pt 52A r 22). Where the Calderbank procedure is used, costs remain in the discretion of the Court, but the Calderbank letter is a circumstance to be taken into account, as part of the totality of the relevant circumstances, in the exercise of the discretion as to costs: SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323, [37] (Giles JA). Failure to accept an offer contained in a Calderbank letter does not, where the party making the offer receives a result more favourable than that offered, create a presumption as to indemnity costs: Jones v Bradley (No 2) [2003] NSWCA 258, [9]. 119 Cavasinni submits that it was not unreasonable for it to reject the Calderbank offer, because it had expert advice that the Ciccarellis' claim would fail, and that even if it succeeded, it would be quantified at no more than $10,000. I am not sure that that, of itself, is a sufficient reason for refusing to make an order for indemnity costs: presumably, almost every unsuccessful litigant, who suffers a result worse than that offered, rejected the offer on the basis of advice. 120 As I have noted, Cavasinni makes reference to the substantial costs that the parties had each incurred at the time the Calderbank offer was first made. There is no evidence of the amount attributable to the interlocutory proceedings, as opposed to the reference; and there is no basis upon which I could attempt to apportion the costs between those two aspects of the dispute. Further, any attempt at apportionment would be difficult, to the point of impracticability, because at least some of the evidence that was relied upon for the interlocutory proceedings was also relied upon before the referee. 121 The circumstances that seem to me to be relevant to the question of indemnity costs include the following:

(1) Even if Cavasinni's original advice was that its works would not have an adverse impact on unit 2 (or any other part of the Ciccarelli land), it was put on notice in February or March 2001 that its activities posed a very substantial risk to unit 2.

(2) Not only did Cavasinni fail to take any step to minimise the risk, it ignored an order of council that was intended to hold the position and carried out further work that had the potential to increase the risk.

(3) Notwithstanding the communication of the Ciccarellis' concerns in the period up to mid July 2001, Cavisinni did not supply any engineering or other details to the Ciccarellis' experts that would enable those experts to assess the real likelihood of the risk.

(4) Instead, once council had given the go-ahead (on a basis that was not made clear to the Ciccarellis), Cavasinni continued with the work.

(5) It was necessary for the Ciccarellis to come to this Court both to restrain the continuation of the work and to obtain access to the relevant engineering and other information.

(6) Although the partial compromise embodied in the consent orders of 14 December 2001 contemplated, among other things, that Mr Mostyn would be able to certify that work to be done thereafter would have the result of preventing the transference of any lateral loads from the Cavasinni land to unit 2 (see paragraph 3(c) of the consent orders), in fact Mr Mostyn was unable so to certify, and could certify only that there would be no transfer of adverse lateral loads.

(7) Both the Ciccarellis and Cavasinni thereafter engaged in what was quite clearly hard fought litigation over a comparatively small amount of money: 13 hearing days over about $150,000.

(8) Even on the referee's approach, the Ciccarellis recovered only about half the total of their claim; and once the adjustment to the outcome is made that I think is required (see para [78] above) they will recover only about one third of their total claim.

(9) The Ciccarellis made three separate attempts to compromise the matter. Had any of those offers been accepted, very substantial costs would have been saved (had the first or second offer been accepted, 10 hearing days would have been saved; had the third offer been accepted, 8 hearing days would have been saved).

(10) The offer that was made and repeated (leaving aside the insistence on party and party costs) was one half what I have found to be the Ciccarellis' entitlement.

(11) There is no evidence that Cavasinni made any counter-offer, or that it sought to engage in negotiation.

(12) There is no evidence as to why the Ciccarellis chose to use the mechanism of a Calderbank letter rather than that provided by SCR Pt 22 (by Pt 22 r 3, an offer of compromise could have been made at any of the times that the Calderbank letters were sent); that having been said, there is no rule that a party is always required to explain why it chooses to utilise one mechanism rather than the other: Jones at [12].

(13) The time limited by each of the offers for acceptance was short: the first offer, made on 17 September 2002, expired at 4 pm on 20 September 2002; the second offer, made on 25 September 2002 in relation to a response to the first offer dated 23 September 2002 (the Monday following the expiry of the first offer), expired at 4 pm on Friday 27 September 2002; and the third offer, made on 8 October 2002, expired at 4 pm on 10 October 2002. 122 Where indemnity costs are sought on a basis that does not involve either an offer of compromise or a Calderbank letter, the authorities suggest that there should be some special or unusual feature, or (as it was put by Gaudron and Gummow JJ in Oshlack v Richmond River Council (1998) 193 CLR 72, 89 [44]) some relevant delinquency. At least where the question is argued by reference to the making and non acceptance of a Calderbank offer, the question may perhaps be more narrowly focussed: requiring attention to the reasonableness, or otherwise, of the non acceptance of the offer. As Giles JA put it in SMEC Testing Services at [37], "the policy informing the regard had to a Calderbank letter is promotion of settlement of disputes" and this gives rise to the question, whether "an offeree can reasonably fail to accept an offer without suffering in costs". In Jones, the analysis focussed on whether the offer was reasonable, and whether it was unreasonable for the offeree to refuse it: see at [10], [16]. That may reflect the way in which, in that case, the parties chose to argue the issue. 123 I am prepared to accept, for the purposes of analysis, that the terms of the offer made (as opposed to the time limited for acceptance) were reasonable. But the time for acceptance of the offers was very short. Had the Ciccarellis utilised the offer of compromise mechanism, they would have been required to afford Cavasinni not less than 28 days for its consideration (SCR Pt 22 r 3(3)). This, no doubt, is intended to permit the offeree to have a reasonable time to consider and take advice upon the offer. An advantage (in some eyes) of the Calderbank mechanism is that a shorter time may be limited. That may be thought to be desirable, as putting pressure on the offeree. On the other hand, it may also be thought to be undesirable, as preventing the offeree from having a reasonable amount of time to consider and take advice upon the offer. 124 In the present case, I do not think that it was reasonable to make an offer, requiring very serious consideration, that required acceptance within 3 days. Thus, I do not think that it was unreasonable of Cavasinni not to have accepted the first offer - particularly where, as the evidence shows, its solicitors did respond apparently seeking information as to the likely amount of the Ciccarellis' costs. That response could perhaps have been sent a little more quickly; but in the absence of evidence as to the likely amount of costs, there is no way that Cavasinni could rationally consider, let alone decide whether to accept or refuse, the offer. It may be noted that the offer when first made included no reference to the likely amount of the Ciccarellis' costs. 125 Once Cavasinni was apprised of the likely amount of costs, the factors to be considered would include not just the merits or otherwise of its own conduct and of its case, but whether the estimate of the Ciccarellis' costs was realistic. In that context, Cavasinni would no doubt reflect upon the fact that (as its solicitor's response showed) its own costs were of the same magnitude. Even then, I do not think that the second offer, requiring acceptance within a further two days, allowed a reasonable time for Cavasinni to consider its position. 126 That leaves the third offer. It, too, allowed two days for acceptance. The occasion specified for renewing the offer on 8 October 2002 was that the Ciccarellis were amending their reply to Cavasinni's defence. The reply raised substantial additional issues as to the impact on the proceedings of the interlocutory orders made by Barrett J on 10 October 2001, and their continuance by orders made (by consent or otherwise) on a number of occasions thereafter, as well as of the orders whereby, ultimately, the interlocutory injunctions were dissolved. The issues raised were not simple. They required careful consideration. Further, they were raised at a time when the hearing of the reference was about to resume (and it did resume the day after the third offer was made). It is reasonable to think that, at that stage, Cavasinni and its legal team were heavily involved in preparation for the further hearing. Even if the offer made could be characterised as one that Cavasinni, acting reasonably, should have accepted - and, as I have said, I am prepared to assume that it was - it does not follow that Cavasinni acted unreasonably in failing to accept it in the short time for which it was open. Both the circumstances that gave rise to the renewed offer (the amendment to the reply) and the circumstances in which it was made (preparation for further hearing, and the commencement and continuation of that further hearing) dictated that more time was required for its consideration. 127 On balance, therefore, I conclude that Cavasinni did not behave in a relevantly unreasonable way in failing to accept any of the offers. I reach that conclusion not by reference to the substance of the offers but because I do not think, in all the circumstances, that Cavasinni can be said to have acted unreasonably in failing to accept any of the offers in the limited time for which it was open. If, contrary to my tentative analysis in para [122] above, some special or unusual feature, or some relevant delinquency, is required, I would not conclude that Cavasinni's conduct in failing to accept the offers could be so characterised. 128 I therefore conclude that the Ciccarellis are not entitled to any costs on an indemnity basis. The position of the second defendant 129 It appears that the second defendant ("Walhand") was the proprietor of some of the land on which Cavasinni was carrying out its works. However, the works were carried out by Cavasinni. It does not appear that Walhand had any involvement. Walhand has not appeared. I do not know whether it has been served. Although the interlocutory orders made by Barrett J on 10 October 2001 and thereafter continued affected it, in the sense that they were directed to "the defendants … ", I do not know if Walhand was served with the orders. It has taken no part in the proceedings. No relief is now claimed against it. 130 In the circumstances, I think that the appropriate course is for the proceedings to be dismissed against Walhand with no order for costs. I will however reserve leave to it to appear and put submissions on the question of costs should it wish to do so. Time taken to report 131 The final matter to which I wish to refer is the time taken for the referee to furnish his report to the Court. I do so because of the way that Cavasinni prefaced its detailed submissions (T 3.25-55): "It should be borne in mind this case concluded and the Referee did not deliver a report for something like 15 or 16 months. The report was ultimately delivered against the background of the Court not the parties, the Court bringing some pressure to bear upon the Referee as to the delivery of this report. The report was delivered within a relatively short period of that pressure being applied by the Court. That's not to say the parties had not, prior to the intervention of the Court, sought to impress upon the Referee that they both wanted this matter out of their lives and requested him on, I think, a number of occasions, twice at least, it might have been more to bring down his report. There was pressure brought by the parties. The parties did not relist the matter. They wrote to the Referee, each with the consent of the other, and asked him to get on with it and, ultimately, the Court's own motion brought pressure to bear. The reason I say this, we don't make this submission likely [sic] in our submission the Referee's report, although on its face appears to be one which has dealt with the issues, and being one which appears to in a reasoned fashion arrive at a conclusion - and I deliberately choose this word - it is a superficial effort. Whilst reading the report, without the knowledge of what was actually argued before the Referee, would perhaps lead one instantly to have the required comfortable feeling of satisfaction which would justify adoption. It cannot, in our submission, remain when one looks at the way in which the Referee has dealt with the matter, and the way in which the Referee has overlooked certain evidence which was not the subject of any serious contest before him." 132 The last day of hearing before the referee was 10 January 2003 when the parties made final submissions. The report was dated 12 April 2004 and received by the Court on 15 April 2004. That is, some 15 months elapsed between the completion of the hearing and the provision of the report. 133 By SCR Pt 1 r 3, the overriding purpose of the Rules, to which the Court must seek to give effect, is the just, quick and cheap resolution of the real issues in civil proceedings. 134 Specialist lists, such as the Commercial List and the Technology and Construction List, seek to give effect to that overriding purpose in a number of ways. Lindley LJ pointed out as long ago as 1895 that one of the advantages of specialist lists (in that case the Commercial List of the Queens Bench Division) was to enable cases "to be tried far better, far more quickly, far more economically and far more advantageously in every sense" because of the "special skill and knowledge as to transactions of [the relevant] nature": Baerlein v Chartered Mercantile Bank [1895] 2 Ch 488, 491. The very reason for the existence of such specialist lists is to serve the needs of the business communities whose disputes are likely to be taken there: TSF Engineering Pty Ltd v Hill [1980] 2 NSWLR 105, 110. The rules applicable in such lists "are structured to enable the judge in charge of the list to exercise his [sic] wide powers to ensure that the matters comes on with the greatest possible despatch … " and with a "statutory obligation to provide a speedy determination": ibid. 135 If referees do not report to the Court expeditiously, then the overriding objective set out in Pt 1 r 3, one of the major purposes for which specialist lists are established, and the confidence of the Court and parties in the reference system, are all undermined. That cannot be beneficial to the Court, to litigants, or to those who are prepared to serve as referees. It is certainly not conducive to the Court's fundamental objective of doing justice between the parties according to law as quickly and as cheaply as the nature of the particular dispute will allow. 136 The fundamental submission put for Cavasinni in this case exemplifies one of the problems that delay may cause. Stripped to its essentials, the submission was that the referee had produced a report hastily, following pressure from both the parties and the Court, after an excessive period of delay. Implicit in the submission was that the referee had overlooked much of the material (the fine detail of which, understandably enough, he might have forgotten) in his haste to produce a report once that pressure was applied. 137 I make no finding that the time taken to produce the report was, in all the circumstances, excessive. It is apparent that the hearing took longer than the parties had predicted. The referee said that this was because the parties had served additional evidence (as I understand it, during the course of the hearing). If that led to the prolongation of the hearing, and (having regard to the referee's other commitments) consumed or truncated the time available for the referee to write his report, then it is somewhat harsh for one of the parties to chide the referee for delay. But it is apparent that, had the report been produced in a shorter period of time, the submission that was put could not have been made. Conclusions and orders 138 I have concluded that the report should be adopted save for paragraphs 126 and 127, which I reject, and with a consequential change to paragraph 134. The Ciccarellis are therefore entitled to judgment in the sum of $51,282. 139 I have concluded that the Ciccarellis are entitled to their costs both of the interlocutory proceedings (ie, up until the order for reference was made) and of the reference. However, they should not have any part of those costs on an indemnity basis. 140 I direct the parties to bring in short minutes of order to reflect these reasons. That is to be done within 7 days, upon a date to be arranged with my associate. I will then, if required, hear the parties on interest and costs (of the adoption dispute). If the parties do not wish to be heard on interest, then there will be no order for interest. If they do not wish to be heard on costs, then costs should follow the event of each notice of motion: ie, the Ciccarellis should have their costs of both, and the short minutes should so provide.

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