Geneville Constructions Pty Ltd v Leslight

Principles applicable

1. In Childs v Bassett trading as Bassett Built Constuctions [2016] NSWDC 243 I stated as follows at paragraphs 5-6: "[5] Part 20.24 is in similar terms to the previous Supreme Court Rules Pt 72, r 13. In Chocolate Factory Apartments v Westpoint Finance [2005] NSWSC 784 McDougall J stated the following general principles at paras [6]-[7]. [6] 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 a report of a Referee, are well established. There are a number of cases to which, customarily, reference is made. They include Super Pty Ltd v SJP Formwork (Aust) Pty Ltd (1992) 29 NSWLR 549; the unreported proceedings in that case before Giles J (19 May 1992: the relevant considerations referred to by his Honour are sufficiently extracted in the decision of the Court of Appeal); Chloride Batteries Australia Ltd v Glendale Chemical Products Pty Ltd (1988) 17 NSWLR 60; White Constructions (NT) Pty Ltd v Commonwealth (1990) 7 BCL 193; and Foxman Holdings Pty Ltd v NMBE Pty Ltd (1994) 38 NSWLR 615. As to the nature and content of the Referee's obligation to give reasons, the relevant authorities include Xuereb v Viola (1989) 18 NSWLR 453 and Hughes Bros Pty Ltd v Minister for Public Works (Rolfe J, 17 August 1994, unreported; BC 9402885). [7] The relevant principles, distilled from those decisions, can be stated as follows: (1) An application under Pt 72 r 13 is not an appeal either by way of hearing de novo or by way of rehearing. (2) The discretion to adopt, vary or reject the report is to be exercised in a manner consistent with both the object and purpose of the rules and the wider setting in which they take their place. Subject to this, and to what is said in the next two sub paragraphs, it is undesirable to attempt closely to confine the manner in which the discretion is to be exercised. (3) The purpose of Pt 72 is to provide, where the interests of justice so require, a form of partial resolution of disputes alternative to orthodox litigation, that purpose would be frustrated if the reference were to be treated as some kind of warm up for the real contest. (4) In so far as the subject matter of dissatisfaction with a report is a question of law, or the application of legal standards to established facts, a proper exercise of discretion requires the judge to consider and determine that matter afresh. (5) Where a report shows a thorough, analytical and scientific approach to the assessment of the subject matter of the reference, the Court would have a disposition towards acceptance of the report, for to do otherwise would be to negate both the purpose and the facility of referring complex technical issues to independent experts for enquiry and report. (6) If the Referee's report reveals some error of principle, absence or excessive jurisdiction, patent misapprehension of the evidence or perversity or manifest unreasonableness in fact finding, that would ordinarily be a reason for rejection. In this context, patent misapprehension of the evidence refers to a lack of understanding of the evidence as distinct from the according to particular aspects of it different weight; and perversity or manifest unreasonableness mean a conclusion that no reasonable tribunal of fact could have reached. The test denoted by these phrases is more stringent than "unsafe and unsatisfactory. (7) Generally, the Referee's findings of fact should not be re-agitated in the Court. The Court will not reconsider disputed questions of fact where there is factual material sufficient to entitle the Referee to reach the conclusions he or she did, particularly where the disputed questions are in a technical area in which the Referee enjoys an appropriate expertise. Thus, the Court will not ordinarily interfere with findings of fact by a Referee where the Referee has based his or her findings upon a choice between conflicting evidence. (8) The purpose of Pt 72 would be frustrated if the Court were required to reconsider disputed questions of fact in circumstances where it is conceded that there was material on which the conclusions could be based. (9) The Court is entitled to consider the futility and cost of re-litigating an issue determined by the Referee where the parties have had ample opportunity to place before the Referee such evidence and submissions as they desire. (10) Even if it were shown that the Court might have reached a different conclusion in some respect from that of the Referee, it would not be (in the absence of any of the matters referred to in sub para (6) above) a proper exercise of the discretion conferred by Pt 72 r 13 to allow matters agitated before the Referee to be re-explored so as to lead to qualification or rejection of the report. (11) Referees should give reasons for their opinion so as to enable the parties, the Court and the disinterested observer to know that the conclusion is not arbitrary, or influenced by improper considerations; but that it is the result of a process of logic and the application of a considered mind to the factual circumstances proved. The reasoning process must be sufficiently disclosed so that the Court can be satisfied that the conclusions are based upon such an intellectual exercise. (12) The right to be heard does not involve the right to be heard twice. (13) A question as to whether there was evidence on which the Referee, without manifest unreasonableness, could have come to the decision to which he or she did come is not raised "by a mere suggestion of factual error such that, if it were made by a trial judge, an appeal judge would correct it". The real question is far more limited: "to the situation where it is seriously and reasonably contended that the Referee has reached a decision which no reasonable tribunal of fact could have reached; that is, a decision that any reasonable Referee would have known was against the evidence and weight of evidence". (14) Where, although the Referee's reasons on their face appear adequate, the party challenging the report contends that they are not adequate because there was very significant evidence against the Referee's findings with which the Referee did not at all deal, examination of the evidence may be undertaken to show that the reasons were in fact inadequate because they omitted any reference to significant evidence. (15) Where the court decides that the reasons are flawed, either on their face or because they have been shown not to deal with important matters, the court has a choice. It may decline to adopt the report. Or it may itself look at the detail of the evidence to decide whether or not the expense of further proceedings before the Referee (which would be the consequence of non adoption) is justified. [6] These principles were cited with approval by Spigelman CJ and Allsop P (with whom Campbell JA agreed) in Bellevarde Constructions Pty Ltd v CPC Energy Pty Ltd [2008] NSWCA 228 at [46]-[47]. Bellevarde was itself approved of by Leeming JA (with whom Ward JA agreed) in Mainteck Services Pty Ltd v Stein Heurtey SA [2014] NSWCA 184 at [19]-[22]. It is accordingly clear that the court has a discretion to adopt, vary or reject the Referee's report. However that discretion has to be exercised taking into account that the purpose of a reference is to provide, where the interests of justice so require, a form of partial solution of disputes alternative to orthodox litigation."
2. See also Jabulani Pty Ltd v Walkabout II Pty Ltd [2016] NSWCA 267 at [40], [90] and [105]; Harris v Morabito Holdings [2018] NSWSC 912 at [12]-[14] and Brighton Australia Pty Ltd v Multiplex Constructions Pty Ltd [2018] VSC 246 referring to Wenco Industrial Pty Ltd v WW Industries Pty Ltd (2010) 25 VR 119; [2009] VSCA 191. See Brighton at [23] and [62] and Wenco at [17] and at [47]. As McDougall J stated in Harris, above, at [13], the principles stated by him in the Chocolate Factory case are not to be approached as some form of checklist but provide a general guide as to how the question of adoption of a Referee's report should be approached. In Wenco the Victorian Court of Appeal noted at [47] that it must be remembered that the referee's report is the report of an expert and must not be subject to an "over-zealous attack".

The Referee's report

1. As stated, the Referee, Ms Grey has produced a report dated 4 September 2018 dealing with the referred matters which is 64 pages long and also has an extensive number of annexures. In my view, having reviewed it carefully, the report of Ms Grey shows a thorough, careful and considered analysis of the subject matter of the reference. In general terms, the report appears detailed and the conclusions in it appear to be reasonable and reasoned. Accordingly, consistent with the principles in the Chocolate Factory case, above, the court would have a disposition towards acceptance of the report.
2. The report discloses that Ms Grey is an architect of considerable experience and therefore she has a degree of expertise in relation to building matters: Annexure C to the report. The matters involved in the reference were all technical building matters including relating to alleged defects in the construction by the plaintiff and the valuation of work completed based on quantity surveyor expert evidence.
3. As was made clear in the Chocolate Factory case, generally a Referee's findings of fact should not be re-agitated in the court. The court will also not reconsider disputed questions of fact where there is factual material sufficient to entitle the Referee to reach the conclusions which he or she did, particularly where the disputed questions are in a technical area in which the Referee enjoys an appropriate expertise. Thus, normally a court will not interfere with a Referee's decision on a factual issue where there is conflicting evidence. Also, as stated in the Chocolate Factory case, even if it was shown that the court might have reached a different conclusion in some respect to that of the Referee, it would not be a proper exercise of the court's discretion to allow matters to be re-agitated so as to lead to qualification or rejection of the report. What needs to be established by a person opposing adoption of the report is an error of principle, an absence of jurisdiction or taking of excessive jurisdiction, a patent misapprehension of the evidence or perversity or manifest unreasonableness in fact-finding being a lack of understanding of the evidence as distinct from the according to particular aspects of it a different weight.
4. With these general principles in mind, I consider the matters which have been raised by the defendant in opposition to the total adoption of the referee's report.

Consideration of issues in dispute

1. In paragraphs 5-7 of the defendant's written submissions dated 22 August 2018, it is submitted by the defendant that the Referee has made an inherent assumption as to the scope of the agreement between the parties which has not presently been determined. Reference is made in particular to paragraphs 4 and 5 of the Referee's report.
2. I do not read the referenced paragraphs in the Referee's report in the way submitted by the defendant. I agree with the submissions in paragraphs 14-15 of the plaintiff's written submissions, that the report in speaking to there being "general agreement" refers not to the scope of the agreement but as to the works actually undertaken by the plaintiff or performed under its supervision in respect of the project.
3. In my view, the matters raised in paragraphs 5-7 of the defendant's submissions therefore do not constitute any basis for not adopting the Referee's report.
4. In paragraph 8(i) of his written submissions, the defendant asserts that the Referee notes that the experts' independent estimates had been prepared as if for a lump sum tender not a value of the work carried out. In paragraph 17 of its submissions, the plaintiff asserts that the lump sum estimates attributed a value to the work on a retrospective basis upon work actually completed as evidenced in the evidential material and were not prepared on a prospective forecast basis as the defendant claims. Clearly the experts reports were initially prepared on the basis on which they were briefed which reflects the parties' different cases; see Referee report paragraph 144.
5. Having looked at the materials and the approach of the Referee in paragraph 162 and following of the report, I do not see any basis for not adopting the Referee's report because the experts on which the Referee relied did not attribute a retrospective value to the work actually completed. The Referee was at pains to show that she proceeded on a retrospective valuation basis: see for example report paragraphs 150, 164, 166 and 172.
6. In paragraph 8(ii)-(iii) of his submissions, the defendant submits that the expert Mr Lee approached his estimation on the basis of an assumption as to the scope of the contract which was impermissible. See the Referee's report page 44 paragraphs 163-164.
7. The plaintiff submits that its expert Mr Lee was briefed on the basis of the position of the plaintiff that the intention was that the agreement between the parties was that Geneville would remain engaged throughout the project and thus an added on figure of 15% would not be satisfied where there was only partial completion of the works.
8. Having reviewed the paragraphs of the Referee's report referred to, I consider that the Referee has made her determination as to the value of the work actually done and therefore it is a proper estimation of the value of the works on a quantum meruit basis. I do not see the defendant's objections as a proper basis for not adopting the Referee's report.
9. In paragraph 8(iv)-(vi) of the defendant's submissions, the report of the Referee is attacked on the basis that she adopts an amount recommended by Mr Lee as a sum for a "contingency". In paragraph 19 of its written submissions, the plaintiff gives detailed reasons for rejecting the criticisms by the defendant and in particular, submits that the defendant has misinterpreted the conclusions of Ms Grey in that a contingency sum as provided by Mr Lee was never adopted by her.
10. Having reviewed paragraphs 168 and 194-205 of the Referee's report, I accept the plaintiff's submissions that the Referee did not accept that it was appropriate to apply a contingency as opposed to valuing the work performed by the plaintiff on the contract. At paragraph 198 of the report, for example, Ms Grey says that she prefers the evidence of Mr Madden that a contingency sum should not be included in the estimate. At paragraph 198 on page 54 of the report the Referee states: "As the extent of site works that Geneville performed was known at the time the estimates were made, in my view the inclusion of a contingency sum is inappropriate. This does not, however, mean that I consider Mr Lee's comments to be entirely without merit. I simply consider that he has used incorrect terminology".
11. Having reviewed the referee's report at paragraphs 199-202, in my view the reasoning of Ms Grey for accepting the amounts for Work on Design Development and Advice on the Whole of the Development are persuasive and there is no reason for not accepting them. Ms Grey refers to hours and rates extracted from the site diary and her reasoning is logical in arriving at the amounts referred to.
12. However, in relation to paragraphs 203-205 of her report, I had some initial difficulty with the amount for Less than Ideal Conditions of $21,405.58. Ms Grey seems to arrive at that figure by allowing 7.5% of Mr Lee's "trade estimate" being $39,764.18 and then subtracting from it the figures which she had arrived at for the headings Design Development and Advice on Whole of Development. In other words, Ms Grey reasoned back from the figure of $39,764.18 and the figure of $21,405.58 had no logical independent basis for it on an hours worked basis. This was the submission of the defendant as articulated by Mr Darvall of counsel.
13. The plaintiff submitted through Mr Manner of counsel that the referee has articulated her reasoning in paragraph 204 of the report based on her assessment that 7.5% of the Lee figure was in her view reasonable. It was said that this was Ms Grey's view as an expert, she conceded the result was not scientific and that it should be accepted. It was said that even if the court would have arrived at a different figure, Ms Grey's assessment should be accepted as that of an expert which was not erroneous in principle.
14. While I think the reasoning could have been more detailed in relation to this analysis by the Referee, the reasoning which Ms Grey does give in paragraphs 203-205, provides a rational basis as an expert for the valuation which she has arrived at. Having considered the matter carefully, I do not think this shows an error of principle, a perversity or manifests unreasonableness in fact-finding within the Chocolate Factory principles that would ordinarily be a basis for rejection. This involves an assessment on an area of expertise and of a technical nature in which the Referee enjoys an appropriate expertise. Accordingly, while initially having some reservations in relation to the sum proposed for Less than Ideal Conditions, I consider the attack on this part of the report should not be accepted.
15. When the paragraphs I have indicated are read as a whole, Ms Grey does not allow the sum on a contingency basis but as a fair assessment of the value of work that has been completed by the plaintiff.
16. Contrary to the defendant's submission, I do not find that the analysis by Ms Grey was an error in principle as it proceeded on the unstated assumption of the scope of the contract. The amount is proposed because of Design Development Work, advice provided by the plaintiff through Mr Phillips on the whole of the development and for work performed in conditions which were less than ideal as described by the experts.
17. In paragraph 11 of his written submissions, the defendant appears to criticise paragraph 129 of the Referee's report on the basis that there is a possible reversal of the onus of proof. In my view, this criticism should be rejected. In paragraph 129 of her report, the Referee considers the question of delay. Delay is pleaded in the Cross-Claim by the defendant: see paragraphs 84-87 of the Referee's report. See also the third and fourth lines in paragraph 129 of the Referee's report. As it was an allegation by the defendant in the Cross-Claim, the defendant did bear the onus of proof on this issue. I agree with the submission of the plaintiff in paragraph 22 of its written submissions on this issue.
18. A similar criticism can be made of the defendant's submissions in paragraph 12. The delay was part of the Cross-Claim of the defendant on which it did bear the onus of proof. In any case, the analysis by the Referee showed a careful consideration of the evidence on this issue without any manifest errors of principle and accordingly, the onus of proof does not appear to have been decisive.
19. In paragraph 13 of his written submissions, the defendant refers to paragraph 206 on page 57 of the Referee's report. The defendant submits that this part of the report in paragraphs 206-209 should be rejected. It is submitted that possible delay costs to the plaintiff have not been raised on the pleadings and were not the subject of any invitation to the parties to address on the matter. It is submitted that the Referee has exceeded jurisdiction and has denied the defendant procedural fairness in not being alerted to the position of the Referee on the point or being given an opportunity to be heard on the matter.
20. In paragraph 23 of his written submissions, counsel for the plaintiff states that the Referee concludes that the quantum meruit ought to include an appropriate amount for any days of delay that were not caused by Geneville and were not at its risk. It is submitted that the Referee specifically states that any such additional payment to Geneville is properly a component of the quantum meruit in the context of the Referee's earlier finding that no delay was caused by the construction/excavation/supervision methodology adopted by Geneville. It is said that there is no difficulty with there being the absence of a specific element from the pleadings relating to this because the question of quantum meruit was properly raised on the pleadings by the plaintiff and was before the Referee. Further, it is submitted that the parties had full notice of the daily delay amount alleged to be payable to Geneville as it was jointly agreed by the experts in conclave on 17 July 2018 and that was provided to the parties prior to the hearings between 2-4 August 2018. It is submitted: "The Referee has afforded a fair opportunity to both parties to state their respective positions in this regard. Finally, the Referee's adoption of the rate, considering the joint agreement by both experts as to the rates applicability and quantum, is entirely appropriate."
21. First, the Referee in paragraph 206 of her report, expresses the opinion that the cost of the builder of delay that was not caused by it should in the Referee's opinion be part of any quantum meruit assessment. It is noted in the paragraph that the Referee asked the experts to provide a daily rate for delay and that in the conclave they agreed that an appropriate daily rate for builders delay on a project of this kind would be $1,016.60. See also paragraphs 207-209.
22. Secondly, the notes on the quantity surveyor conclave held on 17 July 2018 are Annexure D to the Referee's report. On page 3 of this document the following is stated: "To cover the additional time that might have been incurred by matters beyond the control of the builder, the experts estimated a reasonable daily rate for delay - see below".
23. How that delay rate of $1,016.60 per day is calculated is set out on pages 3-4 of Annexure D. This seems to be agreed between the experts. Annexure D states: "The cost of delay is for events beyond the control of the builder and for which he has not accepted contractual risk and for which he has not been compensated in any other way".
24. The notes which are Annexure D are signed by the two experts Mr Madden and Mr Lee on 18 July 2018. It does not seem to be in issue that Annexure D was provided to the parties before the reference hearings: see Annexure HI page 14 paragraphs 62-66; Annexure JK paragraph 4 and Annexure M paragraph 19. It was based on a joint experts' position. Accordingly, it appears to me that, as submitted by the plaintiff, the Referee's adoption of the rate was appropriate on the evidence. The Referee has adopted the rate agreed by the experts without criticism.
25. For the reasons given, I consider there is no substance in the allegation of a denial of procedural fairness. The parties made submissions on the matter.
26. I also do not accept the submission on behalf of the defendant that there was a need to specifically plead this matter in circumstances where a quantum meruit was pleaded. It is clear on the Amended Statement of Claim that a quantum meruit was pleaded: paragraphs 20-23. Counsel for the defendant could not refer me to any case where it has been held that delay costs to a builder must be specifically pleaded as opposed to being a part of a general quantum meruit claim. The defendant was on notice of the issue and dealt with it in his submissions.
27. In paragraphs 14 and 15 of the defendant's written submissions, the Referee appears to have allowed four invoices on the basis that Mr Phillips gave sworn unchallenged evidence that he had paid them and they related to the project: see page 61 paragraph 220 of the Referee's report.
28. I do not think that there is any substance to the criticism of the date of the affidavit as the affidavit of Mr Phillips which was dated 29 May 2017 is dated at the bottom by the witness as 30 May 2017. The reference by the Referee to 30 May 2017 is therefore explicable. Paragraph 38 of Mr Phillips' 29 May 2017 affidavit seems to provide an evidential basis for the assertion that Mr Phillips has paid the invoices relating to this project.
29. I attempted to locate the two invoices 1.035 and 1.133 in the evidence without success. The only Platinum invoice apparent was for $7,260 not $8,349 so it appears there is an error. The Hanson invoice was illegible. It may be that the copy of the invoices which I had located in Tab 16 to Mr Phillips' affidavit was not sufficiently clear. The plaintiff submits that the reference is clearly to the 29 May 2017 affidavit and Tab 16 of that affidavit as referenced by Ms Grey in her report and that the Referee has a wide discretion to determine the payment of the invoices.
30. I have some concern in relation to the two invoices as I could not locate them in the figures alleged. In my view, this part of the Referee's report should be treated as being based on the assumption that the two invoices in question are established on the evidence. I can be addressed on the issue in final submissions.
31. No other matters were raised in relation to the Referee's report by the defendant in Mr Darvall's written or oral submissions.
32. For the above reasons: 1. The report of Ms Grey shows a thorough and analytical approach to the assessment of the subject matter of the reference before her. She provides extensive detail and reasoning for her conclusions; 2. Accordingly, the court would have a disposition towards acceptance of her report; 3. The analysis of defects and the assessment of a quantum meruit fall within her expertise as an architect with substantial building experience: see Annexure C to the report; 4. I have rejected many of the criticisms by the defendant of the report; 5. There was clearly material before the Referee sufficient to entitle the Referee to reach conclusions which she did; 6. The quantum meruit analysis and conclusions were made by the Referee after considering the opinions of experts from both parties; 7. A wide discretion is given to the Referee in the conduct of the reference under Part 20.20(2).
33. For these reasons, I adopt the report as a whole, apart from paragraphs 219-220 to the extent they rely on the Platinum invoice and the Hansen invoice specified which I could not locate.
34. I therefore make the following orders: 1. The report of Referee Ms Janet Grey dated 4 September 2018 is adopted as a whole pursuant to Part 20.24 of the Uniform Civil Procedure Rules excepting in relation to part of paragraph 219 of the report. The invoices described as the "Platinum invoice" and the "Hansen invoice" in paragraph 219 of the report are treated as assumptions made by the Referee pending the court being satisfied that they are established upon the evidence given by Mr Phillips on behalf of the plaintiff. 2. The defendant is to pay the costs of the adoption hearing as agreed or assessed. 3. Liberty to the parties to apply on 14 days' notice, for a variation of the costs order in (2) above.

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