Gleeson v Boden

District Court of NSW|2011-11-24|Before: Brownie J, Dr Phillip J

Introduction 1The plaintiffs (the Builders) by notice of motion filed on 26 October 2011 seek the following orders: "1. The Referee's Reports, dated 29 April 2011 and 4 October 2011, be adopted pursuant to Uniform Civil Procedure Rule 20.24(1)(a). 2. The First and Second Defendants pay the First and Second Plaintiffs' costs. 3. Such further order as the Court thinks fit." 2The report of the Referee, Dr Phillip J Briggs dated 4 October 2011, made a finding of $48,622 in favour of the Builders. The Referee's report is the second report of Dr Phillip Briggs. Orders were made on 1 November 2010 by Gibb DCJ referring the Builders' claims to Dr Phillip Briggs for enquiry and report pursuant to UCPR Part 20 r 20.14. Dr Briggs' first report was provided on 29 April 2011. That report contained a determination of a reasonable addition to the contract sum under clause 10.9 of the building contract entered into by the plaintiffs and defendants. On 24 June 2011, Sorby DCJ remitted the report in part back to Dr Briggs. It is the second report of Dr Briggs, dealing with the Builders' claim for delay costs, which Dr Briggs assesses at $48,622, that is the subject of this application.

Transfer from the CTTT to the District Court 3These proceedings originally commenced in the Consumer, Trader and Tenancy Tribunal (CTTT) and relate to a lump sum building contract dated 3 April 2003 in relation to the construction of a dwelling at 18 Awaba Street, Balmoral, for a contract sum of $1,575,515 (inclusive of GST). The contract sum as assessed by the architect including variations amounted to $1,876,697. The Builders initially commenced proceedings for $42,000, being the shortfall in the contract sum. A claim was then added for costs arising from delays, as the architect had extended the time for practical conclusion by 93 days due to delays described in the statement of claim as "delays in the provision of information to the plaintiffs". The Builders relied upon their letter of 15 June 2005 as particulars of the loss and expenses incurred (paragraph 13 of the statement of claim). The architect rejected the claim for cost of delays on the basis that it had not been submitted within a reasonable time. 4The statement of claim filed in the District Court proceedings sought damages by way of breach of contract arising from the architect's rejection of the Builders' claim for cost of delays on the basis that the delays were not submitted within a reasonable time. The damages which were quantified at $48,622 were identified as follows: " Particulars (a) 93 days x $354 = $32,922 for the costs of an employed foreman; (b) $11,608 for site amenities; (c) 93 days x $18.40 - $1,711.20 for phones and faxes; (d) $2,381 for additional insurances." 5It is no longer in dispute that the architect was mistaken in rejecting the claim for cost of delays. 6In a cross-claim filed in this court on 15 October 2009, the defendants (the Home Owners) brought a claim for, among other issues, liquidated damages in the sum of $16,000, as well as claims for loss and damage suffered by them because of the Builders' failure to conform with statutory warranties under the Home Building Act 1989 (NSW).

The procedural history of these proceedings 7These proceedings have an unfortunate history. They were first listed for hearing on 24 May 2010 for four days, but on 19 May 2010, the Home Owners had the matter listed by reason of late service of one of their reports. The hearing date of 24 May 2010 had to be vacated on the basis that the Home Owners were not ready to proceed. The Home Owners were ordered to pay the Builders' costs, both of the application and those costs thrown away by reason of the adjournment, assessable forthwith and payable immediately. It was noted that the new hearing date was not to be adjourned except in the most exceptional circumstances. 8The matter was next listed for hearing before Gibb DCJ on 1 November 2010. The orders that her Honour made were as follows: "1. Vacate listing for hearing for 1 November 2010. 2. Adjourn cross-claim. 3. Leave to parties to file a motion instanter seeking referral of certain issues to a referee, being Dr Phillip Briggs. 4. Motion determined instanter by consent. 5. Pursuant to Uniform Civil Procedure Rule 20.14, refer the Plaintiff's claim in paragraphs 10 to 18 of the Statement of Claim filed on 15 October 2009 to Referee, Dr Phillip Briggs, for enquiry and report. 6. In accordance with Uniform Civil Procedure Rule 20.20 the referee may conduct the proceedings under the reference in such manner as the referee thinks fit subject to the following: a. The evidence before the Referee shall only be a bundle of documents annexed to these orders marked as MFI 1 - comprising: i. paragraphs 15-21 of the affidavit of Anthony GLEESON sworn 3 March 2010; ii. affidavit of Sean GARTNER sworn 15 August 2008; iii. the bundle of documents marked pages 1 - 62 inclusive; and iv. the contract. b. Given the sum in dispute the Referee is to bear in mind the overriding purpose articulated in s 56 of Civil Procedure Act 2005 (NSW) and to conduct the reference with as little expense and formality as is practicable in the circumstances. c. The Referee is to report to the Registrar of the District Court of NSW on or before 1 February 2010. 7. Grant liberty to apply for an extension of time for the submission of the expert's report to the Registrar. 8. Grant liberty to the Referee and each party (jointly and severally) to apply to the Court directions on 3 days' notice. 9. The plaintiffs are to serve on the Referee Mr Phillip Briggs forthwith a copy of (i) these orders; (ii) the statement of claim and defence; and (iii) the documents marked as MFI 1. 10. The parties undertake to be jointly and severally liable for the Referee's costs in the conduct of the reference. 11. Stand the cross-claim over for mention at conclusion of reference. 12. Liberty to apply generally on 3 days notice. 13. Gibb DCJ is NOT part heard. 14. S.O. for mention before the Judicial Registrar in Sydney on Monday 1 February 2010. 15. Costs of the hearing/motion before the Court on 1 November 2010 to be costs in the cause. 16. MFI 1 (documents annexed to order for reference) to remain on court file." 9Dr Briggs, the Referee, provided the report on 29 April 2011. 10The Home Owners opposed the making of orders sought in accordance with Dr Briggs' report and sought the following orders: (a)The report in respect of the quantum of the builder's claim for delayed costs and interest should be rejected; (b)The court should determine the question of quantum of those cost itself, on the basis of the evidence that was before the Referee; (c)The court should dismiss the builder's claim for delayed cost, with an order that the builder pay the Home Owner's cost of the builder's claim. 11The matter came before Sorby DCJ who, on 24 June 2011, handed down a comprehensive and careful judgment. His Honour found that the Referee had denied procedural fairness to the Home Owners, in that they were denied the opportunity to be heard on the approach he took in calculating delay costs. This failure constituted an error of law. The issue of delay costs was referred back to the Referee for further consideration. 12In particular, the following findings, as set out in paragraphs 7-9 and 12-13 of Sorby DCJ's judgment of 24 June 2011, were challenged: "7. The referee in his report states at paragraphs 336-338: "336. The Builders' claim for extension of time/delay costs was added to this reference pursuant to orders made by her Honour Judge Gibb DCJ on 1 November 2010. 337. The builder has claimed for loss and expense incurred or borne as a result of extensions of the date for Practical Completion granted by the architect under the provisions of Section 9 of the Contract. 338. Mr Gleeson, in his affidavit dated 3 March 2010 (para 16) refers to notification by the architect of 93 days extension of the Date of Practical Completion which he says fell within the grounds 10.9.1 to 10.9.9 of the Contract. His calculation of the delay claim follows; (a) 93 days x $354 - cost of employed foreman; (b) $11,608 - site amenities; (c) 93 days x $18.40 - phones and faxes; and (d) $2,381.00 for additional insurance. The quantum claimed is therefore $48,622.00." (sic) 8. At paragraphs 367-368 the referee states: "367. It has been submitted on behalf of the defendant that the builder has failed to discharge his onus of proof in respect of the quantum of the claim made. Mr Gleeson, in his affidavit of 3 March 2010 has provided admissible and unchallenged evidence as to the allowance which he maintains should have been assessed. This is set out in paragraph 338 above. 368. The 'tender breakdown' prepared by the builders in support of their tender for the project has not been put into evidence and there is no evidence in the form of invoices or receipts to support the sum claimed." 9. Then at paragraph 369 the referee states: "369. There is however evidence in the affidavit of Margaret Boden at MB3 which contains copies of progress payments 1-22. Each claim is accompanied by a list of trades against which the architect has assessed progress for the period of the respective claims. I note that against the head 'Preliminaries' in each claim is an allowance of $212,232.00 or 13.4% of the Contract sum, which provides the architect with a base for an assessment of the daily cost of maintaining the site in operation. It is axiomatic that if there has been a delay of 93 days to the completion of the works and that delay has not been caused by the actions or inactions of the builder then there will be a compensable cost for maintaining the site open." (sic) ... 12. The referee in paragraph 370 of his report, decided to assess the extension of time, by relying on the preliminaries allowance over the original period of work which resulted in an "approximate daily cost of $690 per day". The referee goes on to say: "Mr Gleeson has claimed $522 per day - a total of $48,546. A builder's allowance for preliminaries is a reflection of the way the builder assesses the project, there can be no formula that one can apply to every project to arrive at a value to be allowed for preliminaries but I believe that the industry regularly accepts that 15% of the contract cost will go to preliminaries. It follows that the claim made by the builder falls within the normal range." (sic) 13. Then at paragraphs 370 and 371 the referee's report sates in relation to the contract rate of a foreman: "I note from this clause that the charge-out rate for a foreman is $52 per ordinary hour which on a 7.5 hour day amounts to $388 per day, a greater sum that has been claimed by the builder. The question of whether or not an extension of time claim should be assessed as a variation might be considered relevant [sic - irrelevant?] but in my view is strong evidence of a rate that should be applied in this instance." (sic)" 13Sorby DCJ particularly noted at [16]-[17]: "14. There was no reference to preliminaries and variations in rates in the submissions to the referee. The referee decided to look at preliminaries and variations in rates to determine the delay costs question without reference to either party, but in particular, the Home Owners. 15. This failure by the referee constitutes, in my view, a denial of procedural fairness to the Home Owners, in that they were denied the opportunity to be heard on the approach he took as to calculating delay costs. This failure constitutes an error or [sic] law. 16. The referee has considered the overall matter in detail. In my view the appropriate course in the matter is that it be referred back to the referee to determine the loss and expenses incurred by the Builders, if any, and in making the determination to hear submissions by both the Home Owners and the Builders as to what each say as to the appropriate approach for the referee to take in determining the question. 17. The reference to the referee is to be limited to whether or not there was or was not "evidence in the form of invoices or receipts to support the sum claimed" and if not on what other basis could the referee have based his conclusion, in including his approach of considering "preliminaries" and the charge-out rate for foremen." 14It must be recalled that at all relevant times it was clear from the evidence before both the Referee and Sorby DCJ that there were in fact no invoices or receipt to support the sum claimed. It was presumably for this reason that his Honour added the proviso "and if not on what other basis" the Referee could base his findings. 15Both the Builders and Home Owners made extensive submissions to the Referee, the contents of which are set out in the affidavit of Douglas Andrew Schrader, which is Exhibit A in these proceedings. 16The Referee's decision of 4 October 2011 carefully reviewed the history of the matter, noting the finding of Sorby DCJ that an error of law had been made in relation to a limited issue, which was referred back for reconsideration. At paragraph 8 of the Referee's report, Dr Briggs notes that the following questions had been referred for his further report: (a)Whether or not there was evidence in the form of invoices or receipts to support the sum claimed by the Builders as representing the loss and expense incurred by them by reason of delay [17]; (b)In the absence of any such evidence of loss and damage incurred by the Builder, whether there is any other basis, on the evidence before the Referee, upon which he could conclude that the Builder had incurred loss and damage as a result of delay [17]; (c)The quantum (if any) of the loss and expense incurred by the Builders as a result of delay [16]; and (d)Interest (I note this claim has been abandoned and is not the subject of any ruling). 17The claim for delay costs which was before the Referee consisted of statements by Mr Gleeson in his affidavit of 3 March 2010 (paragraph 16) referring to notification of 93 days extension of the date of practical conclusion and a delay claim as follows: (a)93 days @ $354 for the costs of an employed foreman being on the site for an additional 93 working days; (b)$11,608 for site amenities, principally a toilet, a shed and fencing; (c)93 days additional use of the telephone and fax machine which is assessed at $18.40 per day; and (d)$2,381 for additional insurance to cover the additional 93 working day period. 18This is how the quantum of $48,622 is assessed. 19Dr Briggs, conformably with the task allotted to him by Sorby DCJ, has considered the question of whether or not there was evidence in the form of invoices or receipts to support the sum claimed and, if not, on what other basis he could have based his conclusion, including the approach of considering preliminaries and charge-out rates. The attack the Home Owners makes is on his methodology. 20The defendants were given the opportunity to make submissions on these issues thereby curing the procedural unfairness identified by Sorby DCJ in his judgment. The parties told me that Dr Briggs heard submissions by both parties as to the appropriate approach for a Referee to take in determining the question of loss and expenses incurred by the builder. 21The reasoning process adopted by Dr Briggs is summarised in the Builders' helpful written submissions as follows: "(a) There was no evidence in the form of invoices or receipts to support the sum claimed by the builder. (b) There is another basis, on the evidence before the Reference, upon which he could conclude that the builder had incurred loss and damages as result of the delay. As he said: The manner of the assessment of the reasonableness of the builder's claim is not something that is prescribed by the contract, it is not an auditing process based on an overview of the receipts and invoices but rather it is a determination by the Architect, using his/her skills and judgment of what in the circumstances of the builder's claim is "reasonable" having regard to the nature of the work, the quantum of the claim and the contract sum. (para 72 of the Report) (c) The quantum of damages is $48,622"

The application before me 22In their notice of motion dated 29 October 2011, the defendants ask the court to set aside the whole of the revised report. When asked what be the next step for the court to take in relation to the defendants' claim for delay costs, Mr Sirtes SC identified the following: (e)The court could redetermine the whole of the issue on the spot, which Mr Sirtes SC said would take about an hour; (f)Alternatively, the matter could be listed for hearing before another judge, which Mr Sirtes SC said would also take approximately one hour; or (g)The court could simply strike out the defendants' claim on the basis that it was hopeless. 23This matter was listed before me as a half-day argument and due to time constraints, option (a) was not possible. Option (c) is effectively the same as option (a). This would mean, if the Referee's report was rejected in its entirety, the matter would have to be heard by another judge. I enquired if a third reference to either Dr Briggs or another Referee was considered acceptable by the defendants, but was told by Mr Sirtes SC that this was unacceptable to his clients. 24This brings me to a consideration of the issues before me.

The relevant principles of law in relation to the application 25Rule 20.24 UCPR provides as follows: " 20.24 Proceedings on the report (1) If a report is made under rule 20.23, the court may on a matter of fact or law, or both, do any of the following: (a) it may adopt, vary or reject the report in whole or in part, (b) it may require an explanation by way of report from the referee, (c) it may, on any ground, remit for further consideration by the referee the whole or any part of the matter referred for a further report, (d) it may decide any matter on the evidence taken before the referee, with or without additional evidence, and must, in any event, give such judgment or make such order as the court thinks fit. (2) Evidence additional to the evidence taken before the referee may not be adduced before the court except by leave of the court." 26The defendants' submissions are that the Referee conflated the question of proof of cost and reasonableness, reversed the onus of proof and made findings of fact which were perverse and against the evidence in circumstances where there was no evidence. In relation to the claim for a foreman of $32,922, Mr Sirtes SC submitted there was "not a single piece of paper" to support this claim and referred me to the letter from the builder at page 72 seeking only $192 per day for this item, and called it a "tit for tat" claim. Similarly, the only evidence for the claims for site amenities, phone and fax expenses and insurance consisted of a trade break-up document prepared in 2003, before the contract commenced. There was no "third party" or "objective" evidence to support any of these claims. Mr Sirtes SC submitted that "my clients should not have to pay $1 more than the costs actually incurred, or justice will not have been done". 27The submissions of the builder were that while the evidence in support of the claims may have been weak (the term "exiguous" was used), that weakness of evidence was a matter going to weight of the evidence only. Counsel for the builder submitted that a contract of this nature, which provided for a procedure for quantification of delay costs in the event of delay, was not a claim for breach of contract in which actual evidence of loss needed to be assessed. 28I shall first consider the principles concerning the adoption or rejection of reports under the rules.

The principles concerning the adoption or rejection of a referee's report 29In The Owners Strata Plan 70579 v Midwest Constructions Pty Ltd [2011] NSWSC 429 Einstein J at [8]-[9] noted Dougall J's summary of the main principles (although in relation to the Supreme Court Rules prior to the introduction of the UCPR) as follows: "[8] The principles concerning the adoption or rejection of any report (in part or in whole) under the provisions of the Rules are well established: see Seven Sydney Pty Ltd v Fuji Xerox Australia Pty Ltd [2004] NSWSC 902. [9] In the decision of Seven Sydney Pty Ltd , McDougall J summarised the main principles (referencing the Supreme Court Rules, prior to the introduction of the UCPR): (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." 30Einstein J further considered these principles in more detail at [4]-[11] of Walton Construction Pty Ltd v Illawarra Hotel Co Pty Ltd [2011] NSWSC 534. I particularly note his Honour's reference to the comments of Cole J in Chloride Batteries Australia Ltd v Glendale Chemical Products Pty Ltd (1988) 17 NSWLR 60 at 67: "The Court will have regard to the futility of a process of relitigating an issue determined by the referee in circumstances where parties have had an opportunity to place before the referee such matters as they desire. It will also have regard to cost. If a report shows a thorough, analytical and scientific approach to the assessment of the subject matter of inquiry, the Court will have a disposition towards acceptance of the report, for to do otherwise would be to negate the purpose of and the facility of referring complex technical issues to independent experts for inquiry 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. The Court may be more hesitant in this disposition if the report is provided by the expert in the absence of the parties having been given such an opportunity. The disposition must always yield to the requirements of justice, if it becomes apparent for any reason that to adopt the report would result in an injustice or unfairness to a party. These matters reinforce the view that each matter requires its own consideration." 31In Ryde City Council v Tourtouras [2007] NSWCA 218 the Court of Appeal noted that the power of a judge to reject a referee's report pursuant to UCPR r 20.24 is not limited to circumstances where error of law has been identified. The power to reject a report in whole or in part is not unconstrained, but should be exercised in a manner consistent with the object and purpose of the rules. For example, misapprehension of the evidence and/or failure to take into account relevant matters may be occasions where it is appropriate to consider the rejection of a report, but what the court must not do is to engage upon a substantive reconsideration of factual matters and disagree with opinions of an evaluative nature. 32The submissions of the defendants are that the Referee has made substantial and serious errors. These are set out in their written submissions as including: (a)Misunderstanding his role; (b)Adopting an ill-conceived approach; (c)Imposing arbitrary evidential requirements exonerating the builder from having to prove his claims yet requiring the Home Owners to disprove these claims; (d)Reaching conclusions not supported by evidence; and (e)Manufacturing evidence. 33I shall deal with each of these in turn.

(a) Did the Referee misunderstand his role? 34It is submitted that the role of the Referee was to identify expenses that had been incurred, namely expenses paid to third parties or incurred "internally" by the builder as an operation cost and to identify to the exact dollar the value of such expenses that had been incurred by reason of delay. The Referee's task did not require him to act and stand in the shoes of the project architect in order to determine the reasonableness of the builder's claim and in doing so the Referee confused his role. He was a District Court appointed referee, not an architect's referee as he claims. 35The court's referral to the Referee required the Referee to determine the builder's damages claim as articulated in the pleadings, not to make findings as to the reasonableness of the claim. The defendants did not raise lack of reasonableness in their defence but simply denied that the builder had incurred damages as alleged. It was up to the builder to prove that damages had been incurred, and this meant producing actual evidence in the form of documentation, rather than accepting the sworn evidence of Mr Gleeson, unsupported by corroborative documents. 36The problem that I have with this approach is that it cannot be said that, if there is no paper documentation, there is no evidence at all. Sorby DCJ was well aware, as was the Referee, that there was no supporting documentation in relation to the delay claim. This was why Sorby DCJ made the orders that he did, and made reference in his judgment (at [17]) to alternative means of ascertaining what costs had been incurred by reason of the delay. 37It is not in dispute that the additional time of 93 working days was added to the contract. What the Home Owners submit is that the onus lies upon the builder to prove that during this time, he actually had a toilet installed for his workmen, continued to fence the premises, had a foreman onsite, continued his insurance policy and left his phone/fax machine on the site. 38The way in which the Referee approached his role was to answer the submissions of the Home Owners (paragraph 25) as follows: "25. In summary the Home Owners have submitted that the appropriate principles to apply in assessing this claim are; (a) The builders bear the onus of proof in respect of their claim; (b) The Builders' claim is that which is pleaded at [10] to [18] of the Statement of Claim; (c) The express terms of clause 10.9 of the Contract contemplate that the Builders must have actually incurred loss or expense as a result of delay before they can make the claim; (d) The referee may have regard only to the material identified by Gibb DCJ in the Courts' orders made on 1 November 2010." 39At paragraph 43, the Referee draws a distinction between loss incurred which would not have been incurred at all but for the delay and loss which is incurred because other work cannot proceed thereby diminishing their contractor's income, noting that both types of loss are in principle recoverable. He notes at paragraph 45 that items commonly claimed will by their nature not always be supported by invoices or receipts. This includes such items as amenities, accommodation, hire of equipment such as phones and faxes and the like. 40The Referee extensively refers to Taylor Woodrow International Ltd v Minister of Health (1978) 19 SASR 1, where Bray CJ held that a builder was entitled to recover in relation to matters of this kind, and relies upon the explanation of these principles by Bray CJ in relation to his findings. 41The complaint that the Referee seeks to stand in the shoes of the architect appears to come from his response to the manner in which the Home Owners framed their submissions to him. The Home Owners submitted (Referee's report paragraph 13) that clause 10.9 of the contract was triggered by one of the nine "gateways" that three steps are involved in determining the question of any cost of delay. These are: (a)The Builders must have incurred or borne loss or expense as a result of such delays; (b)The Builders must notify the architect of such loss or expense; and (c)"The architect must determine how much of the loss or expense incurred or borne by the Builders is reasonable and add that amount to the contract sum". 42In other words, it was the Home Owners' own submissions which raised this question of the role of the architect. 43Looking at the whole of Dr Briggs' careful and well-reasoned report in its entirety, I am satisfied that he did not misunderstand his role as claimed. 44In addition, the Builders submits, and I accept, that the question of the identification of the reasonable sum to be added to the contract sum by the architect under clause 10.9 is a question of fact, not a question of law: Hawker Noyes Pty Ltd v New South Wales Egg Corporation (Supreme Court of New South Wales, Brownie J, 11 November 1988); Atlantic Civil Pty Ltd v Water Administration Ministerial Corporation (1992) 39 NSWLR 468.

(b) Did the referee have an "ill-conceived" approach? 45The Home Owners submit that the referee's report "does not demonstrate the requisite thoroughness and analytical approach that court's [sic] require of referees". This submission is based upon the claim that the referee dispensed with the notion that the Builders borne the onus of proving that they incurred expenses, that the referee imposed a burden on the Home Owners to disprove the allegation made by the builder (that the builder had failed to prove) and that the referee "manufactured and relied upon evidence that did not exist to the detriment of the home owners". In particular, it is asserted that his finding at paragraph 72 of the report that the architect "sought to see accounts" for the alleged expenses was non-existent. It is accordingly submitted that he reached a conclusion which was perverse. 46Essentially what the Home Owners submit is that it is perverse for the Referee to have assumed that the site amenities, including toilets and phone and faxes, were actually on site, and that he has "manufactured" such evidence by referring to the request by the supervising architect to sight the account for these amenities. 47The Referee at paragraph 72 referred to the advantage of the architect had of overseeing the works and having firsthand knowledge of whether items such as security fencing, telephones, toilets and the like were actually on site. He refers to the fact that there is no evidence from the architect to suggest that these facilities were not present. He notes that the architect sought to see accounts in relation to them. This is not the manufacturing of evidence, but the drawing of inferences from the fact that the person who was supervising the site from day to day, and who could be expected to have knowledge about whether toilets and security fencing were on the site had not challenged this, but had instead asked to see the invoices for them. 48I am satisfied that the Referee approached the task of determining the claim for delay costs in a commonsense and reasonable fashion. It is not unreasonable for him to draw an inference from the failure of the architect to claim that such facilities were not on site. This challenge to the Referee's report is rejected.

(c) Did the Referee impose arbitrary evidential requirements exonerating the builder from having to prove his claims yet requiring the Home Owners to disprove these claims? 49This is essentially a restatement of the attack upon the Referee's refusal to reject the claim by the Builders in the absence of receipts. It is submitted that this effectively reverses the onus of proof, in that it requires the Home Owners to disprove these claims by leaving evidence to disprove what the Builders says such as, for example, evidence from the architect that in fact the security fencing, toilets, phone faxes and shed were not actually there. 50This misconceives the nature of the task before the Referee, which was to determine firstly whether there was documentary evidence, and secondly, if there was no documentary evidence, whether there were other bases for allowing the claim made for these costs. Accordingly, I am satisfied that the Referee did not impose "arbitrary evidential requirements" as claimed.

(d) Did the Referee reach conclusions not supported by evidence? 51This is essentially a restatement of the objection to the Referee finding that the delay costs claimed by the Builders could be claimed when no receipts were provided. For the reasons set out above, I reject this claim.

(e) Did the Referee manufacture evidence? 52This is essentially a restatement of the objection to the Referee drawing an inference from the architect's request to sight the receipts for the items claimed as delay costs. When viewed in the context of the report as a whole, this objection is misconceived, for the reasons set out in more detail above. I reject this claim.

The submission that the adoption of this report would lead to injustice and unfairness 53It is submitted that no court could, or would, make such a finding "because of the absence of evidence". However, courts make findings concerning delay costs in building matters without the benefit of evidence of receipts and invoices for the reasons explained by Dorter and Sharkey, Building and Construction Contracts in Australia (2 nd ed) at [9.390], where the learned authors explained what "loss" and "expense" are. At paragraph 42 of his report, after having noted this passage from Dorter and Sharkey, Dr Briggs notes a list of items that are often considered by architects and contractors in loss and expense claims which included: (a)Hire and depreciation of cranes; (b)Telephone, electricity and water; (c)Insurance; (d)Security: supervisory staff overheads; (e)Costs of re starting the job (mainly after length delay); and (f)Rise and fall not covered by separate rise and fall clause. 54Further contracts expect to include: (a)On-site overheads, for example, supervisory costs, hoist or crane, standing time of other plant, insurance, additional notices etc, cost of water, cost of electricity, sanitary accommodation, cost of telephone calls, storerooms, offices, sheds etc, provision of progress charts, schedules etc, cleaning up, general foreman and other site staff, interest on security bonds, guarantees etc protection of work and scaffolding guard rails; (b)Off-site overheads; (c)Loss of profit and profit earning capacity; (d)Loss of productivity; (e)Increase in the costs of labour, materials, and subcontract rates not otherwise covered by rise and fall; (f)Any claims by subcontractors; and (g)Storage charges. 55I am satisfied that Dr Briggs' report shows the kind of "thorough, analytical and scientific" approach ( The Owners Strata Plan 70579 v Midwest Constructions Pty Ltd at 9) which would cause the court to have a disposition towards the acceptance of the report. I can see no error of principle or patent misapprehension of the evidence. It would be inappropriate for me to re-agitate his findings of fact, in circumstances where the Referee has based his findings upon a choice between the conflicting evidence of the Home Owners and the Builders. 56The parties to these proceedings have already participated in two hearings (the first being vacated by reason of the Home Owners' unreadiness), and two referee reports. The request by the Home Owners for the Builders' application to be heard by a judge (presumably in circumstances where the parties should be cross-examined on their affidavits, which would take considerable more than the one hour estimate of Mr Sirtes SC) amounts to treating the reference as if it is a "some kind of warm up for the real contest" ( The Owners Strata Plan 70579 v Midwest Constructions Pty Ltd at 9). To refer these proceedings for what would effectively be a third hearing before this court would be contrary to the principles explained by Einstein J (and McDougall J) in The Owners Strata Plan 70579 v Midwest Constructions Pty Ltd at [9]. 57Accordingly, I dismiss the notice of motion. The report of Dr Briggs should be adopted. Judgment will be entered for the plaintiffs/Builders for the sum of $48,622 plus costs. 58I grant liberty to apply in relation to any issues relevant to costs. I was not addressed on any questions in relation to interest.

Orders (1)Defendants' notice of motion dismissed. (2)The report of Dr Briggs, the referee, dated 4 October 2011 is adopted. (3)Judgment for the plaintiffs for $48,622.00. (4)Defendants pay plaintiffs' costs. (5)Liberty to apply on 7 days' notice. (6)Exhibits retained for 28 days. (7)A copy of this judgment is to be forwarded to Dr Briggs by the Registrar of the District Court of New South Wales at the address provided by Dr Briggs to the court.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 08 February 2012

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