Illawarra Hotel Company Pty Ltd v Walton Construction Pty Ltd

Judgment 1HIS HONOUR: There are two motions before the Court. The first in point of time is the motion filed on 16 December 2011 by Walton Construction Pty Ltd, which I will call "Walton", alleging that the appeal filed by Illawarra Hotel Company Pty Ltd ("Illawarra") is incompetent. The second is the motion by Illawarra filed 20 February 2012 seeking an extension of time and leave to amend. If Illawarra succeeds on the first motion, the second motion need not be dealt with at all because it becomes otiose. 2I have found it extremely difficult simply to summarise the background material necessary to understand these reasons, and indeed my summary may disclose that I have not fully appreciated all the nuances. But something needs to be set down and I will do my best. 3The dispute between the parties is over a commercial building project to refurbish the Illawarra Hotel in Wollongong. The parties signed a contract for the works on 26 April 2006 with practical completion set down for 5 August 2006, however practical completion was not achieved until 9 July 2007. 4Walton filed a claim in the Technology and Construction List of the Equity Division claiming that it was entitled to be paid $898,734.24 plus interest, for unpaid variations to the contract together with extensions of time and delay costs. 5The principal dispute was the allowance for extension of time under the contract. Walton claimed 231 days, Illawarra alleged only 28 days ought to be allowed. 6Under the contract the superintendent who was allied with Illawarra, was to make a determination of reasonable extensions of time: she made a determination of 75 days. Walton claimed that the superintendent failed in her duty to grant reasonable extensions of time and that was a breach of contract which entitled Walton to damages against Illawarra. 7When the matter came to the Court, the Court referred seven technical issues arising in the litigation to a referee, Ms Janet Grey. However, the Court retained the legal questions which included the question as to whether the superintendent had acted reasonably. 8Ms Grey delivered her report dated 14 February 2011, which was predominantly in favour of Walton on the matters which she had to consider. Walton filed a notice of motion in the court below seeking adoption of the report in its entirety. Illawarra filed a motion seeking adoption, variation or rejection of various aspects of the report. 9Those motions were considered by Justice Einstein on 25-26 May and 6 June 2011 and his Honour gave judgment on that last mentioned date. The principal dispute before his Honour was whether the referee was correct in allowing an extension of time of 230 days, additionally there were other disputes over variations. 10Justice Einstein held that the referee's findings as to extension of time were to be adopted in full, but rejected her finding as to delay costs. The balance of her report, with one exception, was to be adopted. His Honour made an order for costs but did not make any order for payment of money. The formal order that was taken out as a result of Justice Einstein's determination was simply that most aspects of the report of the referee were adopted. That was not put in the form of a declaration but it is being submitted before me that essentially that is what it was. 11There were then the consequential issues that had been left for determination by the Court, including what consequences flowed from the adoption of the referee's report. 12The question as to the trial of those matters came up before the List Judge. There was some evidence that there was a conversation between counsel as to whether there should be an appeal against Justice Einstein's decision then or whether the matter should wait. I mention that because that conversation goes to show that Walton would not have been misled that as at the date the List Judge set the case down for hearing there was an intention to appeal. The List Judge set the matter down for five days before Justice McDougall. 13In due course Justice McDougall took five days to hear the matters in dispute between the parties and gave his judgment on 13 October 2011, [2011] NSWSC 1188. He ordered that Illawarra pay Walton $513,025.99 plus GST and ordered Walton to pay Illawarra $157,077.59 plus GST with the judgments to be set off, the material date for appeal purposes was 4 November 2011. 14However, apart from the matters which flowed from Justice Einstein's judgment, it would seem that the only money amount that directly affected the parties was about $4,000 as a result of the issues that were actually considered by Justice McDougall. I am not completely au fait with why the present motions are before the Court, but from what I have been told and what has been kept from me, quite legitimately, it seems that there are critical questions that flow from the fact that a Calderbank letter was issued at the relevant time. 15The present position is that Walton takes the view that: (a) the decision of Justice Einstein was final so that any appeal had to be lodged sometime I think before October 2011, or (b) that the decision was interlocutory but of a special character which required that any appeal not awake further hearings with the same consequence. Illawarra says, on the other hand, that the usual rule is that where questions are dealt with by courts in stages or with preliminary issues being tried, a party is entitled to wait until the final determination before lodging an appeal and that when it does so it can challenge all the interlocutory judgments along the way. 16There is higher authority for that proposition including the High Court's decision in Crowley v Glissan [1905] HCA 13; 2 CLR 402 and Smith v Tabain (1987) 10 NSWLR 562. I should note that Illawarra did in fact on 28 June 2011 file a notice of intention to appeal the decision of Justice Einstein, that was four days after the list judge had fixed the remaining issues for trial before Justice McDougall. However, that notice of intention was not followed up. 17The current notice of appeal was filed on 18 November 2011, it challenges both judgments. The second motion deals with an application to amend it, which if necessary I will consider in due course. Walton says the appeal against the decision of Justice Einstein is now out of time and the McDougall J judgment is based on that except for $4,000 which is under the limit and accordingly there is no appeal as of right. 18The motion came on before me last Monday. Mr Gracie and Mr Neggo appeared for Walton, Mr Donaldson SC and Ms Durham appeared for Illawarra. However, time ran out before the motion could be concluded and it was stood over to this afternoon. 19Mr Gracie put that essentially there were three issues with respect to the competency of the appeal, but apart from pleading points, which I think are not really necessary for me to consider, the question comes down to whether in this particular case there were some consequences that flow from the stance of Illawarra in not following up its notice of intention to appeal and allowing the proceedings to continue before Justice McDougall on the basis that Justice Einstein's decision was correct. Further, whether the decision of Justice Einstein was final, interlocutory or interlocutory in that special category which requires a person affected by it to lodge an appeal straight away rather than waiting for the end of the proceedings. 20As to that first issue it does not seem to me that on the facts as I have them there was any conduct on the part of Illawarra which would operate as an estoppel or some unconscientious conduct short of an estoppel, if that be a relevant matter to consider, which misled either the opponent or Justice McDougall to conclude that there would be no appeal and that Justice Einstein's decision could be treated as being the final ruling. 21As to the second matter, it is quite clear that there are three categories of decisions that can be made in a case where issues are dealt with in stages: (a) a final decision; (b) an interlocutory decision; and (c) an interlocutory decision with special consequences. It is also clear that whilst the general rule is that interlocutory orders can be challenged after final judgment, there are exceptions. Thus the plurality in Gerlach v Clifton Bricks Pty Ltd [2002] HCA 22; 209 CLR 478, 483 [6] said that the maxim that interlocutory orders can be challenged after final judgment is too wide and the true rule is that this only applies to an interlocutory order which affects the final result. I do not really consider that takes us very far in this case. 22Recently in Michael Wilson & Partners Limited v Nicholls [2011] HCA 48; 86 ALJR 14, 27-29, the High Court made further pronouncements on this topic, noting that it will often be appropriate to save time and money by appealing an interlocutory order which if upset would mean a hearing before a particular judge should not take place. 23However, the cases that fall into this category would appear to me to be very limited. The category itself has only opened up so relatively recently that there has not been much time to work out exactly what it covers, but the main exception to the maxim are cases where a judge declines to recuse himself or herself. 24In that situation it is usually appropriate to save time and money by having that ruling appealed at that stage because particularly where it involves, as it often does, a long and complex commercial dispute, that avoids an expensive hearing. That is not the only situation, but it would not seem to me that very many others would fall within it and I do not consider that the present case falls within it. 25I say that because the position is complicated by the fact that two different judges and a referee heard different parts of this particular litigation. I think it is simpler to just look at the situation as if it was all done by the one judge in the one trial. It is not infrequent that a judge will make a ruling early in the case, such as whether evidence which is alleged to be privileged should be admitted or not, which will have a vital effect on the outcome of the proceedings. If a ruling is made against the plaintiff, then the plaintiff virtually has no option but to continue on with the rest of the hearing on the basis of the ruling even though if the ruling were reversed the case would be conducted on a completely different basis. 26There is, as far as I know, no suggestion that in that sort of situation what should happen is that the judge should stop hearing the case, adjourn, allow the Court of Appeal to test the ruling, and of course if the case is a jury case such a consideration is absolutely absurd because one would have to discharge the jury and then start again with a new jury. 27I cannot really see how this present case is very different from that scenario and indeed the way in which this Court dealt with the situation in Triden Properties Ltd v Capita Financial Group Ltd [1993] NSWCA 272, a case which involved an arbitration and then the issue being referred to the Court, where it was held that the judgment involved was an interlocutory judgment and the ordinary rule applied. 28The test as to whether a judgment is final or interlocutory is not in contest. I have been cited the well known High Court decision Bienstein v Bienstein [2003] HCA 7; 195 ALR 225 at 230 [25]. The test there is "does the decision finally determine the rights of the parties". Walton says that when Justice Einstein adopted the referee's report the principal issue was finally determined. Illawarra says this could not be so, the referee was not sent the whole of the case but only seven issues. Certain vital issues were reserved to the Court itself, the Court needed to deal with those non-technical issues after the technical matters were considered. Alternatively, Walton says, that the order made by Justice Einstein is properly to be taken as a declaration of right. All such declarations are to be considered as final orders. 29Mr Gracie refers to the Privy Council's decision in Becker v Marion City Corporation [1977] AC 271 and a statement by Nettle JA in the Victorian Court of Appeal in Major Engineering Pty Ltd v Timelink Pacific Pty Ltd [2007] VSCA 228 at [10] that a declaration of right is always final. There is no quarrelling with that proposition. The problem is for Walton that the declaration was not a declaration covering the entire cause of action, it was merely a declaration of a matter that occurred along the way to reaching the final situation. So whether one can properly construe Justice Einstein's decision as a declaration or not really does not affect the issue. 30In my view, the decision of Justice Einstein did not finally determine the rights between the parties and must be considered to be an interlocutory decision. 31In my view, this case does not fall within the situation of an interlocutory decision in a special category. 32Accordingly, the ordinary rule applies and that is that Justice Einstein's decision can now be challenged in an appeal from Justice McDougall. 33So it really comes down to a simple matter. Justice McDougall gave judgment for some $200,000 or $300,000 when taking into account the set-off, that is more than $100,000. It is a final judgment and accordingly there is a right of appeal. 34Thus, the notice of motion must be dismissed with costs. The second notice of motion accordingly is dismissed. The costs of that motion can be as part of the costs in the first motion.