Johnson Controls Australia Pty Ltd v Alliance Group Building Services Pty Ltd

District Court of NSW|2007-06-01

CITATION: Johnson Controls Australia Pty Ltd v Alliance Group Building Services Pty Ltd [2007] NSWDC 277

HEARING DATE(S): 27,28 February, 1,2,3,6,7,9,10,13,14,15,17,20,22,24 March, 2006; 25 August, 29 September, 13 October, 2006 (mentions); 6,7,8,9,10 November, 2006; 29,30 January, 2007; 2, 3 and 12 April, 1 June 2007 (mentions); 22 August 2007 (final submissions and evidence); 12 September 2007 (judgment)

CATCHWORDS: Whether referee's report should be adopted or rejected - Contract - Repudiation - Delay - Waiver - Claim for damages - Self-represented litigant

Uniform Civil Procedure Act 2005 Uniform Civil Procedure Rules 2005 LEGISLATION CITED: Corporations Act 2001 (Cth) Trade Practices Act 1997 (Cth) District Court Act 1973 Legal Profession Act 2004

Super Pty Ltd v SJB Formwork (Aust) Pty Ltd (1992) 29 NSWLR 549 Starcevich v Swart and Associates Pty Ltd (2007) NSWSC 86 Ask Business Solutions Pty Ltd v Dib [2005] NSWSC 1000 Bay Marine Pty Ltd v Clayton Country Properties Pty Ltd (1986) 8 NSWLR 104 Abram v Bank of New Zealand [1996] ATPR 41-507 McPherson v R (1981) 37 ALR 81 Expectation Pty Ltd v PRD Realty Pty Limited [2004] FCAFC 189 Sanpine Pty Ltd v Koompahtoo Local Aboriginal Land Council and anor [2006] NSWCA 291 Majik Markets Pty Ltd v S&M Motor Repairs Pty Ltd (1987) 10 NSWLR 49 Buckley & anor v Bennell Design & Constructions (1978) 140 CLR 1 Xuereb & ors v Viola & ors (1989) 18 NSWLR 453 Homebush Abattoir Corporation v Bermria Pty Ltd (1991) 22 NSWLR 605 Skinner & Edwards (Builders) Pty Ltd v Australian Telecommunications Corporation (1992) 27 NSWLR 567 A&P Parkes Constructions Pty Ltd v Como Hotel Holdings (2004) NSWSC 588 Ryde City Council v Tourtouras [2007] NSWCA 218 Hughes Brothers Pty Ltd v Minister for Public Works (unreported, 17 August 1994) 55011/1991 CASES CITED: Foxman Holdings Pty Limited v NMBE Pty Limited (1994) 38 NSWLR 615 Chloride Batteries Australia Ltd v Glendale Chemical Products Pty Ltd (1988) 17 NSWLR 60 Renard Constructions (ME) Pty Limited v Minister for Public Works (1992) 26 NSWLR 234 Burger King Corporation v Hungry Jack's Pty Limited [2001] NSWCA 187 Integer Computing Pty Ltd v Facom Australian Ltd (Vic SC unrep. 10 April, 1987) Collins Hill Group Ltd v Trollope Silverwood and Beck Pty Ltd [2002] VSCA 205 Vodafone Pacific Ltd v Mobile Innovations Ltd [20-23 October 2003, 20 February 2004] unreported, NSWCA) Ankar Pty Ltd & Arnick Holdings Ltd v National Westminster Finance (Australia) Ltd (1987) 162 CLR 549 Hoenig v Isaacs [1952] 2 All ER 176 Jones v Dunkel (1959) 101 CLR 298 Access Services Group Pty Ltd v McLoughlin [2006] NSWSC 532 Elspan v Eurocopter [1999] NSWSC 55 Nais v Minister for Immigration and Multicultural and Indigenous Affairs (2005) 223 ALR 171; Rajski v Scitec Corp Pty Ltd (CA) unrep. 16 June 1986 Bennett v Jones [1977] 2 NSWLR 355 Antonio Rosiaio Oliveira v Peter Favetti & Sons Pty Ltd [2001] NSWCC 179 NRMA Ltd v Morgan (No 3) [1999] NSWSC 768 Hexiva Pty Ltd v Lederer [2006] NSWSC 1129

PARTIES: Johnson Controls Australia Pty Ltd Alliance Group Building Services Pty Ltd

COUNSEL: Mr Van Aalst (for Plaintiff) Mr Oehme (Defendant - self-represented)

1 This case concerns a dispute arising out of the installation of an electronic/electrical building control system ("BMCS") by the Plaintiff, Johnson Controls Australia Pty Ltd ("Johnson") for the Defendant (and cross-claimant) Alliance Group Building Services Pty Ltd. ("Alliance").

2 The dispute was referred by the Court at the request of the parties to a referee. The referee conducted an inquiry which proceeded over a period of four years and submitted a report to the Court. Both parties are dissatisfied with the referee's report.

3 The issue is whether the report should be adopted, in whole or in part, or rejected.

4 The BCMS system was to be installed in a large, multi-storey retail, commercial and residential tower development known as Market Towers in the Haymarket in Sydney. The total development was over a large city block.

5 The site was developed by a large developer, Grocon Pty Ltd ("Grocon") on behalf of a development partnership. On 28 March 1995, Grocon selected Alliance as the mechanical service contractor to supply, install and commission the system and to provide various mechanical services for the total development. It was the third project Alliance had undertaken for Grocon.

6 In turn, Alliance selected Johnson in July, 1995 to supply and install the BMCS within the development. The price of the system was to be $581,764.

7 The Market City building project comprised two parts:

a) The Podium section of about 5 commercial and retail levels; and b) The Tower section containing about 40 residential levels of apartments.

8 There were to be two BMCS systems on the project - one for the tower section and one for the podium section. There were also fan coil related units in the tower. The system was to service both residential and commercial units within the tower section. The BMCS system was to control the operation and temperature of conditioned spaces within the project as well as the operation and sequencing of ventilation systems and the control and monitoring of fire, lift, hydraulic, and electrical systems.

9 Johnson owned the intellectual property to the system. The commercial value of the installation to Johnson also included the anticipated income stream associated with the maintenance of the system.

10 The system was never installed. Work commenced by Johnson on the project in August, 1995. Johnson and its employees ultimately left the site in February, 1997.

11 Grocon, in turn, was under pressure from the directors/partners of the Market City development to ensure that a building control system was working. Alliance ultimately installed another system - a Honeywell system - for Grocon in the Haymarket project by about February, 1998. That was installed by Alliance with Honeywell between October, 1997 and April, 1998. The final contract price paid by Alliance to Honeywell for that system was $169,104. Honeywell substantially replaced the system rather than simply rectifying and/or completing Johnson's work.

12 These events occurred against the background of the building boom in Sydney in the lead up to the Olympic Games. At that time, the reputation of, and need for, building entities to carry out specified works correctly in accordance with specifications, and on time, would have been known by all parties to have been of fundamental importance in addition to the normal building and commercial imperatives.

13 There were a considerable number of amendments to the pleadings. The pleadings ultimately filed and relied on by the parties were as follows:

a) The amended statement of claim dated 27 August, 2001, amended 27 February, 2006. The original statement of claim was filed on 7 August, 1998; b) The amended defence 5 September, 2001 (subsequently amended); c) The amended cross claim dated 5 September, 2001; d) The defence to the amended cross claim dated 31 January, 2004.

14 Johnson's claim against Alliance arose from money said to be due and owing for the manufacture and installation of the BMCS. That claim was disputed by Alliance.

15 In brief, Johnson claimed that by a contract made on 31 July, 1995, it would install the system for $582,764. That sum was to be paid by monthly progress payments pursuant to a billing compilation procedure, the amounts claimed in each invoice being payable on the date specified. Central to Johnson's claim (amended statement of claim para. 6) was that it was an express term of the contract that Alliance would pay Johnson the amount payable under each of the progress claims on the dates set out in the payment schedules. The statement of claim alleged that Alliance failed to pay the invoices thereby repudiating the contract entitling Johnson to stop work and leave the site.

16 Alliance's defence allege a partly written partly oral contract which was an entire agreement. It alleged the work to be carried out was not divisible.

17 Alliance submitted that the value of the progress claims was to be based on the amount of work to be carried out. The value of the progress claims were to be the subject of agreement between the parties and that invoices were to be raised after the value of the work had been agreed. In addition, Alliance alleged that the parties were aware that there would be additions and variations to the scope of work resulting in variations to the contract sum.

18 Alliance further submitted that it was an implied term that the claims submitted for payment needed to reflect the status of the work actually performed, alleging that that term was necessary to give business efficacy to the agreement.

19 The dispute between the parties was referred to a referee, Mr PR Callaghan SC ("the referee"). The proceedings before the referee took over four years prior to the delivery of the referee's report. 20 The referee found Johnson liable and recommended that Alliance be awarded damages of $549,894. The referee's report dated 10 May, 2005 is exhibit A6 in these proceedings.

21 Both parties are dissatisfied with the referee's report.

22 Johnson seeks orders that the court not adopt the report and that the matter be remitted for a re-hearing by the court rather than being remitted to the referee or indeed, any referee - see transcript 30 January, 2007. The orders originally sought by the Plaintiff are set out in a Notice of Motion dated 25 May, 2005. Paragraph 3 of that Notice sought that the Court decide on the evidence taken before the referee without additional evidence (emphasis added).

23 Johnson conceded that, on the face of the report, I could not give a verdict for Johnson for a quantified sum on the evidence before me. Johnson submits that, in the event that I did not accept the report, then I should make directions as to how the matter should proceed, either on the basis of the material before the referee, or on the basis of additional material introduced by the parties by consent. The history and conduct of the proceedings between the parties does not engender any confidence that if that approach was adopted that the matter will be the subject of any agreement on any matters of substance.

24 Alliance seeks that the report be accepted as to its recommendations on liability but that, in lieu of the verdict recommended by the referee of $549,894, Alliance be awarded damages under a series of points of claim - see para. 153.

25 Both parties seek costs orders against the other. These applications were the subject of separate submissions.

26 I have ordered costs against Alliance in relation to its failure to comply with procedural orders I made at the conclusion of the first period allocated for the hearing of the proceedings before me. There have been further failures by Alliance to comply with procedural and timetable orders made and other costs orders made.

27 At the time of the arrangement, the parties were each substantial corporate entities with extensive experience in the building industry involved in a very substantial building development.

28 The parent company of the Plaintiff, Johnson Controls Inc. of Milwaukee, U.S.A., is an international corporate group. It owned the patents and copyright to the intellectual property in the building control system.

29 Alliance was a company which, at that time, had carried out $50 million worth of work in the building services industry - exhibit A 14. Alliance - Administration

30 Alliance went into voluntary administration on the application of Mr Oehme on 17 April, 2002. That was about six months after the proceedings before the referee actually commenced. An administrator was appointed to Alliance during the reference proceedings on or about 17 April, 2002. The administrators were partners of a large public accounting company, Ernst and Young.

31 The administrators played no part in the proceedings before the referee or this Court. However, during the referee proceedings, leave was granted by the Supreme Court to the administrators to proceed with the litigation for the purposes of section 440D of the Corporations Act. The nature and terms of that administration, and the position of the administrators in relation to this litigation, are referred to elsewhere - para. 57. That administration continues. The administrators' position is that the only asset of the company is any right of recovery in these legal proceedings.

32 Mr Oehme conceded (transcript 9 November, 2006) that the decision to place the company under a deed of voluntary administration was a tactical commercial decision. Mr Oehme has constantly stressed that that commercial decision was taken with the interests of the creditors to the forefront. However, it is clear that, for whatever reason, the administrators and, one assumes the creditors, other than Mr Oehme have not sought any involvement in the proceedings, particularly to take any action to expedite or control the matter.

33 Somewhat surprisingly for two commercial entities of the size and experience of these two corporate entities - involved as they were in a major installation on a large building development - there was no formal contract relating to the installation of the system. Indeed, on 20 March, 1996, at a stage when there had already been considerable disagreements between the parties, Mr Oehme on behalf of Alliance, wrote to Johnson stating that the work would proceed on the basis of Johnson 'agreeing to be non-contractual' (exhibit 5A). Johnson by letter of the same date agreed to this on the basis that it was to be reciprocal (exhibit 5B). Each raised the possibility of a formalised sub-contract arrangement although this did not eventuate.

34 Unsurprisingly, given the project, the system, and the nature of the communications between the parties, and the absence of precise contractual documentation, there were problems.

35 The parties now ask the court to determine whether there was a contract, if so, what were its terms and, depending on those terms, what liability should attach to the consequences of their respective actions.

36 Following the deed of company arrangement, Johnson obtained leave to proceed against Alliance. Alliance needed no such leave to continue its cross-claim - which it did, and has, continued.

37 Mr Van Aalst, counsel for Johnson, said that the commercial considerations behind the decision to proceed against a company in voluntary administration- particularly when it was clear to Johnson during the reference proceedings that Alliance was 'hopelessly insolvent' (see exhibit A18) - were that it was 'the captive of the cross-claim'.

38 There have been various suggestions by the parties during these proceedings that both the way the proceedings - including, and particularly, the referee proceedings - have been conducted and the tactics adopted by the opposing party have contributed to the delays and costs which have been incurred. It has also been submitted by Johnson that the delays before the referee have resulted in an innately defective report warranting its rejection by the Court.

39 Given the matters raised concerning the representation of the parties which are relevant to the question of delay, as well as the way the case has been dealt with, it is appropriate that some of the background chronology and related relevant matters be set out.

40 Johnson is, and has been, represented by counsel, Mr Van Aalst, and his instructing solicitor, Mr Giugni, throughout the proceedings including the proceedings before the referee.

41 Late in the proceedings and after both parties had filed extensive written submissions and there had been more than 20 days of oral argument, Johnson raised the issue of the representation of Alliance by Mr Oehme and whether he had been, or could have been, properly appointed to represent Alliance. Johnson sought that the Court ignore the submissions made by Mr Oehme on behalf of Alliance since the commencement of the proceedings for the adoption or rejection of the report.

42 At various stages of the proceedings before the referee, Alliance was represented by at least three firms of solicitors, Watkins Tapsell, Colin Biggers and Paisley and Dunhill Madden. Counsel also appeared for Alliance at some stages. At least one of those firms or counsel was apparently responsible for the drafting of various legal documents which have been used in the proceedings.

43 From the time when Alliance ceased having legal representation, leave (which was not opposed) was granted both before the referee, and in these proceedings, to Mr Stephen Oehme ("Mr Oehme") to represent Alliance. Mr Oehme was the managing director of Alliance. Alliance was put into voluntary administration in April, 2002 on the application of Mr Oehme. At the outset of the proceedings (transcript 27/02/06 p17), Mr Oehme described the situation as follows: "…the company went into voluntary administration on my own application. Following that, a deed of company administration was proposed, the primary purpose being the conduct of this litigation and that was explored and agreed to by all the creditors and it is that deed of company arrangement which is still on foot and as a result the company was effectively handed back to me…"

44 Apparently a letter from Alliance was filed in the referee proceedings appointing Mr Oehme as the representative of Alliance. No issue was taken by Johnson as to the status or authority of Mr Oehme to so act at the outset of the proceedings before me. Indeed, in response to my specific query of counsel for Johnson in this respect, leave was not opposed.

45 The history of the representation of Alliance was set out in the reasons for the ruling I delivered on 12 April, 2007. In summary, the decision by Mr Oehme and Alliance to enter a deed of voluntary administration was undertaken during the course of the litigation and the proceedings before the referee.

46 Mr Oehme, who is not a solicitor, has appeared essentially as a self-represented litigant on behalf of Alliance throughout the proceedings before me. Mr Oehme has also indicated at various stages in the proceedings before me that he is seeking, and has access to, legal advice from various sources from time to time.

47 Mr Oehme has repeatedly stressed the history of the actions taken by Johnson against Alliance and his determination to pursue the matter 'given the wrongs that were done to Alliance by the Plaintiff' on behalf of the creditors of Alliance who have been in that position for some 10 years. On the last occasion the matter was before the Court (1 June, 2007) he referred to the likelihood of the matter taking up further years in court, 'till sometime perhaps next decade' (transcript pp 13,15), especially if the approach to the future conduct of the proceedings urged by Johnson was adopted. He reiterated his demand both orally and in written submissions for further time to refer to and put in further evidence to refute Johnson's submissions saying that unless that was done and a decision was made on the material being considered then '…we have to fight for more years and years and years and years' - transcript 1 June, 2007 p 17).

48 The conduct of the litigation against this background infringed the clear overriding purpose of section 56 (1) of the Uniform Civil Procedure Act to achieve a 'just quick and cheap resolution of the issues in the proceedings'. Notwithstanding these provisions being brought to Mr Oehme's attention, his, and Alliance's, conduct of the proceedings was in breach of its duty to assist the court in achieving that objective.

49 Documents, tendered on 2 April, 2007, made it clear that Alliance was originally incorporated as a company in 1990 having two shareholder companies (Glowmart Pty Ltd and Lantegrove Pty Ltd). Those companies were deregistered in 1993 and 2002 respectively.

50 At the time of the second deregistration, it appears to have been the position that it was not possible for the articles of Alliance to be amended for it to become a single director company. However, a resolution tendered by Mr Oehme in 1997 showed that from then on he appeared to be the sole director and secretary of Alliance.

51 It was submitted by Johnson that, following the deregistration of Glowmart, Alliance could not become a one-director company; further, that it was not possible for Alliance to authorise by a resolution of directors for Mr Oehme to appear on its behalf.

52 This point was not taken by Johnson in these proceedings until late 2006 in the context of the costs orders made in August, 2006. At that stage, the substantial part of the hearing had already been completed and both parties had filed extensive written submissions. As late as in submissions made on 13 September, 2006, Johnson was submitting that 'The authority of Mr Oehme to represent Alliance was, and is not in issue' (para. 34) acknowledging that 'Alliance … carried on the proceedings before the referee and in this Court by its sole director, Mr Oehme' (para. 35).

53 Johnson submitted that that was necessary under the provisions of Rule 7.2 of the Uniform Civil Procedure Rules. That rule provides that for a person to carry on proceedings in the District Court, an affidavit must be filed as to his authority to so act as well as a copy of the instrument evidencing that authority. Sub-rule 7.2(2) sets out, inter alia, the statements which must be filed which must contain a statement to the effect that the officer has been authorised to carry on the proceedings, when such authorisation is to be made, and that the officer so authorised is aware that he may be liable to pay some or all of the costs of the proceedings.

54 Johnson's submission is that, when it consented to the granting of leave for Mr Oehme to appear on behalf of Alliance at the outset of the adoption proceedings, there was no reason for it to query whether there had been complied with the provisions of UCP Rule 7.2. I have difficulty in accepting that proposition when those matters must have been known to Johnson and those representing it when the voluntary administration was announced during the referee's proceedings. Notification to administrators

55 On 12 April, 2007, orders were made to formally notify the administrators of Alliance of the proceedings within 7 days or by 19 April, 2007 and for there to be compliance with the provisions of UCP Rule 7.2 in relation to any person seeking to appear on behalf of Alliance, including the understanding of any such person as to his or her liability as to costs.

56 Pending compliance with that rule, the further hearing of the cross-claim of Alliance was stayed and the leave granted to Mr Stephen Oehme to appear on behalf of Alliance was revoked. Further procedural orders were made in the event that there was to be any further pursuit of the matter.

57 When the matter was mentioned on 1 June, 2007, Mr Pesman of counsel appeared for the administrators. Mr Pesman said that the administrators did not want to be involved in, and were precluded from being involved in, any involvement in the litigation on the basis that the administrators were administrators of the Deed and not administrators of the company.

58 The Deed, a copy of which was annexed to the affidavit of Kieran Hutchison of the administrators, Ernst and Young, provided in the background preamble clause that "A. The Administrators were appointed the Administrators of the company (Alliance) by its directors…"

59 At some other parts of the Deed (clauses 1(b) and 13.5) the administrators are referred to as administrators and administrators of the deed.

60 In support of his position that the administrators did not wish to be involved in the litigation, Mr Pesman referred to clause 13.7.1 of the Deed of arrangement which provided: "13.7.1 It is an express term of this Deed that the Administrators will not be involved in the conduct of this litigation apart from overseeing the Litigation in consultation with the Directors and Administrators appointed solicitors, being NRG Legal, in order to assess the status of the Litigation from time to time."

61 A further submission was received by the Court on 7 June, 2007 from the solicitors for the Administrators in relation to proposed procedural orders indicating that 'the Administrator does not have the authority to either consent to or to oppose the orders proposed…'.

62 On 30 January, 2007, Johnson filed a Notice of Motion seeking orders that Mr Oehme file an affidavit in compliance with Part 7(2) of the Uniform Civil Procedure Rules, setting out his authority to act and including a statement that he was aware that he may be liable to pay some or all of the costs of Johnson. That Notice was filed in the context of a foreshadowed application that Johnson's costs be met personally by Mr Oehme. In further submissions, Johnson sought that, until such an affidavit was filed, Alliance should not be permitted to be represented by Mr Oehme.

63 That Notice precipitated an application for an adjournment by Alliance which was granted on the basis that Alliance meet Johnson's costs thrown away by the adjournment.

64 Orders were made that Alliance file submissions as to why it should not file an affidavit of authority by 1 March, 2007. There was no compliance with that order by the due date. Written submissions were then filed by Johnson dated 6 March, 2007 and 26 March, 2007 which were also served on Mr Oehme. Ultimately Mr Oehme tendered written submissions on the morning of the hearing of 2 April, 2007. Mr Oehme also filed an affidavit sworn 3 May, 2007 stating that he was the managing director of the Defendant, that he was authorised to appear on behalf of the Defendant and that he was aware that he may be liable to pay some or all of the costs of the proceedings.

65 Mr Van Aalst submitted on behalf of Johnson that the affidavit and resolution was void and of no effect, that the representation of Alliance by Oehme since the outset of the proceedings before me was a nullity and that the participation and submissions of Mr Oehme should be ignored.

66 Johnson relies on the decision of Hamilton J in Starcevich v Swart and Associates Pty Ltd (2007) NSWSC 86 where the nature of the rules was discussed and, in particular, the fact that there needs to be strict compliance with those rules, failing which a director has no right to appear. There do not appear to be any special circumstances of the kind outlined in Ask Business Solutions Pty Ltd v Dib [2005] NSWSC 1000 warranting dispensation with the rules in this instance.

67 The authorities indicate that there should be strict compliance with these or the similar provisions in earlier legislation - see Bay Marine Pty Ltd v Clayton Country Properties Pty Ltd (1986) 8 NSWLR 104 in the context of whether a company could be represented by a person not a solicitor. The Court there reiterated the policy consideration that a person who purports to act on behalf of a corporation must be in a position to subject the corporation to enforceable obligations in the conduct of the proceedings as well as costs.

68 The requirement for representation of a company by a solicitor is not merely technical but is justified on the basis that the court must be satisfied that the person who acts on behalf of a corporation is in a position to subject the corporation to enforceable obligations in the conduct of proceedings.

69 When the original proceedings were instituted, Alliance was solvent and represented. It became known to Johnson during the referee's proceedings that Alliance was 'hopelessly insolvent' (transcript 5 August, 2004 p. 3544 exhibit A 18).

70 The issue of Alliance's representation was not raised at the outset of the case when at least some of the matters relating to the administration of Alliance outlined above were known, or should have been known, to Johnson and its advisers. No objection was taken to Mr Oehme's appearance on behalf of Alliance initially in the proceedings before me concerning the adoption of the referee's report. Those issues would presumably also have been clear in the context of the contested security for costs proceedings which were conducted at the same time as the proceedings before the referee - see transcript 10 November, 2006 p279.

71 Such objection was taken at the latter stages of the proceedings when the parties had filed extensive written submissions and responses. There had been about twenty hearing days and court mentions of the matter with extensive argument by both sides. Essentially the only matter remaining not the subject of argument had been the issue of costs - although Mr Oehme did not regard the proceedings as complete. He indicated on a number of occasions that he wished to agitate his application that I consider details of the evidence before the referee and make further submissions. He has maintained that position in the final submissions received 2 July, 2007.

Factors relevant to revisitation of leave to appear

72 In circumstances where leave is not opposed for a commercial entity to be represented by a lay person at the commencement of proceedings - at a stage when the court is not familiar with the nature and scope of the issues let alone the prior conduct of the litigation - it is difficult for that question of leave to be revisited, at least at the initiative of the Court. In adversarial proceedings where a commercial entity is represented by counsel and solicitors and no issue is raised as to the capacity of those appearing for another party, the Court should not have to second-guess the authority, and capacity of the opposing party to meet the orders of the court.

73 I have had considerable concerns about this aspect of the matter, as well as the stage when this issue has been raised, given the principles expressed in Bay Marine (op cit) and the application of that law by the superior courts in this state - for example, Barrett J in Access Services Group Pty Ltd v McLoughlin [2006] NSWCSC 532. What was also of concern was the submission by Mr Oehme (submissions 5 April, 2007 para. 73) that it was unclear whether Alliance could comply with rule 7.2 and what that would mean for the future conduct of the proceedings as well as associated delays and costs.

74 However, in my view, what was of particular importance was the history of the matter, the existing costs to the parties, the court time already used, the time already taken up before the referee, the stage that the proceedings had reached when the issue was raised and the fact that proceedings had continued in the way they had without objection having been taken by Johnson. Viewed in the light of those matters, my ruling was that any re-visitation of the grant of leave to Mr Oehme - and the revocation of that leave in the circumstances - would be unjust. It was also clear that there would be yet further delays if that matter was re-visited.

75 Accordingly, I rejected the application that Mr Oehme be refused leave to appear and that I ignore the submissions or arguments mounted on behalf of Alliance by Mr Oehme from the time of the commencement of the proceedings before me.

History of reference proceedings 76 These proceedings basically concern the adoption or otherwise of the referee's report in whole or in part. Given the relevant law (to which I will make later reference - paras. 156 ff. ) as to the attitude to be taken by a Court when considering whether to adopt a referee's report - in particular, that the proceedings before the referee are not to be regarded as a 'trial run' - it is appropriate that relevant matters relating to the reference be set out.

77 The referee, Mr P.R. Callaghan SC ('the referee') is, and was, a barrister and senior counsel, who was also experienced in building and construction matters. He was, at least during part of the reference, President of the NSW Institute of Arbitrators and Mediators.

78 The parties agree that Mr Callaghan was selected as referee for his legal expertise as a senior counsel, particularly in building law, and as one who was skilled and experienced, particularly as both counsel and as a referee, in the conduct of building and construction matters.

79 Johnson submits that, in the circumstances where the referee was appointed for his professional qualifications and experience, in particular, in this case as a Senior Counsel experienced in building and construction matters, that there should not be a pre-disposition towards acceptance of the report in circumstances where an error of law is shown on the face of the report. It is submitted that that is particularly relevant when considering the referee's recommendations on matters such as the implication of terms into what was found to be the contract and what are said to be errors of law relating to the application of legal principles such as estoppel and repudiation.

80 Johnson submits that the Court is in at least the same position as the (legally qualified) referee to make decisions as to the legal principles to be applied. It is submitted that this is a different situation from a referee with a specialist technical qualification and skill dealing with highly technical material. He relies on the decision of Cole J in Chloride Batteries Australia Limited v Glendale Chemical Products Pty Ltd (1988) 17 NSWLR 60.

81 Alliance submits that the predisposition for acceptance of a referee's report should be emphasised in this case, particularly in matters where the referee's findings on legal matters are concerned given the legal qualifications, position and experience of the referee.

Relevance and reliance on delay in referee's proceedings

82 Delay in the proceedings before the referee has been raised as the main issue by the Johnson in its Notice of Motion and in its submissions. It is also an issue which is to be canvassed by Alliance in submissions. There are also complaints by the parties as to the conduct of the reference.

83 It is therefore appropriate to set out a chronology of what occurred before the referee, as well as time taken with the court and other resources which have been utilised in the proceedings to date.

84 A detailed chronology of the proceedings before the referee is set out in paragraphs 6 to 25 of his report. A summary is contained in exhibit A17. There were a number of reasons for the delay, some of which are disputed and which are the subject of submissions by the parties. A timetable of the submissions made, and when various submissions were dealt with by the referee, is set out in exhibit A - 11.

85 Johnson filed its original statement of claim on 7 August, 1998. The matter was referred to the referee on 12 September, 2000.

86 A summary of relevant parts of the Court file was admitted as an exhibit (A16). That indicates that the matter came back before the Court on 28 occasions during the period of the reference for either reporting back to the court, or for mentions, or call-overs.

87 In August, 2002, Johnson filed an application for security for costs which was granted on 15 October, 2002. Johnson was also granted leave to file a strike out application if that security was not paid by 20 February, 2003. It was noted that the security was paid on 28 February, 2003.

88 The final hearing before the referee was conducted on 10 December, 2004. Further material was sought by the referee in early 2005. There was a dispute between the parties as to the receipt of that material which resulted in further delays.

89 There were numerous sitting days interspersed throughout those directions dates. The referee also had to issue rulings in respect of matters raised by the parties.

90 The referee set the matter down for hearing on a number of occasions and also fixed about 16 directions hearings (20 October, 2000, 25 January, 2001, 5 February, 2001, 9 May, 2001 - following failure to comply with previous directions - 11 September, 2001, 31 January, 2002 (when another solicitor for Alliance filed a Notice of Ceasing to Act), 6 May, 2002.

91 Over the next year there were other proceedings including applications for security for costs, a stay of proceedings. There were further directions hearings on 4 July, 2003, 1 August, 2003, 6 May, 2004, 13 July, 5 August, 30 August, 24 September, 7 October, 2004, 9 November, 2004 and 6 April, 2005.

92 The matter came back before the Court on 28 occasions during the period of the reference for either case management, reporting back to the court, or for mentions or call-overs. On a number of occasions, the referee indicated his concern at the length of addresses of both parties and their failure to comply with matters (report para. 22).

93 A final directions hearing was held by the referee on 6 April, 2005. The referee's report was delivered on 10 May, 2005.

94 There were two (unsuccessful) mediations conducted.

95 The matter ultimately came before Judge Balla of this Court - who also conducted the judicial mediation between the parties on 3 September, 2004. Her Honour expressed her concern about the delays which had occurred and noted on the court file that 'This is the last occasion on which I will accept an extension of the timetable by the referee'.

96 The referee heard evidence and submissions over 87 days. There were 4000 pages of evidence. There were an additional 6000 - 7000 pages of exhibits. There were over 9,000 pages of documents in the agreed bundle of documents. Eleven witnesses were called, the first being called on 14 May, 2001 and the last witness called on 15 March, 2002 (exhibit A - 11).

97 There was a conference of experts in April, 2002. That went for three days. Those experts also discussed the amended Scott Schedule documents which had been varied during the course of the reference (see Scott Schedules - exhibit A 36 - see para 279).

98 This chronology forms the background to the Plaintiff's submissions on delay (see paras 178 ff).

99 In the early stages of the reference, some delays resulted from the fact that at least two of the firms of solicitors, which represented Alliance at various times during the proceedings, ceased to act for the Defendant. Mr Oehme on some occasions also sought additional time which was granted to arrange other legal representation and advice for Alliance.

100 Those delays started from 28 November, 2000 when the first of the solicitors for Alliance filed a Notice of Ceasing to Act. Following that, the first week of hearings set down for 5 February, 2001 was vacated. Thereafter there were further delays following failures to comply with the referee's directions - which the referee found was principally on the part of Alliance - referee's report para. 10.

101 There were further delays arising from actions and defaults by Alliance as follows: a) with directions made on 11 September, 2001 resulting in the matter coming back on 8 November, 2001; b) from 22 January, 2002 (when another solicitor had ceased to act for Alliance), c) 18 February, 2002 (default in direction for security monies for the referee necessitating delays in the hearing); d) 6 May, 2002 - delays resulting from the appointment of administrators for Alliance and the need to confirm the positions previously reached and consequential delays over the next year; e) 4 July (Alliance seeking to put on further evidence - which was not done); f) 1 August, 2003 further directions following advice about Alliance's situation under the Deed of Company Arrangement; g) further defaults by Alliance in complying with directions (referee's report para. 20); and h) further directions on 17 and 29 October, 2003.

102 It is clear from the referee's report that when the matter came for hearing he canvassed matters in considerable detail (referee's report para. 21) leading to concerns about the progress of the matter. The referee said that on the next occasion 'he looked forward to the orderly presentation of submissions in the matter'. On 2 February, 2004, the referee also expressed concern about the time taken up with addresses.

103 I interpolate to add that the same issues arose during the conduct of the proceedings before me. Those concerns were brought repeatedly to Mr Oehme's attention without any noticeable result other than further delays in the presentation of Alliance's case.

104 There was a further three or four month delay until the next hearing allocated in May, 2004 during which time there was a failure to agree on matters which the parties hoped to put in a joint document. Again that same experience occurred in the proceedings before me.

105 There were further delays in the proceedings (referee's report para. 24) and a further 5 directions hearings consequent upon Mr Oehme's failure to provide written submissions in accordance with directions made. That failure was mirrored in the proceedings before me on a number of occasions.

106 At the conclusion of the proceedings, Mr Oehme addressed the referee between 25 and 29 October, 2004, on 1 and 3 November on 8, 9 and 10 December. By comparison, counsel for Johnson addressed on the morning of 10 December, 2004. That experience in the time taken by Mr Oehme to address needs to be considered in the light of Mr Oehme's repeated requests for additional time to address the Court in these proceedings.

107 There were further delays by Alliance and Mr Oehme in responding to requests for information by the referee between 14 December, 2004 and 31 March, 2005 with an uninvited submission on a matter dealt with previously. The information sought by the referee was not provided (referee's report - para. 25). That same attitude was indicated in Alliance's submissions dated 15 December, 2006 which were supposed to be in relation to costs (see transcript 29 January, 2007) as well as the submissions provided (late) by Mr Oehme to me on 2 July, 2007. Again those delays and the content of the submissions led to understandable and inevitable arguments about the admissibility of such material and further time needing to be extended to Johnson to respond.

108 That process occurred in both the referee's proceedings and these proceedings. All those delays whether intended or not, to delay the proceedings and increase the costs for Johnson. That is a matter which will be taken into account in my decision as to costs and the interest to be paid on any award.

109 Significant delays occurred during the proceedings before the referee were either caused by, or associated with, the arrangement whereby Alliance was made the subject of a deed of arrangement on the application of Mr Oehme.

110 Once the referee's report was received by the District Court on 10 May, 2005, Johnson proceeded with the Notice of Motion asking this Court not to accept the referee's report.

111 That Notice of Motion was met by notification of a similar cross-action, ultimately refined into Alliance's Notice of Motion in these proceedings, urging the acceptance of the referee's report on liability but the substitution of orders for (increased) damages under the cross-claim.

112 As Mr Oehme has continually pressed his demand for more time for Alliance and him to make further submissions and canvass other evidence, it is appropriate that I set out some relevant matters in relation to the hearing of the proceedings in this court.

113 The matter was originally listed for hearing on 27 February, 2006 on the time estimates given by the parties for the hearing. Those estimates were manifestly inadequate. The hearing proceeded during those sittings over 16 days with various interruptions - for example, to enable the parties to confer on a relevant statement - that of Mr Densham - and in the light of matters I had raised on the issue of waiver - see para. 197. There were a further five days of hearing between 6 and 10 November, 2006. Over that total period, each party had approximately equal time to address the court.

114 Mr Oehme indicated on 17 March, 2006 that he had a number of matters on which he wished to make submissions in accordance with a schedule he had prepared (exhibit A19). By arrangement with the listing authorities of the court, I extended the time for the hearing into the week commencing 20 March, 2006. Mr Oehme said on a number of occasions that he was able to attend on 20 and 22 March but not on other days for what he referred to as pressing commitments. On other occasions he has referred (by way of excuse for non-compliance with court orders) to the fact that he has been involved in other commercial matters overseas in Dubai and elsewhere. I did not accept those matters as valid excuses for the delays which occurred.

115 By 22 March, the parties had still not completed their submissions and arguments, despite having filed extensive written submissions. The parties sought additional time to complete their submissions and reply.

116 A further week of court time was allocated at the only time convenient to the parties and the Court between 6 and 10 November, 2006. Strict timetables were imposed on the time to be taken on submissions according to the issues outlined. As the parties wanted further time for submissions on costs at the conclusion of that week, the matter was stood over to 29 January, 2007 for the final days of argument.

117 On 30 January, 2007, Johnson filed a Notice of Motion referred to above necessitating the further adjournment.

118 The parties have filed a total of over 600 pages of written submissions with additional annexures, the great majority of which have been by Alliance. Final written submissions were received on 22 August, 2007.

119 There was a history of disputation between the parties prior to the matter coming before me in relation to whether there was, or was not, an election to proceed for damages over and above the jurisdictional limit of this court. There was also a dispute as to whether there was a requirement for that election to be made by Alliance, or, indeed, whether such an election should have to be made.

120 The issue of the extent of the cross-claim and the precise heads of damages sought by the Defendant seems to have been discussed during, and subsequent to, the reference proceedings without any final position being reached - see exhibit A 24: transcript of proceedings before the referee 14 March, 2002 p. 2476. Ultimately, the extent of the agreement was that, if there was a recommendation by the referee of an award of more than $750,000, the matter would be moved to the Supreme Court. The referee's recommendation was less than that amount. There was no subsequent finalisation of the jurisdictional issue in the proceedings in this court.

121 On 29 October, 2004, Mr Oehme informed the referee that the matter would be transferred to the Supreme Court (exhibit A 26). That did not occur. Johnson stated that no consent would be given to any increase in the jurisdiction of the District Court. Orders were made by Judicial Registrar McDonald on 21 November, 2005 (exhibit A16) that if Alliance wished to seek the transfer of the proceedings to the Supreme Court, it should file a summons to that effect by 5 December, 2005. That did not occur. Johnson's written submissions of 13 September, 2006 set out its account of what occurred in the District Court.

122 It was against the background of these orders that the matter was set down for the hearing that ultimately took place before me commencing 27 February, 2006. During the first week of the proceedings, Johnson sought that Alliance file a Notice of Motion by 6 March 2006 setting out precisely the orders sought. That Notice of Motion was ultimately filed on 9 March, 2006. That matter was central to Alliance's cross-claim and the evidence and relevant parts of the referee's reports on which reliance was to be made.

123 The position as to the amount of the cross-claim and the evidence to be relied on by Alliance remained unclear. What was clear was that the parties could not and would not ever agree on what had occurred by way of background to those matters before the referee. It seemed an inappropriate use of court resources to permit the hearing to go on any further until this matter was clarified. It did not seem that the parties had come to any final resolution nor agreement in relation to this issue at any time at least prior to the matter coming before me - and certainly not to any degree of finality such that the court could determine what evidence was being relied on in relation to what amount and what part of the cross-claim.

124 This issue was also brought to Mr Oehme's attention on 13, 14, 15, 17 and 20 March 2006. At the conclusion of the proceedings on 15 March, I specified that until this matter was rectified, and the extent of the claim clarified, I would not permit submissions in relation to this aspect of the cross-claim.

125 A timetable for submissions was established on 17 March, 2006 (exhibit A19) which was not complied with. I granted leave on 20 March 2006 for Johnson to file and serve a Notice of Motion seeking that the Notice of Motion of Alliance be struck out.

126 Orders were made on 24 March, 2006 for submissions to be filed on the jurisdictional issue and the parties given the reasons for those orders which stressed the importance of the issue for the overall conduct of the proceedings. Alliance did not comply with either the orders or the timetable and costs orders were made.

127 There was also a substantial dispute over the precise, or indeed, the approximate, amount claimed. My calculations, expressed to the parties, was that the amount claimed under the cross-claim was $2,717,014. Johnson alleged that the amount claimed was in excess of $4 million. Ultimately, Mr Oehme said that the amount was of the order of the amount I had calculated.

128 Given the delays which had already occurred, the orders which had been made by the Court and other resources which had already been utilised and in order to bring some order to the proceedings and clarify both the issues and the evidence to be relied on, I directed pursuant to the Civil Procedure Act that Alliance set out precisely what orders and amounts it was seeking to recover which would bring that claim within the jurisdictional limit of the court.

129 Those orders were made over objection by Alliance and Mr Oehme continued to ventilate his opposition to such orders over ensuing months. In proceedings of this nature, particularly involving commercial parties, the Court should not have to second-guess the relevance of evidence nor the issues to which that evidence is directed. In adversarial proceedings it is the responsibility of the parties to get the matter ready for hearing whether they chose to be self-represented or not.

130 There was no compliance with those orders by Alliance by the due date of 9 June, 2006. There were difficulties in contacting Alliance and Mr Oehme both by Johnson and by the Court. The parties had been provided with a detailed judgment. The matter was set down for 25 August, 2006. Mr Oehme complained that he was not aware of what was expected of him on that date and that Alliance was taken by surprise (submissions 15 September, 2006 para 7). If that was the case, Mr Oehme had five months prior to that date to apprise himself of the situation.

131 There were further orders, including costs orders made on 25 August, 2006. The procedural history and the effect of the non-compliance was set out in my reasons for those orders. Orders were made on that date as follows: (i) I note that Alliance has abandoned any claim for amounts of damages over and above $750,000.

(ii) I order that Alliance provide within 21 days: (a) details of the heads of claim under its proposed cross-claim on which it relies including the amount of damages it seeks under all or any of those heads; (b) the parts of the referee's report and the evidence in relation to those matters on which it relies in support of its claim now limited to $750,000. (iii) Alliance shall pay the ordinary costs of Johnson from 30 August, 2006 up to and including 25 August, 2006; (iv) Within 21 days, Johnson shall set out by pre-paid letter to Mr Oehme and the administrators of Alliance, what claims it makes in relation to costs of and incidental to these proceedings, from whom it seeks such costs and the basis for such costs; (v) The matter is stood over for mention to 9:30 am on 29 September, 2006.

132 Mr Oehme's submissions of 15 September, 27 September, and 12 October, 2006 continued to agitate the issue of the distinction between against an abandonment of a head of claim and a monetary figure. The orders were directed to evidence being put on by Alliance in relation to heads of damage.

133 There were further mentions of the matter on 13 and 29 September, 2006. The parties were directed to be ready to proceed with the final part of the hearing on 6 November, 2006.

134 The Defendant filed a one-page outline of the heads of damages claimed on 1 November 2006. That became exhibit A34. Alliance formally abandoned any claims under the cross-claim to amounts over $750,000. 135 Despite these orders having been made, Mr Oehme continued to agitate these matters - the latest occasion being in his written submissions dated 2 July, 2007. In those submissions he again canvassed earlier arguments in relation to whether Alliance should have been required to make an election as to the heads of damage or a monetary amount for the purposes of the District Court jurisdictional limits and again required more time, inter alia, for submissions as to its cross-claim and as to costs. These matters are dealt with in relation to Alliance's cross-claim at paras. 407 ff; 490.

136 Further written submissions were filed by the parties in relation to the issue of costs and in amplification of the costs orders sought by the parties in their original or amended pleadings and further orders made on 25 August, 2006. Issues raised at that time led to the position being taken by Johnson in relation to the continued representation of Alliance.

137 The pleadings on behalf of both parties were extensive and were drafted by legal representatives, apparently in the case of Alliance by Mr Dempsey of counsel. He was originally briefed and appeared in earlier stages of the proceedings before the referee.

138 I do not understand either party to be asserting that it was not able to have the issues between the parties properly identified before (as opposed to dealt with by) the referee. If that is asserted, I should state that in my view the referee fully outlined the issues between the parties.

139 Both parties filed detailed written submissions and called a number of witnesses before the referee. The referee gave the parties every opportunity to place before him what evidence or additional matters they wished. The extensive written submissions filed were substantially based on or contained numerous references to the transcript. The same approach was adopted in these proceedings of filing extensive written submissions - often to the point of prolixity. I do not think it can be fairly said that any point in these proceedings has not been exhaustively canvassed.

140 The proceedings before the referee were prolonged (87 days) and adjourned for lengthy periods as indicated. Both sides called a number of witnesses. There does not seem to be any complaint as to unfair procedures being adopted by the referee - indeed, the referee appears to have gone to great lengths to permit the parties to file additional material whenever requested.

141 The evidence before the referee was both oral and written. The referee appears to have been mainly concerned with the documentary evidence and the relevant explanatory and chronological evidence of the witnesses. This seems to have been entirely appropriate given the nature of the dispute and the extent of the conflict between the parties.

142 It is clear that both parties are dissatisfied with the outcome before the referee. If I do not accept the referee's findings as to liability (as urged by Johnson), it urges that the entire matter be re-litigated. Even if I give a qualified adoption of the report (as urged by Alliance) that is also likely to involve further hearing on aspects of the matter, for example, the assessment of various aspects of the heads of the cross-claim.

143 The history of the matter does not suggest that any such future proceedings will be easy to contain - nor that the parties will be prepared, or able, to contain - any further proceedings. As I have already indicated, the proceedings generally have been characterised by an inability of the parties to agree on virtually all matters of substance. Aspects of the proceedings before me - and apparently before the referee - have been hotly contested and the subject of voluminous submissions. I do not accept Mr Oehme's submission that the areas of agreement before the referee in relation to the Scott schedules indicated that there were 'substantial agreements made' (submissions 2 July, 2007 para. 82). Rather, those matters were a minor respite in the process of litigation by attrition which characterizes the totality of these proceedings. As the referee noted in relation to the Scott Schedule 4 items (referee's report para. 127), a great deal of time was taken up with the relevant evidence, expert opinion, discussion and opinions which was unnecessary. The same approach characterised these proceedings, particularly in the filing of voluminous and repetitious submissions.

144 The attacks by the parties on the referee's report are quite different in focus and effect.

145 Johnson's attack goes to the integrity of the report in terms of the delays and other defects in the reasoning process of the referee and what are said to be the erroneous application of legal principles by the referee.

146 Alliance, while accepting the referee's findings as to liability, attacks the report on the basis of mistakes said to have been made by the referee in assessing and applying the evidence in terms of the award of damages made to Alliance.

147 By Notice of Motion dated 25 May 2005 and amended on 17 June, 2005, Johnson sought an order that the report of the referee be rejected by reason of the inordinate delay between the conclusion of the evidence, the taking of submissions, and the issue of the referee's report to the court.

148 Johnson submitted (proceedings 29/1/07) that, in the event that the referee's report was not accepted, then the proceedings should not be referred back to the referee involved (Mr Callaghan) or indeed any referee, but should be determined by a Judge on the basis of the material before the referee, subject to the rights of the parties to call additional evidence at that stage.

149 When the matter came on for hearing, Johnson advanced further grounds in support of the application that the referee's report be not adopted as follows:- (i) Delays by the referee and the impact of that delay - see paras. 178 ff; (ii) That the referee's findings were not based on the evidence - see paras. 363; 372; (iii) The report did not disclose sufficient reasons for the referee's conclusions - see paras. 384-387; (iv) That there were errors of law warranting the rejection of the report arising from: (a) the implication of an implied term to act reasonably and in good faith - see paras. 317; 337 as well as applying that term erroneously in the circumstances and on the evidence ; (b) the existence of an estoppel by conduct - see paras. 388-392; (c ) the misapplication of a Jones v Dunkel inference against Johnson - see paras. 393 - 402; and that if I am satisfied that errors of law have occurred, then I need to consider the relevant evidence afresh and make my own findings; (v) The referee made errors of material fact - see para. 379; (vi) The referee's report fails to show reasons or a proper reasoning process.

The precise orders sought by Johnson are as set out in the Notice of Motion filed on 17 June, 2005.

150 The precise monetary amount of Johnson's claim was $226,305 being the contract sum ($581,765) less the progress claims paid ($208,773) and adjustments for Scott schedule 1 (addition) and Scott schedule 2 (omission) items as well as retention monies. Johnson also sought costs on an indemnity basis.

151 Alliance contends that the report and its findings as to liability should be adopted but that the report should not be received as to the findings and recommendations as to damages.

152 Alliance submits that there were no difficult issues nor conflicting accounts which needed to be considered by the referee. Further, that the referee's report makes it clear that the referee evaluated the evidence and came to the only finding on liability which was properly open to him, namely, that Johnson had not established its case. Alliance has emphasised that the finding of the referee was that on the evidence provided in the referee proceedings, Johnson did not substantiate the extent of work carried out by Johnson either properly or at all.

153 In support of that contention in relation to the adoption of the report on liability, Alliance submits that: (a) where I am satisfied that the referee's report was based on contemporaneous materials before the referee, there should be a 'pre-disposition' to its acceptance. In support of that proposition, Alliance relies on t he decision of Chloride Batteries Australia Ltd v Glendale Chemical Products Pty Ltd (1988) 17 NSWLR 60. That decision seems to have been in the context of a referee who was looking at matters of a particularly technical nature; (b) That 'pre-disposition' should be especially the case here where there were: (i) objectively established facts set out in the report warranting acceptance of it; (ii) there was a demonstrated logic to the findings that were made compelling its acceptance; (iii) the referee was perfectly entitled to make the decision not to deal with the substantial volume of material before him. The referee had balanced the utility of going through all the material against the cost of the parties. That was in line with the broader principles of the reference system. Alliance relies on the decision of Expectation Pty Ltd v PRD Realty Pty Ltd FCAFC 189 in support of that submission. (c) Alliance contends that Johnson did not set out to prove that it had either carried out the work or substantiated the work it had claimed. Further, that the money due and payable at the date Johnson and its employees left the site was for a far greater amount than that claimed. It is also submitted that Alliance's claim was substantiated by the evidence of witnesses and the contemporaneous evidence. It is contended that Johnson's case was not supported by any contemporaneous records.

154 Alliance's cross-claim is dealt with at paras. In summary, Alliance submited that the referee's report as to damages be set aside and in lieu thereof, the following amounts be awarded:

(a) Wages and related costs: Mr Brian Sharp: $13, 601; (b) Wages and related costs: Mr Grant Perry: $32, 489; (c) Amount for time and expended: Mr Grant Perry: $135, 604; (d) Amount expended: electrical work: $288, 057; (e) Amount expended: additional time: Mr Oehme: $111, 746; (f) Amount for loss of cash flow: $85, 517; (g) Amount re final contract value: $300,000; (h) Amount re loss of contract opportunities: $1, 750, 000.

This claim need to be viewed in the context of an initial contract price of $581,000.

155 As subsequently amended under objection, the claim was altered to a claim for $753,000. When the matters resumed for hearing on 6 November 2006, Mr Oehme sought to alter that amount to $810,000.00. Alliance has confirmed that it does not seek any amount over $750,000 - although submitting that it is entitled to press for items under heads of damages.

156 Against the background of the applications made by the parties, the referee's report by way of recommendation to the Court contained the following relevant matters and findings: (a) Delay - the referee handed down his decision on 10 May, 2007 within weeks of the final hearing; (b) The contract was constituted by and to be found in attachments 3 to 6 of the report. The schedule of rates (attachment 7) also had contractual significance. Those letters constituted the complete bargain between the parties and there was no room for oral terms as alleged by Johnson. The referee rejected Johnson's submission that the contract did not recognise the possibility of variations to the contract; (c) The obligation on Johnson was to complete the whole of the specified work. The lump sum price related to the whole of the work and therefore omissions or non-completion of the work disentitled Johnson from payment proportionately for that work not completed; (d) The contract recognised that there would be variations to existing work as well as variations to the scope of the works as per the Scott Schedules; (e) Various items under the Scott Schedules resulting in a credit of $60,712 from Alliance to Johnson - report para. 99; (f) There was an implied term that the parties should act reasonably and in good faith when dealing with each other (report para. 39). That obligation encompassed reasonable dealings in relation to bill values; (g) There was an implied term to give efficacy to the contract, especially in relation to dealing with bill values and to cover the situation where there was no agreement on a particular bill value; (h) The contract value of the work had been decreased by the variations of addition and omission (from about $560,000 to about $400,000) and that there was a further diminution of the price by the defective and incomplete work, which Johnson 'had not faced up to' (report para. 85); (i) That Johnson did not seek to prove the extent of the work covered by the claims 10 - 14 (see paras.85) and that there was no indebtedness established by Alliance to Johnson in respect of progress claims, subject to retention monies - report para 89; (j) Johnson's behaviour in respect of the billing compilations was not reasonable; (k) Johnson's complaints of non-payment of progress claims was not justified (report para. 84); (l) That Johnson's suspension of work had no justification -report para.58 - that Johnson wrongfully suspended work and left the site, failed to return to the site and thereby repudiated the contract; (m) That repudiation was accepted by Alliance (report para. 87); (n) That Alliance had not made out a claim under the Trade Practices Act in relation to any representation that Mr Drakes would continue an association with the project; (o) An acceptance of Alliance's cross-claim in relation to Mr Grant Perry (part only), Mr Stefinik (report para. 119), Mr Oehme's own time (part only - report para. 120), materials supplied to Honeywell (report para. 121), loss of cashflow to Alliance (part only - report para. 122); (p) A rejection of Alliance's cross-claim in relation to wages and other costs of Mr Sharp (report para. 103), additional wages of Grant Perry (report para. 118); damages arising from the failure of the contract (report para. 123), loss of opportunities/profits (report para. 124); (q) A recommended award to Alliance $549,894 (report para. 129); (r) A recommendation that pre-judgment interest be calculated on the damages from no later than June, 1998; (s) The question of costs was left to the Court.

157 The relevant rules under the Uniform Civil Procedure Rules 2005 are 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.

Onus on party urging that the report not be accepted

158 There is a clear onus on the party or parties urging that a report not be accepted to show that the report is not soundly based or that opinions have been reached which are not properly substantiated - see generally A & P Parks Constructions Pty Ltd v Como Hotel Holdings Pty Ltd [2004] NSWSC 588 per McDougall J.

159 Here Johnson bears the onus of establishing that the report should not be accepted on liability. Alliance has the onus of establishing that the report should not be accepted on the damages sought in its cross-claim.

Approach to be adopted in considering referee's report

160 In reviewing a referee's report to determine whether to adopt, vary or reject it, the reviewing court is given a discretion to exercise in a manner consistent with the relevant rules of court. What is involved is not an appeal, either by way of a hearing de novo or a limited re-hearing. The power to reject a report in whole or in part is not constrained but should be exercised in a manner consistent with the object and purposes of the rules - Super Pty Ltd v SJP Formwork (Aust) Pty Ltd (1992) 29 NSWLR 549; Ryde City Council v Tourtouras [2007] NSWCA 218.

161 As a general rule, the reviewing court should not embark on a re-examination of questions of fact on which the referee has reported in circumstances where there was factual material sufficient to enable the referee to reach the finding he did - per Cole J in Chloride Batteries of Australia Ltd v Glendale Chemical Products Pty Ltd (op cit) quoted with approval by Gleeson CJ in Super Pty Ltd v SJP Formwork (Aust) Pty Ltd (op cit) at 553: "…where the court, having closely scrutinised the referee's 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 referee's report on findings of fact."

162 Each of the parties has taken me, often exhaustively, to relevant sections of the report both orally and in written submissions. In the course of those submissions, there has also been considerable canvassing of material that was before the referee, both self-evidently on the face of the report and, in some very limited areas, before the referee in evidence. That latter aspect has been the subject of considerable argument in these proceedings. Mr Oehme has repeatedly required more time to take the matter further to canvass a great deal more evidence to refute the submissions of Johnson and to advance his own case. He has not complied with the time periods established for the provision of written submissions. That has substantially prolonged the proceedings before me.

163 In accordance with what was said by Mahoney JA in Super Pty Ltd v SJP Formwork (Aust) Pty Ltd (op cit), a court receiving a referee's report should not have recourse to significant amounts of the evidence, although a court can admit additional evidence on the adoption proceedings as well as looking at the evidence that was before the referee at the time. What is important is that the Court must have a sufficient understanding of the issues and the matters in question before the referee.

164 Johnson relied on the report itself and what it disclosed or failed to disclose. Counsel for Johnson did not rely on the evidence nor attempt to adduce or refer to any of the transcript of the evidence of the proceedings before the referee - other than for some isolated exceptions: see waiver para. 204 ff. Mr Van Aalst submitted that the parties had to demonstrate on the face of the report that the report should be either adopted or varied. The case must be made - by both parties given their respective claims - on the face of the report itself.

165 Mr Oehme for Alliance wished to rely on, and to canvass extensively, the evidence before the referee in support of Alliance's submission that the referee's report was properly based on, and involved, a proper consideration of the evidence. That was the subject of an earlier ruling which Mr Oehme has been reluctant to accept. I have referred to that in my reasons for earlier orders in the matter.

166 The authorities, the clear policy of the Uniform Civil Procedure Act, and, indeed, common sense, make it clear that there needs to be an end to proceedings subject to the requirements that there is a fair hearing and a proper examination of the issues. In proceedings such as this for the adoption of a referee's report there should not be a re-ventilation of issues - particularly where those issues mainly involve the credit of parties and the weight to be given to various aspects and categories of the evidence.

167 Implicit in these policy considerations is the use of court resources. While the costs of the referee have been met by the parties, the parties to this litigation have had numerous appearances in this court both prior to, and during, the referee proceedings (including the 28 mentions referred to above) and in these proceedings. This is particularly relevant in this case which essentially involves: (a) a commercial dispute which occurred over ten years ago; (b) between two substantial commercial entities; (c) one of which is now in voluntary administration; (d) where the parties did not reduce their arrangements to writing and early in the dispute expressed their desire to be 'non-contractual'; (e) when the parties have not pursued mediation to any successful outcome nor resolved aspects of the litigation which were clearly capable of agreement.

168 The report has no legal consequence unless and until it is adopted. That process of adoption is what gives the imprimatur of the court to the findings of fact and law by the referee - Xuereb and ors v Viola and ors (1989) 18 NSWLR 453 at 466 D-E. In the event the report is accepted, the findings of the referee become the findings of the court.

169 The authorities indicate that the parties should not be permitted to allow the reference to be treated as some kind of 'warm up for the real contest'. Where a referee has looked at matters in detail and appears to have considered the evidence and absent any other errors, the parties and the court system should not be put to the expense and inconvenience of re-litigating an issue - let alone the totality of the issues of liability (as is urged by Johnson) and damages (as is urged by Alliance).

170 The Court will have regard to the futility of a process of re-litigating an issue determined by the referee in circumstances where the parties have had an opportunity to place before the referee such matters as they desire - per Cole J in Chloride Batteries Australia Ltd v Glendale Chemical Products Pty Ltd (1988) 17 NSWLR 60 at 67C.

171 Inevitably, that will involve considerations of the costs involved. Cole J also referred to the fact that litigation (albeit in the context of a technical dispute) cannot be endless (at 69F). Gleeson CJ in Super accepted what was said by Marks J in Integer Computing Pty Ltd v Facom Australian Ltd (Vic SC unrep. 10 April, 1987) at 6: "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."

172 What needs to be considered are matters such as the type of litigation involved, the issues involved, the nature of the complaints made about the report, the length and complexity of the proceedings before the referee in coming to a conclusion - Super Pty Ltd v SJB Formwork (Aust) Pty Ltd (1992) 29 NSWLR 549; Foxman Holdings Pty Ltd v NMBE Pty Ltd (1994) 38 NSWLR 615. Here the litigation involved was the construction of a contract said to arise out of either correspondence or the course of dealing between the parties.

173 In Foxman, Cole J. considered (at 621) that the referee's report made the issues between the parties sufficiently clear to be fully understood and to be identified when critical decisions of fact were made after assessment of witnesses. In that case, as here, the parties had full opportunity to place all relevant matters before the referee. Cole J therefore declined to reconsider material before the referee. The report in that case (involving a building/site remediation dispute) was adopted.

174 In my view that has also occurred here in the referee proceedings.

175 It is for the court to decide whether the referee has erred in law and if so, to correct such error - Homebush Abattoir Corporation v Bermria Pty Ltd (1991) 22 NSWLR 605 at 609. In the event that I find that there have been errors of law, I must make my own findings. I also need to consider the significance of those errors and whether the errors were such as to warrant other findings being made. An error of law being the erroneous application (as opposed to a mere mis-statement) of incorrect and material legal principle by a referee may require intervention.

176 If the referee's report reveals some error of principle, some absence or excess of jurisdiction (which is not argued here) or some patent misapprehension of the evidence, that would ordinarily be a reason for rejecting it. So also would a perversity or manifest unreasonableness in fact-finding - see generally Super Pty Ltd v SJB Formwork (Aust) Pty Ltd - per Gleeson CJ. (op cit) at 563

177 This is an aspect of the general principle that if a referee decides a matter contrary to law or acts perversely or unreasonably as he would do if he decided against the evidence and the weight of evidence, he exceeds his authority and the report may be set aside or remitted - per Jacobs J in Buckley v Bennell Design and Constructions Pty Ltd (1978) 140 CLR 1 at 36.

178 These principles are relevant when considering, inter alia, the referee's decision in relation to the implication of terms in the contract - para. 317 and the issue of repudiation - para. 352.

179 Johnson's primary application in the Notice of Motion is that the delays which have attended the conduct of proceedings before the referee, between the date of referral and the delivery of the report, have meant that the Court would not be satisfied that the referee properly decided the matters before him on the evidence.

180 Against the background of the chronology outlined above (paras. 39; 84-107), Johnson submits that the referee could not have had regard to the demeanour or presentation of the various witnesses in the proceedings. Mr Van Aalst argues that the delay meant that the referee could not and did not have regard to the evidence given before him but instead referred only to the written material before him. Johnson also contends that there was no indication in the report to his (the referee's) contemporaneous notes supporting any recollections he may have had of the witnesses. In turn, that meant that the referee's findings of fact, particularly on matters of material fact, were such that his conclusions were 'infected' by the delay. Finally, in relation to delay, Johnson submits that there is a strong inference that the referee took the 'soft option' in coming to his conclusions, which was simply to accept the evidence of Mr Oehme as it was set out in his statement.

181 In summary, Johnson submits that, because of the delay, the court should give very careful scrutiny to the report of the referee and in particular, his conclusions of fact and consequential findings as was suggested in Expectation Pty Ltd v PRD Realty Pty Ltd [2004] FCA FC 189 at [68].

182 Alliance submits that the report demonstrates on its face that it was properly based and that the delays, however caused, did not affect the quality of the report.

183 Mr Van Aalst submits (as the then, and current, counsel for Johnson) that no application was made to terminate the reference for the forensic reason that, had that been made, the strong likelihood would have been that the matter would have been referred back to the referee. Nevertheless, neither the evidence nor the record indicate that there was any effort made by Johnson to seek enforcement orders.

184 No sanctions were sought by Johnson from the District Court or by way of recommendation from the referee to seek orders to enforce his orders or directions given - especially in relation to the timetables established during any period of the reference.

Reasons for delays: legal representation of Defendant

At a glance

Court

Decision date

Catchwords

Source

Catchwords

Judgment (530 paragraphs)

Parties

Legislation Cited (2)

Cases Cited (30)