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

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)

DECISION: 1. The report and recommendations of the referee are adopted save and except the recommendations as to the amount recommended and interest on the amount recommended on the cross-claim; 2. The statement of claim is dismissed; 3. Judgment on the cross-claim by Alliance in the sum of $358,293 together with interest thereon from 30 June, 1998 to 18 April, 2002; 4. The parties may file any evidence on which they may rely in relation to costs within seven days of these orders together with any written submissions on costs only covering relevant matters which are additional to the matters already set out in the parties' submissions on costs.

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

185 As I have said it seems that various delays before the referee resulted from the fact that three firms of solicitors ceased to act for the defendant. Mr Oehme on other occasions sought additional time - which was granted by the referee - to arrange other legal representation.

186 At least one of the periods making up the delay was from 6 May, 2002 until 4 July, 2003, when there were issues arising out of the voluntary administration of Alliance and associated proceedings in the District Court concerning security for costs, a stay of proceedings and an unsuccessful mediation as well as proceedings for leave to proceed against the defendant company.

187 The referee's report refers to failures and specifically failure by Alliance to comply with directions, as well as requests by Alliance to put on further evidence. Apart from one reference (report para. 10) to a failure by the parties (my emphasis) to comply with directions, all the failures or the necessity for additional time to be allocated were either associated with Alliance's administration or were caused by or at the behest of, Alliance. That is consistent with what occurred in the proceedings before me.

188 At one stage there was an application by the parties for additional time to work through an anticipated joint document. That document apparently did not eventuate nor were there any savings of court time. The process of submissions and addresses seems to have occupied much of the period of the reference between November, 2003 and 26 April, 2005.

189 The referee delivered a comprehensive and detailed report of some 94 pages within a fortnight of the final submissions being received. In these circumstances I do not think it can be said that the referee simply 'sat on his hands' and delayed the matter.

190 A referee in these circumstances is, in large measure, dependent on the parties, especially (as was the case here) where there are commercial entities involved with, or with access to, competent legal representation.

191 The delays which occurred before the referee seem to me to have been very much the responsibility of the parties - and particularly Alliance. In large measure the delays before the referee may have arisen out of the steps taken to place the company under administration. Whether that was done as a matter of litigation strategy or for commercial reasons or otherwise is not a matter for me to determine. While in my view, much of the responsibility for those delays rested with Alliance and Mr Oehme, the fact remains that no steps were taken by Johnson to enforce the orders of the referee or to have the matter reported back to the court or to seek enforcement orders from the Court.

192 Consideration of the application of these issues necessarily involves the determination of what is the relevant delay period. On one view, there was no delay period in that the referee delivered his report within a fortnight of receipt of the final submissions. Johnson contends that the relevant period is between the date of the last receipt of evidence (March, 2002) and the date of the report (May, 2005).

193 The relevant consideration in my view is whether, whatever period of delay is determined, the time involved has made it likely that the referee would not have had, or have been able to have had as a matter of strong inference, the tenor and effect of the relevant evidence before him when he came to making his determinations and findings and writing his report.

194 In this instance, the period which expired from the time of the last evidence to the report also included a period when the referee was receiving and hearing detailed submissions which incorporated references to the evidence. Inevitably, it seems to me, the referee would have been reminded of the evidence during that process.

195 My examination of the report against the matters contained in the oral and written submissions of the parties does not indicate that there are any areas of substance where the referee, or his report, was affected by the delays which occurred.

196 Alliance submits that issues of credit and demeanour of the witnesses were of little consequence in relation to the competing factual claims. Further, that the delays involved were not significant, nor has it been shown that those delays resulted in an error by the referee nor a misapplication of misunderstanding of the evidence by the referee delays.

197 Alliance submits that Johnson was also responsible for part of the delays. If they were, it was of a very minor order. In my view Alliance was responsible for the most substantial proportion of the delays in the referee proceedings (see report page 9) both directly from the conduct of the proceedings and as a result of Mr Oehme's decision to place Alliance under a deed of voluntary administration.

198 At the conclusion of the Plaintiff's case in relation to delay, I raised with the parties whether the chronology of the proceedings before the referee may raise issues of waiver. In particular, I queried whether any right to complain of any delay by the referee may have been waived by the actions or inaction of the parties, or either of them, to complain or to take action to have effective sanctions imposed for non-compliance with the directions of the referee.

199 Mr Van Aalst objected to me raising the issue of waiver when it had not been raised by the parties or either of them. My view was and remains, that the issue of waiver is an implicit consideration whenever delay is raised by way of complaint as has occurred here on the motion of Johnson.

200 I also took the course of raising the issue as it seemed appropriate to ensure that Mr Oehme, essentially appearing as a self-represented litigant, was put in a position of knowing what the issues were or might be before me, given my assessment of the case, this particular issue and the matters personal to Mr Oehme. That approach when dealing with self-represented litigants seemed to me to be required by, or consistent with, the approaches in Abram v Bank of New Zealand [1996] ATPR 41-507; McPherson v R (1981) 37 ALR 81.

201 It also seemed to me to be important that the issue be raised prior to the end of the Plaintiff's case so that Johnson might be able to call evidence on this issue in its case should it see fit.

202 The question of delays by an arbitrator was examined by Einstein J in Elspan v Eurocopter [1999] NSWSC 555 esp. at 139 ff. That concerned a delay of about six months between the completion of a hearing and the publication of an award by an arbitrator and a referee. Einstein J took into account that those complaining about the delay in that case had apparently awaited the decision of the arbitrator to determine if it was favourable - at [144].

203 Here the delays which occurred resulted from the actions of the parties themselves - especially Alliance and Mr Oehme - rather than the referee. As I have set out above, the matter was before the District Court for supervisory directions hearings/mentions on 28 occasions. There does not seem to have been any determined efforts by Johnson to seek orders from the court to enforce the timetables which had been established - and clearly breached - on a number of occasions.

204 Further, there was no attempt by the parties to bring the matter back before the referee to enforce the timetables which had been set down, nor, if those timetables were not being properly supervised, to ask for the matter to be reported back to the court for the making of enforcement or other orders or if, as Mr Van Aalst asserts, that 'Johnson was the captive of Alliance's cross-claim', to have that aspect of the litigation dealt with separately.

205 Mr Van Aalst took me to an occasion when the matter was before the referee on 5 August, 2004 i.e., on day 74 of the reference (exhibit A18). That application was made at the request of Mr Oehme although apparently initiated by Johnson's solicitors (A18 - p3543 line 6). That occurred because it appeared to Johnson at that time, if not earlier, that Alliance, previously thought to be carrying on business under Administration, was at that stage, 'hopelessly insolvent'. Johnson submitted that the matter should be brought back to the court '… so that it could come under the court's direction because of the serious change in circumstances'.

206 In response to the referee's suggestion that a specific direction or a precise set of orders and directions be formulated (A18 - p3544), and in the light of the fact that it was clear that the referee's directions of 26 May, 2004 had not been and would be unlikely to be complied with (A18 - p 3554), Johnson submitted that the referee set out a report with a transcript and chronology and copy of the evidence of Alliance's insolvency and a direction to be sought from the court.

207 The referee indicated (A18 - p3556) that he was a servant of the parties and the court - while noting that the timetables and directions had not been complied with. He also noted that Johnson might go back to the Court.

208 The matter was ultimately referred back to the District Court at the instigation of Johnson. It came before Her Honour Judge Balla (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'. It does not seem that there were any orders or other directions sought by Johnson.

209 In those circumstances, the parties, and, in particular, Johnson, as the party complaining of delay in these proceedings, must be taken to have waived the rights to complain about the delays that were occurring, which, as I have said, were not, in any event, the fault of the referee.

210 Even if I am wrong on this and there was no waiver by the parties' inaction, a separate issue arises as to whether the delays in the process and proceedings itself - irrespective of the reasons or responsibility for the delay - has meant that the decision is such that I would not be safe in adopting the report.

211 I would also find that the same principles and conclusion applies to Alliance in relation to the findings of the referee which supported his recommendations in relation to the cross-claim.

212 The question of the impact of delay has been examined by the High Court in Nais v Minister for Immigration and Multicultural and Indigenous Affairs (2005) 223 ALR 171; [2005] HCA 77 (14 December, 2005). It is clear from that judgment that the circumstances where delay, of itself, will vitiate proceedings are rare. In a case such as the present, the primary focus of the courts is as to whether the delay in giving judgment has contributed to error or made a decision unsafe.

213 The party claiming that delay has vitiated the proceedings (in this case, Johnson) needs to demonstrate that the relevant delay led to such flaws in procedure and matters which flow from that - for example, the assessment of the evidence - that the delay meant that the decision of the referee was improperly affected. Put another way, was the delay such to create a real and substantial risk that the capacity of the referee for a competent evaluation of all the evidence was diminished?

214 The nature of the case and the proceedings are relevant in considering whether the delay has had an impact on the capacity of the referee to assess, or recall his assessment of, the credibility of relevant witnesses. Here, Johnson contends, the referee needed to consider not just the documentation, but also the background to that documentation. That included the course of negotiations between the parties and their representatives over the years to determine the status intended to be given to the variation agreements. Johnson asserts that that, in turn, required an assessment of the sincerity and reliability of the witnesses over the years of the parties' dealings. Johnson also complains that the referee's report contains no conclusions on credibility which is also said to support the view that the referee did not recall or was not able to recall the other relevant witnesses.

Consequential impact of delay: assessment of witnesses

215 Johnson contends that the delays in the proceedings were so substantial that the referee could not have recalled the testimony and demeanour of the relevant witnesses. Accordingly, his determination of the matters requiring an assessment of the credibility of the various witnesses, and the resolution of competing versions of facts was inevitably at risk, so much so that the relevant determinations could not be relied on to support the ultimate conclusions.

216 Here the referee made an assessment of the witnesses who he regarded as giving evidence relevant to the issues he had determined were conclusive of the findings he made.

217 There were a limited number of witnesses called but extensive reliance on documentation as well as written submissions. The referee also determined the case on the construction of the documents rather than the credibility of the witnesses - as he was entitled to do. The referee made an assessment of the witnesses called by Johnson, particularly Mr Densham, as well as Mr Oehme who gave evidence and was extensively cross-examined. Both at the time and subsequently, the referee had the relevant documents before him. I do not see that the complaint as to the impact of the delay period has been made out or that there was an inability on the part of the referee to properly assess the evidence

218 Moreover, the referee had made throughout the proceedings, a number of directions on various issues. Those indicated that he was continually aware of the issues between the parties and those matters to which they wished to address additional submissions or evidence.

219 Giving the report the close scrutiny that is urged by Johnson, it does not appear to me that there is any clear error of the referee in assessing the evidence or any of the witnesses. Nor do I see that there were any erroneous findings of fact which then affected the findings of the referee on legal matters - such as the issue of estoppel.

220 There was no formal building contract entered into by the parties. The fundamental issue in these proceedings was: what was the agreement between them and, in particular, what were the terms?

221 Johnson submits that the contract was constituted by correspondence, that it was an entire contract which was to be performed for a lump sum payment. Alliance contended that the contract was partly oral and partly implied.

What were the terms of the contract between the parties

222 The dispute about the terms, and the status of the terms, centred on what obligation there was to carry out the work of installing the system and to make payments for that work. In turn, that involved a determination of the status of billing sheets (see para. 271) which were used as a method of founding invoices submitted by Johnson to Alliance and what was said to be the obligation to assess and pay on those invoices.

223 Johnson contends that the original contract included terms which provided for the programme of progress payments, that payments were to be made in accordance with billing compilation sheets and invoices submitted; further, that that regime, and the obligation to make payments in accordance with the invoices submitted, were fundamental terms of the contract. Johnson contends that a breach of those terms meant that there was, and had been, a fundamental breach of the contract justifying repudiation by it of the contract.

224 Alliance denies that the billing compilation sheets constituted such a regime or that the procedure specified was agreed, let alone founding a payment procedure which was a fundamental term of any contract. It submits that the fact that a billing compilation sheet was tendered did not automatically entitle Johnson to raise a corresponding invoice requiring automatic payment.

225 Alliance submits that it is clear from the proper construction of the contract that the billing compilation regime incorporated two aspects of the parties' relationship, namely, a progress claim regime and a quality assurance regime. If work was not carried out in accordance with the quality assurance regime, then Johnson was in breach of the contract.

226 Alliance's case is that the breach was constituted, not by any failure to pay on time, but by a failure of performance in the work to be done. Alliance contends that there was a continual failure by Johnson to carry out the work required under the contract, let alone the work described in the billing compilation sheets or invoices.

227 The referee found that there was an entire contract constituted by four letters of 26 July, 28 July, 31 July 1996 (set out at attachments 3, 4, 5 and 6 to the referee's report; exhibit A6). There was a further letter of 11 August, 1995 which confirmed some aspects of the contract.

228 The letters followed a course of dealings between the parties which consisted of preliminary negotiations and an attempt - "a joint effort" - by Mr Drakes and Mr Oehme to finally negotiate matters in July, 1995.

(i) 26 July, 1995 from Johnson to Alliance (attachment 3). That letter stated that before proceeding with the potential contract, some issues needed to be clarified. The price of $581,765 was specified. The letter said that 'Your acceptance of this offer should make reference only to this letter'. That letter was signed by David Drakes who left the employ of Johnson shortly thereafter

In addition to a considerable number of technical matters, the approval process details were required from Alliance. The letter made it clear (page 3) that 'the conditions of our offer…will provide us with the funds necessary to complete the project to a high level of operational service. Any deviation from the above conditions will create difficulties and may force us to respectfully review our position'.

(ii) 28 July, 1995 (attachment 4) from Johnson setting out projected progress claim details leading to the total price of $581765. The schedule contemplated various advice dates, bill dates and payment dates over a 13 month basis. It was described as being a 'best guess of cost progress in the absence of a program and engineering design'. It accepted that monthly billing values may occur but that once a bill value had been accepted the payment terms detailed cannot shift for any reason'. Billing was said to be 'for agreed work completed'.;

(iii) 31 July, 1995 from Alliance to Johnson (attachment 5). This letter was dictated by Mr Oehme in the presence of Mr Drakes.

That letter specified that 'Payment terms as per Johnson's letter of 28 July, 1995.' The letter also specified that 'No variation will be payable from Alliance to Johnson unless it has been client driven and paid for by the client' that 'All variations and additional works that Johnsons may provide on the project will be authorised and processed via Alliance' and that 'No changes /modifications are to be made unless full approval has been given in writing by Alliance'.

The referee found the letter of 31 July, 1995 to be a decisive document bringing the negotiations to comprehensive finality and to articulate the terms of the agreement.

(iv) 31 July, 1995 from Johnson to Alliance (attachment 6). That letter accepted 'the terms and conditions as documented in our letter of 26 July and amended in your letter of today's date' i.e., 31 July, 1995.

The referee found these four letters constituted a complete statement by the parties of their position and intended by them to be such.

(v) 11 August, 1995 from Johnson to Alliance (attachment 7) specifying a schedule of rates. The letter noted that 'any variation works based on schedule of rates pricing will be performed during the main works in the areas concerned. Additional costs may be associated if these works are performed at a separate time.' The letter also stated that 'No variation works will be performed without a contract variation order from Alliance Group.'

The referee found this letter to have contractual significance.

230 A schedule was established for progress payments. The schedule utilised was essentially a pro-forma document which related to each floor of the tower building and a series of sections pertaining to the engineering equipment, commissioning, and handover stages of the construction. There was a further section pertaining to the podium level. The billing compilation sheets were tendered (exhibit A 10A - F).

231 Johnson's case is that it followed a billing compilation process in accordance with that schedule. It set out each month, under detailed headings, what work had been done during the last month, what was to be done and what proportion of the final work that work represented.

232 Johnson's contention of what occurred was that there were a series of invoices (exhibit A 10G) submitted for work said to have been performed and payments made. In the early stages of the project, Johnson's manager, Mr Densham, would go through each floor and look at the work performed and calculate what percentage of the work had been completed at the end of each month. He would then discuss that work, and the monthly billing compilation, with Mr Perry or Mr Oehme on behalf of Alliance. The procedure that Johnson envisaged was that, if the works as varied were agreed within a period of a fortnight, a bill or invoice would issue and payment would be made thereafter on that bill.

233 Ultimately there were 14 invoices submitted. A pro-forma of the billing compilations as submitted by Johnson to Alliance was contained in exhibits A10 -A. Billing compilation claims 10 (July, 1996), 11 - August, 1996, 12 - September, 1996, 13 - October, 1996 and 14 - November, 1996 were tendered and became exhibits A10 - B, C, D, E and F.

234 The structure of the invoices submitted - and the way the claims related to the original contract amount - is clear from exhibit A10 - G.

235 While this process was adhered to for a short period with some invoices being tendered and being made the basis for payment, there were, in a fairly early stage of the relationship, continuing disputes about whether work had or had not been performed, and, if so, to what standard and by whom it had been performed and whether there was or was not any payment due by Alliance.

236 There were disputes and differences between the parties in relation to the various progress claims submitted - particularly in relation to progress payment numbers 1-9. Alliance, through Mr Oehme, took the view that either work had not been done or that there were such gross defects in the work by Johnson that the progress payment would not be approved.

237 Johnson continued to carry out billing for work phases in accordance with what it said were shown on invoices 10-14. In turn, these assessments were submitted by Mr Densham for Johnson to Alliance for payment. Johnson submits that from the time of the submissions of progress payment number 10, there were differences in the approach to be adopted that thereafter, the parties followed a particular pattern indicative that they had accepted that there would be variations.

238 Ultimately there was a complete breakdown in the arrangements between the parties. The referee's chronology sets out the process whereby the progressive disagreement, and then breakdown, in the relationship between the parties became evident.

Attack on referee's conclusions 239 Johnson attacks the conclusions of the referee which was expressed in the following terms:

"In summary the course of conduct between the parties was one whereby Alliance was trying to reduce the amount owed under the progress claims and Johnson was trying to maintain them."

240 Johnson submits that a further indication of the lack of critical analysis by the referee was the reference, in the summary, to the letter from Mr Densham of 26 April, 1996 to the adjustment of prices in accordance with the principles of "swings and roundabouts".

241 This was simply recited by the referee. Johnson submits that there was no attempt to analyse the letter, or its impact, or to show how it was dealt with by the referee. It was, Johnson submits, in fact consistent with the contract - which did not make reference to variations.

Contractual effect of the billing compilation schedules: Referee's findings

242 The referee found that the contract did not make provision to cover the eventuality of there being variations of addition or omission in relation to the adjustment of bill values - report para. 40 - and that there was no evidence to support the view that payment would be a function of the progress claims.

243 Johnson contends that the terms of the contract incorporated the billing compilation procedure whereby it would assess the work done, and to be done, and what proportion that represented of the total price. Johnson argues that, once that assessment had been submitted to Alliance, the obligation was on Alliance to pay the invoice.

244 Johnson's case is, and was, that payment was a fundamental term of the contract between the parties; moreover, that such payment had to be within the times contemplated by the parties and, in particular, by Johnson, and that the billing compilation sheets were all part of the contract.

245 Johnson contends that it was clear from the correspondence that the projected progress claim procedure to be followed was an important and fundamental part of the contract between the parties. Mr Van Aalst stressed the provision in the letter that "once the bill value has been accepted and the payment terms detailed, payments for that month cannot shift for any reason". He submits that that term was accepted by Alliance by its letter of 31 July, 1995.

246 Further, Johnson submits that the fundamental nature of the procedure was self-evident because Johnson was providing both equipment and labour and establishment costs of substantial value. Johnson contends that anybody operating in that particular environment would have been aware that a contractor in the position of Johnson needed to have such payments made as and when specified.

247 Johnson points to the detailed nature of the billing compilation sheets to show that they were essential to the contract. The sheets referred to each level of the project and the percentage completion of the work and, it is submitted, made it that that was the basis on which the parties proceeded to have the work done.

248 Accordingly, Johnson submits that, in those circumstances what should have been implied was a term of fair dealing in the performance of the contract, in particular, the implication of a term for payment in accordance with the submission of invoices.

249 Alliance's case is that the contract provided for the entirety of the scope of the work. Mr Oehme submits that this contract, containing as it did schedules of rates, still constituted an entire contract. The contract price was fixed and any variations were essentially to be 'client driven' (i.e., by Grocon through Alliance) and were to be separately priced.

250 Alliance relies on various paragraphs of the letter from Alliance of 31 July, 1995, referred to and accepted by Johnson's letter of 31 July, 1995 as follows: (a) paragraph 26 specified that variations had to be authorised and processed by the Alliance Group. That was clearly demonstrative of the fact that Alliance was insisting on the approval of authorisations and payments prior to any obligation being accepted and unless the client had put it, Alliance, into funds to meet such changes. (b) paragraph 31 - that changes would not be made unless full approval had been given in writing by Alliance. Again, that seems to me to be consistent with Alliance insisting that there were to be no variations unless they were approved by Alliance.

251 Alliance contends that the terms did include the fact that the billing compilation procedure was to occur monthly and that progress claims would be made. However, Alliance denies that there was an obligation on it to pay simply on the receipt of invoices. It submits that what Johnson claimed for had to be examined, assessed and agreed to by Alliance prior to payment.

252 Alliance further contends that this is, in fact, what happened in that invoices were submitted, there were then a series of negotiations between personnel from both Johnson and Alliance, amended invoices were then submitted and further discussed.

253 Claims 1 to 9 were discussed, in the case of claims 7, 8 and 9 in great detail. Claim 8 for example, was substantially reduced by five reductions from $114,300 (when made on 15 May, 1996) to $38,076 when it was ultimately paid in August, 1998. Claims 10, 11, 12 13 and 14 were not paid.

Alliance : status and effect of billing compilation sheets

254 Alliance submits that Johnson's submissions amount to an attempt to give the billing compilation sheets greater significance than they actually had. Alliance submits that they were simply an aid to the parties to determine the actual work carried out. The sheets provided a basis for the way the work was to be performed.

255 Mr Oehme refers to the letter from Johnson dated 28 July, 1995 to the effect that the projected progress claim details were a "best guess of the costs progress" and that there would be fluctuations in the exact monthly billing value each month. Billings would be for "agreed work completed". However, there was no provision for what was to happen in the event of a failure to agree.

256 The express terms of the contract were silent on the question of variations by addition or omission. It is also unclear whether those variations were to be dealt with outside the billing compilation process.

257 Johnson's contention is that the contract was to be adjusted in accordance with the variations. Those variations were to be treated separately from the valuing of the progress claims.

258 Johnson submits that these arrangements for variations had nothing to do with the progress claims. The variation procedure did not detract from the methodology which the parties agreed to (Johnson contends) which was ultimately expressed in the billing compilation process.

259 Johnson concedes that the variations would have an impact on the price ultimately to be paid. However, it submits that there was nothing to say that the value of the work to be performed under the contract would be changed by those variations.

260 Alliance submits that all the contemporaneous documents and statements made it clear that variations were to be dealt with separately and outside the scope of the original contract.

261 Alliance submits that its letter of 31 July, 1995 (attachment 5 in the referee's report) sets out the envisaged process which should have been adopted. It was clear from paragraphs 25, 26, and 31 of that letter that Johnson was insisting that any changes or variations had to be 'client-driven' and paid for by the client.

262 Alliance further submits that both parties acted on the basis that claims would be for work completed. Payment entitlement would only arise once the work was done - again Alliance relies in that respect on attachment 4 to the referee's report (page 127).

263 Alliance argues that there is no evidence that this approach was ever disputed until Johnson's change in position before the referee.

264 Alliance submits that this is clear from the billing compilation schedule itself, as well as from the contemporaneous documentation. Alliance refers, for example, to the letter of Mr Densham on 15 May about the forecast of $114,000.00 worth of work to be completed by the end of the month. That letter is also relied on to show consistency with the practice whereby, at the end of the month, Johnson would revise what work it had done compared to the estimates given and then submit a different billing compilation schedule and the accompanying invoice - see referee's report at page 24.

265 Alliance also submits that Mr Densham's evidence established the limited nature of the progress claims in indicating the extent of the works undertaken in respect of each of the claims. The sheets submitted only related to a portion of the works. They could not establish the full extent of the works undertaken or indeed, other areas of the works undertaken let alone completed. Similarly, the commissioning sheets did not show the percentage of the works carried out over the time period discussed. He submits that the limited nature of the sheets is indicated by the reference to the percentage of work claimed for the fan control units.

266 What was finally arrived at was an informal commercial agreement 'which ought to be interpreted in a 'straightforward, commonsense way' on the basis that it was neither drafted by lawyers nor intended to express with legal precision what the parties intended' - Collins Hill Group Ltd v Trollope Silverwood and Beck Pty Ltd [2002] VSCA 205 per Ormiston JA at [14]. However, that does not mean that terms should or can be implied where there is no evidence to support that such terms were either in the contemplation of the parties or would impose obligations not contemplated by either of them.

267 Having regard to all the evidence and material before the referee and in these proceedings, I accept, as the referee found, that the billing sheets were working documents designed and intended to indicate what work had been done, had to be done and for which a claim was to be made; that they were an ongoing record of works which were to be altered on a regular basis depending on what work had been done and by whom. They also needed to reflect the scope of works carried out and to be carried out by Johnson.

268 It is clear that the parties envisaged a system of progress payments and that, during the life of the agreement, the work to be carried out would be varied by various additions or omissions. There is nothing to show that the common intention of the parties was that the contract price would be altered for variation adjustments. The pricing of the variations was a real issue between the parties in assessing their respective entitlements and obligations.

269 Johnson wanted a system which would mandate a time for payment simply by the submission of invoices. It can be readily imagined why a company in its position would want such a process for the ease of operation of its financial systems and requirements. By contrast, Alliance wanted to be put in funds or have a prior agreement with its client Grocon for variations before such work was done. Alliance wanted the work to be done and done to a proper standard before it paid for those items.

270 It is unsurprising with those competing priorities and needs that there was an almost immediate and continuing disagreement which the parties really never resolved.

271 The principal object of the agreement was the installation of the system for the specific project for a price. It was a complicated and sophisticated system requiring expertise. While the price was agreed, I do not think it can be found nor inferred from the evidence that the parties ever had a meeting of minds that the price was to be paid in the manner contended for by Johnson, particularly, that the obligation for payment was to arise automatically on the submission of invoices based on the billing schedule documents. Nor do I think that a term of such fundamental impact can be retrospectively implied in the circumstances of this case.

272 Similarly, I do not see how the billing compilation sheets could be regarded as unalterable, nor as constituting a contractually binding document, nor a document which would found an automatic obligation to pay the amounts submitted. The sheets were indicative of a process to be followed. The sheets did not relate to the totality of the works - particularly in relation to the matters of controversy in claims 10 to 14. Nor do I think that it can be asserted that the billing sheets - simpliciter - show that the work had been satisfactorily carried out or indeed, carried out at all or in part.

273 From what has been put before me, it appears that there are only a limited number of sheets and those only applied to a limited part of the works. I do not think that those sheets can be regarded as an essential part of the contract between the parties, nor can a term to pay in accordance with those sheets be implied as a fundamental or indeed, any other kind of term of the contract.

274 Johnson argues that there was a variation to the contract some months after the exchange of letters in relation to the procedure to be established for progress payments. It submits that this was a recognition by the parties that the proposed schedule of payments was unworkable and that they then tried to bring in a more practical method of valuing progress claims. Johnson submits that that was a process from which the parties could not unilaterally depart. Johnson contends that the letter of the 26 April 1996 from Mr Densham was evidence of the way the parties dealt with this matter.

275 Johnson further submits that the contract was varied by the exchange of letters between the parties of 20 March, 1996. Johnson also submits that the terms for the payment of progress claims became part of the conditions of the contract. There was an exchange of correspondence on 20 March, 1996 (exhibits A5 - A, B, C and D) when it was clear that the parties themselves saw that there had been a major interruption, if not breakdown, in their relationship. There was a further period marked by negotiations and an exchange of correspondence.

276 Johnson relies on the letter from Mr Daley (from Johnson) of 10 December, 1996 to reflect the position that was in operation at the date of that letter. That was at a time when the parties had not come to an agreement on variations. Johnson submits that the process initiated by Mr Densham had been progressing with what was left in the contract to bring it to a conclusion. That remained the process in place even after he, Densham, had left Johnson's employ.

277 In my view, those letters do not form part of, nor provide evidence of, the contract on the basis sought to be relied on by Johnson. The correspondence between the parties including up to 10 December, 1996 makes it clear that the issue of the variations was very much in the mind of the parties as a matter to be addressed and where there was no certainty, let alone agreement.

278 The subsequent correspondence (from March 1996 onwards) seems to me to have been an attempt to resuscitate the parties' relationship rather than to form part of any binding contract. It was clear from the letter of Mr Densham of the 26 April, 1996 that he was proposing that the majority of the variations would involve a "swings and roundabouts" approach and that "addition and deletion works should be offset reducing the impact on the contract amount". The fact that the sheets were used in this way also supports the view that, although there was an original price put into the monthly projections, that price was intended to be altered.

279 That was consistent with the letter of 28 July, 1995 from Mr Densham and Mr Drakes (both from Johnson) that there would be fluctuations in the monthly billing value. In my view, Mr Densham was clearly not suggesting that additions and deletions were outside the contract, rather, that they were contemplated at the time. The real issue was how were they to be taken into account.

280 The referee found that the work covered in the Scott Schedules made it clear that there would be an impact on the pricing of the contract sum.

281 The extent and value of the variations to the scope and standard of work was reflected in the Scott Schedules. As the job progressed, there were variations to the scope of the contract by way of: (i) addition ( see matters set out in Scott schedule 1 ); (ii) omissions ( Scott schedule 2 ); (iii) items part of the contract and performed by Alliance ( Scott schedule 3 ); and (iv) items of incomplete works or works incorrectly performed ( Scott schedule 4 ).

282 The Scott schedules were documents which were constantly evolving during the negotiation and completion of the contract. They were originally drafted by Alliance and ultimately refined and changed during the course of the referee's proceedings and, in particular, following the three day conclave of experts. Following that experts' conclave, the figure of $180,000.00 for the Scott schedule items in schedule 2 was agreed upon in relation to the reduction of the scope of works which had been carried out.

283 Johnson's position was that there was an express written contract with a contract price which did not change. There were to be additional works carried out by way of variations which had not been provided for expressly between the parties. The critical issue on Johnson's case was how those progress claims would be both calculated and met. Crucial to that issue in turn was the billing compilation process and the billing compilation schedules. Johnson's case is that those items would be dealt with differently because there was nothing in the contract to deal with the subject of variations. Moreover, valuations on those variation items were never agreed.

284 Alliance relied on the Scott schedule items as successive retrospective valuations of the various classifications which were revised in the normal way whith such schedules. It submits that it was clear that Johnson agreed that variations were made by virtue of Scott Schedules 2 and 3 and further that those variations would affect the contract sum. Further, that all the contemporaneous documents establish that Johnson acknowledged, at the time, that those works would affect the price and that the Scott Schedules show that the parties were in broad agreement as to the contractual principles and relationship which was in existence between them. The only issue was in relation to the valuation of the variations.

285 Alliance submits that the Scott Schedules show that there would not only be variations but that those variations would affect the scope of the work and the contract sum to be paid. It was clear, Alliance submits, that the valuations were at issue from April 1996 and indeed that many variations had been requested from August 1995.

286 Alliance further submits that, until the proceedings before the referee, Johnson at no stage disputed that variations should not be taken into account in determining the progress claims and notes that Johnson did not call any witnesses in this respect.

287 Alliance therefore submits that there is a complete consistency between Alliance's own case and:

(a) the contemporaneous documentation and other events; (b) the acknowledgment in the Scott Schedules in the amended pleadings in the matter; and (c) the absence of any indication that Johnson considered the variations did not exist or did not have any affect on the progress claims.

288 Moreover, Alliance submits that this understanding was common between the parties at all relevant times and that, until the referee proceedings, there was no indication by Johnson of any dispute as to the way variations were to be taken into account or indeed that they should not be taken into account in progress claims.

289 Alliance submitted that the referee went through the 61 items set out in the Scott Schedule; further, the referee's examination was thorough and complete and it should be accepted.

290 Alliance's case is that it was essential for Johnson to show the extent of the work done and the value of it:- (a) to prove that the progress claims were valid; (b) to show that Alliance had evinced an intention to repudiate; and (c) to establish the amounts that should be awarded.

291 Alliance further submits that Johnson was unable to prove that it had carried out the work or to establish that the amount it claimed was proper. In this regard, Alliance refers particularly to paragraph 85 of the referee's report. I am not persuaded on the submissions, or the evidence I have seen, that the referee's assessment was incorrect. To the contrary, the referee's conclusions seem to be consistent with all the evidence I have seen and my overall impression of the course of conduct between the parties and what was intended.

292 Alliance also submits that Johnson did not demonstrate what it had done, nor did it provide any contemporaneous documentation which could have been expected, had the work that Johnson should have done been done under the applicable quality assurance regime. Alliance also submits that there were no contemporaneous documents which should have been available had Johnson's works been completed. To the contrary, Mr Oehme submits that the only internal documentation came from Mr Seeto's letter of 13 January 1997 which shows that there were 50 items of uncompleted works.

Alliance submissions: Johnson did not complete the work

293 Alliance submits that the referee was correct in coming to his conclusion in paragraph 85 of the referee's report that Johnson had "significantly overstated the work carried out". The referee took into account the work set out in the Scott Schedules in coming to his conclusion that there was "no indebtedness by Alliance to Johnson by virtue of the progress claims".

294 Alliance submits that the only possible inference that can be drawn in these circumstances was that it was impossible for Johnson to prove that they only had a small amount of work to be completed. In fact, it is submitted that Johnson's works were far from complete, and far from being properly carried out within the terms of the regime.

295 Alliance submits that it was the witnesses of Alliance who had introduced most of the contemporaneous documentation which was before the referee. Further, that those witnesses had provided evidence supporting the fact that there had been incomplete work done by Johnson.

296 In this regard, Alliance refers to paragraph 127 of the report where the referee makes reference to the state of the incomplete and defective work which was carried out and demonstrated with reference to the material set out in the Scott Schedule - 4. Alliance stresses the referee's findings that Johnson should have faced up to the fact that the work was both deficient and incomplete.

297 Alliance also submits that this is clear from what was actually claimed. The contract amount was $400,000.00. The amount actually claimed by Johnson was $536,000.00, at a stage when Johnson claimed that the works were 92% complete (i.e., in November 1996).

298 Alliance submits that this could not be the case because Johnson never finally completed the work. It was a patently unrealistic and incorrect amount, even when taking into account the incomplete work as set out in Scott Schedule - 4. Allegation of failure to address variation and performance issues

299 Alliance also submits that Johnson must have been fully cognisant of why Johnson's claims had not been paid. Rather than disputing Alliance's entitlement, it said it would address the variation and performance issues. However, these were not addressed.

300 Alliance submits that Johnson neither provided witnesses or documents to substantiate the work had been done pursuant to the contract either effectively or at all. There was insufficient evidence before the referee to substantiate Johnson's claim. Mr Oehme also refers to the various parts of the referee's findings and comments about what Mr Oehme described as Johnson's failure to install items properly or at all and overcharging for other items.

301 Alliance contends that the terms of the contract included a term that the obligation to make the payments would only arise once it had agreed that the work claimed for had been done, or would be done, and to an appropriate standard. Alliance submits that Johnson's claim was incorrect or untenable for the following reasons: (a) the variation pricing was unreasonable; (b) the variations by omission were in fact greater by the variations by addition; and (c) the variations by omission had an immediate effect on the amount of work claimable.

302 Alliance further submits that the variations by omission needed to be rectified before Johnson could make any further claims. Accordingly, Johnson's claim - that the amounts offset justified its actions - was incorrect. Mr Oehme submits that, moreover, Johnson knew those claims had to be incorrect.

303 Accordingly, Alliance submits that Johnson acted unreasonably in continuing to make claims based on the contract value. Alliance also submits that the Defendant's contemporaneous records establishe that the Plaintiff's claim for variations by addition were too high and that the variations by omission were too low.

304 I accept the submission that the other evidence (for example, the Sydney Electricity defect notices) show that there was evidence on which it could be found that the works had not been properly completed. Accordingly and consequently, Johnson's entitlement to be paid could not be asserted simply on the basis of the submission of those billing sheets.

305 While agreeing to the payments schedule - and that payments would be made in accordance with that schedule - Alliance was equally insistent on the performance of the scope of works in the times specified and at the quality agreed.

306 Alliance specified (A5 - C) that the only reason payment had been delayed was 'in relation to performance issues'. Mr Oehme reiterated that work was to be performed in accordance with the original deadlines and costs as agreed. Johnson, in turn, - (exhibit A 5 - B) - agreed to the completion of works in accordance with the Quality Assurance certification specified in Alliance's earlier letter.

307 A report carried out by Addicott Hogarth and Wilson, consulting engineers, who were authors of the specification documents in the contract as to the outstanding work that needed to be done. That outline was able to be cross-referenced to the matters set out in the Scott Schedule documents.

308 Johnson then quoted to complete that work (see document 525, 16 September 1997). Perhaps unsurprisingly, Alliance got the work completed by another contractor, namely Honeywell. While all these negotiations were going on, the system was still being 'caretaken' by Alliance.

309 That is at least part of the relevant period and work to which the electricians claim by Alliance of $288,000, as well as for Mr Oehme's own time, is made - see cross-claim paras. 422 ff; 434 ff.

310 The challenge to the implication of terms in this case relates to terms of good faith and reasonableness, the conduct in relation to which this term should be implied, and whether time for payment was of the essence. Johnson submits that, while the referee did cite the relevant decisions, he did not analyse what the law was or how it should be applied in relation to the obligations on both Johnson and Alliance concerning the contract.

311 Johnson contends that it is clear that the referee said that there was an omission to make any provisions in relation to variations or as to the process of valuing progress claims. The referee therefore implied a term that the parties should act in good faith imposing on Johnson the contractual obligation which was not expressly provided for in the contract and which could not have been in the contemplation of the parties when the contract was made.

312 Johnson submits that, in so doing, the referee was writing a provision into the contract which was inconsistent with its express terms. That of itself gave a financial advantage to Alliance, in other words, by devaluing each progress claim to the disadvantage of Johnson. Johnson submits that the manner in which the referee dealt with this implied obligation could not, as a matter of law, have been a proper legal interpretation of the contract. This was because there was no provision in the controls contract which dealt with bill values.

313 Johnson accepts that implied obligation to act reasonably would apply to this particular kind of contract. However, it contends that the referee fell into error in that he implied an obligation to act reasonably in relation to Johnson's adjustments to the billing contracts for variations. Johnson submits that such a term could not be implied because it was contrary to the express terms of the contract for billing processes. Johnson then submits that the referee failed to consider whether there was any evidence as to imply a term as to reasonableness to this particular contract.

314 These submissions are made generally in relation to the implication of terms in the contract by the referee. Those principles need to be considered against the specific terms implied or rejected.

315 The referee found (para. 39) that there was an implied obligation on the parties to act reasonably and in good faith. That obligation was extended to be binding on the parties in relation to the submission of variations to the specified work and the assessment of bill values in relation to that work.

316 Johnson further submits that the implication of the term by the referee that there was an obligation to act in good faith, was not warranted in these circumstances - see report page 73.

317 Alliance submits that attachment four to the contract (Johnson's letter of 28 July 1995; report pages 126-127) made it clear that there were to be possible fluctuations of billing values each month and that there were to be variations. The parties knew that the scope of work was to change. In those circumstances, Alliance submits there was a duty to act reasonably on both parties in relation to the costing charges and the way those changes which occurred would be taken into account. Alliance also submits that, as part of that duty, it was not reasonable for Johnson not to take into account the fact that the scope of works had either been reduced or deleted when submitting its accounts.

318 In my view, the referee set out the relevant law as provided in Burger King Corporation v Hungry Jack's Pty Limited [2001] NSWCA 187 and Vodafone Pacific Ltd v Mobile Innovations Ltd [20-23 October 2003, 20 February 2004] unreported, NSWCA and properly applied it. He was entitled to find, and should have found, that such a term should be implied in these circumstances.

319 The referee referred (report para. 45) to the relevant law in relation to the effect that time for payment is not traditionally treated as an essential condition of the contract. The referee found that time for payment was nevertheless significant - which, as a matter of common sense, it would have to be - in a relationship such as this between two commercial entities.

320 Johnson asserts that time for payment was to be of the essence. It relies on the attachment letter 4 (referees report p. 127) to that effect.

321 Alliance submits that that is inconsistent with the actualities of what occurred at the time of the original contract and subsequently. Alliance also submits that no party would ever agree to such a term, particularly in the context of a contract where, in the event that the contract was brought to an end, it would mean that all work done prior to that time would be effectively worthless. Alliance relies on the decision of Ankar Pty Ltd & Arnick Holdings Ltd v National Westminster Finance (Australia) Ltd (1987) 162 CLR 549 at 556-7 to support the approach that there was a reluctance on the part of courts to construe terms which will enable the avoidance of contractual obligations.

322 Alliance further submits that had there been any agreement between the parties to that effect it would have been reflected in the correspondence. The fact that there were no such references is said to support the referee's findings in this respect.

323 Alliance further submits that the history of the matter made it clear that Johnson gave Alliance three options which were: for payments to be made directly from Grocon, for an unconditional guarantee and for an increase in the level of credit insurance. None of these were put forward with any demand that time should be of the essence. Rather these options were put forward in the context of providing security for payment.

324 In my view, the contractual documentation and the parties' dealings at the time do not support the implication of a term that time was to be of the essence in relation to the payment of monies in accordance with the invoices submitted. It is clear that the parties entered a revised payment schedule and there was an adjustment for the payment dates. That arrangement was very different from making time for payment of the essence. In my view the referee was correct in his assessment that the contract documentation did not expressly state that time for payment was to be of the essence, nor was that explicitly stated in any other documentation.

325 The referee considered that it was appropriate that a term be implied into the contract to give it business efficacy - paragraph 44. In doing that, he accepted the suggestion by Alliance that, if agreement on a bill value was not achieved within a particular month, the progress claim for that month would not be payable within 60 days of the end of that month, but within 60 days of the agreement on the bill value.

326 Alliance submits that "what occurred was consistent with industry practice". Johnson submits that the case is not concerned with industry practice. It was a situation where the parties were determining how the variations were to be treated. If one was to rely on whether industry practice was advanced by the practices of the parties one would need evidence to that effect.

327 In my view the referee was justified in the implication of the term outlined above.

328 In this regard it is also of importance to note the referee's experience in this area of building and commercial practice. Even if that was not the case, the implication of this term seems to me to be entirely appropriate in the context that the parties had not, for whatever reason, provided in the contract, or elsewhere, provisions to cover a situation if agreement was not to be achieved in relation to a particular bill value by the bill date. The time period of 60 days was referred to in the letter of 28 July, 1995 - attachment 4. That was taken into account by the referee in his determination (referee's report paras. 57/58). However, his finding - with which I agree - that it was not such to give Johnson the right to suspend work for non-payment of the progress claim.

329 Johnson submits that there were further negotiations between the parties which resulted in an additional term for payment which should have been implied into the contract. Johnson submits that the effect of the arrangement was that was really a counter-offer by Johnson to Alliance, which was accepted, and that therefore Alliance could not unilaterally depart from the arrangement.

330 Johnson further submits that that did not impose an obligation either in relation to the contract or the billing compilation process and that the implication of that term was in conflict with the express term of the billing compilation process. Johnson argues that it was clear that all parties had to act reasonably, particularly as to the time of payment. Alliance submits that the implication of the ad hoc term was open to the referee and that it covered the payment situation. Alliance further submits that such an obligation as to payment would only arise once work had been properly performed in accordance with the contract.

331 Mr Van Aalst refers to the distinction outlined in Renard Constructions (ME) Pty Limited v Minister for Public Works (1992) 26 NSWLR 234 at [256]: "This was analysed by Hope JA, with whom Samuels JA and I agreed, in Castlemaine Tooheys Ltd v Carlton & United Breweries Ltd (1987) 10 NSWLR 468 at 486-490. Hope JA pointed out that implication of this kind is different from implication ad hoc in that the latter occurs in the circumstances of particular individual contracts, whereas implication by law is based on imputed intention as opposed to actual intention, and implies a term as a legal incident of a particular class of contract."

332 The combined effect of the decisions such as Burger King Corporation v Hungry Jack's Pty Limited [2001] NSWCA 187 at [146]; Renard Constructions (ME) Pty Limited v Minister for Public Works (1992) 26 NSWLR 234; Vodafone Pacific Ltd v Mobile Innovations Ltd (20-23 October 2003, 20 February 2004) unrep. NSWCA at [189] are that terms of good faith and reasonableness are implied at least in relation to franchise agreements (as in Burger King) although not necessarily in commercial contracts. However, even taken at its highest in support of the reliance placed on that principle by Johnson (as referred to by Giles JA in Vodafone at [189] and His Honour's rejection of commercial contracts as a class of contracts carrying the implied term as a legal incident), such terms could only be implied where necessary to give business efficacy to the contract. No term will be implied if the contract is effective without it, or where such terms are excluded by express provision, or because they are inconsistent with the terms of the contract.

333 Here the issue for consideration is the referee's approach as to whether terms should be implied into the contract between the parties of reasonableness and for payment where there was no express exclusion of such implied terms or whether such terms were inconsistent with the terms of the contract. Dependent on the answers to those questions - and with respect I would adopt the approach followed by Giles JA in Vodafone at [191] - [198] - the next issue is whether there were breaches of such implied terms by either or both parties.

334 In my view, Johnson's approach that the contract was to be for the installation of the system and the payment of the contract price by monthly instalments was inconsistent with what occurred - and what was clearly contemplated by the parties as to what would occur. Similarly, the submission that the billing compilation process had to be viewed separately from the contract is inconsistent with the proposition that the contract sum was going to be adjusted from time to time.

335 Variations were clearly contemplated - as would be expected in any building contract of this size. There had to be a system of assessing the work done and variations to be done, the payments to be made and the time for making those payments. It was not reasonable to expect payment for work which had not been completed. Here, the system the subject of the contract was never installed.

336 It also seems to have been clearly contemplated by the initial correspondence and subsequent actions that it was practical for Alliance to do work on behalf of Johnson and for that to result in an adjustment to the contract sum and the amount payable.

337 The referee was experienced and expert in building industry practices. He was well able to find on the evidence that the term implied was consistent with industry practices.

338 In my view, the referee correctly applied the law and came to the correct decisions. A term that the parties act in good faith and reasonably was necessary to give business efficacy to the contract which would otherwise have been ineffective. The term was as submitted by Alliance as to when the obligation for payment would arise is correct. Further, and consistently with my earlier findings rejecting the fundamental term sought to be implied by Johnson in relation to the status and effect of the billing compilation procedure, I do not find that such a term was excluded by express provision or was inconsistent with the terms of the contract

Did either party repudiate the agreement and if so, how and to what effect?

339 The referee's report sets out the chronology whereby Alliance asked Johnson to come back to the site. I am not satisfied that there are any substantial errors in that chronology. By 7 February, 1997, Johnson's personnel had left the site. Johnson alleged that they had accepted Alliance's repudiation of the contract by the failure to pay Johnson's claims. In October 1997 Alliance sent Johnson a letter asking Johnson to go back to work. The letter stated that if Johnson did not return to complete the work it would be accepted by Alliance as a repudiation of the contract. Johnson then continued work on the contract.

340 Each party relies on separate acts to justify their claim that the other side had repudiated the contract. Those claims were the subject of extensive correspondence during 1997. During 1997 there were also proceedings between the parties in the Supreme Court in an attempt by Johnson to utilise the statutory demand process to obtain funds from Alliance, and by Alliance to have those demands set aside.

341 Johnson contends that the contract was terminated by Alliance in September, 1996 or alternatively, that there was a repudiation by Alliance by its continuous failure and refusal to pay Johnson for work done. Johnson alleges that it accepted that repudiation on or about 7 February, 1997.

342 Alliance contends that Johnson abandoned the contract by leaving the project on 7 February, 1997 and advising Alliance that it was suspending the work. That action and the refusal to complete outstanding and defective works as required in its letter of 26 September, 1997 constituted a repudiation of the contract. Alliance said that it accepted that repudiation by letter dated 24 October, 1997 (exhibit A 7).

343 Alliance submitted that that repudiation was demonstrated by the chronology of the work done, or said to have been done, and the way the outstanding claims had been presented. Mr Oehme referred to the fact that Johnson had worked on the site between November 1996 and February 1997, leaving the site on 15 February 1997. That was 60 days after the submission of claim number 14 (the invoice of 6 December 1996). Mr Oehme also submits that it was clear that the work had not been completed by Johnson in February 1997 when they left the site. As a matter of inference, therefore, the work the subject of claim 14 had not been completed at that time. Therefore, Johnson was not entitled to leave the site prior to the completion of the work and hence not to terminate the contract in the way they did.

344 Alliance further submits that if Johnson was arguing that the non-payment for the work set out in claim 14 was the fundamental breach by Alliance, entitling Johnson to terminate the contract, Johnson had to show that the work had been done as of November 1996. That was not done - nor could it be done. Johnson had been unable to satisfy the referee that the amount of work set out in each of the claims had been performed.

345 Mr Oehme submitted that Johnson adopted the approach referred to by Mr Van Aalst to give themselves a retrospective justification and legal basis for leaving the site without having completed the works. He submits that what Johnson did was effectively an act of repudiation, entitling Alliance to claim damages.

346 In the alternative Alliance submits that, even if Johnson could prove some payments were due and payable to it (which it denies), there was no basis for any finding that Alliance had repudiated the contract. This was because Alliance was, at all stages, attempting to bring notice of the defects to Johnson's attention, both in relation to the scope of works and the defective works. By doing that, Alliance was evincing an intention to maintain the contract.

347 The referee (report paras. 62 ff) set out the preceding history of the discussions and arrangements and (para. 66 ff) accepted Alliance's account of the discussions. The referee found (report para. 87) that Johnson had wrongfully suspended work and left the site by 7 February, 1997, wrongfully failed to return and complete the work despite requests to do so and had thereby repudiated the agreement.

348 The report (page 43) makes it clear that Alliance offered Johnson $150,000 to return to the site. While that process was going on, Grocon sent a letter to Alliance saying that it was taking over the BMCS system itself.

349 Johnson contends that what defects may have existed, were, if they existed at all, of such a minor nature that Johnson must be taken as having substantially performed its obligations. Mr Van Alst, counsel for Johnson, relies on what was said by Denning LJ in Hoenig v Isaacs [1952] 2 All ER 176 at 180 in that regard.

350 Alliance reiterates that there was no completion nor substantial completion. Mr Oehme submits that the inference that Johnson repudiated the agreement at a time when it had not completed, or substantially completed, the work to be done is stronger when it is considered that it would have been of considerable benefit to Johnson to receive the benefit of a long-term contract involving the premises. Johnson could have had the benefit of this contract had they stayed involved with the project.

351 Alliance also refers to Johnson's attempts to justify its departure from the site to the principal contractor, Grocon, when Johnson claimed that it had carried out a substantial body of the work on the site. Mr Oehme submits that there was no attempt made by Johnson to substantiate to Grocon the actual work done. Alliance submits that, in those circumstances, it is a matter of strong inference that, had Johnson been able to substantiate its claim - whether to Alliance or to Grocon - that it would have done so at that time. Alliance also asks rhetorically why Grocon would have gone to the trouble of getting another contractor in to complete the project if the work was substantially completed.

352 Alliance submits that, if the work had been done by Johnson as it claimed, Johnson would have remained on site. It was in Johnson's commercial interests to maintain its rights under the contract, and in particular, given its ownership of the intellectual property to the system, to ensure that it continued to maintain the contract with the income stream and all the financial benefits that would ensue under the maintenance contract.

353 The law in relation to repudiation has recently been considered by the Court of Appeal in Sanpine Pty Ltd v Koompahtoo Local Aboriginal Land Council and anor NSWCA 291 - special leave granted [2007] HCA 24 April, 2007 - and in particular the nature of repudiatory conduct, when reasonable inferences can be drawn as to when a contracting party is prepared to carry out his part of the contract only if and when is suits him and when there can be termination by acceptance of a repudiation. Other relevant principles were set out by Young J in Majik Markets Pty Ltd v S&M Motor Repairs Pty Ltd (1987) 10 NSWLR 49 at 54 lines C to D. Here it seems to me that the referee applied all the relevant and appropriate principles to the totality of the course of conduct of these parties.

354 I am satisfied that the referee's finding that Johnson repudiated the agreement was correct on the available material. In my view, there was a disavowal by Johnson of its fundamental obligations under the contract. Further, that Alliance's actions were an acceptance of that repudiation.

355 Johnson submits that the referee clearly relied on the documentation and, in particular, the statement of Mr Oehme as well as the agreed bundle of documents rather than reviewing the transcript, let alone his notes of the evidence, in his assessment of the various witnesses. Johnson refers to the referee's report where the referee sets out a summary of events which is said to come exclusively from the statement of Mr Oehme, as well as relevant documents in the agreed bundle of documents.

356 It is clear that the referee examined the available documentation - which was entirely appropriate in the situation where there were conflicts about what was said and the meaning and implication of the parties' course of conduct. The referee was able to compare the evidence of the witnesses and make (appropriate) observations on who he was prepared to accept and why - for example, the evidence and claims of Mr Stefanik who he regarded (report para. 119) as a 'careful record keeper'.

357 Mr Van Aalst, for Johnson, submits that, although the referee referred to that summary as having also been derived from 'the transcript', there are no transcript references other than three references.

358 Further, Johnson complains that there is no consideration of the evidence of witnesses called by Johnson in opposition to Mr Oehme's evidence - for example, and particularly, the evidence of Mr Densham, the Project Manager, who was in charge of the project for Johnson on that particular site and who carried out many of the relevant negotiations with Mr Oehme. Johnson also complains that the referee did not refer to the evidence of another Johnson witness, Mr Stephen Perry. However, as I understand the position, a statement was prepared for Stephen Perry but he was not called.

359 Johnson tendered a statement of the evidence of Mr Densham to the referee (exhibit A 23). Johnson submits that that evidence - which it submits the referee ignored - was available to establish:

the implementation of the billing compilation process; that Mr Densham, was the person who made the assessment of the approximation of the works undertaken for each relevant period; that he consulted and forwarded the relevant billing compilation forms and sought payment on the invoices.

360 Alliance disputes this and submits that the referee's report (at para. 85) really asks what Johnson was attempting to do by this process. The referee's conclusion was that "Johnson has not even in these proceedings sought to prove the extent of the works covered by any of the claims 10 to 14". Alliance submits that that conclusion was both inevitable and correct because there was no evidence to support the other aspects of the claims. Although Mr Densham had sought a recognition that there had been practical completion of the tower (A15), that was disputed by Alliance. Alliance also submits that Densham was not asked to relate his application that there be practical completion to any aspect of the progress claims which were made.

361 Further, Alliance submits that although Densham was asked in his evidence about parts of the billing compilation documents as to the estimates he had made of the work completed, he was not asked whether those estimates had in fact been achieved. Alliance submits that it is clear from exhibit A23 that Densham in fact confirmed that the printouts did not establish that information contained in them was accurate. Alliance's case is in essence that the electrical works were not completed, therefore the commissioning works were not completed; Mr Densham did not and could not establish conclusively the extent of the works undertaken in respect of the progress claims nor that there was practical completion.

362 Alliance submits that scrutiny of the evidence given in relation to those claims shows:- (a) simply that the claims were sent out - see referee's report paragraph 77; (b) the schedules were only estimates of the work which would be completed by the end of the month - transcript 88/89; and (c ) that there was no attempt made to establish by evidence that the works referred to in claims 10 to 14 had in fact been carried out.

363 Alliance submits, and I think accurately, that what was done was to put before the referee claims and the methodology as to how those claims were made. However, Mr Oehme argues that Johnson led no evidence to substantiate that the work had been done, nor that the methodology necessarily resulted in a set of claims which showed that the work had been done and warranted the payment by Johnson. In short, Alliance submits that Johnson needed to prove (and didn't) what had been done and the value of what had been done, not just that something had been done.

364 In my view both the report, the submissions made and the evidence tendered establishes that there was a proper scrutiny by the referee of all the evidence, both oral and documentary, and that the referee's report was properly founded on the evidence. I also agree with the referee's finding that Johnson did not substantiate its claims and the work done, but simply relied on the billing compilation schedules.

365 Johnson submits that the referee did not consider the evidence in the proceedings. Johnson tendered a schedule (exhibit A 12) said to demonstrate the evidentiary sources for paragraphs 63 to 78 of the report. Those paragraphs deal with one of the crucial issues of fact namely, the termination of the contract.

366 The report is attacked on the basis that there was no analysis of the evidence nor even a reference (other than on two occasions) to the transcript of evidence. Johnson submits that but rather that the referee based his findings on a simplistic recounting or reading of the statement of Mr Oehme and of relevant documents set out in the agreed bundle of documents.

Receipt or regard to evidence before the referee : Approach to be adopted

367 The relevant principles (which are relevant both to Johnson's claim and Alliance's cross-claim) are as set out in the decision of Gleeson CJ in Super P/L v SJP Formwork (op cit) especially at 563 and as amplified by Cole J. in Skinner & Edwards (Builders) Pty Ltd v Australian Telecommunications Corporation (1992) 27 NSWLR 567 namely: (a) The court is not required to have regard to the evidence taken before the referee; (b) Whether or not the court receives the evidence which was before the referee is a matter solely for the court. The evidence tendered before the referee is not evidence in the proceedings; (c) The reasons why a referee has reached a particular finding of fact should appear in the reasons as required. If the reasons do reveal the findings, and if a reading of the report satisfies the court that it is appropriate to adopt the opinion of the referee on that question of fact, then the report may be adopted without resort to the evidence; (d) a finding of material fact critical to the chain of reasoning leading to the ultimate recommended result absent any evidence, direct or indirect to found the fact or relevant inference may constitute an error of law- Skinner and Edwards v ATC (1992) 27 NSWLR 567 at 572; and (e) The fact that the court may reach a different conclusion on the evidence before the referee does not oblige the court to reject the referee's opinion or read all the evidence and consider whether a different opinion is justified.

368 The referee had before him the evidence and the submissions which clearly covered the transcript of evidence - both evidence in chief and cross-examination. Summaries of the references made by the referee, the witnesses and the submissions made were exhibits A 11 and A 12. In my view, the referee would have been reminded of the evidence by the process of considering the extensive written and oral, submissions of the parties, containing as they did, references to the transcript.

369 Johnson submits that the referee's report and, in particular, the summary provided in paragraph 26, demonstrate that what the referee did was simply provide a summary based on Mr Oehme's statement. That was exhibit 15D-2 in the exhibits before the referee as well as the agreed documents.

370 While that summary of that aspect of the proceedings appears to be substantially based on Mr Oehme's statement and the agreed documents, it did also contain some references to the transcript. There are also other references in the report to the transcript - for example, para 48, albeit then in relation to procedural matters. Of itself, that does not mean that the referee did not consider other evidence.

Matters apparent from referee's report : Reliance on documentation

371 The referee gave considerable attention to the documents which had been adduced in evidence rather than the oral evidence of the parties. However, that is not surprising given the nature of the case and the apparent conflicts between the parties. The totally different construction both parties put on the question of the variations and the billing procedures made it clear that areas of conflict between the parties' recollections, perspectives and testimony were likely to be, and remain, irreconcilable.

372 In those circumstances the referee was justified in considering that the documentary evidence was the best evidence to be evaluated in coming to the conclusions he did. He was also justified in my view in adopting the same approach in accepting the evidence of witnesses such as Mr Stefanik who he found to be a careful record-keeper - report para. 119.

373 That approach by the referee was significant in considering a primary criticism of Johnson that the referee came to conclusions adverse to Johnson by ignoring aspects of the evidence. In this regard, Johnson refers to the fact that the referee found (para. 85) that Johnson had not 'sought to prove the extent of the work covered by any of these claims 10 to 14 and has simply chosen to rely on the claims themselves'. Johnson submits that this conclusion is inconsistent with the fact that the referee had before him the evidence of its Project Manager, Mr Densham (transcript 15 May, 2001 - ex A15). The referee also had Mr Oehme's extensive statement (exhibit A14), substantial parts of which were in refutation of the assertions of Mr Densham, as well as the extensive documentation in relation to the project - a section of which was set out in exhibit A 37.

374 Mr Densham was the project manager for Johnson. He was crucial to the process of making assessments of work done by Johnson on each floor of the development. He would prepare compilation sheets setting out Johnson's account of what had been done, the percentage of the work ultimately to be completed and an estimate of what was to be done. He then submitted the bill for that work by way of an invoice. Mr Densham would then discuss that with Mr Grant Perry for Alliance and that invoice would then go to Mr Oehme.

375 Without canvassing the detail of that evidence and the extensive cross-examination on it, it is clear that Johnson sought to prove the extent of the work by this evidence. The centrality of Mr Densham's evidence on Johnson's case was that by calling him as the maker of the billing compilation sheets and tendering the sheets themselves, as well as calling evidence from him as to what he did and his process of assessment, that was sufficient proof of his case. Johnson submits that it is clear that the referee made his decision on the basis that there was no evidence led when in fact there was. It is also contended that this approach is a further manifestation of the impact of the delay.

376 Johnson submits that a further indication of the lack of critical analysis by the referee was the reference, in the summary, to the letter from Mr Densham of 26 April 1996 referring to the adjustment of prices in accordance with the principles of "swings and roundabouts". Mr Van Aalst submits that this was simply recited by the referee with no attempt to analyse the letter, or its impact, or to show how it was dealt with by the referee. In my view, that letter was consistent with the contract, which doesn't make reference to variations.

377 The referee found (para. 85) that Johnson had not 'sought to prove the extent of the work covered by any of these claims 10 to 14 and has simply chosen to rely on the claims themselves'.

378 It is clear from the referee's report that the referee had before him the evidence of Mr Densham (ex A14) and was aware of it - see para 53, where the referee says that he '…did not detect Messrs Walters, Densham or Wocjik who were called on behalf of Johnson to dispute in any significant way that evidence (ie., that of Mr Oehme) in so far as they were involved in the discussions'. Alliance also submits that of these witnesses, Mr Wocjik was not an electrician, nor involved in the tower works, nor was his evidence of sufficient detail to support Johnson's case.

379 In my view, the contents of the report and conclusions do not support Johnson's attack. It is clear that there was extensive cross-examination of Mr Densham and his evidence and the related documentation was central to the submissions made to the referee, and that he considered that evidence. Importantly, the referee was not obliged to accept that the billing compilation sheets had, by themselves, the significance that Johnson sought to attach to them.

Did the referee make errors of law or on findings of material fact

380 Johnson submits that what occurred was that the referee found material facts which were erroneous. As those findings were critical to the chain of reasoning, those errors led to the ultimate incorrect result. Johnson contends that, where there is an absence of any evidence, direct or indirect, from which the inferences of the found fact may be drawn, there may be an error of law requiring judicial intervention - Skinner & Edwards Builders Pty Ltd v Australian Telecommunications Corporation op cit. at 572 F.

381 Johnson also contends that the referee did not go to any of the other material to see whether inferences could be drawn from them. He had the opportunity to give findings of fact as to the proper inferences which could be drawn, but did not do so.

382 Alliance submits that there were no difficult issues nor conflicting accounts which needed to be considered by the referee. Further, the 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.

383 Alliance also submits that it is clear that Johnson's attempt to rebut the schedule of matters set out in the Scott Schedule 4 was ineffectual. This was because Johnson was unable to base its actions on any of the available or contemporaneous evidence. By contrast, it is asserted that Alliance's case was supported by all witnesses and the contemporaneous documents which were available.

Conclusion : findings of material fact and inferences

384 The essential findings of the referee in this regard were set out in para. 85 of the report, as well as the conclusions reached on the work done and not done as well as the variations. The inferences drawn were appropriate given the evidence and, in my view, no other inferences were reasonable in the overall circumstances. It has not been demonstrated that there was any error in findings of material fact, nor that any inferences were drawn which were not available to the referee, sufficient to warrant not accepting the report.

385 Johnson submits that the report of the referee does not disclose sufficient reasons or show an appropriate reasoning process for the conclusions ultimately reached. Johnson submits that, where a referee was an expert in law - as Mr Callaghan was - the report itself should demonstrate the application of appropriate principles of law to the evidence which he had found to exist. In this regard, Johnson relies on the decision of Gleeson CJ in Super Pty Ltd v SJB Formwork (Aust) Pty Ltd (1992) 29 NSWLR 549.

386 In A&P Parkes Constructions Pty Ltd v Como Hotel Holdings (2004) NSWSC 588 the court (per McDougall J) referred to the relevant approaches being that "the court must be able to see and follow a reasoning process. That process must be sufficiently disclosed to satisfy the court that the finding was one based upon such an intellectual exercise."

387 Where it is necessary for the court to decide what should be done for a particular report to give it legal effect, there should at least be sufficient reasons indicating what has led the referee to a particular conclusion (adopting the comments of Rolfe J in Hughes Brothers Pty Ltd v Minister for Public Works unrep. 17 August 1994.

388 In my view, the report does show the reasoning of the referee which is related to the evidence on all significant findings. His central conclusions and the basis for them are, in my view, clear, logical - and appropriate given the evidence.

389 The issue of estoppel was raised by Alliance in the hearing before the referee in November. 2003. The estoppel alleged was that Johnson had conducted the case on the basis that the contract was an entire contract where there was no possibility of variations to the contract scope of works by way of omission. Further, that variations could not be taken into account in assessing monthly bill values or adjustment to the lump sum price - report para. 48. That was said to be inconsistent with the subsequent approach adopted by Johnson.

390 Johnson submits that Alliance, having raised the issue of estoppel, also bears the onus of proving that the estoppel existed on the balance of probabilities - see referee's report para. 85 at page 78.

391 The referee found that there was an implied obligation to act reasonably in relation to the assessment of payments under the contract which had the same effect as the suggested estoppel by convention. He also found that there were common understandings concerning variations to the effect of the estoppel alleged by Alliance - report para. 54. There were ongoing variations to the work by way of additional and omitted work, including omitted work carried out by Alliance. If the interpretation as contended by Johnson was correct, then Alliance would suffer a detriment by not receiving compensation for the variations of omission.

392 In my view, the referee was correct in determining that, even if the implied term as to reasonableness could not be implied in these circumstances, there was a common understanding as to the variations that other work (both additional and omitted) would be carried out, that there was reliance on that course of conduct and that it would be unjust for Johnson to act contrary to that common understanding.

393 I also agree with the finding (referee's report para.56) that the estoppel arises from the course of conduct rather than the conduct of the proceedings.

Did the referee erroneously draw a Jones v Dunkel inference

394 Johnson submits that the referee's misunderstanding of the role of the other witnesses is supported by the referee's application of a Jones v Dunkel (1959) 101 CLR 298 inference in relation to other Johnson employees - report para 53 'Messrs Cavacuiti, Daly and Steve Perry who participated in a number of the discussions, were not called to give evidence on behalf of Johnson'.

395 The referee referred (report para. 83) to 'the less than complete evidence' called on behalf of Johnson in relation to the alleged incomplete or defective work. He therefore also made reference to the inference in 'being more comfortable about accepting' other evidence as to commissioning and incomplete and defective work as referred to by the witnesses called by Alliance namely, Mr Oehme and Grant Perry.

396 Johnson submits that the principle was inappropriately invoked given that the other witnesses named by the referee, especially Messrs Cavacuiti and Daly, could not have added anything to the evidence in any event and the inference was incorrectly drawn against Johnson.

Mr Foster who gave only general evidence. Mr Densham (who left the site in March of 1996?) and Mr Paul Wocjik. Mr Wocjik had little or no part to play in the tower (transcript reference 66) which was only 50% of the scope of the work.

398 Alliance submits that the referee made it sufficiently clear that the evidence of Mr Wojcik didn't, and couldn't, establish the case claimed by Johnson. This was because: (a) he was only one of a number of technicians working on the site. He was not involved in all sections of the work and could not give evidence about what was happening in those other areas; (b) he was not significantly involved in the tower works, which was 50% of the total work; (c) he had little recollection of the project; and (d) he was not able to establish the relevant quality assurance or other project documentation necessary to establish the Plaintiff's claim.

399 Alliance also contends that these were the only witnesses who gave evidence as to work and the quality of work carried out. Johnson did not call any witnesses capable of giving evidence about the status of the works carried out in the tower itself. Alliance submits that there were other witnesses who, the report makes clear, could have given relevant evidence but who were not called,, in particular: (a) David Drakes - who negotiated the contract; (b) Tony Cavaccuito - Johnson's Managing Director who was involved in various meetings; (c) Mr Jerome Daly - Johnson's National System's Manager; (d) Mr Stephen Perry author of much of the correspondence relating to payment and variation issues.

400 Alliance submits that that there were also a number of other witnesses who could have been called, namely: (a) Brett Spillane (see report page 81); (b) Three other commissioning electricians who could have been called, namely, (i) Mr Stacey who was unavailable due to ill health - report page 83; (ii) Mr Seto who prepared a report setting out the outstanding task list as at January, 1997 - referee's report 82; (iii) Mr Stephen Perry, the Systems Manager of Johnson in New South Wales who was significantly involved in the tower works. Alliance submits that a statement was prepared by Mr Perry but subsequently withdrawn; (c) Various subcontractors, including Mr Roger Perkins - see referee's report paras. 71/72. Mr Perkins was effectively the Site Manager for Johnson and he was not called by Johnson. That is a matter of importance given the referee's findings as to whether or not there had been practical completion and the strong inference that that would have been known to Johnson; (d) The principle electrical subcontractor for Johnson, namely, Clarkeston Electrics (report para 77 page 74).

401 Against that background, Alliance submits that there was no one who was able to give nor gave evidence about the work claimed by Johnson either properly or at all. In particular, in relation to the work which was essentially of an electrical systems nature, there were no qualified electricians called to substantiate the work done - as opposed to the valuation of the items in dispute. That was particularly significant given the defect notices served by Sydney Electricity.

402 In these circumstances, Alliance contends that the inference was properly and appropriately drawn given the part that both Messrs Cavacuiti and Daly played - as was evident from the chronology of the referee. Moreover, the persons who Johnson announced would be witnesses were not called and, although their statements were served, they were not tendered because of their unavailability.

403 In my view, given the witnesses who were not called and given the issues to which those witnesses could have given evidence, the referee properly applied the Jones v Dunkel principles. Moreover, I consider that he was correct in his conclusions, in particular, that Mr Oehme's accounts were '…credibly presented and remain significantly uncontested in areas in which important Johnson witnesses were not called to give evidence' (report para. 75).

404 The referee dealt with the heads of damages under the cross-claim in paragraphs 100-126 of the report. Alliance's Notice of Motion dated 7 March, 2006 seeking the adoption of the report (with the variations listed) was exhibit A13. The amounts sought in that Notice of Motion were essentially the same amounts as had been dealt with by the referee in his report. A summary of the heads of damage was also tendered (exhibit A34). A folder of extracts from the agreed bundle of documents before the referee as well as copies of the documents referred to in exhibit A 37 was the subject of submissions by Mr Oehme.

405 Alliance supports the referee's report and findings - other than in relation to the cross-claim - and in particular, that the referee's findings were supported on the evidence and that Johnson should not be permitted to go beyond the evidence relied on by the referee as indicated in the report.

406 What Alliance seeks is the variation of the amounts awarded under those heads of damage referred to by the referee. Alliance's claim was for:

(a) the work done while Johnson was carrying out work on the system to be installed under the agreement; (b) while Johnson was not working on the system and Alliance was carrying out work on it; and (c) for other related and consequential costs, particularly relating to the installation of the work by Honeywell.

407 Alliance also complained of an error of law in the implication by the referee of a term of payment within 60 days. In argument, Mr Oehme seemed to be also complaining that the referee ignored, or did not accept, the evidence submitted by Alliance in support of the cross-claim, especially in relation to the work carried out and the consequences for Alliance in terms of its dealings with Grocon. I do not accept that the referee made any error of law in coming to his conclusion.

Preliminary argument : jurisdictional issue of amount of claim

408 The history of this aspect of the matter, the parties approaches and the orders made has been set out earlier - paras. 85-110. Mr Oehme's submissions (dated 2 July, 2007) submits that Alliance maintains its right to claim under heads of damage, albeit, presumably, that if such claims where upheld, that would result in an award of over $750,000. That was reiterated in the submissions of 1 August, 2007.

409 The principal aspects of that claim which would have that monetary effect were the claims for loss of opportunity - although there may well have been a cumulative effect on the total claimed depending on the outcome of the other heads of claim, particularly the claim for electricians and for the deduction from the contract with Grocon.

410 Mr Oehme has continued to argue in relation to the heads of damage, albeit on a reduced basis, for the deductions from the Grocon contract ($98,355 rather than $300,000) and the loss of opportunity ($150,000 rather than $1,750,000). Paragraph 103 of the submissions of 1 August, 2007 seem to repeat the claim for the loss relating to the reduction in the mechanical services contract sum; nevertheless the total sum sought was $750,000.

411 If there is an error in the understanding of Alliance's position, that may have been contributed to by the way Alliance and Mr Oehme chose to conduct the case and the attitudes taken to the adduction of evidence by both parties.

412 Mr Oehme's submissions of 2 July, 2007 (paras. 171/172) acknowledge that there have been difficulties brought about by the absence of legal representation and the need for 'lengthy legal research by Alliance that could have been undertaken prior to the proceedings commencing'. Those difficulties, and that need, should have been self-evident, as should have been the impact of those matters on the way the proceedings have been conducted and the time estimates given prior to and during the case.

413 Mr Oehme was urged to make his submissions on the cross-claim on a number of occasions in March and again during the resumed hearing (see for example, transcript for example, transcript 9/11/06 p. 131ff; 10 November, 2006 pp. 203, 207) but elected to use the additional time which had been made available to him to continue on other matters. At one stage Mr Oehme was told 'I've probably said four or five times I would be greatly helped by your comments on the cross-claim. …I can't direct you how to run your case.' (transcript 9/11/06 p 148); p164 "It's not for me to tell you how to run your case, Mr Oehme, but I have to emphasise that I really do want to hear from you on these cross-claim items". Comments to this effect were repeated to Mr Oehme and should be noted in relation to his complaints that he has been denied a fair opportunity to present his case.

414 Court time is neither elastic nor bottomless. It is a scarce public resource and certainly not a resource to be used up by repetitious submissions, pursuit of minor side issues, making submissions outside the scope of the matters in issue and contrary to directions given and timetables established. The timetable prepared by Mr Oehme on 17 March, 2006 in response to concerns about the time being taken (exhibit A 19) was not complied with.

415 Some of the time taken up in the consideration of the cross-claim submissions involved a re-canvassing of the jurisdictional rulings given - see transcript 9 November, 2006 p 177 ff. Other submissions - for example, the 55 pages of submissions dated 17 May, 2007 (said to be filed in response to the orders of 12 April, 2007 providing for submissions on matters not already canvassed) contained substantial repetition of matters which had already been the subject of submissions and argument. This approach was continued up to and including the final submissions received on 1 and 22 August, 2007.

416 Alliance has had more than ample time and opportunity to make oral and written submissions on all aspects of the cross-claim and it has chosen to be represented and present its case in the way and manner it has. It was the responsibility of Alliance to prepare the material relating to the evidence before the referee and to ensure that was presented to the court and the subject of addresses on matters of relevance - see transcript 9 November, 2006 p 172.

417 To the extent that those matters were not put before the court in the time available, that is the responsibility of Alliance. An unrepresented party is as much subject to the rules as any other litigant - Rajski v Scitec Corp Pty Ltd (CA) unrep. 16 June, 1986. The clear policy considerations behind section 56 of the Uniform Civil Procedure Act - particularly the obligation on parties to assist the court in its overriding purpose to facilitate the just, quick and cheap resolution of the real issues in the proceedings' were brought to Mr Oehme's attention during the proceedings - to little effect.

418 Here there was considerable leeway extended to Alliance - even to the extent of ensuring that the material relied on by Alliance in support of its cross-claim was as foreshadowed. Following the receipt of Mr Oehme's submissions on 2 August, 2007 the parties were asked to confirm the material said to have been provided during the proceedings in November, 2006 and to ensure that such material was checked by 20 August, 2007. Further submissions were then received from Mr Oehme dated 22 August, 2007.

419 A further file of documents and an additional 8 pages of submissions were then received from Mr Oehme dated 22 August, 2007, some of which were argumentative, others related to 'inter-linked' heads of damages and a re-ventilation of other claims - for example, the compensatory reduction in the Grocon amount. A number of those documents have already been tendered or were exhibits in the proceedings before the referee or in these proceedings. Nevertheless, as those documents were checked by Johnson's solicitors, I have read and considered those documents in the light of the earlier submissions made. Again, the effect of this action was to create additional delays and demands on the court time.

420 In any event, as I have indicated below, on the material presented to me, in particular, Mr Oehme's lengthy statement (exhibit A 14), his supplementary statement on damages (exhibit 20D) and the submissions on Alliance's schedule of references (exhibit A 37) the referee's findings and awards on the various heads of damages relied on in the cross-claim were, in my view, correct and justified on the evidence.

421 The approach adopted by the parties after discussion was that if the report of the referee is accepted - in other words, over the objection of Johnson - then there was no challenge by Johnson to the amounts claimed in relation to the heads of damage as follows:

(a) Addison Hogarth Wilson $87,750 (b) Honeywell $169,104 (c) Stephen Oehme $36,900 (d) Grant Perry $130,995.18 (e) Materials (as amended) $41,374 (f) Cash flow $20,000

422 The dispute, therefore, in relation to the amounts claimed under the cross claim then relate to the following items:

(g) Electricians $288, 056.00 (h) Grocon $98,355.23/$300,000 sought (i) Loss of opportunity $150,000.00.

423 The referee disallowed the claims made for the electrician, Mr Brian Sharp, noting that there was no contemporaneous claim by Alliance. He also had the evidence of Mr Perry in that regard - exhibits 32D, 33D, 34D, 36D, which included the instructions he had given to the various Alliance electricians on all the various tasks and areas of the jobs on the project. The referee had the related documentation - see exhibit A 37 documents 4252/3 and the various employee log sheets.

424 The referee awarded $132,531 for Mr Perry's work and for Mr Stefiniak's time ($100,844) after receiving and reviewing the evidence concerning Mr Perry against the background of the totality of the work, the nature of the work and the circumstances in which it had to be done.

425 The referee had before him the amended statement of Mr Stefaniak - exhibit 30D - although para 7 of that statement indicates that Mr Stefaniak did not keep a record of the hours of work of the other electricians. The referee concluded (report para. 119) that the totality of the claim for electricians' and technicians' work would be constituted by awarding Alliance the full cost as claimed by Mr Stefanik of $100,844. The referee had before him Mr Oehme's supplementary statement on damages - exhibit 20D - paras 21ff - and appears to have considered those matters.

426 Mr Oehme complains that the reduction of the award to this amount, and then only for Mr Stefanik, was in error. He complains that this finding effectively dismisses the claims made for the other electricians and that it ignores the discovered wage/job costing records for the other electricians which became evident through Mr Perry's evidence and that clearly other electricians worked on the project including the 'caretaking' work carried out by other electricians which was not carried out by Mr Stefanik.

427 In my view there was an element of generosity to Alliance in this aspect of the award, given that the work covered included work up to June, 2000. That is particularly the case when there was no apportionment of the time of Mr Stefanik between the various periods, a fact about which Mr Oehme also complains although to the opposite effect - submissions para. 269 (f). The referee found there would have been a need for an Alliance electrician to be on site for the system even if the contract had been completed. Mr Oehme disputes that.

428 Just as Alliance seeks to uphold the Jones v Dunkel inference against Johnson, it is clear that Alliance did not call the five or more electricians said to have worked on the system at various times, nor was evidence led with the precision Mr Oehme seeks to rely on in his submissions of 15 December, 2006 pp. 71 - 75.

429 The referee had evidence relating to the totality of the work as well as the claims of the other electricians, what they had done and what was proposed. He was able to compare the work done with that done by Mr Perry and he had Mr Perry's evidence in relation to the wage/job record summary in the relevant spreadsheet, albeit in the context of a challenge to the work done by Honeywell. The referee was aware of what had been done on the systems by all the contractors, including Honeywell. It also seems consistent with what could have been expected to occur with a system of this nature after completion - and the work which Mr Oehme himself says that Mr Stefanik was to perform - see submissions 15/12/06 para. 282.

430 I am not persuaded that his approach of setting-off the work of the other electricians against the additional work of Mr Stefanik was wrong. I am therefore prepared to accept that part of the award. Similarly, I do not accept the argument that a comparison of the work and costs quoted by Johnson, and ultimately performed by Alliance, means that the claim by Alliance is innately reasonable. As I understand the position, the referee had those comparative figures before him and considered them.

431 Grocon had reduced Alliance's progress claims because of the late completion of Johnson's work on the tower - see referee's report pages 40 - 42. That was evident from a letter dated 13 December 1996. The amount retained by Grocon was $186, 940 (transcript 9/11/06 p 187). The referee awarded Alliance the sum of $20,000 for loss of cash-flow. Alliance complains that this does not recognise the consequences to Alliance of the breach and repudiation by Johnson. Mr Oehme submits that there must be a presumption that there were significant consequences and costs to Alliance. He argued that the magnitude of monies held by Grocon effectively precluded Alliance undertaking other work - transcript 9/11/06 p186.

432 The referee had before him the release dates for monies by Grocon and the amounts of those sums released, which he was able to compare with the totality of the sub-contract between Alliance and Grocon - which he found to be a small component of the claim. It is also clear that that relationship between Alliance and Grocon continued. The referee had the statement and evidence of Mr Fussell, the relevant manager of Grocon - see report para. 123.

433 The referee was entitled to give that evidence the significance he did, particularly bearing in mind the totality of the evidence he had about the whole project. Mr Oehme's subsequent submissions (submissions 15 December, 2006 paras. 337 ff) seem to me to rely on a degree of conjecture about the actions and motivations of Grocon and the site developers in a number of potential scenarios and the commercial and other motivations of Alliance.

434 I am not persuaded to accept that those matters would have been established on the evidence sufficient to warrant a departure from the finding of the referee. I accept that finding and recommendation of the referee.

435 The referee also determined (report para. 120) that Mr Oehme's claim for time spent should be assessed at an additional time of 600 hours, at $61.50 per hour, reduced from the amount claimed by Alliance of 1817 hours. Again, Mr Oehme's supplementary statement on damages - exhibit 20D - paras 29 ff - set out the basis of that estimate, which seem to be very generalised amounts with little justification - for example, for the base figure of the starting salary plus benefits.

436 In coming to that conclusion, the referee referred to the time Mr Grant Perry had already been involved in the project for which an award was made and noted the generalised nature of the estimates and the reasons for the time taken.

437 The referee also accepted the claim for materials - (report para. 121) - noting that on this point, Mr Oehme's evidence was short and cryptic.

438 Again I think that there was an element of generosity to Alliance in this aspect of the award - especially given the finding that the proportion that this system installation bore to the totality of the project. However, the referee had the opportunity to consider all the evidence on the total project as well as this particular system installation and is someone who should be relied on to make an assessment of the amounts and salary/benefits claimed.

439 The referee also had the opportunity to see and hear Mr Oehme both in his evidence and in submissions and to analyse the work Mr Oehme had done during all the various parts of the work.

440 Alliance further submits the referee had come to the conclusion (at para. 128) that there had been in fact some measure of over-payment by Alliance to Johnson. I do not think that a proper reading of the report justifies that conclusion. The report notes that, while there may have been a suggestion of 'some measure of overpayment… other considerations arise' and that 'I cannot see that such a situation (of restitution by way of unjust enrichment) has been made out'. In my view that was an appropriate finding.

441 Alliance relies on documents tendered which became exhibit A37 which contained references to the exhibit references and appeal book references before the referee. Alliance bases its claim on the loss of opportunity it suffered as a result of what occurred, in particular, Grocon withholding monies from Alliance and electrical work having to be done by Alliance in the absence of Johnson. The relevant items in Mr Oehme's supplementary statement on damages - exhibit 20D - paras 33 ff ; 51 ff - were before the referee and apparently considered by him.

442 Johnson criticizes the submission by Alliance that there was no error of law in relation to the cross claim but that the referee simply overlooked a body of evidence. Johnson submits that there cannot be categories of error and that if the referee did in fact overlook those matters that is a defect which warrants the rejection of the report.

443 In circumstances where Alliance relies on the findings of the referee as to liability but is seeking a variation of the report on the question of damages, it needs to rely on, and establish, evidence which substantiates its claims and to otherwise establish that I should not accept the report in respect of the cross-claim. I have reviewed all the referee's findings and his recommended awards as well as the documents on which he has based his conclusions. To avoid any suggestion that this section of the judgment does not canvass the relevant legal principles appropriate to the cross-claim, I should indicate that I have applied the same legal principles which are relevant to the cross-claim in my consideration. On the basis of all those matters, I do not consider that the attacks mounted by Alliance have been made out.

444 Specifically I reiterate that the referee was a senior counsel, very experienced in construction and building matters, who had the opportunity to consider the evidence relating to the totality of the project as well as all the evidence of the witnesses and the statements and submissions of the parties. Even though I consider that there may be an element of generosity to Alliance in these findings, particularly as to Mr Oehme's claim for his own work and the consequent award, I accept and adopt this aspect of the referee's report.

445 I have also reviewed Mr Oehme's submissions, both generally and in relation to the cross-claim. I am not satisfied that he has raised any matters which warrant the rejection of the referee's findings. Moreover, I am satisfied that the referee has properly examined all the evidence and his recommended awards on the cross-claim are appropriate

446 These proceedings concern whether I should adopt, in whole or in part, the report of the referee in circumstances where the onus is on the party urging that the report not be accepted (Johnson) or varied (Alliance) to show the report is not soundly based or that opinions reached are not properly substantiated.

447 The referee considered the matter carefully and over a long period of time. Both parties had the opportunity to put all evidence before him and for that evidence to be tested. The referee had the benefit of extensive, if not exhaustive, written submissions on the evidence. He referred to aspects of the evidence and the transcript. The referee may not have referred to the either or both in the detail that the parties may have wished. However, that is not the test. In my view, the referee's report and the transcript to which I have been taken indicate that he took all matters into account sufficiently in relation to the issues which had been identified and which were relevant.

448 For the purposes of the tests stated in the authorities referred to above, I should state that I regard as appropriate the proceedings conducted by the referee, his identification of the issues and examination of the evidence and his consideration of the parties' submissions. Those, subject to some exceptions, appear to be consistent with the parties' submissions before me. I consider that I have a sufficient understanding of the issues and matters in question before the referee both from his report and from the parties' submissions.

449 I am also satisfied that the parties' have had the opportunity both before the referee and in these proceedings to put relevant material for consideration consistently with the interests of justice and a proper hearing. I reject Mr Oehme's submissions to the contrary. It was his decision to conduct the proceedings in the way he has and to utilise the time he had available to him as well as the additional time that was made available. His complaints that he has had not had enough time to present matters and refer to evidence should be viewed in the light of his written submissions which, with the additional annexures he has filed, totalled over 400 pages.

450 There were delays in handing down the report, but those delays were not caused by the referee. They were caused, in my view, by the parties and substantially by reason of, or following, the decision taken to place Alliance in voluntary administration and the consequential problems associated with the conduct of the reference. Mr Oehme's (unopposed) representation of Alliance, effectively in the position of a self-represented litigant, his conduct of Alliance's case and his breaches of the orders and timetables imposed substantially contributed to those delays both before the referee and in these proceedings.

451 However, Johnson did not seek to have the necessary procedural and enforcement orders made, and, to that extent, must be taken to have waived its rights to complain of some of the delay which occurred.

452 In any event, if I am wrong on this, I do not find that there was a failure by the referee to consider material aspects of the evidence, nor that what evidence was considered was done so incorrectly or inappropriately. I do not find that those delays meant that there was an incompetent evaluation of the evidence or of the witnesses by the referee.

453 I find that Johnson has not discharged its onus of showing that there were flaws in the procedures adopted by the referee or that what delays occurred meant that either the decision of the referee, or his assessment of the evidence, were affected by the time taken with the reference.

454 In my view, 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 the assessment of witnesses.

455 Having reviewed the referee's report against all the written and oral submissions made by the parties, in my view, there was factual material sufficient to enable the referee to reach the findings he did.

456 I agree with the referee's findings that, on the evidence provided to him, Johnson did not substantiate the extent of work carried out by it either properly or at all and that it had not established any indebtedness by Alliance in respect of progress claims.

457 There was also evidence, for example from the AHW specifications, on which the referee could find that, when Johnson left the site, its work was substantially incomplete. Simply put, Alliance did not get the system Johnson had contracted to provide. As it was not completed, it had to be replaced, apart from some hardware pieces, with another system as was then installed by Honeywell for $169,104. The referee found that Honeywell substantially replaced rather than rectified and completed Johnson's work (report para. 127). That founded, in my view properly, the damages award of $169,104.

458 The AHW involvement was necessitated by the failure to complete the system and also was the subject of the damages award of $87,750.

459 The findings in relation to the Scott Schedule 3 items (as performed by Alliance) are consistent with the experts' conclave agreements (report paras. 105 - 116) and the total award in relation to these items of $60,391 seems to have been carefully and properly assessed on the available evidence.

460 The calculations for the retention amounts and the Scott Schedule amounts again appear to have been correctly calculated and, in any event, I do not understand there to be serious dispute about them.

461 In my view, the referee was also entitled and justified in making the findings and award he did and those should be adopted in relation to the specific claims concerning Mr Sharp, the additional wages for Mr Grant Perry and for Mr Stefiniak's time.

462 The amounts awarded of $132,531 for Mr Perry's work and of $100,844 for Mr Stefiniak's time were certainly substantial. However, the referee had the advantage of receiving and reviewing the evidence concerning Mr Perry against the background of the totality of the work, the nature of the work and the circumstances in which it had to be done. In my view, the referee was entitled and justified in making the findings and the award he did and those should be adopted.

463 An award was made (report para. 120) for Mr Oehme's additional time of 600 hours at $61.50 per hour reduced from the amount claimed by Alliance of 1817 hours other than by reference to the time Mr Grant Perry had already been involved in the project for which an award was made. There is no apparent basis for that estimate of 600 hours instead of the claimed time of 1817 hours - although the generalised nature of the estimates and the reasons for the time taken is noted.

464 The referee had also had extensive evidence from Mr Oehme, both orally and from his lengthy statement, which he was able to view against the history of the work involved and the amount of negotiation there was in relation to all aspects of the claims made. The referee also accepted the claim for materials - (report para. 121) - noting that, on this point, Mr Oehme's evidence was short and cryptic.

465 As I have said, the referee is an experienced construction and building lawyer who also had the opportunity to consider the totality of the project over a long period of time. Even though I consider that there may be an element of generosity to Alliance in some of these findings (especially Mr Oehme's claim for his own work) and the consequent awards, I accept and adopt this aspect of the referee's report.

466 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 damages. Neither party has discharged its onus of showing that the report of the referee was mistaken on matters of law or fact such as to warrant the report not being accepted.

467 I also consider that the referee was correct in implying a term that the parties should act in good faith as asserted by Alliance, that term to extend to Johnson in submitting claims for work which had been properly carried out and not simply on the basis of having submitted a claim and expecting that it would be met automatically by Alliance.

Errors of law, failure to review the evidence and reached decisions not in accordance with the evidence.

468 Johnson has complained that the referee erred in his application of the law. I do not accept that submission, indeed to the contrary - in my view, the referee acted properly, thoroughly reviewed the evidence and reached his decisions and recommendations in accordance with the evidence presented to him.

469 I do not find that there has been any incorrect and material legal principle by the referee nor misapprehension of the evidence nor manifest unreasonableness in fact-finding. In my view, the report of the referee does disclose reasons and shows an appropriate reasoning process to establish the conclusions ultimately reached.

470 In my view, the referee was correct in his findings that there was an implied term that the contract price could be adjusted by the value of variations. Consequently, Johnson was estopped by the course of its conduct from denying that adjustment.

471 I adopt the report and accept the referee's recommendation that the orders of the Court be that Johnson pay Alliance the sum of $549,894. The parties agreed that, if Alliance is successful and Johnson is unsuccessful, Alliance concedes that the referee made an error by not allowing a credit to Johnson of $211,601.00 (transcript 9/11/06 p 185: exhibit A34). This was essentially for the benefit Alliance had received which would have been payable to Johnson if it had completed the works.

472 Mr Oehme has in further written submissions dated 1 August, 2007 submitted that there should be an additional figure of $20,000 awarded to Alliance for interest on the loss of profits which seems to have been omitted from the referee's award. That appears to be correct - although again, I consider that there is an element of generosity to Alliance in that award and the adoption of the figure of $200,000 loss and interest rate applied of 10% being relevant at that particular time of the parties' dispute.

473 Accordingly, I order that Johnson pay Alliance the sum of $358, 293.

474 The amended cross-claim (para 17) sought interest pursuant to section 83 of the District Court Act, 1973. The referee's recommendation was that interest on the award amount be calculated to commence on 30 June, 1998. While these orders had been sought, there had been no submissions on this aspect of the matter. Accordingly I gave the parties the opportunity to make additional submissions by 1 August, 2007. Submissions were received from Johnson and a further 24 pages of written submissions were received from Alliance dated 1 August, 2007, some of which canvassed the issue of interest.

475 Section 100 of the Uniform Civil Procedure Act, 2005 gives the court discretion as to the award of interest on the whole or any part of the money awarded or for the whole or any part of the period of time from the time the cause of action arose until the time the judgment takes effect.

476 As an award of interest is compensatory, a defendant's conduct in contesting the proceedings does not ordinarily provide a proper basis for making or refusing an award of interest - Bennett v Jones [1977] 2 NSWLR 355 at 356. However, it is clear that there is a discretion in relation to the award of interest upon damages for past losses or detriments. The conduct of a party should be relevant only to the extent to which there is an economic disadvantage to the opposing party by an award of interest being or not being made. This matter was considered by Einstein J in ICT Pty Limited v Sea Containers Limited [2006] NSWSC 1280 at [15] where the decision of Finn J in Frost Holdings Pty Ltd (in liq) v Darvall McCutcheon (a firm) FCA 795; BC9903352 was referred to as follows: "…Nonetheless, insofar as concerns a successful applicant who has been guilty of unreasonable delay, the view I am prepared to follow in the absence of binding authority is that the period for which the interest award is made can properly be adjusted if to allow interest for the whole period for which it could otherwise be ordered would work an injustice to the respondent in the circumstances: cf Clarke v Foodland Stores Pty Ltd , above, at 400. Such would seem to be consistent with the policy of the s 51A (1) in that an applicant that has been held out of the benefit of its money because of its own unreasonable actions should not be allowed as of course to cast the effects of a `self-inflicted burden' onto the respondent: Keithara Pty Ltd v J G L Holdings Pty Ltd (Supreme Court of Victoria, Smith J, 6 December 1994, unreported)."

477 However, it is clear from the decision of Moffitt P in Bennett v Jones (op cit. at 371) that cases of deliberate delaying tactics become relevant particularly where there has been, or is likely to be financial detriment to the other party - 'Thus some order, limited as to time or rate of interest, will be appropriate in the case of gross delay of a plaintiff where the past losses are substantial…'. It is clear from the matters set out in these reasons that I reject the submissions contained in para. 62 - 65 of Alliance's written submissions of 1 August, 2007.

478 The importance of considering the financial detriment to the party not at fault was referred to by Campbell CJ in Antonio Rosiaio Oliveira v Peter Favetti and Sons Pty Ltd [2001] NSWCC 179 at [3]. That should be material to the exercise of the discretion - per Giles J in NRMA Ltd v Morgan (no 3) [1999] NSWSC 768 at [12].

479 Here I am satisfied that an award of interest for the whole period for which it could otherwise be ordered would work an injustice to Johnson and that the history of the proceedings demonstrate that there have been deliberate delaying tactics which have caused a financial detriment to Johnson. From that time the decision taken - clearly deliberately and in the context of what was then occurring in the referee proceedings - to put the company in voluntary administration on 18 April, 2002 the position of Alliance was that of effectively a different structure with its creditors and obligations crystallised as at that time. What occurred thereafter was left to Mr Oehme with no, or little, action or involvement being taken by the administrators. There was an economic disadvantage to Johnson in being able to have the matter resolved at that time or thereafter until Alliance's position was resolved. The other matters which are relevant in this regard include the delays brought about by the way Alliance has conducted the proceedings both before the referee and in these adoption proceedings as well as the delays associated with Alliance's refusal or reluctance to either abandon or clarify its election as to damages in excess of the jurisdictional limit of this Court and the associated issue of what evidence was to be called in relation to which particular aspect of the cross-claim.

480 The consequent delays and the inevitable financial detriment caused to Johnson in having to deal with Alliance and its representatives in that situation were not the fault of Johnson. The proceedings were of a nature where there needed to be considerable analysis of the amounts due and owing under the controls contract and the various variations. It was not the case of a quantified debt - a distinction made by Brereton J in Hexiva Pty Ltd v Lederer [2006] NSWSC 1129 at [70]. Johnson should not have to be responsible for the fact that Alliance 'has been held out of the benefit of its money because of its own unreasonable actions'.

481 In my view, it is appropriate that interest be awarded on the award from the time recommended by the referee, namely 30 June, 1998 until the time when the decision was taken to place Alliance under voluntary administration, namely 17 April, 2002. That was when the substantive delays in the matter commenced occasioned by the actions of Alliance.

Orders

1. The report and recommendations of the referee are adopted save and except the recommendations as to the amount recommended and interest on the amount recommended on the cross-claim.

3. Judgment on the cross-claim by Alliance in the sum of $358,293 together with interest thereon from 30 June, 1998 to 18 April, 2002.

4. The parties may file any evidence on which they may rely in relation to costs within seven days of these orders together with any written submissions on costs only covering relevant matters which are additional to the matters already set out in the parties' submissions on costs.

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