P Ward Civil Engineering v Civil & Civic

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CONSTRUCTION & TECHNOLOGY LIST

55062/97 P WARD CIVIL ENGINEERING PTY LIMITED v CIVIL & CIVIC PTY LIMITED JUDGMENT 1 HIS HONOUR: These proceedings arise from a dispute regarding the construction of the Prospect Water Filtration Plant. The defendant contracted to construct the plant and the plaintiff was the subcontractor in relation to earthworks. 2 This matter comes before me this morning at the request of the parties in order to agitate further issues in relation to the report of the court-appointed referee, Mr K J Hinds, dated 29 November 2001. 3 The referee's report was the subject of consideration on an earlier occasion when I determined that, in some respects, I would not adopt the report, and referred the matter back to the referee for a further report. My judgment was given on 17 April 2002. 4 Further proceedings took place before the referee, and a further report was provided on 7 November 2002. There was an argument as to whether that further report should be adopted, which was heard by Barrett J. His Honour gave judgment on 13 March 2003. Although he rejected the referee's report, his Honour proceeded to determine the question raised in the further report. In short, the question raised was as to the proper construction and application of clause 8.3.1 of the subcontract which states: "8.3.1 C & C will not be liable in contract, negligence or otherwise for losses suffered or incurred by the contractor [ie John Holland] which in any way whatsoever arise out of or are connected with a delay, disruption or interference to the progress or completion of the Works which arise out of or is in any way connected with either or both of the following: (1) the acts or omissions of others (excluding the Client, the Client's Consultant and C & C's Consultants, but otherwise including, but not limited to, the Contractor's [ie, John Hollands] personnel and C & C's construction employees), whether engaged by C & C or otherwise." 5 Barrett J came to the conclusion that, in relation to the matter of damages, the referee had not correctly applied clause 8.3.1. His Honour determined that the proper application of the clause had the consequence that, having regard to the relevant facts, clause 8.3.1 would operate to defeat the defendant's claim for common law damages. Barrett J did not proceed to finally determine the matter, but invited the parties to bring in short minutes in order to dispose of the proceedings. However, he also indicated that, if either party considered any matter arising from the two reports to be unresolved, "the appropriate course will be for that party, after notice to the other, to approach McClellan J as Technology & Construction List Judge, with a view to having that matter dealt with in an appropriate way." 6 It is pursuant to that statement by his Honour that the matter comes before me this morning. 7 To facilitate the argument, the defendant has brought in a notice of motion. In that motion, the defendant seeks to raise three matters for further consideration, before the referee's report is adopted. Two of those matters raise questions with respect to the application of clause 8.3.1 of the relevant subcontract. The third raises a question as to the approach to be taken to the award of interest in the circumstances of this case. 8 The first matter which raises the application of clause 8.3.1 is a delay which the plaintiff suffered by reason of the flooding on two days of the perimeter road known as Road 6. The referee determined that the road was flooded on two days, 14 and 15 May 1996, and that, as a consequence of that flooding, the defendant was delayed in completion of its contractual obligations. The delay was found to be critical to the path of the construction of the relevant works by the defendant. 9 The referee considered this aspect of the matter in his report and discussed the application of clause 8.3.1 to the facts which he had found. That discussion is to be found at pages 87 and 88 of volume 8 of the report. In the first paragraph, under the heading "Discussions and Reasons", the referee appears to approach clause 8.3.1 in a manner consistent with the decision of Barrett J, with which, with respect, I agree. However, his ultimate consideration of the clause on page 36, and his finding, do not appear to be consistent with the approach he originally adopted towardsclause 8.3.1. 10 As the matter was clearly raised before the referee and all of the relevant factual findings have been made (in fact the parties are now in agreement in relation to those facts), I am of the opinion that, to this extent, the referee's report should be rejected. The consequence is that the amount payable by the defendant will be reduced by the sum of $5,669.44. 11 The second matter which raises consideration of clause 8.3.1 is more complex. Before the referee, the plaintiff sought to claim for the delay which it said occurred in the hand-over to it of the area of site described as the "interconnecting structure." The position, as I understand it, was that the plaintiff was responsible for the earthworks necessary to prepare the area of the site located where the interconnecting structure was to be located. Once it had undertaken that task, another contractor was responsible for the construction of the interconnecting structure. Following completion of the structure, that area of the site was to be given back to the plaintiff to complete back-filling earthworks adjacent to the structure. 12 The contest before the referee took place without the plaintiff raising the application of clause 8.3.1. However, as I have indicated, the parties were alive to the possible application of clause 8.3.1 in the context of other aspects of the dispute. There can be no question but that the application of clause 8.3.1 was a live issue in the hearing of the reference. However, the defendant did not raise clause 8.3.1 in the context of this particular claim. The issue considered was the extent, if any, to which the plaintiff was responsible for the ultimate delay by reason of any failure on its part to hand the site over for the purpose of the construction of the interconnecting structure after the plaintiff had completed the initial earthworks. 13 The referee investigated the circumstances of the initial work undertaken by the plaintiff and also considered the time taken by the contractor, which was John Holland Civil Engineering Constructions Pty Limited. The referee determined, on page 81 of volume 8 of his report, that: "The plaintiff was delayed by the late handback of the ICS by JHC in the period to 10 May 1995 by 37.5 working days, hence I grant an extension of time of this duration for this part of the delay claim." 14 Because clause 8.3.1 was not raised by the defendant, it was unnecessary for the referee to consider whether or not the delay which he found was occasioned by the actions of John Holland Construction & Engineering Pty Limited, or whether it was occasioned, in whole or in part, by any action or omission of the defendant itself. 15 It must be appreciated that the plaintiff relevantly had possession of this part of the site for the purpose of its initial earthworks and then handed possession of this part of the site back to the defendant. The defendant was then responsible for providing the site to John Holland, and would have had contractual responsibilities to John Holland so that John Holland could complete its subcontract. Whether or not the defendant discharged its responsibilities in relation to John Holland effectively was not considered by the referee. 16 The defendant submits that following the determination of the proper construction of clause 8.3.1 by Barrett J, it should have the opportunity of arguing that the clause would apply so as to defeat the plaintiff's claim in relation to this aspect of the dispute. However, through its counsel, the defendant also accepts that the relevant facts which might found a successful argument by the defendant on this issue have not been found by the referee. The reason for that is, as I have explained, that it was not suggested before the referee that clause 8.3.1 was relevant to this aspect of the dispute. The matter was investigated and submissions were made in relation to the timing issues. 17 Accordingly, if the defendant was now to be provided with an opportunity to argue the relevance of clause 8.3.1 to this aspect of the matter, it would be necessary to refer the issue back to the referee. It would then be necessary for the referee to conduct further hearings, investigate the relevant facts, and make findings to which clause 8.3.1 might be applied. 18 These proceedings have been on foot for a considerable period of time. There was an initial proceeding in the Court in which the contractual basis between the parties was in issue. Those proceedings occupied eight days of hearing time. Einstein J delivered judgment in relation to that dispute on 3 August 1999. 19 The dispute was then referred to the referee, Mr Hinds, who provided his report after twenty-four days of hearing and nineteen days of conclaves. His report occupies ten volumes and provides a detailed consideration of a multitude of issues. 20 As I have indicated, that report was the subject of proceedings before me in which I determined that a further report was necessary. That report was then the subject of consideration by Barrett J. 21 This Court has had occasion to consider the approach which should be taken to a referee's report in a number of decisions. In Chloride Batteries Australia Ltd v Glendale Chemical Products Pty Ltd (1988) 17 NSWLR 60 at 67, Cole J considered the principles which should be applied when a referee's report was under consideration. His Honour said: "This does not mean that certain considerations will not be present when the Court considers each application. The Court will have regard to the futility of a process of re-litigating an issue determined by the referee in circumstances where parties have had an opportunity to place before the referee such matters as they desire. It will also have regard to costs. If the report shows a thorough, analytical, and scientific approach to the assessment of the subject matter of the inquiry, the Court will have a disposition towards acceptance of the report, for to do otherwise would be to negate the purpose of and the facility of referring complex technical issues to independent experts for inquiry and report. This disposition may be enhanced in circumstances where the parties, as a consequence of the operation of r 8, have had the opportunity to place before the referee such evidence and technical reports as they may wish. The Court may be more hesitant in its disposition if the report is provided by the expert in the absence of the parties having been given such an opportunity. The disposition must always yield to the requirements of justice, if it becomes apparent for any reason that to adopt the report would result in an injustice or unfairness to a party. These matters reinforce the view that each matter requires its own consideration." 22 His Honour went on to consider the observations of Marks J in Integer Computing Pty Ltd v Facom Australia Ltd (Supreme Court of Victoria, 10 April 1987, unreported) in which his Honour drew attention to the necessity for the court to be alert to difficulties in a report, in particular if there are "significant internal inconsistencies, uncertainty of meaning, or possible misconception, consideration can still be given to requesting a further report." 23 In Super Pty Ltd (formerly known as Leda Constructions Pty Ltd) v SJP Formwork (Aust) Pty Ltd (1992) 29 NSWLR 549, this Court of Appeal considered the approach that should be taken to the adoption of a referee's report. The Chief Justice, at 563,had this to say: "What is involved in an application under Pt 72 r13 is not an appeal, whether by way of a hearing de novo or a more limited re-hearing. This is consistent with the right of the referee to conduct the reference as the referee thinks fit and unconstrained by the rules of evidence. Rather, the judge, in reviewing the report and deciding whether to adopt, vary or reject it, has a judicial discretion to exercise in a manner that is consistent both with the object and purpose of the rules in the wider setting in which they take place. That wider setting is a system for the administration of justice according to law. In so far as the subject matter of dissatisfaction with the referee's report is a question of law, or the application of legal standards to established facts, then a proper exercise of discretion would require a judge to consider and determine that matter afresh." 24 His Honour went on to indicate that: "On the other hand, if the referee's report reveals some error of principle, some absence or excess of jurisdiction, or some patent misapprehension of the evidence, that would ordinarily be a reason for rejecting it: cf Jordan v McKenzie (1987) 26 CPC (2d) 193." 25 In that same matter, Mahoney JA, at 567, said, in relation to the consideration of the adoption of a referee's report: "The right to be heard does not involve the right to be heard twice. I am conscious that, in order that the judge may exercise a discretionary judgment of this kind, it may be necessary that the parties have the opportunity to refer to the relevant issues of fact and law and the evidence relevant to them. But the extent to which it is necessary for this to be done depends upon the circumstances of the case and the judgment of the judge. The judge has, I think, a broad discretion and may determine what is necessary to enable him to conclude that he has sufficient understanding of the matters in question and when the argument has been sufficiently presented." 26 In relation to the second matter raised, to which clause 8.3.1 is relevant, I am satisfied that the defendant should not now be allowed to raise it. The opportunity to fashion a case based upon clause 8.3.1 in relation to this issue was available before the referee. The defendant elected to conduct its case on a basis which did not require an investigation of the facts necessary to determine whether or not clause 8.3.1 should apply and, in my opinion, should be bound by that election. 27 If this was a matter which had proceeded in a conventional way before a judge of this Court, the defendant would effectively be asking for leave to reopen the case after judgment had been given so that it could re-litigate a matter which was not previously litigated, having regard to the reasons of the trial judge. In those circumstances, in my opinion, the appropriate decision would be to reject the application. Understood in that way, the application must be rejected in these proceedings. Accordingly, I am satisfied that that aspect of the motion should be rejected. 28 The third matter is the question of interest. That matter was argued before me on the previous occasion and I determined that the approach adopted by the referee was appropriate. However, because the quantum of each individual item had not been determined at that stage, and because of the necessity for the matter to be referred back to the referee in relation to the question of damages, I did not proceed to determine the appropriate quantum for any interest payment. However, the matter has now come to the point where all of the individual claims can be quantified and, accordingly, the entitlement to interest calculated in accordance with the principles adopted by the referee. Accordingly, I reject any application by the defendant to reopen the matter of interest. 29 I direct the parties to bring in short minutes reflecting the various decisions made by the Court and providing for the adoption of the referee's report. 30 Costs may be argued. **********

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