Damages - Order 38 Rule 1 Federal Court Rules - whether in the circumstances the trial judge had power to refer the calculation of damages to the Registrar - extent of matters able to be referred to the Registrar - whether "substantially a matter of calculation".

Counsel and Solicitors for Appellants: Mr F.L. Wright and Mr G.M. Watson

Counsel and Solicitors for Respondent: Mr J.D. Cummins QC, Mr R.W. Cameron and Mr J.D. Driver

Set aside the orders, finding and directions made at first instance on 9 November 1988, except for the order dismissing the cross-claim.

Order a new trial of the respondent's application at a date to be fixed.

Costs of the hearing at first instance on 11, 12, 13, 14 and 15 April 1988 to abide the outcome of the new trial; order that the respondent pay 80 per cent of the appellants' costs of the appeal; no order as to costs of the cross-appeal.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

The first appellant, Gordon M. Jenkins & Associates Pty. Limited, and the second appellant, Christopher Earl Jenkins, seek leave to appeal from orders made by a judge of this Court declaring (1) that the first appellant had engaged in conduct that was misleading and deceptive in contravention of s.52 of the Trade Practices Act, 1974; (2) that the first appellant had made a false representation in contravention of s.53 of the Act; (3) that the second appellant had aided and abetted the first appellant, and was knowingly concerned, in these breaches of the Act; (4) that both appellants were in breach of their contracts with the respondent; (5) that advice given by both appellants was negligent and (6) that the appellants were liable to pay damages to the respondent. The judge ordered that the damages which the appellants were to pay be ascertained by the Registrar pursuant to O.38 r.1 of the Federal Court Rules. His Honour reserved (i) any apportionment between the appellants until all other matters were finalised and (ii) costs; he further reserved liberty to apply.

2. Although the orders were interlocutory (see Computer Edge Pty. Ltd. v. Apple Computer Inc. [1984] HCA 47; (1984) 54 ALR 767), the appellants purported to appeal as of right. Leave to appeal is necessary, but, because the practical effect of his Honour's findings on liability is final, we think that it is proper that leave to appeal should be granted on that issue. Further, all parties seek to challenge the reference to the Registrar for the purpose of assessing damages. This raises important questions of jurisdiction. Again, we think that it is appropriate to grant leave to the appellants to appeal, and to the respondent to cross-appeal, on that issue.

3. The primary judge's reasons for judgment dealt with liability and made other findings and gave directions with respect to damages. His Honour's judgment may be summarised as follows:

(a) The issues arising on the original pleading and the first

His Honour first referred to the issues arising on the

original pleadings. As originally pleaded, the

respondent's case was based on alleged breaches of ss.52

and 53 of the Act by the first appellant, a firm of

architects, claiming "losses sustained by the (respondent)

as a result of the excessive cost and non completion of

what was to be a residence for himself". Later, the

respondent's claim was amended as against the first

appellant, and the second appellant was joined as an

additional respondent to the proceedings. The second

appellant had been a member of the first appellant but

later practised as an architect on his own. The amendments

added fresh claims in contract, negligence and negligent

advice or misstatement.

His Honour then turned to the evidence of dealings between

the parties which his Honour discussed as follows:

(i) The respondent first discussed with the second

appellant the architectural planning and subsequent

construction of the residence in December 1982 or

January 1983. In late May or early June 1983, the

cost of the project was discussed. According to the

respondent's evidence, he indicated to the second

appellant that he could not afford to spend more than

$80,000 or $85,000; and the second appellant told

him that the work could be done for that amount if

the respondent obtained an "owner/builder's" licence

from the council and the second appellant "oversaw

and supervised" the construction. According to the

second appellant's evidence, he then showed the

respondent a copy of the Royal Australian Institute

of Architects Standard Agreement between client and

architect ("the Agreement") and explained that an

architect's fee was based on a percentage of the cost

of the building as estimated or tendered for; and

that an architect's services consisted of four stages

as follows: (1) "schematic design", i.e., the

"preparation of schematic design, illustrated by

preliminary sketch drawings and/or reports, and

provision of indicative estimates of cost;" (2)

"design development"; i.e., the "preparation of

developed design, including as appropriate developed

sketch drawings, reports, advice on preliminary

designs of engineering and other specialist services

and provision of time program and estimates of cost;"

(3) "contract documentation"; i.e., the "preparation

of documents sufficient for the calling of tenders

including as appropriate provision of information to

consultants and co-ordination and integration of

their work. Revision of estimates of cost;" (4)

"contract administration", i.e., calling and

reporting on tenders; analysis and advice in respect

of tenders received; negotiation, preparation of

documents and arrangements for execution of contract;

administration of the contract and inspection of the

works including supplying information, checking

claims and issuing certificates, negotiating

variations and cost adjustments and dealing with

claims for extensions of time. According to the

second appellant's evidence, he then explained to the

respondent the calculation of his fee and referred to

a cost of $150,000 on which the fee of 10% would be

payable; and the respondent then indicated that he

did not want the fourth stage services carried out,

with the result that the architect's fee was then

calculated at 6.5% of a cost of $150,000, i.e.

$9,750. The respondent denied being given this

information and disputed that he had been shown the

Agreement. He said that the only percentage figure

discussed was 4%, but he could not say on what amount

this was to be calculated.

(ii) According to the evidence of the second appellant, on

about 26 May 1983, he delivered to the respondent a

written confirmation of the estimated cost of

$150,000. This was denied by the respondent.

(iii) The respondent and the second appellant again

discussed the project in late June 1983. According

to the respondent's evidence, the second appellant

then gave an estimate of cost of $90,000 to $100,000.

(iv) Plans and sketch drawings were completed by July or

August 1983. According to the respondent, the second

appellant then confirmed a cost of $80,000. The

second appellant denied any discussion of cost at

that time. He said that in August 1983 he advised the

respondent that the cost would be $125,000, excluding

the cost of decks and garage or a carport; and that,

if these items were included, the project would cost

$150,000. This was denied by the respondent.

(v) According to the respondent, he and the second

appellant went to the local council on 7 October

1983. A building application form was then

completed. It stated the cost of the building at

$120,000, although the plans given to council

included a studio and a garage. The respondent's

evidence was that, whilst the second appellant was

filling out the form, a figure of $120,000 was

mentioned by a council employee and the second

appellant wrote that figure on the form. The second

appellant then explained this figure on the basis

that the council would not believe the cost could be

any lower. The second appellant, however, in his

evidence said that nothing was ever mentioned between

any council employee and either of the respondent or

the second appellant as to the cost of the project on

this occasion. His version was that in October 1983

he alone went to the council to lodge the building

application, having previously filled it out himself

stating an approximate cost of $120,000, and later

gave the respondent a copy.

(vi) On 1 December 1983, the second appellant resigned

from the employment of the first appellant. On that

day the first appellant sent an account to the

respondent for $9,751 for work done on the basis of

6.5% of an estimated cost of $150,000. The

respondent's evidence was that he queried the account

with the second appellant, particularly the sum of

$150,000; he said that he was told that it was a fee

based on the value of the residence upon completion,

that he would be paying a fee based on $80,000, and

that the fee would be payable on completion. The

second appellant's version was quite different. He

said that no figure of $80,000 was discussed but that

he explained the method of calculation of his fee to

the respondent.

(vii) On 27 February 1984, the "owner/builder" permit was

granted to the respondent. Subsequently, the

respondent and second appellant went together to

suppliers of building materials and household goods

and obtained quotations for the roofing, plumbing and

prime cost items.

(viii) The respondent paid the first appellant $3,000 for

its services under cover of a letter dated 16 April

1984 indicating that a further remittance would be

forwarded as soon as possible.

(ix) On 22 August 1984, a meeting took place between the

respondent and the second appellant. According to

the second appellant's evidence, only the quotations

obtained were discussed. But the respondent's

evidence was that a total cost of approximately

$80,000 was mentioned; there was also reference to

the fee payable to the second appellant and to an

engineer.

(x) The house was not completed and the property, which

was mortgaged, was subsequently sold by the

mortgagee.

During the hearing, the respondent applied to amend further

his statement of claim by adding an allegation that the

second appellant aided and abetted the first appellant in

its contravention of s.52 of the Trade Practices Act and

was knowingly concerned in the contravention (see s.75B of

that Act). The amendment was opposed on the ground that

the respondent was seeking to raise a new cause of action

which was statute-barred (see s.82(2) of that Act). His

Honour allowed the amendment and leave to appeal against

this order is also now sought.

(i) The contract between the respondent and the first

appellant

His Honour, preferring the respondent's version,

found that the second appellant told the respondent

"at some early stage that the house could and would

be built, under his supervision, for $80,000 or

thereabouts."

His Honour added:

"The evidence established that on or around 26 May

1983 the (respondent) had entered an agreement

with the first (appellant) pursuant to which the

first (appellant) would provide designs and plans

of the (respondent's) residence which involved the

first three stages of the Agreement...

Thereupon the first (appellant), through the

second (appellant) contracted to do the following:

(a) prepare plans for the project;

(b) provide an estimate of the cost of the

project which had to accommodate the

(respondent's) budget (the estimate

eventually provided and accepted was

$80,000);

(c) prepare all documents sufficient to permit

the letting of contracts including providing

information to engineering and other

consultants or contractors, and the

co-ordination and integration of building

works on the design;

(d) advise the (respondent) regarding tenders

received and administer and supervise the

building work.

In return the (respondent) undertook to pay the

first (appellant's) fees and paid them in part.

In view of my later findings, there is no need for

me to determine what the agreed fees were. The

contract seems to have been terminated by

agreement at or about the time the second

(appellant) left the employ of the first

(appellant)."

(ii) The contract between the respondent and the second

appellant

The judge found that after the second appellant left

the employ of the first appellant in December 1983,

he entered into an agreement with the respondent in

April 1984 whereby he agreed to assume responsibility

for the earlier contract with the first appellant,

provide the respondent with appropriate advice from

time to time, and supervise the work; that he was

paid $3,000; and that by November 1984 the second

appellant had abandoned the work; the respondent

then accepted the termination of the Agreement.

(iii) The claims made against the first appellant

The respondent's case was that the appellants were

qualified architects and were therefore competent to

give advice as to costs; the appellants professed to

have skill and expertise in regard to the letting and

supervision of building contracts; the appellants

knew that the respondent had accepted their advice as

to the cost of $80,000 on the basis that the

respondent became an "owner/builder" and retained the

first appellant to supervise and administer contract

works and construction; and that the second

appellant knew the respondent was acting on that

advice in embarking on the project.

(iv) The claims against the second appellant

It was said that the second appellant aided and

abetted the first appellant in its alleged

contraventions of the Trade Practices Act and was

knowingly concerned in the contravention; and that

the second appellant gave negligent advice.

(v) Discussion of the principles

The judge referred to the authorities in the areas of

(i) negligent misstatement and (ii) the duty owed by

an architect. His Honour said:

"There is no doubt that when an architect gives an

estimate, it must not only be an honest and

carefully considered estimate but it must also be

given after due consideration of the facts

involved in the particular case."

(vi) Reference to the "Practice Notes"

The judge then said:

"The Royal Australian Institute of Architects

apparently prepares what are called 'Practice

Notes' to be used by architects as general

guidelines in the course of their work, even

though there is no rule binding on architects that

they must be observed. In particular, parts of

Practice Note 3 provide a general guide on the

question of estimates:

2. The Architect's responsibility in the matter

of estimates must be clearly understood by

all concerned with the direction of a job.

When a budget limit is stated by a client,

the architect is obliged to design within

this limit. If the lowest tender is

seriously in excess of the budget, and for

this reason the project is abandoned, it is

likely that the architect will be unable to

recover fees. Even if this does not happen,

the architect may be involved in

considerable expense in amending documents

to meet the budget limitation.

3.(a) The RAIA Conditions of Engagement provide as

part of the architect's basic service the

provision of estimates of cost at schematic

design stage, design development stage and

contract document stage.

The degree of accuracy required, and

therefore the type of estimate (i.e. square

or cubic basis, approximate quantities,

etc.) should be decided in accordance with

the circumstances of the case and the nature

of the project and agreed with the client.

It also provides a 10% margin for estimates as

reasonable. Furthermore the Agreement provides

under the heading 'Architect's Responsibility and

Authority':

B1.01 The architect shall perform the services

referred to in this agreement. In the

performance of those services the architect

shall exercise reasonable skill and care in

conformity with the normal standards of the

practice of the architecture.

It thus seems clear that an architect is under a

duty to take reasonable care to ensure that any

estimate of the cost of a building being designed

is reasonably accurate. The architect is also

bound to take into account any increases in costs

which the time taken in the construction might

involve. The evidence in this case establishes

for me that the estimate of $80,000 was wildly

inaccurate and that the house at no stage had a

chance of being constructed to any reasonable

state of occupation for any price even close to

$80,000."

The appellants submit, for reasons to be given later,

that it was not open to his Honour to have regard to

the "Practice Notes".

(vii) Conclusions on liability

The judge said:

"I find that the completed project on the plans

prepared was said by the first (appellant),

through the second (appellant), to cost of the

order of $80,000, excluding architects' and

engineer's fees, and prime cost, furniture or

furnishing items, on the basis that the

(respondent) was licensed as an owner/builder and

the second (appellant) supervised the

construction. This was misleading and deceptive

conduct and a false representation within the

meaning of sections 52 and 53 of the Act. I find

that the (respondent) was induced by the first

(appellant), through the second (appellant), to

proceed with the plans because the (appellants)

said the construction would cost $80,000. The

advice that it could and would be built for that

price was negligent. The failure to design the

house to that cost was a breach of contract. The

second (appellant) aided and abetted the first

(appellant) and was knowingly concerned in its

breaches of the Act. He was in breach of his

contract to continue with and supervise the

construction of a house which would cost $80,000

and negligently advised the (respondent) that it

could and would be constructed for that price.

Both (appellants) are liable to pay damages to the

(respondent)."

(viii) Damages

After returning to the authorities, his Honour

concluded that the measure of damages for negligent

misstatement is the same as under s.82(1) of the

Trade Practices Act, "i.e. the court is to put the

person injured in the same position as would have

existed if the person had not sustained the wrong for

which compensation is now being awarded."

(vii) Quantum of damages

The judge said:

"In a case marked by much vagueness, inconsistency

and generality across the spectrum of issues, the

quantification of damages wins the first prize.

As I see it, the (respondent's) claim for damages

can essentially be divided into two main

categories:

1. Construction costs - occasioned by additional

construction costs in excess of the original

estimate of $80,000

2. Additional financing costs - occasioned by the

additional loans incurred by the (respondent)

to fund the project

....

The (respondent) submitted a schedule of damages

but did not identify the evidence said to support

the assertions contained in it...The matters

requiring attention include:

1. Completion costs - alleged to be of the order

of $50,000

2. Interest on borrowed funds to date - alleged

to be of the order of $50,000 (but which seem

to me to be closer to $40,000)

3. Future interest - estimated to be $24,000 (but

which I do not understand)

4. The exclusion of architect's fees - said to

have been paid in the sum of $6,000 (which

seems to be factually correct, but which I

have found not to be comprised within the

$80,000 estimated cost)

5. The exclusion of engineer's fees (as far as I

can see there has been no evidence or estimate

provided but I have likewise found these to

have been excluded from the $80,000 cost)

6. The quantum and relevance to damages of any

overcapitalisation of the site

7. The interrelationship between the $80,000

estimated cost and the debt to State Bank -

i.e. how much of the debt was brought about by

the (appellants') conduct?

8. The costs of the borrowings from the Bank

relevant to this matter

9. The quantum if any of inflation on the costs

of completion

10. The claim for interest on any award of damages

11. Any question concerning apportionment between

the (appellants).

Except for item 11 (and possibly 7) of this list,

it seems to me that these are all very much

matters for calculation of what flows from the

finding that the (appellants) are liable to pay

damages to the (respondent)."

The judge then directed, in accordance with O.38 r.

1, that the amount which the appellant should be

ordered to pay be ascertained by a Registrar.

Did reliance on the "Practice Notes" deny natural justice to the appellants?

4. An important matter argued on behalf of the appellants was that they had been denied natural justice in circumstances which will be described shortly. Having heard full argument on this question, we came to the tentative conclusion that the appeal should be allowed. We decided, however, to consider the matter and reserved our decision for this purpose. We stood the balance of the appeal over, because if our tentative conclusion were to be confirmed, the parties would thereby be saved the costs of at least one additional day's hearing.

5. It is common ground that the "Practice Notes" were not in evidence before his Honour and that no mention of that material was made during argument at first instance. On behalf of the appellants, it is said that the judge took this material into account in making his finding on the issue of liability, without disclosing to the parties his intention to rely on it. The appellants submit that this constituted a denial of natural justice which vitiated his Honour's finding and required the grant of a re-trial.

6. In In re K. (Infants) (1963) Ch 381, Upjohn LJ. (as he then was) said (at pp 405-6):

"It seems to be fundamental to any judicial inquiry that

a person or other properly interested party must have

the right to see all the information put before the

judge, to comment on it, to challenge it and if needs

be to combat it, and to try to establish by contrary

evidence that it is wrong. It cannot be withheld from

him in whole or in part. If it is so withheld and yet

the judge takes such information into account in

reaching his conclusion without disclosure to those

parties who are properly and naturally vitally

concerned, the proceedings cannot be described as

judicial."

7. In Brinkley v. Brinkley (1965) P 75, Scarman J. (as he then was) said (at p 78):

"For a court to take into consideration evidence which a

party to the proceedings has had no opportunity during

trial to see or hear, and thus to challenge, explain or

comment upon, seems to us to strike at the very root of

the judicial process."

8. Reference was made in argument before us to some observations in Kirkpatrick v. Commonwealth of Australia (1985) 9 FCR 36 at pp 41-2, where it was held that natural justice was not denied by recourse by the Administrative Appeals Tribunal to a medical dictionary for the purpose of ascertaining the meaning of "compensation neurosis". The Full Court said (at p 42):

"In any case, it is not to be doubted that the Tribunal

was entitled to consult a standard medical dictionary

in order better to understand medical evidence in which

technical words were employed by the witnesses. That

the evidence, when so understood, may have led it to

regard the condition alleged by the applicant as in

itself provocative of some suspicion cannot, in

circumstances such as the present, make any difference.

For it was perfectly clear, from the searching

consideration devoted to the applicant's complaints in

the medical reports, that the case had indeed been so

regarded by both the psychiatrists. It could not have

been otherwise. The passage in the reasons of the

Tribunal does not suggest a new point discovered in the

dictionary which the applicant had not been given a

fair opportunity to meet."

9. It is not clear to us exactly what use was made of the Practice Notes by the judge. Much of the material consists of generalisations about which there could be little room for dispute. But the reference to a "10% margin" for an estimate as "reasonable" appears to us to fall into a different category. It seems to suggest that an error in making an estimate of cost which went beyond a margin of 10% is unreasonable, that is to say, is evidence of negligence or breach of duty. Indeed, we would go further. We are compelled to conclude that the proximity of his Honour's reference to that part of the Practice Notes which provides 'a 10% margin for estimates as reasonable' to his finding that the estimate of $80,000 'was wildly inaccurate and that the house at no stage had a chance of being constructed to any reasonable state of occupation for any price even close to $80,000' points to his Honour having relied, if not entirely, at least in part, on that portion of the Practice Notes for his conclusion.

10. Two distinct questions arise here. In the first place, was it open to his Honour to take judicial notice of the Practice Notes? As has been said, they were not put into evidence. It is true that at common law a judge may refer to learned works for the purpose of "refreshing his memory" (see Cross on Evidence, 3rd ed., D.M. Byrne QC, J.D. Heydon QC, at p 101). Judicial notice may also be taken of notorious professional practices (see, e.g. Cross, supra, at p 104; P.B. Carter, "Judicial Notice: Related and Unrelated Matters" in Well and Truly Tried (ed. by Enid Campbell and Louis Waller) at p 90). But it is difficult to accept that the Practice Notes were too notorious to be the subject of serious dispute (see Frankipile Australia Pty. Ltd. v. Durham Developments Pty. Ltd., Brownie J., Supreme Court of New South Wales, 17 August 1988, unreported). In any event, even if the material need not be proved by evidence, the requirements of natural justice must still be observed in considering what use can be made of the material by a court. When a judge undertakes such a reference, he is not entitled to inform himself on any contentious matter without giving the parties the opportunity to controvert or comment upon the material to which reference is made (see Cross, supra, at p 101).

11. In Cavanett v. Chambers (1968) SASR 97, Bray C.J. said (at p 101):

"It is one thing to use (a legislative provision

enabling the court to refer to 'such published

books...as the Court considers to be of authority on

the subject(s)...') for the purpose of discovering or

verifying objective facts or figures about which there

can be no real dispute, such as historical or

geographical data of an uncontroversial nature or

mathematical tables of life expectancy or interest

calculations....though even there I think...the parties

should be given notice of the Court's intention and an

opportunity to be heard on the result of its

researches. It is quite another thing for the tribunal

of its own motion to seek to inform itself out of court

on a question of fact or opinion vital to the issue and

by no means free from controversy. This is, of course,

doubly objectionable if done without the parties having

any opportunity to state their views on the specific

authorities consulted. But in my view, even if they

are offered this opportunity, the court should not

embark on such investigations except by consent. It

would be preposterous to suppose, for example, that in

a claim for damages or workmen's compensation where

divergent medical opinions have been expressed by

expert witnesses on each side, the court should be at

liberty without consent to pursue independent inquiries

of its own on the point through medical journals or

text books not referred to by the witnesses."

(See also McGale v. Glad [1981] FCA 89; (1981) 36 ALR 81 at p 91).

12. In our opinion, this reasoning applies here. The professional standard of care required to be observed by the second appellant was a central question in the proceedings. The Practice Notes suggest that an estimate which was inaccurate by a margin in excess of 10% was prima facie negligent. Given that it appears that no expert evidence was called on the point, the suggestion made by the Practice Notes assumed considerable significance. The rules of natural justice require that the material should have been disclosed to the parties if it were to be taken into account by the judge, albeit that the extent and result of such usage may be called into question. It appears that some use of the material was made by the judge. It must follow that the rules of natural justice were not observed.

13. Not every departure from the requirements of natural justice will entitle the aggrieved party to a new trial. If all that happened at a trial was that a party was denied the opportunity of making submissions on a question of law, when, in the opinion of the appellate court, the question of law must clearly be answered unfavourably to the aggrieved party, it would be futile to order a new trial (see Stead v. State Government Insurance Commission [1986] HCA 54; (1986) 161 CLR 141 at p 145). But where the issue is complex, it is difficult, perhaps impossible, to conclude that it would be futile to order a new trial. In Stead, the High Court said (at pp 145-146):

"Where, however, the denial of natural justice affects

the entitlement of a party to make submissions on an

issue of fact, especially when the issue is whether the

evidence of a particular witness should be accepted, it

is more difficult for a court of appeal to conclude

that compliance with the requirements of natural

justice could have made no difference. True it is that

an appeal to the Full Court from a judgment or order of

a judge is by way of rehearing and that on hearing such

an appeal the Full Court has all the powers and duties

of the primary judge, including the power to draw

inferences of fact...However, when the Full Court is

invited by a respondent to exercise these powers in

order to arrive at a conclusion that a new trial,

sought to remedy a denial of natural justice relevant

to a finding of fact, could make no difference to the

result already reached, it should proceed with caution.

It is no easy task for a court of appeal to satisfy

itself that what appears on its face to have been a

denial of natural justice could have had no bearing on

the outcome of the trial of an issue of fact. And this

difficulty is magnified when the issue concerns the

acceptance or rejection of the testimony of a witness

at the trial."

14. We note that what was said in Stead was said in the context of an appeal by way of rehearing where the appellate court has all the powers and duties of the primary judge including the power to draw inferences of fact. This Court is not in that advantageous position. An appeal to this Court is a true appeal and not an appeal by way of rehearing; Duralla Pty. Limited v. Plant [1984] FCA 146; (1984) 2 FCR 342; Petreski v. Cargill (1987) 18 FCR 68.

15. We do not think that it is possible for an appellate court to conclude that there was material, apart from the Practice Notes, from which negligence on the part of the second appellant could be inferred. In particular, we do not think that it is possible for a court of appeal to draw an inference of negligence, even if it could be shown that the evidence disclosed a substantial discrepancy between (i) an estimate of cost given by the second appellant in respect of a particular building and (ii) the actual cost incurred in constructing that building (cf. Duncan & Weller Pty. Ltd v. Mendelson [1989] VicRp 36; (1989) VR 386 at p 390). The judge made no specific findings in respect of these matters. An attempt was made in argument before us to refer to the evidence dealing with these questions, but it soon became obvious that significant components of the structure in respect of which the estimate was given by the second appellant were not dealt with by the evidence, or, if dealt with, were in dispute. Moreover, the evidence was not clear in some respects, or contentious in others, as to the components of the building that was, in fact, erected. Many of the items of the expenditure said to have been incurred by the respondent were questioned by his Honour. This was one of the reasons why the judge purported to refer such matters to the Registrar for his determination. We will come back to this question.

16. For present purposes, it will suffice to say that we share his Honour's difficulty in identifying, on the evidence, all the relevant details of the expenditure actually incurred by the respondent. In the result, it is impossible for us to attempt to make a comparison of the subject of the second appellant's estimate with what was built. The position is further complicated by the circumstance that a considerable period of time elapsed between the giving of the estimate of cost by the second appellant and the actual construction of the building. It may be (and we express no view on the question) that allowance would have to be made for the effects of inflation in this period, but there appears to be no evidence as to the amount of any such allowance.

17. Given the complexity of these facts and circumstances, and the uncertainties we have mentioned, we are not able to conclude that there was such a discrepancy between the amount of the second appellant's estimate and the amount spent by the respondent that a finding of negligence must necessarily be made. It must follow that it is not possible for us to say that, the Practice Notes apart, there is material from which negligence on the part of the second appellant should now be inferred by us.

18. We would emphasise that we are not now purporting to decide the question whether there is evidence, besides the Practice Notes, from which negligence could, or could not, be inferred. Rather, what we are saying is that, as an appellate court, we do not have the benefit of findings from which such an inference could , or could not, be made. It may be (and we express no view on the matter) that there was material before the judge which he could have used for the purpose of making findings of primary fact from which negligence could, or could not, be inferred. But, given the complexities of the case, in the absence of such findings, it is not open to us, as an appellate court, to conclude that negligence was, or was not, established.

19. It follows, in our view, that the trial miscarried and we propose to order a new trial.

Was the reference to the Registrar on the issue of damages within power?

20. It will be recalled that the judge purported to act pursuant to O.38 r.1 but that all parties contend that it was not within his Honour's power to refer the matter in question. So far as is material, O.38 r.1(1) provides:

"Ascertainment of damages where a matter of calculation

1. (1) Where -

(a) ...

(b) the Court finds that a party is liable to pay

damages,

the Court, if it considers that the amount of damages

to be recovered is substantially a matter of

calculation, may direct that the amount which the party

liable shall be ordered to pay be ascertained by the

Registrar at the proper place." (Emphasis added)

"Certificate of Registrar

2. (1) The Registrar shall certify the amount of

damages which he has ascertained pursuant to rule 1,

and shall deliver a copy of the certificate to each

party and, unless within 7 days of the delivery thereof

to him any party objects the Registrar shall deliver

the certificate to a Judge, who, without the attendance

of any party, may make an order that the person liable

pay the amount of damages so ascertained.

(2) Upon an order being made pursuant to sub-rule

(1), the Registrar shall deliver a copy of the order to

each party.

(3) Where an objection is made under sub-rule (1),

the Registrar shall give notice of the objection to the

other party and list the matter for hearing before the

Court and deliver his certificate to the Court.

(4) Upon a hearing pursuant to sub-rule (3) it

shall be a matter for the Court as to what weight

should in the circumstances of the case, be given to

the certificate of the Registrar."

21. No doubt O.38 was drafted having in mind the requirement that judicial power be exercised by judges appointed under Ch.III of the Constitution (cf. The Commonwealth of Australia v. The Hospital Contribution Fund of Australia [1982] HCA 13; (1982) 150 CLR 49 per Mason J. at p 64). It is a condition precedent of the exercise of the jurisdiction given by O.38 r.1 that the Court considers that the amount of the damages is "substantially a matter of calculation."

22. The primary meaning of "calculate" is "to ascertain by mathematical methods" (see the Macquarie Dictionary). But did the matter referred to the Registrar involve, substantially, the ascertainment of an amount of damages by mathematical method? We do not think so. The decision by the Registrar called for by the reference involved elements of judgment and fact-finding on his part which went significantly beyond a process of mathematical method, or even substantially that process. In the absence of specific findings of the relevant costs incurred or to be incurred by the respondent, it would have been necessary for the Registrar to make such findings. As we read the judge's reasons, it was not possible for his Honour to make such findings. This only serves to emphasise that the character of the function sought to be entrusted to the Registrar travelled well beyond matters of calculation into the realm of fact-finding and judgment. Difficult and complicated questions of apportionment of items of expenditure were very likely to arise. Also, it will be recalled, his Honour suggested that some of the respondent's claims may have been "duplicated". Furthermore, the reference is not framed as if it were an exercise in calculation. Rather, the Registrar is invited, for example, to give attention to the "quantum and relevance to damages of any overcapitalisation of the site" (item 6). Moreover, his Honour acknowledged, quite properly, that items 7 and 11 were not matters of calculation.

23. More important, his Honour did not state the method by which a figure by way of damages was to be arrived at. The reference appeared to leave it to the Registrar, first to propound, and then to apply, the relevant legal principles which would establish the measure of damages in the present case. In order that the reference would involve no more, substantially, than a matter of calculation, it was essential that the relevant facts be found by the judge and that the legal principles laying down the proper measure of damages be stated by his Honour, so that the amount to be awarded to the respondent might be calculated by the Registrar. This was not done.

24. In our opinion, the reference ordered by the judge travelled beyond the limits of what was authorised by the rules. The reference must be set aside.

25. In these circumstances, it is not necessary for us to deal with the second amendment of the statement of claim and other matters which were argued before us.

26. His Honour dismissed a cross-claim made by the first appellant in the proceedings. There is no appeal against this decision.

27. In the result, the appeal and the cross-appeal should be allowed, the orders made at first instance should be set aside and a new trial ordered on the issue of liability and on the issue of damages.

28. The costs already incurred at first instance should abide the outcome of the new trial. As to the costs of the appeal, almost all of the argument on the appeal was devoted to the natural justice point on the issue of liability. There was no contest on the damages issue on either the appeal or the cross-appeal. Since the appellants succeeded on the natural justice point, they should have 80 per cent of their costs of the appeal and there should be no order as to the costs of the cross-appeal.

29. The attention of the parties is drawn to the provisions of the Federal Proceedings (Costs) Act 1981.

1. Leave to appeal and leave to cross-appeal granted.

2. Appeal and cross-appeal allowed.

3. Set aside the orders, finding and directions made

at first instance on 9 November 1988, except for

the order dismissing the cross-claim.

4. Order a new trial of the respondent's application

at a date to be fixed.

5. Costs of the hearing at first instance on 11, 12,

13, 14 and 15 April 1988 to abide the outcome of

the new trial; order that the respondent pay 80

per cent of the appellants' costs of the appeal;

no order as to costs of the cross-appeal.