(11) Seven Sydney was not entitled to terminate the DC100 agreement for the reasons given, namely that the machine was unreliable and not fit for its purpose.
50 One of the issues posed in respect of each of the presses was whether any representations that were made, if made in respect of a future matter, were made on reasonable grounds (see issue 14(c) in respect of the DC70 and issue 28(c) in respect of the DC100). The referee did not give explicit consideration to this in the case of the DC70. He did not need to consider it in the case of the DC100, since he found that none of the representations had been made.
51 However, to anticipate another of Seven Sydney's criticisms: I think it is clear, both from the finding made by the referee in respect of issue 14 and from the report as a whole, that the representations that he found were made were, to the extent that they were made in respect of future matters, made on reasonable grounds. It would have been desirable for the referee to have addressed this topic explicitly. Nonetheless, for reasons that I give in para [146] below, I do not think that his failure to do so is of itself a ground for rejection of the report.
Seven Sydney's submissions
52 Seven Sydney's submissions on adoptions fall into a number of categories. Most of its submissions complain that the referee "ignored" evidence of Seven Sydney's witnesses. In some cases, that evidence is characterised as "uncontradicted". In other cases, it is not so described. In a variant of this submission, Seven Sydney from time to time submitted that the referee made findings that conflicted with the unchallenged evidence of its witnesses, and submitted that in the absence of challenge by cross-examination, it was not open (or reasonably open) to the referee to reach a conclusion contrary to that evidence.
53 In a second category, Seven Sydney complains that the referee failed to resolve conflicts between the evidence called for Seven Sydney and that called for FXA. In related submissions, Seven Sydney complains that the referee "ignored" Seven Sydney's submissions about the credibility of various witnesses.
54 In a third category, Seven Sydney complains that the referee made findings that were not supported by the evidence. (In some cases, this complaint is amplified by the complaint, described in para [56] below as the fifth category, that the referee's findings were not put to the relevant witnesses called by Seven Sydney.) A variant submission, convenient to be considered in this category, is that evidence relied upon by the referee was not reasonably capable of supporting a specified finding.
55 In a fourth category, Seven Sydney complains that the referee "ignored" Seven Sydney's submissions.
56 In a fifth category, Seven Sydney complains that the referee reached conclusions that were not put to its relevant witnesses in cross-examination. Where it occurs, this complaint is allied with other complaints - usually, dealing with the referee's alleged error in "ignoring" submissions put by Seven Sydney.
57 Further, as I have noted, Seven Sydney criticises the referee's analysis of and conclusions on the expert evidence.
58 In many cases, the attack on a particular aspect of the report involved more than one category of complaint.
59 As I have already indicated, each of these criticisms was made by reference to individual subsections of the report. Each and every subsection of the referee's findings in section 3.1 (dealing with the DC70 representations) from 3.1.1 to 3.1.35 (pp 15-47 of the report) was criticised.
60 Seven Sydney then turned its attention to section 3.2 of the report (DC100 representations). Again, each and every one of the subsections, from 3.2.1 to 3.2.5 (pp 48-53 of the report), was criticised individually.
61 Thereafter, Seven Sydney's criticisms became for a time, in comparison to what had preceded them, selective. The criticisms of section 3.3 (dealing with termination of the DC100 leasing agreement) dealt only with section 3.3.5: the decision to shut down the DC100. It is a little strange that Seven Sydney criticised the referee's findings in this subsection, without criticising his findings in the preceding subsections of section 3.3. It is equally strange that Seven Sydney criticised the referee's findings in section 3.3.5, but directed no criticism to his findings in sections 3.3.6, 3.3.7 and 3.3.8 (which dealt with matters that, individually and cumulatively, struck at the credit of a vital Seven Sydney witness, and at the credibility of its case as to why it decided to terminate the DC100 leasing agreement).
62 In dealing with section 3.4 of the report (Performance of the DC70), Seven Sydney criticised each of the first eight subsections, 3.4.1 to 3.4.8 (pp 64-82 of the report) individually. It did not direct individual criticisms to sections 3.4.9 to 3.4.12. Again, I find that strange, given that those sections were vital to the commercial case put by Seven Sydney and to the referee's conclusion, in section 3.4.13, that the DC70 was fit for its intended purpose.
63 Only one subsection of section 3.5 (dealing with performance of the DC100) was criticised. That was 3.5.9, in which the referee concluded (among other things) that Seven Sydney had greatly exaggerated its allegations of lack of reliability. (It should be noted that the parties are agreed that in para 105, where this conclusion is expressed and justified, the word "unreliability" in the second line should read "reliability".) It is, once more, a little strange that Seven Sydney should criticise section 3.5.9, which contains the relevant conclusions, without criticising any of the factual findings and analysis in sections 3.5.1 to 3.5.8 on which those findings are based.
64 Seven Sydney directed no criticism to the referee's findings in section 3.6 (which dealt with service and support). However, it returned to form in its analysis of section 3.7 (dealing with operation of the presses). Each of sections 3.7.1 to 3.7.5 (pp 119-125 of the report) was criticised individually.
65 Section 3.8 of the report dealt with testing of the DC100. Seven Sydney criticised the referee's findings at sections 3.8.1 and 3.8.2 (dealing with recommissioning and testing at Seven Sydney's premises). Further, it seems, the criticisms were intended to extend to some of the referee's findings in section 3.8.3 (dealing with testing at Trendsetting's premises).
66 Seven Sydney's written and oral submissions were supplemented by two further sets of written submissions, one entitled "Summary of deficiencies apparent from the referee's report itself" and the other entitled "Summary of deficiencies apparent from evidence not referred to in the referee's report". The material contained in those further submissions does not require any change to the preceding summary of the structure and content of Seven Sydney's submissions. It does, however, support the view expressed in para [9] above of the nature of Seven Sydney's case on adoption.
67 Further, Seven Sydney complained that the referee had failed to deal with its claims of representation by silence, negligence, and reversal of onus under s 51A of the Trade Practices Act. It submitted that it had pleaded, never abandoned and referred in its final submissions to each of these cases, and that the referee had failed to deal with any of them.
68 Thus, Seven Sydney submitted, the flaws in the referee's report were so extensive that it should be rejected. Alternatively, it submitted, the findings that he had made justified the conclusion that neither the DC70 nor the DC100 was fit for its purpose or of merchantable quality.
FXA's submissions
69 FXA submitted that, in substance, the case sought to be made before me by Seven Sydney was that the referee did not take sufficient account of Seven Sydney's submissions to him. This, I think, relates to the first, second and fourth categories that I have identified in paras [52], [53] and [55] above. FXA referred to the length of the hearing, the extent of the evidence and, in particular, to the testing process. As to this last matter, FXA pointed out that Seven Sydney's experts had not observed the operation of the DC100 at Trendsetting's premises, and that (no doubt as a result) FXA's experts were scarcely cross-examined on their evidence relating to that matter. It referred to Hull v Thompson [2001] NSWCA 359 where the Court, speaking through Rolfe AJA, said at [21] that prima facie, if there were no cross-examination of an expert witness (or indeed, most witnesses) there is no basis for the unchallenged evidence not to be accepted. (It may be noted that this proposition may yield to the facts of a particular case: see HSH Hotels v Multiplex [2004] NSWCA 302 at [82] and following.)
70 FXA submitted that each of the critical findings of the referee was amply justified on the evidence, and that it was a matter for him to decide, on each matter, the evidence that he accepted and the conclusion that he formed based upon it. It pointed out, in particular, the very significant issues as to credit, and as to the credibility of Seven Sydney's entire case, that were raised before the referee.
71 FXA submitted that it would have been almost impossible for the referee to deal in detail with all the material, in the way for which Seven Sydney contends. It submitted that it was not open to Seven Sydney "to re-canvass virtually every issue in the case", nor to attack the credit of FXA's witnesses (written submissions on adoption of the referee's report dated August 2004, para 17).
72 Turning to the individual criticisms made by Seven Sydney of subsections of the report, FXA submitted that it was inappropriate to take each finding in isolation (as, it submitted, the approach of Seven Sydney did). It submitted that, since the referee had drafted his report by reference to each and every one of the topic headings contained in Seven Sydney's submissions in chief, it could not be said that he had "ignored" any matter referred to in those submissions.
73 FXA submitted, in relation to many of the pieces of evidence that the referee was said by Seven Sydney to have "ignored", that there was other evidence inconsistent with it; and that, in any event, acceptance of that which was said to have been "ignored" in many cases would have required the referee to come to a different view than that which, by implication, he did as to the credibility of the relevant Seven Sydney witnesses. In other cases, Seven Sydney submitted that the evidence that the referee did accept (inconsistent with the evidence that he is said to have "ignored") was supported by contemporaneous documents and corroborated by other evidence.
74 In answer to Seven Sydney's submissions that, in certain subsections of the report, the referee had made findings that were not supported by any evidence, FXA referred to the evidence that, it submitted, supported the relevant findings. It referred also to its submissions to the referee in which it had referred him to that evidence.
Analysis
General observations
75 Both on reading the report prior to the commencement of the adoption hearing, and upon rereading it thereafter with the benefit of counsel's submissions, I formed the view that it showed a thorough, analytical and scientific approach to the assessment of the issues that were referred to the referee for enquiry and report. The structure of the report makes it, in some ways, a little difficult to follow; particularly because one is required in effect to cross-reference the various sections to obtain a fuller understanding of the referee's reasoning process. However, that is no criticism of the referee. The structure of the report follows, as I have noted, the structure of Seven Sydney's submissions in chief to him. In a lengthy and complex case, involving a very substantial body of evidence, I think that it was appropriate for the referee to consider the issues by reference to the topics proposed by Seven Sydney, and to decide it by reference to the issues that it had posed.
76 A reading of the report against the submissions put by the parties to the referee satisfies me that he turned his mind to, and decided in a rational way, the matters that they had put to him for his consideration.
77 Accordingly, I start with a disposition towards acceptance of the report.
The documents marked for identification
78 As I noted in para [6] above, Seven Sydney tendered four lever arch folders of extracts from the evidence. By bulk, and allowing for duplication and the fact that some of the material tendered had been rejected by the referee, what was tendered would appear to comprise about 5% of the totality of the evidence before the referee.
79 In Foxman at 620, Cole J said that the principles enunciated in Super did not require a court considering adoption of a report to revisit all of the evidence before the referee, nor did they contemplate the court having regard "to some selected portions [of the evidence] favourable to the party opposing or supporting adoption": particularly where findings of fact were, in part, based on considerations of credit. I respectfully agree.
80 The tender of the material to which I have referred might have made good the proposition that the referee "ignored" evidence: in that it may have indicated that there was evidence before the referee that he had not referred to in his report. This, of itself, could hardly advance Seven Sydney's case. It is obvious that the referee did not expressly refer to a huge amount of the evidence that was before him. It would have been impossibly burdensome for him to have done this; and the utility of the exercise would have been inversely proportionate to the burden. There is no principle requiring him (or any other referee) to do so.
81 Nor could the tender show that the evidence in question was "uncontradicted". By definition, that proposition could only be made good either by concession (absent in the present case) or by an examination of the entirety of the evidence.
82 In my judgment, the approach taken by Cole J to the tender of selected portions of the evidence is applicable in this case. If it is appropriate to revisit factual findings made by a referee then the exercise should be undertaken with the entirety of the evidence bearing on the factual findings that are to be revisited. In the present case, given the submissions for Seven Sydney, that would require the Court to consider the entirety of the evidence put before the referee. Neither party tendered the 66 lever arch folders that were said to comprise the substantial part of that evidence. I do not think that the exercise is one properly to be undertaken by considering a small percentage of the whole. It might be otherwise if FXA conceded that the four lever arch folders contained the entirety of the material relevant to the challenges raised by Seven Sydney. But it did not. Indeed, in most but not all cases, it submitted that there was other evidence upon which the referee was entitled to (and, it said, did) rely in reaching the impugned findings.
83 As I have sought to make plain, each party launched significant attacks on the credit of the other's witnesses, and on the credibility of the other's case. It is apparent that the referee considered those attacks. It is in my judgment inescapable that his findings of fact were, to a very substantial extent, influenced by his views on credit. In those circumstances, the tender of a small portion of the entirety of the material before the referee could scarcely assist, since it would not give any indication of the credit issues. (The problem is, no doubt, exacerbated because it is unlikely that Seven Sydney would have chosen to tender the material reflecting adversely on the credit of its witnesses; but even if it did, the general point that I have made is not affected.)
84 For those reasons, I have concluded - as I indicated in para [7] above - that, with two exceptions, the tender of the four lever arch folders of extracts from the evidence before the referee should be rejected. The exceptions relate to two hard copy versions of a PowerPoint presentation relating to the DC70.
85 I now turn to the various categories of the criticisms made by Seven Sydney in its submissions.
First category: the referee "ignored" evidence
The submissions generally
86 I do not think that this challenge - which, as I have said, is the largest single category - is made out. Leaving aside, for a moment, the question of whether or not the evidence said to have been ignored was, in a particular case, "uncontradicted", an assessment of the challenge requires two matters to be considered. I have already referred to them, but it is desirable at this point to restate them.
87 The first is that it is neither possible nor necessary for a decision-maker such as the referee to state every detail of the reasoning that leads to a particular conclusion, or every detail of the evidence relied upon. To do so would be, as well, burdensome and unhelpful.
88 The second is that the referee followed, topic by topic, the structure of Seven Sydney's submissions to him. FXA's written submissions in reply to those of Seven Sydney followed the order of Seven Sydney's written submissions in chief. Thus, from Seven Sydney's submissions in chief and FXA's submissions in reply, the referee had a topic by topic statement of what Seven Sydney said was the relevant evidence, and (where FXA desired to make a particular point) a corresponding reply. In addition, of course, he had FXA's written submissions in chief; and he had the not insubstantial oral submissions for each party.
89 The referee's failure (if such it be) to mention a particular matter raised in submissions does not, of itself, vitiate his conclusion upon a topic to which that matter is said to be relevant. It therefore seems to me in principle that this first category of Seven Sydney's submissions is less than persuasive. But when one considers the second matter to which I have referred - the structure of the report mirroring the structure of Seven Sydney's submissions in chief - the attack becomes unsustainable. It is difficult, to the point of impossibility, to accept that the referee on the one hand read and followed Seven Sydney's submissions in chief but, on the other, ignored evidence referred to in them. The irresistible inference (arising from this and from what he wrote) is that he considered not just the topic headings but the detail that followed them.
90 The reality, as a detailed reading of the report shows, is that the referee made findings on each of the topics referred to by Seven Sydney but that he set out, in his findings, only what he thought was relevant to an overall conclusion on the issues submitted for his decision. In doing so, he referred (in some cases, by direct quotation, in others by paraphrase, and in most cases by footnotes) to the evidence that he considered to be material.
91 Careful attention to Seven Sydney's written and oral submissions leads to the conclusion that Seven Sydney is seeking to reargue - in effect, to conduct an appeal by way of rehearing from - the great bulk of the referee's report. The submissions (in this category and others) do not limit themselves to the well recognised grounds upon which adoption of a referee's report may be opposed. They seek the opportunity to be heard twice, on matters where Seven Sydney had every opportunity to be heard before the referee; and, in so doing, they effectively treat the proceedings before the referee as a warm up for the real contest in this Court.
92 I do not accept Seven Sydney's submission that numerous subsections of the report are vitiated by the alleged failure of the referee to consider evidence. On the contrary, I think, the report shows a proper and analytical approach to the subject matter of those subsections.
93 What I have said so far deals with the submissions generally. I now turn to the specific submission in relation to the PowerPoint presentation and section 3.1.13 of the report.
Section 3.1.13
94 In this section of the report, the referee dealt with a PowerPoint presentation said to have been given by FXA to Seven Sydney. I say "said to have been given" because, as the referee found, the document that was first put in evidence (and that Seven Sydney initially relied upon in its submissions on adoption) was not a copy of the presentation actually made, but one created (apparently, by Seven Sydney) from another PowerPoint presentation made by Seven Sydney and FXA jointly. Seven Sydney subsequently located, and put into evidence, a copy of the earlier PowerPoint presentation. Those documents were identified as POH 1 (the reconstructed presentation) and POH 2 (the original presentation). They are found behind tab 3.1.13 in volume 1 of the documents tendered by Seven Sydney. They will be admitted as exhibits in the adoption hearing.
95 The document (in both forms) included a graph that purported to compare the unit cost of digital printing with the cost of offset printing. That graph apparently showed that the cost per unit of digital printing was lower than that of offset printing for lower print runs but that, after a run of about 2,900 impressions, the cost per unit of offset printing was lower than that of digital printing. (I say "apparently" because the graph as reproduced in POH 1 and POH 2 is not crystal clear; but this explanation was given from the Bar table without demur.)
96 The referee referred to 2,900 copies as a "break even point". Seven Sydney criticised this finding. In my view, if the referee were intending to say that a print run of 2,900 was the point at which digital printing "broke even" when compared to offset printing, then he was wrong. Of course, if he were intending to say that it was the point at which offset printing broke even with digital printing, then he did not err; but the relevance of that finding is less than clear. I think the better view is that the referee did err. But this is of little significance. Firstly, there was no suggestion in Seven Sydney's submissions on adoption that FXA represented the graph to Seven Sydney as showing a "break even" point of 2,900 copies. Secondly, there was no suggestion in Seven Sydney's submissions on adoption that Seven Sydney so understood it. Thirdly - and particularly because the version of the PowerPoint presentation originally tendered was one created jointly by Seven Sydney and FXA - it is likely in fact that Seven Sydney had derived its own, correct, understanding of the graph without relying on anything said by FXA to induce that understanding.
97 The referee said further, of the graph in question, that he read it "as general information on the relative capabilities of digital presses compared with offset presses". Seven Sydney criticised that, saying that the graph was "as much a representation about the DC70 press as about digital presses generally since the presentation was made in the context of the prospective sale of that press". It is quite clear, when one looks at the PowerPoint presentation (in either version) as a whole, that the graph was a representation about digital printing generally. That is apparent from the graph itself, which gives as the source of data not anything that could be taken to relate to the DC70, but a publication dated in July 1996 which was "based on research at R.I.P.". Again, when one reads the document as a whole, other statements in it - in contrast to the graph - are directly referable to the DC70 in particular rather than to digital printing generally.
98 There is other material contained in the PowerPoint presentation that is ignored by Seven Sydney. It includes the assertion (in the reconstructed version, prepared by Seven Sydney and FXA jointly) that:
"Variable information printing [is] arriving soon."
99 That is entirely consistent with FXA's case that it had told Seven Sydney on a number of occasions, and Seven Sydney clearly understood, that variable data printing was not yet available on the DC70 but would "soon" become available.
100 Seven Sydney submitted that other pages of the reconstructed document "illustrated a high degree of variable data" and that the referee "wrongly ignored" those references. In the context of the warning to which I have referred, that could only have been a reference that variable data capability of the represented level would be available "soon". It cannot amount - as Seven Sydney appears to submit - to a representation that such a level (or any level) of variable data capability was available at the time either of the PowerPoint presentations was given.
Second category: failure to resolve conflicts; ignoring submissions as to credibility
101 It will be apparent from what I have said already that, in substance, I think that the referee did resolve conflicts in the evidence. No doubt, he could have expressed his reasons in much fuller terms, referring, in detail, to the evidence that was in conflict and, in equal detail, to the reasons why he accepted one aspect of it in preference to the other. It might have been desirable for the referee to have been slightly more discursive in expressing his reasons for making the findings that he did where there were conflicts. Nonetheless, I do not think that it can be said that he failed to resolve the conflicts. It is clear, on reading the report, that he did: at least, where he regarded them as being significant.
102 Equally, it is clear that the referee was influenced by questions of credit and credibility. (I use the word "credit" to refer to the credit of particular witnesses, and the word "credibility" to refer to the credibility, or "believability", of the cases for which each party contended.) He referred on a number of occasions to aspects of the evidence of Seven Sydney's witnesses that could be regarded as unsatisfactory. He referred also to aspects of Seven Sydney's case (including, by way of example only, its failure to complain at any material time of the matters alleged in its summons) that might be thought to reflect on the credibility to be accorded to the case that it sought to make out.
103 The parties' written submissions show that questions of credit and credibility were central. FXA's written submissions to the referee contained trenchant criticisms both of Seven Sydney's principal witnesses and of its case as a whole; and Seven Sydney dealt with FXA's witnesses and case in like manner. It is impossible to accept that the referee took no account of those submissions. It follows, not only that he resolved conflicts in the evidence but that, where appropriate, he did so by reference to questions of credit and credibility. It also follows, I think, that in doing so he took account of the submissions made to him by each of the parties on those topics. No doubt, he was also assisted by his observations of the witnesses whose credit was in issue.
Third category: findings not supported by the evidence and related submissions
104 It is, I think, clear that if a referee makes a finding that is not supported by any evidence then there is an error of law that is capable of enlivening the discretion to reject the report. It is therefore necessary to consider the submissions individually.
3.1.14 Comparisons between DC70 and Xeikon DCP32/D
105 Seven Sydney submits that the referee concluded, in paras 58 and 61 of this section of his report, that two representatives of Seven Sydney based their conclusions on the capabilities of the DC70 on their observations of other presses at other premises. Seven Sydney submits that those findings are not supported by evidence and were never put to the witnesses in their cross-examination.
106 The paragraphs of the report in question read as follows:
"58. I have formed the opinion that the impressions gained by O'Hanlon[] of the capabilities of the DC70 were obtained from his prior observation of the performance of the Zeikon DCP/32D press with a Barco collator at Print Central [] and a similar Zeikon press demonstrated to Seven Sydney representatives by Edward Keller. Those observations appear to have been of a significantly different press configuration from the DC70 specification in the documents annexed to his affidavit. None of the Seven Sydney executives saw a DC70 demonstrated by Fuji Xerox or in operation anywhere before they made the commitment to purchase the press.
…
61. Markland [] expressed a similar understanding of the capabilities of the DC70 based on materials other than representations made by Fuji Xerox. He made reference [] to the demonstration of variable data printing on the DCP/32D at the premises of Edward Keller. He explained [*] that it was his understanding that the DC70 had capabilities that were at least equal to the variable data capabilities of this Xeikon press that he had seen in operation."