The Owners - Strata Plan No 97315 v Icon Co

Relevant principles

1. UCPR r 20.24 provides: (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.
2. The principles that apply where the Court is asked to either adopt, vary or reject a referee's report are well settled. The principles, which derive from cases such as Chloride Batteries Australia Ltd v Glendale Chemical Products Pty Ltd (1988) 17 NSWLR 60 (per Cole J as his Honour then was) and the Court of Appeal decisions in Homebush Abattoir Corporation v Bermria Pty Ltd (1991) 22 NSWLR 605 and Super Pty Ltd v SJP Formwork (Aust) Pty Ltd (1992) 29 NSWLR 549 in relation to the former provisions in Part 72 of the Supreme Court Rules 1970 (NSW), were conveniently summarised by McDougall J in Chocolate Factory Apartments Ltd v Westpoint Finance Ltd [2005] NSWSC 784 at [6]-[7] as follows: 6 The principles to be applied, in exercising the discretion conferred upon the Court by Pt 72 r 13 to adopt, vary or reject in whole or in part a report of a referee, are well established. There are a number of cases to which, customarily, reference is made. They include Super Pty Ltd v SJP Formwork (Aust) Pty Ltd (1992) 29 NSWLR 549; the unreported proceedings in that case before Giles J (19 May 1992: the relevant considerations referred to by his Honour are sufficiently extracted in the decision of the Court of Appeal); Chloride Batteries Australia Ltd v Glendale Chemical Products Pty Ltd (1988) 17 NSWLR 60; White Constructions (NT) Pty Ltd v Commonwealth of Australia (1990) 7 BCL 193; and Foxman Holdings Pty Ltd v NMBE Pty Ltd (1994) 38 NSWLR 615. As to the nature and content of the referee's obligation to give reasons, the relevant authorities include Xuereb v Viola (1989) 18 NSWLR 453 and Hughes Bros Pty Ltd v Minister for Public Works (Rolfe J, 17 August 1994, unreported; BC 9402885). 7 The relevant principles, distilled from those decisions, can be stated as follows: (1) An application under Pt 72 r 13 is not an appeal either by way of hearing de novo or by way of rehearing. (2) The discretion to adopt, vary or reject the report is to be exercised in a manner consistent with both the object and purpose of the rules and the wider setting in which they take their place. Subject to this, and to what is said in the next two sub paragraphs, it is undesirable to attempt closely to confine the manner in which the discretion is to be exercised. (3) The purpose of Pt 72 is to provide, where the interests of justice so require, a form of partial resolution of disputes alternative to orthodox litigation, that purpose would be frustrated if the reference were to be treated as some kind of warm up for the real contest. (4) In so far as the subject matter of dissatisfaction with a report is a question of law, or the application of legal standards to established facts, a proper exercise of discretion requires the judge to consider and determine that matter afresh. (5) Where a report shows a thorough, analytical and scientific approach to the assessment of the subject matter of the reference, the Court would have a disposition towards acceptance of the report, for to do otherwise would be to negate both the purpose and the facility of referring complex technical issues to independent experts for enquiry and report. (6) If the referee's report reveals some error of principle, absence or excessive jurisdiction, patent misapprehension of the evidence or perversity or manifest unreasonableness in fact finding, that would ordinarily be a reason for rejection. In this context, patent misapprehension of the evidence refers to a lack of understanding of the evidence as distinct from the according to particular aspects of it different weight; and perversity or manifest unreasonableness mean a conclusion that no reasonable tribunal of fact could have reached. The test denoted by these phrases is more stringent than "unsafe and unsatisfactory". (7) Generally, the referee's findings of fact should not be re-agitated in the Court. The Court will not reconsider disputed questions of fact where there is factual material sufficient to entitle the referee to reach the conclusions he or she did, particularly where the disputed questions are in a technical area in which the referee enjoys an appropriate expertise. Thus, the Court will not ordinarily interfere with findings of fact by a referee where the referee has based his or her findings upon a choice between conflicting evidence. (8) The purpose of Pt 72 would be frustrated if the Court were required to reconsider disputed questions of fact in circumstances where it is conceded that there was material on which the conclusions could be based. (9) The Court is entitled to consider the futility and cost of re-litigating an issue determined by the referee where the parties have had ample opportunity to place before the referee such evidence and submissions as they desire. (10) Even if it were shown that the Court might have reached a different conclusion in some respect from that of the referee, it would not be (in the absence of any of the matters referred to in sub para (6) above) a proper exercise of the discretion conferred by Pt 72 r 13 to allow matters agitated before the referee to be re-explored so as to lead to qualification or rejection of the report. (11) Referees should give reasons for their opinion so as to enable the parties, the Court and the disinterested observer to know that the conclusion is not arbitrary, or influenced by improper considerations; but that it is the result of a process of logic and the application of a considered mind to the factual circumstances proved. The reasoning process must be sufficiently disclosed so that the Court can be satisfied that the conclusions are based upon such an intellectual exercise. (12) The right to be heard does not involve the right to be heard twice. (13) A question as to whether there was evidence on which the referee, without manifest unreasonableness, could have come to the decision to which he or she did come is not raised "by a mere suggestion of factual error such that, if it were made by a trial judge, an appeal judge would correct it". The real question is far more limited: "to the situation where it is seriously and reasonably contended that the referee has reached a decision which no reasonable tribunal of fact could have reached; that is, a decision that any reasonable referee would have known was against the evidence and weight of evidence". (14) Where, although the referee's reasons on their face appear adequate, the party challenging the report contends that they are not adequate because there was very significant evidence against the referee's findings with which the referee did not at all deal, examination of the evidence may be undertaken to show that the reasons were in fact inadequate because they omitted any reference to significant evidence. (15) Where the court decides that the reasons are flawed, either on their face or because they have been shown not to deal with important matters, the court has a choice. It may decline to adopt the report. Or it may itself look at the detail of the evidence to decide whether or not the expense of further proceedings before the referee (which would be the consequence of non adoption) is justified.

The referee's report

1. The referee's report (not including the annexures to it) runs to 119 paragraphs. The salient parts of the referee's reasons are summarised below (footnotes omitted).
2. After referring to the Technology and Construction List Statement and List Response, and provisions of the Home Building Act, the referee set out at paragraphs 22 to 40 relevant terms of the contract (described as a Design and Construction Contract), including the Principal's Project Requirements ("the PPR"), and referred to the terms of the Construction Certificate.
3. At paragraphs 41 to 43, the referee described the types of sunshades located on the building, and noted certain agreements reached by the parties' respective "façade experts" (Mr Karsai retained by the Owners Corporation, and Mr McClelland retained by Icon) at paragraphs 44 to 49. Paragraphs 47 to 49 are in the following terms: 47. In relation to the 150 Sunshades, the Façade Experts agreed that once the missing stainless steel screws described in sub-paragraph b. above, had been installed and any existing short stainless steel screws had been replaced, the 150 Sunshades would be structurally adequate under the appropriate design loads. 48. In relation to the 300 Sunshades, the Façade Experts agreed that in order to make them structurally adequate: a. The missing stainless steel screws should be installed to the top face of these sunshades; b. The existing short stainless steel screws should be replaced with stainless steel screws with a nominal length of 18mm; and c. Additional support was required at the ends of each run of the 300 Sunshades. 49. In relation to the 450 Sunshades, the Façade Experts agreed that in order to make them structurally adequate: a. The missing stainless steel screws should be installed to the top face of these sunshades; b. The existing short stainless steel screws should be replaced with stainless steel screws with a nominal length of 18mm; c. Additional support was required at the ends of each run of the 450 Sunshades; and d. Additional support was required at each joint location along the length of the 450 Sunshades.
4. The referee concluded at paragraph 50: 50. In light of the above agreement by the Façade Experts as to the structural inadequacies of the Sunshades, I accept that the existing sunshade installation for all of the Sunshades was defective and amounted to a breach of s. 18B(1)(a), (b), (c) and (f) of the Statutory Warranties.
5. At paragraph 52, the referee noted that the experts were firmly divided concerning the type of additional supports which should be used on the 300 Sunshades and the 450 Sunshades to overcome the structural deficiency. After referring to the various rectification solutions put forward by Mr McClelland, the referee continued at paragraphs 54 to 55: 54. I note that at the hearing before me, Icon ultimately proceeded on the basis that the C-shaped bracket solution (C-Bracket Solution) was the most suitable and preferred option. The other options were all effectively abandoned by Icon. 55. Accordingly, the parties ultimately proceeded on the basis that the only issue was whether the Hidden Bracket Solution proposed by Mr Kasai or the C-Bracket Solution proposed by Mr McClelland, should be adopted to overcome the structural deficiencies with the 300 Sunshades and the 450 Sunshades.
6. At paragraph 57, the referee stated, based on certain oral evidence given by the experts, that they "ultimately agreed that with further design development, either solution would achieve the desired structural outcome". The referee thus proceeded on the basis that either solution would, with further design development, "be technically viable and would achieve the required structural outcome".
7. At paragraphs 59 to 67, the referee described the nature of the two solutions.
8. At paragraphs 68 to 79, the referee set out what he considered to be the relevant legal principles (including by reference to the High Court decisions in Bellgrove v Eldridge (1954) 90 CLR 613 and Tabcorp Holdings Ltd v Bowen Investments Pty Ltd (2009) 236 CLR 272; [2009] HCA 8) and summarised the submissions made by each party.
9. At paragraphs 80 to 83, the referee summarised the parties' submissions as to why the competing solutions should, or should not, be adopted. The referee then continued, in an important section of his reasons, at paragraphs 84 to 93 and 97 as follows: 84. At the outset, I note that the following matters were not in dispute: a. That as the sunshade design and installation is structurally inadequate, it is necessary for rectification work to be carried out to the Sunshades in order to achieve structural conformity; b. That both the Hidden Bracket Solution and the C-Bracket Solution will achieve structural conformity; and c. That the Hidden Bracket Solution will achieve conformity with the plans and specifications as this bracket will not be visible. 85. Although Icon submitted that the Hidden Bracket Solution was 'unnecessary' to achieve conformity with the Statutory Warranties as conformity could be achieved in a straightforward way using the C-Bracket Solution, it seemed to me that this submission was incorrectly conflating issues of necessity with issues of reasonableness. 86. If work is out of conformity, it is necessary to do rectification work to bring it back into conformity. Once you have work which is necessary to be done in order to bring it back into conformity, the question then becomes whether or not the proposed rectification work is reasonable. 87. In its submissions, the Owners submitted that although both solutions achieved conformity as they overcame any structural deficiency, the C-Bracket Solution did not achieve conformity with the plans and specification as the bracket was still visible. In contrast, the Hidden Bracket Solution did achieve conformity as it produced a building that looks, as it's supposed to look, with uninterrupted lines as shown on the drawings. 88. In this regard, I note that reference was made by the Owners to the following sketches and drawings, none of which showed any kind of visible supporting bracket for any of the sunshades: a. The Architect's Façade VE Sketches which are to be found in Appendix B of the PPR and which showed the 300 Sunshades and the 450 Sunshades as having neat and flat horizontal protrusions; b. The AMA Windows Façade Sketches which are also to be found in Appendix B of the PPR and which also showed the 300 Sunshades and the 450 Sunshades as having neat and flat horizontal protrusions; and c. The façade drawings attached to the Construction Certificate which also showed the 300 Sunshades and the 450 Sunshades as having neat and flat horizontal protrusions. 89. While I accept that the C-Bracket Solution is not consistent with the above sketches and drawings, I note that: a. The Architect's Façade VE Sketches were identified in clause 3 of the PPR Appendix B as being 'indicative sketches' that had only been prepared for the purposes of undertaking a Value Engineering exercise with a view to determining whether cost savings could be made to achieve target façade budgets during the design development process. Accordingly, I give little weight to the significance of these sketches; b. The AMA Windows Façade Sketches were also only had drawn sketches that provided 'indicative details' of the façade and were also prepared as part of the Value Engineering exercise. Clause 4 of the PPR also stated that a number of comments which had just been received from the Architect, were yet to be addressed. Accordingly, I attach little weight to the significance of these sketches as well; and c. The façade drawings attached to the Construction Certificate were only prepared for the purposes of 'Design Development' and included an 'Indicative Perspective' and a number of 'Typical…Detail(s)'. They were not final design drawings. Furthermore, these drawings did not provide any details as to how the sunshades would be attached to the façade wall. Accordingly, I see nothing in these drawings which indicated that visible supporting brackets for the Sunshades could not be used. 90. My opinion in this regard, is reinforced by the fact that under both the development consent and the modified development consent, the Opal Tower was only required to be built 'generally in accordance with' the development consent. The drawings which were attached to these consents did not specify how the Sunshades were to be affixed to the Building. 91. I agree with Icon that the C-Bracket Solution, as designed by Mr McClelland, is such that the Sunshades will be 'generally in accordance with' the design and that the installation of such a bracket will only constitute a minor non-conformance when compared with the above sketches and drawings. This is because the evidence disclosed that they will have little visual impact as they will largely be obscured… 92. As I am of the opinion that the C-Brackets will not be readily visible from either the exterior or interior of the Building, I am unable to conclude that the required 'high quality outcome' specified in clause C3.1.1 of the PPR will not be achieved if the C-Brackets are used. 93. My opinion in this regard, is reinforced by the fact that although the Owners sought to claim that the C-Bracket Solution would impact on the aesthetics of the Building and would not achieve a high quality outcome, the Owners did not serve any evidence from either the Architect, or any other expert architect for that matter, who gave evidence to that effect. In the absence of any such evidence, I do not consider it appropriate for me to make any subjective findings on the issue of aesthetics. Instead, I have simply had regard to the factual evidence as to the likely visibility of the C-Bracket Solution, which I have concluded is only minimal. … 97. As I am satisfied that the C-Bracket Solution (as well as the Hidden Bracket Solution) will achieve conformity, it is necessary for me to determine which of these two solutions is the 'proper rectification methodology', having regard to the issue of reasonableness.
10. The referee concluded at paragraph 98: 98. For the reasons which follows, I am of the opinion that: a. The Hidden Bracket Solution is not a reasonable method of rectification as the rectification work involved is out of all proportion to the benefit to be obtained; and b. The C-Bracket Solution is a reasonable method of rectification as the rectification work involved is proportional to the benefit to be obtained. The referee proceeded to set out reasons for that conclusion at paragraphs 99 to 100, before concluding, at paragraph 101, that for the reasons there given, the C Bracket Solution is a reasonable and proper methodology for rectifying the sunshades (see also paragraphs 103 to 107).
11. At paragraph 108, the referee stated: 108. Accordingly, I determine that in addition to rectifying the issues with the stainless steel screws, the C-Bracket Solution is the proper rectification methodology for overcoming the structural deficiencies with the 300 Sunshades and the 450 Sunshades.
12. At paragraphs 109 to 114, the referee set out his conclusions as to the appropriate quality assurance and/or independent consultant steps that would apply to the C Bracket Solution.
13. A summary of the referee's findings is then set out at paragraphs 115 to 119 of the report.

Summary of principal submissions

1. In its written submissions, the Owners Corporation submitted that the parties accepted before the referee, and the referee found, that rectification of the sunshades was both necessary and reasonable. It was then submitted that, in accordance with the principles established by Bellgrove v Eldridge (supra), the Owners Corporation was entitled to recover damages to bring the defective work back into "conformity". The submissions continued at paragraphs 19 to 22 as follows (footnote omitted): 19 The true issue for determination was the standard of 'conformity' required and whether the C-bracket solution achieved what was required. This is because the law would ordinarily disallow the Corporation to claim damages for any rectification methodology that achieved the same standard of conformity but at greater cost. This is the principle of mitigation of damages. So, if the C-bracket solution and the hidden bracket solution were truly competing rectification methodologies that both resulted in 'conformity' in the relevant sense, then the Corporation could not challenge the Referee's finding of the C-bracket solution as the appropriate rectification approach. 20 Each of the HBA section 18B(1)(a) and (f) warranties required Icon to design and construct the building so that it complied with the provisions of the Contract including the Drawings as defined below. The contract required compliance with the sketches and drawings that were part of the Principal's Project Requirements (PPR) and the drawings that were part of the Construction Certificate (the Drawings). The Referee accepted that the C-bracket solution is not consistent with the Drawings (paragraphs [88) and [89)). The Referee construed the contractual provisions and the reference to the Drawings as being either 'indicative sketches', 'indicative details' or details for 'design development' and as not requiring Icon to have designed and built the building with hidden sunshade supports, as it actually did. That misconstrued Icon's obligations. 21 The Drawings provided Icon with an indication of what was required. They were 'indicative' in that sense, not 'optional'. The fact that the building was actually built with the architectural look it has, and with hidden sunshade supporting brackets, demonstrates that Icon itself understood that it was not permitted to modify the important architectural lines and features of the building shown in the Drawings. 22 Accordingly: (1) the C-bracket solution does not bring the building into conformity with the section 18B(1)(a) or (f) warranties under the HBA; (2) the Referee misconstrued the standards of 'conformity' against which he assessed both rectification proposals; and (3) As it is both necessary and reasonable to rectify the sunshades and the hidden bracket solution is the only rectification methodology that achieves conformity, the Referee's finding in support of the C-bracket solution is either perverse, or undermined by legal error in the way the Referee applied the law to the facts as found.
2. In oral submissions, the Owners Corporation submitted that the referee misconstrued the terms of the contract. It was submitted that he ought to have concluded that in order to achieve conformity with the contract (including the warranties contained in s 18B(1) of the Home Building Act), the method of rectification of the sunshades had to employ internal fixings, not external fixings such as the brackets favoured by Icon. The submission was developed by reference to various provisions of the contract, and the sketches and drawings that are referred to in paragraph 89 of the referee's report. It was put that on a proper construction of the contract, Icon was required to build consistently with those drawings, and that this required internal (and thus not visible) fixings.
3. The Owners Corporation also submitted that the findings of the referee concerning the visibility of the brackets in the C Bracket Solution were incorrect or even perverse, and in part based on material that was not before the referee.
4. In its written submissions, Icon submitted that the Owners Corporation was impermissibly seeking to re-agitate the referee's evaluative findings (at paragraphs 89(a) and 89(b)) that certain sketches that were attached to the contract did not mandate that the sunshades could only be affixed to the building by invisible means. Icon submitted that the findings were open to the referee and, as a matter of contractual interpretation, were correct. Icon submitted that the sketches contained no details, let alone final details, as to how the various sunshades were to be affixed to the building.
5. As far as the drawings annexed to the Construction Certificate are concerned (see paragraph 89(c) of the referee's report), Icon submitted that they were not set out in the contract and were thus irrelevant to the claim based on the s 18B(1)(a) warranty.
6. As for the claim based on the s 18B(1)(f) warranty, Icon submitted that the PPR contained only general statements such that no relevant "specified" purpose or result, or "particular" purpose or result, could be identified.
7. Icon further submitted that it could not be said that the C Bracket Solution would not achieve contractual conformity, given the referee's factual findings concerning the visibility of the brackets. It was submitted that those findings were open to the referee, and there was no basis for the Court to disturb them.
8. In oral submissions, Icon submitted that there was nothing erroneous in the referee's summary of the relevant contractual principles at paragraphs 68 to 79 of the report. In relation to the contract itself, it was submitted that the suggested requirements of "clean and neat architectural lines" or "hidden" sunshade supports, were entirely absent from the contract. It was submitted that the PPR included mandatory or prescriptive language in places, but not in relation to the look of the sunshades or as to how they should be affixed. It was put that the referee, having found that the brackets involved in the C Bracket Solution would have little visual impact as they would be largely obscured, correctly concluded that the C Bracket Solution would be generally in accordance with the drawings attached to the Construction Certificate, and would achieve contractual conformity.

The contract

1. The relevant contract is described as a Design and Construction contract. The contract was entered into between Australia Avenue Developments Pty Ltd as Principal and Icon as Contractor. The contract is dated 29 October 2015. The Contract Sum was in excess of $154 million. Some of the provisions of the contract which have particular relevance to the present application are set out or referred to below.
2. Clause 2.1 relevantly provides: 2.1 Performance and payment The Contractor: (a) shall carry out and complete the WUC in accordance with the requirements of the Contract and in accordance with all directions of the Superintendent; (b) acknowledges and agrees that: (i) the Principal has made known to the Contractor in the Principal's project requirements the intended purpose or result that it requires the Contractor to achieve; and (ii) the Principal relies on the Contractor's skill and judgement to achieve the intended purpose or result. … 'Principal's project requirements or PPR' is defined to mean: the Principal's written requirements for the Works, described in the documents stated in Item 10 which: (a) shall include the stated purpose for which the Works are intended; (b) may include the Principal's design, timing and cost objectives for the Works; and (c) where stated in Item 10, shall include a preliminary design;
3. Clause 2.2(a)(iv) provides: 2.2 Contractor's warranties Without limited the generality of subclauses 2.1 or 2.5, the Contractor warrants to the Principal that: (a) the Contractor: … (iii) shall carry out and complete the Contractor's design obligations: (A) to accord with the Principal's project requirements; (B) including, if subclause 9.4 applies, accepting the novation and retaining the Principal's consultants for any work the subject of a prior contract with the Principal; (C) so the design of the Works does not adversely affect: (1) the functional integrity of the Works; or (2) the quality or standard of the Works required under the Principal's project requirements; (iv) shall carry out and complete the WUC in accordance with the design documents so that the Works, when completed, shall: (A) be fit for their stated purpose or result; (B) comply with all the requirements of the Contract and all legislative requirements; and (C) comply with the requirements of the Principal's project requirements including the requirements in respect of the Sales Contracts; … (e) it will construct and complete the WUC: (i) in accordance with the Contract documents so that the Works, when completed, will comply with all the requirements of the Contract and Approvals; (ii) so as to create a high quality (in terms of design, construction, operation and management) Building Complex having regard to the specified finishes and the requirements of the Principal's project requirements which includes: (A) high quality urban form and amenity; (B) design outcomes which are of a high quality consistent with the recent development of venues and facilities within Sydney Olympic Park; (C) high quality residential development in accordance with the Approvals and SOPA Guidelines; (D) a high quality child care centre; and (E) a high quality stormwater detention and water quality system; (iii) so as to ensure that all people who live, work [sic] or visit Sydney Olympic Park are not prevented from being able to access and use spaces, services and facilities in accordance with the Access Guidelines as a result of the WUC; … 'Design documents' is defined to mean: the drawings, specifications and other information, samples, models, patterns and the like prepared (including those created by the Contractor) for the construction of the Works and the marketing plans for the Works;
4. By cl 8A.13(a), Icon was obliged to provide to the Principal and the Superintendent a consolidated set of the Final Plans and Specifications attached to a Construction Certificate. Final Plans and Specifications is defined to include the plans and specifications consented to by the Consent Authority and for which a Construction Certificate has issued for the Works.
5. In Part A of the annexures to the contract, it is stipulated in Item 10 that the PPR are described in the documents in Annexure Part R, and that a preliminary design is included. Item 11 also states that a preliminary design is included in the PPR.
6. The PPR are set out in Part R to the annexures to the contract. In the Overview of the PPR, cl B1.3 provides: B1.3 The information contained in the PPR's including its annexures are the minimum requirements for the works under contract (WUC) in relation to all aspects of the WUC, including: (a) design and specification; (b) construction; (c) dimension and size; and (d) the schedule of finishes and inclusions (SOFI).
7. In the Development Overview section of the PPR, cl C1.2.1 provides: C1.2.1 The Development is diagrammatically described in the preliminary design. The preliminary design is based on the winning proposal produced by Bates Smart as part of the design excellence competition, for the design of the Development on the site. The scheme presented in the preliminary design is a triangular residential tower with curved apexes, supported over a mixed-use podium and 3 levels of basement car park. The preliminary design includes this PPR's and all of its annexures: … 7. Annexure 0007: PPR's design package; …
8. Clause C3.1.1 relevantly provides: C3.1.1 The Principal's objectives are: (a) to develop the site to a high quality and in accordance with the PPR's; (b) the create high quality outcomes for design, construction, operation, management and maintenance of the Development, including: (i) high quality urban form and amenity; (ii) design outcomes which are of high quality and consistent with the recent Development of venues and facilities within Sydney Olympic Park; (iii) a high quality Development designed and constructed in accordance with Approvals; and (iv) compliance with the PDA; and (v) to provide equitable access from Sydney Olympic Park centre to Bicentennial Park. …
9. Clause C3.2.1 provides: C3.2.1 The Contractor must design and construct the Works to meet the Principal's objectives as referred to in item C3.1;
10. Clause C3.2.2 provides: C3.2.2 Without limiting any other requirement of the Contract the Contractor must carry out the WUC in accordance with (in no particular order): (a) the PPR's; (b) all Approvals and Other Approvals related to the Development; (c) the preliminary design; (d) the benchmark building only in the event that no level of finish or quality level is specified then the benchmark building will be relied upon; (e) the benchmark documentation referred to in C4.4 below; (f) the showroom/sales suite located on the corner of Australia Avenue and Herb Elliot Drive; and (g) the Project Documents.
11. Clause C4.1.1 provides: C4.1.1 The Contractor must: (a) design all aspects of the Development; (b) obtain all Approvals and Other Approvals for the Development; (c) design the Development in compliance with C3.2.2; (d) incorporate in its design; a. professional design consultant drawings and specifications; b. shop drawings; and c. Works as executed (WAE) drawings.
12. In the Design and Construction section of the PPR, the façade of the building is dealt with at cl E18.3. Clauses E18.3.1 and E18.3.2 provide: E18.3.1 The Contractor must provide a high quality external finish to all elements of the facade. Façade systems will be developed by the Contractor under the VE initiative D&C Façade Package in close consultation with the Principal and to the approval of the project architect, Bates Mart [sic], provided the Contractor does not become liable to additional costs due to the Principal or Architect requirements. Refer to PPR Appendix B, Design Brief for D&C Façade Package. E18.3.2 Annexure 0007 to the PPR's sets out the Principal's design intent for the façade of the Works. This document includes a "Façade development package" demonstrating a clear intent from the Principal for façade design and materiality. The final design must be developed and constructed in accordance with this design - subject to VE constraints defined in the VE D&C Façade Package listed above - and must comply with the Building Code of Australia, Australian Standards, structural and wind engineering requirements and the Development Consent.
13. The above clauses refer to Appendix B Design Brief for D & C Façade Package. In that document, under the heading 'Introduction', it is stated: This document and its attachments form the basis for the Value Engineering (VE) redesign of the project façade to achieve target façade budgets.
14. Under the heading "General Notes" it is stated: The façade elements design is generally detailed in the Preliminary Design. Unless superseded by the contents of this Brief, all content of Preliminary Design drawings, schedules and specifications regarding façade elements must be observed. Reciprocally, the contents of this Brief supersede - conceptually and pending design development and Architect's approval as noted above - similar content in the Preliminary Design. The following general principles will apply…
15. Under the heading 'Architect's Façade VE Sketches', the following is stated: The following pages include indicative sketches produced by Bates Smart, forming the basis of the VE briefing/design intent to be observed during the design development process. The Bates Smart sketches are referred to in the referee's report (including at paragraphs 88 and 89). They were included in Appendix 1 to the report.
16. Under the heading 'AMA Windows Façade Sketches', the following is stated: The pages following the above include indicative details, prepared by AMA Windows, covering the main façade areas (Habitable Spaces, Wintergarden, balcony, Slot) in section and in plan. These form the basis of the profiles and extrusions to be used throughout the façade systems. The AMA Windows Façade Sketches are also referred to in the referee's report (including at paragraphs 88 and 89). They were included in Appendix 2 to the report.

Construction Certificate

1. The relevant Construction Certificate for the façade works was issued on 28 October 2016. There were a great many attachments to the Construction Certificate, including façade drawings prepared by Bates Smart. At least some of those drawings are referred to in the referee's report (including at paragraphs 88 and 89). Those drawings were included in Appendix 3 to the report.

Determination

1. The manner in which the referee approached his task is broadly evident from the summary of his report set out above at [19] to [31].
2. Having found that the various types of sunshades were structurally inadequate, and required new screws, or both new screws and additional support, in order for the inadequacies to be overcome, the referee concluded that the existing sunshades were defective and that Icon had thus breached the warranties in s 18B(1)(a), (b), (c) and (f) of the Home Building Act (see paragraph 50 of the report).
3. Each party advanced a solution aimed at providing the required additional support for the sunshades. The referee proceeded on the basis that either solution would, with further design development, be technically viable and would achieve the required structural outcome (see paragraph 58 of the report).
4. The referee recognised that he was faced with a choice between competing rectification proposals, and proceeded to consider the relevant legal principles in that context. He referred to a number of the cases cited by the parties in their written submissions to him, including Bellgrove v Eldridge (supra), which both parties had relied upon. The referee appreciated that whilst Bellgrove v Eldridge (supra) was not expressly concerned with how to decide between competing rectification proposals, he considered that the principles enunciated in that case were relevant to the task he was facing. In particular, the referee stated (at paragraph 70 of the report) that in considering the merits of any rectification proposal, regard had to be given to whether: 1. the proposed rectification work is necessary to produce conformity; and 2. the proposed rectification work is a reasonable course to adopt.
5. It seems to me that the stated approach of the referee in that regard was appropriate in the circumstances. The orders for reference required the referee to determine whether Icon is liable for the alleged defects and, if so, determine "the proper rectification methodology". As the referee was not asked to assess the amount of damages for which Icon would be liable, the latter question should be considered to be directed to the rectification method that would otherwise be the basis of an award of damages for the breach. In that way, the principles enunciated in Bellgrove v Eldridge (supra) were engaged, as referred to by the referee at paragraph 69 of his report. Further, it is clear that the referee understood, based on what was said by McDougall J in Bannister & Hunter Pty Ltd v Transition Resort Holdings Pty Ltd (No 3) [2013] NSWSC 1943 at [329], that any work proposed by way of rectification must be necessary to bring the building into conformity with the contract.
6. The thrust of the attack upon the referee's report is aimed at his conclusion, expressed at paragraph 97, that the C Bracket Solution (as well as the Hidden Bracket Solution) would achieve conformity [with the contract]. The Owner's Corporation primarily contends that the conclusion is undermined because the referee misconstrued Icon's obligations under the contract.
7. Before the referee, the Owner's Corporation submitted that by reason of cll 2.1 and 2.2(e)(ii) of the contract, and PPR cll 3.1.1(a) and (b) (and, it seems, cl 3.2.1), the contract should be construed to mean that Icon was required to provide an outcome that included a completed building that: 1. is of high quality; 2. is defect free; 3. is designed and built in accordance with the requirements of the PPR; and 4. provided high quality design and construction outcomes. (See the Owners Corporation's written submissions to the referee at paragraph 12.) Submissions to the above effect are referred to by the referee at paragraphs 80(a) and 81(d) of the report.
8. The Owner's Corporation further submitted to the referee that the uninterrupted external lines of the floor to ceiling façade glazing and the neat and flat sunshades protruding from those window walls were an important and distinctive architectural feature of the building. It was put that securing the sunshades by hidden structural support brackets which cannot be seen externally allows the appearance of the sunshades to be a streamlined and regular line to compliment the architectural lines of the building (see the Owners Corporation's written submissions to the referee at paragraphs 13 and 14). Further, it was put that the Hidden Bracket approach, unlike the C Bracket Solution, would achieve the three design intents of: 1. the brackets not being visible, 2. the sunshades being neat and flat, and 3. the external surface of the window walls being flat uninterrupted lines (see the Owners Corporation's written submissions to the referee at paragraphs 34 and 35).
9. At paragraph 87 of the report, the referee noted the submission of the Owners Corporation that the C Bracket Solution, with visible brackets, would not achieve conformity, whereas the Hidden Bracket Solution would "as it produced a building that looks as it's supposed to look, with uninterrupted lines as shown on the drawings".
10. The Owners Corporation sought to demonstrate that only the Hidden Bracket Solution was in conformity with the contract, by reference to certain sketches that were part of the PPR and certain drawings that were annexed to the Construction Certificate. The Owners Corporation relied upon: 1. the Bates Smart façade sketches referred to above at [54]; 2. the AMA Windows façade sketches referred to above at [55]; and 3. the Bates Smart façade drawings referred to above at [56].
11. I pause at this point to note that the Owners Corporation did not contend that the sketches or drawings expressly mandated that the sunshades be affixed only by means that were not externally visible. It seems rather to have been put that the manner in which the sunshades were depicted in the sketches and drawings should lead to the conclusion that affixing in that manner was required under the contract. It is clear that the sketches and drawings, insofar as they depict the sunshades, do not show them as fixed by any external fixings such as brackets. That was expressly noted by the referee at paragraph 88 of his report. Further, he accepted, at paragraph 89, that the C Bracket Solution was not consistent with those sketches and drawings. Read in its context, that should be understood as an acceptance that the C Bracket Solution would not produce "neat and flat horizontal protrusions" (see report at paragraphs 81(d) and 88).
12. However, for the reasons set out in paragraph 89 of the report, the referee attached little weight to the significance of the Bates Smart façade sketches and the AMA Windows façade sketches, and saw nothing in the Bates Smart façade drawings (attached to the Construction Certificate) which indicated that visible supporting brackets for the sunshades "could not be used".
13. Again, the approach taken by the referee seems to me to be appropriate. The Bates Smart façade sketches were indicative sketches that were to form the basis of a design intent to be observed during a design development process. To the extent that sunshades are depicted, the detail of how they would be affixed is not specified. That was conceded by Senior Counsel for the Owners Corporation. Further, the sketches are marked "not for construction". The AMA Windows façade sketches, which were also marked "not for construction", included indicative details of the main façade areas that were to form the basis of the profiles and extrusions to be used throughout the "façade systems". The drawing of some of the sunshades depicted in these sketches suggest a form of fixing by bolts, but no further detail is provided. In its submissions, Icon contrasted the position concerning the fixing of the sunshades with numerous items in the PPR that were the subject of mandatory and prescriptive language, including as to matters of detail. The Bates Smart drawings that were prepared later, and annexed to the Construction Certificate, have a status described as "Design Development". They, too, do not include any details as to how the sunshades would be affixed.
14. The referee concluded, in effect, that the above sketches and drawings did not require Icon to only affix the sunshades by a means that was not externally visible. I do not discern any error of principle or misconstruction of the contract in reaching that conclusion. In my view, none of the sketches and drawings relied upon mandated such means (or indeed any particular means) as the only contractually permissible mode of affixing the sunshades to the façade of the building.
15. So, even if, as the referee apparently thought, the C Bracket Solution is not consistent with what is depicted in the sketches and drawings in as much as it does not yield "neat and flat horizontal protrusions", it does not necessarily follow that the C Bracket Solution would not achieve conformity with the contract. In my opinion, to affix the sunshades by means of external brackets would not, in and of itself, amount to a breach of the contract. By way of example, there would not necessarily be: 1. a failure to construct in accordance with the plans and specifications set out in the contract, contrary to the s 18B(1)(a) warranty; 2. a failure to make the works reasonably fit for a specified purpose or result, contrary to the s 18B(1)(f) warranty; 3. a failure to carry out and complete the WUC in accordance with the design documents, contrary to cl 2.2(a)(iv); or 4. a failure to carry out the WUC in accordance with the PPR's and the preliminary design, contrary to cl 3.2.2 of the PPR.
16. I should add at this point that the Owners Corporation, in oral submissions in reply, seemed to suggest that as the sunshades were in fact affixed without using any externally visible means, it could be inferred that this was specified in the actual for construction drawings. However, this argument does not seem to have been made to the referee, and Senior Counsel for the Owners Corporation informed the Court that there was no evidence before the referee of any plan prepared after the drawings that were attached to the Construction Certificate. In these circumstances, I do not think it appropriate to seek to rely upon such an argument as a basis to ask the Court to not adopt the referee's report.
17. The referee noted, at paragraph 90, that under the terms of the development consent, the building was required to be built generally in accordance with the development consent, and the relevant consent drawings did not specify how the sunshades were to be affixed. The referee then concluded at paragraph 91 that the C Bracket Solution was such that the sunshades would be generally in accordance with the design, and that the brackets would constitute only a minor non-conformance when compared with the sketches and drawings relied upon. Again, the minor non-conformance should be understood as a reference to the C Bracket Solution not yielding "neat and flat horizontal protrusions". The referee's conclusions at paragraph 91 were expressly based upon his finding, on the evidence, that the brackets will have "little visual impact as they will largely be obscured".
18. It is evident, from the extensive and detailed content of paragraph 91 of the report, that the referee based that finding upon a thorough examination of the evidence concerning the dimensions and locations of the proposed brackets, and their likely visibility from various viewing positions. The referee further found, at paragraph 92, that the brackets would not be readily visible from either the exterior or interior of the building, and that he was thus unable to conclude that the high quality outcome (required by cl 3.1.1 of the PPR) would not be achieved. The referee noted at paragraph 93 that no expert architectural evidence had been called. In those circumstances, he gave little or no weight to the subjective opinions as to aesthetics given by the engineering experts, and he rejected the evidence of the Chairperson of the Owners Corporation on that topic (see paragraphs 94 and 95 of the report). The referee was quite entitled to do so.
19. I do not accept that the above findings of the referee are in any way called into question by the referee's apparent reliance upon page 13 of the NSW Guide to Standards and Tolerances 2017 (which seems not to have been in evidence before him) to define what he meant by "the normal viewing position" (see paragraphs 91(a)(iii), 91(b)(iii) and 91(c)(iii)). Nor do I accept that the findings are in some way perverse, or based upon a failure to understand (or take into account) certain evidence given by the Owners Corporation's engineering expert about the brackets being visible from balconies. It was not shown that the referee failed to take into account this or any other aspect of the evidence of the expert. It seems that the referee considered such evidence, but decided to give it little or no weight. As I have said, the referee was entitled to do so.
20. The findings of the referee at paragraphs 91 and 92 evidently led him to his conclusion (at paragraph 97) that the C Bracket Solution, as well as the Hidden Bracket Solution, would achieve conformity [with the contract]. The conclusion involves a rejection of the various submissions made by the Owners Corporation to the effect that the C Bracket Solution was a departure from what the contract required in terms of the "look" of the building and its "design intent". The findings were clearly open to the referee, and all the more so in the absence of expert architectural evidence, and in my view the conclusion was reached without any error of principle on the part of the referee.
21. In broad summary, the referee assessed the particular sketches and drawings relied upon by the Owners Corporation, and concluded, without any error of principle or misconstruction of the contract, that they did not require Icon to only affix the sunshades by a means that was not externally visible. Accordingly, it did not necessarily follow that the C Bracket Solution would not achieve conformity with the contract. The referee then found on the evidence that the brackets involved in the C Bracket Solution would not be readily visible and would have little visual impact, such that the required high quality outcome would be achieved and there would be no departure from what the contract required in terms of the "look" of the building or its "design intent". Those findings, which were clearly open to the referee, led him to the conclusion that the C Bracket Solution would achieve conformity with the contract. Again, I do not discern any error of principle in that regard.
22. I will add that the parties had every opportunity to adduce such evidence and make such submissions to the referee as they saw fit. The hearing before the referee in fact occupied four days, including two days of expert evidence. The referee's report reveals that the referee took a thorough and well-reasoned approach to the issues presented to him.
23. For the above reasons, the challenges made by the Owners Corporation to the referee's report have not been made out. I do not regard it as appropriate to exercise the discretion of the Court under UCPR r 20.24 to reject or vary the referee's report as sought by the Owners Corporation. In particular, it would not be appropriate in my view to reject the report insofar as it concerns the referee's conclusions that the C Bracket Solution will achieve conformity with the contract and is "the proper rectification methodology" in relation to the defective sunshades.
24. The Owners Corporation accepted that if the C Bracket Solution was relevantly in conformity, it could not challenge the referee's finding that the C Bracket Solution was the proper rectification approach. That concession was well-founded, having regard to the findings of the referee (particularly at paragraphs 99(b) and 99(c)) that the Hidden Bracket Solution would involve an extensive and unreasonable amount of work, and cause significant inconvenience to the occupants of the building.
25. The Notice of Motion filed by the Owners Corporation on 20 February 2023 will be dismissed, with costs.
26. In these circumstances, it is not necessary to proceed to determine the Notice of Motion filed by Icon on 2 March 2023, and I do not propose to do so, particularly having regard to the position taken by Icon as referred to above at [15]. I think that this motion should also be dismissed, but with no order as to costs given that it has not been determined on its merits. The parties will thus be left to proceed in accordance with their agreement as expressed in cl 17 of the Deed dated 30 May 2022.

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. Decision last updated: 13 April 2023