ABB Engineering Construction Pty Ltd v Abigroup Contractors Pty Ltd

[2003] NSWSC 665

CITATION:	ABB Engineering Construction Pty Limited v Abigroup Contractors Pty Limited [2003] NSWSC 665
HEARING DATE(S):	16/07/03, 17/07/03, 18/07/03, 21/07/03, 22/07/03, 24/07/03
JUDGMENT DATE:	30 July 2003
JURISDICTION:	Equity Division Technology and Construction List
JUDGMENT OF:	Einstein J
DECISION:	Parties to bring in Short minutes of order. Costs to be argued
CATCHWORDS:	Practice and Procedure - Part 72 reference - Application to adopt Referee's report - Application to set aside sections of the report - Principles applicable - Parties bound by conduct of litigation at trial or on reference - Contract - Formation of contract - Ongoing negotiations - Intention to contract - Masters v Cameron classes - Fourth Masters v Cameron class - Whether binding and enforceable subcontract formed between plaintiff and defendant - No formal signed agreement entered into by parties - Works partly completed when defendant claims repudiation of extant contract by plaintiff and purports to terminate such contract - Relevance of prior negotiation and subsequent contract - Objective determination of intention of parties - Admissibility of post contractual conduct - Whether parties arrived at consensus capable of forming a contract - Whether subsequent negotiations supports or mandates inference that parties did not intend to make concluded bargain - Restitution - Recovery on quantum meruit - Principles - Considerations to be taken into account in determination of amount which constitutes in the circumstances, fair and just compensation for benefit or 'enrichment' actually or constructively accepted - Remuneration - Whether calculated at a reasonable rate for work actually done or the fair market value of material supplied - Whether calculated as value to principal of works performed
LEGISLATION CITED:	Arbitration Act 1902 Prescribed Progress Payment Act Occupational Health & Safety Act Supreme Court Rules (NSW) Trade Practices Act 1974
CASES CITED:	Abigroup v Peninsula [2001] NSWSC 752 Air Great Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309 Allen v Carbone (1975) 132 CLR 528 Anaconda Nickel Ltd v Tarmoola Australia Pty Ltd (2000) 22 WAR 101 Angelopoulos v Sabatino (1995) 65 SASR 1 Appleby v Johnson (1874) LR 9 CP 158 Astor Properties Pty Ltd v L'Union des Assurance de Paris (1989) 17 NSWLR 483 Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 Australian Development Corporation Pty Ltd v White Constructions (ACT) Pty Ltd (1996) 12 BCL 317 Ballas v Theophilos (No 2) (1957) 98 CLR 193 Barrier Wharfs Ltd v W Scott Fell & Co Ltd (1908) 5 CLR 647 Baulkham Hills Private Hospital Pty Ltd v G R. Securities Pty Ltd (1986) 40 NSWLR 622 Bolot v Capper (1957) 75 WN (NSW) 316 Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153 Brenner v First Artists' Management Pty Ltd [1993] 2 VR 221 British Steel Corp v Cleveland Bridge and Engineering Co Ltd [1984] 1 All ER 504 Brunninghausen v Galvanics (1999) 46 NSWLR 538 B Seppelt & Sons Ltd v Commissioner for Main Roads (1975) 1 BPR 9147 Buckley v Bennell Design & Construction Pty Ltd (1978) 140 CLR 1 Buttrose v Versi (Rolfe J, 10 December 1990, unreported) Chloride Batteries of Australia Ltd v Glendale Chemical Products Pty Limited (1988) 17 NSWLR 60 Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 Coulton v Holcombe (1986) 162 CLR 1 Council of the City of Sydney v Woodward [2000] NSWCA 201 Cumnock No. 1 Colliery Pty Limited v Pacific Power [2002] NSWCA 278 FAI Traders Insurance Co Ltd v Savoy Plaza Pty Ltd [1993] 2 VR 343 Film Bars Pty Ltd v Pacific Film Laboratories Pty Ltd (1979) 1 BPR 9251 Flender (Australia) Pty Ltd v Warman International Ltd [New South Wales Court of Appeal, 18 June 1998, unreported] Foxtel Management Pty Ltd v Seven Cable Television Pty Ltd (2000) 175 ALR 433 Franks v Berem Constructions Pty Ltd [New South Wales Court of Appeal, 2 December 1998, unreported] GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd [2003] FCA 50 Geebung Investments Pty Ltd v Varga Group Investments (No.8) Pty Ltd (1995) 7 BPR 14,551 Glover v Australian Ultra Concrete Floors Pty Ltd [2003] NSWCA 80 Godecke v Kirwan (1973) 129 CLR 629 Graham Evans Pty Ltd v Stencraft Pty Ltd (2000) 16 BCL 335 G R Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631 Heysham Properties Pty Ltd v Action Motor Group Pty Ltd (1996) 14 BCL 145 Hide & Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310 Homebush Abattoir Corporation v Bermria Pty Limited (1991) 22 NSWLR 605 Howard Smith & Co Ltd v Varawa (1907) 5 CLR 68 Inland Revenue Commissioners v Raphael [1935] AC 96 Integrated Computer Services Pty Ltd v Digital Equipment Corporation (Australia) Pty Ltd (1988) 5 BPR 11,110 Jennings Construction Limited v QH & M Birt Pty Ltd (Supreme Court of New South Wales, Cole J, 16 December 1998, unreported) John R Keith Pty Ltd v Multiplex Constructions (NSW) Pty Ltd [2002] NSWSC 43 LMI Australasia Pty Limited v Baulderstone Hornibrook Pty Limited [2003] NSWCA 74 Love & Stewart Ltd v S Instone & Co Ltd (1917) 33 TLR 475 Masters v Cameron (1954) 91 CLR 353 Najjar v Haines [(1991) BCL 145] Nowlan v Marson Transport Pty Ltd (2001) 53 NSWLR 116 Renard Constructions (M E) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234 Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221 Peabody Resources Limited v Allco Constructions Pty Ltd [Supreme Court of New South Wales, O'Keefe CJ, 14 March 1994, unreported] Peninsula Balmain Pty Ltd v Abigroup Contractors Pty Limited (appeal) Pobjie Agencies v Vinidex Tubemakers [2000] NSWCA 105 Raguz v Sullivan (2000) 50 NSWLR 236 Reardon Smith Line Ltd v Hansen-Tangen [1976] 1 WLR 989 Rowe v Australian United Steam Navigation Company Limited (1909) 9 CLR 1 Ryan v Textile Clothing & Footwear Union [1996] 2 VR 235 Sabemo Pty Ltd v North Sydney Municipal Council [1977] 2 NSWLR 880 Sinclair Scott & Co Ltd v Naughton (1929) 43 CLR 310 Skinner & Edwards (Builders) Pty Ltd v Australian Telecommunications Corporation (1992) 27 NSWLR 567 Spencer's Pictures Limited v Cosens (1918) 18 SR (NSW) 102 Super Pty Limited v SJP Formwork (Aust) Pty Limited (1992) 29 NSWLR 549 Telstra Corporation Limited v Australis Media Holdings (1997) 24 ACSR 55 Tern Minerals NL v Kalbara Mining NL (1990) 3 WAR 486 Trentham (G Percy) Ltd v Archital Luxfer Ltd [1993] 1 Lloyd's Rep 25 University of Wollongong v Metwally (1984) 158 CLR 447 Walter Construction Group Limited v Walker Corporation Ltd (2001) 47 ATR 48 White Constructions (NT) Pty Ltd v Commonwealth (1990) 7 BCL 193 White v Overland [2001] FCA 1333 William Lacey (Hounslow) Ltd v Davis [1957] 2 All ER 712
PARTIES :	ABB Engineering Construction Pty Limited (Plaintiff) Abigroup Contractors Pty Limited (Defendant)
FILE NUMBER(S):	SC 55033/98
COUNSEL:	Mr B Collins QC, Mr M Orlov (Plaintiff) Mr T Bathurst QC, Mr F Corsaro SC, Mr F Hicks (Defendant)
SOLICITORS:	Abbott Tout (Plaintiff) Clayton Utz (Defendant)

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

Einstein J

30 July 2003

55033/98 ABB ENGINEERING CONSTRUCTION PTY LTD v ABIGROUP CONTRACTORS PTY LTD

JUDGMENT

The Proceedings

1 These proceedings concern rights and obligations flowing from dealings between the plaintiff, ABB Engineering Construction Pty Ltd ["ABB"] [referred to in the contemporaneous correspondence as "AEC"] and Abigroup Contractors Pty Ltd ["Abigroup"], relating to the supply and installation of the structural steel roof system and the acoustic roofing system [“the works” or “the roofworks"] for the Multi Use Arena ["MUA"] now known as "the Superdome", being a major Olympic facility.

2 In 1997 Abigroup was engaged by Obayashi Corporation [“Obayashi”] (the Head Contractor to parties commissioned by the Olympic Coordination Authority under a head contract dated 31 July 1997) to perform works in connection with the construction of the Superdome so as to discharge Obayashi’s obligations. Those obligations arose under a design and construction contract Obayashi had entered into in respect of the Superdome. The date for practical completion under the contract with Obayashi Corporation was 31 August 1999.

3 The Referee summarised the position as follows:

“An entity called the Millennium Consortium (“Millennium”), comprising a number of commercial partnerships, was formed to develop and own (for a period of time) the MUA. Millennium, and in particular Millennium Agent Pty Ltd, were wholly owned by Abigroup. Millennium's design brief required the roof to be a long-span structure, extremely light for its span and designed to be built, clad and to have services installed on the ground prior to being lifted or jacked into position in sections.

In July 1997, Millennium Contractors Pty Ltd contracted with the Olympic Coordination Authority (“OCA”) to, inter alia, design, construct and commission the MUA and some associated structures. The contract sum for the MUA was $138,962,000. Via a chain of subcontracts, Abigroup was contracted to design and construct the MUA and adjoining carpark and public domain.”

4 Abigroup began seeking tenders for various subcontract packages for the construction of the Superdome in late 1997. One such package was for the construction of the steel roof works. This was a significant component of the overall work.

5 ABB was one of the tenderers for the roof works.

6 The Referee described the works as follows:

“The arena of the MUA is fully enclosed with a steel-framed (space frame) roof providing a completely column-free space beneath. As well as the steel frame, the roof comprises sound absorption and reflecting elements which, due to their combination in a certain sequence, provide required acoustic qualities, both internal and external. The roof is a complex structure, supported by tension cables (or ties or stays) back to masts located around the perimeter of the seating bowl. Each mast carries two lines of roof trusses. Radially, multiple lower trusses work in concert with the upper roof trusses and ties in a combination of arching, bending, cantilever and catenary, to carry the roof loads to the supports, which are steel columns located at the mechanical level 5 around the perimeter of the bowl. These columns also support rakers and plats for the arena seating. The radial system of roof trusses is connected by a series of ovaloid ring trusses, RT1 being at the circumference of the arena, and RT7 being the innermost ring.”

[Report page 4]

7 Following communications passing between Abigroup and ABB from November 1997 up to 19 February 1998, a letter from Abigroup of 19 February 1998 authorised ABB to commence and proceed with the works. ABB did precisely that.

8 Some eight months later, by letter dated 15 October 1998 from Abigroup to ABB, Abigroup contended that:

· as ABB was aware, the subcontract (including granted extensions of time) required ABB to achieve substantial completion of the subcontract works by 22 December 1998;

· ABB had indicated that it intended to complete its subcontract works in August 1999 and was either unable or unwilling to complete earlier;

· Abigroup considered this to be an anticipatory breach of the subcontract which amounted to a repudiation of the subcontract and elected to accept the repudiation and terminate the subcontract.

9 ABB ceased to carry out work on the project on 15 October 1998, commencing these proceedings in the same year.

10 The proceedings concern cross contentions as to whether or not, and if so when, and on what terms, the parties entered into a binding subcontract.

11 ABB's stance in the proceedings was that no such contract had been entered into and that it was entitled to be remunerated for work done and materials supplied on the basis of a quantum meruit.

12 Alternatively, ABB pleaded that if there was a concluded contract between the parties, Abigroup had repudiated that contract on 15 October 1998 and sought:

· a declaration that it had accepted Abigroup's repudiation by letter dated 15 October 1998 and had thereby lawfully terminated the contract;

· relief in respect of that repudiation;

· further or in the alternative, certain orders pursuant to section 87 of the Trade Practices Act 1974 to vary any contract so as to provide for the completion of the Works 40 weeks from the provision of a complete, correct set of approved for construction drawings by Abigroup to ABB.

[Without prejudging a matter falling for determination in the proceedings, it is convenient by way of internal dictionary to use the term "the Works" save when considering that matter in a technical sense]

13 Abigroup’s stance in the proceedings was to cross-claim for damages for repudiation; in the alternative for damages for breach of contract; and in the further alternative for damages pursuant to section 82 of the Trade Practices Act.

14 It is unnecessary for present purposes to detail the entirety of the pleadings forming part of the record. Part only of the pleadings require attention.

The Part 72 Reference

15 On 3 November 1999 the Court pursuant to Part 72 Rule 2 (1) of the Supreme Court Rules referred the whole of the proceedings to Mr R N Wensley QC for inquiry and report, giving the Referee power to permit such amendments or additions to the matters referred to him as he saw fit in order to dispose of the two issues between the parties.

16 Following a reference hearing, the Referee by a 900 page report dated 9 December 2002:

· awarded to ABB - $3,215,771.70 on the quantum meruit claim

- interest on the quantum meruit claim
[in addition to $1,855,971 paid to ABB in progress payments up to October 1998]

· dismissed Abigroup's Trade Practices Act cross-claim for damages for alleged misleading and deceptive conduct.

17 The scale of the reference is apparent from the following passages in the Report [at page 15]:

“Following a preliminary conference in November 1999, and the delivery of witness statements of evidence in chief, the hearing began in March 2000. The case for the plaintiff was opened, beginning on 3 April 2000. The defendant's opening followed and there was an inspection of the MUA roof structure. Early in the piece, some time was spent on debating, organising and conducting conclaves of experts, in relation to the broad topics of delay and programming issues and quantum issues. In this way, during the course of the reference, numerous issues relating to expert evidence were narrowed and/or made the subject of joint reports to the Referee by the relevant experts. Some of the conclaving sessions were chaired by, or involved, the Referee. The parties, and their experts, adopted an appropriately helpful and professional approach to the conclaving process which, in my view, has been of ultimate benefit to the reference and to the parties.

In the early days of the hearing, there was considerable debate about some issues of evidence and pleadings. Ultimately, the defendant applied to amend its pleadings, to plead expressly the making of agreements on 7 July 1998. That led to a contested hearing, with affidavit evidence on both sides and cross-examination of deponents. I reserved my decision on the application and resolved it in the defendant's favour, giving my decision and reasons on 18 May 2000, on day 16 of the hearing. On the following day, the first witness was called.

Thereafter, some seventeen plaintiff's witnesses and nine defendant's witnesses gave oral evidence and were cross-examined, over a period extending until hearing day 148 on 11 September 2001. Some 70 witness statements or reports were tendered. Much time was spent during the hearing dealing with objections to witness statements. Although the rules of evidence did not apply, a convention was adopted, by agreement, that objections to evidence would be dealt with by reference to those rules.

As well, some 24 further statements and reports of witnesses and experts, who were not required for cross-examination, were tendered in the reference. Further, during the course of the hearing, in addition to statements and reports, a large number of exhibits was tendered. At final count, there were some 473 exhibits in the reference comprising about 200 lever arch folders and other documents or bundles, such as diaries; architectural, engineering and workshop drawings; spreadsheets, and so on. The hearing finally was concluded in December 2001, on hearing day 151. The transcript runs to in excess of 10,000 pages.

By agreement and direction, the parties produced comprehensive and extensive written final submissions in chief, in reply, in response to reply and in reply to submissions in response. These submissions extend over some 20 volumes of submissions and authorities, comprising thousands of pages of material. They were produced, submitted and exchanged progressively between October 2001 and May 2002. Because of the very comprehensive nature of the written submissions and, further, because of regrettable, but inevitable, slippages in the timetable for the conclusion of the matter, oral submissions in support and amplification of written submissions were not made, despite this step having been included in the original timetabled plan for the conclusion of the reference. “

The motions presently before the Court

18 There are before the Court competing motions:

· filed on 13 December 2002 by ABB seeking for the report to be adopted and ancillary declarations and orders;

· filed on 25 March 2003 by Abigroup seeking:

- judgment in respect of claims said to have been abandoned by ABB during closing submissions;

- save and except insofar as the Referee found:

· that there was agreement between the parties in respect of particular terms as found between 12 February 1998 and 7 July 1998; and

· that ABB had engaged in misleading or deceptive conduct in contravention of section 52 of the Trade Practices Act 1974.

- an order rejecting the report of the Referee in respect of his conclusions that:
(1) no concluded formal contract was entered into between the parties for the works;
(2) ABB is entitled to be paid a reasonable remuneration by the defendant for work done and materials supplied to the defendant in connection with the works;
(3) Abigroup pay to ABB $3,215,771.70.

The approach taken by the parties upon the hearing of the motions

19 Both parties carried out extensive preparation for the hearing of the motions. Hence the Court was furnished with extensive overview submissions underpinned by formal affidavits which in turn identified relevant transcript, the evidence before the Referee and the report itself. The majority of matters falling for decision on the respective motions raise questions of principle and application of principle. There were however a number of disputes as to the respective “summaries of factual findings” sought to be used to assist the Court.

20 A careful reading of the report discloses the care with which the Referee conscientiously went about his task. That form of attention to detail and that form of careful cross-referencing of findings of fact and principle is of assistance to the parties and to the Court in relation to the present exercise.

Overview of Abigroup's submissions as to contract

21 Abigroup submits that the Referee erred in concluding that:

(a) no subcontract was made between Abigroup and ABB for ABB to carry out the roof works on the Superdome;

(b) Abigroup was liable to pay ABB the further sum of $3,215,771.70 (exclusive of the sum of $1,855,971 already paid to ABB by Abigroup) (together with interest).

22 Abigroup in contending before the Referee that a subcontract had in fact been entered into, threw up a plethora of alternate cases in this regard. The Referee dealt with each of these cases, rejecting them. One of the significant issues presently before the Court concerns whether as ABB submits, Abigroup is now before the Court seeking to raise a further case in respect of which case it was either not one which fell within the pleadings or alternatively, if falling within the pleadings, was not one in respect of which a single submission was addressed to the Referee. Hence ABB submits that the Referee can be seen not to have sought to address this case and submits that Abigroup is precluded from endeavouring to pursue such a case for the first time before this Court. I return to deal with this matter below, noting that there is even difficulty in seeking to discern what are the sinews of the further case.

23 The issues arising for the Court in relation to Abigroup’s contract case are:

(a) whether errors were made by the Referee sufficient to warrant rejection of the Referee’s conclusion that no subcontract was made as a result of ABB’s commencement of the roof works;

(b) if the answer to (a) is yes, whether the Court should conclude that a subcontract was made as alleged by Abigroup;

(c) if the answer to (b) is yes, whether the Court should proceed to determine whether the subcontract was repudiated by ABB and assess damages.

24 It seems convenient to commence by examining the principles in a number of disparate areas.

The principles which inform the proper exercise of the discretion conferred on the Court in considering a Referee's report and the decision as to whether or not a report should be adopted

25 Part 72 Rule 13 of the Supreme Court Rules deals with "Proceedings on [a Referee's] report" provided to the Court. It states:

"(1) Where a report is made, the Court may, of its own motion, after notice to the parties, or on application by any party on a matter of fact or law or both:

(a) adopt, vary or reject the report in whole or in part;
(b) require an explanation by way of report from the Referee;
(c) on any ground, remit for further consideration by the Referee, the whole or any part of the matter referred for a further report;
(d) decide any matter on the evidence taken before the Referee, with or without additional evidence; and shall 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 with the leave of the Court."

26 The Court's approach has been considered in a number of cases (see Super Pty Limited v SJP Formwork (Aust) Pty Limited [(1992) 29 NSWLR 549]; Homebush Abattoir Corporation v Bermria Pty Limited [(1991) 22 NSWLR 605]; Skinner & Edwards (Builders) Pty Ltd v Australian Telecommunications Corporation [(1992) 27 NSWLR 567]; Chloride Batteries of Australia Ltd v Glendale Chemical Products Pty Limited [(1988) 17 NSWLR 60]; Najjar v Haines [(1991) BCL 145]; Australian Development Corporation Pty Limited v White Constructions (ACT) Pty Limited [(1996) 12 BCL 317]; Flender (Australia) Pty Ltd v Warman International Pty Ltd [Unreported, NSWCA 18 June 1998] and Franks v Berem Constructions Pty Ltd [Unreported, NSWCA, 2 December 1998].

27 The parties were at one in accepting that the principles which inform the Court’s discretion whether and to what extent to adopt, vary or reject the Referee’s report are as set out in Super Pty Ltd v SJP Formwork (Australia) Pty Ltd (1992) 29 NSWLR 549 [an appeal from Giles J in SJP Formwork (Aust) Pty Ltd v Leda Constructions Pty Ltd (19 May 1992, unreported)].

28 Giles J had set out the relevant principles as follows:

“For my own part, in the circumstances of this case I do not think
that the Referee's findings of fact should be generally re-agitated in the Court. As a broad proposition, depending upon the circumstances of each case, the Court will not reconsider disputed questions of fact where there is factual material sufficient to entitle the Referee to reach the conclusions he did, particularly where the disputed questions are in a technical area where the Referee enjoys an appropriate expertise. As an example of the application of that approach, in Buttrose v Versi (Rolfe J, 10 December 1990, unreported) Rolfe J adopted a passage from the judgment of Cole J in White Constructions (NT) Pty Ltd v Commonwealth of Australia (1990) 7 BCL 193 in the following terms:

'Consistent with the views I expressed in Chloride Batteries of Australia Ltd v Glendale Chemical Products Pty Ltd , I am of the view that in this instance the Court should not embark upon a re-examination of the questions of fact upon which the Referees have reported. There is obviously a large body of evidence upon which the Referees could properly find as they did. The purpose of Referees reporting to the Court on disputed questions of fact is rendered futile if the Court is to reconsider disputed questions of fact in circumstances where it is conceded that there is factual material sufficient to enable the Referees to reach the findings they did. In circumstances where the Court, having closely scrutinised
the Referee's report, has a comfortable feeling of satisfaction that the factual issues have been properly explored and considered, in my view the Court should adopt the Referee's report on findings of fact. In this instance I have that feeling and adopt the actual findings.'

Rolfe J went on to say that he was satisfied from a reading of the
report as a whole that it was reasoned and that there was factual
material upon which the findings by the Referee could properly be made. Noting that it had not been put that there was insufficient evidence to support the findings, but rather that the Referee had come to the wrong conclusion, his Honour said that he was not so satisfied, and that to require the Court to reconsider disputed questions of fact would render the purpose of the Referee reporting to the Court futile. It seems to me that is an approach appropriate to this case.” (set out at pp 553-4 of (1992) 29 NSWLR 549)

29 On the appeal the appellant submitted that Giles J misconceived the nature of his duty under Pt 72. It was submitted that his Honour was obliged to consider and determine for himself, all issues whether of fact or of law, in respect of which the appellant was not satisfied with the Referee’s report. In particular, that Giles J should have re-heard some of the evidence and formed his own view as to their reliability.

30 This contention was rejected by Gleeson CJ (Mahoney JA and Clarke JA agreeing). Gleeson CJ agreed with Giles J’s approach (as set out above) – see (1992) 29 NSWLR 549 at 564.

31 Gleeson CJ reviewed the provisions of Part 72 (see (1992) 29 NSWLR 549 at 556-558). His Honour emphasised the importance of Pt 72 r 8 and the wording on r 13(1), which “appear[s] to confer a wide discretion”. Gleeson CJ concluded that:

“The proposition that all litigants are entitled to have a judge (or, presumably, a master) decide all issues of fact and law that arise in any litigation, is unsustainable… Again, one thing that is clear about Pt 72, r 13 is that the procedure it establishes is not that
of an appeal from a Referee to a judge.” (at 558)

32 Gleeson CJ then reviewed the historical development of Pt 72 (see (1992) 29 NSWLR 558-560). In particular, the cases of Buckley v Bennell Design & Constructions Pty Ltd (1978) 140 CLR 1 (per Stephen J and Jacobs J) (which concerned the provisions of the Arbitration Act 1902) and Astor Properties Pty Ltd v L'Union des Assurance de Paris (1989) 17 NSWLR 483 (per Cole J).

33 A comprehensive summary of the relevant principles that have been established are set out in the judgment of O'Keefe CJ in Comm D in Peabody Resources Limited v Allco Constructions Pty Ltd. [NSWSC, unreported, 14 March 1994, pages 10-13]. They were also distilled by Hunter J in Walter Construction Group Limited v Walker Corporation Ltd [(2001) 47 ATR 48] and recently approved by Barrett J in Abigroup v Peninsula [[2001] NSWSC 752 at paras, 19-21. The appeal in Peninsula Balmain Pty Ltd v Abigroup Contractors Pty Limited, referred to earlier, did not concern his Honour's reasoning as to the relevant principles that should apply on an application to adopt a Referee's Report].

34 The relevant principles include:

(a) The Supreme Court Rules confer a wide discretion on the Court considering a Referee's report and the decision as to whether or not a report should be adopted is an exercise in discretion ( Super at 557).

(b) The present rules replace earlier provisions dealing with decisions of Arbitrators and Referees, to whom matters were referred by order of the Court. Those earlier provisions had the effect of giving the decision of an Arbitrator or Referee the same effect as though the decision was a verdict of a jury; the decision was only liable to review for error of law, perversity or manifest unreasonableness ( Super at 562-563).

(c) An application under Part 72 rule 13 is not an appeal. A reviewing judge has a judicial discretion to exercise. This must be exercised in a manner which is consistent both with the object and purpose of the rules and the wider setting in which they take their place ( Super at 563).

(d) It is undesirable to attempt closely to define the manner in which the discretion is to be exercised. The nature of the complaints made about the report, the type of litigation involved as well as the length and complexity of the proceedings before the Referee are all relevant considerations ( Super at 563).

(e) A party who is dissatisfied with the Referee's report is not entitled to require a judge acting under Part 72 rule 13 to reconsider and determine afresh all issues whether of fact or law which that party wishes to contest before the judge ( Super at 562).

(f) A judge exercising his discretion under Part 72 rule 13 may consider the material before the Referee where there is a real question as to whether there was any evidence for the decision made. The requirement for a "real question" in this context goes beyond a mere suggestion of the type of factual error that, if made by a trial judge, would be corrected on appeal ( Franks at 12).

(g) A judge exercising a discretion under Part 72 rule 13 may also need to consider the evidence before the Referee where the Referee's reasons appear adequate on their face, but the challenge is based on the adequacy of the reasoning due to the Referee's failure to refer to very significant evidence against the finding ( Franks at 12).

(h) There is no implied authority given to the Referee to make errors of law. The Court is bound to decide for itself whether the Referee erred in law and, if such error be found, to correct the error in exercising its discretion under the rules ( Bermria at 609).

(i) It would ordinarily be a reason for rejecting the Report if it reveals some error of principle, some absence or excess of jurisdiction or some patent misapprehension of the evidence. Perversity or manifest unreasonableness in fact finding would also ordinarily be a reason for rejecting a Referee's report ( Super at 563 to 564).

35 The Court’s discretion to adopt, vary or reject the Referee’s report is not constrained in the same way that challenges to arbitral awards are constrained. As Super makes plain, grounds for rejecting a report may include:

(a) an error of principle;
(b) a patent misapprehension of the evidence;
(c) perversity or manifest unreasonableness in fact finding.

36 Super also makes plain that where a complaint about a report involves a question of law, or the application of legal standards to the facts, a proper exercise of the discretion requires a judge to consider and determine that matter afresh.

The Principles - Masters v Cameron (1954) 91 CLR 353 and its extension

37 As already indicated, the question as to whether or not the parties entered into a subcontract and if so when, and on what terms, lies at the heart of the proceedings. It is next convenient to briefly examine the relevant principles in relation to this matter. In what follows I adopt the statements of principle to be found in John R Keith Pty Ltd v Multiplex Constructions (NSW) Pty Ltd [2002] NSWSC 43. [It is convenient to note that the parties tended before the Referee, as well as before this Court, to refer to what is sometimes termed "the fourth Masters v Cameron class" as "the Baulkham Hills class"]. The following passages are taken from John R Keith at [217]-[238].

“In view of the …submission relying upon either the first or second, or alternatively the so-called 'fourth' class in Masters v Cameron it is necessary to recall the three classes for which the decision of the High Court is authority. The passage in question at 360 is in the following terms:

"Where parties who have been in negotiation reach agreement upon terms of a contractual nature and also agree that the matter of their negotiation shall be dealt with by a formal contract, the case may belong to any of three classes. It may be one in which the parties have reached finality in arranging all the terms of their bargain and intend to be immediately bound to the performance of those terms, but at the same time propose to have the terms restated in a form which will be fuller or more precise but not different in effect. Or, secondly, it may be a case in which the parties have completely agreed upon all the terms of their bargain and intend no departure from or addition to that which their agreed terms express or imply, but nevertheless have made performance of one or more of the terms conditional upon the execution of a formal document. Or, thirdly, the case may be one in which the intention of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract.


In each of the first two cases there is a binding contract: in the first case a contract binding the parties at once to perform the agreed terms whether the contemplated formal document comes into existence or not, and to join (if they have so agreed) in settling and executing the formal document; and in the second case a contract binding the parties to join in bringing the formal contract into existence and then to carry it into execution…

Cases of the third class are fundamentally different. They are cases in which the terms of agreement are not intended to have, and therefore do not have, any binding effect of their own…"

As the defendants point out in their written submissions, the seeds of what has now been called the "fourth class" were sown in the earlier case of Sinclair Scott & Co Ltd v Naughton (1929) 43 CLR 310:

“One in which the parties were content to be bound immediately and exclusively by the terms which they had agreed upon while expecting to make a further contract in substitution for the first contract, containing, by consent, additional terms.”
(per the majority consisting of Knox CJ, Rich and Dixon JJ at 317)

In Love & Stewart Ltd v S Instone & Co Ltd (1917) 33 TLR 475, His Lordship Lord Loreburn stated at 476:

“It was quite lawful to make a bargain containing certain terms with which one was content, dealing with what one regarded as essentials, and at the same time to say that one would have a formal document drawn up with the full expectation that one would by consent insert in it a number of further terms. If that were the intention of the parties, then a bargain had been made, nonetheless that both parties felt quite sure that the formal document could comprise more than was contained in the preliminary bargain.”


In Baulkham Hills Private Hospital Pty Ltd v G R. Securities Pty Ltd (1986) 40 NSWLR 622 McClelland J. by reference to Sinclair Scott and Co Ltd v Naughton (1929) 43 CLR 310 referred to a fourth class in terms of Masters v Cameron , namely the situation where the parties were content to be bound immediately and exclusively by the terms which they had agreed upon, whilst expecting to make a further contract in substitution for the first contract containing, by consent, additional terms.

On the issue which arose in Baulkham Hills of whether or not there was a binding contract, McClelland J at 627 put the matter as follows:

"There was a binding contract, if and only if, by the exchange of letters the parties mutually communicated their respective assents to being legally bound by terms capable of having contractual effect: see the discussions in Film Bars Pty Ltd v Pacific Film Laboratories Pty Ltd (1979) 1 BPR 9251 at 9254ff and Air Great Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309. In the last mentioned case Mahoney J A (at 326) identified three questions which it is often useful to consider in such a context as the present, namely "….did the parties arrive at a consensus?; (if they did) was it such a consensus as was capable of forming a binding contract?; and (if it was) did the parties intend that the consensus at which they arrived should constitute a binding contract?"

On appeal to the Court of Appeal, McClelland J’s decision was affirmed on the basis of the principle quoted above in Sinclair, Scott . In G R Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631, the Court of Appeal held that,

“…the decisive issue is always the intention of the parties which must be objectively ascertained from the terms of the document when read in the light of the surrounding circumstances: Godecke v Kirwan (1973) 129 CLR 629 at 63; Air Great Lakes Pty Ltd v K S Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309 at 332-4, 337. If the terms of a document indicate that the parties intended to be bound immediately , effect must be given to that intention irrespective of the subject matter, magnitude or complexity of the transaction.”
(per McHugh JA as his Honour then was at 634E-F, with whom Kirby P and Glass JA agreed) [emphasis added]


…the fourth class has now passed into common parlance insofar as the courts are concerned and is referred to regularly as an accepted classification: see Tern Minerals NL v Kalbara Mining NL (1990) 3 WAR 486; Heysham Properties Pty Limited v Action Motor Group Pty Limited & Ors (1996) 14 BCL 145; Telstra Corporation Limited v Australis Media Holdings (1997) 24 ACSR 55; Brunninghausen v Galvanics (1999) 46 NSWLR 538.

I accept that regardless of classification, the principle that is now recognised is that there can be an informal contract with the expectation that other terms will be negotiated and by consent included in the formal document. That is, to say that such further negotiations and activity regarding other terms is still to take place does not mean the existing informal contract is not binding: Anaconda Nickel Ltd v Tarmoola Australia Pty Ltd (2000) 22 WAR 101 (per Ipp J at 110-111).

Most recently, the fourth class was considered in Graham Evans Pty Ltd v Stencraft Pty Ltd (2000) 16 BCL 335 [Full Federal Court (French, Whitlam and Dowsett JJ) and see also transcript of special leave application which was refused]. Evans brought an action against Stencraft claiming damages for breach of contract. The claim was dismissed at first instance. Evans appealed to the Full Federal Court. The Full Federal Court, in reversing Spender J at first instance, considered Masters v Cameron and applied Baulkham Hills and in so doing upheld the appeal unanimously. The Full Court held that parties may be bound immediately by the terms, which they agree upon whilst expecting to negotiate the terms of, and make a further contract in substitution for, the first contract.

Brambles Holdings Ltd v Bathurst City Council (Unreported, 2001, NSWCA, Mason P, Heydon JA and Ipp AJA) was a case in which the “difficulties” of pressing too far the classical theory of contract formation based upon offer and acceptance (see also Pobjie Agencies Pty Ltd v Vinidex Tubemakers Pty Ltd [2000] NSWCA 105 per Mason P at paragraph 1). Heydon JA said in that case, whilst considering the principles of the law of contract that:

“Offer and acceptance analysis does not work well in various circumstances.” [at paragraph 71]

In that case, Heydon JA set out succinctly the conventional and accepted principles of the law of contract:


“The first relevant principle of law is that pre-contractual conduct is only admissible on questions of construction if the contract is ambiguous and if the pre-contractual conduct casts light on the genesis of the contract, its objective aim, or the meaning of any descriptive term: Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 at 347-352.

The second relevant principle is that post-contractual conduct is admissible on the question of whether a contract was formed: Howard Smith & Co Ltd v Varawa (1907) 5 CLR 68 at 77; Barrier Wharfs Ltd v W Scott Fell & Co Ltd (1908) 5 CLR 647 at 668, 669 and 672; B Seppelt & Sons Ltd v Commissioner for Main Roads (1975) 1 BPR 9147 at 9149 and 9154-9156; Film Bars Pty Ltd v Pacific Film Laboratories Pty Ltd (1979) 1 BPR [97023] at 9255.

The third relevant principle is that post-contractual conduct is not admissible on the question of what a contract means as distinct from the question of whether it was formed. As explained by Priestley JA (Meagher JA agreeing) in Hide & Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310 at 326-330, the status of the relevant High Court authorities is unclear: hence unless it is demonstrated that the later decisions of the Victorian Full Court and Court of Appeal against admissibility, Ryan v Textile Clothing & Footwear Union of Australia [1996] 2 VR 235 and FAI Traders Insurance Co Ltd v Savoy Plaza Pty Ltd [1993] 2 VR 343, are clearly wrong or they are overruled, they should be followed in New South Wales. No attempt was made to demonstrate that they are clearly wrong.

The fourth relevant principle is that the construction of a contract is an objective question for the Court, and the subjective beliefs of the parties are generally irrelevant in the absence of any argument that a decree of rectification should be ordered or an estoppel by convention found.”

Hence in determining the circumstances surrounding the formation of the agreement, the matrix of facts, it is the objective intent that is paramount. Whether any relevant individual representative thought that an agreement existed or that it did not exit, is irrelevant to the exercise unless there exists an argument concerning estoppel. As Lord Wilberforce has said:

“When one speaks of the intention of the parties to the contract one speaks objectively - the parties cannot themselves give direct evidence of what their intention was - and what must be ascertained is what is to be taken as the intention which reasonable people would have had if placed in the situation of the parties.”
[ Reardon-Smith Line Ltd v Hansen-Tangen [1976] 1 WLR 989]


Barrier Wharfs Ltd v W Scott Fell & Co Ltd (1907) 5 CLR 647; Howard Smith & Co Ltd v Varawa (1907) 5 CLR 68; Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 at 548-549; Geebung Investments Pty Ltd v Varga Group Investments (No.8) Pty Ltd (1995) 7 BPR 14,551 (supra); Anaconda Nickel (supra) are also authorities supporting the proposition that in ascertaining the relevant intention, that is the intention to contract, relevant circumstances may include prior negotiation and subsequent conduct.

A fundamental question falling for consideration is whether the conduct of the parties viewed in the light of surrounding circumstances shows or is indicative of an agreement having come into existence.

“In an ongoing relationship, it is not always easy to point to the precise moment when the legal criteria of a contract have been fulfilled. Agreements concerning terms and conditions which might be too uncertain or too illusory to enforce at any particular time in the relationship may by reason of the parties’ subsequent conduct become sufficiently specific to give rise to legal; rights and duties. In a dynamic commercial relationship new terms will be added or will supersede older terms. It is necessary therefore to look at the whole relationship and not only at what was said and done when the relationship was first formed.”
[Per McHugh JA in Integrated Computer Services Pty Limited v Digital Equipment Corporation (Australia) Pty Limited (unreported, NSWCA, McHugh, Mahoney and Hope JJA, 23 December 1988); see also Raguz v Sullivan (2000) 50 NSWLR 236 at 251]


Questions of the relevance and probative value of evidence in circumstances in which the issue concerned whether or not an enforceable contract had been entered into were also before the Court in Film Bars Pty Ltd v Pacific Film Laboratories (1979) BPR 97023. As McClelland J. put it, such questions cannot properly be considered independently of a consideration of the relevant issue namely what it is in point of fact that constitutes the making of a contract in circumstances such as here obtained. As his Honour points out, such a contract is made " by the mutual communication between the parties of their respective assents to being bound by identifiable terms otherwise capable of having contractual force, the mutual communication typically taking the form of offer and acceptance ". As his Honour (citing Williston on Contract, 3rd ed, Vol 1 paragraph 21) points out, one is not concerned with the subjective thing known as meeting of the minds, but the objective thing, the manifestation of mutual assents which is essential to the making of a contract. [At page 9254]

Film Bars [at page 9255] is also authority for the proposition that:

“in determining whether the communications between the parties constitute a contract the Court is not confined to a consideration of the terms or manner in which the communications were made: they must be interpreted by reference to the subject matter and the surrounding circumstances including, inter alia, the nature of, and the relationship between, the parties, and previous communications between them, as well as to standards of reasonable conduct in the known circumstances."


I approach the evidentiary issues reserved for decision in the final judgment in precisely the way in which McClelland J. approached the issues in Film Bars . In short subsequent communications may have probative value depending upon the light they throw on the proper interpretation of earlier communications alleged to constitute the contract. Post contractual conduct is not admissible on the question of what a contract means as distinct from the question of whether it was formed [cf Brambles Holdings supra].

Subsequent communications can also legitimately be used against a party as an admission by conduct of the existence or non-existence, as the case may be, of a subsisting contract. Having said that neither counsel sought to have particular material here admitted as admissions.

Considerable assistance in terms of following the relevant principles and seeking to apply them in the present case is to be obtained from the decision of the New South Wales Court of Appeal in Australian Broadcasting Corporation v X1VTH Commonwealth Games Ltd (1988) 18 NSWLR 540. Some consideration is also given to questions of evidence without any departure from the approach taken by McClelland J. in Film Bars.

Here, as there, the short issue is whether, when the parties negotiated about, and made their ‘agreement’ (the word is used in a neutral sense), concerning price (on or about 18 July 1997), they should be held to have entered at that stage into a contract, albeit one that would later be overtaken by a further more formal contract containing additional terms and conditions (at 543).

Here, as there, the alternative view is that, contemplating that at some future time it would be necessary for them to make agreement on various other terms and conditions, they first set about agreeing on price, in the expectation that if they could agree on that they would have little difficulty in reaching common ground on the other matters which they contemplated would form part of their contractual arrangement, but as to which, in the events which happened, they never reached final agreement.

The matter was put in the following terms by the Chief Justice (at 550 and following) with whose reasons for judgment Hope and Mahoney JJA agreed:

"…The case involves the objective determination of the intention of the parties from a consideration of a series of communications exchanged by them in the context of their dealings over a period of time. In those circumstances it is both appropriate and necessary to have regard to the commercial circumstances surrounding the exchange of communications and, in particular to the subject matter of those communications : Allen v Carbone (1975) 132 CLR 528 at 531-532. Furthermore, as was noted earlier, it is proper to have regard to communications between the parties subsequent to the date of the alleged contract to the extent to which those communications throw light upon the meaning of the language which is being considered for the purpose of determining whether it expresses an intention one way or the other upon the critical matter. At the least, such subsequent communications will often form part of the context in which the particular exchanges in question are to be evaluated.
The position is by no means so clear, however, in connection with internal memoranda… or statements as to subjective intention made by individuals in the course of giving evidence. As it happens, although the learned judge had a good deal of material of this kind put before him at the hearing, it was not particularly helpful even if admissible. In the first place, a great deal of it was equivocal and individual pieces of evidence were contradictory in effect. Some of the persons who participated in the negotiations in question were called to the witness box and vigorously examined as to what was going on inside their minds at particular times. This process in the end principally served to demonstrate what might have been expected to be the case, that is to say, that the witnesses, not being lawyers themselves, were in a state of considerable confusion about the issue that ultimately emerged as determinative of the rights of the parties ……..
In so far as acts or statements of the kind referred to, not involving communications between the parties, are claimed to be relevant in a case such as the present upon the ground that they constitute an admission, it seems to me that it will often be necessary to identify with some care the fact which is said to have been admitted. As was noted, there may be cases in which the issue is such that the fact of the subjective state of mind of one or other of the parties is relevant. Normally, however, what is in issue is not their subjective state of mind but their “intention as expressed” (cf Inland Revenue Commissioners v Raphael [1935] AC 96 at 142 per Lord Wright) and caution may need to be exercised in relating the fact which is said to be admitted to the fact which is legally relevant.”
[emphasis added]

Correspondence of offer and acceptance

38 As the matter is put in Carter on Contract [at 8246-8247]:

"The offer and acceptance must precisely correspond and any departure from the offer will result in the purported acceptance being ineffective. The position is obvious in relation to a counter offer. However, the rule is a strict one, and is not limited to material deviations from the terms of the offer.
Even if it is worded as an acceptance, an acceptance which does not correspond to the offer will normally amount to a counter offer…
Acceptance must be unequivocal. This means that the language used by the offeree must be such as would convey to a reasonable person in the position of the offeror a clear and definite decision by the offeree to be bound by the terms of the offer, leaving nothing further to be negotiated [ Appleby v Johnson (1874) LR 9 CP 158; Spencer's Pictures Limited v Cosens (1918) 18 SR (NSW) 102; Ballas v Theophilos (No 2) (1957) 98 CLR 193."

39 To the same effect Anson's Law of Contract, 27th edition puts the matter as follows at 38:

"If a contract is to be made, the intention of the offeree to accept must be expressed without leaving room for doubt as to the fact of acceptance or as to the coincidence of the terms of the acceptance proposed and those of the offer. These requirements may be summed up in a general rule sometimes called the mirror image rule."

Parties bound by the course they deliberately adopt at trial

40 In the light of the vigorous attack by ABB of what is suggested to be an attempt before the Court to reshape its case before the Referee by pressing a case effectively not litigated during the reference hearing, it is convenient to refer to the principles:

"It is elementary that a party is bound by the conduct of his case. Except in the most exceptional circumstances, it would be contrary to all principle to allow a party, after a case had been decided against him, to raise a new argument which, whether deliberately or by inadvertence, he failed to put during the hearing when he had an opportunity to do so." (See University of Wollongong v Metwally (1984) 158 CLR 447 at 483.)

41 In Coulton v Holcombe (1986) 162 CLR 1 at page 7 the matter was put this way:

"It is fundamental to the due administration of justice that the substantial issues between the parties are ordinarily settled at the trial. If it were not so the main arena for the settlement of disputes would move from the Court of first instance to the appellate Court, tending to reduce the proceedings in the former Court to little more than preliminary skirmish."

42 In Rowe v Australian United Steam Navigation Company Limited (1909) 9 CLR 1 at page 24 Sir Isaac Isaacs said:

"… it is a sound general principle, leading not only to the maintenance of fair play, but also to the repression of unnecessary litigation, that parties must be bound by the course they deliberately adopted at the trial."

43 In White v Overland [2001] FCA 1333 Allsop J said at par [4]:

“…in the efficient and proper conduct of civil litigation, even civil litigation hard fought between the parties, it should always be recognised that in the propounding of issues for trial the parties should take steps to ensure that all relevant parties to the dispute are cognizant of what the issues are. Even if something has been said, where it is evident, or indeed suspected, that the other side is proceeding on the basis of a misconception or has not appreciated something, as a general rule, efficiency, common sense and an appreciation of the costs and resources (both public and private) likely to be wasted by confusion in litigation will mandate that a party through his or her representative ensure that the other is not proceeding on a misconception or that the other does appreciate something that has been said. Litigation is not a game. It is costly and stressful, though necessary, evil.”

44 In Nowlan v Marson Transport Pty Ltd (2001) 53 NSWLR 116, Heydon JA said:

“[26] Fourthly, the conduct of litigation as if it were a card game in which opponent’s never see some of each other’s cards until the last moment is out of line with modern trends. Those trends were developed because the expense of courts to the public is so great that their use must be made as efficient as is compatible with just conclusions. Civil litigation is too important an activity to be left solely in the hands of those who conduct it.”

45 Similarly in Glover v Australian Ultra Concrete Floors Pty Ltd [2003] NSWCA 80, Ipp JA said:

[60] “The “cards on the table” approach is now common practice in many jurisdictions…”

Turning to the present proceedings

Central Structure

46 An enormous amount of focus was addressed by the parties both before the Referee and this Court to a very simple structure. It is convenient to commence by summarising this structure:

· The parties exchanged communications orally and in writing prior to 19 February 1998, which communications included invitations to quote by Abigroup, a response and a series of further communications inter partes;

·

On 19 February 1998 the critical meeting between the parties took place during the course of which certain minutes were examined and discussed and towards the end of which, Abigroup handed a letter of the same date across to the ABB representatives attending the meeting [this letter was often referred to during the reference as " the letter of intent" ]. The proper construction of the letter and more importantly the attempt to discern objectively the intention of the parties from the events at this meeting including the letter and from the circumstances anterior to and following this meeting, form the heart of the matter which was litigated;

· On 20 February 1998 two particularly significant events took place. Whilst there was a question as to the timing of these events they were:

- the uplifting by ABB of certain drawings;

- the forwarding by ABB to Abigroup by facsimile of a response [“the response”] to the 19 February 1998 letter;

· On 24 February ABB received from Abigroup a document called ‘Project Related Conditions’;

· On 25 February 1998 ABB uplifted other drawings from Abigroup which were not drawings which ABB had ever seen before or had ever assessed in terms of the subject work [The finding was that

these drawings dated and issued on 25 February 1998 were not a full set of structural and architectural AFC drawings-report 485] [cf transcript 32 where Mr Bathurst accepted that he could not put the proposition that ABB saw the drawings prior to 25 February];

· Following the assessment by ABB of these new drawings and ABB making plain that they substantially departed from the whole of the previous regime and understanding in relation to what works were to be carried out, Abigroup ultimately reverted to the original drawings. [the word ‘reverted’ was not quite accurate, save in the sense that the design represented a return to the predominant use of rolled steel beams as the main structure element rather than the predominant use of hollow sections. The structure depicted in the April AFC drawings was significantly different to the structure depicted in the tender drawings – report 817/818].

The letters of 19 and 20 February

47 As the terms of the 19th February 1998 letter and the response require careful examination and were treated with by the Referee with very great care and were the subject of so much of the submissions before this Court, it is convenient to commence by setting these letters out, noting that one of the questions for determination by the Referee was whether the response constituted a rejection of any offer in the so-called letter of intent, or by its terms, meant that any continuing offer to be found in the letter of intent which was still live at the time when the response was sent, did not survive as a continuing offer once the response had been sent.

The 19th February 1998 letter

48 This letter read as follows:

“Abigroup Contractors Pty Limited hereby accept your offer $14,000,000.00 (Fourteen million dollars) to supply, deliver and install all roof structure and roof cladding components to complete the main roof at the above mentioned project, all as per the contract drawings, specification and construction schedule as amended from time to time by Abigroup.

Our acceptance is conditional upon the parties entering into a formal subcontract based upon ‘Amended SC JCC-D 1994’ and Project Related Conditions of Contract.

1. Contract Agreement

A copy of the standard subcontract agreement has been forwarded to you. We will now proceed to prepare the subcontract agreement and will forward this document to you for signing.

2. Letter of Acceptance

This letter of acceptance dated 19 February 1998 will be included in and form part of the contract agreement.

3. Rise and Fall

Rise and fall is not applicable and the price stated above is firm for the duration of the project and is inclusive of all site and industry allowances.

4. Progress Payments

To be on a 45 day basis related to completed works as at the 20th of each month.

5. Retention

Retention is to be in the form of two (2) Bank Guarantees to the value of $350,000.00 each, the first one to be released at the Head Contract Practical Completion. Balance to be released upon completion of the defects liability period.

6. Defect Liability Period

Fifty two (52) weeks from date of Practical Completion of the Head Contract works.

7. Liquidated Damages

Actual costs to a maximum of $1,400,000.00
8. Insurance

Prior to any works commencing on site, the subcontractor shall provide copies of the actual certificate and the following information.

· Current Certificates of Unlimited workers Compensation, Top Up, Public Liability having minimum cover of $10,000,000.00, contract works Insurance with Public Liability to include the respective interests and rights of Abigroup Contractors Pty Limited and any benefit in terms of premium reduction due to Abigroup head contract insurance shall form a credit variation.

· Approved Superannuation and Redundancy schemes along with current evidence of contribution by your company to the funds.

· Appropriate PPS taxation requirements.

9. Program of Works

In order to meet program target dates, you are authorised to commence and proceed with the works to in accordance with this letter of intent prior to the execution of formal copies of the subcontract documents.
The works are to be carried out in accordance with the tendered Programme, which will be with completion of the roof structure by the middle of October 1998.

Drawings and Specification

The trade works relative to this contract are indicated on the following schedule of drawings and specification.
Drawings
Architectural drawings by Cox Richardson Architects and Taylor Thomson Whitting.
As per Abigroup transmittal No. 164 dated 19/1/98.
Specifications
Taylor Thomson Whitting: SPA–3K Structural Steel Roof Steelwork No 96319A 24 November 1997 Page 2 to 31 inclusive.
Cox Richardson Architects: SPA-4C Roofing.
No 961033 29 January 1998 Pages 1 to 12 inclusive.
SPA-5G Painting.
No 961033 9 December 1998 Pages 1 to 18 inclusive.
Addendum No 1 – gutter on Main Roof No 96319A 23 January 1998 Pages 1 to 3 inclusive of Plan Layout.

10. General Clauses

Commencement by the subcontractor is deemed to be full acceptance of the terms of this subcontract agreement and confirms the existence of a subcontract between our two companies.
We confirm that the subcontractor has examined the contract drawings and has allowed for everything necessary and incidental to carry out the work as required under this contract. No claims will be recognised as a result of the subcontractor’s failure to allow for everything necessary to complete the works.
The subcontractor is to carry out all necessary work as required by the contract.
Where work commences piror to the execution of the subcontract agreement, no monies will become due and payable until the subcontract agreement has been executed.
You are required to comply with the current law in respect of the Prescribed Progress Payment Act and we further confirm that all progress payment claims are to be accompanied by the appropriate Prescribed Progress Payment Tax Form, or a copy of your deduction certificate.
Debris – the subcontractor shall daily clean up all debris created by his work and, at a time nominated by the builder, the subcontractor shall deposit such debris into the site rubbish chute, where applicable, or in a position pre determined by the builder. The said debris shall then be removed from the site by the subcontractor at no further expense to the builder.
The subcontractor is to provide all necessary storage facilities for his materials and equipment.
Fixing on, near or adjacent to works performed by others is deemed to be acceptance of the suitability of the works performed by others to accept the works contained under this Subcontract Agreement.
The subcontractor is to comply with the “Occupational Health & Safety Act” of the safe working practice of his employees as well as himself as it applies to the work of this subcontract. The subcontractor will supply all materials and equipment necessary to facilitate such safe working practice. Particular attention is drawn to the specific requirements of the Act in relation to electrical equipment and power leads used on site. Failure to comply with this could invoke heavy fines or industrial disputation on site. Compliance is therefore compulsory.


Where the word “tradesman” is referred to in this contract this work is deemed to mean the tradesperson (male or female).

We would like to take this opportunity to thank you for your interest in this project and we look forward to mutually rewarding association on this and future projects.”

“Further to our meeting at your offices on Thursday 19 February 1998 and following further post tender discussions, we were most pleased to receive your letter regarding the Main Roof Structure and Roof Cladding on the above project.

You will recall that there are a couple of outstanding commercial matters to be resolved regarding the subcontract and these are detailed below for your consideration.

1. We have not had sight of the sections of the Head Contract document that may be applicable to the above subcontract works nor have we received a copy of the Project Related Conditions marked “D”. Our offer is therefore based on the proviso that there are no adverse commercial considerations within these documents. (We still await such documents from Abigroup).

2. As an amendment to clause 8 of the Subcontract we would require the following clauses covering exclusion of consequential losses and a cap on total liability.


“Notwithstanding anything to the contrary contained in this Subcontract Agreement and the Head Contract, the Subcontractor shall not be liable for any indirect, consequential or economic losses whether in contract or in tort (including negligence) such as, but not limited to, loss of profit, loss of use, cost of replacement production, business interruption and the like.”

“Notwithstanding anything to the contrary herein contained, the total liability of the Subcontractor shall be limited to the Subcontract Sum.”

3. We require clarification of clauses 9.03.02 and 10.11 whereby the Builder may, due to any act, default or omission by it, or it’s designers, or any of it’s subcontractors or suppliers etc. cause delay to the works of this Subcontractor and in such a case, the Builder is not entitled to an extension of time under the Head Contract. In such a scenario, how does this Subcontractor recover lost time and any associated costs? Will the Builder seek agreement and pay this Subcontractor for acceleration measures if necessary and/or any associated reasonable costs for delay? Obviously, we cannot be expected to pay liquidated damages where the delay was caused by Abigroup.
The condition precedent in clause 10.12.01 and 10.12.08 should not apply to the above case.


4. Clauses 10.15 and 10.16 refer to liquidated damages “or otherwise”. As discussed, we would agree to actual costs incurred by Abigroup, subject always to a maximum daily rate of damages inclusive of both clauses, combined at $40,000 per day and capped to a maximum of 10% of the Subcontract Sum.

5. As soon as we are in receipt of the Project Schedule from Abigroup, we will propose a payment schedule for your consideration, which would include payments linked to milestone achievements and a provision for payment in respect of design and engineering works progressing off site and purchase of raw steel.

6. Programme/Drawings
We acknowledge receipt of tender drawings, but these are not approved for Construction and therefore we cannot proceed using such drawings. Due to Abigroup’s very tight schedule for this work, Abigroup will need to provide the Approved For Construction drawings (correct, complete and with no “holds”) within two weeks of 20 February 1998. Obviously, the sooner this occurs, the better, because our period of 26 weeks cannot commence until we have received such drawings.


In addition, we request your clarification of the following matters which we did not have the opportunity to discuss at the meeting.

(a) the provision by Abigroup of a form of surety that ABB will be paid.

(b) administration of the BHP Free Issue Steelwork option.

(c) Clause 10.30 of the Subcontract conditions should be qualified with the words “Subject to clause 3.02” at the beginning.

We trust the above matters are acceptable for inclusion in the subcontract documentation and look forward to your further correspondence.”
[Facsimile from ABB to Abigroup 20 February 2003, (Ex 20 Vol 2 Tab 67)]

The contract cases

The submissions

49 It is convenient to commence with the written submissions of Abigroup. These:

· first seek to identify facts said to have been derived from the findings of the Referee and from uncontroversial communications between the parties and said not to involve any challenge to the findings of the Referee as to the credit of witnesses or his findings as to disputed versions of conversations and events at meetings [Whilst the report at pages 14 to 704 does include a very lengthy narrative of events spanning a period from about the middle of 1996 to 7 July 1998, it is clear that in this narrative the Referee examines many events beyond the communications between these parties. In endeavouring to identify the particular facts concerning its contract case, Abigroup seeks to focus primarily on the communications between the parties];

· secondly comprise detailed submissions.

50 ABB takes violent objection to Abigroup's so-called derived summary statement of the facts relating to Abigroup's contract case [to be found in Appendix 1 to the Abigroup submissions]. ABB submits as follows:

· Having said that it was not challenging the Referee's findings the defendant in fact seeks to do so by a method which it describes as the "derived” facts (paragraph 20 of Abigroup's submissions), that is the facts which the defendant itself says it "derives" from the Referee's detailed factual findings. These "derived" facts are set out at the end of the defendant's submissions in Appendix 1. They are in effect a back door method of challenging the Referee's specific factual findings either by:

- reformulating and redefining what were otherwise clear and unassailable factual findings;
- omitting references to important facts which alone were of significance to the Referee's conclusions; or
- omitting reference to important facts which place other facts in context or in a different light.

· It is to those "derived" facts to which Abigroup has had regard in structuring its submissions.

· The answer to each of Abigroup's submissions is to be found in the numerous detailed and specific findings made by the Referee. It is inappropriate, dangerous and non-productive for any analysis to be based upon the defendant's so-called "derived" facts.

51 In fact the written submissions put forward by ABB in an extensive and extremely detailed exercise proceed to effectively disassemble many of the material "derived" facts for which Abigroup contends.

52 In the result I have proceeded:

· by closely examining the so-called derived facts document;

· By closely examining the attack mounted by ABB upon that derived facts document;

· in each case by referring, when and as necessary, to the all-important Referee's report.

The plethora of alternative contract cases addressed by the Referee

53 The Referee in Appendix 1 to his report entitled "Issues List based on the pleadings" entered into considerable detail in identifying [albeit sometimes in shorthand] no less than eight numbered contract allegations which his close analysis of the pleadings showed had been pursued in the alternative by Abigroup. He then proceeded to identify other contract claims pursued by reference to an estoppel [no suggested errors by the Referee in his manner of dealing with estoppel based contract claims were ultimately pressed before this Court].

54 It is possible to cross-reference the eight contract allegations summarised in Appendix 1 to the report proper, so that for example:

· the first of the alternative contracts pleaded is the subject within the report of paragraph 3.2;

· the second of the alternative contracts pleaded is the subject within the report of paragraph 3.3;

· the third of the alternative contracts pleaded is the subject within the report of paragraph 3.4;

· the fourth of the alternative contracts pleaded is the subject within the report of paragraph 3.5

· the fifth and sixth of the alternative contracts pleaded are the subject within the report of paragraph 5.5;

· the seventh and eighth of the alternative contracts pleaded are the subject within the report of paragraph 5.7.

55 The relevant section of Appendix 1 was as follows:

CLAIMS THAT THERE WAS A CONTRACT

ACTUAL - VERSIONS PLEADED

A. Binding agreement made 19 February 1998

(k) The parties agree that the defendant provided to the plaintiff a “ Letter of Intent ” dated 19 February 1998 on that date, which letter stated in part -

“Abigroup Contractors Limited hereby accepts your offer $14,000,000.00 (Fourteen Million Dollars) to supply, deliver and install all roof structure and roof cladding components to complete the main roof at the abovementioned project, all as per the contract drawings, specification and construction schedule as amended from time to time by Abigroup.

Our acceptance is conditional upon the parties entering into a formal subcontract based upon ‘Amended SC JCC-D 1994' and Project Related Conditions of Contract”.


However -

First contract alleged - D accepts P’s offer - 19.2.98 there and then
(NB this contract NOT pleaded in FACC)

(i) (i) was the defendant’s letter of 19 February 1998 provided:

A. following the offer of the plaintiff by letter dated 19 February 1998 (see issue 1.A.5 above), and

B. following a meeting between representatives of the plaintiff and the defendant on 19 February 1998 (common ground that there was a meeting but disputes as to what occurred at it)

C. at which the plaintiff and defendant

AA. reached agreement upon the terms of their bargain and

BB. intended to be immediately bound to the performance of those terms (as alleged by the defendant)?: ADTSFAS para 3(d); or
(ii) was no formal contract agreed and entered into between the plaintiff and the defendant that day or at all (as alleged by the plaintiff)?: SFAS para C6 .

Second contract alleged - first version of Baulkham Hills - 19 February 1998
(NB this contract pleaded differently in FACC)

(ii) in the alternative to issue 2.A.11(a)(i) above, on 19 February 1998 did the plaintiff and defendant reach agreement on essential terms with the expectation that further terms would be agreed in substitution for or in addition to the terms of this first agreement, this first agreement comprising -

Oral parts

(a) statements by the representatives of the plaintiff to the representatives of the defendant at the meeting on 19 February 1998: ADTSFAS para 3(e)(i);

Written parts

(ii) A. the signed minutes of the meeting of 19 February 1998 (ADTSFAS para 3(e)(i));


B. minutes of the meeting between representatives of the plaintiff and representatives of the defendant on 12 February 1998 and 19 February 1998 (ADTSFAS para 3(e)(i) and ADTSFAS para 3(e)(ii)) [Note that the reference to “the signed notes of that meeting” ie meeting 19.02.98 is a reference to the minutes of that meeting: T8520, 21.06.01];

C. a fax from the plaintiff to the defendant dated 19 February 1998 [ Not pleaded in second Baulkham Hills pleading]

AA. being an offer [SEE ISSUE 1.A.5] in respect of the whole of the roof works for the MUA project
BB. which was accepted at the meeting on 19 February 1998 (as alleged by the defendant)? ADTSFAS para 3(e)(iii).
[NO REF TO LETTER OF INTENT?]

Third contract alleged - second version of Baulkham Hills contract allegation

(iii) in the alternative to issues 2.A.11.(a)(i) and 2.A.11.(b), on 19 February 1998 did the defendant and the plaintiff enter into an agreement whereby -


(i) the plaintiff agreed to supply and erect a structural steel roof frame and to supply and install an acoustic roof system (the “Works”) at the MUA by bringing the Works to substantial completion within 36 weeks of receipt of AFC drawings; and

(ii) the defendant agreed to pay to the plaintiff for performance of the Works the sum of $14 million (the “Contract Sum”) (the “the First Agreement ”): FACC para C1; DTFACC para 1?

(d) was the First Agreement made on essential terms with the expectation that further terms would be agreed in substitution for or in addition to the terms of the First Agreement (the “Further Agreement”): FACC para C1A; DTFACC para 1, this First Agreement comprising -

Oral parts

(i) A. discussions on 12 February 1998 between Smith and McDonnell for and on behalf of the plaintiff and Owen and Sleeman for and on behalf of the defendant (as evidenced by the Minutes of the Post Tender Interview dated 12 February 1998): FACC para C1A(a)(i);


B. discussions on 19 February 1998 between Smith, Glanville and McDonnell for and on behalf of the plaintiff and Owen and Sleeman for and on behalf of the defendant (as evidenced by the Minutes of the Post Tender Interview dated 19 February 1998): FACC para C1A(a)(ii);

[Note the differences between this and the oral parts of the second contract alleged pleaded at issue 2.11.(b) above, a third contract introducing discussions at SPTI of 12 February 198]

Written parts

(ii) insofar as the First Agreement was in writing, was it contained in and evidenced by one or more [sic - NB] of the following:

A. Invitation to Tender dated 24 November 1997 (FACC para C1A(b)(i)) [ Not in first Baulkham Hills pleading] ;
B. Tender from plaintiff dated 16 December 1997 (FACC para C1A(b)(ii)) [ Not in first Baulkham Hills pleading] ;
C. Specifications SPA-3K Structural Steel and Acoustic Roof and Painting (FACC para C1A(b)(iii)) [ Not in first Baulkham Hills pleading. Probably document dated 09.12.97, SPA-3K revision 2, pp1-31 and document SPA-5G Painting, pp10-18 as per Michael Owen fax 10.12.97] ;
D. General Conditions of Subcontract SC.JCC-D 1994 as Amended: FACC para C1A(b)(iv) [Assume this is document with handwritten note “Tender issue received on 10/12/97. Not in first Baulkham Hills pleading] ;
E. Drawings MAS 7701-01, MAS 7706-01, MAS 7707-01, MAS 7750-01, MAS 7752-01, MAS 7753-01, MAS 7754-01 and MAS 7755-01: FACC para C1A(b)(v);
F. Project Related Conditions: FACC para C1A(b)(vi) [Not dated but see exhibit 23 volume D49 tab 4 for sending details - sent 23.02.98. Not in first Baulkham Hills pleading] ;
G. Invitation to Tender dated 21 January 1998: FACC para C1A(b)(vii) [ Not in first Baulkham Hills pleading] ;
H. Tender from plaintiff dated 9 February 1998: FACC para C1A(b)(viii) [ Not in first Baulkham Hills pleading. Presumably this is the combined bid of 9 February for $14,848,861. Note ABB fax of 19 February reducing price to $14 million is not pleaded here but it is in the first Baulkham Hills pleading] ;
I. Minutes of Post Tender Interview dated 12 February 1998: FACC para C1A(b)(ix) [NB this is pleaded in the first Baulkham Hills pleading] ;
J. Minutes of Post Tender Interview dated 19 February 1998: FACC para C1A(b)(x) [This is pleaded in the first Baulkham Hills pleading] ;
K. Letter from defendant to plaintiff dated 19 February 1998: FACC para C1A(b)(xi) [Presumably the letter of intent. NB this letter not (apparently) pleaded in first Baulkham Hills version, whereas plaintiff’s letter of 19 February 1998 is, but is not pleaded in this version] .
B. Fourth contract allegation - plaintiff accepts defendant’s offer by starting work

(l) Did the defendant’s letter of 19 February 1998 constitute an offer to the plaintiff (sic) to carry out the roof works for the MUA project on the terms and conditions thereof (ie in the defendant’s letter of intent)?; and

(i) did the plaintiff accept that offer [a fourth contract formation allegation, presumably deriving from the words of the letter of intent] by commencing the roof works on the MUA project?: ADTSFAS para 5; FACC para C1AA; DTFACC para 1.

Conclusion on Quantum Meruit

185 At the end of the day Abigroup has failed to establish error vitiating the findings on the quantum meruit claim. Once the Court has, as in the present case, been satisfied that there was no error of principle made by the Referee which can be seen to vitiate his approach, the attempt to involve the Court in a re-agitation of the determination of the disputed questions of fact fails at threshold.

186 I have however been prepared to follow the submissions of both parties into the areas of fact, particularly by reason of the need to do this in order to assess the substance or lack thereof, in the submission by ABB that what Abigroup is seeking to do before this Court is to depart from the way in which it put its case to the Referee. Those ABB submissions are seen to be of substance. It is entirely inappropriate to permit Abigroup which had:

· every opportunity, through its participation in the conclave process, to have the experts consider and report upon all matters which should be taken into account in relation to the valuation of ABB’s quantum meruit claim;

· had every opportunity in making submissions to the Referee, to draw to the Referee’s attention the particular evidentiary matters that the Referee should take into account, consistent with the principles that Abigroup submitted should guide the Referee’s approach,

to now revisit the manner in which it was content to litigate these issues before the Referee.

187 Authorities have already been referred to underpinning the principle which leads not only to the maintenance of fair play, but also to the repression of unnecessary litigation, which principle requires that parties must be bound by the course they deliberately adopt at the trial. In an area not only of a Part 72 reference, but more particularly of the narrow type of issues where very great assistance is received from experts, and where the Referee, with the consensus of the parties, has set in place a regime whereby conclaves of experts take place, all ultimately supervised or regulated by the Referee, the party seeking to revisit the matter and particularly to put submissions, either inconsistent with submissions put to the Referee by that party or worse, never put by that party to the Referee, has in my view a hopeless task in seeking to persuade this Court to now enter that arena.

188 Mr Corsaro SC who addressed the Court on behalf of Abigroup in relation to the quantum claim issue, conceded that no submissions had been addressed by Abigroup to the Referee identifying the several disparate amounts for which Abigroup now contends before the Court, ought to have been the subject of findings by the Referee by way of the "fair market value of the benefit to Abigroup" of particular works. That circumstance speaks volumes in terms of what was and was not on the table being litigated before the Referee.

189 The attempt to sidestep this problem makes the point that the Referee [Report 857] said:

"On what principle should the Referee treat amounts which have been agreed between the parties.

As will be seen, the experts agreed on almost every component of the costs which the plaintiff claimed…

Both parties' submissions impliedly accept that those components which were agreed to not fall to me for determination or final validation, at least provided that I am satisfied as to the legal principles underlying the agreement"

190 The proposition for which Abigroup contended before this Court was that this excerpt made plain that the Referee posed for himself the task of identifying the legal principles to be applied on the assessment of the quantum meruit claim.

191 This is not exceptional. But what is exceptional is to find at the end of the years of reference including conclaves of experts, not a single word is advanced by Abigroup in the form of a submission that a particular amount and no more should be accepted as proving the value to Abigroup of particular works. To my mind this is a strong indicator that the parties determined through the conclave process to reach and did reach an agreement in accordance with the principle stated in Renard - and the Referee says as much at the foot of Report 856.

192 The submission by Abigroup to this Court was that the Court should remit to the Referee, the question of only now receiving from Abigroup, all the close submissions which it failed to put to him, and which by reference to the mountain of evidence before the Referee and the experts reports, it is suggested may now permit the Referee to apply, what is suggested to have been the “proper” approach to the quantum meruit claim by reference to 'fair value to Abigroup'. Even if the Referee had erred in his approach to principle, the Court would not have acceded to this application, simply on the basis that there must be an end to litigation and that Abigroup, having once had an opportunity to make the submissions which it now seeks to make, has forgone that opportunity. The principles have been set out above. I do not see that Abigroup’s approach to the litigation could be said to have been uninformed or naïve - indeed the whole of the approach taken by both parties to this mammoth litigation where they have fought each other to a standstill on every point, appears to be the antithesis of any 'babe in the woods' notion.

193 Finally, to my mind, a refusal to apply the 'fair value to Abigroup' approach was not incorrect in the particular circumstances which here obtained. On the findings of the Referee, the work carried out during the period from 19 February 1998 up until October 1998 involved a complex and interrelated set of factual circumstances explaining the delays to progress and where eighteen circumstances were identified in respect of which the conditions and qualifications upon which ABB had based its tender, were seen not to have been fulfilled. It was clearly open to the Referee to find that the work which had been carried out fell outside that normally expected of tenderers. It was clearly open to the Referee to find that Abigroup bore the risk that if the contract did not materialise, it would be obliged to pay a reasonable sum for work actually done. The application of the principle of unjust enrichment assists in displacing an inference which might normally be drawn, namely, that because no contract was agreed, there was no obligation to pay. All the more so when Abigroup, in the face of the ‘no monies will become due…until the subcontract has been executed’ clause, proceeded to make payments to ABB.

Disparate matters

194 It is possible in conclusion to deal with a number of disparate matters.

Profit

195 The Referee did not allow a margin for profit on work not carried out by ABB.

196 It is simply an incorrect statement of principle to put, as Abigroup appears to have, that Renard is authority for the proposition that on a claim for quantum meruit a claimant can only receive costs bare of profit.

197 In my view the following submission by ABB is of substance:

“What these findings and these circumstances show also is that while there are undoubtedly many ways in which one can, at an evidentiary level, tackle the question of what is reasonable remuneration or a reasonable price for work - and the cases contain a number of examples of it - in the circumstances of this case [where the circumstances of performance really were quite unique, and they were unique because ABB went through it and nobody else did, and they were unique in the sense that the Referee found that anyone else doing that work would have encountered the same problems] whatever other approaches might have been available at an evidentiary level to support a finding of reasonable remuneration, the appropriate approach was to look at the costs that ABB had actually incurred in doing that work and then to apply an appropriate margin for overhead and profit.” [Transcript 442]

198 As Mr Orlov of counsel who addressed on the quantum meruit issue submitted:

· The figure of 10.8 per cent, which the experts agreed was a reasonable margin, or was part of the reasonable margin, was comprised of a 2.8 per cent allowance which was to recover the overhead cost associated with tendering and winning the work; 5 per cent of which was the administration cost associated with the project, being an overhead cost; and then a 3 per cent margin for profit.

· The principles upon which the defendant founded its submissions are really quite remote from the circumstances of this case. Those principles are concerned with a situation where it is the disappointed tenderer who does not enter upon the work who sues to recover the costs of tendering.

· ABB worked on this job for eight months, a period which reflected what was originally contemplated would be the contract period. During that time they performed substantial work, and the question is whether an overhead cost incurred in connection with obtaining that work should be recovered as part of the reasonable remuneration or price payable for the work done.

· Paragraphs 8.1 and 8.2 of Mr Blunden's report [exhibit P5] [referred to and incorporated by reference in footnote 150 of the Referee's report at page 867], shows that the experts were examining this overhead cost - that is, the cost of tendering was $350,995, an overhead cost. It was an overhead cost which was, in the way in which they calculated it, recovered partially as a component of the 10.8 per cent mark-up for overheads and profit which was applied to the value or the cost of the work done up to the time that ABB was terminated.

· What it shows, and what the Referee's report shows, is that the experts agreed, in working out what was a reasonable price for the work done, that it was reasonable for the plaintiff to recover in full the overhead costs associated with tendering. No doubt there are various ways in which an appropriate margin for overhead cost and profit can be calculated. What the experts did here, and what the parties did here, was to agree that the total amount of margin should comprise in part a percentage factor and in part a lump sum amount. The lump sum amount was the amount of that incurred overhead cost which was not able to be recovered through the application of the percentage.

· In essence, the effect of what the experts concluded in their approach to the matter and which the Referee accepted, was that a contractor in the position of the plaintiff, eight months down the track, would expect to recover that cost in his price. Ultimately whether that is achieved by a higher percentage for profit or what the mix is probably does not matter. But what they were really doing was saying that when you take the costs incurred by ABB in performing the work, ABB is entitled to a margin for overhead and profit and the overhead margin should include as part of it full compensation for the tender costs plus some small uplift for profit.

The course of the work

199 The Referee at page 797 found that ABB's requirements were for a set of drawings which were approved by Abigroup and its consultants for construction and had such a level of correctness, completeness, detail and finality that, effectively, the design was complete and fully depicted in the drawings which could be used not only to begin building the structure, but also quickly to order the majority of the steel and also to finish the structure within the tight time frame using those drawings.

200 As Mr Orlov submitted:

“That provides the template against which the Referee had to compare what occurred, and what your Honour needs to take into account. An issue before the Referee related to the course of work and the reasons why, as at the period between August and October 1998, ABB had made less progress than Abigroup said it should have. The way in which that was put was that, having regard to the lack of progress during that period, that was an indication - indeed, it was positive proof - that ABB did not have the capacity to carry out the work using its construction sequence and method within the period it had represented. And so the case was fought out, or that part of the case was fought out, by a meticulous examination of what happened and why.

That evidence and the Referee's findings in relation to it was also relevant to the question of the quantification of the claim, because it identified the work that was done and the circumstances under which that work was performed, so that it was a matter that had more than one relevance [Transcript 435-436]

[T]he Referee made detailed findings about the course of work and the reasons for it and the respects in which any other contractor doing the work would have encountered the same impediments to performance as ABB encountered. That is directly relevant to the question of valuation. The Referee's findings establish that as at 25 February 1998, when the first wave of AFC drawings was issued to ABB, Abigroup had a design of a roof that was unfinished and could not be built without extensive redesign by any sensibly anticipated method of construction.

As at 14 October 1998, by virtue of the work that ABB did, Abigroup obtained a design of the roof that was finished and that could be built in accordance with Abigroup's preference, and indeed requirement, for a modular method of construction. That roof was able to be built by Transfield with a minimal further changes to the design. Now, while the Referee's findings establish also that while an iterative process of completing the design was proceeding, ABB was also endeavouring simultaneously to detail and fabricate the steelwork for the roof. Abigroup obtained the benefit of that work in the sense of the design work, the shop drawings and fabrication work and it used it to complete the roof.

When those findings are examined in detail, they establish objectively that in the circumstances of this case it was appropriate to determine the reasonable remuneration payable to ABB for the work actually done by reference to ABB's actual proper and reasonable costs calculated in the way the experts agreed should be done plus a reasonable margin for overheads and profit.

If I can just digress for a moment and deal with this notion that there is some tension between the value to the principal, the value to Abigroup of the steelwork and the cost that ABB incurred in building that steelwork. There are a number of problems with that particular piece of evidence…
To price some steelwork on the basis of a completed design is one thing; to fabricate steelwork when you have an incomplete design and the design is being completed while you are detailing and endeavouring to fabricate that steelwork is an entirely different matter. The former takes the advantage of all of the efficiencies that are associated with a completed design. The latter does not. But the fact that there is a difference does not entitle the principal to pay only what would have been payable if the design had been complete right from the start. It was not. So that what the experts agreed was that ABB incurred certain costs which were proper and reasonable and were consistent with market rates for that work in actually carrying out the work in the circumstances in which that work had to be carried out, or in the circumstances under which that work had to be performed. That is a very different situation to a situation where a contractor comes along nine months into the job and he was asked to take over a fully designed job which has been designed, mostly detailed and partly.” [Transcript 414-415]

201 At pages 820 to 830 the Referee dealt with the course of the job in relation to the evolution and completion of its design, and there were two strands to that analysis. There was a process of completion of the design which Abigroup's structural engineer, TTW, was undertaking, and that simply involved completing something that it had not completed before either 19 February or 25 February. It involved the iteration of the design between TTW and its peer reviewer in the UK, Buro Happold, who was considering the design and signing off on it and in that process requiring further changes to be made to the design.

202 The Referee at 821 put the matter thus:

“The process that took place between February 1998 and late September 1998 was one of continuing design development to accommodate:

(a) initially, Abigroup's instruction to radically redesign the structure to save weight;

(b) then Abigroup's instruction to "revert to tender";

(c) the gradual convergence upon a design solution resulting from Buro Happold's and TTW's continuing analysis of the structure;

(d) the effects of construction loads and residual stresses on member capacity and sizing;

(e) the effects of increased loads resulting from the finalisation of the design of fans and catwalks, something that Abigroup and TTW always knew had to be completed; and

(f) the effect of increased loads due to a variety of causes on the design of connections.”

203 The position was summarised this way in ABB's submission which the Referee accepted:

“Another way of looking at what happened is that it took until late September 1998, with the combined efforts of TTW, Buro Happold and ABB, to reach a point at which it might be said that the conditions of ABB's tender had been fulfilled. Thus, when Abigroup instructed on 12 October 1998 that ABB should proceed on the basis of the 24 September 1998 AFC drawings, for the first time since ABB commenced work many months earlier, ABB was at the point where it had expected it would be right from the start.”

204 Mr Orlov made the following points:

“If your Honour then just links that finding with the finding at the bottom of page 840. This is where the Referee dealt with a submission which raised the question whether ABB had in fact ever received AFC drawings of the appropriate standard:
... I have made findings as to the inapplicability of those criteria and, given the factual findings I have made about the drawings which were provided on 20 February 1998, 25 February 1998, 15 April 1998 and in the September AFC set, it is clear that ABB did not receive a full, complete and proper set of AFC drawings in the state of completeness and finality encapsulated by the phrase "correct, complete and with no holds".

[A]t pages 826 to 829 the Referee made detailed findings in relation to the circumstance that the structure was incapable of withstanding construction by any sensibly anticipated method of construction, and the development of that - in fact, your Honour will see in subparagraph (b) on page 826:
The design of the structure assumed the roof would get into its final position under zero-gravity conditions.

In other words, it was assumed that you could put this structure into space with gravity switched off, and then in its fully erected condition, you switch gravity back on. In that condition the structure was structurally adequate. This was a very complicated space frame type of structure which depended on the interrelationship of various members.” [Transcript 438]

Plug and unplug

205 I accept as of substance the submission put by Mr Orlov that a careful examination of what Abigroup has been about during a deal of the quantum meruit submissions may be properly described as engaging in the process of plugging and unplugging figures, all of which it is said were before the Referee, in order to arrive at sundry results. This exercise is neither a matter of simple assembly nor for my part, a matter of simplicity in terms of disassembling the same. The problem inheres in the complexity underlying the sundry assessments and reasons therefore in the experts reports. This simply further confirms that Abigroup having been content to accede to the bases underpinning the approaches taken by the respective experts, cannot only now be entitled to move away from this position. Albeit that the Court requested a short schedule thumbnail sketching Abigroup’s claims, the Court was not impressed with the document which came forward at last minute [and in a number of ways unexplained, and unparticularised] in the form of schedules, part of MFI D5, but at least it can be said that these submissions were not before the Referee.

Steel fabrication

206 A good example of the plug and unplug exercise sought to be undertaken by Abigroup concerns its claim in respect of steel fabrication. In MFI D5 the claim is put as the difference between "Cost [$1,404,341.43]" and" Value [$1,182,932]"-that is to say a difference of $221,409.43.

207 The matter may be examined by reference to exhibit D2 and in particular the first page, which was the first page of a very long spreadsheet which the experts had prepared. This was part of a report which was prepared called "Assessment of Abigroup's costs incurred in the completion of the MUA as a consequence of ABB' termination". The page in question includes the following:

Transfield subcontract account
Lump sum price based on Baigent detail drawings issued to Transfield	$4,425,000.00
Less items fabricated by ABB	$(1,182, 932.06)
Component where work was not previously detailed calculated at agreed rates.	$2,087,681.00
Free issue materials	$(974,268.22)
Dayworks – receipt, checking, rework of ABB defects, and completion of components where partially finished by ABB	$407,086.90

208 The submissions which Mr Orlov made to this Court which are of substance in relation to this matter were as follows:

· The first thing to say about this is that material has not been placed before your Honour, but one can search high and low in the reports and one will not find any reference to these items, or any explanation of these items which would shed further light on what they actually are or how they have been arrived at or what they represent. The experts got together, they worked certain things out, known best to themselves, which was consistent with the conclave process … and then, having reached agreement in relation to these matters, they simply recorded that agreement on this and many other items in this way. So your Honour has in front of you all the material that is available on the subject.

· [I]t should be as immediately obvious to your Honour, as it no doubt should have been to the Referee, that one simply takes out a figure which obviously was the value to Abigroup and substitute that figure for another figure which was in another report. That seems to be the burden of the defendant's submission.

· This all appears under a heading "Transfield subcontract account". The first entry is a lump sum price based on Baigent detailed drawings issued to Transfield of $4.425. What it appears that Transfield did was to give a lump sum price for all of the steelwork in the then completed shop drawings.

· The next item "Less items fabricated by ABB" appears to be a credit back by Transfield for the work which had already been done by ABB, because it appears that the figure of $4.425m included steel which was depicted in the Baigent detailed drawings but which ABB had already fabricated.

· The next item is a component where work was not previously detailed, calculated at agreed rates, and that is an item which is then added to the amount payable to Transfield.

· There is then a deduction for free issue materials.

· Then there is this item - it is a day works item. So that lying behind it, though not tendered, would have been a whole lot of invoices and daily time records and detailed records of the kind that are generated when work is done on a day works basis, which related to this: receipt, checking, rework of ABB defects, and completion of components where partially finished by ABB.

· Just going to the last item first, by hypothesis, where ABB had not done the work, it plainly had not incurred a cost in doing it and it plainly had not been paid for it. There cannot possibly be any suggestion that it had been. So that that figure of $407,086, which it is said should be simply deducted and the Referee should simply have credited against ABB, in fact contains a component unstated and unidentified for work which ABB would be entitled to be paid for if it had done it.

· It also contains a component relating to the receipt and checking of the steel. That is a cost incurred also in this undifferentiated sum of $407,000 which has nothing to do with anything ABB did but has everything to do with the fact that at a particular point in time Abigroup changed its mind and decided to have Transfield do the work, and it incurred a cost in Transfield looking over that steelwork, receiving it and checking it. Obviously not in its submissions to the Referee, but certainly not in its submissions to your Honour, either in writing or orally, has it been explained why it would be against conscience for ABB to recover compensation for the work that it did without giving credit to Abigroup for a cost that it incurred as a result of its decision to have someone else take over the work.

· There is no doubt that, to the extent that this figure of $407,000 includes the rework of ABB's defects, that is a matter which would be relevant to take into account. But whether that figure was $5,000 or $105,000 simply doesn't emerge. What is absolutely clear on the face of this document is that it is not $407,086.90.

· If Abigroup considered that the issue had not been taken properly into account by the experts in working out what were the proper and reasonable costs incurred by ABB in carrying out the work at its Tomago fabrication facility, then no doubt they would have tendered the day works records, or the relevant day works records, and no doubt they would have made submissions to the Referee about it. That is, "There was work done on these days and these were the defects, and that cost, whatever it is, hasn't been taken into account in discounting the reasonable cost of performance of the work." Well, they did not do that.

· By hypothesis, what the experts did was to consider what are the proper and reasonable costs of carrying out the fabrication work. All of this material was before them. It is quite clear that the material was before both of them because they dealt with it in the context of this report, so that one would expect that the experts would have taken into account, the cost associated with rectifying any defects in assessing what were the proper and reasonable costs incurred by ABB in doing the work.

· The Referees report at 864 in the "Summary of Differences" deals with the Tomago Fabrication Facility Costs by identifying the proposition contended for by the plaintiff as $1,404,341.43 and the adjustment or difference contended for by the defendant as "-66,383"

· In ABB’s submission to the Referee [Appendix L to exhibit MAH 1 of Mr Harrowells Affidavit] is set out the make up of the $1.4 million at page 27. One of the components was:

Radcliffe Par No.	Blunden Para No.	Item	Radcliffe	Blunden	Difference
3.06.02	4.6	Subcontractors – Detailing (Baigents)	$572,582.00	$467,656.87	-$104,925.13

· Hence the true comparison, according to the defendant, when you take that figure out, is that the cost of the steelwork was $831,759. That was ABB's cost of the steelwork for which Transfield gave a credit of $1.182m. Your Honour would be forgiven for thinking that that was not a bad deal from Abigroup's point of view, because the figure of $1.182m, which the defendant urges upon your Honour as being a plug-and-play figure that you can simply substitute for the $1.4m, does not include shop detailing expenses.

· Now, even if your Honour was to add in the 10.8 per cent margin, that leads to a comparison of $921,589 charged by ABB as the reasonable remuneration for that work and $1.183m which was the credit back by Transfield. If one tries to plug and play with different figures from different reports prepared for different purposes, they are liable to produce an entirely unexpected and wrong result. The suggestion that the Referee should have been left to do so without guidance from the defendant in submissions should simply be rejected out of hand.

Submissions as to matters of difference

209 Paragraph 519 of Abigroup’s submissions to the Referee drew specific attention to the items which were identified in the submissions of ABB as being matters of difference between these experts. The following paragraph further makes a reference to claims, "which were unresolved in the conclave process".

Lampson Crane

210 One of the areas in respect of which Abigroup has contended that the Referee erred concerns this particular crane, apparently the largest such crane in the southern hemisphere. After ABB was required to leave the site it became necessary for the dismantling and removal from the site of the crane. The disagreement between the experts was simply whether the cost of hiring the crane during the period which it took to dismantle it was properly incurred. The matter was dealt with by the Referee at 168 and following. No material error is shown by the Referee. Interestingly it was Abigroup which put the following to the Referee:

"The valuation made by Mr Blunden included costs for items that ultimately were of no benefit to Abigroup at all. However, at the time the costs were incurred they would have provided a benefit to the project had, ABB not been terminated" [submissions paragraph 538]

Shop drawings

211 Abigroup submitted before the Referee that ABB had failed to establish that any amount for shop drawings as invoiced by Baigent was reasonably incurred. The submission was that the experts had agreed that Baigent had completed $193,482 worth of shop detailing work as the cost of the work against the design contract value. The proposition was that the cost of carrying out the work had been $572,582 which had been agreed between the experts. The submission was that the work was so defective in quality that it should have been discounted. The Referee having allowed the cost, Abigroup claimed the difference of $379,100. [Transcript 394 and written submissions of Abigroup, paragraph 114]

212 The full amount of $572,582 was found by the Referee as being a reasonable amount paid to Baigent for the work that was done, the full benefit of which Abigroup ultimately received. No error has been shown in the approach taken by the Referee to this item.

213 Mr Orlov submitted:

“[T]he work that was done was not simply producing 500 shop drawings or X tonnes of steel. It was producing 500 shop drawings and X tonnes of steel under those circumstances where there were three steps forward and two steps back, so that in valuing the work it is necessary to have regard to that circumstance because that is an integral part of the work that was done…

[I]f I can pose the question this way - if one was to value - and approach it from the point of view of valuing the work in the defendant's hands, upon what basis would it be conscionable for the defendant to come along and say, "Well, now that you have struggled and laboured mightily for eight months under these adverse circumstances and produced these results, I could have got this work done for half the price without taking into account the circumstances under which that work would have to have been performed."
[Transcript 441]

Glanville/ Lim salary costs

214 No error is shown in the approach taken by the Referee on the claim concerning a salary issued dealing with salaries of Mr Glanville and Mr Lim. The report deals with this matter at 877 and following.

215 In the result, both as a matter of correct application of relevant principle and as a matter of assessment of the respective claims, as well as by reference to the obvious need to hold Abigroup to the way in which the matter was litigated at the reference, the attack seeking to vitiate the report fails.

Other matters

216 None of the other matters of detail, the subject of complaint in Abigroup’s submissions, were of substance.

Claim to Judgment for matters abandoned by ABB

217 Overview submissions in writing were addressed by the parties to the claim by Abigroup that by reason of matters abandoned by ABB in the Third Further Amended Summons on 4 December 2001 [and identified in a letter dated 4 December 2001] the Court should order that there be Judgment for Abigroup. That Judgment is sought in relation to the claim set out in Annexure "A" to the Notice of Motion.

218 During the hearing the Court made plain that this was a matter more appropriate to be addressed following the delivery of the principal judgment and at the same time as submissions will be taken concerning costs. Leave is granted to the parties to treat with this issue on that occasion.

Short Minutes of Order

219 The parties are to bring in short minutes of order providing for the adoption of the Report and ancillary relief.

I certify that paragraphs 1 - 219
are a true copy of the reasons
for judgment herein of
the Hon. Justice Einstein
given on 30 July 2003

___________________
Susan Piggott
Associate

30 July 2003

1. Replace the word” dissemble” with the word
“disassemble” on page 35 paragraph 51 line 2;
2. Replace the word “Abigroup” with the word
“ABB” on page 55 paragraph 76 line 3;
3. Replace the word “tomb” with the word “tome” on page 123 paragraph 129 line 2;
4. Replace the word “ABB” with the word “Abigroup” on page 136 line 10;
5. In paragraph 205 on page 175 line 1 replace the word “the” after “Mr Orlov” with the words “that a”, Line 2 add the word “a” after the word “during”, line 7 replace the word “dissembling” with the word” disassembling”
6. Page 180 second bullet point add the word “In” before the words “ABB’s submission” and “to” before the words “ the Referee”.

___________________
Susan Piggott
Associate

7 August 2003

Last Modified: 08/11/2003