Abigroup Contractors Pty Ltd v BPB Pty Ltd

[2000] VSC 261

SUPREME COURT OF VICTORIA          

COMMERCIAL & EQUITY DIVISION

BUILDING CASES LIST

No. 7644 of 1998

ABIGROUP CONTRACTORS PTY LTD (ACN 000 201 516)	Plaintiff
v
B.P.B. PTY LTD (ACN 006 089 210)	Defendant

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JUDGE:	Byrne J
WHERE HELD:	Melbourne
DATE OF HEARING:	28 April 2000
DATE OF JUDGMENT:	2 June 2000
CASE MAY BE CITED AS:	Abigroup Contractors Pty Ltd v B.P.B. Pty Ltd
MEDIUM NEUTRAL CITATION:	[2000] VSC 261

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Practice and Procedure – reference by court to special referee – reference opposed – whether reference should be ordered.

RSC Rule 50.01

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr A.C. Neal	Deacons Graham & James
For the Defendant	Mr P.G. Cawthorn	Minter Ellison

HIS HONOUR:

1. In this proceeding commenced by writ filed on 30 October 1998, the plaintiff, Abigroup Contractors Pty Ltd (“Abigroup”), sues the defendant, B.P.B. Pty Ltd (“BPB”), for loss and damage suffered by it in the construction of the Eastern Freeway extension. 

1. The plaintiff on 22 November 1995 submitted to Vic Roads a tender to construct the extension and on 22 February 1996 was awarded the contract.  BPB, a consulting engineer, assisted Abigroup in the preparation of its tender.  As part of its tender, Abigroup offered to construct sound walls along the sides of the freeway using a foundation system which differed from that proposed by Vic Roads in its invitation to tender.  It is alleged by Abigroup and admitted by BPB that there was an agreement between them made in or about October 1995 for the provision by BPB of engineering consulting services for the preparation of Abigroup’s tender and that this agreement included a term that BPB would provide services which included the production of an alternative wall foundation design.  There appears to be a dispute between the parties as to whether this alternative system was to be one comprising both spread footing and piled footing systems, as Abigroup alleges in its statement of claim, paragraph 4(a), or one comprising only a piled footing system as BPB admits in its defence, paragraph 4.1. 

1. In any event, BPB produced a tender design which is contained in drawings 536/02/01, 02, 03 and 04, dated 2 November 1995 and a further design contained in drawings 536/04/01, 02, 03, 04 and 05, dated 17 November 1995.  There is a dispute between the parties as to whether these two sets of drawings comprise different aspects of the one design, or two separate designs with the later design being an amendment to the first made upon an instruction by Abigroup.  This design was, or these designs were, used by Abigroup in preparing its successful tender which was submitted on 22 November 1995. 

1. Abigroup then engaged BPB to carry out the final design for the project.  This it did, but the final design differed from the preliminary design inasmuch as the piling component for the sound walls was increased with a consequent increase in the cost of the project to Abigroup.  Abigroup fixes this extra cost at $1,216,168.48 and seeks to recover it from BPB.  In its defence, BPB agrees that there were changes introduced between the tender design and the final design.  In paragraph 16.2 it identifies these changes and says that they were the result of changes in the Vic Roads’ requirements and the result of the provision of more comprehensive geotechnical information.

1. It seemed to me from an examination of the pleadings that two, essentially engineering, issues arise from all of this: 

(1)Given the information then available to BPB, did it exercise reasonable skill and care in the preparation of its preliminary design or designs. 

(2)       If no to (1), did Abigroup incur any and what extra cost as a consequence. 

With this in mind, I invited the parties to consider whether any issues might usefully be referred to a special referee for report pursuant to R. 50.01.  Counsel for Abigroup has responded to this suggestion and has put forward a set of sixteen questions for a special referee.  These questions are legal, factual and technical and are intended to dispose of all issues in the proceeding except costs.  The defendant opposes the reference, at least at this stage.  Its counsel proposed that the matter be deferred until witness statements had been delivered.

1. It is convenient, at this stage, to make some general observations about references out of court in building cases.  When the Building Cases List was established in this Court on 2 October 1972 as the first example of judge managed litigation in this country, Menhennitt J, the first judge in charge, early seized the opportunity to set out its objectives.  It is worth a moment to recall these objectives and to remark how apposite they are over a quarter of a century later. 

“The conclusion I have stated is, I think, strongly pointed to by the manifest object and purpose of O. 76 [Ch. II O. 3].  It is notorious that in many building cases proceedings have been bedevilled by complexity and detail, interlocutory proceedings have been tortuous and slow, trials have been long and expensive, the real issues have often emerged only during the course of the trial and parties, often both of them, have been disillusioned.  What O. 76 [Ch. II O. 3] aims to do is avoid or minimize these hazards.  Its essence is in the provision for the judge to give directions at the outset of the proceedings.  This power enables the judge to endeavour to sort out and identify at the earliest possible stage the issues in the proceedings and then decide how those issues should best be determined.  This process may reveal a main issue or issues – one which may determine the case or, when decided, may result in the case being determined.  It may identify an issue or issues which, unless determined, will stand in the way of the orderly and expeditious determination of the whole case.  An issue or issues having been so identified the judge then has open to him, inter alia, the power under O. 36, r. 8, [R. 47.04] to order one or more questions of fact to be tried before others and the power under O. 25, r. 2, or O. 34, r. 2 [R. 47.04], to order that a point of law be disposed of or decided before general trial and those powers may be employed in conjunction.  The parties may be encouraged to state a special case pursuant to O. 34, r. 1.  A question or the whole cause or matter may be referred to a referee pursuant to s. 14 or s. 15 of the Arbitration Act 1958:  see American Real Estate Pty Ltd v Abbatangelo, [1968] V.R. 362. A matter may be ordered to be investigated by a master pursuant to s. 104 of the Supreme Court Act 1958.  Experience of the Building Cases List since O. 76 [Ch II O. 3] has been in operation has revealed the value of this process of identifying issues and deciding the best method for their determination.  So far in one case only has the conclusion been reached that it should go for trial in the ordinary way.  But even in such a case, just as in cases where it is possible to identify issues and decide upon the best mode of determining them, the advantages of a summons for directions at the outset of the proceedings are very real.  By bringing the summons on for hearing periodically it can be ensured that pleadings are delivered promptly and that other interlocutory steps are pursued expeditiously.  The hearing of a summons for directions presents an opportunity for the parties to be present at the outset of the proceedings and to come face to face with the issues involved in their litigation at that stage rather than, as sometimes happens, after a complex trial has proceeded for days or weeks.”[1]

[1]C.W. Norris & Co. Pty Ltd v World Services and Construction Pty Ltd [1973] VR 753 at 755-6. Where appropriate, I have inserted in brackets the modern equivalents of the rules of court to which his Honour refers.

1. Experience has demonstrated that references out of court have often proved to be a useful tool in the efficient management of building cases.[2]  In most cases the reference is made with the consent of the parties.  This case raises the question what should be the attitude of the court where one party resists the reference.

   [2]See Murphy J (writing extrajudicially) (1982) 56 ALJ 673. For a discussion of the successes of the procedure in New South Wales, see Giles J (writing extrajudicially) “The Supreme Court Reference Out System” (1996) 12 BCL 85.

1. The starting point for any consideration of this question in this Court must be the decision of Beach J in A.T. and N.R. Taylor & Sons Pty Ltd v Brival Pty Ltd.[3]  This was a building case which had been commenced by writ on 19 December 1980 and was, by 30 November 1981, ready for trial.  The claim was that of a builder who sought some $71,000 for work performed.  The defendant proprietor disputed the claim and counterclaimed for damages for late completion.  The proceeding was duly referred to the Causes List and came on for hearing three months later (including the long vacation) on 26 February 1982.  Regrettably, the trial date had to be vacated because the plaintiff disclosed a quantity of undiscovered documents on the eve of trial.  The proceeding was referred back to Beach J as the judge in charge of the Building Cases List whereupon the plaintiff unsuccessfully sought a reference to a special referee of questions as to the reasonable cost of the work performed and the reasonable time for its performance. 

   [3][1982] VR 762.

1. His Honour, relying on two Queensland cases,[4] concluded as follows:

“I agree with the views expressed by Campbell J in the Honeywell case.  Where a party to litigation wishes the sort of dispute which normally calls for judicial determination to be tried by a judicial tribunal it will only be in cases of an exceptional nature that his wishes will be disregarded and the matter referred to an arbitrator or special referee.  In my opinion, the so-called complexities of the matters pointed to by the plaintiff in support of its application do not constitute special circumstances in the present case.[5] 

[4]Silk v Eberhardt [1959] QWN 29; Honeywell Pty Ltd v Austral Motors Holdings Ltd [1980] Qd R 355.

[5][1982] VR 762 at 765.

1. In reaching this conclusion his Honour endorsed the view of the Queensland judges that the court should not, except in exceptional circumstances, impose the expense of a reference upon an objecting party and that a judge is particularly appropriate to determine conflicts of fact including technical facts.  This decision, and the Queensland cases upon which it is based, have commanded widespread support around Australia.  By way of example, recent decisions to this effect are found in Queensland,[6] in Western Australia[7] and in South Australia.[8] 

   [6]Tropeano v Monogram Pty Ltd [1992] 2 Qd R 324; Netanya Noosa Pty Ltd v Evans Harch Constructions Pty Ltd [1995] 1 Qd R 650.

   [7]Bold Park Senior Citizens Centre & Homes Inc v Bollig Abbott & Partners (Gulf) Pty Ltd (1998) 19 WAR 281.

   [8]O’Brien Lovrinov Crafter Pty Ltd v Corradini [1999] SASC 159.

1. It is possible to discern in the Taylor case and in the cases which have reached the same or similar conclusions, that the reluctance of the court to make an order for reference against the wishes of a litigant is driven by a number of matters.  These are the duty of the court to provide a judicial forum for the determination of issues for litigants who seek this; considerations which depend upon the terms of the rule under which the order for reference is made; and those of a practical nature including the relative cost, expedition and efficiency of the special referee procedure.

1. As to the first, it has been said that the reference of a question to a special referee involves no abnegation of the responsibility of the court itself to determine cases brought before it;  the reference is merely one of the tools available to the judge in the discharge of that function.[9]  In any event, I feel a little uncomfortable in giving weight to an argument which depends for its conclusion upon the assumption that a litigant comes to court in order to obtain a judicial determination of the claim.  While it may be true that this is the usual outcome of the filing of a writ and that the plaintiff may desire such a determination, the decision to do so is not always a statement of preference for a judicial forum.  Absent cooperation from a defendant, a plaintiff usually has no alternative forum available unless there be a binding and enforceable arbitration agreement.  Even less so can it be said that a defendant who is sued in court has voluntarily chosen a judicial forum. 

   [9]Super Pty Ltd v SJP Formwork (Australia) Pty Ltd (1992) 29 NSWLR 549 at 558-62, per Gleeson CJ (Mahoney and Clarke JJA concurring).

1. Turning now to the terms of the rule conferring the power to refer a question to a special referee, Smart J in Park Rail Developments Pty Ltd v R.J. Pearce Associates Pty Ltd[10] relied upon changes to the rule in the New South Wales Rules in 1985 to conclude that the court should not follow the Honeywell case or the Taylor case.  It should approach an application for reference out of court without any predisposition to make or refuse an order depending upon the wishes of one party.  His Honour observed[11] that the delays in court lists often work to the disadvantage of plaintiffs; whereas defendants were often less dismayed by the prospect of a distant trial.  Moreover, in an industry as fluid as the construction industry, witnesses move interstate to other projects and over the years the various jobs tend to merge and memories become less distinct and reliable.  His Honour said that, where an application for an order for reference to a special referee is sought and opposed, the court will make or refuse the order in the light of all the prevailing circumstances.  He listed[12] five matters which will generally require consideration upon such an application. 

“(a)the suitability of the issues for determination by a referee and the availability of a suitable referee;

(b)the delay before the court can hear and determine the matter and how quickly a suitable referee can do so.  Building and engineering matters, because of their length and complexity, often require either the judge or the referee to devote extensive time after the hearing to considering and resolving the issues.

(c)the prejudice the parties will suffer by any delay;

(d)whether the reference will occasion additional costs of significance or is likely to save costs;

(e)the terms of any reference including the issues and whether they should be referred for determination or inquiry or report.”

[10](1987) 8 NSWLR 123.

[11]8 NSWLR at 129.

[12]8 NSWLR at 130.

1. For reasons which have been authoritatively expounded in Buckley v Bennell Design and Construction Pty Ltd[13] and Nicholls v Stamer,[14] it does not seem to me that there is a sufficient difference between the procedure for reference out of court in Victoria under the Arbitration Act 1958 and that under the modern Order 50 to warrant any revisiting of the conclusions of Beach J in A.T. and N.R. Taylor & Sons Pty Ltd v Brival Pty Ltd.[15]  This said, it should be noted that, unlike the procedure in Western Australia, a special referee in Victoria is not necessarily required to conduct the reference “in the same manner as nearly as circumstances will admit, as trials conducted before a judge”.[16]  Indeed, the particular value of the procedure in Victoria is often that the special referee may not be so constrained.[17]  From the point of view of efficient trial management, it is very difficult to justify referring a question to a special referee where the investigation is to be conducted in the same manner as a trial in court, with the one difference that it is to be conducted before a lay person who may lack the authority and standing, and experience of a judge. 

   [13](1978) 140 CLR 1.

   [14][1980] VR 479.

   [15][1982] VR 762.

   [16]See Bold Park Senior Citizens Centre & Homes Inc v Bollig Abott & Partners (Gulf) Pty Ltd (1998) 19 WAR 281 at 284, per Ipp J, referring to O. 35 R. 3 of the WA Rules. See, also, Qld Uniform Civil Procedure Rules 1999 R. 502(3)

   [17]Where the court so orders pursuant to R. 50.02.

1. It follows, then, that an order for reference out will not be made over the opposition of a party unless the case for this is demonstrated by the applicant.  The applicant must show that the question or questions to be referred are appropriate to be enquired into before the other questions in issue in the proceeding.  It must, further, demonstrate that the proceeding is of such an exceptional nature that the genuine wishes of the respondent for a judicial determination should be disregarded.  This is not the case for me to attempt to enlarge upon this requirement and I will not do so.  It is sufficient that I emphasise that the applicant will not succeed unless it is able to demonstrate at least that the procedure which it would have the court adopt rather than a conventional trial is more likely to achieve the objectives of the Building Cases List, namely, the effective, complete, prompt and economical determination of the proceeding.[18]

   [18]Ch II R. 3.04(3).

1. In the present case, the reference proposed by the plaintiff would have the consequence that all issues, other than costs, between the parties would be dealt with in the referee’s report.  It was not demonstrated that such disposition would be more economical or expeditious than a trial before a judge or that for some other reason the question would be better dealt with than by a judge.  As to expedition, there is nothing before me which shows that a hearing before a special referee would be completed more quickly than a trial in court.  Experience suggests that I should not readily assume that this would be so.  It is true, however, that the hearing may commence earlier than a trial in court.  In any event, the reference out of technical issues only would require the parties to return to the court for the adoption of the report and the determination of the remaining issues.  This could not be done, given the present business of the court, before early 2001.  I understand that the trial of the whole proceeding in court might be set down for hearing about that time.  In those circumstances there is no advantage in the reference, at least in terms of the speedy disposition of the proceeding.  As to relative cost, there is again no material before me.  The parties before a special referee must assume the burden of paying for the venue and the special referee’s costs of the hearing and of the preparation of the report.  In these circumstances, the objective of an economical disposition of the proceeding cannot be achieved by a special reference unless it can be demonstrated that these extra costs will be more than compensated for by other savings or advantages in the procedure proposed. 

1. In the circumstances, this application must be refused.

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