Bellevarde Constructions Pty Ltd v CPC Energy Pty Ltd

[2008] NSWCA 228

New South Wales

Court of Appeal

CITATION:	Bellevarde Constructions Pty Ltd v CPC Energy Pty Ltd [2008] NSWCA 228
HEARING DATE(S):	29 July 2008
JUDGMENT DATE:	25 September 2008
JUDGMENT OF:	Spigelman CJ at 1; Allsop P at 1; Campbell JA at 63
DECISION:	Appeal dismissed with costs.
CATCHWORDS:	CONTRACT – Cost-plus contract – Authorised subcontractor – Where subcontractor a related company – Cost of services by subcontractor - DAMAGES – Claim in tort of deceit and misleading conduct – Loss pursuant to contract only – Relevance of contractual loss to breach of tort or statute - PRACTICE AND PROCEDURE – Referees’ report – Review and adoption of report – Exercise of discretion – Appeals – Principles to be applied
LEGISLATION CITED:	Australian Constitution Civil Procedure Act 2005 Judiciary Act 1903 (Cth) Trade Practices Act 1974 (Cth)
CASES CITED:	Briginshaw v Briginshaw (1938) 60 CLR 336 Buckley v Bennell Design Constructions Pty Ltd (1978) 140 CLR 1 Chloride Batteries Australia Ltd v Glendale Chemical Products Pty Ltd (1988) 17 NSWLR 60 Chocolate Factory Apartments Pty Ltd v Westpoint Finance Pty Ltd [2005] NSWSC 784 Coulton v Holcombe (1980) 162 CLR 1 CPC Energy Pty Ltd v Bellevarde Constructions Pty Ltd [2007] NSWSC 1397 Foxman Holdings Pty Ltd v NMBE Pty Ltd (1994) 38 NSWLR 615 House v The King (1936) 55 CLR 499 Nicholls v Stamer [1980] VR 479 Super Pty Ltd v SJP Formwork (Aust) Pty Ltd (1992) 29 NSWLR 549 Suttor v Gundowda Pty Ltd (1950) 81 CLR 418 White Constructions (NT) Pty Ltd v Commonwealth of Australia (1990) 7 BCL 193
PARTIES:	Bellevarde Constructions Pty Ltd (First Appellant) John Francis Fielding (Second Appellant) CPC Energy Pty Ltd (Respondent)
FILE NUMBER(S):	CA 40871/2007
COUNSEL:	(Appellant) B W Walker SC with R D Marshall (Respondent) M J Slattery QC with R A Parsons
SOLICITORS:	(Appellant) Dibbs Abbott Stillman (Respondent) Summit Law
LOWER COURT JURISDICTION:	Supreme Court
LOWER COURT FILE NUMBER(S):	55062/2005
LOWER COURT JUDICIAL OFFICER:	Einstein J
LOWER COURT DATE OF DECISION:	25 September 2008
LOWER COURT MEDIUM NEUTRAL CITATION:	[2007] NSWSC 1397

CA 40871/2007

SPIGELMAN CJ
ALLSOP P
CAMPBELL JA

Thursday 25 September 2008

Bellevarde Constructions Pty Ltd & Anor v CPC Energy Pty Ltd

Judgment

1 SPIGELMAN CJ and ALLSOP P: The respondent (“CPC”) commenced proceedings in the Technology and Construction List of the Equity Division of the Supreme Court seeking relief with respect to a cost-plus building contract pursuant to which the appellants (“Bellevarde”) as builder undertook to demolish buildings and construct apartments for CPC.

2 The proceedings were referred out to the Honourable Moreton Rolfe QC and Ms Janet Grey as referees. By a report dated 9 July 2007 the referees recommended that certain aspects of CPC’s case should be upheld and consequential orders made.

3 A number of matters were disputed before Einstein J who concluded that the referees’ report should be adopted and made consequential orders. (CPC Energy Pty Ltd v Bellevarde Constructions Pty Ltd [2007] NSWSC 1397.) Bellevarde seeks to reagitate only one of the issues argued before Einstein J. The sole ground of appeal is:

“The trial judge erred in adopting the Referees’ Report delivered by the Hon. Moreton Rolfe QC and Ms Janet Grey and dated 9 July 2009 (‘Referees’ Report’), as the Referees had erred in holding that, on the proper interpretation of clause 14(j) of the Cost Plus Building Contract entered into by the first appellant and the respondent on 2 February 2003 (‘Contract’), in the events that have happened, Cutcross Pty Limited, was not a subcontractor within the meaning of clause 14(j) of the Contract, although it was found by the Referees to be an authorised subcontractor under the Contract.”

4 These proceedings arise from the fact that, unbeknownst to CPC, Bellevarde had entered into a subcontract arrangement with Cutcross Pty Ltd (“Cutcross”), a company related to Bellevarde, so that any profits made by Cutcross were to the benefit of the same persons who had financial interests in Bellevarde. Cutcross performed the functions of a labour hire company but it was not at arm’s length from Bellevarde. It incurred costs in recruiting labour for, relevantly, Bellevarde. However, it passed on by way of an invoice to Bellevarde both the costs it incurred and a profit mark up.

5 The cost-plus contract entered into between CPC and Bellevarde was such that Bellevarde was entitled to pass on costs it incurred but its own profit margin was limited by the contract in terms of a specific amount. In substance, by entering into the contract with Cutcross as a subcontractor Bellevarde and its privies were able to earn profits from the contract with CPC over and above the amount of profit stipulated by the contract between CPC and Bellevarde.

6 In the course of the administration of the relevant contract various certificates had been issued pursuant to which CPC had made progress payments until a point arrived at which it discovered the misrepresentation. The proceedings were, in substance, for repayment of the amount that it had paid upon each certificate in excess of what it ought to have paid.

7 There was evidence before the referees to the effect that the amount actually charged by Cutcross, including the profit margin, was a reasonable price for the work it performed. Accordingly, on the causes of action on which CPC succeeded, being in the tort of deceit and for false and misleading conduct contrary to s 52 of the Trade Practices Act 1974 (Cth), CPC had to be put into the same position in which it would have been if either the tort or the breach of statute had not occurred.

The Appeal

8 The sole issue on appeal is whether, on the findings of fact made by the referees and adopted by Einstein J, there has been proved a loss appropriately measured by the damages awarded. The finding of fact made by the referees, underlying this issue, is the finding that Cutcross was an “approved subcontractor” within the meaning of the contract. Bellevarde submits that that finding was and is inconsistent with the ultimate finding that Bellevarde was not entitled to treat the invoices from Cutcross as costs incurred in accordance with the contract.

9 The way in which the appellants’ submissions were put on appeal, although not in terms the subject of any ground of appeal, linked this alleged inconsistency to the proposition that CPC had not proven any loss for purposes of the causes of action on which it succeeded.

10 Bellevarde submitted that, on the assumption that full disclosure of the Cutcross arrangement had been made, there was no finding of fact, and indeed no basis in the evidence for a finding of fact, that Bellevarde would have been able to secure services at a lower price or, indeed, that it would not have accepted Cutcross’ price, including both the actual cost and the mark up. Accordingly, Bellevarde could show no loss for which it could receive compensation as damages in tort or pursuant to s 82 of the Trade Practices Act.

11 CPC submitted that it had a contractual right to receive the services provided at a price calculated in accordance with Cutcross’ costs, ie without the uplift. On this basis the loss it suffered as a result of the deceit or misrepresentation was the payment of the excess amount. This approach was adopted by the referees and by Einstein J.

12 There is, of course, a difference between damages for breach of contract on the one hand and damages for tort or for breach of the statute on the other hand. Nevertheless, CPC contends that in the circumstances of this case, the computation of damages in terms of the amount of excess payments on the certificates is a reasonable assessment of the amount it has lost by reason of the misrepresentation.

13 CPC further contends that, in terms of computation, and arguably on the issue of actual loss, it was common ground before the referees, and before Einstein J, that this was the appropriate damage and measure of damages.

The Contract

14 The relevant contract is headed “Cost-Plus Contract for Building Works”. The builder agrees to execute and complete the Works in consideration of the payment of an amount computed by the addition of “the actual costs of the Works” and a “fee to cover overheads and commission … calculated at the rate of 5.5 percent on the actual cost of the Works”.

15 With respect to the employment of a subcontractor, cl 5(b) provides:

“5(b) The Building shall not enter into any sub-contract for the execution of the Works or any portion thereof without the consent of the Architect provided that such consent shall not be unreasonably withheld. In any case in which the Architect refuses to consent to a sub-contract which the Builder is desirous of entering into the Architect may by written notice require the Builder to enter into such sub-contract as the Architect shall nominate and in this event the Builder shall subject to the provisions of clause 6 hereof enter into such sub-contract accordingly.”

16 As we have indicated, the referees made a positive finding of fact that, by reason of the conduct of the Architect referred to cl 5(b) and of the principal of CPC, consent had been given to a subcontract between Bellevarde and Cutcross, albeit in circumstances in which neither CPC nor the Architect knew of the relationship between Bellevarde and Cutcross.

17 Clause 14 identifies the meaning of the words “actual cost of the Works” and, relevantly, provides:

“14 The actual cost of the Works shall include only costs attributable to this Agreement and as follows:
(a) The actual wages or other remuneration (including allowances) paid to workmen and other employees at Award rates or such higher rates as shall be paid generally by the Builder under industry agreements or in accordance with arrangements notified by him prior to entering into this Agreement or as approved by the Architect prior to the execution of the work concerned in respect of services and labour supplied wholly in connection with the Works together with the requisite allowance or on-cost for annual leave, public holidays, sick pay, Payroll Tax, long service leave or payments and/or other benefits provided for in current Awards, Ordinances or Acts of Parliament, which on-costs as at the date of this Agreement are represented by the percentage figure shown in the Appendix.
…
(j) The cost of all authorised sub-contracts and prime cost items.”

18 As we have indicated above, until a certain point of time CPC made progress payments under the contract. Clause 16 of the contract made provision for the making of claims during the progress of the work and for payment at the completion of the works. Relevantly cl 16(c) and cl 16(e) provided:

“16(c) Unless disputed by notice in writing within ten days of issue any such certificate shall be conclusive evidence of the cost of materials, labour and other items provided by the Builder during the period under review except in the case of fraud, dishonesty or error in computation.
…
(e) Such Final Certificate shall unless disputed by notice in writing served within fourteen days of the issue of the same be conclusive evidence that the Works have been completed in accordance with the terms of this Agreement and any proper adjustments made between the Proprietor and the Builder except in the case of fraud, dishonesty or error in computation of the amounts due or defect in or omission of any of the Works not apparent at date of issue of the Final Certificate.”

The Referees’ Findings

19 The referees made findings of fact that the certificates issued in this case pursuant to cl 16 could not be relied upon and, accordingly, could not be “conclusive evidence of the cost” by reason of fraud, or alternatively dishonesty, on the part of Bellevarde. There is no challenge to this finding.

20 In this regard the referees’ report stated:

“[58] … In our opinion, upon a proper construction of the relevant clauses, once fraud giving rise to the tort of deceit is established, it will play the dual role of defeating the conclusiveness of any certificate to which it applies and entitling the party, who has established fraud, to damages and, to that extent, rectification of the certificate. Although the parties were asked specifically about the effect of removing the conclusiveness of the certificates, they did not suggest that it should be viewed other than as amending, if that was held to be appropriate, the amounts payable to Cutcross representing the difference between the cost of labour to it and the amount it charged Bellevarde.”

21 By reason of the relationship between Bellevarde and Cutcross the referees went on to make a finding that:

“[75] … the profit being made allowed for an increase of the capped profit margin to which Bellevarde was entitled under the Contract …”

22 In that context the referees accepted a submission made on behalf of CPC that:

“[75] … Cutcross was not a genuine sub-contractor falling within Clause 14(j), but, rather, a company interposed to increase the ‘plus’, i.e. the profit margin.”

23 On that basis the referees concluded:

“[75] … The ‘plus’ Bellevarde or, perhaps more accurately the Fielding Group was obtaining was not only the agreed capped profit margin, but also the profit generated by Cutcross and, therefore, it exceeded that to which Bellevarde, which received the ‘uplift’ in the first instance, was entitled. It was, therefore, in our opinion, not an amount to which Bellevarde was contractually (or indeed in any other way) entitled.”

24 With respect to the authorised contract proposition the referees set out cl 14(j) and added:

“[111] Accordingly, Bellevarde was entitled to recover the ‘ cost of all authorised sub-contracts’. In relation to the labour sub-contracted to Cutcross, on our analysis, this cost was to be determined by reference to the actual cost to the interposed company, Cutcross, and not to the inflated figure charged by Cutcross to Bellevarde.”

25 Accordingly, the referees interpreted the word “cost” in cl 14(j) to mean the “cost” incurred, as a matter of substance not form, by Bellevarde pursuant to invoices of an “authorised subcontractor”. On this basis there is no inconsistency between the finding that Cutcross was an authorised subcontractor and the finding that the recovery by Bellevarde should be restricted to Cutcross’ costs, not to its invoices including the uplift.

26 The referees also made it clear that the conduct complained of was in breach of the representation that the contract would be carried out in good faith and, indeed, even in the absence of any term to that effect, that was the expectation for contracting parties. In this regard the referees held:

“[83] … Mr Fielding organized the affairs of Bellevarde and Cutcross in such a way that the uplift in labour costs by Cutcross to Bellevarde would be passed on to CPC, paid by it to Bellevarde and by Bellevarde to Cutcross and, for the reasons we have given, increase the capped profit margin by providing a greater profit than that for which the Contract provided. In the absence of any contrary explanation from Mr Molyneux, that is the antithesis of good faith under a cost plus contract.
[84] … The representation was that the Contract would be carried out in good faith at a time when Mr Fielding must have been aware, and we infer was aware, that labour would be employed through Cutcross with all the consequences to which we have referred and that, in those circumstances, the price being passed on to CPC would exceed the price, which CPC was obliged to pay by way of the capped profit margin.”

The Interpretation of cl 14

27 In our opinion, the referees correctly interpreted the contract. The chapeau to cl 14 states that “the actual cost to works” will include “only costs attributable to this Agreement” and cl 14 proceeds to identify, in successive subclauses, what such costs will be. However, the phrase “only costs attributable to this Agreement” assists in the interpretation of the word “costs” in cl 14(j), as not extending to profit mark ups under authorised subcontracts which were not at arm’s length.

28 Furthermore, as the referees emphasised on a number of occasions in their report, there is an inconsistency between the cap upon the profit which Bellevarde was entitled to make pursuant to the contract and the inclusion of a profit component to one of its related corporations pursuant to an authorised subcontract.

29 Finally, there is a tension between Bellevarde’s submission and the exception for “fraud, dishonesty or error in computation” in the conclusive evidence provisions for progress payments and final payments in cl 16(c) and cl 16(e). Plainly, the contract envisages that monies received fraudulently or dishonestly, or by means of an error in computation, are not recoverable pursuant to the contract. Although cl 16(c) and cl 16(e) refer only to the conclusive evidential effect of the certificate, they are based on the proposition that monies do not fall to be due and payable under the contract if incurred in any such manner.

30 Before the referees and before Einstein J Bellevarde sought to restrict the scope of cl 16(c) and cl 16(e) solely to fraud, dishonesty or error in computation related to the preparation and presentation of a relevant certificate. However, that case was dismissed below and is not pressed here. Accordingly, the fraud and dishonesty exception applies with respect to the concept of “the actual cost of the Works” as defined to include “only costs attributable to this Agreement”.

31 In our opinion, the mark up to Cutcross was not a “cost” attributable only to this agreement and was not a “cost” of an “authorised subcontract” within s 14(j).

Causation and Computation of Loss

32 In our opinion, it was open to the referees to determine that, for the purposes of the tort of deceit or the statutory breach, CPC had suffered loss, namely that it had made payments which it was not obliged to make under the contract. Although, as we have indicated, this is not a breach of contract case, nevertheless loss incurred pursuant to a contract can be, and is in the present case, a kind of loss that flows from the breach of duty, whether in tort or in statute.

33 Furthermore, in the present case computation of those damages in terms of the amount of overpayment was an appropriate estimate. Indeed, this approach does not appear to have been challenged until the appeal.

34 In written submissions Bellevarde suggested that the analysis of causation of loss required CPC to be placed in the hypothetical position under the contract where the Cutcross invoices were submitted and, if objected to, had to be ruled upon by the Architect pursuant to cl 16 leading to a conclusive certificate. It submitted that there was no evidence as to what the architect would have done. No doubt this was one way of establishing loss occasioned by reliance on the representations. It was not the only way.

35 The referees set out at [23]-[26], and clearly accepted, evidence by Mr Molyneux, the relevant officer of CPC, that CPC would never have agreed to pay the Cutcross profit or uplift. As they put it on one occasion:

“[24] … Mr Molyneux made [it] clear that he would have rejected a secret profit, being one over and above that provided by the contract.”

36 The referees made the further express finding that CPC would have paid “on costs” of labour, but:

“[26] … Mr Molyneux was not including or contemplating as ‘on costs’ anything above the actual costs of labour, as we have described them, and that it certainly was not including any form of secret profit or other payment to which Bellevarde was not contractually entitled or which CPC was not contractually obliged to pay …”

37 The referees made further findings on causation as follows:

“[71] In the result, we are of the opinion that Mr Fielding’s statements of his trustworthiness; of his books being always open for checking; and of his hiding nothing were each wilfully false misrepresentations and that they were made with the intention that Mr Molyneux, on behalf of CPC, would rely upon them and, induced thereby, would pay the amounts invoiced by Bellevarde to CPC, albeit supported by invoices from Cutcross, without being aware that there was an additional profit being made by interposing Cutcross. These matters have been proved to the necessary degree required by Briginshaw v Briginshaw [(1938) 60 CLR 336] . ”

38 Accordingly, the loss identified by the referees, which occurred by reason of reliance on the misrepresentations, consisted in the making of payments which, on the findings of fact by the referees, would not have been made.

39 Furthermore, when dealing with a submission put to the referees by counsel then appearing for Bellevarde, to the effect that the Cutcross charges were reasonable and therefore could not be recovered on a quantum merit basis, the referees said:

“[78] … If Bellevarde had employed an arms-length sub-contractor, or engaged the same sub-contractor, as had been engaged through Cutcross, there could have been no complaint. It was Cutcross’ interposition which added to the costs, and Mr Fielding’s failure, notwithstanding his assertion that he hid nothing, to disclose, consistently with his hiding nothing, that by that strategy the capped profit margin under the Contract was increased. Even though the charges may have been ‘much the same’, with which we do not necessarily agree, if Bellevarde had sub-contracted with the workers, CPC would have been paying to have the work carried out conformably with the Contract and not by making the uplift payments adding to the contractually stipulated capped profit margin.”

40 In conclusion, the referees affirmed their finding of causation and quantification when they said:

“[87] In our opinion, and not overlooking in any way the onus of proof carried by CPC in establishing a case of fraud, we are satisfied that the statements made by Mr Fielding were actionable misrepresentations. They had the consequence of causing CPC, through Mr Molyneux, to rely on them and, in reliance on them it was induced to pay more than it should have paid.”

41 On the measure of damages the referees concluded:

“[97] We found above that, once CPC established fraud, it was entitled to damages and that these damages should be assessed by calculating the difference between the amount Cutcross charged Bellevarde for day labour and the amount Cutcross paid for this labour.”

42 There is no challenge to the findings of fact that CPC acted in reliance on the misrepresentations by making the progress payments in an amount in excess of what they should otherwise have paid. Nor is there any challenge to the findings referred to at [35]-[36] above that transforms this “should” into a “would”. In our opinion, on this basis, it was open to, indeed correct for, the referees to determine that this led to an actual loss which could be computed in the amount assessed.

43 The relevant comparison is between what actually happened and what would have happened in the absence of the misrepresentations. That is how damages were computed. In our opinion, it was open, indeed correct, for the referees to do so. There was no reason to proceed on the basis of the evidence that Cutcross’ charges were reasonable. This evidence was not pertinent in the light of the finding of fact that CPC would never have made the payments insofar as they consisted of the Cutcross profit. Bellevarde adduced no evidence that, if CPC had refused to make that part of the payment, they would or could have received more.

44 The appeal should be dismissed with costs.

A New Case on Appeal

45 CPC contends, in the alternative, that the appellant’s contentions in this Court were not raised before the referees or before Einstein J. This alternative case raises some important issues of principle which the Court should determine as the appellant, in view of the nature of the findings made, could well attempt to take the matter further.

46 In stating the principles to be applied in the adoption of the referees’ report, Einstein J recited the helpful statement of the principles by McDougall J in Chocolate Factory Apartments Pty Ltd v Westpoint Finance Pty Ltd [2005] NSWSC 784 at [7]. There, McDougall J sought to distill that which had been said by Gleeson CJ in Super Pty Ltd v SJP Formwork (Aust) Pty Ltd (1992) 29 NSWLR 549 at 562-564 (with whose judgment Mahoney JA and Clarke JA agreed, Mahoney JA adding comments of his own) and by Cole J in Chloride Batteries Australia Ltd v Glendale Chemical Products Pty Ltd (1988) 17 NSWLR 60, White Constructions (NT) Pty Ltd v Commonwealth of Australia (1990) 7 BCL 193 and Foxman Holdings Pty Ltd v NMBE Pty Ltd (1994) 38 NSWLR 615.

47 No issue was taken with this expression of the approach to the task of the primary judge. That is not said with any unstated reservation or criticism of how McDougall J expressed the matter. We would only add that the approach of a judge faced with the requested adoption of a referee’s report should be determined according to the nature of the issues and the circumstances of the case.

48 Highly relevant to that general overall consideration is the historical context of the rules concerning references, the recognition of the reference as a special form of hearing or trial (though not one leading, without more, to a verdict or judgment) over which the Court has a power of review, and the recognition of the place of references within the wider modern framework of alternative dispute resolution: see the discussion of these matters in the reasons for judgment of Gleeson CJ in Super v SJP Formwork at 558-564. The history of references under an order of the Court in the disposition of justiciable controversies that is the subject of discussion by Stephen J and Jacobs J in Buckley v Bennell Design & Constructions Pty Limited (1978) 140 CLR 1 at 15-22 and 28-38, respectively, by Gleeson CJ in Super v SPJ Formwork and by Brooking J in Nicholls v Stamer [1980] VR 479 illuminates the wide general power available to the Court in the review and adoption process.

49 The controversy between the parties here was one which included a claim for relief under ss 82 and 87 of the Trade Practices Act 1974 (Cth), consequential upon alleged contraventions of that Act. The relief recommended by the referees and adopted by the Court was limited to damages for deceit and damages under s 82 of the Trade Practices Act. Thus, the matter (that is the whole controversy) was one which arose under a law of the Parliament for the purposes of s 76(ii) of the Australian Constitution. Accordingly, the matter was in federal jurisdiction invested in the Court under s 39(2) of the Judiciary Act 1903 (Cth). No argument was put which gave any occasion to consider what influence, if any, the federal character of the matter may have on the proper approach to review and adoption: cf Gleeson CJ in Super v SJP Formwork at 560.

50 The nature of the reference as a court supervised special form of trial or hearing, finding its place within the framework of judicially controlled alternative dispute resolution, is important for two further aspects of the matter.

51 The first arises from the complaint made by the CPC that the way Bellevarde were framing their arguments on appeal went beyond what had been put to the referees. Coulton v Holcombe (1986) 162 CLR 1 at 7-8 and Suttor v Gundowda Pty Ltd (1950) 81 CLR 418 at 438 were relied upon. To put the matter thus, with respect, reflects a misunderstanding of the task of this Court on appeal. This is an appeal from orders of the Court made by Einstein J, adopting the recommendations of the referees. As the form of the rules and the authorities to which we have referred make clear, Einstein J was exercising a power in the nature of a discretion. It is the approach taken by his Honour and any asserted error therein that is the subject of the appeal, not the referees’ report itself.

52 That said, there is significant force in the submission of CPC that the way the matter was put on appeal was not agitated before the referees. Bellevarde asserted, as discussed above, that the referees had failed to address the correct legal test for the tort of deceit under s 82 of the Trade Practices Act. (It is to be noted that the two bases of liability were assimilated in this respect, a proposition which is doubtful, at least expressed at such a level of generality.)

53 In the context of the correct approach to assessing loss, the referees at [58] of their report said, to repeat:

“Although the parties were asked specifically about the effect of removing the conclusiveness of the certificates, they did not suggest that it should be viewed other than as amending, if that was held to be appropriate, the amounts payable to Cutcross representing the difference between the cost of labour to it and the amount it charged Bellevarde.”

54 This can be seen as the referees’ understanding as to how the matter was approached before them by the parties. There were passages in the transcript of the reference which can be seen to support the proposition that Bellevarde put loss in issue, and that an approach based on quantum meruit was discussed. None of these references, however, squarely contradicted the understanding of the referees, reflected by the above passage, which appeared to govern their approach to the calculation of damages.

55 It is important in this context to state how parties should approach the conduct of references. It is for the parties to make clear what their cases are. In appropriate cases, references are a tool for the convenient and expeditious conduct and despatch of controversies. Sometimes in technical matters the referee will not be legally trained. Here, the referees were a highly experienced former commercial judge of this Court and an architect. To effectuate the administration of justice in accordance with the overriding purpose in s 56 of the Civil Procedure Act 2005, and to make efficient use of referees, parties are obliged to express with clarity the issues that they wish to ventilate and upon which the referee will report.

56 The nature of the review by the Court on adoption makes it imperative that referees deal with all matters referred to them. This makes it imperative, in turn, that parties express their cases clearly and without equivocation, ambiguity or opacity. If a party complains about how a referee has dealt with the issues on the reference, it may be difficult to persuade a judge that a referee has not dealt with an issue, or not dealt with it adequately, if that issue had not been placed before the referee with the requisite clarity.

57 Here, the passages of transcript referred to by Bellevarde do not demonstrate that the referees misunderstood any aspect of the parties’ cases covering the consequences of the fraud and the setting aside of the conclusiveness of the certificates. Although loss was put in issue in general terms, the submissions in this Court turning on the absence of evidence or of particular findings were not the way in which that was done.

58 Once the certificates were set aside, the conclusion was clear that more had been paid by CPC than, in the circumstances, was legally owed. Further, the passages of the transcript do not support the proposition that how the matter was put on appeal was how the matter was argued before the referees. There was no clear issue taken by Bellevarde at the reference that contradicted the referees’ approach to loss and damages once the certificates were set aside. A party resisting the adoption of a report cannot be permitted to do so on the basis of an absence of evidence or of factual findings based on a view of the case for which it did not contend before the referees.

59 The second matter that arises from the nature of the reference is the form of power exercised by the Court at the time of adoption. It is a power in the nature of a discretion that is exercised. Thus, on appeal, this Court is limited to the correction of error exhibited by the approach of the primary judge constrained by principles of the kind expressed in House v The King (1936) 55 CLR 499. This is of importance here because it is clear from the reasons of the primary judge, in particular [42] and [43], that no submission was put to him that the referees had somehow misunderstood the issues as to damages in the reference and that what they said in [58] of their reasons cited above reflected such a misunderstanding.

60 In other words, not only was the argument on appeal not clearly put (if put at all) to the referees, but also it was not squarely placed before the primary judge. In such circumstances, in the absence of some deficiency in the report the subject of the adoption application of a character to which the primary judge would be obliged to have regard, irrespective of the submissions of the parties (which is not the position here), one cannot say that the exercise of the power miscarried.

61 On this alternative basis, the appeal should also be dismissed.

Order

62 The order we propose is:

1 Appeal dismissed with costs.

63 CAMPBELL JA: I agree with Spigelman CJ and Allsop P.

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