Cardno BSD Pty Ltd v Water Corporation [No 2] - [2011] WASCA 161

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

TITLE OF COURT : THE COURT OF APPEAL (WA)

CITATION: CARDNO BSD PTY LTD -v- WATER CORPORATION [No 2] [2011] WASCA 161

CORAM: MARTIN CJ
NEWNES JA
MURPHY JA

HEARD: 20 JUNE 2011

DELIVERED : 2 AUGUST 2011

FILE NO/S: CACV 63 of 2010
CACV 115 of 2010

BETWEEN: CARDNO BSD PTY LTD
Appellant
AND
WATER CORPORATION
Respondent

ON APPEAL FROM:
Jurisdiction              :  DISTRICT COURT OF WESTERN AUSTRALIA
Coram  :SLEIGHT DCJ
Citation  :WATER CORPORATION -v- CARDNO BSD PTY LTD [2010] WADC 87
File No  :CIV 2735 of 2007

Catchwords:

Contract law - Design engineering - Admission of breach of duty - Issue of which contract applies - Construction of exclusion clauses - Leave to appeal from costs order of District Court judge - Exercise of discretion to award costs - Assessment of damages - Impact of salvage value of damaged pipes on assessment - Discretion to award interest on costs incurred before commencement of proceedings

Legislation:

District Court of Western Australia Act 1969 (WA), s 79(1)(a), s 79(2)
Supreme Court Act 1935 (WA), s 32, s 60(1)(e)

Result:

CACV 63 of 2010:
Appeal dismissed
Cross-appeal allowed
Notice of contention allowed

CACV 115 of 2010:
Appeal dismissed

Category: B

Representation:

Counsel:

Appellant: Mr A P Hershowitz & Mr R L Marando
Respondent: Mr R D Shaw

Solicitors:

Appellant: Jackson McDonald
Respondent: Lavan Legal

Case(s) referred to in judgment(s):

Anderson v Littlemore [1985] WAR 157
British Westinghouse Electric and Manufacturing Co Ltd v Underground Railways Co of London Ltd [1912] AC 673
Forbes v Git [1922] 1 AC 256
Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1
Gronow v Gronow [1979] HCA 63; (1979) 144 CLR 513
Haines v Bendall [1991] HCA 15; (1991) 172 CLR 60
Mallet v Mallet [1984] HCA 21; (1984) 156 CLR 605
Monteleone v Owners of the Old Soap Factory [2007] WASCA 79
Tenbohmer v Eden (1992) 6 WAR 366
Water Corporation v Cardno BSD Pty Ltd [2010] WADC 87

MARTIN CJ: I agree with Murphy JA for the reasons he gives, that all grounds of appeal should be dismissed, and that both grounds of cross‑appeal should be allowed, although the respondent's success on ground 1 of the cross‑appeal should be negated by upholding the appellant's notice of contention. The result of those conclusions is that the only variation to the judgment below will be to increase the amount of interest awarded to the Water Corporation.
I do, however, wish to add a few short observations of my own.

The appeals on liability

All grounds of appeal which challenged the conclusion of the trial judge to the effect that the Water Corporation was entitled to damages for breach of a duty of care at common law or in contract, without any upper limit imposed by the contract between the parties, depended upon the success of ground 1. Although ground 1 is not elegantly expressed, it became clear during argument that its essence was the assertion that the rights of the parties were governed by the terms of what was called the 'Panel A contract' rather than the 'Panel B contract'.
The argument advanced in support of the ground focused critically upon the time at which the relevant design work was done. Argument focused that way misconceived the true question. The true question required the identification of the applicable contract by reference to the acts or omissions of Cardno BSD Pty Ltd (Cardno) which caused the Water Corporation to suffer loss and damage. The Water Corporation suffered loss and damage as a consequence of installing overflow pipes in accordance with specifications contained in drawings provided by Cardno, when those pipes were inadequate for the purpose for which they were required.
Put another way, the Water Corporation suffered loss and damage by reason of relying upon, and acting in accordance with, specifications which were contained within the final drawings issued by Cardno for the purposes of construction. The act of Cardno which caused the Water Corporation to suffer loss and damage was the issuing of drawings which both parties intended would be used for construction purposes. The time at which Cardno first made the mistake which was embodied in the specifications which were issued as part of the final drawings was irrelevant.
The final drawings which were issued by Cardno with the intention and understanding that they would be relied upon by the Water Corporation for construction purposes (as in fact they were), were issued in December 2002. They were issued pursuant to a contract entered into by the parties through the exchange of correspondence in September 2002, the relevant terms of which are set out in the reasons of Murphy JA. The letter of 6 August 2002 from the Water Corporation invited Cardno to submit an offer to complete the work required to finalise the design and drawings. The offer which Cardno provided in response to that invitation by its letter of 5 September 2002 included, expressly, the assertion that the scope of works would 'involve finalising the design drawings'. That offer was accepted by the Water Corporation in its letter of 11 September 2002 giving rise to the relevant contract.
During argument on the appeal, counsel for Cardno accepted the obvious proposition that an obligation to finalise drawings which are to be relied upon for the purposes of construction, includes an obligation to check those drawings to ensure that they were adequate and did not contain errors. During the trial, Cardno accepted that the drawings which it issued were inadequate and were negligently prepared. It follows that Cardno was in breach of the obligations imposed by the contract entered into in September 2002 when it issued the final drawings to the Water Corporation in December 2002. The contract entered into in September 2002 plainly incorporated the terms of the 'Panel B contract'.
The failure by Cardno to recognise this relatively simple and straightforward process of reasoning lies at the heart of the grounds of appeal on the subject of liability.

The appeal on costs

I agree with Murphy JA that it is regrettable that the legislature has not heeded previous calls from this court to resolve the anomaly by which appeals can be brought to this court as of right from decisions of the District Court on costs, whereas such appeals can only be brought from a member of this court with leave.
Parties incurring costs and deploying the limited resources of the court to hear argument about reopening orders that have been made with respect to the allocation of costs previously incurred is a classic example of the law of diminishing returns. It is a process which should be actively discouraged. In the case of appeals from the Supreme Court, the requirement for the grant of leave provides a mechanism by which the court can actively discourage the dissipation of further costs in what will very often prove to be a futile attempt to challenge a discretionary judgment relating to costs. However, in the case of appeals from the

District Court, there is no mechanism available to the court to prevent such issues being fully argued.

This case provides a good example of the desirability of providing such a mechanism. The notice of appeal contains more grounds relating to the question of costs than it does in relation to the issue of liability. Further, the grounds of appeal relating to costs were brought in a context in which Cardno admitted during the trial (but not before) that it had breached its common law and contractual duties of care by negligently issuing drawings which were inadequate. However, it sought to resist the obligation to pay damages to the Water Corporation as a consequence of its admitted negligence by relying upon exclusion clauses which it asserted were contained in a contract which plainly preceded the contract pursuant to which the final drawings were issued by Cardno and in which the exclusion clauses were in any event plainly inconsistent with the standard conditions upon which the Water Corporation insisted, and which the parties had agreed were dominant. This is a singularly inauspicious context in which to challenge the discretionary allocation of costs to the Water Corporation by the trial judge. If Cardno had required leave to pursue its grounds of appeal with respect to costs, I would have refused leave.
NEWNES JA: I agree with Murphy JA and with the additional observations of Martin CJ.
MURPHY JA:

Introduction

These appeals concern a matter in the District Court in which the appellant (the defendant in the District Court action) was ordered to pay the respondent (the plaintiff in the District Court action) damages for breach of contract and negligence. The learned primary judge's reasons are in Water Corporation v Cardno BSD Pty Ltd [2010] WADC 87.
In the first appeal (CACV 63 of 2010), the appellant (Cardno) appeals against the judge's findings regarding liability. The respondent (the Water Corporation) also cross‑appeals on quantum, in relation to which there is a notice of contention. In the second appeal (CACV 115 of 2010), Cardno appeals against costs orders made against it.
In summary, from 1995 the Water Corporation was engaged in a large public infrastructure project in providing deep sewerage to

approximately 100,000 sites in metropolitan Perth and in parts of rural Western Australia. The project included the provision of sewerage to an area called Eaton, east of Bunbury. The sewerage works in question involved a gravity‑fed network of sewage in which the sewage was transmitted to a pumping station. From the pumping station, it was pumped to a sewage treatment plant for treatment. In order to address the prospect of a failure occurring at the pumping station, provision was also made for a series of concrete overflow pipes to take the sewage into storage tanks for holding.

Cardno was engaged as a design engineer to perform a variety of tasks in relation to the Eaton project. In late December 2002 and early January 2003, it submitted design drawings to the Water Corporation which specified 'Class 2' overflow pipes. Those overflow pipes were defective. They cracked and went out of shape, and had to be replaced with more robust 'Class 4' overflow pipes. The Water Corporation sued Cardno for the costs associated with their replacement.
Cardno admitted, during the course of the trial, that it was in breach of contract and negligent in specifying, in its final drawings, Class 2 overflow pipes. The final drawings were sent in A3 form on 19 December 2002 and re‑sent in A1 form, and signed, on 17 January 2003 - collectively the 'defective final drawings'.
Cardno submitted, however, that by its contract with the Water Corporation, it was not liable to be sued because, it said, there was a contractual provision which, in effect, precluded suit after 12 months, and the Water Corporation had not sued within 12 months. Alternatively, it said that its liability was limited under the contract to $100,000 (I will refer to these alleged contractual provisions as 'exclusion clauses').
The contractual framework within which the question of the application of the exclusion clauses arose involved a consideration of what was called the 'Panel A contract' and the 'Panel B contract'. It was common ground that Cardno had, at various times, been engaged to provide certain services under both the Panel A contract and the Panel B contract. The Panel A contract contained (Cardno alleged) the exclusion clauses. The Panel B contract did not. Cardno's principal contention was that the Panel A contract (either in its original form or as varied) applied to its provision of the defective final drawings and that, accordingly, the exclusion clauses applied. The Water Corporation alleged that even if the Panel A contract applied, on its proper construction the exclusion clauses did not form part of the Panel A contract.
The principal issues before the judge on liability were, relevantly:
(a)whether the Panel A contract (containing the alleged exclusion clauses) applied, or whether the Panel B contract applied (which, it was agreed, did not contain the exclusion clauses);
(b)if the Panel A contract applied, did it, nevertheless, on its proper construction contain the exclusion clauses, or had they themselves been excluded from the Panel A contract by the Water Corporation's general conditions?
(c)even if the Panel A contract, in its original form, did not include the exclusion clauses, had the parties subsequently varied the Panel A contract so that, as varied, it incorporated the exclusion clauses?
The judge found that the Panel B contract applied, so that the exclusion clauses relied on by Cardno were not applicable. The judge also found that, in any event, the Panel A contract, properly construed, did not contain the exclusion clauses, and that it was not subsequently varied to incorporate the exclusion clauses.
For the reasons which follow, I would dismiss the appeals, and allow both grounds of the cross‑appeal, but also allow the notice of contention.

The consolidated grounds of appeal - overview

By ground 1, Cardno contends that the judge erred in finding that the defective final drawings were supplied pursuant to the Panel B contract and not the Panel A contract.
By ground 2, Cardno contends, in effect, that the judge erred in finding that the Panel A contract did not, on its proper construction, contain the exclusion clauses.
By ground 3, Cardno contends, in effect, that even if the exclusion clauses did not form part of the Panel A contract originally, the judge erred in not finding that the parties subsequently varied the Panel A contract to include them.
By ground 4, Cardno contends, in effect, that in consequence of the errors alleged in grounds 2 and/or 3, the judge erred in failing to find that Cardno was not liable at all, or alternatively was liable for damages limited to $100,000.
Grounds 5 to 9 deal with costs, and I will refer to them in greater detail later.
Before addressing the grounds of appeal concerning liability, it is convenient to note the following findings of fact.

The primary judge's findings of fact

The stages of the project (reasons [23])

The judge found that the stages of the Eaton project comprised the following ([23]):
Pursuant to the Panel A contractual arrangement the Water Corporation engaged Cardno BSD on a number of separate occasions to carry out works relating to the Eaton project. This staggered engagement was partly due to various delays in the project, but also because in any event the project is carried out in stages. The stages of the project can be summarised as follows:
1.Preliminary plans are prepared which set out the layout of the sewerage route (the reticulation route) and the location of the pumping station.
2.A site inspection is conducted which involves walking through the reticulation route. This site inspection is conducted in order to observe any physical obstructions to the proposed route of the sewerage works. The design and layout plans are then altered to overcome any such obstructions.
3.A formalities plan is prepared. The formalities plan shows the sewerage route and the location of the pumping station. This plan is issued to local authorities, utilities and the general public for comment.
4.After consideration of any objections, final drawings and plans are submitted for the construction of the sewerage works and tenders are called.

The Panel A contract (reasons [20] ‑ [22])

In May 1998, the Water Corporation issued a document described as a 'Registration of Interest' which called for consulting engineers to register their interest in providing professional design services for sewer reticulation, pumping stations and pressure mains. Cardno submitted a proposal by letter dated 26 May 1998, which included, in annexure A, Cardno's 'Standard Terms of Appointment'. By letter dated 12 August 1998, the Water Corporation advised Cardno that its application had been successful and that it had been placed on a panel for the provision of engineering services relating to the sewerage contracts. The letter also stated that services were to be provided on an 'as required' basis under the provisions of a document described as the 'Water Corporation General Conditions of Contract, Consultancy' which was attached to the Registration of Interest document. The Panel A contract was constituted by the Registration of Interest document, Cardno's proposal dated 26 May 1998 and the Water Corporation's letter of acceptance dated 12 August 1998.
Although not mentioned by the judge, the Registration of Interest document referred to services under the Panel A contract being anticipated to be required for a period of three years commencing July 1998, ie, to July 2001 (GB 3).

The engagements pursuant to the Panel A contract

It was common ground, and the judge found, that pursuant to the Panel A contract, Cardno was engaged in about October 1999, June 2001 and March/April 2002 to provide certain services.
The judge found (reasons [55] points 1 to 7) as follows:
1.The Water Corporation initially engaged Cardno BSD to prepare design plans for the pumping station in September 1999. Prior to September 1999 the engagement of Cardno BSD by the Water Corporation related to preliminary plans and drawings for the Eaton project but did not include design drawings for the pumping station.
2.As a result of the engagement in September 1999, Cardno BSD prepared unsigned design drawings relating to the pumping station. The unsigned design drawings were dated the 10 April 2000 and forwarded to the Water Corporation. These design drawings were prepared pursuant to the Panel A contract. Completion of these design drawings is confirmed by Cardno BSD issuing an invoice for the full contractual price of the September 1999 engagement.
3.The design drawings for the pumping station prepared pursuant to the September 1999 engagement were not final drawings. This is because final drawings could not be completed as other stages of the project, including the formalities stage, needed to be completed before final drawings could be submitted.
4.After completion of the September 1999 engagement, the Eaton project went into abeyance until about June 2001. In June 2001 the Water Corporation engaged Cardno BSD to prepare amended design drawings to bring them up to date with the latest criteria of the Water Corporation. Cardno BSD invoiced the Water Corporation for this work on 1 January 2002 from which I infer that by this date the drawings had been revised.
5.Sometime between January 2002 and May 2002 the Water Corporation further commissioned Cardno BSD to revise the design drawings of the pumping station to comply with new standard drawings which included the amended example drawing referred to earlier in this decision.
6.The revised design drawings were completed by Cardno BSD by 2 June 2002 when Cardno BSD issued an invoice for all of the works required as a result of revising the design drawings. The defendant contends that I should find that Mr Greay signed these final drawings sometime before the issue of this invoice. However, Mr Greay's evidence was that he could not say when he signed the design drawings. Although I conclude that the drawings had been revised, I am unable to reach any conclusion as to when Mr Greay signed his approval.
7.The formalities plan was distributed in or about April 2002. The formalities stage closed on 17 May 2002. None of the objections required any amendment to the design drawings of the pumping station.
In relation to the October 1999 engagement, the judge said (reasons [29]):
It is common ground between the parties that this engagement included instruction for Cardno BSD to prepare design drawings for the pumping station which included the design of the overflow pipes.

In relation to the drawings submitted by Cardno prior to the September 2002 engagement, the judge said (reasons [58] and [60] point 1):
My findings are that prior to the September 2002 engagement the only design drawings relating to the pumping station that had been submitted by Cardno BSD were preliminary drawings unsigned. These were not final drawings as final drawings were not required until the formalities stage had been completed.
...
Up until the final engagement in September 2002 there was no requirement to submit final design drawings as the formalities stage had not been completed. Accordingly, the engagements prior to the final engagement in September 2002 were preliminary stages only to the ultimate obligation which might arise by a commission to present final drawings after the formalities stage. It is clear on the evidence that each of these preliminary stages was treated as an independent and complete contract consistent with the understanding that Cardno BSD would be engaged 'as required' (albeit that such engagements were part of a progression towards an ultimate result). This explains why each stage involved Cardno BSD submitting a separate fee proposal and the Water Corporation sending a letter of acceptance and engagement. It also explains why each separate engagement was invoiced and paid for separately. The evidence of witnesses called by Cardno BSD was that an invoice was not issued until all of the work under an engagement had been completed.

The September 2002 engagement (reasons [46] ‑ [50])

Although the judge set out extracts of the correspondence constituting the September 2002 engagement, it is convenient to set it out in full.
By letter dated 6 August 2002 to Cardno, the Water Corporation said:
Re: Infill Sewerage: Reticulation Areas Eaton 1H and 3C, Pumping Main and Pump Station
I refer to the Corporation's design brief for the above project dated 20th March 1998 (Reticulation Areas Eaton 1H and 3C) and your design proposal dated 30th March 1998.
The Corporation is terminating the Infill Sewerage Design Panel Contract from the 30th June 2002. BSD Consultants are required to re‑submit a Design Proposal for the above job under the [Panel B contract]. The work is to be in accordance with the original Design Brief.
The current status of the above project is that the Preliminaries to works have been advertised and closed 17th May 2002. Variations due to this process are due to be passed to you soon.
Based on the original proposal and your letter dated 1st June 2002, variations as a result of formality would be the only work required to complete this project.
Could you please confirm your current hourly rates and accept the completion of this project so the Water Corporation can re‑engage you under the terms and conditions of the [Panel B contract]. Should you wish to submit new hourly rates please have them to Kiet Pham by Wednesday 14th August 2002. (emphasis added)
Cardno's response, dated 5 September 2002, stated:
INFILL SEWERAGE
RETICULATION AREA EATON 1H AND 3C PUMPING STATION & PRESSURE MAIN
In response to your letter dated 6th August 2002, BSD Consultants would like to confirm that we are willing to undertake the completion of the design drawings for Reticulation Area Eaton 1H and 3C as part of the Panel [B] Contract. We understand that the scope of works will involve finalising the design drawings, following the completion of the formalities period.
Works will be undertaken on discounted hourly rates, as follows:
...
Thank you for confirming our agreement to complete this project ... (emphasis added)
In an undated letter, received on 11 September 2002, the Water Corporation replied, relevantly:
Re: Infill Sewerage: Reticulation Areas Eaton 1H and 3C, Pumping Main and Pump Station
Thank you for your proposal dated the 5th September 2002 to complete the outstanding work for the above project.
The Water Corporation accepts your proposal and requires BSD Consultants to proceed as per the Panel [B] Contract ...
As indicated in my letter to Mr John Kotula dated 6th August 2002, variations as a result of the Preliminaries to Works Process are the only work required to complete this project. I will organise for them to be passed to you soon. (emphasis added)
The Water Corporation's original 'design brief', dated 20 March 1998, referred to in the letter of 6 August 2002, did not, at that time, include a requirement to design the pumping station. It said, inter alia, (GB 282):
...
6.Identify the 40 L/S pumping station site within Area 3C and carry out preliminary negotiations on land matters. (You will be notified later regarding the additional design of the pumping station and pressure main). (emphasis added)
...
It also said (GB 289):
Additional design work or amendments required as a result of the formalities action will be paid for on a time basis ... (emphasis added)
In relation to what was required in relation to drawings, it said (GB 288):
Each stage of the design shall be submitted with an accompanying letter signed by the Design Engineer confirming that the design has been checked ...
Two sets of A1 size paper prints shall be submitted for each stage of the design ...
The design and drawings will not be checked by the Water Corporation. The documents will be signed and accepted as complying with overall planning but it is the Consultant's responsibility for the design to be correct and efficient. (original emphasis)

The work done after the September 2002 engagement and the provision of the final defective drawings (reasons [51] ‑ [54] and [55] point 8)

The judge found:
On 5 December 2002 Mr Greay of Cardno BSD sent an email to Mr Kiet Pham of the Water Corporation stating in part as follows:
… The pump station layout and changes from formalities have also been completed and the final drawings will be with you next week as agreed.
None of the witnesses gave any evidence that objections arising from the formalities led to changes to the design of the pumping station. The only evidence of changes arising from the formalities stage was a notation made by Mr Michelmore on the formalities plan which indicated a change in an access path to the pumping station. Mr Michelmore acknowledged this would not have impacted on the final design drawings of the pumping station.
According to the evidence of Mr Greay of Cardno BSD an A3 set of the final pumping station drawings was forwarded to the Water Corporation on 19 December 2002 and an A1 set of the drawings was sent to the Water Corporation on 17 January 2003.
The Water Corporation was invoiced by Cardno BSD for the work pursuant to the September 2002 engagement at an hourly rate as per the Panel B contract. The invoice dated 1 January 2003 described the works in the following terms:
Completion of reticulation plans and sewer pump station following formalities period. Variation undertaken as specified in letter dated the 5/9/02.
...
8.A final set of design drawings in A3 was submitted by Cardno BSD in December 2002. This was followed up by a letter dated 17 January 2003 containing a set of the drawings in A1. No final drawings had been submitted prior to these dates.

The Panel B contract

Although not directly mentioned by the judge, the Panel B contract was entered into on 27 December 2000 (GB 121). It related to the provision of engineering definition and design services for 'Minor Works' (GB 135, 145). The Water Corporation's letter of acceptance dated 27 December 2000, which formed part of the Panel B contract, provided:
The Corporation hereby advises acceptance of your offer for the above Contract.
You have been placed on the Panel for the provision of the above Services together with the following companies ...
As and when required, [we] will contact you regarding the provision of the Services ... (emphasis added)
Cardno's tender proposal (GB 136) included the following:
Having examined the Tender Document for the above named Services, I/we offer to undertake the said Services in conformity with the said Tender Document for the rates inserted in the Fee Schedule, and in accordance with the requirements of each Request for Quotation accepted by the Principal under this contract.
The services were defined in special condition 14 (GB 251 ‑ 252):
14.1Scope of Services
The Services which the Consultant is required to provide to the Principal in accordance with this Panel Contract comprise those stated in the specific Request for Quotation issued in relation to each definition and design services job (the 'job') to be executed under this contract for a Minor Works project together with such other services as may be necessary and instructed by the Principal for the completion of that job.
...
Minor Works includes those water supply, sewerage and drainage works deemed by the Principal to be low value and non complex. Examples include but are not limited to:
•Pipelines
•Small tanks
•Pumping Stations
Major Works, Water and Wastewater Treatment Plants and Dams are not included. (emphasis added)
It was admitted on the pleadings that the terms of the Panel B contract included:
(a)Cardno would provide the services with all due skill, care and diligence;
(b)Cardno would be liable for loss and damage suffered by the plaintiff as a result of a breach of contract or of any negligent act, error, omission or statement by Cardno or Cardno's employees, agents or subcontractors.

Disposition of the appeal - ground 1

Ground 1 is said to be supported by nine 'particulars', although in relation to a number of them, their meaning and effect are somewhat difficult to discern.
The first two particulars focus on the Panel A contract and its proper construction, and allege various errors by the judge in relation to those matters. In its written submissions, Cardno sought to develop the argument (par 9 of its written submissions) in these terms:
The only considerations relevant to determine which of the Panel A or B Contracts applied to the appellant's Project pump station designs are:
(a)what did the September 1999, June 2001, March 2002 and September 2002 engagements require of the parties?
(b)how did the parties satisfy those obligations?
This proposition, which is apparently central to the first two particulars relied upon in support of ground 1, cannot be accepted. Whether or not the defective final designs were issued pursuant to the Panel B contract depends, principally, upon the proper construction of the September 2002 engagement, in the context of the Panel B contract and the mutually known circumstances at the time the engagement was entered into.
Insofar as Cardno addresses the proper construction of the September 2002 engagement, it appears to do so in particulars 6 to 8 and 9. I will address particular 9 later, but I would observe, at this juncture, that particulars 6 to 8, read with particulars 1 and 2, seem to involve the contention, in effect, that the designs for the pump stations (including the overflow pipes) had been completed prior to September 2002, under the Panel A contract. It contends, in this regard, that the extent of its engagement in September 2002 was confined by a plan which had been forwarded to it by the Water Corporation on 14 November 2002 (GB 409), by which Cardno was asked expressly to illustrate the physical layout of an affected street. Cardno says that this instruction was given on the premise, which was in fact erroneous, that previous draft plans issued by Cardno had not properly recognised the layout of the street. It says, moreover, that there was no change from the earlier draft designs which had referred to the use of the Class 2 overflow pipes. For these reasons, Cardno contends that the final defective drawings were unrelated to the September 2002 engagement.
In my view, Cardno's submissions do not identify error by the judge. Whether or not Cardno was asked specifically to illustrate the layout of the street, and whether or not that illustration was unnecessary in light of earlier draft drawings, the full scope of Cardno's engagement remains to be determined by reference to the documents constituting the September 2002 engagement, properly construed.
I have emphasised relevant parts of the correspondence in [37] ‑ [42] above. It appears to me that, read as a whole, Cardno was re‑engaged under the Panel B contract to finalise the design drawings, following completion of the formalities process.
In my view, an agreement to finalise the drawings following the completion of the formalities process was, in effect, an agreement by Cardno to review the design drawings in light of any matters arising in consequence of the formalities process and to produce final drawings suitable for the purpose of the Water Corporation engaging in the construction phase of the project. The engagement, on its proper construction, was not limited to doing any design changes necessitated by the results of the formalities process, but, more broadly, to consider whether any changes were required as part of the ultimate object of producing final drawings upon which construction work could proceed. That was the scope of its engagement in September 2002 in connection with which Cardno was required to exercise reasonable care.
Insofar as the Water Corporation communicated, by its letters dated 6 August and 11 September 2002, that the only additional design work required would be work resulting from the completion of the formality stage, it was communicating its expectation as to the likely nature of the additional work. That expectation was plainly based on a mistaken belief, which remained uncorrected by Cardno, that the then existing drawings required no other revision because they had been prepared with reasonable care. The Water Corporation's subjective misapprehension, albeit one also then held by Cardno, provides no basis for limiting the scope of Cardno's obligations, objectively ascertained, under the September 2002 engagement. In agreeing to finalise the design drawings pursuant to the Panel B contract, Cardno assumed a fresh obligation to exercise reasonable care and skill in the production of the final design drawings. It breached that obligation by producing and providing to the Water Corporation the defective final drawings.
Moreover, at the hearing of this appeal, Cardno admitted, in effect, that the parties could not objectively have intended Cardno, under the September 2002 engagement, to finalise the drawings on the basis that it was at liberty to produce final signed drawings which incorporated earlier negligent design errors. As a corollary, Cardno, in effect, also admitted that the September 2002 engagement, by necessary implication, required Cardno to check its earlier drawings of the pump designs before submitting final, signed drawings to the Water Corporation. These admissions provide substantial support for the conclusion I have reached as to the proper construction and application of the September 2002 engagement.
For these reasons, the first, second, sixth, seventh and eighth particulars do not support the first ground of appeal.
By the third particular, Cardno contended that the judge erred in attributing to Cardno a submission to the effect that the time at which the Water Corporation's cause of action arose was relevant to the question of whether the defective final drawings were issued pursuant to the Panel A or B contract. At the hearing of the appeal, Cardno conceded that the judge did not make the alleged error, and abandoned the particular.
The fourth and fifth particulars relate to the formalities stage of the work. It is said, first, that the judge misconstrued the Panel A contract and the September 1999, June 2001 and March 2002 engagements, in that he failed to find that none of them 'made [Cardno's] pump station designs subject to the formalities process'. Next, it is said that he erred in fact in finding that the Cardno's pump station designs 'could not be completed until after the formalities process was complete'.
As to the former matter, in my view, it was unnecessary for the judge to have made the finding which, it is asserted, he ought to have made. It is correct to say that neither the Panel A contract, nor any of the engagements prior to September 2002, contained a term to the effect that the design work carried out under those engagements for the pump station would be subject to revision at the formalities stage. Nevertheless, as noted earlier, the real question concerns the proper construction of the September 2002 engagement. This involved finalising the design drawings, following the completion of the formalities period.
As to the alleged error of fact, the judge's actual finding was (reasons [55] point 3):
The design drawings for the pumping station prepared pursuant to the September 1999 engagement were not final drawings. This is because final drawings could not be completed as other stages of the project, including the formalities stage, needed to be completed before final drawings could be submitted.
Earlier, the judge had found (reasons [44]) that until objections are received pursuant to the formalities stage of the process, 'it cannot be excluded that a change to the design drawings of the pump station may be required'. There was no challenge to that finding. Nor could there be. His Honour drew that inference from certain evidence given by Mr Michelmore on behalf of the Water Corporation, which his Honour evidently accepted. Moreover, it is evident that final drawings were needed for the construction phase of the project, and final drawings could not be completed until after the formalities stage had been undertaken. No error is shown in the findings of fact at reasons [55] point 3.
By particular 9, Cardno alleges that the judge erred in fact and in law in finding that the September 2002 engagement 'required the appellant to re‑submit any designs to [the Water Corporation]'. This is a reference to the judge's reasons at [60] point 2:
[T]he engagement in September 2002 expressly required Cardno BSD to 're-submit' the design drawings under the Panel B contract. Although it may have been envisaged by the parties that the only alterations that were necessary to the pre‑existing drawings prepared by Cardno BSD would be as a result of any changes arising from the formalities procedure, in my view the express terms of the engagement in September 2002 pursuant to the Panel B contract to 're‑submit' design drawings established a fresh contractual and tortious duty of care to ensure that final drawings submitted to the Water Corporation pursuant to the Panel B contract did not contain flawed designs. This is consistent with a continuing obligation on a design engineer to correct results of past defects which become known (see Edelman v Boehm (1964) 26 SASR 66). (emphasis added)
I accept that the judge erred in construing the reference in the Water Corporation's letter dated 6 August 2002 to 're‑submit a design proposal' as requiring Cardno to 're‑submit design drawings'. The words 'design proposal' cannot, in my view, be read as a reference to 'design drawings'. Having regard to the terms of the letter, and in light of the mutually known history of prior engagements, the Water Corporation was inviting Cardno to submit a 'design proposal' which outlined the scope of work which it was prepared to undertake and the fees for undertaking the work. Moreover, it is evident that Cardno itself understood that to be the nature of the proposal required, bearing in mind the contents of its response dated 5 September 2002.
The references to the requirement for Cardno to 're‑submit' a design proposal, and for the Water Corporation to 're‑engage' Cardno, are to be read in the context of the original design brief dated 20 March 1998. It is evident from this document that the Water Corporation regarded the completion of drawings following the formalities process as falling within additional work or variations to the original design brief, which would ordinarily be executed under the Panel A contract. Accordingly, it evidently considered it necessary, in its letter dated 6 August 2002, to require an express undertaking by Cardno to 'accept the completion of the [Eaton] project' in pursuance of the Panel B contract, rather than pursuant to the Panel A contract (subject to the agreement of new hourly rates).

Accordingly, I accept that particular 9 identifies an error in the judge's process of reasoning. Nevertheless, for the reasons given earlier, the judge's ultimate conclusion that the Panel B contract applied to the issue of the defective final drawings, was correct.
Accordingly, the error was not material and I would dismiss ground 1 of the appeal.

Disposition of the appeal - ground 2

Clauses 14 and 15 of Cardno's Standard Terms

Cardno contends that the judge erred in law in finding that cls 14 and 15 of its Standard Terms of Appointment were excluded by the Panel A contract.
Clauses 14 and 15 of Cardno's Standard Terms provided (GB 92):
14.The maximum liability of BSD to the Client arising out of the performance or non‑performance of the services by BSD or arising out of this agreement or any other act or omission by BSD pursuant to common law or equity or any statute, the amount agreed in writing between the Client and BSD, or $100,000.00, whichever is the lesser amount.
15.BSD shall be deemed to have been discharged absolutely from all liability arising from the services or arising from any act or omission relating directly or indirectly to the services pursuant to common law or equity or by any statute, at the expiration of one year from the completion of the services or the occurrence of the act or omission from which the liability arises and the Client and any persons or entities claiming through or under the Client shall not be entitled to commence any action or claim whatsoever against BSD or any employee or agent of BSD in respect of services or acts or omissions after that date, with it being deemed the date of completion of the services is either the date the service which is the subject of an action or claim was completed, or the date of the invoice issued by BSD for that service, whichever is the earlier date.

The background

Cardno's Standard Terms were submitted to the Water Corporation in its proposal dated 26 May 1998, which responded to the Water Corporation's Registration of Interest document. As noted earlier, the Registration of Interest document, Cardno's proposal dated 26 May 1998 and the Water Corporation's letter of acceptance dated 12 August 1998, constituted the Panel A contract.
The Water Corporation's Registration of Interest document contained a section headed 'Conditions for Registration of Interest', which provided, relevantly (GB 3, 4):
1.GENERAL
...
The Water Corporation is now inviting Consulting Engineers to register interest in providing professional design services for sewer reticulation, pumping station and pressure main design.
...
2.THE RESPONSE
The selection criteria are detailed in appendix B. The submission should specifically address each of the selection criteria. Accurate evaluation of the Registration of Interest can only be completed if all the selection criteria are covered adequately.
...
4.EXAMINATION AND EVALUATION
...
Contract Award
Group A and Group B organisations will be required to sign a Head Agreement which will govern any subsequent Contracts awarded. The Head Agreement will be based on the Conditions of Contract - Consultancy Contract attached at Appendix E. (emphasis added)
I will refer to the relevant terms of Appendix E later.
The Water Corporation's Appendix A (GB 17) provided, inter alia:
Information to be Supplied
Please confirm your interest in undertaking this work including the provision of the following information:‑
...
e)Details of Professional Indemnity Insurance Cover. (emphasis added)
...
In its response to the registration of interest document, Cardno's proposal dated 26 May 1998 included the following (GB 83, 89):
1.INTRODUCTION
This submission is in response to the Tender Brief titled 'Registration of Interest for Infill Sewerage Program, Reticulation Design, Professional Services' released by the Water Corporation. BSD Consultants proposes to register an interest for the following categories as outlined in the above tender brief.
...
This submission will also outline brief details of BSD's quality assurance, professional indemnity and terms of engagement.
...
4.5.1Professional Indemnity
Details of insurances held are outlined below.
Insurer (Lead)  Commercial Union Insurance
Policy Number  06CON0242621
Limit of Liability                   $15,000,000 (emphasis added)
Cardno included as an appendix to its proposal its Standard Terms document, with a cover sheet which stated (GB 91):
Note: The Water Corporation Conditions of Contract shall prevail where any conditions clash with our Standard Terms of Appointment. (emphasis added)

The Water Corporation's Conditions of Contract

The Water Corporation's Appendix E to the Registration of Interest document, Conditions of Contract, included cls 11 and 12 (GB 65 ‑ 66):
11.INSURANCES
11.1Before performing the Services, the Consultant shall effect and maintain all insurances required by law to be effected whether by the Principal or by the Consultant and any other insurances required by the Contract, or the Principal, which insurances must be on terms and conditions acceptable to the Principal, including without limitation, the term as to the dollar limit of liability under the relevant policy.
...
11.4The Consultant shall arrange Professional Indemnity Insurance with an insurer acceptable to the Principal on terms, conditions and limits of cover approved by the Principal. The limits of cover and the interest insured are detailed in item 11 of Schedule 1. The Consultant must maintain the insurance referred to in this clause for at least 24 months following termination of the Contract.
11.5Before performing the Services and on request, the Consultant shall provide to the Principal confirmation of currency and all other evidence that the Principal may require to ensure that the insurance referred to in the preceding clauses are maintained by the Consultant ...
12.INDEMNITY
The Consultant shall indemnify and keep indemnified the Principal against any claim, action, damage, loss, liability, cost, charge, expense, outgoing or payment which the Principal suffers, incurs or is liable for in respect of any act or omission or breach of professional duty by the Consultant or the Personnel arising out of or in connection with the execution of the Services. (emphasis added)

Disposition of ground 2

In my view, Cardno's promise in cl 12 to indemnify the Water Corporation against 'any ... damage, loss ... cost ... expense ... or payment which the [Water Corporation] suffers, incurs or is liable for' means what it says. It includes damage, losses or expenses suffered or incurred by the Water Corporation, whether or not the quantum exceeds $100,000. A clause such as cl 14 of Cardno's Standard Terms, which purports to limit liability to up to $100,000, is inconsistent with this obligation and 'clashes' with it.
The obligation in cl 12 of the Water Corporation's General Conditions also required Cardno to 'keep' the Water Corporation indemnified against any losses or damage suffered. Clause 12 is to be read in the context of cl 11, which includes an obligation, under cl 11.4, on Cardno to maintain professional indemnity insurance, including for a period of at least 24 months following termination of the contract. An unqualified obligation to 'keep' the Water Corporation indemnified, in a context where the parties obviously contemplated that Cardno would maintain professional indemnity insurance for two years beyond the completion of the contract, is also inconsistent with a provision such as cl 15 of Cardno's Standard Terms, which deems any liability to have been discharged after 12 months.
Cardno relied on Forbes v Git [1922] 1 AC 256. That case involved an application of the principle that contracts are to be construed as a whole. It provides no assistance to Cardno's submission that cl 11 and cl 12 of its Standard Terms did not clash with the Water Corporation's general conditions.
I would dismiss ground 2 of the appeal.

Disposition of the appeal - grounds 3 and 4

Ground 3

By ground 3, Cardno alleges that the Panel A contract was, in any event, varied by the September 1999 engagement which, it says, reinstated its Standard Terms. As a result, Cardno says, insofar as the defective final drawings were issued pursuant to the Panel A contract, the exclusion clauses applied to limit or to exclude its liability.
In my view, this ground also cannot succeed. It cannot be said, in my view, that the September 1999 engagement effected an overall amendment to the terms of the Panel A contract by reinstating the exclusion clauses. The following considerations are relevant.
The Water Corporation's letter of 22 September 1999, informing Cardno of the stage of the project which had then been reached, outlining the further work required, and requiring a 'fee proposal', is to be read with background that the parties had agreed to the Panel A contract in 1998, and had thereby agreed that it would apply to work of the kind outlined in the Water Corporation's letter of 22 September 1999. The letter of 22 September 1999 did not invite or raise the possibility of an alteration to the terms of the Panel A contract. Also, Cardno's letter dated 7 October 1999 made no mention of a proposed alteration to the terms of the Panel A contract. It annexed a document entitled, relevantly, 'Service Brief - Civil Engineering', which specified a fee for the work and referred to '[Cardno's] Standard "Terms of Appointment" as attached'. The Standard Terms document contained the exclusion clauses. Both Cardno's proposal letter and the attached 'service brief' requested the Water Corporation to complete and return a third document, headed 'Confirmation of Appointment'. That document provided (GB 330):
CONFIRMATION OF APPOINTMENT
We, the Water Corporation, do hereby appoint BSD Consultants Pty Ltd to provide the services specified in the Service Brief (B991X.043‑DD100287.1O‑DVN) upon the terms and conditions in the Service Brief and as specified in the Standard Terms of Appointment attached to the Service Brief. (emphasis added)
Dated the day of 1999.
______________________________
Signed for and on behalf of the Client
by its duly appointed agent who represents
and warrants to BSD to have the full right,
power and authority to execute on behalf of the
Client.
The Water Corporation did not sign or return the 'Confirmation of Appointment', and thus did not execute the document which specifically called for acceptance of the 'terms and conditions ... as specified in the Standard Terms of Appointment'. Rather, it sent a letter dated 11 October 1999 in which it said that the Water Corporation 'commissions' Cardno to 'undertake the design of the project in accordance with your Service Brief ... and for the fees contained therein'. The letter made no express reference to agreeing to Cardno's standard terms.
The Water Corporation's letter of 11 October 1999 could not, in my view, objectively be understood as signifying an agreement to all of Cardno's standard terms, including the exclusion clauses, for the following reasons. First, the parties were, at the time, addressing the scope of the work and the fees for performing the work foreshadowed in the Water Corporation's letter of 22 September 1999. This was done in the context of the umbrella agreement, being the Panel A contract. The parties were not renegotiating the Panel A contract. Secondly, the principal focus of the Water Corporation's response was to 'commission' the work to be done in accordance with the service brief. This indicates that it was authorising Cardno to carry out the work detailed in the service brief in the manner and to the standard set out in the service brief. The language used is not apt, objectively, to signify an acceptance of all of the (34) terms contained in the Standard Terms of Appointment. Thirdly, even if it be assumed (contrary to the above) that the Water Corporation was signifying an acceptance of the Standard Terms, in context its acceptance could only extend to those terms dealing with fees, and not, for example, other terms such as those dealing with limitations on liability for negligently performed work. Fourthly, even if it be further assumed that the acceptance could be read as extending to an acceptance of all of the terms in the Standard Terms document, the acceptance could only be properly understood as applying to the work to be performed under the September 1999 engagement. There is nothing in the relevant correspondence to suggest that the parties were agreeing terms for the September 1999 engagement which would carry over into other, future, engagements to which the Panel A contract would apply.
Accordingly, in my view, ground 3 fails.

Ground 4

Ground 4 depends upon the success of grounds 2 and 3. Accordingly, ground 4 also fails.

Disposition of the appeal - ground 5

By ground 5, Cardno alleges that the judge erred in finding that Cardno had disputed that it had been provided with an 'amended example drawing' between January and May 2002. This ground also features, expressly and implicitly, in the particulars to ground 9.
Cardno's submissions are somewhat difficult to follow. They seem to suggest that Cardno advanced a case to the effect that it 'had been provided with amended example drawings in about March 2002' and had pleaded that case in pars 5(c)(iv) and (v) of its defence, and that the Water Corporation had resisted that case. As explained more fully in the reasons given below in relation to ground 9, Cardno's pleas in pars 5(c)(iv) and (v) of its defence (blue book 71) do not allege that it 'had been provided with amended example drawings in about March 2002'.
Moreover, as best I understand it, Cardno does not dispute at least the following findings concerning 'example drawings' in [8] ‑ [14] and [41] of the judge's reasons for judgment. In summary, the judge there found that at the start of the trial, Cardno had alleged that it was given drawings by the Water Corporation which required it to specify Class 2 pipes, and that accordingly it was not negligent or, alternatively, that the Water Corporation was guilty of contributory negligence. The Water Corporation, on the other hand, responded to the effect that the drawings provided to Cardno were given as examples of the type of information required only, and were not intended to be directory. The judge recorded, in effect, that any ambiguity as to the illustrative purpose of what he described as the 'first set' of drawings was removed by later 'amended example drawings' and that during the trial, the Water Corporation produced an 'amended example drawing' from February 2002, as a result of which Cardno withdrew its allegation that it was required to specify Class 2 pipes, and conceded that it had been in breach of its duty of care and abandoned any claim of contributory negligence.
In light of these findings, it seems to me to have been explicit, or at least necessarily implicit, that Cardno's case involved it disputing that it had been provided with amended example drawings prior to the time it issued the defective final drawings in December 2002/January 2003.
Accordingly, I would dismiss ground 5.

Disposition of the appeal - grounds 6, 7, 8 and 9

Preliminary observations

Grounds 6 to 9 deal with the trial judge's decision to award costs against Cardno. For the reasons which follow, Cardno has not demonstrated appellable error. Even if it had demonstrated error in some particular respect as alleged, this was a case in which costs properly followed the event, and I would not exercise the discretion afresh any differently.
Before dealing expressly with grounds 6 to 9, I should mention the question of leave.

The question of leave to appeal in relation to costs

At the hearing an issue emerged concerning the competency of that part of the appeal which challenges costs orders made by Sleight DCJ. It was suggested that the leave of the Court of Appeal was required under s 60(1)(e) of the Supreme Court Act 1935 (WA), which provides:
60.Restriction on appeals
(1)No appeal shall lie to the Court of Appeal ‑
…
(e)without the leave of the judge or the master or of the Court of Appeal, from the order of a judge or a master made with the consent of the parties, or as to costs only which by law are left to the discretion of the judge or the master;
I am satisfied that s 60(1)(e) does not apply to a final order of a District Court judge as to costs, and that the appeal is therefore competent without leave of the Court of Appeal or of Sleight DCJ. Section 60(1)(e) applies only to appeals from the 'order of a judge or a master'. Although the word 'judge' is not defined in the Supreme Court Act, it appears in the general interpretation provision of the Interpretation Act 1984 (WA). Section 5 provides that in every written law, unless express provision is made to the contrary or the context otherwise requires, the word 'judge' means a judge, acting judge or auxiliary judge of the Supreme Court.
The appeal from the order as to costs lies as of right under s 79(1)(a) of the District Court of Western Australia Act 1969 (WA), which reads:
79.Appeal to the Court of Appeal
(1)A party to an action or matter who is dissatisfied with ‑
(a)a final judgment, may appeal from that judgment to the Court of Appeal;
(b)a judgment that is not a final judgment or an order remitting any action or matter from one court to another, may by leave of the Court of Appeal, appeal to the Court of Appeal,
notwithstanding that the action or matter to which the final judgment or judgment relates may have been brought in the Court by consent as provided in this Act.
In Tenbohmer v Eden (1992) 6 WAR 366, 367 (Malcolm CJ), it was assumed that an order as to costs only which are left in the discretion of the District Court was a 'final judgment' for the purposes of s 79(1)(a). 'Judgment' is defined in s 6 of the District Court of Western Australia Act as including a judgment, order or other decision or determination of the Court or a District Court judge.
The court in Anderson v Littlemore [1985] WAR 157 adverted to s 79(2) of the District Court of Western Australia Act, which provides that:
(2)An appeal under this section shall be made in the same way as an appeal from a judgment or order of the Supreme Court or a judge thereof, may be made to the Court of Appeal, and in all respects the practice and procedure of the Court of Appeal in the appeal shall be the same as though the appeal were an appeal to the Court of Appeal from a judgment or order of the Supreme Court or a judge thereof.
The expression, 'practice and procedure' is defined in s 6 of the District Court of Western Australia Act:
practice and procedure includes matters relating to costs, the method of pleading, the institution, conduct, trial or hearing and adjudication in any proceeding, the attendance of witnesses, the custody on bail of accused or convicted persons and the enforcement and execution of judgments and all the jurisdiction and powers conferred and the matters prescribed, provided for, or regulated by the rules of court;
Burt CJ questioned whether s 79(2) operated so as to make s 60(1)(e) of the Supreme Court Act applicable to an order for costs which are left in the discretion of the District Court or of a District Court judge. The court construed s 60(1)(e) as it stood before it was recently amended following the establishment of the Court of Appeal. At 158, his Honour held that:
Section 60(1)(e) of the Supreme Court Act goes directly to the statutory right of appeal itself and it denies that right unless the leave of the judge making the order sought to be appealed from has been obtained. It conditions the jurisdiction of this Court to entertain the appeal. It is not of the 'way' in which the appeal is to be made. It cannot be drawn into the District Court Act so as to condition the right of appeal which is granted to a dissatisfied party by s 79(1)(a) of that Act.

I would adopt his Honour's reasoning and observe further that if the costs order had been made by a Supreme Court judge, leave of the judge or of the Court of Appeal would have been required under s 60(1)(e). In contrast, an appeal from a final costs order of a District Court judge lies as of right to the Court of Appeal. This was identified as an 'anomaly' by Malcolm CJ in Tenbohmer v Eden, who commented that it required attention by the legislature. An opportunity to cure this anomaly arose in 2004 when both the District Court of Western Australia Act and the Supreme Court Act were amended following the creation of the Court of Appeal, but, regrettably, this opportunity was not taken by the legislature. The anomaly ought, in my view, be corrected.

Ground 6

By ground 6, Cardno alleges that the judge erred in ordering costs in relation to the June 2001 engagement. Specifically, it is said that the judge erred in:
(a)not allowing Cardno its costs in respect of establishing that the June 2001 engagement was entered into in pursuance of the Panel A contract; and
(b)conversely, permitting the Water Corporation to recover costs in having contended that the Panel B contract applied to the June 2001 engagement.
Three preliminary observations should be made. First, costs were in the discretion of the judge. The principles of appellate review in relation to discretionary decisions are well known. In Gronow v Gronow [1979] HCA 63; (1979) 144 CLR 513, 534 ‑ 535, Aickin J said:
Those principles have been stated in this Court on many occasions and are not in doubt. It is sufficient to refer to such cases as House v The King, Evans v Bartlam, Storie v Storie and Lovell v Lovell. Two short passages make the position clear. In House v The King [(1936) 55 CLR 499 at 504 ‑ 505] Dixon, Evatt and McTiernan JJ said:
'The manner in which an appeal against an exercise of discretion should be determined is governed by established principles. It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred.'
In Lovell v Lovell [(1950) 81 CLR 513 at 519] Latham CJ said:
'But when the appellate tribunal is considering questions of weight it should not regard itself as being in the same position as the learned trial judge. In the absence of exclusion of relevant considerations or the admission of irrelevant considerations an appellate tribunal should not set aside an order made in the exercise of a judicial discretion (as to which see Sharp v Wakefield [[1891] AC 173 at 179]) unless the failure to give adequate weight to relevant considerations really amounts to a failure to exercise the discretion actually entrusted to the court. The words used by their Lordships in the House of Lords in this connection are not always easy to apply, but they ought not to be read as denying the long established principle (which, indeed, is expressly recognized in the cases in the House of Lords) that on an appeal from an order founded upon the exercise of a discretion the appellate tribunal has no right to substitute its discretion for the discretion entrusted to the primary tribunal.' (citations omitted)
See also Gronow v Gronow per Stephen J (519 ‑ 520) and Mason & Wilson JJ (525); Mallet v Mallet [1984] HCA 21; (1984) 156 CLR 605, 614; Monteleone v Owners of the Old Soap Factory [2007] WASCA 79 [36]
Secondly, insofar as Cardno contends that the judge did not 'properly consider' certain matters, it is in substance alleging that those matters ought to have been given greater weight than the judge afforded them. An allegation going simply to weight is not a proper ground of appeal.
Thirdly, the judge in his oral reasons concerning costs, outlined the relevant principles governing the exercise of his discretion. Cardno does not contend that the judge erred in his statement of the relevant principles.
Having made those preliminary observations, I turn to the 'particulars' in respect of ground 6. The particulars, in summary, allege that the judge failed to consider or 'properly consider' the history of the parties' amendments to their pleadings and the consequent emergence of the real issues for determination at trial.
I reject the allegation that the judge failed to consider these matters. It is apparent that, in substance, the submissions now made on appeal were put to the judge and considered by him in the court below (ts 470 ‑ 472). Even if the allegation that he failed to 'properly consider' those matters was a proper basis for the appeal, it does not assist Cardno for the reasons explained below.
Evidently, for a lengthy period between December 2007 and July 2009, the parties pleaded their respective cases on the basis that the pump station designs were commissioned pursuant to the June 2001 engagement, in accordance with the Panel B contract. During this period, Cardno, in effect, admitted that the Panel B contract applied to the defective final designs. In July 2009, leave was given to Cardno to amend its defence to deny that the Panel B contract applied. There followed in October and November 2009, admissions and amendments by the Water Corporation, with the result that it was agreed that the September 1999, June 2001 and March 2002 engagements were pursuant to the Panel A contract, and that the September 2002 engagement was in pursuance of the Panel B contract. In this way, the issues on liability were clarified for resolution at the trial.
The fact that the real issues emerged in this way in the four months up to the trial, and in the early days of the trial, is not surprising, given the complexity of the arrangements and that the parties were grappling with issues with respect to events going back to the period 1998 to 2002. This background certainly provides no decisive consideration on the question of the proper exercise of discretion in relation to the costs associated with matters in the case concerning the June 2001 engagement.
I would dismiss ground 6.

Ground 7

By ground 7, Cardno alleges, in effect, that the judge erred 'in fact and in law in failing to find' that the Water Corporation should only recover its costs in proving that the defective final drawings were finalised and re‑submitted pursuant to the September 2002 engagement, and that Cardno's Standard Terms clashed with the terms of the Panel A contract.
In its 'particulars', Cardno repeats the particulars to ground 6, and says that the judge erred:
[I]n considering, alternatively giving inappropriate weight to the consideration, that if the appellant did not defend the action the respondent would not have incurred considerable expense in taking the action to trial, when the two issues on which the respondent succeeded were not pleaded until 3, 24 and 26 November 2009.
In its written submissions, Cardno relied on the additional proposition that the Water Corporation succeeded at trial because:
[A]fter the respondent discovered (ie on 19 March 2010, being after the sixth trial day) and tendered (ie on 23 March 2010, being the eighth trial day) exhibit 326, the appellant conceded that it was negligent and in breach of its contractual duties.
It may be noted, at the outset, that it is apparent from the judge's oral reasons of 22 October 2010 (ts 472) that the Water Corporation was ordered to pay the costs of its application on 24 November 2009 to amend its pleadings and to pay the costs incurred by Cardno and thrown away by reason of the amendments, and to pay Cardno's costs of any consequential amendments.
Further, to the extent that Cardno relies on the same matters it relies on with respect to ground 6, for the reasons given above, these matters do not demonstrate error by the judge.
The circumstances of Cardno's admission of liability are expressly the subject of the ninth ground of appeal. For the reasons given in relation to ground 9, this matter does not assist Cardno either.
I would dismiss ground 7.

Ground 8

By ground 8, Cardno alleges that the judge 'erred in fact and law in failing to order [the Water Corporation] to pay [Cardno's] costs of refreshers to prepare for the recommencement of the trial on 22 March 2010'.
The first two 'particulars' allege, in effect, that the judge erred in finding that the applications for leave to amend resulted in adjournments for a short period and did not cause the trial to extend beyond the original sitting dates. The third 'particular' says that the judge erred 'in fact in finding and law in considering, alternatively giving inappropriate weight to the consideration, that the respondent's delay in not amending its pleadings prior to 24 and 26 November 2009 was partly caused by the appellant amending its defence on 17 July 2009'.
With respect to the first two particulars relied upon, Cardno contends that 'about 3 days' were lost as a result of the adjournments caused by the Water Corporation's applications (ground 8, particular (b)(v), written submissions par 116). The reference to three days lost is a reference to the judge's reasons in disallowing certain claims by the Water Corporation for the recovery of its costs as the successful party. The Water Corporation sought to increase the 'getting up' item, and sought an allowance for a refresher. In dismissing those claims by the Water Corporation, his Honour said (ts 480):
However, in considering this issue, I take into account that almost the first three days of the allocated trial dates were lost due to the application by The Water Corporation for amendments to its pleadings. Taking into account these delays caused by The Water Corporation, I am not satisfied that the cost determinations for trial are inadequate, and that The Water Corporation ought to be allowed an additional item for a refresher.
In my view, no appellable error is demonstrated, for the following reasons. First, the lost time was properly taken into account in limiting the scope of the costs sought by the successful party, the Water Corporation. Secondly, the judge expressly found (ts 472 ‑ 473), and the finding is not challenged, that 'because of the complexity of the issues between the parties ... there was a very real chance that in any event the trial would not have been completed in the first week'. Thirdly, the judge properly took into account that the amendments were partly responsive to the late amendments to the defence by Cardno, including the pleading of the Panel A contract. I do not accept Cardno's contention that this was an irrelevant consideration. The question of weight to be attached to it was one for the judge. Moreover, as the judge, in my view, correctly said (albeit in the context of matters now raised in relation to ground 6):
It is important to stress that the real issue at all times was what contract applied to the final submission of design drawings. As to when that engagement occurred, and pursuant to what contract, only arose as a live issue as a result of Cardno ... disputing in its amended defence that the Panel B contract applied to the submission of the final drawings to the Water Corporation, and arguing that the Panel A contract applied. On this issue Cardno was unsuccessful.
I am not persuaded that an appellable error has been disclosed in relation to ground 8.
I would dismiss ground 8.

Ground 9

By ground 9, Cardno alleges that the judge 'erred in fact and law in failing to order the respondent to pay [Cardno's] costs thrown away by reason of the [Water Corporation's] late discovery and tender of exhibit 326'. Exhibit 326 was an 'amended example drawing' from about February 2002, to the effect and significance of which I have referred in relation to ground 5.
Cardno's contentions, in substance, with respect to ground 9 appear to be as follows. First, up to 24 March 2010, the Water Corporation's pleaded case was that it had 'provided to [Cardno] exhibit 36 (ie not exhibit 326 or an example drawing like exhibit 36)' and that exhibit 36 was an amended example drawing from about April 2003. Secondly, from 17 July 2009, Cardno 'expressly pleaded that in about March 2002, the [Water Corporation] provided [Cardno] with an amended example drawing ...' . Thirdly, on 19 March 2010, the Water Corporation discovered exhibit 326 (ie an amended example drawing of February 2002), and it was admitted into evidence on 23 March 2010, and on 25 March 2010 the Water Corporation consequently amended its reply to delete reference to exhibit 36. Fourthly, the judge wrongly held (reasons [41] ‑ [42]) that even without the tender of exhibit 326, he would have found that Cardno had received an amended example drawing between January and March 2002, in that the judge failed to appreciate, in considering the evidence, that this was an 'uncontested issue' (written submissions par 148). Fifthly, prior to exhibit 326 being tendered, the 'relevant issue requiring the primary Court's determination was - whether the amended example drawing provided to the appellant in March 2002 was exhibit 36' (written submissions par 135). Sixthly, it was reasonable for Cardno to deny that it was negligent or in breach of its contractual duties and to contend that the Water Corporation was negligent and in breach of its contractual duties prior to 24 March 2010. Seventhly, the judge erred in 'considering, alternatively giving inappropriate weight to the consideration' that the Water Corporation had conducted a diligent search to locate exhibit 326 and that Cardno did not tender evidence as to the efforts it had exerted to locate exhibit 326.
Cardno expressly accepts (written submissions 132) that on 24 March 2010 'as a result of the [Water Corporation] discovering and tendering exhibit 326, [Cardno] amended its defence and counterclaim to concede that it was negligent and in breach of its contractual duties and withdrew its claims that the [Water Corporation] was negligent or in breach of its contractual duties'.
In relation to Cardno's first proposition, the Water Corporation's pleaded case was not that it had supplied a single document in the form of exhibit 36. Rather, its pleading was, relevantly (GB 507):
[The Water Corporation] says on or about 12 March 2002 the [Water Corporation] supplied [Cardno] with revised example drawings including example drawing [exhibit 36]. (emphasis added)
Accordingly, Cardno has not established its first proposition.
As to its second proposition, Cardno did not 'expressly' plead that 'in about March 2002, the respondent provided the appellant with an amended example drawing and instructed the appellant to amend its pump station designs'. Instead, Cardno pleaded:
5(c)(iv)In about September 2001 and March 2002, the plaintiff prepared updated standards ('the New Standards');
(v)in about September 2001 and March 2002, the plaintiff varied the first defendant's commission and required the first defendant to perform the Upgrade in accordance with:
Afirst, the September 2001 New Standard;
Bultimately, the March 2002 New Standard.
Accordingly, Cardno has not established its second proposition.
Cardno's third proposition is correct, but the matters referred to do not, on their own, lead anywhere.
As to Cardno's fourth proposition, having regard to Cardno's failure to establish its first and second propositions, and having regard to the other matters to which I have referred in these reasons in relation to ground 5, it is not correct to contend that the question of whether Cardno had received amended example drawings in the period January to March 2002 was not an issue in the case. The judge examined the evidence from the correct starting‑point that it was an issue, and his findings on the evidence were clearly open. I can see no basis for inferring that the judge misunderstood the evidence.
In relation to Cardno's fifth proposition, the primary issue was not whether exhibit 36 had been provided in March 2002. The issue was whether 'revised example drawings' (including exhibit 36) had been provided to Cardno, in the context of Cardno's contention that it had been obliged, by the drawings supplied by the Water Corporation prior to December 2002/January 2003, to specify Class 2 overflow pipes.
In relation to Cardno's sixth proposition, whilst it was clearly open to Cardno to put the Water Corporation to proof on liability insofar as it took the view that the Water Corporation could not prove that amended example drawings had been supplied in about March 2002, it always ran the risk of adverse costs consequences if it were wrong in that view. Cardno itself should have discovered the document which, it says, in the end, demonstrated the error in the view that it had taken. Its own failure to discover the document ought be considered in light of Cardno's acceptance, in this appeal, that it knew of the need to replace the Class 2 pipes as early as July 2003. The late discovery of exhibit 326 by the Water Corporation is not a basis for ordering costs in favour of Cardno on an issue about which it took a forensic view, contrary to the true position - of which it must be taken to have always known.
In relation to Cardno's seventh proposition, the judge gave detailed reasons, and made detailed findings, in relation to those matters at ts 474 ‑ 476. In an application by Cardno for the court to award it, the unsuccessful party, the costs thrown away by reason of the Water Corporation's late discovery of a document, it was clearly open to the judge to consider the efforts made by each party to give discovery. After referring to the obligation of each party to have given proper discovery, and having considered the evidence led by the Water Corporation as to the inquiries it made on discovery, his Honour said:
Cardno BSD has not presented any evidence as to what efforts it made to locate the amended example drawing provided to it between January and May 2002, or explain why such a document was not in its records.
Mr Gray's evidence of Cardno BSD, at paragraph 202 and 205 of the statement of evidence, was that he could not recall receiving the amended example drawings. In the absence of any recollection by Mr Gray or record of Cardno BSD and the Water Corporation being able to confirm the existence of the amended example drawings, bearing a date in early 2002, in my opinion Cardno BSD made a tactical decision to make it an issue as to whether or not Cardno BSD had received the amended design drawings.
And based upon the original example drawings, to argue Cardno BSD had been instructed to provide design drawings with a class 2 specification and alternatively, that the Water Corporation had been negligent. In my view that tactical decision of Cardno BSD is one that it has to bear the consequences of, given my findings that it had, in fact, received the amended example drawing. It ought to have known of its existence.
Further, I believe it is relevant that in my reasons for decision I found that even if exhibit 326 had not been produced, I would have been satisfied on the balance of probabilities that Cardno BSD was provided with amended example drawings between January 2002 and May 2002.
Taking these factors into account, I'm not persuaded that in the exercise of my discretion I should make any costs order in favour of Cardno BSD of costs thrown away as claimed in paragraph of 2e of Cardno BSD's minute.
However, I believe that The Water Corporation was seeking an indulgence by making an application to tender into evidence a document that it had not discovered. Cardno BSD opposed the tender of the document. Although it was unsuccessful in its opposition, I believe that in the exercise of my discretion, I should award costs to Cardno BSD in accordance with paragraph 2d of its minute.

No error is disclosed in the judge's reasons.
I would dismiss ground 9.

The Water Corporation's cross‑appeal

Introduction

The cross‑appeal concerns quantum of damages. The first ground concerns what was described as the 'salvage' issue. The second concerns the Water Corporation's claim for interest under s 32 of the Supreme Court Act1935 (WA).
It was common ground that, putting aside the question of the 'salvage' value of the Class 2 pipes, the net cost of replacing the Class 2 pipes with Class 4 pipes in 2006 was $431,155.06.
The 'salvage issue' arose in the following way. The flaws in the Class 2 pipes were detected on 8 July 2003. They were not, however, replaced until 2006, although there was no finding by the judge that the delay was unreasonable (reasons [91]). Following the replacement of the defective Class 2 pipes in 2006, the Water Corporation had available to it 33 Class 2 pipes which, after refurbishing them at a cost of $44,177.55, were used by the Water Corporation in its business in other projects in 2006 (reasons [84]). Cardno contended that but for the negligence, the Water Corporation would not have had the defective Class 2 pipes available for use (after refurbishment) in other projects, and that had the Water Corporation gone out to buy new Class 2 pipes for its other projects, instead of using the refurbished Class 2 Eaton pipes, it would have paid $122,560. Cardno contended that the Water Corporation accordingly received, in effect, a benefit of $78,382.45, being the market cost of 33 new Class 2 pipes in 2006 ($122,560), less the cost of the refurbishment of the 33 Eaton Class 2 pipes ($44,177.55), which should be deducted from the sum of $431,155.06. The Water Corporation disputed that there ought be any reduction as alleged by Cardno.
In relation to this issue, the judge referred to the observations of Viscount Haldane LC in British Westinghouse Electric and Manufacturing Co Ltd v Underground Railways Co of London Ltd [1912] AC 673, where his Lordship said (689):
[W]hen in the course of his business he [the plaintiff] has taken action arising out of the transaction, which action has diminished his loss, the effect in actual diminution of the loss he has suffered may be taken into account even though there was no duty on him to act.
Viscount Haldane, later in his speech (690) said:
[P]rovided the course taken to protect himself by the plaintiff in such an action was one which a reasonable and prudent person might in the ordinary conduct of business properly have taken, and in fact did take whether bound to or not, a jury ... may properly look at the whole of the facts and ascertain the result in estimating the quantum of damage.
In McGregor on Damages (17th ed) the learned authors refer to Viscount Haldane's statements in British Westinghouse v Underground Railways as the third of three 'rules' of mitigation which they describe as follows [7‑004] ‑ [7‑006]:
(1) The first and most important rule is that the claimant must take all reasonable steps to mitigate the loss to him consequent upon the defendant's wrong and cannot recover damages for any such loss which he could thus have avoided but has failed, through unreasonable action or inaction, to avoid. Put shortly, the claimant cannot recover for avoidable loss.
(2) The second rule is the corollary of the first and is that, where the claimant does take reasonable steps to mitigate the loss to him consequent upon the defendant's wrong, he can recover for loss incurred in so doing; this is so even though the resulting damage is in the event greater than it would have been had the mitigating steps not been taken. Put shortly, the claimant can recover for loss incurred in reasonable attempts to avoid loss.
(3) The third rule is that, where the claimant does take steps to mitigate the loss to him consequent upon the defendant's wrong and these steps are successful, the defendant is entitled to the benefit accruing from the claimant's action and is liable only for the loss as lessened; this is so even though the claimant would not have been debarred under the first rule from recovering the whole loss, which would have accrued in the absence of his successful mitigating steps, by reason of these steps not being ones which were required of him under the first rule. In addition, where the loss has been mitigated other than by steps taken by the claimant subsequent to the wrong, the claimant can again recover only for the loss as lessened, provided that the benefit gained is not to be regarded as collateral. Put shortly, the claimant cannot recover for avoided loss.
The learned judge, in the court below, held that the benefit alleged by Cardno was not a benefit for the purposes of the principles outlined by Viscount Haldane in British Westinghouse v Underground Railways. In this regard, his Honour said (reasons [90]):
On the evidence before me I cannot conclude that the Water Corporation has made a net gain. This is because it is necessary to take into account inflation and the loss of use over approximately three years of the $73,944 initially invested in purchasing the pipes in 2003. To conclude there was a net gain would be based upon a comparison of the value of the pipes in 2003 and 2006, which is too simplistic. This differs from the factual scenarios in cases such as British Westinghouse and Staniforth v Lyall where the net gain was clearly identifiable and was not due to inflationary factors.
Nevertheless, his Honour said that that was 'not the end of the matter' and continued (reasons [91]):
The Water Corporation in calculating its gross loss of $431,155.06 (an amount agreed to by the parties) took into account the purchase price of replacing Class 4 pipes in 2006, the refurbishment and testing costs on the Class 2 pipes in 2006 and the labour costs in 2006 when the pipes were replaced. The flaws in the Class 2 pipes were detected on 8 July 2003. Some evidence was given that the delay in replacing the pipes occurred due to the need to fully investigate the matter. It may well be that the delay was reasonable based upon a need to call in experts and other factors. However, the effect of the delay was that the costs of purchasing Class 4 pipes, the costs of refurbishing and testing of the Class 2 pipes and the labour costs of replacing the pipes, have all been set at inflated prices that existed in 2006. In those circumstances I conclude that the assessment of the Water Corporation damages ought to take into account that in 2006 the Water Corporation was able to use the Class 2 pipes in projects when the acquisition of those pipes in 2006 would have otherwise cost it $122,560. I believe that by taking the 2006 value of the Class 2 pipes for the purposes of the calculation leads to a more accurate picture of the actual loss suffered by the Water Corporation given that the other critical expense items were all calculated at 2006 values. Accordingly, I conclude that the proper assessment of the damages payable to the Water Corporation should be reduced to $352,772.61. (emphasis added)
As a preliminary observation, it is difficult, with respect to the judge, to understand by reference to what principle he made the deduction if it were not by way of the application of what has been described as the third of the three rules of mitigation.
The judge also disallowed the Water Corporation's claim for interest on damages, as claimed, from 1 December 2006. The judge said that no evidence was led as to the exact date that the replacement expenses were incurred and that, although evidence had been given in interlocutory proceedings to the effect that a delay had occurred in commencing proceedings due to negotiations, no evidence of that was presented at trial (reasons [93]). His Honour said that, in the circumstances, there was 'inadequate material' to exercise a discretion to award interest prior to the commencement of the proceedings in 2007 (reasons [94]).

The grounds of the cross‑appeal

There are two grounds in the cross‑appeal. The first is, in effect, that the judge erred in reducing damages with reference to a 'hypothetical gain based on the value of the pipes salvaged at some later date', ie, in 2006. The second ground is to the effect that the judge erred in finding that there was inadequate material to exercise a discretion to award interest prior to the commencement of the proceedings in 2007.
In the cross‑appeal, Cardno, by notice of contention, contends that even if the Water Corporation succeeds on its first ground of cross‑appeal, the judge, nevertheless, correctly discounted the claim for damages. In this regard, it is said that the judge should, in any event, have found that the Water Corporation had made a net gain of $78,382.45 for which it should give credit, because it had obtained a benefit in that amount by virtue of having reused the refurbished Class 2 pipes elsewhere in 2006.

The first ground of the cross‑appeal and the notice of contention - disposition

In my view, the first ground of the cross‑appeal should be allowed.
The judge, in effect:
(a)found that the Class 2 pipes were unsuitable for purpose and had 'cracked and gone out of shape' when used in 2003 (reasons [2]);
(b)found that the replacement works were carried out in 2006 (reasons [91]);
(c)made no finding that the Water Corporation had unduly or unreasonably delayed in replacing the defective pipes, despite the lapse of time.
The object of the award of damages was to place the Water Corporation in the position it would have been in had the contract been performed: Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1, 11 ‑ 12. In light of the judge's findings, the Water Corporation was entitled to have the Class 2 pipes removed, and have them replaced with Class 4 pipes, at the costs applicable to that work in 2006. That entitlement was not dependent upon, or qualified by, some other rule that the actual replacement costs in 2006 were to be reduced by the theoretical amount by which the market cost of Class 2 pipes in 2006 exceeded the market cost of Class 2 pipes in 2003. The market cost of new Class 2 pipes in 2006 only has relevance, if at all, insofar as it may properly be taken into account in considering whether any benefit accrued to the Water Corporation in accordance with the third rule of mitigation.
Accordingly, in my view, ground 1 of the cross‑appeal has been made out. The question remains whether, as Cardno contends, the reduction made by the judge can be sustained on the basis of the principles in British Westinghouse v Underground Railways.
In relation to the notice of contention, it was common ground that the Water Corporation had reused the Class 2 pipes elsewhere in its business in 2006. It is important to note that the Water Corporation accepted in this appeal that had there been an available market for used Class 2 pipes, it would have, in the ordinary course, been required to sell the Class 2 pipes on the market and credit the proceeds of sale against the damages. The Water Corporation also, in effect, admitted at the hearing of the appeal that, instead, it refurbished the pipes at 2006 cost levels, and that the refurbished pipes had a value commensurate with what it would have cost the Water Corporation to purchase new pipes in 2006. It accepted that the use of the refurbished pipes in 2006 had saved the Water Corporation from having to purchase new pipes in 2006 for the other areas of its business.
It follows, in my view, that in the course of mitigating its damage, the Water Corporation obtained a net benefit in 2006, being the saving it made in not having to buy new Class 2 pipes in 2006 at the 2006 market price, less the costs of the refurbishment work at 2006 cost levels. The Water Corporation thereby lessened its loss, and the extent to which the loss was lessened is properly deducted from the damages claimed.
Accordingly, I would allow the notice of contention. This, in effect, cancels out the result of allowing the first ground of the cross‑appeal.

Ground 2 of the cross‑appeal - disposition

In my view, ground 2 of the cross‑appeal is also made out. It was not correct to say, as the judge did, that there was no material before him upon which he could properly exercise his discretion to award interest on costs prior to the commencement of proceedings on 20 December 2007. His Honour had made a finding of fact, in effect, that the repair work had been carried out in 2006. Whilst there may have been no evidence as to the 'exact date' various expenses were incurred, having found that the works were completed in 2006, it was reasonable to infer that the Water Corporation had incurred the expenses by the end of 2006. Also, the Water Corporation contends, and it is not disputed by Cardno, that the parties had filed a 'minute of agreed facts - quantum', by which the parties had expressly agreed that the costs had been incurred in 2006.
Whilst the findings to which I have referred, and the agreed statement of facts, would not necessarily lead to the conclusion that the Water Corporation had incurred the expenses by 1 December 2006 (being the date alleged by the Water Corporation in its statement of claim), the fair inference was that it had incurred them by the end of the calendar year 2006, ie, by 31 December 2006.
Accordingly, in my view, there was sufficient material before the judge from which he could have exercised his discretion to award interest prior to the commencement of proceedings on 20 December 2007.
The discretion should have been exercised bearing in mind the principles in relation to the award of statutory interest outlined by Mason CJ, Dawson, Toohey and Gaudron JJ in Haines v Bendall [1991] HCA 15; (1991) 172 CLR 60, 66. Speaking of the equivalent New South Wales statutory provision, their Honours said:
The power to award interest on damages for the period between the date when the cause of action arose and the date on which a judgment takes effect is conferred by ... the Supreme Court Act. The section confers power on the Supreme Court to order that there shall be included, in the sum for which judgment is given, interest at such rate as it thinks fit on the whole or any part of the money between the date when the cause of action arose and the date when the judgment takes effect.
An award of interest up to the date of judgment is an award of interest in the nature of damages: Fire and All Risks Insurance Co Ltd. This statement acknowledges that the award of interest is an integral element in the attainment of the object of damages, namely, to compensate a plaintiff for injury sustained. Hence the award of interest is compensatory in character. While '[i]nterest should not be awarded as compensation for the damage done' (emphasis added) (Jefford v Gee), the award of interest is nevertheless an essential element in the achievement of true compensation for that damage. In Thompson v Faraonio, the Privy Council stated that '[t]he reason for awarding interest is to compensate the plaintiff for having been kept out of money which theoretically was due to him at the date of his accident' (emphasis added): see also Batchelor v Burke, per Gibbs CJ; MBP (SA) Pty Ltd v Gogic; cf Ruby v Marsh, per Barwick CJ. The award of interest for the period of delay in payment between the date of accrual of the cause of action and judgment affords the fair legal measure of compensation: Pheeney v Doolan, per Reynolds JA. Thus, it is the award of damages and, where appropriate, interest awarded on damages for the period up until the judgment takes effect which allows the plaintiff to be placed in or restored to the situation, as far as money can do, in which he or she would have been but for the defendant's negligence.
... the Supreme Court Act confers a wide discretion on a court awarding interest. That discretion must, however, be exercised in accordance with legal principle: Cullen v Trappell per Gibbs J. That means that the discretion must be exercised in conformity with the general principles governing the award of damages so that an award of interest on damages for personal injury should do no more than assist in the restoration of a plaintiff to the position in which he or she would have been but for the defendant's negligence. (citations omitted)
It follows, in my view, that his Honour erred in not awarding interest from 31 December 2006.

Conclusion

For the above reasons, I would dismiss the appeals, allow the cross‑appeal, but also allow the notice of contention. In relation to the second ground of the cross‑appeal, interest should be awarded as from 31 December 2006.