Elcom Collieries Pty Ltd v Brown

[2005] NSWSC 1084

CITATION:	Elcom Collieries Pty Ltd v Brown [2005] NSWSC 1084 This decision has been amended. Please see the end of the judgment for a list of the amendments.
HEARING DATE(S):	17/10/05
JUDGMENT DATE :	26 October 2005
JUDGMENT OF:	Gzell J
DECISION:	Declarations that deed not terminated and it and termination of expert binding on parties.

CATCHWORDS:	CONTRACTS - General Contractual Principles - Construction and Interpretation of Contracts - Whether Deed for Expert Determination by Neutral Expert was terminated - Deed required expert to visit subject property for a view - Gates to property padlocked limiting view to exterior - Whether entitled to terminate for failure of expert to carry out a viewing - Expert suggested parties consider settlement - Expert considered reports by experts for both parties as required under deed - Whether entitled to terminate for breach of term that expert act as an expert and not as an arbitrator - Whether entitled to terminate for breach of term that expert notify any circumstance adversely affecting his capacity to act independently or impartially - Unnecessary to decide whether estopped from asserting a failure to take a view or whether relief from termination should be granted for unconscionable conduct - No other matters of principle
PARTIES:	Elcom Collieries Pty Ltd - Plaintiff Norman Keith Brown and Mavis Ethel Brown - Defendants
FILE NUMBER(S):	SC 4048/05
COUNSEL:	Mr I V Gyles - Plaintiff Mrs Brown - Appearing in person on behalf of Mr Brown and Herself
SOLICITORS:	Clayton Utz Lawyers

LOWER COURT JURISDICTION:

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

GZELL J

WEDNESDAY 26 OCTOBER 2005

4048/05 ELCOM COLLiERIES PTY LTD v NORMAN KEITH BROWN AND MAVIS ETHEL BROWN

JUDGMENT

The issue

1 This matter was heard following the hearing of Elcom Collieries Pty Ltd v Comserv (No 1727) Pty Ltd [2005] NSWSC 1083. Mrs Brown appeared in person and for her husband.

2 Mr and Mrs Brown own a two-storey brick residence with loft at Chain Valley Bay in New South Wales. They commenced proceedings in the District Court for damages to their dwelling due to subsidence allegedly caused by the coal mining operations of Elcom Collieries Pty Ltd.

3 Consequent upon orders of the District Court that the parties participate in alternative dispute resolution processes, Mr and Mrs Brown and Elcom executed a deed for expert determination by neutral expert with Mr Markham as the expert in identical terms to the deed executed in Comserv. The solicitors who represented Comserv also represented Mr and Mrs Brown.

4 Prior to Mr Markham’s delivery of his determination under the deed, Mr and Mrs Brown purported to terminate the deed. The question is whether they were entitled to do so.

Additional terms of the deed

5 The material terms of the deed are set forth in Comserv at [4]-[8]. Two further provisions are relevant to this matter.

6 Clause 6.2(a) of the deed required Mr Markham to visit the subject property for a view:

“The Neutral Expert must, in discharging his obligations under this Deed:
(a) visit the Subject Property for a view. The Neutral Expert will be accompanied on the view by the Legal Representatives, and if he thinks it would be helpful, by one or more of the Expert Witnesses;”

7 Clause 9.3 required Mr Markham to inform Mr and Mrs Brown and Elcom should he become aware of any circumstance that might adversely affect his independence or impartiality. It was in the following terms:

“If the Neutral Expert becomes aware of any circumstance which might reasonably be considered to adversely affect the Neutral Expert’s capacity to act independently or impartially, the Neutral Expert shall immediately inform the Plaintiffs and the Defendant. The Plaintiffs and the Defendant shall consider the Neutral Expert’s disclosure and, unless otherwise agreed between the Plaintiffs and Defendant, the Neutral Expert shall terminate the expert determination by written notice to the Plaintiffs and the Defendant.”

Background

8 On 9 September 2004, Mr Markham nominated Friday 29 October 2004 commencing at 10.00 am for a view. Mr and Mrs Brown informed their solicitors that they would not be available between 18 and 29 October and possibly thereafter due to appointments for Mr Brown of a critical medical nature. The solicitors requested Mr Markham to postpone the view for this reason. The solicitors for Elcom protested that no explanation had been given for a specialist appointment on 29 October 2004 when that date had been set for some time.

9 On 20 October 2004, Mr Markham noted that an application had been made on behalf of Mr and Mrs Brown to postpone the view, the application was opposed and he proposed to rule on it.

10 On 21 October 2004, Mr Markham noted that no explanation had been provided in relation to Mr Brown’s appointment and no reply had been received by him to a telephone enquiry by his secretary. Mr Markham had previously indicated at the preliminary conference that he expected the experts, Messrs Shirley, Appleyard, Holmes and Eason to be present at the view together with two solicitors for each party. He indicated that if Mr and Mrs Brown wished to have an observer present at the view, he hoped Mrs Brown would be able to attend. He ruled that the view should go ahead at the appointed time.

11 On 26 October 2004, the solicitors wrote informing their clients of the ruling, noting that they had tried to contact Mr and Mrs Brown by telephone but they were not answering. The solicitors asked their clients to contact them urgently to confirm that they would be in attendance.

12 After business hours on 28 October 2004, Mr and Mrs Brown sent a facsimile to their solicitors stating that they were disappointed that Mr Markham had disagreed to a date that the Browns were able to attend and should the solicitors decide to proceed on 29 October 2004 they would do so on their own initiative and not on behalf of the Browns.

13 On 29 October 2004, Mr Markham, the experts and the solicitors went to the residence of Mr and Mrs Brown. The Browns were not present. Mr Markham and those accompanying him were unable to enter the property as the front and rear gates were padlocked. I infer that the padlocks had been put in place by, or on the instructions of, Mr and Mrs Brown.

14 Mr Markham inspected the property from the street, side and rear boundaries. He had internal and external photographs of the residence and its surround from the reports of Shirley Consulting Engineers Pty Ltd and Building Consultant Centre Pty Ltd. Mr Shirley’s report included internal floor plans of the residence. Various survey reports contained evidence relating to the levels of the ground, first and second floors of the building together with information relating to the plumb of the walls. And Mr Shirley’s report provided structural details of the footing slab upon which the residence was constructed.

15 Mr Markham observed that the ground floor of the building was below street level. The main entry was at the first floor. Brickwork appeared to be of a reasonable quality and there was no sign of structural distress. The brickwork was not articulated with control joints. Some relatively minor masonry cracking and repair was apparent near the front door. Out of plumb of the high eastern and western side walls was not obvious from sighting along the edge of a vertical 1.2 m long spirit level. The highly penetrated and movement sensitive masonry balustrade at the first floor level on the north elevation showed no sign of distress as viewed from the northern boundary and was not listed as a defect in the expert reports. Exterior maintenance and finishing of external timbers was required.

16 Assuming that the raft footing slab was likely to be founded on clay, Mr Markham said that one would expect the 225 mm slab to hog due to the edge loading of the high masonry side walls. Mr Markham was of the view that slab deformation of this nature would cause the top of the walls to lean outward unless restrained.

17 Mr Markham formed the view that he had no difficulty in assessing the cause of the defects of which complaint was made in both the Shirley and BCC reports nor in determining whether or not those defects were causally related to the mine subsidence.

18 In discussions with Messrs Shirley and Appleyard, Mr Markham noted the location of the tie bar installed beneath the high south light windows. Also discussed was a crack in the raft slab that had been epoxy grouted. Mr Appleyard stated that at his last inspection in April 2003 the repaired crack had not re-cracked.

19 Mr Markham made the same suggestion to the solicitors for Mr and Mrs Brown on 1 November 2004 as he had to Comserv that the parties consider settlement discussions. The letter was entitled in the names of Mr and Mrs Brown and Comserv. The correspondence with respect to the suggestion of settlement is set out in Comserv at [9]-[11].

20 On 14 January 2005, the solicitors informed Mr Markham that they would soon be filing a notice of ceasing to act in the District Court proceedings. The solicitors subsequently confirmed that they had ceased to act as at that date.

21 On 10 February 2005, Mr Markham wrote to Mr and Mrs Brown indicating that he was proceeding to make a final determination, listing all the material that he was considering, and inviting the Browns to make any further submissions or provide any further documentation by 23 February 2005.

22 On 21 February 2005, Mr and Mrs Brown gave notice of termination of the deed. The facsimile was in the following terms:

“We refer to your letter dated 10 February 2005.
We note it is your decision to make a final determination without having conducted a view of our property, other than from what you could independently determine from the road outside and the park. Any determination made in the absence of an inspection of the property would be unfair and unreliable, in so far as both of the parties are concerned.
Clause 6.2(a), a substantive clause of the Deed states that you must visit the property for a view. The road and park is not the property. Clause 6.2(a) is a substantive term: you are in breach of the Deed.
Clause 9.3 required you to immediately inform the parties of any circumstance, which may adversely affect your capacity to act independently or impartially. We say, the inability to inspect the property is such a circumstance; it has put you in a position of having to arbitrate between the competing opinions of the parties’ experts. You have not been able to develop an independent opinion from a neutral and independent position.
Clauses 6.2(c) and 9.3 are substantive terms of the Deed. You are required to act as an expert, not as an arbitrator and to know what it is that might effect your capacity to act impartially and independently.
Either party may terminate the Deed if you fail to observe and fulfil any of the substantive terms of the Deed (clause 15.1).
Your decision to proceed with the determination assumes that you did not give any thought to these issues or that you did and decided they did not matter. Either way, we can have no confidence in your ability to provide an independent and impartial and impartial determination quite apart from any issue arising out of your breach under clause 6.2(a).
You have apparently not thought (or decided not to) avail yourself of the opportunity offered by clause 15.3, which also gives rise to the perception of there being a possible bias. You may still do that.
We have decided to terminate the Deed under clause 15.1(a) (c) and (f) for the reasons set out above and request your acknowledgment of your receipt of our decision to terminate the Deed.”

23 The reference to cl 15.1(a) of the deed was misplaced. It provided for termination if Mr Markham was declared of unsound mind or mentally ill. The position was clarified in a letter from Mr and Mrs Brown to Mr Markham of 24 February 2005 in which it was stated that they had acted under cl 15.1(f) of the deed for breaches of cl 6.2(a), cl 6.2(c) and cl 9.3.

24 Mr Markham did not accept that the deed had been terminated. He offered to return to the site to view the interior of the residence before making his determination. Mr and Mrs Brown did not avail themselves of that offer. Mr Markham’s determination was forwarded to them under cover of a memorandum of 15 March 2005.

Was the deed terminated?

25 So far as the claim that Mr Markham acted as an arbitrator and not as an expert in contravention of cl 6.2(c) of the deed is concerned, Mrs Brown relied upon the same evidence upon which Mrs Axford relied in Comserv. For reasons set out therein at [26], I find that there was no contravention by Mr Markham of that provision with respect to his suggestions of settlement.

26 Mrs Brown also argued that by reason of Mr Markham’s failure to view the inside of their home, he was reduced to the position of arbitrating between the opinions of the rival experts.

27 I reject that submission. Mr Markham had the advantage of the view of the exterior of the premises and the advantage of the objective evidence contained in the photographs, internal floor plans, structural details of the footing slab and survey reports relating to the levels of the ground, first and second floors of the building, together with information relating to the plumb of the walls. In utilizing that material to arrive at his determination, it could not be said, in my view, that Mr Markham was acting as an arbitrator. He was having regard to appropriate evidence to form his expert opinion.

28 Nor, in my view, could it be said that he was so acting because he considered the experts’ reports constituting the relevant evidence as that term was defined in cl 2 of the deed and in item 7 in Sch 1 which listed the reports of the experts that each party had obtained to the date of the deed. The deed required Mr Markham to consider these reports in arriving at his determination as an expert and not as an arbitrator.

29 Clause 9.3 of the deed required Mr Markham to inform Mr and Mrs Brown and Elcom should he become aware of any circumstance that might adversely affect his independence or impartiality.

30 Mrs Brown argued that by proceeding to his determination without having inspected the interior of their home, Mr Markham’s capacity to act independently or impartially was adversely affected. It was agued that not having seen the interior left him obliged to decide between the competing opinions of the experts retained by the parties.

31 In my view, Mr and Mrs Brown did not make out this contention. What Mr Markham lacked by being unable to view the interior of the residence was made up by the advantage of interior photographs, internal floor plans, structural details of the slab and various survey reports. A consideration of that evidence could not raise any question with respect to Mr Markham’s independence or impartiality.

32 That Mr Markham considered the reports of the various experts in arriving at his determination did not raise any question about his independence or impartiality. The deed contemplated in cl 6.1(d) that the neutral expert might meet with any of the expert witnesses who accompanied him to the premises.

33 Mrs Brown argued that because Mr Markham did not view the interior of their home he was in breach of cl 6.2(a), a substantive term of the deed, and thus cl 15.1(f) was enlivened.

34 On the findings I have made, Mr and Mrs Brown precluded Mr Markham from viewing the interior of their home. A representation need not be express. It may be implied from conduct (Western Australian Insurance Co Ltd v Dayton (1924) 35 CLR 355 at 374 adopting Maclaine v Gatty [1921] 1 AC 376 at 386). There is a lot to be said for the view that by their conduct Mr and Mrs Brown represented that a view of the interior of the residence was unnecessary and they are estopped from asserting to the contrary. It would be unjust for Mr and Mrs Brown to depart from any assumption to this effect made by Mr Markham (See, generally, Thompson v Palmer (1933) 49 CLR 507 at 547).

35 Alternatively, this may be one of those exceptional cases following Legione v Hateley (1983) 152 CLR 406 in which a court of equity might grant relief against termination on the basis of unconscionable conduct on the part of Mr and Mrs Brown (Sunbird Plaza Pty Ltd v Maloney (1987-1988) 166 CLR 245 at 263).

36 It is unnecessary for me to consider these matters further because I put my judgment on a different basis. Besides, these issues were not raised in argument.

37 Mr Markham’s obligation under cl 6.2(a) was to visit the site for a view. That he did. Further, the nature of the view contemplated by cl 6.2(a) was not defined in the deed. When Mr Markham visited the site the extent of a view was circumscribed by the padlocked gates. Mr Markham conducted that view which was available to him. He not only complied with cl 6.2(a) by visiting the sight with the intention of conducting a view, but he also conducted the only view that was available to him.

Conclusion

38 In my judgment, Mr and Mrs Brown have failed to make out any basis for their notice of termination and Elcom is entitled to a declaration that the deed was not terminated by them and remains on foot and a declaration that the purported termination was invalid and of no effect.

39 Mrs Brown did not advance any reason why the deed should not be binding upon her and her husband should I conclude that the notice of termination was invalid. Elcom is entitled to a further declaration that Mr Markham’s determination is binding and enforceable against Mr and Mrs Brown by Elcom.

40 In the alternative, Elcom sought orders that the deed be specifically performed and Mr and Mrs Brown be ordered to allow Mr Markham or, alternatively, another neutral expert, access to their home for the purpose of an internal inspection. I do not think such orders are appropriate in the circumstances.

41 I will hear the parties on the appropriate terms of the declarations and any consequent orders and I will hear the parties on costs. I direct the parties to bring in short minutes of orders reflecting these reasons.

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31/10/2005 - Wrong spelling of plaintiff in the body of the judgment - Paragraph(s) headnote