Fletcher Construction Australia Ltd v Lines MacFarlane & Marshall Pty Ltd (No 2)

[2002] VSCA 189

SUPREME COURT OF VICTORIA

COURT OF APPEAL

No. 7828 of 1996

FLETCHER CONSTRUCTION AUSTRALIA LIMITED	Appellant
	v.
LINES MACFARLANE & MARSHALL PTY. LTD.	Respondent

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JUDGES:	CHARLES, BUCHANAN and CHERNOV, JJ.A.
WHERE HELD:	MELBOURNE
DATES OF HEARING:	29-31 May, 3-6 June and 11 June 2002
DATE OF JUDGMENT:	29 November 2002
MEDIUM NEUTRAL CITATION:	[2002] VSCA 189

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Appeal and new trial – Contract for architectural services – Percentage of work completed – Whether judge’s assessment flawed – Nature of assessment – When appellate court may interfere – Judge’s reasoning affected by significant error – Process of reasoning not exposed in reasons for decision – New trial ordered.

Courts and judges – Statement of reasons for decision – Scope and adequacy of reasons – Whether restrictions on trial process limit duty to give reasons – Errors and inadequacy in reasons – Discussions of purpose, content and adequacy of reasons for decision.

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APPEARANCES:	Counsel	Solicitors
For the Appellant	Mr W.J. Martin, Q.C. Mr D.W. Bennett	Clayton Utz
For the Respondent	Mr P.N. Vickery, Q.C. Mr R.J. Manly, S.C. Mr W.E. Alstergren	Minter Ellison

CHARLES, J.A.:
BUCHANAN, J.A.:
CHERNOV, J.A.:

The appeal

1. This appeal concerns a judgment and orders given and made by a judge of the Supreme Court on 13 September 2000 after a trial which occupied some 34 sitting days.  The trial was conducted according to a “limited trial” procedure which confined the time available to the parties to cross-examine witnesses and to make opening and closing submissions.  The parties had agreed to pre-determined starting and finishing dates and to present evidence in chief and in reply essentially through witness statements.

Overview of dispute

1. The appellant (“Fletcher”) is a major building contractor which, in 1996, was awarded the contract to design and construct the Men's Metropolitan Prison at Laverton which became known as the Port Phillip Prison (“the MMP”).  The respondent to this appeal, Lines MacFarlane & Marshall Pty. Ltd. (“LMM”) provides architectural services.  LMM entered into an agreement with Fletcher on 24 May 1996 (“the Consultancy Agreement”) pursuant to which Fletcher subcontracted to LMM the task of designing the MMP for a lump sum fee of $1.6m together with an allowance of $100,000 for the final commissioning phase of the works.  It was a term of the agreement that LMM would be paid according to the value of the services it had completed from time to time. 

1. In the latter part of 1996 a dispute erupted between the parties as to the extent of the work completed by LMM under the Consultancy Agreement and as to its entitlement to fees.  On 9 September 1996 LMM rendered an account to Fletcher in the sum of $207,000 in respect of Stage 3 works.  Fletcher paid only $62,900 of the account and, in the result, LMM stopped all work on the project on 16 November 1996.  LMM’s case at trial was that 95 per cent of architectural services work that it had to provide under the Consultancy Agreement had been completed when it stopped work.  Fletcher, on the other hand, claimed that when LMM stopped work, a substantial amount of architectural work was still required to be completed by it and much of the work that was done by LMM was defective.  LMM contends that Fletcher’s failure to pay the fees due to it amounted to repudiatory conduct on the part of Fletcher which LMM accepted by cessation of work on 16 November 1996, or alternatively, by effectively advising Fletcher of its acceptance during a meeting between the parties on 20 November 1996. 

1. Fletcher maintains that LMM’s cessation of work on 16 November amounted to a repudiation by it of the Consultancy Agreement and that it accepted that repudiation by notice served on LMM on 18 December 1996.  Fletcher retained another architect, Godfrey Spowers Pty. Ltd. ("Spowers"), to complete the remaining architectural services in respect of the construction of the prison at a cost of a little under $200,000.  The construction of the MMP was completed in August 1997.

1. On 17 November 1996 LMM filed the present proceedings in which it claimed approximately $400,000 from the appellant in unpaid fees under the Consultancy Agreement.  On 26 March 1997 Fletcher counterclaimed against LMM for the additional cost of the new architect and for other alleged damages arising out of allegedly incomplete and defective work in the sum of approximately $4.3m.

Proceedings below

1. The hearing of the action was completed on 29 June 2000 and on 9 August 2000 the trial judge pronounced judgment in favour of LMM for $196,950 (together with interest) and dismissed Fletcher’s counterclaim.  At the same time his Honour gave a brief oral summary of his reasons and provided the parties with what he called his “draft” of written reasons for judgment.  He did not, however, hand down his final reasons until some five weeks later, on 13 September 2000.  Later, his Honour heard argument on various matters arising out of his judgment and made certain orders, some of which are the subject of appeal.  As will be explained more fully later, Fletcher has appealed against his Honour’s principal decision and sought leave to appeal against some of his Honour’s related orders.  LMM has also sought leave to appeal against an order made by his Honour to which reference will be made later and has filed a notice of contention in relation to the principal decision. 

MMP tenders

1. Before dealing with the issues that are raised by this appeal, it is necessary to describe more fully the context in which the parties entered into the Consultancy Agreement and the circumstances leading to the dispute.  In 1993 the MMP was to be one of the three privately run prisons to be built for the Victorian State Government.  The other two were to be the Metropolitan Women’s Correctional Centre at Deer Park comprising 250 beds and the Fulham Prison, a medium security rural prison for 600 male prisoners at Sale.  The MMP was to be a maximum security prison incorporating remand, hospital, medium security and accommodation facilities together with a psycho-social unit. 

1. According to the trial judge, various consortia were formed to bid for each of the projects.  The consortium (“the Fletcher consortium”) put together under the aegis of Fletcher consisted of Fletcher itself, LMM and Group 4 Corrections Services Pty. Ltd. (“G4”).  Fletcher was to be the builder, G4 was to act as the local operator and manager of the prisons and LMM was to provide the architectural services.  His Honour considered that LMM actively sought participation in the consortium as is evidenced, inter alia, by its written proposal to Fletcher in November 1993 in which it set out its experience in relation to the design and documentation of prisons in the following terms:

“LMM have experience in the design and documentation of corrective facilities including quality assurance during construction by having successfully completed the Loddon Regional Prison in Victoria”.

In the course of the next month, LMM wrote this to Fletcher:

“LMM through their involvement in the Loddon project has an understanding and an appreciation of prison design criteria as well as the process, having been part of a successful design and construct bid”. 

His Honour found those statements to be an accurate summary of LMM’s experience.  But his Honour also considered that LMM did not, by reason of those representations, hold itself out as an expert in maximum security prisons. 

1. Although the Fletcher consortium tendered for the three proposed new prisons, it was only successful in relation to the MMP bid so that, in respect of the unsuccessful tenders, the work done by it and the other members of the Fletcher consortium in preparing the failed briefs went unrewarded.  For the purpose of facilitating the bid, the Government established a group called the New Prisons Project (“the NPP”) which was to be primarily responsible for overseeing the tendering process in respect of the three proposed prisons and their construction and operation.  It was intended that the ultimate contract for the building, maintenance and operation of the prisons would be entered into on behalf of the State by the relevant Minister.  For the purposes of the MMP tender, the NPP prepared a brief (“the design brief”) for the short listed parties by which it sought tenders for the design, construction, operation and maintenance of the MMP over a 20 year period.  The completion of construction was set for mid-1997. 

1. The Fletcher consortium tendered for the MMP contract in late 1995 with a proposal which it revised in early 1996.  By the time the Fletcher consortium was nominated as the successful tenderer in April 1996, its members had carried out a significant amount of work in relation to the then anticipated construction of the MMP in the expectation that it would be the successful bidder.  Following the acceptance of its tender by the government, the respective members of the Fletcher consortium entered into a number of separate contracts in relation to the design and construction of the MMP.  Thus, Fletcher and G4 formed the Australian Corrections Facilities Pty. Ltd. (“ACF”) in which each had a 50 per cent shareholding.  On 10 July 1996, ACF entered into a contract with the Minister for Corrections for the design, construction, maintenance and operation of the MMP.  On the same day Fletcher entered into a contract with ACF to design and construct the MMP.  As has already been mentioned, Fletcher and LMM had earlier, on 24 May 1996 entered into the Consultancy Agreement relating to the prison. 

1. This chain of contracts constructed a form of hierarchy through which LMM’s drawings were to pass for the purpose of being reviewed.  A design review process (“DRP”), which was incorporated into the Consultancy Agreement, as will be explained later in these reasons, contemplated that LMM’s drawings would first go to Fletcher for review, suggestion and endorsement, after which they would be further reviewed by G4.  After that process and after any consequential amendments were made to the drawings by LMM, they were to be forwarded to the NPP for endorsement.  Once endorsed, they were to be passed to Fletcher to be stamped “approved for construction”.  It was originally envisaged that the approved drawings would be sent to LMM, but, as things turned out, of the 167 LMM drawings which were so approved, only one was returned to LMM.  It was part of Fletcher’s case that 163 of those drawings were incomplete and contained significant omissions and for that and other defects and omissions in its work, LMM was not entitled to the payment it sought. 

Design and construct contract

1. It is convenient to mention at this point that the contract pursuant to which Fletcher undertook to build the MMP was a design and construct contract as distinct from a more commonly used lump sum contract.  An essential feature of a design and construct contract is that the two parts of the process which are intended to produce the ultimate building, namely, the design of it and its construction, are carried out simultaneously, unlike the position with a typical lump sum contract where the design is usually fully completed before the construction contract is entered into.  His Honour explained that, in order to fulfil the time constraints, design work proceeds along with other elements of the project. 

The Consultancy Agreement

1. It is appropriate to describe at this point the structure of the Consultancy Agreement and its relevant terms.  The body of the document contains General Conditions which incorporate three annexed schedules and, by reference, other documents which will be described later.  Annexure A describes the scope of service which LMM was to provide.  It divides the service into four chronological stages, namely, Stage 1 – the schematic design stage; Stage 2 – the design development stage; Stage 3 – the documentation stage (which is the subject of the present dispute) and Stage 4 – the construction and commissioning stage.  So far as is relevant, Annexure A contains the following provision. 

“Documentation Stage

The Architect shall:

(i)prepare all contract documentation including detailed working drawings, schedules and specification as are necessary to fully describe the Works...”

1. Schedule B specifies the time for completion of the project by way of a bar chart indicating that the entire project was to be completed by August 1997.  Schedule C sets out LMM’s total fee and the break-up of it.  So far as is relevant, it is in the following terms:

“1.      Total Lump Sum Fee  $1,700,000

Break-up of fee stage

·           Schematic Design  $     30,000

·           Design Development  $   655,000

·           Design Documentation  $   915,000

·           Construction, Commissioning                  $   100,000

1. The General Conditions contain the following clauses. 

“The Services

1.(a)The consultant shall perform the Services relating to the Works.  The scope of the Services is set out in Annexure A.

(b)In performing the Services, the Consultant shall:

·     do all things reasonably incidental or necessary to give effect to the Services even if not expressly stated in Annexure A;

·     comply with all directions and instructions of Fletcher;

·     exercise the standard of skill, care and diligence to be expected of a professional consultant experienced in the class of work to be executed.

...

Payment

3.(a)Fletcher shall pay the consultant the Total Lump Sum Fee ('the Fee') for the Services set out in Annexure C.  The Fee is inclusive of all costs, fees and disbursements incurred by the Consultant in carrying out the Services.

(b)Fletcher will pay the Consultant the Fee in instalments in accordance with the payment terms set out in Annexure B as the Consultant completes parts of the Services.  Each payment will be based on the value of the Services completed by the Consultant and will only be made if:

·     the Consultant submits the claim in accordance with the payment terms;

·     the Consultant provides supporting information for the claim required by Fletcher;

·     The Consultant is not in breach of a term of this Agreement;

·     separate claims are made for any variations to the Services carried out by the consultant;  and

·     the part of the Services for which the claim is made complies with the Agreement.

(c)Each instalment shall be paid by Fletcher in accordance with the payment terms set out in Annexure C, provided the requirements in Clause 3(b) have been met.

(d)Any instalment paid by Fletcher shall be deemed to be on account only and shall not imply the Services or any part of the Services are approved by Fletcher.

Documentation

4.(a)Fletcher shall provide the Consultant with the Design Brief and a Cost Plan for the works.

(b)The Consultant must take account of the contents of the Design Brief and the Cost Plan in performing the Services.  The Consultant must immediately notify Fletcher if the Consultant becomes aware of any circumstances that may effect the Cost Plan.

...

Design

6.(a)The design work undertaken by the Consultant as part of the Services will conform with the requirements of the Agreement and be fit for the purposes for which it is intended.  Work undertaken by the Consultant in relation to the preparation of the Design Brief shall comply with the design intent.

(b)All design and documentation prepared by the Consultant will be fully coordinated with all other design and documentation produced in relation to the Works so as to eliminate design conflict, omissions or discrepancies.

...

Suspension of the Services

13.Fletcher may by notice in writing at any time to the Consultant suspend or defer the Services.  Upon receipt of the notice, the Consultant shall suspend the Services until further written notice from Fletcher.

...

Previous offers

16.This Agreement cancels all previous offers and negotiations between Fletcher and the Consultant in relation to the Services. 

...

Default and Termination

22.(a)If in Fletcher’s opinion, the Consultant fails to comply with any requirement in this Agreement or has not proceeded with the Services competently or with reasonable diligence, Fletcher is entitled to end the Agreement by giving written notice to the Consultant.

(b)Fletcher may end the Agreement by written notice to the Consultant if the Consultant dies, tries to enter into a composition or arrangement with creditors or any attempt is made to wind the Consultant up, bankrupt the Consultant, make the Consultant insolvent, appoint an administrator or official manager or receiver for any of the Consultant’s property or undertaking or an execution is levied against the Consultant.

(c)Fletcher may end the Agreement for any reason by written notice to the Consultant.

(d)If Fletcher ends this Agreement or takes over any part of the Services for the reasons set out in clauses 22(a) or (b), Fletcher may employ others to carry out any part of the Services at the Consultant’s expense.

Dispute Resolution

23.(a) If a dispute arises under this Agreement, either party may at any time give written notice to the other requesting that a settlement meeting take place.  Nominated representatives of both parties must meet within seven (7) days of the notice and endeavour to resolve the dispute in good faith.

(b)If a settlement meeting does not take place or, after seven (7) days of the settlement meeting the dispute remains unresolved, the dissatisfied party is free to pursue its rights under Clause 24.

(c)If the dispute remains unresolved after the settlement meeting the Consultant shall continue to perform the services in accordance with the Agreement for a period of not less than 28 days.”

Relevant persons

1. Before dealing with the circumstances leading to the dispute which is the subject of this litigation, it is appropriate to identify the principal persons who were involved in those events.  Gavin Patrick Grahame (“Grahame”) was the Project Manager of the MMP development and a senior employee of Fletcher.  Gary Marshall (“Marshall”) was the principal of LMM and was the person who represented his organisation in its dealings with Fletcher.  Frank Kendall (“Kendall”) was employed by Fletcher as a construction manager at the MMP project.  Denis Scheele (“Scheele”), an architect, was an employee of Fletcher and, as will be explained later, although he did not give evidence, he did provide information to Grahame as to the state of completeness of LMM’s design work which Grahame passed on to the Project Committee on 10 September 1996.  Peter James Bowe (“Bowe”) was an architect who was employed by G4.  He made an assessment of the state of completeness of LMM’s work in September 1996 to which reference will be made later.

Events leading to dispute

1. Bearing in mind the parameters of the dispute, it is unnecessary to detail here the services performed by LMM under the Consultancy Agreement and the payments that were made to it prior to 1 July 1996.  For present purposes, it is sufficient to say that by that date, LMM had completed all or nearly all the Stage 1 and Stage 2 work that was required of it and, save for approximately $85,000, it was paid all the amounts that it had claimed from Fletcher in relation to its work.  On 1 July 1996, it rendered account No.6430 for $614,286 for the Stage 3 work that it had carried out during April, May and June 1996.  It also claimed the unpaid amount of $85,000 remaining from the earlier stages.  Thus, in round terms, LMM claimed in early July 1996 that $700,000 was due to it under the Consultancy Agreement.  Fletcher, however, disputed LMM’s entitlement to the full amount of that claim notwithstanding that, as his Honour found, Grahame conceded that, at that stage, Fletcher had not made any formal assessment as to the state of completion of LMM’s drawings.  His Honour said:  “... without sound foundation and merely because he 'thought' so, ... Grahame contested the propriety of LMM’s claim as to the amount of work done.”  As a result, by a facsimile sent to Fletcher on 22 July 1996 LMM claimed that it was in dispute with Fletcher under the Consultancy Agreement in relation to its claimed fees.  His Honour said that between 22 and 26 July Marshall and Grahame met to discuss the outstanding accounts.  Marshall told Grahame that if LMM was not paid its invoices, it would stop work.  Grahame says that he took this to be LMM’s final ultimatum.  As a result of this meeting, he sent LMM a letter of 26 July which stated: 

“For the purposes of progress assessment, the documentation fee (Stage 3) of $915,000 had been proportioned 85 per cent for drawing and 15 per cent for schedules and specifications.  Furthermore, documentation completed to review standard shall be regarded as 75 per cent complete.”

On about 26 July 1996, Fletcher paid LMM $502,638.  On 1 August 1996 Fletcher paid LMM a further sum of $200,000.  Thus, as at August 1996, there was little or no money outstanding to LMM under the Consultancy Agreement.  According to Fletcher, there were, however, numerous discussions about outstanding design issues. 

1. In early September 1996 Marshall of LMM went overseas, having signed off on a significant number of drawings prior to his departure.  On 9 September 1996 LMM rendered account No. 6436 which, it is common ground, was incorrectly dated 9 August 1996, for $270,000.[1]  A large part of that claim related to Stage 3 work.  Taking into consideration the LMM invoices relating to Stage 3, LMM was contending that it had completed over 95 per cent of the Stage 3 work.  It is the September claim for $270,000 that triggered the dispute between the parties that resulted in their making their respective claim and counterclaim in the proceeding.  Whereas, as we have said, LMM claimed that its Stage 3 work was substantially completed in September 1996, Fletcher contended that the extent of the completion of that work was substantially less than that claimed by LMM.  Later, it asserted that much of the work was defective. 

   [1]Nothing turns on this mistake and we will continue to refer to this account as being dated 9 September 1996.

1. The minutes of the Project Committee[2] show that at its meeting of 10 September 1996 Grahame reported that “the design component (of the project) is approximately 95 per cent complete with the majority of the detailed design documentation being submitted to NPP for endorsement.  The exception being finishes, schedules, landscaping and compound fencing.”  His Honour concluded that Grahame must have been satisfied that LMM’s design work was approximately 95 per cent complete as at 10 September 1996.  His Honour noted that, in his report to the Project Committee and to Fletcher’s financiers (made on the same day) Grahame’s reference to work that was “yet to be completed” was a reference to work that was largely outside LMM’s control.  

   [2]The members of the Committee included representatives of NPP and G4 and Grahame.

1. On 23 September 1996  Bowe, an architect, completed a two-day assessment of the value of the LMM work and reported to Grahame that the Stage 3 work was 73 per cent complete.  As we will mention in more detail later, his Honour dismissed Bowe’s assessment on the basis, inter alia, that Bowe, being Kendall’s brother-in-law, was not independent, was unqualified to make the assessment and knew that the exercise was performed for the purpose of challenging the value of the work that LMM claimed to have performed in relation to Stage 3.  Be that as it may, Grahame wrote on Bowe’s report a message to Scheele to the effect that LMM should be told (in response to its claim) that its documentation was assessed only at 73 per cent complete and to request LMM to rectify “immediately shortfalls in the documents”.  In compliance with Grahame’s request, Scheele wrote to LMM on that day enclosing the Bowe assessment and advising LMM that its design documents were assessed at 73 per cent complete and that, on that basis, the amount due to it was $52,950.  Scheele also asked LMM to respond to the assessment and “to rectify shortfall in documents immediately and confirm completion program.”  Beyond saying that, it seems that Fletcher did not provide to LMM any more specific written complaint concerning its work.

1. On 7 October 1996 LMM sent a facsimile to Fletcher disputing the Bowe assessment and claimed that its drawings were, at worst, 95 per cent complete and it sought a meeting with Fletcher to discuss its claim.  On the following day LMM threatened Fletcher with a notice of dispute alleging that Fletcher was in default as it had failed to pay the amount due to it.  

1. On 8 October 1996 Grahame requested Kendall to review the Bowe assessment.  His Honour considered that this was no more than an attempt to justify the refusal by Fletcher to pay LMM’s account. 

1. On 17 October 1996 Fletcher paid LMM $62,950 in relation to invoice No.6436 leaving a balance outstanding at $207,050.

1. On 16 October 1996 a meeting was held between Grahame, Kendall and Marshall to discuss the issue of completeness of the design stage and the moneys that were claimed by LMM as being due to it.  Marshall later said that he regarded this meeting as a “settlement meeting” for the purpose of clause 23(a) of the Consultancy Agreement, although Grahame claimed he was then unaware that the meeting was supposed to have been of that character.  Fletcher’s case was that the meeting was not a settlement meeting although it claims that Marshall treated it as such for the purpose of triggering the commencement of the 28 day period referred to in clause 23(c) after which LMM could stop work in conformity with the Consultancy Agreement.  Be that as it may, the meeting did not resolve any relevant issue between the parties.

1. Following the meeting of 16 October 1996 Kendall performed a further assessment of the completeness of design by LMM to that date and, on the basis of that assessment, on 21 October, 1996, Grahame wrote to LMM summarising Fletcher’s then position in relation to the dispute between the parties.  As will become apparent later, that was an important letter and its relevant parts are set out below: 

“Following on from the discussions held in our office on Wednesday 16 October 1996, I again confirm that reductions made to your last progress claim are not motivated by any ulterior reason, rather it is a fair and reasonable attempt to assess completeness of the architectural design.

There is no question that you and your teams efforts to date in meeting a difficult construction schedule are testimony to your commitment to this project.  I am convinced the frustration I see between yourself and the Fletcher design team has been brought about by poor communication between the parties.  It has become obvious to me, having involved myself over the past week, that areas of great concern to the Fletcher design team may not have been properly communicated to your office.

In assessing your claim they have attempted to identify those elements of the design that are either incomplete or need more attention.  You [sic] reaction to this at Wednesday’s meeting suggested to me that this may been [sic] the first time you were made aware of the issues.

This concerns me.  It is therefore a matter of importance that both Fletcher and LMM work at improving the lines of communication.  This is a design and construct project and to say, merely because construction has started, that the design component is finished is not correct.  The issues currently at hand are clearly design issues.”

In the letter Fletcher promised that it would pay LMM $96,587 "this week" and stated that, in its view, all but $145,463 of the work had been completed by LMM.  Notwithstanding this letter, as no payment was forthcoming from Fletcher, Marshall told Grahame that LMM would cease work because of non-payment of fees and would commence proceedings to recover the moneys due to it.  

1. On 23 October 1996 LMM sent a facsimile to Fletcher entitled “Notice of Dispute”.  In the letter, LMM said that it did not accept Fletcher’s proposed reduction of its fees.  On the following day, Fletcher made an internal requisition for a cheque in the sum of $96,587 payable to LMM but the cheque, although drawn, was not paid to LMM within the time promised by Fletcher or at all.  On 31 October 1996 LMM sent Fletcher a statement in respect of the outstanding invoices which showed that LMM claimed that $207,050 was due to it. 

1. On 8 November 1996 Fletcher sent a letter to LMM in which it said that payments to LMM had been made in accordance with the Consultancy Agreement and sought from LMM confirmation of its commitment to the project.  On the same day, LMM sent a facsimile to Fletcher stating that it would resort to legal action against Fletcher. 

1. On 11 November 1996 LMM sent to Fletcher a further invoice No.6440 for $76,525.  Of that sum, $45,000 related to Stage 3 work and the balance was essentially concerned with work relating to Stage 4.  On 15 November 1996 Fletcher told LMM that it would make no further payments to LMM until LMM affirmed its commitment to its contractual obligations.

1. On 16 November 1996 LMM ceased all work on the project.  To that stage the construction of the prison had progressed broadly in accordance with the Bar chart and a substantial amount of building work had been completed.  It was LMM’s case  that it completed 5 per cent of the Stage 3 work between approximately 21 October and 16 November 1996.  Fletcher’s position was that a considerable amount of design work remained outstanding, while LMM contended that its work was virtually finished. 

1. On 17 November 1996 LMM filed a writ in this proceeding claiming payment for  unpaid fees and apparently, on that day, either served it on Fletcher or made a copy available to it.  The statement of claim as originally endorsed on the writ made no allegation of the repudiation of the Consultancy Agreement by Fletcher.  In the proceeding as it then stood, LMM claimed that it had completed 95 per cent of the design documentation and therefore was entitled to be paid 95 per cent of $915,000, namely, $869,250.  Consequently, it said that a balance of $283,575 (being the unpaid balance of account No.6436, namely, $207,050 and the $45,000 claimed in account No.6440) out of the $869,250, was due to it.  Thus, LMM accepted that $585,657 had been paid to it in relation to Stage 3 work.

1. Attempts were made by the parties to discuss the dispute but to no avail.  On 19 November 1996 Fletcher requested LMM to confirm its intention to proceed and complete the work in accordance with the Consultancy Agreement.  LMM responded on the same day to the effect that it was not obliged to continue to work because the dispute between the parties had not been resolved.  It pointed out that the period of 28 days (under clause 23(c)) had expired since the 16 October meeting and suggested that the relationship of architect and builder and LMM's commitment to proceed could be obtained by Fletcher paying the amounts invoiced plus its legal costs and interest.

1. On 20 November 1996 a meeting took place between Marshall and Hanich of Fletcher in the course of which Marshall said that LMM did not intend to do any more work because it had not been paid.  Hanich had with him the cheque for $96,587 to which reference has been made earlier, but he did not pass it on to Marshall at that meeting or at all.[3]

   [3]Hanich did not give evidence at the trial due to serious illness.

1. On 18 December 1996 Fletcher served a notice of termination upon LMM.  It was LMM’s case at the trial that, by 18 December 1996, it had already accepted Fletcher’s repudiation of the Consultancy Agreement and thereby had terminated it.  By that date, Fletcher had engaged Spowers to take over the architectural role in relation to the MMP. 

1. During the balance of December 1996 and in January 1997 Spowers familiarised itself with the relevant documentation and events.  In March 1997, Spowers and Fletcher entered into an agreement in which Spowers agreed to complete the architectural services in respect of the MMP.  The agreement provided that Spowers would be paid $193,000 for the Stage 3 design and documentation phase of the architectural work which was to have been completed by LMM (and approximately $326,000 for the construction and commissioning phase of the work).  Spowers worked on the project for Fletcher from December 1996 through to September 1997 and was paid a total of $544,696.  The construction of the prison was completed in September 1997.

The trial and judgment

1. It was Fletcher’s case at trial that since LMM had completed only approximately 57 per cent of the Stage 3 work by the time it stopped work, it was not entitled to be paid the sum claimed.  Fletcher contended that the vast bulk of the LMM drawings was incomplete and that LMM had failed to produce 50 drawings which it should have produced in order to fulfil its obligations under the Consultancy Agreement.  Because of LMM’s breach in that regard, said Fletcher, it suffered substantial damage in the sum of approximately $4.3m, and counterclaimed that sum.  At the trial, LMM called 23 witnesses in support of its claim and in the defence of Fletcher’s counterclaim.  Fletcher called eight witnesses.  Both sides called their officers and expert witnesses.  As we have said, the trial lasted 34 sitting days.  The hearing concluded on 29 June 2000.  On 9 August 2000, his Honour pronounced judgment for LMM in the sum of $196,950 and dismissed Fletcher’s counterclaim.  We will deal later with his Honour’s reasons for decision and with matters arising from them, but for the moment, it should be mentioned that his Honour’s conclusion that LMM was entitled to be paid $196,950 under the Consultancy Agreement was based on his assessment that, as at 16 November 1996, when LMM ceased all work on the project, it had completed 93 per cent of the work required of it in relation to Stage 3.  In coming to that conclusion and in deciding to dismiss Fletcher’s counterclaim, his Honour effectively accepted the whole of the relevant evidence given by LMM’s witnesses and rejected essentially the whole of the relevant evidence of witnesses called by Fletcher. 

1. It is necessary to say something briefly about the circumstances in which judgment was pronounced by his Honour, the orders that were made by him and the parties’ respective challenges to his Honour’s decisions.  These matters are set out more fully in Fletcher Constructions Australia Ltd. v. Lines MacFarlane & Marshall Pty. Ltd.[4] (“Fletcher No.1”), which was decided in circumstances which will become apparent later.  Immediately after his Honour pronounced judgment in the case on 9 August 2000, he gave a brief oral summary of his reasons for decision and provided the parties with what he called his “draft” written reasons for judgment.  He did not, however, hand down his final reasons until some five weeks later, on 13 September 2000.  Before his Honour published his final reasons, however, Fletcher had served its notice of appeal on LMM on 22 August 2000 (the judgment having been authenticated on 15 August 2000).  On the following day, Fletcher paid LMM the judgment sum in exchange for a guarantee from Marshall that the amount would be repaid should the appeal be successful.  LMM, by summons dated 25 August 2000 then sought, unsuccessfully, to strike out Fletcher’s notice of appeal.  On 13 September 2000, shortly after his Honour delivered his “settled” reasons, he heard and rejected LMM’s application to amend the judgment sum to $220,742 pursuant to the slip rule.  It was argued for LMM that the judgment sum claimed at trial (and awarded by his Honour) was the product of an error in the calculation of the relevant sum by its counsel.  On 14 November 2000, after hearing argument, his Honour made the following orders: 

(a)Fletcher pay LMM’s costs of its claim and counterclaim on an indemnity basis. 

(b)Fletcher also pay the costs of Marshall at the rate of $110 per hour for “investigating and instructing [LMM’s] solicitors with respect to the proceeding from 1 September 1999”. 

(c)There be a stay of the taxation and execution of the costs order, conditional upon Fletcher undertaking to pay interest on any amount of costs ordered to be paid by it in the event that the appeal is unsuccessful.  (This part of the order was subsequently varied by this Court on 11 December 2000, but it is not necessary to elaborate on this change.)

[4](2001) 4 V.R. 28.

1. Fletcher has appealed against his Honour’s judgment and has sought leave to appeal against the costs orders.  LMM has also sought leave to appeal against his Honour’s dismissal of its slip rule application and has filed a Notice of Contention.

1. In its (third) Amended Notice of Appeal of 91 pages Fletcher challenges nearly every adverse finding made by his Honour.  There are 12 grounds of appeal but each is subdivided into a large number of sub-grounds.  Ground 1 alleges, in effect, that the judgment is a nullity or should be set aside because his Honour wrongfully failed to deliver reasons contemporaneously with pronouncing judgment and because his Honour’s “settled” reasons bore no relevant relationship to his draft reasons which meant that he failed to give reasons for his decision.  This ground was heard separately last year and was determined in Fletcher (No.1) against Fletcher.

1. On 23 November 2001 this Court conducted interlocutory hearings which dealt with various matters pertaining to the balance of the appeal and the parties’ respective applications for leave to appeal against the orders to which reference has already been made.  The Court ordered, inter alia, that the issues raised by Fletcher’s notice of appeal be heard and determined first.  It adjourned the parties’ respective applications for leave to appeal and ordered that they be heard on a date to be determined, but after the determination of Fletcher’s appeal.  On 12 March 2002, the Court fixed 29 May 2002 as the date for the commencement of the hearing of the appeal on the basis that its duration would not exceed 12 sitting days.  The Court also set a timetable in accordance with which the parties were required to file relevant documentation, including outlines of submissions and books of critical documents.  The parties have complied with the directions and, in the end, have delivered sixteen volumes of appeal books (printed on both sides of each page) three lever arch folders of written submissions and twelve lever arch folders of authorities as well as other material, including books of critical documents and a book of reduced plans.  The parties’ full and helpful submissions have resulted in the time taken to hear this appeal being considerably shorter than it would otherwise have been having regard to the issues raised by the grounds of appeal, the notice of contention and the considerable volume of documentation contained in the appeal books.

1. During the interlocutory hearings the parties submitted that, if this Court were to set aside his Honour’s judgment, it should dispose of the proceeding by considering for itself the issues between the parties and make relevant findings in relation to them.  We were unable to determine this submission during the interlocutory hearings because we were not sufficiently seized of the issues between the parties or of the material which they claimed supported their respective cases.  Once we had read the relevant documents, however, it became relatively clear that there would be significant difficulty in this Court attempting to decide the case if the judgment below was set aside.  This is primarily because the resolution of significant areas of dispute between the parties depends on findings of credibility and reliability of witnesses.  Realistically, it would not have been possible for this Court to resolve these highly contentious issues between the parties without seeing and hearing witnesses.  The parties, in the end, reached a like conclusion and, did not press us to hear and determine the action if we decided that the judgment below should be set aside. 

Ground 2 – The finding that LMM's work was 93 per cent complete

1. We now turn to consider the grounds of appeal and the respective arguments in relation to them.  We shall first deal with ground 2 which attacks his Honour’s finding that LMM should succeed in its claim for moneys due under the Consultancy Agreement on the basis that it had completed, as at 16 November 1996, 93 per cent of the Stage 3 work.  This was one of the principal issues argued in the appeal.  After summarising what his Honour considered to be the gist of the relevant evidence of the witnesses, his Honour said this:

“As at 16 November 1996, the date of cessation of LMM’s works, I have the following calculations as to the state of completeness of the works for Stage 3 – the design documentation stage.  Mr Marshall – initially 99% but now 95%; Mr Quigley – 94-96%; Mr Bailey – 91-95%; Mr Sheele – 95% (although Mr Sheele was not called, this was the figure indicated in the exhibits);  Mr Grahame – 95%;  Mr Brickell – 85-87.5%; Mr Bowe – 78%; Mr Kendall – 80%; and, Mr Codd – 57%.  As I have already observed, Mr Codd’s evidence must be rejected.  This stance can be tested against the proposition that, according to Mr Codd, LMM had only done two-thirds of the work that Mr Grahame himself says it had done (that is, 57% complete compared to Mr Grahame’s 95%).  In my view, the lowest reliable percentage produced by a witness of credit and of relative independence, is that of Mr Brickell at 87.5%.  And the highest, is that of Mr Quigley at 96%.

Doing the best that I can, but only after a careful assessment of the thousands of pages of documentation and an evaluation of the witnesses, I have come to the view that I can conservatively and reliably conclude that 93% of Stage 3 – the design documentation stage was complete as at 16 November 1996.

That is architectural services having a value of $850,950.  In assessing what is due under the CA, the sums of $685,000 should be added for stages 1 and 2 – the schematic and design development stages, together with the additional variations and extra work in the sum of $31,800.  That brings the total of $1,567,750.  The amount actually paid by FCA, namely $1,370,800, must be deducted from this sum.  Therefore, the balance due to LMM is $196,950.”

1. Before dealing with Fletcher’s attack on his Honour‘s various findings leading to his conclusion that LMM had completed 93 per cent of the design and documentation stage, it is desirable to set out briefly the evidence of the relevant witnesses and his Honour’s assessment of it.  It was common ground that LMM had completed 167 drawings which were reviewed pursuant to the DRP and which were stamped “approved for construction”[5]  We note that it was also common ground that only one of those drawings was returned to LMM.

   [5]Taking into account the various revisions, however, the total number of drawings produced by LMM for the project exceeded 2,400. 

1. It is now necessary to summarise his Honour’s analysis of the relevant witnesses which preceded the judge’s conclusion that LMM had completed 93 per cent of its work. 

Marshall – 95 per cent complete 

1. Marshall said in his evidence that because only one drawing out of the 167 that were approved for construction was returned to LMM, he assumed that all the drawings were accepted by Fletcher (and by G4 and the NPP) as having been fully completed.  He said that it was only in late October 1996 that Fletcher raised the allegation that there were deficiencies in the drawings.  His Honour accepted Marshall’s evidence as to the extent to which he reviewed the drawings for the purpose of assessing the level of completeness of the Stage 3 work.  Marshall said that he reviewed each of the 167 drawings for the purpose of determining, in percentage terms, the extent of their completeness.  He also said that he had assessed the number of man hours taken to complete each drawing.  In carrying out these assessments, said Marshall, he had regard to the information contained in the running sheets and bar chart which recorded the progress of the work carried out by LMM during the relevant period.  According to his Honour,  Marshall said that he had cross-checked his estimate of the percentage level of completeness of the drawings with his estimate of man hours taken to complete it before arriving at a final view as to the percentage of the work completed in respect of the relevant drawings.  His Honour said that, having completed the assessment, Marshall then applied the assessed percentage to the Stage 3 work in order to determine its level of completeness.  His Honour noted that, initially, Marshall assessed the degree of completeness of the 167 drawings at 99 per cent, but after review of the documentation not long before the trial, he reduced that assessment to 95 per cent. 

Quigley – 94-96 per cent complete

1. Peter Quigley (“Quigley”) was called by LMM to provide an independent assessment of the state of completeness of the Stage 3 work at the relevant date.  Quigley is an architect, with considerable experience in architectural work relating to institutional and government projects, but he had no experience in prison design and documentation.  He assessed LMM’s Stage 3 work to have been complete at the relevant time to the extent of 94-96 per cent.  He said: 

“The documents are of good standard and would compare favourably with other documents in comparable projects used for [design and construction] contract.  I have not seen anything which suggests that [Spowers] produced any significant additional documentation which would justify the suggestion that LMM’s documents were only 75 per cent or 57 per cent complete at the time it ceased its works on the project”. 

His Honour was obviously impressed with Quigley as a witness and with the documents that he prepared in support of his assessments.  The judge accepted the thrust of his reasoning and his conclusion as to the level of completeness of the Stage 3 work and noted that Quigley described his estimate as “a conservative” one.  

1. Importantly, his Honour rejected Fletcher’s contention that Quigley’s lack of expertise in connection with prisons prevented him from giving worthwhile evidence.  The judge considered that Quigley had expertise in relation to large public institutional buildings and large projects generally and that he was familiar with design and construction contracts.  In essence, the judge considered that Quigley was well-qualified to give expert opinion evidence on the issues.  His Honour said that he was impressed with Quigley’s statement that:  “The general standard of the LMM drawings is well in excess of that required for a design and construct project and contained a level of detail which would have been suitable for lump sum tender contracts”.  One of the matters taken into account by Quigley in coming to his ultimate assessment of the level of completeness of LMM’s work was the work done by Spowers, which he used to estimate the time that would have been required to complete the drawings had the contract remained with LMM.  This estimate was used by him to check his original estimate as to the amount of work that LMM had actually completed. 

Bailey – 91-95 per cent complete

1. Ralph Edward Bailey (“Bailey”), who had considerable experience in the design and documentation of correctional facilities, including maximum security prisons, was called by LMM.  He did not give evidence during his examination-in-chief about the level of completeness of the LMM work in relation to Stage 3.  He was, however, cross-examined about the matter and during an overnight adjournment he re-examined all the relevant LMM drawings and, on the following day, said that he estimated that LMM had completed 90 to 95 per cent of the work, although doubt has been raised as to whether he effectively said that this range was to be taken out of 100 or out of 130.  In the light of that, it is perhaps not surprising that Fletcher attacked the reliability of Bailey’s estimate.  His Honour, however, rejected that attack and concluded that Bailey had established that LMM’s work was “91 to 95 per cent complete”, although the judge noted that Bailey’s evidence on this issue was “less forceful” than that of Marshall.  As we have mentioned, this was one of the bases on which his Honour concluded that 93 per cent of the Stage 3 work was completed by LMM when it stopped work on the project.  Edward Thomas Codd (“Codd”), who was called by Fletcher, estimated the level of completeness of the LMM work at 57 per cent.  In his reasons, his Honour noted that, when Codd’s estimate was put to Bailey, he responded:  “I’ve never heard of that figure, I am shocked”. 

1. Bailey said in his evidence that, in his opinion, given the very limited time frames, the drawings prepared by LMM were adequate for the purposes of a design and construct contract for the development of the MMP.  He said that the drawings “did not fall short of a standard which I regard would be usual to expect from an experienced architect in general practice or for an architect who practised in the field of public institutional architecture."  He said that, had LMM continued in a normal way on this design and construct contract it was open to it to provide any necessary supplemental information as the need arose.  He also said:

“If the standard to be applied to the drawings prepared by LMM for the NPP as at 16 November 1996 was that of an architect experienced in the design of prisons including maximum security prisons, I would regard those drawings as meeting that standard in the context of a [design and construct] contract”. 

1. His Honour concluded that he was satisfied that when Bailey gave his evidence as to the state of completion of LMM work he was referring “to Stage 3 – the document design stage and to no other.  Consequently, I am able to give credence to this estimate.”

Scheele – 95 per cent complete

1. We have already mentioned that, on 10 September 1996, Grahame effectively reported to the Project Committee that the design component of the project was approximately 95 per cent complete.  It is apparent from the evidence that Grahame obtained that figure from Fletcher’s architect, Scheele.  Although Scheele was not called to give evidence at the trial, his Honour took that estimate into account in reaching the conclusion that the work was 93 per cent complete. 

Grahame – 95 per cent complete

1. Although Grahame did not personally carry out any assessment of the level of work completed by LMM, he had, as we have just mentioned, told the Project Committee that approximately 95 per cent of the LMM design work was completed.  His Honour seems to have treated this statement by Grahame as an admission by Fletcher that, as at 10 September 1996, the total design work was complete to the extent of approximately 95 per cent.

Bowe and Kendall reports

1. It is convenient to note here his Honour’s findings on the assessment made by Bowe and Kendall as to the level of completeness of the LMM work to which reference has been made earlier.  As we have already noted, his Honour rejected Bowe’s assessment, and he did so for a number of reasons.  First, his Honour said, in effect, that since Bowe was Kendall’s brother-in-law, he was not independent.  Secondly, the judge said that Bowe was not competent to do the assessment since he had no experience in that area and performed his task only by reference to the documents that were given to him by Fletcher and further, he was given only two days to do the work, the inference being that his Honour considered that he could not have performed the work properly within that time.  His Honour concluded that the Bowe report was a “construct organised by Mr. Grahame”.  His Honour also did not regard Kendall’s assessment as a credible estimate of the level of completeness of the LMM work.  The judge considered that the request by Grahame that Kendall, the cost planner, review the Bowe assessment and estimate the level of completeness of the architect’s work was “an elaboration of the attempt to justify the refusal to pay ... in circumstances of Mr. Grahame knowing he faced a threat of cessation of work and that there had been a request for a meeting to resolve the issue within the week.”  Thus, the judge considered that the Kendall report was prepared for a “purpose”, namely, to justify Fletcher’s refusal to meet the invoices claimed.  His Honour said that Kendall knew that his report was meant to bolster the earlier report of his brother-in-law, Bowe, and that Grahame wanted it to challenge LMM’s claim.  Further, his Honour was of the view that the report was based upon an incorrect assumption as to the “project value”.

Judge’s assessment of Grahame

1. His Honour was critical of Grahame’s role in Fletcher’s failure to pay LMM the amounts claimed and said, in effect, that his motive for commissioning the Bowe and Kendall assessments was to find a basis for not paying LMM.  As far back as July 1996, which was not long after he came to be associated with the project, Grahame formed the view that the fee claimed by LMM on 1 July by way of account No.6434 for $700,000 “must have been in excess of the work completed by LMM as at the date of the invoice because by 1 July 1996 LMM had claimed $1.3m of a $1.6m contract." According to his Honour that attitude was “the real genesis of the dispute”.  The judge also rejected much of Grahame’s evidence as to the extent of the work that LMM had completed by 16 November 1996.  His Honour considered that Grahame’s claim that there was a “never ending flow of unresolved design issues” and that LMM was “out of its depth” was a “post factum reconstruction and confabulation in order to justify the notice of termination delivered by [Fletcher] in December”.

1. His Honour also did not accept Grahame’s rejection of Quigley’s claim that design and construct contracts generally require drawings of less detail than those required for pre-prepared lump sum tender contracts.  The judge accepted Quigley’s evidence as to the standards required of design and construct contracts.  Similarly, his Honour did not accept Grahame’s characterisation of the role of the architect in respect of this project.  Grahame had claimed that it was the architect’s responsibility “to lead the development of the design and co-ordinate it where necessary rather than simply leave it to the builder as happened in this case”.  The judge said that he had no doubt that Twinn of G4 and later Grahame of Fletcher were the guiding forces in the design and construction of the MMP and that they would not have tolerated LMM leading the development of the design and supervising the coordination.  His Honour considered that Grahame’s view of the role of the architect in this project revealed "a lack of appreciation on his part of the reality of the scene at the MMP."

Brickell

1. Michael John Brickell (“Brickell”) was a director of Spowers and had considerable experience in, inter alia, the design and building of prisons.  He gave evidence on behalf of Fletcher as to the adequacy of LMM’s architectural services under the Consultancy Agreement.  Relevantly for present purposes, he was asked to provide an opinion as to the extent to which LMM had completed the architectural services required of it under the Consultancy Agreement.  His evidence was that he estimated that the proportion of the Stage 3 services that was completed by LMM under the Consultancy Agreement as at 21 October 1996 was 75 per cent, and as at 18 December 1996, 80 per cent.  There were two findings that his Honour made in relation to Brickell which are of significance for reasons which will become apparent later.  First, when his Honour summarised the evidence of the various witnesses on this subject in the manner to which we have referred, he ascribed to Brickell the opinion that LMM had completed 85 to 87.5 per cent of the Stage 3 work.  Secondly, his Honour considered that “the amount his firm charged to complete Stage 3 [was] not much different from that which LMM says was outstanding at the time”.  The judge noted that Brickell’s evidence conflicted with that of Codd and that he, the judge, “much preferred the evidence of Brickell”.

Codd – 57 per cent complete

1. Codd, who had considerable experience in prison design and documentation, was the principal independent witness called by Fletcher and gave extensive evidence on the question of the extent to which LMM had completed its work.  He accepted for the purposes of his analysis that the Consultancy Agreement required LMM to provide design and documentation work that fell within the scope of the services described in Annexure A.  He considered that the extent of the scope of work was to be gauged by reference to the type of building that was to be designed and constructed, namely, a prison with high security facilities which was to be operated in the manner described earlier. 

1. Codd examined 166 out of the 167 LMM drawings that were subject to the DRP for the purpose of determining the extent to which they were complete having regard to the requirements of the Consultancy Agreement.  He concluded that 163 of the drawings were not complete and that, had LMM completed its work under the Consultancy Agreement, it would have produced another 50 drawings.  Codd also found that the relevant drawings contained over 1,700 omissions or other inadequacies. 

1. His ultimate conclusion was that, as at 16 November 1996, LMM had completed only 57 per cent of  the Stage 3 work.  His Honour, however, found that Codd was an unpersuasive witness, notwithstanding that he had given his evidence “directly and without equivocation”.  The judge effectively rejected Codd’s evidence and, thus, his conclusion as to the extent to which the work was completed by LMM.  His Honour explained the basis on which he rejected Codd in the following way.  He first noted that Codd was not “on site” and that he was retained by Fletcher after the event in order to provide expert evidence in support of its case.  The steps in His Honour's reasoning were these:

(a)“Firstly” Codd’s evidence was “prepared for a purpose and did not arise from an independent request”.  His Honour enlarged on this view a little later, effectively saying that, by reason of this, Codd was not an independent expert witness but was partisan in favour of Fletcher.  His Honour considered that Codd’s evidence was prepared “solely for the purpose of litigation.”  We take his Honour to mean that, in his view, Codd prepared and gave his evidence with the aim of promoting Fletcher’s case rather than giving evidence as an independent expert.

(b)Codd’s conclusion as to the level of completeness of the LMM work was “some 30 to 40 per cent less than that calculated by all the other experts”.  More importantly, his Honour said, it is “significantly less than the figure arrived at by the those engineers and architects who were on site at the time”.  (The only people who were “on site at the time”, i.e., prior to 16 November 1996, and who gave evidence at the trial, were Grahame and Bowe.  Scheele was also “on site” but, as we have said, he did not give evidence.)

(c)The MMP was under construction “then” (namely, when LMM was providing its drawings) and ultimately met budget requirements and was delivered to the government “a few months after LMM quit”.

(d)His Honour then tested Codd’s assessment against what Spowers actually did to complete the project.  The judge said that Spowers prepared six drawings, “almost mostly from LMM’s work and that only two were of relative novelty”. 

(e)Spowers completed the drawings for Stage 3 for “about the same sum as LMM considers it would have been owed for work yet to be done by it”. 

(f)The “architect on site” (presumably, the judge was referring to Scheele) considered that 95 per cent of the LMM work was completed as at 10 September 1996 and Spowers, which took over from LMM, through Brickell said it was “85 per cent or more” complete.

(g)Codd’s analysis appeared to be quantitative rather than qualitative.  Mr. Martin for Fletcher submitted in the course of the hearing before us that his Honour erred in that conclusion.  Counsel contended that Codd’s assessment was qualitative rather than quantitative. 

(h)His Honour considered that Codd exaggerated the standard of security that was required for the MMP and this led him into error in assessing whether LMM had performed sufficiently the work required of it by the Consultancy Agreement.  The judge said, in effect, that Codd set standards which were unreal and were not required by the NPP for the design of the MMP.  His Honour summarised this view by saying that the standards “which his analysis demands would produce an impenetrable, escape proof fortress.  This was not the objective of the NPP and certainly not of Fletcher, which was building to a budget.  In that regard, his Honour referred to what Codd said “should be one of the criteria in achieving maximum performance with regard to the prime function of the NPP."  His Honour quoted the following statement by Codd:

‘Primary concerns focus on security issues.  This means that every part of the design from master planning to the smallest detail needs to take account of the fact that attempted escape will show up any weakness in security.  To keep an inmate removed from the community for the period of incarceration is the primary task of the facility.’

That analysis, said his Honour, was not aligned with the NPP, which referred to prisoner dignity and rehabilitation.  His Honour said: 

"This case does not concern matters of penal philosophy, but Mr. Codd’s remarks reveal the position from which Codd moved.  He implanted on the architect obligations which were simply not in the brief.  Therefore, his basic premises were wrong and everything built upon them became flawed.”

(i)Other than Codd, no other witness complained about the standard of LMM’s work.  In any event, his Honour said, “construction work proceeded based on the design documentation stage and ultimately continued into Stage 4 – the commissioning stage”.

1. His Honour also dismissed as “absurd” Codd’s claim that 50 drawings should have been, but were not, completed by LMM.  It seems that the basis of this conclusion was that “the MMP was built and commissioned on the basis of 167 LMM drawings and six extra ones, only two of which were new and were prepared by [Spowers].  The MMP has been functioning for more than three years as designed and built.  To suggest that almost a quarter of the drawings necessary to have achieved this were omitted, is simply not credible.” 

Whether it was correct to reject Codd’s evidence

1. Codd was Fletcher’s principal witness on this important issue, and the judge rejected outright the whole of his evidence.  During the course of the argument in this appeal, Mr. Vickery, for LMM, accepted that if his Honour erred in rejecting Codd’s evidence, and in particular, his conclusion that LMM’s work was only complete to the extent of 57 per cent, then his Honour’s assessment that the work was 93 per cent complete as at 16 November 1996, could not stand.  In our view, with all respect, his Honour  made a number of errors in arriving at his decision to reject the whole of Codd’s evidence.  It will be necessary to examine the nature and the character of the errors to determine if they went to the basis of his Honour’s rejection of Codd and thus vitiated his decision in that regard. 

1. First his Honour made a fundamental error in concluding that Codd’s  evidence was based on a false premise, namely, that the design and documentation of the MMP had to reflect a level of security that was not called for by the contract documentation.  Secondly, his Honour erred in finding that Codd “implanted on the architect obligations which were simply not in the brief and were not required by the Consultancy Agreement”.  There were, as we have already mentioned, other reasons for which his Honour dismissed Codd’s evidence, but it is plain that a major reason for his Honour’s total rejection of Codd was that he took the view that Codd made his assessment on a false premise relating to the security that was required for the MMP. 

1. In our view, the contract does call for the design of the MMP to include security facilities to the standard which Codd said was applicable.  The design brief, which is incorporated into the Consultancy Agreement, stipulates the security factor as an essential design requirement.  It provides that the LMM design is to provide or include, inter alia –

“(a)a facility which was to operate as part of the Victorian prison system and include:

(i)the secure management of and safe custody for remand and sentenced male prisoners;

...

(c)a facility which would contain and supervise prisoners in a safe, secure, humane and just manner (s.2.2.1).

...

(g)a facility which incorporated prison security principles including:

(i)an effective balance of static and dynamic security components;

(ii)a secure principle perimeter;

(iii)secure prisoner accommodation; and

(iv)contraband control facilities (s.6.3).

(h)a facility which minimised aids to escape by careful design, layout and placement of buildings, walls, structures, services, elements, furniture, fittings and equipment (s.8.1).

...

(r)measures to ensure the whereabouts of all prisoners was known at all times, and that the movement of all prisoners within the prison was controlled at all times (Appendix A.2.3.2).”

In the light of these requirements of the design brief, there was no basis on which his Honour could have properly concluded that Codd, by focussing on the security issues as he did, “implanted on the architect obligations which were simply not in the brief”.  That Codd had regard to the security requirements of the design brief (as LMM should have done) when considering the content of the prison design, is clear from his evidence, more particularly his principal witness statement of February 2000 and his subsequent witness statement in which he made frequent references to the requirements of the design brief. 

1. It is also clear, in our view, that his Honour wrongly characterised Codd’s evidence as effectively requiring a design that would produce “an ideal maximum security prison”.  Part of the reason for this mistake probably sprang from the judge’s selective quoting of Codd’s evidence on this issue.  As we have already mentioned, his Honour quoted passages from Codd’s evidence to show that he considered that the design should produce an impenetrable, escape proof fortress and that his requirements in that regard were not in accordance with the modern prison philosophy which the NPP sought to have reflected in the design of the MMP.  His Honour omitted reference to other paragraphs in Codd’s evidence, including paragraphs 17 to 20 of his principal witness statement in which he made it plain that he considered that the aim of a prison design called for a balanced approach to security and that he well understood the modern approach to prison management with due recognition to the need to cater for prisoners’ rehabilitation.  He considered that the architect’s task was to create a physical environment for prisoners which met the objectives of the correctional philosophy of the government. 

1. These errors on his Honour’s part demonstrated also, with respect, that he did not properly appreciate that elements of the design brief required the prison to be secure (to the extent provided for in the design brief), in turn reflecting a fundamental misunderstanding on his Honour’s part of the criteria by which the extent of LMM’s services was to be determined and the extent to which those services had been completed. 

1. Next, his Honour wrongly assumed that the work of Spowers, which essentially amounted to carrying out the work that LMM had not completed, consisted of six drawings.  The trial judge failed to have regard to any of Spowers’ Project Advice Notices (“PAN”), at least 44 of which related to Stage 3 work according to Webster, a witness called by LMM.  It was an error to rely on the “six drawings” as a basis for inferentially concluding that most of the LMM work was complete by the time Spowers took over. 

1. We also take the view that Codd’s absence from the site was an irrelevant consideration when assessing the standard of the work, particularly when the witnesses whose evidence his Honour accepted, namely, Quigley, Bailey and Marshall, were also not “on site”.  No explanation was given by his Honour as to why he regarded that factor as relevant to an assessment of Codd’s evidence, but not, say, that of Quigley.  On the face of his reasons it does appear that his Honour applied different standards in assessing the evidence of competing experts. 

1. Another error in his Honour’s reasons for rejecting Codd was the conclusion that Spowers completed the drawings for Stage 3 for “about the same sum as LMM considers it would have been owed for work yet to be done by it” (emphasis added).  There was no evidence capable of supporting that conclusion.  Brickell’s evidence was that Spowers’ costs to complete Stage 3 were agreed at $193,223, yet by the time of invoice No.6436 on 9 September 1996 LMM had claimed all but $51,000 of the $915,000 fee and at the time of invoice No. 6440 on 11 November 1996 all but $6,233.  Brickell also said that the scope of services for Spowers and under the Consultancy Agreement were similar.  In the circumstances, it could not be said that the amount charged by Spowers to complete Stage 3 (just under $200,000) was not much different from what LMM said was the cost to complete the performance of its obligations under the Consultancy Agreement.

1. As we understood LMM’s submissions on this point, it was said that, in making the comparison, his Honour was not referring to the value of the outstanding LMM work, but to the amount which LMM said was outstanding to it, namely, $207,050 plus $45,000.  If that were the case, however, there would have been no point in comparing what was owing to LMM under the Consultancy Agreement (for past work) with the amount charged by Spowers to complete the remaining Stage 3 work.  The only possible meaningful comparison would be between the value of the work uncompleted by LMM at the time Spowers took over its obligations and the amount charged by Spowers for that uncompleted work.  Even that comparison could not be decisive, but if that was the exercise which his Honour sought to perform, then it could not be said, as the judge did, that “the amount charged by Spowers to complete Stage 3 was “not much different from what LMM said was outstanding at the time”.  Thus, his Honour either made a comparison which could not have been relevant to determining the state of completeness of the LMM work (i.e., between the balance due to LMM under the Consultancy Agreement and the Spowers fees) or made a comparison which was based on a false premise (i.e., the difference between the value of Stage 3 work outstanding as at 16 November 1996 and the Spowers fee which could not be described as “not much different”).  

1. Furthermore, his Honour seems to have failed to take into account in determining the worth of Codd’s evidence that, as well as assessing the work that was done by LMM, Codd also estimated, for cross-checking purposes, what was the reasonable cost to complete Stage 3.  Codd’s conclusion that the cost would be in the order of $250,000 meant that on that basis, 72.6 per cent of LMM’s work was completed.  This estimate is not very different from Brickell’s assessment of the completed work, which was also undertaken by reference to work yet to be done.  One would expect such an important item of evidence to be at least mentioned by the judge and, if it were to be disregarded, the reasons for doing so should have been stated.

1. His Honour in our view also erred in assuming that the state of construction was a yardstick in assessing the value of the services said to have been completed by LMM.  The LMM work may not have been complete, yet the building may nevertheless have progressed in its construction.  It may be that that was because Fletcher “made do” with a particular incomplete drawing or a set of incomplete drawings, or because others completed the work that LMM should have done.  Be that as it may, it cannot be said that merely because the construction of the building proceeded, LMM’s work was correspondingly complete. 

1. We mention for completeness, although it is probably of no great moment, that his Honour also erred in concluding that the project finished “a few months after LMM quit”; in fact it was completed some nine months later. 

1. The judge’s view that Codd’s evidence was prepared for a “purpose” was yet another matter treated as relevant to his Honour’s decision to reject this witness’s evidence.  But that observation could apply to every independent witness called in the case.  If what his Honour really meant was that Codd was an advocate for Fletcher’s cause and was not an independent expert witness, his Honour should, with respect, have said so and explained how he arrived at his conclusion.  Merely to make the statement without explanation or substantiation is itself suggestive of error. 

1. Next, his Honour’s dismissal of Codd’s evidence on the basis that the construction of the building progressed on time, was also erroneous.  The fallacy in the reasoning may be demonstrated by looking at 13 of the 50 drawings which are concerned with the pouring of the slab.  Codd’s view (and that of Bailey) was that LMM should have produced drawings which showed slab fit outs, namely, the location of plumbing and like services and other relevant dimensions.  The slabs, however, were poured without the slab fit outs being shown on any of the relevant drawings.  It was LMM’s case that Annexure A to the Consultancy Agreement which defined the scope of service only required it to document the necessary components for the project.  It argued that, since those components – the slab fit outs – were obviously not “necessary” because the slabs were poured without such drawings[6], Codd performed a theoretical exercise without regard to the requirements of the contract and to its administration by Fletcher “on the ground”.  His Honour effectively accepted that argument and, as we have said, dismissed Codd’s claim that these drawings were relevantly “missing”. 

   [6]In that context, LMM relied on the evidence of Robert Howden who was called by it to give evidence to the above effect.

1. The work which LMM was required to produce according to Annexure A, however, not only consisted of drawings without which the building could not have been built, but also included drawings that were “necessary to fully describe the Works” (emphasis added).  That requirement, we think, obliged LMM to have produced drawings that showed the slab fit outs.  Consequently, his Honour erred in his reasoning which led him to dismiss as “absurd” Codd’s claim that 50 drawings were missing. 

1. It is apparent from his Honour’s reasons that, as we have already mentioned, he accepted all of Quigley’s evidence and on that basis rejected Codd.  His Honour was obviously entitled to accept one witness in preference to another, but he failed to explain why he did so.  Quigley and Codd were critical witnesses and it is clear that Codd had by far the greater experience in prison design.  Quigley had none.  The importance of this factor, in our view, was that, on the evidence, the design of prisons required a level of detail that would not be required in respect of other public buildings.  It seems that Quigley did not take that factor into account in assessing LMM’s work.  To say, as Quigley did, that detail in the LMM drawing was sufficient because it would have been adequate for a lump sum tender contract, demonstrates his lack of appreciation that prison design required greater detail.  In those circumstances, his Honour should have explained, however briefly, why these matters did not operate to prevent him from wholly accepting Quigley and wholly rejecting Codd.

Conclusion as to the judge’s rejection of Codd’s evidence

1. The judge had the advantage, of course denied to this Court, of seeing the witnesses and in particular Codd, in the witness box.  It has been said many times that in these circumstances the task of an appellant is a difficult one.  It is unnecessary to repeat reference to the many High Court decisions to this effect, a number of which were reviewed at some length in Aqua-Max Pty. Ltd. v. M.T. Associates Pty. Ltd.[7].  A Court of Appeal will only be entitled to depart from a finding of fact made by a judge based on an assessment of a witness if the Court is “satisfied that any advantage enjoyed by the trial judge by reason of having seen and heard the witnesses, could not be sufficient to explain or justify the trial judge’s conclusion”:  Watt or Thomas v. Thomas[8].

   [7](2001) 3 V.R. 473 at paras.[63]-[64].

   [8][1947] A.C. 484 at 488.

1. In Walsh v. Law Society of New South Wales[9] McHugh, Kirby and Callinan, JJ. put the issue in the following way –

“… the appellate court will be bound generally to defer to any conclusions on the question of credibility formed by the court or tribunal from whom the appeal is brought where the latter has seen and heard the witnesses.  In particular circumstances, it will be open to an appellate court to reach conclusions contrary to those of the court or tribunal below, notwithstanding a credibility finding.  Sometimes it will be authorised to reject those findings where they are ‘glaringly improbable’ or ‘contrary to compelling inferences’ of the case.  But the caution required of all appellate courts in such matters has long been recognised and frequently upheld in decisions of this court.”

[9](1999) 198 C.L.R. 73 at 92.

1. In our view, given that his Honour’s reasons for rejecting Codd’s evidence were, with all respect, fundamentally flawed, the judge’s decision on this question cannot stand.  The inevitable consequence of such a conclusion is that his Honour’s assessment that the LMM work was 93% complete must also fall.  Even if we were wrong in that conclusion, there are, however, other errors made by his Honour to which we refer below which vitiate his Honour’s conclusion that LMM had completed 93% of the relevant work.

Brickell

1. As we have already indicated, in his summary of the estimates made by relevant witnesses as to the state of completion of the LMM work, the judge said that Brickell estimated that the state of completion was 85-87.5%.  Mr Martin argued, correctly in our view, and Mr Vickery for LMM conceded as much, that such a conclusion could not have been founded on Brickell’s evidence, which was that the LMM work was, at best, 75-80% complete.  In cross-examination Brickell said that his estimate of the state of completeness of the relevant work was closer to 80% than 75%.  Given that his Honour also said, in coming to his assessment of 93%, that “the lowest reliable percentage produced by a witness of credit and of reliable independence, is that of [Brickell] at 87.5%”, the judge’s error in relation to Brickell’s evidence destroyed another critical foundation for his 93% conclusion.  The error appears to have arisen from the fact that in his closing address, Mr Vickery for LMM submitted that, by analysing Mr Brickell’s estimate of 75-80% in a particular manner and taking into account certain other evidence, it was possible to interpret Brickell’s evidence as amounting to 85-87.5% completeness.  We do not accept Mr Vickery’s argument that this was a possible interpretation of Mr Brickell’s evidence, but even if it had been accepted by the judge, the fact remains that Brickell did not finally assess LMM’s work as between 85 and 87.5% complete.  If the judge accepted Mr Vickery’s argument, he should, with respect, have said so and explained why, rather than recording in his reasons the erroneous view that Brickell gave that evidence himself.

Bailey

1. In coming to the conclusion that LMM had completed 93% of the work, his Honour also had regard to what he considered to be Bailey’s estimate that 91 to 95% of the work was finished.  Given Bailey’s evidence and the circumstances in which it was given, we very much doubt whether his evidence was correctly summarised by his Honour (even if one overlooked that Bailey never said that the range was 91 to 95%).  On one view of the evidence, Bailey said that his assessment was 90 to 95% out of 130%.  This ambiguity was sufficiently important to require his Honour to explain the basis on which he concluded that Bailey’s estimate was 91 to 95%.  We consider that the judge’s failure to give that explanation amounted to error on his part.

1. The relevant circumstances and context in which Bailey gave the evidence were these.  In his evidence-in-chief, Bailey did not say what was the level to which LMM had completed its Stage 3 work, although in his supplementary witness statement he suggested that LMM had completed 94 to 96% of the relevant work.  When the matter was raised with him in cross-examination, he said: 

1. Fletcher's submission that the judge failed to deal with a number of relevant contractual provisions is bound up with the complaint that his Honour completely disregarded Fletcher's closing submissions which, inter alia, invoked contractual provisions that needed to be considered in order to resolve the issues in the case.  For example, in rejecting Codd's evidence the judge failed to have any regard to the contractual provisions setting out the scope of the work to be performed by LMM.  The extensiveness of LMM's obligations under the contract was crucial to any assessment of Codd's evidence, and was canvassed in some detail in Fletcher's closing submissions.  Yet the  judge undertook no analysis of the relevant provisions in this context.  As we have noted earlier, he evidently thought that Codd imposed standards upon LMM which were greater than those demanded by the contract.  His Honour, however, failed, as we have pointed out previously, to consider the contractual provisions themselves in order to determine whether that was so.  Paragraph (i) of Annexure A provided that LMM was required to prepare "details of working drawings, schedules and specifications".  The provision was clearly relevant to Codd's view that the prison design required significant detail which was lacking from LMM's drawings.  Again, the Design Brief which was incorporated into the contract, contained numerous references to security as a necessary element in the design of the prison.[57]  The trial judge criticized Codd for his inclusion of security as a matter to be taken into account in assessing the design of the prison.

   [57]See ss. 2.2.1, 6.3, 8.1, Appendix A 2.3.2.

1. A careful examination of the reasons for judgment shows that the judge adopted LMM's closing submissions almost in their entirety.  More than 40 paragraphs of the judgment correspond closely to the contentions advanced by LMM in its closing submissions.  Fletcher mounted contrary arguments relying on particular evidence and contractual provisions, which were set out extensively in its closing submissions.  Nowhere in the reasons is there any reference to those contrary submissions.  Fletcher alleged that one of a number of defects in the design of the prison was that LMM overlooked the requirement that the walls of cells at the end of the row of cells needed to be of the same strength as other exterior walls.  The defect was covered in Fletcher's closing submissions but was not dealt with in LMM's closing submissions.  We think that it is significant that the judge, too, did not deal with this claimed defect.

1. LMM submitted in this Court that the judge dealt with Fletcher's submissions by reaching conclusions which necessarily implied the rejection of those submissions.  That is no answer to Fletcher's complaint.  The Court is required to do more than decide the issues arising in a proceeding:  it is also obliged to give reasons for rejecting at least the principal submissions relied upon by the losing party which relate to the issues upon which the result of the proceedings depends.

1. The contrast in the manner in which the judge dealt with the submissions of the parties is striking, to the point that it appears that most of Fletcher's arguments and the evidence supporting its arguments were simply ignored by the judge.  If his Honour had any reasoned basis for rejecting the arguments, he did not state them.  Fletcher was entitled to complain of that treatment.

1. In Conder v. Silkbard Pty. Ltd.[58] Beazley, J.A. said that

   [58][1999] NSWCA 459.

"It was incumbent for [the trial judge] to deal with the central contentions advanced by the parties and indicate, even in general terms, whether and why he accepted or rejected those matters."

Similarly, the New South Wales Court of Criminal Appeal in R. v. Maxwell said:

"The appellant had a right to expect that the arguments put on his behalf would be dealt with in such a way that he could be satisfied that they had been understood and, either accepted, or, if rejected, that the rejection was based on a clear and rational process of reasoning."[59]

Again in Australian Securities Commission v. Schreuder Underwood, J. said:

"It was a clear obligation upon a judicial officer to deal with relevant submissions made by the parties for litigation.  If this is not done the parties are denied their proper rights of appeal and justice does not appear to have been done."[60]

[59]Referred to in Moylan v. NutrasweetCo. [2000] NSWCA 337.

[60](1994) 14 A.C.S.R. 614 at 625.

The significance of the errors and omissions

1. LMM in their written submissions conceded that of the 94 errors alleged by Fletcher, 24 were in fact errors.  In another eleven cases LMM made submissions which argued that no error was involved but made submissions which in effect admitted that error had occurred.  In at least another three cases LMM asserted that the error was of no consequence, impliedly accepting that error had occurred.  Having reviewed Fletcher's catalogue of errors we have concluded that the judge made some 50 errors and that the errors were significant in that they related to issues determined by his Honour and which presumably influenced his decisions.

1. Mr Vickery in oral argument put to the Court that the errors were either of no consequence, and/or that there was ample evidence in each case to support the conclusion at which the judge had arrived.  Counsel argued that in determining the adequacy of reasons, one had to view this trial as unique in the manner in which the parties had presented their cases.  It was said that both parties had consented to a shorter trial procedure, with a limited time in which to put their case, a prospect which presented risks but which avoided the possibility of a trial running possibly longer than a year.  In Mr Vickery’s submission Fletcher bore the onus of proof of breach of contract by LMM and in support of its case had produced vast paper schedules.  The nature of the way the case was conducted, so Mr Vickery’s argument ran, bore significantly on the judge’s capacity to reason.  In answer to the various schedules produced by Fletcher and in particular by Codd, LMM had produced vast schedules, and a great body of documents to support LMM’s case at every point.  Mr Vickery submitted that every single allegation mounted by Fletcher had been met and the answer was supported by documents.  Accordingly, the judge was left with two substantial bodies of written evidence and two competing sets of particulars.  In LMM’s submission the judge analysed the evidence as far as his Honour was able to do so.  Fletcher, having accepted a limited trial could now hardly complain as to an inadequacy of reasons.  Mr Vickery submitted that the degree of reasoning required must depend on the circumstances of each case.

1. In our opinion it does not follow from the fact that evidence exists to support a conclusion drawn by the judge that errors of significance, or substantial inadequacy, in the reasons for arriving at the conclusion are to be disregarded.  The limitations in the conduct of the trial to which the parties agreed no doubt placed a severe burden on the judge (and, for that matter, the parties and their legal advisers) and may have played some part in the making of the errors we have identified in the judge’s reasons.  But these limitations do not in our view require the losing party to accept a verdict in which such errors played a significant, and possibly crucial, role, nor to accept a verdict arrived at, say, by coincidence, in circumstances where it cannot be said that only one proper conclusion, or set of conclusions, was open on all the evidence.  Nor did those limitations justify the want of, or inadequacy of, reasoning. 

1. While oral submissions and cross-examination were limited, no restrictions were placed upon written statements of witnesses or written submissions as to the facts and the law.  Nearly all the witnesses gave oral evidence.  The oral evidence of the principal protagonists, Marshall and Grahame, occupied 402 pages of transcript.  We do not think it can be said that any of the issues in the trial were of such a nature that no rational basis could be stated for discriminating between the various positions of the parties.  The judge himself never expressed any difficulty in deciding any of the contested issues of fact nor did his Honour resolve any issue of fact on the basis that a party had failed to discharge a burden of proof. 

1. The courts have approached the question of the adequacy of reasons given independently of the correctness of the conclusion reached by the judge.  For example, in Palmer v. Clarke[61] inadequate reasons resulted in the setting aside of a decision in circumstances where the outcome of the case itself was not necessarily incorrect.  Kirby, P. said:

“It is not necessary to resolve the appeal on the merits.  The appellants took a preliminary point which succeeds.  It is enough to say that, at the point at which appellants’ counsel were stopped from arguing the merits, I would not have been disposed to disturb the judgment in favour of the respondent on these grounds.  It must, however, be disturbed for another consideration, to which I now turn.”[62]

His Honour then went on to address the question whether the trial judge’s reasons were adequate.  It was held that they were not and a new trial was ordered.  In the same case, Priestley, J.A. said:

“Had the reasons eventually forwarded by Moore, D.C.J. been given before the judgment it would have been very difficult for this Court to overturn the judgment that he arrived at both on the plaintiffs’ claim and the defendant’s cross-claim.  I say this having heard the argument to the contrary by Mr Rares for the appellants yesterday.  I refrain from speaking more positively only because Mr Rares did not complete that argument as the Court decided the appeal must be resolved in his client’s favour on the ground that has been dealt with in detail by the learned President.”[63]

[61](1989) 19 N.S.W.L.R. 158.

[62]Above at 163.

[63]Above at 174.  See also Sun Alliance, above, at 18 per Gray, J.; Ambulance Service of New South Wales v. Daniel [2000] NSWCA 116; Papps v. Police (2000) 77 S.A.S.R. 210.

Conclusion

1. It is plain from what we have said that the errors and want of reasoning we have identified in the judge’s reasons were of such a nature and overall magnitude that his Honour’s conclusions cannot stand, and the decision must be set aside.  It is common ground, as we have said, that in these circumstances the disputes between the parties in this proceeding cannot be determined by us.  Consequently we are reluctantly driven to the conclusion that the only appropriate disposition of the appeal is to allow the appeal, set aside his Honour’s judgment and orders and to order a new trial.  We arrive at this conclusion with great regret, conscious of the enormous expense both to the parties and public funds, brought about by this result.  There is, however, no alternative.  Having regard to the views we have expressed on the two principal grounds of appeal, it is unnecessary for us to comment on any of the remaining grounds.

1. For the foregoing reasons we allow the appeal and order that the proceeding be retried.

- - -

APPENDIX

ANNEXURE  3 TO THE NOTICE OF APPEAL

GROUND 12

ERRORS

Errors of Fact

1. DR17/CR17 The learned trial judge erred in finding that, as at 11 April 1996 LMM had not charged the consortium for any of its schematic design work when, as at 11 April 1996, LMM had charged for and been paid its fee of $30,000 for schematic design.

1. DR21/CR20 The learned trial judge erred in finding that the drawings prepared by the plaintiff ('LMM') were stamped "approved for construction" by the defendant ('FCA') after:

   a)taking into account comments from G4;

   b)endorsement by the NPP.   

1. The drawings referred to in paragraph 2 above were stamped "approved for construction" by Mr Warwick of FCA immediately the documents were received by FCA but prior to:

   a)the receipt of any comments from G4;

   b)any endorsement by the NPP.           

1. DR41/CR40 The learned trial judge erred in finding that clause 1(b) or clause 14(a) of the General Conditions of the Consultant Agreement of themselves were tantamount to a written instruction from FCA to LMM to follow the DRP inherent in the PDP when, instead of constituting a direction or instruction by themselves and without more, clauses 1(b) and 14(a) of the General Conditions of the Consultant Agreement were merely terms of the Consultant Agreement.

1. DR152/CR149 The learned trial judge erred in finding that upon the NPP signalling its endorsement of the drawings, they were returned to FCA and were then marked “approved by FCA” and then rubber stamped “approved for construction” by FCA when in fact there was no evidence to support such a finding.

2. DR154/CR151 The learned trial judge erred in finding that, in respect of the 163 drawings referred to in FCA’s defence and counterclaim, LMM relied upon the "approved for construction" stamp when preparing its invoices for documentation when Mr Marshall’s evidence was that LMM only received one drawing stamped "approved for construction" and the source of this document was unknown.

1. DR163/CR160 The learned trial judge erred in finding that the dispute as to fees erupted in September 1996 when in fact fee disputes between FCA and LMM occurred as early as July 1996.

1. DR163/CR160 The learned trial judge erred in finding that, in October 1996 LMM contended that its work was 95% complete when in fact LMM was then contending that its work was approximately 97% complete.

1. (Deleted).

1. DR181/CR179 The learned trial judge erred in finding that, by letter to LMM dated 26 July 1996, FCA conceded that the entirety of the LMM documentation was 75% complete when the thrust of the letter was that any individual document forwarded to the NPP for review would be regarded, for the purposes of payment, as 75% complete.

1. DR209/CR206 The learned trial judge erred in finding that LMM probably thought FCA was in some sort of financial difficulty on 21 October 1996 when there was no evidence from LMM or FCA to support such a finding.

1. DR209/CR206 The learned trial judge erred in finding that FCA was "temporarily straitened" in its construction contract with ACF when there was no evidence to support  a finding that FCA was in some sort of financial difficulty on 21 October 1996.

1. DR209/CR206 The learned trial judge erred in making his implicit finding that FCA did not pay LMM because it was in financial straits in respect of (presumably) its construction contract with ACF when the evidence was that:

   a)FCA had made large payments to LMM despite being cash flow negative;

   b)FCA did not pay the LMM invoices in dispute because the relevant FCA employees formed the view that it had not completed the work in respect of which it was seeking payment.

1. DR212/CR209 The learned trial judge erred in finding that Mr Grahame was aware that his meeting on 16 October 1996 with Mr Marshall was a settlement meeting pursuant to GC 23(a) when there was no evidence to support such a finding, and the learned trial judge should have found that Mr Grahame did not know that his meeting on 16 October 1996 with Mr Marshall was or was to be a settlement meeting pursuant to General Condition 23(a).

2. DR215/CR212 The learned trial judge misconstrued Exhibit P156 as indicating only $1,063 would be paid by FCA to LMM subsequent to 23 October 1996 when the exhibit indicated that FCA then estimated its final cost of LMM's services at $1,714,751 and the column which included the sum of $1,063 in fact indicated no more than the difference between the Revised Budget and Estimated Final Cost columns as was apparent on the face of the document. 

1. DR226/CR222 The learned trial judge erred in finding that LMM did not operate a CAD facility when the evidence was that LMM did operate a CAD facility.

1. DR226/CR222 The learned trial judge erred in finding that FCA knew LMM did not operate a CAD facility when the evidence was that LMM did operate a CAD facility and FCA knew LMM operated a CAD facility.

1. DR240/236 The learned trial judge erred in finding that LMM did everything that was required of it by FCA without contest or complaint when the evidence (both in the form of contemporaneous documents and the written and oral evidence of witnesses) showed serious disputes between FCA and LMM as to the services provided and to be provided by LMM.

1. DR241/237 The learned trial judge erred in finding that FCA's dissatisfaction with LMM's services only arose when FCA was pressed for payment and it was tardy in producing its complaints about incomplete or omitted work when there was ample evidence that:

   a)FCA's dissatisfaction with LMM's services arose prior to FCA being "pressed for payment" by LMM;

   b)FCA made complaints about LMM’s services whilst LMM was still involved in design and;

   c)many of the omissions and defects complained of by FCA in did not become apparent until after LMM left the project. 

1. DR244/CR240 The learned trial judge erred in his finding that galvanising may have prevented or hindered the ingress of moisture under the C-section window frame when there was no evidence that galvanising has any effect on the ingress of moisture under the C-section window frame.

2. DR244/CR240 The learned trial judge erred in concluding FCA became the author of the defect for which it claimed more than $2m by the deletion of galvanising when the learned trial judge ought to have found that if LMM had complied with the Consultant Agreement and issued painting specifications in compliance with the Australian Standard for prime painting of metalwork Exhibit D90 galvanising was unnecessary.    

3. DR247/CR243 The learned trial judge erred in finding that FCA took upon itself the responsibility for the fitment of cell windows into the fenestration when there was no evidence to support such a finding.

1. DR247/CR243 The learned trial judge erred in finding that the fenestration was dictated by Mr Twinn of G4 and FCA accepted it when there was no evidence to support such a finding.

1. DR277/CR243 The learned trial judge erred in finding that if Mr Twinn did not approve of anything it did not happen, until it was modified and his imprimatur given when Mr Twinn’s own evidence was to the contrary [TN 896.13-22 ].

1. DR295/CR291 The learned trial judge erred in stating that pre-cast concrete was prepared by SWIJ as pre-cast concrete was not prepared by SWIJ although drawings in respect of pre-cast concrete were prepared by SWIJ.

1. DR295/CR291 The learned trial judge erred in finding that Mr Pepper had no difficulty in preparing shop drawings based on LMM's architectural drawings when SWIJ prepared the pre-cast concrete drawings not LMM.

1. DR297/CR293 The learned trial judge erred in finding that a certificate of occupancy was issued which certified that the design of the prison complied with the building regulations and codes in all respect as the certificate of occupancy provided no certification at all as to the design of the prison.

1. DR301/CR297 The learned trial judge erred in finding that the MMP was delivered to the DOJ "on time and on budget a few months after LMM quit" when the MMP was handed over in August 1997, some 9 ½  months after LMM left the project.

1. DR301 & 369/CR297 The learned trial judge erred in finding that Spowers work to complete the MMP project consisted of only 6 drawings when the evidence of Mr Brickell (which the learned trial judge accepted) was that, amongst other work performed by it, Spowers prepared many other sketches and issuing approximately 446 project advice notices (PANS).

1. DR301/CR297 The learned trial judge erred in finding that Spowers completed the drawings for stage 3 "for about the same sum as LMM concedes was yet to be done by them" when Spowers undertook the stage 3 design documentation work for an agreed fee of $193,223 and LMM was at that time asserting that it was entitled to be paid all but $6,000 of its fee for stage 3 design documentation and at trial contended that it was entitled to be paid all but $45,750 of its fee for stage 3 design documentation.

1. DR301/CR297 The learned trial judge erred in describing (if he did) "the architect who took over, namely Spowers" as one of LMM’s witnesses, when Mr Brickell of Spowers was called by FCA.

1. DR301/CR297 The learned trial judge erred in finding that Mr Codd’s figure was significantly less than the “figure arrived at by those engineers and architects who were on site at the time”, when no engineer who was on site “at the time” (presumably November 1996) gave any figure in evidence at all.

1. DR301/CR297 The learned trial judge erred if he made a finding that the plaintiff’s expert witnesses in respect of the state of completion of the Stage 3 design documentation (Messrs Quigley and Bailey) were “the actual people to work with and from LMM’s drawings” when Messrs Quigley and Bailey were never on site during the construction of the MMP.

2. DR301/CR297 The learned trial judge erred in finding the evidence of Mr Brickell of Spowers was that LMM had completed "85% or more" of its stage 3 design documentation services, when Mr Brickell's evidence was the figure was "at the most 80%" TN 1623.3-.8.

3. DR320/CR316 The learned trial judge erred in finding that Mr Webster gave evidence as to the corrosion of windows, when Mr Webster gave no such evidence.

1. DR372/CR323 The learned trial judge erred in finding that Mr Twinn and Mr Graeme would not have tolerated direction from LMM and would not have tolerated LMM leading the development of the design and supervising co-ordination when there was no evidence to support such a finding.

1. DR328/CR324 The learned trial judge erred in finding that November 1996 was only a “few months prior to the hand over” when, in November 1996, there was still 9 ½  months until hand over.

1. DR348/CR344 The learned trial judge erred in finding that, by 24 May 1996, most (or, at DR409/CR401 half) of the architectural work in respect of the MMP had already been completed by LMM when the facts were that LMM had claimed for approximately $500,000 of its total fee only and had therefore at best completed less than one third of its architectural services.

1. DR352/CR348 The learned trial judge erred in making his finding of fact that FCA presented itself prior to the MMP project as having some experience in building prisons and relying in respect of that finding on exhibit P131 when the evidence was that exhibit P131 was prepared at the time at which the MMP was due for hand over.

1. DR359/CR355 The learned trial judge erred in his finding that Mr Warwick was an employee of FCA when, at the time of the trial, Mr Warwick was a former employee of FCA.

1. DR363/CR359 The learned trial judge erred in finding that, in respect of defect 1, it was Chubb that required additional space in each of the cupboards the subject of the claim to fit its equipment, when the evidence was that Chubb required additional space in only 1 of the cupboards in dispute.

1. DR363/CR362 The learned trial judge erred in finding that Chubb was an “off-shoot” of G4 when there was no evidence to support such a finding.

1. DR366/CR362 The learned trial judge erred in finding that Mr Scheele calculated the state of completeness of the LMM documentation as 95% as at 16 November 1996 when there was no evidence to support such a finding.

1. DR366/CR362 The learned trial judge erred in finding that Mr Graeme assessed the level of completeness of LMM’s works at 95% as at 16 November 1996 when there was no evidence to support such a finding.

1. DR375/CR368 The learned trial judge erred in making his implicit finding that Mr Twinn had "expert input" into all aspects of the design of the windows, whereas Mr Twinn’s own evidence was that his input was in respect of security and operational issues.

1. DR375/CR368 The learned trial judge erred in finding that FCA accepted Mr Twinn’s assumption of authority on its behalf in respect of the design of windows when there was no evidence to support such a finding.

1. DR382/CR375 The learned trial judge erred in finding that FCA accepted Mr Twinn’s assumption of authority on its behalf in respect of the design of cell doors when there was no evidence to support such a finding.

1. DR379/CR386 The learned trial judge erred in finding that FCA knew that Mr Marshall was overseas at the time of design meeting No.20 and ‘accepted that fact’ when there was no evidence to support such a finding.

1. DR389/CR382 The learned trial judge erred in finding that "LMM relies upon an acoustic report which it had commissioned and accepted from Mr Marshall dated 1 July 1996".  Presumably the reference to LMM is intended to be a reference to FCA.  Nevertheless, the acoustic report was not commissioned or accepted from Mr Marshall, but from Carr Marshall Day, an entity with no connection to Mr Marshall.

1. DR389/CR382 The learned trial judge erred in finding that FCA accepted and in fact insisted upon assuming responsibility for the preparation of the acoustic report as there was no evidence to support such a finding and the learned trial judge did not make any reference to any relevant evidence.  Further, this latter finding is inconsistent with his finding earlier in the same paragraph of his judgment that Mr Marshall prepared the acoustic report.

1. DR392/CR385 The learned trial judge erred in finding that FCA permitted G4 to undertake design work in respect of both loose and fixed FF&E and compound fencing when:

   a)Mr Marshall’s evidence was that LMM undertook some design work for loose and fixed FF&E;

   b)Mr Brickell’s evidence was that LMM had undertaken some design work for loose and fixed FF&E and that Spowers undertook design work in respect of both loose and fixed FF&E and compound fencing when completing the services that LMM should have undertaken.

   c)Mr Twinn’s evidence was that G4 supplied loose FF&E in accordance with an agreement with FCA (exhibit D87).

1. DR395/CR388 The learned trial judge erred in accepting Mr Marshall’s evidence that he was told by employees of FCA in May 1996 that FF&E was not his responsibility when there was no evidence to support such a finding and LMM undertook FF&E design work.

1. DR398&399&9/CR391&392 When dealing with paragraph (a)(ix) of the particulars to paragraph 48 of the fourth further amended defence and counterclaim, the learned trial judge erred by finding he would only deal with those items were raised at trial, when all the items were raised at trial and Mr Brickell (whose evidence he accepted) gave evidence about LMM’s failure to undertake each of the services in question.

1. DR398&399/CR391&392 In considering paragraph (a)(ix) of the particulars to paragraph 48 of the fourth further amended defence and counterclaim the learned trial judge erred by finding that the items complained of were raised by Mr Codd whose evidence he had rejected when, in fact, they were raised by Mr Brickell whose evidence he had accepted.

1. DR399/CR392 The learned trial judge erred in finding that the incomplete work listed under paragraph (a)(ix) of the particulars to paragraph 48 of the fourth further amended defence and counterclaim were "minor", when the evidence of Mr Brickell (which he accepted) was that they were significant omissions. 

2. DR403/CR396 When dealing with paragraph (a)(xiii) of the particulars to paragraph 48 of the fourth further amended defence and counterclaim, the learned trial judge erred in finding that none of the complaints had been established when the complaints were supported by the evidence of Mr Brickell, which evidence the learned trial judge accepted.

1. DR413-484/CR405-477 In these paragraphs the learned trial judge has made findings in respect of defects 1 to 13 of the 17 defects set out in Section 2C of Schedule 2 of FCA’s third further amended defence and counterclaim.  It is apparent that the learned trial judge has not considered FCA’s closing submission in respect of these items (he has not referred to them or dealt with the factual issues and arguments raised).  The errors of fact in these paragraphs are too numerous to list in this annexure and FCA refers to Section J of its closing submission.

1. DR488/CR481 The learned trial judge erred in finding that Mr Twinn was of the opinion that LMM’s work was adequate when Mr Twinn gave no such evidence and was in fact critical of LMM’s work [TN 892.22-894.19].

1. DR488/CR481 The learned trial judge erred in finding that Mr Twinn was of the opinion that LMM had discharged its duties and obligations when Mr Twinn gave no such evidence and was in fact critical of LMM’s work [TN 892.22-894.19].

1. DR488/CR481 The learned trial judge further erred in finding that Mr Twinn had some expertise in judging the architectural quality of LMM’s work when Mr Twinn’s evidence was that he had no such qualifications [TN 887.26 – 889.10]

1. DR489/CR482 The learned trial judge erred in finding that it was Mr Codd’s evidence that the MMP was a public building of "stunning novelty", when in fact:

   a)Mr Codd’s evidence was that the MMP was not unusual; and

   b)It was LMM’s case (rather than FCA’s) that the MMP was a highly unusual and unique ‘first time’ project. [See paragraph 6 of the LMM ‘Key Points of Final Address’ document provided during closing submissions]

1. DR500/CR493 The learned trial judge erred in finding that FCA’s termination of LMM in December 1996 was "a construct for litigation purposes" when the evidence was that:

   a)   LMM was, by late November 1996 asserting that it had completed over 99.5% of its stage 3 design documentation services;

   b)   FCA had prepared lists of outstanding design issues as at 6 December 1996 as referred to in paragraph 15 of exhibit D205 and paragraph 124 of exhibit D125;

   c)   After terminating LMM, FCA then engaged Spowers as its replacement architect for a considerable fee;

   d)   Spowers, according to Mr Brickell’s evidence (which the learned trial judge accepted) undertook considerable work within LMM’s scope of services under the Consultant Agreement that LMM had failed to complete.

1. DR511/CR504 The learned trial judge made a series of errors in respect of FCA’s obligation to pay and payments made to LMM by it.  FCA refers to Grounds 2 and 3 of the amended notice of appeal.

1. DR516/CR508 The learned trial judge erred in finding that, as at 18 December 1996 LMM had ceased work when in fact it had merely suspended work pending payment by FCA.

2. DR521/CR513 The learned trial judge erred in finding that Mr Hanich of FCA, by failing to hand over a cheque in his pocket on 20 November 1996, accepted LMM’s repudiation of the Consultant Agreement.  It is not possible to place any meaningful interpretation on this finding given the learned trial judge’s earlier finding that LMM had accepted FCA’s repudiation of the Consultant Agreement.

1. DR521/CR513 The learned trial judge erred in finding that the final stage (presumably the construction stage) was about to commence in December 1996, when construction had commenced in July 1996. 

1. DR526/CR518 The learned trial judge erred in finding that LMM accommodated changes to drawings "so that they could be incorporated in the framework of its fee structure" when many revisions of the disputed drawings were made as part of the design and construct process.

1. DR526/CR518  The learned trial judge erred in finding that LMM did not seek payment for variations except in one instance when LMM in fact sought payment for variations in at least 5 separate invoices.

Errors as to the cases of the parties

1. DR45/CR44 The learned trial judge erred in saying that FCA contended at trial that the stamping of documents "approved for construction" did not mean that FCA was then obligated to pay for the documents as FCA made no such contention at trial (as no issue was raised which required such a contention).

1. DRD45/CR44 The learned trial judge erred in making his implicit finding that LMM contended at trial that the stamping of documents "approved for construction" by FCA meant that FCA was then obligated to pay for the documents as LMM made no such contention at or prior to trial or in its pleadings.

1. DR65/CR64 The learned trial judge erred in finding that FCA admitted that additional professional services for the construction phase of the work was done by LMM and conceded that the amount of $76,525 was payable in that respect when, in fact, FCA denied that any amount was payable in respect of construction phase services and made no such concession prior to or during the course of the trial, as was made clear in its Closing Submissions E6.1-6.3 and elsewhere.

1. DR94/CR91 The learned trial judge erred in finding that FCA contended that the present plant platforms located on the roof and within the roof cavities constitute an occupational health and safety hazard as FCA made no allegations about plant platform located in roof cavities as no such platforms exist.

1. DR94/CR91 The learned trial judge erred in finding that FCA alleged that it would have to relocate plant platforms as FCA made no such allegation.

1. DR95/CR92 The learned trial judge erred in his finding that defect 17 arose because Mr Twinn said that fixed ladders to the plant and equipment were not required by G4 as FCA made no claim in respect of fixed ladders.

1. DR195/CR193 The learned trial judge erred in his finding that LMM alleged that finishes schedules and compound fencing were not part of its architectural services when LMM made no such allegation and the learned trial judge later made findings (DR399/CR392) that in respect of finishes schedules that LMM conceded that these were within its scope of services.

2. DR277/CR273 The learned trial judge erred in finding that FCA attempted at trial to disavow Mr Twinn when FCA relied upon Mr Twinn's evidence in its closing submissions and argued that his evidence supported FCA's case.

1. DR284/CR281 The learned trial judge erred in summarizing FCA's Closing Submission as contending Mr Twinn's evidence quoted at DR284/CR280 disavowed Mr Twinn's central position when, in accordance with FCA's Closing Submission, the learned trial judge ought to have accepted that Mr Twinn's evidence supported FCA's case, and the particular submission that Mr Twinn was not the designer, not an architect, not a builder and the other points made in paragraph P17.10.

1. DR285/CR181 The learned trial judge erred in finding that "FCA cannot now say they were not bound by decisions made by Mr Twinn on their behalf" when the question of whether Mr Twinn made decisions on behalf of FCA was not in issue in the case. 

1. DR288/CR284 The learned trial judge erred in summarizing FCA's complaint about the doors as one about the actual dimensions of metal skin of the cell doors when FCA's complaint was that LMM did not initially specify 3mm x 2mm skins when it should have.

1. DR373/CR366 The learned trial judge erred in finding that LMM “contends that FCA is now estopped from designing the windows", when LMM made no such contention at trial (and the meaning of the finding is unascertainable in any event.

1. DR379/CR372   When dealing with paragraph (a)(ii) of the particulars to paragraph 48 of the fourth further amended defence and counterclaim, the learned trial judged erred in finding that the particulars referred to cell doors only, when the complaint was not so limited.

1. DR409/CR401 The learned trial judge erred in finding that, in April 1999 a substantially new case was advanced by FCA based upon a revised counterclaim, when in fact the revised defence and counterclaim was not a “new” case at all. FCA refers to the earlier versions of its defence and counterclaim.

1. DR409/CR401 The learned trial judge erred in finding that FCA “rather unhandsomely contends” that it was the minor party in (presumably) the consultant agreement, when FCA never made that contention.

1. DR412/CR404 The learned trial judge in finding that FCA’s counterclaim “rests significantly” upon Mr Kendall and, in particular, upon his second reply statement, Exhibit D239, when Mr Codd and Mr Brickell also gave evidence in support of the FCA counterclaim.

Inconsistencies in the apparent reasoning of the learned trial judge

1. DR198/CR196 The learned trial judge described Mr Bowe's assessment of the value of LMM's work as a valueless exercise, in part because the work was done "in less than 2 days".  However, the learned trial judge was prepared to accept [DR249/CR245] that Mr Bailey - LMM's expert witness - could make a similar assessment 'overnight' when he was detained in Melbourne during the trial when his evidence was not completed at the end of the first hearing day on which he gave evidence.

1. DR198/CR196 The finding by the learned trial judge that Mr Bowe was unqualified to make the assessments set out in his report is inconsistent with his findings DR255/CR251, DR256/CR252, DR259/CR255 as to the satisfactory qualifications of each of the LMM witnesses called to give expert architectural evidence.

1. DR255/CR251 The finding by the learned trial judge that Mr Howden had relevant architectural expertise is inconsistent with his finding that the class of work relevant to the CA was [492] "the design and construction of large public institutional buildings requiring secure environments", in respect of which Mr Howden was unqualified.

1. DR256/CR252 The finding by the learned trial judge that Mr Permewan had relevant architectural expertise is inconsistent with his finding that the class of work relevant to the CA was [492] "the design and construction of large public institutional buildings requiring secure environments".

1. DR259/DR255 The finding by the learned trial judge that Mr Quigley had relevant architectural expertise is inconsistent with his finding that the class of work relevant to the CA was [492] "the design and construction of large public institutional buildings requiring secure environments".

1. DR260/CR256 The finding of the learned trial judge that he could accept the evidence of Mr Quigley in negatively assessing the value of work not done by LMM is inconsistent with his criticism DR362/CR358 of Mr Kendall undertaking exactly the same task.

1. DR277/CR273 The finding of the learned trial judge that Mr Twinn was an impressive witness is inconsistent with the learned trial judge's apparent rejection of his evidence insofar as it supported the case of FCA.

1. DR300/CR296 The finding of the learned trial judge that Mr Codd's evidence was diminished because he was not on site is inconsistent with his failure to find that the evidence of the LMM architectural experts was similarly diminished even though they were also not on site.

1. DR300/CR296 The finding of the learned trial judge that Mr Codd's evidence was diminished because it was prepared for the purposes of the proceeding is inconsistent with his failure to find that the evidence of the LMM architectural experts was similarly diminished even though their evidence was likewise prepared for the purposes of the proceedings.

1. DR336/CR332 The rejection by the learned trial judge of Mr Grahame’s evidence that Mr Marshall “acted more like a draftsman than an architect” is inconsistent with the learned trial judge’s finding that FCA waived certain significant elements of a design of the prison and that LMM merely documented the design of others in respect of these items.