Goldspar Australia Pty Ltd v Council of the City of Sydney
[2000] NSWSC 685
•18 July 2000
Reported Decision: [2001] 17 BCL 183
New South Wales
Supreme Court
CITATION: Goldspar Australia Pty Ltd v Council of the City of Sydney [2000] NSWSC 685 FILE NUMBER(S): SC 55025/99 HEARING DATE(S): 26, 27, 28 & 29 June 2000 JUDGMENT DATE: 18 July 2000 PARTIES :
Goldspar Australia Pty Ltd (Plaintiff)
Council of the City of Sydney (Defendant)JUDGMENT OF: Einstein J
COUNSEL : S. Walmsley SC, I. Young (Plaintiff)
G. Inatey SC, M. Condon (Defendant)SOLICITORS: Greg Judd & Associates (Plaintff)
Pricewaterhousecoopers Legal (Defendant)CATCHWORDS: Contract - Contract for expert determination - Principles governing intervention of Court in determination of expert - Need to establish a mistake amounting to a breach of contract - No relevant mistake established. - Evidence - Circumstantial evidence - Evidence from which inference may be drawn - Distinction between inferences and hypotheses. CASES CITED: Bradshaw v McEwans Pty Ltd (27 April 1951
ex parte Hebburn Ltd; Kearsley Shire Council (1947) 47 SR (NSW) 416
G & L Woolnough Pty Ltd v Stewart (unreported, Supreme Court of New South Wales, Einstein J, 11 December 1998
Holloway v McFeeters (1956) 94 CLR 470
Holt v Cox (1997) 23 ACSR 590
Legal & General Life of Australia Ltd v A. Hudson Pty Ltd (1985) 1 NSWLR 314
WMC Resources Limited v Leighton Contractors Pty. Limited [1999] W.A.S.C.A. 10DECISION: The Plaintiff's claim is dismissed
JUDGMENT 1 On or about 18 September 1987 the plaintiff entered into a contract with the defendant to design, manufacture, supply and install multi function street poles ["smart poles"] for the defendant. 2 During the construction of the subject works a dispute arose between the parties relating to the contract and its performance 3 On or about 23 November 1998 the parties agreed by way of Deed to submit certain disputes to an expert, Mr John Morrisey [“Mr Morrisey” or “the Expert”], for expert determination. By a further written agreement dated 24 November 1998 the parties entered into an agreement with Mr Morrisey to determine the matters in dispute. 4 It was a term of the agreement of 24 November 1998 that Mr Morrisey would determine the matters in dispute by issuing a certificate without giving reasons, in such form as he considered appropriate. 5 It was also a term of the agreement that the determination in the certificate by the Expert would be final and binding. 6 Following his appointment the expert handed down a number of consensual Determinations. These were dated 15 January 1999, 19 January 1999 and 9 February 1999. Ultimately the expert handed down a final Determination on 3 May 1999 ["the May Determination"]. 7 The convenient course is to annex each of these determinations to this judgment as Annexures “A”, “B”, “C” and “FD”. 8 When the hearing of these proceedings commenced the pleadings exposed that the parties were at issue principally as to two matters, namely as to the terms of the subject contract [that is to say as to what were the matters which the Expert had been asked to determine], and as to what the Expert had in fact done in purporting to carry out the contract by which he had been appointed. 9 Following an amendment to the summons allowed during the course of the early part of the hearing, the first of these issues fell away. In short the parties were now agreed that the terms of the contract required Mr Morrisey to determine the dispute between the parties identified by them in the Determination of February 1999 concerning the value of all work in relation to 520 poles including accessories and variations to them. 10 The essential issue which then separated the parties and which was the subject of most of the evidence and address was as to what the Expert had in fact done in purporting to carry out the contract by which he had been appointed. 11 The plaintiff's contention was that the Expert had made a valuation that included only the value of 520 poles and variations to those poles and the CPI indexation factors in respect of those 520 poles. The plaintiffs contended that the Expert did not make a valuation in respect of accessories and variations to accessories, miscellaneous items and other schedule rate items. [Such items were referred to during the hearing as “the etcetera items”] 12 The defendant on the other hand contended that the expert did precisely that which he was required to do by the terms of the contract, that is to say he valued all work in relation to the 520 poles, including accessories and variations to them. 13 The parties have taken the Court to the most recent authorities dealing with questions as to whether or not a report made by an expert appointed to carry out a particular task was or was not made in accordance with the terms of the contract of appointment. Most recently attention is given to the relevant principles in the judgment of McHugh JA in Legal & General Life of Australia v Hudson (1985) 1 NSWLR 314 at 331 and following and in the judgment of Mason P in Holt v Cox (1997) 23 ACSR 590 at 596 and 597. Mason P makes the point that a close reading of the judgment of McHugh JA in Legal & General indicates that his Honour was not propounding the view that a valuation would stand regardless of error but was rather making the point that mistake is not itself a ground of vitiation. As Mason P commented (and in doing so referred to the judgment of McHugh JA): "a valuation may contain factual error or embody consideration of matters which should not have been taken into account, but it does not follow that the result is outside that which the contract contemplated would be within the realm of determination by the valuer”. As McHugh JA makes plain, “in each case the critical question must always be: Was the valuation made in accordance with the terms of [the] contract? If it is, it is nothing to the point that the valuation may have proceeded on the basis of error or that it constitutes a gross over or under value” (Emphasis added by Mason P) 14 Importantly Mason P pointed out that is recognised that there are limits to the types of errors which will be overlooked in the courts, even in the most robust statements of the modern position as to judicial restraint where parties have chosen voluntarily to commit the determination of a valuation to an expert. Mason P refers to the apophthegm of Sir Frederick Jordan in ex parte Hebburn Ltd; re Kearsley Shire Council (1947) 47 SR (NSW) 416 at 420 to the effect that "there are mistakes and mistakes". Mason P also makes the point that the criteria of discrimination between 'mistakes and mistakes" are not determinable in advance. 15 The facts are not particularly difficult to follow. And whilst in most cases as would appear obvious, a party seeking to impugn an expert's valuation where no reasons have been given for the that valuation, must face an uphill task, in this case the plaintiff relies virtually exclusively in seeking to climb this hill upon the suggestion that a simple arithmetic exercise permits one to extrapolate from certain of the materials furnished to Mr Morrisey by the parties before the handing down of his May Determination, into the actual figures the subject of that determination. The suggestion which the plaintiffs pursue is that there is no coincidence in the Court being able, to the very dollar, to be in a position to be of absolute certainty as to precisely what Mr Morrisey did in reaching his May Determination. The defendant on the other hand submits that this is a mere coincidence and that there are a number of other ways of carrying out the diverse calculations which may permit one to obtain a resultant figure extremely close to that which Mr Morrisey in fact reached. 16 In consequence the proper approach to the facts and that which the parties both adopted in address was to follow reasonably closely the paper trail of what materials were handed to Mr Morrisey from time to time during the course of submissions. An understanding of certain of the particular submissions and spreadsheets which were relied upon by the parties before Mr Morrisey becomes essential to follow the arguments of both parties. The convenient course is to deal with the position in chronological fashion.
THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION - CONSTRUCTION LISTEINSTEIN J
Tuesday 18 July 2000
55025/99 - GOLDSPAR AUSTRALIA PTY LTD V THE COUNCIL OF THE CITY OF SYDNEY
17 As are ready stated on this date the parties executed a Deed. The Deed is annexed to this judgment as Annexure “D”. As will be noted the Deed had annexed to its certain "Guidelines for Expert Determination ". 18 The defendant's direct specific attention to the provision in the guidelines obliging the Experts to act as an Expert and not as an arbitrator, to proceed in such manner as the Expert thinks fit without being bound to follow the rules of natural justice or the rules of evidence and to issue the certificate of determination in such form as the Expert considers appropriate stating the Expert's determination of the matters in dispute. The defendant also directs specific attention to the provision in the guidelines providing that the determination is to be final and binding and that unless otherwise agreed by the parties, the Expert shall not give reasons for the determination. The Confidentiality provision is also pointed to by the defendants.
23 November 199819 On this date the parties and Mr Morrisey signed, a document entitled “Agreement for Binding Expert” in the form annexed and marked “E” to this judgment.
24 November 199820 On this date the plaintiff’s detailed submissions were furnished to Council and to the Expert. [PX 2/278]
30 November 199821 On this date the plaintiff received the defendant’s submission which responded to the first plaintiff’s submission of 30 November 1998. [PX 3/660]
24 December 199822 On this date the plaintiff served its further response. [PX 3/870]
13 January 199923 As already indicated, on this date Mr Morrisey made a Consent Determination.
15 January 199924 On this date the plaintiff served a further submission. [PX 3/773]
[PX 3/968]
18 January 199925 As already indicated, on this date Mr Morrisey made a further Consent Determination. [PX 3/969]
19 January 199926 On this date the plaintiff responded to the defendant’s submission of 24 December 1998. [PX 4/1052]
23 January 199927 On this date the plaintiff further responded to the defendant’s submission of 24 December 1998. [PX 4/1091]
26 January 199928 On this date Mr Wilson, on behalf of the plaintiff, provided the Expert and the defendant with a 'Summary of Variations'. [PX 4/1297]
9 February 199929 As already indicated, on this date Mr Morrisey made a Consent Determination. [PX 4/1300]
9 February 199930 On this date the plaintiff presented a submission entitled "Quantification of Current Position" [PX 4/1303 and following]. This consisted of a letter of 11 February 1999 and altered versions of the plaintiffs submissions of 13 January and 18 January 1999]
11 February 199931 On this date the defendant responded to the plaintiff’s last submission. [PX 5/1410]
5 March 199932 On this date the plaintiff responded to the council’s last submission. [PX 5/1547]
29 March 199933 On this date the council responded to the plaintiff’s last submission. [PX 5/1644]
1 April 199934 On this date the plaintiff furnished to the Expert and to the council certain corrected calculations. [PX 5/1651]
6 April 199935 A council response of this date is to be found at PX 5/1658.
8 April 199936 A further response by the council of this date is to be found at PX 5/1662.
14 April 199937 On this date the plaintiff's solicitors wrote to the Expert in terms of the document at
22 April 199938 On this date the defendant's solicitors wrote to the Expert asking him to ignore the plaintiff’s solicitors letter of 22 April 1999. [PX 5/1704] 39 Also on this date the Expert sent a facsimile to the parties requesting identification of certain documents. [PX 5/1708]
PX 5/1664.
27 April 199940 On this date the plaintiff responded to the Expert. [PX 5/1709] 41 Also on this date the plaintiff included a further spreadsheet, which was apparently only given to the Expert and never to the council. [PX 5/1732]
28 April 199942 On this date the council’s solicitors responded to the Expert. [PX 5/1757]
30 April 199943 As are ready indicated, on this date the expert handed down the May Determination.
3 May 199944 Turning to examine the respective sets of submissions in terms of a close reading of the documents furnished to the Expert it is apparent that the critical words in focus comprise paragraph 5 of the May Determination:
[PX 5/1774]
Examining the respective submissions to this Court.45 It is particularly the figure $4,362,588.00 which forms the central focus of the plaintiff’s case. 46 Approaching the matter in the way the plaintiff’s senior counsel, Mr Walmsley SC, addressed his submissions, the first matter which seems not to be exceptional is that from 30 November 1998 when the plaintiff submitted it’s first set of submissions, the parties exchanged many submissions devoted to a number of issues which separated them. These matters included questions of the various aspects of the supply of the poles which were in issue between them resulting in the consent Determination of 19 January 1999. 47 Following the resolution of those types of issue there appears to have been a flurry of further submissions over the next several weeks leading up to the 9 February 1999 consent Determination. 48 Mr Walmsley conceded that in order to determine the plaintiff’s case, all that one needed to draw from the material exchanged and furnished to the Expert prior to the making of the 9 February Determination was the fact that there had been a process of negotiation between the parties from November 1998 comprising the gradual elimination of various matters of disagreement. Subject to that fact which, on my understanding of the submissions from both parties, may be taken as a given, Mr Walmsley submitted that it was only the materials which had been exchanged between the parties and/or furnished by the parties to the Expert following the 9 February determination, to which reference is required to be made, in order to follow the plaintiff’s submissions as to why the Court should be clearly satisfied that Mr Morrisey had failed to carry out the task which the parties had contracted with him to carry out. [Transcript 29 June 2000 at pp 24 - 25] 49 Mr Walmsley commences by drawing the Court's attention to the plaintiffs submission of 29 March 1999 which begins at PX 5/1547. The particular point of going to the submission is to refer to the spreadsheet which the plaintiff included as part of the submission and which is to be found at PX 5/1643. This appears to be the first spreadsheet in this particular form exchanged between the parties and furnished to the Expert as part of a submission. It became a familiar form as is apparent from later spreadsheets which followed generally the same form. 50 Clearly enough this spreadsheet [to which I shall refer as "Mach 1"] purports to be a final submission of outstanding moneys and sets out categories of pole types ie "Type A Pole". Two-thirds of the way down the spreadsheet, one comes to the subheading "Amount Due to Goldspar for Schedule of Rate items". There is also an additional list of matters under the heading "New Products not included in Tender". Other headings also appear. 51 Importantly, as at this time, there is no reference to any CPI claim and as at this time type A-B Poles do not appear as a separate category after the reference to the "Type D Poles". 52 Following the approach taken by Mr Walmsley one moves next to the spreadsheet at PX 1693 which I shall referred to as "Mach 2". It is common ground that this formed part of the plaintiff’s submission of 22 April 1999. It is common ground that this spreadsheet was the first spreadsheet which included reference to claims for CPI and for interest. Importantly this spreadsheet was submitted together with a series of spreadsheets to be found at PX 1695-1703. An examination of this series of spreadsheets discloses that they cover claims in respect of poles given particular serial identification numbers. These spreadsheets include headings identifying the particular invoice number in focus for each of the numbered poles, the pole type, the pole contract price, and a number of other items which Mr Walmsley described as similar to the type of accessory such as the radio or floor mats one might have included if one purchases a motor vehicle. In short Mr Walmsley described the list of items as items which a particular pole may or may not have included as an accessory, such as, for example, the item "traffic light outreach". 53 As one travels through this series of spreadsheets one reaches the position at spreadsheet PX 5/1698 where in relation to pole number 54 said to be delivered on 23 September 1998, a claim for CPI is seen to be introduced for the first time. The defendant has explained that this was because the contract provided for this type of indexation from one year following the date of the Supply Contract. [see clause 16.2(b) to be found in Volume 2 of exhibit D2] 54 Next of special interest is the fact that a very careful count in the number of poles itemised on the relevant sheets, where CPI claims have been included, is not 520 but is 519. This fact is not readily apparent from any heading and can only be discovered by a line count. 55 It is apparent from the last figure in the far right hand column on page 5/1702 that the total CPI figure given on the spreadsheets up to page 5/1702 is $54,332.66. 56 As PX 5/1703 makes plain, there is then added to this total figure a number of amounts for the matters listed on the far left hand side. These include certain variations and for example an item reading "Telcos (not known what Pole No.s"). [I shall refer to these items as “the Telcos etc items”] 57 A CPI figure is included for each of the Telcos etc. items. The far right hand column of PX 5/1703, then includes each of these further CPI figures with a resultant all in total described as "Total CPI” which is given the figure $55, 796.69. 58 Mr Walmsley then emphasizes that at PX 5/1708 one finds a facsimile from the Expert to the solicitors for the parties asking for identification of documents relating to particular variations and for copies to be supplied where necessary. The variations referred to in the facsimile are described as "Type A pole hatches" and "Type AB poles". Mr Walmsley conceded at transcript page 30 on 29 June 2000 that it does not necessarily appear what the Expert was here dealing with. 59 This was the facsimile which it appears prompted the plaintiff’s response of 28 April which begins at 5/1709. And it was this response by the plaintiff which included the spreadsheet on which so much time was expended in the respective submissions of both Council. This is the spreadsheet to be found at PX 5/1732 [to which I shall refer as " Mach 3"]. 60 Perhaps the first point to note in relation to spreadsheet Mach 3 is that it corrected a number of errors which had been included in the spreadsheet Mach 2. Detailed evidence was given before the Court as to these errors by Mr Barnes who, through the vehicle of his own company which had provided his services, had at the material time been integrally involved in the dealings with the Expert. He had generally been present before the Expert on any occasion when the expert determination process was continuing and he was well aware of the detail of the various spreadsheets some of which he had prepared himself. 61 He gave evidence as to the errors in the spreadsheet Mach 2 which it was said had been corrected in the production of the spreadsheet Mach 3. The errors in question were as follows:
"After taking into account the determinations referred to above, I hereby determine and certify as follows:
* value of work $4,362,588.00
* less paid $2,455,292.35
$1,907,295.65
* less retention $ 120,456.95
* to be paid $1,786,838.70 ”
62 There was no issue between the parties as to the obvious fact that the two spreadsheets differed in a few places to correct alleged earlier errors suggested by the plaintiff to have been included in Mach 2 or that the evidence given by Mr Barnes purported to explain what the particular errors had been 63 Mr Barnes was asked and answered as follows:
(i) A correction with respect to the type A poles, to the figure for ‘Luminaires’ from $41.04 to $82.08
(ii) A correction with respect to the type D poles, to the figure for ‘Castings’ from $400.00 to $69.00
(iii) Corrections to certain of the figures for the number of poles delivered to date, as for example under the Type A and Type B poles.
(iv) A difference shown in spreadsheet 5/1643 as between $505 [being a subtraction from $6,722.00 of $6,217.00 - see under the items No 1 and 2 under the heading "New Products Not including Tender] and the figure shown in spreadsheet 5/1732 of $205.00.
Q. The position was this, wasn't it, that in your spreadsheet document 1643 the figures under the heading "Contract schedule rate" for each type of pole included a component for assembly? Correct?
A. That is correct.
Q. Council's position that was put to Mr Morrissey was that there were poles which were supplied on the basis of supply and assemble or install - correct - at $7,935 for a type A?
A. Supply and install, that's right.
Q. And there were poles which council contended were supply only poles which didn't include an assembly or an installation component?
A. Didn't include an installation component.
Q. An installation component, and which council suggested for a type A, for example, would be $5,935?
A. Council actually had a couple of different views on that during the process, yes.
[Transcript 28 June 2000 at pages 29 - 42] 64 With this background it is now possible to focus on the precise submissions advanced on behalf of the plaintiff and which it may fairly be said, are central to its case. The short submission is that it is quite clear what Mr Morrisey did in order to reach his "value of work" figure of $4,362,588.00 in his May determination. The submission is that this figure can be shown, subject to the rounding off to the dollar, to be the sum of the following three figures:
Q. But, nevertheless, one view was that a type A pole on that basis would be $5,935?
A. That was one of their stances, yes……
Q. And they put those submissions to Mr Morrissey in their 5 March 1999 submissions. Correct? Would you like to have a look at it?
A. I would have to refresh my memory on that one, yes…..
Q. Goldspar's position was put at various times and council's position was put at various times in that submission?
A. It does have some of council's positions there, yes.
Q. And council's position was that there should be nothing for assembly at all on that document?
A. On this document, that's correct.
Q. And that was on the basis that the contract required Goldspar to supply the poles and install them for the price of $5,935 at that point in time?
A. No, the supply and install price was 7,935. Supply only was 5,935.
Q. 5,935. I am sorry, supply was 5,935. Correct?
A. Yes, supply only.
Q. Yes. So there is a dispute about the assembly item between council and Goldspar?
A. That's correct.
Q. And that dispute was, you would agree, put before Mr Morrissey?
A. It would have been one of the issues that he would have looked at, yes.
Q. Yes. And that continued to be the position up until the conclusion of submissions. Correct?
A. I would assume so, yes….
INATEY: Q. An up-to-date version of 1643 produced some time in April 1999?
A. It is certainly a later version, yes.
Q. Yes. And April 1999 would be the sort of figure, the sort of date, that is relevant?
A. Yes.
Q. And, again, this was put to Mr Morrissey indicating the value of work for which Goldspar was contending as at that date with a number of additions, would you agree?
A. Yes, and, unfortunately, a number of errors too, but, yes.
Q. Well. The total at that point in time for which Goldspar was contending before CPI and interest was about $5.4 million, $5.426 million?
A. That's correct, yes.
Q. And that continued to include in it the items of variations that we started our discussion with in document 1297. Correct?
A. That's correct.
Q. And at that point in time there was put to Mr Morrissey a figure for CPI?
A. Yes.
Q. And you were asking Mr Morrissey to take account of the variation items that had been the subject of the spreadsheet 1297?
A. Those items are there, yes.
Q. And a calculation for interest was done?
A. Yes….
INATEY: Q. And other than for correcting those errors your intention in producing the document 1732 and providing it to Mr Morrissey was to put before him a value-of-work figure in relation to the 520 poles including the items that have been the subject of the spreadsheet 1297. Correct?
A. That's correct.
HIS HONOUR: Q. Am I not correct in also seeing that type AB poles is a whole extra thing in 1732?
A. Oh, yes, it has been made into a separate item to match the format of the other poles.
HIS HONOUR: Yes.
INATEY: Previously that had been included under the heading "New products not included in tender" in document 1693. Correct?
A. That's correct.
HIS HONOUR: Yes.
INATEY: Q. And it was the position, was it not, that there were areas of disputation between council and Goldspar in relation to matters such as anodising shown on document 1732 under "Type A poles", "Type B poles", "Type C poles" and "Type D poles"?
A. That's correct.
Q. And there are indeed areas of disputation in relation to a number of matters individually itemised under the various pole headings?
A. That's correct.
Q. And this document was - by "this document" I mean 1732 was - Goldspar's contentions in relation to those matters. Correct?
A. They were a summary of our claims, yes.
Q. And there was evidence and material put before Mr Morrissey by council to the contrary position. Correct?
A. In most cases, yes.
Q. Yes. And there were matters which were, of course, the subject of agreement which were included on 1732?
A. Yes.
Q. And the matter was put before Mr Morrissey for his ultimate determination - correct - of a value-of-work figure on the basis of competing contentions?
A. That's correct, but, as I said, there is no reference to this to set-up items, which was an item that wasn't brought into the determination.
Q. Well, that was certainly put before Mr Morrissey by Mr Wilson in an earlier document, wasn't it?
A. Set-up items may have been listed, but it wasn't an item of contention….
Q. And do you see there Goldspar was contending for a value of work to the end of the current schedule? Do you see that?
A. It is listed there, yes.
Q. And the current schedule was a reference to the 520 poles, was it not?
A. It appears to be that, yes.
Q. And you see that the value of work contended for by Goldspar at that point was $5.6 million-odd?
A. Yes, that's correct.
Q. From which there is then deducted the income from determination 2, as it is put?
A. Yes.
Q. Providing some figures at the bottom of the page at 1308. Do you see that?
A. That's correct.
Q. And that was material that was put before Mr Morrissey?
A. That appears to be the case.
Q. For his consideration in arriving at his value of work figure. Would you agree?
A. Yes. On that sheet, yes.
Q. And you would have expected - it was your expectation that Mr Morrissey would have regard to all the material before him in performing the task that he was asked to perform?
A. Items that he was asked to determine that were in dispute, yes.
Q. To arrive at his value-of-work figure?
A. Items in dispute, yes.
Q. Well, you keep saying that, Mr Barnes, but you have already agreed with the proposition that the schedule at page 1732 included matters in dispute and matters not in dispute for his consideration. Correct?
A. That's correct. We were asked to list all items.
Q. Yes. And you expected that he, in arriving at his value-of-work figure, would take into account matters that were agreed and matters that were still not in agreement. Correct?
A. Initially, yes.
Q. Well, ultimately, this schedule, 1732, was given to Mr Morrissey only a few days before his determination. Correct?
A. That's correct.
Q. Then that included items which were in agreement and items which were not in agreement?
A. That's correct.
Q. And you expected him in arriving at his value of work figure to take into account all of those items. Correct?
A. Yes, we did.
(i) The amount $4,306, 601.26 shown approximately halfway down the page on spreadsheet Mach 3 and described on that spreadsheet as "Total Value of A, B, C, D, AB Poles Delivered to Date" ["I shall refer to this as 'figure 1'].
(ii) The amount of $55,796.69 shown in the right-hand column on Mach 3 against the heading "CPI" [I shall refer to this as 'figure 2'].
(iii) The amount of $190.93 said to have been taken by the Expert from the second last line of PX 5/1702 and being, at least on that page, plainly the CPI figure which had then been included against pole number PS030 (which seems to have been the last of some eight poles not given delivery dates on the page but presumably all being delivered on or after 17 March 1999). [I shall refer to this as 'figure 3'].
65 The total of figures 1, 2 and 3 is $4,362,588.00.66 Mr Walmsley explains the plaintiff’s theory as to how and why it is suggested that Mr Morrisey included figure 3 at all. The submission is that Mr Morrissey realised that the several spreadsheets earlier referred to included the CPI figures for only 519 poles and must have sought to locate an appropriate CPI figure for the last pole. The submission is that he simply used the figure which happened to be the last such CPI figure shown on spreadsheet 5/1702 without discriminating in any way as between the particular features of the so-called missing pole and what amount might or might not have been required to be included as the CPI figure to be attributed to such pole.
67 The plaintiff refers the Court to the letter from the council's solicitors to Mr Morrisey of 1 April 1999 to be found at PX 5/1644 and following. This letter was responsive to the plaintiff's submission which had enclosed the spreadsheet Mach 1. In the course of the letter in commenting on that spreadsheet, the councils solicitors at PX 5/1647 made the point that the plaintiffs figure for poles had been incorrect and that there was no supporting material for the number of poles stated. Hence the plaintiff suggests that it is likely that the Expert would have been alerted to the need to double check in relation to spreadsheet references to the number of poles and that it is not surprising that Mr Morrisey would have himself worked out, although it is certainly a tedious exercise to endeavour to do so, that the series of spreadsheets had only involved dealing with 519 poles and not with 520 poles.
68 Hence the plaintiff submits that there cannot be any possibility of an explanation otherwise than that which is the subject of it’s hypothesis to explain how it was that Mr Morrisey came up with his 'value of work' figure. Yet at the same time, as Mr Walmsley conceded at transcript 29 June 2000 page 35, the plaintiff appears not to shrink from suggesting that there is speculation involved in the exercise.
69 Mr Walmsley referred the Court to the decision of the High Court in Holloway v McFeeters (1956) 94 CLR 470 as an example of the inferential reasoning he wishes to pray in aid in this case. That case involved a claim against the Nominal Defendant by the widow of a man who was found deceased on the side of the road. The man had clearly been hit by a car, but the driver could not be found. There was only the most meagre evidence of the circumstances in which the deceased had come to be struck by the erstwhile driver. The question which exercised the minds of the High Court was whether there was sufficient evidence for the jury to conclude that the driver had been negligent, thus establishing the liability of the Nominal Defendant. 70 Mr Walmsley referred the Court to the statement of the majority (Williams, Webb and Taylor JJ, at 480) where it was said that ‘Inferences from actual facts that are proved are just as much part of the evidence as those facts themselves.’ The judgment goes on to quote a statement of principle from an unreported judgment of Dixon, Williams, Webb, Fullugar and Kitto JJ in the case of Bradshaw v McEwans Pty Ltd (27 April 1951):71 The quoted passage addresses the circumstances in which an inference from fact may mature into a finding of fact. However, as the dissenting judgment of Dixon CJ in Holloway v McFeeters (supra, at 476 - 477) points out there is a difference between affirmative inferences from facts and mere conjectures or hypotheses, notwithstanding how intuitively attractive such hypotheses are:
‘All that is necessary is that according to the course of common experience the more probable inference from the circumstances that sufficiently appear by evidence or admission, left unexplained, should be that the injury arose from the defendant’s negligence. By more probable is meant no more than that upon a balance of probabilities such an inference might reasonably be considered to have some greater degree of likelihood.’
The conjecture that the driver must have been in fault in failing to see him in time to avoid him may be shrewd. But is it more than a conjecture? Before the plaintiff can succeed in such a case as this the circumstances must lead to a satisfactory inference, even though resting on a balance of probabilities, that the accident was caused by some negligence on the part of the driver. In this case, the true cause of the accident is in truth unknown. The state of facts reached by inferences is itself compatible with a number of hypotheses, some of them implying fault on one side, some on the other, some on both sides. Hypotheses of this kind are not inferences. What is required is a basis for some positive inference involving negligence on the part of the driver as a cause of the deceased’s death.’
72 The plaintiff submits that figure 1 must be seen as having included the total value of A, B, C, D and AB poles plus the variations for each pole which are listed on the spreadsheet Mach 3 under the several references to each pole type.
73 Mr Walmsley submitted inter alia as follows:
"WALMSLEY: No. We say probably what has happened is he started off calculating a figure to represent what Mr Inatey would say is the high point of the poles case for Goldspar.
HIS HONOUR: Yes.
WALMSLEY: And probably calculated the high point for the et cetera part of the claim, then dealt with, or no doubt considered, the arguments on the spreadsheets from the council and has then, having done that, no doubt by accident, happened to use the figure as the value of work which he no doubt had come to or was coming to after consideration of these matters, has incorrectly used the wrong figure, being one of those figures that he has, we would say, started from in his deliberations and calculations.
HIS HONOUR: A wrong-piece-of-paper-type situation.
WALMSLEY: Well, it may be the wrong piece the paper or merely a slip of the calculator.
HIS HONOUR: Well, it couldn't be a slip of the calculator if your exactness point is of substance.
WALMSLEY: Only in the sense, your Honour, that one sometimes adds and subtracts figures on calculators and finds oneself with a total because one has forgotten to take something off or add something on. There are a number of ways in which it might have happened."
[Transcript of 29 June 2000 at page 42]
74 Although it was difficult to follow this, I generally understood Mr Walmsley to be submitting that a real possibility was that the arbitrator had been endeavouring to approach his decision in a number of ways and had begun by seeking to treat with the value of the poles alone as part of an overall exercise. The proposition was that the expert simply in some way became confused in referring to different sets of figures and ended up by using calculations which broadly may be seen as accepting the whole of the plaintiffs set of submissions but not to have included those figures to be found on spreadsheet Mach 3 under the headings "Manufacture and Supply of Schedule of Rates Items" and "New Products Not Included in Tender", which figures in total would have included, but of course did not include, the further figure of $1,148, 512.86.
75 Mr Walmsley fairly conceded that the Telcos etc items on spreadsheet PX 5/1703 caused difficulties to the plaintiff’s theory. It is of course clear from looking at those particular items that if the plaintiff’s theory as to how the Expert came to produce figure 1 be correct, the Expert did use CPI figures for these items which in some measure seem to be correlated to some of the items which on spreadsheet Mach 3, on the plaintiff’s submissions, were not at all taken into account by the Expert. See for example the references to Variation V103 and to Variation V104 and to "Martin Place Light Outreach Arms" and to "GPO’s for Martin Place Poles". In short the plaintiff’s theory that Mr Morrisey did not include any provision in his valuation in respect of accessories and variations to accessories even on the plaintiffs theory, falls down insofar as at least certain CPI allowances were given on certain of such accessories and variations.
76 The defendant relied upon detailed written submissions which were supplemented from the bar table. The convenient course is to set out the written submissions which were inter alia in the following terms:77 To my mind the written submissions of the defendant are generally of substance. Paragraphs 1 - 5 of those submissions are accepted as correct. Paragraph 6 is made out on the evidence and is a submission of substance. It is certainly important to note that right until the conclusion of the Expert Determination process, the parties remained in dispute about the value of work and how individual items were to be value. It is also important to note that in addition, the defendant continued to submit that many of the plaintiff's latest submissions should be disregarded because of their contents and/or the lateness of their delivery. 78 I accept as of substance the whole of paragraph 7 of the defendant's written submissions. Plainly enough, on its face, the Determination of 5 May 1999 determined "the value of work" performed by the Defendant. These words mean precisely what they say and I accept are without limitation. I accept that there is no warrant for limiting them in any way, particularly as Mr Morrisey was an Expert entitled to rely upon his own expertise and inquiry. Without more, the parties are bound by that Determination: Legal & General Life of Australia Ltd v A. Hudson Pty Ltd (1985) 1 NSWLR 314 at 335 - 336; Woolworths Ltd v Merost Pty Ltd (1988) 14 NSWLR 300 at 303; Holt v Cox (1987) 23 A.C.S.R. 590 and G & L Woolnough Pty Ltd v Stewart (unreported, Supreme Court of New South Wales, Einstein J, 11 December 1998 at paragraphs 219-250). 79 Given that the Determination is final and binding, the onus is clearly on the plaintiff to establish that the Expert departed from the terms of the contract: Legal & General Life at 324 per Priestley JA. 80 I further accept as of substance the defendant's submission that a Court will not set aside an Expert’s determination simply on the ground that the expert committed error or that his or her determination is incorrect. I accept as of substance the defendant's submission that the Court should approach the issue in the light of the circumstances identified by Mason P in Holt, namely:
1 The Plaintiff advances two claims, which both in form and substance are true alternatives. The Plaintiff’s claim for monies (see Order 1 and paragraphs 18-21 of the Second Further Amended Summons) is predicated on the Determination being binding; on the other hand, its contentions regarding the Expert’s breach of contract have, as their end point, a claim for a declaration that the Determination is not binding on the Plaintiff (see Claim 3B (b) of the Second Further Amended Summons). Logically, the Court must, first, determine whether or not the Determination is binding on the parties before it moves to consider the Plaintiff’s claim for payment under the Determination.2. If the Determination is not binding, then it can have no force or effect whatsoever, and no party can take any advantage of any of its purported terms. On the facts of this case, the parties will be left to pursue whatever rights they may still have pursuant to Clause 26 of the conditions of contract for the supply of multi-functional street poles (1/Doc 4).
NO DEPARTURE BY EXPERT FROM TERMS OF CONTRACT
3. It is now common ground that the Expert was asked, pursuant to the two contracts, to determine the value of all work in relation to 520 poles, including what are now described by the Plaintiff to be accessories and variations to them.
4. The parties, by their contracts of 23 and 24 November 1998 (2/Docs 7 and 8 respectively) have agreed to be bound by a Determination made in accordance with those contracts. More precisely, they have agreed that:
4.1 Mr. Morrisey was to act as an Expert and not as an arbitrator (2/273, 2/275);
4.2 the Expert was entitled to take into consideration all documents, information and other writing and oral material that the parties placed before him, including documents, information and material relating to the facts in dispute and to arguments upon the matters in dispute (2/273);
4.3 the Expert would proceed in such manner as he thought fit without being bound to observe the rules of natural justice or the rules of evidence (2/275);
4.4 the Expert would issue the Certificate of Determination in such form as he considered appropriate (2/273, 2/275);
4.5 the Determination of the Expert is final and binding and, unless otherwise agreed by the parties, the Expert shall not give reasons for the Determination (2/273, 2/276).
5. The parties exchanged submissions which dealt with the value of the work performed by the Plaintiff either as a whole, or in relation to various items. We list the principal submissions exchanged below:. Plaintiff’s log of outstanding claims (30.11.98);
. Defendant’s submissions (24.12.98);
. Plaintiff’s further submissions (13.01.99);
. Plaintiff’s submissions on issues (18.01.99);
. Plaintiff’s submissions on assembly (23.01.99);
. Plaintiff’s submissions on variations (26.01.99);
. Defendant’s submissions on variations and assembly;
. Plaintiff’s response to the Defendant’s submissions on variations and assembly (29.03.99);
. Plaintiff’s corrected calculations for variations (06.04.99);
. Plaintiff’s solicitor’s letter to Expert (22.04.99);
. Plaintiff’s letter to Expert (28.04.99).
In addition, the Expert received many communications (including supporting documents) over the course of the Determination process…
Whilst at first blush there is a superficial attraction in acceding to the submission that the coincidence of being able to add figures 1, 2 and 3 and by this route for the Court to be able to see into the Expert's reasoning process in deriving his "value of work" figure in the May Determination and thence to see that the Expert failed to carry out the work entrusted to him in the contract, on giving the matter careful reflection it seems to me that the plaintiff has not established on the balance of probabilities that the Expert failed to value all of the work in relation to the 520 poles, including accessories and variations to them. The submission of Mr Walmsley does not, in my view, proceed beyond a hypothesis or conjecture, however shrewd, and mature into an inference capable of forming the basis of a finding of fact.
81 I further accept that this restraint is all the more appropriate where the Expert in this case was plainly on the evidence asked to consider voluminous submissions, both in writing and oral extending over many months and involving some 12 days of hearing. And as McHugh JA stated in Legal & General at 335-336:
"… that the trend in recent years has also been influenced by a recognition that Courts have no greater expertise than expert valuers; and where parties have chosen voluntarily to commit the determination of valuation to an expert, judicial restraint is an appropriate response"
82 Many of the matters referred to in the defendant’s written submissions in paragraphs 11, 12 and 15 seem to me to be of substance. Hence:
"while mistake or error on the part of the valuer is not itself sufficient to invalidate the decision or the certificate of valuation, nevertheless the mistake may be of a kind which shows that the valuation is not in accordance with the contract…. But a valuation which is the result of the mistaken application of principles of valuation may still be made in accordance with the terms of the agreement. In each case, the critical question must always be: was the valuation made in accordance with the terms of the contract? If it is, it is nothing to the point that the valuation may have proceeded on the basis of error or that it constitutes a gross over or undervalue. Nor is it irrelevant that the valuer has taken into consideration matters which he should not have taken into account or has failed to take into account matters which he should have taken into account…"
83 The clearest evidence of the Expert’s work must be found in the Determination itself. The words “value of work” in the 03.05.99 Determination (5/1775) are plain and mean what they say. 84 And again many of the matters set out in paragraphs 16 and following of the defendant's written submissions seem to me to be of substance. 85 The evidence suggests that most, if not all, of the facts that the Plaintiff must assume to succeed did not occur. In relation to sub-paragraph 12.1, it is self-evident from the terms of the final spreadsheet at 5/1732, that the Plaintiff’s calculation assumes that each of the items listed 1-5 were accepted in full by the Expert. It was the evidence of Barnes (during cross-examination) that many of the items remained in dispute right up until 03.05.99. From the myriad of factors and figures before the Expert, it is no doubt possible to construct a conclusion of one’s choice. Attached to these submissions is a schedule prepared by the Defendant based on materials before the Expert and which assumes that the Expert accepted a combination of submissions, some from the Plaintiff and some from the Defendant, which produces a figure of $4,366,457.36, a difference of $3,869.36 or 0.089%. Doubtless other combinations can be constructed particularly in circumstances where the Expert is an Expert and he is authorised to exercise his own judgment. 86 Common sense and experience indicate that, only in the clearest cases, would any party’s submission on valuation be accepted without any qualification; a furtiori in construction cases where the parties put ambit claims and where complex issues were raised over many months. 87 In the context of sub-paragraphs 12.1 and 12.2, the Plaintiff puts at naught the possibility that the Expert might have used his own judgment to find some alternative analysis. The fact that Mr. Morrisey was appointed as an Expert and not as an Arbitrator clearly indicates that it was intended that he could rely upon his own investigations, skill and judgment (Legal and General at 336). It is clear from the parties’ submissions that many of the matters in dispute involved issues of judgment, discretion and the application of indeterminate criteria. Thus, in the context of the Plaintiff’s claim for a mark-up of 60%, the Defendant suggested that the appropriate rate should be 25% and, in so doing, referred to a number of legal matters and factors which might influence departures from the estimates, such as bulk, quality, urgency and lapse of time (see 5/1413-14). In these circumstances, the valuation process that the Expert had to undertake involved matters of estimation and not of precise mathematical calculation: WMC Resources Limited v Leighton Contractors Pty. Limited [1999] W.A.S.C.A. 10 at paras. [23] and [25]. 88 If the Plaintiff is correct, the Expert’s error was unexpected, uninvited and egregious. Having accepted every submission by the Plaintiff up to that point in its various spreadsheets, the Plaintiff must prove that the Expert failed to consider claims valued by the Plaintiff at $1,148,512.96 or some 20.39% of the total amount claimed by it. It was also done in face of the parties’ apparent desire to have the value of all work determined (see, for example, 5/1643, 5/1693 and 5/1732). No reason has been proffered by the Plaintiff as to why the Expert should suddenly behave in such a manner when not invited to do so by any party, and in circumstances where the items said to have been ignored had been the subject of express submissions in the preceding months; particularly when some had been agreed upon. 89 No explanation is proffered by the Plaintiff by reason of the groupings of the items that are found on its various spreadsheets. Items that are said to have been excluded incorporate matters that had been agreed by the parties, and some that had not. Similarly, whilst schedule of rate items are also said to be excluded, an item coming within the same description (namely holes in upper extrusion) does, it is accepted by the Plaintiff, form part of the Expert’s Determination. There is no warrant in the contract between the parties for any such distinction in principle. 90 Although already mentioned there is one matter to be particularly emphasised. This is the fact that the parties exchanged very detailed written submissions on what was referred to during the hearing as the "below the line" section of Mach 3. During the course of the oral submissions the Court invited the parties, particularly the defendant, to identify extracts from submissions, which had been exchanged and furnished to the Expert dealing with these items, [that is to say the items described in the subject spreadsheet under the headings "Manufacture and Supply of Schedule of Rates Items" and "New Products Not Included in Tender"]. Those materials were furnished to the Court following the written submissions together with an appropriate index. The materials taken from Exhibit PX clearly make the point that very detailed submissions had been prepared. I shall take the course of marking these materials for identification as "BL1”. The index to these materials is annexed to the Judgment as Appendix “F”. 91 At the end of the day I have reached the conclusion that the Expert has not been shown to have committed relevant error. Had the Expert given a value of work figure at a rounded off amount such as for example $4,300,000.00 or $4,350,000.00 or even $4,340,000.00, the plaintiff it seems to me would have had an impossible task in endeavouring to persuade the Court that the Expert had committed a material error. It is certainly true that there seems to be an uncanny coincidence in the ability of the plaintiff to add together figures 1, 2 and 3 in the manner earlier referred. But when one endeavours to second-guess the Expert's thinking process one begins to realise just how many combinations and permutations there are which the Expert might have taken into account. The defendant, for example, as part of its written submissions, put forward a schedule prepared by the defendant based on material before Mr Morrisey which schedule assumes that Mr Morrisey accepted a combination of submissions, some from the plaintiff and some from the defendant and which produced a figure of $4,366,457.36, being a difference from the actual figure determined, of $3,869.36 or 0.089 percent. I accept as of substance the defendant’s submission that doubtless other combinations can be constructed particularly in circumstances where Mr Morrisey is an expert who was authorised to use his own judgment.
(b) For the coincidence argument to carry any weight, I accept that the Plaintiff must:
(a) I accept that in this case, the only basis upon which the Plaintiff contends that the expert departed from his contract is the alleged coincidence that is said to arise upon comparing the Expert’s Determination of the value of the work of 05.05.99 with the sum of a sub-total of some of the claims for 520 poles (namely, $4,306,601.26), together with CPI for the poles and accessories ($55,796.69 and $190.93), which sum is then rounded off. That supposed coincidence says nothing about the manner in which the Expert approached his task and does not establish that the Expert departed from his contract.
(i) assume that the Expert accepted each and every submission of the Plaintiff on the matters which the Plaintiff says the Expert determined in preference to the competing submissions of the Defendant;
(ii) assume that the Expert did not bring to bear his own independent judgment and reach a conclusion on issues which was not in accord with either parties’ submissions;
(iii) assume that, at the same time, and without invitation and forewarning, the Expert unilaterally decided to excise from the Determination claims said by the Defendant to amount to $1,148,512.86 (5/1732) and which had been the subject of repeated submissions and discussions from at least early February until the end of April 2999;
(iv) in so doing, assume that the Expert differentiated between items according to the Plaintiff’s categorisation, when such categorisation was without warrant in the contract or otherwise logical;
(v) assume that the Expert (without invitation or forewarning) detected the errors said to have been committed in the Plaintiff’s earlier calculations and corrected the same;
(vi) assume that, in the face of the express terms of the Plaintiff’s spreadsheet (5/1732), which spoke of 520 poles, the Expert decided to count the CPI spreadsheet (commencing at 5/1698) and determine that there were, in fact, only 519 poles present and then make an appropriate calculation of the CPI on the “missing pole” which is needed by the Plaintiff to make good the coincidence argument;
(vii) assume that at the same time as the Expert detected certain errors and embarked upon the detailed examination referred to in sub-paragraph 12.6, he himself committed an error by accepting a calculation of CPI put to him by the Plaintiff arrived at by reference to items which it is alleged by the Plaintiff he had excluded from his Determination;
(viii) assume that the Expert ignored the items now alleged not to have been taken into account by the Expert and deducted from the value of work figure the figure of $2,455,292.35 which the parties had been paid to the Plaintiff up to November 1998, which figure now incorporates items now said to be excluded, such as set-up costs.92 When one does venture to try to second-guess what Mr Morrisey actually did and in this regard looks at the 'below the line' section of the spreadsheet Mach 3, it will be seen that there are some items to which are attributed very large sums indeed. For example - under the heading "Manufacture and Supply of Schedule of Rates Items", one finds a figure close to $440,000.00. Item 7 for "Energy Australia Panel" under the following heading, includes a claim for some $260.000.00. In short, two alone of the figures making up the sum of $1,148,512.86, contribute some $700,000.00 of the total the subject of the plaintiff's claim.
93 It may be that the Expert, for example, simply viewed as specious, the plaintiff's below the line claims. But more likely as it seems to me is the probability that the Expert, took a very large number of claims and counterclaims into account reaching his final determination. Exactly how he did this was a matter for him. It is common for example for a judge in determining a damages claim, to weigh many matters up and to ultimately reach a figure in his or her mind which to the judge seems appropriate. That figure might or might not bear some reasonably close relationship to some specific way in which one or other of the parties has referred to a particular set of figures. This is not to say however that it was that set of figures which the judge used as his or her yardstick in achieving the damages figure ultimately the subject of an order. 94 A particular problem for the plaintiff's approach, which has already been referred to, is the difficulty that the plaintiff's approach must accept, namely that the Expert used the Telcos etc items in reaching his ultimate determination. But any such use of those items does not square with the plaintiff's theory. Following the plaintiff's theory of what the Expert did to its logical conclusion, use by the Expert of these items demonstrates fundamental error because the Expert on the plaintiff's submission, only utilised the CPI additions but did not use the basal figure on which those additions had to be calculated. 95 For the reasons and notwithstanding the very unusual situation which has arisen, to my mind the plaintiffs have not proven their case on the balance of probabilities. The Expert is not shown to have departed from the terms of the Contract. 96 In the result the plaintiff's claim is dismissed
18 July 2000 _____________________ _____________________
I certify that paragraphs 1 - 96 Corrigendum: (i)to substitute“defendant’s” in
are a true copy of the reasons place of the word “plaintiff’s”
for judgment herein of Further Corrigendum: in the first line of paragraph 82.
the Hon. Justice Einstein (i) to substitute "defendant’s” in (ii) to complete the reference to the
given on 18 July 2000 place of the word “plaintiff’s” in Appendix in the last line of
the first line of paragraph 78 paragraph 90 as “Appendix “F”
___________________ (ii) to add the word “not” after and annex to that Appendix as
Susan Piggott the word “does” on the second described in paragraph 90 to the
Associate last line of paragraph 82 (a) Judgment.Susan Piggott Susan Piggott
Associate Associate
28 July 2000 19 July 2000
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