Guillot Enterprises (LE) Pty Ltd v Twin Disc (Pacific) Pty Ltd
[2009] VSC 69
•5 March 2009
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
ADMIRALTY LIST
No. 7431 of 2007
| GUILLOT ENTERPRISES (LE) PTY LTD (ACN 006 752 138) | Plaintiff |
| v | |
| TWIN DISC (PACIFIC) PTY LTD (ACN 001 070 321) | Defendant |
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JUDGE: | BYRNE J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 27 February 2009 | |
DATE OF JUDGMENT: | 5 March 2009 | |
CASE MAY BE CITED AS: | Guillot Enterprises (LE) Pty Ltd v Twin Disc (Pacific) Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2009] VSC 69 | |
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PRACTICE and PROCEDURE – reference to special referee – special referee an expert marine engineer – special referee directed to investigate and to apply own observations and expertise – requirements of natural justice – whether special referee must give expert witnesses opportunity to defend their opinions – special referee’s report – sufficiency of reasons – report adopted
RSC R50.01
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr M Harvey | DLA Phillips Fox |
| For the Defendant | Mr J Brett | HWL Ebsworth Lawyers |
HIS HONOUR:
This proceeding is brought by Guillot Enterprises (LE) Pty Ltd (“Guillot”), the owner of the fishing vessel Lady Cheryl operating at Lakes Entrance. In circumstances which are in dispute, the vessel, in November 2005, suffered damage to its transmission including its gearbox. And so, on 1 December 2005 the gearbox was delivered to the defendant, Twin Disc (Pacific) Pty Ltd (“Twin Disc”), a marine engineer, for repair. Upon completion of the repair work the gearbox was returned to Guillot and refitted in the vessel.
When the Lady Cheryl left port on 29 December 2005 vibration was noted and on 2 January the engine and transmission failed a second time. In this proceeding Guillot seeks damages for the cost of further repairs to the engine and the transmission and for loss of profit, totalling a little less than $500,000.
On 24 April 2008 I made an order referring four questions to a special referee for him to determine pursuant to R 50.01(1). These are the questions:
(a)whether the defendant’s works in December 2005 upon the transmission of the fishing vessel Lady Cheryl were defective or incomplete;
(b)if “yes” to (a), above, whether the defendant’s works to the transmission caused damage to the vessel’s engine between 29 December 2005 and 2 January 2006;
(c)if “yes” to (b), above, whether the plaintiff contributed to or failed to mitigate such damage to the vessel’s engine by continuing to operate the vessel’s engine between 29 December 2005 and 2 January 2006;
(d)if “yes” to (c), above, to what extent did the plaintiff cause such damage to the vessel’s engine.
The parties selected to be the special referee a marine application engineer, Thomas W Frew. The terms of reference given to Mr Frew include wide powers to investigate the referred questions. The order contained the following directions, pursuant to R 50.02:
3.Subject to the rules of natural justice, the following directions and any further directions which may be given by the Court, the special referee may conduct the reference in such manner as is appropriate for the efficient and economical implementation of this order.
…
5.Subject to paragraph 3, the special referee may for the purposes of the reference investigate any matter or call for any document or explanation he/she considers appropriate and generally may make such enquiry and inspection of any document or thing including the transmission and the engine, the subject of this proceeding, or any part of them and use such personal knowledge and expertise as is reasonably necessary for the purpose of the reference.
6.Where a party wishes to rely upon the opinion of an expert, the special referee may direct that a copy of the expert’s opinion and the reasons in support be provided to the other party and may direct that the experts meet in the absence of the special referee and the parties with a view to settling any points of difference between them and to presenting a joint report for use in the reference. Except as all the parties whose experts have participated in such a meeting in writing agree, no evidence shall be admitted in the reference or otherwise in this proceeding of anything said or done at the meeting.
7. The special referee is not bound by the rules of evidence.
Mr Frew delivered his report to the Court on 6 October 2008. The application now before me is brought pursuant to R 50.04, seeking that I adopt the report or remit the questions to Mr Frew for further consideration, as Twin Disc would have it; or that I not adopt the report and proceed to hear the proceeding, including the referred questions, myself, as Guillot would prefer.
The principles which I must apply and consider in this application are well settled. I note that the reference was for the determination of the questions and not merely for the opinion of the special referee upon them. For reasons which I have set out in Re Markbys Renaissance Pty Ltd,[1] I do not think much turns upon this distinction.
[1][1999] 3 VR 851, at 858-9.
It is common ground that, in terms, the report does not provide an answer to any of these questions, but it is fair to say that the effect of the conclusions reached by the special referee is that the damage to the engine in January 2006 was due to the incident in November 2005 and not to the work carried out on the gearbox by Twin Disc.[2] The special referee concluded, however, that the transmission clutch hub taper failure was a matter for which Twin Disc is responsible under its repair warranty.[3] Accordingly, it was said, these conclusions, albeit not in terms responding to the referred questions, provide a sufficient foundation for the determination of the remaining issues in the proceeding.
[2]Report section 4, paras 2, 3.
[3]Report section 4, para 4.
I turn first to the submissions put on behalf of Guillot in support of their contention that the reference has failed and should be abandoned:
(a)the special referee failed to prepare the report or to make his enquiries in preparing the report in accordance with the rules of natural justice;
(b)the special referee did not make adequate enquiries in preparing the report;
(c)the report generally fails to state sufficient reasons for the conclusions therein; and
(d)the special referee failed to adopt undisputed evidence about the cause of the incident that occurred in November 2005.
It is necessary at this stage that I identify the competing contentions of the parties. Guillot contended that the propeller of the vessel failed in November 2005 when it came into contact with a seal and that this caused the transmission shaft to break and consequent damage to the gearbox. Importantly, the engine was unaffected by this. When the repaired gearbox was reinstalled in the vessel and the vessel resumed operations from 29 December, the gearbox was defective and caused the vibrations which in turn damaged the engine.
The contrary position, advanced by Twin Disc, was that the failure of the transmission in November was the product of long term deterioration and that this failure caused damage, not only to the gearbox, but also to the engine. The damage to the engine went unnoticed by those in charge of the vessel, at least until the engine was in operation after the repaired gearbox had been installed. The special referee accepted this scenario.
Natural Justice
The special referee was given by the court order wide powers to investigate the cause of the January failure. Moreover, it is clear from the affidavit of Ronald John Salter sworn 20 November 2008, that the parties were content that he conduct an inquiry that was more inquisitorial than a conventional adversarial hearing. Mr Frew decided what he should look at and whom he should speak to, and he did so in the absence of the parties or their representatives. It is clear, too, that he brought to bear his own experience and expertise in examining the parts of the engine and transmission which were available and he was ready to draw inferences based on this. Let me say immediately that this was not the subject of criticism by any party. Nor do I say a word against this; in a technical area such as this, the ability of a special referee to approach the task in this way is a strength of the Order 50 procedure.
Nevertheless, as paragraph 3 of the order makes clear, the special referee must comply with the requirements of natural justice. The application of these requirements will, however, depend upon the nature of the inquiry. In a inquisitorial inquiry such as this into a conflict which is essentially one of technical fact, a technically qualified special referee is given considerable latitude. In the present case, however, natural justice would require the special referee to give each of the parties the opportunity to address contentions which may affect its case.
There are four complaints offered by Guillot under this head. The first was that the special referee failed to speak to two of the experts retained by Guillot, Ray Newall and David Avis, notwithstanding that he said he would do so. Second, he failed to examine the rotor assembly of the Lady Cheryl at Lakes Entrance in August 2008 when he went there. Third, he rejected the opinions of the experts, on both sides, in terms which were critical of them without giving them or the parties an opportunity to respond. Finally, he formed novel conclusions and opinions which were not put to any expert.
The cause of the January 2006 failure and, indeed, the November 2005 failure was the subject of a number of expert opinions of five persons which opinions were set out in nine reports provided to the special referee:
1.Robert Ashworth, shipwright, marine surveyor and consultant, examined the vessel in November 2005 after the first failure and again after the second failure. He provided four reports dated respectively 14 December 2005, 25 January 2006, 22 February 2006 and 2 May 2006.
2.Mr Newell, marine surveyor, who examined the vessel including the transmission and engine in February 2006. Mr Newall prepared a report dated 9 February 2006 and a joint report with Mr Avis dated 17 June 2008.
3.Lakes Diesel Sales and Service of Lakes Entrance. This was the firm which repaired the transmission after the November incident and the transmission and engine after the January 2006 failure. The date and author of the report provided by Lakes Diesel are not given.
4.Colin F Rawlings, mechanical engineer, whose report is dated March 2008.
5.Mr Avis, consulting engineer for ships propulsion, who examined the partially disassembled gearbox with Mr Newall in Brisbane in 2008. His report is undated. His joint report with Mr Newall is dated 17 June 2008.
A matter which appeared to assume some importance at the hearing, but which is not raised as a specific ground of complaint, was a document prepared by Mr Frew and handed to the parties on 25 June 2008. This document, entitled Project Overview Statement, was apparently prepared in the light of material then in his possession. In it, he indicated his impression of where this material pointed and which matters required further investigation. It was put on behalf of Guillot that certain of the conclusions there expressed were premature and in some respects incorrect. Some of the conclusions expressed in the Project Overview Statement found their way into his final report. I accept that these June conclusions were tentative only and that there is no reason to conclude that Mr Frew obdurately adhered to them despite material which he later received which might be thought to point in another direction. It may have been unwise for him to publish in this way conclusions which were not expressed to be tentative, but it is not uncommon for courts to signal to the parties before them how things appear to stand before a trial is over so that the parties may focus upon the issues which seem important to the Court or redirect the attention of the Court to what they see as the correct issues. This was done by Mr Salter in correspondence with Mr Frew following receipt of the Project Overview Statement.
Nor do I criticise the special referee for failing to speak with Mr Newall or Mr Avis. He sought to contact Mr Newall in September 2008 but the witness was unavailable. Mr Frew had had the benefit of the reports of these experts and it is clear that he had regard to them. As I have mentioned, the requirements of natural justice in this case require that each of the parties be aware of the case it must meet and have the opportunity to address it. The expert witnesses are witnesses; they are not parties. Nor are they the advocates of the parties. Moreover, in a case such as this, they are witnesses of a special kind. This special referee is an investigator in a field in which he has expertise. A judge approaches the judicial task without previous knowledge and therefore, subject to limited exceptions, depends upon expert witnesses for opinions based on facts established by the lay witnesses. In a case like this, the role of the opinion witness whose expertise lies in the field of the special referee’s expertise may be to direct the investigator to matters to which he might apply his own expertise. Each of the parties, here, was well aware of the contentions of the other. They had the opportunity to address these and did so. They were content within this framework to let the special referee explore them and decide which contention to accept and which to reject.
As to the failure of the special referee to inspect the vessel, Mr Frew explained in his email of 20 August 2008 why this would not be useful.
As to the third complaint, the special referee was entitled to reject the opinions of experts. It was essentially his task to make a finding notwithstanding that the evidence of some witnesses was against it. It is not correct to say that he rejected the evidence of all the witnesses and formed his own view of matters. As I have mentioned, he was confronted with competing scenarios for which arguments were offered by the various experts. He accepted one of those scenarios.
The final complaint under this head is that Mr Frew formed novel conclusions and opinions which were not put to any expert. The short answer to this emerged in argument. It is that the conclusions which Mr Frew drew were not novel; they had been considered and discussed in the expert reports. In some cases they had been espoused and later abandoned. It was open to him to come to the same conclusion without putting it to a witness who had already considered it and expressed views upon it. Again I remind myself of the role of the expert witness in a reference such as this.
I find no want of natural justice.
Failure to make proper enquiries
It is not clear to me what inquiries the special referee failed to make which are the subject of this complaint. Under the preceding heading, I have dealt with the matters mentioned in argument. There is no substance in this complaint.
Insufficient Reasons
When I first read the report I was a little perplexed by it. But, upon further consideration and having regard to the explanations of counsel at the hearing, I am confident that I now understand how the special referee went about his task and arrived at his conclusions.
It is clear that he considered what Mr Guillot said and what the various experts contended. He noted that, as more facts came to light, the views of some of them had changed. In the event, he set out in section 4 of his report what he understood to be their final positions and his own views about them.
It is perhaps regrettable that, in criticising the opinions of some of the experts, he entered upon a more personal criticism than was necessary, but this does not detract from the fact that his approach to their opinions in the light of his own observations appears to have been thorough, analytical and scientific. There was evidence to support the conclusions which he reached, and his inferences and opinions were not inconsistent with those of one or more of the experts whose reports were before him.
The Cause of the November 2005 Incident
There was evidence that seals were in the vicinity of the vessel at the time of the first incident. It may be that the special referee might have inferred from this that a seal was the cause of the failure at that time. There was also evidence of the condition of the propeller and the signs of progressive failure in the transmission which would support a contrary inference. In any event, as I mentioned in argument, this may not really matter. The critical aspect of the November incident was whether the admitted failure of the transmission, for whatever reason, produced damage to the engine. I will not refuse to adopt the report on the ground that the special referee failed to act upon undisputed evidence about this matter.
I conclude from this that I should adopt the report of the special referee. Having regard to the conclusions there expressed, it may serve no purpose to remit the questions for him to answer them in terms. I will hear counsel further upon this and upon the further orders and directions that are required to be made in this proceeding.
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