HSH Hotels (Australia) Ltd v Multiplex Constructions Pty Ltd - [2004] NSWCA 302

NEW SOUTH WALES COURT OF APPEAL

CITATION: HSH Hotels v Multiplex [2004] NSWCA 302

FILE NUMBER(S):
40088/04

HEARING DATE(S): 21 July 2004, 22 July 2004

JUDGMENT DATE: 15/09/2004

PARTIES:
HSH Hotels (Australia) Ltd
Multiplex Constructions Pty Limited

JUDGMENT OF: Mason P Hodgson JA Tobias JA

LOWER COURT JURISDICTION: Supreme Court - Equity Division

LOWER COURT FILE NUMBER(S): SC 55002/00

LOWER COURT JUDICIAL OFFICER: Bergin J

COUNSEL:
A: Mr A Sullivan QC / Mr Watts QC
R: Mr Rudge SC / Mr D Miller

SOLICITORS:
A: Griffins, Sydney
R: Minter Ellison, Sydney

CATCHWORDS:
Contract - Building contracts - Construction of - Completion - Minor defects - If considered collectively - Referee's report
Evidence - No cross-examination - Whether practical - Evidence in direct contradiction - Rejection of non-cross-examined evidence
Practice and Procedure - Amendments - Prejudice - Trial in near future
Costs - Offer of compromise - Addressed to two parties - Only acceptable by both - One party reasonably refuses offer - Other party liable in amount greater than offer - Whether indemnity costs may be ordered against other party

LEGISLATION CITED:
Nil

DECISION:
(a) Appeal dismissed with costs
(b) Cross-appeal dismissed with costs.

JUDGMENT:

IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

CA 40088/04
SC 55002/00
MASON P
HODGSON JA
TOBIAS JA
Wednesday 15 September 2004

HSH HOTELS (AUSTRALIA) LIMITED as trustee of SHR KENT STREET TRUST v MULTIPLEX CONSTRUCTIONS PTY LIMITED

A dispute arose over whether certain stages of a hotel development had been completed properly. In particular, there were said to be 16,000 defects, one of which was the fact that, at the said completion of the first stage, only one out of a possible four lifts serviced every floor of the hotel.

The contract defined a stage as being complete when two conditions were satisfied (the completion conditions). First, where the stage was completed except for minor defects that did not prevent, and whose correction would not prejudice, the ability to use the stage as intended. Secondly, where the builder (Multiplex) had done everything the contract required prior to completion.

The issues on appeal, following the handing down of a referee’s report which had been accepted by the primary judge, included:

- Whether, in virtue of the second of the completion conditions, a stage could be said to be properly completed where any minor defects remained;

- Whether the referee erred in preferring the evidence of the builder’s witnesses, in relation to the seriousness of the defects, over non-cross-examined evidence led by the owner’s expert witness;

- Whether the referee erred in not considering if several minor defects could collectively equate to a ‘major’ defect;

- Whether the referee ought to have allowed the owner (HSH) to amend the particulars of their defence; and

- Whether the primary judge ought to have found that Multiplex was entitled to indemnity costs from the date of an offer of compromise.

HELD: (per Tobias JA with Mason P and Hodgson JA agreeing) (1) It was not the case that the second of the completion conditions could only be satisfied if there were no minor defects (seemingly allowed by the first completion condition). The second condition relates to other obligations in the contract.

(2) A court, as a matter of necessity, in not compelled to accept non-cross-examined evidence where there exists a credible and persuasive body of substantial evidence in direct contradiction. In some cases, such as the present where evidence was given in respect of 16,000 alleged defects, it may be practical to forego cross-examination if directly contradicting evidence is being led. It was open to the referee to prefer the totality of the builder’s evidence in direct contradiction with the owner’s evidence.

(3) The referee properly kept in mind whether, within the definition of completion, the alleged defects, either individually or collectively, were minor or otherwise.

(4) The referee’s discretion in refusing the amendment did not miscarry. There was evidence of actual prejudice that was likely to have been suffered had the amendment been made; that is, Multiplex would have been required to have obtained further lay and/or expert evidence in the last days leading up to the hearing.

(5) The offer of compromise was addressed to two parties and could only be accepted by both, and not by one party individually. However, one party (not HSH) reasonably rejected the offer such that HSH, who is now liable, was not in a position to have accepted the offer. Accordingly, the primary judge’s discretion did not miscarry in refusing to award such costs.

(6) (per Hodgson JA with Mason P agreeing) The failure to provide the three lifts would result in the stage not being complete unless the defect, which amounted to an omission, was a ‘minor defect’, as the referee in fact, and correctly, held.

(7) (per Hodgson JA with Mason P agreeing) The correct approach in commencing consideration of expert evidence is, at a prima facie level, to accept it. In context it appears that the referee correctly approached Mr Nixon’s evidence as prima facie acceptable, but then having come to regard it as of less weight because of countervailing considerations.

IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

CA 40088/04
SC 55002/00
MASON P
HODGSON JA
TOBIAS JA
Wednesday 15 September 2004

HSH HOTELS (AUSTRALIA) LIMITED as trustee of SHR KENT STREET TRUST v MULTIPLEX CONSTRUCTIONS PTY LIMITED

Judgment

MASON P: I agree with the reasons of Tobias JA and the additional reasons of Hodgson JA. Orders should be made as proposed by Tobias JA.
HODGSON JA: I agree with the orders proposed by Tobias JA, and substantially with his reasons. I wish to add some comments on the first and second issues raised by HSH, concerning the non-completion of lifts and the referee’s treatment of expert witnesses who were not cross-examined.
On the non-completion of lifts, I accept Mr. Sullivan’s submission that the completion of lifts 1, 2 and 3, at the floors where they were coloured blue on the relevant plans, was included in Stage 1A; and that Stage 1A would not be complete until these lifts were completed at these floors, unless their omission was a “minor defect” within paragraph (a) of the definition of “completion”.
There was no explicit finding by the referee that the omission of these lifts was a minor defect; but as submitted by Multiplex (Orange 39 [26]), in my opinion he did implicitly make that finding.
The referee held that a minor defect was one that did not fall foul of paragraphs (i) and (ii) of paragraph (a) of the definition of completion (Red 355 [244]); and it is clear that “defect” includes “omission”. The referee referred to evidence of Mr. Johnson which was to the general effect that the omission of the lifts did not prevent Stage 1A from being reasonably capable of being used for its intended purpose, and that correction of the omission would not prejudice the convenient use of the Stage (Red 387-8 [310]-[311]), and accepted it completely (Red 419 [371] and Red 513 [586]).
For those reasons, in addition to those mentioned by Tobias JA, HSH fails on this point.
On the treatment of evidence of expert witnesses not cross-examined, notably Mr. Nixon, the referee said this (Red 375 [289]):
It seems to me that, in the absence of cross-examination for whatever reason there may have been, the proper approach is to have regard to the evidence of Mr. Nixon in so far as it is corroborated by other evidence called on behalf of HSH and Stamford in so far as it is contradictory of other evidence called by Multiplex.
He later said this (Red 377 [291]):
As I said, I think the best way to treat this difficulty is by looking at the totality of the tested evidence and seeing the extent to which it is corroborated by the evidence of Mr. Nixon on that particular issue.
If those statements were taken as indicating the approach taken by the referee in commencing consideration of the evidence of an expert who was not cross-examined, they would in my opinion indicate error. The correct approach in commencing consideration of such evidence is prima facie acceptance of it.
However, in my opinion in their context these statements do not indicate such an approach. Rather, they indicate the view of Mr. Nixon’s evidence reached by the referee after he had already subjected it to substantial scrutiny, in the light of his own assessment of photographs, his own interpretation of contractual provisions pronounced on by Mr. Nixon, and his assessment of other evidence contrary to that of Mr. Nixon. These statements are not inconsistent with the referee having appropriately approached Mr. Nixon’s evidence initially as prima facie to be accepted, but then having come to regard it as of less weight because of these countervailing considerations.
For those reasons, in addition to those given by Tobias JA, HSH fails on this point also.
TOBIAS JA: The appellant, HSH hotels (Australia) Limited (HSH), was in April 1998 the owner of a building located at 167-187 Kent Street, Sydney then known as Caltex House. By a Novated Building Works Contract dated 15 April 1998 as amended by a Deed of Release and Amendment dated 26 May 1999 (the contract), Multiplex Constructions Pty Limited (Multiplex) agreed with HSH to design, partially construct and re-build Caltex House (the Works) for the purpose of its conversion into a hotel to be known as "The Stamford Plaza, Sydney" (the hotel) and residential apartments to be known as "Stamford-on-Kent" (the apartments). The contract was to be administered by Stamford Property Services Pty Limited (Stamford).
The hotel was to consist of a lobby restaurant, boardroom and function rooms at ground level and accommodation on levels 1-8. The apartments were proposed for levels 9-25. The building also consisted of 5 basement levels, at the lowest of which (fronting Jenkins Street) was the entrance to the car parking for the hotel, the apartments and to the loading dock
As a consequence of disputes between the parties, on 3 February 2000 Multiplex instituted proceedings against HSH and Stamford to recover monies allegedly due to it by HSH and for damages arising out of alleged breaches by HSH of the contract and the failure of Stamford to certify completion when requested by Multiplex to do so. HSH cross-claimed against Multiplex for liquidated damages for late completion.
After numerous amendments to the pleadings and the completion of other interlocutory steps, on 9 October 2002 McClellan J made an order pursuant to Part 72 rule 2(1) of the Rules 1970 (the Rules) referring the whole of the proceedings to the Honourable J M N Rolfe QC as Referee for enquiry and report. His Honour's order required that unless otherwise permitted by the Referee, any evidence in chief was to be given by way of written statements signed by the maker of the statement. A further order empowered the Referee to permit such amendments or additions to the matter as he saw fit. The parties and the Referee approached this last-mentioned order on the basis that the Referee had power to grant leave to a party to amend its pleadings.
The reference hearing commenced on 12 February 2003 and concluded on 6 March 2003. The Referee published his main report dealing with the substantive issues in the dispute on 19 May 2003 and a second report dealing with a motion by Multiplex to amend, for costs and recommendations as to declarations and orders on13 June 2003.
By competing Notices of Motion filed pursuant to Part 72 rule 13 of the Rules, Multiplex sought an order that the court adopt both reports in full as the judgment of the court whereas HSH sought an order that both reports be rejected in full.
The primary judge, Bergin J, heard the Notices of Motion and, on 25 November 2003, upheld Multiplex's claim and rejected that of HSH. Accordingly, she considered that the Referee's report should be adopted in full. Formal declarations and orders were made by her Honour on 8 December 2003. It is against those orders that HSH appeals to this Court. As the Referee found in favour of Stamford and there was no issue but that Multiplex's claim against it should be dismissed with costs, Stamford is not a party to the appeal.
The relevant contract provisions
The Works the subject of the contract were to be performed in stages. Clause 1.1 of the contract defined a "Stage" as
"a stage of the Works described in the Contract Particulars"
The "Contract Particulars" were defined as
"the Particulars set out in Part B"
Relevantly, the Works were divided into three stages, Stage 1A, Stage 1B and Stage 2. These stages were defined in the Contract Particulars in the following terms:
"Stage 1A:That part of the Works described as Stage 1A on the plan which is Part O to the Contract but also including all other areas, lifts and services (as described in the building approval) which are necessary for the commencement and/or the completion (as the case may be) of furnishings, fittings and equipment fitout works of that part of Stamford Plaza Sydney within Stage 1A however, in the case of particular areas of Stage 1A on a shared access basis, as more particularly described in the plan which is Part O to the contract.
Stage 1B:That part of the Works described as Stage 1B on the plan which is Part O to the Contract but also including all other areas, lifts and services (as described in the building approval) which are necessary for the commencement and completion of furnishings, fittings and equipment fitout works of that part of Stamford Plaza Sydney within Stage 1B however, in the case of particular areas of Stage 1B on a shared access basis, as more particularly described in the plan which is Part O to the Contract.
Stage 2:The balance of the Works not included in Stage 1A or 1B."
The Contract Particulars set out the "Date for Completion" for each stage as follows:

Stage	Date for Completion
Stage 1A	2 October 1999
Stage 1B	30 October 1999
Stage 2	30 October 1999

The term "Completion" was defined in clause 1.1 of the contract in the following terms:
"Completion
The stage when in respect of the Works or a Stage:
(a)the Works are or the Stage is complete except for minor Defects:
(i)which do not prevent the Works or the Stage from being reasonably capable of being used for the intended purpose of the Works or the Stage; and
(ii)correction of which will not prejudice the convenient use of the Works or the Stage; and
(b)the Builder has done everything which the Contract requires it to do prior to Completion including those things described in the Contract Particulars."
The word "Defects" was defined in clause 1.1 to mean:
"any defect, shrinkage or omission in the Works or a Stage or any other aspect of the Works or a Stage which is not in accordance with the Contract."
Part O to the contract consisted of the floor plans of the building (the Part O plans) from Basement Level 5 to Level 8. Stage 1A on those plans was coloured blue, Stage 1B was coloured yellow and Stage 2 was uncoloured. The plans also depicted shared Stages 1A and 1B which are not presently relevant.
It is appropriate interpolate at this point the proposed lift system for the building. Seven lifts were proposed. Lifts 5, 6 and 7 ran from Basement Level 5 to the top of the building but were only to service the apartments. Accordingly, for present purposes, they can be left to one side. The shafts of Lifts 1 and 2 ran from Basement Level 5 to Level 8 but were depicted on the Part O plans as opening only at Basement Level 3, the ground or lobby level and Levels 1-8. However, they were only coloured blue as forming part of Stage 1A in respect of Levels 1-8. They were uncoloured at the other levels referred to. In particular, they were uncoloured at the ground or lobby level.
The shaft of Lift 3 extended from Basement Level 5 to Level 1 (where it comprised the lift over-run). It was uncoloured at Basement Levels 2, 4 and 5, was coloured blue at Basement Levels 1 and 3, and coloured yellow at the ground or lobby level as was most of the lobby area. It will be recollected that the areas coloured yellow comprised Stage 1B.
Lift 4 was depicted on the plans as an emergency and goods lift. It serviced the whole building. Except for Basement Level 1, it was uncoloured and, therefore, formed part of Stage 2. At Basement Level 1 it formed part of Shared Stage 1A.
The Contract Particulars contained the "Completion Requirements" for Stages 1A and 1B. They were as follows:
"(a)the Builder can provide sufficient and continuous access to Stage 1A and 1B as the case may require of the Works to enable the Principal or Other Contractors engaged by the Principal to complete furniture, fixture and equipment fitout works including access to:
(i)the offices of Stamford Plaza, Sydney located on the ground floor and basement car parking levels;
(ii) ground floor including foyer/lobby/function rooms/restaurant/kitchens of Stamford Plaza, Sydney; and
(iii)ground floor building manager's office of Stamford on Kent,
(b)the Builder can provide sufficient and continuous access to Stamford hotels and Resorts personnel for sales and marketing activities to existing and prospective clients of Stamford hotels and Resorts. Sufficient access includes access to all levels of Stamford Plaza Sydney and the ground floor foyer, ground floor restaurants, boardroom and function rooms, the health club and swimming pool on Level 1, the rooms located on Levels 1 to 8 (inclusive). If the builder complies with the access arrangements shown in the Plan in Part O it will be deemed to have provided 'sufficient and continuous access' under this paragraph (a) and (b)." (emphasis added)
The decision of the Referee
The Referee found, and the primary judge declared, that Multiplex was entitled to an extension of time to complete Stage 1A of the Works up to and including 26 October 1999 and to complete Stage 2 up to and including 20 December 1999. He also found, and the primary judge declared, that completion of Stage 1 of the Works as defined occurred on 26 November 1999 and Stage 2 on 24 February 2000.
The major debate before the Referee and the primary judge on the motions to adopt or reject the Referee's reports, related to the competing claims of the parties as to completion of Stages 1A and 2. Relevantly for present purposes, there were two issues. The first concerned Lifts 1, 2 and 3. HSH argued that each of those lifts formed part of Stage 1A and were not completed by 26 November 1999. In fact it was common ground that those lifts were not operational until 22 January 2000. The second issue concerned the question of defects. Much of the hearing before the Referee was taken up with this issue and, in particular, whether the defects were "minor" within the meaning of sub-paragraph (a) of the definition of "completion". The Referee held they were and the primary judge upheld this finding.
HSH makes two complaints with respect to the Referee's finding regarding the defects issue. The first concerns the failure of the Referee to adopt the statement of Mr Richard Nixon, a building expert called on behalf of HSH, who was not cross-examined. The second concerns the failure of the Referee to consider and deal with what was referred to in the submissions as "the multiple defects issue" that is, that even if individual defects might be regarded as "minor" within the meaning of the definition of "completion", collectively they were anything but "minor".
Shortly prior to the commencement of the hearing before the Referee, HSH applied by notice of motion to amend its claim by including in its particulars with respect to what was referred to as the "delayed completion issue" a reference to the failure of Multiplex to complete the Mechanical Car Parking System (MCPS) located at Basement Levels 1, 2 and 3 and which constituted part of Stage 2. In an interim report dated 31 January 2003, the Referee refused the amendment and the primary judge upheld this. HSH also challenges those decisions on the appeal.

Finally, an issue of indemnity costs arose before the Referee and the primary judge. The Referee recommended that HSH pay Multiplex's costs of the claim and HSH's cross-claim on a party/party basis up to and including 15 January 2003 and on an indemnity basis from and including 16 January 2003. That recommendation stemmed from an offer made by Multiplex on 16 January 2003, which was rejected by both HSH and Stamford. An issue arose as to whether the offer conformed to Part 22 rule 3(9) of the Rules. The Referee found that it did, but the primary judge held that it did not. Accordingly, her Honour declined to accept the Referee's recommendation in respect of costs and ordered that HSH pay Multiplex's costs of the claim and HSH's cross-claim on a party/party basis subject to a reduction by 5% for reasons not presently relevant. Multiplex has cross-appealed against her Honour's order.
HSH's grounds of appeal
It is appropriate to set out HSH's grounds of appeal as they encapsulate the issues to which I have referred above. They allege that the primary judge erred in law in:
(a)failing to address properly or at all HSH's arguments as to the proper construction of the contract for the determination of completion of Stage 1A;
(b)finding that the conclusion reached by the Referee as to the issue of availability of Lifts 1, 2 and 3 was open to him and that no relevant error of law had been demonstrated;
(c)failing to properly address HSH's submissions on the issue of the erroneous rejection by the Referee of evidence of witnesses and, in particular, Mr Nixon, who were not cross-examined;
(d)not concluding that the Referee misapplied the law with respect to the failure by Multiplex to cross-examine certain of HSH's witnesses;
(e)finding that the Referee had dealt with the issue of multiple defects and thereby failing to conclude that on a proper construction of the contract, completion had not occurred prior to 28 March 2000;
(f)finding that the Referee's exercise of discretion had not miscarried in his disallowance of HSH's amendment on the completion issue to include reference to the MCPS as a factor delaying completion.
It is convenient to deal with grounds (a) and (b) together and grounds (c) and (d) together. Accordingly, there are four issues in respect of which HSH challenges the findings of the Referee and the primary judge. I now turn to those issues.
The first issue – the failure to provide Lifts 1, 2 and 3 in Stage 1A
Relevant to both this and the second issue, is the Referee's finding as to what constituted a "minor Defect" within the meaning of the definition of "Completion" in the contract. He found (at [196]) that a "minor" defect was one which did not have either of the problems referred to in sub-paragraphs (i) and (ii) of the definition of "Completion" whereas a "major defect" did have those characteristics. In other words, a defect was "minor" if it did not prevent the stage from being reasonably capable of being used for its intended purpose and its correction would not prejudice the convenient use of that stage. It was accepted that the reference in sub-paragraph (ii) of paragraph (a) of the definition of "Completion" to "the convenient use of the …Stage" was a reference to the convenient use of that stage for its "intended purpose". There was no challenge to this construction by the Referee of a "minor Defect".
Multiplex submitted before the Referee that the intended purpose of Stage 1A within the meaning of sub-paragraph (i) of paragraph (a) of the definition of "Completion" was to enable the commencement and completion of furniture, fixture and equipment fitout works (the FF&E fitout works) and sales and marketing activities by Stamford hotels and Resorts personnel. Its submissions emphasised that it could not be the case that the intended purpose or proposed use of Stage 1A was that of a 5 star hotel at that point. This was because the hotel could not function as such unless and until Stage 1B was completed as it included the foyer and front of house areas. Further, until Stage 2 was completed, it was submitted that the hotel could not function because, by reference to the Part O plans, the lifts were not required to be continuously available throughout the hotel levels. This was because Lifts 1 and 2 were part of the Stage 2 works being uncoloured on those plans in respect of all levels below Level 1.
The Referee recognised that the Part O plans were somewhat strange in that to complete Stage 1A it was not necessary to have Lifts 1 and 2 operating from the lobby although they were required to be operative at Levels 1-8. Further, Lift 3 which gave access to the hotel basement car parking level, was included in Stage 1A at Basement Levels 1 and 3 but was only included in Stage 1B at the critical lobby level. On the other hand, the lift overrun to Lift 3 at Level 1 was part of Stage 1A.
In its submissions, Multiplex recognised that sub-paragraph (b) of the definition of "Completion" required it to have "done everything which the Contract requires it to do prior to Completion". However, it submitted that those words must be read as meaning "everything" which Multiplex was required to do as a pre-condition to the completion of Stage 1A insofar as that stage could be completed, prior to the carrying out of matters which the contract obviously contemplated being carried out after its completion.
HSH on the other hand submitted that for Stage 1A to be completed, Multiplex was required to complete the areas coloured blue on the Part O plans and that it was not sufficient to take those works only to a state of readiness for the purposes of FF&E fitout works. Accordingly, it was submitted that it was necessary for Stage 1A to be completed to 5 star hotel standard so that when the FF&E fitout works were complete, the whole of Stage 1A was then complete to 5 star standard.
The Referee accepted the submissions of Multiplex. He considered (at [236]) that one could look at the "Completion Requirements" in the Contract Particulars to determine the extent of work which had to be performed to achieve "Completion". He further accepted that that part of the description of Stage 1A in the Contract Particulars, namely, "in addition to the specified works on the plan" included "all other areas, lifts and services … necessary for the commencement and/or the completion … of furnishings, fittings and equipment fitout works of that part …". However, the Referee considered (at [239]) that as the parties did not anticipate that when Stage 1A completion was being considered, Stage 2 would also then be complete, there could be no 5 star hotel until Stage 2 was complete. Accordingly, he found that Stage 1A was not required to achieve 5 star hotel status as the time its completion. He concluded this aspect of the reference in the following terms (at [243]):
"In the result, I have come to the conclusion that upon a proper construction of the Contract Multiplex was entitled to claim Completion of a stage and, relevantly for present purposes, Stage 1A, provided it had completed the Stage except for minor Defects, which did not have the disqualifying effect provided for by the Contract; that it had done everything which was a pre-condition under the Contract to completing that Stage; and that it had met the Completion Requirements."
The Referee then proceeded to deal with the issue as to the nature of the alleged defects. He first dealt with the evidence of Mrs Maxine Lapstun, a professional dilapidation surveyor whose evidence the Referee accepted for the purposes of the second issue to which I shall later refer. He then considered the evidence of Mr Nixon. He was asked by Clayton Utz, HSH's then solicitors, to assume that the "intended purpose" referred to in sub-paragraph (a)(i) of the definition of "Completion" was a 5 star hotel. In his statement of 7 January 2000, Mr Nixon considered that the definition of "Completion" was not satisfied because of the non-provision of continuous access to each floor through the use of Lifts 1, 2 and 3. Mr Nixon concluded that it was clear that the intent of the contract was for "Lifts 1, 2 and 3 to be complete in Stage 1A and to provide access to the floors required for the use of that component of the building contained in Stage 1A."
This evidence of Mr Nixon was rejected by the Referee upon the basis that he had misconceived the requirements for contractual completion in that he had wrongly assumed that Stage 1A would not be complete unless it could then be used as a 5 star hotel. This included the completion of Lifts 1 and 2 at the ground or lobby level which, as the Referee observed, was not required according to the Part O plans to be carried out within Stage 1A but, being uncoloured, was part of Stage 2.
Mr Warwick Johnson was called on behalf of Multiplex primarily in relation to the defects issue. However, he also gave evidence with respect to the access issue. He considered that to achieve Completion of Stage 1A, Multiplex was required to ensure that the works for that stage were complete so as to enable HSH and other contractors engaged by it to commence and/or complete FF&E fitout works and to carry out sales and marketing activities in relation to the hotel part of the development by the staff of Stamford hotels and Resorts. He considered that the absence of Lifts 1, 2 and 3 did not prevent Multiplex from claiming completion of Stage 1A for that purpose. Mr Johnson noted that it was apparent from the Part O plans that the blue coloured areas of Stage 1A showed that Lifts 1 and 2 were required from Levels 1-8 but not from the ground level and that Lift 3 was only required for Basement Levels 1 and 3 with the consequence that none of those lifts gave access to the loading dock area on Basement Level 5 or to the street access at Basement Levels 2 and 4.
Mr Johnson also pointed out that the goods lift, Lift 4, was the only lift which actually serviced both the Basement 5 loading dock and Levels 1-8 as well as the apartments. Accordingly, it was the only lift which would have been feasible for HSH and other contractors to use for the FF&E fitout works and sales and marketing activities with the result that that lift enabled HSH to have a level of access which was the same or greater than that which could have been provided by Lifts 1, 2 and 3 had they been operational. In addition, Lift 4 had a greater capacity than those lifts. He therefore considered that the provision of Lift 4 "practically solved the problem of the unavailability of Lifts 1 and 2 (as required by the Contract)".
The only other witness who seemed to touch on the question of access was Mr John Andrews, an architect employed as a senior consultant with Bovis and who was called on behalf of Multiplex. He considered that the Stage 1A works had achieved completion with the exception of designated Lifts 1, 2 and 3. However, he noted that the goods lift, Lift 4, was available on a shared basis for the purpose of enabling access to Levels 1-8 for the FF&E fitout works and marketing activities.
Under the heading "Conclusion on Completion", the Referee found (at [586]) that by 26 November 1999, Stage 1A was complete save for "minor Defects" which did not infringe sub-paragraph (a)(i) and (ii) of the definition of "Completion". He accepted the totality of the evidence on the issue of defects called by Multiplex including the evidence of Messrs. Johnson and Andrews. Although he made no specific reference to the issue of lifts in his conclusion, it is apparent that the Referee accepted that, given the intended purpose of Stage 1A as found by him, the Completion Requirements in the Contract Particulars in respect of the provision of sufficient and continuous access to Stage 1A had been achieved by the availability of Lift 4 with the consequence that it mattered not that Lifts 1 and 2 at Levels 1-8 were not available until 22 January 2000.
HSH submitted to the primary judge that the Referee had erred in finding that Stage 1A had been completed even though Lifts 1 and 2 were unavailable until 22 January 2000. It further submitted, and repeated on the appeal, that sub-paragraph (b) of the definition of "Completion" obliged Multiplex to do "everything which the contract requires it to do" and that this included the completion of the work coloured blue in the Part O plans. Independently of the issue of continuous and sufficient access for the purpose of carrying out the FF&E fitout works and marketing activities, HSH submitted that Multiplex was required to complete Lifts 1 and 2 between Levels 1-8 and that this was so irrespective of whether there was an error in the Part O plans in omitting Lifts 1 and 2 at the ground or lobby level as part of Stage 1A.
The primary judge noted (at [100]) that the lifts shown on the Part O plans as being part of Stage 1A could not provide continuous access from all or any of the basement levels to all or any of Levels 1-8. She noted that Multiplex conceded that it did not comply with the access arrangements shown on the Part O plans but that if it had done so, that would not have provided "sufficient and continuous access within the meaning of the Completion Requirements".
Multiplex submitted that the "Completion Requirements" for Stage 1A contained in the Contract Particulars meant that Multiplex could meet its obligation to provide "sufficient and continuous access" to Stage 1A in two ways. The first was by giving "sufficient and continuous access" in fact that would enable the commencement or completion of the FF&E fitout works and the relevant sales and marketing activities. The second was by complying with the access arrangements shown on the Part O plans. The latter is a reference to that part of the Completion Requirements recorded in [29] above and which I have emphasised. In other words, that provision deemed Multiplex to have provided "sufficient and continuous access" under (a) and (b) of the "Completion Requirements" if it provided the access arrangement shown on the Part O plans. However, if it did so, it would not be providing "sufficient and continuous access" as Lifts 1, 2 and 3 were not relevantly coloured blue at Basement Level 5 (the loading dock level) or at the ground or lobby level. The primary judge suggested that there appeared to be a mistake on the Part O plans in that those lifts should have been coloured blue at least at those levels but, by oversight, had been left uncoloured.
The Referee referred (at [164]) to evidence called on behalf of HSH to the effect that Lifts 1, 2 and 3 were required to be operational before "Completion" occurred, it not being sufficient or appropriate to use the builder's lift (Lift 4) for sales and marketing activities. HSH argued that the colouring on the plans was incorrect but the Referee noted that it made no case, and during the hearing expressly stated that it did not intend to make a case, for rectification of the plans.
HSH submitted to the primary judge that the Referee fell into error when he presumed that it was necessary for it to make an application for rectification of the Part O plans to have Lifts 1, 2 and 3 coloured blue at the ground or lobby level so as to enable continuous access via those lifts as part of Stage 1A. It was contended that rectification was irrelevant: the contract, properly construed, expressly required Lifts 1, 2 and 3 to be available prior to completion of Stage 1A, at least with respect to Levels 1-8 where they were coloured blue on the plans.
The primary judge concluded this issue in the following terms (at [107]):
"Although the Referee did refer to the fact that no application for rectification was made by HSH, the fact was that he had before him a contract to be construed in light of the Contract Particulars including the term relating to "sufficient and continuous access". It was for him to decide whether that access had been provided notwithstanding the fact that Lifts 1, 2 and 3 were not available until January 2000. The access arrangements 'shown in the plan in Part O' included the goods lift being available and the Referee found as a matter of fact that such an 'arrangement' satisfied the test. In this regard I am satisfied that the conclusion reached by the Referee was open to him and no relevant error has been demonstrated."
Did the primary judge err in her conclusion that no relevant error had been demonstrated on the Referee's part?
HSH's submissions on this issue were simple. It was submitted that the Referee had misconstrued the contract in that he had conflated the "Completion Requirements" in the Contract Particulars for the provision of sufficient and continuous access to Stage 1A to enable FF&E fitout works and to enable HSH staff to conduct sales and marketing activities with the requirement of (b) of the definition of "Completion" that Multiplex do "everything which the Contract requires him to do prior to Completion". It was submitted that the additional words in (b), namely, "including those things described in the Contract Particulars" imposed an obligation upon Multiplex in addition to the requirement that it do everything which the contract required it to do with respect to Stage 1A. Accordingly, whether or not completion of the lifts between Levels 1-8 involved "sufficient and continuous access" within the meaning of the "Completion Requirements", was irrelevant except that those requirements would be deemed to be satisfied if, in fact, the access arrangements shown on the Part O plans had been complied with. The fact that Lifts 1, 2 and 3 were not coloured blue below Level 1, and particularly at Basement Level 5, was not the point.
The essence of Multiplex's submissions were as follows:
(a)The intended purpose of Stage 1A was that the works comprising the stage should be completed to the point where FF&E fitout works could be commenced and completed and access provided to HSH's personnel to pursue their sales and marketing activities.
(b)For the above purposes it was necessary, at least in respect of FF&E fitout works, to ensure sufficient and continuous access from the loading dock at Basement Level 5 to each of Levels 1-8. Lifts 1 and 2 could not provide that access as they did not open at Basement Level 5: they only opened at Basement Level 3.
(c)Lift 3 opened at Basement Level 5 but did not proceed past the ground or lobby level. It could not, therefore, give continuous access from Basement Level 5 to Levels 1-8.
(d)Accordingly, the only lift which could provide sufficient and continuous access from Basement Level 5 to Levels 1-8 was Lift 4, the goods lift: it was provided for the very purpose of transporting furnishings and other items from the loading dock to the accommodation levels where they were to be installed.
(e)The term "Defect" is defined to include an "omission in … a Stage or any other aspect of … a Stage". Accordingly, the omission of the lifts from Levels 1-8 as otherwise required by the Part O plans was an omission within the meaning of that definition.
(f)The omission of Lifts 1 and 2 was a "minor Defect" because:
(i)it did not prevent Stage 1A from being reasonably capable of being used for the purpose of FF&E fitout works and/or for the purpose of sales and marketing activities given that there was continuous and sufficient access to those levels by way of Lift 4; and
(ii)the installation of the lifts would not prejudice the convenient use of Levels 1-8 for the purposes referred to.
(g)Accordingly, Stage 1A was complete notwithstanding the unavailability of Lifts 1 and 2 at Levels 1-8.
Multiplex further submitted that whether or not the non-provision of Lifts 1 and 2 at Levels 1-8 was a "Defect" which ran foul of sub-paragraphs (a)(i) and (a)(ii) of the definition of "Completion" was a question of fact for the Referee which he answered in favour of Multiplex. As I have observed, this is not at all clear from the Referee's report although it is probably implicit from what he said in [236] when combined with his criticism of Mr Nixon in the first sentence of [280] and in his general acceptance of the evidence of Mr Johnson which would include his summary of Mr Johnson's evidence in [310] and [329]. To that should be added the Referee's acceptance of Multiplex's submission, which does not appear to be have been in contest, that there was no evidence to suggest that the commencement and/or completion of the FF&E fitout works were in any way delayed, impeded or frustrated by the non-provision of Lifts 1, 2 and 3 or that the personnel of Stamford hotels and Resorts were impeded in their sales and marketing activities with respect to the proposed hotel.

Although it is not readily apparent from the Referee's recitation in his report of the competing arguments, a reference to the transcript of argument before the Referee makes it clear that Multiplex did squarely submit to the Referee that the non-provision of Lifts 1, 2 and 3 was excepted from any requirement of "Completion" as their omission did not prevent Stage 1A from being capable of being used for the intended purpose of providing access for the FF&E fitout works and for sales and marketing activities and that the ultimate provision of the lifts would not prejudice the convenient use of Stage 1A for those purposes.
Further, it is clear that Multiplex did submit, and the Referee accepted, that the intended purpose of Stage 1A was its availability for the FF&E fitout works and for sales and marketing activities and that the achievement of those purposes did not require access thereto by way of Lifts 1, 2 and 3 given that that access was provided by Lift 4 which complied with the "Completion Requirements" of the Contract Particulars.
Furthermore, although HSH submitted to the Referee that the intended purpose of Stage 1A was its immediate use as a 5 star hotel, it did not suggest that, if its purpose was that contended for by Multiplex, the non-provision of Lifts 1, 2 and 3 would prevent Stage 1A from being reasonably capable of being used for that purpose or that the correction of the omitted lifts by their installation would prejudice the convenient use of Stage 1A for that purpose.
Rather, HSH's submission before the Referee and on the appeal was more blunt. As I have noted, it submitted that the requirements of (b) of the definition of "Completion" were cumulative upon the requirements of (a). Further, the requirements of the Contract Particulars including the "Completion Requirements" were in addition to the obligation imposed by (b) upon Multiplex to do "everything which the contract requires it to do" which included the provision of Lifts 1 and 2 at Levels 1-8.
However, the effect of HSH's submission is that it creates a tension between the permissibility of "minor Defects" (including omissions) in (a) of the definition of "Completion" and the requirement to do everything which the contract required under (b). In other words, on the one hand (a) was complied with even if some part of Stage 1A was omitted provided it did not prevent Stage 1A from being reasonably capable of being used for its intended purpose and the correction of which would not prejudice its convenient use for that purpose. On the other hand, the carrying out of the works the subject of Stage 1A was something "which the Contract requires" Multiplex to do prior to completion.
But if the two limbs of the definition of "Completion" are to be read consistently, it follows that (b) did not require Multiplex to complete work which was otherwise a "minor Defect" as defined in (a). It seems to me that (a) was concerned with the carrying out of the planned work with respect to a stage and that the first part of (b) related to other requirements of the contract which imposed obligations upon Multiplex other than the requirement to complete the works shown on the Part O plans in respect of a particular stage. There is then superimposed upon those requirements the "things described in the Contract Particulars" which included the "Completion Requirements". It is clear that the latter imposed obligations which were over and above the completion of the stage within the meaning of (a).
Finally, in [107] of her judgment, the primary judge referred to the access arrangements "shown in the plan in Part O" being a reference to that part of (b) of the "Completion Requirements" which I have emphasised in [29] above. However, it is not clear what "access arrangements" are being referred to in the Part O plans. Given that the "Completion Requirements" were concerned with the provision of "sufficient and continuous access" to Stage 1A, the access arrangements referred to by her Honour cannot be confined to the provision of Lifts 1 and 2 at Levels 1-8. Even if one included access to those lifts at the ground or lobby level, that would not have been "sufficient access" given the obvious necessity to have continuous access to the loading dock on Basement Level 5 for the purpose of carrying out the FF&E fitout works at Levels 1-8. On the other hand, the Part O plans did show Lift 4 as having continuous access to each level of the building from Basement Level 5 to Level 8. Given that it was a designated goods lift, it is obvious that its use for the purpose of transporting furniture and equipment from the loading dock to Levels 1-8 was appropriate. Accordingly, as the primary judge seems to suggest and the Referee seemed to accept, it may well be that the provision of Lift 4 was both an actual and deemed compliance with the requirements of (a) and (b) of the "Completion Requirements".
For the foregoing reasons, I am therefore of the opinion that HSH's challenge to the Referee and primary judge's findings with respect to the non-availability of Lifts 1, 2 and 3 should be rejected.
The second issue – the failure to cross-examine Mr Nixon on the defects issue
As already noted, the major issue at least in terms of time taken in the hearing of the reference, related to the question of defects and, in particular, whether they were "minor" in that they fell within sub-paragraphs (i) and (ii) of (a) of the definition of "Completion".
The parties' approach to this issue was as follows. Multiplex filed evidence in chief as to completion, which in effect by agreement did not deal with the question of defects. HSH then filed its evidence to support its case that completion had not been achieved because of defective work. Multiplex, conformably with the agreement already noted, then replied to that evidence in detail and, thereafter, both parties put on further evidence dealing with that topic.
When it came to cross-examination, Multiplex called its witnesses first. All of them were cross-examined to a greater or lesser degree. The major witnesses on the issue of defects called by Multiplex were Messrs. Johnson, Pirrello, Zanelli, Trezisa, Andrews and Lawlor together with Ms Sweetham and, importantly, Mrs Lapstun. HSH filed statements and reports from Mr Gaston, an architect, Mr Nixon, an expert project manager, and Mr Brady, a project programmer together with Ms Browne and Ms Dixon all of whom, it was submitted, observed the alleged defects.
The Referee dealt with Mrs Lapstun's evidence at [246] to [262] of his report. She inspected the building on 24 and 25 November 1999 and, with the assistance of a defect list prepared by Stamford which had been provided to her by Multiplex, she photographically surveyed the relevant levels of the building in respect of each alleged defect on that list. Between 17 and 24 February 2000, she carried out another photographic survey of the entire building, identifying alleged defects on a new list, which had been issued to Multiplex by Stamford. She carried out further similar exercises on 31 March 2000, 13 April 2000 and May 2000.
In her second statement, Mrs Lapstun referred to reports of Mr Nixon who had carried out a somewhat similar exercise on behalf of HSH. In essence, she considered that the defects identified by Mr Nixon in his reports either did not exist or were very minor in nature. She had not seen the contract and was therefore unaware of the definition of "Completion". Her judgment as to whether defects were minor was, therefore, based upon her understanding of the normal standards of the industry. She was shown photographs taken by Mr Nixon and asked to agree in cross-examination that certain alleged defects depicted in the photographs were not minor which she refused to do. At [288] the Referee concluded that he was satisfied that Mrs Lapstun had correctly characterised the defects she had observed. Further, the Referee considered some of Mr Nixon's photographs and concluded that it did not seem to him that some of the items Mr Nixon had described as other than minor would fit that description. Of immediate relevance he remarked:
"Mrs Lapstun formed a similar view from a far more informed basis"
Complaint was made that there was no evidence that Mrs Lapstun was more informed than Mr Nixon. However, it is clear from the context of this remark that the Referee is referring to Mrs Lapstun being more informed than himself and was not comparing her to Mr Nixon.
The Referee dealt with Mr Nixon's evidence from [263] to [291] of his report. In his first statement of 7 January 2000, Mr Nixon had (as noted in [42] above) assumed that the "intended purpose" referred to in sub-paragraph (a)(i) of the definition of "Completion" was a 5 star hotel. The Referee rejected Mr Nixon's evidence based upon that assumption as he held that the assumption was erroneous.
However, Mr Nixon proposed as an alternative to that assumption what he referred to as a "lesser test" for completion of each Stage. That test required Multiplex to relevantly comply with three conditions, namely,
(a)the stage was complete except for minor Defects which do not prevent the stage from being reasonably capable of being used for the intended purpose of the stage;
(b)the stage was complete except for minor Defects which will not prejudice the convenient use of the stage;
(c)Multiplex has done everything which the contract requires it to do including (with respect to Stage 1A):
(i) …
(ii) …
(iii) providing sufficient and continuous access to the stage to enable the Principal or other contractors engaged by the Principal to complete furniture, fixture and equipment fitout works include access to those areas included in the stage;
(iv)providing sufficient and continuous access to Stamford hotels and Resorts personnel for sales and marketing activities to existing and prospective clients of Stamford hotels and Resorts. Sufficient access includes only access to those areas defined as Stage 1A.
Mr Nixon then defined the "intended purpose" referred to in his first condition and the term "convenient use" in the second condition by reference to condition (c)(iii) and (iv). He therefore considered the "intended purpose" and the "convenient use" as being
"(a)to allow the Principals' Contractors to complete furniture, fixture or equipment fitout works to the stage; and
(b)the provision of sufficient and continuous access to Stamford hotels and Resorts personnel for sales and marketing activities."
Mr Nixon then prepared "Attachment C" to his report which was a table which listed each defect with space for notations of either "yes" or "no" against each defect in terms of whether or not it complied with the three conditions to which he had referred. Where he had given a "no" response, the table provided space for his reasoning in support of that response. The table is hereafter referred to as "Attachment C".
The Referee (at [263]) referred to Mr Nixon's "alternative and less rigorous 'test' ". In [274] he referred to the application by Mr Nixon of his "less demanding test" for completion based upon the stage being complete except for minor Defects not preventing it from being reasonably capable of being used for the intended purpose and which will not prejudice the convenient use of it.
Having in [288] indicated that he was satisfied that Mrs Lapstun had correctly characterised the defects she observed, the Referee noted the difficulty, so far as Mr Nixon's evidence was concerned, that he was not required for cross-examination. Nevertheless, he observed that there were certain parts of Mr Nixon's report which depended upon his assumed interpretation of the contract with which he did not agree, this being a reference to the assumption that he was asked to make by Clayton Utz that Stage 1A was required to be complete to 5 star hotel standard. The Referee further referred to some of Mr Nixon's photographs and to the fact that it did not seem to him that the defects described therein were other than minor and to Mrs Lapstun's similar view.
Acknowledging the fact that Mr Nixon had not been cross-examined, the Referee considered that the appropriate way to approach his evidence was as follows:
"289.It seems to me that, in the absence of cross-examination for whatever reason there may have been, the proper approach is to have regard to the evidence of Mr Nixon in so far as it is corroborated by other evidence called on behalf of HSH and Stamford and in so far as it is contradictory of other evidence called by Multiplex. Whilst it is part of the evidence and whilst it has not been challenged by his being cross-examined, there are, nonetheless, certain observations concerning the contractual position contained within it with which I do not agree and, in relation to a number of the photographs, Mr Faulkner cross-examined Mrs Lapstun to seek to establish from her that they were other than minor Defects, with which she was not prepared to agree. I have expressed my views as to the credibility of Mrs Lapstun and, to that extent, taken with my own viewing of a number of the photographs, I think, in a matter conducted as this was, it is permissible for me to form at least a prima facie view about the opinions Mr Nixon has expressed. I stress, however, that it must be, in relation to such factual matters, a prima facie view, although this does not impinge upon those parts of his report where, in my respectful opinion, he is in error in relation to his construction of the Contract.
290.However, that having all been said, in the absence of a submission based on Browne v Dunn, I think it reasonable to assume that Mr Faulkner took the view that as to the matters disclosed in the photographs the parties were, essentially, at issue. In these circumstances I have the conflicting evidence of Mrs Lapstun and Mr Nixon. I am prepared to assume, in favour of Mr Nixon, that confronted with a cross-examination that he was in error in asserting that the defects shown by his photographs were only minor, he would have adhered to his view that they were not minor. I also have the evidence of Mrs Lapstun that such defects were minor.
291.As I said, I think the best way to treat this difficulty is by looking at the totality of the tested evidence and seeing the extent to which it is corroborated by the evidence of Mr Nixon on that particular issue. I do that, of course, against the background of my assessment of Mrs Lapstun's evidence."
There is no doubt that the prima facie view concerning Mr Nixon's opinions referred to by the Referee in [289] was that he intended to reject those opinions in preference to those of Mrs Lapstun. However, it is clear that Mrs Lapstun and Mr Nixon were at issue and that the Referee was prepared to assume in favour of Mr Nixon that had he been cross examined, he would have adhered to his view that the defects he observed were not minor.
It is also apparent from [289] that the Referee considered that it was appropriate to approach Mr Nixon's evidence by ascertaining the extent to which it was corroborated by other evidence called on behalf of HSH. Although he refers to having regard to Mr Nixon's evidence "in so far as it is contradictory of other evidence called by Multiplex", it is not entirely clear to what he was referring. Obviously, Mr Nixon's evidence would be contradictory to, or in conflict with, the evidence called by Multiplex on this topic. I do not think that this part of what the Referee said takes the matter much further.
However, in [291] the Referee adumbrated a slightly different approach. He adopted the approach of looking at the totality of the tested evidence (by which, I assume, he meant evidence upon which there had been cross-examination) and seeing the extent to which it was corroborated by Mr Nixon's evidence. This seems to be the converse of what he had said in [289] which was to have regard to the evidence of Mr Nixon so far as it was corroborated by other evidence called on behalf of HSH. At the end of the day, it seems to me from a consideration of the Referee's subsequent recitation and analysis of the evidence of the various witnesses, that he has in fact looked at the totality of the evidence to determine the extent to which, if at all, it supported Mr Nixon on the basis that he would only accept Mr Nixon's evidence to the extent to which it was supported (or corroborated) by other acceptable evidence whether of witnesses called by HSH or Multiplex.
From [292] to [518] of his report the Referee analysed the evidence of Messrs Johnson, Pirrello, Zanello, Trezisa, Andrews and Lawlor as well as that of Ms Sweetham. From [519] to [583] he analysed the HSH evidence including that of Mr Woollam, Ms Browne, Mrs Keys and Messrs. Lee and Brady. He made no reference to the evidence of a Ms Dickson who identified alleged defects in the carpet which were photographed by Mrs Lapstun and duly tendered before the Referee. The Referee concluded his assessment of the witnesses in the following terms (at [586]):
"586.I have now considered the essential evidence concerning Completion. That called by Multiplex satisfies me, (and in this regard I consider that the onus is on Multiplex), that by 26 November 1999 Stage 1A was complete, save for minor Defects, which did not infringe sub-sub-clauses (i) and (ii), and that by 22 February 2000 Stage 2 was similarly completed. I have found the totality of the evidence of Messrs Johnson, Pirrello, Zanelli, Trezise, Andrews and Lawler and that of Ms Sweetham compelling on these points and it has some corroboration from the expert evidence called on behalf of HSH and Stamford from TBH and PKP.
587.Multiplex's evidence was not, in my opinion, subjected to any doubt by that of Mr Woollam, Ms Browne or Mrs Keys for the reasons I have given. I considering the matter, I must also have regard to the obviously important role played by Mr Leffler in preparing defect lists and the inference arising from the failure to call him in the circumstances. However, that is but another consideration to which the law requires regard to be had. Even without the availability of that inference, I would have come to the same conclusion."
The Referee then concluded (at [589]) that he was satisfied that Stage 1A was completed by 26 November 1999 and Stage 2 by 24 February 2000.
HSH submitted that the Referee erred in rejecting the evidence of those witnesses whose statements were tendered by it but who were not cross-examined, particularly that of Mr Nixon. The bases of this submission were as follows:
(a)The Referee failed to properly apply his own observations, when an Acting Judge of Appeal in Hull v Thompson [2001] NSWCA 359, namely, that where an expert witness is not cross-examined, his evidence should ordinarily be accepted;
(b)A party cannot gain a forensic advantage by not cross-examining an expert witness. When such a witness is not cross-examined, there must be compelling circumstances to justify the non-acceptance of that witness's evidence; in particular, there must be cogent evidence that is contrary to that of the witness;
(c)In requiring Mr Nixon's evidence to be corroborated by other evidence called on behalf of HSH, the Referee downgraded his evidence upon the erroneous basis that he had not been cross-examined so that his expert observations were unchallenged; accordingly, he erred in his approach to Mr Nixon's evidence by adopting the approaches articulated by him in [289] and [291] of his report;
(d)In any event, the Referee erred by rejecting Mr Nixon's evidence without considering his alternative approach based upon the "less demanding" test that he assumed and in the application of which he produced Attachment C to his report of 7 January 2000;
(e)The Referee erred in failing to deal with the evidence of Mr Gaston, Mr Brady, Ms Dickson and Ms Browne who also were not cross-examined;
(f)Accordingly, the Referee erred in his application of established principle with respect to the consequences of failing to cross-examine expert witnesses; his misapplication of the principle was such that the primary should not, as a matter of fairness, have adopted the Referee's report.

The primary judge dealt with the issues concerning the rejection by the Referee of the evidence of Mr Nixon et al who had not been cross-examined at [33] to [96] of her judgment. From [35] to [66] her Honour considered HSH's submissions with respect to the evidence of Mr Nixon and Mrs Lapstun including (at [48]) setting out in full [288] to [291] of the Referee's report which I have extracted in [76] above. She also dealt at [49] et seq with HSH's submissions concerning the Referee's reference to the rule in Browne v Dunn: see, in particular, [49].
At [56] the primary judge observed that
"notice that Multiplex would be suggesting that Mrs Lapstun's evidence was preferred over that of Mr Nixon, thus impeaching his version, 'had to be so distinctly and unmistakably given' by the service of the competing statements."
After referring (in [57]) to the fact that the Referee was acutely aware that Mr Nixon had not been cross-examined and that that fact was a "difficulty", the primary judge then cited from the judgment of Rolfe A-JA, with whom Sheller JA and Davies A-JA agreed, in M & EMHull Pty Limited v Thompson [2001] NSWCA 359 including the following passage:
"21.Prima facie if there is no cross-examination of an expert, (and indeed most witnesses), there is no basis for a Judge not to accept the unchallenged evidence. I say "prima facie" because there are circumstances in which evidence in a report may be rejected or subject to criticism or doubt. This may occur where, for example, the report is ex facie illogical or inherently inconsistent; or where it is based on an incorrect or incomplete history; or where the assumptions on which it is founded are not established. However, in the absence of some such matters, there is no rational reason to not accept unchallenged evidence."
I would interpolate here a reference to the following passage from the judgment of Newton J in Bulstrade v Trimble [1970] V.R. 840 where, at 849, he said:
"I know of no case where it has been held that where evidence of a witness upon a particular matter is allowed to pass without cross-examination, but evidence of a substantial character is called by the opposite party in direct contradiction thereof, the judge or jury is required in law to accept the former evidence. And, in my view, this is plainly not the law."
In my opinion there is no inconsistency between this statement of the position and that stated by Rolfe A-JA in Hull. The critical issue where there is no cross-examination of a particular witness, including an expert witness, is whether, as in the present case, there is a credible body of evidence of a substantial character in direct contradiction of the non-cross-examined evidence.
Thus, after dealing with an alleged inconsistency between the manner in which the Referee dealt with the evidence of Mr Johnson compared to that of Mr Nixon, the primary judge (at [65]) said that
"Mr Nixon's evidence in relation to defects was an issue upon which the parties had joined issue by the filing of competing statements."
She then referred (at [67]) to the Referee's approach that, in the absence of cross-examination of Mr Nixon, he would have regard to that evidence (1) insofar as it was corroborated by other evidence called by HSH; and (2) insofar as it was contradictory of other evidence called by Multiplex.
The primary judge then considered the evidence of Mr Pirrello and the Referee's findings with respect to it ([68]-[72]). In particular, she rejected the submission that, as a matter of fairness, the Multiplex witnesses should have given Mr Nixon the opportunity of answering criticisms of his opinions. Given the manner in which the hearing was conducted, I find that submission somewhat odd. As already noted, HSH first raised the defects issue in its statements filed in reply to Multiplex's case in chief. Multiplex then filed statements which clearly put in issue the opinions expressed by HSH's witnesses including Mr Nixon. No doubt, senior counsel for HSH contemplated that he would be cross-examining Multiplex's witnesses and that this would take place before his own witnesses were cross-examined, something which he also would have then contemplated. It may well have come as a surprise to him when senior counsel for Multiplex declined to cross-examine his witnesses on the defect issue. At that point, clearly, as the primary judge observed (at 65]) the parties had joined issue by the filing of competing statements. If at that point senior counsel for HSH considered that it was desirable or necessary to call Mr Nixon to rebut the criticisms of his report by the Multiplex witnesses, he could have done so.
Clearly, the Referee had no power to require Multiplex to cross-examine HSH's witnesses including Mr Nixon. On a factual issue such as the present, when the experts on each side cannot agree as to whether a particular defect is or is not minor, one can understand the Referee's suggestion (in [288]) that Multiplex may have taken the view that to cross-examine every witness about the definition of defects would be an unnecessary waste of time. It seemed to be common ground between the parties that even if the cross-examination were confined to Mrs Lapstun and Mr Nixon, to cross-examine on each and every alleged defect (there was said to be 16,000 of them) would have involved an inordinate amount of time.
The primary judge then dealt (at [73]-[79]) with HSH's criticism of the manner in which the Referee dealt with the evidence of Mr Andrews compared to that of Mr Nixon, the suggestion being that the Referee was not prepared to give any benefit of the doubt to HSH's witnesses as exemplified by his findings with respect to the evidence of Mrs Keys and to his alleged failure to refer more fully to the evidence of Mr Brady. I agree with her Honour that none of these challenges had substance for the reasons that she has given.
At [80]-[84], the primary judge dealt with HSH's complaint that the Referee failed to deal appropriately with the evidence of Ms Dickson. It was common ground that the Referee made no mention at all of Ms Dickson's evidence in his report. Her evidence related to alleged defects in the carpet. However, as her Honour observed at [84], there was ample reference in the report to the allegations made in relation to the carpet which made it apparent that the Referee clearly reviewed all the evidence with respect thereto. Complaint was made in HSH's written submissions that her Honour failed to address the submissions made to her regarding the Referee's rejection of the evidence of Mr Gaston, Mr Brady, Ms Dickson and Ms Browne. However, it is clear from her Honour's judgment that she certainly dealt with the evidence of Mr Brady and Mr Dickson. Her general comments to which I shall refer below, were, in my opinion, sufficient to rebut the submissions made by HSH with respect to the evidence of Mr Gaston and Ms Browne.
Thus, at [87] of her judgment, the primary judge referred to the submission that the Referee fell into error such that the report should be rejected by reason of Multiplex's failure to cross-examine HSH's witnesses and, in particular, Mr Nixon and the Referee's statement that there was no submission "based on" Browne v Dunn.
At [88] her Honour observed that the Referee was clearly cognisant of the fact that Mr Nixon had not been cross examined and decided to approach what he described as "this difficulty" in the manner set out in paragraphs [288]-[291] of the report. She noted that the Referee had not made a detailed comparison of the evidence given by Mr Nixon with the evidence given by each of Multiplex's witnesses to which he referred in his report; nor was Mr Nixon's evidence expressly analysed in conjunction with the evidence of other HSH witnesses. Nevertheless, as her Honour noted, it is clear that the Referee was aware of the care he needed to take in the absence of any cross-examination of Mr Nixon.
At [89] her Honour noted the submission, which was repeated on the appeal at least in HSH's written submissions, that Mr Nixon should have been given the opportunity to explain his reasoning process for reaching the conclusion he expressed in his reports and that the only way that could occur in the process before the Referee was by requiring Multiplex to cross-examine him as a prerequisite to an entitlement to impeach his opinions. Her Honour then referred (at [90]) to the suggestion in Hull (at [24]) that if HSH was to maintain that Mr Nixon had not been challenged at all and that there was no basis for doing anything other than accepting his opinions, the evidence of Mrs Lapstun was objectionable as raising what Rolfe A-JA referred to in Hull as a "false issue". However, having noted that her evidence was not objected to on that basis, her Honour acknowledged that that was understandable as Mrs Lapstun was cross-examined before HSH was aware that it was not intended to cross-examine Mr Nixon.
The primary judge then made the following observation (at [91]):
"Where there is unchallenged evidence called by a party and there is evidence that is called by the opposing party that the tribunal of fact accepts, notwithstanding a challenge to it, there is the necessity to weigh that evidence against the unchallenged evidence called by the first party. The examples of circumstances that Rolfe A-JA referred to in Hull v Thompson in which unchallenged evidence in a report may be rejected included where the report is ex facie illogical or inherently inconsistent; where it is based on an incorrect or incomplete history; or where the assumptions on which it is founded are not established (par 21). These were only examples and could hardly be said to be exhaustive. HSH submitted that none of these examples is referred to by the Referee in the Report as a basis for having rejected Mr Nixon's evidence. In the circumstances it was submitted that as Rolfe A-JA said in Hull v Thompson "there is no rational reason not to accept unchallenged evidence" of Mr Nixon."
At [92] her Honour referred to the comparison made by Mr Nixon between the photographs he took and those taken by Mrs Lapstun. Further, she recorded that the Referee analysed each aspect of Mr Nixon's report including that dealing with Mrs Lapstun's photographs. She concluded:
"It is obvious that the Referee reviewed Mr Nixon's photographs having regard to paragraphs 277 and 278 in the report. The Referee went further and assumed that had Mr Nixon been cross-examined, he would have maintained that the defects that observed were not minor."
The primary judge then referred (at [93]) to the fact that the Referee had two experts' opinions that were in conflict and that
"although one was cross-examined upon, the ultimate position was that neither had been effectively challenged. It was therefore important for the Referee to look at all the evidence and to find the facts."
In response to a submission that the Referee had not analysed Mr Nixon's evidence and that he had in fact failed to comply with the approach that he set himself in [291] of his report as well as with the principles enunciated in Hull, the primary judge (at [95]) observed that the reality was that the Referee reviewed the photographs for himself and came to the conclusion that it was a well-finished building, the defects appeared to be minor rather than otherwise, and there was a well-organised regime for the rectification of those defects. Her Honour then set out in full [278] of the report which recorded the Referee's observations with respect to a number of the photographs.
The primary judge then concluded her survey of the Referee's approach to the non-cross-examination of HSH's witnesses in the following terms:
"96.In the face of what were two competing effectively unchallenged experts' reports the Referee had to decide whether these defects were minor or not. Mr Nixon and Mrs Lapstun were only two witnesses out of a number of witnesses called in relation to the question of Completion. The finding made by the Referee that he preferred the evidence called by Multiplex and that the HSH evidence did not subject it to any doubt, is in my view consistent with him having considered all the evidence called and treated Mr Nixon's evidence as unchallenged but outweighed by the Multiplex evidence. The Referee did compare the evidence of the two experts and did not misapply the principles relevant to the "difficult" circumstance of Mr Nixon not having been cross-examined. It is clear that all the evidence called by Multiplex was, in the Referee's opinion, such as to outweigh the evidence called by HSH including Mr Nixon's evidence. I am not satisfied that the Report should be rejected based upon the submissions made on this Ground."
The submissions advanced by HSH on the appeal relating to the alleged unfairness of the Referee in preferring the evidence of the HSH witnesses and, in particular, that of Mrs Lapstun and Mr Johnson, over the unchallenged evidence of Mr Nixon were generally the same as those made to the primary judge, which she rejected. It was, however, submitted that her Honour's conclusion that the Referee's finding that he preferred the evidence called by Multiplex and that that called by HSH did not subject that evidence to any doubt, was consistent with the Referee having considered all the evidence called and as having treated Mr Nixon's evidence as unchallenged but outweighed by the evidence of Multiplex, was a conclusion that, in effect, was not open to her Honour. With respect, I disagree.
References have already been made to the obvious fact that Mrs Lapstun and Mr Nixon were at issue: the latter said the defects he identified in his photographs were not minor, whereas the former said that those defects either did not exist or, to the extent to which they did, they were minor. Mr Nixon and Mr Johnson were also at issue. As the Referee records in [336] of his report, Mr Johnson in his 8th statement of 8 November 2002 commented upon the two reports prepared by Mr Nixon and, in particular, expressed the view that the defects referred to by Mr Nixon in his Attachment C and photographed in his Attachment B, were either minor in nature or not present when Multiplex claimed completion had occurred or not defects at all.
Again, as recorded by the Referee in [341] of his report, Mr Johnson in his 13th statement of 8 November 2002, returned to a consideration of Mr Nixon's reports and expressed the view that the alleged defects described therein were minor and did not prevent the use of the building for its intended purpose. Although there was some cross-examination of Mr Johnson with respect to the alleged defective wardrobe doors, damaged aluminium door frames, sliding doors not closing properly, a missing balcony down-light in Unit 101 and stains and marks on the carpet at Levels 1-8, it being put to Mr Johnson that those defects were major which he denied, none of Mr Johnson's cross-examination was referenced to any defect disclosed in any of Mr Nixon's reports notwithstanding that Mr Johnson's 8th, 13th and 21st statements responded in detail to them. Quite clearly, it would have been a tediously impossible task for the cross examiner to take Mr Johnson through each and every defect alleged by Mr Nixon. It is no criticism of senior counsel for HSH that he did not do so.
As her Honour noted in [96] of her judgment, to all intents and purposes the evidence concerning defects and their characterisation on both sides – that of Mr Nixon for HSH and that of Mrs Lapstun and Mr Johnson for Multiplex – was effectively unchallenged.
It was acknowledged by HSH that the statement of principle relied upon in Hull provided a prima facie position only. Furthermore, as her Honour observed at [91] of her judgment, the examples given by Rolfe A-JA in [21] of Hull, of circumstances in which unchallenged expert evidence may be rejected, were not intended to be exhaustive. One can therefore accept that the prima facie position should prevail unless there are cogent reasons for rejecting the unchallenged evidence. However, it is clear that such reasons may be provided by credible evidence which contradicts that of the unchallenged witness in circumstances which are persuasive.
It was in this context that the Referee considered that it was appropriate to contrast the evidence of Mr Nixon with the totality of the tested evidence (including witnesses from both sides) to determine the extent to which Mr Nixon's views were corroborated on a particular issue. In my opinion, this is essentially what the Referee then did. The Referee was saying that to the extent to which Mr Nixon was corroborated by that evidence, including the evidence of other HSH witnesses, the more weight could be attached to it whereas to the extent to which it was not corroborated, justified his evidence being given less weight.
It was not suggested by HSH that the Referee erred in forming a prima facie view about the opinions of Mr Nixon in the light of his analysis of the evidence of Mrs Lapstun. Having recognised, however, that this was only a prima facie view because Mr Nixon had not been cross-examined, the Referee considered it appropriate to look at the balance of the evidence to see if Mr Nixon's opinions achieved greater or lesser acceptance depending upon whether they were corroborated or contradicted by a consideration of the evidence of the other witnesses.
In Super Pty Ltd v SJP Formwork (Aust) Pty Ltd (1992) 29 NSWLR 549 at 563-564, Gleeson CJ made a number of observations with respect to the fact that firstly, an application under Part 72 rule 13 of the Rules was not an appeal and, secondly, the judge hearing the application has a judicial discretion to exercise in a manner which is consistent both with the object and purpose of the rules and with the wider setting in which they take their place. In particular, where neither a question of law nor the application of legal standards to establish facts is involved as in the present case, and after observing (at 563G) that it would frustrate the purpose of Part 72 to allow the reference to be treated as some kind of warm-up for the real contest, the Chief Justice said (omitting citations):
"On the other hand, if the Referee's report reveals some error of principle, some absence or excess of jurisdiction, or some patent misapprehension of the evidence, that would ordinarily be a reason for rejecting it. So also would perversity or manifest unreasonableness in fact-finding."
The Chief Justice (at 564) further held that on the particular question of the approach to be taken on disputed findings of fact, where there is shown to be evidence available to support such findings, or the issue involves a choice as between conflicting evidence, he agreed with the views of Giles J, the trial judge, that (at 555):
"…rejected the submission that he was obliged to reconsider, and determine for himself, every issue of fact or law in respect of which the builder was dissatisfied with the decision of the referee. He considered that such an approach would render virtually futile the whole procedure of sending matters to a referee, and was not required by the rules. On the contrary, his Honour approached the matter on the basis that he had a discretionary decision to make as to whether he adopted the referee's report in whole, or in part, and that in making that decision he, being satisfied that the referee had applied his mind to the task of fact finding required of him, carefully and in a manner consistent with legal principle, would not do more than ensure that the referee had addressed the appropriate questions, and that there was evidence capable of being accepted, which, if accepted, supported the findings of fact made."
The primary judge was familiar with these principles and cited them in [23] and [24] of her judgment. The Referee was particularly conscious of the fact that Mr Nixon had not been cross-examined and was no doubt well aware of what he had said, in a different capacity, in Hull. Accordingly, it was open to the Referee to prefer the totality of the evidence called by Multiplex to that called by HSH including that of Mr Nixon: see [586]-[587] of the report. I see no demonstrated error of principle on the part of the Referee let alone any patent misapprehension of the evidence or perversity or manifest unreasonableness in his fact finding. In my opinion the conclusion reached by the primary judge at [96] of her judgment was correct. HSH's challenge to the Referee's rejection of Mr Nixon's evidence did not lead to any relevant unfairness which would have justified her Honour in refusing to adopt the Referee's report.
The third issue – the failure of the Referee to deal with the issue of multiple defects

As noted by the primary judge at [123] of her judgment, senior counsel for HSH submitted to the Referee that the definition of "Completion" did not preclude a consideration of multiple defects in ascertaining whether defects were a disentitling matter. It is clear from the exchange between senior counsel and the Referee to which her Honour refers, that the former was making alternative submissions, well understood by the Referee, that one could have a thousand minor defects which may have the effects referred to in sub-paragraphs (a)(i) and (ii) in which event collectively they would not be minor. Senior counsel exemplified the issue by referring to the fact that because of the magnitude and difference in nature of the defects, many different trades would be required to rectify them and that that would cause disruption which would "prejudice the convenient use of the Works or the Stage" within the meaning of sub-paragraph (a)(ii) of the definition.
HSH submitted to the primary judge that in considering the evidence, the Referee had overlooked and/or failed to consider the effect of the defects in aggregate in terms of whether they were not "minor" in that they did not fall within sub-paragraph (a)(i) or (ii) of the definition. On the other hand Multiplex submitted that it was clear that the Referee considered all the evidence including the extent to which there were multiple or repetitive defects and the effect thereof.
The primary judge's conclusion with respect to this issue was as follows:
"128.It is true that the Report does not expressly refer back to the argument raised by Mr Faulkner SC. However when the whole of the Report is reviewed and in particular the Referee's statement that nothing Mr Rice had said satisfied him in that the evidence called by Multiplex failed to establish that "any defects remaining" were only minor, that seems to me to encompass the position of whether any defects, either alone or together, constituted a defect other than a "minor" defect. It is clear from a reading of the whole of the Report that the Referee was quite comfortably satisfied that the defects upon which HSH relied were both individually and collectively minor defects. I am not satisfied that this ground is a basis upon which the Court would reject any part of this Report."
The reference in the second sentence of the above citation concerning the Referee's statement with respect to Mr Rice is a reference to [588] of the report which her Honour extracted at [125] of her judgment.
It was submitted that the question of the effect of the totality of the defects, even if they were minor individually, was an important issue with which the Referee simply did not deal. Accordingly, his failure to deal with a relevant issue which was clearly before him constituted an error of law. Further, it was submitted that the primary judge erred in finding that the Referee found that the defects upon which HSH relied were not only individually but also collectively minor defects. It was acknowledged that this issue was linked to that of the failure of Multiplex to cross-examine important HSH witnesses and, in particular, Mr Nixon. It was contended that Mr Nixon addressed the issue of multiple defects and that that evidence was unchallenged.
Multiplex submitted to the Referee that both its evidence and its submissions thereon were to the effect that the defects, such as they were, that existed at the times when completion was claimed, when viewed individually or collectively, did not prevent Multiplex from satisfying the "Completion Requirements" in the Contract Particulars. In particular, it was submitted that, whether taken individually or collectively, those defects did not prevent the use of any Stage of the Works from being reasonable capable of being used for the intended purpose of the FF&E fitout works and/or sales and marketing and, further, that their correction would not prejudice their convenient use for those purposes. It was submitted that HSH's submissions did not do justice to the approach taken by the Referee during the hearing, or in his report, to the receipt and assessment of the competing evidence of the parties as to the nature and extent of defects, (be they minor or otherwise), and the question of whether those defects, individually or collectively, impacted upon the question that the Referee was required to answer in terms of the definition of "Completion".
As the primary judge observed, there is no doubt that a reading of the report as a whole, leads one to the conclusion that the Referee gave lengthy and detailed consideration to the evidence relating to defects and, in particular, to their impact in terms of sub-paragraph (a)(i) and (ii) of the definition of "Completion". Further, as is clear from the exchange between senior counsel for HSH and the Referee extracted by her Honour in [123] of her judgment, the Referee was alive to the submission being made by HSH with respect to the effect of multiple defects. In these circumstances, like the primary judge, I am not prepared to find that the Referee, in coming to his conclusion that he preferred the evidence called by Multiplex to that called by HSH, overlooked the contentions of HSH with respect to this issue.
The Referee kept clearly in mind the particular question which he was to answer with respect to the defects issue. That was whether, within the meaning of the definition of "Completion", the defects alleged by HSH were "not minor". This required a consideration by him as to whether, either individually or collectively, they prevented the Works from being reasonably capable of being used for their intended purpose as found by him and/or that the correction thereof would not prejudice their convenient use for that purpose. In my opinion, it would be drawing a long bow indeed for this Court to find that in such a lengthy and detailed report, the Referee had overlooked or failed to consider what he clearly knew to be an aspect of the issue he was required to determine.
The primary judge did not think so and nor do I. Accordingly, this challenge to her Honour's decision to adopt the report should be rejected.
The fourth issue – refusal of the Referee to allow an amendment to HSH's particulars of its defence
On 4 October 2001, HSH's solicitors, Griffins, wrote to Multiplex's solicitors, Minter Ellison, providing amended particulars of Multiplex's alleged failure to achieve completion in respect of, inter alia, Stage 2. Those particulars alleged the failure of Multiplex to complete the MCPS located in Basement Levels 1, 2 and 3. It was alleged that the failure to complete the MCPS was a "Defect" which was not "minor".
On 19 October 2001, the primary judge made an order that HSH prepare a schedule in the form of a single document encapsulating the particulars they had provided to Multiplex including details of defects alleged to have prevented "Completion" as defined. The schedule provided omitted any reference to the MCPS.
After the matter had been referred to the Referee, he gave directions on 23 October 2002 in respect of the service of Multiplex's evidence on HSH and Stamford. On 24 October 2002, Mr Wong of Minter Ellison wrote to Griffins highlighting the fact that the MCPS was only relied upon by HSH in relation to alleged breaches of the contract for defective works and not for delayed completion. It was not until 12 December 2002 that Griffins wrote to Minter Ellison referring to a directions hearing that was to occur that afternoon before the Referee and advising that they had become aware that the schedule of particulars served pursuant to the order of the primary judge made on 19 October 2001, erroneously omitted the MCPS from the particulars of matters which precluded the completion of Stage 2. They advised that they intended to restore that particular.
On or about 17 December 2002, Griffins filed and served a Notice of Motion seeking leave to amend HSH's defence by including the non-completion of the MCPS as a particular of work which precluded the completion of Stage 2.
On 20 December 2002, Griffins served on Minter Ellison a copy of a supplementary report by Tracey Brunston & Hammond dated 19 December 2002, HSH's programming experts, which included findings that the MCPS had not reached the stage of practical completion until 4 July 2000 or later and that it had become critical to the completion of the Works no later than mid-January 2000 and potentially from mid-December 1999. The assessment of Extension of Time entitlements previously completed was amended having regard to a revised critical path.
HSH's Notice of Motion was not heard by the Referee until 31 January 2003, some 10 days prior to the commencement of the hearing fixed for 10 February 2002. In the meantime, Mr Wong of Minter Ellison, in an affidavit sworn 24 January 2003, after setting out the history relevant to the provision of particulars of Multiplex's alleged delay in achieving completion, deposed to the fact that on the basis of Multiplex's understanding that HSH would only be relying on the MCPS issue in its breach of contract claim giving rise to general damages and not for delayed completion, he was instructed by Multiplex to prepare limited evidence in defence and reply in relation to the MCPS. The last of that evidence was filed on 6 December 2002. So far as the MCPS issue was concerned, Multiplex filed and served only one piece of evidence from its expert witness, Sinclair Knight Merz. Mr Wong then noted that since 6 December 2002, HSH had served five more pieces of evidence with respect to the delay issue relating to the MCPS, including two expert reports. This occurred notwithstanding that it was not until 12 December 2002 that he became aware for the first time since 24 October 2002 that HSH would be seeking to rely on the MCPS matter as a delayed completion particular.
Although the matter had been highlighted to the Referee at a preliminary conference on 12 December when Multiplex's counsel had indicating that it would be objecting to the inclusion of the MCPS as a delayed completion issue, HSH's Notice of Motion for leave to amend was not filed until 17 December.
Paragraph 16 of Mr Wong's affidavit was in the following terms:
"In my opinion, substantial prejudice will be suffered by the plaintiff if the MCPS is admitted as a delayed Completion issue, given that the cross-claimant did not dispute the plaintiff's letter of 24 October 2002 that it was not a delayed Completion issue, and led the plaintiff to believe so during the preparation of the plaintiff's evidence, which has now closed. Further, as the plaintiff had prepared limited evidence in defence and reply on the MCPs as a direct result of the cross-claimant's representation, if the MCPS is admitted as a delayed Completion issue, the plaintiff will be severely prejudiced. Additional expert and lay evidence on programming, performance and critical path issues will need to be adduced by the plaintiff at this late stage of the proceedings."
Mr Wong's evidence was unchallenged.
At the hearing before the Referee on 31 January 2003, it was submitted by HSH that Multiplex was not asserting that if the amendment was allowed, it would suffer any material prejudice. As to [16] of Mr Wong's affidavit it was submitted that no prejudice was there referred to except the necessity to obtain further evidence. It was asserted that there was no indication that that evidence could not be obtained, and within a reasonable time. It was suggested that although the hearing of the proceedings was to commence some 10 days hence, nevertheless it would be some weeks into the hearing before any issue concerning the MCPS would become a matter for evidence.
Counsel for Multiplex responded, asserting that the prejudice was patent and that, in particular, his client's programmers would now need to go back and determine the impact that the MCPS would have on critical paths: see the exchange between the Referee and counsel extracted at [148] of her Honour's judgment.
The Referee refused the amendment. After referring to the history of the matter which I have set out above (including Mr Wong's evidence), he accepted as understandable the omission in the furnishing of the particulars ordered by the primary judge but indicated that
"what I do not find understandable and what has not been explained is why back in October 2002 the matter, if it be a matter of significance was not attended to, particularly in the light of the letter from Mr Wong [of 24 October 2002]."
As to the submission of HSH that there was no real evidence that the matter could not be attended to between then and 10 February or during the hearing, the Referee observed that the matter had been advancing for a long time on the basis that the MCPS was not part of the delayed completion issue. He concluded in these terms:
"I have little doubt that the experts are engaged in preparing themselves for the matter and, irrespective of the mistake which was originally made, ample time was in my view given by Mr Wong's letter to enable that mistake to be rectified. Sadly, from the defendants' point of view, it does not seem to have been availed of until mid-December of 2002 and, of course, one has to take into account that that was shortly before, one may reasonably anticipate a number of people would be unavailable for a period by virtue of the Christmas and New Year period and holidays. To deal with this issue during the hearing would also be difficult and distract attention from the many others.
I am always loath to shut a party out from ventilating issues. However, the history of this matter is such, and I have sought to set it out, albeit perhaps briefly, that more particularly it is such that from October there being an error originally in November 2001, it should have been corrected. In the exercise of my discretion I do not see that there should now be allowed to be resurrected an issue that has been dealt with in the circumstances to which I have referred."
The primary judge rejected the submission that the Referee had erred in exercising his discretion in failing to allow the amendment. Her Honour noted (at [153]) that when the matter was "highlighted" by Multiplex in October 2002, HSH did not seek to change the position for a further six or seven weeks and then only on the morning of the directions hearing on 12 December 2002, some six days after the time for service of all evidence had expired. Further, it was not until 20 December 2002 that an expert report on the issue was served on Multiplex.
Her Honour noted (at [154]) that the Referee had referred to the evidence that Multiplex would be "severely prejudiced" and that if the amendment was allowed, it would have to obtain additional expert and lay evidence on programming, performance and critical path issues. Although HSH was critical of the Referee's reference to the Christmas/New Year holiday period and the fact that relevant people would be on holidays, her Honour could see no basis for this criticism and nor can I. As her Honour recognised, the holiday period would clearly impact on Multiplex's capacity to deal with the matter given that it would have little or no control over when its independent experts took their vacation time.
Reliance was also placed on a number of authorities which established than an amendment to a pleading should be allowed unless an injustice would be caused to the other party. Particular reliance was placed on the decision of the High Court in State of Queensland v J L Holdings Pty Ltd (1997) 189 CLR 146 at 155. However, (at [157]) her Honour held that it was clear that there was no doubt that the Referee was cognisant of the principles upon which he should make the decision as to whether to allow the amendment. She considered, contrary to the submission of HSH, that the Referee had engaged in the necessary balancing exercise as the authorities required. The facts of J L Holdings were clearly distinguishable from those in the present case. Her Honour's conclusions were contained in [158] of her judgment:
"The claim that an appropriate costs order can cure prejudice is a very attractive submission. But each case needs to be looked at on its particular facts and it must be remembered that this was a discretion with which both parties accepted the Referee was endowed. The Referee clearly considered the need to strive to have all issues litigated between the parties – thus his reference to being "loath" to shut a party out. He considered the relevant history and facts and accepted the evidence that HSH's solicitor had caused the error. He weighed that matter into the balance when finding as a fact that HSH delayed further, and in his view unacceptably further, from the time Multiplex's solicitor highlighted the matter in October 2002. He considered the submission made by HSH that the matter could be dealt with later in the hearing but did not accept it, referring to the difficulties and distraction it would cause, no doubt having regard to Mr Wong's affidavit evidence and the prospect of having so many strands of the evidence affected. As I have adverted to earlier, the test is not whether I might have allowed the amendment, it is whether there has been demonstrated an error such as to vitiate the exercise of the Referee's discretion. On balance, I am not satisfied that such has been demonstrated."
HSH submitted that the primary judge had erred in failing to find that the Referee's exercise of discretion had miscarried. It was submitted that as the issue of the MCPS was previously contained within the particulars relating to the defects completion issue, Multiplex must at some point in time have prepared for it. However, the evidence of Mr Wong is to the contrary. As I have observed, on Multiplex's understanding that the MCPS issue would only be relied on with respect to HSH's breach of contract claim and not in respect of the delayed completion claim, he was instructed by his client to prepare only limited evidence in reply to the MCPS issue.
HSH further submitted that in the overall context of the reference, the issue could have been conveniently accommodated despite the lateness of the application to amend. The Referee thought otherwise. In my opinion, it was open to him to do so. It was then submitted that the application was some two months prior to the hearing. However, this submission overlooks the fact that it was not until 20 December 2002, that HSH filed and served its evidence in support of the issue. It apparently did not see fit to bring the motion on for hearing by the Referee before Christmas and as a matter of urgency with the consequence that it was not heard until 31 January 2003 in circumstances where it had been made clear to HSH at the preliminary conference on 12 December 2002 that the amendment would be strenuously opposed.
Finally, it was submitted that there was no evidence from Mr Wong of actual prejudice. There was nothing to suggest that the additional expert or lay evidence could not be obtained or that an appropriate order for costs could not have resolved the matter if that was warranted. One can accept that it would have been possible to obtain the additional evidence. But the real issue was when it could be obtained. Furthermore, as the Referee acknowledged, Multiplex was then in full-time preparation for a hearing which was to commence 10 days hence. The question, therefore, was whether Multiplex would be prejudiced in its preparation of its case both before and during the hearing which had been fixed for four weeks commencing 10 February. The Referee held that it would and, in my opinion, it was clearly open to him to so find. This was particularly so where an adjournment application by Multiplex would not have been in its interests. It was the moving party in the litigation, claiming that it was owed substantial monies under the contract and that HSH was wrongly refusing to return the security deposit which was substantial. Further delay would have only caused further loss which could not have been compensated by an order for costs.

Accordingly, in my opinion the primary judge was correct to find that the Referee's discretion in refusing the amendment had not miscarried. The challenge by HSH to that finding of her Honour should be rejected.
Multiplex's cross-appeal
The Referee recommended HSH pay Multiplex's costs of the claim and HSH's cross-claim on a party/party basis up to and including 15 January 2003 and on an indemnity basis from an including 16 January 2003 (the Offer). The basis for this order was an Offer of Compromise dated 16 January 2003 made by Multiplex purportedly pursuant to Division 1 of Part 22 of the Rules. The Offer was in the following terms:
"On 16 January 2003, Multiplex made an Offer of Compromise, purportedly pursuant to Part 22 of the Supreme Court rules, by serving the following document:
'1.This Offer of Compromise is made in accordance with Division 1 of Part 22 of the Supreme Court Rules.
2.This Offer of Compromise is without prejudice.
3.This offer is open for acceptance for a period of 28 days from the date of this offer.
4. The Plaintiff offers to the First and Second Defendants to compromise all of its claims against the First and Second Defendants in these proceedings, as well as the Cross-Claim against it by the Cross-Claimant, as follows:
(a)that the Defendants jointly pay the Plaintiff the sum of $1.00 plus the Plaintiff's costs of the proceedings up to the date of acceptance of this offer (such costs to be paid on a party and party basis); and
(b)that the First Defendant releases any security retained by it pursuant to Clause 4 of the Novated Building Works Contract dated 15 April 1998 between the Plaintiff and the First Defendant.
5.This offer is made to both Defendants, and the Cross-Claimant, and is offered to compromise the Plaintiff's claims against both the Defendants and the Cross-Claimant's claims against the Plaintiff."
The Offer was not accepted. Accordingly, Multiplex submitted to the Referee that it was entitled to costs on an indemnity basis after 16 January 2003 pursuant to Part 52A rule 22(4) of the Rules. Relevant to the issue arising from the non-acceptance of the Offer by HSH and Stamford was Part 22 rule 9 which relevantly provided:
"Where two or more defendants are alleged to be jointly or jointly and severally liable to the plaintiff in respect of a debt or damages and rights of contribution or indemnity appear to exist between the defendants, Part 52A rule 22 shall not apply to an offer unless -
(a)in the case of an offer made by the plaintiff – the offer is made to all defendants, and is an offer to compromise the claim against all of them;
…"
After analysing paragraph 4 of the Offer, the Referee (at [64] of his Supplemental Report dated 13 June 2003), held that the offer in paragraph 4(a) was made jointly, so that either HSH or Stamford could, if so minded, have accepted it. However, to accept the whole offer, HSH also had to comply with paragraph 4(b).
The Referee then referred to paragraph 5 of the Offer which, he said (at [65]), made it clear that the Offer was made to both HSH and Stamford and that it was offered to compromise Multiplex's claims against both including HSH's cross-claim. This paragraph, the Referee said,
"emphasises that the offer was made to both HSH and Stamford, it being clear, in my opinion, that either or both could accept it."
At [70], the Referee continued:
"The offer, insofar as it related to payment, was that they should 'jointly pay' Multiplex. This did not mean that each had to join in the payment. The obligation being for joint payment would have been met by either HSH or Stamford accepting the offer in which case, subject to HSH's releasing any security, there would have been no call by Multiplex upon the party, which did not participate in the acceptance, for payment."
Having found that either HSH or Stamford or both could have accepted or rejected the terms offered to each, the Referee held that it was one capable of being accepted by one or both of HSH and/or Stamford.
The Referee concluded in these terms (at [75]):
"The effect of the rejection of the offer was, so far as HSH was concerned, that Multiplex obtained the right to a recommendation for an order or Judgment on the claim to which the offer related no less favourable to it than the terms of the offer. On the other hand, as against Stamford, it obtained a right to a recommendation to an order or Judgment less favourable to Multiplex than the terms of its offer. In those circumstances, it is my opinion that Multiplex is entitled to an order for indemnity costs in relation to HSH's liability for costs to it on an indemnity basis from and including 16 January 2003."
It was submitted before the primary judge that Multiplex had pitched the Offer very deliberately on the basis that it wanted the security of a judgment against both defendants. Ultimately, Stamford was found to have no liability to Multiplex because the Referee recommended that the claim against it should be dismissed and Multiplex sought an order to that effect. It was submitted that Multiplex would not have a judgment any less favourable than the terms of the Offer because the position vis-à-vis Stamford was far less favourable in that Stamford would have no judgment against it, as had been sought by Multiplex. In those circumstances, it was submitted that there was no entitlement to indemnity costs and that her Honour should reject the Referee's recommendation in this regard.
The primary judge responded to these submissions in the following terms (at [172]):
"With respect to the Referee, it seems to me that Part 22, Rule 9(a) makes clear that the offer is an offer 'to compromise the claim against all of' the defendants. The payment of $1 plus costs was an offer to compromise the claim against all the defendants and not 'either' of them. In this regard, I am of the view that the Referee fell into error. I am satisfied that it was not unreasonable for the defendants to view the offer in the way they did and not to accept it. This is so particularly by reason of Stamford's success against the plaintiff. Accordingly, I do not intend to accept the recommendation made in [77] of the Report but will make an order that HSH pay Mutliplex's costs of the claim and HSH's Cross-Claim on a party/party basis, such total costs to be reduced by 5%, for the reasons given below."
Multiplex submitted that the Offer did conform to Part 29 rule 9(a) as acceptance of the offer by either (or indeed both) HSH or Stamford would result in the compromise of the claim against both of them so that Multiplex could not continue to have recourse to the party who rejected the Offer. Acceptance by either HSH or Stamford, so it was submitted, would make the accepting party alone amenable to the operation of Part 22 rule 3(9) which provides that where an offer is accepted under the rule, any party to the compromise may enter judgment accordingly.
Contrary to the submission made by HSH to the primary judge, if the Offer was accepted by either of HSH or Stamford, it did not follow that the non-accepting defendant would have had to agree to a judgment being also entered against it pursuant to rule 3(9).
It is clear from paragraph 4(a) of the Offer that it proposed that both HSH and Stamford pay Multiplex the sum of $1 plus its costs. It further required HSH to release the securities. Paragraph 5 provided that the offer was made to both HSH and Stamford and that it was offered to compromise Multiplex's claims against both of them as well as HSH's cross-claim against Multiplex.
In my opinion, it follows from the foregoing that if the Offer was to be accepted, both Stamford and HSH would have had to agree to a judgment being entered against each of them. HSH's submission that the terms of the Offer were not such that it was open to be accepted by only one defendant or the other should be accepted. It is clear that the intent of the Offer was to settle the whole of Multiplex's claims against both HSH and Stamford and that it was designed to be accepted by either both or neither of them. Accordingly, in my opinion the primary judge was correct in so finding and rejecting the view of the Referee that the Offer was one to either HSH or Stamford and that either or both could accept it.
Even if Part 22 rule 9 did not strictly apply to the Offer because Multiplex's claim against each of HSH and Stamford was based on separate causes of action so that each of them was severally and not jointly liable on the specific causes of action pleaded against each, nevertheless the primary judge's construction of the Offer which required it to be accepted by both HSH and Stamford jointly to achieve an overall settlement of the litigation was, in my opinion, correct.
Multiplex submitted that even if this was so, the rejection of the Offer by HSH and Stamford was unreasonable so that, in all the circumstances, a departure from the ordinary rule as to costs was warranted. Accordingly, weighing up all the circumstances, the appropriate exercise of discretion warranted the making of an indemnity costs order.
The primary judge did not address this question directly although she was satisfied that it was not unreasonable for HSH and Stamford to view the Offer as one that was capable only of acceptance by both of them. It is true, as Multiplex submitted, that the rejection of the Offer by HSH was "a forensic disaster". I am prepared to accept for present purposes that the non-acceptance of the Offer by HSH was, in the circumstances, unreasonable. But to justify a departure from the ordinary rule as to costs, the conduct of Stamford also needs to be considered. There can be no doubt that it was not unreasonable for it to reject the Offer given that, ultimately, Multiplex's claim against it was recommended by the Referee to be dismissed with costs.
Notwithstanding the highly critical findings of the Referee in [339], [366], [399], [747], [883] and [884] of the report with respect to HSH's conduct, the fact remains that the Offer, properly construed, was open to be accepted only by both of HSH and Stamford. Stamford's conduct in rejecting it was entirely reasonable with the consequence that HSH had no option but to reject it as well. In these circumstances, I do not consider that the primary judge's exercise of discretion in ordering that HSH pay Multiplex's cost of the claim and HSH's cross-claim on a party/party basis demonstrates appealable error.
Conclusion
I would propose the following orders:
(a)Appeal dismissed with costs
(b) Cross-appeal dismissed with costs.

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LAST UPDATED: 16/09/2004