Morrison v Moss (No. 2)

[2020] NSWDC 29

District Court

New South Wales

Medium Neutral Citation:	Morrison v Moss (No. 2) [2020] NSWDC 29
Hearing dates:	21 February 2020
Date of orders:	21 February 2020
Decision date:	21 February 2020
Jurisdiction:	Civil
Before:	Abadee DCJ
Decision:	See paragraphs 42-46
Catchwords:	PRACTICE AND PROCEDURE – building dispute – finding in reasons for judgment in relation to debt owed to Builders by Home Owner subject to Home Owner’s defence of set-off - Home Owner’s defence of set-off comprises claim for cost of rectification works for defective or incomplete work by the Builders - application by Home Owner to re-open judgment to correct provisional finding on debt owed to Builders – whether discretion to re-open should be exercised – quantum of costs to rectify defective work to be the subject of referral – application to limit information available to referee to evidence served by parties prior to the hearing – appropriate orders to give effect to referral
Legislation Cited:	Civil Procedure Act 2005 (NSW), s 56 Uniform Civil Procedure Rules 2005 (NSW) rr 20.14, 20.20, 36.16 and 36.17
Cases Cited:	Autodesk Inc v Dyason (No.2) (1993) 176 CLR 300 Busways Blacktown Pty Ltd v Westbus Region 1 Pty Ltd (No.2) [2018] NSWSC 1901 Elliott v R (2007) 234 CLR 38 Mann v Paterson Constructions [2019] HCA 32 Morrison v Moss [2019] NSWDC 746 Nominal Defendant v Livaja [2011] NSWCA 121 Power v Deputy Commissioner of Taxation (No.2) [2014] NSWCA 77
Texts Cited:	Ritchie’s Uniform Civil Procedure New South Wales [36.17.5]
Category:	Procedural and other rulings
Parties:	Mr J Morrison (Plaintiff) Mr A Moss (Defendant) Ms E Moss (Defendant)
Representation:	Counsel: Mr T Bland for the Plaintiff No appearance for the Defendants   Solicitors: Osborn Law for the Plaintiff
File Number(s):	2018/121395
Publication restriction:	Nil

Judgment

INTRODUCTION

1. On 12 December 2019, I published my reasons in respect to the primary issues before the Court in this proceeding[1] . By the orders referred to in [464]-[464] of my earlier reasons, I indicated that the proceeding should be referred to a referee on the subject of costs of rectification works, whilst generally according liberty to the parties to apply. The essential findings in my earlier reasons were summarised at [463] of the judgment. This judgment assumes a general familiarity with those reasons.

   1. Morrison v Moss [2019] NSWDC 746 (‘my earlier reasons’).

2. Since publishing my reasons, and before any orders have been made to give effect to them, the plaintiff has raised two issues in correspondence. The first issue amounts to a complaint about the amount that the Builders should receive in respect to their debt claim. The Court had found that the Builders were entitled to receive the sum of $52,470.56 (including GST), with such amount subject to be set-off against the Owner’s claim, which I determined should be quantified by a referee. The second issue arises from a concern about the information which the referee should have regard to once a referral is made to him or her to quantify the Owner’s claim.

3. Through correspondence addressed to the Court [2] , but not by way of the filing of a notice of motion, the Owner seeks the following:

1. a variation of the amount of the Builders’ damages, to the sum of $28,770.56 (subject to further set-off); and

2. a limitation upon the materials to be provided to the referee which quantify the defects in the works (as the Court has found them), being that they only consist of the evidence on quantum served by the parties in the proceeding to date.

   2. By letter from the Owner’s solicitor to my Associate dated 6 February 2020.

4. There are also orders to be made to facilitate the referral.

RELEVANT PROCEDURAL BACKGROUND

5. To place the Owner’s application in context, it is pertinent to note several procedural features.

6. First, at an early stage of the Hearing, the Court indicated to the parties its predisposition that issues associated with quantum of remdial works should be referred (see [11-13]). No party objected to this proposal when it was raised by me during the trial or since.

7. Secondly, the parties commonly availed themselves of the opportunity to present their cases through the service of both detailed written submissions and closing addresses.

8. Insofar as the Builders’ claim is concerned, by his written submissions, the Owner recognised that the Builders relied upon a deeming provision of the contract to deem practical completion and making a claim for the entire amount that staged payment [3] . A cursory reading of the written submissions prepared by Counsel for the Owner indicates that the Owner made many submissions as to why the Builders’ claim should be rejected; including, in particular, its reliance upon the deeming provision in the context. But what was missing in the written submissions was any articulation, on behalf of the Owner, as to how the Builders’ claim should be quantified should I accept the Builders’ submission that the deeming provision for practical completion was engaged.

   3. Paragraph 10 of the written submissions of Counsel for the Owner, dated 2 December 2019.

9. The closing addresses occurred on 5 and 6 December 2019. As occurred throughout the hearing of evidence neither party requested a transcript of the hearing which carried the usual consequence in this Court (in its civil jurisdiction) that the Court itself would not receive a transcript; or, at least, not receive it in a timely fashion closely proximate to the hearing itself.

10. Counsel for the Owner says, however, that he had raised with me during closing address the proposition that if I were to find that deemed practical completion had occurred, then unless the Builders could show the value of work undertaken between the previous 9 payments and the date of termination, then the Court should not award any damages. My review of my notes does confirm that a submission was indeed advanced on behalf of the Owner that if I was not satisfied that the works were completed, the Builders would not be entitled to any damages where there was no evidence of the value of the work. I do not now recall, and my notes do not indicate, whether the reasoning underlying this submission, in the terms indicated shortly below, was put before me during the closing address.

11. Thirdly, the preponderant part of my earlier reasons plainly indicate that in a significant number of respects, findings were made, to the benefit of the owner, that the works performed by the Builders were either incomplete or defective and it is inevitable that the owner will obtain a substantial sum of money in its Money Order which will either substantially reduce, if not completely extinguish, the amount of the Builders’ debt referred to in my earlier reasons.

Non-Appearance of the Builders on this Application

12. I note that the Owner first foreshadowed his application in correspondence dated 6 February 2020, prompting the Builders’ lawyers to foreshadow their objection to the application on 7 February 2020.

13. On 17 February 2020, this proceeding was before me for mention. The previous day (a Sunday), an email was sent to my Associate from Counsel who appeared for the Builders during the trial advising that he was unable to attend the mention and providing an explanation for his absence. That email attached a short submission regarding the materials that should be placed before the referee. Neither the covering email nor the attachment said anything about the application to rectify reasons in the judgment; other than by Counsel setting out a range of dates that he was not available to argue that application.

14. When the matter was mentioned on 17 February 2020, Counsel for the Owner sought to proceed with his application in the absence of representation for the Builders. I indicated that I would not hear the application, but would instead fix the application for hearing this afternoon. The date was set in accordance with what I understood was the mutual convenience of trial Counsel for both parties. I also directed the parties to exchange short written submissions in advance of the argument. Counsel for the Owner prepared submissions dated 18 February 2020. At a point near the close to business hours yesterday, my Associate received an email from the solicitors for the Builders to the effect that the firm had not been able to obtain adequate instructions from the Builders. The firm indicated that it held no instructions to respond to the Owner’s submissions or to attend the Court for the argument today.

15. It is plain, in my view, that the Builders have had fair opportunity to attend and participate in this hearing – the date and time was set having regard to the indication of their trial Counsel. Their Counsel has already made a submission about the materials to the referee. They have now had notice of the ‘slip’ application for virtually two weeks. I now intend to proceed.

APPLICATION TO VARY QUANTUM OF BUILDERS DEBT

Owner’s Argument

The 6 February 2020 Letter

16. By his solicitors’ letter to my associate (6 February 2020), the Owner submits that the finding that the Court made that the Builders were entitled to terminate the contract as a result of practical completion being deemed to have occurred did not give rise to an entitlement to claim the payment which they did on practical completion.

17. The Owner submits that by the operation of clause 20(e) of the contract, the owner’s obligation was to make payment on account, only, and that he had the rights to recover it where there were incomplete or defective works. He denied the Builders’ claim as he was required to do by cl 22(d) of the contract. The Builders conceded that their works were not practically complete and, as the Court has found, there were also defective works.

18. The Owner cited that provision was made in the contract (in Sch 2) for the calculation of the value of the works in circumstances where the Builders had terminated the contract. This could be evidenced by reference to invoices and/or time and labour records which could, it was said, give a true calculation of any amount due to the Builders. But there were no such records. Indeed, it was said, the Builders had indicated problems with their record-keeping in their evidence at trial.

19. The Owner accepts that there was some unchallenged evidence as to what he called the second limb of the ‘final claim’. But in the absence of full records, the Owner submits that the Court has made an error which is capable of being corrected at this stage and thereby avoid the need for appeal.

20. The Owner submits that the Builders’ damages award should be reduced by the contract stage payment $23,700 according to the invoice (practical completion). That would yield a revised sum for damages of $28,770.56 (subject to the set-off against the amount awarded to the Owner by the referee).

Additional Submissions

21. In additional written submissions dated 18 February 2020, Counsel for the Owner developed his arguments to ground the ultimate submission that it was incumbent upon the Builders to establish what works had been done between the previous claim and the issue of the claim for practical completion payment and the requirement that they allocate a value for those works, based upon contract rates. Reference was made to the High Court’s recent decision in Mann v Paterson Constructions [2019] HCA 32.

22. The Owner now invokes the ‘slip’ rule to correct what he contends was an error in my reasoning as to the quantum of the Builders’ claim. Counsel referred me to the decision of Stevenson J in Busways Blacktown Pty Ltd v Westbus Region 1 Pty Ltd (No.2) [2018] NSWSC 1901 as a recent illustration of how the slip rule can be invoked to correct errors.

Builders’ Argument

23. By their solicitors’ letter dated 7 February 2020, the Builders did not engage with the correctness of the Builders’ submissions, on their merits, as put above. They say that the request contained in the correspondence of the Owner’s solicitor about to an attempt to put additional submissions to the Court on, a substantive point, after the conclusion of the hearing. Indeed, the Builders object to my even entertaining the Owner’s submission at all.

24. I have already noted that no appearance has been made by the Builders today and no further submission has been made on their part.

Consideration

Power to correct judgments before orders entered

25. Two matters may be noticed. First, no order for damages in favour of the Builders has in fact been made. This is partly explicable on the basis that whether and to what extent the Builders receive any amount will be affected by the quantum of the money order which will be obtained by the Owner. On present indications [4] , there is, at least, a real prospect, that the amount recovered by the Owner will exceed and therefore (by operation of the set-off) extinguish the Builders’ monetary judgment. Secondly, even if an order for damages was made, it has not been entered. What is sought to be corrected is a mere finding which, as I have said, is practically provisional, if not contingent upon what a referee finds is the sum of money owed to the Owner (assuming that finding is adopted).

    4. At [6], it was noted in the Reasons that the Owner quantified his claim in the trial in the sum of $640,047.16.

26. The power to recall or re-open a judgment is well-established under r 36.16(1) of the Uniform Civil Procedure Rules 2005 (NSW). The principles were articulated by the High Court in Autodesk Inc v Dyason (No.2) (1993) 176 CLR 300 per Mason CJ at 301-303, in the following terms:

1. the power is to be exercised “with great caution“ in view of the public interest in the finality of legal proceedings;

2. the power may be exercised where, through no fault on the applicant’s part, the applicant has not been heard on a matter by the Court;

3. the jurisdiction also extends to cases where a court has good reason to consider it has proceeded on a misapprehension as to the facts or law; and

4. the jurisdiction is not a backdoor or re-arguing the case. It is not to be used for the purposes of re-agitating arguments already considered by the court or because the party has failed to present the argument in all aspects or as well as it might have been put.

27. In Elliott v R (2007) 234 CLR 38, the High Court determined that the exercise of the power depends on establishing that the existing judgment is affected by some irregularity or by a misapprehension of law or fact. It could also include a contention that the court had misapprehended a party’s evidence or submission (Power v Deputy Commissioner of Taxation (No.2) [2014] NSWCA 77 at [3]. As the Court of Appeal explained in Power, for an application of this kind, the Court must balance considerations of ensuring that justice is done and being seen to be done (I interpose that I take the reference to justice to include procedural justice as much as substantive justice). The other is the objective of finality in litigation.

28. The circumstance that error can be readily addressed, without the need to resort to expensive and time-consuming appeal proceedings is a consideration that militates in favour of the power being exercised: Nominal Defendant v Livaja [2011] NSWCA 121 at [23]. Livaja was a case involving a primary judge’s arithmetical mistake in calculating damages.

29. The Court has additional power to correct matters in a judgment, or orders, under the ‘slip rule’, which is enshrined in r 36.17 of the UCPR. That power may be exercised after orders have been entered (which is not yet the case in this instance). The power is, by its terms, limited to errors which arise from an “accidental slip or omission”. The authorities as canvassed in Ritchie’s Uniform Civil Procedure New South Wales [36.17.5] indicate that the slip rule applies where the fact of the error, mistake, omission or slip is a matter upon which no real difference of opinion can exist. The real question is whether there is a matter of controversy of substance. A practical yardstick is whether the supposed error, has been drawn to the attention of the court or the parties at the relevant time, would have been corrected as a matter of course. This was the type of situation which was considered by Stevenson J in Busways Blacktown, where erroneous language was expressed that was contrary to what the judge intended in the primary judgment. The ‘slip rule’ is not, however, intended to confer a power to vary or supplement final orders by making substantive alterations to determine a point which was not argued, considered or decided.

Determination

30. This is not a situation where the slip rule is engaged. It is not the Owner’s argument that the finding (provisional or contingent as it is) about what the Builders’ are entitled to for their damages should be corrected for mere arithmetical error (such as occurred in Livaja). It is, rather, a substantive submission, referable to an arguable view of the evidence, or the state of that evidence, that the finding should not have been made in its current terms.

31. I do not propose, in my discretion, to re-open the judgment in the matter sought by the Owner. Although the submission that the Builders should receive nothing because they did not adduce evidence of the value of their work was made during closing address, the argument now raised by the Owner was only elaborated fully in its correspondence, and in further supplementary submissions, received by the Court after the judgment was published. It cannot be doubted that nothing like the reasoning in the argument (occupying over 2 pages in the Owner’s most recent written submissions) raised in the latter document was put to the Court during the hearing. In effect, this is a situation where the owner is re-agitating an argument that was not “fully put in all its aspects or as well as it might have been put” (Autodesk at 303). A consequence of acceding to this application could be to incentivise litigants who are dissatisfied with Court findings to routinely apply to the Court to re-open a hearing to allow for their losing arguments to be elaborated or perhaps even tweaked. This would be contrary to the requirement that parties present their cases fully during trial.

32. During his oral argument, Counsel for the Owner noted that some unusual or complicated features attended this particular contract. This only underscored the need to have the matter fully ventilated at trial.

33. This aspect of the Owner’s application is refused.

REFERRAL OF MATERIALS TO REFEREE

34. The Owner’s point is that before there was any suggestion that the matter of the quantum of costs for remedial works on the Owner’s property was raised by the Court at an early stage of the trial, the parties had equal opportunity to prepare and serve evidence as to the costs of those works. The Owner says that, in some respects, the Builders’ quantity surveyor, Mr Seeto, did not respond, or did not adequately respond, to the Owner’s expert, Mr Morris’s Scott Schedule and Bill of Quantities (Mr Morris had also given expert evidence as to the proper scope of the remedial works as well). This was, it was said, explicable on the basis that the Builders had taken a view, which in some cases may have been falsified by the Court’s findings in my earlier reasons, that certain items of work were not defects; and did not need to be quantified.

35. The Owner says that, now that the topic of costs is to be referred, it would be unfair for the Builders to have the opportunity, in effect, to strap up their case on quantum when they had the opportunity to do so before the hearing, in compliance with earlier directions of the Court.

36. The Builders say that, upon referral, the referee is not bound by rules of evidence that may inform himself or herself in relation to any matter in such manner as he or she thinks fit (r 20.20(2)(b)). The Builders say that it is incumbent upon the referee to ensure that the parties are given procedural fairness in the context of the referee’s hearing of the matter.

34. This application should be considered in the procedural paradigm in which the remaining dispute between the parties is to be resolved. At an early stage of the hearing, and certainly before the completion of the lay evidence, the Court indicated its predisposition to have the quantum of costs determined by a referee. No objection was expressed by either party to that course.

35. I am loath to impose fetters upon the way the referee is to carry out its task or the way that he or she goes about the task of producing the report. His or her cardinal task is to deploy his or her technical expertise to reach an expert conclusion. The primary constraint is that he or she affords procedural fairness to the parties. The manner in which the expert goes about his or her work will then be subject of overview at the point of the process for adoption of the report. If some complaint about procedural fairness about the process undertaken by the referee is to be made, including whether or not information he or she took into account was obtained fairly, it can be considered at the point of adoption.

36. Further, I apprehend that the request, if acceded to, might present practical difficulties for the referee. If he or she asks for information, it might be met with the contentious assertion on behalf of the Owner that the information could or should have been available prior to the hearing before me. That would then occasion some collateral and possibly wasteful inquiry by the referee into the record of the proceeding to date which is antithetical to the desirability of him or her producing a helpful report as expeditiously as possible so that the process of adoption can be brought forward to dispose of the proceeding. This does not mean that the referee should act quickly if it would mean that he or she would act unfairly. It does mean, however, that given the oversight provided by the Court to the process, the referee should not be subjected to unnecessary procedural complaints stemming from what has occurred in the proceeding up to the point of reference. The imperative to limit the prospect of delay to the referral is expressly referred to in r 20.20(6) and is, in any event, reflective of the parties’ case management objectives: Civil Procedure Act 2005 (NSW), ss 56(1) and (3).

37. I refuse therefore to accede to the request to place a limitation or constraint upon what the referee considers or how he or she is to inform himself or herself.

38. The Owner’s application, contained in his solicitor’s letter of 6 February 2020, is refused.

ORDERS FOR REFERRAL

42. The parties had agreed to some short minutes of order. They had had the opportunity also to consider preliminary directions (set out in [465] of my earlier reasons) to give effect to the referral.

43. The parties have reached agreement to some extent. This is set out in the short minutes of order annexed to Ms David’s email to my Associate dated 11 February 2020.

44. I make orders 2 and 4 in the short minutes of order.

45. Now I deal with the orders for referral. I have been supplied quotes from two highly qualified experts. I prefer Mr Madden on the basis of his extensive experience in residential construction. I note also that his quote falls below that of the other suggested expert.

46. In addition, I order:

1. David Madden of MBMpl Pty Ltd be appointed as referee;

2. pursuant to rule 20.14 of the Uniform Civil Procedure Rules the quantification of costs of each of the defective works, using the reasonable and necessary scope of rectification, as found in the Judgment dated 12 December 2019, is referred to David Madden for enquiry and report;

3. the parties will be jointly and severally liable to the referee for his fees and each party will act expeditiously and comply with the terms of engagement and the fee agreement of the referee (to be clear, in terms of payment of the referee’s fees, should there be any dispute, the plaintiff will pay the fees and will be entitled to seek reimbursement from the defendants as part of the owner’s costs in the proceedings);

4. the referee is to provide his report to the Court no later than 30 March 2020;

5. liberty to apply on 3 days’ notice through email contact with my Associate; and

6. the proceeding is stood over for mention on 6 April 2020.

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Endnotes

Decision last updated: 28 February 2020