Multiplex Constructions Pty Limited v HSH Hotels (Australia) Limited as Trustee of SHR Kent Street Trust - [2003] NSWSC 1069

No judgment structure available for this case.

CITATION: Multiplex Constructions Pty Limited v HSH Hotels (Australia) Limited as Trustee of SHR Kent Street Trust and Anor [2003] NSWSC 1069

HEARING DATE(S): 22, 23 and 24 September 2003

JUDGMENT DATE:
25 November 2003

JURISDICTION:
Equity Division
Technology and Construction List

JUDGMENT OF: Bergin J

DECISION: Reports to be adopted subject to changes to recommended costs orders.

CATCHWORDS: [REFERENCE] - [ADOPTION OR REJECTION OF REPORT] - Competing applications pursuant to Part 72 Rule 13 to adopt or reject Referee's Reports - Court's approach to such applications - References not to be constrained by the rigorous application of rules - [EVIDENCE & PROCEDURE] - Application of the "rule" in Browne v Dunn (1893) 6 R 67 - Competing expert's reports - No cross-examination of expert - Application of principles in Hull v Thompson [2001] NSWCA 359 - [AMENDMENT] - Courts power under Part 72 Rule 9 in circumstances where Referee has power to amend and refuses amendment.

LEGISLATION CITED: Supreme Court Rules 1970 (NSW)

CASES CITED: Allied Pastoral Holdings Pty Limited v Commissioner of Taxation (1983) 1 NSWLR 1
Browne v Dunn (1893) 6 R 67
Chocolate Factory Apartments Limited v Westpoint Finance Pty Limited [2003] NSWSC 547
Clough and Anor v Frog (1974) 4 ALR 615
Cropper v Smith (1884) 26 Ch D 700
M & EM Hull Pty Limited v Thompson [2001] NSWCA 359
State of Queensland v JL Holdings Pty Limited (1997) 189 CLR 146
Seymour v Australian Broadcasting Commission (1990) 19 NSWLR 219
Super Pty Limited v SJP Formwork (Aust) Pty Limited (1992) 29 NSWLR 549

PARTIES :
Multiplex Constructions Pty Limited (Plaintiff/Cross-Defendant)
HSH Hotels (Australia) Limited as Trustee of SHR Kent Street Trust (First Defendant/Cross-Claimant)
Stamford Property Services Pty Limited (Second Defendant)

FILE NUMBER(S): SC 55002/00

COUNSEL: MG Rudge SC and DT Miller (Plaintiff)
AJ Sullivan QC and S Walsh QC (Defendants)

SOLICITORS: Minter Ellison Lawyers (Plaintiff)
Griffin Hilditch Lawyers (Defendants)

- 74 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
TECHNOLOGY & CONSTRUCTION LIST

BERGIN J

25 NOVEMBER 2003

55002/00 MULTIPLEX CONSTRUCTIONS PTY LIMITED v HSH HOTELS (AUSTRALIA) PTY LIMITED AS TRUSTEE OF THE SHR KENT STREET TRUST AND ANOR

JUDGMENT

1 These are competing Notices of Motion pursuant to Part 72, rule 13 of the Supreme Court Rules 1970 (the Rules) in respect of two reports to the Court by the Referee, the Honourable Moreton Rolfe QC. The first report, dated 19 May 2003, is the main report dealing with substantive matters (the Report). The second report, dated 13 June 2003, deals with a Motion by the plaintiff, Multiplex Constructions Pty Limited (Multiplex), to amend, costs and recommendations as to declarations and orders.

2 Multiplex seeks an order that the Court adopt both reports in full as a judgment of the Court. The first defendant, HSH Hotels (Australia) Limited as Trustee of SHR Kent Street Trust (HSH), seeks an order that both reports be rejected in full.

3 The main proceedings, which were commenced by Summons filed on 3 February 2000, involve a claim by Multiplex for monies alleged to be due to it by HSH for damages arising out of alleged breaches of a Novated Building Works Contract dated 15 April 1998, as amended by a Deed of Release and Amendment between Multiplex and HSH dated 26 May 1999 (the Deed). Multiplex also claims damages from the second defendant, Stamford Property Services Pty Limited (Stamford) (the Contract Administrator), for failing to certify Completion when requested by Multiplex to do so. HSH cross-claimed against Multiplex for liquidated damages for late Completion.

4 The contract was for the design, partial construction and re-building of a building known as Stamford Plaza, Sydney, a proposed hotel (the Hotel), and “Stamford-on-Kent”, proposed residential apartments (the apartments). The Hotel consists of a lobby and 8 levels and includes restaurants, a boardroom and function rooms, a health club and a swimming pool. The apartments are on levels 9 to 25.

5 There were numerous amendments to the pleadings and after interlocutory steps were completed, McClellan J made an Order for Reference on 9 October 2002 referring the whole of the proceedings to the Referee. That Order required that unless otherwise permitted by the Referee, any evidence in chief was to be given by way of written statement signed by the maker of the statement (order 4(d)). Order 5 provided that: “The Referee shall have power to permit such amendments or additions to the matter in the Schedule as the Referee sees fit in order to dispose of the true issues between the parties”. Both parties and the Referee approached this order on the basis that the Referee had power to amend the pleadings.

6 The Order for Reference required the Referee to commence the hearing of the Reference on 10 February 2003 and report to the Court on or before 30 June 2003. The Reference hearing commenced on 12 February 2003 and concluded on 6 March 2003.

Background

7 The building Works were to be completed in stages. Originally there were two Stages, defined in the Contract Particulars as:

Stage 1: The Works excluding “Levels 9 to 25” but including all plant and equipment, plant areas, lifts and essential services (as described in the building approval) which are necessary for the commencement or completion of furnishing, fittings and equipment fitout works of Stamford Plaza Sydney.

Stage 2: The balance of the Works not included in Stage 1.

8 In the Deed the definition of “Stages of Work” was amended to the following:

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.

9 Part O to the Contract consisted of 11 drawings. Drawings 102 to 108 related to Basement Levels 5 to 1 inclusive, Ground Level and Level 1 respectively and were dated 16 March 1999. Drawings 109 to 112 related to Level 2; Levels 3 and 4; Level 5; and Levels 6, 7 and 8 respectively and were dated 21 December 1998.

10 Drawing 102 contained a legend of the colours on the drawings with a date next to each Stage. Stage 1A was coloured blue and dated 2 October 1999. Shared 1A was hatched blue and dated 2 October 1999. Stage 1B was coloured yellow and dated 16 October 1999. Shared 1B was hatched yellow and dated 16 October 1999. Stage 2 was blank, or white, and dated 30 October 1999. There was a problem with the colouring in of the various drawings in relation to the lifts numbered 1, 2 and 3. Although the lifts from the Ground to Level 8 should have been coloured blue for Stage 1A, they were coloured blue from Levels 1 to 8 but not on the Ground Level.

11 The Contract as amended provided for Completion as follows:

12 The dates for Completion under the Contract as amended were: for Stage 1A, 2 October 1999; for Stage 1B, 30 October 1999, and for Stage 2, 30 October 1999.

13 It was proposed that the Hotel would be operated by Stamford and that it would be equivalent to a hotel with a five-star rating. The Hotel had what has been referred to as its “hard opening” (accommodating guests), on 2 May 2000. The apartments were to be sold either off the plan or after Completion. Residents commenced occupying the apartments in March 2000.

14 By letter dated 14 April 2000 from Minter Ellison, solicitors for Multiplex, to Clayton Utz, the then solicitors for HSH and Stamford, and a response from Clayton Utz of 19 April 2000, the parties reached an agreement which can be conveniently summarized as follows:

15 It was also noted between the parties that notwithstanding the deemed Completion arrangement, HSH would not be regarded as accepting that Completion could or should have occurred or did occur on a date earlier than 28 March 2000. It was also agreed that Multiplex was entitled to claim that Completion of each Stage and the Works as a whole occurred on dates prior to 28 March 2000.

16 At the hearing before the Referee, Multiplex claimed that Completion of Stage 1A had occurred as at 26 November 1999 and Completion of Stage 2 had occurred on 24 February 2000. HSH and Stamford claimed that neither Stage was completed prior to the deemed completion date of 28 March 2000.

17 The parties have accepted before me that the arguments put before the Referee in respect of the competing claims as to Completion can be summarized as follows. Multiplex argued:

1. The whole of the Works comprising Stage 1A and Stage 2 were complete;
2. Any defects which existed were minor and did not prevent the reasonable use of the Works or Stage and the correction of which did not prejudice the convenient use of the Works or Stage;
3. Lifts 1, 2 and 3 were not required to be completed for Stage 1A and that Lift 4 was capable of being used to access Stage 1A;
4. It was not required to provide the relevant Certificates for Stage 1A and that it had provided all relevant Certificates and warranties required for completion of Stage 2;
5. That it had satisfied all of the Completion Requirements.

18 HSH and Stamford argued:

19 The Report is 418 pages in length and contains a most detailed record of the issues between the parties and the evidence given at the hearing before the Referee. The Referee concluded that Completion of Stage 1A occurred on 26 November 1999 and Completion of Stage 2 occurred on 24 February 2000. In both instances, those dates were said to be inclusive of all extensions of time to which Multiplex was entitled.

20 The Referee concluded that 75% of the securities retained by HSH should have been released no later than 2 May 2000 and the balance no later than 27 March 2001. The Referee also concluded that there were delays of 31 days in respect of Stage 1A and 66 days in respect of Stage 2. He found liquidated damages of $381,300 and $1,056,000 respectively, totalling $1,437,300 and recommended judgment be entered for Multiplex in the amount of $1,195,546, calculated as the balance owing under the Contract of $2,632,846 less liquidated damages of $1,437,300, plus interest on $1,195,546.

21 In his Report of 13 June 2003 the Referee recommended interest be awarded to Multiplex with entry of judgment for it in the amount of $1,860,486.70, inclusive of interest up to and including 28 May 2003. The Referee also recommended interest be awarded on the amount of $1,523,833.60 from 29 May 2003 to the date of entry of judgment.

22 These applications are made pursuant to Part 72, rule 13 of the Rules which provides:

13

referee;

the referee the whole or any part of the matter referred for a further report;

referee, with or without additional evidence,

(2) Evidence additional to the evidence taken before the referee may not be adduced before the Court except with leave of the Court.

23 Whilst the discretion of the Court is wide it must be remembered that this is not an appeal. As Gleeson CJ said in Super Pty Limited v SJP Formwork (Aust) Pty Limited (1992) 29 NSWLR 549 at 563-564:

It would be inconsistent with the object and purpose of the rules, and potentially productive of delay, expense and hardship, that the practical effect of appointing a referee should be simply to add an extra level to the hierarchy of decision-makers in a given case.

…

Homebush Abattoir Corporation v Bermria Pty Ltd

Cape v Maidment

Buckley

Nicholls v Stamer

Jordan v McKenzie

24 As to the matter of manifest unreasonableness in fact finding Gleeson CJ agreed with the views of the trial judge, Giles J. In this regard Gleeson CJ said at 555 that Giles J:

… 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 out 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.

Grounds Relied Upon for Rejection of Reports

25 The following grounds were relied upon by HSH in support of its Motion for rejection of the Referee’s Reports:

Ground 1: Erroneous Rejection of Evidence
It was submitted that the Referee wrongly rejected evidence of those of HSH’s witnesses who were not cross-examined. In this regard it was submitted that: (a) the Referee incorrectly and without foundation implied that an agreement had been reached between the parties in relation to compliance or non-compliance with the rule in Browne v Dunn (1893) 6 R 67; (b) the Referee failed to consider the evidence of some of the HSH witnesses who were not cross-examined when making findings of fact after analysis of the evidence of other witnesses; and (c) the Referee failed to advise the parties that cross-examination should have been undertaken or alternatively failed to inform HSH that he was considering an adverse finding against HSH witnesses who had not been cross-examined and/or failed to invite HSH to consider re-opening its case in the light of that consideration.

Ground 2: Availability of Lifts 1, 2 and 3
It was submitted that the Referee failed to properly analyse the evidence in relation to the requirement that Lifts 1, 2 and 3 should have been available to allow Completion of Stage 1A. It was also submitted that the Referee erroneously concluded that a failure by HSH’s counsel to seek rectification of Plan O to cure the colouring-in problem in the Plan was an impediment to HSH’s claim in respect of the date of Completion of Stage 1A.

Ground 3: Extension of Time – Floor Space Ratio (FSR) Issue
One issue between the parties was the date upon which Multiplex received notice of a change in the FSR from Stamford. HSH submitted that although the Referee referred to some correspondence on this matter when he was reviewing the evidence of various witnesses, he failed to consider it when reaching his conclusion. It is submitted that the Referee failed to give proper weight to the objective evidence in relation to this issue.

Ground 4: Agreed Benchmark for Standard of Finish
HSH submitted that the evidence before the Referee supported the conclusion that the parties had agreed that Unit 1101 on the eleventh floor would be a benchmark for the standard of finish to be achieved for the apartments. This was relevant to the time at which Completion was achieved and whether defects were an impediment to Completion. HSH submitted that the Referee erred in failing to consider this matter in reaching his conclusions and failed to take HSH’s submissions on this topic into account.

Ground 5: Multiple Defects
It was submitted that during the hearing before the Referee counsel for HSH had submitted that multiple defects may mean that Completion had not been achieved. It was submitted that the Referee did not deal with the evidence of multiple defects, notwithstanding his statement during argument that it was potentially relevant.

Ground 6: Finding of Motive of HSH and Contract Administrator
The Referee concluded that there was deliberate delay and procrastination by HSH and Stamford in order to place Multiplex in as bad a position as possible with the “sole” view of seeking to bring about a financial result more favourable to HSH than that to which it was properly entitled. It was submitted that the evidence of HSH witnesses who were not cross-examined would have been a basis for strong justification for the Contract Administrator not to certify Completion and would thus render unjustified the adverse conclusion.

Ground 7: Refusal to Allow Amendment
Prior to the commencement of the hearing of the Reference HSH made application to amend its particulars relating to Multiplex’s alleged delay in Completion to include the Mechanical Car Parking System (MCPS). It is submitted that the Referee fell into error in refusing to allow this amendment.

Ground 8: Apprehension of Bias/Denial of Natural Justice

26 In considering HSH’s submissions in respect of each of the grounds upon which it relies it will be necessary to descend into some of the detail of the evidence given before the Referee and to analyse the structure of the Report. As I have already said, the evidence before the Referee was required to be by way of signed statement. It is apparent from the Report that some witnesses only provided one to two statements whilst others provided many statements. In this regard, it is apparent that Maxine Patricia Lapstun (Mrs Lapstun), a Multiplex witness whose evidence is dealt with below, provided two statements, whilst Mr Rice of HSH provided at least forty statements. It is apparent from a reading of the whole of the Report that there was a great deal of evidence in the form of statements, oral evidence and documentary material before the Referee.

Structure of the Report

27 The Report commences with an introduction and an analysis of the Contract, the Deed and the Agreement reached by the parties in April 2000 (pars 1-39). It then deals with the nature of the competing claims, the pleadings and the issues as “finally articulated” (pars 40-121). There is then the detail of the claim by Multiplex that Completion of Stage 1A had been effected and the reasons the defendants contended that Completion was not achieved on 23 November 1999 and 22 February 2000 (pars 122-193). The following five sections of the Report are headed “The Issue of Defects” (pars 194-207), “Completion” (pars 208-220), “Multiplex’s Case on Completion” (pars 221-243), “Minor Defects” (par 244) and “The Nature of the Defects When Completion was Claimed” (pars 245-291).

28 The Report sets out the Referee’s analysis of evidence called by Multiplex. This analysis is made under the headings, for example, “The Evidence of Warwick Stuart Johnson” (pars 292-342) and “The Cross-Examination of Mr Johnson” (pars 343-371). This analysis includes aspects of the case on Completion, including the standard of finish, defects and the approach to rectification of defects, the lifts and the communications between the parties on these aspects. It also includes an analysis of what the witness said in relation to the evidence of the defendants’ witnesses. There are seven witnesses dealt with in this section of the Report, being: Warwick Stuart Johnson (pars 292-371), Joe Pirrello (a witness called by Multiplex in reply) (pars 372-413), Robert James Zanello (pars 414-418), Kathleen Anne Sweeten (pars 419-447), Gregory William Trezise (pars 448-485), John Kevin Andrews (pars 486-506) and Cyril Lawler (pars 507-518).

29 The Report then deals generally with the defendants’ evidence on Completion (pars 519-538) and particularly with the evidence of Linda Alison Browne (pars 539-555), Mrs Keys (pars 556-564), Mr Lee (pars 565-571) and Mr Brady (pars 572-583). After reference to an assessment by the firm PKP (pars 584-585), the Report states the Referee’s conclusion on Completion at pars 586-590:

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, Trezisa, Andrews and Lawler and that of Ms Sweetham (sic) 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. In 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.

588. I have not overlooked the presence of Mr Rice on site or the inspections he made. However, the evidence satisfies me that he left the main work of ascertaining and characterising defects to Mr Woollam and Mr Leffler. He received the various reports, but nothing he has said satisfies me that the evidence called by Multiplex fails to establish that any defects remaining at the dates when Completion was claimed were only minor, and that there was a well organised program in place to deal with them in the manner contemplated by the Contract.

589. It was necessary for other matters to receive attention before Completion could be achieved. I have referred to these in my consideration of the construction of the Contract. I am satisfied, for the reasons I have given, that those relating to Stage 1A were completed by 26 November 1999. So far as Stage 2 is concerned, the necessary documentation was not delivered, as I understand the evidence, until 24 February 2000. The provision of that was a requirement for Completion and, accordingly, I am satisfied that Completion of Stage 2 occurred on 24 February 2000.

590. The extent to which there was a delay in Completion of each Stage will depend upon my findings in relation to the disputed EOT questions, and the consequences of any delay will depend on whether the liquidated damages provision imposed a penalty.

30 The Report then deals with whether the liquidated damages provision was a penalty (pars 591 to 673) and the Referee concluded that it was not. This aspect of the Report is not challenged.

31 The next sections of the Report are headed “Extensions of Time” (pars 674-675), “The Lift Dispute” (pars 676-680), “The FSR Dispute” (pars 681-713), “The Evidence of Mrs Natalie Ann Borozan (nee Byrne)” (pars 714-747), “The Gymnasium” (pars 748-753), “HSH’s Cross Claim” (par 754), “The Fan Coil Unit Equipment” (pars 755-759), “The Evidence of Mr Jackson” (pars 760-787), “The Down Lights” (pars 788-792), “The Evidence of Mr Kennedy” (pars 793-822) and “Liquidated Damages” (par 823), which is followed by the Referee’s conclusion on the Cross-Claim for liquidated damages (par 824).

32 The Report deals with Multiplex’s unsuccessful claim against Stamford under the heading “Multiplex’s Claim Against Stamford” (pars 825-845). There are then sections headed “An Application to Re-Open” (pars 846-881) and “The Reason for Seeking Leave to Re-Open” (pars 882-883), in which the Referee deals with HSH’s failure to return the security deposit bonds to Multiplex until during the hearing before him in February 2003. At pars 885 to 888, the Referee purports to make declarations and proposes to order judgment for Multiplex against HSH. These matters were the subject of correction in the Report dated 13 June 2003, in which the Referee correctly made recommendations in this regard.

Ground 1: Erroneous Rejection of Evidence

33 A number of witnesses relied upon by HSH were not cross-examined. HSH submitted that the evidence of each of the witnesses who were not cross-examined was “highly relevant” to the questions of what defects existed, the status of the defects and their impact on the date upon which Completion occurred.

34 An aspect of what Gleeson CJ said in Super Pty Limited v SJP Formwork is, in my view, appropriate to emphasise in relation to this Ground. After stating that the process under Pt 72 r 13 is not an appeal, the Chief Justice said at 563: “This is consistent with the right of the referee to conduct the reference as the referee thinks fit and unconstrained by the rules of evidence” (see p 563 at D). Certainly the point taken here is more one relating to a “rule” of procedure, however it must be remembered that the reference procedure is not meant to be constrained by rules being applied with the same rigour as in curial proceedings. However the Court will be required to analyse and review the procedure before the Referee if, as here, an allegation has been made that a procedure was adopted that resulted in unfairness to one of the parties, such as to justify the rejection of the Report.

35 The main complaint made by HSH on this aspect of the matter relates to the manner in which the Referee dealt with the evidence of an HSH witness, Richard Nixon. The Report refers to Mr Nixon’s academic degrees in building matters, his membership of various building institutions and his lengthy employment history in the building industry (par 263). It also records the fact that Mr Nixon had undertaken three inspections and prepared written and photographic records of the status of the Works.

36 In Mr Nixon’s report of 7 January 2000 the Executive Summary stated:

It is my opinion that at the date of my inspection on Saturday, 11 December 1999, the works included in Stage 1A had not reached ‘Completion’. This determination is based on the following:

(a) The spaces/rooms/areas do not meet the definition of “Completion” as provided by Messrs Clayton Utz. That is, there is not continuous access and the defective works required to be repaired would preclude the use of the Stage as a 5-star hotel;

(b) The spaces/rooms/areas do not meet all the criteria defined as ‘Completion Requirements’ in Part B, Contract Particulars. That is, the Works of the Stage are not complete except for minor defects, and sufficient and continuous access is not available; and

(c) The Builder has not complied with the provisions of Clause 8.4 of the Conditions of Contract in that it has not provided all the Certificates required, and those Certificates that have been provided are not in the correct format.

(Ex A: Tab 4).

37 In paragraph 269 of the Report the Referee stated:

269. The basis of his first assessment was, firstly, that the non-provision of continuous access to each floor through the use of lifts would prevent the Stage from being utilised as five-star hotel; and secondly, that the level of incomplete works would require significant repair/replacement works would prejudice the use of the Stage as a five-star hotel, examples being repair works to laundry recesses, cracked architraves around door openings, repairs to windows and doors on external facades, repainting, replacement of damaged carpet and repair of gyprock walls including setting and sanding. His third reason was that the entry doors to the units did not meet BCA requirements regarding fire isolation of each unit.

38 The consideration of Mr Nixon’s evidence appears in paragraphs 263-291 of the Report under the heading “The Nature of the Defects When Completion was Claimed”. In the first part of that section the Referee deals with the evidence of Mrs Lapstun, a professional dilapidation surveyor called by Multiplex. Mrs Lapstun gave evidence of the photographic survey she carried out of the serviced apartments by reference to a Defects List. The Referee described the photographic survey and the way in which Mrs Lapstun approached the completion of that survey (par 246-254). The Referee also referred to Mrs Lapstun’s response to Mr Nixon’s reports, noting that Mrs Lapstun regarded a number of the defects alleged by Mr Nixon as “either non-existent or ones which she could not recall or as being minor or extremely minor” (par 255).

39 In respect of Mrs Lapstun’s evidence about what she observed and her photographic evidence, the Referee said:

257. I have looked at Mrs Lapstun’s photos and, so far as I can see, the material in her statements is totally consistent with what she said she photographed. The photos disclose, at least to my observation, an essentially well finished building, which observation is quite consistent with Mrs Lapstun’s view.

40 The Report noted that Mrs Lapstun did not see the specification for Works on the Project, nor any part of the Contract or specification or schedules as to finishes (par 260). The Report also records that during cross-examination Mrs Lapstun was shown photographs taken by Mr Nixon and asked to agree that certain of the alleged defects depicted by the photographs were not minor but serious, which she did not do (par 260-261).

41 It is apparent from the Report that there was a challenge to the nature of Mrs Lapstun’s experience and in par 262 the Report records:

At Tp 111, Mrs Lapstun said that it was incorrect to suggest that she had no experience in carrying out or supervising building defects or completing otherwise incomplete building works. She gave evidence that she had assisted her father in running his business as a builder for 15 to 20 years dealing in fire reinstatement and insurance works. She agreed that she did not have experience of defects or repairs in relation to a structure of the kind of the subject premises in her father’s business, but that in her work as a dilapidation surveyor and building reporter she did.

42 In paragraph 3.5 of Mr Nixon’s report of 7 January 2000 there is reference to a “lesser test” for completion. On this topic the Report records:

274. Mr Nixon then applied a second and, as I understand it, what he regards as a 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; and Multiplex’s having done everything required by the Contract, including only providing sufficient access to those areas defined as Stage 1A.

275. Mr Nixon concluded, for reasons he gave, that Multiplex failed to comply with the provisions of Clause 13.1 in various ways.

…

278. The real question which arises, having regard to the photographs provided by Mr Nixon, is whether the work described as needing to be done is in reality minor work or something other than minor work. Mrs Lapstun was cross-examined on a number of the photographs and maintained the view that it was minor work. Mr Nixon was not cross-examined. However, when one sees, as in photograph 23/1, that the purpose of the photograph is to indicate that a hinge has not been installed to a cupboard door, and in photograph 4/2 that there is a penetration drilled in the sill of a sliding door frame, which still has metal filings around it, and in photographs 6/2, 16/2 and 20/2 that the Builder has left plastic material on the carpet to prevent its being stained with paint and a paint tin or tins in the corridor, one has doubt about the seriousness of these matters. Other matters in other photographs were put to Mrs Lapstun and she was of the view that they were minor or very minor. Comment may also be made about the extent of the seriousness of a number of other matters depicted in the photographs as, for example, photograph 13/2 which depicts paint splashes from façade painting on the glass and frames of an external window.

43 Mr Nixon had attached to his report of 7 January 2000 a 15 page document entitled “Completion Assessment Table”. This document sets out certain assessment criteria and deals with each of the relevant locations within the building, answering “yes” or “no” as to whether the criteria had been complied with. Where the answer was “no”, reasons were provided for that answer. For example, in respect of the Apartments’ Garbage Room the criteria “complete except for minor defects” was answered “no” with one reason being given as “North wall not constructed to correct fire rating. Refer Photograph No. 3/1”.

44 The Report refers to that table in the following way:

280. The difficulties, so far as the table of assessment criteria is concerned, are that, at least to a not insubstantial extent, Mr Nixon appears to have proceeded on the basis that certain work was required to be done in Stage 1A, which, according to the coloured plans annexed to his report was not required to be done within Stage 1A. It is also interesting to note that Mr Nixon was unable to find any room which was complete except for minor defects, although in respect of several he was of the view that the correction of minor Defects would not prejudice the convenient use of the Stage.

45 HSH submitted that the last sentence of paragraph 280 of the Report was an expression of veiled criticism of Mr Nixon, that no opportunity was given to him to respond, and that he may well have been able to do so. As I understand it, this sentence was an expression of the fact that Mr Nixon did not find any such room. However the introduction of the words “it is interesting to note that” could leave one with an impression that it was intended critically. In consideration of the whole Report, I am not satisfied that this sentence is decisive of any particular matter about which complaint was made.

46 The Referee referred to Mr Nixon’s second report and to his misapprehension of what was required for Completion of Stage 1A (par 283). After referring to his third report and to the submissions put by Multiplex in respect of Mr Nixon’s evidence, the Referee noted that Mr Faulkner SC made no reference to the evidence of either Mrs Lapstun or Mr Nixon in his written submissions (par 287). However the Referee made no reference to Mr Faulkner SC’s oral submission in which he did include submissions in relation to Mr Nixon’s evidence. Those submissions included the following:

I then wish to refer to the evidence of Mr Nixon. Mr Nixon in his three reports brought forward a statement of his own observations and opinions and we rely on this material that was not cross-examined on. Our submission is that you would not find contrary to anything in these reports from this expert in the absence of the very best grounds in an evidentiary sense to do so.

(Ex. 1: tr 831)

47 Mr Faulkner SC analysed some of the evidence given by Mr Nixon and then made the submission that in the absence of cross-examination of Mr Nixon “the plaintiff has significant difficulties” (Ex. 1: tr 834).

48 The Referee dealt with the contest, as he saw it, between Mrs Lapstun and Mr Nixon in the following way:

288. So far as the evidence of Mrs Lapstun is concerned, I regarded her as a forthright and truthful witness, who went about the task committed to her with diligence and integrity. I am satisfied that she correctly characterised the defects she observed. The difficulty I have, so far as Mr Nixon is concerned, was that he was not called for cross-examination. There are certain parts of his reports, which depended upon views of the Contract with which I do not agree. Further, from a consideration of some of the photographs, it does not seem to me that some of the matters that he described as other than minor would fit this description. I have referred to a number of them. More importantly, Mrs Lapstun formed a similar view from a far more informed basis. On the other hand, I must bear carefully in mind that Mr Nixon was not required for cross-examination. The view may well have been taken that his views were sufficiently flawed in relation to the Contract and its purpose to make this unnecessary. The view may also have been taken that to cross-examine every witness about, essentially, the definition of defects, would have been an unnecessary waste of time. Indeed, the parties seemed to agree that this was not a case in which it was appropriate to adopt with rigour the Brown v Dunne (sic) approach. This was obviously sensible and greatly shortened the hearing time.

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 Brown v Dunne (sic), 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.

49 HSH submitted that the statement by the Referee that “the parties seem to agree that this was not a case in which it was appropriate to adopt with rigour” the Browne v Dunn approach was erroneous. It is obvious that the parties adopted differing stances as to when it was necessary to put matters to various witnesses. Those approaches are referred to below; however it has to be noted that what the Referee said was that it seemed that they agreed, not that they did agree. It is not suggested that the parties seemed to agree not to apply the “rule” in Browne v Dunn at all; it was that they would not apply it with “rigour”. This was a lengthy hearing with various statements being made about the Browne v Dunn approach from time to time. I am not persuaded that this particular observation by the Referee is either unjustified or erroneous.

50 The Referee’s statement that there was an “absence” of a Browne v Dunn submission in respect of Mr Nixon’s evidence is also challenged as erroneous. Mr Faulkner SC did not expressly refer to Browne v Dunn. His submission was that Multiplex would have “significant difficulties” in the absence of cross-examination (Ex. 1: tr 834) and that the Referee “would not find contrary to anything“ in Mr Nixon’s reports “in the absence of the very best grounds in an evidentiary sense to do so” (Ex. 1: tr 831). Mr Sullivan QC, for HSH before me, preferred to refer to the issue and submission as a failure to cross-examine rather than there having been an infraction of the rule in Browne v Dunn.

51 HSH also submitted that the evidence of Mr Nixon commanded significant attention and weight and that there was manifest unfairness to the defendants in the way the evidence of Mr Nixon was dealt with by the Referee. It was submitted that HSH was entitled to assume that Mr Nixon, being a highly experienced expert, was not being challenged and that the Referee failed to apply the fundamental principle that where a witness is not cross-examined his or her evidence should ordinarily be accepted.

52 The so-called “rule” in Browne v Dunn has been referred to many times. In that case Lord Herschell LC said at 70:

Now, my Lords, I cannot help saying that it seems to me to be absolutely essential to the proper conduct of a cause, where it is intended to suggest that a witness is not speaking the truth on a particular point, to direct his attention to the fact by some questions put in cross-examination showing that that imputation is intended to be made, and not to take his evidence and pass it by as a matter altogether unchallenged, and then, when it is impossible for him to explain, as perhaps he might have been able to do if such questions had been put to him, the circumstances which it is suggested indicate that the story he tells ought not to be believed, to argue that he is a witness unworthy of credit. My Lords, I have always understood that if you intend to impeach a witness you are bound, whilst he is in the box, to give him an opportunity of making any explanation which is open to him; and, as it seems to me, that is not only a rule of professional practise in the conduct of a case, but is essential to fair play and fair dealing with witnesses. Sometimes reflections have been made upon excessive cross-examination of witnesses, and it has been complained of as undue; but it seems to me that a cross-examination of a witness which errs in the direction of excess may be more fair to him than to leave him without cross-examination, and afterwards to suggest that he is not a witness of truth, I mean upon a point on which it is not otherwise perfectly clear that he has had full notice beforehand that there is an intention to impeach the credibility of the story which he is telling. Of course I do not deny for a moment that there are cases in which that notice has been so distinctly and unmistakably given, and the point upon which he is impeached, and is to be impeached, is so manifest, that it is not necessary to waste time in putting questions to him upon it. All I am saying is that it will not do to impeach the credibility of a witness upon a matter on which he has not had any opportunity of giving an explanation by reason of there having been no suggestion whatever in the course of the case that his story is not accepted.

53 Glass JA in Seymour v Australian Broadcasting Commission (1990) 19 NSWLR 219 said at 225:

Since the rule is designed to prohibit the unfair conduct of trials, it is obvious that breaches of it may occur in many different circumstances and no uniform sanction can be laid down. Depending upon the nature of the infraction, the remedy is essentially a matter in the discretion of the trial judge. … (I)n my opinion, it is going altogether too far to contend that evidence which would otherwise be relevant to a conclusion for which one party contends should be disregarded because its implications have not been put to the party against whom the inference is to be drawn. In my opinion, the trial judge would have been entitled to refuse such a direction and his failure to give it does not entitle the plaintiff to a new trial.

54 In the same case Mahoney JA said at 236:

Browne v Dunn

Phipson on Evidence

Halsbury’s Laws of England

Similarly, failure to cross-examine a witness may not found such an assumption or render the course of the trial unfair if it is clear from the manner in which generally the case has been conducted that his evidence will be contested.

55 In Allied Pastoral Holdings Pty Limited v Commissioner of Taxation (1983) 1 NSWLR 1, a case to which the Referee referred in the Report, Hunt J said at 26:

I remain of the opinion that, unless notice has already clearly been given of the cross-examiner’s intention to rely upon such matters, it is necessary to put to an opponent’s witness in cross-examination the nature of the case upon which it is proposed to rely in contradiction of his evidence, particularly where that case relies upon inferences to be drawn from other evidence in the proceedings.

56 The “rule” is a procedural one, the adherence to which enhances the fairness of a trial. In this case it was obvious that the parties were at issue as to whether the defects were minor or would prevent Completion. There could have been no surprise to HSH, in the Browne v Dunn sense, that Multiplex would be submitting that, inconsistently with what the HSH witnesses had said, the defects were minor or such as would not prevent Completion. To use the words of Lord Herschell LC, notice that Multiplex would be suggesting that Mrs Lapstun’s evidence was to be preferred over that of Mr Nixon, thus impeaching his version, “had been so distinctly and unmistakably given” by the service of the competing statements.

57 Once the parties joined issue by the reading of the statements, it was open to them not to cross-examine the witnesses for the opposing side and to submit that the opinions of their witnesses were to be preferred. However in this case HSH cross-examined Mrs Lapstun, but Multiplex did not cross-examine Mr Nixon. In these circumstances HSH made the submission to the effect that Multiplex would at least have had to cross-examine Mr Nixon before the Referee would entertain a rejection of his opinions. Put this way, it is understandable that Mr Sullivan QC, correctly in my view, distinguished between what has been described as a Browne v Dunn infraction, and a failure to cross-examine. Put this way, the statement by the Referee that there was an absence of a Browne v Dunn submission may be technically correct and, in any event, it is obvious that the Referee was acutely aware of the fact that Mr Nixon had not been cross-examined and even referred to it as a “difficulty”, whether or not that awareness was specifically sourced to Mr Faulkner SC’s submission.

58 In this regard HSH relied heavily upon M & EM Hull Pty Limited v Thompson [2001] NSWCA 359 in which the Referee was sitting as an Acting Judge of Appeal. The Court (Sheller JA, Rolfe AJA and Davies AJA) was considering a case in which four expert engineers had provided reports and none had been required for cross-examination. The following portions of the judgment of Rolfe AJA, with whom Sheller JA and Davies AJA agreed, were relied upon by HSH:

20. … This Court has, on a number of occasions, remarked on the difficulties a Court confronts when asked to decide matters involving various types of expertise without the benefit of at least the principal expert witnesses being cross-examined.

Prima facie

ex facie

22. … As experience in conducting litigation frequently shows, cross-examination, far from eroding the expressed views, often strengthens them as the expert explains in more detail the reasoning process.

23. Furthermore, the Court has the opportunity of hearing the expert and making an evaluation of his or her evidence.

prima facie

25. The only reasonable inferences to be drawn from the failure of Counsel for the appellant to cross-examine the respondents’ experts are that his instructions were that their evidence was probably right; or that a calculated decision (perhaps influenced by the first point) was taken to try to argue the matter without attacking the evidence.

59 It was submitted that it was unfair to HSH to reject the evidence of Mr Nixon in circumstances where he had not been cross-examined and where there was no indication given that his evidence would be rejected. This position was contrasted to the position adopted by the Referee in respect of the cross-examination of Mr Johnson. In that regard the Referee was dealing with the situation that Mr Johnson had not been cross-examined about a gymnasium issue and asked Mr Faulkner SC why he should not reject HSH’s submissions on the basis that relevant matters were never put to Mr Johnson conformably with the rule in Browne v Dunn and Allied Pastoral v The Commissioner of Taxation (tr 898). The Referee said:

Well, Mr Faulkner, just so that there is no misunderstanding, if the matter stays as it is, I propose to reject that submission on the basis that that matter was never put to Mr Johnson. Now, there are several ways you could or may seek to rectify that situation, but I don’t want you to be under any misapprehension about it as matters presently stand.

(Ex. 1: tr 899)

60 HSH submitted that the Referee’s failure to inform counsel that he intended to reject Mr Nixon’s evidence was inconsistent with the approach that he had adopted in respect of Mr Johnson’s evidence. In other words, he did not suggest to counsel for Multiplex that he would have to cross-examine Mr Nixon and put the matters in issue to him if it was to be Multiplex’s case, as indeed it was, that Mr Nixon’s evidence should be rejected.

61 Multiplex submitted that there is no inconsistency demonstrated by the Referee’s approach to the evidence of Mr Johnson on the gymnasium issue. In analysing this aspect of the matter Mr Rudge SC, for Multiplex before me, referred to the transcript of the hearing before the Referee. His starting point was a submission made by counsel for Multiplex before the Referee, Mr R McDougall QC, as his Honour then was, in respect of the evidence of Ms Sweeten, who was not cross-examined, upon a particular aspect of her evidence. Mr McDougall QC submitted:

Browne v Dunn

(Ex. 1: tr 691)

62 Mr Rudge SC made the following submission in respect of Mr McDougall QC’s submission:

Browne v Dunn

Interestingly, Mr Faulkner does not at that stage take any issue with Mr McDougall. He doesn’t jump up and say, “Just a moment, Mr Referee. This is a case where Browne v Dunn is being rigidly applied.”

(tr 96)

63 Mr McDougall QC referred to the gymnasium matter and the fact that Mr Faulkner had not put certain things to Mr Johnson in respect of that matter and submitted:

I accept, as I said before, that this is not a case where Browne v Dunn rules supreme, but in this case the omission is very significant, because I’m instructed, and I put this as a summation only, that had the matter been raised with Mr Johnson, he would have said that the principal was allowed into the gym prior to Multiplex claiming Completion and that was for the purpose of allowing the principal to carry out its FF&E works; that the FF&E works carried out by the principal involved putting in television brackets for the television in the gym, which descended from the ceiling and therefore meant the ceiling couldn’t be completed and then putting in the timber floor that I think we saw on the view, which meant that the skirtings and sills couldn’t be completed.

If my learned friend is going to rely on this submission, then I would respectfully submit that it would be appropriate to allow us to re-open our evidence for the limited purpose of adducing that from Mr Johnson because otherwise, it having been sprung on us in this way and then the submission being put, it is entirely unfair.

(Ex. 1: tr 879)

64 Mr Rudge SC submitted that what Mr McDougall QC was putting was that the parties had not implicitly joined issue by reference to their pre-trial statements, or to put it another way, Multiplex had not been put on notice that this particular aspect of the matter was in issue. It was submitted that it was something of significance that had not been raised. Mr Rudge SC also relied upon Mr Faulkner SC’s response to the Referee as to why he should not reject the submission about the gymnasium matter. It was:

The reports on which we rely to raise that issue were served in evidence and, in my submission, it’s not necessary for me to put directly something of that nature.

(Ex.1: tr 899)

After further debate, Mr Faulkner SC conceded that it could not be said that the reports served at the relevant time raised the gymnasium issue under discussion (Ex. 1: tr. 899, line 24).

Thereafter Mr Johnson was re-called and the matter was put to him directly.

65 Mr Rudge SC submitted that Mr Faulkner SC’s response to the Referee is significant because: (1) it demonstrates that HSH’s position was that it was adopting the approach that it was not necessary to put matters “directly” to various witnesses if the parties had joined issue on a matter by the service of reports and/or statements; and (2) it demonstrates that issue had not been joined on the gymnasium matter under discussion. In those circumstances it was submitted that the approach the Referee took to this aspect of the case does not provide any proper basis for a submission that the Referee’s treatment of Mr Nixon’s evidence compared to his treatment of Mr Johnson’s evidence on this topic was inconsistent and unfair. Mr Nixon’s evidence in relation to defects was an issue upon which the parties had joined issue by the filing of competing statements. It was quite different from the gymnasium issue and the evidence of Mr Johnson on which the parties had not joined issue. The position was quite different with Mr Johnson and I agree with Mr Rudge SC’s submission that this comparison is not apt. It does not demonstrate any error by the Referee.

66 HSH also submitted that in the light of the significant relevance of Mr Nixon’s evidence it was unfair to make a finding of credibility in favour of Mrs Lapstun when there was absolutely no reason to make any adverse findings against Mr Nixon in relation to his observations and conclusions based on his inspections. HSH contrasts the position of Mr Nixon in 2002 when his brief was to conduct an independent inspection without utilizing any Defects Lists, to that of Mrs Lapstun, who conducted her inspections on the basis of Defects Lists provided to her by Multiplex.

67 HSH submitted that the approach the Referee suggested in pars 289 and 291 of the Report he would adopt in relation to Mr Nixon’s evidence was not adopted. That approach was that, in the absence of cross-examination, he would have regard to Mr Nixon’s evidence: (1) in so far as it was corroborated by other evidence called by HSH; and (2) in so far as it was contradictory of other evidence called by Multiplex.

68 The first of the witnesses referred to by HSH in this regard was Mr Pirrello who expressed the opinion that a major defect would have to be structural, for example, a defect in the foundations. The cross-examination of Mr Pirrello was referred to by the Referee commencing at par 392 of the Report. Mr Pirrello was shown a document in which he had written to a sub-contractor in relation to a problem with wardrobe doors stating that it was “a major defect” (par 397). The Referee then extracted the evidence in which Mr Pirrello said that he exaggerated the description of the defect to the sub-contractor so that the work would be done as quickly as possible. Mr Pirrello said that “major defect” was the terminology he used to get the sub-contractor to react (pars 397-398). The Referee wrote:

399. Having had the advantage of seeing Mr Pirrello cross-examined and of having reflected on his answers, I do not consider that he was being untruthful. The simple fact of the matter was that Multiplex was being confronted by a client and a Contract Administrator that were taking every point possible to avoid having to concede Completion. In these circumstances, so far as Multiplex and the sub-contractor were concerned, the rectification of the wardrobe doors took on major significance and, in my opinion, Mr Pirrello’s evidence, in those circumstances, was totally satisfactory. He appreciated that notwithstanding his view as to the nature of the defect Mr Rice was going to take a contrary view and, therefore, to stimulate urgent activity on the part of the sub-contractor, Mr Pirrello used the language he did. There was no lack of frankness in doing so, because of the consequences flowing from the refusal to grant Completion by Stamford and thus, in the circumstances he was being as frank “as he could be”.

69 The Referee then referred to a number of facsimile transmissions that Mr Pirrello had sent to sub-contractors about defects in which he stated that the outstanding defects were “delaying Completion and occupation of the hotel” (par 407). The Report records Mr Pirrello’s evidence that he was not of the view that the defects were delaying Completion and the following portion of his evidence is extracted as indicative of Mr Pirello’s views:

Q: But you say today, don’t you, that you believe that the defects you were referring to in this list were not delaying Completion and occupation of the hotel, don’t you?

The Referee: No, he’s not saying that, he’s not saying that at all. He is saying he, along with everyone else at Multiplex, believed there have (sic) been Completion, but your client was denying there had been Completion. That’s what he is saying.

His evidence is he was saying to the sub-contractors that until that work was done, in parenthesis, there was this ongoing dispute about whether there was Completion or not. That’s how I understand his evidence.

The Referee: I mean, he wasn’t writing an opinion he was trying to get a result.

(par 409)

70 The Referee referred to the further cross-examination of Mr Pirrello in relation to his use of the term “major defect” and wrote:

evidence he had previously given and, I must say, the more he explained his position in those terms the clearer, so far as I was concerned, his explanation became and, the clearer it became, the more credible it seemed to me to be.

413. In the end, and for the reasons I have given, I accept that Mr Pirrello was a witness of truth and that his purpose in referring to “major” defects in communications with the sub-contractors should be accepted. Furthermore, I accept his evidence as to what he regarded the nature of the defects to be, viz. minor or very minor.

71 Mr Pirello’s written words were consistent with Mr Nixon’s evidence that the defects were major and that they were an impediment to Completion. In reaching the conclusion as to whether to accept Mr Pirello’s explanation that the words written at the time were an exaggeration rather than the truth, the Referee did not make an express comparison of those documents with the evidence of Mr Nixon. It was submitted that the Referee failed to apply the approach that he said he would adopt, and in any event, failed to apply the proper approach to unchallenged evidence, as stated in Hull v Thompson.

72 It was also submitted that in the circumstances of Mr Pirrello effectively being excused for using the term “major defects” in his documents, it was even more important to approach the evidence of Mr Nixon in line with what was said in Hull v Thompson and that, as a matter of fairness, Mr Nixon should have been given the opportunity of answering criticisms of his opinions. The Referee was acutely aware that Mr Nixon had not been cross-examined. Having reviewed the whole of the Report and the approach the Referee adopted it must be remembered that he was exquisitely placed to decide the facts, including whether Mr Pirello used the words as he said he did, to motivate the contractors to do the work promptly. This finding of fact was the Referee’s domain and I am not satisfied that simply because he did not say again that he was weighing the evidence in the way he said he would in pars 288 to 291, this Court should find he did not do so. Indeed the Referee’s conclusions, to which reference is made below, militate against such a finding.

73 In respect of the Referee’s criticism of Mr Nixon applying an incorrect test, HSH highlighted the fact that neither Mr Andrews nor Mrs Lapstun, who were called by Multiplex, were aware of the use to which the various parts of the building were to be put. The Referee noted that Mr Andrews’ opinion was qualified and that his “preliminary analysis” was based on a “brief inspection and limited documentation review” (par 504). On this aspect the Referee reported:

505. Once again it is necessary to keep in mind that the report was qualified and that it must be read, in its entirety, subject to those qualifications. However, it forms part of the evidence upon which, in my opinion, Multiplex is entitled to rely. Obviously, in the fullness of time and when all the evidence is assessed, it will be necessary to decide the extent to which Multiplex could place reliance on the report. However, there is one matter with which I have little difficulty, and that is that it is unlikely, in the absence of the most detailed investigation and report, that any other building contractor would be disposed to grant an unqualified opinion.

506. Nonetheless Mr Andrew’s evidence … was corroborative of the view expressed by the other witnesses whom Multiplex called. … I see no reason why his evidence should not be accepted.

74 HSH points to the acceptance of Mr Andrews’ evidence, notwithstanding his qualified report, and contrasts it to the rejection of Mr Nixon’s unqualified and unchallenged evidence. It is submitted that this is demonstrative of the error into which the Referee fell, both from the point of view of failing to apply the approach he set for himself in the Report and the approach endorsed by the Court of Appeal in Hull v Thompson.

75 It was submitted that in contrast to the way the Referee dealt with Multiplex’s evidence, he was not prepared to give any benefit of doubt to HSH witnesses. The example relied upon by HSH in this regard was the evidence of Mrs Keys, who spoke of many workmen being on site and the premises being dusty and dirty (par 560). The Report records that Mrs Keys made notes of defects she observed in electrical appliances and services and continues:

563. The problem, so far as Mrs Keys’s (sic) is concerned, in my

76 HSH submitted that the treatment of Mrs Keys’ evidence in contrast to Mrs Lapstun’s evidence demonstrates further error by the Referee. It was submitted that it was clear that Mrs Lapstun, whose evidence the Referee accepted, had no knowledge of any contractual test to be applied, yet when assessing the evidence of Mrs Keys, who, it was submitted, was in the same position as Mrs Lapstun in this regard, the Referee referred to the lack of knowledge as “the problem”. HSH submitted that Mrs Keys and others were as capable as Mrs Lapstun was found to be of making observations of defects.

77 HSH submitted that even applying the Referee’s approach outlined in paragraph 291, Mr Nixon’s evidence did corroborate the tested evidence of Mr Pirrello, Mr Andrews and Mrs Keys.

78 The treatment of the evidence of another HSH witness, John Brady, was also the subject of complaint. The Referee dealt with Mr Brady’s evidence between paragraphs 572 to 583 of the Report. HSH submitted that the Referee did not refer to a portion of one of Mr Brady’s reports in which he had expressed the opinion that Completion of the Works by mid February 2000 required that the quality of the work be maintained, the defects rectification and approval process be streamlined and that if the process was not managed better than it was on Levels 1 to 8, it was likely that Completion would extend to March 2000. It was submitted that this opinion and others expressed in other reports of Mr Brady supported the later Completion date contended for by HSH.

79 The Report refers on a number of occasions to Mr Brady’s “further status reports” (pars 579, 581) and specifically refers to the prospect of a Completion date in late February 2000 and extending into March 2000 (par 582). It is true that the Referee did not refer specifically to some of the portions of Mr Brady’s reports to which reference has been made in the submissions, but I am satisfied that the material to which he did refer was ample for the purpose he was required to fulfil.

80 It was also submitted that the Referee failed to deal appropriately with the evidence of Russell Keith Dickson. Mr Dickson is the General Manager of Restorex, a company specializing in disaster cleaning and the recovery of carpets, upholstery, curtains, electronics and furniture affected by fire, water or odour. His statement of 18 December 2001 and his report of 3 January 2003 (Ex. A: Tab 7) referred to his experience and completion of disaster cleaning and fire and water restoration courses in the United States of America.

81 Mr Dickson made two inspections, the first in November 1999 and the second in February 2000, during which he made notes and took photographs of what he described as a “broad range of defects”. He referred to paint stains and other marks as a result of carpet being laid prematurely. He also referred to glue stains on the carpet. He concluded that some of the defects could have been eradicated by simple solutions but other defects would be more difficult to rectify.

82 HSH submitted that Mr Dickson’s evidence went directly to the determination of whether the contractual definition of Completion was met and that his evidence was corroborative of evidence from other witnesses, including Ms Browne and Mr Rice. However the Referee did not make any mention at all of Mr Dickson’s evidence in the Report. It was submitted that as a result of his failure to refer to or deal with that evidence it was not possible to know whether that evidence was considered by the Referee and if so, what conclusions he arrived at on the evidence and whether or not it was accepted or rejected.

83 Mr Dickson’s evidence, Exhibit 10, consisted of a statement and a carpet inspection report. He expressed the view that it was “sheer stupidity” to have painters and other tradespeople working in rooms after the carpet was laid. He also expressed the view that the site was “completely disorganized”. However in relation to the nature of the defects, the issue in question on this aspect of HSH’s complaints, Mr Dickson did not describe the defects as major. He expressed the view that some marks on the carpet would be more difficult than others to remove and that some defects from “poor workmanship” would be relatively straightforward to rectify. He did express an opinion that there were “far too many outstanding defects” in February 2000, but that has to be viewed in the context to which I have just referred.

84 The Referee did not specifically refer to or separately analyse Mr Dickson’s evidence in the Report. However there is ample reference in the Report to the allegations made in relation to the carpet. The Referee clearly reviewed all the evidence and when he reviewed the photographs in relation to the alleged carpet defects, he came to the view that they were not serious (par 278). I am not satisfied that the failure to specifically refer to Mr Dickson’s evidence is a ground upon which to reject the Report.

85 HSH made a further complaint that the Referee did not raise with counsel for HSH that he was minded to make adverse inferences from its failure to call Mr Leffler to give evidence. It was submitted that had the Referee done so, the defendants would have had the opportunity to call further evidence from Mr Rice or from the defendants’ legal representatives as to the inherent difficulty in obtaining a witness statement from Mr Leffler. Mr Rice’s evidence in cross-examination disclosed that Mr Leffler had left Stamford’s employment in August 2001 and that Mr Rice and Mr Leffler did not see “eye to eye” towards the end of his employment. This was not referred to in the Referee’s criticism or adverse inference drawn against the defendants for failing to call Mr Leffler. Additionally it was submitted that there was no reason to think that the failure to call Mr Leffler was because HSH thought he would give unfavourable evidence.

86 For the purpose of dealing with this submission I will assume that this was a matter that should have been raised with HSH prior to the inference being drawn. The fact that this was not done and the inference was so drawn does not affect the outcome of these applications because the Referee stated clearly that this inference was not decisive in his reasoning (par 587). In any event HSH was on notice that this was a course that the Referee was being asked to take by a submission made by Mr McDougall QC, referred to in paragraph 199 of the Report.

136 Multiplex submitted, correctly in my view, that HSH’s complaint appears to be that the Referee did not believe Mr Rice and did believe Multiplex’s witness, Mr Johnson. The finding as to who should be believed in the circumstances of the case was, as submitted by Multiplex, peculiarly within the province of the Referee, who had the benefit of hearing all the evidence, observing the witnesses over an extended period of time and weighing their evidence against other evidence. I agree with Multiplex’s submission that the Referee’s conclusion was open to him and that there has been no error demonstrated in the approach that he adopted.

Ground 7: Refusal to Allow Amendment

137 During the interlocutory steps preparatory to hearing, and in particular in respect of amendments to pleadings, HSH provided particulars of its claims in respect of the alleged delay of Completion. One matter to which reference was made in the particulars was the Mechanical Car Parking System (MCPS).

138 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 Stages 1A, 1B and 2 as at 23 February 2000. In relation to completion of Stage 2, the Schedule stated:

139 On 19 October 2001 I made an order that HSH and Stamford prepare a Schedule in the form of a single document encapsulating particulars they had provided to Multiplex in relation to certain parts of the Defence and Cross-Claim. Those particulars included particulars of defects alleged to have prevented Completion being achieved on the dates claimed by Multiplex. The Schedule in the form of a single document omitted the above reference in relation to the MCPS.

140 From October 2001 the litigation was prepared and pursued on the basis that the MCPS issue was not part of HSH’s case in relation to the delay of Completion. This preparation included statements from lay and expert witnesses and plans for an experts’ conclave.

141 On 27 September 2002, Multiplex and the relevant Body Corporate of the building entered into a Deed whereby the Body Corporate, inter alia, assigned to Multiplex all its rights to claims against HSH and Stamford in relation to any defects or performance issues with the MCPS.

142 On 23 October 2002 the Referee gave directions 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 contract for defective works and not for delayed Completion.

143 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 advised as follows:

Particulars

144 In a letter from the Referee to the solicitors for the parties referring to the preliminary conference on 12 December 2002, the following appears:

(e) The defendant gave notice that it wished to apply to amend its defence in a number of substantial ways, which would alter the way in which the case has thus far been conducted. The plaintiff had not had the opportunity to consider the proposed amendments. This matter will have to be argued at some stage and certainly should be done as soon as possible. I consider, at least prima facie, that as the whole matter has been referred to me, I have the power to rule on this point. However, the parties should give further consideration to it, as shall I. The parties should also give thought to the consequences of any such amendments being allowed, particularly in the light of the time I have been asked to set aside for this reference.

145 It is apparent that on or about 17 December 2002 Gregory Phillip King, solicitor of Griffins, provided a Notice of Motion and affidavit to Minter Ellison seeking leave to amend the Defence. That document anticipated the hearing of the Motion in December 2002, however the application was not heard until Friday, 31 January 2003. The affidavit filed by Mr King referred to the history of the particulars and stated:

6. The previous schedules of those particulars provided to the Plaintiff, which were to be encapsulated in the Schedule, included that the Mechanical Car Parking System was not complete and prevented Completion of Stage 2 from being achieved. In the preparation of the Schedule, the Mechanical Car Parking System was omitted in error.

146 On 20 December 2002 Griffins served on Minter Ellison a copy of a report by Tracey Brunstom and Hammond, dated 19 December 2002, entitled “Report on MCPS as Built and Assessment of Impact on Extension of Time Entitlement” (Ex. C). That Report was based on an assumption the authors were asked to make that the MCPS had not reached practical Completion by 28 March 2000. It included findings that the MCPS had not reached practical Completion until 4 July 2000 or later and that it became critical to 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 the revised critical path.

147 At the hearing of the application to amend on 31 January 2003 Mr Faulkner SC for HSH made the following submissions:

The defendants long ago put on their evidence, their lay evidence, as to the factual problems with the Mechanical Car Parking System and put on an expert report of Guthrie Haskins and Davey.

Mr Miller: When was that?

Mr Faulkner: In approximately May 2002. In addition we served a supplementary report of our programming experts, Tracey Brunstom and Hammond, on 20 December 2002. I don’t want to have to give you a copy of that report unless you need it but it ..

The Referee: Well, that followed the meeting we had on the 12th.

Mr Faulkner: That’s right and the report was prepared on an assumption. They were asked to assume that the MPCS had not achieved practical completion as at 28 March 2000 and they were, on that assumption, to provide a report as to where or when it got onto the critical path and caused the critical delay. The report goes to that.

In my submission, you would allow the reinstatement of this particular for the following reasons: It has been omitted in error – and that is not contested; evidence in relation to it has long since been served with the exception of that last report by the defendants; the plaintiff does not assert any material prejudice.

The Referee: I‘m not so sure about that.

A: In paragraph 16 of Mr Wong’s affidavit, he says that they have suffered or will suffer substantial prejudice, but there is no prejudice referred to except the necessity to obtain further evidence. There is no indication that that evidence cannot be obtained and be obtained in reasonable time. These proceedings are scheduled to commence the week after next but it will, nevertheless, be some weeks into the hearing before this issue becomes a matter of evidence.

If there had been difficulty in obtaining the evidence, I would submit to you that that would have been referred to in the affidavit.

(tr 35-36)

148 The following exchange occurred between the Referee and Mr Miller, junior counsel for Multiplex:

The Referee: And insofar as programming issues have been dealt with, if one now included the car stacker, that could affect all sorts of things.

Mr Miller: Potentially yes. At the very least our programmers have got to go back now, if it’s going to be permitted, and have a look at what is said in terms of the car stacker to impact on critical paths and to identify whether it is said at some point that it’s co-critical or not co-critical and it has an impact upon entitlements potentially under contracts. There are any number of permutations that can arise out of that. None of this arose until such time as all the evidence in the matter had closed. The prejudice is patent.

(tr 40)

149 The Referee delivered the following reasons, described by Multiplex as “an interim report”, on 31 January 2003 refusing the amendment:

By an order made on 19 October 2001 by Bergin J, I assume by consent, although that is not a matter of any particular significance, the first defendant was ordered to prepare a schedule in the form of a single document encapsulating its particulars and conforming with a certain order and to serve it on the solicitors for the plaintiff by 15 November 2001.

Prior to that date, particulars had been furnished by the defendants of their various complaints, but it is obvious that her Honour had in mind that the particulars should be drawn together in one document, and this was done in a document enclosed with a letter from the solicitors for the defendants to the solicitors for the plaintiff dated 15 November 2001.

It is not in issue that prior to that date and prior to the provision of those particulars the MPCS had been a live issue in relation to, amongst other things, the timing issue. Its omission from the schedule is, therefore, difficult to understand but is frankly enough explained by Mr King in his affidavit of 17 December 2002 as being in error. I accept that evidence, it not being challenged.

In his affidavit of 24 January 2003, Mr Wong, a solicitor for the plaintiff, sets out the history of the resurrection of the MPCS starting with paragraph 5 and noting that on various occasions in September 2001 it was only put forward as a defect giving rise to “breaches of contract claimed”. Mr Wong states that on 24 October 2002 his firm wrote to the solicitors for the defendant:

… highlighting that the cross-claimant relies on the MPCS only in relation to alleged breaches of contract for defective work,

and not for delayed Completion

(my emphasis).

On 29 October, or perhaps 28 October 2002, I was handed a document dealing with the witness statements in reply and this dealt under the heading “G” with a number of witnesses to be called in relation to the MPCS. Thus, it was well appreciated that the MPCS was in issue but, as the solicitors for the plaintiff had put forward, for the limited basis to which I have referred.

The evidence on the matter was closed on or about 6 December 2002 and on 12 December 2002 the solicitors for the defendants advised the solicitors for the plaintiff that the MPCS would be relied upon “as a delayed completion issue”. In paragraph 16 Mr Wong set forth that in his opinion substantial prejudice would be suffered by the plaintiff if that course was allowed to be followed and he concluded:

Further, as the plaintiff has prepared limited evidence in defence and reply on the MPCS as a direct result of the cross-claimant’s representation, if the MPCS 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.

I have also noted that in a document handed to me on 12 December 2002 there was to be a conclave in relation to the MPCS between representatives of each party but I was informed by Mr Miller, and this was not disputed, that that did not go to the timing issue.

The matter has been before me on a number of occasions with complaints and countercomplaints about the evidence or, more accurately, the absence of the evidence and when it would be available, all of this arising by dint of the fact that the hearing date had been fixed for 10 February 2003.

It seems to me most unfortunate that there was an error in furnishing the particulars ordered by Bergin J. That is understandable. However 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 to which I have referred.

The submission of Mr Faulkner is that there is no real evidence that the matter cannot be attended to between now and 10 February or during the hearing. From my appreciation of the issues involved and the history of the matter, it seems to me that one must take a somewhat more practical – I do not say this in any pejorative sense – and commonsense view of the preparation of the litigation. For a long time it has gone forward on a certain basis, namely that the MPCS (sic) was not part of the timing issue. 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.

150 HSH submitted that the sole emphasis by the Referee was on the delay in correcting the error and the inconvenience to the parties in trying to overcome the problem because of the Christmas/New Year break and the impending hearing. It was submitted that Multiplex made no suggestion that an appropriate costs order would not remove the prejudice. Alternatively it was submitted that there was nothing to suggest that the Reference could not start and the issue be dealt with in a discrete way after the evidence had been obtained on the issue by Multiplex’s expert or adviser.

151 HSH submitted that the issue of the MCPS was an important issue on the topic of the proper Completion date for Stage 2 and could have had an important bearing on the outcome of the case. It is submitted that the Referee erred in exercising his discretion in failing to allow the amendment. It was also submitted that there is nothing in the ex tempore reasons to show that the issues that should have been balanced were balanced.

152 This question has been raised as a separate ground for rejecting the Report. The Referee’s refusal to allow the amendment is not part of the Report and is a separate matter decided on 31 January 2003 about ten days before the commencement of the hearing before the Referee. However both parties have approached this aspect of the matter as appropriate for consideration as to whether the Report should be adopted or rejected in whole or in part. Focus must therefore be kept on the fact that this is not an appellate process, and the prospect that a judge may have exercised his or her discretion differently is not to the point. It seems to me that the question is whether the exercise of the discretion by the Referee was infected by some error of principle, a misapprehension of facts or failure to consider relevant matters, such as to amount to an exercise of discretion so unreasonable that the Court would intrude.

153 The reasons given by the Referee contain the rather elliptical reference, “the history of the matter is such”, but there is an emphasis on the case having been prepared over a lengthy period (October 2001 to January 2003) on the basis that the MCPS matter was not an issue in relation to the date of Completion and was only relied upon as an alleged breach of contract. The Referee correctly accepted the evidence that the case had gone forward on this basis by reason of an error by the solicitor for HSH. However, 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 to serve all evidence had expired. It was not until 20 December 2002, the last Friday before Christmas, that a report on the topic was served on Multiplex.

154 The Referee 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. As can be seen from the portion of the transcript extracted earlier, Mr Miller, junior counsel for HSH, submitted to the Referee that there was a potential to affect all the other programming issues that had been the subject of evidence already prepared and that there were “any number of permutations that can arise out of that”.

155 HSH was critical of the Referee’s reference to the holiday period and the fact that relevant people would be on holidays. I see no basis for that criticism. It was a fact that impacted on Multiplex’s capacity to deal with the matter. When the Referee referred to the “practical and commonsense” approach to the litigation with the immediately following statement that the matter had “for a long time gone forward on a certain basis” there is no doubt in my mind that he was referring back to the problems described by Mr Miller in his submissions of the difficulties of effectively having to try to disentangle so many aspects of the matter that Multiplex had already settled in its evidence. I am satisfied that the reference to the “history of the matter” included a consideration of this aspect of the problem that had been described in evidence as “severe prejudice”.

156 Multiplex relied on a number of authorities in support of its submission that the Report should be rejected by reason of the Referee’s failure to allow the amendment. It was submitted that the general principle is that an amendment to the pleadings should be allowed unless an injustice would be caused to the other party: Cropper v Smith (1884) 26 Ch D 700 at 710 per Bowen LJ, adopted by the majority in Clough and Anor v Frog (1974) 4 ALR 615 at 618. Reliance was also placed on State ofQueensland v JL Holdings Pty Limited (1997) 189 CLR 146 at 155. It was submitted that the Referee failed to have regard to the relevant principles in refusing the amendment.

157 In my view there is no doubt that the Referee was cognisant of the principles upon which he should make the decision as to whether to allow the amendment. I do not agree that the sole emphasis for the Referee’s decision to refuse the amendment was delay and inconvenience of the holiday period. In my view, the Referee engaged in a balancing exercise to do as the authorities required. This was not a matter in which case management intruded to dictate the result and delay was but one factor upon which the application was refused. In that regard, the principles enunciated in JL Holdings were not offended. It has to also be remembered that in JL Holdings the amendment was refused six months in advance of the hearing date. This amendment was sought effectively on the eve of the hearing with a history very different to that in JL Holdings.

158 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.

159 A further submission by Multiplex was that HSH had failed to seek directions from the Court pursuant to Pt 72 r 9 in respect of its application to amend, similar to the approach taken in Chocolate Factory Apartments Ltd v Westpoint Finance Pty Ltd [2003] NSWSC 547 (Einstein J, 18 June 2003), and that such failure should weigh against the Court entertaining Multiplex’s complaint on this aspect of the matter. My conclusion that this Ground is not made out makes it unnecessary to deal with this submission, save to say that: (1) I respectfully agree with Einstein J that the Court has power under Pt 72 r 9 to give directions in relation to amendments of pleadings, notwithstanding that the Referee has been given the power to amend the Schedule to the Order for Reference and inferentially to amend the pleadings: (2) this case was heard for two weeks in February and March 2003 and part of a third week in May 2003, during which there was ample time to approach the Court for directions; and (3) there may be force in the submission that by its failure to raise the matter with the Court other than as a basis for rejection of the Report, HSH had allowed the matter to reach the point where to allow an amendment would cause serious injustice to Multiplex, because the matter may have gone beyond the point of being able to be “unscrambled”: Chocolate Factory at par 66.

Ground 8: Apprehension of Bias/Denial of Natural Justice

160 It should immediately be said that this submission arises from the review of the Report by HSH and was not a matter that was raised with the Referee during the Reference. It is a submission that is made in reliance upon the earlier grounds. As I have not found favour with HSH’s submissions in respect of any of those matters this ground is not made out.

Report dated 13 June 2003

Costs of Motion to Amend

161 In the Report dated 13 June 2003, the Referee dealt with, inter alia, Multiplex’s Notice of Motion to amend the Third Further Amended Summons to claim appropriate relief against HSH in relation to the claim that it had wrongfully and in breach of the contract failed to release the securities, referred to earlier in this judgment. This matter was of course fought out between the parties during the hearing before the Referee and was the subject of the re-opening of HSH’s case and the calling of Mr Tay.

162 The evidence before the Referee in support of the Motion was an affidavit of Mr Wong in which he referred to having noted that the pleading contained a prayer for declaratory relief in respect of the alleged breach but did not seek a formal order. The circumstances in which Multiplex sought from HSH agreement to the proposed amendment to reflect the claims that had been litigated are set out in paragraphs 8 to 10 of this Report. It records that HSH refused to agree to the amendment claiming it was “too late, unfair to our client and will cause prejudice”. The Referee set out the concessions made by Mr Faulkner SC in paragraph 12 of the Report and concluded that in the light of the concessions it was “obvious” that granting leave to Multiplex to amend would lead to no prejudice or unfairness and in this instance it was not too late to grant that leave.

163 The Referee recommended that HSH pay Multiplex’s costs of the Notice of Motion.

164 HSH submitted that ordinarily the costs should be in favour of HSH and that no reasonable exercise of the discretion would result in the order recommended. HSH submitted that the issue of the costs of the Motion was not raised by the Referee at the hearing on 28 May 2003 and that no opportunity was given to counsel to make submissions as to costs. This matter has been cured by the opportunity in this application for HSH to make the submissions on this aspect of the matter.

165 The costs awarded by the Referee were the costs of having to bring and argue the Motion. HSH could have agreed to the amendment and in those circumstances it would not have been at risk of a costs order. I can see no error by the Referee in recommending that the costs of unsuccessfully resisting an amendment application should not be borne by HSH. I intend to adopt his recommendation.

Costs of the Proceedings

166 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 and including 16 January 2003.

167 That recommendation stems from an offer made by Multiplex on 16 January 2003, the terms of which are contained in paragraph 55 of this Report. The offer was put to both HSH and Stamford “jointly” to pay the sum of $1 plus Multiplex’s costs of the proceedings. HSH submitted 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. That submission is based on Part 22, rule 3(9) which provides: “Where an offer is accepted under this rule, any party to the compromise may enter judgment accordingly”.

168 HSH submitted that Multiplex had pitched its 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 seeks an order to that effect.

169 It is submitted therefore that the Referee’s conclusion that HSH could always pay the amount of the judgment plus costs is not to the point. It is submitted that Multiplex will not have a judgment no less favourable than the terms of its 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 the Court should reject the recommendation as to costs in this regard.

170 Part 22, rule 9, to which the Referee refers in this report, provides:

Where two or more Defendants are alleged to be jointly or jointly and severally liable to the Plaintiffs 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.

171 It was submitted that in exercising his discretion the Referee was required to ask the question whether it was reasonable for the HSH and Stamford to have rejected the Multiplex’s offer. Multiplex’s submission is that the Referee properly construed the offer as being able to be accepted or rejected by either HSH or Stamford. It was submitted that the Referee was correct in his conclusion that the offer of compromise having been made to both HSH and Stamford, each was obliged to consider it and determine whether it would accept it.

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 paragraph 77 of the Report but will make an order that HSH pay Multiplex’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.

Costs in relation to penalty argument

173 The final complaint made by HSH in respect of the costs orders recommended by the Referee was in respect of the costs of litigating the issue of whether the liquidated damages clause was a penalty. The penalty issue was decided in favour of HSH and it claims at the very least that it should not have to pay Multiplex’s costs for litigating that aspect of the matter, and indeed that Multiplex should pay its costs of that aspect of the matter.

174 The Referee dealt with the evidence in respect of this matter at paragraph 34 of this Report and considered it in paragraphs 50 to 54 inclusive. The Referee considered the relevant authorities and applied them to the matter of the penalty argument. He found that it was a discrete issue but came to the conclusion, wrongly in my view, that it should not be treated as so dominant as to require the proper exercise of his discretion to alter the general rule. It seems to me that the issue was so dominant that if Multiplex had been successful, HSH would not have been able to recover any liquidated damages and would thus not have been able to reduce the amount payable on the judgment that is to be entered against it. I am satisfied therefore that it is appropriate to accept the Referee’s alternative recommendation. He was in the best position to make an assessment of the percentage amount to be recommended on the basis that the Court found the issue was “so dominant”. I am satisfied that there should be a 5% reduction of the amount of the total costs HSH is to pay to Multiplex.

Orders

175 On the Notice of Motion filed by Multiplex: I make the order in paragraph 1 and I make the order in paragraph 2, subject to the different costs orders I have indicated I propose to make. I dismiss the Motion filed by HSH. The parties are to bring in Short Minutes of Order reflecting the Orders recommended by the Referee in the Report and reflecting the orders recommended in the report of 13 June 2003, subject to the changes I have indicated. Interest as recommended should be calculated up to and including 1 December 2003.

176 If there is no agreed costs order relating to these applications when the matter is listed for entry of orders at 9.30 on 1 December 2003, I will hear argument on that occasion.

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Last Modified: 11/26/2003

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Citations

Multiplex Constructions Pty Limited v HSH Hotels (Australia) Limited as Trustee of SHR Kent Street Trust [2003] NSWSC 1069

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CITATION:	Multiplex Constructions Pty Limited v HSH Hotels (Australia) Limited as Trustee of SHR Kent Street Trust and Anor [2003] NSWSC 1069
HEARING DATE(S):	22, 23 and 24 September 2003
JUDGMENT DATE:	25 November 2003
JURISDICTION:	Equity Division Technology and Construction List
JUDGMENT OF:	Bergin J
DECISION:	Reports to be adopted subject to changes to recommended costs orders.
CATCHWORDS:	[REFERENCE] - [ADOPTION OR REJECTION OF REPORT] - Competing applications pursuant to Part 72 Rule 13 to adopt or reject Referee's Reports - Court's approach to such applications - References not to be constrained by the rigorous application of rules - [EVIDENCE & PROCEDURE] - Application of the "rule" in Browne v Dunn (1893) 6 R 67 - Competing expert's reports - No cross-examination of expert - Application of principles in Hull v Thompson [2001] NSWCA 359 - [AMENDMENT] - Courts power under Part 72 Rule 9 in circumstances where Referee has power to amend and refuses amendment.
LEGISLATION CITED:	Supreme Court Rules 1970 (NSW)
CASES CITED:	Allied Pastoral Holdings Pty Limited v Commissioner of Taxation (1983) 1 NSWLR 1 Browne v Dunn (1893) 6 R 67 Chocolate Factory Apartments Limited v Westpoint Finance Pty Limited [2003] NSWSC 547 Clough and Anor v Frog (1974) 4 ALR 615 Cropper v Smith (1884) 26 Ch D 700 M & EM Hull Pty Limited v Thompson [2001] NSWCA 359 State of Queensland v JL Holdings Pty Limited (1997) 189 CLR 146 Seymour v Australian Broadcasting Commission (1990) 19 NSWLR 219 Super Pty Limited v SJP Formwork (Aust) Pty Limited (1992) 29 NSWLR 549
PARTIES :	Multiplex Constructions Pty Limited (Plaintiff/Cross-Defendant) HSH Hotels (Australia) Limited as Trustee of SHR Kent Street Trust (First Defendant/Cross-Claimant) Stamford Property Services Pty Limited (Second Defendant)
FILE NUMBER(S):	SC 55002/00
COUNSEL:	MG Rudge SC and DT Miller (Plaintiff) AJ Sullivan QC and S Walsh QC (Defendants)
SOLICITORS:	Minter Ellison Lawyers (Plaintiff) Griffin Hilditch Lawyers (Defendants)