Shoalhaven City Council v Firedam Civil Engineering Pty Limited

[2010] HCATrans 234

[2010] HCATrans 234

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S118 of 2010

B e t w e e n -

SHOALHAVEN CITY COUNCIL (ABN 59 855 182 344)

Applicant

and

FIREDAM CIVIL ENGINEERING PTY  LIMITED (ABN 84 003 923 377)

Respondent

Application for special leave to appeal

GUMMOW J
HEYDON J
KIEFEL J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 3 SEPTEMBER 2010, AT 11.20 AM

Copyright in the High Court of Australia

MR D.F. JACKSON, QC:   If the Court pleases, I appear with my learned friend, MS J.A. STEELE, for the applicant.  (instructed byTressCox Lawyers)

MR I.G.B. ROBERTS:   If the Court pleases, I appear with my learned friend, MR R.M. O’BRIEN, for the respondent.  (instructed by Herbert Geer Lawyers)

GUMMOW J:   Yes, Mr Jackson.

MR JACKSON:   Your Honours, this case involves a standard form of contract for New South Wales government projects.  It provides for expert determination of claims which determinations are to be binding up to $500,000.  Your Honours will see the expert’s functions set out at page 137. I will take your Honours to that for just a moment.  Your Honours will see, commencing at about line 25 what the expert does, how the expert is to act and then in paragraph 3:

must issue a certificate in a form the Expert considers appropriate, stating the Expert’s determination and giving reasons, within –

the time specified there.  Your Honours, here the expert did issue a certificate and did give reasons, but the Court of Appeal held that the expert had not given reasons in accordance with the contract because, if I could put it shortly, your Honours, the determination which he gave, it was said, contained conflicting decisions on two issues and his reasons did not explain why decisions were conflicting.  I will come, your Honours, to the reasons why special leave should be granted in just a moment, if I may, but could I take your Honours to where that may be seen.  Justice Campbell, at page 130 in paragraphs 12, 14 and 17, you will see in paragraph 12, said:

The obligation of the expert to give reasons relates to the determination as a whole.

In paragraph 14, the last three lines:

when there is an unexplained discrepancy in his conclusions concerning some of those issues, he has not provided reasons for his determination as a whole.

Then, your Honours, paragraph 17, the last sentence, again:

For the reader to be left wondering about what construction the expert put on clause 54.6 provides one reason why the expert has not fulfilled his obligation –

Then Justice Macfarlan, at page 143, paragraph 41, the last sentence again, the last four lines, and page 149, paragraphs 58 to 60.

KIEFEL J:   Does the argument for inadequacy of reasons depend upon there being an inconsistency of ‑ ‑ ‑

MR JACKSON:   Entirely, your Honour, in our submission – perhaps I should add that qualification – but that is why it is said there is an inadequacy of reasons, because it is said there is a conflict.  We would say, your Honours, if I could speak a little more generally, first of all, the decision of the Court of Appeal does extend the contractual obligation of the expert beyond that provided for by the contract because he did give reasons and the approach taken by the Court of Appeal involved their content, as it were. 

I do not mean to say, your Honours, that there could be no case where content does not indicate that reasons have not been given, but the point that arises is simply one of the correctness of the construction of particular provisions of the contract.  When I say “the point that arises”, that is the point that underlies the view taken by the Court of Appeal.  Your Honours, the issue is of some importance.  Could I refer your Honours to page 171 in paragraphs 27 and 28 of our submissions.

GUMMOW J:   With reference to what you are referring to us there at 171, you complain, I think, do you, therefore, as to what was said at paragraph 64 in the Court of Appeal at page 150 as to what was the minimum?

MR JACKSON:   Your Honour will see, in effect, two particular sentences there.

GUMMOW J:   Yes.

MR JACKSON:   If one goes to the one three lines from the bottom of page 150, one would think that that is not really exceptionable.  If one goes, however, to what immediate follows it in the last sentence of that paragraph it is said:

This standard is not complied with if the ultimate basis for a decision cannot be discerned because of inconsistency of reasoning or findings.

Your Honours, so far as the first of those propositions is concerned, we have no objection to it.  The second, however, is one to which we would submit could only apply in some cases.  If one is speaking about a context in which in a case like this there was a money limit involved for the purposes of the contract and the expert’s determination, one sees what the expert has to do.  If the expert is to answer particular questions and gives reasons for them, then it may be that if one looked at it from an entirely legal point of view saying, is it right or wrong, that one could see that there may be error, but not every error is one which would say that there has not been the giving of reasons.

The second point we would seek to make, your Honours, is that, in our submission, the decision of the Court of Appeal is itself based on an incorrect interpretation of the provisions of the contract and it found conflict in the reasons because of its interpretation and the interpretation, in our submission, was itself incorrect.  Could I go, your Honours, just a little to the circumstances to seek to make out what I have just said.  We have tried to put it in short, your Honours, in the reply submissions at page 181, paragraph 6.

Your Honour, the position under the contract, to put it shortly, was that the contractor had two entitlements under the contract in the circumstances which then applied.  One was to get additional costs, the other was to get an extension of time under clause 54.  You will see clause 54 set out at page 133.  At page 133 your Honours will see that clause 54 in .1, commencing about line 18, sets out the circumstances in which “the Contractor will be entitled to” obtain the “extension of time”.  You will see in paragraphs .1, .2, .3 and .4 on the same page going down to line 50 that there were various requirements that had to be satisfied and the expert held that they were not satisfied. 

You will see that, your Honours, at page 27 in the expert determination in paragraphs 140 through to 144 and the conclusion in paragraph 146 d.ii. about line 26 on the page.  There are two relevant claims, your Honours.  I have dealt with the first one.  The second one is at page 63, paragraph 367 and also, your Honours, at page 79, paragraph 519.  What was held, simply, was that the burden of proof or the requirements had not been satisfied in respect of the claims for extension of time and that had the consequences that are set out in paragraph 9 of our reply submissions at page 182.

GUMMOW J:   What you have just been taking us to, Mr Jackson, that is reflected in the draft notice of appeal, grounds ‑ ‑ ‑

MR JACKSON:   Yes, it is, your Honour.  Your Honour, we will just see that.  The draft notice of appeal is at page 161.  The inconsistency issue is one referred to in ground 2.  The issue to which I have not quite yet come is in ground 3.  I think it is right to say that grounds 4, 5 and 6 are elaborations of the same proposition.  When one goes to ground 7, that is something that ‑ ‑ ‑

GUMMOW J:   Yes.

MR JACKSON:   Your Honours, the notions involved there have some relationship in fact with the issue between New South Wales and Victorian courts discussed in the case in which the Court was last dealing.

GUMMOW J:   Yes, that is right.

MR JACKSON:   Your Honours, I said that I have not yet dealt with the clause 54.6 issue and what it was was simply this.  We, as principal, were making a claim for damages for delay.  There had to be a determination of the starting point in terms of date from which the claim should commence and the issue was referred to at page 75 in paragraphs 478 to 492.  Now, your Honours, if I could try to put it shortly, the claims would be that the expert was of the view that we had contributed to delay in part.  A question which then arose was whether we would be entitled to any, in effect, liquidated damages for delay because of our participation in the cause of the delay or whether, as appears to be the custom and the decisions that are referred to there, the position was that he could make it to fix a time as from which the delay is deemed to start.

Now, your Honours, in doing that, you will see the nature of the issue.  May I say the reasoning seems pretty clear, occupies quite a number of paragraphs.  He then goes on to paragraphs 496, 497, 498 to say that he had power to extend time.  The provision to which he was referring was clause 54.6, which you will see on page 134, commencing at about line 35, “The Principal may in its absolute discretion”, and then your Honours will see the words, “for the benefit of the Principal”.  Now, it does not say for the benefit of both, “for the benefit of the Principal”.  So what he did was to do the best he could to make an estimate of the time “for the benefit of the Principal” that there should be a starting point allocated as the time for liquidated damages, to put it shortly.

Now, your Honours will see he gave reasons for it.  We would say the primary judge was right in what he said at page 111 in paragraphs 34 to 36 of there being no inconsistency.  Your Honours, it is perfectly possible for a provision to be for the benefit only of one party to the contract.  We have given in our book of materials one example in this Court, Sandra Investments Pty Ltd v Booth.  It is also reported at 153 CLR 153.  The two courts below in Queensland had taken the view that a vendor had also the right specifically given to the purchaser.  That view did not survive long in this Court.  If one looks at the transcript of the matter, Mr Shand, who was then appearing for the appellant, did not have to speak for very long.

GUMMOW J:   Mr Jackson, looking at Justice Tamberlin’s decision, he refers at page 99 to that New South Wales Court of Appeal decision in Holt v Cox.  That seems to say that, well, the expert can always be sued for negligence, and that somehow is a factor that enters into these debates.

MR JACKSON:   Yes, your Honour, we have relied on that dictum.  There must be questions about it.  Most persons engaged to give an expert determination would have some agreement in relation to the terms on which they were to do it and the prudent course would be to seek to avoid liability for it, seek to.....liability but, your Honours, there would also be a question about the degree of possible success of such litigation because if one is in an area where the obligation is to give reasons, presumably, although not necessarily, one might imply in such an obligation that one had to do one’s best or to act reasonably but recognising that many of the issues would be ones on which there were differences of possible view.

In the end, your Honours, that does not really matter, we would submit, the issue as raised by Holt v Cox, but it may be a factor, it may not, but in the end one does have to go back to the contract and if one looks to see what the expert was asked to do and what the expert did in the particular case, your Honours, we would say there is something in the nature of a visitation case here because we would submit the underlying view of the Court of Appeal on the contract was erroneous.  The other point we would seek to make about it is that it does turn the corner a little in looking to see how correct the reasons were as distinct from whether the reasons that were given were ones that were within the range of reasons that might possibly have been given.

KIEFEL J:   If Justice Tamberlin is correct about there being no inconsistency, having regard to the contractual provision, do we necessarily get to the discussion about whether it was necessary to explain anything?

MR JACKSON:   No, your Honour, in fact, because ‑ ‑ ‑

KIEFEL J:   It might be a pure visitation point on that and no more?

MR JACKSON:   Your Honour, it might.  That is why I say, your Honour, there is, in part, a visitation point involved.  Could I just say this, that if Justice Tamberlin’s view is right, it is right because it is inherently right but one also sees what is reflected from that and that is that the expert did say exactly what he was doing and why and, your Honours, that is what reasons tend to be.

GUMMOW J:   Thank you, Mr Jackson.  Yes, Mr Roberts.

MR ROBERTS:   If the Court pleases.  Your Honours, in our submission, the Court of Appeal’s decision is based on a construction of the relevant part of the contract, a construction which is not challenged in this Court and, secondly, the application of the established principle to the particular facts of the case.  As such, in our submission, there is no special leave point.  Your Honours, the Court of Appeal approached the matter, we say correctly, in this way.  Their Honours construed the relevant part of the expert determination procedure as obliging the expert to give reasons relating to the determination as a whole.  That is a construction that appears in the judgment of Justice Campbell at paragraph 12, application book 130, and it is an approach taken by Justice Macfarlan, which appears in paragraph 21 at application book 132.

KIEFEL J:   Did the Court of Appeal identify the error in Justice Tamberlin’s approach at paragraph 34 of his Honour’s reasons?

MR ROBERTS:   They tended to go back to the expert determination and deal with it afresh.

KIEFEL J:   Did they approach the matter by reference to the more abstract question of what was necessary by way of reasons in the first place rather than focusing upon whether there was an inconsistency?

MR ROBERTS:   Not precisely, your Honour.  The way I understand the judgment, it arose in this way.  There was an inconsistency in two components of the expert’s determination.  The way in which the Court of Appeal interpreted the contract was to look at the expert determination procedure and identify that there were issues which made up a determination which was then certified and it was the determination, not the individual issues, that required the reasons.  For that reason, their Honours said one needs to look at the determination as a whole to assess whether or not the reasons were appropriate.  When one gets two components of that determination ‑ ‑ ‑

KIEFEL J:   I am sorry, are you distinguishing that because the Court of Appeal did not focus upon the actual claims that the expert was dealing with in respect of which there was said to be some inconsistency?

MR ROBERTS:   The Court of Appeal did focus on that and they came to the conclusion that there was an inconsistency, contrary to what Justice Tamberlin said in the passage.

KIEFEL J:   Can you identify where that is?

MR ROBERTS:   In paragraph 41 which appears at page 143.  His Honour Justice Macfarlan identified that it was difficult to reconcile the two findings in paragraph 508 of the expert’s determination which dealt with the principal’s claim and paragraphs 140 to 144 which dealt with what we say is the other side of the same coin in the contractor’s claim, as the Court of Appeal expressed it.  The way in which the expert dealt with the issue was this.  The expert had to assess whether or not there was an extension of time entitlement and then recognising there was no absolute right to compensation ‑ ‑ ‑

GUMMOW J:   If I can just interrupt, Mr Roberts, you referred us to paragraph 41 in answering Justice Kiefel?

MR ROBERTS:   Yes.

GUMMOW J:   That was picked up in paragraph 58.  It is 58, 59 and 60 that Mr Jackson challenges.

MR ROBERTS:   Yes, your Honour.  As I understand it, the challenge is that there was no inconsistency between the two aspects of the express determination and for that reason there was no need to elaborate in the reasons beyond what the expert did.  In my submission, when one looks at the Court of Appeal’s treatment of the two findings by the expert, the Court of Appeal, with respect, was correct because they cannot sit together without any explanation as to how they should be reconciled.  On the one hand, there is a claim by a contractor for an extension of time arising out of a particular delaying event. 

The expert says, prior to 140, there was an event for which the principal was responsible that gave rise to the claim for the additional costs.  The other component of its claim was a claim for an extension of time because of the effect on the project because of the need to do additional work.  What the expert said in 140 to 144, which appears at court book 27 to which Mr Jackson took your Honours, is that the expert could not, with material available to him and recognising that he was entitled to use his own expertise, determine whether or not there had been an effect on critical path and if there had been an effect on critical path, what was that effect in terms of the number of days delay?

It was not a case of the expert saying, in my submission, that there were contractual requirements that had not been met; in fact, to the contrary.  There was an assertion by the respondent – the applicant in the Court here – that there had not been a compliance with the contractual requirements but there had been no substantiation for that assertion.  What the expert said was, “I do not have the material and I cannot assess what effect on time this extra work had”, but when he came to deal with the other side of the argument in the principal’s claim, which appears at pages 78 and 79 of the application book, he had to back out of the overall delay, those components of the delay that were caused by the principal.

True it is that he was doing that exercise for the benefit of the principal, but the bottom line is he had to determine as a matter of fact what delay was caused by these same events that he dealt with in the contractor’s claim.  In the contractor’s claim he said, “I don’t have the material to assess the effect on time”, but in the principal’s claim he says, “I do have the material and I can make an assessment of nine days”.  What the Court of Appeal said is those two findings cannot be reconciled without some sort of explanation.  They are two components of the whole of the determination. 

If one looks at the whole of the determination requiring reasons, those reasons have not been provided and therefore it does not comply with the contractual description in the expert determination procedure.  That is at the heart of the application before your Honours.  It is said against us that the Court of Appeal’s approach is not consistent with appellate authority.  In our submission, that is not correct.  When one goes to the starting point, which is Legal & General, and your Honours have been provided with the authorities in the applicant’s bundle, the second tab is the ‑ ‑ ‑

GUMMOW J:   This is Justice McHugh’s judgment, is it?

MR ROBERTS:   That is correct.  The relevant part appears at page 336 at the top of the page where his Honour said:

In each case the critical question must always be:  Was the valuation made in accordance with the terms of a contract?

That is the principle that was reproduced in Kanivah Holdings, which appears behind the third tab, at paragraph [46] of his Honour Justice Stein’s judgment, and then his Honour goes on to approve of that formulation.  Then the next case we are given is AGL Victoria v SPI Networks, which appears behind the fourth tab, and at paragraph 51 on page 89,425 his Honour Justice Nettle agrees with the proposition and states the principle in paragraph 51 on the left‑hand column in the same way.

GUMMOW J:   Do you rely on paragraph 52 of Justice Nettle’s reasons in AGL:

The situation is analogous to that which faces a court in a cases of judicial review ‑ ‑ ‑

MR ROBERTS:   Your Honour, I do not.  That is not the approach that the Court of Appeal took and, in my submission, it does not arise.  The question that the Court of Appeal correctly asked was, what does the contract require and, does what the expert did comply with that contractual description?  That proposition then finds its way into the judgment at paragraph ‑ ‑ ‑

GUMMOW J:   Justice Nettle also referred at paragraph 51 to Holt v Cox, I see.

MR ROBERTS:   Yes.  It is also referred to, I think, in Kanivah, but I think it is referred to, your Honours, because there is a reference to the Legal & General principle, an attempt to explain it in some way.  It is not particular material to the present argument.  In paragraph 11 of Justice Campbell’s judgment, at the bottom of the page, page 129, at about line 51, his Honour, consistent with the approach in the earlier authorities, said:

The role of the court in deciding whether an expert determination is binding is not to decide whether there is a respect in which the expert erred.  Rather, it is to determine whether the determination that the expert provided is one that conforms to the contractual requirements.

GUMMOW J:   In paragraph 13 Justice Campbell uses the expression, “basic ground for decision has not been identified”.

MR ROBERTS:   Yes, but then in the following sentence his Honour seems to be expressly not trying to put a stamp or a standard on the question by saying:

Putting it that way, in the negative, does not attempt to state what is the full content of the obligation to give reasons, but is sufficient for determining the present case.

That is consistent with the way that Justice Macfarlan dealt with it in paragraph 63.

GUMMOW J:   Then in the third sentence in paragraph 14 Justice Campbell speaks of “unexplained discrepancy”.

MR ROBERTS:   Yes.  That is the discrepancy between the two findings that I took your Honours to earlier between 144 of the expert determination and 509.  In paragraph 63 of Justice Macfarlan’s decision at page 150 again his Honour asks the same question, although not in the terms that Justice Campbell put, by saying, at the third line in the paragraph:

An expert’s determination that does not contain reasons for the determination is not a determination of the contractual description.

One must read the reasons for the determination as being the reasons for the determination as a whole because that is the way on which the court approached the question.

GUMMOW J:   What is being construed is the standard contract provision that appears at 137, is it not, “Role of Expert”, “The Expert”, et cetera, “must issue a certificate . . . giving reasons, the phrase “giving reasons”.

MR ROBERTS:   Yes, but the proposition that it must be the determination as a whole is not challenged, as I understand it.  It has a logic behind it because the way in which the expert determination provisions are framed, it separately refers to issues which might be – the particular items of claim and then refers to the determination which comprises those many issues and it is the determination in subparagraph .3 of paragraph 4 that is required to be supported by reasons.  So that being the case, in my submission, their Honours were correct in saying when one cannot reconcile those two components of the whole, the whole has not been supported by the reasons and they were right, in my submission, to find that the determination did not comply with contractual description.  If the Court pleases.

MR JACKSON:   Your Honours, our learned friend said that the construction of the contract was not challenged.  I am not entirely sure what that meant.  That seemed to be a central part of our challenge and your Honours will see that at ground 3 of the notice of appeal at page 161.  Your Honours will also, if I could go to that page for a moment, in the draft notice of appeal that in ground 6 on page 161 we accept, I think, the proposition that, of course, one has to read the expert determination as a whole to see what it did, but that the Court of Appeal erred in taking the view that is there referred to. 

Your Honours, so far as Justice Tamberlin’s reasons were concerned, your Honour Justice Gummow pointed to paragraph 41, I think, but then one sees the issue dealt with again by the Court of Appeal in paragraph 50 and then a little more fully in paragraphs 53 to 56.  Your Honours, could I just also say one thing and that is that if I could go back to the expert determination for just a moment at page 30 of the application book, your Honours will see set out in a passage I went to quickly before, about line 25 on page 30 the expert said:

There is no submission that the Claimant has provided any written notice of a materially adverse Site Condition.

And so on, and what he was saying was that the terms that had to be complied with in order to satisfy the entitlement by the present respondent to get an extension of time had not been complied with.  If one goes then to

page 77, you will see in the passage that goes from paragraph 495 on to paragraph 501 that he notes, particularly in paragraph 501 in the third line, that:

delays would have entitled the Claimant to an EOT provided it had satisfied the contractual conditions precedent –

but that had not been done and that is why one sees him going on then to work out in paragraphs 503 and following a way, rough and ready one might accept, but your Honours will see that the terms in which he was appointed expert at page 137 include in paragraph 2:

on the basis of the submissions of the parties, including documents and witness statements, and the Expert’s own expertise –

Your Honours, those are our submissions.

GUMMOW J:   There will be a grant of special leave in this matter.  This appeal will be listed immediately after the appeal in the Westport Case and between them two days should be appropriate, I think.  We will adjourn to reconstitute.

AT 11.56 AM THE MATTER WAS CONCLUDED