The Owners Strata Plan 70579 v Midwest Constructions Pty Limited
[2011] NSWSC 429
•13 May 2011
Supreme Court
New South Wales
Medium Neutral Citation: The Owners Strata Plan 70579 v Midwest Constructions Pty Limited & Ors [2011] NSWSC 429 Hearing dates: 11 May 2011 Decision date: 13 May 2011 Jurisdiction: Equity Division - Technology and Construction List Before: Einstein J Decision: Superintendent's fee issue to be limited to remitted to the referee for hearing of a matter not previously litigated. Save for that matter, interim and final report by the referee to be adopted.
Catchwords: Reference out - Discretion to adopt, vary or reject reports of referee- Principles Legislation Cited: Arbitration Act 1902
Supreme Court Rules 1970
Uniform Civil Procedure Rules 2005Cases Cited: Allied Constructions Pty Limited v Hyder Consulting (Australia) Pty Limited & Ors [2004] NSWSC 808
Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139
Buckley v Bennell Design and Construction Pty Ltd (1978) 140 CLR 1
Cape v Maidment (1991) 98 ACTR 1
Chocolate Factory Apartments Pty Ltd v Westpoint Finance Pty Ltd [2005] NSWSC 784
CPC Energy Pty Ltd v Bellevarde (2007) NSWSC 1297
Foxman Holdings Pty Ltd v NMBE Pty Ltd (1994) 38 NSWLR 615
Homebush Abattoir Corporation v Bermria Pty Ltd (1991) 22 NSWLR 605
Seven Sydney Pty Limited v Fuji Xerox Australia Pty Ltd [2004] NSWSC 902
Super Pty Ltd v SJP Formwork (Aust) Pty Ltd (1992) 29 NSWLR 549
Chloride Batteries Australia Ltd v Glendale Chemical Products Pty Ltd (1988) 17 NSWLR 60
White Constructions (NT) Pty Ltd v Commonwealth of Australia (1990) 7 BCL 193Category: Procedural and other rulings Parties: Owners Strata Plan 70579 (Plaintiff)
Midwest Constructions Pty Limited (First Defendant)
Zolsan Pty Limited (Second Defendant)
J & R Investments Pty Limited (Third Defendant)
Peter Burgess (Fourth Defendant)Representation: Mr JJ Young (Plaintiff)
Mr FP Hicks (Defendants)
Grace Lawyers Pty Limited (Plaintiff)
Colin Biggers & Paisley (Defendants)
File Number(s): 2009/0298819
Judgment
The notices of motion
There are before the Court the following notices of motion :
(1) A notice of motion filed by the plaintiff [the owners/strata Plan number 70759] seeking for the final report of the referee dated 23 March 2011 to be adopted subject to a number of matters
(2) A notice of motion filed by Midwest Constructions Pty Ltd seeking the adoption of the interim report and the final report handed down by the referee.
Background
The plaintiff commenced proceedings against the first, second, third and fourth defendants in April 2009, by way of a summons and list statement, in which it alleged numerous building defects.
The dispute between the parties involved some 470 items claimed by the plaintiff (including defect rectification costs, overhead and profits, builder's margin, contingency fees, GST, etc).
Numerous expert reports were prepared and served by the parties to the proceedings, dealing with building and fire safety defects and all aspects of quantum. Some lay evidence was prepared and served by the plaintiff, though nothing much turned on the lay evidence.
Ultimately, the reference hearing was run in three stages.
(1) The issue of liability was addressed in the first stage of the hearing on 9 to 15 November 2010. Thereafter the Referee handed down an Interim Report .
(2) The issue of quantum was addressed in the second stage of the hearing on
(3) 8 March 2011.
(4) Closing submissions were heard by the Referee on 9 March 2011. Thereafter, the Referee handed down a Final Report .
The defendant's position
The defendants position is that it seeks the adoption of the Interim Report and the Final Report pursuant to rule 20.24 of the Uniform Civil Procedure Rules 2005 .
In truth the plaintiff and the first to third defendants agree that the vast majority of the findings of the final report of the referee should be adopted. Where they differ is that the plaintiff contends that a small number of discrete findings on quantum should be rejected while the defendant seeks adoption of the report in its entirety.
The principles
The principles concerning the adoption or rejection of any report (in part or in whole) under the provisions of the Rules are well established: see Seven Sydney Pty Limited v Fuji Xerox Australia Pty Ltd [2004] NSWSC 902.
In the decision of Seven Sydney Pty Limited , McDougall J summarised the main principles (referencing the Supreme Court Rules , prior to the introduction of the UCPR):
(1) An application under Pt 72 r 13 is not an appeal either by way of hearing de novo or by way of rehearing.
(2) The discretion to adopt, vary or reject the report is to be exercised in a manner consistent with both the object and purpose of the rules and the wider setting in which they take their place. Subject to this, and to what is said in the next two sub paragraphs, it is undesirable to attempt closely to confine the manner in which the discretion is to be exercised.
(3) The purpose of Pt 72 is to provide, where the interests of justice so require, a form of partial resolution of disputes alternative to orthodox litigation; that purpose would be frustrated if the reference were to be treated as some kind of warm up for the real contest.
(4) In so far as the subject matter of dissatisfaction with a report is a question of law, or the application of legal standards to established facts, a proper exercise of discretion requires the judge to consider and determine that matter afresh.
(5) Where a report shows a thorough, analytical and scientific approach to the assessment of the subject matter of the reference, the Court would have a disposition towards acceptance of the report, for to do otherwise would be to negate both the purpose and the facility of referring complex technical issues to independent experts for enquiry and report.
(6) If the referee's report reveals some error of principle, absence or excessive jurisdiction, patent misapprehension of the evidence or perversity or manifest unreasonableness in fact finding, that would ordinarily be a reason for rejection. In this context, patent misapprehension of the evidence refers to a lack of understanding of the evidence as distinct from the according to particular aspects of it different weight; and perversity or manifest unreasonableness mean a conclusion that no reasonable tribunal of fact could have reached. The test denoted by these phrases is more stringent than "unsafe and unsatisfactory".
(7) Generally, the referee's findings of fact should not be re-agitated in the Court. The Court will not reconsider disputed questions of fact where there is factual material sufficient to entitle the referee to reach the conclusions he or she did, particularly where the disputed questions are in a technical area in which the referee enjoys an appropriate expertise. Thus, the Court will not ordinarily interfere with findings of fact by a referee where the referee has based his or her findings upon a choice between conflicting evidence.
(8) The purpose of Pt 72 would be frustrated if the Court were required to reconsider disputed questions of fact in circumstances where it is conceded that there was material on which the conclusions could be based.
(9) The Court is entitled to consider the futility and cost of re-litigating an issue determined by the referee where the parties have had ample opportunity to place before the referee such evidence and submissions as they desire.
(10) Even if it were shown that the Court might have reached a different conclusion in some respect from that of the referee, it would not be (in the absence of any of the matters referred to in sub para (6) above) a proper exercise of the discretion conferred by Pt 72 r 13 to allow matters agitated before the referee to be re explored so as to lead to qualification or rejection of the report.
(11) Referees should give reasons for their opinion so as to enable the parties, the Court and the disinterested observer to know that the conclusion is not arbitrary, or influenced by improper considerations; but that it is the result of a process of logic and the application of a considered mind to the factual circumstances proved. The reasoning process must be sufficiently disclosed so that the Court can be satisfied that the conclusions are based upon such an intellectual exercise.
On an earlier occasion [ CPC Energy Pty Ltd v Bellevarde (2007) NSWSC 1297] I had occasion to advert to the principles
i. In Chocolate Factory Apartments Pty Ltd v Westpoint Finance Pty Ltd [2005] NSWSC 784 at [7], McDougall J, by reference to various authorities, including Super Pty Ltd v SJP Formwork (Aust) Pty Ltd, Chloride Batteries Australia Ltd v Glendale Chemical Products Pty Ltd (1988) 17 NSWLR 60, White Constructions (NT) Pty Ltd v Commonwealth of Australia (1990) 7 BCL 193 and Foxman Holdings Pty Ltd v NMBE Pty Ltd (1994) 38 NSWLR 615 summarised the principles to be applied in considering whether to adopt or reject a referee's report as follows:
"(1) An application under Pt 72 r 13 is not an appeal either by way of hearing de novo or by way of rehearing.
(2) The discretion to adopt, vary or reject the report is to be exercised in a manner consistent with both the object and purpose of the rules and the wider setting in which they take their place. Subject to this, and to what is said in the next two sub paragraphs, it is undesirable to attempt closely to confine the manner in which the discretion is to be exercised.
(3) The purpose of Pt 72 is to provide, where the interests of justice so require, a form of partial resolution of disputes alternative to orthodox litigation, that purpose would be frustrated if the reference were to be treated as some kind of warm up for the real contest.
(4) In so far as the subject matter of dissatisfaction with a report is a question of law, or the application of legal standards to established facts, a proper exercise of discretion requires the judge to consider and determine that matter afresh.
(5) Where a report shows a thorough, analytical and scientific approach to the assessment of the subject matter of the reference, the Court would have a disposition towards acceptance of the report, for to do otherwise would be to negate both the purpose and the facility of referring complex technical issues to independent experts for enquiry and report.
(6) If the referee's report reveals some error of principle, absence or excessive jurisdiction, patent misapprehension of the evidence or perversity or manifest unreasonableness in fact finding, that would ordinarily be a reason for rejection. In this context, patent misapprehension of the evidence refers to a lack of understanding of the evidence as distinct from the according to particular aspects of it different weight; and perversity or manifest unreasonableness mean a conclusion that no reasonable tribunal of fact could have reached. The test denoted by these phrases is more stringent than "unsafe and unsatisfactory".
(7) Generally, the referee's findings of fact should not be re-agitated in the Court. The Court will not reconsider disputed questions of fact where there is factual material sufficient to entitle the referee to reach the conclusions he or she did, particularly where the disputed questions are in a technical area in which the referee enjoys an appropriate expertise. Thus, the Court will not ordinarily interfere with findings of fact by a referee where the referee has based his or her findings upon a choice between conflicting evidence.
(8) The purpose of Pt 72 would be frustrated if the Court were required to reconsider disputed questions of fact in circumstances where it is conceded that there was material on which the conclusions could be based.
(9) The Court is entitled to consider the futility and cost of re-litigating an issue determined by the referee where the parties have had ample opportunity to place before the referee such evidence and submissions as they desire.
(10) Even if it were shown that the Court might have reached a different conclusion in some respect from that of the referee, it would not be (in the absence of any of the matters referred to in sub para (6) above) a proper exercise of the discretion conferred by Pt 72 r 13 to allow matters agitated before the referee to be re-explored so as to lead to qualification or rejection of the report.
(11) Referees should give reasons for their opinion so as to enable the parties, the Court and the disinterested observer to know that the conclusion is not arbitrary, or influenced by improper considerations; but that it is the result of a process of logic and the application of a considered mind to the factual circumstances proved. The reasoning process must be sufficiently disclosed so that the Court can be satisfied that the conclusions are based upon such an intellectual exercise.
(12) The right to be heard does not involve the right to be heard twice.
(13) A question as to whether there was evidence on which the referee, without manifest unreasonableness, could have come to the decision to which he or she did come is not raised "by a mere suggestion of factual error such that, if it were made by a trial judge, an appeal judge would correct it". The real question is far more limited: "to the situation where it is seriously and reasonably contended that the referee has reached a decision which no reasonable tribunal of fact could have reached; that is, a decision that any reasonable referee would have known was against the evidence and weight of evidence".
(14) Where, although the referee's reasons on their face appear adequate, the party challenging the report contends that they are not adequate because there was very significant evidence against the referee's findings with which the referee did not at all deal, examination of the evidence may be undertaken to show that the reasons were in fact inadequate because they omitted any reference to significant evidence.
(15) Where the Court decides that the reasons are flawed, either on their face or because they have been shown not to deal with important matters, the Court has a choice. It may decline to adopt the report. Or it may itself look at the detail of the evidence to decide whether or not the expense of further proceedings before the referee (which would be the consequence of non adoption) is justified."
ii. Where the challenges to a referee's report are directed to errors of law, the principles are well established. In Homebush Abattoir Corporation v Bermria Pty Ltd (1991) 22 NSWLR 605 the New South Wales Court of Appeal (Clarke, Meagher and Handley JJA) said (at 609) of proceedings regarding adoption of a referee's report pursuant to Part 72 rule 13 of the Supreme Court Rules (which read identically to Part 20 rule 24 of the Uniform Civil Procedure Rules 2005 ):
"Whatever be the proper approach to a report dealing with issues of fact, there can be no justification for the Court exercising any restraint when dealing with a referee's decision on issues of law. The powers of reference currently conferred by Pt 72 are derived from powers of compulsory reference to an arbitrator or referee previously conferred on the Court by s 15, s 16 and s 17 of the Arbitration Act 1902. The nature and extent of the Court's jurisdiction to supervise references under these sections was considered in Buckley v Bennell Design and Construction Pty Ltd (1978) 140 CLR 1. Jacobs J said (at 38): "... In respect of errors of law there can be no implied authority given to an arbitrator under s 16(1) to make errors of law."
A referee appointed under Pt 72 can have no wider authority. In our opinion therefore the Court in deciding what action to take on a referee's report is both entitled and bound to decide for itself whether the referee has erred in law and to correct any such error."
iii. In Super Pty Ltd v SJP Formwork (Aust) Pty Ltd (1992) 29 NSWLR 549 Gleeson CJ (at 563) observed that the judge hearing such an application:
"has a judicial discretion to exercise in a manner that is consistent both with the object and purpose of the rules and with the wider setting in which they take their place.
That wider setting is a system for the administration of justice according to law. In so far as the subject matter of dissatisfaction with a referee's report is a question of law, or the application of legal standards to established facts, then a proper exercise of discretion would require a judge to consider and determine that matter afresh. That was decided by this Court in Homebush Abattoir Corporation v Bermria Pty Ltd (1991) 22 NSWLR 605: see also, Cape v Maidment (1991) 98 ACTR 1 at 4. That conclusion is entirely consistent with the history of the rules and the reasoning of the High Court in Buckley which, although the case related to different provisions is also instructive as to the present provisions."
iv. As I observed in Allied Constructions Pty Limited v Hyder Consulting (Australia) Pty Limited & Ors [2004] NSWSC 808:
"There is no implied authority given to the Referee to make errors of law. The Court is bound to decide for itself whether the Referee erred in law and, if such error be found, to correct the error in exercising its discretion under the rules ( Bermria at 609)."
v. The question whether, on a given set of facts, a duty of care was owed is a question of law: see the joint judgment of the High Court in Amaca Pty Ltd v State of New South Wales (2003) 199 ALR 596 (at 602 [26]):
"...there may be some question about whether the Court of Appeal, and therefore this Court, could undertake a review of the factual question of breach. But it is clear that the Court of Appeal did have power to determine whether, on the facts found at trial, the State did owe the injured plaintiff a duty of care . That was a question of law. If the Court of Appeal had identified the errors of law which the trial judge made, it would then have been appropriate, and in this case necessary, for the Court of Appeal to go on to consider whether the claim for contribution should have failed on the ground, urged by the State, that the State owed no duty of care to the injured plaintiff."
vi. In Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139 at 156, Glass JA said:
"A finding of fact ... may nevertheless reveal an error of law where it appears that the trial judge has misdirected himself, i.e, has defined, otherwise than in accordance with law, the question of fact which he has to answer."
Dealing with the plaintiff's case
The plaintiff made clear that it was not pressing the complaints to be found in its notice of motion respectively numbered f, g and h.
The plaintiff mobilised 4 tightly packed folders in support of its contentions.
The approach taken by the plaintiff was to identify a number of discrete areas of complaint utilising on a number of occasions the contention that the referee's findings constituted perversity and manifest unreasonableness in the relevant sense.
To this end the plaintiff identified the issues as follows:
(a) the Referee's failure to find that the plaintiff's loss included a requirement to incur a building superintendent's fee of $70,000, in the light of unchallenged evidence to that effect (here referred to as the Superintendent's Fee Issue);
(b) the Referee's finding (at Report paragraph 65) that 50% of the Courtyard topsoil could be stored on-site, based on:
(i) her failure to take into account Mr Sassine's evidence that he could not be satisfied that the structural slab could withstand the additional load;
(ii) her conclusion without evidence that it is highly likely the slab could support the load; and
(iii) her finding without evidence that propping could be provided, including without allowing therefore (here referred to as the Topsoil Storage Issue);
(c) the Referee's finding (at Report paragraph 34) that mobile scaffolding was preferable to standing scaffolding notwithstanding the opinions of three experts to the contrary, two of whom were not cross-examined in relation to the matter (here referred to as the Scaffolding Issue);
(d) the Referee's finding (at Report paragraph 180) that 18 weeks is a reasonable time frame for the work notwithstanding the opinions of three experts that 21 weeks is reasonable, two of which experts were not cross-examined and her finding (at paragraph 177) that the reasons behind the plaintiff's estimate were not transparent or testable when two of the experts were not cross examined (here referred to as the Contract Period Issue);
(e) the Referee's finding (at Report paragraph 188) that a contingency allowance of only 5% should be made, rather than a higher figure, based on a finding that no allowance should be made for unidentified work, contrary to the collective knowledge of the plaintiff's expert's firm, and inconsistent with the Referee's finding (at paragraph 65) of the potential of at least one item of unidentified work, namely, propping (here referred to as the Contingency Issue);...
(i) the Referee's finding (at Report paragraph 133) that only 9 out of 19 units required protection during the ceiling fire-rating works notwithstanding the opinions of two experts to the contrary, one of whom was not cross-examined, and her failure to give reasons for rejecting the evidence of the two experts (here referred to as the Protection Issue); and,
(j) the Referee's failure to consider, or to give reasons for ignoring or discounting, the prior evidence of Mr Waddell in relation to quantum when accepting higher rates of Mr Sassine (here referred to as the Waddell Evidence Issue).
The plaintiff does not press, as independent challenges to the Report, the matters, in relation to rates, adopted by the Referee, as those challenges are set out in paragraphs 2(f), (g) and (h) of the Notice of Motion but deals with them, where appropriate, within the individual items set out hereunder.
The plaintiff advanced the following submissions
The Superintendent's Fee Issue
The reference hearing proceeded in the usual way, all parties having served their evidence on liability and quantum pursuant to pre-trial directions (MT1-MT4) and then tendering it at the hearing (MT7). This included quantum evidence, being an Affidavit of Mr John Roberts dated 26 May 2010 for the plaintiff (Ex P7) and a Costings Schedule for the Defendants (Ex D10, D12). The Affidavit of Mr Roberts dealt with the requirement of a superintendent's fee (MT10 p.458). There was no evidence from the Defendants dealing with this issue.
During the course of the initial hearing, it was agreed that quantum would be dealt with after an Interim Report on liability was delivered (see the Interim Report p.3/30at MT8, p.664). For that purpose, after the Interim Report was delivered, pursuant to directions of the Court (Teh para.12), the plaintiff served a further Affidavit from Mr John Roberts (MT9) and the Defendants served an Affidavit of a Mr Sassine (MT13). Mr Roberts' Affidavit again dealt with the requirement of a superintendent's fee (MT9 p.260). Mr Sassine did not deal with this issue.
The hearing on quantum proceeded on 8 and 9 March 2011 (Teh para. 18) when Mr Roberts and Mr Sassine gave concurrent evidence. Mr Roberts was not cross-examined about his evidence in relation to the superintendent's fee and no submission was thereafter made on behalf of the Defendants as to why the evidence of Mr Roberts in this regard should not be accepted (albeit that no express reference was made to it in submissions on behalf of the plaintiff).
The Referee failed to make a finding, in the light of the uncontested evidence of Mr Roberts, that the plaintiff's damages included $70,000 plus GST for the losses incurred by the necessity of the plaintiff to engage a superintendent for the works. Such a failure was perversity and manifest unreasonableness in the relevant sense ( Chocolate Factory at 7(6) ).
Nor did the Referee give any reason for failing to make that finding, as a result of which the Report should be rejected in that respect ( Chocolate Factory at 7(11) ).
The Court is in just as good a position as the Referee to make a determination of this issue and should find that the plaintiff's damages should be increased by the amount of $70,000 plus GST for the losses incurred by the necessity of the plaintiff to engage a superintendent for the works. Alternatively, the issue should be referred back to the Referee for the preparation of a supplementary report based on the evidence before the Referee in the reference proceedings.
The absence of any express submission to the Referee on behalf of the plaintiff about the Superintendent's Fee Issue should not be characterised as a failure to raise the issue before the Referee. This is because the reference hearing proceeded on the basis that all issues were left for the Referee to deal with without the need for express submissions in relation to them. The Referee was an experienced architect who understood her role as enquiring into, and satisfying herself in relation to, all issues in dispute. The Referee made her own enquiries (see e.g. Report p.31/40: MT15 p.1606) and took into account other matters referred to in Mr Roberts Affidavit (e.g. see Report p.37/40, re overheads and profits and contingency: MT15 p.1612), while not taking into account his evidence therein on the superintendent's fee.
If the Court forms the view that the issue was not raised before the Referee, then this Court should permit the plaintiff to rely upon the evidence of Mr Roberts in relation to the superintendent's fee in this hearing (see per Giles J in Australian Development Corporation Pty Ltd v White Constructions (ACT) Pty Ltd 1993 Unreported NSW BC9302150 at p.8-12). The Defendants suffer no prejudice by this course being adopted. They had no evidence upon which to base a submission in opposition before the Referee and should not have been permitted to make such a submission in any event in the absence of any cross-examination of Mr Roberts about it.
Alternatively, this Court should refer the question back to the Referee, granting leave, if necessary, for the plaintiff to re-open or, alternatively, for the Referee to determine an application by the plaintiff to re-open.
Topsoil Storage Issue
The Referee found, on liability (Interim Report p/16/30: MT8 p.077, 107), that the entire central Courtyard membrane required re-waterproofing and, for that purpose, the removal of the soil from "the entire central Courtyard area ... and remove or store for re-use as applicable" was required. Mr Roberts costed this work at $353,999.87 (MT10 p.824). This was based on removal of all topsoil from site, storage then subsequent return to site, a sub-component of the work costing about $87,000.00 (MT9 p.259). Mr Sassine's method in relation to the topsoil was for the storage of 50% of it on site (see Report p.16/40: MT15 p.1591) at a cost of approximately $21,573.59.
The evidence was that the storage of topsoil on site would create an additional load on the slab (see Report p.16/40: MT15 p.1591). However, there was no evidence to support the proposition that the slab could support such a load if the Defendants' proposed method of rectification were adopted (the Defendants having the onus in those circumstances). To the contrary, Mr Sassine stated that he would require the input of a structural engineer to answer that question (MT17 p.1634).
Notwithstanding this, the Referee found (at Report paragraph 65) that 50% of the Courtyard topsoil could be stored on-site. This was based on her findings, both without any evidence to support them, that it is highly likely the slab could support the load and that propping could be provided if not. These findings of fact, without evidence, are an error of law which require the Court to determine the matter afresh ( Chocolate Factory at 7(4) ). They are also a manifestly unreasonable ( Chocolate Factory at 7(6) ) failure to take into account Mr Sassine's and Mr Roberts' evidence to the effect that they could not be satisfied that the structural slab could withstand the additional load.
Further, the Referee's finding that propping could be provided is perverse ( Chocolate Factory at 7(6) ) in circumstances where, not only was there no evidence that it could, but there was no evidence of how that was to occur precisely and, more importantly, what allowance was made for it in the damages awarded. In fact, no allowance was made. As a consequence, the plaintiff is left in a situation where it may be required to prop the slab during the rectification works, but has been awarded no damages for that eventuality.
The Scaffolding Issue
The Referee found (at Report paragraph 34: MT15 p.1584) that standing scaffolding, costed at approximately $100,000.00 (MT9 p.257), was not required but, rather, mobile scaffolding was sufficient, at a fraction of the cost (see MT13 p.1370).
This finding was manifestly unreasonable and perverse having regard to the fact that:
(1) Mr Roberts' view was supported by the opinions of two other experts for the plaintiff, Messrs David Roberts and Mr Vile (see MT9 p.257, MT11 pp.1140, 1141 and MT12 p.1333);
(2) neither of whom was cross examined (Teh para.18; MT16);
(3) who were described by the Referee (at Report paragraph 33: MT15 p.1584) as "highly experienced" and "impressive expert witnesses"; and,
(4) where there was no evidence to support the Defendants' contention from any other expert witness from the defendant, other than Mr Sassine, the defendant's quantum witness.
A further reason why the Referee's finding on the Scaffolding Issue should not be accepted is that the Referee failed to take into account that the figure promulgated for scaffolding by Mr Sassine, namely, $191.00 per item (see MT13 p.1372) is substantially less than the amount allowed by the Defendants' first expert on quantum, Mr Waddell, of $500.00 per item (see e.g. MT14 p.1530, 1532, 1558 etc). No reason for accepting the evidence of Mr Sassine over Mr Waddell was given.
The Contract Period Issue
The Referee found (at Report paragraph 180: MT15; p.1611), for the purpose of calculation of preliminaries, that 18 weeks was a reasonable time frame for the work, giving a preliminaries figure of $121,625.00 (Report para.171). The Referee rejected the evidence of the plaintiff's experts that a period of 21 weeks is required, giving a preliminaries figure of $146,179.00 (Report para.171).
This finding was manifestly unreasonable and perverse having regard to the fact that:
(1) it was the opinion of three experts that 21 weeks was necessary (Report para.173: MT15, p.1610; Mr Vile's evidence: MT12, p.1334; Mr David Roberts' evidence: MT11, p.1140);
(2) Messrs Vile and David Roberts were not cross-examined (Teh para.18); and,
(3) there was no evidence to support the Defendants' contention from any other expert witness from the Defendants, other than Mr Sassine, the defendant's quantum witness.
Further, the Referee found (at Report paragraph 177) that the reasons behind the plaintiff's estimate were not transparent or testable. This is again manifestly unreasonable and perverse having regard to the fact that Messrs David Roberts and Vile both gave transparent reasons (Mr Vile's evidence: MT12, p.1334; Mr David Roberts' evidence: MT11, p.1140) and neither was cross-examined (Teh para.18). Thus, it is erroneous to say that the evidence was not testable when the witnesses were not tested under cross-examination.
A reason given why the Referee preferred the evidence of Mr Sassine was because he had prepared a project programme. However, there is no evidence that Messrs David Roberts or Mr Vile did not, and they were not cross-examined about it.
The Contingency Issue
The Referee found (at Report paragraph 188) that a contingency allowance of only 5% (representing $33,832: MT13, p.1341, 1343) should be made, rather than a higher figure, such as, say, 10%, being a figure half way between the two experts (Mr Roberts' figure was 15%), and, it is submitted, the lowest reasonable figure on the evidence. This percentage of 5% is manifestly unreasonable having regard to the following matters:
(1) it requires acceptance in full of the evidence of Mr Sassine while rejection in full of the evidence of Mr Roberts and the collective experience of his company (Report para.186: MT15 p.1613);
(2) this is an unreasonable approach having regard to the Referee's finding (Report para.188: MT15 p.1613) that a figure of 15% is "frequently included"; and,
(3) it is based on a finding (Report para.188: MT15 p.1613) that no allowance should be made for unidentified work when it is contrary to common sense that there will be no unidentified work and, moreover, the Referee had herself already adverted to the potential for unidentified work in the form of the propping to the Courtyard slab (see above).
Moreover, the Referee's statement (at Report paragraph 188) that the plaintiff must prove its loss shows that the Referee misdirected herself. A contingency is not analogous to a damages buffer but rather an amount provided for by a rectification works contractor in pricing for the rectification works the subject of the claim for damages. This is the relevant consideration. A rectification works contractor is not in the same position, in relation to knowledge of precisely what work is required or foreseen, as the experts who have provided opinions in the proceedings. It is the state of the rectification works contractor's knowledge of the works which is relevant, not that of the Referee's or the parties experts.
The Protection Issue
The Referee found (at Report paragraph 135: MT15 p.1603) that only 9 out of 19 units required protection during the ceiling fire-rating works, as opposed to the plaintiff's contention that they all required such protection. The failure to allow for this protection work in the 10 units excluded amounts to a reduction in the damages claimed by $18,380.00.
No reasons were given by the Referee for allowing 9 only out of the 19 units that required protection. As a result, the Court cannot be satisfied that this finding was based on any intellectual exercise carried out by the Referee. This finding should, therefore, be rejected ( Chocolate Factory at 7(11) ).
The finding is in any event manifestly unreasonable. The reasoning process of Mr Roberts in identifying this protection work was accepted by the Referee and no basis for applying it to 9 only of the units can be imagined. Moreover, this finding was made notwithstanding the opinions
of two experts to the contrary, Mr Roberts, and Mr Vile (his opinion at MT12 p.1333, item 2 should be taken to be an acceptance of Mr John Roberts' method of protection), who was not cross-examined.
The Waddell Evidence Issue
The Referee failed to consider, or failed to give reasons for ignoring or discounting, the prior evidence of Mr Waddell in relation to quantum, when accepting higher rates of Mr Sassine. The evidence of Mr Waddell's costings is at MT14 and was replaced by Mr Sassine's evidence (Teh para.16, 17).
An example of this can be identified in the Referee's findings in relation to the scaffolding rate of Mr Sassine of $191.00 instead of Mr Waddell's figure of $500.00, as explained above.
Other examples (not exhaustive) of where Mr Sassine's figures have been substantially less than the prior figures of Mr Waddell can be found at Items 11, 25, 26, 33, 47, 94, 113, 114, 139 and 239.
The above examples establish that there were many instances where the figures of Mr Waddell, the expert the Defendants' originally engaged but later replaced with Mr Sassine, were substantially higher than those of Mr Sassine. This is a very relevant matter when it comes to the Referee accepting the figures promulgated by Mr Sassine over those promulgated by Mr John Roberts. However, this was not the subject of any consideration, reasoning or finding by the Referee.
Standing back from the plaintiff's approach
I have already drawn attention to the proposition that an application of this type is not an appeal either by way of hearing do or by way of rehearing and that the purpose of the relevant rules is to provide, where the interests of justice so require, a form of partial resolution of disputes alternative to orthodox litigation, which purpose would be frustrated if the reference was to be treated as some kind of warm up for the real contest
It has to be recalled that the dispute between the parties involved some Digi-Tech 470 items claimed by the plaintiff. The approach of the plaintiff was in most cases entirely misconceived.
Ultimately albeit at the request of the Court, the plaintiff was asked to identify the essential most important points that he saw as requiring particular attention from this Court at this time. The items he then nominated were the following :
(1) The referee's failure to find that the plaintiff's loss included a requirement to incur a building superintendents fee of $70,000, in what was contended to be unchallenged evidence to that effect
(2) The referee's finding that 50% of the Courtyard topsoil could be stored on site
(3) What was described by the plaintiff as an objection which goes across the board : namely the contention that the referee's failure to grasp with the fact that there were two witnesses who gave evidence on these matters who were not cross cross-examined.
I propose to deal with these issues seriatim.
The referee's failure to find that the plaintiff's loss included a requirement to incur a building superintendent's fee of $70,000
To my mind the plaintiff has made good its contention concerning the above issue.
To follow the defendants' contention to the contrary it is appropriate to identify the defendants' approach:
(1) At no stage during the plaintiff's presentation of its case was any reference made to a building superintendent's fee.
(2) There is no reference in the plaintiff's pleadings (summons and list statement) of a superintendent's fee.
(3) The issues between the parties in relation to both liability and quantum were wholly driven by the scott schedules, from a relatively early stage in the proceedings. At no stage during the multiple revisions of these scott schedules leading up to the hearing on liability or the subsequent hearing on quantum was any reference made to a building superintendent's fee.
(4) A final joint scott schedule prepared by both parties formed the framework for the hearing on liability and quantum. That scott schedule set out the totality of the plaintiff's claim put before the Referee (setting out the approximate 470 items claimed by the plaintiff, including defect rectification costs, overhead and profits, builder's margin, GST, etc). The final joint scott schedule contained no reference to a superintendent's fee.
(5) The Referee's Interim Report addressed each and every item contained within the joint scott schedule prepared by the parties.
(6) The plaintiff tendered detailed quantum evidence, prepared by John Roberts, set out in the Affidavits of John Roberts dated 26 May 2010 (Exhibit P7 in the Interim Hearing) and 2 February 2011 (Exhibit P13 at the Final Hearing). Detailed calculation spreadsheets, identified as the "Priced Scott Schedule" and "Re-Priced Referee's Schedule" respectively both formed Appendix A in Exhibit JKR-1 to these Affidavits. These Schedules identified the totality of the plaintiff's claim. There is no claim in that Schedule for a superintendent's fee.
(7) At no stage during the giving of evidence in chief or cross-examination (of all the witnesses) during the hearings was the issue of a superintendent's fee ever raised or in any way discussed.
(8) At the conclusion of the hearing on quantum and again at the conclusion of closing submissions, the parties were expressly asked by the Referee whether there were any other issues. The parties both said no.
(9) The plaintiff now asserts that it is entitled to rely upon a single reference in a report prepared John Roberts (page 8 of Exhibit P7 in the Interim Hearing).
(10) there is no evidence to suggest that the Referee failed to have regard to and properly consider all the plaintiff's evidence. The Referee did not award the plaintiff any sum pertaining to a supervision fee.
(11) the issue of site supervision was addressed by Mr Sassine (for the defendants) at section 4.4 of Mr Sassine's report (p.4 of Exhibit D13 at the Final Hearing), in which allowance was made in his preliminaries for a site supervisor who will coordinate and supervise the works as well as obtain quotes.
(12) the Referee preferred the quantum evidence of Mr Sassine. At paragraph 177 of the Referee's Final Report the Referee adopted Mr Sassine's estimated total cost of preliminaries for the rectification work in
(13) As the defendants have contended in relation to the superintendents fee issue this was a process consistent with the alternate dispute resolution principles whereby the parties approached the matter informally, whereby the existence of defects and the rectification work was addressed using Scott Schedules identifying in excess of 450 items of defective work. This was a case where the experts gave their evidence following the delivery of reports concurrently with the so-called hot tub approach, whereby all parties were invited, together with the referee, to enquire about all matters relevant to the claims made by the plaintiff and whereby the process was so informal that no transcript was considered necessary for the deliberations and the parties elected to rely on the notes of these solicitors.
(14) Further submissions were to be made as to the various matters that each party which the referee to concert. As part of that process dealing with the question of defects and the necessary rectification works, the scope of works that performed the subject of the interim or first report, the referee was never addressed to any matter of a building superintendents fee. There was never any such address as to why such a person would be required, what such a person's qualifications would be, what such a person would do, what allowance or consideration would be as to their fee and that such a person was indeed necessary as part of this work.
(15) The only evidence about this matter was where the plaintiff took the Court to the report of Mr Roberts, where it was said that a budget might be allowed if a building superintendent was invited to submit a fee because that fee it may be, could be proposed either on a single lump some basis or a matter of reimbursement of actual hours. There was no assessment that any such person was required or what they would do or what qualifications they would have had to have or why it was indeed that they would not be otherwise able to be encompassed within the costs of preliminaries provided for by the builder. So that when it came to the interim report as to the scope of works and the necessary matters which would need to be ultimately clustered as part of the final report, there was no mention of a building superintendent because the referee had simply not be nice to consider that matter.
(16) In all the circumstances be superintendents fee issue cannot be made out and is rejected.
Decision
The simple fact is that notwithstanding the failure by the plaintiff to put to the referee the contention that the plaintiff's loss included a requirement to incur a building superintendent fee of some amount, that matter can be referred back to the referee for consideration and as appropriate to permit both parties to reopen their cases on this issue..
The referee's finding that 50% of the Courtyard topsoil could be stored on site
At paragraph 59 the referee identified the allowances made by each of the experts and their principal differences being one body of soil allowed for excavation and 2 whether the work be carried out in stages. She then proceeded to consider those matters and dealt with the evidence of Mr Sassine as to the blocking factor
Thereafter she dealt with the matter of the issue of whether the whole or only half of the soil would need to be removed. She dealt with the evidence given by Mr Sassine to the effect that typically transfer slabs noted up with palates of bricks during initial construction and that engineers typically designed for live loads to support this kind of activity. He had said that at worst the slab could be propped up from underneath if an engineer considered the temporary lading unsafe. She then reached the view based on her own experience and expertise that it was highly unlikely that the transfer slabs would not be designed to support a live load sufficient to temporarily support the soil storage.
Again in the circumstances of this reference to this referee, an entirely legitimate conclusion was given following and analytic assessment of the evidence and the issue.
Dealing with the protection issue
A close reading of paragraphs 133, 134 and 135 of the referee's final report makes clear that the referee put the matter as follows :
133. Mr Roberts allowed $1,880.00 to pack, remove, return and unpack occupants' possessions and $105.00 for 7 days' storage, whereas Mr Sassine allowed $147.00 for the cost of protecting occupants' possessions within the unit. He said the disruption would be limited to a 5-day period and, as only half the unit would be affected by the work, he took the view that furniture could be moved around within it and covered. He priced for the cost of labour to do this work. In the hot-tub examination he agreed that, as this same work was to be carried out in many units, it was probable that some possessions of some residents would need grater protection than others and would need to be stored.
134. The Owners submitted that, if the referee took the view that only some possessions needed to be stored off site, it would be reasonable to provide a " buffer" based on an assessment (say 50% of the unit owners who might require this). The Defendants submitted that the scope of work in the Interim Report did not include off-site storage and that it was too late to re-open the case on rectification. They submitted that protection of possessions would be covered by the Owner's insurance. In response, the Owners submitted that the Interim Report provided an overall scope but did not cover the detail of how the work was to be carried out.
135. The Interim Report did not identify how the occupants' possessions were to be protected. Nevertheless, as indicated, both experts allowed for protection of some kind. Protection was necessary and I do not consider that the possibility of off-site (as opposed to in-situ) protection was excluded from the scope because this detail was not included in the Interim Report. Nineteen units required this type of work. I will allow the cost of $147.00 for protection as calculated by Mr Sassine for each unit and an additional buffer of $16,542.00 calculated as $1,838.00 x 9 units ($1,985.00 as calculated by Mr Roberts less $147.00 as calculated by Mr Sassine).
Clearly the referee took the view that only some possessions needed to be stored off-site. She allowed that which the owners had invited her to consider, being a buffer of 50%, by giving the cost of removal for nine out of 19 relevant units, and is well allowing the cost proposed by Mr Sassine for the balance. So that in effect the conclusion the referee reached that is now the subject of complaint is one that she was specifically invited to make by the plaintiff. Clearly there is no substance in the protection issue complaint
The contingency issue
The contingency issue complaint was dealt with by the referee from paragraph 183. It is plain from those paragraphs that the referee considered the evidence of Mr Roberts as to a 15% margin, the evidence of Mr Sassine as to a 5% margin, the submissions of the plaintiff as to which evidence should be preferred, the submissions of the defendant as to which should be preferred and in paragraphs 188 reached a conclusion as to which margin based on her own experience as an architect and that which she had been asked to consider by reference to the evidence was appropriate. Having regard to the terms of the report, there is no basis for any conclusion of perversity or manifest unreasonableness
Dealing with the matter of the contract period
The position in this regard was put by the referee as follows :
(1) The plaintiff's submitted that it was entitled to a reasonable time to complete and that it should not be in a position where it was caught short. It said that 18 weeks was subject to having good management and reasonable access, which was grounded in a test case scenario. The plaintiff referred to an estimate of Mr Vile where he considered a spend rate of $230,000 to $250, 000 per month was typical and that this coincided with a 21 week construction period. It said that the referee should prefer the opinion of three competent experts against one.
(2) The defendants submitted that Mr Roberts arrived at his opinion in conference with two other men and that this opinion was grounded in vague assertion and guesswork rather than logic. Date pointed out that a critical path analysis or a construction programme did not support the opinion. They also pointed out that both experts allowed for contingency factor, in addition to any buffer for delay built into their estimate.
The referee then continued as follows :
I prefer the estimate of Mr Sassine because it was based on a construction programme with a critical path analysis prepared by an experienced builder. This grounded the opinion in logic and practical experience. On the other hand, the reasons behind the plaintiff's estimate were not transparent or testable.
It is unnecessary to go further safe to note that the referee accepted 18 weeks as a reasonable timeframe for this work and, based on this found that Mr Sassines estimate of $121.625 four preliminaries was a reasonable and necessary cost
Here again there was no substance in the plaintiff's complaints.
Scaffolding
The referee carefully dealt with this issue by reference to the evidence of Mr Roberts, the evidence of Mr Sassine, the evidence of Mr Roberts together with the alternate Mr Roberts and Mr Vile and the further and the use of Mr Sassine.
She then reviewed the submissions and in paragraph 33 provided an analysis and conclusion, noting that all four experts were highly experienced in their various fields and were impressive expert witnesses and reached the view that the merits of the argument favoured the use of mobile scaffold and then proceeded to give four reasons why that was so.
There is no substance in the complaints concerning scaffolding.
Decision
It follows from the above reasons that save for the building superintendent fee issue which is to be remitted back to the referee, the plaintiff has not made good any of its other complaints.
The parties will be given a proper opportunity to address on costs and to bring in short minutes of order.
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Decision last updated: 13 May 2011
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