Wallfire Pty Ltd v Andwendrod Services Pty Ltd
[2003] VSC 348
•24 September 2003
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
No. 4305 of 2003
| WALLFIRE PTY LTD | Plaintiff |
| v | |
| ANDWENDROD SERVICES PTY LTD & Ors | Defendants |
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JUDGE: | Hansen J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 22 August 2003 | |
DATE OF JUDGMENT: | 24 September 2003 | |
CASE MAY BE CITED AS: | Wallfire Pty Ltd v Andwendrod Services Pty Ltd & Ors | |
MEDIUM NEUTRAL CITATION: | [2003] VSC 348 | |
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Corporations – Oppression – Reference to special referee to determine the fair value of the plaintiff's shares – Report – Alleged errors - Application to remit – Supreme Court Rules 0 50, r 50.03(2)(b),
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr F G A Beaumont Q.C. with Mr A P Young | Phillips Fox |
| For the Defendants | Mr P H Clarke | Harwood Andrews |
HIS HONOUR:
Wallfire Pty Ltd, the plaintiff, holds 125, or 25%, of the issued shares in Metro 5 Gallery Pty Ltd ("Metro 5"). On 30 January 2003, after differences arose between the plaintiff and the other shareholders in relation to the conduct of Metro 5, the plaintiff filed an application for relief under the oppression provisions of the Corporations Act. The plaintiff sought orders for the acquisition of its shares or the winding up of Metro 5, and for the repayment of a loan of $100,000. At the first directions hearing on 21 February 2003 the parties sought orders referring to a special referee the question of the fair value of the plaintiff's shares. Following discussion with counsel as to the form of the orders, counsel, a few days later, provided written minutes of consent orders dated 24 February 2003. An order was made, dated 21 February 2003, in the terms provided. The parties duly appointed Michael John Humphris, an accountant, to undertake the valuation pursuant to the order. He provided a report, addressed to the Court, dated 30 May 2003. The report is 13 pages in length and contains further material in attached annexures. The annexures include reports of experts, two on behalf of the plaintiff and one on behalf of the defendants.
In his report, Mr Humphris states that he valued the business of Metro 5 as a whole and then applied the plaintiff's shareholding to that value to determine the fair value of the plaintiff's shares. The result was that the fair value of the plaintiff's 25% interest was $31,065. Mr Humphris did not consider a discount appropriate for the minority interest, which was, in my view, a correct judgment.[1] The present application is made by the plaintiff, which seeks to remit the report to the special referee to consider certain matters and, in light of them, recalculate the value of the plaintiff's shares.
[1]See In re Bird Precision Bellows Ltd [1986] CH 658; Re D G Brims and Sons (1995) 16 ACSR 559 at 594-595; O'Neill v Phillips [1999] 1 WLR 109 at 1107.
In view of the arguments raised on the application, and to enable an understanding of them and of the applications previously made, it is necessary to set out certain of the orders made on 21 February 2003. The orders included the following:
"1.Pursuant to order 50 a special referee be appointed pursuant to Rule 50.01(1) of the Supreme Court (General Civil Procedure) Rules 1996 to determine the fair value of the Plaintiff's shares in Metro 5 Gallery Pty Ltd (A.C.N. 095 348 762) ("the company") as at 30 January 2003.
2.The parties shall agree on the special referee to be appointed within 7 days of the date of this order, failing which, they agree to the appointment of a special referee by the President of the Institute of Chartered Accountants or his nominee.
3.Save that the special referee shall be bound by the rules of natural justice, the following directions and any further directions which may be given by the Court, the special referee may conduct the reference in such manner as is appropriate for the efficient and economical implementation of this order.
…
15.The special referee make a report on the questions referred to him in writing to this Court, stating (with reasons), his opinion on such questions by lodging his report, together with a copy for each party, to the Prothonotary at his office at the Supreme Courts, 436 Lonsdale Street, Melbourne not later than 11 April 2003 or by such date as the Court may direct, (the "report").
…
19.The Plaintiff shall sell and the Defendants shall purchase the Plaintiffs shares in the company for the value determined by the special referee as stated in the report ("the purchase price") and the Defendants shall pay the purchase price to the Plaintiff within 60 days of the date of the report (or such other date as may be agreed between the parties) in default of which the Plaintiff shall be entitled to judgment against the Defendants for the purchase price, interest pursuant to statute and costs of and occasioned by the entry of judgment.
20.On or before 30 days from the date of the report, the company shall pay to the Plaintiff the sum of $100,000.00 together with interest thereon at the rate of 7.3% per annum from the date or dates upon which interest was last paid to the Plaintiff by the company to the date of repayment, in default of which the Plaintiff shall be entitled to judgment against that company for the said sum, interest pursuant to statute and costs of and occasioned by the entry of judgment.
21.The special referee and each party shall have liberty to apply generally to the Court in respect of these orders and directions.
…
23The issue of the Plaintiff's entitlement to any interest on the purchase price is reserved."
I have omitted the orders that pertain to the powers of the special referee and the costs of the reference.
The parties returned to court on 13 June 2003. In the interim, the plaintiff's solicitors had written to the special referee requesting an explanation as to how he had projected the company's operating expenses for the 2003 calendar year to $1,166,694, as referred to in para 39 of his report. The special referee had replied with information, to which the plaintiff's solicitors had responded with a request for further information. The special referee had not replied. The plaintiff's solicitor had sworn an affidavit deposing as to advice received from accounting experts that the special referee appeared to have erred in his treatment of the expenses and their projection for the calendar year 2003. That impacted on the value of the plaintiff's shares. As such, the plaintiff opposed the adoption of the report until the special referee clarified the issue of expenses. The defendants' solicitors objected to any such further correspondence with the special referee.
At the hearing on 13 June 2003, counsel for the plaintiff requested an adjournment of one week to enable the preparation of an application for an order that the special referee provide a report clarifying the issue of expenses. Later in the hearing counsel instead sought that an order be made that day directing the special referee to provide a further clarifying report. Counsel stated that no further appearance before the special referee would be required as he had all of the materials necessary to enable him to provide the clarifying report. Counsel for the defendants opposed the making of an order on the basis of the plaintiff's oral application. In counsel's view, the appropriate course was to adjourn the proceeding to enable the plaintiff to bring an application on notice. After some discussion, the further hearing of the proceeding was adjourned to give the plaintiff time to formulate an application.
I next heard the parties on 27 June 2003. The plaintiff had not filed an interlocutory process. Rather, in accordance with an indication I had given, the plaintiff had told the defendants that it would ask the Court to deal with and resolve the matter of the alleged errors, or to remit the matter to the special referee for him to consider. The parties had filed affidavits by accountants on the matter of the correctness or otherwise of the special referee's report. For the plaintiff, there was an affidavit by Colin Stanley Wight, who deposed as to four errors in the report, and Bruce Sainsbury, who also deposed as to errors in the report. In a second affidavit, Wight expressed his agreement with Sainsbury, but with a qualification in relation to GST. The defendants countered with an affidavit by Peter Damian Carroll, who deposed as to errors he identified in the report and to his opinion that on a revised calculation on a future maintainable earnings basis no value at all could be attributed to the plaintiff's shares. The defendants also filed an affidavit by Michael Ian Nissen, a director of Metro 5, as to certain matters of fact relevant to the valuation.
It is to be noted that Sainsbury and Carroll had provided reports for the purpose of the reference, and that their reports were Annexures B and D, respectively, to the special referee's report.
In the course of the hearing on 27 June, it was apparent that counsel for the plaintiff was not in a position to deal with the Carroll affidavit, as it had been served late. Instructions were required from the plaintiff's experts. Further, the purpose for which the defendants wanted to use the Carroll affidavit was not clear. While the defendants opposed the plaintiff's application, contending that the special referee's report was final and should not be opened up, the defendants' attitude, in the alternative, was that the special referee's report was flawed for reasons deposed to by Carroll, and that those matters identified by Carroll should be taken into account in any consideration (by the Court or the special referee) of the report. In these circumstances, neither party moved under rule 50.04 that the report be adopted in whole or in part. Counsel for the plaintiff submitted that the matter should be adjourned to a date fixed for the purpose of hearing his application. Counsel suggested that several hours would be required and referred to the possibility of cross-examining the deponents. In other words, counsel for the plaintiff anticipated a hearing in which the matters deposed to in the recent affidavits concerning the expenses would be considered and, consequently, the Court itself determining the issues or remitting the issues to the special referee for a further report. I fixed the plaintiff's application for hearing on 28 July 2003.
Before concluding the matter on 27 June, counsel for the defendants sought a stay on payment of the sum of $100,000, due under para 20 of the orders made on 21 February 2003. I declined to order a stay. The defendants duly made payment in accordance with the order.
By the time the matter was heard on 28 July 2003 further affidavits had been filed. There was an affidavit by Sainsbury, in which he agreed with a conclusion of Wight. He also deposed that the matters raised by Carroll did not constitute errors on the part of the special referee or warrant any adjustment to the value of the shares. Two further affidavits by Wight dealt with the Carroll affidavit and other matters. A further affidavit by Carroll dealt with the Sainsbury and Wight affidavits.
A surprising turn of events occurred on 28 July. The purpose of the hearing was to resume the adjourned application of the plaintiff, however, counsel for the plaintiff did not press that application. Rather, counsel for the defendants made an oral application for an order that the plaintiff sell its shares to the defendants for the price found by the special referee. Counsel contended that this order should be made, as para 19 of the orders made on 21 February operated as a final order once the special referee provided his report. Paragraph 20 similarly operated as a final order. A number of affidavits had been sworn, but none suggested that the special referee had denied natural justice or made a fundamental error, such as an error in respect of a question of law. As para 19 operated as a final order, the plaintiff's remedy, if there be defects in the report, is to appeal to the Court of Appeal. I interpolate that counsel did not clearly state what exactly the plaintiff would appeal against. Counsel submitted that it was not otherwise open to the plaintiff to raise defects in the special referee's report. In support of the submission, counsel for the defendants referred to an observation of mine, in the course of the hearing on 21 February, that the proposed orders moved from obtaining a report from the special referee to an automatic consequence that the shares be acquired for the fair value ascertained by the special referee, thus jumping the step of a party moving for its adoption, with which counsel for the plaintiff had agreed. That was not a considered observation, it was, rather, a remark made in the course of the initial directions hearing in a busy list of cases.
At the time of the hearing on 28 July, the period of 60 days stipulated in para 19 had not expired, and the defendants had not tendered to the plaintiff the amount found by the special referee as the value of its shares. Further, the order sought by the defendants added nothing, in effect, to para 19, assuming that it operated as a final order for the sale of the plaintiff's shares for the "purchase price" stated in the special referee's report. Further, there was no motion for judgment by the plaintiff, as referred to in para 19, or even by the defendants, assuming that it was competent for the defendants to move for judgment under para 19. If there was any motion for judgment, as I observed to counsel, the question might arise whether the special referee's report was one contemplated by para 1 of the order. At that point, the defendants' counsel made an oral application for judgment on the basis that he would file appropriate documentation as soon as possible.
Following an adjournment to enable the defendants to consider the terms of their application, the hearing resumed, and counsel sought the following orders pursuant to the liberty to apply reserved in para 21, namely:
(a) a declaration to the effect that the "purchase price" of the plaintiff's shares pursuant to para 19 of the orders made on 21 February 2003 is $31,065; and
(b) to the extent (if any) to which the report requires formal adoption by the Court, that the report be adopted in whole pursuant to rule 50.04.
In opposing these orders, counsel for the plaintiff said that the plaintiff desired to lead evidence as to the discussions between the parties' lawyers which produced the consent order. The evidence would relate to whether the orders were intended to be final. The evidence would found a contention that the order should be corrected or varied to give effect to the agreement of the parties, or be otherwise relevant in determining whether to grant the declaration sought by the defendants.
For reasons I then gave, I declined to make either order sought by the defendants. The application was premature prior to the expiration of the period of 60 days in para 19, and, further, the plaintiff desired the opportunity to file affidavit material. The further hearing was adjourned to 31 July 2003.
On 31 July counsel for the defendants sought the declaration for the purchase of the plaintiff's shares. The period of 60 days having then expired, counsel submitted that para 19 of the orders operated in conjunction with the report to produce a binding sale. There was no need to adopt the report as the order was self-fulfilling. If adoption was to be considered, the onus was on the plaintiff to establish why the report should not be adopted.
For the plaintiff's part, counsel for the plaintiff relied on an affidavit sworn by a solicitor as to the discussions which led to the consent order. She deposed that it was never suggested that the appointment of the special referee would not be subject to the supervision of the Court under O 50. In particular, there was no discussion that the Court would not be required to formally consider, and if thought appropriate, adopt the report. Counsel for the defendants submitted that the evidence was not admissible as an aid in the construction of the orders of the Court, those orders being clear and unambiguous on their face. If, however, regard was had to the evidence, it was consistent with the defendants' submission as to the finality of the order. On their proper construction, the orders "leap frog" the step of adoption. Alternatively, in the interests of justice, it was appropriate to adopt the report, and in that respect counsel referred to the decision of the Court of Appeal in Plumley v Adguage Pty Ltd[2], among other cases.
[2](1998) 29 ACSR 315.
In the course of their submissions, counsel for the plaintiff analysed the orders of 21 February 2003 in the context of O 50. Counsel submitted that the Court retained its powers under rules 50.03 and 50.04. However, counsel did not make an application under either rule. A negative stance was adopted in answer to the defendants' application. Among the plaintiff's submissions was the contention that if the defendants wanted to enforce para 19 of the orders they should commence a separate proceeding for that purpose.
I refused the defendants' application. It seemed to me that the declaration would serve no purpose. If the special referee's report was a report required by para 1 of the orders, para 19 operated according to its terms. That operation was the premise of the defendants’ submission. Adoption of the report, the alternative remedy sought by the defendants, was inconsistent with the defendants' primary position that the Court did not have power under rule 50.04. After some further discussion, it was made clear, if not confirmed, that the defendants did not move for adoption. That may well have been because the defendants did not wish to risk opening up the issue of errors in the report. Nor did the plaintiff move for adoption, its counsel stating, after obtaining instructions, that the plaintiff would wait to see what the defendants did with respect to the report. Counsel for the defendants then sought costs, including the costs of the whole proceeding, and began to refer to the matter of offers made by the defendants to the plaintiff. The submission was not fully developed. To allow counsel for the plaintiff time to consider the matter of costs, and because I thought it wise to allow the parties time to consider their position and what they should do, I adjourned the proceeding until 22 August 2003.
On 18 August 2003 the plaintiff filed an interlocutory process returnable on 22 August for an order pursuant to rule 50.03(2)(b) that the question of the fair value of the plaintiff's shares be remitted to the special referee for further consideration of the matters referred to in Annexure A to the application. In the alternative, the same order was sought pursuant to the Court's inherent powers or the liberty to apply reserved by para 21 of the orders made on 21 February 2003. Annexure A lists a series of matters for the special referee to consider. They are matters which arise in the affidavits sworn on behalf of the plaintiff. At the hearing on 22 August I gave leave to the plaintiff to amend the interlocutory process in respects that are immaterial.
At the hearing on 22 August, the plaintiff was represented by new counsel. They pressed the application to remit the question of the fair value of the plaintiff's shares to the special referee. This was opposed by the defendants, whose counsel renewed the applications concerning costs which had been made on 31 July. The applications were, first, that the plaintiff pay defendants' costs subsequent to the provision of the special referee's report, and secondly, that the plaintiff pay the defendants' costs of the proceeding.
The plaintiff's submission rested on a simple proposition. The affidavit evidence disclosed that experts for both parties were of the opinion that the special referee's conclusion as to the fair value of the plaintiff's shares was wrong. On each side it was deposed that, for various reasons, the conclusion was affected by relevant errors. The errors are clearly identified and explained in the affidavits. I was informed by counsel that the errors affected a matter on which the parties had not previously had an opportunity to be heard, and that if they had been afforded the opportunity of a hearing, the issue of fact and its application could have been dealt with. The parties had spent a lot of money and remitting the report would be the most efficient way of resolving the matter. It would avoid the extra time and expense involved in a contested application to adopt the report.
Counsel said that there is no case which sets out the criteria for determining whether to order a remit. I refer to the matter of the criteria below. Counsel submitted that the orders made on 21 February did not preclude the exercise of the power under rule 50.03(2)(b) because, as Cole J succinctly stated in Astor Properties Pty Ltd v L'Union Des Assurance De Paris, until a report is adopted in whole or in part, it "is of no effect".[3] Cole J added:
"Again, it is the order of the court adopting, varying or rejecting the report which has a legal consequence: the report itself has none unless and until adoption. "
Therefore, unless the report is adopted, it cannot give force to para 19. Counsel submitted that, in all of the circumstances, it was in the interests of justice as between the parties to remit the report to the special referee.
[3]Astor Properties Pty Ltd v L'Union Des Assurance De Paris (1989) 17 NSWLR 483 at 490.
In opposing the application, counsel for the defendants submitted that the Court did not have power to grant the application. That was the consequence of para 19 of the orders operating as a final order on the provision by the special referee of his report. In other words, the lodging by the special referee of his report fed the order in para 19 so that without the report being adopted by the Court, the order operated according to its terms. That being the case, the only remedy open to the plaintiff was to appeal. As I understood counsel, the appeal would be against the special referee's report, because that is where the error lay. I note that the orders made on 21 February were made by consent, and that the time for appealing against them, or applying for leave to appeal in respect of them, expired in March.
As an alternative, counsel for the defendants submitted that if the Court had power to remit the question, the power should not be exercised. The plaintiff could have brought the application "at the very outset on receipt of the referee's report". This statement seemed to suggest that at some point a time was reached after which either the plaintiff was precluded from making the application, or the application should be refused on account of delay. Perhaps counsel had in mind the period of 60 days in para 19, which period had now expired. I do not know, as counsel did not develop the submission. Nevertheless, the submission involved a concession that it had been open to the plaintiff to make an application to remit.
Almost at the end of his submissions, counsel for the defendants returned to the alternative position of adoption of the report, which had previously been put on 28 July. It was referred to but not developed.
Counsel concluded with the defendants' request for costs mentioned above. I said that I would not deal with that issue now.
I now deal with the defendants' submissions. When the parties sought the consent orders of 21 February they were asking me, as the Court, to exercise the power of the Court under rule 50.01(1) to refer the question of the fair value of the plaintiff's shares to a special referee. In view of the consent and the nature of the case it was appropriate to order a reference, and to do so with the various machinery and other provisions designed to facilitate the conduct of the reference.
It is necessary to refer to other provisions of O 50. The commencement point is rule 50.01(2)(b). It requires that the order direct the special referee to report in writing to the Court on the question referred to him stating, with reasons, his decision or opinion. Rule 50.01(2)(b) was covered by orders 1 and 15. Rule 50.01(2)(c) provides that the Court may direct that the special referee give such further information in his report as it thinks fit, and rule 50.01(3) confers on the Court power, on the application by a party or the special referee, to set aside or vary such an order. Rules 50.03 and 50.04 are concerned with the situation after a report has been provided. Rule 50.03(2)(b) provides that on receipt of the special referee's report the Court may, by order -
"(i)require the special referee to provide a further report explaining any matter mentioned or not mentioned in the report;
(ii)remit the whole or any part of the question originally referred to the special referee for further consideration by him or any other special referee;
(iii) vary the report."
Rule 50.03(3) requires that not less than three days' notice be given of an application under para (2)(b). Rule 50.04 deals with the adoption of a report, and states that:
"The Court may as the interests of justice require adopt the report of a special referee or decline to adopt the report in whole or in part, and make such order or give such judgment as it thinks fit."
It is fundamental that the report of a special referee is a report to the Court, and that it is for the Court to decide whether to adopt it in whole or in part. The adoption is for the purpose of the proceeding in which the reference was ordered. If not for the reference, the question referred is one that a judge would decide in determining the litigation. It is, therefore, appropriate that the Court retains the power to decide whether the report will be adopted in whole or in part. The report does not, of itself, operate to determine the rights of the parties in the proceeding. It has no legal effect as between the parties unless and until it is adopted and acted on by the Court in the disposition of the proceeding. It is a matter for the Court, in the exercise of its discretion, having regard to the interests of justice in the circumstances of the particular case, to decide whether to adopt the report. It is thus seen that a special referee acts to aid the Court in the resolution of a proceeding, and does so as its delegate, as it were, subject to the powers of the Court in rules 50.01(2)(c) and 50.03(2)(b), and to the fact that, ultimately, the report may not be adopted at all or, if adopted, only in part. This applies whether, as referred to in rule 50.01(1), the question is referred to the special referee for decision or opinion.[4]
[4]Re Markbys Renaissance Pty Ltd [1999] 3 VR 851.
Rules 50.01(2)(c) and 50.03(2)(b) do not state the criteria to be considered by the Court in deciding whether to exercise the discretion to make the orders they authorise. Rule 50.04 refers to the "interests of justice", and that is understandable because the report is obtained by the Court in aid of the due administration of justice, and the attainment of that purpose must remain the principal object. It is fundamental that the Court retain control over that exercise. As Buchanan JA observed in Plumley v Adgauge Pty Ltd[5] in relation to the Court's discretion under rule 50.04:
"The courts' discretion is confined only by the interests of justice, which will depend upon the circumstances attending particular cases."
[5](1998) 29 ACSR 315 at 318. See also Nichols v Stamer [1980] VR 479 at 495-496; Oddy v Fry [1998] 1VR 142 at 147-149.
Plumley concerned adoption of a report. It is as necessary that the Court has effective control of the process before a report has been provided (rule 50.01) as it is after it has been provided and before its adoption (rule 50.03). In Mallett and Mallett[6] the High Court made it clear that the purpose of conferring a discretion in terms of those in rules 50.02(2)(c) and 50.03(2)(b) is to ensure that the Court is able to do that which is just and equitable as between the parties in light of the relevant circumstances of the particular case.[7]
[6][1984] 156 CLR 605 at 609.
[7]See McKenna v McKenna [1984] VR 665 at 674.
The wide terms of rules 50.01(2)(c) and 50.03(2)(b) ensure that the Court has power to do that which is just and appropriate in all cases. That is consistent with its control over the orders it makes and the supervision of that which is done under them by its appointee. The rules aid in ensuring that a report sufficiently deals with the question it addresses. The further information ordered under rule 50.02(2)(c) or the further report or consideration ordered under rule 50.03(2)(b)(i) or (ii) will serve to fulfil the reference and provide a report better able to be considered for adoption. Moreover, the wide powers seem only reasonable, and necessary, having regard to the power to vary or to refuse to adopt the report. In other words, they assist the Court's delegate to better perform the task which the Court itself requires to dispose of the litigation.
I conclude this discussion by referring to some observations, obiter, of Marks J in Integer Computing Pty Ltd v Facom Australia Ltd,[8] a case in which he ordered the adoption of reports of a special referee. The observations are illustrative, but not, of course, definitive, of situations in which an order might be made under rules 50.01(2)(c) and 50.03(2)(b). Marks J said:
"In addition, if, in the course of, or at the end of, the hearing, there appear difficulties about application of the reports or one or more of their aspects or any significant internal inconsistencies, uncertainty of meaning or possible misconceptions, consideration can still be given to requesting a further report, for which, clearly, there is ample power; (r 50.01(2)(c); r 50.03(2)(b))."
[8]Supreme Court of Victoria, Marks J, No 899287, 10 April 1987, unreported, BC 8701728.
The orders of 21 February were made in this context. That is, in the context of the purpose and operation of the special referee provisions in O 50. None of the orders made on that day stated that the powers of the Court under rules 50.01(2)(c), 50.03(2)(b) or 50.04 were excluded in relation to any report provided by the special referee pursuant to O 15. I put aside the question of whether it would have been competent to have made such an order. Indeed, the concession made by counsel for the defendants in his alternative submission, that the plaintiff could have applied for a remit, is consistent only with the proposition that the Court retains those powers. In my view, counsel was correct in making that concession.
The primary submission of the defendants seemed to conflate two distinct matters, the powers of the Court under O 50, and the terms of para 19 of the orders. In particular, counsel submitted that para 19 was a final order which operated as such on the provision of the report pursuant to para 15 of the orders. This meant, inferentially, that the powers of the Court under rules 50.01, 50.03 and 50.04 could not be exercised. The expression "leap frogged" was used to describe the situation. That is, the parties by the orders had "leap frogged" the Court or, to put it another way, the Court was to be taken as having relinquished its powers. This result was achieved by para 19, and para 20 was said to be similar. The effect was not expressly stipulated. There was nothing in the orders with respect to the reference that stated this effect. Thus, putting aside the orders dealing with the reference, it must be para 19 itself that produced this result.
I cannot accept this argument. The order in para 19 must be understood as having effect in the context of, and subject to, the powers of the Court under rules 50.01(2)(c) and 50.03(2)(b). Any other conclusion could produce injustice in any of a number of circumstances that might have obtained. It is for such reasons that the powers exist, and they are hardly to be considered as having been excluded by the Court in a particular case except by an order in the clearest terms. That is, of course, assuming it would be open to a judge to generally exclude the powers of the Court.
It should be noted that at the hearing on 21 February counsel for the plaintiff explained that the orders meant that the step of adoption was to be avoided. That submission seemed to me then, and still does, an extraordinary proposition that reflects a curious apprehension of the proper use of the Court's powers under O 50. Nevertheless, I am not immediately concerned with an application to adopt under rule 50.04.
The weakness in the defendants' position is seen in their submission that the plaintiff's remedy was to appeal. It was perhaps being suggested that the parties had contemplated an appeal as the route for redress if either party was aggrieved by the special referee's report. The submission is flawed, in that until the report is adopted it has no more status in the proceeding than that of a report to the Court. An un-adopted report does not stand as a judgment of a trial Judge. There is nothing from which to appeal. It would not have been open to the Court in making orders on 21 February to have adopted the report in advance of its provision, and para 19 could do no more, and did no more, than refer to a report which was to be provided to the Court.
What para 19 seemed to do was reflect an agreement between the parties as to the operation and effect of an order when the special referee's report was provided. Of course, the parties could agree on all sorts of things out of Court, but when they asked the Court to order a reference under O 50, the reference was subject to the several related provisions and powers in O 50. Furthermore, if it were open to consider the subjective intention of the parties' solicitors, there is evidence to indicate that the plaintiff's solicitor did not intend to exclude those provisions and powers. However, I do not decide the point by reference to subjective intention.
The defendants next submitted that the Court should refuse to exercise its powers to remit. That result should follow having regard to the orders of 21 February, the events since the provision of the report and, as I understand it, the delay in making the present application. I am not persuaded that the question should not be remitted to the special referee. The matter is before the Court, the plaintiff has been alleging or complaining of defects since early June, immediately following the provision of the report, and the defendants also point to errors. Having read the affidavits, and on several occasions heard what each counsel has said as to errors in and affecting the report, I am concerned as to the integrity and sufficiency of the report, in terms of the extent to which it has appropriately dealt with the question referred. I do not propose to elaborate on the matters raised. I consider it inappropriate and of potential embarrassment to the special referee, as the delegate of the Court, to do so. I am in no doubt that in the interests of justice as between the parties the question should be remitted to the special referee for further consideration, and I will so order. The report produced in response to the remit should address specific matters identified in an annexure to the order.
As a final option, counsel for the defendants submitted that the report should be adopted. In my view, in light of all of the circumstances, the appropriate course is first to remit the question for further consideration. The issue of adoption should be held over until the special referee has provided a further report.
In conclusion, there will be an order that the question referred to the special referee by para 1 of the orders made on 21 February 2003 be remitted to him for further consideration, in particular, of the matters referred to in the annexure to the order. I will stand the matter over to give the defendants an opportunity to add to the annexure the matters which they wish to raise concerning the report. I will then hear the parties as to the appropriate orders.
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