SOLAH BLUE METAL PTY LTD v TECMA PTY LTD SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL KIRBY P, MAHONEY and COLE JJA 4 April 1995, 19 April 1995 [1995] NSWCA 440 PRACTICE AND PROCEDURE Commercial Division — adoption of referee's report — whether misinterpretation of pleadings and particulars — whether failure to give reasons — held: No failure. Complaint about referee's report without substance and want of reasons immaterial. PRACTICE AND PROCEDURE — Commercial Division of Supreme Court — reference to referee — definition of matters in dispute — whether referee and Judge of Commercial Division (Rogers CJ Comm D) failed to address the issue presented by party upon pleadings of particulars — whether issue of substance in dispute overlooked or ignored — whether judge failed to give any or adequate reasons for adopting the report of the referee in the circumstances — whether failure of the judge to deal with the issue material in the circumstances — held: (Cole JA; Kirby P and Mahoney JA concurring): (1) The issue contended was not properly before the referee on the pleadings and particulars so that the referee was not obliged to address evidence in relation to allegations not pleaded before him. Xuereb and Anor v Viola and Ors (1988) 18 NSWLR 453 (SC) considered; (2) Although the judge did not address the submissions of the appellant in his reasons, as they were without substance he was not obliged to do so for the purpose of rejecting them; (3) Appeal dismissed with costs. COURTS AND JUDGES — Commercial Division of Supreme Court — adoption of report of referee — obligation of referee to give reasons — obligation of judge to give reasons — whether default in such obligation requiring intervention of Court of Appeal — held: (1) The referee did not fail to give reasons upon the matters pleaded and particularised before him; (2) Although the judge did not deal with a matter the subject of submissions, as that matter was without substance, no error was shown inviting correction by the Court of Appeal. ORDERS Appeal dismissed with costs. Kirby P I agree with Cole JA. Mahoney JA I agree with the judgment of Cole JA. Cole JA This is an appeal from a judgment of Rogers CJ Comm D delivered 16 December 1991 in which his Honour adopted the report of the Honourable RG Reynolds QC. In consequence a verdict was entered for the defendant. On the appeal one matter only was argued. Briefly stated, it was contended that the referee wrongly reported to the Court pursuant to Pt72 that the plaintiff, Solah Blue Metal Pty Ltd ("Solah Blue') had not alleged in the proceedings before the Court and the referee that the defendant!, Tecma Pty Ltd ('Tecma') which sold to Solah a head cone crusher, had "some obligation to act as a consultant engineer to the plaintiff and advise it generally as to the configuration of the plant and the acquisition of other components to achieve greater efficiency". The referee reported: 2 UNREPORTED JUDGMENTS "As I read the summons, this is not alleged and, even if it was, there is no such promise on the part of the defendant to be spelled out within the particularised components of the contract, or at all"! Solah contended that it had so alleged, and that an examination of the pleadings and particulars would disclose that was so. In the proceedings considering the adoption of the report, this error had been asserted by Solah but, whilst such submission was averted to by Rogers CJ Comm D in argument, it was not addressed in his judgment which adopted the report. In those circumstances the appellant sought that the matter be remitted to the Commercial Division to enable a judge to consider whether that aspect of the referee's report disclosed error, and if it did, for that Court to consider rejection of that portion of the report. THE PLEADINGS The summons was filed in the Commercial Division. Thus the pleadings took the form prescribed by the Rules for that Division. In Section A of the summons entitled 'Nature of Dispute" there appeared: "1. An action by a purchaser against a vendor of an item of quarrying equipment known as SMD-120 900mm Cone Crusher ('the Cone Crusher') and a variety of other components and ancillary equipment (all of which including the Cone Crusher is hereinafter called 'the equipment") for damages and other relief for: (d) Failing to advise or assist the defendant in the installation and commissioning of the equipment as required by the contract, or failure to so advise or assist the defendant with due care and skill;"2 In s(B) of the summons headed "Issues Likely to Arise", no issue regarding obligation on the respondent to act as a consultant engineer to the plaintiff either generally or as to the configuration of its plant was asserted as arising. In s(C) of the summons, headed "Contentions", the following was pleaded: "23. By a contract made between the plaintiff and the defendant, the plaintiff agreed to buy and the defendant agreed to sell the equipment. PARTICULARS OF CONTRACT The contract was partly oral and partly in writing. The written part was contained in the following documents: (a) Letter dated 5 November, 1986, from the defendants to the plaintiff. (b) Letter dated 19 November, 1986, from the defendant to the plaintiff. (c) Letter dated 16 January 1987 from the plaintiff to the defendant. (d) Letter dated 6 February, 1987 from the defendant to the plaintiff. The oral part of the contract arose from: (e) a conversation between Frank Solah of the plaintiff and Roger Kay of the defendant in October, 1986, at the defendant's premises at Hoxton Park in which Roger Kay referring to the Cone Crusher said words to the effect: "It will give good shape. It will produce 100 cubic metres of good shape per hour of 20mm or less as a product". 1. Appeal Book, at 1565. 2. Appeal Book, at 27 URJ SOLAH BLUE METAL PTY LTD v TECMA PTY LTD (Cole JA) 3 (f) a conversation between Frank Solah of the plaintiff and Roger Kay of the defendant on or about the 21st October, 1986, st the plaintifFs quarry site at Jugiong in which Roger Kay said words to the effect: "To have success here you will need a third crusher and one of our SMD 120 900mm Cone Crusher would be well suited for the job."3 In para31 the following was pleaded: "31. The defendant delivered the equipment to the plaintiff in or about 15th April, 1987. The defendant failed to provide assistance or advice concerning the installation and commissioning of the equipment promptly or, if it did, failed to do so with due care and skill. PARTICULARS OF PROBLEMS CONCERNING INSTALLATION AND COMMISSIONING OF THE EQUIPMENT (a) Due to the unavailability of servants and agents of the defendant, including two Russian technicians familiar with the equipment, and as a result negligent advice and assistance (itemised in para31(b), para31(c) and para31(d) below), the period of installation and commissioning was extended from the expected 2 days to 6 weeks. (b) The defendant provided a plan to the plaintiff for the foundation for the frame on which the equipment was to be mounted. That plan was inaccurate requiring adjustments to be made to the frame once it had been built by the defendant. (c) According to the defendant the distribution hopper located upon the equipment was incorrectly positioned causing the equipment to overload. The defendant did not advise the plaintiff to locate the distribution hopper correctly and failed to identify the problem until late May, 1987. (d) When the equipment was put into operation after installation and commissioning, the cone crusher was rotating in the wrong direction. The defendant failed to advise the plaintiff on the correct method of installation and operation of the equipment and failed to identify that the equipment was rotating in the wrong direction until early June, 1987.4 Para36 and para37 of the summons were as follows: "36. In consideration of the purchase of the Cone crusher by the plaintiff the defendant, by Mr Kay, undertook the design of the plaintiffs plant [so as] to incorporate the Cone Crusher. In the presents the defendant undertook to perform such work with skill and care. 37. In breach of contract the defendant did not exercise care and skill and failed to include in the design; (a) a surge bin and feeder before the Cone Crusher with the rate of feed controlled by the Cone Crusher's power so as to avoid excessive feed to the Cone Crusher; and (b) a conveyor to allow excessive recycling load at the Cone Crusher to be returned to the secondary crusher for crushing.'5 The above contains the totality of the relevant allegations made by the plaintiff/appellant. In the amended defence the defendant pleaded; 3. Appeal Book, at 31-32 4. Appeal Book, at 34-35. 5. Appeal Book, at 40. 4 UNREPORTED JUDGMENTS "6A. That is was a term of the contract between the plaintiff and the defendant, that installation of the equipment was the responsibility of the plaintiff. It was however not a term of the contract nor was the defendant lawfully obliged to provide advice and/or assistance to the plaintiff in relation to the configuration of the plant. 13. The defendant denies that is was a term of the contract to provide advice to the plaintiff in relation to: (a) a surge bin and feeder, (b) a conveyor to convey any excess recycling load which was required to be returned to the secondary crusher."6 THE REFEREE'S REPORT In his report the referee stated: There is before me a lengthy document entitled "Further Amended Summons" which is the only legal document setting out the Claims the plaintiff makes, the legal basis therefor and the particulars thereof. There is no other formulation of the plaintiff's claim before me. The following are the causes of action which appear to be relied upon though imprecisely stated: E. That it was a term and condition of the contract that the defendant would advise or assist the plaintiff in the installation of and commissioning of the cone crusher and the defendant failed to advise and assist; In formulating these causes of action I have sought as best and as benevolently as I can to interpret what has been said in the Summons under the heading "Nature of Dispute" and "Issues Likely to Arise". There is, in particular, no claim that circumstances were such that there was to be implied a promise that the cone crusher was of merchantable quality, nor is there any claim that there was an enforceable promise made collaterally to the main contract. Further, it is not alleged that the defendant undertook the design of, or promised to design a plant which incorporated the cone crusher.'7 In dealing with the claim which the referee entitled "Failure to advise and assist", the referee wrote as follows: "E. FAILURE TO ADVISE AND ASSIST In the original quotation of Sth November 1986 it is said: "We would be pleased to provide assistance relative to installation on the basis that your staff install; we provide advice and would assist'. The letter of 19th November, which was designed primarily to clarify the basis of the right to return the equipment, stated: "We thank you for your instructions to proceed with supply and assure you of our willingness to co-operate in the setting up of the new crusher". The amended quote of 6th February 1987, which was accepted, provided: "INSTALLATION Installation will be carried out by Solah Blue Metal Pty Ltd and the writer will be pleased to provide assistance. EXCLUSIONS 6. Appeal Book, at 64-65. 7. Appeal Book, at 1549-1550. URJ SOLAH BLUE METAL PTY LTD v TECMA PTY LTD (Cole JA) 5 "Tecma excludes the installation and electrical wiring of the equipment from its supply and responsibility". The plaintiff's cause of action in this respect is: "(d) failing to advise or assist the (plaintiff) in the installation and commissioning of the equipment as required by the contract or failure to so advise or assist the defendant with due care and skill". Iam of the opinion that the operative provision is that contained in the quote of 6th February and that, if there was imposed on the defendant a legal obligation, it was that Roger Kay (the writer) would provide assistance in the installation. The defendant claims, by its defence, that no legal obligation arose. I am inclined to the view that it was part of the consideration and was an enforceable promise, but this is of little or no consequence because I am persuaded that Mr Kay rendered all reasonable assistance in the installation of the cone crusher, even to the extent of bringing in a highly qualified outside consultant. At the hearings, counsel for the plaintiff sought to develop a case that the defendant had some obligation to act as a consultant engineer to the plaintiff and advise it generally as to the configuration of its plant and the acquisition of other components to achieve greater efficiency. As I read the Summons, this is not alleged and, even if it was, there is no such promise on the part of the defendant to be spelled out within the particularised components of the contract, or at all."8 APPELLANTS SUBMISSIONS The appellant's contention was that para36 of the Summons when read with the particulars associated with para23 constituted an allegation by the appellant that the respondent had contractually undertaken "the design of the plaintiff's plant (so as) to incorporate the Cone Crusher". The appellant did not plead that as a collateral warranty or contract. The terms establishing that contractual obligation were said to be found in particulars (a) to (f) attached to para23. Mr Heydon QC for the appellant conceded that particulars (e) and (f) did not particularise conversations which could support the contractual allegation alleged in para36. His contention was that material which might support that contractual allegation was to be found in other aspects of conversations which occurred between Mr Solah and Mr Kay in October 1986. However those other aspects were not referred to in subpara(e) or subpara(f) of the particulars and thus were not pleaded. Thus any contractual obligation was left to be found in the letters referred to in subpara(a) to subpara(d) of the particulars. The referee found that the contractual arrangements between the parties were contained in the amended quote of 6 February 1987 which was accepted. The only obligation under that quotation was: "INSTALLATION Installation will be carried out by Solah Blue Metal Pty Ltd and the writer (Mr Kay) will be pleased to provide assistance." That clearly does not support an allegation contained in para36 that the respondent "undertook the design of the plaintiff's plant (so as) to incorporate the Cone Crusher". It follows, in my view, that the referee was correct in asserting that the summons did not plead that the defendant had "some obligation to act as a consultant engineer to the plaintiff and advise it generally as to the configuration of its plant and the acquisition of other components to achieve grater efficiency". 8. Appeal Book, at 1564-1565. 6 UNREPORTED JUDGMENTS The referee was also correct that such a claim was not particularised. He was also correct in finding that the documents held to constitute the contract between the parties did not contain any such promise. A subsidiary argument was mounted. It was that in using the expression "or at all" as the concluding words of the referee's finding I have quoted, the referee was intending to address all of the evidence touching upon the allegations of breach of an alleged obligation of design which was placed before him. By using those concise words it was argued that the referee had breached the obligation to provide reasons for his decision?. That submission should be rejected. Whatever may have been intended by use of the expression "or at all", the referee was not obliged to address evidence in relation to allegations not properly before him. It follows that the complaint made to Rogers CJ Comm D on his consideration of whether the report should be adopted that the referee had wrongly understood the pleadings and the contract was without substance. It is true that Rogers CJ Comm D did not address those submissions. However, as they were without substance he was not obliged to do so simply for the purpose of rejecting them. The appeal should be dismissed with costs. Appeal dismissed with costs. COUNSEL: Appellant: JD Heydon QC / JM Jackman Respondent: FS McAlary QC/JS Drummond SOLICITORS: Appellant: Tress Cocks and Maddox Respondent: Doherty and Partners 9. Xureb and Anor v Viola and Ors (1988) 18 NSWLR 453 at 469.