MULTICON ENGINEERING PTY LTD v FEDERAL AIRPORTS CORPORATION SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL POWELL and STEIN JJA 12 May 1997, 3 June 1997 [1997] NSWCA 214 Appeal — Issue not raised at trial — Issue of law not of fact. Constitutional Law (Commonwealth) — Judicial power of Commonwealth — State courts vested with federal jurisdiction — Delegation of exercise of jurisdiction — Order for reference pursuant to SCR Pt72 — Adoption variation or rejection of report — Nature of hearing under SCR Pt72 r13 — Whether order for reference valid — Whether order for adoption of report valid. Powell JA The Court has been called upon to deal with two Notices of Motion, the first, filed on behalf of the Appellant on 8 April 1997, in which the Appellant sought orders, in substance: 1. granting the Appellant leave to amend its Notice of Appeal by amending the craftsmanship of two existing grounds of appeal, grounds 31 and 32 and by adding an additional ground of appeal, 32A which ground of appeal and additional ground of appeal have been described as "constitutional grounds"; and 2. providing for the determination of those "constitutional grounds" separately from, and prior to the hearing of, the balance of the grounds of appeal raised in the Notice of Appeal. and the second, filed on behalf of the Respondent on 6 May 1997, by which the Respondent sought an order that grounds 31 and 32 of the Notice of Appeal be struck out. In order that one might understand the circumstances which have given rise to the filing of the two Notices of Motion and the nature of the "constitutional grounds" which the Appellant seeks to have determined in the appeal, it is necessary that one record some of the history of the proceedings. Although - because of the paucity of the material which has been placed before the Court for the purposes of this application - it is not possible to go into any great detail as to the background facts giving rise to the proceedings, it would appear that the proceedings arose out of a contract which was entered into between the Appellant and the Respondent in 1990, by which contract the Appellant undertook to catty out certain structural steel work for the Respondent. It would appear that the contract had been entered into following an invitation by the Respondent to the Appellant to tender for the structural steel work contract. The proceedings appear to have been commenced in March 1991. Although it may be that the basis of the claim made by the Appellant against the Respondent was initially different, it would seem that, in July 1991, the Appellant amended its claim so as to convert the claim into, or to add to the original claim, a claim that it (the Appellant) was induced to enter into the contract with the Respondent by reason of the Respondent's conduct in providing to it, in contravention of the provisions of s52 of the Trade Practices Act, misleading and deceptive information. 2 UNREPORTED JUDGMENTS In November 1991, there was made pursuant to the provisions of SCR Pt72, an order that the whole of the proceedings be referred to Mr A A de Fina, a consulting engineering and President of the Institute of Arbitrators of Australia, for report, that order, so we were informed, having been made by Giles J (as he then was) on the application of the Appellant and not withstanding the opposition of the Respondent. Although the detail of the conduct of the reference is not entirely clear, it would appear that the hearing before the Referee commenced on 7 May 1992 and continued thereafter, from time to time, and for varying periods, until late 1994 - it is said that in excess of 200 hearing days were involved in the reference. In the Respondent's Written Submissions on this application, it is said that the transcript record of the proceedings on the reference extends to some 12,500 pages and that the final submissions of the parties on the reference extended to some 6,590 pages. In the light of the matters with which the Court had been called upon to deal on the hearing of these applications, it should be recorded that it is asserted by the Respondent - it does not appear to be denied by the Appellant - that, in the course of the final submissions made on its behalf on the reference, the Appellant sought from the Referee specific findings of fact. The Referee's report, which, so it is said, comprises some 267 pages, appears to have been delivered to the Court on 10 February 1995. Although the detail of what occurred in the following 12 months is not revealed by the material before the Court on the hearing of these applications, it is tolerably plain that one or other of the parties - one assumes, the Respondent - moved to have the Court adopt the Referee's report. The hearing of that application commenced before Rolfe J on 5 February 1996 and occupied some 9 hearing days concluded on 21 February 1996. Having regard to the matters with which the Court has been called upon to deal, it should be recorded, first, that, in the submissions which were advanced on its behalf, the Appellant sought to have the Referee's report rejected upon the ground (inter alia) that the Referee had not made sufficient findings of fact and submitted that Rolfe J should himself make certain findings of fact; and, second, that at no time during the course of those submissions which were advanced on behalf of the Appellant, was it submitted that because Rolfe J was exercising federal jurisdiction, it was not open to him to adopt the Referee's report merely because in his opinion there was material before the Referee upon which the Referee's findings were open, and that he was bound himself to consider directly the evidence in the reference and to draw his own conclusions in relation thereto. In the Judgment which he delivered on 11 March 1996, Rolfe J adopted substantially the whole of the Referee's report and gave Judgment for the Respondent in the proceedings. It is said that his Honour did so without making his own findings in relation to the disputed questions of fact and without deciding the proceedings for himself on the basis of his own findings. Thereafter, by Notice of Motion filed 22 April 1996, the Respondent sought the making of special orders as to its costs of the proceedings and of the reference. That Motion appears to have been heard by Rolfe J on 20 May 1996, his Honour's Judgment (138 ALR 425) being delivered on 20 June 1996. Meantime, on 26 April 1996, there had been filed on behalf of the Appellant, the Notice of Appeal which is the subject of the applications with which the Court is concerned to deal some eighty-one grounds of appeal being taken in that Notice of Appeal. Grounds 31 and 32 in that Further Notice of Appeal are in the following terms: WRULTICON ENGINEERING PTY LTD v FEDERAL AIRPORTS CORPORATION (Powel JA) "31. His Honour invalidly exercised the judicial power of the Commonwealth contrary to s86 of the Trade Practices Act and Chapter III of the Constitution of the Commonwealth of Australia in failing to consider directly the evidence in the proceedings and in failing to draw his own conclusions in relation thereto. 32. Alternatively to para31, Pt72 r13(1)(a) of the Supreme Court Rules is invalid to the extent that it permits the Court, in relation to a report in proceedings in the federal jurisdiction, to adopt a disputed factual finding merely because, in the opinion of the Court, there was material before the Referee upon which the finding was open." The only explanation - if explanation it be - proffered on behalf of the Appellant for the fact that the matters the subject of these two grounds of appeal had not been raised prior to 26 April 1996 is contained in the following sentence in the Affidavit of the Appellant's solicitor, sworn in support of the Appellant's application for leave to amend its Notice of Appeal: "A question about the proper approach to the adoption of a Referee's report by a Judge in a matter of federal jurisdiction was first raised with me by a lawyer not previously involved in the case on or about 18 April 1996." It is said that a supplementary Notice of Appeal and Notice of a Constitutional Matter under s78B of the Judiciary Act 1903 were filed and served on behalf of the Appellant on 27 May 1996. Although the material before the Court on the hearing of these applications did not contain a copy of either the supplementary Notice of Appeal or Notice of a Constitutional Matter, it would seem that, insofar as related to grounds 31 and 32 taken in the original Notice of Appeal, all that was involved was the addition at the end of each of a sentence: "This involves a matter under s78B of the Judiciary Act 1903 of the Commonwealth." In response to the Notice of Constitutional Matter served upon him, the Attorney-General for New South Wales has indicated his intention to intervene pursuant to the provisions of s78A of the Judiciary Act 1903 on the hearing of the Appeal. The inclusion in the Appellant's Notice of Appeal of grounds 31 and 32 caused the Respondent's solicitors to write to the Appellant's solicitors to the effect that, unless those grounds of appeal were deleted from the Notice of Appeal, the Respondent would move to strike those grounds of appeal out of the Notice of Appeal. However, despite that letter, which was written in October 1996, no such application was filed on behalf of the Respondent until after the first of the Notices of Motion with which the Court is concerned to deal had been filed on behalf of the Appellant on 8 April 1997. By that Notice of Motion the Appellant sought leave to amend its Notice of Appeal by deleting therefrom grounds 31 and 32 and by substituting therefor the following: "31. His Honour, exercising federal jurisdiction invested by s86 of the Trade Practices Act acted outside power. or erred in law. in failing himself to consider directly the evidence in the proceedings in relation to disputed factual findings in the report in accordance with Pt72 r13(1)(d) of the Supreme Court Rules or alternatively. in failing to hear de novo the evidence relating thereto and in failing to draw his own conclusions from the evidence. This involves a matter within s78B of the Judiciary Act 1903 of the Commonwealth. 32. Further or alternatively to para31, Pt72 r13(1)(a) of the Supreme Court Rules is invalid to the extent that it permits the Court, when exercising federal jurisdiction, to adopt a disputed factual finding in a report merely because, in the 4 UNREPORTED JUDGMENTS opinion of the Court, there was material before the Referee upon which the finding was open. This involves a matter within s78B of the Judiciary Act 1903 of the Commonwealth. 32A. Further to para31 and para32 for there to have been a valid exercise of federal jurisdiction. his Honour should have decided the proceedings for himself on the basis only of the undisputed factual findings in the report and such further factual findings as his Honour may have made in the manner referred to in para31. This involves a matter within s78B of the Judiciary Act 1903 of the Commonwealth." Thereafter, on 6 May 1997, there was filed on behalf of the Respondent the Notice of Motion in which is sought the order that grounds 31 and 32 in the Appellant's Notice of Appeal be struck out. Before turning to record, albeit but briefly, the submissions which were advanced on behalf of the parties on the hearing of these applications, it is as well to record that the parties appear to agree that, if the Court is of the view, either, that the Appellant be permitted on the appeal to raise the constitutional question, or, that the hearing of the two Motions ought to stand adjourned until the hearing of the appeal, it would be in the interests of all parties that the appeal be heard in two stages, the first stage being limited to argument on the constitutional question with the balance of the questions raised in the Notice of Appeal to stand adjourned either to a later date or generally, the parties agreeing not to raise any objection if it be found necessary to reconstitute the Court for the purpose of the hearing of the second stage of the appeal if that became necessary. The reason for that course having been agreed upon appears to be that, whatever be the view which this Court might take on the constitutional question, the unsuccessful party would wish to seek special leave to appeal to the High Court and, if leave be granted, to have the appeal determined, before the hearing of the second stage of the appeal to this Court if that ever became necessary. Reduced to their most simple form, the submissions advanced by Mr D F Jackson QC, who appeared with Mr P M Biscoe QC for the Appellant, appear to involve the following propositions: 1. the general rule that a party is bound by the conduct of his or its case at first instance and ought not to be allowed to raise on appeal an argument which he or it failed to put during the hearing at first instance when he had the opportunity to do so (University of Wollongong & Ors v Metwally (No 2)!; Coulton v Holcombe?; Water Board v Moustakas3) is subject to at least the following exceptions: (a) where the case is exceptional and the interests of justice dictate that the party have leave to raise that argument; and (Maloney v Commissioner for Railways (NSW)4) (b) when the question is one of law, as for example upon the construction of a document or upon facts either admitted or proved beyond controversy, and it is expedient in the interests of justice that the question should be argued and decided (see, for example, Connecticut Fire Insurance Co v Kavanah5; Suttor v - (1985) 59 ALJR 481 . (1986) 162 CLR 1 . (1988) 180 CLR 491 . (1977-1978) 52 ALJR 291,294; 18 ALR 147,152 . [1892] AC 473, 480 URwWN WRULTICON ENGINEERING PTY LTD v FEDERAL AIRPORTS CORPORATION (Powel JA) Gundowda Pty Ltd®; Green v Sommerville"); particularly is this so - so it seemed to be submitted (reference being made to (inter alia) Cockle v Isaksen8; Thomson Australian Holdings Pty Ltd v Trade Practices Commission?; National Parks & Wildlife Service K Stables Perisher Pty Ltd!°; Household Financial Services Ltd v Commercial Tribunal of NSW!!; Della Petrona v Director of Public Prosecutions (Cth) (No 1)!2) where the question of law is one relating to the jurisdiction of the court at first instance or as to limitations or restrictions upon that jurisdiction or the manner in which the court at first instance might exercise its powers; 2.the present case was an exceptional one since it was not until after Giles J had made the order referring the whole of the proceedings to Mr de Fina for report that the Court of Appeal (Super Pty Ltd v SJP Formwork (Aust) Pty Ltd!3) held that an application pursuant to SCR Pt72 r.13 is not an appeal, whether by way of a hearing de novo or a more limited re-hearing, and that it was open to the judge to whom such an application was made not to reconsider disputed questions of fact where there was factual material sufficient to entitle the referee to reach the conclusions which he did, particularly where the disputed questions were in a technical area where the referee enjoyed an appropriate expertise; until that time - so it was submitted, reference being made to the competing views expressed by Cole J (as he then was) in Chloride Batteries of Australia Ltd v Glendale Chemical Products Pty Ltd!4 and of Young J in Hoogerdyk v Condon!5 - there had been expressed within the Court differing views as to the duty of a judge to whom an application was made pursuant to the provisions of SCR Pt72 1.13; 3. the decisions of the High Court in Harris v Caladine!¢ and Brandy v Human Rights and Equal Opportunities Commission!7 would appear to indicate that although a court invested with federal jurisdiction may delegate to its officers the exercise of some part of that jurisdiction, that delegation will be valid only if the exercise of the delegated jurisdiction is subject to review or appeal by a judge or judges of the court on questions of both fact and law, particularly so if the review is by way of hearing de novo. Although Kirby P (as he then was) in IBM Australia Ltd v National Distribution Services Ltd!8 and Gleeson CJ in Super Pty Ltd v S J P Formwork (Aust) Pty Ltd!9 have referred to the special considerations involved in delegation where what is being exercised is the judicial power of the Commonwealth, there is no decision of the Court of Appeal - and still less of the High Court - as to the validity or otherwise of a reference by the Court when (1950)81 CLR 418, 438 (1979)141 CLR 594, 607-608 (1957)99 CLR 155, 161 (1981)148 CLR 150, 163 (1990)20 NSWLR 573, 585 11. (1995)36 NSWLR 220, 222 12. 1 September 1995 (unreported) 13. (1992)29 NSWLR 549 14. (1988) 17 NSWLR 60 15. (1990) 22 NSWLR 171 16. (1991) 172 CLR 84 17. (1995) 183 CLR 245 18. (1991) 22 NSWLR 466, 468 19. supra at 560 So werID 6 UNREPORTED JUDGMENTS exercising federal jurisdiction or as to the duty of a judge when exercising federal jurisdiction, on an application pursuant to the provisions of SCR Pt72 1.13. Reduced to their most simple form, the submissions of the D M J Bennett QC who appeared with Mr J E Griffiths for the Respondent, appear to involve the following propositions: 1. unless - which, so it was submitted, it could not - the Appellant could bring itself within the exceptions discussed in such cases as University of Wollongong v Metwally (No 2)29, and Coulton v Holcombe?!, the Appellant ought not to be permitted to raise the questions the subject of grounds 31 and 32 in the Notice of Appeal or the proposed substituted grounds; 2. it could not be said that the present case was an exceptional one, for, despite the apparently conflicting views of Cole J (with whom other judges who sat regularly in the Commercial Division or in matters in the Construction List agreed) and Young J to which reference has earlier been made, Young J accepted that there e were exceptions to the general principle which he propounded, those exceptions including cases in which there had been a long and complicated factual question heard on the reference and complicated construction cases (of which the present was one); 3. although it was accepted that any attempt to delegate the exercise of jurisdiction to officers of a federal court would be valid only if the officer remained under the effective supervision and control of the Court in the sense discussed in Harris v Caladine22, except for the views expressed by Murphy J in Commonwealth of Australia K The Hospital Contribution Fund of Australia23 there is nothing in any of the other judgments in that case, or in any of the judgments of the High Court since that case overruled the earlier decisions of the High Court in Kotsis v Kotsis?4 and Knight v Knight2> which applied to State courts exercising federal jurisdiction the tests discussed in Harris v Caladine?6; on the contrary, the other judgments in the Commonwealth of Australia v The Hospital Contribution Fund of Australia27 proceed upon the basis that, when a State court is invested with federal jurisdiction, that investment applies to the court as it is organised from time to time under State law, so that not only its members but its officers and other persons under its supervision may exercise federal jurisdiction in the same way as they would exercise State jurisdiction; 4. even if the test discussed in Harris v Caladine is to be regarded as applicable to State courts exercising federal jurisdiction, the fact that this Court has the power to e adopt, vary or reject the report of a referee in whole or in part, and, for that purpose, (inter alia) to decide any matter of the evidence taken before the referee, whether with or without additional evidence, satisfies that test. Although the facts which I have recorded above are not such as, in my view, endow the points now sought to be raised by the Appellant with the slightest degree of attractiveness, it seems to me that it would be inappropriate for a court of two judges, when dealing with two interlocutory motions, in effect to decide a question of constitutional law which appears to me, as at present advised, to be 20. supra 21. supra 22. supra 23. (1981-1982) 150 CLR 49, 66 24. (1970) 122 CLR 69 25. (1971) 122 CLR 114 26. supra 27. supra WRULTICON ENGINEERING PTY LTD v FEDERAL AIRPORTS CORPORATION (Powell JA) one which is not lacking in substance, that question being whether it is open to a judge when exercising federal jurisdiction, to adopt a report of a referee where that report deals with disputed questions of fact, without considering for himself, whether with or without fresh evidence, those questions of fact as on a hearing de novo - no similar question arises where the question in issue is a question of law, for the decision of this Court in Homebush Abattoir Corporation v Bermria Pty Ltd28 makes it clear that, in deciding what action to take on a referee's report, a judge to whom application is made pursuant to SCR Pt72 r.13 is both entitled, and bound, to decide for himself whether the referee has erred in law and to correct any such error as may be revealed. Although the Supreme Court Rules do not contain any express provisions authorising the Court of Appeal - as opposed to a first instance judge (see SCR Pt31 12; see also Supreme Court Act 1970 s85) - to determine separate questions, or to hear an appeal in several stages, it seems to me that that absence is of no consequence, for the power of the Court on Appeal to hear an appeal by stages is in my view, merely an incident of the Court's power to control its own procedure (see, for example, Landsal Pty Ltd (In liq) v R EI Building Society?9; Arrowcrest Group Pty Ltd v Gill3°) and it is a power which the Court exercised recently when dealing with the appeal in Norris v Blake (by his tutor Porter) which dealt, first, with the appeal insofar as it involved the question of liability and the question of contributory negligence (Judgment delivered 8 October 1996), and, later, with the question of damages (Judgment delivered 11 February 1997). Further, although, as a general rule, adopting such a course is undesirable, it would seem that it would be open to the Court, if it became necessary to do so, to be reconstituted for the purpose of concluding the hearing of the balance of an appeal notwithstanding that the Court had earlier heard and determined one or more questions arising in the appeal (see, for example, Cotogno v Lamb3!). In the circumstances, it seems to me that the orders which should now be made are as follows: 1. ORDER that each of the Notice of Motion filed on behalf of the Appellant on 8 April 1997 and the Notice of Motion filed on behalf of the Respondent on 6 Mayl997 stand adjourned until the hearing of the appeal. 2. ORDER that, in the first instance, the hearing of the appeal and of the two several Notices of Motion, be limited to grounds 31 and 32 in the Notice of Appeal filed 26 April 1996 and the questions raised by the two several Notices of Motion. 3. ORDER that the hearing of so much of the appeal and of the two several Notices of Motion be expedited. 4. ORDER that the hearing of the balance of the appeal stand adjourned generally pending the determination of the questions raised by grounds 31 and 32 of the Notice of Appeal and the questions raised by the two several Notices of Motion. 5. ORDER that the costs of the hearing of the two several Notices of Motion on 12 May 1997 be reserved to be dealt with by the Court which determines the questions raised by grounds 31 and 2 of the Notice of Appeal and the questions raised by the two several Notices of Motion. 28. (1991) 22 NSWLR 605 29. (1993) 41 FCR 421, 427-428 30. (1993) 46 FCR 90, 99-100 31. (1985) 3 NSWLR 221 UNREPORTED JUDGMENTS Stein JA I agree with Powell JA. I would wish to add only one comment. The conduct of the appellant in alleging that Rolfe J invalidly exercised the judicial power of the Commonwealth, a point not taken before him, in circumstances where it was the appellant who had asked the court to appoint a 5 Referee pursuant to Pt72 of the Supreme Court Rules, is unmeritorious to say the least. Notwithstanding, I agree with the orders proposed by Powell JA and his reasons therefor. 1. ORDER that each of the Notice of Motion filed on behalf of the Appellant on 8 April 1997 and the Notice of Motion filed on behalf of the Respondent on 6 Mayl997 stand adjourned until the hearing of the appeal. ORDER that, in the first instance, the hearing of the appeal and of the two several Notices of Motion, be limited to grounds 31 and 32 in the Notice of Appeal filed 26 April 1996 and the questions raised by the two several Notices of Motion. ORDER that the hearing of so much of the appeal and of the two several Notices of Motion be expedited. ORDER that the hearing of the balance of the appeal stand adjourned generally pending the determination of the questions raised by grounds 31 and 32 of the Notice of Appeal and the questions raised by the two several Notices of Motion. ORDER that the costs of the hearing of the two several Notices of Motion on 12 May 1997 be reserved to be dealt with by the Court which determines the questions raised by grounds 31 and 2 of the Notice of Appeal and the questions raised by the two several Notices of Motion. Counsel for Claimant 1/Opponent 2: D F Jackson QC and P M Biscoe QC Solicitors for Claimantl/Opponent 2: Freehill Hollingdale & Page Counsel for Opponent 1/Claimant 2: D M J Bennett QC and J E Griffiths Solicitors for Opponent 1/Claimant 2: Phillips Fox Counsel for the Intervener (Attorney-General for New South Wales): Ms MM Foy (Solicitor) Solicitors for the Intervener: I V Knight, State Crown Solicitor