JARVAN PTY LTD (in liquidation) formerly John R CARR & ASSOCIATES PTY LTD v SEERY SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL COMMON LAW DIVISION MEAGHER, SHELLER and STEIN JJA 29 October 1998, 1 December 1998 [1998] NSWCA 117 DISCRETION — reference by court to referee — adoption of report — powers of court in respect of factual findings — whether exercise of discretion to adopt report miscarried — no miscarriage in absence of perversity or manifestly unreasonable fact-finding — Supreme Court Rules 1970, Pt72 r13 The first respondents brought an action for damages against the builder, architect (appellant) and consulting engineer of their new residence in relation to extensive cracks that developed in the building soon after construction was completed. At the hearing, the court referred certain questions to a referee. The report of the Referee, a highly experienced consulting engineer, was adopted by the court and judgment given against the appellant and engineer. The damages totalled $1,059,428 (plus interest) together with $50,000 for vexation. The appellant was ordered to pay 15% of the damages and to pay the costs of the owners, which included the costs of the builder which the owners had been ordered to pay. The appellant submits that the trial judge erred in adopting the Referee's Report which included a finding that the architect's contract with the owners embraced responsibility for the professional services of the engineer. He also challenges the proportion of responsibility found between himself and the engineer. Held: 1. The findings of fact and the conclusions of the Referee were open on the evidence, as were the findings of the trial judge. There is no basis on which to conclude that the trial judge's exercise of discretion to adopt the report of the Referee miscarried. Super Pty Ltd v SJP Formwork (Australia) Pty Ltd (1992) 29 NSWLR 549 Nine Network Ltd v Kennedy Miller Television Pty Ltd (unreported, Court of Appeal, 8 July 1994) applied 2. The apportionment of responsibility of 85% to the engineer and 15% to the architect determined by the Referee, and adopted by the trial judge, was justified on the findings. No error has been demonstrated and, unless it can be shown to be clearly wrong, should not be disturbed. Meagher JA I agree with Stein JA. Sheller JA I agree with Stein JA. Stein JA INTRODUCTION: The first respondents (Mr and Mrs Seery) had a large and expensive home built for them in the Moree district. It was constructed by Dengate Constructions Pty Ltd which, although a defendant in the proceedings, is not a party to the appeal. The appellant, formerly John R Carr & Associates Pty Ltd, was the architect for the project acting by its principal, Mr John Carr. The second respondent (D T Cohen & Associates Pty Ltd) was the consulting engineer. 2 UNREPORTED JUDGMENTS The residence was completed by the end of July 1992. From a fairly early point of time after the Seerys moved in, the building began to move and develop cracks. The building continued to move and by 1995 had become severely cracked. The home was constructed on a concrete slab. The movement of the ground beneath the slab caused the problem. The Seerys brought an action for damages against the builder, the architect and the engineer. Pursuant to Pt72 of the Supreme Court Rules the court referred certain questions to a Referee for inquiry and report. The questions included the cause of the severe cracking, the parties responsible and the quantum of damages. The Referee, described by Hunter J as a highly experienced consulting engineer, embarked on the reference. The hearing before the Referee ran for in excess of 10 days during 1997 and involved a phalanx of experts, 19 witnesses, almost 1000 pages of transcript, 67 exhibits and an agreed bundle of documents. The Referee produced his report on 16 October 1997 running to 83 pages together with annexures. He found the architect liable to the owners for the whole of their loss and damage. He further found that the engineer was liable to indemnify the architect for 85% of that loss and damage. No liability was found against the builder. On 8 December 1997 the Referee's Report was before Hunter J in the Construction List. The owners moved for its adoption. The architect argued to the contrary. His Honour adopted the report in an ex tempore decision which also dealt with damages for vexation and costs. Judgment was given against the architect and engineer. The damages totalled $1,059,428 (plus interest) together with $50,000.for vexation. The architect was ordered to pay the costs of the owners, such costs to include the costs of the builder ordered to be paid by the owner. The architect has appealed challenging the adoption of the Referee's report, the proportion of responsibility found between him and the engineer (viz 15%/85%) and the order that he pay the owners' costs including the costs of the builder. We have been informed that the last mentioned ground is abandoned. THE APPLICABLE PRINCIPLES The court has laid down how challenges to the adoption of the report of Referees under Pt72 should be approached, both by a trial judge and the court of appeal. In Super Pty Ltd v SJP Formwork (Australia) Pty Ltd (1992) 29 NSWLR 549 at 563 - 564 Gleeson CJ explained the judge's role in reviewing the report. It involves a judicial discretion to be exercised in a manner consistent with the object and purpose of the rules and their wider setting. If the dissatisfaction with the report is a question of law, then a proper exercise of discretion requires a judge to consider that matter afresh. The Chief Justice observed that it was unwise to attempt to closely confine the manner of exercise of the discretion. However, if the report revealed some error of principle, some absence of jurisdiction or some patent misapprehension of the evidence, that would ordinarily be a reason for rejecting it. So too would be perverse or manifestly unreasonable findings of fact. Gleeson CJ stated that where there was evidence available to support findings of fact, or where there was a choice between conflicting evidence, the court is not required to reconsider the disputed facts. In Nine Network Pty Ltd v Kennedy Miller Television Pty Ltd (unreported Court of Appeal 8 July 1994) Gleeson CJ held that there was no ground for attacking a judgment based on the adoption of a Referee's report unless it could URRVAN PTY LTD (in liquidation) formerly John R CARR & ASSOCIATES PTY LTD 3 SEERY (Stein JA) (Stein JA) be shown that the judge made a material error. If the error was one of law, it may not be difficult to demonstrate. If, on the other hand, the error is in the exercise of the discretion, this may also constitute a ground for setting the judgment aside. Importantly, it is for the judge at first instance to review the report and the Court of Appeal to review what the judge did, within the limits of the ordinary rules governing appeals. Importantly, his Honour added: However, if the judge, in the proper exercise of the discretion given by the Rules, declines to consider afresh questions of fact that may have been decided by the referee, then it is not open to the party aggrieved to invite this Court to revisit those questions on the basis that by virtue of the adoption of the referee's report, the judge's decision is vitiated by any errors in it. THE APPEAL The case for the appellant is that Hunter J erred in adopting the Referee's report which included a finding that the architect's contract with the owner embraced responsibility for the professional services of the engineer. This is said to be an error of law. However, in pressing the submission the appellant appears to seek to canvass findings of fact by the Referee, to suggest that some relevant findings of fact were not made and that some relevant facts were not taken into account by the Referee. These submissions run into the obstacle of Super. If the findings of fact by the Referee, and by the judge on adoption of the report, were open on the evidence, that is an end of the matter. In determining to adopt the report Hunter J said: What the Referee has found is that Carr was responsible under his contract with the plaintiffs for the design of the residence. Included in that responsibility was the design of the structural elements. That finding is the central finding at issue in these proceedings in which Carr presses upon the court that it should not adopt the Referee's report. [AB 175 - 176] His Honour noted a number of matters which were not in issue including the failure of the slab to meet appropriate professional standards, design defects in the pit and mound and the failure to provide drainage to the pit and seal the mound. Also, that the architect, without reference to the engineer, made design changes which exposed the mound to the intrusion of water. Hunter J noted that the Referee had found that the architect was responsible for the design of the residence including the structural design carried out by the engineer. The context was the introduction by the architect of the engineer. His Honour set out extracts from the report which traversed the relationship between the owners, the architect and the engineer. In response to the architect's submission that the finding by the Referee of his responsibility for all design was unsupportable, Hunter J said '... material is more than sufficient to enable me to conclude that the Referee was fully justified in the conclusions which he reached...'. [AB 180] He added '... Carr clearly agreed to provide full architectural services, other than full-time supervision of the construction of the residence and included in that service was a responsibility for the design of the residence'. [AB 180] This conclusion, said his Honour, was not only open to the Referee but was the proper conclusion to draw from the letter dated 16 May 1991 from the architect to the owner, which he then set forth. His Honour then referred to the evidence of the architect which, he said, could be characterised as containing admissions. He added his own observations of the evidence which supported a finding that there was a design obligation on the 4 UNREPORTED JUDGMENTS architect that integrated the architectural and engineering aspects 'so as to provide a finished structure that would not suffer from the effect of movement of the surrounding black soil'. [AB 182] Hunter J continued: Nothing turns, in my view, upon the fact that the mound was designed by Cohen and constructed by the plaintiffs. Quite clearly, in my view, the obligation for design of the residence by Carr involved the provision of the residence and of elements in its structure that would result in the integration of the home with the mound by whatever means was required in order to meet professional standards. [AB 185] In my opinion, no error of law by Hunter J is demonstrated. The findings of fact and conclusions of the Referee were open to him to make on the evidence. Similarly, the findings of his Honour on the adoption of the report were open to him on the evidence. The decision to adopt the report manifests no error. I can see no basis to conclude that his Honour's exercise of discretion to adopt the report miscarried. That being so, it is not open to this court to revisit the questions of fact determined by the Referee. Indeed, it would be singularly inappropriate for us to do so since no perversity or manifestly unreasonable fact finding is alleged, nor is it suggested that there was a patent misapprehension of the evidence by the Referee. I would dismiss this aspect of the appeal. DIVISION OF LIABILITY The appellant submits that the overall division of responsibility of 85% to the engineer and 15% to the architect was in error. I can see nothing in this submission. Indeed, the apportionment determined by the Referee, and adopted by Hunter J, appears to be a reasonable and sensible one and eminently justified on the findings of fact. Unless it can be shown to be clearly wrong, it ought not be disturbed. This has not been demonstrated. I would propose that the appeal be dismissed with costs. Appeal dismissed with costs Counsel for the appellant: Mr Gee QC/I Faulkner Solicitors for the appellant: Colin Biggers & Paisley Counsel for the first respondent: Dr G Flick SC/T Alexis Solicitors for the first respondent: Cole & Butler Counsel for the second respondent: Ms K Leotta Solicitors for the second respondent: Conway MacCallum