New South Wales Supreme Court CITATION : ABB Engineering Construction Pty Limited v Abigroup Contractors Pty Limited [2003] NSWSC 665 HEARING DATE(S) : 16/07/03, 17/07/03, 18/07/03, 21/07/03, 22/07/03, 24/07/03 JUDGMENT DATE : 30 July 2003 JURISDICTION: Equity Division Technology and Construction List JUDGMENT OF : Einstein J DECISION : Parties to bring in Short minutes of order. Costs to be argued CATCHWORDS : Practice and Procedure - Part 72 reference - Application to adopt Referee's report - Application to set aside sections of the report - Principles applicable - Parties bound by conduct of litigation at trial or on reference - Contract - Formation of contract - Ongoing negotiations - Intention to contract - Masters v Cameron classes - Fourth Masters v Cameron class - Whether binding and enforceable subcontract formed between plaintiff and defendant - No formal signed agreement entered into by parties - Works partly completed when defendant claims repudiation of extant contract by plaintiff and purports to terminate such contract - Relevance of prior negotiation and subsequent contract - Objective determination of intention of parties - Admissibility of post contractual conduct - Whether parties arrived at consensus capable of forming a contract - Whether subsequent negotiations supports or mandates inference that parties did not intend to make concluded bargain - Restitution - Recovery on quantum meruit - Principles - Considerations to be taken into account in determination of amount which constitutes in the circumstances, fair and just compensation for benefit or 'enrichment' actually or constructively accepted - Remuneration - Whether calculated at a reasonable rate for work actually done or the fair market value of material supplied - Whether calculated as value to principal of works performed Arbitration Act 1902 Prescribed Progress Payment Act LEGISLATION CITED : Occupational Health & Safety Act Supreme Court Rules (NSW) Trade Practices Act 1974 Abigroup v Peninsula [2001] NSWSC 752 Air Great Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309 Allen v Carbone (1975) 132 CLR 528 Anaconda Nickel Ltd v Tarmoola Australia Pty Ltd (2000) 22 WAR 101 Angelopoulos v Sabatino (1995) 65 SASR 1 Appleby v Johnson (1874) LR 9 CP 158 Astor Properties Pty Ltd v L'Union des Assurance de Paris (1989) 17 NSWLR 483 Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 Australian Development Corporation Pty Ltd v White Constructions (ACT) Pty Ltd (1996) 12 BCL 317 Ballas v Theophilos (No 2) (1957) 98 CLR 193 Barrier Wharfs Ltd v W Scott Fell & Co Ltd (1908) 5 CLR 647 Baulkham Hills Private Hospital Pty Ltd v G R. Securities Pty Ltd (1986) 40 NSWLR 622 Bolot v Capper (1957) 75 WN (NSW) 316 Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153 Brenner v First Artists' Management Pty Ltd [1993] 2 VR 221 British Steel Corp v Cleveland Bridge and Engineering Co Ltd [1984] 1 All ER 504 Brunninghausen v Galvanics (1999) 46 NSWLR 538 B Seppelt & Sons Ltd v Commissioner for Main Roads (1975) 1 BPR 9147 Buckley v Bennell Design & Construction Pty Ltd (1978) 140 CLR 1 Buttrose v Versi (Rolfe J, 10 December 1990, unreported) Chloride Batteries of Australia Ltd v Glendale Chemical Products Pty Limited (1988) 17 NSWLR 60 Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 Coulton v Holcombe (1986) 162 CLR 1 Council of the City of Sydney v Woodward [2000] NSWCA 201 Cumnock No. 1 Colliery Pty Limited v Pacific Power [2002] NSWCA 278 FAI Traders Insurance Co Ltd v Savoy Plaza Pty Ltd [1993] 2 VR 343 Film Bars Pty Ltd v Pacific Film Laboratories Pty Ltd (1979) 1 BPR 9251 Flender (Australia) Pty Ltd v Warman International Ltd [New South Wales Court of Appeal, 18 June 1998, unreported] Foxtel Management Pty Ltd v Seven Cable Television Pty Ltd (2000) 175 ALR 433 Franks v Berem Constructions Pty Ltd [New South Wales Court of Appeal, 2 December 1998, unreported] GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd [2003] FCA 50 Geebung Investments Pty Ltd v Varga Group Investments (No.8) Pty Ltd (1995) 7 BPR 14,551 Glover v Australian Ultra Concrete Floors Pty Ltd [2003] NSWCA 80 Godecke v Kirwan (1973) 129 CLR 629 Graham Evans Pty Ltd v Stencraft Pty Ltd (2000) 16 BCL 335 CASES CITED : G R Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631 Heysham Properties Pty Ltd v Action Motor Group Pty Ltd (1996) 14 BCL 145 Hide & Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310 Homebush Abattoir Corporation v Bermria Pty Limited (1991) 22 NSWLR 605 Howard Smith & Co Ltd v Varawa (1907) 5 CLR 68 Inland Revenue Commissioners v Raphael [1935] AC 96 Integrated Computer Services Pty Ltd v Digital Equipment Corporation (Australia) Pty Ltd (1988) 5 BPR 11,110 Jennings Construction Limited v QH & M Birt Pty Ltd (Supreme Court of New South Wales, Cole J, 16 December 1998, unreported) John R Keith Pty Ltd v Multiplex Constructions (NSW) Pty Ltd [2002] NSWSC 43 LMI Australasia Pty Limited v Baulderstone Hornibrook Pty Limited [2003] NSWCA 74 Love & Stewart Ltd v S Instone & Co Ltd (1917) 33 TLR 475 Masters v Cameron (1954) 91 CLR 353 Najjar v Haines [(1991) BCL 145] Nowlan v Marson Transport Pty Ltd (2001) 53 NSWLR 116 Renard Constructions (M E) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234 Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221 Peabody Resources Limited v Allco Constructions Pty Ltd [Supreme Court of New South Wales, O'Keefe CJ, 14 March 1994, unreported] Peninsula Balmain Pty Ltd v Abigroup Contractors Pty Limited (appeal) Pobjie Agencies v Vinidex Tubemakers [2000] NSWCA 105 Raguz v Sullivan (2000) 50 NSWLR 236 Reardon Smith Line Ltd v Hansen-Tangen [1976] 1 WLR 989 Rowe v Australian United Steam Navigation Company Limited (1909) 9 CLR 1 Ryan v Textile Clothing & Footwear Union [1996] 2 VR 235 Sabemo Pty Ltd v North Sydney Municipal Council [1977] 2 NSWLR 880 Sinclair Scott & Co Ltd v Naughton (1929) 43 CLR 310 Skinner & Edwards (Builders) Pty Ltd v Australian Telecommunications Corporation (1992) 27 NSWLR 567 Spencer's Pictures Limited v Cosens (1918) 18 SR (NSW) 102 Super Pty Limited v SJP Formwork (Aust) Pty Limited (1992) 29 NSWLR 549 Telstra Corporation Limited v Australis Media Holdings (1997) 24 ACSR 55 Tern Minerals NL v Kalbara Mining NL (1990) 3 WAR 486 Trentham (G Percy) Ltd v Archital Luxfer Ltd [1993] 1 Lloyd's Rep 25 University of Wollongong v Metwally (1984) 158 CLR 447 Walter Construction Group Limited v Walker Corporation Ltd (2001) 47 ATR 48 White Constructions (NT) Pty Ltd v Commonwealth (1990) 7 BCL 193 White v Overland [2001] FCA 1333 William Lacey (Hounslow) Ltd v Davis [1957] 2 All ER 712 PARTIES : ABB Engineering Construction Pty Limited (Plaintiff) Abigroup Contractors Pty Limited (Defendant) FILE NUMBER(S) : SC 55033/98 COUNSEL : Mr B Collins QC, Mr M Orlov (Plaintiff) Mr T Bathurst QC, Mr F Corsaro SC, Mr F Hicks (Defendant) SOLICITORS : Abbott Tout (Plaintiff) Clayton Utz (Defendant) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION TECHNOLOGY AND CONSTRUCTION LIST Einstein J 30 July 2003 55033/98 ABB ENGINEERING CONSTRUCTION PTY LTD v ABIGROUP CONTRACTORS PTY LTD JUDGMENT The Proceedings 1 These proceedings concern rights and obligations flowing from dealings between the plaintiff, ABB Engineering Construction Pty Ltd ["ABB"] [referred to in the contemporaneous correspondence as "AEC"] and Abigroup Contractors Pty Ltd ["Abigroup"], relating to the supply and installation of the structural steel roof system and the acoustic roofing system ["the works" or "the roofworks"] for the Multi Use Arena ["MUA"] now known as "the Superdome", being a major Olympic facility. 2 In 1997 Abigroup was engaged by Obayashi Corporation ["Obayashi"] (the Head Contractor to parties commissioned by the Olympic Coordination Authority under a head contract dated 31 July 1997) to perform works in connection with the construction of the Superdome so as to discharge Obayashi's obligations. Those obligations arose under a design and construction contract Obayashi had entered into in respect of the Superdome. The date for practical completion under the contract with Obayashi Corporation was 31 August 1999. 3 The Referee summarised the position as follows: "An entity called the Millennium Consortium ("Millennium"), comprising a number of commercial partnerships, was formed to develop and own (for a period of time) the MUA. Millennium, and in particular Millennium Agent Pty Ltd, were wholly owned by Abigroup. Millennium's design brief required the roof to be a long-span structure, extremely light for its span and designed to be built, clad and to have services installed on the ground prior to being lifted or jacked into position in sections. In July 1997, Millennium Contractors Pty Ltd contracted with the Olympic Coordination Authority ("OCA") to, inter alia, design, construct and commission the MUA and some associated structures. The contract sum for the MUA was $138,962,000. Via a chain of subcontracts, Abigroup was contracted to design and construct the MUA and adjoining carpark and public domain." 4 Abigroup began seeking tenders for various subcontract packages for the construction of the Superdome in late 1997. One such package was for the construction of the steel roof works. This was a significant component of the overall work. 5 ABB was one of the tenderers for the roof works. 6 The Referee described the works as follows: "The arena of the MUA is fully enclosed with a steel-framed (space frame) roof providing a completely column-free space beneath. As well as the steel frame, the roof comprises sound absorption and reflecting elements which, due to their combination in a certain sequence, provide required acoustic qualities, both internal and external. The roof is a complex structure, supported by tension cables (or ties or stays) back to masts located around the perimeter of the seating bowl. Each mast carries two lines of roof trusses. Radially, multiple lower trusses work in concert with the upper roof trusses and ties in a combination of arching, bending, cantilever and catenary, to carry the roof loads to the supports, which are steel columns located at the mechanical level 5 around the perimeter of the bowl. These columns also support rakers and plats for the arena seating. The radial system of roof trusses is connected by a series of ovaloid ring trusses, RT1 being at the circumference of the arena, and RT7 being the innermost ring." [Report page 4] 7 Following communications passing between Abigroup and ABB from November 1997 up to 19 February 1998, a letter from Abigroup of 19 February 1998 authorised ABB to commence and proceed with the works. ABB did precisely that. 8 Some eight months later, by letter dated 15 October 1998 from Abigroup to ABB, Abigroup contended that: · as ABB was aware, the subcontract (including granted extensions of time) required ABB to achieve substantial completion of the subcontract works by 22 December 1998; · ABB had indicated that it intended to complete its subcontract works in August 1999 and was either unable or unwilling to complete earlier; · Abigroup considered this to be an anticipatory breach of the subcontract which amounted to a repudiation of the subcontract and elected to accept the repudiation and terminate the subcontract. 9 ABB ceased to carry out work on the project on 15 October 1998, commencing these proceedings in the same year. 10 The proceedings concern cross contentions as to whether or not, and if so when, and on what terms, the parties entered into a binding subcontract. 11 ABB's stance in the proceedings was that no such contract had been entered into and that it was entitled to be remunerated for work done and materials supplied on the basis of a quantum meruit. 12 Alternatively, ABB pleaded that if there was a concluded contract between the parties, Abigroup had repudiated that contract on 15 October 1998 and sought: · a declaration that it had accepted Abigroup's repudiation by letter dated 15 October 1998 and had thereby lawfully terminated the contract; · relief in respect of that repudiation; · further or in the alternative, certain orders pursuant to section 87 of the Trade Practices Act 1974 to vary any contract so as to provide for the completion of the Works 40 weeks from the provision of a complete, correct set of approved for construction drawings by Abigroup to ABB. [Without prejudging a matter falling for determination in the proceedings, it is convenient by way of internal dictionary to use the term "the Works" save when considering that matter in a technical sense] 13 Abigroup's stance in the proceedings was to cross-claim for damages for repudiation; in the alternative for damages for breach of contract; and in the further alternative for damages pursuant to section 82 of the Trade Practices Act. 14 It is unnecessary for present purposes to detail the entirety of the pleadings forming part of the record. Part only of the pleadings require attention. The Part 72 Reference 15 On 3 November 1999 the Court pursuant to Part 72 Rule 2 (1) of the Supreme Court Rules referred the whole of the proceedings to Mr R N Wensley QC for inquiry and report, giving the Referee power to permit such amendments or additions to the matters referred to him as he saw fit in order to dispose of the two issues between the parties. 16 Following a reference hearing, the Referee by a 900 page report dated 9 December 2002: · awarded to ABB - $3,215,771.70 on the quantum meruit claim - interest on the quantum meruit claim [in addition to $1,855,971 paid to ABB in progress payments up to October 1998] · dismissed Abigroup's Trade Practices Act cross-claim for damages for alleged misleading and deceptive conduct. 17 The scale of the reference is apparent from the following passages in the Report [at page 15]: "Following a preliminary conference in November 1999, and the delivery of witness statements of evidence in chief, the hearing began in March 2000. The case for the plaintiff was opened, beginning on 3 April 2000. The defendant's opening followed and there was an inspection of the MUA roof structure. Early in the piece, some time was spent on debating, organising and conducting conclaves of experts, in relation to the broad topics of delay and programming issues and quantum issues. In this way, during the course of the reference, numerous issues relating to expert evidence were narrowed and/or made the subject of joint reports to the Referee by the relevant experts. Some of the conclaving sessions were chaired by, or involved, the Referee. The parties, and their experts, adopted an appropriately helpful and professional approach to the conclaving process which, in my view, has been of ultimate benefit to the reference and to the parties. In the early days of the hearing, there was considerable debate about some issues of evidence and pleadings. Ultimately, the defendant applied to amend its pleadings, to plead expressly the making of agreements on 7 July 1998. That led to a contested hearing, with affidavit evidence on both sides and cross-examination of deponents. I reserved my decision on the application and resolved it in the defendant's favour, giving my decision and reasons on 18 May 2000, on day 16 of the hearing. On the following day, the first witness was called. Thereafter, some seventeen plaintiff's witnesses and nine defendant's witnesses gave oral evidence and were cross-examined, over a period extending until hearing day 148 on 11 September 2001. Some 70 witness statements or reports were tendered. Much time was spent during the hearing dealing with objections to witness statements. Although the rules of evidence did not apply, a convention was adopted, by agreement, that objections to evidence would be dealt with by reference to those rules. As well, some 24 further statements and reports of witnesses and experts, who were not required for cross-examination, were tendered in the reference. Further, during the course of the hearing, in addition to statements and reports, a large number of exhibits was tendered. At final count, there were some 473 exhibits in the reference comprising about 200 lever arch folders and other documents or bundles, such as diaries; architectural, engineering and workshop drawings; spreadsheets, and so on. The hearing finally was concluded in December 2001, on hearing day 151. The transcript runs to in excess of 10,000 pages. By agreement and direction, the parties produced comprehensive and extensive written final submissions in chief, in reply, in response to reply and in reply to submissions in response. These submissions extend over some 20 volumes of submissions and authorities, comprising thousands of pages of material. They were produced, submitted and exchanged progressively between October 2001 and May 2002. Because of the very comprehensive nature of the written submissions and, further, because of regrettable, but inevitable, slippages in the timetable for the conclusion of the matter, oral submissions in support and amplification of written submissions were not made, despite this step having been included in the original timetabled plan for the conclusion of the reference. " The motions presently before the Court 18 There are before the Court competing motions: · filed on 13 December 2002 by ABB seeking for the report to be adopted and ancillary declarations and orders; · filed on 25 March 2003 by Abigroup seeking: - judgment in respect of claims said to have been abandoned by ABB during closing submissions; - save and except insofar as the Referee found: · that there was agreement between the parties in respect of particular terms as found between 12 February 1998 and 7 July 1998; and · that ABB had engaged in misleading or deceptive conduct in contravention of section 52 of the Trade Practices Act 1974. - an order rejecting the report of the Referee in respect of his conclusions that: (1) no concluded formal contract was entered into between the parties for the works; (2) ABB is entitled to be paid a reasonable remuneration by the defendant for work done and materials supplied to the defendant in connection with the works; (3) Abigroup pay to ABB $3,215,771.70. The approach taken by the parties upon the hearing of the motions 19 Both parties carried out extensive preparation for the hearing of the motions. Hence the Court was furnished with extensive overview submissions underpinned by formal affidavits which in turn identified relevant transcript, the evidence before the Referee and the report itself. The majority of matters falling for decision on the respective motions raise questions of principle and application of principle. There were however a number of disputes as to the respective "summaries of factual findings" sought to be used to assist the Court. 20 A careful reading of the report discloses the care with which the Referee conscientiously went about his task. That form of attention to detail and that form of careful cross-referencing of findings of fact and principle is of assistance to the parties and to the Court in relation to the present exercise. Overview of Abigroup's submissions as to contract 21 Abigroup submits that the Referee erred in concluding that: (a) no subcontract was made between Abigroup and ABB for ABB to carry out the roof works on the Superdome; (b) Abigroup was liable to pay ABB the further sum of $3,215,771.70 (exclusive of the sum of $1,855,971 already paid to ABB by Abigroup) (together with interest). 22 Abigroup in contending before the Referee that a subcontract had in fact been entered into, threw up a plethora of alternate cases in this regard. The Referee dealt with each of these cases, rejecting them. One of the significant issues presently before the Court concerns whether as ABB submits, Abigroup is now before the Court seeking to raise a further case in respect of which case it was either not one which fell within the pleadings or alternatively, if falling within the pleadings, was not one in respect of which a single submission was addressed to the Referee. Hence ABB submits that the Referee can be seen not to have sought to address this case and submits that Abigroup is precluded from endeavouring to pursue such a case for the first time before this Court. I return to deal with this matter below, noting that there is even difficulty in seeking to discern what are the sinews of the further case. 23 The issues arising for the Court in relation to Abigroup's contract case are: (a) whether errors were made by the Referee sufficient to warrant rejection of the Referee's conclusion that no subcontract was made as a result of ABB's commencement of the roof works; (b) if the answer to (a) is yes, whether the Court should conclude that a subcontract was made as alleged by Abigroup; (c) if the answer to (b) is yes, whether the Court should proceed to determine whether the subcontract was repudiated by ABB and assess damages. 24 It seems convenient to commence by examining the principles in a number of disparate areas. The principles which inform the proper exercise of the discretion conferred on the Court in considering a Referee's report and the decision as to whether or not a report should be adopted 25 Part 72 Rule 13 of the Supreme Court Rules deals with "Proceedings on [a Referee's] report" provided to the Court. It states: "(1) Where a report is made, the Court may, of its own motion, after notice to the parties, or on application by any party on a matter of fact or law or both: (a) adopt, vary or reject the report in whole or in part; (b) require an explanation by way of report from the Referee; (c) on any ground, remit for further consideration by the Referee, the whole or any part of the matter referred for a further report; (d) decide any matter on the evidence taken before the Referee, with or without additional evidence; and shall give such judgment or make such order as the Court thinks fit. (2) Evidence additional to the evidence taken before the Referee may not be adduced before the Court except with the leave of the Court." 26 The Court's approach has been considered in a number of cases (see Super Pty Limited v SJP Formwork (Aust) Pty Limited [(1992) 29 NSWLR 549]; Homebush Abattoir Corporation v Bermria Pty Limited [(1991) 22 NSWLR 605]; Skinner & Edwards (Builders) Pty Ltd v Australian Telecommunications Corporation [(1992) 27 NSWLR 567]; Chloride Batteries of Australia Ltd v Glendale Chemical Products Pty Limited [(1988) 17 NSWLR 60]; Najjar v Haines [(1991) BCL 145]; Australian Development Corporation Pty Limited v White Constructions (ACT) Pty Limited [(1996) 12 BCL 317]; Flender (Australia) Pty Ltd v Warman International Pty Ltd [Unreported, NSWCA 18 June 1998] and Franks v Berem Constructions Pty Ltd [Unreported, NSWCA, 2 December 1998]. 27 The parties were at one in accepting that the principles which inform the Court's discretion whether and to what extent to adopt, vary or reject the Referee's report are as set out in Super Pty Ltd v SJP Formwork (Australia) Pty Ltd (1992) 29 NSWLR 549 [an appeal from Giles J in SJP Formwork (Aust) Pty Ltd v Leda Constructions Pty Ltd (19 May 1992, unreported)]. 28 Giles J had set out the relevant principles as follows: "For my own part, in the circumstances of this case I do not think that the Referee's findings of fact should be generally re-agitated in the Court. As a broad proposition, depending upon the circumstances of each case, the Court will not reconsider disputed questions of fact where there is factual material sufficient to entitle the Referee to reach the conclusions he did, particularly where the disputed questions are in a technical area where the Referee enjoys an appropriate expertise. As an example of the application of that approach, in Buttrose v Versi (Rolfe J, 10 December 1990, unreported) Rolfe J adopted a passage from the judgment of Cole J in White Constructions (NT) Pty Ltd v Commonwealth of Australia (1990) 7 BCL 193 in the following terms: 'Consistent with the views I expressed in Chloride Batteries of Australia Ltd v Glendale Chemical Products Pty Ltd , I am of the view that in this instance the Court should not embark upon a re-examination of the questions of fact upon which the Referees have reported. There is obviously a large body of evidence upon which the Referees could properly find as they did. The purpose of Referees reporting to the Court on disputed questions of fact is rendered futile if the Court is to reconsider disputed questions of fact in circumstances where it is conceded that there is factual material sufficient to enable the Referees to reach the findings they did. In circumstances where the Court, having closely scrutinised the Referee's report, has a comfortable feeling of satisfaction that the factual issues have been properly explored and considered, in my view the Court should adopt the Referee's report on findings of fact. In this instance I have that feeling and adopt the actual findings.' Rolfe J went on to say that he was satisfied from a reading of the report as a whole that it was reasoned and that there was factual material upon which the findings by the Referee could properly be made. Noting that it had not been put that there was insufficient evidence to support the findings, but rather that the Referee had come to the wrong conclusion, his Honour said that he was not so satisfied, and that to require the Court to reconsider disputed questions of fact would render the purpose of the Referee reporting to the Court futile. It seems to me that is an approach appropriate to this case." (set out at pp 553-4 of (1992) 29 NSWLR 549) 29 On the appeal the appellant submitted that Giles J misconceived the nature of his duty under Pt 72. It was submitted that his Honour was obliged to consider and determine for himself, all issues whether of fact or of law, in respect of which the appellant was not satisfied with the Referee's report. In particular, that Giles J should have re-heard some of the evidence and formed his own view as to their reliability. 30 This contention was rejected by Gleeson CJ (Mahoney JA and Clarke JA agreeing). Gleeson CJ agreed with Giles J's approach (as set out above) – see (1992) 29 NSWLR 549 at 564. 31 Gleeson CJ reviewed the provisions of Part 72 (see (1992) 29 NSWLR 549 at 556-558). His Honour emphasised the importance of Pt 72 r 8 and the wording on r 13(1), which "appear[s] to confer a wide discretion". Gleeson CJ concluded that: "The proposition that all litigants are entitled to have a judge (or, presumably, a master) decide all issues of fact and law that arise in any litigation, is unsustainable… Again, one thing that is clear about Pt 72, r 13 is that the procedure it establishes is not that of an appeal from a Referee to a judge." (at 558) 32 Gleeson CJ then reviewed the historical development of Pt 72 (see (1992) 29 NSWLR 558-560). In particular, the cases of Buckley v Bennell Design & Constructions Pty Ltd (1978) 140 CLR 1 (per Stephen J and Jacobs J) (which concerned the provisions of the Arbitration Act 1902) and Astor Properties Pty Ltd v L'Union des Assurance de Paris (1989) 17 NSWLR 483 (per Cole J). 33 A comprehensive summary of the relevant principles that have been established are set out in the judgment of O'Keefe CJ in Comm D in Peabody Resources Limited v Allco Constructions Pty Ltd. [NSWSC, unreported, 14 March 1994, pages 10-13]. They were also distilled by Hunter J in Walter Construction Group Limited v Walker Corporation Ltd [(2001) 47 ATR 48] and recently approved by Barrett J in Abigroup v Peninsula [[2001] NSWSC 752 at paras, 19-21. The appeal in Peninsula Balmain Pty Ltd v Abigroup Contractors Pty Limited, referred to earlier, did not concern his Honour's reasoning as to the relevant principles that should apply on an application to adopt a Referee's Report]. 34 The relevant principles include: (a) The Supreme Court Rules confer a wide discretion on the Court considering a Referee's report and the decision as to whether or not a report should be adopted is an exercise in discretion ( Super at 557). (b) The present rules replace earlier provisions dealing with decisions of Arbitrators and Referees, to whom matters were referred by order of the Court. Those earlier provisions had the effect of giving the decision of an Arbitrator or Referee the same effect as though the decision was a verdict of a jury; the decision was only liable to review for error of law, perversity or manifest unreasonableness ( Super at 562-563). (c) An application under Part 72 rule 13 is not an appeal. A reviewing judge has a judicial discretion to exercise. This must be exercised in a manner which is consistent both with the object and purpose of the rules and the wider setting in which they take their place ( Super at 563). (d) It is undesirable to attempt closely to define the manner in which the discretion is to be exercised. The nature of the complaints made about the report, the type of litigation involved as well as the length and complexity of the proceedings before the Referee are all relevant considerations ( Super at 563). (e) A party who is dissatisfied with the Referee's report is not entitled to require a judge acting under Part 72 rule 13 to reconsider and determine afresh all issues whether of fact or law which that party wishes to contest before the judge ( Super at 562). (f) A judge exercising his discretion under Part 72 rule 13 may consider the material before the Referee where there is a real question as to whether there was any evidence for the decision made. The requirement for a "real question" in this context goes beyond a mere suggestion of the type of factual error that, if made by a trial judge, would be corrected on appeal ( Franks at 12). (g) A judge exercising a discretion under Part 72 rule 13 may also need to consider the evidence before the Referee where the Referee's reasons appear adequate on their face, but the challenge is based on the adequacy of the reasoning due to the Referee's failure to refer to very significant evidence against the finding ( Franks at 12). (h) 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). (i) It would ordinarily be a reason for rejecting the Report if it reveals some error of principle, some absence or excess of jurisdiction or some patent misapprehension of the evidence. Perversity or manifest unreasonableness in fact finding would also ordinarily be a reason for rejecting a Referee's report ( Super at 563 to 564). 35 The Court's discretion to adopt, vary or reject the Referee's report is not constrained in the same way that challenges to arbitral awards are constrained. As Super makes plain, grounds for rejecting a report may include: (a) an error of principle; (b) a patent misapprehension of the evidence; (c) perversity or manifest unreasonableness in fact finding. 36 Super also makes plain that where a complaint about a report involves a question of law, or the application of legal standards to the facts, a proper exercise of the discretion requires a judge to consider and determine that matter afresh. The Principles - Masters v Cameron (1954) 91 CLR 353 and its extension 37 As already indicated, the question as to whether or not the parties entered into a subcontract and if so when, and on what terms, lies at the heart of the proceedings. It is next convenient to briefly examine the relevant principles in relation to this matter. In what follows I adopt the statements of principle to be found in John R Keith Pty Ltd v Multiplex Constructions (NSW) Pty Ltd [2002] NSWSC 43. [It is convenient to note that the parties tended before the Referee, as well as before this Court, to refer to what is sometimes termed "the fourth Masters v Cameron class" as "the Baulkham Hills class"]. The following passages are taken from John R Keith at [217]-[238]. "In view of the …submission relying upon either the first or second, or alternatively the so-called 'fourth' class in Masters v Cameron it is necessary to recall the three classes for which the decision of the High Court is authority. The passage in question at 360 is in the following terms: "Where parties who have been in negotiation reach agreement upon terms of a contractual nature and also agree that the matter of their negotiation shall be dealt with by a formal contract, the case may belong to any of three classes. It may be one in which the parties have reached finality in arranging all the terms of their bargain and intend to be immediately bound to the performance of those terms, but at the same time propose to have the terms restated in a form which will be fuller or more precise but not different in effect. Or, secondly, it may be a case in which the parties have completely agreed upon all the terms of their bargain and intend no departure from or addition to that which their agreed terms express or imply, but nevertheless have made performance of one or more of the terms conditional upon the execution of a formal document. Or, thirdly, the case may be one in which the intention of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract. In each of the first two cases there is a binding contract: in the first case a contract binding the parties at once to perform the agreed terms whether the contemplated formal document comes into existence or not, and to join (if they have so agreed) in settling and executing the formal document; and in the second case a contract binding the parties to join in bringing the formal contract into existence and then to carry it into execution… Cases of the third class are fundamentally different. They are cases in which the terms of agreement are not intended to have, and therefore do not have, any binding effect of their own…" As the defendants point out in their written submissions, the seeds of what has now been called the "fourth class" were sown in the earlier case of Sinclair Scott & Co Ltd v Naughton (1929) 43 CLR 310: "One in which the parties were content to be bound immediately and exclusively by the terms which they had agreed upon while expecting to make a further contract in substitution for the first contract, containing, by consent, additional terms." (per the majority consisting of Knox CJ, Rich and Dixon JJ at 317) In Love & Stewart Ltd v S Instone & Co Ltd (1917) 33 TLR 475, His Lordship Lord Loreburn stated at 476: "It was quite lawful to make a bargain containing certain terms with which one was content, dealing with what one regarded as essentials, and at the same time to say that one would have a formal document drawn up with the full expectation that one would by consent insert in it a number of further terms. If that were the intention of the parties, then a bargain had been made, nonetheless that both parties felt quite sure that the formal document could comprise more than was contained in the preliminary bargain." In Baulkham Hills Private Hospital Pty Ltd v G R. Securities Pty Ltd (1986) 40 NSWLR 622 McClelland J. by reference to Sinclair Scott and Co Ltd v Naughton (1929) 43 CLR 310 referred to a fourth class in terms of Masters v Cameron , namely the situation where the parties were content to be bound immediately and exclusively by the terms which they had agreed upon, whilst expecting to make a further contract in substitution for the first contract containing, by consent, additional terms. On the issue which arose in Baulkham Hills of whether or not there was a binding contract, McClelland J at 627 put the matter as follows: "There was a binding contract, if and only if, by the exchange of letters the parties mutually communicated their respective assents to being legally bound by terms capable of having contractual effect: see the discussions in Film Bars Pty Ltd v Pacific Film Laboratories Pty Ltd (1979) 1 BPR 9251 at 9254ff and Air Great Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309. In the last mentioned case Mahoney J A (at 326) identified three questions which it is often useful to consider in such a context as the present, namely "….did the parties arrive at a consensus?; (if they did) was it such a consensus as was capable of forming a binding contract?; and (if it was) did the parties intend that the consensus at which they arrived should constitute a binding contract?" On appeal to the Court of Appeal, McClelland J's decision was affirmed on the basis of the principle quoted above in Sinclair, Scott . In G R Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631, the Court of Appeal held that, "…the decisive issue is always the intention of the parties which must be objectively ascertained from the terms of the document when read in the light of the surrounding circumstances: Godecke v Kirwan (1973) 129 CLR 629 at 63; Air Great Lakes Pty Ltd v K S Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309 at 332-4, 337. If the terms of a document indicate that the parties intended to be bound immediately , effect must be given to that intention irrespective of the subject matter, magnitude or complexity of the transaction." (per McHugh JA as his Honour then was at 634E-F, with whom Kirby P and Glass JA agreed) [emphasis added] …the fourth class has now passed into common parlance insofar as the courts are concerned and is referred to regularly as an accepted classification: see Tern Minerals NL v Kalbara Mining NL (1990) 3 WAR 486; Heysham Properties Pty Limited v Action Motor Group Pty Limited & Ors (1996) 14 BCL 145; Telstra Corporation Limited v Australis Media Holdings (1997) 24 ACSR 55; Brunninghausen v Galvanics (1999) 46 NSWLR 538. I accept that regardless of classification, the principle that is now recognised is that there can be an informal contract with the expectation that other terms will be negotiated and by consent included in the formal document. That is, to say that such further negotiations and activity regarding other terms is still to take place does not mean the existing informal contract is not binding: Anaconda Nickel Ltd v Tarmoola Australia Pty Ltd (2000) 22 WAR 101 (per Ipp J at 110-111). Most recently, the fourth class was considered in Graham Evans Pty Ltd v Stencraft Pty Ltd (2000) 16 BCL 335 [Full Federal Court (French, Whitlam and Dowsett JJ) and see also transcript of special leave application which was refused]. Evans brought an action against Stencraft claiming damages for breach of contract. The claim was dismissed at first instance. Evans appealed to the Full Federal Court. The Full Federal Court, in reversing Spender J at first instance, considered Masters v Cameron and applied Baulkham Hills and in so doing upheld the appeal unanimously. The Full Court held that parties may be bound immediately by the terms, which they agree upon whilst expecting to negotiate the terms of, and make a further contract in substitution for, the first contract. Brambles Holdings Ltd v Bathurst City Council (Unreported, 2001, NSWCA, Mason P, Heydon JA and Ipp AJA) was a case in which the "difficulties" of pressing too far the classical theory of contract formation based upon offer and acceptance (see also Pobjie Agencies Pty Ltd v Vinidex Tubemakers Pty Ltd [2000] NSWCA 105 per Mason P at paragraph 1). Heydon JA said in that case, whilst considering the principles of the law of contract that: "Offer and acceptance analysis does not work well in various circumstances." [at paragraph 71] In that case, Heydon JA set out succinctly the conventional and accepted principles of the law of contract: "The first relevant principle of law is that pre-contractual conduct is only admissible on questions of construction if the contract is ambiguous and if the pre-contractual conduct casts light on the genesis of the contract, its objective aim, or the meaning of any descriptive term: Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 at 347-352. The second relevant principle is that post-contractual conduct is admissible on the question of whether a contract was formed: Howard Smith & Co Ltd v Varawa (1907) 5 CLR 68 at 77; Barrier Wharfs Ltd v W Scott Fell & Co Ltd (1908) 5 CLR 647 at 668, 669 and 672; B Seppelt & Sons Ltd v Commissioner for Main Roads (1975) 1 BPR 9147 at 9149 and 9154-9156; Film Bars Pty Ltd v Pacific Film Laboratories Pty Ltd (1979) 1 BPR [97023] at 9255. The third relevant principle is that post-contractual conduct is not admissible on the question of what a contract means as distinct from the question of whether it was formed. As explained by Priestley JA (Meagher JA agreeing) in Hide & Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310 at 326-330, the status of the relevant High Court authorities is unclear: hence unless it is demonstrated that the later decisions of the Victorian Full Court and Court of Appeal against admissibility, Ryan v Textile Clothing & Footwear Union of Australia [1996] 2 VR 235 and FAI Traders Insurance Co Ltd v Savoy Plaza Pty Ltd [1993] 2 VR 343, are clearly wrong or they are overruled, they should be followed in New South Wales. No attempt was made to demonstrate that they are clearly wrong. The fourth relevant principle is that the construction of a contract is an objective question for the Court, and the subjective beliefs of the parties are generally irrelevant in the absence of any argument that a decree of rectification should be ordered or an estoppel by convention found." Hence in determining the circumstances surrounding the formation of the agreement, the matrix of facts, it is the objective intent that is paramount. Whether any relevant individual representative thought that an agreement existed or that it did not exit, is irrelevant to the exercise unless there exists an argument concerning estoppel. As Lord Wilberforce has said: "When one speaks of the intention of the parties to the contract one speaks objectively - the parties cannot themselves give direct evidence of what their intention was - and what must be ascertained is what is to be taken as the intention which reasonable people would have had if placed in the situation of the parties." [ Reardon-Smith Line Ltd v Hansen-Tangen [1976] 1 WLR 989] Barrier Wharfs Ltd v W Scott Fell & Co Ltd (1907) 5 CLR 647; Howard Smith & Co Ltd v Varawa (1907) 5 CLR 68; Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 at 548-549; Geebung Investments Pty Ltd v Varga Group Investments (No.8) Pty Ltd (1995) 7 BPR 14,551 (supra); Anaconda Nickel (supra) are also authorities supporting the proposition that in ascertaining the relevant intention, that is the intention to contract, relevant circumstances may include prior negotiation and subsequent conduct. A fundamental question falling for consideration is whether the conduct of the parties viewed in the light of surrounding circumstances shows or is indicative of an agreement having come into existence. "In an ongoing relationship, it is not always easy to point to the precise moment when the legal criteria of a contract have been fulfilled. Agreements concerning terms and conditions which might be too uncertain or too illusory to enforce at any particular time in the relationship may by reason of the parties' subsequent conduct become sufficiently specific to give rise to legal; rights and duties. In a dynamic commercial relationship new terms will be added or will supersede older terms. It is necessary therefore to look at the whole relationship and not only at what was said and done when the relationship was first formed." [Per McHugh JA in Integrated Computer Services Pty Limited v Digital Equipment Corporation (Australia) Pty Limited (unreported, NSWCA, McHugh, Mahoney and Hope JJA, 23 December 1988); see also Raguz v Sullivan (2000) 50 NSWLR 236 at 251] Questions of the relevance and probative value of evidence in circumstances in which the issue concerned whether or not an enforceable contract had been entered into were also before the Court in Film Bars Pty Ltd v Pacific Film Laboratories (1979) BPR 97023. As McClelland J. put it, such questions cannot properly be considered independently of a consideration of the relevant issue namely what it is in point of fact that constitutes the making of a contract in circumstances such as here obtained. As his Honour points out, such a contract is made " by the mutual communication between the parties of their respective assents to being bound by identifiable terms otherwise capable of having contractual force, the mutual communication typically taking the form of offer and acceptance ". As his Honour (citing Williston on Contract, 3rd ed, Vol 1 paragraph 21) points out, one is not concerned with the subjective thing known as meeting of the minds, but the objective thing, the manifestation of mutual assents which is essential to the making of a contract. [At page 9254] Film Bars [at page 9255] is also authority for the proposition that: "in determining whether the communications between the parties constitute a contract the Court is not confined to a consideration of the terms or manner in which the communications were made: they must be interpreted by reference to the subject matter and the surrounding circumstances including, inter alia, the nature of, and the relationship between, the parties, and previous communications between them, as well as to standards of reasonable conduct in the known circumstances." I approach the evidentiary issues reserved for decision in the final judgment in precisely the way in which McClelland J. approached the issues in Film Bars . In short subsequent communications may have probative value depending upon the light they throw on the proper interpretation of earlier communications alleged to constitute the contract. Post contractual conduct is not admissible on the question of what a contract means as distinct from the question of whether it was formed [cf Brambles Holdings supra]. Subsequent communications can also legitimately be used against a party as an admission by conduct of the existence or non-existence, as the case may be, of a subsisting contract. Having said that neither counsel sought to have particular material here admitted as admissions. Considerable assistance in terms of following the relevant principles and seeking to apply them in the present case is to be obtained from the decision of the New South Wales Court of Appeal in Australian Broadcasting Corporation v X1VTH Commonwealth Games Ltd (1988) 18 NSWLR 540. Some consideration is also given to questions of evidence without any departure from the approach taken by McClelland J. in Film Bars. Here, as there, the short issue is whether, when the parties negotiated about, and made their 'agreement' (the word is used in a neutral sense), concerning price (on or about 18 July 1997), they should be held to have entered at that stage into a contract, albeit one that would later be overtaken by a further more formal contract containing additional terms and conditions (at 543). Here, as there, the alternative view is that, contemplating that at some future time it would be necessary for them to make agreement on various other terms and conditions, they first set about agreeing on price, in the expectation that if they could agree on that they would have little difficulty in reaching common ground on the other matters which they contemplated would form part of their contractual arrangement, but as to which, in the events which happened, they never reached final agreement. The matter was put in the following terms by the Chief Justice (at 550 and following) with whose reasons for judgment Hope and Mahoney JJA agreed: "…The case involves the objective determination of the intention of the parties from a consideration of a series of communications exchanged by them in the context of their dealings over a period of time. In those circumstances it is both appropriate and necessary to have regard to the commercial circumstances surrounding the exchange of communications and, in particular to the subject matter of those communications : Allen v Carbone (1975) 132 CLR 528 at 531-532. Furthermore, as was noted earlier, it is proper to have regard to communications between the parties subsequent to the date of the alleged contract to the extent to which those communications throw light upon the meaning of the language which is being considered for the purpose of determining whether it expresses an intention one way or the other upon the critical matter. At the least, such subsequent communications will often form part of the context in which the particular exchanges in question are to be evaluated. The position is by no means so clear, however, in connection with internal memoranda… or statements as to subjective intention made by individuals in the course of giving evidence. As it happens, although the learned judge had a good deal of material of this kind put before him at the hearing, it was not particularly helpful even if admissible. In the first place, a great deal of it was equivocal and individual pieces of evidence were contradictory in effect. Some of the persons who participated in the negotiations in question were called to the witness box and vigorously examined as to what was going on inside their minds at particular times. This process in the end principally served to demonstrate what might have been expected to be the case, that is to say, that the witnesses, not being lawyers themselves, were in a state of considerable confusion about the issue that ultimately emerged as determinative of the rights of the parties …….. In so far as acts or statements of the kind referred to, not involving communications between the parties, are claimed to be relevant in a case such as the present upon the ground that they constitute an admission, it seems to me that it will often be necessary to identify with some care the fact which is said to have been admitted. As was noted, there may be cases in which the issue is such that the fact of the subjective state of mind of one or other of the parties is relevant. Normally, however, what is in issue is not their subjective state of mind but their "intention as expressed" (cf Inland Revenue Commissioners v Raphael [1935] AC 96 at 142 per Lord Wright) and caution may need to be exercised in relating the fact which is said to be admitted to the fact which is legally relevant." [emphasis added] Correspondence of offer and acceptance 38 As the matter is put in Carter on Contract [at 8246-8247]: "The offer and acceptance must precisely correspond and any departure from the offer will result in the purported acceptance being ineffective. The position is obvious in relation to a counter offer. However, the rule is a strict one, and is not limited to material deviations from the terms of the offer. Even if it is worded as an acceptance, an acceptance which does not correspond to the offer will normally amount to a counter offer… Acceptance must be unequivocal. This means that the language used by the offeree must be such as would convey to a reasonable person in the position of the offeror a clear and definite decision by the offeree to be bound by the terms of the offer, leaving nothing further to be negotiated [ Appleby v Johnson (1874) LR 9 CP 158; Spencer's Pictures Limited v Cosens (1918) 18 SR (NSW) 102; Ballas v Theophilos (No 2) (1957) 98 CLR 193." 39 To the same effect Anson's Law of Contract, 27th edition puts the matter as follows at 38: "If a contract is to be made, the intention of the offeree to accept must be expressed without leaving room for doubt as to the fact of acceptance or as to the coincidence of the terms of the acceptance proposed and those of the offer. These requirements may be summed up in a general rule sometimes called the mirror image rule." Parties bound by the course they deliberately adopt at trial 40 In the light of the vigorous attack by ABB of what is suggested to be an attempt before the Court to reshape its case before the Referee by pressing a case effectively not litigated during the reference hearing, it is convenient to refer to the principles: "It is elementary that a party is bound by the conduct of his case. Except in the most exceptional circumstances, it would be contrary to all principle to allow a party, after a case had been decided against him, to raise a new argument which, whether deliberately or by inadvertence, he failed to put during the hearing when he had an opportunity to do so." (See University of Wollongong v Metwally (1984) 158 CLR 447 at 483.) 41 In Coulton v Holcombe (1986) 162 CLR 1 at page 7 the matter was put this way: "It is fundamental to the due administration of justice that the substantial issues between the parties are ordinarily settled at the trial. If it were not so the main arena for the settlement of disputes would move from the Court of first instance to the appellate Court, tending to reduce the proceedings in the former Court to little more than preliminary skirmish." 42 In Rowe v Australian United Steam Navigation Company Limited (1909) 9 CLR 1 at page 24 Sir Isaac Isaacs said: "… it is a sound general principle, leading not only to the maintenance of fair play, but also to the repression of unnecessary litigation, that parties must be bound by the course they deliberately adopted at the trial." 43 In White v Overland [2001] FCA 1333 Allsop J said at par [4]: "…in the efficient and proper conduct of civil litigation, even civil litigation hard fought between the parties, it should always be recognised that in the propounding of issues for trial the parties should take steps to ensure that all relevant parties to the dispute are cognizant of what the issues are. Even if something has been said, where it is evident, or indeed suspected, that the other side is proceeding on the basis of a misconception or has not appreciated something, as a general rule, efficiency, common sense and an appreciation of the costs and resources (both public and private) likely to be wasted by confusion in litigation will mandate that a party through his or her representative ensure that the other is not proceeding on a misconception or that the other does appreciate something that has been said. Litigation is not a game. It is costly and stressful, though necessary, evil." 44 In Nowlan v Marson Transport Pty Ltd (2001) 53 NSWLR 116, Heydon JA said: "[26] Fourthly, the conduct of litigation as if it were a card game in which opponent's never see some of each other's cards until the last moment is out of line with modern trends. Those trends were developed because the expense of courts to the public is so great that their use must be made as efficient as is compatible with just conclusions. Civil litigation is too important an activity to be left solely in the hands of those who conduct it." 45 Similarly in Glover v Australian Ultra Concrete Floors Pty Ltd [2003] NSWCA 80, Ipp JA said: [60] "The "cards on the table" approach is now common practice in many jurisdictions…" Turning to the present proceedings Central Structure 46 An enormous amount of focus was addressed by the parties both before the Referee and this Court to a very simple structure. It is convenient to commence by summarising this structure: · The parties exchanged communications orally and in writing prior to 19 February 1998, which communications included invitations to quote by Abigroup, a response and a series of further communications inter partes; · On 19 February 1998 the critical meeting between the parties took place during the course of which certain minutes were examined and discussed and towards the end of which, Abigroup handed a letter of the same date across to the ABB representatives attending the meeting [this letter was often referred to during the reference as " the letter of intent" ]. The proper construction of the letter and more importantly the attempt to discern objectively the intention of the parties from the events at this meeting including the letter and from the circumstances anterior to and following this meeting, form the heart of the matter which was litigated; · On 20 February 1998 two particularly significant events took place. Whilst there was a question as to the timing of these events they were: - the uplifting by ABB of certain drawings; - the forwarding by ABB to Abigroup by facsimile of a response ["the response"] to the 19 February 1998 letter; · On 24 February ABB received from Abigroup a document called 'Project Related Conditions'; · On 25 February 1998 ABB uplifted other drawings from Abigroup which were not drawings which ABB had ever seen before or had ever assessed in terms of the subject work [The finding was that these drawings dated and issued on 25 February 1998 were not a full set of structural and architectural AFC drawings-report 485] [cf transcript 32 where Mr Bathurst accepted that he could not put the proposition that ABB saw the drawings prior to 25 February]; · Following the assessment by ABB of these new drawings and ABB making plain that they substantially departed from the whole of the previous regime and understanding in relation to what works were to be carried out, Abigroup ultimately reverted to the original drawings. [the word 'reverted' was not quite accurate, save in the sense that the design represented a return to the predominant use of rolled steel beams as the main structure element rather than the predominant use of hollow sections. The structure depicted in the April AFC drawings was significantly different to the structure depicted in the tender drawings – report 817/818]. The letters of 19 and 20 February 47 As the terms of the 19th February 1998 letter and the response require careful examination and were treated with by the Referee with very great care and were the subject of so much of the submissions before this Court, it is convenient to commence by setting these letters out, noting that one of the questions for determination by the Referee was whether the response constituted a rejection of any offer in the so-called letter of intent, or by its terms, meant that any continuing offer to be found in the letter of intent which was still live at the time when the response was sent, did not survive as a continuing offer once the response had been sent. The 19th February 1998 letter 48 This letter read as follows: "Abigroup Contractors Pty Limited hereby accept your offer $14,000,000.00 (Fourteen million dollars) to supply, deliver and install all roof structure and roof cladding components to complete the main roof at the above mentioned project, all as per the contract drawings, specification and construction schedule as amended from time to time by Abigroup. Our acceptance is conditional upon the parties entering into a formal subcontract based upon 'Amended SC JCC-D 1994' and Project Related Conditions of Contract. 1. Contract Agreement A copy of the standard subcontract agreement has been forwarded to you. We will now proceed to prepare the subcontract agreement and will forward this document to you for signing. 2. Letter of Acceptance This letter of acceptance dated 19 February 1998 will be included in and form part of the contract agreement. 3. Rise and Fall Rise and fall is not applicable and the price stated above is firm for the duration of the project and is inclusive of all site and industry allowances. 4. Progress Payments To be on a 45 day basis related to completed works as at the 20th of each month. 5. Retention Retention is to be in the form of two (2) Bank Guarantees to the value of $350,000.00 each, the first one to be released at the Head Contract Practical Completion. Balance to be released upon completion of the defects liability period. 6. Defect Liability Period Fifty two (52) weeks from date of Practical Completion of the Head Contract works. 7. Liquidated Damages Actual costs to a maximum of $1,400,000.00 8. Insurance Prior to any works commencing on site, the subcontractor shall provide copies of the actual certificate and the following information. · Current Certificates of Unlimited workers Compensation, Top Up, Public Liability having minimum cover of $10,000,000.00, contract works Insurance with Public Liability to include the respective interests and rights of Abigroup Contractors Pty Limited and any benefit in terms of premium reduction due to Abigroup head contract insurance shall form a credit variation. · Approved Superannuation and Redundancy schemes along with current evidence of contribution by your company to the funds. · Appropriate PPS taxation requirements. 9. Program of Works In order to meet program target dates, you are authorised to commence and proceed with the works to in accordance with this letter of intent prior to the execution of formal copies of the subcontract documents. The works are to be carried out in accordance with the tendered Programme, which will be with completion of the roof structure by the middle of October 1998. Drawings and Specification The trade works relative to this contract are indicated on the following schedule of drawings and specification. Drawings Architectural drawings by Cox Richardson Architects and Taylor Thomson Whitting. As per Abigroup transmittal No. 164 dated 19/1/98. Specifications Taylor Thomson Whitting: SPA–3K Structural Steel Roof Steelwork No 96319A 24 November 1997 Page 2 to 31 inclusive. Cox Richardson Architects: SPA-4C Roofing. No 961033 29 January 1998 Pages 1 to 12 inclusive. SPA-5G Painting. No 961033 9 December 1998 Pages 1 to 18 inclusive. Addendum No 1 – gutter on Main Roof No 96319A 23 January 1998 Pages 1 to 3 inclusive of Plan Layout. 10. General Clauses Commencement by the subcontractor is deemed to be full acceptance of the terms of this subcontract agreement and confirms the existence of a subcontract between our two companies. We confirm that the subcontractor has examined the contract drawings and has allowed for everything necessary and incidental to carry out the work as required under this contract. No claims will be recognised as a result of the subcontractor's failure to allow for everything necessary to complete the works. The subcontractor is to carry out all necessary work as required by the contract. Where work commences piror to the execution of the subcontract agreement, no monies will become due and payable until the subcontract agreement has been executed. You are required to comply with the current law in respect of the Prescribed Progress Payment Act and we further confirm that all progress payment claims are to be accompanied by the appropriate Prescribed Progress Payment Tax Form, or a copy of your deduction certificate. Debris – the subcontractor shall daily clean up all debris created by his work and, at a time nominated by the builder, the subcontractor shall deposit such debris into the site rubbish chute, where applicable, or in a position pre determined by the builder. The said debris shall then be removed from the site by the subcontractor at no further expense to the builder. The subcontractor is to provide all necessary storage facilities for his materials and equipment. Fixing on, near or adjacent to works performed by others is deemed to be acceptance of the suitability of the works performed by others to accept the works contained under this Subcontract Agreement. The subcontractor is to comply with the "Occupational Health & Safety Act" of the safe working practice of his employees as well as himself as it applies to the work of this subcontract. The subcontractor will supply all materials and equipment necessary to facilitate such safe working practice. Particular attention is drawn to the specific requirements of the Act in relation to electrical equipment and power leads used on site. Failure to comply with this could invoke heavy fines or industrial disputation on site. Compliance is therefore compulsory. Where the word "tradesman" is referred to in this contract this work is deemed to mean the tradesperson (male or female). We would like to take this opportunity to thank you for your interest in this project and we look forward to mutually rewarding association on this and future projects." The 20 February 1998 response "Further to our meeting at your offices on Thursday 19 February 1998 and following further post tender discussions, we were most pleased to receive your letter regarding the Main Roof Structure and Roof Cladding on the above project. You will recall that there are a couple of outstanding commercial matters to be resolved regarding the subcontract and these are detailed below for your consideration. 1. We have not had sight of the sections of the Head Contract document that may be applicable to the above subcontract works nor have we received a copy of the Project Related Conditions marked "D". Our offer is therefore based on the proviso that there are no adverse commercial considerations within these documents. (We still await such documents from Abigroup). 2. As an amendment to clause 8 of the Subcontract we would require the following clauses covering exclusion of consequential losses and a cap on total liability. "Notwithstanding anything to the contrary contained in this Subcontract Agreement and the Head Contract, the Subcontractor shall not be liable for any indirect, consequential or economic losses whether in contract or in tort (including negligence) such as, but not limited to, loss of profit, loss of use, cost of replacement production, business interruption and the like." "Notwithstanding anything to the contrary herein contained, the total liability of the Subcontractor shall be limited to the Subcontract Sum." 3. We require clarification of clauses 9.03.02 and 10.11 whereby the Builder may, due to any act, default or omission by it, or it's designers, or any of it's subcontractors or suppliers etc. cause delay to the works of this Subcontractor and in such a case, the Builder is not entitled to an extension of time under the Head Contract. In such a scenario, how does this Subcontractor recover lost time and any associated costs? Will the Builder seek agreement and pay this Subcontractor for acceleration measures if necessary and/or any associated reasonable costs for delay? Obviously, we cannot be expected to pay liquidated damages where the delay was caused by Abigroup. The condition precedent in clause 10.12.01 and 10.12.08 should not apply to the above case. 4. Clauses 10.15 and 10.16 refer to liquidated damages "or otherwise". As discussed, we would agree to actual costs incurred by Abigroup, subject always to a maximum daily rate of damages inclusive of both clauses, combined at $40,000 per day and capped to a maximum of 10% of the Subcontract Sum. 5. As soon as we are in receipt of the Project Schedule from Abigroup, we will propose a payment schedule for your consideration, which would include payments linked to milestone achievements and a provision for payment in respect of design and engineering works progressing off site and purchase of raw steel. 6. Programme/Drawings We acknowledge receipt of tender drawings, but these are not approved for Construction and therefore we cannot proceed using such drawings. Due to Abigroup's very tight schedule for this work, Abigroup will need to provide the Approved For Construction drawings (correct, complete and with no "holds") within two weeks of 20 February 1998. Obviously, the sooner this occurs, the better, because our period of 26 weeks cannot commence until we have received such drawings. In addition, we request your clarification of the following matters which we did not have the opportunity to discuss at the meeting. (a) the provision by Abigroup of a form of surety that ABB will be paid. (b) administration of the BHP Free Issue Steelwork option. (c) Clause 10.30 of the Subcontract conditions should be qualified with the words "Subject to clause 3.02" at the beginning. We trust the above matters are acceptable for inclusion in the subcontract documentation and look forward to your further correspondence." [Facsimile from ABB to Abigroup 20 February 2003, (Ex 20 Vol 2 Tab 67)] The contract cases The submissions 49 It is convenient to commence with the written submissions of Abigroup. These: · first seek to identify facts said to have been derived from the findings of the Referee and from uncontroversial communications between the parties and said not to involve any challenge to the findings of the Referee as to the credit of witnesses or his findings as to disputed versions of conversations and events at meetings [Whilst the report at pages 14 to 704 does include a very lengthy narrative of events spanning a period from about the middle of 1996 to 7 July 1998, it is clear that in this narrative the Referee examines many events beyond the communications between these parties. In endeavouring to identify the particular facts concerning its contract case, Abigroup seeks to focus primarily on the communications between the parties]; · secondly comprise detailed submissions. 50 ABB takes violent objection to Abigroup's so-called derived summary statement of the facts relating to Abigroup's contract case [to be found in Appendix 1 to the Abigroup submissions]. ABB submits as follows: · Having said that it was not challenging the Referee's findings the defendant in fact seeks to do so by a method which it describes as the "derived" facts (paragraph 20 of Abigroup's submissions), that is the facts which the defendant itself says it "derives" from the Referee's detailed factual findings. These "derived" facts are set out at the end of the defendant's submissions in Appendix 1. They are in effect a back door method of challenging the Referee's specific factual findings either by: - reformulating and redefining what were otherwise clear and unassailable factual findings; - omitting references to important facts which alone were of significance to the Referee's conclusions; or - omitting reference to important facts which place other facts in context or in a different light. · It is to those "derived" facts to which Abigroup has had regard in structuring its submissions. · The answer to each of Abigroup's submissions is to be found in the numerous detailed and specific findings made by the Referee. It is inappropriate, dangerous and non-productive for any analysis to be based upon the defendant's so-called "derived" facts. 51 In fact the written submissions put forward by ABB in an extensive and extremely detailed exercise proceed to effectively disassemble many of the material "derived" facts for which Abigroup contends. 52 In the result I have proceeded: · by closely examining the so-called derived facts document; · By closely examining the attack mounted by ABB upon that derived facts document; · in each case by referring, when and as necessary, to the all-important Referee's report. The plethora of alternative contract cases addressed by the Referee 53 The Referee in Appendix 1 to his report entitled "Issues List based on the pleadings" entered into considerable detail in identifying [albeit sometimes in shorthand] no less than eight numbered contract allegations which his close analysis of the pleadings showed had been pursued in the alternative by Abigroup. He then proceeded to identify other contract claims pursued by reference to an estoppel [no suggested errors by the Referee in his manner of dealing with estoppel based contract claims were ultimately pressed before this Court]. 54 It is possible to cross-reference the eight contract allegations summarised in Appendix 1 to the report proper, so that for example: · the first of the alternative contracts pleaded is the subject within the report of paragraph 3.2; · the second of the alternative contracts pleaded is the subject within the report of paragraph 3.3; · the third of the alternative contracts pleaded is the subject within the report of paragraph 3.4; · the fourth of the alternative contracts pleaded is the subject within the report of paragraph 3.5 · the fifth and sixth of the alternative contracts pleaded are the subject within the report of paragraph 5.5; · the seventh and eighth of the alternative contracts pleaded are the subject within the report of paragraph 5.7. 55 The relevant section of Appendix 1 was as follows: CLAIMS THAT THERE WAS A CONTRACT ACTUAL - VERSIONS PLEADED A. Binding agreement made 19 February 1998 (k) The parties agree that the defendant provided to the plaintiff a " Letter of Intent " dated 19 February 1998 on that date, which letter stated in part - "Abigroup Contractors Limited hereby accepts your offer $14,000,000.00 (Fourteen Million Dollars) to supply, deliver and install all roof structure and roof cladding components to complete the main roof at the abovementioned project, all as per the contract drawings, specification and construction schedule as amended from time to time by Abigroup. Our acceptance is conditional upon the parties entering into a formal subcontract based upon 'Amended SC JCC-D 1994' and Project Related Conditions of Contract". However - First contract alleged - D accepts P's offer - 19.2.98 there and then (NB this contract NOT pleaded in FACC) (i) (i) was the defendant's letter of 19 February 1998 provided: A. following the offer of the plaintiff by letter dated 19 February 1998 (see issue 1.A.5 above), and B. following a meeting between representatives of the plaintiff and the defendant on 19 February 1998 (common ground that there was a meeting but disputes as to what occurred at it) C. at which the plaintiff and defendant AA. reached agreement upon the terms of their bargain and BB. intended to be immediately bound to the performance of those terms (as alleged by the defendant)?: ADTSFAS para 3(d); or (ii) was no formal contract agreed and entered into between the plaintiff and the defendant that day or at all (as alleged by the plaintiff)?: SFAS para C6 . Second contract alleged - first version of Baulkham Hills - 19 February 1998 (NB this contract pleaded differently in FACC) (ii) in the alternative to issue 2.A.11(a)(i) above, on 19 February 1998 did the plaintiff and defendant reach agreement on essential terms with the expectation that further terms would be agreed in substitution for or in addition to the terms of this first agreement, this first agreement comprising - Oral parts (a) statements by the representatives of the plaintiff to the representatives of the defendant at the meeting on 19 February 1998: ADTSFAS para 3(e)(i); Written parts (ii) A. the signed minutes of the meeting of 19 February 1998 (ADTSFAS para 3(e)(i)); B. minutes of the meeting between representatives of the plaintiff and representatives of the defendant on 12 February 1998 and 19 February 1998 (ADTSFAS para 3(e)(i) and ADTSFAS para 3(e)(ii)) [Note that the reference to "the signed notes of that meeting" ie meeting 19.02.98 is a reference to the minutes of that meeting: T8520, 21.06.01]; C. a fax from the plaintiff to the defendant dated 19 February 1998 [ Not pleaded in second Baulkham Hills pleading] AA. being an offer [SEE ISSUE 1.A.5] in respect of the whole of the roof works for the MUA project BB. which was accepted at the meeting on 19 February 1998 (as alleged by the defendant)? ADTSFAS para 3(e)(iii). [NO REF TO LETTER OF INTENT?] Third contract alleged - second version of Baulkham Hills contract allegation (iii) in the alternative to issues 2.A.11.(a)(i) and 2.A.11.(b), on 19 February 1998 did the defendant and the plaintiff enter into an agreement whereby - (i) the plaintiff agreed to supply and erect a structural steel roof frame and to supply and install an acoustic roof system (the "Works") at the MUA by bringing the Works to substantial completion within 36 weeks of receipt of AFC drawings; and (ii) the defendant agreed to pay to the plaintiff for performance of the Works the sum of $14 million (the "Contract Sum") (the "the First Agreement "): FACC para C1; DTFACC para 1? (d) was the First Agreement made on essential terms with the expectation that further terms would be agreed in substitution for or in addition to the terms of the First Agreement (the "Further Agreement"): FACC para C1A; DTFACC para 1, this First Agreement comprising - Oral parts (i) A. discussions on 12 February 1998 between Smith and McDonnell for and on behalf of the plaintiff and Owen and Sleeman for and on behalf of the defendant (as evidenced by the Minutes of the Post Tender Interview dated 12 February 1998): FACC para C1A(a)(i); B. discussions on 19 February 1998 between Smith, Glanville and McDonnell for and on behalf of the plaintiff and Owen and Sleeman for and on behalf of the defendant (as evidenced by the Minutes of the Post Tender Interview dated 19 February 1998): FACC para C1A(a)(ii); [Note the differences between this and the oral parts of the second contract alleged pleaded at issue 2.11.(b) above, a third contract introducing discussions at SPTI of 12 February 198] Written parts (ii) insofar as the First Agreement was in writing, was it contained in and evidenced by one or more [sic - NB] of the following: A. Invitation to Tender dated 24 November 1997 (FACC para C1A(b)(i)) [ Not in first Baulkham Hills pleading] ; B. Tender from plaintiff dated 16 December 1997 (FACC para C1A(b)(ii)) [ Not in first Baulkham Hills pleading] ; C. Specifications SPA-3K Structural Steel and Acoustic Roof and Painting (FACC para C1A(b)(iii)) [ Not in first Baulkham Hills pleading. Probably document dated 09.12.97, SPA-3K revision 2, pp1-31 and document SPA-5G Painting, pp10-18 as per Michael Owen fax 10.12.97] ; D. General Conditions of Subcontract SC.JCC-D 1994 as Amended: FACC para C1A(b)(iv) [Assume this is document with handwritten note "Tender issue received on 10/12/97. Not in first Baulkham Hills pleading] ; E. Drawings MAS 7701-01, MAS 7706-01, MAS 7707-01, MAS 7750-01, MAS 7752-01, MAS 7753-01, MAS 7754-01 and MAS 7755-01: FACC para C1A(b)(v); F. Project Related Conditions: FACC para C1A(b)(vi) [Not dated but see exhibit 23 volume D49 tab 4 for sending details - sent 23.02.98. Not in first Baulkham Hills pleading] ; G. Invitation to Tender dated 21 January 1998: FACC para C1A(b)(vii) [ Not in first Baulkham Hills pleading] ; H. Tender from plaintiff dated 9 February 1998: FACC para C1A(b)(viii) [ Not in first Baulkham Hills pleading. Presumably this is the combined bid of 9 February for $14,848,861. Note ABB fax of 19 February reducing price to $14 million is not pleaded here but it is in the first Baulkham Hills pleading] ; I. Minutes of Post Tender Interview dated 12 February 1998: FACC para C1A(b)(ix) [NB this is pleaded in the first Baulkham Hills pleading] ; J. Minutes of Post Tender Interview dated 19 February 1998: FACC para C1A(b)(x) [This is pleaded in the first Baulkham Hills pleading] ; K. Letter from defendant to plaintiff dated 19 February 1998: FACC para C1A(b)(xi) [Presumably the letter of intent. NB this letter not (apparently) pleaded in first Baulkham Hills version, whereas plaintiff's letter of 19 February 1998 is, but is not pleaded in this version] . B. Fourth contract allegation - plaintiff accepts defendant's offer by starting work (l) Did the defendant's letter of 19 February 1998 constitute an offer to the plaintiff (sic) to carry out the roof works for the MUA project on the terms and conditions thereof (ie in the defendant's letter of intent)?; and (i) did the plaintiff accept that offer [a fourth contract formation allegation, presumably deriving from the words of the letter of intent] by commencing the roof works on the MUA project?: ADTSFAS para 5; FACC para C1AA; DTFACC para 1. C. 5 May contract allegations Fifth contract alleged - 5 May 1998, a Further Agreement in substitution for or in addition to terms of First Agreement, ie second Baulkham Hills contract allegation (m) Was a " Further Agreement ", as anticipated by the First Agreement referred to in FACC para C1A, in substitution for or in addition to the terms of the First Agreement therein pleaded, made on 5 May 1998, as alleged by the defendant and as denied by the plaintiff: FACC para C2A(a); DTFACC para 2, this Further Agreement being partly oral and partly in writing, alternatively in writing (FACC para C2B; DTFACC para 2), as follows - Oral parts (a) (i) discussions on 12 February and 19 February 1998 as per FACC para C1A(a) ie issue 2.11.(d)(i) above: FACC para C2B(a)(i); (ii) [Perhaps - not clear] discussions at meeting 25 March 1998 between Glanville and McGilvray as evidenced by "the annotations" on a copy of the subcontract document: FACC para C2B(a)(iv); (iii) [Perhaps] discussions at meeting held on 5 May 1998 (FACC para C2B(a)(vii)) as evidenced in - A. letter from plaintiff dated 8 May 1998; B. letter from plaintiff dated 13 May 1998 [Presumably this is letter exhibit 23, tab 23 re Notice of Delay] ; C. letter from defendant dated 13 May 1998; D. "amended subcontract document" [Not sure what this refers to. One version is attached to exhibit 22; another longer version is attached to attachment A to McGilvray's statement of 26 April 2000 in volume D40. Presumably defendant will identify document referred to in pleading] ; Written parts (b) (i) all of the documents referred to in FACC para C1A(a) and (b) ie issue 2.A.11.(d) above: FACC para C2B(a)(i); (ii) letter from plaintiff dated 20 February 1998: FACC para C2B(a)(ii) [Presumably this is Glanville's letter reference TGPB 9829 fax] ; (iii) letter from plaintiff dated 12 March 1998: FACC para C2B(a)(iii); (iv) [Perhaps] annotations on a "copy of the Subcontract Document": FACC para C2B(a)(iv) [See comments above re oral part (a)(ii)] ; (v) letter from defendant dated 8 April 1998: FACC para C2B(a)(v); (vi) letter from plaintiff dated 20 April 1998: FACC para C2B(a)(vi); (vii) [Perhaps documents A, B, C and D referenced in oral parts (a)(iii) above] . Sixth contract allegation - Final Agreement 5 May 1988 (n) In the alternative to the defendant's third contract allegation (First Agreement) 19.02.98, issue 2.A.11.(c); fourth contract allegation; acceptance by starting work, issue 2.B.12; fifth contract allegation, Further Agreement 05.05.98, issue 2.C.13; and seventh contract allegation, Further Agreement 07.07.98, issue 2.D.15, did the parties enter into a Final Agreement for the plaintiff to perform the Works for $14 million on 5 May 1998 , as alleged by the defendant in FACC para C2C, and denied by the plaintiff in DTFACC para 2, this Final Agreement being partly oral and partly in writing or alternatively entirely in writing as particularised in FACC para C2B above, ie issue 2.C.13 particulars (a) and (b) above. D. 7 July contract allegations Seventh contract allegation - Further Agreement 7 July 1998 in substitution for or in addition to First Agreement (o) Alternatively, was a "Further Agreement", as contemplated by the second Baulkham Hills First Agreement (see issue 2.A.11.(c) above re Third Contract alleged) made on 7 July 1998: FACC para C2A(b), DTFACC para 2, this agreement comprising - Oral parts (a) defendant relies on each of the particulars in issue 2.C.13.(a), ie FACC para C2B(a), above: FACC para C2B(b)(i). Written parts (b) (i) letter from plaintiff dated 20 May 1998: FACC para C2B(b)(ii) [With attachments?] ; (ii) letter from defendant dated 28 May 1998: FACC para C2B(b)(iii); (iii) letter from defendant dated 3 June 1998: FACC para C2B(b)(iv); (iv) letter from plaintiff dated 3 June 1998: FACC para C2B(b)(v) [Have been unable to identify this document] ; (v) letter from plaintiff dated 10 June 1998: FACC para C2B(b)(vi); (vi) letter from plaintiff dated 17 June 1998: FACC para C2B(b)(vii); (vii) letter from defendant dated 24 June 1998: FACC para C2B(b)(viii); (viii) letter from plaintiff dated 26 June 1998: FACC para C2B(b)(ix); (ix) letter from defendant dated 26 June 1998: FACC para C2B(b)(x); (x) letter from plaintiff dated 1 July 1998: FACC para C2B(b)(xi); (xi) letter from defendant dated 7 July 1998: FACC para C2B(b)(xii) [With attachment?] . NOTE: In addition to denying of the making of this agreement on 7 July, the plaintiff raises an estoppel defence, on the basis of the defendant not having pleaded such an agreement when it could and should have done so earlier, to the plaintiff's detriment. Ultimately this was not pursued. Eighth contract allegation - Final Agreement 7 July 1998 (p) In the alternative to the defendant's third contract allegation (First Agreement) 19.02.98, issue 2.A.11.(c); fourth contract allegation; acceptance by starting work, issue 2.B.12; fifth contract allegation, Further Agreement 05.05.98, issue 2.C.13; and seventh contract allegation, Further Agreement 07.07.98, issue 2.D.15, did the parties enter into a Final Agreement for the plaintiff to perform the Works for $14 million on 7 July 1998, as alleged by the defendant in FACC para C2C, and denied by the plaintiff in DTFACC para 2, this Final Agreement being partly oral and partly in writing or alternatively entirely in writing as particularised in FACC para C2B above, ie issue 2.D.15 particulars (a) and (b) above. [ NOTE: As well as denying that any agreement was made on 7 July the plaintiff raises an estoppel based on late pleading - see issue 3.B.19 below.] An important distinction 56 It is important to keep clear the distinction between: · On the one hand, what both parties agree, which is that they indeed litigated the question of fact as to when the work had actually commenced [a matter decided by the Referee who found commencement had occurred on 25 February 1998]; · On the other hand, whether or not the parties litigated any claim by Abigroup that a binding contract only came into existence upon the occasion when, as a matter of fact, commencement of work occurred [as opposed to litigating a claim by Abigroup that a binding contract only came into existence on 19 February 1998]. What was the "fourth contract" case which was ultimately litigated before the Referee? 57 It may be of assistance if I endeavour to commence the examination of this question by distinguishing two very different situations: Situation 1 - 19 February Masters v Cameron Class 1 case 58 In situation 1, parties ABI and ABB have been in negotiation and regardless of the documents which they have exchanged in the course of that negotiation and regardless of what has been said in communications between them in the course of that negotiation, they ultimately have a meeting at which further documents are examined and at which ABI hands a particular document purporting to be a letter of acceptance of an offer, to ABB. The letter itself includes a provision stating that commencement by ABB of particular works will be deemed to be full acceptance of the terms of and will confirm the existence of a contract between the two parties. The meeting continues without ABB reading that letter. During the course of litigation between these parties, ABI claims that by the end of the meeting both parties may be seen objectively by their communications to have reached finality in arranging all of the terms of the bargain [the allegation being that the terms are no more and no less than was set out in the letter passed across at the meeting] and intend to be immediately bound to the performance of those terms, but at the same time proposed to have the terms restated in a form which will be full or more precise but not different in effect [a "first Masters v Cameron class" contract]. ABI in putting forward this proposition, albeit wishing to contend that ABB in fact commenced the work a few days thereafter, makes clear in the litigation that this fact: · is not to be relied upon in support of a submission that the party became bound only upon the commencement of that work; · is only to be relied upon in an evidentiary sense as providing confirmatory or corroborative support for the proposition that the parties had indeed agreed to be bound by the end of the aforementioned meeting [the evidentiary foundation which is suggested being that it would be unlikely that ABB would commence the work unless a binding agreement had been entered into]. Situation 2 - 19 February Baulkham Hills essential terms case 59 In situation 2 ABI and ABB have been in negotiation and regardless of the documents which they have exchanged in the course of that negotiation and regardless of what has been said in communications between them in the course of that negotiation, they ultimately have a meeting at which further documents are examined and at which ABI hands a particular document purporting to be a letter of acceptance of an offer, to ABB. The letter itself includes a provision stating that commencement by ABB of particular works will be deemed to be full acceptance of the terms of and will confirm the existence of a contract between the two parties. The meeting continues without ABB reading that letter. During the course of litigation between these parties, ABI claims that by the end of the meeting both parties may be seen objectively by their communications to have reached agreement where they were content to be bound immediately and exclusively by the terms which they had agreed upon, whilst expecting to make a further contract in substitution for the first contract containing, by consent, additional terms. [a so-called "fourth Masters v Cameron" class or " Baulkham Hills" contract]. ABI in putting forward this proposition, albeit wishing to contend that ABB in fact commenced the work a few days thereafter, makes clear in the litigation that this fact: · is not to be relied upon in support of a submission that the party became bound only upon the commencement of that work; · is only to be relied upon in an evidentiary sense as providing confirmatory or corroborative support for the proposition that the parties had indeed agreed to be bound by the end of the aforementioned meeting [the evidentiary foundation which is suggested being that it would be unlikely that ABB would commence the work unless a binding agreement had been entered into]. Situation 3- Baulkham Hills essential terms case 60 In situation 3, a number of the elements involving situation 1 remained unchanged. Hence: · as in situation 1, ABI and ABB have been in negotiation and regardless of the documents which they have exchanged in the course of that negotiation and regardless of what has been said in communications between them in the course of that negotiation, they ultimately have a particular meeting at which further documents are examined and at which ABI hands a particular document purporting to be a letter of acceptance of an offer, to ABB. · Again the letter itself includes a provision stating that commencement by ABB of particular works will be deemed to be full acceptance of the terms of and will confirm the existence of a contract between the two parties. The meeting continues without ABB reading that letter. · However in situation 3, the day following the conclusion of the meeting which happens to be 20 February 1998, two things happen. The first is that ABB commences the work. The second is that ABB responds to the letter which had been handed over during the meeting, in a fashion such that the response treats with a number of particular matters and does not expressly accept the offer purported to be made in the earlier letter. · In the litigation which ensues ABI claims that the commencement of the work took place before receipt of the responsive letter from ABB. ABI then contends that the first time that the parties had become bound in contract was when the extant offer was accepted by commencement by ABB of the work. The contention is that upon commencement of the work the parties became bound immediately and exclusively by the terms which they had agreed upon [the allegation still being that the terms are no more and no less than was set out in the letter passed across at the meeting], whilst expecting to make a further contract in substitution for the first contract containing, by consent, additional terms [a so-called "fourth Masters v Cameron" class or " Baulkham Hills" contract]. · ABI also claims that in any event the letter from ABB neither rejected the offer nor could it be regarded as a counter offer having the effect that the offer could no longer be regarded as capable of acceptance by commencement of the work, so that, even if the responsive letter had been received by ABI before the work had commenced, it would not have prevented the act of commencement of the work by ABB constituting an acceptance of the extant offer. 61 To put the matter shortly, ABB submits that the Referee found as follows: · Abigroup had in its pleadings alleged in the alternative, contract cases outlined as situations 1 and 3 above. · During the course of the reference Abigroup had by the manner in which it litigated and addressed submissions to the Referee, abandoned the situation 3 case [Report 523.6/541.8/543.3]. [I interpolate to note that this proposition is not accepted by Abigroup] · During the course of the reference Abigroup moved away from its pleaded claims, by pursuing a situation 2 case. Hence Abigroup was found to have " ultimately advanced a new and further contract claim "for an essential terms or "Baulkham Hills" agreement made on 19th February 1998, the terms of which are set out in the SPTI minutes of 19th February 1998, reflected and formalised by the provision of the letter of intent and confirmed by the commencement of works by ABB the next day ". [Report 544.2] 62 ABB submitted before this Court: · that Abigroup had not pleaded or pursued during the reference any "Masters v Cameron fourth class" or "Baulkham Hills" agreement ever entered into on commencement of work by ABB; [vide - the situation 3 case had been abandoned]; · that now for the first time ever, Abigroup was seeking to pursue before this Court, a claim that the Referee erred in failing to find that on the occasion of the commencement of work by ABB [now put as occurring on 25 February 1998], the parties had become bound by such a Masters v Cameron fourth class or "Baulkham Hills" agreement which excluded the SCJCC-D conditions and/or the project-related conditions of contract and/or the project related conditions mentioned in the letter of intent; · that as no such case had been litigated before the Referee it was impossible for the Court to hold that the Referee had erred in failing to uphold any such case; · that as no such case had been litigated before the Referee the principles preventing a party from endeavouring to agitate on the adoption of a Part 72 Report [and in other circumstances on an appeal] must operate to require the Court to reject any such attempt to raise such a claim now; · further that a fundamental denial of natural justice must be seen to take place if the Court was now to permit any such claim to be pursued for the reason that ABB had not been in a position to, and had not litigated such case on an evidentiary basis. 63 During the course of the making of his submissions, Mr Collins QC whilst accepting the above summary of ABB's submissions sought to importantly make the further complaint that no limited terms contract case had been litigated at the trial. The submission was as follows: · Abigroup pleaded that the letter of intent was an offer "on the terms and conditions thereof"; · Abigroup made brief submissions in support of that case but made no submissions as to the terms to be derived from a reading of the letter of intent; · Abigroup's 19 February 1998 contract case, as eventually run, is summarised at Report pages 559.5 to 560.3. That case was based on all of the documents referred to in clause 32 of the SPTI minutes which included SCJCC-D and project-related conditions being part of the terms of the contract; · Abigroup did not plead or run any case based upon an offer on some, but not all of the terms of the letter of intent; ie excluding SCJCC-D and project-related conditions; · either variant of the terms of the offer or the contract set out in paragraph 30 of Abigroup's written submissions before this Court is a limited terms case; ie one which does not include all of the terms in the letter of intent; · specifically that case now sought to be put to the Court was: - not pleaded - not run at the hearing - not supported by submissions to the Referee - not decided by the Referee - not dealt with in Abigroup's oral submissions before the Court in terms of an attack upon anything the Referee was either said or not to have said to have done in that regard Abigroup's paragraph 30 submission 64 Abigroup in its overview submissions submitted as follows: 30 The subcontract made by ABB's commencement was on the terms set out in the letter of 19 February 1998, namely: (a) a price of $14m with no rise and fall (as specified in the first paragraph and Clause 3); (b) ABB to carry out the works as described in the first paragraph and in the drawings and specifications referred to in Clause 9; (c) completion was to be by the middle of October 1998 in accordance with the tendered program as specified in Clause 9 (the tendered program was a reference to the program described in Abigroup's letter to ABB of 21 January 1998); [Vol 29 tab 8 [Ex 20, vol 2, tab 46]; see Paragraphs 16 and 17 of Appendix 1] (d) progress payments to be as described in Clause 4; (e) terms as to retention, defect liability period, liquidated damages, insurance and other general clauses as described in Clause 5, 6, 7, 8 and 10 of the letter. [Paragraph 30] [the footnote to paragraph 30, also numbered 30 was in the following terms: An alternative construction is that the words "the terms of this subcontract agreement" in the first paragraph of Clause 10 includes a reference to the terms in the standard subcontract agreement already forwarded to ABB as described in Clause 1. Hence, the subcontract that comes into existence by commencement is Abigroup's standard form as adjusted to incorporate the matters described in Clauses 2-10 of the letter. However, nothing turns upon whether the subcontract which comes into existence by commencement is as contended for above or has added to it the terms in Abigroup's standard form previously forwarded to ABB.] [Paragraph 31 read: 31 If commencement occurred, these terms would apply pending the expected finalisation and signing of a formal subcontract, containing by consent, additional or altered terms. Contrary to the Referee's conclusion, it was not a consequence of ABB's acceptance by commencement of the works that the subcontract which came into existence was a formal subcontract not yet prepared or seen by ABB.] Further confusion in terms of the approach of Abigroup to addressing submissions to this Court 65 Abigroup addressed detailed written submissions to the Court both in support of its motion and then, following the detailed written submissions of ABB in answer, Abigroup addressed written submissions in reply. Its initial written submissions gave no particular hint, as it seemed to me, of any case otherwise than that a subcontract was made as a result of ABB's commencement of work on 20 February 1998 ["the 20 February 1998 case"]. There was a veiled reference to it "not mattering precisely when commencement occurred" [25], but the initial written submissions certainly did not identify 25 February 1998 as the date when a subcontract had been made as a result of ABB commencement of work on that date. 66 Nor were Abigroup's written submissions in reply particularly clear in this regard, simply including a paragraph making the point that ABB had not sought to withdraw its position advanced to the Referee that commencement occurred on 25 February 1998. 67 Nonetheless, at the commencement of the hearing before this Court it became very clear from oral address by Mr Bathurst QC, leading counsel for Abigroup, that the only case now being pressed was that: · It had been open to Abigroup before the Referee to contend that a Masters v Cameron fourth class binding agreement had been entered into when ABB commenced work on 25 February 1998 ["the 25 February 1998 case"]; · The Referee erred in failing to find accordingly. 68 ABB of course takes issue with any suggestion at all that Abigroup pressed [and the Referee was required to determine], any Baulkham Hills agreement said to have been entered into by an act of acceptance on any date after 19 February 1998, whether it be 20 February 1998 or 25 February 1998. 69 ABB also takes issue with the fact that even if one was to disregard Abigroup's now attempt to press the claim referred to in the previous paragraph, it cannot move from its only claim pressed on the reference, namely a case based on all of the documents referred to in clause 32 of the STPI minutes which included SJCC-D and project related conditions being part of the terms of the contract – but now seeks to claim that upon the 25 February 1998 date of (now submitted) acceptance, a limited terms case, which again moves the goalpost, was entered into. Hence my earlier reference to difficulties involved in understanding "the sinews" of the further case. The Referee's decision 70 The Referee concluded that Abigroup's letter of 19 February 1998 revealed that there was to be no subcontract concluded unless and until the parties signed a formal subcontract [For example, see Report at 524.5 and 526.9-527.1]. According to the Referee's conclusions, the effect of the letter was that ABB achieved the status of selected or preferred tenderer permitted to begin the works while negotiations for the conclusion of a contract proceeded [Report 593.6]. Although the parties came very close to resolving all issues concerning the detailed terms of a formal subcontract agreement in early May 1998 and again in early July 1998, no formal subcontract was ever entered into. The consequence in Masters v Cameron classification terms 71 The submission which seems to me to be correct is that the Referee's conclusion would place the situation in the third class referred to in Masters v Cameron (1954) 91 CLR 353, namely: "Or thirdly, the case may be one in which the intention of parties is not to make a concluded bargain at all, unless and until they execute a formal contract." [Report 361.7] 72 Abigroup then submits, with one qualification, that the case in fact belongs to the fourth Masters v Cameron class already mentioned, namely: "… one in which the parties were content to be bound immediately and exclusively by the terms which they had agreed upon whilst expecting to make a further contract in substitution for the first contract, containing, by consent, additional terms" [ Sinclair, Scott & Co v. Noughton (1929) 43 CLR 310 at 317; see also Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40 NSWLR 622 per McClelland at 628; Tern Minerals NL v Kalbara Mining NL (1990) 3 WAR 486; Heysham Properties Pty Ltd v Action Motor Group Pty Ltd & Ors (1996) 14 BCL 145; Telstra Corporation Ltd v Australis Media Holdings (1997) 24 ACSR 55; Brunninghausen v Galvanics (1999) 46 NSWLR 538; John R Keith Pty Ltd v Multiplex Constructions (NSW) Pty Ltd [2002] NSWSC 43] 73 The qualification is said to be that consistent with the express terms of the letter of 19 February 1998 the parties were not bound until either work commenced or the subcontract was signed. The suggested high significance of the real consequences of the Referee's conclusion 74 Abigroup's submission is that it is a consequence of the Referee's conclusion that: (a) ABB would be undertaking work on a major component of a large and prestigious project at an agreed price of $14m, unregulated by contract; (b) ABB had, unregulated by contract, incurred $4.58m which was approximately 30% of the agreed price of $14m [See for a comparison of expert opinions as to reasonable costs Report 861-862. Abigroup's expert's costs are 32.7% of ABB's tender price of $14m and ABB's expert's costs are 38% of that price]; (c) at all times, both parties were free to withdraw from the project despite pressing commercial considerations which pointed strongly to a shared desire for a binding commitment that ABB carry out the works; (d) statements and conduct by Abigroup and ABB indicative of an intention to make a contract in advance of entry into a formal subcontract agreement were misconceived; (e) the parties acted as if a subcontract existed between them – bank guarantees were supplied by ABB, claims for extension of time and variations were made and administered and a progress claim was made and paid (in part), despite there being no contract between the parties; (f) admissions by ABB that a subcontract existed were mistaken. 75 The submission is that these matters cast grave doubt on the correctness of the Referee's conclusion. 76 ABB on the other hand makes the point that the subject matter being an Olympic project having an international profile with the possibility of mammoth consequential loss damages, ABB had in crystal clear terms made plain that it was simply not prepared to contract on the basis of exposure to consequential loss or unlimited total damages. As the Referee found [in relation to his findings following the 12 February 1998 meeting]: "it must have been evident to the Abigroup representatives present at the meeting that these issues involved important contractual policy questions for ABB, ABB's position being that it was not prepared to contract on the basis of exposure to consequential loss or unlimited total damages and required terms (the precise wording of which were to be negotiated) limiting liability and excluding consequential loss to be inserted in any contract into which it might enter. " [report 157] [emphasis added] This then being a finding which was reiterated in relation to the 19 February 1998 meeting, is relied upon by ABB in support of the proposition that there was a very good reason indeed why in this particular circumstance, it was appropriate for the Referee to find that the parties cannot be seen to have objectively intended to have bound themselves to a contract in the absence of ABB's requirement in relation to this matter being first agreed upon in terms of the wording, and of course, tied down in writing. The decisive issue 77 Subject to Abigroup being entitled to rely upon what I have described as it's "situation 3" case, and if so subject to it's being entitled to rely upon a case that the contract sprang into being upon the commencement of work on 25 February, it is put that the decisive issue was the intention of the parties objectively ascertained from the terms of Abigroup's letter of 19 February 1998 and ABB's commencement of the works when considered in the light of the surrounding circumstances, and the subsequent conduct of the parties [GR Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631 per McHugh JA at 634E-F; Brambles Holdings Ltd. Bathurst City Council (2001) 53 NSWLR 153 per Heydon JA at 163.23-164.28 and Trentham (G Percy) Pty Ltd v Archital Luxfer Ltd [1993] 1 Lloyd's Rep 25 per Steyn LJ, at 27 (adopted by Beaumont J, in dissent, in Foxtel Management Pty Ltd & Ors v. Seven Cable Television Pty Ltd & Ors (2000) 175 ALR 433 at 469.5-470.1; LMI Australasia Pty Limited v Baulderstone Hornibrook Pty Limited [2003] NSWCA 74; Cumnock No. 1 Colliery Pty Limited v Pacific Power [2002] NSWCA 278]. I accept this submission as of substance. It clearly correctly identifies the decisive issue. The nine suggested errors 78 Abigroup's written submission included that in arriving at his conclusion, the Referee erred in the following nine respects: The meaning of the acceptance Clause (a) he concluded that the words of the Acceptance Clause did not mean what they plainly said; Failing to take account of subsequent conduct (b) he failed to take any or any proper account of the subsequent conduct of the parties in ascertaining whether the parties intended to conclude a subcontract by ABB's commencement of the works, and in assessing the significance of unresolved contractual issues at the time of ABB's commencement. It is said that the Referee seemed to proceed on the assumption that if he was of the view that as a matter of construction the letter of 19 February 1998 did not of itself amount to a concluded contract it was not necessary for him to take these matters into account. This is said to have been incorrect (see the cases cited at footnote 62); Reasons for concluding that 19 February letter had no [or insufficient] contractual consequence (c) he concluded that Abigroup's letter of 19 February 1998 could not be treated as having any contractual consequence because he found that Abigroup handed it over without comment and ABB did not immediately read the clause concerning acceptance by commencement of work, or understand there was a clause to that effect [Report 530.2; see also the Referee's finding at 620.3 when dealing with the estoppel submission that "The ABB representatives did not and had no particular reason to read the letter of intent". However, this must be a reference to ABB not reading the whole of the letter at the meeting on 19 February 1998 because he found that Glanville did read the letter (for the first time) on 20 February 1998 see Report 404.2]. Failing to have regard to surrounding circumstances (d) he failed to have regard to surrounding circumstances indicative of an intention to conclude a contract at or by the time work commenced; Misconstruing words in the Acceptance Clause (e) he misconstrued the words in the Acceptance Clause referring to acceptance of the terms of "this subcontract" as referring to a formal subcontract to be prepared based upon the amended SC JCC-D 1994 conditions and concluded that the parties could not have intended ABB by commencement to become bound to a subcontract not yet prepared and seen by it [Report 526.6-526.8; 528.5-528.9]. Construction influenced by consideration of subjective intent (f) his construction of the letter of 19 February 1998 was influenced by his consideration of the subjective intent of the parties; Attaching undue significance to existence of unresolved matters (g) he attached undue significance to the existence of unresolved matters as at 19 February 1998 concerning the terms of a formal subcontract and ignored the fact that these matters were not objectively speaking, essential to the existence of a binding contract nor did they hinder commencement of work for which ABB could at least be liable in negligence if not in contract; Conclusion that 20 February 1998 letter amounted to rejection of offer (h) he erred in concluding that ABB's letter of 20 February 1998 amounted to a rejection of any offer contained in Abigroup's letter of 19 February 1998 [Report 541.6]; and Commencement of works date (i) the original submission had been that the Referee erred in concluding that ABB did not commence the works on 20 February 1998 [Report 539.5; 540.9]. The 24 February 1998 case accepts as correct, the finding that commencement of the Works took place on 24 February 1998. ABB's submissions 79 ABB's written submissions on the contract issue extend across 225 pages. However the basal proposition is quite simple. The proposition is that: · the decisive consideration being the intention of the parties which must be objectively ascertained from the terms of the communications between the parties, the parties were entitled to have the whole of their communications and the whole of the facts examined, which is precisely what occurred in very considerable detail. · The Referee in that very close examination and correctly applying the principles of law requisite to be applied in this area, by reference to the subject matter, the surrounding circumstances, relevant communications between the parties and the standards of reasonable conduct in the known circumstances, reached a finding which is unassailable; namely that the intention of the parties objectively ascertained was not to be bound on 19 February 1998 by any contract [but to the contrary, having prior to and on 19 February 1998 endeavoured to advance negotiations to achieve contractual status had not by that date, nor later, achieved that status]. · Very great significance was attached by the Referee to the exact stances taken by each party through their respective inter partes communications, unassailable findings of fact in this regard being set out in the report in the clearest possible terms. · Amongst those findings of fact was a finding that notwithstanding that Abigroup handed the letter of 19 February 1998 over to ABB towards the end of the 19 February 1998 meeting between the parties, it was not possible to treat that communication in isolation from nor as a radical departure from the particular matters which had been discussed at and before the meeting. · The report is replete with many references to the same matter which perhaps received convenient short summary mention in the following passage: "Despite the large number of issues, the size of the record, the very significant amount of oral evidence and the numerous and various words contained in the key documents, the case boils down to be a simple one where, after careful consideration of the factual disputes and of all of the relevant evidence, it may be stated simply that, at the end of the meeting (sic) 19 February 1998, the parties had advanced their negotiations to a significant point, namely, ABB had been selected as the preferred tenderer but, with numerous (and potentially deal-breaking) matters remaining for discussion and resolution , the point of contract had not been reached". [Report 584] (Emphasis added). 80 ABB's written submissions draw together a number of material considerations in taking issue with Abigroup's statement in its derived facts document [43 (a)] that: "Relevant events at the meeting on 19 February 1998 included…. the parties discussed specific items on the Minutes prior to their initialling of handwritten conditions and amendments. That discussion did not disclose any obstacles to a contract with ABB. " 81 To my mind it is appropriate to set out the content of this section of ABB's written submissions taken from Chapter 2 [15]: "The submission referred to in paragraph 9(c) that the discussion at the meeting on 19 February 1998 did not disclose any obstacles to a contract with ABB may be contrasted with the Referee's findings in relation to a number of important matters which remained unresolved at the end of the 19 February 1998 meeting, each of which had their genesis in matters left unresolved at the end of the earlier meeting on 12 February 1998. ABB's non-negotiable clauses · In relation to ABB's non-negotiable clauses, the Referee found that "ABB had communicated to Abigroup that the clauses were fundamental and non-negotiable and had to be included in any contract which ABB made. Because the Abigroup representatives lacked relevant authority, the matter of the clauses could not be resolved on 19 February 1998; it had to be "taken higher" within the Abigroup organisation. On this basis, and with agreement struck that the parties would meet later on the issue, once the matter had been considered at the appropriate level within Abigroup, the parties at the meeting agreed to defer the issue of the two clauses. At that point the matter had been taken as far as it could on that day". [Report 580, sub-paragraph (a)] (Emphasis added). Project Related Conditions · In relation to the Project Related Conditions, the Referee found that, at the meeting on 19 February 1998, the "topic was discussed on more than one occasion during the meeting. Glanville said a number of times that ABB had not received the Project Related Conditions. Owen told him a number of times that they were available and he agreed to send a copy to ABB quickly. As a result of the discussions which occurred ABB had communicated to Abigroup and Abigroup knew and understood that the Project Related Conditions were an important document for ABB, which ABB wished to review so that it could determine whether there were any adverse commercial concerns in the document and, if there were, raise those concerns with Abigroup in further discussions. The ABB offer or bid was expressed to be conditional upon ABB receiving the Project Related Conditions and upon either determining that they did not contain any matters of adverse commercial concern to ABB or upon any such matter being worked out by agreement. At the end of the meeting, the position on this topic was that the parties had gone as far as they could, the matter was not resolved and the next step in the process, which might lead to resolution, had been identified and agreed, namely, Owen would send a copy of the Project Related Conditions to Glanville". [Report 581, sub-paragraph (b)]. (Emphasis added). SC-JCC-D conditions · In relation to the SC-JCC-D conditions and some other outstanding contractual matters, the Referee found that the position was that "at the beginning of the meeting, major condition 17 of the original bid letter was on the table and had operative effect. The ABB position, known to Abigroup, was that ABB had concerns about a number of the proposed conditions of Subcontract and that it would require to discuss and resolve them before entering into any contract. What the ABB representatives said at the meeting affirmed and emphasised this position. Glanville said words to the effect that he still had reservations about the proposed general conditions; that those matters needed to be looked at; and that there were matters which had not been talked about. The Owen response was to the effect that "now is (not) the appropriate time to discuss those items and we should deal with them later", this matter then being left upon the basis that there would be further discussions to resolve these contractual issues. Once again, on an important matter which ABB signalled was a condition of its entering into a contract, a position was reached at the end of the meeting that the parties had gone as far as they could and each expected and objectively informed the other that there would be further discussions at a later time on this topic which would address ABB's requirement to discuss the terms before entering into any contract". [Report 582, sub-paragraph (c)] (Emphasis added. Underlining is Referee's emphasis). Head Contract conditions · In relation to the Head Contract conditions, the Referee found that the "matter was raised again at the 19 February 1998 meeting. There was discussion and ABB indicated that it needed to see a copy of the Head Contract document because it had not been received by ABB and was regarded by ABB as an important document which it needed to see. The matter was resolved upon the basis that, since (according to Abigroup) the Project Related Conditions contained all of the relevant details of the Head Contract, and since the Project Related Conditions were going to be sent to Glanville for consideration and comment, the next day, ABB agreed to defer discussion of the topic for the moment". [Report 583, sub-paragraph (d)] Payment linkage to project milestones · In relation to ABB's proposal for payment to be linked to the achievement of project milestones, the Referee found that the "matter was discussed and not finalised at the 19 February 1998 meeting. It was left on the mutually agreed basis that Abigroup would provide a program to ABB and, after that, ABB would produce a specific proposal and submit it to Abigroup for further consideration. There was no final agreement but, rather, an agreement to continue to negotiate on this point"[Report 583(e)] The context of, background to and events which took place at the 19 February 1998 meeting 82 ABB in its written submissions made a number of very significant points both in terms of adjectival information and most particularly because of the detailed cross-referencing to Referee's findings. Sections of those submissions [to which I have added my own emphasis] were as follows: 2.29 The Referee's findings in relation to the context of and background to the second SPTI meeting on 19 February 1998 At pages 576-580 of the Report, the Referee summarised his findings in relation to significant matters which form the context of and background to the meeting including the status of ABB's $14M offer [Report 576, sub-paragraph (a)] the limitations on Owen's authority at the meeting [Report 576, sub-paragraph (b)], Abigroup's desire to let the roofing Subcontract as soon as it could [Report 576-577, sub-paragraphs (c) and (d)], ABB's desire to win the job [Report 577, sub-paragraph (e)], the attitudes of the ABB representatives to Abigroup's hope or intention to let the contract by 20 February 1998 [Report 577-578, sub-paragraph (f)], and the important matters left unresolved at the end of the 12 February 1998 meeting which remained unresolved when the 19 February 1998 meeting began [Report 378-580, sub-paragraphs (g)-(k)]. The Referee stated that " none of these matters determine the 19 February 1998 contract question, as finally posed by Abigroup, but, taken together, they provide the factual stage upon which the discussions and events which occurred at the meeting were played out. It is those discussions and events which do determine this contract question . Several of those events make it impossible to find that there was a concluded agreement made at the meeting " [Report 580.3]. It may be added that those same events make it impossible to conclude that the handing over of the letter of intent, without comment, was intended to be an offer to contract on different terms, not discussed to that point in time, which could be accepted by ABB commencing work pursuant to an arrangement made before the letter of intent was even mentioned at the meeting. 2.30 The 19 February 1998 SPTI meeting The meeting started at about 4 o'clock in the afternoon and lasted about a couple of hours. The meeting was held at Abigroup's Chatswood offices. Smith, McDonnell and Glanville attended for ABB. Sleeman, Owen and McGilvray (as the Referee found, probably only nearly at the end of the meeting) attended for Abigroup [Report 279.8-280.1, 280.9]. At the beginning of the meeting the ABB representatives were handed a copy of the SPTI minutes of the 12 February meeting, as marked up by Owen and signed and initialled by Smith on that day [Report 280.4]. Not all of the paragraphs from the 12 February minutes documents were discussed at the meeting of 19 February, with only some of the printed items being discussed [Report 281.1]. 2.31 The 19 February 1998 SPTI meeting - discussion about price The revised contract price of $14M was inserted in the minutes by Owen early in the meeting and there was a discussion about the items in McDonnell's fourteen point facsimile of 18 February 1998, in relation to which the Referee made detailed findings [Report 285-287]. Handwritten notes or amendments were made to the minutes as a result. The Referee found that the purpose the discussion seemed to have been to identify which matters of detail were and which matters were not included in the lump sum price of $14M. 2.32 The 19 February 1998 SPTI meeting - discussion about the start date and the receipt of AFC drawings The Referee found that at some stage, and probably early during the meeting, there was a discussion about Item 7 " Completion Dates/Duration " in the minutes [Report 294.3]. The Referee found that it was a substantial discussion. As to material parts, the Referee found that Smith, for ABB, stated words to the effect that " We want to make sure that the start date is subject to us receiving all AFC drawings. We require AFC structurals to start the shop detail drawings ". In saying this, or perhaps later in the meeting when asking whether the drawings were ready, Smith said words to the effect that ABB's offer relied on ABB receiving Abigroup's AFC drawings " on Day 1 " and that " the clock can't start until we are in receipt of AFC drawings ". Smith also said words to the effect that the provision of all of the AFC drawings for the structural steelwork was non-negotiable, as far as ABB was concerned, if ABB was to be required to complete the works within the thirty six week program which had been discussed. He said words to the effect " They are required immediately " and described the program as being " very tight ". The Referee also found that those present at the meeting knew that the thirty six week period was to involve a period of ten weeks off-site fabrication by ABB followed by a period of twenty six weeks on-site erection work. The Referee found that Smith conveyed to the Abigroup representatives that the thirty six week period would not commence until all of the AFC drawings had been provided to ABB [Report 294, sub-paragraphs (a)-(d)]. The Referee found that Sleeman spoke words acknowledging what ABB had said, saying in response to Smith's indication that ABB's position on this point was non-negotiable and that the clock could not start until ABB had received the AFC drawings, " Yes " and " Yes, we understand and we will expedite the issue of the AFC drawings ". The Referee found that Owen, reasonably, understood ABB's requirement to involve a full set of both structural and architectural AFC drawings. As a result of the discussion, Owen wrote the words on the 19 February 1998 minutes document " From issue from AFC drawings ", opposite the notes written adjacent to Item 7 on 12 February 1998 [Report 295, sub-paragraphs (e)-(g)]. The Referee found that the objective consensus between those present at the meeting as a result of the discussion, and intended to be recorded in Owen's note was that, on the understanding or basis that the AFC drawings would be issued immediately, a ten week off-site fabrication period would begin to run, after which, on about 1 May 1998, work would begin on-site and continue thereafter for a period of twenty six weeks until completion [Report 295, sub-paragraph (h)]. 2.33 The 19 February 1998 SPTI meeting - discussion about liquidated damages The Referee found that probably at a relatively early stage of the meeting on 19 February 1998, Item 8 of the minutes document was discussed. As a result of what Glanville said would be acceptable to ABB, Owen wrote a note in a cloud at that item on the minutes document, neglecting to include Glanville's stipulation that ABB would only accept an exposure to liquidated damages which actually had been incurred by Abigroup, capped by the maximum daily rate and, ultimately, capped by 10% of the contract sum [Report 297.8]. 2.34 The 19 February 1998 SPTI meeting - discussion about milestone payments The Referee found that there was a long discussion on the topic of milestone payments. This was one of the matters that remained unresolved after the 12 February 1998 meeting, at which ABB had been pressing for an entitlement in the nature of milestone payments to take care of substantial expenditures by ABB in relation to off-site work, in the context of a provision in the draft Subcontract Agreement that payment for unfixed materials and off-site work would not be made. The Referee found that the discussion at the meeting on 19 February 1998 was resolved in the following way. ABB had suggested, described and wished to pursue a payment regime based on milestone payments. Abigroup understood that and was receptive to the idea. The matter could not be and was not finalised because Abigroup wanted a specific proposal from ABB, including information about cost implications. ABB needed Abigroup's program to produce such a proposal. The matter was left on the mutually agreed basis that Abigroup would get its program to ABB and ABB would produce a specific proposal, based on the Abigroup program, and submit it to Abigroup. The lengthy discussion and the conclusion of it, was recorded in Owen's cryptic note on the minutes document " costs of to be provided " at the conclusion of the notes made at the earlier meeting, " cash flow for progress claims to establish finance costing " [Report 301]. The Referee concluded in relation to this item [Report 301.9-302.5]: "The important matter to be noted is that, at the 19 February 1998 meeting, no agreement was reached about this item which, as I find, was, and was to the knowledge of Abigroup, an important matter for ABB , particularly in circumstances where it was contemplated that a very large amount of work would be done off-site before any work was done on-site. This was emphasised in a letter from ABB to Abigroup dated 20 April 1998, where ABB said - "As per our facsimile dated 20 February 1998 Item 5, it was always the position of AEC to agree a payment cash flow schedule with yourselves, which would allow for payments linked to milestone achievements for shop drawing and engineering works, purchase of raw steel and materials and goods off site and in stages of manufacture. If Abigroup no longer wished to have such an agreement to payment arrangement AEC's price will need to be increased ." I accept the plaintiff's submission that the evidence establishes that the method of payment had not been agreed as at 19 February 1998. It is not entirely clear how that matter might have played out but there is at least the suggestion that, as at the end of the meeting on 19 February 1998, the parties contemplated that the contract price might change as a result of the working out of this item to an agreed conclusion, because the note said " costs of to be provided. That the state of affairs at the end of 19 February 1998 meeting was as I found above is confirmed, to my mind, by the Glanville facsimile of 20 February 1998, and by Owen's draft reply." (Referee's emphasis). 2.35 The 19 February 1998 SPTI meeting - discussion about ABB's non-negotiable clauses There was also a discussion about ABB's two non-negotiable clauses. The Referee found that prior to attending the meeting on 19 February 1998, Glanville prepared a single page document which had typed on it two clauses to be shown to Abigroup at the meeting. The clauses were standard ABB clauses, one relating to a limitation of total liability and the other to an exclusion of consequential losses. They involved standard ABB language [Report 316, sub-paragraphs (a) and (b).] Glanville took the document with him to the meeting with a view to handing it over to Abigroup if the opportunity arose. In fact, the Referee found that both ABB and Abigroup expected the matter to be raised, because of what had happened in this regard at the 12 February 1998 meeting and Owen, in particular, was expecting ABB to produce some suggested clauses [Report 317, sub-paragraphs (d) and (e)]. (Owen's expectation is a further circumstance that shows that the expression " placing an order " in Owen's facsimile to McDonnell on 18 February 1998 could never have the meaning contended for by Abigroup). The Referee found that the clauses related to fundamental policy matters for ABB and were regarded by ABB as non-negotiable . That was known to each of the ABB representatives who went to the meeting on 19 February 1998 and it was expressly communicated by ABB representatives to Abigroup representatives at the meeting . In particular, both Smith and Glanville spoke about the clauses and referred to them as being non-negotiable matters . The Referee found that Glanville said, and Sleeman confirmed, that ABB required the clauses to be agreed and inserted into the proposed Subcontract. The Referee also found that Owen understood that ABB wanted the clauses included in any contract , having been described to him as ABB policy [Report 317, sub-paragraph (f)]. The Referee found that the topic was raised more than once during the meeting, the first time being shortly after specific items in the minutes document had been discussed. It was raised again towards the end of the meeting when Glanville stated that there were various matters which were outstanding and which needed to be resolved [Report 317, sub-paragraph (g)]. In particular, the Referee found that the matter was raised and Abigroup was told that the clauses were ABB policy, non-negotiable, and had to be included in any contract document , before the minutes document was initialled [Report 317, sub-paragraph (h)]. The Referee found that when the matter was raised for the first time in the meeting, Glanville handed over his document with the clauses on it. Owen and Sleeman looked at the document and there was some discussion about the clauses. During the discussion Owen said something along the lines " We can't include these clauses in any agreement today, we will need to take them higher " and said something like " I'll have to send this upstairs. I can't deal with this matter ". He also said something like " We'll have to deal with those (referring to the clauses) later. We can meet later once we've spoken to 'upstairs' about your clauses and we can work something out ", to which Glanville responded to the effect that he was prepared to be involved in further discussions. Owen also said something along the lines of " We are not familiar with the meaning of such qualifications and we will have to respond later regarding these matters ". Sleeman also said something along the lines " We'll need to take them higher ". The Referee found that what Owen and Sleeman said along those lines was said because in fact they did not have the authority to agree on matters of that kind at the meeting [Report 317-318, sub-paragraph (j)]. The Referee found that on that basis, the matter was deferred to a later time, the parties agreeing that it would be discussed in the future, implicitly when consideration had been given to the clauses by someone in Abigroup with authority to consider them [Report 318, sub-paragraph (k)]. The Referee found that when the matter was deferred, the situation, as the representatives of both parties at the meeting appreciated, was that it had been taken as far as it could be taken on that day and would have to be discussed and dealt with at a later time. As at 19 February 1998, the matter was not resolved and both parties understood that [Report 318, sub-paragraph (l)]. In his reasons, the Referee referred to a submission by Abigroup to the effect that " After the agreement to discuss these clauses later … (there was no) … suggestion that these clauses had to be agreed before ABB could bind itself to an agreement" , and stated: " I reject this submission . While it is true that my findings do not involve ABB having indicated that the clauses had to be agreed, word for word , before ABB could enter into a contract, it is plain that ABB had indicated to Abigroup that the matter was an important one to ABB, involving non-negotiable policy matters which were required to be addressed in any contract and, indeed, Abigroup had agreed that someone with requisite authority would do just that. Theoretically, the matter was still in the realm of negotiation and the sense I have of it is that ABB would have been willing to negotiate the form of words but not willing to negotiate away the ultimate matters of principle, namely, that, as Abigroup knew, it would not bind itself to a contract which exposed it to consequential loss, nor to a contract which exposed it to unlimited damages " [Report 319.5]. (Emphasis added). 2.36 The 19 February 1998 SPTI meeting - discussion about the Head Contract The Referee found that there was a discussion regarding the Head Contract which occurred early during the meeting on 19 February 1998, probably when Item 4 of the minutes document was being considered. The discussion occurred in connection with a discussion about the Project Related Conditions. The matter may have been discussed more than once but the Referee found that it was certainly discussed at least once. The matter was raised by an ABB representative, who indicated that ABB needed to see a copy of the Head Contract document , because it had not been received by ABB and it was regarded by ABB as an important document which it needed to see. Abigroup representatives stated at the meeting that all relevant details from the Head Contract were contained in the Project Related Conditions and, Abigroup having agreed to send a copy of the Project Related Conditions the next day, ABB agreed to defer discussion of the Head Contract , and its requirement to see the document, at least for the moment. The Referee found that this specific arrangement, which left the issue of the Head Contract unresolved as between the parties, involved ABB considering the Project Related Conditions as the next step in the process . [Report 324, sub-paragraphs (a)-(g)] The Head Contract was important because, as noted earlier, the amended SC-JCC-D Subcontract Agreement provided to ABB contained extensive references in the text to the " Head Contract " and " Head Contract Works " . [See clauses 1.02.12, 1.02.13, 2.08, 3.01, 3.03, 6.08.05, 6.12.04, 6.15, 8.03, 8.04, 8.09.01, 9.03.02, 9.10, 10.04, 10.11, 10.12.01, 10.12.07, 10.16, 10.18.03, 10.19.07, 10.29, 11.01, 11.02, 12.08, 12.08.01, 12.08.02, 12.08.03, 12.09, 13.12, 16.01, 16.02, 16.03. References also appeared in Items B.6, G.2, G.3, M and Q of the Appendix that appears at the back of the document] 2.37 The 19 February 1998 SPTI meeting - discussion about the Project Related conditions The Referee found that when Item 4 of the minutes document was being discussed, the subject matter of the Project Related Conditions was raised and then raised again on several later occasions during the course of the meeting, before the minutes were initialled. The Referee found that Glanville communicated to the Abigroup representatives the following matters. ABB had not seen the Project Related Conditions. ABB wanted and needed to see the Project Related Conditions. They were an important document as far as ABB was concerned and seeing them and considering them was an important matter as far as ABB was concerned . The reason that ABB wanted to get and consider the Project Related Conditions was so that ABB could determine whether there were any adverse commercial concerns in the document . If there were such concerns, ABB would want to raise them with Abigroup in further discussions. The Referee found further that Glanville communicated to the Abigroup representatives that ABB's offer or bid was conditional upon ABB receiving the Project Related Conditions and upon either determining that they did not contain any matters of adverse commercial concern to ABB or upon any such matters being worked out by agreement . [Report 345, sub-paragraphs (a) and (b)] The Referee found that, from the conversations at the meeting on 19 February 1998 about this topic, the Abigroup representatives knew and understood that the Project Related Conditions document was an important document for ABB, which ABB wished to review and comment upon, the importance being underlined by Glanville's asking for the document a number of times, so much so that Owen expressed frustration or exasperation at Glanville's persistence, even though Owen knew that ABB had not seen the document to that time and must have known that it was one of the important Abigroup suite of contract documents which Abigroup procedures required to be included in any Subcontract. [Report 333.8-334.1] Glanville's persistence in insisting on seeing a copy of the Project Related Conditions, Owen's expressed frustration at that, and Glanville's communication to the Abigroup representatives that ABB's offer was conditional upon ABB receiving the Project Related Conditions and determining that they did not contain anything disadvantageous to ABB, in the terms the Referee found, shows that both parties were proceeding at the meeting on the basis that Abigroup was continuing to insist that any contract that it entered into with ABB should include the Project Related Conditions . Abigroup's intention in that regard had been clearly disclosed to ABB in the two invitations to quote sent to ABB on 24 November 1997 and 21 January 1998, in the standard form SPTI minutes used as the basis for discussion at the SPTI meetings on 12 February 1998 and again on 19 February 1998, emphasised by the reading out aloud of the contents of clauses 29 and 32 at the 12 February 1998 SPTI meeting, and Owen's promise at that meeting to send a copy of the Project Related Conditions to ABB in response to a request by the ABB representatives. Having considered all of the evidence, the Referee found that in relation to the Project Related Conditions, the position at the end of the 19 February 1998 meeting was that the parties had gone as far as they could on the topic; the matter was not resolved; and the next step in a process which might lead to resolution had been identified and agreed , namely, that Owen would send a copy of the document to Glanville. [Report 349.5] In that context, the Referee said that he took particular note of the following passage of Mr Owen's evidence in cross examination as it was given, and accepted the evidence and regarded it as being particularly important [Report 315.7]: "Q: In relation to the consequential clauses, or the two clauses on the piece of paper, and the Project Related Conditions and the matters that Mr Glanville said that he wanted to discuss, the position was that at the meeting of 19 February you had gone as far as you could and those matters that I have mentioned would have to be discussed and dealt with later on? A: Yes. " 2.38 The 19 February 1998 SPTI meeting - discussion about the SC-JCC-D conditions of contract and other contractual matters The Referee found also that during the meeting on 19 February 1998 there was discussion about Abigroup's proposed general conditions of Subcontract and about some other contractual matters that ABB wished to discuss. The matter was raised at least once during the course of the meeting and again towards the very end of the meeting. The Referee concluded that probably, it was first raised before the minutes were initialled and certainly it was first raised before the letter of intent was handed over and before ABB was told that it was the successful contractor. On each occasion it was raised by Glanville. [Report 355, sub-paragraphs (a)-(d)] The Referee found that when Glanville first raised the topic, he said words to the effect that he still had reservations about the general conditions; that there were things in the general conditions that had not been talked about and needed to be talked about and needed to be looked at. Owen then said words to the effect " Without wishing to cut across your bows, Terry, I don't think that now is the appropriate time to discuss those items and we should deal with them later ", saying words to the effect " We will talk about these later " and/or " I'll discuss with you later "; and/or " We can deal with this later ". The Referee found that ABB, by Glanville, agreed that this matter should be deferred, Glanville rightly assuming from what Owen had said that there would be another meeting to discuss these issues. On this basis, ABB's requirement to discuss the terms of the proposed general conditions of Subcontract were carried over and were not worked through. [Report 355, sub-paragraphs (e)-(i)] The Referee found that when Glanville raised the matter of unresolved contractual issues again , towards the very end of the meeting , Abigroup , through Owen, said words to the effect that the issues had to be deferred and ABB, through Glanville, agreed, somewhat reluctantly, to do that. [Report 355, sub-paragraph (k)] The Referee found that at the end of the meeting on 19 February 1998 the position with respect to this matter was that the parties had gone as far as they could go in relation to discussions on the topic and the matter was one which was not resolved at the meeting . [Report 355, sub-paragraph (l)] The Referee found that the arrangement to defer discussions to a later time was in the context that: ABB had stated in Condition 17 of its original bid letter of 16 December 1997 that " We have concerns regarding a number of your proposed conditions of Subcontract, therefore, if our offer is of interest to you, we would require to discuss and resolve our concerns before entering into the contract ". (Referee's emphasis); This qualification was restated in the revised bid of 9 February 1998, both Owen and Sleeman understanding the phrase in that letter " Previously stated qualifications and clarifications still apply " to be a reference to the qualifications in the 16 December letter; the matter was raised but not dealt with at the 12 February 1998 meeting; Owen understood when he first read Qualification 17 that ABB wished to negotiate the terms of the proposed SC-JCC-D contract, an understanding that he still had on 19 February 1998. [Report 356, sub-paragraph (m)] The Referee found that on all of these bases, the matter of the proposed amended SC-JCC-D contract terms was left outstanding, and for further discussion, at the end of the meeting . [Report 356, sub-paragraph (n)] 2.39 The 19 February 1998 SPTI meeting - the signing of the minutes The Referee found that at some stage during the meeting on 19 February 1998, after items in the minutes document had been discussed and after Owen had added notes to the document, clouded them and attached the revision " A " symbol, Smith initialled Owen's notes on the document. [Report 364, sub-paragraph (a)] The Referee found that this happened in the following circumstances. Owen gave the minutes document, upon which he had written, to Smith. Owen or Sleeman then asked Smith to read or review the document and to initial the various changes which Owen had made to it if Smith agreed if those changes were an accurate record of matters discussed. Owen left the room but Sleeman did not at that time. Smith read the document. Sleeman asked Smith something along the lines of whether he was happy with the minutes and asked him whether there was anything he wished to add or amend. Smith said something to the effect that he considered that the changes were accurate. Owen returned to the room and Smith and Owen then initialled the changes on the document. [Report 364, sub-paragraphs (b)-(h)] The Referee found that objectively, and as the representatives of both ABB and Abigroup present at the meeting understood, the purpose of initialling the changes on the document was to record and acknowledge that both parties considered that the changes to the minutes had been made accurately by Owen, the ABB representatives not having seen what Owen had written until the document was handed to Smith. [Report 364, sub-paragraph (j)] Nevertheless, the Referee accepted Glanville's evidence to the effect that " The "minutes" of the meeting of 19 February 1998 do not in fact record either accurately or in sequence the conversation as it took place on that day. In a number of significant ways, the document does not record what happened at the meeting … and is inconsistent with what happened at that meeting " [Report 281.5] and made specific findings to that effect, to which reference has been made already. 2.40 The 19 February 1998 SPTI meeting - ABB is told it is the successful contractor and Smith asks " When can we start? " The Referee found that during the meeting on 19 February 1998, and after some discussion about ABB's two non-negotiable clauses and other matters that Glanville wanted to raise, and after it had been agreed that Owen and Glanville would meet later to " work something out " on these issues, Sleeman made an announcement to the meeting along the lines that ABB was the successful contractor for the roofworks and said words to the effect " Welcome on board ". [Report 371, sub-paragraphs (a) and (b)] Not long after this Smith asked " When can we start? " [Report 371, sub-paragraph (f)] As well, Smith asked whether the AFC drawings were reading. He indicated that he would like to pick up the AFC drawings as soon as possible, and that ABB wanted to start the shop drawings. Sleeman had a discussion with the Abigroup people in the room, the contents of which the ABB people could not hear. Owen left the room and returned with one of the TTW engineers, Duff, who was working on the drawings. Sleeman and Duff had a conversation, which the ABB representatives could not hear. [Report 383, sub-paragraphs (e)-(g)] 2.41 The 19 February 1998 SPTI meeting - Abigroup knowingly falsely misrepresents that the AFC drawings would be available for collection immediately after 19 February 1998 The Referee found that each of Owen and Sleeman then said words to the effect that the drawings were ready or would be ready at the end of the meeting and could be collected from Abigroup's Chatswood offices, where the meeting was being held. The Referee found that in fact Duff had told Sleeman that the drawings were not ready and that Sleeman deliberately chose to inform the ABB representatives, untruthfully, that they were ready. [Report 384, sub-paragraph (m)] The Referee found that, not long after that, Owen said something to the effect that the drawings could not be collected on that day, indicating that there was some sort of printing problem, but they could be collected the following day. Smith said words to the effect that he could and would pick up the drawings the following day, because he lived at Castle Hill in Sydney and would then take them to Tomago so that ABB could begin work on them. [Report 383, sub-paragraphs (i) and (j)] The Referee found that Abigroup representatives knew that the ABB non-negotiable position was that it required to have all of the AFC drawings immediately, and the ABB inquiry, as to whether the drawings were ready, was made in that context. The Abigroup response, that the drawings were ready, contained no suggestion or qualification that only some of the drawings were ready. In fact, contrary to what Abigroup's representatives had told ABB, the Referee found that the drawings were not ready on 19 February 1998 and it was not expected by Duff, Sleeman or Owen that they would be ready the next day. [Report 383, sub-paragraphs (k) and (l)] The Referee concluded that on 19 February 1998 Sleeman, for Abigroup, falsely, and knowingly falsely, represented to McDonnell, Glanville and Smith for ABB, that all of the AFC drawings for the roofworks were then in existence and ready and would be available for collection by ABB immediately after 19 February 1998. [Report 387.5] Reference has been made earlier to the Referee's finding that, as at 18 and 19 February 1998 Abigroup had decided to build the alternative structure on which TTW had been working since mid January 1998, although that fact was unknown to ABB. Thus, when arrangements were made for Smith to pick up all of the AFC drawings the next day, ABB did not know that those drawings related to the alternative design, that ABB had not priced and had said it would carry out on a cost plus basis because it was more complicated. The Referee concluded [Report 564, sub-paragraph (e)] "There is no evidentiary support for a conclusion, that objectively on 19 February 1998, ABB agreed to construct the roof in accordance with the AFC drawings which were to be collected the following day when those drawings depicted a design which Owen had told McDonnell in the course of the post-tender dealings was a design which Abigroup would not pursue and in circumstances where ABB's bid and price, and all of the discussions which it had had with Abigroup (except for the conversation with Owen, just referred to) were on the basis of the tender design". 2.42 The 19 February 1998 SPTI meeting - the letter of intent is brought in and handed over without comment The Referee found that after an agreement was made to defer discussion of the contractual matters raised by Glanville and after ABB had been told it was the successful contractor and after the discussion about the readiness of the AFC drawings and the making of arrangements for Smith to pick up all of the AFC drawings the following day, Owen said words to the effect that a letter of intent was being prepared or was being put together or was ready, and that he was going to get it. [Report 402, sub-paragraph (a)] Owen then left the room to get the letter. He returned with the letter and without comment, handed the letter to Sleeman who immediately, and also without comment, slid or pushed the letter open and face up across the table to Smith. [Report 402, sub-paragraph (c), (f) and (g)] The Referee found that at least until Owen said, before he left the room, something about a letter of intent being prepared, or words to that effect, the ABB representatives at the meeting were not expecting to receive a letter of intent. [Report 402, sub-paragraph (i)] It is clear that, to that point in time at the meeting, there had not been any mention of a letter of intent. The Referee specifically rejected the evidence of Owen and Sleeman, that Owen said, at that time, words to the effect " This will reflect the agreement until these new items are worked out ". The Referee also specifically rejected their evidence that Glanville replied " Okay " to this statement . [Report 402, sub-paragraph (b)] Abigroup has not challenged that finding, nor is there any basis upon which that finding could be challenged consistent with principle. This means that one of the important facts established by the Referee's findings, which provides the context within which the letter of intent has to be construed, is that when the Abigroup representatives announced that a letter of intent was being prepared and the letter was then brought into the room and handed over, nothing was said to the ABB representatives to indicate that, by handing over the letter of intent, Abigroup was intending to depart from the position that it had taken to that point in time at the meeting, and at all previous times, that any contract between the parties would be in writing, executed by the parties, and on terms set out in Abigroup's amended SC-JCC-D Subcontract Agreement and the Project Related Conditions . The Referee found that Smith picked up the letter, which was typewritten on Abigroup letterhead and which was four pages in length. He briefly looked at what was on the first page and he read part of that page, in particular the heading and the beginning of the first paragraph of the letter. Smith then gave the letter to McDonnell. McDonnell looked at the front page of the letter and noted the reference to Abigroup accepting ABB's offer but read no more of the document. McDonnell quickly passed the letter to Glanville. Glanville did not read the letter but, at about that time he learnt or understood that the letter was a letter of intent. [Report 403, sub-paragraphs (l)-(q)] The Referee stated: "I accept the ABB submissions to the effect that at the time the letter of intent was handed over nothing was said by ABB's representatives to indicate that ABB agreed with any statement in the letter; the letter was not read in full or considered by ABB's representatives when it was handed over; no Abigroup representative required or suggested that any reply or response should be made at that time ; and (as appears below), in fact Deane came into the room almost immediately after the letter had been handed over and began to speak. At that time, the parties had agreed to discuss the Project Related Conditions, milestone payments, the SC-JCC-D conditions of contract and ABB's non-negotiable clauses on some later occasion and there was neither the time nor, in the context and flow of the meeting, the opportunity for the single copy of the letter of intent to be read by all (or indeed any) of the ABB representatives, and certainly not analysed and discussed between them to enable serial replies to be formulated and provided to Abigroup at the meeting ". [Report 404, sub-paragraph (u)] 2.43 The 19 February 1998 SPTI meeting - the respects in which the contents of the letter of intent failed to reflect matters that had been agreed at the meeting ABB makes submissions in relation to the construction of the letter of intent in Chapter 3 of these submissions. However, in this part of the submissions, which deal only with the facts, it is necessary to identify the respects in which the contents of the letter of intent failed to reflect matters that had been discussed and in respect of which there was consensus at the meeting, or took positions that were contrary to such consensus. The letter made no reference to the parties' specific agreement to discuss later the Project Related Conditions (after they had been provided to ABB), the Head Contract, Abigroup's amended SC-JCC-D General Conditions and other contractual matters ABB wanted to raise, milestone payments (after Abigroup provided its program to ABB and ABB submitted its proposal and costing) and ABB's non-negotiable clauses (after someone within Abigroup, with the appropriate level of authority had considered the clauses Glanville had given to Owen). The first numbered paragraph of the letter of intent stated that " a copy of the standard Subcontract Agreement has been forwarded to you. We will now proceed to prepare the Subcontract Agreement and will forward this document to you for signing ". That statement was incorrect as a matter of fact because, read in context, the reference to the " standard Subcontract Agreement " was a reference to Abigroup's amended SC-JCC-D 1994 General Conditions and the Project Related Conditions, which were incorporated in the Subcontract Agreement by reference, provision being made for both of these documents to be signed by the parties. [See paragraphs 31(c)-(e) and 32 above] The Project Related Conditions had not been forwarded to ABB and arrangements had been made for that to be done the next day. [See paragraph 148 above] The fourth numbered paragraph of the letter stated that progress payments would be " on a forty five day basis relating to completed works as at the 20th of each month ". This had not been agreed at either of the two SPTI meetings and was contrary to the consensus as to how the parties would move forward. As the Referee's findings establish, ABB had made clear that it wanted to agree a regime of milestone payments, there was a consensus at the meeting that the matter would be considered and that ABB would provide a specific proposal, including any effect on its price, after Abigroup had provided its program to ABB for that purpose. [See paragraphs 72-76 (as to 12/02/98 meeting) and paragraphs 130-131 (as to 19/02/98 meeting)] The seventh numbered paragraph related to liquidated damages and provided that they should be " actual costs to a maximum of $1,400,000 ". This was contrary to the consensus reached at the meeting about liquidated damages during the discussion about Item 8 of the minutes. That consensus was to the effect that ABB would agree to pay liquidated damages, being the actual costs incurred by Abigroup, up to a maximum of $40,000 per day, including any damages arising out of clauses 10.15 and 10.16 of the proposed SC-JCC-D subcontract conditions, with total damages capped at 10% of the contract sum. The provision in the letter of intent was not the same as the matters discussed and agreed at the meeting, nor the same as the matter recorded in Owen's Item 8 note of the discussion, which the Referee found was not a complete and accurate note of the matters agreed. [Report 530, sub-paragraph (b). See also Report 297.8-298.1. See also paragraphs 65-66 (as to the 12/02/98 meeting) and paragraph 129 (as to the 19/02/98 meeting)] The ninth numbered paragraph of the letter of intent stated in part that " the works are to be carried out in accordance with the tendered Program, which will be with completion of the roof structure by the middle of October 1998 ". This was plainly contrary to the consensus at the meeting. The Referee found that ABB had not tendered a program. [Report 566, sub-paragraph (i)] The Referee referred to the fact that there was a program of sorts in Abigroup's invitations to quote. However, in both letters (dated 24 November 1997 and 21 January 1998 respectively) what was included was described as a " Preliminary Construction Program " which related only to on-site work, namely assembly and erection of the roof . The latter invitation to quote (dated 21 January 1998) provided for an early start date for the on-site work of 3 April 1998 and completion by 17 October 1998. However, the consensus at both the 12 February 1998 and 19 February 1998 meetings was that on-site work should commence on 1 May 1998 (not 3 April) and finish twenty six weeks later and that ABB's non-negotiable requirement was that, if Abigroup wanted the work completed within an overall period of thirty six weeks, time could not commence to run until ABB had been provided with a full set of structural and architectural AFC drawings. The letter made no mention of those matters. Moreover, the requirement stated in the letter of intent to complete the roof structure " by the middle of October 1998 " allowed only thirty four weeks within which to complete the work, based on a start date of 20 February 1998. That had been expressly not agreed by ABB and the consensus was that a completion date of late October 1998 should apply subject to the immediate provision of a full set of AFC drawings. [See paragraphs 61-63 (as to 12/02/98 meeting) and paragraphs 126-128 (as to the 19/02/98 meeting)] Paragraph 9 of the letter of intent under the heading " Drawings and Specifications " listed drawings and specifications that the Referee found were not current at that time . [Report 532.8 and Report 536.4] Moreover, the Referee found that Abigroup had already decided to build a different structure, which ABB had not priced and which, objectively, ABB had not agreed to build. [See paragraphs 80-81, 112-114 and 166 above and paragraphs 258-262 below] The Referee's findings, referred to earlier, show that nothing was said to the ABB representatives when the letter of intent was handed over that, considered objectively, could have communicated to them that Abigroup was intending to depart radically from the consensus position reached at the meeting in relation to these various matters and now was offering to enter into a contract on entirely different terms. 2.44 The 19 February 1998 SPTI meeting - discussions with Deane at the end of the meeting The Referee found that after the letter of intent was handed over without comment Owen then left the room again to get Deane. He returned after a short time, accompanied by Deane and probably, by McGilvray and a little while later Picking came in as well. [Report 404.8] The Referee found that when Deane came into the room there was an atmosphere of happiness and enthusiasm. Deane introduced himself to the ABB people. He also came into the room, with Deane or shortly after him and Picking was also introduced to the ABB people. Deane said words to the effect " My name is Peter Deane and I am with Millennium Consortium ". There were introductory hand shakes with Smith, McDonnell and Glanville. This was the first time Glanville had met Deane. Deane said nothing to indicate that he was in any way connected with Abigroup and he handed Glanville his business card when they were introduced. Glanville, after being introduced to Deane said something to the effect that ABB were happy having been told they were the successful tenderer. The Referee said that he was unable to find precisely what words were spoken but he found that Glanville conveyed two things to Deane by the words he used, namely that ABB had been successful in the tender process and was pleaded about that and that there were some matters yet to be resolved. [Report 419, sub-paragraphs (f)-(p)] Deane then made a speech, saying something along the lines " I am pleased to welcome ABB, or AEC, to become part of the team for the completion of this prestigious project ". Early in the speech he said something like " Welcome aboard and we look forward to working with you ". He made mention of the Olympic Games and said something to the effect that all members of the team were to co-operate with one another to help achieve everyone's aim and to work towards the target of ensuring a successful project for all. He also spoke about working together for the project, the profile of the project and the benefits it would reap for both companies, saying something like " It is an important project for both companies; it is high profile; I am sure we will work well together; we'll make it successful ". Towards the end of his speech, he said something like " Please come and see me any time if you have any problems ". [Report 420, sub-paragraph (q)] The Referee found that after making his speech, Deane made a statement to the ABB representatives about the VIK steel scheme. Deane indicted that if ABB did take steel under the VIK agreement there would be, or probably would be, a contract price adjustment. Glanville responded to what Deane said, indicating that ABB would consider the matter and that he would let Owen know whether ABB wanted to take up the option. [Report 430, sub-paragraphs (a)-(e)] The Referee found that at about this time, Glanville repeated that there were outstanding contractual issues which he had to take up with Owen. [Report 430, sub-paragraph (f)] This statement was made after the letter of intent had been handed over and before ABB commenced work. The Referee found that Smith said something along the lines that ABB was looking forward to working with Abigroup and wanted to show other builders in the Olympic Park how good ABB was and the error they made not using ABB on their projects. Deane said words to the effect that he was sure the two companies would work well together and it was good to have ABB on board. McDonnell then said words to the effect that ABB was keen to get started. The meeting then concluded with handshakes between some, if not all, of those present and with Deane making some concluding remark along the lines of " Welcome on board. Come and see me if there are any problems ". [Report 430, sub-paragraphs (h)-(l)] The meeting then ended, with the ABB representatives leaving Abigroup's Chatswood offices in the evening, the meeting having lasted for about, or perhaps a bit less than, two hours. Glanville took with him the Abigroup letter of intent which, to that time, he had not read or considered and, the Referee concluded, he also took with him a copy of the revised initialled SPTI minutes document. [Report 431, sub-paragraphs (m) and (n)] 2.45 The Referee's findings as to the position that the parties had reached at the end of the 19 February 1998 SPTI meeting By means of its selective exposition of 'derived facts' Abigroup has sought to justify the following submission, which may be taken to represent what Abigroup says was the position reached at the end of the meeting on 19 February 1998: " That background, including the events on 19 February 1998 surrounding the delivery of the letter (of intent) to ABB supports a conclusion that the parties had completed negotiations of all matters of significance, were aware of the importance of work commencing in the immediate future and thus the necessity of finalising any contractual arrangements which were to be agreed between them ". The true position, which emerges from a consideration of the Referee's detailed findings extracted in the preceding paragraphs of this chapter of the submissions, is encapsulated in the following passage from the Report, to which reference has been made earlier [See paragraph 24 above], but which is set out again for convenience of reference: "When the SPTI meeting finished on 19 February 1998, ABB had the status of being the successful tenderer; it had won the job and it was the Subcontractor - elect . Abigroup had expressed clearly its intention to enter into a contract with ABB and by the minutes document and the letter of intent, and matters discussed at the two SPTI meetings, had indicated in quite detailed terms what it wanted in the contract that it intended to enter into. ABB, for its part, had sought and accepted the position of successful bidder for the works and was anxious to begin pre-construction activities. It had made clear to Abigroup that there were numerous important matters which it needed to have resolved and/or included in the contract which both parties obviously were looking forward to concluding but which, at that time, was a future prospect and not a present fact. No doubt, the parties confidently hoped, if not expected, that they would be able to attend to and resolve the matters which remained outstanding before a contract could be concluded. However, at that time there was no agreement in place, whether a core agreement, an essential terms agreement or, indeed, the rather extensive agreement for which Abigroup ultimately argued , involving all of the documents listed in the SPTI minutes document. It was on this basis that the parties moved forward, at the practical, technical and construction level, to get the roof built and at the contractual level, to work towards finalising the terms of an agreement." It needs to be emphasised that, even on Abigroup's contract case, at this point in time, no contract had been concluded. Dealing with the issue Proper approach taken by the Court in relation to the challenge to the Report 83 The principles have already been set out. This is not an occasion for the Court to do otherwise than to focus upon the areas in respect of which it is submitted that the findings of the Referee are seen to have miscarried. It is not an occasion in which the Court is obliged to revisit or to permit re-agitation of findings of fact, save where a case is sought to be made that there is a real question as to whether there was any evidence for the decision made. This requires more than a mere suggestion of the type of factual error that, if made by a trial judge, would be corrected on appeal. The Court's close examination is also warranted in terms of any suggested patent misapprehension of the evidence or perverse or manifest unreasonableness in fact-finding. Generally the evidence can be examined in terms of a challenge based on the adequacy of reasoning where there is a failure to refer to particular especially significant evidence tending against a relevant finding. And of course overlaid upon all of this, is the courts untramelled task of determining whether the Referee has erred in law. 84 The requirement to descend to detail has led to my building up a chronological folder from materials which were before the Referee, and cross-referencing that folder to the respective submissions and to the particular passages in the report of relevance. Both the building of the folder and the following exercise require patience and care, for, at the end of the day, it is by careful examination of that material that the Court in this case is able to reach the very clear conclusion that neither errors of principle, nor patent misapprehension of the evidence, nor perversity, nor manifest unreasonableness in fact-finding, nor any of the other miscellaneous complaints put forward by Abigroup justify rejection of the findings in the report. Indeed and to the contrary. I have come to the very clear conclusion that the findings in the report were correct. 85 This is a case where both parties have advanced close and sophisticated submissions, mobilising their obvious command of principle and practice. Scrupulous care is necessary to determine according to law whether or not the Referee's decision miscarried. 86 At the end of the day as so often occurs, it is scrupulous attention to the evidence as found which drives the ultimate findings. The intention of the parties required to be objectively ascertained from the material and admissible facts, matters and circumstances. 87 In that regard Abigroup puts the critical issue as one concerning the construction of its letter of 19 February 1998. And it places what are said to be "the plain words of the Acceptance Clause" at the forefront of its case. Abigroup also emphasizes particular subsequent conduct of both parties including ABB's procuring of bank guarantees in favour of Abigroup and references in correspondence from ABB to Abigroup referring to a date for practical completion. 88 ABB on the other hand draws its strength from the suite of inter partes communications anterior to the hand delivery of this letter, as well as subsequent to that hand delivery. Further it takes issue with essential parameters of the manner in which Abigroup seeks to characterise this all-important letter. And in doing so ABB treats closely with dissembling Abigroup's alternate and sometimes internally inconsistent propositions in terms: · not only of what in Masters v Cameron "fourth" class fashion, are said by Abigroup to be "the terms" said by way of a preliminary agreement, to have been immediately and exclusively agreed to, pending the parties expectation that they would be able to reach a consensus by way of a further agreement containing additional terms ; but also, · of the proper approach to material communications in terms of offer, acceptance and counter offer. 89 In my view the Referee is not shown to have erred in his assessment of the terms of the 19 February 1998 letter, nor in his extremely careful analysis of and findings in relation to the evidence concerning the inchoate state of affairs which existed when that letter was hand-delivered, as well as when the response of 20 February 1998 was sent across from ABB. Importantly this is not the type of case sometimes found where there has simply not been advertant attention paid to matters unresolved by parties in the process of a negotiation. Indeed signal significance marks the findings to the effect that there was express discussion in relation to the unresolved matters, the parties on the findings of the Referee, expressly agreeing to leave matters of high significance in relation to the contract for further negotiation, no doubt trusting that a degree of consensus would paper over the otherwise problems. 90 As a general proposition it may well be correct that it would likely be very surprising to find an arrangement entered into between builder and proprietor [or as here subcontractor and contractor], where the builder/subcontractor is to commence work on a major project virtually immediately, without the parties being seen to have intended that a contractual relationship be regarded as having been entered into at the point of work commencement. [cf Stencraft] However there are cases and there are cases. This was one of those cases where, although surprising, that was precisely the arrangement which the parties were found by the Referee to have intended, the evidence before the Referee as explicitly found by him, justifying the proposition that for all the distance which the parties had come by the time: · of the handing over of the 19 February letter; · of the sending of the 20 February response; · of the acts by ABB which Abigroup contended before the Referee had taken place on 20 February 1998 and hence constituted commencement of the Works on that date; there remained so many "loose ends" critical to be determined before there could be any question of the parties having entered a binding [ in Masters v Cameron fourth class terms, "preliminary" ] contract, that it was quite clear that the intention of the parties had not been to make a concluded bargain. In my view it is inconceivable that on the findings of fact already reached by the Referee any different conclusion could follow in relation to the 25 February case now sought to be propounded. 91 Stencraft was par excellence a case decided upon its own facts. It is unnecessary to do more than to make the point that Dowsett J (with whom French and Whitlam JJ agreed) not only identified the close questions of fact arising from an important conversation of 12 May 1994 [52], but went on to find [58] that particular conduct in a particular telephone conversation was only objectively consistent with an intention to respond to what was found by his Honour as a firm offer which was then "in place". Most particularly Dowsett J went on to say: "Nothing in that conversation suggested that the documentation to be sent would differ from that contained in the final offer documents". That of course is a very different case from the case before the Referee whose report is now sought to be adopted by order of the Court. Offer and acceptance/Construction of the letter of 19 February 1998 and of the response of 20 February 1998 92 It will be recalled that Abigroup submits that the Referee erred in concluding that ABB's letter of 20 February 1998 amounted to a rejection of any offer contained in Abigroup's letter of 19 February 1998 [Written submissions of Abigroup paragraph 19 (h)] 93 In my view the submissions put by ABB in answer to this proposition are of substance. They include the proposition that even if the 19 February 1998 letter may be read as an offer, the responsive 20 February 1998 letter rejected that offer and/or may be regarded as a counter offer, never accepted. 94 I note in this regard that: · the letter of intent commences by purporting to be an acceptance; · in the following paragraph the letter then proceeds to make the acceptance "conditional" upon a particular matter. That matter is the entry by the parties into a formal subcontract based upon "Amended SC JCC D 1994 and Project Related Conditions of Contract"; · later in the letter one finds the so-called Acceptance Clause providing: "Commencement by the subcontractor is deemed to be full acceptance of the terms of the subcontract agreement and confirms the existence of a subcontract between our two companies." · the problems with allowing Abigroup to have this Acceptance Clause do the work for which Abigroup contends arises from the nature, type and significance of the matters which were inchoate at the time the letter was handed across. If the matrix of possibility is such that the position which obtained at the time of delivery of the letter and the terms of the letter itself [read in context with the anterior communications] simply could not justify the letter being regarded as a preliminary contract, then a finding against the letter being so regarded cannot be impugned. In a state of affairs in which both parties had expressly acknowledged and accepted that critical and still missing integers required to be agreed upon before they would or could be regarded as having entered into any contract, one party was not able to blithely hand a letter across to the other which sub silentio, or at all, sidestepped those issues completely, nor to assert that the letter achieved a radical alteration in the conventional state which the negotiations had achieved. In substance this captures the Referee's findings on the issue. 95 But there are other answers. And here again the Referee's findings seem to me to be of substance. The Referee's findings and analysis 96 The Referee dealt in a number of places with his analysis of the matters in issue. 97 The manner in which the Referee dealt with the proper construction of and circumstances relating to the letters of 19 February 1998 and 20 February 1998, also included some reference to a further document which was a handwritten draft response prepared by Mr Owen in response to the 20 February letter. The finding was that what Mr Owen had written in his draft was accurate and that the evidence of Mr Sleeman and Mr Owen amounted to an admission by each of them to that effect, in relation to matters which had been discussed at the 19 February 1998 meeting, to which matters the draft referred. [Referee's report at 452-453] 98 The Referee then in dealing with the matter made the following findings and drew the following inferences, emphases being my own: I turn now to the detail of Glanville's letter and Owen's draft response. It will be recalled that there were six numbered paragraphs described as "outstanding commercial matters to be resolved regarding the subcontract". This must have flagged to Owen and Sleeman that ABB was taking the position, immediately after the SPTI meeting, that numerous commercial matters required resolution before a contract could be concluded. This is entirely consistent with my findings as to the state of affairs at the end of the 19 February 1998 meeting. This goes to the representation issues, as well, because, reading this letter, the Abigroup representatives could not have been led into believing that ABB considered that there was a contract in place . The first numbered paragraph of Glanville's letter read - "We have not had sight of the sections of the Head Contract document that may be applicable to the above subcontract works nor have we received a copy of the Project Related Conditions marked 'D'. Our offer is therefore based on the proviso that there are no adverse commercial considerations within these documents. (We still await such documents from Abigroup)." Owen's draft response was - "1. We have posted a copy of the project related conditions marked 'D' and as explained in our meeting on the 19 February 1998, that all relevant detail from the head contract is pertained (sic) in this document and as such we will not be providing you with the head contract to sight." It will be recalled that I have found that at the 19 February 1998 there was discussion about the head contract in connection with some discussion about the project related conditions, with the matter being raised by ABB representatives who indicated that ABB needed to see a copy of the head contract document, which had not been received by ABB and which ABB regarded as an important document which it needed to see. At the meeting, Abigroup having stated that all relevant details from the head contract were in the Project Related Conditions and Abigroup having agreed to send a copy of the Project Related Conditions the next day, ABB agreed to defer discussion of the head contract, at least for the moment. Similarly, I have found that at the meeting the Project Related Conditions were raised by ABB, ABB informing Abigroup that ABB had not received the Project Related Conditions and Owen agreeing to send a copy to ABB forthwith. Importantly, I have found that Glanville raised this matter on several occasions at the meeting; communicated to Abigroup that the Project Related Conditions were an important document as far as ABB was concerned and considered them to be an important matter for ABB, because it wanted to determine whether there were any adverse commercial concerns in the document and, if there were, ABB would want to raise them with Abigroup in further discussions. More importantly, Glanville expressly communicated to the Abigroup representatives that ABB's offer was conditional upon ABB receiving the Project Related Conditions and upon either determining that they did not contain any matters of adverse commercial concern to ABB or upon any such matters being worked out by agreement. At the end of the meeting, this matter had been taken as far as it could be and was not resolved, although the next step in the process, which might lead to resolution, had been identified and agreed, ie Owen would send a copy of the Project Related Conditions to Glanville. The contents of Glanville's paragraph 1 and Owen's draft response are precisely consistent with these findings and provide powerful contemporaneous documentary confirmation of the correctness of those findings and, what seems to be more important, of the fact that Owen (and Sleeman, because of his conduct in relation to Owen's draft) understood that the state of affairs was as per those findings. Had their understanding been otherwise, one would have expected some protest or at least some response to the proposition that ABB was still talking about an offer which was subject to unresolved conditions. Had the Abigroup representatives understood or believed that an agreement had been concluded on 19 February 1998, which agreement included all of the Project Related Conditions (the Abigroup case) one would have expected Owen's draft and Sleeman's response to have been quite different. To my mind the fact that it was not amounts to express and implicit admissions on Abigroup's part consistent with the statement of ABB's position. The second numbered paragraph of Glanville's facsimile read - "2. As an amendment to clause 8 of the Subcontract we would require the following clauses covering exclusion of consequential loss and a cap on total liability: 'Notwithstanding anything to the contrary contained in this Subcontract Agreement and the Head Contract, the Subcontractor shall not be liable for any indirect, consequential or economic losses whether in contract or in tort (including negligence) such as, but not limited to, loss of profit, loss of use, cost of replacement production, business interruption and the like.' 'Notwithstanding anything to the contrary contained herein, the total liability of the Subcontractor shall be limited to the Subcontract Sum.'" Owen's draft reply was - "2. We have passed onto our relevant legal people your proposed addition to clause 8 and will respond once we have their input." Once again, Glanville's statement and Owen's responses are completely consistent with the findings I have made with respect to the so-called ABB non-negotiable clauses, as discussed at the 19 February 1998 meeting. As will be recalled, the essence of those findings was that (against the background that the matter had been raised as the 12 February 1998 meeting, as an important matter which had to be dealt with to ABB's satisfaction in any contract document, and then deferred to allow ABB to provide suggested wording) Glanville produced suggested wording on a piece of paper at the 19 February 1998 meeting, when Abigroup was again told that the clauses were ABB policy, non-negotiable and had to be included in any contract document; Owen and Sleeman said words to the effect that the clauses had to be taken higher or upstairs and would have to be dealt with later; and on this basis the matter was deferred with agreement that it would be discussed in the future. Glanville's paragraph 2 succinctly restated ABB's position on these clauses and Owen's draft reply succinctly confirmed that the arrangement that had been made was being honoured by Abigroup, in that the clauses had been passed on to people who could deal with them and Abigroup would respond once those people had provided their input. I should note that I accept Owen's evidence at T8802 that, when he prepared his draft, he had not in fact passed the clauses on to Abigroup's legal people but that he proposed to do so in the very near future. Glanville's third numbered item read - "We require clarification of clause 9.03.02 and 10.11 whereby the Builder may, due to any act, default or omission by it, or it's designers, or any of it's subcontractors or suppliers etc cause delay to the works of this Subcontractor and in such a case, the Builder is not entitled to an extension of time under the Head Contract. In such a scenario, how does this Subcontractor recover lost time and any associated costs? Will the Builder seek agreement and pay this Subcontractor for acceleration measures if necessary and/or any associated reasonable costs for delay? Obviously, we cannot be expected to pay liquidated damages where the delay was caused by Abigroup. The condition precedent in clause 10.12.01 and 10.12.08 should not apply to the above case." Owen's draft contained a numbered paragraph 3, after numbered paragraph 2 and before numbered paragraph 4 with space for text, but no text. I infer that the matter was beyond Owen's capacity even to prepare a draft response to and that somebody else, such as McGilvray, would need to be brought in to deal with the point. However, what is important is that Owen obviously regarded the matter as being open to negotiation because, presumably, had he believed that ABB had agreed to bind itself to all of the detailed provisions of the Abigroup amended subcontract conditions, it would have been an easy and logical thing for him to write in his draft something like "ABB has agreed to all of the terms and conditions in the amended SC-JCC-D document and Abigroup does not intend to reopen negotiations which now have been concluded". While there was no particular discussion, at the 19 February 1998 meeting, of the clauses referred to in Glanville's paragraph 3, there was general discussion of the proposed subcontract conditions and some other outstanding contractual matters, which involved Glanville saying words to the effect that he still had reservations about those conditions; that these matters needed to be looked at; and that there were things that had not been talked about, with Owen responding with words to the effect "Without wishing to cut across your bows, Terry, I don't think now is the appropriate time to discuss these items". ABB then agreed to defer discussion of these issues to a later meeting on Owen's assurance that there would be later discussions or that the issues could be dealt with later, this in the particular circumstances that Abigroup knew that ABB's requirements to discuss the proposed terms before entering into any contract (as per condition 17 of the original quotation document) remained unmet, with the position at the end of the meeting being that the parties had gone as far as they could in relation to the discussions on this topic and each expected and objectively informed the other that there would be further discussions on this topic later which would address ABB's requirements to discuss the terms before entering into any contract. Glanville's fourth numbered paragraph read - "Clauses 10.15 and 10.16 refer to liquidated damages 'or otherwise'. As discussed, we would agree to actual costs incurred by Abigroup, subject always to a maximum daily rate of damages inclusive of both clauses, combined at $40,000 per day and capped to a maximum of 10% of the Subcontract Sum." Owen's draft reply was - "4. This item was agreed to at our meeting on the 19 February 1998." These two paragraphs and, in particular, Owen's admission of agreement having been reached on 19 February 1998 in accordance with ABB's requirements, are squarely in accordance with what I have found happened on 19 February 1998 in relation to this matter . The finding was that, ABB said it had a problem with $40,000 per day plus actual cost but would agree to actual costs to a maximum of $40,000 per day, including those arising out of clauses 10.15 and 10.16. Sleeman agreed that the daily rate of liquidated damages would be a maximum of $40,000. Owen acknowledged and agreed to ABB's requirement and made the consequential note (which did not fully reflect the agreement) next to item 8 on page 2 of the minutes document. As will appear, this arrangement was not accurately reflected in the letter of intent which had been prepared by Owen before the meeting of 19 February 1998. Numbered paragraph 5 of Glanville's facsimile stated - "As soon as we are in receipt of the Project Schedule from Abigroup, we will propose a payment schedule for your consideration, which would include payments linked to milestone achievements and a provision for payment in respect of design and engineering works progressing off site and purchase of raw steel." Owen's draft response was - "5. As part of your requirements, you will be submitting a detail programme by the 6 March 1998. It would therefore be prudent to base your payment schedule on this for our consideration rather than our less detail programme. We look forward to both of these documents." At the 19 February 1998 meeting there was discussion about this item and, as I have found, ABB having suggested and described a payment regime based on milestones, which it wished to pursue, and Abigroup having taken that on board and being receptive to the idea, the matter was not finalised because Abigroup wanted a specific proposal from ABB, including regarding cost implications and ABB needed Abigroup's programme to produce such a proposal. Therefore, the matter was left on the mutually agreed basis that Abigroup would provide its programme to ABB and ABB then would produce a specific proposal and submit it to Abigroup. Abigroup knew that this was an important matter for ABB, especially where a large amount of work would be performed off site, and significant materials would be procured, before any on site work. Glanville's paragraph 5 is precisely in accordance with this discussion and these arrangements but Owen's draft reply shifts the ground somewhat, raising a suggestion (which had not been discussed before and which was contrary to what had been discussed on 19 February 1998) that the ABB payment schedule proposal should be based on ABB's programme, rather than Abigroup's (less detailed) programme. There is nothing in the evidence to suggest why there was this change which, in any event, was not communicated to ABB because the draft letter was never sent. However, what is important is that Owen's draft reply is broadly in accord with what had happened at the SPTI meeting and contemplates that ABB will be submitting to Abigroup two documents, one, obviously, being a payment schedule for Abigroup's consideration, including payments linked to milestone achievements and a provision for payment in respect of design and engineering works off site and purchase of raw steel. The tenor of the response, if not the detail, confirms this to be an issue which, at 23 February 1998, remained for resolution . In that regard, I note and accept the plaintiff's submission that Sleeman agreed that, by and large, what Glanville had written on this subject was in line with what was discussed at the meeting on 19 February 1998, referring to T9360. Glanville's item 6 read - "6. Programme/Drawings We acknowledge receipt of tender drawings, but these are not Approved For Construction and therefore we cannot proceed using such drawings. Due to Abigroup's very tight schedule for this work, Abigroup will need to provide the Approved For Construction drawings (correct, complete and with no 'holds') within two weeks of 20 February 1998. Obviously, the sooner this occurs, the better, because our period of 26 (sic) weeks cannot commence until we have received such drawings." I read the reference to a period of 26 weeks to be a typographical error because all the evidence is that the relevant period was 36 weeks. Owen's draft response was - " 6 . We are aware of this and anticipate issuing AFC drawings on the 24.2.98 ." Given what occurred at the 19 February 1998 meeting about AFC drawings, it is not clear to me where Glanville's reference to a two week period beginning 20 February 1998 comes from. It will be recalled that, at the 19 February 1998 meeting ABB, through Smith, had made it clear that the start date was subject to ABB receiving all AFC drawings and that this was non-negotiable if ABB was to be required to complete within 36 weeks, in the context of a very tight programme. Abigroup representatives acknowledged this and understood ABB's requirements and the objective consensus at the meeting, intended to be recorded in Owen's terse note at item 7, was that AFCs would issue immediately and time would then begin to run, with Sleeman, later in the meeting, representing that the AFC drawings were ready and could be picked up the next day. I think the reference, in Glanville's paragraph, to receipt of tender drawings, probably was a reference to all the tender drawings which had been issued to ABB, in various tranches, during December 1997 and January and February 1998, to enable ABB to prepare its bids. It probably does not refer to the four revision 04 drawings of the reduced-weight design which seem to have been received by Abigroup on 20 February 1998, but probably this does not matter in the context of the present discussion. Probably, as well, it does not refer to the three architectural drawings which were collected by Smith on the morning of 20 February 1998. As well, the reference to drawings being "correct, complete and with no 'holds'", seems to involve the addition of a descriptive ingredient which had not featured in the discussions between the parties up to that time. Perhaps what Glanville was seeking to do was to better particularise what ABB considered to be necessary characteristics of drawings which were "approved for construction". In any event, with the exception of the reference to "correct, complete and with no 'holds'" and of the reference to the two week period beginning 20 February 1998, what Glanville has written accords essentially with my findings as to what occurred at the 19 February 1998 on this topic and Owen's response, which is an express acknowledgement of Abigroup's awareness of what Glanville had written, confirms that state of affairs and does not challenge it in any way . The confirmation is emphasised by the provision of the information that the AFC drawings were anticipated to be issued on 24 February 1998, a matter which Owen knew because of the events which had transpired on Friday 20 February 1998, referred to above. Owen's draft reply did not seek to challenge any matter of detail in Glanville's paragraph 6 and embraces the whole of the paragraph with the words "We are aware of this". This must mean, I think, that to Owen, at least, nothing new or different was raised by Glanville's words and, in particular, the words "correct, complete and with no 'holds'" almost certainly were accepted by Owen as being a shorthand description of the nature and quality of the AFC drawings that ABB had said it needed. Certainly there is no suggestion in Owen's draft that ABB was trying to introduce some new or foreign element into the requirements which ABB had expressed in relation to AFC drawings, and the significance with respect to time to be attached to the receipt of those drawings, as expressed at the SPTI meetings between ABB and Abigroup. Equally, the absence of any comment by Sleeman about item 6 points in the same direction as far as his understanding of matters, on 23 February 1998, was concerned. After setting out the six numbered paragraphs, Glanville's facsimile stated - "In addition, we request your clarification of the following matters which we did not have the opportunity to discuss at the meeting: (a) The provision by Abigroup of a form of surety that ABB will be paid. (b) Administration of the BHP Free Issue Steelwork option. (c) Clause 10.30 of the Subcontract conditions should be qualified with the words 'Subject to clause 3.02' at the beginning. We trust the above matters are acceptable for inclusion in the subcontract documentation and look forward to your further correspondence." Owen's draft response was - "a) This will not be given. b) Meeting organised for 11.00am 24 February 1998 to finalise this. c) We will clarify this with our response to our item no. 2 & 3. On receipt of the necessary responses, we will then advise you of Abigroup's position with the outstanding clauses." Item (a) seems to be something which had not been discussed between the parties prior to this time although, plainly, it is the type of item which was capable of being the subject of the further discussions which the parties had agreed, at the 19 February 1998 meeting, to hold, about contractual matters of concern to ABB, as flagged in condition 17 of the original bid letter. Item (b) confirms matters arranged on Friday 20 February 1998, as discussed above and, in particular, the meeting scheduled for 11.00am, to involve BHP, Millennium and ABB. Item (c) is entirely consistent with the arrangements which had been agreed on 19 February 1998 , namely, that there would be further discussions relating to outstanding contractual matters of concern to ABB, these discussions to involve, among other things, aspects of the amended subcontract conditions proffered by Abigroup and ABB's two non-negotiable clauses. Once again, and consistent with the tenor of the whole of the letter, neither Owen nor Sleeman made any challenge or protest or objection to these various items being raised for discussion and, obviously, negotiation at this stage of proceedings . There is complete consistency, between what is in, and what is not in, the draft reply, and the lack of any comment from Sleeman, on the one hand, and what occurred, as I have found, at the 19 February 1998 meeting, in relation to the matters referred to in Glanville's facsimile and the draft response, on the other. I note that ABB's submissions in chief para 371 say - "The striking feature about the statement (in the last paragraph of Owen's draft) and Owen's draft reply as a whole, is the absence of any assertion that a contract of any kind had been concluded the previous evening (timing wrong) or any hint of objection to ABB's attempt to negotiate terms of the proposed contract, or any suggestion that ABB was acting inconsistently with the position the parties had reached at the end of the meeting on 19 February 1998. On the contrary, the last paragraph of Owen's reply acknowledged that the next step in the process once Abigroup had received 'the necessary responses' (which was a reference to the legal advice that Abigroup awaited) was that Abigroup would have to advise ABB of its' 'position' in relation to the 'outstanding clauses'. In the plaintiff's submission, the Referee should so find." Further reasons given by the Referee on the topics: - The handing over of the letter of intent not being an offer in the circumstances; - When and how "commencement by the subcontractor" [of work] took place and the relationship of this finding to whether or not, if the letter of intent had been an offer, that offer had been accepted by what was put forward by Abigroup as the commencement of work; - Rejection of the offer by the ABB 20 February 1998 letter. 99 It seems to me convenient at this point to set out a portion of the report which is generally self-explanatory going to these three topics. An examination of this section of the report: · emphasises a number of matters in terms of the Referee's reasoning processes; · explains the sequential and necessarily alternative findings; · serves to point up the significance of the finding that the matters relied upon by Abigroup as "commencement" did not amount to commencement within the meaning of the letter of intent. 100 This section of the report is to be found at pages 529 - 540, the headings being my own: The handing over of the letter of intent not being an offer in the circumstances What I have said so far on this matter has had no regard to the factual situation existing when the letter of intent was handed over. When relevant facts, as to the context and circumstances in which the letter was handed over at the meeting on 19 February 1998, are taken into account, it becomes even clearer that the letter did not constitute the offer pleaded by Abigroup in this part of its contract case. Indeed, these facts, to which I refer briefly below, negate the contention that the letter of intent was such an offer, even if I am wrong about the construction of the deeming clause. When the letter of intent was handed over there were express and objectively agreed factual circumstances making it impossible for the letter, in effect, to completely wipe the slate clean and to create, potentially, a new contractual platform upon which a simple offer and acceptance contract could be concluded by ABB commencing the works. In my view, the letter could not have had that effect because - (a) the important matter of progress claims and milestones had been left on the mutually agreed basis that Abigroup would provide its programme to ABB and ABB would produce a specific proposal and submit it to Abigroup, with the parties having reached no agreement about this item which was, to Abigroup's knowledge, an important matter for ABB and which, at the time the letter of intent was handed over, remained for resolution. If the Defendant's contention on this point is correct, the letter of intent completely annihilated the arrangement which had been made in that regard and, what is more, since the offer said to be contained in the letter was an offer to carry out the works "on the terms and conditions" of the letter of intent, substituted a quite different progress payment regime for that which was under discussion. Clause numbered 4 of the letter of intent was head "Progress Payments" and said - "... to be on a 45 day basis related to completed works as at the 20th of each month." In my view, that cannot be correct. Moreover, the letter was handed over without comment; Smith briefly looked at the first page and read part of it, including the heading and the first paragraph, which spoke of Abigroup accepting an ABB offer conditionally; Smith gave the letter to McDonnell who looked at the front page and noted a reference to Abigroup accepting an offer but read no more of the letter, although he did understand that ABB "had got the job"; McDonnell passed the letter to Glanville who did not read it but learnt or understood that it was a letter of intent. In those circumstances, it simply is not possible to conclude that the letter, by operation of its legal effect, and the proper meaning of a general clause on page 3 of four detailed pages of numerous clauses, objectively was an offer by Abigroup to ABB which ABB could accept simply by commencing the works, especially where the circumstances relating to the discussion about ABB picking up the AFC drawings (which the defendant says constituted the relevant commencement of works the very next day) were not at all in the context that ABB commencing the works would conclude a contract but rather were in circumstances where detailed discussions over two SPTI meeting on a large number of topics objectively left a number of important matters unresolved and where agreement had been made for further discussions to attempt to resolve them. (b) During the meeting consensus had been reached about liquidated damages, during the discussion about item 8 of the minutes. The consensus, referred to but not fully recorded in Owen's item 8 note, was that ABB would agree to pay liquidated damages, being actual costs incurred by Abigroup, up to a maximum of $40,000 per day, including any damages arising out of clauses 10.15 and 10.16 of the proposed subcontract conditions, with total damages capped at 10% of the contract sum. This consensus was reached after discussion on the topic at each of the 12 February 1998 and 19 February 1998 meetings and after ABB had expressed concerns with the liquidated damages proposed or referred to in the minutes document item 8. Item 7 of the letter of intent stated - "Liquidated Damages Actual costs to a maximum of $1,400,000.00." This is not the same as the matters discussed and agreed or even as recorded in Owen's notes. Yet, this is the term, presumably, in the letter of intent which would be the term governing ABB's exposure to liquidated damages in the event of ABB accepting the letter of intent offer, contended for by Abigroup in this part of its case, by commencing the works. In my view, such a conclusion is unsustainable. (c) Similarly, and telling even more strongly against the letter of intent being an offer by Abigroup, was the situation, when the letter of intent was handed over, as to ABB's two non-negotiable clauses. That situation was that the clauses were fundamental policy matters and were non-negotiable from ABB's point of view and Abigroup had been told that. Because the wording of the clauses could not be dealt with by the Abigroup representatives at the meeting it was agreed that they would have to be dealt with later and that the clauses would be taken higher in the Abigroup structure so that they could be responded to. On this basis the matter was deferred and the parties agreed that it would be discussed in the future. The matter was not resolved and the parties understood that it had to be resolved in any contract which might be made. As with the milestone payments issue, in these circumstances it is not possible for Abigroup to have communicated, in its letter of intent, an offer to contract, which did not deal with the issue, which offer ABB could accept to conclude an agreement which excluded the non-negotiable clauses. (d) The same can be said with respect to the state of affairs, when the letter of intent was handed over, relating to the head contract, the project related condition, the unresolved issues going to the SC-JCC-D conditions and other outstanding contractual matters. The letter of intent stated that Abigroup accepted ABB's offer subject to the parties entering into a formal subcontract based on the amended SC-JCC-D terms and the project related conditions. Not long before the letter was handed over, at the meeting at which the letter was handed over, Glanville had stated in terms that ABB's offer was conditional upon receiving the project related conditions and subsequently confirming that they contained no adverse commercial conditions. Likewise, Abigroup knew, because ABB had told it in its initial bid letter, that ABB required to discuss its concerns about the proposed terms of Abigroup's proposed subcontract document before entering into any contract. In circumstances where the letter of intent recorded an acceptance by Abigroup of an ABB offer which was conditional upon the parties entering into a formal subcontract, based upon those proposed general conditions and upon those project related conditions, and in the further circumstance that shortly before the letter was handed over ABB had communicated to Abigroup that particular concerns that it had about the proposed subcontract conditions (which it had seen) and about the project related conditions (which it had not seen and asked to see) had to be resolved before ABB would enter into any contract, it is simply not possible to characterize the letter of intent as an offer by Abigroup which did not deal with and completely swept away the ABB concerns which Abigroup had agreed would be the subject of further discussions, being an offer which could be accepted, to conclude a binding contract between the parties which did not deal with those matters of ABB concern, simply by ABB commencing the works. (e) There is a further level of difficulty with the letter of intent being characterised as an offer containing the terms of a contract which would be made if that offer was accepted. The terms, on this view of things, must be found in the letter. But, on this part of Abigroup's case, what are the terms? Those contained in the December 1997 version of the SC-JCC document - the only version which ABB had seen and considered (leaving aside ABB's express requirement to discuss those terms)? The revised version which Abigroup probably was finalising at the very time of the meeting, and which was not sent to ABB until 18 March 1998? What were the relevant contract drawings and specifications which defined the scope of work in this contract? The drawings referred to in the letter of intent "as per Abigroup transmittal No.164 dated 19/1/98" were not the current tender set and certainly they did not depict the design which was to be found in the AFC drawings issued on 25 February 1998. The three specifications referred to, quite specifically by number and date, in the letter of intent, were superseded versions of those specifications; was Abigroup truly offering to contract on the basis of these documents? It seems hardly likely. Were these difficulties with drawings and specifications capable of resolution, in a contractual sense, by the description in the opening paragraph of the letter of intent of the work to be done as "all as per the contract drawings, specification and construction schedule as amended from time to time by Abigroup "? (my underlining). Is it suggested that the offer said to be contained in the letter of intent, which was capable of acceptance by commencement, was an offer which, if accepted, would bind ABB to perform varied or amended work for the fixed price? What was the "construction schedule" which the letter of intent offer presumably contemplated binding ABB to, if it started work? The rather crude schedule in Abigroup's original invitation of November 1997? The MUA9TARG programme? The "tendered Programme" referred to at the bottom of page 2 of the letter of intent? It is not possible, in my view, to analyse and resolve such difficulties, especially without the assistance of submissions from the defendant which address them. For these numerous reasons, I conclude that the letter of intent was not an offer by Abigroup to ABB to carry out the roof works on the terms and conditions contained in the letter of intent, as pleaded in paragraph 5(a) of the defendant's amended defence to the second further amended summons and as pleaded in paragraph C1AA(a) of the defendant's further amended cross claim. When and how "commencement by the subcontractor" [of work] took place and the relationship of this finding to whether or not, if the letter of intent had been an offer, that offer had been accepted by what was put forward by Abigroup as the commencement of work This conclusion is sufficient to dispose of the defendant's fourth alternate pleaded contract claim. However, the parties have spent considerable effort looking at what I have called the "second limb" of this claim, relating to commencement of work and for that reason, I will consider these second limb arguments. The parties are agreed that ABB did commence work. The question is - when and how? And, perhaps more importantly, did what ABB did in this regard amount to acceptance of the offer said to be contained in the letter of intent? In the context of the way that this part of the case is pleaded by the defendant, the focus of enquiry is whether the pleaded offer was accepted "by commencing the Works" (as per paragraph C1AA(b) of the further amended cross claim), or by commencing "the Roof Works on the MUA Project" (as per paragraph 5(b) of the amended defence to the second further amended summons). As mentioned, in the cross claim pleading, the phrase "the Works" is defined as "the supply and erection of a structural steel roof frame and the supply and installation of an acoustic roof system": paragraph C1(a). The phrase "the Roof Works" in the defence document is also a defined term, meaning "the supply and installation of the structural steel roof frame and the supply and installation of the acoustic roofing system for the Multi Use Arena Project". The only difference between the two definitions is the use, in the first, of the word "erection", and, in the second, of the word "installation", at the same place, in the second. Obviously, the two pleadings are referring to the same thing. The defendant's submissions do not pay attention to this fairly precise definition of the phrase "commencing the Works" and seem to equate it, in a broad way, with an undefined concept of "commencing work". The submissions contain phrases such as "commence work" [Defendant's submissions in chief, vol 1, para 84]; "start work" [Op. cit. para 86]; "commenced work" [Abigroup's submissions in reply, para 34]; "commenced the roof works" [Op. cit. para 35]; "commencement of the roof works" and "commencement of work" [Op. cit. para 36]. In some of it submissions, the plaintiff seems to take a similar approach. For instance, in its submissions in chief [Chapter 2, para 428], the phrases "commencement of work" and "commencing work" are used in relation to the defendant's submissions and the plaintiff, itself, submits that ABB "commenced work" on 25 February 1998. Likewise, in paragraphs 32 to 35 of chapter 1 of the plaintiff's submissions in chief, ABB uses phrases including "commencing work"; "before any work had commenced"; "ABB did not commence work"; and particularly in a submission that "It was never suggested by Abigroup at the time that the collection of three architectural drawings could amount in those circumstances to a commencement of work within the meaning of the letter of intent". I accept that no narrow or legalistic approach should be taken to the meaning to be given to the pleadings although I think it is at least worthy of note that the defendant chose to plead that the alleged act of acceptance was the plaintiff's "commencing the Works" and then defining precisely those words by reference to words of particular contractual and engineering significance, relating to supply and installation/erection of the roof frame and acoustic roofing system, while the letter of intent itself, in what seem to be the relevant clauses or paragraphs, speaks of authority "to commence and proceed with the works"; of "the works" to be carried out in accordance with a nominated programme; of "commencement" being the important event which triggers the operation of the deeming and confirming clause; and of "work", for instance in the general clause providing that "where work commences prior to the execution of the subcontract agreement, no moneys will become due and payable until the subcontract agreement has been executed". The ABB submissions refer to the actual words of the letter of intent in the context of an argument that, as a matter of proper construction, when Smith picked up the three architectural drawings on the morning of 20 February 1998, he did not do that which was referred to in the letter of intent as "commencement" and, as I understand the submissions, nor did he do that contended for in the pleading as amounting to acceptance of an offer creating a contract, namely, "commencing the Works", as defined in the defendant's pleading. These submissions are made in response to the defendant's submission, which seems to be that the act of acceptance contemplated or required by the pleading, and by the letter of intent, on this argument of the defendant's, was for ABB "to start work" [Abigroup's closing submissions in chief, vol 1, para 86], that being equivalent to "collecting the AFC drawings" [Ditto, p63], as arranged at the 19 February 1998 meeting. Abigroup then submits that "Mr Smith took the first step in commencing on the roof works by picking up (the) design drawings ... the next day ..."[ Abigroup's closing submissions in chief, vol 1, para 99]. Using slightly different phraseology Abigroup also submits that "ABB immediately commenced work by picking up the design drawings on 20 February 1998" [Abigroup's closing submissions in chief, vol 1, para 103]. Further, as indicated above [Re Abigroup's submissions in reply paras 34, 35 and 36], Abigroup submits (in an argument which attempts to demonstrate that acceptance had occurred before receipt of Glanville's 20 February 1998 fax) that ABB "commenced work" by Smith collecting the available AFC drawings; by Smith, McDonnell and Hardy meeting later that day to review the drawings; by ABB making preparations to attend meetings; and by ABB receiving correspondence from Abigroup [Although this was characterised as being in accordance with the agreement made on 19 February 1998 rather than as being the acts of acceptance in relation to an agreement made by commencement]. This also was described as ABB having "commenced the roof works by taking those steps". A further submission seems to be that "commencement of work" should not be limited to physical manufacturing of steel because what ABB did in picking up and reviewing the drawings and the other matters relied on were things "that ABB agreed to do as part of the roof works". At this point, I should record that I reject the Abigroup submission [In reply, para 36] that "Mr Smith attended the site on 20 February 1998 to collect the available AFC drawings to commence work". There was never an arrangement to collect only the available AFC drawings. The arrangement, on the findings which I have made, was that Smith would collect all or a full set of the architectural and structural steel AFC drawings on the morning of 20 February 1998, Sleeman having told him the previous day that they were ready. I note that Abigroup's position on this is that Smith's attending "to collect the available AFC drawings" is tantamount to "ABB immediately (commencing) work on 20 February 1998" [cf ABB's reply to reply submissions, vol 6A, para 284(iii)]. The Abigroup approach to the argument is taken up again in paragraph 175 of its submissions in reply, where the Referee is urged to find "that a representative of ABB attended at Abigroup's offices on the morning of 20 February 1998, collected the available AFC's (sic) drawings and then took those drawings to a meeting at ABB's Tomago facility involving Mr Smith, Mr McDonnell and Mr Hardy and by these acts, ABB commenced work " (my underlining). [The Referee's emphasis] On the basis that the parties seem to be ad idem that the argument on this point is about whether ABB did indeed "commence work" or "start work" or "commence the roof works" in accordance with what the letter of intent required as acceptance ( if the letter of intent indeed was itself an offer capable of acceptance) by "commencement", I will give no further consideration to whether there is any material difference between the defendant's pleading and the actual words of the letter of intent. ABB does raise a construction submission, relating to the words of the letter of intent, as one of its responses to Abigroup's arguments. It is submitted [Plaintiff's submissions in reply, vol 3, beginning at para 106] that the letter of intent did not use the expression "commenced work", as used in Abigroup's submissions and that "commenced work" was not what the letter referred to but, rather, to an authorisation "to commence and proceed with the works ... in accordance with this letter of intent". The submission is made that that was about giving ABB authority to begin the "contract works", with a view to making a progress claim for payment for such works, presumably because, absent such authority, ABB would begin work at its own risk and without the protection of a contractual framework, albeit prospective (perhaps) at that time. It is further submitted that ABB did not need authority to pick up and collect three architectural drawings from Abigroup, which seems to be correct. ABB continues the construction argument by submitting [Op. cit. para 115] that the relevant question is whether, as a matter of construction, making use of evidence of the surrounding circumstances, the plaintiff did something which can properly be described as "commencing and proceeding with the works" as defined by the Abigroup letter of intent. The ABB submissions then look at parts of the letter of intent and contend - which I accept - that the use of the word "commencement" in the first sentence of the general clauses (what I have called "the deeming clause") - refers back to the expression "commence and proceed with the works", mentioned above. The submission [Op. cit. para 122] then is that " The question then boils down to a relatively simple one, can it be said that an offer by a potential contractor to call to the principal's office to collect a 'full set of AFC drawings' followed by the mere collection of three architectural drawings was to 'commence' and proceed with the 'works' under the contract ?". [The Court's emphasis] On the defendant's pleaded case I do not think that that is [the Referee's emphasis] the question but I do accept that, in considering whether what Smith did (and the other particularised acts of so-called acceptance) amounted to acceptance of an offer contained in the letter by "commencing" the work, the surrounding circumstances should be taken into account. I do not think that the fact, that the consensus reached between the parties was that time under any contract would not begin to run until a full set of AFC drawings had been provided to ABB, points to the relevant time or act/s of commencement or acceptance for the purpose of analysing this part of the defendant's case. I say this because a submission of the plaintiff seems to be that, since the arrangement, made before the letter of intent was handed over, was that a full set of AFC drawings would be provided on 20 February 1998, the fact that something less was collected on that day means that there was no "commencement" in accordance with the letter of intent. In that regard, I reject the submission of the plaintiff [Op. cit. para 126] that the arrangement made by Mr Smith was one in which the parties themselves defined what would constitute a "commencement of the works" within the meaning of the letter of intent; on the findings which I have made, that cannot be correct. However, I think the plaintiff's submission about the nature of the drawings which Smith did collect on 20 February 1998 hits the mark. The drawings were three in number, architectural drawings, issued for construction it is true but, on the facts which I have found, useless for ABB in the sense of enabling it to take some positive and productive step, for instance ordering steel or commencement of the shop drawings process . To take an extreme example, suppose what Smith had picked up had been some drawings relating to another project, and that fact was not revealed until the ABB men looked at the drawings at Tomago and decided that they were of no use to them. Plainly, Smith's picking up the drawings in those circumstances could not have been a relevant act of "commencement" and nor could the meeting at which the ABB men considered the drawings and made their decision about them. Why? Because on a reading of the letter of intent that cannot have been what the letter intended, or more precisely what the parties objectively intended, would be an act of commencement concluding a large and important engineering contract where none had existed before [Plaintiff's submissions in reply to defendant's submissions in reply, vol 6A, para 296]. [The Court's emphasis] Therefore, on this construction argument, and on this particular point, I do not think that Smith's collection of the architectural drawings amounted to a "commencement" of work or of the works as contemplated by the letter of intent. I consider that this conclusion is assisted by the content of Glanville's 20 February 1998 facsimile letter, item 6 and by the words of Owen's draft in response. ABB seeks to resist the commencement argument on a different basis, namely, that whatever was done (by reference to Smith's picking up the drawings, the ABB meeting etc) could not, in all of the circumstances, be regarded objectively as referable to in the letter of intent. I accept this submission [See plaintiff's submissions in reply, vol 3, paras 117 and 129 et seq]. Put simply, what Smith did, and the subsequent ABB acts relied upon by the defendant as particulars of commencement, simply was not referable to the expressions in the letter of intent about commencement being authorised and having some potential contractual significance, indeed, great significance, on Abigroup's case. I accept the ABB submission [Op. cit. para 29] that "in order to determine whether there is a relevant consensus ad idem between two parties where there is a stipulation of the kind apparently relied upon by Abigroup, such a stipulation must be known to the party alleged to be bound by it and that party must objectively be seen to have been acting in response to and in conformity with the stipulation" and "the acts of the party sought to be bound must be distinctly referable to the stipulation sought to be relied upon" a requirement that cannot be satisfied simply by demonstrating that the party was aware of the requirement. On the facts, neither Smith nor the other ABB people, involved in the particularised acts relied upon by the defendant, had read the letter of intent and knew of the trigger provision which it contained (on the defendant's case) by which ABB, by commencing work, might bring a contract into existence, with terms markedly at variance with important matters discussed the previous day, and about which reservations had been stated by ABB and in respect of which arrangements had been made by the parties for further discussions to address those reservations. The ABB submissions [Op. cit. para 135 et seq] address a closely related point, namely, a submission that what was done by Smith could not, in all the circumstances, be regarded objectively as the communication by the plaintiff to the defendant of the plaintiff's agreement to all of the terms put forward by the defendant in the letter of intent. The submission is that on an objective view of everything that happened no reasonable person could conclude that Abigroup had accepted ABB's offer. I accept this submission. ABB also makes a contra proferentem submission with which, on the findings I have made, I do not need to deal. For the reasons expressed above, I conclude that, even if the letter of acceptance was an offer by Abigroup to ABB, capable of acceptance by ABB to form a binding agreement, by ABB commencing work, or the roof works, the matters relied upon by Abigroup as particulars of "commencement" do not amount to commencement within the meaning of the letter of intent, so that what I have called the "second limb" of this part of the Abigroup claim fails. [The Court's emphasis] Rejection of the offer by the ABB 20 February 1998 letter ABB makes a further submission about this part of Abigroup's case, namely, that, if the letter of intent was an offer, Glanville's facsimile letter of 20 February 1998 amounted to a rejection of that offer and, on this analysis, a counter offer by ABB. On the conclusions which I have reached, it is not necessary to consider this submission but I should say, for the sake of completeness, and referring back to the details of Glanville's letter which I have discussed earlier in the report, there can be little doubt that if the letter of intent was an offer capable of acceptance by commencement and if Smith's picking up the drawings on the morning of 20 February 1998, together with the other acts of ABB on that day, relied upon by the defendant, did amount to acceptance, thus concluding a contract, and contrary to the conclusions which I have reached, then the timing of the sending and receipt, by Abigroup, of Glanville's letter, would prevent its operating as a rejection of the offer and as a counter offer. However, given the words of Glanville's letter and, in particular, the express reference in the first numbered paragraph of the letter to ABB's offer being based on the proviso that there are no commercial considerations within the head contract and the Project Related Conditions, if the letter of intent was an offer but the acts of ABB relied upon by Abigroup did not operate to effect acceptance of that offer, then Glanville's letter was a rejection of the offer and constituted a counter offer by ABB to Abigroup . [The Court's emphasis] Ultimate decision 101 I have reached the clear conclusion that the attempt to impugn the findings of the Referee must fail. In the result the submissions of ABB are accepted as correct: · the decisive consideration being the intention of the parties which must be objectively ascertained from the terms of the communications between the parties, the parties were entitled to have the whole of their communications and the whole of the facts examined, which is precisely what occurred in very considerable detail; · the Referee in that very close examination and correctly applying the principles of law requisite to be applied in this area, by reference to the subject matter, the surrounding circumstances, relevant communications between the parties and the standards of reasonable conduct in the known circumstances, reached a finding which is unassailable; namely that the intention of the parties objectively ascertained was not to be bound on 19 February 1998 by any contract [but to the contrary, the parties having prior to and on 19 February 1998 endeavoured to advance negotiations to achieve contractual status, had not by that date, nor later, achieved that status]; · very great significance was attached by the Referee to the exact stances taken by each party through their respective inter partes communications, unassailable findings of fact in this regard being set out in the report in the clearest possible terms; · amongst those findings of fact was a finding that notwithstanding that Abigroup handed the letter of 19 February 1998 over to ABB towards the end of the 19 February 1998 meeting between the parties, it was not possible to treat that communication in isolation from nor as a radical departure from the particular matters which had been discussed at and before the meeting; 102 No material error vitiating the report has been demonstrated. As the Referee put it: "at the end of the meeting [of] 19 February 1998, the parties had advanced their negotiations to a significant point, namely, ABB had been selected as the preferred tenderer but, with numerous (and potentially deal-breaking) matters remaining for discussion and resolution, the point of contract had not been reached". [Report 584] [Mr Bathurst accepted that no consensus had been reached by 19 February – his submission being: "In one sense, if there was a consensus, there would be no reason for a letter in the terms which was written…seems to be fatal to there being an agreement on 19 February." 103 The Referee certainly appears to have formed the view that albeit having pleaded what I have called "the situations 1 and 3 cases" in the alternative, the situation 3 case appeared to have been abandoned during submissions and the situation 1 case had been departed from when Abigroup advanced as its ultimate case, a situation 2 case. This was a new and further contract claim "for an essential terms or "Baulkham Hills" agreement made on 19th February 1998, the terms of which are set out in the SPTI minutes of 19th February 1998, reflected and formalised by the provision of the letter of intent and confirmed by the commencement of works by ABB the next day. [Report 544.2][Referees emphasis] 104 The view was most clearly expressed at Report 523 and 543. However there are clear indications that the Referee had some hesitation in this regard, as where he said: "it seems ( although it is not certain on my reading of the whole of the defendant's submissions) that commencement of work by ABB ultimately is relied upon by the defendant as an evidentiary act rather than one creating a contract, ie an act which supports a contract case advancing an essential terms agreement reached on 19 February 1998" Report 541 [emphasis added] [see also his use of the words " Abigroup's reply to reply submissions seem to abandon the case that the letter of intent was an offer which was accepted by commencement " [Report 523] 105 Nevertheless he proceeded: · by first dealing with and rejecting what he had described [Report 544.2] as the "new and further contract claim made on 19 February 1998… confirmed by commencement of works.." · notwithstanding what he had said in relation to the apparent abandonment of the situation 3 case, to deal with that case apropos the commencement of works occurring on 20 February 1998 with the uplifting of the drawings. Importantly he here focused upon and dealt with the Abigroup contention that it was the event this day, of Mr Smith attending the site to collect the drawings then available, which was "tantamount to 'ABB immediately (commencing) work on 20 February 1998'". [Report 536] · by rejecting that case [Report 540 and 543]. And doing so for the following reasons: - finding that the letter of intent was not an offer capable of acceptance by ABB to form a binding agreement; - finding that even if the letter of intent was an offer capable of acceptance by ABB to form a binding agreement, the matters relied upon by Abigroup as particulars of "commencement", did not amount to commencement within the meaning of the letter of intent. [Report 540] - finding that Mr Glanville's letter was a rejection of the offer and constituted a counter offer by ABB to Abigroup. 106 The Referee did not deal with any submission put by Abigroup to the effect that the uplifting of other drawings on 25 February 1998 constituted a contractual acceptance by ABB of an extant offer still capable of being accepted. That was because no such submission had been put by Abigroup. And this Court by reference to the Referee's reasoning, is able to conclude without any doubt at all, that on the factual findings reached [and in the absence of some different facts emerging for examination], even if such a submission had been put by Abigroup, it would require to be rejected. Such a rejection was mandated by the finding that even if the letter of intent had been an offer capable of being accepted, Mr Glanville's letter had constituted a rejection of the offer. That finding put paid to any possibility of success in any case [as now sought to be pursued], relying upon the uplifting of drawings on 25 February being the event from which a binding agreement sprang into life. That this was the case appears to have been recognised by Mr Bathurst in his submissions to this Court [Transcript 15]: "We stand or fall in this regard on the proposition that on a proper contractual analysis the Referee erred, in effect, in saying that the writing of the letter of 20 February put an end to any contractual force which the letter of 19 February might have as a result of the plaintiff subsequently commencing work." 107 If any situation 3 case had been litigated by Abigroup grounded upon a 25 February 1998 acceptance by commencement of works, it is, it seems to me, inconceivable that the Referee would have failed both to identify it and to deal with it in terms. If ever there was a report from a Referee which conscientiously and scrupulously examined every aspect of the pleaded cases, the litigated cases and the facts, this is such a report. The absence of any treatment of the 25 February 1998 contract case by the Referee is a powerful indicator that, whether or not the pleading might have permitted such a case to be run, no such case was litigated. 108 The conclusion which I reach is confirmed by the fact that Abigroup was not, before this Court, able to point to any submissions in support of the situation 3 case, apropos the 25 February 1998 date. 109 It is very important to appreciate that when a party such as Abigroup might seek to propound a particular contract, the date when the contract is alleged to have been entered into is all important [the more so particularly in a case where that date is said not to be a date when a contract was signed, but to be a date which is discerned from a particular form of conduct (25 February 1998 or any other date of suggested commencement of works by ABB)]. 110 That this level of significance attaches to the date when the contract is alleged to have been entered into is seen in the present case by reference to the importance in assessing the case, of an intensive examination of the communications which had passed between the parties by that particular point in time on the date in question. As will have been seen from the report, the Referee required to examine in very great detail: · each of the matters in respect of which, on his findings, both parties had reached a particular consensus in the negotiations, that consensus being that there was an absolute necessity that agreement be reached upon these matters before either party would be bound in contract; · the exact position which objectively could be seen to have been reached as between the parties, with respect to these matters as at the exact point in time ["the critical moment"] when Abigroup claimed the contract to have been entered into; · whether and if so why, and in what respects, the communications between the parties anterior to the critical moment, could be said to show an objective intent to be bound in contract, as at the critical moment. 111 None of these matters were the subject of examination in the report in relation to the 25 February uplifting of the drawings. These matters turn upon questions of fact which then underpin the ultimate decision which is one of judgment, in terms of the discerning of objective intent. This Court cannot on the occasion of the claim to have the report adopted or rejected, allow to be agitated a matter which was simply, in the way in which Abigroup ultimately elected to run its case at the reference, simply not litigated. 112 It may be convenient to simply add the following: · there was no evidence at all before the Referee as to the precise timing of the 25 February 1998 collection by ABB of the further drawings and of when, if at all, on 25 February 1998, those drawings and their departures or changes from previous drawings inspected by ABB, were examined or noticed by ABB, nor as to what would have been a reasonable time which Abigroup ought to have realised would have been necessary in order for the new drawings to be examined for the purpose of ABB being on notice of the departures; · this was a matter of high significance in any suggestion that the parties could be seen to have objectively intended that they commenced to be bound by an enforceable contract as and from the point in time when ABB did anything at all on 25 February 1998. 113 As pointed out above, Abigroup could never, in any event, have succeeded before the Referee, even on the situation 3 case, and even if it had put such a case in terms of the contract springing up on 25 February 1998, for the reason that such a case faced [and still faces], an insurmountable obstacle, namely the fact that as the Referee found that, even if the 19 February 1998 letter could be regarded as an offer capable of acceptance, that offer was roundly rejected by the 20 February 1998 response. On the authorities already referred to, the 20 February 1998 response in my view put an end to the 19 February 1998 letter regarded [for present purposes only], as an offer capable until rejected, of being accepted. 114 The only argument put forward by Abigroup in an attempt to outflank, what I have referred to as the insurmountable obstacle comprised by the 20 February 1998 letter of rejection, has no substance whatever. This submission was that if the offer remained open notwithstanding the rejection of the offer, the offeree could still later and notwithstanding its initial rejection of the offer, determine to accept it, and that this was precisely what had happened on the facts before the Referee [cf Brambles Holdings at paragraph 84. One only needs to state the submission to see the difficulties which inhere in it. Against the matrix of fact found by the Referee, it is inconceivable that the Referee could or would have drawn an inference that the parties could be seen to have objectively intended that they would be bound by any contract at all upon ABB's act of uplifting the drawings which were uplifted on the 25th February 1998. Any such inference flew to such an extent in the face of the numerous findings by the Referee earlier referred to in this judgment, as to make the submission one of no weight at all. 115 Such a finding could only be consonant with the parties being held to have objectively intended to bind themselves to a contract, which would involve a radical change in the position which ABB had adopted up to that point in time. 116 The burden of the submission was that the Court should infer from all relevant facts, matters and circumstances [including the events of 19, 20, 24 and 25 February] that the parties objectively intended that for ABB to commence the works: · on 25 February 1998; or · on any later date could only be consonant with its accepting the 19 February 1998 offer still regarded as being open. 117 In my view no such inference was appropriate in the light of the relevant facts, matters and circumstances. Such an inference: · would fly in the face of the findings of fact in terms of the explicit and reasonable and communicated insistence by ABB of its need to sight and on an informed basis determine to be acceptable to it, the sundry documents referred to by the Referee including the sections of the Head Contract document that may be applicable to the subcontract works; · would fly in the face of the findings of fact in terms of the explicit and reasonable and communicated insistence by ABB that the clauses covering the non-negotiable exclusion of consequential losses and a cap on total liability set out in terms in paragraph 2 of the 20 February 1998 response from Mr Glanville, be included as an amendment to clause 8 of the proposed Subcontract; · would fly in the face of the findings of fact in terms of the explicit and reasonable and communicated insistence by ABB that it have clarification of clauses 9.03.02 and 10.11 [cf paragraph 3 of the 20 February 1998 response]; · would mean that the parties must be seen to have objectively intended that ABB, having stipulated for its only agreement qua liquidated damages being to actual costs incurred by Abigroup, subject to a maximum daily rate of damages inclusive of both clauses 10.15 and 10.16, combined at $40,000 per day and capped to a maximum of 10 percent of the subcontract sum [cf paragraph 4 of the 20 February 1998 response] was sub silentio content not to press such a crucial matter; · would mean that the parties must be seen to have objectively intended that ABB [sub silentio] was content not to press a payment schedule including payments linked to milestone achievements. 118 The background context provided powerful indicators against the propriety of the drawing of such an inference. 119 Further problems standing in the way of the drawing of such an inference concern: · the paragraph in the 19 February 1998 letter providing that where work commenced prior to the execution of the subcontract agreement, no moneys would become due and payable until the subcontract agreement had been executed. [see clause 10]. [I note in this regard that Mr Bathurst accepted that these words were "difficult" in the letter [transcript 78]. This provision is indeed one which requires to be carefully weighed against the Abigroup submission placing such significance upon the mere fact of commencement of work. · the difficulty of accepting the Abigroup submission that the net effect of its case in this regard was that time was at large, meaning that the parties must be taken to have accepted that the time for completion would be a reasonable time- a rather extraordinary assumption in the circumstances of the subject, internationally high profile contract being sought to be negotiated. 120 My own view is further that a close examination of the subsequent conduct of the parties confirms that the parties cannot be said to have objectively intended to have entered into a binding contract upon the commencement by ABB of work. The matter is generally dealt with in great detail by the Referee [report 622 et seq]. 121 ABB wrote in a letter to Abigroup of 20 April 1998 that "Abigroup have themselves proposed well over 200 amendments to the standard form"-the Referee making the point that there did not seem to be any issue about that. The Referee found [Report 630] that: "[t]he differences were extensive and of potential, if not actual, importance so far as the terms of the contract which Abigroup was proposing were concerned. Differences related to matters such as definitions; access; the important matter of site conditions; variations; extensions of time; progress payments; liquidated damages; matters going to the important question of liability for consequential loss (a non negotiable matter from ABB's position); construction programme [and other matters]". 122 Notwithstanding that one can of course find indications to the contrary as for example the procuring by ABB of bank guarantees in favour of Abigroup, and an e-mail of 27 February 1998 internal to ABB referring to ABB having been awarded the fabrication and erection of the subject structure, to my mind the overwhelming burden of the subsequent conduct of both parties is against any inference confirmatory of their having entered into a binding contract of the type and that the time for which Abigroup contends or at any time. That the case is unusual for reasons I have earlier outlined [essentially concerning findings as to the communicated and accepted inhibitions of ABB on entering into any contract in the absence of clarification of the matters to which I have referred] is clear. 123 In what follows I set out and adopt a section of ABB's written submissions identifying facts in support of the proposition that the subsequent conduct of both parties is inconsistent with the drawing of an inference confirmatory of the parties having entered into a binding contract of the type and at the time for which Abigroup contends or at any time: · ABB's facsimile of 20 February 1998 referred to Abigroup's letter of intent (in the first paragraph) and stated, in Item 6, that: "Due to Abigroup's very tight schedule for this work, Abigroup will need to provide the Approved For Construction drawings (correct, complete and with no "holds") within two weeks of 20 February 1998. Obviously, the sooner this occurs, the better, because our period of 26 (sic) [The Referee found this was a mistake and should be thirty six weeks] weeks cannot commence until we have received such drawings". · Owen's 23 February 1998 draft reply to ABB's facsimile (Exh. 370) recorded Abigroup's actual state of knowledge - vis. "We are aware of this and anticipate issuing AFC drawings on the 24.02.98". · Abigroup's minutes of the start-up meeting on 24 February 1998 (incorrectly dated 25 February 1998) recorded in Item G.1.2: "AEC committed program, is to be established on-site by 1st May 1998, have the centre section of the roof installed by ??? 1998 and be completed by the 2nd November 1998. All parties are to ensure that these dates do not change". (Abigroup Bundle, Tab 25, page 275). ABB's minutes of the same meeting recorded a discussion in the following terms: "7. Program - 26 weeks on-site (10 weeks prelims) following receipt of AFC drawings". (Abigroup Bundle, Tab 24, page 270). · ABB's notice of delay dated 20 March 1998 (Abigroup Bundle, Tab 35, page 294) stated expressly that the "notification is issued in accordance with the requirements proposed to be incorporated in a formalised Contract Agreement between AEC and Abigroup for these Works". The notice was given because "the information issued to AEC "Approved For Construction" is not sufficient for our originally planned progress …". The reference to "our originally planned progress" could only be a reference to ABB's timeframe for completion based on the receipt of a full set of AFC drawings that were correct, complete and had no holds on them, and not the timeframe stipulated in the letter of intent. Other statements in the letter to the effect that "AEC's tender offer is based upon …" specific characteristics of the AFC drawings and the failure of the drawings provided to ABB to achieve "a character, format, nature and state of completeness that concurs with the basis of AEC's offer" support that construction, as does ABB's statement that "as a direct consequence of the above items AEC has not yet been allowed to progress the works as originally programmed in the offer". The words "in the offer" plainly was a reference to ABB's conditional offer and not to any offer by Abigroup that might be read into the letter of intent. · Abigroup's minutes of various roof co-ordination meetings held subsequently, contain numerous references that show that the parties were proceeding on the basis that there should be a construction period of thirty six weeks commencing from the issue of AFC drawings with a target completion date in early November 1998 (see Item 2.1 in the minutes of roof co-ordination meeting no. 4 held 25 March 1998 in Abigroup Bundle. See Tab 38, page 303 and similar references in minutes of subsequent roof co-ordination meetings in Abigroup Bundle, Tab 44, page 334 ("36 week total duration from issue of AFC drawings"). See also Tab 78, page 452 which states additionally "Abi to advise the start of the 36 week period, not completed at 14/05/98, extended to: … 18/05/98" referring to the ongoing disagreement between the parties as to whether ABB's thirty six week period had commenced to run having regard to the unsatisfactory state of the AFC drawings. See also minutes of the roof co-ordination meeting no. 16 held 11 June 1998 at Abigroup Bundle, Tab 92, page 489, which stated that "Start of the 36 week period, not resolved at site meeting on 02/06/98. However settlement to be the subject to (sic) agreement on a revised fabrication, assembly and erection reprogramming"). These references show that Abigroup never conducted itself on the basis that ABB was bound to complete by the date stipulated in the letter of intent (i.e. "the middle of October 1998") or that the commencement of the construction period was independent of the date of receipt of AFC drawings. · In a facsimile from Owen (for Abigroup) to McDonnell (for ABB) dated 20 April 1998 on the subject of "monthly cash flow" (Abigroup Bundle, Tab 52, page 355) Owen wrote that "We require a copy of your projected monthly cash flow based on your contracted timeframe that is noted in your post tender interview minutes". Reference to Item 7 of the SPTI minutes of 19 February 1998 (at Abigroup Bundle, Tab 16, page 208) shows that the construction period was intended to be thirty six weeks from the issue of AFC drawings. To similar effect, Owen wrote to McDonnell on the same subject on 27 April 1998 (Abigroup Bundle, Tab 57, pages 364-365) that "Your cash flow should reflect all your tendered documentation i.e. $14M contract sum with completion by the 2nd November 1998". Again this was completely inconsistent with the completion date stipulated in the letter of intent. The nine suggested errors 124 Having carefully examined Abigroup's submissions in respect of the so-called nine suggested errors, I have a comfortable feeling of satisfaction not only that the factual issues have been properly explored and considered but also that none of the matters relied upon by Abigroup is seen to vitiate any of the findings of the Referee. 125 It is possible to deal with the suggested errors fairly shortly. The meaning of the acceptance Clause 126 There was no error in the approach taken by the Referee to the words of the Acceptance Clause. That the Referee approached the whole of the 19 February 1998 letter in context as opposed to focusing on and only on the words of the Acceptance Clause, is not a matter for complaint and demonstrates that the Referee was alive to the task at hand - the task of ascertaining the intention of the parties objectively when considered in the light of all the relevant circumstances including this letter, the point in time at which this letter was passed across, the response to the letter and the subsequent conduct. Failing to take account of subsequent conduct 127 It is incorrect to submit that the Referee failed to take any, or any proper, account of the subsequent conduct of the parties in assessing the significance of unresolved contractual issues at the time of ABB's commencement. Subsequent conduct of both parties in these particular circumstances involves so many dealings that both parties are able to point to disparate events consistent with their respective cases. Ultimately the finding is based on all of the evidence. Reasons for concluding that the 19 February letter had no [or insufficient] contractual consequence 128 The Referee did far more than base his finding that Abigroup's letter of 19 February 1998 did not, in the circumstances of the commencement of work by ABB, mean that the parties were bound by a preliminary contract which was enforceable, upon the narrow ground that Abigroup had handed over without comment [and that ABB did not immediately read] the clause concerning acceptance by commencement of work or understand that there was a clause to that effect. There is no substance in this alleged error. Failing to have regard to surrounding circumstances 129 Nor is there any substance at all in this alleged error. The Referee has provided a weighty tome with innumerable references to surrounding circumstances supporting his finding that the parties could not be said to have objectively intended to conclude a binding contract at or by the time the work commenced. Misconstruing words in the Acceptance Clause 130 There is no substance in the submission that the Referee misconstrued the words in the Acceptance Clause referring to acceptance of the terms of "this subcontract" as referring to a formal subcontract to be prepared based upon the amended SC JCC-D 1994 conditions and concluded that the parties could not have intended ABB by commencement to become bound to a subcontract not yet prepared and seen by it. This is a very narrow submission taking no account of the far broader approach taken by the Referee to the context in which the 19 February 1998 letter was handed over and to the parties objective intention seen in the light of all of the relevant facts, matters and circumstances. That the Referee was not forced into the straitjacket of determining the issue by reference only to the Acceptance Clause and/or by reference only to the use in this letter of the words "this subcontract" or "a subcontract" simply demonstrates that he avoided error and not that he erred. Construction influenced by consideration of subjective intent 131 Having carefully scrutinised the report I am comfortably satisfied that the construction by the Referee of the letter of 19th February 1998 is not vitiated by the suggested consideration by the Referee of the subjective intent of the parties. Together with a number of the other causes of complaint, this cause of complaint suffers from the problem that it addresses the wrong question. The matter does not stand or fall on the proper construction of the letter of 19th February 1998, although that construction is of course extremely significant in the scheme of things. What the Referee was about was an endeavour to objectively ascertain the intention of the parties ascertained not only from the terms of the 19 February 1998 letter but ascertained from the whole of the relevant surrounding facts matters and circumstances, importantly in this case requiring that letter to be read in the light of those circumstances. He said as much, from time to time, expressly referring to the need to objectively ascertain the parties' intention. The examination of subjective states of mind was necessary for a variety of other exercises, including determination of the question of credit and the estoppel case, as well of course as the need to reach findings of fact. [See for example the comment by the Referee at 518 that a particular fact concerning a belief issue - put in terms of an inference from a failure to assert a particular belief - "probably goes only to Abigroup's estoppel cases"] It is a delicate task to sift through the reasons in order to examine the substance or lack thereof in the submission that the Referee was influenced in the construction exercise, by the subjective intent of the parties. The carrying out of the task throws up the many occasions when the Referee refers to matters which to use his words were "expressly communicated" between the parties [cf as one only example – Report 317, sub paragraph (f)]. Having carried out that task I am comfortably satisfied that the submission is of no substance. Attaching undue significance to existence of unresolved matters 132 It is incorrect to say that the Referee attached undue significance to the existence of unresolved matters as at 19 February 1998 concerning the terms of a formal subcontract. He is not shown to have erred in his assessment of which matters were and which matters were not objectively speaking, essential to the existence of a binding contract. I am comfortably satisfied that his assessment in this regard has not shown to have been in error, whether in relation to facts or in relation to proper application of principle. Conclusion that 20 February 1998 letter amounted to rejection of offer 133 No error in reaching this conclusion has been demonstrated. Commencement of works date 134 For the reasons given in the report no error has been demonstrated in relation to the finding that ABB did not commence the works on 20 February 1998. The limited terms case 135 I have left until last the need to deal with a matter in respect of which the parties were violently at issue before this Court. It has already been mentioned and concerns ABB's submission that: · Abigroup's 19 February 1998 contract case, as eventually run, is summarised at Report pages 559.5 to 560.3. That case was based on all of the documents referred to in clause 32 of the SPTI minutes which included SCJCC-D and project-related conditions being part of the terms of the contract; · Abigroup did not plead or run any case based upon an offer on some, but not all of the terms of the letter of intent; ie excluding SCJCC-D and project-related conditions; · either variant of the terms of the offer or the contract set out in paragraph 30 of Abigroup's written submissions before this Court is a limited terms case; ie one which does not include all of the terms in the letter of intent; · specifically that case now sought to be put to the Court was: - not pleaded; - not run at the hearing; - not supported by submissions to the Referee; - not decided by the Referee; - not dealt with in Abigroup's oral submissions before the Court in terms of an attack upon anything the Referee was either said or not to have said to have done in that regard. 136 The matter harks back to paragraph 30 of Abigroup's submissions to this Court and the manner in which Mr Bathurst presented Abigroup's submissions from the bar table during this hearing. 137 The core of the issue relates to whether or not the only case put by Abigroup to the Referee was that the terms of the contract for which it contended: · included as part and parcel of the suggested acceptance of the 19 February 1998 letter of intent, the terms of the " amended SCJCC-D 1994 subcontract" and "the Project Related Conditions of Contract" ["the inclusive terms case"]; or · did not include as part and parcel of such alleged acceptance of the 19 February 1998 letter of intent, the terms of any sub contract so described and of such Project Related Conditions of contract ["the limited terms case"]. 138 It will be seen that paragraph 30 of Abigroup's submissions contends for the limited terms case. 139 A resolution of the issue requires careful attention not only to the pleadings, but also to the submissions put by both parties to the Referee as well as to sections of the report. 140 A particular problem in this regard concerns the many tentacled approach to alternative versions of the contract pursued by Abigroup. The extremely detailed and extremely voluminous submissions from both parties to the Referee required to deal with these sundry versions of the contract and it is possible to find any number of references in those submissions which it may be difficult to thumbnail sketch in terms of which particular version of the contract may there be being addressed. 141 Ultimately I am satisfied that no limited case, at least of the type now sought to be pursued by Abigroup to this Court, was prosecuted before the Referee. 142 There are numerous indicators in this regard: The Pleadings · Paragraph 3.5 of the Report reads as follows: "The fourth pleaded contract variation in the defendant's case appears first in the amended defence to the second further amended summons where it is pleaded - "(a) ... (the letter of intent) constituted an offer to the Plaintiff to carry out the Roof Works for the MUA Project on the terms and conditions thereof; and (b) the Plaintiff accepted that offer by commencing the Roof Works on the MUA Project." (my underlining)" "This case is advanced in almost identical words in the further amended cross claim and I proceed on the basis that there is only one such contract pleaded. Paragraph C1AA of the further amended cross claim pleads in the alternative that - "(a) The Cross Claimant's letter dated 19 February 1998 constituted an offer to the Cross Defendant to carry out the Works on the terms and conditions thereof; and (b) The Cross Defendant accepted the offer by commencing the Works." (my underlining)" The Referee's noting the lack of articulation · Later in the report the Referee makes the point more than once, that Abigroup had not articulated what were the terms of the agreement said to have been made: - he notes that no such articulation has been made " other than to point in the pleading to the terms and conditions of the letter and in the submissions to the terms discussed at the meeting " [Report 518] - he notes that the circumstances are such that " the submissions of the parties did not offer particular assistance as to why, or why not, the letter of intent constituted an offer by Abigroup to ABB it [being therefore] necessary to consider the words of the document itself and to construe them in the context of the surrounding circumstances, including, in particular, what occurred at the meeting of 19 February 1998 [Report 524] - he says [Report 532] : There is a further level of difficulty with the letter of intent being characterised as an offer containing the terms of a contract which would be made if that offer was accepted. The terms, on this view of things, must be found in the letter. But, on this part of Abigroup's case, what are the terms ? Those contained in the December 1997 version of the SC-JCC document - the only version which ABB had seen and considered (leaving aside ABB's express requirement to discuss those terms)? The revised version which Abigroup probably was finalising at the very time of the meeting, and which was not sent to ABB until 18 March 1998? What were the relevant contract drawings and specifications which defined the scope of work in this contract ? The drawings referred to in the letter of intent "as per Abigroup transmittal No.164 dated 19/1/98" were not the current tender set and certainly they did not depict the design which was to be found in the AFC drawings issued on 25 February 1998. The three specifications referred to, quite specifically by number and date, in the letter of intent, were superseded versions of those specifications ; was Abigroup truly offering to contract on the basis of these documents? It seems hardly likely. Were these difficulties with drawings and specifications capable of resolution, in a contractual sense, by the description in the opening paragraph of the letter of intent of the work to be done as "all as per the contract drawings, specification and construction schedule as amended from time to time by Abigroup "? (Referee's underlining). Is it suggested that the offer said to be contained in the letter of intent, which was capable of acceptance by commencement, was an offer which, if accepted, would bind ABB to perform varied or amended work for the fixed price? What was the "construction schedule " which the letter of intent offer presumably contemplated binding ABB to, if it started work? The rather crude schedule in Abigroup's original invitation of November 1997? The MUA9TARG programme? The "tendered Programme" referred to at the bottom of page 2 of the letter of intent? It is not possible, in my view, to analyse and resolve such difficulties, especially without the assistance of submissions from the defendant which address them. [emphasis added] · The difficulties before the Referee can be better understood by looking directly at the Contentions Section of the Further Amended Cross Claim where: - paragraph 1 where it pleads an agreement having been entered into on 19th February 1998 which is given an internal dictionary as "the First Agreement" - paragraph 1A which gives further adjectival information in relation to the First Agreement [and importantly gives particulars making clear that insofar as the First Agreement was in writing it was contained in and evidenced by a number of documents including General Conditions of Contract SC JCC-D 1994 as Amended and Project Related Conditions]. - paragraph 1AA which is very short and reads: "In the alternative, the Cross Claimant says that: (a) the Cross Claimant's letter dated 19 February 1998 constituted an offer to the Cross Defendant to carry out the Works on the terms and conditions thereof; and (b) the Cross Defendant accepted the offer by commencing the Works." · It is very important to note that no particulars at all of paragraph 1AA are given. · This has led to the parties strenuously put cross contentions to this Court; Abigroup seeking to take refuge in its submission that: "[It] did not expressly allege that the terms of the commencement of work case included the SC JCC-D conditions or the Project Related Conditions…Nor did ABB seek particulars that they were so included" [Submissions to this Court MFI 2 of 22 July 2003 paragraph 8] · ABB on the other end has strenuously submitted that: - The further amended cross claim did not allege a breach of the offer and acceptance claim advanced in paragraph 1AA of the further amended cross claim, nor did it allege any repudiation of any contract formed as a consequence of ABB commencing work. If it is said that the agreement referred to in paragraph 1AA of the further amended cross claim is one of the alternatives to paragraph 1 and is therefore within the definition of the "first agreement" (a construction which is against the plain words of the pleading), it does not matter because the "first" agreement so defined includes the Project Related Conditions and the SC-JCC-D conditions of subcontract in any event, see paragraphs 1A(a) and 1A(b) and paragraph 2 where once again the Project Related Conditions, the SC-JCC conditions, specific provisions of the SC-JCC conditions and the "date for substantial completion" were all relied upon as terms of the "first agreement". - In other words, if the defendant contends that its further amended cross claim should be read as if the offer and acceptance agreement referred to in paragraph 1AA, is part of the "first agreement" then such agreement is specifically alleged to include the terms of the Project Related Conditions and the SC-JCC conditions and in particular the obligation to complete the works by the date for substantial completion as may be extended "in accordance with the terms of the first agreement". - Alternatively, if it is contended that the offer and acceptance agreement referred to in paragraph 1AA of the further amended cross claim does not include the terms and conditions of the SC-JCC and Project Related Conditions documents, then the defendant has: - not alleged any breach of any alleged terms of that other and more limited agreement; - not sought damages as a result of an alleged breach of any of the terms of that other and more limited agreement; and - could not do so in any event because the act of repudiation relied upon is said to be ABB's statement that it would not meet the extended date for substantial completion which is a date and an obligation which does not exist in respect of the agreement in paragraph 1AA and the agreement now contended for by Abigroup; - conceded that time is at large in respect of the argument now relied upon. [T.285 lines 21-28]. 143 In my view these submissions of ABB are of substance, albeit that the question of time being at large: · is sought to be answered by Abigroup [and may arguably be answerable] in its proposition that the reasonableness of the time period for ABB to complete the Works was not predicated on the existence of either the amended SCJCC-D 1994 subcontract or the Project Related Conditions of Contract. · to which proposition ABB submits that Abigroup never conducted before the Referee any case which alleged a breach of a reasonable time term by ABB. The submission is that: "In fact Abigroup at all times referred to a 36 week case from the provision of AFC drawings. This case was based upon the entry in those terms in Abigroup's SPTI minutes, not upon anything contained in the contract now sought to be propounded by Abigroup. [cf also paragraph 29 of Abigroup's defence to the second further amended summons relying upon clause 6 of the Project Related Conditions and Clause 10.12 of the General Conditions of Contract]. 144 If Abigroup had in fact made explicit to the Referee that under cover of Paragraph C1AA of the further amended cross claim, it was contending for the limited terms contract case, it would certainly seem surprising, to say the least, that such a case would simply never have been treated with or dealt with by the Referee, nor by ABB in its written submissions. As ABB submitted before this Court, any such limited terms contract case as that contended for under cover of paragraph 30 of the Abigroup submissions ultimately amounts to: "some undefined contract agreement referred to in the letter [of intent] which excises the heart and soul of the letter which was the predominant qualification or condition set by Abigroup, namely: "You have to sign the SCJCC-D conditions and you have to be bound up [by] the Project Related Conditions." [Transcript 148] 145 In amplification of this submission ABB made the point by addressing what would have to be blue penciled out of the 19 February 1998 letter of intent, if the limited terms contract case had been before the Referee: · Firstly it would be necessary to notionally delete the section from page 1 commencing with the second paragraph of the letter and to excise also the paragraphs enumerated 1 and 2 [One could not include the reference to acceptance being conditional upon the parties entering into a formal subcontract based upon Amended SCJCC-D 1994 and Project Related Conditions of Contract because they are not referred to in paragraph 30. The paragraph enumerated 1 would also have to go out as would the paragraph enumerated 2, because one could not include the letter of acceptance in the putative contract [to do so, would be to again insert the SCJCC-D 1994 and Project Related Conditions of Contract, which had just been written out]. · Next, one could not include the whole of the paragraph enumerated 9, because the first sub-paragraph uses the words "in accordance with this letter of intent", which could not be read as "in accordance with the whole of the letter of intent". · The next matter requires one to focus upon paragraph 30 of Abigroup's submissions, which raises some difficulties of precision where, as it will be recalled, it includes an allegation that the subcontract made by ABB's commencement was on: (e) terms as to retention, defect liability period, liquidated damages, insurance and other general clauses as described in Clauses 5, 6, 7, 8 and 10 of the letter · Next the reference in Clause 2 of the letter to "the terms of this subcontract agreement" could not possibly mean the whole of the letter of intent, because of the excised sections earlier referred to. 146 One does not need to have to accept every one of these submissions of ABB, in order to see the type of semantic gymnastics which would require to have to be undertaken in even understanding a case put as Abigroup now seeks to do, in terms of its paragraph 30. 147 My conclusion is that no such case was put to the Referee. And to blithely submit, as Abigroup does: " Abigroup did not, and was never required to, identify the terms and conditions of contract arising from the letter of intent, and in particular it did not expressly include or exclude the [SCJCC-D 1994 and Project Related Conditions of Contract]" [MFI D2 paragraph 7 (a)] simply does not treat with the fact that the case was never litigated by Abigroup nor defended by ABB nor treated by the Referee as one pursuing the terms now put forward in Abigroup's paragraph 30. 148 It is appropriate to add that there are a number of references in the written submissions addressed by Abigroup to the Referee which may arguably support this finding. Hence one may find Abigroup submitting: · "in simple terms, Abigroup submits that there is no evidence to suggest that there was any contract agreed that did not include the [Project Related Conditions]" [Submissions paragraph 80 referred to in transcript before this Court at 334]; · "Abigroup subsequently acknowledged to ABB that the GCS sent to ABB at the time of tender were different from those sent at the stage and when the parties were trying to negotiate further in connection with the machinery provisions relevant to the agreement they had made on 19 February 1998" [submissions paragraph 181 referred to in transcript before this Court at 109]; · "The agreement made on 19th February 1998 provided for a payment regime of claim and certificate (items 1,4, 15 and 17 of the Minutes]"[I interpolate consistent with the SCJCC-D] [submissions paragraph 155 referred to in transcript before this Court at 336]. 149 Whilst I accept that these references may have in fact been supportive of Abigroup's responses to ABB written submissions in chief to the Referee dealing with the question of whether or not any agreements were formed on 19 February 1998, and whilst they are not the reason for the above finding, it is fair to say that one cannot find any explicit submission anywhere to the Referee in terms of the contentious paragraph 30. When it is said that a party is bound by the manner in which it litigated its case, this does not permit such a party to hide behind the many possibilities which might, on some view, be said to be able to be extracted from a particularly wide mode of pleading without particulars. Ambush litigation must be very carefully examined and is not conventionally permitted. The matter is regulated not only by the principles earlier set out concerning both the proper approach with respect to Part 72 references sought to be adopted before the Court but also by the elementary principle that parties are bound by the conduct of that case. [I note that in cases to which the overriding purpose Rule, to be found in part 1 of the Supreme Court Rules; would apply, the facilitation of the just, quick and cheap resolution of the real issues in civil proceedings would not permit such ambush litigation]. When not a single submission was put to the Referee in support of the limited contract case, the Court has a reasonable basis for the finding that no such case was litigated. And all of this against a background in which, as the transcript before the Referee discloses, the Referee put the following matter to Abigroup on the second day of the hearing: "Leaving aside the submission that you will make, the other matters, whatever date it was , remains to be negotiated, were in fact negotiated to a conclusion, but you still have to point to whatever the terms were of that core contract. " [Transcript 180.24-.20] [emphasis added] Quantum Meruit Quantum meruit finding of the Referee 150 Having determined that Abigroup and ABB did not enter into a subcontract for the performance of the steel roofworks project in February 1998 or thereafter, the Referee determined: · that the work performed by ABB between 20 February 1998 and 15 October 1998 (when Abigroup terminated ABB's services) was done pursuant to a request by Abigroup; · that in the circumstances, ABB was entitled to be paid on a quantum meruit basis. [Report 853.5] 151 The Referee valued the total amount to which ABB is entitled on a quantum meruit basis as $5,701,742.70, which included the amount of $1,855,971 already paid to ABB by Abigroup in progress payments. He stated in his final conclusion that there should be an order made requiring Abigroup to pay ABB the amount of $3,215,771.70 (together with interest). [See R898-R890] Abigroup's submissions 152 Abigroup submits that errors made by the Referee require that his assessment of the quantum meruit be rejected and that a fresh assessment of that claim is required having regard to all of what are submitted as the relevant circumstances. The suggested errors identified in the overview written submissions are: · in fact the value of the work performed by ABB in Abigroup's hands was only $1,823,670.10 [the submission is that notwithstanding this evidence, the Referee concluded that Abigroup should pay all of the reasonable costs incurred by ABB together with an allowance for profit] · the Referee erred by finding as a matter of law, that the only relevant consideration in valuing a quantum meruit claim, was what were the reasonable costs incurred by ABB in performing the work. ABB's submissions 153 ABB submits that Abigroup now seeks to advance a totally new case not advanced before the Referee and which, in significant respects, contradicts the case which Abigroup did advance to the Referee. In this regard the submission is that it is essential to follow the context within which the Referee determined the quantum meruit claim in order to discern that the matter was litigated in fashion such that Abigroup is presently out-of-Court by the way it conducted its case before the Referee. 154 Further ABB advances a number of particular suggested answers to Abigroup's submissions. The Way Forward 155 It seems convenient to: · first deal with the appropriate principles; · secondly examine the principles as found by the Referee; · thirdly treat with the respective stances taken by each party in its submissions to this Court - an exercise which must of necessity examine the complaints made by ABB to the effect that Abigroup is bound by the way in which it litigated the issue before the Referee. The principles Renard Constructions v Minister for Public Works 156 The Referee regarded himself as bound by the decision of the Court of Appeal in Renard Constructions [ME] Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234. In that case Meagher JA [with whom Priestley JA at 271 and Handley JA at 283 agreed on this issue] said at page 276: 'The cross-appellant really raised two distinct points. The first is that the arbitrator (and his Honour) was wrong to calculate the quantum meruit claim on the basis of what would be a reasonable remuneration for the contractor ; he should have essayed that task of inquiring what was the value to the principal of the work performed. Quantum meruit was now perceived, so the argument ran, to be based on concepts of unjust enrichment; it followed, according to this argument, that since the principal should not be unjustly enriched, he should pay to the contractor the value to him of the works performed as distinct from the reasonable cost to the contractor of performing the works . His Honour had already rejected such an argument in Jennings Construction Ltd v Q H and M Birt Ltd (Cole J, 16 December 1988, Unreported). That decision is precisely in point and, in my view, entirely correct. His Honour was therefore justified in applying it.' [emphasis added] Council of the City of Sydney v Woodward 157 In Council of the City of Sydney v Woodward [2000] NSWCA 201, reference was made by Heydon JA [with whom Priestley and Meagher JJA agreed] without exception to the following proposition as to principle put by the trial judge [cf Woodward v Sydney City Council, unreported Supreme Court of New South Wales, 27 October 1998, Einstein J]: "The position which obtains when a Court is asked to determine a reasonable remuneration payable to a plaintiff, on a quantum meruit basis, is as Renard makes quite plain, that it is the task of the Court to stand back from the evidence and to weigh up, in general terms from all of the evidence before it , what is a fair and reasonable amount to be paid to a plaintiff." [at paragraph 12] [emphasis added] Pavey & Matthews Pty Ltd v Paul 158 In Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221 the matter was put as follows by Deane J: "What the concept of monetary restitution involves is the payment of an amount which constitutes, in all the relevant circumstances, fair and just compensation for the benefit or "enrichment" actually or constructively accepted. Ordinarily, that will correspond to the fair value of the benefit provided (eg remuneration calculated at a reasonable rate for work actually done or the fair market value of materials supplied). In some categories of case, however, it would be to affront rather than satisfy the requirements of good conscience and justice which inspire the concept or principle of restitution or unjust enrichment to determine what constitutes fair and just compensation for a benefit accepted by reference only to what would represent a fair remuneration for the work involved or a fair market value of materials supplied.' [at page 263] [emphasis added] Contracts which do not materialise 159 The particular principles which require to be applied in the present case concern contracts which do not materialise. The matter is dealt with in Mason & Carter, Restitution Law in Australia, Butterworths 1995 at [1033] et seq. 160 It is plain enough as the learned authors point out [1033] that "in all cases in order to rely on restitution, a plaintiff must establish both enrichment and injustice [it being] insufficient merely for a plaintiff to assert that a request to do work was relied upon, or that there was a legitimate expectation that contract would be agreed". The authors go on to add "[t]herefore, work done in preparing to perform a contract, such as in preparing a tender, generally cannot be made the subject of a claim for reasonable remuneration. Such expenditure is an overhead expense to be recouped, if at all, from payments under the contract". 161 Abigroup particularly relies upon this last passage but, as will be seen from the discussion which follows, the matter must always be governed by the particular facts, matters and circumstances. 162 Mason & Carter also make the point that: "It is perhaps correct to say that the courts were less willing, when applying the implied contract rationale, to regard work done in anticipation of a contract which fails to materialise as liable to be remunerated in a restitutionary claim, than are the courts today in applying the unjust enrichment rationale. In part this is a response to a not uncommon feature of modern contracting. This is that the contracting process often lags behind performance. Documents such as heads of agreement and letters of intent are executed as agreements preliminary to contracts which are, in fact, never signed" [1033] The risk element 163 The authors discuss the incidence of the risk element making the point that risk concept is elusive although in some situations there is scope for a conclusion that the other party is implicated in the risk that no contract will materialise: "Thus, if the work in question is actual performance of the contemplated contract, begun simply because the contracting process is complex, it may be quite unrealistic to say that the risk of the negotiations coming to nothing falls only on the plaintiff. It may be plausible to say that the plaintiff has taken the risk that there will be no remuneration under the contemplated contract, and that the defendant has borne the risk that if the contract does not materialise there will be an obligation to pay a reasonable sum for work actually done. Although unjust enrichment assumes that there was no express agreement on risk, its application may help to displace an inference which would normally be drawn, namely, that because no contract was agreed there is no obligation to pay ." [1033] [emphasis added] Work partly executed 164 The authors deal with alternate situations: the first being where complete execution of the work contemplated by the parties has materialised and the second being "the more difficult case" where there is not only a failure to conclude an agreement, but the work done does not amount to full execution of what was contemplated as being done under the contract. The case presently before the Court is of course in this second-class. As part of the treatment given by the learned authors to this second-class, they comment on the decision by Sheppard J in Sabemo Pty Ltd v North Sydney Municipal Council [1977] 2 NSWLR 880. Mason & Carter make the point that in its dealings with Sabemo, a point was reached where the Council was requesting work for which it knew Sabemo expected payment, and the Council came under a duty to say that it would not pay. The authors express the view that "in failing to advise Sabemo that it had no intention of paying, it accepted the benefit of the work and came under an obligation, imposed by the law of restitution, to pay for the work done" [1035] 165 In Brenner v First Artists' Management Pty Limited [1993] 2 VR 221, Byrne J made the following observations: "This will involve proof that the services were not provided as a gift: Pavey's Case, at 227 to 228. Furthermore, it will be necessary for the plaintiff to establish, where a certain event has not occurred, that the services were not provided on the basis that they were not to be paid for unless that event came to pass. In this category will fall cases where a tenderer carries out estimating or other work in response to an invitation to tender for a contract. It is understood in such cases that, in general, the tenderer takes the risk that the tender will be unsuccessful and that, as a consequence, the work will be unrewarded. It may be, however, that, even in such a case, an obligation to pay the tenderer will arise where the contract is not entered into by reason of a change of heart on the part of the proprietor: Sabemo's Case; or where the work done falls outside that normally expected of tenderers : William Lacey's Case; or where the work performed is of particular benefit to the proprietor: British Steel Corp v Cleveland Bridge and Engineering Co Ltd [1984] 1 All ER 504." (at page 259) 166 William Lacey (Hounslow) Ltd v Davis [1957] 2 All ER 712 involved generally the following facts: · premises which had been damaged during the Second World War and which the owner was intending to reconstruct. The building scheme proposed that the premises be rebuilt as a shop, with an office floor and residential flats above. · A firm of surveyors was employed by Mr Davis (the defendant) and 3 tenders were obtained (including one from the plaintiff). · Lacey's first tender (9,114 pounds) was based on properly prepared drawings and bills of quantities and was considerably lower than other bids. · Lacey was told that their bid was the lowest and was led to believe that they would receive the contract. · Lacey was asked to calculate the timber and steel requirements (to help obtain necessary licences) – which they did. · Lacey was asked to submit their estimates for the notional reconstruction of the building (ie cost of reconstructing the building to what it was before the war damage) and its pricing schedule on which the tender was based – this was used by the surveyors to negotiate a "permissible amount" (the amount to be obtained from the War Damage Commission to help fund the repair). · Lacey gave an estimate of 7,650 pounds. · The Licence for the scheme was not obtained, upon which Davis proposed to rebuild the premises as a shop with 3 flats above. · War Damage Commission offered a "permissible amount" of 4,970 pounds. · Davis then asked Lacey to submit a revised estimate in accordance with specifications given – the aim being to increase the "permissible amount". · Lacey then undertook a considerable amount of work – and produced a revised estimate of 6,996 pounds. · The War Damage Commission approved the plaintiff's revised tender and increased the "prescribed amount" to 5,776 pounds. · Greer LJ found that the substantial increase was "partly, at least, as a result of the estimates and information provided by the plaintiffs" (at 714). · Later, Davis suggested numerous amendments to the plans and Lacey submitted further estimates. · In a letter, the surveyors informed Lacey that they were hoping to be "able to prepare contracts, etc., for the works really to commence". · After ordering bricks for the reconstruction the builders were told that someone else was to be employed to do the job (in fact, the work was never done, and the building was sold). 167 The holding was that a promise should be implied on the part of the defendant to pay a reasonable sum to the plaintiffs for the services rendered to them in respect of which they claimed remuneration (namely in respect of their work – excluding the work done on their initial tender), because: · the whole of the work fell outside the normal work which a builder, by custom and usage, normally performed gratuitously when invited to tender for the erection of a building; and · the proper inference from the facts was that the work was done under a mutual belief and understanding that the building was being reconstructed and that the plaintiffs were obtaining the contract. 168 Greer LJ distinguished the facts from a situation of providing gratuitous work in the hope of obtaining the contract. His Lordship expressed the following view: "I am unable to see any valid distinction between work done which was to be paid for under the terms of a contract erroneously believed to be in existence, and work done which was to be paid for out of the proceeds of a contract which both parties erroneously believed was about to be made. In neither case was the work to be done gratuitously, and in both cases the party from whom payment was sought requested the work and obtained the benefit of it. In neither case did the parties actually intend to pay for the work otherwise than under the supposed contract, or as part of the total price which would become payable when the expected contract was made. In both cases, when the beliefs of the parties were falsified, the law implied an obligation – and in this case I think the law should imply an obligation – to pay a reasonable price for the services which had been obtained. I am, of course, fully aware that in different circumstances it might be held that work was done gratuitously merely in the hope that the building scheme would be carried out and that the person who did the work would obtain the contract. That, I am satisfied, is not the position here . In my judgment, the proper inference from the facts proved in this case is not that the work was done in the hope that the building might possibly be reconstructed and that the plaintiffs might obtain the contract, but that it was done under a mutual belief and understanding that the building was being reconstructed and that the plaintiffs were obtaining the contract." (at 719) [emphasis added] The principles as found by the Referee 169 The Referee sets out the "proper basis for valuing a quantum meruit" as follows [Report 853.7 - 854.10]: "Paragraph 10(a) [of the Amended Defence] ... raises the issue of the proper basis for valuing the claim [namely a quantum meruit claim]. That is, whether it is to be considered in light of what might loosely be called 'the reasonable cost of the Plaintiff,' or [my emphasis] whether it is to be valued also by having regard to some benefit conferred on the Defendant. ... This point is governed by the decision of the Court of Appeal in Renard Constructions (ME) v Minister for Public Works (1992) 26 NSWLR 234. The basis of this assessment is to be those costs incurred by the Plaintiff which were reasonable and which were properly incurred in performing the work. As part of its submissions on this point, the defendant submitted that I should have regard to all of the circumstances. It nominated a number of circumstances as relevant: (a) whether the principal requested the work; (b) whether the principal accepted the work; (c) whether there was any real benefit to the principal; (d) whether the work performed had a sufficient nexus with the substance of the request to perform; (e) how the provider, in its estimation, came to be entitled to the claim. Without commenting on the validity or otherwise of this list, it can be said generally that in this case items (a) and (b) can be answered in the affirmative while item [(e)] is subsumed within item (a) and (b). Item (d) is partly a restatement of the requirement that any cost be shown to be properly incurred .. A cost cannot be properly incurred if it did not have a sufficient nexus to the word which was requested. To the extent that item (c) is a submission that the work should be valued on a 'benefit to principal' basis, it is wrong." 170 Abigroup submits that Renard is not authority for the basis of assessing the costs recoverable by ABB. In that regard Abigroup cites as the proper test: "The tendency in some past cases to see the rationale of the right to recover remuneration for a benefit provided and accepted under an unenforceable contract as contract or promise rather than restitution has tended to distract attention from the importance of identifying the basis upon which the quantum of the amount recoverable should be ascertained. What the concept of monetary restitution involves is the payment of an amount which constitutes, in all the relevant circumstances, fair and just compensation for the benefit or 'enrichment' actually or constructively accepted" . (Emphasis added by Abigroup). [per Deane J in Pavey & at 263] 171 Abigroup further submits as follows: "Cole J's reasoning in Jennings Construction Limited v QH & M Birt Pty Ltd (unreported, Supreme Court of New South Wales, Cole J, 16 December 1998) (and upon which Meagher J was commenting in Renard ) accepts "all the circumstances" are relevant (consistent with Pavey ) when in that case he stated (at paragraph 20): "There is authority binding upon me, including Bolot v Capper (1957) 75 WN 316 at 317 which makes clear that on a quantum meruit the task is to determine a reasonable price or charge in all the circumstances ...". It is submitted that Renard is not authority for the proposition that a quantum meruit claim can only be determined by reference to "the reasonable cost to the contractor of performing the works" [Vol 4] [As submitted by ABB at paragraph 35 tab 11 of its submissions in chief]. The Court in Renard simply said that it is not correct to value a quantum meruit solely on the basis of the value to the principal or recipient of the works or services. It is proper to have regard to all of the relevant circumstances, which may include having regard to the value of the services in the recipient's hands. Brenner In the case of Brenner v. First Artists' Management Pty Ltd [1993] 2 VR 221 (" Brenner "), the Supreme Court of Victoria considered a quantum meruit claim in circumstances where there had been no binding contract entered into between the parties [Whilst not a construction case it is submitted that this case is more relevant to the current case, the Renard and Jennings cases being concerned with circumstances where a contract existed and there was a claim that it had been wrongfully repudiated. The main issue for consideration was whether the contract price represented a ceiling on recovery of a quantum meruit]. In Brenner , Byrne J set out, comprehensively, we submit the circumstances which should be taken into account in assessing fair and reasonable compensation. He held that (at 262-263) as the focus of an unjust enrichment claim was the enrichment of the recipient, the 'benefit' necessary for a restitutionary quantum meruit action must be assessed from the point of view of a recipient of the services acting reasonably. The applicable principles include: The "fundamental yardstick" is to assess a fair and reasonable compensation for the benefit accepted actually or constructively by the defendant; The fair value of requested services will ordinarily be remuneration calculated at a reasonable rate for the "work actually done" regardless of whether this produced an "enormous profit" or none at all. However, services which produce no profit at all because they are performed defectively are not likely to lead to a significant assessment of compensation ; Therefore, the assessment must have regard to what the recipient would have had to pay to obtain the services under a normal commercial arrangement; The cost incurred by the plaintiff in performing the services is not determinative of what is fair and reasonable although it will be evidence; Where the services are performed pursuant to a contract which is unenforceable - or for some reason no longer binding on the parties, the agreed price in that contract is evidence, but not determinative, of reasonable remuneration; Where the Court has regard to either an agreed price or agreed method of calculating remuneration, it is entitled to modify this to determine a fair recompense in all the circumstances: for example, where the services under the ineffective contract have not been completely performed; Most recently, Byrne J's reasoning in Brenner has been approved by the full Court of the South Australian Supreme Court in Angelopoulos v Sabatino (1995) 65 SASR 1 and in the Federal Court in GEC Marconi Systems Pty Limited V BHP Information Technology Pty Ltd [2003] FCA 50 Finn J (at para 1415)." Assessing the approach taken by the Referee 172 It is to be noted that ABB submitted before the Referee: "It is not controversial that in determining what amount may be recovered "representing the reasonable cost of the work he has done and the money he has expended" [Renard at pages 277E-F] all relevant circumstances must be considered. However, the Court of Appeal clearly rejected the submission that this amount should be determined on the basis of the value to the principal of the work performed". [Paragraph 91 of ABB's reply submissions to the Referee reproduced in Appendix N] [emphasis added] 173 It seems to me that, as ABB has submitted, it is clear from the Referee's statements [at Report 854] that the Referee accepted that he had to take into account, as a matter of principle, all relevant circumstances. 174 It cannot be suggested that the Referee was not bound by the statements of principle in Renard. He was so bound. This Court is so bound. The suggested problem inheres in the fact that the Referee was not prepared to accept the proposition that on the authorities it was a correct statement of principle to say that work should [in some mandatory fashion] be valued on a 'benefit to principal' basis. To my mind there was no error in the Referee so approaching the matter. However this is simply not the same as regarding the Referee as closing his mind to the obvious need to take into account all relevant circumstances. He is not seen to have closed his mind in this way. [See in particular the disjunctive 'or' used by the Referee when he first poses the question for decision – making clear that he was regarding Renard as authority, in that way of putting the question, for accepting the first leg of the disjunctive, namely "the reasonable cost of the plaintiff"]. 175 In essence the question may involve two possible, approaches to how one reads the last two lines at Report 854. Those two lines read: "To the extent that item (c) is a submission that the work should be valued on a 'benefit to principal ' basis, it is wrong". 176 One reading of those lines is as follows: "To the extent that item (c) is a submission that the work should be valued on a 'benefit to principal ' basis, it is wrong. Subject to that proviso, I accept (c) which is apparent as (a) and (b) are satisfied" 177 Another reading of those lines is as follows: "Item (c) is incorrect and irrelevant" 178 Ultimately and even if I be incorrect in my construction of those lines, it will be seen from what follows that the Referee is not shown to have been relevantly in error where failing to have valued on a "benefit to principal" basis. 179 Ultimately and as ABB submitted to the Referee, the inquiry is as to what is "reasonable remuneration" in all the circumstances: "Ordinarily that will correspond to the fair market value of the benefit provided (e.g. remuneration calculated at a reasonable rate for work actually done or the fair market value of materials supplied") [See proposition 12 of Einstein J judgment in Woodward set out at paragraph 51 of ABB's quantum meruit submissions in chief, derived from Pavey ] 180 Importantly and as ABB has submitted to this Court, that is what the experts assessed in this case [See ABB's submissions in reply at paragraphs 3-15; ABB's quantum meruit submissions in chief at paragraphs 28-34] and the Referee so found [Report 855-856]. The Referee specifically referred to evidence given by Mr Radcliffe, ABB's quantum expert, explaining his methodology, which made clear that Mr Radcliffe had taken into account the question whether the rates and salaries used to value the costs were "reasonably in accord with the market for this type of work" and were "in the order of magnitude of what I would have expected to see as industry standards". [Report 856, subparagraphs (a) and (b)] 181 The Referees findings were expressed as follows: "Assessment principles used by the experts There is ample evidence in the transcript and the experts' reports that the experts (Mr Radcliffe for the plaintiff and Mr Blunden for the defendant) based their assessments on the correct legal principles. A few examples will suffice. In his report of 21 December 1999, Radcliffe said " I have carried out an audit ... in order to establish whether the costs incurred were properly incurred ..., and secondly whether the costs incurred were reasonable ." [Para 1.06] That is a correct statement of principle. Radcliffe also took steps to ensure that costs were reasonable. For example, he calculated the claimed overtime labour penalty rate from the total claim and the overtime hours recorded. He then concluded that the rate was reasonable. [Paras 3.01.05, 3.01.06] Similarly, he formed an opinion as to the reasonableness of labour on-costs [Para 3.01.07] and salary rates. [Para 3.02.02] In his report of 9 March 2000, Blunden said, criticising Mr Radcliffe's methodology, that " The report [that is, Mr Radcliffe's] is basically an audit report of costs 'properly incurred' by ABB and does not investigate whether the costs incurred are "'reasonable' for the amount of work performed by ABB . " [Para 3.4.3] That passage shows that Blunden understood the correct legal principles on which he was to base his work. Radcliffe's methodology specifically was considered as one of the items upon which the parties did not initially agree. It appeared as such at item 1 on a Supplementary List of Issues prepared by Radcliffe, which was resolved in conclave, as the following passages indicate [T311 - T314]: In explaining his methodology, Radcliffe said that " In auditing the costs and reaching a monetary conclusion, I had regard to whether the costs are costs properly incurred in executing the work. In other words, there are no costs in there that belong to other jobs, and they are properly for the work carried out. I have had regard to whether [ABB] worked diligently . There are no duplications. The hours of work performed properly relate to and are accounted to the job, and the rate for labour and salaries are reasonably in accord with the market for this type of work ... ... it is my opinion that the method I have adopted represents a reasonable remuneration.. " When I asked him whether the matters he had mentioned were matters with which he was professionally familiar, he replied, "They are, sir, yes. I deal with a number of mechanical projects and civil engineering, and the rates of pay, the all-in rates of pay, and salaries are in the order of magnitude of what I would expect to see as industry standards ." Blunden heard that passage. I then asked him a question concerning the Tomago facility and Blunden replied, " ... So the point stands as we have made it, tested as a reasonable costs test ... " As will be seen, the experts arrived at the same conclusion in respect of the great majority of the evidence that they considered. Blunden confirmed they had done so in his report [Part 9.1]. That could not have occurred had the experts been proceeding on fundamentally different legal principles." The context within which the Referee determined the quantum meruit issue 182 It is convenient to return to the submissions put by ABB in terms of the context this issue was determined. Those submissions were as follows: "1. Early in the reference, the Referee put in place a mechanism, to which both parties agreed, whereby the value of ABB's quantum meruit claim could be assessed by a conclave of the parties' respective experts. The conclave process in relation to this claim is described in detail in ABB's submissions in chief to the Referee. [See paragraphs 84-97 of chapter 11, reproduced in Appendix L] 2. As well, separate conclaves, set up and supervised by the Referee, were held to assess the value of ABB's entitlement to payment for variations and other contractual claims on the assumption that there was a contract and to assess the value of Abigroup's claim for the costs it incurred in completing the construction of the roof after ABB left the job and consequential costs it incurred as a result of delays to other parts of the project. 3. The parties were represented in the conclaves by their respective quantum experts, Mr Radcliffe for ABB and Mr Blunden for Abigroup, under the supervision of the Referee. Agendas were developed and agreed identifying matters to be discussed and resolved and the parties co-operated in the process so as to facilitate the prompt exchange of information on an informal basis to enable the experts to carry out their respective tasks and to enable them to bring forward any matter that either party required to be resolved in connection with the assessment of the claims. 4. The Referee chaired the initial meetings of the experts. Subsequently, a dialogue was established between the experts, which was conducted orally in meetings and by telephone and by the exchange of detailed written material, over a period of many months, during which they sought to identify areas of agreement and to narrow and define the specific matters upon which they disagreed and the reasons for disagreement. The Referee closely followed and overviewed this process. 5. Each of the experts produced extensive individual reports dealing with each of the separate claims and counter claims of the parties. As well, the experts produced a series of joint reports and spreadsheets summarising the results of their dialogue and identifying the areas of agreement and disagreement in relation to the topics dealt with in all three conclaves. In total there were more than a dozen lever arch folders of expert evidence dealing with all of the various aspects of quantification and assessment arising out of the respective claims and counter claims of both parties. The conclave process took more than a year to finalise . 6. Both parties were willing and active participants in the process. 7. In its submissions to the Referee in relation to the valuation of ABB's quantum meruit claim, Abigroup submitted: "Mr Radcliffe and Mr Blunden embarked upon a fruitful exercise of conclaving to deal with the quantum of the claims made by both ABB and Abigroup in these proceedings. Abigroup submits that Mr Blunden's assessment in respect of the claims of ABB should be accepted." [Paragraph 516 of Abigroup's submissions in chief reproduced in Appendix M] 8. The experts reached a substantial measure of agreement in relation to their assessment of the value of ABB's quantum meruit claim. The Referee noted that "both parties' submissions impliedly accept that those components which were agreed do not fall to me for determination or final validation, at least provided that I am satisfied as to the legal principles underlying the agreement". [Report 857.8] ABB's submissions to the Referee summarised the position as follows [Paragraph 15 of ABB's submissions reproduced in Appendix L]: The ABB (Radcliffe) position $3,290,255.64 The Abigroup (Blunden) position $2,921,819.00 Amount in dispute $ 368,436.64 9. The difference between the experts related to five discrete items [See paragraphs 16 and 17 of the submissions in Appendix L] totalling $341,144.93 plus a further amount of approximately $27,000 arising from the consequential need to adjust the value of certain margins depending on the value of the final base figure. 10. The parties addressed detailed submissions to the Referee in relation to the applicable legal principles and in relation to the valuation of the claim. [See the submissions reproduced in Appendix L, M and N] Abigroup in its submissions to the Referee [See Appendix M paragraphs 516-538], responded to certain particular submissions ABB had made in relation to the matters upon which the experts had disagreed. As well, Abigroup made submissions in relation to certain parts of ABB's claim, in respect of which the experts had reached a substantial measure of agreement, where Abigroup considered that there were grounds to depart from the consensus position agreed by the experts. In particular, although the experts had reached a substantial measure of agreement in relation to the costs of the shop drawing process, Abigroup submitted that "ABB has failed to establish that any amount for Baigents (the shop drawing subcontractor) was reasonably incurred". [Paragraph 518 of the submissions in Appendix M]. 11. It will be necessary for the Court to read closely Abigroup's submissions in paragraphs 516-538 of its submissions to the Referee [These are reproduced in Appendix M] in light of the challenges that Abigroup has made to the Report. As will be seen, Abigroup has advanced a totally new case in its submissions to the Court, one that it did not advance in its submissions to the Referee. When the submissions that Abigroup made to the Referee are read, it can be seen that: (a) Abigroup submitted that Blunden's assessment should be accepted [Paragraph 516 in Appendix M] (as noted earlier, Blunden's valuation of the claim was $2,921,819) [See paragraph 9 above] (b) Abigroup submitted that ABB had failed to establish that any amount paid to ABB's shop drawing subcontractor was reasonably incurred [Paragraphs 517, 518 and 532 of the submissions in Appendix M]; (c) Abigroup submitted that the need to have regard to " all of the circumstances is demonstrated plainly by reference to the items which are identified in the submissions in chief of Abigroup as being matters of difference between Mr Blunden and Mr Radcliffe", apart from claims relating to the shop drawing process in relation to which Abigroup made separate submissions [Paragraph 519 of the submissions in Appendix M]; (d) Abigroup submitted that the claims which were unresolved in the conclave process between Mr Blunden and Mr Radcliife substantially related to costs claimed by ABB for work performed after 14 October 1998 [Paragraph 520 of the submissions in Appendix M]; (e) Abigroup submitted that there was a dispute [See paragraph 522 of Abigroup's submissions reproduced in Appendix M] in relation to the expert's agenda item 1.18 (which related to an item of $15,930.66 for interest incurred after 14 October 1998) [See the table set out in paragraph 174 on page 57 of Abigroup's submissions to the Referee reproduced in Appendix N]; (f) Abigroup submitted that costs incurred by Abigroup after 14 October 1998 in connection with the Lampson crane, was not a cost for which it should have to pay because ABB 'took the risk' in relation to such costs [Paragraph 523 of Abigroup's submissions in Appendix M]; (g) Abigroup submitted that there was a dispute in relation to McDonnell's and Hardy's salary costs in respect of the running down of the job in November and December 1998 [See paragraphs 524-525 of Abigroup's submissions reproduced in Appendix M]; (h) Abigroup disputed certain costs in relation to QA and safety loading on the basis that there was duplication of cost recover [Paragraphs 526-531 of Abigroup's submissions reproduced in Appendix M]; (i) Abigroup submitted that there was a dispute in relation to the recovery of Glanville's salary costs for the period from July to the start of October 1998 on the basis that his salary was recovered in the allowance for head office overhead [Paragraphs 533-534 of Abigroup's submissions reproduced in Appendix M]; (j) Abigroup then submitted that, in the case of the Lampson crane, although no benefit was ultimately conferred on Abigroup for the mobilisation costs of the crane nevertheless "Abigroup, by Mr Blunden, have accepted some costs as a reasonable cost to ABB" [Paragraph 536 of the submissions in Appendix M]. The further submission was made that "the valuation made by Mr Blunden included costs for items that ultimately were of no benefit to Abigroup at all. However, at the time the costs were incurred they would have provided a benefit to the project had ABB not been terminated" [Submissions paragraph 538 reproduced in Appendix M]. 12. Each of those submissions was answered in detail in ABB's reply submissions to the Referee [See the submissions reproduced in Annexure N, paragraphs 16-73 in relation to the shop-drawing costs, paragraphs 74-79 in relation to the Lampson crane issue and paragraphs 80-94 in relation to the other remaining disputed items]. 13. As well, there was extensive evidence and the parties made lengthy and detailed submissions to the Referee in relation to the course of the work in the period after 19 February 1998 up to the time that Abigroup terminated ABB on 14 October 1998. As noted at paragraphs 38-42 below, the evidence had multiple relevance including to quantum issues and to Abigroup's contention on the one hand, that the state of the job in the period from August to October 1998 proved ABB's lack of capacity to do the job as it represented it could and, on the other hand, ABB's contention that there was a complex and interrelated set of factual circumstance that explained the delays to progress, and which related to eighteen identified circumstances in respect of which the conditions and qualifications upon which ABB had based its tender were not fulfilled [See particular ABB's submissions to the Referee reproduced in Appendix I and J]. 14. The Referee accepted ABB's submissions in relation to the causes of delay and made findings to which reference has been made earlier in paragraph 24 of chapter 4. These findings included that it was not until Abigroup issued a direction to ABB on 12 October 1998 for ABB to proceed with the works on the basis of a set of AFC drawings issued on 24 September 1998, that ABB was at the point where it expected to be at the start of the job [Report 821]. Those findings were relevant also to ABB's claim for payment on a quantum meruit. 15. In coming to those conclusions the Referee referred to the party's submissions in relation to the RFIs (requests for information) that had been issued by ABB's shop detailing subcontractor, in the following terms: "I have had regard to ABB's detailed analysis of RFIs in Section S of its submissions in reply [Reproduced in Appendix K] and to Abigroup's submissions on the RFI topic [Abigroup's submissions are reproduced in the exhibit to Mr Pudig's affidavit]. The whole topic involved a substantial engagement and I do not intend to analyse it in any detail. While it seems to me that the parties have just about fought each other to standstill on the issue, at least in so far as it was joined (here the Referee noted in a footnote that Abigroup did not comment in relation to many of the RFIs in its submissions), I think that it should be concluded that a level of defects in the drawings was an ingredient in the mix which helps to explain elements of the history of the job leading to its overall circumstances in October 1998, a conclusion detracting from Abigroup's primary submission in this regard" [Report 832.9-833.1]. 16. The Referee found further that: "The shop detailing performed by Baigent was an integral part of the work which the defendant had requested the plaintiff to perform. The original scope of that work corresponded with the original state of the design. The final scope was different. It was different because the design changed, often at the defendant's instigation, and always with its approval and because the original drawings, issued by the defendant were in a state such that they could not be used unchanged as the basis for shop detailing . 17. Regardless of the precise nature of the plaintiff's original requirements as to the quality and timing of drawings, the defendant did what it did. In doing so, it requested the plaintiff to perform the work accordingly, and inevitably, that involved the plaintiff and Baigent in a welter of variations and RFIs . Responding to those events was as integral a part of performing the shop detailing work as requested from time to time by the defendant as was the original scope of that work" [Report 896.6]. 18. Having considered many engineering drawings and shop drawings, thousands of pages of other evidence and more than a thousand pages of submissions dealing with the history of the job and the assessment of the quantum of ABB's quantum meruit claim, and having meticulously recorded his conclusions and reasoning process over some forty six pages in the Report, the Referee assessed the value of ABB's quantum meruit claim in the sum of $3,215,771.10 [Report 898 ] plus an amount of interest yet to be determined . 19. Abigroup now, in its submissions to the Court, seeks to advance a totally new case which it did not advance to the Referee and, in significant respects, contradicts the case that it did advance to the Referee. The submission is premised on Abigroup's assertion that the Referee misapprehended the relevant legal principles governing the assessment of a quantum meruit, in particular that the Referee should have taken into account all relevant circumstances, including the value of services in Abigroup's hand. Building from that premise, Abigroup submits that this "misapprehension of the legal principles" [Paragraph 109 of Abigroup's submissions] led the Referee into error. The error, so it is submitted, is that the Referee had regard only to the joint report of the experts assessing the value of the quantum meruit claim and that the Referee confined his "only additional analysis" to "differences in opinion of the experts within the report dealing with "quantum meruit" without regard to any of the evidence contained in the other reports" [ Paragraph 110 of Abigroup's submissions]. (It should be noted that it is hardly surprising that the Referee should do so in light of Abigroup's submissions to the Referee, to which reference has been made earlier in paragraph 11 above). Even more startling is Abigroup's submission, made for the first time, that in considering the value of the work and services received in Abigroup's hands, the Referee should have had regard to certain specific pieces of evidence, to be found in another joint report recording the experts' joint assessment of Abigroup's costs of completion of the project, the effect of which, so Abigroup submits, is that the net value to Abigroup of the work performed by ABB was only $1,823,670.10 [Abigroup's submissions paragraphs 113-116]. It takes but a moment to compare the submissions in those paragraphs of Abigroup's submissions to the Court with the submissions Abigroup made to the Referee, to which reference has been made earlier in paragraph 11 above, to see that there is no correspondence whatever between the case now put to the Court and the case Abigroup put to the Referee . Even Abigroup's present submission to the Court, that the value to it of the shop detailing work carried out by Baigent was $193,482, contradicts the submission that Abigroup made to the Referee, which was to the effect that ABB had failed to demonstrate that any part of the costs paid to Baigent had been reasonably incurred and, implicitly, that ABB should not receive anything for that work [ See e.g. Abigroup's submissions in paragraph 517-518 of Abigroup's submissions reproduced in Appendix M]. 20. In similar vein, Abigroup now submits to the Court that the Referee was in error in failing to have regard to "the amount the parties had actually agreed for that work to be performed" [See paragraph 117 of Abigroup's submissions to the Court]. The submission continues to the effect that Abigroup had led evidence as to the amount that ABB would have been entitled to be paid under the contract, on the assumption that there was a contract, which Abigroup now submits was relevant to the assessment of a quantum meruit calculated on the basis that there was no contract. Implicit in Abigroup's submission that the Referee should have taken that evidence into account, is the unstated submission that the Referee should have accepted the evidence of Abigroup's expert on that question in preference to the evidence of ABB's expert, in circumstances where there was a very wide divergence of opinions as to the amount that may be due to ABB on the assumptions upon which that valuation exercise was undertaken. Again, it takes but a moment to compare Abigroup's submissions to the Court on this issue with the submissions that Abigroup made to the Referee, for it to be apparent that no such submission was made to the Referee . Nor did Abigroup submit to the Referee, and nor does it submit to the Court, that the experts had regard to any of those matters in carrying out their assessment of the value of ABB's quantum meruit claim during the extensive conclave process that had been put in place specifically to enable that issue to be determined." 183 In my view there is substance in the following written submissions put to this Court by ABB: · it was incumbent upon Abigroup to identify in its submissions to the Referee any matters which Abigroup considered should result in the 'ordinary situation' not applying and to identify any evidence that it wished the Referee to take into account in carrying out his assessment. A fortiori, if Abigroup considered that the Referee should disregard the consensus reached by the parties' respective experts following the lengthy conclave process and the basis upon which it was conducted (which the Referee described at Report 857-858). · Abigroup is bound by the way it conducted its case before the Referee, which was as follows: · it submitted that Blunden's assessment should be accepted; · it submitted that ABB had not established that any amount paid to Baigent (the shop drawing subcontractor) was reasonable; · it submitted that the Referee should not allow the items representing the difference between the Radcliffe and Blunden assessments. · Abigroup now, for the first time, submits that the Referee should have taken into account the value of work in Abigroup's hands, assessed at $1,823,670.10, and the 'contract' value of ABB's work assessed at $2,175,869.48, plus $165,434.87 for variations [See paragraph 119 of Abigroup adoption submissions] and, implicitly, that the Referee should have disregarded Radcliffe's assessment, which was substantially higher, although no reasons for doing so have been given. · Abigroup now, for the first time, submits that the Referee should have taken into account unspecified parts of other reports that were specifically directed to different quantification issues raised by other claims and counter claims made by the parties in the proceedings, in circumstances where the experts made no reference to the need to do so and Abigroup did not submit to the Referee that he needed to do so. · although Abigroup's attack on the Referee's report masquerades as an 'error of principle', in fact, no issue of principle is involved. The Referee carefully considered every specific matter that the parties, and Abigroup in particular, submitted was relevant. The Referee carried out the appropriate enquiries and was not misguided in the way he approached the task. 184 ABB further submissions also of substance and adopted are as follows: The value of the work and services to Abigroup 20. The evidence which Abigroup now says, for the first time, the Referee should have taken into account comprises amounts extracted from a spreadsheet included in Exhibit 307, a three volume joint report entitled "Assessment of Abigroup's costs incurred in the completion of the MUA as a consequence of ABB's termination and assessment of the contract sum ABB would have been paid had they complete the works". There was no reason for the Referee to commence to search for evidence that might be relevant to the assessment of ABB's quantum meruit claim in that location, particularly when Abigroup had made no mention of it in its submissions and nor had the experts done so in their joint consideration of the question . 21. The spreadsheet includes a long list of items, extending over many pages, including items referred to generically as "Transfield subcontract account". Abigroup now says that two items listed under "Transfield subcontract account" are relevant and should have been taken into account by the Referee. One item, representing an amount of $1,182,932.06, is described obscurely as "less items fabricated by ABB". That was an agreed amount. However, there is no evidence to be found anywhere in the joint report or in the experts' other reports explaining what was included or excluded from the amount and how it was arrived at. The second amount to which Abigroup now points is an amount of $407,086.90 which is described in the spreadsheet as "dayworks - receipt, checking, rework of ABB defects, and completion of components where partially finished by ABB". Again, there is no evidence to be found anywhere in the joint report or in the other reports which sheds light on how that figure is to be apportioned between, for example, rework of ABB defects on the one hand and, on the other, completion of partially finished work. 22. Another figure that Abigroup says that the Referee should have taken into account is an amount of $26,104.44 for the lower half roof columns. This figure, as appears from paragraph 114 of Abigroup's submissions, has been plucked from a different joint report concerned with the "assessment of amount due to ABB in the event that a contract is in force". No submissions are provided to the Court ( nor were they provided to the Referee ) why that item, for example, and no other, should be taken into account. Nor are there (or were there) any submissions explaining how values determined on the assumption that a contract was concluded should be related to the actual reasonable cost of the work, valued at market rates (which is what the experts did) in circumstances where the Referee found that no contract was concluded, with the result that the assumptions upon which any such valuation may have been made were unproven. 23. Moreover, apart from the fact that Abigroup's submissions now assert, for the first time, that the net value to Abigroup of the work performed by ABB was $1,823,670.10, it remains unclear how Abigroup says that figure should be related to the figure agreed by Abigroup's expert as the reasonable cost of the work carried out by ABB at Abigroup's request, which was $2,921,819 . It is unclear, for example, whether Abigroup now submits that the only amount to which ABB should be entitled to be paid is that figure of $1,823,670.10. Apart from there being no rational basis for that approach set out in Abigroup's submissions to the Court (which would in any event, be an approach which was specifically rejected in Renard) it is directly contrary to Abigroup's submissions to the Referee . For example, taking the 'net value' approach that Abigroup now submits should be taken, would involve excluding from the amount payable to ABB, any amount that ABB incurred in connection with the mobilisation of the Lampson crane, which was a substantial amount. As noted earlier, in paragraph [11] above, in its submissions to the Referee Abigroup expressly accepted that it was liable for those costs subject only to its submission that it should not be liable for the costs incurred after 14 October 1998 because, so it was submitted, ABB 'took the risk' of such costs. 24. Another basis upon which Abigroup says that the Referee should have had regard to the value of the work and services to Abigroup is in reducing the amount payable in respect of the work done by Baigent, the shop detailing subcontractor. The inconsistency between the approach Abigroup took in its submissions to the Referee and the approach that it now takes has been referred to earlier in paragraph 19 above. The substantive issues raised by Abigroup's challenge to the Referee's inclusion of an amount of $572,582 for the Baigent work, focussing particularly on Martin's evidence, is considered later in these submissions. Abigroup's submissions in relation to the relevance of the agreed price : 25. There are two limbs to this part of Abigroup's submissions. The first involves the proposition that the Referee should have accepted Blunden's assessment in preference to Radcliffe's assessment of the 'contract' value of the work. No submissions were addressed to the Referee in relation to that matter and none have been addressed to the Court. Given that the difference between the experts on that issue represented some $3.2M, the submission, if it had been made to the Referee (and indeed, now in Abigroup's submissions to the Court) would be expected to be supported by detailed evidentiary references and analysis. An essential part of the task of resolving the extensive differences between the experts would involve determining the relevant terms of the contract governing the assessment of the value of the work , a difficult task in circumstances where the Referee found that no contract had been agreed and where the price of $14M for the work ABB was required to perform related to a structure that Abigroup ultimately did not require ABB to build and was based on qualifications and conditions that were not fulfilled. In its submissions to the Referee Abigroup agreed that Blunden should be accepted generally, in relation to all matters where he differed from Radcliffe. The Referee correctly rejected the submission [Report 858-859 and see also paragraph 2 of ABB's submissions in Annexure N]. 26. The second limb of the Abigroup argument is that the figure for the 'contract value' of the work is relevant and should have been taken into account, together with an amount of $405,087.90 which Abigroup, quite misleadingly, describes as being "on account of defective work which would have to be rectified under any contract". As noted earlier in paragraph 31 above, the evidence does not support that characterisation of the amount in question . However, fundamentally what Abigroup should have done if it considered that it was relevant for the Referee to take these matters into account, is to make submissions to the Referee as to how these disparate amounts (calculated on a 'value of the works to Abigroup' basis and 'contract value' basis) should be related to the different, and higher, figure that the experts agreed was the reasonable cost of ABB's performance of the work that it was required to undertake. Neither in its submissions to the Referee , nor in its submissions to the Court, has Abigroup sought to undertake that task. 27. Abigroup had every opportunity, through its participation in the conclave process, to have the experts consider and report upon all matters which should be taken into account in relation to the valuation of ABB's quantum meruit claim. Moreover, Abigroup had every opportunity in making submissions to the Referee, to draw to the Referee's attention the particular evidentiary matters that the Referee should take into account, consistent with the principles that Abigroup submitted should guide the Referee's approach. It should not be permitted now to depart from the way it put its case to the Referee. Abigroup's submissions in relation to Martin's evidence 28. There was a considerable amount of evidence in relation to the reasons for delay in the progress of the works, particularly affecting the preparation of shop drawings. The evidence was relevant to multiple issues including Abigroup's argument that the lack of excuse for ABB's delays and the lack of progress achieved by October 1998 proved that ABB lacked the capacity to do the work in the way and within the time that it said it could. The evidence was relevant also to the valuation of ABB's quantum meruit claim, the valuation of ABB's alternative contract claims and the valuation of Abigroup's cross-claim which was quantified at all times by its own expert on the basis that due allowance should be made for amounts that Abigroup would have to pay to ABB in any event for the work done. 29. Themes that ran through Abigroup's case included that the shop drawing process was inefficient; that changes that had to be made were not changes for which Abigroup should bear responsibility, among other reasons, because they were related to re-designing the structure to enable it to withstand construction loads and residual stresses due to ABB's modular method of construction, for which Abigroup said ABB was responsible at all times; that other changes were initiated by ABB and accordingly were changes for which Abigroup was not responsible; that the AFC drawings did not have the deficiencies that ABB said they did and that even if they did have such deficiencies, the drawings were in any event 'meaningful', such that ABB had no basis for complaint that the AFC drawings were not correct, complete and had no holds on them. 30. ABB, on the other hand, contended that contrary to its express stipulation to Abigroup, ABB had never received a full set of architectural and AFC drawings that were correct, complete and had no holds on them and that the delays that occurred were related directly to circumstances intimately interwoven with Abigroup's failure to fulfil various important conditions and qualifications of ABB's tender. 31. The scope of some of the issues emerge from a reading of ABB's submissions to the Referee reproduced in Appendix I and J and the Referee's findings set out at Report 826-832. 32. There was a great deal of evidence that established, objectively, for example, that ABB had been inundated with waves of drawings between February and October 1998 and that there were extensive deficiencies in the drawings which became the subject of hundreds of RFIs (see paragraphs 1797-1801 of Appendix J and Appendix K). As noted earlier, the Referee observed that the parties had "just about fought each other to a standstill on the issue" of RFIs "at least in so far as it was joined" [See paragraph 15 above], bearing in mind that Abigroup failed to comment in relation to many of the RFIs which had been issued. The particular evidence that Mr Martin gave, which the defendant has singled out for criticism, was but a small part of a much larger body of objective evidence relevant to the matters affecting the preparation of shop drawings and had to be viewed within the context of that larger body of evidence , as ABB's submissions to the Referee at paragraphs 1802-1810 of Appendix J illustrate. 33. The specific issues that Abigroup now seeks to re-agitate in its submissions to the Court were answered in detail in paragraphs 16-73 of ABB's submissions to the Referee, reproduced in Appendix M. ABB invites the Court to read those submissions as part of ABB's submissions to the Court. Neither in its submissions to the Referee, nor in its submissions to the Court, has Abigroup attempted to answer the matters raised by ABB's submissions, which the Referee ultimately accepted. 34. Those submissions and the extensive evidence to which they refer show that it was open to the Referee to conclude, as he did on the basis of all of the evidence, that ABB was entitled to recover the full amount it had paid to Baigent in settlement of its claims . The Referee set out his reasoning process for that conclusion in meticulous detail at pages 887-898 of the Report. The conclusion clearly was open to him on the evidence. Abigroup has not demonstrated any reviewable error in the Referee's findings or conclusions. 35. Moreover, the Referee's findings in relation to the course that the job took and the respects in which the circumstances of performance were fundamentally different to those that ABB envisaged in its tender and upon which it had based its original price of $14M, show that the appropriate approach to valuing ABB's claim was to determine the reasonable cost of the work done and the material supplied by ABB having regard to market rates for such work, consistent with what ABB has termed the 'ordinary situation' in paragraph 24 above. That is precisely how the experts approached the task and the basis upon which the Referee, correctly, determined the amount due to ABB. Conclusion on Quantum Meruit 185 At the end of the day Abigroup has failed to establish error vitiating the findings on the quantum meruit claim. Once the Court has, as in the present case, been satisfied that there was no error of principle made by the Referee which can be seen to vitiate his approach, the attempt to involve the Court in a re-agitation of the determination of the disputed questions of fact fails at threshold. 186 I have however been prepared to follow the submissions of both parties into the areas of fact, particularly by reason of the need to do this in order to assess the substance or lack thereof, in the submission by ABB that what Abigroup is seeking to do before this Court is to depart from the way in which it put its case to the Referee. Those ABB submissions are seen to be of substance. It is entirely inappropriate to permit Abigroup which had: · every opportunity, through its participation in the conclave process, to have the experts consider and report upon all matters which should be taken into account in relation to the valuation of ABB's quantum meruit claim; · had every opportunity in making submissions to the Referee, to draw to the Referee's attention the particular evidentiary matters that the Referee should take into account, consistent with the principles that Abigroup submitted should guide the Referee's approach, to now revisit the manner in which it was content to litigate these issues before the Referee. 187 Authorities have already been referred to underpinning the principle which leads not only to the maintenance of fair play, but also to the repression of unnecessary litigation, which principle requires that parties must be bound by the course they deliberately adopt at the trial. In an area not only of a Part 72 reference, but more particularly of the narrow type of issues where very great assistance is received from experts, and where the Referee, with the consensus of the parties, has set in place a regime whereby conclaves of experts take place, all ultimately supervised or regulated by the Referee, the party seeking to revisit the matter and particularly to put submissions, either inconsistent with submissions put to the Referee by that party or worse, never put by that party to the Referee, has in my view a hopeless task in seeking to persuade this Court to now enter that arena. 188 Mr Corsaro SC who addressed the Court on behalf of Abigroup in relation to the quantum claim issue, conceded that no submissions had been addressed by Abigroup to the Referee identifying the several disparate amounts for which Abigroup now contends before the Court, ought to have been the subject of findings by the Referee by way of the "fair market value of the benefit to Abigroup" of particular works. That circumstance speaks volumes in terms of what was and was not on the table being litigated before the Referee. 189 The attempt to sidestep this problem makes the point that the Referee [Report 857] said: "On what principle should the Referee treat amounts which have been agreed between the parties. As will be seen, the experts agreed on almost every component of the costs which the plaintiff claimed… Both parties' submissions impliedly accept that those components which were agreed to not fall to me for determination or final validation, at least provided that I am satisfied as to the legal principles underlying the agreement" 190 The proposition for which Abigroup contended before this Court was that this excerpt made plain that the Referee posed for himself the task of identifying the legal principles to be applied on the assessment of the quantum meruit claim. 191 This is not exceptional. But what is exceptional is to find at the end of the years of reference including conclaves of experts, not a single word is advanced by Abigroup in the form of a submission that a particular amount and no more should be accepted as proving the value to Abigroup of particular works. To my mind this is a strong indicator that the parties determined through the conclave process to reach and did reach an agreement in accordance with the principle stated in Renard - and the Referee says as much at the foot of Report 856. 192 The submission by Abigroup to this Court was that the Court should remit to the Referee, the question of only now receiving from Abigroup, all the close submissions which it failed to put to him, and which by reference to the mountain of evidence before the Referee and the experts reports, it is suggested may now permit the Referee to apply, what is suggested to have been the "proper" approach to the quantum meruit claim by reference to 'fair value to Abigroup'. Even if the Referee had erred in his approach to principle, the Court would not have acceded to this application, simply on the basis that there must be an end to litigation and that Abigroup, having once had an opportunity to make the submissions which it now seeks to make, has forgone that opportunity. The principles have been set out above. I do not see that Abigroup's approach to the litigation could be said to have been uninformed or naïve - indeed the whole of the approach taken by both parties to this mammoth litigation where they have fought each other to a standstill on every point, appears to be the antithesis of any 'babe in the woods' notion. 193 Finally, to my mind, a refusal to apply the 'fair value to Abigroup' approach was not incorrect in the particular circumstances which here obtained. On the findings of the Referee, the work carried out during the period from 19 February 1998 up until October 1998 involved a complex and interrelated set of factual circumstances explaining the delays to progress and where eighteen circumstances were identified in respect of which the conditions and qualifications upon which ABB had based its tender, were seen not to have been fulfilled. It was clearly open to the Referee to find that the work which had been carried out fell outside that normally expected of tenderers. It was clearly open to the Referee to find that Abigroup bore the risk that if the contract did not materialise, it would be obliged to pay a reasonable sum for work actually done. The application of the principle of unjust enrichment assists in displacing an inference which might normally be drawn, namely, that because no contract was agreed, there was no obligation to pay. All the more so when Abigroup, in the face of the 'no monies will become due…until the subcontract has been executed' clause, proceeded to make payments to ABB. Disparate matters 194 It is possible in conclusion to deal with a number of disparate matters. Profit 195 The Referee did not allow a margin for profit on work not carried out by ABB. 196 It is simply an incorrect statement of principle to put, as Abigroup appears to have, that Renard is authority for the proposition that on a claim for quantum meruit a claimant can only receive costs bare of profit. 197 In my view the following submission by ABB is of substance: "What these findings and these circumstances show also is that while there are undoubtedly many ways in which one can, at an evidentiary level, tackle the question of what is reasonable remuneration or a reasonable price for work - and the cases contain a number of examples of it - in the circumstances of this case [where the circumstances of performance really were quite unique, and they were unique because ABB went through it and nobody else did, and they were unique in the sense that the Referee found that anyone else doing that work would have encountered the same problems] whatever other approaches might have been available at an evidentiary level to support a finding of reasonable remuneration, the appropriate approach was to look at the costs that ABB had actually incurred in doing that work and then to apply an appropriate margin for overhead and profit." [Transcript 442] 198 As Mr Orlov of counsel who addressed on the quantum meruit issue submitted: · The figure of 10.8 per cent, which the experts agreed was a reasonable margin, or was part of the reasonable margin, was comprised of a 2.8 per cent allowance which was to recover the overhead cost associated with tendering and winning the work; 5 per cent of which was the administration cost associated with the project, being an overhead cost; and then a 3 per cent margin for profit. · The principles upon which the defendant founded its submissions are really quite remote from the circumstances of this case. Those principles are concerned with a situation where it is the disappointed tenderer who does not enter upon the work who sues to recover the costs of tendering. · ABB worked on this job for eight months, a period which reflected what was originally contemplated would be the contract period. During that time they performed substantial work, and the question is whether an overhead cost incurred in connection with obtaining that work should be recovered as part of the reasonable remuneration or price payable for the work done. · Paragraphs 8.1 and 8.2 of Mr Blunden's report [exhibit P5] [referred to and incorporated by reference in footnote 150 of the Referee's report at page 867], shows that the experts were examining this overhead cost - that is, the cost of tendering was $350,995, an overhead cost. It was an overhead cost which was, in the way in which they calculated it, recovered partially as a component of the 10.8 per cent mark-up for overheads and profit which was applied to the value or the cost of the work done up to the time that ABB was terminated. · What it shows, and what the Referee's report shows, is that the experts agreed, in working out what was a reasonable price for the work done, that it was reasonable for the plaintiff to recover in full the overhead costs associated with tendering. No doubt there are various ways in which an appropriate margin for overhead cost and profit can be calculated. What the experts did here, and what the parties did here, was to agree that the total amount of margin should comprise in part a percentage factor and in part a lump sum amount. The lump sum amount was the amount of that incurred overhead cost which was not able to be recovered through the application of the percentage. · In essence, the effect of what the experts concluded in their approach to the matter and which the Referee accepted, was that a contractor in the position of the plaintiff, eight months down the track, would expect to recover that cost in his price. Ultimately whether that is achieved by a higher percentage for profit or what the mix is probably does not matter. But what they were really doing was saying that when you take the costs incurred by ABB in performing the work, ABB is entitled to a margin for overhead and profit and the overhead margin should include as part of it full compensation for the tender costs plus some small uplift for profit. The course of the work 199 The Referee at page 797 found that ABB's requirements were for a set of drawings which were approved by Abigroup and its consultants for construction and had such a level of correctness, completeness, detail and finality that, effectively, the design was complete and fully depicted in the drawings which could be used not only to begin building the structure, but also quickly to order the majority of the steel and also to finish the structure within the tight time frame using those drawings. 200 As Mr Orlov submitted: "That provides the template against which the Referee had to compare what occurred, and what your Honour needs to take into account. An issue before the Referee related to the course of work and the reasons why, as at the period between August and October 1998, ABB had made less progress than Abigroup said it should have. The way in which that was put was that, having regard to the lack of progress during that period, that was an indication - indeed, it was positive proof - that ABB did not have the capacity to carry out the work using its construction sequence and method within the period it had represented. And so the case was fought out, or that part of the case was fought out, by a meticulous examination of what happened and why. That evidence and the Referee's findings in relation to it was also relevant to the question of the quantification of the claim, because it identified the work that was done and the circumstances under which that work was performed, so that it was a matter that had more than one relevance [Transcript 435-436] [T]he Referee made detailed findings about the course of work and the reasons for it and the respects in which any other contractor doing the work would have encountered the same impediments to performance as ABB encountered. That is directly relevant to the question of valuation. The Referee's findings establish that as at 25 February 1998, when the first wave of AFC drawings was issued to ABB, Abigroup had a design of a roof that was unfinished and could not be built without extensive redesign by any sensibly anticipated method of construction. As at 14 October 1998, by virtue of the work that ABB did, Abigroup obtained a design of the roof that was finished and that could be built in accordance with Abigroup's preference, and indeed requirement, for a modular method of construction. That roof was able to be built by Transfield with a minimal further changes to the design. Now, while the Referee's findings establish also that while an iterative process of completing the design was proceeding, ABB was also endeavouring simultaneously to detail and fabricate the steelwork for the roof. Abigroup obtained the benefit of that work in the sense of the design work, the shop drawings and fabrication work and it used it to complete the roof. When those findings are examined in detail, they establish objectively that in the circumstances of this case it was appropriate to determine the reasonable remuneration payable to ABB for the work actually done by reference to ABB's actual proper and reasonable costs calculated in the way the experts agreed should be done plus a reasonable margin for overheads and profit. If I can just digress for a moment and deal with this notion that there is some tension between the value to the principal, the value to Abigroup of the steelwork and the cost that ABB incurred in building that steelwork. There are a number of problems with that particular piece of evidence… To price some steelwork on the basis of a completed design is one thing; to fabricate steelwork when you have an incomplete design and the design is being completed while you are detailing and endeavouring to fabricate that steelwork is an entirely different matter. The former takes the advantage of all of the efficiencies that are associated with a completed design. The latter does not. But the fact that there is a difference does not entitle the principal to pay only what would have been payable if the design had been complete right from the start. It was not. So that what the experts agreed was that ABB incurred certain costs which were proper and reasonable and were consistent with market rates for that work in actually carrying out the work in the circumstances in which that work had to be carried out, or in the circumstances under which that work had to be performed. That is a very different situation to a situation where a contractor comes along nine months into the job and he was asked to take over a fully designed job which has been designed, mostly detailed and partly." [Transcript 414-415] 201 At pages 820 to 830 the Referee dealt with the course of the job in relation to the evolution and completion of its design, and there were two strands to that analysis. There was a process of completion of the design which Abigroup's structural engineer, TTW, was undertaking, and that simply involved completing something that it had not completed before either 19 February or 25 February. It involved the iteration of the design between TTW and its peer reviewer in the UK, Buro Happold, who was considering the design and signing off on it and in that process requiring further changes to be made to the design. 202 The Referee at 821 put the matter thus: "The process that took place between February 1998 and late September 1998 was one of continuing design development to accommodate: (a) initially, Abigroup's instruction to radically redesign the structure to save weight; (b) then Abigroup's instruction to "revert to tender"; (c) the gradual convergence upon a design solution resulting from Buro Happold's and TTW's continuing analysis of the structure; (d) the effects of construction loads and residual stresses on member capacity and sizing; (e) the effects of increased loads resulting from the finalisation of the design of fans and catwalks, something that Abigroup and TTW always knew had to be completed; and (f) the effect of increased loads due to a variety of causes on the design of connections." 203 The position was summarised this way in ABB's submission which the Referee accepted: "Another way of looking at what happened is that it took until late September 1998, with the combined efforts of TTW, Buro Happold and ABB, to reach a point at which it might be said that the conditions of ABB's tender had been fulfilled. Thus, when Abigroup instructed on 12 October 1998 that ABB should proceed on the basis of the 24 September 1998 AFC drawings, for the first time since ABB commenced work many months earlier, ABB was at the point where it had expected it would be right from the start." 204 Mr Orlov made the following points: "If your Honour then just links that finding with the finding at the bottom of page 840. This is where the Referee dealt with a submission which raised the question whether ABB had in fact ever received AFC drawings of the appropriate standard: ... I have made findings as to the inapplicability of those criteria and, given the factual findings I have made about the drawings which were provided on 20 February 1998, 25 February 1998, 15 April 1998 and in the September AFC set, it is clear that ABB did not receive a full, complete and proper set of AFC drawings in the state of completeness and finality encapsulated by the phrase "correct, complete and with no holds". [A]t pages 826 to 829 the Referee made detailed findings in relation to the circumstance that the structure was incapable of withstanding construction by any sensibly anticipated method of construction, and the development of that - in fact, your Honour will see in subparagraph (b) on page 826: The design of the structure assumed the roof would get into its final position under zero-gravity conditions. In other words, it was assumed that you could put this structure into space with gravity switched off, and then in its fully erected condition, you switch gravity back on. In that condition the structure was structurally adequate. This was a very complicated space frame type of structure which depended on the interrelationship of various members." [Transcript 438] Plug and unplug 205 I accept as of substance the submission put by Mr Orlov that a careful examination of what Abigroup has been about during a deal of the quantum meruit submissions may be properly described as engaging in the process of plugging and unplugging figures, all of which it is said were before the Referee, in order to arrive at sundry results. This exercise is neither a matter of simple assembly nor for my part, a matter of simplicity in terms of disassembling the same. The problem inheres in the complexity underlying the sundry assessments and reasons therefore in the experts reports. This simply further confirms that Abigroup having been content to accede to the bases underpinning the approaches taken by the respective experts, cannot only now be entitled to move away from this position. Albeit that the Court requested a short schedule thumbnail sketching Abigroup's claims, the Court was not impressed with the document which came forward at last minute [and in a number of ways unexplained, and unparticularised] in the form of schedules, part of MFI D5, but at least it can be said that these submissions were not before the Referee. Steel fabrication 206 A good example of the plug and unplug exercise sought to be undertaken by Abigroup concerns its claim in respect of steel fabrication. In MFI D5 the claim is put as the difference between "Cost [$1,404,341.43]" and" Value [$1,182,932]"-that is to say a difference of $221,409.43. 207 The matter may be examined by reference to exhibit D2 and in particular the first page, which was the first page of a very long spreadsheet which the experts had prepared. This was part of a report which was prepared called "Assessment of Abigroup's costs incurred in the completion of the MUA as a consequence of ABB' termination". The page in question includes the following: Transfield subcontract account Lump sum price based on Baigent detail drawings issued to Transfield $4,425,000.00 Less items fabricated by ABB $(1,182, 932.06) Component where work was not previously detailed calculated at agreed rates. $2,087,681.00 Free issue materials $(974,268.22) Dayworks – receipt, checking, rework of ABB defects, and completion of components where partially finished by ABB $407,086.90 208 The submissions which Mr Orlov made to this Court which are of substance in relation to this matter were as follows: · The first thing to say about this is that material has not been placed before your Honour, but one can search high and low in the reports and one will not find any reference to these items, or any explanation of these items which would shed further light on what they actually are or how they have been arrived at or what they represent. The experts got together, they worked certain things out, known best to themselves, which was consistent with the conclave process … and then, having reached agreement in relation to these matters, they simply recorded that agreement on this and many other items in this way. So your Honour has in front of you all the material that is available on the subject. · [I]t should be as immediately obvious to your Honour, as it no doubt should have been to the Referee, that one simply takes out a figure which obviously was the value to Abigroup and substitute that figure for another figure which was in another report. That seems to be the burden of the defendant's submission. · This all appears under a heading "Transfield subcontract account". The first entry is a lump sum price based on Baigent detailed drawings issued to Transfield of $4.425. What it appears that Transfield did was to give a lump sum price for all of the steelwork in the then completed shop drawings. · The next item "Less items fabricated by ABB" appears to be a credit back by Transfield for the work which had already been done by ABB, because it appears that the figure of $4.425m included steel which was depicted in the Baigent detailed drawings but which ABB had already fabricated. · The next item is a component where work was not previously detailed, calculated at agreed rates, and that is an item which is then added to the amount payable to Transfield. · There is then a deduction for free issue materials. · Then there is this item - it is a day works item. So that lying behind it, though not tendered, would have been a whole lot of invoices and daily time records and detailed records of the kind that are generated when work is done on a day works basis, which related to this: receipt, checking, rework of ABB defects, and completion of components where partially finished by ABB. · Just going to the last item first, by hypothesis, where ABB had not done the work, it plainly had not incurred a cost in doing it and it plainly had not been paid for it. There cannot possibly be any suggestion that it had been. So that that figure of $407,086, which it is said should be simply deducted and the Referee should simply have credited against ABB, in fact contains a component unstated and unidentified for work which ABB would be entitled to be paid for if it had done it. · It also contains a component relating to the receipt and checking of the steel. That is a cost incurred also in this undifferentiated sum of $407,000 which has nothing to do with anything ABB did but has everything to do with the fact that at a particular point in time Abigroup changed its mind and decided to have Transfield do the work, and it incurred a cost in Transfield looking over that steelwork, receiving it and checking it. Obviously not in its submissions to the Referee, but certainly not in its submissions to your Honour, either in writing or orally, has it been explained why it would be against conscience for ABB to recover compensation for the work that it did without giving credit to Abigroup for a cost that it incurred as a result of its decision to have someone else take over the work. · There is no doubt that, to the extent that this figure of $407,000 includes the rework of ABB's defects, that is a matter which would be relevant to take into account. But whether that figure was $5,000 or $105,000 simply doesn't emerge. What is absolutely clear on the face of this document is that it is not $407,086.90. · If Abigroup considered that the issue had not been taken properly into account by the experts in working out what were the proper and reasonable costs incurred by ABB in carrying out the work at its Tomago fabrication facility, then no doubt they would have tendered the day works records, or the relevant day works records, and no doubt they would have made submissions to the Referee about it. That is, "There was work done on these days and these were the defects, and that cost, whatever it is, hasn't been taken into account in discounting the reasonable cost of performance of the work." Well, they did not do that. · By hypothesis, what the experts did was to consider what are the proper and reasonable costs of carrying out the fabrication work. All of this material was before them. It is quite clear that the material was before both of them because they dealt with it in the context of this report, so that one would expect that the experts would have taken into account, the cost associated with rectifying any defects in assessing what were the proper and reasonable costs incurred by ABB in doing the work. · The Referees report at 864 in the "Summary of Differences" deals with the Tomago Fabrication Facility Costs by identifying the proposition contended for by the plaintiff as $1,404,341.43 and the adjustment or difference contended for by the defendant as "-66,383" · In ABB's submission to the Referee [Appendix L to exhibit MAH 1 of Mr Harrowells Affidavit] is set out the make up of the $1.4 million at page 27. One of the components was: Radcliffe Par No. Blunden Para No. Item Radcliffe Blunden Difference 3.06.02 4.6 Subcontractors – Detailing (Baigents) $572,582.00 $467,656.87 -$104,925.13 · Hence the true comparison, according to the defendant, when you take that figure out, is that the cost of the steelwork was $831,759. That was ABB's cost of the steelwork for which Transfield gave a credit of $1.182m. Your Honour would be forgiven for thinking that that was not a bad deal from Abigroup's point of view, because the figure of $1.182m, which the defendant urges upon your Honour as being a plug-and-play figure that you can simply substitute for the $1.4m, does not include shop detailing expenses. · Now, even if your Honour was to add in the 10.8 per cent margin, that leads to a comparison of $921,589 charged by ABB as the reasonable remuneration for that work and $1.183m which was the credit back by Transfield. If one tries to plug and play with different figures from different reports prepared for different purposes, they are liable to produce an entirely unexpected and wrong result. The suggestion that the Referee should have been left to do so without guidance from the defendant in submissions should simply be rejected out of hand. Submissions as to matters of difference 209 Paragraph 519 of Abigroup's submissions to the Referee drew specific attention to the items which were identified in the submissions of ABB as being matters of difference between these experts. The following paragraph further makes a reference to claims, "which were unresolved in the conclave process". Lampson Crane 210 One of the areas in respect of which Abigroup has contended that the Referee erred concerns this particular crane, apparently the largest such crane in the southern hemisphere. After ABB was required to leave the site it became necessary for the dismantling and removal from the site of the crane. The disagreement between the experts was simply whether the cost of hiring the crane during the period which it took to dismantle it was properly incurred. The matter was dealt with by the Referee at 168 and following. No material error is shown by the Referee. Interestingly it was Abigroup which put the following to the Referee: "The valuation made by Mr Blunden included costs for items that ultimately were of no benefit to Abigroup at all. However, at the time the costs were incurred they would have provided a benefit to the project had, ABB not been terminated" [submissions paragraph 538] Shop drawings 211 Abigroup submitted before the Referee that ABB had failed to establish that any amount for shop drawings as invoiced by Baigent was reasonably incurred. The submission was that the experts had agreed that Baigent had completed $193,482 worth of shop detailing work as the cost of the work against the design contract value. The proposition was that the cost of carrying out the work had been $572,582 which had been agreed between the experts. The submission was that the work was so defective in quality that it should have been discounted. The Referee having allowed the cost, Abigroup claimed the difference of $379,100. [Transcript 394 and written submissions of Abigroup, paragraph 114] 212 The full amount of $572,582 was found by the Referee as being a reasonable amount paid to Baigent for the work that was done, the full benefit of which Abigroup ultimately received. No error has been shown in the approach taken by the Referee to this item. 213 Mr Orlov submitted: "[T]he work that was done was not simply producing 500 shop drawings or X tonnes of steel. It was producing 500 shop drawings and X tonnes of steel under those circumstances where there were three steps forward and two steps back, so that in valuing the work it is necessary to have regard to that circumstance because that is an integral part of the work that was done… [I]f I can pose the question this way - if one was to value - and approach it from the point of view of valuing the work in the defendant's hands, upon what basis would it be conscionable for the defendant to come along and say, "Well, now that you have struggled and laboured mightily for eight months under these adverse circumstances and produced these results, I could have got this work done for half the price without taking into account the circumstances under which that work would have to have been performed." [Transcript 441] Glanville/ Lim salary costs 214 No error is shown in the approach taken by the Referee on the claim concerning a salary issued dealing with salaries of Mr Glanville and Mr Lim. The report deals with this matter at 877 and following. 215 In the result, both as a matter of correct application of relevant principle and as a matter of assessment of the respective claims, as well as by reference to the obvious need to hold Abigroup to the way in which the matter was litigated at the reference, the attack seeking to vitiate the report fails. Other matters 216 None of the other matters of detail, the subject of complaint in Abigroup's submissions, were of substance. Claim to Judgment for matters abandoned by ABB 217 Overview submissions in writing were addressed by the parties to the claim by Abigroup that by reason of matters abandoned by ABB in the Third Further Amended Summons on 4 December 2001 [and identified in a letter dated 4 December 2001] the Court should order that there be Judgment for Abigroup. That Judgment is sought in relation to the claim set out in Annexure "A" to the Notice of Motion. 218 During the hearing the Court made plain that this was a matter more appropriate to be addressed following the delivery of the principal judgment and at the same time as submissions will be taken concerning costs. Leave is granted to the parties to treat with this issue on that occasion. Short Minutes of Order 219 The parties are to bring in short minutes of order providing for the adoption of the Report and ancillary relief. I certify that paragraphs 1 - 219 are a true copy of the reasons for judgment herein of the Hon. Justice Einstein given on 30 July 2003 ___________________ Susan Piggott Associate 30 July 2003 Corrigendum 1. Replace the word" dissemble" with the word "disassemble" on page 35 paragraph 51 line 2; 2. Replace the word "Abigroup" with the word "ABB" on page 55 paragraph 76 line 3; 3. Replace the word "tomb" with the word "tome" on page 123 paragraph 129 line 2; 4. Replace the word "ABB" with the word "Abigroup" on page 136 line 10; 5. In paragraph 205 on page 175 line 1 replace the word "the" after "Mr Orlov" with the words "that a", Line 2 add the word "a" after the word "during", line 7 replace the word "dissembling" with the word" disassembling" 6. Page 180 second bullet point add the word "In" before the words "ABB's submission" and "to" before the words " the Referee". ___________________ Susan Piggott Associate 7 August 2003 Last Modified: 08/11/2003 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.