New South Wales Supreme Court CITATION : Chelva v Brodyn [2005] NSWSC 701 HEARING DATE(S) : 24/06/2005 JUDGMENT DATE : 15 July 2005 JURISDICTION : Equity Division JUDGMENT OF : Associate Justice Macready at 1 DECISION : Paragraph 20 CATCHWORDS : Reference under Part 72 of the Supreme Court Rules. Whether Referee adopted an appropriate method of determining reference. Report adopted. PARTIES : Chelva Holdings Pty Limited v Brodyn Pty Limited FILE NUMBER(S) : SC 55076/2005 Mr D Shoebridge for plaintiff/applicant COUNSEL : Mr T.O. Bland for defendant/respondent Taylor & Scott for plaintiff/applicant SOLICITORS : Johninfo Lawyers for defendant/respondent LOWER COURT JURISDICTION : - 1 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION TECHNOLOGY AND CONSTRUCTION LIST Associate Justice Macready Friday 15 July 2005 55076 2004 Chelva Holdings Pty Limited v Brodyn Pty Limited JUDGMENT 1 His Honour: This is the hearing of the defendant's motion filed a 18 May 2005 which seeks a partial adoption of a report of Mr Austin dated 2 May 2005. Mr Austin made the report pursuant to a reference under part 72 of the Supreme Court Rules. The applicant sought the adoption of paragraphs 1 to 4 and paragraphs 7 to 11 of the amended determination of Mr Austin. The applicant sought the rejection of paragraphs 5, 6 and 12 of the determination. The motion did not seek any orders as to the determination of the parts in respect of which it was suggested there be rejection. In argument it appeared that the applicant wished the Court to determine those matters or, alternatively, order a further report. 2 The dispute arose out of a contract for the cement rendering of an apartment building at 301-313 Stanmore Road, Petersham. It appears that late last year the parties agreed to have Mr Austin carry out the determination. In a letter dated 16 December 2004 he suggested a procedure; the provision of all available documents to him; a view with perhaps a few questions after it; and then submissions from the parties. This procedure was put in place and he was supplied with a series of documents including various affidavits from the parties. 3 In due course Mr Austin made his report on 23 February 2005. When the matter was back before the Court the parties realised that in fact there had been no order made for the reference. On 26 April 2005 the Court made the usual order for reference to Mr Austin for him to enquire and report on the matter in the schedule to the order. The relevant parts of the schedule were as follows: "SCHEDULE To re-consider (on the basis of further submissions by the parties) certain aspects of the expert determination dated 23 February 2005 as outlined below. The evidence to be considered by the expert is all evidence submitted to the expert prior to his determination dated 23 February 2005, together with any observations made by the expert during his site visit. Matters for re-consideration on the basis of the parties submissions: 1. To confirm or amend the finding in paragraph 5.04 of the expert determination dated 23 February 2005 as to the actual quantity of external render; 2. To confirm or amend the finding of the actual quantities of lineal meters of external render carried out by Chelva Holdings in paragraph 5.05; 3. To confirm or amend the findings in paragraph 6.06 – 6.08 as to whether or not openings have been or are not to be deducted from the total of 4871.77 and thereafter reconcile that finding with the alleged term of the contract as stated in paragraphs 10 to 15 of the affidavit of Brett Matterson dated 31 January 2005 and Subcontractor pre-award minutes referred to therein to the effect that if openings are not deducted then there shall be no allowance for reveals; 4…… 4 The defendant complained about paragraph 5 of the report which dealt with the measurement of the external render and paragraph 6 which measured the internal render. In essence the defendant submitted that what was required of the expert was a physical measurement of actual areas of the two items of work rather than the method adopted by the referee. External works 5 The part of report of 2 May 2005 that dealt with the external works was as follows: "5 EXTERNAL WORKS 5.01 Chelva has measured the external render for a total of 2,643.33 sq.m. 5.02 Brodyn has measured the external render for a total of 1,874.58 sq.m. 5.03 In order to determine the correct quantity I have taken the quantities off the drawings no. CD9E and CD10E, which are the elevations, and from the floor plans. My intention was not to determine the actual quantities for the work, and my method would not be accurate enough for that because of the irregular shape of the building , but to determine which party's measurements are most correct. 5.03A My method of measuring was to take the overall size of each elevation, subtract the openings and sections with a split block finish and add the balcony balustrades and recesses. My measurements resulted in a total similar to Brodyn's. I have accepted the measurements closest to mine as the correct measurements. 5.04 I find that the area of the external works carried out by Chelva is 1,874.58 sq.m. 5.05 Brodyn have included a set of measurements broken up into small areas for the external render and dealt with the reveals separately. None of the areas shown in the break up come under our definition of narrow widths and there is no adjustment to the quantity of narrow widths. Brodyn have measured the quantity of reveals as being 310.6 lin.m. I have compared this with my measurements and, when I consider that this equates to more than 12 lin.m per unit and most units have two balcony doors and no other openings in the external walls as a cross check, I am satisfied that this measurement is correct." 6 It is apparent from clause 5.03A that the referee has added this by way of further explanation as required under the reference. The approach of the referee was criticised as not being one which demonstrated a thorough analytical and scientific approach. It was submitted that by him accepting "the measurements closest to mine as the correct measurements" was not such an approach. Internal walls 7 Mr Austin dealt with the internal walls in paragraph six in the following terms: "6 DIFFERENCES BETWEEN PAYMENT CLAIMS AND PAYMENT SCHEDULE - MEASUREMENT OF INTERNAL WALLS 6.01 Chelva has measured the internal render for a total of 4,941.50 sq.m. plus WC 35.7m2 = 4,977.20 6.02 Brodyn has measured the internal render for a total of 4,540.26 sq.m. 6.03 I have measured an example of each unit layout, multiplied by the number of units and compared my measurements against those of the parties. 6.04 By a fax dated 23 December Chelva have disputed Anthony Pidgeon's figures as follows "As Anthony Pidgeon is aware, the ground floor units were not measured as he said they were of the same size of other units on Level 1. However, on further inspection of our quantities and the drawings plus a site measure once again this morning we have found that the quantities Anthony Pidgon has provided are incorrect." 6.05 Although I have confirmed that there is a difference in the layout of units 1 and 3 from those above, as identified by Chelva, I have found that Brodyn's measurements for units 1-4 are correct. 6.06 I am also satisfied that Chelva had included door openings in the quantities for units 1-4 in the progress claim. This has been noted on annexure B of Pidgeon's affidavit 31 January 2005 where he has written "incl door opening" alongside units 1-4 on Chelva's internal site measure and initialled it. The other unit areas on this list and all unit areas on the Pidgeon hand written list exclude door openings, contrary to Pidgeon's notation alongside the Chelva total. Therefore I find that the Pidgeon sub total of 4871.77 is the correct measurement, and the openings are not to be deducted from this total. 6.07 As found above, I accept that the narrow widths are to be measured as reveals. I accept the Chelva claim of 462.43 lin.m for reveals as correct." 8 Once again the referee's reasons were criticised for adopting one party's measurements rather than carrying out a complete measurement process. It was submitted that it was no more than guesswork as to the most accurate of the claims rather than an in-depth analysis of what was the actual quantity of work performed by the applicant. 9 It is necessary to understand a little more of the process which the referee followed. Paragraph one of his determination sets out the various documents that were supplied by the parties. He also referred to a telephone conference with the parties to agree on the issues to be determined. He concluded his outline of the process in these terms: "1.10 I consider that the information provided by the parties and the visit to the site is sufficient for me to understand the complexity of the work and the way in which it progressed. I have referred to the plans in order to assess the areas of work and to assist me in determining whose calculations are correct. I have made my determination on the documents provided by the Parties." 10 Plainly the referee had before him two conflicting versions of what were the actual quantities of the relevant work. 11 The respondent referred to the Courts approach in applications of this nature as set out in Super Pty Ltd v SJP Formwork (Australia) Pty Ltd (1992) 29 NSWLR 549 at 553 Gleeson CJ quoted Giles J in SJP Formwork (Aust) Pty Ltd v Leda Constructions Pty Ltd (unreported, 19 May 1992) at 6: "As a broad proposition, depending on 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" 12 Similarly in White Constructions (NT) Pty Ltd v Commonwealth of Australia (1990) 7 BCL 193, Cole J stated (at 194): "There is obviously a large body of evidence upon which a referee could properly find as they did. The purpose of the Referees reporting to the Court on disputed questions of fact would be rendered futile if the Court is to reconsider disputed questions of fact in circumstances were it is conceded that there is factual material sufficient to enable the referees to reach the findings they did". 13 There was a body of evidence which was being considered by the referee. He was faced with two obviously conflicting strands of evidence. His position was probably similar to that of an expert faced with competing strands of evidence. In ASIC v Rich [2005] NSWSC 149 (7 March 2005), at paragraph 291, the Court stated: "The fact that the opinion is reached by the expert preferring one strand of evidence to another contradictory strand will not render it inadmissible, provided the reasoning process is properly explained and is shown to depend upon the expert's specialised knowledge. For example, an accounting and financial expert whose task is to express an opinion on the solvency of a company might explain, when confronted with two inconsistent lists of bad debtors which disclose, ex facie , their respective methods of compilation, that one list is more likely to be accurate than the other because the method of compilation is more robust for stated reasons. The element of specialised knowledge is the expert's view as to which method of compilation is to be preferred" 14 It is plain that both parties accepted Mr Austin as an expert in the area and this is the reason why they agreed on his initial appointment as an expert to determine the matter. It is necessary to see whether his reasoning process was appropriately explained and that he made his determination based upon his expertise. 15 In respect of the external works the referee has explained in the report his reasoning process in deciding on which party's measurements to accept. Not only has the expert carried out measurements from the plans he also deals with measurements of the small areas. Mr Austin says he did this by comparing his own measurements. Presumably these measurements are non-physical measurements but off the plans. It seems that he has adopted the use of the plans which were part of the documents before him as a crosscheck to determine which of the party's measurements were the most accurate. 16 When one turns to the internal walls once again one finds the reasons of expert expressed. Not only has he measured, presumably from plans, each unit layout and arrived that a final figure he also dealt with some particular difficulties in respect of units 1 to 4 inclusive and gives reasons why his decision is supported. 17 It seems to me that the referee has utilised his expertise to accept one of the party's measurements over that of the other. That is one approach which I think is available to a referee in this situation. There were other approaches which might have been available to him such as conducting a complex measuring exercise of the areas in question. 18 If this were to be the method to be adopted it is surprising that the parties did not specify it when setting up the terms of reference. It should be remembered that there was an initial determination before appointment of the expert as referee and, accordingly, this was an ideal time to have refined the process to be adopted by the referee. Instead, what happened was that the referee was asked to reconsider his report based upon all the material he had before him, namely, his view, statements and submissions together with any fresh submissions. Considering the way the matter was left for the referee to consider, I do not think that his particular approach is invalid. He has chosen an available course in a reference based substantially on documentary material and his site inspection. There is no material which would suggest the parties made known to the referee that they wished him to physically measure the particular areas in question. 19 In these circumstances it seems to me that the court should adopt the whole of the report. I make the following order: 20 The Court adopts the determination of Mr Lloyd Austin dated 2 May 2005 being Exhibit A before me. 21 I will hear the parties on costs and any other necessary formal orders. ********** 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.