New South Wales Supreme Court CITATION : MPM Constructions Pty Limited v Michael Triguboff & Anor [2004] NSWSC 686 HEARING DATE(S) : 30/07/04 JUDGMENT DATE : 30 July 2004 JURISDICTION: Equity Division Technology and Construction List JUDGMENT OF : Einstein J DECISION : Defendants motion dismissed. CATCHWORDS : Part 72 reference - Adoption/rejection LEGISLATION CITED : Evidence Act 1995 Supreme Court Rules (NSW) Foxman Holdings Pty Ltd v NMBE Pty Ltd (1994) 38 NSWLR 615 CASES CITED : Jordan v McKenzie [1987] 26 CPC (2d) 193 Nicholls v Stamer [1980] VR 479 Super Pty Limited v SJP Formwork (Aust) Pty Limited (1992) 29 NSWLR 549 MPM Constructions Pty Limited ACN 003 910 601 (Plaintiff) PARTIES : Micahel Triguboff (First Defendant) Eleanora Triguboff (Second Defendant) FILE NUMBER(S) : SC 55024/02 COUNSEL : Mr T Lynch, Ms Dolenec (Plaintiff) Mr G Watson SC, Ms T Wong (Defendants) SOLICITORS : Snelgroves (Plaintiff) MasseyBailey (Defendants) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION TECHNOLOGY AND CONSTRUCTION LIST Einstein J Friday 30 July 2004 ex tempore Revised 23 August 2004 55024/02 MPM CONSTRUCTIONS PTY LIMITED v MICHAEL TRIGUBOFF & ANOR JUDGMENT The Notices of Motion 1 There are before the court two notices of motion for hearing. The notices of motion relate to a report of 22 June 2004 by Mr P R Callaghan SC who had been appointed pursuant to part 72 of the Supreme Court Rules for enquiry and report. 2 The notices of motion are firstly, a motion filed on 16 July 2004 pursued by the defendants [who were also cross-claimants] ["the owners"] seeking that subject to particular matters, the referee's report be adopted. The motion seeks an order varying the referee's report by: (a) rejecting paragraph 164 and in lieu thereof inserting a sum reflecting damages for the defective works. (b) varying paragraphs 172 and 173 and in lieu thereof inserting a finding consequential upon any variation made to paragraph 164. Appropriate costs orders are also sought. 3 The second motion is brought by the plaintiff ["the builder"], who seeks an order that the whole of the report be adopted. 4 Each of the parties by their respective motions seek differing orders with respect to costs of the proceedings and of the motions. The Proceedings 5 The proceedings arise from a contract entered into between the owners and the builder whereby the builder agreed to construct a residence on land owned by the owners. It is apparently common ground that by 8 May 2002 the builder had ceased operations on the site prior to completion of the construction works in response to a letter purporting to terminate the contract issued by the owners. 6 The statement of claim was filed on 21 June 2002 seeking damages in excess of $900,000, including claims for unpaid progress certificates, loss of profits, costs to dis-establish the site and interest. Alternatively the builder claimed a quantum meruit for the work performed for the benefit of the owners. 7 By an amended cross-claim filed in October 2002 the owners claimed damages assessed in accordance, so it was said, with clause 12.04.05 of the contract, or in the alternative, damages for the builder's alleged repudiation of the contract, including damages for rectifying defective works said to have been carried out by the builder, the costs of completing the contract and interest. The Referee's Findings 8 The referee found that the contract was terminated on 8 May 2002 by the builder's acceptance of the owner's repudiation of the contract [157]. In consequence the referee found that the builder was entitled to damages as follows [paragraphs 163-164, 172-173]: · $110,516.84 consisting of the amount of progress certificate 11 unpaid by the owners at the time of termination; · $120,019.97 consisting of the return of retention moneys of $126,231.97 less the cost of rectifying defective works assessed by the referee at $6,212; · prejudgment interest calculated at the rates stipulated in the contract. 9 The referee made two principal findings in relation to the cost of rectifying defective works constructed by the builder [paragraph 164]: · Mr Eccles, an expert retained by the builder, "assessed the cost to rectify defective works at $6,212". · Mr Boyer and Mr Maneas, who gave evidence for the owners, made "suggestions" of a quantum for defective work that "seems to be based on Conduit Constructions Consultants' figures", in circumstances where Conduit Constructions Consultants have prepared a defects report on behalf of the owners which was not tendered into evidence. 10 It is convenient at this point in time to set out verbatim the critical section of the report. "164. Nor can there, I believe, be any question concerning the plaintiff's entitlement to the retention moneys of $126,231.97 as show in Mr Allan's certification in respect of progress claim 11. Subject to such liability that the plaintiff may have in respect of defective work as at 8 May 2002. There is evidence from Mr Eccles that in assessing a report prepared by Conduit Constructions Consultants on behalf of the defendants, he attended the site on 5 September 2002 and inspected items complained of as defective work by them. He assessed the cost to rectify defective works at $6,212.00. The report of Conduit Constructions Consultants was not tendered. Included in their evidence were suggestions by Mr Boyer and Mr Maneas of a quantum for defective work but this seems to have been based on Conduit Constructions Consultants figures. The evidence before me is such, therefore, that I must find the by way of balance of retention money, that the plaintiff is entitled to $120,019.97. Retention money $123,231.97 Less defective work $ 6,212.00 $120,019.97" 11 As will have been observed, the referee then concluded that $6,212.00 should be deducted from the retention sum, hence apparently accepting the evidence of Mr Eccles that the full extent of the defective works was valued at only $6,212.00. The Owners' Contentions 12 The owners contended as follows: "11. The referee's finding regarding the evidence of Mr Boyer and Mr Maneas is quite wrong: (a) Mr Boyer was the project manager retained by the Triguboffs before and during construction of their new residence. Mr Boyer's first statement dated 14 May 2003 did refer to the Conduit Report, but not for the purpose of establishing the value of rectification works. Rather, Mr Boyer estimated the value of rectification works by reference to works actually carried out by Ganellen Pty Ltd, the builders of the Triguboffs' residence after 8 May 2002. In his first statement, Mr Boyer estimated the value of those rectification works at $189,089 (Boyer Statement, para 38(b)), Annexure H). Following Mr Boyer's first statement, construction works continued, and further defective works by MPM were uncovered. In his second statement dated 5 September 2003, Mr Boyer revised his estimate to $213,734 (Boyer Statement in Reply, Annexure GB6). Mr Boyer also provided the following breakdown of the types of remedial work performed (Boyer Statement in Reply, Annexure GB6): Remedial Work Cost Estimate Excavation $4,211 Concrete / Structure $71,225 Masonry $31,578 Structural steel $46,343 Waterproofing $4,000 Plasterboard $1,848 Render $14,918 Roof remedial / carpentry $0 Remedial Work Cost Estimate Hydraulics $19,219 Electrical $10,890 Landscaping $6,543 Variations – remedial Included above TOTAL $213,734 MPM did not cross-examine Mr Boyer regarding his assessment of the value of the rectification works. (b) Mr Maneas of Ganellen Pty Ltd refers to the Conduit Report in his statement dated 9 May 2003, but principally relied upon a detailed register of variations as evidence of sums attributable to Ganellen's rectification of defective works constructed by MPM (Maneas Statement, para 22, Annexure G). This register was prepared independently of the Conduit Report, and provided evidence of remedial works valued at $211,939.78 (Maneas Statement, Annexure G). This assessment was not challenged by MPM. 12. The referee also failed to refer to other evidence which supported a finding that the value of defective works was far greater than $6,212.00. By statement dated 4 June 2003, Mr Robert Allan of Kerry Hill Architects Pty Limited, architect of the residence, noted that payments had been made to Ganellen for rectification of defective works in the amount of $247,228.78, calculated from his analysis of progress certificates issued to Ganellen (Allan Statement, para 82). This assessment was not challenged by MPM. 13. Mr Eccles' assessment of the value of rectification works at $6,212.00 included a sum of only $1,200.00 for fixing walls and steelwork out of plumb, following his inspection of the premises on 5 September 2002. Yet the report does not refer to evidence of persons working on site which clearly contradicts Mr Eccles' account of the seriousness of the problem: (a) In his statement dated 21 May 2003, Mr Royce Fairbrother, manufacturer of the windows and doors installed in the residence, stated (Fairbrother Statement, para 26): "The installation of the windows commenced in September 2002 and was a slow process. One of the major obstacles to the smooth installation of the windows was the existence of walls that had been built by [MPM] that were not plumb and were defective. It was also clear from a visual inspection by Fairbrother that some of the walls, especially on the ground floor, were clearly not plumb. This issue was discovered when Fairbrother initially took its site measurements and attempted to reconcile those site measurements with the drawings at the time of installation. This specific issue was raised with Ganellen and Robert Allan and the walls were demolished and reconstructed." (b) Mr Maneas observed in his statement dated 9 May 2003 (Maneas Statement, para 34): "Significant delay was experienced in the installation phase [of the windows] due to defective work by MPM including cavities into which sliding elements had to go which had brick ties and services installed, brickwork and steel out of wind and concrete elements constructed both too high and too low." 14. The evidence of Mr Boyer, Mr Maneas, Mr Allan and Mr Fairbrother regarding the extent of defective works was not challenged in cross-examination by MPM. 15. In summary, the referee's finding that the Defendants' evidence of defects was based on figures from a report prepared by Conduit was manifestly unreasonable, as it failed to comprehend that the Defendants had assessed the cost of rectifying defective works by reference to the actual value of the rectification works performed by Ganellen, not by reference to a defects report prepared while those rectification works were taking place. 16. In those circumstances, no reasonable tribunal of fact could have made such a finding: Foxman Holdings Pty Ltd v NMBE Pty Ltd (1994) 38 NSWLR 615 at 620. In the words of Gleeson CJ in Super Pty Ltd v SJP Formwork (Aust) Pty Ltd (1992) 29 NSWLR 549 at 563-4, the referee's finding revealed a "patent misapprehension of the evidence" and "perversity or manifest unreasonableness in fact-finding" which would justify its variation pursuant to Pt 72 r 13. CONCLUSION 17. It is submitted that the referee's report should be varied by: (a) Rejecting paragraph 164, and replacing it with the following findings: (i) MPM is entitled to the retention sum of $126,231.97, subject to such liability that MPM may have in respect of defective work as at 8 May 2002; (ii) On any view of the evidence the cost of rectifying MPM's defective work easily exceeded the retention sum; and (iii) MPM is therefore not entitled to receive any portion of the retention sum. (b) Varying paragraph 172 by substituting $110,516.84 for $230,536.81." Dealing With The Matter 13 It is appropriate to proceed by setting out the decision of the Court in terms of the giving of reasons and, at the same time to comprehend in that regard what had been the submissions which had come forward from the builder. Application of the rules of evidence 14 Part 72 of the Rules makes provision in subrule 8 that subject to any direction given under subrule 1 by the court, a referee may conduct proceedings under a reference in such manner as he or she thinks fit and the referee in conducting proceedings under the reference is not bound by the rules of evidence but may inform himself or herself in relation to any matter in such manner as the referee thinks fit. 15 Part 72, rule 8, subrule 3 provides that evidence before the referee may be given orally or in writing and shall, if the referee so requires, be given on oath or affirmation or by affidavit. 16 From time to time references will be conducted by the parties under the aegis of the referee without a strict application of the rules of evidence. The parties presently before this court on the subject applications have made quite plain and accept that early in the reference it became common ground that the reference would be conducted applying the rules of evidence. As I have understood the parties, the Evidence Act was thereafter from time to time referred to and the parties, to all intents and purposes, conducted the litigation almost precisely the same way as they would have conducted, for example, proceedings before a court bound by the rules of evidence. 17 The significance of that matter will become apparent shortly. The position taken by the builder 18 The short position taken by the builder was that a particular importance attaches to an identification of the precise nature of the relevant evidence which was before the referee. Particularly important in this regard was the contention by the builder that there had been a clear distinction before the referee as between, on the one hand, witnesses qualified to be called, and in fact called as expert witnesses satisfying, as I have understood it, the requirements of section 79 of the Evidence Act 1995, and on the other hand persons who had been called as lay witnesses. 19 It is of course common ground that section 79 of the Evidence Act provides the criteria for the entitlement of a party to call expert evidence. The section generally provides that evidence may be adduced from a person shown by his or her training, study or experience to have acquired specialised knowledge on the basis wholly or partially of which to be in a position to express opinions. 20 The contention was that the referee had himself early in the report [at paragraphs 7 and 8] clearly differentiated between witnesses who had been called as expert witnesses and those who had been called as lay witnesses: identifying Mr Stubbs, Mr Eccles, Mr Gilling and Mr Zakos as expert witnesses and relevantly failing in that regard, to so describe Mr Boyer or Mr Fairbrother. Mr Maneas was not referred to in paragraph 8. 21 The builder's submission was that paragraph 9 also included specific reference to expert evidence. 22 The central proposition put by the builder presently was that the words "I must find" appearing in the report [at 164]are to be read as a statement that the relevant evidence called before the referee effectively mandated that conclusion, [the proposition being that effectively it was only the evidence given by Mr Eccles which had been called on the issue of identification of the defective works and of quantification in terms of quantum relating to the defective works]. 23 In the course of submissions taken from the bar table from the owners' counsel, Mr Watson took the court to so much of the evidence as he contended was available to the referee in terms of proof of defective works. In this regard he referred inter alia, for example to the evidence given by Mr Fairbrother [at 26] dealing with the existence of walls which were out of plumb and were defective; to the evidence given by Mr Maneas [at 19-23, 34] and to the evidence given by Mr Boyer [at 29-30]. 24 Mr Watson submitted that this evidence could only be regarded as having been accepted by the referee as evidence qualifying for section 79 expert evidence. This submission came forward notwithstanding the fact that none of these persons had signed to an expert's code of conduct and that none of their statements appeared to follow what might have been expected in terms of the preferred and often usual format adopted by an expert, namely, a statement of assumptions followed by relevant opinions. 25 Mr Watson strongly contended that as there had never been an objection to the admission of this evidence during the reference, the referee had continued along the line where both parties must be taken to have accepted, as indeed the referee must be taken to have accepted, that these persons were being called as experts. They were also, it must be added, lay witnesses. 26 Mr Lynch, counsel for the builder has submitted to the contrary. The builder does not accept that it waived its entitlement to object to the reception of this evidence as qualifying for section 79 expert evidence treatment. His proposition was that the evidence as given could never rise above or be regarded as more than lay evidence. 27 The further proposition put on behalf of the builder was that a careful reading of all of the materials of relevance before the referee makes it clear that the evidence did not, save in regard to the evidence given by Mr Eccles, go the distance of proving the precise respects in relation to which particular works were defective. Nor did witnesses otherwise than he, prove how they may have costed what were alleged to be shown as defective works. 28 To my mind the submission is shown to be of substance in terms of the evidence presently before the court. Naturally, it is foundational to being able to prove that rectification of defective works had been carried out, that one be in a position in each case to prove what were the defects, and that those defects were in fact rectified and when and by whom and at what cost, being a cost shown to be a reasonable cost. 29 Apparently the owner had intended to tender, but ultimately elected not to tender, a particular report which Conduit Construction Consultants had been retained to prepare. That report had, in fact, been referred to in the statement of Mr Boyer of 14 May 2003 [at 27-28], but these paragraphs were not, in the event, read by the owners. The same report it may be noted, had also been referred to and indeed annexed to the affidavit of Mr Maneas [at 20]. But it became common ground during the hearing before this Court that the owner had elected not to tender that report, so that, to the extent that it may have been read at the time when the statement of Mr Maneas was read, it was common ground between the parties and the referee that the report was not, as the referee pointed out [report 164], before the referee. 30 The particular burden of the submissions put to the court by the owners in relation to paragraph 164 was that it was entirely impossible to follow how the referee could have suggested that in so far as Mr Boyer at Mr Maneas had made any statements or suggestions or had purported to give any evidence as to the appropriate quantum for defective work "this [was]based on Conduit Constructions Consultants' figures". The precise words used by the referee were, "but this seems to have been based on Conduit Constructions Consultants' figures". I reject that submission of the owners. That the submission is not of substance is, it seems to me, in part made clear by paragraph 20 of the statement of Mr Maneas and paragraph 29 of the statement of Mr Boyer. 31 Where an application such as the present is pursued it is particularly important that the court look extremely closely at precisely that which was proved before the referee and general references in statements by witnesses who can only be regarded as having been called as lay witnesses in terms of the discovery of "defects" which are either unclear or eschew the task of identifying what precisely the defects were, how they were dealt with, what was the reasonable cost for relevant remediation and the like can only be regarded as having, if any weight at all, extremely doubtful weight. 32 A relatively clear statement of the proper approach to be taken where an application comes before the court pursuant to part 72 rule 13 by any of its subrules or as here, seeking to have a particular finding rejected or varied, is dealt with in the decision of the New South Wales Court of Appeal in Super Pty Limited v SJP Formwork (Aust) Pty Limited (1992) 29 NSWLR 549 at 563-564. Relevantly Gleeson CJ said: "Subject to what has just been said, it is undesirable to attempt closely to confine the manner in which the discretion is to be exercised: CF Nicholls v Stamer [1980] VR 479 at 495 per Brooking J. The nature of the complaints made about the report, the type of litigation involved, and the length and complexities of the proceedings before the referee, may all be relevant considerations. The purpose of part 72 is to provide, where the interests of justice so dictate, a form of partial resolution of disputes alternative to orthodox litigation, and it would frustrate that purpose to allow the reference to be treated as some kind of warm up for the real contest. On the other hand, if the referee's report reveals some error of principle, some absence or excess of jurisdiction, or some patent misapprehension of the evidence, that would ordinarily be a reason for rejecting it: CF Jordan v McKenzie [1987] 26 CPC (2d) 193. So also would perversity or manifest unreasonableness in fact finding…" 33 As Gleeson CJ there indicated it is undesirable to attempt to closely confine the manner in which the discretion is to be exercised, there being many parameters to be taken into consideration on an instant specific basis. 34 I return to the issue of the manner in which the owners were entitled to rely upon the statements of those witnesses already referred to and called by them, who had not signed to the expert's code of conduct, nor produced documents in fact entitled "Reports". It must be said that Mr Watson has strongly submitted that it does not lie in the mouth of the builder to contend that this evidence was incapable of being put forward as not only lay evidence, but also expert evidence. Mr Watson's submission in this regard has been that it was up to the builder's counsel to object to the receipt of that evidence. As I have understood the submission, it is that the failure of the builder's counsel to so object requires the Court to regard the reference as having been conducted in fashion such that the referee was obliged to treat evidence of these witnesses as expert evidence. The submission is rejected. 35 To my mind the report does not reveal an error of principle, nor does it reveal a patent misapprehension of the evidence. Nor, to my mind, does it reveal perversity or manifest unreasonableness in fact finding. The short position is that the referee, who may be pardoned for having assumed that the Conduit Constructions report was originally to have intended to be placed before him, but was not, is seen to have proceeded in an entirely regular way. Mr Callaghan apparently proceeded by relying upon the only evidence placed before him by an expert who had signed the code of conduct, being satisfied in that regard of the reliability of that evidence. 36 Nor can it be suggested that the referee did not refer to the so-called evidence given by Mr Boyer and Mr Maneas. He is seen to have done so, albeit stating that the evidence seemed to have been based on the Conduit Construction figures which were never before the referee. I accept as of substance the proposition put by the builder to the effect that the referee's observation that the evidence of Mr Maneas and Mr Boyer seemed to be based on the Conduit report, appears to make clear that the referee was unable to satisfy himself in relation to how Mr Boyer and Mr Maneas derived their opinions with respect to quantum. 37 Further, and as Mr Lynch has submitted Mr Eccles was not challenged on his findings with respect to defects, nor with respect to his assessment of quantum. 38 Further, in so far as the owners now suggest that Mr Eccles' assessment must be wrong because the report is said not to refer to evidence of persons working on the site which is said to clearly contradict Mr Eccles' account of the seriousness of the problem, the owners simply do not explain how the presence of unknown persons performing unknown works at unknown times would have any bearing on Mr Eccles' assessment of the defects. 39 The builder further submits that in so far as Mr Fairbrother is concerned, there is no evidence of the cost of the work referred to by Mr Fairbrother to challenge the figure put forward by Mr Eccles. Here again in my view the builder's submission is of substance. 40 The builder further submits that in cross-examination Mr Fairbrother admitted that he was not involved in the process of assessing and measuring the site and he did not know how many doors and windows were affected by walls being out of plumb. 41 The builder further submits that Mr Maneas had been unable to provide any clarity about the alleged defects in cavities, brickwork and steel and concrete elements constructed both too high and too low, as set out in paragraph 34 of his statement of 9 May 2003. 42 The builder makes the point that Mr Maneas was apparently unable to recall whether he built the walls in the dining room, acknowledging that he could not recall. He was not there every single day. 43 There are other difficulties which it seems to me face the owners and the builder's submissions are accepted as of substance in this regard and are adopted. In short: "16. The Defendants also refer to annexure "GB6" to Mr Boyer's affidavit of 5 September 2003 (Ex 36D). Page 5 of "GB6" is a schedule headed "Current Contract Sum estimate". The figure of $231,734 which the Defendants rely on as the cost of rectification work is derived from column 8 in that schedule which is headed "July 2003 Cost Estimate". 17. The two schedules referred to are, by their own description, nothing more than estimates. There is no explanation provided as to the source of these figures, how the figures were calculated or even a description of the work that is alleged to be defective. Apportioning lump sums to specified trade categories is not evidence of anything. 18. Although Mr Boyer does not refer to Conduit in his statement, it is apparent that these figures were initially based on the Conduit report. 19. At paragraphs 19 to 22 of his statement, Mr Maneas explains that he was provided with a copy of the conduit report and defects list. He says: 20. In relation to the defective works, we were provided with a list of defects prepared by Pyramid/Conduit Construction Consultants ("Conduit") dated March 2003. Annexed and marked "F" is a copy of the defects list. 21. As trade packages were developed Ganellan would, together with Greg Boyer and Bob Allan look closely at defects and incorporate rectification in the trade package. When tenderers inspected the works further defects were identified and incorporated. This was particularly the case for the plumber and electrician. 22. During the course of carrying out the works other defects were discovered and variations were granted in respect of those works. The variations register notes whether the variation relates to defect rectification. Exhibited hereto and marked "G" is a copy of the variation register. 23. The method of rectification of any defect was devised by consultation between Ganellan and the contractor. 20. Paragraphs 20 and 21 make it clear that the Conduit document did form the basis for the trade packages, which then, it is inferred, formed the basis for the Current Estimate Schedule referred to by Mr Boyer. (iii) Evidence of Mr Allan 21. It is incorrect to assert that Mr Allan made any assessment of the payments purported to be made to Ganellan for rectification of defective works, unless by "assessment" the Defendants mean that Mr Allan added up the claims submitted for payment. It is also incorrect to state that Mr Allan's "assessment" was not challenged by the Plaintiff. 22. Mr Allan's evidence appears at paragraphs 81 and 82 of his statement dated 4 June 2003 (Ex 21D). Mr Allan refers to progress claims made by Ganellan (Exhibited and marked "LL") and says: "Based on the amounts paid to Ganellan and confirmed by the various progress certificates, the following payments have been made to Ganellan with respect to the following items …. (b) Rectification of defective works carried out by Ganellan including masonry, concrete, structural steel, roof and carpentry rectification, hydraulics, electrical works and damaged palm trees $247,228.78 23. Mr Allan has not made nay attempt to assess the quantum of the alleged defective works. This was expressly put to Mr Allan in cross-examination at T436-7: Q: And that figure and that description [paragraph 82(b) of Mr Allan's statement] is something you derived entirely from the document in LL; is that correct? A: LL is all the progress claims. No, I would think there's additional information that I sourced in addition to this, the stuff that's in LL. Q: So if one went through the documents at LL, one could not derive this figure of $247,228; is that what you are saying? A: For the remedial works? Q: Yes A: I don't know that the material that's in here lists the remedial works in any way. Q: You see, I was looking at paragraph 81 in your statement, and then when I read paragraph 82, I inferred that the material at paragraph 82(b) had been derived from the documents at LL. A: Yes, yes, that's correct, but there's no breakdown of the remedial works in LL.. Q: No; one can't derive what the defect was.. A: No Q: from LL, can one? A: No Q: One can't derive what the remedial action was? A: No Q: One can't derive what the cost of nay particular remedial action was? A: No." 44 I further accept as of substance the builder's submissions: "25. The statements relied on do not identify the work that is said to be defective, which must be the first step to assessing the cost of rectification. There is no attempt to assess the value of rectification works. The Defendants simply submitted a bundle of progress claims. Further, the progress claim attributed to defective work do not in fact relate to work performed by Ganellan – the claims relate to work performed by contractors engaged directly by the Defendants. 26. However the Referee expressed his findings at paragraph 164, there was no probative evidence of defective work tendered in the Defendants' case. The Defendants made no attempt to even identify the work that was said to be defective. All the Defendants did was assert that remedial works had to be performed and claims for payment were made. 27. It follows that even if the Referee erred in his interpretation of the evidence of Mr Boyer and Mr Maneas, the Defendant claim for defective work was doomed to fail." 45 I return to the issue of contention in so far as the question of those witnesses upon whom the owners seek to rely as expert witnesses is concerned. 46 At the end of the day the decision to dismiss the owners' notice of motion does not depend upon the proposition that the witnesses to whom I have referred were not qualified as section 79 experts before the referee. 47 The central difficulty which, as I have said, the owners face concerns the critical significance of having had to prove, with precision before the referee, what precisely were the suggested defective works, why is it said that those works were defective, what followed from the subject defects and critically, what was a reasonable costing of those defective works. The referee did not accept, as I have understood his report, the evidence put forward by the owners as substantiating the claims which they apparently put forward in that regard. 48 The referee is not shown to have erred in accepting the evidence of Mr Eccles. 49 If it be necessary to add to the reasons for rejection of the owners' Notice of Motion the proposition that the owners, in a case which it is common ground was run on the rules of evidence, failed to qualify the witnesses to whom I have referred as section 79 specialised knowledge experts, it seems to me that one has an altogether independent ground for rejecting the owners' submissions. 50 There is authority that following the enactment of the code of conduct the court, absent some very special circumstance, will reject a report put forward by a putative expert. 51 Whilst it is at the stage of the court hierarchy presently being invoked, not an easy matter for the court to deal with the circumstance in which one party contends that a particular set of statements were put forward and were accepted in so far as expressing expert opinions compliant with section 79 of the Evidence Act, whilst the other party gainsays that proposition contradicting it, it is ultimately necessary in this regard for the court to simply fall back on what are the objective facts, matters and circumstances squarely laid before the court. 52 Here those objective facts, matters and circumstance are quite simply: · The reference was run on the rules of evidence. · The rules of evidence require by section 79 that particular criteria must be satisfied before a witness can be called as an expert. · The Supreme Court Rules deal with the code of conduct. 53 Regardless of all of the above Mr Callaghan himself may be inferred as having regarded neither Mr Boyer nor Mr Maneas, nor the other witnesses whom the owners seek to rely upon, as experts if, as it seems to me is appropriate, one can take what Mr Callaghan actually said at the very commencement of his report into regard [when he described those witnesses]. 54 At the end of the day the manner in which the discretion is to be exercised is instant specific. What is involved under part 72 rule 13, it is common ground, is not an appeal, whether by way of a hearing de novo or a more limited rehearing. As has been said by Gleeson CJ [supra]: "That is consistent with the right of the referee to conduct the reference as the referee thinks fit and in certain cases unconstrained by the rules of evidence. The court's proper exercise of its discretion in reviewing the report and deciding whether to adopt, vary or reject it must exercise the judicial discretion in a manner which is consistent both with the object and the purpose of the rules and with the wider setting in which they take place". 55 For those reasons the owners' motions fails. I certify that paragraphs 1 - 55 are a true copy of the reasons for judgment herein of the Hon. Justice Einstein given on 30 July 2004 ex tempore and revised 23 August 2004 ___________________ Susan Piggott Associate 23 August 2004 Last Modified: 09/08/2004 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.