Acciona Infrastructure Australia Pty Ltd v Zurich Insurance plc UK Branch

1. [1]

   Acciona claims the insurer defendants must pay it about $980,000 plus interest, in response to a claim under an insurance contract. A court appointed referee determined that the insurers must pay Acciona, but Acciona was not entitled to interest on that claim.

2. [2]

   The primary issues to be determined in this case are what parts of the referee’s reports ought to be adopted, varied or rejected pursuant to r 20.24(1)(a) Uniform Civil Procedure Rules 2005 (NSW) (UCPR), and what is the appropriate sum of a judgment and interest.

Background

1. [3]

   In 2013, Acciona entered a design and construct contract with the Department of Transport and Main Roads for the State of Queensland to upgrade a section of public road known as the Bruce Highway.

2. [4]

   In February and then May 2015, severe weather events damaged work on the site. Acciona made two claims for indemnity under an insurance policy which covered the contract works for physical damage and demanded the insurers to pay the cost of repatriation of the works.

3. [5]

   By December 2016, the insurers acknowledged receipt of Acciona’s final, revised claim and its quantum based on all the invoices that Acciona had paid. Later, the insurers accepted the policy responded to some of the damage claimed, but declined to indemnify other parts of the claim, in particular “Embankment costs”, which was the focus of the issues before me.

4. [6]

   The Court ordered a reference to Mr Richard Cheney SC, who was assisted by expert quantity surveyor, Mr Simon Lowe, to determine Acciona’s unresolved claim.

5. [7]

   The discretion to refer matters to a referee “must be exercised in accordance with the dictates of s 56(1) [Civil Procedure Act 2005 (NSW) (CPA)], namely, the facilitation of the just, quick and cheap resolution of the real issues in the proceedings”: Rodriguez & Sons Pty Limited v Queensland Bulk Water Supply Authority (t/as Seqwater) (No 25) [2020] NSWSC 1544 at [17] (Beech-Jones J). Annexure 2 to Practice Note SC Eq 3, “Supreme Court Equity Division – Commercial List and Technology and Construction List”, contains the Usual Order for Reference, which, inter alia, directs the referee to “consider and implement such manner of conducting proceedings under the reference as will, without undue formality or delay, enable a just determination to be made”.

6. [8]

   Further, r 20.20 UCPR also applied to the reference, including that:

   1. (1)

      The referee was to conduct the reference as he saw fit;

   2. (2)

      The referee was not bound by the rules of evidence and could inform himself of matters as he saw fit.

7. [9]

   In March 2025, the referee held a four-day hearing and was provided with over 10,500 pages of material. All documentary material was tendered without objection on the parties’ agreement that they would make submissions as to weight. Witnesses were cross-examined, including loss-adjusting experts. The referee received oral and written submissions of over 200 pages.

8. [10]

   At the reference hearing, Acciona claimed the Embankment to the Northbound offramp was damaged by saturation of the fill. The insurers contended the relevant work was not done because of damage, but rather, because of defective road fill and a contractual direction to replace those works.

9. [11]

   At the reference hearing, Acciona had tendered a report by expert geotechnical engineer Mr Peter Sharp, entitled “Northbound Off Ramp Summary of Findings”, and other expert reports described in a document “Attachment A” annexed to Acciona’s closing submissions. The authors of those reports were not called as witnesses or cross-examined.

10. [12]

    The insurers complained that Acciona ought not be entitled to deploy the expert reports to prove damage to the Embankment. Acciona submitted it had not understood that the insurers disputed there was damage to the Embankment but, upon becoming aware, it relied upon the expert reports. The referee received oral and written submissions about whether the insurers had changed their position leading to Acciona being misled, and also whether Acciona could deploy the evidence in a way the insurers had not been expecting. The referee concluded that:

    1. (1)

       The insurers were entitled to object, as they were not aware of the specific use to which Acciona would put the expert reports;

    2. (2)

       Acciona could rely upon the expert reports in proving damage to the Embankment;

    3. (3)

       The expert reports and the oral evidence in chief of Acciona’s project manager, Mr Jose Santonja Menendez De Luarca (Mr Santonja), proved Acciona’s damage for the Embankment claim.

11. [13]

    On 9 May 2025, the referee delivered a report (First Report) to the Court determining the insurers must pay Acciona a further $2,109,335.42 as damages before interest and costs. On 10 August 2025, a supplementary report (Second Report) found Acciona was not entitled to any interest pursuant to s 57 Insurance Contracts Act 1984 (Cth) (ICA) for the Embankment costs claim, because Acciona had only made plain that claim during the reference hearing.

12. [14]

    The insurers submitted that the Court ought to adopt the whole of the referee’s Second Report, but that the Court should not adopt the whole of the referee’s First Report concerning Embankment costs because either:

    1. (1)

       The referee ought to have upheld the insurers’ objection and not allowed Acciona to rely on the Sharp report and other tendered expert reports referred to at paragraph [190] of the First Report, and that the insurers were denied natural justice; or

    2. (2)

       The referee failed to give adequate reasons to substantiate his findings and conclusions about Acciona’s claimed damages.

13. [15]

    Acciona sought an order that the Court adopt the whole of both referee reports, save for the referee’s rejection of s 57 ICA interest concerning the Embankment claim in the Second Report.

Discretion to adopt or reject referee report

1. [16]

   McDougall J’s general “guide” to the exercise of the discretion under rule 20.24 to adopt or reject a referee’s report is well known: Chocolate Factory Apartments Ltd v Westpoint Finance Pty Ltd [2005] NSWSC 784 (Chocolate Factory) at [7] (this “guide” was not questioned on appeal: [2007] NSWCA 253 at [9] (Giles JA)). The particular approach taken by a Court depends on the nature of the issues and circumstances of the case.

2. [17]

   Rejection of a report is not justified by mere disagreement with a referee’s factual findings: Bermria Pty Ltd v Homebush Abattoir Corporation (1991) 22 NSWLR 600, 602-603 (Powell J); Super Pty Ltd v SJP Formwork (Aust) Pty Ltd (1992) 29 NSWLR 549, 562 (Gleeson CJ, Mahoney and Clarke JJA); Ryde City Council v Tourtouras [2007] NSWCA 218 at [22] (Santow, McColl and Basten JJA).

3. [18]

   I also note Rees J’s observations in The Owners – Strata Plan No 89074 v Ceerose Pty Ltd [2024] NSWSC 1494 (Ceerose (NSWSC)) at [14] (citations omitted) (appeal dismissed [2025] NSWCA 235):

Insurers’ complaints as to the referee’s First Report

1. [19]

   During the hearing, the insurers limited the complaints outlined in their written submissions as to why the First Report ought not be adopted to:

   1. (1)

      An alleged denial of procedural fairness because the expert reports, which Acciona relied upon to prove the Embankment costs, were accepted by the referee as material on which he could rely; and

   2. (2)

      An alleged failure to provide sufficient reasoning in the First Report as to why the Embankment costs were allowed.

2. [20]

   There is no dispute that a reference must be conducted in accordance with natural justice. In Woolf v 52 Birriga Road Pty Ltd [2012] NSWSC 921 (Woolf) at [29], Beech-Jones J stated:

3. [21]

   Cases giving meaning to what might be sufficiently procedurally unfair to warrant the rejection of a report include the following examples.

4. [22]

   It was found to be procedurally unfair for a referee not to afford the parties an opportunity of “putting before [the referee] the relevant matters for which they contended and giving each the opportunity to comment upon the relevant information adduced from the other party and to comment upon information on contentious matters otherwise gathered by [the referee]”: Rhodes v Fletcher [2000] NSWSC 797 (Rhodes) at [18] (Bergin J). In Rhodes, important information was imparted to the referee when he conferred with one of the parties and it was not later communicated to the other side (see [39]). It is clear that that information played a role – perhaps a significant one – in the referee’s reasoning and analysis (at [57]).

5. [23]

   There was also a denial of procedural fairness where a referee relied upon an expert report that was expressly disavowed by the parties, and the defendant was not given an opportunity to make submissions: Gigi Entertainment Pty Ltd v Schmidt [2010] NSWSC 906 at [52] (Hall J).

6. [24]

   In contrast, there was no denial of procedural fairness where evidence was tendered by way of what was called a “procedural ambush”, but where no application was made to seek to rely on rebuttal evidence or cross-examine witnesses: Ceerose Pty Ltd v The Owners – Strata Plan No 89074 [2025] NSWCA 235 at [54] (Kirk JA).

7. [25]

   For the following reasons, I do not accept the referee denied the insurers procedural fairness when he allowed Acciona to deploy the expert reports and then he relied upon them in determining Embankment costs.

8. [26]

   The referee was alive to the parties’ competing positions as recorded in paragraphs [151]-[155] of the First Report, which can be summarised as:

   1. (1)

      Acciona claimed that the weather events “caused cracking, which exposed the substate of the embankment material to water ingress, causing saturation, instability, shrinking and swelling effects, erosion, moisture infiltration and a significant reduction in the shear strength of the materials in the Northbound Offramp”. This was evidenced by the expert evidence of Mr Sharp, which accorded with Mr Santonja’s evidence that the Embankment was weakened by excessive moisture.

   2. (2)

      The insurers claimed that Acciona bore the onus of proving the repair costs were the result of damage, rather than “defect”, and that there was insufficient evidence for it to do so. Further, it was submitted that the works were a result of a contractual direction about non-conforming material, which was a defect.

   3. (3)

      Acciona’s response was that the insurers’ evidence from a loss adjuster, Mr Brock, applied loss adjusting principles only, and he only visited the site three times. It was said that Mr Santonja’s evidence ought to be preferred, as he was on site every day. Further, there were soil surveys which demonstrated that non-conforming materials “increase[d] the likelihood of instability… upon moisture inundation leading to the potential for cracks appearing due to shrinkage and swelling of the non-conforming material”. This was consistent with Mr Sharp’s report. The insurers led no evidence contradicting Mr Sharp. There were other expert reports which were consistent with Acciona’s position found in “Attachment A” to the closing submissions.

9. [27]

   Further, the referee was alive to the insurers’ complaint about “natural justice” and considered the issue from both parties’ perspectives: paragraphs [156]-[183] of the First Report.

10. [28]

    The referee recorded the insurers’ objection that “Acciona’s newfound reliance on the report of Mr Sharp” would be “unfair”, because his views were “untested” as he was not called as a witness and was not cross-examined. The referee set out paragraphs of the insurers’ submissions claiming they were unable to make “forensic decisions”. He recorded that Acciona did not specifically notify the insurers that it was relying on Mr Sharp, but that the report and Attachment A was included in the voluminous material, which was all tendered without objection on the basis the parties would make submissions as to weight. He did note that Mr Sharp did acknowledge the Expert Witness Code of Conduct.

11. [29]

    The referee understood that he was required to determine the issue of fairness to both parties, which was “finely balanced”, and that he was not bound by the rules of evidence. He concluded Acciona ought to be allowed to rely on the report of Mr Sharp.

12. [30]

    While not recorded in the report, it was not in dispute that the insurers had been served with the particular expert reports before the proceedings commenced. For example, on 8 July 2019, Acciona’s lawyers wrote to the insurers’ lawyers attaching a copy of the Sharp report and asking that its claim be accepted. That report was pleaded as a particular of damage, but the letter was also pleaded to support Acciona’s claim for interest. In that letter, it was asserted that significant repair work was necessary on the Embankment because of water saturation of the fill under the road pavement. Acciona invited the insurers to accept the claim; the insurers did not reply.

13. [31]

    Before the referee, the insurers made oral and written submissions about the use and weight of the expert reports, and made no submission that they required further time to lead contradictory evidence or they wanted to cross-examine Mr Sharp or others.

14. [32]

    In that context, I doa not accept that the insurers were denied procedural fairness, or that there was an error in the referee’s exercise of the discretion not to exclude the reports.

15. [33]

    In limited circumstances the Court may also consider whether it is appropriate to review the evidence which was before the referee. This should only be considered in rare circumstances, such as those identified by Hodgson CJ in Eq (as his Honour then was) in Franks v Berem Constructions Pty Ltd [1998] NSWCA 87 at 8-9:

    1. (1)

       Where it is seriously and reasonably contended that the referee has reached a decision which no reasonable tribunal of fact could have reached; that is, a decision that any reasonable referee would have known was against the evidence and weight of evidence (see also [7(13)] in Chocolate Factory);

    2. (2)

       Where the referee’s reasons on the face of them appear adequate, but the party challenging the report contends that the reasons are not adequate because there was very significant evidence against the referee’s finding which the referee did not deal with at all;

    3. (3)

       Where the referee’s reasons were flawed, either on the face of them or because they did not deal at all with an important matter appearing in the evidence, and it may be appropriate for further proceedings before the referee.

16. [34]

    The insurers made various submissions as to inadequacy of reasons. However, their focus was that the referee provided insufficient reasons for concluding that Acciona was entitled to the Embankment costs. The insurers submitted the reasons insufficiently explained that it was necessary to determine that the Embankment repairs were “damage” within the meaning of the policy, rather than “defects” in the form of defective fill under the pavement. The insurers complained that the referee was required not only to identify damage within the policy, but also “consider whether the remaining integers of the Policy were engaged and, if so, the evidence which he relied upon.”

17. [35]

    I reject that submission.

18. [36]

    The insurers had run the case that the Embankment repairs were carried out because of defects, not because of damage. Their case before the referee was based on evidence of Mr Brock, their loss assessor. It was that the Embankment costs claim was “not incurred in respect of Damage to Insured Property”, but because of defects sense of non-conforming materials that caused the damage to the Embankment. In contrast, Acciona claimed there was damage.

19. [37]

    The referee referred to this dispute as the “binary issue”; he understood that the policy distinguished between damage (for example, caused by a storm event) and defective construction works that needed to be remedied. The policy made plain that where a claim was made for only defects, the policy would not respond. If there was any “damage”, even if there were also defects, the policy would respond.

20. [38]

    However, the insurers do not challenge the referee’s conclusion at paragraph [144] of the First Report that “I do not see that repair works undertaken following, or pursuant to, a contractual direction, cannot also be directed to repairing Damage within the meaning of the Policy”. This meant that the works could be carried out for two purposes: to repair defects and also to repair damage. There was no dispute that provided damage was identified and required repair, the policy would respond, even if there were also defects requiring repair. This was accurately recorded by the referee.

21. [39]

    The referee provided adequate reasons. He explained Acciona’s late deployment of the Sharp and other expert reports. He then concluded that Mr Sharp’s evidence accorded with the soil surveys held by the insurers and a 2015 Golders Report that recorded instability, as well as Mr Santonja’s oral evidence that the Embankment was weakened by excessive moisture. He concluded Acciona’s evidence was “strongly supportive” of there being damage caused by “saturation, instability, shrinking and swelling effects, erosion, moisture infiltration, and the shear strength of the materials in the Northbound Offramp being greatly reduced”.

22. [40]

    I do not consider further reasons were required, in light of there being no contradictory evidence. The referee recorded that the insurers accepted that if the “binary issue” of whether there was damage was resolved favourably to Acciona, then he was not required to scrutinise every invoice for the purpose of “‘verifying’ their connection to the Embankment repair works”. For that reason, the referee accepted the totality of Acciona’s claim for those works.

23. [41]

    I do not accept that there were insufficient reasons such as to require a reconsideration of the evidence, or that the evidence was insufficient to support the conclusion reached. This was not a conclusion that no reasonable referee could have reached.

Acciona’s complaint concerning interest – referee’s Second Report

1. [42]

   Acciona submitted the referee erred in not awarding it interest on the Embankment costs under s 57 ICA.

2. [43]

   Acciona accepted that the referee expressed the principles concerning the operation of s 57 ICA correctly, setting out the relevant authorities over many pages including LCA Marrickville Pty Ltd v Swiss International SE (2022) 290 FCR 435 (LCA Marrickville) at [228]-[230], [235]-[250] and [252]-[255] (Derrington and Colvin JJ, Moshinsky J agreeing); Koolan Iron Ore Pty Ltd v Infrassure Ltd (No 2) [2023] FCA 1654 (Koolan Iron Ore) at [754] and [757] (Jackman J).

3. [44]

   Without seeking to derogate from those authorities, it is sufficient to note that the referee understood that:

   1. (1)

      A claimant must make a claim in quantifiable and identifiable terms; and

   2. (2)

      An insurer is required to pay interest commencing on the day on which it became unreasonable for the insurer to refuse to pay the claim.

   3. (3)

      “Reasonableness” is a mostly factual exercise.

4. [45]

   During the hearing, Mr Marskell for the insurers referred to a decision of Ball J (as his Honour then was), but did not have the citation to hand or a copy for Mr Gray for Acciona. I directed that a single joint communication be provided to my chambers with the decision and an agreed position on what it stood for.

5. [46]

   I received a joint note of four paragraphs identifying the decision of DTZ Worldwide Limited v AIG Australia Limited [2025] NSWSC 12 (DTZ) (especially at [203]-[211]). Ball J helpfully summarised the relevant test under s 57 ICA at [210]:

6. [47]

   I indicated that Acciona could make a short submission, if necessary, as to “why [the authority] doesn’t apply, or [if] there’s a distinguishing feature”. Acciona did so, but also made submissions beyond that as to the way Acciona had run its case before the referee. The insurers opposed leave being granted as to Acciona’s further submissions, but provided additional submissions, should leave be granted.

7. [48]

   I do not grant leave for further submissions to be considered. As noted by Rees J in Ceerose (NSWSC) at [14], it is not just, quick and cheap for these proceedings to be extended with further submissions in the context of the lengthy reference hearing, the hearing before me and the lengthy oral and written submissions already provided. For context, after the completion of the hearing before me, the 8,000 pages of court book were reduced to less than 3,000 pages, together with over 350 pages of submissions, including the submissions before the referee.

8. [49]

   Even so, as outlined below, the referee relied not only on the material in the tender bundle, but also on the oral evidence in chief given by Mr Santonja, in determining the issue of the Embankment claim.

9. [50]

   Acciona submitted that it was entitled to interest from commencing the proceedings, because a reasonable time to consider its claim for Embankment costs had expired, and by reason of the “factual error the Referee made an error of law relating to the operation of s 57… the Referee misapplied the principle of parity…”. This was characterised as a misapprehension of the evidence or an unreasonable finding of fact.

10. [51]

    I do not accept Acciona’s submissions for the following reasons.

11. [52]

    I accept Acciona had pleaded in its final List Statement filed (with no objection from the insurers) five days before the reference hearing, that it had notified the claim at the very latest by a letter to the insurers dated 8 July 2019, attaching the Sharp report. At the same time, Acciona pleaded it had also served evidence of Charles Taylor Adjusting Reports dated between April 2016 and March 2017, which Mr Brock had considered in reports up to 30 September 2020. No List Response was filed by the insurers. The insurers never responded to the 8 July 2019 letter, and Acciona commenced the proceedings in October 2019.

12. [53]

    In his supplementary report, the referee refused Acciona’s claim for s 57 ICA interest on the basis that, while there was material within the over 10,500 pages of tender bundle that demonstrated the Embankment claim, “there appears to be no clear formulation of the claim, pre-hearing, to the effect of that which I ultimately upheld”. The referee recorded that the claim was “riven with complexity”, which was ostensibly demonstrated by the volumes of material and oral evidence.

13. [54]

    He recorded his opinion that the first time Acciona:

14. [55]

    He concluded:

15. [56]

    As noted, the referee allowed Acciona to rely upon material within the tender bundle to prove damage, despite the insurers’ objection, but also Mr Santonja’s oral evidence in chief during the reference hearing. That evidence and an explanation as to how it would be deployed was never before the insurers until the reference hearing, when they became fully aware of the Embankment costs claim.

16. [57]

    Adopting the test in DTZ at [207], I consider that:

    1. (1)

       The claim which succeeded was not first made in its totality until the reference hearing; and

    2. (2)

       It was as at the reference hearing that the insurers received all information in support of that claim, including the oral evidence of Mr Santonja.

17. [58]

    There is a high bar before a referee’s report will be rejected: see eg Chocolate Factory at [7(6)]. I do not accept that on the face of the referee’s report there is a manifest error in relation to the law. The referee understood the relevant legal principles; these were canvassed in his report.

18. [59]

    I also do not accept there is a misapprehension of the evidence, nor a manifest unreasonableness in the finding of fact, insofar that the insurers did not have a reasonable time to understand and deal with Acciona’s claim concerning the Embankment claim. Critically, I am not satisfied that the conclusion reached by the referee is one that “no reasonable tribunal of fact could have reached; that is, a decision that any reasonable referee would have known was against the evidence and weight of evidence”: Chocolate Factory at [7(13)]. As noted above, I consider that the referee’s reasons logically and cohesively explain his conclusion of fact that the insurers did not have the totality of Acciona’s claim until the reference hearing; a Court need not have specific or detailed regard to the evidence relied upon by the referee in acting upon that opinion: see Skinner & Edwards (Builders) Pty Ltd v Australian Telecommunications Corp (1992) 27 NSWLR 567 at 575 (Cole J); Wenco Industrial Pty Ltd v WW Industries Pty Ltd (2009) 25 VR 119 at [36] (Redlich and Bongiorno JJA, and Beach AJA).

19. [60]

    It would not advance the “overriding purpose” for the Court to re-examine the evidence and issues which have already been considered by the referee: s 56(1) CPA; see Woolf at [29] (Beech-Jones J). In the absence of any manifest error, misapprehension of evidence or unreasonableness in fact-finding, it is not appropriate for the Court to exercise its discretion to re-explore the matter purely on the basis that a different conclusion from that of the referee may have been reached: see eg Chocolate Factory at [7]; Mikeon Projects Pty Ltd v Staffseal Pty Ltd [2022] NSWSC 170 at [10] (Ball J).

20. [61]

    I therefore consider the referee’s Second Report concerning interest ought to be adopted.

Conclusion and orders

1. [62]

   For the reasons above, the appropriate orders are:

   1. (1)

      Pursuant to rule 20.24(1)(a) Uniform Civil Procedure Rules 2005 (NSW) the Court:

   2. (2)

      On or before 4pm on 17 March 2026, Acciona is to serve on the insurers short minutes of order it proposes in relation to costs and any necessary explanation;

   3. (3)

      On or before 4pm on 20 March 2026, the insurers: