Walter Construction -v- Walker Corporation

These proceedings arose out of disputes between parties to a design and construct contract for a commercial project situated on the site of what was known as the old Grace Bros Broadway site. The project consisted of specialty shops (divided into ‘food’ and ‘non-food’ categories with different hand-over dates under the contract), cinemas, retail stores (divided into ‘majors’ and ‘mini-majors’) and a tavern. The specialty shops, the retail stores, the cinemas and the tavern had different hand-over dates under the contract.

The project was undertaken under a deed of agreement dated 29 February 1997 (the contract) between the first defendant, Walker Corporation Limited (WCL), as principal, and the plaintiff, Concrete Construction Group Limited (CCG) (as it was formerly known), as contractor. By its Fifth Further Re-Amended Summons (the summons) CCG sought the following relief against WCL: “1 A declaration that the First Defendant repudiated the contract (“ Contract ” ) between the First Defendant and the Plaintiff dated 29 February 1997 in respect of the design and construction of the Broadway Shopping Centre (“ the Project ”). 2 A declaration that the Plaintiff was entitled to and did terminate the Contract by Notice dated 23 June 1998. 3 A declaration that it was agreed between the Plaintiff and the First Defendant in or about February 1998 that, in consideration of the Plaintiff bringing the Project to the stage that the shopping centre could open for trading on 31 March 1998, and letting the First Defendant and others into possession for the purpose of trading, liquidated damages would not be imposed by or on behalf of the First Defendant (“ the February Agreement ”). 4 A declaration that the Contract was varied by the February Agreement. 5 Alternatively a declaration that the First Defendant is estopped from: (a) denying that the Contract was varied by the February Agreement; and (b) imposing liquidated damages. 6 An order for payment for the work performed on the Project on a quantum meruit. 7 In the alternative to paragraph 6, damages in the sum of $22,130,398 or such other sum as the Court may order. 8 A declaration that the Plaintiff is entitled to further payment of variations in the sum of $6,019,999.00 or such other sum as the Court may order. 9 A declaration that the Plaintiff is entitled to extensions of time. 10 A declaration that the Plaintiff is entitled to time related costs in respect of extensions of time. 11 A declaration that the conduct of the Defendants, in representing to the Plaintiff that if the Plaintiff brought the project to the stage where the shopping centre could open for trading on 31 March 1998 liquidated damages would not be imposed by or on behalf of the First Defendant, breached section 52 of the Trade Practices Act 1974, and section 42 of the Fair Trading Act 1987. 12 Alternatively, a declaration that the Second to Fifth Defendants were involved in the said contravention by the First Defendant within the meaning of section 75B of the Trade Practices Act. 13 An order pursuant to section 87 of the Trade Practices Act 1974 and/or section 72 of the Fair Trading Act varying the Contract as may be appropriate including so that liquidated damages are unenforceable against the Plaintiff. 14 Damages pursuant to sections 82 & 87 of the Trade Practices Act 1974, and sections 68 & 72 of the Fair Trading Act 1987, in the sum of $22,130,348 or such other sum as the Court may order. 14A A declaration that the First Defendant is liable to indemnify the Plaintiff in respect of the Goods and Services Tax, if any, which may be payable by the Plaintiff on any amount paid to it by the First Defendant pursuant to the orders of the Court herein pursuant to A New Tax System (Goods and Services Tax) Act 1999.”

On 4 June 1999 all issues in these proceedings were referred to The Hon. T R W Cole QC RFD (the referee) for report thereon pursuant to Pt 72 of the Supreme Court Rules. On 24 March 2000 the referee presented his report after a sitting lasting seventy two days, which commenced on 11 October 1999 and concluded on 9 March 2000. The report is a closely reasoned, referenced, detailed analysis of a mass of evidentiary material and comprises two volumes running into 694 pages. The referee was appointed for his legal expertise and considerable experience in litigation of this kind.

CCG seeks adoption of the report which is opposed by WCL. The referee summarised his principal findings and opinions as follows: “ SUMMARY OF FINDINGS AND RECOMMENDATION 1. On the 2nd March 1998, WCL and CCG agreed that if the Broadway Shopping Centre could be opened for trading on 31 March 1998, WCL would not impose liquidated damages under the Agreement between them (“the February Agreement”). This varied the Agreement between them. 2. The Broadway Shopping Centre was opened for trading on 31 March 1998. 3. WCL repudiated the Agreement between it and CCG by: (a) acting contrary to the February agreement by provisionally withholding liquidated damages; (b) requiring “defect free practical completion” contrary to the Agreement; (c) interfering with the role of the Administration Manager in his role as certifier; (d) interfering with the role of Buchans (Architects) and Floth (Engineers) in their role as certifiers. 4. CCG accepted that repudiation, and terminated the Agreement on 23 June 1998. 5. CCG are entitled to be paid on a quantum meruit. The balance so payable, after deducting the cost of rectification of defects but including interest, is $16,310,468. 6. WCL’s cross claim against CCG in relation to water damage succeeds as to $347,534, including interest. 7. The net amount payable by WCL to CCG is $15,962,934. 8. Neither Mr McGilvery, nor CCG, acted in breach of fiduciary duty. 9. WCL should pay CCG’s costs of the claim, cross claim and the Reference.”

The correctness of each of those findings and opinions is challenged by WCL. A set of findings and opinions in relation to lesser issues are also challenged by WCL. Where convenient I have adopted the terminology of the report in these reasons.

In opposing adoption of the report, WCL attributed to the referee numerous errors of fact and of law. In support of that case it had recourse to a considerable volume of the evidence which was before the referee.

That aspect of WCL’s case has brought into focus the nature of the judicial discretion involved in exercising the Court’s power under Pt 72 r 13 which is in the following terms: “ 13 (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.

I do not understand the principles applicable to the exercise of such discretion to be in dispute in this case. The difficulty lies in the application of those principles. A number of guiding principles may be taken from the observations of Gleeson CJ in Super Pty Ltd -v- SJP Formwork (Aust) Pty Ltd (1992) 29 NSWLR 549: (a) The hearing of a reference should not be equated with a hearing at first instance in this Court. So much may be extracted from (i) the fact that a referee may be appointed by reason of his or her technical expertise - not necessarily in legal matters, and (ii) from the provisions of Pt 72 r 8 which includes the following terms: “ 8 (1) Where the court makes an order under rule 2, the Court may give directions with respect to the conduct of proceedings under the reference. (2) Subject to any direction under subrule (1)- (a) the referee may conduct the proceedings under the reference in such manner as the referee thinks fit; (b) the referee, in conducting proceedings under the reference, is not bound by rules of evidence but may inform himself or herself in relation to any matter in such manner as the referee thinks fit…”

Those considerations have particular moment in this case. The referee was appointed for his outstanding qualifications as a lawyer with considerable experience in construction litigation. Further, it is apparent from the report and the affidavit of Peter Thomas Pether, sworn 29 March 2000 (the Pether affidavit) that the referee exploited the powers conferred under r 8.

The transcript in the case ran to 4,077 pages. In addition there were 153 witness statements admitted into evidence and some 47 witnesses were called. The Pether affidavit gave the following description of the reference: “28 Complex technical issues necessitated numerous and substantial expert reports. A joint expert report on programming was produced by Messrs Hammond and Luikens. A joint expert report on quantum was produced by Messrs Byford and Tozer. For WALTER, expert evidence was given in the hearing or in conclaves by Evans & Peck Management, Tracey Brunstrom and Hammond (programming), Rider Hunt (cinema variation) George Ilias Design Pty Limited (hydraulic design), Taylor Thomson & Whitting (cinema ceiling tests), Synergetic Management Pty Limited (fire services design) and Eswood (commercial kitchen appliances), Ross Drinkwater (Wattyl products) and Barry Webb and Associates. For Walker, expert evidence was given by Barry Tozer, Vos Partnership Pty Limited, Ralph Beattie Bosworth, Jan Luikens, Paint Consultants, George Floth and Associates (hydraulic engineers) Robert Bird and Associates, T.A. Taylor, St Hilliers and The Buchan Group (architects). 29 Many technical issues, in particular variations, defective/incomplete work, programming, and cost/ valuation issues, were addressed by conclaves and convocations of experts and parties’ representatives. These were held throughout the period of the Reference and a large number of issues were resolved or narrowed by these processes. For example, defects were divided into “Top Value” defects and the “rump” of defects. There was agreement on a number of these Top Value defects with the balance determined by a process agreed between the parties, save for three resolved by private treaty between the parties. The rump of defects, electrical variations and other variations were resolved by agreement following expert and parties’ representatives’ conclaves.”

(b) It is untenable to construe the power of the Court under r 13 as falling within the umbrella of a proposition that “all litigants are entitled to have a judge decide all issues of fact and law that arise in any litigation” ( Super at 558). The procedure that r 13 “establishes is not that of an appeal from a referee to a judge…the concept of “a re-hearing” which is itself ambiguous, at best provides an imperfect analogy”( Super at 558).

(c) R 13 does not require a judge to “reconsider and determine afresh all issues, whether of fact or law which [a] party desires to contest before the judge ( Super at 562)….. it would be a radical departure from the history of the [Pt 72] rules to treat them as giving a dissatisfied party an automatic right to a hearing de novo ( Super at 563)….What is involved in an application under Pt 72 r 13 is not an appeal, whether by way of a hearing de novo, or a more limited re -hearing” ( Super at 563).

(d) “In so far as the subject matter of dissatisfaction with a referee’s report is a question of law, or the application of legal standards to established facts, then a proper exercise of discretion would require a judge to consider and determine that matter afresh” ( Super at 563).

(e) 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 … So also would perversity or manifest unreasonableness” ( Super at 563-564).

(f) In the case of findings of fact by the referee, where there is evidence to support such findings and the court is satisfied that those issues have been carefully considered by the referee it will not normally engage in a re-examination of the referee’s findings ( Super at 563, agreeing with the observations of the trial judge and of Cole J in Chloride Batteries Australia Ltd -v- Glendale Chemical Products Pty Ltd (1988) 17 NSWLR 60).

In Super Mahoney JA expressed the nature of the Court’s discretion in relation to disputed findings of the referee as follows: “What is required by the obligation to allow a party, for example, to be heard in support of or in opposition to a proposed course under Pt 72 must be determined according to the nature of the issue and the circumstances of the case. In determining what is so required, the court is, in my opinion, entitled to take into account the extent to which the party’s case has been presented to and dealt with by the referee. The extent to which, for example, matters dealt with in detail before the referee should be permitted to be dealt with at length before the judge is to be determined by the exercise of a discretionary judgment by the judge. The right to be heard does not involve the right to be heard twice. I am conscious that, in order that the judge may exercise a discretionary judgment of this kind, it may be necessary that the parties have the opportunity to refer to the relevant issues of fact and law and the evidence relevant to them. But the extent to which it is necessary for this to be done depends upon the circumstances of the case and the judgment of the judge. The judge has, I think, a broad discretion and may determine what is necessary to enable him to conclude that he has a sufficient understanding of the matters in question and when the argument has been sufficiently presented.” (at 566-567). See also Foxman Holdings Pty Ltd -v- NMBE Pty Ltd (1994) 38 NSWLR 615 at 620-621 and Leighton Contractors Pty Ltd -v- C E Heath Underwriting Services & Others; Leighton Contractors Pty Ltd v Kinhill Engineers (1995) 8 ANZ Insurances Cases ¶61-231.

In Leighton Contractors, Giles J, as he then was, described the exercise of the discretion as follows: “The Approach to the report The principles which should guide me in considering the report have been discussed in a number of cases culminating in the decision of the Court of Appeal in Super Pty Ltd v SJP Formwork (Aust) Pty Ltd (1992) 29 NSWLR 549. A comprehensive summation can be found in Peabody Resources Ltd v Allco Constructions Pty Ltd (O’Keefe CJ Comm D, 14 March 1994, unreported). More shortly, a party dissatisfied with a referee’s report is not entitled to have the judge before whom it comes reconsider and determine afresh all issues whether of facts or law which it would wish to contest. Nor does the consideration of the report involve an appeal. Rather, the judge has a judicial discretion to exercise, a discretion which would normally be exercised by reconsidering a question of law or the application of legal standards to established facts, but otherwise may fall to be exercised having regard to matters such as the nature of the complaints, the type of litigation involved, and the length and complexity of the proceedings before the referee. Patent misapprehension of the evidence, or perversity or manifest unreasonableness in fact finding, would ordinarily preclude relevant adoption of or action upon the report, but a report may be adopted or acted upon even if upon reconsideration of the evidence the judge might have reached a conclusion different from that of the referee. In general, where there is shown to be evidence available to support a referee’s findings of fact, or where the issue involves a choice between conflicting evidence, in the exercise of the discretion the judge will not reconsider disputed questions of fact. But it is always a question of judicial discretion, exercised in a manner consistent with the object and purpose of the Rules and the place which they play in the administration of justice according to law.” (at 75,533 - 75,534)

The issues arising out of the report have been identified by the parties in carefully structured and referenced written submissions, elaborated upon in oral submissions. One of the principal issues raised by WCL is whether it repudiated its agreement with CCG, whatever that agreement is found to have been. The central findings of the referee on this issue were as follows: “ Conclusion Regarding Repudiation And Termination 565. I have found that: (i) The February agreement amended the Agreement so as to deny the right to impose liquidated damages beyond 17 March 1998. (ii) That in provisionally withholding liquidated damages, WCL breached the Agreement as amended by the February Agreement. (iii) That in insisting upon defect free Practical Completion, WCL required a standard of performance greater than that required by the Agreement. It did not adopt that position pursuant to any bona fide belief of the correctness of the position it maintained. (iv) That WCL interferred (sic) with the role of the Administration Manager as certifier so as to deny to the contractor independent certification. (v) That WCL improperly interferred (sic)) with the independent certification process by the consultants Buchans and George Floth Pty Ltd. 566. In my view each of the (ii), (iii), (iv) and (v) alone, and especially in conjunction with each other, constitute repudiatory conduct on the part of WCL indicating an intention no longer to be bound by the terms of the agreement entitling CCG to terminate the Agreement. Each went to the heart of the contract.

Consequently, it will be necessary for WCL to establish that each of those findings in pars (ii) to (v) should not be adopted, or if adopted, do not amount to a repudiation of any agreement between WCL and CCG, whether viewed in isolation, or in conjunction with the other findings. That presents WCL with a considerable task where one is concerned with a finding of contractual repudiation of a technical construction contract which requires an understanding of the materiality of the alleged breach.

That task would involve, in most cases, an insight into the commercial and technical context in which the breach is said to have occurred. It is here, I think, that the considerable expertise of the referee has an important, valuable role: particularly where, as in this case, the referee has found, not one, but several repudiatory breaches.

I think it is axiomatic that where several contractual breaches have been found to have occurred, the combined materiality of those breaches may be dramatically greater than the materiality of each breach looked at as a discrete breach. If one needed authority for that proposition it may be found in Carr v J A Berriman Pty Ltd (1953) 89 CLR 327 at 351. Repudiation Issues

Referee’s finding of repudiation in WCL acting contrary to the February agreement by provisionally withholding liquidated damages Challenged finding “224. I find that on the 2nd March a proposal was put by Mr McGilvery with the prior concurrence of Mr Walker and Mr Dransfield, and after discussion with Mr Lawes who thought the proposal had merit, that if CCG could bring the premises to a state of completion so as to permit an opening of the shopping centre on the 24th March, that being the date then known to Mr McGilvery as the opening date, liquidated damages would not be imposed. When Mr Walker and Mr Dransfield made known to him that the true opening date was 31 March, not 24 March, Mr McGilvery communicated the date to CCG. He obviously understood that the substance of the February agreement related to ‘opening’ by WCL’s nominated date, as I have found, because he said “You’ve got another week”. The discussion constituting the agreement was intended by all those present to be a variation of the obligations under the Agreement, and thus a variation of that Agreement. The agreement did not relate to the achievement of Practical Completion. The agreement was that no liquidated damages would be imposed if CCG met WCL’s nominated opening date. Mr McGilvery advanced the opening date of 24 March because he believed that to be the date. Mr Walker and Mr Dransfield knew, and had known since at least mid February that the opening date was 31 March. When they told Mr McGilvery of the true opening date immediately after the 2 March meeting, Mr McGilvery communicated the true opening date to Mr Delahunty and Mr Ambler.”

To better understand the issues raised under this heading it will be of assistance to identify the persons principally involved in the dispute, as follows: Gary McGilvery (McGilvery), a principal of McGilvery & Associates Pty Ltd, which was a building consultant to WCL and its associated companies on a full-time basis from March 1996 to April 1997 when the consultancy was reduced to a part-time one. McGilvery & Associates was also a consultant to CCG between May 1997 and August 1998. Peter Dransfield (Dransfield), a director of companies within the WCL Group. Lang Walker (Walker), the managing director, chief executive and major shareholder of WCL. Kirk Lawes (Lawes) , Administration Manager of the project for WCL. Terrence Delahunty (Delahunty) a director of CCG and general manager of its building division. Timothy Ambler (Ambler), State Branch manager of CCG with involvement in the project at executive level. Ian Irving (Irving), Construction manager for CCG who attended senior executive meetings with WCL representatives in relation to the project. James Joseph Mitchell (Mitchell), Project manager of the project for CCG. Whether the February agreement related to Practical Completion

A central issue on the reference was whether an agreement between the parties of 2 March 1998, referred to in the hearing as the February Agreement, related to practical completion, or to the opening of the shopping centre portion of it.

The finding in par 224 of the report in relation to that issue was identified in WCL’s written submissions as follows: “21.1 the finding that on 2 March 1998 an agreement (called in the Report and hereafter “the February Agreement”) was made that if CCG could bring the Shopping Centre to a state of completion so as to permit an Opening on 24 March 1998, liquidated damages would not be imposed: Report, para.224. See Submissions paras. 22,23.

Of that finding, WCL contended as follows: “23. The Referee should have found that it was agreed that if Practical Completion was achieved by 24 March no liquidated damages would be imposed, but if Practical Completion was not achieved by that date, liquidated damages would be imposed as from 17 March 1998, for the following reasons: 23.1 The Referee rightly found that the February Agreement was made when a proposal was put to the meeting by Mr McGilvery and accepted by CCG. 23.2. The Referee rightly found that proposal was the proposal “initially advanced by Mr McGilvery to Mr Walker”. It was the same proposal which had been discussed between Mr McGilvery and Mr Lawes, prior to the 2 March meeting. That finding must be right because Mr McGilvery would have known that he could not have put forward in the 2 March meeting, in Mr Walker’s presence, a proposal different in any material respect from the one he had previously discussed with Mr Walker. 23.3 The evidence about the proposal initially discussed between Mr McGilvery, and Mr Walker was that of Mr Dransfield, who said that Mr McGilvery proposed to him and Mr Walker “that at next Monday night’s meeting we put forward a proposition to extend the contract date for practical completion from 17 March to the 24th. That evidence was not contradicted, rejected nor otherwise adversely commented upon by the Referee. 23.4 The uncontradicted evidence about the proposal discussed between Mr McGilvery and Mr Lawes prior to the meeting is that of Mr Lawes who said that Mr McGilvery told him: “It’s too tight. I don’t believe they’ll get there by the 17th” and “I’m going to put a proposal to Lang to give them extra gratia [sic] another week” and that Mr McGilvery later told him before the 2 March meeting: “I’ve spoken to Lang. We’re going to give them another week and not charge them LDs for that time. But if they don’t make it, all bets are off.” Mr Lawes took that to mean that if CCG “did not achieve practical completion on 24 March then liquidated damages would run from the 17th”. 23.5 The Referee accepted that the proposal as explained to Mr Lawes and Messrs Walker and Dransfield in the above terms was the proposal as explained to Messrs Delahunty and Ambler and accepted by them before the 2 March Meeting. 23.6 This evidence as to the terms of the proposal put to Messrs Delahunty and Ambler prior to the 2 March meeting is exactly consistent with the proposal which Mr McGilvery said he put again to the meeting on 2 March, as recalled by Mr McGilvery, Mr Lawes, Mr Dransfield, Mr Mitchell and Mr Walker, i.e. “…that [WCL] consider extending the 17th date to the 24th … We would forego LDs for that week. If Concretes should fail then LDs will apply from 17 March. It would be in the nature of an extra [sic] gratia extension of time for a week.” 23.7 Having identified the terms of the proposal put to the meeting, the Referee had no basis for construing those terms as meaning anything other than what they literally conveyed, namely, that what was being agreed was an extension of time for one week from 17th to 24th March of the only event relevant to the imposition of liquidated damages which was required to occur on 17th March, i.e. Practical Completion under the Building Contract, and if that extended time for Practical Completion was not achieved, liquidated damages would be imposed in accordance with the Contract. 23.8 The reasoning of the Referee seems to have been that opening of the Centre, rather than Practical Completion, must have been the subject of the proposal because “had anyone directed their attention to the definition of Practical Completion in the [Building Contract] it must have been apparent that Practical Completion under the [Building Contract] could not have been achieved by the 17th March, or indeed the 24th March or the 31st March.” There was no evidence that at or prior to the 2 March meeting any of the participants, let alone all participants, had actually directed their attention to the definition of Practical Completion under the Contract. There would be no basis for concluding that this consideration gave meaning and content to what was actually said. 23.9 Further, in making this observation, the Referee disregarded the uncontested evidence from CCG’s witnesses that the whole discussion between the parties about liquidated damages, both prior to and at the 2 March meeting, commenced with the assertion by CCG that it was still aiming for Practical Completion under the Contract on 17 March but that, because of the industrial stoppage, that date may well slip back to 24 March. That was the context in which an extension of time of one week from 17 March to 24 March came about.”

WCL accepted that an agreement was made between the parties on 2 March 1998. Its primary contention was that it was an agreement about practical completion within the meaning of the contract and not, simply, an agreement for the opening of the shopping centre portion of the project.

It was a central proposition in WCL’s submissions that what was discussed privately between McGilvery, Dransfield and Walker and between McGilvery, Delahunty, Ambler and Lawes prior to the meeting of 2 March 1998 was identical with the proposal that WCL brought to that meeting. What had been discussed within WCL prior to the meeting, it was submitted, concerned practical completion within the meaning of the contract, not a proposal for the opening of the shopping centre. It was an issue that was strenuously contested before the referee and it was an issue that WCL lost.

The ultimate findings on this issue in pars 565 and 566 of the report were reached after a careful weighing of the evidence, some of which was not in dispute, some of which was in conflict with other evidence, and some of which was contested by WCL on the basis that the subject matter had never occurred. It seems to me that the submissions of WCL on this point rest upon an argument that, I think, is fallacious, and represents an oversimplification and a misunderstanding of particular primary findings of the referee.

The approach adopted by the referee to this issue was expressed in the report as follows: “100. In view of the importance of this issue I will set out in some detail the evidence concerning the February agreement as given firstly by the witnesses for the plaintiff, then by Mr. McGilvery who whilst called by WCL is in fact being sued by both the plaintiff and the other defendants, and then consider the evidence from the defendant’s witnesses.”

That paragraph may be found at page 51 of the report. The referee’s ultimate findings in paragraph 224 are located at page 117. The intervening pages contain a careful evaluation of the evidence.

It was Delahunty’s evidence that in pre-2 March 1998 discussions with McGilvery and Ambler the matter under consideration was the opening of the shopping centre (report pars 101-109).

It was Ambler’s evidence that the proposal put to him by McGilvery prior to the 2 March 1998 meeting related to the opening of the shopping centre (report pars 112, 113): that at the “Monday night” meeting, which the referee found was held on 2 March, not 9 February as Ambler thought, the proposal concerned the opening of the shopping centre (report par 114): that he knew that practical completion of the project within the meaning of the agreement could not be achieved in the month of March 1998 (par 116 of the report): that he understood references to “Practical Completion” in his first conversation with McGilvery referred to completion of the shopping centre to a stage ready for opening (report pars 112-116); that he understood the discussion of the “Monday night” meeting to relate to the opening of the shopping centre (report pars 119-121).

Irving also thought that the February agreement was made at the meeting of 9 February, and not on 2 March 1998 as the referee found. Some aspects of his evidence were challenged in cross-examination as fabrication. The referee did not accept that Irving’s evidence was fabricated and accepted that, while his evidence “was not always consistent in his use of language” the discussion at executive meetings and on 2 March 1998 “centred around “the opening”” of the shopping centre and that the “technical concept of Practical Completion in strict accordance with the terms of the Agreement was not addressed” (pars 133,134).

Mitchell’s evidence was that the meeting at which the February agreement was made took place on 9 February and that Delahunty was not present. He identified those present as Walker, Dransfield, Lawes and McGilvery on behalf of WCL and Ambler, Irving and himself on behalf of CCG. It was his evidence that the conversation concerned the opening of the shopping centre. The referee commented on that evidence adduced on behalf of CCG as follows: “144. The evidence adduced by the plaintiff in relation to the February agreement was thus not entirely consistent. Each of Messieurs Ambler, Irving and Mitchell asserted the absence of Mr. Delahunty at the meeting where the agreement was made. Mr. Delahunty confirmed this. Each of Messieurs Ambler, Irving and Mitchell were clear in their evidence that the discussion related to opening, not to Practical Completion under the Agreement. Mr. Delahunty is confirmatory of that. Mr Ambler and Mr. Irving’s recollection was of a meeting at which the date discussed was the 31st March, rather than the 24th March. That is in conflict with the evidence of Mr Mitchell who recalled that the date discussed was the 24th March but that Mr. McGilvery subsequently varied that date to the 31st March. Mr. Delahunty’s evidence is confirmatory of the recollection of Mr Mitchell in this respect, and of Mr Ambler in other respects.”

McGilvery was described by the referee as “a very experienced contractor, particularly in relation to the construction of shopping centres” (report par 145). It was at his suggestion that CCG and WCL held weekly executive meetings to consider progress of the project (report par 145). McGilvery placed the meeting at which agreement on liquidated damages was reached as occurring in late February, early March. The referee set out considerable portions of his evidence, which included the following: “150. …. Q: You see, wasn’t it the case that after the ceiling collapsed on 28 January you had a conversation with Mr. Delahunty in which it was discussed that a proposal should be put that if the centre could be opened by a certain date, rather than practical completion being achieved, by the contract date, then liquidated damages should be waived by Walkers? A: Similar to that; exactly what I said in my statement.”

Another portion of McGilvery’s evidence was quoted and commented upon by the referee as follows: “155. Mr McGilvery was clear in his evidence that the expression used was “opening”, not practical completion or completion. He was asked: “Q: Are you certain that the words used at the meeting at which Mr. Walker attended was not “practical completion” or “completion”- “practical completion” under the contract but “opened”? A: We all used the word “opened” but as I said to you before, we probably envisaged certain things being done for opening to be achieved.”

The referee summarised McGilvery’s evidence as follows: “157. Mr. McGilvery’s oral evidence is strongly confirmatory of material portions of the evidence of Messrs Delahunty, Ambler, Irving and Mitchell. It supports the position that there was, either in February or in early March a meeting at which it was agreed by those present, excluding Mr. Delahunty, that liquidated damages would not be imposed if the centre was in a position to be opened on the 24th March. It confirms that Mr McGilvery had a conversation with Mr Delahunty to that affect. It confirms that subsequent to that arrangement, there was a second telephone conversation with Mr Delahunty advising him of deferment of opening until 31 March. It confirms that Mr. McGilvery did advise Mr Ambler that the opening was deferred to 31 March, although his evidence in chief that he had reserved that week as “our week” was not challenged in cross examination. His confirmation of having said to Mr. Delahunty “You’ve got another week” suggests the contrary. It confirms that the discussions were about “opening” not Practical Completion.” 158. Of importance is Mr McGilvery’s evidence that it was apparent to him, and he made plain to Mr Walker and Mr Dransfield if it was not otherwise apparent to them, that by late January or early February there was no prospect of the centre being opened on the 17th March, and that the suggestion of an arrangement to trade liquidated damages for a certain opening date came from him, and was advanced for good commercial reasons, in particular, the certainty necessary to plan an opening date for the shopping centre. The only conflict of substance between Mr McGilvery’s evidence and that of Messrs Delahunty, Ambler and Mitchell is whether Mr McGilvery extended the date for opening from the 24th to the 31st of March. Both he and Mr Delahunty agreed that he said “You’ve got another week. We’re not opening until the 31st.” If that be accepted, it is difficult to interpret that as a communication that whilst opening is delayed for one week, and another week is available to prepare the centre for opening, nonetheless the arrangement previously made shortly before regarding non imposition of liquidated damages no longer applied. If accepted, it constituted the conveying of a variation to the February agreement if the agreement waived liquidated damages if either the centre could be opened by 24 March, or Practical Completion could be achieved by 24 March by extending the date to 31 March. Mr McGilvery conveyed the changed date for opening because he was told by Mr Walker and Mr Dransfield within minutes of the meeting that the opening date was 31 March not 24 March as had been discussed.

The evidence of Dransfield put the February agreement as occurring on either 2 or 9 March 1998. He was in error in recalling that Mr Delahunty was at the meeting. It was his evidence in chief that, prior to 2 March 1998, he had a discussion with Walker and McGilvery concerning the extension of the date for practical completion from 17 March to 24 March 1998 and in which Walker and Dransfield acceded to McGilvery’s suggestion that he would “put forward a proposition [to CCG] to extend the contract date for practical completion from 17 March to the 24th”. The referee commented on the evidence of Dransfield as follows: “167… However, importantly, he supplemented this evidence in his second affidavit by the following statements: “In no conversation at any of the Monday night meetings I attended did any representative of CCG or Walker refer to the 24th of March proposal in the context of “the majority of its works” being completed by that date. The words I remember being used were “you being finished on the 24th to allow us to open” or “complete the works” or “you finish the works by the 24th so that we can open the centre” and later he said: “My recollection is that all of these expressions “getting the centre opened”, “achieving practical completion”, “completing the works” and “finishing the contract” were used in the discussions at the Monday night meetings in March. At the time of those discussions, it was always my understanding that the centre could not be opened unless it had reached practical completion..” 168. In cross examination Mr Dransfield adopted the passages just quoted as being his recollection. This gives strong support to the evidence of the plaintiff’s witnesses, and Mr McGilvery, that the discussions centred around the centre being in a state to be opened, rather than achievement of Practical Completion under the contract. 169. Mr Dransfield made plain that at the meeting, whenever it was held, an agreement was reached. He gave the following evidence: “Q: You accept, do you, at this meeting an agreement was reached? A: My recollection is a proposal was put and a proposal - and the proposal was accepted. Q. And did you regard that as an agreement? A. Yes, verbal.” 170. It is thus plain from Mr Dransfield’s evidence, and consistent with the evidence of the plaintiff’s witnesses and Mr McGilvery, that an agreement was reached at a Monday night meeting. His evidence supports the view that the discussion giving rise to that agreement related to the opening of the centre, not the achievement of Practical Completion under the contract. His evidence conflicts with that of Mr Ambler and Mr Irving regarding the date discussed being the 24th rather than the 31st March but accords in that respect with the evidence of Mr Mitchell and Mr McGilvery. His evidence supports Mr McGilvery’s evidence that he was informed of the opening date of 31 March immediately after the meeting at which the agreement with CCG was made and that the 31 March date was agreed by Mr Walker.

Par 170 of the report, I think, demonstrates the reasoning of the referee in resolving the conflict of evidence concerning the February agreement. It also demonstrates the manner in which Dransfield’s evidence was treated by the referee. It is noteworthy that in par 170 the referee excluded Lawes’ evidence from the analysis. I think the reason was that he did not accept Lawes’ evidence that the 2 March meeting addressed practical completion of the project.

I think that it is useful to keep in mind, in reading this section of the report, that the referee was concerned with more than one issue. An issue of significance was the nature of that agreement. However, a further issue of significance was the role played by McGilvery in the making of the agreement. It is clear from the report of the referee that WCL presented a case that it was Delahunty who put forward a proposal to McGilvery, not the reverse, and that McGilvery had acted in breach of his fiduciary duty to WCL in the role he thereafter played in the formulation of the agreement (see report pars 151-153).

It was in that context that in several portions of the report the referee referred to the “proposal” as emanating from McGilvery in discussions with Dransfield, Walker and Lawes and with representatives of CCG prior to the 2 March meeting (see for example pars 176, 216, 217 and 250 of the report)

The evidence of Lawes was that the agreement in relation to liquidated damages occurred at a meeting on 2 March 1998. His evidence was that discussions with McGilvery prior to the 2 March meeting centred on practical completion. He understood the proposal put forward at that meeting was the waiver of liquidated damages if practical completion was achieved by 24 March. Of Lawes’ evidence the referee found as follows: “176 . This evidence is confirmatory of the evidence of Mr Delahunty, Mr Ambler and Mr McGilvery regarding the genesis of the February agreement, and in particular, that Mr McGilvery had raised the proposal put both with Mr Walker and Mr Lawes in advance of putting the proposal, and also had raised it with Mr Delahunty and Mr Ambler on behalf of CCG. All persons had accepted the proposal, as had Mr Dransfield, in advance of it being raised.”

That finding is relied upon by WCL as evidencing some inconsistency in the referee’s reasoning. I think that is, clearly, not the case. It is obvious from the evidence quoted by the referee preceding par 176 and in subsequent paragraphs of the report that the referee recognised that the evidence of Lawes was that the pre-2 March discussions and the proposal at the meeting of 2 March 1998 concerned the extension of the time for practical completion. That the referee was under no misapprehension about that is reflected in the referee’s finding at par 184 of the report, as follows: “184. The evidence of Mr Lawes supports the defendants’ case. His evidence makes plain that there was an agreement regarded by all who attended as binding on both parties, and as operating as a variation to the Agreement. Mr Lawes recollection of the discussion was that it centred around Practical Completion, not opening. That recollection is to be assessed with the evidence of the other witnesses, and assessed against the background that Mr Lawes knew, and as must all others on site have known if they considered the matter, that Practical Completion under the Agreement could not be achieved by the 24th March, or indeed the 31st March.”

In my view, all that the referee was seeking to do in par 176 of the report was to identify areas of agreement as to the means by which agreement was reached at the 2 March 1998 meeting: namely, by matters being raised by McGilvery with representatives of CCG and with representatives of WCL prior to the 2 March 1998 meeting and obtaining some measure of agreement in advance of that meeting. In saying that “all persons had accepted the proposal… in advance of it being raised” the referee should not be understood to have lost sight of the two competing versions of the proposal.

I am satisfied that the referee was fully aware of and commented upon the evidence (of Lawes in particular) which was inconsistent with the evidence of the CCG witnesses on the nature of the proposal under discussion.

There is some logic in WCL’s submission that, if it is accepted that the WCL discussions prior to the 2 March 1998 meeting concerned extension of practical completion, it was likely that the proposal advanced at that meeting was to waive liquidated damages for an extension of the date for practical completion. However, it does not necessarily follow and the task that confronted the referee was to evaluate all of the evidence and, in particular, the evidence of what, in fact, was said at the 2 March 1998 meeting.

On that score, I think it was open to the referee, on the evidence cited by him, to find that the 2 March meeting discussion centred upon the opening of the shopping centre and not upon practical completion.

In assessing the reasoning of the referee in reaching that finding, it is necessary to have regard to the referee’s finding in par 213 of the report in which the referee found that he was unable to accept the evidence of Walker unless it was “independently corroborated or contrary to interest”. That finding was made after a very extensive analysis of the evidence of Walker which is to be found between pars 185 and 213 of the report. I think it is unnecessary to examine the particular criticisms of Walker’s evidence as found by the referee.

The whole of the evidence of the February agreement was then analysed by the referee between pars 214 and 223 of the report. The referee found that agreement was reached between the parties on 2 March 1998. There was no dispute that an agreement of some kind was reached between the parties.

The referee accepted the evidence of McGilvery that the reason for advancing the proposal concerning liquidated damages centred upon the importance to WCL of reaching agreement on a date for the opening of the shopping centre (par 216).

The referee found that a proposal was raised by McGilvery, in advance of the 2 March meeting, with representatives of CCG and also with representatives of WCL. The reason for its acceptance by Walker was to get the centre finished on time for opening by 31 March 1998, consistently with WCL’s promotion program for the opening of the shopping centre.

These discussions took place at a time when it was generally known that elements of the complex could not reach practical completion by the end of March 1998 (par 217). The referee found that: “The emphasis of both parties was … on getting the centre finished so it could open … because it was important to WCL “ to get the centre finished on time.” ” (pars 218-219)

In my view, the submission of WCL in par 23.2 of its submissions proceeds on a misunderstanding of the findings of the referee referred to in that submission, namely pars 216, 217 and 250. I am satisfied from the sections of the report referred to earlier in these reasons, that the referee well understood there was evidence of pre 2-March discussions amongst McGilvery, Lawes, Dransfield and Walker which involved submission of a proposal to CCG to extend the date for practical completion by one week and to waive liquidated damages if practical completion was achieved within that time.

It is equally clear, I think, that the referee, in weighing up the evidence of all witnesses to the February agreement, found that the opening of the shopping centre was the subject of the agreement and not an extension of the date for practical completion. In my view, there was ample evidence as accepted by the referee to support that finding.

To illustrate that point, in par 147 the referee considered evidence of McGilvery of the 2 March meeting, which, standing alone, was consistent with the matter under discussion being an extension of the date for practical completion. However, there was an abundance of evidence, which the referee accepted, which established that the subject matter of discussion prior to the 2 March meeting, at the meeting and subsequent to it, was the opening of the shopping centre portion of the complex (report pars 148, 149, 150, 151, 152, 154, 155, 156, 157, 158, 159, 163, 167, 168, 170).

The referee recognised that the evidence of Lawes was that the pre-2 March discussions and the discussion at the 2 March meeting concerned an extension of time for practical completion (report pars 173, 174, 177-179, 184). It is also clear from the report (pars 184, 216 - 224) that the referee did not accept Lawes’ evidence that the 2 March agreement “centred around practical completion not opening”.

In the light of those findings, I think it is simplistic and erroneous to treat the referee’s statements in pars 217 and 250 of the report, namely, that the “proposal was discussed by Mr McGilvery with Mr Lawes who thought it had merit”(par 217), and that “Mr McGilvery advanced the proposition which became the February agreement after discussing it with Mr Lawes, who thought it had merit” (par 250), as evidencing an acceptance of Lawes’ evidence that the agreement reached at the 2 March meeting related to an extension of the time for Practical Completion of the project.

As I read the report, the referee resolved the conflict of evidence as to what was agreed upon at the 2 March meeting, principally, by recourse to the evidence of McGilvery and Dransfield. In the case of McGilvery’s evidence (report pars 145-158) the referee relied heavily on his oral evidence to show that what was discussed in pre-2 March meeting discussions with Delahunty (pars 150,152,154,157,158), Walker (pars 150, 156), and Dransfield (pars 150, 156, 158), was the opening of the shopping centre and not practical completion of the project.

It is clear from par 155 of the report that the referee accepted McGilvery’s evidence that what was discussed in the 2 March meeting was the “opening” and not practical completion. Clearly, he preferred that evidence to the evidence of Lawes as summarised by the referee in par 184 of the report.

When the referee refers to the genesis of the February agreement as being found in the matters raised by McGilvery with representatives of CCG and with Walker, Dransfield and Lawes prior to the 2 March meeting (see, for example, par 176), it needs to be read in the context of the findings referred to above in which the referee resolved the issue against WCL.

Further, it is in that context that the statement in par 216 of the report, that the proposal accepted at the 2 March meeting “was initially advanced by Mr McGilvery to Mr Walker”, should be understood. It is erroneous in my view to treat the finding in par 216 as a statement that the referee accepted evidence that the agreement related to an extension of time for practical completion of the works, as submitted in par 23.2 of the WCL’s submissions.

The submission in par 23.3 of WCL’s submissions relied upon pars 147, 166 and 167 of the report. The submission was that the evidence of Dransfield to the effect that McGilvery had suggested to him and Walker that a proposal to extend the contract date for Practical Completion should be advanced by WCL to CCG representatives at the 2 March meeting was evidence that “was not contradicted, rejected nor otherwise adversely commented upon by the referee.”

In my view, that submission ignored the referee’s findings in relation to Dransfield’s evidence as set out in pars 167 to 170, which relied heavily upon concessions made by Dransfield in his supplementary affidavit of 26 July 1999, and in cross examination. Of that evidence, the referee found that it gave “strong support to the evidence of the plaintiff’s witnesses and Mr McGilvery that the discussions centred around the centre being in a state to be opened, rather than achievement of Practical Completion under the contract” (par 168).

I think the submission further overlooked the reliance by the referee upon the evidence of McGilvery in the way I have earlier examined as establishing the order of events which culminated in the February agreement.

The submission in par 23.4 of WCL’s submissions, which relied upon the evidence of Lawes, in my view, failed to accommodate the way in which Lawes’ evidence was viewed by the referee, particularly in the light of the evidence of McGilvery.

For the same reasons the submissions in pars 23.5 - 23.7, in my view are unsustainable.

The submission in par 23.8 mis-states, I think, the manner in which the state of completion of the project was used by the referee. As I read the report the referee legitimately had regard to the incomplete state of the works as the commercial background in which the discussions relevant to the February agreement took place.

Par 23.9 of WCL’s submissions is really a submission going to the weight of evidence and one that, I think, has been sufficiently addressed in the preceding reasons.

It will be apparent from the preceding reasons that I am satisfied that the referee did not suffer from “some patent misapprehension of the evidence” and his findings did not reflect some “perversity or manifest unreasonableness” in relation to the evidence.

I think a good illustration of the way WCL has challenged the findings of the referee may be found in WCL’s submissions in relation to Mitchell’s evidence. In the course of senior counsel’s oral submissions, he relied upon the evidence of Mitchell in the reference hearing as proving that the subject matter of the February agreement was practical completion of the project. The portion of Mitchell’s evidence relied upon is to be found at pages 732-734 of the evidence before the referee (exhibit 2 (3 of 3)) (tab 4).

Although not free of ambiguity, that evidence, in isolation, could bear the description as evidence, if accepted, of the fact that the subject matter of the February agreement was practical completion of the project.

According to Mitchell, after the arrival of Walker at the 2 March meeting, McGilvery stated: “Lang has approved that proposal. There’ll be no liquidated damages if you finish by 24th of March. Otherwise they’ll run from the 17th of March.”

After that was said, according to Mitchell, Walker added: “I don’t want to be silly about this but I want a commitment from you so that I can open.”

The ambiguity in that exchange was emphasised in cross- examination of Mitchell as follows : “Q. At the end of that meeting you understood that the date required by Walkers for this deal for practical completion was 24 March, didn’t you? A. I understood that the date required for the opening was 24 March.”

That evidence may be examined alongside pars 135 -144 of the report in which the referee analysed the evidence of Mitchell, some of which I have referred to earlier in these reasons. From pars 137 -142 the referee quoted and cited passages from the evidence of Mitchell which supported a finding that the subject matter of the February agreement was the opening of the centre (see particularly pars 141 and 142 and also the summarising observations of the referee in pars 143 and 144).

When regard is had to the evidence relied upon by the referee in relation to his findings in pars 135 to 144 of the report and to the evidence relied upon by WCL in its submissions before me, in my view the referee had ample evidence before him to support the findings made in relation to the evidence of Mitchell and reveals the nature of WCL’s challenge as one going to the weight of evidence and not demonstrating manifest unreasonableness, perversity or mistake on the part of the referee.

The referee’s findings in relation to the nature of the February agreement as one concerned with the opening of the shopping centre should, in my view, be adopted. Referee’s finding as to the “true opening date” of the shopping centre

The disputed findings in par 224 of the report in relation to this subject matter were identified in WCL’s written submissions as follows: 21.2 The finding that the February Agreement was “that no liquidated damages would [be] imposed if CCG met WCL’s nominated opening date”: Report, para.224. See Submissions paras 24-26. 21.3 The finding that Mr McGilvery “ communicated the true opening date”; being 31 March rather than 24 March 1998, to Messrs Delahunty and Ambler, thereby (presumably) inserting “31 March” into the February Agreement as “WCL’s nominated opening date”: Report paras.224,1371,1420(f). See submissions paras.24-26.

WCL’s written submissions on those findings were as follows: “24. The Referee found that: 24.1 the February Agreement was “that no liquidated damages would imposed (sic) if CCG met WCL’s nominated opening date”: Report, para.224; 24.2 Mr McGilvery “communicated the true opening date”, being 31 March rather than 24 March 1998, to Messrs Delahunty and Ambler, thereby (presumably) inserting “31 March” into the February Agreement as “WCL’s nominated opening date”: Report paras.224, 1371. 25. The finding referred to in paragraph 24.1 should not be adopted because: 25.1 there was no evidence at all from any witness that anyone at the 2 March meeting, or in any prior proposal put by Mr McGilvery, said anything to the effect that liquidated damages would not be imposed “if CCG met WCL’s nominated opening date”; 25.2 a finding of such an agreement is contrary to the findings of the Referee referred to in paragraphs 22, 23.1 and 23.2 above; 25.3 CCG never pleaded such an agreement; 25.4 Not even Mr McGilvery thought he was extending the agreement made on 2 March by nominating the true opening date; he thought he was just advising CCG of the opening date which he had just learned about before they heard it in the media. The Referee said that “Mr McGilvery took (what he had been told about the opening date) to be a variation to the agreement publicly reached, for he rang Mr Delahunty and said ‘You’ve got another week’ ”. But there was no evidence at all that Mr McGilvery interpreted what he had been told in that way. 26. If the finding referred to in paragraph 24.1 above is not adopted, the finding referred to in paragraph 24.2 cannot be adopted.”

It is evident from the report that the referee regarded the commercial sub-stratum of the February agreement as being the objective of WCL to open the shopping centre in accordance with its launch program formulated in February 1998 (pars 52-99 of the report).

It is plain from that section of the report that there was ample evidence to warrant the conclusion that a major concern of WCL, in entering the February agreement, was to fulfil a commitment to open the shopping centre in March 1998 in accordance with its launch program (see, in particular, pars 65, 66, 67, 73-85).

The findings of fact set out in pars 100 to 223 of the report, I think, were open to be made by the referee in his analysis of the evidence in relation to the February agreement.

The referee accepted that the essential element in the February agreement was completion of the centre to enable it to be opened for trading as planned by WCL, it having the strongest commercial interest to ensure that the centre opened in accordance with its advertising campaign announcing the opening. That is my understanding of the referee’s construction of the February agreement as relating to the “true opening date” of the centre.

It was found by the referee that, as at the date of the February agreement, the date under discussion was 24 March 1998. However, the evidence, which the referee accepted, established that, immediately after the 2 March meeting, it was disclosed that the planned opening date was 31 March 1998. I do not understand there to be any dispute that the parties thereafter worked towards opening the centre on that date and, as found by the referee, the centre opened on that date and continued trading thereafter: a finding itself that is challenged as examined later in these reasons.

Upon that approach to construction, treating the February agreement as one to complete the centre to enable it to be opened in accordance with WCL’s planned opening (ie the true opening date), then the substitution of the 31 March date for 24 March shortly after the 2 March 1998 meeting should, in my view be regarded as a machinery provision not involving a variation of the February agreement.

That this is the true construction of the February agreement as found by the referee is confirmed in par 1420(f) of the report as follows: “(f) The February agreement, made on 2 March 1998, was not made by Mr McGilvery. It was advanced by him as a proposal in the interests of WCL. Mr Lawes thought it had merit. Mr Dransfield and Mr Walker approved it. The agreement was, in essence, that liquidated damages would not be imposed if CCG brought the project to a state where the shopping centre complex could be opened by WCL’s planned date. At the time when that agreement was made, WCL knew that that date was 31 March, but Mr McGilvery and CCG did not. When Mr McGilvery learned that the opening date was 31 March he communicated that information to CCG before it became public. That did not constitute the making of a new agreement but rather a communication to CCG that the opening date which under the February agreement it was obliged to meet to avoid the imposition of liquidated damages was 31 March rather than 24 March.”

To like effect is the referee’s finding in 1371 of the report as follows: “1371. The third aspect is his communication to CCG that the opening date was 24 March, which was the basis on which the February agreement was made that liquidated damages would not be applied if the works could reach a stage sufficient to open the shopping centre, but rather 31 March. This was simply a communication of the revised opening date once it became known to Mr McGilvery, and was not the making of any separate agreement by him with CCG.”

Whether the substitution by McGilvery, shortly after the 2 March meeting, of 31 March for 24 March as the opening date, was an implementation of the February agreement to complete the centre by the planned opening date or was a variation of the February agreement is, in my view, of little practical consequence, having regard to my findings later in these reasons, as to the authority of McGilvery to substitute the 31 March date for 24 March.

WCL’s submission that the February agreement as found by the referee had not been pleaded has little substance having regard to the form of the pleading and contention c (11) of the summons and the particulars furnished in contention c (13).

In my view the referee’s findings on this issue should be adopted. McGilvery’s Authority

The nature of the issue raised by WCL in relation to this aspect of par 224 of the report was presented in WCL’s written submissions as follows: “41. The Referee found that Mr McGilvery had ostensible authority to vary the February Agreement by nominating the actual opening date: Report paras. 224, 1371, 258. 42. This finding should not be adopted because the Referee erred as to the basis in law upon which he found ostensible authority, for the following reasons: 42.1 the Referee found that Mr McGilvery had no actual authority to extend the time of the February Agreement from 24th March to 31st March. This must clearly have been so because the uncontradicted and unanimous evidence of all witnesses was that Mr McGilvery had expressly stated to CCG, prior to the 2 March meeting and in Mr Walker’s presence at that meeting, that only Mr Walker had the authority to make agreements affecting liquidated damages; 42.2 Mr McGilvery did not regard himself as having any authority to vary the agreement reached on 2 March as to what was required to happen on the 24th March. There is no evidence at all that at the conclusion of the 2 March meeting he regarded “both Mr Walker and Mr Dransfield as having agreed to further extend the agreement made with CCG that if the shopping centre would be opened by 31 March, rather than 24 March, no liquidated damages would apply.” That finding by the Referee is unsupportable. 42.3 It is axiomatic that if an agent without actual authority is to bind his principal by reason of apparent or ostensible authority, the principal, not the agent, must have made a representation, intended to be and in fact acted upon, that the agent has authority to enter on behalf of the principal a contract of the kind within the scope of the apparent authority. 42.4 There is no evidence at all that Mr Walker or Mr Dransfield had any discussion with any officer of CCG after the 2 March meeting which could in any way have represented that Mr McGilvery had authority to vary what was agreed on 2 March. No such allegation was pleaded by CCG. The only evidence as to Mr McGilvery’s authority, actual or ostensible, was that referred to in paragraph 42.1. 42.5 The Referee did not make any finding that WCL had represented in any way that Mr McGilvery was authorised to vary the agreement of 2 March. 42.6 The Referee’s finding of ostensible authority was apparently based on the unchallenged evidence of Messrs Delahunty, Ambler and Irving that they had relied on Mr McGilvery’s statements about WCL not imposing liquidated damages if opening was achieved on the 31st March. But all of the statements of Mr McGilvery relied on were the statement (sic) made prior to the 2 March meeting in which Mr McGilvery made it clear that everything that he was proposing was subject to Mr Walker’s express agreement and that he could agree nothing on his own authority: see paragraph 42.1. 42.7 The Referee found that “there was nothing to suggest [to CCG] that, when [Mr McGilvery] was told of the true opening date, he did not have authority to either extend the agreement… or convey a supposed decision of WCL that as the opening date had been deferred from the 24th to the 31st March so too was the date by which CCG had to achieve a state to permit opening…” On the contrary, there was evidence of a disclosed lack of authority: see paragraph 42.1. 42.8 Further, the Referee addressed himself to the wrong question. He should have asked himself whether there had been anything done or said by Messrs Walker or Dransfield as at the time Mr McGilvery said you’ve got another week” which could have suggested to CCG that the authority which CCG knew Mr McGilvery previously lacked had now been conferred on him. 42.9 There is no reason why WCL is not able to raise Mr McGilvery’s lack of authority. The February Agreement (with the date of 31st March) as pleaded and particularised by CCG at all times was said to have been agreed at the meeting which Mr Walker attended. WCL denied the terms of that alleged agreement and its evidence was that the only date agreed by Mr Walker was the 24th March. No issue of authority arose at that stage because the February Agreement was alleged to have been made by Mr Walker himself. 42.10 During the hearing it became apparent from the evidence that there had been no discussion of 31st March at the meeting attended by Mr Walker. In Written Submissions on the February Agreement filed by WCL during the course of evidence, in accordance with the Referee’s direction, WCL raised the issue that if the February Agreement containing the 31st rather than the 24th March was relied on, that agreement could not have been made subsequently by Mr McGilvery because he had no authority. The parties addressed the Referee on the February Agreement during the course of evidence. CCG filed Written Submissions on Fiduciary Obligation in which it raised for the first time the contention that “the date for the purposes of the [February Agreement] was always the date of opening, said initially to be 24 March then revealed to be 31 March.” 42.11 Neither party objected to the submissions of the other on the issue of Mr McGilvery’s authority on the basis that further evidence would be required and that irremediable prejudice would be suffered if the submission were entertained. The Referee has not made such a finding. He dealt with the submissions of both parties on that issue. There is no basis for holding that WCL should not be allowed to rely on the submission. 42.12 The Referee should have found that, whatever CCG had to achieve under the February Agreement, it had to achieve by 24th March, because Mr McGilvery had no authority to vary that date.”

As stated in these reasons, I think that the referee was correct in finding that McGilvery’s communication to CCG of the 31 March date, shortly after the meeting of 2 March, was done in furtherance of the February agreement (see pars 224 and 252 of the report).

On that view of the February agreement there was nothing exceptional in McGilvery conveying to CCG the “true” date of the planned opening of the shopping centre. The question of ostensible authority only arises, I think, if McGilvery’s communication of the 31 March date to CCG is characterised as a variation of the February agreement. The referee has found that, although he did not regard that communication as such a variation, McGilvery had no actual authority to vary the February agreement.

However, the referee also found that it was not open to WCL to raise the issue of McGilvery’s authority to vary the February agreement (see pars 252 and 253 of the report). In my view, those paragraphs reflect a proper exercise of the referee’s discretion in precluding WCL from raising the issue of McGilvery’s authority.

In any event, the referee found that McGilvery had ostensible authority to vary the February agreement (par 258). The matters relied upon by the referee in pars 256 and 257 of the report, in my view, fully support the finding in accordance with long standing authority. See Freeman & Lockyer (A Firm) v Buckhurst Park Properties (Mangal) Ltd (1964) 2 QB 480 at 503-505, noting that, in the view of Diplock LJ, the “commonest form of representation by a principal creating an “apparent” authority of any agent is by conduct, namely, by permitting the agent to act in the management or conduct of the principal’s business” (at 505).

Pars 256 to 258 of the report are set out for ease of reference: “256. Mr Walker said that “certainly McGilvery had no authority, after all the work leading up to getting one week’s extension, to extend that of his own volition for another week”. However he accepted that there was never any discussion upon the authority nor any limitation placed upon it.” 257. Mr McGilvery had been the spokesman for WCL who had negotiated the Hoyts variation at a cost of $2.25 million, including substituting a monetary sum for a significant time claim. He had also been the person who, prior to the 2nd March, had raised with Mr Delahunty and Mr Ambler, the proposal which became the February agreement and which centred around assurance of a date for opening. That proposal was publicly put and agreed to by Mr Walker. It is true that in the discussions Mr McGilvery made clear that the proposal was subject to Mr Walker’s agreement, but once that was achieved, it was he who communicated the agreement. There was thus nothing to suggest that, when he was told of the true opening date, he did not have authority to either extend the agreement which he proposed and Mr Walker had agreed to, or to convey a supposed decision of WCL that as the opening date had been deferred from the 24th to 31st March so to (sic) was the date by which CCG had to achieve a state to permit opening. In fact that is what he did. The essence of the February agreement was related to opening; when the date for opening changed, communication of that change with the statement “you’ve got another week” was consistent with the authority which Mr McGilvery had previously exercised. There was nothing to suggest that he was not communicating the decision of WCL. That is the manner in which his communication is to be characterised, not as a variation to the February agreement. 258. In my view it is not open to WCL to raise in submissions the issue of Mr McGilvery’s authority. However if a contrary view be taken, I am of the view that he had ostensible authority. Further, properly characterised, his communication was not a variation to the February agreement.”

While the referee accepted that McGilvery in discussions with CCG representatives, disclosed that the proposal under consideration was “subject to Mr Walker’s agreement,” it does not follow that this represented a “disclosed lack of authority”, as submitted on behalf of WCL, having regard to the matters referred to in pars 256 and 257 of the report.

In my view, WCL’s written submissions (pars 42.3 - 42.8) fail to meet the findings of the referee in pars 256 and 257 and confused the question of reliance with the matter of representation. For ostensible authority to be established there must be: “a representation, made by the principal … intended to be and in fact acted upon … that the agent has authority to enter on behalf of the principal into a contract of a kind within the scope of the “apparent” authority, so as to render the principal liable to perform any obligations imposed upon him by such contract.” ( Freeman at 503)

WCL’s submission in par 42.6 referred to pars 253, 254 and 255 of the report. Those paragraphs are concerned with the findings of the referee on evidence of reliance by CCG on WCL’s representation of McGilvery’s authority.

In my view, the referee’s findings as to the authority of McGilvery should be adopted. February Agreement in breach of McGilvery’s fiduciary duty to WCL

WCL challenged the following findings of the referee: “1367. In my view there is no evidence at all that Mr McGilvery acted contrary to the interests of WCL and in the interests of CCG. Indeed, such evidence as exists makes clear that at all times Mr McGilvery acted in WCL’s best interests. The evidence discloses five instances when Mr McGilvery acted in circumstances involving CCG. Those circumstances are the resolution of the Hoyts variation problem, the proposing of the February agreement, the communicating of the new opening date being 31 March rather than 24 March, interfering with certification by George Floth Pty Ltd, and instructing the architects, Buchans, not to issue their certificate until WCL said so. … 1417. Mr McGilvery had a contractual duty pursuant to his company’s consultancy agreement with WCL not to act contrary to the interests of WCL. I do not think it necessary to decide whether that constitutes a fiduciary relationship. Assuming that it does, I have found that his obtaining of the consultancy agreement with CCG was not related to his position with WCL, nor was it related to his position as a consultant to WCL having some influence in relation to the Broadway Shopping Centre Project. I have also found that he did not place himself in a position in which his interests would or might conflict with his duty to WCL because his consultancy agreement with CCG was on the specific basis that he would not act contrary to the interests of WCL, and thus the Broadway Project was quarantined or excluded from that consultancy. Once Mr Walker agreed to him becoming a part time consultant to WCL, he was entitled to enter into other consultancies provided they were not in conflict with his continuing duty to act in the interests of WCL, relevantly in relation to the Broadway Project. Accordingly I reject the submissions in paragraph 1 and paragraph 3 of the Defendant’s closing submissions. … 1419. By excluding or “quarantining” the Broadway Project from the CCG consultancy, the parties to it negated what otherwise would have been a conflict of interest. That is because the agreement did not apply to the Broadway Project. It follows that in entering into the CCG consultancy agreement, Mr McGilvery was not in breach of any duty he owed to WCL. Further, as a matter of fact, I find that Mr McGilvery did not act otherwise than in the best interests of WCL. There was thus neither a conflict of interest and duty, nor any breach of duty. 1420. … (b) The obligations under the consultancy agreement with WCL required Mr McGilvery to act in the interests of WCL against CCG. The CCG consultancy agreement did not conflict with those obligations because the CCG agreement was on the basis that no obligations pursuant to the CCG agreement attached to Mr McGilvery when he was acting on behalf of WCL, it being specifically accepted that in those circumstances he should act in the best interests of WCL. The two consultancies thus did not conflict. (c) In fact, Mr McGilvery acted at all times in the interests of WCL in his dealings affecting CCG.”

A general finding in par 250 of the report, that the February agreement was not procured in breach of McGilvery’s fiduciary duty, is also challenged by WCL.

The substance of WCL’s submissions rests on two broad propositions, namely: (a) By McGilvery accepting a consultancy retainer from both CCG and WCL, he placed himself in a position of conflict or potential conflict, which, in the circumstances of this case, resulted in a breach of his fiduciary duty to WCL. McGilvery’s non-disclosure to WCL of the CCG consultancy rendered the transaction “surreptitious” and gave the CCG retainer the character of a secret commission or bribe. (b) the referee erred as a matter of law in finding that, by reason of the express exclusion of matters relating to the project from the CCG consultancy, the conflict or potential conflict of interest had been removed from the performance of McGilvery’s duty to WCL.

The relevant section of the report (pars 1378-1421) reveals a keen awareness by the referee of the factual issues before him: reflects a close analysis of the evidence which, in my view, takes it beyond any valid criticism of the report as being manifestly unreasonable, perverse or as reflecting a patent misapprehension of the evidence. Further, I think it sets out a conclusion that was open to the referee on the evidence referred to in his findings of fact.

The basic approach adopted by the referee is set out in pars 1378-1381 of the report as follows: “1378. In mounting an attack on the position of both CCG and Mr McGilvery in relation to the consultancy agreement entered into in April 1997, WCL starts with a decided advantage based upon the unusual circumstances. It is not at all usual for a person in an influential position to have a consultancy agreement with each of the two parties to an agreement, the consequences of which contract the person is in a position to influence. One approaches such a situation, as I have, with a very healthy suspicion indeed. The potential for conflict of interest is great, and the suspicions regarding the use of influence to advance one party’s interests against the other is magnified where the existence of the two consultancies is known only to one party to the contract and has not been disclosed to the other in circumstances where the other’s consultancy pre-dated that of the party with knowledge of both. One asks why would a person or a commercial organisation put themselves in such a situation of potential or actual conflict of interest, and why would either the person with the consultancies, or the company (here CCG) not advise WCL of the arrangement. 1379. The answer given to these questions by WCL was that CCG placed itself in the position of paying a consultancy fee to a person having an existing consultancy with WCL, and Mr McGilvery placed himself in the invidious position of potential or actual conflict of interest, because the consultancy payments were a bribe. The reason, so WCL argued, that neither informed WCL of the CCG consultancy was because: “It would have been blindingly obvious that anyone in Mr Walker’s position would have objected to a senior executive on the Broadway Project being simultaneously paid more by the builder on that project than he was receiving from WCL. No one in Mr Walker’s position would have permitted for a moment even the possibility of a conflict of loyalties on the part of Mr McGilvery between WCL and CCG. 1380. The strength of these submissions is obvious. The strength flows from the extraordinary circumstance of a person having two consultancies with the two parties to a contract. The submission is sought to be supported and further strengthened by the fact that the term of the CCG consultancy was said to coincide with the effective life of the Broadway Project. Further, it was submitted that “when the opening of the centre was achieved in April 1998, but it was immediately apparent that there would be a bitter dispute between CCG and WCL, the CCG consultancy agreement was brought to a premature end.” And it was additionally put that little if anything was done by Mr McGilvery pursuant to the consultancy, which supported the view that the agreement was a cloak for a bribe. Reference was made to the evidence of Mr Delahunty: “I did not derive from the consultancy the benefits I had anticipated may be available when I negotiated the consultancy in 1997.” 1381. I recognise the strength of these submissions which have caused me to scrutinise closely the evidence and to ponder on appropriate inferences to be drawn.”

The succeeding paragraphs in the report represent the “close scrutiny” of the evidence undertaken by the referee. His findings may be summarised as follows: (a) there was no actual conflict of interest in that “all of the evidence indicates that, in fact, Mr McGilvery acted in the best interests of WCL and not in the interests of CCG in relation to the Broadway Project” (par 1398: see also pars 1399, 1413, 1420(c) ) (b) the CCG retainer was a bona fide consultancy and, in no sense, involved a gift, or an inducement (for example, in the form of an excessively generous retainer) and was not otherwise a secret commission or bribe (pars 1396, 1406, 1418, 1420(d) & (e) ). (c) it had been expressly agreed in relation to the CCG retainer that the project was to be excluded from the consultancy (pars 1383, 1399, 1417, 1419 and 1420(b) & (d)).

No challenge to those findings of fact is sustainable in my view.

In addressing the question whether the referee has erred in law in finding no breach of duty by McGilvery, I have adopted the approach of the referee in proceeding on the basis that a fiduciary obligation was owed by McGilvery to WCL to act in its interests and not to place himself in a position of conflict or potential conflict of interest: although, I am not satisfied that a fiduciary duty was owed by McGilvery to WCL (as to which, see Breen v Williams (1996) 186 CLR 71 at 107).

There is no doubt that, if the CCG consultancy embraced professional services to CCG in relation to the project, McGilvery would have been in a position of clear conflict of interest and at the very least under a duty to disclose that interest to WCL ( Maguire v Makaronis (1996-7) 188 CLR 449 at 464-5; Beach Petroleum NL v Abbott Tout (1999) 33 ACSR 1 at 43-46; Bray v Ford (1896) AC 44 at 51-52.

However, as found by the referee, the terms of the CCG retainer expressly excluded the project from any consultancy services to be provided by McGilvery. In reaching those findings, the referee accepted the evidence of McGilvery and Delahunty, in particular, and did not accept the evidence of Walker.

The referee’s finding was that there was neither an actual nor a possible conflict of interest in the circumstances in which McGilvery undertook and performed the CCG consultancy. It was open to him to do so. The referee’s findings of fact on which that conclusion is based, are almost insurmountable in considering WCL’s case that the referee, nevertheless, erred in law in finding that there had been no breach of duty arising out of the CCG consultancy and its non-disclosure to WCL.

Counsel for WCL sought to meet that situation with the following submission: “34. In finding that the CCG Consultancy Agreement involved no breach of fiduciary obligation by Mr McGilvery because the Broadway Project was ‘quarantined’, the Referee paid no regard to the principle that, if there is some live matter between the donor of a payment and the fiduciary’s beneficiary - as there was when the CCG Consultancy was entered into and when the February Agreement was being negotiated - the Court will not enquire into the donor’s motives or reasons for making the secret payment: an irrebuttable presumption is raised that the money has been given with intent to gain advantage: see paragraph 31.2 above; and see Parker v McKenna at 124-24.”

In aid of those submissions WCL sought to water down factual findings of the referee as to McGilvery’s non-disclosure of the consultancy: the nature of the exclusion of the project from the CCG consultancy: the bona fide nature of the CCG transaction: the finding that McGilvery had acted always in the best interest of WCL. However, that exercise is essentially one of challenging the weight given to the evidence by the referee and does not address the task of challenging findings of fact by a referee in the manner required by Super and Leighton.

The referee’s analysis of the CCG consultancy and of McGilvery’s relationship with WCL, is in conformity with those authorities that call for an examination of the circumstances of a relationship in evaluating the extent of the subject fiduciary duty (see Beach at 43-44, Maguire at 460-464, Breen at 82-83, 106-107, and In re Goldcorp Exchange Ltd (In Receivership) [1995] 1 AC 74 at 98: particularly where the relationship upon which the duty is sought to be imposed does not fall within the recognised categories of fiduciary relationships.

Consequently, in addressing the question of law raised by WCL, the consideration of any alleged conflict of interest has to be approached in the context of the findings of the referee, in particular, that as a matter of fact there was no conflict: that the project was excluded from the CCG consultancy so as to avoid conflict of interests, that the consultancy was a conventional one, both in its terms and performance, and not tainted in the manner contended for by WCL.

In support of its submissions, WCL adopted passages from Fiduciary Obligations - PD Finn at pars 495 et seq., particularly pars 495, 501, 504, 506 and 509; paragraphs to be found in a section entitled “Bribes and Secret Commissions”. In my view, the passages relied upon and the authorities cited, to which I have been referred, do not require labelling the CCG retainer either as a bribe, or as a secret commission, or as one involving a conflict of interest in the circumstances as found by the referee.

In pars 502, 504 and 506, are to be found comments by the learned author that, superficially, may be seen as consistent with the submissions of WCL. The paragraphs are as follows: “502. But for a payment to be a bribe it is not essential either that it be a gift or that it be handed over with a manifestly corrupt purpose in mind. The payment constituting the bribe or secret commission may in fact have been earned by the fiduciary for services rendered to the donor but rendered in a transaction in which he also acted for or on behalf of his beneficiary who was unaware that such a payment was being made. Again, the payment may simply be one which the donor usually gives to persons dealing with him as agents, for example, an introduction fee, or it may stem from a bet with the fiduciary. But, as the High Court has observed, it does not make “any difference whether the surreptitious profit was gained as a pure gift or for services rendered or for any other reason.” …. 504. While a bribe or secret commission usually takes the form of a money payment, it need not necessarily do so. It may, for example, take the form of a gift of shares in a company or even a sale of shares to the fiduciary if the sale is at any undervalue. It can be the granting of a lucrative sub-contract. It may be an act which relieves the fiduciary from a personal liability. The courts would most likely hold that giving a paid holiday is tantamount to a bribe. It is, however, unlikely that treating, i.e., the provision of meals or drinks to secure influence or favour in a particular matter, would be held to constitute a bribe save perhaps in the most gross of cases.” 506. The intention with which a payment is made to a fiduciary and the knowledge in which he receives it, are, as a general rule, irrelevant to the question whether or not that payment should be characterised as a bribe. A concealed payment attracts the taint of bribery solely from the circumstances in which it was made. If it has been promised, made or earned while a course of dealing is being effected or projected between the donor on the one hand and the fiduciary on the other, it will be a bribe. Provided there is some live matter -some question open- between the parties, the courts will not inquire into the donor’s motives in promising or making it. An irrebuttable presumption will be raised that the fiduciary was influenced by it. Thus a present given to an employee after he has performed a service on behalf of his employer for the donor will not be a bribe - unless it has been promised before the service had been completely performed. But a payment by a prospective contractor to an employee before tenders have been awarded will amount to a bribe. Similarly, where a person engages a fiduciary on a commission basis to sell property for him and subsequently learns that the fiduciary intends to earn his commission by purchasing the property on behalf of his beneficiary, the consequent payment of the commission with such knowledge is bribery of the fiduciary.”

The authorities relied upon, principally, by WCL were Keogh v Dalgety & Co Ltd (1916) 22 CLR 402 at 418, Panama & South Pacific Telegraph Company v India Rubber, Gutta Percha & Telegraph Works Co (1875) LR 10 Ch. App 515 at 526, and Parker v McKenna [1874] LR 10 Ch. App 96 at 124-125.

However, these cases are no exception to the line of authorities, that, in my view, require some nexus between the fact situation, said to constitute a bribe or commission and the fiduciary relationship, such that a potential for a conflict of interest arises. That potential must be founded on stronger bases than fanciful considerations.

In Keogh the agent negotiating a mortgage for its principal accepted a commission from the mortgagee in obtaining a guarantor of the mortgage debt. It was in that context that the observation was made in Keogh , adopting what was said by Bowen LJ in Boston Deep Sea Fishing & Icco v Ansell (1888) 39 CH D 339, that the “learned Lord Justice … distinctly dissipated the idea that it makes any difference whether the surreptitious profit was gained as a pure gift or for services rendered or for any other reason” (at 418). It is in that context that the passage in Finn at par 502, citing Keogh, should be understood.

Parker’s case I think adds little to discussion on the subject, it being a case of a clear conflict of interest of directors, involved in the raising of fresh capital, entering into arrangements involving shares not taken up by shareholders. They were required to account to the company for the profits derived on disposal of the shares.

Panama was cited by WCL as a similar facts case to that the subject of these proceedings. WCL relied principally upon the following passage from the judgment of James LJ: “According to my view of the law of this Court, I take it to be clear that any surreptitious dealing between one principal and the agent of the other principal is a fraud on such other principal, cognizable in this Court. That I take to be a clear proposition, and I take it, according to my view, to be equally clear that the defrauded principal, if he comes in time, is entitled, at his option, to have the contract rescinded, or, if he elects not to have it rescinded, to have such other adequate relief as the Court may think right to give him.” (at 526)

That statement of the law must be understood in the context of the facts in Panama which give colour to the expression “surreptitious dealing”, as used by the learned Lord Justice. What their lordships were concerned with was an unhealthily close connection between the “surreptitious transaction” and the subject fiduciary relationship.

The relationship in Panama was that created by the appointment of an engineer by a principal to a cable laying contract to act as certifying engineer for payments under the contract to the contractor. The “surreptitious transaction” was an agreement by the engineer with the contractor by way of subcontract to the cable laying contract to provide services for which the engineer was to be paid by instalments, geared to certification of instalments due to the contractor under the cable laying contract : the contract in which he was the certifying agent of the principal.

Of that connection between the “surreptitious transaction” and the fiduciary relationship James LJ observed as follows: “Although the parties may not have thought that they were doing anything wrong, yet, when I put together the two contracts -the contract between the Plaintiff company and the Defendant company, and the contract between the Defendant company, and Sir Charles Bright, the engineer on the other side, and see that the money to be paid to Sir Charles Bright is not money to be paid when he has completed, or is completing, the sub-contract as a reward for work or labour, but is money to be paid out to him time after time, exactly when and as he shall have certified money to have been due and payable by one company to the other, then I say that this is a contract as to which res ipsa loquitur, and of which I am bound to express my strongest disapprobation and reprehension.” (at 527)

Mellish LJ was no more impressed with the connection between the two transactions, expressing his “astonishment” that the engineer and the contractor: “… should actually think that this is a mere technical rule of a Court of Equity, and that there is nothing morally wrong in itself, in the man who is engineer of a telegraph company, and who has to certify to them when the money becomes payable by them to a construction company, having behind their backs a sub-contract with that construction company for part of what they had contracted to do for the purposes of the telegraph company.” (at 529)

Panama is cited in Finn in par 504 for the proposition that the bribe or secret commission may be the granting of a “lucrative subcontract”. In that respect, the statement requires to be placed in the context of the facts of that case.

I am satisfied that the referee in reaching the findings of fact in this section of the report has not erred in the sense considered in Super and Leighton , nor has he erred in his application of the law to those findings. WCL’s Loss of right to unliquidated damages for delay

WCL challenges the following finding of the referee “1184. I would also uphold the contention that the effect of the February agreement was to deny to the proprietor the right to claim unliquidated damages for delayed completion. The February agreement did not alter the Date for Practical Completion. What it did was to provide that in the event of the shopping centre being able to be opened by a given date, liquidated damages would not be applied. It seems to me to be commercially inconceivable that the parties agreement that liquidated damages would not be applied nonetheless reserved to the proprietor the right to claim unliquidated damages for delayed performance in respect of the period when liquidated damages would otherwise be applicable. For this reason also the claim for unliquidated damages for delayed performance fails.”

That finding was challenged on the basis that, by use of the term “commercially inconceivable” in the paragraph of the report above quoted, the referee “seems to have found, therefore, that there was an implied term in the February agreement that if CCG achieved Opening of the Centre on 31 March 1998, CCG was relieved of all liability for damages for failure to achieve Practical Completion by the Contract Date.”

WCL’s submissions then proceeded on that premise and contended that such a term was not necessary to give the contract business efficacy, was not so obvious as to require its implication and was both unreasonable and inequitable. I do not agree with the premise postulated in WCL’s submissions.

The conclusion of the referee, in my view, was one of construction of the express terms of the February agreement and not one based on an implied term of that agreement. Even if the construction found by the referee was based on implication of a term, I would still have no reason to conclude differently from the referee’s opinion. I think it would be absurd to treat the February agreement as one which left to WCL the right to unliquidated damages for delays to date of that agreement.

In my view, the February agreement extinguished any right to damages for delay to that point upon CCG achieving opening of the shopping centre as contemplated under the February agreement.

It was argued that it would be “unreasonable and inequitable to imply a term in the February agreement which would have the effect of depriving WCL of any remedy in damages no matter how long CCG took to achieve Practical Completion, or indeed if it never achieved Practical Completion.”

I agree with that contention, if that was the effect of the construction of the contract by the referee. In fact, I think, it plainly was not. CCG was answerable for breaches of the contract, thereafter, sounding in damages for delay. It always remained the obligation of CCG to perform the work in a diligent manner and to perform the work in a timely way. Nothing in the referee’s report would lend itself to the construction erected by WCL to support its challenge to this finding, a finding which I think should be adopted. Sufficient performance by CCG to permit opening of centre on 31 March 1998

WCL submitted the referee erred in finding that CCG satisfied the condition of the February agreement that it would perform the work so as to enable opening of the centre on 31 March 1998.

There is an element of the bizarre in WCL’s challenge to this element of the referee’s report in that it is common ground that the centre did open for trading on 31 March 1998 and remained so thereafter. WCL’s argument is founded on the submission that the opening was not lawful, and that upon the true construction of the February agreement, what was contemplated in the opening of the centre, was a lawful opening or alternatively, there was to be implied a term to that effect.

The alleged illegality is best described by setting out the section of the referee’s report that is challenged by WCL: “233. A fifth defence was that there should be implied into the February agreement a term that the plaintiff was required to bring the Project to the stage where the Centre could be “lawfully” opened for trading. The defendants contended that the opening on the 31st March was not lawful because there was not, at that date, a Certificate of Classification or an interim certificate of classification issued by the Leichhardt Municipal Council pursuant to the Local Government Act 1993. 234. Pursuant to section 68(1) of the Act, a person may carry out an activity specified in a table only with the prior approval of the Council. An activity so specified was: “6. Use or occupy a building before it has been completed in accordance with the plans and specifications approved by the Council.” Pursuant to section 175 of the Act a regulation making power was conferred and regulation 45 provided: “1. A building or part of a building must not be occupied until a certificate of classification or interim certificate of classification has been issued in respect of the building or part.” Regulation 48 provided: “(1) if it approves the occupation of a portion of an uncompleted building, the Council must issue an interim certificate of classification for that portion. (3) However, the Council is not to issue an interim certificate of classification for a portion of a building unless it has received: (a) a fire safety certificate for the whole of the building, or (b) an interim fire safety statement for the portion or portions concerned.” 235. CCG applied on 25 March for a Certificate of Classification pursuant to Regulation 46 Local Government (Approvals) Regulations 1993. On 30 March WCL wrote to CCG: “As discussed and agreed, opening of the Shopping Centre is scheduled for 31 March 1998, subject to CCGL obtaining permission from Leichhardt Council to occupy the partially completed centre.” 236. At 4.38pm that day Leichhardt Council advised that it was not in a position to issue CCG with a certificate of classification for the buildings based on Council’s knowledge of the site as at 11am 30 March 1998. It pointed out that regulation 46 did not apply to an uncompleted building but said that, in the alternative, Council would consider an application pursuant to section 68 “provided Council can be satisfied that the health and safety of the occupants of the buildings will not be compromised”. Such an application was lodged by CCG with the Council that day. The application stated: “We undertake to provide certification by Trevor Howse & Associates Pty Ltd to Council in relation to the health and safety of the building, to allow occupation of the shopping centre. We propose that the certification be provided to Council before 7.30am on 31 March 1998.” 237. On 31 March the Commissioner New South Wales Fire Brigades provided a certificate in respect of the areas to be opened stating: “Based on certification received and inspections of the building, it is considered that adequate provisions have been made for the preventing and extinguishing of fires, and the protection and saving of life and property in the case of fire. Occupancy is subject to the provisions of Council’s interim classification certificate and completion of items as listed by the Brigades. See attached list.” The attached list had eighteen items. 238. On 1 April 1998 Council wrote to CCG stating it had not received the Trevor Howse & Associates certification, but had received the Fire Brigade’s notification. Council stated: “As Council has not received any satisfactory certifications relating to the safety of the building for members of the public, and subsequently[sic] Council is unable to give consent for the occupation of the building, attached is a notice of proposed order that will be served if the appropriate certifications are not received by Council by 10am Thursday, 2 April 1998.” 239. On the same date WCL wrote to CCG advising that it was critical that satisfactory certification be obtained. 240. On 2 April CCG forwarded to Council a letter from Trevor Howse “giving a Statement of Adequacy for the current occupation of the building”. It indicated rectification items would be inspected by Howse on 3rd April with certification of satisfaction to be provided to Council by 3pm, 3 April 1998. It also advised that the Fire Brigade items would be completed on 2 April. 241. Subsequently it was required that an application be lodged bearing the consent of the owner, Broadway Shopping Centre Sydney Pty Ltd. This application was dated 14 April, the owners consent dated 15 April and Council received the document on 20 April. Council finally issued a consent on 5 June 1998 pursuant to the application lodged on 15 April 1998. 243. The benefit conferred on WCL by the agreement made on the 2nd March was the achievement of a state of completion sufficient to enable it to open the centre on 31 March 1998. It did so open and achieved that benefit. It now seeks to imply a term that the occupation on 31 March for the purposes of opening was to be legal occupation with the obligation being on CCG to achieve that legality. If there was an illegal act either in occupying the centre or opening it, that act was the act of WCL. Thus it seeks to imply a term to overcome its own illegal acts so as to be able to contend that failure by CCG to obtain Council’s consent by 31 March rendered its acts of occupation and opening illegal thus breaching the implied term that CCG had promised, in consideration of the waiving of liquidated damages, that the shopping centre would be bought to a stage of completion where the centre could be “lawfully opened for trading”. In the Statement of Defence it was pleaded that CCG was not entitled to the benefit of the February agreement releasing it from liquidated damages if, inter alia, it failed to obtain prior to 31 March “all certificates necessary to obtain the issue of, and obtain, a Certificate of Classification or interim Certificate of Classification enabling lawful occupation and use of the Project for trading as at 31 March 1998.” 243. I do not think such a term is to be implied into the February agreement. No doubt the parties, had they addressed the matter, would have expected the occupancy and opening to be legal. However it does not necessarily follow that there is to be implied a term to that effect, or that breach of any such term should deprive the contractor of the benefit of the February agreement. The benefit conferred by the February agreement on the proprietor was opening. That benefit was achieved. If a term were to be implied, the term to be implied would be one which would deny to the contractor the benefits of the February agreement if the benefits to the proprietor were denied to it by illegality. Such a term might be: “provided that if WCL is not able to occupy or open the Centre because of absence of any necessary Certificate of Classification, CCG is deprived of the benefit of this Agreement.” Such an implication would satisfy the tests for implication of a term. 244. Having taken the advantage of the February agreement and occupied and opened the shopping centre, I see no basis upon which WCL should now be entitled to seek to imply a term so as to render its illegal acts, if such they be, a breach by CCG of the February agreement for the purpose of denying to CCG the benefit of that agreement. 245. The sixth defence raised was that CCG did not perform the February agreement because the centre “was not fit for use and occupation”. I reject that submission. WCL plainly thought that it was because it did, in fact, use and occupy the centre. No doubt there were omissions and defects, but these were not such as to render the centre not fit for use or occupation.”

In relation to the finding in par 245, WCL made the following submission: “50. WCL alleged that there was an implied term in the February Agreement that the Shopping Centre, when opened, would be fit for use and occupation. The Referee did not reject such an implied term but found that the Centre was fit for use and occupation because WCL thought so, as evidenced by the fact that it occupied the Centre on 31 March: Report para.245. 51. This conclusion should not be adopted because the question of whether the Centre was reasonably fit for use and occupation was a question of objective fact, not a matter of the subjective belief of WCL. 52. Further, in reaching this conclusion the Referee did not deal in any way with all of the evidence that WCL did not know of the true state of the Shopping Centre until after 31 March, nor did he examine the evidence to determine whether the Centre was, as a matter of objective fact, reasonably fit for use and occupation. As at 23 June 1998 rectification work to the value of $3,086,311 was still to be done, almost three months after the opening and after considerable rectification work had already been carried out. That indicates that as (sic) opening there were very considerable defects in the Centre. The Referee did not ascertain what defects were outstanding as at 31 March and gave no reasons in support of his conclusion that “no doubt there were omissions and defects but these were not such as to render the Centre not fit for use or occupation.”

Exhibit D in the hearing before me contains witness statements in evidence before the referee and transcript of the reference hearing. The latter evidenced the attention that the referee gave to the issue of the state of the works as at 31 March 1998.

It is apparent that there was an abundance of evidence before the referee that the centre was fit for use and occupation on 31 March 1998. It is sufficient, I think, to refer to only a portion of that evidence to demonstrate the strength of the evidence capable of supporting a finding that the shopping centre was fit for occupation.

Mitchell, the project manager for CCG, gave the following evidence, namely: “24. I do not recall any of the representations of George Floth & Associates (“Floth”), or the architect, The Buchan Group (“Buchan”), or Mr Lilli from Trevor House (sic) & Associates (“THA”), advising me that in their opinion, the shopping centre was not safe or was not fit to open on 31 March 1998. Further, I do not recall any of them advising me after that date that in their opinion, the shopping centre was unsafe or was not fit to remain open. 25. From my 36 years experience in the building industry, I was of the opinion that the building was safe and was fit to open on 31 March 1998. From my site inspections on and immediately prior to the opening day, I observed that in the public areas, the sprinkler system was complete (and I knew that it had been certified), all fire stairs were satisfactory, all safety signs were illuminated and the roads were complete. Although there were some minor outstanding issues I was satisfied that they did not represent a danger to the health, safety and welfare of the occupants and users of the shopping centre. 26. Over the years, I have seen many shopping centres including Mt Druitt Shopping Centre and Westfield Parramatta Shopping Centre open in a far less state of completion than was achieved by CCG on this project. I have also seen a number of other shopping centres open in comparable condition to Broadway including Tuggerah (a $90 million project for Westfield) and Cairns Central (an $88 million project for Coles Myer), both being regional shopping centres comparable to Broadway, and on both of which I was employed as Project Manager by Westfield Constructions and Multiplex respectively.” (Exhibit D)

Rhett Laurence Webster, another project manager of CCG, gave the following evidence: “27. From my 11 years experience in the building industry, I was of the opinion that the building was safe and was ready to open on 31 March 1998. From my site inspections on and immediately prior to the opening day, I observed that in the public areas, the sprinkler system was installed, all fire stairs were satisfactory, all safety signs were illuminated and the roads were complete. Some access ramps and stairs in the Creek Street carpark were unsafe and were closed to the public. Although there were some minor outstanding issues I was satisfied that they did not represent a danger to the health, safety and welfare of the occupants and users of the shopping centre.”

John Malcolm Hawkins was a services engineer employed by CCG. His evidence was as follows: “10. By 31 March 1998 I had received Form 6 certificates from all designers and all subcontractors regarding all of the essential services of those parts of the building that were to be opened on that day. The Form 6 certificates were then forwarded to THA. … 16. As to paragraph 5 (f) above, on or about 30 March 1998 I accompanied the N.S.W Fire Brigade whilst they conducted their inspection of the fire services on the Project. During this time I observed that all fire systems were operating in accordance with AS 1668. I also observed that the fire panel was indicating that everything was operating satisfactorily and that there was fire protection to all areas that were to be opened the following day. At the conclusion of this inspection, one of the inspectors, Mr Ted Donner from the Fire Brigade said words to the following effect: “We are satisfied that everything is okay for the opening tomorrow. However, the 18 items that we discussed will need to be rectified before we can send our letter to the Council.” … 28. Although some of the items listed by the Fire Brigade on 30 March 1998 and some of the items listed by THA on 30 March 1998 were incomplete on the date that the project was opened, I was of the opinion, based on my own 20 years experience in the building industry and from my own knowledge of the site, that the essential services for the project were operating satisfactorily such that they were fit and ready for the opening on 31 March 1998. In my opinion, the impact of those outstanding essential services items was such that they had little, if any, impact on the health, safety and welfare of any persons using the premises. Neither the Fire Brigade or Mr Lilli during their inspections prior to opening, ever expressed any concern to me to the effect that in their opinion the building was not safe or was not fit to open on 31 March 1998. In my experience, when the Fire Brigade is dissatisfied with the safety of a building which is intending to open on a particular day, the Fire Brigade issues an order to the effect that the building must not be occupied.”

The material above referred to was not the subject of cross examination, although it is fair to say that, in respect of each of the statements quoted, there were statements in evidence in WCL’s case which put CCG’s statements in issue.

The transcript references in exhibit D make it clear that the referee saw the issue concerning the state of the shopping centre as at 31 March as a “critical” issue. To take an example, on 20 September 1999 the following matter was addressed by the referee, at the outset of the reference hearing: “THE REFEREE: Has there been any endeavour by way of agreement to specify the state of the building as at 31 March? If we have an opening, presumably somebody will tell me from the plaintiff’s point of view what the building was like and the defendants will do the same. There may be a great difference or there may not, I don’t know, but that seems to me to be a fairly critical aspect. I had in mind that I would hear an opening from both the plaintiff and the defendants on day one just so that I have some better understanding of what the true areas of debate are and from the little I know about this case it seems to me one critical factor will be what was the state of the building certainly as of 31 March, and I think as of the 14th of March and the other dates in March, if there is a great difference in those couple of weeks.” (Exhibit D - T 169:3-T 169:20)

The submissions of WCL at the close of the hearing before the referee were in evidence before me. Par 82 in WCL’s written submissions was confined to the following: “ Centre not fit for use and occupation 82. See separate Submissions on omissions and defects.”

I think it is beyond argument that the referee did not misdirect himself by treating the issue as one of “subjective belief” and not as “a question of objective fact”. Apart from the strength of the evidence on this issue adduced in CCG’s case, I would have thought the most compelling “objective” fact was the fact that the shopping centre was opened on 31 March 1998 and continued thereafter to trade. I am satisfied that the referee’s findings in relation to the fitness of the centre for use and occupation were open to him on the evidence and was consistent with the evidence of defects that required rectification.

WCL put in evidence before me several statements which had been admitted into evidence in its case before the referee, which, if accepted, contradicted the evidence of the CCG witnesses: referring, in particular, to exhibits 21H, 31 B, 32B, 34B, 35D, 36A, 38C, 43C, 24-28A. The exhibit references referred to above are the exhibit numbers before the referee and were evidenced before me in exhibit 2, vol 2 of 2, within tabs 7-22.

However those submissions, in my view, raise a weight of evidence case which is not the basis upon which the Court should review the referee’s findings.

It was submitted on behalf of WCL that the referee failed to address the argument that the proper construction of the February agreement required a construction that “open” meant “lawfully open” and only addressed the issue of an implication of lawfulness. The issue that the referee addressed is to be found in paragraph 34A of WCL’s defence, namely: “34A. In further answer to paragraphs C11 to C14, the Defendants say that if (which is denied): (a) the parties entered into the February Agreement varying the Contract; or (b) the Plaintiff assumed the parties had entered into the February Agreement varying the Contract it was a term of the February Agreement that, in order that the Project could be open for trading on 31 March 1998, the Plaintiff would: (c) obtain on or prior to 31 March 1998 all certificates necessary to obtain the issue of, and obtain, a Certificate of Classification or interim Certificate of Classification enabling lawful occupation and use of the Project for trading as at 31 March 1998; (d) by 31 March 1998 complete construction of the Project to the point that the Project was reasonably fit for occupation and use by the proprietor and tenants for trading on and from 31 March 1998; and that if Concrete did not perform both conditions referred to in (c) and (d), it would not be entitled to release or waiver of Walker’s right to liquidated damages under the Contract.”

That was the issue addressed by the referee and determined in favour of CCG. In my view, the reasons advanced by the referee concluded the issue against WCL, whether expressed as a matter of construction of the express terms of the February agreement, or as a matter of implication.

The referee found that what the parties agreed upon was the achievement of a commercial objective, namely the opening of the shopping centre for trading on 31 March 1998, and that was achieved.

The parties may well have contemplated the issuing of an interim classification certificate by the responsible authority prior to 31 March 1998. Nonetheless, in my view, it was open to the parties under the February agreement to do what, in fact, they did, namely, to bring the shopping centre to a state that was reasonably fit for use and occupation and safe for such use and in negotiation with the responsible authority, to open the centre for trading pending the issuing of a classification certificate.

That construction, in my view, does not call for the insertion of the word “lawful” in the terms of the agreement, nor does it require the implication of the term proffered by WCL.

I would not see the need for the implication of a term in a commercial arrangement which was specifically designed to achieve a physical state of the works as at 31 March 1998 which the referee found, in fact, was achieved.

Even if there was to be imported a term of the kind proffered by WCL, I would have some difficulty in accepting the consequence of such a term as contended for by WLC, namely, a finding that CCG had not performed its obligations under the February agreement and was not entitled to the benefit of the agreement.

It will be seen from par 232 of the report that the referee construed the contract as one which gave WCL “no right to give access to the public to the site prior to Practical Completion [and that it] gained that right as a consequence of the [February agreement]…. That was consideration for WCL’s promise not to impose liquidated damages if the Project reached the stage that the centre could open by the 24th and subsequently the 31st March 1998.” WCL took that benefit and, in my view, cannot be heard to deny CCG’s right to have the February agreement performed on the part of WCL.

Senior counsel for WCL relied upon the following cross examination of CCG’s construction manager, Irving, in support of WCL’s construction of the February agreement: “Q. You knew at the time that you made your application to council that the centre could not open unless the council gave permission for occupation? A. We were aware that we had to get a certificate from the council. To my knowledge a certificate would be issued based on a report on the BCA consultant’s report from Vic Lilli. Q. But you knew at the time you made your application to council that you had to obtain the council’s permission to occupy the centre before you could in fact open? A. Yes, that’s normal. Q. And you knew at the time you made your application that the council would not be in a position to give you such a certificate of occupation until they were satisfied that the health and safety of the occupants of the building would not be comprised? A. No, I didn’t know that. We were relying on a report from Trevor Howse & Associates to satisfy the council, and the council were also very much aware that certain areas wouldn’t be finished. We’d had discussions with them during the course of March that made them aware of that. Q. Certainly by 30 March you were aware that the council would not issue a certificate unless they were satisfied that the health and safety of the occupants of the building would not be compromised, weren’t you? A. For the whole of the project? Q. For that part of the project that was open. A. No, that’s correct; they wouldn’t issue. Q. When you had your discussions with the Walker personnel about what has become known as the February agreement, you were aware at that time that in order to open the centre on 31 March it was necessary to obtain from council a certificate permitting occupation? A. Yes.” (Exhibit 2, vol 3, tab 21,T 2007: 10 - T 2007: 54)

In my view, that evidence does not warrant the construction of the February agreement advanced on behalf of WCL, nor do I regard it as admissible evidence in aid of construction (see also Exhibit 2, vol 3, tabs 10 -12). The February Agreement : a variation not a forbearance

It was submitted on behalf of WCL as follows: “54. Referee should have found that, on the true construction of the terms of the Agreement, there was a promise by WCL not to enforce the liquidated damages provisions of the Building Contract if a certain condition were met, and not a promise to vary the Building Contract itself, for the following reasons: 54.1 the terms of the February Agreement, as found by the Referee, were the terms of the proposal put by Mr McGilvery to Messrs Walker and Dransfield and discussed with Mr Lawes, prior to the 2 March meeting: see paragraphs 22 and 23 above; 54.2 those terms clearly and expressly meant that WCL would not exercise its rights under the Building Contract to liquidated damages if a condition were fulfilled but, if it were not, WCL would be free to exercise those rights. Clearly, that was what was meant by the phrase “all bets are off”. 54.3 There was no discussion at all about varying the terms of the Building Contract. In particular, the parties did not agree: .1 to vary the date for Practical Completion in the Contract; .2 to vary the Contract so as to delete any obligation to achieve Practical Completion at all or by any particular date. .3 to vary WCL’s right to unliquidated damages if CCG breached its contractual obligation to achieve Practical Completion by 17 March 1998; .4 to affect in any way WCL’s rights relating to the Bank Guarantees, conferred by Clauses 11.12, 11.15, 11.16, 11.17 of the Building Contract.”

The referee found in par 226 of the report that the February agreement operated as a variation of the contract. I think par 226 should be read in conjunction with par 232 of the report. They are set out below for ease of reference: “ 226. First, is was contended that all that occurred on the 2nd March was an agreement by WCL not to enforce its contractual right to liquidated damages if a certain condition was fulfilled, namely, achievement of a state to permit opening by the 24th March, later extended to the 31st March. That was not the view of Mr Walker, Mr Dransfield, Mr Lawes, or Mr McGilvery. I reject that submission. It is true, as the defendant submitted, that the date for Practical Completion was not changed, and it was still necessary for Practical Completion to be achieved for the payment of the final $10 million, release of bank guarantees and commencement of the Defects Liability Period. The 2nd March agreement, however, did change the contractual obligations under the Agreement, by removing the right of WCL to impose liquidated damages in the event of an opening being achieved by 24 March, extended to 31 March.“ 232. The Contractor was entitled to “non-exclusive access to the Site sufficient to enable the execution of the Project in accordance with the requirements of this Agreement.” The Agreement contemplated that, after various milestones being Substantial Completion of various aspects of the work, particularly the major tenancies, others called fitout contractors would be permitted to work on the site concurrently to enable fitout to occur. There were also provisions, in certain circumstances, where Walker itself could carry out works. That aspect was addressed by clauses 3.07 and 7.01. Clause 3.06 highlights the limited nature of access available to Walker, its tenants and their representatives. Clause 3.06 makes no provision for access by the public. Clause 3.05 recognises that after Practical Completion the site will be in the possession of Walker who will then, during the Defects Liability Period, allow the contractor reasonable access to make good defects. The plain intent of the clauses to which I have referred is that the contractor will be given non-exclusive access to the site sufficient to enable it to execute the Project, unimpeded by others, subject to the limited rights of access given to Walker, its tenants, and “Separate Contractors”. On achievement of Practical Completion the contractor’s access ceases subject to the right conferred by clause 3.05. Walker had no right to give access to the public to the site prior to Practical Completion. It gained that right as a consequence of the agreement made on the 2nd March 1998. That was consideration for Walker’s promise not to impose liquidated damages if the Project reached the stage that the centre could open by the 24th and subsequently the 31st March 1998.”

I do not regard the referee’s reference to the evidence of WCL’s witnesses in par 226 of the report as germane to his construction of the February agreement. As stated, I think the referee’s construction of the February agreement as a variation to the contract was correct.

I have not found it necessary to examine, further, WCL’s submissions on this issue. Estoppel Issue

Before the referee, CCG pressed an alternative case that WCL was estopped from denying that the contract was varied by the February agreement. In view of the referee’s construction of the February agreement as a variation of the contract, it was unnecessary for him to make any findings in relation to that issue. In par 260 of the report the referee acknowledged that.

However, in pars 260 - 269, the referee addressed the issue and concluded that WCL was estopped from denying that the contract was varied by the February agreement. The process by which the referee reached that view is challenged by WCL. I have not found it necessary to address that question, having regard to my concurrence with the referee’s finding that the February agreement was a variation of the contract. Waiver Issue

WCL relied upon a defence that the contract, being a deed, could only be amended by a deed and not orally, for example, as by the February agreement, and, further, that any such variation was ineffective by reason of the provisions of cl 1.09 of the contract. The issue was addressed by the referee in pars 227 and 228 of the report in the following terms: 227. Second , it was contended that the Agreement was signed as a deed. Accordingly at common law it could only be amended by a deed, not orally. Different to but associated with this defence was the third contention that any variation was ineffective because of the terms of clause 1.09 which provided: “The Agreement may not be modified except by deed signed by both parties. None of the terms and conditions of this Agreement shall be waived, discharged (except by performance thereof) or released either at law or in equity except with the prior written consent of Walker.” 228. Clause 1.09, in its first sentence, incorporates the common law position. It was accepted by the defendants that clause 1.09 itself could be waived and elsewhere I indicate reasons why that is so. If a contractual provision expresses the common law, and the contractual provision can be waived, it cannot be thought that the parties intended that the common law position would nonetheless apply even if the contractual provision was varied. That all formalities attending the 2nd March agreement, including any need to incorporate the amendment in a deed, was intended to be waived was plain from the evidence of Mr Walker which I have quoted, in particular his answer: “If Concretes wanted to formalise it we would have been happy to formalise it.” It falls ill from the mouth of WCL now to assert that the agreement fails for lack of formality. I reject both the second and third contentions.”

WCL challenged the finding in par 228. The referee’s distaste for WCL’s defence, presumably, stemmed from the referee’s findings in pars 194 to 198 of the report. It is also apparent from those paragraphs and from pars 94, 95 and 194 of the report that the referee was aware of the necessary consent of WCL’s financiers to a variation of the contract.

I think it is also clear from the findings of the referee in relation to the February agreement, to which I have previously referred, that the referee construed the February agreement as necessarily including a waiver of the common law provision as to variation of the deed as embodied in cl 1.09 of the contract, which the referee deemed also to have been waived by WCL.

In my view of the findings of the referee in relation to the February agreement, I think the referee’s conclusion was correct that WCL must be taken to have waived its entitlement to rely on the absence of a deed in relation to the variation of the contract by the February agreement.

The submissions of WCL in challenging par 228 of the report, in substance, rely upon the absence of any election or estoppel by WCL to support a waiver as found by the referee. I think those submissions misconceive the nature of the waiver inherent in the terms of the February agreement and the circumstances in which it was entered into by WCL.

The waiver as found by the referee was in the nature of the abandonment of the right to have the variation to the contract effected in the form of a deed. This concept of waiver as an abandonment, free from concepts of election and estoppel, was explained by Brennan J in The Commonwealth v Verwayen (1990) 170 CLR 394 at 421-423 as follows: “Election, estoppel and waiver are cognate concepts: each relates to the sterilization of a legal right otherwise than by contract. A "right" may include a liberty or an immunity, according to the circumstances. In Sargent v. A.S.L. Developments Ltd . (1974) 131 CLR 634 Mason J. said (at p 655): " Any discussion of the principles governing the circumstances in which a party's words or conduct may preclude him from exercising a legal right which he possesses is beset with difficulties. They have their origin in the differences to be found in the various doctrines (election, waiver and estoppel) which may come into operation and in the differing concepts which each doctrine has at times been thought to embrace." Election consists in a choice between rights which the person making the election knows he possesses and which are alternative and inconsistent rights: Evans v. Bartlam (1937) 2 All ER 646, at pp 652,653; Tropical Traders Ltd. v. Goonan (1964) 111 CLR 41 at p 55; Kammins Co. v. Zenith Investments (1971) AC 850 at p 883. A doctrine closely related to election, and sometimes treated as a species of election, is the doctrine of approbation and reprobation. This doctrine precludes a person who has exercised a right from exercising another right which is alternative to and inconsistent with the right he exercised as, for example, where a person "having accepted a benefit given him by a judgment, cannot allege the invalidity of the judgment which conferred the benefit": Evans v. Bartlam , per Lord Russell of Killowen at p 652. An election is binding on the party who makes it once it is made overtly - or, at all events, not later than on the communication of the election to the party or parties affected thereby: Newbon v. City Mutual Life Assurance Society Ltd . (1935) 52 CLR 723 at p 733; Scarf v. Jardine (1882) 7 App Cas 345 at pp 360-361. It is binding whether or not others who are affected by the election have acted in reliance on it. In this respect, election is to be distinguished from estoppel: Khoury v. Government Insurance Office (N.S.W.) (1984) 165 CLR 622 at p 633. Estoppel by representation of a fact (estoppel in pais) precludes a party who, by his representation, has induced another party to adopt or accept the fact and thereby to act to the other party's detriment from asserting a right inconsistent with the fact on which the other party acted: Thompson v. Palmer (1933) 49 CLR 507; Grundt v. Great Boulder Pty. Gold Mines Ltd . (1937) 59 CLR 641. Equitable estoppel or, as I prefer to call it, an equity arising by estoppel precludes a person who, by a promise, has induced another party to rely on the promise and thereby to act to his detriment from resiling from the promise without avoiding the detriment: Waltons Stores (Interstate) Ltd. v. Maher (1988) 164 CLR 387 at p 427. An equity of this kind, by imposing a liability either to avoid detriment to the other party or to honour the promise, trenches upon the liberties or immunities of the person who is bound. An estoppel, whether in pais or arising in equity, is binding so soon as it is acted on to the detriment of the other party. 8. Waiver is a term of shifting meaning. Lord Wright in Smyth and Co. v. Bailey and Co. (1940) 3 All ER 60 said (at p 70): " The word 'waiver' is a vague term used in many senses. (Stroud's Judicial Dictionary lists at least 13.) It is always necessary to ascertain in what sense and with what restrictions it is used in any particular case. It is sometimes used in the sense of election as where a person decides between two mutually exclusive rights. Thus, in the old phrase, he claims in assumpsit and waives the tort. It is also used where a party expressly or impliedly gives up a right to enforce a condition or rely on a right to rescind a contract, or prevents performance, or announces that he will refuse performance, or loses an equitable right by laches." To identify the relevant legal doctrine, it is necessary to identify the sense in which we intend to use the term "waiver". In this case, there is no contract to admit liability (a proposition considered in Newton, Bellamy and Wolfe v. S.G.I.O. (1986) 1 Qd R 431) and we can put aside until we consider estoppel the kind of waiver which depends on the suffering of detriment by a person who relies on the waiver. We are concerned here with a unilateral release or abandonment of a right. In Banning v. Wright (1972) 1 WLR 972 at pp 978-979; (1972) 2 All ER 987 at p 998, Lord Hailsham of St Marylebone L.C. pointed out that "waiver" is derived from the same root as the word "waif" - a thing, or person, abandoned. Lord Hailsham, after citing the speech of Lord Wright (supra), continued: "In my view, the primary meaning of the word 'waiver' in legal parlance is the abandonment of a right in such a way that the other party is entitled to plead the abandonment by way of confession and avoidance if the right is thereafter asserted." In accord, see Halsbury's Laws of England , 4th ed. (1976), vol.16, par 1471. His Lordship must not be taken to be saying that waiver necessarily occurs before pleadings are closed. Clearly enough, rights are frequently waived during a trial. What his Lordship is saying is that a right which is susceptible of waiver can be "confessed" by a party against whom it might prima facie be exercisable but that party's liability can be "avoided" by showing that the right has been abandoned. In other words, upon waiver, the party waiving the right ceases to be able thereafter to assert it effectively. When a right has been waived in the sense defined by Lord Hailsham (and it is in this sense that it is used in this judgment), it is unnecessary to consider whether any other party has acted in reliance on the release or abandonment: the right is abandoned once and for all. These distinct doctrines serve different purposes: election (in either species) ensures that there is no inconsistency in the enforcement of a person's rights; estoppel or equitable estoppel ensures that a party who acts in reliance on what another has represented or promised suffers no unjust detriment thereby; waiver recognizes the unilateral divestiture of certain rights.”

An alternative way of expressing WCL’s conduct would be to view the waiver as a necessary implication in the terms of the February agreement.

I also take the view that, on the findings of the referee, it was open to him to have found that WCL was estopped from relying upon a right to have the contract varied by deed. In particular, the referee found that CCG had accelerated the works under the February agreement and had permitted access to WCL and the public to the shopping centre, clearly to CCG’s detriment if it was not to have the benefit of the February agreement (see Waltons Stores (Interstate) Ltd v Maher (1987-88) 164 CLR 387 at 432, 446, 464).

There was ample evidence of reliance by CCG on WCL’s representation and promises (pars 254, 255 of the report).

Further, in taking the benefit of the February agreement WCL may be taken to have approbated the varied contract ( Verwayen at 421). Validity of Termination

By its defence WCL also contended that CCG’s purported termination of the contract was ineffective by reason of its failure to comply with cl 13.05 of the contract. That issue arose as a result of the referee raising the question during the course of the reference. The section of the report dealing with this issue is to be found in pars 175 to 198.

The principal submission of WCL was that the referee erred in finding that cll 13.05 and 13.06 of the contract did not contain an exclusive code for termination, WCL relying upon the authorities of Amann Aviation Pty Ltd v Commonwealth of Australia (1990) 22 FCR 527 and Roadshow Entertainment Pty Ltd v ACN 053006269 Pty Ltd (1997) 42 NSWLR 462.

The referee considered Amann but not Roadshow, in the latter instance, for the reason that it was not cited in argument before him.

The question is one of construction and, in this respect, Roadshow is of little assistance, in so far as the court’s expression as to the construction of the termination clause in the subject contract did not form part of the ratio decidendi. The ultimate decision in Roadshow turned on the finding that the plaintiff was entitled to withhold payments otherwise payable under the subject contract by reason of its entitlement to an equitable set off : hence, avoiding the need to consider its purported termination of that contract.

The following passage in Roadshow relied upon by WCL formed part of the court’s consideration whether time was of the essence in relation to Roadshow’s obligation to make the disputed payments under the contract: “The agreement was not a contract for the sale of goods but was analogous to such a contract. Unless a contrary intention appears, stipulations as to time for payment in contracts for the sale of goods are not of the essence of the contract … In our judgment the words “no later than”, and the relationship between the parties, do not displace the prima facie rule that stipulations as to time for payment are not of the essence in contracts such as this. In any event, cl 9.1 must be evaluated in its context. Clause 15.1 which deals with the effect of breaches or defaults provides: “In the event of either or both of the Principals on the one hand and the Distributor on the other hand being in breach or default of any provision of this Agreement , this Agreement may be terminated by notice in writing from the Principals (if neither of the Principals is the party in breach or default) or from the Distributor (if either of the Principals shall be the party in breach or default) requiring that the breach or default be remedied and if that breach or default is not remedied within thirty (30) days after receipt of such notice by the party or parties in default, the party or parties giving the notice may, by further notice in writing to the party or parties in default, terminate this Agreement forthwith.” (Emphasis supplied.) … The terms of cl 15.1 make it clear that the parties did not intend that an immediate right of rescission would arise on a breach of cl 9.1. A right to terminate for breach after notice excludes any right to terminate without notice, and the continuing failure to remedy any breach did not involve further breaches: see Larking v Great Western (Nepean) Gravel Ltd (In Liq ) (1940) 64 CLR 221 at 235-238, per Dixon J. The application of these principles leads to the conclusion that the time stipulation in cl 9.1 was not essential, and Roadshow's assumed breaches on 31 October and 30 November did not confer on CEL/Vision an immediate right to rescind.” (at 477-479)

Apart from the fact that this construction of the termination clause was not essential to the judgment, I do not think that it can be seriously contended that the decision is authority for the proposition that any provision of a right to terminate for breach after notice “excludes any right to terminate without notice”.

In Roadshow the court regarded the termination clause, on the proper construction of a contract analogous to a contract for the sale of goods, as excluding the right to terminate without notice. However, the reasoning of the court by which it reached that construction of the subject termination clause is not expressed in the judgment beyond the passage I have quoted.

I think the approach to construction of the termination clause adopted by the court in Roadshow should be viewed in the context in which the termination clause was considered, namely that time was not of the essence in relation to the obligation of Roadshow to make payments under the subject contract. Viewed in that way, it is not surprising that the court would have regarded the termination clause as precluding a right to rescind, without notice under the termination clause, on the basis of Roadshow’s non-payment in a contract “analogous” to a contract for the sale of goods.

In Amann the judge at first instance held that the termination clause exhaustively regulated the Commonwealth’s right to terminate the subject agreement. In that case, the Commonwealth had purported to terminate without notice for alleged repudiation of that agreement. While on appeal it was found that Amann had not been guilty of repudiation of the agreement, Davies J (at 532) agreed with the trial judge’s construction of the termination clause. Since there had been no repudiation of the agreement by Amann, termination could only have been effected by notice under the termination clause. Sheppard J agreed with the reasons and conclusions of Davies J (at 540). Burchett J, although differing from the trial judge as to the ambit of the termination clause, nevertheless was of the view that it should be construed as “regulating comprehensively the Commonwealth’s right to terminate the agreement for breach …” (at 555). Burchett J further held that the conduct of Amann did not amount to repudiation and upon his construction of the termination clause, that clause would not have permitted the Commonwealth to have terminated the agreement.

In Amann the termination clause was part of a comparatively complex web of provisions dealing with inter alia, liquidated damages, default, termination and “Break Clauses”: the last mentioned being a provision entitling the Commonwealth on notice to cancel the agreement and for the payment of compensation to Amann “in respect of the loss or damage sustained … by reason of such cancellation.” The default provision (cl 2.23) provided for payment to the Commonwealth of expenses in having the subject defaults made good. It was significant in the default clause that it had a saving provision, namely, that it was “without prejudice to any other remedy” of the Commonwealth in relation to the subject default. The termination clause had no such saving provision and it was of a very special kind, as appears from the following: “ 2.24 TERMINATION Whenever and so often as the Contractor fails to carry out the Contract or comply with a condition of the Contract to the satisfaction of the Secretary then in either of these events the Secretary may, by notice in writing, require the Contractor to show cause in writing to the satisfaction of the Secretary, why the Contract or any specified portion thereof should not be cancelled. If the Contractor fails to show cause in writing, as so required, the Secretary shall be entitled to treat the Contract or any specified portion thereof as having been cancelled and may declare the whole or any part of the security lodged by the Contractor forfeited to the Commonwealth, and thereupon the amount so declared to be forfeited shall become the property of the Commonwealth absolutely. The Commonwealth shall, in addition, be entitled to recover from the Contractor any damages, losses costs and expenses which the Commonwealth may sustain, or incur in consequence of such cancellation of the Contract or portion thereof as the case may be. A certificate by the Secretary stating the amount of any damages, losses, costs and expenses sustained or incurred by the Commonwealth in consequence of the cancellation of the Contract or portion thereof shall be conclusive evidence of the matter stated.” (at 552)

Burchett J also gained comfort for his construction of the clause from the following: “There are also considerations, on which his Honour did not rely, to support the proposition that cl 2.24 does exhaustively govern termination of the contract for breach by the contractor. The words "fails to carry out the Contract or comply with a condition of the Contract" (though the measure, at least in the latter case, is the satisfaction of the Secretary) seem to cover both repudiation of the whole contract and also breach of a term breach of which entitles the Commonwealth to rescind. The verb "carry out" and the unqualified reference to "the Contract" suggest that the one alternative relates to performance of the entirety of the contract, while the reference to compliance with a condition is quite apt to refer to the classical mode of breaching a contract so as to entitle the other party to rescind it for breach.” (at 553)

In my view, the nature of the subject agreement in Amann and the web of provisions surrounding its termination clause are significant distinguishing features from the provisions of the contract calling for construction in this case.

WCL also sought support for its position from Switz Pty Ltd v Globind Pty Ltd (2000) 33 ACSR 723 at 737, pars 69 -73, and Huskisson RSL Sub-branch Club Ltd v Sullivan (1990) 20 NSWLR 332 at 246. In my view, neither of the passages relied upon assist WCL’s construction of the termination provisions.

Switz was concerned with statutory construction and, in the passages cited, Spigelman CJ cited with approval cases explaining the application of the principle expressu facit cessare tacitum in statutory construction. Huskisson was to like effect, each authority referring to the passage in Dixon J’s judgment in R v Wallis; ex parte Employers Association of Wool Selling brokers (1949) 78 CLR 529 at 549-550.

In my view, the termination provisions of the contract are not ones upon which that rule of construction has any operation.

In the case of contractor’s default under the contract, cl 13.01 entitles WCL’s Administration Manager to give written notice to the contractor of WCL’s intention to “determine the engagement of the Contractor …” for specified events, namely, the contractor’s suspension of progress; failing to proceed with due diligence or in a competent manner; failing to commence the project without reasonable cause; failing to comply with the Administration Manager’s instructions or committing “any other breach of the provisions of the “contract”, being a substantial breach. Failure to comply with the Administration Manager’s notice entitled WCL “without prejudice to any other rights or remedies” to determine the employment of CCG (cl 13.02).

Clause 13.03 concerned the contractor’s insolvency and cl 13.04 set out the consequences of determination of CCG’s employment under cll 13.02 and 13.03.

It is clear from those provisions that the contract itself was not determined by WCL’s exercise of power to determine CCG’s employment. In contrast, cl 13.05 entitled CCG to give notice of intention to “determine” the contract for “substantial breach of any provisions” of the contract by WCL. Clause 13.06 entitled CCG to determine the contract in the event that WCL’s breach was not remedied. Those clauses are set out in par 279 of the report. The consequences of the contractors determination of the contract was set out in cl 13.07, the terms of which may be found in par 280 of the report.

In substance, I am in agreement with the reasoning of the referee and in his construction of the termination clause of the contract. The referee does not deal expressly with the reasoning of the court in Amann in the report. However, argument in the reference concerning Amann was in evidence before me and it is apparent, that the referee saw features in the construction of the termination clause in Amann which distingiush it from the default provisions of the contract.

My principal point of departure from the reasoning of the referee lies in his adoption of a presumption against an exclusive regime in default provisions of construction agreements. I have preferred not to express that view, essentially, because I think the correct construction of the termination clause, without recourse to such a presumption, is that it is not an exclusive regime. However, it is important, in my view, to recognise that the nature of the contract is significantly different from the nature of the agreements considered in Roadshow and Amann.

I think the reasoning of the referee in pars 284, 287 save for the adoption of the presumption, 289, again save for the presumption, 290, 292, 293, and 294 is correct and justifies the construction that the termination provisions were not an exclusive code such as to deny CCG the right to terminate for repudiation without notice.

Moreover, I have some considerable difficulty in seeing how the termination clause has any application to conduct, examined later in these reasons, which amounted to a total disregard by WCL of its obligations to CCG under the varied contract. In general terms, WCL’s conduct may be characterised as repudiating its obligations in relation to the certification processes under the contract with the objective of preventing certification of practical completion, with the serious consequences to CCG flowing from that interference. Compliance with dispute resolution provisions of contract

The defences raised by WCL based upon CCG’s failure to have recourse to the termination provisions and the dispute resolution provisions (cl 14) of the contract were raised before the referee by way of amendment to the defence. Both applications for leave to amend were opposed unsuccessfully by CCG.

In relation to those amendments, CCG replied with a case of waiver, estoppel or election which precluded WCL from relying upon such defences. Those reply issues did not have to be considered by the referee in relation to the defence based upon the termination provisions of the contract, by reason of the referee’s construction of the contract.

The referee found that WCL was precluded from relying upon cl 14. I think the findings of the referee in relation to that issue are unassailable (par 297).

CCG contended, in the submissions for the adoption of the report, that I should also find that WCL is precluded from relying upon cl 13. As it happens, there is no need to consider the question, having regard to my adoption, in substance, of the referee’s report as to the proper construction of the termination provisions of the contract. However, in my view, there was evidence before the referee, which is not in dispute, upon which a finding of waiver of reliance upon cl 13 could be made. Repudiation The referee’s findings in relation to WCL’s (a) resort to the liquidated damages provisions of the contract; (b) interference with the certifying role of the Administration Manager ; and (c) requiring a standard of defect-free practical completion

Earlier in these reasons I set out the four elements of WCL’s conduct as found by the referee, each of which, alone, and “especially in conjunction with each other” in the referee’s opinion, constituted repudiatory conduct. It was in that context that I observed that WCL was presented with a considerable task where one is concerned with a finding of repudiation of a technical construction contract which requires an understanding of the materiality of the alleged breach. I made that observation in the context of the referee’s insight into the commercial and technical subject matter of the contract resulting from his considerable expertise in the field.

The applicable repudiation principles are dealt with by the referee at pars 383 and 384 and I do not understand there to be any dispute about that matter.

The referee’s finding of repudiation in par 300 of the report based upon WCL’s resort to the liquidated damages provisions of the contract as varied by the February agreement is best examined by looking at the wider conduct of WCL between March and June 1998. That is so, because that breach by WCL, as found by the referee, may be seen as part of a strategy adopted by WCL in relation to the administration of the contract during that period.

One starts with the proposition expressed in par 50 of the report that the “contractual date for Practical Completion [is an] important background factor never to be overlooked.” The referee summarised that aspect of the contract in par 304 of the report as follows: “304. The issue of whether there was imposed a requirement for the achievement of Practical Completion different to, or additional to, that required by the Agreement is a matter of obvious importance to the contractor. That is because the achievement of Practical Completion as defined in the Agreement was the trigger for the payment of the last $10 million of the contract sum, was the terminating date for the imposition of any liquidated damages, was the trigger for the release of undertakings and performance bonds, and was the date for commencement of the Defects Liability Period, on the expiration of which the remaining bank undertaking is released. Thus imposition of a requirement for the achievement of Practical Completion additional to that required by the Contract rendering the achievement of Practical Completion more difficult goes to the heart of the contractor’s capacity to conclude the works under the construction contract, to receive significant monetary sums and to be released from major financial obligations.”

The importance of that contractual element was expressed in the evidence of Delahunty, which the referee accepted, as quoted in pars 305 and 306 of the report in the following terms: “305. …. At no time during the construction of the Works up until Centre opening on 31 March 1998 did anyone from WCL or Baker & McKenzie say that “practical completion” in the Building Contract required that the works be entirely complete, free from any omissions and free from any defects. I would not knowingly have agreed to Practical Completion requiring that the project be complete in all regards and defect free. That is particularly so in circumstances where the last $10 million payable to CCG and return of three unconditional Bank Guarantees depended on the achievement of Practical Completion. Nor would I have knowingly agreed a date for Practical Completion of 17 March 1998 if Practical Completion required that the works be complete in all respects and defect free at Practical Completion.” 306. He further said: “ Had anyone from WCL communicated to me at any time prior to CCG handing over possession of the site to WCL for opening of the Centre handover [sic] on 31 March 1998, that WCL intended to administer the Contract on the basis that Practical Completion required that the works be complete in all respects and entirely free from defects I would not have allowed Walker Corporation Ltd to go into possession of the Shopping Centre on 31 March and to open the Shopping Centre for trading. Rather, I would have retained the possession of the site which CCG had up until 31 March 1998 so that CCG could have completed the incomplete and defective work then present in the shortest possible time and been paid the last $10 million due under the Contract and had its three Bank Guarantees returned.”

As at March 1998, the contract date for practical completion was 17 March 1998 - no extensions of time having been granted, although there had been an undisputed variation, known as the Hoyts variation, and a conditional agreement for the payment to CCG of an acceleration compensation in relation to that variation. Issues concerning the Hoyts variations are examined later in these reasons.

Paragraphs 52 to 54 of the report contain a succinct description of the achievement by CCG of the contractual dates for substantial completion and hand-over of the supermarket section of the project and of the nature of the works being performed on the cinemas and specialty shops in the first two months of 1998.

Aspects of particular importance to CCG in achieving practical completion under the contract were outlined by the referee in pars 57 to 60 of the report, adverting, in particular, to the dependence on practical completion of final payment to CCG of $10,000,000, the release of substantial performance security bonds and avoidance of liquidated damages.

The importance to WCL of the opening of the shopping centre in terms of its commitment to financiers for the project and the obtaining of a cash flow was referred to in pars 61-66 of the report, in which it was noted that full rental payments by tenants in the shopping centre depended upon up to 80% of the specialty shops having commenced trading.

That was the commercial background to the events which culminated in the February agreement in terms as set out in par 224 of the report and which have been examined earlier in these reasons.

I think the most revealing findings of the referee on the repudiation issues are to be found in those dealing with the issue of WCL’s alleged insistence on a defect-free state of the works to achieve practical completion within the meaning of the contract and the role played in that conduct, in particular, by Lawes and WCL’s solicitors at the time.

It is of particular significance that the reference was conducted on the basis of a concession on behalf of WCL that defect-free practical completion did not accord with the contractual requirement for practical completion. The referee dealt at length with that concession in pars 309-325 of the report.

The referee summarised the powers of Lawes as Administration Manager under the contract, as follows: “418. … (a) certifying Practical Completion: clause 1.05.09; (b) issuing 5.04.01 notice: clause 5.04.01; (c) valuation of variations: clause 9.03.02; (d) considering extensions of time due to variations: clause 9.05; (e) considering extensions of time due to delays (other than variations): Clause 10 (f) specifying matters required to be done for the granting of Practical Completion: clause 10.09 (g) certifying Progress Claims, including any deduction for liquidated damages : clause 11.10.01 (h) giving notice of the date when, in the Administration Manager’s opinion, the Project ought reasonably to have been brought to Practical Completion: clause 11.10.01”

The referee’s analysis of the legal principles application to the exercise of powers of an Administration Manager under a construction contract was expressed by the referee (pars 398-420) in terms which, I think, should be adopted.

The referee recorded the agreement of the parties on one aspect of the matter as follows: “413. I turn now to the terms to be implied regarding the obligations of the first defendant, Mr Lawes’ employer. The defendants have accepted that there should be implied a negative term that the parties, including WCL, “would not do anything that would prevent the Administration Manager from a proper discharge of the mandate which contractually they had granted him”, and a positive term that “the employer should ensure that the Administration Manager performs his duties when exercising certifying functions in accordance with his mandate.”

The referee’s principal findings of the nature of the Administration Manager’s obligations are found in pars 408 and 409 as follows: “408. I respectfully adopt the expressions of opinion in the passages quoted from the judgments by the Court of Appeal of New Zealand in Hatrick and Canterbury Pipe Lines Ltd . They do not, I think, conflict with anything written by Macfarlan J, in Perini Corporation which rather addressed the nature of contractual terms to be implied in a contract between a proprietor and a contractor. As the defendant’s submissions make plain, from Perini is to be drawn the obligations of an administration manager acting as a certifier to act “independently”, “fairly and justly and with skill to both parties to the contract”, and that his “overriding duty …is to give his own decision having regard to the rights and interests of the parties…such rights and interests being measured both by the rights and obligations of each party as it appears from all the provisions of the contract.” 409. It must follow if a certifier is obliged to act “honestly”, “independently”, “fairly” and “impartially”, that in exercising his functions as certifier he must act without partiality or bias. There is no authority of which I am aware which suggests the contrary. The defendants have relied upon a passage in the judgment of Macfarlan, J in Perini to suggest the contrary. That passage states: “The essence of such a relationship in my opinion is that the parties by the contract have agreed that this officer shall hold these dual functions and they have agreed to accept his opinion or certificate on the matters which he is required to decide. It has also been said, and in my opinion correctly said, that the agreement of the parties is that they have referred the decision of these matters to a person who by reason of his employment and who by reasons of his other duties in supervising the execution of the contract is a person who has both bias and partiality. It is now in my opinion too late to hold that an appointment of this kind is not one for which the parties to a contract cannot provide. I have reached the conclusion that although the Director of Works as an officer of the Commonwealth may well have been the servant of the Commonwealth, the general nature of the duties imposed upon him by cl.35 was such that at the same time he fulfilled this biased and partial role of a certifier when he was required to consider an application by the plaintiff for an extension of that completion date. This conclusion is quite unaffected by the consideration that in relation to other provisions of this agreement, (cf. cl.21) the Director of Works was acting in a purely administrative role and only as an officer and servant of the Commonwealth.”

The referee’s findings as to the conduct of WCL in the period between mid-March and June 1998 justify a conclusion, if those findings are adopted, that WCL interfered with Lawes’ performance of his function as Administration Manager under the contract to a point where he ceased to act independently, and where he lent his name to decisions of contractual importance which he knew were unreasonable and did not accord with his understanding of the contract.

Included in that conduct was the imposition by WCL of a ‘defect-free’ standard of completion before practical completion could be achieved under the contract, together with a resort by WCL to the liquidated damages provisions of the contract. Lawes considered the ‘defect-free’ standard to be impossible of satisfaction and regarded the resort to the liquidated damages provisions to be unreasonable, yet he lent his name to directions and notices under the contract, based upon those erroneous interpretations of the contract.

I think the starting point of an examination of WCL’s conduct in this period, as found by the referee, is the file note of a consultant to WCL’s financiers of 12 March 1998, the relevant portion of which is repeated for ease of reference: “Walkers to ask Tim Reed of Baker McKenzie re advice · Conseq impact of occupation -last $10m withheld until 10 days after PC · Walker don’t want to issue PC until as late as poss. CCG lost money - so pressure to drop job after PC.”

The referee clearly regarded this file note as having more than passing interest in evaluating whether WCL or Lawes reasonably held the view that defect-free completion was required of CCG before practical completion could be achieved under the contract. That much is evident from the following paragraphs of the report: “357. Before addressing the relevant legal principles, two factual issues need to be considered. The first is the position of Mr Reed, the partner giving legal advice to WCL from mid March 1998, and the second the position of Mr Lawes regarding that advice. It is necessary to refer to some matters preceding the giving of the advice. 358. Mr Reed’s involvement in issues relating to Practical Completion and liquidated damages commenced, so far as the documentary material discloses, on the 11th of March 1998 when Mr McGilvery’s diary note indicates a meeting concerning Practical Completion. Mr Armour’s notes of 12 March 1998 indicate that Mr Reed’s advice was to be sought by WCL regarding: “• conseq impact of occupation - last $10 M withheld until 10 days after PC • Walker don’t want to issue PC until as late as poss.” One does not know what Mr Reed’s instructions were, if any, regarding WCL’s intentions or desires, or those of its financiers, in relation to occupation, Practical Completion, liquidated damages, and the relationship between those three matters, except that WCL wished to occupy the premises to permit opening of the shopping centre on 31 March 1998. 359. What is known is that in relation to these aspects he drafted five letters which Mr Lawes signed. I will come to those letters. 360. On the 18th March 1998 there was a meeting attended by Mr Lionel Cruise, Mr McGilvery, Mr Hendry, Mr Reed, Mr Armour and Mr Slender. Mr Cruise was a senior representative of BT Management Services Pty Limited or Bankers Trust Australia Limited, Walker’s financiers. Mr McGilvery was, subject to Mr Walker’s overriding position, the senior Walker representative, concerned with the project. Mr Hendry was a Walker Corporation representative, presently being the Executive Manager, Contracts and Administration. Although his statement states that “on 16 April 1998 I became involved in the Broadway project on Walker’s behalf” assisting Mr Lawes and the project team with a backlog of paperwork and correspondence, it is plain that he had an involvement from at least 18 March. From early May 1998 he took a major role in contract administration. Mr Reed was WCL’s solicitor. Mr Armour and Mr Slender were representatives of Farrell Management Pty Ltd, who were overseeing the Project on behalf of the financiers, and reporting to them. 361. Only Mr McGilvery and Mr Hendry gave evidence. Neither gave evidence regarding the purpose of the meeting, or its substance. At various times I was informed that Mr Reed was to give evidence and statements from him were being prepared. Ultimately I was informed of a considered decision not to call him. There are however two diary entries regarding the meeting. It is to be noted that the meeting occurred on the day after the contractual date for Practical Completion.”

The referee examined the administration of the contract, with particular reference to Lawes’ role as Administration Manager during the following periods: “(a) prior to 9 April 1998, the date Mr Lawes went on holidays; (b) 9 to 18 April 1998, being the period when Mr Lawes was on holidays; (c) 19 April 1998 to 4 May 1998, being the period after Mr Lawes returned from holidays and before a management re-structure; and (d) after 4 May 1998, being the post management re-structure period.” (par 423 of the report)

The first of the letters drafted by WCL’s solicitor (Reed) for Lawes to sign was that of 20 March 1998. “As you are aware the Project has not yet reached Practical Completion. In my opinion the Project should reasonably have been brought to Practical Completion by 17 March 1998 and I look forward to your co-operation to achieve the earliest possible completion. It would assist me in managing outstanding issues if you would advise the date when you anticipate you will receive Practical Completion of the Project”. (par 96-97 of the report)

There was ample evidence before the referee entitling him to find that Lawes did not agree with the contents of that letter and that he signed it on instructions (see pars 365 to 368 of the report).

The next letter drafted for him was one of 26 March 1998 which included the following: “We appreciate your stated commitment to achieving the earliest possible completion and assume that you still anticipate achieving Practical Completion by 31 March 1998, as stated in your Notice of Date of Practical Completion pursuant to clause 10.09 of the Contract dated 20 March 1998. We have relied upon that Notice in confirming arrangements (including with tenants) for the anticipated opening of the Shopping Centre and have incurred significant costs and expenses in making necessary arrangement for opening on the advised date.” (par 371 of the report )

The referee described the letter as “a legal stratagem endeavouring to found a misrepresentation case and noted that Lawes regarded the second of those two paragraphs as “nonsense” (par 371), there being “no factual basis at all for the statement”. The letter, in my view was aptly described by the referee.

Of the 20 March letter, the referee made the following findings: “426. This was an important letter purporting to express the view of the Administration Manager. It was the first step towards the imposition of liquidated damages, although Mr Lawes did not know that. It was a letter insisted upon by WCL’s financiers and WCL, and was drafted by their lawyers. It was a communication to the contractor expressing a statement of opinion of the Administration Manager with which opinion in truth the Administration Manager did not agree. … 428. In my view the evidence establishes that the letter of the 20th March was not the independent exercise of the mind of the Administration Manager. The letter was drafted by WCL’s solicitors at the behest of WCL’s financiers and Mr Lawes was informed by Messrs McGilvery and Hendry that the letter was to be sent, and he signed and sent it because he believed it was his job as an employee of Walker to do so, he being under the wrong impression at that time that that was his duty even though he was exercising the independent role of certifier as Administration Manager. I reject any view that Mr Lawes bought an independent mind to a consideration of either the accuracy of the substance of the letter or the appropriateness of it being sent, after considering submissions or explanations put to him by WCL or WCL’s solicitors. If he had received such submissions, for the reasons previously given, he would have been obliged to received (sic) contrary submissions from the contractor. But the reality is he neither received submissions nor independently considered whether the letter should be sent: he simply did as he was told by his employer, its financiers and its lawyers. In that fashion his independence was compromised, and the compromise was bought about by the pressure from his employer. Mr Lawes specifically agreed that was so: “Q: This letter, because of the circumstances in which it came into existence, did not represent the exercise of you (sic) independent judgement, did it? A: No.”

It is apparent from the evidence relied upon by the referee that it was open to him to make those findings.

Of the Reed drafted letter of 26 March, the referee regarded it as an “instance of …Lawes being pressured to sign a letter with which he did not agree at the behest of his employers or their lawyers”. It was open to the referee to reach such a finding on the evidence cited and accepted by him.

Par 246 of the report, quoted above, is a good example of the interweaving of the interference by WCL in the performance by Lawes of his function as Administration Manager and of the resort by WCL to the liquidated damages provision of the contract.

In respect of the first period the referee found that WCL “interfered with the exercise by the Administration Manager of his independent functions as certifier …” (par 430). For the reasons stated, I think that conclusion was open to the referee on the evidence.

In the second period selected by the referee, two letters were sent to CCG, dated respectively 14 and 16 April which had been drafted by Reed for the Administration Manager. The first contained the statement that “the Contract Agreement requires that any defects and omissions in all premises…must be rectified prior to Practical Completion…” (emphasis added). The second letter was in the following terms: “16th April 1998 … Broadway Shopping Centre Application for Issue of Notice of Practical Completion We refer to your letter dated 31 March 1998 stating that in the opinion of the Contractor the Project has reached Practical Completion. The Project has not reached Practical Completion and, accordingly, pursuant to clause 10.09.02(b) of the Contract Agreement, we hereby issue to you notice of matters and things required to be done before the Project shall reach Practical Completion. The matters and things which are required to be done are described in the Schedules to this notice which forms part of this notice. We note that the schedules include a number of items which were identified as having been attached to your letter dated 31 March 1998 but were not provided with that letter. Your careful attention is requested to the accuracy of any further notice under clause 10.09.03 of the Contract Agreement. As the Date for Practical Completion has now passed without Practical Completion of the Project having been achieved, you are directed to attend to the matters and things referred to in this notice with due diligence and expedition in order to achieve Practical Completion at the earliest possible time after the date of this notice.” ( par 431 of the report)

The schedules, there referred to, comprised some one hundred and ninety six pages and contained several thousand items.

The referee’s findings in relation to the content of those letters and the circumstances in which they were forwarded to CCG are set out in pars 432 to 434.

It is not without significance in the context of the referee’s findings in pars 432 to 434 of the report that, during this period of Lawes’ absence from the project the referee found that “there was a series of other letters signed… by Saba, each letter having been drafted by WCL’s solicitors” dealing with contractual entitlements and requirements. The referee made the following finding in relation to those letters: “The sending of these letters, all drafted by the solicitors, over the name of Mr Lawes but signed by others, Mr Lawes being on holidays and having no input into them, are indicative of the scope to which the functions of Administration Manager had been removed from the personal determination of Mr Lawes and placed in the hands of WCL’s solicitors, although to some extent they reflected Mr Lawes’ instruction to “bat back over the line” certain requests for extensions of time”. (par 435 of the report )

The referee concluded that “during the second period, WCL, through its solicitors assumed the role of Administration Manager during the absence of Lawes on holidays”.

Although it is not my function to redetermine the issue, I think it would be difficult to reach a conclusion contrary to that of the referee based on the extent of the involvement of Reed and the sending of letters under the name of the Administration Manager who was absent from the site on holidays. That conclusion was fortified by what took place in the third period.

As was the case in respect of the first period, the evidence and the findings of the referee in respect of the second period illustrate the intertwining of strands in the conduct of WCL which are the subject of adverse findings by the referee: in this case, the extent of WCL’s interference with the functions of the Administration Manager and the attempted imposition of a defect-free standard of practical completion. The absurdity of the contents of the 16 April letter lies in the volume of claimed defects and the inclusion within them of defects of the most trivial kind.

The third period was marked by Lawes removal from the project site to take up the position of “Manager, Residential Development” at WCL’s Botany office. Significantly, of the ensuing period, the referee had the evidence of Lawes that “From about this point on I don’t initiate much at all” (par 438). Not particularly surprising when the evidence disclosed that shortly after his return from holidays, a “Project Team Management Plan” was implemented from 4 May 1998, the commencement of the fourth period considered by the referee, and which was described by the referee, along with the effect of its implementation, in the following terms: “ The Fourth Period 450. I have previously referred to the evidence of Mr Lawes regarding him being “prompted to put in train the new regime of early May.” A new “Project Team Management Plan” was implemented from 4 May 1998. It provided that: “The overall day to day management of the Broadway Shopping Centre will be by Neil Johnson, with input from Gary McGilvery and Kirk Lawes as required”. It divided work into four categories, the first of which was “Legals/Practical Completion/Contract-Mark Hendry/Daryl O’Brien”. The Plan stated: “All legal issues, Practical Completion and the finalisation of Concrete Constructions Group (CCGL) contract will be dealt with by Mark Hendry and Daryl O’Brien. Issues resulting in works being taken over by Walker Corporation will be identified to Neil Johnston with all legal correspondence in place. Duties will include: • Assessment of Progress Claims by CCGL. • Assessment and approval of all outstanding variations including tenancy variations. • Co-ordination and response to CCGL in regards to Legal issues.ie.EOT claims, variation requests etc • Review of Practical Completion prerequisites and issuing of PC Notice. • A summary of outstanding PC issues and variations to be issued weekly. • Liaising with Bankers Trust/Farrell Management for any outstanding issues.” That evidence was accepted by the referee and is not challenged by WCL.

The referee found as follows: "451. I am satisfied that, in reality, from this point onwards, although Mr Lawes signed letters as Administration Manager, he ceased to exercise any true independent approach to the functions of Administration Manager. The reality was that that function was carried out by Mr Hendry who had from March or April been appointed to this Project, and who became responsible for contract administration, and, indeed, the litigation which has followed. The solicitors for Walkers continued to play a major part, drafting most important letters.”

I would add that the mere removal of Lawes from the project site, the taking over of project management by the “Project Team Management”, the conferring on Lawes of the duties of “Manager, Residential Development’ at Botany and the active role of Reed in the administration of the contract would, in my view, be sufficient to justify the referee’s findings in relation to the stripping of Lawes’ independence as Administration Manager.

However, the referee had more evidence to support his findings from the evidence of Lawes (see eg pars 438-440, 443, 445, 452-455 covering the third and fourth periods).

In relation to the third period the referee made the following findings: “449. In my opinion the evidences [sic] establishes in relation to the instances to which I have referred that in the third period certain functions of the Administration Manager were exercised by other employees of WCL, although Mr Lawes was available to exercise those functions, and in the instances where he signed the section 5.04 notices, this was done as a result of those notices being instituted by others in the Walker organisation being senior to Mr Lawes, prepared by WCL’s lawyers and forwarded to Mr Lawes for signature. They were not the exercise of his independent judgement [sic]. It follows that WCL interfered in the exercise by the Administration Manager of his powers and discretions, and to an extent usurped them.” (par 449)

In that period there were “four letters of importance [in the mind of the referee] involving the exercise of the certifier function by the Administration Manager” (par 438). The first was a letter of 23 April 1998 signed by Saba “restating the requirement for defect- free Practical Completion” (par 439). Of that letter the referee made the following finding: “Notwithstanding Mr Lawes’ return from holidays, the letter was signed by Mr Saba. It does not reflect Mr Lawes’ opinion regarding work necessary to be done to achieve Practical Completion. It was drafted by the lawyers, signed by Mr Saba and sent. As Mr Lawes said, he “eventually” saw the letter.” (par 439 of the report)

There were two further letters of 24 April 1998 signed by Lawes purporting to act under cl 5.04 of the contract which empowers the Administration Manager to issue a notice requiring compliance by the contractor with a previous direction or instruction of the Administration Manager.

Of the first notice, the evidence before the referee was that it had not been initiated by Lawes and, at least in part, not a product of his independent judgment (par 443). The second cl 5.04 notice of that date was the subject of evidence, which, I think, compelled the finding of the referee that it was not the product of Lawes’ independent judgment ( see pars 444, 445 and 446).

The fourth document was a progress certificate signed by Saba “although…Lawes was available”.

As with the evidence in respect of the previous two periods, the findings of the referee underline the relationship between WCL’s interference in the administration of the contract, and its unjustified attempt to impose a ‘defect-free’ standard for practical completion under the contract.

The findings of the referee in respect of the fourth period were as follows: “456. The reality was, from at least 4 May 1998, that the role of Administration Manager was being exercised by Mr Hendry with guidance from WCL’s solicitors, and with formal signature being obtained, in most part, from Mr Lawes after he had been informed of the legal rights of Walkers. That position is satisfactory when the Administration Manager is exercising a function under the contract which us not that of a certifier or assessor. However it is contrary to the obligations on to (sic) Administration Manager when he was called upon to exercise the functions of assessor or certifier. In truth, however, no different procedure or process of mind, was exercised by Mr Lawes when he ought to have been exercising the independent functions of an assessor or certifier. ….. 477. The reality of the matter is that in this fourth period Mr. Lawes did not bring to bear any independent mind to the role of Administration Manager. That role was formally in the hands of Mr Hendry who was guided by WCL’s legal advisers, and such certification or assessment as occurred simply reflected Walker’s legal advice and position. It follows, in my view, that in this period WCL did interfere with the certifying functions of the Administration Manager, taking control of his function and exercising it through Mr Hendry and its solicitors.” Hendry had been appointed to the project by WCL with responsibility for contract administration (par 451).

One of the letters signed by Lawes during the fourth period was that of 12 May 1998 which had been drafted by WCL’s solicitors. It insisted on defect-free practical completion in the following terms: “ BROADWAY APPLICATION FOR ISSUE OF NOTICE OF PRACTICAL COMPLETION We refer to your letters dated 27 April 1998 and 8 May 1998. As you are aware, clause 1.05.09 of the Contract defines Practical Completion and lists all those matters which must be carried out by CCG in order for the Administration Manager to be in a position to award Practical Completion. We disagree with your interpretation of clause 1.05.09(a ). That clause clearly requires the Project to be complete . Our interpretation of that requirement, there being no exclusion of minor omissions and defects, means complete in all respects . The Project is defined specifically under clause 1.05.10A. In my opinion, the matters referred to by Walker in its letters dated 16 April 1998 and further issues which have arisen since which have been communicated to CCG, must be carried out by CCG before Practical Completion is achieved. Your reference to the existence of a defects liability period in respect of the Project Works is not, in my opinion, determinative of the issue. Clause 6.12 does not refer, as you assert, to “minor omissions and defects” but requires the rectification by CCG of any faults, omissions, shrinkages or other defects in the Project which are apparent during the Defects Liability Period. Many matters remain to be performed by CCG under the Contract prior to it being in a position to request that Practical Completion be awarded. In fact, as you are aware, you have recently commenced the compilation of an exhaustive list of defects which are required to be performed by CCG. Murray Gregory has indicated that there are between 5,000 and 7,000 such defects. In addition, there are a number of other significant incomplete works issues which need to be dealt with by CCG, as well as the obtaining of necessary approvals and certifications. Further, it is disappointing that CCG has sought to once again make an application for a notice of Practical Completion without having dealt with the issues raised in our letter of 16 April 1998, nor with many of the other issues which remain outstanding. We make the following general comments in relation to the particular issues you raise in your letter dated 27 April 1998 which is not exhaustive:…” (emphasis added) (par 458 of the report)

The letter was drafted by the solicitors for Lawes to sign. The referee found that it did not represent Lawes’s opinion. On the evidence cited and accepted by the referee, it clearly didn’t. However, it is sufficient for me to find that it was open to the referee to reach that finding.

There were two further letters, each dated 15 May 1998, signed by Lawes, but, on the referee’s finding, were not letters of his making.

The first purported to be a notice pursuant to cl 6.05.04 which empowered WCL to require a “Cure Plan” when the contractor fell behind in performance of an approved construction programme. The referee found the notice to be misconceived as it did not relate to an approved construction programme (par 460).

The second letter purported to be a notice by the Administration Manager pursuant to cl 11.11 of the contract in the following terms: “The Date for Practical Completion (being 17 March 1998) having passed without the Project having been brought to Practical Completion, the Administration Manager hereby notifies the Contractor pursuant to clause 11.11 of the Contract that in future the Contractor’s liability in respect of liquidated damages pursuant to the Contract will be reflected by way of provisional assessment in Progress Certificates issued by the Administration Manager.” (par 462 of report)

The referee found that the letter was initiated by persons within WCL, other than Lawes, and by WCL’s solicitors. The referee found that Lawes signed the letter even though he regarded the provisional withholdings of liquidated damages as unfair and commercially unjustifiable. The referee had evidence of that from the cross examination of Lawes (pars 464 to 466 of the report) and that finding was, in my view, open to the referee.

The circumstances, as found by the referee, in which that letter was sent out under the signature of Lawes as Administration Manager are a further example of the intermingling in the findings of the referee of breach by WCL of its February agreement, in resorting to the liquidated damages provisions of the contract, and of WCL’s interference in the performance by Lawes of his role as Administration Manager.

The referee, correctly, in my view, found that the giving of a cl 11 notice under the contract required the Administration Manager to exercise an independent assessment of the contractor’s performance under the contract and to form an opinion as to the date upon which practical completion under the contract ought to have been achieved (pars 468-469).

The referee found that Lawes had not exercised that independent assessment (pars 469, 470). It followed that the progress certificate No 16 served on 15 May 1998, signed by Lawes was not a justified resort to cl 11 of the contract. On the evidence accepted by the referee (eg pars 463-466) those findings were open to him and, although unnecessary for me so to decide, in my opinion, the referee was correct in reaching those findings.

Lawes signed a further letter to CCG of 9 June 1998 which was in the following terms: “The Administration Manager is of the opinion that the Project has not reached Practical Completion at this stage. Walker wishes to communicate its disappointment that the Contractor has again sought to make an application for the issue of the notice of Practical Completion without having dealt with the issues raised in our letters of 16 April 1998 or 12 May 1998, nor with many of the other issues which remain outstanding. Indeed, many matters remain to be performed by CCG under the Contract prior to it being in a position to request that Practical Completion be awarded. The Contractor is again reminded of the provisions of clause 1.05.09 of the Contract which defines Practical Completion and which lists all those matters which must be carried out by the Contractor in order for the Administration Manager to be in a position to award Practical Completion. The Administration Manager is of the opinion that the Project is so far from Practical Completion that it is not practicable to issue a notice under the provisions of Clause 10.09.02(a) or (b). The Contractor is therefore required to continue with the execution of the Project in accordance with the Contract. Notwithstanding this, the Administration Manager is keen to assess a proper claim by the Contractor for Practical Completion which demonstrates the Contractor’s compliance with each of the matters referred to in Clause 1.05.09. Set out below is the Administration Manager’s opinion with respect to the status of each of the items referred in to Clause 1.05.09. This list is not intended to be an exhaustive list, nor written notice of matters and things required to be done before the Project shall reach Practical Completion as describe (sic) under Clause 10.09.02(b).” (par 474 of the report)

The referee’s findings in relation to that letter were as follows: “475. The letter purports to be the response to a request for Practical Completion required by clause 10.09. As such it must express the opinion of the Administration Manager. In so far as the letter re-states the position adopted in the letters of 16th April and 12th May 1998 that defect-free practical completion is required, it does not express the opinion of Mr Lawes. The letter was drafted by Messrs Blake Dawson Waldron and forwarded to Mr Hendry and is, no doubt, one of those letters forwarded to Mr Lawes for signature with an explanation that this was the appropriate legal response reflecting WCL’s position.

On the evidence relied upon by the referee, it was open to him to make those findings.

The referees conclusions in respect of the fourth period were as follows: “476. For the above reasons, in the fourth period, the letters of 12th May and 19th June1998 signed by Mr Lawes do not reflect his opinion and are not the exercise of any independent mental process. They state the position of WCL and the legal advice which it received. The notice pursuant to clause 11.11, dated 15 May 1998, provisionally withholding liquidated damages, and the progress certificate number 16 of the same date effecting that, in so far as they constitute an exercise of the certifying functions of the Administration Manager, also do no (sic) reflect Mr Lawes’ independent judgement regarding provisional withholding of liquidated damages but reflect the legal advice received by WCL concerning that matter which advice Mr Lawes complied with. He bought no independent mind to bear on the issue. The letters of the 15th May 1998 concerning clause 6.05.04, and the letter of 22nd June 1998 concerning liquidated damages signed by Mr Saba, are letters signed by Mr Lawes and Mr Saba in their capacity as employees of WCL, and are not the exercise of any certifying function as Administration Manager.”

Not only was the evidence as accepted by the referee sufficient to justify such findings, it is my view that the findings were correct.

The referee’s ultimate findings of the nature of WCL’s conduct in demanding a defect-free standard for the certification of practical completion under the contract are set out in pars 381 to 386 of the report, as follows: “381. In my view it has been established that defect-free Practical Completion was required by the first defendant and the Administration Manager, and that such requirement was beyond the contractual obligation, and imposed a requirement for performance under the contract which was not contractually required nor practically capable of achievement. The consequence necessarily was that the contractor could not achieve Practical Completion, and would not receive the final contractual payment, or the discharge of the performance bonds, and would be subject to the imposition of liquidated damages. In fact Practical Completion has never been certified under the Agreement. Nor, if the position adopted by WCL between 14 April and 19 June 1998 was correct, and if the Agreement had remained on foot, could it now be certified, although the Centre has been trading for almost two years, because WCL maintains that there remains outstanding unrectified defects or omissions. 382. It follows that, although I am not prepared to make the positive finding, absent evidence from Mr Reed, that he did not bona fide hold the view that the contract required there to be defect free Practical Completion, I do find that the position when advanced by or on behalf of the Administration Manager, or WCL, was not a position bona fide held by Mr Lawes as Administration Manager, or WCL. Mr Lawes was of the view that was not the correct interpretation of the Agreement, a position the legal advisers to WCL now accept. Applicable Repudiation Principles 383. A party repudiates a contract if the party evinces an intention to no longer be bound by the contract, or indicates that it intends to fulfil the contract in a manner substantially inconsistent with its obligations and not in any other way. WCL made it clear that it would make the residual payment of $10 million, would cease imposing at least provisional liquidated damages, and would release performance bonds only on achievement of Practical Completion. That was its contractual entitlement, subject to the February agreement. However, by imposing a requirement for Practical Completion beyond that required by the contract, it breached the contract. And it breached an essential term if the contract because it was critical to the contractor to be able to obtain Practical Completion on performance of the contractual requirements in that regard and thus obtain the residual contract monies, release of performance bonds and termination of any liquidated damages. It is obvious that a contractor will not enter into a construction contract unless it knows what it must do to complete its primary obligations under that contract and thus receive practical completion certification with its attendant rights. 384. WCL insisted upon defect-free Practical Completion although that was beyond its contractual entitlement, as is now accepted. It maintained its position notwithstanding the contrary view being put. It did not bona fide hold the view that the interpretation being advanced was correct. By insisting upon performance of the contract beyond the contractual entitlement it indicated an intention not to be bound by the terms of the contract and repudiated it. By breaching an essential term of the contract it repudiated it. As Jordan CJ said in Tramways Advertising Pty Limited : “If the innocent party would not have entered into the contract unless assured of a strict and literal performance of the promise, he may in general treat himself as discharged upon any breach of the promise, however slight. If he contracted in reliance upon a substantial performance of the promise, any substantial breach will ordinarily justify a discharge.” 385. It was said by the defendant that there should be no finding that such insistence on an admittedly erroneous construction of the contract constituted an indication of an intention not to be bound by the contract because such erroneous construction was based upon legal advice. It was said that the conduct of the defendant in relying upon that advice was a reasonably and bona fide act not indicating an intention not to perform its contractual obligations. 386. The advice was conceded to be wrong. The person who acted upon it, or in whose name it was acted upon, was Mr Lawes. He did not agree with the advice and was not persuaded of its correctness. Both he and Mr McGilvery believed it resulted in the contract becoming impossible of performance by the contractor. It necessarily follows that I reject the contention that Walker insisted on an erroneous contractual position reasonably or bona fide. No person from the Walker organization gave evidence that the requirement for a defect-free practical completion insisted upon was a reasonably held interpretation of the Agreement. Absent clear words in the contract, I do not understand how it could be contended that an interpretation of a contract which produces impossibility of performance by the other contracting party could be said to be a reasonably held view of the proper interpretation of the contract.”

His finding as to the nature of WCL’s interference in the Administration Manager’s role as certifier was as follows: “ Conclusion 478. The plaintiff’s allegation that Walkers interfered with the independent functions of the Administration Manager in relation to certification and assessment is established, as is the allegation that from 4 May 1998, WCL took over and exercised for itself those functions. As a result of this improper interference, CCG did not receive the independent assessment to which it was entitled under the Agreement, and on the basis of which it contracted. Depriving a contractor of the independence of an assessor at the critical time towards the end of a construction contract goes to the heart of the contract because it deprives the contractor of the independent assessment of a certifier on whose impartiality and independence of mind it relies to determine its contractual rights and obligations in relation to the performance of the contract, payment, liquidated damages and release of performance bonds. It constitutes repudiatory conduct.”

If the referee’s findings are adopted in relation to WCL’s conduct in the March to June period, in my view, those findings would justify the conclusions of the referee that WCL had repudiated the contract by (a) resorting to the liquidated damages provisions of the contract in breach of the February agreement, (b) interfering in the performance of the Administration Manager’s function as certifier under the contract and, (c) requiring a defect-free standard of completion before Practical Completion under the contract could be certified, a view of the contract that was not held by WCL in good faith.

Although I think that each of those breaches, as found by the referee, justify a conclusion that each constituted a repudiatory breach, it is difficult to view each in isolation from the others.

WCL has presented a detailed and referenced set of submissions which, in my view, fall well short of demonstrating any misapprehension of the evidence by the referee, any absence of evidence to support his findings, or any erroneous or perverse findings by him.

The principal finding of the report challenged by WCL in relation to the defect-free requirement by WCL is par 387 in which the referee found that the insistence on a defect-free practical completion “constituted a breach of an essential term of the agreement entitling the plaintiff to rescind the agreement on the ground of WCL’s repudiation of it”.

The underlying contentions of WCL before me were that: (a) the referee did not identify the term which had been breached. Moreover, it could not be said that there had been a failure to make the final progress payment by reason of insisting upon such a standard, since practical completion, in any event, had not been obtained at the time of the purported rescission of the contract by CCG. (b) the referee was “not correct” in finding that “WCL’s final position was that it imposed a requirement for defect-free practical completion”, an argument based upon the construction to be placed on the letter by WCL (Lawes) to CCG of 19 June 1998: the finding in par 339 of the report being that: “ … at least from 14 April to 19 June 1998 [WCL] and the Administration Manager imposed a requirement of defect-free Practical Completion”. (c) the references in the report to a defects list of 5000 to 7000 defects were “plainly wrong”. (d) there was no evidence to support the referee’s finding (pars 376, 379, 380, 382 and 384 of the report) that WCL or Lawes did not bona fide hold the view that defect-free practical completion was required by the contract : that there was evidence that Lawes accepted the advice of WCL’s solicitor and there was no finding by the referee that “Lawes was untruthful in this evidence”. It was contended that the referee “misconstrued” this evidence.

As to (a): the submission that the referee did not identify any particular condition of the contract which had been repudiated by WCL does not expose any error of fact or law by the referee and pays no heed to the referee’s findings, particularly those in par 354 of the report, which described the material importance of achieving practical completion under the contract and of the effect upon that performance of WCL’s imposition of a defect-free standard before practical completion could be certified.

WCL’s repudiatory conduct as found by the referee could be described as evidencing contempt by WCL of its obligation to co-operate with CCG in bringing the project to practical completion and of its obligations to adhere to the due processes of the contract for the issuing of the certificate of practical completion: a matter of fundamental importance under the contract.

As to (b) : this submission is essentially a submission as to the weight of the evidence and what, in WCL’s submissions, was referred to as a “fair reading” of Lawes’ letter of 19 June 1998. It was submitted that, on a “fair reading” of the letter, Lawes had abandoned any unreasonable requirements for achieving practical completion.

The findings of the referee were clearly open to him, based upon the evidence accepted by him and to which reference has been made in these reasons. The submission on behalf of WCL in relation to the 19 June letter amounts to a ‘weight of evidence’ argument as to which, the reference back in the 19 June letter to the defect-free requirements letters of 16 April and 12 May was sufficient basis, in the context of WCL’s conduct in the preceding weeks, to support the referee’s finding in relation to the 19 June letter.

In my view, there was ample evidence for the finding of the referee in par 339 of the report that WCL/Lawes had imposed a requirement of defect-free practical completion between March and June 1998.

As to (c): this submission related to a number of references in the report to a defects list of five to seven thousand items: one such reference being par 328 of the report, which was in the following terms: “CCG applied for Practical Completion on 31 March 1998, the date the shopping centre opened. It sought the issue of the Notice of Practical Completion within 10 days and, on such issue, return of bank guarantees. It forwarded boxes of documentation said to be documents satisfying the requirements for Practical Completion in clause 1.05.09. Mr Lawes and Mr O’Brien began a review of that documentation and sought consideration of it by consultants. On 14 April 1998 Mr Saba (WCL) signed a letter over Mr Lawes name as Administration Manager, Mr Lawes being on holidays advising: “in the meantime, however, the Contract Agreement requires that any defects and omissions in all premises (including the Hoyts premises) must be rectified prior to Practical Completion of the Project.” That letter was drafted by Messrs. Baker & McKenzie. Consistent with it was the confirmatory advice given on 15 April which I have quoted. On 16 April, in a further letter drafted by the Walker defendants solicitors, the following was stated: The Project has not reached Practical Completion and, accordingly, pursuant to clause 10.09.02(b) of the Contract Agreement, we hereby issue to you notice of matters and things required to be done before the Project shall reach Practical Completion. The matters and things which are required to be done are described in the Schedules to this notice which form part of this notice. …………………………… As the Date for Practical Completion has now passed without Practical Completion of the Project having been achieved, you are directed to attend to the matters and things referred to in this notice with due diligence and expedition in order to achieve Practical Completion at the earliest possible time after the date of this notice.” The letter was signed by Mr Dransfield. Attached to the letter were 196 pages listing asserted defects and omissions. Estimates of the numbers of items listed range between five and seven thousand .” (emphasis added)

The submissions by WCL were based on a detailed analysis (Ex 3) of the communications which passed between WCL and CCG and the consultant engaged on the project.

The communications commenced with a letter from CCG to WCL of 20 March 1998, notifying WCL that CCG anticipated achieving practical completion on 31 March 1998. There followed several communications from Lawes to various consultants on 23 March 1998 requesting “advice…. of outstanding items”. Those requests resulted in each of those consultants forwarding lists following inspections by them, the latest of which being received by WCL on 15 April 1998. In addition, lists were received from the supermarkets and the mechanical services engineer. The latest of those was received by WCL on 16 April 1998. For the most part, they were included in the schedule to WCL’s letter to CCG of 16 April 1998.

The submissions on behalf of WCL concluded with the following: “12. In paragraph 73 of his statement of 15 January 1999, Mr. Webster stated that the defects register that he compiled (which excluded the architectural defects) contained 2,600 items. He further said that of these items, 427 were raised after the 16 April PC notice and that 852 were items that had been raised by CCG which were not included in the PC notice. If these items are deducted from the 2,600 items contained in the defects register, it follows that the lists that accompanied the letter of 16 April 1998 contained 1,321 items. The table that Mr. Webster prepared from the architectural drawings contained 1,241 separate items. 13. Thus, the references in the report to the lists which were attached to the letter dated 16 April 1998 having 5,000 to 7,000 defects is plainly wrong. The total number was 2,562 items. And of course, not all of these items were defects. A vary large number appear to have been incomplete work.” (Exhibit 3)

It is not difficult to identify the evidence referred to by the referee. The letter of WCL (Lawes) to CCG of 8 May, quoted earlier in these reasons identified the number of defects as being “between 5000 and 7000” in addition to “a number of other incomplete works issues”. The 12 May letter relied upon the defects notified in the 16 April letter with its 196 pages of attachments.

Moreover, in Lawes’ statement of evidence of 3 May 1999 (Ex 4B tab 3 par 504), in relation to the 16 April 1998 schedule, he stated that the “A3 marked up drawings [identified] several thousand items of omitted and defective work”.

I have not found it necessary to analyse the accuracy of WCL’s calculations, mainly because I think WCL’s submissions miss the point of the referee’s findings in relation to WCL’s approach to defect-free practical completion. It is not suggested that the referee had not been given estimates of the range of defects of the order referred to in the report.

The significance to the referee of the letter of 16 April 1998 is to be found in pars 329 to 332 of the report. WCL’s letter of 16 April requiring performance of the numerous items listed in the accompanying schedules before Practical completion could be achieved was regarded by Lawes as “nonsense”. He thought that “maybe five hundred would be important”.

Whatever the correct number of defects may have been that WCL required to be rectified before practical completion could be certified, it is plain, on the evidence before the referee, that the defect-free standard, which WCL sought to impose, involved some thousands of items.

As to (d): there are some general observations that, I think, are pertinent to the referee’s findings.

The evidence before the referee included the notes of meetings in mid March, involving WCL’s representatives, notably not Lawes, representatives of WCL’s consultants and financiers and Reed. The referee’s findings in relation to those meetings which preceded the 20 March letter are set out in pars 358 to 364 of the report and are referred to earlier in these reasons.

With that background to the imposition of a defect-free standard of practical completion, it would not take much evidence, in my view, to justify the referee coming to a conclusion that the imposition of such a standard for practical completion was not a bona fide view held by WCL/Lawes as to WCL’s entitlement under the contract.

Especially is that so where WCL did not attempt to justify such a construction of the contract before the referee, conceded that it was not the true construction of the contract, and called no one to assert that it was a bona fide, although erroneous, view of WCL. The simplest way of establishing that would have been to tender the evidence of Reed concerning his advice on that subject. The referee adverted to that aspect in par 361 of the report, noting that at various times he had been informed that Reed was to be called as a witness and, at one stage, that a statement of evidence was being prepared.

The submissions in my view are, in substance, weight of evidence arguments. In particular, it was submitted that the evidence revealed that Lawes “signed the … letters [requiring a defect-free standard of practical completion] after he reviewed them to satisfy himself at least as to the legal rights of the parties”. That submission was based on passages from the transcript of Lawes’ evidence in cross examination (T 1317-T 1320).

In my view, that evidence is equivocal. Still, assuming that it is evidence which could support a finding that Lawes brought an independent mind to the task of Administration Manager in requiring a defect-free standard of practical completion, it is clear, from the reasons earlier, stated that the referee was satisfied on the totality of the evidence that Lawes did not, in fact, bring an independent mind to this task. As earlier stated, I think that there was ample evidence upon which the referee could have reasonably reached the conclusions as expressed in pars 376 and 379-382 of the report.

The untenability of this challenge by WCL to the adoption of the referee’s report is emphasised by the fact that at pars 376-379 the referee considered the evidence said to support a finding contrary to that reached by the referee. Of that evidence, I think the referee correctly said that the “evidence to support [WCL’s] submission [was] thin indeed”(377).

In addition to finding that Lawes did not bring an independent mind to the exercise of his responsibilities of Administration Manager by “simply [doing] as he was told by his employer, its financiers and its lawyers”, the referee expressed a further concern, as appears in the following extract of his report: “375. It is a matter of concern that a solicitor should draft a letter (20 March 1998) said to express the opinion of a certifier when plainly it did not, and a further matter of concern that a letter (26 March 1998) should be drafted making assertions of fact designed to ground an action for misrepresentation when there was no basis for such factual assertions. Nonetheless, and even though Walkers solicitors and counsel are not now prepared to support the correctness of Mr Reed’s advice regarding the construction of the Agreement concerning defect-free Practical Completion, I am not prepared to hold that Mr Reed did not bona fide hold the view of the construction of the Agreement regarding defect free practical completion contained in his advice, and conveyed to the Contractor in the letters of 16th April and 12 May.”

The submission that the referee “did not find that Mr Lawes was untruthful in his evidence”, I think overlooks the manner in which the referee approached the evidence of Lawes. A similar submission was made in relation to the ‘February agreement’ issue and I have examined that. In relation to this issue, the referee rejected WCL’s contention that the evidence called for a finding that Lawes accepted legal advice that the contract called for defect-free practical completion. In pars 347 to 352 of the report it may be seen that the referee did not accept particular aspects of Lawes’ evidence, which he found on occasion to be inconsistent in relation to this issue.

It was argued before the referee and before me that WCL’s conduct in resorting to the liquidated damages provisions of the contract did not amount to a repudiation, rather it simply reflected an incorrect understanding of the legal position under the February agreement, with WCL erroneously regarding it as one relating to practical completion and not one directed to the opening of the centre, adopting what was said in DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423 at 432.

It is unrealistic, in my view, to look at that issue in isolation, as against seeing that conduct in the context of WCL/Lawes’ insistence on an untenable and impossible requirement of a defect-free standard of practical completion, stripping Lawes of his independence as Administration Manager in the process, as found by the referee. WCL can hardly be heard to complain if the referee looked with particular interest at the record of meetings attended by WCL representatives, notably other than Lawes, WCL’s consultants, financiers and solicitor in mid-March as the setting in which the conduct of WCL in the ensuing months should be viewed. That is the way in which I understand the referee approached the contents of those records of meetings and in particular, considered the platform upon which the letter of 20 March was drafted for Lawes to sign.

It would have been open to the referee on that evidence to conclude that, commencing with the 20 March letter, and up to the 19 June letter, WCL embarked on a strategy of gaining occupation of the shopping centre at a time when it was not contractually entitled to occupation and, then, having gained occupation, ensuring that certification of practical completion should be put off as long as possible, (a) by imposing an absurd standard of completion; (b) by dictating to Lawes what WCL required in that respect; (c) by eventually side-lining Lawes, and (d) by resorting to the liquidated damages provisions of the contract. In adopting that strategy WCL would have ensured that payment to CCG of the “last $10M withheld until 10 days after PC” was withheld indefinitely.

In my view, it was open to the referee on the evidence accepted by him to find that the conduct of WCL/Lawes should not be explained by an erroneous, although honestly held, belief that the February Agreement related to practical completion and that practical completion under the contract required a defect-free standard.

It was submitted on behalf of WCL that the withholding of provisional liquidated damages “had no discernible effect on cash flow”, in support of a more general submission that the conduct of WCL, in resorting to the liquidated damages provisions of the contract, could not be characterised, reasonably, as repudiatory.

Certificate 16, issued on 15 May 1998, was accompanied by the statement signed by Lawes as Administration Manager, that CCG’s liability in respect of liquidated damages would be reflected by way of provisional assessment in progress certificates ( exhibit 2, vol 2, tab 24). The calculation accompanying the certificate showed a debit and overpayment to CCG of $3,128,994, while the allowance for provisional liquidated damages as at that date amounted to $3,104,639. On that basis, if the amount of provisional liquidated damages was excluded there would still have been an overpayment of approximately $24,0000

CCG submitted that the imposition of provisional liquidated damages produced “a negative balance on the current progress certificate”. I do not think that is correct.

However, assuming it to be correct that there was no immediate effect on cashflow at the date of termination of the contract, in my view, that is of little significance in considering the referee’s finding that WCL repudiated the contract by resorting to the liquidated damages provision of the contract.

The real vice, in WCL’s conduct as found by the referee, lay in WCL accepting the benefit of the February agreement and immediately embarking upon a strategy aimed at thwarting the due administration of the contract by depriving the Administration Manager of any effective certifying role under the contract and by resorting to an impossible requirement for the achievement of practical completion by CCG. Embedded in that strategy was recourse to the liquidated damages provisions of the contract, despite the terms of the February agreement.

It was submitted on behalf of WCL that the referee’s finding in par 478 of the report that WCL “interfered with the independent functions of the Administration Manager in relation to certification…”, was a finding that was “unclear”. It was said that it could not mean that “Lawes ceased to carry out any of the functions as administration manager.” For my part, I do not share that difficulty in light of the finding of the referee that, in effect, Lawes did as he was instructed by WCL, its financiers and solicitors, of which there was ample evidence as cited by the referee.

The finding may be put into context in the light of the findings at par 450 to 456 of the report, in which the referee found that the role of Administration Manager had been taken over by WCL’s establishment of a “Project Team Management Plan” on 4 May 1998, which the referee found had the effect of removing any independent function as assessor or certifier from Lawes’ role. I think that finding was clearly open to the referee on the evidence before him.

It was further submitted on behalf of WCL that the evidence, established that Lawes continued to carry out the functions of an Administration Manager in the period between March and June 1998. It was said that the evidence established that there were five areas in which he so acted, namely: (a) attendance at defects meetings with CCG: (b) Lawes’ intimation to CCG that it did not have to complete minor defects: (c) the subject matter of a telephone conversation between him and Webster of CCG on 20 June 1998 relating to practical completion: (d) the acceptance by Lawes of responsibility for signing off work that was complete and (e) the role played by Lawes during April, May and June of 1998 in “[working] through outstanding variations”.

Those matters were the subject of submissions to the referee. On those evidentiary matters, the referee was unconvinced that Lawes exercised his independent judgement in his certification role as Administration Manager.

Of the letter of 20 March 1998, the evidence before the referee which is referred to in pars 365 et seq of the report, in my view, is powerful evidence to support the referee’s findings that Lawes’ acted under direction in performing the role of Administration Manager.

It was submitted that Lawes’ unwillingness to send the letter of 20 March only stemmed from the fact that Lawes considered the issuing of the letter as premature, consistent with a willingness to send it after, at least 24 March 1998, by which time the February agreement, on Lawes’ version, would have been spent.

However, that is not the importance of the letter, in the context in which the referee considered it. Rather, it is but one instance amongst many in which the referee found that Lawes simply did as he was told by WCL or its solicitors.

It is necessary to recount some of those matters to address a further submission on behalf of WCL relating to the communication of legal advice to Lawes. While Lawes was on holidays two letters were sent by WCL to CCG over his name, dated, respectively 14 April and 16 April 1998. The referee addressed those letters in pars 328 to 330, 431 and 432 of the report. I have examined earlier in these reasons the referee’s findings in relation to those letters.

In the course of those findings, the referee, in par 434, rejected Lawes’ evidence that the April letters, were the consequence of instructions by Lawes to O’Brien. In so rejecting that evidence, the referee found that Reed’s advice as to defect-free practical completion (set out in par 311 of the report) was not communicated to Lawes before he left on holidays.

It is submitted on behalf of WCL that that finding was in error, as the letter of the solicitor to WCL of 15 April 1998, on the face of it, was a confirmation of advice as to practical completion; relying upon the words “As advised”, which preceded the advice in that letter.

In my view WCL has not made good that submission. In par 436 of the report the referee considered the question whether Reed’s advice was given to Lawes before he departed on holidays. In the course of that examination of the evidence, the referee stated that “as previously indicated there was no satisfactory evidence that Mr Reed’s advice regarding defect-free practical completion was communicated to Mr Lawes before he went on holidays”. (my emphasis)

It should be inferred from the finding that the referee did not consider the evidence relied upon by WCL as satisfactory evidence that Reed’s advice had been conveyed to Lawes.

Whether that is a correct analysis of the referee’s reasoning is, in any event, beside the point. The point of the referee’s reasoning was that Lawes simply did not hold the views expressed in the April letters. The timing of Lawes’ knowledge of the solicitor’s advice is, in my view, irrelevant, as appears from the findings of the referee in respect of the period in April after Lawes returned from holidays (see pars 438-449).

That was a period in which Lawes was transferred from the Broadway site and put into a new position of “Manager, Residential Development” (par 438), from which point he didn’t “initiate much at all” and letters were sent, purporting to be letters of the Administration Manager, signed in one instance by another employee. That section of the report, I think, contains damning findings in relation to the interference by WCL in the administration of the contract by Lawes and in respect of which, I think, the evidence referred to by the referee provided an ample basis for those findings.

I return to the general observation that it is not practicable to dissociate the referee’s findings in relation to the interference by WCL in the performance by Lawes of his role as Administration Manager from the referee’s findings in relation to the imposition of a defect-free standard of practical completion. In turn, those findings should be viewed, I think, in the broader context of WCL’s “strategy” revealed in the records of meetings in mid March 1998, as found by the referee.

For those reasons, I think the submissions on behalf of WCL are reduced, essentially, to a weight of evidence argument and invite an impermissible approach to the report.

WCL has presented submissions in respect of the several communications that issued from WCL/Lawes in the period March to June 1998, contending that the referee was in error in relation to his findings concerning those communications: that the transgressions as found by the referee were not serious: that the communications were not part of the Administration Manager’s function of certification or assessment under the contract: that any transgression as to the requirement for practical completion had been cured by the letter of 19 June 1998: that the letters of 16 April, 12 May and 19 June, so far as they conveyed the Administration Manager’s contention that the project had not reached practical completion, reflected a matter that was not in dispute. It is necessary to examine WCL’s contentions in relation to each of the communications.

The letter of 20 March 1998: I have examined sufficiently the referee’s findings that this letter was not the expression of Lawes’ opinion and was one which he sent simply because he was instructed so to do. It was submitted that if there was interference of the kind found by the referee in relation to this letter, then it wasn’t so serious as to justify repudiation. I do not think it is suggested otherwise. The question is whether in totality the evidence of WCL’s conduct in relation to this issue warranted the finding of the referee. This communication was certainly a significant factor in the issues relating to WCL’s resort to the liquidated damages provisions of the contract and its interference in Lawes’ administration of the contract.

The letters of 14 and 16 April 1998: again, I think the subject matter of these letters has been sufficiently canvassed in these reasons. In my view, the findings of the referee in relation to them were open to the referee on the evidence relied upon by him.

That conclusion, I think, holds good, regardless of whether the referee accepted or rejected evidence upon which a finding could have been made that the letter of 16 April was in accordance with advice received by Lawes prior to his departure on holidays.

It was submitted that in relation to the 16 April letter that it had been “superseded” by the 19 June letter. That is a matter of weight of evidence, in respect of which the referee found against WCL: a finding that, I think, was open to the referee.

The letter of 23 April 1998: I note that the letter of 23 April was signed by an employee of WCL who was not the Administration Manager, notwithstanding the fact that Lawes had returned from holidays. That, in itself, was a significant piece of evidence available to the referee upon which a finding could be made as to the usurping of Lawes’ responsibilities by WCL (see pars 439 and 440).

24 April 1998 notices (2): these notices were considered by the referee at pars 441-446. In respect of each of them the referee made findings that they did not represent the independent judgment of the Administration Manager nor the exercise of Lawes’ discretion. The evidence relied upon by the referee clearly supported those findings.

It was submitted that the referee was in error in assuming that notices under cl 5.04 of the contract were part of the Administration Manager’s certifying function, whereas it was “ancillary to the power granted to the Administration Manager to issue directions that work be done”.

The referee’s findings concerning these notices are to be found in pars 446 and 449 of the report and the findings there set out were open to the referee on the evidence relied upon in pars 443 and 445. Further, it could not be suggested that the issuing of cl 5.04 notices did not form an important part of the Administration Manager’s responsibilities under the contract.

Both notices referred back to the letter of 16 April, notwithstanding the real views of Lawes about the requirements in that letter.

It was submitted that these notices did not “have a substantial impact” and did not go to the root of the contract. Again it would be difficult to disagree with that submission if these notices stood in isolation. That is not the reality.

Notice 15 May 1998: this notice purported to resort to the liquidated damages provisions of the contract. The referee dealt with this subject at par 454-472 and within those paragraphs the referee set out the evidence that directly touched upon this issue. In my view, it was open to the referee to make those findings on that evidence (see pars 467-472). However, I think it is important to view those findings of the referee in the context of his findings as to WCL’s “strategy” in relation to the administration of the contract in its concluding weeks.

It was submitted that the referee should have found that Lawes believed that WCL was legally entitled to liquidated damages and that his “personal feelings” on the subject matter were matters of irrelevance. For the most part the submissions of WCL in relation to this matter are a repeat of the submissions before the referee (exhibit 1, vol1, tab 4), which underscores what I think is the essential sub-stratum of WCL’s submissions, namely that they are submissions going to the weight of evidence and inviting an exercise of a review of the report, which, in my view, is impermissible.

12 May letter : this letter is addressed by the referee at pars 458 and 459 in which he found that the letter did not state Lawes’ opinion, but rather the opinion of WCL or its lawyers. It was submitted on behalf of WCL that that finding was not supportable so far as the letter expressed Lawes’ opinion that the project had not reached practical completion.

The letter, which is set out in par 458 of the report, is a regurgitation of the 16 April 1998 letter with its schedule of 196 pages. I note that in this letter the assessment of outstanding defects was “between 5000 and 7000”.

The evidence of Lawes in cross examination on the letter of 16 April 1998, which the referee relied upon, was evidence upon which it was open to the referee to find that the 16 April 1998 requirements were unjustified in Lawes’ mind and that this letter of 12 May 1998 was not the product of Lawes’ views on the subject.

Letter 19 June 1998 : this is dealt with in the report for the second time in pars 473 to 476 with the findings in pars 476 and 477 that the letter was not the product of Lawes’ proper exercise of his responsibilities as Administration Manager.

I have addressed the challenge to the referee’s findings in relation to this 19 June letter earlier in these reasons and little needs to be added, beyond emphasising that the submissions of WCL are essentially contentions going to the weight of the evidence, and ones inviting an analysis of the evidence which is not called for.

WCL presented a separate defects submission in exhibits 4A and 4B which were said to be a history of the state of the work, both before and after 1 June 1998. I have not found it necessary to analyse that material beyond what has been addressed in these reasons, principally, because it is my view that the real mischief in WCL’s conduct did not lie in a simple denial that the works had reached a stage of practical completion. That was not CCG’s case.

The real debate concerned the overturning of the contract by WCL, particularly through the imposition of a defect-free standard for practical completion, an impossible requirement that could only have the effect of postponing the issuing of a certificate of practical completion and, at the same time, disrupting the orderly direction of work required for practical completion. Hand in hand with that, WCL reneged on the February agreement, and “usurped” the role of the Administration Manager, thus ensuring that WCL could have the benefit of the opening of the shopping centre and defer, indefinitely, any obligation to make a final payment of $10,000,000 to CCG. In the background was the potential for WCL to gain access to the substantial bank guarantees provided by CCG as security under the contract. WCL’s interference with the role of consultants under the contract

This aspect of WCL’s repudiatory conduct as found by the referee is set out in pars 479 to 536 concerning the conduct of WCL, qua the architect (Buchans), and pars 536 to 551, in the case of the engineer (Floth).

The role of the consultants under the contract in relation to completion was somewhat unusual, in that, it did not involve certifying practical completion within the meaning of the contract. Their role was, in effect, to provide preliminary certificates, as part of the process of the Administration Manager’s certification of practical completion. The provisions of the contract are sufficiently set out in pars 482 to 485 of the report. In par 486 the referee correctly found, in my view, that the consultants were obliged to carry out their duties as certifiers, “impartially, independently and honestly as between” WCL and CCG. The authorities examined by the referee in pars 398-410 of the report, are in point. The referee’s finding of WCL’s interference with Buchans’ duties under the contract

It was submitted on behalf of WCL that the referee was in error in imposing upon Buchans the obligation to act independently by reason of the architect’s contractual obligations to WCL. That submission in my view is untenable.

The contractual position of Buchans, as consultants, in relation to the project is set out in par 487 of the report. It follows that Buchans had consultancy obligations both to CCG and WCL.

In submissions on behalf of WCL no reliance is placed upon any special feature of the consultancy agreement which would require the reading down of Buchans’ duty to act independently as certifier under the contract. WCL simply asserted that the fact that Buchans had consultancy obligations to WCL removed the need for an absence of bias by Buchans.

I think the referee was correct in finding that the consultant’s duties as certifier under the contract were unaffected by the consideration “…of whether the fee for that work was being paid by the proprietor or the contractor…” (par 486).

It was further submitted that the subject of the referee’s findings were “trivial incidents” and could not constitute repudiatory conduct. I think that submission involves the error of examining WCL’s conduct in isolation. The nature of the conduct was captured in the evidence that Buchans were instructed by WCL not to issue certification under the contract “..until Walker said so…” (par 534 of the report).

In my view, it is unrealistic to ignore the context in which that instruction was given. It occurred on the same day as the 16 April 1998 letter was sent which required a defect-free standard of practical completion: carrying the connotations of WCL’s strategy, examined earlier in these reasons.

Further, that conduct of WCL should not, in my view, be disassociated from WCL’s conduct in instructing Buchans not to deal directly with CCG (pars 521-528 of the report). The referee referred to that aspect as the “complimentary evidence” in relation to the conduct of WCL in instructing Buchans not to issue a certificate until it said so (par 535 of the report).

It was submitted that the findings in par 535 of the report were inconsistent with the referee’s findings in par 533. I do not agree. Par 533 is concerned with an evaluation of Buchan’s evidence in failing to indicate to CCG prior to 1 June 1998 what defects required rectification before Buchans could certify completion in accordance with the contract design. The referee found that he should not infer that the failure was due to WCL’s interference with the certification process by instructing Buchans not to deal with CCG.

Par 535 is part of the “Conclusion” section of the report concerned with the issue of WCL’s interference in the certifying process by Buchans under the contract. In my view, it states the obvious in finding, on the undisputed evidence set out in the report, that, in the face of WCL’s instruction not to deal with CCG, that CCG “was unable, prior to 1 June 1998, to find out what work the architect really required to be performed before they would issue the certificate”.

Again, I am of the view that the submissions on behalf of WCL in relation to this issue, for the most part, involve weight of evidence arguments which invite an impermissible approach to the consideration of the report. The referee’s finding of WCL’s interference with Floth’s duties under the contract

WCL in support of its submissions has put before me the evidence of certification which was followed by Floth and was referred to by the referee (exhibit 2, vol 1, tab 2 A). That material reinforces the conclusion I have reached that this challenge to the referee’s finding is essentially a weight of evidence argument. I do not think there is anything to be gained by reproducing this section of the report, which is a well reasoned and referenced set of findings, which should be adopted.

As with the interference with the architect Buchans, I do not regard WCL’s interference evidenced in the referee’s findings in relation to Floth as “trivial”, nor do I think the subject matter of the referee’s findings should be divorced from the events relating to the stratagem of WCL in imposing the impossible requirement of defect-free practical completion.

The referee found that Floth had been instructed by WCL on 31 March 1998 to “pull” its certificate. On that day Floth had issued a certificate as to the design brief, as was required under cl 1.05.09 (d) (see par 482), and which was in the following terms: “The Broadway Shopping Centre project has been completed, barring minor omissions and defects, in accordance with the design brief as described in the contract documents and further documents and as varied by the Administration Manager and are fit for their intended purpose.”

That was not a certificate of practical completion, but a design compliance certificate. That was well understood by the referee (pars 536 -541). It was this certificate that Floth was directed to “pull” by McGilvery (pars 542-546), noting the referee’s adverse finding in relation to the evidence of Floth (par 546).

It was submitted on behalf of WCL that, although this was a design compliance certificate, the referee, at par 547, treated the Floth certificate as a certificate of practical completion. That is not the way I read that paragraph. In my view, the referee’s findings should be adopted in respect of this element of interference with the performance of the consultant’s responsibilities under the contract.

Standing alone one might hesitate to characterise WCL’s conduct in relation to Buchans and Floth as repudiatory. By putting it in the context of the conduct of WCL in reneging on the February agreement: in usurping the role of Administration Manager: in resorting to the liquidated damages provisions of the contract and in imposing a requirement, an impossible one, for a defect-free practical completion, which interfered with CCG’s ability to order its works to achieve practical completion under the contract; to obtain the release of substantial security bonds and to establish an entitlement to payment of $10,000,000, I think the referee was entitled to reach the conclusion that this conduct was repudiatory of WCL’s obligations under the contract.

I commenced the reasons addressing the challenge by WCL to the findings of repudiatory conduct by observing that the task undertaken by WCL was an extremely difficult one. Nothing, in the course of the foregoing reasons has caused me to qualify that view. I think the conduct of WCL, as found by the referee, constituted a cynical approach to the obligations of WCL under the contract, to the point where, I think, one should see it as conduct of a party to a contract who was not prepared to be bound by it and only prepared to have recourse to it as it suited its purpose.

For those reasons, I think the referee’s findings on the issue of repudiation should be accepted, save where I have expressly refrained from doing so

There were other bases relied upon by CCG in its case of repudiation dealt with by the referee under the title of “Oppressive Use of Contract”. That section of the report so far as it concerns repudiation is not under challenge by WCL. The ultimate findings of the referee on repudiation are set out in pars 565 to 570 of the report, and in my view, those findings should be adopted. CCG’s entitlement to be paid as on a quantum meruit

It is accepted by WCL that I am bound to follow Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234 in upholding the entitlement to CCG to be paid on a quantum meruit, in the event that the referee’s findings on repudiation are adopted. However, it was “formally” submitted that Renard was wrongly decided and that WCL wished to “reserve its position to argue this proposition in the Court of Appeal”. I think it is sufficient for me to accept that I am bound by Renard and adopt the reasoning of the referee in pars 571-579 of the report. Top Value Defects

There are four principal findings by the referee in respect of defects which were identified as numbers 3,4,6 and 30 respectively. The description of these defects as top value defects is explained in pars 1190 and 1191 of the report. Top Value Defect Number 3

This is dealt with in the report at pars 1228 to 1239. The reasoning of the referee is not under challenge so much as the assumptions implicit in his mathematics as set out in pars 1237-1239 as follows: “1237. WCL had claimed $499,124. However, it has paid only $396,771, including a retention sum of $18,169. The net cost to WCL was thus $378,602. There is no evidence of any additional costs beyond that sum as having been incurred or paid. 1238. Mr Byford contended that the reasonable cost of rectification was: (a) PVC pipework below 3 metres $ 81,827.00 (b) and (c) balance of defects (19.9% of line replaced) $ 121,744.00 $ 203,571.00 Mr Cowley estimated the reasonable costs as being: (a) PVC pipework below 3 metres $ 126,618 He provided no calculation for (b) and (c). Having regard to my view that it was reasonable for WCL to replace all the pipe that it did, in my view the actual cost of rectification of $378,602 is a reasonable cost for the increased scope of work to that assumed in Mr Byford’s lesser scope of work. 1239. In my view, WCL is entitled to recover $378, 602 for this defect.”

It was submitted on behalf of WCL that the referee should have awarded the full amount claimed of $499,124, the referee having mistakenly found that WCL had only incurred a net cost of $378,602 and not the sum claimed. It has been contended on behalf of CCG that the correct allowance should have been something between $200,000 and $280,000 approximately.

WCL based its submission on the assertion that the actual amount paid by WCL was $499,124. However, there is no evidence of that and it is clear from exhibit C, volume 2, tab 17,18 and 19, that there was evidence before the referee which, I think, justified the calculations now challenged by WCL. Understandably, counsel for WCL accepted the position as reflected in the findings above quoted when the matter was raised by the referee (exhibit C, volume 2, tab 16). For those reasons, it is not open to WCL to dispute this finding of the referee. Top Value Defect Number 4

This claim was covered in pars 1240 -1255 of the report.

The issue raised in respect of this matter concerned the correct allowance for the replacement of certain pipework which had been installed by CCG in PVC, whereas metal piping was called for because of temperature considerations.

The referee accepted that the PVC piping should be replaced but only allowed for the cost of replacing the piping outside of tenancy areas. His reasoning was that the installation of the PVC piping within those areas was the subject of an agreed variation. The particular finding of the referee was as follows: “1248. It is plain that horizontal lines should have been in metal. This was accepted by CCG, who accepted responsibility for the cost of rectification by changing UPVC lines to metal lines up to the tenancy boundaries. Thereafter installations which CCG did as a variation to its contract as approved and directed by WCL, specified that the piping would be in UPVC and was costed accordingly. If WCL subsequently required that to be rectified by changing horizontal lines from the tenancy border to the food preparation outlet area from UPVC to metal, that variation cost would be a cost to WCL and would be an extra under the contract.”

It was submitted that that reasoning was erroneous. I am unable to see why and consider that the referee’s finding based upon that reasoning should be adopted.

The further basis on which WCL disputed this finding stems from the differing views of rectification costs by the experts for the parties. The assessment on behalf of WCL was $300,019 while that of CCG was $201,747. It was submitted that the referee erred in preferring the basis of assessment of CCG’s expert (pars 1254-1255). WCL contended that this error flowed from the referee’s finding that $300,019 had actually been paid out by WCL whereas the amount was “an assessed reasonable cost figure [and that] the amount paid was in excess of that sum.”

Assuming that it be correct, in my view, that should not be taken as tainting the validity of the referee’s finding. I think this can be seen from par 1253 of the report which identified the basis upon which the referee preferred the expert evidence upon which he proceeded to base his allowance in pars 1254 and 1255. If anything, I think the referee’s belief that $300,000 had been paid out would have favoured WCL’s claim for that amount as against the acceptance of reasonable costs in the manner calculated by CCG’s expert. In my view, the referee’s findings in par 1255 should be adopted.

I am fortified in that view by the fact that the case as conducted before the referee on behalf of WCL was on the basis that the actual cost of this item was “$300,000- odd” (Exhibit C, volume 2, tab 23) (see also Exhibit C, volume 2, tab 24). Top Value Defect Number 6

This defect claim was addressed by the referee in pars 1259 to 1291 of the report. In practical terms, the amount in dispute is $12,676. There was an agreed quantum in respect of defects concerning the Hoyt’s cinema section of the project which came to a total of $130,002. There were four related disputed claims. One consisted of a claim for $12,676 being the cost of testing twelve ceilings in the cinemas after rain penetration had caused damage to some, and for which, at least in part, CCG was responsible. Another item was an agreed amount of $76,619, being the cost of replacement of ceiling number four in those cinemas: a cost incurred as a result of that ceiling failing, following the testing of the ceilings referred to. The manner in which the referee dealt with liability is taken up in pars 1279 to 1281 as follows: “1279. Nonetheless, where the ceilings had, at least in part, been subjected to water penetration which I elsewhere have held was partially the responsibility of CCG, in my view a consequence of that responsibility is the necessity to adequately test such ceilings for structural integrity. The requirement for such testing flows directly from the water penetration. In circumstances where the ceiling void could not be visually assessed for water damage, and even though some cinemas did not exhibit apparent water damage, in my view testing of all cinemas was a direct consequence of the water penetration for which, as I elsewhere hold, CCG is responsible. Accordingly, in my view, the claim for the whole of the testing of the cinemas is recoverable. The sum of $12,676.00 is thus recoverable. 1280. The remaining item is the replacement of ceiling 4, the agreed quantum being $76,619.00. For reasons I have given I am satisfied that it was proper to test the ceiling in the manner in which it did, and it failed. CCG should accordingly bear the cost of replacement. 1281. Subject to the section 5.04.02 notice point the sum recoverable is thus $229,353.00.”

After considering the “5.04.02 notice point” the referee disallowed those two items as damages recoverable under the contract by WCL (pars 1281-1289 of the report). The way in which the referee dealt with the effect of his findings on these two costs in determining CCG’s quantum meruit and alternative contract claim, is set out in par 1291 of the report as follows: “1291. The position I have stated in relation to the ceiling replacement and testing relates to the cross claim by WCL for those sums. However, when determining the reasonable cost of work for the purposes of a quantum meruit there is to be deducted from the cost of the work the cost of rectification. No question of technical entitlement to recover by way of cross claim the rectification costs arises. The task is to determine the value of the work performed with the defect, and thus the rectification cost must be deducted. This principle does not apply to the testing costs, but it does to the rectification cost of $76,619. The amount to be considered for quantum meruit purposes is thus $216,677.”

In other words, CCG’s quantum meruit claim was adjusted for the rectification costs of $76,619 leaving the testing cost of $12,676 to the account of WCL. In my view, the findings of the referee are correct in that the cost of rectification has been properly taken from the valuation of CCG’s entitlement to a quantum meruit, leaving WCL with no contractual basis for claiming the cost of testing, notwithstanding the referee’s finding that, subject to the notice point, the cost of testing would ordinarily have been recoverable by WCL under the contract (see par 1279 of the report).

In relation to the contract point considered by the referee at pars 1282-1288, I think, the referee’s reasoning is correct and should be adopted. In brief, the referee found that the purported notices pursuant to cl 5.04.02 of the contract were ineffective to take replacement of the failed ceiling out of the hands of CCG.

That failure by the Administration Manager to properly exercise his powers under the contract as Administration Manager was the direct result of WCL’s implementation of the project management team on 4 May 1998, which, de facto, took over Lawes’ powers as Administration Manager in bringing the project to practical completion.

In the absence of a validly exercised contractual basis for recovery of the certification costs, WCL’s contractual claim must fail as found by the referee in par 1289 of the report.

However, as found by the referee in par 1291 of the report, that failure of WCL’s contract claim did not preclude the referee from excluding the cost of rectification of the ceiling in his estimation of CCG’s quantum meruit entitlement.

I prefer not to base my adoption of the referee’s conclusion on the application of Turner Corporation Limited (Receiver and Manager appointed) v Austotel Pty Ltd (1994) 13 BCL 378 as I think it is unnecessary to the adoption of the report in relation to the treatment of both the rectification of ceiling four and the testing costs in the manner in which the referee calculated the entitlement of CCG to a quantum meruit. Top Value Defect Number 30

This subject was addressed by the referee at pars 1323-1331. The challenge to this section of the report is a narrow one involving the sum of $34,674 and proceeds on the submission of WCL that CCG was obliged under the contract to install a “two ring fire main [whereas it] in fact installed a one ring main.” It is common ground that the referee allowed a cost of $6500 as an “upgrade cost” required to bring the installed system into compliance with relevant fire safety regulations. I think it is sufficient to dispose of that argument on the basis that the referee made no such finding in par 1329 of the report as submitted on behalf of WCL. The referee made the following finding: “The requirement to instal (sic) the second ring was based on calculations performed on a wrong basis. Had Floths, even in April 1998, indicated the information which they had indicating this wrong basis, it would have been apparent, as is now apparent, that the one ring system with pump upgrade would have satisfied necessary standards.”

Bearing in mind that this was a design and construct contract, there was no contractual obligation to install a two ring main as contended by WCL (see referee’s finding par 1325). In my view the referee’s reasoning is clearly correct and should be adopted in relation to this section of the report. Rejection of WCL’s claim to recover monies paid under settlement between it and Hoyts

The matter is addressed by the referee in pars 974-1041. The subject matter of that portion of the report concerns a claim by WCL to recover $786,443, being monies paid out by a related corporation (Broadway) under an agreement resolving a dispute with Hoyts. The sum was made up of values placed beside some thirty numbered items of costs in addition to a claim for economic loss of $100,000 (par 974). In substance, the claim failed, the referee awarding only the amount of $3,867 (par 1041). Item D17 is the relevant claim number.

The challenge by WCL is to the whole of this section of the report and, in my view, for the most part, consists of submissions going only to the weight of evidence.

The issue, as it was presented to the referee, is set out in par 976 of the report as follows: “ 976. With the exception of the $100,000 for economic loss claimed by Hoyts, the other figures have been agreed between Hoyts and WCL. Nonetheless CCG contended that, in many instances, there was no evidence to support the sums, and second that there was no evidence to support any finding that such sums were attributable to defective or omitted work under CCG’s Agreement with WCL. It is thus necessary to consider each item. The material supporting WCL’s claim is found in the statement of Mr Hendry of 2 March 2000. It compiles the totality of the evidence upon which WCL relied, when read with the material in PD1 being annexures to the Statement of Mr Dransfield dated 30 September 1999.”

The material relied upon by WCL before the referee, as identified by him, is set out in the evidence before me in exhibit C, volume 2, tab 103-105.

Before the referee, CCG put WCL to proof that the settlement as between Hoyts and Broadway was reasonable to pass on to WCL, and, in turn, on to CCG. That is reflected in par 976 of the report.

The rejection by the referee of the various items of claim under this heading was based upon the failure of WCL to establish the link between the sum claimed and default by CCG under the contract. That is the approach identified by the referee in par 978 of the report which was in the following terms: “978. The claim made by Hoyts was against Broadway. To establish that the settlement proposed was reasonable, in discussion it was accepted that it was necessary for it to be shown that, first, as between Broadway and Hoyts the sums claimed and agreed to be paid were reasonable, second, that as between Broadway and Walker, the sum was reasonably payable by Walker to Broadway, and third, that as between Walker and CCG the sums, being reasonable, were attributable to default by CCG. This third aspect was said to be satisfied because essentially the work claimed for was said to be rectification of base building works performed by CCG, notwithstanding that Mr Lawes had certified on 24 January 1998 that the base building works were substantially complete. Substantial Completion in relation to the Hoyts premises means: “that the Premises have been completed in accordance with the specifications relating to the relevant Premises to the stage where in the opinion of the Administration Manager the tenant may reasonably commence its fitout works.””

On that basis the referee found that WCL had failed to satisfy him that the items of cost, the subject of the settlement, were recoverable against CCG (see pars 980, 982, 984, 986, 988, 990, 991, 994, 995, 996, 998, 1000, 1002, 1003, 1005, 1008, 1011, 1022, in part 1023, 1024, 1026 and 1028).

It was submitted on behalf of WCL that the referee had the evidence of Dransfield, Hendry and a Mr Koster, although no reference is made specifically to Koster’s evidence in this section of the referee’s report.

From the evidence placed before me, Koster’s evidence was to the effect that : “All Mr Koster’s statement says… is that these items are not included in the moneys that …were expended in relation to top value defect number 6” (Exhibit C, volume 2, tab 102).

In my view, the referee addressed the only evidence of significance relied upon by WCL in relation to this issue. Notwithstanding, it was submitted by WCL before me: “Beyond that material, as is evident from the report, there was a substantial body of evidence adduced before the Referee and relating to the Hoyts premises and the progress of works in respect of them.”

Given the way the matter was conducted before the referee, I think that submission is of little assistance and, in any event, does not admit of any legitimate exercise of review of the report.

It was also submitted that, in the finding referred to above, the referee: “…gave substantial weight to the fact that, before Hoyts entered into the premises and subsequently incurred any of the amounts included in its claim, the administration manager had certified the Hoyts premises as having reached substantial completion [and] the weight given by the referee to that fact was not warranted.”

That is an unadorned question of weight of evidence. In any event, it is very difficult to elicit from it a legitimate criticism of the referee’s findings, having regard to the obvious importance of the issuing of such a certificate under the contract. The starting point chosen by the referee, in that respect, is one with which I would agree.

It was further submitted that there were “substantial defects in the base building works for the Hoyts premises as at the date of substantial completion”. In support of that, reference was made to notices of 24 April 1998 said to have been issued under clause 5.04.01 of the contract. The material offered in support of that submission made no attempt at all, in my view, to link any one of the items, the subject of the settlement agreement with Hoyts and Broadway, with the subject matter of those notices in a way that would permit an evaluation of the WCL claim in respect of the payments made under the Hoyts’ agreement.

The same observation applies to the submission that the referee in another section of the report, made allowances for defects in the Hoyts section of the project.

It was also submitted on behalf of WCL that the referee, in par 1039 of the report, had overstated the effect of the evidence : referring to the phrase used in that paragraph “ that the base building works were complete.” That was not the finding of the referee. The finding of the referee was that it had been agreed at the meeting referred to in that paragraph of the report that the base building works were complete. That, incidentally, was a meeting attended by WCL representatives, representatives of its consultants and of CCG. This submission only goes to a question of weight of evidence.

Of the many findings of the referee where he found that WCL had failed to link the Hoyts payment to CCG’s performance of the contract it was submitted that the referee “was in error rejecting any item” on that basis: relying on the evidence of Hendry, in particular.

I think that submission misses the point of the referee’s reasoning which, reflected a conclusion in most instances that WCL had failed to satisfy the steps outlined by the referee in par 973 of the report.

It could not be said that the approach adopted by the referee came as a surprise, since that was the basis upon which the major part of this element of claim was resisted by CCG.

It was submitted that CCG and WCL had reached agreement on the quantum of the items involved in these elements of claim, other than the delay claim. The evidence before me demonstrated that not to be so.

There has been no attempt to identify for me how, in any particular item of claim, the Hendry evidence provided the nexus that the referee sought in order to link the settlement payment with any particular item of claim against CCG. The submission was expressed as follows: “[Hendry] gave uncontroverted evidence that he assessed each of the items in the claim including by site inspections. As a result of that process, the amount of the Hoyts claim was reduced from $1,592,978 to the final figure of $786,443. He underwent the process for the purpose of determining which elements of the Hoyts claim were properly treated as recoverable from WCL and this, of necessity, involved a determination of which of the items was a loss caused by the state of the base building works and the conduct of CCG as distinct from the cost associated with the fit-out properly to the account of Hoyts. His evidence in the context of the broader evidence of defects in the Hoyts premises … makes inescapable an inference that each item was a loss caused by CCG’s breaches of the Building Contract.”

In my view, that submission amounts to little more than a general invitation to have regard to the fact that there were defects in the Hoyts’ section of the project : that Hendry had undergone a process of whittling down the Hoyts’ claim in a manner that he thought left a residual of a claim against WCL. I do not think it follows that the referee was in error in addressing each item of claim in order to ascertain whether there was evidence upon which he could be satisfied that the amount paid out to Hoyts by Broadway was in respect of a subject matter for which CCG was responsible. At best, the submission is one simply going to the weight of evidence.

A separate set of submissions was presented in relation to the several items of claim which related to the air conditioning installation within the Hoyt’s premises. It can be seen from par 974 of the report that there were several such items which represented the major portion of this area of claim by WCL.

WCL disputed the finding of the referee in rejecting those claims on the basis that the referee erred in failing to distinguish between two obligations of CCG under the contract in respect of the installation of the subject air conditioning system. They were identified as one to design and install an air-conditioning system which was, in fact, fit for its purpose and the second was to supply a certificate from the [designing engineer] as an element of practical completion.

It was submitted that the issuing of the certificate did not discharge CCG from its underlying obligation to design and install a suitable system. It was submitted that the referee “proceeded on the wrong basis that CCG’s delivery of the certificate concluded the question as to whether or not the air-conditioning system was defective”.

While par 1018 of the report read alone might give some superficial support for that contention on behalf of WCL, a reading of the referee’s findings commencing at 1012 demonstrates that the submission of WCL is an oversimplification and obscures the fact that the referee was not satisfied that WCL had satisfied the onus of showing the amounts paid by Broadway to Hoyts in relation to air-conditioning represented payments for defective design, defective work or omissions on the part of CCG. Of special importance in that context is the finding in par 1019 as follows: “1019. Regarding category 2 items, there is no material before the Reference to suggest that the work performed by CCG in relation to airconditioning and associated systems was other than required by its contract with WCL. If the agreement between Hoyts and Broadway requires the provision of a larger or different service, it is of no concern to CCG. CCG was obliged to do only that which was the subject of its agreement with WCL.”

It is also clear from par 1021 of the report that the referee did not misconstrue the obligations of CCG under the contract. That paragraph finding was as follows: “1021. In my view there is no basis upon which any such sum as may be expended on upgrading or amending the air conditioning, and smoke exhaust systems to accommodate safety or comfort issues, can be said to be the responsibility of CCG. That is because it has not been shown that the work performed by CCG was other that that required by its agreement with WCL. Indeed it has been certified that the work complied with the terms of that agreement, and WCL, the Council, and Hoyts have acted on that.”

There has been nothing put before me to substantiate a case that the referee either overlooked or misconstrued evidence or that his findings were manifestly wrong. On the contrary, the referee found that WCL had failed to satisfy its onus of establishing that the settlement with Hoyts related to contractual shortcomings of CCG.

Accordingly, the referee’s findings in relation to top value defects should be adopted. The parties raise no further issue on the referee’s findings as to defective work.

As a consequence of the referee’s findings on repudiation, the sum due to CCG was calculated in the report as follows: “667. The resulting reasonable cost of construction of the Project is thus as follows: Tozer’s revised assessment of reasonable direct costs: $86,831,000 Plus: Delay to the Project February 1997 to December 1998 $771,000 Acceleration to Project February/ March 1998 Nil Costs Incurred before February 1998 Attributable to Delays Nil Unreasonable Premium Paid in Undertaking the Project $80,000 Additional Costs Resulting from Dalma Nil Residual Value of Assets Nil Backcharges not Recovered from Dalma Nil Other Backcharges not Recovered Nil Loss of or Damage to Hired Equipment Nil Cost of Rectification of Damage to Works Recovered by Nil Insurance Other Amounts Considered Unreasonable Nil Cost of Rectification of Damage to Works not Covered Nil by Insurance Contingent Sums: (Dalma) $392,513 (Buchan) 110,000 TOTAL: $88,184,513 668. From this sum must be: (a) Deducted the reasonable cost of rectification of defects. (b) Added a reasonable margin. Cost of Rectification of Defects 669. As appears from the reasons addressing “Defects and Incomplete Works”, the reasonable cost of rectification is $3,086,311. 670. The cost to which the margin must be added is thus: Direct cost $88,184,513 Less rectification $ 3,086,311 Net Cost $85,098,202 Reasonable Margin 671. To the reasonable direct cost must be added a reasonable margin. WCL accepted that was so. 672. Mr Byford’s opinion was that a reasonable margin was 7.5%. His view was that was within the lower range of the “market rate for return of this nature in the 1997/98 period”. A figure of that dimension was said to be supported by CCG results on other projects. 673. Mr Tozer regarded the market as more competitive at that period than to allow a 7.5% margin. It is established that, in fact, in its bid for the contract the margin included by CCG was 4.5%. 674. I can see no persuasive reason why the percentage margin which the contractor thought appropriate to include in its successful bid should not be applied to the direct costs. On the assessed reasonable cost of $85,098,202 a margin of 4.5% equates to $3,829,419.” 675. Accordingly I determine that the reasonable cost of the Project assessment for determination of a quantum meruit is: Direct Cost $85,098,202 Margin 4.5% $ 3,829,419 TOTAL $ 88,927,621 676. CCG has been paid $74,957,444 by WCL. Thus, CCG is now entitled to recover as a quantum meruit the sum of: $88,927,621 less $74,957,443 $13,970,178 … 678. The parties agreed that the interest rate payable under the Supreme Court Act was: (a) 23 June 1998 - 30 August 1998 (69 days) 10% (b) 1 September 1998 - 24 March 2000 (571 days) 9.5% Daily rates are thus: (a) 0.02739726% (b) 0.026027397% 679. The interest rate payable on the quantum meruit is thus: (a) 69 days $264,093.75 (b) 571 days $2,076,198.07 $2,340,291.82 680. The sum payable by WCL to CCG is thus: Quantum Meruit $13, 970, 177 Interest (to 24 March 2000) $ 2,340,291 $16,310,468 ”

Those findings and calculations are adopted (noting that there is a discrepancy of one dollar in the nett quantum meruit figure which I have ignored).

The referee dismissed the claims against individual defendants. Those findings are not challenged by either party and, accordingly, are adopted.

CCG mounted an alternative claim in contract which is unnecessary for me to consider. It relied upon allegations of breach which are, in substance, the grounds upon which it treated WCL’s conduct as a repudiation of the contract.

On this alternative basis the referee found that CCG was entitled as at 24 March 2000 to $12,851,794 calculated as follows: “Conclusion 754. On this alternate claim the plaintiff would be entitled to the following: Original Contract Sum $83,422,500.00 Plus: Electrical variation $675,000.00 Other Variations $1,831,601.00 Hoyts Variation $3,376,048.00 Loss of margin claims Nil Acceleration costs Nil Delay costs $1,037,953.00 Total $90,343,102.00 Less: Cost of incomplete and defective work $4,368,068.00 Paid to date: $74,957,443.00 Balance Due $11,017,591.00 Plus Interest: 69 days $208,277.75 571 days $1,637,395.11 Total Interest $1,845,672.86 $1,845,672.00 TOTAL SUM DUE $ 12,851,794.00 ”

However, there are two areas in which WCL maintained the referee was in error and which, I think, have some bearing on the conduct of WCL which I have found to be repudiatory of the contract in adopting the report. I refer to issues described in the reference as the “Hoyts Variation” and “Delay Costs” which were related to the Hoyts Variation.

I think the delay occasioned to the works, as found by the referee, do provide a further dimension to the matrix of facts in which WCL’s repudiation took place.

The Hoyts Variation was, in substance, the additional cost of constructing a twelve cinema complex instead of the eight cinema complex which originally formed part of the project and in respect of which a variation notice was issued on 24 February 1997 (pars 691 and 841 of the report).

That change in the works became the subject of an agreement between the parties which provided for payment by WCL of $2,225,000 which included an acceleration sum of $400,000. That agreement was subject to a condition which was not fulfilled (pars 691, 849). The relevance of this area of the report, in my view, is to be found in the conclusion of the referee as to the Delay Costs issue as follows: “ Delay Costs 751. I have found in relation to the Hoyts variation that the plaintiff is entitled to extension of time until at least 23 June 1998. CCG has claimed for time related costs in respect of that period. The Hoyts variation claim was submitted in accordance with the Agreement but neither the price, nor the time was agreed. I have determined the value of that variation. However, because of the fitout not being complete prior to 23 June 1998, CCG could not complete its works prior to that date. CCG had complied with the requirements of clause 9.02.02 to that date. Clause 9.05.02 applies and CCG is entitled to time related costs in accordance with clause 9.06.01. However entitlement to time related costs pursuant to that clause arise only if “the Contractor’s costs are not included in the value of any variation”. In submitting its price CCG stated “we note that the maximum daily allowance has been used in calculating time related costs for the purposes of this budget price.” The price so submitted however, was not accepted. The pricing of the variation which I have determined includes an acceleration cost of $400,000, but makes no allowance for the cost of being on site between 17 March 1998 and 23 June 1998 which was necessary in order to carry out the following works once the fitout works were complete. Accordingly, in my view CCG is entitled to time related costs in respect of that period.”

The ‘fitout’ of the cinemas was not part of the contract so that the referee’s finding of delay is, at least, in part, dependent upon there being uncompleted contract works at the time of the fitout, which, in turn, were dependent upon completion of the fitout.

On 2 May 1997, CCG made a claim for an extension of time arising out of the Hoyts variation, claiming an extension to 2 June 1998 (par 845 of the report).

On 24 January 1998, substantial completion of the cinema complex was certified under the contract and hand-over for fitout was given to Hoyts on 25 February 1998 (par 850). I do not understand there to be any dispute that substantial completion was achieved by CCG’s acceleration of the works to combat delay associated with the Hoyt’s Variation.

Under the contract, time for fitout was allowed at forty working days. Under the agreement in fact entered into between WCL and Hoyts, sixty calendar days were allowed which meant that fitout would not be completed until 26 April 1998. In fact, the agreement between Hoyts and the fitout contractors provided for completion by 28 April 1998 (par 852).

The essential findings by the referee as to the fitout delay that ensued were in the following terms: “853. Whilst the base building work was Substantially Complete prior to the 17th March 1998, the work the subject of the Hoyts variation was not entirely complete because there remained work which CCG was obliged to do under the Agreement to obtain Practical Completion of the Project (including Hoyts theatres), which work could not be performed until after completion of the fitout by Hoyts’ fitout contractor. The evidence is, in my view, overwhelming that there remained work to be done under the variation. The work of CCG included the installation of services including electrical, airconditioning, plumbing, and fire fighting services involving smoke alarms, fans, sprinklers, and emergency lights. Many of these services required modification as a consequence of the Hoyts fitout. Further, after fitout it was necessary for the base installations, as modified as a result of the fitout, to be integrated with monitoring systems, tested and certified by the appropriate engineers. Warranties in respect of the final installation were to be provided by the subcontractors. It was only after this that, formally, could the Certificate of Classification allowing occupation of the whole of the Project be obtained, and compliance with the conditions of building and development approval be achieved. This was made plain to WCL by CCG in its letter of 10 June 1998 when it wrote: “Please be advised that we have not yet been able to conduct final “BCA Compliance” inspections throughout the cinema area as a result of the cinema fitout impacting on the base building works. We take this opportunity to inform you that we will require a reasonable period of time once the cinema fitout works are complete so we may ensure the base building works are complete and ready for certification, sign-off and inspection to achieve BCA compliance certification. We await your advice as to when the cinema fitout works are complete so we can make the necessary arrangements.” There was no response to this letter prior to the 23rd June 1998. The theatre variation work was on the critical path on the July programme. Thus the contractor had an entitlement to an extension of time pursuant to clause 9.05.02. It had claimed an extension of time but no extension had been agreed. … 864. As discussed elsewhere, in my view the evidence is overwhelming that there were adjustments to be made to services in the nature of sprinklers, fire fighting equipment, exit lights and other emergency services which could not be attended to until after the Hoyts fitout was complete. Only after such adjustments would there be proper testing of all services sufficient to enable the obtaining of the certificates necessary for Practical Completion. The work was work which CCG was obliged to do under the terms of the Agreement, being work after Substantial Completion, and after fitout. The delay necessarily resulting from the Hoyts fitout contract not being let until 3 March, and operative from 25 February, and with a period of 60 days contract time, necessarily meant that the Project, which included the Hoyts cinema, could not be practically complete until that work was done post fitout. … 866. If the Hoyts Variation be regarded as a variation extension of time matter attracting clause 9.05, an extension of time could be granted because the Hoyts Variation work was on the critical path of the contract construction programme. It was applied for (10 weeks), but not determined by the Administration Manager. As the work under the variation could not be completed until after the fitout work was complete, the extension of time must be until a time after that date. That means the contractor was entitled to an extension of time until at least 23 June 1998.”

If those findings by the referee were sound, then, in my view they only add to the seriousness of WCL’s conduct in resorting to the liquidated damages provisions of the contract and what that entailed, while imposing impossible and unjustified requirements upon CCG in its efforts to achieve practical completion.

WCL does not challenge the finding of the referee that the Hoyts Variation was on the critical path of CCG’s Construction Program.

The argument advanced on behalf of WCL is not the most meritorious case advanced in these proceedings.

It is acknowledged by WCL that the original scope of works, so far as they included the cinema area, provided for construction of a building to house eight cinema areas to be substantially completed by 24 January 1998 and to reach practical completion by 17 March 1998.

It is common ground that those works were varied by requiring the construction of a building to encompass twelve cinemas. The works being on the critical path, it could not be seriously suggested that such a variation would not delay “the construction of [a] critical activity noted on the critical path of the Construction Programme”. It is not disputed that CCG, in effect, responded to WCL’s ‘request’ to accelerate the works in achieving substantial completion of the Hoyts Centre by the time stipulated in the contract.

WCL challenges the referee’s finding that CCG was entitled to an extension of time for practical completion “until at least 23 June 1998”, on the basis that CCG had failed to comply with the contractual provisions entitling it to an extension of time.

WCL also contended that the referee was in error in finding that CCG was entitled to delay costs related to this variation on the basis that CCG had failed to comply with the contractual provisions entitling it to delay costs.

These contractual provisions required CCG to give prescribed notices of claims for extension of time and delay costs. The rationale for those provisions lies in affording the Administration Manager the opportunity of considering the effect of a claimed variation on contract time and costs at the time of performance of the subject work and to give such instructions as are deemed appropriate to avoid or minimise those impacts.

In this case the parties entered into an agreement in relation to the variation which provided for payment to CCG of $2,225,000. That sum included the amount of $400,000 as acceleration costs.

Although the agreement was subject to a condition subsequent which was unfulfilled, namely, reaching agreement in relation to an unrelated variation, it could not be said that the Administration Manager and WCL were not fully informed of the nature of the variation and as to its related effect on time and costs of performance. In fact the referee found as follows: “852. The work to be performed by CCG with respect to the Hoyts theatres involved base building works excluding fitout. The base building work was Substantially Complete before 17 March 1998, namely on 24 January 1998. No question of non-compliance with the contractual provisions for application for an extension of time arises because WCL accepted that there was an entitlement to a time extension and agreed to pay the sum of $400,000 in lieu of granting that extension of time. CCG agreed to accept that sum in lieu of time.”

I think that reasoning is correct. Even if WCL’s challenge to that paragraph, based on legal arguments was a valid one, the paragraph is beyond criticism.

It was argued on behalf of WCL that the notice provisions of the contract could not be waived or “dispensed with”, relying upon cl 1.09 of the contract, a provision against modification of the contract other than by deed and “except with the prior written consent of [WCL]”…. WCL could not and did not waive the requirement in the case of the clause 9.05.02 notice because CCG had immediately started work on the [Hoyts] variation”. Cl 9.05.02 required the giving of notice of a variation that was likely to cause delay “prior to commencing the execution of that Variation”.

As stated, I think the referee was correct in finding waiver of notice in respect of time and delay costs related to the Hoyts variation. Further, I would strain to avoid the consequence inherent in applying WCL’s construction of the contract to the facts of this case, in the face of the undisputed facts relating to the Hoyts variation. I would not regard that task as a particularly difficult one on the evidence before the referee tendered by CCG in the proceedings before me.

It was further argued on behalf of WCL that the referee, in finding CCG to be entitled to an extension of time to “at least 23 June 1998”, had failed to distinguish between the effect of the Hoyts variation, which related to the increase in theatre areas from eight to twelve, and the effect of the fitout on achieving practical completion of the Hoyts centre under the contract.

That submission is based primarily upon par 839 of the report which identified one of five matters to be considered in relation to CCG’s claims for extensions of time as being “Hoyts Cinema Variation, including fit-out”. In my view, that argument is simplistic and mis-states the reasoning of the referee at pars 840 et seq of the report (see in particular pars 852, 853, 864 and 866).

The remainder of the submissions advanced on behalf of WCL in challenging the referee’s finding that CCG was entitled to an extension of time under the contract are, essentially, weight of evidence contentions that do not justify a finding that the referee misunderstood the evidence or was manifestly wrong in evaluating the evidence.

One starts with the referee’s finding that the evidence was “overwhelming that there remained work to be done under the [Hoyts] variation” which could not be performed until after completion of the fitout by Hoyt’s fitout contractor”. The referee’s findings as to the time of performance of the fitout are not in dispute, in particular, that the fitout contractors did not complete that work prior to 23 June 1998, the theatres being opened on 2 July 1998 (pars 863 and 865 of the report).

The submissions on behalf of WCL are summarised in the written submissions as follows: “51. The only available conclusion is that, until late March 1998, the fact was, as the parties well knew, that had CCG performed its obligations under the Contract its works would not have included any follow-on works in the Hoyts Premises. That is reinforced by a consideration of the letter from CCG to WCL of 11 May 1998. In it CCG asserts (in the third paragraph) that the Hoyts Variation involved removing the tenancy fit-out for the cinemas from the scope of its works. That was false and a reflection of the fact that in writing the letter which terminated the Hoyts Variation agreement CCG was searching for a basis (which did not exist in fact) to assert the Hoyts Variation had involved a change which necessitated for the first time follow-on works.”

The reference to the letter of CCG of 11 May 1998, is a reference to the letter set out in par 855 of the report.

The submissions on behalf of WCL are, in substance, a repetition of the arguments and a reliance upon the same evidence as was the subject of WCL’s submissions which failed before the referee (see Ex 1, vol 1, tab 7). That case was met by CCG in the submissions presented to the referee on its behalf (see Ex 1 vol 2, tab 4 particularly pars 15-22).

I think it is sufficient to note, from the findings of the referee that he accepted the evidence relied upon by CCG in those submissions in reaching the conclusion that the Hoyts variation could not be completed until the fitout was completed (see in particular par 853 of the report and the evidence noted in foot note 591). It was that evidence that the referee referred to as “overwhelming” (par 864 of the report).

It follows that the referee’s findings as to delay occasioned to CCG by the Hoyts variation should be adopted, in particular that CCG was delayed in the performance of critical activities until “at least 23 June 1998”.

There was advanced an argument before me on behalf of WCL that CCG’s case in repudiation should be approached on the basis that the contract was a losing contract for CCG and that its conduct leading up to its purported termination of the contract was contrived.

This aspect of the case did not receive any particular attention by WCL until a series of supplementary submissions with related evidentiary material was presented between 29 August and 14 September 2000.

In WCL’s principal submissions of 19 August, reliance was placed upon Ex 8 of the evidence before the referee which included CCG’s project reports for the months of March to June 1998 which referred to projected losses increasing from $4,826,476 in March to $15,432,578 in May and slipping back to $13,772,095 in June 1998.

There was evidence of Irving that there was a “considerable cost overrun”, although not of the magnitude of ‘projected’ losses referred to in the monthly reports.

It was submitted that CCG’s motivation in “engineering” a case of repudiation was to enable it to recover on a quantum meruit basis and so avoid the consequences of a losing contract.

While not discounting that factor as one which could be taken into account in assessing conduct of a principal said, by a contractor to be repudiatory, it is far from a significant factor and one frequently, in my view, associated with disputes involving termination of a contract for repudiation.

Ultimately, the judicial exercise is one of evaluating the conduct alleged to be repudiatory, regardless of the motivation of the party rescinding for repudiation. It is difficult to envisage a case where a party rescinding elects to claim on a quantum meruit basis where prospects of a losing contract are not hovering around.

Further, one of the difficulties in paying too much attention to such a factor as projected losses by a contractor during the course of performance of a contract, is that such projections usually do not take into account the damages occasioned by breaches of the principal.

It is apparent from the projected income in CCG’s monthly reports that CCG had not taken into account the full measure of income represented by the referee’s finding in relation to CCG’s contractual claim in these proceedings.

Further, the difference between the sums found to be due to CCG, respectively, on a quantum meruit basis and under the contract, was not that significant. Before interest, the referee found that, in quantum meruit, CCG was entitled to $13,970,177, while, in contract, he found the entitlement to be $11,017,591.

In WCL’s further submissions of 14 September 2000 the “motivation” issue was expressed as follows: “3. The question of the plaintiff’s motive for its actions in the critical period leading up to the termination of the contract was therefore an issue before the referee, yet he has failed to deal with it. This circumstance can only reinforce that the Court would not have the required degree of comfortable satisfaction in adopting the report at least in relation to the repudiation issues. A failure to deal with an important issue is a circumstance which must be taken into account in deciding whether to adopt or reject the report.”

I would have considerable hesitation in attributing to the referee, with his experience in the field, an oversight such as that ascribed to the referee’s reasons on the issue of repudiation.

It was submitted on behalf of CCG that: “Nowhere (in WCL’s submissions before the referee) did [WCL] submit that the Broadway contract’s profitability motivated [CCG’s] actions up to 23 June 1998, nor was any submission made as to how such a fact would affect a finding that the contract was repudiated by [WCL]”.

It was further submitted that the “motive point had dropped off [WCL’s] agenda by the end of the reference and the referee was not asked by [WCL] to make any finding about it.”

In reviewing WCL’s submissions before the referee, I think, it is sufficient to observe that those submissions do not justify WCL in now attributing to CCG’s financial position under the contract the characteristic of an “important issue” before the referee.

In any event, in the face of the findings of the referee on repudiation which should be adopted, I would place such an issue in a very low level of relevance to the ultimate findings of the referee on repudiation.

Accordingly, in relation to the quantum meruit case of CCG and its claim of delay in relation to the Hoyts variation, I am of the view that the referee’s report should be adopted save where I have expressly refrained from adopting particular findings or reasoning.

Where I have not directly addressed particular paragraphs in the quantum meruit case comprised within the report, those paragraphs have been, nevertheless, adopted by me in assessing CCG’s quantum meruit case.

In relation to the alternative contract case, I have limited any express consideration of the report to findings that I regarded as having some bearing on the quantum meruit case. Those findings of the referee are adopted.

It has been unnecessary to consider further findings of the referee on CCG’s alternative contract case. However, I think it may be of assistance to observe that I have examined that section of the report and agree with its reasoning and conclusions, on the assumption that the evidence cited by the referee has been correctly stated.

The dispute between the parties as to the valuation of the Hoyts variation (pars 691-723) rests in contentions by WCL that the referee misunderstood the outcome of joint conferences involving the parties’ respective experts and wrongly favoured CCG’s expert over the opinion expressed by WCL’s expert.

Even if one accepted that the referee misunderstood that outcome, what is plain from a reading of the report is that the referee (a) favoured a principle of quantification which had actually been employed on site during performance of the work, (b) rejected the opinion of WCL’s expert that such an approach was “impossible”, (c) did not favour the approach of WCL’s expert.

The referee regarded the assessment of WCL’s expert as disproportionate to the likely value of the variation and preferred the opinion evidence advanced on behalf of CCG.

When regard is had to the expertise of the referee in this field, I think his conclusions in this section of the report should be adopted: viewing the submissions on behalf of WCL when reduced to essentials, as amounting to a weight of evidence argument.

By a further amendment to the summons, CCG sought an additional form of relief, namely: “A declaration that the First Defendant is liable to indemnify the Plaintiff in respect of the Goods and Services Tax, if any, which may be payable by the Plaintiff on any amount paid to it by the First Defendant pursuant to the orders of the Court herein.”

The relief relates to the provisions of the legislation referred to as A New Tax System (Goods and Services Tax) Act 1999 (Cth) (the Act) which took effect from 1 July 2000. The tax (GST) is payable on a “supply” within the meaning of s 9.10(2) of the Act which includes the following: “(2) Without limiting subsection (1), supply includes any of these: (a) a supply of goods; (b) a supply of services; (c) a supply of advice or information; (d) a grant, assignment or surrender of real property; (e) a creation, grant, transfer, assignment or surrender of any right; (f) a financial supply; (g) an entry into, or release from, an obligation: (i) to do anything; or (ii) to refrain from any act; or (ii) to tolerate an act or situation; (h) any combination of any 2 or more of the matters referred to in paragraphs (a) to (g).’”

CCG bases its claim for this relief on the “real possibility” that GST will be payable upon a judgment of the Court delivered after 1 July 2000. For this contention, reliance has been placed upon the affidavit of Alison Chappell sworn 22 August 2000 in which she deposes to the expectation that a draft and final ruling on this matter will be published by the Australian Taxation Office and evidences some views expressed within the Taxation Office on the subject. The test of there being a ‘real possibility’ of the imposition of the GST comes from the approach of the South Australian Supreme Court in Duke Group Ltd (In Liq.) v Pilmer (1999) 73 SASR 64.

I am not prepared to approach consideration of the relief sought on that basis. The Court is seized of the relevant facts. I regard the task as one requiring me to decide whether GST is payable in respect of the judgment given in these proceedings.

In my view, it is not.

Section 9-5 of the Act defines a taxable supply as follows: “You make a taxable supply if: (a) you make the supply for consideration ; and (b) the supply is made in the course or furtherance of an enterprise that you carry on; and (c) the supply is connected with Australia ; and (d) you are registered, or required to be registered However, the supply is not a taxable supply to the extent that it is GST-free or input taxed .”

In my view, the imposition by the Court upon WCL to pay the judgment debt as ordered in these proceedings does not constitute a supply by CCG in the form of a supply of goods or services, of advice or information, of a grant, assignment, surrender or release of any kind, nor is it a financial supply.

Further, in order to make the supply a “taxable supply”, it must be one which “you make….for consideration”. I have been unable to see any room for ‘consideration’ in the supply said to be, or arise out of, the judgment in these proceedings.

To the extent that there has been a merger in the judgment of CCG’s causes of action relating to the project, that does not involve any release grant, assignment, surrender, transfer or creation of a right by CCG. It is a merger by operation of law. Payment of the judgment debt is in no different category. It operates to satisfy the Court’s judgment, without creation of a right, release, assignment or the like by CCG.

For those reasons, I decline to make the declaration sought.

In summary, save where I have expressly refrained from doing so, I have adopted the report of the referee in the substantive sections indicated in the report as follows: The February Agreement Estoppel Contractual Provisions The Plaintiff’s Repudiation Case Quantum Meruit Claims Interest Plaintiff’s Claim Against Individual Defendants Hoyts Variation Extension of Time - Hoyts Cinema Variations Unliquidated Damages Defects and Incomplete Works Misrepresentation and Damages Pursuant to Trade Practices Act 1974 Breach of Fiduciary Duties Costs

Since the hearing of these proceedings, a draft ruling has issued from the Australian Taxation Office relating to the possible application of GST to judgments. I have not had regard to that ruling, nor have the parties applied to address me further on the issue as a consequence of that publication.

Accordingly, the entitlement of CCG to be paid as on a quantum meruit is calculated as set out in the following paragraphs:

As calculated by the referee, the total reasonable cost of the work performed by CCG was $88,927,621 of which it had been paid $74,957,444 leaving a balance of $13,970,177 (pars 675, 676 and preceding pars).

The parties agreed before the referee that interest payable under the schedules published pursuant to the Supreme Court Act 1970 was 10% from 23 June 1998 to 30 August 1998 and 9.5% to 24 March 2000 (in fact, for the latter part of March it was 10%).

Interest, accordingly, was calculated by the referee up to and including 24 March in the sum of $2,340,291.82 (par 678). I have calculated interest from 25 March 2000 to 31 August 2000 at 10% and then at 11% from 1 September 2000 to 19 April 2001 in accordance with the schedule rates for those periods.

So calculated, the further interest payable amounts to $1,584,945 making the total sum payable by way of quantum meruit, including interest, $17,895,413.

Against that sum must be allowed $294,034 as payable to WCL by way of unliquidated damages (pars 1186-1188). Those findings are not in dispute. The referee calculated interest on that sum to and including 24 March 2000 in the same manner as interest was calculated on CCG’s quantum meruit. Interest on those damages amounted to $53,500. I have calculated interest from 25 March to 19 April 2001 at Supreme Court schedule rates as in the case of the quantum meruit amount. That additional interest amounts to $33,358 so that the total of unliquidated damages and interest that is to be allowed against the quantum meruit claim is $380,892.

The amount payable to CCG after allowing for that unliquidated damages claim is $17,514,521.

Accordingly, I give judgment and make the orders and declarations as follows: 1. Judgment for the Plaintiff against the First Defendant in the sum of $17,514,521 inclusive of interest up to and including 19 April 2001. 2.Declare that: (a) The deed between the Plaintiff and the First Defendant of 29 February 1997 (the deed) was varied by oral agreement of the parties of 2 March 1998. (b) The deed as varied was repudiated by the First Defendant and lawfully rescinded by the Plaintiff on 23 June 1998 (c) The Plaintiff is entitled to an extension of time for practical completion under the deed as varied to 23 June 1998. (d) The Plaintiff is entitled to be paid on a quantum meruit basis for work done for the First Defendant. 3. The First Defendant’s Further Amended First Cross-Claim be dismissed with costs. 4. The First Defendant’s Second Cross-Claim be dismissed with costs. 5. The Fifth Further Re-Amended Summons be dismissed against the Second, Third, Fourth and Fifth defendants with no order as to costs. 6. The First Defendant pay the Plaintiff’s costs of the proceedings. 7. The First Defendant to pay the costs of the reference. 8. Otherwise, the summons is dismissed. Wherever costs of the proceedings or the cross claims are referred to in these orders, those expressions include the parties’ costs of the litigation of those issues in the reference.