White Constructions Pty Ltd v PBS Holdings Pty Ltd

1. [1]

   BELL P: This appeal relates to a claim for damages alleged to have been suffered by the appellant, White Constructions Pty Ltd (White), a developer, in connection with the development of a multi-lot subdivision, known as Cedar Grove in Kiama NSW (the Development).

2. [2]

   White pre-sold all lots prior to commencing construction in early 2016. Completion was conditional upon registration of the plan of subdivision, which in turn was conditional on compliance with certain development consent conditions. One such precondition for the registration by the Land Titles Office of the subdivision was the issue by Sydney Water Corporation (Sydney Water) of a s 73 certificate under the Sydney Water Act 1994 (NSW) (s 73 Certificate), certifying that Sydney Water’s requirements to service the subdivision with water, wastewater and stormwater services had been met.

3. [3]

   The current appeal concerns the sewerage design for the Development. The context, as explained by Hammerschlag J (the primary judge), was that the usual design goal of a new land development sewerage installation is to discharge sewerage from the development lots to a connection point with an existing sewer main, via “lead-in works” and that, ideally, an installation will be naturally gravity-fed to the connection point, but sometimes pumping installations are required: White Constructions Pty Ltd v PBS Holdings Pty Ltd [2019] NSWSC 1166 at [28]. The attractions of a gravity-fed solution lie in the costs of operation and maintenance, with a gravity-fed solution using, or predominantly using, the natural forces of gravity as opposed to requiring the mechanical pumping of sewerage.

4. [4]

   In or about February 2012, at least on an informal basis, White engaged the second respondent, Illawarra Water & Sewer Designs Pty Ltd (IWS), a sewer designer, to provide design and project co-ordination services for the purposes of obtaining Sydney Water’s approval of, and funding for, the sewer infrastructure for the development. IWS was principally represented by Mr Joel Edwards (Mr Edwards).

5. [5]

   In its dealings with IWS, White was, for the most part, represented by Mr Trevor Unicomb (Mr Unicomb). Mr Unicomb had been retained to be White’s project manager for the project. A major issue in the case concerns whether, when and in what terms Mr Unicomb instructed Mr Edwards not to pursue a gravity-fed solution for the sewerage design for the Development which involved horizontal drilling into rock.

6. [6]

   On or about 18 December 2014, White and IWS entered into a contract, under which the latter agreed to provide design and project co-ordination services for the delivery of sewer infrastructure in respect of the Development. The terms of the contract were set out in a document prepared by IWS, entitled “Project Coordinators Fee Proposal”, dated 18 December 2014 (the Fee Proposal).

7. [7]

   In or about early February 2015, IWS prepared and provided to White a sewer design that included two pumping stations. White subsequently entered into a contract with Cleary Bros (Bombo) Pty Ltd (Cleary Bros) for the construction works for the Development, including sewer infrastructure works based on IWS’s sewer design. Construction work commenced in mid-August 2015.

8. [8]

   Subsequently, the first respondent, PBS Holdings Pty Ltd (PBS) (referred to in the judgment at first instance as Sydney Wide Coordinators or SWC), a water servicing co-ordinator, submitted the sewer design prepared by IWS to Sydney Water for the latter’s approval for the purposes of obtaining a s 73 certificate. This design included the proposal involving pumping stations, rather than a gravity-based solution.

9. [9]

   On 24 November 2015, White as Developer, PBS as Water Servicing Coordinator and IWS as Designer entered into a Developer Works Deed (the Deed) with Sydney Water. The requirements for such a Deed and its terms are considered more fully later in this judgment. (The construction of this Deed and a consideration of to whom warranties were given under it formed an important element of the controversy between the parties.)

10. [10]

    In January 2016, Sydney Water rejected the sewer design prepared by IWS.

11. [11]

    On or about 16 May 2016, following a suggestion by Sydney Water in March of that year, PBS submitted to Sydney Water an alternative design that used a horizontal deep-bore main to gravity drain for the site (the horizontal bore sewerage system) instead of the previously submitted and rejected pumping stations design. This was a gravity-fed solution.

12. [12]

    On or about 11 August 2016, Sydney Water approved the revised sewer design.

13. [13]

    In or about late December 2016, the sewer infrastructure works for the Development were relevantly completed.

14. [14]

    The essence of the claim brought in the Technology and Construction List of the Equity Division of this Court was pithily summarised by the primary judge as follows (noting that his Honour referred to PBS as SWC):

15. [15]

    As put at [157] of the primary judgment, “White’s essential complaint is about delay. Its loss was allegedly caused because the underbore design was not prepared and submitted earlier.”

16. [16]

    White claimed to have incurred substantial financing costs as a result of the delay to completion of the Development which was said to have been occasioned by the initial proposal for, and ultimate rejection of, the two pumping stations designs, rather than the horizontal bore sewerage system which was ultimately approved and implemented.

17. [17]

    The primary judge noted at [153] that the experts called by both parties agreed that “gravity sewerage options are generally preferred over pumping stations”, and (at [155]) that a design should have been submitted by 24 November 2015 which, if prepared to the prescribed standard, would likely have been approved on or about 4 January 2016. This, it was said, would have allowed the completion of the Development by July 2016, whereas ultimate approval of the horizontal bore sewerage system was not submitted until mid-May 2016 and not approved until 11 August 2016, with installation of the sewerage infrastructure not completed until late December 2016.

18. [18]

    The primary judge rejected White’s claims, and dismissed the Further Amended Technology and Construction List Statement with costs.

Issues on appeal

1. [19]

   A number of issues arise on appeal including:

   1. (1)

      whether PBS and IWS had obligations to White under the Deed, or whether contractual obligations were only owed pursuant to the Fee Proposal. The significance of this issue lay in the fact that the Deed contained warranties given by both IWS and PBS which, if owed to White in addition to (as opposed to solely to) Sydney Water, would, together with an entire agreement clause in the Deed, permit White to circumvent an argument that the terms of IWS’s obligations under the Fee Proposal had been qualified by verbal instructions said to have been given by Mr Unicomb on behalf of White to Mr Edwards, prior to entry into the Deed, not to pursue a gravity-fed design solution (the Instruction);

   2. (2)

      whether the primary judge erred in holding that the Instruction had in fact been given, and whether he erred in his findings as to the timing and terms of such instructions. A related issue concerned the nature of this finding by the primary judge, and whether it was in part a demeanour-based finding, with White contending that it was not, and that this Court was in as good a position as the primary judge to make an assessment as to whether or not the disputed Instruction had been given;

   3. (3)

      the role played by Mr Ian McIntyre (Mr McIntyre), an “adviser” appointed under the Uniform Civil Procedure Rules 2005 (NSW) r 31.54 (UCPR), and whether the primary judge failed to afford White procedural fairness by acting upon his advice without giving the parties an opportunity to make submissions in respect of that advice or its application;

   4. (4)

      the adequacy of the primary judge’s reasons with respect to the expert evidence on the issue of delay and damages;

   5. (5)

      subsidiary issues relating to the damages claim.

2. [20]

   Before turning to consider each of these issues, it is necessary to set out in considerably greater detail both the statutory and factual background to the engagement by White of PBS and IWS, the relevant terms of the Fee Proposal and of the Deed, and of the events following rejection of the pumping station proposal.

Background

1. [21]

   It is first convenient to refer to Sydney Water and the role it plays in the development of land, such as that which was the subject of the Development in the present case.

2. [22]

   Sydney Water Corporation is constituted by s 4 of the Sydney Water Act as a corporation. It is a corporation within the meaning of the State Owned Corporations Act 1989 (NSW). One of its functions under s 12 of the Sydney Water Act is, under licence, to “provide, construct, operate, manage or maintain systems or services for”, inter alia, “providing sewerage services” or “disposing of waste water”.

3. [23]

   Division 9 of the Sydney Water Act is headed “Development”. It makes provision, in s 70, for the issue of compliance certificates in relation to particular developments, certifying either that Sydney Water’s requirements under Div 9 in relation to the development have been complied with or that no such requirements were imposed by Sydney Water in relation to the development.

4. [24]

   Section 73 of the Sydney Water Act provides that:

5. [25]

   Section 74 of the Sydney Water Act provides that:

6. [26]

   The primary judge observed (at [40]) that, once Sydney Water receives an application for a s 73 Certificate, it issues a Notice of Requirements (NOR) which the Developer is required to satisfy. The primary judge noted that “[t]hese requirements inevitably require the developer to engage an authorised Water Servicing Coordinator to be the contact point with Sydney Water”, and that “Sydney Water does not have direct contact with the developer.”

7. [27]

   The primary judge noted (at [40]) that Mr Edwards of IWS was designated as a Key Person with PBS, “which gave him direct access to Sydney Water”. The primary judge also noted (at [41]) that Sydney Water “requires the developer to engage appropriately capable Developer Infrastructure Providers (in this case IWS) and then to enter into a Developer Works Deed (incorporating standard terms) which sets out all the parties’ roles and responsibilities.”

8. [28]

   From as early as 2012, Mr Unicomb was in discussion with Mr Edwards in relation to sewerage works on the development site. As is perhaps not unusual, no contractual arrangements were in place between White and IWS at this time in relation to the Development, although documents before the Court suggested that Mr Edwards was engaged in work with Mr Unicomb on other projects at around this time.

9. [29]

   Thus, on 9 January 2012, Mr Unicomb sent an email to Mr Edwards with the subject line “Kiama Subdivision”, inquiring as to how he was going with the “sewer proposal for the Milne subdivision (that is the land above the Cedar Grove Estate)”. Just under a month later, on 3 February 2012, Mr Unicomb sent to Mr Edwards a plan “showing approx. location of sewer through the treed area to the east of the site”. The attachment to that email was not in evidence before the primary judge. There was, however, in evidence a plan of the proposed development which had been prepared by Don Fox Planning Pty Ltd (the Don Fox Plan) and was described on the plan as “Lot Dimensions & Areas Cedar Grove Stage 2 White Constructions”. (This plan was reproduced at [170] of the primary judgment.) On this plan, which is to be inferred was sent to Mr Edwards by Mr Unicomb, Mr Edwards had handwritten the following five options:

10. [30]

    Metadata that was in evidence [Blue 4/1511] disclosed that the Don Fox Plan with Mr Edwards’ handwritten options was scanned into his computer on 6 February 2012 in a file named “cedargrove2sewerconcept”. This document was referred to by Mr Edwards in his affidavit of 3 July 2019 as the “2012 Options Document”, and he deposed in this affidavit that he had no email record of sending the 2012 Options Document to Mr Unicomb which he said was “unsurprising to me because it is very likely that I attended Mr Unicomb’s office to deliver the document by hand after I had scanned it to my computer”.

11. [31]

    On the same day that the 2012 Options Document was scanned into Mr Edwards’ computer, Mr Unicomb emailed him inquiring how he was “going with [the] sewer design concept for Milne land at Kiama”. The evidentiary record before the Court was silent as to any documentary response to this email inquiry. Mr Edwards said in his affidavit of 3 July 2019 that he had no record of responding to Mr Unicomb’s email and posited that this was because it was “likely that I attended on Mr Unicomb personally to provide him with the original 2012 Options Document”. Mr Edwards said that he did not have a copy of the original 2012 Options Document with his handwritten annotations on his file, and that the only copy he could locate was the scanned document on his computer.

12. [32]

    There was a contest between Mr Unicomb and Mr Edwards as to whether or not Mr Unicomb had even been provided with the 2012 Options Document. This was resolved in favour of Mr Edwards’ account that it had been.

13. [33]

    The evidentiary record discloses little about what transpired between February 2012 and the first quarter of 2013 with regard to the Development. It would appear that Mr Unicomb was working with Council in relation to the development of a Planning Proposal for the Development and that that proposal required input in relation to Sydney Water’s requirements for sewerage and water facilities to the site. It would appear that there had been some liaison with Sydney Water because, on 2 April 2013, Sydney Water wrote to “Unicomb Development Services” (presumably Mr Unicomb’s service company) c/- of Sydney Wide Coordinators with what was described as a “Feasibility Letter” with regard to the site and the proposed development. This letter contained, under the heading “What You Must Do To Get A Section 73 Certificate In The Future”, the following:

14. [34]

    Section 4.2 of the Feasibility Letter, headed “Sewer”, was as follows:

15. [35]

    At some point in 2013 (the evidentiary record did not disclose precisely when), Mr Unicomb prepared a Planning Proposal in respect of the Development. Section 3.3.9.2 of that document, headed “Sewer and Water Reticulation”, was in the following terms:

16. [36]

    Plan No 1 in the Appendix as referred to in the Planning Proposal (Options Plan 1) had been prepared by Mr Edwards in or about March 2013. An image of that Plan is reproduced below.

17. [37]

    There is something of a gap in the evidentiary record for approximately 8 months following receipt of the Sydney Water Feasibility Letter in April 2013. That hiatus may well have been because White was awaiting rezoning of the developed land to R2 residential. So much was suggested by an email from Mr Unicomb to Mr Edwards on 20 January 2014, in which he wrote:

18. [38]

    On 7 April 2014, Mr Unicomb emailed Mr Edwards a contour plan for the land asking him to review the plan, to then arrange a meeting with Sydney Water “ASAP”, also to charge White c/- Mr Unicomb’s service company on an hourly basis for that work. It was at about this time that Mr Edwards said in his affidavit of 8 June 2018 that he had a conversation with Mr Unicomb to the following effect:

19. [39]

    Mr Unicomb denied this conversation.

20. [40]

    As summarised by the primary judge at [46]-[48] of the judgment, Mr Edwards said that he told Mr Unicomb on a number of occasions that Sydney Water’s preferred option was a complete gravity feed system, unless it was persuaded otherwise. He also recalled having discussed with Mr Unicomb the possibility of boring and the geological composition of the rock on the development site in the period between April to October 2014, but that Mr Unicomb repeatedly indicated that the rock could not be bored due to its hardness. Mr Edwards recalled such a conversation occurring and attending a meeting at Mr Unicomb’s home office in Blackbutt in or about May 2014 and that Mr Unicomb had plans and diagrams showing possible routes and depths, and that he again emphasised the hardness of the rock.

21. [41]

    The primary judge recorded at [48] that Mr Unicomb denied that any such conversations took place with Mr Edwards and that he never discussed with Mr Edwards the possibility of boring until Sydney Water requested in March 2016 that it be considered in an options report. The primary judge did not accept this evidence.

22. [42]

    When under cross-examination, Mr Edwards said that “the discarding of the bore option was much, much earlier, so 2012”. Mr Edwards connected the answer in this passage of cross-examination with the 2012 Options Document (which at Option 5 had referred to horizontal drilling) and Plan No 1 of March 2013 (see [36] above), which made no reference to drilling as an option if a gravity sewer was not chosen, the inference being that that option had been dropped in the interim. Mr Edwards had given no evidence of any such conversation in 2012 or 2013 in his affidavits, despite acknowledging that he had exhausted his recollection of any relevant conversations with Mr Unicomb in those affidavits. (In its submissions on appeal, White made much of this change in Mr Edwards’ evidence, the absence of any reference to a conversation in 2012/2013 in his affidavit evidence, and submitted that this undermined the integrity of his evidence including the accuracy of his account as to what he claimed Mr Unicomb had said to him in 2014 (see [40] above)).

23. [43]

    When challenged with the proposition that the first time any discussion of a horizontal boring option between Mr Edwards and Mr Unicomb occurred was after 29 March 2016 (when Sydney Water had raised it: see at [72] below), Mr Edwards responded:

24. [44]

    Returning to the judgment, the primary judge recorded at [50]-[56] that:

25. [45]

    The next event of significance was the making of a Fee Proposal by IWS which, although never signed, was one of the two contractual documents by reference to which White sought to make its case against IWS.

26. [46]

    On 18 December 2014, Mr Edwards sent to Mr Unicomb a Fee Proposal which commenced with the following paragraph:

27. [47]

    The Fee Proposal included the following:

28. [48]

    It is uncontroversial that, by 3 February 2015, IWS had prepared a sewer design, incorporating pumping stations, with a connection to a lead-in main, and that, by 11 February 2015, Mr Edwards had provided Mr Unicomb with draft sewer plans.

29. [49]

    On 16 June 2015, White obtained conditional consent from Kiama Municipal Council for the Development and took transfer of the land on 26 June 2015, which it had contracted to purchase from a Mr and Mrs Milne.

30. [50]

    On 7 July 2015, White entered into a works contract with Cleary Bros for the construction of the works necessary to achieve the subdivision (the Building Contract). These included drainage works, road works, water reticulation and sewer works. The Building Contract specified the Date for Practical Completion to be 30 weeks, with this period later extended to 43 weeks. Mr Unicomb was appointed Superintendent under the Building Contract.

31. [51]

    On 17 August 2015, Cleary Bros commenced work on the site.

32. [52]

    White applied to Sydney Water for a s 73 Certificate on 15 September 2015 and Sydney Water issued a NOR on 4 November 2015. This included the requirement to enter into a Developer Works Deed. Addressed to Unicomb Development Services c/- Sydney Wide Coordinators, the NOR included the following:

33. [53]

    On 24 November 2015, the Deed was entered into between Sydney Water, White, PBS and IWS.

34. [54]

    Part B2(a) of the Deed comprised an entire agreement clause, which provided that:

35. [55]

    Part B1 of the Deed recorded that the Deed comprised a number of instruments, one of which was Schedule 1: Standard Terms (the Standard Terms).

36. [56]

    Part A1 of the Standard Terms was entitled “General obligations”. Under cl A1.1 of the Standard Terms, it was provided that:

37. [57]

    Under cl A1.2 of the Standard Terms, Sydney Water’s obligations were specified as follows:

38. [58]

    Part B6 of the Standard Terms was entitled “General warranties”. Clause B6.1 of the Standard Terms contained “Developer warranties”, as follows:

39. [59]

    Clause B6.2 of the Standards Terms contained “Listed Provider Party warranties”, as follows:

40. [60]

    Clause B6.3 of the Standards Terms contained “Sydney Water warranties”, which provided that:

41. [61]

    Part B7 of the Standard Terms was entitled “Specific warranties, indemnities and release”. Clause B7.1 of the Standard Terms contained “Designer warranties”, which provided that:

42. [62]

    Clause B7.2 of the Standard Terms contained “WSC warranties”, which provided that:

43. [63]

    The following uncontroversial chronological narrative of events is largely taken directly from the primary judgment.

44. [64]

    IWS’s sewer design was submitted to Sydney Water on 3 February 2016. The design provided for packaged pump stations.

45. [65]

    On 9 February 2016, IWS lodged with Sydney Water a Waste Water Servicing Options Report, together with a contour plan. It included the following:

46. [66]

    Significantly, Mr Edwards ran this document past Mr Unicomb before he sent it, and Mr Unicomb responded, pointing out one matter that is immaterial for present purposes, and instructed Mr Edwards to send the document “ASAP”.

47. [67]

    On 19 February 2016, Sydney Water called for a more detailed options report in an email from Ms Margaret McTainsh (McTainsh) to Mr Edwards, who forwarded the email to Mr Unicomb.

48. [68]

    On 25 February 2016, Mr Edwards wrote to Sydney Water saying, relevantly, that “gravity is impractical & impossibly expensive with up to 11.2m of excavation in bluestone”.

49. [69]

    Mr Unicomb then prepared a submission for inclusion in a new options report, and he sent it to Mr Edwards on 2 March 2016.

50. [70]

    On 6 March 2016, Mr Unicomb sent Mr Edwards further information for inclusion in the proposed draft options report. A further draft, which the primary judge found was apparently prepared on 7 March 2016, was more comprehensive. Mr Unicomb prepared and included an options table in the report. The only options identified as viable for the southwest and southeast catchments were packaged pump stations and a low pressure system.

51. [71]

    A further draft was prepared and was held by the primary judge to have been sent to Sydney Water on or about 17 March 2016. His Honour noted at [112] that there:

52. [72]

    On 29 March 2016 at 2.31pm, Mr Matthew Stark (Mr Stark) of Sydney Water forwarded comments to Mr Edwards on the draft Options Report that had been submitted to Sydney Water, as follows:

53. [73]

    The primary judge described this communication from Sydney Water as significant as it was the first time that Sydney Water had raised a solution by way of underboring. The Sydney Water email was forwarded by Mr Edwards to Mr Unicomb at 3.39pm on the day it was received.

54. [74]

    The primary judge took up the narrative at [115], stating that “Unicomb intervened, responding to Sydney Water directly. He also spoke to Stark.” This was an accurate characterisation of events and by 6.07pm on the same day, having spoken to Mr Stark of Sydney Water but not Mr Edwards, Mr Unicomb prepared and sent to Sydney Water an amended options report which included a deep gravity bore option for both the SW and SE catchments, as well as a net present value calculation for this option. Mr Unicomb’s covering email noted that he had “added some more notes regarding the costing of the various options.”

55. [75]

    The amended Options Report provided by Mr Unicomb showed as viable options:

56. [76]

    This observation by Mr Unicomb was inconsistent with a submission advanced on appeal by White (AS 51) that there was “no evidence of any awareness at the relevant time of the comparative cost of an under bore to other options”. It was also inconsistent with White’s submission (at AS 52) that “[t]here is no evidence of any known correlation between hard rock and high cost impossibility of an under bore in either 2012 or 2014.” Mr Unicomb drew the correlation in March 2016 without any reference to either Mr Edwards or any consultants. It may readily be inferred that he was well aware of it at an earlier point in time. So much may also be inferred from Mr Unicomb’s endorsement of Mr Edwards’ observation in the 9 February 2016 Options Report sent to Sydney Water: see at [65]-[66] above.

57. [77]

    Further discussions and negotiations continued with Sydney Water as described by the primary judge at [119]-[122] at a level of detail that does not require reproduction in these reasons. His Honour then at [123] recounted a conversation between Mr Unicomb and Mr Edwards, with Mr Edwards attributing to Mr Unicomb words to the following effect:

58. [78]

    On 1 April 2016, Mr Unicomb sent an email to Mr Edwards which again exposed Mr Unicomb’s concern about the costs of a boring solution and the strength of the rock that would need to be drilled. This email included the statement that:

59. [79]

    At [124]-[126] of the judgment, the primary judge recorded that:

60. [80]

    The primary judge found that all the work, including the sewer works, was effectively completed on 24 February 2017, and that a Certificate of Practical Completion was issued on 1 March 2017.

The primary judgment

1. [81]

   The primary judge made a number of important findings in favour of White including that, in reliance on the evidence of each party’s expert water servicing co-ordinator, a compliant sewer design should have been submitted by 24 November 2015 and, if so, it would have been likely to have been approved on or about 4 January 2016: at [155]. The primary judge further held that, although there is no defined timeframe for Sydney Water to give design approval, generally for gravity sewers, approval could be expected within six to eight weeks of lodgement: at [155].

2. [82]

   Notwithstanding these findings, the primary judge ultimately found against White, holding that no warranty was provided by the respondents to White under the Deed (at [146]) and further that, although the initial designs clearly did not meet Sydney Water’s requirements, there was no breach of obligations under the Fee Proposal, because Mr Unicomb had given Mr Edwards the Instruction not to propound an underbore option. The primary judge held that this “probabilit[y] [was] supported by objective contemporaneous circumstances”: at [165]-[167].

3. [83]

   The primary judge had identified the importance of the factual finding as to whether or not Mr Unicomb gave the Instruction at [162] of the judgment as follows:

4. [84]

   Additionally, although each of the parties tendered reports from independent expert witnesses with knowledge and experience in programming and delay analysis (Mr Jonathan Shahady for White, and Mr James Senogles for IWS), the primary judge stated (at [22]):

5. [85]

   With the consent of the parties, Mr McIntyre, who had many years of experience in the same discipline, was appointed under UCPR r 31.54 to advise the Court. The primary judge acted upon the advice received from Mr McIntyre, finding that neither method as adopted by either party’s expert witness was “appropriate” to be adopted in the present case: at [195]. Rather, the primary judge held (at [196]-[197]) that the appropriate method was that, in accordance with Mr McIntyre’s opinion:

6. [86]

   The primary judge ultimately held that White had failed to discharge this burden: at [199].

7. [87]

   Of the two principal findings made by the primary judge that are challenged on this appeal, one involved a question of law and the other a question or questions of fact.

8. [88]

   As to the first finding, as has been noted above, the primary judge rejected White’s contention that both of the respondents breached warranties said to have been given by them to White pursuant to Pts B7.1 and B7.2 of the Standard Terms to the Deed. The primary judge held that the warranties given by the respondents under the Deed were only made to Sydney Water and not to White: at [145]. At [146], the primary judge provided his reasons for this finding as follows:

9. [89]

   The primary judge held that, although the Deed Warranties did not apply in favour of White, essentially the same obligations were owed by IWS to White under the Fee Proposal; that is, to prepare, within a reasonable time and with due care, skill and diligence, a design fit for purpose which met Sydney Water’s requirements: at [148]. The primary judge also held, in a finding that was not challenged by way of notice of contention, that PBS, because it had to supervise IWS, also had a duty to ensure that IWS performed its duties within a reasonable time: at [150].

10. [90]

    Those findings made of crucial significance the second principal finding which related to the Instruction not to pursue a horizontal drilling/underbore solution, and whether or not it had been given by Mr Unicomb to Mr Edwards. On this issue, the primary judge held that, contrary to his denial, Mr Unicomb had instructed Mr Edwards not to pursue a sewerage design that would involve boring through what was considered to be the hard rock that characterised the land on which the Development was to take place. The primary judge’s key findings in this regard were as follows:

11. [91]

    His Honour then set out the 2012 Options Document before continuing:

12. [92]

    I turn now to consider the principal issues in contention on the appeal.

Consideration – the Deed

1. [93]

   In challenging the primary judge’s conclusion as to the warranties, White put that, on a proper construction of the Deed read as a whole, the warranties given under Standard Terms cl B7.1(a) (extracted at [61] above), and cl B7.2(a) (extracted at [62] above) were owed to it as well as Sydney Water, submitting that:

2. [94]

   The respondents submitted that the primary judge was correct to find that neither respondent granted any warranties to White under the Deed, as the Deed was a multi-party document with the central aim of satisfying the statutory imperative within the Sydney Water Act that sewer assets constructed by private enterprises vest in Sydney Water. In relation to the construction advanced by White, the respondents submitted that:

3. [95]

   I accept this submission and the correctness of the primary judge’s reasoning on the question of construction.

4. [96]

   As to White’s first contention, the fact that White was a party to the Deed does not advance matters in the context of a multi-party deed. The fact of a multi-party deed does not, by reason of that fact alone, mean that every warranty given by one party to that Deed is given to all others. It is a question of construing the terms of the Deed as a whole and the individual warranties, in particular cf. Wollongong Coal Ltd v Gujarat NRE India Pty Ltd (2019) 100 NSWLR 432; [2019] NSWCA 135 at [67]-[71].

5. [97]

   Secondly, the context by which the Deed came into existence is highly relevant. As has been explained, its entry was a requirement of Sydney Water in the context of the provision of a s 73 Certificate. It was Sydney Water which was ultimately to assume ownership and responsibility for the sewerage system after the Development had been completed, with what were described in the Deed as the “Developer Works” to vest in Sydney Water. It made perfect commercial sense that the warranties contained in the Deed would be directed to it, and be for Sydney Water’s benefit.

6. [98]

   Thirdly, the relationship between White and IWS/PBS necessarily predated the entry into the Deed with Sydney Water, and it would not be expected that a Deed would be entered into without a pre-existing contractual relationship already existing between Developer and Designer. It would be in that pre-existing contract that one would expect to find the obligations IWS owed to White, and the Deed in Standard Term B8.1(c) expressly contemplated the existence of other agreements between the parties.

7. [99]

   Fourthly, the language of the Deed not only did not support White’s argument; it was against it. In particular, each of cll B7.1 and 7.2 are prefaced with the words “As well as the warranties under B6.2”. The warranties under B6.2 are expressly given by “Each Listed Provider Party” to Sydney Water. They are of a general character. The additional warranties under cll B7.1 and 7.2 are more bespoke; they are formulated by reference to the identity and role of the party to whom they are addressed, namely the Designer and the WSC (Water Servicing Coordinator). No assistance to White’s argument is to be derived from cl B6.1(f), because it is cl B6.2 that is the relevant provision on which Pts 7.1 and 7.2 expand.

8. [100]

   Fifthly, only Sydney Water is given remedies under the Deed for non-compliance by another party with its obligations under it: see, for example, cll A1.1(d); C4.1; C4.2 and C5.3.

9. [101]

   For these reasons, the primary judge was correct, in my opinion, in his construction of the Deed and in his conclusion that it did not contain any warranties given by either of the respondents to White. White’s challenge to this aspect of the decision at first instance must be rejected.

Consideration – the Instruction

1. [102]

   The significance as to whether or not the Instruction was in fact given has already been noted (see at [83] above).

2. [103]

   White’s challenge to the primary judge’s finding that the Instruction was given must, perforce, overcome the heavy burden which falls on an appellant met with adverse findings of fact. So much flows from decisions of the High Court, including Fox v Percy (2003) 214 CLR 118 at 126; [2003] HCA 22 at [28]-[29] (Fox v Percy); Robinson Helicopter Co Inc v McDermott (2016) 90 ALJR 679; [2016] HCA 22 (Robinson Helicopter) and Lee v Lee (2019) 266 CLR 129; [2019] HCA 28 at [55]. In the latter case, the plurality said that:

3. [104]

   In the present case, there was a debate between the parties as to whether or not the factual findings by the primary judge in relation to the Instruction were based in part at least on impressions about the credibility and reliability of witnesses formed by the primary judge as a result of seeing and hearing both witnesses give their evidence. In my opinion, the better view is that they were but even if they were not, for reasons I will explain, the primary judge’s findings were correct and strongly supported by contemporaneous documentary evidence.

4. [105]

   Both Mr Edwards and Mr Unicomb were cross-examined at some length and with some force during a trial which lasted some 9 days during which their credibility was squarely in issue. The primary judge undoubtedly had a number of advantages which this Court did not have in assessing the evidence and the likelihood or otherwise of Mr Unicomb having given the Instruction to Mr Edwards. These advantages included what was referred to by Gleeson CJ, Gummow and Kirby JJ in Fox v Percy at [23] as “the ‘feeling’ of a case which an appellate court, reading the transcript, cannot always fully share” (footnote omitted). Their Honours went on to observe (at [23]) that:

5. [106]

   No doubt conscious of the hurdle standing in its way presented by Fox v Percy and Robinson Helicopter, as I have indicated above, White submitted that the primary judge’s conclusions in relation to the Instruction did not turn upon any assessment of the demeanour of Messrs Edwards and Unicomb in the witness box: AS [21]. Leeming JA, in his concurring judgment, favours this view. I incline in the other direction, fully conscious that credibility is a larger concept than demeanour, and the latter is not to be overemphasised: see Goodrich Aerospace Pty Ltd v Arsic (2006) 66 NSWLR 186; [2006] NSWCA 187 at [16]-[27]. But, as also indicated above, I would reach the same conclusion as to the correctness of the primary judge’s finding as to the Instruction even if I did not take this view.

6. [107]

   Although the primary judge’s reasoning on this issue was somewhat terse, his Honour’s assessment was not one, in my view, based solely on objective circumstances or inferences drawn from those objective circumstances. The primary judge expressed himself in terms of “believing” Mr Edwards: see at [90] above. He had before him two diametrically opposed accounts of events and came to a clear view, preferring one over the other, after extensive cross-examination of both witnesses.

7. [108]

   When dealing with an aspect of the attack on Mr Edwards’ credit at first instance, arising from a false assurance he had given Mr Unicomb in the course of the project as to his interactions with Sydney Water, the primary judge observed (at [97]):

8. [109]

   The primary judge’s acceptance of Mr Edwards as a truthful witness necessarily meant that he rejected as untrue or mistaken Mr Unicomb’s denial of various conversations and propositions that were forcefully put to him during his cross-examination at first instance. Reference may also be made to the primary judge’s observation at [168] in relation to Mr Unicomb’s failure to disclose two geological reports, a matter the primary judge determined was “not without significance” and which fed into the primary judge’s overall assessment of credibility.

9. [110]

   The primary judge also plainly formed a view as to the personalities of Messrs Edwards and Unicomb, no doubt as a result of closely observing them in the course of their cross-examinations: see at [164] where the primary judge described Mr Unicomb as “demonstrative and dominant” and Mr Edwards as “restrained and less dominant”.

10. [111]

    White’s submission on appeal that the primary judge did not rely on or attribute significance to demeanour should be rejected.

11. [112]

    In its submissions in this Court, White mounted a strong attack on Mr Edwards’ evidence, making reference especially to his purported late recall of conversations in 2012/2013 which he had originally placed in 2014: see [40]-[42] above. In my view, whilst there was undoubtedly a basis for the forensic attack made on Mr Edwards’ evidence both at first instance and on appeal, there was also a strong answer to it. As the primary judge said at [167], “[t]he probabilities, supported by the objective contemporaneous circumstances, favour Edwards.”

12. [113]

    The answer to White’s attack on the evidence of Mr Edwards began with the existence of the 2012 Options Document. Although this only emerged late in the day (not being referred to in Mr Edwards’ first affidavit), there was no doubt or question as to the authenticity of the document. That was vouchsafed because of the metadata which confirmed the date at which it was scanned onto Mr Edwards’ computer, with the scanned copy including his handwritten annotation of five options for the southwest catchment: see [29] above.

13. [114]

    This document, moreover, was not “any document”, but contained Mr Edwards’ description of a series of options handwritten on a plan which had been sent to him by Mr Unicomb in late 2011 in relation to a project he was managing on behalf of White. The natural inference is that Mr Unicomb had asked Mr Edwards to identify options for sewerage for the southwest catchment of the Development site. This is not something he would have done without a request to do so. A further and natural inference, moreover, is that having been asked to undertake that task, he would have provided the result of his assessment to Mr Unicomb. Whether he did this by providing Mr Unicomb with a copy of the 2012 Options Document, simply showed it to him, or even only discussed the options with him is not really to the point, or critical. What is critical, and what is more than reasonable to infer, is that the options were communicated to Mr Unicomb.

14. [115]

    Once this is accepted, or accepted as open (given the “glaringly improbable” hurdle White needs to overcome), the next part of the analysis is relatively straightforward. It involves the following steps:

15. [116]

    Reliance was also placed on the evidence volunteered by Mr Unicomb in his first affidavit that a gravity sewer was not preferred by him because it involved a long lead in “through hard rock”.

16. [117]

    The respondents also relied, by way of corroboration of the primary judge’s finding that the Instruction was given, on an email sent by Mr Unicomb to Mr Edwards on 20 January 2014 in which he said that the outcome was to secure Sydney Water’s agreement in principle “to our preferred option”, language which suggested that other options had been considered and rejected.

17. [118]

    Further support for the primary judge’s conclusion was an email sent on 29 October 2014 from Mr Edwards to Mr Phil Cooper of Sydney Water, in which he said :

18. [119]

    There was also considerable force in the respondents’ submission to the effect that, if it were true that a deep boring solution was never raised or discussed with Mr Unicomb, nor discounted “early on”, there is no sensible explanation for why Mr Unicomb did not remonstrate with Mr Edwards upon receiving Sydney Water’s email of 29 March 2016 that mentioned, when discussing available boring options, a gravity boring solution. It was put that if this sewer option was an epiphany to Mr Unicomb, which, according to White’s case narrative should have been raised by Mr Edwards in the over almost half a decade of discussing sewer design options for the site, surely Mr Unicomb would have confronted Mr Edwards and said something like “Why didn't you tell me we could do this” or “Shouldn't we have included a gravity sewer as an option?”. The respondents pointed out accurately that “[n]ot one such thing was ever said. Not one email was written. Rather, Unicomb said nothing.”

19. [120]

    Whilst not all of these matters were called in aid by the primary judge to support his conclusion as to the giving of the Instruction, they only serve to reinforce that finding, and negative any conclusion that it was a finding that was “glaringly improbable”.

20. [121]

    One of White’s complaints on appeal (AS 22) is that the primary judge failed to provide any valid or adequate reasons for preferring the evidence of Mr Edwards over that of Mr Unicomb and failed to address or give proper weight to submissions made for White. As already indicated, the primary judge’s reasoning as to the fundamental difference between Mr Edwards and Mr Unicomb as to the Instruction was relatively terse, and his Honour did not in terms make all of the points referred to above in his analysis.

21. [122]

    It should be observed, however, that his Honour had set out in considerable detail in the body of his judgment the chronology including the 2012 Options Document, the 2013 Options Plan No 1, Mr Unicomb’s Planning Proposal and his approval of the submission made by Mr Edwards on 9 February 2016, which recorded as a fact that drilling options had been discarded at an earlier time, a matter that was entirely consistent with Mr Edwards’ account, especially taken in conjunction with the 2012 Options Document. These matters were, in my opinion, undoubtedly taken into account by the primary judge in reaching his conclusion, at [167], that “[t]he probabilities, supported by the objective contemporaneous circumstances, favour Edwards.”

22. [123]

    It was a conclusion that, in my opinion, was not only not “glaringly improbable” but was fully supported by the contemporaneous documents. It would follow that, even if there were a basis for criticising the terse nature of the primary judge’s analysis in his reasons for judgment, in conducting a rehearing within the meaning of s 75A of the Supreme Court Act 1970 (NSW), I would have reached the same conclusion as the primary judge in relation to the Instruction and the legal consequences of a finding that it had been given, had I been satisfied that the primary judge had erred in his conclusion in relation to the Instruction.

23. [124]

    That the Instruction was given and was continuing in nature is also supported by Mr Unicomb’s endorsement of the statement made by Mr Edwards in the Options Paper on 9 February 2016: see [65]-[66] above.

24. [125]

    If the Instruction had been given and continued to operate, there is no reason in principle to construe the Fee Proposal as excluding, or in some way negativing, the Instruction. That would be a wholly uncommercial approach to an analysis of the events that transpired. That contract did not contain an entire agreement clause, nor was it apt to exclude the operation of verbal instructions given by the client to the contractor. To the extent that White relied upon the statement by Campbell JA in Masterton Homes Pty Ltd v Palm Assets Pty Ltd (2009) 261 ALR 382; [2009] NSWCA 234 at [90(1)] (Masterton Homes) to the effect that:

25. [126]

    Moreover, as White JA put to Mr Dempsey SC in the course of argument during the appeal, “[i]f the obligation is to exercise reasonable skill and care, and not simply an absolute obligation to do something, why would not the Instruction, if it were given, inform the content of the duty to act with reasonable care and skill?” Perhaps picking up on this observation, Mr Sirtes SC for the respondents submitted, cogently in my view, that:

26. [127]

    White’s reliance on Masterton Homes was also undermined by the fact that the Fee Proposal was unsigned, a matter that might well be thought to tend against a conclusion that the document in question appeared “on its face” to be a complete contract.

27. [128]

    For all of the above reasons, White’s attack on the primary judge’s finding that the Instruction was given and the consequences of that finding, together with its submission, apparently made for the first time on appeal, that the Instruction was superseded by the Fee Proposal, must be rejected.

28. [129]

    A claim for damages because of alleged negligent delay, by reason of a failure to propose a particular solution, cannot be mounted in circumstances where the client had, on the facts as found by the primary judge and not shown to have been in error, indicated it did not wish that particular solution to be pursued because of perceived cost and difficulty.

29. [130]

    White’s submissions implicitly accepted (at AS 74) that the primary judge’s conclusion on causation at [162], reproduced at [83] above, could not be assailed if his Honour’s holding as to the giving of the Instruction was upheld.

30. [131]

    For completeness, it should be noted that a number of grounds of appeal were advanced challenging the primary judge’s contingent finding that, even had liability been established, White had failed to establish that delay in the underboring solution delayed the project as a whole. His Honour observed at [198] that this required White to establish that:

31. [132]

    The primary judge gave reasons extending over some 80 paragraphs as to why his Honour concluded that White had failed to discharge its burden. Earlier in his Honour’s judgment at [22], he had described the expert reports going to causation and damages as “complex” and “[t]o the unschooled … impenetrable.” It was for this reason that he had appointed Mr McIntyre pursuant to UCPR r 31.54(1) to assist him. In the event, the primary judge relied upon Mr McIntyre’s opinion that the method and approach of the experts on both sides was not appropriate to be adopted.

32. [133]

    White wishes to challenge this conclusion, the adequacy of the primary judge’s reasons on the question of delay and damages, as well as specific challenges to a number of detailed matters that were considered by the primary judge. Many of these Mr Dempsey accepted would more appropriately be dealt with by way of remitter because of their detail if the Court had otherwise upheld the challenge to liability. In light of their wholly contingent nature coupled with the level of detail and granularity of the arguments White sought to put on delay and damages, it is neither desirable nor efficient in my opinion to seek to deal with them.

33. [134]

    This approach is in line with Boensch v Pascoe (2019) 94 ALJR 112; [2019] HCA 49 at [7]-[8], in which Kiefel CJ, Gageler and Keane JJ, with whom the other members of the Court agreed at [101], observed that :

34. [135]

    For the foregoing reasons, the appeal should be dismissed with costs.

35. [136]

    LEEMING JA: I have had the considerable advantage of reading the President’s reasons for judgment in draft. I agree with the orders proposed by his Honour, and, subject to one issue, with his Honour’s reasons. That issue concerns the factual challenge to the finding that an instruction not to use a “full gravity system” was given. It follows that I agree with the President’s reasons in relation to (a) the construction of the Deed, (b) causation and (c) the inappropriateness of dealing with the ground directed to the contingent findings of damages. In relation to whether the Instruction was given, I reach the same conclusion that the President reaches (which is to say, that these grounds of appeal fail), but by a slightly different route. What follows presupposes familiarity with what the President has said as to the factual background and the parties’ submissions.

36. [137]

    Although I acknowledge the force of the considerations contained in the President’s reasons, and in White JA’s reasons on this point, on balance I prefer White’s submission that the primary judge, in preferring the evidence of Mr Edwards over that of Mr Unicomb, did not rely on demeanour.

37. [138]

    The joint judgment in Fox v Percy (2003) 214 CLR 118; [2003] HCA 22 at [31] noted the limits upon the ability of judges to distinguish truth from falsehood accurately on the basis of the witnesses’ appearance, and the tendency to limit judges’ reliance on the appearances of witnesses and to reason to their conclusions, as far as possible, on the basis of contemporary materials, objectively established facts and the apparent logic of events. Those limitations have added force in an invidious case such as the present, where the primary judge was required to determine, as between two known liars, whose account was to be accepted.

38. [139]

    The ultimate conclusion of the primary judge in resolving the dispute concerning whether or not the Instruction was given was expressed in terms which accorded with what was said in Fox v Percy at [31]. It was contained at [167]:

39. [140]

    On balance I think that those reasons should be taken at face value. They reflect the language of a very experienced judicial officer, who was doubtless fully conscious of the human limitations of assessing credibility and reliability based on demeanour. I do not think it was necessary for his Honour to go further, and say expressly that he had disregarded the men’s demeanour.

40. [141]

    The majority of his Honour’s reasoning on this issue (at [164]-[179], which paragraphs have been reproduced by the President) is based on documents and objective probabilities.

41. [142]

    I need to address three aspects of his Honour’s reasons, which might be thought to be suggestive of a demeanour-based finding. They are:

    1. (1)

       the passage at [164]:

    2. (2)

       the sentence which constitutes [169]:

    3. (3)

       the conclusion at [173] in respect of an answer by Mr Edwards in cross-examination:

42. [143]

    Even so, I do not consider that those statements displace what was said at [167].

43. [144]

    I deal first with the “personalities” of the two men, and the conclusions that Mr Unicomb was “demonstrative and dominant”, while Mr Edwards was “restrained and less dominant”. The question was each man’s personality at the time of the events giving rise to the litigation, rather than the trial. It might be thought that evaluations of each man’s personality by what they did at the time, before litigation was commenced, would be more probative than the personalities manifested in the witness box. To my mind, the emails between the two men earlier reproduced by the primary judge fairly account for the conclusions that Mr Edwards’ emails are fuller, more deferential, and more polite. In contrast, the primary judge recorded emails from Mr Unicomb to Mr Edwards:

    1. (1)

       On 29 March 2016, Mr Unicomb emailed Mr Edwards:

    2. (2)

       In response to Mr Unicomb’s terse “This meeting should be ASAP. I can’t meet next Tuesday but we need it this week anyway. Let me know what you can organise”, Mr Edwards sought to arrange a meeting with Sydney Water, copying in Mr Unicomb, in carefully polite language:

    3. (3)

       On 30 March 2016 at 10.44am, Mr Unicomb emailed Mr Edwards:

44. [145]

    Those are far from isolated examples of the manner in which each man wrote emails at the relevant time.

45. [146]

    Turning to what the primary judge wrote about his “believing” Mr Edwards, and finding his evidence “compelling”, I do not think this alters the position. After all, some explanations are compelling or inherently believable, and some much less so, and it does not strain language to say one has come to “believe” something because a compelling account has been given. This need have nothing to do with anyone’s demeanour. One may read a work of history, or literary criticism, or some other non-fictional work, and find the account to be “compelling”. The reader may thereafter hold a different belief about the subject.

46. [147]

    Perhaps unusually, this is a case where what emerges from the judge’s reasoning is supported by what occurred at trial. Messrs Unicomb, Morcom and Edwards were cross-examined over three days, occupying transcript pages 42-225. Almost immediately thereafter (at transcript page 228) the following was said:

47. [148]

    That did not foreclose a demeanour based finding. It expressly left open to the parties scope to make submissions on demeanour. However, at least on my reading of the written and oral submissions, they did not do so.

48. [149]

    That statement reinforces the inference which, on balance, I would draw from his Honour’s reasons. The trial judge explicitly told the parties that he found it neither safe nor appropriate to rely on demeanour. The trial judge wrote in his judgment that he had relied upon the probabilities supported by the objective contemporaneous circumstances. I think the trial judge should be taken to have done what he told the parties he was going to do.

49. [150]

    It is of course open to a judge to deny to himself or herself any advantage based on his or her assessment of demeanour in the witness box. That approach does not, of course, preclude findings of dishonesty or other findings as to credit, although it does lower the bar for appellate interference.

50. [151]

    But even though, favourably to White, I accept its submission as to how the primary judge’s reasons are to be read, I nonetheless very comfortably reach the same result as the President.

51. [152]

    At the forefront of White’s submissions was that the inherent probabilities of the case supported the absence of any Instruction being given. I do not agree. The President’s reasons explain in more detail why. White’s submission faces a series of difficulties. One was that it was accepted that Sydney Water preferred a gravity solution, and that on this site either a deep trench or a horizontal bore would be necessary to achieve that. Another is that the contemporaneous handwritten annotations reproduced by the primary judge at [170], which included as option 5 “directional drilling/horizontal bore (blue stone may be a problem)” were accepted to have been made by Mr Edwards on a draft of the subdivision (in the form it then took – with a mere 93 lots, as opposed to the eventual 99) which undoubtedly was made on the morning of Monday 6 February 2012. Thus Mr Edwards was aware of the (obvious) fact that a gravity solution might be achieved through directional drilling or a horizontal bore. This in turn reinforces the power of the reasoning of the primary judge at [172]-[173] that Mr Edwards’ response to the Browne v Dunn question was “compelling”.

52. [153]

    Thus even accepting as, on balance, I do that the findings do not warrant the deference to which demeanour-based findings are entitled, I conclude that these grounds are not made out.

53. [154]

    WHITE JA: I agree with Bell P, including on the only point of difference between his Honour and Leeming JA.

54. [155]

    I do not read para 167 of the primary judge’s reasons quoted by Leeming JA (at [139]) as a statement by the primary judge that his assessment of the credibility of Mr Unicomb and Mr Edwards was arrived at without regard to the intuitive impression that both men made on the primary judge during the course of their oral evidence. Rather the primary judge’s reference to objective contemporaneous circumstances favouring Mr Edwards is the very kind of testing of conclusions as to a witness’s credibility, having regard to the impression made by the witness on the judge, that should be made as described by Mahoney JA in Fabre v Arenales (1992) 27 NSWLR 437 at 448-449, and as discussed by Dr H Bennett and Professor G Broe in their article “The civil standard of proof and the ‘test’ in Briginshaw: Is there a neurobiological basis to being ‘comfortably satisfied’?” (2012) 86 ALJ 258 at 274-275.

55. [156]

    The primary judge enjoyed an advantage in assessing the credibility of the witnesses which this court does not have. The fact that he tested his conclusions against the objective probabilities does not affect that advantage.

56. [157]

    After the conclusion of the cross-examination, the primary judge expressed a view, quoted by Leeming JA at [147], that is not found in his Honour’s reasons for judgment. Such views when expressed by a trial judge during the course of a trial must be treated with caution. For example, it is not unknown for a trial judge to suggest that he or she has not been impressed by the evidence of either party to seek to bring the parties to a realistic expectation of difficulties in their case with a view to encouraging a settlement. An explicit example can be found in statements made by a judge in a family provision case to counsel for the successful defendants quoted in Olsen v Olsen (2019) 101 NSWLR 225; [2019] NSWCA 278 at [69]. I am not suggesting that this might be an explanation for the primary judge’s observations in the present case; only that it is unsafe for this court to assume, on the basis of statements made by a judge during the course of a trial, that the judge has rejected all assistance from seeing and hearing the witnesses in making findings as to their credibility, when he or she does not say so in the reasons for judgment.

57. [158]

    I agree that the appeal should be dismissed with costs.