Sydney Advanced Plumbing Pty Ltd v Smoothflow Australia Pty Ltd

1. [1]

   HER HONOUR: This is an appeal from the Local Court.

2. [2]

   By amended summons filed 18 June 2019, Sydney Advanced Plumbing seeks firstly, that leave be granted to extend time to file the summons to appeal against the decision his Honour Magistrate Richardson (“the Magistrate”) dated 26 March 2019 in Local Court proceedings 2017/140548; secondly, that the appeal be allowed; thirdly, an order that the decision of the Magistrate be set aside; and finally, that the matter be remitted to the Local Court to be determined according to law.

3. [3]

   The first plaintiff is Sydney Advanced Plumbing Pty Ltd (“Sydney Advanced Plumbing”). The second plaintiff is Mourtada El-Reda. The plaintiffs were the defendants/cross claimants in the Local Court proceedings. The defendant is Smoothflow Australia Pty Ltd (“Smoothflow”), who was the plaintiff/cross defendant in the Local Court proceedings. The parties relied upon two court books (Ex A(i) and A(ii)). To avoid confusion, I shall refer to the parties by name.

4. [4]

   On 26 March 2019, the Magistrate ordered that there be judgment in favour of Smoothflow in the amount of $37,447.44, and dismissed Sydney Advanced Plumbing’s cross claim.

5. [5]

   This appeal relates only to the cross claim. The second plaintiff, Moutada El-Reda, was sued as guarantor for the debt of Sydney Advanced Plumbing. He plays no role in this appeal.

Appeals generally

1. [6]

   Section 39 of the Local Court Act 2007 (NSW) provides that a party who is dissatisfied with a judgment or order of the Local Court may appeal to the Supreme Court, but only on a question of law.

2. [7]

   Section 40(1) of the Local Court Act provides that a party who is dissatisfied with a judgment or order of the Local Court may appeal to the Supreme Court on a ground that involves a question of mixed law and fact, but only by leave of the Supreme Court.

3. [8]

   Section 40(2) of the Local Court Act provides that a party who is dissatisfied with an order as to costs of the Local Court may appeal to the Supreme Court, but only by leave of the Supreme Court.

4. [9]

   Section 41 of the Local Court Act provides that this Court may determine an appeal either (a) by varying the terms of the judgment or order, (b) by setting aside the judgment or order, (c) by setting aside the judgment or order and remitting the matter to the Local Court for determination in accordance with the Supreme Court's directions, or (d) by dismissing the appeal.

5. [10]

   The grounds of appeal are firstly, that the Magistrate failed to give reasons for rejecting Sydney Advanced Plumbing’s expert evidence; and secondly, that the Magistrate denied Sydney Advanced Plumbing procedural fairness by failing to bring to its attention the critical factor upon which the Magistrate’s decision turned.

Extension of time

1. [11]

   It is common ground that Sydney Advanced Plumbing lodged its application to appeal 37 days out of time, and requires an extension of time to appeal. Smoothflow objects to an extension of time being granted.

2. [12]

   In Gallo v Dawson (1990) 93 ALR 479; [1990] HCA 30 (“Gallo”), McHugh J stated at [2]:

3. [13]

   Sydney Advanced Plumbing submitted that the Court should extend the time for it to appeal from 23 April 2019 until 30 May 2019, a period of 37 days. It submitted that under the circumstances, the delay in filing the summons was short; there is a good explanation for the delay; there is no prejudice to Smoothflow; and Sydney Advanced Plumbing has a fairly arguable case. Smoothflow submitted that Sydney Advanced Plumbing has not provided a good explanation for delay.

4. [14]

   Sydney Advanced Plumbing submitted that the explanation for delay is that on 26 March 2019, the Magistrate gave an ex tempore judgment and provided no written reasons. Accordingly, Sydney Advanced Plumbing could not sensibly commence an appeal without the transcript disclosing the Magistrate’s reasons. Sydney Advanced Plumbing’s solicitor, Mr Ayache, ordered the transcript on 2 April 2019, the day after the Court notified the parties of the orders which had been made on 26 March 2019. Mr Ayache did not appear on the day judgment was delivered because he understood from the Magistrate that no appearance was necessary. It is fair to say that the Magistrate left it up to the legal representatives to decide whether or not they wished to appear when he delivered his ex tempore judgment. Mr Gulper, solicitor for Smoothflow, attended Court on 26 March 2019 when the ex tempore judgment was given.

5. [15]

   The Court did not provide the transcript of the Magistrate’s judgment to Sydney Advanced Plumbing’s solicitors until 17 April 2019, six days before the appeal period expired. That was two days before the Easter long weekend commenced. In these circumstances, Sydney Advanced Plumbing could not reasonably have commenced the appeal within 28 days of the material date.

6. [16]

   In addition to requiring time to seek and consider advice as to prospects, Sydney Advanced Plumbing’s solicitor did not have a full transcript of the Local Court proceedings because he originally only obtained the transcript of the first two days of the four day hearing. Given the small quantum of the claim, and the cost of a transcript, the solicitor thought that he ought to order the remainder of the transcript before commencing the appeal. On 1 May 2019, Sydney Advanced Plumbing’s solicitors ordered the transcript but did not receive a complete transcript until 24 May 2019. Sydney Advanced Plumbing commenced the appeal six days later.

7. [17]

   Sydney Advanced Plumbing submitted that for these reasons, the delay between 23 April 2019 (when the appeal period expired) and 30 May 2019 (when the summons commencing the appeal was filed) is explicable and reasonable.

8. [18]

   On 26 March 2019, the Magistrate delivered his ex tempore judgment. There was no appearance on behalf of Sydney Advanced Plumbing, despite the fact that it knew or ought to have known that those reasons could be relevant to any appeal that might need to be filed.

9. [19]

   A transcript of the decision was received by Sydney Advanced Plumbing on 17 April 2019. It could have, but did not, file a summons that would have been within time in the following week.

10. [20]

    It took two weeks, until 1 May 2019, for Sydney Advanced Plumbing to seek a transcript, although only for the 6 September 2018 and 8 February 2019 hearing dates. The transcript for 6 September 2018 was received by Sydney Advanced Plumbing on 8 May 2019. The transcript for the hearing date of 8 February 2019 was received by Sydney Advanced Plumbing on 24 May 2019.

11. [21]

    Sydney Advanced Plumbing then took a further week, until 30 May 2019, to file these proceedings commencing an appeal.

12. [22]

    Sydney Advanced Plumbing justifies its delay in seeking transcripts by reference to “the small quantum of the claim and the cost of a transcript”. Smoothflow submitted that in circumstances where delays in receiving the relevant transcripts were foreseeable, and in circumstances where those transcripts were relevant to any prospective appeal, the plaintiff could and should have sought those transcripts on 2 April 2019 rather than 1 May 2019. As such, its delay was unreasonable.

13. [23]

    It is not in dispute that Sydney Advanced Plumbing has a more than “fairly arguable case” on its appeal. If the extension of time is not granted, Sydney Advanced Plumbing will be denied the opportunity to have a Court determine the case according to law. The claim against Smoothflow is in the sum of $58,000.

14. [24]

    While I accept that the Magistrate left it up to the parties’ legal representatives to decide whether or not they should attend Court to hear the Magistrate deliver his ex tempore judgment, it was not prudent for Sydney Advanced Plumbing’s solicitor to elect not to appear. Nor did he chase up the transcript of the judgment until six days later, when the Court that notified him of the decision. Nor was it an exercise of good judgment not to order the entire transcript at once, if that is what was required in order to appeal. This is a borderline decision. Sydney Advanced Plumbing has an arguable case, the delay was 37 days and Smoothflow does not suffer real prejudice, in the exercise of my discretion, I grant an extension of time to appeal.

The Local Court proceedings

1. [25]

   Smoothflow sued Sydney Advanced Plumbing for a debt claim in the sum of $42,169.24, largely in respect of unpaid invoices. The claim related to goods supplied by Smoothflow to Sydney Advanced Plumbing, which were of a class used in fire prevention systems and water sprinkler systems.

2. [26]

   Sydney Advanced Plumbing admitted that it had agreed to purchase the goods (save for those the subject of invoice 19517), but denied liability on the grounds that the goods were not of merchantable quality and not fit for purpose. The Magistrate made a finding that Sydney Advanced Plumbing had not purchased the goods the subject of invoice 19517. There is no challenge to that finding on appeal.

3. [27]

   Sydney Advanced Plumbing cross claimed for damages, alleging that goods provided by Smoothflow were not fit for purpose or of merchantable quality, and had caused Sydney Advanced Plumbing to incur loss in carrying out repairs or replacement. The alleged “defective goods” comprised of Galvanised Malleable Equal Tees, a Sprinkler Control Valve Set, Galvanised Malleable Hexagon Reducing Tees, Galvanised Malleable Hexagonal Nipples, Fire Pumps and an Automatic Jacking Pump.

4. [28]

   The cross claim pleaded at [11] to [13]:

5. [29]

   In its defence to the cross claim, Smoothflow denied Sydney Advanced Plumbing’s allegations.

6. [30]

   The Local Court proceedings where heard over four days, namely, 1 and 2 March 2018, 6 September 2018 and 8 February 2019.

7. [31]

   Both parties relied upon evidence from several lay witnesses. Each party relied upon an expert’s report. Sydney Advanced Plumbing relied on the expert report of Dr Paul Schaffer (“the Schaffer report”). Smoothflow relied upon the expert report of Dr Tawfik (“the Tawfik report”). The Tawfik report provided a contradicting opinion on the products which were the subject of the Schaffer report. It was also referred to as “the rebuttal report”.

8. [32]

   The Magistrate stated that both the Schaffer and Tawfik reports were admissible as expert reports. On 6 September 2019, the two experts gave concurrent evidence. The parties filed written submissions after the conclusion of the hearing.

9. [33]

   So far as the lay witnesses were concerned, the Magistrate set out their evidence and made a finding that largely, their evidence was not helpful because none of them had the expertise necessary to unravel the tryst between the parties on what caused the alleged defects. As the Magistrate stated, this meant that the outcome rested entirely in the analysis of the evidence of the two experts, Drs Tawfik and Schaffer, and “this is where this dispute needed to be resolved.”

10. [34]

    The Magistrate then set out the expert evidence, beginning with Dr Schaffer and then turning to Dr Tawfik. After setting out the two opinions, the Magistrate explained where their opinions differed as follows (T 20-21):

11. [35]

    The Magistrate then set out the Tawfik report and explained why Dr Tawfik’s opinion differed from that of Dr Schaffer (T 21-23):

12. [36]

    The Magistrate observed that the experts agreed that the hemp escaping through the cracks of the pipes could have been exacerbated by water pressure, and then referred to the material issues that were the subject of disagreement between the experts.

13. [37]

    The Magistrate set out Dr Tawfik’s disagreement with Dr Schaffer’s postulations as follows (T 23-28):

14. [38]

    The Magistrate then summarised the expert evidence and commented upon it (T 28-31).

15. [39]

    The Magistrate dismissed the cross claim and entered judgment in favour of Smoothflow in the amount of $37,447.44.

16. [40]

    Sydney Advanced Plumbing submitted that the Magistrate dismissed the cross claim for two reasons. The first was that there was insufficient evidence to persuade the Court that the relevant goods were defective. Sydney Advanced Plumbing submitted that his Honour failed to adequately explain that conclusion.

17. [41]

    The Magistrate had a duty to provide reasons for his decision. In Sydney Advanced Plumbing’s submission, the Magistrate failed to do so and that failure comprises an error of law vitiating his judgment.

18. [42]

    The onus lies on Sydney Advanced Plumbing to demonstrate that there has been an error of law. What is a question of law (as opposed to a question of fact) was considered in Allen v Kerr & Anor (1995) Aust Torts Reports 81-354; Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139 at 155-156; Carr v Neill [1999] NSWSC 1263 and RL & D Investments Pty Ltd v Bisby [2002] NSWSC 1082; (2002) 37 MVR 479.

19. [43]

    Sydney Advanced Plumbing submitted that the Magistrate’s reasons did not engage with or resolve the competing evidence adduced from Drs Schaffer and Tawfik. It submitted that the record of the proceedings discloses the following key areas of conflict:

20. [44]

    Sydney Advanced Plumbing submitted that the Magistrate made no specific findings as to any of these issues. Nor did his Honour provide reasons for preferring the evidence of one expert over another in relation to them.

21. [45]

    Sydney Advanced Plumbing argued that in the course of summarising of the expert evidence, the Magistrate gave no reasons for preferring the evidence of either expert in respect of the contested issues. The closest the Magistrate came to giving such reasons was to state that Dr Schaffer’s evidence that he had not conducted “mechanical testing” was a “very important piece of evidence that, in this case because it shows the weakness of the Schaffer [sic] analysis in my opinion” (T 24.33-34).

22. [46]

    The Magistrate returned to the expert evidence (at T 28.05-27 and at T 29.01-36), extracted earlier in this judgment. Those parts of the judgment contain the Magistrate’s conclusions as to the expert evidence. Sydney Advanced Plumbing submitted that again, they disclose no analysis of it. The Magistrate stated that Dr Tawfik “has made some salient points and they do resinate [sic]” (T 28.21-22). It is apparent from those parts of the Magistrate’s judgment that his Honour’s sole reasons for rejecting Dr Schaffer’s evidence as to the cause of the defects were that the expert evidence was contradictory, and that Dr Tawfik raised “good questions about the adequacy of Dr Schaffer’s research”.

23. [47]

    Sydney Advanced Plumbing submitted that those reasons are manifestly inadequate. They do not disclose any engagement with the areas of dispute between the experts. In that regard, Sydney Advanced Plumbing submitted that the Magistrate erred and the judgment ought to be set aside.

24. [48]

    Smoothflow submitted that as a general rule, a judicial officer should firstly, refer to relevant evidence; secondly, set out any material findings of fact and any conclusions or ultimate findings of fact reached; and finally, provide reasons for making the relevant findings of fact (and conclusions) and reasons in applying the law to the facts found.

25. [49]

    There is no “mechanical formula” for what reasons will be required in any given case. However, while more detail may be preferable in a particular case, once a primary judge accepts the evidence given by a witness on a crucial issue, unless that finding is not open to the primary judge, no error of law arises.

26. [50]

    The Magistrate was not required to “make findings on every argument or destroy every submission”, or “make explicit findings on each disputed piece of evidence”. His Honour was only required to make findings on matters which were material to his Honour’s exercise of power.

27. [51]

    Sydney Advanced Plumbing has conceded that the Magistrate gave a reason for rejecting the claim that the goods which Smoothflow supplied were defective. The complaint is that this finding was inadequately explained. For the reasons set out below, Smoothflow submitted that the Magistrate’s explanation was adequate.

28. [52]

    The Magistrate correctly identified that Sydney Advanced Plumbing had to prove on the balance of probabilities that the goods supplied by Smoothflow were defective.

29. [53]

    The evidence before the Magistrate was that goods, although it was not proven which ones, were incorporated by Sydney Advanced Plumbing into its fire protection system. This constituted sufficient acceptance of the goods so that the breach (if there was one) of the implied conditions in s 19 of the Sale of Goods Act 1923 (NSW) could only be treated as a breach of warranty, pursuant to subs 16(3) of the Sale of Goods Act.

30. [54]

    The Magistrate made a finding that the fire protection systems were defective once assembled. The Magistrate then correctly identified that “the issue is what caused the defect”.

31. [55]

    Having carefully reviewed Sydney Advanced Plumbing’s lay witness evidence, his Honour concluded that none of that evidence went beyond demonstrating that “there was a defect in the system once assembled”.

32. [56]

    The Magistrate then identified that in order to resolve the issue of causation he needed to consider the evidence of the two experts.

33. [57]

    The Magistrate accepted the validity of Dr Tawfik’s “challenge of Dr Schaffer’s testing and that it was not sufficient”. In other words, his Honour determined that the evidence relied on by Sydney Advanced Plumbing did not support a finding that any defects in Smoothflow’s products caused the fire protection systems to fail.

34. [58]

    Sydney Advanced Plumbing has contended that the Magistrate failed to engage with or resolve the competing evidence from Drs Schaffer and Tawfik. Smoothflow submitted that this is a partial and selective reading of the judgment. It demands a level of detail that is not legally required. What is required is that the Magistrate set out any material findings of fact, not a finding as to every fact about which experts disagreed. There is no need for a Magistrate to deal with every minute detail. His Honour more than adequately engaged with the expert evidence in setting out his reasoning process.

35. [59]

    Smoothflow submitted that the expert evidence before the Magistrate was as follows.

36. [60]

    Dr Schaffer was given 7 items (2 elbows, 3 tees and 2 landing valves) to test. He acknowledged that there were 500-700 fittings installed. Dr Schaffer accepted that the chemical composition of the fittings which he tested did not contribute to the cracking in Sydney Advanced Plumbing’s fire prevention systems. However, on the basis that Smoothflow’s fittings were “inferior [on a basis not stated] when compared to new fittings obtained from an [unidentified] alternate supplier”, he proffered an opinion that it was “likely that the level of defects found in in the failed fittings would have led to cracking under normal tightening conditions”.

37. [61]

    In reply, Dr Tawfik’s opinion was as follows. He stated that Dr Schaffer “has not properly considered whether the load levels applied by the tightening procedure were excessive to cause cracking.” His opinion was that the testing conducted by Dr Schaffer was insufficient to support Dr Schaffer's opinion. Dr Tawfik maintained this position in giving his oral evidence.

38. [62]

    In giving his oral evidence, Dr Schaffer said he did not believe that the defects in the few parts he tested were indicative of over-tightening during installation. Those parts were “susceptible to cracking.”

39. [63]

    Dr Schaffer said that the two landing valves he tested included a stem made from “incorrect material” and had “poor corrosion resistance” which led to “eventual seizure of the values”.

40. [64]

    In reply, Dr Tawfik stated that there was “no evidence to indicate that the inferior corrosion resistance of the stem caused the galling” [being the chafing to which Dr Schaffer referred], and that Dr Schaffer “did not consider the contributing factors of hardness levels and tightening load levels that can cause significant contact stresses and eventually lead to seizing if the landing valves.” Dr Tawfik did not express an opinion as to why the landing valve failed. His point was that there was insufficient evidence to exclude the alternate causes.

41. [65]

    The Magistrate quoted extensively from Dr Schaffer’s and Dr Tawfik’s evidence. He clearly recognised that Dr Schaffer’s opinion was that latent, or patent, defects in Smoothflow’s products caused cracking in the fire protection system. He then clearly recognised that Dr Tawfik disagreed. His Honour observed that Dr Tawfik undertook a critical analysis of Dr Schaffer’s findings, which persuaded the Magistrate that the Sydney Advanced Plumbing could not discharge its burden of satisfying the Court that on the balance of probabilities, any defects in Smoothflow’s products caused the fire protection systems to fail.

42. [66]

    The Magistrate referred to Dr Tawfik’s “good questions about the adequacy of Dr [Schaffer]’s research” and said that Dr Tawfik’s “salient points ... resonate”. Sydney Advanced Plumbing submitted that these observations were inadequate to disclose the Magistrate’s reasons. However, Smoothflow argued that the Magistrate’s observations cannot be read in isolation. They need to be read by reference to the Magistrate's description of “Dr Tawfik’s challenge of Dr [Schaffer]’s testing and that it was not sufficient as “a valid criticism”. Dr Tawfik’s challenge to the extent of Dr Schaffer’s testing and Dr Schaffer’s concession that more testing needed to be completed were described at some length by the Magistrate in his judgment. As Sydney Advanced Plumbing noted, the Magistrate stated that Dr Schaffer’s failure to complete “mechanical testing ... shows the weakness of the Schaffer analysis in my opinion”.

43. [67]

    The next complaint is that there were no reasons for preferring the evidence of one expert over another. However, the chain of reasoning summarised above more than adequately demonstrates that the Magistrate did engage with, and give reasons for, accepting Dr Tawfik’s critical analysis, and rejecting Dr Schaffer’s causation theory.

44. [68]

    For the above reasons, Smoothflow submitted that the reasons given by the learned Magistrate were adequate. Read fairly, the Magistrate:

45. [69]

    The Magistrate said:

46. [70]

    The Magistrate’s findings as to the inadequacy of Dr Schaffer’s testing provided a sufficient basis for his conclusions, and were a stand-alone “material” basis for the decision to dismiss the cross claim. To that end, they were all that his Honour was required to disclose in his judgment. Indeed, the Magistrate explicitly stated that it was not necessary to resolve the additional conflicts between the experts.

47. [71]

    Smoothflow submitted that in doing so, the Magistrate satisfied the relevant requirements for adequate reasons. The Magistrate referred extensively to the evidence before him; he found that Sydney Advanced Plumbing’s’ expert evidence was not sufficient to satisfy him that the materials supplied were defective; and he identified the key basis for this finding, namely, that Dr Schaffer’s testing was insufficient to support his opinion as to causation.

48. [72]

    It is trite law that if a court fails to give sufficient reasons for its decision, it constitutes an error of law: see Wang v Yamamoto [2015] NSWSC 942; and Jung v Son [1998] NSWCA 120.

49. [73]

    Counsel for Sydney Advanced Plumbing referred to Pettitt v Dunkley [1971] 1 NSWLR 376 (“Pettitt”) and Beale v GIO (1997) 48 NSWLR 430 (“Beale”). Counsel for Smoothflow referred to Bradley v Matloob [2015] NSWCA 239 (“Matloob”).

50. [74]

    In Pettitt, Moffitt JA (with whom Manning JA agreed) cited with approval the following remarks of Jordan CJ in Carlson v King (1947) 64 WN (NSW) 65 at 387:

51. [75]

    In Pettitt, Moffitt JA concluded that a failure to give reasons comprised an error of law, observing at 388 that:

52. [76]

    In Pettitt, Asprey JA agreed with these conclusions at 382, which have since been cited with approval by the High Court in Public Service Board of NSW v Osmond (1986) 159 CLR 656 at 666-667.

53. [77]

    Where “one set of evidence is accepted over a conflicting set of significant evidence, the trial judge should set out his findings as to how he comes to accept the one over the other”: see Beale at 443. As Campbell JA (Allsop P and McColl JA agreeing) stated in Mitchell v Cullingral Pty Ltd [2012] NSWCA 389 at [116]:

54. [78]

    Finally, in Matloob, the Court of Appeal per Beech-Jones (with McColl and Leeming JJA agreeing) stated at [17] and [18]:

55. [79]

    The Magistrate’s ex tempore reasons for decision should be considered in the context of his Honour providing reasons for judgment in a busy Local Court. The focus therefore must be upon the substance of what the Magistrate said and did. Any other approach imposes an intolerable burden on Magistrates: see Acuthan v Coates (1986) 6 NSWLR 472 at 479 at 479; 24 A Crim R 304 at 310 per Kirby P. Taking these circumstances into account and reading the judgment as a whole, I must determine whether the Magistrate engaged, grappled or wrestled with the cases presented by each party, such that the losing party can understand why it lost.

56. [80]

    The Magistrate’s task was a difficult one, as there was almost no agreement between the experts. The only issue the experts agreed upon was that the cracking of the component parts was caused by the assemble systems failing, but they did not agree as to what caused the units to crack. Essentially, the area of dispute was whether the defects were caused by installation or as a consequence of metallurgical failure in the composition of the materials used to manufacture the various fittings. The experts disagreed on the issues of magnification, testing, hardness levels and perlite. The parties made careful written submissions on the topic of the experts’ evidence. Each party also referred to the lay evidence that supported the experts’ reports. While the Magistrate held the view that the outcome of the dispute rested on the analysis of the evidence of the experts, these submissions would have been of some assistance to the Magistrate.

57. [81]

    The Magistrate made a finding that the fire protection systems were defective once assembled and correctly identified that “the issue is what caused the defect”. The Magistrate set out the lay witnesses’ evidence and made a finding that largely, their evidence was not helpful because none of those witnesses had the expertise necessary to unravel the disagreement between the parties on what caused these defects. That meant that the outcome rested entirely in the analysis of the evidence of the two experts, which is where the dispute needed to be resolved.

58. [82]

    Dr Schaffer wrote a report dated 2 February 2018 for Sydney Advanced Plumbing. Dr Tawfik wrote a rebuttal report dated 27 February 2019. Both experts relied upon their reports and gave concurrent evidence at the hearing.

59. [83]

    Dr Schaffer was supplied with 2 elbows, 3 tees and 2 landing valves. He visually inspected these 5 fittings, carried out radiography and chemical analysis, hardness testing, metrollography and scanning electromiscroscopy. Dr Schaffer reached the following conclusion in relation to the fittings. Firstly, microstructure of the fittings did not comply with the microstructural requirements of ferritic malleable iron as out lined in ASTM A47-99; secondly, the presence of large interconnected graphite flakes in the interdendritic would have significantly reduced the ductility of the fitting making them prone to cracking; thirdly, the presence of perlite at the outer surface of the fitting indicated that the incorrect atmosphere was used in the furnace during the annealing heat treatment; and finally, the chemical composition of the fitting was consistent with the chemistry of ferritic malleable iron.

60. [84]

    In relation to the valves, Dr Schaffer found firstly, corrosion at the thread interface between the stem and bonnet led to the seizure of the valves; secondly, the corrosion resulted in higher contact stresses between the threads and consequently increased the friction between these two components, which caused threads to seize; thirdly, the material used to produce the stem did not comply with the material requirements of AS 2419.2; and finally, the material used to produce the stem had inferior corrosion resistance compared to the minimum grade outlined in AS 24119.2.

61. [85]

    The Magistrate reviewed Dr Schaffer’s conclusions. His Honour considered the following exchange to represent an important piece of evidence, because in his opinion it showed a weakness of Dr Schaffer’s analysis:

62. [86]

    The Magistrate also pointed to another piece of important evidence in relation to ASTM847, which was when Dr Tawfik said it highlighted to him the mechanical properties of the fittings. The tightening procedure that was applied would have to have exceeded the mechanical properties of the fittings to cause them to crack. As such, Dr Schaffer and Dr Tawfik agreed that tightening caused the cracking. The question relevant to the Magistrate was whether the cracking was caused by the deficiency in the material, or whether it had been used to excessive load levels.

63. [87]

    On this issue, the Magistrate referred to the perlite issue, which is the magnification microstructures and quoted Dr Tawfik as stating that in his opinion, excessive perlite in the microstructures presented in figures 6 and 7 of Dr Schaffer’s report was construed as excessive. Dr Tawfik deemed it as acceptable.

64. [88]

    The Magistrate noted that Dr Tawfik disagreed with Dr Schaffer on the perlite. Dr Tawfik had stated, “The hardness was scrutinised by Dr Schaffer for conformity. If there’s an excessive amount of perlite the hardness levels would have exceeded the requirements of ATSM847.”

65. [89]

    The Magistrate rejected Dr Tawfik’s conclusion on the topic of how the installation process had caused the defects, because he gave absolutely no reasoning as to how he came to his conclusion. An expert witness should state the facts or assumptions upon which his or her opinion is based. The expert should not omit to consider material facts which could detract from his or her concluded opinion. As his Honour rightly pointed out, this gap in reasoning offends the principle in Makita (Aust) Pty Ltd v Sprowles (2001) 52 NSWLR 705; [2001] NSWCA 305.

66. [90]

    The Magistrate referred to the solicitor for Sydney Advanced Plumbing’s submissions, where he said that because of this deficiency in Dr Tawfik’s reasoning process in relation to how the installation process caused the defects, the whole of his report should be disregarded. His Honour disagreed, because Dr Tawfik had questioned the veracity of the process engaged by Dr Schaffer, and made some salient points with which Dr Schaffer agreed. The Magistrate then identified those salient points, which were that it would have been preferable to engage in further testing, but that he was unable to do so because of the size of the products and other constraints that existed.

67. [91]

    In addressing Smoothflow’s submissions, the Magistrate drew a Jones v Dunkel (1959) 101 CLR 298 finding against Sydney Advanced Plumbing, who had called Mr A N Fawad (its business manager) on 1 August 2016 when the first complaints had been made about the products.

68. [92]

    His Honour reached the following conclusion at T 29.5-23:

69. [93]

    The Magistrate was of the opinion that the evidence on the cross claim was not enough to persuade him, on the balance of probabilities, that the defects were the result of failures in the component parts provided by Smoothflow to Sydney Advance Plumbing. In his view, this was because the expert evidence was contradictory, as Dr Tawfik raised “good” questions about the adequacy of Dr Schaffer’s research. The Magistrate stated that it was because of these factors he reached the opinion that the cross claim should be dismissed. He did not find it necessary to make any rulings in regard to the defence to the cross-claim, because although he made observations about Dr Tawfik’s view, it was up to Sydney Advanced Plumbing to establish that the relevant failings occurred because of defects in the products. As his Honour had found that Sydney Advanced Plumbing failed to do so, Smoothflow’s defence to the cross claim became otiose.

70. [94]

    The onus of proof was on Sydney Advanced Plumbing to establish the matters pleaded in its cross claim. As the Magistrate stated, his first reason for dismissing the cross claim was that there was evidence such as to persuade the Court on the balance of probabilities that the goods were defective.

71. [95]

    The Magistrate’s second reason for dismissing the cross claim was the way in which it had been pleaded. Sydney Advanced Plumbing had referred to invoices, but made no correlation between the evidence of any defects detected by Dr Schaffer and the particular items identified in the invoices. The Magistrate made a finding that there was no correlation between them. As he outlined, the express terms of the contract were not followed by Sydney Advanced Plumbing in regards to the delivery of goods, the inspection of goods and the lodging of complaints. In other words, Sydney Advanced Plumbing did not prove that the goods examined by Dr Schaffer were those delivered by Smoothflow under the contract. In these circumstances, the Magistrate also dismissed the cross claim because the evidence as to whether the goods supplied by Smoothflow were deficient was not sufficient to meet the standard, albeit whether it was on the balance of probabilities, more probable than not. For these reasons, it is my view that in reaching his conclusion, the Magistrate in his reasons sufficiently engaged, grappled and/or wrestled with the cases advanced by the parties. The result is that this ground of appeal fails.

72. [96]

    The parties agreed that if ground 1 failed, even if the Magistrate erred in his finding in relation to the second basis for dismissing the cross claim, the outcome of the case would not change; the cross claim would still need to be dismissed. As such, this Court would not need to determine this second ground of appeal.

73. [97]

    As ground 1 of appeal has failed, it is not necessary that ground 2 of the appeal be dealt with. However, I will express my tentative reasons.

74. [98]

    This ground of appeal arises from the following exchange. At the hearing before the Magistrate, his Honour engaged Sydney Advanced Plumbing’s solicitor in the following exchange during opening (1 March 2018 at T 10.15-22):

75. [99]

    Smoothflow’s legal representative did not interject to contradict Mr Ayache.

76. [100]

    Sydney Advanced Plumbing submitted that if the Magistrate had alerted it to the issues which became the “primary reason” (at T 30.46) for his decision, Sydney Advanced Plumbing could have taken steps to address the issue. In particular, Sydney Advanced Plumbing could have sought to adduce evidence to prove that the items examined by Dr Schaffer did correspond to those that were the subject of the cross claim. By failing to alert Sydney Advanced Plumbing to a critical basis for his decision, his Honour denied Sydney Advanced Plumbing that opportunity.

77. [101]

    Sydney Advanced Plumbing alleged that the Magistrate denied it procedural fairness in respect of its cross claim, in that “[h]is Honour did not raise with [Sydney Advanced Plumbing’s] representative any concern that the items examined by Dr Shaffer were not those particularised in the cross claim” between the defects identified by Dr Schaffer and the invoices specified in the cross claim.

78. [102]

    The complaint was that when Mr Ayache suggested to the Magistrate that the fittings were provided pursuant to the agreement, Smoothflow did not interject.

79. [103]

    The Magistrate’s second reason for dismissing the cross claim was that “it is pleaded by reference to invoices and there is no correlation made in the evidence between any defects detected by Dr Schaffer and particular items identified in the invoices”. In Sydney Advanced Plumbing’s submission, the Magistrate erred in the process by which he reached this conclusion.

80. [104]

    The Magistrate was obliged to afford Sydney Advanced Plumbing procedural fairness. That obligation required the Magistrate to bring to Sydney Advanced Plumbing’s attention “any issue critical to the decision which is not apparent from its nature” and to “advise of any adverse conclusion which has been arrived at which would not obviously be open on the known material”: see Commissioner for ACT Revenue v Alphaone Pty Ltd (1994) 49 FCR 576 at 592; SZBEL v Minister for Immigration and Multicultural and Indigenous Affairs (2006) 228 CLR 152 at [29]. Although this principle has been articulated in relation to administrative decision making, it applies with equal force in relation to judicial decision making: see Jorgensen v Fair Work Ombudsman (2019) 371 ALR 426; [2019] FCAFC 113 at [199].

81. [105]

    Over the course of a four day hearing, his Honour did not raise with Sydney Advanced Plumbing’s representative any concern that the items examined by Dr Schaffer were not those particularised in the cross claim. Nor did Smoothflow’s counsel raise any such concern. To the contrary, Smoothflow adduced expert evidence from Dr Tawfik in relation to those same items. The experts’ oral evidence in relation to those items occupied an entire day of the hearing.

82. [106]

    Smoothflow made the following written submissions.

    1. (1)

       There is no reference in any of Smoothflow’s affidavits in chief that deal with any allegation of defectiveness with respect to any of the 10 separate items comprising tax invoice 18640. Tax Invoice 18640, while raised in the cross claim, is not the subject of any evidence.

    2. (2)

       Mr Choi referred only to Sydney Advanced Plumbing’s tax invoice 19517. He failed to mention Sydney Advanced Plumbing’s tax invoices 17670; 18640; 19028; 18954 or 19072, which were itemised by the first defendant in its cross claim, and further failed in his evidence to identify and correlate allegations of defects to specific identifiable goods referred to in Sydney Advanced Plumbing’s tax invoices 17670; 18640; 19028; 18954 or 19072, and certainly not with any of the 9 defects pertaining to individual items identified by invoice 18640, which Sydney Advanced Plumbing asserted had been paid.

    3. (3)

       Mr Mourtada El Reda referred only to Sydney Advanced Plumbing’s tax invoice 19517. He too failed to mention Sydney Advanced Plumbing’s tax invoices 17610 and 18640, or the 9 defects pertaining to individual items identified by invoice 18640.

    4. (4)

       Mr Mourtada El Reda in Ex 6 referred only to Sydney Advanced Plumbing’s tax invoice 19517. He too failed to mention Sydney Advanced Plumbing’s tax invoices 17670; 18640; 19028; 18954 or 19072 which were itemised by Smoothflow in its cross claim, and further failed in his evidence to identify and correlate allegations to specific identifiable defects to goods referred to in Sydney Advanced Plumbing’s tax invoices 17670; 18640; 19028; 18954 or 19072, and certainly not with any of the 9 defects pertaining to individual items identified by invoice 18640.

    5. (5)

       Smoothflow’s closing submissions contained the relevant passages questioning the link between the pleaded invoices and the defects identified by Dr Schaffer.

83. [107]

    Not every departure from the rules of natural justice will give rise to jurisdictional error, appealable error or otherwise warrant setting aside a decision at first instance. Appellate courts will not order a new trial “if it would inevitably result in the making of the same order as that made by the primary judge at the first trial”. Similarly, a breach of “procedural fairness” will not be material to the exercise of power (and hence will not give rise to jurisdictional error) “where a failure to afford procedural fairness did not deprive the person who was denied an opportunity to be heard of the possibility of a successful outcome”.

84. [108]

    In the circumstances, Smoothflow submitted that any denial of procedural fairness was not material to the Magistrate’s exercise of power, and did not deny Sydney Advance Plumbing the possibility of a successful outcome. Smoothflow submitted that if ground 1 is dismissed, ground 2 should also be dismissed.

85. [109]

    At the commencement of the hearing, the Magistrate agreed with the solicitor for Sydney Advanced Plumbing that the issue as to whether the fittings and valves were provided pursuant to the agreement was not in dispute. The legal representative for Smoothflow did not say anything to the contrary. However, Smoothflow had filed submissions dated 30 October 2018 and put into issue that there was no link between the goods supplied in the pleaded invoices and the defects identified by Dr Schaffer. Sydney Advanced Plumbing filed written submissions dated 26 November 2018. Paragraph 10(1) analyses Sydney Advanced Plumbing’s lack of evidence in relation to the tax invoices and the allegations of defectiveness. Sydney Advanced Plumbing had been put on notice of Smoothflow’s argument concerning the fittings and valves, which were not proved to be the ones supplied under the contract. The Magistrate provided an opportunity for oral elaboration on the written submissions, but the parties were content to rely on the written submissions (T 6.39-42). Sydney Advanced Plumbing did not address this issue in its written submissions, and although given the opportunity, it did not seek to make oral submissions. In my view, in the circumstances, Sydney Advanced Plumbing was afforded procedural fairness. The result is that this ground of appeal also fails.

Costs

1. [110]

   Costs are discretionary. Costs usually follow the event. Sydney Advanced Plumbing is to pay Smoothflow’s costs on an ordinary basis.