Harris v Morabito Holdings

1. [1]

   HIS HONOUR: On about 7 February 2012, the defendant (the builder) contracted to perform residential building work for the plaintiffs [1] (the owners). The builder achieved practical completion on about 13 September 2013. The defects liability period under the contract expired 12 months later.

2. [2]

   In the usual way, the parties have fallen into dispute. The owners said that the work done by the builder was defective. The builder said that it was not liable for any further defects rectification. Further, the builder said, it is entitled to be paid for, among other things, variations and delay costs. There were other, relatively minor (in monetary terms), disputes.

3. [3]

   The owners commenced proceedings in the NSW Civil and Administrative Tribunal. The proceedings were transferred to this court. When the evidence was complete, the whole of the proceedings were referred to a referee, Mr Barry Tozer (the referee), for inquiry and report. After a hearing taking 9 days spread over a four month period in 2017, involving no less than 25 lever arch folders of documents and oral evidence that occupied over 750 pages of transcript, the referee reported. He concluded that, taking into account amounts that he thought were owed one way and the other, there was a total of (in round figures) $328,000, including GST, owed by the builder to the owners.

4. [4]

   The builder accepts the outcome. It moves for adoption of the report. The owners are dissatisfied. They say that they are entitled to much more by way of damages. Thus, they oppose adoption of the report.

Approach to adoption of a referee’s report

1. [5]

   The topic of reference out to a referee is dealt with in Division 3 of Part 20 of the Uniform Civil Procedure Rules 2005 (NSW). The subject-matter of Part 20 is, as its title indicates, “Resolution of proceedings without hearing”.

2. [6]

   Rule 20.15 empowers the court to appoint a referee. Rule 20.20 deals with the conduct of proceedings under the reference. Rule 20.23 requires the referee to report. Rule 20.24 deals with proceedings on the report.

3. [7]

   I set out those rules:

4. [8]

   It will be seen that r 20.24(1) requires the court to make final orders in the proceedings, and gives it a discretion to do so by taking one or other of the various approaches set out. The rule does not itself state how the court is to exercise the discretion. Nor does it state any express limitation or condition upon its exercise.

5. [9]

   The discretion must be exercised in a manner consistent with the overriding objective set out in s 56 of the Civil Procedure Act 2005 (NSW). As s 56(2) states, “[t]he court must seek to give effect to the overriding purpose when it exercises any power given to it by this Act or by rules of court…”.

6. [10]

   Otherwise, all that can be said is that the discretion must be exercised judicially, and that the exercise must lead to a final resolution of the dispute. The discretion must be exercised in a way that takes into account the purposes that UCPR Part 20 seek to achieve, and thus the purposes in aid of which the discretion is conferred. The evident philosophy underlying the whole of Part 20 is the resolution of disputes without a hearing in court, through processes designed to achieve that outcome in a way that is just, quick and cheap. In this context, the minimisation of cost and delay is seen to be an integral part of a just resolution: see Gummow, Hayne, Crennan, Kiefel and Bell JJ, in Aon Risk Services Australia Ltd v Australian National University [2] at [98].

7. [11]

   There have been many decisions in which various principles, or guidelines, considered relevant to the exercise of the discretion have been suggested. Some of those cases relate to r 20.24. Others relate to the former Part 72 r 13 of the Supreme Court Rules 1970 (NSW).

8. [12]

   In Chocolate Factory Apartments Pty Ltd v Westpoint Finance Pty Ltd [3] , I considered a large number of earlier decisions dealing with the discretion (as it then stood, conferred by the Supreme Court Rules) and sought to draw from them the principles that had been generally recognised as relevant to the exercise of the discretion. I said at [7]:

9. [13]

   It should be emphasised that the 15 points that I identified are not to be approached as some sort of checklist, the application or completion of which will provide in all cases an answer to the exercise of the discretion. By contrast, and as the Court of Appeal of the Supreme Court of Victoria observed in relation to a not dissimilar statement of principles, they “provide a general guide as to how the question of adoption of a referee’s report should be approached” [4] . A similar point was made in the Court of Appeal of this State in Bellevarde Constructions Pty Ltd v CPC Energy Pty Ltd [5] .

10. [14]

    Nonetheless, generally accepted statements of principle may be important. As Basten JA said in Jazabas Pty Ltd v Haddad [6] at [9] “the need to avoid confining an unfettered discretionary power should not be pursued to the exclusion of the need to ensure that material facts are assessed in a coherent and principled fashion”. His Honour cited the joint judgment of Mason and Deane JJ in Norbis v Norbis [7] at 519, where their Honours said:

11. [15]

    In Illawarra Hotel Company Pty Ltd v Walton Construction Pty Ltd [8] , Barrett JA (with whom Meagher and Ward JJA agreed) referred at [15] to, among other things, what I had said in Chocolate Factory at [7]. His Honour made it clear at [16] that what I had said “may be accepted as equally applicable to a reference under Pt 20 Div 3 of the Uniform Civil Procedure Rules”.

Background

1. [16]

   The owners were proprietors of land at Lilli Pilli upon which a dwelling house was erected. They wished to build for themselves a far more substantial dwelling, taking advantage of the views afforded by their property. They engaged an architect to prepare plans and specifications, and a builder (the first builder) to construct according to those plans and specifications. The owners became dissatisfied with the performance of the first builder, and ultimately terminated the contract. At the time that contract was terminated, the construction works were incomplete and were affected by many defects.

2. [17]

   The owners then engaged Mr Horace Rapisarda of MLR Architects (the Architect – I shall use this term to refer indiscriminately to Mr Rapisarda and his firm) to prepare plans and specifications for:

   1. (1)

      rectification of defects in the work done by the first builder; and

   2. (2)

      completion of construction of the dwelling.

3. [18]

   The Architect prepared a voluminous contract based on a standard form Major Works Contract designated ABIC MW – 2008 H NSW.

4. [19]

   The work to be done was identified in two specification documents described as “Document No.1” and “Document No.2”. Document 1 (as I shall call it) dealt with rectification of the existing defective work. Document 2 (as I shall call it) dealt with work to complete the construction of the residence. In addition, the architect prepared a large number of plans, illustrating and identifying further the work to be done.

5. [20]

   The builder tended for the work. Its revised quotation, almost $1.75 million including GST, was accepted. The quotation was broken up between construction works (referable to document 2) at (rounded up) $1.24 million and repair works (referable to document 1) at (rounded down) $510,000.

6. [21]

   By the time practical completion was achieved, the builder had been paid (leaving aside any retention sum) in excess of $2.5 million. The value of approved variations was almost $830,000.

Outline of the report

1. [22]

   The hearing before the referee concluded on 15 November 2017. His report is dated 31 January 2018. It is clear that he had worked very hard to produce the report in such a comparatively short space of time (noting that the Christmas / New Year vacation intervened between conclusion of the hearing and delivery of the report). Thus, no doubt, the evidence and the submissions were relatively fresh in the referee’s mind.

2. [23]

   The report is structured in a logical fashion. It commences by setting out the background, and the conduct of proceedings under the reference. It then identifies the issues on the pleadings, the evidence called by each party and the documents comprising the contract.

3. [24]

   The report then moves to consider the defective work. The referee approached that task by aggregating the defects into nine categories, including metal window and doorframes, window glazing, and other trade packages, and then dealing with general building defects. He made findings along the way as to what was or was not a defect and, where defects were found, the method and cost of rectification.

4. [25]

   The referee then turned his attention to a separate claim made by the owners for “reimbursable costs”. This head of claim related to a deposit paid by the owners to an aluminium window manufacturer that went into liquidation. They lost the value of the deposit and, they say, received nothing in exchange for it.

5. [26]

   The referee then moved to consider the builder’s claims for payment for further variations and for delay costs.

6. [27]

   Having looked at all those matters in dispute, the referee aggregated the results and reported in the way that I outlined at the beginning of these reasons.

7. [28]

   The report shows a reasoned and thorough approach to the issues. It demonstrates that the referee engaged with the evidence, both lay and expert, and expressed conclusions on it. Although there were complaints made that some of the conclusions were not supported by adequate reasons, or were contrary to the evidence, that was not and could not be said of the greater part of the report (which was 194 pages in length).

8. [29]

   The referee is a qualified engineer. He is well known as a referee and arbitrator (and he is a fellow of the Chartered Institute of Arbitrators). If I may say so, he enjoys a high reputation in the field in which he practises.

9. [30]

   It will be necessary to return to some of the detail of the report when I turn to consider the owners’ complaints and the builder’s response to them. However, at a level of some generality, there are matters that should be stated immediately.

10. [31]

    Some of the owners’ challenges rely on errors of law, including errors in the application of legal standards to established facts. On orthodox principle (see Chocolate Factory at [7(4)]), they are matters that the court must consider on the hearing of the motion for adoption.

11. [32]

    In general terms, however, I am of the opinion that the referee’s report shows a logical, thorough and analytical approach to the resolution of the dispute. It is quite clear that the referee’s consideration of the issues was facilitated by his technical expertise.

12. [33]

    Where there were disputed questions of fact, the referee dealt with them in a way that showed that he understood and engaged with the issues. He did so in an economical way, which from time to time requires that reference be made to earlier or later paragraphs in the report to obtain a clear understanding of his reasoning process (for example, where he resolved questions in dispute between experts). Although his reasons are economical, they are sufficient to show that he engaged intellectually with the factual disputes, and reasoned towards a conclusion in a way that is both logical and capable of being understood. In my view, there is nothing remotely approaching perversity or manifest unreasonableness in the referee’s approach to and conclusions on the factual disputes. That he gave weight to the views of some experts over others, and found facts in a way that is disappointing to the owners, does not suggest perversity or manifest unreasonableness.

13. [34]

    As I have said, the referee’s factual findings in many cases are informed and facilitated by his technical expertise. It would be inappropriate for the court to re-examine those matters, not only because to do so would be inconsistent with the philosophy underlying the reference process (for the reasons given at [10] above), but also because the court does not have an advantage possessed by the referee. It is inherent in the process of reference and report that where the referee enjoys technical expertise relevant to the subject-matter of the reference, that expertise will be used appropriately in coming to conclusions upon the matters in dispute.

Outline of the owners’ complaints

1. [35]

   The owners provided 25 lever arch folders of documents as a “Court Book” to be relied upon on the hearing of the motion for adoption. I declined to permit the tender of that material. The extent of the tender has now been limited to the documents identified in two lists that have been marked for identification “A” and “B”. Not all of those documents should be in evidence, but I do not propose to waste time on pointing out why this is so.

2. [36]

   Mr Bambagiotti of Counsel, who appeared for the owners, arranged their complaints in six categories. They were:

   1. (1)

      alleged errors of law and principle in the construction of the contract, including in particular the warranties contained in it. That was said to lead to an erroneous approach to the referee’s decision on questions of rectification and the costing of rectification work.

   2. (2)

      Alleged errors in the application of the proper construction of the contract (again, in particular, the warranties) to the facts of the case.

   3. (3)

      Errors in findings of fact arising where evidence is said to have been overlooked or misinterpreted.

   4. (4)

      Arithmetical and oversight errors dealing with quantum.

   5. (5)

      Denial of procedural fairness because findings were made on issues that were not “live” or were not taken up in cross-examination with the relevant witnesses.

   6. (6)

      Failure to give adequate reasons, also characterised as a denial of procedural fairness.

Conclusions on three complaints

1. [37]

   I do not propose to deal in detail with the third, fourth and sixth of those heads of complaint. The reasons for that approach can be stated simply.

2. [38]

   The third complaint asserts that, in various places, the referee overlooked or misinterpreted evidence. There are a number of difficulties lying in the way of accepting that this error (if demonstrated) should lead to any different outcome. First, it treats the exercise of the discretion as if it were an appeal by way of rehearing. That is not a correct approach. In general terms, it is not for the court considering the exercise of the r 20.24 discretion to re-evaluate the facts for itself. Of course, if it can be shown that on a significant point the referee completely overlooked or completely misunderstood an important piece of evidence, the position might be different. But the complaints in this case do not go so far.

3. [39]

   The second reason flows from (indeed, may be a restatement of) the first. The discretion to “adopt, vary or reject the report”, or to take another of the courses identified in r 20.24, is to be exercised by reference to the just, quick and cheap identification and resolution of the real issues in dispute. That is what the reference was designed to achieve and what, in large measure, it has achieved. The exercise of the discretion requires a balance between the interests of litigants in having a full and complete opportunity to prepare and present their cases so as to lead to an outcome that is, objectively, fairly derived according to law on the one hand, and the efficient and economical litigation of disputes on the other. The proposition that a judge hearing the application under r 20.24 should descend into the detail of the evidence for the purpose of deciding complaints of the kind with which I am now dealing is inimical to the fundamental nature and purpose of the discretion.

4. [40]

   The third reason is that Mr Bambagiotti’s approach does not take proper account of the way in which the referee addressed and decided questions of fact. Mr Bambagiotti’s submissions identified, or highlighted, particular paragraphs from the 1,253 comprising the whole of the report. They do not take account of the fact that the referee expressed relevant conclusions (for example, as to his preference for the evidence of one expert over that of another) in one place, and a conclusion on a particular factual dispute at another, where that conclusion was driven by the preference expressed elsewhere. Further, having regard to the character of some of the disputes and the voluminous amount of evidence, it would have been unconscionable to expect the referee to grapple with every minute aspect of the detail.

5. [41]

   When I read the paragraphs to which objection is taken on this ground, and consider them in the context of the report as a whole, it is plain that the referee does give, either in or adjacent to the paragraphs or elsewhere in the report, a sufficient basis of reasoning to enable an understanding of why he came to the conclusion he did.

6. [42]

   I turn to the fourth ground of complaint, mistakes in calculation and the overlooking of certain items of cost. That is simply not a matter that should occupy the time of a judge on an adoption hearing. The parties should be able to agree where there have been arithmetical errors. They should also be able to agree where (if it happened) the referee found that a defect existed, expressed a conclusion as to the proper method of rectification, but mistakenly omitted to allow whatever he concluded was the proper cost to carry out that rectification work. Of course, if the parties, having considered the matters complained of, remain at odds, the matter may require determination. But as a wholesale complaint, it should not be advanced for resolution by a judge in its entirety.

7. [43]

   I turn to the sixth category – alleged insufficiency of reasons. That is answered by what I have said at [40], [41] above.

8. [44]

   With those matters out of the way, I turn to the first of the significant complaints: namely, that the referee misconstrued relevant provisions of the contract, and thus erred in his application of those provisions, properly construed, to the facts that he found.

Relevant provisions of the contract

1. [45]

   Clause A3 of the contract states the warranties given by the builder (referred to as “the contractor”). I set out that clause:

2. [46]

   Clauses R4 and R7 were referred to in the course of submissions. I set them out:

3. [47]

   In the usual way, the contract provided for an architect to be appointed to administer the contract, and made provision for instructions, disputes, and the like (see generally cls A6 to A9). Presumably, the Architect was so appointed; but since the page containing item 2 of schedule 1 (which is where the architect is to be named) is missing, I cannot be certain.

4. [48]

   One of the annexures to the contract was the development consent given by Sutherland Shire Council dated 10 February 2009. That consent contained a number of conditions. One (condition 2A) required the work to be “carried out in accordance with the provisions of the Building Code of Australia”.

5. [49]

   The specification – document 1 and document 2 – also formed part of the contract. As I have noted, document 1 dealt with rectification work. Counsel did not refer to any provisions of document 1 in the course of their submissions.

6. [50]

   Document 2 dealt with new work required to complete the construction of the dwelling. It contained a number of general conditions, described as “supplementary conditions of contract”. Mr Bambagiotti referred to some of the requirements set out in cls 28 to 30 and 32 to 34. I set out the parts of those clauses to which Mr Bambagiotti referred:

7. [51]

   In the usual way, document 2 then set out separate specifications for each trade package. Particular reference was made to sections 07600 (dealing with metal roofing and roof plumbing) and 0852 (dealing with metal windows, doors and glazing).

8. [52]

   For convenience, I set out at this point those parts of the specifications for those packages to which particular reference was made. I start with the specification for metal roofing and roof plumbing:

9. [53]

   Turning to the specification for the metal windows, doors and glazing package, the starting point is that in cl 101, dealing with “Scope”, there was the following statement in bold print:

10. [54]

    Mr Bambagiotti referred to cls 106, 107, 205, 309 and 310. I set them out:

11. [55]

    It should also be noted that in cl 203, there was a requirement that “the glazed assembly [be designed] to minimise visual distortion of reflected[ [9] ] images”. To jump ahead for a moment: the glazing experts agreed, and the referee found, that for toughened glass of the kind specified some degree of distortion must be expected. They said, further, that the only way to minimise distortion was to continue rejecting panels of glass (which had to be custom-made for the particular job) until one was delivered that, from the subjective view point or according to the subjective requirements of the home-owner, had an acceptably low degree of distortion.

12. [56]

    Returning to the warranties, it will be noted that cl A3.2 imposed, as express terms of the contract, the warranties implied into every contract to do residential building work by s 18B of the Home Building Act 1989 (NSW). For convenience, I set out s 18B:

13. [57]

    The only point to make for present purposes is that the express warranty set out in cl A3.2(f) differs from the warranty implied pursuant to s 18(b)(1)(f). The express contractual warranty suggests that the specified purpose and result may be discerned from the contract documents. Counsel did not point to any particular provision of the voluminous contract documents that said, in terms, what was the particular purpose for which the owners required the works to be done or what was the result that they intended to achieve. Thus, the purpose and result must be inferred from the documents as a whole.

14. [58]

    The inference from the documents is that the owners desired to have a dwelling constructed, conforming to the plans and specifications, to the standard and using materials of the quality specified. They did not stipulate any more particular purpose or any more particular result. Nor did they stipulate that any particular or specific standard of workmanship or finish was to be achieved, except in so far as those matters are covered, expressly or by implication, in the specifications (in particular, for present purposes, in document 2). Since the work done by the first builder was retained (subject to rectification of defects), it may be appropriate to infer that the appropriate standard of workmanship was that shown in the non-defective parts of the first builder’s work.

15. [59]

    There is what could most kindly be described as a peculiarity in the pleading of the breach of warranty case. Paragraphs 63 to 65 of the Technology and Construction List Statement allege express terms of the contract:

16. [60]

    Paragraph 70 alleges that the s 18B statutory warranties were implied into the contract. However, for reasons known only to the drafter, there is no pleading of the express warranties set out in cl A3 of the contract. Thus, there is no pleaded case of breach of the express warranty set out in cl A3.2(f). The owners’ case that the works will be fit for purpose is thus confined to the s 18B(1)(f) warranty [10] . Perhaps that reflects the owners’ appreciation that, despite the wording of cl A3.2(f), the contract does not specify any particular purpose or any particular result that the owners desired to achieve.

17. [61]

    There is one final point to note about the contract. Contrary to common practice, it does not incorporate, either expressly or by reference, the builder’s tender (except in so far as the contract contains a statement of the revised tender price). Nor does it warrant the accuracy of statements made in the tender. That is of some significance, because the owners relied upon statements, as to quality, capacity, and the like made in the tender. Since the tender was not incorporated into the contract, those statements could not have contractual effect. In terms, reliance upon them appears to be forbidden by cl R4.1. Of course, that clause would not prevail were there a claim for damages for misleading or deceptive conduct in breach of some statutory norm; but no such claim was pleaded or advanced.

Error of law in the construction of the warranties?

1. [62]

   The owners’ case was that the referee had erred in his approach to the construction of the warranties implied by s 18B of the Home Building Act (I shall refer to these simply as “the statutory warranties”). Mr Bambagiotti submitted, correctly, that a mistake in the construction of a contract (whether of an express or implied term is irrelevant) is an error of law.

2. [63]

   The owners submitted to the referee, as they did to me, that the construction of the statutory warranties should take into account matters of context and background known to the parties before the contract was concluded. The referee summarised those submissions as follows [11] :

3. [64]

   The referee noted [12] that the owners had referred to a number of authorities on the standard of workmanship. He said (in my view correctly) “that the only conclusion that can safely be drawn from these sources is that it depends on the terms of the Contract”.

4. [65]

   The referee then reasoned as follows [13] :

5. [66]

   Mr Bambagiotti submitted that the referee had erred because he should have concluded, from various items of background information (in substance, those identified by the referee at R [114] which I have set out at [63] above) that a higher standard of workmanship was required than “the ordinary standard applied to building work” derived from the statutory warranties. Mr Bambagiotti submitted (and I am prepared to assume, although there was no evidence on the point) that the contract price was very high for a residential dwelling. He noted that it included both a substantial element for rectification of defective work done by a previous builder and an even more substantial element for new work to complete the dwelling. He pointed to the specifications, and to what the owners said were pre-contractual representations made by, and the pre-contractual understandings of, the owners and the builder.

6. [67]

   Mr Bambagiotti submitted, on the basis of all that material, that the statutory warranties should be construed as requiring the highest standard of workmanship, applicable to “a luxury waterfront home” [14] .

7. [68]

   Mr Shipway of Counsel, for the builder, submitted that much of the material to which Mr Bambagiotti referred – in particular, pre-contractual representations and understandings – was inadmissible on the question of construction of the warranties. He submitted that the meaning of the warranties was clear and well established, and that to interpret them in the way for which the owners contended would replace those well understood requirements with a standard of vague and uncertain application.

8. [69]

   Mr Shipway submitted that it had been open to the owners to stipulate for some higher or specific level of workmanship and quality, but that they had not done so. Instead, he submitted, they had simply stated (with an irrelevant variation in one case) the statutory warranties as express terms of their bargain with the builder.

9. [70]

   Counsel referred to numerous authorities dealing with the approach to be taken to the construction of contracts. I do not propose to refer to any but one of those decisions . In my view, there is no reason for a judge at first instance sitting in a commercial court to continue to restate, by reference to copious citation of authority, the relevant principles. In this case, it is unnecessary to do more than set out six paragraphs from the joint reasons of French CJ, Nettle and Gordon JJ in Mount Bruce Mining Pty Limited v Wright Prospecting Pty Limited [15] at [46] to [51]. Although the process of bulk citation from authority is generally and properly regarded as inimical to analysis and understanding, I see no point in restating in my own words what has been said authoritatively. I therefore set out, without references, those paragraphs:

10. [71]

    In my view, the submissions for the owners elide the distinction between the proper construction or interpretation of the terms of a contract – in substance, the determination of the legal effect of the words that the parties used – on the one hand, and the application of those terms, properly construed, in the facts of the particular case. To put it another way, there are in my view two distinct tasks. The first requires the court to decide the proper construction of the terms of the parties’ bargain. The second requires the court to consider and decide what is the factual extent of the performance required to satisfy the relevant term or terms, properly construed?

11. [72]

    That distinction was drawn by May LJ (with whom Henry and Chadwick LJJ agreed) in Plant Construction PLC v Clive Adams & Associates [16] . His Lordship said [17] :

12. [73]

    Of course, the contract as a whole will give indications of performance standards. For example, a specification will frequently stipulate standards of performance. In this case, as the quoted extracts from document 2 show, that happened. A failure to meet the stipulated standard of performance means that there is a breach of contract. That in turn would direct attention to the question of rectification. Again, factors of the kind to which May LJ referred may assist in deciding, by reference to the principles established in cases such as Bellgrove v Eldridge [18] and Tabcorp Holdings Ltd v Bowen Investments Pty Ltd, [19] what is the appropriate measure of damages to be awarded as compensation for the breach.

13. [74]

    The approach to construction for which Mr Bambagiotti contended would have the effect that the proper construction of common form statutory warranties implied into every contract for the performance of residential building work would vary from contract to contract. The certainty that the statutory warranties are intended to provide would evaporate. It would be necessary, in each case, to delve into the antecedent contractual material to understand what it was that the parties really “meant” those warranties to mean in the circumstances of their particular contract. That is antithetical to the objective approach to the construction of contracts. It is antithetical to certainty. And it is antithetical to the obvious purposes intended to be served by the uniform and non-excludable regime of statutory warranties imposed by s 18B.

14. [75]

    Further, in my view, Mr Bambagiotti’s submissions, as to the matters that can be taken into account in construing the statutory warranties, go too far. I do not accept that the subjective non-contractual expectations of the parties are relevant. Nor do I accept that a pre-contractual statement (“boast” or “puff” might be better words) made by the builder can be taken into account, in particular because cl R4.1 of the contract propounded by the owners expressly excluded such matters from consideration.

15. [76]

    There is a further problem with this aspect of the submissions. The evidence advanced for the owners as to subjective understanding (including understanding based on pre-contractual statements made by the builder) did not come from the owners themselves. Rather, it came from their son Mr John Harris. Mr Harris (as I shall call him) said that the owners had authorised him to be their representative for the building work, and that actions that he undertook in relation to it were done with their consent and authority [20] . Mr Harris (who is the “Harris” referred to from time to time by the referee) was not a party to the contract; he was not “the owners”. Even if the subjective understandings of the owners were relevant in some way to the process of interpretation (and I do not accept that they were), evidence of his subjective understanding is not, of itself, evidence of his parents’ subjective understanding.

16. [77]

    Further, (although this a very minor point), to the extent that Mr Bambagiotti’s submissions relied on a promotional brochure published by the builder which featured, among other projects, the owners’ dwelling, that (being self-evidently something produced after work under the contract had been completed) can have no relevance to this, or indeed any other, issue in the litigation.

17. [78]

    When the referee said [21] that the standard required is that denoted by the statutory warranties, he did not err. Rather, he gave effect to the bargain that the plaintiffs had made. When the referee said, in the same paragraph, that this “is the ordinary standard applied to building work”, he was saying no more, in my view, than that the statutory warranties applied to this contract as much as they applied to any other contract for the performance of residential building work. He said, again in my view correctly, that this analysis was reinforced by the twin facts that:

    1. (1)

       the owners had stipulated the language of the statutory warranties (with the modification to which I have referred) as express terms of their contract; and

    2. (2)

       the owners had not stipulated for any higher, more specific, or different standard of performance.

18. [79]

    I conclude that the referee did not err in his approach to the construction of the statutory warranties (considered either in that capacity or as express terms of the contract).

Error in application of the warranties properly construed?

1. [80]

   At the outset, it is necessary to note a few points about the evidence and the referee’s approach to it. It is common ground that there were no structural defects. The expert evidence as to defects was given in substance by Mr John Foster (called by the owners) and Mr Peter Ellis (called by the builder). Mr Harris also gave detailed evidence of defects that, he said, he had observed. The referee took the view that Mr Harris had influenced Mr Foster’s evidence as to defects (in particular, in so far as that evidence was set out by reference to a Scott Schedule prepared by Mr Foster).

2. [81]

   The referee noted [22] that Mr Foster based his inspection on a defects list said to be the product of a site inspection carried out by the architect on 9 September 2014. That date is significant, because it was shortly prior to the expiry of the defects liability period. No doubt, the list was intended to provide the basis of a requirement for the builder to rectify the defects listed in it. However, the referee said in the same paragraph that Mr Foster:

3. [82]

   In short, the referee concluded that Mr Foster’s list of defects in the Scott Schedule was based partly on the results of the inspection carried out on 9 September 2014 purportedly by the Architect, partly on his own observations and partly on instructions from Mr Harris. In those circumstances, it is hardly surprising that the referee said the following [23] :

4. [83]

   Further, as the referee found [24] , the evidence given by the Architect in cross-examination was “that the inspection of defects undertaken on 9 September 2014 (at the end of the defects liability period) was not carried out by him or MLR Architects”. The referee obviously (and on the evidence understandably) inferred that Mr Smith had prepared the list. He said, with admirable understatement, that Mr Harris had “had a significant influence on the inclusion of items on the defects list” [25] .

5. [84]

   Another very significant point made by the referee [26] was that, given Mr Harris’ “meticulous and at times pedantic attention to detail”, any defects not included in the list prepared on 9 September 2014 “were, on the balance of probabilities, not present at the time that the defects list was prepared”. As the referee recorded in the same paragraph, the obvious inference was “that any new defects not listed were not caused by [the builder], because [the builder] had left the site”. Instead, the likelihood was, “such defects were more likely caused by the occupants… or their pets or through normal wear and tear”.

6. [85]

   The referee expressed a preference for the evidence of Mr Ellis over that of Mr Foster where there was a difference between them. That preference is found very late in the report [27] . The referee had however presaged that preference earlier [28] :

7. [86]

   Finally, by way of introductory comments, the referee plainly performed a meticulous analysis of the defects list set out in the Scott Schedule. As a result, he was able to conclude [29] that there was significant duplication (that is, that the same defect was listed more than once) and indeed that not all defects said to relate to a particular trade (in this case, metal window and door frames) did in fact do so.

8. [87]

   Mr Bambagiotti submitted that the referee had erred because he had applied the wrong test, based on his suggested erroneous interpretation of the contract, to the facts. For the reasons I have given, that submission cannot be accepted in the form in which it was put. However, it remains necessary to deal with the factual basis on which that submission was put.

9. [88]

   Mr Bambagiotti relied upon the various provisions of document 2 to which I have referred. He submitted, correctly, that the builder was required to deliver window frames and glazing that were relevantly “as new” and unmarked. This the builder failed to do because, on any view of the evidence, there were scratches and marks present on both the anodised metal frames and the glazing (both window and balcony) that were fitted.

10. [89]

    Mr Bambagiotti submitted that the referee had erred in the way that he analysed the defects, because he considered, in effect, whether the defects were such as might be observed in ordinary usage, or whether they were observable only if some special means of viewing them were adopted (for instance, using a torchlight – as the referee said at one stage – or a magnifying glass). It was not to the point, Mr Bambagiotti submitted, that the bystander might not notice the defects. The point was, rather, that the very presence of the defects, whether readily observable or not, marked a departure from the contracted standard of quality.

11. [90]

    It followed, Mr Bambagiotti submitted, that the only way to secure to the owners the full benefit of the contract they had made with the builder was to order replacement of all the defective frames and glazing. Rectification, he submitted, would not give them the quality for which they had contracted and which they had understood they would receive.

12. [91]

    Mr Shipway submitted that the referee had analysed the defects appropriately, using his experience and the results of his own observation, and had come to a decision that was open to him on the facts.

13. [92]

    The referee commenced by identifying the extent to which there were deficiencies (scratches and the like) in the anodised metal frames, and in the glazing. Having eliminated double counting, defects that were not properly classified under either heading, and defects that had not been identified in the report prepared following the inspection of 9 September 2014 (in each case, for the reasons I have given already), the referee found that the anodised metal framings were defective to the extent that Mr Ellis had accepted.

14. [93]

    The referee then turned his attention to the rectification of the defective framing. The referee considered the expert evidence of Ms Tracey Gramlick (called for the owners) and Mr Craig Brennan (called for the builder). Based on that evidence, he found that rectification was required and that there were two alternative methods. The first involved removal and replacement of the accessible components of the material, and the use of “anodised trim angles or flat extruded sections to cover the surface damage” for fixed components. The alternative method of rectification involved leaving all the components in place, but using “an accredited and reputable surface finishing company experienced in recoating” to replicate the required finishes.

15. [94]

    The referee recorded [30] that the owners did not accept either solution; that is to say, that the owners did not agree with the methods of rectification that their own expert Ms Gramlick had said were appropriate.

16. [95]

    The referee concluded that [31] that the appropriate method of rectification was to use 1mm thick cover strips over the damaged sections of framing. He accepted [32] that there were component suppliers and tradespeople who could do the work, and that there were practitioners who could implement a quality control process to ensure an appropriate outcome.

17. [96]

    The referee referred to an inspection that he had carried out, which suggested to him that where trim strips had been applied, they were “not noticeable… until viewed closely and then only after the rectification work was pointed out” [33] . Mr Bambagiotti submitted that this passage of the report involved a denial of natural justice, because the referee had not informed the parties of his observations or given them an opportunity to put submissions, and thus had deprived them of the opportunity to address him on the matter. I return to this submission at [137] below.

18. [97]

    So far as this passage of the report goes, I see nothing in it that involves any erroneous application of the warranties, properly construed, to the facts as found. On the contrary, the referee:

    1. (1)

       expressed a reasoned (and on the face of things entirely understandable) preference for the evidence of Mr Ellis over that of Mr Foster;

    2. (2)

       based on that preference, reached a conclusion as to the extent of the defects; and

    3. (3)

       based on the joint views of the rectification experts, expressed a view as to a method of rectification of the defects.

19. [98]

    It is correct to say that the whole of the framing components could have been removed and replaced. But there was no reason given, apart from the desire to have precise conformity with the specification (document 2), why this should be done. It was not suggested that the method of rectification proposed was functionally or aesthetically inadequate (there was a separate dispute as to its impact on warranties, and I shall return to this).

20. [99]

    Further, to do as to the plaintiffs wished would have given them the benefit of rectification not only of defects to the anodised metal framing that could be attributed to the builder, but also of defects that had been caused after the builder had ceased to have any contractual responsibility. Indeed, given the evidence of the susceptibility of such frames to damage, it is likely that some of the damage observed on 9 September 2014 had in fact been caused by others, in circumstances for which the builder had no responsibility; but that is not a consideration of any dispositive significance. In those circumstances, complete removal and replacement would go far beyond what was “necessary” and “reasonable” [34] to give the owners the benefit of the contract.

21. [100]

    The first question for the referee was whether there had been a breach of warranty in relation to the anodised metal framing. He found that there had been, to the extent identified by Mr Ellis [35] . The next question for the referee was what was the appropriate method of rectification. He expressed a conclusion on this, based on the joint evidence of Ms Gramlick and Mr Brennan. The third question was what should be allowed for the cost of rectification. The referee dealt with this, based on the evidence of the costing experts, in a way that does not require consideration.

22. [101]

    I return to the reservation expressed at [98] above. The owners submitted, both before the referee [36] and before me, that rectification by the use of thin anodised strips would void the manufacturer’s warranty. The specification required that a nine year warranty be given. It is entirely unclear whether that warranty was to be given by the manufacturer or by the builder (or, for that matter, by someone else). Regardless, there was no evidence as to the terms of any manufacturer’s warranty for the material actually used.

23. [102]

    There was apparently evidence of the terms of a warranty offered by another supplier. That supplier had not been engaged on the project. The relevance of that evidence is a little difficult to understand. There was apparently also evidence from Ms Gramlick that rectification by the use of anodised strips (which was one of the methods she had recommended) would void a manufacturer’s warranty. That may have been Ms Gramlick’s opinion, based on the terms of some unidentified and unproven warranty, but it is not capable of proving the asserted fact. There is no reason to think that Ms Gramlick is an expert in the interpretation of contracts. There is no evidence of the terms of the contract on which she based her opinion. And there is no evidence that those terms would have been the terms on which the metal components in question were in fact supplied.

24. [103]

    Although Mr Bambagiotti attacked this aspect of the referee’s reasons, the attack in my view was misconceived. If the owners wished to contend that a proposed method of rectification would have an adverse impact on the warranty actually offered by the manufacturer of the components actually installed (assuming that such a warranty had been given), it was incumbent upon them to prove the terms of the warranty. They did not do this. The fundamental premise of this argument is, therefore, missing.

25. [104]

    I conclude that there was no error in the referee’s treatment of defects relating to the anodised metal framing.

26. [105]

    I turn to the glazing. The first complaint was of chips, scratches and blemishes. The evidence of the relevant experts, Mr Bill Moisidis (called for the owners) and Mr Peter Karsai (called for the builder) was that some of those alleged defects were not defects at all, and that most of the others could have been rectified. In a few cases, where the defects simply comprised material adhering to the glass, they could be rectified by cleaning. In other cases, where the defects comprised chips or cracks, the experts opined that they could be removed by light polishing. The referee accepted that evidence, and concluded [37] based on it that polishing would remove defects comprising chips or cracks.

27. [106]

    There was a dispute along the way as to the extent of scratching defects, and as to how those defects were to be assessed. In the event, those disputes do not seem to me to go anywhere. The referee concluded, based on the expert evidence, that they could all be dealt with by polishing. As the referee said [38] :

28. [107]

    There were some panes of glass that had a coating, presumably intended to reduce the passage of ultraviolet radiation. The referee accepted that it was likely that the process of polishing would damage the coating. Where this was a problem, he accepted that the panes (if defective by reason of scratches or chips attributable to the builder) should be replaced.

29. [108]

    There was a separate complaint relating to scratches to the balustrade glazing. The referee noted that they had not been included in the defect list prepared following the inspection of 9 September 2014. In those circumstances, he concluded [39] , they were not attributable to the builder.

30. [109]

    The owners have failed to demonstrate that the referee erred in relation to chips and other marks in the glazing.

31. [110]

    The other defect of which the owners complained, relating to balustrade glazing, was “rolling waves or distortion… visible the through toughened glass in some locations” [40] . That appears to have related to two sheets of glass [41] . It was common ground that this was a natural (in other words, inevitable) result of the process of manufacturing the glass.

32. [111]

    The referee said that “there were no specified criteria for rejection or acceptance of a particular degree of distortion in the glass” [42] . That was correct. As I have said, document 2 required only that distortion [43] be minimised. There was no evidence that the extent of distortion apparent breached this somewhat elastic, imprecise and subjective criterion.

33. [112]

    Finally, although it may not be relevant having regard to the nature of the alleged defect, the referee noted [44] that distortion was not a subject of complaint in the list of defects provided to the builder at the time of practical completion. Presumably, the Architect did not regard the distortion as excessive. There is the additional common-sense reality check following from what the referee said [45] to the effect that, as the experts agreed, “new replacement glass will exhibit similar distortions to the current glass”.

34. [113]

    In short, there is no basis for concluding, in relation to distortion, that the glass did not comply with the requirements of document 2. Nor is there any basis for concluding that replacement would achieve a better outcome. The referee did not err in his conclusions on this topic.

Error in relation to roofing and hydraulic work?

1. [114]

   The owners complained of a number of “hydraulics defects”. The evidence is a little obscure, because, as it appears from the report [46] , the relevant experts appear to have agreed on the existence of the defects. The real dispute was as to responsibility for the defects.

2. [115]

   Roofing and roof plumbing (which is as I understand it is the subject of the complaints as to “hydraulics defects”) is dealt with in both document 1 and document 2. Document 1 specifies defects in the work carried out by the previous builder which the builder was required to rectify. Those defects related to the cold water service, gas service and soil and waste service.

3. [116]

   Document 2 contains a separate section, 07600, dealing with metal roofing and roof plumbing. Clauses 101 and 107 were referred to in the course of submissions. I set them out again, for convenience:

4. [117]

   The specification is remarkable for its obscurity. On its face, it appears to require the builder to construct the complete roofing installation. The extent of that work is qualified only by the reference to the drawings. The parties did not take me to the drawings to indicate, by reference to them, what roofing work the builder was required to perform.

5. [118]

   The alleged defects included, according to the report, complaints relating to the eaves, gutters, box gutters, Vergola downpipes and other parts of the roofing or roof plumbing [47] .

6. [119]

   The referee started from the proposition that the defects identified by the relevant experts were agreed. He then considered the contract. He stated, correctly, that there were two parts: document 1, for rectification works; and document 2, for new works required to complete the dwelling [48] . He referred to the clauses of the roofing specifications set out in document 2 that I have set out above, and noted that in general terms, the builder was required to complete all contracted work in accordance with the contract documents and written variations issued by the architect [49] . Neither party submitted that there were any other provisions of document 2 that bore on this question.

7. [120]

   The referee considered document 1 and document 2 (including, as I understand it, the plans) and came to the conclusion that [50] :

8. [121]

   Having dealt with the scope of works, the referee turned his attention to the requirement to provide a warranty. He said [51] :

9. [122]

   The referee turned to the alleged defects in the roofing and roof plumbing. He concluded [52] that a number of those items were not the responsibility of the builder, because they related to work done by the previous builder. For completeness, I note that document 1 (to which the referee had already referred) does not require the builder to undertake any rectification work in respect of defective work done by the previous builder relating to box gutters, overflow rainwater heads and sumps and related matters. However, the referee concluded, others of the defects listed did fall within the builder’s scope of work, and thus that the builder was liable for the cost of rectification.

10. [123]

    Mr Bambagiotti submitted that, on its proper construction, document 2 required, by cl 101 read in conjunction with cl 107, the builder to check all roofing and associated plumbing (including work done by the previous builder) and thus, to the extent that there were defects in the roofing work done by the previous builder, the builder was liable.

11. [124]

    Mr Shipway submitted that the plain intention of the scope was to limit the builder’s responsibility to the limited work that it was required to perform.

12. [125]

    As I have said, document 2 is opaque as to the scope of the work to be performed by the builder in relation to roofing and roof plumbing. It was apparently to be understood by reference to “the drawings”. However, Counsel did not take me to the relevant drawings, to show whether the scope of work extended beyond the limited scope that was the subject of the referee’s conclusion at R [527].

13. [126]

    The scope cannot mean that the builder was required to supply and install a complete roofing installation. That follows because, as the scope itself noted, the bulk of that work had been done by the previous builder. Since the parties did not provide any assistance as to the extent to which the scope identified by the drawings, I am unable to express a view as to whether the referee’s conclusion at R [527] is correct. It is enough to say that the conclusion has not been shown to be erroneous.

14. [127]

    The real debate concerned the extent or content of the obligation “to check all remaining works, flashing etc.” Mr Bambagiotti submitted that this meant the entirety of the roofing works, whether done by the previous builder or by the builder. In effect, his submission was that “remaining” should be read as “existing”; or that the words “after completion of the builder’s scope of works” should be read in after the word “remaining”. Mr Bambagiotti sought to support that conclusion by reference to cl 107.

15. [128]

    Mr Shipway submitted that the natural and ordinary meaning of the words in question was that they obliged the builder to check the roofing work that remained to be done after it went onto the site.

16. [129]

    Considering cl 101 in its entirety, it seems to me that the construction for which Mr Shipway contended is correct. It accords with the natural meaning of the words “all remaining works, flashing etc”. It respects and gives effect to the syntax of the sentence, which appears to juxtapose two separate concepts: “the bulk of the roof” (referring to work already done by the previous builder) and “all remaining [roof] works, flashing etc” (referring to work to be done by the builder).

17. [130]

    In effect, the construction for which Mr Bambagiotti contended required the builder to check the whole of the roofing works and their associated flashings and plumbing. If that is what the parties meant to say, there was a very obvious and clear way for them to say it. They did not do so.

18. [131]

    However, it is erroneous to consider the words in question simply in the context of cl 101. They must be considered in the wider context of the whole of section 07600. Indeed, they should be considered in the context of the entirety of the contract, although neither party submitted that there was anything outside document 2 that would bear on the question of construction.

19. [132]

    Clause 107 imposes a freestanding obligation on the builder to provide a warranty having the characteristics that are described. The referee considered the impact of cl 107. He said, in substance, that it required the builder to identify any deficiencies in the existing roofing and roof plumbing works done by the previous builder, and to seek a variation to rectify them. If no such direction were provided, the referee said, then the builder was not obliged to provide a warranty [53] .

20. [133]

    I am not sure that it is correct to read down cl 107 as requiring the builder to warrant only to the extent that it had assumed responsibility for the work of the previous builder by checking and rectifying defects in that work outside the defects identified in document 1 [54] .

21. [134]

    However, the question at present is not what is the content of the cl 107 warranty but, rather, whether the existence of that warranty has any bearing on the construction of the words “check all remaining works, flashing etc”. On balance, I do not think that it does. I think that cl 107 imposes an independent obligation on the builder to warrant the whole of the roof and roof plumbing in the terms set out. Whether the builder carried out in the inspection or not, it would be liable for the whole of the roof pursuant to the cl 107 warranty.

22. [135]

    The pleaded case did not rely on cl 107. It did not plead any breach of the warranty that the builder gave, or breach of the obligation to give a warranty, pursuant to cl 107. Instead, it pleaded a claim for damages for breach of the statutory warranties relating to the work that the previous builder actually did. The defects were identified by reference to the Scott Schedule. So far as the Scott Schedule deals with roofing and roof plumbing, it refers to breaches relating to box gutters, flashing and the like. In other words it relates to discrete defects in workmanship. The owners did not plead, and the Scott Schedule did not identify, a breach of the obligation “to check all remaining works, flashing etc”.

23. [136]

    On the case that was pleaded and run, I see no overall error in the conclusion reached by the referee.

Denial of natural justice

1. [137]

   As I have indicated, this relates to the referee’s observations at R [160]. I set out the whole of that paragraph:

2. [138]

   Mr Bambagiotti submitted that the referee had been obliged to inform the parties of his visual observations and of what he thought followed from them, and by not doing so had denied some measure of natural justice to the owners. I do not agree.

3. [139]

   The parties knew that the referee was going to undertake an inspection. He recorded at R [67] that he had arranged to inspect the defects in the company of “the two experts”, presumably, Messrs Foster and Ellis. It was apparently in the course of this inspection that the referee made the observations referred to at R [160]. Thus, the experts were aware that the builder had examined part of the anodised metal framing where cover strips had been applied over scratched metal work. It is obvious that the experts knew this, because the referee said that he was only able to discern the cover strips (which he called in this paragraph “trims”) “after the rectification work was pointed out”.

4. [140]

   It is apparent, considering those matters, that one or other of the experts (or if not one of them, Mr Harris) must have pointed out to the referee where the cover strips had been applied. Although I do not suggest that the experts were agents or representatives of the parties, it was open to them to report to their respective clients that the inspection had been performed, and that the referee’s attention had been drawn specifically to the cover strips.

5. [141]

   Referees are not bound by the rules of evidence. They are entitled to inform themselves as they see fit. They are, of course, bound to afford natural justice to the parties. In the circumstances that I have outlined, I think that the referee afforded sufficient natural justice to the parties by conducting the inspection in conjunction with the experts, and by inspecting the applied cover strips when that was pointed out by one expert or the other.

Reimbursable costs

1. [142]

   I have outlined the basis of this dispute already [55] . The referee dealt with it relatively briefly. He found that:

   1. (1)

      the subcontractor in question, Cath Aluminium, was a subcontractor that the Architect directed the builder to use [56] ;

   2. (2)

      the Architect certified payment of the deposit amount (which is the subject of the present claim) to Cath Aluminium, for work that included removal of windows, repair, and manufacture of new windows [57] ;

   3. (3)

      Cath Aluminium went into liquidation, apparently having removed windows for the purpose of rectification [58] ; and

   4. (4)

      in those circumstances, Cath Aluminium had performed at least some of the work for which the deposit had been paid to it [59] .

2. [143]

   It was plain, as the referee found [60] , that such work as Cath Aluminium did was abortive. The referee also noted [61] that the owners had changed the windows specification and that a new supplier had been engaged. In those circumstances, the referee concluded that “some work was undertaken by Cath Aluminium for which it was entitled to be paid prior to entering liquidation” [62] .

3. [144]

   Mr Bambagiotti submitted that the referee’s conclusions were not supported by the evidence. He did not show me why it was that the particular findings made by the referee, that Cath Aluminium had removed the windows and commenced the process of repair, were erroneous. In essence, this seems to amount an invitation to the court to review the evidence and come to some different conclusion. As I have said already, that is not a task that should be undertaken in the exercise of the discretion conferred by UCPR r 20.24.

4. [145]

   I find no error in the referee’s approach to and conclusion on this issue.

Variations and delay costs

1. [146]

   The builder claimed for the cost of variations that had not been approved, and for delay costs and damages arising from extensions of time. Although the referee considered those mattes separately (and in careful detail), they can be dealt with together.

2. [147]

   It appears to have been common ground that the builder did not comply with the requirements of the contract that had to be satisfied were it to be entitled to payment under either head. The owners relied on those contractual provisions in answer to the claims. The referee found that they had been waived, by the way in which the Architect, with the knowledge of Mr Harris, informally administered the contract.

3. [148]

   The real difficulty with this conclusion is that waiver (whatever that may be thought to mean) had not been pleaded. The closest that the pleadings come is an allegation, based on scanty particulars, that the owners were estopped from relying on the relevant contractual provisions. That pleading is found in the Technology and Construction List Cross-Claim Statement at [24] (in relation to variations) and [36] (in relation to delay costs). I set out those paragraphs:

4. [149]

   I enquired of Counsel whether waiver had been addressed in the course of submissions. They agreed that it had not.

5. [150]

   In my view, the pleading of estoppel was not sufficient to put the owners on notice that the builder would argue that they had waived their right to rely on the contractual requirements that had to be satisfied before the builder became entitled to payment for variations of payment for delay costs. The inadequacy of the pleading is highlighted by the uncertainty inherent in the use of the term waiver (as to which, see Gummow, Hayne and Kiefel JJ in Agricultural and Rural Finance Pty Ltd v Gardiner [63] at [50].)

6. [151]

   I accept, of course, that the term “waiver” is sometimes used to refer to estoppel, and that estoppel was pleaded. However, the referee did not address specifically the pleaded estoppel. Nor did he address the “reasonable price” issue that would have arisen had he found that the pleaded estoppel had been made out on the facts.

7. [152]

   I conclude that it was not open to the referee to decide in favour of the builder on these issues, on the basis of some innominate waiver. In doing so, he denied the owners natural justice in a significant way.

8. [153]

   The referee found that the builder was entitled to $8,723.67 for variations, and $49,211.58 for delay costs (in each case, inclusive of GST). He took those amounts into consideration in concluding that the amount (in his precise figures) of $327,741.22 (again inclusive of GST) was owing to the owners.

9. [154]

   It follows from my conclusions that the amounts allowed in favour of the builder for variations and delay costs should be added back to that amount. On that basis, the amount payable to the owners would be $385,676.47. That is subject to any agreed adjustment by reason of the matters stated at [42] above.

Conclusion and orders

1. [155]

   The report should be adopted, save in respect of [1190] and the underlying paragraphs quantifying the total set out in that paragraph, [1245], [1246], [1250], [1251] and [1253]. It is unnecessary to say anything more about any other paragraphs apart from [1253]. That paragraph should be varied to refer to the amount of $385,676.47 [64] payable to the owners.

2. [156]

   So varied, and to the extent indicated, the report should be adopted. The owners are entitled to judgment for the sum of $385,676.47, subject to any agreed adjustment. Interest should run on that sum from the date of the report, 31 January 2018, until the date of entry of judgment pursuant to s 100 of the Civil Procedure Act.

3. [157]

   That leaves for resolution the question of costs: both the costs of the reference and the costs of the proceedings (including, specifically, the costs of the motion for adoption). I think that the best way to deal with this is to give the parties a date for directions, with the intention that a date will be fixed for the hearing of argument on costs and that directions will be given to ensure that the argument is ready to proceed on that date. In the meantime, the parties are to bring in an agreed calculation of interest and a minute of the judgment that is to be entered pursuant to these reasons.

4. [158]

   I make the following orders:

   1. (1)

      direct the parties to bring in draft orders to give effect to these reasons;

   2. (2)

      List the proceedings at 9:30am on 28 June 2018 before me for entry of judgment accordingly; liberty to apply in chambers if the form of orders is agreed before then.

   3. (3)

      Reserve all questions of costs.

   4. (4)

      List the proceedings for directions in the Technology and Construction List at 12 noon on 29 June 2018 for allocation of a date for hearing of argument on costs (subject to the views of the judge conducting the directions list) and for directions in relation to that hearing.