FEDERAL COURT OF AUSTRALIA

VoR Environmental Australia Pty Limited v Taset Inc. (No 2) [2019] FCA 1094

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to s 54A of the Federal Court of Australia Act 1976 (Cth), each of the following reports of the Referee, Dr David Tawfik, is adopted in whole:

(a)    “Referee Report” dated 11 December 2018;

(b)    “Referee Supplementary Report” dated 30 May 2019.

2.    The costs of and incidental to the interlocutory hearing on 8 March 2019 are costs in the cause.

3.    The respondent is to pay the applicant’s costs of and incidental to the interlocutory hearing on 17 June 2019.

4.    The respondent is to pay $17,855.75 to the applicant, being the applicant’s share of the costs of the “Referee Supplementary Report” dated 30 May 2019.

5.    Pursuant to r 35.13 of the Federal Court Rules 2011 (Cth), the time for the respondent to file any application for leave to appeal from these orders is extended to 14 days after the date that the Court publishes its reasons for judgment for these orders.

6.    The proceeding is listed for a case management hearing before Justice Jagot at 9.30am on 23 July 2019.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

Revised from the transcript

LEE J:

A     INTRODUCTION

1    This modest commercial dispute commenced over two years ago. The material before me suggests the claim is for less than $1 million and, as I explained in VoR Environmental Australia Pty Limited v Taset Inc. [2017] FCA 541 at [4]-[6]:

Put generally, the applicant and the respondent are manufacturers and suppliers of water and waste-water related infrastructure. The applicant alleges that, in 2015, it contracted with the respondent for it to design, document, supply, deliver and otherwise procure various significant items of equipment. After delivery of the equipment to Fremantle, the respondent assisted in providing installation at a remote mining site located in a coastal area of Western Australia. The installation, it is alleged, involved the respondent making various recommendations as to the installation of the equipment.

Subsequently, a dispute arose between the parties concerning alleged problems arising from the equipment including an alleged improper preparation of paint coatings, a lack of bracing support and related matters. There were various subsequent dealings between the parties including a proposal made by the respondent that the equipment would be rectified by a particular time. Ultimately, the applicant took the view that it was forced to rectify the equipment itself and alleges that it suffered loss and damage by reason of taking such rectification steps and incurred other related costs.

The relief sought by the applicant includes statutory compensation pursuant to s 236 of the Australian Consumer Law (ACL) or, alternatively, damages at common law.

2    On 17 May 2017, I granted leave to serve the originating process by causing a letter of request under the Hague Convention: see Convention 20 ‘Convention of 18 March 1970 on the Taking of Evidence Abroad in Civil or Commercial Matters’ of the Hague Convention, Art 1. The proceeding, at that time, was listed for a case management hearing on 21 July 2017. On that day, Mr Conde, who appears for the applicant, said the following (T14.35-40):

The only other matter I wish to flag today, which is not seeking an order, but is to address the question of a referee, in that if and when this matter progresses, [it is] one that involves at the moment, pleaded losses of $1 million. … I just wish to raise… that we do see benefit in the possibility of a referee, because a matter of this nature most likely will need somebody with expertise travelling to Western Australia and going to the sight and so on.

3    This approach was commendably consistent with the requirements of Pt 8.5(e) of the Central Practice Note (CPN-1), which requires parties to give early attention to whether or not an order should be made for questions to be referred to a referee for an inquiry and report in appropriate matters: see also Pt 6 of the Expert Evidence Practice Note (GPN-EXPT); s 54A of the Federal Court of Australia Act 1976 (Cth) (Act) and Div 28.6 of the Federal Court Rules 2011 (Cth) (FCR). Eventually, both parties agreed that it was appropriate that there be a reference, although the position of the respondent was that this non-opposition was subject to two preliminary objections being: (a) the timing of the reference; and (b) whether or not documentary disclosure should occur prior to the reference commencing.

4    One matter in respect of which there was no dispute was the identity of the proposed referee. Dr Tawfik, who is a chartered engineer, was agreed to be appropriate. Dr Tawfik is a highly specialised expert in the field of mechanical engineering and has undertaken numerous investigations and expert advisory assignments for the legal, commercial and insurance sectors. Dr Tawfik has conducted investigations to determine the root cause of asset failures, industrial accidents, construction disputes, product defects and component damage. The parties were correct to conclude that his specialised expertise made Dr Tawfik both capable and qualified to reach an objective conclusion as to the matters the subject of the reference.

5    On 15 June 2018, I made orders facilitating the reference. As is not unusual in matters of this sort, one of those orders required Dr Tawfik to consider and implement such manner of conducting the reference that would, without undue formality or delay, enable a just, efficient, timely and cost-effective resolution of the reference. Broad powers were given to the referee to make enquiries in person, by telephone or in writing and have direct communication (without the intervention of solicitors) with persons whom the referee considered may be of assistance in conducting the reference. Such flexible and ample powers, supplemented by an ability to seek direction and orders from the Court, accommodated the provision, if the referee thought appropriate, of additional material including any documentary disclosure, thus addressing any concerns as to the timing of the reference. Further, the ability to obtain all relevant documents for the purpose of conducting the reference, was secured by various orders of the Court detailed below.

6    The purpose of the reference was reflected in the orders made on 13 April 2018, which directed the referee to enquire into and report upon the following questions set out in Annexure A to the orders:

1.    Was the Equipment fit for the purpose for which it was intended to be used at Site?

2.    If “No” to Question 1:

(a) In what way(s) was the Equipment not fit for purpose at Site?

(b) Who or what was responsible for the Equipment not being fit for purpose at Site?

(c) What costs were incurred by VoR to rectify the Equipment to make it fit for purpose?

(d) Were the costs incurred by VoR (either all or any part thereof) reasonable in all the circumstances?

B     THE REASONS FOR THE REFERENCE

7    As should already be evident, in a modest commercial dispute, the question as to whether certain equipment was fit for the purpose for which it was intended to be used needed to be resolved as cost-effectively as possible. As I explained in Kadam v MiiResorts Group 1 Pty Limited (No 4) [2017] FCA 1139; (2017) 252 FCR 298 at 312 [56], immediately prior to the introduction of s 54A of the Act, Part VB of the Act was introduced by the Access to Justice (Civil Litigation Reforms) Amendment Act 2009 (Cth) which, of course, included the enactment of the overarching purpose provision and the allied requirement of s 37M(3) that the Court apply any practice and procedure provision, including the power to order references, in a way which best promotes the quick, inexpensive and efficient resolution of proceedings.

8    The size of the proceeding and the nature of the central issues, including the necessity of consideration of technical questions, made identified issues in this proceeding particularly apt for appointment of a referee. At both the time of ordering the reference and now, it seems to me that the adoption of a reference process in this case facilitated the overarching purpose.

C     THE REFEREE REPORT AND DISPUTE CONCERNING ADOPTION

9    The Referee Report (Report) of Dr Tawfik dated 11 December 2018, was provided to the Court in accordance with the orders made on 13 April 2018 and supplementary orders made on 15 June 2018. Following its receipt, the applicant applied for an order pursuant to s 54A(3) of the Act and r 28.67(1)(a) of the FCR that the Report be adopted in whole. Conversely, the respondent sought an order rejecting the Report in whole (notwithstanding that there are some aspects of the Report which reflect uncontroversial matters).

10    In support of its contention the Report be adopted, the applicant pointed to five aspects of the orders made by the Court on 13 April 2019 which are important in order to understand the reference process adopted: first, Dr Tawfik was given a wide discretion to conduct the reference as he saw fit (order 1(c)); secondly, the respondent was granted leave to issue various subpoenas, allowing it the ability to put material it considered relevant before the referee (order 3); thirdly, the Court ordered discovery by the parties before the commencement of the reference; this was to occur within a short timeframe because the parties had already marshalled documents ahead of the reference (order 5); fourthly, the parties were ordered by 21 May 2018, to have conferred and provided the referee with a joint agreed bundle or separate bundles of all documents to which they wished the referee to have regard (order 11); and fifthly, the referee and each of the parties were given liberty to seek directions from the Court with respect to a matter arising in the reference (order 17).

11    As was noted in the Report, on 25 May 2018, the parties provided a joint agreed bundle of documents to the referee (Joint Exhibit (JE) at 15). On 15 June 2018, orders were made refining the orders for reference and, on the application of the respondent and, to address concerns raised by the respondent, orders were made requiring the referee to answer 20 questions set out in annexure A to those orders (order 3 dated 15 June 2018).

12    It followed that by the time the reference commenced, a detailed process had been undertaken whereby any concerns initially identified by the respondent as to the timing of the reference and the provision of documentation to the referee, and as to the precise material to be considered by the referee, had been fully addressed by the Court’s orders.

13    Again, to address issues as to procedural fairness, on 28 September 2018, the Court made further orders by consent. The referee was ordered to provide a draft of the Report to the parties by 19 October 2018 (Draft Report) and the parties were ordered to provide any written submissions (not to exceed 10 pages) as to the Draft Report by 23 November 2018. The referee was to consider the parties’ submissions and make whatever changes he deemed necessary to the Draft Report and the referee was ordered to provide the final Report by 12 December 2018.

14    It is evident from the Report (at [32]-[36]) that following the orders made by the Court, lengthy submissions were provided to the referee. These submissions included: (a) on 14 November 2018, the applicant provided a two-page document comprising submissions on the Draft Report; (b) on 23 November 2018, the respondent provided a 67-page document comprising submissions and further evidence by way of an affidavit; (c) on 27 November 2018, the applicant, in accordance with a direction of the referee, provided an eight-page submission and affidavit; and (d) on 28 November 2018, the respondent provided a one-page submission in answer to the reply submissions provided by the applicant.

15    On 11 December 2018, the referee provided the Report and a “document styles (tracking sheet)” to the parties which, according to Dr Tawfik’s covering email, contained his response (where appropriate) to the submissions of the parties concerning the Draft Report.

16    Despite all this effort to ensure that each party had the ability to put all they wished before the referee, when the matter came before the Court on 11 February 2019 for the adoption hearing, the respondent objected to the adoption of the Report. The complaints were lengthy but could be boiled down to the following submissions: first, the respondent criticised the referee for not requiring a statement of contentions of fact in accordance with FCR 28.65(7) and for conducting the reference principally by reference to the joint agreed bundle of documents (and only inviting submissions after the Draft Report was prepared); secondly, after lengthy exchange during the course of submissions and inviting the respondent to be more specific about the nature of the complaints that it made, the respondent contended that the referee failed to have regard to five specific contentions advanced on behalf of the respondent; and thirdly, that there was a failure to have regard to a specific contention that the respondent did not supervise the installation of the tank.

17    Although a number of more granular submissions were made in relation to the proposed adoption to the Report, these were the three predominant difficulties with the Report identified by the respondent.

18    As I expressed during the course of argument, it did not appear to me that there was any compelling substance in the complaints made by the respondent. The referee had a wide discretion to conduct the reference as he saw fit. In order to conduct the reference, the referee was given the parties’ concise statements, the joint bundle of documents as well as extensive submissions, including the respondent’s 67-page document of submissions and further evidence (notwithstanding an earlier consent order had limited the parties to 10 pages of submissions). Although the referee did not inspect the equipment or undertake a site inspection, he was ultimately bound to conduct the reference in a way that he considered was conducive to its cost-effective and expeditious conclusion. It is evident from the Report (at [vi]-[vii]) that he conducted all inquiries that he believed were desirable and appropriate in order to conduct the reference.

19    Despite my preliminary view that the process had not miscarried in any way and concerns as to cost, I was, at the adoption hearing, also concerned to ensure that the respondent did not consider that it had been denied any procedural fairness in having its contentions considered carefully by the referee or that there could conceivably be a concern that the referee did not have regard to the evidence that the respondent wished to rely upon which, it was said, demonstrated that the respondent did not supervise the installation of the equipment.

20    Before going further, it is perhaps useful to summarise this material concerning supervision, which has become the renewed focus of submissions during the course of the interlocutory hearing today. In an affidavit affirmed on 23 November 2018, Mr Geonsu Kim, an engineer employed by the respondent, gave evidence concerning his knowledge of the installation of the equipment (JE 205-206). Paragraphs 5-10 of that affidavit are in the following terms:

VoR engaged JNJ Mech Services (JNJ) to install the Tank. I along with Mr Tae young Kim, a technician, visited the site from 5 November 2015 to 9 November 2015. On 5 November 2015 I met with Mr. Patrick Yeoh from VoR and three workers from JNJ to discuss the installation. During the meeting, Mr Tae young Kim explained to them the method and the procedure to install the tank panels. They asked questions and we answered. Mr Tae young spoke in Korean and I translated in English.

For each of the days in which I was in Western Australia, I prepared a Daily Supervision Report. I prepared each report in Korean and emailed it to Mr Wootae Lee. The English translation of the Daily Supervision Reports for 5, 6, 7 and 8 November 2015 are attached to this affidavit marked as Annexure 2.

In the Daily Supervision Report from 5 November 2015 I wrote: “Entry was not permitted due to the lack of job approval”. I made a brief site inspection on that day but soon was requested by Mr Patrick Yeo from VoR to leave the site. He said ‘[y]ou must finish a safety training first to get an entry permit to the site. CITIC requested to do so. You should leave now”.

During the remainder of the visit during November 2015 until 9 November 2015, Tae young Kim and I were not permitted to be involved in the on-site installation of the Tank because we did not have work permits. We stayed away from the site and, when necessary, passed our oral instructions through Mr. Patrick Yeoh to JNJ workers who worked on-site. All the required measurements and installation process on site were performed by JNJ workers and I could only monitor the installation from the area where entry permit is not required and though data and information which JNJ provided us.

In the Daily Supervision Report for 8 November 2015 I wrote that the “Schedule for the Next Day” included: “4. Commence tank panel assembly”. Tae young Kim and I left the site on 9 November 2015. By the time I left Australia on 9 November 2015, I could confirm at distance that (sic) 6th panel (out of a total 108 panels of the tank) was assembled and Mr. Patrick Yeoh said “I fully understood the installation procedure. I think there would be no problem in installing the tank panel with JNJ workers”.

I returned to the site on 4 December 2015. By that time, the assembly of the tank was in its final stages. The installation of the last layer of the tank (the 4th layer) began on 5 December 2015 and was completed on 7 December 2015.1 left the site on 17 December 2017.

21    This material was, of course, before the referee.

22    Also before the referee was additional material, being the affidavit of Jonathan Edward Light dated 28 November 2018 annexing a photograph taken on 8 November 2015 which showed Mr Kim (and another representative of the respondent) standing on the concrete base of the tank apparently supervising the work of JNJ. This was the very date (8 November 2015) in which Mr Kim in his affidavit of 23 November 2018 had indicated that he was not permitted to be involved in on-site installation (JE 256). Also before the referee was a series of supervision daily reports (JE 231-49) and an email from the solicitor for the respondent addressed to Dr Tawfik dated 28 November 2018 (that responded to VoR’s submissions and the Affidavit of Jonathan Edward Light dated 28 November 2018). In it, the solicitor for the respondent submitted that staff, although not allowed to handle tools, gave “oral instruction at a distance (approximately five meters (sic) away from the work spot)” (JE 258 at [2]). The email then repeats the contention deposed in Mr Kim’s affidavit that the respondent’s staff were not allowed to be “involved in installation” (JE 258 at [2]). The further submission was made that “if it can be said there was ‘supervising’, it was limited to the thickener and not the tank” (JE 258 at [3]).

23    Including at section 11 of the Report (JE 35-39), the referee, at some length, dealt with the issue of the equipment installation assistance provided which, in its terms, demonstrates a thorough familiarity with the material that I have summarised above, including Mr Kim’s affidavit.

24    Despite all this, more out of hope than expectation that it would narrow future disputation and despite my misgivings as to additional cost, I determined that it may be prudent to seek further clarification by way of a supplementary report (Supplementary Report). As a consequence, on 26 March 2019, I made the following orders:

1.    Pursuant to section 37P(2) of the Federal Court of Australia Act 1976 (Cth) and rule 28.67(1)(c) of the Federal Court Rules 2011 (Cth) (FCR):

(a) The Referee is to provide a further report which:

(i) provides a detailed response to the five contentions of the Respondent referred to in the Schedule to this order, including if appropriate by reference to the Referee's original report of 11 December 2018, and indicates, in relation to each contention, whether the Referee agrees or disagrees with each contention and his reasons for forming such a view; and

(ii) indicates which, if any, of the conclusions as to the damage to the tank expressed in his report of 11 December 2018 would be altered in the event that it was found that the limit of Taset's supervision of the installation of the tank was as follows:

1.    between 5 and 8 November 2015, representatives of Taset were present when six panels were installed;

2.    between 9 November and 3 December 2015, no representatives of Taset were present;

3.    from 4 December 2015 until the conclusion of the installation of the tank, representatives of Taset were present for the purposes of supervising the installation of the thickener.

(b) In preparing the further report, the Referee:

(i) is to continue to have regard to the assumptions identified in Annexure B to the order made on 15 June 2018;

(ii) is not bound to conduct his inquiries to prepare the further report in accordance with the rules of evidence;

(iii) has the same powers and ability to conduct inquiries set out in order 1(c) of 13 April 2018.

2.    The Referee is to be provided with a copy of the transcript of the proceedings before Justice Lee on 8 March 2019.

6.     If the Referee requests that a person (whether VoR, Taset or other company or person) provide to him a document, the Referee will provide a copy of that document to both VoR and Taset unless the Referee considers special circumstances apply such that he should not disclose the document to VoR and Taset, in which case he will promptly apply to the Court for a direction whether to disclose the document to the parties.

7.     Each of the Referee, VoR and Taset have liberty to seek directions with respect to a matter arising in the Reference and the Referee has leave to communicate with the Associate to Justice Lee without notification to VoR or Taset.

Schedule: Taset's contentions in relation to the problem with the tank

1.    In all likelihood the corrosion observed on the tank panels was caused by cracks and damage to the Glass Flake Vinyl Ester (GVFE) coating during installation by VoR and/or JNJ.

2.    The panel slippage and deflection (bulging) of the tank was caused by VoR and/or JNJ failing to follow the installation instructions provided by Taset in the Installation Manual.

3.    The distance between the bolt and the bolt hole would not have caused any problems if there had been compliance with the Installation Manual.

4.    The deflection (bulging), in all likelihood, was the main cause of the cracks in the GFVE coating which, in turn, caused the corrosion.

5.    The specification of a coating with “glass flake” content which was not repairable (by overcoating rather than field repair limited to localised sections) was unsuitable in the circumstances due to the high risk of damage during transportation and installation.

D     THE SUPPLEMENTARY REPORT AND THE FURTHER APPLICATION

25    As can be seen from the above, the intention of the orders made, following the lengthy interlocutory hearing on 8 March 2019, was to ensure that Dr Tawfik had considered (or more accurately, that it was evident that he had considered) the respondent’s statement of contentions. Dr Tawfik was then to provide a supplementary report that addressed directly the five contentions made by the respondent and provide a specific response to each of those contentions. The orders also required the referee to express a conclusion as to whether the damage of the tank expressed in the Report would be altered in the event that it was eventually found that the respondent’s supervision of the installation of the tank was limited as identified in order (1)(a)(ii).

26    In broad terms, I am satisfied that the Supplementary Report constitutes a thorough and comprehensive document which sets out, in a lucid way, the referee’s reasons (and process of reasoning) as to why he disagrees with the five contentions. It also explains why (even on the assumption that the respondent’s supervision of the installation of the tank was limited in the manner described in the Court orders) this fact makes no difference to Dr Tawfik’s ultimate conclusions in relation to the problem with the tank.

27    Perhaps inevitably, the respondent maintains its objection to the Report, which on any view is damaging to its case, and in these circumstances, an application is before me today whereby the applicant seeks the adoption of both the Report and the Supplementary Report, while the respondent again resists any adoption.

28    Before coming to the specific arguments as to why the adoption of the two reports continues to be resisted by the respondent, it is appropriate that I briefly recount the well-known principles (which were not in dispute on this application), as to the adoption of reports of referees.

E     RELEVANT PRINCIPLES

29    Recently in CPB Contractors Pty Limited v Celsus Pty Limited (formerly known as SA Health Partnership Nominees Pty Ltd) (No 2) [2018] FCA 2112; (2018) 364 ALR 129 at 145 [67], I noted that the principles informing consideration of the adoption of referee reports are now firmly established and well known. The process has various characteristics which were identified by Gleeson CJ in Super Pty Limited v SJE Formwork Pty Limited (1992) 29 NSWLR 549 and other cases, and which were the subject of collection and summary by McDougall J in Chocolate Factory Apartments v Westpoint Finance [2005] NSWSC 784 at [7]. Those principles are as follows:

(1) An application [for adoption or rejection] is not an appeal either by way of hearing de novo or by way of rehearing.

(2) The discretion to adopt, vary or reject the report is to be exercised in a manner consistent with both the object and purpose of the rules and the wider setting in which they take their place. Subject to this, and to what is said in the next two sub paragraphs, it is undesirable to attempt closely to confine the manner in which the discretion is to be exercised.

(3) The purpose of [the reference process] is to provide, where the interests of justice so require, a form of partial resolution of disputes alternative to orthodox litigation, that purpose would be frustrated if the reference were to be treated as some kind of warm up for the real contest.

(4) In so far as the subject matter of dissatisfaction with a report is a question of law, or the application of legal standards to established facts, a proper exercise of discretion requires the judge to consider and determine that matter afresh.

(5) Where a report shows a thorough, analytical and scientific approach to the assessment of the subject matter of the reference, the Court would have a disposition towards acceptance of the report, for to do otherwise would be to negate both the purpose and the facility of referring complex technical issues to independent experts for enquiry and report.

(6) If the referee’s report reveals some error of principle, absence or excessive jurisdiction, patent misapprehension of the evidence or perversity or manifest unreasonableness in fact finding, that would ordinarily be a reason for rejection. In this context, patent misapprehension of the evidence refers to a lack of understanding of the evidence as distinct from the according to particular aspects of it different weight; and perversity or manifest unreasonableness mean a conclusion that no reasonable tribunal of fact could have reached. The test denoted by these phrases is more stringent than “unsafe and unsatisfactory”.

(7) Generally, the referee’s findings of fact should not be re-agitated in the Court. The Court will not reconsider disputed questions of fact where there is factual material sufficient to entitle the referee to reach the conclusions he or she did, particularly where the disputed questions are in a technical area in which the referee enjoys an appropriate expertise. Thus, the Court will not ordinarily interfere with findings of fact by a referee where the referee has based his or her findings upon a choice between conflicting evidence.

(8) The purpose of [the reference process] would be frustrated if the Court were required to reconsider disputed questions of fact in circumstances where it is conceded that there was material on which the conclusions could be based.

(9) The Court is entitled to consider the futility and cost of re-litigating an issue determined by the referee where the parties have had ample opportunity to place before the referee such evidence and submissions as they desire.

(10) Even if it were shown that the Court might have reached a different conclusion in some respect from that of the referee, it would not be… a proper exercise of the discretion conferred by [the relevant Court rule] to allow matters agitated before the referee to be re-explored so as to lead to qualification or rejection of the report.

(11) Referees should give reasons for their opinion so as to enable the parties, the Court and the disinterested observer to know that the conclusion is not arbitrary, or influenced by improper considerations; but that it is the result of a process of logic and the application of a considered mind to the factual circumstances proved. The reasoning process must be sufficiently disclosed so that the Court can be satisfied that the conclusions are based upon such an intellectual exercise.

(12) The right to be heard does not involve the right to be heard twice.

(13) A question as to whether there was evidence on which the referee, without manifest unreasonableness, could have come to the decision to which he or she did come is not raised “by a mere suggestion of factual error such that, if it were made by a trial judge, an appeal judge would correct it”. The real question is far more limited: “to the situation where it is seriously and reasonably contended that the referee has reached a decision which no reasonable tribunal of fact could have reached; that is, a decision that any reasonable referee would have known was against the evidence and weight of evidence”.

(14) Where, although the referee’s reasons on their face appear adequate, the party challenging the report contends that they are not adequate because there was very significant evidence against the referee’s findings with which the referee did not at all deal, examination of the evidence may be undertaken to show that the reasons were in fact inadequate because they omitted any reference to significant evidence.

(15) Where the [C]ourt decides that the reasons are flawed, either on their face or because they have been shown not to deal with important matters, the [C]ourt has a choice. It may decline to adopt the report. Or it may itself look at the detail of the evidence to decide whether or not the expense of further proceedings before the referee (which would be the consequence of non adoption) is justified.

F     SUBMISSIONS IN SUPPORT OF THE ADOPTION OF THE REPORTS

30    The applicant points to the fact that Dr Tawfik is highly experienced and the agreed choice of the parties. Further, from the face of both the Report and the Supplementary Report, Dr Tawfik has carefully considered the questions asked, and answered those questions by reference to the materials available. More particularly, turning to the considerations identified by McDougall J in Chocolate Factory at [7], the following was submitted by the applicant:

(a) Dr Tawfik’s reports show a “thorough, analytical and scientific approach to the assessment of the subject matter of the reference” such that the Court should be disposed towards accepting them;

(b) Dr Tawfik’s findings of fact “should not be re-agitated in the Court” on the basis that “there is factual material sufficient to entitle the referee to reach the conclusions he … did, particularly where the disputed questions are in a technical area in which the referee enjoys an appropriate expertise”;

(c) the Court is entitled to consider the futility and cost of re-litigating an issue determined by the Referee where the parties have had ample opportunity to place before the Referee such evidence and submissions as they desire. In the present case, more than $150,000 has been spent to date on Dr Tawfik’s reports. It would be futile and costly to re-litigate the issues considered by him any further;

(d) Dr Tawfik’s reasoning process has been sufficiently disclosed in the Original Report dated 11 December 2018 and Supplementary Report dated 30 May 2019 such that the Court can be satisfied that his conclusions are not arbitrary or influenced by improper considerations but are the result of a process of logic and the application of a considered mind to the factual circumstances proved;

(e) “The right to be heard does not involve the right to be heard twice”; and

(f) here, it cannot be “seriously and reasonably contended that the referee has reached a decision which no reasonable tribunal of fact could have reached; that is, a decision that any reasonable referee would have known was against the evidence and weight of evidence”.

31    Conversely, and with reference to the considerations identified in Chocolate Factory at [7], the respondent provided the following submissions in relation to the rejection of the Report and Supplementary Report.

(a) [there was a] “unreasonableness in fact finding”;

(b) [there was a] “misapprehension of the evidence” including “a lack of understanding of the evidence”;

(c) …a decision is made that “any reasonable referee would have known was against the evidence and weight of evidence”;

(d) [there was] a lack of opportunity to place before the referee evidence and submissions;

(e) [there was a] failure to disclose a reasoning process; and

(f) [there was] a failure to address important matters.

32    The question of the adoption of the Report can be dealt with relatively shortly. The respondent contends that the Report should be rejected because the deficiencies that it highlighted in respect of the adoption of the Report have not been cured by the Supplementary Report. Accordingly, the focus of today’s submissions was on the deficiencies in the Supplementary Report. Essentially the two arguments advanced by the respondent were as follows: (a) the referee failed to conduct all necessary inquiries; and (b) the referee failed to record any conclusions reached on the premise that the respondent did not supervise the installation of the tank and hence failed to attend to the task identified in order 1(a)(ii) of the orders made on 26 March 2019.

33    Neither of these arguments have any substance. What is important to recall is that the Supplementary Report was just that, it was supplementary to the principal Report which was directed to Dr Tawfik reaching a conclusion as to the fitness for purpose of the equipment. Given the complaints made by the respondent on the last occasion, the matter was sent back to the referee again on the basis that he was to conduct all the inquiries that he regarded as appropriate or necessary in order for him to discharge his obligation to the Court. This obligation being to give answers to the questions asked by the parties in such a way that was both efficient and cost effective given the amount in dispute and to perform that role in such a manner so the disinterested observer would know that his conclusions were not arbitrary, nor influenced by improper considerations; but that they were the result of a rational process.

34    I have no doubt that Dr Tawfik discharged his obligations in this regard. The careful response of Dr Tawfik to the contentions made by the respondent can be seen by reproducing, in tabular form, the specific responses of the referee to [4(e)]-[4(f)] of the submissions made by the respondent on 11 April 2019:

Citations omitted.

35    It followed that when it came to the Court’s query as to whether or not his view would be different if supervision by the respondent of the tank had been more limited, Dr Tawfik made it plain that his reasoning contained in both the Report and the Supplementary Report as to the causes of problems with the equipment would remain unchanged: see Supplementary Report at 3, 6, 12-14.

36    It is no doubt already evident that I agree with the submissions of the applicant that both the Report and the Supplementary Report plainly show a thorough, reasoned and scientific approach to the assessment of the questions posed for Dr Tawfik. There is sufficient factual material as to the extent of the “supervision” during the period referred to in Mr Kim’s affidavit (JE 205-206). When taken together with all other material to which the referee refers, I am satisfied the material allowed the referee to reach the ultimate conclusions concerning the disputed question. I am also satisfied that such a determination was made in a technical area in which Dr Tawfik enjoys unquestioned expertise.

37    The attempted re-litigation of these issues might be forensically understandable, given that the referee has reached a conclusion adverse to the interests of the respondent. However, as has been stressed more than once, a right to be heard in relation to these matters does not involve the right to be heard twice: see Chocolate Factory at [7(12)]. The conclusions reached by the referee are not ones which were not open. Indeed, a review of the Report and the Supplementary Report reveals clearly why the referee reached the conclusions he did. In these circumstances, both the Report and the Supplementary Report should be adopted in whole.

38    Before turning to costs, for completeness, I should note that for the purpose of this interlocutory application I allowed the parties to adduce evidence which was given in the inquiry. The question of whether such evidence can be adduced (given the terms of FCR 28.67(2), which states that a “party must not adduce in the Court evidence given in an inquiry” was addressed in CPB Contractors Pty Limited, where I noted at 147-148 [73] that:

…for my part, I very much doubt that FCR 28.67(2) can be valid (or at least have any operation) in circumstances where the adduction of evidence as to what was before a referee on an inquiry was relevant to a fact in issue on the adoption hearing. An example might be that there was an alleged patent misapprehension by the referee because evidence existed which demonstrated a particular fact relied upon by the referee in forming an opinion did not, in truth, exist, and uncontested evidence was before the referee to that effect. Such evidence would clearly be admissible pursuant to s 56(1) of the Evidence Act 1995 (Cth) which provides that “[e]xcept as otherwise provided by [this] Act, evidence that is relevant in a proceeding is admissible in the proceeding”. Apart from this, in an appropriate case, even assuming the rule was valid, if it was necessary that such evidence be adduced in order to fulfil the judicial task of dealing with an issue raised on an adoption hearing, compliance with FCR 28.67(2) could be the subject of dispensation: see, for example, FCR 1.32 or 1.34.

39    I adhere to the view expressed in CPB Contractors Pty Limited and, given the nature of the respondent’s objection to adoption, allowed evidence given in the inquiry to be adduced into evidence on the adoption hearings.

G     COSTS

40    The two adoption hearings that have taken place have been lengthy and have included the provision of significant material to the Court. No doubt, the costs involved in this process would have been significant, particularly in proportion to the amount ultimately in dispute. Having said that, the respondent did obtain some measure of success in persuading me (contrary to my preliminary view) to engage in the process of obtaining a supplementary report. The difficulty for the respondent is that, in accordance with my misgivings, the Supplementary Report has done nothing other than confirm the views expressed in the initial Report.

41    Having said that, it seems appropriate I order the respondent to pay the applicant’s costs of, and incidental to, the interlocutory hearing on 17 June 2019 and order that the costs associated with the hearing on 8 March 2019 be costs in the cause.

42    The costs order will involve the applicant being reimbursed for those costs it has already paid in relation to the preparation of the Supplementary Report. If it is necessary to make an order requiring the payment of that amount directly after hearing from the parties I will do so, but presumably, there is no reason why that payment should not be made by the respondent to the applicant forthwith.

Associate:

Dated:    12 July 2019