BURKE v LUNN [1976] VR 268

November 26, 2018

SUPREME COURT OF VICTORIA

BURKE v LUNN

29 August,29, 30 September 1975

Building contract — Disputes between builder and building owner — Order for reference of questions to special referee for enquiry and report to Court — Finding by special referee that building owner liable to pay builder a specified sum — Principles applicable to resolving conflicts between parties as to what took place before special referee — Principles to be applied in determining whether or not finding of special referee should be adopted or set aside by Court — Unilateral communication by party with special referee after report made — Undesirability of — Arbitration Act 1958 (No. 6200) s14, s16(1).

Building contract — Damages — Measure of — Whether building owner entitled to damages for physical inconvenience and time spent in rectifying or arranging to rectify defects.

Courts practice and procedure — Costs — Adoption by Court of report of special referee — Judgment entered for sum found to be owing by building owner to builder — Payment into Court by defendant building owner after order for reference but before reference made of an amount greater than judgment — Amount of judgment less than one half of County Court jurisdiction — Relevant considerations in determining costs payable by parties — Whether costs should be set off against each other — Whether balance of costs owing by builder to building owner should be set off against damages recovered by builder — Rules of the Supreme Court, O.22 r6, O.65 r12.

In an action in the Building Cases List between a builder, who was the plaintiff, and a building owner, who was the defendant, concerning disputes relating to additions, alterations, renovations, repairs, decorations and fittings to a home, by order of the Court questions were referred to a special referee pursuant to s14 of the Arbitration Act 1958 for enquiry and report to the Court. Pursuant to the order the special referee reported to the Court and answered and made findings on the questions and found in effect that the building owner was liable to pay to the builder a specified sum in addition to what had already been paid. The building owner moved for an order that the report of the special referee be adopted and that judgment be entered for the builder for the sum which the special referee found was owing to the builder. The builder moved for an order that the report of the special referee be varied or that the questions referred to the special referee be remitted to him or to some other referee for rehearing and further consideration.

The builder, in an affidavit in support of his motion, gave an account, inter alia, as to certain matters which had occurred before the special referee. The building owner, in an answering affidavit, disagreed with the account given by the builder and contradicted most of it specifically and in detail. The builder relied on further affidavits in reply.

Held: (1) Conflicts as to what took place before the special referee or otherwise should be resolved in the same manner as such disputes are resolved on the return of an order nisi to review a decision of a magistrates’ court. Prima facie, the version of what happened given by the party seeking to uphold the decision should be accepted but this prima facie rule may be displaced in a variety of circumstances.

Moore v Ferguson (1892) 18 VLR 266; Martin v O’Sullivan (1899) 24 VLR 856; Larkin v Penfold, [1906] VLR 535; Pearce v Jones, [1917] VLR 650, at p. 653; Taylor v Armour and Co. Pty. Ltd., [1962] VR 346, at p. 352; Buzatu v Vournazos, [1970] VR 476, at p. 478; Thomson v Cross, [1954] VLR 635; Rogers v Ventura, [1955] VLR 139; Lindgran v Lindgran, [1956] VLR 215; City of Oakleigh v Brown, [1956] VLR 503, at p. 506; Scott v I’Anson, [1958] VR 204, referred to.

[1976] VR 268 at 269

(2) S16(2) of the Arbitration Act 1958 provides that the report of a special referee on a reference shall, unless set aside by the Court or a Judge, be equivalent to the verdict of a jury and the Act also provides that the special referee shall be deemed to be an officer of the Court. Accordingly, the principles applicable in determining whether or not a verdict of a jury should be set aside are the principles that should be applied to decide whether or not a special referee’s report should or should not be adopted and enforced as a judgment or order of the court. As to findings of fact, the basic principle so applicable is that such findings should be set aside only if it is established by the party seeking to set them aside that on the material before the special referee no reasonable special referee could reasonably make the findings which he did make. The Court or a Judge should not attempt to reach independent findings on the material but should merely ask whether the findings in the report were reasonably open to be made by the special referee.

Longman v East (1877) 3 CPD 142, at p. 155, discussed.

(3) Once the special referee has made his report to the Court, any further communication with him should not be unilateral and, in the absence of some course agreed upon between the parties, any such communication should only be upon order of the Court.

Larkin v Penfold, [1906] VLR 535, at p. 544; R v Mairs; Ex parte Vansuylen (1881) 7 VLR (L) 43, at p. 45; R v Dixon; Ex parte Richardson (1883) 9 VLR (L) 2; R v Edwards; Ex parte Marrinan (1887) 13 VLR 50, at p. 52, referred to.

(4) Damages may be awarded for physical inconvenience and time spent by a building owner in rectifying or arranging to rectify defects. McGregor on Damages 13th ed. para.64, applied.

The Court adopted the report of the special referee and enforced it as a judgment of the Court and entered judgment for the plaintiff builder for the sum which the special referee found in the report was owing by the building owner to the builder. There had been paid into Court, after the order for the reference had been made but before the reference took place, an amount greater than the amount of the judgment. The amount of the judgment was also less than one half of the limit in point of amount to which the jurisdiction of the County Court was limited.

Held: (1) The provisions of O.22 r6 of the Rules of the Supreme Court applied and accordingly the plaintiff builder was ordered to pay the costs of the defendant building owner subsequent to the date of the payment into Court, which should include costs of the action and of the reference, including the fees of the special referee, and the costs of the parties’ motions.

(2) The provisions of O.65 r12 were applicable and accordingly the costs payable by the defendant building owner to the plaintiff builder were confined to the plaintiff’s costs of the action up to and including the date of payment into Court taxed on the relevant County Court scale less an amount equal to the additional costs properly incurred by the defendant by reason of the action having been brought in the Supreme Court instead of the County Court.

O’Dogherty v McMahon, [1971] VR 625, applied.

(3) The costs payable by the parties should be set off against each other.

(4) Any surplus of costs payable by the plaintiff to the defendant should be set off against the amount of the judgment in favour of the plaintiff.

Pryor v Hennessy and Cham, [1973] VR 221, at p. 222, applied.

[1976] VR 268 at 270

Motions

The facts appear sufficiently from the headnote and from the judgment, infra.

G.H. GOLVAN

RM Johnstone, for the plaintiff.

P Mandie, for the defendant.

Menhennitt , J.:

This is a building dispute in the Building Cases List. The plaintiff is a builder and the defendant is a building owner. The dispute relates to a sunroom added to a private home situated at 210 Wattletree Road, Malvern and to alterations, renovations, repairs, decorations and fittings to the home. The work was done for the defendant by the plaintiff.

The plaintiff claims for the sunroom at an agreed price less the value of the work not done, or alternatively for work and labour done and materials supplied in the construction of that room. It is claimed that the agreed price was $3500 and the work not done is stated alternatively as of the value of $137 or $48. The alterations, renovations, repairs, decorations and fittings are claimed for on the basis of work and labour done and materials supplied and the amount claimed therefor in the statement of claim is $14,543.30.

In his defence and counterclaim, the defendant denies that the plaintiff completed or substantially completed the sunroom and he denies that the plaintiff did other work of the value alleged by the plaintiff and says that the value of the other work done was less than the sum claimed by the plaintiff. He alleges that it was a term of the agreement with the plaintiff that all the work would be carried out in a proper and workmanlike manner and that the plaintiff would supply proper and adequate materials therefor and he claims that in respect of both the sunroom and the other work those terms were broken in various specified respects.

The pleadings and the particulars supplied thereunder define the parties’ contentions with commendable precision and particularity.

As to the sunroom, the defendant claims that there were 22 items as to which the work was not performed in a proper and workmanlike manner and proper and adequate materials were not supplied and he specifies the cost of rectifying each item, the total cost claimed being $2,112.78.

As to the work done on the premises other than in adding the sunroom, the plaintiff supplied details of the work which he claims was done in a schedule to his further particulars of the statement of claim and this schedule was replaced by a document headed “List A–Plaintiff’s Claim”. In List A the plaintiff claims for this work under 19 headings, specifying an amount claimed under each heading. Most of the headings are broken up into the items of materials, profit and labour, with an amount specified for each. Under the headings of electrical, painting and plumbing there are shown amounts paid to sub-contractors less the amounts referable to the sunroom. Appended to List A is a document headed “Detailed Claim of Plaintiff” which consists of nine pages of further particulars whereunder each of the 19 headings is broken up still further by specifying each of the materials claimed to be supplied and the price therefor, the kind of work and labour done, the number of hours of work and the rate per hour, and profit and overhead which, in a number of instances, are claimed at the rate of 10%. The total amount claimed by the plaintiff in this document for all the work done and materials supplied is $19,185.39, which includes $3500 for the sunroom, so that the amount claimed for the additional work and materials supplied apart from the sunroom is $15,685.39. It is agreed that the defendant made progress payments of $10,800. Hence the amount claimed by the plaintiff is $8,385.39.

[1976] VR 268 at 271

As to the work done other than on the sunroom, the defendant in his defence and counterclaim and the particulars supplied by him thereunder not only disputes that the work done and materials supplied are not of the value claimed by the plaintiff but he also claims that there are 34 items as to which the work was not done in a proper and workmanlike manner or the materials supplied were not proper and adequate and he specifies the cost of rectifying each item, the total cost claimed for rectifying these 34 items being $2687.55.

It was ordered that the action be set down for trial in a causes list. The action came on for trial before the learned Chief Justice on 4 February 1975, on which date an order was made by consent of the parties. It was ordered that five questions (which were divided into parts) be referred to Mr. John Anthony Benetti of 660 High Street, East Kew, as a special referee pursuant to s14 of the Arbitration Act 1958 for enquiry and report to the court. Mr. Benetti was selected by the parties. The questions so referred were in substance as follows:–

Whether any and if so what amount is payable by the defendant to the plaintiff in respect of the sunroom.
In respect of the plaintiff’s claims in amended List A, whether any and what amounts claimed therein relate to work performed on the sunroom and whether, in respect of work other than on the sunroom, the amounts claimed constitute fair and reasonable charges and, if not, what are fair and reasonable charges therefor.
As to the sunroom, whether any and if so which of the 22 items of complaint by the defendant were carried out otherwise than in a proper and workmanlike manner and, if so, in what respects, and whether any and which of the materials were not proper and adequate and, if so, in what respects, and what allowance should be made to compensate the defendant in respect thereof.
As to the work other than the sunroom, whether any and, if so, which of the 34 items of complaint by the defendant were carried out otherwise than in a proper and workmanlike manner and, if so, in what respects, and whether any and which of the materials were not proper and adequate and, if so, in what respects, and what allowance should be made to compensate the defendant in respect thereof.
Whether in respect of both the sunroom and the other work the defendant has suffered any and, if so, what loss by reason of the inconvenience caused to him by reason of any work which was not properly done or any materials which were not proper and adequate and by reason of the time spent by the defendant in rectifying and arranging to rectify the same, and, if so, what allowance, if any, should be made by the plaintiff to compensate the defendant in respect of that loss.

[1976] VR 268 at 272

By the order the Court directed that the special referee was authorized for the purpose of making the report to have and use a copy of the Court’s order, a copy of the pleadings as amended (which presumably included the particulars supplied thereunder) and a copy of the plaintiff’s amended claim List A. The Court further directed that the special referee should inspect the premises at 210 Wattletree Road, Malvern and make such observations and take such measurements and do such acts and things as might be necessary to make the report and, in particular, for that purpose, should hear the evidence of the plaintiff and the defendant and any witnesses which they might wish to call to give evidence and it was directed that there might attend on behalf of the parties at the hearing their solicitors and counsel. The Court further ordered that copies of the report should be supplied to the parties, provision was made in the order for security for the remuneration of the referee and it was ordered that the further hearing of the action be adjourned to a date to be fixed, with liberty to either party to apply to the Judge in charge of the Building Cases List for further orders and directions.

By a report dated 16 April 1975 the special referee, Mr. John Anthony Benetti of 660 High Street, East Kew, reported to the Court pursuant to that order. In his report the special referee set out seriatim the questions on which he was asked to report and his findings and report thereon.

He clarified the first question with the instructing solicitors to make it clear that it comprehended both works left incomplete and the cost of rectifying defective works. As to the sunroom, he found and reported in answer to question 1 that there were 14 items which needed to be completed and he found and reported the cost of completing each item, the total being $660.85. He found and reported that there were six items which needed to be rectified and he found and reported the cost of rectifying each item, the total being $680.00. These two sums totalled $1,340.85. Deducting this amount from the agreed cost of the sunroom, namely, $3,500.00, he found and reported that the defendant is to pay the plaintiff in respect of the sunroom $2,159.15.

As to the plaintiff’s claims in amended List A, the referee found and reported that none of the amounts claimed related to the sunroom. As to the 19 headings of claim, the referee found and reported that the plaintiff’s claims in respect of two of the 19 items, namely for plastering and rubbish removal, were fair and reasonable. As to the remaining 17 items, he said in his report:–

“The amounts claimed as set out in the Plaintiff’s Statement of Claim (as amended by ‘List A’) which do not constitute a fair and reasonable charge are detailed hereunder compared to what I consider a fair and reasonable charge to be taking into account that:

(a) the basic charge for labour, of $4.50 per hour was unilaterally changed to $6.00 per hour by the plaintiff.

(b) Profit is allowed at 10%, although there was no agreement as to this charge, and accordingly this is based on trade practice.

(d) Cost of rectifying the defective work as claimed.

(e) Agreement reached by the parties to vary the charge made.”

The referee then set out the amounts claimed by the plaintiff and found and reported what were fair and reasonable charges for each item. The total of the amounts which he found and reported were fair and reasonable charges for the 17 items was $11,781.09. Adding to this the $850.20 for the other two items which the referee found and reported were charged at fair and reasonable charges, the total of the amounts which the referee found and reported were fair and reasonable charges for the 19 items was $12,631.29, in contrast with the amount of $15,685.39 claimed by the plaintiff.

[1976] VR 268 at 273

As to the 22 items of alleged defects in respect of the sunroom as claimed by the defendant, the referee found and reported that, in addition to the 14 amounts of costs to complete and the six amounts of costs to rectify referred to in the answer to question 1, there were four other items in respect of which an allowance should be made by the defendant to compensate the plaintiff, and he found and reported the amounts of these allowances, the total being $87.00.

As to the 32 items of alleged defective work and materials raised by the defendant in relation to the work other than the sunroom, the referee found and reported that there were 13 items in respect of which an allowance should be made by the defendant to compensate the plaintiff, and he found and reported the amounts of these allowances, the total being $891.32.

As to question 5, the referee found and reported that were due to the defendant allowances of $200.00 for inconvenience, $330.00 for engaging security service and $400.00 for time spent in rectifying or arranging to recrifying defects as claimed (being for 20 hours at $20.00 per hour). These three figures total $930.00.

The referee summarized his findings in a table which appeared at the end of his report as follows:–

SUMMARY:

Q1. Original Contract for Sunroom		$3,500.00
DEDUCT
Part A. Cost to complete…….	$660.85
Part B. Cost to rectify……..	$680.00	$1,340.85	$2,159.15
Q2. (b) As to “List A”
Item 16……………………	$299.20
Item 18……………………	$551.00	$850.20
Q2. (c) Items 1-15 (incl.) 17,19		$11,781.09	12,631.29
			$14,790.44
DEDUCT (Allowances to defendant)
Q3. ……………………….	$87.00
Q4. ……………………….	891.32
Q5. ……………………….	930.00		$1,908.32
Adjusted Contract Sum			$12,882.12
Less Amount Paid			10,800.00
			$2,082.12

The referee reported that in view of a certain deduction he had made, two specified goods should be returned to the plaintiff.

The effect of the special referee’s finding and report is that, in addition to the sum of $10,800 paid by the defendant to the plaintiff, the defendant is liable to the plaintiff for a further sum of $2,082.12.

By notice dated 3 June 1975 the defendant gave notice that the Court would be moved for orders that the report of John Anthony Benetti dated 16 April 1975 be adopted and that judgment be entered for the plaintiff for the sum of $2,082.12 and for costs.

[1976] VR 268 at 274

By notice dated 20 June 1975 the plaintiff gave notice that the Court would be moved for an order that the report of the special referee John Anthony Benetti made 16 April 1975 be varied or that the questions referred to the special referee be remitted to him or to some other referee for rehearing or further consideration.

The defendant did not file an affidavit in support of his motion but the plaintiff did make one in support of his motion. In that affidavit the plaintiff deposes that the special referee heard oral evidence on oath and submissions on behalf of the parties on three days in April 1975 and also inspected the premises at which the work was carried out. He says that he, the plaintiff, was present throughout the whole of the proceedings but that no transcript of proceedings was taken. The plaintiff states that he is dissatisfied with the report of the special referee inasmuch as his findings are in may respects contrary to the evidence offered by both parties and made without the support of any evidence at all. He sets out in his affidavit the portions of the report with which he is dissatisfied and the basis of his dissatisfaction. There follow references to some twenty-one different items or matters. In referring to various of these items he says in substance, among other things, that certain matters were or were not agreed to between the parties on the hearing before the referee or that certain concessions were made by the defendant or that the defendant abandoned or withdrew certain claims and that certain amounts fixed by the referee involved mistakes. He makes various other statements.

The defendant made an affidavit in reply to this affidavit. In it he agreed with the statement in the plaintiff’s affidavit that no transcript of the proceedings before the special referee was taken but he states that the special referee took copious handwritten notes throughout the proceedings and carefully examined each party and the various experts and other witnesses called on behalf of each party. He swears that he was present throughout the whole of the proceedings. He next swears that none of the findings of the special referee were contrary to the evidence or made without the support of any evidence. He then deals with each of the 21 items or matters of complaint by the plaintiff and disagrees with all the statements thereon in the plaintiff’s affidavit and contradicts most of them specifically and in detail. In particular, he denies that the matters which the plaintiff asserts were agreed to were agreed to or that there were the concessions or abandonments or withdrawals by him which the plaintiff asserts in his affidavit or the mistakes by the referee asserted by the plaintiff. He states that there was agreement on certain matters as to which the plaintiff denies that there was agreement. As to the plaintiff’s 19 headings of claims for work other than on the sunroom, he swears that the referee inspected many of the items, took measurements and made calculations as to the quantities of materials. He concludes his affidavit by swearing that the referee conscientiously examined all the matters in dispute and made findings within the terms of reference, in his opinion, that, to avoid extending the costly reference, he, the defendant, agreed on a number of matters and these were in the plaintiff’s favour, that he regards the amount allowed to him for inconvenience as small but is prepared to accept the same and that there are a considerable number of other items which he regards as being against his interest and in favour of the plaintiff but is prepared to accept the same. Finally he submits that the report should be adopted and that the matter should not be referred back to the special referee.

[1976] VR 268 at 275

The two motions came before me for hearing on 29 August 1975. After hearing submissions by counsel I intimated that I would make rulings as to certain fundamental matters which had been raised and then, in the light of those rulings, proceed with the further hearing of the parties’ motions.

The matters argued before me raised the following three matters of general importance:–

(1) What material may properly be placed before the Court or a judge in relation to an application for a report of a special referee to be varied or for questions to be remitted to the referee or some other special referee for rehearing or further consideration.

(2) What principles are to be applied to resolve differences or contradictions between the parties as to facts referred to in the material placed before the Court or a judge and, in particular, as to what took place before the special referee.

(3) What principles are to be applied in deciding whether or not, on the facts which are accepted, the report of the special referee should be adopted or should be varied or questions remitted to the referee or some other special referee for rehearing and further consideration.

There is a surprising paucity of authority on these matters.

As to the material which it is permissible to place before the Court or a judge, the only authority of which I am aware is the decision of Holroyd, J., in Moore v Ferguson (1892) 18 VLR 266. That case concerned a building dispute in which, by consent, it had been ordered that all the issued of fact should be tried by a referee. After the referee had made his first report the matter was remitted to him for further consideration and he made a second report. On those reports each party moved for a different judgment. The decision of Holroyd, J., commences at pp. 270-271 with the following paragraph:–

“The only materials that I have properly before me upon which to found my judgment are, besides the pleadings, which could be amended if necessary, the two reports of the referee and the two contracts annexed to his first report as therein stated and thereby made part thereof. A number of exhibits were cited and commented upon, which, however useful to enable me more readily to apprehend the subject matter of the controversy between the parties, I am bound to discard absolutely in performing my functions as judge. I am no more entitled to regard exhibits not made part of the referee’s reports than any of the oral testimony adduced before him. When the cause came on for hearing, and before any evidence was taken or point of law argued, it was by the consent of the parties ordered that all the issues of fact in the consolidated actions should be tried by the referee; and he made a report, which was subsequently remitted to him for further consideration with a direction to state any points of law that were raised before him and to find specially such facts as might be necessary to determine the whole case according to the view which the Court might take on those points. The second report states the points of law that were raised before the referee and finds certain facts specially; but I must still keep the first report under consideration, because the second does not reject it but upholds it while explaining its meaning. The Court was not moved to set aside or remit the second report, and my duty is now to determine those points of law, and those only, which were raised before the referee, or which arise upon the pleadings or upon the referee’s special findings, and subject thereto to accept his findings upon the issues as conclusive.”

[1976] VR 268 at 276

In the present case it was conceded on behalf of the defendant that where one party is seeking not to have the report adopted and made an order of the Court but varied or the matter remitted back to the special referee, the position is different from that stated by Holroyd, J., in Moore v Ferguson and that it is permissible for the parties to place before the Court material on affidavit as to what took place before the special referee. Having regard to this concession, it is unneccessary for me to decide whether and in what circumstances it is permissible, on an application to vary a report or have the matter remitted back to a special referee, for the parties to place material before the court as to what happened before the special referee or otherwise, but I am not to be taken as making any decision on the matter one way or the other. I proceed with the hearing of this particular matter on the basis asserted on behalf of the plaintiff and conceded on behalf of the defendant, namely, that it is permissible for the parties to place before the Court material as to what happened before the special referee.

The next question is as to the principles to be applied to resolve differences or contradictions between the parties on the material placed before the Court and in particular as to what took place before the special referee. S14 of the Arbitration Act 1958 empowers the Court or a judge to refer any question arising in any cause or matter for inquiry or report to any special referee. S16(1) of the Act provides: “In all cases of reference to a special referee…under an order of the Court or a judge in any cause or matter, the special referee…shall be deemed to be an officer of the Court, and shall have such authority and shall conduct the reference in such manner as…the Court or a judge may direct.”

In the present case the special referee was directed to inspect the premises and make such observations and take such measurements and do such acts and things as might be necessary to make the report, and, in particular, for that purpose to hear the plaintiff and the defendant and any witnesses which they might wish to call to give evidence and it was directed that there might attend on behalf of the parties their solicitors and counsel. S16(2) of the Act provides that the report of any special referee on any such reference shall, unless set aside by the Court or a judge, be equivalent to the verdict of a jury.

Having regard to these provisions of s14 and s16 of the Arbitration Act it appears to me that any conflicts as to what took place before the special referee or otherwise should be resolved in the same manner as such disputes are resolved on the return of an order nisi to review a decision of a magistrates’ court. The special referee is deemed to be an officer of the Court and his report, unless set aside by the Court or a judge, shall be equivalent to the verdict of a jury. In these circumstances it appears to me that, in the absence of transcript of the proceedings before the special referee, the considerations applicable to resolve differences as to what took place on the hearing in a magistrates’ court are equally applicable here and that the rules applied on the return of an order nisi to review a decision of a magistrates’ court to resolve such differences should, by analogy, be applied here.

[1976] VR 268 at 277

The rule applicable on the return of an order nisi to review a decision of a magistrates’ court is that, prima facie, the version of what happened given by the party seeking to uphold the decision should be accepted. This rule is enunciated in Martin v O’Sullivan (1899) 24 VLR 856, Larkin v Penfold, [1906] VLR 535; Pearce v Jones, [1917] VLR 650, at p. 653, Taylor v Armour and Co. Pty. Ltd., [1962] VR 346, at p. 352 and Buzatu v Vournazos, [1970] VR 476, at p. 478. This prima facie rule appears to me to be one aspect of the more general rule that it is for a party seeking to set aside a decision to show good cause why it should be set aside and that, prima facie, an account of the facts which tends to support the decision should be accepted in preference to an account which would tend the other way. However, the authorities make it clear that the rule is only a prima facie one and that it may be displaced in a variety of circumstances. Cases where the rule was departed from or where there was a statement of the circumstances in which the rule would be departed from include Thomson v Cross, [1954] VLR 635; Rogers v Ventura, [1955] VLR 139; Lindgran v Lindgran, [1956] VLR 215; City of Oakleigh v Brown, [1956] VLR 503, at p. 506, Scott v I’Anson, [1958] VR 204 and Taylor v Armour and Co. Pty. Ltd., [1962] VR 346, at p. 352.

In the present case the prima facie rule would mean that I should accept the version of the facts given by the defendant, which supports the findings and report of the special referee. On behalf of the plaintiff I was invited to conclude that, having looked at the material overall, I should not accept the defendant’s version. However, looking at both the material overall and the respective accounts given by the parties as to each of the matters on which the plaintiff is dissatisfied, there appears to me to be nothing which displaces the prima facie rule. The versions which the defendant gives of the matters in controversy are precise and specific and do not appear to be in any way incredible. If the versions of the facts given by the plaintiff were accepted, the findings and report of the referee would, in many respects, be surprising and even incredible. Having regard to the precision and particularly of the referee’s findings in his report, which deals item by item with every matter raised on the reference and gives figures for the various items in precise terms and, in some instances, gives the reasons for the conclusions stated, it appears to me that the probabilities are that the versions of the facts given by the defendant are the more likely ones, supporting as they do the referee’s findings.

Accordingly, on the material which is before me, which consists of affidavits by the parties, I have concluded that I should determine conflicts of fact as to what took place before the special referee by accepting the versions given by the defendant rather than those given by the plaintiff on all matters on which there are conflicts.

On this basis of fact, what principles should then be applied in deciding whether the report of the special referee should be adopted and enforced as a judgment or order of the Court or whether it should be varied or whether questions should be remitted to the special referee or some other special referee for rehearing and further consideration? The most significant provision in this regard is that contained in s16(2) of the Arbitration Act 1958 which reads: “The report or award of any special referee or arbitrator on any such reference shall, unless set aside by the Court or a judge, be equivalent to the verdict of a jury.” There is the associated provision that the special referee shall be deemed to be an officer of the Court. These provisions appear to me to produce the result that the principles applicable in determining whether or not a verdict of a jury should be set aside are the principles that should be applied to decide whether or not a referee’s report should or should not be adopted and enforced as a judgment or order of the Court. As to findings of fact, the basic principle so applicable is that such findings should be set aside only if it is established by the party seeking to set them aside that on the material before the special referee no reasonable special referee could reasonably make the findings which he did make. The Court or a judge should not attempt to reach independent findings on the material but should merely ask whether the findings in the report were reasonably open to made by the special referee.

[1976] VR 268 at 278

My attention was drawn to the decision of the Court of Appeal in Longman v East (1877) 3 CPD 142 and in particular to what was said by Brett, LJ, at p. 155. In that case the Court of Appeal was concerned with the provisions of s56, s57 and s58 of the Judicature Act 1873. S56 and s57 of that Act were very similar in substance to s14 and s15 of the Victorian Arbitration Act 1958 except that there was no mention therein of an arbitrator. However, s16(2) of the Victorian Arbitration Act is significantly different in its terms from the concluding portion of s58 of the English Judicature Act 1873. S56 of the English Judicature Act 1873 and s14 of the Victorian Arbitration Act empower the Court or a judge to refer any question arising in any cause or matter for enquiry or report to a special referee. S57 of the English Judicature Act 1873 and s15 of the Victorian Arbitration Act empower the Court or a judge, in certain causes or matters, to order any question or issue of fact arising therein to be tried before a referee. The concluding portion of s58 of the English Judicature Act 1873 reads:– “and the report of any referee upon any question of fact on any such trial shall, unless set aside by the Court, be equivalent to the verdict of a jury.”

In contrast with this provision, s16(2) of the Victorian Arbitration Act provides: “The report or award of any special referee or arbitrator on any such reference shall, unless set aside by the Court or a judge, be equivalent to the verdict of a jury.”

The significant difference is that the English Judicature Act provision is confined to the report of a referee upon any question of fact on any such trial, which was clearly a reference back to s57 of the English Judicature Act the equivalent of s15 of the Victorian Arbitration Act which provides for the trial of the whole cause or matter, or any question or issue of fact arising therein. In contrast with this provision in s58 of the English Act, there is no such limitation in s16(2) of the Victorian Arbitration Act to a report upon a trial. On the contrary, the Victorian section refers to the report or award of any special referee on any such reference. The use of the word reference in s16(2) of the Victorian Act, in contrast with the use of the word trial in the concluding portion of s58 of the English Judicature Act 1873, leads to the conclusion, in my view, that the provisions of s16(2) of the Victorian Arbitration Act apply to a report of a special referee appointed pursuant to s14 of the Victorian Arbitration Act as well as to a report or award of a special referee by whom a whole cause or matter or a question or issue of fact arising therein is ordered to be tried pursuant to s15 of the Victorian Arbitration Act. It was the reference to trial in the concluding portion of s58 of the English Judicature Act 1873 which caused Brett, LJ, to say in Longman v East (1877) 3 CPD 142, at p. 155 that there was a difference between the report of a referee appointed pursuant to s56 and the finding of a referee on issues of fact sent to him under s57. As to report or award of a special referee appointed under either s14 or s15 of the Victorian Arbitration Act is, unless set aside by the Court or a judge, to be equivalent to the verdict of a jury, what Brett, LJ, had to say as to issues of fact sent to the referee under s57 of the English Act applies, in my view, to a report of a referee appointed pursuant to s14 of the Victorian Arbitration Act when he said, at p. 155: “that is to say, the Court must accept the finding of the referee, unless they can set it aside, according to the ordinary rules which would be applicable to the finding of a jury, or to the finding of a judge trying a cause without a jury. It is open to appeal, therefore, whether improper evidence has been received by the official referee, in considering the facts, has so to speak, misdirected himself. The Court can set aside the finding of the official referee, if they consider that the finding is a finding against the evidence, in the same way that the Court set aside the finding of a jury when their finding is against the evidence. In that case, if the issue were a material one, the Court would have to send back that issue to the referee, or to some other referee, to be tried.”

[1976] VR 268 at 279

Accordingly, it appears to me that, in the present case, the findings of the special referee should be dealt with on the basis that they are, unless set aside on some good ground, equivalent to the verdict of a jury and that, in deciding whether or not they should be set aside, I should apply the principles which are applicable in considering whether or not a jury verdict should be set aside.

In so dealing with the findings and the report in the present case there are certain basic considerations. One is that the special referee was a special referee appointed by the Court and is thereby deemed to be an officer of the Court. Another is that the material placed before the Court on behalf of the plaintiff reveals that the special referee is by occupation a building consultant and chartered builder and holds the qualifications of Bachelor of Building and Associate of the Australian Institute of Builders. Another is that, as he was directed to do by the order appointing him, he inspected the premises at which the work was carried out. Further, as deposed to by the defendant, the special referee took copious handwritten notes throughout the proceedings and carefully examined each party and the various experts and other witnesses called on behalf of each party and, as to many of the 19 headings of work additional to the sunroom, he inspected the items, took measurements and made calculations as to the quantities of the materials. It would also appear that the parties called expert witnesses before the special referee.

In the further hearing of this matter I shall apply all the principles I have stated in deciding whether or not the report of the special referee should be adopted and enforced as a judgment or order of the Court or whether it should be set aside or whether any questions or matters should be referred back to the special referee or some other referee for rehearing or further consideration.

There is one other matter raised on the hearing before me to which I think I should refer. After the special referee had made his report to the Court and supplied copies to the parties, the solicitors for the plaintiff wrote to the special referee stating that their client was dissatisfied with the report and that, after careful analysis of the report, the plaintiff considered that a number of the special referee’s findings could not be supported by the evidence before the special referee. Matters with which the plaintiff was particularly concerned were then specified and it was stated that it would be submitted to the judge when the action came on for trial that the special referee’s findings in answer to the questions enumerated could not be supported by the evidence. The letter then continued: “So that we may properly instruct Counsel at the trial of the action, we will be grateful if you would prepare for the assistance of both parties, a supplementary report detailing what evidence or other material you relied on in arriving at the answers referred to in this letter.”

[1976] VR 268 at 280

In my view, having regard to the fact that the special referee is appointed by the Court, is deemed to be an officer of the Court and reports to the Court, any unilateral communication by one party with the special referee, especially after his report has been made, is very undesirable and is a course which should not be followed. The position is similar to that stated by Cussen, J., in relation to an order to review in Larkin v Penfold, [1906] VLR 535, at p. 544, where he said that the practice of justices being approached personally–as is sometimes the case–by one or other of the parties–is a very undesirable proceeding and he referred to R v Mairs; Ex parte Vansuylen (1881) 7 VLR (L) 43, at p. 45; R v Dixon; Ex parte Richardson (1883) 9 VLR (L) 2; R v Edwards; Ex parte Marrinan (1887) 13 VLR 50, at p. 52. Once the special referee has made his report to the Court any further communication with him should not be unilateral and, in the absence of some course agreed upon between the parties, any such communication should, in my view, be only upon order of the Court.

In the present case the special referee acknowledged the plaintiff’s solicitors’ letter and said in reply:– “Having given due consideration to the matters contained therein, I still remain satisfied that the answers given to the questions referred to, are amply supported by evidence placed before me, and by my own observations, and accordingly I do not propose stating my reasons.”

Although the communications should not have taken place, the reply is in fact before the Court and it supports the conclusions that in the present case the versions of the facts given by the defendant in his answering affidavit should be accepted and that the findings reached by the special referee as stated in his report were amply supported by the evidence placed before him and by his own observations.

The parties’ motions will be brought on for further hearing tomorrow, 30 September 1975, when I shall deal with those motions in accordance with the principles I have stated above. [On 30 September his Honour, after hearing further argument delivered the following judgment:]

In this matter I have before me two motions which are referred to in reasons for judgment and rulings which I gave yesterday. The motions were before me on 29 August of this year, when, as stated in my reasons yesterday, I reserved for consideration matters of principle. Yesterday I gave rulings on those matters of principle and gave my reasons for them, and intimated that the motions would come on for hearing today, as was announced on 29 August last.

[1976] VR 268 at 281

The defendant’s motion is that the report of the special referee, dated 16 April 1975, be adopted and that judgment be entered for the plaintiff for the sum of $2,082.12, which was the amount for which the special referee found the defendant was liable to the plaintiff.

The plaintiff’s motion is that the report of the special referee be varied, or that the questions referred to the special referee be remitted to him or to some other referee for rehearing or further consideration.

In the light of the rulings I gave yesterday, counsel for the plaintiff has submitted that the referee’s report should be varied or the matter remitted to him in respect of four particular matters. In respect of one of those matters the plaintiff sought to rely upon additional affidavit material, namely an affidavit by himself and an affidavit by his solicitor, both sworn this day, and I permitted reliance to be made on those affidavits as well as all the other material before the Court.

I deal accordingly with the four matters in respect of which the plaintiff asks that the report be varied or the matter remitted to the special referee.

The first matter raised concerns the referee’s findings and report in relation to the 19 items of additional work other than the sunroom.

In the reasons which I gave yesterday I set out that the referee found and reported that the plaintiff’s claims in respect of two of the 19 items, namely for plastering and rubbish removal, were fair and reasonable and that as to the remaining 17 items he said in his report certain things which I then set out and which I repeat, namely:–

“The amounts claimed as set out in the plaintiff’s Statement of Claim (as amended by ‘List A’) which do not constitute a fair and reasonable charge are detailed hereunder compared to what I consider a fair and reasonable charge to be taking into account that:–

(a) the basic charge for labour, of $4.50 per hour was unilaterally changed to $6.00 per hour by the plaintiff.

(b) Profit is allowed at 10%, although there was no agreement as to this charge, and accordingly this is based on trade practice.

(d) Cost of rectifying the defective work as claimed.

(e) Agreement reached by the parties to vary the charge made.”

In the plaintiff’s affidavit relative to these 17 items, the plaintiff says:

“The referee calculated in this portion of his report on a labour charge out rate of $4.50 per hour. It was common ground between the parties that there was no agreed labour rate in the agreement. The reference in paragraph (a) of the Report to my having unilaterally charged the rate to $6 per hour arises from the following evidence which I gave. After the work was substantially completed I rendered an itemised bill calculated at the rate of $4.50 per hour for carpenters. In my later accounts I calculated at $6 per hour. In fact the charge out rate prescribed by the appropriate Award at that time was $5.97 per hour, which fact was conceded at the hearing before the Referee by the Defendant’s expert witness.”

In his answering affidavit the defendant deposes as follows:–“The said special referee heard full evidence on this item. The plaintiff admitted before the said special referee that the charge of $4.50 had been agreed and that the charge of $6.00 per hour was a unilateral change on his part. The referee heard all the evidence and found what was a fair and reasonable charge in the circumstances.”

[1976] VR 268 at 282

In his answering affidavit of today, the plaintiff deposes as follows:–“I deny (if it is what the defendant means in his said affidavit) that I admitted in the hearing before the special referee that the charge of $4.50 per hour had been agreed between the defendant and me as the charge rate. In fact I maintained consistently throughout the hearing before the special referee that there was no agreement between the defendant and me as to that rate. I admit and such was the evidence before the special referee that when I first rendered accounts I charged for labour at $4.50 per hour which was an amount I was prepared to charge lower than the award on the assumption or in the hope that I would receive regular progress payments from the defendant. Shortly before the works came to an end I began to fear that the defendant either would not or could not make a progress payment and then I did unilaterally prepare a fresh statement of the amount payable by the defendant based on a charge of $6 per hour which was fair and reasonable and almost exactly the same as the award.”

The plaintiff’s solicitor swears that he was present on the second day of the hearing before the special referee when a body of evidence was given by the plaintiff in relation to the charge rate for labour for extra work, and swears that at no time did the plaintiff say in evidence that the charge rate had been agreed between him and the defendant at $4.50 per hour or at any other rate.

What the special referee was asked to find and report on in relation to these 19 additional items was in substance, as I stated in my reasons yesterday, “whether, in respect of work other than on the sunroom, the amounts claimed constitute fair and reasonable charges and, if not, what are fair and reasonable charges therefor.”

This is precisely what the special referee did. In answer to the question he said that “the amounts claimed as set out in the plaintiff’s Statement of Claim (as amended by “List A”) which do not constitute a fair and reasonable charge are detailed hereunder compared to what I consider a fair and reasonable charge to be taking into account” the five matters he mentioned, and then he sets out, in one column “Plaintiff’s Claim”, and in the next “Fair and Reasonable Charge”.

The special referee does not anywhere say, as is asserted by the plaintiff, that he calculated the charges for the 19 items of additional work at a rate of $4.50 per hour. What the special referee did say was that, in determining fair and reasonable charges for these 19 items, he took into account, among other things, the fact that the basic charge for labour of $4.50 per hour was unilaterally changed to $6.00 per hour by the plaintiff. That is a matter that he says he took into account. He does not say expressly even that that basic charge was agreed. He does say that it was a basic charge, and the evidence of the plaintiff himself makes it clear that that is true. He makes a finding of fact that it was unilaterally changed, that is, changed by the plaintiff, without agreement, to $6 per hour. The evidence of the plaintiff himself justifies that finding, as well as the evidence of the defendant. Accordingly, in my view, there is no foundation shown for not accepting these findings and report of the special referee. He has found fair and reasonable charges for 17 items, being other than those that he accepted as being fair and reasonable. He has indicated matters taken into account, not even saying that those are all the matters taken into account, and certainly not in my view saying that he has fixed a basic charge or acted upon a basic charge of $4.50 per hour or any other charge. He has reached a conclusion as to fair and reasonable charges.

[1976] VR 268 at 283

Insofar as there is a conflict of evidence between the evidence of the plaintiff and the evidence of the defendant, for all the reasons I gave yesterday I am of the view that the account of the defendant should be accepted, in preference to that given by the plaintiff and his solicitor. I reach that conclusion, not on the basis that I do not accept the evidence of the plaintiff’s solicitor, but on the basis that the solicitor was present for only one day, and that the very account given by the plaintiff himself as to the original charge and the change he made and how he came to make it tends to support the conclusion that it was unilaterally changed and the conclusion that there was a basic charge. Insofar as there is evidence from the defendant that that was a matter of agreement, for all of the reasons I gave yesterday I prefer that and accept that in preference to that of the plaintiff, because it is consistent with and supports the referee’s finding that there was a basic charge, which by implication could have been an agreed charge, although it does not necessarily involve that.

For all of the reasons I have given, in my view no sound ground has been shown for not accepting this portion of the referee’s findings and report or for remitting the matter to the special referee. He has done what he was asked to do under the reference. Insofar as he has indicated matters he took into account, those matters do not invalidate the conclusion but show rather a series of matters that he took into account, all of which were matters proper to be taken into account.

It is convenient whilst dealing with these items to refer to another matter of complaint by the plaintiff, which was one of the two items as to which the special referee found that the claims by the plaintiff were fair and reasonable. That is the item of $299.20 for plastering. In his affidavit the plaintiff says, in substance, that the amount of $299 claimed for this, being $272 plus 10% making $299, was a typographical error for $372, to which should have been added 10%, $37, making it $409. In his affidavit in reply the defendant swears that the allegations as to this item by the plaintiff are false. He then proceeds to give a detailed account of what happened about this matter before the special referee. The plaintiff had sworn there was an account and the defendant swears that the plaintiff said on oath before the referee that he could not produce a receipt for the plastering, and admitted that he had not made any payment for the plastering, but had done other work for the plasterer in lieu of payment and swears that the plaintiff did not produce any account. The defendant concludes: “There was no agreement between the parties as to the reasonableness of the cost of plastering and this matter was left to the special referee to fix a fair and reasonable price as he did”.

In my view, the reasons that I gave yesterday lead to the conclusion that I should accept the defendant’s account of this matter in preference to that of the plaintiff, because the defendant’s account is precise and detailed and makes the finding of the special referee credible, whereas the account by the plaintiff would make the finding of the special referee incredible. Accordingly, I conclude that there is no foundation for the report in respect of this matter to be varied or remitted to the special referee.

[1976] VR 268 at 284

The third matter of complaint by the plaintiff as to the referee’s report relates to work done on the sunroom. As I stated in my reasons yesterday, the question which the special referee was asked as to the sunroom was, in substance, whether any and if so what amount is payable by the defendant to the plaintiff in respect of the sunroom. The special referee answered this by saying that the amount due for the sunroom was $2,159.15. He arrived at that figure by taking the agreed figure of $3,500 for the sunroom and deducting from it items which he put under the two headings of “Cost to Complete” and “Cost to Rectify”. Under the item of “Cost to Complete”, he deducted from the amount of $3,500 originally payable, among other things, $120 for bricks not provided by the plaintiff. On this matter there is a direct conflict of evidence between the plaintiff and the defendant. The plaintiff swears that the original price did not include the supply of bricks and that the defendant said he would be purchasing the bricks himself. In answer, the defendant swears that at no time was it agreed between him and the plaintiff that the original price did not include the supply of bricks and that he gave evidence to the contrary before the special referee and that the said evidence was true, and that he gave evidence, and it is the fact, that he obtained the bricks only because the plaintiff stated that he was unable to obtain the same.

As to that conflict of evidence, for the reasons I gave yesterday, I accept the account given by the defendant, which I have not reproduced in full, because it is specific, detailed and makes credible the special referee’s finding on the matter, whereas the evidence of the plaintiff would make the finding incredible.

As to whether the item is a proper deduction, the question was–what amount is payable by the defendant to the plaintiff in respect of the sunroom? And if the agreement were, as the evidence of the defendant showed, that the bricks were to be provided by the plaintiff and they were not provided by the plaintiff but were provided by the defendant at a cost of $120, whatever heading is given, in my view the amount for the bricks provided by the defendant is clearly deductible from the amount otherwise payable, and the report is not defective in this respect and should not be varied.

The fourth matter relates to the special referee’s finding and report on the fifth question, which, as I stated in my reasons yesterday, was in substance as follows: whether in respect of both the sunroom and the other work the defendant has suffered any and, if so, what loss by reason of the inconvenience caused to him by reason of any work which was not properly done or any materials which were not proper and adequate and by reason of the time spent by the defendant in rectifying and arranging to rectify the same, and, if so, what allowance, if any, should be made by the plaintiff to compensate the defendant in respect of that loss?

The submission on behalf of the plaintiff is a dual one: first, that there is no evidence to justify the special referee’s findings, and secondly, that the amounts found are not in law allowable as damages in any event.

The referee, as I stated yesterday, found as follows: Allowances due to the defendant for (a) Inconvenience $200, (b) Engaging Security Services $330, Time spent in rectifying or arranging to rectify defects as claimed, Total allowances 20 hours at $20 per hour, $400. The overall total is $930.

[1976] VR 268 at 285

For all the reasons I gave yesterday, it is for the plaintiff to establish that there was not evidence on which it was reasonably open to a reasonable referee to make the findings he did. The only evidence on this matter which is before me, which has been supplied by the plaintiff as to what happened before the referee, consists of a statement (which was part of the evidence) made by the defendant.

In that statement the defendant says in substance that the plaintiff assured him that all the works of alteration to the house and the sunroom would be completed by late October 1973, and that he did not in fact obtain possession of the premises until about mid-December 1973. He gives details of inconvenience caused to both himself and his wife due to that delay and also inconvenience caused by flooding of the laundry to a depth of some two inches.

On that evidence, in my view, it was open to the referee reasonably to find that the defendant himself had suffered inconvenience, and there is nothing in that evidence which leads to the conclusion that the figure of $200 was not a figure that it was reasonably open to the referee to find.

As to the engaging to security services, the statement of the defendant is that the plaintiff threatened the defendant that, unless the plaintiff’s account was paid by 3 p.m. on 12 December 1973, the plaintiff would do physical damage to the premises by ripping out cupboards and wiring. The evidence also was that the plaintiff, in fact, removed from the property certain equipment, namely the stove, dishwasher, dryer, sliding door and pelmet, charcoal grill and robinhood, and that he had also disconnected the electricity. The defendant’s evidence was that, as a result of this and these threats, he engaged the services of security guards, and, although he does not state so expressly, that they were engaged for some two days. In my view, this evidence establishes loss or damage of a kind for which the defendant is entitled to damages, and there is nothing before me to suggest that the figure of $330, which the special referee found, is other than the actual cost of those security services which were necessitated by both threats and conduct on the part of the plaintiff. Accordingly in my view they are recoverable damages under the heading of either inconvenience or rectification, but certainly, in my view, are permissible damages.

The third item is time spent in rectifying or arranging to rectify defects as claimed, total allowance 20 hours at $20 per hour, $400. The statement by the defendant, which is in evidence, includes a statement that he, the defendant, calculated his time from 16 December 1973 to about September 1974, and attached to his statement was a statement in that regard. He states: “In addition to same I was required to attend the property during the course of building on many occasions.” The amount of $400 allowed appears to me to be an actual amount for either work and labour done in physically rectifying or arranging to rectify, and is again, in my view, an allowable item of damages, in the direct sense of a cost incurred by the defendant, in the form of his time either actually doing things or causing them to be done.

I should add that as to the item of inconvenience, the amounts allowed by the special referee fall within the authorities stated in para. 64 in McGregor on Damages (13th ed.) where, in relation to breach of contract, it is stated under the heading: “Permissible Heads”, sub-heading: “(1) Physical inconvenience and discomfort”: “Substantial physical inconvenience and discomfort caused by a breach of contract will entitle the plaintiff to damages”, and there follows a citation of the number of authorities supporting that conclusion. The evidence to which I referred establishes that there was physical inconvenience and discomfort, and, therefore, that it is a permissible heading of damage.

[1976] VR 268 at 286

Accordingly, in my view, the finding of the special referee in relation to the fifth question was one that was open to him on the evidence that is before me, which I should say is not the whole of the evidence, but certainly some evidence as to what happened before the special referee, and the amounts found are in my view in law allowable as damages.

In the result, I conclude that no basis has been shown for varying in any respect the report of the special referee or remitting any matter to the special referee or any other referee. I conclude therefore that the defendant’s motion should succeed and that the plaintiff’s motion should fail.

The plaintiff asks for interest on the amount found in the referee’s report and his entitlement to interest from the date of the issue of the writ is not disputed. In my view there is no justification for awarding interest, or legal basis which is a justifiable one for awarding interest, before the date of the issue of the writ. As to the date until which the interest should be allowed, in my view the defendant’s submission is a justifiable one. If the plaintiff had accepted the report of the special referee on the reference to which he consented, and by a referee whom he with the defendant selected, judgment could have been entered in his favour on 29 May 1975. But on that date he expressed his dissatisfaction with the report. Having failed in the objections he has taken, in my view the only interest to which he is entitled is interest until the date when judgment could properly have been obtained by him.

As the defendant has succeeded in his motion and the plaintiff has failed in his, in my view the defendant should have the costs of both motions.

Accordingly, the Court adopts wholly the report of the special referee John Anthony Benetti, dated 16 April 1975, and it is ordered that such report be enforced as a judgment of the Court. And, accordingly, judgment is entered for the plaintiff against the defendant for the sum of $2,082.12 together with interest on that sum at the rate of 8% per annum, from 21 December 1973 until 29 May 1975.

It is ordered that the plaintiff pay the defendant’s taxed costs of the defendant’s motion by notice dated 3 June 1975 and the defendant’s taxed costs of the plaintiff’s motion by notice dated 20 June 1975.

I shall make orders as to the costs of the action and the reference after I have heard submissions from counsel on those matters. [Submissions were then made as to costs and his Honour continued:] In this action I have found that the plaintiff is entitled to judgment against the defendant for $2,082.12, together with interest at 8% per annum from 21 December 1973 to 29 May 1975, which has been calculated in the sum of $240, which means that the total amount for which the plaintiff is entitled to judgment is $2,322.12.

I have been informed, since indicating that the plaintiff is entitled to such judgment, of the fact that on 6 February 1975 the defendant paid into Court the sum of $3,250 with a denial of liability. In that situation the provisions of O. 22, r6 apply, which means that the defendant is entitled to his costs from the date of payment in, unless for special cause the Court shall otherwise order. No special cause has been advanced, nor can I find any. Accordingly, it appears to me to follow that the plaintiff should be ordered to pay the costs of the defendant from and after 6 February 1975.

[1976] VR 268 at 287

It was on 4 February 1975 that the learned Chief Justice made the order for the reference to the special referee, and the reference occurred thereafter, that is after 6 February 1975. The reference was pursuant to an order of the Court, and the Act provides that the special referee shall be deemed to be an officer of the Court and that his report may be adopted wholly or partially by the Court or a judge, and if so adopted may be enforced as a judgment or order to the same effect. It is also provided that the report or award of the special referee or arbitrator on the reference shall, unless set aside by the Court or a judge, be equivalent to the verdict of a jury. In these circumstances, it appears to me that the costs of the reference are properly to be regarded as governed by the provisions of O.22, r6, and that the costs of the defendant since the date of payment in should and do include the costs of the references. Those costs include any legal costs incurred by the defendant in relation to the reference. It appears to me that they also do properly cover the referee’s fees which were of the order of $800. The object of the reference was to avoid the very considerable legal costs which would have been involved in a detailed examination of the charges made by the plaintiff for work done and complaints by the defendant as to defects and incompleteness. But, by saving considerable legal costs, it seems to me that there is no justification for concluding that the presumably lesser costs none the less incurred, including the referee’s fees, should not be comprehended by the provisions of O.22, r6. Accordingly, I propose to order that the plaintiff pay the defendant’s taxed costs since 6 February 1975, including the costs of the reference and the referee’s fees.

The amount recovered by the plaintiff is, as I have said $2,322.12. This is less than one half of the jurisdiction of the County Court at all relevant times which was $6,000. This situation attracts the provisions of O.65, r12, which provides that unless the Court or a judge otherwise orders the plaintiff is entitled to only the costs he would have been entitled to if he had brought his action in the County Court less an amount equal to the additional costs properly incurred by the defendant by reason of the action having been brought in the Supreme Court instead of the County Court. It has been held by the Full Court in O’Dogherty v McMahon, [1971] VR 625, which deals with an identical order as between the County Court and the Magistrates’ Court, that the Court should otherwise order only in special circumstances or for special reasons. No special circumstances or special reasons have been advanced in this case, nor in my view are there any. Accordingly I conclude that the costs to which the plaintiff is entitled are costs on the relevant County Court scale, which is scale “C”, up to 6 February 1975, less an amount equal to the additional costs properly incurred by the defendant by reason of the action having been brought in the Supreme Court instead of the County Court.

I have already, in dealing with the parties’ motions today, ordered that the plaintiff pay the defendant’s taxed costs of the plaintiff’s motion and of the defendant’s motion. Having examined the Court file in this matter and taking such notice as I can of what was likely to have been involved in the preparation of the case, it seems to me that the strong probability, and I think I could say certainty, is that the costs which the plaintiff has been, by the orders I have indicated, ordered to pay the defendant will considerably exceed the costs which the defendant will, in accordance with the orders that I have indicated, be ordered to pay the plaintiff. The precise amounts involved of course cannot be ascertained without taxation, in the absence of agreement.

[1976] VR 268 at 288

The question then arises as to the moneys in court, and as to what should be done about the costs. Counsel for the defendant submits that the costs should be set off against each other and that is clearly common practice and I do not understand it to be suggested that that should not happen. However, counsel for the defendant also submits that the probable surplus of costs payable to the defendant should be set off against the amount of the judgment in favour of the plaintiff.

I disregard for the purposes of the decision I am about to make the information I have been given that the plaintiff is on legal aid, partly because it does not give me up to date information as to the plaintiff’s financial position. It seems to me, however, that common justice and equity demands that in a situation such as the present where there is a real possibility, and in my view a probability, which I have said in my mind amounts to a certainty, that the costs payable to the defendant will exceed the costs payable by the defendant, it should lead to the view that no money should be paid out of court to the plaintiff and no money should be recoverable by the plaintiff by execution until the costs have been taxed and there is an ascertainment of what the precise position financially between the parties is. I can and will order expeditious taxation of costs, but it appears to me that it would be inequitable in the extreme for a plaintiff to be able to recover by execution moneys or to have moneys paid out of court to him, if in truth, because of a liability for costs, he is not entitled to them, that liability for costs being appropriately regarded as a set off against the amount of his judgment.

Indeed, it seems to me that, where the probability is that the costs payable by the plaintiff will exceed the costs payable to the plaintiff and that there will be therefore a reduction in the net amount payable to him to an amount below the amount of the judgment, the defendant is suffering at least as much as and possible more than the plaintiff by the moneys remaining in court. Until the costs are taxed the defendant is without his moneys and is unable to use them or recover interest on them, and that is a significant deprivation. I adopt with respect and apply as to the practice in this Court what was said by Newton, J., in Pryor v Hennessy and Cham, [1973] VR 221, at p. 222, when he said: “In cases where an adult plaintiff recovers less than a sum paid into court and where the defendant’s costs since the date of payment into court will exceed the plaintiff’s costs prior to that date, the usual practice is to order that costs be set off and that the balance of costs owing by the plaintiff to the defendant be set off or charged against the plaintiff’s damages; see, for example, Lyons v Winter (1899) 25 VLR 464, at p. 468; 6 ALR 122; Spencer v Commonwealth (1907) 5 CLR 418, at pp. 439-40; 14 ALR 253; Crapp v Crocker (1941) 58 WN (NSW) 146; Abrahams v Catip, [1942] QWN 19, and Baird v Baird, [1946] QWN 37; cf. O’Sullivan v Morton, [1911] VLR 249, at p. 260; 17 ALR 201. This practice appears to me to be based on considerations of fairness and good sense. A payment into court by a defendant is an offer to the plaintiff to settle the action for the amount of the payment, and is subject to the sanction that if the plaintiff rejects the offer but recovers less than the payment into court, then the plaintiff will have to pay the defendant’s costs since the date of the payment into court. The proper implementation of this sanction, in cases where it takes effect will ordinarily justify an order that the costs owing by the plaintiff to the defendant be set off against the damages recovered by the plaintiff as well as against costs owing by the defendant to the plaintiff; the costs which the plaintiff is ordered to pay to the defendant represent in effect a price payable by the plaintiff for his judgment for the damages, and he should not be allowed to take the damages without paying that price; the money in court is under control of the court, which can properly order that the money shall be the sole source for the payment of the plaintiff’s damages, subject to all necessary set offs or charges in respect of the defendant’s costs. In so far as any observations in Powell v Vickers, Sons and Maxim Ltd., [1907] 1 KB 71, at p. 77; [1904-7] All ER Rep 390, are inconsistent with these conclusions, I respectfully consider that they do not represent the present practice.”

[1976] VR 268 at 289

I would only add that it is to be noted in any event that in Powell v Vickers, Sons and Maxim Ltd., [1907] 1 KB 71, the judgment of the members of the Court of Appeal make it clear that all that existed in that case was a possibility that the defendant’s costs might exceed the plaintiff’s. It was said by Collins, MR, at p. 77: “there was no evidence before the Master as to which, when both were taxed, would out-top the other”. Farwell, LJ at p. 77 referred to: “the mere possibility that the defendants’ costs when taxed may exceed the plaintiff’s costs”.

In this case, I regard it as not a mere possibility, but as a probability, and, as I have said, in my view a certainty. Accordingly, in my view the judgment should be stayed until the costs are taxed, or execution on the judgment should be stayed until the costs are taxed. The costs should be set off against each other, any surplus of costs owing by the plaintiff to the defendant should be set off against the plaintiff’s judgment, and I think I should also order that, to give effect to this, there be an expeditious taxation, and that the defendant should have the responsibility for taxing the costs at the earliest available date that the Master should make available the earliest possible appointment. On reflection I think that both parties should be subject to that direction, so that the taxation can take place as soon as possible.

Accordingly, I now pronounce the following judgment and orders:–

There will be judgment for the plaintiff against the defendant for $2,082.12 plus interest in the sum of $240, being interest at the rate of 8% per annum on the amount of the judgment from 21 December 1973 until 29 May 1975.
It is ordered that the plaintiff pay the defendant’s taxed costs, including any reserved costs, of the plaintiff’s motion by notice dated 3 June 1975 and the defendant’s taxed costs of the plaintiff’s motion by notice dated 20 June 1975.
It is ordered that the defendant do pay the plaintiff’s costs of the action, including any reserved costs, up to and including 6 February 1975, taxed on County Court scale “C”, less an amount equal to the additional costs properly incurred by the defendant by reason of the action having been brought in the Supreme Court instead of the County Court.

[1976] VR 268 at 291

It is ordered that the plaintiff do pay the defendant’s taxed costs, including any reserved costs, of the action and of the reference to the special referee, John Anthony Benetti, since 6 February 1975, including the fees of the special referee.
It is ordered that the costs payable by the plaintiff and defendant be set off against each other and that the balance be paid by the party by whom the surplus is payable.
It is ordered that both parties tax the costs to which they are entitled with all due despatch, and it is directed that the Taxing Master give the earliest available date or dates for the taxation of the costs and do tax the costs at the earliest available date or dates.
It is ordered that there be a stay of execution on the judgment until further order.
It is ordered that, upon the taxation of the costs and the ascertainment of the surplus of the costs after the set off of the costs and by whom the surplus is payable, there be liberty to either party to apply to the Court for such order as such party is advised with respect to the moneys in court and execution on the judgment.

Order

Orders accordingly.