Court of Appeal Supreme Court New South Wales

• Medium Neutral Citation: Ball v McInerney [2014] NSWCA 331
• Hearing dates: 15 July 2014
• Decision date: 19 September 2014
• Before: Beazley P at [1]; Emmett JA at [2]; Gleeson JA at [5]

Decision

(1) Grant leave to the appellants to amend the notice of appeal to add an additional ground of appeal concerning insufficiency of reasons.

(2) Direct the appellants to file an amended notice of appeal within 7 days.

(3) Appeal dismissed.

(4) Appellants to pay the respondent's costs.

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

• Catchwords: APPEAL - Grounds - Failure to give adequate reasons - Whether reasons given failed to reach minimum acceptable level to constitute a proper exercise of judicial power; APPEAL AND NEW TRIAL - Appeal - Interference with primary judge's findings of fact - Where findings are based on assessment of credit - Due weight to be given to the trial judge's advantage of seeing the witnesses give oral evidence -Principles in Fox v Percy apply - Whether primary judge's findings were inconsistent with incontrovertible facts or uncontested testimony, or were glaringly improbable or contrary to compelling inferences; JUDICIAL REVIEW - Grounds of review - Procedural fairness - Bias - Apprehended bias - Whether primary judge impermissibly and excessively interfered with the appellants' cross-examination - Whether primary judge's conduct as a whole indicated apprehended bias - Where a party fails to object at trial - Waiver of objection; JUDICIAL REVIEW - Grounds of review - Procedural fairness - Where appellant seeks a new trial - Whether some substantial wrong or miscarriage has been occasioned - Whether primary judge erred in permitting respondent to rely on an issue not pleaded in the defence - Where issue has been particularised in a Scott Schedule prior to trial
• Legislation Cited: Supreme Court Act 1970 (NSW) s 75A; Uniform Civil Procedure Rules 2005 (NSW) r 14.14, 15.2, 15.9, 51.53
• Cases Cited: Adamson v Ede [2009] NSWCA 379; Banque Commerciale SA, En Liquidation v Akhil Holdings Ltd [1990] HCA 11; 169 CLR 279; Beale v Government Insurance Office of New South Wales (1997) 48 NSWLR 430; Fox v Percy [2003] HCA 22; 214 CLR 118; Galea v Galea (1990) 19 NSWLR 264; John Samuel Ball & Anor v Martin McInerney t/as Wildthorn Landscapes (District Court of New South Wales, Balla DCJ, 3 May 2013, unreported); Keith v Gal [2013] NSWCA 339; Michael Wilson & Partners Limited v Nicholls & Others [2011] HCA 48; 244 CLR 427; Mifsud v Campbell (1991) 21 NSWLR 725; Nakhl Nasr v State of New South Wales [2007] NSWCA 101; Rajski v Bainton (Court of Appeal, 6 September 1991, unreported); Re Minister for Immigration and Multicultural and Indigenous Affairs; Ex parte Lam [2003] HCA 6; 214 CLR 1; Selvanayagam v University of the West Indies [1983] 1 WLR 585; [1983] 1 All ER 824; Tory v Megna [2007] NSWCA 13; Vakauta v Kelly [1989] HCA 44; 167 CLR 568
• Category: Principal judgment
• Parties: John Samuel Ball (First appellant); Elizabeth Jane Carey (Second appellant); Martin McInerney t/as Wildthorn Landscapes) (Respondent)
• Representation: Counsel: M T McCulloch SC with V O'Halloran (Appellants); D T Miller SC with D M Macfarlane (Respondent); Solicitors: Walker Hedges & Co (Appellants); McGirr Lawyers (Respondent)
• File Number(s): 2013/155973
• Publication restriction: Nil

Decision under appeal

• Jurisdiction: 9101
• Citation: John Samuel Ball & Anor v Martin McInerney t/as Wildthorn Landscapes (District Court of New South Wales, Balla DCJ, 3 May 2013, unreported)
• Date of Decision: 2013-05-03 00:00:00
• Before: Balla DCJ
• File Number(s): 2011/411847

HEADNOTE

[This headnote is not to be read as part of the judgment]

The appellants, Mr Ball and Ms Carey, retained the respondent, Mr McInerney, in mid 2008 to design and construct horse riding and training facilities, including an all-weather arena, at the appellants' property in Terrey Hills. The respondent was experienced in setting up equestrian properties and discussed with the appellants their requirements for the arena, including that it had to drain properly and was to be used regularly to train equestrian riders of various levels. The respondent commenced construction of the arena in September 2008 and completed construction in about mid November 2008. The respondent said that he told Mr Ball at the time of completion how the drainage system for the arena operated and of the importance of regular maintenance to ensure that it functioned properly.

In February 2009 the appellants made a complaint to the respondent that water was not draining properly from the arena after periods of rain. In response the respondent attended the property on 19 February 2009. The respondent said that he performed some maintenance work on this occasion and gave further instructions to Mr Ball on how to carry out maintenance in the future. Later in June 2009 the respondent again attended the appellants' property and, in response to further complaints by the appellants as to drainage, installed a second drain along the eastern side of the arena. The appellants continued to complain of drainage problems following this work.

The proceedings were commenced by a statement of claim filed in the District Court of New South Wales on 22 December 2011. The appellants alleged that the works as constructed were defective, incomplete, and not in accordance with the contract between the parties. The appellants also alleged that the respondent had made a number of representations to them regarding his skill and terms of work and that these representations were misleading or deceptive. The main source of complaint related to the drainage qualities of the main arena, as well as the quality of the materials used (in particular, the sandstone base).

The parties exchanged expert reports and the appellants served a Scott Schedule during the second half of 2012. On 23 January 2013 an experts' conclave was held during which the appellants' expert provided a further report. A second Scott Schedule was then prepared and filed on 18 March 2013 and the respondent provided a response on 10 April 2013. The trial commenced on 15 April 2013 and proceeded over six days.

The primary judge:

1 made credit findings in relation to the evidence of Mr Ball, Ms Carey, Ms Pither, and Mr McInerney and made findings as to the weight of the conflicting expert and witness evidence;

2 found that the respondent had explained to the appellants the need for regular maintenance on a number of occasions;

3 found that the appellants had failed to maintain the arena in three significant respects (failing to maintain a gap between the sandstone base of the arena and timber surround, failing to maintain a consistent sand depth of at least 75mm, and failing to break up compacted areas of sand);

4 found that the drainage difficulties experienced by the appellants, and the defects alleged in the Scott Schedule, were not as a result of faulty construction or design by the respondent but rather were a consequence of the appellants' failure to maintain the arena, and therefore did not amount to a breach of contract by the respondent; and

5 rejected the claim for misleading and deceptive conduct, on the basis that each of the representations, as alleged by the appellants, were on the evidence not misleading but, rather, they accurately reflected the respondent's skills and experience.

Mr Ball and Ms Carey appealed. The main focus of the appeal was on the alleged "maintenance issue" and whether the respondent should have been permitted to advance the contention that the appellants had failed to maintain the drainage system and that this was the cause of the problems experienced. The appellants contended that this issue had not been pleaded and that the trial had therefore miscarried. Accordingly they argued that a new trial should be ordered in respect of the entirety of their claim. The key issues on appeal were: 1) whether the appellants were denied procedural fairness in the primary judge allowing the respondent to advance the failure to maintain defence; 2) whether there was a demonstrated apprehension of bias on the part of the primary judge; 3) whether the primary judge erred in permitting the respondent's expert to give further evidence during the trial; 4) whether the primary judge erred in finding that the respondent had not breached the contract; 5) whether the primary judge erred in not finding that the respondent had made misleading and deceptive representations; and 6) whether the primary judge had provided insufficient reasons.

Appeal dismissed. The Court held, per Gleeson JA (Beazley P and Emmett JA agreeing), that:

1 Whether there has been a denial of procedural fairness will depend upon the circumstances of the case and may be affected by what is said and done during the proceedings. The ultimate focus is upon whether unfairness has resulted from the process (not whether an expectation has been disappointed) and whether there has been practical (rather than theoretical) injustice. Where an appellant is seeking an order for a new trial they must satisfy the Court that some substantial wrong or miscarriage has been occasioned. In this case the maintenance issue had been clearly articulated, and particularised, prior to trial in the respondent's response to the Scott Schedule and had also been raised in the respondent's expert reports well before the start of trial. It could not be said that the appellants were taken by surprise or disadvantaged by the issue not being pleaded in the respondent's defence. Therefore no procedural unfairness is shown in the circumstances of this case: at [55]-[76];

Considered: Adamson v Ede [2009] NSWCA 379; Re Minister for Immigration and Multicultural and Indigenous Affairs; Ex parte Lam [2003] HCA 6; 214 CLR 1; Banque Commerciale SA, En Liquidation v Akhil Holdings Ltd [1990] HCA 11; 169 CLR 279

2 The test of apprehension of bias is objective. Here there was no unfairness in the conduct of the trial in allowing the maintenance issue to be raised by the respondent. Nor did the primary judge impermissibly intervene in the conduct of the trial so as to demonstrate apprehended bias. In any event the appellants must be taken to have waived any objection to her Honour continuing to hear the matter by reason of their failure to object below: at [77]-[91];

Considered: Galea v Galea (1990) 19 NSWLR 264; Michael Wilson & Partners Limited v Nicholls & Others [2011] HCA 48; 244 CLR 427; Vakauta v Kelly [1989] HCA 44; 167 CLR 568

3 Where, as in this case, no objection is made at trial to the tender of further evidence, and no particular prejudice is identified as having resulted from that tender, a party will be bound by the conduct of their case at trial: at [92]-[99];

4 The appellants' submission that the primary judge should have found that there had been a breach of contract ignored the primary judge's findings that the drainage difficulties were caused by the appellants' own failures. There was no error shown in these findings. Nor was it shown that the primary judge's acceptance of the respondent's expert evidence was erroneous: at [121]-[125];

5 Contrary to the appellants' submissions, the primary judge had dealt with the misleading conduct claim in finding that the representations made were in fact true. The appellants did not challenge these findings. As such the misleading conduct claim was properly rejected by the primary judge: at [126]-[129];

6 It is a necessary incident of the judicial process that decision makers give adequate reasons. However the required extent and content of such reasons will depend upon the particular case under consideration and the matters in issue. The function of an appellate court is to determine whether the reasons provided have reached a minimum acceptable level to constitute a proper exercise of judicial power. Whilst the primary judge's reasons given for certain issues in this case were brief this largely reflected the brevity of the submissions as advanced at trial. In relation to her Honour's approach to the evidence of Mr Ball, Ms Carey, and Ms Pither, no error was demonstrated in her Honour's rejection of Mr Ball's evidence nor was it shown that her Honour failed to understand or deal with the evidence of Ms Carey or Ms Pither. In the circumstances no failure to properly exercise judicial power has been established: at [130]-[143].

Considered: Mifsud v Campbell (1991) 21 NSWLR 725; Beale v Government Insurance Office of New South Wales (1997) 48 NSWLR 430; Keith v Gal [2013] NSWCA 339.

Judgment

1 BEAZLEY P: I have had the advantage of reading in draft the reasons of Gleeson JA. I agree with his Honour's reasons and proposed orders.

2 EMMETT JA: This appeal is concerned with the design and construction by the respondent of horse-riding facilities on the appellants' property at Terrey Hills. The appellants sued the respondent in the District Court, alleging that several aspects of the work performed by the respondent were defective and that the horse-riding facilities were not fit for all-weather use. They claimed damages for rectification costs, including costs relating to alleged drainage defects. After a trial in the District Court, the proceedings were dismissed with costs and the appellants now appeal to this Court.

3 The principal complaint by the appellants in this Court is that the trial miscarried in that they say they were denied procedural fairness, because the trial judge should not have permitted the respondent to advance a case that the drainage problems experienced by the appellants were the consequence of the failure by the appellants to maintain the horse-riding facilities in certain respects, since that case had not been specifically pleaded in the respondent's defence.

4 I have had the advantage of reading in draft form the proposed reasons of Gleeson JA for dismissing the appeal. I agree with the orders proposed by Gleeson JA for the reasons proposed by his Honour.

5 GLEESON JA: This appeal concerns a dispute relating to the design and construction of a horse riding arena and related works by the respondent on the appellants' property at Terrey Hills in 2008. The appellants' case was that the respondent made a number of representations concerning his skill and expertise, including experience in repairing arenas with drainage problems, which induced them to engage the respondent to perform the work. The appellants complained that several aspects of the work performed were defective and that the main horse arena (the arena) was not fit for the purpose of an all-weather arena. The most significant complaint related to the drainage system for the arena. The appellants claimed damages for total rectification costs of $182,992.78, of which the rectification costs of the alleged drainage related defects were said to be $105,865.46.

6 After a trial occupying seven days the appellants' claim for damages was dismissed by the District Court and the appellants now appeal to this Court: John Samuel Ball & Anor v Martin McInerney t/as Wildthorn Landscapes (District Court of New South Wales, Balla DCJ, 3 May 2013, unreported).

7 The appellants seek a new trial in respect of the whole of their claim. The Court may order a new trial under the general power contained in s 75A(10) of the Supreme Court Act 1970 (NSW). Although the appeal to this Court is a rehearing (s 75A(5) Supreme Court Act) to succeed in obtaining a new trial the appellants must demonstrate that some substantial wrong or miscarriage has been occasioned because of an error of law, the improper admission or rejection of evidence, or "on any other ground": Uniform Civil Procedure Rules 2005 (NSW) (UCPR) r 51.53. If this Court concludes that there has been a relevant error below what has to be assessed is the essential justice of the case and whether the error of primary judge, if there was one, really bore upon the ultimate result: Tory v Megna [2007] NSWCA 13 at [41] (Spigelman CJ; Beazley and Bryson JJA agreeing).

8 Here the appellants contend that the trial miscarried in relation to what was referred to as the "maintenance issue". The appellants complain that they were denied procedural fairness because the primary judge should not have permitted the respondent to advance a case that the drainage problems experienced by the appellants were a consequence of the appellants failing to maintain the arena in three material respects (as found by her Honour), as this had not been pleaded in his defence. Related complaints were made that the appellants were denied a fair trial because the primary judge excessively intervened in the conduct of the trial, that her Honour erred in admitting certain evidence of the respondent's expert, Mr Keighran, and that her Honour failed to provide sufficient reasons for her decision.

9 A consideration of the conduct of the trial (including the pre-trial directions hearings) and of her Honour's reasons reveals that the appellants' complaint that the trial miscarried is not established. None of the remaining grounds of appeal have been made out. For the reasons which follow, the appeal should be dismissed with costs.

The appellants' claim

10 The property at Terrey Hills, which the appellants purchased in March 2008, had previously been used as an equestrian boarding, training facility, and riding school but most of the improvements were in a poor state of repair. It was common ground at trial that the respondent was retained to design and build an arena for horse training.

11 The respondent was experienced in setting up equestrian properties. He said that he utilised a design and construction method which he had used on about 20 other arenas. He accepted that he understood before he started work that the arena had to drain properly and he knew the arena was to be used regularly to train equestrian riders of various levels. The primary judge described the respondent's design and construction of the arena in the following terms (at Red 35):

"The arena is 62.5 metres by 25 metres. It has a sandstone base. The sandstone base was compacted in layers as it was installed. It was then graded to a laser level and rolled with an eight tonne roller. The sandstone base was slightly larger than the internal dimensions of the finished arena. The defendant then installed a timber surround 300 mm inside the edge of the compacted sandstone base. The sandstone base was then left for three weeks after which that part of the sandstone base which was inside the arena was rolled again.

The defendant then installed sand purchased by the plaintiffs on top of the sandstone base to a depth of between 75mm and 100mm which was graded. The sand was intended to provide a cushion between the hard sandstone base and the hooves of horses being ridden on the arena.

The sandstone base had a 1% cross fall from west to east. The arena had been designed so that any rain which fell on the sand would travel down to the sandstone base. The water would then travel down the 1% cross fall towards the eastern border of the arena. There was a 40mm gap between the sandstone base and the underside of the timber surround to allow the water to drain out of the arena evenly along the 62.5 metre length of the arena. The water would then travel along the 300 mm length of the sandstone base which protruded past the timber surround. The water then fell about 30 mm off the sandstone base. When it was originally installed the water fell into a garden bed, however in June 2009 the defendant installed a drain in the garden bed along the entire 62.5 metres of the eastern border."

12 Construction of the arena by the respondent commenced in September 2008 and was completed in about mid November 2008.

13 The appellants' principal complaint was that water did not drain from the arena after rain. Mr Ball's evidence was that, since November or December 2008, the sandstone base was continually damp and uneven and that water continued to pool across the arena, especially on the low side, for days if not weeks until he dragged the arena with a blade attached to a tractor.

14 The respondent's case was that he had told Mr Ball how the drainage system operated and the importance of regular maintenance. In his affidavit the respondent said that he had a conversation with Mr Ball in mid November 2008 to the following effect:

"MM As to maintenance, it is important to maintain the arena and to keep an even sand depth. You should remove the jumps, level the sand and make sure that outside the surround the original level is maintained. You need to make sure that the 40mm gap is maintained so the water can evenly escape. Don't allow any weeds to grow outside the arena surround as roots or grass will cause it to dam up.

JB Yeah I understand." (Blue 1/106S-Y.)

15 Notably, whilst Mr Ball's evidence was that he was never given any advice or warning by the respondent concerning the need for maintenance of the arena, the appellants' counsel at trial did not directly challenge the respondent's evidence of the mid November 2008 conversation.

16 The first complaint by the appellants was made in February 2009. In an email dated 17 February 2009 (Blue 2/483), Mr Ball mentioned a "drainage problem". On 19 February 2009 there was a meeting on site between Mr Ball and the respondent. There was a dispute as to what occurred on this occasion. The respondent said that he did some maintenance work and gave instructions to Mr Ball as to how to carry out maintenance in the future. In cross-examination Mr Ball said he did not recall the respondent and his son attending the property on 19 February 2009. Mr Ball denied that the respondent and his son carried out maintenance by digging away the build up of sand, soil, and plant matter on the lower eastern side of the timber surround on that occasion. He also denied that the respondent repeated the requirement that the appellants maintain the gap under the timber surround, stop allowing compacted sand to build up along the timber board, to maintain the level of sand at 75mm to 100mm, and to keep the outside perimeter clear of weeds (Black 177D-U).

17 In June 2009 Mr Ball complained of drainage problems in a letter to the respondent dated 21 June 2009 containing two photos (Blue 1/39-43). The photos showed ponding of water on the arena, and some surface trenches that had been dug on the arena by the appellants. The respondent attended the appellants' property in June 2009 and installed a drain along the eastern side of the arena. His evidence in cross-examination was that the arena was designed for water to flow out the low side along the entire length of the arena (which was 65m), but that the appellants had put a hole under the timber surround to let the water cascade through in one spot and that was why sand was escaping at that point (Black 271J-272V).

18 The next photographic evidence of the arena was not until 2010. The respondent contended that the condition of the arena depicted in these photos was consistent with a failure by the appellants to maintain the arena in accordance with the requirements which he had instructed Mr Ball about.

The pleadings

19 The amended statement of claim pleaded two contracts, the first arising from acceptance of a written quote given by the respondent during a telephone conversation on 28 July 2008. The second contract was said to be oral arising from discussions between Mr Ball and the respondent concerning additional works in late August 2008. The second contract was pleaded as a new contract or, alternatively, a variation of the first contract.

20 It was pleaded that the appellants' request for additional works included specifications that the arena was to have an all-weather surface; to be of a world-class equestrian standard; to be of a specified minimum size; and to have ongoing truck vehicle access to the arena (para 5).

21 It was also pleaded that, during the discussions in August 2008 and prior to entering the second contract, the respondent made certain representations to the appellants, namely: regarding his skill and experience, and also that he would charge for the materials on a time and materials basis; that his pricing would be very cost-effective; that if he obtained material for free he would not charge for such material; that where he bought materials he would charge at cost price only; and that for any fencing work he would only charge for labour and the cost would be less than $30 per metre (para 6).

22 The appellants alleged that the works as constructed were defective, incomplete, and not in accordance with the contract (para 7). Particulars were given of this allegation, but these were mostly expressed in terms of consequences of the works as constructed (eg, "the arena drainage area is faulty"; and "the arena could not be used immediately after rain ceases"), rather than particulars of the alleged defects.

23 One particular, (m), concerned the use of incorrect or wrong materials in the construction of the arena surface base, which was said to have caused a considerable proportion of clay fines in the sand layer (thus inhibiting normal seepage runoff and evaporation).

24 Two particulars, (n) and (o), concerned the alleged drainage-related defects - that the timber wall on the south-eastern side of the arena was constructed without any visible provision for draining surface water off the arena; and that the 60mm diameter subsurface drain along the south-eastern side of the arena was inadequate for the length of the trench and the expected volume of water runoff during periods of wet weather.

25 The amended defence of the respondent was not particularly informative. Most of the allegations, including the pleaded contracts and the alleged representations, were denied. The respondent made one affirmative response. This was that he agreed to carry out works on a "do and charge" basis.

The expert evidence and Scott Schedule

26 The parties exchanged expert reports and the appellants served a Scott Schedule in the second half of 2012. The appellants' expert, Mr Walker, was a geotechnical engineer. In his report of 25 June 2012, Mr Walker expressed the opinion that the material supplied and used for the arena sand subsurface layer and sub-base appeared to be satisfactory from a geotechnical materials perspective. He noted that the surface of the sub-base was softening when wet and then additional "fines" from the sub-base were becoming mixed into the surface sand layer. He expressed the following opinion:

"7.2 However, on the basis of the above evaluation, it is my opinion that the problems being experienced with ponding and flooding of the arena following rainfall, is the result of either the lack of a formal drainage system below the arena surface, or a combination of insufficient hydraulic conductivity of the sand surface, the relatively long flow path (about 25m) and flat cross-fall of 1%." (Blue 1/258F-J.)

27 Mr Walker had no prior experience in the construction of horse arenas.

28 The respondent's expert, Mr Keighran, was also a geotechnical engineer and he had experience in the construction of horse arenas. In his report of 29 November 2012, Mr Keighran expressed the following opinions:

"A) Whether the construction of the arena occurred in a proper and workman like manner?

In my opinion, the construction of the arena has adopted materials which have been used successfully on similar arenas throughout the Sydney and surrounding areas. The placement of the sandstone base is considered to have been compacted and rolled to form a smooth surface which is still in place. The fall across the arena of 1% is typical and allows good drainage provided the sand and surrounding surfaces monitored are maintained regularly (possibly daily to weekly) depending on usage.

B) Whether the drainage works as constructed are working satisfactorily and / or constructed in a proper and workmanlike manner?

In my opinion, the arena was constructed to provide cross fall drainage to the lower side and is currently operating to that extent, however, the integrity of the drainage system is suffering due to lack of reasonable and proper maintenance of the arena as detailed in my evidence above. The north western corner of the arena is currently exposed to potential storm water runoff from the car parking area, northern end of the new stable and access track.

C) Whether the arena and surrounds have been properly maintained?

In my opinion, the maintenance of the arena has been poor with poor control of surrounding vegetation, poor control of the depth of sand, poor control of the spreading of stones into and around the arena and poor control of the compaction of the sand particularly along the lower south eastern edge which is critical to maintaining good drainage. All of the details are provided in my evidence above.

D) If they have not been properly maintained, the effect such lack of maintenance would have on the operation of the arena including drainage thereof.

The lack of maintenance leads to exposure base material removing the sand cushion which may result in injury to horses.

...

H) Whether maintenance of the arena including the spreading of the sand surface has been adequate, and if not, whether such lack of maintenance would have an adverse effect on the sandstone base of the arena?

No, it appears maintenance has been poor with variable thicknesses of sand measured above the sandstone base. The effect on the sandstone base can be:-

· Horses hoof coming into contact with the sandstone base, either injuring the horse or damaging the sandstone base.

· Saturation of the base materials leading to possible softening and weakening due to ponding created by over compacted sand at the edges.

No signs were observed by me during my inspections of damage to the sandstone base.

...

M) Whether drainage including pit is properly maintained?

No, I observed substantial vegetation in and surrounding the drainage pits resulting in me developing the opinion they have not been properly maintained." (Blue 2/367S-369K.)

29 An experts' conclave was held on 23 January 2013. On that occasion Mr Walker provided Mr Keighran with an "Addendum Report" dated 18 January 2013 (Blue 2/321-358). This report was said to augment Mr Walker's previous report of 25 June 2012 as he had carried out some additional investigations in relation to the drainage issues raised in Mr Keighran's report. Mr Walker's response also dealt with Mr Keighran's opinion concerning maintenance being the cause of the drainage problems, as well as poor control of sand thickness and compaction along the edges of the arena.

30 A dispute arose between the parties as to whether the appellants could rely upon the further report from their expert, Mr Walker. The respondent complained that the experts' conclave had been derailed by the late service of Mr Walker's report during the conclave (Further Supplementary Black 2P-Q). This led to the proceedings being relisted for directions on 11 March 2013 on the respondent's application.

Pre-trial directions

31 On 11 March 2013 Olsson DCJ gave leave for the appellants to rely upon the report of Mr Walker dated 18 January 2013, and directed the appellants to produce a Scott Schedule by 18 March 2013 that set out in itemised form the defects that it alleged in the respondent's design and construction of the works. (It seems that Olsson DCJ was of the view that the Scott Schedule which had previously been served by the appellants was deficient. Her Honour described it as "useless" (Further Supplementary Black 5Q).) Directions were also made in relation to the service of lay and expert evidence, and the hearing date of 15 April 2013 for four days was confirmed.

32 Shortly prior to this directions hearing the appellants' solicitors had written to the respondent's solicitors seeking particulars of the defence including whether it was the case that the respondent was merely putting the appellants' case to proof (Blue 1/96-98). They invited the respondent's solicitors to provide particulars of any "affirmative" allegation that the respondent intended to make. Ultimately on 22 March 2013 the respondent's solicitors replied stating:

"Our client will serve its Scott Schedule in accordance with the orders made and we will rely on the matters contained in the joint expert conclave (including maintenance aspects), our client's expert report and the expert report which our client's expert is in the process of producing." (Blue 1/101FG.)

33 On 5 April 2013 a further directions hearing was held in relation to objections by the respondent to the appellants' Scott Schedule filed on 21 March 2013. Olsson DCJ granted leave to the appellants to rely on paragraphs 1 to 10 inclusive of the Scott Schedule, but rejected paragraphs 11 and 12 (Further Supplementary Black 44X-45E). No complaint is raised on appeal in relation to this ruling.

34 The respondent's affidavit of 9 April 2013 was served on or about that date.

35 On 10 April 2013 the respondent provided its response to the Scott Schedule. In relation to items 1a, b and c and 2a and b concerning the alleged drainage defects, the respondent contended:

"The maintenance necessary (but not as a consequence of any defective work by the Defendant) to stop ponding after rain includes: (a) removal of the significant build up of vegetation and other matter around the arena (in particular eastern side) (Blue 1/239 and 243) to allow the water to drain down the 1% fall and through the gap installed by the defendant of 25-40 mm between the sandstone base and the bottom of the timber surround for the entire 65m length on the eastern side of the arena (and down into the subsurface drain of 300mm x 300m) and not just the select locations which appear to be the "drainage points" referred to by plaintiffs; (b) maintaining sand depth of 75mm-100 mm across the entire surface of the arena; (c) ensuring maintenance includes breaking up any compacted areas of sand on the inside of eastern boundary."

36 The trial commenced on 15 April 2013.

37 A further experts' conclave was also held on the first day of the trial and the experts produced a supplementary joint report dated 15 April 2013. Subsequently on 17 April 2013 Mr Keighran provided a further supplementary joint report in which he qualified his earlier agreement with some of the matters stated in the supplementary joint report of 15 April 2013.

Conduct of the trial

38 In opening written submissions dated 10 April 2013, served shortly before the trial commenced, the appellants noted that it was "anticipated" that the respondent would allege that the arena is fit for its purpose and "can be used in all weather conditions but ... must be maintained in a certain manner to meet the purpose" (Supplementary Black 6B-D). The appellants' opening submissions contended that if the respondent sought to rely on the appellants failing to maintain the arena and associated works, this was an "affirmative" defence that was not pleaded, and objection was taken to the respondent relying upon that matter. Nonetheless the appellants also submitted that if this objection was not accepted, the appellants' case was that maintenance was not the reason for the works not being fit for the purpose. Alternatively the appellants submitted that the respondent had failed to give warnings to the appellants as to the need for maintenance of a detailed and specific methodology, given the design of the arena and the particular method of drainage which had been constructed.

39 In his oral opening at the trial the appellants' counsel again raised an objection to the respondent relying upon an "affirmative" defence of maintenance. The primary judge indicated that she did not understand the maintenance issue to be an affirmative defence, but rather the respondent's case was that if there was water ponding on the arena this was the appellants' fault because if the appellants had cleared away obstructions around the arena the water would have been able to escape. Her Honour observed that it was a question of expert evidence and noted that the experts were meeting that day, and she assumed the plaintiffs' expert would give evidence as to his opinion about the proposition that the reason the water was ponding in the arena was because of the appellants' failure to maintain the arena. The appellants' counsel did not press his objection further, but indicated that he may need to seek leave to have rebuttal evidence. Her Honour indicated that she would give such leave to call oral evidence from the plaintiffs' expert if counsel could persuade her that a new issue had only recently been raised (Black 27M-Y).

40 A little later the transcript records a complaint by the appellants' counsel in relation to the late service of the respondent's amended expert report dated 12 April 2013, but counsel then indicated that he would not press the objection further, and he would seek leave to call evidence from the plaintiffs' expert. Her Honour then inquired of the appellants' counsel whether he was proposing to call additional oral evidence from Mr Ball. The appellants' counsel indicated that he was seeking leave to call additional oral evidence in chief, and when asked to outline what issue that would go to, the appellants' counsel stated that it would go to maintenance, what information was provided by the respondent as to what maintenance was necessary, and what maintenance was conducted beyond what was already dealt with in Mr Ball's affidavit (Black 29S-Y). (It seems however that no attempt was subsequently made to adduce additional oral evidence in chief from Mr Ball on this issue (Black 33D-W).)

41 Other than formal objections, the appellants' counsel did not object to the tender of the reports of Mr Keighran dated 29 November 2012, a further short report dated 12 April 2013, and Mr Keighran's supplementary conclave report dated 17 April 2013 (Black 230S-231L). Likewise, except for formal objections, the appellants' counsel did not object to the reading of the respondent's affidavit, in particular paragraph 29 concerning the mid November 2008 conversation as to the need for maintenance of the arena.

42 The appellants' closing written submissions, whilst repeating the earlier complaint concerning the respondent's reliance on the "maintenance issue", contended that the prejudice suffered by the appellants by the late raising of the maintenance issue related to costs and the length of the trial because it was said that the issue gave rise to a protracted process involving expert evidence and the respondent's lay evidence (Supplementary Black 33Y-34E).

43 In oral closing submissions at trial, counsel for the appellants ultimately disclaimed any complaint that he was taken by "surprise" by the maintenance issue (Black 351T-Y). The contention which was advanced was that the issue was relevant to the question of costs, because the trial had been protracted for that reason (Black 352J-P).

The primary judge's reasons

44 The primary judge did not consider the evidence of Mr Ball to be reliable because she did not accept his evidence denying that the respondent had told him that it was critical to maintain the gap under the timber surround (Red 38M-O). Her Honour considered that Mr Ball's evidence, that he failed to appreciate that he needed to keep the gap of 40mm on the low side of the arena clear, to be fanciful. Her Honour found that Mr Ball knew that the arena had been designed for water to flow away through that gap (Red 39R).

45 Turning to the expert evidence, the primary judge observed that:

"Mr Walker concluded from comparing his test results to the earlier test results that the quantity of fines had increased over time and that the fines had come from the sandstone base under the sand. This had occurred because as the water ponded on the arena after rain the sandstone base softened. Then any mechanical mixing (eg the motion of a horse's hoof or the motion of the tractor or rake) released fines from the sandstone base into the sand. These additional fines reduced the permeability of the sand. Permeability is a flow rate measurement, which describes the rate at which water will flow through the sand." (Red 41M-R.)

46 Nonetheless the primary judge found that Mr Walker made a number of concessions in cross-examination including: that he had only undertaken limited testing on the samples of sand taken from the arena for the presence of clay particles or "fines"; that he expected mechanical mixing to occur if there was only 20mm of sand on the sandstone base (which was less than the 75mm to 100mm recommendation of the respondent); that he agreed that the build up of material, soil, sand, and plant matter behind the timber surround would reduce the differential in pressure, meaning that the forces encouraging water to exit the arena and travel under the timber surround were reduced; and that the flow rate of water would be improved if the sand level was evenly maintained and by breaking up the compacted sand at the inside of the timber surround (Red 41T-43Q).

47 The primary judge preferred the evidence of the respondent's expert, Mr Keighran, to that of Mr Walker as to the design and construction of the arena. In doing so her Honour took into account Mr Walker's concession that he knew nothing about the construction of horse arenas and that his report did not suggest that he undertook any testing of the arena as constructed (Red 43W-44D). By contrast her Honour accepted that Mr Keighran was experienced in horse arena design and construction.

48 The primary judge then made the following findings:

"I find that:

1. The arena was designed to drain water in the manner I have already described. [See [11] above.]

2. The plaintiffs were aware from the time when the defendant constructed the arena that there was a gap 62.5 metres long under the timber surround along the eastern boundary through which water had to escape. On numerous occasions the defendant explained to Mr Ball that he had to keep the gap under the timber surround clear to allow rain water to leave the arena. The defendant told Mr Ball that the garden bed needed regular maintenance to ensure that plant matter did not combine with the sand and fill the gap. The defendant told Mr Ball to ensure that the level of the garden bed remained below the level of the gap. On at least one occasion the defendant showed the plaintiffs how to do it.

3. The defendant also told Mr Ball that the level of the sand in the arena affected the drainage system and that he needed to ensure it was kept level and to break up any compacted areas of sand on the inside of the timber surround along the eastern boundary. On one occasion the defendant showed Mr Ball how to do it.

4. The action of the horses' hooves threw sand to the outside of the arena. Over time the level of sand would become uneven, In addition, as it collected along the edges, it would compact. While the plaintiffs did have the sand in that part of the arena used by the horses levelled from time to time, it was not done often enough and the compacted sand along the eastern boundary of the arena was not removed.

5. The level of sand in the arena significantly decreased over time. 10% of the sand was removed by the defendant at the request of the plaintiffs because it was too deep for the horses. This would not have affected the drainage function of the sand if there had been no further reduction in the quantity of the sand. In addition the plaintiffs have not maintained consistent sand depth across the arena. I am satisfied that, after the defendant removed some sand the remaining sand would have been, if evenly spread at an average depth of around 75 mm. However by the time Mr Walker undertook some measurements on 4 June 2012 only one location had sand at a level above 50 millimetres. The other four test pits had levels of 20, 25, 35 and 45 mm. The failure to maintain a consistent sand depth has caused ponding and inhibited drainage on the arena. In addition where the sand depth is too low (such as at 45mm and less) mechanical fixing caused the release of fines into the sand and which in turn reduced the permeability of the sand and in turn inhibited drainage. The build-up of sand along the eastern side caused a lengthening of the drainage path which has also inhibited drainage.

6. The plaintiffs deliberately did not keep the gap under the 62.5 metre eastern timber surround clear from sand and plant matter. Other than the occasions on which the gap has been cleared by the defendant, the gap has been blocked by sand in which weeds and other plant material has been growing, The consequence has been that water is inhibited from draining through the 40mm gap for the full length of the 62.5m lower eastern side. The build-up has also decreased the pressure differential thereby inhibiting drainage.

7. The plaintiffs have not shown that the drainage issue with the arena has been caused by any defect in the design or construction of the arena or the materials used by the defendant.

8. The plaintiffs' failure to maintain the arena and its surrounds has been the cause of water not draining from the arena after rain."

49 As to the claim in contract, her Honour found that the arena was not faulty and the drainage difficulties experienced by the appellants were a consequence of the appellants failing to maintain the arena in three significant respects:

"(a) failing to keep the 40mm gap between the sandstone base and timber surround clear from the outside of plant, soil and sand build up;

(b) maintaining a consistent sand depth of at least 75mm across the entire surface of the arena; and

(c) ensuring maintenance includes breaking up any compacted areas of sand on the inside of the eastern boundary." (Red 50E-L.)

50 This finding addressed items 1a, b and c of the Scott Schedule.

51 The primary judge made factual findings in relation to the remaining items 2-10 of the Scott Schedule. Based on those findings, her Honour found that each claim for rectification must fail.

52 As to the claim for misleading conduct, the primary judge made the following findings (at Red 48U-49M) in rejecting this claim:

• The respondent was a contractor skilled in the design and construction of arenas. Thus the representation to this effect was not misleading.

• The respondent did consult with contractors to the Olympic equestrian venue in Sydney and did construct part of that arena and had repaired many arenas with drainage problems. Thus the representations to this effect were not misleading.

• The claim in respect of the representations that the respondent would supply materials to the appellants at cost and would only charge for labour for fencing at less than $30.00 per metre were abandoned or not pressed at the trial.

• The respondent had the skills required to enable him to undertake the works and achieve the result required. Thus the representation to this effect was not misleading.

Issues on appeal

53 On the hearing of the appeal the appellants sought to add an additional ground of appeal, namely, that the primary judge provided insufficient reasons for her decision. The respondent did not object to this amendment of the notice of appeal (Orange 34D). Leave should be granted to the appellants to rely upon this additional ground. However it must be remembered that the appropriate form of appellate intervention when there has been a failure to give adequate reasons that warrants correction on appeal, is an order for a new trial - this is not the sort of error that a Court of Appeal is capable of correcting for itself: Nakhl Nasr v State of New South Wales [2007] NSWCA 101 at [23] (Campbell JA; Beazley and Hodgson JJA agreeing).

54 The issues on appeal may be conveniently grouped as follows:

(1) whether the appellants were denied procedural fairness because her Honour permitted the respondent to advance the maintenance issue and made findings that the losses complained of were caused solely by the appellants' failure to maintain the drainage system which the respondent had put in place (grounds 3 and 4);

(2) whether there was a demonstrated apprehension of bias by the primary judge permitting the respondent to raise the maintenance issue and impermissibly interfering with the appellants' counsel's cross-examination (grounds 9 and 10);

(3) whether Mr Keighran's supplementary conclave report was wrongly admitted into evidence (grounds 11 and 12);

(4) whether the primary judge erred in her preferring the evidence of the respondent to the evidence of Mr Ball, and erred in her understanding of the evidence of the second appellant, Ms Carey (grounds 6, 7 and 8);

(5) whether the sandstone base supplied by the respondent was not fit for its purpose (ground 13);

(6) whether the primary judge erred in her findings as to whether the contract had been breached by the respondent (grounds 5, 14, 15 and 16);

(7) whether the primary judge failed to address and determine the appellants' misleading conduct claim (grounds 1 and 2);

(8) whether the primary judge provided sufficient reasons for her decision.

Issue 1: Procedural fairness

55 The appellants' fundamental complaint is that they were denied procedural fairness because her Honour permitted the respondent to advance the maintenance issue as an answer to the appellants' claim, even though this was not pleaded in his defence, and then went on to make findings on this issue which were adverse to the appellants' case.

Relevant principles

56 It is uncontroversial that a judge is required to conduct judicial proceedings in accordance with natural justice (often called procedural fairness). The authorities for this principle were reviewed by Campbell JA in Adamson v Ede [2009] NSWCA 379 at [53]-[63].

57 The content of the requirement of fairness will depend upon the circumstances and may be affected by what is said and done during the proceedings. The focus is upon the consequence of any departure from proper procedure because what is ultimately in issue is whether unfairness has resulted from the process, not whether an expectation has been disappointed: Re Minister for Immigration and Multicultural and Indigenous Affairs; Ex parte Lam (Lam) [2003] HCA 6; 214 CLR 1 at [34] (Gleeson CJ). The concern of the law is to avoid practical, and not merely theoretical, injustice: Lam at [37].

58 Where the remedy sought in relation to a denial of procedural fairness is a new trial, this Court must be satisfied that some substantial wrong or miscarriage has been occasioned: UCPR r 51.53(1).

Denial of procedural fairness not established

59 The general rule as to matters required to be pleaded specifically is found in UCPR r 14.14, which relevantly provides:

"...

(2) In a defence or subsequent pleading, a party must plead specifically any matter:

(a) that, if not pleaded specifically, may take the opposite party by surprise, or

(b) that the party alleges makes any claim, defence or other case of the opposite party not maintainable, or

(c) that raises matters of fact not arising out of the preceding pleading.

(3) Matters which must be pleaded pursuant to subrule (2) include (but are not limited to) fraud, performance, release, statute of limitation, extinction of right or title, voluntary assumption of risk, causation of accident by unknown and undiscoverable mechanical defect and facts showing illegality."

60 The premise of the appellants' complaint that they were denied procedural fairness is twofold. First, that the respondent was required to plead the maintenance issue as an "affirmative" defence, but had not done so. Secondly, that the appellants were taken by "surprise" by this issue not having been pleaded and were prejudiced in the conduct of their case at trial.

61 As to the first premise, it was common ground that the respondent had not pleaded the maintenance issue in his defence. Nonetheless the issue had been clearly articulated in the respondent's response to the Scott Schedule. Part 15 of the UCPR dealing with particulars recognises that a Scott Schedule may be used in a building, technical or other matter in which several items of claim are in dispute as to liability or amount (or both): r 15.2. A Scott Schedule serves the function of providing particulars of a pleading in relation to both the claim and defence. Particulars can be included in a pleading or set out in a separate document filed with the pleading: UCPR r 15.9.

62 Here pre-trial directions were made for the service of a Scott Schedule and a response by the respondent. Issue had been joined on the pleadings in respect of the allegation of defective design or construction of the works. It was sufficient, in my view, for the respondent to particularise his reliance on the maintenance issue in answer to the drainage problems experienced by the appellants by way of his response in the Scott Schedule.

63 The critical issue in terms of procedural fairness is whether the appellants were taken by surprise by the respondent's response in the Scott Schedule which had been served only about five days prior to the commencement of the trial. It is useful to start with a consideration of how the maintenance issue arose at trial.

64 The maintenance issue was first raised in the expert evidence which had been exchanged between the parties in November 2012 and January 2013. The respondent's expert, Mr Keighran, expressed the opinion that the drainage problems were attributable to the appellants' failure to maintain the arena, not the design or construction of the arena itself or of the drainage system. The appellants' expert, Mr Walker, provided a report in response. No complaint was made by the appellants at this time about a case not pleaded by the respondent.

65 There cannot have been any doubt on the appellants' side from late November 2012 that the respondent intended to meet the appellants' case by pointing to the appellants' alleged failure to maintain the arena. That this was the position is evident from the following matters.

66 First, the appellants served an expert's report in reply (by Mr Walker, dated 18 January 2013) which addressed the maintenance issue.

67 Secondly, the appellants did not object to the respondent's response to the Scott Schedule dated 10 April 2013 insofar as it particularised the maintenance issue as an answer to the alleged defective works.

68 Thirdly, the appellants' written opening submissions expressly acknowledged that it was "anticipated" that the respondent would rely upon the maintenance issue by way of defence.

69 Fourthly, the appellants did not object to the respondent's lay and expert evidence addressing the maintenance issue, other than formal objections.

70 Fifthly, the appellants' counsel at trial acknowledged in closing argument that the appellants were not taken by "surprise" by the raising of the maintenance issue, but that the way in which the issue had been raised was relevant to costs, as it had led to a protracted trial.

71 Thus, so far as the maintenance issue was the subject of competing lay and expert evidence, which her Honour resolved, it cannot be said that the appellants were taken by surprise or were disadvantaged by the absence of this matter having been expressly pleaded by the respondent in his defence.

72 If, contrary to the view I have reached, the maintenance issue was required to have been specifically pleaded by the respondent in his defence, beyond what was particularised in his response to the Scott Schedule, the present case is one in which the parties have deliberately chosen a different basis for the determination of the respective rights and liabilities to that in their pleadings: Banque Commerciale SA, En Liquidation v Akhil Holdings Ltd [1990] HCA 11; 169 CLR 279 at 287. The procedural fairness complaint is not made out.

Need for maintenance not a term of the contract

73 There is a further difficulty with the appellants' grounds 3 and 4 of the notice of appeal. They both proceed upon the premise that the primary judge erred because, it is asserted, her Honour found that the contract between the appellants and the respondent contained an express or implied term that the appellants needed to maintain the arena in the three respects as found by her Honour (Red 50H-L), and a further term that the drain adjacent to the wooden surround at the lower side of the arena required constant maintenance. The premise of these grounds is incorrect. Her Honour did not find that there were any such express or implied terms of the contract.

74 What her Honour found was that the drainage difficulties experienced by the appellants were a consequence of their failing to maintain the arena in the three identified respects, and accordingly the arena was not defective as alleged. It does not follow from such a finding that it was a term of the contract that the appellants maintain the arena in those three material respects.

75 Likewise it does not follow that her Honour's finding of lack of maintenance of the drain along the southern eastern boundary of the arena involved a finding that it was a term of the contract that the drain required constant maintenance (Red 51C-F).

76 Grounds 3 and 4 must be rejected.

Issue 2: Apprehended bias

77 The appellants next contend that they were denied a fair trial because the primary judge impermissibly interfered with the appellants' counsel's cross-examination and that her Honour's conduct as a whole, particularly relating to allowing the maintenance issue to be raised at trial, demonstrated apprehended bias.

78 The authorities recognise that a complaint of excessive intervention by the trial judge may be advanced as giving rise to either demonstrated apprehended bias, or a lack of an objective approach by the trial judge to the extent that the hearing miscarried: Galea v Galea (1990) 19 NSWLR 264 at 265C-D (Kirby A-CJ; Meagher JA agreeing).

79 The test of apprehension of bias is objective. The question is whether a fair-minded lay observer might reasonably apprehend that the judge might not bring an impartial and unprejudiced mind to the resolution of the question to be determined: Michael Wilson & Partners Limited v Nicholls & Others [2011] HCA 48; 244 CLR 427 at [31].

80 An allegation of apprehended bias requires an objective assessment of the connection between the facts and circumstances said to give rise to the apprehension and the asserted conclusion that the judge might not bring an impartial mind to bear upon the issues that are to be decided. The question is not whether the judge had in fact prejudged an issue: Michael Wilson & Partners Limited v Nicholls & Others at [67].

81 As to whether there has been excessive intervention by a trial judge, the guidelines emerging from the authorities are set out in Galea v Galea at 281-282. It is unnecessary to repeat those guidelines here, other than to note that the test to be applied is whether excessive judicial questioning or prerogative comments have created a real danger that the trial was unfair.

Suggested unfairness in conduct of the trial not established

82 So far as the appellants' complaint relates to her Honour's conduct of the trial in permitting the maintenance issue to be raised, this has already been dealt with above under issue 1. For the reasons already given, there is no substance to this complaint.

Suggested impermissible intervention not established

83 The appellants provided seven transcript references in support of the suggested impermissible intervention by the primary judge in the conduct of the trial. None of these, either alone or in combination, demonstrate apprehended bias.

84 No attempt was made by the appellants' counsel during oral argument to substantiate the complaint of impermissible interference by the primary judge in the appellants' counsel's cross-examination at trial. Of the complaints in the appellants' written submissions three were directed to this issue. Each complaint is unsustainable.

85 The first concerned an objection taken by the respondent's counsel to what was said to be a confusing line of questioning by the appellants' counsel. The transcript records that the appellants' counsel apologised to the witness (Black 305H-J). Her Honour, when dealing with this objection, sought clarification from the appellants' counsel as to what question he was trying to ask. The appellants' counsel requested that he not answer in front of the witness. Her Honour in effect rejected the objection by the respondent's counsel and allowed the appellants' counsel to proceed but stated: "move along a little faster we're all getting a bit lost" (Black 305P). There is nothing remarkable or inappropriate, in the circumstances, in her Honour expressing this comment in the course of a trial lasting 6 days.

86 The second complaint relates to the appellants' counsel's cross-examination of the respondent on the proposition that the sandstone used as the sub-base to the arena was not of a sufficient standard (Black 306O-307W. The respondent's counsel had previously, successfully, objected to the appellants' counsel's attempt to cross-examine Mr Keighran on this same point, on the basis that the appellants' own witness, Mr Walker, had expressed the opinion that the sandstone sub-base material was suitable (Black 250S-252I). On that occasion her Honour asked the appellants' counsel how the matter could be explored in light of that circumstance, and the appellants' counsel immediately desisted. When the appellants' counsel subsequently attempted to raise the same matter with the respondent her Honour, consistent with her earlier ruling, rejected that line of questioning. There was nothing impermissible in the exchange between her Honour and the appellants' counsel as to how such questions could be properly put in light of her Honour's earlier ruling.

87 The third complaint relates to an unsuccessful attempt by the appellants' counsel to cross-examine the respondent on an assumed fact (Black 329E-Q). The assumption was that Mr Ball was raking or dragging the arena on a daily basis between November 2008 and February 2009. Objection was taken to this question by the respondent's counsel on the ground that there was no evidence that such maintenance was being done. Her Honour asked the appellants' counsel whether there was evidence in the appellants' case (which had closed at this stage) that supported the assumption the witness was being asked to make. The appellants' counsel acknowledged that he was not in a position to say that there was such evidence. Her Honour requested the appellants' counsel to "move on" (Black 329Q). Again there was nothing inappropriate in her Honour's ruling or comment.

Waiver of objection

88 There is a further difficulty with the appellants' contention. No objection was taken at trial by the appellants' counsel that her Honour should recuse herself on the grounds of apprehended bias. It may be accepted that an objection need not necessarily be made in formal or even explicit terms. "The circumstances may be such that it is plain, without it being put into words, that a judge is being asked to consider his position having regard to the requirement of impartiality": Vakauta v Kelly [1989] HCA 44; 167 CLR 568 at 577 per Dawson J.

89 Here, however, it was not submitted on appeal that any form of objection was raised by the appellants' counsel at trial to any of her Honour's questions and comments during the trial. The absence of any objection at trial is unsurprising because the complaint (first made on appeal) of excessive or impermissible intervention by the primary judge, in my view, is simply untenable.

90 Nonetheless, if there was otherwise a possible basis for this complaint, the appellants must be taken to have waived any objection they may have had to her Honour continuing to hear the matter: Michael Wilson & Partners Limited v Nicholls & Others at 449 [76]; Vakauta v Kelly at 577-579 per Dawson J.

91 Grounds 9 and 10 must be rejected.

Issue 3: Evidentiary ruling relating to Mr Keighran's supplementary conclave report

92 The appellants contend that the primary judge erred in permitting the respondent's expert, Mr Keighran, to give further evidence during the trial which was said to amount to a departure from the agreed position of the experts reached during the supplementary experts' conclave held on 15 April 2013.

93 The background to this complaint is as follows. The experts initially held a conclave on 23 January 2013. The joint report of the experts dated 23 January 2013 noted that the experts had not received any specific briefing questions from the solicitors for the parties. The experts proceeded to set out the matters on which they agreed or disagreed with reasons why. They dealt with three broad areas: design, construction, and maintenance.

94 Subsequently a further experts' conclave was held on 15 April 2013, on the first day of the trial. A supplementary joint report was prepared by the experts dated 15 April 2013 (Supplementary Blue 1-4). This report was largely directed to matters of geotechnical design, and otherwise dealt with some of the issues raised in Mr Walker's report of 18 January 2013 and Mr Keighran's response report of 12 April 2013.

95 On 17 April 2013 Mr Keighran provided further comments on the supplementary joint report from 15 April 2013 (Supplementary Blue 5-21). The context of Mr Keighran's further comments was stated to be "after giving due consideration for all factors associated with the construction and operation of this arena using my own resources which I did not have at the subject meeting" (Supplementary Blue 5J). Mr Keighran qualified his earlier agreement with particular matters at the joint conference held on 15 April 2013. The qualifications largely related to technical matters and calculations concerning drainage rates and the permeability of the sand under certain hypothetical assumptions.

96 Mr Keighran's supplementary conclave report was tendered and an objection was made, but only to the extent of arguing that Mr Keighran was not a maintenance expert. The report was ultimately admitted into evidence and other grounds of objections were not pressed (Black 230K-231L). The appellants' counsel then proceeded to cross-examine Mr Keighran on this report. Further, no objection had earlier been taken when the appellants' expert, Mr Walker, was cross-examined by the respondent's counsel with respect to this report before it had been admitted into evidence (Black 219V-226X).

97 A party is bound by the conduct of his or her case at trial. The primary judge cannot be said to have erred in admitting into evidence Keighran's supplementary conclave report in circumstances where the appellants did not object to the tender of this report at trial on the grounds of prejudice because it was supplementary evidence not the subject of the experts' conclave, nor object to the earlier cross-examination of the appellants' expert on this report, and indeed proceeded to cross-examine Mr Keighran on this very report.

98 Moreover, no argument was advanced on appeal as to any particular prejudice occasioned to the appellants in the conduct of their claim at trial by reason of the admission of this supplementary report into evidence. So far as her Honour's findings in relation to the maintenance issue were based upon the expert evidence, those findings were largely the subject of agreement between the joint experts as recorded in their earlier joint report dated 23 January 2013 (item 3.6 - failure to maintain the 40mm gap; items 1.4 and 2.6 - failure to maintain consistent sand depth of at least 75mm; and item 3.2 - failure to break up compacted areas of sand) and otherwise reflect an acceptance by her Honour of the opinions in Mr Keighran's first report of November 2012 in preference to the views of Mr Walker.

99 Grounds 11 and 12 must be rejected.

Issue 4: Rejection of Mr Ball's evidence and assessment of other evidence

100 The appellants contend that the primary judge erred in preferring the evidence of the respondent to that of Mr Ball. Related complaints are made that her Honour also erred in her assessment of the respondent as a witness, and in her understanding and use of the evidence of the second appellant, Ms Carey, particularly in relation to a contemporaneous file note Ms Carey made of a conversation with the respondent and two of his workers in June 2009.

101 These challenges are concerned with her Honour's factual findings. In order to succeed on appeal the appellants must establish that the primary judge's conclusions were erroneous by reason of incontrovertible facts or uncontested testimony or that the decision is glaringly improbable or contrary to compelling inferences: Fox v Percy [2003] HCA 22; 214 CLR 118 at [28] and [29]. It must also be accepted, of course, that, insofar as the judge made credibility findings, she had the very considerable advantage of seeing the relevant witnesses give their oral evidence and was thus able to bring to bear aspects of judgment and appraisal that are simply unavailable to this Court: Fox v Percy at [23].

102 Her Honour did not accept Mr Ball's denial that the respondent had told him that it was critical to maintain the gap of approximately 40mm between the sandstone base and the timber surround (Red 38N). The appellants submitted her Honour's reasons for rejecting Mr Ball's evidence were inadequate. Her Honour found Mr Ball's evidence (that he failed to appreciate that he needed to keep the gap clear) to be fanciful, in circumstances where: he knew that the arena was designed with a fall down to the gap; he knew the arena had been designed for water to flow away through that gap; he knew that the drain ran along the whole of the eastern boundary of the arena behind the gap; and he himself had cut some holes under the timber surround to enable water to escape at those points, which was consistent with his understanding of how the drainage was designed to work (Red 40R-Y). None of these findings are challenged. To these can be added three further matters.

103 First, the respondent correctly pointed to other evidence of Mr Ball that supported her Honour's findings (at Red 50H-L) that the appellants had failed to maintain the arena. Mr Ball agreed in cross-examination that he knew that proper maintenance of the arena required keeping an even cover of sand over the arena base of between 75mm to 100mm, and that he had not maintained that level of cover since, at least, January 2012 (Black 129R-V and 130B-C); that he intentionally did not break up compacted sand on the edge of the lower side of the arena (Black 137S-W and 142R-U); and that he did not maintain the gap between the sandstone base and the timber surround, and in particular did not worry about weeds in that area, because he had made a couple of exit points under the timber surround that reduced the maintenance work required (Black 142W-Y and 143I-W).

104 Secondly, there was no direct challenge in cross-examination of the respondent on his affidavit evidence that he informed Mr Ball of the need for maintenance during the mid November 2008 conversation. The cross-examiner limited his challenge to the broad proposition that the respondent had never told Mr Ball that he needed to make sure that he kept the area along the eastern timber wall clear of weeds. The respondent denied this proposition, saying that he did this for the appellants in February 2009 and showed Mr Ball what to do (Black 284P-U). The cross-examiner did not challenge this evidence of what occurred in February 2009, despite Mr Ball denying in cross-examination that the respondent had carried out some maintenance when he inspected the arena with Mr Ball on 19 February 2009 (Black 177E-U). Nor did the cross-examiner directly challenge the respondent's evidence that he repeated to Mr Ball on that occasion the requirement for maintenance.

105 Indeed the cross-examiner put to the respondent (and the respondent agreed) that the respondent had carried out some maintenance when he inspected the arena with Mr Ball on 19 February 2009 (Black 275O-S).

106 Thirdly the evidence of Ms Pither contradicted the denials by Mr Ball that he did not understand how the drainage system operated. Ms Pither's evidence, which was accepted by her Honour, was that she knew exactly how the drainage system was designed and she discussed those matters with Mr Ball (Black 103W-104M). There was no challenge to this finding.

107 The appellants submitted that her Honour's findings viewed as a whole were glaringly improbable or controverted by evidence of other witnesses and contemporaneous documents, and were contrary to compelling inferences: Fox v Percy at [29]. But no attempt was made in either the written submissions or oral argument to demonstrate why this was so. This submission should be rejected.

108 The appellants also complained that her Honour wrongly took into account the evidence of Ms Carey who gave evidence that, at a meeting with the respondent and one of his workers (Adam) on 10 June 2010 (at which Mr Ball was not present), a conversation occurred (which she recorded in a file note) during which the respondent and Adam pulled grass from around a drain and told her that "But you have to do maintenance" to which she responded "Marty (that is, the defendant) between you and me this is getting embarrassing" (Blue 1/76E). The appellants submitted that her Honour misunderstood and misused this aspect of Ms Carey's evidence. It was argued that Ms Carey was simply recording in her file note a facetious remark she had made to the effect that the appellants had not maintained the arena and that she was doing so in a mocking way, but that the primary judge failed to appreciate this.

109 The difficulty with this submission is that it ignores the considerable advantage of the primary judge in seeing Ms Carey give her evidence: Fox v Percy at [23]. A further difficulty is that Ms Carey did not, in her evidence, seek to characterise her remark as merely intended to be facetious, nor was any submission to this effect put to the primary judge in closing submissions when her Honour raised with the appellants' counsel (Black 358G-P) the significance of Ms Carey's affidavit evidence concerning her note of the June 2010 meeting in which she referred to keeping drains free of weeds. The complaint that her Honour misunderstood and misused this evidence of Ms Carey is not made out.

110 The challenge to her Honour's factual findings in grounds 6, 7 and 8 are not made out.

Issue 5: Sandstone base issue

111 The appellants contend that the primary judge erred in failing to find that the sandstone supplied for the arena base was not fit for that purpose and accordingly, that the respondent was in breach of contract.

112 The suitability of the sandstone base was the subject of item 6a of the Scott Schedule. The competing contentions of the parties were as follows:

• The appellants claimed that:

"The base of the arena as constructed by the Defendant is unsuitable for use and not fit for purpose as it has contaminated the sand surface of the arena resulting in arena not draining as required when wet and causing dust to fly up when dry and there is present a considerable proportion of clay fines in the sand layer which has been caused by the Defendant using incorrect or wrong materials in his construction of the arena surface base, as a result of which water is retained within the arena, effectively inhibiting the normal process of seepage run off and evaporation resulting in long periods of a heavily saturated sand surface layer thereby rendering the arena for extended periods after rain to be unusable."

• The respondent's response was that the appellants had not maintained the arena base by keeping a sufficient and even cover of the sand; and that the amount of clay fines in the sand was so small as to be inconsequential (Blue 1/242 and 244).

113 The primary judge found that there was no evidence of the sandstone base being unsuitable (Red 53R). Her Honour accepted that the evidence was to the contrary. This seems to have been a reference to the evidence of Mr Keighran, which her Honour must be taken to have accepted, that the use of sandstone was widely accepted as a material for the base course in arenas, and that his inspections of the sandstone base indicated that it had been properly compacted and was working satisfactorily (Blue 368K-L). Her Honour also found that the appellants had failed to maintain a consistent cover of sand depth of at least 75mm across the whole surface of the arena (Red 50J). This finding is not challenged.

114 Her Honour noted that Mr Walker gave evidence that sandstone softens when it is allowed to stay wet for long periods and "that mixing in of fines and the release of gravel and cobble fragments can occur as a result of this softening and because of horse hooves impacting on the sub-base layer due to a relatively thin layer of surface sand" (Blue 1/257-258). However, Mr Walker did not suggest that the sandstone was unsuitable or not fit for the purpose. On the contrary, Mr Walker's evidence was that:

"the materials supplied and used for the arena sand surface layer and sub-base appear to be satisfactory from a geotechnical materials perspective" (Blue 257R-S).

115 On appeal no oral argument was directed to this issue. No error has been demonstrated in her Honour's finding on the sandstone base issue.

116 It is necessary to address two further related matters in the appellants' written submissions on this issue. The first concerns the appellants' contention that the material, which made up the sandstone base, was sourced from an inferior supplier and was not of proper quality material. There are two difficulties with this submission. One is that the sole reference given for this submission was a portion of the cross-examination of the respondent on the question of whether he actually paid for the sandstone base or exchanged it for landscaping and other fencing works provided to the supplier, Andy Moit & Sons. The purpose of this cross-examination was acknowledged by the appellants' counsel at trial to go only to the credit of the respondent (Black 343R). Nothing in the cross-examination (at Black 346) supports the appellants' contention that the sandstone was of an inferior quality.

117 The other difficulty is that the appellants' counsel at trial abandoned cross-examination of Mr Keighran on the suitability of the sandstone base when objection was taken by the respondents' counsel that this proposition was inconsistent with their own expert evidence (see at [86] above).

118 The second matter concerns the appellants' complaint that the primary judge impermissibly permitted the respondent to have his cross-examination interrupted so he could have a conference with his solicitor and counsel before continuing. This contention is misconceived. What occurred, as recorded in the transcript (Black 347J-P), is that, at the conclusion of the respondent's cross-examination, counsel for the respondent sought and obtained an adjournment to confer with the respondent on the issue which had been last raised concerning whether the respondent had paid for the sandstone base or had exchanged other work and services with the supplier of the sandstone base. These questions had been directed to establishing that the respondent had lied in an email of 2 September 2008 to Mr Ball in which he had stated that he had just paid for the sandstone base. After a short adjournment the respondent gave evidence in re-examination that he recalled that the first lot of rock which was delivered by the supplier was not enough for the job and that he did have to pay for some rock in the vicinity of about $3,750 and he had produced a receipt for that amount in his evidence.

119 Contrary to the appellants' contention, her Honour did not permit the respondent to have a conference with his solicitor and counsel whilst under cross-examination. Rather this short adjournment occurred at the conclusion of his cross-examination. There was nothing impermissible in allowing that course. Whether it was a matter which affected her Honour's assessment of the weight to be given to the respondent's evidence in re-examination was entirely a matter for the primary judge. No submission was made on appeal that the primary judge erred in some manner in her assessment of the respondent's credit having regard to his evidence given on this issue in re-examination.

120 Ground 13 must be rejected.

Issue 6: Whether the respondent breached the contract

121 The appellants contend by appeal grounds 14, 15, and 16 that the primary judge erred in failing to find that: (a) the design for the drainage of the arena was defective; (b) that the construction of the arena was defective; and (c) that the respondent breached his contract with the appellants. These matters may be conveniently dealt with together.

122 The appellants submitted that the breach of contract was established by the "failures demonstrated". The difficulty with this submission is that it ignores the evidence and her Honour's factual findings that the drainage difficulties experienced by the appellants were a consequence of their own failure to carry out maintenance in three material respects. No error has been shown in those findings.

123 The appellants further submitted that the joint expert report dated 18 January 2013 "essentially agreed" on the various breaches manifested in the design and construction of the arena. The difficulty with this submission is that the experts' conclave proceeded without any briefing questions from the solicitors for the parties. The experts proceeded to identify what they understood to be the issues. The extent of agreement on the matters stated in the joint expert report was of limited utility having regard to the high level of generality in the "issues or comments" identified by the experts. The joint report cannot be read without reference to the experts' own reports. Her Honour undertook that exercise and concluded that she should prefer the evidence of Mr Keighran to that of Mr Walker on the question of design and construction of the arena. No attempt was made in oral argument to demonstrate why her Honour's conclusion and reasons for that finding were erroneous.

124 These grounds of appeal are not made out.

125 It is necessary to refer to one further ground of appeal. Ground 5 contended that the primary judge erred in finding that it was reasonably practicable to clean the outside of the drain. No written or oral submissions were advanced in support of this ground. It may be ignored in the absence of any submissions made in support of it.

Issue 7: Misleading conduct claim

126 The appellants contend that the primary judge never dealt with the misleading conduct claim which was based on representations said to have been made by the respondent to Mr Ball in August 2008. The appellants' case was that the respondent represented to them that he had sufficient skill, experience, and expertise to do the works the subject of the contract(s). The appellants submit that there was no issue at trial that they were induced to engage the respondent by reason of the representations. The appellants contend that the representations were misleading because they did not get what they were promised.

127 Contrary to the appellants' submissions, the primary judge dealt with the misleading conduct claim. First, so far as the alleged representations related to the respondent's skill in the design and construction of horse arenas, her Honour found that this representation was true (see at [52] above). This finding is not challenged. Indeed it was never put to the respondent that he was not so skilled.

128 Secondly, so far as the representations related to the cost of supply of materials and fencing charges, her Honour correctly observed that these allegations were abandoned or not pressed at trial (Black 82N).

129 Appeal grounds 1 and 2 must be rejected.

Issue 8: Suggested insufficient reasons

130 The appellants' overarching contention is that the primary judge failed to provide sufficient reasons for her decision. Complaint is made that her Honour dealt with the matter simplistically on the basis that a determination of the "maintenance issue" necessarily disposed of all of the issues. Complaint is also made that her Honour did not deal adequately with the evidence of Mr Ball, that she misunderstood and misused the evidence of the second appellant, Ms Carey, and that she ignored the evidence of Ms Pither.

131 In my view these complaints are without substance.

132 First, the premise of the overarching complaint of insufficient reasons (that her Honour adopted a simplistic approach to the issues) is incorrect. It is apparent from a review of the transcript, which records how the appellants ran their case at trial, that the principal issue was whether the arena had been designed or constructed so as to adequately drain after rainfall.

133 It should also be observed that the appellants devoted little attention at trial to the alleged non-drainage related defects. Beyond asserting the claims in items 3-10 of the Scott Schedule, these alleged defects did not feature in the appellants' written submissions at trial. The transcript of the trial (at Black 365Q-369R) records that only brief oral submissions were made in support of items 3-10 of the Scott Schedule. Her Honour's reasons dealt with each of the non-drainage related defects in the Scott Schedule and made findings adverse to the appellants' contentions, only one of which (relating to the sandstone base issue) is challenged on appeal.

134 The duty to give reasons is a necessary incident of the judicial process. Failure to provide sufficient reasons promotes "a sense of grievance" and denies "both the fact and the appearance of justice having been done", thus working a miscarriage of justice: Mifsud v Campbell (1991) 21 NSWLR 725 at 728; Beale v Government Insurance Office of New South Wales (1997) 48 NSWLR 430 at 442 per Meagher JA.

135 The extent and content of reasons will depend upon the particular case under consideration and the matters in issue. The function of an appellate court is to determine whether the reasons provided have reached a minimum acceptable level to constitute a proper exercise of judicial power. The authorities were reviewed in Keith v Gal [2013] NSWCA 339 at 110-119 (Gleeson JA; Emmett JA and Simpson J agreeing).

136 In the present case the observation of Meagher JA in Beale v Government Insurance Office of New South Wales at 443-444 is apposite:

"... that is not to say that a judge must make explicit findings on each disputed piece of evidence, especially if the inference as to what is found is appropriately clear: Selvanayagam v University of the West Indies [1983] 1 WLR 585; [1983] 1 All ER 824. Further, it may not be necessary to make findings on every argument or destroy every submission, particularly where the arguments advanced are numerous and of varying significance: Rajski v Bainton (Court of Appeal, 6 September 1991, unreported)."

Scott Schedule - items 3-10

137 Notably in this case, no submissions were advanced by the appellants directed to the alleged insufficiency in her Honour's reasons for rejecting the claims in respect of items 3-10 of the Scott Schedule, although her Honour's finding in relation to item 6 (the sandstone base issue) was challenged. In relation to each item her Honour recorded the appellants' claim, addressed whether there was evidence in support of the alleged defect, and made relevant findings before reaching her conclusion rejecting each of those claims.

138 It may be accepted that her Honour's references to the evidence were only brief, but this largely reflected the brevity of the submissions advanced by the appellants at trial in support of these claims. In my view, in the circumstances of this case, it was unnecessary for her Honour to go further in her reasons for rejecting these claims.

Scott Schedule - items 1-2

139 The remaining question is whether her Honour provided insufficient reasons for rejecting the drainage related defects the subject of items 1 and 2 of the Scott Schedule. The main matter relied upon by the appellants was her Honour's treatment of the evidence of Mr Ball. The appellants complain that her Honour provided inadequate reasons for rejecting his evidence. This submission cannot survive scrutiny for the reasons given above under issue 4. In short, her Honour was called on to resolve the conflicting evidence of Mr Ball and the respondent. Her Honour found against Mr Ball on this question because his evidence was found to be unreliable and fanciful. The appellants have failed to demonstrate error in her Honour's reasons.

140 The appellants also complain that the primary judge did not understand and deal effectively with the evidence of Ms Carey and Ms Pither. It was submitted that their evidence established that the arena was not draining in the way that it should, and that the assertions of lack of maintenance as being the main cause of the drainage problems were incorrect. It was further contended that there was evidence of the appellants carrying out regular maintenance in the area of the arena and that the primary judge had overlooked this, in particular the evidence of Ms Carey and Ms Pither. (It is to be observed that these submissions were made without any reference to the suggested relevant portions of the affidavit evidence or oral evidence of these witnesses.)

141 As to Ms Carey, contrary to the appellants' submissions, her affidavit evidence did not contain evidence of carrying out regular maintenance of the arena of the type recommended by the respondent. Rather it referred simply to measures taken to help drain the arena after rain, including grading or dragging the main arena and digging trenches manually across the full length and breadth of the main arena to route the water to the low side, and digging holes under the low side of the arena to channel the water out. Ms Pither gave similar evidence of digging holes underneath the timber surround to allow the trapped water to escape when the arena was wet and also dragging the arena on an "as need be basis" (Blue 1/87L). The weight that could be given to her evidence was limited having regard to Ms Pither's acknowledgment that she was not in attendance at the arena on a daily basis as it was not used as a riding school and she was often away at competitions or attending to other business (Blue 1/87M-O).

142 The further difficulty with the appellants' complaint of insufficient reasons is that it ignores that the primary judge's findings (that the drainage difficulties were a consequence of the appellants failing to maintain the arena in three significant respects), were largely based on the concessions made by Mr Ball that he did not undertake the maintenance which the respondent said he had recommended to him, her Honour having previously rejected Mr Ball's denial that the respondent had not informed him of the need to carry out such maintenance.

143 The additional appeal ground must be rejected.

Order

144 I propose the following orders:

(1) Grant leave to the appellants to amend the notice of appeal to add an additional ground of appeal concerning insufficiency of reasons.

(2) Direct the appellants to file an amended notice of appeal within 7 days.

(3) Appeal dismissed.

(4) Appellants to pay the respondent's costs.

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Decision last updated: 19 September 2014