620 Collins Street Pty Ltd v Abigroup Contractors Pty Ltd

"10. Whilst the Building Contract was entered into on about 24 August 2001, Abigroup actually established on site on about 15 September 2000. Apparently it was originally intended that Abigroup would undertake the demolition work, however, this work was undertaken by Delta Pty Limited, a specialist contractor engaged by the Principal. These circumstances give rise to the issue of whether Abigroup was delayed in being given possession of the site.

11. During the course of the Works, there was a progressive hand-over of apartments and floors, and a significant issue between the parties is whether the Works comprising SP1 were split into further Separable Portions. A further significant dispute exists between the parties as to whether or not they agreed that Level 27 was to be excluded from SP2 or from the operation of the Contract in respect of extensions of time ('EOT's') and LD's [Liquidated Damages].

12. There was significant delay in completing Level 27 due to changes and upgrading of finishes for the Penthouses. The two Penthouses on Level 27 were owned by companies controlled by Morris Schwartz and his brother, Daniel Schwartz. Mr Morris Schwartz was a director of the Principal and a director of Schwartz Pty Ltd, the Fourth Respondent. He and his wife intended to live in one of the Level 27 Penthouse Apartments. Level 27 was finally completed on about 20 May 2003.

13. The main issues between the parties turn on the creation of new Separable Portions and Abigroup's entitlement to EOT's. From the findings on these issues will flow any entitlement of Abigroup to delay costs, damages or bonus payments and/or the Principal's entitlement to LD's.

14. Apart from the above main issues, there are other disputes which include whether or not the time for certain variation works formed part of the Contract duration, disputed variation claims, progress claims, interest entitlements and, finally, financial reconciliation."

8 The disputes between the parties were first the subject of proceedings before the Victorian Civil and Administrative Tribunal and then made the subject of an agreement for accelerated arbitration between the parties.

9 The Arbitrator Mr Geoffrey Markham entered on the reference at a preliminary conference on 13 January 2004. Thereafter a series of preliminary conferences were conducted in March, April and May 2004.

10 A hearing was conducted over 10 days in June 2004 and a conclave of expert witnesses with respect to the programming of the works was conducted during the hearing on 10 and 11 June 2004.

11 The parties exchanged written closing submissions running to some hundreds of pages and the parties' oral addresses were heard on 8 September 2004.

12 The Arbitrator's first interim award was published on 3 November 2005 ("the award").

13 Consequent upon the award a second interim award was published on 13 January 2006 by which the Arbitrator ordered the respondents to pay Abigroup the total of $2,619,354 (including interest and GST).

Misconduct

14 Section 42 of the Act provides:

(a) there has been misconduct on the part of an arbitrator or umpire or an arbitrator or umpire has misconducted the proceedings; or

(b) the arbitration or award has been improperly procured--

the Court may, on the application of a party to the arbitration agreement, set the award aside either wholly or in part.

(2) Where the arbitrator or umpire has misconducted the proceedings by making an award partly in respect of a matter not referred to arbitration pursuant to the arbitration agreement, the Court may set aside that part of the award if it can do so without materially affecting the remaining part of the award.

(3) Where an application is made under this section to set aside an award, the Court may order that any money made payable by the award shall be paid into court or otherwise secured pending the determination of the application."

15 "Misconduct" is defined by s.4 of the Act as including "corruption, fraud, partiality, bias and a breach of the rules of natural justice."

16 The plaintiff does not allege actual misconduct in the nature of corruption, fraud, partiality or bias. The application relates to what is described as legal/technical misconduct by the arbitrator. In Stannard v Sperway Constructions Pty Ltd[1] Brooking J stated:

" 'Misconduct' when used in relation to arbitrators, is a term of art and one which, as the inclusive definition in section 4 accepts, cannot be succinctly defined. It is rather like the elephant - we know it when we see it. If we are in doubt we may gain assistance from the books, where we will however find no rigid definition of the species but instead statements of principle and multifarious examples of their application."

17 In Williams v Wallace and Cox[2] Lush J observed:

"Misconduct is not necessarily personal misconduct. If an arbitrator for some reason which he thinks good declines to adjudicate upon the real issue before him, or rejects evidence which, if he had rightly appreciated it would have been seen by him to be vital, that is within the meaning of the expression 'misconduct' in the hearing of the matter which he has to decide and misconduct which entitles the person against whom the award is made to have it set aside."

18 Atkin LJ said in reference to "misconduct", at 485:

"That expression does not necessarily involve personal turpitude on the part of the arbitrator ... The term does not really amount to much more than such a mishandling of the arbitration as is likely to amount to some substantial miscarriage of justice ..."

19 Misconduct includes a mistake in procedure which has, or may have, unjustly prejudiced a party.[3]

20 Nevertheless "misconduct" of proceedings is not established merely because an arbitrator makes an error of fact or law.[4] There must be "some real dereliction of duty on the part of the arbitrator before it can be said that the arbitrator has ... misconducted the proceedings."[5]

21 If it were otherwise it would enable a party to circumvent the restrictive rights of appeal provided by s.38 of the Act.[6]

The Basis of the Claim

22 The plaintiff submits:

"5. Four grounds of misconduct are relied upon:-

(1) first ground - delay in publishing the Award and failure to deal with submissions worthy of serious consideration - the plaintiffs' Closing Submissions at paragraphs 81-138, regarding use of the Go-Mode Program as the baseline program for the assessment of delays

(a) the Arbitrator was guilty of inordinate and inexcusable delay in publishing the Award. That of itself does not constitute misconduct within Section 42;

(b) however the plaintiffs contend that the Arbitrator failed to consider at all, or failed to properly consider and deal with submissions worthy of serious consideration, and this amounts to misconduct;

(c) in determining whether such contention is made out, the Court should approach that determination in light of such inordinate and inexcusable delay by the Arbitrator;

(d) the first ground relates to the Arbitrator's failure to deal with the plaintiffs' Closing Submissions at paragraphs 81-138, regarding the use of the Go-Mode Program as the baseline program for the assessment of delays.

(2) second ground - delay in publishing the Award and failure to deal with submissions worthy of serious consideration - that with respect to the defendant's extension of time claims, there was no, or no adequate proof of actual delay

(a) the plaintiffs repeat sub-paragraphs (1)(a)-(c) above;

(b) the second ground relates to the Arbitrator's failure to deal with the plaintiffs' Submissions that with respect to the defendant's extension of time claims, there was no, or no adequate proof of actual delay.

(3) third ground - making a finding not pleaded or contended for by any party in relation to Issue 1 - Separable Portions

(a) on the issue of separable portions, the defendant's case proceeded on the basis that an agreement was made to create separable portions;

(b) the Arbitrator made a determination that the parties made 15 separate agreements to create new separable portions;

(c) this was a determination not pleaded or contended for by either party;

(d) this constituted misconduct within Section 42 of the Act;

(4) fourth ground - granting an extension of time regarding the Soho Apartments which claim was not pleaded or claimed in the arbitration

(a) the Arbitrator granted an extension of time to the defendant in respect of the Soho Apartments, which resulted in the plaintiffs being deprived of $185,813.00 liquidated damages;

(b) the extension of time granted by the Arbitrator was not the subject of any pleading or claim by the defendant during the hearing of the arbitration;

(c) this constituted misconduct within Section 42 of the Act."

The First Ground of Alleged Misconduct - Delay Coupled With Alleged Failure to Deal With Submissions Concerning the Baseline for the Assessment of Delay

23 Delay may give rise to an inference of misconduct when coupled with a failure to address relevant matters in the award.

24 The underlying principle is that applied in appeals from inferior tribunals on questions of law. The classic statement of that principle in this Court is that of Sholl J in Yendall v Smith Mitchell & Co Ltd.[7]

"The true principle ... must be, not that everything relevant which a magistrate does not refer to is taken to have been overlooked, or on the other hand, that is to be taken to have been considered, but that, if something which should have been considered is not referred to, and the nature of the decision suggests some error, which may have been due to the matter not having been considered as it should have been, or if the magistrate's observations indicate, on a comparison of what he said with what he did not say, that the matter in question has not been considered as it should have been, the appellate tribunal may properly draw such an inference, and the magistrate will have no cause to complain if it does so."

25 In short a failure to deal with a relevant matter in reasons may lead to the inference that it was not properly considered when that omission is viewed in the whole of the circumstances of the case. Delay may be a relevant circumstance.

26 In Monie & Ors v Commonwealth of Australia[8] the New South Wales Court of Appeal dealt with a delay of 17 months in the handing down of a judgment with respect to a claim made in negligence. The Court held that the delay was destructive of the quality of the judgment to the extent that it could not be allowed to stand. Hunt AJA stated:[9]

"It must however be emphasised that delay between taking evidence and the delivery of judgment does not in itself justify upholding an appeal against the judgment given. Error must still be established on the part of the trial judge warranting either a reversal of the judgment or the grant of a new trial. Delay may assist an appellant in establishing such error because, as the approach identified by the Full Federal Court demonstrates, the inference will more readily be drawn that a trial judge's failure to deal in a significantly delayed judgment with particular matters on which the appellant relied in contradiction of the findings made in that judgment resulted from those matters being overlooked by the judge - either because of the time which has passed or because of the pressure on the judge in the end to complete the judgment. In Boodhoo v Attorney General of Trinidad and Tobago[10], the Privy Council acknowledged that the delay in giving the decision may adversely affect its quality to such an extent that it cannot be allowed to stand. That is what must be shown in order to demonstrate error resulting from delay which warrants either a reversal or a new trial."

"(6) If, after such delay, the trial judge has not given specific and satisfactory reasons in relation to accepting or rejecting evidence which is of importance in the appeal, and where there does not exist any indication in the transcript or the evidence which clearly explains the judge's finding, the appellate court is obliged to give careful scrutiny and consideration to those findings. Where there has been significant delay, there can be no assumptions that statements of a general assertive character made by the judge are based on a sufficient consideration of the evidence, or that evidence relevant to a particular finding not considered in the judgment has not been overlooked by the judge in making that finding where that evidence, if accepted, could have supported a different finding."

28 It is not contended in the present case that delay alone amounted to misconduct. What is relied upon is delay coupled with an alleged failure to properly respond to submissions made on behalf of the plaintiff.

The Circumstances of Delay

29 The arbitration agreement provided:

"Unless the parties otherwise agree, the award of the arbitrator (and all matters save as to the costs) shall be delivered within 21 days of the conclusion of the one day hearing under paragraph 5.1(j) above."

30 The one day hearing was the hearing of oral submissions with respect to the parties' final submissions in writing. This hearing took place on 8 September 2004.

31 As I have already indicated, the progress of the arbitration from January 2004 passed through a series of preliminary conferences. These conferences co-ordinated the exchange of points of claim, points of defence and counterclaim, and points of reply and defence to counterclaim. They also resulted in an expert's conference on 25, 26 and 27 May 2004 which was conducted by the Arbitrator and resulted in a joint report of experts signed by each expert and dated 27 May 2004. In June 2004 an agreed limited duration hearing took place over a period of nine days. On 26 July 2004 the parties forwarded a letter to the Arbitrator enclosing a "statement of the issues for determination". On 16 August 2004 closing written submissions were filed and exchanged by the parties. On 31 August 2004 closing written submissions in reply were filed and exchanged by the parties. On 8 September 2004 a one day hearing for the purpose of closing oral submissions took place.

32 During the course of this final hearing discussions occurred in which the Arbitrator asked the parties' representatives to obtain instructions as to whether they would agree to extend the date for the delivery of the award. The Arbitrator stated that another commitment would delay him and it was possible he might need to finish the award in January 2005. Subsequently, counsel for 620 stated:

"Our position is we are keen Mr Arbitrator for you to have the time that you think is necessary. I am aware of the discussions you have had and if circumstances changed and it was going to be longer, would it be appropriate to let us know; that was all."

Counsel for Abigroup agreed with this statement.

33 Thereafter the Arbitrator advised the parties of further delay in his consideration of the matter on 31 January, 21 March, 6 May, 15 June, 1 August and 30 September A number of these communications refer to the difficulties he was experiencing with the task required of him. The award was ultimately published on 4 November 2005.

34 Abigroup seeks to characterise the position adopted by counsel for the plaintiff at the final hearing before the Arbitrator as giving rise to an open ended agreement. I do not accept this was so, but it seems to me that thereafter the parties acquiesced in the continuing delay. No notice was given that 620 required compliance with the 21 day period stipulated in the arbitration agreement. No demurrer was made to the Arbitrator's requirements for more time.

35 Further, I am satisfied from the very extensive material lodged in this proceeding that the task confronting the Arbitrator was, in truth, a technically difficult and complex one. The production of his 175 page award was no simple task.

36 In these circumstances the delay which occurred is relevant to the assessment of the Arbitrator's reasons, but I am not persuaded that it can be characterised as "inordinate and inexcusable".

37 The plaintiff put its case relating to failure to deal with submissions worthy of serious consideration on two bases. The first relates to the alleged failure to deal with submissions regarding the use of the Go-Mode Program as the baseline program for the assessment of delays. The second relates to the alleged failure to deal with submissions relating to Abigroup's extension of time claims that there was no or no adequate proof of actual delay.

Go-Mode

38 Abigroup made 15 extension of time claims. Issue 2 stated for determination by the Arbitrator was variously put by the parties as follows:

2. How many of the 87.7 days and 169.1 days extensions of time for Practical Completion claimed in respect of:

(a) any new Separable Portions within the original SP1 and SP2 respectively; or

(b) the original SP1 and SP2,

on account of the extension of time claims set out in Schedule 3 of Abigroup's Further Amended Points of Claim should be granted.

2. With respect to each of the Separable Portions found by the Arbitrator to have been agreed or determined under the General Conditions of Contract, is Abigroup entitled to any, and if so what, extensions of time for Practical completion on account of the alleged delays listed in Schedule 2 to the Further Amended Points of Claim.

39 Clause 35.5 of the contract provided as follows:

"35.5 Extension of Time for Practical Completion

When the Contractor becomes aware that anything, including an act or omission of the Principal, the Superintendent, the Principal's Representative or the Principal's employees, consultants, other contractors or agents, may delay the work under the Contract, the Contractor shall promptly notify the Superintendent in writing with details of the possible delay and the cause.

When it becomes evident to the Principal that anything which the Principal is obliged to do or provide under the Contract may be delayed, the Principal shall promptly give notice to the Superintendent who shall promptly notify, the Contractor in writing, of the extent of the likely delay.

If the Contractor is being delayed or will be delayed in reaching Practical Completion by a cause described in the next paragraphs and within 7 days after the delay occurs or the Contractor becomes aware of the delay and, the Contractor gives the Superintendent a written claim for an extension of time for Practical Completion setting out the facts on which the claim is based and demonstrating the extension to the critical path or paths as set out in the Contractor's Program provided under clause 33.2, the Contractor shall be entitled to an extension of time for Practical Completion to the extent approved by the Superintendent (or any tribunal or court reviewing the decision of the Superintendent).

The causes are ―

(a) strikes, demarcations or industrial disputes which affect the Site and more than 50% of major building sites or is part of a rolling industrial campaign in the greater Metropolitan Melbourne area not caused by the Contractor or its Subcontractors;

occurring on or before the Date for Practical Completion and which are beyond the reasonable control of the Contractor; and

(b) any of the following other causes whether occurring before, on or after the Date for Practical Completion -

― the Principal;

― the Superintendent or the Principal's Representative;

― an employee, consultant, other contractor or agent of the Principal, the Principal's Representative or Superintendent;

but, for the avoidance of doubt, this cause of delay does not include delay or disruption as a result of an act of the Principal, the Superintendent or the Principal's Representative authorised by the Contract made in response to a default error or omission of the Contractor;

(ii) not used;

(iii) a Latent Condition;

(iv) a variation;

(v) a change in Legislative Requirements;

(vi) a direction by a municipal, public or statutory authority but not where the direction arose from the failure of the Contractor to comply with a Legislative Requirement;

(vii) delay by a municipal, public or statutory authority not caused by the Contractor;

(viii) not used;

(ix) a breach of the Contract by the Principal;

(x) a suspension under clause 34.5 (other than a suspension caused by the Contractor); and

(xi) Court orders restraining the commencement or continuation of the work under the Contract or the Contractor performing its obligations under the Contract other than orders relating solely to protection works for which the Contractor is responsible under the Contract or Court Orders for which the Contractor is responsible or liable under the Contract.

Where more than one event causes concurrent delays and the cause of at least one of those events, but not all of them, is not a cause of delay listed in Clause 35.5(a) or (b), then to the extent that the delays are concurrent, the Contractor shall not be entitled to an extension of time for Practical Completion.

Notwithstanding the preceding paragraph the Contractor shall be entitled to an extension of time if the concurrent delay occurs after the Date for Practical Completion and the cause of the delay is one or more of the events listed in Clauses 35.5(b)(i), (iv), (viii) and (ix).

In determining whether the Contractor is or will be delayed in reaching Practical Completion regard shall not be had to ―

• whether the Contractor can reach Practical Completion by the Date for Practical Completion without an extension of time; or

• whether the Contractor can, by committing extra resources or incurring extra expenditure, make up the time lost.

With any claim for an extension of time for Practical Completion, or as soon as practicable thereafter, the Contractor shall give the Superintendent written notice of the period of extension claimed.

If the Contractor is entitled to an extension of time for Practical Completion the Superintendent shall, within 7 days of receipt of the notice of the number of days extension claimed, either request further reasonable particulars, refuse an extension of time if it is not reasonable that any extension of time be granted or, grant a reasonable extension of time. If within the 7 days, the Superintendent does not grant the full extension of time claimed, the Superintendent shall before the expiration of the 7 days give the Contractor notice in writing of the reason. If the Superintendent requests further reasonable particulars, the Contractor must provide all the reasonable particulars requested within 7 days of the Superintendent's request and this paragraph shall apply again as if receipt of the particulars was receipt of the notice of the number of days extension claimed except that the Superintendent may not then again request further particulars.

In determining a reasonable extension of time for an event causing delay, the Superintendent shall have regard to whether the Contractor has taken all reasonable steps to preclude the occurrence of the cause and minimise the consequences of the delay.

Notwithstanding that the Contractor is not entitled to or has not claimed an extension of time, the Superintendent may at any time and from time to time before the issue of the Final Certificate by notice in writing to the Contractor extend the time for Practical Completion for any reason.

A delay by the Principal or the failure of the Superintendent to grant a reasonable extension of time or to grant an extension of time within 7 days, shall not cause the Date for Practical Completion to be set at large but nothing in this paragraph shall prejudice any right of the Contractor to damages."

40 In this Court 620 submitted as the preliminary to its contentions that significant submissions were not responded to by the Arbitrator:

"[52] One of the contractual requirements for claiming and obtaining an extension of time was for the defendant to give the Superintendent a written claim for an extension of time for practical completion setting up the facts on which the claim was based and demonstrating the extension to the critical path or paths as set out in the contractor's program provided under clause 33.2 of the contract.

[53] Clause 33.2 of the contract sets out the requirements regarding the contractor's program including:

(1) the information it was to contain, which included identifying the project's critical paths;

(2) that it was to be provided in hard and electronic form within eight weeks of the date of signing the contract;

(3) that the defendant was not to depart, without reasonable cause, from the contractor's program."

41 The same submission was the starting point and foundation of the submissions made on behalf of 620 to the Arbitrator.

42 On the other hand, Abigroup submitted to the Arbitrator that it was entitled to claim extensions of time pursuant to the penultimate paragraph of clause 35.5 which provides:

"Notwithstanding that the contractor is not entitled or has not claimed an extension of time, the Superintendent may at any time and from time to time before the issue of the final certificate by notice in writing to the contractor extend the time for practical completion for any reason."

(a) Notwithstanding the requirements of clause 35.5 the Superintendent has a discretion under clause 35.5 (penultimate paragraph) to extend the time for practical completion for any reason.

(b) The discretion under clause 35.5 (penultimate paragraph) requires that the Superintendent act fairly and reasonably but is otherwise unfettered and is in no way dependent on Abigroup demonstrating a delay to the critical path set out in the contractor's program provided for under clause 33.2.

(c) The Superintendent exercised the discretion on 11 March 2003, however the Superintendent failed, refused or neglected to grant reasonable extensions of time for practical completion.

(d) Accordingly, the extensions of time claimed by Abigroup should have been granted and Abigroup was entitled to an award that the "date for practical completion" be extended by the Arbitrator to take into account the delays claimed by Abigroup.

44 It follows that in the first instance the Arbitrator was required to construe the contract in order to assess the relevance of the submissions put to him on behalf of Abigroup.

45 In the event he took the view, as was clearly open to him, that the contractual premise articulated in the introductory submissions made by the 620 relating to clause 33.2 of the contract quoted above was incorrect. The Arbitrator concluded it was not necessary for Abigroup to prove that it had complied with the requirements of clause 33.2 in respect of a contractor's program in order for an EOT to be granted pursuant to the penultimate paragraph of clause 35.5.

46 Further, the Arbitrator found for 620 that as a matter of fact no such contractor's program was proved by Abigroup.

"[192] The principal mounted an attack on Abigroup's reliance on the 15 August 2000 issue of the Go-Mode Program as the baseline program for the assessment of delay. This attack was really overtaken by the experts' contribution in their joint report and the evidence they gave during the conclave.

[193] However, it must be said that neither the construction A151100 program nor the 15 August 2000 issue of the Go-Mode Program fully satisfy the contractual requirements of the contractor's program under clause 33.2, and, therefore, their use pursuant to clause 35.5 to assess the effect of delays on the critical path is not appropriate."

47 It follows that if the construction of the contract adopted by the Arbitrator was open to him then the failure by him to deal with specific submissions made on behalf of the plaintiff could only be said to evidence misconduct if such submissions necessarily bore relevantly upon the framework of reasoning he adopted.

48 The Arbitrator's reasons in this regard sit within an award which read as a whole is logical and relatively detailed. More particularly the analysis of this issue is also logical and relatively detailed.

49 At [169] - [171] the Arbitrator recorded:

"In the alternative, the principal submits that, if Peninsula Balmain is to be applied the discretion ought not be exercised in favour of Abigroup for the following reasons:

(a) The parties agreed upon a strict mandatory regime for the making of EOT claims. The parties reduced the 28 day period under the standard form AS4300-1995 contract to a period of 7 days for submitting EOT claims to the Superintendent.

(b) There is an evidential onus upon Abigroup to demonstrate why the mandatory provisions concerning the making of EOT claims should not be applied.

(c) Abigroup has not provided any reasons or explanations as to why it failed to comply with such provisions.

(d) In relation to each of the EOT claims (the subject of this submission), Abigroup acknowledges that it was aware of the delay a very substantial period of time prior to an EOT claim being submitted. Periods ranging between 14 and 22 months elapsed between the date of Abigroup becoming aware of the alleged delay and the date upon which it made the relevant EOT claim.

(e) The Superintendent, the Principal's Representative and the Principal itself were all denied the opportunity of investigating these claims at a time proximate to the occurrence of the alleged delays. Had they been advised of the claims at the time agreed upon by the parties under the Contract, they could have fully investigated the claims, both in relation to the relevant facts and circumstances surrounding them and programming issues, including criticality. Had they been advised within the agreed contractual period, they may have been able to put in place measures to minimise or avoid the delay or to institute measures which may have resulted in re-capturing time lost.

(f) Instead, the Principal was bombarded with substantial and potentially very costly delay claims, which were being raised for the first time a long time after the alleged events occurred. In a somewhat arrogant manner, Abigroup has sought to pursue such claims without even an explanation as to why it did not submit the EOT claims for periods between 14 and 22 months after it became aware of the alleged delays. It has proceeded as if the residual discretion vested in the Superintendent is a ready alternative in the event of its conscious and flagrant breach of its contractual obligation to notify the Superintendent of its EOT claim in accordance with the third paragraph of Cl.35.5.

(g) Worse still, Abigroup adduced almost no factual evidence of a contemporaneous nature concerning these delay claims. Mr Kiskiris and Mr Stavrou were not called as witnesses. Similarly, Mr Porter was not called. Abigroup's contractors and/or sub-contractors were not called. Some very brief and very general evidence regarding some of the subject EOT claims was adduced from Messrs Dollas, Soso, Picking, Sleeman and Longmire. However, their evidence was so generalised as to be of little or no probative value in relation to these EOT claims. Further, it was apparent during cross-examination of these witnesses that they had little or no actual knowledge of the matters relating to these delay claims. Further, little or no contemporaneous documentation was produced evidencing delay or claimed delay in respect of these EOT claims.

[I understand that Mr Steve Stavrou was the initial Site Manager and his services were terminated by Abigroup in about early August 2002. Mr Nick Porter was Abigroup's programmer.]

170. Based upon the above matters, the Principal further submits that the discretion granted to the Superintendent under the penultimate paragraph of Cl.35.5 should not be exercised in favour of Abigroup with respect to EOT claims 10, 41, 42, 44, 64 and 66 as the Superintendent was unable to determine that a critical delay had occurred. Accordingly, it contends that these claims are barred by reason of non-compliance with the third paragraph of Cl.35.5.

171. I have found that Peninsula Balmain should be followed in this arbitration, and, in my view, all of the above submissions by the Principal are not directly to point. In considering the Superintendent's discretion under the penultimate paragraph of cl 35.5, the Court of Appeal said:

'... this power is one capable of being exercised in the interests both of the owner and the builder, and in my opinion, the superintendent is obliged to act honestly and impartially in deciding whether to exercise this power'."

50 In my view this conclusion was open to the Arbitrator. For reasons I shall elaborate elsewhere it was correct as to the law and it was open as a result of logic to take the view he did as to his discretion.

51 The Arbitrator went on to acknowledge, however, that the failure to make a timely claim may give rise to difficulties in determining whether an extension claimed is justified.

52 At [173] to [175] the Arbitrator responded directly to the question of whether delay in making claims caused prejudice to the position of the principal and the Superintendent.

"173. It is clear that Abigroup has not provided reasons or explanation as to why most of its claims in issue were out of time. This is in circumstances where the particulars to its pleadings identify that it was aware of the delays well ahead of the claims being lodged.

174. It is also possible that the lateness of some of Abigroup's EOT claims may have denied the Principal the opportunity to avoid or reduce the delay in circumstances where a claim is justified. If this was the case, it would be unfair to the Principal for the Superintendent to exercise the discretion in favour of Abigroup. However, there is no evidence of probative value to support findings that this was the case here.

175. The evidence does support the conclusion that the Superintendent was probably unable to assess EOT's 10, 41 and 66 as a consequence of Abigroup's failure to properly comply with its programming obligations. It seems to me that EOT's 42, 44 and 64 were intimately involved with initial site activities and, even with the limited contemporaneous programming information available, could probably be assessed by the Superintendent."

In my view these conclusions were open to the Arbitrator and cannot be said to be indicative of misconduct.

53 The Arbitrator then turned to the basis on which he might exercise the discretion under clause 35.5.

54 He commenced by identifying the methodology appropriate to assessment of the merits of any entitlement to an extension of time.

"176. Both parties retained engineers to provide the Tribunal with expert programming evidence. Abigroup engaged Mr G. Lynas of Tracey Brunstrom & Hammond Pty Limited ("TBH") and the Principal engaged Mr D. Wagstaff of Johnstaff Pty Limited. Both Experts are qualified and experienced in this specialised field and conducted themselves in a professional manner.

177. The Experts met in conference prior to the hearing and produced a helpful joint report which significantly reduced the number of programming matters in issue.

178. Each Expert produced an as-built programme, and, after reviewing site records during the conference, the Experts were able to resolve a number of date differences between their initial as-built programmes. An important outcome of this process was an agreed as-built programme that records how the project was actually built. This programme includes the effect of all compensable and non-compensable delay events. It should be appreciated that the as-built programme is a summary-type programme which does not specifically identify periods when work is not being carried out on a particular activity or identify delay events.

179. The Experts agreed that the following programming methodology is appropriate to assess any entitlement of Abigroup to an EOT.

'1. An acceptable programme to completion is required.

2. The programme should be updated to account for all progress achieved reasonably close to the date of the delay.

3. Using the above progress status programme, assess the critical path at the time of the delay.

4. Assess the factual records of the delay period to identify the following points:

(a) Identify the start and finish dates of the delay

(b) Identify the programme tasks affected by the delay

(c) Identify lost time within the delay period for any other causes (eg. Industrial, weather, contractor delays)

(d) Identify the actual duration of the delay excluding lost time as above.

5. Identify if the delay period affected the critical path.

6. The delay to completion is the extent to which the delay affected the critical path.'

Absent consideration of other contractual provisions, including the Superintendent's reserve powers, I accept and agree with this methodology."

He then went on to assess the evidence as to the adequacy of the programs adduced in evidence before him and the process of refinement of such programs by way of joint report and expert conclave which produced a series of revisions of the program put forward on behalf of Abigroup to describe the sequence of works. The evidence of Mr Lynas who was called on behalf of Abigroup was that he had adopted the above methodology and that utilising the available project documentation and appropriate critical delay analysis, he was able to demonstrate the effect of delay events on a critical path.

55 Ultimately the Arbitrator concluded:

"194. The 15 August 2000 issue of the Go Mode Programme does broadly portray the proposed construction sequence and intent. The development of this programme by Mr Lynas into Go Mode C and then as finally revised to Go Mode D:

(a) sits comfortably with the as-built programme agreed by the Experts;

(b) whilst not the Contractor's Program under cl 33.2, is a programme (developed from an Abigroup construction programme) which is capable of being used to assess the effect of identified delays; and

(c) generally satisfies the guidelines for retrospective delay analysis published by the UK Society of Construction Law [2002].

In my opinion, therefore, the Go Mode D Programme does provide a reasonable basis for assessing the effect of the claimed delays using the programming methodology agreed by the Experts, which is earlier discussed in Paragraph 179."

I am not persuaded that either this process of reasoning or these conclusions demonstrate misconduct.

56 First, it seems to me that the award does demonstrate the Arbitrator was cognisant of the submissions made to him with respect to deficiencies in the Go-Mode Program and indeed specifically accepted key criticisms. The core submissions made were:

(a) that Abigroup had not proved the use of a Contractor's program in accordance with the contract; and

(b) that Abigroup had not proved reliance upon the Go-Mode Program during the construction of the project.

The Arbitrator accepted the first core submission and acknowledged and responded to the second.

57 Secondly, insofar as the Arbitrator accepted conclusions of ultimate fact contended for by 620, it was not necessary to further address all the submissions made by 620 in support of those conclusions.

58 Thirdly, the Arbitrator did address those submissions directly relevant to his chain of reasoning.

59 Fourthly, insofar as it was submitted that it was not open to the Arbitrator to conclude, "the 15 August 2000 issue of the Go-Mode Program does broadly portray the proposed construction sequence and intent" such finding was open having regard to the history of programs adopted by Abigroup and the actual history of construction.

60 Fifthly, the Arbitrator did address the substance of the plaintiff's closing written submissions which included:

"(8) 620 Collins Street does not dispute that it is proper and valued (from a programming analysis viewpoint) that, where necessary, correction of inconsistencies and illogicalities and the addition of logic be carried out to an as planned program so as to make it satisfactory for the purpose of being used as a baseline program for the assessment of critical delays.

(9) However, one must not lose sight of the fact that the as planned program has no validity in terms of it being used as a baseline program for the assessment of critical delays unless it accurately represents the Contractor's intentions at the outset of the project.

(10) Where (as in the present case) the as planned program, in its original form, is substantially lacking in detailed construction logic and has a number of errors, omissions and deficiencies, it is all the more important that the addition of detailed logic and the correction of errors, omissions and deficiencies be validated as accurately reflecting the Contractor's intended manner, sequence and timing for the carrying out of the works."

61 In summary the Arbitrator responded to the substance of 620's case as follows:

(1) The submission that Abigroup's purported contractor's program A151000.MPP did not comply with clause 33.2 of the contract was in fact accepted. Likewise, the Arbitrator did not accept this program as a sufficient baseline program in itself.

(2) The Arbitrator did not proceed on the basis that the August Go-Mode Program represented the defendant's detailed intended manner, sequence and timing for the carrying out of the works, or that it was used by the project team to assess delays. Insofar as he made findings as to the broad portrayal of the proposed construction sequence and intent such findings were open to him on the evidence.

(3) The Arbitrator's finding at [184] did address the evidence as to the provision of the August Go-Mode Program.

"Prior to the works commencing on site in September 2000, Abigroup produced a programme which can be referred to as the Go-Mode Programme. The heading at the top of the programme was 'Contract Construction Programme'. The first issue of this programme was dated 14 June 2000 and was probably given to Mr Hart. The program was subject to some revision and re-issued on 24 July 2000 and again on 15 August 2000. The first two issues of this programme were prepared by Mr Longmire with some input from Messrs Porter and Kiskiris. It seems likely that the 15 August 2000 issue included some revision made by Mr Kiskiris. Mr Longmire gave evidence that this programme '... was the basis upon which the dates for practical completion were agreed by Abigroup'."

(4) The findings made as to the probabilities were open on the whole of the evidence, even in the absence of evidence of Mr Kiskiris, a matter which was the subject of criticism elsewhere by the Arbitrator. If they were wrong they did not demonstrate misconduct.

(5) The asserted absence of evidence that the August Go-Mode was provided to the Superintendent or that the defendant furnished the program in accordance with clause 33.2 of the contract was considered by the Arbitrator insofar as it was relevant to his reasoning. (See [173]-[175]).

(6) Evidence as to confusion and uncertainty on the part of Abigroup in October 2002 as to the program which should form the basis of EOT claims was not of significance to the Arbitrator's reasoning.

(7) The proposition emphasised and repeated by 620 that the evidence did not show that Abigroup's expert was entitled to assume that the project team used the Go-Mode Program does not invalidate the Arbitrator's path of reasoning.

(8) The Arbitrator was critically concerned to assess whether the program evidence was sufficient for the purposes of the methodology set out at [54] above.

(9) The Arbitrator directly addressed the expert evidence called on behalf of 620 in [187]-[194] of the award. He expressly acknowledged the criticisms made by the expert witness called on behalf of 620 with respect to the Go-Mode Program. He recorded the preparation by that witness of a detailed critical path program said to be similar in content and sequencing to the construction A151100 program initially utilised by Abigroup in November 2000 and the later revisions of that program. He recorded the revision of the Go-Mode Program which resulted from the mutual criticism by the experts of the programs put forward by them. He recorded the experts' conference and conclave process which was undertaken. He concluded:

"[191] It seems to me that, during the conclave process, Mr Wagstaff's residual concerns with the Go-Mode C Program were satisfactorily addressed by Mr Lynas. However, the effect of Mr Wagstaff's evidence was that he and Mr Lynas ought prepare a joint programme and, when completed, then such a programme could be utilised to address each of Abigroup's delay claims."

62 This conclusion was the subject of no direct attack before me. If it be accepted that Mr Wagstaff's evidence could be so characterised then it was proper for the Arbitrator to proceed on the basis that the evidence available did enable the preparation of a satisfactory program for the purposes of the assessment of extension of time claims.

63 In summary the plaintiff contended that Abigroup must prove a prospective construction program as contemplated by the contract, as a precondition to valid EOT claims. The Arbitrator rejected the contractual basis of this argument. He further addressed the evidence expressly on the basis that its adequacy in justifying a retrospective delay analysis was ultimately critical issue.

64 I am not satisfied that his reasoning demonstrates misconduct. It does not, in my view, demonstrate a failure to have regard to the evidence called on behalf of the 620 or a failure to have regard to the submissions made on its behalf. Likewise, the conclusions stated at [194] of the award flow logically from the reasoning adopted and I am not satisfied that they were not open to the Arbitrator.

65 The relevant principles concerning an Arbitrator's obligation to give reasons were stated by Byrne J in Peter Schwarz (Overseas) Pty Ltd v Morton.[12] In that case his Honour considered an application to set aside the award of an arbitrator for misconduct on the basis in part that the arbitrators did not deal with certain contentions or failed to set out facts which they found or the reasons which they employed to arrive at their award. Byrne J said:[13]

"[31] It is the duty of an Arbitrator to consider and deal with all matters the subject of the reference.[14] Commonly, the arbitrating parties will present contentions of fact and law in support of their own case in opposition to that of the opponent. Often there will be multiple contentions put forward, sometimes in the alternative to those which have preceded them. The Arbitrators must have regard to them all. When it comes to preparing the award pursuant to s.29(1), and to 'a statement of reasons for making the award', the obligation is not identical. The statutory requirement that the reasons be 'reasons for making the award', means that the Arbitrators are not required to provide reasons which did not lead to the determination of the disputes referred to arbitration. Accordingly, it is not necessary for them to deal with an alternative basis of claim or defence when the primary claim or defence has been accepted.

[32] The requirement for reasons in s.29 means that the Arbitrators must set out the facts which they have found and the legal principles which they have relied upon as the foundation for the award and that this should be in terms sufficient for the parties to understand why they have won and lost and for them to decide whether to make and for the Court to determine an application for leave to appeal or enforcement.[15]

[33] I have mentioned the purposes which the statement of reasons is to serve. The statement of reasons, at a minimum, must be sufficient to achieve these purposes. I say 'at a minimum', because I am concerned with the point at which the Court will take an active interest in the insufficiency of reasons; the prudent Arbitrator will not be tempted to stray close to this cliff edge. The question may arise whether a particular contention must be dealt with in the statement of reasons. Judges, mindful of their own judgment-writing experience, have been careful not to impose upon Arbitrators a burden greater than their own. And so, there is no need to deal with contentions which are frivolous, irrelevant or even peripheral to the matters in issue.

[34] This has led the Court to stipulate that Arbitrators must deal with every "submission worthy of serious consideration"[16]. In Fletcher Construction Australia Ltd v Lines MacFarlane and Marshall Pty Ltd[17] the Court of Appeal in this State said that a reasoned judgment of a court must 'deal with the central contentions advanced by the parties'. However the test is expressed, the minimum requirement is not that the Arbitrators deal with every contention. Precisely where the line is to be drawn in a given case will depend upon the circumstances, including the relevance of the contention to the Arbitrators' conclusions. The decision to deal in the reasons with a particular rejected submission may also depend upon an assessment of its weight, particularly in a case where the arbitrating parties are not legally represented. Putting it bluntly, some points are so obviously bad that no good purpose is served by dealing with them in any detail. I need hardly add that the prudent Arbitrator will prefer to err on the side of comprehensiveness in order that the award should be of benefit to the parties."

66 In Fletcher Construction Australia Ltd v Lines MacFarlane and Marshall Pty Ltd[18] the Court of Appeal (Charles, Buchanan and Chernov JJA) stated of a trial judge's obligation to give reasons:

"The duty to deal with facts or evidence is not absolute. The evidence must be significant in the sense that, unless disposed of, it stands in the way of the Court's conclusions. The Court need not deal in terms with evidence when its importance falls away because of the manner in which the Court disposes of the case. Nevertheless, if evidence is significant, it is not to be peremptorily shunted aside or ignored."

67 Applying the above principles in the present case I am not satisfied that the response of the Arbitrator to the submissions made on behalf of 620 was materially inadequate or demonstrated misconduct.

68 It follows that ground 1 is not made out. Although the delivery of the Arbitrator's award was attended by delay, no failure to deal properly in the award with 620's case has been demonstrated.

The Second Ground of Alleged Misconduct - Delay Coupled with Alleged Failure to Deal with Submissions Concerning Proof of Actual Delay

69 620 submitted to the Arbitrator that a number of EOT's should fail because of the lack of any or any adequate evidence "which supported the programming analysis by Mr Lynas".[19]

70 620 attacked the lack of direct evidence from persons involved in the management of the project during the period of the delay claims between October 2000 and February 2002.

71 Further, 620 submitted that in terms of contemporaneous documentation (apart from EOT 27) the only documentation Mr Lynas had available to him comprised site daily reports and various programs. With respect to the programs it was submitted that there was no evidence that Mr Lynas received any instructions from the person or persons who prepared or were responsible for the preparation of such programs and no evidence as to whether the programs were used.[20]

72 It was further submitted the site daily reports did not contain contemporaneous information evidencing the fact of delay.

73 In turn, the plaintiffs submit in this Court that the Arbitrator failed to deal with the following key submissions:

"1. That Mr Lynas relied upon programs produced during the course of the works but that there was no evidence as to whether the project team intended to use such programs and/or did in fact implement such programs;

2. That there was no contemporaneous evidence of actual delay, viz. no evidence in the nature of site diary entries or other diary entries, letters, memoranda, notices of likely delay or extension of time claims demonstrating that at the time of the alleged delay the works were actually delayed or that the defendant was claiming that the works were delayed;

3. That there was no evidence adduced from the defendant's site personnel at the time, that the works were actually delayed, viz. Messrs Kiskiris, Stavrou and Porter were not called, nor any other site staff, contractors, sub-contractors or suppliers to say that the works were actually delayed;[21]

4. That it was necessary for the defendant to adduce evidence of actual delay in order to establish a claim for an extension of time under the contract."[22]

74 Abigroup's first answer to these submissions, is that it was not necessary for the Arbitrator in exercising the reserve discretion provided for in cl.35, to find that the works were done in accordance with a contractor's program, proved to be implemented in compliance with the contract. As my analysis of ground 1 indicates, I am of the view the Arbitrator was not guilty of misconduct in accepting this submission. The consequence is that he rejected the framework of reasoning put forward by 620, and that it cannot be said that a failure to deal with subsidiary submissions made within that framework necessarily constituted misconduct.

75 The question is rather whether, accepting the framework of reasoning adopted by the Arbitrator, there was sufficient evidence to justify his conclusions, and whether his reasons adequately address 620's criticism of that evidence?

76 Abigroup submits that there was sufficient evidence to justify the Arbitrator's conclusions and that he substantially addressed the plaintiffs' submissions. Abigroup first points to the ambit of the ultimate dispute as to EOT's. Of the 16 extension of time claims in dispute in the arbitration, only five remain the focus of 620's submissions.

77 Abigroup submits that in relation to these EOT's, the Arbitrator did rely upon and address contemporaneous documents and site records which were exhibited to witness statements relied on by both Abigroup and 620.

78 In addition to such documentation, Abigroup submits the Arbitrator had before him evidence from the Superintendent, who was on site at the relevant time. He assessed and determined EOT's 9/65, 41, 42 and 44. His assessments of these EOTs were similar to those ultimately made by the Arbitrator. Conversely, the Superintendent rejected EOT 10 on the basis of the information provided and the adequacy of this information was further addressed before the Arbitrator.

79 In his award the Arbitrator sets out his assessment of the EOT claims and the basis on which he determined them. EOT 42 related to a claim for delay resulting from the enlargement of the basement floor area. The Arbitrator's approach is illustrated by the following matters.

• The Arbitrator was not uncritical of Abigroup:

"230. If Abigroup thought it had an entitlement to both cost and time arising from variations 9 and 12, one would have expected the EOT claims to have been made in April 2001 when it claimed the cost of both variations. Surprisingly, the two EOT claims were submitted about 18 months later in September 2002."

• The Arbitrator set out and evaluated the evidence of the individual witnesses bearing on the claim.

• The Arbitrator dealt specifically with 620's submission as to the programming evidence:

"242. Based on Mr Wagstaff's initial evidence in his report and having regard to the construction A151100 programme, the principal submits that the basement work was generally completed ahead of schedule and therefore had no impact on the project's critical path. Firstly, little weight ought to be given to this programme in the light of what was earlier said in paragraphs 181 and 182. Secondly, if the duration of the basement works was extended as a result of the variation, then the extension represents a delay to Abigroup in reaching Practical Completion as the parties agreed this work was on the critical path."

• The Arbitrator came to a series of conclusions which were open to him on the evidence.

(a) The large basement was a design change identified prior to signing the Consultancy Agreement;

(b) The parties agreed to treat the design change as a variation;

(c) The drawings listed in the Drawing Schedule, which formed part of the Contract and which in turn was Schedule 2 of the Consultancy Agreement, were those that incorporated the design change.

(d) The basement work was carried out in late 2000.

(e) Abigroup claimed for the variation on 9 April 2001 and this was approved by the Superintendent on 16 August 2001.

(f) Abigroup claimed the EOT on 5 September 2002 and a 12 day EOT was approved by the Superintendent on 11 March 2003.

(g) I accept Mr Longmire's evidence that both the pricing and time implications of the design change were to be dealt with as a variation.

(h) Abigroup's EOT claim was not submitted within the timing provisions of the third paragraph of cl.35.5.

(i) It is reasonable to conclude that the Superintendent assessed the claim exercising his reserve discretion under the penultimate paragraph of cl.35.5."

80 The Arbitrator in turn exercised the reserve discretion and allowed an 11 working day EOT as assessed by Mr Lynas.

81 I do not accept that this reasoning evidences misconduct. In my view it deals with the facts in issue in a logical and relatively detailed way, taking account where relevant of the submissions of the parties.

82 EOT 41 related to the construction of an additional suspended apartment slab along the Collins Street side of the building. As the Arbitrator records, the claim arose out of a variation submitted on 5 April 2000 and approved on 16 August 2001. The EOT claim was not submitted until 5 September 2002.

83 Having formed the view that the works did not form part of the contract scope, the Arbitrator identified the next issue as whether the works resulted in critical delay. In so doing he identified the underlying issue which 620 submits was the critical issue.

84 The Arbitrator considered the evidence of Mr Lynas for Abigroup and Mr Wagstaff for 620. He ultimately accepted the assessment of Mr Lynas having regard to the evidence of the Superintendent. Once again I do not accept this process of reasoning evidences misconduct.

85 EOT 44 comprised a 5.1 day EOT relating to the removal of contaminated soil from the basement excavation. As the Arbitrator records, a variation was approved on 8 March 2001, following a variation claim made in November 2000. The EOT claim was not, however, made until 2002.

86 The Arbitrator recorded that it was common ground that part of the excavation works were on the critical path.

87 The Arbitrator sets out the history of the EOT claim and a summary of the relevant evidence.

88 This included evidence of typical delay factors for the removal of contaminated soil of the type in issue, and the calculation by Mr Lynas of that portion of the excavation time attributable to contamination complications.

89 The Arbitrator accepted 620's submission that the Lynas calculations did not take account of a series of relevant factors.

90 He then had regard to the Superintendent's assessment of a two day EOT and ultimately allowed 3.8 working days.

91 In my view his process of reasoning does not disclose misconduct.

92 EOT 9/65 comprised a three day EOT relating to a failure by 620 to advise Abigroup of the outcome of purchasers' choices as to colour schemes and upgrades, by 28 March 2001.

93 The Superintendent assessed this EOT at 4 days on 11 March 2003 (and left this amount unchanged on review on 30 April 2003).

94 The Arbitrator summarised the evidence of Mr Isihos, Abigroup's site co-ordinator, from June 2001, as to subsequent advices concerning purchaser options and upgrades.

95 The Arbitrator recorded and accepted the evidence of Mr Rodgers for 620 as to intended programming.

96 He further recorded the evidence of Mr Isihos that partial advice of the purchasers' options and upgrades, occurring in the latter half of 2001, was not sufficient for Abigroup's purposes.

97 The process in issue led to variation of the contract sum by way of an adjustment of $251,963 for purchaser options/upgrades approved by the Superintendent in January 2002.

98 The Arbitrator identified a strong potential for delay in these circumstances and gave significant weight to the view of the Superintendent, whom he found to be an experienced building works administrator, who gave direct and truthful evidence.

99 The Arbitrator then set out the evidence of Mr Lynas as to the question of critical path.

100 At [290] the Arbitrator sets out a summary of detailed submissions on the facts made by 620. He then responds to each of them.

101 Part of the reasoning accepted by the Arbitrator turns on his acceptance of the proposition that it was reasonable for Mr Lynas to demonstrate criticality by his adjusted Go Mode program (a view based ultimately on the Arbitrator's perception of the evidence as a whole going to this issue).

102 The Arbitrator then allowed 3 days by way of EOT.

103 In my view there is no misconduct demonstrated by the Arbitrator's reasoning.

104 EOT 10 relates to the fit-out and finish of the five Soho Apartments, including the additional apartment provided for by the variation to which I have already referred.

105 Abigroup claims 5.2 working days as a consequence of variation 37. The Arbitrator set out the relevant chronology including the fact that the claim related to 21-28 February 2002 and was submitted on 5 September 2002, and the fact of further correspondence with the Superintendent concerning proof that the critical path of the project was affected.

106 The Arbitrator accepted the underlying logic of the claim:

"297. As a matter of general construction logic, one would accept that the work sequence for the fit-out and finishing of the Soho Apartments would flow from one Soho level to the next. For example, the tradesmen erecting the wall and ceiling framing would complete one apartment and then move to the next level. Further, the original contract scope involved only four apartments whereas the revised scope required five, which is at the nub of this claim. Therefore, it must follow that the total duration for the fit-out and finishes for the five apartments (on different levels) would be greater than for the original four apartments, assuming the same resources."

107 The Arbitrator accepted the evidence of Mr Lynas that the fitting of stud frames was critical to the Soho fit-out, leading to the question of whether the Soho fit-out itself was on the critical path for the project. The Arbitrator stated:

"300. As I have said before, criticality in a project sense cannot be assessed by reference to the Construction C 140102 program. In appendix 1 of his report in reply, Mr Lynas demonstrates that the Soho fit-out would be critical in relation to the practical completion of what the Superintendent referred to as SP1B, and I agree with his assessment. During the conclave, Mr Lynas said this work would not be critical in relation to SP2, with which I also agree."

108 The Arbitrator addressed the submission of 620 concerning delay in commissioning the variation work. He rejected the evidence of Abigroup's project manager Davies as not very persuasive.

109 The Arbitrator addressed Mr Wagstaff's evidence and preferred the view of Mr Lynas that the works would affect the critical path even if there was delay in their commencement.

110 The Arbitrator found as a matter of fact that the variation work did cause critical delay and awarded a 5.2 working day EOT.

111 I am not persuaded the Arbitrator's process of reasoning discloses misconduct.

The Superintendent's Awards

112 Abigroup further submits that the Arbitrator's findings in relation to EOT's 9/65, 41, 42 and 44 were substantially in accordance with the determination by the Superintendent on 11 March 2003. It further submits that because 620 has not challenged the Arbitrator's decision that the Superintendent was not entitled to withdraw this determination, the Arbitrator's findings as to the merits of each EOT claim have not caused 620 material prejudice.

113 I do not find it necessary to rule on this submission given the views I have expressed above, save to observe that the prior decisions of the Superintendent make it more difficult to regard the subsequent decisions of the Arbitrator as evidencing misconduct. The Arbitrator has in effect substantially upheld the primary decisions made by the Superintendent who had available to him direct observations of the manner of progress of the project.

Third Ground of Alleged Misconduct - Separable Portions

114 As stated in the introduction above, the contract originally provided for two separate portions of works, relating to distinct parts of the building.

115 Clause 35.4 of the contract provided:

"If a part of the Works has reached a stage equivalent to that of Practical Completion but another part of the Works has not reached such a stage and the parties shall use their best endeavours to agree upon the creation of Separable Portions, and failing agreement the Principal's Representative may determine that the respective parts shall be Separable Portions.

In using a Separable Portion that has reached Practical Completion, the Principal shall not hinder the Contractor in the performance of the work under the Contract."

116 Abigroup alleged before the Arbitrator that the parties agreed to the creation of new separable portions within the original SP1.

117 Save for an issue relating to level 27, it was also agreed between the parties that new separable portions were created in respect of the original SP2.

118 620 contended, however, that there had been no valid division of SP1.

119 By its further amended points of claim Abigroup pleaded:

"5. Parts of the works reached stages equivalent to that of Practical Completion but other parts of works had not reached the stage of Practical Completion and the parties agreed the creation of Separable Portions and/or the First Respondent's representative determined that the respective parts shall be Separable Portions.

5.1 Details of the separable portions are in schedule 1 herein ('the new separable portions').

5.2 The agreement and/or determination with respect to the new separable portions is partly in writing, partly oral, and partly to be implied ...

5.4 Insofar as it is oral it is constituted, inter alia, by conversations between Ron Lovitt, the Applicant's Building Manager and Roger Hart, the Principal's Representative. At various meetings in or about June 2002, Roger Hart stated to Ron Lovitt that the Applicant was directed to complete separable portions within separable portions 1 and 2 respectively in order for the Respondent to settle the apartments on a floor by floor basis.

5.5 Insofar as it is implied, it is constituted by the conduct of the parties including, inter alia, the use and occupation of apartments within separable portions 1 and 2 by the Principal and the subsequent settlement and sale on the dates referred to in schedule 1 herein and column 4 of appendix G of the Certificate of Practical Completion Report prepared by the Superintendent and provided to the Applicant on or about 14 March 2003."

120 In my view this is not as 620 contended before the Arbitrator and again before this Court, simply a plea of a prospective agreement to create new separable portions. To the contrary, the pleading expressly embraced the notion that the relevant agreement was in part constituted by the continuing conduct of the parties including the progressive delivery up to and use and occupation by 620 of sections of separable portions 1 and 2.

121 The Arbitrator's findings were that the following levels were handed over on the following dates:

Levels 7-11 ― 16 July 2002

Levels 12, 13 ― 24 July 2002

Levels 14-16 ― 29 July 2002

Retail ― 1 August 2002

Level 17 ― 21 August 2002

Level 18 ― 26 August 2002

Swimming pool and gym ― 6 September 2002

Soho Apartments ― 20 December 2002.

122 In closing submission Abigroup (as the plaintiffs now highlight) submitted to the Arbitrator in part:

"23. Therefore, the claimant contends that it was open to the parties to agree, and the parties did agree, that once a part of the works reached a stage equivalent to Practical Completion, a further separable portion would be created. The claimant contends that the creation of further separable portions was consummated when the works were handed over to the First Respondent once the works reached Practical Completion;"

"36. The claimant contends that the creation of new separable portions within the original SP1 and SP2 arises from the conduct of the parties in agreeing that the works would be handed over on a floor by floor basis and from the actual handing over of the works that had reached Practical Completion on that basis."

"44. In the premises, the claimant contends that the creation of new separable portions within the original SP1 arises from the parties agreeing that the works would be handed over on a floor by floor basis and from the actual handing over of the works that had reached Practical Completion on that basis."

123 In my view, neither the terms of the pleading relied upon by 620 nor the submissions constitute contentions that the agreement was entirely "prospective". To the contrary, the case put by Abigroup was that the relevant agreement was consummated when the relevant part of the works reached a stage equivalent to practical completion and was handed over. Abigroup's case was that the creation of new separable portions arose from the conduct of the parties in agreeing that the works would be handed over on a floor by floor basis and from the actual handing over of the works that had reached practical completion on a floor by floor basis.

124 The Arbitrator recognised the submissions of the parties. He set out their principal contentions as follows:

"93. Abigroup submits that the contract does not provide for the division of the original SP1 and SP2 into further separable portions or for the parties to reach an agreement to divide SP1 and SP2 into further separable portions. However, it says that clause 35.4 provides that a further separable portion can be created once a part of the works has reached a stage equivalent to Practical Completion. That is, part of the works must have reached a stage equivalent to Practical Completion before a further separable portion is created. Therefore, Abigroup contends that it was open to the parties to agree, and the parties did agree that, once a part of the Works reached a stage equivalent to Practical Completion, a further separable portion would be created. Further, Abigroup says that the creation of further separable portions was consummated when the Works were handed over to the Principal once the Works reached (a stage equivalent to) Practical Completion.

94. The Principal contends that the alleged agreement for the creation of new separable portions within SP1 is inconsistent. It submits that Abigroup says that the agreement to create new separable portions within SP1 was made under clause 35.4, and yet it was made prior to the relevant portion of the Works reaching a stage (equivalent to) Practical Completion. It therefore argues that the agreement was prospective in nature, which clause 35.4 does not permit."

125 The Arbitrator then ruled upon the submissions as follows:

"95. It is clear from the evidence that the discussions and documents between Messrs Hart and Lovett related to what would happen in the future. It seems to me that each agreement actually arose and was completed (or consummated as Abigroup puts it) when the relevant part of the Works reached a stage equivalent to Practical Completion and was handed over to the Principal.

96. In my view, the above circumstances are not unlike those which Allsop J described in Branir Pty Ltd v Owston Nominees (No. 2) Pty Ltd [(2001) [2001] FCA 1833; 117 FCR 424] at 525 where his Honour (with whom Drummond and Mansfield JJ agreed) referred to a contract arising 'from prior conduct and communication of the parties'. Later he went on to say:

'... a number of authorities discuss the need not to constrict one's thinking in the formation of contract to mechanical notions of offer and acceptance. Contracts often, and perhaps generally do, arise in that way. They can also arise when business people speak and act and order their affairs in a way without necessarily stopping for the formalities of dotting i's and crossing t's or where they think they have done so. Here, the i's were not dotted and the t's were not crossed because of Mr Graham's conduct. Sometimes this failure occurs because, having discussed the commercial essentials and having put in place necessary structural matters, the parties go about their commercial business on the clear basis of some manifested mutual assent, without ensuring the exhaustive completeness of documentation. In such circumstances, even in the absence of clear offer and acceptance, and even without being able (as one can here) to identify precisely when a contract arose, if it can be stated with confidence that by a certain point the parties mutually assented to a sufficiently clear regime which must, in the circumstances, have been intended to be binding, the court will recognise the existence of a contract.'

What occurred prior to the apartments reaching a stage equivalent to Practical Completion and being handed over to the Principal can, in practical terms, be regarded as conduct leading up to the crystallisation of the agreement made in accordance with cl.35.4.

97. In my view, therefore, each agreement should not be construed as being a prospective one made prior to the relevant part of the Works reaching a stage equivalent to Practical Completion, which both parties agree is not permitted by cl.35.4

...

109. In my view, irrespective of the language the Principal's Representative used absent an express variation to the terms of the Contract, if the Contractor obtains an Occupancy Permit for a part of the Works and hands it over to the Principal in a condition that enables it to be sold by the Principal to a third party, then one must conclude that a stage equivalent to Practical Completion is reached at the time of handover to the Principal. If the Principal accepts the subject part of the Works, then its conduct signifies its agreement to the creation of a new Separable Portion. Further, once it is handed over, and the new Separable Portion is created, the Superintendent would be entitled to issue a Certificate of Practical Completion in respect of the subject part of the Works.

110. Having considered the evidence, particularly that summarised above, and all the submissions of the parties on this topic, I am of the opinion that new Separable Portions were created within SP1 and SP2 at the time that these parts of the Works were handed over to and accepted by the Principal."

126 In my view, the conclusions reached by the Arbitrator were responsive to the case pleaded by Abigroup and the submissions put to him on its behalf.

127 In this Court it appeared at one point that 620's submissions came down to the proposition that the word "agreed" as used in paragraph 5 of the Further Amended Points of Claim, connoted a single agreement concluded prospectively prior to the relevant stages of work. I do not agree that it did, when regard is had to the particulars. Further, the submissions of Abigroup to the Arbitrator made plain that it was not so contended.

128 620 was not taken by surprise or denied procedural fairness with respect to Abigroup's case. The process of agreement upon which Abigroup relied was both particularised and the subject of elaboration in submissions.

129 It follows that ground 3 is not made out.

The Fourth Ground of Alleged Misconduct - Granting Extension of Time Regarding the Soho Apartments Which was not Pleaded or Claimed in the Arbitration

130 Abigroup's case with respect to delay was formulated by reference to entitlements to EOT's. It claimed (by [15] of its Further Amended Points of Claim) first, that it had been granted EOT's and further and alternatively, that it was entitled to be granted EOT's.

131 Abigroup made no claim before the Arbitrator for any EOT with respect to the Soho Apartments apart from EOT's 41 and 10 which I have addressed above.

132 620 made a claim for liquidated damages on the basis that practical completion was reached in relation to SP1 on 20 December 2002:

(a) a period of 190 calendar days after the adjusted date for practical completion (15 May 2002), based upon the extensions of time, totalling 25.6 days, allowed by the Superintendent; and

(b) a period of 160 calendar days after the date from which liquidated damages were payable (14 June 2002).

133 Such claim at the rate of $20,800 per calendar day amounted to $3,328,000.

134 Abigroup's amended points of reply and defence to counterclaim joined issue with this claim but did not raise any issue of prevention or release of claim for liquidated damages. In written closing submissions to the Arbitrator, Abigroup submitted with respect to issue 7:

"7(d) Any entitlement [620] may have to liquidated damages in relation to the original SP1 relates to the completion of the Soho Apartments. However, the Superintendent 'accepted that the Soho Apartments were being built for the owner and that Abigroup were advised that they should concentrate on tenanted areas as a priority' [11 March 2003 determination, Witness Statement of Matthew Davies, ...]. In the circumstances, [620] should not be entitled to insist upon strict compliance with the terms of the contract in relation to completion or to claim liquidated damages ...

15. Contrary to clause 35.3, [620] has wrongfully applied the full rate of liquidated damages for SP1 for each day of the alleged period of delay notwithstanding that occupation of the floors comprising the further separable portions within the original SP1 (and, therefore, the creation of further separable portions) took place on a progressive basis between July and August 2002.

16. In his 11 March 2003 determination, the Superintendent 'accepted that the Soho Apartments were being built for the owner and that Abigroup were advised that they should concentrate on tenanted areas as a priority' [Witness Statement of Matthew Davies ...]. In the circumstances, (620's) direction prevented (Abigroup) from completing the Soho Apartments such that (620) is not entitled to insist upon strict compliance by (Abigroup) with the contractual date for Practical Completion. As the contractual Date for Practical Completion is unenforceable then (620) has no entitlement to liquidated damages which are calculated by reference to the date for Practical Completion: Peak Constructions (Liverpool) Ltd v McKinney Foundation Ltd (1971) 1 BLR 111."

135 The Arbitrator found with respect to the Soho Apartments:

"121. There was no evidence to contradict the statement made by the Superintendent in his determination dated 11 March 2003 that he 'accepted that the Soho Apartments were being built for the owner and that Abigroup were advised that they should concentrate on tenanted areas as a priority.' This statement is borne out by the fact that Abigroup achieved Practical Completion of all tenanted areas, including level 26 (PC 26 November 2002), ahead of the Soho Apartments (PC 20 December 2002).

122. The Soho Apartments were one of the last parts of the Works to be completed, and their deferral, in my view, results from a direction as to the required order of work. The effect of the direction was to prevent Abigroup completing the Soho Apartments at an earlier time.

123. In my opinion, the above facts raise issues in relation to time extension/delay costs, LD's and prevention. Also relevant is the reserve power of the Superintendent to unilaterally extend time pursuant to the penultimate paragraph of clause 35.5. These matters will be considered later."

136 In considering issue 4 - delay costs and/or damages, the Arbitrator stated at [473]:

"The Soho Apartments were being built for the owner and Abigroup was 'advised that they should concentrate on tenanted areas as a priority.' As a consequence of this direction, the Soho Apartments were not completed until after the completion of level 26. In these circumstances one must consider whether delay costs ought to be awarded in respect of the variation 37 works and the awarded EOT 10 of 5.2 working days. The duration of the claim delay was 21-28 February 2002. However, the completion of the Soho Apartments (the remaining SP1 works) was effected concurrently with the work which can be broadly described as the SP2 works. In effect, completion of the Soho Apartments was moved into SP2 and became a non-critical event not lengthening the duration of Abigroup's establishment on site. In my opinion therefore Abigroup ought not be awarded delay costs in respect of EOT 10."

137 In relation to issue 7 - liquidated damages, the Arbitrator made the following finding in relation to the Soho Apartments:

"514. As I have referred to earlier, the Superintendent 'accepted that the Soho Apartments were being built for the owner and that Abigroup were advised that they should concentrate on tenanted areas as a priority.' This statement by the Superintendent was not challenged. In my opinion, in circumstances where the Soho works were deferred as a consequence of a direction, it would be unfair and unreasonable to impose LD's on Abigroup for the late completion of the Soho Apartments.

515. In relation to the Principal's claimed entitlement to LD's for SP1, Abigroup submits that, in the circumstances, the Principal's direction prevented Abigroup from completing the Soho Apartments such that the Principal is not entitled to insist upon strict compliance by Abigroup with the contractual date for Practical Completion. Abigroup went on to contend that, as the contractual date for Practical Completion is unenforceable, then the Principal has no entitlement to LD's which are calculated by reference to the Date for Practical Completion (refer Peak Construction (Liverpool) Ltd v McKinney Foundation Ltd (1971) BLR 111).

516. Apart from its earlier submissions against the application of Peninsula Balmain in Abigroup's favour, the Principal did not directly address Abigroup's submission that I should apply the Peak principle to the whole of SP1. In Peninsula Balmain Hodgson JA, referring to the reserve power to extend time in the penultimate paragraph of clause 35.5 said that it 'is one capable of being exercised in the interests both of the owner and the builder ...' In my view, the exercise of the reserve power is appropriate in these circumstances.

517. Contrary to my finding that further separable portions were created within SP1, the Principal's submission was that, in effect, SP1 remained intact. It seems to me that Abigroup's submission that 'the contractual date for Practical Completion is unenforceable' may have been directed to cover a finding favouring the Principal in respect of an intact SP1. However, it is arguable that it puts the date for Practical Completion of each new separable portion within SP1 at large. Such a situation would nullify the Principal's contractual entitlement to LD's. In my view, such an outcome would be an unfair and unreasonable result to the Principal.

518. Abigroup has successfully claimed that new separable portions were created within SP1. It has not applied for an EOT in respect of SP1 generally or specifically for the direction which resulted in the deferral of the Soho Apartments. This is a situation where the reserve power of the penultimate paragraph of clause 35.5 ought fairly to be exercised by extending time in respect of the completion of the Soho Apartments, which was the remaining work in SP1. Appropriately, this protects Abigroup from LD's in relation to the Soho Apartments and the Principal from the contention that the contractual date for Practical Completion for SP1 and the new separable portions within SP1 are unenforceable pursuant to the Peak principle. Accordingly, I proceed on this basis and, as a matter of convenience, add this quite unrelated extension to EOT 10."

138 It can be seen that these findings were responsive to Abigroup's closing submissions insofar as the Arbitrator accepted that it would be unfair and unreasonable to allow a claim for LD's arising out of the late completion of the Soho Apartments and the Arbitrator further accepted that 620's direction prevented Abigroup from completing the Soho Apartments in accordance with the contract. However, as the Arbitrator expressly acknowledges, Abigroup had not applied for an EOT in respect of SP1, generally or specifically, for the direction which resulted in the deferral of the Soho Apartments.

139 620 had made no direct response in reply to Abigroup's closing submission concerning the direction given relating to the Soho Apartments. In particular 620 had not submitted to the Arbitrator that this line of reasoning was not open to him.

140 Nevertheless, it seems to me that the Arbitrator's findings did both go beyond the terms of the claims pleaded before him and the terms of the parties' submissions.

141 The question of whether a direction as to the order in which work was to be performed resulted in delay in the completion of SP1, was not one raised by the pleadings with respect to what was a substantial claim.

142 The issues arising on the arbitration as a whole were sufficiently complex to give rise to the necessity, that the Arbitrator ensure that the development of the issues as he saw them, was fairly communicated to a party potentially adversely affected by such process.

143 I am satisfied that 620 was not given a sufficient opportunity to meet the issue ultimately identified by the Arbitrator. The issue was not pleaded and no claim was made for the EOT allowed by the Arbitrator.

144 Before the Arbitrator could properly allow an EOT as the resolution of the issues urged before him, he was required to ensure that 620 was given a proper opportunity to meet and contest the proposition that an EOT was the appropriate mechanism for resolution of the aspect of the dispute in issue.

145 Accordingly, this is a case which falls within the principle stated in The Vimeira.[23] In that case the owners of a ship claimed against the charterers for damage sustained by the ship when the sub-charterer discharged it at an allegedly unsafe port. The Arbitrator found that the port was unsafe because the turning area at the entrance to the dock was insufficient for a ship of that size to be safely manoeuvred. The charterers sought to set aside the award on the ground of misconduct. The charterers argued that it had not been pleaded that the dock was unsafe due to a restricted turning area at a particular point. They argued they had been deprived of an opportunity to deal with the Arbitrator's finding that the dock was insufficiently wide at a particular point for a safe turning manoeuvre.

146 In the Court of Appeal Goff J held that the relevant point was not pleaded in the owner's points of claim. The owner's case had been pleaded and put on the basis of alleged insufficient depth of water not inadequate width for turning.

147 Goff J stated:

"There is plain authority that for arbitrators so to decide a case without giving a party any warning that the point is one which they have in mind and so giving the party no opportunity of dealing with it, amounts to technical misconduct and renders the award liable to be set aside or remitted ... In truth, we are simply talking about fairness. It is not fair to decide a case against a party on an issue which has never been raised in the case without drawing the point to his attention so that he may have an opportunity of dealing with it, either by calling further evidence or by addressing argument on the facts or the law to the tribunal. In my judgment, the arbitrators in the present case failed to give that opportunity to the charterers in respect of an issue not raised in the arbitration that the turning space at the entrance to the dock was insufficiently wide. It follows that they committed technical misconduct of the kind I have described. I say this in no spirit of criticism of these three very experienced arbitrators. Expressions such as 'misconduct' and 'breach of the rules of natural justice' carry overtones which are frequently unjustified. Here it appears that there may well have been some misunderstanding on the part of the arbitrators; but the fact remains that, in the result, there was unfairness to the charterers."[24]

148 This is a case in which the Arbitrator did not give 620 adequate warning as to the basis on which he proposed to resolve its claim for LD's against it. The Arbitrator went beyond matters that were "in the ring".[25] 620 did not squarely address the evidentiary and legal issues raised by a case of prevention justifying an EOT, either in the course of presentation of its case or in final submissions.

149 Accordingly, the fourth ground of alleged technical misconduct is made out.

150 I will give the parties the opportunity to further address me as to the appropriate orders in the circumstances.

[1] [1990] VicRp 57; [1990] VR 673 at 678.

[2] [1914] 2 KB 478 at 484.

[3] Melbourne Harbour Trust Commissioners v Hancock [1927] HCA 26; (1927) 39 CLR 570 at 587; Doran Constructions Pty Ltd v Health Administration Corporation of New South Wales (1984) 12 BCL 59.

[4] Moran v Lloyds [1983] QB 542 at 550.

[5] Holland Stolte Pty Ltd v Murbay Pty Ltd (1991) 105 FLR 304 at 309 per Miles CJ.

[6] See Garmes v Telstra Corp Pty Ltd [1998] VSC 40 at [107] per Harper J; Bond Corp Pty Ltd v Thames Water Asia/Pacific Pty Ltd (1996) 12 BCL 139 at 141 per Byrne J.

[7] [1953] VicLawRp 53; [1953] VLR 369 at 379. This statement of principle was originally made by Scholl J in Sandhurst & Anor v Agency Co Ltd & Anor [1952] VicLawRp 64; [1952] VLR 488 at 496, it was amended by Scholl J in Yendall v Smith Mitchell & Co Ltd, and re-stated in full by Sholl J in Harrison v Mansfield [1953] VicLawRp 60; [1953] VLR 399 at 404. It was adopted by Adam J in McConkey v McConkey [1960] VicRp 47; [1960] VR 295 at 300.

[8] [2005] NSWCA 25; (2005) 63 NSWLR 729.

[9] Ibid at 743 - 744.

[10] [2004] UKPC 17; (2004) 1 WLR 1689 at 694 [11].

[11] Monie & Ors v Commonwealth of Australia at 742 [43].

[12] (2004) 20 BCL 133.

[13] Ibid at [31]-[34].

[14] Askew v Fields [1985] HCA 4; (1985) 156 CLR 268 at 270.

[15] Housing Commission of New South Wales v Tatmar Pastoral Co Pty Ltd [1983] 3 NSWLR 378 at 381 per Hutley JA, at 385 per Mahoney JA.

[16] Sydney Water Corporation Ltd v Aqua Clear Technology Pty Ltd, unreported, SC(NSW), Rolfe J, 17 December 1996.

[17] [2002] VSCA 189 at [166].

[18] [2002] VSCA 189; (2002) 6 VR 1 at [157].

[19] Plaintiffs' misconduct submissions [75].

[20] Plaintiffs' misconduct submissions [84].

[21] Cf. Kane Constructions v Sopov (2006) 22 BCL 92 at 120 - 121; [661]-[668].

[22] Plaintiffs' misconduct submissions in reply [34].

[23] Interbulk Ltd v Aiden Shipping Co Ltd (The Vimeira) (1984) 2 Lloyd's Rep. 66.

[24] Ibid at 74 - 75.

[25] Cf Anaconda Operations Pty Ltd v Fluor Australia Pty Ltd [2003] VSC 275 at [178]- [181].