MATTER : Commercial Arbitration Act 1985 (WA)

An appeal against the interim award of Adrian Goold given 7 October 2009 in an arbitration

Arbitration - Application for leave to appeal - Principles applicable to such applications - Whether arbitrator made manifest error in the construction of contracts - Turns on own facts

Commercial Arbitration Act 1985 (WA), s 38

Alghussein Establishment v Eton College [1991] 1 All ER 267

Alvaro v Temple [2009] WASC 205

Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99

EDWF Holdings 1 Pty Ltd v EDWF Holdings 2 Pty Ltd [2010] WASCA 78

Michael Kellaway International Pty Ltd v Shark Bay Airport Pty Ltd (Unreported, WASCA, Library No 970604, 13 November 1997)

New Generation Enterprises Pty Ltd v Western Australian Planning Commission [2007] WASCA 89

Nouvelle Homes Pty Ltd v G & M Smargiassi [2008] WASC 127

Onesteel Manufacturing Pty Ltd v United KG Pty Ltd [2006] SASC 119; (2006) 94 SASR 376

Opat Decorating Service (Aust) Pty Ltd v Hansen Yuncken (SA) Pty Ltd (1994) 11 BCL 360

Pioneer Shipping Ltd v BTP Tioxide Ltd [1980] 1 QB 547

Promenade Investments Pty Ltd v New South Wales (1992) 26 NSWLR 203

Quadwest Developments Pty Ltd v Thi [2009] WASC 260

SMK Cabinets v Hili Modern Electrics Pty Ltd [1984] VicRp 31; [1984] VR 391

Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165

Turner Corporation Ltd (in liq) v Co-ordinated Industries Pty Ltd (1994) 11 BCL 202

Turner Corporation Pty Ltd (Receiver & Manager Appointed) v Austotel Pty Ltd (1994) 13 BCL 378

Ukrainian Association of Western Australia in Perth (Inc) v Squire Constructions Pty Ltd [2004] WASC 4

West Boat Builders Pty Ltd v Cull Holdings Pty Ltd [1999] WASCA 72; (2000) 16 BCL 21

Zurich Bay Holdings Pty Ltd v Iluka Midwest Ltd [2009] WASC 237

1 MAZZA J: The appellant (the proprietor) seeks leave to appeal and to appeal against an interim award made by the second respondent, a lay arbitrator (the arbitrator), under s 38(4) of the Commercial Arbitration Act 1985 (WA) (the Act).

2 The application for leave to appeal and the appeal were heard together. The arbitrator took no part in the proceedings. He has notified the court that he will abide by its decision.

4 The proprietor was the owner of land situated at 79 Kingsmill Street, Port Hedland (the land). The first respondent is a builder (the builder).

5 On 6 February 2006, the parties entered into a cost plus contract for the construction on the land of six grouped dwelling units (the contract).

6 The contract was the standard form cost plus contract issued by the Housing Industry Association Ltd in June 2000 (AB 75 - 82). The contract provided that the builder would be paid the actual cost of the works, plus a fee of $125,000 plus GST.

7 Pursuant to cl 11 of the contract, the works were scheduled to be completed by 4 September 2006. In fact, they were not completed until 31 August 2007.

8 After the contract was completed, a dispute arose between the proprietor and the builder. As a result, and pursuant to cl 18 of the contract, the parties agreed to resolve the dispute by arbitration and so the arbitrator was appointed.

9 In its amended points of claim (AB 20 - 24), the proprietor claimed that the builder breached the contract by failing to complete the works on time. As a result, the proprietor alleged it suffered loss of the rental income it would have received from the property. The proprietor claimed $405,600 under this head of damage, calculated at a loss of rent of $31,200 per month for 13 months. In addition, the proprietor claimed interest on this loss in the sum of $262,765.95.

10 In its points of defence and counterclaim (AB 25 - 32), the builder admitted that the works were not completed on time, but alleged that the delay was the proprietor's fault or due to factors beyond its control (AB 26, par 9). The builder sought payment of unrecovered costs of $525,946.10, its fee of $125,000 plus GST, and interest.

11 With respect to the claim for unrecovered costs, the proprietor disputed the builder's entitlement to $202,465.57 plus GST on the basis that costs in that sum had not been reasonably and properly incurred by it.

12 The issues for the arbitrator to decide in the arbitration which relate to these proceedings were expressed by him in the interim award in this way (AB 6):

3.1 Responsibility for the delay in completion of the contract and loss of rent claimed by Proprietor amounting to $405,600.00.

3.2 Loss of interest of $262,765.95 claimed by Proprietor.

...

3.5 Costs amounting to $202,465.57 plus GST submitted by Builder that are disputed by Proprietor.

13 The hearing before the arbitrator took place over two days, being 12 February and 24 August 2009. At the hearing the arbitrator heard evidence from Mr Ian Loxton, an officer of the proprietor, and Mr M Hicks, the proprietor's project manager for the work. Mr G Weston gave evidence for the builder. The proceedings were not transcribed and the arbitrator's notes are basic.

14 On 7 October 2009, the arbitrator handed down his interim award (AB 4 - 12).

15 The arbitrator's findings on the issues relevant to these proceedings were relatively brief and I quote them in full:

5.1 Responsibility for the delay in completion of the contract and loss of rent claimed by Proprietor amounting to $405,600.00

5.2 The Proprietor claims the contract was delayed in completion by 13 months. A sum of $405,600.00 is claimed for loss and damage due to the delay.

The claim is made up of a loss of rent of $5200.00 per month for each of the six units in the complex for a period of 13 months. The claim is from September 1, 2006 to September 30, 2007.

The Cost Plus Contract dated February 6, 2006 states 4 weeks to commence and 26 weeks to complete the contract, which date computes to Monday September 4, 2006.

Mr Weston gave evidence that Port Pride commenced the works on or about February 17, 2006 and practical completion was achieved in August 2007. September 4, 2006 to August 31, 2007 computes to a contract over-run of 12 months.

5.3 Mr Weston gave evidence of delays that occurred as below:

5.3.1 Retaining Wall and Earthworks:

Mr Loxton advised him that he would undertake the building of the retaining wall. Port Pride issued Variation No 1 dated February 20, 2006 deleting Demolition, Earthworks, Retaining Wall and Relocation of gas pipes and electrical wiring from the contract.

Gold City failed to undertake the retaining wall work; so in early July 2006 Port Pride built the retaining wall. Gold City failed to undertake the earthworks and around July 27, 2006 Port Pride undertook the work. Delay incurred due to Gold City not undertaking the earthworks and retaining wall was 3 months.

5.3.2 Failure to Order Structural Steel

On or about April 4, 2006 Mr Loxton stated that Gold City would pay Stratco directly for the structural steel, V/O No. 2, dated April 4, 2006 being for a deduction of $50,000 being a deposit to be paid by owner to Stratco. Mr Loxton did not pay the deposit. Port Pride paid the deposit on July 5, 2006 so the project could continue. Delay incurred was 3 months.

5.3.3 Early February 2007, Mr Loxton advised Gold City would supply and install the Gyprock, insulation and accessories, kitchen cupboards and vanities. Gyprock was expected on site about February 20, 2007, it did not arrive until February 27, 2007. Labour organised by Gold City took 1-1/2 months longer than anticipated. Time delay was approximately 2.5 months. Variation No. 3 was issued on April 18, 2007 for the deduction of insulation, Gyprock and accessories and kitchen cupboards and vanities all to be undertaken by Gold City.

5.3.4 Supply and lay tiles and Vanities

Mr Loxton advised that Gold City would supply the tiles and labour to fit them. Mr Loxton supplied the tiles only and Port Pride paid for the installation of the tiles together with car hire for the tilers. V/O No. 4 was issued on May 14, 2007 for the deduction of Tiles Supply and Lay. Approximate delay 2 weeks.

5.3.5 Lack of Accommodation

Due to unavailability of accommodation a delay of 3 months was experienced.

5.3.6 Cyclones

A delay of one month occurred due to cyclonic conditions. The delays as occurred as per Mr Weston's evidence as noted in 5.3.1 to 5.3.6 amount to 13 months. Mr Weston claims that Gold City was responsible for 9 months with 4 months due to lack of accommodation and cyclones.

1. Mr Loxton gave evidence relative to delays as below:

6.1 Port Pride did not commence the works on site until August 2006. He stated that the works were not progressing well with lack of tradespersons on site. He stated he was in contact with Mr Weston on a regular basis regarding lack of onsite progress.

He stated that he employed Stuart Watson to oversee the works and assist Port Pride in obtaining completion of the project.

He denied any time lost by Port Pride due to: Retaining wall 5.3.1, Structural Steel 5.3.2, Gyprock 5.3.3, Tiles 5.3.4, Lack of Accommodation 5.3.5, and Cyclones 5.3.6 was caused by the action or inaction of Gold City.

Gold City claims 13 months delay.

Port Pride states that contract over-run was 12 months. The contract dated February 6, 2006 was to be completed in 30 weeks from the start date, which equates to September 4, 2006. The actual completion date was August 2007 which is an over-run of 12 months; therefore Gold City's claim should be reduced by 1 month which reduces the claim for $405,600.00 by $31,200.00 to $374,400.00.

Port Pride did not notify Gold City of any delays and claim for extensions of time as per clause 11(c) of the contract; however I accept the evidence of Mr Weston with regard to the delays caused by Gold City. Mr Loxton would have been well aware that delays were being experienced as described in sections 5.3.1 to 5.3.4 of this Award which total 9 months.

I therefore determine that Port Pride are responsible for 3 months delay. Amount awarded to Gold City for loss and damage is $93,600.00 ($31,200 x 3)

1. Loss of interest of $262,765.95 claimed by Proprietor.

No evidence was provided by the Claimant to substantiate the second Claim for lost interest therefore the claim is disallowed.

...

1. Costs amounting to $202,465.57 plus GST submitted by Builder that are disputed by Proprietor.

11.1 The Claimant Proprietor states that although the contract is cost plus, Port Pride is only entitled to be reimbursed for costs which were reasonably and properly incurred.

11.2 Builder's margin:

Gold City claims that the builder's margin has been over claimed by $58,689.80, invoices No's 1 to 22.

Invoices 1-10 onsite labour

Invoice 11 accommodation and onsite labour

Invoice 12 builder's margin

Invoices 13-18 onsite labour and hire spreader bar

Invoice 19 builder's margin

Invoice 20 onsite labour

Invoices 21-22 construction and workers compensation insurance

I determine that the amounts spent with respect to onsite labour, accommodation, hire of spreader bar and insurance were reasonably and properly incurred.

11.3 Cost of Tools $16,414.12, invoices 168 to 210

Tool Invoices: 168, 169, 174, 175, 176, 179, 180, 184, 188, 190, 191, 192, 193, 194, 195, 198, 200, 201, 202, 204, 206, 208. Total $6,125.38

Building Material invoices: 181, 199, and 207. Total $7,277.84

Consumables & Disposables: 170, 171, 172, 173, 178, 182, 186, 187, 189, 196, 197, 203, 205, 209, 210. Total $1,115.68

Gyprock labour invoice: 183. Total $1,895.22

The four separate areas add to $16,414.12

Mr Weston gave evidence that the tools were purchased for the use of workmen placed onsite by Mr Loxton as they did not have any tools. He also stated that he is not aware where those tools are now.

I determine that the amounts spent on tools, building materials, consumables, disposables and Gyprock labour were reasonably and property incurred.

11.4 Accommodation, Meals and Petrol

Invoices 23 to 167 totalling $31,112.87

The Claimant alleged that a total claim of $31,112.87 for living costs and fuel is excessive as Gold City provided the front house at 79 Kingsmill Drive as accommodation for Graham Weston and other trades. Mr Weston stated in his evidence that he would not live in the front house.

The Claimant states that the front house was more than adequate accommodation and that the living cost should be reduced, however no amount has been submitted as to how much it should be reduced.

The Claimant claims that Port Pride charged Gold City for red wine which was denied by Mr Weston. Invoices No's 39, 40, 43, 70, 122, 157, 160, and 161 where red wine was purchased it has not been charged to Gold City. Invoice 70 has been charged, therefore there is an adjustment in the amount of $117.00.

I determine that the amounts spent on accommodation, meals and petrol were reasonably and properly incurred except for $117.00

11.5 Extraordinary Hire: $96,248.78

Telehandler hire 17,153.63

Scaffolding hire 74,304.72

Bin hire/rubbish clearing 4,790.43

Telescopic Handler hire: $17,153.63 (Invoices 177, 185, 212, 232, 243, 244, 245)

Gold City claims that the Telehandler was left on site and say that all Gyprock should have been put into the area required by the Telehandler at the one time; then the Telehandler could have been demobilised from the site. They did not suggest a reasonable fee, nor did they lead any evidence as to the appropriate costs for each item.

Invoice 212 is not for Gyprock, it is for lifting house frames to first floor.

Mr Weston gave evidence that the telescopic handler was required on site for the periods of the hire also the daily hire rate was $150.00, delivery $170.00 and pickup $170.00 showing that continuous delivery and pickup would most likely equal the continuous hire rate.

Scaffolding Hire: $74,304.72

Invoices 213-224, 226-229, 233, 234, 238

Gold City claims that $74,304.72 is an astonishingly high sum for a six unit development and states it is because of delay caused by the Builder. No reasonable cost was submitted by the Claimant. Examination of the invoices indicate that they also include formwork hire and labour to the first floor suspended concrete slab. The cost of $74,304.72 would therefore include scaffolding and formwork, material, labour and cartage costs.

Mr Weston tendered two photographs of the building with scaffolding erected to the total perimeter of the building and to a height above 6 metres.

Bin hire & rubbish clearing $4,790.43

Invoices 221, 225, 230, 231, 235-237, 239-242

Claimant objects to the cost of bin hire and rubbish removal but did not lead any evidence or suggest a reasonable fee as to an appropriate cost.

I determine that the amounts spent on telescopic handler hire, scaffolding hire, formwork hire, labour to erect and strip formwork, bin hire and rubbish clearing were reasonably and properly incurred.

Summary of schedule of disputed sums:

Credit of $117.00 awarded to Gold City - reference 11.4.

1. The claim was, at best, for 12 months' rent and not 13 months' rent. Accordingly, the claim should have been calculated at $374,400 and not $405,600; par 7 of the award, AB 8.
2. The proprietor caused a total of nine months' delay because it failed to, as promised:

(a) undertake the building of a retaining wall and earthworks. This caused three months' delay; par 5.3.1 of the award, AB 7;

(b) pay for structural steel to be used in the building of the houses. This caused another three months' delay; par 5.3.2 of the award, AB 7;

(c) supply and install Gyprock, insulation and accessories, kitchen cupboards and vanities. This caused a further two and a half months' delay; par 5.3.3 of the award, AB 7; and

(d) pay for the installation of tiles. This caused a further two weeks' delay; par 5.3.4 of the award, AB 8.

1. The proprietor would have been well aware of the delays it caused. I think the phrase used by the arbitrator 'would have been well aware' amounts to a finding that the proprietor was aware of the delays. The parties' submissions proceeded on this basis.
2. The builder did not give notice to the proprietor of the delays or seek an extension of time pursuant to cl 11(c) of the contract. It is implicit in the arbitrator's reasons that this failure on the part of the builder did not cause the proprietor's loss because it (the proprietor) was aware of the delays, and could have remedied them.
3. It is also implicit in the arbitrator's reasons that he saw nothing in the contract and in particular, cl 11 which thwarted the builder's defence and counterclaim.
4. The builder was responsible for three months' delay caused by a lack of accommodation for its workers.

18 As a result of these findings, the proprietor's claim was allowed in the sum of $93,600, being three months' loss of rent at $31,200 per month; par 7 of the award, AB 9.

19 The arbitrator made no award as to the claim for interest; par 8 of the award, AB 9.

20 As to the builder's counterclaim, the arbitrator found that:

1. Of the $202,465.57 in disputed building costs, the builder was entitled to all but $117.00 plus GST; par 11 of the award, AB 9 - 12.
2. The builder was entitled to interest on the unpaid sums due to it from the proprietor; par 13 of the award, AB 12.

(a) The Builder agrees to execute and complete for the Owner the building work described in Item 3 of the Schedule hereto ('the Works') upon the land described in Item 3 of the Schedule hereto ('the Site') in a proper and workmanlike manner and in accordance with the drawings, plans and specifications (inclusive of all addenda and colour schedules) agreed between the parties and annexed hereto and for the purpose of identification signed by each of them (which said drawings, plans and specifications and colour schedules are hereinafter referred to as 'the Construction Documents') for the consideration as described in Item 5a or 5b of the schedule hereto and upon the terms and conditions herein appearing.

...

(a) The actual Costs of the Works shall include the following:

(i) the costs of labour and services supplied wholly in connection with the Works;

(ii) the net costs of all subcontracts wholly in connection with the Works;

(iii) all fees payable to Statutory Authorities having jurisdiction over the Works;

(iv) fees for licensed surveyor, structural engineer, architect or other professional consultants engaged by the Builder;

(v) the premiums payable for all insurances as specified in Clause 8 hereof;

(vi) the net cost of all building materials including temporary structures used wholly for the Works and including the cost of cartage. The costs shall be normal trade costs and any discounts applicable for prompt or cash payments shall remain with the Builder;

(vii) the cost to rectify any defects as part of the Defects Liability Period, other than making good faulty materials or workmanship;

(viii) costs for plant, equipment and services used wholly for the Works;

(ix) any costs to repair, replace and/or rebuild any damage or loss as a result of causes beyond the control of the Builder. Any amounts recoverable from an insurance claim shall be credited to the favour of the Owner;

(x) any excesses payable for Insurance claims by the Builder; and

(xi) any GST payable on the supply of the Works.

(a) Subject to this Contract the Builder shall commence the Works by the time specified in Item 9 of the Schedule or as soon thereafter as may be reasonably practicable and shall proceed therewith with reasonable despatch and diligence and complete the Works within the time specified in Item 9 of the Schedule provided that:

(i) the Owner shall have complied with any notice given by the Builder pursuant to Clause 2(c) hereof;

(ii) the Builder is satisfied that the boundaries of the Site have been adequately delineated;

(iii) provision has been made for adequate water supply to the Site; and

(iv) the Builder has received approval to the Construction Documents from all relevant authorities.

(b) Notwithstanding provisions to the contrary contained in this Contract the Builder shall not responsible for any delays caused by any matter or thing over which the Builder shall have no control and including (without limiting the generality thereof):

(i) any event which affects directly or indirectly access to or the condition of the Site or the Works or any person engaged on or material employed in or to be employed in or in relation to the Works including acts of God, fire, explosion, earthquake, civil commotion, theft or acts of vandalism, flooding, inclement weather, strikes, industrial action, lockouts or holidays granted in accordance with industrial awards, fires, vehicle accidents, unavailability of labour, vehicles or equipment or permits required;

(ii) any alterations to the Construction Documents resulting in alterations to the Works;

(iii) any instruction or delay of instruction by or any omission of the Owner;

(iv) any deliberate and substantial prevention of or interference with the Works or the progress thereof caused by the Owner;

(v) any delay in the supply of materials or transport;

(vi) any proceedings being taken or threatened by any disputes with adjoining or neighbouring owners concerning the continuation or variation of delivery to or completion of the Works upon the Site;

(vii) any cessation of work pursuant to Clause 15;

(viii) any delay in the commencement of or continuance with the Works, caused by or resulting from an order or directive of a relevant authority;

(ix) any delay caused by proper investigation of any of the above by the Builder or the Owner; and

(x) any delay due to the suspension of the Works by the Builder pursuant to the Builder's powers contained herein.

(c) Upon the happening of any of the events aforesaid the Builder shall notify the Owner thereof and shall be entitled to such extension or extensions of time for completion of the Works as shall in the circumstances be agreed and if there shall be any dispute the provisions of Clause 18 shall apply.

...

(a) Any notice given to any party pursuant to the terms of this Contract shall be properly given if addressed to the party and served personally upon him or forwarded to him by prepaid letter addressed to such party at his address given herein or such other address as may be notified in writing by such party to the other. Any notice so posted shall be deemed to have been served unless contrary is shown at the time when by the ordinary course of post the notice would be delivered.

22 The proprietor in its appeal notice sought leave to appeal on four grounds. At the hearing of this appeal, it pursued grounds 1, 2 and 3. It did not argue ground 4 and leave was given to withdraw it.

23 The three proposed grounds of appeal upon which the proprietor relies are as follows:

1. The arbitrator erred in law in extending the time for the [Builder] to bring the works the subject of its building contract with the [Proprietor] to practical completion when the [Builder], contrary to clause 11(c) of the building contract, failed to notify the [Proprietor] of and/or claim any extensions of time in accordance with the terms of the building contract.
2. Further and/or in the alternative to ground 1 above, the arbitrator erred in law in any event in extending the time for the [Builder] to bring the works the subject of the building contract to practical completion, in that there was no evidence that any act of the [Proprietor] impacted the critical path to the completion of the works so as to cause or contribute to the ultimate failure of the [Builder] to bring the works to practical completion within the contractually specified time period.
3. The arbitrator erred in law in finding that the costs incurred by the [Builder] (which grounded its claim for payment of the sum of $202,465.57 plus GST) were reasonably and properly incurred in accordance with the terms of the building contract in that there was no evidence to support such a finding.

24 Grounds 1 and 2 are misconceived in that they allege that the arbitrator 'erred in law in extending the time for the [builder] to bring the works ... to practical completion'. The arbitrator did not purport to extend the time for practical completion. His task was to determine who was responsible for the delay in completion of the works and then decide, in light of the terms of the contract, what were the consequences of any finding he made.

25 However, the parties were content to argue the first ground of appeal on the understanding that it alleged that the arbitrator erred in law by not finding that the builder's failure to comply with cl 11(c) precluded it from claiming that delays in practical completion were the proprietor's fault.

26 The second ground of appeal was understood to allege that the arbitrator erred in law in finding that the proprietor was responsible for the nine months' delay because there was no evidence that any act (or omission) of the proprietor caused, or contributed to, the delay in bringing the works to practical completion.

27 The third ground of appeal is, I think, plain enough.

Section 38 of the Act and the principles which apply to a grant of leave

28 Relevantly to this appeal, s 38 of the Act is in the following terms:

(1) Without prejudice to the right of appeal conferred by subsection (2), the Court shall not have jurisdiction to set aside or remit an award on the ground of error of fact or law, on the face of the award.

(2) Subject to subsection (4), an appeal shall lie to the Supreme Court on any question of law arising out of an award.

...

(4) An appeal under subsection (2) may be brought by any of the parties to an arbitration agreement -

(a) with the consent of all the other parties to the arbitration agreement; or

(b) subject to section 40, with the leave of the Supreme Court.

(5) The Supreme Court shall not grant leave under subsection (4)(b) unless it considers that -

(a) having regard to all the circumstances, the determination of the question of law concerned could substantially affect the rights of one or more parties to the arbitration agreement; and

(b) there is -

(i) a manifest error of law on the face of the award; or

(ii) strong evidence that the arbitrator or umpire made an error of law and that the determination of the question may add, or may be likely to add, substantially to the certainty of commercial law.

29 Having regard to these provisions and the cases to which counsel referred, it seems to me that the law with respect to this section can be summarised in the following propositions.

1. No appeal lies from the decision of an arbitrator on a question of fact.
2. A limited right of appeal lies from the decision of an arbitrator on an error of law arising out of an award. This right is not the equivalent of a right to appeal against an arbitrator's decision: Nouvelle Homes Pty Ltd v G & M Smargiassi [2008] WASC 127 [39].
3. The right of appeal can be exercised only if:

1. Where, as in this case, leave is required, the court will not grant leave unless it is established by the appellant that the question of law could substantially affect the rights of one or more parties. In other words, it must be a matter of practical importance and not a minor or technical point: Pioneer Shipping Ltd v BTP Tioxide Ltd [1980] 1 QB 547, 564 (Denning MR).
2. The errors of law must either be a manifest error of law on the face of the award, or there must be strong evidence that the arbitrator made an error of law and that the determination of the question may add or may be likely to add substantially to the certainty of commercial law.
3. The underlying legislative intention is that leave to appeal should not readily be given and should be strictly limited: Quadwest Developments Pty Ltd v Thi [2009] WASC 260 [23].
4. In considering whether there is an error of law a court should not, when considering the reasons of a lay arbitrator, cast an overly critical eye over his or her reasons: New Generation Enterprises Pty Ltd v Western Australian Planning Commission [2007] WASCA 89 [5].
5. A manifest error of law is one where there are 'powerful reasons for considering on a preliminary basis, without any prolonged adversarial argument, that there is on the face of the award an error of law': Promenade Investments Pty Ltd v New South Wales (1992) 26 NSWLR 203, 226, cited in New Generation Enterprises v WAPC [4].
6. An error of law which is manifest on the face of the award is an error which is not to be discovered by looking behind its back: Ukrainian Association of Western Australia in Perth (Inc) v Squire Constructions Pty Ltd [2004] WASC 4 [8]. This does not mean that only the terms of the award can be considered. If the award refers to materials put before the arbitrator and it is not possible to understand the award without reading them, those materials can be considered: Quadwest Developments v Thi [23]; Ukrainian Association v Squire Constructions [25]; and New Generation Enterprises Pty Ltd v WAPC [49].
7. As to what is an error of law in the context of s 38, I have been greatly assisted by Murphy J's decisions in Quadwest Developments v Thi [23] - [25] and Alvaro v Temple [2009] WASC 205 [37] - [44].

Relevantly to the grounds of appeal in this case, an error of law is revealed where:

(a) There is an error in the construction of the contract.

(b) A finding of fact is made in the absence of any evidence at all. However, where there is some evidence upon which a fact could be found, there will be no error of law even if the finding is perverse or against the weight of the evidence.

1. A determination which adds substantially to the certainty of commercial law may be a determination of a question of the construction of a contract in standard terms rather than the construction of a one-off clause: Ukrainian Association v Squire Constructions [9].
2. Where the requirements of s 38(5) of the Act have been fulfilled, this does not create an entitlement to a grant of leave. It only gives rise to a discretion to grant leave. This discretion must be exercised judicially after considering all of the circumstances of the case: Ukrainian Association v Squire Constructions [7].

30 I will deal, first, with some of the preconditions which must be satisfied before a grant of leave is made.

31 The arbitrator dismissed the proprietor's claim to the extent of $280,800. In my opinion, this amount is sufficient to satisfy the requirement for leave that the determination of the question of law could substantially affect the interests of all of the parties. No submission to the contrary was made by the builder.

32 Then, there is the question of whether the contract forms part of the arbitrator's award. Counsel made no specific submission on this point. It seemed to me that it was assumed that the contract formed part of the award. In my view, it is not possible to understand the award without referring to the terms of the contract. Accordingly, I consider that the contract forms part of the award.

33 Next comes the question of whether the arbitrator made a manifest error of law or whether there is strong evidence that the arbitrator made an error of law and that the determination of the question may add or may be likely to add substantially to the certainty of commercial law.

34 Although in oral submissions, Mr Pentony on behalf of the proprietor referred to the second limb of s 38(5) of the Act, he frankly acknowledged that he would struggle to succeed on this point (appeal ts 31). In my view that concession was properly made. Although the contract in question is a standard form contract, the construction of the contract, as important as it no doubt is to the parties, will be in accordance with established principle. I do not see how it could add or may be likely to add substantially to the certainty of commercial law.

35 The decisive issue is whether the arbitrator made a manifest error of law.

37 The construction of a written contract involves ascertaining what a reasonable person would have understood the parties to mean. This task is approached having regard, not to the subjective intentions of the parties, but to the language of the contract, the surrounding circumstances known to the parties and the purpose and object of the transaction: EDWF Holdings 1 Pty Ltd v EDWF Holdings 2 Pty Ltd [2010] WASCA 78 [103] (Buss JA, Owen & Newnes JJA agreeing); and Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 [40].

38 When construing a contract it is necessary to have regard to the document as a whole and to, if possible, interpret its provisions harmoniously. Where the language in the contract is open to two interpretations an interpretation which avoids consequences which appear too capricious, unreasonable, inconvenient or unjust will be preferred: Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99, 109 (Gibbs J).

39 The submissions of the parties focussed upon the language used in the contract.

40 The proprietor submitted that cl 11(a) provides for when the works are to commence and be completed. Clauses 11(b) and (c) it is submitted provided a mandatory 'regime' to deal with delay in the progress of the works. Specifically it was submitted that if there is any delay, including delays caused by the proprietor, the builder is obliged to notify the proprietor in writing of the delaying event. It was submitted that if notice is given, the builder is entitled to an extension of time, unless the claim is disputed by the proprietor. However, if notice is not given, the builder may be liable for damages.

41 The proprietor contends on the basis of this construction of cl 11 and in light of the builder's failure to give notice of events which delayed completion of the works, the builder was prevented from relying on the proprietor's own delays as a basis for defending the appellant's claim for damages arising from late completion.

42 It was submitted that cl 11 overcame the principle of contractual construction, known as the prevention principle. This provides that a party to a contract will not be entitled to take advantage of its own wrong. The proprietor submitted that as in cases such as Turner Corporation Pty Ltd (Receiver & Manager Appointed) v Austotel Pty Ltd (1994) 13 BCL 378, Turner Corporation Ltd (in liq) v Co-ordinated Industries Pty Ltd (1994) 11 BCL 202 and Opat Decorating Service (Aust) Pty Ltd v Hansen Yuncken (SA) Pty Ltd (1994) 11 BCL 360, cl 11 in its terms excluded the operation of the prevention principle.

43 The proprietor submitted that the arbitrator made a manifest error of law in failing to construe cl 11 in the way it now contends.

44 The builder submitted that the arbitrator made no manifest error of law in his interpretation of cl 11.

45 The builder submitted that the proprietor's construction of cl 11(b) and (c) did not take into account the words in cl 11(b) '[n]otwithstanding provisions to the contrary contained in this Contract the Builder shall not be responsible for any delays caused by any matter or thing over which the Builder shall have no control'. These words, it was submitted, are a clear and overriding statement in the contract to the effect that the builder was not responsible for anything over which it had no control. Accordingly, the failure to give notice could not thwart the builder's defence to the proprietor's claim for damages for delay.

46 Counsel for the builder sought to distinguish the cases cited by the proprietor on the basis that the extension of time provisions in those cases were significantly different to those in the contract. He submitted that cl 11 did not overcome the prevention principle.

47 The builder submitted that cl 11(c) could not be understood to require the builder to notify the proprietor of the proprietor's own delay. Further, even if it did, notice did not have to be given in writing.

48 It cannot be overlooked that the proprietor must demonstrate that the conclusion reached by the arbitrator on the question of construction of the contract is manifestly wrong. Minds might differ on the construction of cl 11 but it is not enough that I might or would, on balance, have taken a different view on the proper construction of the clause: Zurich Bay Holdings Pty Ltd v Iluka Midwest Ltd [2009] WASC 237 [12].

49 In my opinion the arbitrator's construction was legitimately open to him. I would, however, go further. In my opinion it was correct. Either way, manifest error has not been demonstrated.

50 The construction of cl 11(a) is not controversial in this case. Plainly it provides for when the works are to commence and be completed. The clause obliges the builder to 'proceed therewith with reasonable despatch and diligence and complete the Works'.

51 With respect to cl 11(b) I accept the builder's submission that the words '[n]otwithstanding provisions to the contrary contained in this Contract the Builder shall not be responsible for any delays caused by any matter or thing over which the Builder shall have no control' are a clear and overriding statement which means that no other provisions in the contract, including cl 11(c), can have an effect which results in the builder having responsibility for any delaying event over which the builder had no control. I interpret the word 'responsible' as including any financial responsibility.

52 Clause 11(b) sets out from (i) - (x), in an inclusive way, some of the events or things over which the builder shall have no control. The delays which the arbitrator found were the proprietor's come within the words in cl 11(b)(iii) 'any omission of the owner'. Accordingly, the proprietor's delays were matters over which the builder had no control.

53 So far as cl 11(c) is concerned the arbitrator found that no notice was given by the builder, albeit the proprietor was aware of its delaying conduct. That finding of fact cannot now be challenged. I reject the builder's submission that notice under cl 11(c) did not have to be in writing. Clause 19 by virtue of its opening words '[a]ny notice given to any party pursuant to the terms of this Contract' includes any notice to be given under cl 11(c). However, given the clear overriding statement in cl 11(b) to which I have referred, I do not see how failure to comply with cl 11(c) can lead to the builder being responsible for the delays which the proprietor caused over which the builder had no control. To hold the builder responsible by requiring him to pay damages would not reflect the clear language used in cl 11(b).

54 I now turn to the prevention principle. This principle has a long legal lineage which is set out in Alghussein Establishment v Eton College [1991] 1 All ER 267, 270 - 272.

55 Although some regard the principle as a rule of law (see the discussion about this in Sir Kim Lewison, The Interpretation of Contracts (4th ed, 2007) [7.10]), in Australia, and for that matter England and Wales, it is regarded as a principle of construction. It is based on considerations of fairness and reasonableness: SMK Cabinets v Hili Modern Electrics Pty Ltd [1984] VicRp 31; [1984] VR 391, 397.

56 In Alghussein Establishment v Eton College (274) Lord Jauncey (Lords Bridge, Elwyn-Jones, Ackner & Goff agreeing), said that the prevention principle will yield in the face of clear express provisions which contradict the presumption that it was not the intention of the parties that either should be entitled to rely on his own breach in order to obtain a benefit.

57 In Australia, the cases indicate that while clear words are required, they do not necessarily have to be express. See for example Turner Corporation v Austotel (395).

58 Whether words excluding the prevention principle are required to be express or not, they most certainly need to be clear having regard to the construction of the contract as a whole. In my opinion the words of this contract do not clearly exclude the prevention principle.

59 I have read carefully the cases cited by the proprietor's counsel I referred to earlier in these reasons at [42].

60 Counsel relied particularly on Cole J's statement in Turner Corporation v Austotel (384 - 385):

If the Builder, having a right to claim an extension of time fails to do so, it cannot claim that the act of prevention which would have entitled it to an extension of the time for Practical Completion resulted in its inability to complete by that time. A party to a contract cannot rely upon preventing conduct of the other party where it failed to exercise a contractual right which would have negated the affect of that preventing conduct.

61 This statement must, like the other cases relied upon by the proprietor, be seen in its proper context. There are features of this and other cases cited by the proprietor which are not present here. The extension of time provisions were in contracts which provided for liquidated damages to be paid by the contractor in the event of delay. Further, the provisions are detailed and very clear about how notice of any delaying event is to be made, to whom it is to be made, when it is to be made, and the consequences of failing to give it. Moreover, in none of the contracts referred to in the cases is there a provision with the kind of overriding words seen in cl 11(b). Finally, in none of the cases were there findings that delay had actually been caused by the proprietor and the proprietor was aware of the delay.

62 In my opinion, the authorities cited by the proprietor are distinguishable from the present case and do not assist the proprietor.

63 There remains to be considered the effect of cl 11(c). I do not consider it to be inoperative or surplus. There is an obligation to provide notice to the proprietor. However, breach of it does not lead to the consequences urged on the arbitrator by the proprietor on the facts of this case.

64 For these reasons the proprietor has failed to demonstrate that the arbitrator made a manifest error of law. Leave to appeal is refused on ground 1.

65 The burden is on the proprietor to establish that there was no evidence that any act or omission caused or contributed to the delay in bringing the works to practical completion. If there was some evidence before the arbitrator to this effect no manifest error of law can be established.

66 The proprietor is hampered in its task by the practical problem of the absence of a transcript of the proceedings or detailed notes of the evidence: Ukrainian Association v Squire Constructions [41]. Moreover, in my view, it is clear from the arbitrator's interim award that there was evidence on the issue of causation. At par 5.3 of the arbitrator's interim award the arbitrator summarised the evidence of Mr Weston, the builder's representative, as to both the nature of the delaying events and the length of the delay that resulted from them. In par 7 the arbitrator stated that he accepted Mr Weston's evidence. Plainly there was evidence before the arbitrator of causation.

67 There is no substance in ground 2. Leave to appeal is refused.

68 Like ground 2, this ground alleges an absence of any evidence, this time in relation to the arbitrator's finding that the builder was entitled to be paid costs in the sum of $202,348.57 (being the sum claimed $202,465.57 less $117). Specifically, the proprietor submits that there was no evidence that the costs claimed by the builder were reasonably and properly incurred.

69 The proprietor submitted that the onus was on the builder in arbitration proceedings to establish that the costs it claimed were actually incurred and were reasonable. It was submitted that there was no evidence that any of the claimed costs were reasonably incurred.

70 The builder submitted that there was evidence to support the finding of reasonableness.

71 Again, proof of this ground is hampered by the lack of a transcript and adequate notes of evidence.

72 I accept that a provision in a building contract which entitles a builder to be reimbursed for costs incurred will be subject to an implied term that the costs will be reasonably and properly incurred: Onesteel Manufacturing Pty Ltd v United KG Pty Ltd [2006] SASC 119; (2006) 94 SASR 376 [36].

73 The builder's claim for unpaid costs is dealt with in par 11 of the arbitrator's interim award. In par 11.1 the arbitrator is clearly alive to the issue that the reasonableness of the claimed costs was in dispute.

74 He then proceeds to determine the builder's claims under various headings. It is apparent from the interim award that the arbitrator examined individually the many invoices which were put before him and significantly in my view, he heard evidence about them. Under each heading he came to a decision about what sum had been reasonably and properly incurred. In these circumstances it is very difficult to see how there was a complete absence of evidence on the point.

75 The proprietor submitted that the invoices tendered at the arbitration were themselves insufficient to establish that the amounts charged in them were reasonable and properly incurred: Michael Kellaway International Pty Ltd v Shark Bay Airport Pty Ltd (Unreported, WASCA, Library No 970604, 13 November 1997); and West Boat Builders Pty Ltd v Cull Holdings Pty Ltd [1999] WASCA 72; (2000) 16 BCL 21. These cases are distinguishable. They relate to decisions by judges and not expert arbitrators. Further, in this case there was oral evidence about the reasonableness of the invoices.

76 It must be remembered that one of the advantages of arbitration is that the dispute is resolved with the consent of the parties, by a person who has training and expertise in respect of the subject matter of the arbitration: New Generation Enterprises Pty Ltd v WAPC [5]. The arbitrator is expected to and should bring that experience to bear when he or she assesses the evidence. In this case the arbitrator was well able to use his expertise to judge the reasonableness of the invoices.

77 There is no substance in ground 3. Leave to appeal is refused.

78 For the reasons I have expressed none of the proposed grounds have merit. Leave is refused in relation to all of them. The appeal must be dismissed.