Bles v GRS

High Court of Australia|1927-07-01|Before: Starke JJ

SAS Hs 570 HIGH COURT {HIGH COURT OF AUSTRALIA.] THE MELBOURNE HARBOUR TRUST ; COMMISSIONERS - 2 0 2 ae AND HANCOCK Scar' Enea' el ene REsPon ON APPEAL FROM THE SUPREME COURT OF VICTORIA. H.C. or A, Arbitration - Award - Setting aside award - Construction of cont 1927. construction left to arbitrator - Application of wrong principle - U1 See, award - Misconduet of arbitrator - Arbitration Act 1915 (Vict.) (No. 2614), a MELpourne, 19. : Mar. 14-17; : ate a: A contract between the omen and the nit, for the cunyiaa by the respondent of certain works in connection with the construction es Ce wharf, contained a clause providing that the appellants' engineer should | Gavan | Dufty, the power of requiring from time to time the omission of any particular Starke JJ. or portions of the work and of deducting the value of the omitted part from

amount of the contract and that the respondent should have no claim for lo damage or compensation on that account. Certain omissions having

that the construction of the contract was a matter committed to the that his decision thereon was correct and, the question whether the omission did fundamentally alter the nature of the contract being one arbitrator alone, that his award was not open to attack on the ground construing the contract he had proceeded upon wrong principles of const or had otherwise been guilty of some error of law.

Kelantan Government v. Duff Development Co., (1923) A.C. 395, applied

'The contract also contained a clause providing that the respondent, on receiving a written notice from the engineer, should from time to time suspend the whole or any portion of the works as might be directed, and another clause providing that none of the provisions of the contract should be varied, waived, discharged or released unless by express consent of the appellants under their seal.

Held, that notwithstanding the last-mentioned clause the appellants might be precluded by their conduct from relying on the absence of a written notice directing a suspension.

Craine v. Colonial Mutual Fire Insurance Oo., (1920) 28 C.L.R. 305; York- shire Insurance Oo. v. Oraine, (1922) 2 A.C. 541; 31 C.L.R. 27, followed.

'The arbitrator in respect of a claim for lose occasioned by a suspension of "certain portion of the work awarded a certain sum and, in the event of the Supreme Court of Victoria determining that certain views expressed by him in his reasons as to the meaning of the clause relating to suspensions were 'erroneous, a certain larger sum.

Held, that in the absence of any such determination the alternative award did not come into operation and the award was not thereby rendered uncertain.

The arbitrator during the course of the arbitration stated that he would, by 'stating a case or otherwise, afford the appellants an opportunity of obtaining the opinion of the Supreme Court upon the question of the construction of the "contract, and the appellants were therehy induced to refrain from applying to the Court under sec. 19 of the Arbitration Act 1915 (Vict.) for an order directing the arbitrator to state a case for the opinion of the Court. The arbitrator made his award, and at the same time issued his reasons for his award, whereby the appellants were enabled on a motion to set aside the award to raise the substantial points of law upon which it relied.

Held, that the arbitrator was not guilty of misconduct.

Decision of the Supreme Court of Victoria (Full Court) affirmed.

EAL from the Supreme Court of Victoria. 9th January 1924 a contract was entered into between the Melbourne Harbour Trust Commissioners and Charles Daniel Hancock. The contract was embodied in a printed contract form ited by both parties, incorporating by reference four other documents, namely, Hancock's tender, the specification, the itions of the contract and the acceptance of the contract. In e specification the contract was described as a contract " for the ition of existing wharf and sheet piling and construction of a y wharf for river berths between Victoria Dock and proposed

H. C. or A. 1927. _~ MELBOURNE Harpour 'Trust Commis- SIONERS % Hancock.

H.C. or A. Appleton Dock entrance." The conditions of the contract

Mztsourne "1, This contract is a schedule of prices contract, Trusr such extras, additions, deductions, enlargements, d Commas: a}terations, and omissions, required by the engineer, as

% provided. The contractor shall, if required, furnish on den Hancock.

schedule of his estimated quantities, rates and amounts for item of work described in such schedule, or required in orde

carry out all the works of the contract; and in case the described in the schedule do not include all the descriptions of we and material required for the entire completion of the cor the contractor shall enter upon the schedule all such ad items as may be necessary in order to form his correct and arrive at the bulked sum named in his tender, which sum must correspond in amount with the total arrived at b summing up of the various amounts carried out in his The schedule is intended to show how the amount named tender has been estimated for the information of the Comm only and their officers and is to form a part of the contrac to be the basis for progress or other payments or valuations.

"13, The engineer shall have the power of requiring fron to time the omission of any particular portion or portions of works of this contract, and of any materials or other matter to supplied by the contractor, whether such omitted portion or po may or may not be requisite or necessary to complete the wl of the works, and of deducting the value thereof from the a of the contract, at rates to be fixed by the engineer under his whose decision shall be binding and conclusive on all parties the contractor shall have no claim for loss, damage, or comp on this account anything herein contained to the contrary m0 standing."

"21. The contractor, on receiving a written notice fron engineer, shall from time to time suspend the whole or any of the works as may be directed; and the contractor shall no claim for loss or damages on this account until after a the expiration of thirty working days from the dates of s suspensions, and such suspensions shall in no wise vi

ontract. All claims for loss or damage caused by such suspensions the expiration of the said thirty days in each case of suspension all be settled by the engineer, whose decision shall be binding d conclusive on the Commissioners and on the contractor."

"35. None of the clauses or provisions of the specification or of conditions, or of any other part of this contract, shall be ied, waived, discharged, or released, either in law or in equity, y the express consent of the Commissioners under their seal." The tender was on a form of specification prepared by the mers in which the quantities of the various items of work 'material were set out in a "schedule of quantities' on which printed notification that "the quantities in this schedule are f guaranteed as correct, but are merely given for the guidance intending contractors. The final quantities will be taken from tual measurements on completion of the works." The tender ted of a document containing a copy of the schedule of antities with the rates for the various items filled in and the

rates. Those amounts were added together and the total was ut £130,000 with a deduction of 1s. 9d. for every cask of cement lied by the Commissioners.

important portion of the work consisted of a large quantity avation and reclamation work. The work under the contract proceeded for some time, on Ist July 1925 a written notice Ss given by the engineer to Hancock requiring the omission from é contract of certain portions of the specified work, and on 9th ptember 1925 the engineer gave a further written notice that in pect of the required omissions he deducted £55,894 16:. 10d. m the amount of the contract.

Disputes having arisen between the parties, on 9th December 5 an indenture of submission to arbitration was executed by the issioners (therein called "the Trust") and Hancock (therein lled " the contractor "') which, so far as is material, was as follows : - ereas by a certain contract in writing made 9th January 1924 the Trust of the one part and the contractor of the other part agreed that the contractor should execute the works and provide le materials specified in the said contract at the rates and upon and

_ MELBOURNE Harpour Trust Commis- SIONERS

Hancock.

subject to the terms and conditions in the said contract partic set forth And whereas by notice dated 30th June 1925 works and materials of the contract were required to be o1 from the contract And whereas the sum of £55,894 16s. 10d. h been deducted from the amount of the contract by reason of said works and materials having been required to be omitted | the said contract And whereas the contractor while ad that the omission and deductions were made under and in accor with the requirements of the contract alleges that the said om was not such as could properly be made under the said cor

and the contractor claims for loss occasioned by performin remainder of the contract the sum of £10,045 2s., parti which are as follows - (a) £9,185 2s. by reason of the omis 256,776 cubic yards from excavations required by the cor and the consequent increase in the cost per cubic yard for reduced excavations ; (b) £860 by reason of the reduction of th number of piles from 2,113 (the number required by the conti to 1,038 - the sum claimed is for the cost of moulds made but required owing to the reduced number of piles And whereas | contractor also alleges that prior to the requiring of such om as aforesaid portions of the said works of such contract suspended and the contractor claims £3,000 for loss occasione such suspension And whereas the Trust denies all the allegations of the contractor and disputes all the claims of 1 contractor: Now this indenture witnesseth as follows : - (1) allegations and claims of the contractor hereinbefore recited hereby referred to the award and final determination of Edward Fancourt Mitchell, K.C.M.G., K.C. (hereinafter ca "arbitrator ") so that the award of the arbitrator concerning l same be made in writing ready to be delivered to the said p or either of them on or before the day of December or any later day to which the arbitrator may by writing und hand endorsed on these presents from time to time enlarge time for making his award. . . . (9) The provisions of 1 Arbitration Act 1915 so far as consistent herewith shall be deen to be incorporated herein."

On 16th April 1926 the arbitrator issued his award which, so far is is material, was as follows : - " I do award and adjudge that the said omission was not such as could properly be made under the said ontract. And do further award and adjudge that of the contractor's said claim for loss occasioned by performing the remainder of the contract as to (a) being the said sum of £9,185 2s. by reason of the omission of 256,776 cubic yards from excavations required by the contract and the consequent increase in the cost per cubic yard for

of Victoria or any other Court of competent jurisdiction einafter finally determining in any proceedings duly brought by her of the said parties in respect of this my award that the views xpressed in my reasons for this award published contemporaneously ewith to the effect that I have no jurisdiction under the terms of the indenture of reference to award damages or compensation to contractor in respect of the said claim of the contractor on the of a 'quantum meruit' claim are erroneous and that I had jurisdiction to make an award in respect of the said sum of £9,185 2s.

eduction of the number of piles from 2,113 (the number required y the contract) to 1,038: The sum claimed being for the cost of

s I do award adjudge and direct that the Trust do pay to the tractor the whole of the said sum of £860. And I do further ward and adjudge that prior to the requiring of the said omission aforesaid portions of the said works of such contract were pended. And do further award adjudge and direct that of the mtractor's said claim of £3,000 in respect thereof the Trust do ay to the contractor the sum of £2,500. And I do further award determine that in the event of the Supreme Court of Victoria any other Court of competent jurisdiction hereinafter finally

ed MELBOURNE Harpour Trust Commas- SIONERS v Hancock.

MELBOURNE Harpour TrusT Commis- SIONERS vw Hancock.

determining in any proceedings duly brought by either of the parties in respect of this my award that the views expressed in : reasons for this award published contemporaneously herewit the effect that such suspension is a suspension to which the ter of condition 21 of the general conditions of contract are erroneous to the extent that such suspension was not one which the provisions of such condition 21 applied then I awan and adjudge that this part of my award should be varied increasing the said amount of £2,500 to the sum of £3,000 altos and in such event I do award and direct that the Trust do pay sum of £3,000 to the contractor in lieu of the sum of £2,500." 1 the award the arbitrator's reasons were attached.

The Commissioners moved the Supreme Court to set aside 1] award, and the Full Court dismissed that motion and ordered the amount of Hancock's claim for loss occasioned by perform the rest of the contract as set forth in par. (a) of the reference remitted to the arbitrator for his reconsideration.

As to the construction of the submission Irvine C.J. was of 0 that the recital that the contractor admitted that the omi and deductions "were made under and in accordance with requirements of the contract " was limited to matters of form. reference to a contention that the arbitrator had been guilty « misconduct in that he had stated that he would, by stating a cz or otherwise, afford the Commissioners an opportunity of obte the opinion of the Court upon the question of the construction of the contract, that the Commissioners were thereby induced refrain from applying to the Court under sec. 19 of the Arbit Act 1915 (Vict.) for an order directing the arbitrator to state 1 question for the opinion of the Court, and that the efiect of | award in the form in which it was made was to prevent that 0 being obtained, Irvine O.J. said: - "It would appear that the learned arbitrator thought that the making of his award and attaching thereto his reasons, which he throughout indicated as one of th alternatives he might decide to adopt, and which he, in fact, adop ed

would give all parties the same rights to review his decisions points of law as if he had stated those points of law in a special ¢

under sec. 19 of the Arbitration Act. It would appear also that th

resentatives of the Board accepted his opinion, and did not in t apply to a Judge to direct the statement of a special case, nor apply to the arbitrator at the close of the evidence for a special case, suggested by him. If he was wrong in this view, as to any of points of law specifically referred to him, the honest expression his view, even if it lulled the Board into a false security, does not, my opinion, amount to ' misconduct,' invalidating the award, can the arbitrator's words or actions be taken to amount to any of warranty that the effect of the course, which he had many nes announced as one of the alternatives he could adopt and which he has in fact adopted, would have all the legal effects which he thought it would have. If the Trust desired to safeguard itself ts course was clear - namely, to apply at the close of the evidence for a special case. It is not probable that a Judge would have

rdered a special case where questions of law were specifically teferred to the arbitrator, and the parties had selected for this very purpose an eminent lawyer. 'The dominant factors, guiding the discretion of the Judge in ordering a special case under sec. 19, are, what is the nature of the point of law and what are the qualifications 'of the arbitrator for deciding the point in question' (In re Nuttall and Lynton and Barnstaple Railway Co. (1), adopted by Schutt J. in In re President &c. of the Shire of Wodonga and Carr (2); and same case on appeal to the High Court (3) ). It would, I think, unjust to the other party to the arbitration that all the cost and trouble of the arbitration should be rendered useless by the fact that e Trust, relying on a possibly incorrect view of the arbitrator as to the extent to which the Court's power to review his award might be ted by the form it took. omitted to apply for a special case."

_ From the decision of the Supreme Court the Commissioners now,

Other material facts are stated in the judgments hereunder.

Ham K.C. (with him Spicer), for the appellants. The finding by e arbitrator that the omission was not one that could properly ye made under the contract was open to question before the Court

(1899) 82 L.. 17, at pp. 19-20, per (2) (1924) V.LR. 56, at p. 625 45 ollins LJ. A.L-T. 89, at p. 92. (3) (1924) 34 C.L.R. 234, at p. 242,

_ MELBOURNE Harzour Trust Commis- SIONERS v. Hancock.

reasons for it that conclusion is wrong in law. It is not di that if a pure question of law is referred to an arbitrator his d thereon cannot be upset on the ground that his decision is w in law. But, assuming that a question of the construction of contract is a pure question of law, the question referred in case was not only as to the construction of the contract, and, if it was, the decision can be upset if it be shown that the arbitrat applied a wrong principle of construction. The arbitrator di apply a wrong principle of construction in that he held that el 13 could not be construed in such a way as to put the respon at the mercy of the appellants. There was no legal ground for th implication that clause 13 did not apply to omissions whid fundamentally altered the nature of the contract. The arbitrator was wrong in holding that the appellants were not entitled to advantage of clause 13 because they were responsible for bringing - about the condition of affairs which rendered the omission necessary or advisable. [Counsel referred to British Westinghouse Electric and Manufacturing Co. v. Underground Electric Railways Co. of London (1); Champsey Bhara & Co. v. Jivraj Balloo Spinning and Weaving Co. (2): Kelantan Government v. Duff Development Co. (3); Carr v. Wodonga Shire (4); In re King and Duveen (5); Young we Walter (6); Kent v. Elstob (7); Parsons v. Brixham Fishing Smack Insurance Co. (8); Czarnikow v. Roth, Schmidt & Co. (9): R. ve Peto (10).] 1

[Isaacs J. referred to In re Olympia Oil & Cake Co. and MacAndrew Moreland & Co. (11).]

The arbitrator indicated by his award and reasons that he did not intend to make an award upon any other basis than that his award should be subject to correction by the Court; the appellants are, therefore, not precluded from obtaining that correc- tion. As to the £9,000 in respect of the omission and the oe in respect of the suspension, the award is not final, for it is in each

(1) (1912) A.C. 673, at p. 686. (7) (1802) 3 East 18.

(2) (1923) A.C. 480, at pp. 486-488. (8) (1918) 118 LP. 600. i (3) (1923) A.C. 395, at pp. 408, 416. (9) (1922) 2 K.B. 478, at pp. 484, (4) (1924) 34 G.LR. 234. 491.

(10) (1826) 1 Y. & J. 37. G4, (11) (1918) 2 K.B. 771.

_ suspension the arbitrator was not entitled to find that there had

in writing. Under clause 35 a waiver must be under seal, and even if that could be waived there was no evidence of a waiver by the appellants, who alone could waive the requirement of clause 35.

Owen Dixon K.C. (with him Robert Menzies), for the respondent. Clause 13 of the conditions does not operate upon so much of the contract as is to be paid for according to the rates of payment. It cannot operate so as to enable some fundamental change to be made in the character of the work, or, in other words, so as to enable the appellants to stop the work or rescind the contract. There was not an omission from the works but a change in the character of the works. The effect of Kelantan Government v. Duff Development Co. (1) is that if parties by a contract agree to refer a question of construction to an arbitrator his conclusion upon that question is final. Here, looking at the submission, the parties did submit a question of construction to the arbitrator. The construction of a document is not a question of law. It is a matter for the determina- tion of the Court; but that does not mean that it is a question of Jaw. The Kelantan Case is the only case which suggests that it _ isa question of law. [Counsel referred to Tn re Nuttall and Lynton and Barnstaple Railway Co. (2).| The arbitrator did not intend to leave to the Court any question which was finally committed to him, but he intended to leave to the Court those questions which would be open to the Court if the only question left to him was the question of construction, and by doing so he has not prevented the appellants from obtaining the decision of the Court upon any question which they were entitled to have determined by the Court. The decision that the appellants were not entitled to rely on the fact that the notice of suspension was not in writing is correct in view of the decision in Craine v. Colonial Mutual Fire Insurance Co. (3). The appellants did not disavow, but adopted, the act of the engineer, and they are not entitled to say that the legal

(1) (1923) A.C. 395, (2) (1899) 82 LT. 17. (3) (1920) 28 C.L.R. 305.

case subject to a condition. As to the claim in respect of the H.C. or A.

been a waiver of the provision that a notice of suspension must be Mexsovrye

consequences did not flow from the notice because it was not writing. The award in respect of the loss occasioned by suspension is not uncertain. The award of an alternative sum does not depend on anything extrinsic to the award but depends solely on whether the award is held to be bad. There is no lack of certainty as to what was awarded but only as to whether the award was good.

Kyox C.J. anp Gavan Durry J. This is an appeal by special leave from an order of the Supreme Court of Victoria dismissing an motion to set aside an award. The submission to arbitration is contained in a deed the material portions of which are in the words - following : - [The material portions of the submission were set out.]

The arbitrator by his award adjudged (1) that the omission directed by the notice of 30th June 1925 was not such as could be properly made under the contract; (2) that in respect of claims i (a) and (b) respectively the appellants should pay to the respondent the sum of £9,000 and £860 respectively, and (3) that in respect of - the claim for loss occasioned by suspension of the works the appellants should pay to the respondent the sum of £2,500. The award - contained references to the reasons of the arbitrator published - contemporaneously therewith. In the opinion of the majority of -

the Supreme Court, with which we agree, these reasons are to be read with the award. 4

The principal ground of attack on the validity of the award was 7 that the decision of the arbitrator that the omission in question - was not such as could properly be made under the contract was wrong in law. It was argued for the appellants that it appeared from the reasons that the arbitrator in arriving at this conclusion - : had wrongly construed clause 13 of the contract and had in doing so proceeded on wrong principles of construction. This, it was - said, amounted to error in law appearing on the face of the award and afforded sufficient ground for setting it aside. If we assume this to be so, the first question to be considered is whether the

decision of the arbitrator that the omission was not such as could properly be made under the contract is subject to review. In Kelantan Government v. Duff Development Co. (1) it was decided by the House of Lords that where a question of construction is specifically referred, or is the very question referred, to arbitration, the decision of the arbitrator on that point cannot be set aside _ because the Court would have come to a different conclusion unless it appears on the face of the award that the arbitrator has acted illegally, e.g., by deciding on evidence which is inadmissible or on principles of construction which the law does not countenance. Tn that case Viscount Cave L.C., with whose reasoning Lord Shaw of Dunfermline agreed, said (2) : - " The reference, therefore, was a reference as to construction. If this be so, I think it follows that, unless it appears on the face of the award that the arbitrator has proceeded on principles which were wrong in law, his conclusions as to the construction of the deed must be accepted. No doubt an award may be set aside for an error of law appearing on the face of it; and no doubt a question of construction is (generally speaking) a question of law. But where a question of construction is the very thing referred for arbitration, then the decision of the arbitrator upon that point cannot be set aside by the Court only because the Court would itself have come to a different conclusion. If it appears by the award that the arbitrator has proceeded illegally - _ for instance, that he has decided on evidence which in law was not admissible or on principles of construction which the law does not countenance, then there is error in law which may be ground for setting aside the award; but the mere dissent of the Court from the arbitrator's conclusion on construction is not enough for that _ purpose." And Lord Parmoor said (3) : - '' In the present appeal it was argued by the counsel on behalf of the appellants that the question of the construction of the deed had not been specifically referred to the arbitrator, although the construction of the deed was absolutely necessary for the determination of the disputes which had been referred to him. In my opinion this contention is not maintainable. Whether, however, a question of law has been

(1) (1923) A.C, 395. (2) (1923) A.C., at p. 409, (3) (1923) A.C., at p. 418,

MELBOURNE Harzour Trusr Commis- SIONERS v. Hancock.

H.C. or A. gpecifically submitted to arbitration, falls in each case to ae determined on the terms of the particular submission. If Mexsourne Court, before which the award is sought to be impeached, comes eae the conclusion that the alleged error in law, even if it can be Counts; maintained, arises in the decision of a question of law dire cp ea submitted to the arbitrator for his decision then the princi stated by Channell J. in In re King and Duveen (1) applies, and

Sivan diy J. parties having chosen their tribunal, and not having succes applied to the Court under either sec. 4, or sec. 19, of the Arbi

Act 1889, are not in a position to question the award, or to

to set it aside." Lord Swmner gave no reasons for concurring in the

motion to dismiss the appeal, while Lord Tvevethin appears to ha

thought that the decision of the arbitrator was open to

but was well founded. On the terms of the submission in

present case it is clear that one question specifically submitted t

the arbitrator for final determination was whether the omii

could properly be made under the contract, and the answer

that question depended wholly on the meaning of the contract and

on the nature of the required omission. This view of the intentio1

of the parties seems to us to be supported by reference to par. 31

of the contract, which provides in very wide terms for the reference

to the engineer, to be settled and decided by his award, of almost

every conceivable kind of dispute between the parties, includi

disputes " touching or concerning the meaning of this contract, or

touching or concerning any order made by the engineer." inference which we draw from the insertion of this clause in contract is that the parties intended to forego the right to submit for determination by a Court of law any dispute which might a in carrying out the contract. They have, in effect, by the submi done no more than substitute an eminent lawyer for the engine being probably influenced in so doing by the nature of the ques submitted. On this view of the meaning of the submission next question for consideration is whether it appears on the fa of the award, including the reasons published therewith, that th arbitrator proceeded on wrong principles of construction. careful consideration of the passages which are referred to in

proceeded on wrong principles has failed to satisfy us that he did

he conclusion at which he arrived, but he definitely decided that the notice to omit was not within the provisions of clause 13 of the contract because on a consideration of all the terms of the contract and the nature and extent of the work to be done under it he

issions the extent and nature of which would render the remaining at of the work a fundamentally different undertaking from that iginally covered by the contract. If this can be described as a principle of construction, it is not, in our opinion, erroneous as a tule to be applied, though its application in a particular case may be erroneous. The appellants also attacked the award made on the claim for £3,000 for loss occasioned by the suspension of the work. The award on this claim is in the words following : - "I do further award and adjudge that prior to the requiring of the said omission as aforesaid portions of the said works of such contract were pended. And do further award adjudge and direct that of the mtractor's said claim of £3,000 in respect thereof the Trust do pay to the contractor the sum of £2,500. And I do further award and determine that in the event of the Supreme Court of Victoria or any other Court of competent jurisdiction hereinafter finally ing in any proceeding duly brought by either of the said ies in respect of this my award that the views expressed in my ons for this award published contemporaneously herewith to e effect that such suspension is a suspension to which the terms condition 21 of the general conditions of contract . . . apply erroneous to the extent that such suspension was not one to which the provisions of such condition 21 applied then I award d adjudge that this part of my award should be varied by 2 the said amount of £2,500 to the sum of £3,000 altogether din such event I do award and direct that the Trust do pay the of £3,000 to the contractor in lieu of the sum of £2,500." It said for the appellants that this award was bad (1) because it as uncertain and not final and (2) because the arbitrator had

thought that the words of the clause should be read as excluding Gavan Datty 3.

asons of Mann J. as leading to the conclusion that the arbitrator H.C. oF A.

so. No doubt the arbitrator gave additional reasons in support of Mezsovrne

wrongly construed clause 21 of the contract as applying to ; suspension of work not ordered in writing. As to the first obj there is, in our opinion, no uncertainty in the award. The arbi held that clause 21 applied, and on that footing assessed the loss £2,500. The alternative award of £3,000 was expressed to be conditional upon the determination by the Court that the arbit : was wrong in holding that clause 21 of the contract applied, in the absence of any decision to that effect never came operation and may be treated as a nullity. In support of the second objection Mr. Ham for the appellants argued that, as notice to suspend was not in writing, clause 21 did not apply and that, having regard to clause 35 of the contract, the arbitrator was _ wrong in law in holding that the condition requiring a notice in writing could be and was waived. That he so held appeared from his reasons. Clause 35 of the contract is in the words following : "None of the clauses or provisions of the specification or of a conditions, or of any other part of this contract, shall be varied, waived, discharged, or released, either in law or in equity, unless by the express consent of the Commissioners under their seal." The decision of this Court in Craine v. Colonial Mutual Fire Insurance Co. (1) is authority for the proposition that the appellants might be precluded by their conduct from relying on the absence of a notice in writing notwithstanding the existence of clause 35 of the contract. The question whether they were so precluded was one the determination of which was for the arbitrator. For these reasons we think that the appellants have failed to establish 2 error in law appearing in the award and the attack on this part of the award fails.

The validity of the award was also challenged on the ground misconduct on the part of the arbitrator. It was said that arbitrator had on various occasions in the course of the pi before him stated that he would, by stating a case or "aaa afford the appellants an opportunity of obtaining the opinion of a Court upon the question of construction, that the appellants induced by these statements to refrain from applying to the Oot i

under sec. 19 of the Arbitration Act for an order directing ™

that if the effect of the award in the form in which it was made

thinking that, for the reasons stated by Irvine C.J., this objection to the award cannot be sustained.

Isaacs J. The appellants contend that the award should be set aside, and for reasons that resolve themselves into three issues : first, as to the omissions - that clause 13 of the contract does not permit so fundamental a set of omissions as were directed by the engineer ; next, as to the suspension under clause 21 - that it was not within the contract because it was not in writing and that 'objection could not be held to be waived by reason of any conduct short of writing ; and lastly, as to both branches - that there was 'misconduct of the arbitrator.

_ The first two reasons are dependent on the application of a rule now established beyond discussion, namely, that an award may be set aside for error of law appearing on its face. The meaning and extent of that rule has occasioned considerable argument and has occupied a great amount of time. But I think its formulation is not difficult when the governing authorities are carefully read. With one qualifying observation, I think that Lord Trevethin in the Kelantan Case (1) collected in a short passage the broad sense of he matter as found in the cases from Hodgkinson v. Fernie (2) to the Kelantan Case. His Lordship said that the arbitrator's decision cannot be questioned, though the law be bad on the face the award, only " when the submission is of a specific question law, and is such that it can be fairly construed to show that the ies intended to give up their rights to the King's Courts, and in lieu thereof to submit that question to the decision of a tribunal of their own." As to "specific question of law" as there used, I do not understand that to be confined to a question of law separately

(1) (1923) A.C, at p. 421. (2) (1857) 8 C.B, (N.S.) 189. VOU, XXxIx. 40

arbitrator to state the question for the opinion of the Court, and H.C. or A.

'was to prevent the opinion of the Court being obtained on this ye question, the arbitrator was guilty of misconduct in the technical HA®2°U® sense. We agree with the learned Judges in the Supreme Court in Commus-

H.C. or A. and categorically stated in the form of a legal proposition, but

tee * question of law necessarily forming an integral part of the mat Metzourne Submitted. The governing notion is contained in the rest of ape passage quoted. To express the rule in my own words, I woul

conn. say that as to every question of fact and of law necessarily inch ee within the inner area of the submission, and therefore e confided to the judgment of the arbitrator, every conclusion of the arbitrator is final, however plainly it appears on the face of award; but as to any matter of law not so included, how necessary it may be as an approach to the inner area, any e appearing on the face of the award is open to the consideration the Court, because that has not been confided to the arbitrator, I take that to be the essence of the observations of Viscount L.C. in the Kelantan Case (1), where he states the principle, leat till later in his judgment the application of the principle to particular case before the House. It remains to apply that rule to the present case, remem that an error of law appearing on a document bound up with #

award is an error appearing on the face of the award itself. As to

clause 13 two objections are taken. It is said that one error law appearing on the face of the award is that the arbitr determined that so fundamental an alteration of the works as caused by the engineer's direction in respect of omissions foreign to the contract. The answer to that is that the conte mingles two things which must be left distinct, namely, enunciation of a principle, and its application. The principle enunciated on the face of the award is that a fundamental

contract, unless, of course, provided for, and would leave one pa . at the mercy of another. That is not an error: it is a

the arbitrator entered the inner area itself, namely, the consti of the clause, and, gauging it by that proposition, found it in opinion too narrow to allow of so wide an omission as was dii . That,being within the inner area, his conclusion is final, Even if wrong in the opinion of a Court, it is an error within his exclus

isdiction and is not what Lord Dunedin, in Champsey Bhara & v. Jivraj Balloo Spinning and Weaving Oo. (1), calls a " legal position which is the basis of the award."

Another objection touching clause 13 is that, even if the restricted view be given to the clause, no proper ground of damages is shown

al grounds and not one to be determined by a merely moral sense justice. But again I see no error of law appearing on the face of award. In a contract of this nature, where such vast powers of direction, control and ultimate decision are vested in the engineer, it is quite reasonable, if the facts sufficiently appear, to find that the contractor yielded to the direction as an exertion of power, ile contesting the right. This the arbitrator finds was the case, ind his decision does not, even if wrong, constitute an error of law on the face of the award. Nor was the direction for omission and the contractor's compliance a necessary or integral part of the new angements. As found, they were not; and so it seems to me. An objection was made that the claim being for loss of cost in respect of the work done - not omitted - was inherently unsustain- able. Strictly read, that might be so; but read as the parties, ing by the evidence, understood it, it is plain enough, It ans, as I understand, that costs which but for the omissions would have been distributed over all the works of excavation, and tecouped generally, were thrown exclusively on the smaller quantity of excavation without the opportunity of recovering them later, as anticipated. As there has been a remittal of this claim to the arbitrator, nothing further as to that need be said.

Next, as to the suspension. The fact that it was verbal and at the requirement of clause 21 is that it should be in writing does give rise to any necessary basic error of law. The findings of e arbitrator really show a case of estoppel by conduct, which is not inconsistent with the non-waiver clause. The only other ection respecting the branch as to suspension is with regard to It is said not to be final. I think it is final in the necessary It is as final as if a case were stated.

'The last question is whether there has been what is called 'misconduct " on the part of the arbitrator. The word is here used (1) (1923) A.C., at p, 487.

only in its technical and often misleading sense. No one sugge: could suggest, the smallest deviation from the strict path of hi But the word "misconduct as employed in this connection in even a mistake in the procedure which has or may have unjus prejudiced a party (see per Lord Watson in Adams v. Great No of Scotland Railway Co, (1) ). Therefore, the appellants say that arbitrator in the course of the proceedings used language le the appellant to believe that there would be no necessity to ma application to the Court under sec. 19 of the Arbitration Act becau the award would be stated in such a way as to enable all disputed questions of law to be considered by the Court. A on this assurance, say the appellants, they waited until the awar was made, and now they are shut out from discussing the tr construction of clause 13 and the true effect of clause 35 upo1 clause 21, or any other question of law excluded as the aw: stands. There can be no shadow of doubt the arbitrator indicate that he would so frame and publish his award as to a that opportunity to the appellants. Neither is there any sha of doubt that the arbitrator endeavoured faithfully to carry ou his promise, and expressly stated he desired the parties to h the opportunity if they so desired. That the appellants fi barriers is not what either the arbitrator or the parties expe There was a mistake, one easily made, in an intricate subject, a which has, I do not say of necessity, but not without pre brought about days of discussion. Justice, I think, requires th if the appellants would be deprived of a tenable ground of objectio1 to the award which they would have had on an application unde sec. 19, their present request to reopen the award should be ace to. Sec. 19 is one which gives the Court a discretion, and, if i sees that the point of law relied on cannot be sustained, # application will be refused. Its function is clearly stated in @ v. Wodonga Shire (2). It touches questions of law, whether the are within the inner area of the arbitrator's jurisdiction, or are 0

the approaches, so as to be a basic foundation on which to the conclusions directly affecting the matters within the

(1) (1891) A.C, 31, at p. 45, 46. (2) (1924) 34 CLR, at pp. 241, 242

The geinion of the Court, as stated at p. 242 of Oarr's Case not a " decision," and, though the arbitrator is " bound" to (ol ow it, yet the general law as to his jurisdiction is not impaired, md, if the opinion is followed, that general law prescribes when how and to what extent his award may be challenged. That n is stated in Carr's Case, where the final authorities are ited. When, therefore, I proceed to consider how the Court in m application under sec. 19 would regard the points raised here, unavailing in this form of award, I find that the appellants have not been prejudiced. To put the matter shortly, I agree with arbitrator that clause 13 does not extend to authorize so ensive and so transforming a scheme of omissions as were ected. They were part of a larger scheme of operations intended the Trust in consequence of its discovery that its first plan of ations had proved impracticable. The Trust then proceeded h the scheme, which involved the stoppage of the original scheme tracted for, and for the substitution of another which, though

the first. The omissions did not preserve the old scheme in general acter, but either treated the work done under it as useless or imnexed it as subsidiary to the new and substituted scheme. True, Trust assumed to act under clause 13 so far as formalities went, the contractor waived formalities, but as to the Trust's right to order the omissions I am of opinion the arbitrator's construction of clause 13 is correct, and as to this part of the matter the appellants ail. With regard to the Trust's contention respecting clause 35 ind its effect on clause 21, I am of opinion that the law as stated n Craine's Case (2) operates to preclude the Trust from relying m any such contention. All contentions with respect to the true sure of damages are already made available under the order

the accidental disappointment occasioned by the form the has taken, in not being technically in the form of a special case. 'The appeal should, therefore, be dismissed.

(1) (1924) 34 G.LR. 234, 2) (1920) 28 C.L.R., at pp. 326-328; and (1922) 2A.0. 541; 31 C.L.R. 27(P.C.).

~ MELBOURNE HarBour Trust Commrs- SIONERS v Hancocx.

MELBOURNE Harpour Trust Commis- SIONERS w. Hancock.

Ricu J. The relevant portions of the submission to arbitr have already been set out, and I need not restate them.

The learned arbitrator decided that the omission directed notice of 30th June 1925 was not such as could properly be n under the contract the subject of the award. This decision, i said, was wrong in law because the learned arbitrator had w construed clause 13 of the contract and applied thereto principles of construction. I cannot accede to this a Clause 13 in terms refers to an omission from the works, not fi the contract - an omission of some physical thing. In my opini a fundamental alteration, such as this was, is not within the clau An alteration which wholly changes the character of the work i not an omission.

In any event I think that the parties by the submission ints to oust the jurisdiction of the Courts. They submitted the spe question which was in controversy between them to the arbitre

as one containing matters of law and interpretation. agreement to abide by his decision on such question was int to commit finally to him the ascertainment and interpretati the contract (cf. Kelantan Government v. Duff Development Co. (1)

The award was also attacked on the ground of uncertainty | want of finality. I do not so regard it. The award of £3,000 based upon a condition which was not fulfilled and is, the otiose.

The further objection that the suspension of work was not 0 in writing also fails. The arbitrator was empowered to determi and did determine that the appellants had waived this condition were by their conduct prevented from taking advantage absence of writing. '

Lastly, I agree that there is no justification for the attack the award on the ground of misconduct. '

For these reasons I agree that the appeal should be dismiss

Srarxe J. "If a specific question of law is submitted to arbitrator for his decision, and he does decide it, the fact the decision is erroneous does not make the award bad on its f

the Judicial Committee of the Privy Council have approved of

Attorney-General for Manitoba v. Kelly (2) ). The question may be found in the submission itself, as in Adams v. Great North of Scotland Railway Co. (3), or the course of the arbitration may show that some question of law was committed to the arbitrator for decision as in the Kelantan Case. A passage in the speech of Lord Trevethin in that case (4) throws a good deal of light upon the views of the other noble and learned Lords on this aspect of the ease. The proposition, however, is not absolute, for the Lord Chancellor (5) added the qualifying words, unless "it appears on the face of the award that he has proceeded on evidence which was inadmissible or on wrong principles of construction, or has otherwise been guilty of some error in law." This passage is somewhat difficult of application. What, asks Irvine C.J., is the meaning of the phrase "proceeded on wrong principles of construction" ? and what, may I ask, is covered by the words " otherwise been guilty of some error in law" ? Some day, no doubt, the passage will be elucidated, but a decision can be reached in this case without endeavouring to expound the qualification made by their Lordships. The question submitted to the arbitrator in the case before us was whether certain omissions from the work prescribed by a contract 'made between the appellants, the Melbourne Harbour Trust Commissioners, and the respondent, Hancock, a contractor, could properly be made - which, I agree, means in this contract, could lawfully be made upon the true construction of the contract. That is as clearly a question of law as were the matters submitted to the arbitrator in the Adams and Kelantan Cases. "The parties committed to the arbiter, whom they selected, the right to construe the contract between them," and they are bound by his decision unless he proceeded on wrong principles of construction or was otherwise guilty of some error in law.

_ The arbitrator found that the work remaining, after the omissions were ordered, was wholly different "from what any person reckoned

(1) (1923) A.C. 395. (3) (1891) A.C., a (2) (1922) 1 A.C. 268. (4) (1923) A. (5) (1923) A.C., at p. 411.

to permit of its being set aside." Both the House of Lords and H.C. or A.

is proposition (Kelantan Government v. Duff Development Co. (1); Mexzourne

or calculated upon" (cf. Thorn v. Mayor of London (1) ). He ti applied his mind to the construction of clause 13. It did not, its face, authorize the omission of the whole of the work the sub of the contract; in other words, the destruction of the cont Now, fundamentally to alter the character of the contract by omission of work is to destroy it as a business or commerci proposition. Consequently the arbitrator held that the prope construction of clause 13 of the contract did not warrant omissi that fundamentally altered its character.

T cannot see that he proceeded upon any wrong principle construction or that he was guilty of any error in law, for I with his construction. If, however, it were wrong, then it s to me that the arbitrater was guilty of some error in law app

ing and forming part of the award, namely, his reasons, the cont and all facts relevant to its construction. It would then app that the award is based upon a legal proposition which is erroneous, to use the words of Lord Dunedin in Champsey Bhara & Co.
Jivraj Balloo Spinning and Weaving Co. (2). It is true that arbitrator adverts, in the course of his reasons, to several irrele' considerations for the purpose of the construction of clause 13, such as the unfairness of the clause if interpreted unfavourably to the contractor, the case of New Zealand Shipping Co. v. Société de Ateliers et Chantiers de France (3), and the form of the notice of - omissions which was actually given, but in the end the arbitrator - found the right test and based his decision fairly and squarely up: the view that clause 13 of the contract did not authorize on fundamentally altering and practically destroying the character of the contract between the parties. Whether the omissions did s change the character of the contract was, of course, for the arbitrator to say, and his decision upon the question of fact is admittedly final and binding upon the parties. The contractor claimed for loss occasioned by performing remainder of the contract £9,185, by reason of the omission of 256,776 cubic yards from excavations required by the contract

(1) (1875) 1 App. Cas. 120, at p. 127. (2) (1923) A.C., at p. 487. (3) (1919) A.C. 1.

reduced excavations; this claim was referred to the arbitrator.

those damages an error of law appears on the face of the award or some document so closely connected with it that it must be ded as part of the award, the error can be reviewed and the wward set aside or remitted to the arbitrator (British Westinghouse Electric and Manufacturing Co. v. Underground Electric Railways Co. London (1); Champsey Bhara & Co. v. Jivraj Balloo Spinning and Weaving Co. (2)). The claim is based, I think, upon some misapprehension of the proper measure of the damages arising from he omission of work from the contract which could not properly be omitted according to its terms. It is clear enough, however, that e arbitrator's calculation is erroneous and the Supreme Court was tin remitting this part of the award to him. The meaning of e claim requires consideration by the arbitrator. It may be capable 'of the interpretation suggested by Irvine C.J., but otherwise I do 'not follow the legal basis of the claim.

I agree that the proper measure of damage for the breach of ontract found by the arbitrator is that suggested by Irvine C.J. ; but that is not the claim made and submitted, to the arbitrator. her, it must be remembered that the contractor was bound to tigate his loss, and it may be that his loss was reduced or wholly averted by the execution of works substituted for the works omitted from the contract.

Another claim of the contractor submitted to the arbitrator was for £3,000 for loss occasioned by the suspension of portion of the orks. Under the contract the engineer might from time to time by notice in writing suspend the whole or any portion of the works. A notice in writing was not given, as the arbitrator finds, in point of fact, and the Trust relies upon the provision of the contract in these words : "None of the clauses or provisions of the specification or of these conditions, or of any other part of this contract, shall be va ied, waived, discharged, or released, either in law or in equity, unless by the express consent of the Commissioners under their ." The arbitrator found that this provision had been waived ;

(1) (1912) A.C., at pp. 686-688. (2) (1923) A.C. 480.

nd the consequent increase in the cost per cubic yard for the H.C. oF A.

The quantum of damage is a question of fact and, if in ascertaining Me.sourne

H.C. or A. by which he means, I apprehend, that the Trust was pre, hae by reason of its acts and conduct from relying on the want of ¥

Mzxtzourne notice (Yorkshire Insurance Co. v. Oraine (1)). The qi

nee is one of fact, and wholly within the jurisdiction of the arbitrato

Comatis- Nothing appears on the face of the award or in the reasons ai SIONERS

v. to it which suggests any error in point of law on the part of Hancock.

The Trust has also sought to set aside the award on the ground of the misconduct of the arbitrator, but the arbitrator in issuin his award with the reasons accompanying it enabled the Trust raise the substantial points of law upon which it relied. If T assent to the reasoning of Irvine C.J. on this branch of the and have nothing to add (see In re Olympia Oil & Cake Co. a MacAndrew Moreland & Co. (2) ). sa

Finally, it was contended that the award was not final and uncertain. In my opinion, that argument is disposed of by s cases as Barton v. Ranson (3); In re Wright and Cromford Canal Co. (4); Olympia Oil Co. Case (5).

Solicitors for the appellants, Malleson, Stewart, Stawell & Nar

Solicitors for the respondent, Arthur Phillips, Pearce & Just. BL.

(1) (1922) 2 A.C. 541; 31 C.LLR. 27. (3) (1838) 3 . ou

M. & W. (2) (1918) 2 K.B,, at p. 775. (4) (1841) 1 QB. 98. (5) (1918) 2 K.B. 771.

At a glance

Court

Decision date

Before

Source

Judgment (160 paragraphs)

Parties