Principal pursuant to clause 46." (emphasis mine)
20. Mr Reeves submitted that the sum of $127,676.00 which had been retained
by Diano represented liquidated damages due to Diano for delay by Evins in
completing the contract, at the rate of $541 per day,
as provided for in
Clause 35.5, and the Annexure to the Contract. It followed in his submission
that in terms of Clause 46 no retention
moneys were "held" by Diano from which
could "be deducted" a sum to meet Evins' debts to Diano of $58,577.62 (Clause
37 expenses)
and $54,566.90 (estimated arbitration costs).
21. He submitted that even if the Court was not prepared to accept Diano's
solicitor's
assessment of the arbitration costs at $54,566.90, the guarantee
should nevertheless be permitted to be called up to the extent of
$58,577.62,
the amount due to Diano under the invoices, being a "debt due" from Evins to
Diano in terms of Clause 37.2. As to this,
Mr Wyvill submitted that the sum
of $58,577.62 constituted part of Diano's counter-claim before the Arbitrator,
which the Arbitrator
had not yet heard; as to the costs ordered to be paid by
the Arbitrator, he submitted that if they had not been taxed they could
not
constitute a "debt due", in terms of Clause 46. Mr Reeves submitted that the
balance of the guarantee of $93,050.00 after deducting
the Clause 37.2 debt,
namely $34,472.38, should be ordered to be paid into Court, as security for
the arbitration costs, pending
their taxation by an officer of the court as
ordered by the Arbitrator.
22. After hearing argument on 3 and 4 October, I ordered
on 6 October, for
reasons then published, that the interim injunctions of 28 September be
dissolved, on the basis that in the history
of the particular circumstances of
the case Diano's solicitors, who had been told by Evins' solicitors late on 27
September that
an application for an injunction would be made on 28 September,
should have been notified of the time the actual application was
to be made,
prior to the hearing of that application.
23. On 6 October Evins applied for interlocutory injunctions in the same
terms
as those it had sought on 28 September. Subsequently, on 13 and 14
October, this application was sought to be varied so as to exclude
relief
against the Bank, and to further seek a mandatory injunction against Diano,
requiring it to withdraw the demand it had already
made against the Bank;
although it was objected to, I allow the variation. Pending the resolution of
this new application, interim
injunctions were granted. Evins' application
was argued on 7, 11, 13 and 14 October. I rule on it today.
24. Mr Wyvill submitted
that the costs ordered to be paid by the arbitrator
were payable by virtue of the Commercial Arbitration Act or by the parties'
arbitration agreement, and were not payable pursuant to the Contract;
accordingly, in his submission, those costs
could not constitute a "debt due
from the Contractor to the Principal under or by virtue of any provision of
the Contract", in terms
of Clause 46, and therefore could not in any event be
deducted from the security. As noted earlier, Mr Reeves submitted that the
arbitration took place pursuant to Clause 45 of the Contract which provides
for the "Settlement of Disputes". The power of the arbitrator
to award costs
arises by virtue of s.34 of Commercial Arbitration Act, which enables an award
of costs "unless a contrary intention is expressed in the arbitration
agreement". It is common ground that
no such contrary intention was expressed
in the parties' arbitration agreement. It was against this background that Mr
Reeves had
submitted that the costs awarded by the arbitrator constituted, in
terms of Clause 46, a "debt due from the Contractor to the Principal
... by
virtue of Clause 45, a provision of the Contract". I consider that Mr
Reeves' submission is correct; Clause 45 is the foundation
of the recourse to
arbitration, and an order for payment of costs which flows from that process
when resorted to, is properly characterised
as arising "by virtue of" Clause
45 for the purposes of Clause 46.
25. Mr Reeves pointed out that there were several provisions
of the Contract
under which sums became debts "due from the Contractor to the Principal", and
could be deducted under Clause 46.
For example, Clause 10.6 provides:-
"If the Contractor does not furnish proof satisfactory to the
Superintendent in accordance
with the first paragraph of the last
preceding sub-clause, the Principal may pay to the Nominated
Sub-contractor the whole
or any part of such amount as is required
to be so paid by the contractor under sub-clause 10.4 and any moneys
so paid shall
be a debt due from the Contractor to the Principal
which may be deducted or recovered by the Principal pursuant to
clause 46."
(emphasis mine)
26. Similar provisions are found in Clauses 15, 25, 30.3, 31.7, 35.5, 36, 37,
39, 43 and 44.4. I do not consider,
however, that these provisions
exclusively delimit the debts due for the purposes of Clause 46, so as to
exclude therefrom costs
awarded by the Arbitrator.
27. At this point I note that on 3 October Evins instituted proceedings No.
734 of 1988 in this Court
in which it sought declarations that the arbitration
had been conducted in breach of the terms of the arbitration agreement and of
the rules of natural justice, and that the interim award of 26 July was
accordingly void. On 10 October in those proceedings Diano
applied for Evins
to be ordered to pay moneys into Court by way of security. Mr Wyvill submitted
that even if Evins' contention that
various matters other than the
air-conditioning platform had been referred to arbitration, was incorrect, its
claim arising from
the air-conditioning platform remained on foot, because it
had not been validly determined. Mr Wyvill submitted that in making his
interim award the Arbitrator had not heard evidence and had not addressed the
real question in issue in relation to the air-conditioning
platform, namely,
whether the consultant was responsible for mistakes as alleged by Evins and,
if so, whether the consultant was
acting on behalf of the principal and not
Evins.
28. To the amount of $58,577.62 claimed by Diano under Clause 37.2, Mr Wyvill
submitted
that the major sum claimed, $47,921, and the accounts from John
Connell and Associates totalling some $4,500 could not be said to
relate to
the rectification of an "omission or defect", in terms of Clause 37.2. As to
other invoices totalling some $1,000 he submitted
that no details have been
given of any direction given by the Superintendent to Evins to rectify the
omissions to which those invoices
related; this was a requirement of Clause
37.2. In his submission these matters showed that Diano had failed to
establish indebtedness
for the purposes of Clause 46.
29. Further, in Mr Wyvill's submission, these amounts were all included in
Diano's counter-claim
before the Arbitrator, which had not yet been
determined, and hence could not be claimed as a "debt due".
30. Mr Reeves submitted
that mere claims by Evins for damages due to delays,
did not fall within the words "any moneys which may be or thereafter become
payable to the Contractor by the Principal", in Clause 46. That expression
contemplated moneys which had been proved to be payable,
an enforceable debt.
Mr Wyvill submitted that the words "thereafter become payable" explicitly
indicated that Clause 46 contemplated
prospective payments and accordingly the
security could not be resorted to by Diano until moneys prospectively payable
to Evins had
been ascertained, a matter which could only occur when accounts
were finally settled between Evins and Diano.
31. I reserved the
question of the meaning of Clause 46 and meanwhile heard
matters which Evins wished to put in support of its application. It appeared,
as noted earlier, that there was a serious dispute between the parties as to
exactly what matters had been referred to arbitration.
In the result that
factual dispute was not capable of being resolved before me on this
application. I note also that the Arbitrator's
interim award is challenged in
proceedings instituted by Evins No. 734 of 1988. It appears to me that the
factual matters in issue
between the parties, which are incapable of
resolution at this stage, affect the application of Clause 46, even if Mr
Reeves' submissions
as to its meaning are correct. Further, those factual
disputes affect Mr Reeves' arguments as to the delay in which, he submitted,
Evins had indulged in performing the Contract, in the course of the
arbitration, in instituting proceedings No. 734 of 1988, and
instituting these
proceedings.
32. I consider that the factual matters in issue between the parties indicate
that there is a triable
issue between them; that is to say, there is
ultimately a serious question to be tried as to whether Diano is presently
entitled
to call up the guarantee.
33. I turn to the question of where the balance of convenience lies, on the
grant of interlocutory relief.
Mr Kelsey gave evidence of the effect on Evins
of calling up the guarantee, and of the financial situation of Evins at that
time
(October 1988). It appeared that Evins had tendered for some 30
contracts in the preceding 21 months and had managed to win one
of them. On
25 November I was informed that Evins had instituted proceedings No. 850 of
1988 on 21 November to be wound up on the
basis of insolvency; the Court file
relating to those proceedings shows that a Provisional Liquidator was
appointed on 30 November
1988, and that is where the matter stands. I was
also informed that the arrangements whereby a receiver and manager had been
appointed
to Diano would cease to operate as from the end of November 1988. I
take these matters into account on the question of the balance
of convenience.
34. I consider that the balance of convenience favours Diano. Insofar as the
strength of Evins' case is a factor,
I do not consider on the materials placed
before me that it has a strong case. I am not satisfied that Evins will
suffer irreparable
damage unless the injunctions it seeks are granted. To the
contrary, I consider that damages would be an adequate remedy for Evins,
in
the event that it ultimately establishes that Diano was not entitled to call
up the guarantee. There is nothing now to suggest
that Diano would not have
the capacity to pay any such award of damages. In the light of the disclosed
facts, this cannot be said
to be a case where any loss of reputation by Evins
due to the calling up of the guarantee should count for much in the balance.
35.
Mr Reeves seeks that Evins be ordered to pay various sums into Court in
these proceedings by way of security for damages and for
costs of the
application for the interlocutory injunction and the action. He also seeks
orders for security for costs with respect
to proceedings No. 734 of 1988
(including security for the costs awarded by the Arbitrator) and in
proceedings No. 696 of 1987 (being
proceedings in which Evins claims
$50,815.06 against Diano as amounts said to be due and payable by Diano under
Progress Certificates
No. 10 ($3,044.44) and 12 ($47,770.62)). I accept that
these two sets of proceedings were intermeshed with the application by Diano
in these proceedings. The question of security is a matter of discretion
under s.533 of the Companies Code, turning on the facts
of the case. Those
applications by Diano are refused, except as to the application in proceedings
No. 734 of 1988 with respect to
security for the costs awarded by the
Arbitrator, without prejudice to Diano's right to apply at some later time.
In proceedings
No. 734 of 1988 I order pursuant to s.42(3) of the Commercial
Arbitration Act that when the costs awarded by the Arbitrator are taxed, as
was directed by the Arbitrator, Evins pay that sum into Court in proceedings
No. 734 of 1988, or give security for that sum by way of Bank Guarantee,
within one month of the date of taxation.
36. Evins' application
for interlocutory injunctive relief in proceedings No.
728 of 1988 is refused and the interim injunctions are dissolved. Diano may
proceed to call up the Bank guarantee of 25 October 1985. Evins must pay
Diano's costs of the application for interlocutory relief,
as well as those of
the Bank which appeared briefly to interplead.