PRIZAC DEVTS P/L v UNLEY PROPERTY DEVT P/L & ANOR No. SCCIV-01-317 [2001] SASC 141

On the hearing of the application, counsel for the arbitrator intimated that he did not wish to advance an argument on the question of leave and would accept the ruling of the Court. I then heard counsel for Prizac and UPD.

Prizac is the registered proprietor of the land upon which the shopping centre was built. It contracted with UPD as builder to carry out the construction of the shopping centre. Prizac had entered into a lease with Woolworths (SA) Pty Ltd ("Woolworths") who were to be the major tenant of the shopping centre. The contract between Prizac and UPD stipulated, inter alia, that the building work was to be carried out in accordance with Woolworths' plans and specifications, a copy of which was attached to the lease.

After UPD maintained that it had completed the work required of it pursuant to the building contract, Prizac served a notice of dispute on UPD claiming, inter alia, defects in the construction of certain bulkheads, as to the fastening system used for the fixing of the ceilings, as to the strength of the concrete used in certain areas of the construction, as to the reinforcement used in the concrete associated with a loading dock, and as to whether or not a certificate of practical completion had properly been issued.

Following the service of the notice of dispute, an arbitration was conducted by the arbitrator pursuant to the Commercial Arbitration Act 1986. The hearing, at which the parties were represented by legal counsel, over some ten days. Witnesses were called on both sides.

In his award, the arbitrator discussed the evidence at some length, and reached conclusions which were substantially in favour of UPD.

UPD had already been paid the contract price for the building work performed by it. The arbitrator awarded it a further $50,000, being an early performance bonus, and some $9,360 for epoxy treatment to some of the concrete floors, which he held to be an extra, a total of $59,360.

A right of appeal from the award is conferred by s 38 of the Act. Relevantly, the section provides:

(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-

(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;

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

(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."

As for s 38(4)(b), s 40 of the Act is not relevant to this case. It follows that the application for leave falls to be determined pursuant to subsection (5).

This is not a case where subsection (5)(b)(ii) is of application, despite the faint suggestion to the contrary from Ms Nelson QC for the applicant. Quite apart from anything else, she did not identify any area in which the determination of any question raised by the proposed appeal would "add, or may be likely to add, substantially to the certainty of commercial law".

It follows that the application may only succeed if there is "a manifest error of law on the face of the award", of a kind the determination of which "could substantially affect the rights of one or more parties to the arbitration agreement".

Given that requirement, it is necessary to deal with the question whether or not all of the material offered in support of the application is admissible and may be taken into account in the process of determining whether there is "a manifest error of law on the face of the award". I put aside the separate question whether the material may be taken into account in determining whether, if there is such an error of law, it could substantially affect the rights of one of the parties. On the view which I have reached, it is unnecessary to address that question.

The material which I have been asked to take into account comprises an affidavit of Sean Anthony Ryan, solicitor, to which is annexed a number of exhibits.

Amongst the exhibits is a copy of the building contract, a document setting out the design requirements laid down by Woolworths for the construction of its supermarket, a copy of the notice of dispute, and a copy of some engineering reports.

Given the requirement that the error of law must appear on the face of the award, I ignore those documents and do not take them into account.

This means that I have regard only to the remaining two exhibits to the affidavit, that is, the copy of the award itself and the draft notice of appeal.

In the draft notice of appeal, the applicant complains that the arbitrator erred in law in making findings which are summarised and with respect to which discrete complaints are made under the headings "The Bulkhead Findings", "The Ceilings Findings", "The Back of House Area and Cool-room and Stock-room Area Findings", "The Practical Completion Finding", and "The Loading Dock Ramp Findings".

In addition, the applicant makes more generalised complaints as to alleged failings on the part of the arbitrator correctly to construe and apply the contractual obligations which it alleges bound UPD (paragraph 7).

I have carefully considered the arguments advanced by Ms Nelson QC with respect to each of the relevant findings, but in my view there is nothing in the findings which could properly be construed as a manifest error of law on the face of the award. On the contrary, the various findings with respect to each of the headings to which I have referred are essentially findings of fact.

Given that this is an application for leave to appeal only, it is necessary for me simply to identify the principal reasons which lead me to that view.

The arbitrator found that the contract was one of construction only, as opposed to design and construction, and that Mr Bibbo, a consulting engineer, was ".... employed and paid by Prizac". I am unable, on the face of the award, to find that there was a manifest error of law in the arbitrator's findings as to those matters.

It follows that although the principal obligation of UPD was to perform the work in accordance with the specifications, insofar as Mr Bibbo took responsibility for advising UPD of the appropriate specifications for concrete, UPD cannot be held responsible if this differed from the relevant documentation.

Insofar as Mr Bibbo declined to certify approval of the particular ceiling system installed, the arbitrator found that Mr Wright, a representative of Woolworths approved what was finally constructed. It is true, as Ms Nelson QC contended, that Woolworths were not a party to the contract between Prizac and UPD. But the arbitrator was entitled to decide this aspect of the case on the footing that any written specification by Woolworths could be varied by Woolworths' representative on the spot. His finding that Mr Wright was in fact authorised by Woolworths to give such approval, despite some conflicting evidence on the point, was likewise not tainted by manifest error of law on the face of the award.

It is important to note that the arbitrator specifically found that both the bracing of the bulkheads and the system used to fix the ceiling were safe and within relevant load standards.

Ms Nelson QC also complained that the arbitrator erred in law in basing some findings in part upon observations which he had made as to a section of concrete forming part of the loading dock ramp, on a view. Far from this being evidence of an error of law, in my opinion, the arbitrator was entitled to use, to the limited extent which appears from his reasons, his observations in that respect. As an expert, he was entitled to use a view to inform himself, and was not limited to using a view only as a means to understand the evidence (Buckley and Anor v Bennell Design & Construction Pty Ltd and Anor)[1]

In any event, absent access to the transcript, I am unable to say upon what basis the view was conducted. It appears from the award that in fact two views were conducted in the presence of the parties, and that at least on the occasion of the first view, the arbitrator prepared some sketches and notes about the state of the ceiling. I do not know if the sketches and notes were shown to the parties. Apparently, there was no visible deterioration between the two views. I assume that both views were conducted with the consent of the parties. Without knowing what, if anything, was agreed between them as to what use might be made of the views, it is impossible to conclude that the arbitrator's findings on this topic indicate an error of law.

Ms Nelson QC has put everything which could be advanced in favour of the case for leave. I have not paused to refer to all of the arguments which she raised. But at the end of the day I am left in no doubt that none of the matters raised by the applicant identify a manifest error of law on the face of the award.

[1] [1913] HCA 32; (1977-1978) 140 CLR 1 per Barwick CJ at 10-11.