One object of the Act is to promote the private, prompt and speedy hearing of contractual disputes which the parties to the contract have agreed should be decided by arbitration.
To help achieve this object an appeal against an Arbitrator's award is allowed to the Supreme Court only in restricted circumstances. If all parties to the arbitration consent an appeal is permitted limited to questions of law arising out of the award, (s38(2) and s38(4)(a)). In the absence of such consent, if the Supreme Court grants leave to a party to appeal, then that party may appeal on any question of law arising out of the award, (s38(2) and s38(4)(b)). S38(5) says that the Supreme Court shall not grant leave unless the court considers that one of two sets of two conditions is fulfilled. The first condition is the same in each of the two sets of conditions: that the determination of the question of law concerned could substantially affect the rights of one or more parties to the arbitration agreement. The second condition of the first set of two conditions is that there is a manifest error of law on the face of the award. The second condition of the second set of two conditions is that 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.
S38(5) took its present form by an amendment to the Act made in 1990. Since then this court has indicated that the restrictions on appeals on questions of law arising out of awards of Arbitrators to the Supreme Court must be adhered to: Promenade Investments Pty Ltd v State of New South Wales (1991) 26 NSWLR 203; Natoli v Walker, 26 May 1994, unreported, Kirby P and Mahoney and Meagher JJA."
Preliminary matters
4 The project was a major civil construction for which tenders were called. Information was provided to tenderers which included the results of drilling which was undertaken at various points along the proposed path of the tunnel. Results of that drilling were included in a report and a geotechnical model of the site was developed. Tenderers were expected to use that model for the purpose of preparing their tenders.
5 A report was prepared by Douglas Partners, geotechnical engineers, which looked at various methods of constructing the tunnel. The report recommended, as the preferred option, the construction of the tunnel by a methodology referred to as "road header/partial shield". The report apparently indicated a number of features of concern along the proposed route of the tunnel, one of which was the need to cross an existing creek valley filled with "probable alluvial deposits." This became known as the soft ground section.
6 Tender documents were prepared which included specifications and drawings for the tunnel. The tender documents also included the reports of Douglas Partners which included a conceptual design of a fairly simple form of shield for driving the tunnel through the "soft ground" section. The successful tenderer was to prepare a detailed design of the shield, in the nature of a shop drawing, but did not otherwise have design obligations in relation to the contract works.
7 Before the contract was entered into, a revision occurred in the design of the internal support for the tunnel. It was incorporated in a document known as "alternative type A5 support" which the arbitrator referred to as "Revised Construction Method for Rex Street (Type A5 Support)." The arbitrator found that this revised documentation "took the place, in every respect, of the "Soft Ground Support Type A5" of Clause 201.10.1 as the "support type proposed by the Designer."
8 The arbitrator concluded that the contractor's responsibility under the contract was limited to that covered by the specification for the shield method of ground support. He found that the defendant was not responsible for the detailed design of, or the adequacy of the proposed method of construction which was the responsibility of the plaintiff.
9 As it happened, problems occurred in the course of the construction of the tunnel because of the soft nature of a significant portion of the material through which the defendant was required to carry out excavation.
10 The contract contained provisions in relation to payment in the event of a latent condition. The arbitrator found that under these provisions, the defendant was entitled to be paid for overhead and profit on the additional cost incurred. This finding is challenged by the plaintiff.
11 The contract was set forth in a written agreement which incorporated many documents. It included a number of documents, identified as addenda, which were additional to the original tender documents. Four addenda were identified in the "formal instrument of agreement." However, there is a dispute between the parties as to whether a document entitled "Addendum No 5" was incorporated as part of the contract. Addendum No 5 contains provisions relevant to the obligations of the defendant to deal with surplus material. Accordingly, it is necessary to consider the arbitrator's approach to identification of the relevant provisions of the contract when considering the question of the obligation to remove excess spoil.
Variation
12 The defendant prepared its tender utilising the geotechnical model which had been provided to it. The model concluded that, although there would be a significant "soft" section of the tunnel, the material would be of greater stiffness than was in fact the case. Once the soft material was encountered, the method of construction originally proposed to be whole face excavation was required to change. The arbitrator awarded $1,510,778 for the claim which was identified as Claim CVO8.
13 The arbitrator identified the fact that in the Douglas Partner's report which preceded the tender, a number of features of potential concern in relation to the proposed route for the tunnel had been identified. One of these was the point at which the tunnel would cross an existing creek gully filled with "probable alluvial deposits". It is this section which is ultimately referred to as the soft ground section. Logs of two bore holes in this section were made available to tenderers. As it happened the length of the soft ground section which was identified before tender, was realised. However, progress through the soft ground was described by the arbitrator as "disastrously slow" and significant costs were incurred. As I understand the position, the material was so soft that upon exposure it collapsed and a different method of construction and support was required to safely carry out the contracted works.
14 Instead of using a full face method of tunnelling, the defendant was required to use a heading and bench operation. This involved small machinery both to grub at the material and carry it away compared to a significantly more efficient operation which had originally been contemplated.
15 The arbitrator considered the claim as a variation but ultimately came to the conclusion that he could not determine it on this basis. There was evidence before him that, because of the complexities of the original task, to identify and quantify the components of the work which would qualify for payment as a variation, would be difficult and he could not determine the matter on that basis.
16 General condition 40 of the contract provides for variations. Clause 40.1 is in the following terms;
40.1 Variations to the Work
Superintendent may direct the Contractor to -
(a) increase, decrease or omit any part of the work under the Contract;
(b) change the character or quality of any material or work;
(c) change the levels, lines, positions or dimensions of any part of the work under the Contract;
(d) execute additional work; and/or
(e) demolish or remove material or work no longer required by the Principal.
The Contractor shall not vary the work under the Contract except as directed by the Superintendent or approved in writing by the Superintendent under Clause 40.
… "
17 The arbitrator provided a summary of his findings in relation to the claim and in response to the question "whether the Claimant was directed to perform certain variations to the work under the Contract" the arbitrator said:
"The Claimant was directed, by the Superintendent's Representative, to make changes to the method of work which was the basis of the contract price. Whether this as such was a variation to work under the Contract is a question of interpretation, which I don't think I can answer.
It was, however, a variation to the Contract, in my view, under Clause 40.1 of the General Conditions, since it changed the character or quality of the material or work concerned.
At the same time, I don't believe it can be properly valued as such. The need for the variation was caused by the unexpected ground conditions, so that the need for the variation was an effect of the cause, not the cause in itself. I don't think you can value the variation while denying the cause."
18 The arbitrator concludes his summary discussions by saying that:
"The question of Issue 2 is, in any event as I see it, made irrelevant by the finding on the first question, since the answer to that takes into account the physical effect of the new ground conditions, as well as the changes to the method of work."
19 The arbitrator identified Issue 1 as being "whether the Claimant encountered the latent conditions complained of in executing work under the contract." Issue 2 raised the question of whether there was a variation.
20 The defendant submitted that as the arbitrator had determined that a variation within the meaning of the contract had occurred, the award should be understood as providing a money sum in relation to the variation of the method of work by reason of the material which was encountered. I do not understand the arbitrator to have made such a determination. Although he found that there was a variation to the contract, he did not proceed to determine a money sum on that basis.
21 Accordingly, as I understand the arbitrator's award, he has not made an award in relation to claim CV08 as a variation. Any challenge to the award on that basis fails.
Latent conditions
22 In the course of his decision, the arbitrator identified the clauses relevant to the contractor's risk when latent conditions were encountered. In the body of his reasons he includes the definition of latent conditions but otherwise incorporates the full conditions as an annexure.
23 The definition of latent conditions is as follows:
"Latent Conditions are sub-surface physical conditions, including artificial obstructions, encountered by the Contractor at the Site during the execution of the Work, which differ materially:-
ag from the physical conditions indicated in the documents or materials issued or made available to the Contractor by Ryde City Council for the purpose of tendering or otherwise in connection with the Works prior to the Date of Acceptance of Tender; and
bh from the conditions generally recognised by a competent and suitably experienced Contractor as likely to be encountered in the performance of work of the character required by the Contract in the area where the Works are being performed, and are not capable of being overcome by the Contractor in the ordinary course of work by the application of good engineering practice and proper construction procedures without additional expense or time, but does not include:
i) climatic conditions or conditions arising from climatic conditions; or
ii) any conditions of which the Contractor at the time of lodging or making its Tender is by virtue of the provision of Part 1 of the Special Conditions of Contract deemed to have informed itself or be aware; or
iii) any conditions which a person in the position of the Contractor being aware of all the matters of which the Contractor is deemed by virtue of the provision of Part 1 of the Special Conditions of Contract to be aware should reasonably have foreseen as likely to be encountered during the execution of the Works if the Contractor had -
· examined all information relevant to the risk, contingencies and other circumstances having an effect on its tender and which is obtainable by the making of reasonable enquiries; and
· inspected the site and its surroundings."
24 The arbitrator considered this clause and it is appropriate to examine relevant extracts from his discussion of the matter.
25 He commenced by saying:
The starting point is that what is involved is not what a competent and suitably experienced geotechnical engineer would assess, in geotechnical terms, as the nature of the material likely to be encountered, but what a competent and suitably experienced contractor would expect to encounter by way of physical conditions in the execution of the works. Contractors are not normally interested in whether, for example, material which is to be excavated, is correctly described as firm clay or stiff clay in terms of the relevant Australian Standard. They are more concerned with what the material is like, physically, and how it is likely to behave when excavated, based on their experience of how a material of similar appearance or feel has behaved. The geotechnical evidence and description is a starting point in forming such an opinion, but it is not of itself decisive. In any event, I don't recall any of the geotechnical experts advancing the view that soil mechanics is an exact science."
26 The arbitrator then identifies the fact that the issue of the latent conditions clause was raised at different times during the hearing. During the course of the hearing, the arbitrator offered the opinion, without at that stage having checked the latent conditions clause, that the "point at issue" is "not what a prudent geotechnical engineer may think of it but what a prudent contractor may think of it." In this respect the arbitrator was undoubtedly correct having regard to sub-clause bh.
27 However, complaint is made by the plaintiff that in the course of consideration of the matter, the arbitrator failed to address sub-clause ag. By concentrating upon a consideration of the opinion of an experienced contractor, it is submitted that the arbitrator failed to identify whether the physical conditions were materially different as required by sub-clause ag.
28 The arbitrator identified the fact that five geotechnical experts gave evidence before him and remarks that "it would be possible to analyse their views at considerable length and come up with an exhaustive analysis. However, I think it is possible to get to the answer in a quicker fashion." He then includes an extract from the statement in evidence of Mr Bertuzzi, a geotechnical engineer and a principal of the firm Pells Sullivan Meynink, Consulting Geotechnic Engineers. Mr Bertuzzi was called to give evidence by the defendant. In his statement he said:
"It has been my experience that a tunnel support methodology is designed after considering the geotechnical conditions and geotechnical model assumed for any given location. Where the assumptions in those geotechnical investigations and geotechnical model are proved to be incorrect then, by necessity, the tunnel support methodology must be amended by the tunnel designer. In this situation where a Type A5 design was prepared by Connell Wagner-Sydney, it was always going to be necessary to change that tunnel design when the actual ground conditions were inconsistent with those assumed by all parties at the time of tender."
29 The arbitrator said of this observation:
"The first two sentences of this, as a general statement of principle irrespective of who the designer is, accord with my understanding and experience and were, I think, accepted by the other experts, at least implicitly. I agree also with the conclusion in the final sentence, since there is no doubt, from the analysis earlier in Section B6 that the Revised Construction Method Rex St (Type A5 Support) was the method directed by the Superintendent's Representative and on which the contract price was based.
30 The arbitrator also drew upon the evidence of Mr Parkin who said in his report:
"Neither party expected the ground conditions to vary to the extent that they did. A review of the geological survey led to the change in the original design requirement to tunnel through the area with the use of shield. Although this change was motivated by a possible cost saving the feasibility was agreed by all parties based on the perceived properties of the clay sampled from the Bore Holes 4 and 5. The method of construction was evaluated at the time of the tender negotiations and accepted as being viable. The fact that the method had to be changed to the extent that it was confirms the presence of a Latent Condition and not merely a minor fluctuation in the ground conditions."
31 The arbitrator continues:
"Following the additional drilling by TT in March 98, the further investigation by Douglas Partners and the issuing of the Phase 4 report in late June 98, CW-S identified modifications it thought necessary in the Revised Construction Method, introducing the Type A5 (Alternative) support, to be employed in the 'soft ground' section.
Section B9 then describes the further change to the method, to the Heading & Bench design, with a temporary dished shotcrete invert, performing the dual function of a wall beam to support the half arch rib supports and an invert strut to keep them from closing in.
Even if it could be maintained that the Revised Construction Method could conceptually have applied to heading & bench as well as full face, the fact that, when push came to shove, it was found that the bearing capacity of the ground was inadequate to support the half arch ribs without the wall beams would indicate that there was a latent condition at work.
It is also inconceivable to me that any experienced contractor, in a situation where it was directed to price a variation abandoning the use of a shield in favour of a conventional forepoling, ribs and shotcrete approach, would entertain the idea of the change if it was seriously thought that there was even a possibility that it would end up as a heading & bench method.
Mr Edwards also agreed (Section B3) that the Addendum 4 method change was not put forward on any basis other than a full face one.
The respondent contends that the pre-tender investigation revealed conditions, in the form of alluvial materials, which would have warned an experienced contractor to formulate methods to cope with these and to put them into effect."
32 The arbitrator then addressed the plaintiff's submission that the pre-tender investigation revealed conditions which would have warned an experienced contractor to formulate methods to cope with them. This discussion required consideration of the nature of the geological model which had been developed. The arbitrator concludes that the work done for the plaintiff was sufficient to be able to provide design and construction information. He found that this was also the view of the defendant which he described as a "competent and suitably qualified contractor." However, notwithstanding the work which had been done to generate the model, the works were required to be undertaken in a different manner to that which had been originally contemplated. Of this the arbitrator said:
"The fact that it was subsequently necessary to change that design showed that the physical conditions actually encountered, from the viewpoint of a competent and suitably experienced contractor, were inconsistent with the assumptions made by all parties as to the tunnel support necessary, from consideration of the geotechnical model established for the purpose of tendering."
33 The arbitrator then considers the geological evidence which was available before tender. He concludes that the borehole information was reflected in the conditions actually encountered but says:
"However, it seems to me that the conclusions in the Douglas Partners joint report as to whether what was encountered was like that which was predicted, are geotechnical ones rather than engineering ones. That is to say, if 'firm to very stiff soils' are predicted, and firm to very stiff soils are found, then clearly what you found is what was predicted in the geotechnical sense. How it might have behaved, in the engineering sense though, is what is important, from the latent conditions viewpoint."
34 The arbitrator accepts the evidence that the soft section of the tunnel was comprised of "very stiff silty clays, clayey sands and clayey gravel, with some soft material." However, he says that although he has no difficulty with that as a general statement what it does not do "is give an opinion on whether the proportions of the mix of the materials encountered would affect the expected behaviour of the material when excavated." He then looked at the evidence of Mr Braybrooke, a geotechnical engineer, called by the defendant and concluded from his evidence:
"In other words, how the material behaves when there are lenses of other material present depends on how big the lenses are, even though the existence of that material could have been predicted.
To predict the behaviour would require the investigation to be of a scale and sophistication that would be unreasonable and excessively costly.
The alternative is to make the best assessment possible from the investigation results and accept the latent conditions clause as a protection.
To find out whether A and B are really the same or not, the test posed by Mr Bertuzzi seems to be a convenient and reliable one.
That is, even if you find the same variety of materials before and after, but the design has to be changed, then the material is not the same as to its behaviour.
On that basis, it is my conclusion that latent conditions were encountered."
35 It is said that in reaching this conclusion, the arbitrator failed to consider the two elements within the definition. It is accepted that he fulfilled the task required by sub-clause bh, but it is submitted that he ignored the task required by sub-clause ag.
36 I am not satisfied that the arbitrator has fallen into error. His analysis in my view called up consideration of both limbs of the definition. Sub-clause ag was not confined only to considerations of whether or not the geotechnical information available pre-tender was reflected in the actual conditions encountered on the site. The physical conditions of the sub-surface material were comprised of not only its physical elements but included the manner in which those elements were dispersed through the sub-surface material. The purpose of describing that material was to facilitate the design of the proposed engineering works. Accordingly, the way in which the material would perform, when disturbed, was the most significant factor requiring consideration. Although the arbitrator does not expressly indicate that he is considering the test required by sub-clause ag, I am satisfied that he has done so.
37 I do not believe that by adopting the Bertuzzi test the arbitrator fell into error. It is accepted by the plaintiff that the site conditions were different from those expected, having regard to the information available pre-tender. Where, as happened, the changes necessitated substantial alteration to the proposed work method, I would have thought it plain that the test in sub-clause ag had been met. The physical conditions were obviously different in material respects.
38 In his summary of the discussion the arbitrator says:
"Summing up, then, I find that the matters discussed above are things resulting from the latent conditions encountered in Sections 2 and 3 of the 'soft ground' section of the tunnel. The latent condition was that the nature (as revealed by its behaviour) of the material there excavated was not that which could reasonably be expected as being likely to be encountered by competent and suitably experienced contactor, in the terms of Clause 1.1 of the Special Conditions of Contract Part 2."
39 Criticism is also made of this paragraph, it being said that it revealed a failure by the arbitrator to consider sub-clause ag. In my opinion, the alleged error is not apparent in the paragraph but in any event, the paragraph is merely, as indicated, a summary. The discussion which preceded it, in my opinion, contains no error.
40 Further criticism is made of the arbitrator, and it is said that he failed to consider each of the elements (i), (ii) and (iii) of bh. There is no substance in this criticism. I am satisfied that the arbitrator did consider the steps taken by the defendant to inform itself and concluded that the work method provided in the tender was reasonable, having regard to the information which was available in relation to the conditions likely to be encountered.
41 I do not consider that any error of law can be demonstrated.
Overhead and Profit
42 Clause 1.3 of the Special Conditions of Contract Pt 2 provided as follows:
"Ryde City Council shall determine the amount of additional expense and delay, if any, incurred by the Contractor in connection with any Latent Condition or complying with any instruction or direction given by Ryde City Council under this Clause and the Contract Price and period shall be varied by the amount which Ryde City Council determines as being appropriate in the circumstances, provided always that the Contractor shall not be entitled to any additional remuneration for or in respect of: … ."
43 Evidence was given before the arbitrator by the parties as to the amount which he should award in relation to the claim with respect to the latent condition. The evidence given by the expert called by the plaintiff was that an appropriate allowance for overhead and profit would be twenty percent. Evidence was given for the defendant that the appropriate allowance would be eighteen percent. The arbitrator determined that eighteen percent was appropriate.
44 It is submitted that cl 1.3 should be construed so that the only amount which can be awarded is the true expense incurred by the contractor in accommodating the works to the latent condition. It is submitted that because this is the approach which was required to be adopted in relation to other aspects of the contract, the same approach should be taken to any award in relation to the latent condition. Furthermore, it is submitted that before any award could be made, which included an allowance for overheads, the actual costs incurred would have to be proved.
45 The arbitrator accepted that expenses did not include profit but was a reference to monies actually spent. However, he rejected the plaintiff's submission that he could not include an allowance for profit when determining the amount by which the contract price should be varied under the clause. In my opinion, the arbitrator correctly identified that although the clause required there to be an additional expense, the decision which the plaintiff was required to make, and which the arbitrator was now required to make, was to determine the amount by which the contract price should be varied. Plainly, the contract price would have included an allowance for overhead and profit and in considering the appropriate variation of that price, in my view, it was appropriate to have regard to and make allowance for both overhead and profit.
46 There being no error in the approach which the arbitrator took to the construction of the clause, in my view, no error of law is revealed. It could hardly be submitted that the conclusion which the arbitrator reached was relevantly unreasonable when he, in fact, adopted a figure which was lower than that which had been contended for by the expert called by the plaintiff.
Excess Spoil Removal
47 The excavation for the tunnel released considerable volumes of spoil which required disposal. The arbitrator referred to cl 201.12 of the specification which related to disposal of excavated material. He included it in his award in the following terms:
"Disposal of spoil shall be by means which are in accordance with regulations of the relevant Statutory Authorities. The Contractor may treat with any private individual regarding terms, times and methods of removal providing all is in compliance with Statutory Authority regulations.
The Contractor's attention is drawn to Sections 168 and 169 of the Specification which relate to Environmental Management and Haulage.
Excavated material shall be removed from the Worksite as soon as practicable after excavation unless otherwise directed or approved by the Superintendent's Representative.
To meet delays in the transport off Site, and to comply with the environmental restraints, suitable temporary surge stockpiles shall be formed on Site with particular emphasis on suppression of either dust or mud.
All trucks leaving the Site shall pass through a truck wheel wash as required to remove mud and dirt from their tyres. No existing structure, permanent works and or temporary works including batters shall be surcharged by any excavated material.
48 This form of the clause gives no indication of where the excavated material is to be placed, although clearly it is contemplated as being disposed of away from the site of the actual works.
49 The disposal of the excavated material was the subject of correspondence between the parties before contract. The arbitrator extracts that correspondence and notes that the Superintendent's Representative's letter of 27 August 1997 which forwarded the Addendum for the re-pricing of the tender:
"… does not place any limitation on the extent of the disposal on the existing Playing Fields. It does though, include some conditions, the relevant passage is:
Disposal of Tunnel Spoil
As advised during the previous Tender Negotiations, the tunnel spoil may be disposed of by regrading the existing Playing Fields.
Although this concession by Council will allow some cost savings with regard to spoil disposal off site, several additional points should be taken into account in the repricing. Dust suppression is to be used throughout the Contract either to treat stockpiles until material is placed to the appropriate grade or as ongoing treatment during the placing activity, if material is being placed as it becomes available.
The Contractor shall be responsible for undertaking all measures required to protect the surrounding environs from any dust generated as a result of the spoil spreading activities and such cost shall be included in the excavation rate.
Lastly, the Contractor shall be responsible for compacting the spoil, once spread across the playing fields, to a density acceptable to Ryde City Council with respect to the short term topsoiling and regarding requirements and the long term site usage."
50 The reply from the defendant dated 9 September 1997 which enclosed the updated pre-tender price said:
"Disposal of Tunnel Spoil
We have allowed to dispose of tunnel spoil by regrading the existing playing fields at Meadowbank Park. Dust control, spreading and compacting of spoil, short-term topsoiling and regrassing have been costed into our tender price."
51 The arbitrator found that this became the basis of the accepted price at least as far as tunnel spoil was concerned.
52 A further problem arose. During the course of the excavation material was taken from the site for the purpose of constructing shafts and excavation for surface works, apart from the material which was actually taken from below the ground during the course of tunnelling. There was also other material which was retrieved from the site, which because of the fact that it contained asphalt, rubbish, clay and other matter, was not suitable for use on the park regrading works.
53 The question arose as to whether or not material, apart from that taken from within the below ground excavation, was included within the description of tunnel spoil and could be disposed of on the playing field.
54 The arbitrator found that the phrase "tunnel spoil" should be interpreted as meaning "material which is left over from the excavation process in tunnels (and in this case, in shafts), including material which has found its way into the tunnel during the excavation process." Accordingly he concluded:
"On that basis I think that the (defendant) was entitled to put material resulting from the tunnel (or shaft) excavation on Meadowbank Park and if the (plaintiff) didn't want it left there, the (defendant) was not obliged to remove it at its costs. It was, in other words, in exactly the same category as tunnel spoil which was not wanted only because there was too much of it. It is, in any event, strongly arguable that the presence of 'unsuitable material' such as substantial quantities of face nails, or extremely soft clay, is associated with the latent condition encountered in Sections 2 and 3.
Following on from this, it is my view that the cost of loading out the surplus material for carting away is not a (defendant's) responsibility. On the other hand, the (defendant) agreed that it had allowed for 'dust control, spreading and compaction of spoil and short term topsoiling and re-grassing'."
55 The plaintiff submits that the arbitrator has fallen into error because the form of cl 201.12 extracted by the arbitrator and apparently relied upon is not the form of the clause which actually found its way into the contract.
56 In the course of negotiations for the contract, various addenda to the original draft were prepared. Addendum No 5 included extensive changes which were communicated by letter dated 16 December 1997. In Addendum No 5, cl 201.12 provided for the disposal of the excavated material in the following terms:
"Excavated material will be disposed of by regrading the existing playing fields.
Excavated material not utilised in regrading the playing fields shall be removed from the Worksite as soon as practicable after excavation unless otherwise directed or approved by the Superintendent's Representative."
57 It is submitted that this being the clause which governed the relevant aspect of the contract, material not suitable for the playing fields was to be disposed of at the defendant's cost.
58 It appears that the defendant accepted before the arbitrator that Addendum No 5 formed part of the contract. In the submissions made on behalf of the defendant to the arbitrator the following was said:
"Specification Clause 201.12 was amended by Addendum 5 issued on 16 December 1997. The relevant part of this clause provides:
'Disposal of spoil shall be … (emphasis added)
Excavated material will be disposed of by regrading the existing playing fields.
Excavated material not utilised in regrading the playing fields shall be removed from the Worksite as soon as practicable after excavation unless otherwise directed or approved by the Superintendent's Representative.'
Transfield contends that this provided for the situation as it existed before the regrading arrangements. As a result of the tender negotiation meetings in mid-August 1997, the Council approved the retention of excavated material at Meadowbank Park. In addition the specification refers to disposal of "spoil" not "tunnel spoil."
59 Accordingly, the submission on behalf of the defendant was that although the contract was varied by Addendum 5, this did not reflect the ultimate position which is to be found in the correspondence dealing with the regrading arrangements.
60 The submission made by the plaintiff to the arbitrator on this issue was in the following terms:
"Transfield is not entitled to any allowance for the removal of spoil from the Eastern Stockpile.
The agreement expressed in the Connell Wagner letter of 27.08.97 page 3 'Disposal of Tunnel Spoil' and Transfield letter of 9.09.87 (sic) 'Disposal of Tunnel Spoil' was confined in its terms to tunnel spoil and excluded other project spoil.
Transfield was obliged to remove spoil from tunnel excavations which was not 'utilised in regrading the sporting fields' (specification 201.12) and from the drainage including culvert works which was 'unsuitable' (specification 221.10).
The regrading of the playing fields was subject to a specific provision of the specifications S245 which prescribed a criteria for the suitability of spoil to be used in the regrading of the fields.
All of the material disposed of was unsuitable material which was to the account of Transfield."
61 Section 221.10 (Drainage: Disposal of Material) of the specifcation provided as follows:
"Any excess material resulting from excavation operations which is surplus or unsuitable for use under this or related Parts of the Specification shall be removed from Site or shall be disposed of by hauling and spreading in spoil areas as approved, except such material as classified as rubbish and debris which shall be disposed of off site."
62 It follows that before the arbitrator, the parties had joined issue as to the effect of clause 201.12 as amended by Addendum No 5 and having regard to the pre-contractual correspondence. The arbitrator has failed to consider the matter on that basis. Instead, he has referred to the earlier version of clause 201.12 and considered the parties' arguments having regard to the provisions of the clause when in that form.
63 It is submitted by the plaintiff that the arbitrator has accordingly fallen into error expressed, either, as the misconstruction of relevant document (see Natoli v Walker 26 May 1994, unreported, Court of Appeal), or a failure to deal with a substantial submission worthy of serious consideration (see Dennis Willcox Pty Ltd v Federal Commissioner of Taxation (1988) 79 ALR 267) and an error of law on the face of the record is revealed. I accept the submission.
64 The arbitrator was required to consider the matter having regard to the correct sequence of events and the form of the concluded contract. In my opinion, he failed to do this. Leave should be granted in relation to this aspect of the plaintiff's claim.
65 In the event that I concluded that leave should be granted in relation to this aspect of the matter, counsel for the defendant sought instructions as to the attitude which his client would take as to the further conduct of any appeal. The indication given to the court was if I concluded that leave should be granted, the defendant would accept that the appeal should be upheld and the matter remitted to the arbitrator for consideration of this aspect of the matter according to law.
66 Accordingly, I am of the view that in relation only to the question of the disposal of spoil, the plaintiff has made a case which justifies a grant of leave to appeal. I direct the plaintiff to bring in appropriate short minutes which reflect these reasons.
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