South East Fibre Exports Pty Limited v WGE Pty Limited

LEGISLATION CITED : Commercial Arbitration Act 1984 (NSW) Supreme Court Act 1970 (NSW)

Ambulance Service of New South Wales v Daniel (2000) 19 NSWCCR 697 Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139 Bankinvest AG v Seabrook (1988) 90 ALR 407 Beaudoin v Hartford Accident and Indemnity Company 594 So 2d 1049 (La App 3rd Cir 1992) Bell v Bell 417 So 2d 115 (La App 3rd Cir 1982) DeCosta v Columbia Broadcasting System, Inc et al, 383 F Supp 326 (DCR1 1974) Flamm v Flamm 442 So 2d 1271 (La App 4th Cir 1983) Fredericks v Warren 561 So 2d 208 (La App 5th Cir 1990) Hope v Bathurst City Council (1980) 144 CLR 1 Hill v Green (1999) 48 NSWLR 161 Lamac Developments Pty Ltd v Devaugh Pty Ltd (2002) 27 WAR 287 Larkin v Parole Board (1987) 10 NSWLR 57 McPhee v S Bennett Ltd (1934) 52 WN (NSW) 8 CASES CITED : Masawa Australasia Pty Ltd v JCorp Pty Ltd [2000] WASC 5 Natoli v Walker (1994) 217 ALR 201 New Generation Enterprises Pty Ltd v Western Australian Planning Commission [2007] WASCA 89 Oil Basins Ltd v BHP Billiton Ltd [2007] VSCA 255 Otis Elevators Pty Ltd v Zitis (1986) 5 NSWLR 171 Porotto v Fiduciary Trust Co 75 NE 2d 17 (Mass 1947) Promenade Investments Pty Ltd v State of New South Wales (1992) 26 NSWLR 203 R v District Court of Sydney; Ex parte White (1966) 116 CLR 644 Randwick Municipal Council v Manousaki (1988) 66 LGRA 330 Roads Corporation v Dacakis [1995] 2 VR 508 Rosell v Esco d/b/a Jolly Elevator Corp 549 So 2d 840 (La 1989) Scott Fell v Lloyd (1911) 13 CLR 230 Smith v Two "R" Drilling Company Inc 606 So 2d 804 (La App 4th Cir 1992) So v So [2004] NSWCA 67 Tor Line A B v Alltrans Group of Canada Ltd [1982] 1 Lloyd's Rep 617 Waterford v Commonwealth (1987) 163 CLR 54

TEXTS CITED : Hudson's Building and Engineering Contracts, Hudson AA, Wallace IND, 11th edition, London: Sweet & Maxwell, 1995

PARTIES : South East Fibre Exports Pty Limited (Plaintiff) WGE Limited (Defendant)

COUNSEL : Mr I Bailey SC (Plaintiff) Mr J Simpkins SC (Defendant)

SOLICITORS : Dibbs Abbott Stillman (Plaintiff) Colin Biggers & Paisley (Defendant)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION TECHNOLOGY AND CONSTRUCTION LIST

55072/07 South East Fibre Exports Pty Limited v WGE Pty Limited JUDGMENT The proceedings 1 This is the second occasion when the parties to these proceedings have sought leave to appeal from an interim award of an arbitrator. The first set of such applications came before McDougall J, [2006] NSWSC 60, which decision provides an overview of the general matters in dispute. As his Honour there observed:

1. WGE Pty Limited (WGE) and Harris-Daishowa (Australia) Pty Limited (Harris-Daishowa) were parties to a contract (the contract) under which WGE undertook to design, carry out and complete upgrading and modification works to Harris-Daishowa's ship loading facility at Mungano Point near Eden in the State of New South Wales. Harris-Daishowa claimed to have taken the works out of WGE's hands pursuant to cl 30 of the General Conditions of Contract. WGE denied that Harris-Daishowa was entitled so to act, but relied on Harris-Daishowa's action as constituting a repudiation of the contract, which repudiation WGE purported to accept. The disputes between the parties were referred to arbitration. By agreement, the Arbitrator dealt first with the question of liability. He gave his interim award, dealing with questions of liability on 9 May 2005 (the Award). WGE and Harris-Daishowa each seek leave to appeal, pursuant to s 38 of the Commercial Arbitration Act 1984, (the Act) from certain of the Arbitrator's findings; and they each seek directions pursuant to s 43 of the Act in relation to other findings.

2. Harris-Daishowa has changed its name to South East Fibre Exports Pty Limited. However, it is convenient to refer to it, as did the parties and the arbitrator, as Harris-Daishowa. 2 The Arbitrator's Interim Award on Liability was upheld by the judgment which at the same time upheld certain of the applications under the Act which altered some of the findings in that Award. 3 The most recent hearing before the Arbitrator and the Interim Award dated 4 September 2007 was accordingly confined to determining the financial consequences of the exercise of the take out, or forfeiture, power under the Contract particularly the determination of the cost incurred by SEFE to complete the work concerned. The hearing also addressed the quantum of claims by WGE for variations which the Arbitrator had found it was entitled to under the Interim Award for Liability. 4 SEFE seeks leave to appeal on what are said to be a limited number of questions of law from the later interim award. In the alternative it seeks an order pursuant to section 42 of the Commercial Arbitration Act [the Act] setting aside a particular finding by the arbitrator on suggested grounds of misconduct 5 By a cross summons WGE also seeks an order granting leave to appeal pursuant to section 38 (4) (b) of the act in respect of a number of matters. It seeks orders varying the interim award on quantum in a number of ways and alternatively seeks either an order remitting the whole or some one or more of the matters to the arbitrator for further determination orders pursuant to sections 42 and 43 of the Act. The principles 6 It is convenient before addressing the particular facts to briefly address the policy underlying the 1990 amendments to section 38(5), to refer to the threshold sections which require to be satisfied and to deal with the correct approach to be taken on the important evidentiary matter raised in the case. 7 Section 38(2) of the Act restricts appeals to the Court to "any question of law arising out of an award". 8 The purpose of the amendment to the Act effected by section 38(5) was to further limit intervention by the Courts in the arbitration process, even beyond the restrictions on the ground of leave to appeal imposed by the pre 1990 legislation. The policy behind the amendment as explained in Promenade Investments Pty Ltd v State of New South Wales (1992) 26 NSWLR 203 at 221 and following and as explained by Kirby P in Natoli v Walker (1994) 217 ALR 201 at 202 was:

"...to promote the finality of arbitral awards even at the price of denying a party its usual entitlement to the determination of the dispute by a court of law, that is the precise assignment of the parties' legal rights after a detailed scrutiny of the relevant facts and application of the relevant law." 9 Section 38(5) "constitutes thresholds which must be surmounted by an applicant before leave to appeal can be granted; a particular type of error of law must first be shown to exist, the effect of section 38(5)(b)(i) is that an error of law in an award is no longer enough; it must be `manifest'." 10 As Sheller JA pointed out in Promenade Investments at pages 225-226, if an error of law of the statutory type is found to exist, the threshold is surmounted but the gate to appeal remains closed. In short, even if the requirements of section 38(5) have been satisfied, the question still remains as to whether as a matter of discretion leave to appeal should be granted. [Cf Natoli v Walker, per Mahoney JA at pages 3-4] The first threshold: section 38(5)(a) 11 The question here is whether "the determination of [the] question of law concerned could substantially affect the rights of one or more of the parties to the arbitration agreement." 12 If the amount in issue is substantial, this is a relevant factor in determining whether the requirement in section 38(5)(a) is met. And as Mahoney JA made plain in Natoli at page 9, a relevant consideration in determining whether leave to appeal should be granted is the relationship between the costs of the appeal and the significance of the question of law to be determined. The second threshold: section 38(5)(b)(i) 13 What then is an "error of law on the face of the award"? In Promenade, Sheller JA said at page 225:

"The expression error of law on the face of the award' is one of a type well known to courts. The award having been examined the question is whether there is apparent (and such is the denotation of the word manifest') an error of law. `Manifest error' is an expression sometimes used in reference to reasons given by judges or the approach taken by juries: see, eg, section 107(c)(iii) of the Supreme Court Act 1970 and the judgments of Kirby P in Azzopardi v Tasman UEB Industries Ltd (at 151) and Otis Elevators Pty Ltd v Zitis (1986) 5 NSWLR 171 at 181. It is used to indicate something evident or obvious rather than arguable: see generally per McHugh JA in Larkin v Parole Board (1987) 10 NSWLR 57 at 70-71." 14 Kirby P in Natoli said, inter alia, at pages 23-25:

"So convincing is the exposition of Sheller JA in Promenade of the meaning and purpose of the amended legislation, and of the duty of judges to conform to it, that little point is served by detailed re-examination of the matter. But a glance at authority in the United States of America confirms, in analogous contexts, the approach which Sheller JA expounded. For a long time, in that country, Federal and State statutes have limited certain appellate and other curial interventions, to cases of manifest error'...for more than a century, manifest error' tests have been operating in the United States. The judges have generally declined to define what the test precisely means. Typically, they have adopted criteria which refers to whether there was evidence error, obvious, capable of being easily understood or recognised at once by the mind'. See Pettine CJ in DeCosta v Columbia Broadcasting System, Inc 383 F Supp 326 (DCRI 1974) 339. When the judge finds no such manifest error, he or she is duty bound to avoid entering into the detail of the case. What is in issue is a preliminary impression. It should not require a great deal of argument. The precondition to curial intervention is the easy demonstration that the primary decision-maker was clearly wrong'. Bell v Bell 417 So 2d 115 (La App 3rd Cir 1982); Flamm v Flamm 442 So 2d 1271 (La App 4th Cir1983), 1273 (La CA)...

Necessarily, the criterion has been held in the United States to require great deference to be given to the primary decision-maker's findings of fact. See Beaudoin v Hartford Accident and Indemnity Company et al 594 So 2d 1049 (La App 3rd Cir 1992). If there are two permissible views of the evidence, the fact-finders choice between them cannot be manifestly erroneous' or clearly wrong'. See eg Fredericks v Warren 561 So 2d 208 (La Application 5th Cir 1990). This is so even if the appellate court feels that the evaluations and inferences which it would draw are different from those which the primary decision-maker has drawn. The existence of two possible views contradicts manifest error'. See Smith v Two "R" Drilling Company Inc 606 So 2d 804 (La Application 4th Cir 1992). See also Rosell v Esco d/b/a Jolly Elevator Corp 549 So 2d 840 (La 1989). If the only way an error can be shown is by requiring of a court the most elaborate examination of the facts and of the law, this is not a case for which manifest error' can be made out. The object of so providing in a statute is precisely to prevent a court from embarking upon such a detailed scrutiny. Hence the adjective manifest'. Porotto v Fiduciary Trust Co 75 NE 2d 17 (Mass 1947). To the extent that the court does embark upon such an elaborate examination of fact or law, it defeats the achievement of the object of the rule requiring the demonstration of manifest error'.

None of these authorities take the principle in Promenade beyond what was stated by Sheller JA. But they demonstrate that the criterion adopted by our Commercial Arbitration Act is not unique. The problem which it presents is shared by judges in many jurisdictions of the United States. It is clear from reading their authorities that they have accepted the requirement of very considerable judicial restraint where the criterion of `manifest error' obtains. We must do likewise.

This is not to say that the criterion slams the door on judicial intervention or deprives judges, whose jurisdiction is invoked, of the necessity to exercise the discretion thereby conferred upon them...

Obviously, there is a difficulty in the word manifest'. What may be manifest' to one judicial officer may fail to persuade another. The criterion cannot be the swiftness of mind of the sharpest intellect. Nor can it be the perception of one whose whole career has been devoted to examining and reflecting upon building contracts. An objective, not a subjective, test for what is `manifest' is contemplated. But the word will not go away. Against the background of its history in this context it requires swift and easy persuasion and rapid recognition of the suggested error. Otherwise, Parliament has taken the decision that it is better for the community as a whole that the parties should be held to their arbitral award. The price of lengthy exploration and reconsideration may prove warranted in a particular case. But, in the administration of justice as a whole, it is not. Expressed in economic terms, the marginal utility of the variations which will be achieved in particular cases is outweighed by the marginal cost of the delays, frustrations, uncertainties, inconvenience and legal and other expenses thereby necessitated..." 15 Mahoney JA said at page 10:-

"In addition, if there was an error at law, I do not think that it was manifest. It was neither plain in the sense of being obvious nor was it manifest in the sense that there was little or no doubt that error it was." 16 In Crown Glass Tobias JA [with whose reasons Campbell AJA agreed], expressed some of the principles on the following terms:

[36] It was common ground that the appeal to this Court from the decision of the primary judge was confined to a question of law. The relevant principles as to what constitutes a question of law were articulated by Glass JA, with whom Samuels JA agreed, in Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139 at 155-157. They were summarised by Clarke JA, with whom Hope and McHugh JJA agreed, in Randwick Municipal Council v Manousaki (1988) 66 LGRA 330 at 333-334. In both those cases reliance was placed upon the following statement of Jordan CJ in McPhee v S Bennett Ltd (1934) 52 WN (NSW) 8 at 9 where his Honour said (omitting citations): The question whether there is any evidence of a particular fact is also a question of law. But if there is evidence of the fact, the question whether that evidence ought to be accepted in whole or in part, or ought to be accepted as sufficient to establish the fact, is itself a question of fact and not a question of law, unless, of course, there is some law which provides that the particular evidence, when given, is to be taken to establish the fact. [37] Furthermore, perverse or unreasonable findings of fact do not constitute errors of law: Azzopardi at 155-157; Randwick Municipal Council v Manousaki at 333; cf Hill v Green (1999) 48 NSWLR 161 at 209-210. That proposition is only subject to the exception that the court will correct perverse or unreasonable applications of the law to the facts found: Azzopardi at 157; So v So [2004] NSWCA 67 at [31]. However, the present is not such a case. Although the appellant challenges the primary judge's ultimate finding of fact that the respondent's injuries arose out of the course of his employment, the success of the challenge depends upon the appellant's attack upon his Honour's primary finding of fact (which underpinned his ultimate finding of fact) that, at the time of the assault, he had in his possession $8,000 in cash which he intended to use for the purpose of paying himself and the appellant's employees. In this context, in Azzopardi Glass JA observed (at [156]): A finding of fact in the Commission may nevertheless reveal an error of law where it appears that the trial judge has misdirected himself ie has defined otherwise than in accordance with law the question of fact which he has to answer. A possibility of this kind exists with ultimate findings of fact but not with respect to primary findings of fact such as whether the applicant suffered injury on a particular date. Further, an ultimate finding of fact, even in the absence of misdirection, may reveal error of law if the primary facts found are necessarily within or outside a statutory description and a contrary decision has been made. [39] In Ambulance Service of New South Wales v Daniel (2000) 19 NSWCCR 697 at 711 ([46]), Hodgson CJ in Eq (with whom Sheller and Beazley JJA agreed on this point) noted that in Glass JA's judgment in Azzopardi: A clear distinction was drawn between the situation where the finding of fact in question is made in favour of a person bearing the onus of proof, and a situation when the finding of fact is made against the person bearing the onus of proof. In the former situation, the question is not whether there is any evidence at all on the point, but rather whether the evidence on the point is sufficient, in the sense that it is evidence, which if fully accepted could properly base the finding of fact. 17 Their Honours drew attention to So v So where Santow JA [with whose reasons Meagher and McColl JJA agreed] had made the following observations:

[28] In Ambulance Service of New South Wales v Daniel (2000) 19 NSWCCR 697 at 711-12 Hodgson CJ in Eq followed Glass JA in Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139 in adopting a particular discrimen for distinguishing questions of fact from questions of law. But importantly, that discrimen arises in the sufficiency of evidence category of challenge. Hodgson CJ in Eq concluded that in that context the question of sufficiency of evidence is a question of fact when the appeal is brought by the party bearing the onus of proof, whereas it is a question of law when such an appeal is brought by the other party without that onus. This is because in the latter case the appeal is essentially whether the evidence is capable of supporting the finding under challenge.

[29] Here, the challenge is not to the sufficiency of evidence to support a particular finding. Rather it is whether facts fully found fall within the provisions of the relevant statutory enactment properly construed. That is classically a question of law; Hope v Bathurst City Council (1980) 144 CLR 1 at 7 per Mason J. Hope (above) was a case in which the challenge was brought by the party with the onus of proof.

[30] Even in sufficiency of evidence cases, where the party with the onus of proof can demonstrate that "a judge's reasons show that he or she made a finding of fact relying exclusively on material that could not as a matter of law support that finding ... they will disclose an error of law"; Hodgson CJ in Eq in Ambulance Service of New South Wales (above) at 718 [81].

[31] The proposition that a finding contrary to the weight of evidence, even a perverse finding, is not an error of law, is subject to exception. As Glass JA explains in Azzopardi, an error of law may occur after the facts are found at the second stage, following fact-finding, should the tribunal misdirect itself as to the law. It can also occur at the third and final stage when applying the law to facts found, if the tribunal fails to reach the only conclusion reasonably open: At the third stage when the law correctly stated is applied to the facts found in order to produce a conclusion error may intrude again. An erroneous conclusion that facts properly determined fail to satisfy a statutory test ... will ordinarily be an erroneous conclusion of fact. It is only in marginal cases that the statutory test is satisfied or not satisfied as a matter of law, because no other application is reasonably open ... Accordingly this Court will not entertain unexplained perversity of result as a ground for intervention although it will correct perverse or unreasonable applications of the law to the facts found. [at 157] 18 In New Generation Enterprises Pty Ltd v Western Australian Planning Commission [2007] WASCA 89 Pullen JA [with whose reasons Steytler P and Miller AJA agreed] observed as follows:

[3] There is no error of law in making what is only a wrong finding of fact ( Waterford v Commonwealth (1987) 163 CLR 54 at 77 per Brennan J), even if the reasoning whereby the court reached its conclusion was demonstrably unsound ( R v District Court of Sydney; Ex parte White (1966) 116 CLR 644 at 654 per Menzies J; Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139 at 156 per Glass JA, Samuels JA concurring). If there is some basis for an inference, in the sense that the inference is reasonably open, there will be no error of law: Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 at 356 per Mason CJ, Brennan J agreeing; Roads Corporation v Dacakis [1995] 2 VR 508 at 520.

[4] Where there is an error of law, it will be "manifest" when there are "powerful reasons for considering on a preliminary basis, without any prolonged adversarial argument, that there is on the face of the award an error of law": Promenade Investments Pty Ltd v New South Wales (1992) 26 NSWLR 203 at 226 per Sheller JA, Meagher JA agreeing; Lamac Developments Pty Ltd v Devaugh Pty Ltd (2002) 27 WAR 287 at 318-319.

[5] In considering whether there is a manifest error of law, the court, when dealing with the decision of an arbitrator who is not legally trained, should be cautious not to read the reasons with an over critical eye: Tor Line A B v Alltrans Group of Canada Ltd [1982] 1 Lloyd's Rep 617 at 625 per Bingham J; Masawa Australasia Pty Ltd v JCorp Pty Ltd [2000] WASC 5 at [5] per Parker J. The reason why parties often choose to appoint an arbitrator who is not legally trained rather than embark upon court proceedings is because the advantage arising out of the training and expertise which that person has in respect of the subject matter of the arbitration (whether as a valuer, architect, engineer or anything else), coupled with the advantage of avoiding the greater technicality, delay and cost associated with court proceedings, outweighs the disadvantage brought about by the fact that the arbitrator is unlikely to express himself or herself with the precision (so far as legal issues are concerned) that might be expected of a judge, or even of a legally trained arbitrator. If the courts are too exacting in their expectations of the language used by lay arbitrators in making their awards, the benefits of the freedom of choice offered by the CA Act might to some extent be rendered illusory.

[6] These considerations are significant, given that "the clear policy of the ... [CA Act] is to achieve speedy economic and informal relief to parties to arbitration agreements ... [with] curial [involvement] ... [being] kept to a minimum": Lamac at 315 [110] per Mathews AJ, with whom Malcolm CJ, Anderson and Steytler JJ were in agreement; Masawa at [5], [7]. Dealing with the respective applications 19 The convenient course is to deal with the respective applications seriatim. In some instances issues raised by one or both parties will overlap and it will become unnecessary to repeat earlier findings. The application by SEFE The suggested questions of law 20 SEFE contends that leave to appeal should be granted in respect of what are suggested as the following questions of law:

i. The proper consideration of Clause 30.6 of the Contract and its application by the Arbitrator in relation to the amount of the " cost incurred " by SEFE for the painting of the facility. The error of law is that when determining the amount involved, notwithstanding proof by SEFE of the actual cost incurred and that the work for which it paid was that required of WGE, the arbitrator proceeded on the basis that SEFE had an onus to prove that the work performed was not different from that which it had established was the same. The error also forms part of the application to set aside the finding on this aspect for misconduct pursuant to s42 of the Act.

ii. The proper consideration of Clause 30.6 of the Contract and its application by the Arbitrator in relation to the amount of the "cost incurred " by SEFE for the provision of a maintenance jacking system for the facility. The error of law is that when determining the amount involved, notwithstanding proof of the actual cost incurred and that the work performed was in fact that required by the contract with WGE, and in the absence of a finding that SEFE had acted capriciously in incurring the cost, the arbitrator proceeded on the basis that some theoretical alternative might have been adopted and a lesser cost incurred.

iii. The finding by the Arbitrator that under the Contract, WGE was entitled to interest on security in the form of retention. This finding is predicated on an unstated, but necessary, conclusion as to an apparently implied entitlement to be paid notwithstanding the absence of any payment claim or certification under the contract.

iv. The finding by the Arbitrator that WGE was entitled to interest on amounts which had not been claimed by WGE. This finding is based on an implied entitlement to payment in the absence of a progress payment claim or a progress certificate under the Contract. The finding is further based on a cause of action neither pleaded nor asserted by the defendant. 21 Generally in dealing with SEFE's contentions the contradictor contentions by WGE are seen to be of substance. They are adopted as correct in what follows. These contradictor contentions are presented in a fashion which to my mind:

i. firstly and fairly summarise the arguments put by SEFE usefully doing so by giving references to the paragraph numbers to be found in SEFE 's submissions;

ii. proceed to explain how it is that SEFE identifies a suggested question of law;

iii. deal with the relevant materials necessary to be understood and in most instances, quote from those materials;

iv. clearly and fairly summarise the arbitrators processes of reasoning;

v. finally and in each case correctly point up how the particular result turned on the arbitrators fact-finding;

vi. seek to explain the fundamental misconception in SEFE's submissions. SEFE's claim item 1 - painting shiploading tower, including boom & other equipment 22 SEFE argues that:-

a. The scope and standard of the work under the "Rectification Painting Contract… was the same as that required of WGE, that is, except for one modest separately priced item of work" (paragraph 20);

b. There was, therefore, an onus on WGE "to prove that there was something different in the work undertaken by Lothways TBS" (paragraph 23);

c. The Arbitrator incorrectly applied an onus on SEFE to disprove the existence of a difference between the work required of WGE and that carried out by Lothways TBS (paragraphs 24, 27 - referring to paragraphs 183 and 185 of the Quantum Award ). 23 This is said to give rise to a question of law broadly in the following terms (paragraph 8(i)):- Whether (for the purposes of clause 30.6) SEFE bore the onus of proving that the cost incurred by SEFE with Lothways TBS related to the work otherwise required to be performed by WGE. 24 As a result of an agreement between the parties (Exhibit C30), the Arbitrator was not required to apply clause 30.6 of the Contract, but an alternative regime that avoided the need for a certificate that SEFE lacked.

25 Under Exhibit C30 SEFE was only entitled to claim "the Increased Cost". The Arbitrator had to determine:-

b. The Cost Avoided (paragraph 3). 26 SEFE's complaint relates to the imposition of an onus in respect of the establishment of "the Cost Incurred". 27 The relevant wording of Exhibit C30 is:-

1. The Arbitrator shall ascertain the cost incurred by SEFE in completing the work (the Remaining Work ) taken out of the hands of WGE under clause 30.4(a) of the Contract ( the Cost Incurred ). 28 The finding is that SEFE bore the onus of proving this - as well as every other element - of its claim for recovery of an Increased Cost. SEFE bore the onus of establishing what was the cost incurred by it in completing the work which it took over; that same onus obliged it to prove what the otherwise cost would have been had SEFE been required to pay WGE and had WGE completed the work. It had to prove that the claimed cost was incurred "in completing the work…taken out of the hands of WGE". Normally in any Court, the party who asserts must prove in order to succeed: Scott Fell v Lloyd (1911) 13 CLR 230 at 241; Bankinvest AG v Seabrook (1988) 90 ALR 407 at 411 per Kirby P. This is a particularly important finding where the sufficiency of evidence category of challenge is concerned because the appeal is brought by SEFE which bore the onus of proof. Hence the sufficiency of evidence issue remains a question of fact. 29 Accordingly, I accept that there was no error of law. 30 WGE is correct in its submission that essentially what SEFE is complaining about is not the incorrect imposition of an onus, but the Arbitrator's factual conclusion that the onus had not been discharged. 31 The Arbitrator's process of reasoning was:-

a. The painting work related to rectification of defects and incomplete work (paragraph 144);

b. SEFE claimed a cost incurred of $665,438.58 (paragraph 147);

c. SEFE submitted that this cost was only for the work WGE was required to perform (paragraph 148);

e. To resolve the issue it was necessary to identify what work Lothway TBS had carried out (paragraph 150);

f. SEFE bore the onus of proving that it was the same work that WGE would otherwise have had to carry out (paragraph 150);

g. SEFE should have maintained proper records so as to discharge this onus (paragraph 151);

h. There were records of an 'initial scope of works' drawn up in November 2000 (paragraph 152);

i. But:- i. There was no evidence from Mr Lackey as to whether this was what was sent out to tenderers on 8 November 2000;

ii. There were further documents issued to tenderers at a site visit, but Mr Lackey could not say what they were (paragraph 153);

j. Mr Ivanovich (from Lothway TBS) was unable to say what documents were ultimately received from SEFE for the work (paragraph 154);

k. The Lothway TBS tender which was accepted by SEFE was for the "revised scope of work issued at the site visit", not the "initial scope of works" (paragraph 155);

l. Mr Lackey had no involvement in the issue of the further documents (paragraph 158);

k. The further documents issued were described by Mr Vaibar as "full tender documents" (in his letter of 8 November 2000 - Exhibit C46, Document 69) and, accordingly, must have consisted of more than the one document marked as having been issued at the site visit (Exhibit C46, Document 57) (paragraph 158);

m. Mr Vaibar could have clarified what was finally issued (at the time of the site visit by tenderers), but was not called (paragraph 158) and his absence was not adequately explained (paragraph 183);

n. Whatever it was which was so issued seemed to have superceded what went before (paragraph 159 - referring to a letter dated 15 November 2000 in Exhibit C46);

o. It was not possible to reach any conclusion about the documents finally issued to Lothway TBS - in particular the evidence of Mr Lackey on the topic could not be accepted (paragraphs 160, 161);

p. SEFE had not established that the amount paid to Lothway TBS was for completing the painting work required by the contract or for some other work (paragraph 163);

r. Plainly, however, SEFE incurred some cost (paragraph 164);

s. The award should be for the amount conceded by WGE, namely, $323,162 (paragraph 186). 32 As WGE has contended, the result turned on the Arbitrator's fact finding: WGE notably contending as an aside that the findings (which, were correct and clearly open on the evidence. 33 I accept as correct the proposition that the fundamental misconception in SEFE's submissions on this ground of appeal is that:-

a. The evidence of Mr Lackey about the final scope of work for Lothway TBS (see SEFE's submissions at paragraphs 13 to 17) was not accepted by the Arbitrator (see the Quantum Award at paragraph 160);

b. The original scope of work (which was proved) had been overtaken by unidentifiable documents issued at the site meeting for tenderers;

c. Accordingly, SEFE had not proved what the Lothway TBS work was and how it related to WGE's work;

d. The claim failed at a factual, not legal, level. 34 In truth the submissions put by Mr Bailey SC for SEFE show that the template put forward includes an assumption which is misconceived. The stated error of law is put as follows:

The error of law is that when determining the amount involved, notwithstanding proof by SEFE of the actual cost incurred and that the work for which it paid was that required of WGE, the arbitrator proceeded on the basis that SEFE had an onus to prove that the work performed was not different from that which it had established was the same. 35 The problem with this formulation involves the words which I have emphasised. No such thing was established. Clearly the Arbitrator did not accept that SEFE had in fact otherwise establish that the work was the same. 36 It is appropriate to add that the contention put by SEFE suggesting that WGE had not clearly indicated before the arbitrator that SEFE had not discharged its onus in relation to the painting costs is rejected. It suffices for this purpose to refer to:

i. WGE's submissions in volume 2 of the tender bundle [at tab 10 paragraph 53 on page 11];

ii. Paragraph 56 where WGE noted that according to Hudson's Building and Engineering Contracts, Hudson AA Wallace IND 11th edition, in order to establish the entitlement to any increased costs, a party required to demonstrate that the very same work had been completed;

iv. WGE had submitted at paragraph 29 (a) that it was for SEFE to prove what the scope of incomplete work was and that it had not done so: [at tab in 13 the same volume]. 37 In these circumstances the allegations of misconduct raised in paragraphs 70-84 of SEFE's submissions are of no substance and require to be rejected'. SEFE's claim item 25 - maintenance jacking system for boom 38 SEFE argues that:-

a. Clause 201.7 of the Contract had been held by the Liability Award to require the provision of " some system for jacking, lifting and supporting…the boom" [emphasis added] (paragraph 30);

b. Such a system had been independently designed and installed (paragraphs 31-34);

c. WGE bore the onus of proving that the jacking system was not that required by the contract (paragraph 35) [wrong, for the reasons submitted earlier];

d. The evidence established that:- i. What had been designed and installed was a jacking system;

ii. The design and installation was not capricious (paragraph 36); e. The Arbitrator's rejection of the claim as made (and allowance of a lesser figure) involved the application of "some arbitrary criteria" based on a "clearly erroneous interpretation of clause 201.7(b)" (paragraph 38 - referring to paragraph 270 of the award). 39 This is said to give rise to a question of law broadly in the following terms (paragraph 8(ii)):-

Whether (for the purposes of clause 30.6) the existence of a cheaper alternative maintenance jacking system for the boom was legally irrelevant unless SEFE had capriciously refused to adopt it. 40 As noted earlier, whatever point arises (if any) does so under Exhibit C30, not clause 30.6. 41 The Arbitrator's process of reasoning was:-

a. WGE contended that the issue was 'one of scope' (paragraph 259);

b. The contract did not specify the type of jacking system required (paragraph 261);

c. In completing the work, therefore, SEFE was not entitled to direct the implementation of a particular design (paragraph 261);

d. URS ought to have been required to design to accord with the obligation identified in clause 201.7(b) (paragraph 264);

i. Was instructed by SEFE to adopt a particular system (paragraph 264);

ii. Was, accordingly, not instructed to carry out the work taken out of WGE's hands;

f. There was no evidence that the same system would have been designed by URS if simply directed to clause 201.7(b) (paragraphs 266, 268);

g. Accordingly, SEFE had failed to prove that the cost related to work taken out of the hands of WGE (paragraph 269);

h. Since, however, there was work done it was appropriate to award the amount conceded by WGE (paragraph 270). 42 WGE is correct in its contention that the suggested question of law has nothing to do with the Arbitrator's reasoning. At issue was not the meaning of clause 30.6 - nor even Exhibit C30. What was at issue was a factual question - the relationship between the cost incurred and what the contract would have required of WGE. SEFE had to establish that the cost incurred related to the work that was removed, this being a factual matter for the referee to determine on the evidence. 43 SEFE's claim failed (except as to the conceded amount) because no connection was demonstrated. This involved no question of law - only fact. There was no application of arbitrary criteria. Nor was there any erroneous construction of clause 201.7(b). WGE claim no. 35 - bank guarantees 44 SEFE argues that:-

a. WGE never challenged the mistaken inclusion of the retention in the progress certificates before SEFE took over the work from WGE (paragraph 45);

b. After SEFE took over the work from WGE, WGE had no right to payment of the wrongly withheld amounts for 'retention' (paragraphs 48, 65 and 66);

c. Since there was no unconditional right to payment, there was no right to interest (paragraph 49). 45 This is said to give rise to a question of law broadly in the following terms (paragraph 8(iii)):-

Whether WGE was entitled to interest on amounts wrongly withheld for retention absent:- (a) a payment claim;

(b) certification. 46 The Arbitrator's process of reasoning was:-

a. SEFE was not authorised to deduct amounts for retention after WGE provided a bank guarantee on or about 19 October 1998 (paragraph 456);

b. Notwithstanding this SEFE did thereafter deduct amounts for retention (paragraph 457);

c. The award on liability determined that WGE was entitled to damages for this breach (paragraph 458);

d. After SEFE took over the work from WGE its only relevant entitlement was to withhold payment for the work taken over; SEFE remained liable to pay amounts owed to WGE for work performed up to that time (paragraph 461);

e. SEFE wrongfully deducted various identified amounts for retention (paragraph 462);

f. The deductions were 'overdue' from the time of deduction and accrued interest at the contractual rate (paragraph 463). 47 WGE is correct in its contention that SEFE's arguments relate to the Liability Award, not the Quantum Award - they seek to challenge the basis for the award rather than the calculation of the entitlement. I accept that to raise these arguments SEFE would need to endeavour to institute a further appeal in respect of the Liability Award. 48 WGE pleaded Claim 35 at paragraphs 203 to 206 of the Amended Points of Claim. 49 SEFE pleaded its defence to such claim at paragraphs 203 to 205 of the Reply to the Points of Claim. 50 The alleged question of law was not raised by the pleadings. Nor was any issue taken therein in respect of the alleged absence of:-

b. Certification. 51 The evidence before the arbitrator about the sum allowed was:-

a. The Statement of Joe Armour dated 31 August 2006 (Exhibit C26 ) at paragraphs 56 to 57 52 The submissions made by the parties about this item were:-

a. WGE's Supplementary Submissions dated 30 April 2007 at paragraphs 2, and "Appendix A";

b. SEFE's Schedule "Items Awarded to WGE Quantum - Summary of Evidence"". 53 Not only did the alleged question of law not arise on the pleadings, it was not even referred to in SEFE's submissions. 54 The relevant provision regarding retention is clause 5.6 of the Contract. 55 There is no substance in any event in SEFE's argument. 56 There was plainly a dispute about the wrongful withholding of amounts for retention. This was a dispute that the Arbitrator was entitled to determine - and he did so in the Liability Award. 57 SEFE was plainly in breach of clause 5.6 and damages were appropriately awarded for such breach.

WGE claim no. 6 - late & incorrect payments for progress claims 1, 2, 8 & 9 58 SEFE argues that:-

a. The claim for interest was first made in the arbitration (paragraph 51);

b. In the absence of a payment claim conforming to clause 26.1 of the Contract, there was no entitlement to interest under clause 27 (paragraph 54);

c. Moreover, where claims were rejected by the Superintendent and no challenge made by WGE to the certificate, there could be no amount due in respect of which any interest could accrue (paragraphs 59, 61, 64);

d. The Arbitrator was required to consider the impact of delay (paragraph 69). 59 This is said to give rise to a question of law broadly in the following terms (paragraph 8(iv)):-

Whether WGE was entitled to interest in the absence of:-

(b) certification. 60 The Arbitrator's process of reasoning was:-

a. WGE was not entitled to interest for the alleged late payment progress claims No. 1 and No. 2 as the Engineer did not issue a progress certificate; there being no time obligation for payment in the absence of such certificate (paragraph 469);

b. The amounts certified for payment in respect of progress claims No. 8 and No. 9 were paid slightly late with the consequence that WGE was entitled to interest of $632.53 and $34.70 respectively (paragraphs 470-471);

ii. Paid one day late (paragraph 471); e. WGE made a claim in respect of the VVVF Drive (WGE Claim No. 3) on 15 June 1999 and it should have been certified for payment in progress certificate No. 9 but was not (paragraphs 472-474);

f. The interest payable for this was $41,657.51 (paragraph 479);

g. In certifying the amount due for payment in respect of progress claims Nos. 8 and 9 the Superintendent made impermissible deductions for alleged defective and/or outstanding work (paragraphs 481-527);

h. For progress claim No. 8 the Superintendent deducted $718,756 but should only have deducted $643,756.00 (paragraphs 481 and 528);

i. For progress claim No. 9 the Superintendent deducted $560,981 but should only have deducted $487,431.00 (paragraphs 482 and 528);

j. Interest payable on the amount improperly deducted was $972.33 for claim No. 8 (paragraph 529) and $63,411.99 for claim No. 9 (paragraph 530);

k. Interest was allowed at the contractually stipulated rate (paragraph 468). 61 Most of the interest allowed, therefore, relates to interest on amounts claimed by WGE but improperly omitted from progress certificates Nos. 8 and 9. 62 It appears that SEFE's first point is that in order to claim interest there must first be a progress claim made for interest that is either accepted or wrongfully rejected. 63 I accept that is a question of law, arising from the terms of the contract. 64 WGA has contended, it is not a question of law, however, that was raised by the pleadings; see the:

b. Reply to the Points of Claim, paragraph 57 (notably, it also failed to allege that the claim was unmaintainable as it was not within the notice of dispute - given the fact that the interest claim was consequential, such a contention could have gone nowhere anyway). 65 The submissions made by the parties about this item were:-

d. WGE's Supplementary Submissions dated 30 April 2007 at paragraphs 2, 149-159 and "Appendix A";

e. SEFE's Schedule "Items Awarded to SEFE Quantum - Summary of Evidence". 66 The Arbitrator had a discretion as to interest: see clause 31.2 of the Contract. 67 Accordingly, whatever clause 27 may have required the Arbitrator was not bound to apply it. 68 SEFE makes no submission to the effect that the discretion miscarried or that, if it did, there was an error of law. 69 Since SEFE neither pleaded nor argued that WGE's Claim No. 6 had to fail because interest had to be claimed and rejected by the Superintendent first, the failure of the Arbitrator to act upon this footing cannot be an error of law in respect of which it would be appropriate to grant leave. 70 Further and as WGE has contended, any event, the argument is fundamentally misconceived. 71 An amount is "due" if it is recoverable by action (or arbitral process). There was no need for WGE to make any claim for certification of interest. Once the Arbitrator determined that WGE was entitled to be paid amounts that the Superintendent had wrongfully failed to certify and/or wrongfully deducted interest was able to be awarded from the date that the amount should have been paid if the Superintendent had not so acted. 72 The next argument raised by SEFE may also be shortly disposed of. By its Amended Points of Claim WGE challenged the Superintendent's relevant certificates. 73 Although the Arbitrator had a discretion as to interest, he was not pressed with any argument by SEFE that the award of interest should be reduced because of delay (and, in any event, SEFE's current submissions do not establish that whatever delay occurred was WGE's responsibility). 74 The contention that no power to issue a progress certificate survived SEFE's takeover of the work was never put to the Arbitrator (and never pleaded as an answer to any WGE claim). It is, in any event, an irrelevant contention since there was no question of any new progress certificate being issued at any time after takeover. 75 The Arbitrator's reasoned as follows [at 475-477]:

475. SEFE also relied on the right to suspend payments as a basis for not making further payments after the work was taken out of WGE's hands. The right to suspend payments as set out in part of Clause 30.4(a) is as follows: "If by the time specified in a notice under Clause 30.2 the Contractor fails to show reasonable cause why the Purchaser should not exercise a right referred to in Clause 30.4, the Purchaser may by notice in writing to the Contractor - (a) take out of the hands of the Contractor the whole or part of the work remaining to be completed; or

Upon giving a notice under Clause 30.2 the Purchaser may suspend payments to the Contractor until the expiration of the earlier of - (i) the date upon which the Contractor shows reasonable cause;

(ii) the date upon which the Purchaser takes action under Clause 30.4(a) or (b);

(iii) the date which is 7 days after the last day for showing cause in the notice under Clause 30.2.

If the Purchaser exercises the right under Clause 30.4(a), the Contractor shall not be entitled to any further payment in respect of the work taken out of the hands of the Contractor unless a payment becomes due to the Contractor under Clause 30.6."

476. SEFE gave the notice under Clause 30.2 of the Contract and therefore was entitled to suspend payments until the expiration of, amongst other things, "the date upon which the Purchaser takes action under Clause 30.4(a) or (b)". There was no qualification as to the payments which could be suspended and I therefore have taken that to mean that SEFE was, on the giving of notice under Clause 32, entitled to suspend all payments to WGE. The right to suspend all payments remained until the expiration of the earlier of the events in (i), (ii) and (iii) of Clause 30.4(a). SEFE did take action under Clause 30.4(a) and the right to suspend all payments thereby came to an end. Upon the exercise of the right under Clause 30.4(a) to take over work SEFE's entitlement then became one whereby WGE was " not entitled to any further payment in respect of the work taken out of the hands of the Contractor ". After taking the work out of WGE's hands SEFE was not entitled to suspend payments in respect of work carried out by WGE. 477. SEFE has not demonstrated a right to suspend the payments for earlier work beyond when it took the work out of WGE's hands… 76 Nothing in this reasoning exposes any error of law. 77 Further one must recognize the source of the arbitrator's authority to award interest. The relevant interest provision is a discretionary one. The arbitration provisions and in particular Clause 31.2 provides that:

"[N]otwithstanding Clause 27, the Arbitrator may award whatever interest the Arbitrator considers reasonable" 78 This provision gives a discretion to the arbitrator as to how he determines interest. 79 Accordingly, there was no error - let alone an error of law in what the Arbitrator did in respect of interest.

The applications by WGE SEFE'S claim item 17 - dolphin linking structure control and dust covers 80 This item is dealt with at paragraphs 244 to 255. 81 It is common ground that the arbitrator allowed the item at the figure of $9,950.51 (paragraph 255). This was arrived at by allowance of the purchases and disallowance of the labour (paragraphs 245 and 255). 82 WGE had contended that the costs had not been shown to relate to the work that was necessary in order to modify appropriately. To a large extent, the arbitrator seems to have accepted that contention. 83 In respect of the purchase orders the arbitrator said (at paragraph 246):-

"It is not known how Harris-Daishowa's Purchase Orders 22396 and G221245 to Excell Control relate to the work taken out of WGE's hands. There are no explanations in the statement of Mr Vaibar as to what work was in these purchase orders and how they related to the dolphin linking structure work. The same can be said about the purchase orders to Lawrence and Hansen." 84 And a little later, the arbitrator said (at paragraph 248) that:-

"Harris-Daishowa's purchase order dated 18 July 2002 to System Control Services ("SCS") includes an amount of $3,575 to "Carry out all the required work on the linking structure control and PLC etc". That description does not assist in identifying the work covered by the purchase order although it may have been well understood at the time between the people involved …" 85 WGE contends that surprisingly the arbitrator concluded (at paragraph 255) that:-

"Doing the best I can with the evidence on this issue the cost incurred as determined in this Award is $9,950.51 which is the amount claimed as the cost incurred less the amounts for the unidentified work claim for HDA employees." 86 WGE submits that in other words, by a process that is unidentified and unexplained the arbitrator arrived at a cost incurred notwithstanding general acceptance of the proposition that the evidence did not establish that the cost incurred related to the claimed item. 87 SEFE's in response contends that the arbitrator's conclusion and reasoning did not disclose any error of law and do not disclose any misconduct. 88 In my view WGE is correct in its submissions that:

i. its complaint is that the Arbitrator allowed this claim:- a) Without adequate reasons; and/or

b) Inconsistently with his acceptance of the fact that the evidence did not establish any connection between the claimed expense and the earlier determined liability.

ii. SEFE's response is that these matters, if made out (as to which there is no submission), do not constitute:-

iii. If WGE's complaints are made out there would be both an error of law and misconduct: Oil Basins Ltd v BHP Billiton Ltd [2007] VSCA 255 at [49]-[65], [75]-[78]. iv. The evidence before the arbitrator about the sum allowed was:- a) The Statement of Tony Vaibar (SEFE's Superintendent) dated 20 May 2003 (Exhibit D10) [notably Mr Vaibar was not produced for cross-examination during the quantum hearing - although his attendance was required by WGE];

b) The Statement of Graeme Skinner (SEFE's Finance Manager) dated 15 December 2006 (Exhibit D40);

c) The Statement of Graeme Skinner dated 27 March 2007 (Exhibit D59);

d) The oral evidence of Mr Skinner at transcript ("T") pages 2005-2023.

v. The Arbitrator heard argument and ruled on the admissibility of relevant parts of the statement evidence at:-

b) T2007-2012 (Exhibit D59). vi. The submissions made by the parties about this item were:-

b) WGE's Supplementary Submissions dated 30 April 2007 at paragraphs 2, 126-133 and "Appendix B";

c) SEFE's Schedule "Items Awarded to SEFE Quantum - Summary of Evidence"";

d) SEFE's "Submissions on the Counter Claims" - page headed "Counter Claim 17";

e) WGE's Written Submissions in Reply dated 16 May 2007 at paragraphs 57-58;

f) SEFE's Respondent's Submissions in Reply dated 26 April 2007 at paragraphs 100-106. vii. In the absence of Mr Vaibar, SEFE was reliant upon the sufficiency of its cost recording to link its expenditure with the claim allowed (as to liability) by the Arbitrator.

viii. SEFE's evidence failed to demonstrate that its recorded expenditure, however, was the expenditure resulting from such claim.

ix. The Arbitrator's reasons acknowledged this, but by an unexplained process he allowed the full amount of the claimed expenditure (although disallowing labour). 89 Accordingly I accept that the arbitrator in this instance is shown to have committed an error of law and to have engaged in 'technical' misconduct. SEFE claim item 32 - as-built drawings 90 This item is dealt with at paragraphs 279 to 304. 91 WGE's submissions are of substance in relation to this item. They are adopted in what follows:

i. The arbitrator allowed an amount of $71,020 for this item. This was a proportion only of the costs that had been incurred with URS - $141,714.11 (paragraph 304).

ii. The relevant obligation was contained in clause 123(f) of the Specification. That obligation required the provision of drawings showing the Works as constructed to the extent that drawings were "necessary for the efficient maintenance of the works" according to "the opinion of the Superintendent" (the relevant provision is set out at paragraph 279).

iii. The arbitrator construed clause 123(f) as requiring a relevant expression of opinion by the Superintendent (paragraph 282).

iv. Mr Vaibar was and remained the Superintendent (paragraph 285).

v. There was no evidence of any relevant opinion; the arbitrator saying (at paragraph 287):- "There is no evidence of any opinion in relation to clause 123(f) of the Specification from Mr Vaibar, Mr Lackey or any other person purporting to be the Engineer or Superintendent or purporting to be an Engineer's or Superintendent's Representative under the Contract. Mr Mitchell put forward some evidence as to what he had been told by Mr Olsen. That is not relevant to the opinion of the Superintendent under Clause 123(f) and Mr Olsen did not give evidence although he is still employed by SEFE. I inferred from this that SEFE did not consider that Mr Olsen could assist SEFE's case." vi. WGE took the point that there being no relevant expression of opinion, the claim for as-built drawings must fail.

vii. It is unclear how the arbitrator has progressed from finding that there was no evidence of any opinion to, nevertheless, allowing some amount for as-built drawings.

viii. After referring again to the requirements of clause 123(f) (paragraphs 281 to 285), the arbitrator said (at paragraph 302):-

"…Mr Vaibar, who is the only person identified in the Contract as the Engineer or the Superintendent said in his 20 May 2003 statement … that WGE has not provided as-built drawings as required by Clause 123 of the Contract. That would suggest that Mr Vaibar did require some drawings but which ones is not known."

ix. That evidence is insufficient for the purposes of clause 123(f). Mr Vaibar failed to identify any drawings as being necessary for the efficient maintenance of the works.

x. After making that observation the arbitrator continued (in paragraph 302) and said:-

"…The statement was also made in the context of the maintenance manuals not having been provided … and it is doubtful at best whether Mr Vaibar would have required any as-built drawings after having received and considered the maintenance manuals which were subsequently provided." xi. Having regard to those conclusions the arbitrator ought have disallowed the claim for as-built drawings in its entirety.

xii. The arbitrator, however, seems nevertheless to have continued upon the task of trying to identify for himself (having regard to the evidence that was led) what drawings might be relevantly necessary.

xiii. He accepted Mr Fitzpatrick's evidence that only 67 drawings were necessary (paragraph 304). He pro rated the URS fee (claimed in respect of 134 drawings) so as to derive the amount that he ultimately allowed.

xiv. The arbitrator ought properly to have allowed nil dollars. 92 The short contention of SEFE raised following matters:

i. The Arbitrator's original finding in which he refused SEFE's claim to recover the cost of providing as built drawings was overturned by the judgment of McDougall J referred to in paragraph 4 of the plaintiff's submissions.

ii. The only issue before the Arbitrator was thus whether the amount claimed by SEFE, being that which it paid to an engineering consultant (URS) to provide as built drawings, was in fact incurred to complete this work.

iii. There was no dispute as to the fact that the cost had been incurred and the drawings had been provided. The Arbitrator, however, concluded that all of the drawings provided were not necessary under the relevant term of the contract. 93 In consequence SEFE contended that the Arbitrator made a finding of fact as to the drawings which were required and allowed an amount accordingly. Hence it was put that there was no error of law in the arbitrator's conclusions and no misconduct. 94 This approach by SEFE requires one to travel into the reasons given by McDougall J on the item. This is because:

i. WGE's complaint is that the Arbitrator allowed this claim contrary to the requirements of clause 123 (f) (which required, relevantly, an opinion to be formed by the Superintendent - Mr Vaibar - that identified drawings were 'necessary for the efficient maintenance of the works').

ii. SEFE's response is that, as a result of the decision of McDougall, J it was a matter for the Arbitrator to determine what drawings were so necessary and he did so. 95 As WGE has contended:

i. McDougall, J said:- As-Built drawings

[72] The claim for the provision of As-Built drawings was included in item 32 of the particulars of para 8 of the points of counterclaim (ie. among the "Works to be Completed"). [73] The claim was founded on TS123(f), which includes the following: * (f) Within eight (8) weeks of the Superintendent's Certificate of Takeover all drawings, which in the opinion of the Superintendent are necessary for the efficient maintenance of the works, shall be revived to show the Works as constructed or installed and two (2) paper prints of each shall be submitted for approval. The drawings shall include a table of part numbers for identification and ordering of replacements. The Contractor shall provide the Superintendent with one plastic reproducible transparency of a minimum thickness of 0.06mm together with three (3) paper prints of each drawings [sic]. …

[74] The Arbitrator dealt with this claim at A720 to A723. At A722, having set out the relevant contractual obligation, he said: A Certificate of takeover, whatever that may be, has never been issued and therefore no obligation has arisen to provide these drawings. The drawings had not been supplied as at the date the work was taken out of WGE's hands, however there was no obligation to provide them at that time.

[75] He therefore concluded at A723 that: The obligation to provide drawings has not arisen and therefore this item is not work under the Contract.

[76] The parties were unable to identify the phrase "Certificate of takeover" as a defined term, or term of art. This, no doubt, explains the Arbitrator's comment "whatever that may be" in A722. The words may refer to the Certificate of Acceptance for which GC23.1 applies. If they do, then the Arbitrator's finding that there has been no such certificate is undoubtedly correct. Harris-Daishowa was unable to point to any other certificate, capable of being a "Certificate of takeover", that has been issued.

[77] However, it does not follow, because the obligation to provide As-Built drawings has not yet arisen, that the obligation to provide them is not work under the contract. The effect of TS123(f) is to impose on WGE an obligation to deliver As-Built drawings after the occurrence of the defined event - issue of "the Superintendent's Certificate of Takeover". It was therefore part of the work to be performed by WGE under the contract. That, in turn, means that it is part of the work that Harris-Daishowa is to "complete" under GC30.5 and for which it is entitled to be paid on the basis specified in, or to the extent consistent with, GC30.6.

[78] WGE submitted that, the claim having been brought under GC30.6, "no liability has yet accrued, because no Superintendent's Certificate has yet been issued".

[79] Harris-Daishowa's entitlement under GC30.6 is to a debt quantified as the difference between the cost incurred by it in completing the relevant (ie defective or incomplete) contract works and the amount that would have been payable by it to WGE for those works. It is correct to say that the clause provides for certification of that amount (although by the "Engineer" rather than a "Superintendent"). It does not follow that it is certification, rather than the incurring of the additional cost, that is a condition of WGE's liability to pay. I note that if WGE's argument were correct, it would be an answer to every claim that the Arbitrator determined (in principle but not yet in quantum) in favour of Harris-Daishowa; and that WGE has not submitted that the Arbitrator thereby erred in law in reaching those findings. At most, certification may be relevant to the characterisation of WGE's obligation as a debt rather than one sounding in damages: as a liquidated, rather than unliquidated, amount.

[80] I therefore conclude that the Arbitrator erred in concluding that the obligation to provide As-Built drawings "is not work under the Contract". I think that the simplest way to correct this error is to direct the Arbitrator, pursuant to s 43 of the Act, to consider Harris-Daishowa's claim in relation to As-Built drawings in accordance with the provisions of GC30.6. [emphasis added]

ii. All this amounts to is a recognition that if SEFE completed the relevant work the cost of so doing would appropriately be included in the calculation required by clause 30.6. That left for consideration what the relevant work was - a matter addressed by the Arbitrator.

iii. The relevant work was:- "all drawings, which in the opinion of the Superintendent are necessary for the efficient maintenance of the works".

iv. Mr Vaibar was the Superintendent. He gave no evidence of forming the opinion that any drawings were "necessary for the maintenance of the works". 96 Accordingly the claim had to inevitably fail and the Arbitrator erred in allowing any amount for it. To do so was contrary to the contract. SEFE claim item 34 - management costs at 5% 97 This item is dealt with at paragraphs 305 to 309. 98 The item was allowed at a figure of $25,290.65 (paragraph 309). 99 Mr Lackey supported the 5% estimate. The estimate was attacked by WGE on the basis that management costs needed to be proved by reference to, at the very least, the approximate management time spent on particular claims. 100 The arbitrators approach in terms of his conclusions at paragraphs 207-308 was as follows:

"307 Having regard to - (a) the Claimant's allowance of 13% for overheads in the unsuccessful quantum meruit claim (Amended Points of Claim paragraph 20);

(b) Mr Fitzpatrick's mark-ups of 10% (Exhibit C37 & C38); and

(c) Mr Fitzpatrick's evidence (Exhibit C38) that supervision and management accounted for $350 out of a total of $1,610 for WGE Claim No. 2 which calculates to be 22%.

Mr Lackey's estimate of 5% for the cost incurred for management time based on his observations, is conservative even though Mr Lackey could not be precise as to the total time involved for each Counter-Claim item. 308 The cost incurred for SEFE employees to manage the completion of the work taken out of WGE's hands is as much a cost incurred in completing the work taken out of WGE's hands as the cost incurred for painting and other work. Although better evidence of the management and supervision costs might have been daily records and diaries, an efficient way of determining the cost incurred is to apply the percentage estimated by Mr Lackey to the other cost incurred by SEFE in carrying out the Remaining Work". 101 I am unable to discern any error of law nor evidence of misconduct on the part of the arbitrator in respect of the item. 102 In any event even had there been an error of law in relation to this claim, this is an area where a relevant consideration is the relationship between the costs of the appeal and the significance of the suggested question of law. The determination of any question of law, had one arisen is not shown to substantially affect the rights of either party: cf s. 38(5)(a) of the Act. SEFE claim- item 23 - price reduction for luffing winch 103 This item is dealt with at paragraphs 310 to 315. 104 The arbitrator allowed a figure of $22,346 for this item (paragraph 315). 105 There is no substance in the submission that the arbitrator's conclusion that the amount to which SEFE was entitled by reference to the price reduction of the subject winch throws up an error of law or evident misconduct. 106 Here again even had there been an error of law in relation to this claim, I would not be satisfied that the determination of any such questions of law could substantially affect the rights of either party. Hence for this discretionary reason leave to appeal on this item would have been refused. Increased cost of completing the works 107 This item is dealt with in paragraphs 323 to 359. 108 The arbitrator found that the cost avoided, for the purposes of the agreement contained in Exhibit C30, was $425,659 (paragraph 351). 109 Having regard to the arbitrator's determinations in respect of each of SEFE's items (paragraph 316), the cost incurred in completing the remaining work was $531,103.61 (paragraph 359). 110 Accordingly, the increased cost, as found by the Arbitrator, was $105,441.61 (paragraph 359). 111 WGE contends that the calculation is dependent ultimately on the way in which the arbitrator found in respect of each of SEFE's items of claim, this amount may be decreased or increased according to the outcome of challenges to those determinations. 112 The ultimate award was expressed by the arbitrator (at paragraph 558) as follows:-

"For the reasons set out above I find and award that:

a) The Increased Cost in the amount of $105,441.61 is a debt due and payable by WGE to SEFE from May 2007;

b) WGE is entitled to payment of an amount of $1,302,749.56 for its Claims;

c) SEFE is entitled to payment of an amount of $553,449.61 for its Counter-Claims; and

d) Interest is payable on the award at the same rate as that at which interest is payable on a judgment debt of the Supreme Court of New South Wales on and from 4 September 2007." 113 In other words, the arbitrator has allowed both the amount of SEFE's claims ($553,449.61) and the increased cost ($105,441.61). 114 WGE contends that it was not open to the arbitrator to award both of these amounts. The contention is that essentially what SEFE was entitled to was the amount calculated in accordance with the agreement contained in Exhibit C30. 115 It does appear to me that WGE's submissions on this topic are of substance. One has to analyse the situation very carefully as WGE has done. I accept that analysis in what follows:

i. WGE's complaint is that the award contains an impermissible duplication as a result of the allowance of both:

b. An increased cost to complete. ii. SEFE's response (which does not deny the duplication) is that:-

a. WGE pressed the arbitrator to determine the increased cost to complete;

c. The relevant findings are of fact only. iii. The basis for the assessment of the ultimate consequence of SEFE's claims was agreed (Exhibit C30).

iv. Under the agreement the only relevance of the cost of work to SEFE was to provide a figure from which the WGE price for such work would be deducted in order to determine whether more had been spent with a view to awarding any excess.

v. The Arbitrator concluded:- 359 The Cost Incurred by SEFE in completing the Remaining Work as set out in Table 3 above (at paragraph 316 above) is $531,103.61. The Cost Avoided as set out in Table 6 above (at paragraph 351) above is $425,659.00. The Increased Cost is therefore $105,444.61. In accordance with paragraph 5 of the 30 March 2007 Agreement (Exhibit C30) the Increased Cost is a debt due and payable by WGE to SEFE from the date that the Remaining Work has been completed without the need for any Engineer's Certificate conforming to Clause 30.6 of the Contract and shall not carry any interest if unpaid until after such date. vi. As noted by the Referee the Cost Incurred by SEFE totalling $531,103.61 is made up of the items set out in Table 3.

vii. Table 3 provides:- TABLE 3 Description Amount Paragraph Item 1 - Painting Shiploading tower, including boom & other equipment $323,162.00 186 Item 2 - Modify tower luffing sheave block $57,800.00 200 Item 3 - Jetslinger maintenance platform $5,293.89 201 Item 4 - Luffing winch emergency brake control $0.00 210 Item 5 - Wharf conveyor head drum lagging $2,400.00 215 Item 6 - Gangway caster system $1,247.34 216 Item 8 - Electrical work including boom luffing automatic stop; Jetslinger belt speed; safety limit telescopic lower; plant permissive start up; gangway control from ship's deck; luffing winch slow brake timer; install relays tunnel PLC; flow switch boom conv. Gearbox; alarms and buzzer; training. $11,894.00 217 Item 9 - Boom conveyor return "V" scrapers $1,700.00 218 Item 11 - Wharf conveyor to boom conveyor $400.00 233 Item 12 - Wharf conveyor dust chute modifications $0.00 237 Item 14 - Boom conveyor belt replacement $10,523.20 242 Item 16 - Control cabin glass - 8mm $1,672.02 243 Item 17 - Dolphin linking structure control and dust covers $9,950.51 255 Item 25 - Maintenance jacking system for boom $5,500.00 270 Item 26 - Modify head of boom conveyor $2,450.00 277 Item 31 - Eliminate telescopic chute sticking $800.00 278 Item 32 - As-Built Drawings $71,020.00 304 Subtotal $505,812.96 Item 34 - Management costs at 5% $25,290.65 309 Subtotal - the Cost Incurred $531,103.61 Item 23 - Price reduction for luffing winch $22,346.00 315 Total $553,449.61

viii. The figure of $531,103.91 in Table 3 was greater than the cost avoided ($425,659.00) summarised in Table 6- TABLE 6 Description Cost Avoided Item 1 - Painting Shiploading tower, including boom & other equipment $385,000.00 Item 2 - Modify tower luffing sheave block $0.00 Item 3 - Jetslinger maintenance platform $5,000.00 Item 4 - Luffing winch emergency brake control $0.00 Item 5 - Wharf conveyor head drum lagging $0.00 Item 6 - Gangway caster system $1,000.00 Item 8 - Electrical work including boom luffing automatic stop; Jetslinger belt speed; safety limit telescopic lower; plant permissive start up; gangway control from ship's deck; luffing winch slow brake timer; install relays tunnel PLC; flow switch boom conv. Gearbox; alarms and buzzer; training. $2,250.00 Item 9 - Boom conveyor return "V" scrapers $200.00 Item 11 - Wharf conveyor to boom conveyor $2,000.00 Item 12 - Wharf conveyor dust chute modifications $5,000.00 Item 14 - Boom conveyor belt replacement $0.00 Item 16 - Control cabin glass - 8mm $2,000.00 Item 17 - Dolphin linking structure control and dust covers $5,209.00 Item 25 - Maintenance jacking system for boom $10,000.00 Item 26 - Modify head of boom conveyor $0.00 Item 31 - Eliminate telescopic chute sticking $0.00 Item 32 - As-Built Drawings $8,000.00 Cost Avoided $425,659.00

ix. Accordingly, all of SEFE's claims have been allowed for in the calculation of the recoverable increased cost pursuant to the agreement recorded in Exhibit C30.

x. In making the award, however, the Arbitrator said:- Summary of Award

552 The change to the Arbitration Agreement in respect of how Clause 30.6 of the Contract was to be given effect by the Arbitrator (Exhibit C30) required me to find the Cost Incurred, the Cost Avoided and the Increased Cost. Those amounts are as follows: Cost Incurred (Table 3, Paragraph 316) $531,103.61 Cost Avoided (Table 6, paragraph 351) $425,659.00 Increased Cost $105,444.61

553 In accordance with paragraph 5 of the 8 March 2007 Agreement (Exhibit C30) the Increased Cost in the amount of $105,444.61 is a debt due and payable by WGE to SEFE from the date that the Remaining Work has been completed without the need for any Engineer's Certificate conforming to Clause 30.6 of the Contract and shall not carry any interest if unpaid until after such date. The Remaining Work was completed on an unspecified date in May 2007. 554 For WGE's claims WGE is entitled to an amount of $1,302,749.56 calculated as follows: Contract Price $4,166,897.00 Adjustment for WGE Claims 1 - 35 $413,442.64 Cash from Converted Bank Guarantee $208,344.85 Other Interest $53,586.07 WGE Total Entitlements $4,842,056.18 Payments made by SEFE -$3,539,521.00 Award to WGE for the Claims $1,302,749.56 555 For SEFE's Counterclaims SEFE is entitled to an amount of $553,449.61 calculated as follows: Cost Incurred $531,103.61 Adjustment for Counter-Claim 23 $ 22,346.00 Award for Counter-Claims to SEFE $553,449.61 556 WGE claimed interest on the award. Section 32 of the Commercial Arbitration Act provides as follows: "(1) Unless a contrary intention is expressed in the arbitration agreement, where the arbitrator or umpire makes an award for the payment of money, the arbitrator or umpire shall have power to direct that interest at the same rate as that at which interest is payable on a judgment debt of the Supreme Court shall be payable on and from the date of the making of the award or such later date as the arbitrator or umpire may specify on so much of the money as is from time to time unpaid and any interest that so accrues shall be deemed to form part of the award.

(2) If judgment is entered by the Court in terms of an award, interest shall cease to accrue in pursuance of a direction under this section on the date of the entry of the judgment." 557 There is no intention expressed in the Arbitration Agreement which is contrary to the Arbitrator having power to direct that interest is payable on and from the date of making the award. No argument has been advanced that this Interim Award on Quantum should not include a direction that interest on the award is payable. Therefore I direct that interest at the same rate as that at which interest is payable on a judgment debt of the Supreme Court of New South Wales shall be payable on and from 4 September 2007 which is the date of the making of this Interim Award on Quantum. 558 For the reasons set out above I find and award that: The Increased Cost in the amount of $105,444.61 is a debt due and payable by WGE to SEFE from May 2007;

WGE is entitled to payment of an amount of $1,302,749.56 for its Claims ;

SEFE is entitled to payment of an amount of $553,449.61 for its Counter-Claims ; and

Interest is payable on the award at the same rate as that at which interest is payable on a judgment debt of the Supreme Court of New South Wales on and from 4 September 2007. [Emphasis added]

xi. What the Arbitrator has, therefore, done is to have regard to the amount of SEFE's established claims ($531,103.61) twice : a. First, to calculate how much more SEFE had to spend to complete the works than it would have had to spend had WGE completed;

b. Secondly, to award the amount of SEFE's claims themselves.

xii. The second step was only appropriate if WGE was awarded the amount it would have been entitled to had it completed the works (rather than just the amount WGE was entitled to for those works it performed ). The net result of such an approach would be to give WGE the benefit of the contract but to enable SEFE to offset the cost of rectifying or completing defective/incomplete work. But this approach necessarily picks up the difference between the total cost to SEFE for the work and the contract price - there is no room for the additional award of "increased cost".

xiii. In other words, if the Arbitrator was awarding on a 'fully performed' basis; SEFE recovering all of its costs, not just a cost overrun and WGE recovering all of what it otherwise would have become entitled to through performance there was no room for a separate 'overrun' figure to be allowed.

xiv. The Arbitrator allowed WGE's claims on a 'fully performed' basis, determining that:-

xv. WGE is entitled to payment of an amount of $1,302,749.56 for its Claims;

xvi. This amount was calculated in the following way (giving WGE the full benefit of the contract price):- 554 For WGE's claims WGE is entitled to an amount of $1,302,749.56 calculated as follows: Contract Price $4,166,897.00 Adjustment for WGE Claims 1 - 35 $413,442.64 Cash from Converted Bank Guarantee $208,344.85 Other Interest $53,586.07 WGE Total Entitlements $4,842,056.18 Payments made by SEFE -$3,539,521.00 Award to WGE for the Claims $1,302,749.56 [Emphasis added]

xvii. By including the full contract price (undiminished for incomplete or defective work) the Arbitrator adjusted a 'fully performed basis'.

xviii. There was nothing wrong with the approach so long as the Arbitrator avoided duplication. Unfortunately he did not.

xix. The effect of the awards was to award:- a. To SEFE, for the total cost (as found) for completing the works $531,103.610; being the cost it had incurred in addition to its WGE payments to complete the works;

b. To WGE, the total amount it was or would have become entitled to (as found) for completing the works;

c. But, additionally to allow the difference between these amounts.

xx. Any award proceeding in this way, already takes account of the extent of any cost overrun to SEFE and it is inappropriate to award the overrun as a separate recoverable item. By including the cost overrun as well ($105,444.61) the Arbitrator has overcompensated SEFE by that amount.

xxi. The matter can be looked at simply by having regard to the following figures:- SEFE Payments to WGE $3,539,521.00; SEFE further expenses $ 531,103.61; Total SEFE expenditure $4,070,624.61; Contract Sum $4,166,897.00; Variations (excl 6 &35) $ 145,762.08 Total WGE Price $4,312,659.08

xxii. Approached other than on a 'fully performed basis, there was no cost overrun. For what it matters, WGE submitted before the Arbitrator that this outcome was the result of underpayment by SEFE.

xxiii. The net balance due to WGE based on the calculation just performed is $242,034.47.

a. WGE Claim 6 - $106,709.06 (late/incorrect payments);

c. Bank Guarantee conversion (paragraph 533) - $208,344.85;

d. Other interest (paragraph 534) - $53,586.07. xxv. These 5 amounts total to $771,645.95.

xxvi. As the award stands the net balance is $643,855.34 - a difference of $127,790.61. xxvii. The reason for the difference is the duplication error the Arbitrator made. 116 In the result the arbitrator committed an error of law: This is seen because the approach he has taken is effectively to result in an obligation to account to SEFE in a way which produces a duplicated result. Short minutes of order 117 The parties are to bring in short minutes of order, coping with the proper orders called for in light of the reasons on which occasion costs may also be argued. ***************************

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