Supreme Court of WA|2004-01-30|Before: Pullin J

Ukrainian Association of Western Australia In Perth (Inc) v Squire Constructions Pty Ltd [2004] WASC 4 (30 January 2004)

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : UKRAINIAN ASSOCIATION OF WESTERN AUSTRALIA IN PERTH (INC) -v- SQUIRE CONSTRUCTIONS PTY LTD [2004] WASC 4

BETWEEN : UKRAINIAN ASSOCIATION OF WESTERN AUSTRALIA IN PERTH (INC)

Arbitration - Application for leave to appeal - Turns on own facts

Alghussein Establishment v Eton College [1991] 1 All ER 267

Balfour Beatty Power Constructions Aust Pty Ltd v Kidston Goldmines Ltd [1989] 2 Qd R 105

Carr v J A Berriman Pty Ltd [1953] HCA 31; (1953) 89 CLR 327

Miles v Palm Bridge Pty Ltd [2002] WASC 284

Pavey & Matthews Pty Ltd v Paul [1987] HCA 5; (1987) 162 CLR 221

SMK Cabinets v Hill Modern Electrics Pty Ltd [1984] VicRp 31; [1984] VR 391

Turner Corporation Ltd (in liq) v Co-ordinated Industries Pty Ltd (1994) 11 BCL 202

Turner Corporation Ltd v Co-ordinated Industries Pty Ltd (1995) 12 BCL 33

UDR Equipment Pty Ltd v Afkos Industries Pty Ltd [2000] WASC 57; (2000) 22 WAR 221

1 PULLIN J: This is an application under s 38 of the Commercial Arbitration Act 1985 ("Act"), whereby the plaintiff seeks leave to appeal the interim award made on 24 July 2002 by the arbitrator Mr A B Goold and the final award made by the same arbitrator on 8 November 2002.

2 The plaintiff ("owner") and the defendant ("builder") entered into a lump sum contract on 25 August 1998 for the construction by the builder of the Ukrainian Community Centre in Bassendean. Disputes arose between the parties after completion of the building, and the builder served a notice of dispute. Mr Goold was appointed arbitrator on 17 August 2000.

3 The amended points of claim filed on behalf of the builder allege that the agreement between the parties was both oral and in writing and claimed the balance due under the contract plus interest. The owner denied there was any oral component to the contract, denied that the builder was owed any further moneys, and counterclaimed for liquidated damages and for damages due to the builder's failure to remedy defects.

4 On 24 July 2002, the arbitrator gave notice and published an interim award, and on 8 November 2002, the arbitrator gave notice of, and published, a final award.

5 It is against that background that the owner seeks leave to appeal. The papers reveal that this was a poorly administered contract, that the contract contained several unsatisfactory features, that the dispute was arbitrated before a lay arbitrator who gave brief reasons for decision, and that the hearing involved oral evidence which was not transcribed. The proposed grounds of appeal originally put forward were in unsatisfactory form (including impermissible proposed grounds of appeal alleging errors of fact), which were amended during the hearing and which are still, in several respects, in unsatisfactory form. All of these factors show the wisdom of Parliament in passing s 38 of the Act, which restricts the right of appeal in these sort of cases to questions of law, and then only under the conditions set out in s 38.

6 Section 38 of the Act reads:

"38. Judicial review of awards

...

(2) Subject to subsection (4), an appeal shall lie to the Supreme Court on any question of law arising out of an award.

...

(4) An appeal under subsection (2) may be brought by any of the parties to an arbitration agreement -

(b) subject to section 40, with the leave of the Supreme Court.

(5) The Supreme Court shall not grant leave under subsection (4) (b) unless it considers that -

(a) having regard to all the circumstances, the determination of the question of law concerned could substantially affect the rights of one or more parties to the arbitration agreement; and

(b) there is -

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

(ii) strong evidence that the arbitrator or umpire made an error of law and that the determination of the question may add, or may be likely to add, substantially to the certainty of commercial law.

7 Parker J, in Masawa Australasia Pty Ltd v J-Corp Pty Ltd [2000] WASC 5, collected together a number of authorities which supported the following propositions:

(a) Section 38, like similar provisions in other jurisdictions, is concerned with finality in arbitration proceedings. It is designed to limit the intervention of the courts in arbitration. The philosophy of the new Act is that the election of parties to have their disputes resolved by arbitration should be respected in the sense that awards should not be scrutinised with an over critical eye and the courts should exercise restraint in seising themselves of legal questions.

(b) Section 38(5) was amended in 1997 to strengthen the restriction against leave to appeal being granted. By s 38(5)(a), leave shall not be granted by this Court unless the question of law is one which could substantially affect the rights of one or more of the parties to the arbitration, having regard to all the circumstances. The 1997 amendment also added the further requirements of s 38(5)(b), which are set out above. From the nature of these additional requirements and the terms in which they are expressed, it is clear that the legislature has sought to reinforce the policy of the provision against too ready intervention by this Court.

(c) Finally, it is to be noted that satisfaction of the requirements in s 38(5) does not of itself entitle the applicant to a grant of leave. Section 38(5) sets out threshold requirements to be satisfied before leave may be granted. Satisfaction of the threshold requirements gives rise to a discretion to grant leave pursuant to s 38(4)(b). This discretion to grant leave is to be exercised after considering all the circumstances of the case.

8 In Promenade Investments Pty Ltd v State of New South Wales (1992) 26 NSWLR 203 at 222, Sheller JA discussed the requirements of s 38(5)(b). He stated that a manifest error of law on the face of the award may be demonstrated if there be 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". An error which is "manifest" is one which is "evident and obvious rather than merely arguable": Anaconda Operations Pty Ltd v Fluor Australia Pty Ltd [2003] VSC 275. The error must an error "on the face of the award", which means that the error is not to be discovered by looking behind its back. It is not permissible to treat the limited jurisdiction by which a court ensures that an arbitration is conducted in accordance with law as if it were the equivalent of an appeal from an arbitrator's decision: Gold Coast City Council v Canterbury Pipe Lines (Aust) Pty Ltd [1968] HCA 3; (1968) 118 CLR 58 at 77, per Windeyer J.

9 A determination which adds substantially to the question of commercial law may be a determination of a question of the construction of a contract in standard terms rather than construction of a one-off clause. See also Lamac Developments Pty Ltd v Devaugh Pty Ltd [2002] WASCA 245; (2002) 27 WAR 287 per Murray J at [60] and per Matthews AJ [132], approving the views expressed by Sheller JA in Promenade Investments (supra).

10 A question of law will arise if there has been an error of law arising out of the award. Although the question of law may "arise out of an award", the threshold requirements in s 38(5) require the error of law to be manifest on the face of the award, or, alternatively, if not manifest on the face of the award, be the subject of "strong" evidence that there was an error of law coupled with the requirement that the determination of the question may add, or may be likely to add, substantially to the certainty of commercial law.

11 To show an error of law in the circumstances of this case and on the grounds proposed, it will be necessary to show an error in construction of the contract or an erroneous application of the law to the facts. There is no error of law in relation to factual findings unless there was no evidence to support the findings: Australian Broadcasting Tribunal v Bond [1990] HCA 33; (1990) 170 CLR 321 at 355.

12 The builder's points of claim in the arbitration proceedings alleged that the contract was partly written and partly oral. The written part of the contract was described as a "Lump Sum Contract for Medium Works (for use in Works without an Architect)". It was said to be a Master Builders Association of WA form, and it has typed on the bottom "Printed May/92". No evidence has been led about whether or not the form is still in use. I would hope not, because there are some problems with the form, and with cl 10(a) in particular (which I mention below). The written part of the contract also contained some special conditions applicable to this contract only. The owner, in its points of defence, denied the paragraph in the points of claim alleging that the contract was partly written and partly oral, but the arbitrator in par 8 of his interim award said "I determine that the Contract between the Parties contained both written and oral terms". He does not state what the oral terms of the contract were.

"1 The learned Arbitrator erred in law by allowing variation 49A. The learned Arbitrator erred in law as he made reference to the works being authorised as remedial works and not as a variation extra at the time the works were performed, and then notwithstanding this finding found, in contravention of the express agreement of the parties and the express terms of the Building Contract, that the Variation 49A should be allowed. The learned Arbitrator should have found that:

(a) the Defendant had requested in writing from the Plaintiff to authorise the works as a variation extra;

(b) the Plaintiff did not agree the works were a variation extra and only authorised the works on the agreement the works were remedial;

(c) the Plaintiff instructed the contractor to perform the works on the basis they were remedial, and accordingly no claim could be made for a variation;

(d) by virtue of clause 16(g) of the Contract the Defendant was not entitled to payment for any variation due to his default;

(e) if the Defendant disputed the works were remedial, then the Defendant should have referred the dispute to arbitration at the time of the works, and that by failing to do so the Defendant is now estopped from claiming the works as a variation extra;

(f) in any event, on a proper construction of clause 16(c) of the Contract or by necessary implication, the Defendant is only entitled to claim a variation extra if it is in writing and signed by both parties prior to the Defendant performing the works; and

(g) in the absence of a signed variation, the claim should have been disallowed.

2 The learned Arbitrator erred in law by allowing variation 60/OA. The learned Arbitrator erred in law as at the time the works were performed the Defendant did not advise the Plaintiff that it would result in an extra cost nor did the Defendant present a variation claim in accordance with the express terms of the Building Contract, and accordingly Variation 60/OA should not have been allowed. The learned Arbitrator should have found that:

(a) the Plaintiff instructed the contractor to perform the works on the basis they did not involve any extra cost to the Plaintiff;

(b) the Defendant made no claim that it would result in an extra cost, and that by failing to do so the Defendant is now estopped from claiming the works as a variation extra;

(c) in any event, on a proper construction of clause 16(c) of the Contract or by necessary implication, the Defendant is only entitled to claim a variation extra if it is in writing and signed by both parties prior to the Defendant performing the works; and

(d) in the absence of a signed variation, the claim should have been disallowed."

14 As to the contention that the arbitrator erred in law as alleged in 1(f) and (g) and 2(c) and (d), I was taken by counsel for the owner to the written part of the building contract, and in particular to cl 16. As to whether regard can be had to this clause when considering whether or not there is an error of law manifest on the face of the award, was something which it is not necessary for me to consider at this point, because I consider that even if reference is made to cl 16, it cannot be demonstrated that there was any error of law of the kind contended for in the proposed notice of appeal. Clause 16 reads:

"16 VARIATIONS

(a) This Contract may be varied at the request of the Owner by omissions from the Works or by the performance of extra work with the consent of the Builder; which consent shall not be unreasonably withheld. No variation shall vitiate the contract.

(b) The Builder may decline to execute any variation required by the Owner unless the Owner has first given notice in writing detailing the requirements.

(c) If the Builder agrees to undertake the variation, the variation shall be in writing and signed by both the Builder and the Owner.

...

(e) the value of all extra work shall be added to the contract sum and shall be added to the next progress payment due after the execution of such work.

..."

15 The plaintiff's written submissions stated that:

"The Contract expressly provided that any additional or varied work could only be permitted if approved in writing by both the Plaintiff and the Defendant."

16 By this I take it that the owner is submitting that the builder was not entitled to have the value of the extra work added to the contract sum.

17 In my opinion, the owner's contention cannot be sustained. Clause 16 does not have the effect contended for by the owner. The contractual provision referred to, allows the owner to request the builder to carry out extra work. The request does not have to be in writing. The builder may decline to execute the extra work unless the owner gives notice in writing. However, the builder is not required to demand any writing. Clause 16(c) then imposes an obligation on both parties to co-operate to record the variation in writing and for both parties to sign it. Nowhere in the contract is it said that if that clause is not complied with, the builder is not entitled to payment. If one or other of the parties failed to co-operate by signing the variation, then that party would be liable for damages for that failure. In many cases only nominal damages would be awarded. In cases where there is a dispute about whether or not the works were extra works, it is highly unlikely that the parties would co-operate to reduce the variation to writing. It could not be contended that in those cases, the builder would fail to recover because the owner had not signed a record of the variation.

18 In my opinion, leave should not be granted in relation to proposed grounds 1(f) and (g), 2(c) and (d), because there is no error of law revealed by these grounds.

19 As to proposed grounds 1(a)-(e), these paragraphs of proposed ground 1 are that the arbitrator made a finding that the works in question were remedial works rather than variations. By that, the owner suggests that the work was necessary to fix up work not carried out by the builder in accordance with the contract. No such finding was made. All the arbitrator said at AB 271 was:

"The Respondent states that this work is remedial as per Van Der Meer letter December 31 1998, Exhibit R-8."

That is not a finding but a recording of the owner's contention. The finding of the arbitrator was against the owner's contention. Whether the work was remedial work, as is asserted by the owner, or whether it was work extra to the work required under the contract, was a question of fact to be determined by the arbitrator. That does not raise a question of law.

20 In any event, error, if it exists, is not manifest on the award. If strong evidence of an error of law is to be shown, it would be necessary to go to the evidence, and even if error could be shown on the evidence, this is not a case where the determination of the question may add, or may be likely to add, substantially to the certainty of commercial law. It is a case which turns entirely on the circumstances of this case.

"3 The learned Arbitrator erred in law in determining practical completion as having been achieved on 1 May 2000. The learned Arbitrator erred as:

(a) his determination was based on the evidence of Exhibits C-66, C-67, C-68, C-69, C-70 and C-71 which showed that as at 17 May 2000 the Defendant had not obtained certification from the Town of Bassendean;

(b) there was no evidence to support a finding that practical completion was achieved on 1 May 2000 in light of the above evidence referred to directly by the Arbitrator in the award;

(c) he failed to explain in the Interim Award whether any consideration had been given to whether the Works were reasonably capable of being used in light of the defects identified by the Plaintiff in Exhibits C67 and Exhibit R52;

(d) having noted that the Plaintiff was in possession of the Centre from 11 June 2000, he failed to then consider whether Practical Completion was achieved on that date by virtue of clause 27(e) of the Contract, and not by reason of the Works having been completed in accordance with clause 27(a) of the Contract.

The learned Arbitrator should have found that:

(a) the Works as at 1 May 2000 were not completed to a level which allowed the Centre to be used for the intended purpose of the Plaintiff as a function Centre as:

(i) the Town of Bassendean did not provide a Section 40 Certificate certifying this to be the case until 30 May 2000;

(ii) the matters raised in the snag list by the Plaintiff were never attended to by the Defendant;

(iii) all keys to the Centre and manuals were not provided until 3 July 2003 (see Exhibit R3) and so the Plaintiff could not reasonably use the premises without those items;

(b) practical completion was not achieved until the owner took possession of the premises on 11 June 2000, thereby by operation of clause 27(e) of the Contract the date of possession is deemed to be the date of practical completion."

22 This proposed ground amounts no more than an assertion that on the evidence led in the case, the owner contends that the arbitrator should have agreed with the owner's submissions. The parties were in dispute about the date of practical completion.

23 Counsel for the owner argued that the error is manifest on the face of the award, but I do not agree with that submission.

24 The arbitrator, in his interim award, had this to say about practical completion:

September 4 1998 was agreed between the Parties at the Hearing as the commencement date of the Contract.

Construction period as per Contract was 36 weeks including public holidays and rostered days off.

September 4 1998, plus 36 weeks equates to May 14 1999. Claimant Builder claims practical completion occurred on May 1 2000, i.e. approximately 50 weeks from May 14 1999

The Respondent Proprietor does not claim a definite date the practical completion was achieved, however liquidated damages have been claimed from May 3 1999 to June 10 2000, a period of 58 weeks at $2000.00 per week totalling $116,000.00

The Respondent commenced works not included in the Contract in March 2000, also the Respondent was directing works deleted from Contract. Possession of the centre was provided by the Claimant for the official opening that took place on June 11 2000. Claimant handed over keys to the Centre on July 3 2000.

I determine that practical completion was achieved by the Claimant Builder as per Contract on May 1 2000. This determination is based on the evidence of Mr Ray Sluchniak, Exhibits C-66, C-67, C-68, C-69, C-70 and C-71."

25 The arbitrator, in brief terms, identified the issue between the parties. He identified the commencement date of the contract, the construction period, and the date when the builder was obliged to achieve practical completion. The arbitrator records the contentions of the parties, and in particular the contention of the builder that practical completion was 1 May 2000 and the contention of the respondent that it was a later date. The arbitrator refers to an arrangement which was apparently in place, whereby the owner was to carry out some works which had not been included in the contract and which had been deleted from the contract. This concludes with a determination as to the date of practical completion. There is nothing manifestly in error in that reasoning. However, the owner says that the reference made by the arbitrator to the "evidence of Mr Ray Sluchniak, Exhibits C-66, C-67, C-68, C-69, C-70 and C-71" incorporates all of that material into the award. The owner seeks to do this so that it can then say that the reading of those exhibits as part of the award will reveal the error. In my opinion, the mere fact that the arbitrator has referred to evidence does not mean that that evidence is all incorporated into the awards. During oral submissions, counsel for the owner informed me that, despite search, he had found no authority which might guide me as to whether this evidence may be referred to or not. My own researches uncovered Gianfriddo v Garri Constructions Pty Ltd [1971] VicRp 34; [1971] VR 289, Edwards v Jaxon Construction Pty Ltd [1973] WAR 105 and Anaconda Operations Pty Ltd v Fluor Australia Pty Ltd (supra). These cases state that a mere recital or narrative statement will be insufficient to incorporate a contract or other documents into the award, just as words relied upon in the operative part of the award which expressed the decision or direction of the arbitrator on the matter referred to him, are insufficient to incorporate those provisions into the award. If, however, the decision given is expressed in terms referential to contractual provisions to such an extent that it is necessary to read the document referred to in order to give effect to the decision, then the document should be treated as incorporated. If the decision is expressly based upon the wording of a specified clause of the contract, then that clause is incorporated in the award itself. Again, where the decision is expressed to be based upon the wording or effect of the contract as a whole, the weight of authorities supports the view that in such circumstances the contract or the relevant part of it will be incorporated.

26 In Giacomo Costa Fu Andrea v British Italian Trading Co Ltd [1963] 1 QB 201 at 219, it was said that "if any document is intended to form part of an award ... it should be made clear that it is the intention of the award that the document should be actually incorporated into it". In my opinion, the reference to the evidence of "Mr Ray Sluchniak, Exhibits C-66, C-67, C-68, C-69, C-70 and C-71" does not reveal any intention (objective or subjective) that this evidence and these documents were to be incorporated into the award. There would be a practical consideration in this case which would operate even if I were wrong in that regard, because I was informed that the oral evidence was not transcribed.

27 As a result, I concluded that there is no manifest error on the face of the award and, in any event, exercise my discretion not to grant leave.

28 As to s 38(5)(b)(ii), my opinion is that the owner does not satisfy the requirements of that subsection. The owner seeks to demonstrate that practical completion on the facts had not been achieved on 1 May 2000. I will again assume, without deciding, that cl 27(a) of the contract was incorporated into the award. This clause reads:

"Practical Completion is that stage when the Works are completed except for any omissions and/or defects which do not prevent the Works from being reasonably capable of being used for their intended purpose by the Owner, and such testing or certification by any authority having jurisdiction has been complied with. ..."

29 The owner says that if regard is had to the evidence, it would be revealed that certification by the local authority had not been given until a date after 1 May 2000, and as a result the arbitrator was in error when he determined that practical completion was achieved on 1 May 2000. I should add that counsel for the builder submits that on its case the reason why there was no certification by the local authority was because work which the owner had agreed to do had not been carried out, not because work which the builder was responsible for had not been carried out. What this reveals is that there was a dispute on the facts and the facts were then resolved by the arbitrator. There is no strong evidence that the arbitrator made an error of law.

30 In any event, I see nothing in this ground, even if there was strong evidence of an error of law, which would add, or may be likely to add, substantially to the certainty of commercial law. This is simply a dispute on the particular facts of this case and the application to those facts of a clause in the contract, the interpretation of which appears not to be in dispute. I would therefore refuse leave in relation to this proposed ground.

(i) extensions of time would be based on variations;

(ii) the excessively large quantity of variations was the main reason the job went overtime;

(iii) 20 weeks were lost due to a contract variation and not remedial works;

(iv) the Contract between the parties contained both written and oral terms; and

(v) the Plaintiff cannot levy liquidated damages, thereby disallowing the deduction of $122,000.00; and

(b) failing to recognise that the Contract permitted the Plaintiff to request variations verbally which did not therefore equate to the contract containing express and oral terms, just to it containing an express provision permitting variations to be requested verbally;

(c) failing to consider the terms of the Contract and whether the Defendant had complied with the requirement to request extensions of time in writing;

(d) implicitly finding a waiver of clause 19(a) of the Contract in circumstances where there was no evidence to support a waiver of the express term of the Contract and the only evidence referred to by the Arbitrator (Exhibit C-19) being an example of a written agreement to an extension of time;

(e) failing to require the Defendant to comply with the terms of the Contract; and

(f) failing to consider whether the extension of time claims were based on variations which caused an actual delay to the works.

The learned Arbitrator should have found that:

(a) Exhibit C-19 and the continued presentation of written variations was consistent only with the contractual requirement to obtain written approval for extensions of time for variations as required by clause 19(a) of the Contract, and not with any implied finding that the requirement to request extensions of time in writing had been waived;

(b) the structural steel delay of 20 weeks was due to agreed remedial works and thereby the Defendant caused a delay of 20 weeks for which no extension of time claim could be made;

(c) where a contract provides a clause to obtain extensions of time, if that clause is not utilised there is no power to then extend the time;

(d) in the absence of the Defendant having presented written claims for an extension of time for variations during the course of the construction of the Centre, by virtue of clause 19(a) of the Contract and the 'prevention principle' the Defendant failed to obtain any extension of time for completion of the project beyond 14 May 1999, and the Plaintiff was thereby entitled to claim liquidated damages for the period 14 May 1999 to the date of practical completion;

(e) in any event, the Defendant had failed to adduce any evidence to establish that the variations caused any actual delay to the construction timeline for the project, and furthermore, the Defendant did not adduce any evidence to establish the length of the actual delays and timing of the works caused to the [sic], and thereby did not establish a valid claim to an extension of time; and

(f) the Plaintiff was entitled to levy liquidated damages for the period 14 May 1999 to 10 June 2000, being a period of 55 weeks at $2,000.00 per week totalling $112,000.00"

32 This proposed ground involves complaint about that part of the arbitrator's reasons which read:

The Respondent deducted $40,000.00 liquidated damages due to the alleged delay caused by the steelwork variation. At practical completion the damages were increased to $100,000.00 and then to $116,000.00 and finally $122,000.00 in the Respondents submission. It appears from the vast number of Contract variations that took place that the documents were not totally acceptable to the Respondent. Continual changes were being made to the works apart from changes made to reduce costs. These variation changes, whether additions or deletions, add time to the contract period.

The Respondent claims that the Builder did not give notice as per clause 19(a)(i - viii) of the Contract to claim an extension of time, therefore the Proprietor is entitled to levy liquidated damages as per Contract clause 10(a).

Exhibit C-19, site meeting minutes no. 2, September 11 1998. Item 1 states regarding variation to stormwater disposal system: 'Time delay to be added to Contract at no cost to the Proprietor nor damages enforced against Builder.' Mr Parin stated in evidence that matters addressed in site minutes (unless disputed) form an agreed written document. Mr Alex McLean also confirmed during the Hearing that site minutes formed an agreed written document.

Mr Sluchniak confirmed in his evidence that extensions of time would be based on variations.

The Builder has not exercised his right under contract 19(b) on the premise that the Proprietor would not levy damages under clause 10(a).

I determine that the excessively large quantity of variations was the main reason the job went overtime. Twenty weeks were lost due to the error in Architectural Plan A2, which I have determined was a Contract variation and not remedial structural steelwork.

Evidence given by Mr Sluchniak and the witnesses engaged by the Claimant was that directions were given by Mr Parin verbally as well as in writing.

Mr Parin stated in his evidence that variations were firstly investigated through subcontractors. Sometimes instructions were given in writing and sometimes orally, with contentious items put in writing.

I determine that the Contract between the Parties contained both written and oral terms.

Based on the aforementioned reasons, I determine that the Proprietor cannot levy liquidated damages, therefore the deduction of $122,000.00 is disallowed."

33 Here it does become important to decide whether cl 19 is incorporated into the award. In my opinion, the clause must be incorporated because, without reading the clause, the reasons for decision are meaningless. In his reasons for decision, the arbitrator at one point referred to cl 19(b), but counsel for the builder conceded that this was an error and should be read as a reference to cl 19(a).

"19. DELAYS AND EXTENSION OF TIME

(a) Should the progress of the Works be delayed by any of the following causes or conditions resulting therefrom;

(i) on account of authorised variations or extras;

...

THEN in any such case the Builder shall within seven (7) days notify the Owner in writing of the same, and shall be entitled to a fair and reasonable extension of the time provided for completion of the Works. Any such notification shall state the cause and the extent of the delay. Should the Owner not dissent in writing from such notification within seven (7) days after the date when he shall be deemed to have received any such notification, the Date for Practical Completion of the Works shall be extended by the period claimed in the said notification."

35 The consequence of gaining an extension of time under cl 19(a) is that liquidated damages for late completion would be reduced or not payable at all, depending upon when practical completion was achieved. The extension may be gained if the builder gave notice under cl 19(a). It is clear, however, that the builder did not give notice under cl 19(a). So the question then was whether the owner was entitled to liquidated damages for the period of time by which completion was delayed by reason of the builder carrying out the "excessively large quantity of variations" which the arbitrator found was the main reason why the job went over time. The builder claimed that the owner was not entitled to liquidated damages for the period of delay caused by the time taken to perform these variations, because the owner had waived its entitlement to liquidated damages in relation to such period of delay.

36 The issue arose in the following way. In cl 2.7 of the substituted points of claim, the builder pleaded that it was "a term ... of the Contract that ... the Contract's requirement concerning all matters require [sic] to be in writing would not be strictly adhered to and all paperwork would be kept at a minimum." The owner then pleaded in par 2(d) of its Re-Amended Points of Defence and Counterclaim that it "denies sub paragraph 2.7 of the Substituted Points of Claim, and says further that at all times the Respondent made it clear to the Claimant that any matter required to be in writing under the terms of the Contract was required to be in writing", and in par 14 pleaded that "pursuant to clause 10 of the Contract the Respondent is entitled to liquidated and ascertained damages for any period during which, the Works are not practically completed." The builder, in par 3 of its Amended Reply and Defence to Re-Amended Points of Defence and Counterclaim, denied par 2(d) of the owner's pleading and pleaded that "in addition to paragraph 2.7 of the Substituted Points of Claim being a term of the Contract" that the owner had "waived by its conduct the requirements for any matter including variations to be in writing".

37 The builder in its closing written submissions said that:

"... from the evidence of Mr Sluchniak and Mr Parin it is clear that the Claimant and the Respondent conducted the Contract on an oral basis and by the Respondent so doing, the Respondent has waived its entitlement to claim that all matters required to be done in writing by the Contract was to be in writing."

38 The owner in its written closing submissions said:

"The Respondent at no stage waived any written requirement of the Contract."

39 The arbitrator resolved this dispute when he said in his reasons:

"The Builder has not exercised his right under contract 19(b) [sic] on the premise that the Proprietor would not levy damages under clause 10(a)."

40 I read this as a finding by the arbitrator that the owner had, by its conduct, indicated that it would not levy damages under cl 10(a), thereby inducing the builder not to exercise its right to give notice under cl 19(a).

41 This finding is devoid of the kind of detailed reasons which would be expected from a judicial officer dealing with the dispute, but it is the very reason why there is a restriction on the right of appeal. The decision of the arbitrator was a decision called for on the pleadings and in the submissions, and made after hearing the evidence of the parties. The proposed ground does not allege that there was no evidence of a waiver of the owner's right to liquidated damages. That being so, the argument is that the arbitrator came to the wrong conclusion on all of the evidence, but that is not an error of law. Even if there were an unrestricted right of appeal, the appeal could not succeed on the materials before me, because there is no transcript of the evidence of the witnesses and neither party has attempted to produce a note of the evidence given by the witnesses.

42 Even if I were wrong in the conclusion I have just reached and if a manifest error does appear on the face of the award, the builder submits that I should exercise my discretion and refuse leave, because cl 10 does not in any event allow the recovery of liquidated damages. Clause 10(a) reads:

"If the Builder shall fail to bring the Works to Practical Completion as defined in Clause 27, or within any extended time fixed pursuant to Clause 19 then, the Builder shall pay or allow to the Owner a sum calculated at the rate stated in Appendix 1 as liquidated and ascertained damages for the period during which, the Works shall so remain not practically completed."

43 Clause 27 concerns itself with the date "of Practical Completion", ie when the work is actually completed, and not the date "for" practical completion, ie the date when the builder promised to complete. Perhaps the draftsmen meant to refer to cl 9(a) rather than cl 27. Clause 9(a) is the clause which obliges the builder to complete the works on the dates stated in the contract, although there is nowhere a definition of the date "for" practical completion. However, the clause does not refer to cl 9(a).

44 Counsel for the owner objected that the builder's submission about cl 10 was raised for the first time at this hearing. I assume that this objection was made on the basis that it may have prejudiced the owner, because if this argument had been raised before the arbitrator, then the owner may have sought rectification of the contract so that the reference in cl 10(a) to cl 27 was amended to refer to cl 9(a). The owner's objection must be overruled because the builder did, in fact, make a submission about the effect of cl 10 before the arbitrator. The builder's written submissions read:

"Accordingly, in terms of the Contract the Respondent is only entitled to liquidated damages where the Claimant has failed to bring the works to practical completion."

45 The provisions of cl 10(a) or the difficulty in trying to apply cl 10(a) are, in my opinion, reasons why the Court should exercise its discretion to refuse leave, even if there had been an error of law. I refuse leave to appeal on this proposed ground.

46 This was a consequential ground. If ground 5 succeeded, then the question of interest would have to be re-litigated, but that is not a separate ground of appeal. Leave has been refused in relation to ground 5. Therefore, leave is refused in relation to this ground.

47 Leave is refused in relation to this ground. This merely asserts what the owner considers should have been awarded if grounds 1 to 5 were upheld.

"7 The learned Arbitrator erred in law in his Final Award by determining that the Plaintiff was to pay the Defendant's legal costs and the Arbitration costs. The learned Arbitrator erred in the exercise of his discretion by:

(a) failing to note that had the Defendant sought extension of times during the course of the running of the contract and at a time when the Plaintiff could have properly considered such claims, and that the Defendant thereby contributed to the unnecessary costs by failing to comply with his obligation under the contract;

(b) failing to give sufficient or any consideration to the fact that the Plaintiff did not know, and could not know, of the Defendant's claims for variations or entitlements to extension of time until the Defendant has presented such evidence during the course of the arbitration;

(c) failing to give sufficient or any consideration to the Defendant having contributed to the hearing having been unnecessarily lengthened by the need to produce evidence to support variation claims which if had they been requested during the course of the running of the contract and at a time when the Plaintiff could have properly considered such claims, that the Defendant may not have needed to resort to the arbitration process to validate those claims;

(d) failing to give sufficient or any consideration to the Plaintiff's financial position in exercising his discretion whether to award costs; and

(e) failing to give sufficient or any consideration to an appropriate exercise of his discretion in the above circumstances being that each party bear their own costs notwithstanding that the money flow was to the builder.

The learned Arbitrator should have ordered that each party bear their own legal costs and pay equally the arbitrator's costs of the arbitration."

49 This ground complains about the exercise of the arbitrator's discretion in awarding costs. The first point to note is that insofar as the ground alleges that there was a failure to give "sufficient" consideration to certain factors, that raises no question of law.

50 Leave will not be granted in relation to this ground. There is no error manifest on the face of the award. This is not a case where the determination of the question of law may add, or may be likely to add, substantially to the certainty of commercial law. The principles on which costs are awarded are well known and certain. This is a case which turns on considerations relevant only to this case. Another judgment on the subject of costs would not add to the already certain law in relation to the awarding of costs.

51 I refuse the plaintiff's application for leave to appeal.

Arbitration Act 1985

Ukrainian Association of Western Australia In Perth (Inc) v Squire Constructions Pty Ltd [2004] WASC 4

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (112 paragraphs)

Ukrainian Association of Western Australia In Perth (Inc) v Squire Constructions Pty Ltd [2004] WASC 4 (30 January 2004)

Parties

Legislation Cited (1)

Cases Cited (7)