Allmore Constructions Pty Ltd v Failli
[2004] VSC 60
•4 March 2004
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
No. 7485 of 2003
| ALLMORE CONSTRUCTIONS PTY LTD (ACN 072 183 156) | Plaintiff |
| v | |
| LUIGI FAILLI AND GIUSEPPINA FAILLI | Defendants |
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JUDGE: | HARPER J | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 27 FEBRUARY 2004 | |
DATE OF JUDGMENT: | 4 MARCH 2004 | |
CASE MAY BE CITED AS: | ALLMORE CONSTRUCTIONS PTY LTD v LUIGI FAILLI & GIUSEPPINA FAILLI | |
MEDIUM NEUTRAL CITATION: | [2004] VSC 60 | |
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Arbitration – Commercial Arbitration Act 1984 – application for leave to appeal against interim award – building dispute.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr J.A.H. Foxcroft SC | Giannakopoulos Solicitors |
| For the Defendants | Mr G.H. Golvan QC with Mr S.V. Palmer | Vincent Verduci & Associates |
HIS HONOUR:
The plaintiff is a builder. On 4 June 2001, it was engaged by the defendants to construct retail premises at 159-163 Rosamond Road, Maribyrnong. The contract, which was in writing, included provision for disputes between the parties to be settled by arbitration to which the Commercial Arbitration Act 1984 applied.
Underpinning the Act is the proposition that those who choose arbitration are bound by their choice. Thereafter, access to the courts is to be limited. One party to an arbitration agreement cannot force the other party into litigation otherwise than in accordance with the agreement itself, or as permitted by the Act.
That permission is not readily granted. Consistently with the scheme of the Act, one party to an arbitration agreement cannot thwart its operation by, for example, refusing to join in the appointment of an arbitrator: s.8. Similarly, a refusal to attend before the arbitrator may invoke the jurisdiction of the Court to compel such attendance: s.18. Of particular relevance in the present context, s.28 provides that, unless a contrary intention is expressed in the arbitration agreement, the award made by the arbitrator shall be final and binding on the parties to the agreement.
There is, however, a caveat. By s.30, the Act provides for the correction (by the arbitrator or umpire, or by the Court) of an award which contains such flaws as a clerical mistake, an accidental slip or a material miscalculation of figures. In addition (if the parties so agree, or if the leave of the Court is obtained) an appeal shall lie to the Supreme Court on any question of law arising out of an award: ss.38 (2) and 38(4). Leave shall not be granted, however, unless the Court considers that each of two sets of circumstances obtain. First, that – having regard to all the circumstances – the determination of the question of law could substantially affect the rights of one or more parties to the arbitration agreement; and, secondly, that there is either a manifest error of law on the face of the award, or 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: s.38(5).
In addition to its power to grant leave to appeal, the Court may set aside an award, or may remove an arbitrator or umpire, where the Court is satisfied that there has been relevant misconduct on the part of the arbitrator or umpire: ss.42 and 44. Removal is also open where the Court is satisfied that undue influence has been exercised in relation to an arbitrator or umpire, or that such a person is incompetent or unsuitable to deal with the particular dispute: s.44. In addition, the power to set aside an award arises where the arbitration or award has been improperly procured: s.42(1)(a).
By a notice of dispute dated 4 December 2001, the plaintiff claimed that the defendants were indebted to it pursuant to the contract: the plaintiff had, according to it, properly submitted claims for progress payments; but these had not been met in accordance with the defendants’ contractual obligations.
The original contract sum was $1,711,812.30. This was subsequently amended by variations and credits. Some of these favoured the plaintiff; some, the defendants. Some, or the amounts claimed for them, were contentious. By 18 December 2001, the date on which the plaintiff suspended work on the project, $1,698,799.04 had been paid. The plaintiff asserted that this was not enough. The defendants took the opposite position. According to them, the plaintiff had been overpaid.
So the matter went to arbitration. The arbitrator, Mr Kelvin Hegarty, handed down his interim award on 20 June 2002. He held that the plaintiff had been overpaid in the sum of $29,540.69. The plaintiff was dissatisfied. It sought leave to appeal to this court. The application was heard by me in proceeding no. 6475 of 2002. I granted the application, but on a limited basis. I differed from the arbitrator on only two points. These I referred back to the arbitrator for his final determination. The parties later agreed, on the basis of my judgment, to the making by me of consent orders in the Supreme court proceeding. These were as follows:
"1.The interim award of the arbitrator dated 20 June 2002 is varied by setting aside his determination that the defendants were entitled to the following credits:
(a)additional exit stairs to first floor $15,000.00
(b)additional new first floor amenities block $17,485.00
2.The interim award be remitted to the arbitrator for further hearing and consideration of:
(a)his finding in relation to the plaintiff's alleged entitlement to suspend the works in December 2001; and
(b)his finding that the defendants were entitled to receive liquidated damages consequent upon that suspension
in light of the opinion of the Court contained in the judgment … dated 12 November 2002."
By these orders, the parties accepted that the defendants were not entitled to the two credits, previously allowed in their favour, which were the subject of the grant of leave to appeal and, subsequently, of the orders themselves. The result was that, on the figures arrived at by the arbitrator with the amendments suggested by me, the defendants were indebted to the plaintiff in a sum in the order of $3,000. This contrasted with the finding of the arbitrator – namely, that the plaintiff had been overpaid in the sum of $29, 540.69.
The arbitrator, by his interim award, had held that the plaintiff was not entitled to do as it had done on 18 December 2001: that is, suspend its work on the project. One reason, perhaps the sole reason, why the arbitrator came to this conclusion was that the suspension was based upon a false premise. The plaintiff had sought, in the arbitration, to justify the suspension on the ground that the defendants had not paid that which, under the building contract, was due. Given the arbitrator’s finding that the plaintiff had been overpaid, however, the underlying premise was false. Accordingly, the suspension was held to be wrongful.
This position, according to the plaintiff, was reversed by the making of the consent orders following my judgment At that time, the underlying premise was made good; or so the plaintiff claims.
The defendants beg to differ. They wish to argue before the arbitrator, when the matter comes back to him, that even given the new circumstances, the plaintiff’s suspension was unjustified. And (the argument runs) this is so because at the time of the suspension the plaintiff had claimed an amount from the defendants that was $139,896 more than that to which the plaintiff was entitled. In other words, the suspension might have been justified had the defendants refused or failed to pay the sum in which they were in fact indebted. Their refusal to meet a demand much greater than the plaintiff’s entitlement, however, gave the plaintiff (or so the defendants claim) no right to take the action it did. As part of their argument, the defendants submit that only a certain proportion of the total works had been completed when the plaintiff suspended its operations at the site. The defendants claim that in these circumstances they cannot be required to pay more than the value of the completed portion.
The differences between the parties are significant. The contract by which their relationship is governed makes provision for the payment in certain circumstances of liquidated damages by the plaintiff to the defendants. The arbitrator ordered that such a payment, in the amount of $105,000, be made. The plaintiff now asserts that that order should be vacated. It argues that, since the arbitrator’s order in relation to liquidated damages was predicated on the plaintiff having been overpaid, and since it is now settled that the plaintiff was not, two consequences follow. First, suspension of the works was justified. Secondly, there can in those circumstances be no basis upon which to charge the plaintiff with liquidated damages.
For the reasons to which I have already adverted, the defendants assert that suspension was not a remedy to which the plaintiff could properly resort. Its unjustified decision to stop work on the project therefore carries with it a right in the defendants to the liquidated damages for which the contract makes provision.
It now remains for the arbitrator to adjudicate on this dispute. He has already issued a second interim award. By this, he dismissed applications by each of the parties for leave to amend their pleadings in the arbitration.
The defendants accept the arbitrator's refusal to grant the leave sought by them. The plaintiff, however, seeks leave to appeal against the similar refusal in relation to it. It submits that the amendments were designed to put before the arbitrator the proposition that, as at the date of suspension of the works on 18 December 2001, the defendants - or persons claiming through them – had assumed occupancy of the building works and that, accordingly, those works were, by the terms of the contract between the defendants and the plaintiff, deemed to have reached practical completion on or before 19 December 2001 or, alternatively, before 24 January 2002. As a consequence (so the proposed amendments seek to allege) the defendants have and had no entitlement to liquidated damages.
The plaintiff now returns to this Court seeking, in the first instance, that leave be granted pursuant to s.38(4) of the Act to appeal against Mr Hegarty's second interim award. By that provision, it will be remembered, an appeal against an arbitrator's award may be brought (subject to s.40) with the leave of the Court. In the alternative, the plaintiff seeks an order pursuant to s.42(1) of the Act setting aside the second interim award on the ground of the arbitrator's misconduct. As a further alternative, the plaintiff seeks pursuant to ss.38 and 43 of the Act an order remitting the award to the arbitrator for further consideration. As a final alternative, the plaintiff seeks the arbitrator's removal pursuant to s.44.
The arbitrator’s refusal to grant leave to amend was in my opinion correct. The proposed amendments either raised issues which had been before him during the hearing which preceded the making of his first interim award, and which cannot now be revisited, or were not within the scope of the remaining issues which, by the consent orders, were remitted to him.
I did not intend, by my judgment of 12 November 2002, to give either party leave to argue on the remitted hearing before the arbitrator either for or against the proposition that the defendants or persons claiming under them had occupied the works such that practical completion was deemed to have been effected before the end or 2001. That question could have been, but was not, raised during the hearing which preceded the handing down of the first interim award. It is too late to raise it now.
It is true that the issue is one which might bear upon the plaintiff's liability to pay liquidated damages; and it is also true that I gave leave to appeal against the arbitrator's finding in relation to such damages. I expressly made that leave conditional, however, upon the success of the appeal in relation to the stairs and the amenities block. It was only in the event of such success that the matter of liquidated damages would arise at all.
In the event, the consent orders settled, in the plaintiff’s favour, the question whether the defendants were entitled to the relevant credits. There remains the effect, if any, that circumstance has on the question of liquidated damages. The re-hearing before Mr Hegarty should be restricted to the outcome of the dispute thus defined. It will depend on the arbitrator’s view of the arguments which will be put before him on that re-hearing. I summarised those arguments, or some of them, above. Although it will ultimately be a matter for the arbitrator, those arguments do not, it seems to me, seek to revisit or challenge any of the findings the subject of the first interim award as varied by the consent orders. Those findings should not now be revisited; nor are they now open to challenge.
For the reasons set out above, there is it seems to me no basis upon which the present application for leave to appeal, and for the alternative relief which the plaintiff seeks, can succeed. The application must therefore be dismissed with costs.
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