Amec Australia v Pacific Power

[1999] NSWSC 531

CITATION:	Amec Australia v Pacific Power [1999] NSWSC 531
CURRENT JURISDICTION:	Equity Division Commercial List
FILE NUMBER(S):	55007/99
HEARING DATE(S):	23.4.99 and 28.5.99
JUDGMENT DATE:	3 June 1999
PARTIES :	Amec Australia Pty Ltd v Pacific Power
JUDGMENT OF:	Hunter J

COUNSEL :	Plaintiff: Mr P Donohoe QC Defendant: Mr BW Collins QC
SOLICITORS:	Plaintiff: Clayton Utz Defendant: Allen Allen & Hemsley
CATCHWORDS:	Commercial arbitration - leave to appeal from award - manifest error of law on the face of award - strong evidence of error of law by arbitrator - determination adding to certainty of commercial law - consideration of "all the circumstances" - discretion in refusing leave - s 38 Commercial Arbitration Act 1984.
ACTS CITED:	Commercial Arbitration Act 1984
CASES CITED:	Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234
DECISION:	Leave to appeal refused - summons dismissed - plaintiff to pay the defendant's costs.

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL LIST

HUNTER J

THURSDAY 3 JUNE 1999

55007/99 AMEC AUSTRALIA PTY LTD v PACIFIC POWER

REASONS FOR JUDGMENT
1 This is an application by Amec Australia Pty Ltd (Amec) for leave to appeal pursuant to s 38 of the Commercial Arbitration Act 1984 (the Act) from an interim award dated 5 February 1999 (the award) of the Right Honourable Sir Ian McKay (the arbitrator) in arbitral proceedings between Amec and Pacific Power (Pacific Power) arising under a contract dated 8 March 1994 (the contract) for the design and construction by AMEC of a coal handling facility (the works) for Pacific Power. 2 The disputes under the contract arose, principally, out of a notice of 3 October 1995 by Pacific Power to Amec taking the incompleted portion of the works out of the hands of Amec. The notice was expressed to be given pursuant to clause 44.4 of the general conditions of contract which, the evidence has disclosed, was in standard form in extensive use in the construction industry, being known as General Conditions AS 2124-1986. Clause 44, so far as is relevant, is in the following terms:

“44. DEFAULT OR INSOLVENCY
44.1 Preservation Of Other Rights
If a party breaches or repudiates the Contract, nothing in Clause 44 shall prejudice the right of the other party to recover damages or exercise any other right.
44.2 Default by the Contractor
If the Contractor commits a substantial breach of Contract and the Principal considers that damages may not be adequate remedy, the Principal may give the Contractor a written notice to show cause.
Substantial breaches include but are not limited to -
(a) suspension of work, in breach of Clause 33.1;

(b) failing to proceed with due expedition and without delay, in breach of Clause 33.1;

(c) failing to use the materials or standards or workmanship required by the Contract, in breach of Clause 30.1;

(d) failing to comply with a direction of the Superintendent under Clause 30.2, in breach of Clause 23;
(e) failing to provide evidence of insurance, in breach of Clause 21.1.
44.3 Requirements of a Notice by the Principal to Show Cause .
A notice under Clause 44.2 shall -
(a) state that it is a notice under Clause 44 of the General conditions of Contract;
(b) specify the alleged substantial breach;

(c) require the Contractor to show cause in writing why the Principal should not exercise a right referred to in Clause 44.4;

(d) specify the time and date by which the Contractor must show cause (which time shall not be less than seven clear days after the notice is given to the Contractor);
(e) specify the place at which cause must be shown.
44.4 Rights of the Principal
If by the time specified in a notice under Clause 44.2 the Contractor fails to show reasonable cause why the Principal should not exercise a right referred to in Clause 44.4, the Principal 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;
(b) terminate the Contract.
Upon giving a notice under Clause 44.2 the Principal 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 Principal takes action under Clause 44.4(a) or (b);
(iii) the date which is seven days after the last day for showing cause in the notice under Clause 44.2.
If the Principal exercises the right under Clause 44.4(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 44.6.
44.5 Procedure when the Principal Takes over Work
If the Principal takes work out of the hands of the Contractor under Clause 44.4(a) the Principal shall complete that work and the Principal may without payment of compensation take possession of such of the Constructional Plant and other things on or in the vicinity of the Site as are owned by the Contractor and are reasonably required by the Principal to facilitate completion of the work.
If the Principal takes possession of Constructional Plant or other things, the Principal shall maintain the Constructional Plant and, subject to Clause 44.6, on completion of the work the Principal shall return to the Contractor the Constructional Plant and any other things taken under this clause which are surplus.
44.6 Adjustment on Completion of the Work Taken Out of the Hands of the Contractor
When work taken out of the hands of the Contractor under Clause 44.4(a) is completed the Superintendent shall ascertain the cost incurred by the Principal in completing the work and shall issue a certificate certifying the amount.
If the cost incurred by the Principal is greater than the amount which would have been paid to the Contractor if the work had been completed by the Contractor, the difference shall be a debt due from the Contractor to the Principal. If the cost incurred by the Principal is less than the amount that would have been paid to the Contractor if the work had been completed by the Contractor, the difference shall be a debt due to the contractor from the Principal.
If the Contractor is indebted to the Principal, the Principal may retain Constructional Plant or other things taken under Clause 44.5 until the debt is met. If after reasonable notice, the Contractor fails to pay the debt, the Principal may sell the Constructional Plant or other things and apply the proceeds to satisfaction of the debt and the costs of sale. Any excess shall be paid to the Contractor.”

3 The “question of law arising out of the award” for the purposes of s 38(2) of the Act is stated in the declarations sought in Amec’s summons in the following form:

“2. A declaration that the Arbitrator erred (in paragraph 9.38 of the interim award) in failing to hold that, under General Conditions of Contract AS 2124 - 1986, which formed part of the contract between the parties, the exercise by the Principal of the power, under clause 44, to take work out of the hands of the Contractor, carried with it an obligation to complete the work taken away.
3. A declaration that the Arbitrator erred in holding that even if Pacific Power’s decision not to complete all of the Works had been made before it decided to take the balance of the Works out of Amec’s hands, it would not invalidate the exercise of the power.”

4    The further relief sought by Amec is an order as follows:

“4. An order that the following questions be remitted to the Arbitrator for reconsideration (together with the Court’s opinion on the question of law the subject of this appeal):
(1) Did Pacific Power repudiate the Contract on 3 October 1995?
(2) If the answer to (1) is “yes”, is Amec entitled to recover on a quantum meruit from Pacific Power for works performed?”

5    Paragraph 9.38 of the award, the paragraph of the award in which it is said that the arbitrator has made an error of law, is in the following terms:

“9.38 Mr Donohoe further argued that the power to take the work out of Amec’s hands carried with it an obligation to complete the whole of the work in the contract. I do not agree. Pacific Power would retain its power under the contract to vary the work, and its power to do so by directing certain work to be omitted from the total works. An appropriate adjustment would be required in the final accounting with the contractor under clause 44.6, to which I will refer later. In any event, even if Pacific Power’s decision not to complete all the works had been made before it decided to take the work out of Amec’s hands, it would not in my view invalidate its exercise of that power. Its only effect might be to reduce any claim which it might otherwise have under clause 44.6, or to increase any balance payable to the contractor under that clause.”

6 When this matter first came before me on 23 April 1999, the only material relied upon was the award, the contract and the affidavit of Craig Paul Pudig sworn 9 April 1999 testifying to the industry usage of AS 2124-1986. 7 Although not spelt out in my reasons of 23 April 1999, the main objective in adjourning the matter until 28 May was to enable Amec to discharge its onus in relation to the matters referred to in s 38(5) of the Act, namely 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.”

8 I was not satisfied then, nor am I now, that there was a manifest error of law on the face of the award. In my view, each of the matters referred to in s 38(5)(a) and (b)(ii), in this case, admitted of an examination of the nature of the issues before the arbitrator and the manner in which, in particular, the construction of clause 44 of the contract was addressed. The real point in the challenge to the arbitrator’s paragraph 9.38 of the award lay in the submission that it failed to give recognition to the true construction of clause 44 which obligated a principal, who exercised a clause 44.4 power to take the balance of works out of the hands of the contractor, to complete all of those works. It followed, it was contended on behalf of Amec, that a principal, who at the time of giving a clause 44.4 notice had formed the intention or had decided not to complete the whole of such balance of works, was acting in breach of that obligation and so rendered any notice purporting to exercise power under clause 44.4 invalid or ineffective. 9 Even if one was to accept the construction placed upon that clause by Amec, I would not be prepared to conclude, on the material that was before me on 23 April, that there was a manifest error of law on the face of the award; or strong evidence that the arbitrator made an error of law; or that the determination of the question raised by Amec may add substantially to the certainty of the commercial law for the following reasons:

(a) The finding of the referee in paragraph 9.38 is not a finding upon a pure question of law but a finding upon the operation of clause 44 upon the facts. That much is clear from the following passage:

“In any event, even if Pacific Power’s decision not to complete all the works had been made before it decided to take the work out of Amec’s hands, it would not, in my view invalidate its exercise of that power. Its only effect might be to reduce any claim which it might otherwise have under clause 44.6, or to increase any balance payable to the contractor under that clause.”
I read that finding as one made in the circumstances of the case, as distinct from a finding that a principal, in any circumstances, purporting to exercise a clause 44 power, was not obliged to complete the balance of works taken out of the hands of the contractor pursuant to that notice.


(b) A decision by Pacific Power not to complete the whole of the balance of works taken out of Amec’s hands pursuant to clause 44 may have been a decision taken before the giving of this clause 44.4 notice and one dictated by the breach of contract by Amec giving rise to the clause 44.4 notice.

(c) The intention not to complete the balance of such works may be formed prior to the giving of the clause 44.4 notice, but never acted upon, nor persisted in and not communicated to Amec by Pacific Power.

(d) So far as Amec may have been entitled to raise a case of anticipatory breach, the mere intention not to complete the balance of the works, uncommunicated to Amec, could have no actionable effect.

(e) A mere intention not to complete the balance of the works is consistent with an intention to exercise the variations power under the contract.

10    Upon the resumption of the hearing before me on 28 May, there was admitted into evidence two volumes of tender bundles evidencing the issues before the arbitrator and the manner in which those issues were addressed, particularly having regard to the question of construction raised in these proceedings. A review of that material, I think, if anything, confirms my initial assessment of this application for leave. 11    In examining that material, I think it is noteworthy that there was no claim before the arbitrator for damages for breach of contract by Pacific Power in the performance of the works. To put that observation in context, it is conceivable that in taking the balance of the works out of the hands of a contractor under clause 44.4, a principal may proceed in a way at variance with its obligations under the contract. For example, it could take possession of the contractor’s “Constructional Plant” and use that plant other than for the purpose of completing the works, or, alternatively, it could take possession of the plant and simply quarantine it without applying the plant for the purpose of the completion of the works. The principal could unduly and unreasonably prolong the completion of the works and maintain possession of the contractor’s plant for an inordinate time and so wrongfully deprive the contractor of the use of that plant. 12    The essential claim of Amec before the arbitrator was one based upon an alleged repudiation of the contract by Pacific Power in issuing a clause 44.4 notice on 3 October 1995 and thereafter taking possession of the balance of the works. In general terms, it was alleged that Pacific Power had acted unreasonably in its exercise of the various powers under clause 44, in giving notice to show cause, in considering Amec’s response to that notice and in, then, giving the clause 44.4 notice. Essential to that case was the Court of Appeal’s decision in Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234. In particular, by its statement of claim, Amec relied upon implied terms which included the following:

“5.(l) having issued the notice referred to in paragraph 5(b) hereof and Amec having responded to that notice, Pacific Power had to give reasonable consideration to the question whether Amec had failed to show reasonable cause why Pacific Power should not exercise a right referred to in clause 44.4 of AS2124(implied);

(m) if Pacific Power had reasonably concluded that Amec had failed to show reasonable cause why Pacific Power should not exercise a right referred to in clause 44.4 of AS2124, Pacific Power had to reasonably consider whether any power, and, if any power, which power, should be exercise (sic) (implied);”

13    In paragraphs 6 to 12 of the statement of claim, Amec alleged that Pacific Power’s clause 44.3 notice to show cause was invalid, for which allegation no particulars were provided and, consequently, that the 3 October 1995 notice was invalid. That, together with the conduct of Pacific Power in taking possession of the site, was said to constitute a repudiation of the contract which had been accepted by Amec, resulting in a termination of the contract and a claimed entitlement to be paid for work performed on a quantum meruit basis. 14    In the alternative, in paragraphs 13 to 25, there were allegations of waiver of Pacific Power’s entitlement to exercise clause 44.4 powers, having the same consequences as the relief claimed in paragraph 12. 15    In paragraphs 26 to 32, Amec relied upon a breach of the term pleaded in paragraph 5(l) as quoted above, with the consequent reliance upon the letter of 3 October 1995 and the conduct of Pacific Power in taking possession of the site as constituting repudiation. 16    In paragraphs 33 to 38, Amec relied upon a breach of the implied term set out in paragraph 5(m) as quoted above with the same consequence as flowed from the earlier alleged breaches. 17    There were several other claims raised by Amec in its statement of claim, notable amongst which was a claim for a substantial extension of time under the contract. 18    During the course of cross-examination of witnesses in Pacific Power’s case and, in particular, the cross-examination of Paul Michael Dewar (Dewar), senior counsel for Amec established that an internal memorandum of Dewar of 26 September 1995 (Dewar’s memorandum), which bore the signed approval of Pacific Power’s general manager and chief executive, was the basis upon which, in all probability, Pacific Power acted in relation to the completion of the balance of the works to be taken out of the hands of Amec by Pacific Power’s notice of 3 October 1995. Dewar’s memorandum was in the following terms, for the understanding of which it should be noted that Barclay Mowlem was the principal subcontractor of Amec on site:

“This report seeks your approval to negotiate with Barclay Mowlem and other subcontractors the completion of those works on the above contract whose manufacture/erection has started. It is further proposed that the remaining works be re-tendered.
Contract No. 4223 for the rehabilitation of Station Conveyors and miscellaneous civil works at Wallerawang Power Station was awarded to AMEC Construction Pty Ltd in December 1993. The Company has failed to progress the works in a satisfactory manner and it has been decided to take the remaining works out of their hands. A letter to the Company will be issued on the 29th September, 1995.
To complete the outstanding contract works, the following strategy is proposed which will ensure:
(a) maximum security for the Station by having two coaling routes at all times;

(b) the contractor executing the works must be such as to ensure a manageable risk for the Station and Power Engineering; and

(c) the works should be achieved at the lowest cost for the Station and Pacific Power commensurate with items (a) and (b).
An outline of the proposed workscopes and estimated costs are included in Appendix 1 together with the value of works outstanding from the existing contract.
In summary, works on the existing Portions 1 and 4 are recommended for completion by Barclay Mowlem and particular subcontractors. The outstanding work on Portion 1 is such that the involvement of an experienced coal plant contractor, such as Barclay Mowlem, is considered important for the completion of these critical works. Portion 4 is already the subject of work by Barclay Mowlem as subcontractors under the existing contract. Outstanding work on Portion 2 is recommended to be completed by the original subcontractor, Ferrcom. Work on the Unit 8 bunkering conveyors is proposed for completion internally by Maintenance Services. The remaining works will be re-tendered to obtain the most competitive pricing.
The above proposals have been discussed with the Manager/Wallerawang Power Station and he supports this approach.
Recommendation
It is recommended that for the outstanding Wallerawang Power Station Coal Handling Plant works previously included in Portions 1, 2 and 4 of Contract No. 4223, negotiations with Barclay Mowlem and other subcontractors be initiated to effect their completion. Further, it is recommended that the balance of the works be re-tendered in accordance with the new program.

19    It will be seen from that memorandum that there were separable portions of works under the contract as to which it was proposed that new portions be created in accordance with the attached schedule to the memorandum. Of those six portions it was contemplated that four be completed by existing subcontractors or Pacific Power’s own maintenance division and that two portions, namely E and F, be completed by calling for open tenders on a revised program of works. Of those two portions, portion F coincided with what had formerly been portion 6 under the contract and the entitlement of Amec to perform that work was always at the option of Pacific Power under the contract. 20    The contention of senior counsel before me and before the arbitrator was that Pacific Power’s approval of this revised program and method of completion of the works evinced an intention not to complete the whole of the works to be taken out of the hands of Amec. 21    I have some difficulty in accepting the thrust of that submission, given the proposal for the work in portion E to be performed by calling for open tenders under a revised program. At best, I think, it demonstrated a deferment of work in that portion to an indefinite time, significantly later than was contemplated under the contract. 22    In final written submissions before the arbitrator, Amec contended, in relation to Dewar’s memorandum, in a section of the submissions entitled “CHAPTER 10 The Defective State of Knowledge of the Pacific Power Decision Makers”, as follows:

“10.9 The critical document which shows that Pacific Power’s plan was to complete part only of the work taken away is Mr Dewar’s memorandum that he signed on 26 September 1995. Mr Stuart in cross-examination demonstrated little understanding of it. He thought Mr Dewar probably would understand it. He seemed not to know that Mr Dewar had played the predominant part in its preparation. He thought that the persons who would understand the detail were Mr Dewar and Mr Vasili. Mr Dewar understood that it was not a proposal to complete the whole of the work taken away from Amec. Significantly, Mr Stuart did not expect Mr Graham or Mr Bunyon to understand the detail. Between T5527.12 and 5529.22, Mr Stuart demonstrated that, even in 1998, he did not understand that the effect of the proposal was not to complete all of the work taken away.
10.10 Mr Graham also did not understand the proposal. He described it as a report recommending the commencement of negotiations with Barclay Mowlem “ so that the works could be completed ”. The mistake was an easy one to make. The memorandum was misleadingly entitled “ Completion of Balance of the Works ” and it required a careful reading of the detail to understand that it was not a proposal for completion of the balance of the works.”

23    I understand that the thrust of that general submission in Chapter 10 was that the persons within Pacific Power charged with the process of exercising powers under clause 44 of the contract were ignorant of essential features required to make an informed and reasonable decision in exercising clause 44.4 powers. 24    In a further set of written submissions entitled “CHAPTER 12 Pacific Power’s Plan to Take Away the Whole of the Works but Complete Only Part of Them”, extensive submissions were made on behalf of Amec based upon, in substance, Dewar’s memorandum. The submissions advance a construction of clause 44 to the effect that, upon the true construction of the obligation expressed in clause 44.5 that “the Principal shall complete that work”, referring back to the work taken out of the hands of the contractor under clause 44.4, Pacific Power was obliged to complete all of the works so taken out of the hands of Amec. It was said that Dewar’s memorandum, and some antecedent matters which are not necessary to elaborate upon in these reasons, demonstrated that “Pacific Power planned to breach its obligations to complete the whole of the Works taken out of the hands of Amec. It planned to complete part of that work and to postpone parts of it.” 25    In senior counsel’s oral submissions on behalf of Pacific Power, objection was taken to this formulation of Amec’s case as follows:

“It is not open to the claimant to rely upon this now because it hasn’t been pleaded and it should be: Pacific Power were given no notice and, therefore, no opportunity to deal with the matter which was first raised in the claimant’s written submissions.
It is one of those cases where the rule of fairness, described as the rule in Browne v Dunn clearly applies.”

26    However, having put that submission, senior counsel for Pacific Power addressed the substance of Amec’s submissions and challenged the construction placed upon Dewar’s memorandum by senior counsel for Amec. 27    I think it is noteworthy that during the course of cross-examination of Dewar, it was elicited by the arbitrator that the postponement of work into portion E was necessitated by a conflict in the concurrent performance of separable portions under the contract and that this construction problem had been created by the delay in completing those portions by Amec. In that regard, it is relevant, I think, to observe that the arbitrator found against Amec on all matters raised by it in its extension of time case. 28    A further matter which I think calls for attention is the oral submissions of senior counsel for Amec to the arbitrator which followed the written submissions. I think it is worthwhile setting out a portion of that material because I think it shows something of the dilemma that confronted Amec’s attempt to rely upon a breach arising out of the construction of clause 44 which was advanced in Chapter 12 of Amec’s written submissions before the arbitrator and in the submissions before me. 29    A portion of the exchange between the arbitrator and counsel follows:

“MR DONOHOE: … But the critical thing was, whatever they took away, they had to then complete. Whatever they took away the principal was bound to complete it.
THE ARBITRATOR: Yes. Subject, of course, to retaining the ordinary rights it had of ordinary variation, including the omission of work, such as the optional separable portions.
MR DONOHOE: Indeed.
THE ARBITRATOR: Or any work which was to be excluded from being done altogether.
MR DONOHOE: Yes. They could, if they exercised the power like that, or, the superintendent might have varied work in the process of doing it, a whole lot of things, but, what they did wrongly was, they planned right at the start not to complete the work. That’s the breach. Mr Dewar understood that, though he may not have understood the legal consequences of it, but his superiors didn’t even understand that. That is a serious flaw.
You remember we had a discussion yesterday in which I said to you peripheral things which, in the decision-making, I am not going to say mattered.
THE ARBITRATOR: I am not too sure it was a breach. It would be a breach if when they did it - a mere intention would hardly be a breach.
MR DONOHOE: No. It amounts to anticipatory breach because they had resolved - they didn’t tell us - before they took the work away.
THE ARBITRATOR: Anticipatory breach, surely, requires communication of the intention to break the contract. You can’t have an anticipatory breach because in the secrecy of your own mind or your own office you decided you were going to do something which was in breach.
MR DONOHOE: If you prevent performance and it emerges that was your intention, and you conducted yourself in that way, that can evince an intention.
THE ARBITRATOR: It must be evinced in some way. The mere fact you thought about it, or even made up your mind to do it, can hardly amount to a breach. I never heard of a plaintiff suing for a breach in which the plaintiff was unaware. It must be evinced in some manner.
MR DONOHOE: Let me say this: We are entitled to rely upon the conduct we didn’t know about. That is clear.
THE ARBITRATOR: You can rely upon it as evidence, but I don’t know that you can rely on it as a breach of contract, unless there is actual conduct which is a breach of contract. But mere intention can hardly be a breach of contract.”

30    In that exchange I note that it would appear that it was accepted by senior counsel for Amec that the variation power inured for the benefit of Pacific Power after an exercise of power under clause 44.4. That was in conformity with the written submissions in Chapter 12. In a passage dealing with the construction of clause 44 advanced on behalf of Amec the following submissions were made:

“12.18 The remaining work which the Principal is obliged to complete may be affected by subsequent variations, as the definition of “the work under the Contract” in clause 2 of the General Conditions of Contract suggests. The Principal is not necessarily obliged to complete the exact work which the Contractor was obliged to complete when the work was taken out of the Contractor’s hands. For example, there may be substantial differences in time and price in the work completed by the Principal compared with the work which the Contractor might otherwise have been obliged to complete. However, the Principal cannot complete the work whenever it feels like it: Lady de Soysa v De Pless Pol, Summers v Commonwealth, Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd . It must complete the work within a reasonable time: Hick v Raymond, Canning v Temby .
12.19 The Principal may take into account its own interests in deciding upon the manner in which it will complete the work. But the Principal may not completely ignore the interests of the Contractor when it comes to completion of the work. The Contractor possess a vested interest in the work’s completion, given that the Contractor’s right to payment for the incomplete work is suspended until that work has been completed by the Principal. The Contractor may also have a vested interest in the work’s completion if its Constructional Plant has been seized by the Principal for the purpose of completing the work. It is only once the work has been completed that the Contractor may become entitled to a return of its Constructional Plant. All of this indicates that the Principal is not unfettered in the course of action which it takes subsequent to removing the work from the Contractor’s hands. The Principal must complete the work. This obligation becomes of fundamental importance once the work has been taken out of the Contractor’s hands. It is a condition of the contract, breach of which will entitle the Contractor to terminate the Contract.”

31    When one considers the way in which the clause 44.5 construction was addressed in the arbitration, I think the following observations are warranted:

(a) That nature of the alleged unreasonableness in the exercise of the clause 44.4 power had not been pleaded.

(b) The concept of a decision not to complete the balance of the works taken out of the hands of Amec under a clause 44.4 notice was raised evidentially during the proceedings in cross-examination without telegraphing any change in direction in the clause 44.4 case of Amec.

(c) When raised in written submissions at the conclusion of the arbitration it was objected to on the basis that it had not been part of the pleaded case of Amec.

(d) It was acknowledged that the obligation of Pacific Power to complete the balance of work taken out of the hands of Amec, as advanced by Amec, was subject to a continuing variation power under the contract and to the entitlement of the principal to further its own interests, in the latter case, consistent with the rights of Amec under the contract.

(e) There was evidence that the re-arrangement of the order of works under the contract envisaged in Dewar’s memorandum had been dictated by the breach of Amec in failing to perform the works in a timely manner.

(f) Amec’s case that Dewar’s memorandum evinced an intention not to complete portions E and F in the schedule to that memorandum has a shaky foundation. Under the contract, Pacific Power reserved the option to exclude portion F from the works. As to portion E, as noted, there was evidence that the re-arranged order of works flowed from Amec’s breach. Further, the schedule envisaged the calling for tenders for portion E under a revised program for performance described as “nominal”. At best, from Amec’s standpoint, in my view, that could be equated with “indefinite”. I have difficulty in equating that proposal with one importing a decision not to complete that portion of the work.

(g) Senior counsel for Amec placed some emphasis upon the regrouping of severable portions in the schedule to Dewar’s memorandum as an act which would have required a variation of the contract with Amec had there been no resort to clause 44. Accepting that contention on face value, in my view, that was of no significance, given the effect of the exercise of powers under clause 44 which leave the contractual provisions otherwise intact, but which leave reasonable scope to the principal in the manner of completion of the works as contemplated under that clause. The manner in which works are so carried out may have some relevance to monetary adjustments to be made on completion of the works, but that is an entirely different question to the one at issue in these proceedings.

32 In my view, the context of paragraph 9.38 in the award is significant. It is a detailed, reasoned award in which Amec suffered a resounding loss, virtually on all major issues. The passage in paragraph 9.38 of the award, although not reasonably described as a throw-away passage, nevertheless, is one which, I think, may be fairly described as a finding unnecessary to the ultimate findings of the award. 33 In the result, I have not been satisfied a) that there is manifest error on the face of the award: b) that there is strong evidence of error in the award: c) that a determination of the question raised by Amec’s summons may add to the certainty of commercial law. As to “all the circumstances” to which I have had regard, as a matter of discretion I would refuse leave under s 38(2). If there is some benefit to the commercial community to have clause 44 of the contract construed by the Court, this is not the case in which to address that question. The applicable principles governing applications of this kind are well known and are common ground between the parties. 34 The summons is dismissed. The plaintiff is to pay the defendant’s costs of the summons.

oOo

Last Modified: 06/08/1999