APG Homes Pty Ltd v Primary Creations Pty Ltd - [2009] WASC 227

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: APG HOMES PTY LTD -v- PRIMARY CREATIONS PTY LTD [2009] WASC 227

CORAM: MURPHY J

HEARD: 23 JULY 2009

DELIVERED : 21 AUGUST 2009

FILE NO/S: ARB 6 of 2009

BETWEEN: APG HOMES PTY LTD
Applicant
AND
PRIMARY CREATIONS PTY LTD
Respondent

Catchwords:

Application to set aside interim award - Arbitral misconduct - Application out of time - Requirement for explanation for delay - Finality in arbitral matters

Legislation:

Commercial Arbitration Act 1985 (WA), s 42

Result:

Application dismissed

Category: B

Representation:

Counsel:

Applicant: Mr B P Wheatley
Respondent: Mr K Burgoyne

Solicitors:

Applicant: Mossensons
Respondent: Burgoynes

Case(s) referred to in judgment(s):

Alvaro v Temple [2009] WASC 205
Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27
Carr v Finance Corporation of Australia Ltd (No 1) [1981] HCA 20; (1981) 147 CLR 246
Doran Constructions Pty Ltd v Health Administration Corporation of New South Wales (1994) 12 BCL 59
Gallo v Dawson [1990] HCA 30; (1990) 64 ALJR 458
Gas & Fuel Corporation of Victoria v Wood Hall Ltd & Leonard Pipeline Contractors Ltd [1978] VR 385
Gebauer Nominees Pty Ltd v Cole [No 2] [2008] WASCA 41
Girando v Girando (1997) 18 WAR 450
Lester v Heitman (Unreported, WASC, Library No 980515, 9 September 1998)
Livesey v New South Wales Bar Association [1983] HCA 17; (1983) 151 CLR 288
Minenco Pty Ltd v Abigroup Contractors (WA) Pty Ltd (1992) 7 WAR 576
Modern Engineering (Bristol) Ltd v C Miskin & Son Ltd (1980) 15 BLR 82
Nathan v MJF Constructions [1986] VR 75
Oil Basins Ltd v BHP Billiton Ltd [2007] VSCA 255; (2007) 18 VR 346
Pakenham Upper Fruit Co Ltd v Crosby [1924] HCA 55; (1924) 35 CLR 386
Peter Schwarz (Overseas) Pty Ltd v Morton [2003] VSC 144
Shirley Sloan Pty Ltd v Merril Holdings Pty Ltd t/as Airen Constructions [2000] WASC 99
Silent Vector Pty Ltd v Hassell [2005] WASC 79
Sydney Water Corporation Ltd v Aqua Clear Technology Pty Ltd [1996] NSWSC 640
Technical Team Projects Pty Ltd v Noble Dunn Pty Ltd (1990) 20 NSWLR 221
Wentworth v De Montfort (1988) 15 NSWLR 348

MURPHY J:

Introduction

The applicant is a builder. The respondent is the owner of certain land in Dawesville upon which the applicant agreed to build a domestic dwelling. A dispute arose between the parties as to the construction of the dwelling, which was referred to arbitration. The arbitrator delivered three interim awards, the first and third of which are under challenge in these proceedings. I will refer to the applicant as the builder and the respondent as the owner in these reasons.
This is an application by notice of originating motion filed 28 April 2009, but dated 17 April 2009, by the builder for, in effect:
(a)leave to extend the time in which to make an application under s 42 of the Commercial Arbitration Act 1985 (WA) (the Act);
(b)an order that the arbitrator's interim award dated 27 April 2008 (the first interim award) be set aside in respect of the second of the two issues with which it dealt;
(c)an order that the arbitrator's interim award dated 12 February 2009 (the third interim award) be set aside;
(d)subject to pars (b) and (c), the matter be remitted to the arbitrator to determine the costs of the arbitration;
(e)subject to par (d), the arbitrator be removed;
(f)further or other relief as may be appropriate; and
(g)costs.
The builder relied on two affidavits of Mr Peers, one dated 17 April 2009 and the other dated 15 July 2009. The second affidavit was one month late and much of it was not purely responsive, contrary to Master Sanderson's programming orders of 26 May 2009. Despite this, the builder was given leave to rely on it, although certain paragraphs were the subject of specific objections, some of which were upheld. The owner relied on an affidavit of Mr Bernasconi sworn 5 June 2009. The builder objected to specific parts of Mr Bernasconi's affidavit, some of which objections were upheld. Written submissions were filed by the parties. The builder filed its submissions one month late, and only following a reminder from the court. The owner's submissions were filed out of time in consequence of the delay by the builder in filing its submissions. Neither party sought to cross‑examine on the affidavits.
Mr Peer's second affidavit attached a letter from the arbitrator dated 19 May 2009. The arbitrator said in effect that he had received the builder's notice of motion and supporting documents, he noted that he was not named as a party, and advised that he did not intend to attend or take a position in the proceedings, and would abide by the decision of the court.

The background to the dispute

On 23 January 2006 the builder and the owner entered into a written agreement for the construction of the dwelling. It was a lump sum contract on standard terms and conditions published by the Housing Industry Association Ltd (the contract). Clause 16 of the contract provided, inter alia, that:
In the event of any dispute, disagreement or difference between the Owner and the Builder at any time whatsoever as to any matter or thing arising hereunder or in any way concerned or connected herewith or relating to the construction of this Contract … either party may give to the other notice of such dispute, disagreement or difference … and in the absence of any settlement the same be referred to arbitration either by
(i)a single arbitrator appointed by mutual consent; or
(ii)in the event that agreement of the appointee is not reached within FIVE (5) days a single arbitrator shall be appointed by the President … of the Housing Industry Association Western Australian Division ...
The contract contained provisions in relation to increasing the price of the works, including in certain circumstances where the builder was unable to commence the works within a 45‑day period from execution of the 'Construction Documents' due to 'delays outside the Builder's control': cl 4(b), read with cl 7(a) and item 6 of the schedule to the contract. It was common ground in the arbitration that the 45‑day period referred to in the contract in that regard expired on 29 March 2006.
There were delays in the issue of the building licence arising in connection with the local authority's unwillingness to grant planning approval for the development insofar as it affected a particular tree on the owner's property. Construction was not commenced within the 45‑day period referred to in the relevant provisions of the contract, ie, by 29 March 2006. The builder claimed increases in price, and asked the owner to acknowledge variations increasing the contract price by $26,734 on 20 April 2006, and by $21,774 on 11 September 2006. The first claimed price increase was said to relate to the delay in the grant of building approval. The second claimed price increase was said to be due to the owner's delay in disputing the first price increase, which it was said, also constituted a circumstance beyond its control. The owner did not agree to the price increases.
On 14 June 2006 the builder received a letter from the relevant local authority advising that building approval had been granted. Notwithstanding this, by letter dated 20 June 2006, the builder advised the owner that it would not commence construction whilst the owner would not acknowledge the claimed price increase of 20 April 2006.
The arbitration clause in the contract was invoked, an arbitrator nominated by the president of the Housing Industry Association pursuant to the contract was appointed, and a preliminary conference before the arbitrator took place on 7 March 2007. The owner was the claimant and the builder was the respondent to the arbitration.
The matter proceeded by way of pleadings.
By points of claim dated 16 April 2007, the owner pleaded inter alia:
23.Further the planning and building approval function was always the obligation of the [builder].
24.The [builder] failed to carry out this part of the work diligently and in accordance with the Contract.
25.The [owner] entered into a dispute with the builder over the payment of the price increase.
26.The [owner] at all material times has said the delay is the cause of the [builder].
27.The [builder] has refused to carry out the building of the home unless the variation is signed agreeing to the price increase or alternatively signing another agreement that in the [owner's] view is not required.
28.The [owner] says that the [builder] must carry on with the works whilst this dispute is resolved.
…
30.The [owner] denies the [builder] is entitled to any payment or extension of time as a result of the raising of variations for delay. The [owner] maintains that the delay is the cause of the [builder].
31.The [owner] is suffering loss as a result of the non completion (delay) of the Works by the [builder]. Those losses are in the form of lost rent, and interest on loans. The losses cannot be quantified until the works are completed.
32.The primary remedy that the [owner] claims is for an order that the [builder] commences work or alternatively that the [builder] is not entitled to delay the works as a result of this dispute.
33.Further a declaration as to date upon which the [builder] should complete the Works given the contract commencement date.
As I understand the builder's submissions in this application, the first part of par 32 of the points of claim (the primary remedy) sought, in effect, an order for specific performance. In relation to the second part (the alternative claim) the builder contends that the arbitrator made, in effect, a declaration of right which is the subject of the challenge referred to in [2(b)] above.
By its defence and points of counterclaim dated 23 July 2007 the builder pleaded in detail the circumstances which it said were relevant to delay, it denied the matters pleaded in pars 5 ‑ 29 and 30 ‑ 33 of the points of claim, and denied that the owner was entitled to any relief as claimed, or at all. By its defence and points of counterclaim the builder alleged, inter alia:
POINTS OF DEFENCE
…
5.With regard to paragraphs 5 to 29 of the Points of Claim, the [builder] denies the [owner's] general allegations that the delays in obtaining a building licence, beyond the allowed 45 working days contained within the Contract, were the fault of the [builder]. The [builder] states that the delays in obtaining a building licence were outside the [builder's] control and the [builder's] conduct did not contribute to these delays.
6.The planning approval process for the [owner's] dwelling was a complicated and unique one. Without the benefit of hindsight, the [builder] did all it could reasonably be expected to do to obtain approval and did so promptly. The delay in the approval process was due to the complicated nature of the particular approval and circumstances that were beyond the control of the [builder]. As such the [builder] says that it is entitled to price increases in accordance with the contract.
…
POINTS OF COUNTERCLAIM
…
2.For the reasons pleaded in the Points of Defence, in accordance with Clause 4(b) of the Contract, as the [builder] was unable to commence works within the 45 working day period as allowed for in the Contract, due to delays outside the [builder's] control, the [builder] was entitled to amend the Contract price prior to the commencement of construction works in accordance with the Contract.
…
8.The [owner] has at no time signed or otherwise agreed to the Price Increase Variation Order despite its being in compliance with the Contract.
…
14.On 11 September, the [builder], through its solicitors, notified the [owner] that due to their delay in disputing the first price increase (circumstances beyond the [builder's] control) there would be a second price increase of $21,774.00.
15.The [owner] has at no time signed or otherwise agreed to the second Price Increase Variation Order despite its being in compliance with the Contract.
The builder, in its points of counterclaim, also sought orders that the owner pay the builder a sum representing the two claimed price increases, alternatively a declaration that the claimed amount was 'valid and payable at a specified time'.
The builder in par 5 of the defence and par 14 of the counterclaim appears to pick up the language or meaning of cl 4(b) of the contract ('delays outside the Builder's control'), and par 2 of the counterclaim pleads cl 4(b) of the contract expressly. The builder did not plead any extra‑contractual principle of law such as, eg, an estoppel, which arguably gave it a right to suspend or delay commencement of the works.
By its response to counterclaim dated 2 October 2007 the owner pleaded inter alia:
6.The [builder] has an obligation to carry out works (clause 1) within a specified time (item 9 of the schedule to the contract).
7.The [owner] provided, at the [builder's] request, proof that it had the ability to pay the first and then again the ability to pay the second price increase.
8.The [owner] says there is no reason for the [builder] to maintain the position not to commence work. Clause 4b of the contract states 'The Builder shall notify the Owner in writing of the amended contract Price prior to the commencement of the construction of the works' There is no right for the builder to refuse to commence work as a result of a dispute particularly when evidence of capacity to pay has been provided by the [owner] for the claimed price variations.
Mr Peers on behalf of the builder, in his affidavit sworn 17 April 2009, after referring to the above pleadings, deposed '[f]urther pleadings were filed and served but they do not assist in the matter for determination'. At the hearing of the arbitration the owner filed amended points of claim on 8 April 2008 and the builder filed a minute of amended points of defence on 9 April 2008. Neither party claimed in these pleadings any further or different relief. The builder, in its amended pleading, did not plead any other provisions of the contract or allege the application of any principle of law such as estoppel.

The arbitration hearing and the delivery of interim awards

The arbitration was heard by the arbitrator on 7, 10 and 11 April 2008.
By letter dated 8 April 2008 (a day on which there was no hearing) the owner's solicitor wrote to the arbitrator:
I refer to the orders of 07 April 2008 and attach Amended Points of Claim.
I also would like to clarify a point. Did Mr Wheatley say that if his client was successful in proving there was a delay not in the builder's control within the 45 day period that his client will continue with the contract, but if the contrary was found then his client would not proceed with the contract?
If that is the case then if the Respondent is not successful it is prudent for the Arbitrator to deal with the Claimant's losses at some point and similarly if the Respondent is successful the issue of the amount payable for the delay is to be determined plus the issue of the builders suspension of the works. I only say this to make it clear that our submission is that the initial finding should be an interim award only and not a final award so that Mr Arbitrator can ultimately deal with all of the issues.
Mr Bernasconi, in his affidavit dated 5 June 2009, deposed to what he says occurred at the arbitration in communications between the arbitrator, Mr Wheatley, solicitor for the builder, and Mr Burgoyne, solicitor for the owner. Mr Bernasconi attended the arbitration and each directions hearing. Neither Mr Wheatley nor any other representative of the builder has sworn an affidavit in this application giving direct evidence as to whether they participated in, or observed, the communications to which Mr Bernasconi deposes. The builder did adduce, however, certain documentary evidence to which I refer later, which counsel for the builder (Mr Wheatley) said was inconsistent with Mr Bernasconi's evidence.
Mr Bernasconi said:
11.I refer to [the builder's] affidavit paragraph 11. At the Arbitration hearing and prior to evidence being received there were discussions between The Arbitrator, Mr Wheatley and Mr Burgoyne. The Arbitrator proposed and Mr Wheatley and Mr Burgoyne agreed that the Arbitrator would determine 2 questions. These questions were firstly whether the Builder was delayed and for how long, and secondly was the builder entitled to suspend work under the contract because of the price increase dispute. Mr Burgoyne asked that the Arbitrator make an interim award because there may be further issues in relation to determining quantum and possible flow on from the determination of those 2 points. Mr Wheatley agreed and Mr Arbitrator said he would proceed on the basis of an interim award.
…
13.I refer to [the builder's] affidavit paragraph 12. Specific performance was not a question the Arbitrator was going to determine because the questions were formulated at the commencement of the Arbitration. A major question was the right of the Builder to suspend the works.
…
15.I refer to [the builder's] affidavit paragraph 13. The contract was an exhibit at the Arbitration. The contract had the signing date, the date upon which construction should have commenced, and the completion time contained within it. The Arbitrator and the parties agreed, prior to evidence being received the 2 questions for determination. …
At the arbitration, both parties led evidence as to the circumstances relating to the delay in commencing construction work. The evidence included certain evidence from Mr Mossenson, a solicitor, and Ms Petta, on behalf of the builder.
In closing submissions at the arbitration, according to the builder's solicitor's (Mr Wheatley's) notes of the arbitration hearing, annexed to Mr Peer's second affidavit on behalf of the builder, the solicitor for the owner referred to certain provisions of the contract and submitted in effect that nothing in the contract entitled the builder to suspend work, and that the builder was obliged to continue carrying on its performance of the contract, despite the disputed price increases.
The arbitrator reserved his decision.
By facsimile dated 15 April 2008 the owner wrote to the arbitrator with respect to a document which had not previously been discovered. By facsimile dated 15 April 2008 the arbitrator wrote to the parties indicating that he did not propose to consider the newly discovered document. He also said:
In respect to the Award, I will decide only those matters pleaded, substantially-
1was there an entitlement to claim and receive a price increase as a result of delays in obtaining the building licence
2was there an entitlement to suspend works under the contract with reference to the decision in 1 above
and note that there were no submissions of law, nor authorities provided for any position that either party took. In this regard, it seems to me that the matter will turn largely on the facts and the application of the Contract, however in the event that I find a matter of law needs to be decided, I will seek submissions from the parties, in respect to that matter.
I also note that the Award will be an Interim Award, with the understanding that there may be further matters to be decided, including costs, consequent to the publication of the Award.
The builder's solicitors responded by letter dated 16 April 2008 and said, relevantly:
It is too late to submit further documents which should have been discovered, after the conclusion of the arbitration, particularly when they go to the issue of credit of a witness and the respondent has no opportunity to cross‑examine them regarding such documents.
Further, each party has delivered their final submissions. It was agreed that submissions be oral and we see no reason for further written submissions, which will only serve to prolong an already protracted arbitration.

The builder's solicitors did not, in their letter of 16 April 2008, respond to, or contradict, the arbitrator's characterisation of the two pleaded issues which he considered he was required to determine for the purpose of the first interim award.
On 18 April 2008 the builder's solicitors sent to the builder a copy of the arbitrator's letter of 15 April 2008, and their response of 16 April 2008, in their report to their client on the events of the arbitration. No comment was offered to the client concerning the two issues which the arbitrator had said he was proposing to determine.
On 27 April 2008 the arbitrator delivered the first interim award dealing with the two issues to which he had earlier referred. It commenced in these terms:
… I find and determine -
The Respondent has been delayed in the procurement of a Building Licence from the City of Mandurah, for reasons outside of its control and is entitled to amend the price of the works, consistent with Clause 4(b) of the HIA Contract dated the 23^rd January 2006, for the period between the expiry of the fixed price, (29 March 2006) until receipt of the issue of the Building licence on or around the 13^th June 2006. No finding is made as to the quantum of the price rise.
That the Respondent was not entitled to suspend work under the contract as a result of a refusal by the Claimant to accept the quantum of the price rise.
The parties are at liberty to make submissions as to costs.
The arbitrator also said, in the first interim award:
Extent of 1^st Stage of Arbitration
The parties agreed that the extent of this Award should be limited to the determination of 2 issues
•Was the Respondent entitled to claim for additional costs as a result of delays in obtaining a building licence, consistent with the contract, that is were the delays outside of the control of the Builder and for the reasons allowed for in the contract that would give rise to a right to make a claim for increase in cost
•With reference to the finding at 1 above, was the Respondent entitled to suspend works for failure by the Claimant to sign the price rise variation.
It was agreed that other matters, including the matter of quantum arising from any finding could be left for further determination and subject to the determination of these 2 preliminary questions.
The reference in the second dot point above to 'sign the price rise variation' was a reference to the finding (line 94) that:
On the 20^th June 2006, the [builder] advised the [owner] that it would not commence construction until the [owner] signed the variation for the price rise submitted by the [builder] on the 20^th April 2006.
On 6 May 2008 the builder's solicitor wrote to the arbitrator and said, relevantly:
We refer to the finding 'That the Respondent was not entitled to suspend work under the contract as a result of a refusal by the Claimant to accept the quantum of the price rise' (lines 13 and 14 of the interim award).
The Respondent did not address this issue and was not afforded an opportunity to be heard in relation to the same.
The two issues that the parties agreed to be determined by the Arbitrator at the initial hearing were the Claimant's entitlement to the first price rise on 20 April 2006 and the second price rise on 11 September 2006 (compare lines 137 to 149 of the interim award).
It was further agreed that the quantum of the price rises arising from these two issues and the issue of specific performance, etc. would be left for later determination.
Both sides restricted submissions to matters of delay and did not make submissions regarding specific performance or whether the Claimant was entitled to delay the works. It should be noted that paragraph 32 of the Claimant's Points of Claim, dated 16 April 2007, refers to an order for specific performance or alternatively that the Respondent is not entitled to delay the works as a result of this dispute.
The arbitrator responded by letter dated 6 May 2008 and asked the parties how he might 'revisit' an award and why he would not be considered functus officio in respect of the findings that had been made in the first interim award. There is no evidence that the builder or its solicitors sent any letter of response to the arbitrator's letter of 6 May 2008.
The builder did not commence work after the delivery of the first interim award.
According to Mr Peer's first affidavit for the builder, 'after delivery' of the first interim award, 'attempts were made by the [builder] to negotiate a settlement of the matter without success'.
According to Mr Bernasconi's affidavit '[a]fter interim award No 1 there were numerous requests for the Builder to commence work by Mr Burgoyne [solicitor for the owner] but there was no response'.
On 2 July 2008 the owner's solicitor wrote to the builder's solicitors in these terms:
I refer to my correspondence requesting whether you are still acting for APG Homes and further whether APG Homes will be commencing work on my client's home.
I have not yet had a response to my letters. I have further left telephone messages for yourself and Mr Mossenson to return my calls on 2 occasions.
If I do not have a response to my letters by 4.00pm tomorrow 02 July 2008 I will be making a complaint to the Legal Practitioners Complaints Committee.
The builder's solicitors responded on the same day as follows:
We refer to your recent correspondence in relation to the above and confirm that we are waiting on instructions from our client regarding the calculation of the price rise concerning the above.
Subject to agreement regarding the above, we understand our client may be prepared to commence construction.
We will revert to you as soon as we receive further instructions.
By 1 September 2008 the builder had not commenced work on the dwelling, and had not given the owner any indication as to when it might commence construction.
On 1 September 2008 there was a further directions hearing held at the request of the owner. The arbitrator said that he would not review his finding in the first interim award that the builder was not entitled to suspend the work as a result of the owner's refusal to accept the quantum of the price rise. At this directions hearing the arbitrator ordered that the builder provide details of its claim for the increase in costs in relation to the first issue determined in the first interim award, viz that the builder was entitled to amend the contract price for the delay in the procurement of the building licence from 29 March 2006, to 13 June 2006.
The builder failed to comply with this direction.
On 14 September 2008 the owner's solicitor wrote to the builder's solicitors:
The Respondent [builder] has failed to provide the costs that it promised through it's solicitor at the directions hearing on 01 September 2008.
It was understood at that directions hearing that the Respondent builder would carry out the works after being provided with the amount to be paid by the Applicant (either agreed or by decision of the Arbitrator).
Would Mr Wheatley [for the builder] confirm:
1.why there is a delay in obtaining the costings? and
2.when will we be provided with the costings?
I would have thought Mr Wheatley has spoken with his client after the 01 September directions hearing. Perhaps Mr Wheatley can now confirm my clients understanding and his understanding at the directions hearing that work will commence.
It has always been by my client's position that the amount of the funds to be paid is irrelevant to the question of the builder commencing work.
On 30 September 2008, the arbitrator directed the owner to provide submissions in respect of the entitlement of the builder for increased costs in respect of the first issue determined in the first interim award, and directed that the builder respond within 14 days thereafter. The owner provided its submissions on such costs on 20 October 2008. The builder did not respond to those submissions in the time directed by the arbitrator, or at all.
By facsimile dated 5 November 2008, the arbitrator delivered the second interim award, in which he found that the builder was entitled to increased costs of $3,320.90 arising from the delays outside of its control in obtaining the building licence.
In November 2008 there was correspondence between the builder, the owner and the arbitrator as to whether a further dispute existed and whether the arbitration should be extended. The timing and sequence of the communications in early November 2008 in this regard are not clear. The arbitrator by 6 November 2008 had understood that the owner had raised the prospect of further disputes which may be required to be arbitrated. By letter to the parties' solicitors dated 6 November 2008 he said, inter alia:
Further to fax correspondence from Mossensons regarding unavailability on the 13^th November, and in the absence of other unavailable dates, the proposed Directions Hearing is re scheduled to Monday the 17^th November 2008 commencing at 8.30 and otherwise as my fax of 5 November 2008.
In respect to further matters that may be in dispute, I note that Cl 25 of the Commercial Arbitration Act may have some relevance in respect to those further matters and to Clause 9.1 of the Preliminary Conference Agreement, however this would subject to application and argument by the parties.
In respect to the request for a Minute of Proposed Orders, I think it appropriate that such a Minute is prepared and submitted by the [owner] to the [builder] and myself, before close of business on Tuesday 11^th November 2008.
The owner by letter to the arbitrator dated 25 November 2008, enclosed a copy of a notice of dispute to the builder dated 18 November 2008. The owner contended that the arbitration should be extended to deal with whether the builder intended to perform the contract, and to deal with the issue of delay and other costs if the builder did not propose to perform the contract.
The notice to the builder dated 18 November 2008 concluded:
If the current Arbitrator does not extend the ambit of the Arbitration then we will notify the HIA to nominate an Arbitrator (requesting [the current arbitrator]) because of his previous knowledge of the matter). Utilising [the current arbitrator's] services will be the most cost and time effective way of dealing with this dispute.
On 27 November 2008 the builder's solicitors wrote to the arbitrator and the owner and said that there was no dispute, as the builder intended to perform the contract, and that it would commence work once the 'required approvals' had been 'finalised'. I infer that the first building approval, granted on 13 June 2006, had expired, and that the builder was required to obtain a fresh building licence in order to commence work on the dwelling.
On 1 December 2008 the owner sent to the builder a document described in part as 'notice of dispute' which stated inter alia:
We now claim from you the following:
1.Delay costs up to and including 1 December 2008 for not bringing the above construction to practical completion within the time allocated in the contract. The delay cost is calculated as follows:
a.68 weeks rent at 450.00 per week being $30,600.00 plus
b.Lost landscaper's rebate being $1500.00
The basis of the claim is that:
2.Construction should have commenced at the latest on 11 July 2006
3.With 276 working days the latest date for completion was 13 August 2007
4.Without even breaking ground on site as at 1 December 2008 you are 68 weeks over practical completion.
We are claiming our losses to 1 December 2008 and reserve our rights to claim further losses in the future.
We demand payment of the amount claimed within 10 days and further an acknowledgement that the payment will be made within 10 days of the date of this letter. We request that you acknowledge by 4.00 pm on Monday 08 December 2008 in writing the amount claimed and that it will be paid.
If the amount claimed is not acknowledged or you disagree with the time calculation or the amount claimed then we will be in dispute and will request at the expiration of 5 days from this notice that the current Arbitrator extend the ambit of the Arbitration to deal with this dispute.
If the current Arbitrator does not extend the ambit of the Arbitration then we will notify the HIA to nominate an Arbitrator (requesting [the current arbitrator]) because of his previous knowledge with the matter). Utilising [the current arbitrator's] services will be the most cost and time effective way of dealing with this dispute.
The local authority issued a fresh building licence to the builder dated 5 December 2008.
By letter dated 11 December 2008 the arbitrator advised the parties that he considered that a further dispute had arisen and proposed a directions hearing on 19 December 2008. The builder's solicitors, by letters dated 11 and 16 December 2008, said in effect that there was no dispute and that the builder did not in any event consent to the appointment of the arbitrator. The letter dated 16 December 2008 also said that s 25 of the Act had not been complied with, as any application thereunder had to be made 'by the parties' and not just by one party. The letter also enclosed a copy of the fresh building licence. It also requested the arbitrator to vacate the proposed directions hearing and to proceed to deal with the issue of the costs of the arbitration commenced by reference dated 7 March 2007.
By letter dated 16 December 2008 the arbitrator declined to vacate the directions hearing listed for 19 December 2008, and asked for submissions on s 25 of the Act in relation to the proposed extension of the arbitration as sought by the owner, and in relation to certain case law in that regard to which he adverted.
The builder's solicitors sent to the arbitrator, by letter dated 17 December 2008, written submissions in relation to the costs of the arbitration. The letter stated, inter alia:
3.The costs of separate issues can be made the subject of separate orders.
4.The [builder] succeeded on its contention that it was delayed in the procurement of a Building Licence from the City of Mandurah for reasons outside its control ('the primary issue'). See paragraph 2 of the [first interim award].
5.The [owner] succeeded on the finding that the [builder] was not entitled to suspend work as a result of the [owner's] refusal to accept the price rise ('the secondary issue'), subject to the [builder's] objection. See paragraph 3 of the [first interim award].
…
8.In the circumstances and subject to the [builder's] objection, the interests of justice would be served by making no order as to costs.
Despite the reference to 'subject to the [builder's] objection', the letter concluded by asking the arbitrator to provide a decision on the costs of the arbitration, ie to make what the builder saw as a final award. In other words, the builder sought to reprobate and approbate in relation to the 'secondary issue' at the same time.
On 19 December 2008 the arbitrator held the directions hearing, at which the parties addressed submissions on s 25 of the Act, and whether the arbitrator should deal with a further dispute in relation to a claim for delay and other costs by the owner. The builder's submissions on this occasion are referred to by the arbitrator in the third interim award:
The Respondent [builder] denied that the ambit of the Arbitration could be extended consistent with CL 25 of the Commercial Arbitration Act 1985, in the absence of consent of both parties. It was the position of the [builder] that they objected to an extension of the ambit of the Arbitration.
It was further the position of the [builder] that if the Arbitration were able to be extended, a claim for damages could not be considered as a damages claim would need to have crystallized, which it was contended, it had not, or in the alternative, that the Claimant [owner] had abandoned any ability to claim damages by not pursuing the claim made earlier in the Arbitration.
Mr Bernasconi in his affidavit sworn 5 June 2009 also deposed, without contradiction, to the events at the directions hearing on 19 December 2008:
25.A further directions hearing was held on 19 December 2009 [sic] subsequent to the Owners request for an extension to the ambit of the Arbitration. At that hearing there was significant discussion about the progress of the Arbitration. Mr Burgoyne said there were 2 issues, repudiation and losses that flow from that, or alternatively delay costs if the Builder starts work because the time for completion had already crystallized.
26.Argument was also heard on the point of law for extending the Arbitration. Mr Burgoyne said that some of the Owners delay costs could be determined prior to the completion of the works, because crystallisation had occurred in relation to the contracted completion date.
27.Mr Wheatley announced that work was commencing on site on the 20^th of December 2008. The Owner had not previously been advised that a building licence was issued or that a start date was set. Amongst other things Mr Wheatley disputed the extension of the Arbitration. All of the issues that Mr Wheatley raised were addressed in interim award No 3.
28.It was agreed at that hearing that if work commenced on site then we would not pursue the repudiation claim. Mr Arbitrator said that he would determine the extension of the Arbitration and if works had commenced on site then determine the delay time if any. He said that he could do this from the current documentation he had and said further hearing was not necessary. Mr Burgoyne agreed to that course of action. Mr Wheatley did not object to that course of action but did oppose the extension of the ambit of the Arbitration. Mr Burgoyne subsequent to the 19^th of December 2009 [sic] directions hearing confirmed with Mr Arbitrator that work had commenced on site so the repudiation argument was not being pursued. Interim Award No 3 was handed down on 12 February 2009.
On 12 February 2009 the arbitrator delivered the third interim award in which he said, relevantly:
I find and determine-
that the application to extend the ambit of the arbitration, in consideration of the circumstances, should be granted to the Claimant, to include a claim for loss and damages for the period of delay in completion of the works, represented by the time between the issue of the first and second building licences.
In his reasons in respect of the third interim award, the arbitrator addressed each of the builder's submissions in opposition to the application to extend the arbitration. The arbitrator also said inter alia:
As noted above, the Respondent applied for and received a second building licence, dated 5^th December 2008 and commenced work on site on the 20^th December 2008. The application to consider whether the repudiation had occurred was withdrawn shortly afterwards, by the Claimant and is not considered further.
The remaining issue to be resoled [sic] therefore is to consider an application to extend the ambit of the Arbitration to include a claim for damages for effectively, delays in Practical Completion, notwithstanding that Practical Completion has not occurred.
…
In essence, the contracted time for completion of the works, being 275 days from the date that all approvals to commence works was received, that date having been found to be 275 days beyond 13^th June 2006, is now passed and the amount of time between the 13^th June 2006 and the date of issue of the second building licence is a fixed amount of time.
If the Respondent now completes the building within 275 days of receipt of the second building licence on or around the 5^th December 2008, it seems unlikely that there will be any basis for further claim for damages for late completion, however this may not be the case if the building is completed beyond the 275 days after the 5^th December 2008. In any event, there is nothing to suggest that completion of the works can not be achieved in this time and is not a matter capable of being considered in these proceedings.
I am of the view that the claim for damages for the period of delay between the issue of the first and second building licences, is a fixed time and for which a claim for damages might be said to have crystallized.

The builder's evidence as to what occurred after the delivery of the third interim award was originally addressed in Mr Peer's first affidavit as follows:
41.The [owner] is now seeking a substantial sum for delay costs, contending that the [builder] is solely responsible for such delay.
42.In view of the above, the [builder] seeks to set aside the second finding in Interim Award No. 1 and Interim Award No. 3 and to remove the Arbitrator from proceeding with the further hearing of the arbitration.
In his second affidavit he said:
16.… The arbitration is still ongoing and has not been concluded. The [builder] initially attempted to preserve its relationship with the Arbitrator, however, has been compelled to bring this application in view of the cumulative effect of the matters referred to … that have arisen over the course of the arbitration, which has not yet been concluded.
17.The [owner] has now advised that it is seeking $450.00 per week for the period between the first building licence (13 June 2006) and the second building licence (5 December 2008), being a period of 129 weeks, as a result of Interim Award No. 3, being Annexure 'AA' to the [builder's] first affidavit. This amounts to a sum of $58,050.00, which the [owner] contends is the sole responsibility of the [builder], so that the [builder] is likely to suffer unjust prejudice as a result of the findings made during the course of the arbitration. There is no prejudice to the [owner] as there has not, as yet, been any monetary award by the Arbitrator in favour of the [owner].
Also in his second affidavit Mr Peer deposes, in effect, that on 8 July 2009 the solicitor for the builder requested the arbitrator to provide a copy of his handwritten notes taken at the arbitration hearing on 7 April 2008, for use in this application. The arbitrator replied:
I advised Mr Wheatley that I was unprepared to provide a copy of my notes, unless specifically ordered by the Court to do so and that I did not intend to take any part in the proceedings, as previously advised. No other matters were discussed.
Notes taken by me for the purposes of assisting me to prepare a determination and to recall evidence or salient points, including any comments that I may have made or detail that I may or may not have recorded, do not in my view represent a document that is evidence or that should be produced in subsequent proceedings. In this respect I assert that the notes were prepared solely for my purposes and are otherwise not disclosable.

The grounds of the application

In relation to the application to set aside that part of the first interim award by which the arbitrator found that the builder 'was not entitled to suspend work under the contract as a result of a refusal by the [owner] to accept the quantum of the price rise' (which I will refer to as 'the suspension issue'), the builder alleged, in written and oral submissions, misconduct under s 42 on the following grounds, as I understood them:
(a)that the arbitrator lacked authority to determine the suspension issue in the first interim award and thereby acted in excess of jurisdiction;
(b)that the builder was denied natural justice in that he was not given a proper opportunity to be heard in relation to the suspension issue before the delivery of the first interim award especially given that the parties and the arbitrator had expressly agreed at the hearing of the arbitration to defer consideration of the suspension issue until after delivery of the first interim award;
(c)the builder was denied natural justice when he failed to 'revisit' the suspension issue following the builder's solicitors' letter dated 6 May 2008;
(d)that the arbitrator did not give adequate reasons for the suspension issue because the 'suspension order is granted on a wrong premise because it relies on Clause 4(b) of the contract rather than 7(b) which applies' (ts 3);
(e)that the arbitrator's failure to provide his written notes of the hearing was an unreasonable attitude to take in the circumstances.
In relation to the application to set aside the third interim award, the builder alleged misconduct under s 42 on the bases that:
(a)The arbitrator:
[D]etermined that the owner was entitled to damages for the period between the issue of the first and second building licences without permitting pleadings or evidence in relation to this issue as agreed between the parties, so that the [builder] is entitled to have the award set aside as the parties did not agree to be bound by an award made by the procedure adopted.
(b)The arbitrator:
[D]id not give any reasons to establish that the delay between the first and second building licences was caused by the [builder] to exclude the provisions of clause 7(b) of the Contract and did not give the [builder] an opportunity to be heard in relation to this issue.
(c)The arbitrator 'doubled the claim for time delay' beyond that requested by the owner in its letter of 1 December 2008.
(d)The reasons given by the arbitrator, in the third interim award, do not support the arbitrator's finding as to the proper construction of s 25 of the Act.
(e)The arbitrator, by adverting to s 25 of the Act, and to the case law, in his letter of 16 December 2008, was improperly 'descending into the arena' with the parties.
In relation to the application to remove the arbitrator under s 44, the builder contends that the circumstances as a whole, in light of the alleged misconduct, indicate a trend or pattern which had, or appeared to have, the effect of unfairly disadvantaging the builder.
The builder's counsel disavowed any allegation of fraud by the arbitrator.
I note here that cl 7 of the contract provided:
(a)Subject to this Contract the Builder shall commence the Works by the time specified in Item 9 of the Schedule or as soon thereafter as may be reasonably practicable and shall proceed therewith with reasonable despatch and diligence and reach Practical Completion within the time specified in Item 9 of the Schedule, PROVIDED THAT:
(i)the Owner shall have complied with any notice given by the Builder pursuant to Clause 2(c) hereof;
(ii)the Builder is satisfied that the boundaries of the Site have been adequately delineated;
(iii)provision has been made for adequate water supply to the Site; and
(iv)the Builder has received approval to the Construction Documents from all relevant authorities.
(b)Notwithstanding provisions to the contrary contained in this Contract the Builder shall not be responsible for any delays caused by any matter or thing over which the Builder shall have no control including (without limiting the generality thereof):-
(i)any of the following events which affect directly or indirectly access to or the condition of the Site or the Works or any person engaged on or material employed in or to be employed in or in relation to the Works, namely; acts of God, fire, explosion, earthquake, civil commotion, theft or acts of vandalism, flooding, inclement weather, strikes, industrial action, lockouts or holidays granted in accordance with Industrial awards, fires, vehicle accidents, unavailability of labour, vehicles or equipment or permits required;
(ii)any alterations to the Construction Documents resulting in alterations to the Works;
(iii)any instruction or delay of instruction by or any omission of the Owner;
(iv)any deliberate and substantial prevention of or interference with the Works or the progress thereof caused by the Owner;
(v)any delay in the supply of materials or transport;
(vi)any proceedings being taken or threatened by any disputes with adjoining or neighbouring owners concerning the continuation or variation of delivery to or completion of the Works upon the site;
(vii)any cessation of work pursuant to Clause 13;
(viii)any delay in the commencement of or continuance with the Works, caused by or resulting from an order or directive of a relevant authority; or
(ix)any delay caused by proper investigation of any of the above by the Builder or the Owner.
(c)Upon the happening of any of the events aforesaid the Builder may notify the Owner thereof and shall be entitled to such extension or extensions of time for completion of the Works as shall in the circumstances be reasonable and if there shall be any dispute the provisions of Clause 16 shall apply. Extra costs necessarily incurred by the Builder by reason of an extension of time shall be paid for by the Owner but only if the extension of time was due to a breach of the provisions of this Contract by the Owner or an act or omission on the part of the Owner.

Statutory provisions and principles

Section 42 of the Act provides, relevantly:
(1)Where -
(a)there has been misconduct on the part of an arbitrator or umpire or an arbitrator or umpire has misconducted the proceedings; or
(b)the arbitration or award has been improperly procured,
the Court may, on the application of a party to the arbitration agreement, set the award aside either wholly or in part.
(2)Where the arbitrator or umpire has misconducted the proceedings by making an award partly in respect of a matter not referred to arbitration pursuant to the arbitration agreement, the Court may set aside that part of the award if it can do so without materially affecting the remaining part of the award.
Section 44 of the Act provides, relevantly:
Where the Court is satisfied that -
(a)there has been misconduct on the part of an arbitrator or umpire or an arbitrator or umpire has misconducted the proceedings;
(b)undue influence has been exercised in relation to an arbitrator or umpire; or
(c)an arbitrator or umpire is incompetent or unsuitable to deal with the particular dispute,
the Court may, on the application of a party to the arbitration agreement, remove the arbitrator or umpire.
Section 4(1) of the Act provides that misconduct includes corruption, fraud, partiality, bias and a breach of the rules of natural justice.
Section 25 of the Act provides:
(1)Where -
(a)pursuant to an arbitration agreement a dispute between the parties to the agreement is referred to arbitration; and
(b)there is some other dispute between those same parties (whenever the dispute arose), being a dispute to which the same agreement applies,
then, unless the arbitration agreement otherwise provides, the arbitrator or umpire may, upon application being made to the arbitrator or umpire by the parties to the arbitration agreement at any time before a final award is made in relation to the first mentioned dispute, make an order directing that the arbitration be extended so as to include that other dispute.
(2)An arbitrator or umpire may make an order under subsection (1) on such terms and conditions (if any) as the arbitrator or umpire thinks fit.
In relation to 'misconduct' for the purpose of s 42 of the Act, in Shirley Sloan Pty Ltd v Merril Holdings Pty Ltd t/as Airen Constructions [2000] WASC 99, Steytler J said at [28]:
There is no question as to the proposition that breach of the rules of natural justice amounts to 'misconduct' for the purposes of s 42(1)(a) of the Act. That is the effect of the definition of that term in s 4 thereof. The real question is whether, where there is misconduct of that kind, it is such as should attract an exercise of the discretion which s 42(1) affords to the court, on the application of a party to the arbitration agreement, to set aside the award either in whole or in part. It is unlikely that a court would exercise its discretion in that way, even in the case of a denial of natural justice, unless the denial was such as (to use the words of Isaacs J in Melbourne Harbour Trust Commissioners v Hancock (1927) 39 CLR 570 at 588) 'has or may have unjustly prejudiced a party' in a respect material to the outcome of the arbitration (cf Doran Constructions Pty Ltd v Health Administration Corporation (NSW) (1994) 12 BCL 59 at 62 - 63 and Van Dongen v Cooper [1967] WAR 143 at 145).
In Gebauer Nominees Pty Ltd v Cole [No 2] [2008] WASCA 41 the Court of Appeal said at [61] ‑ [63] and [65], in relation to s 42 and s 44 of the Act:
It is, however, impossible to provide a comprehensive definition of what would constitute misconduct within the meaning of s 44 of the Act warranting the removal of an arbitrator. Given the infinite variety of circumstances that could arise, it would be unwise to attempt to do so.
But what is clear is that an error of law, even a serious error of law, does not of itself amount to misconduct: Moran v Lloyd's [1983] QB 542, Forsayth NL v Australasian Gold Mines NL (No 1) (1992) 7 WAR 549, 560 - 561. In that connection, it is important to recognise that while parties to arbitration, like parties to litigation, are entitled to expect that the arbitration will be conducted without mishap or misunderstanding, and that the procedure adopted will be fair and appropriate, they are not entitled to expect of an arbitrator, any more than of a judge, that he or she will necessarily and in all circumstances arrive at the 'right' answer as a matter of fact or law: King v Thomas McKenna Ltd [1991] 2 QB 480, 491.
… We respectfully agree with the view of the learned authors (Mustill & Boyd) of the Law & Practice of Commercial Arbitration in England (2nd ed, 1989), where they say:
'The fact that the court is given a wide power to remove the arbitrator in cases of misconduct does not mean that the power will be freely exercised. An arbitrator may commit errors - even serious errors - in the course of the reference, and yet remain perfectly able to carry the arbitration to a successful conclusion once his mistakes have been pointed out. Justice requires that in such a case the arbitrator should be left in office, rather than that the parties should suffer the delay and expense of beginning arbitration afresh (530).'
…
In our view, an arbitrator will be removed by reason of an error made in the course of an arbitration proceeding only where the error indicates some impropriety, partiality or general lack of capacity on the part of the arbitrator, so that 'a reasonable person would no longer have confidence in the … arbitrator's ability to come to a fair and balanced conclusion on the issues if remitted': see Lovell Partnerships (Northern) Ltd v AW Construction Plc (1996) 81 BLR 83.
Generally, a matter should only be removed from an arbitrator as a last resort, as opposed to having it remitted to him or her, although ultimately the proper relief will depend upon the nature and degree of misconduct and all the circumstances of the case: Sydney Water Corporation Ltd v Aqua Clear Technology Pty Ltd [1996] NSWSC 640; Oil Basins Ltd v BHP Billiton Ltd [2007] VSCA 255; (2007) 18 VR 346 [76] ‑ [80]; Alvaro v Temple [2009] WASC 205 [53].
Mistakes, misconceptions, misstatements and irregularities may not in themselves, and individually, constitute misconduct, but they may, where occurring in one setting and when considered in a general context of other mistakes, misconceptions or misstatements, contribute to an overall inference of apprehended bias, and thereby misconduct under s 42: Gas & Fuel Corporation of Victoria v Wood Hall Ltd & Leonard Pipeline Contractors Ltd [1978] VR 385, 398 ‑ 399.
Once an arbitrator has published the award he or she is functus officio, subject to the operation of the 'slip rule' (s 30 of the Act), and the extent to which the arbitrator's jurisdiction is revived by court order. If the award is an interim award, the arbitrator still, however, has authority to deal with the matters left over, although he or she is functus officio as regards matters dealt with in the interim award: Mustill M J and Boyd S C, Commercial Arbitration (2nd ed, 1989); Alvaro v Temple [67].

Principles relevant to the application for extension of time to challenge arbitral award

By O 81D r 5 of the Rules of the Supreme Court 1971 (WA) (the Rules), an application under s 42 is to be made, relevantly in effect, within 21 days of publication of the award or within such extended time as the court may allow. The power to extend time is for the sole purpose of enabling the court to do justice between the parties and it is necessary to have regard to the history of the proceedings, the conduct of the parties, the nature of the litigation (in this case arbitration), and the consequences for the parties of a grant or refusal of the application for the extension of time: Gallo v Dawson [1990] HCA 30; (1990) 64 ALJR 458, 459; Girando v Girando (1997) 18 WAR 450.
An applicant for an extension of time to challenge an arbitral award will generally need to show first, an explanation for the delay, secondly, a substantial point to be argued, and thirdly that injustice will be caused if the extension of time is not allowed. These considerations are to be weighed in the context that the evident purpose of the arbitral scheme under the Act is for there to be finality to disputes at an arbitral level. See Peter Schwarz (Overseas) Pty Ltd v Morton [2003] VSC 144 [14], [53]; Technical Team Projects Pty Ltd v Noble Dunn Pty Ltd (1990) 20 NSWLR 221, 231 ‑ 232. The three factors are not exhaustive and may overlap in their application to a particular case. It remains important to consider the position of the parties as a whole: Doran Constructions Pty Ltd v Health Administration Corporation of New South Wales (1994) 12 BCL 59, 61.
There is no obligation on a respondent to such an application to establish prejudice, although the absence of established prejudice may be material to the question of whether the applicant has demonstrated injustice: Technical Team Projects v Noble Dunn (230). Also, a party is ordinarily entitled to assume that where an arbitral award is not challenged within time, the arbitration insofar as it relates to the matters the subject of the award, is concluded, and to so regulate its affairs accordingly. In that regard, the successful party 'is entitled to be released from the strain, worry and expense of litigation' once the time limits provided by the Rules for the challenging of an award have passed: Technical Team Projects v Noble Dunn (232). See also Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27 [30], [100] ‑ [101] in relation to the ill effects of delay on litigants.
The length of the delay will also be relevant to the third factor, and the longer the delay, the more cogent the explanation must be: Silent Vector Pty Ltd v Hassell [2005] WASC 79 [36]. Having regard to the importance of finality in arbitral matters, even relatively short delays may be important in the exercise of the court's discretion: Lester v Heitman (Unreported, WASC, Library No 980515, 9 September 1998) (Master Sanderson). Delay, in this context, in my view includes both the delay in bringing the application, and delays in the prosecution of the application once made. The absence of an explanation for a delay of two months has been treated as a basis to dismiss the application for an extension of time: Minenco Pty Ltd v Abigroup Contractors (WA) Pty Ltd (1992) 7 WAR 576, 585.

Builder's application for extension of time: analysis

In support of its application for an extension of time, the builder made the following submissions. First it said that after the delivery of the first interim award, the builder attempted to negotiate a settlement with the owner but was unable to do so. Secondly, as a result of the second interim award, the builder obtained a fresh building licence dated 5 December 2008 and commenced construction prior to the end of December 2008. Thirdly, after the delivery of the third interim award, further attempts were made to negotiate a settlement, without success, and the owner sought to have the arbitrator determine the issue of loss or damage in accordance with the provisions of the third interim award. Fourthly, as a result of those three matters, the builder brought this application by motion dated 17 April 2009.

Fifthly, the builder contends that:
Given the centrality of the second issue (ie the suspension of work) to the extension of the arbitration for delay and to the amount now claimed by the [owner], the [builder] will suffer substantial injustice or unjust prejudice as a result of the arbitration by the arbitrator.
I would decline the application for leave to extend time. My reasons are as follows.
First, in relation to the first interim award, the length of the delay has been very substantial to the point of inordinate, and there has been no adequate explanation for the delay. This application was filed approximately 11 months out of time in relation to the first interim award. It is not correct to contend, as the builder did in written submissions, that the application was brought by motion dated 17 April 2009, when it was not filed until 28 April 2009, although the difference between those two dates is immaterial having regard to the substantial period that has elapsed since the delivery of the first interim award on 27 April 2008.
The builder's evidence that after the delivery of the first interim award it had made 'attempts to negotiate … a settlement' is silent as to the duration and timing of the negotiations. There is certainly no suggestion that they proceeded beyond the directions hearing of 1 September 2008. At that directions hearing, attended by the builder's solicitor, programming orders were made in relation to determining the amount payable to the builder on the first issue, decided in favour of the builder, in the first interim award. The second interim award was delivered on 5 November 2008 by which the owner was found liable to pay the builder a sum of money arising in respect of the first issue determined in the first interim award. On 17 December 2008, the builder made submissions and sought an award on costs as referred to in [52] of these reasons. The builder participated in the directions hearing on 19 December 2008 as to whether the arbitration should be extended. At no time in this period of activity in the arbitration from 1 September 2008 did the builder apply to set aside that part of the first interim award adverse to it. Also, the facts that the builder applied for a fresh building licence and commenced construction in December 2008 provide, in my view, no explanation for the delay in not bringing an application to set aside that part of the first interim award decided adversely to it earlier that year.
The arbitrator reserved his decision for nearly two months in relation to whether to extend the arbitration. He delivered the third interim award on 12 February 2009. Accordingly, two interim awards later, and nearly 10 months after delivery of the first interim award, there was still no application to set aside that part of the first interim award adverse to the builder. A further period of approximately 2 1/2 months then elapsed before this application was filed. The builder's submissions contend that there were further attempts to negotiate a settlement in this period too. That submission was made in the absence of evidence from the builder that it did engage in settlement negotiations after 12 February 2009. Accordingly, there is no evidence to explain the delay in respect of the third interim award. Even if there were evidence of such negotiations, it is not, in my view, sufficient in this context for a party to see how it fares in an award, then to open up negotiations if it is unsuccessful, and then to seek curial relief outside of the prescribed time limits if the negotiations fail.
The delay in bringing the application in respect of the first interim award is inordinate. The delay in respect of the third interim award is significant. It is not a matter of days or a week or so out of time. It is well over a month. No evidence is provided to explain this 1 1/2 month delay after the lapse of time to apply following the delivery of the third interim award. It could not be said that the owner's intimated intention to proceed with a claim for delay costs following the delivery of the third interim award created a source of surprise to the builder. It must have been evident to the builder since November 2008 that the owner wished, subject to resolution of the issue as to whether the arbitration should be extended, to pursue a claim in the arbitration for delay costs.
There was no explanation on affidavit as to why, in this application, the builder was a month late in filing its responsive affidavit, and why it was a month late in filing its written submissions.
The above considerations are sufficient to dispose of the application to extend time, absent other very compelling discretionary considerations that would require a different result. For the reasons given in the next section headed 'merits', the builder has also failed to show that it has a substantial point to be argued. Also the owner will suffer prejudice if the application to extend time is allowed.
In relation to prejudice, first, the owner has been entitled, in my view, since at least 1 September 2008, to have assumed that finality had descended on the issue on which it had succeeded in the first interim award, and that it had been 'released from the strain, worry and expense of litigation' in relation to that issue. Secondly, the continued delay in its ability to bring a claim for damages, having regard to the history of this matter, involves a significant impairment to its property rights constituted by the chose in action against the builder.

Merits: the application in respect of the first interim award

The first ground of alleged misconduct is, in effect, that the arbitrator acted in excess of jurisdiction by dealing with the suspension issue as an issue for determination in the first interim award.
As with the other allegations made in the application, it is important to bear in mind that the builder bears the onus of proof.
In my opinion, the first ground does not raise a substantial point to be argued. There is no evidence to indicate that the arbitrator lacked jurisdiction to grant a declaration in relation to the suspension issue. The issue was clearly pleaded by the owner. It was responded to in the builder's pleading. There was no application to strike out the owner's claim on the basis that it did not properly fall within the reference. The parties led evidence on the reasons for the delay. It was addressed in the owner's closing submissions at the arbitration. The substance of the builder's submissions to the arbitrator in its solicitor's letter dated 6 May 2008 was not that the arbitrator lacked jurisdiction to deal with the issue, but that he should have exercised his jurisdiction later. That is inconsistent with an assertion that he lacked jurisdiction to deal with the issue.
Secondly the builder has alleged a failure to afford procedural fairness to the builder in relation to the determination of the suspension issue.
In this regard, the following matters are in my view significant:
(a)the suspension issue was raised in the owner's pleadings, and the builder's pleading responded to it (see [11] ‑ [16] above);
(b)Mr Bernasconi's evidence was to the effect that the arbitrator, Mr Wheatley and Mr Burgoyne, in discussions at the arbitration, agreed that the suspension issue was one of the two issues which should be determined in the first interim award;
(c)the arbitrator's letter of 15 April 2008, although not expressed as confirmation of an earlier agreement, dealt with the new discovery document and recorded that the arbitrator intended to deal with the suspension issue having regard to the pleadings;
(d)the builder's solicitors' letter of the next day in response, took no objection to the course proposed by the arbitrator in his letter of 15 April 2008, and nor did it suggest that a contrary agreement to defer that issue had been reached;
(e)the builder's solicitors reported to their client on 18 April 2008 and enclosed copies of the arbitrator's letter of 15 April 2008, and their response dated 16 April 2008, without suggesting that the arbitrator mistook the issues which he was required to determine in the first interim award;
(f)the first interim award recorded what the arbitrator said had been agreed between the parties in relation to the determination of the two issues, including the suspension issue;
(g)the absence of any direct evidence on affidavit from Mr Wheatley or any representative of the builder who attended the arbitration disputing or contradicting the discussions to which Mr Bernasconi deposed;
(h)Mr Wheatley's notes of closing submissions, which the builder adduced in evidence in these proceedings, refers to the solicitor for the owner making submissions in relation to the suspension issue at the hearing of the arbitration.
As against the above matters, the builder's counsel put particular emphasis on the following matters. First, he said that the 'primary issue' for determination was the first issue determined by the arbitrator in the first interim award. In my opinion, emphasising that the 'primary issue' was the first issue, does not assist in establishing that the builder had no notice that the arbitrator proposed to deal with the pleaded suspension issue as a secondary issue.
Secondly, the builder contends that the arbitrator's finding in relation to the suspension issue was, in effect, a declaration of right. I accept that the finding in respect of the suspension issue was, in effect, a declaration that on the proper construction and application of the contract in the circumstances, the builder had no right to delay or suspend commencement of the works by reason of the owner's refusal to sign or acknowledge the price variations claimed by the builder. The builder, in its submissions before me, then made two points about the declaration. First, that declaratory relief is an equitable discretionary remedy and requires a proper contradictor. Secondly, that the declaration is a 'backdoor' method of granting specific performance or an injunction, and that the parties had expressly agreed that the owner's primary claim for an order for specific performance should be deferred.
As to the first point, the proposition that a bare declaration of right is an equitable remedy, as opposed to a statutory remedy, is doubtful (cf Meagher RP, Heydon JD and Leeming MJ, Meagher, Gummow & Lehane's Equity: Doctrines and Remedies (4th ed, 2002) [19‑005] ‑ [19‑070]), but is irrelevant. I would agree, however, that it is a discretionary remedy, and that it requires a proper contradictor. But so to describe it does not, in my view, assist in proving that the arbitrator acted without authority or in the absence of procedural fairness, as alleged by the builder, in making in effect the declaration which he did.
As to the second point, the builder in its submissions referred to the well known principle that generally the courts do not order specific performance of a building contract. He also referred to Pakenham Upper Fruit Co Ltd v Crosby [1924] HCA 55; (1924) 35 CLR 386. That case concerned the proper construction of a contract for the sale of fruit, the implication of a negative stipulation in the contract, equity's capacity to enjoin the breach of a negative stipulation, and the inappropriateness of granting injunctive relief if the effect is to order specific performance in respect of a contract which is not amenable to such an order. The significance of these submissions in the present context is not clear. The fundamental premise seems to be that a declaration is tantamount to an order for specific performance. In my view, it is clearly not. Further, an agreement to defer for consideration a claim for specific performance does not in itself say anything about whether a declaration as to the anterior question of whether there is an enforceable right or not (the breach of which may or may not sound in damages or specific performance), has also been deferred for consideration.
Thirdly it was submitted for the builder that Mr Wheatley's notes at the start of the arbitration 'specific performance not approp' showed that the suspension issue was not an issue to be dealt with. For the reasons given above in relation to the submissions on specific performance, no seriously arguable point is raised by this.
Fourthly, it is said that the owner's solicitor's (Mr Burgoyne's) letter dated 8 April 2008 shows that there was no agreement that the arbitrator would decide the suspension issue in the first interim award. The language of this letter in my view is somewhat opaque. It arguably implies that in the mind of Mr Burgoyne on 8 April 2008, he was unsure as to when the suspension issue would be determined and, to that extent, it arguably supports a submission that no agreement as to whether to deal with that issue had been reached on 7 April 2008, the first day of the arbitration. The letter could also suggest that Mr Bernasconi's evidence as to the timing of the agreement, although not necessarily the fact of the agreement, was inaccurate. It does not by itself negative the proposition that an agreement to deal with the suspension issue had been clarified, or even reached, on the second or third days of the arbitration. As I have noted, however, the meaning is far from pellucid. It appears that whatever doubts Mr Burgoyne may have had were resolved over the course of the next two days of the arbitration, as he addressed the suspension issue in his closing submissions. Taken in the context of matters referred to in [92] above as a whole, it would not support findings, as contended for by the builder, that the parties had agreed to defer consideration of the suspension issue until after delivery of the first interim award, or that the builder was not given a proper opportunity to deal with that issue, prior to delivery of the first interim award.
Fifthly, the builder contends that the arbitrator said in his letter of 15 April 2008 that he would not decide 'a matter of law' in relation to the two issues without first seeking further submissions from the parties. It is said that a declaration of a contractual right involves 'a matter of law', and hence the builder was denied procedural fairness in that the arbitrator decided the suspension issue without seeking further submissions. In my view this point is without substance. The words 'a matter of law' in the arbitrator's letter appear following the arbitrator's statement as to how he saw the two issues being determined. He said they 'will turn largely on the facts and the application of the contract'. He drew a distinction between the operation of the terms of the contract, and other matters of law. The arbitrator clearly said, in effect, that he would be applying the contract to the facts as found. No extra‑contractual matter of law such as an estoppel had been pleaded by the builder. It cannot be said, in my view, that the builder has shown a substantive point to be argued that the arbitrator, in consequence of this letter, denied the builder procedural fairness.
Sixthly, the builder's counsel submitted that even if, contrary to his principal submission, there were no agreement to defer consideration of the suspension issue, the builder made a unilateral mistake in thinking it had been deferred, and that the delivery of the first interim award thereby constituted misconduct by the arbitrator. When asked how a unilateral mistake on the part of the builder could constitute misconduct by the arbitrator, counsel for the builder said, in effect, that the arbitrator and the owner knew, or perhaps ought to have known, that the builder was unilaterally mistaken. In light of the matters referred to in [92], this point, even if arguable as a matter of law, lacks any cogent evidence to support it.
Having regard to the foregoing reasons, in my opinion the builder has not demonstrated a substantial point to be argued in relation to the second ground.
The third ground alleges a denial of natural justice when the arbitrator failed to 'revisit' the suspension issue following the builder's solicitors' letter of 6 May 2008. This point is also without substance. First, there was no need to 'revisit' it, for the reasons canvassed in relation to the first two grounds. Secondly, the arbitrator provided a response to the builder's solicitors' letter dated 6 May 2008 which invited further submissions from the builder. The builder was afforded natural justice but no further submissions were then advanced by the builder. Thirdly, no impropriety could be inferred from the nature of the arbitrator's response, that he understood that he was functus officio. See [73] in relation to the position of an arbitrator following delivery of an award.
The fourth ground alleges that the arbitrator failed to give adequate reasons for his determination of the suspension issue, particularly in that he had regard to cl 4(b), rather than cl 7(b), of the contract. This seems to me to be tantamount to an allegation of an error of law by the arbitrator as to the construction and application of the contract. It is not, in my view, properly a ground of misconduct. Moreover, the builder had in effect pleaded cl 4(b) in its defence to the owner's claim, and not cl 7(b). There is, in my view, no substantial point to be argued in respect of the fourth ground.
The last ground alleges misconduct in the arbitrator's failing, upon the builder's solicitors' request of 8 July 2009, to provide his notes of the arbitration hearing. It should be noted at the outset that this ground could not be said to amount to misconduct by the arbitrator in the proceedings leading up to, and in making his findings in, the first and third interim awards. The request for the notes was made some 15 months after delivery of the first interim award and five months after delivery of the third interim award. The complaint, in substance, is that it is misconduct for an arbitrator not to provide his or her notes to a party, upon request from that party, where the party seeks access to the notes for the purpose of assisting that party in proceedings alleging misconduct by the arbitrator and seeking the arbitrator's removal. No authority for this proposition was cited by counsel for the builder at the hearing of this application. Nor was this a point raised in the builder's written submissions. It emerged in oral argument. At the conclusion of the oral hearing I directed the parties to provide supplementary submissions on whether the arbitrator's failure to provide notes in these circumstances constituted misconduct.
The builder in supplemental written submissions submitted, in effect, that misconduct arose by reason of a reasonable apprehension of bias on the basis that:
It was stated by Robert Goff J that 'it is of the utmost assistance to the Court to have information from the arbitrator explaining why he has acted as he has done when his actions are the subject of criticism by one of the parties when making an application and it is a matter of regret for me that I have no such information before me from the arbitrator himself' cited by Sharkey & Dorter 'Commercial Arbitration' (1986) at 294 when discussing the case of Modern Engineering (Bristol) Ltd v C Miskin & Son Ltd (1980) 15 BLR 93.
The above passage does not refer to the provision of the arbitrator's notes. Moreover it is necessary to consider it in the context in which it originally appeared, in Modern Engineering (Bristol) Ltd v C Miskin & Son Ltd (1980) 15 BLR 82. In that case both parties had recognised that the arbitrator had made a 'grave error' (95) in the denial of procedural fairness. There were urgent proceedings for his removal and to set aside the award. The trial judge, Robert Goff J, did not remove the arbitrator but set aside the award with remitter. The party denied procedural fairness appealed to the English Court of Appeal. The Court of Appeal ordered that the arbitrator be removed, and in doing so applied a different test from that approved by the Court of Appeal in Gebauer Nominees v Cole ([70] of these reasons). In relation to the passage quoted by counsel for the builder, Lord Denning said:
I gather from what counsel has told us that the arbitrator himself may have been advised to say nothing. So he ought not to be criticised unduly for not having made any explanation to the court. Nevertheless it is unfortunate, as the judge said, that we have no explanation, no apology, and no statement of any kind from the arbitrator as to why he fell into this error: and we have not received any assurances that he will not make any such like error again (96).

Accordingly, the English Court of Appeal considered that the arbitrator's failure to provide an explanation for the 'grave error' that both parties recognised, was a matter relevant to the exercise of the court's discretion in whether to remove the arbitrator. It is not authority for the proposition that a failure by the arbitrator to provide his notes constitutes misconduct.
In this case the arbitrator was not joined as a party. The arbitrator's notes are his property and not held as agent for the parties: cf Wentworth v De Montfort (1988) 15 NSWLR 348, 358 ‑ 359. The arbitrator said, in effect, that he would supply his notes if ordered by the court. There was no debate in this matter as to the court's power to order production, but in any event the builder did not apply before the hearing for an order that they be produced: cf Nathan v MJF Constructions [1986] VR 75.
In these circumstances there is no conceivable basis for concluding that the parties and the public might, in respect of this point, entertain a reasonable apprehension that the arbitrator might not bring an impartial and unprejudiced mind to the arbitration: see Livesey v New South Wales Bar Association [1983] HCA 17; (1983) 151 CLR 288, 293 ‑ 294. There is, accordingly, no substance in this ground of alleged misconduct.
The builder in its supplemental written submissions requested that if the court found that the arbitrator was not guilty of misconduct, it should now order the arbitrator to produce his notes for the purpose of assisting in the application to set aside the first interim award. This is, in effect, a request to the court to issue a subpoena for the production of documents, with a view to the builder then considering whether to make an application to adduce 'fresh evidence' in respect of a matter the hearing of which has been concluded, in proceedings which were brought, relevantly, 11 months out of time. No formal application in this regard has been made. It does not properly arise out of the leave given at the end of the hearing to provide supplemental submissions on whether the arbitrator's failure to provide his notes constitutes misconduct. It is inappropriate to raise fresh matters by way of supplemental written submissions without leave once the hearing has been completed: Carr v Finance Corporation of Australia Ltd (No 1) [1981] HCA 20; (1981) 147 CLR 246, 258.

Merits: the application in respect of the third award

Before addressing the grounds raised in relation to the third interim award, it is appropriate to note that in the first interim award, the arbitrator found, in effect, that by virtue of cl 7(a)(iv), the builder was not required to commence the works prior to the issue of the building approval on 13 June 2006 (first interim award lines 91 ‑ 92, 208 ‑ 210). He also relevantly found, in effect, that the builder had no contractual entitlement to suspend commencement of the works on account of the owner's failure, as from 20 June 2006, to sign or acknowledge the variation for the price increases.
The purpose of the third interim award was to determine whether a claim could be made by the owner in the arbitration by, in effect, an extension of the reference in respect of a further and related dispute under the same contract. The whole of the award must be read in the light of its evident purpose.
The effect of the third interim award was to enable the owner to include in the matters to be arbitrated before the arbitrator, a claim for unliquidated damages in connection with the period between the issue of the first building approval on 13 June 2006, and the issue of the second building licence in December 2008. Accordingly, the arbitrator has not found that the owner is entitled to damages for the whole or indeed any part of that period. All that he has determined is that a claim in that regard may be made by the owner in this arbitration. The alternative would have been for the owner to initiate a fresh arbitral reference for the determination of that claim, and to seek the appointment of the same arbitrator, as it had foreshadowed.
The arbitrator has not determined whether there is a defence to any such claim that may be brought by the owner in the arbitration. Both the claim and any defences to it are yet to be determined, as the owner's counsel accepted in submissions in this application (ts 59). The determination of the proposed damages claim by the owner may occur in the context that an issue estoppel might be said by the owner to arise if the builder defends the claim on the basis that it was entitled to suspend commencement of the works pending a signed or other acknowledgement by the owner of the price increases claimed in 2006. I offer no comments on the validity of any such claim of issue estoppel. That result if contended for and found, would however, be found as a consequence of the effect of the first interim award on the parties. The arbitrator, in making the third interim award, has not only not prejudged any finding of issue estoppel that may be pleaded by the owner in reply to any such defence of the owner's damages' claim, but he has also not prejudged the raising of any other defences by the builder, or prejudged the merits of any other defences.
Accordingly, in my opinion, the builder's submissions misstate the effect of the third interim award. In my view, the first two grounds relied upon by the builder have no substance.
The third ground also lacks substance having regard to the following matters. The owner's letter of 1 December 2008 was written before the owner knew of the issue of the second building licence. It reserved the right to claim further losses in the future. It was written before the owner knew whether the builder would perform the contract. It was also written before the directions hearing on 19 December 2008, before the submissions made by the parties on the question of the extension of the arbitration and before the arbitrator foreshadowed how he proposed to deal with that issue as deposed to in Mr Bernasconi's affidavit (see [54] above). The builder's evidence in relation to the third interim award does not reveal that it was denied natural justice in relation to the issue to be determined in the third interim award. Moreover, no material prejudice is established, as it remains important to recall that all that the arbitrator has decided is that a claim may be made in this arbitration.
The fourth ground alleges that the arbitrator's reasons do not support his finding as to the proper construction of s 25 of the Act, and that he thereby misconducted the proceedings. This submission cannot in my view be sustained. His reasons do support his finding. He referred to the meaning of the language used as he understood it, and to case law which supported the construction that he accepted. There is, in my view, no conceivable misconduct in so finding. It is not necessary to determine, in this application, whether he made an error of law or not in that regard.
The fifth ground alleges that the arbitrator acted improperly by initiating advertence to s 25 of the Act and certain authorities of which he was aware relevant to that section. This point appears to be an after‑thought, as it was not raised in the builder's written submissions, which were filed a month late. It too emerged in oral argument. There is no substance to this complaint. The arbitrator was seized of a reference from the parties in relation to an arbitration agreement. He observed that the arbitration agreement did not limit the ability to extend the ambit of the arbitration (lines 172 ‑ 178 third interim award). He had received communications from the parties in relation to the prospect of an extension of the reference by one of the parties in connection with the same arbitration agreement. The owner, in its letter of 25 November 2008, applied to the arbitrator to extend the reference. It was not inappropriate that the arbitrator should inform the parties of any obvious legal considerations which he regarded as relevant to the question of extension, for the purposes of receiving the parties' submissions in that regard. Section 25 was the obvious provision of the Act having potential application, and the cases to which he referred were, I infer from the third interim award, ascertained from a well known and well recognised text on arbitration: Jacobs M, Commercial Arbitration Law & Practice (Thomson Lawbook Co) [24.30]. The builder was afforded natural justice and provided submissions. There is no evidence that the builder, in December 2008, complained that the arbitrator had 'descended into the arena' by eliciting submissions. The complaint has only arisen (and only then very late) after its submissions were not accepted by the arbitrator. There is, in my view, no seriously arguable case that the arbitrator misconducted himself or the proceedings in the course he took.

Section 44

There is no substantial point to be argued for the removal of the arbitrator under s 44, having regard to the reasons referred to above.

Conclusion

The builder's application to extend time, and accordingly its motion otherwise, should be dismissed.