ASC AWD Shipbuilder Pty Ltd v Ottoway Engineering Pty Ltd

The Supreme Court of South Australia, constituted by Kourakis CJ, Stanley and Nicholson JJ, considered an appeal by ASC AWD Shipbuilder Pty Ltd against an order granting leave to appeal an arbitration award to Ottoway Engineering Pty Ltd. The dispute concerned whether an implied term existed within the parties' contract that would permit a statutory right of appeal against an arbitration award on a question of law.

The central legal issue before the Full Court was whether the primary judge erred in finding that a term was implied into the contract between ASC and Ottoway Engineering, granting a statutory right of appeal against an arbitration award. This involved determining whether the conditions for implying a term in fact, as established in *BP Refinery (Westernport) Pty Ltd v Hastings Shire Council*, were met. Specifically, the court had to assess if such a term was reasonable and equitable, necessary for business efficacy, so obvious it went without saying, capable of clear expression, and did not contradict express terms.

The Full Court reasoned that the primary judge had correctly applied the *BP Refinery* test. It was found that implying a term allowing for a statutory appeal was reasonable and equitable, necessary to prevent the contract from operating capriciously, and so obvious that the parties would have agreed to it had the issue been raised. The implied term was also capable of clear expression and did not contradict the express terms of the contract, being consistent with the statutory opt-out scheme in place at the time. The court rejected arguments that the term was not implied, noting that the absence of an express agreement did not preclude implication where the conditions were otherwise satisfied.

Ultimately, the Full Court allowed the appeal. The order of the primary judge granting Ottoway Engineering leave to appeal the arbitration award was vacated, and the application for leave to appeal was dismissed in its place. The court indicated it would hear the parties on the question of costs.