Aurora Building Company Pty Ltd v DUNCAN-SMITH
[2013] WASC 34
AURORA BUILDING COMPANY PTY LTD -v- DUNCAN-SMITH [2013] WASC 34
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2013] WASC 34 | |
| Case No: | ARB:10/2012 | 11 DECEMBER 2012 | |
| Coram: | MASTER SANDERSON | 12/02/13 | |
| 13 | Judgment Part: | 1 of 1 | |
| Result: | Leave refused | ||
| B | |||
| PDF Version |
| Parties: | AURORA BUILDING COMPANY PTY LTD MARK DUNCAN-SMITH |
Catchwords: | Building contract Application for leave to appeal award of arbitrator Turns on own facts |
Legislation: | Nil |
Case References: | New Generation Enterprises Pty Ltd v Western Australian Planning Commission [2007] WASCA 89 Willoughby v Clayton Utz [2007] WASCA 5 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Appellant
AND
MARK DUNCAN-SMITH
Respondent
Catchwords:
Building contract - Application for leave to appeal award of arbitrator - Turns on own facts
Legislation:
Nil
Result:
Leave refused
(Page 2)
Category: B
Representation:
Counsel:
Appellant : Mr J D MacLaurin
Respondent : Mr N D C Dillon
Solicitors:
Appellant : Doyles Construction Lawyers
Respondent : Hammond Legal
Case(s) referred to in judgment(s):
New Generation Enterprises Pty Ltd v Western Australian Planning Commission [2007] WASCA 89
Willoughby v Clayton Utz [2007] WASCA 5
(Page 3)
1 MASTER SANDERSON: By originating motion filed 3 October 2012 the appellant applied for an extension of time for leave to appeal, leave to appeal and appeal against a decision of an arbitrator in relation to a building dispute. At the first return date I ordered all matters be heard together. It is convenient to deal first with the application for an extension of time and then deal with the remaining two issues together.
2 Under O 81D r 5 of the Rules of the Supreme Court 1971 (WA) an appeal must be made within 21 days after the material date. In this case that was 6 August 2012. However the court has a discretion to extend time. On such an application four main factors are to be considered. They are the length of the delay, the reasons for the delay, whether there is an arguable case and the extent of any prejudice suffered by the respondent: see Willoughby v Clayton Utz [2007] WASCA 5 [42].
3 In this case the length of the delay is not substantial. It is 23 days. The appellant was not legally represented at the arbitration which took place on 3 May. When dissatisfied with the decision, Mr Pearton, the director of the appellant, was uncertain as to how to proceed. He contacted the Housing Industry Association and was advised to seek legal advice. This is what he did. By the time his solicitors took instructions and prepared the necessary documents the time for filing the appeal had expired. Initially the solicitors filed a notice of appeal rather than a notice of originating motion and this resulted in some further delay.
4 For reasons which follow I am satisfied that the appellant has an arguable case. The respondent did not point to any prejudice it had suffered as a consequence of the appellant's delay and in fact raised no objection to the extension of time being granted.
5 In the circumstances it is appropriate to extend the time to bring the application for leave to appeal.
6 To understand the nature of the application for leave to appeal some background facts are necessary. It is convenient to provide a summary taken from the arbitrator's award (what follows is document lines 30 - 90 and document lines 115 - 160 - the arbitrator has employed a curious document line numbering system):
Background and Reasons
The Claimant is a natural person and the owner of a building at 10 Bolton St, East Fremantle, the Respondent is a proprietary limited company, trading and operating as a building company and carrying out building works in West Australia.
(Page 4)
- The parties entered into a standard form Housing Industry Association Cost Plus Building Contract (form 13A - June 2000) dated 10 August 2010 (the contract), for the renovation of a dwelling (the works) at 10 Bolton St, East Fremantle, WA (the site).
A contract sum was not part of the contract, as would be expected given the nature of the contract, and it was agreed that the Claimant would reimburse the Respondent for costs incurred on the works, plus a margin of 15% would be applied to the costs of the project, representing the builders fee. The time for completion of the works is identified in the contract to be 20 weeks beyond the date of commencement, subject to revision as set in the terms of the contract.
The Respondent commenced work shortly after the execution of the contract and over a period of approximately 12 months made 11 claims for payment. Much was made of the time taken to complete the works, however for the purposes of this dispute nothing turns on this issue.
The claims for payment included claims for the time spent by the sole director of the Respondent, Mr Pearton, carrying out work in relation to the works.
Evidence was not adduced that the Respondent engaged any other person to manage or supervise the works at the site.
Around June 2011 and at the time of the progress claim #8, the Claimant came to the view that that the claims for Mr Pearton's time, made in each progress claim, was not in fact time spent working on the project, but was instead time spent doing those things that should be expected to be done as part of the builders work and which should be included in the 15% margin on the costs of the works.
The parties subsequently engaged in discussions as to this issue.
The work continued, with the parties being unable to reach agreement as to the meaning of the contract in respect to the work carried out by Mr Pearton and any right to claim it as a cost to the project, as opposed to Mr Pearton's time being deemed to be included in the 15% margin applied to all other costs.
Progress claims 9, and 10 were subsequently submitted in the following months and which were paid by the Claimant; progress claim 8 and 9, it is contended, was paid in order to keep the works going, whilst progress claim 10 did not contain any charges for Mr Pearton's time and there was no other reason for it not to be paid.
In August or September 2011, the parties agreed that no further works would be carried out at the site by the Respondent and the Respondent subsequently issued its progress claim 11.
(Page 5)
- Progress claim 11 dated 15 September 2011 did not contain any charges for Mr Pearton's time, however the Claimant did not pay the invoice and instead sought reimbursement for all claims for Mr Pearton's time made in progress claims 1-9 and retaining the amount owed under progress claim 11, by way of offset or some other basis.
The amount claimed in this arbitration, by the Claimant, is represented by the 436 hours of work claimed by the Respondent for the work carried out by Mr Pearton, at the rate of $75 per hr, plus the 15% builders fee charged on that time, plus GST.
...
The President of the HIA, by letter dated 4 August 2011, appointed Richard Machell as the arbitrator to arbitrate the dispute in accordance with Cl 18 of the contract, Richard Machell being an arbitrator accredited with the Institute of Arbitrators and Mediators Western Australian Chapter.
A preliminary conference was scheduled and which took place on the 20 October 2011, and which was attended by both parties to the dispute. The parties entered into a preliminary conference agreement of the same date and the arbitrator entered into the reference.
The parties agreed that a valid notice of dispute had been provided and that the arbitration is to be conducted in accordance with the provisions of the Commercial Arbitration Act 1985 and the terms and conditions of the preliminary conference agreement. Other matters were also agreed at the Preliminary Conference including that the rules of evidence would not apply and that the arbitrator may inform himself as he sees fit to establish valuations or costs pertaining to matters under dispute.
It is noted that each party was self-represented in the matter, although the Claimant sought advice from legal advisers and who were understood to have prepared the points of claim, dated 1 December 2011.
The points of claim were responded to by the Respondent on the 18 January 2012.
A reply to the Respondents defence was received and dated 21 February 2012.
The Respondent amended its defence to the points of claim by a document dated 15 March 2012.
The Claimant replied to the Respondents amended defence of the points of claim by document dated 30 March 2012.
A further reply to the Claimant's reply to the amended defence was not provided.
(Page 6)
- A hearing was held at the HIA offices in Osborne Park in WA on the 3 May 2012 and was attended by Mr Pearton and Mr Duncan-Smith, no other witnesses were called to give evidence and the parties substantially relied on their written submissions and which were accepted into evidence and also made oral submissions.
A view of the site was not held and was considered by all parties to be of little value to the arbitrator in determining the matters under dispute.
7 A copy of the contract entered into between the parties is found as annexure NG001 to the affidavit of Nathan Grozotis sworn 20 September 2012. It is a standard form cost plus contract issued by the Housing Industry Association. It anticipates the respondent would supervise the construction work on the appellant's premises and would charge 15% of the costs of work as a fee. As the figures involved show, this was a modest undertaking.
8 For present purposes the relevant clauses of the contract are cl 6 and cl 7. They are in the following terms:
6. COSTS
(a) The actual Costs of the Works shall include the following:
(i) the costs of labour and services supplied wholly in connection with the Works;
(ii) the net costs of all subcontracts wholly in connection with the Works;
(iii) all fess payable to Statutory Authorities having jurisdiction over the Works;
(iv) fees for licensed surveyor, structural engineer, architect or other professional consultants engaged by the Builder;
(v) the premiums payable for all insurances as specified in Clause 8 hereof;
(vi) the net cost of all building materials including temporary structures used wholly for the Works and including the cost of cartage. The costs shall be normal trade costs and any discounts applicable for prompt or cash payments shall remain with the Builder;
(vii) the cost to rectify any defects as part of the Defects Liability Period, other than making good faulty materials or workmanship;
- (viii) costs for plant, equipment and services used wholly for the Works;
(ix) any costs to repair, replace and/or rebuild any damage or loss as a result of causes beyond the control of the Builder. Any amounts recoverable from an insurance claim shall be credited to the favour of the Owner;
(x) any excesses payable for Insurance claims by the Builder; and
(xi) any GST payable on the supply of the Works.
- 7. COST EXCLUSIONS
(a) The following costs shall be borne by and at the Builder's expense and are not deemed as a Cost in accordance with this Contract:
(i) costs and expenses incurred in the purchase of plant and equipment which could otherwise be subject to hire, unless otherwise agreed to in writing with the Owner;
(ii) overheads incurred by the Builder for clerical staff for the preparation of accounts, statements, correspondence, drawings, estimates, supervision and other administrative duties;
(iii) any expense whatever incurred by the Building being an overhead incurred by the Builder's firm not wholly in connection with the Works; and
(iv) the cost of making good defective materials or faulty workmanship not in accordance with this Contract.
10 The arbitrator came to the conclusion the amount claimed by the appellant was excluded under cl 7(a)(iii) of the contract. He expressed his conclusions in the following way (document lines 218 - 382):
Mr Pearton has advised that he assisted in lifting beams into place, participated in concrete pours, site measuring, obtaining levels, assisting machinery operators and was involved in demolition of the rear veranda and wall.
At the hearing, the Respondent conceded that Mr Pearton did carry out physical work at the site over a period of 2 days in the installation of some
(Page 8)
- beams and agreed that this would be an acceptable claim under Cl 6(i) of the contract.
The Respondent contends that the above descriptions of Mr Pearton's activities does not represent the time for overall supervision of the project but instead represents physical work carried out by Mr Pearton and which is claimable under Cl 6(i) of the contract.
Mr Pearton did not establish with any certainty that he carried out any other physical work as a tradesman or by way of labour, and that would otherwise be able to be carried out by another and be claimed as a Cost of the Work.
The Respondent contends that the activities carried out by Mr Pearton do not constitute labour and services that may be charged in accordance with Cl 6(i) but are instead either supervisory or administrative services that are required to be carried out and which are excluded as a claimable cost by reference to Cl 7(a) of the contract.
The interpretation put forward by the Claimant to Cl 7(a)(ii) is that 'overheads incurred by the Builder' are excluded costs and that the words following those, serve to define those overheads, so that 'supervision and other administrative duties' should be read as an overhead and opposed to that work being carried out by 'clerical staff'.
The Claimant has provided references to NSW 'Fair Trading Home Building Contract' that support such an interpretation and to an MBA standard form cost plus contract. I do not rely on these documents in support of an interpretation of the contract, whilst there may be some association, history or connection between the documents, the reference to extrinsic information of this type and which is so remote to this contract, is of no value, in my opinion and where a reasonable interpretation that gives sense to the contract may be found for the words used in the contract.
The Respondent has not proved any basis for his interpretation of the meaning of Cl 7(a)(ii) other than to refer to what is contended to be the plain meaning in the context of Cl 6(a)(i), that is that all costs of labour and services supplied wholly in connection with the works are allowable costs, unless they are overheads, for services supplied by clerical staff of the builder and that references to 'supervision and administrative duties' relate to those functions as they may be provide by the clerical staff.
An explanation of how clerical staff might prepare drawings, estimates, supervision and other administrative duties was not provided and it is usual that these services are normally provided by technical staff in the context of a building contract, with clerical staff more likely preparing accounts, statements and possibly correspondence.
It seems to me that for the words in Cl 7(a)(ii) to have the meaning that the Respondent proposes, an interpretation that provides for clerical staff to
(Page 9)
- provide supervision and administrative duties in the context of a building contract and for the purposes of identifying exclusions to allowable costs, must be found.
Conceivably this might refer to supervision of clerical staff by other clerical staff, performing the preparation of the accounts, statements etc, however I can see no sense in such an interpretation and it is in my view not the intention of the plain words used in the contract in using the words 'supervision and administrative duties' when considering exclusions.
The contract provides for the builder to receive a fee calculated to be 15% of the costs of the works, and for the purpose of enabling it to meet its obligations as a builder and to build the works, consistent with Cl 1 of the contract. It is not apparent to me that it was intended that the 15% margin is exclusively for the builder's profit and for clerical or other overheads, as the Respondent has contended; the contract identifies the 15% as a fee and which must in my view, include for the provision of services provided by the builder and which are reasonably set out in Cl 1 of the contract.
Accordingly I find that that Clause 7(a)(ii) should be properly read to mean that it is the builders overheads that are excluded from costs that are able to be claimed and that these overheads are defined as -
• clerical staff for the preparation of accounts,
• statements,
• correspondence,
• drawings,
• estimates,
• supervision,
• other administrative duties
I would concur with the Respondent that the services that Mr Pearton provided, were 'services supplied wholly in connection with the Works', within the meaning at Cl 6(a)(i) of the contract. Mr Pearton's work was, labour ... supplied wholly in connection with the Works', in my view.
Mr Pearton's work was not an overhead incurred as a clerical staff member, however it is clear to me that the services provided by Mr Pearton, as he has described them, are clearly able to be identified as supervisory of the building project and process, with many of the activities that were performed on site and off site being administrative, in respect to the engagement and management of suppliers and sub contractors and the review of documents and drawings.
According I find that the work carried out by Mr Pearton, except as conceded by the Claimant, is work that is properly identified as supervision or administrative works and is a cost which is excluded from being considered as a Cost of Work, within the meaning of Cl 6 of the contract and must be otherwise borne by the Respondent.
(Page 10)
11 The proposed ground of appeal is as follows:
The Arbitrator erred in his construction of Clause 7(a)(ii) ... of the Housing Industry Association Cost Plus Contract ... dated 10 August 2010 purporting to exclude Mr Pearton's time costs ... , pursuant to the clause, when the Arbitrator ought to have found that the costs were an actual cost of the works pursuant to Clause 6(a)(i) and claimable under the contract.
12 The Commercial Arbitration Act 1985 (WA) for public policy reasons discourages appeals from arbitration awards. Section 28 provides that unless the contrary intention is expressed an award is to be final and binding. In this matter the parties expressly agreed the right to appeal was not to be excluded. Section 38 of the Act covers appeals. It is in the following terms:
38. Judicial review of awards
(1) Without prejudice to the right of appeal conferred by subsection (2), the Court shall not have jurisdiction to set aside or remit an award on the ground of error of fact or law, on the face of the award.
(2) Subject to subsection (4), an appeal shall lie to the Supreme Court on any question of law arising out of an award.
(3) On the determination of an appeal under subsection (2), the Supreme Court may by order -
(a) confirm, vary or set aside the award; or
(b) remit the award, together with the Supreme Court’s opinion on the question of law which was the subject of the appeal, to the arbitrator or umpire for reconsideration or, where a new arbitrator or umpire has been appointed, to that arbitrator or umpire for consideration,
and where the award is remitted under paragraph (b) the arbitrator or umpire shall, unless the order otherwise directs, make the award within 3 months after the date of the order.
(4) An appeal under subsection (2) may be brought by any of the parties to an arbitration agreement -
(a) with the consent of all the other parties to the arbitration agreement; or
(b) subject to section 40, with the leave of the Supreme Court.
(5) The Supreme Court shall not grant leave under subsection (4)(b) unless it considers that -
- (a) having regard to all the circumstances, the determination of the question of law concerned could substantially affect the rights of one or more parties to the arbitration agreement; and
(b) there is -
(i) a manifest error of law on the face of the award; or
(ii) strong evidence that the arbitrator or umpire made an error of law and that the determination of the question may add, or may be likely to add, substantially to the certainty of commercial law.
- (6) The Supreme Court may make any leave which it grants under subsection (4)(b) subject to the applicant complying with any conditions it considers appropriate.
(7) Where the award of an arbitrator or umpire is varied on an appeal under subsection (2), the award as varied shall have effect (except for the purposes of this section) as if it were the award of the arbitrator or umpire.
13 The principles to be applied in determining whether leave is to be granted are well established. In New Generation Enterprises Pty Ltd v Western Australian Planning Commission [2007] WASCA 89, Pullin JA (with whom Miller AJA agreed) said:
Section 38 is concerned with finality in arbitration proceedings and is designed to limit the intervention of courts in arbitration. The philosophy of the section is that the election of parties is to have their disputes resolved by arbitration: and this should be respected in the sense that awards should not be scrutinised with an overcritical eye and the courts should exercise restraint in seising themselves of legal questions: Masawa Australasia Pty Ltd v J Corp Pty Ltd [2000] WASC 5. Section 38(5) was amended in 1997 to strengthen the restriction against the grant of leave to appeal (Ukrainian Association of Western Australia in Perth (Inc) v Squire Constructions Pty Ltd [2004] WASC 4) [44].
14 An error of law will only be 'manifest' when there are powerful reasons for considering on a preliminary basis, without any prolonged adversarial argument, that there is on the face of the award an error of law. The error must be evident or obvious rather than merely arguable. The underlying legislative intention is that leave to appeal should not readily be given and that the intervention of the court should be strictly limited. In the New Generation Enterprises case Steytler P observed:
(Page 12)
- In considering whether there is a manifest error of law, the court, when dealing with the decision of an arbitrator who is not legally trained, should be cautious not to read the reasons with an over critical eye: Tor Line A/B v Alltrans Group of Canada [1982] 1 Lloyd's Rep 617 at 625 per Bingham J; Masawa Australasia Pty Ltd v J Corp Pty Ltd [2000] WASC 5 at [5] per Parker J. The reason why parties often choose to appoint an arbitrator who is not legally trained rather than embark upon court proceedings is because the advantage arising out of the training and expertise which that person has in respect of the subject matter of the arbitration (whether as a valuer, architect, engineer or anything else), coupled with the advantage of avoiding the greater technicality, delay and cost associated with court proceedings, outweighs the disadvantage brought about by the fact that the arbitrator is unlikely to express himself or herself with the precision (so far as legal issues are concerned) that might be expected of a judge, or even of a legally trained arbitrator. If the courts are too exacting in their expectations of the language used by lay arbitrators in making their awards, the benefits of the freedom of choice offered by the CA Act might to some extent be rendered illusory.
These considerations are significant, given that 'the clear policy of the … [CA Act] is to achieve speedy economic and informal relief to parties to arbitration agreements … [with] curial [involvement] … [being] kept to a minimum': Lamac at 315 [110] per Mathews AJ, with whom Malcolm CJ, Anderson and Steytler JJ were in agreement; Masawa at [5], [7]. [5] - [6]
15 The main complaint made by the appellant can be summed up by quoting from par 19 of the appellant's written submissions:
Another major difficulty with the Arbitrator's construction is that, having conceded that the services were supplied wholly in connection with the Works, the Arbitrator proceeds to class them as overheads. The Appellant contends that this is an error in the construction of the Exclusion Clause and the term 'overheads'. It conflicts with the reasonably attributed purpose of the Exclusion Clause, the allowable costs which may be claimed under the Contract, the definition of an overhead, and the relevance of the term 'overheads' in the clause.
16 With respect it does not seem to me there is an obvious error on the face of the record. The key finding made by the arbitrator is found at document line 377. I will repeat it again:
Accordingly I find that the work carried out by Mr Pearton, except as conceded by the Claimant, is work that is properly identified as supervision or administrative works and is a cost which is excluded from being considered as a Cost of Work, within the meaning of Cl 6 of the contract and must be otherwise borne by the Respondent.
17 It is true that there is a discussion of the exclusion for overheads found in cl 7. It may also be the arbitrator's interpretation of what
(Page 13)
- amounts to an 'overhead' is astray. But on its face the award shows the arbitrator looked at what was claimed by the appellant, decided with the benefit of his experience it amounted to supervision and determined it should not be allowed as a cost of works. Accordingly in my view there is no error on the face of the record and leave to appeal ought not be granted.
18 It is worth taking one step back from this application in an attempt to see the bigger picture. This was a modest building project where the parties entered into an agreement which contained an arbitration clause. What they anticipated in the event of a dispute and what they got was an experienced arbitrator - someone with practical experience who could look at the nature of the dispute and come to a conclusion. They chose to avoid the court process and all that involves. Furthermore, the Act by its terms and various judicial statements discourage intervention by courts in disputes of this nature. There is no point in paying lip service to these principles and ignoring them in practice. To my mind this is a classic case where judicial intervention is unwarranted.
19 The application for leave to appeal will be dismissed. The appellant should pay the respondent's costs of the application.
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