Colin Joss & Co Pty Ltd v Cube Furniture Pty Ltd

[2015] NSWSC 735

Supreme Court

New South Wales

Medium Neutral Citation:	Colin Joss & Co Pty Ltd v Cube Furniture Pty Ltd [2015] NSWSC 735
Hearing dates:	27 May 2015
Decision date:	12 June 2015
Jurisdiction:	Equity Division - Commercial Arbitration List
Before:	Hammerschlag J
Decision:	Plaintiff’s claim is dismissed. Defendant is entitled to an order that the Arbitrator’s award be enforced as a judgment of this Court.
Catchwords:	COMMERCIAL ARBITRATION – Commercial Arbitration Act 2010 (NSW) ss 34(2)(b)(ii) and 35(1) –An action to set aside an arbitral award on the basis that it infringes principles of natural justice and is therefore in conflict with the public policy of this State – counterclaim for enforcement of the award. HELD: That the award is not in conflict with the public policy of this State – award to be enforced as a judgment of this Court
Legislation Cited:	Commercial Arbitration Act 2010 (NSW)
Cases Cited:	TCL Air Conditioner (Zhongshan) Co Ltd v Castel Electronics Pty Ltd (2014) 311 ALR 387 JH Rayner (Mincing Lane) Ltd v Shaher Trading Co [1982] 1 Lloyd's Rep 632 Industriebeteiligungs & Handelsgesellschaft v Malaysian International Shipping Corporation Berhad (The "Bunga Melawis") [1991] 2 Lloyd's Rep 271 Barry Smith Grains Pty Ltd (in liq) v Riordan Group Pty Ltd [2010] NSWSC 1291
Texts Cited:	D Rhidian Thomas, The Law and Practice Relating to Appeals from Arbitration Awards, (1994, Lloyd's of London Press Ltd)
Category:	Principal judgment
Parties:	Colin Joss & Co Pty Ltd - Plaintiff Cube Furniture Pty Ltd - Defendant
Representation:	Counsel: J. Twigg QC with S. Ipp - Plaintiff S. Duggan with T. Yeh - Defendant   Solicitors: Macpherson & Kelley Lawyers Pty Ltd - Plaintiff Goodman Law - Defendant
File Number(s):	2014/370641

Judgment

INTRODUCTION

1. HIS HONOUR:   This is a challenge by the plaintiff (Joss or the Main Contractor) to an arbitral award against it for $149,773.78 and a counterclaim by the defendant (Cube or the Subcontractor) for the enforcement of the award as a judgment of the Court.

2. Joss argues that the award is in conflict with the public policy of this State as provided in s 34(2)(b)(ii) of the Commercial Arbitration Act 2010 (NSW) (the Act).

3. Cube moves for an order for recognition and enforcement of the award pursuant to s 35(1) of the Act.

4. For the reasons which follow, Joss’ challenge wholly fails and Cube is entitled to the orders it seeks.

BACKGROUND

5. Joss is a builder. Cube specialises in joinery.

6. In 2011 Joss was appointed head contractor for the construction of a project at Charles Sturt University in Wagga Wagga, New South Wales, known as the National Life Sciences Hubproject, involving the construction of a phytotron building (Stage 2) (an enclosed research greenhouse used for studying interactions between plants and the environment) and a life sciences building (Stage 3).

7. By written agreement made on 23 June 2011 (the Subcontract), Joss retained Cube to supply and install joinery and furniture for a Subcontract price of $1.65 million plus GST.

8. Clause 42.1 of the Subcontract provides that if a difference or a dispute arises between the parties in connection with the subject matter of the Subcontract, either party shall give the other and the Subcontract Superintendent a notice of dispute. Clause 42.2 provides that the parties are thereafter to confer to resolve the dispute or to agree on methods of doing so. Under that clause, if the dispute has not been resolved within 28 days, the dispute is referred to arbitration. Under cl 42.3, read with item 35(b) of the Schedule to the Subcontract, the arbitration is to be conducted in accordance with rules 5-18 of the Rules of the Institute of Arbitrators & Mediators Australia for the Conduct of Commercial Arbitrations (Rules). Rule 17 provides relevantly that the arbitrator shall make such directions or rulings in respect of procedural and evidentiary matters as he or she sees fit.

9. In 2012 the relationship between the parties broke down and on 28 June 2012 Joss terminated the Subcontract. Joss then initiated arbitration.

10. On 17 October 2012 Mr Tony Makin, a chartered quantity surveyor and Arbitrator, accepted appointment as the Arbitrator.

11. On 2 October 2013 the Arbitrator heard an application by Joss for security for costs, which he dismissed on 16 October 2013.

12. The hearing of the arbitration commenced on 10 December 2013 and lasted for four days. Both parties were represented by counsel. On its conclusion, the Arbitrator directed the parties to provide written submissions. Extensive written submissions were provided.

13. The witnesses called by Joss included Mr Julian Kosmina (Kosmina), Joss’ contract administrator on the project, and Mr Anthony Byrt (Byrt), a project manager employed by Joss who was appointed the Subcontract Superintendent. Cube called Mr Christopher Devoy (Devoy), a director, and Mr Matthew Mikola (Mikola), a director and shareholder.

14. On 4 November 2014 the Arbitrator issued an Interim Award dated 27 August 2014 awarding Cube $149,773.78.

15. Costs were left over for further consideration. On 12 January 2015 the Arbitrator issued a Final Award determining that Joss was to pay Cube’s costs of the arbitration.

16. Joss initially challenged the Final Award as well as the Interim Award. It correctly abandoned its challenge to the Final Award. References below to the Award are, unless the context otherwise indicates, references to the Interim Award.

THE CONTEST AND THE AWARD

The Claims and Counterclaims

17. The Subcontract incorporated provisions requiring the Subcontractor to ensure that the work reached practical completion by specified dates, coupled with an obligation to pay liquidated damages of $1,000 per calendar day for delay in respect of Stage 2 and $2,000 per calendar day for delay in respect of Stage 3.

18. In its initial claim, Joss claimed liquidated damages totalling $494,000 for delays in respect of both Stages from the dates for practical completion (25 August 2011 and 27 March 2012, respectively) to the date of termination of the Subcontract (28 June 2012) amounting to 308 days in respect of Stage 2 and 93 days in respect of Stage 3.

19. Cube responded by claiming an entitlement to extensions of time (EOT) based on events which occurred on the site. With respect to Stage 2 it relied on delay in the installation of vinyl flooring which in turn caused delay in the installation of joinery. With respect to Stage 3 Cube claimed an entitlement to an EOT based on the fact that the main works were delayed which inhibited it from having access to the site. Joss’ position was that EOTs were not available unless the Superintendent had granted them based on formal notices of delay, which had not occurred.

20. Cube counterclaimed for unpaid amounts due under progress claims and for the value of variations.

21. In response, Joss made claims for “negative variations”, which included work omitted from the Subcontract and the costs to it of completing work originally included under the Subcontract, and for the costs of rectifying defective work done by Cube.

General Comments

22. The Award is a substantial document running to 88 pages, excluding annexures, into which the Arbitrator undoubtedly put very substantial effort without the benefit of adequate assistance from the parties.

23. In a section entitled “General Comments on the Matters in Dispute” under the subheading “Delay and Liquidated Damages”, the Arbitrator remarks that Joss relied entirely on a lack of formal notice of delays and on its opinion that the Subcontract Superintendent (and the Arbitrator) had no power to issue extensions of time in the absence of formal notice under the Subcontract. He records that in response to a question from him at the hearing, he was informed that the periods claimed for liquidated damages had been calculated by the lawyers for Joss.

24. He states in pars 31 – 35:

31.   The evidence provided to me in order to carry out a valuation of the cross-claim and the effect of the negative variations was not co-ordinated in any effective way in the original submissions. Both parties provided opinions on the valuation of these items with reference to relevant documents.

32.   No final certificate was ever issued by Joss so Joss’s opinion of the reconciliation of the contract was not provided until it issued the Submissions in Reply to Defence and Crossclaim. This submission included a summary of Joss’s and Cube’s values for the variations. In order to obtain a reliable summary of the parties’ versions of the contract reconciliation and to include changes in values arising from the submissions and hearing, I requested a Scott Schedule on the final day of the hearing. The parties provided this in their final submisisons.

33.   Therefore, until the production of the Scott Schedule in Joss’s reply to Cube’s final submission, no focus existed on the relative values of the variations and the positions taken by the parties on the valuations of those items.

34.   To add to the problem of valuing these Items, the subcontract had been terminated (or at least come to an end) with the work incomplete and the effect of this termination on the valuation of variations was in dispute between the parties.

35.   Neither party made any significant concessions in valuing its opinion or the variations.

25. Under the subheading “My Comments on Day 4 of the Hearing” he records, amongst others, that the parties failed to assist him to an adequate extent in determining their precise position with respect to the other’s claims, and that, on the final day of the four day hearing, he still did not have clarity on the positions taken by the parties with respect to either the delay or the counterclaim items. He records that he had received a great deal of evidence on the variations (both positive and negative) but no consolidated summary which would enable him to compare the opinions provided by the parties. He records that on day 4 of the hearing he provided informal comments on a number of issues and requested the parties to assist him in determining the matters in dispute and that in its final submission Joss criticised his comments and suggested that he was pre-judging the issues.

26. Joss’ challenge to the Award initially included an assertion of apprehended bias on the part of the Arbitrator which, in my view, was groundless, and which was properly abandoned in oral submissions.

27. In addition to abandoning its challenge to the Final Award (dealing with costs) and its contention of bias, Joss abandoned various other manifestly insupportable contentions in its Amended Commercial Arbitration List Statement and written submissions, including that the Arbitrator exceeded his authority, had not expressed a discernible methodology of reasoning, had given reasons which were illogical, incoherent, inadequate, inconsistent and ambiguous and had acted unreasonably and irrationally in the Wednesbury sense. As appears below, it limits its challenge to three matters.

Date for Practical Completion of Stage 2

28. The date for practical completion of Stage 2 was 25 August 2011. The Arbitrator determined that the date of completion was 8 November 2011. He extended the date for completion from 25 August 2011 to 22 October 2011 on the basis of the delay to the installation of vinyl flooring.

29. His central findings on the delay caused by the late installation of vinyl flooring are set out in pars 261 – 266 of the Award. They are as follows:

261.   In paragraphs 76 to 81 of Cube’s final submissions, Cube examines the relevant dates and arrives at a date for completion of Cube’s work, taking into account the delay to the vinyl, of 8th November 2011 (paragraph 81 of Cube’s final submissions).

262.    Before dealing with Cube’s calculations, I note that Joss has rejected this issue on the basis that no vinyl was required to be installed to the floor in areas affecting Cube’s installation of the joinery. Paragraph 41 of the Claimant’s Closing Submissions in Reply refers to documents AB1189 to 1990 to demonstrate that the relevant areas did not require vinyl flooring.

263.   Those documents (which are A3 drawings of this building) confirm that the area where the large sink was required to be installed does not have a vinyl floor. However, those same drawings do confirm that the clean rooms and “BAL/PHOTO” room do require vinyl floors. Vinyl floors are also required in the Cold Rooms, Soil Grind and Plant Grind Rooms.

264.    Therefore, when the minutes of the main contract meeting provided by Savills refer to incomplete or, later, completion of the vinyl installation (e.g. minutes of the meeting on 21st September 2011 at Cube Discovered Document 50 which refers to vinyl installation in progress in minute 4.1.2), I assume they refer to these rooms.

265.    I noted that the rooms mentioned above did have vinyl floors at the time I carried out my view. Photographs of some of these rooms were provided to the parties following my view and the parties were represented at the time of my view. I also noted in my email to the parties on 11th October 2013, following the view, that the joinery clearly had to be interfaced with other trades, including floor finishes.

266.    Therefore, I conclude that any joinery work installed in the rooms mentioned above could not be completed until the vinyl flooring had been completed.

Delays and Liquidated Damages for Completion of Stage 3

30. The Arbitrator determined that the date for completion of Stage 3 was 27 March 2012 and that the works were not complete until 22 June 2012, entitling Joss to liquidated damages to this date. He went on to determine that due to a revised main works program which extended to 1 May 2012 the activity of installing main furniture, the date for completion was to be extended to 1 May 2012. He awarded liquidated damages for the period 1 May 2012 – 22 June 2012.

31. In par 215(c) of the Award the Arbitrator said the following:

215(c).   The second part of the second paragraph in sub-clause 34.3 ties the EOT available to the subcontractor to “EOT for that delay granted to the main contractor pursuant to the main contract”.

This part of the sub-clause appears to limit Cube’s entitlement to EOT to EOTs available to Joss as the main contractor under its contract for the project. No evidence has been provided by either party of extensions of time granted under the main contract and therefore this part of the sub-clause has not been enforced in this arbitration.

I can only speculate on how many days EOT were granted to Joss under the main contract. Comparison of the original program included in the Cube subcontract and the alleged practical completion date for stage 3 in November 2012 confirms that the main contract did suffer a significant delay in completion. My determination of the EOT entitlement for stage 3 in this determination ultimately relies on this part of the sub-clause.

32. The Arbitrator’s central findings on Cube’s claim for an extension based on an EOT under the head contract are set out in pars 304 – 306 of the Award. They are as follows:

304.    On 16th January 2012, Joss issued a contract program (refer to exhibit RS4 – print date of this document is 19th March 2012 but the program is noted as “as at 16/1/12”). The program included a date for completion of the “Install remaining furniture" of 1st May 2012 (line 470 on page 7 of RS4).

305.    Mr Byrt was cross-examined about this document and explained that this was a main contract program, not a subcontract program. Counsel for Cube pointed out that the subcontract binds the subcontractor to main contract extensions of time. Special Condition 7 amends Clause 32 and adds “The Subcontractor acknowledges and agrees that, subject to this Subcontract, it shall be bound in all respects by the Main Contractor’s program…” Notwithstanding the qualification “subject to this Subcontract” within this amended clause, Joss has amended the main contract program and cannot escape the knock-on effect on the subcontract.

306.    Therefore, Joss should have allowed Cube an extension of time to that date at least in accordance with its own program.

Costs to Complete

33. The Arbitrator’s central findings in respect of Joss’ costs to complete are set out in pars 515 – 534 of the Award. They are as follows:

515    In addition to the negative variations referred to in the previous section of this award, Joss has claimed as item 32 of the Scott Schedule a cost to complete Cube’s work of ($190,715) and backcharges noted as item 33 in the sum of ($41,623).

516    Joss’s entitlement to these sums, at least in regard to the costs to complete, is dependent on its entitlement to terminate Cube’s subcontract. Elsewhere in this award I have determined that Joss was entitled to terminate Cube’s subcontract and was entitled to recover the costs of completing the work under clause 39.10 of the subcontract.

517    Joss claims a total of $190,715 for costs it claims it incurred in completing the balance of Cube’s subcontract work.

518    A calculation of this amount is included at document AB952 and is referred in paragraph 20 of Mr Kosmina’s statement.

519    Attached are invoices and timesheets which Joss provides in substantiation of the amount claimed.

520    A similar schedule of completion costs (totalling $201,602.43) was attached to a payment schedule issued to Cube in October 2012 (Document AB396).

521   Mr Kosmina was cross-examined on the contents of this schedule and Mr Byrt was also asked one question in connection with the J14 cupboards.

522    No alternative calculation has been provided by Cube and Cube has not carried out any critical analysis of the figures claimed for these items.

523    In its final submission, Cube objects to the introduction of this item and claims that, because the item was not included in the original claim from Joss, Cube was not provided with the opportunity to obtain subpoenas or to properly investigate the claims made.

524    Cube also claims that the costs claimed are “grossly inflated” and inconsistent with the progress claims made under the head contract. With regard to this last issue, I have rejected the allegation which Cube has raised by reference to the main progress claims.

525    In the scott schedule, Joss points out that there is “no doubt that there was work remaining to be done at the time Cube left the site” and points out that Cube has not provided any alternative valuation of these issues. I have reviewed the items included on Mr Kosmina’s list and there is clear evidence that Joss incurred some costs in completing Cube’s work.

526    However, I am not convinced that all the items claimed are realistic and reject some of the costs as being inappropriate. In particular, the amounts claimed for Joss supervision are inappropriate since these persons would have been required to be present on the site to complete all trades, not only Cube’s work. It is therefore unclear to what extent their costs could be fairly attributed to completion of the Cube subcontract work.

527    Mr Kosmina referred to an inspection carried out with Mr Mikola in June 2012 where they identified items still to be completed. Mr Kosmina sent a list of incomplete items to Cube by email on 8th June 2012 and requested that Cube complete a column of dates when the work would be completed (document AB943). I would expect it to be possible to reconcile the results of that inspection with the list of completion costs provided by Mr Kosmina. However, this does not appear to be possible.

528    Following the joint inspection with Mr Mikola, Mr Mikola sent an email to Mr Kosmina dated 13th June 2012 (document AB948) which attached a partially completed list of the outstanding items. Mr Mikola’s notes generally note a date when the work was anticipated to be completed or noted that the work had been completed or noted that the work was part of Aspen scope of work (i.e. already omitted from Cube’s scope of work). No further evidence has been provided of whether any or all of the deadlines included in Mr Mikola’s list were achieved.

529    My attempts to reconcile the list of items which Mr Kosmina and Mr Mikola agreed were outstanding in mid-June to the list of items included on Mr Kosmina’s cost to complete calculation resulted in the conclusion that the two lists were not reconcilable. Some of the rooms listed in Mr Kosmina’s calculation of cost are not included in the list of incomplete work agreed between the parties. Also the calculation of cost includes generic items which cannot be easily related to the specific items agreed as evidenced in joint list.

530    Therefore, the only opinion provided of the scope of works to complete is that provided by Mr Kosmina with no review by Cube either at the time or during the arbitration process.

531    Both Mr Byrt and Mr Kosmina were cross-examined on the contents of the calculation for this credit. That cross-examination revealed uncertainties in the items claimed and some “double dipping”.

532    Joss is claiming a significant amount of money and I accept that, since it was not claimed originally by Joss but simply provided in response to the cross claim, Cube was not able to investigate the claim in as much detail as might be appropriate.

533    It is uncertain whether all the items on the list were appropriate costs to complete Cube’s work or were part of subcontracts already taken over by Joss and, to the extent that some of these items are backcharges, it is uncertain whether those backcharges are appropriate.

534    For the reasons above I reject this item and value the cost to complete claim by Joss at nil.

The Arbitrator’s Conclusions

34. The Arbitrator concluded that the contract sum of $1.65 million was to be reduced by the value of negative variations worth $567,597.28 to $1,082,402.72. He found that Cube was liable to Joss for liquidated damages of $17,000 in respect of Stage 2, and $104,000 in respect of Stage 3, resulting in an adjusted contract sum of $961,402.72. Joss had to date paid Cube $825,244.74, leaving a balance of $136,157.98 excluding GST, resulting in a balance of $149,773.78, including GST. He determined that no interest was payable.

RELEVANT PROVISIONS OF THE ACT

35. Section 5 of the Act provides:

Extent of court intervention

In matters governed by this Act, no court must intervene except where so provided by this Act.

36. Section 34 of the Act provides:

Application for setting aside as exclusive recourse against arbitral award

(1)    Recourse to the Court against an arbitral award may be made only by an application for setting aside in accordance with subsections (2) and (3) or by an appeal under section 34A.

(2)    An arbitral award may be set aside by the Court only if:

(a)    the party making the application furnishes proof that:

(i)    a party to the arbitration agreement referred to in section 7 was under some incapacity, or the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication in it, under the law of this State, or

(ii)    the party making the application was not given proper notice of the appointment of an arbitral tribunal or of the arbitral proceedings or was otherwise unable to present the party’s case, or

(iii)    the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the award which contains decisions on matters not submitted to arbitration may be set aside, or

(iv)    the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Act from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Act, or

(b)    the Court finds that:

(i)    the subject-matter of the dispute is not capable of settlement by arbitration under the law of this State, or

(ii)    the award is in conflict with the public policy of this State.

(3)    An application for setting aside may not be made after 3 months have elapsed from the date on which the party making that application had received the award or, if a request had been made under section 33, from the date on which that request had been disposed of by the arbitral tribunal.

(4)    The Court, when asked to set aside an award, may, where appropriate and so requested by a party, suspend the setting aside of proceedings for a period of time determined by it in order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the arbitral tribunal’s opinion will eliminate the grounds for setting aside.

37. Sections 35(1) and (2) of the Act provide:

Recognition and Enforcement

(1)    An arbitral award, irrespective of the State or Territory in which it was made, is to be recognised in this State as binding and, on application in writing to the Court, is to be enforced subject to the provisions of this section and section 36.

(2)    The party relying on an award or applying for its enforcement must supply the original award or a copy of the original award.

38. Section 36 of the Act provides:

Grounds for refusing recognition or enforcement

(1)    Recognition or enforcement of an arbitral award, irrespective of the State or Territory in which it was made, may be refused only:

(a)    at the request of the party against whom it is invoked, if that party furnishes to the Court proof that:

(i)   a party to the arbitration agreement was under some incapacity, or the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication in it, under the law of the State or Territory where the award was made, or

(ii)    the party against whom the award is invoked was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present the party’s case, or

(iii)    the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, that part of the award which contains decisions on matters submitted to arbitration may be recognised and enforced, or

(iv)    the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties or, failing such agreement, was not in accordance with the law of the State or Territory where the arbitration took place, or

(v)    the award has not yet become binding on the parties or has been set aside or suspended by a court of the State or Territory in which, or under the law of which, that award was made, or

(b)    if the Court finds that:

(i)    the subject-matter of the dispute is not capable of settlement by arbitration under the law of this State, or

(ii)    the recognition or enforcement of the award would be contrary to the public policy of this State.

(2)    If an application for setting aside or suspension of an award has been made to a court referred to in subsection (1) (a) (v), the Court may, if it considers it proper, adjourn its decision and may also, on the application of the party claiming recognition or enforcement of the award, order the party to provide appropriate security.

JOSS’ CHALLENGE

39. First, Joss says that in determining Cube’s entitlement to an EOT with respect to Stage 2, the Arbitrator acted without any probative evidence and contrary to the “hearing rule”, because:

1. there was no evidence and no argument as to the criticality of the delay to the vinyl flooring;

2. there was no evidence to found the conclusion that the Cold, Soil Grind, and Plant Grind Rooms were incomplete and that joinery in these rooms required pre-installation of vinyl flooring;

3. he made assumptions that the various rooms where vinyl had been laid were not completed until 19 October 2011, that joinery was to be installed in these rooms, and that it could not be installed until after 19 October 2011, thereby delaying practical completion; and

4. Cube’s argument for EOT based on the installation of vinyl flooring was first made in final submissions and although Joss made an argument, the Arbitrator’s assumptions were only revealed in the Final Award and involved a reversal of onus and an assumption of criticality of the vinyl flooring delay, a burden Joss neither knew of nor could possibly justify.

40. In support of its submission that there was a reversal of onus, Joss relies on par 231 of the Award in which the Arbitrator says:

I disagree with Joss; the burden of proof for establishing the entitlement to liquidated damages lies with Joss. Notwithstanding that delays obviously occurred to the project and Cube may be responsible for some of those delays, Joss still needed to prove that the amount it was claiming for liquidated damages was the correct amount and was fully justified.

41. Second, it says that in determining that the date for completion of Stage 3 should be extended by reason of a revised main works program, the Arbitrator breached the hearing rule, because:

1. the Arbitrator “created the legal argument that formed his reasons”;

2. Cube did not put and Joss therefore did not have an opportunity to meet the argument; and

3. the Arbitrator speculated in finding that there must have been EOTs as there was a program extending time.

42. Third, it says that in rejecting Joss’ claim for costs to complete, the Arbitrator acted contrary to the rules of natural justice because he failed to complete his contracted task by not deciding which of the costs were supported by clear evidence and which were uncertain, the result of which was that, as a “default position”, he awarded the full contract sum contrary to clear evidence or on no probative evidence.

CONSIDERATION

43. Joss contends that the Award should be set aside because it is in conflict with the public policy of this State within the meaning of s 34(2)(b)(ii) of the Act.

44. The rules of natural justice apply in this State. An Award which is infected with a sufficiently material breach of them will be in conflict with the public policy of this State. Under s 34(2)(b)(ii), the Court has a discretion to set such an award aside.

45. For the Court to exercise that discretion in its favour, Joss must demonstrate real unfairness or real practical injustice in how the arbitration was conducted or resolved by reference to established principles of natural justice or procedural fairness. The rules of natural justice include the hearing rule, that is, that a person should be given a fair hearing. The making of a factual finding by a Tribunal without probative evidence may be a breach of the rules of natural justice if the fact was critical, was never the subject of attention by the parties to the dispute, and where the making of the finding occurred without the parties having an opportunity to deal with it. It does not follow that any wrong factual conclusion that may be seen to lack probative evidence (and so amount to legal error) should necessarily be, and without more, characterized as a breach of the rules of natural justice. A disguised attack on factual findings dressed up as a complaint about natural justice will not suffice; see TCL Air Conditioner (Zhongshan) Co Ltd v Castel Electronics Pty Ltd (2014) 311 ALR 387 at [54]-[55] and [83].

46. The public policy exception in ss 34(2)(b)(ii) and 36(1)(b)(ii) is not concerned with mere procedural imperfections but with a negation of rights which our legal system recognizes as being fundamental and therefore matters of public policy.

47. It is also to be remembered that arbitrators are frequently, as is the case here, non-lawyers. Their procedural behaviour and awards should not be scrutinised with an overcritical or pedantic eye and should be viewed with commonsense and without undue legality: JH Rayner (Mincing Lane) Ltd v Shaher Trading Co [1982] 1 Lloyd's Rep 632 at 636; Industriebeteiligungs & Handelsgesellschaft v Malaysian International Shipping Corporation Berhad (The "Bunga Melawis") [1991] 2 Lloyd's Rep 271 at 277; D Rhidian Thomas, The Law and Practice Relating to Appeals from Arbitration Awards (1994, Lloyd's of London Press Ltd); Barry Smith Grains Pty Ltd (in liq) v Riordan Group Pty Ltd [2010] NSWSC 1291 at [40]. Additionally, by reason of Rule 17, the Arbitrator was not bound to apply strict rules of evidence.

48. I will deal with each challenge in turn.

Date for practical Completion of Stage 2

49. It is not clear what Joss intends to connote in its submission that there was no evidence and no argument as to the “criticality” of the delay to the vinyl flooring. I infer that use of the term “criticality” emanates from what was said in TCL Air Conditioner (Zhongshan) Co v Castel Electronics.

50. Whether Cube was entitled to an EOT because of the vinyl flooring delay was an issue clearly and squarely in play in the arbitration. In par 261 of the Award, the Arbitrator refers to pars 76 – 81 of Cube’s final submissions in the arbitration. In pars 68 – 75 of those submissions under the heading “The vinyl flooring” Cube referred to evidence given by Kosmina that the rooms which required vinyl were “Soil Grind Rooms” and his acceptance that Cube had to perform works in those rooms sequentially and after vinyl was laid. Cube submitted that the evidence was unclear as to when the vinyl was properly laid. Cube referred to minutes of a site meeting on 19 October 2011 which indicated that as at that date PHY (meaning Phytotron) Joinery was in progress, and to minutes dated 23 November 2011 which listed PHY Joinery under Completed Works. It also referred to a construction program prepared by Joss dated 18 November 2011 and a Certificate of Occupancy had been issued at this time. Cube further referred to evidence by Devoy that the works in the Phytotron were completed on 8 November 2011 and submitted that this should be accepted as the date of practical completion of Stage 2 works to be done by Cube especially in the absence of any alternative completion date put forward by Joss.

51. Joss’ response is instructive. In pars 39 – 41 of its written submissions in reply in the arbitration under the heading “Vinyl not Laid”, Joss said:

39.    It is claimed that there was delay to the installation of vinyl in the phytotron building and that “the evidence is unclear as to when the vinyl was properly laid”.

40.    The witness purporting to give that evidence admitted he had no role in Cube’s involvement with separable portion 2.

41.   The relevant drawings also showed a sealed concrete floor in the areas where Cube claimed that the vinyl installation was delaying it. That is, the claim made by Cube is simply unsustainable, the facts of arbitration do not support Cube’s submissions.

52. The questions before the Arbitrator whether vinyl flooring was required and whether its installation delayed Cube were, and were treated by Joss as ones of fact, and so dealt with by the Arbitrator in an unexceptional and entirely acceptable way. He had documents before him which enabled him, in the absence of direct evidence from Joss (in whose power it was to bring) properly to infer that the vinyl flooring had been delayed and to find that that delay had in turn caused Cube delay until 8 November 2011.

53. In addition, the Arbitrator had the benefit of his own observations during a view that the rooms concerned had vinyl flooring, that joinery work could not be completed until the flooring had been installed, and that benches had been installed in at least some of these rooms on top of the vinyl. These observations enabled him to reject Joss’ submission that relevant drawings showed a sealed concrete floor in the areas where Cube claimed that the vinyl installation was delaying it.

54. There was no reversal of onus, let alone one which was unfair to Joss. The facts found by the Arbitrator positively established Cube’s entitlement to the EOT which it claimed. Joss made its own forensic decisions as to what evidence to bring and what submissions to make.

55. There was no, let alone real, unfairness or practical injustice in how the Arbitrator approached the matter.

56. This challenge is a disguised attack on factual findings dressed up as a complaint about natural justice, and it fails.

Delay and Liquidated Damages for Stage 3

57. Joss complains, firstly, that in breach of the hearing rule the Arbitrator gave Cube an EOT based on Special Condition 7 although Cube had not submitted to the Arbitrator (and Joss had no opportunity to respond to a submission) that Cube was entitled to an EOT under the Subcontract because there was an amendment to the main contract; and secondly that the Arbitrator engaged in speculation (presumably meaning that he found without any probative evidence) that there must have been an EOT under the main contract because there was a change in the programming under it which extended time.

58. Neither of these complaints has substance.

59. The general thrust of Cube’s argument, as articulated in par 49 of its written submissions in the arbitration, was that the site was not ready for it to perform its works under the Subcontract, which in turn gave it an entitlement to an EOT. It put that its claim that there was delay was substantiated by various things including contemporaneous photographs of the site condition, oral testimony (including admissions obtained in cross-examination), original records such as the minutes of monthly site meetings, correspondence and “iterations of construction programs”.

60. As components of its overall claim for additional time, Cube relied both on the fact of the change in construction programs on the main contract (as evidencing delay) and, as a factor entitling it to a corresponding EOT, on the operation of Special Condition 7, which provides:

The subcontractor acknowledges and agrees that, subject to this Subcontract, it shall be bound in all respects by the Main Contractor’s program (howsoever so called or referred to…incorporated in the Tender or as updated from time to time).

61. Express reliance was placed on Special Condition 7. It was set out in par 82 of Cube’s written submissions in the arbitration.

62. Cube went on in the following 19 paragraphs of its submisisons to motivate its claim for an EOT on the basis that it was delayed in preparing joinery shop drawings because the state of the site did not enable it timeously to take site measurements. The original construction program required Cube to finish its shop drawings by 20 June 2011, but at 6 October 2011 it could not have completed them, and this was apparently conceded by Byrt. In further support of its contention that the site was not ready it relied on a construction program dated 4 October 2011 circulated by Kosmina which contemplated commencement of the joinery shop drawings on 5 October 2011, which Cube put was effectively an acknowledgement that an EOT should have been granted because of the problems with site readiness.

63. During cross-examination of Byrt, Cube tendered the main contract construction program prepared by Joss dated 16 January 2012 (which became exhibit RS-4) referred to by the Arbitrator in par 304 of the Award. Byrt accepted that under it Cube had until 1 May 2012 to install remaining furniture and that if the program was correct an extension would have been reasonable for the furniture. Byrt, however, pointed out that the program was not a sub-contractor program but a head contract program. Thereafter the following exchange took place:

Counsel:   And the contract page that I took you to earlier, 99, says that the subcontractor is bound in all respects by the main contractor’s program, howsoever called or referred to, incorporated in the tender, and – or is updated from time to time. So you accepted that Cube was bound by this, being RS4 …

Byrt:    Look, again, I’m not sure how bound Cube could be by it if they didn’t receive a copy of it. I think you’re still confusing the head contract program that we update for the purposes of client reporting and the program which we expected Cube to undertake their own works.

64. In final oral submissions, counsel for Cube put the following:

… What we say is that there was a construction program that was part of the contract and there was a clause of the contract that said we are bound by the construction program and any further iterations of it. What happened was the construction program allowed us 357 days to do the works we were required to do in relation to LSB.

We move down the track to the third of October and a further program was issued, rather it was on the fifth of October by Mr Kosmina, in relation to our aspect of the works. It wasn’t the entire contract program, it was only in relation to our works and LSB. The calculation of the time given for us on that part of the works is 157 days. We say that is a concertinaing of the program of the works required by us by 200 days. Because we say that on the third of October the site wasn’t ready for us to take final measurements. And in addition to that not only were we not given an extension, but we were given a reduction in time to perform the works.

Now we say that in that context and in the context particularly of the Superintendent not exercising a function to extend time, had to consider it but didn’t. I don’t need to ask him what he would have done but didn’t, because that’s entirely irrelevant. One starts to see what happens on this project because it got the speed wobbles, because we say, of the concertinaing effect.

Of course there were problems. The head contractor Joss Construction was under extreme pressure from its principal CSU. You can see that in some of the correspondence it is having with BVN and with Savilles and so on. It is under enormous pressure and it is placing enormous pressure on the subcontractors.

And that’s entirely appropriate if it is done under the contractually agreed regime. We say it wasn’t, we say the project got speed wobbles and no wonder there were this turned into a contractual mess.

65. Joss dealt with the shop drawings and the construction program relied on by Cube in pars 51 – 75 of its written submissions in reply in the arbitration. It made no reference to Special Condition 7 or to the 16 January 2012 program. It referred to the 4 October 2011 program, approaching the matter on the basis that it was brought about, relevantly, because Cube had not, although it could have, commenced the shop drawings on time and that this was the cause of the delay.

66. In par 305 of the award, after referring to Byrt’s cross-examination, counsel’s submission, and the terms of Special Condition 7, the Arbitrator determined that Joss had amended the main contract program and could not escape the “knock on effect” on the Subcontract.

67. As reflected by par 215(c) of the Award, this conclusion was not based on the existence of any formal EOTs granted under the main contract and the Arbitrator did not approach it on that basis.

68. The argument was fairly and clearly before the Arbitrator and was hardly his own invention. Joss did not engage with it.

69. Anyway, viewed in a common sense way and without undue legality these findings are open to be viewed as ones of fact that there had been delay in the main contract works evidenced by the 16 January 2012 program, with a consequential “knock on effect” which, by reason of Special Condition 7, Joss could not escape.

70. There was no, let alone real, unfairness or practical injustice in how the Arbitrator approached the matter.

Costs to Complete

71. Joss’ complaint is that the Arbitrator could and should have separated out and dealt with proved (as opposed to unproved) items of costs incurred by Joss in completing Cube’s work, and that his failure to do so and decide on this basis was a breach of the rules of natural justice.

72. It points out that Joss relied on the evidence of Kosmina and that Cube did not provide an alternative calculation and did not critically analyse the figures presented by Kosmina. It refers to a concession by Devoy in his Statement of Evidence in the arbitration that four sets of identified items of work, having a total contract amount of $62,817, had not been delivered or installed by Cube. I observe that in par 147 of Joss’ written submissions in reply to Cube’s defence and cross-claim in the arbitration, Joss put “The Devoy statement at paragraph 10 asserts that only four items required by the original Subcontract were not supplied and installed yet no credit is allowed”.

73. Cube, in its written submissions in the arbitration, took the position that the Scott Schedule relied on by Joss was not itself evidence and that Joss had the obligation to prove its claim which it had not done. It pointed to Kosmina’s inability to explain the discrepancy between amounts which were outstanding in mid June 2012 and the works set out in Kosmina’s schedule of alleged costs to complete. It referred to Kosmina as being of doubtful credibility.

74. Joss’ challenge fails. The Arbitrator did not decline to perform his duty. He found against Joss.

75. The Arbitrator determined that on all of the evidence before him Joss had failed to prove all of the facts necessary to sustain its claim. He was not satisfied that Joss had established the right to payment of a particular sum of money even though there was evidence that some costs had been incurred by Joss completing Cube’s work.

76. The Arbitrator was not persuaded that all the items claimed by Joss were realistic and he expressly rejected some of them as inappropriate. He was not satisfied that Joss had established the extent to which its costs could fairly be attributed to completion of the Cube Subcontract work. He was not obliged to accept particular evidence even if unchallenged or in the nature of a concession.

77. Since the Arbitrator was faced with the position that:

1. the Scott Schedule relied on by Joss in the arbitration with respect to costs to complete Cube’s work was different to one attached to a payment schedule issued to Cube in 2012;

2. lists of items prepared by Kosmina and Mikola after a joint inspection in June 2012 could not, despite his efforts, be reconciled, including the calculation of costs of generic items which could not be easily related to specific items agreed as evidenced in the joint list;

3. it was uncertain whether all the items were appropriate costs to complete or were part of Subcontracts already taken over by Joss; and

4. cross-examination revealed uncertainties in the items claimed and some double-dipping;

his finding is not only unexceptional but unsurprising.

78. There was no, let alone real, unfairness or practical injustice in how the Arbitrator approached the matter.

79. This challenge is a disguised attack on factual findings dressed up as a complaint about natural justice.

CONCLUSION

80. None of Joss’ challenges have been made out. It has not established any basis upon which the statutory discretion given to the Court under s 34(2)(b)(ii) should be exercised in its favour.

81. There is no basis upon which the Court should refuse to enforce both the Interim Award and the Final Award.

82. If follows that Joss’ Summons is to be dismissed and Cube is entitled to an order that the Interim Award and the Final Award be enforced as a judgment of this Court.

83. The parties are to bring in short minutes of order.

84. I will hear them on costs.

85. The exhibits may be returned.

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Decision last updated: 12 June 2015