D & M (Australia) Pty Ltd v Crouch Developments Pty Ltd - [2011] WASCA 109

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

TITLE OF COURT : THE COURT OF APPEAL (WA)

CITATION: D & M (AUSTRALIA) PTY LTD -v- CROUCH DEVELOPMENTS PTY LTD [2011] WASCA 109

CORAM: MARTIN CJ
NEWNES JA
MURPHY JA

HEARD: 8 APRIL 2011

DELIVERED : 2 MAY 2011

FILE NO/S: CACV 65 of 2010
CACV 66 of 2010

BETWEEN: D & M (AUSTRALIA) PTY LTD
Appellant
AND
CROUCH DEVELOPMENTS PTY LTD
Respondent

ON APPEAL FROM:
Jurisdiction              :  SUPREME COURT OF WESTERN AUSTRALIA
Coram  :BLAXELL J
Citation  :D & M (AUSTRALIA) PTY LTD -v- CROUCH DEVELOPMENTS PTY LTD [2010] WASC 130
File No  :GDA 2 of 2009, ARB 8 of 2009

Catchwords:

Arbitration - Application for leave to appeal award - Whether manifest errors of law on the face of the award - Whether implied term was inconsistent with express terms of contract - Turns on own facts

Arbitration - Technical misconduct by the arbitrator in finding an implied term which had not been pleaded - Whether matter should have been remitted to the arbitrator - Discretionary decision - Need to demonstrate error

Legislation:

Commercial Arbitration Act 1985 (WA), s 38, s 42(1), s 43
Supreme Court Act 1935 (WA), s 60(1)(f)

Result:

Leave to appeal refused
Appeals dismissed

Category: B

Representation:

Counsel:

Appellant: Mr P G McGowan
Respondent: Mr B P Wheatley

Solicitors:

Appellant: Lavan Legal
Respondent: Mossensons

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

Agropol Trading Praha sro v Podex sro [1997] EWCA 3246
Allmark v Mossensons (a firm) [2006] WASCA 127
BP Refinery (Westernport) Pty Ltd v Shire of Hastings [1977] HCA 40; (1977) 180 CLR 266
Byrne v Australian Airlines Ltd [1995] HCA 24; (1995) 185 CLR 410
Codelfa Construction Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24; (1982) 149 CLR 337
D & M (Australia) Pty Ltd v Crouch Developments Pty Ltd [2010] WASC 130
Gronow v Gronow [1979] HCA 63; (1979) 144 CLR 513
Hometeam Constructions Pty Ltd v McCauley [2005] NSWCA 303
IOOF Building Society Pty Ltd v Foxeden Pty Ltd [2009] VSCA 138; (2009) 23 VR 536 [133]
Lamac Developments Pty Ltd v Devaugh Pty Ltd [2002] WASCA 245; (2002) 27 WAR 287
Mallet v Mallet [1984] HCA 21; (1984) 156 CLR 605
March v E & MH Stramare Pty Ltd [1991] HCA 12; (1991) 171 CLR 506
Masawa Australasia Pty Ltd v J Corp Pty Ltd [2000] WASC 5
Monteleone v Owners of the Old Soap Factory [2007] WASCA 79
Moran v Lloyd's [1983] QB 542
New Generation Enterprises Pty Ltd v Western Australian Planning Commission [2007] WASCA 89
O'Keefe v Williams [1910] HCA 40; (1910) 11 CLR 171
Peak Construction (Liverpool) Ltd v McKinney Foundations Ltd (1970) 1 BLR 111
Peters (WA) Ltd v Petersville Ltd [2001] HCA 45; (2001) 205 CLR 126
Promenade Investments Pty Ltd v State of New South Wales (1992) 26 NSWLR 203
Rapid Building Group Ltd v Ealing Family Housing Association Ltd (1985) 29 BLR 5
Shirley Sloan Pty Ltd v Merril Holdings Pty Ltd [2000] WASC 99
Turner Corporation Ltd (In provisional liquidation) v Co‑ordinated Industries Pty Ltd (1995) 11(3) BCL 202
Turner Corporation Ltd (Receiver & Manager Appointed) v Austotel Pty Ltd (1997) 13(6) BCL 378
Vodafone Pty Ltd v Supercall Pty Ltd [2003] NSWSC 302

MARTIN CJ: I agree with Murphy JA that the application for leave to appeal in CACV 65 of 2010, and the appeal in CACV 66 of 2010 should each be dismissed, for the reasons which he gives. However, I wish to add a short observation of my own.
Murphy JA has dealt with each of the arguments advanced in support of the appeals in some detail. However, as his Honour points out, the interests of finality in arbitration proceedings, and the corresponding constraints upon judicial intervention will often render it unnecessary to provide detailed reasons for refusing to intervene.
In this case, the only arguments advanced in support of the appeals which raised issues of law focused upon an attack on that part of the arbitrator's reasoning which relied upon a term which he implied into the contract. However, in my view, that part of the arbitrator's reasoning was not necessary to sustain his finding that the owner had failed to establish the right to invoke the contractual power of the termination based upon the builder's failure to proceed with due diligence. As McColl JA observed in similar circumstances in Hometeam Constructions Pty Ltd v McCauley [2005] NSWCA 303 [169], whether delay is in itself sufficient to raise an inference of a lack of due diligence is a question of fact. In McCauley [194], it was held the builder's failure to seek a formal extension of time could not be determinative of the question of whether the builder had failed to perform the works with due diligence, and the same reasoning applies with equal force to this case. In the present case, the arbitrator found that the owner had failed to establish that the builder had failed to proceed with the works of due diligence. That finding of fact, and not the implied term, was determinative of the critical issue in the arbitration. And in the circumstances of this case, that finding of fact was not open to challenge in this court.
It follows from this brief analysis that the trial judge was correct to exercise his discretion to not set aside the arbitral award, notwithstanding his finding of technical misconduct with respect to the implication of the term, and that the owner has failed to establish any evident or obvious grounds of appeal.
NEWNES JA: I agree with Murphy JA. I also agree with the additional observation of the Chief Justice.

MURPHY JA:

Introduction

This matter involves two appeals from a judgment of Blaxell J in which his Honour refused the appellant leave to appeal the decision of an arbitrator under s 38(4)(b) of the Commercial Arbitration Act 1985 (WA), and declined to set aside the award and remit the matter for further consideration by the arbitrator. In the first appeal (CACV 65 of 2010), it is alleged that the primary judge ought to have granted leave to appeal on the basis that there were manifest errors of law on the face of the award which substantially affected the rights of the appellant within the meaning of s 38(5)(a) and (b)(i) of the Commercial Arbitration Act. In the second (CACV 66 of 2010), it is alleged that the judge erred in not setting aside the award and remitting the matter to the arbitrator for reconsideration pursuant to s 42(1) and s 43 of the Commercial Arbitration Act. This second appeal relates to the judge's finding that there had been technical misconduct by the arbitrator in finding an implied term of the building contract, which had not been pleaded.
The judgment of Blaxell J is recorded in D & M (Australia) Pty Ltd v Crouch Developments Pty Ltd [2010] WASC 130. With respect to the first appeal, the appellant applies for leave to appeal on the basis that the decision is of a kind for which leave to appeal is required under s 60(1)(f) of the Supreme Court Act1935 (WA): Lamac Developments Pty Ltd v Devaugh Pty Ltd [2002] WASCA 245; (2002) 27 WAR 287. With respect to the second appeal, the appellant has not sought leave to appeal, although there is authority to the effect that the decision of the primary judge on an application to remit is also interlocutory: Moran v Lloyd's [1983] QB 542. The question of whether leave was required on the second appeal was not debated. It is unnecessary to decide it, and nothing turns on it for the purposes of the disposition of the second appeal.
The principles concerning the exercise of discretion on the grant of leave are well known. See, eg, Allmark v Mossensons (a firm) [2006] WASCA 127 [26] (Pullin JA, Buss JA agreeing):
Leave will usually only be granted where the decision below was wrong, or at least attended with sufficient doubt to justify the granting of leave, and if in addition substantial injustice would be done by leaving the decision unreversed. See Wing Luck Foods v Lay Choo Lim [1989] WAR 358 at 360 and Friday v Australian National Airlines Commission, unreported; FCt SCt of WA; Library No 8502; 24 September 1990; Stanley v Layne Christensen [2006] WASCA 56 at [15] and [58]. These are not rules but guidelines. The Court has a residual discretion to do justice in any case requiring leave even if the guidelines are not satisfied. See Sanderson v Metropolitan (Perth) Passenger Transport Trust, unreported; FCt SCt of WA; Library No 950185; 22 March 1995.
In this context, the discretion in respect of leave to appeal the decision of the primary judge will be informed by the principle of finality, which is to be recognised as applying to the determination of disputes by arbitration: Agropol Trading Praha sro v Podex sro [1997] EWCA 3246. See also [18] ‑ [19] below.
For the reasons which follow, the appeals ought be dismissed.

The underlying dispute

The underlying dispute between the appellant (the owner) and the respondent (the builder) was, relevantly, summarised in the judge's reasons [2] ‑ [3] as follows:
The dispute arose from an agreement between [the owner] and Crouch (as builder) for the construction of 27 apartments at Mount Hawthorn. Although the agreement was in a standard form, it was complicated by the fact that a substantial proportion of the work was to be performed by [the owner]. In this regard, the agreement was made on the common assumption that [the owner] would import some of the construction materials from China, and also engage Chinese and local workers to install those materials. The building work proceeded in accordance with these arrangements, but prior to completion of construction [the owner] purported to terminate the contract for alleged breach by [the builder].
This resulted in a dispute between the parties which was referred to arbitration. In the arbitration proceedings [the builder] claimed outstanding construction costs and damages for wrongful termination of the contract. [The owner] counterclaimed for alleged overpayments and damages for failure to bring the works to practical completion. The arbitrator's award upheld [the builder's] claims, and awarded nominal damages. The award also dismissed [the owner's] counterclaims. These outcomes were largely based upon the finding that the contract had an implied term that the [owner] would supply materials and perform work in such a way as 'not to compromise or create any inconsistency' with the builder's performance of its obligations.

The terms of the building contract

The primary judge set out the express terms of the contract at [10] ‑ [11]:
In light of the issues raised in the present proceedings it is relevant to note the following express terms of the contract between the parties:
5.The Builder shall commence the Works within ten (10) days of the issue of the Building Licence by the Local Authority concerned or the date upon which the Proprietor delivers to the Builder evidence of his title to the land as required by Clause 3 of these Conditions, whichever is the later. He shall complete the Works within the number of weeks [52 weeks] stated in the Appendix hereto from the date of commencement.
…
11.Should the progress of the Works be delayed by any of the following causes:
(a)On account of authorised variations or extras;
(b)In consequence of any notice given by the Builder under Clause 12;
(c)By a suspension of the Works under Clause 12;
(d)By inclement weather;
(e)In consequence of proceedings being taken or threatened by, or disputes with adjoining or neighbouring owners or residents;
(f)By reason of any civil commotion, or combination of workmen or strikes or lock-outs affecting any of the trades employed upon the Works or affecting the manufacture or supply of materials for the Works;
(g)By any other matter, cause or thing beyond the control of the Builder;
THEN in any such case the Builder shall within seven (7) days notify the Owner in writing of the same, and shall be entitled to a fair and reasonable extension of the time provided for completion of the Works. Any such notification shall state the cause and the extent of the delay. Should the Owner not dissent in writing from such notification within seven (7) days after the date when he shall be deemed to have received any such notification, the Date for Practical Completion of the Works shall be extended by the period claimed in the said notification.
…
13.If the Builder shall make default in any of the following respects, viz:
…
(b)If he fails to proceed with the Works with due diligence and in a competent manner;
…
AND if in the case of any such default as aforesaid that is capable of remedy he shall continue such default for ten (10) days after notice in writing specifying the same and stating the Proprietor's intention of determining the Builder's employment has been given to him THEN the Proprietor may without prejudice to any other rights or remedies by notice by registered mail determine the employment of the Builder.
…
17.(a) The Builder may, … at intervals of not less than each four (4) weeks, submit to the Proprietor a statement accompanied, if the Proprietor shall so require, by wages sheets, delivery dockets, invoices and other relevant data in the Builder's possession setting out the costs of labour and materials provided by the Builder and all other items claimed … in respect of the period covered by the statement and shall without due delay give the Proprietor all such further information as the Proprietor reasonably may require in relation to the statement.
(b)In the case of Statements during the progress of the Works the Proprietor shall, within ten (10) days after the receipt thereof and of any further information reasonably required by him pay to the Builder the amount thereof plus a proportion of the Builder's fee calculated on such amount at the rate stated in the Agreement.
Under the contract, [the owner] was to pay [the builder] the 'actual cost' of the works together with a flat fee of $250,000. (In this regard [the builder] was to be entitled to '0%' in the event of any additions or alterations to the works). Work on construction was to commence within 10 days of the issue of the building licence. The contract also provided for regular progress claims at intervals not less than every four weeks, with payments to be made within 10 days of submission of each claim and receipt of any further details that were reasonably required.
The arbitrator also found an implied term. The primary judge, in his reasons at [28], quoted the arbitrator's finding:
20.In my opinion those facts do not support a further finding that it was a term of the contract that [the owner] would import and supply materials from China which [the owner's] Chinese workmen would fit and install, with reasonable skill and care or otherwise. However, [the owner's] intention to do just that was clearly expressed and that intention formed part of the basis or assumption on which [the builder] agreed to undertake the project and sign the contract. The intention was simply not included in the document. In those circumstances, and keeping in mind the cost plus nature of the contract, I believe a term must be implied into the contract ... as follows:
Any materials supplied or work performed by the Proprietor discretely will be supplied and performed in such a way as not to compromise or create any inconsistency with the Builder's performance of its obligations under the contract. ('the implied term')

The arbitrator's material findings

It was common ground in the arbitration that the works had not been completed within the 52 weeks referred to by cl 5.
In addition to finding the implied term of the contract referred to above, the arbitrator also found (reasons [13] ‑ [17], [25], [31] ‑ [34]) that:
(a)the owner had brought both materials and workers from China with the objective of reducing costs and increasing profit in the project. In relation to this, the arbitrator found that (reasons [13]):
[The owner] was primarily cost driven and appears to have believed from the outset that it could use its assets and contacts in China to achieve great savings and therefore great profits on this project. It intended to import cheap materials from China and have them installed with cheap labour. That objective was, unfortunately for [the owner] incompatible with the engagement of an Australian builder and with Australian building standards. The result was a chaotic worksite on which 2 almost disparate workforces were attempting to complete the same overall task. There was a great deal of wasted money and effort. From [the builder's] perspective, it being a cost plus contract, [the owner] could, with some obvious qualifications, organise or disorganise the site as it wished, so long as it continued to pay for all costs and expenses incurred. In my opinion, the evidence establishes beyond doubt that the delays that occurred on this building site were, in the main at least, caused by the actions and omissions of [the owner].
(b)by written notice dated 11 April 2008, purportedly under cl 13(b) of the contract, the owner stated that the builder had failed to proceed with the works with due diligence and in a competent manner and unless the default were remedied in 10 days, the owner would terminate the contract;
(c)by written notice dated 29 April 2008, the owner terminated the contract purportedly pursuant to the notice of default dated 11 April 2008;
(d)the owner wrongfully terminated the contract because there were no circumstances of default which entitled the owner to terminate;
(e)the owner had refused to pay the builder's invoices, not on any proper basis concerning whether the costs had been reasonably incurred, but rather on the improper basis that the owner would not pay the builder whilst the parties were in dispute;
(f)the delays in construction were, in the main at least, caused by the owner and the owner could not complain that the builder was running behind the time fixed by the contract for completion;
(g)the owner had breached the implied term repeatedly and comprehensively;
(h)the builder had not done anything, or failed to do anything, which could be characterised as a repudiation of the contract;
(i)the owner's notice dated 11 April 2008 purportedly under cl 13 was invalid, and its purported notice of termination dated 29 April 2008 was also consequently invalid.

The grounds of appeal and principles concerning the appeal

CACV 65 of 2010

The owner alleges that the learned judge erred in law in refusing it leave to appeal in that, it is said, there were manifest errors of law on the face of the interim award in the arbitrator's findings that:
(1)the contract between the appellant and the respondent was subject to a term implied in fact (being the term stipulated at par 20 of the interim award); and/or
(2)the said implied term operated independently of the express written terms of cl 11 of the contract; and/or
(3)the appellant was not entitled to terminate the contract; and/or
(4)the appellant was not entitled to claim the costs of rectifying the incorrectly sized water pipes and/or replacing the water meters and/or installing acoustic lagging; and/or
(5)the respondent was entitled to an extension of time allowance despite failing to submit any application for extension of time claims pursuant to cl 11 of the contract; and/or
(6)the appellant caused or contributed to delays to the works.
In order to succeed before the primary judge, the owner had to establish that:
(a)there was a manifest error of law on the face of the award (s 38(5)(b)(i));
(b)having regard to all the circumstances, the determination of the question of law concerned could substantially affect its rights (s 38(5)(a)); and
(c)even if (a) and (b) were satisfied, it was appropriate to exercise the court's discretion to grant leave (Masawa Australasia Pty Ltdv J Corp Pty Ltd [2000] WASC 5 [8]).

In New Generation Enterprises Pty Ltdv Western Australian Planning Commission [2007] WASCA 89, Pullin JA (with whom Miller AJA agreed) said [44]:
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).
An error of law will 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': New Generation Enterprises Pty Ltd [4]. The error must be evident or obvious rather than merely arguable: New Generation Enterprises Pty Ltd [48]; Promenade Investments Pty Ltd v State of New South Wales (1992) 26 NSWLR 203, 225. 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: Vodafone Pty Ltd v Supercall Pty Ltd [2003] NSWSC 302 [64].

CACV 66 of 2010

The owner, in this appeal, alleges that:
Having found that the arbitrator misconducted the arbitration, the Learned Judge erred by failing to set aside the award and remit the matter back to the arbitrator for reconsideration pursuant to the terms of sections 42(1) and 43 of the Commonwealth Arbitration Act 1985 (WA).
In Shirley Sloan Pty Ltd v Merril Holdings Pty Ltd [2000] WASC 99 [27] ‑ [28], Steytler J said:
...in Thiess Contractors Pty Ltd v Water Corporation of Western Australia, unreported; SCt of WA; Library No 970561; 28 October 1997 ... Parker J ... said (at 37 ‑ 38):
'It is well settled that in contexts such as s 42 of the Act, misconduct may include a mistake in procedure which has, or may have, unjustly prejudiced a party: Melbourne Harbour Trust Commissioners v Hancock (1927) 39 CLR 570 at 587, 588. The consideration of what constitutes misconduct for these purposes by Marks J in Gas and Fuel Corporation of Victoria v Wood Hall Ltd [1978] VR 385 at 391 ff has received wide acceptance. The analysis by Marks J was relied on by each of the judges in Doran Constructions Pty Ltd v Health Administration Corporation of New South Wales (1994) 12 BCL 59, particularly at 62 per Cole JA, Gleeson CJ agreeing and at 63 per Kirby P (as he then was). In that case, as Kirby P pointed out at 63, the term "misconduct":
"may not, by the authorities, amount to much more than such a mishandling of the arbitration as to be likely to amount to a substantial miscarriage of justice".
The learned President referred to Williams v Wallis and Cox [1914] 2 KB 478 at 485. There was also acceptance of the decision of ... [Staughton J] in Edible Oil Products (Malaysia) ... [Bhd] v Jayant Oil Mills Private Ltd [1982] 2 Lloyds Rep 95 at 97 for the proposition:
" ... the mere failure to put a party on notice of an argument as to a point which might be decided ... may not, in the context of an arbitration, necessarily amount to misconduct."
From this brief identification of relevant authority, I would for present purposes accept that procedural unfairness may amount to misconduct, but that is not necessarily the case. What is to be discerned is that the procedure has, or may have, unjustly prejudiced a party in some respect material to the outcome. The notion bears much similarity to procedural unfairness amounting to a substantial miscarriage of justice.'
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).
The appellant, in this appeal, challenges the judge's exercise of discretion not to remit. The principles of appellate review in relation to discretionary decisions are well known. In Gronow v Gronow [1979] HCA 63; (1979) 144 CLR 513, 534 ‑ 535, Aickin J said:
Those principles have been stated in this Court on many occasions and are not in doubt. It is sufficient to refer to such cases as House v The King, Evans v Bartlam, Storie v Storie and Lovell v Lovell. Two short passages make the position clear. In House v The King [(1936) 55 CLR 499 at 504 ‑ 505] Dixon, Evatt and McTiernan JJ said:
'The manner in which an appeal against an exercise of discretion should be determined is governed by established principles. It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred.'
In Lovell v Lovell [(1950) 81 CLR 513 at 519] Latham CJ said:
'But when the appellate tribunal is considering questions of weight it should not regard itself as being in the same position as the learned trial judge. In the absence of exclusion of relevant considerations or the admission of irrelevant considerations an appellate tribunal should not set aside an order made in the exercise of a judicial discretion (as to which see Sharp v Wakefield [[1891] AC 173 at 179]) unless the failure to give adequate weight to relevant considerations really amounts to a failure to exercise the discretion actually entrusted to the court. The words used by their Lordships in the House of Lords in this connection are not always easy to apply, but they ought not to be read as denying the long established principle (which, indeed, is expressly recognized in the cases in the House of Lords) that on an appeal from an order founded upon the exercise of a discretion the appellate tribunal has no right to substitute its discretion for the discretion entrusted to the primary tribunal.' (citations omitted)
See also Gronow v Gronow per Stephen J (519 ‑ 520) and Mason & Wilson JJ (525); Mallet v Mallet [1984] HCA 21; (1984) 156 CLR 605, 614; Monteleone v Owners of the Old Soap Factory [2007] WASCA 79 [36].

The principal issue in CACV 65 of 2010 and its resolution

The principal question agitated by the owner in this application and before the primary judge in seeking leave to appeal the arbitrator's decision, concerned the arbitrator's finding of the implied term. There is no dispute that the contract was made on the common assumption or in common contemplation that the owner would import certain construction materials from China, and engage Chinese and local workers to install those materials (reasons [2]).
The implication of a term is an exercise in the interpretation of a contract: Codelfa Construction Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24; (1982) 149 CLR 337, 345.
In addition to the express terms of the contract, the law implies certain generic terms into contracts, including terms to the effect that:
(a)each party would not hinder or prevent the fulfilment of the purpose of the express terms of the agreement: Peters (WA) Ltd v Petersville Ltd [2001] HCA 45; (2001) 205 CLR 126 [36];
(b)each party would do all things necessary on its part to enable the other party to have the benefit of the agreement: Peters (WA) Ltd v Petersville Ltd [36]; and
(c)each party will abstain from any act which would destroy or deprive the agreement of its efficacy or efficiency: O'Keefe v Williams [1910] HCA 40; (1910) 11 CLR 171, 191, 197 ‑ 210.
Specific, as opposed to generic, terms may be implied into particular written contracts to ensure business efficacy.
Terms of the latter (generic) kind may be regarded as rules of construction applied to the express terms of the contract, particularly to the written terms of contracts. Although treated as implied by law, they may be excluded by express provision or as a result of inconsistency with the other terms of the contract. Terms of the specific kind are terms unique to the particular contract in question: Byrne v Australian Airlines Ltd [1995] HCA 24; (1995) 185 CLR 410, 448 ‑ 449.
Terms of the specific kind are implied from the particular circumstances of the case and to give effect to some apparent underlying intention of the parties about providing business efficacy. The will only be applied if the five conditions, which might overlap, referred to in BP Refinery (Westernport) Pty Ltd v Shire of Hastings [1977] HCA 40; (1977) 180 CLR 266, are satisfied: Byrne v Australian Airlines Ltd (422, 441); Codelfa Construction v State Rail Authority (347).
The primary judge found, in effect, that the implied term was, in substance, a term of the latter (generic) kind (reasons [51]), although the judge held that it was also properly regarded as a term of the former (specific) kind (reasons [49]). The arbitrator had treated it as a term of the former kind.
For the purposes of this appeal, whichever way the implied term is characterised, in each case the focus is on whether it is inconsistent with the express terms of the contract.
The owner's principal contention, in this appeal, is that there was manifest error in concluding that the implied term could operate consistently with the express term in cl 11 of the contract. The owner, in this regard, relies on the authority of Turner Corporation Ltd (Receiver & Manager Appointed) v Austotel Pty Ltd (1997) 13(6) BCL 378, and the contractual abrogation of the 'prevention principle'.
In Cremean DJ, Shnookal BA, Whitten MH, Brooking on Building Contracts (4th ed, 2004), the 'prevention principle' in the context of building contracts, is referred to in these terms [6.8]:
It is a fundamental principle that one party may not rely upon the failure of the other party to perform the contract where it is the former who has prevented the performance. Or, as it was put in Panamena Europea Navigacion (Compania Limitada) v Frederick Leyland & Co Ltd, 'at common law ... no person can take advantage of the non‑fulfilment of a condition the performance of which has been hindered by himself'. One application of this principle is a general rule that a proprietor may not recover or retain damages for delay in completion where by the proprietor's own act timely completion of the work has been prevented. The proprietor may, for example, have failed to give possession of the site or deliver machinery to be erected by the contractor or may have ordered extras, and in either case thereby increased the time required to execute the works. In these circumstances the proprietor will (unless the position is affected by a clause providing for an extension of time) usually be unable to claim damages for delay. This is consistent with the application of the principle that no person shall be allowed to prevent an act being performed and then take advantage of that non‑performance for such person's own benefit.
In Turner v Austotel, the proprietor sued the builder for liquidated damages in failing to complete the works by the date specified in the contract. The contract required the builder to achieve practical completion by the specified date 'subject to adjustment as provided for in clause 9'. Clause 9 provided a regime by which the builder should, if 'he desire[d] to claim an extension of time for Practical Completion of the Works', give a notice in writing to the architect stating the nature, cause and extent of the delay where possible, and for an extension to be determined by the architect appointed under the contract. The grounds upon which an extension of time could be claimed included, expressly, any 'default or omission on the part of the Proprietor'.
There, the judge found that there was no applicable principle, or implied term, to the effect that the proprietor was precluded from recovering liquidated damages for the builder's breach of contract in failing to achieve practical completion by the due date, even if the proprietor had done something which prevented the works from being completed in time. His Honour held, in effect, that properly construed, the builder's obligation to complete the works by the specified completion date was 'subject to' cl 9 only, and cl 9 specified a complete code for the circumstances in which, and the process by which, the completion date could be extended. This provided, expressly, for the circumstance where the proprietor's default or omission caused the delay in the builder's progression of the works. There was no scope for an implied term by which the completion date could be extended by reason of the proprietor's default or omission, because of the contractual code which governed extensions of time, including in relation to circumstances where there had been defaults or omissions by the proprietor. Accordingly, the judge held that the 'prevention principle' did not operate, in relation to the contract there under consideration, to preclude the proprietor from recovering liquidated damages.
The owner in this appeal, in substance, contends that the judge erred in not applying the decision in Turner v Austotel.
There are at least three difficulties with the owner's reliance on Turner v Austotel. First, there is authority, accepted by the owner in this appeal, that the prevention principle is not abrogated by contract by an extension of time clause where the clause does not provide expressly or by necessary inference, for an extension of time on account of the fault or breach of the proprietor: Peak Construction (Liverpool) Ltd v McKinney Foundations Ltd (1970) 1 BLR 111, 121 ‑ 122, 126; Rapid Building Group Ltd v Ealing Family Housing Association Ltd (1985) 29 BLR 5, 15, 19; Turner Corporation Ltd (In provisional liquidation) v Co‑ordinated Industries Pty Ltd (1995) 11(3) BCL 202. In the last‑mentioned case, Rolfe J observed (at 212 ‑ 213), in the context of a discussion on the concept of prevention, that the operation of the prevention principle has been held to occur where the contract either did not contain an extension of time clause, or where it was not apparent that the extension of time clause provided for an extension in the event of default by the proprietor.
Consonantly with the above authorities, the owner submits that 'for an extension of time clause to capture owner delays it must be clearly applicable. Any doubt and the clause must be construed against the owner'.
Clause 11 in this contract does not expressly provide for an extension of time in the event of default by the owner. Also, subcls (a) to (f) of cl 11 all relate to matters where there is no default by the owner. In this context, it is not clear that the words 'any other matter' in cl 11(g) encompass, without saying so, default by the owner, as opposed to other matters (beyond those enumerated in subcls (a) to (f)), which involve no default by the owner.
The second difficulty with the owner's argument is that in order to make good the analogy with Turner v Austotel, the owner must establish that there is no entitlement to an extension of time unless notice is first given by the builder under cl 11. We were not referred to any authorities in which a clause such as cl 11 has been construed to that effect. Clause 11 is substantially different from cl 9 in the contract in Turner v Austotel. The operative words in cl 11 provide that the builder 'shall be entitled to a fair and reasonable extension' in the circumstances referred to in subcls (a) ‑ (g) of cl 11. Those words of entitlement are not expressly dependent upon the builder first giving notice of delay. Nor, particularly in the absence of a regime leading to a third party certifying or granting an extension of time, is it clear, for the purposes of the present application, that the builder's entitlement is by necessary implication dependent upon it first giving notice. Moreover, importantly in this case, the essentiality of notice is not clear where the owner is itself supplying materials and labour and is thereby engaged in the works, and may thus be taken to be familiar with the progress of the works and the cause of delays - particularly where it is the cause.
The third difficulty with the owner's argument is that even on the assumption that cl 11 may be regarded as containing, in substance, terms equivalent to cl 9 in the Turner v Austotel case, the question would remain as to the scope and purpose of cl 11 properly construed.
The contract is a costs‑plus contract. As there is no liquidated damages clause, the builder might take the view that any potential liability in damages for breach of contract in not completing the works within 52 weeks is so unlikely that it is unnecessary to obtain extensions of time under cl 11. Alternatively, it might, by administrative neglect, fail to obtain extensions. In either event, cl 11 might mean (on the owner's construction) that the failure by the builder to protect its own interests by obtaining an extension, results in it being unable to resist a claim for unliquidated damages in the event that the owner could prove damage resulting from a breach of the failure to complete the works within time, which was not too remote. The operation of cl 11 in that way would be consistent by analogy with the reasoning and result in Turner v Austotel.
The owner, however, needs to take the argument one step further in this appeal. The proposition for which the owner contends is that cl 11, properly construed (on the assumption referred to earlier) also necessarily precludes the implied term from operating consistently with cl 13. It is far from evident that this is so.
In order for the owner properly to invoke the contractual power of termination under cl 13, where it relies on a default under cl 13(b), the owner must positively establish that the builder had failed to 'proceed with the Works with due diligence and in a competent manner'. See Hometeam Constructions Pty Ltd v McCauley [2005] NSWCA 303, [166] ‑ [178]. In that case, McColl JA (Ipp & Tobias JJA agreeing) said [194]:
... the [builder's] failure to seek a formal extension of time in a case where the issue is whether it performed the Works with due diligence cannot be determinative. The fact that the [builder], through administrative neglect but not neglect in carrying out the work, fails to make proper claims for variations does not affect the enquiry, whether, in actually performing the work, due diligence was shown.

Those observations are equally pertinent to this matter. The owner did not contend that there was an express or implied term that any failure to complete the works within 52 weeks would be deemed to be a failure to complete the works with due diligence and in a competent manner. The implied term operates harmoniously with cl 13, to give scope and content to the words 'proceed with the Works with due diligence and in a competent manner' in cl 13(b). It also operates harmoniously with cl 11, even if cl 11 operates with the effect assigned to cl 9 in Turner v Austotel and precludes, in effect, any resistance to a claim for unliquidated damages. The owner did not point to anything in the contract which would give cl 11 the more extensive scope of application for which it contends. It has not demonstrated that cl 11 (even on the assumption referred to earlier) would necessarily preclude, for all contractual purposes, the operation of a term in the nature of the one found to be implied in the contract by the arbitrator.
These three difficulties individually and collectively indicate that the owner has not established manifest error of law on the face of the award.
The above conclusion is sufficient, in substance, to dispose of the appeal. Nevertheless, it is necessary to deal with each ground expressly, albeit briefly, in light of that conclusion.

Disposition of the grounds of appeal - CACV 65 of 2010

Ground 1 alleges that there was a manifest error of law in the arbitrator's finding of the implied term. For the reasons indicated above, the judge's conclusion that the owner did not establish manifest error of law is not attended with sufficient doubt to warrant the grant of leave to appeal.
Ground 2 alleges that there is a manifest error of law in the finding that the implied term operates 'independently' of cl 11. In this regard, it is said that cl 11(g) on its express terms is 'wide enough' to encompass the owner's works causing delay to the builder. The owner says that there 'is nothing in the implied term that operates so as to prevent the builder from complying with clause 11 and making a proper claim for extension of time pursuant to clause 11(g)'. Again, these arguments assume, rather than demonstrate, a meaning for cl 11 which is inconsistent with the implied term. This ground must also fail.
Ground 3 alleges that there was a manifest error of law in the arbitrator's finding that the appellant was not entitled to terminate the contract. This ground appears to proceed on the basis that grounds 1 and 2 are accepted and, consequently, on the basis that the notice purportedly given under cl 13(b) was a valid notice. As grounds 1 and 2 fail, ground 3 must also fail.
Ground 4 alleges that there was a manifest error of law in the arbitrator's finding that the appellant was not entitled to claim the costs of rectifying certain works. This ground also proceeds on the basis that grounds 1 and 2 are successful. Accordingly, this ground also fails.
Ground 5 alleges that there was a manifest error of law in the arbitrator's finding that the builder was entitled to an extension of time despite not submitting any application for extension of time claims pursuant to cl 11 of the contract. It is said that this is a corollary of the first two grounds of appeal. It probably is, but as grounds 1 and 2 are flawed, so is the corollary. This ground also fails.
Ground 6 alleged that there was manifest error in the arbitrator's finding that the owner caused or contributed to delays in the works. Causation is a question of fact: March v E & MH Stramare Pty Ltd [1991] HCA 12; (1991) 171 CLR 506, 515. This is not a proper ground of appeal and it was not pressed at the hearing.

Disposition of the appeal - CACV 66 of 2010

The owner has not, in this appeal, identified a proper ground of appeal. No specific error of law, fact or discretion is alleged. The owner merely alleges that the judge should have exercised his discretion differently.
The owner has, in its submissions, sought to fill the vacuum by asserting, in effect, that the judge 'overlooked' the fact that the owner had not conducted the arbitration in the knowledge that there was an issue as to whether the contract contained the implied term, and that it lacked the opportunity of dealing with the issue on the facts and the law in the arbitration.
The owner's submissions, to this extent, repeat the basis of the judge's finding of technical misconduct, but do not demonstrate error in the exercise of discretion, having regard to the principles referred to in [21] ‑ [23] above.
There is no challenge to the judge's finding to the effect that the implied term was, in substance, a generic term. As a generic term, its existence and operation depended upon whether and to what extent it was expressly excluded or contradicted by the other, written, terms of the contract. That involves an analysis of the written terms of the contract.
In any event, this is not a case where the implied term could possibly have been met by other evidence. The owner has not pointed to any evidence which might conceivably have been different had the implied term been pleaded by the builder. His Honour found that the background to which the arbitrator had regard in finding the implied term was to the effect that there was a common assumption or contemplation that the owner would import materials and have its own workmen install them. That finding arose from evidence as to the antecedent negotiations between the parties (judge's reasons [46]). The builder had pleaded a related implied term and an estoppel, both of which were said to arise from the owner's intention to import materials and engage workmen (builder's amended reply and defence to counterclaim pars 11 ‑ 13). Those matters were canvassed in the arbitration (arbitrator's reasons [15] ‑ [30]). It was accepted in this appeal that the finding of the common assumption which was the basis for the implied term according to the arbitrator, was correctly made by the arbitrator. There was no dispute that the extrinsic evidence justified the finding of the assumption. Counsel was able to address the legal issue fully before the primary judge.
In these circumstances, no error is demonstrated - see IOOF Building Society Pty Ltd v Foxeden Pty Ltd [2009] VSCA 138; (2009) 23 VR 536 [133].

Conclusion

The owner's application for leave to appeal in CACV 65 of 2010 should be dismissed. The appeal in CACV 66 of 2010 should also be dismissed.