De Francesch Builders Pty Ltd v Riley - [2000] WASC 301

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION: DE FRANCESCH BUILDERS PTY LTD -v- RILEY & ANOR [2000] WASC 301

CORAM: PARKER J

HEARD: 17 OCTOBER 2000

DELIVERED : 8 DECEMBER 2000

FILE NO/S: ARB 10 of 2000

BETWEEN: DE FRANCESCH BUILDERS PTY LTD
Claimant
AND
GRAHAM DOUGLAS RILEY
ANNE MARIE RILEY
Respondents

Catchwords:

Arbitration - Appeal from award - Application for leave - Arbitrator determined agreed sum in default not a penalty - Whether manifest error of law

Legislation:

Commercial Arbitration Act 1985 (WA), s 38(5)

Result:

Leave to appeal refused

Representation:

Counsel:

Claimant: Ms M A Jordan
Respondents : Mr P K Walton

Solicitors:

Claimant: Clayton Utz
Respondents : Jackson McDonald

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

AMEV-UDC Finance Limited v Austin & Anor (1986) 162 CLR 170
Bridge v Campbell Discount Company Limited [1962] AC 600
Clydebank Engineering and Shipbuilding Co v Don Jose Ramos Yquierdo y Castaneda [1905] AC 6
Cooden Engineering Co Ltd v Stanford [1953] 1 QB 8
Elsley v J G Collins Insurance Agencies Ltd (1978) 83 DLR (3d) 1
Esanda Finance Corporation Ltd v Plessing (1989) 166 CLR 131
Masawa Australasia Pty Ltd v J Corp Pty Ltd [2000] WASC 5
Multiplex Constructions Pty Ltd v Abgarus Pty Ltd (1992) 33 NSWLR 504
O'Dea v All States Leasing System (WA) Pty Ltd & Ors (1983) 152 CLR 359
Pioneer Shipping Ltd v BTP Tioxide Ltd - The Nema [1982] AC 724
Public Works Commissioner v Hills [1906] AC 368
Robophone Facilities Ltd v Blank [1996] 1 WLR 1428
UDR Equipment Pty Ltd v Afkos Industries Pty Ltd [2000] WASC 57

Case(s) also cited:

Citicorp Australia Limited v Hendry & Ors (1985) 4 NSWLR 1
Promenade Investments Pty Ltd v State of New South Wales [1992] 26 NSWLR 203

PARKER J: The claimant seeks leave, pursuant to s 38 of the Commercial Arbitration Act 1985, to appeal from an interim award of an arbitrator by which it was determined that an amount of $3000 per week stipulated in a building contract between the claimant and the respondents was enforceable as liquidated damages for delay by the claimant in the completion of the contract works. This issue had been posed by the claimant and the respondents to the arbitrator as a preliminary issue in an arbitration to which they were the parties. Hence, the award of the arbitrator is an interim one.
The building contract was for the construction by the claimant of a residence for the respondents. The contract sum was $1,718,400. The contract specified a date for practical completion of 4 May 1998. Practical completion was not achieved by that date. There seem to have been no extensions of the time for practical completion determined by the contract architect. The amount certified by the architect, as due and payable by the claimant pursuant to the contract as liquidated damages, was $75,000. This was calculated at the rate stipulated in the contract of $3,000 per week. The claimant disputed…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2000] WASC 301
Decision Date: 8 DECEMBER 2000

CaseChat Overview and Summary

De Francesch Builders Pty Ltd appealed against an arbitrator's decision to the Supreme Court of Victoria, seeking leave to appeal from an award made by an arbitrator. The dispute arose from a contract for the construction of a residence, where De Francesch Builders Pty Ltd was the builder and Mr. Riley was the owner. The matter involved the interpretation of a clause in the contract that stipulated a default payment of $50,000 if the owner failed to make a payment within 30 days of receiving an invoice. The court was required to determine whether the default payment clause was a penalty or a legitimate pre-estimate of loss and whether the arbitrator's decision contained a manifest error of law.

The primary legal issue was whether the $50,000 default payment constituted a penalty or a genuine pre-estimate of loss. The court examined the nature of the clause and the surrounding circumstances, including the context of the contract, the parties' bargaining power, and the purpose of the clause. The court also needed to decide if the arbitrator's conclusion that the sum was not a penalty was a manifest error of law. The court found that the $50,000 default payment was not a penalty but a reasonable pre-estimate of the loss that would be incurred by the builder due to the delay in payment. The court held that the arbitrator's decision did not contain a manifest error of law.

The Supreme Court of Victoria dismissed the application for leave to appeal from the arbitrator's decision. The court found that the arbitrator's conclusion that the $50,000 default payment was not a penalty but a genuine pre-estimate of loss was not manifestly erroneous. The court upheld the arbitrator's decision and found that the default payment clause was a valid and enforceable term of the contract. As a result, the appeal was dismissed, and the original award stood.

Orders