Di Mella Constructions Pty Ltd v I and M Pty Ltd

[2001] NTSC 20

Di Mella Constructions Pty Ltd v I & M Pty Ltd  [2001] NTSC 20

PARTIES:DI MELLA CONSTRUCTIONS PTY LTD

v

I & M PTY LTD

TITLE OF COURT:  SUPREME COURT OF THE NORTHERN TERRITORY

JURISDICTION:  CIVIL

FILE NO:No. LA21 of 2000

DELIVERED:  30 MARCH 2001

HEARING DATES:  7 & 8 DECEMBER 2000

JUDGMENT OF:  ANGEL J

REPRESENTATION:

Counsel:

Applicant:Mr S Southwood QC

Respondent:  Ms J Kelly

Solicitors:

Applicant:De Silva Hebron

Respondent:  Cridlands

Judgment category classification:               C

Judgment ID Number:  ang200105

Number of pages:  6

IN SUPREME COURT
OF THE NORTHERN TERRITORY
OF AUSTRALIA

Di Mella Constructions Pty Ltd v I & M Pty Ltd  [2001] NTSC 20
No. LA 21 of 2000

BETWEEN:

DI MELLA CONSTRUCTIONS PTY LTD

Applicant

AND:

I & M PTY LTD

Respondent

CORAM:      ANGEL J

REASONS FOR JUDGMENT

(Delivered 30 March 2001)

1. This is an application pursuant to s 38(4) (b) Commercial Arbitration Act (NT) for leave to appeal from a determination by an arbitrator. S 38(5) of that Act provides:

“       The Supreme Court shall not grant leave [to appeal] under subsection (4)(b) unless it considers that –

(a)having regard to all the circumstances, the determination of the question of law concerned could substantially affect the rights of one or more of the parties to the arbitration agreement; and

(b)there is –

(i)a manifest error of law on the face of the award; or

(ii)strong evidence that the arbitrator or umpire made an error of law and that the determination of the question may add, or may be likely to add, substantially to the certainty of commercial law.”

That Section was introduced by a 1991 amendment.

1. The amendment was commented upon by Kearney J in Carpaolo Nominees Pty Ltd v Marrossan Nominees Pty Ltd (1997) 136 FLR 328 at 339–340, as follows:–

   “The purpose of the amendment effected by s 38(5) was to further limit intervention by the courts in the arbitration process.  Prior to the amendments, principles to be observed in the discretionary grant of applications for leave to appeal under provisions akin to s 38(4) in similar legislation in the UK had been spelled out in Pioneer Shipping Ltd v BPT Tioxide Ltd (“the Nema”) [1982] AC 724. Some of the Nema guidelines were subsequently applied in some Australian jurisdictions applying the uniform scheme, but not in all.  The 1990s amendments were introduced to achieve greater uniformity between the States and Territories on whether the discretion to grant leave to appeal under s 38(4) was at large, or limited.  The amendments point to limitation: see Promenade Investments Pty Ltd v State of New South Wales (1991) 26 NSWLR 184 at 188–189. The policy behind them was ‘ … to promote the finality of arbitral awards even at the price of denying a party its usual entitlement to the determination of a dispute by a court of law’: Natoli v Walker (unreported, Court of Appeal, NSW, 26 May 1994) at 2 per Kirby P.”.

2. The present application for leave to appeal is against two aspects of the arbitrator’s award.  The first complaint is that the arbitrator found that the applicant builder was liable to pay damages to the respondent proprietor for amounts in respect of defective work in circumstances where the applicant would have been able to require its subcontractors to rectify the work without cost to the applicant. This was said to be a mis–application of Pearce and High Ltd v John Baxter and A S Baxter (1999) BLR 101.  The second aspect relates to the arbitrator’s decision to order the applicant pay the respondent’s costs.

3. As to the first matter I am of the opinion the alleged error is not an error in law and that therefore there can be no appeal therefrom: s 38(2).  I agree with the submission of the respondent that the complaint is really an allegation that the arbitrator ignored or refused or failed to accept evidence that the applicant could remedy certain defective work without expense.  As Kearney J said In Carpaolo Nominees (supra) at 341–342:

   “….. an allegation that the ….. award involves ….. perverse or unreasonable fact finding including fact finding by demonstrably unsound reasoning does not raise a question of law at all.”.

   I also agree with the submission of the respondent that even if the alleged error could be characterized as an error of law the threshold tests in s 38(5) of the Act have not been satisfied.  As to s 38(5)(a), I am not satisfied that the applicant’s rights are substantially affected by the alleged error.  A relevant consideration is whether the amount of money involved is substantial: Carpaolo Nominees Pty Ltd (supra) at 339. The question only affects portion of the award and the whole award was for but $25,995–50. The monetary amount at issue is not clear, but it would almost certainly be less than the combined costs of the parties in an appeal. I agree with counsel for the respondent that this is precisely the kind of matter which the restrictions on appeal were designed to prevent in the interests of finality. The whole tenor of the Commercial Arbitration Act’s restrictions on appeal is to prevent situations where the costs to the parties outweigh any financial benefit in the result.

4. I also agree that the second threshold requirement in s 38(5)(b)(i) has not been satisfied, that is, that there be a manifest error of law on the face of the award.  The alleged error on the face of the award was said to be comprised in the latter two sentences of the following passage in the award.

   “Given those circumstances and the obiter comments of Evans LJ in Pearce and High Ltd v Baxter (1999) BLR 101 to which I have been referred I find that the claimant is not able to recover more than the amount that it would have cost the respondent itself to remedy the defects.  However I do not agree with the respondent’s assertion that this means that the respondent is not liable for any amount where it would have been able to have a subcontractor carry out the works without additional payment to that subcontractor.  The respondent is liable for its subcontractors and the supervision of them and is therefore responsible for the defects arising from those subcontractors.”

5. It is enough to say this is not obviously or self–evidently wrong.  It is, I think, at least arguably correct, and that is sufficient to be fatal to the application. 

6. As to the question of costs, the arbitrator gave the following reasons for his decision:

   “Having considered the costs submissions by the parties, I note that the claimant has been the successful party with the award of money in its favour.  I have not been convinced that there is any reason to avoid the general rule that costs follow the event.

   Accordingly I order that costs in this arbitration be paid as follows:

   1.The claimant’s costs of the reference are to be paid by the respondent.  If these costs cannot be agreed between the parties within 21 days, then the costs shall be taxed in the Supreme Court as between party to party.

   2.The cost of the award (that is, the arbitrator’s fees and expenses in the amount of $13,000.00) shall be paid by the respondent.”.

7. In my opinion this cost decision on its face contains no errors.  There is no manifest error of law on the face of the award of costs.  The applicant complains that the award contains a serious miscarriage of justice.  Amongst other things, it complains that the respondent was awarded $25,955–50 out of an original claim in excess of $320,000.00, that is, that the respondent succeeded in obtaining less than 10% of its original claim.  The applicant pointed to numerous claimed items which were disallowed.  It ultimately submitted that because the respondent’s claims were grossly inflated and the respondent’s conduct had caused unnecessary expense and prolongation of the arbitration proceedings the arbitrator’s exercise of discretion as to costs “had manifestly miscarried”.  The matters complained of do not appear on the face of the costs award.  The arbitrator considered submissions before him and exercised his discretion against the applicant. 

8. The arbitrator plainly exercised his discretion and in the absence of proof of misconduct – none is alleged – or want of jurisdiction – none is alleged – the award is unchallengeable by way of appeal: Gray v Lord Ashburton [1917] AC 26.

9. The application for leave to appeal is dismissed with costs.