Eltin Open Pit Operations Pty Ltd v Far North Civil Pty Ltd & Anor No. Scciv-01-787
[2001] SASC 302
•24 August 2001
[2001] SASC 302
ELTIN OPEN PIT OPERATIONS PTY LTD V FAR NORTH CIVIL PTY LTD AND ANORCivil
LANDER J. The plaintiff commenced these proceedings by inter partes summons with a Statement of Claim annexed seeking a number of diverse orders. The plaintiff sought a stay of an arbitrator’s award made on 27 April 2001; an order pursuant to s 11(1)(b) of the Commercial Arbitration Act 1986 (SA) (the Act) that the arbitration agreement cease to have an effect; an order pursuant to s 42(1) of the Act; an order pursuant to s 44 of the Act removing the second defendant as an arbitrator and in the alternative leave to the plaintiff to the extent that leave is necessary to appeal to this Court against an interim award that the arbitrator made on 27 April 2001.
The relief sought shows the circumstances giving rise to the proceedings.
The plaintiff, Eltin Open Pit Operations Pty Ltd, (Eltin) is a company incorporated in the State of Western Australia which, in early 1992, entered into a joint agreement with DML Resources Pty Ltd (DML) to carry out rehabilitation works at South Blackwater Coal Mine in Queensland. The joint venture tendered for the contract to do the works to South Blackwater Coal Ltd (SBCL).
In April 1992 Eltin and DML entered into a contract with SBCL to carry out the head contract works. At all times Eltin and DML acted as joint venturers pursuant to a joint venturer agreement to perform the head contract.
In May 1992 the defendant, Far North Civil Pty Ltd (Far North), was invited by the joint venturers to tender for a portion of the rehabilitation works programme at this site.
In June 1992 the joint venturers and Far North entered into an agreement, the (sub-contract) for Far North to perform rehabilitation works at this site.
A dispute arose in relation to the sub-contract and Far North issued proceedings in this Court against the plaintiff and DML in Action No. 1071 of 1998. DML was at that stage in liquidation. No leave to proceed in respect of DML was sought by Far North.
On 4 May 1999 orders were made by consent staying those other proceedings pursuant to s 53(1) of the Act and providing that all further proceedings be carried on between Far North and Eltin in accordance with the agreement to arbitrate contained in the head contract between the plaintiff and SBCL.
On 22 October 1999 the second defendant, Mr Neil Sarah was appointed as arbitrator and entered on the reference. It was agreed that the Minutes of Conference held between the parties on that date when signed by the parties would constitute an arbitration agreement.
On 12 December 2000 the plaintiff and defendant entered into a further agreement in writing to refer the dispute to arbitration. That second agreement is in writing and dated 12 December 2000.
The arbitration hearing was conducted between 12 February 2001 and 15 March 2001. On 27 April 2001 the arbitrator delivered an interim award in which he ordered Eltin to pay the sum of $743,530 to Far North within 21 days after the date of the interim award.
On 1 May 2001 Eltin’s solicitors wrote to the Far North’s solicitors and the arbitrator as parties to the second arbitration agreement seeking those parties consent, pursuant to s 38(4)(a) of the Act, to appeal against the interim award to this Court. On 2 May 2001 Far North’s solicitors advised that it would not consent to leave being granted to appeal against the interim award.
On 7 May 2001 Eltin applied in the other proceedings to join the second defendant as a defendant to those proceedings. It also applied pursuant to s 42(1) of the Act for an order setting aside the interim award made on 27 April 2001. Further, it sought an order pursuant to s 11(1)(b) of the Act that the arbitration agreement entered into by the parties and the arbitrator ceased to have an effect with respect to the dispute to which the arbitration relates.
Lastly, it sought leave to appeal against the interim award of the arbitrator.
That application first came on before me on 11 May and the matter was adjourned until 18 May.
On 18 May I was advised that these proceedings had been instituted seeking the relief to which I have referred.
By consent I dismissed that part of the summons in the other proceedings which sought the same relief as has been sought in these proceedings.
The matter was further adjourned until 23 May when I was advised that the plaintiff was considering its position in relation to the claims of misconduct in these proceedings.
On 23 May I was advised that Eltin did not intend to proceed with the relief based upon misconduct.
The only application before me is now the application for leave to appeal. That application has been supported by a draft notice of appeal and an affidavit.
The notice of appeal is out of time and the plaintiff seeks an order extending time within which to bring the application for leave to appeal until 1 June 2001, which was the date of the filing of the application.
It seems to me that it would be appropriate in the circumstances of this case to extend time within which to seek leave to appeal until 1 June 2001. Far North could not point to any prejudice if I made such an order. Far North has been on notice for a considerable period of time that it was Eltin’s intention to seek leave to appeal under the Act.
Eltin has sought leave pursuant to s 38(4)(b). In particular it relies upon both limbs of s 38(5) of the Act.
It asserts that having regard to all the circumstances the determination of the questions of law involved in the application for leave to appeal could substantially affect its rights and in support of that application it relies upon both limbs of s 38(5)(b).
No appeal can be brought under the Act without leave by any party to an arbitration agreement except with the consent of all the other parties to the arbitration agreement or with leave of the Court: s 38(4). As I have already noticed the other parties refused to consent when their consent was sought.
In those circumstances Eltin is obliged to seek leave under s 38(4)(b). The Supreme Court shall not grant leave under that subsection unless it considers that the matter in s 38(5)(a) is made out and one of the matters in s 38(5)(b) has been made out.
In this case, as I say, Eltin claims that the determination of the question of law concerned could substantially affect the rights of one or more parties to the arbitration agreement. That matter is not in dispute on this application.
Leave therefore will depend upon Eltin making out that there is either a manifest error of law on the face of the award or strong evidence that the arbitrator 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.
There is no doubt that the intent of the act is to treat an arbitral award as final: Pioneer Shipping Limited v BTP Tioxide Limited (The Nema) [1982] AC 724; Qantas Airways Ltd v Joseland and Gilling (1986) 6 NSWLR 327. That is obvious from the terms of s 38(5) itself.
I recently considered applications of this kind in Giles v GRS Constructions Pty Ltd & Anor [2001] SASC 274. I will not repeat all the matters which I then considered but it can be understood that I will approach this application in the light of my comments in that case.
Eltin divided its application into two parts.
I set out the grounds in the draft Notice of Appeal:
“The grounds for appeal are that either:
1.There are manifest errors of law on the face of the Award in that, the Arbitrator in his Award:
1.1Failed to construe the Subcontract as incorporating clauses 37, 39 and 45 of the standard form Head Contract which would have had the effect of barring expressly or absolutely the claims of FNC (which were not made until October 2000), whereas there were express provisions in clauses 2.2 and 2.3 of the formal Subcontract that FNC:
1.1.1agreed to be bound by all the provisions of the Head Contract insofar as they related to the Sub-contract Works; and
1.1.2undertook the same obligations as were imposed upon Eltin in the Head Contract,
and he failed to address those provisions and to construe the Subcontract accordingly.
1.2Construed the Schedule of Rates as containing an express term as to rates payable from particular topsoil sources, whereas it expressly states that the Subcontract is a lump sum contract and the contractual acceptance letter of 11 June 1992 states that the tender is accepted on the understanding that it constitutes a Lump Sum Fixed Price and (apart from exclusions not here relevant) provides for all costs.
1.3Having found that there was a credit for $100,000 in early pleadings, held that the allowance was withdrawn in later pleadings, whereas paragraphs 28 and 29 of the Statement of Claim which made such allowance remained unamended and were reaffirmed in paragraph 1 of the Defence to Counterclaim.
1.4Having found that there were acknowledgements of the back charges for the months August to December 1992 and that the letter of 1 March 1993 was sent by FNC to Eltin, the Arbitrator failed to address the objections to pleading in paragraphs 34 and 39 of the Defence and the matters of withdrawal of admissions in pleadings as he ruled at the commencement of the Arbitration that he would.
1.5Failed to accept the summary sheets of equipment hire by Eltin to FNC which were tendered and admissible pursuant to the Evidence Act as being evidence of the back charges, and found that they were of no probative value or were displaced by unspecified accepted industry standards.
1.6Held that the absence of production of on site records by Eltin was fatal to its back charges claim whereas he found that FNC acknowledged that it was liable for some back charges and that it kept records of what they were, but did not tender them and was not liable for any back charges.
1.7Held that Eltin failed to make adequate attempts to locate on site records as to back charges when there was no evidence of any such failure and when the pleaded admissions of credit for back charges and acknowledgment of reliance upon them were not withdrawn from its pleading by FNC.
1.8Failed to find after accepting
1.8.1the following evidence of admissions of liability by FNC during 1992 and 1993 for back charges from Eltin:
1.8.1.1allowance in Progress Claim No. 4 of 1st October 1992 of $98,450,
1.8.1.2allowances in the 22nd December 1992 interim claim of credits for $100,000 for equipment use and assistance and for previous plant hire of $120,000,
1.8.1.3formulation in its letter of 1st March 1993 of its claim against Eltin specifically by reference to the back charges from Eltin for equipment hire for October to December 1992 in the sum of $130,000, and
1.8.1.4evidence of Berghofer (for FNC) accepting that Eltin had hired plant to FNC and that he had signed plant dockets
1.8.2the failure by FNC to raise any disputation concerning the back charges for equipment hire for a period of 9 years from 1992 until its Position Paper in the arbitration in October 2000 that it was a sufficient basis to require him to find that it was unconscionable to allow a defence to the counterclaim to first be raised in October 2000.
1.9Held that the express provisions Plan 22 which required 200mm of topsoil in Laleham Area 1 were inconsistent with Clause 11.03 of the Specifications which required a “minimum of 150mm” topsoil in all areas.
1.10Held that the absence of direct evidence that the pushing up of the stockpile in the extreme South area was not in pursuit of the agreement to do so without charge was a sufficient basis to award damages to FNC for the cost of pushing up the material in the sum of $92,010, whereas the ultimate onus to prove its damages was upon FNC and the absence of any evidence in its favour should mean that it failed, or
2.In the alternative to the matters set out in paragraphs 1.1 to 1.10 being manifest errors on the face of the award, there is strong evidence that the Arbitrator made errors of law which could substantially affect the rights of Eltin and FNC in that:
2.1the matters set out in paragraph 1.1 can operate as a complete bar to the entitlement of FNC to any amount in respect of its claims if not made in accordance with the Head Contract for provisions, thereby reducing the interim award in favour of FNC by approximately $433,000 (Volumes Claim + Stockpiling Claim + Transport Claim less paragraph 9);
2.2the matters set out in paragraph 1.2 would reduce the award by $106,779;
2.3the matters relating to the allowance of the claim for back charges set out in paragraphs 3 to 8 would reduce the amount of the interim award by up to approximately $309,000;
2.4the matters set out in paragraph 1.9 would reduce the award by $10,082;
and
2.5the matters set out in paragraph 1.10 would reduce the amount in the award by $15,861; and
are questions of law (which affect the interpretation of standard contracts) the determination of which are likely to add substantially to the certainty of commercial law.”
It identified those matters which it said were manifest errors of law on the face of the award and the other matters which it said were errors of law and the determination of the questions may be likely to add substantially to the certainty of commercial law.
Eltin’s application was supported by an affidavit of its solicitor. Far North tendered an affidavit in response to Eltin’s solicitor’s affidavit.
Mr Douglas QC, who appeared for Eltin objected to the tender of Far North’s solicitor’s affidavit but I ruled it admissible indicating that I would take into account the submissions made by Mr Douglas on the question of the weight to be accorded to the matters deposed to in the affidavit.
In due course grounds 1.9 and 1.10 were abandoned. I will say no more about them. I think ground 1.6 was abandoned although it is not entirely clear.
The draft Notice of Appeal seeks to agitate a number of different issues. Grounds 1 and 2 relate to the construction of the contract. Grounds 3 and 4 are pleading points. Grounds 5, 6, 7 and 8 raise, in my opinion, questions of fact.
It can be seen from the draft Notice of Appeal that Eltin has formulated its case by reference to both placita in s 38(5).
I am not satisfied that Eltin should be given leave to appeal in relation to grounds 5, 6, 7 and 8. I am not satisfied that there is a manifest error on the face of the award. Nor am I satisfied that there is strong evidence of an error of law and that a consideration of those matters would be likely to add substantially to the certainty of the commercial law. Leave should be refused in relation to those grounds.
Grounds 3 and 4 are pleading points. It is clear that the matter was over pleaded and over particularised. Far North filed a Statement of Claim. Eltin filed a Defence. An amendment was allowed to Eltin’s Defence. Far North filed a Reply. Thereafter Eltin was allowed to file a further amended Defence incorporating changes to the quantum of its counterclaim. Later still the arbitrator ordered both parties to file Statements of Position. After that the Statement of Claim and the Defence were both amended yet again on two occasions. It was not entirely clear from time to time whether the pleadings or the statements of position were regulating the conduct of the proceedings.
However, in my opinion, grounds 1.3 and 1.4 should not be the subject of leave. In respect of ground 1.3, the allowance which Far North had earlier conceded in its pleadings was unequivocally withdrawn in a witness proof which was delivered to Eltin. In any event I am not satisfied that any injustice was caused to Eltin in the manner in which the arbitrator proceeded. I think in any event that the ruling was a procedural one and does not amount to an error of law in respect of the award. Whether it amounts to misconduct is another matter which I do not need to decide.
In respect to ground 1.4 the arbitrator allowed the amendments which were sought by Far North. During the hearing Eltin complained that Far North’s ‘materials moved’ claim was the subject of a number of reformulations and that the changes were ‘procedurally and substantially unfair’.
There was no prejudice caused to Eltin. At least none has been identified. The arbitrator specifically had regard to the reformulations in considering the credibility of Far North’s claim but concluded, as was open to him, that the claims did not lack credibility because of those changes.
Neither ground is available upon the construction I would give to s 38(5) of the Act. I would refuse leave in respect of grounds 1.3 and 1.4.
Grounds 1.1 and 1.2 are different.
They relate to the construction of the contract itself.
Far North tendered for the works on 30 May 1992. By letter dated 11 June 1992 the joint venture purported to accept the tender.
The parties entered into a contract which was a subcontract to the Head Contract between the joint venture and SBCL.
Clause 2.2 and 2.3 of the sub-contract provided:
“2.2The Subcontractor acknowledges that he has pursued (sic) in details the Head Contract including its plans, specifications and general and special conditions and where applicable that part of the schedule of quantities which relates to the Subcontract Works (“the Contract Documents”) and that it is fully conversant with all provisions directly or indirectly affecting the Subcontract Works and agrees to be bound by, observe, perform and comply with all the provisions of the Contract Documents insofar as they relate to the Subcontract Works, except to the extent that they are varied by this.
Subcontract and in particular all the powers, rights and remedies of the Principal and of the Supervisor in the Contract Documents may be exercised against the Subcontractor by the Principal, Supervisor, or Contractor in addition to the rights, remedies and powers herein expressed.
2.3In respect of the Subcontract Works the Subcontractor will undertake and accept in favour of the Contractor the like obligations and liabilities as are imposed upon the Contractor in favour of the Principal by the terms of the Head Contract and will save harmless and indemnify the Contractor from and against all obligations and liabilities pertaining to the Subcontract Works and from and against all claims demand proceedings damages (including liquidated damages) under the Head Contract, costs charges and expenses arising out of or in connection with any dispute pertaining to the Subcontract Works or failure to perform such obligation or to fulfil such liabilities.”
It is Eltin’s contention that clause 2.2 has the effect of incorporating all of the terms of the Head Contract except to the extent that they are varied by the sub-contract. It is the applicant’s contention that they are the plain meaning of the words.
Eltin contends that in particular clauses 37 (variations), 39 (certificate and payments), 40 (payments of workers and sub-contractors) and 45 of the head contract are thereby included in the sub-contract.
In particular clause 45 provides:
“The Principal shall not be liable upon any claim by the Contractor in respect of any occurrence arising out of the Contract unless within fourteen (14) days of the commencement of the occurrence notification of intention to claim together with the nature and basis of the claim is lodged with the Superintendent; and within 28 days from the cessation of the occurrence, or within such a period as agreed by the Superintendent, a claim together with full particulars thereof, is lodged in writing with the Superintendent.
From the commencement of the occurrence, which may be the subject of a claim by the Contractor, the Contractor shall maintain separate records for all items affecting the claim and these records shall be subject to the scrutiny of the Superintendent’s representative.
In the event of any inconsistency between the provisions of this Clause and the provisions of any other Clause in the General Conditions of Contract requiring notice to be given or a claim to be made by the Contractor within the time specified in that Clause, the provisions of that other Clause shall prevail.”
Eltin contends that there is no other clause which would limit the operation of clause 45.
It is Eltin’s contention that no notice was ever given and the failure by Far North to observe those clauses which have been incorporated into the sub-contract means that the claim had to fail.
The arbitrator rejected Eltin’s contention and found that clauses 37, 39, 40 and 45 were not incorporated in the sub-contract and thereby found that Far North’s claims were not barred by notice requirements. He observed that the relevant clauses referred to the Principal, the Supervisor and the Contractor and said “and even taking into account the terms of clauses 2.2 and 2.3 of the agreement, set out earlier in these reasons, clauses 37, 39 and 45 cannot be sensibly read to create a notice obligation for the sub-contractor.”
Secondly he observed that there was to his knowledge no circumstances in the industry where the sub-contract was obliged to deal direct with the Principal in relation to variations, progress payments and notices.
The question of the construction of the subcontract is a matter of law. So also is the question of the construction of the Head Contract and in particular the construction of Clause 45: Jennings Construction Ltd v Q H and N Birt Pty Ltd (1986) 8 NSWLR 18; Opat Decorating Service (Aust) Pty Ltd v Hansen Yuncken (SA) Pty Ltd (1995) 11 BCL 360.
I am satisfied that it would be appropriate to grant leave to appeal in respect of paragraph 1.1 of the proposed Notice of Appeal.
That leaves ground 1.2.
That proposed ground also raises, in my opinion, a question of law.
In my opinion it would be appropriate to grant leave to appeal in respect of that ground.
Debelle J said in Leighton Contractors v SA Superannuation Fund Investment Trust (1994) 63 SASR 444 at 449:
“In this context it is relevant to note also that, generally speaking, a judge ought not normally to give reasons for a grant or refusal of leave to appeal from an arbitral award. He should follow the practice which is generally adopted in the case of application for leave to appeal. To do no more than say that the application is allowed or refused as the case may be: see Antaios where Lord Diplock advances the reasons for this approach (Antaios Compania Naviera SA v Salen Rederierna AB [1985] AC 191).”
In that same case Debelle J gave reasons for treating the case as an exception.
This case is also an exception in that the matter was fully argued over almost a day and I was presented with lengthy written submissions in support of each party’s contentions.
It seems to me appropriate that the parties be given reasons especially because I am refusing leave to appeal in respect of most of the grounds of appeal advanced.
I am also not sure that I can agree with the broad thrust of Debelle J’s dictum. In the Roy Morgan Research Centre Pty Ltd v Commissioner Of State Revenue [2001] HCA 49 Gaudron, Gummow, Hayne and Callinan JJ said in respect of an appeal to the Supreme Court of Victoria from the Civil and Administrative Tribunal:
“As has been noted earlier, the primary judge gave no reasons for refusing leave. It may be thought that some support for that course may be derived from Coulter v The Queen where it was said at 359-360 that the discretion to grant or refuse an application for leave or special leave to appeal ‘can commonly be exercised without the provision of detailed or, sometimes, any reasons.’ But it is very important to notice two considerations. First, what was said in Coulter related to the refusal of leave or special leave to appeal to a court - a process which is invoked only where there has been at least one earlier judicial disposition of the matter attended by full reasons for judgment. An application for leave under s 148(1) is the first engagement of judicial power and is an engagement of judicial power in respect of a controversy which is framed differently from, and more narrowly than, whatever may have been the controversy in the Tribunal. It is, therefore, not to be supposed in the course of argument in, and decision by, the Tribunal, even if taken with the course of argument before a judge of the Trial Division, will ordinarily reveal to the applicant with any certainty why it is that leave to bring proceedings under s 148(1) is refused. Secondly, as was recognised in Coulter, it is usual to give short reasons for refusing leave or special leave to appeal. Not giving reasons is exceptional.”
It may be that the dictum of Debelle J has to be reconsidered having regard to that recent statement of principle by the High Court.
In any event I have thought it necessary to give reasons for my decision.
Pursuant to s 38 of the Act, r 120 and r 97 of the Supreme Court Rules I grant leave to appeal to a single Judge in respect of grounds 1.1 and 1.2. Otherwise I dismiss the application for leave.
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