Eminent Forms Pty Ltd v Formosa

Case [2004] SASC 192


SUPREME COURT OF SOUTH AUSTRALIA

(Civil: Miscellaneous Appeal)

EMINENT FORMS PTY LTD v FORMOSA & ANOR

Judgment of The Honourable Justice Besanko

1 July 2004

CONTRACTS - BUILDING, ENGINEERING AND RELATED CONTRACTS - REMUNERATION - RECOVERY

ARBITRATION - THE AWARD - APPEAL OR JUDICIAL REVIEW - GROUNDS FOR REMITTING OR SETTING ASIDE - ERROR OF LAW

Appeal by leave against an interim award made by an arbitrator – the appellant entered into a contract with the respondents to make alterations and additions to the respondents’ home –appellant was to be paid the contract price by progress payments at the completion of various stages of the work – the appellant sought payment of the first progress payment but the respondents denied an obligation to make the first progress payment because the Stage 1 works were not completed  – the respondents asked the appellant to put the works on hold until problems with work performed in Stage 1 of the contract were addressed – the appellant served a notice of termination on the respondents on the ground that the respondents were in breach of contract by their refusal to make the first progress payment because the Stage 1 work had been completed and by a number of other breaches – the respondents asserted that the purported termination by the appellant constituted an unlawful repudiation of the contract and the respondents accepted the repudiation – the arbitrator found that the appellant had wrongfully repudiated and that the respondents had accepted the repudiation – the arbitrator made an award of $22,164.00 in favour of the respondents and made no allowance for the work done by the appellant – whether the arbitrator erred in finding that certain work not completed by the appellant was a part of the Stage 1 work – whether the arbitrator erred in finding that the respondents were not in breach of their obligations under the contract not to take possession of the building area and not to disrupt the work – whether the appellant had substantially performed the Stage 1 work such that it was entitled to recover the first progress payment – discussion of the doctrine of substantial performance – whether, if the appellant is not entitled to relief on the contract, the appellant is entitled to restitutionary relief by way of a claim on a quantum meruit – discussion of the principles of quantum meruit in relation to work performed on land – whether the appellant should be given leave to challenge the award in respect of compensation awarded to the respondents for the front verandah – appeal allowed.

Commercial Arbitration Act 1986 s 38, referred to.
Hoenig v Isaacs [1952] 2 All ER 176, applied.
H Dakin & Co Ltd v Lee [1916] 1 KB 566; Bolton v Mahadeva [1972] 2 All ER 1322; Sumpter v Hedges [1898] 1 QB 673; Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221; Steele v Tardiani (1946) 72 CLR 386, discussed.
Leighton Contractors Pty…

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Eminent Forms Pty Ltd v Formosa [2004] SASC 192
Case
[2004] SASC 192
Decision Date

CaseChat Overview and Summary

In the case of Eminent Forms Pty Ltd v Formosa, the appellant sought to challenge an interim arbitration award made in favour of the respondents. The dispute originated from a contract between the parties for the appellant to undertake alterations and additions to the respondents’ home. The appellant sought payment of the first progress payment, but the respondents denied the obligation to make such payment due to incomplete Stage 1 works. The appellant subsequently terminated the contract, and the respondents accepted the termination. The arbitrator found that the appellant had wrongfully repudiated the contract and awarded $22,164.00 to the respondents without accounting for the work done by the appellant.

The appeal centred on several legal issues. Firstly, whether the arbitrator erred in determining that certain work not completed by the appellant constituted part of the Stage 1 work. Secondly, whether the arbitrator erred in concluding that the respondents were not in breach of their contractual obligations not to take possession of the building area and not to disrupt the work. Thirdly, whether the appellant had substantially performed the Stage 1 work, entitling it to recover the first progress payment. Fourthly, if the appellant was not entitled to relief under the contract, whether it could claim restitutionary relief on a quantum meruit basis. Lastly, whether the appellant should be granted leave to challenge the award regarding compensation awarded to the respondents for the front verandah.

The court examined the doctrine of substantial performance, determining that if the appellant had substantially performed Stage 1, it would be entitled to the first progress payment. The court also considered the principles of quantum meruit in relation to work performed on land, evaluating whether the appellant could claim restitutionary relief if not entitled to relief on the contract. Ultimately, the court found that the arbitrator had erred in several respects, leading to the conclusion that the appeal should be allowed, and the award set aside. The court ordered that the appellant could claim the first progress payment minus the cost of specific work, while the respondents could recover costs for defective works, sundry items, and compensation for inconvenience and stress. The balance in favour of the appellant was set at $12,398.50, with further hearings to determine appropriate orders, interest, and costs.

Orders

Orders of the court

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Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

There is a question as to whether leave to appeal should be granted in relation to this complaint, and I would have to say that the answer to that question is fairly described as borderline. However, having regard to the approach taken in Angela Kinnane v Zee Homes Pty Ltd (supra), I am prepared to grant leave.Conclusions The appeal must be allowed and the award made by the arbitrator must be set aside. The appellant is entitled to claim from the respondents the first progress payment ($31,423.50) minus the cost of applying two slurry coats of xypex ($2,340.00) giving a total of $29,083.50. The respondents are entitled to recover from the appellant the cost to make good other defective works ($6,291.00), the various sundry items ($894.00) and the compensation for inconvenience and stress ($9,500.00) giving a total of $16,685.00. This leaves a balance in favour of the appellant of $12,398.50. I will hear the parties as to the appropriate orders, interest and costs.

Ratio Decidendi

Legal Principle Established

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