Highway Construction Pty Ltd v Commissioner of Main Roads - [2011] WASCA 27

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

TITLE OF COURT : THE COURT OF APPEAL (WA)

CITATION: HIGHWAY CONSTRUCTION PTY LTD -v- COMMISSIONER OF MAIN ROADS [2011] WASCA 27

CORAM: PULLIN JA
MURPHY JA
ALLANSON J

HEARD: 2 FEBRUARY 2011

DELIVERED : 11 FEBRUARY 2011

FILE NO/S: CACV 15 of 2010

BETWEEN: HIGHWAY CONSTRUCTION PTY LTD
Appellant
AND
COMMISSIONER OF MAIN ROADS
First Respondent
STEVEN GOLDSTEIN
Second Respondent

ON APPEAL FROM:
Jurisdiction              :  SUPREME COURT OF WESTERN AUSTRALIA
Coram  :HALL J
Citation  :HIGHWAY CONSTRUCTION PTY LTD -v- COMMISSIONER OF MAIN ROADS [2010] WASC 9
File No  :CIV 2221 of 2009

Catchwords:

Contract - Construction and interpretation - Expert determination agreement - Whether 'matters in dispute' includes costs of Supreme Court action - Turns on own facts

Legislation:

Rules of the Supreme Court 1971 (WA), O 35

Result:

Appeal dismissed

Category: B

Representation:

Counsel:

Appellant:     Mr M J McCusker QC & Mr A Metaxas
First Respondent           :     Mr P J Ward
Second Respondent      :     No appearance

Solicitors:

Appellant:     Metaxas & Hager
First Respondent           :     Blake Dawson
Second Respondent      :     No appearance

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

Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99
Highway Construction Pty Ltd v Commissioner of Main Roads [2010] WASC 9
Mullin v Monico (1877) 3 CPD 142
Super Pty Ltd v SJP Formwork (Aust) Pty Ltd (1992) 29 NSWLR 549
Sydney and Suburban Hydraulic Power Co v Mercantile Mutual Insurance Co (1896) 17 LR (NSW) 323
Wenco Industrial Pty Ltd v WW Industries Pty Ltd [2009] VSCA 191

REASONS OF THE COURT:

Introduction

This is an appeal against the decision of the learned primary judge in relation to the proper construction of a written contract between the appellant, the first respondent and the second respondent. In the proceedings below, the appellant was the plaintiff, the first respondent was the first defendant, and the second respondent was the second defendant. The appellant had sought, amongst other things, a declaration as to the proper construction of the agreement and, in particular, as to the scope of the power conferred on the second respondent as an expert in the determination of certain disputes between the appellant and the first respondent. There was no appearance in the proceedings below or in the appeal by the second respondent (the expert).
The relevant background is conveniently taken from his Honour's reasons in Highway Construction Pty Ltd v Commissioner of Main Roads [2010] WASC 9 [1] ‑ [5]:
The plaintiff is in the business of building roads. In 2000 it was contracted by the first defendant to construct two portions of the Ripon Hills Road. In 2002 it was further contracted by the first defendant to undertake work on the Eyre Highway. In respect of both of these matters there were disputes as to the work done. The disputes led to proceedings in this court being CIV 1266 of 2005 (Ripon Hills) and CIV 2657 of 2004 (Eyre Highway).
The parties eventually agreed to submit the matters in dispute to an expert for a binding determination. That agreement was formalised in a document entitled 'Expert Determination Appointment Agreement' (the agreement), signed by both parties and by the appointed expert on 1 November 2006. The expert, Mr Steven Goldstein, is the second defendant in these proceedings. I will hereinafter refer to him as the expert as the present dispute is essentially between the plaintiff and the first defendant.
On 20 June 2007 the expert made a determination as to the liability of the parties in respect of the construction work. The determination was in favour of the first defendant on the Ripon Hills dispute and in favour of the plaintiff on the Eyre Highway dispute. The determination did not include any findings in respect of costs, but the parties were invited to make submissions to the expert in that regard.
On 5 March 2009 the first defendant submitted to the expert a claim for legal costs in respect of the Ripon Hills dispute. That claim included costs incurred both before and after the agreement was made. That is to say, it included legal costs that related to the court proceedings in CIV 1266 of 2005.
Both parties accept that the expert was permitted to make a determination as to costs, but there is a dispute as to whether that power was limited to costs for work done in relation to the determination process. The plaintiff contends that on a proper construction the agreement only permits the expert to determine costs in relation to the expert determination process and that does not include costs incurred before the agreement was made. The first defendant contends that the agreement empowers the expert to determine all of the matters in dispute and that includes pre-agreement costs because the claim in CIV 1266 of 2005 included a claim for the costs of those proceedings. The resolution of these contesting positions depends entirely on the construction of the agreement. Accordingly, the parties agreed that all of the relevant documentary evidence could be tendered by consent and that no witnesses were required.
The learned trial judge canvassed the issues raised in relation to the proper construction of the agreement and expressed his conclusions as follows [43]:
In my view the phrase 'matters in issue' includes the costs of the proceedings in the Supreme Court in CIV 1266 of 2005. The phrase 'all matters presently before the Supreme Court' is clear and unambiguous. Accordingly, the expert had the power to determine those costs pursuant to cl 9.3 of the agreement. I come to that conclusion having regard to the following:
1.That the object and purpose of the agreement was to bring to a final conclusion the disputes between the parties;
2.That this interpretation is consistent with cl 11 of the agreement and in particular the references to the determination giving effect to a final resolution of the disputes;
3.That on a literal reading of cl 9.3 read with the schedule the expert has a power to determine the costs of the proceedings;
4.That such a reading does not result in absurdity or commercial inconvenience, rather it promotes it by ensuring that all elements of the matters in dispute are conclusively determined by the expert appointed by the parties.
5.There is no ambiguity in cl 9.3 or the schedule and no inconsistency between those provisions and other terms of the agreement;
6.Even if there were ambiguity, the surrounding circumstances support a reading which gives the expert power to determine all matters in dispute, including pre‑agreement costs.

Grounds of appeal

The appellant's ground of appeal is in the following terms:
Grounds of Appeal
The learned trial Judge erred in law in holding that on its proper construction the Expert Determination Agreement ('the Agreement') empowered the Second Respondent ('the Expert') to determine what costs and disbursements in Supreme Court action CIV 1266 of 2005 the Appellant should pay to the First Respondent.
Particulars
1.The Agreement contained a provision empowering the Expert to include in his determination of 'the matters in dispute' the costs and disbursements of and in relation to the 'expert determination process' to be paid to one of the parties. There was no provision empowering him to include legal costs and disbursements in CIV 1266 of 2005. His Honour failed to give proper or any weight to that fact, in construing the Agreement.
2.The learned trial Judge erred in holding that 'the matters in dispute' referred to the Expert for determination, as defined in The Schedule, meant not only the issues raised by the pleadings in CIV 1266 of 2005, but also the claim for costs in the prayer for relief.
3.The learned trial Judge erred in holding that his construction was supported by principles applicable to the construction of commercial contracts, and the perceived 'purpose and object' of the Agreement.
4.The learned trial Judge erred in treating, as relevant to the construction of the Agreement, a number of irrelevant matters.
We will refer to the proceedings in CIV 1266 of 2005, to which reference is made in the grounds of appeal, as the 'Ripon Hills proceedings'.

The provisions of the agreement

His Honour recorded [22] ‑ [23]:
The crucial clause for the purposes of these proceedings is cl 9. That clause provides as follows:
9.Expert Determination
9.1The Expert shall act consistently with this Agreement.
9.2The Expert shall:
(a)take into consideration all documents, witness statements, information and other written and oral material that the parties place before the Expert including documents, witness statements, information and material relating to the facts in dispute and to arguments and submissions upon the matters in dispute provided that submissions by each party shall not exceed 40 pages in length (and the Rules of the Supreme Court of Western Australia as to documents shall apply thereto as to font size and spacing);
(b)not be expected or required to obtain or refer to any other documents, information or material but may do so if the Expert so desires.
9.3The Expert shall make the Expert's determination on the matters in dispute:
(a)On the basis of information received from the parties and, subject to the requirements of procedural fairness, the Expert's own expertise;
(b)In accordance with the law;
(c)Within 30 days after receipt of the parties' submissions or as agreed in any subsequent conference with the parties provided that documents, witness statements, information and other written and oral material from the parties will not be required before 15 December 2006;
(d)In writing with sufficient reasons for the parties to understand the basis of the determination.
9.4Where a party has been afforded a reasonable opportunity to make submissions or provide any other material to the Expert but has not done so, the Expert may proceed to determine the matters in dispute without the submissions or material and the affected party hereby waives any objection it may have to the Expert's determination which is based on the Expert proceeding in the absence of the submissions or material.
9.5Except to the extent that the parties' contract or the law requires a particular determination of entitlement to interest and/or costs, the Expert may include in the determination:
(a)whatever interest the Expert considers reasonable on any monetary sum determined as payable; and
(b)(following submissions) whatever costs the Expert considers it appropriate and reasonable for one party to pay to the other in relation to the legal and other costs and disbursements of and in relation to the Expert Determination.
9.6The matters in dispute are the matters referred to in the Schedule.
The schedule to the agreement provided as follows:
Matters in dispute: All the matters presently before the Supreme Court of Western Australia in:
(a)CIV 1266 of 2005 between the Commissioner of Main Roads and Highway Construction Pty Ltd; and
(b)CIV 2657 of 2004 between Highway Construction Pty Ltd and the Commissioner of Main Roads.
Other provisions in the agreement included cl 8 and cls 11.4 ‑ 11.6:
8. View
8.1Upon application of a party or of the Expert's own volition, the Expert may direct that a view be conducted of the site or any other place or thing relevant to the matters in dispute by the Expert in the company of representatives of the parties.
8.2The Expert may draw any reasonable inference from what he sees, hears or otherwise observes during a view.
...
11.Nature of Proceedings
...
11.4The Expert's determination shall be final and binding upon the parties.
11.5Within 28 days of the parties receiving the final and binding determination of the Expert, the parties will take whatever steps and execute whatever documents are necessary to finally resolve proceeding CIV 2657 of 2004 and CIV 1266 of 2005 in the Supreme Court of Western Australia in terms appropriate to give effect to the Expert's determination. Such documents may include, without limitation, a consent judgment, a notice of discontinuance and/or a deed of settlement and release but will include, if required by the other party, orders which will constitute a judgment of the Supreme Court and be enforceable on that basis.
11.6In the event of dispute between the parties as to the form or content of such documents, the Expert shall direct the parties to execute such documents in terms the Expert determines are necessary and appropriate to give effect to the Expert's determination and to resolve the said proceedings.

Disposition of the appeal

By way of general observation, we see no error in the primary judge's reasons.

Particular 1

The first matter relied upon by the appellant is question‑begging. The question for his Honour was whether, properly construed, there was a provision empowering the expert to determine the legal costs and disbursements of the Ripon Hills proceedings. The assertion that the judge failed to give any or any proper weight to the absence of such provision involves an assumption that, properly construed, there was no provision empowering the expert to determine the costs of the proceedings. However, the correctness of that conclusion was the point in issue. Moreover, the express power given to the expert in cl 9.5(b) to determine the costs in relation to the process of expert determination is clearly separate from, and in addition to, the power to determine the 'matters in dispute' (cl 9.3) being, according to cl 9.6 and the Schedule, all of the matters before the court in the Ripon Hills proceedings, including the claim for costs.

Particular 2

In relation to the second matter relied on by the appellant, concerning the scope of the words 'matters in dispute', the appellant advances in substance six arguments. The first is that the words 'matters in dispute' in cl 9.3, by their ordinary meaning, are insufficient to encompass a claim for costs in the Ripon Hills proceedings. The appellant contends that the words 'matters in dispute' denote, simply, 'issues in dispute', or 'pleaded issues'. We are unable to accept that submission. The agreement does not use the words 'issues in dispute', or 'pleaded issues'. Moreover, the words 'matters in dispute' were, through cl 9.6, in effect, defined in the Schedule to mean '[A]ll the matters presently before the Supreme Court of Western Australia in [the Ripon Hills proceedings]'.
In the Ripon Hills proceedings, the respondent's prayer for relief included a claim for costs. The appellant pleaded, in its defence:
36.The defendant [appellant] denies that the plaintiff [respondent] is entitled to the relief claimed or any relief.
The court in the Ripon Hills proceedings thus had before it a claim for costs, an order for which would ordinarily have been made as part of the dispositive orders made in the proceedings. It is not to the point that costs are ordinarily awarded once the substantive issues have been decided by the court. That does not alter the fact that costs are ordinarily part of the dispute for curial resolution.
In this case, the matters 'before the Supreme Court' clearly involved the question of the costs of the proceedings. In our view, the ordinary meaning of the words 'matters in dispute' in the sentence in which they appear in the Schedule and as they appear in cl 9.3 and cl 9.6, is not limited to the pleaded issues in the litigation. Even if they were confined to the matters pleaded, the appellant had expressly put in issue, by its pleading, the respondent's claim for costs.
The appellant's second argument is that other provisions in the agreement confine the scope of the words used in the Schedule and picked up by cl 9.3 and cl 9.6. The appellant says that cl 8, which empowers the expert to conduct a view 'of the site or any other place or thing relevant to the matters in dispute' is inconsistent with the construction found by the judge. We do not accept that submission. The resolution of some of the matters in dispute may be assisted by a view. Others, such as costs or the construction of a document, would not. Clause 8 is facultative and does not restrict or qualify the meaning of the words 'matters in dispute'.
The appellant also says that cl 9.4, which empowers the expert to determine, in specified circumstances, matters in dispute without submissions from the parties, is inconsistent with the judge's construction. We disagree. Clause 9.4 does no more than empower the expert to make a determination where natural justice has been afforded to a party, but the party, nevertheless, fails to make submissions or provide material to the expert.
The appellant then says that the presence of cl 9.5(b) confines the scope of the wording in the Schedule. We have dealt with this in relation to the first matter raised by the appellant. Next, the appellant says that cl 11.5 is inconsistent with the judge's construction of the agreement. In our view, cl 11.5 supports it. Once a determination is made, the parties are to take steps, and execute documents, 'necessary to finally resolve' the Ripon Hills proceedings. Clause 11.5 indicates that the expert determination is to resolve all matters in the proceedings.
The third argument is that the judge's construction is 'capricious or unreasonable' because O 20 r 2(1) of the Rules of the Supreme Court1971 (WA) provides that costs need not be specifically pleaded in order to be recoverable. We do not accept that argument. Order 20 r 2(1), if anything, supports the judge's construction. It indicates that costs were intrinsically part of the dispute in the Supreme Court in the Ripon Hills proceedings.
The fourth argument is that O 26 r 1(1), which refers to a 'matter in question' in relation to discovery, is a factor weighing against the judge's construction. We do not accept that argument. Procedural rules concerning discovery do not assist in the proper construction of the agreement.
The fifth argument is in these terms:
It is not uncommon for parties to litigation to agree to resolve the matters in dispute in the litigation, by arbitration. Where an arbitration agreement provides for 'the costs of and in relation to' the arbitration to be determined by the arbitrator, without more, an arbitrator could not make an award of any costs, other than those incurred in the arbitration itself.
The appellant also refers to Sydney and Suburban Hydraulic Power Co v Mercantile Mutual Insurance Co (1896) 17 LR (NSW) 323, a case concerning the proper construction and application of the Arbitration Act 1892 (NSW). We are unable to see how the hypothetical reference to arbitration, or the case mentioned, sheds any light on the proper construction of the agreement in this case.
The sixth argument is that the judge's construction is not 'sensible' because the parties could not reasonably have intended that 'a person with no expertise in litigation costs in this State should be empowered (instead of the Supreme Court Taxing Master) to determine them'. In this regard, the appellant refers to cl 9.3, which refers to the use of the expert's expertise. It is said that the determination of costs is not without its complexity, and may involve the exercise of discretion in relation to special costs orders. Here, the expert had both engineering qualifications and legal qualifications. He was a barrister at the New South Wales Bar (reasons [32]). The costs scale in this State is published. No doubt there could be a degree of complexity in both the engineering and costs aspects of the dispute. In our view, it could not be said that the judge's construction involves imputing to the parties a nonsensical intention.

Particulars 3 and 4

The appellant's submissions with respect to the third and fourth matters relied upon in support of the ground of appeal, are to the effect that the judge erred in applying the principles of construction outlined by Gibbs J in Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99, 109, and thereby took into account irrelevant considerations. This submission is somewhat unusual, since the appellant, as part of its arguments in support of particular 2, in substance relies upon the principles outlined by Gibbs J in Australian Broadcasting Commission. Gibbs J said (109):
It is trite law that the primary duty of a court in construing a written contract is to endeavour to discover the intention of the parties from the words of the instrument in which the contract is embodied. Of course the whole of the instrument has to be considered, since the meaning of any one part of it may be revealed by other parts, and the words of every clause must if possible be construed so as to render them all harmonious one with another. If the words used are unambiguous the court must give effect to them, notwithstanding that the result may appear capricious or unreasonable, and notwithstanding that it may be guessed or suspected that the parties intended something different. The court has no power to remake or amend a contract for the purpose of avoiding a result which is considered to be inconvenient or unjust. On the other hand, if the language is open to two constructions, that will be preferred which will avoid consequences which appear to be capricious, unreasonable, inconvenient or unjust, 'even though the construction adopted is not the most obvious, or the most grammatically accurate', to use the words from earlier authority cited in Locke v Dunlop, which, although spoken in relation to a will, are applicable to the construction of written instruments generally; see also Bottomley's Case. Further, it will be permissible to depart from the ordinary meaning of the words of one provision so far as is necessary to avoid an inconsistency between that provision and the rest of the instrument. Finally, the statement of Lord Wright in Hillas & Co Ltd v Arcos Ltd, that the court should construe commercial contracts 'fairly and broadly, without being too astute or subtle in finding defects', should not, in my opinion, be understood as limited to documents drawn by businessmen for themselves and without legal assistance (cf Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd). (Footnotes omitted)
In our view, the judge was correct to apply those principles. This was a commercial contract for the resolution of a commercial dispute between commercial parties. The appellant, nevertheless, says that the preceding principles of construction have no application because the contract was 'analogous to a reference by the Court to a referee under O 35 r 2'. We do not accept that submission. The determination by the expert under this agreement was antithetical to the process of curial referral to a referee. Section 50 of the Supreme Court Act1935 (WA) provides:
50.Question in civil matter may be referred to referee etc.
(1)Subject to the rules of court, and to any right to have particular cases tried by jury, the Court or a judge may refer to a master or a registrar or to a referee for inquiry or report any question arising in any cause or matter, other than a criminal proceeding.
(2)The report of the master, registrar or referee may be adopted wholly or partially by the Court or a judge, and, if so adopted, may be enforced as a judgment or order to the same effect.
By O 35 r 7, notice of a report made by a referee is to be served forthwith on all parties to the trial or reference.
A referee appointed to report does not dispose of the action nor does he or she determine any matter in issue between the parties. The referee's duty is not to determine issues of fact or law, but to define the materials on which the court is to act: Mullin v Monico (1877) 3 CPD 142 (Bramwell LJ). The judge exercises a judicial discretion as to whether or not he or she will adopt the report of a referee. See, generally, Super Pty Ltd v SJP Formwork (Aust) Pty Ltd (1992) 29 NSWLR 549; Wenco Industrial Pty Ltd v WW Industries Pty Ltd [2009] VSCA 191.
In this case, it was the parties who, by contract, agreed to a process of expert determination. There was no order of the court. The parties agreed that the expert's determination should be 'final and binding' (cl 11.4), and the parties agreed to 'take whatever steps and execute whatever documents [were] necessary to finally resolve [the proceedings] ... in terms appropriate to give effect to the Expert's determination' (cl 11.5). We see no analogy in this case with O 35 r 2.
The appellant also contends that the judge erred in finding that the 'evident purpose and object of the agreement was to put an end to the disputes between the parties and thereby avoid further litigation' (reasons [19]), because, it says, there 'was no provision to [that] effect'. However, his Honour's finding in that regard was evidently drawn from a consideration of the terms of the agreement as a whole, read in the context in which the agreement was made. In our view, his Honour was correct and no error has been shown in relation to the third and fourth matters relied upon by the appellant. The matters considered by the judge at [35] and [38] of his Honour's reasons were not irrelevant considerations.

Conclusion

Accordingly, we would dismiss the appeal.