Milligan Contractors Pty Ltd v Jaxon Construction Pty Ltd
[2004] WASC 134 (S)
MILLIGAN CONTRACTORS PTY LTD & ANOR -v- JAXON CONSTRUCTION PTY LTD & ANOR [2004] WASC 134 (S)
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2004] WASC 134 (S) | |
| Case No: | ARB:5/2003 | 12 MAY, 23 JUNE 2004 | |
| Coram: | MASTER SANDERSON | 17/06/04 | |
| 1/07/04 | |||
| 14 | Judgment Part: | 1 of 1 | |
| Result: | Application dismissed | ||
| B | |||
| PDF Version |
| Parties: | MILLIGAN CONTRACTORS PTY LTD JE MILLIGAN JAXON CONSTRUCTION PTY LTD ADRIAN GOOLD |
Catchwords: | Arbitration award Application to remove arbitrator on basis of misconduct Turns on own facts |
Legislation: | Commercial Arbitration Act 1985, s 38 |
Case References: | Milligan Contractors Pty Ltd & Anor v Jaxon Construction Pty Ltd & Anor [2003] WASC 220 Villani & Anor v Delstrat Pty Ltd & Anor [2002] WASC 112 Nil |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
DECISION : 1 JULY 2004 FILE NO/S : ARB 5 of 2003
- ARB 6 of 2003
- JE MILLIGAN
Applicants
AND
JAXON CONSTRUCTION PTY LTD
First Respondent
ADRIAN GOOLD
Second Respondent
Catchwords:
Arbitration award - Application to remove arbitrator on basis of misconduct - Turns on own facts
(Page 2)
Legislation:
Commercial Arbitration Act1985, s 38
Result:
Application dismissed
Category: B
Representation:
Counsel:
Applicants : Mr A J Goldfinch
First Respondent : Mr R D Shaw
Second Respondent : No appearance
Solicitors:
Applicants : Goldfinch & Co
First Respondent : Phillips Fox
Second Respondent : No appearance
Case(s) referred to in judgment(s):
Milligan Contractors Pty Ltd & Anor v Jaxon Construction Pty Ltd & Anor [2003] WASC 220
Villani & Anor v Delstrat Pty Ltd & Anor [2002] WASC 112
Case(s) also cited:
Nil
(Page 3)
1 MASTER SANDERSON: On 17 June 2004 I published reasons and dismissed the applicants' applications for leave to appeal the third interim award of the second respondent. At the time I published those reasons, counsel for the applicants pointed out that there was an amended notice of originating motion dated 7 April 2004 which sought to remove the second respondent as arbitrator on the basis of misconduct. Counsel pointed out that I did not deal directly with this issue in my reasons. He was quite correct. The purpose of these supplementary reasons is to deal with that issue.
2 In the amended originating summons, broad complaints as to misconduct are made against the second respondent. It is convenient if I set out what is said by the applicants in their amended originating summons (marking up omitted).
"A. Misconduct
1A. The second respondent misconducted the arbitration by ignoring or not complying with the orders of Master Sanderson made 23 February 2004 in that the second respondent did not provide an award which:
(a) clearly identified the issues between the parties;
(b) made a determination on each of those issues; and
(c) provided the second respondent's reasons for coming to each such determination.
1B. The third interim award delivered by the second respondent was in exactly the same terms as the second interim award which was set aside by the order of Master Sanderson made 23 February 2004 save that the second respondent added further italicised paragraphs. The second respondent thereby misconducted the arbitration by prejudging the issues.
- 1C. (a) The first respondent stated in paragraph 4.5.6 of the third interim award that he found that the Builder achieved practical completion on 15 April 2002.
(b) The relevant dispute in the arbitration was whether practical completion had occurred on
(Page 4)
- 20 March 2002. The arbitration on that issue resulted from the terms of clause 19(b) of the contract because there was no pre-handover inspection.
- (c) The second respondent acted without jurisdiction in making the purported 'finding' that practical completion had occurred on 15 April 2002 because the notification requirements by the first respondent set out in condition 19 of the contract were not complied with.
(d) In any event, the purported finding that practical completion occurred on 15 April 2002 was an arbitrary date and no or no proper reasons were given as to why that date was chosen by the second respondent.
(e) The statement by the second respondent in paragraph 4.5.5 of the third interim award that the Proprietors' (applicants') work did not prevent Practical Completion is contrary to the definition of practical completion in clause 19 and to the Addenda to the specifications which set out the Proprietor's obligations and the Builder's powers. Practical Completion as defined in clause 19 of the contract is an objective state of affairs and is not qualified by and does not exclude Proprietor's works.
(f) The finding that practical completion was achieved by 15 April 2002 was contrary to the evidence.
(g) Accordingly, the second respondent by his 'findings' on practical completion misconducted the arbitration.
- 1D. The second respondent misconducted the arbitration by failing to deal with and decide material issues the subject of the arbitration including the following issues:
(Page 5)
- (a) (i) Whether the first respondent as builder achieved practical completion of the works the subject of the arbitration.
(ii) Whether a failure of the first respondent to achieve practical completion precluded the first respondent from claiming the final claim under the contract.
(b) (i) Whether the contract was terminated by the applicants.
(ii) Whether a termination by the applicants precluded the first respondents from claiming the balance of progress claim 4 and the final claim.
(c) (i) Whether special condition 1 which purported to give the first respondent the right to recover GST was unenforceable as being unsupported by consideration.
(ii) Whether the first respondent by claiming GST in progress claims was precluded from claiming any further GST pursuant to a 'variation'.
(d) (i) Whether the contract drawings were 'prepared' by the applicants or the first respondent.
(ii) If the contract drawings were 'prepared' by the applicants, and if they contained discrepancies, the effect of a failure by the first respondent to seek a variation or variation as required by clause 3(d) of the contract.
- (e) Whether some of the heads of damages for delay claimed by the first respondent were variations which should have been, but were not, claimed under the variation clause of the contract.
(Page 6)
- (f) Whether the first respondent had a power or right to seek variations or directions from the applicants and if so, whether any failure by the applicants to give directions or variations caused any delay.
(g) (i) Whether a letter dated 7 February 1990 tendered by the first respondent as evidence of its Administration and Overhead Claim and objected to by the respondents was irrelevant and inadmissible as evidence.
(ii) Whether a global claim for damages for delay without identifying which parts of the alleged delay were caused by the applicants was a proper claim.
(iii) Whether the use by the first respondent of a modified 'Hudson' formula was appropriate and whether the first respondent laid the necessary evidential foundation for the use of the formula.
(i) Whether the right of the first respondent to claim delay costs depended on the grant of an extension of time and whether the failure of the respondent to seek extensions of time thereby precluded any claim for 'damages' for delay.
(j) (i) Whether the valuation evidence relied upon by the first respondent to defend the applicants' claim for damages for delay was irrelevant and valueless.
(Page 7)
- (ii) Whether the reliance by the first respondent on the valuation evidence was an impermissible attempt by the first respondent to take advantage of its own wrong.
(iii) Whether documentation and submissions provided by Mr RS Milligan, on behalf of the firstnamed applicant, rebutted the first respondent's valuation evidence.
(iv) What damages for delay the applicants were entitled to based on the evidence led and the opinion tendered on the rental value of the subject property.
- (k) (i) Whether the contract included the following implied terms:
(A) an implied term of co-operation;
(B) an implied term that the first respondent would act reasonably in exercising its powers under the contract;
(C) An implied term that the first respondent would act in good faith in the exercise of its contractual powers.
- (ii) Whether the first respondent breached those implied terms by taking the parties to an earlier arbitration.
(iii) Whether the applicants suffered damage as a result of a breach of those implied terms by the first respondent.
(l) (i) Whether the first respondent failed to carry out the works properly.
(ii) Whether such failure by the first respondent required the applicants to supervise and check the first respondent's work.
(Page 8)
- (iii) Whether the applicants were entitled to damages being the costs of that supervision.
- (n) The issue of the encroachment over the boundary of the subject property.
- 2. The second respondent misconducted the arbitration by the following conduct:
(a) (i) The failure of the second respondent to give any or any proper reasons for the conclusions reached in the award for his findings on responsibility for delay.
(ii) The making of findings on delay in paragraphs 4.2, 4.3, 4.4, 4.5 and 4.6 of the third interim award which are arbitrary and lack rationality.
(iii) The uncritical acceptance by the second respondent in paragraph 4.2 of the third interim award of the third respondent’s summary of the evidence contained in the first respondent’s submissions and the failure to independently consider the evidence.
(iv) The failure of the second respondent to give any or any proper reasons for his finding in paragraphs 4.2.2 and 6.2 that the applicants caused interference to the progress of the work.
(v) The failure of the second respondent to give any or any proper reasons for the finding that there were considerable errors in the drawings which were not discovered before construction started onsite, and which contributed to the delay.
(vi) The making of a finding that because the applicants' architect and engineer prepared the architectural drawings and structural
(Page 9)
- drawings the contract documents were prepared by the applicants and the failure to give any or any proper reasons for that finding.
- (b) The failure of the second respondent to give any reasons for his finding in paragraph 5.2 of the third interim award that there was no breach of the Trade Practices Act.
(c) (i) The making of an arbitrary 'determination' of a date of practical completion 'for the purpose of determining the parties' responsibility for delay.'
(ii) The use by the second respondent of a reference in an unsigned and undated draft of a proposed settlement agreement to a new practical completion date of 16 weeks from the signing of the settlement agreement. The second respondent used the 16 week period when 'determining' the parties 'responsibility' for delay.
(iii) The determination by the second respondent in paragraph 4.3 of the third interim award that the applicants were responsible for half the delay during the period 11 August 2000 to 27 February 2001 when the first respondent had abandoned any claim that the applicants had caused delay during that period.
(iv) The determination by the second respondent in paragraph 4.4 of the third interim award that the applicants were responsible for half the delay during the period 26 February 2001 to 17 October 2001 when the first arbitration had taken place during that period and when the second respondent had stopped work and had not sought an extension of time.
(Page 10)
- (v) The determination by the second respondent in paragraph 4.5 of the third interim award that the applicants were responsible for 4 weeks of the delay during the period 18 October 2001 to Practical Completion when the first respondent had not made any claim, alternatively had abandoned any claim, that the applicants had caused delay during that period.
(vi) The award by the second respondent of damages in favour of the first respondent for delay by the applicants when, apart from alleging responsibility for delay, the second respondent made no finding that the applicants had breached the contract and identified no other basis upon which the applicant could be liable for damages for delay.
(vii) The reliance by the second respondent in paragraphs 4.2.11 and 6.2 of the third interim award on clauses 16(d) (the events of termination clause) and 9(b)(iii) (iv) and (viii) (the extension of time clause) as grounding a right to damages when these clauses were not terms of the contract or covenants by the applicants and were irrelevant to claims for damages.
- (d) (i) The dismissal of the applicants' claim for damages for inconvenience and distress because the first respondent did not claim damages for inconvenience and distress.
(ii) The dismissal of the applicants' claim for damages for distress and inconvenience by purporting to classify the claim as one for 'frustration' without giving reasons and without explaining what 'frustration' is and how it differs from distress and inconvenience.
(Page 11)
- (iii) The dismissal of the applicants' claim for damages for inconvenience and distress because some of the relevant events were allegedly caused by (unidentified) other factors when the fact that an event giving rise to a claim for damage may have more than one cause is irrelevant.
(iv) The reference to the fact the claim was a 'late inclusion in the counterclaim' when the second respondent had made a direction that the parties could make any claims arising from the evidence in the arbitration.
(v) The reference to the fact that there was no medical evidence to support the claim when this point was never raised and the applicants were never given an opportunity to address the second respondent on this issue. The reference to medical evidence is irrelevant in any event.
(vi) The statement by the second respondent that no attempt was made to justify the amount sought by way of damages when the applicants had referred the second respondent to authorities where amounts for such claims had been quantified.
(vii) The reference to physical hardship, discomfort and inconvenience when that was not the basis of the claim.
- (e) The allowance by the second respondent of the first respondent's claim for GST, inter alia, pursuant to clause 6(c) of the contract, which is a standard form contract, after having been referred by the applicants to a decision of the District Court of Western Australia between different parties which held that clause 6(c) of the same or
(Page 12)
- a similar standard form contract, did not allow a builder to recover GST.
- (f) The use by the second respondent of an arbitrary figure of 2.5% of the contract price without evidence and without reference to the parties to calculate the first respondent's 'head office expenses' for the purposes of calculating damages for delay.
(g) The apportionment of responsibility for delay between the applicants and the first respondent when there was no evidence to support the finding that the applicants were liable for any delay.
(h) The failure by the second respondent to reject the use by the first respondent of the 'Hudson' formula in support of its claim for damages for delay because of a failure to lay the necessary evidentiary foundation.
(i) The statement in clause 7.2 of the third interim award that no evidence was adduced to contradict the valuer's evidence when Mr R S Milligan on behalf of the firstnamed applicant, without objection, tendered documentation to the arbitrator after completion of the hearing but prior to delivery of the award.
(j) The failure of the second respondent to give proper reasons for his findings on the issues of unconscionability, duress, misrepresentation, mistake and rescission.
- B. Removal of the second respondent
1. The misconduct of the second respondent is of such a nature that the second respondent should be removed as arbitrator.
2. Alternatively the second respondent is incompetent or unsuitable to deal with the arbitration.
(Page 13)
- C. Termination of the arbitration agreement
1. The misconduct of the second respondent is of such a nature that an order should be made that the arbitration agreement cease to have effect.
2. The dispute, the subject of the arbitration is not amenable to nor appropriate for resolution by arbitration.
3. The justice of the case requires that the arbitration be permanently brought to an end."
4 In an earlier decision relating to this arbitration, I determined that there had been misconduct on the part of the arbitrator: see Milligan Contractors Pty Ltd & Anor v Jaxon Construction Pty Ltd & Anor [2003] WASC 220. In that decision I relied upon what was said by McKechnie J in Villani & Anor v Delstrat Pty Ltd & Anor [2002] WASC 112. It is worth quoting again what his Honour had to say (at [40]):
"Where parties under a contract agree to submit a dispute to arbitration, there must be implied a condition that the arbitrator will determine the matters in controversy. No doubt there is some limit to such a rule. It may not be essential for every matter in controversy to be resolved in order for a proper award to be made. However, where the matters in dispute are defined by points of claim and points of defence, unless there is a formal or practical abandonment of any such points, the arbitrator has a duty to resolve these issues."
5 If the arbitrator does not resolve the defined issues then it may be said there has been misconduct on the part of the arbitrator and an award can be set aside. That was what happened in Villani. I reached the same conclusion in my earlier decision. In both of these two cases the matter was referred back to the arbitrator with a quite specific direction as to how he was to approach the dispute.
(Page 14)
6 I have already resolved in these proceedings that the arbitrator dealt with the issues defined by the points of claim and defence. Having reached that conclusion, it seems to me that there is no basis upon which it could be said that there has been misconduct on the part of the second respondent. Further, the broad sweep of complaints made by the applicants is inappropriate. Section 38 of the Commercial Arbitration Act 1985 makes it plain that the parties' rights of appeal are limited. A reading of the applicant's complaints in this case makes it plain that they take exception to the conduct of the arbitration generally. In effect they are mounting a collateral attack on the arbitration award - that is to say, they are attempting to bypass s 38 by relying upon an allegation of misconduct. In my view that is inappropriate.
7 I am satisfied that the arbitrator in this case, the second respondent, resolved all of the issues between the parties. That being so, it can not be said in any sense that there was misconduct on his part. Accordingly I would dismiss the originating summons.
8 I dealt with the question of costs when handing down my earlier decision. I need say nothing more on that issue.
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