Milligan Contractors Pty Ltd v Jaxon Construction Pty Ltd

[2004] WASC 134

MILLIGAN CONTRACTORS PTY LTD & ANOR -v- JAXON CONSTRUCTION PTY LTD & ANOR [2004] WASC 134

Jurisdiction:	SUPREME COURT OF WESTERN AUSTRALIA	Citation No:	[2004] WASC 134
Case No:	ARB:5/2003	Heard:	12 MAY 2004
Coram:	MASTER SANDERSON	Delivered:	17/06/04
No of pages:	13	Judgment Part:	1 of 1
Result:	Application for leave dismissed
Category:	B
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Parties:	MILLIGAN CONTRACTORS PTY LTD JE MILLIGAN JAXON CONSTRUCTION PTY LTD ADRIAN GOOLD
Catchwords:	Commercial arbitrations Application for leave to appeal Turns on own facts
Legislation:	Commercial Arbitration Act 1985, s 38
Case References:	Lamarc Developments Pty Ltd v Devaugh Pty Ltd [2002] WASCA 245 Milligan Contractors Pty Ltd & Anor v Jaxon Construction Pty Ltd & Anor [2003] WASC 220 Promenade Investments Pty Ltd v New South Wales (1992) 26 NSWLR 222 "Agroexport" Enterprise D'Etat Pour le Commerce Exterieur v NV Goorden Import Cy SA [1956] 1 Lloyd's Rep 319 Admiralty Commissioners v Owners of Steamship Susquehanna [1926] AC 655 Admiralty Commissioners v SS Chekiang [1926] AC 637 Banque Keyser Ullman SA v Skandia (UK) Insurance Co Ltd [1990] 1 QB 665 Birmingham Corporation v Sowsbery (1969) 113 SJ 877 Boncorp Pty Ltd v Thames Water Asia/Pacific Pty Ltd (1995) 12 BCL 139 Buckley v Bennell (1978) 140 CLR 1 Campbell Mostyn (Provisions) Ltd v Barnett Trading Co [1954] 1 Lloyd's Rep 65 Chu v Minister for Immigration and Ethnic Affairs (1997) 78 FCR 314 Dennis Wilcox Pty Ltd v FCT (1988) 79 ALR 267 Director of War Service Homes v Harris [1968] QdR 275 Edwards v Bairstow [1956] AC 14 Forsayth v Australasian Gold Mines (1992) 7 WAR 549 Friend & Brooker Pty Ltd v Council of the Shire of Eurobodalla, unreported; NSWCA; 24 November 1993 GKN Centrax Gears Ltd v Matbro Ltd [1976] 2 Lloyd's Rep 555 Heskell v Continental Express Ltd [1950] 1 All ER 1033 Imperial Leatherwear Co Pty Ltd v Macri & Marcellino Pty Ltd (1991) 22 NSWLR 653 In re An Arbitration Between Kee v National Mortgage and Agency Co of NZ Ltd [1917] NZLR 173 In re Enoch and Zaretzky, Bocks & Co's Arbitration [1910] 1 KB 327 In re Fischel & Co v Mann & Cook [1919] 2 KB 431 In the Matter of an Arbitration Between M'Clean and Co v Marcus (1890) 6 TLR 355 Interbulk Ltd v Aiden Shipping Co Ltd [1984] 2 Lloyd's Rep 66 Jamal v Moola Dawood, Sons & Co [1910] AC 175 Kalwy v Secretary, Department of Social Security (No 2) 32 ALD 451 Koch Marine Inc v D'Amica Societa Di Navigazione ARL (The "Elena D'Amica") [1980] 1 Lloyd's Rep 75 Lord Citrine v Hebridean Coast [1961] AC 545 Mark Blake Builders Pty Ltd v Davis, unreported; SCt of NSW; 14 November 1994 Melwood Units Pty Ltd v Commissioner of Main Roads (1978) 52 ALJR 593 Menna v HD Building Pty Ltd, unreported; SCt of NSW; 1 December 1986 Miles v King (1874) 8 SALR 202 Modern Engineering Bristol Ltd v Miskin & Son Ltd [1981] 1 Lloyd's Rep 135 Oleificio Zucchi SPA v Northern Sales Ltd [1965] 2 Lloyd's Rep 496 Peter Schwartz v Morton [2003] VSC 144 Ramage v Vancouver [1956] 6 DLR (2d) 236 Re McMasters Construction Pty Ltd [1992] 1 Qd R 628 Re Wood and Malkin Co [1928] 4 DLR 511 RP Robson Constructions Pty Ltd v D & M Williams (1989) 6 BCL 219 SBBG v Minister for Immigration and Multicultural and Indigenous Affairs (2003) 199 ALR 281 Seaworld Ocean Line Co SA v Catseye Maritime Co; the Kelaniya [1989] 1 Lloyd's Rep 30 Sinclair v Bayly (1994) 11 BCL 439 State of South Australia v Fricker Carrington Holdings Pty Ltd (1985) 3 BCL 72 Sunley (B) & Co Ltd v Cunard White Star Ltd [1940] 1 KB 740 Sydney Water Corporation Ltd v Aquaclear Technology Pty Ltd, unreported; SCt of NSW; 17 December 1996 Tersons Ltd v Stevenage Distribution Development Corporation [1965] 1 QB 37 The Owners of the Steamship "Mediana" v The Owners, Master and Crew of the Lightship "Comet" [1900] AC 113 Turner Corporation Ltd (Receiver and Manager Appointed) v Austotel Pty Ltd (1994) 13 ACLR 62 Villani & Anor v Delstrat Pty Ltd & Anor [2002] WASC 112 Walford Baker & Co v Macfie & Sons (1915) 84 LJQB 2221 Williams Brothers v Ed T Agius Ltd [1914] AC 510 Woodman v Rasmussen [1953] St R Qd 202

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION : MILLIGAN CONTRACTORS PTY LTD & ANOR -v- JAXON CONSTRUCTION PTY LTD & ANOR [2004] WASC 134 CORAM : MASTER SANDERSON HEARD : 12 MAY 2004 DELIVERED : 17 JUNE 2004 FILE NO/S : ARB 5 of 2003

ARB 6 of 2003

BETWEEN : MILLIGAN CONTRACTORS PTY LTD

JE MILLIGAN
Applicants

AND

JAXON CONSTRUCTION PTY LTD
First Respondent

ADRIAN GOOLD
Second Respondent

Catchwords:

Commercial arbitrations - Application for leave to appeal - Turns on own facts

Legislation:

Commercial Arbitration Act 1985, s 38

(Page 2)

Result:

Application for leave 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):

Lamarc Developments Pty Ltd v Devaugh Pty Ltd [2002] WASCA 245
Milligan Contractors Pty Ltd & Anor v Jaxon Construction Pty Ltd & Anor [2003] WASC 220
Promenade Investments Pty Ltd v New South Wales (1992) 26 NSWLR 222

Case(s) also cited:

"Agroexport" Enterprise D'Etat Pour le Commerce Exterieur v NV Goorden Import Cy SA [1956] 1 Lloyd's Rep 319
Admiralty Commissioners v Owners of Steamship Susquehanna [1926] AC 655
Admiralty Commissioners v SS Chekiang [1926] AC 637
Banque Keyser Ullman SA v Skandia (UK) Insurance Co Ltd [1990] 1 QB 665
Birmingham Corporation v Sowsbery (1969) 113 SJ 877
Boncorp Pty Ltd v Thames Water Asia/Pacific Pty Ltd (1995) 12 BCL 139
Buckley v Bennell (1978) 140 CLR 1
Campbell Mostyn (Provisions) Ltd v Barnett Trading Co [1954] 1 Lloyd's Rep 65


(Page 3)

Chu v Minister for Immigration and Ethnic Affairs (1997) 78 FCR 314
Dennis Wilcox Pty Ltd v FCT (1988) 79 ALR 267
Director of War Service Homes v Harris [1968] QdR 275
Edwards v Bairstow [1956] AC 14
Forsayth v Australasian Gold Mines (1992) 7 WAR 549
Friend & Brooker Pty Ltd v Council of the Shire of Eurobodalla, unreported; NSWCA; 24 November 1993
GKN Centrax Gears Ltd v Matbro Ltd [1976] 2 Lloyd's Rep 555
Heskell v Continental Express Ltd [1950] 1 All ER 1033
Imperial Leatherwear Co Pty Ltd v Macri & Marcellino Pty Ltd (1991) 22 NSWLR 653
In re An Arbitration Between Kee v National Mortgage and Agency Co of NZ Ltd [1917] NZLR 173
In re Enoch and Zaretzky, Bocks & Co's Arbitration [1910] 1 KB 327
In re Fischel & Co v Mann & Cook [1919] 2 KB 431
In the Matter of an Arbitration Between M'Clean and Co v Marcus (1890) 6 TLR 355
Interbulk Ltd v Aiden Shipping Co Ltd [1984] 2 Lloyd's Rep 66
Jamal v Moola Dawood, Sons & Co [1910] AC 175
Kalwy v Secretary, Department of Social Security (No 2) 32 ALD 451
Koch Marine Inc v D'Amica Societa Di Navigazione ARL (The "Elena D'Amica") [1980] 1 Lloyd's Rep 75
Lord Citrine v Hebridean Coast [1961] AC 545
Mark Blake Builders Pty Ltd v Davis, unreported; SCt of NSW; 14 November 1994
Melwood Units Pty Ltd v Commissioner of Main Roads (1978) 52 ALJR 593
Menna v HD Building Pty Ltd, unreported; SCt of NSW; 1 December 1986
Miles v King (1874) 8 SALR 202
Modern Engineering Bristol Ltd v Miskin & Son Ltd [1981] 1 Lloyd's Rep 135
Oleificio Zucchi SPA v Northern Sales Ltd [1965] 2 Lloyd's Rep 496
Peter Schwartz v Morton [2003] VSC 144
Ramage v Vancouver [1956] 6 DLR (2d) 236
Re McMasters Construction Pty Ltd [1992] 1 Qd R 628
Re Wood and Malkin Co [1928] 4 DLR 511
RP Robson Constructions Pty Ltd v D & M Williams (1989) 6 BCL 219
SBBG v Minister for Immigration and Multicultural and Indigenous Affairs (2003) 199 ALR 281
Seaworld Ocean Line Co SA v Catseye Maritime Co; the Kelaniya [1989] 1 Lloyd's Rep 30
Sinclair v Bayly (1994) 11 BCL 439
State of South Australia v Fricker Carrington Holdings Pty Ltd (1985) 3 BCL 72
Sunley (B) & Co Ltd v Cunard White Star Ltd [1940] 1 KB 740


(Page 4)

Sydney Water Corporation Ltd v Aquaclear Technology Pty Ltd, unreported; SCt of NSW; 17 December 1996
Tersons Ltd v Stevenage Distribution Development Corporation [1965] 1 QB 37
The Owners of the Steamship "Mediana" v The Owners, Master and Crew of the Lightship "Comet" [1900] AC 113
Turner Corporation Ltd (Receiver and Manager Appointed) v Austotel Pty Ltd (1994) 13 ACLR 62
Villani & Anor v Delstrat Pty Ltd & Anor [2002] WASC 112
Walford Baker & Co v Macfie & Sons (1915) 84 LJQB 2221
Williams Brothers v Ed T Agius Ltd [1914] AC 510
Woodman v Rasmussen [1953] St R Qd 202


(Page 5)

1 MASTER SANDERSON: By amended notice of originating motion dated 7 April 2004, the applicants seek leave to appeal an arbitration award. This is the second occasion on which a determination of the arbitrator, the second respondent to this application, has been attacked. These reasons should be read in conjunction with the earlier decision in Milligan Contractors Pty Ltd & Anor v Jaxon Construction Pty Ltd & Anor [2003] WASC 220.

2 Because of the comprehensive nature of the originating motion, it is convenient as background to set out the motion in full. It reads as follows (the marking up on the amended motion has been omitted):

"1. The applicants be granted leave to appeal pursuant to section 38 of the Commercial Arbitration Act 1985 on a question of law arising out of the third interim award between the applicants and the first respondent delivered by the second respondent as arbitrator on 27 February 2004.

2. The award be varied, alternatively wholly set aside.

3. The arbitration be remitted to a new arbitrator for consideration.

4. The costs of this application be paid by the respondents.

A. Questions of law arising out of the award

1. The failure of the arbitrator to deal with material issues in the arbitration.

2. The arbitrary 'determination' of a date of practical completion 'for the purpose of determining the parties' responsibility for delay.'

3. (i) The dismissal of the applicants' claim for damages for distress because the first respondent did not claim damages for distress.

(ii) The dismissal of the applicants' claim for damages for distress because some of the relevant events were allegedly caused by other factors.

(Page 6)

(iii) The dismissal of the applicants' claim for damages for distress because no medical evidence was led to support the claim.

4. The failure of the second respondent to give any or any proper reasons for the conclusions reached in the award.

5. The allowance of the first respondent's claim for GST, inter alia, pursuant to clause 6(c) of the contract.

6. 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.

7. 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.

8. The finding that the applicants were responsible for part of the delay and that the first respondent was entitled to damages when the first respondent did not seek any extensions of time despite the fact the contract contained an extension of time clause and when the extension of time clause incorporated the variation clause including the valuation of variations.

9. The failure by the second respondent to exclude the first respondent's evidence in support of its claim for damages for delay based on 'administration and overhead' costs.

10. 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.

11. The failure to reject the first respondent's claim for damages for delay on the basis it was a global claim.

12. The (implied) finding by the second respondent that practical completion as defined in the standard form

(Page 7)

contract meant completion of the 'builder's works' and did not include completion of the 'proprietor's works'.

13. The finding by the second respondent that practical completion had occurred on 15 April 2002 when none of the procedural requirements in clause 19 of the contract relating to practical completion had occurred in respect of that date.

14. The finding that each of the parties were responsible for half the delay during the duration of an earlier arbitration because out of four items that were the subject of that arbitration, two items had to be rectified and two items were to remain 'as is'.

15. The finding that a "Notice of Termination' caused delay in the progress of the works contrary to clause 16(d) of the contract.

16. The finding that because the applicant's architect and engineer prepared the architectural drawings and structural drawings respectively, the Contract Documents were prepared by the applicants, thereby giving the respondent a claim under clause 3c of the contract entitling the respondent to (unidentified) 'delay costs'.

17. The finding that clauses 16(d) and 9(b)(iii)(iv) and (viii) of the contract were covenants entitling the respondent to (unidentified) 'delay costs'.

18. The awarding of damages and of the final payment to the first respondent after making a finding in clause 7.3 of the third interim award that there had been a determination of the contract by the applicants.

19. The reliance on and acceptance by the second respondent of the first respondent's valuation evidence in relation to the applicants' house and the use of that evidence to make a finding that an increase in value of the applicants' house would be set off against the damages suffered by the applicants."

3 Section 38 of the Commercial Arbitration Act 1985 ("the Act") makes it plain that there are limited circumstances in which an appeal

(Page 8)

shall lie from a decision of an arbitrator. Section 38 is in the following terms:

"38. Judicial review of awards

(1) Without prejudice to the right of appeal conferred by subsection (2), the Court shall not have jurisdiction to set aside or remit an award on the ground of error of fact or law, on the face of the award.

(2) Subject to subsection (4), an appeal shall lie to the Supreme Court on any question of law arising out of an award.

(3) On the determination of an appeal under subsection (2), the Supreme Court may by order ¾


(a) confirm, vary or set aside the award; or

(b) remit the award, together with the Supreme Court's opinion on the question of law which was the subject of the appeal, to the arbitrator or umpire for reconsideration or, where a new arbitrator or umpire has been appointed, to that arbitrator or umpire for consideration,

and where the award is remitted under paragraph (b) the arbitrator or umpire shall, unless the order otherwise directs, make the award within 3 months after the date of the order.


(4) An appeal under subsection (2) may be brought by any of the parties to an arbitration agreement ¾

(a) with the consent of all the other parties to the arbitration agreement; or

(b) subject to section 40, with the leave of the Supreme Court.

(Page 9)

(5) The Supreme Court shall not grant leave under subsection (4)(b) unless it considers that ¾

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

(b) there is ¾


(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.

(6) The Supreme Court may make any leave which it grants under subsection (4)(b) subject to the applicant complying with any conditions it considers appropriate.

(7) Where the award of an arbitrator or umpire is varied on an appeal under subsection (2), the award as varied shall have effect (except for the purposes of this section) as if it were the award of the arbitrator or umpire."

4 It is the applicants' case that it satisfies the requirements of s 38(5). It was submitted that the applicants satisfied both limbs of subs (5)(b) of the Act. Even on the most favourable view of the applicants' case, this is not an application which could fall within subs (5)(b)(ii). That means then that the applicants must satisfy two criteria for leave to be granted. First, the applicants must show a manifest error of law on the face of the award. Second, they must show that the error of law substantially affected their rights in the arbitration. To put the test in that way reverses the order found in subs 38(5). But in dealing with an application, it is difficult to see how any other approach could be adopted. What is imposed is a twin-test and both parts of the test must be satisfied if leave is to be granted.
(Page 10)

5 The general approach to s 38(5) was considered recently by the Full Court in Lamarc Developments Pty Ltd v Devaugh Pty Ltd [2002] WASCA 245. Both Murray J (at 60) and Matthews AUJ approved of what was said by Sheller JA in Promenade Investments Pty Ltd v State of New South Wales (1992) 26 NSWLR 203 at 222:

"The added requirements of 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 substantially to the certainty of commercial law suggests that the draftsmen was seeking to constrain the exercise of court control over arbitral awards in the manner described by the House of Lords in The Nema. A manifest error of law on the face of the award may be an error which would be apparent to the judge upon a mere perusal of the reasoned award itself without the benefit of adversarial argument. A determination which adds substantially to the certainty of commercial law may be a determination of a question of the construction of a contract in standard terms rather than the construction of a one-off clause. In such a situation, strong evidence that the arbitrator made an error of law may equate with the strong prima facie case that the arbitrator had been wrong in his construction."

6 For leave to be granted the applicant must show that there is a manifest error of law on the face of the award and having regard to all the circumstances, the determination of the question of law concerned could substantially affect the rights of the parties to the arbitration.

7 By the terms of their amended originating motion, the applicants took broad and general exception to the arbitrator's award. This approach was maintained in counsel's written and oral submissions. But in determining this application it is important to bear in mind what it was that the arbitrator had to decide. In my earlier reasons I identified, by reference to the points of claim and defence, the issues which fell for determination in the arbitration. They can be summarised as follows:

(1) Were there any terms to be implied into the contract between the parties;

(2) Was practical completion achieved by the respondent and if so, on what date;

(Page 11)

(3) Was the respondent entitled to make a claim for GST payments; and

(4) What damages should be awarded to the respondent for breach by the applicants of the implied terms set out in the points of claim.

8 In relation to this last point, I said (at [10]):

"… It is worthy of note that particulars of loss and damage for this last claim were supplied in annexure 3 to the points of claim. The damages claimed related to seven separate matters. The first of these matters was 'administration overhead'. Although the wording in the particulars is somewhat obscure, it appears that the first respondent put its administration costs at 5 per cent of the contract price. It then calculated a daily rate for administration costs of $63.46 per day. It was said that the claimants were responsible for 260 days of 335 days delay leading to a claim of $16,499.16."

9 Against that background, it is necessary then to consider what the arbitrator described as his "third Interim Award". The award itself appears as annexure "B" to the affidavit of Brian Peter Harvey, sworn 12 March 2004. The arbitrator adopted a rather novel approach to this award. It is to be remembered that as a consequence of my earlier decision, the second interim award was set aside. Rather than draft an entirely new award, what the second respondent did was revise the second interim award. Certain parts of that award were retained and the arbitrator simply added extra paragraphs clearly designed to deal with the issues he was directed to address by my earlier decision. These extra paragraphs are in italics. It is thus possible to work out what material has been added. This approach was criticised by counsel for the applicants. Counsel submitted that as the second interim award had been set aside, it was a nullity and to simply add further material was improper and inappropriate. It was counsel's submission that this, in and of itself, showed an error of law on the face of the record.

10 It must be said that the approach of the second defendant is unusual. It is not an approach which would be adopted by a court. Nonetheless, in my view, it does not make the award bad on its face. Rather, it is a question of whether the approach adopted by the arbitrator identifies each of the issues and deals with them.

(Page 12)

11 On page 2 of the third interim award, the second defendant identifies the five matters to which I directed his attention. That is a promising start. It shows clearly that the arbitrator had in mind that it was necessary for him to determine matters raised by the pleadings.

12 The second respondent deals with the first question - the issue of implied terms - at par 6 (page 13) of the award. He concludes that there are no terms to be implied into the contract. Essentially his reasoning is that the express terms of the contract cover the position with respect to delay. That is enough, he has dealt with the issue.

13 The question as to when and if practical completion was achieved by the first respondent is dealt with in s 4 of the award. The second respondent notes at par 4.5.1 (page 9) that the first respondent claimed practical completion on 20 March 2002. It is common ground that the applicants moved into the dwelling on 10 May 2002. The second respondent found (par 4.5.1) that "the Claimant Builder (first respondent) achieved Practical Completion on Monday 15 April 2002." It is clear that in reaching that conclusion the second respondent paid particular attention to the evidence of Pasco Bartolone (par 4.5.4). While it might well be argued that the reasoning of the second respondent lacks clarity, there is, in my view, no doubt that he has dealt with the issue raised and that it is possible, by a reading of his reasons, to understand why he has come to that conclusion. I am not satisfied there is a manifest error on the face of the award.

14 The GST claim is dealt with in par 5.2 (page 10) of the award. The second respondent has added significantly to his earlier findings. He has set out the reasons why he has reached his conclusion and he has gone so far as to refer to two District Court authorities. His reasoning is clear and no manifest error is disclosed.

15 In relation to the interest claimed on progress claims numbered 3 and 4, both of these claims were disallowed (paras 5.3 & 5.4). The second defendant dealt appropriately with this issue in the award and cannot be criticised.

16 Finally, there is the question of damages. In relation to damages generally, in my view a complete reading of the award indicates that the second respondent has dealt adequately with this issue. In particular, par 5 and 6 of his reasons set out how it is he has reached his conclusion with respect to damages. Particular criticism was made by the applicants of the damages awarded for "Administration Overhead". It was said that

(Page 13)

the second respondent had adopted what is sometimes called the "Hudson formula" without any evidence to justify such an approach. There may be some substance in the applicants' complaint. It seems clear from a review of the evidence that the first respondent did not put before the arbitrator evidence which would justify the adoption of the Hudson formula. But the amount awarded by the second respondent was $6479. I am not satisfied that any error on the part of the arbitrator was such as to "substantially affect" the rights of the applicant. In the context of the arbitration as a whole, this aspect of the claim is of minor significance.

17 In all the circumstances then, I am satisfied that the second respondent's award should stand. I would dismiss the application for leave to appeal. I will hear the parties as to costs.

18 Before leaving this matter I should make some general comments in relation to the way in which this application for leave was mounted. Before doing so I should make the point that this arbitration concerned the construction of a dwelling in the inner-Perth suburbs. While it is doubtless an undertaking of some importance to each of the parties, it was not a huge undertaking. The aim of submitting disputes of this nature to arbitration is to have a practical individual deal quickly and effectively with the disputes which arise. The parties did not put the dispute before a court, nor was it thought appropriate to appoint a lawyer as an arbitrator. They cannot then expect that the arbitrator's award will be a model of legal reasoning. It is clear that the second respondent in this matter took on board the comments I made in my earlier reasons and dealt with all of the issues raised in the points of claim and defence. Both parties must now live with the award.