Prizac Developments P/L v Unley Property Development P/L & Don Sarah No. Scciv-01-317

PRIZAC DEVELOPMENTS PTY LTD v UNLEY PROPERTY DEVELOPMENT PTY LTD
[2001] SASC 327
Full Court: Prior ACJ, Bleby and Gray JJ (Ex tempore)

PRIOR ACJ. I agree with Bleby J that leave to appeal should be refused. I have nothing to add.
BLEBY J. By summons dated 8 February 2001, the applicant applied to this Court pursuant to s 38 of the Commercial Arbitration Act 1986 for leave to appeal against the award of an arbitrator. The application came before a judge of this Court, and leave to appeal was refused.
At the hearing before the Judge, it was common ground that, of the alternative matters which the applicant had to establish under s 38(5)(b) of the Act in order to obtain leave, the applicant had to satisfy the Judge that there was a manifest error of law on the face of the award. The Judge concluded that there was nothing in the findings of the arbitrator that could properly be construed as a manifest error of law on the face of the award, and that the various findings challenged by the applicant were essentially findings of fact.
The applicant then applied to the Full Court for leave to appeal against the decision and order of the single Judge dismissing the application for leave to appeal. This application was considered ex parte and in private before the Full Court comprising Olsson, Gray JJ, and myself. Based on the content of the intended notice of appeal, particularly ground 3, it appeared that the applicant sought to raise a question of some importance as to what constituted the face of the award for the purposes of s 38(5)(b)(i) of the Act. We considered that it was inappropriate to grant or refuse leave to appeal on an ex parte application which sought to raise that ground. On 18 July 2001, for reasons then published[1], we directed pursuant to Rule 94.03(c)(ii) of the Supreme Court Rules that the application be listed for oral argument on notice.
[1] Prizac Developments Pty Ltd v Unley Property Development Pty Ltd [2001] SASC 245.
The application has now come before this Court as presently constituted for that purpose.
The sole argument put by the applicant in favour of granting leave to appeal from the single Judge is that the Judge wrongly held that he was precluded, for the purposes of identifying the alleged errors of law, from having regard to any documents other than the award itself and the accompanying reasons of the arbitrator, and that he wrongly ignored, among other things, the contract, the specifications to the contract and the notice of dispute.
What was not apparent at the time when the Full Court considered the application for leave in private, and what, in my opinion, an examination of the transcript reveals, was that in the argument before the single Judge there was no apparent reliance by the applicant on documents other than the content of the award as published. There was no argument that the Judge could or should look at the extraneous materials to identify the alleged errors of law.
In those circumstances, in my opinion, it is inappropriate now for the applicant to allege that the single Judge erred in failing to have regard to other contractual documents. Speaking for myself, had I been aware, at the time when leave to appeal was being considered in private, that that was the position, I would have refused leave.
What were argued before the single Judge to be errors of law on the face of the award were held by the Judge to be questions of fact. The applicant does not now seek to challenge that conclusion on this application. I respectfully agree with the Judge that they were only questions of fact. Accordingly, in my opinion, the applicant has failed to discharge the onus upon it that leave to appeal from the decision of the single Judge should be given. In my opinion, the application for leave to appeal should be dismissed without venturing on the question now sought to be agitated by the applicant.
GRAY J. I have the misfortune to disagree. I would have allowed the applicant to place before this Court the exchange of correspondence between solicitors as to the agreed documents on which the application was to proceed. I am not satisfied that the contractual documents were not relied upon. Ms Nelson QC appears to have relied on the contractual documents in the course of her submissions, in particular, on parts of the documents not referred to in the published award.
In these circumstances I would not dismiss the application on the ground that the contractual documents were not relied upon, nor on the ground that there was an acceptance by counsel that they would not be relied upon.
As the arguments have not proceeded on the other issues, I make no comment about them. I would allow the application to proceed.
As these are extempore reasons I reserve the right to edit and supplement them.
Gray J later published the following further reasons:
GRAY J This is an application for leave to appeal against the decision of a single Judge of this court refusing an application for leave to appeal against the award of an arbitrator pursuant to s 38 of the Commercial Arbitration Act 1986 (SA) (“the Act”).
Section 38 relevantly provides:
“...
(2) Subject to subsection (4), an appeal shall lie to the Supreme Court on any question of law arising out of an award.
...
(4) An appeal under subsection (2) may be brought by any of the parties to an arbitration agreement -
(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.
(5) The Supreme Court shall not grant leave under subsection (4)(b) unless it considers that -
(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 -
(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.”
The applicant applied to the Full Court for leave to appeal against the decision and order of the single judge. The application was considered in private. It appeared to the Full Court that a question of importance has arisen - what constituted the “face of the award” for the purposes of s 38(5)(b)(i) of the Act. As was said by Olsson J (with whom Bleby and Gray JJ agreed):
“In essence it is argued that, given the provisions of s 38(5)(b) of the Commercial Arbitration Act 1986 which limit a grant of leave (inter alia) to situations in which there is “a manifest error of law on the face of the award”, it is permissible for the court to examine extraneous documents when the justice of the case requires that course and, in particular, where it is apparent that the arbitrator has intended to incorporate the provisions of other documents into the award, so that one needs to be read with the other. (Compare, for example, the reasoning in authorities such as Gold Coast City Council v Canterbury Pipe Lines (Aust) Pty Ltd (1968) 118 CLR 58 (“Gold Coast”), Pearl Marin Shipping A/B v Pietro Cingolani S.A.S. (The ‘General Valdes’)” (1982) 1 Lloyd’s LR 17 (“The General Valdes”)).
In written submissions the applicant seeks to derive comfort from Donvito v Diekman (SCNSW, 3 March 1989, unreported), Graham Evans & Co Pty Ltd v SPF Formwork Pty Ltd (1991) 8 BCL 147 and Leighton Contractors Pty Ltd v South Australian Superannuation Fund Investment Trust (Debelle J, 11 November 1994, unreported).
It suggests that these stand as authority for the proposition that extraneous materials can be referred to when the justice of the case requires.
In Graham Evans & Co Pty Ltd v SPF Formwork Pty Ltd (supra) at 148 Brownie J adopted the approach of Smart J in Warley Pty Ltd v Adco Constructions Pty Ltd (1988) 5 BCL 141. He concluded that it was “legitimate, when examining the reasons for making an award, expressed in the award, to refer to the documents mentioned in the award, for the purpose of understanding the award itself, and the reasons for making the award, but it was not legitimate to comb through the evidence on the arbitration, to see whether there was some error of law which arose out of the arbitration, rather than out of the award.
...
A perusal of his reasons in Leighton Contractors Pty Ltd v South Australian Superannuation Fund Investment Trust (supra) reveals that, in that case, Debelle J merely seems to have taken it as patent that, for the purpose of considering whether there is manifest error on the face of the award, it is appropriate to have reference to the terms of the building contract to which it relates. There is no separate discussion of that issue.
...
It seems to me that this application raises an important legal issue likely to be of recurrent importance. It is by no means free from doubt. The issue is as to the extent to which the reasoning in Gold Coast and The General Valdes may be resorted to in relation to a purported appeal pursuant to s 38.”
The application for leave to appeal was referred to this Full Court for oral argument.
This appeal involves a dispute about the construction of a retail shopping centre at a site on Burbridge Road, Hilton. The applicant is the registered proprietor of the land upon which the shopping centre was built. It contracted with the respondent as builder to carry out the construction of the shopping centre. The applicants had entered into a lease with Woolworths (SA) Pty Ltd who were to be the major tenant of the shopping centre. The contract stipulated that the building work was to be carried out in accordance with the Woolworths’ plans and specifications, a copy of which was attached to the lease.
Counsel for the applicant contended that the arbitrator had misconstrued the terms of the building contract[2]. However in the course of his published determination, reference was made to only part of the contract. It was said that counsel had wished to refer to other parts of the contract not referred to in the published determination (“the other parts of the contract”).
[2] The contract was a building contract and included specifications.
During the course of submissions, the single judge expressed the view that only those parts of the contract referred to in the published determination could be included as being “on the face of the award”. His Honour was of the view that no reference could be made to the other parts of the contract. The issue was briefly addressed in the reasons of the single judge[3]:
“The material which I have been asked to take into account comprises an affidavit of Sean Anthony Ryan, solicitor, to which is annexed a number of exhibits.
Amongst the exhibits is a copy of the building contract, a document setting out the design requirements laid down by Woolworths for the construction of its supermarket, a copy of the notice of dispute, and a copy of some engineering reports.
Given the requirement that the error of law must appear on the face of the award, I ignore those documents and do not take them into account.
This means that I have regard only to the remaining two exhibits to the affidavit, that is, the copy of the award itself and the draft notice of appeal.”
[3] Prizac Development Pty Ltd v Unley Development Pty Ltd 2001 SASC 141
On the hearing of the application before this court it was suggested that the question of importance had not been, or alternatively had not remained, “a live issue” before the single judge.
Counsel for the applicant rejected this assertion and submitted that the other parts of the contract had been relied upon. Issue was further taken with the suggestion that reliance on other parts of the contract had been abandoned before the single judge.
Counsel for the applicant explained that the parties had agreed upon a book of documents for use at the hearing before the single judge. It was said that those documents included the complete contract and that the argument before the single judge proceeded on that basis and with the concession that the agreed documents were relevant. Counsel for the applicant sought to place correspondence between the parties’ solicitors before this court to confirm this position.
My review of the transcript suggests that several of counsel for the applicant’s submissions to the single judge relied upon the other parts of the contract.
During the course of submissions to the single judge it was accepted by counsel for the respondent that the arbitrator had considered “all the documentation” and that “on the face of the award it is true the arbitrator has considered all the material.” The tenor of these submissions would appear to confirm counsel for the applicant’s submission that it was common ground that reference could be made to the complete contract.
I consider that as a matter of procedural fairness the applicant should be permitted to place before this court the correspondence between the solicitors concerning the agreed documents. A review of this correspondence would have allowed counsel to further explain and demonstrate the context in which the application was argued before the single judge. Such a review would have also allowed full debate and a considered ruling as to whether there had been reliance on the relevant part of the contract or whether there had been an acceptance of the judge’s ruling that the relevant parts of the contract could not be referred to ruling, to be made.
It follows that I do not agree with the order proposed by the other members of the court. The applicant should be permitted to proceed.

[2001] SASC 327

5 September 2001