Republic of Turkey v Mackie Pty Ltd

[2019] VSC 103

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

COMMON LAW DIVISION

JUDICIAL REVIEW AND APPEALS LIST

S CI 2017 03687

REPUBLIC OF TURKEY	Plaintiff
v
MACKIE PTY LTD (ACN 097 603 846)	First defendant
and
TECTURA PTY LTD (ACN 053 962 413)	Second defendant

JUDGE:	BELL J
WHERE HELD:	Melbourne
DATES OF HEARING:	17,18 and 19 July, 11 September 2018, 1 February 2019
DATE OF JUDGMENT:	1 March 2019
CASE MAY BE CITED AS:	Republic of Turkey v Mackie Pty Ltd
MEDIUM NEUTRAL CITATION:	[2019] VSC 103

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BUILDING AND CONSTRUCTION LAW—appeal—orders of Victorian Civil and Administrative Tribunal awarding damages to builder—whether in error of law—tribunal constituted by non-specialist—whether qualified to determine issues in proceeding—whether apparently biased—whether acted fairly and according to substantial merits of case—scope, application and limits of that obligation—AS 2124–1992, cll 23, 35.5 and 40.5—superintendent’s responsibility to act honestly and arrive at reasonable measure or value of work, quantities or time—whether properly applied—superintendent’s power to grant extensions of time for practical completion—whether properly exercised—whether concurrent delays taken into account—reserve power to grant extensions at any time for any reason—whether available to tribunal—whether properly exercised—scope and application of that power—superintendent’s power to value variations—whether properly applied—Victorian Civil and Administrative Tribunal Act 1998 (Vic) ss 97, 98, 148(1).

APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr R Andrew with Mr N J Phillpott	AUM Lawyers
For the Defendant	Mr J A F Twigg QC with Mr C Dawlings	Herbert Smith Freehills

HIS HONOUR:

1. The Republic of Turkey makes application to this court for leave to appeal, and appeals, under s 148(1) of the Victorian Civil and Administrative Tribunal Act 1998 (Vic) from a decision of senior member Robert Davis in the building and property list of the Victorian Civil and Administrative Tribunal. It was the losing party in a proceeding arising out of the construction of a new residence for the Consul-General of Turkey in Toorak pursuant to a substantial domestic building contract dated 18 December 2009 under which it was the owner. The first defendant, Mackie Pty Ltd (named for its principal, Ralph Mackie), was the builder. The second defendant, Tectura Pty Ltd, was the owner’s architect and also its contractual superintendent of the construction works. As here material, the orders of the tribunal were that the owner pay the builder the sum of $693,824.58 by way of amounts outstanding under the contract, plus interest and costs. The owner contends that the orders of the tribunal should be set aside because its decision involved several errors of law and the proceeding should be remitted to the tribunal for reconsideration according to law.

Proceeding in Victorian Civil and Administrative Tribunal

1. The contract was for the construction of the building for a fixed lump sum of $4,350,000 plus GST.  The date of practical completion was specified to be 1 March 2011, some 15 months after the date of the contract.  The actual cost of the construction works was much greater than the fixed lump sum and the actual date of practical completion was 8 February 2012, which was very late.  Hence the owner’s grievance.

1. Even substantial contracts of this kind are domestic building contracts, and disputes concerning such contacts are domestic building disputes, under the Domestic Building Contracts Act 1995 (Vic). That brought the dispute within the jurisdiction of the tribunal under div 2 of pt 5 of that Act. It had to determine that dispute in accordance with the contract, according to its own statutory processes and procedures.

1. The proceeding originated in the County Court of Victoria and was transferred to the tribunal.   It was a claim by the builder against the owner for money outstanding under the contract.  The owner counterclaimed against the builder and the owner joined the architect as a third party against whom it claimed a contribution with respect to any order made against the owner in favour of the builder.  Declaratory and other relief was also sought by the builder against the owner.  The builder did not make any claim against the architect and the architect denied liability for making any contribution to the owner. 

1. The parties disagreed as to whether the builder was entitled to the amounts claimed against the owner and whether the architect should make a contribution towards any such amounts.  They also disagreed about whether the builder had failed to construct the building on time for reasons beyond its control and was entitled to extensions of time for practical completion. 

1. In summary, the builder claimed damages against the owner for:

(a)       variations of $354,133.72;

(b)      agreed variations of $6,312.12;

(c)       delay costs of $232,331; and

(d)reimbursement of liquidated damages of $264,000 (retained by the owner by way of security).

1. The hearing before the tribunal occupied some 31 sitting days and was hotly contested (see the description in paras [25]–[34] of the tribunal’s reasons for decision).[1] After some 25 days of hearing, the architect made application to Justice Greg Garde AO RFD, the president of the tribunal, for the tribunal to be reconstituted under s 108(1)(a) of the Victorian Civil and Administrative Tribunal Act.  Supported by the owner and opposed by the builder, the architect contended that the senior member could not hear and determine the dispute as he had no specialised building and construction expertise and there was a reasonable apprehension of bias as a result of the manner in which the senior member conducted the hearing. 

   [1]Mackie Pty Ltd v Republic of Turkey (Building and Property) [2017] VCAT 129 (25 August 2017) (Senior Member Robert Davis) (‘Mackie (No 2)’).

1. After thoroughly considering the architect’s submissions and analysing the course of the hearing, Justice Garde dismissed the application.[2]  Justice Garde’s decision was not challenged, and the proceeding continued before the senior member.  Justice Garde’s decision was not challenged before me.

   [2]Mackie Pty Ltd v Republic of Turkey (Building and Property) [2017] VCAT 620 (8 May 2017) (Garde J, President) (‘Mackie (No 1))’.

1. In the reasons for the decision, the tribunal helpfully described the primary issues for determination as follows:

The primary issues that I am required to determine in this proceeding concern:

(a)The ascertainment of the price for the varied works, and a determination as to whether the superintendent, in the ascertainment of that price, acted fairly and reasonably;

(b)Where a variation is denied, a determination whether the scope of works was varied and the ascertainment of the price that the superintendent failed to undertake;

(c)Whether the works were delayed by an event that entitled the builder to an extension of time;

(d)The extent to which the builder was delayed in reaching practical completion and whether the delay was to be compensated by an extension of time to the date for practical completion. Also whether the architect/superintendent acted fairly and reasonably in determining these issues;

(e)The entitlement of the builder to be reimbursed liquidated damages deducted from its contract sum; and, the payment of delay costs of damages; and

(f)The extent to which the works were defective (if at all) and the fair and reasonable cost to repair works.

1. The tribunal substantially, but far from totally, upheld the builder’s claim against the owner and partly upheld the owner’s claim for contribution against the architect.  The decision is over 100 pages in length.  For reasons there explained in commendable detail, the tribunal made the following orders on 25 August 2017:

1        The respondent pay the applicant the sum of $693,824.58.

2        The joined party pay the respondent the sum of $119,664.65.

3As to the sum of $123,641.00 held as security by the respondent the parties have leave to make submissions.

4        The respondent’s counter claim is dismissed.

5        Reserve costs.

On 18 October 2017, the senior member made further orders requiring the owner to pay the builder $311,650.99 interest by way of damages and costs on the Supreme Court standard basis.  The tribunal also ordered the architect to pay the owner $10,118.88 interest by way of damages.

1. The payments to be made by the owner to the builder and by the architect to the owner were set out in a table in the tribunal’s reasons for decision as follows:

Payments to be made by the owner to the builder

Name	Amounts claimed	Total amounts claimed
VARIATIONS
Imported fill XO 9	$5,500.00 plus GST = $6,050.00
Telstra clean up XO 15	$528.00 plus GST = $580.80
Imported fill XO 26	$10,980.00
Structural steel increase X 41	Nil
Hydraulic variation XO 9D	$11,697.00 plus GST = $12,866.70
Electrical credits wrongly made X 75D	$4,782.00
Stone work X 077D	$151,980.00
Curtains X 81	Nil
Additional structural work X 03D	$19,677.90 plus GST = $21,644.70
Flues X 119D	$4,324.10 plus GST = $4,756.51
Angle brackets X 139d	Nil
Stone cladding for reflection pool X 140D	Nil
Balustrade X 144D	$2,222.00
Marble tiles X 145D	$30,527.00
Pre-cast mould X O146D	$36,490.00
Power pole X O147D	$33,936.000
Design fee for city power X 148	Nil
Total for variations:	$316,816.70
EXTENSION OF TIME TO BUILDER
Gasline EOT 2A	$10,500.00
Demolition and foundation work EOT 13.4	$39,000.00
Lift panels EOT 17	Nil
External panels	$51,000.00
Columbia panels	Nil
Sewer works	$24,000.00
Inclement weather	$28,500.00
Total allowance to builder for extension of time:	$153,000.00
Delay costs to builder
Delay	$141,058.86
DAMAGES FOR WRONGLY CASHING SECURITY RELATING TO DEFECTS
Wrongly cashing security	$83,684.00
Total sum payable by owner to builder:	$693,824.58

Reimbursement to owner by architect superintendent

Name	Total amounts claimed
Variation additional structural works X 103	$19,677.30 plus GST = $21,645.03
EOT external panels	$51,000.00
Delay costs	$47,019.62
Total amount to be reimbursed by Architect / Superintendent to owner:	$119,664.65

1. The architect also appealed against the tribunal’s decision in the owner’s contribution proceeding under s 148(1) (proceeding S CI 2017 03807). That proceeding was settled and discontinued, with the consent of all three parties, leaving only the present appeal proceeding between those parties, but in which the architect did not participate by reason of the settlement.

1. The court has ordered that the owner’s application for leave to appeal is to be heard and determined at the same time as the substantive appeal.  This proceeding raises some substantial and legitimate issues in relation to the legal basis for the tribunal’s decision, although I would not characterise all of the grounds of appeal in that way.   Applying the well-established principles,[3] against the builder’s strong opposition, leave to appeal will therefore be granted.

   [3]Department of Premier and Cabinet v Hulls [1999] 3 VR 331, 335–7 [8]–[17] (Phillips JA, Tadgell and Batt JJA agreeing); Myers v Medical Practitioners’ Board (2007) 18 VR 48, 55–6 [28]–[30] (Warren CJ, Chernov JA and Bell AJA agreeing).

Grounds of appeal

1. An appeal against orders of the tribunal is only allowed under s 148(1) of the Victorian Civil and Administrative Appeals Tribunal Act ‘on a question of law’.

1. The owner’s questions of law and the grounds of appeal are set out in the proposed notice of appeal dated 14 September 2017. 

1. At the end of the hearing of the appeal proceeding in this court, the owner sought leave to add a new ground of appeal (cl 2A below), which was opposed by the builder.  Leave to include that ground will be granted because it is convenient way of formalising more precisely an element of the owner’s case that was fully argued in the hearing under other grounds.  I reject the builder’s submission that the new ground is ambiguous, fails properly to specify a legal question, and will give rise to irreparable prejudice.  It does not amount to a reopening of the owner’s case.

1. The questions of law and grounds of appeal are as follows (particulars omitted):

1.In conducting the hearing and making the orders on 25 August 2017 the Tribunal Member breached s 97 and/or s 98(1)(a) of the Victorian Civil and Administrative Tribunal Act … by conducting himself in a manner which gives rise to a reasonable apprehension of bias.

2.In conducting the hearing and making the orders on 25 August 2017 the Tribunal Member breached s 97 of the Victorian Civil and Administrative Tribunal Act … by failing to decide the matter in accordance to the substantial merits of the case.

2AIn conducting the hearing and making the orders on 25 August 2017 the Tribunal Member breached s 97 and s 98(1)(a) of the Victorian Civil and Administrative Tribunal Act … by permitting Mackie to tender a vast number of documents without calling relevant witnesses, and then relying on many of those documents to make findings of fact against the Republic.

3.In granting Mackie extensions of time, the Tribunal erred in law by failing to apply the provisions of clause 35.5 of the Contract, which provided, inter alia, to the effect that Mackie was not entitled to an extension of time if there were concurrent delays.

4.In granting the First Respondent extensions of time and time related damages, the Tribunal Member breached s 97 and/or 98(1)(a) of the Victorian Civil and Administrative Tribunal Act … by denying the Appellant a reasonable opportunity to be heard.

5.In ordering the Appellant to pay the First Respondent for alleged variations and extensions of time, the Tribunal erred in law by purporting to objectively review the certificates issued by the Superintendent under the building contract, contrary to the Court of Appeal judgment in Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd (2013) 41 VR 636.

6.In ordering a refund to the First Respondent in respect to defects, the Tribunal denied the Plaintiff a reasonable opportunity to be heard and breached s 97 of the Victorian Civil and Administrative Tribunal Act … by failing to decide the matter in accordance to the substantial merits of the case,  by ignoring the evidence of defects adduced by Mr Baycan and Mr Gebbie.

7.In allowing Mackie an extension  of time for the abolition of the gas line, the Tribunal erred in law as follows:

(a)The Tribunal erred in law by misconstruing the contract, in finding that the abolition of the gas line was something that was to be arranged by the Consul and the Superintendent [371], because this was not a matter which was excluded under the Contract and was the responsibility of Mackie to organise.  The Tribunal has failed to identify any clause of the Contract where this work was excluded;

(b)In finding that the abolition of the gas line was something that was to be arranged by the Consul and the Superintendent, the Tribunal took into account the fact that Ms Stewart (a former employee of Tectura) had not been called to give evidence [371]; this was an irrelevant consideration because the question is one of construction of the Contract;

(c)In granting Mackie an extension of time for abolishment of the gas line, the Tribunal failed to apply clause 35.5, in that it failed to take into account a significant concurrent delay to the project, as referred to above.

(d)In finding that Mackie had organised its programme for works to commence on 2 February 2010, the Tribunal misdirected itself by finding that Mr Andrews had relied on Mackie's Revision D programme [121], when in fact Mr Andrews had relied on Mackie's revision B programme (at TB 0878);

(e)In finding that Mackie had organised its programme for works to commence on 2 February 2010, the Tribunal arrived at a decision that was so unreasonable that no reasonable Tribunal could have arrived at, because Mackie's own construction programmes prepared in January and February 2010 gave 22 February 2010 as the start date for demolition.

8.         In allowing Mackie an extension of time for claims 13, 4 and 14, the Tribunal erred in law as follows:

(a)The Tribunal found that the works in relation to EOT 13, 4 and 14 were on the critical path [391], when earlier in the decision the Tribunal had found that Mackie’s programme did not contain a critical path.

(b)The Tribunal failed to take into account substantial concurrent delays:

(i)31 working days for lift and dumb waiter and [410], [412], [422];

(ii)18 working days for Columbia panels.

9.The Tribunal misapplied the so-called ‘reserve power’, by exercising such a power when claims had been made and assessed by the Superintendent.

10.The Tribunal misapplied the so-called ‘reserve power’, by exercising such a power when the basis of the claims were not matters which had been made known to the Superintendent during the course of construction.

11.The Tribunal misapplied the so-called ‘reserve power’, by exercising such a power based on an expert witnesses’s theoretical assessment of possible delays to a programme never used on site and prepared by another expert.

1. Before determining these grounds, it is necessary to say something about the limited jurisdiction of the court in appeals of this nature, which is important in this case.

Jurisdiction of court is supervisory, not substitutionary

1. Section 148(1) of the Victorian Civil and Administrative Tribunal Act allows a party to a proceeding in the tribunal to appeal to this court ‘on a question of law’ from an order of the tribunal.  The question of law on which the appeal may be brought is the subject-matter of the proceeding in the court and not simply a commencement criterion which, once satisfied, enlivens a broad appellate review or rehearing.[4]  Despite the impression that may be created by the term ‘appeal’, the determination of the appeal is an exercise of the court’s original jurisdiction in relation to the determination of questions of law, one that is ‘in the nature of judicial review,’[5] not one in the nature of appellate or merits review.  The court’s jurisdiction is ‘supervisory not substitutionary’.[6]  This underlines the importance of confining the appeal to the legal grounds upon which it is brought. 

   [4]Osland v Secretary to the Department of Justice (No 2) (2010) 241 CLR 320, 333 [21] (French CJ, Gummow and Bell JJ) (‘Osland’).

   [5]Roy Morgan Research Centre Pty Ltd v Commissioner of State Revenue (Vic) (2001) 207 CLR 72, 79 [15] (Gaudron, Gummow, Hayne and Callinan JJ); see also Osland (2010) 241 CLR 320, 351 [271 (French CJ, Gummow and Bell JJ).

   [6]Rugolino v Howard (2010) 57 MVR 178, 180 [9] (Bell J).

1. The limits on the jurisdiction of the court in appeals under s 148(1) of the Victorian Civil and Administrative Tribunal Act reflect the different functions of the court and the tribunal under the Act.  The function of the tribunal is to determine the merits of the proceeding and the function of the court is to determine the legality of the tribunal’s orders.  The purpose of limiting appeals in the court to questions of law is to ensure that the facts and merits of the proceeding before the tribunal are determined by the tribunal, not by the court.  The particular distribution of functions as between the court and the tribunal cannot be maintained if the court exercises its (original) appellate jurisdiction in a way that usurps the fact-finding and merits jurisdiction of the tribunal.[7]   Nowhere is this more important than in cases like the present, where many of the issues of fact and merit that were determined by the tribunal against the owner where effectively rerun by that party in the appeal.

   [7]See Haritos v Federal Commissioner of Taxation (2015) 233 FCR 315, 384 [194] (Allsop CJ, Kenny, Besanko, Robertson and Mortimer JJ).

1. Therefore the courts have repeatedly emphasised, as Brooking JA (Ormiston and Charles JJA agreeing) did in Ericsson (Aust) Pty Ltd v Popovski (to give but one example), that ‘[an] appeal … is only on a question of law, and it is not enough to show error of law simply to persuade a judge that the [tribunal or court below] went wrong on a question of fact’.[8]  For the court to have jurisdiction to review an order of the tribunal under s 148, the decision must be erroneous in law.

   [8](2000) 1 VR 260, 265 [14].

1. This does not preclude appeals upon the ground that the order of the tribunal was vitiated by a finding of fact that was erroneous in law because it was not open on the evidence, although strict principles apply to this situation to ensure that the distribution of functions between the court and the tribunal is respected and maintained when this ground is determined.  The principles were summarised in Rugolino v Howard:[9]

These principles have been established … usually in the context of defining the proper role of a judge on appeal.   So in Roads Corporation v Dacakis,[10] Batt J held ‘the question whether there is any evidence of a particular fact is a question of law.’  Therefore a finding of fact is open to challenge as ‘erroneous in law’, but only if ‘there is no probative evidence to support it’.[11]   Similarly, in S v Crimes Compensation Tribunal,[12] Phillips JA said making a finding of fact would ordinarily give rise to an error of law only if ‘it is shown that the fact-finding tribunal arrived at a finding that was simply not open to it.’  His Honour emphasised that the question was not whether the finding was ‘reasonably open’, for that implied the court on appeal could test the finding against a reasonableness standard, but whether the finding was open at all. 

S v Crimes Compensation Tribunal has been followed and explained by the Court of Appeal.  In Myers v Medical Practitioners’ Board of Victoria,[13] Warren CJ (Chernov JA and Bell AJA agreeing) held there was no error of law in making a finding of fact unless the finding was ‘not open’.  After endorsing[14] the decision of Phillips JA in S v Crimes Compensation Tribunal, the Chief Justice approved the statement of Kirby P in Azzopardi v Tasman UEB Industries[15] that it was ‘critical’ to making findings of fact that they be based on the evidence, but there would be no error of law ‘unless it can be shown that there was no evidence’ to support the finding.  The decision of Phillips JA in S v Crimes Compensation Tribunal was also followed in ISPT Pty Ltd v Melbourne City Council.[16]After approving the ‘not open’ test, Warren CJ, Kellam JA and Osborn AJA referred to Transport Accident Commission v Hoffman[17] where Young CJ and McGarvie J said an appeal court, when determining whether a finding of fact was made in error of law, had to determine whether there was ‘any evidence’ to support it.[18]

In State of Victoria v Subramanian,[19] Cavanough J examined these and other authorities.  As his Honour held, whether a finding was open on the evidence, or whether there was any or some evidence to support it, are different ways of expressing the same test.

It follows that, if there is any direct evidence in support of the finding of fact which is under challenge, the court cannot interfere with the finding on appeal, even if it would have made a different finding on the evidence before the magistrate.  

This summary was approved and applied by Garde AJA (Tate and Kyrou JJA agreeing) in Patsuris v Gippsland and Southern Rural Water Corporation.[20]  As can be seen, on the principles applied, a finding of fact is open to challenge for error of law upon the ground that it was not open on the evidence only if there is no probative evidence to support it.  Such a challenge must therefore fail if there is some or any such evidence to support it even if the court would, on the whole of the evidence, have made a different finding.

[9](2010) 57 MVR 178, 180 [10]–[13] (Bell J).

[10][1995] 2 VR 508, 517.

[11]Ibid 520.

[12][1998] 1 VR 83, 90.

[13](2007) 18 VR 48, 59 [44].

[14]Ibid [43]–[44].

[15](1985) 4 NSWLR 139, 151.

[16](2008) 20 VR 447.

[17][1989] VR 197, 199.

[18](2008) 20 VR 447, 464 [65].

[19](2008) 19 VR 335, 347–8 [32].

[20](2016) 218 LGERA 167, 181 [46]–[47]. See also Kuek v Phillips [2017] VSCA 322 (21 November 2017) [70] (Whelan JA and McDonald AJA).

1. The following consideration of the grounds of appeal shows that these principles stand in the way of many of the submissions made by the owner in this appeal.

Grounds 1, 2, 2A, 4 and 6 (natural justice, fairness and substantial merits of the case)

1. These grounds raise questions in relation to apparent bias, procedural fairness and the tribunal’s obligations under ss 97 and 98 of the Victorian Civil and Administrative Tribunal Act.

1. Section 97 provides:

The Tribunal must act fairly and according to the substantial merits of the case in all proceedings.

1. Section 98(1) provides:

The Tribunal —

(a)       is bound by the rules of natural justice;

(b)is not bound by the rules of evidence or any practices or procedures applicable to courts of record, except to the extent that it adopts those rules, practices or procedures;

(c)       may inform itself on any matter as it sees fit;

(d)must conduct each proceeding with as little formality and technicality, and determine each proceeding with as much speed, as the requirements of this Act and the enabling enactment and a proper consideration of the matters before it permit. 

1. In relation to apparent bias, the owner submitted to this court that the conduct of the senior member was so bad that the architect had to make an application for the tribunal to be reconstituted under s 108(1).  It submitted that the matters there relied upon, plus what happened subsequently, establish a reasonable apprehension of bias.  That submission does not take the owner very far, for Justice Garde rejected the application and his Honour’s decision has not been and is not challenged, and what happened subsequently does not add much to what the owner put in that application.  

1. The owner submitted that the senior member had virtually ignored overwhelming evidence that the builder had caused substantial and prolonged delays and made persistently negative findings about the credibility of Mr Gebbie (who gave evidence for the architect).  Further, the senior member stated that there was no explanation for the owner in not calling Mr Andrews (an expert programmer), when there was.

1. It was submitted that the senior member: was not critical of the builder for the ‘shambolic’ manner in which it conducted the case, including suddenly closing its case before calling key witnesses;  had effectively ignored Mr Gebbie’s extensive evidence;  and had largely adopted and repeated substantial sections of the builder’s submissions, ignoring those made for the owner and architect.

1. These submissions were forcefully developed in oral argument.  For example, counsel submitted that the senior member: made negative findings against the owner’s case at ‘every opportunity’; engaged in ‘trumping up the evidence’; and adopted a ‘capricious line of reasoning’, one that was ‘unjudicial’.  The submissions conveyed a strong sense of grievance.

1. The owner relied upon three affidavits: one of the architect’s lawyer dated 29 March 2017 (used before Justice Garde); one of the consul-general dated 12 April 2017 (used before Justice Garde); and one of the owner’s lawyer dated 8 September 2017 (used in this proceeding).  I have read and considered these affidavits, as counsel for the owner requested.  Again, I recognise that they communicate a strong sense of grievance. 

1. In relation to s 97, the owner submitted that the senior member had failed to act fairly and according to the substantial merits of the case. Besides the above, it was submitted that the senior member had ignored: extensive evidence and submissions of the owner and architect; evidence about the builder’s mismanagement of the shop drawings; evidence about the builder’s failure to procure a precast panel contractor until many months into the project; and whole aspects of the owner’s case in relation to extensions of time. As in relation to apparent bias, the owner here relied upon the fact that the senior member had permitted the builder to close its case without calling key witnesses. The senior member had also allowed the builder to call its expert witness (Mr Watson) before relevant lay witnesses were called to establish the factual foundation of his opinion evidence, which is unusual. These submissions were also developed forcefully in oral argument.

1. In rejecting the architect’s application for reconstitution of the tribunal under s 108(1), Justice Garde decided that the senior member had not breached the rules of natural justice nor conducted the proceeding in a manner that gave rise to apparent bias. This conclusion definitely does not stand in the way of grounds 1, 2, 2A, 4 and 6 of the notice of appeal. Under s 148(1), the court has jurisdiction and indeed the responsibility independently to determine these grounds despite the rejection of the application for reconstitution. It completely misunderstands the difference between the jurisdictions of the court and the tribunal to suggest otherwise.

1. While I appreciate that the owner has sincere concerns about the conduct of the proceeding by the senior member and the decision that was made, after carefully considering his reasons for decision and the way that the proceeding was conducted, I am unable to accept counsel’s submission that the senior member exhibited apparent bias or failed to conduct the proceeding fairly and in accordance with the substantial merits of the case.  I specifically reject the submission that the senior member made negative findings against the owner’s case at ‘every opportunity’; engaged in ‘trumping up the evidence’; and adopted a ‘capricious line of reasoning’, one that was ‘unjudicial’.  These contentions have not been made out.   In my view, the senior member conducted the proceeding according to rulings that he was entitled to make and decided the case by reference to findings that were open to him on the evidence. 

1. A critical feature of the owner’s case in relation to apparent bias, unfairness and failing to consider the substantial merits of the case related to the senior member’s decision to permit the builder to close its case earlier than expected.  The sequence of events is helpfully described in detail in the owner’s supplementary submissions dated 26 July 2018 and the attached materials.  A large part of the builder’s case related to claims for extension of time claims.   Mr Watson was the builder’s main expert in relation to these claims.  The builder closed its case after its principal (Mr Mackie), its expert estimator (Mr Beattie), its defects expert (Mr Cross) and Mr Watson gave evidence, and after the senior member permitted it to tender a large volume of financial and like documents as business records.  The builder relied upon these records to prove the truth of their contents and did not call witnesses to give direct evidence about various factual issues concerning the cause for delays.  The owner opposed this course and its submissions were not accepted.  The ‘vast number of documents’ referred to in ground 2A are those business records.

1. The proceeding continued after the tribunal made the rulings.  In its considered response, the owner did not challenge the rulings in this court and closed its case after the opening of its counsel without adducing any evidence of its own, although it had filed expert witness statements.  The architect conducted the proceedings differently.  It called a number of witnesses. 

1. The course adopted by the owner meant perforce that the senior member had to determine the proceeding upon the basis of the evidence presented by the other parties, including the business records tendered by the builder, and reasonably available inferences, which is exactly what the senior member did.   In so determining the proceeding, the senior member considered in his reasons for decision the failure of the builder to call certain witnesses and of the owner to call any witnesses, as was entirely appropriate and predictable.

1. The senior member was not bound by the rules of evidence and was required in its discretion to conduct the proceeding with as little formality and technicality and as much speed as was proper (s 98(1)(b)–(d)).  But the tribunal’s discretion had to be exercised consistently with the rules of natural justice (s 98(1)(a)), and it was required to act fairly and in accordance with the substantial merits of the case (s 97), including this particular building and construction case.[21] Where appropriate in such a case it may be necessary for the tribunal to consider in its discretion, among other formal evidentiary rules, the rule that, where otherwise admissible business records are tendered by a party to a proceeding, unfair prejudice to the other side is a basis upon which the records may be excluded from evidence under s 135(a) of the Evidence Act 2008 (Vic).[22]  Therefore, in the present case, admitting the business records was not a foregone conclusion, and the record shows that the tribunal did not treat admitting the records as a foregone conclusion.

   [21]See generally the discussion and cases cited in: Justice RD Giles, ‘Dispensing with the Rules of Evidence’ (1992) 8(2) Building and Construction Law 88, 98–9.

   [22]Matthews v SPI Electricity Pty Ltd (Ruling No 35) [2014] VSC 59 (27 February 2014) [65] (J Forrest J).

1. The owner’s central complaint in this court under these grounds of appeal was that the senior member should not have allowed the builder: to call expert evidence before foundational lay evidence;  to tender business records as truth of their contents partly in substitution for that direct foundational evidence; to close its case early once this expert and documentary evidence was admitted;  and to use this evidence as the basis for seeking findings of fact. 

1. But the owner has not established why these rulings were not open to the senior member to make in the ordinary exercise of the tribunal’s discretion in the management of this complex building case, which was in the building and property list of the tribunal, where efficiency and expedition are legitimately expected, when fair.  The senior member was persuaded that the proceeding would be more efficiently and expeditiously conducted by permitting the builder to adopt this course, without unfairness to the owner (and the architect). 

1. The record shows that, in so concluding, the senior member considered both sides of that question—efficiency/expedition and unfairness.  Nothing in the nature of the case or the particular issues and circumstances legally required the senior member not to follow the course that he did.  The owner may have been somewhat, but not I think unfairly, forensically disadvantaged by the rulings made.  I appreciate that the owner maintains a strong sense of grievance about the course that the tribunal adopted, which was forcefully communicated in its counsels’ submissions.   But this is not the legal question. 

1. As to apparent bias, the applicable authorities were reviewed by Justice Garde in the decision refusing the reconstitution application,[23] which I gratefully adopt.  In particular, the test is whether ‘a fair-minded lay observer might reasonably apprehend that the judge might not bring an impartial mind to the resolution of the question’.[24]  It is first necessary to identify what might lead the judge to decide the case ‘other than on its legal and factual merits’, and second necessary to identify the logical connection between that matter and the apprehension that the matter  might cause the judge to deviate from those merits.[25]  The owner’s submissions in this court in relation to apparent bias fail at the first step.  It has not established that something extraneous might have led the senior member to decide the case other than by reference to the legal and factual merits.

   [23]Mackie (No 1) [2017] VCAT 620 (8 May 2017) [67]–[79] (Garde J).

   [24]Ebner v Official Trustee in Bankruptcy (2000) 205 CLR 337, 344 [6] (Gleeson CJ, McHugh, Gummow and Hayne JJ).

   [25]Ibid 345 [8].

1. As to unfairness (s 97) and natural justice (s 98(1)(a)), the critical question is whether the owner had a reasonable opportunity to present its case, after knowing the case against it.  Once the rulings were given that the builder could lead expert evidence before lay evidence, tender the business records and close its case, the owner knew the case that was being put against it very well.  After that, it had a number of options available to it, including leading evidence of its own.  It chose not to lead evidence.  That was a deliberate election made in the exercise of the reasonable opportunity to be heard that the owner was given by the tribunal, not something forced upon the owner by a procedure that was unfair or unreasonable.

1. As to the substantial merits of the case, s 97 has purposes that are of singular importance. It operates as a statutory direction to the tribunal, as a judicial institution that is not a court, to focus upon matters of substance and not form, as long as its procedures are fair. Parliament has determined that the formality/fairness balance still has to be struck by the tribunal, but in its own way. No-one understanding the significance of the tribunal in the contemporary civil justice system would wish to say a single word subtracting from that direction. Accepting that, one needs to be clear about what the provisions do and do not do. Section 97 does not authorise a procedural free-for-all. It operates such that ‘the interests of case management … [are] not be employed so as to shut a party out of litigating its case’,[26] for this would be inconstant with s 98(1). Nor can the provisions be mined for merit-based appeal points, for this would be inconsistent with s 148(1). Thus the provision does not require the tribunal ‘to achieve a substantially fair result’ such that breach of the provision, so understood, ‘provide[s] an avenue for merits review of the tribunal’s decision’.[27] 

   [26]Bell Corp Victoria Pty Ltd v Stephenson (2003) 20 VAR 280, 298 [51] (Ashley J).

   [27]Shaw v Gadens Lawyers [2010] VSC 7 (27 January 2010) [104], [106] (Williams J).

1. The owner has not established that the tribunal failed to act fairly and in accordance with the substantial merits of the case. The tribunal was not apparently biased, it made procedural and evidentiary rulings that were open, and it did not shut the owner out from litigating its case. The owner has not established that the tribunal ignored evidence and whole aspects of the owner’s case in relation to extensions of time. To the extent that the owner’s submissions made under this ground were concerned with the tribunal’s findings of fact and the merits of the decision that was made, appellate review of such matters is not available under s 97.

1. Grounds 1, 2, 2A, 4 and 6 are for those reasons rejected.

Grounds 3, 7(c) and 8 (concurrent delays)

1. As noted above, the builder claimed delay costs of $232,331.00 against the owner.  The tribunal rejected two claims, upheld five others in whole or in part and ordered the owner to pay the builder delay costs of $141,058.86.  That is a large amount.

1. Clause 35.2 of the contract required the builder to execute the works by the specified date of practical completion (1 March 2011).  There was a general obligation on the builder in cl 33.1 to proceed with the construction works ‘with due expedition and without delay’.  Under cl 35.6, the builder was liable to pay the owner the specified amount of liquidated damages ($1,500.00 per calendar day) if the date of practical completion was not reached and not extended.  That is because, beyond that date, if there is no justification that the contract recognises, the delay effectively deprives the owner of access to a building that should have been built.  In this case, the building was a consular residence, so delay is no small matter for the Republic of Turkey.  This is understandably reflected in the way that it has conducted the proceeding in the tribunal and this court.

1. As is usual, the contract made provision for extending the time for practical completion.  With the construction of buildings, as with the living of life, there is a risk that the unexpected and the unpredictable might happen.  The contract allocated responsibility for that risk.  Clause 35.5 required the builder promptly to notify the superintendent whenever it became evident that the works might be delayed.  The builder was ‘entitled’ to an extension of time for practical completion for specified purposes where a claim was made within 28 days.  The entitling events were, amongst others, events beyond the reasonable control of the builder, inclement weather, delay caused by the owner or the architect and latent conditions. 

1. However, under cl 35.5, the builder was not entitled to an extension of time where there was a concurrent delay: 

Where more than one event causes concurrent delays and the cause of at least one of those events, but not all of them, is not a cause referred to in the preceding paragraph, then to the extent that the delays are concurrent, the Contractor shall not be entitled to an extension of time for Practical Completion.

As can be seen, under this part of cl 35.5, delay caused by more than one event does not give rise to an entitlement to extension of time where one of the events is not an entitling event.  The principle, enshrined in the contract, is that the builder has to bear the risk of delays attributable to the builder even if there is another cause for which the builder is not responsible.  The builder cannot hide behind some other delay to avoid responsibility for a delay of the builder’s own.

1. In the proceeding in the tribunal, the owner contended that the builder was not entitled to extensions of time (and was therefore liable to pay liquidated damages to the owner) because a substantial part of the delay was concurrently caused by non-entitling events.  On its case, this was most especially so in relation to the failures of the builder in relation to the precast panel contract, the abolition of the gas line, the change in the design of the lift walls and basement dumbwaiter, and the changes to the shop drawings.  In the proceeding in the tribunal, the owner had a lot to say on this subject.  It placed a big bundle of issues of fact and merit in the tribunal’s in-tray.

1. As its jurisdiction required, the tribunal engaged heavily with this bundle of issues.  Such is revealed by even a cursory reading of the reasons for decision of the tribunal relating to the extension of time claims made by the builder.  It is perfectly clear that the tribunal well knew that concurrent delay was an important issue from the owner’s point of view.  I want to put to rest the idea that it thought otherwise.  One of the primary issues that the senior member stipulated for consideration was:  ‘(c) [w]hether the works were delayed by an event that entitled the builder to an extension of time’ (see above).  This patently incorporates the issue of concurrent causes of delay.  The tribunal considered the seven claims one by one (paras [352]–[518] of the reasons for decision).  As set out in the table above, the tribunal made allowances by way of extension of time for a certain number of days in relation to the gas line, the demolition and foundation work, the external panels, the sewer works and inclement weather.  It refused to make allowances in relation to the lift panels and the Columbia panels.  For the following reasons, it is inconceivable that the tribunal failed to consider the issue of concurrent delay in doing so.

1. To repeat, cll 3, 7(c) and 8 of the owner’s grounds of appeal are that the tribunal erred in law by failing to apply the concurrent delays provisions in cl 35.5 of the contract in relation to the precast panels, the gas line, the lift and dumbwaiter design changes and the shop drawings.  These grounds were addressed in extensive and detailed written submissions which were developed in oral argument. 

1. On those submissions, the builder’s own records showed that it fell behind schedule at an early stage and failed to proceed with the works diligently and without delay.  It fell into serious delay due to its own mismanagement of the project.  It failed to call Mr Sale, the relevant project manager.  It did not finalise the precast panels contract by the specified date, without justification (the chronology of events was presented in minute detail in the written submissions).  The builder was responsible for the major delay caused in the procuration of the precast panels, from which the project never recovered.  It was submitted that the tribunal granted extensions of time despite finding that the builder had substituted the lift without authority (delaying the lift panels).  The contract provided that the builder was responsible for all necessary demolition work, yet the gas line was not abolished until 23 February 2010, delaying demolition work generally.  The owner’s submissions criticised the tribunal for relying upon the evidence of Mr Watson, who was ignorant of the concurrent delays.  In doing so, the tribunal breached cl 35.5 as regards concurrent delays.  In the owner’s submission, the failure of the tribunal to apply cl 35.5 in these and other respects was a substantial error of law relating to the extensions of time granted.

1. I accept that cl 35.5 of the contract required the tribunal to give consideration to concurrent delays when deciding whether the builder was entitled to extensions of time.  It would have been an error of law, indeed a serious error of law, for the tribunal to fail to do so.  I reject the submission made for the builder that whether the tribunal failed to apply cl 35.5 as regards concurrent delays was a question of fact.  Far from it, it was an important legal issue going to what the parties bargained for.

1. In determining whether the tribunal considered and applied cl 35.5 as regards concurrent delays, I have had regard to issue for determination (c) (see above).  Further, in its reasons for decision, the tribunal expressly mentioned that cl 35.5 ‘deals with concurrent delays so that the builder cannot claim for a delay over’ a period covered by the concurrent delay clause (para [107]).  I have read and considered the tribunal’s reasons for decision in relation to the seven items claimed (paras [352]–[518]).  I note that the tribunal again mentioned the issue of concurrent delays when referring to the owner’s (and the architect’s) submissions with respect to the sewer works claim (para [494]).

1. The reasons for decision make clear that the issue of concurrent cause for delay was considered as part of the general application of cl 35.5, claim by claim:

·    The decision in relation to the gas line was that, on the facts that happened, the builder was not responsible for the delay (paras [352]–[373]) and was entitled to all of the 15 days claimed (not just the eight granted).  The owner lost its objection in relation to this claim wholly (which necessarily included the concurrent cause element) on the facts. 

·    The decision in relation to the demolition works was that, on the facts that happened, the builder was not responsible for the delay (paras [374]–[394]) and was entitled to an extension of time of 26 days (para [391]).  Again, the owner lost on the facts and the concurrent delay argument fell into these findings. 

·    The decision in relation to the lift panels and the Columbia panels was that, on the facts that happened, the builder was responsible for the delay (paras [406]–[422], [473]–[487]) and no extension of time was allowed.  I cannot see that the tribunal has failed to consider the concurrent delay implications of these findings when considering other claims that were allowed. 

·    The decision in relation to the external precast panels was that, on the facts that happened, the builder was not responsible, and 34 days should be allowed (paras [423]–[472]).  Again, this factual conclusion necessarily involved rejection of the proposition that some non-entitling concurrent cause played a role in this delay. 

·    The decision in relation to the sewer pipe was that the builder was not responsible and 25 days (not just the nine allowed) should be allowed (paras [488]–[500]), rejecting by implication the builder’s concurrent delay submission (noted at para [494]). 

·    The decision in relation to the inclement weather claim was also entirely factual, resulting in an extension of time of 19 days (paras [501]–[504]).

1. The owner’s written and oral submissions to this court go into excruciating detail as to why these findings of the tribunal should not be accepted.  In this connection, the related submissions made for the owner under ground 4 criticised the tribunal’s reliance upon the evidence of Mr Watson as regards the issue of delay. 

1. An appeal on grounds of error of law under s 148(1) of the Victorian Civil and Administrative Tribunal Act cannot be used as a vehicle for attacking findings of fact made by the tribunal or the merits of the decision made upon the basis of those findings (see above).  In my view the submissions made for the owner under grounds 3, 7(c) and 8 (and 4) largely fall into this impermissible category.  Ground 8(a) specifically falls into this general category.  Further, it has not been established that the tribunal failed to take into account the matters referred to in ground 8(b).  It would have been an error of law for the tribunal to fail to apply cl 35.5 of the contract as regards concurrent delay, but it is clear from the reasons for decision that there was no such failure.

1. Grounds 3, 7(c) and 8 (concurrent delays) are therefore rejected.

Ground 5 (objective review of variation valuations and extensions of time)

1. As can be seen from the table above, there were 17 items in dispute in relation to the valuation of variations.  The tribunal allowed 12, rejected five and awarded $316,816.70 in favour of the builder according to a judicially objective valuation of the allowed items.  The architect as superintendent had valued seven of these variations.  Of these seven, one involved a mathematical mistake and six were found by the tribunal to be unfair and unreasonable.  It is those seven that are covered by ground 5.  Under this ground, the owner also raised issues about how the tribunal reviewed the architect’s extension of time determinations, although this aspect of the appeal is considered more directly in more detail below (grounds 9-11).

1. The owner submitted that the tribunal erred in law by objectively reviewing the architect’s valuation and extension of time determinations.  It contended that this was contrary to the decision of the Court of Appeal in Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd.[28]  The merits of such determinations were for the superintendent to consider and not justiciable by the tribunal.  In relation to the extension of time determinations, it made these submissions in addition to the submissions made in relation to the reserve power in cl 35.5 (see below).

   [28](2013) 41 VR 636 (Maxwell P, Ashley and Redlich JJA) (‘Dura’).

1. In its written submissions, the owner contended that the proper determination by the tribunal of whether the superintendent had ascertained the value of variations in accordance with the contract precluded any assessment of the objective correctness of the amount.  The ascertainment of an architect acting as a superintendent of what is reasonable in the exercise of the superintendent’s professional judgment and expertise is not reviewable by the tribunal, which must recognise the subjective state of mind of the superintendent, whose contractual function is to carry the valuation.  The valuation is not reviewable on the merits by the tribunal.  These are powerful submissions that deserve serious consideration, which is one reason why I have granted leave to appeal.

1. The owner submitted orally that the senior member was an inexperienced lay person who was confessedly ignorant of basic aspects of the building and construction industry.  He ought not to have reviewed the valuations made by the superintendent architects in accordance with their professional judgment and expertise.  He was in no position to do so.  Where there has been a valuation by a superintendent of this kind, Dura establishes that it is not reviewable by the courts, even if it contains a mistake (which is why even the admittedly mathematically incorrect valuation was not reviewable) and even if the court does not agree with the valuation.  The tribunal also erred in treating Dura as a case that could be explained away as one that was concerned with the value of a whole contract, and in treating the present case as one in which the valuation certificates issued by the architect were interim certificates.

1. It was submitted that the tribunal erred in law by referring to LU Simon Builders Pty Ltd v HD Fowles[29] and J M Kelly (Project Builders) Pty Ltd v Toga Development No 31 Pty Ltd (No 2),[30] which were not apposite to the matters under discussion.  As to LU Simon, the owner submitted, in the strong language of counsel, that the senior member had ‘completely confused himself’.  Counsel submitted that ‘I just don’t know how he could have misunderstood it so badly’.  These cases did not deal with the issues discussed in Dura.  The tribunal had completely misunderstood the relevant case law, in his submission.   Counsel was a strong advocate in the owner’s cause in the appeal.

   [29][1992] 2 VR 189 (‘LU Simon’).

   [30][2008] QSC 312 (1 December 2008) (Daubney J) (‘JM Kelly’).

1. In the owner’s submission, the contract provided for valuations by the superintendent (here the architect, Tectura).  The valuation assessment required the exercise of professional judgment and estimation which the senior member was not qualified to undertake. 

1. I completely reject this submission. Constituted as the tribunal having jurisdiction to hear and determine the proceeding, the senior member had to review the professional judgment and estimation of the architect as to the value of variations (and as to the extension of time claims) if the contract, properly interpreted, required this to be done. The senior member had the statutory jurisdiction and indeed the responsibility to do so, even though he was a non-specialist. This review function had to be carried out by reference to the evidence and according to procedures that complied with ss 97 and 98 of the Victorian Civil and Administrative Tribunal Act.  Allocation of particular cases to particular members of the tribunal was for the tribunal to determine.  As the senior member was allocated the proceeding, he had to determine it, and that is what he did.  The real issue raised by this ground of appeal is not whether the tribunal, as constituted, was qualified to review the judgment and estimation of the architect but whether, and in what way, the contract permitted such a review function to be carried out.  For that purpose, I now go to the contract.

1. Clause 40.1 of the contract made provision for variations directed by the superintendent (here the architect) to the contractor (here the builder).  Clause 40.4 made provision for the contractor to seek approval for variations from the superintendent.  Clause 40.3 related to pricing the valuation.  As relevant here, it provided:

Unless the Superintendent and the Contractor agree upon the price for a variation, the variation directed or approved by the Superintendent under Clause 40.1 shall be valued under Clause 40.5.

Clause 40.5 made provision for ascertaining the amount of the valuation.  It provided:

40.5     Valuation

Where the Contract provides that a valuation shall be made under Clause 40.5, the Principal shall pay or allow the Contractor or the Contractor shall pay or allow the Principal as the case may require, an amount ascertained by the Superintendent as follows –

(a)if the Contract prescribes specific rates or prices to be applied in determining the value, those rates or prices shall be used;

(b)if Clause 40.5(a) does not apply, the rates or prices in a Priced Bill of Quantities or Schedule of Rates shall be used to the extent that it is reasonable to use them;

(c)to the extent that either Clause 40.5(a) or 40.5(b) apply, reasonable rates or prices shall be used in any valuation made by the Superintendent;

(d)in determining the deduction to be made for work which is taken out of the Contract the deduction shall include a reasonable amount for profit and overheads;

(e)if the valuation is of an increase or decrease in a fee or charge or is a new fee or charge under Clause 14.3, the value shall be the actual increase or decrease or the actual amount of the new fee or charge without regard to overheads or profit;

(f)if the valuation relates to extra costs incurred by the Contractor for delay or disruption, the valuation shall include a reasonable amount for overheads but shall not include profit or loss of profit;

(g)if Clause 11(b) applies, the percentage referred to in Clause 11(b) shall be used for valuing the Contractor’s profit and attendance;  and

(h)      daywork shall be valued in accordance with Clause 41.

When under Clause 40.3 the Superintendent directs the Contractor to support a variation with measurements and other evidence of cost, the Superintendent shall allow the Contractor the reasonable cost of preparing the measurements or other evidence of cost that has been incurred over and above the reasonable overhead cost.

1. As can be seen, under cl 40.5, it is the superintendent who ascertains the valuation amount.  But, cl 23 contained provisions regulating the exercise of the contractual functions of the superintendent.  As here material, it provided:

23       SUPERINTENDENT

The Principal shall ensure that at all times there is a Superintendent and that in the exercise of the functions of the Superintendent under the Contract, the Superintendent –

(a)       acts honestly …;

(b)acts within the time prescribed under the Contract or where no time is prescribed, within a reasonable time;  and

(c)       arrives at a reasonable measure or value of work, quantities or time.

1. In the owner’s submission:

·these provisions did not authorise ‘objective’ review of the architect’s valuations;  and

·that is what the tribunal did, which was an error of law.

If those submission are correct, the owner must obtain a significant victory in this appeal.  I will examine each of these propositions in turn.

1. I accept the owner’s submission that these provisions must be interpreted in the light of the decision of the Court of Appeal in Dura.  Nothing said in the reasons for decision of the tribunal suggests that it thought otherwise. 

1. It was established in Dura that the parties are bound by a determination that complies with the terms of a contract and a court will only interfere with a determination that does not so comply.[31]  The case also contains an important discussion about the difference between ‘mechanical’ and ‘discretionary’ computations.[32]  The relevant valuation clause in the contract in Dura was cl 44.6.  The contract in the present case also had a cl 40.5 which was in very similar terms.   Of the word ‘ascertain’ in those clauses, Maxwell P (Ashley and Redlich JJA agreeing) said:

the parties intended by their use of the word ‘ascertain’ to authorise a process of computation which would, where necessary, involve judgment, estimation and approximation. The determination of what might be ‘reasonable’ is, quintessentially, an exercise involving judgment and experience.[33]

[31](2013) 41 VR 636, 643 [15], 644–5 [18]–[19] (Maxwell P, Ashley and Redlich JJA agreeing), following WMC Resources Ltd v Leighton Contractors Pty Ltd (1999) 20 WAR 489 (Ipp J, Kennedy and White JJ agreeing) (‘WMC Resources’).

[32]Dura (2013) 41 VR 636, 645–6 [19]–[21] (Maxwell P, Ashley and Redlich JJA agreeing).

[33]Ibid 647 [28] (footnote omitted).

1. All seven valuations at issue in the present case fell into this category.  The process of ascertainment in relation to these valuations involved the exercise of the (architect) superintendent’s professional judgment and experience.  In accordance with Dura, the parties were bound by, and the court cannot review, a valuation of that kind that is in accordance with the contract, even if it contains a mistake.[34]   

   [34]Ibid 647 [29] (Maxwell P, Ashley and Redlich JJA agreeing). See also Legal & General Life of Australia Ltd v A Hudson Pty Ltd (1985) 1 NSWLR 314, 335–6 (McHugh JA); WMC Resources (1999) 20 WAR 489, 499 [36]-[37] (Ipp J, Kennedy and White JJ agreeing).

1. However, cl 40.5 is not the only source of the (architect) superintendent’s contractual obligations in the present case.  Under cl 23, which the parties amended but did not exclude when adopting AS 2124-1992 as the form of their contract, the superintendent had to exercise the contractual functions of the superintendent ‘honestly’ and in a manner that ‘arrive[d] at a reasonable measure or value of work, quantities or time’ (paras (a) and (c)).  Clause 23 applies to the exercise of the superintendent’s valuation function under cl 40.5 to require that the ascertainment of the amount in accordance with that clause be honest and reasonable.  It also applies to the exercise of the superintendent’s functions in relation to extension of time claims (cl 35.5).

1. As discussed by McDougall J in Walton v Illawarra,[35] the presence of a clause like cl 23 in a contract affects the scope of the jurisdiction of a court, tribunal or arbitrator of contractual review in situations where the superintendent’s discretionary decision is not conclusive.  In Walton, cl 23 of AS 2124-1992 was retained in full.  It therefore required the superintendent ‘honestly and fairly’ to exercise the functions of the superintendent and to arrive at a ‘reasonable measure or value of work, quantities or time’ (paras (a) and (c)).  His Honour held that this clause contractually required the superintendent to arrive at a reasonable outcome with respect to both extensions of time and variations:

   [35](2012) 28 BCL 202 (New South Wales Supreme Court) (‘Walton’).

[T]he contract requires, in relation to extensions of time, both that the Superintendent's manner of exercise of her functions must be honest and fair and that the product of her deliberations must be reasonable. It follows that, even if the Superintendent had acted honestly and reasonably, Walton could not be bound by her determination if that determination did not meet the description ‘a reasonable extension of time’. That is because, by definition, it would not have got what it was entitled to receive.

I do not think that any different analysis is required in relation to variations. The only possible distinction of present significance is that, in relation to the valuation of variations, the requirement to arrive at a reasonable value is imposed not by the clauses that authorize the Superintendent to value the variations (cls 40.2 and 40.5) but by cl 23 (c). I do not think that anything flows from this distinction. The Superintendent is, nonetheless, required to arrive at a reasonable outcome.[36]

In his Honour’s view, it followed that a reviewing court could—really must— objectively assess the reasonableness of the superintendent’s decision to determine whether it was in accordance with the contract:

What is a reasonable extension of time for a particular cause and in a particular situation is a question of fact to be assessed objectively. Likewise, what is a reasonable sum to allow for the cost of executing a variation to the work is a question of fact to be assessed objectively. That is so in each case notwithstanding that, as I accept, reasonable minds acting on a properly informed basis and in a rational way may differ as to what is, in either case, reasonable. (It could be said that the use of the indefinite article preceding ‘reasonable’ recognises this.) The obvious fact that, in any case, there may be a range of reasonable outcomes or opinions has never stopped the law from relying on the concept of ‘reasonableness’ in a wide range of contexts, both civil and criminal. Nor does it mean that a determination of what is, in any given situation, reasonable is something other than a question of fact to which an objective answer can be given.

In relation to both extensions of time and the valuation of variations, the court is able to look at the product of the Superintendent's labours, to see whether she has arrived at a reasonable extension of time or a reasonable valuation for a variation. (That is made clear, in relation to extensions of time, by the emphasised words in the definition of ‘Date for Practical Completion’ set out at [13] above.) If the superintendent did not do so, then she has not performed her task, and Walton has not received its contractual entitlement.

Accordingly, I conclude that it is open to the court to look at the challenged assessments (for extensions of time and valuation of variations and the like), to determine whether or not they equate to the contractual standard of reasonableness, and to substitute its own determination of what should reasonably have been allowed if they do not. Having regard to the way in which the dispute was framed and argued, the consequences will fall for consideration under the third and fourth issues.[37]

I respectfully agree with this analysis and it applies as much to the tribunal in a case like the present as it does to a court.

[36]Ibid 210–11 [42]–[43].

[37]Ibid 212–13 [55]–[57].

1. It follows that, in the present case, in exercising its jurisdiction to determine what the contract in law required, the responsibility of the tribunal was objectively to determine whether the architect had acted honestly and reasonably (cl 23(a) and (c)) when exercising the superintendent’s function of valuing the variations (cl 40.5).  As the superintendent’s determination was not final and conclusive in this situation, the tribunal was not bound by a determination that was not in accordance with cl 23, for this was not what the parties bargained for.  They had bargained for a determination that was objectively in accordance with that provision.  Therefore, where the tribunal objectively determines that the architect has not exercised the valuation function honestly and reasonably, it can substitute its own valuation as the one that the contract requires.  That is its statutory dispute resolution jurisdiction.  By parity of reasoning, it is the same with extension of time determinations (see further below).

1. That was the course adopted by the tribunal in the present case.  It correctly decided that this was not a case where some kind of contractually conclusive determination had been made, either in relation to valuation of variations or extensions of time.  It was a case in which no final certificate had been issued.  I think this was the point of the tribunal’s observation that the certificates issued by the architect were ‘only interim certificates’ and its discussion of LU Simon and J M Kelly.  I reject the owner’s criticisms of the tribunal’s reasons for decision in this regard.  They are pernickety and uncharitable, particularly given the difficulty of its task.  Having so concluded, the tribunal then decided that it could objectively review the reasonableness of the architect’s valuation determinations against the superintendent’s obligations under cl 23(a) and (c), which it did.  Again, it adopted a similar course in relation to the extension of time determinations.  In my view the tribunal’s approach was correct in law in both situations. 

1. The owner also contended that the tribunal erred in law in treating certain valuations as variations when they were not.  For example, the Attila Stone ‘variation’ was brought about by the builder’s failure to engage the stone contractor in a timely way.  This contention takes issue with the tribunal’s decision in relation to a matter of fact and merit and raises no question of law.

1. Ground 5 is therefore rejected.

Ground 7 (extension of time for abolition of gas line)

1. In relation to the extension of time granted with respect to the abolition of the gas line, ground 7(a) alleges misconstruction of the contract.  Ground 7(b) alleges irrelevant considerations.  Ground 7(c) has been rejected (see above).  Ground 7(d) alleges a misdirected fact finding.  Ground 7(e) alleges legal unreasonableness.

1. The architect allowed an extension of time of eight days with respect to the delay in abolishing the gas line.  The builder claimed 15 days, which the tribunal allowed, ordering payment of the balance outstanding for seven days ($10,500).

1. In relation to ground 7(a), the owner submitted that the extension of time for the gas line was initially claimed upon the basis that it was a latent condition, which it was not.  The contract expressly provided that the builder was to do all the work necessary for the demolition of the existing residence and the construction of the new one.  Therefore, the builder was responsible for abolition of the gas line.  The tribunal’s finding that this was ‘something to be arranged by the owner’s consul and the superintendent’ was therefore an error of law.  The owner made an extensive attack upon the findings made by the tribunal in relation to the abolition of the gas line in the submissions made under grounds 3, 7(c) and 8 (concurrent delays).  As much as it raises questions of law, I have rejected that attack.  As much as it raises matters of fact and merit, no appeal lies.  I repeat those conclusions here.

1. The builder contended: its case was put upon the basis of the architect’s delay in arranging abolition of the gas line; the tribunal made available findings of fact supporting the conclusion that the builder was not responsible for the delay;  and the contract did not expressly provide that the builder was responsible for abolishing the gas line.

1. The tribunal’s reasons for decision extensively discuss this claim from a factual point of view.  The dispute about who was responsible for the abolition of the gas line under the contract was noted.  The tribunal also noted that the architect had granted eight days of the extension claimed, which is inconsistent with the owner’s position that under the contract the builder was entitled to none.  This claim was apparently within time and the reserve power in cl 35.5 was not engaged.  The tribunal granted 15 days extension of time upon the basis that, on the evidence, it was unreasonable and unfair to grant an extension of eight rather than 15 days. 

1. I am not persuaded that in reaching this conclusion the tribunal misconstrued the contract in relation to who was responsible for abolishing the gas line.  This was a matter of dispute, but the architect had granted eight days of the 15 days claimed.  On the found facts, the builder was not responsible for the delay and it was unreasonable and unfair not to grant the extension of time claimed, in the tribunal’s view.  As I have already decided, I am not persuaded that these findings were not available on the evidence.  It may or may not be that the senior member made certain mistakes of factual detail in the course of his reasoning (see paras [354], [366]–[367]), which would hardly be surprising given the complexity of the case.  Such mistakes, if any, were clearly not legally vitiating. 

1. Ground 7(a) is therefore rejected.  In consequence, ground 7(b) is rejected.  On the approach of the tribunal, which was not legally erroneous, Mr Stewart’s absence was not irrelevant.  Ground 7(c) has already been rejected.  Ground 7(d) is not a ground of error of law.  It is a ground of error of fact that is not appealable.  Ground 7(e) raises matters of fact and merit that do not amount to a proper allegation of legal unreasonableness.

1. Ground 7 is therefore rejected.

Grounds 9, 10 and 11 (reserve power)

1. As we have seen, cl 35.5 of the contract makes provision for the builder to claim an extension of time within a specified time and for specified reasons.  Clause 35.5 also contains a ‘reserve power’ allowing the superintendent to grant an extension of time at any time for any reason:

Notwithstanding that the Contractor is not entitled to an extension of time the Superintendent may at any time and from time to time before the issue of the Final Certificate by notice in writing to the Contractor extend the time for Practical Completion for any reason.

The purpose of the reserve power is ‘to place on the principal the risk of delay caused loss not attributable to any contractual party’.[38] 

[38]Spiers Earthworks Pty Ltd v Landtec Projects Corporation Pty Ltd (No 2) [2012] WASCA 53 (13 March 2012) [61] (McLure P) (‘Spiers Earthworks Pty Ltd’).

1. The tribunal held that cl 35.5 as regards the reserve power applied to extension of time claims made by the builder.  It granted 26 days ($39,000) in respect of demolition and foundation work, 25 days (up from the nine granted by the architect, leaving a balance of $24,000) in respect of sewer works and 19 days ($28,500) in respect of inclement weather.

1. Grounds 9, 10 and 11 contend that, in doing so, the tribunal misapplied the reserve power.  The owner submits that the reserve power is only available to the superintendent, only available when the superintendent has not assessed the claims already (only the inclement weather claim had not been so assessed) and only available where the superintendent considers it to be justified in the exercise of specialised professional expertise.  I have already acknowledged the force of these submissions.  They essentially put in issue the outer edge of the power as it is presently judicially understood.

1. The owner’s submissions in relation to the reserve power repeat and develop many of the submissions that it made in relation to the valuation of variations (see above).  It was submitted that the tribunal cannot use the reserve power to conduct a merits review of the superintendent’s determination.  Whether it is fair and reasonable to grant an extension of time requires the exercise of specialised professional knowledge, which the senior member lacked.  This was especially important in a project like this one where there had been substantial and concurrent delays.  The parties only agreed to the superintendent exercising the reserve power.  They never agreed to the tribunal exercising the power.  The tribunal’s function was to review the exercise of the superintendent’s discretion, not to exercise that discretion for itself.  The function is akin to judicial review, not merits review.  It follows that only facts and circumstances applicable at the time of the extension of time application and known to the superintendent are relevant.  The power does not apply to afterthought claims, like the one based on inclement weather, which was never made to the architect.

1. I refer to and adopt the above analysis in relation to the interaction between cl 23 and cl 35.5 as regards the reserve power.  As there concluded, it follows from that interaction that the contract requires the superintendent not just to act in an honest and reasonable manner but to make extension of time determinations that are fair and reasonable in outcome.  It is substantive and not just formal compliance in that respect that the contract requires.

1. The scope of the reserve power in cl 35.5 of AS 2124-1992, taken with cl 23 (see above), was considered by the Supreme Court of New South Wales (Court of Appeal) in Peninsula Balmain Pty Ltd v Abigroup Contractors Pty Ltd.[39]  Hodgson JA (Mason P and Stein JA agreeing) held that, when exercising this power, the superintendent was ‘obliged to act honestly and impartially’ as between the owner and the builder[40] and it was open to a reviewing referee (and hence a court, tribunal or arbitrator exercising contractual review jurisdiction) ‘to conclude that the superintendent, acting fairly, would have granted the extensions which the referee found to be justified’.[41]  

   [39](2002) 18 BCL 322 (‘Peninsula Balmain’).

   [40]Ibid 343 [79].

   [41]Ibid 343 [81].

1. Also considered in Peninsula Balmain was the question whether the reserve power in cl 35.5 came to an end upon the termination of the contract.  The court held that it did not.  Hodgson JA (Mason P and Stein JA agreeing) held:

I do not think the superintendent’s power is lost on termination, even if the claim for exercise of the power to extend notwithstanding non-compliance had not been made until after termination.[42]

[42]Ibid 343 [80].

1. Kane Constructions Pty Ltd v Sopov[43] was a case in which Warren CJ considered cl 23 and cl 35.5 as regards to reserve power of AS 2124-1992.  Following Peninsula Balmain, the Chief Justice held that:

Under cl 35.5, the superintendent was obliged to certify an extension of time … where it may be fair and reasonable to do so, notwithstanding a plaintiff’s failure to make a claim or non-compliance with the relevant timing requirements.[44]

Her Honour went on to determine the extension of time claims upon the basis that the court was effectively in the same position as the superintendent under the contract and therefore had to consider whether, in the circumstances, it would be a breach of contract to refuse to grant a fair and reasonable claim for extension of time.  With respect, I again agree.

[43](2006) 22 BCL 92 (‘Kane Constructions’).

[44]Ibid 120 [660].

1. 620 Collins Street Pty Ltd v Abigroup Contractors Pty Ltd (No 2)[45] was an appeal from an arbitrator’s decision.  Relying on Peninsula Balmain, the arbitrator had applied cl 35.5 as regards the reserve power to grant extensions of time.  The builder argued that the arbitrator fell into error in doing so (ground 4).  Following the decision of Warren CJ in Kane Constructions, Osborn J held that ‘the arbitrator was correct to follow Peninsula Balmain’.[46]  In his Honour’s view, properly interpreted, the reserve power operates thus:

   [45][2006] VSC 491 (14 December 2006) (Osborn J) (‘620 Collins Street Pty Ltd’).

   [46]Ibid [34].

(a)The primary mechanism of cl.35.5 gives the contractor an entitlement to an extension of time, subject to compliance with special conditions;

(b)The penultimate paragraph reserves a discretionary power to grant an EOT in other circumstances effectively where it is just and equitable to do so;

(c)Such power is expressly directed to situations where ‘the contractor is not entitled to or has not claimed an extension of time …’;

(d)It is expressed to arise on a separate and distinct basis from the provision for the extension of time pursuant to the primary mechanism;

(e)The grounds for exercise of the reserve power are expressed in the broadest possible terms as ‘for any reason’;

(f)The potential prejudice to the principal flowing from a failure by the contractor to comply with [cl] 35.5 is a matter going squarely to the equitable exercise of the Arbitrator’s discretion.[47]

With respect, again I agree.

[47]Ibid [26].

1. The judgment of Osborn J in 620 Collins Street Pty Ltd was recently approved by the New South Wales Supreme Court (Court of Appeal) in relation to a conceptually similar provision in Probuild Constructions (Aust) Pty Ltd v DDI Group Pty Ltd.[48]  After discussing Peninsula Balmain and 620 Collins Street Pty Ltd, McColl JA (Beazley ACJ and Macfarlane JA agreeing) confirmed Peninsula Balmain and held that the superintendent ‘was obliged to exercise the reserve power to grant extensions … honestly and fairly’.[49]

   [48](2017) 95 NSWLR 82 (‘Probuild Constructions’).

   [49]Ibid 113 [128].

1. In the present case, the owner submitted that Probuild Constructions supported its submission that the reserve power was not a free-standing equitable power to be exercised at any time.  It relied upon the reference by McColl JA[50] to paras (c) and (d) of that part of the judgment of Osborn J in 620 Collins Street Pty Ltd set out above.  I do not accept this submission.  I think Osborn J was emphasising the wide extent and not the narrow limits of the power, and McColl JA was agreeing. 

   [50]Ibid 112–3 [127].

1. Now the decision in Peninsula Balmain has been the subject of academic criticism[51] and the correctness of the decision has been doubted.[52]   But it has never been challenged, has been followed by this court in Kane Constructions and 620 Collins Street Pty Ltd, as well as in other courts,[53] and was recently confirmed by the New South Wales Supreme Court (Court of Appeal) in Probuild Constructions.  In this jurisdiction, I think Peninsula Balmain is good law until our Court of Appeal or the High Court of Australia says otherwise.

   [51]See Hervey Bay (JV) Pty Ltd v Civil Mining and Construction Pty Ltd [2008] QSC 58 (19 March 2008) [38] (McMurdo J).

   [52]Spiers Earthworks Pty Ltd [2012] WASCA 53 (13 March 2012) [57] (McLure P) (as to whether anyone but the superintendent can exercise the reserve power).

   [53]See, eg, Built Environs Pty Ltd v Tali Engineering Pty Ltd[2013] SASC 84 (3 June 2013) [152] (Blue J).

1. In the present case, the tribunal followed Peninsula Balmain and 620 Collins Street Pty Ltd, as well as Allmore Constructions Pty Ltd v K7 Property Group Pty Ltd[54] where the same approach was followed by the tribunal in an earlier case.  The senior member held that the task before him was to decide objectively whether the reserve power in cl 35.5 should be exercised to grant the extensions of time by reference to what was ‘fair and reasonable based on the evidence before me’.  The senior member stated that, in doing so, he was not performing the function of the superintendent under the contract so much as having regard to the superintendent’s contractual responsibilities.  That approach was correct in law.

   [54][2016] VCAT 1770 (20 October 2016) (Senior Member Walker).

1. As established in Peninsula Balmain and the cases that have followed it, the reserve power in cl 35.5 is not reserved for the sole use of the superintendent under the contract.  A court, tribunal or arbitrator of contractual review can grant appropriate relief, including damages, when a dispute of this kind becomes justiciable and it finds that the determination of the superintendent was not objectively fair and reasonable, or the contract would otherwise be breached if the reserve power were not to be applied where it was objectively fair and reasonable that it be applied.   Such a determination must be made by reference to the evidence after the parties have been given a reasonable opportunity to be heard.  But it is not necessary for the court, tribunal or arbitrator of contractual review to have specialised knowledge and expertise.  Ground 9 is therefore rejected.

1. By its very nature, contractual review of the superintendent’s exercise of the reserve power in cl 35.5 is not to be confined to the facts and circumstances obtaining at that time or known by the superintendent.  The power is available to be exercised ‘at any time and from time to time’, and even after the termination of the contract.[55]  When a dispute of this kind becomes justiciable before a court, tribunal or arbitrator of contractual review, it can determine whether the contract requires the power to be exercised according to the evidence presented at the time and make a determination about whether it would be fair and reasonable to exercise the power by reference to that evidence.  The evidence may extend to facts and circumstances that the superintendent did not know or which  happened subsequently.  As the power can be exercised at any time from time to time, and for any reason, the issue is live at all times up until the determination of the dispute by the court, tribunal or arbitrator of contractual review, whether or not a claim has been assessed and the power has been exercised by the superintendent at first instance.  The last court, tribunal or arbitrator having jurisdiction over the dispute has the final say of what the contract requires in this as in other respects.  It follows that the late-made inclement weather claim was valid within the tribunal’s dispute resolution jurisdiction.  Ground 10 is therefore rejected.

   [55]Peninsula Balmain (2002) 18 BCL 322, 343 [80] (Hodgson JA, Mason P and Stein JA agreeing).

1. Ground 11 is that the tribunal misapplied the reserve power by taking into account an expert witness’s theoretical assessment of possible delays according to a programme never used by the superintendent.  This is a reference to evidence given by the builder’s expert, Mr Watson, of which (I have noted) the owner was trenchantly critical, both in the tribunal and in the present proceeding.

1. Mr Watson’s evidence was relevant and probative in relation to the extension of time issues before the tribunal, including those engaged by cl 35.5 as regards the reserve power.  The tribunal was entitled to have regard to this evidence.  The owner’s criticisms of Mr Watson’s evidence go to issues of fact and merit, not law.  Ground 11 does not raise a question of law.

1. Grounds 9, 10 and 11 are therefore rejected.

Conclusion

1. For those reasons, leave to appeal will be granted but the appeal will be dismissed.  I will hear the parties on the question of costs.