Southern Region Ltd v Minister for Police & Emergency Services
[2004] VSC 297
•19 August 2004
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
No. 5109 of 2004
| SOUTHERN REGION LIMITED (ACN 004 770 085) | Plaintiff |
| v | |
| THE MINISTER FOR POLICE AND EMERGENCY SERVICES FOR AND ON BEHALF OF THE STATE OF VICTORIA | Defendant |
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JUDGE: | OSBORN J | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 28 JUNE – 29 JUNE 2004 | |
DATE OF JUDGMENT: | 19 AUGUST 2004 | |
CASE MAY BE CITED AS: | SOUTHERN REGION LTD v MINISTER FOR POLICE | |
MEDIUM NEUTRAL CITATION: | [2004] VSC 297 | |
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Application for leave to appeal – s.38 Commercial Arbitration Act – No manifest error of law.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr J. Burnside QC with Mr M. Roberts | Deacons |
| For the Defendant | Mr D. Levin QC with Mr F. Tiernan | Minter Ellison |
HIS HONOUR:
The plaintiff in this matter seeks leave to appeal the decision of an Arbitrator pursuant to the provisions of s.38(4) of the Commercial Arbitration Act 1984 ("the Act"). That leave is sought on the basis of contentions that the Arbitrator's reasons disclose two conclusions which are vitiated by manifest errors of law and that the questions of law concerned could substantially affect the rights of the plaintiff.
The underlying dispute between the parties arises out of the manner of performance by the plaintiff of a contract for the construction by the plaintiff of a new court house at Ballarat.
The contract was concluded on 28 November 1997 and during its performance disputes arose concerning a series of issues, including the certification and payment of progress claims. The plaintiff served a notice of dispute on 27 July 2000 and an Arbitrator was appointed on 8 February 2001. A hearing commenced before the Arbitrator on 18 March 2002. There were some 72 hearing days and closing addresses were concluded on 31 October 2002. At the conclusion of this hearing the parties settled an agreed list of questions for determination by the Arbitrator in Interim Award No. 7. The Arbitrator published Interim Award No. 7 ("the Award") relating to these questions on 23 February 2004. The Award is a detailed document comprising some 793 pages of reasons together with annexures.
The plaintiff contends that the Arbitrator erred:
(a)in concluding that the documentation which comprised the contract between the parties included documents capping delay costs otherwise recoverable under the general conditions of the contract; and
(b)as to the standard specified by the contract for precast concrete wall panels.
Section 38(5) of the Act provides:
"(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 plaintiff contends firstly, that the questions of law in issue could substantially affect its rights and secondly, that the Arbitrator's reasons disclose manifest errors of law. The reasons comprise part of the Award pursuant to s.29 of the Act.
A manifest error of law must be "evident and obvious rather than merely arguable".[1]
[1]See Leung v Hungry Jacks Pty Ltd [1999] VSC 477 at [15] and the cases there referred to.
In Promenade Investments Pty Ltd v New South Wales[2] Sheller JA said:
"There should … before leave is granted be powerful reasons for considering on a preliminary basis, without any prolonged adversarial argument, that there is on the face of the award an error of law."[3]
This statement was referred to with approval by Ormiston JA with whom Winneke P, Phillips, Buchanan and Vincent JJA agreed in Energy Brix Australia Corporation Pty Ltd v National Logistics Coordinators (Morwell) Pty Ltd[4].
[2](1992) 26 NSWLR 203
[3]Ibid at p226
[4](2002) 5 VR 353
A manifest error of law will not arise where the construction of a document adopted by an Arbitrator is "reasonably open" or "fairly arguable". In American Diagnostica Inc v Gradipore Ltd[5] Giles CJ (Comm Div) referred to the approach articulated in the Promenade Investments case and said:
"This approach to the meaning and effect of s.38 was informed by the deliberate legislative intention of confining curial intervention in arbitrations earlier mentioned, and it follows (and has been held) that if an Arbitrator's construction of a contract is reasonably open, it cannot be said that his error is evident or obvious or that there are powerful reasons for considering that he was in error."
[5](Supreme Court of New South Wales (Commercial Division) 50224 of 1997, 26 March 1998). The case is reported omitting the relevant passage in (1998) 44 NSWLR 312 at 338.
Having regard to the nature of the subject matter of this application I ordered on 2 June 2004 that subject to any order of the trial Judge the application for leave to appeal be treated as the hearing of the appeal.
The questions of law set out in the proposed notice of appeal are:
"1.Did the Arbitrator fall into legal error by relying upon clause 2.1.3 of Vol.2 of the Specification to find that the documents identified in paragraphs (15)-(24) of [10] of the interim award constituted contract documents.
2.Did the Arbitrator fall into legal error in failing to resolve the patent ambiguity in the construction of the Contract and thereby failing to find whether the parties had adopted Australian Standard AS1510 or had adopted Australian Standard AS3610 as governing the precast concrete component of the work."
The Scope of the Contract Documentation
Question 1 for the determination of the Arbitrator was:
"What documents comprised the contract between the Claimant and the respondent?”
The Arbitrator answered the question as follows:
"The documents which comprise the Contract are:
(1) Instrument of Agreement;
(2)General Conditions of Contract AS2124-1992 as amended by Parts A and B referred to in this Award as the General Conditions;
(3) Tendering Information Volume 1 dated July 1997;
(4)Project Information/Preliminaries/General Building Requirements Volume 2 dated July 1997;
(5) Project Specification Volume 3 dated July 1997;
(6) Project Specification Volume 4 dated July 1997;
(7) Project Specification Volume 5 dated July 1997;
(8) Project Specification Volume 6 dated July 1997;
(9) Project Specification Volume 7 dated July 1997.
Documents in items (3) to (9) are collectively referred to as the ('Specification').
(10)The drawings listed in clause 2.1.3 (Contract Documents) of Volume 2 of the Specification. Those drawings are collectively referred to as the ('Drawings');
(11)The Claimant's priced Bill of Quantities Volumes 1 and 2 ('Bill of Quantities');
(12) Addendum No. 1 issued 21 August 1997;
(13) Claimant's Tender Form dated 29 August 1997;
(14) Respondent's Letter of Acceptance dated 28 November 1997;
(15)Statutory Declaration of David McJannet dated 29 August 1997;
(16) Tenderers Assessment Checklist (undated);
(17) Tender Breakdown Summary (undated);
(18)Schedule of Prices Rates for Costs Adjustments and Variations (undated);
(19) Proposed Subcontractors (undated);
(20) Facsimile, Claimant to BSA dated 1 September 1997;
(21)Letter, Claimant to BSA dated 12 September 1997, together with two attachments:
(a) Tom Moore Health & Safety Manager;
(b)Schedule of Prices, Rates for Cost Adjustments and Variations, resubmitted;
(22)Facsimile, Superintendent to the Claimant dated 18 September 1997;
(23)Letter, Claimant to the Superintendent dated 23 September 1997; and
(24) Letter, Claimant to BSA dated 17 October 1997."
The parties had agreed that documents numbered 1 to 14 were documents forming part of the contract but did not agree with respect to documents 15 to 24. In respect of these documents the Arbitrator formed the view that they fell within clause 2.1.3 of the Specification. This provides:
"The contract documents comprise:
- the instrument of agreement
- the drawings and schedules
- the specification
- the agreed priced bill of quantities
- the general conditions of contract
- the tender form
- the letter of acceptance
- addendums if any issued during tender stage
- any other document as may be applicable in the circumstances.”(emphasis added)
The tender documents of which clause 2.1.3 formed part were put out to tender in mid 1997 with a view to entering into a contract with a tenderer at some later point in time. The Arbitrator found that there was a lengthy period of time between the initial issue of the tender documents and acceptance of one of the tenders. During the intervening period, negotiations and communications took place which crystallised in documents "which deal with important contractual matters agreed between the parties."
It might be observed that insofar as the documentation in issue is fairly characterisable as part of the plaintiff's response to the invitation to tender (including “addendums if any issued during the tender stage”), it cannot be regarded as surprising that the Arbitrator concluded it forms part of the contract documentation.
At paragraphs 54 to 90 of the Award the Arbitrator sets out the sequence of documentation in issue. I note the following aspects of that sequence.
(a)Addendum No. 1 was issued on 21 August 1997 and is an agreed contract document. It required by cl.B1 that tenderers add an extension of time cost daily rate to their tenders.
(b)The plaintiff's tender submitted on 29 August 1997 comprised the following documents:
·tender form
·statutory declaration of David McJannet
·tender assessment check list
·tender breakdown summary
·schedule of prices, rates for cost adjustments and variations
·proposed sub-contractors list.
(c)The schedule of prices, rates for cost adjustments and variations document had, in accordance with cl.B1 of Addendum No. 1 a section setting out daily extension of time costs in the following terms:
"Daily extra costs relating to extension of time $4,000/day."
(d)Following the initial submission of the tender there was an exchange of correspondence relating to the "scope and extent" of the tenderer's nominated figure of $4,000 for daily extensions of time.
(e)This culminated in the plaintiff's letter of 23 September 1997 which stated:
"We accept that the rate per day for extended time is to be applied as an all inclusive rate."
(f)Thereafter the plaintiff submitted a revised tender sum of $17,866,000 on 17 October 1997. The tender was accepted on 28 November 1997.
The Arbitrator concluded:
"[71]In my view, the circumstances referred to above demonstrate that following the submission by the Claimant of the Schedule of Prices, Rates for Cost Adjustments and Variations stating the amount of $4,000 per day for extension of time costs, the parties engaged in further communications clarifying precisely what was covered by the rate. Ultimately, the Claimant, by letter dated 23 September 1997 agreed that $4,000 was an all inclusive daily rate."
It is the Arbitrator's conclusion as to the documents which the defendant relied on for its contention that there was a cap of $4,000 per day delay costs which is said to have given rise to an error or errors which could substantially affect the rights of the plaintiff. It is, accordingly, unnecessary to go to the Arbitrator's conclusion as to other documents.
The plaintiff's case with respect to the relevant documents is put on the following bases.
(a) It is not contended the Arbitrator applied incorrect principles of law.
(b)It is contended he did not correctly apply the relevant principles to the last phrase of cl.2.1.3 "any other document as may be applicable in the circumstances", which it is said is void for uncertainty and should be severed from the contract.
(c)It is said the Arbitrator erred in failing to ascribe a "definite or precise" meaning to the phrase in issue.
(d)It is said "the clause does not provide a warrant to incorporate in the contract pre-contractual negotiations which are inconsistent with the terms of documents 1-14."
(e)It is said that it was not open to the Arbitrator to conclude as he did when "neither party until after commencement of the arbitration gave any indication that it regarded those documents as part of the contract."
(f)It is said no contextual considerations were available to enable a definite meaning to be ascribed to the phrase in issue.
(g)It is said the Arbitrator gave undue weight to the fact that the phrase in issue "is what the parties themselves agreed."
The plaintiff's concession that the Arbitrator's statement of relevant legal principle was "unexceptional" was correctly made. The Arbitrator referred to the principles stated by Barwick CJ in Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd[6]:
"The question becomes one of construction, of ascertaining the intention of the parties, and of applying it. Lord Tomlin's words in this connexion in Hillas & Co Ltd v Arcos Ltd ought to be kept in mind. So long as the language employed by the parties, to use Lord Wright's words in Scammell (G) & Nephew Ltd v Ouston is not 'so obscure and so incapable of any definite or precise meaning that the Court is unable to attribute to the parties any particular contractual intention', the contract cannot be held to be void or uncertain or meaningless. In the search for that intention, no narrow or pedantic approach is warranted, particularly in the case of commercial arrangements. Thus will uncertainty of meaning, as distinct from absence of meaning or of intention, be resolved." (citations omitted)
[6](1968) 118 CLR 429 at 437
The Arbitrator also referred to the principles stated in Lewin's Interpretation of Contracts (2nd ed. 1997):
"7.11Where parties have entered into what they believe to be a binding agreement the court is most reluctant to hold that their agreement is void for uncertainty, and will only do so as a last resort.
7.12The courts reluctance to hold a provision in a contract void for uncertainty is greater in a case where the agreement is no longer executory but has been partly performed.
7.13A provision in a contract will only be void for uncertainty if the court cannot reach a conclusion as to what was in the draftsman's mind or where it is not safe for the court to prefer one possible meaning to other equally possible meanings."
The Arbitrator emphasised that he was concerned with the objective and not the subjective intention of the parties. He referred to the statement of Lord Hoffman in Investors Compensation Scheme Ltd v West Bromwich Building Society & Ors[7]:
[7][1998] 1 WLR 896 at 912-913
"44. The principles may be summarised as follows:
(1)Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.
(2)The background was famously referred to by Lord Wilberforce as the 'matrix of fact', but this phrase is, if anything, an understated description of what the background may include. Subject to the requirement that it should have been reasonably available to the parties and to the exception to be mentioned next, it includes absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man.
(3)The law excludes from the admissible background the previous negotiations of the parties and their declarations of subjective intent. They are admissible only in an action for rectification. The law makes this distinction for reasons of practical policy and, in this respect only, legal interpretation differs from the way we would interpret utterances in ordinary life. The boundaries of this exception are in some respects unclear. But this is not the occasion on which to explore them.
(4)The meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of words is a matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean. The background may not merely enable the reasonable man to choose between the possible meanings of words which are ambiguous but even (as occasionally happens in ordinary life) to conclude that the parties must, for whatever reason, have used the wrong words or syntax. (see Mannai Investments Co Limited v Eagle Star Life Assurance Co Limited [1977] AC 749.)
(5)The 'rule' that words should be given their 'natural and ordinary meaning' reflects the common sense proposition that we do not easily accept that people have made linguistic mistakes, particularly in formal documents. On other hand, if one would nevertheless conclude from the background that something must have gone wrong with the language, the law does not require judges to attribute to the parties an intention which they plainly could not have had. Lord Diplock made this point more vigorously when he said in Antaios Compania Neviera SA v Salen Rederierna A.B. [1985] AC 191, 201:
'… if detailed semantic and syntactical analysis of words in a commercial contract is going to lead to a conclusion that flouts business common sense, it must be made to yield to business common sense'.” (My emphasis)
He also referred to the judgment of Mason J in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales[8]:
"The true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning. Generally speaking facts existing when the contract was made will not be receivable as part of the surrounding circumstances as an aid to construction, unless they were known to both parties, although, as we have seen, if the facts are notorious knowledge of them will be presumed."
[8](1982) 149 CLR 337 at 352
The Arbitrator concluded as follows:
"[47]There must be certainty in the formation of a contract. In this case, I have attempted to determine objectively the intention of the parties at the time the Contract was entered into. In my view, the circumstances are such that it can be said, viewed both reasonably and objectively, the parties intended the disputed documents I have found to be contract documents are in fact contract documents. I hold this view notwithstanding that neither party until after the commencement of the arbitration gave any indication that it regarded those documents as part of the Contract."
In my view it has not been demonstrated that this conclusion involved a manifest error of law.
·The Arbitrator has set out the relevant principles of law;
·The contractual documentation in issue is not before the Court;
·Insofar as the Award sets out the terms of that documentation it does not demonstrate that the Arbitrator was wrong in law.
·I do not accept that it is manifest the phrase "any other document as may be applicable in the circumstances" is necessarily so uncertain as to be incapable of the meaning which the Arbitrator has attributed to it.
·At the time of the conclusion of the contract the phrase was on the facts found by the Arbitrator capable of embracing the documentation which he found the parties objectively intended it.
·In my view the Arbitrator's reasons disclose contextual considerations which enable a definite meaning to be given to the phrase in issue.[9] The Arbitrator was required to consider not only the text of the documents but also the surrounding circumstances known to the parties and the purpose and object of the transaction.[10]
[9]cf Meehan v Jones (1982) 149 CLR 571 per Mason J at 587-588
[10]cf. Pacific Carriers Limited v BNP Paribas [2004] HCA 35, unreported decision 5 August 2004 at [22] per Gleeson CJ, Gummow, Hayne, Callinan and HeydonJJ
·The Arbitrator was not required to enter into an abstract exposition of the meaning of the words in issue. He was simply required to conclude what documents comprised the contract.[11] In so doing he did ascertain and define the content of the phrase in issue.
[11]cf Lord Hoffman’s distinction between the meaning of the words and the meaning of the document, quoted at [22] above
·It does not advance the matter to seek to label the correspondence in issue as "pre-contractual". Either it was the objective intention of the parties to incorporate it into the contract pursuant to the mechanism provided by the last phrase of cl.2.1.3 or it was not.
·Clause 36 of the Specification provided:
"Where the contractor has been granted an extension of time under clause 35.5 for any delay caused by any of the events referred to in clause 35.5(b)(i), the principal shall pay to the contractor such extra costs as are necessarily incurred by the contractor by reason of the delay.
Where the contractor has been granted an extension of time under clause 35.5 for any delay caused by any other event for which payment of extra costs for delay or disruption is provided for in the Annexure or elsewhere in the Contract the principal shall pay to the contractor such extra costs as are necessarily incurred by the contractor by reason of the delay."
Nevertheless it is not possible to conclude that it is manifest the documents in issue were inconsistent with the agreed contractual documents having regard to the terms of Addendum No. 1 and in particular cl. B1 which required statement of an extension of time cost daily rate.
·Conversely the plaintiff’s construction would result in a situation where it was agreed the Addendum constituted a contract document but the response to the Addendum was not a contract document rendering the Addendum itself ineffectual.
·The finding that neither party contended that the documentation in issue was part of the contract until after the commencement of the arbitration is not fatal to the Arbitrator's conclusion as to the objective intention of the parties, particularly having regard to the complexity and history of dispute as it otherwise appears from the 793 pages of Interim Award No. 7 plus annexures.
·The Arbitrator was bound to have regard to and did not give undue weight to the fact that the clause "is what the parties agreed to."
It follows that I am not satisfied that the plaintiff has established that the Arbitrator's conclusion as to the documents comprised in the contract was vitiated by a manifest error of law.
Precast Panels
Question 2 in the Agreed List of Issues referred to the Arbitrator was:
"Is the claimant entitled to any and if so what number of the 332 days extensions of time for practical completion on account of alleged delays in column K of schedule 1 and schedule 1A to the Points of Claim?"
The Arbitrator determined that the plaintiff was entitled to 48.81 days extension of time. The extension of time allowed did not include certain claims made by the plaintiff in respect of delays in the production, assessment and erection of precast concrete wall panels ("precast delays").
The Arbitrator considered the contractual obligations relevant to the plaintiff's production of and the superintendent's assessment of the panels. The relevant contractual provisions included in the Specification and the structural drawings referred to Australian Standards, but did so both expressly and by necessary implication by reference to two different and inconsistent standards namely AS1510 and AS3610.
The plaintiff's position was that AS3610 was applicable. The defendant's primary position was that AS1510 was applicable but in the alternative the defendant contended:
"(n)… notwithstanding any requirements of AS1510 or AS3610, the overriding contractual obligation of the Claimant was to produce an approved sample panel of 1200 x 1200 x 175mm in accordance with clause 8.2 of the Specification and to supply and install full size panels which matched the approved sample; and
(o)the Superintendent was entitled to reject any panel which did not match the standard of the approved sample panel."
It is this alternative contention that the Arbitrator ultimately accepted. He did so after concluding the conflict between the specific references to the Australian Standards made in the contract documentation were not capable of satisfactory resolution but gave rise to patent ambiguities.
At [167] of the Award the Arbitrator stated:
"Notwithstanding the extensive submissions the Respondent makes on the issue in support of a finding for AS1510, I am of the opinion that the Respondent has correctly observed that both AS1510 and AS3610 are of limited relevance to the arbitration in any event. The Respondent's submission is that both AS1510 and AS3610 prescribed, among other things, standards for colour, surface finish and allowable imperfections for various different classes of off-form in situ and precast concrete. This submission is put on the basis that neither Standard provides corresponding procedures with respect to in situ or precast concrete which has already been surface treated."
At paragraph [174ff] the Arbitrator addressed the issue by reference to subquestions posed by the defendant.
"174.Paragraph 154 of the Respondent's Submissions raises for consideration five specific Subquestions in relation to establishing what were the contractual requirements for the precast panels under the Contract. I have reviewed those Subquestions and consider that it is appropriate that they be addressed as part of the reasoning process in concluding an answer to Question 2. The Subquestions posed are in the following terms:
Subquestion 1 – was there an ambiguity under the Contract in relation to the calling up of Class 1A surface finish and grade of colour control and Class 2C surface finish and colour control?
Subquestion 2 – If 'yes' to Question 1, can the ambiguity be resolved to establish what was agreed between the parties in relation to class of surface finish and colour control?
Subquestion 3 – was there an ambiguity under the contract in specifying AS1510 and AS3610 in relation to the concrete work (including precast panel works)?
Subquestion 4 – If 'yes' to Question 3, can the ambiguity be resolved to establish whether the agreement between the parties was that AS1510 applied with respect to the precast panel works, or that AS3610 applied with respect to the precast panel works?
Subquestion 5 – in the event that the Arbitrator finds that the ambiguities are not resolvable as a matter of construction of the contract, how does he proceed forward to decide the issues in dispute in the arbitration concerning precast panels?
175. My answers to the five Subquestions are as follows:
Subquestion 1 - Yes
Subquestion 2 - No
Subquestion 3 - Yes
Subquestion 4 - No
Subquestion 5 - By reference to clause 8.2 of the
Specification."
The Arbitrator sets out detailed reasons for his conclusions in relation to these subquestions. In relation to subquestion 1 he said at [177] and [178]:
"177.As I have said, in my view there is clearly a patent ambiguity under the Contract. On the one hand, there were express provisions calling up Class 1A concrete work:
(a)clause 7.30 Specification – precast panels shall be Class 1A concrete work;
(b)clause 8.1 Specification – all precast shall be Class 1A and will be strictly enforced.
178.On the other hand, structural drawings S1 and S2 require the class of finish for exposed surfaces of precast wall panels to be Class 2C in accordance with AS3610."
In relation to subquestion 2 he stated in part:
"183.I proceed on the basis that in the event of a patent ambiguity, evidence of what the respective parties 'really meant' or 'really intended' is not admissible. The scope within which I am able to seek to resolve the ambiguity is:
(a)by construing the ambiguous terms in the Contract in the context of the Contract as a whole; and
(b)by having regard to evidence of facts and circumstances surrounding the entry into the Contract.
184.I have considered the statements of Mason and Aitkin JJs in the decision of the Full Court of the High Court of Australia in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 and accept as applicable the Respondent's analysis of that case as referred to in paragraphs 161-168 of the Respondent's Submissions.
185.As I did in my answer to Question 1, I have also considered the House of Lords decision in Investors Compensation Scheme Limited v West Bromwich Building Society & Ors (1998) 1 WLR 896 in which Lord Hoffman at pages 912-913, had to say about the scope of evidence admissible under the head of surrounding circumstances.
186.Applying the principles referred to above as best I can to the issue concerning AS1510/AS3610 and evidence in this arbitration, I am of the view that the patent ambiguity concerning the calling up of both Class 1A and Class 2C precast panel work is not resolvable."
He concluded at [196]:
"196.All things considered, I am of the view that the Contract cannot reasonably or objectively be interpreted by giving precedence to the calling up of Class 1A under AS1510 or Class 1C or 2C under AS3610."
In relation to subquestion 3 he stated in part at [206]:
"206.I agree with the Respondent the ambiguity between the two Standards in relation to the concrete surface finish and colour requirements is clear:
(a) each Standard specifies classes of surface finish:
(i) AS1510 – Classes 1-5 (clause 2.1);
(ii) AS3610 – Classes 1-5 (clause 3.3);
(b)each Standard makes provision in relation to colour control:
(i)AS1510 – three grades of colour uniformity and colour control, namely grades A, B and C (clauses 3.2 and 3.3);
(ii)AS3610 – provides (clauses 3.3.2 and 3.5) that where colour control was incorporated it should be denoted by the suffix 'C' following the surface finish class number; and
(c)the Specification read with drawings S1 and S2 calls up two Standards, each of which contains differing, although not greatly dissimilar, provisions concerning class of surface finish and colour control for concrete together with other related provisions which are not the same as between the two Standards."
In relation to subquestion 4 he stated in part at [323] and [324}:
"323.AS1510 and AS3610 prescribe, among other things, standards for colour, surface finish and allowable imperfections for various different classes of off-form in situ and precast concrete. Significantly, they provide no guidance with respect to in situ or precast concrete which had already been surface treated as was in the case of this project.
324. The evidence in relation to this point is not in dispute.
(a)David Mahaffey's report at page 14, in discussing AS3610 says:
The standard is essentially a document that covers the surface of the concrete that comes off the formwork. Whilst some reference is made to surface treatments, the standard makes very limited reference on how the treated surface is to be assessed;
(b)Kevin Campbell's evidence during cross examination on the above evidence from David Mahaffey's report was put to Kevin Campbell during cross examination. He argued that David Mahaffey's statement was correct (T2894:14);
(c) Kevin Campbell's evidence in chief report at paragraph 1.5:
Since AS3610 formwork for concrete gives no guidance for surface treatment, reference in the specification should have been made to an existing architectural precast concrete clad structure as a guide to tenderers of the quality required;
(d) David Newbegin's evidence during cross examination:
Does 3610 provide the criteria for assessing panels after the surface treatment?…Not in this context, no.
They don't do they?…No.
So that reliance upon the standard alone is not sufficient, is it in terms of assessing panels after surface treatment because essentially AS3610 doesn't provide the criteria to be applied in assessing panels after surface treatment, does it?…The way it is written at the moment, no (T3072:27-3073:4);
You have just agreed a few moments ago that AS3610 does not provide the criteria by which a panel is to be assessed after surface treatment?…That's correct.
So that the contracting parties need something more than simply reliance upon AS3610 where a panel is going to be surface treated, don't they, to assess it?…Yes, they can take that approach.
I suggest to you that the means provided under clause 8.2 of this contract provides that method, namely you do have an approved panel which is said to constitute the standard of the precast. It does have the surface treatment so that when the panel has been surface treated the parties can look at that panel, that is the approved sample, and the panel that has been submitted for assessment and compare the two and see whether they match up. Isn't that a valid means of assessing the panel after surface treatment?…I would have expected that every time a panel was inspected, as you would describe, that the sample panel would be used in conjunction with that inspection.
That's right?…Every time (T3073:20-3074:9)."
In relation to subquestion 5 he stated at paragraph [328]:
"328.I agree with the position put forward by the Respondent that the consequences flowing from the fact that AS1510 and AS3610 are essentially concerned with the off-form finish are:
(a)the common intention of the parties was that production and assessment of the surface treated panels were to be governed by clause 8.2 of the Specification;
(b)the evidence shows, conclusively in my view, that the Claimant and the Superintendent proceeded on the basis that clause 8.2 was the basis for the production and assessment of the precast panels. The only departure was on 5 February 1999, when the Claimant put forward and the Superintendent accepted and directed full size panel CE23 as the sample panel;
(c)notwithstanding references to both AS1510 and AS3610 neither party sought to implement the procedures or criteria for assessing colour variation or blow holes prior to surface treatment;
(d)even in the event of a finding that either AS1510 and AS3610 were applicable under the Contract, neither Standard provided for the procedures or criteria by which the panels could be assessed after surface treatment; and
(e)that the requirements with respect to precast panels were and are to be determined by reference to clause 8.2 of the Specification."
The plaintiff contends:
(a)that it was the Arbitrator's duty to determine which standard had been adopted by reference to the terms of the contract.
(b)having identified the ambiguity the Arbitrator was bound to resolve it;
(c)there are objective contextual factors which enabled the Arbitrator to resolve the ambiguity;
(d)the current standard should have been adopted;
(e)the Arbitrator wrongly had regard to the parties' subjective intentions;
(f)the Arbitrator wrongfully had regard to the post-contractual conduct of the parties;
(g)the Arbitrator accepted AS3610 was the current standard at the time of production of the precast panels;
(h)the current standard should have been accepted as the relevant standard having regard to accepted principles of contractual construction.
In my view the Arbitrator's reasons do not disclose a manifest error of law. Firstly, it is to be observed the plaintiff's submission involves a fundamental over simplification. It was submitted:
"Both parties accepted that one or other of the Australian Standards applied."
In fact, it is clear the defendant did not simply submit that the choice was between one of two standards. This was the plaintiff's but not the defendant's position. The defendant put an alternative position which was accepted by the Arbitrator.
Secondly, the Arbitrator expressly acknowledged the factors of "logic and common sense" which favoured application of the current Australian Standard. Nevertheless, he remained unpersuaded that it was the parties' objective intention to apply that standard as governing the relevant criteria.
Thirdly, as a matter of principle, unless two standards apply to the same characteristics of a process or object, it does not follow from the fact that they relate to the same general subject matter that an equivalent can be found in the second standard logically capable of substitution for a criterion referred to in the first standard (or vice versa). Furthermore, in these circumstances if criteria in both standards are expressly adopted by the parties it may also be that severance of references to one or other standard will not give effect to the objective intention of the parties. The resolution of these issues is a matter of mixed fact and law turning upon the particular documentation in issue.
Fourthly, the standards themselves are not before the Court and I am left with the Arbitrator's assessment of their effect.
Fifthly, the Specification and contract drawings are not before the Court and I am not persuaded that it is apparent from the Arbitrator's reasons that his conclusions with respect to these documents were not reasonably open.
Sixthly, in these circumstances it is impossible to conclude that the Arbitrator's conclusions were not reasonably open to him with respect to “ unresolvable express ambiguities” within the contract documentation.
Seventhly, the Arbitrator has not been shown to have failed to take into account a materially relevant objective contextual factor relating to his considerations.
Eighthly, I am not persuaded that a fair reading of the reasons demonstrates the Arbitrator did other than seek to give effect to the objective intention of the parties.
Ninthly, insofar as the Arbitrator had regard to post-contractual conduct he did so only in the circumstances referred to in paragraph [187] of the Award.
"I have considered the construction of the Contract as a whole having regard to the circumstances surrounding the entry into the Contract. Because both parties have relied upon post contract conduct, I have also considered the conduct of the parties and the Superintendent and the numerous references made to Class 1A in the contemporaneous documentation." (My emphasis)
Tenthly, the general principles of contractual interpretation upon which the plaintiff relies (namely that a reference to a standard in a contract will generally be presumed to be a reference to a current standard, and the principle of contra proferentum) cannot be said to compel a conclusion contrary to that reached by the Arbitrator, founded as such conclusion was upon a detailed consideration of the specific documentation here in issue.
Insofar as it is now submitted that no reference should have been made to post-contract conduct, I would not exercise my discretion pursuant to s.38(4) of the Act to allow the plaintiff to adopt a position contrary to that which it took before the Arbitrator. In addition to the very strong policy reasons which support the view that a party to civil litigation should be held on appeal to the approach taken by it at first instance (particularly in a case where the hearing is an extended one), the consensual nature of an Arbitration makes it difficult to conclude that an Arbitrator who decided questions put to him by reference to considerations which the parties accepted were relevant, could ever be regarded as having erred in law. As I observed in Victoria v Seal Rocks Victoria (Aust) Pty Ltd[12], however, having regard to the terms of s.22 of the Act the resolution of this latter question may in strictness require a consideration of the positions adopted in writing by the parties before the Arbitrator. These matters were not evidenced before me. In this case as in Seal Rocks, however, I would exercise my discretion pursuant to s.38(4) of the Act against the plaintiff and apply the principles stated by the High Court in University of Wollongong v Metwally:
"Except in the most exceptional circumstances, it would be contrary to all principle to allow a party, after a case has been decided against him, to raise a new argument which, whether deliberately or by inadvertence, he failed to put during the hearing when he had an opportunity to do so."[13]
[12][2003] VSC 84
[13](1985) 59 ALJR 481, 483 and see Coulton v Holcombe (1986) 162 CLR 1 at 8.
The philosophy of commercial finality underlying the limitations on the right to appeal found in s.38 of the Act also supports the view that the plaintiff should not be permitted to change its ground.
Further, and in any event, it is apparent from an overall reading of the Arbitrator's reasons that he reached his conclusion concerning this aspect of the matter independently of evidence as to post-contract conduct although such conduct was also found by him to be consistent with his conclusion. Paragraphs [183] to [186] of the Award which I have quoted above demonstrate a conclusion contrary to the plaintiff reached entirely in accordance with strict legal principle.
In the circumstances I am not satisfied the Arbitrator's conclusion with respect to the standard applicable to the manufacture of precast panels was affected by a manifest error of law.
A series of further submissions were also made to me on behalf of the defendant with respect to the requirement of s.38(4)(a) of the Act concerning potential substantial effect upon the rights of one of the parties. These submissions were made both with respect to the plaintiff's case concerning the contract documents and the applicable standards. In the circumstances it is unnecessary for me to address them.
In summary I am not satisfied that the Arbitrator's reasons disclose manifest errors of law:
(a)by failing to hold that the last bullet point in clause 2.1.3 of volume 2 of the Specification was vague and uncertain and in the circumstances was unenforceable and ought to be severed from the contract; and
(b)finding that documents contained in paragraphs 15-24 of [10] of the Interim Award constituted contract documents; or
(c)by failing to resolve the ambiguity as to which Australian Standard applied to the assessment of the precast concrete wall panels; and
(d)failing to hold that the applicable standard was AS3610 in circumstances where he had made a finding of fact that he did not accept the respondent's contention that the applicable Australian Standard was AS1510.
In the circumstances the plaintiff's application must be dismissed.
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