The Minister for Industrial Affairs v Civil Tech (No 3) No. Scgrg-99-883

THE MINISTER FOR INDUSTRIAL AFFAIRS v CIVIL TECH PTY LTD (NO 3)
[2000] SASC 368

Full Court: Doyle CJ, Williams and Wicks JJ

1................ DOYLE CJ....... This is an application by the Minister for Industrial Affairs for leave to appeal to the Full Court from a decision of a Judge of this Court.

The Judge refused an application for leave to appeal on a question of law arising out of a decision made by an Arbitrator. The Arbitrator’s decision is found in a Further Interim Award (“the second Award”) dated 9 July 1999.
The Judge also refused leave to appeal against his decision refusing leave to appeal.
In Minister for Industrial Affairs v Civil Tech Pty Ltd (1997) 69 SASR 348 this Court held that an applicant for leave to appeal against a decision of an Arbitrator can, subject to a grant of leave to appeal, appeal to the Full Court from a refusal to grant leave to appeal. By application dated 31 August 2000 the applicant sought leave to appeal from the Full Court against the decision of the Judge refusing leave to appeal against his decision. That application was made pursuant to R 94.02.
By R 94.03, such an application is made in writing and is to be considered privately by the Full Court. A differently constituted Full Court initially considered this application and ordered that the application be listed for oral argument on notice to the Respondent. As a result of that, the application has come before the Court as presently constituted.
It is not possible to identify the issues raised, and to deal with them, until they are set in the context of the background to the application for leave to appeal.

Earlier Proceedings

Civil Tech Pty Ltd (“Civil Tech”) contracted with the Minister for Industrial Affairs (“the Minister”) to carry out certain civil engineering works. The contract was in writing, and was entered into on 18 September 1990. Disputes arose between the Minister and Civil Tech. They were referred to arbitration. The arbitration began on 1 February 1995, but the hearing of the respective claims and counter claims did not begin until September 1996. The Arbitrator was asked to deal with a preliminary issue. It seems to me that some of the difficulties that have arisen have resulted from the approach taken by the parties in separating out the preliminary issue.
The preliminary issue was, in brief, whether a letter of 14 February 1992, sent by Civil Tech to the Minister, was a binding agreement which settled all claims made by Civil Tech arising out of the contract, or only certain claims made by Civil Tech, and whether any such agreement was in any event voidable.
The letter referred to stated that Civil Tech agreed to accept from the Minister an “ex gratia payment” of $343,440. The letter also contained words to the effect that this payment was accepted in settlement of all claims made by Civil Tech. However, it suffices to say that there was other evidence supporting the view that Civil Tech neither intended to grant such release, nor should have been understood by the Minister as so intending.
The Arbitrator found that the agreement apparently constituted by the letter was voidable on several grounds. They included grounds which he described as “economic duress and unconscionability”. He found that the agreement constituted by the letter did not settle Civil Tech’s claims “as pleaded nor finalise all additional claims arising out of the Contract”. He so found by an Interim Award dated 25 November 1996 (“the earlier Award”).
In Minister for Industrial Affairs v Civil Tech Pty Ltd (1997-98) 70 SASR 394 the Full Court granted leave to appeal against the earlier Award.
The Full Court considered the grounds on which the Arbitrator had held that Civil Tech was not bound by the agreement constituted by the letter. It upheld the earlier Award in that respect. Although it found that the Arbitrator had erred in certain respects, it found that there was neither manifest error of law on the face of the Award, nor evidence that the Arbitrator had made an error of law, to the extent that he found that any agreement arising from the letter of 14 February 1992 should be discharged on the grounds of unconscionability. That unconscionability arose from what the Arbitrator had described as “economic duress”.
But the Full Court held that the Arbitrator had made a manifest error of law on the face of the award in that he failed to consider a further plea by the Minister. That further plea was a plea that Civil Tech was estopped from claiming that the letter did not settle the dispute between the parties, or finalise all additional claims arising out of the original contract. The Full Court referred to this plea as the “affirmation plea”.
Accordingly, the Full Court allowed the appeal, and made orders the effect of which was that the matter was remitted to the Arbitrator to consider the affirmation plea. It is important to understand that the only matter remitted to the Arbitrator was what the Full Court called the affirmation plea. That plea was described by the Arbitrator in the earlier Award as follows:
“The Respondent [the Minister] said that the contractor was estopped from claiming that the letter did not settle the dispute between the parties nor finalise all additional claims arising out of the contract, on the following grounds;
(1)... the contractor had at no time either orally or in writing challenged, queried, corrected, clarified or qualified the content and interpretation of the letter prior to its Reply to Defence.
(2)it had not challenged the validity of the letter on the grounds alleged or on any grounds at all prior to the Reply to Defence.
(3)... the Respondent paid the amounts referred to in the letter on the dates alleged and to that extent acted to its detriment, and the contractor accepted the payments referred to in the letter.”
The hearing then resumed before the Arbitrator. He made the second Award on 9 July 1999. He dealt with the affirmation plea. He made the following finding:
“It is my finding that the agreement contained in the letter of 14th February 1992 was not affirmed by the Contractor. The Contractor is not estopped from its election to rescind the agreement.
The agreement has not settled the dispute between the parties relating to the man made obstructions, nor has it finalised all additional claims arising out of the Contract.”
The Minister sought leave to appeal against the second Award. As I said at the outset, a Judge of this Court refused leave to appeal, and refused leave to appeal from his decision.
Leave to appeal is to be granted only if the determination of the question of law that is said to arise could substantially affect the rights of one or more of the parties to the arbitration agreement, and there is either manifest error of law on the face of the award, or strong evidence that the Arbitrator made an error of law and that the determination of the question may add, or may be likely to add, substantially to the certainty of commercial law: Commercial Arbitration Act 1986 (SA), s 38(5). There is no dispute that the determination of the question of law said to arise could substantially affect the rights of one or more of the parties. It does not appear to me that the determination of the question that arises would substantially add to the certainty of commercial law. Accordingly, the issue is whether there is a manifest error on the face of the second Award.

Submissions by the Minister

The Minister’s application is founded on the reasons given by the Arbitrator for the second Award.
The meaning of the letter of 14 February 1992, and the agreement that it constituted, was a matter of dispute. On one view the agreement released the Minister from all further claims under the contract. On another view, the agreement released the Minister only from claims related to man made obstructions and to consequential delays.
The former and wider view had been advanced by the Minister. That was the agreement for which the Minister contended at the hearing before the Arbitrator which led to the earlier Award. The preliminary point that the Arbitrator was asked to decide was whether the letter released the Minister from all claims under the contract. It was in the context of that contention that the Arbitrator made the earlier Award. It was in that context that he found that the apparent agreement to be found in the letter of 14 February 1992, meaning the agreement in its wider sense, was obtained by the Minister as a result of unconscionable conduct, and was liable to be set aside.
When he made the second Award, the Arbitrator considered the claim of estoppel or affirmation in some detail. Passages can be found in his reasons that suggest a finding that when the letter was signed, Civil Tech intended to release the Minister from claims relating to man made obstructions. That is, there are passages in his reasons that suggest that Civil Tech intended to enter into an agreement in the narrower sense identified above. There are also passages in the Arbitrator’s reasons in which he refers to the conduct of Civil Tech and of the Minister as being consistent with an agreement in the more limited sense. There are also passages in his reasons to the effect that Civil Tech and the Minister acted on a basis consistent with an agreement in the narrower sense, until relatively late in the piece when the Minister asserted that there was an agreement in the wider sense.
On the basis of these passages in the reasons of the Arbitrator, the Minister submits that there is manifest error of law. The submission is, in effect, as follows: that when Civil Tech signed the letter, it represented to the Minister that it had entered into a binding agreement in the narrower sense; that Civil Tech intended that the Minister would rely upon that agreement as an enforceable agreement releasing the Minister from claims attributable to man‑made obstructions; that the Minister relied upon that release for that purpose when making payments to Civil Tech; that in that respect the Minister acted to his detriment; and on that basis the Minister asserts that Civil Tech is estopped from denying that it entered into a binding agreement in the limited sense.
Putting things a little differently, the Minister submits that in concluding that Civil Tech was not estopped from rescinding or having set aside the agreement in the wider sense, and in dismissing the affirmation plea, the Arbitrator made findings to the effect that Civil Tech had acted in a manner consistent with it having entered into an agreement in the limited sense, and the Minister had acted to his detriment on that basis.
The suggested error of law is the failure of the Arbitrator to hold that Civil Tech is estopped from denying that it entered into a binding agreement with the Minister to settle all claims arising out of man made obstructions, that is, an agreement in the narrower sense identified.

Conclusions on Minister’s Submissions

I agree that in a number of respects the reasons of the Arbitrator reflect some confusion and imprecision.
Nevertheless, I do not accept the submissions for the Minister.
My understanding of the reasons of the Arbitrator for the earlier Award and the second Award is that one of his findings is that the Minister and Civil Tech were at cross purposes. The Minister had in mind, apparently, an agreement in the wider sense. At best from the Minister’s point of view, Civil Tech had in mind an agreement in the narrower sense. But the parties were never agreed on the subject matter of their agreement, either subjectively or objectively. The parties were mistaken.
In any event, the effect of the Arbitrator’s findings in the earlier Award in particular is that Civil Tech’s agreement, whatever the agreement might mean, was extracted from it by unconscionable pressure amounting to duress. The Arbitrator’s findings as to duress and unconscionable conduct relate to the signing of the letter of 14 February 1992, however it is construed, not just to the signing of the letter with the wider meaning. In other words, whatever agreement arose from the letter of 14 February 1992, on the Arbitrator’s findings Civil Tech was entitled to have that agreement set aside because it was obtained under circumstances that made it unconscionable for the Minister to enforce the agreement.
The significance of the later payments made by the Minister, and of their acceptance by Civil Tech, has to be assessed in that context.
Under those circumstances, I do not understand how the Minister can claim that the conduct of Civil Tech led him to assume that Civil Tech was intending to grant a release from claims in the wider sense or in the narrower sense.
The letter was signed in circumstances that, in retrospect, evidence confusion as to its effect and meaning. On the Arbitrator’s findings the parties thereafter acted for some time in a manner consistent with the narrower meaning identified by me. A further dispute arose when the Minister asserted that the agreement had the wider meaning. The effect of the Arbitrator’s findings is that the parties were at all times at cross purposes, and Civil Tech in any event should not be bound by the letter it signed.
For there to be an estoppel, the representations relied upon by the party asserting the estoppel must be clear. An estoppel cannot be founded upon an ambiguity. The meaning of the letter on which the estoppel is founded is not clear.
The Minister was not induced to make payments by a representation by Civil Tech to the effect that it was granting a limited release to the Minister. The Minister must be taken to have made the payments that he made because the Minister believed that he had secured a complete release from Civil Tech. That is the claim that he advanced before the Arbitrator. The Arbitrator has found that it is unconscionable for the Minister to maintain that stance. It seems to me quite inconsistent with that finding for the Minister now to assert that Civil Tech is to be held to the agreement in a more limited sense, when the vitiating effect identified by the Arbitrator affects the letter whatever meaning is attributed to it.
Nor, in my opinion, is it unconscionable for Civil Tech to deny that it agreed to release the Minister. The Minister acted as he did, and made payments to Civil Tech, as a result of securing what the Arbitrator found to be an unconscionable bargain.
I also do not accept the submission by counsel for the Minister that the Arbitrator’s reasons contain a finding that there was in fact an agreement in the narrower sense. Read as a whole I consider that the Arbitrator was not finding that there was an agreement between the Minister and Civil Tech in the limited sense, and merely rejecting a contention by the Minister that that agreement should be read in the wider sense. I acknowledge that there are passages in the Arbitrator’s reasons that support the submission by the Minister. But taken as a whole I consider that the Arbitrator’s reasons indicate a finding that there was no agreement in the narrower sense, and so this aspect of the Minister’s submission also fails.
Nor, in my opinion, has the Minister suffered a detriment that can be remedied only by holding Civil Tech to the agreement in the narrower sense. Granted, the Minister has made payments to Civil Tech. But if no agreement has been reached, the money has been paid under a mistake. Presumably that money must be repaid to the Minister or credited to him for the purpose of determining the respective entitlements to the parties in the course of the arbitration. The entitlement of Civil Tech is to be determined on the basis that the payment has not been made. The only detriment to which the Minister can point is the failure by Civil Tech to fulfil a promise that the Minister says Civil Tech should be taken to have made. A mere failure to fulfil a promise which a party is taken to have made does not of itself amount to unconscionable conduct which will constitute a basis for estoppel: Mortgage Acceptance Nominees Ltd v Australian Thoroughbred Finance Pty Ltd & Anor (1997) 69 SASR 302 at 305. The principle of estoppel, as I understand it, is directed to prevention of the detriment that would flow if an assumption which the representor has caused to be made were to be departed from. The best the Minister can say is that he made payments to Civil Tech on the basis that Civil Tech had agreed to grant a release in the limited sense identified by me. But if that payment is credited to the Minister, in effect set aside, then the suggested detriment is disposed of.
For what it is worth, I would add that I have difficulty understanding how it can be unconscionable to permit Civil Tech to depart from an arrangement into which it entered as a result of unconscionable conduct on the part of the Minister.
For those reasons, while I accept that there are aspects of the Arbitrator’s reasons that support the submissions by the Minister, my conclusion is that properly understood there is no error of law manifest on the face of the award.
The Judge below refused leave to appeal on a further ground. That was that the point now advanced by the Minister is not within the matter remitted by the Full Court to the Arbitrator. He also concluded that until the matter was remitted to the Arbitrator it had not been part of the Minister’s case that the Minister and Civil Tech had entered into an agreement in the narrower sense defined. Until then his case had been that any agreement was one in the wider sense identified by me. The Judge said that it was too late now for the Minister to change his stance in that respect. I see considerable force in this observation. However, it is unnecessary for me to reach a conclusion on the point.

Orders

For those reasons I would refuse leave to appeal from the decision of the Judge of this Court, whereby the Judge refused leave to appeal against the second Award.

41.............. WILLIAMS J... I agree.

42.............. WICKS J......................... I agree with the orders proposed by the Chief Justice for the reasons he gives.

[2000] SASC 368

1 November 2000