Time Developments Pty Ltd v Village Roadshow Jam Factory Pty Ltd
[2004] VSC 19
•4 February 2004
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
PRACTICE COURT
No. 9337 of 2003
| TIME DEVELOPMENTS PTY LTD | Plaintiff |
| V | |
| VILLAGE ROADSHOW JAM FACTORY PTY LTD | Defendant |
No. 9477 of 2003
| VILLAGE ROADSHOW JAM FACTORY PTY LTD | Plaintiff |
| V | |
| TIME DEVELOPMENTS PTY LTD | Defendant |
JUDGE: | HANSEN J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 3 & 4 February 2004 | |
DATE OF JUDGMENT: | 4 February 2004 | |
CASE MAY BE CITED AS: | Time Developments Pty Ltd v Village Roadshow Jam Factory Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2004] VSC 19 | |
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Arbitration – award – application for leave to appeal – whether manifest error of law.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr C. W. Porter Mr D. Farrands | Andrew T Fraser & Associates Herbert Geer & Rundle |
| For the Defendant | Mr D. Farrands (9337 of 2003) Mr C. W. Porter (9477 of 2003) | Herbert Geer & Rundle Andrew T Fraser & Associates |
HIS HONOUR:
On 20 November 2003, Mr Ronald John Salter, as arbitrator in a dispute between Time Developments Pty Ltd and Village Roadshow Jam Factory Pty Ltd, published an interim final award by which he determined that Village Roadshow was liable to pay Time Developments $100,000, together with interest of $49,205.62, and reserved for further argument and determination the question of costs.
The question of costs was determined by a final award, dated 7 January 2004. The present applications do not concern the disposition of costs by the final award.
Each party to the arbitration now seeks leave to appeal pursuant to s.38 of the Commercial Arbitration Act. The application by Time Developments was filed on 17 December 2003 and was thus within the period of time required by the rules for the institution of such an application. The application by Village Roadshow was filed on 22 December 2003 and was thus just outside that period of time. No point is taken by Mr Porter, who appears for Time Developments, against time being extended to enable Village Roadshow's application to be considered.
The interim final award recites the history of the matter and what the case concerned. It runs to some 29 pages. It is an exhibit to the affidavit of Stephen Gerard Donovan, sworn 22 December 2003. I do not propose to repeat what is set out in the award, save to the extent that might be necessary.
The award followed a hearing of some 14 days, followed by submissions of the parties and then by the interim final award. The award itself reflects the attentiveness of the arbitrator to the matters in question.
The case concerned the proposed development of air space above the railway tracks on the eastern side of Chapel Street and adjacent to the development known as the Jam Factory. After an initial appointment by Village Roadshow of Mr Donovan's company in 1997, there was signed a contract which is referred to in paragraph 17 of the award by which Village Roadshow, as the preferred developer of the Public Transport Corporation, appointed Time Developments, referred to in the agreement as consultant and agent, in order to carry out the proposed development project.
The development project was described as Railway Airspace Development, Chapel Street, East South Yarra. The agreement stated that the developer (Village Roadshow) agreed to appoint Time Developments to conduct the following project services, and there then followed a list of 14 stated services, each being, although directed to a specific matter, of broad scope.
Clause 2 of the agreement provided for the payment of a fee for Time Developments. Clause 2.1 stated that "the developer hereby agrees to pay Time Developments upon completion of the project fees calculated as 15% of project profit" and in Clause 2.2, there was a statement as to how that profit was to be calculated. There was no provision for termination of the agreement. I think that is sufficient reference to the agreement, except that it also provided for reference of disputes to arbitration and it was by action under that clause that Mr Salter was appointed as arbitrator.
The project got under way, but Village Roadshow came to terminate Time Developments' engagement under the contract in 1999, following its sale of the project, as the relevant act is described, to the Village Entertainment Property Trust. Put simply, Village Roadshow having exited the project, it wrote to Time Developments terminating the agreement. The arbitrator records in paragraph 18 of the award, "that the sale of the project into the Trust was for bona fide commercial reasons and without intent to deprive the claimant of its profit share." In these circumstances differences and disputes arose between Time Developments and Village Roadshow. Village Roadshow refused to pay any amount to Time Developments, whether in respect of the project profit or in respect of work undertaken to the time of termination, or otherwise, and nor was Time Developments' engagement in connection with the project continued by the property trust.
The arbitrator records that Time Developments sought damages from Village Roadshow for repudiation of the agreement by its termination, which repudiation was accepted by Time Developments who rescinded the contract accordingly. It sought damages in the amount which would have been payable under the agreement it if it had gone to completion and the arbitrator records in his findings that he had evidence of valuers as to what that amount might have been. That is to say, the parties led evidence in an attempt to inform the arbitrator of the quantum of the amount to which Time Developments would have become entitled had the project continued to completion.
In the alternative, if the termination did not amount to a repudiation, Time Developments claimed the same amount of remuneration under the agreement. As an ultimate alternative, Time Developments sought the award of an amount as on a quantum meruit.
The arbitrator records that Village Roadshow raised a raft of defences. I should say that the document setting out the defences is in evidence as an exhibit. It is unnecessary to refer to them or to the full gamut of all that was submitted to the arbitrator. Primarily, although other points were taken, it was submitted by Village Roadshow that Time Developments was not entitled to receive any remuneration, or fee, unless it had duly completed the project pursuant to the agreement, or, perhaps, only if the project was completed. In various ways it was alleged that, in the circumstances, Village Roadshow was entitled to terminate as it had, and that Time Developments was not entitled to remuneration.
To these contentions of Village Roadshow, Time Developments submitted, as is stated in paragraph 37 of the award, that there was no express term in the contract entitling Village Roadshow to terminate and that it was inappropriate to imply such a term having regard to the principles of law by reference to which implications may be made. It was submitted that the termination constituted a repudiation which it was entitled to accept and rescind.
The arbitrator goes on in his award to elaborate upon the submissions that were made and to refer to some authorities that counsel referred him to, and relied upon, and I might say that I have been similarly referred to these cases and to a number of other authorities in the course of the argument on these applications. Naturally enough, as the ability of Village Roadshow to terminate as it had rested upon an implied term, the arbitrator was taken to the decision of the Privy Council in B.P. Refinery (Westernport) Pty Ltd v Shire of Hastings[1] and to the decision of the High Court in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales,[2] and particular attention has been paid to those cases in the argument before me. I have regard to the propositions in those cases as to the circumstances in which an implication might be made.
[1](1977) 52 ALJR 20.
[2](1982) 149 CLR 337.
After further referring to submissions of counsel, the arbitrator concluded on the matter of implication, in paragraph 45 of the award. He did proceed from there to refer to matters that he had taken into account, and to deal with other aspects of the case, including the assessment of the amount of Time Developments entitlement. The argument before me concentrated on the matter of an implied term rather than on these other matters and I do not need to refer to them. In particular, counsel for Time Developments did not address a submission that the assessment of $100,000 was affected by error, indeed of manifest error of law.
The challenge that is now made by Time Developments to the award is seen sufficiently in its proposed Notice of Appeal, as being that the arbitrator wrongly concluded, or found, that the agreement between the parties contained an implied term permitting the defendant to terminate the contract unilaterally if, or in the event that, it might not or did not complete the project and consequently that the defendant did not repudiate the agreement by terminating it as aforesaid.
This is all concerned with the conclusion of the arbitrator, expressed in paragraph 45 of the award. The arbitrator, in that paragraph, said this:
"The contract in question was prepared by Mr Donovan on the claimant's stationery. There is no suggestion that the contract was prepared or vetted by lawyers, and while this of itself is neither here nor there, it leads me to a conclusion that the parties were content at the time to cover the main points of agreement. I have taken the view that had the parties turned their minds to it at the time when the agreement was signed, they would most certainly have included a term providing for termination, and they would most certainly have included a provision for payment of a fee of some sort in that event. In coming to this conclusion, I note that it was always understood by both parties that the project was integrally related to the Jam Factory, that a property trust might be established into which the Jam Factory (and with it the project) would be sold, and that in the circumstances, the respondent itself might not complete the project. The respondent could not have contemplated when signing the agreement that in such circumstances, the claimant would receive no fee at all whatever services had been performed, and likewise, the claimant could not have contemplated at that time that it would receive a full fee even if its role in the project was cut short by a sale of the project. Putting the matter in another way, I have concluded that each of the five criteria for implication of such terms into the contract, as specified both in the Privy Council and in the High Court have been made out. In my opinion, the contract between the parties contained an implied term allowing the respondent to terminate the contract in the event of disposal of the project before completion, in which event the claimant would become entitled to a fee commensurate with the services provided by the claimant to that time and to the stage which the project had reached."
The reference in that passage to the parties having turned their minds to the matter seems to reflect the approach of the Full Court in Barro Group Pty Ltd v Fraser[3], to which the arbitrator referred in paragraph 40 of the award.
[3][1985] VR 577 at 583.
The submission of Mr Porter was directed to whether, in this passage, read in context with other paragraphs in the award, the arbitrator had fallen into error, which could be described as manifest error of law, in failing to properly take account of and apply the relevant considerations expressed in BP and Codelfa for the implication of a term.
In a helpful submission, Mr Porter took me to those considerations, to a useful discussion of them in The Law of Contract by Greig and Davis and submitted that the statements of the arbitrator as to understandings of the parties that the respondent itself might not complete the project, did not necessarily mean that the term implied by the arbitrator was necessary in the sense stated in the authorities. That is to say, it did not follow from the finding of fact made by the arbitrator that the term which he implied was necessary, or required, to provide business efficacy to the contract.
In referring to Mr Porter's submission in this, perhaps, summary way, I do not mean to indicate that I have not considered all that he urged. I have taken it into account, considered the matter overnight and heard further submissions this morning.
Counsel for Village Roadshow, Mr Farrands, had provided written submissions in both applications which I have read and in succinct submissions presented this morning, emphasised essentially that the difficulty confronting Time Developments here was that if there be error of law, the error lay not only in a matter of law such as construction of the contract, but also in the findings of fact that were made by the arbitrator. That is to say, that the ultimate conclusion as to the implication, both as to the ability to terminate the contract and to be subject to an obligation in the event of doing so to pay a fee, rested on conclusions of fact and law.
He submitted that, in such a case, the conclusion of the arbitrator is not open to challenge. He referred, in particular, in that regard to the recent decision of Osborn J in Victoria v Seal Rocks Victoria (Aust.) Pty. Ltd[4]. He further submitted that the findings of fact which led to the implications were open to be made by the arbitrator and were thus not matters that could be attacked by Time Developments. So, in summary, it was submitted that it was reasonably open to have implied the term in the way the arbitrator did on the basis of the findings of fact and, furthermore, that there was no manifest error of law on the face of the award.
[4][2003] VSC 84.
It is convenient at this point to mention that the application of Village Roadshow for leave to appeal, is made on the basis that the conclusion of the arbitrator that a term was to be implied that entitled Time Developments to a fee in these circumstances was, and constituted, a manifest error of law on the face of the award. This seemed a somewhat curious approach to the case, because it was Village Roadshow that pressed for the implied term entitling it to terminate and one might have supposed that if it succeeded in that approach, and the circumstance being that Time Developments had not been in breach of the contract, that Time Developments might fairly receive some compensation for work undertaken. Nevertheless, that is only an observation that I make now. The case run before the arbitrator was that, in the circumstances, Time Developments was entitled to no fee.
For his part, Mr Porter took the approach that if Time Developments succeeded in establishing, or in obtaining leave to appeal, then so also would it be appropriate for Village Roadshow to have leave to appeal. In a sense, the one implication was related to the other and Mr Porter's approach recognised the relationship between the two.
Section 38, sub-s.5 of the Commercial Arbitration Act, provides that the court shall not grant leave unless it considers that certain matters are satisfied and they are set out in paragraphs (a) and (b). It is sufficient to say that paragraph (a) does not raise a difficulty in the sense of being a hurdle in the path of either parties success, because clearly enough, if either was to succeed, there would be a direct result in money terms for both sides. If Time Developments can succeed on an appeal it will avoid the award of $100,000 and leave the day open for it to claim a much larger amount, and conversely for Village Roadshow, it would be saved from paying a fee.
As far as paragraph (b) is concerned, the first requirement is that there be a manifest error of law on the face of the award. The alternative to that is that there be strong evidence of 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. In no circumstance in this case could it be said that the latter requirement of any certainty to commercial law is satisfied. This case concerns a unique contract between two parties and the issue only concerns the proper application of established principles of law to the relevant facts. It is for that reason that the issue with which I am concerned is whether, on either side, it is established that there has been a manifest error of law on the face of the award. A number of authorities have considered what this expression means. It is sufficient in this respect to refer to Energy Brix v National Logistics Coordinators[5] where at paragraph 31, Ormiston JA refers to the judgment of Sheller JA in Promenade Investments Pty Ltd v New South Wales[6], to the effect that a manifest error may be demonstrated if there 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 or law. I have, in fact, in this case, heard substantial and what might be called sustained argument as one might hear if this was an appeal itself. Sometimes that is unavoidable.
[5][2002] 5 V.R. 353 at p.368.
[6][1992] 26 NSWLR 203 at 226.
It is also to be borne in mind that it is not sufficient to succeed on an application of this type that one may think there might be an error that would be exposed by full argument on an appeal, or there may be or is something arguable. What is required is that there be a manifest error of law that appears on the face of the award when one considers it. I have given the matter anxious consideration and read and re-read the relevant papers, and heard argument over two days.
In the end the difficulty, as I perceive it, for Time Developments, lies in the statements of the arbitrator in paragraph 45 of the award, read in context with other parts of it, and that what is said there is by way of conclusions of fact, and conclusions of law. Reference was made in the course of argument, often, to what the arbitrator has said in paragraph 43. I think it is necessary to be careful to note that what he said there was by way of referring to the submissions of counsel, but it does seem to me reading the award as a whole that he has, in his findings and conclusions in paragraph 45, to have carried forward the substance of what he there records as having been submitted by counsel for Village Roadshow. He has made findings, attentive to the language of the Full Court in Barro, and then proceeded further to find that the criteria for the implication of terms stated in BP and Codelfa had been made out.
Apparently the arbitrator was pressed as to the relevance of Barro to the present agreement, and I too heard contentions as to this. I think, as I have said in the course of argument, that Barro is a somewhat different case to the present for the reason that, in my view, the present was a case of an engagement for the undertaking of a particular project, whereas Barro was a situation where the carting of quarry material might take place, from time to time on request, and for an indefinite time in the future. The present contract was to either to be performed, or it was not to be performed. Nevertheless I do not find in any such distinction, and the arbitrator's seeming use of the language in Barro, any error of law in the arbitrator's reasoning. The arbitrator has clearly attended to the facts of the present case and based his conclusion on findings as to them.
I think that one has to approach an award in the way that has been stated by a number of judges, including Kirby, P, as he then was, in Natoli v Walker[7]. Reading the whole of what the arbitrator has said in paragraph 45 in the context of the award as a whole, I conclude that it does not exhibit manifest error of law. While the arbitrator might have expressed himself more fully as to each of the elements stated in BP and Codelfa, he has found facts and further concluded that the five criteria for the implication of terms were satisfied. The latter expressed a conclusion as to law and facts, the facts being those necessary to satisfy the criteria for the implication of a term, to the extent they might be additional to the earlier expressed findings. It is not open on this present application to have an appeal against findings of fact.
[7]Court of Appeal New South Wales, 26 May 1994, BC9402554.
For all of these reasons I am of the view that the application by Time Developments must fail. So also, in my view, must the application by Village Roadshow fail. Indeed, it seems to me, that the one follows from the other.
The orders that I propose to make therefore are these. In the application by Time Developments the proceeding is dismissed with costs. In the application by Village Roadshow there will be leave to make the application out of time, and the proceeding will be dismissed with costs.
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