WFA Pty Ltd v Hobart City Council
[2001] TASSC 82
•1 August 2001
[2001] TASSC 82
CITATION: WFA Pty Ltd v Hobart City Council [2001] TASSC 82
PARTIES: WFA PTY LTD (ACN 062 289 310)
v
HOBART CITY COUNCIL
TITLE OF COURT: SUPREME COURT OF TASMANIA
JURISDICTION: ORIGINAL
FILE NO/S: M134/2001
DELIVERED ON: 1 August 2001
DELIVERED AT: Hobart
HEARING DATES: 28, 29 June 2001
JUDGMENT OF: Cox CJ
CATCHWORDS:
Arbitration - The award - Appeal or judicial review - Procedure - Extension of time for application for leave - Application to extend time in which to seek leave to appeal or to set aside award - Relevant considerations.
Technical Team Projects Pty Ltd v Noble Dunn Pty Ltd (1990) 20 NSWLR 221, referred to.
Aust Dig Arbitration [97]
REPRESENTATION:
Counsel:
Applicant: B J Morgan; D R Wallace
Respondent: P W Tree
Solicitors:
Applicant: Wallace Wilkinson & Webster
Respondent: Toomey Maning & Co
Judgment Number: [2001] TASSC 82
Number of Paragraphs: 17
Serial No 82/2001
File No M134/2001
WFA PTY LTD (ACN 062 289 310) v HOBART CITY COUNCIL
REASONS FOR JUDGMENT COX CJ
1 August 2001
This is an application to extend until 7 June 2001 the time to commence proceedings to set aside the award of a commercial arbitrator made on 3 March 1998. The application was filed in the Court on 14 June 2001, seven days after the filing of an originating application seeking to set aside that award upon the grounds that the award was obtained by the respondent's misleading and deceptive conduct and in breach of its undertakings "that the respondent's monopoly on information used in the arbitration process would not be a factor to prejudice the applicant's ability to conduct its case and respond to material of the respondent".
The original dispute arose out of the construction of the Hobart Aquatic Centre. The applicant (previously known as WaterFurnace Australia Pty Ltd) had contracted to supply and install certain mechanical services, including pool heating and pool hall air handling systems. The pool complex was opened to the public on 19 September 1997. A dispute arose between the parties to the contract and on 13 October 1997, the applicant was denied further access to the site, save that it and its experts were offered access to the site thereafter if accompanied by a representative of the respondent. The dispute was referred to arbitration pursuant to cl 47 of the contract. Clause 47.3 provided as follows:
"47.3 Arbitration
If the dispute involves a claim for an amount of $50,000.00 or more or an extension of time of 14 days or more and either party is dissatisfied with the decision of the nominated person under Clause 47.2 then the dissatisfied party ('the Claimant') shall within 7 days of receipt of the nominated person's decision give notice to the other party ('the Respondent') referring the dispute to arbitration in accordance with the terms of this Clause 47.3.
The dispute shall be arbitrated by a single arbitrator ('the Arbitrator') agreed to by the parties, or, if the parties are unable to agree upon an arbitrator within 7 days of the service of notice under the preceding paragraph, the nominees of the person named in Annexure Part A.
For the purposes of the following paragraphs of this Clause 47.3, a reference to a number of days shall be construed as a reference to that number of days from but not including the date of appointment of the Arbitrator.
Within 7 days each party shall lodge with the Arbitrator security for the Arbitrator's fee for arbitrating the dispute in the sum of $5,000.00 or such greater sum as the Arbitrator may determine.
Within 7 days the Claimant shall submit a written statement of the Claimant's claims to the Respondent.
Within 14 days the Respondent shall submit a written defence to the claims and a written statement of the Respondent's counterclaims, if any, to the Claimant.
Within 21 days the Claimant shall submit a written reply to the defence and a written defence to the counterclaims to the Respondent.
Within 28 days the Respondent shall submit a written reply to the defence to the counterclaims to the Respondent.
Within 28 days both the Claimant and the Respondent shall provide a copy of these submissions to the Arbitrator and shall provide all arguments and supporting information (which either party wishes to put to the Arbitrator) to the Arbitrator and to the other party.
Within 5 days each party shall submit its best offer of settlement. Each offer shall be of an amount in dollars (even if only $1.00) which the party offers to pay to or to accept from the other party in full settlement of all the claims and counterclaims, but excluding the costs of the arbitration.
Within 42 days the Arbitrator shall deliver an award. The award shall be for the amount of one or other of the offers referred to in the preceding paragraph. The Arbitrator shall select the offer which the Arbitrator considers to be the more just and fair. The Arbitrator shall not give any reasons for the award.
Upon delivery of the award the Arbitrator shall be entitled to the Arbitrator's fee. The whole of the Arbitrator's fee shall be paid by the party against whom the award is made. If the fee is not paid within 49 days the Arbitrator may apply the security to payment of the fee.
When the Arbitrator's fee has been paid, the Arbitrator shall release any remaining security to the party entitled to it.
Each party shall bear its own costs of the arbitration."
After the exchange of pleadings and of submissions and supporting evidentiary materials, the parties submitted their respective best offers. The amount claimed by the respondent as damages from the applicant was $9,376,610.11 made up as follows:
1
Cost to rectify work not in accordance with the contract as set out in the report of JMG (Engineers)
$3,654,625.00
2
Cost of operating works prior to anticipated practical completion 31/3/98
$230,713.37
3
Additional power cost.
$1,535,198.71
4
Additional maintenance costs.
$3,509.375.33
5
Liquidated damages for the period 22/8/97 - 18/9/97 inclusive
$70,000.00
6
Engineering and other consultants' fees incurred due to breaches of contract
$296,857.00
7
Legal costs incurred by the Principal during the period of the contract due to the contractor's breaches
$79,840.70
Grand total
$9,376,610.11
The respondent's best offer was a sum of $597,700. On 3 March 1998, the arbitrator awarded this sum to the respondent which, in proceedings initiated on 13 March 1998 and still not resolved, is seeking to enforce the award. On 9 April 1998, the applicant filed an originating application in this Court seeking to set aside the arbitrator's award (M80/1998). This application was outside the period of 28 days from the date of the award prescribed by Rules of the Supreme Court, PtIX, r3A. On 4 May 1998, I ordered (inter alia) that the applicant file any application for an extension of time to regularise those proceedings within 21 days. No such application was made. On 5 June 1998, Wright J made an order by consent in M80/1998 that the proceeding be discontinued. Meanwhile the applicant had made application in the Supreme Court of New South Wales for an extension of time within which to take proceedings to set aside the award. It was heard on 5 June 1998 and dismissed by Hunter J. Thereafter, the applicant filed a notice of appeal to the Court of Appeal of New South Wales and on 18 August 1998, the Tasmanian application of the respondent to enforce the award, was adjourned sine die by Wright J at the request of the parties to await the outcome of the appeal in New South Wales. That appeal was dismissed by the Court of Appeal on 28 March 2000. The applicant then sought leave to appeal to the High Court and its application was refused on 5 December 2000. By letter dated 21 December 2000, the respondent's solicitors requested the Registrar to relist the application to enforce the award. As I have said, the applicant filed an application to set aside the award of 7 June 2001 and a week later filed this application for an extension of time to do so. Even this multiplicity of proceedings to set aside the award is only part of the story for, on 13 March 1998, the applicant commenced proceedings in the Supreme Court of South Australia seeking to recover under the contract. The respondent on 13 April 1998 filed an application in that court to have the proceedings dismissed. In May 1998, the applicant filed an amended claim in the Supreme Court of South Australia joining additional defendants. This prompted a response seeking to have those proceedings dismissed as an abuse of process. That motion came on for hearing in October 1998 and on 14 October 1998, Kelly J dismissed the applicant's proceedings.
The applicant in the latest proceedings now wishes to agitate two issues which were not raised in the proceedings subsequent to the arbitration. They have at their core a contention that the respondent was under an obligation to disclose certain documentation which it is said was in the possession of the respondent, was material to the two issues and was not disclosed to the applicant prior to the arbitration, notwithstanding an alleged undertaking to do so. The first issue relates to the effect of overcrowding at the pool complex on the satisfactory functioning of the mechanical services provided by the applicant. The applicant complains that in the year 2000, as a result of the use of Freedom of Information legislation and the intervention of the Ombudsman, it first learnt that despite the fact that the respondent had issued itself a building permit requiring the installation of some means of monitoring the patrons in the complex at any given time (a "people counter"), no such device was installed. A copy of the permit was produced to the applicant by the respondent on 25 July 2000. The relevant provision says:
"4 The maximum number of occupants that are permitted to occupy the facility is 1200 persons. Measures must be incorporated into the operations of the Centre to ensure an appropriate counting system is introduced to ensure compliance with occupancy numbers."
The copy produced has a line drawn through the provision and the words "Not Installed" hand printed thereon. Despite Mr Tree's contention that the author of the annotations is not revealed, nor is the date on which they were made, and that in consequence no reliance can be placed on them, I think the evidentiary material is sufficient to justify a prima facie conclusion that the device was not in fact installed at any material time. Furthermore, the applicant claims, a man named Cossich made a number of reports to the respondent asserting that the pools were regularly being overcrowded.
The second issue relates to electrically heating the water used in the complex. The applicant guaranteed that the amount of electrical heating units would not exceed a certain figure. A large part of the respondent's claim related to the fact that the cost of heating significantly exceeded that guaranteed. The evidence shows that a part of the pool water heating mechanism employs an appliance which captures and transfers heat from a waste water pipe which forms part of the Hobart sewerage system. The temperature of the effluent varies. The applicant claims that it was a term of the contract that the respondent would supply a minimum flow of treated sewerage at a minimum temperature and that a failure to do so would prevent the applicant's heating system from meeting the maximum energy use performance guarantees which had resulted in the respondent's claim for damages of $1,535,196.71 "additional power cost". The applicant learned after the arbitration had been concluded that the respondent had won a national award for innovation in local government in respect of the procurement of energy from effluent and sought a copy of the respondent's submission to the responsible agency in Canberra. In the report appear the words:
"In the early days of the commissioning some components were adversely affected by the formation of a biofilm originating from the sewerage effluent. This was a direct result of the use of ultraviolet light disinfection at the Selfs Point Sewerage Treatment Plant and has since been overcome through minimal overdosing of the effluent return line with a small quantity of chlorine."
A little later in the report, the following words appear:
"As stated in question 9 the build up of biofilm within some components was troublesome in the early days of commissioning and operating of the Centre but this has been largely overcome through minimal dosing of the effluent return pipeline with chlorine."
The applicant claims that it was prejudiced by the fact that the respondent did not disclose this information as it may explain why the maximum power usage guaranteed was exceeded in the first few months of the complex's operations.
The obligation to make disclosure of the above facts and documentation is said to derive from a letter dated 5 December 1997 from the respondent's solicitors to the applicant's director, Mr David Greenberg. They were responding to a letter to their client from him of the same date, the contents of which were as follows:
"Further to our telephone conference of this date, please be informed that I am requesting that you provide to WaterFurnace on an ongoing basis the following specific information which we require to pursue our rights under the arbitration. More particularly with regard to the WPS equipment, would you provide the following information:
1The daily water quality reports that have been compiled since date of opening and which you are continuing to compile. Please fax this as produced.
2The output current for the electrolytic reactors on each pool system as measured daily.
3The as monitored salt level in each pool system.
Could you please confirm by return of fax that you will be prepared to provide the information requested.
As there is some urgency in this matter, I will take the position that should you not wish to accommodate on an informal basis then I take this opportunity to serve notice by way of this facsimile and accompanying document that I will request a direction from Mr Easton with regard to the matter." [Mr Easton was the arbitrator]
The respondent's solicitor's letter relevantly said:
"I refer to your letter to my client of today. My client has asked me to respond to your letter.
At the present time, it is not appropriate for my client to provide you with the information referred to in your letter. The information which is relevant to the dispute will be provided to you at the appropriate time in the course of the arbitration. I am confident that arrangements can be made to ensure that your company is not prejudiced by this."
It will be noted that Mr Greenberg's letter sought the production of specific material which he tabulated under three headings. The response of the respondent's solicitors could not reasonably be said to amount to an undertaking to provide all information in the respondent's possession which might be relevant to the dispute. No order was made by the arbitrator that the parties make discovery, nor was any specific request made by the applicant for the production by the respondent of information relating to the number of persons using the pool or the minimum temperatures of the effluent in the pipe from which heat was extracted by conduction.
In any event, in relation to the first issue, the absence of a "people counter" was a completely neutral fact. Pool overcrowding was an issue raised on the pleadings. There is no evidence that any claim was ever made by the respondent that a mechanical monitor demonstrated lower numbers than the 1,200 mentioned in the building permit. The absence of a "people counter" could prove neither that the numbers were greater nor that they were less than 1,200. The principal evidence on this issue before the arbitrator presented by the respondent was contained in an affidavit by a Mr Dix, the pool manager, who gave the following evidence:
"4 To my knowledge there are not Australian Standards or regulations specifying bather numbers for aquatic facilities. Industry practice is to ensure that numbers of bathers in pools are managed to ensure that safe numbers of bathers are not exceeded. This is determined by reference to size and depths of pool and number of staff available.
5 In the case of the 25 metre and leisure pools at the Centre, the Hobart City Council, in a meeting in October 1997, has directed that the number of bathers in the pool should be maintained around 250, with a maximum of 300.
6 The pool is at all times managed to accord with this direction.
7 The pool is not subject to consistently heavy bather loads. While the maximum figure of 300 may occasionally be approached, for much of the time the bather loading in the pool is low as the Centre is open from 6.00 am to 9.00 pm weekdays and 8.00 am to 6.00 pm on weekends.
8 There is a duty manager on duty at the Centre at all times when the Centre is open. Each manager routinely counts numbers of patrons in and around the 25 metres and leisure pools. If the number of bathers is approaching the maximum, measures are put in place to stabilise the numbers including opening other attractions within the Centre, initiating activities outside the pool and controlling access to the Centre."
It is claimed by the applicant that the absence of a "people counter" in some way affects the credibility of Mr Dix's evidence, but in my view there is no substance in this contention at all. Mr Dix's affidavit, in any event, is confined to evidence of the number of bathers using the pools and does not directly address the question of whether or not the total number of patrons at any given time exceeded 1,200.
A second aspect of the first issue is a complaint that a subcontractor of the applicant was later appointed a consultant to the respondent and passed on information to the respondent which the latter failed to disclose to the arbitrator or to the applicant. In the New South Wales proceedings, a draft affidavit by Mr Cossich was prepared in which he would affirm that the permitted use of the pools was contrary to the design brief and performance criteria which the applicant was required to meet. Those criteria were a maximum of 220 bathers in the 50 metre pool, 100 in the diving utility pool, 120 in the leisure pool, and 100 in the 25 metre pool. The draft affidavit contained claims as follows:
"36When I commenced as consultant to HCC, my immediate and most significant concern was that it was clear from my observations of the Centre that the bather loadings prescribed by the EMF Design Brief and Performance Criteria ('the Bather Loadings') were being exceeded. The Bather Loadings were being greatly exceeded in the 25 m and Leisure pools, which had a combined maximum of 220 bathers as set out in paragraph 12 above.
37My observations were that at any one time there were frequently larger numbers of people in the pool and on the pool decks, on weekdays between 9 am and 2 pm when school groups visited the Centre, and on Saturdays, Sundays and public holidays, when there was greater attendance from members of the public ('Peak Times').
…
40I recorded some of my observations as to the Bather Loadings in the Log Book, as follows:
40.1At 2pm on 18 October 1997, I noted that I had made an itemised head count, as follows:
25m pool 130 bathers Leisure pool 130 bathers 50m pool 120 bathers Utility/Diving pool 30 bathers plus 50 in line Slide
10 bathers plus 40 in line
40.2At 1.30pm on 23 October 1997, which was a public holiday, I noted that I had done a head count at about 1.30pm. I estimated 500 plus people in the 25m and Leisure pools. I also noted that the pool decks were crowded, that there was heavy loading to the dive pool, and four lanes had been open in the 50m pool. By that I meant that lane ropes had been removed from four lanes to allow for the spill over of people not being able to get into the 25m and Leisure pools. I also noted that there was also a large crowd on the lawn area and the court yard.
40.3On 9 November 1997 I did a head count and ascertained that the average load for the 25 metre and Leisure pools was 300 over a period of time. By this I mean that I observed the number of people during that period to average, but to be at times higher, and at times lower, than 300.
40.4On Saturday 22 November 1997 I recorded under the heading 'weather' ‑ 'hot 32 degrees C.' This is very hot for Hobart. Under the heading 'pool loading' I noted 'extreme', by which I meant to record conditions of gross overloading. I considered there to have been 'extreme' or gross overloading when over 500 bathers were present in the leisure pool. I further noted that the doors to the Centre were closed and that there were restrictions on entry.
40.5On 6 January 1998 I made a notation of 'very hot weather ‑ high bather loadings'.
40.6On Wednesday 7 January 1998 I noted 'very hot weather' and 'major bather loadings'.
40.7On Thursday 8 January 1998 I made a notation 'weather fine ‑ high loading'.
40.8On 9 January 1998 I noted 'weather warm/hot high loading'.
40.9On 14 January 1998 I noted 'weather hot ‑ high bather loadings'.
40.10On 16 January 1998 I noted 'weather very hot ‑ high bather loadings'.
40.11On 17 January 1998 I noted 'weather extreme hot 39 degrees C' and I recorded 'highest bather loading'. I can distinctly recall one afternoon at approximately 2pm doing a pool head count as best I could with crowd movement. I estimated in the 25m and Leisure pools that there were somewhere between 500 and 600 people. At that same time I also counted 150 children who were queuing up on the water slide. To the best of my recollection, this was on 17 January 1998, when I made the note 'highest bather loading'.
…
46The Bather Loadings at the Centre were regularly being exceeded in a significant way, and beyond any acceptable margin for overloading. In my experience, maximum Bather Loadings can not be exceeded by more than 10-15% of the specified or allowable load, without there being a critical impact on the functioning of the water treatment systems for the pools."
The applicant's complaint in respect of the Cossich observations, as articulated by Mr Morgan who appeared as senior counsel for the applicant, was that the latter "did not know the material because Mr Cossich was employed by the Council and he [ie, Mr Greenberg] did not obtain the information until well after the arbitration".
Mr Greenberg conceded in cross-examination on his affidavits that overcrowding was clearly an issue on the arbitration and that a representative of the applicant had been present at a meeting with the respondent's consultants and agents on 9 October 1997 at which Mr Cossich's concerns about overcrowding had been raised. The applicant's statement of claim specifically refers to this meeting and to Mr Cossich's observations thereat which were recorded in these terms:
"It is to be noted that a strong representation was made to the Principal at this meeting by Mr John Cossich that the operator was continually overloading the pool. That is to say the 25 metre leisure pool system which is one continual body of water."
It was open to the applicant to approach Mr Cossich prior to the arbitration for further information or to seek from the respondent any further reports from him as to the alleged overloading. Alternatively, further information might have been sought by way of discovery. In my view, the respondent was under no obligation to disclose the material, and no undertaking to do so can be teased out of the letter of 5 December 1997, to which I have already referred.
The second issue relating to the presence of biofilm in the effluent pipe also depends upon the existence of a general obligation to disclose every conceivably relevant material in the respondent's possession. Again I am satisfied that the letter of 5 December 1997 gave no undertaking to disclose this material and that the respondent had no such obligation.
Even if the applicant has a legitimate complaint that some relevant material was not disclosed to it prior to the arbitration, this is not a case where the justice of the situation warrants the grant of an extension of time to challenge the award. The parties chose an unusual and abbreviated method of settling their dispute. The arbitration clause, as Fitzgerald JA said in his reasons for judgment in the New South Wales Court of Appeal delivered on 28 March 2000, "was plainly aimed at a summary and expeditious determination of the parties' dispute". As the arbitrator was required not to, and did not, give reasons, it is nigh on impossible to say what effect on his decision disclosure to the applicant of the information which is said not to have been disclosed would have had upon it. With respect to the biofilm, there is no evidence as to whether or not it caused a reduction below the minimum temperatures said to have been warranted by the respondent. Whether or not the presence of biofilm accounts for the high cost of electricity in the first few months of operation, which was advanced as justifying part of the respondent's overall claim for over $9,000,000, is presently a matter of speculation.
Mr Greenberg seems to have been the applicant's principal agent in respect of the arbitration and subsequent proceedings. It is inconceivable that from his experience of those proceedings he would have remained, in the year 2000, when he learnt of the information he says his company was denied, in ignorance of a time limit in which a challenge to the award could be made. He is, furthermore, a legal practitioner with a practising certificate in South Australia, although his practical experience is very limited. The information concerning Mr Cossich's claims was known to the applicant at least prior to 22 February 1999 when the draft affidavit to which I have referred was annexed to an affidavit affirmed that day by Mr Hasofer, the solicitor having the conduct of the New South Wales litigation on behalf of the applicant. The non-installation of a "people counter" was revealed to Mr Greenberg on 25 July 2000 and it was on 8 August 2000 that he procured the report on the biofilm adversely affecting some components of the effluent heating system in the imprecisely described "early days of commissioning" which may or may not be a material time in respect of the second issue. Nevertheless, the applicant took no action to seek an extension of time to raise either issue as a basis for challenging the award for several months. The receipt of the request of the solicitors for the respondent in December 2000 for a hearing date of the application to enforce the order prompted some activity in January 2001 and there was evidence that Mr Greenberg tried to contact his previous Tasmanian solicitor that month for that purpose, but the solicitor was on holiday and next month indicated that he had a conflict of interest which would prevent him from acting. Thereafter, the applicant encountered some difficulties in obtaining Tasmanian representation, but in all the circumstances, the delay in prosecuting the application has not been satisfactorily explained.
In Technical Team Projects Pty Ltd v Noble Dunn Pty Ltd (1990) 20 NSWLR 221, Cole J acknowledged that it was wrong to merge an application for an extension of time with the substantive application to set aside an arbitrator's award but said, at 227:
"However, a court considering an application for an extension of time will wish to consider the substance of matters to be argued to satisfy itself that granting an extension is not a futile exercise because the points sought to be raised are of no substance."
In my view the points the applicant seeks to raise by way of challenge to the award are without substance and having regard to all the circumstances I am not satisfied that justice requires that the applicant's default should be overlooked nor that there is any reasonable explanation or excuse for its neglect of the rules establishing a time limit. The application is accordingly refused.
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