WMC Resources Ltd v Leighton Contractors Pty Ltd

In WMC Resources Ltd v Leighton Contractors Pty Ltd, the dispute arose from a building and engineering contract between the parties, specifically relating to the valuation of variations to the works. The case was heard in the Australian courts. The primary issue was the extent to which an arbitrator could interfere with the proprietor's valuation of variations when determining the value of those variations in the absence of an agreement between the parties. The central legal question was whether the arbitrator had the authority to substitute their own valuation for that of the proprietor, who had determined the value of the variations in its sole discretion.

The court considered the terms of the contract and the principles of construction and interpretation applicable to building and engineering contracts. It was established that where a contract provides for the proprietor to determine the value of variations in its sole discretion, the proprietor's valuation is conclusive unless there is evidence of fraud, dishonesty, or bad faith. The court examined the circumstances in which the proprietor made the valuation and whether there were any grounds to question the propriety of the valuation. The court held that in the absence of such grounds, the proprietor's valuation should be respected and the arbitrator had no authority to substitute their own valuation.

Consequently, the court found that the arbitrator had overstepped their authority by substituting their own valuation for that of the proprietor. The appeal was allowed, and the decision of the arbitrator was set aside. The matter was remitted back to the arbitrator with directions to adhere to the proprietor's valuation of the variations as the conclusive determination of their value under the contract.