The Rintoul Group Limited v Far North District Council
[2017] NZHC 364
•9 March 2017
IN THE HIGH COURT OF NEW ZEALAND WHANGAREI REGISTRY
CIV-2016-488-130 [2017] NZHC 364
UNDER The Arbitration Act 1996 IN THE MATTER
of an arbitration before John Walton
BETWEEN
THE RINTOUL GROUP LIMITED Plaintiff
AND
THE FAR NORTH DISTRICT COUNCIL Defendant
Hearing: 10 February 2017 Counsel:
R C Mark for Plaintiff
G J Christie for DefendantJudgment:
9 March 2017
JUDGMENT OF WHATA J
This judgment was delivered by me on Tuesday 9 March 2017 at 4.00 pm pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date:………………………….
Counsel/Solicitors:
R C Mark, Barrister, Kerikeri
G J Christie, Simpson Grierson, Auckland
THE RINTOUL GROUP LIMITED v THE FAR NORTH DISTRICT COUNCIL [2017] NZHC 364 [9 March
2017]
[1] The Rintoul Group Limited (Rintoul) and the Far North District Council (FNDC) arbitrated a dispute about a construction contract. The arbitrator resolved all issues in favour of the FNDC. Rintoul now seeks leave to appeal in respect of four issues, namely:
(a) Whether the arbitrator was correct to find that the defendant’s requirement for a producer statement design (PS1) for temporary piling was not a variation of the contract;
(b) Whether the arbitrator was correct to find that the FNDC was not
required to procure the plaintiff’s access to the site;
(c) Whether the arbitrator was correct to determine the FNDC’s counterclaim was proven, simply on the grounds that Rintoul’s claim failed; and
(d)Whether the arbitrator erred in finding that the FNDC was entitled to liquidated damages.
[2] I have resolved to not allow leave to appeal. My reasons follow.
Background
[3] During July, August and September 2014, there was an extreme weather event which caused a number of slips in the Far North. Two of these slips were on Mangakahia Road. The FNDC tendered for contracts for the two slips together, as the traffic management plans for the two contracts would overlap due to the proximity of the two slips. The documentation provided that one live lane of traffic was to be maintained at all times during the work. The contractor would also have to comply with all statutory requirements, including the Building Act 2004, and the requirements of the Code of Practice for Temporary Traffic Management (CoPTTM), published by the NZTA.
[4] Rintoul was the preferred tenderer. The dispute which was the subject of the arbitration concerned only the two contracts referred to at [3] (contracts 7-14-115 and 7-14-116).
[5] Issues arose as to Rintoul’s proposed traffic management plan for contract
115, particularly in relation to visibility for two lanes of traffic and insufficient width. The FNDC rejected an initial proposed traffic management plan as it believed it did not properly deal with the period for installation of temporary works (steel piling) and it pointed out that as the steel piling was to retain the road, a PS1 would be required under the Building Act 2004. A revised traffic management plan was later approved by the FNDC, subject however to agreement being reached with Downer to provide traffic control while the temporary works were installed and the production of a PS1 in relation to the sheet piling.
[6] The arbitrator found that Rintoul simply anticipated that the Downer control would remain in place and refused to provide a PS1 unless it was a variation. Rintoul also issued a notice to engineer (NTE) on 4 March and the Engineer responded on
6 March confirming FNDC’s position on Downer’s control of the site, the
requirement for a traffic plan for the temporary work and the requirement for a PS1.
[7] No progress was made until Rintoul provided a PS1 on 2 April. This was followed by a reconciliation meeting held on 15 April and Rintoul sought a formal engineer’s decision under clause 13 of the contract in relation to three matters which became the focal point of the arbitration, namely:
(a) The traffic management plan – raised in NTE15, Rintoul believed it was precluded from gaining access to the site or possession of the site by the current traffic management plan, and that it was for the FNDC to resolve this matter;
(b)Possession of the site – Rintoul acknowledged it was in delay as it was unable to commence work and take possession of the site as a result of a failure by the FNDC to provide possession of the site; and
(c) “Materials not on site” as outlined in special conditions 12.1.2 – Rintoul was unable to get materials on site as it was unable to obtain possession of the site as the FNDC had not resolved the Rintoul’s ability to take possession of the site under the existing traffic management plan.
[8] The engineer issued his formal decision on 25 May resolving all issues in FNDC’s favour. On 26 June, Rintoul issued formal notice that it was dissatisfied with the formal decision of the engineer, and the FNDC gave formal notice on 13
July under the contract requiring that the dispute be referred to arbitration.
The arbitrator’s conclusions
[9] The arbitrator identified three central questions in terms of liability:
(a) Did the FDNC unreasonably withhold the approval of the traffic management plan?
(b) Was the requirement for a PS1 a variation?
(c) Was the FNDC responsible for procuring access to the site for Rintoul under the Downer Traffic Management Plan?
[10] Dealing with the first question, the arbitrator noted that Rintoul had two primary responsibilities under the contract:
(a) To provide a traffic management plan in terms of clause 5.19; and
(b) To comply with all the applicable rules in terms of clause 5.11.
[11] The arbitrator observed that until the traffic management plan had been approved, no work could commence on the site, even though time was already running under the contract. He found that Rintoul had to come up with a construction method and traffic management plan for its entire works, including the carrying out of temporary works. He concludes that FDNC’s consideration of the
three submissions by Rintoul was not unreasonable and that the FNDC was clear and consistent in its requirements of the traffic management plan.
[12] The arbitrator also rejected the contention that the PS1 was a variation. The following findings are central to the resolution of the present application, namely:
[87] This is not, on the evidence provided to me, a case where the Respondent was seeking to impose a greater obligation on the Claimant than the contract or the general law provides. A contractor is entitled to carry out the work in accordance with the approved programme and method, in accordance with the law; and there is no question that if an owner interferes with how the work is to be done without lawful justification, then it will be a variation. That, however, is not the case here. The Respondent was simply pointing out that the Claimant’s proposed construction method triggered a requirement for a PS1. That is an entirely reasonably and proper thing for an owner to do under a construction contract.
[88] The Respondent raised the issue of a PS1 as soon as the steel piling notation appeared on the Claimant’s plan. If the Claimant was correct in its position that neither building consent nor PS1 were required, then it was incumbent on them to satisfy the Respondent that this was the case. Mr Rintoul patently failed to do this. He made a number of assertions but he did not satisfy the Respondent that the retention would be below the height for which consent is required under the Building Act, or that there would be no loading on the area (notwithstanding that the expert’s review of the retention wall design identified cracks in the road which needed to be monitored). Instead, he threatened and blustered.
[89] The Claimant is correct that the temporary works were its responsibility, and that the requirement for a PS1 is a separate issue to the traffic management plans; but compliance with the requirements of all relevant legislation was the Claimant’s responsibility (including in relation to temporary works), and it was entirely reasonable for the Respondent to point out that a PS1 was required.
[90] Rather than asserting that a variation was warranted, it was up to the Claimant to satisfy the Respondent that a PS1 was not required; this it patently failed to do.
[13] As to the final question, the arbitrator found that it was not the FNDC’s responsibility to procure access for Rintoul under the Downer Traffic Management Plan. The arbitrator disagreed with Rintoul’s construction of the CoPTTM, noting that there was no basis for their shifting responsibility for the traffic management plan to the FNDC. In particular the arbitrator notes:
[93] In his closing submissions, Mr Mark points out that the CoPTTM does provide (at page 44) that there can be two “lodged” TMPs, and therefore he argues it is possible to have two management plans for the same stretch of road. That is not actually what that part of the CoPTTM says. The quoted clause provides that there may be two plans lodged for the same stretch of road, as was the case here, but the engineer is to approve one of those plans, which both groups are then bound by.
[94] In this case, Downer’s plan did not (according to Downer) cover the Claimant’s works, whether temporary works or permanent works. There is no basis in the quoted part of CoPTTM for two plans to be in place. Mr Rintoul’s assertion that it was always intended that the temporary works would be carried out under Downer’s traffic management plan may well be correct, but that was his company’s responsibility, not the Respondent’s; and it seems he failed to include Downer in that expectation.
[95] In the ordinary course, the Claimant would submit a traffic management plan for its work, including its temporary works, and on approval the site would be handed over to the Claimant and the management plan would then become effective. Where there is an existing traffic management plan in effect, part of the mechanics of that handover would be the arrangements between the Claimant, the Respondent and Downer.
…
[97] As the contract only provided for 5 working days between award and commencement on site (a short period, it has to be said), any such arrangement would almost certainly include some level of reimbursement from the Claimant to the Respondent for the extension of the Downer contract, or at least for a saving to be included in the Claimant’s contract. There is no evidence that any such arrangements were discussed. Instead, the Claimant asserted that it was the Respondent’s obligation to require Downer to cooperate.
[98] In the event, notwithstanding Mr Rintoul’s evidence that he had telephoned Brad Flower from Downer on an indeterminate date, Downer consistently declined to enter into such an arrangement.
Quantum hearings
[14] Hearings as to quantum then followed, with an interim award as to quantum issued on 14 October 2016.
[15] The FNDC made two claims in its statement of defence and counterclaim to the amended statement of claim that were the subject of the award as to quantum:
(a) Liquidated damages at $500 per working day for each working day after 18 June 2015 under both contracts; and
(b)Additional traffic management costs of $204,305.26 (the initial claim was for $242,875.00) from 26 February 2015 to 13 August 2015.
[16] The arbitrator rejected an argument by Rintoul that the claim for liquidated damages was outside the jurisdiction of the arbitration, because the arbitration addressed only issues of cost arising out of delays in implementing the traffic management plan. In doing so, he accepted the contention by counsel for FNDC that the underlying issue in the arbitration was a dispute as to the contract period, commencement date and due date of completion, from which an issue as to liquidated damages would inevitably arise as a largely arithmetical exercise. Moreover, he noted that Rintoul addressed those issues in its evidence and submissions.
[17] On the basis of his findings that the FNDC could raise the issue of liquidated damages in the arbitration, and that the delays in completion were not the fault of the FNDC, the arbitrator concluded that liquidated damages were payable at a rate of
$500.00 per working day from 19 June 2015, resulting in a total payable of
$95,500.00 plus GST across the two contracts.
[18] He added that the liquidated damages sum may be reduced or extinguished if Rintoul could establish an extension of time or an entitlement to have liquidated damages suspended, but that no such claim had been made in the arbitration.
[19] The arbitrator also found that additional traffic management costs flowed from Rintoul’s breach of its obligation to provide for traffic management in accordance with the contract, which were independently recoverable from the liquidated damages.
[20] He rejected Rintoul’s objections on the following grounds:
(a) Rintoul had ample opportunity to inspect the invoices verifying costs;
(b)The progress payment procedure in the contract was a means of making instalment payments of contract price, and thus compliance with the procedure was not a precondition to either parties’ entitlement to payment of damages arising in the contract;
(c) Rintoul’s argument that part of the cost claim related to the “Retreat” section of the road which was outside its site, but the arbitrator found that it was not included in the claim, and even if it had been any additional costs were minimal; and
(d)Any failure by the FNDC to reserve its position as to costs in the reconciliation meeting and thus to raise the dispute did not disentitle it from recovering costs. The arbitrator found that Mr Rintoul was an experienced contractor who would have known the consequences of a breach of contract. Thus, the costs flowing from the breach of contract under dispute were plainly at issue in the arbitration, indeed, costs arising from Rintoul’s failure were part of the parcel of determining the FNDC’s counterclaim.
[21] Accordingly, the arbitrator found that Rintoul was liable to pay:
(a) Costs to the FNDC arising from its failure to provide a traffic management plan as required by the contract; and
(b)Liquidated damages for delay and actual traffic management costs during the period from the date possession of the site were awarded to the point in time when Rintoul properly put a traffic management plan in place.
Appeals on questions of law
[22] Clause 5 of Schedule 2 of the Arbitration Act 1996 sets a high threshold for leave to appeal arbitral awards:
(a) Appeals must be on questions of law; and
(b)The Court must be satisfied that the determination of the question of law concerned could substantially affect the rights of 1 or more of the parties.
[23] For present purposes, the key considerations relevant to the exercise of discretion to grant leave are:1
(a) The strength of the challenge and the nature of the point of law raised.
A one off point, in the sense that it was unlikely to arise again, with little precedent value, will rarely attract leave;
(b) In other cases the Court described the test as whether the applicant
had “a strongly or very strongly arguable case”;
(c) How the question arose before the arbitrators is also a relevant factor in assessment. If the question of law was the very point of the arbitration, this counts against leave being obtained, as it allows parties to re-litigate their dispute. By contrast, if the legal issue only emerged as crucial to the decision during the arbitral process, leave will be more readily granted;
(d)The qualifications of the arbitrator(s). If the arbitrator is legally qualified, it will be harder to obtain leave to appeal on a question of law, as the parties must be assumed to have had good reason for relying on that lawyer’s expertise; and
(e) The importance of the dispute to the parties. Where the dispute has great significance to the parties, leave will be easier to obtain as the effect of an incorrect ruling will be greater. In particular, the Court of Appeal emphasised that in some disputes the arbitration may involve
more than just a question of money.
1 Gold and Resource Developments (NZ) Ltd v Doug Hood Ltd (2000) 9 TCLR 513 (CA) at [54].
Rintoul’s general contentions
[24] Mr Mark for Rintoul contends that each of the issues on appeal have significant importance for Rintoul as they bear on its contractual relations with a number of local bodies and the burden and standard of proof carried by contractors generally when issues of contractual responsibility are in issue. The central complaint is that the arbitrator has wrongly enlarged Rintoul’s contractual obligations while at the same time requiring Rintoul to show that it has not breached those obligations. Against this general claim I turn to the individual appeal issues.
Whether the arbitrator was correct to find that the defendant’s requirement for a producer statement design (PS1) for temporary piling was not a variation of the contract
[25] As to the first issue, Mr Mark submits:
(a) Clause 5.1.5 of the Contract states:
The contractor shall be responsible for the adequacy, stability and safety of all its site operations and methods of construction, provided that the contractor shall not be responsible for the design or specification of the contract works except as provided under 5.13 and 5.14.
(b)Temporary works are at the discretion of the contractor and did not form part of the contract works;
(c) The temporary steel piles undertaken by Rintoul did not require building consent as they were not load bearing;
(d)The arbitrator wrongly found that it was Rintoul’s responsibility to prove the PS1 was not required, rather than FNDC’s obligation to show that it was necessary; and
(e) The requirement to provide a PS1 was a variation.
[26] The first question posited by the application arguably involves a matter of interpretation or variation of a contractual obligation: is Rintoul obliged by cl 5.1.5
to demonstrate, by way of a PS1, the adequacy, stability and safety of all its site operations and methods of construction? But the strength of Rintoul’s case is low. Rintoul was statutorily obliged to undertake “building works” in accordance with the Building Code, whether or not consent was required.2 It is common place to demonstrate conformity with the Building Code by producing a PS1 (a producer statement confirming that works undertaken in conformity with an engineering
design will meet relevant building standards). The central issues raised by the appeal point are therefore whether not the construction of steel piles and temporary works (described at [5]) were building works and if so whether it was then reasonable in the circumstances to require a PS1 for them. Both of these issues of fact were resolved by the arbitrator in FNDC’s favour. The prospect then of this Court finding that Rintoul was not obliged to provide a PS1 is very small. Furthermore, I reject the contention made by Mr Mark that the arbitrator shifted to Rintoul the burden of establishing that there was no requirement to produce a PS1. I am advised from the bar that the Council attended the hearing with an expert to demonstrate why a PS1 was necessary. No competing evidence was produced. I therefore apprehend, whatever the burden, the Council discharged it.
[27] Accordingly, while an issue of law is raised by the first posited issue, the appeal point lacks merit and it was available to the arbitrator to conclude that it was entirely reasonable for FNDC to insist on a PS1. Furthermore, the issue raised is an idiosyncratic matter of no wider import as it is concerned primarily with a specific requirement to produce a PS1 in the particular circumstances arising.
Whether the arbitrator was correct to find that the FNDC was not required to
procure the plaintiff ’s access to the site
[28] Mr Mark submits:
(a) FNDC was obliged to provide unfettered access to the work site as required by clause 5.4.1, which states:
The principal shall give the contractor possession of the site on the date provided for in the special conditions and if no such date is provided ten working days after the date of
2 See Building Act 2004, s 40.
acceptance of tender, subject to prior compliance with the contractors and the principal's obligations under 8.25 and
8.75.
(b)FNDC’s engineer advised Rintoul that it could not work on the site without Downer’s approval and under Downer’s traffic management plan; and
(c) This effectively prevented Rintoul from access to the site unless it
agreed to Downer’s traffic management plan.
[29] No issue of law or contractual interpretation arises. The contract is clear. Access to the work site was to be permitted and secured by the FNDC. But, as Mr Christie noted, the real issue or lis between the parties was not about a right of access, but about traffic management while Rintoul carried out its temporary works. The arbitrator noted Mr Rintoul’s assertion that it was always intended that the temporary works would be carried out under Downer’s traffic management plan. The arbitrator ruled on that issue, finding that, in the particular circumstances of the case, it was Rintoul’s responsibility to manage traffic. That was a finding of fact available to the arbitrator and is not amenable to challenge on an appeal as a point of law relating to the obligation to provide access.
[30] Furthermore, if a question of law could be divined on this aspect of the dispute (for example a question about who carried the legal obligation to produce a traffic management plan for the temporary works), it is so fact dependant that I would have declined leave in any event. In short, the dispute essentially arises out of Rintoul’s proposal for temporary works to address a site specific problem (that is to enable two-way traffic while the main works were completed) at a specific time. It does not qualify as an issue of law for which leave should be granted.
Whether the arbitrator was correct to determine the FNDC’s counterclaim was proven, simply on the grounds that Rintoul’s claim failed
[31] Mr Mark’s central complaint under this heading is that the arbitrator simplistically found on the counterclaim established because Rintoul’s primary claim
had not been made out. The reasons given by the arbitrator are, admittedly, pithy but, on their face, sufficient. The central claim and counterclaim concern whether Rintoul was responsible for delay and, if so, whether the council should be entitled to damages for that delay. The arbitrator clearly found that Rintoul was responsible for the delay so, in fact, in terms of the counterclaim, the only issue is one of quantum. No question of law arises in that context. Even if a question of law arises, it is largely concerned with the particular facts of this case.
Liquidated damages
[32] Finally, in terms of the liquidated damages claim, in the Interim Ruling on Jurisdiction dated 30 October 2015, the arbitrator identified three key issues for resolution. They are noted at [8] above. They do not refer to resolution of a liquidated damages claim. This was raised before the arbitrator at the hearing on damages. The arbitrator dealt with this issue in this way:
On the point of jurisdiction, I agree with Mr Christie. The underlying issue was always whether or not the Respondent had delayed the Claimant in its ability to provide and acceptable traffic management plan, carry out its temporary works and get its goods, materials and equipment onto the site. The claim for liquidated damages and costs of additional traffic management was inevitable, and the claimant addressed those issues in its evidence and in its submissions.
[33] Mr Mark also accepts that the claim for liquidated damages had always been pleaded.
[34] In those circumstances, I see nothing in the preliminary determination on jurisdiction as circumscribing the scope of the arbitration on the issue of quantum. It was important to identify the key issues to be resolved by the arbitration on questions of liability, with quantum issues to be resolved separately. There being no pleading deficiency, I agree with the FNDC that the pleaded issue of liquidated damages was properly resolved by the arbitrator. In this regard, I also acknowledge the point raised by Mr Christie, that under art 16.2 of schedule 1 of the Arbitration Act 1996, any challenge to the jurisdiction is to be made before the defence to the counterclaim was lodged.
[35] It is therefore simply too late for Mr Mark to assert lack of jurisdiction to make the liquidated damages order.
[36] The application for leave to appeal the arbitral awards is therefore dismissed.
Application to enter the awards as judgments
[37] I also have an application made by the FNDC on 2 December 2016 seeking to enforce the Interim Award as to Quantum and the Final Award dated 24 November
2016 by entry as judgments under art 35 of schedule 1 of the Arbitration Act 1996.
[38] Grounds for refusing recognition or enforcement are limited, and prescribed in art 36 of schedule 1. Article 36(2) provides that:
(2) If an application for setting aside or suspension of an award has been made to a court referred to in paragraph (1)(a)(v), the court where recognition or enforcement is sought may, if it considers it proper, adjourn its decision and may also, on the application of the party claiming recognition or enforcement of the award, order the other party to provide appropriate security.
[39] Clause 5(9) of schedule 2 provides that for the purposes of art 36 of schedule
1, an appeal under cl 5 shall be treated as an application for the setting aside of an award.
[40] Given the result, however, the outcome of this application is inevitable. The application to enter the awards is granted.
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