Gaymark Investments v Walter Construction Group

• Jurisdiction: Northern Territory
• Court: Supreme Court
• Judge: Bailey J
• Judgment Date: 20 December 1999
• Neutral Citation: [1999] NTSC 143
• Docket Number: FILE NO: Nos. LA5 of 1999 (9907030) and LA6 of 1999 (9910874)
• Date: 20 December 1999

[1999] NTSC 143

SUPREME COURT OF THE NORTHERN TERRITORY

IN SUPREME COURT OF THE NORTHERN TERRITORY OF AUSTRALIA IN DARWIN

Judgment of:

Bailey J

FILE NO: Nos. LA5 of 1999 (9907030) and LA6 of 1999 (9910874)

Between:

Gaymark Investments Pty Limited and Darwin Central Nominees Pty Ltd

Appellant

and

Walter Construction Group Limited (Formerly Concrete Constructions Group Ltd)

Respondent

Walter Construction Group Limited (Formerly Concrete Constructions Group Ltd)

Appellant

and

Gaymark Investments Pty Limited and Darwin Central Nominees Pty Ltd

Respondent

REPRESENTATION:

Counsel:

Appellant (LA5 of 1999) / Respondent (LA6 of 1999): J. Bond

Respondent (LA5 of 1999) / Appellant (LA6 of 1999): W. Cochrane

Carpaolo Nominees Pty. Ltd. v Marossan Nominees Pty. Ltd. (1997) 112 NTR 1 , applied.

White Constructions (NT) Pty. Ltd. v Mutton (1988) 57 NTR 8 , referred.

Abignano Ltd. v Electricity Commission of NSW (1986) 3 BCL 290 , referred.

Promenade Investments Pty. Ltd. v State of New South Wales (1992) 26 NSWLR 203 , applied.

Australian Gasfields Ltd. v Phillips Oil Company Australia (Atkinson J, Supreme Court of Queensland, unreported, 1 October 1998), referred.

Natoli v Walker (NSW Court of Appeal, unreported, 26 May 1994),referred

Kleerstyle Homes, Dickson and Dickson v Wilde (Williams J, Supreme Court of Queensland, unreported, 24 September 1997), referred.

Pavey and Matthews Pty. Ltd. v Paul (1987) 162 CLR 221 , applied.

Update Constructions v Rozelle Child Care Centre (1990) 20 NSWLR 251 , considered.

Hedley Byrne and Co. Ltd. v Heller and Partners Ltd. (1964) AC 465 , considered.

Mutual Life and Citizens Assurance Co. Ltd v Evatt (1968) 122 CLR 556 , referred.

Sutton v A J Thompson Pty. Ltd. (1987) 73 ALR 233 , considered.

Peak Construction (Liverpool) Ltd. v McKinney Foundations Ltd. (1970) 1 BLR , applied.

Turner Corporation Ltd. v Co-ordinated Industries Pty. Ltd. (1994) 11 BCL 202 , considered.

Turner Corporation Pty. Ltd. v Austotel Pty. Ltd. [1994] 13 BCL 378 , considered.

Turner Corporation Ltd. v Co-ordinated Industries Pty. Ltd (1995) 12 BCL 33 , referred.

Commercial Arbitration Act (1985)-s38(5)(a) and (b)

Trade Practices Act (1974) (CW)- s52(1)

Consumer Affairs and Fair Trading Act (1990) (NT)

Commercial Arbitration Act (1985) - s39

APPEAL — COMMERCIAL ARBITRATION ACT — CROSS-APPEALS — APPLICATIONS FOR LEAVE TO APPEAL — DECISION OF ARBITRATOR

APPEAL — COMMERCIAL ARBITRATION ACT — APPLICATION FOR LEAVE TO APPEAL — DECISION OF ARBITRATOR — INTERIM AWARD — ELEMENTS OF AWARD — ERRORS OF LAW — CONTRACTUAL REMEDIES — CLAIM FOR QUANTUM MERUIT — CLAIM FOR DAMAGES FOR NEGLIGENT MISSTATEMENT — CLAIM FOR RELIEF UNDER THE TRADE PRACTICES ACT

APPEAL — COMMERCIAL ARBITRATION ACT — APPLICATION FOR LEAVE TO APPEAL — DECISION OF ARBITRATOR — INTERIM AWARD — QUESTION OF LAW — CONTRACT — ENTITLEMENT TO LIQUIDATED DAMAGES — PREVENTION PRINCIPLE — WHETHER CONTRACTORS ARE ENTITLED TO AN EXTENSION OF TIME FOR COMPLETION — GROUNDS ON WHICH EXTENSION OF TIME WOULD BE GRANTED

REASONS FOR JUDGMENT

(Delivered 20 December 1999)

Background

1 These two applications for leave to appeal, pursuant to s.38 of the Commercial Arbitration Act (‘the Act’), from an interim award made by an arbitrator were heard together.

2 The arbitration arose out of the construction by Walter Construction Group Ltd (formerly Concrete Constructions Group Ltd) (‘Concrete Constructions’) of the Darwin Central Hotel between October 1996 and April 1997. The hotel, retail and office complex was constructed for Gaymark Investments Pty Ltd and Darwin Central Nominees Pty Ltd (‘Gaymark’) as principals under an agreement dated 12 October 1995.

3 Claims were made by Concrete Constructions for $4,900,341 pleaded on a number of bases, but principally for variations, prolongation and disruption/acceleration. Gaymark counter-claimed for $1,545,059, principally arising through the application of liquidated damages in accordance with the contract.

4 The arbitrator, Mr T M McDougall, a consulting construction engineer, delivered an interim award on 1 March 1999 in favour of Concrete Constructions in the amount of $1,440,486 exclusive of interest and costs. The arbitrator rejected Gaymark's counter-claim for liquidated damages. In reaching that conclusion, the arbitrator expressly indicated that Gaymark would have had an entitlement to 87 days of liquidated damages at $6,500 per day ($565,500) except for the view which he had taken on a particular question of law.

5 Gaymark applied for leave to appeal from the arbitrator's decision on that particular question of law. Gaymark's notice of appeal seeks an order that the interim award be varied to insert an order that Concrete Constructions pay Gaymark liquidated damages in the amount of $565,500 or alternatively that the award be remitted to the arbitrator for reconsideration.

6 Concrete Constructions applied for leave to appeal from the arbitrator's rejection of its (alternative) claims for a quantum meruit, for damages for negligent misstatement and for relief under the Trade Practices Act (Cmth).

7 On 22 October 1999, at the conclusion of submissions, I refused the application of Concrete Constructions for leave to appeal and indicated that I would publish my reasons at a later date. In the case of Gaymark's application for leave to appeal, I reserved my decision. I now set out my reasons with respect to both applications.

Section 38 of the Act

8 Section 38 of the Act relevantly provides:

‘(2) Subject to subsection (4), an appeal shall lie to the Court on any question of law arising out of an award.

(4) An appeal under subsection (2) may be brought by any of the parties to the arbitration agreement –

• (a) with the consent of all the other parties to the arbitration agreement; or

• (b) subject to section 40, with the leave of the Court.

(5) The Supreme Court shall not grant leave under subsection (4)(b) unless it considers that —

• (a) having regard to all the circumstances, the determination of the question of law concerned could substantially affect the rights of one or more parties to the arbitration agreement; and

• (b) there is —

  • (i) a manifest error of law on the face of the award; or

  • (ii) strong evidence that the arbitrator or umpire 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.’

9 Gaymark and Concrete Constructions have not consented to either of the present applications and accordingly each sought to persuade the Court with respect to their own application that the criteria of sub-section (5) of section 38 were satisfied.

10 Section 38(5)(a) and (b) provide cumulative restrictions on the grant of leave to appeal. If an applicant meets the threshold test of section 38(5)(a) then the further restrictions prescribed by section 38(5)(b) apply in the alternative. Finally, an applicant must persuade the Court that as a matter of judicial discretion leave to appeal should be granted.

11 It is apparent that section 38(5) presents a substantial barrier to a grant of leave to appeal from an arbitrator's award. Kearney J in Carpaolo v Marrosan (1997) 112 NTR 1 at 11-12 referred to the legislative background to the provision in the following terms:

‘In its present form, s38(5) reflects amendments introduced between 1990 and 1993 to the uniform scheme for commercial arbitration introduced throughout most of Australia by State and Territory legislation of the 1980s, and embodied in the Act. The purpose of the amendment effected by s38(5) was to further limit intervention by the courts in the arbitration process. Prior to the amendments, principles to be observed in the discretionary grant of applications for leave to appeal under provisions akin to s38 (4) in similar legislation in the United Kingdom, had been spelled out in Pioneer Shipping Ltd v BTP Tioxide Ltd [1982] AC 724 ( The “Nema”). Some of the “ Nema” guidelines were subsequently applied in some Australian jurisdictions applying the uniform scheme, but not in all. The 1990s amendments were introduced to achieve greater uniformity between the States and Territories on whether the discretion to grant leave to appeal under s 38(4) was at large, or limited. The amendments pointed to limitation: see Promenade Investments Pty Ltd v New South Wales (1991) 26 NSWLR 184 at 188-9. The policy behind them was “…to promote the finality of arbitral awards even at the price of denying a party its usual entitlement to the determination of the dispute by a court of law”: Natoli v Walker CA(NSW), 26 May 1994, unreported per Kirby P at p 2.’

12 In determining whether the threshold test set out in section 38(5)(a) is met, it is relevant to consider whether the amount in issue is substantial: see Kearney J in Carpaolo v Marrosan, supra, at p.12, White Constructions (NT) Pty Ltd v Mutton (1988) 57 NTR 8 at 22-3 and Abignano v Electricity Commission of NSW (1986) 3 BCL 290 at 297.

13 In the case of the present applications, the amount in issue in Gaymark's appeal is $565,600 and affidavit evidence on behalf of Concrete Constructions puts the effect of the arbitrator's rejection of its claims as precluding Concrete Constructions from recovering damages of up to a maximum of $4,330,000: see para. 13 of Mr Kennedy's affidavit of 14 May 1999. It is not a matter of dispute that these are substantial sums. I am satisfied that the amounts in issue are substantial and that the requirement of section 38(5)(a) is satisfied with respect to the applications by both Gaymark and Concrete Constructions.

14 The first alternative test for leave to appeal provided by section 38(5)(b) is that there is:

‘(i) a manifest error of law on the face of the...