Parliament House Construction Authority v Cld Meares and Lumo Constructions Pty Limited [1987] ACTSC 35 (25 May 1987)

SUPREME COURT OF THE ACT

PARLIAMENT HOUSE CONSTRUCTION AUTHORITY v. C.L.D. MEARES and LUMO
CONSTRUCTIONS PTY LIMITED
S.C. No. 256 of 1987
Arbitration

COURT

IN THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Kelly J.(1)

CATCHWORDS

Arbitration - Error of law on face of record alleged - Declarations sought - Application to strike out summons for declarations - Whether specific question of law referred to arbitrator - Whether necessary to deal with application to strike out in view of correctness of arbitrator's decision.

Government of Kelantan v. Duff Development Co. Ltd. (1923) AC 395

N.S.W. Rutile Mining Company Pty. Ltd. v. Hartford Fire Insurance Company (1972) 46 ALJR 391.

HEARING

CANBERRA
25:5:1987

ORDER

The plaintiff's application by originating summons dated 9 March 1987 herein be dismissed.

The second defendant's application made by summons dated 22 April 1987 be dismissed.

DECISION

By an originating summons dated 9 March 1987, the plaintiff Parliament House Construction Authority (the Authority), sought declarations that:-

(a) an award of the first defendant dated 1 December

1986 (the award) in a dispute between the
plaintiff and the second defendant be set aside as
disclosing an error of law on its face; and

(b) pursuant to the terms of a contract entered into
between the plaintiff and the second defendant and
dated 5 September 1984 a provisional index figure
published by the Australian Bureau of Statistics
of 141.80 is the correct index figure to be
applied pursuant to Schedule S to the said
contract as opposed to the index figure of 135.9
as revised by the Australian Bureau of Statistics.

2. The title of the proceedings did not accord with that required by the Rules and on 13 March 1987 leave to amend it was given. However, the amendment appears not to have been made within 14 days and the order has therefore lapsed. Order 32, r.7. In the circumstances, however, I order afresh that the Authority have leave to amend that title to the form shown and direct that the usual indorsement be made on the originating summons within seven days.

3. On 2 April 1987 the second defendant, Lumo Constructions Pty Ltd (Lumo), took out a summons seeking orders that the Authority's summons as amended be struck out and that its (Lumo's) summons be heard separately on a date convenient to the Court. On 10 April 1987 I ordered that Lumo's summons be heard in conjunction with the originating summons. In the result, the only grounds upon which Lumo claimed that the originating summons should be struck out were that there was no right of appeal to this Court from the award nor could the Court review it.

4. The first defendant has taken no part in the proceedings and is content to submit to the order of the Court.

5. The dispute between Lumo and the Authority arose out of the contract referred to above. The contract provided by clause 45 for a procedure in relation to disputes. Ultimately a dispute of the kind with which I am concerned was to be determined by arbitration on notice in writing to the Authority requiring that the matter at issue, which was to be specified with detailed particulars should be referred to arbitration.

6. Part of clause 45 read:-

"A reference to arbitration under this clause
shall be deemed to be a reference to
arbitration within the meaning of the laws
relating to arbitration in force in the State
or Territory named in the Annexure hereto and
the arbitration proceedings shall be
conducted in that State or Territory. The
arbitrator shall have all the powers
conferred by those laws and it shall be
competent for him to enter upon the reference
without any further or more formal submission
than is contained in this clause . . ."

7. After the dispute arose between the Authority and Lumo, they made an agreement on 2 September 1986.

8. It was agreed that the issue to be arbitrated was:-

"What Material Price Index Number should be
applied as the Base Index Number in respect
of Materials for the purpose of Clause 4.19
of the Contract Conditions of Particular
Application forming part of the Contract
between Lumo Constructions Pty. Ltd. and
Parliament House Construction Authority dated
5 September 1984 and referred to as 'Formwork
Area 18 and 20, Project No. 34-0310-12' ('the
Issue')."

9. The arbitrator appointed was the first defendant, the Honourable C.L.D. Meares, AC, CMG, QC.

10. It was agreed that formal pleadings, discovery and inspection should be dispensed with and that the award should be made on the basis of written submissions without any formal hearing unless the arbitrator should consider it necessary to have one. Lumo was to deliver to the Authority and to the arbitrator by 23 September 1986 and the Authority was to deliver to Lumo and the arbitrator by 14 October 1986 their written submissions detailing their respective contentions as to the issue including:-

(a) any references, authorities and arguments relied
upon in support of their contentions and

(b) all documents relied upon, copies of which were to
be annexed to the submission.

Lumo's reply to the Authority's submission was to be delivered to the Authority and to the arbitrator on or before 28 October 1986. The arbitrator was not to be bound by the rules of evidence but might inform himself in such manner as was appropriate in the circumstances. He was to provide written reasons for his award as part of his award.

11. Resolution of the matter in issue required the consideration and construction of clause 4.19 of the contract and of part of a document described as Schedule S. It is unnecessary to set out the whole of clause 4.19. The relevant portion of it reads:-

"2. For the purpose of this clause:

2.1 'Index Number' shall mean the index
number appropriate to an index
referred to in Schedule 1.

2.2 'Base Index Number' shall mean the
appropriate Index Number applicable
to:

2.2.01 the date shown in Schedule 3
or, if there is no date shown;

2.2.02 the date 14 days prior to the
date on which tenders closed
or, if there is no such date;

2.2.03 the date of the Contractor's
offer.

. . .

4. Where a final Index Number is not
available, the preliminary Index Number
or where there is no preliminary Index
Number the last available Index Number
shall be used for calculation. Except in
the case of a preliminary Index Number
published by the Australian Bureau of
Statistics, the increase or decrease may
be recalculated on the basis of the final
Index Number.

SCHEDULE 1

The relevant indices are:

. . .

Index B Materials Index as specified
in Schedule S Part 1

. . .

SCHEDULE 3

The date applicable to the Base Index Number
is the date fourteen (14) days prior to the
date on which tenders close."

Schedule S was headed as follows:-

"FORMWORK
WORKERS COMPENSATION INCREASE"

Part 1 of the Schedule read:-

"The Materials Adjustment Factor M is 35%
The Wage Adjustment Factor W is 55%
The Materials Price Index Number is that
number under the heading Structural Timber
Sydney of the Wholesale Price Index of
materials used in building other than house
building published by the Australian Bureau
of Statistics and modified by any relevant
conversion factor published by the Australian
Bureau of Statistics to exclude entirely the
effect of any sales tax change and in respect
of any month shall be the first figure
published preliminary or otherwise and in
respect of that month that first figure shall
be deemed to be final and conclusive to the
intent that no further applications of the
formula with a different number will be
allowed in respect of that particular month."

Near the foot of the Schedule appeared the following:-

"This Schedule S referred to by the special
condition in respect of rise/fall will be
completed by the principal by the insertion
of the relevant information existing at the
adjusted tender date and the completed
Schedule will be bound with the formal
contract documents and shall be deemed to be
part thereof."

12. Lumo contends that the originating summons should be struck out because it claims that a specific question of law was referred to the learned arbitrator and his decision on it was final. Since the question of construction of the relevant portion of the agreement was the very thing referred for arbitration the arbitrator's decision on that question could not be set aside by the Court merely because the Court would itself have come to a different conclusion.

"No doubt an award may be set aside for an
error of law appearing on the face of it; and
no doubt a question of construction is
(generally speaking) a question of law. But
where a question of construction is the very
thing referred for arbitration, then the
decision of the arbitrator upon that point
cannot be set aside by the Court only because
the Court would itself have come to a
different conclusion. If it appears by the
award that the arbitrator has proceeded
illegally - for instance, that he has decided
on evidence which in law was not admissible
or on principles of construction which the
law does not countenance, then there is error
in law which may be ground for setting aside
the award; but the mere dissent of the Court
from the arbitrator's conclusion on
construction is not enough for that purpose."

Government of Kelantan v. Duff Development Co. Ltd. (1923) AC 395 at p 409 and see N.S.W. Rutile Mining Company Pty. Ltd. v. Hartford Fire Insurance Company (1972) 46 ALJR 391.

13. Much debate centred upon the question whether the issue referred to the arbitrator was in truth a specific question of law. Many authorities were referred to. It seemed to me that in any event the correctness of the interpretation placed upon the relevant part of the agreement by the learned arbitrator would have to be considered. He gave reasons in his award for the construction he afforded the relevant parts of the agreement. It is conceded that the reasons form part of the award.

14. If the issue referred was truly a specific question of law and the question of construction of the relevant part of the agreement was confided to the learned arbitrator that would be the end of the matter save for one thing. If it could be shown that the arbitrator was wrong and also shown that he had proceeded illegally (in the sense in which that word is used in the passage from Government of Kelantan v. Duff Development Co. Ltd. quoted above), for example, on evidence which was not admissible or on principles of construction which the law did not countenance, the fact that a specific question of law had been confided to him for resolution would avail Lumo nothing. The construction he placed upon the relevant part of the agreement would be shown to be illegally founded and the award would be set aside. Of course, if the learned arbitrator did not proceed illegally and yet reached an incorrect conclusion the Authority's originating summons would have to be struck out. But consideration of the correctness or otherwise of the learned arbitrator's construction of the relevant part of the agreement and his reasons therefor would lead inevitably to a conclusion that he was right or wrong. If he was right that would be the end of the matter. If he was wrong it would be necessary, it seems to me, to see whether the matter in issue referred to him was a specific question of law (in the sense used above). Then it would be necessary to see whether the learned arbitrator had proceeded illegally (again in the sense used above).

15. Whatever approach be taken, it seemed to me to be sensible to consider first the correctness of his decision for if it is correct the Authority must fail and no other question need be considered.

16. It was common ground between the Authority and Lumo that the date referred to in clause 4.19.2.2 was 9 February 1984. Neither is it disputed that by the date relevant to the claim for the first progress payment made by Lumo to the Authority a revised final number of 135.9 appeared under the heading "Structural Timber Sydney" of the Wholesale Price Index of materials used in building other than house building published by the Australian Bureau of Statistics in November 1984 as applicable to the month of February 1984. It is also common ground that the first number published, preliminary or otherwise, in respect of that month by the Australian Bureau of Statistics was a provisional number of 141.8.

17. The nub of the dispute between the parties is whether the applicable "Base Index Number" referred to in clause 4.19 is 141.8 or 135.9.

18. Senior counsel for the Authority contended that the number must be that referred to in Schedule S as "the first figure published preliminary or otherwise". Senior counsel for Lumo, on the other hand, contended that by the relevant date there was a final index number available and that because of the provisions of clause 4.19.4 that number, 135.9, was the applicable base index number.

19. In my respectful opinion the reasons given by the learned arbitrator set out clearly the opposing contentions and it is convenient to set them out. Having made the finding that the number to be applied was 135.9, the learned arbitrator went on to say:-

"And I make this finding for the following
reasons:

By virtue of clause 4.19.4 of the Contract
Conditions of Particular Application if the
relevant final 'index number' as defined in
clause 4.19.2 is available at the relevant
date for determining progress payments or the
final payment it shall be used for
calculating any rise or fall in accordance
with clause 4.19.3.

It is not disputed that the relevant final
index number published in November 1984 was
135.9 and all adjustments for rise and fall
in respect of payments thereafter, are
accordingly to be calculated using 135.9 as
the relevant materials index number.

By virtue of schedule 1 of the clause the
relevant index for materials was the material
index for structural timber as specified in
Schedule S Part 1.

The respondent relies upon the facts that
Part 1 of Schedule S provides that the
materials price index number 'in respect of
any month shall be the first figure published
preliminary or otherwise and in respect of
that month that first figure shall be deemed
to be final and conclusive to the intent that
no further applications of the formula with a
different number shall be allowed in respect
of that particular month' and that in the
schedule it is provided that 'the completed
schedule will be bound with the formal
contract documents and shall be deemed to be
part thereof.'

The respondent accordingly submits that
reading clause 4.19.4 with Schedule S Part 1,
the preliminary and not the final material
index number is to be used as the Base Index
Number.

I am unable to agree with this Submission.
The schedule defines two things viz the
'index' and the 'index number'. Although the
schedule provides, in effect, that it shall
be deemed to be part of the contract, it is
only relevant to clause 4.19 as defining the
materials 'index' and NOT the materials
'index number'. Were it to be construed
otherwise it would be inconsistent with
clause 4.19.4. Under clause 4.19.4 a final
index number published by the Australian
Bureau of Statistics is to be used in
'calculation' (i.e. any calculation
determining the amount of progress payments
and the final payment) if available at the
time; all the exception in the clause does
is to provide that if only a preliminary
index number published by the Bureau is
available at the time of the 'calculation'
there can be no 'recalculation' on the basis
of there being subsequently published by the
Bureau a final index number. The
'calculation' under those circumstances
stands."

20. It will be seen that it was contended on behalf of Lumo that the only purpose that Schedule S served in the matter at issue was to establish what was the Index to which the arbitrator was required to refer. It was contended on behalf of the Authority, on the other hand, that Schedule S was a clause of particular reference to the circumstances to be read as taking precedence over the general clause 4.19.4.

21. In my opinion the definition of "Index Number" required first, under clause 4.19.2.2.1, that an index be ascertained. That was to be done by reference to Schedule S. (Schedule 1 to clause 4.19.) The only index referred to in Schedule S is the wholesale price index of materials used in building other than house building published by the Australian Bureau of Statistics. The submission that Schedule S is to be read as part of clause 4.19.4 gives to that Schedule a role which I am satisfied it was never meant to be given. Its principal, perhaps sole, purpose in relation to clause 4.19 was to act as a dictionary clause for the word "Index".

22. I do not think that the parties intended that, even though a provisional number had been published long before, a final index number, available when the rise and fall clause fell to be considered in respect of a particular progress payment, was to be ignored.

23. I respectfully agree with the interpretation placed upon the contract by the learned arbitrator. It follows that the declarations sought must be refused.

24. I will hear argument on the question of costs.