Civil Mining & Construction Pty Ltd v State of Queensland [2013] QSC 214

SUPREME COURT OF QUEENSLAND CITATION: Civil Mining & Construction P/L v State of Qld [2013] QSC 214 PARTIES: CIVIL MINING & CONSTRUCTION PTY LTD (applicant) v STATE OF QUEENSLAND (respondent) FILE NO: BS 2126 of 2013 DIVISION: Trial PROCEEDING: Application DELIVERED ON: 20 August 2013 DELIVERED AT: Brisbane HEARING DATE: 10 April 2013 JUDGE: Jackson J ORDER: 1. The application is dismissed. 2. The applicant pay the respondent‟s costs of the application including reserved costs. CATCHWORDS: ARBITRATION – THE AWARD – APPEAL OR JUDICIAL REVIEW – PROCEDURE – APPEALS AND LEAVE TO APPEAL – LEAVE TO APPEAL FROM DECISION OF ARBITRATOR – QUESTION OR ERROR OF LAW – where the applicant applies for leave to appeal an interim award under a contract for road construction works – where variations were claimed in relation to a change in statutory requirement and subgrade treatments – whether manifest error of law – whether discretion to grant leave should be exercised Commercial Arbitration Act 1990 (Qld), s 38(4)(b) Commercial Arbitration Act 2013 (Qld), s 41, s 42 Transport Operations (Road Use Management – Mass, Dimensions and Loading) Regulation 2005, reg 47 Carpaolo Nominees Pty Ltd v Marrosan Nominees Pty Ltd (1997) 136 FLR 328 at 340; [1997] NTSC 1, cited Cole v Gebauer Nominees Pty Ltd [2012] WASC 9 at [32] Westport Insurance Corporation v Gordian Runoff Ltd (2011) 244 CLR 239; [2011] HCA 37, followed TX Australia Pty Ltd v Broadcast Australia Pty Ltd [2012] NSWSC 4 Yesodai Hatorah College Inc v Trustees of the Talmud Torah -- 1 of 11 -- 2 Congregation [2011] VSC 622, cited COUNSEL: PL O‟Shea SC and M Jones for the applicant RA Holt and M Hindman for the respondent SOLICITORS: Clayton Utz for the applicant Allens Linklaters for the respondent [1] JACKSON J: The applicant (“CMC” or “the Contractor”) applies for leave to appeal an arbitral award made by Mr Barry Tozer (“the arbitrator”) on 18 February 2013. The award was an interim award in respect of ten disputed claims made by CMC upon the respondent, the State of Queensland (“DTMR”), under a contract for road construction works which included the construction of a pre-stressed concrete bridge on a new fully sealed road realignment of Wide Bay Creek (“the Contract”). [2] The arbitration was conducted under the Commercial Arbitration Act 1990 (Qld) (“the Act”). By s 42(2) of the Commercial Arbitration Act 2013 (Qld) (“the 2013 Act”), the law governing the arbitration and the arbitration agreement is to be that which would have been applicable as if the 2013 Act had not been enacted. Accordingly, the application for leave is to be decided under the Act, notwithstanding its repeal by s 41 of the 2013 Act. [3] The application is made pursuant to s 38(4)(b) of the Act, which provides that the right of appeal on any question of law arising out of an award conferred by s 38(2) may be brought with the leave of the Supreme Court. [4] The ten disputed claims were described and numbered as variations. Only two are now relevant, being Variation 16 and Variation 21. Variation 16 was described as a change in statutory requirement and was for an amount of $593,426.88. Variation 21 was described as “subgrade treatments” and was for the amount of $517,420. In each case, the amount allowed by the award was nil. Variation 16 [5] The claim was made pursuant to cl 14.2 of the General Conditions of the Contract (“GCC”). Clauses 14.1 and 14.2 provide: “14.1 Complying with Statutory Requirements The Contractor shall comply with the requirements of – (a) Acts of the Commonwealth; (b) Acts and Ordinances of the State or Territory in which the work under the Contract or any part thereof is carried out; (c) Ordinances, regulations, by-laws, orders and proclamations under the Acts and Ordinances; (d) persons acting in the exercise of statutory powers enabling them to give directions affecting the work under the Contract. -- 2 of 11 -- 3 If a requirement is at variance with a provision of the Contract, as soon as the Contractor discovers the variance the Contractor shall notify the Superintendent in writing specifying the difference. If a requirement necessitates a change to the Works or so much of the Temporary Works or method of working as may be specified by the Principal in the Contract, the Superintendent shall direct a variation under Clause 40.1. Except to the extent that the Contract provides for reimbursement in respect of a requirement referred to in Clause 14.1 the Contractor shall bear the cost of complying with the requirement, whether the requirement existed at the time of tendering or not. 14.2 Payment Where There is No Variation If a requirement does not necessitate a variation under Clause 40 but is – (a) a change after the 28th day prior to the date of closing a tenders in a requirement referred to in Clause 14.1 (a), (b) or (c); or (b) a requirement referred to in Clause 14.1 (d), which necessitates a change in the Temporary Works or the Contractor‟s method of working and thereby causes the Contractor to incur more or less cost than the Contractor could reasonably have anticipated at the time of tendering, the difference shall be valued under Clause 40.5.” [6] For the purposes of cl 14.2, the relevant date was 5 or 6 October 2010. Nothing turns on the difference between the parties about which was the relevant date. On that date there was a regulation in force which affected the right of CMC to use an existing bridge alongside the location of the bridge to be constructed over Wide Bay Creek. Regulation 47 of the Transport Operations (Road Use Management – Mass, Dimensions and Loading) Regulation 2005 empowers the Chief Executive to decide the maximum loaded mass for a vehicle that may use a bridge or culvert forming part of a State-controlled road. If such a decision is made and a notice stating the maximum loaded mass that may use the bridge, is erected on or in the vicinity of the bridge, it is an offence for a person to drive a vehicle over the bridge where the loaded mass of the vehicle is greater than the mass stated on the notice.1 [7] However, the person will not contravene reg 47(2) if the person obtains the written consent of the Chief Executive to drive the vehicle over the bridge before doing so and complies with any relevant conditions.2 [8] There is a document in evidence described as a “Condition Report” for permitted travel over the Wide Bay Creek Bridge.3 It described the restriction as follows: “the 1 Regulation 47(2). 2 Regulation 47(3). -- 3 of 11 -- 4 „B‟ class bridge over Wide Bay Creek is closed to all Excess Mass Vehicles”. That Condition Report described the restriction as being “effective from 15/12/2009 to 31/12/2010”. Thus, it was in effect on 5 or 6 October 2010. The bridge referred to was the existing bridge. [9] There is a second similar Condition Report in evidence for permitted travel over the Wide Bay Creek Bridge.4 It described the restriction as follows: “the bridge over Wide Bay Creek is closed to all Excess Mass Vehicles”. That restriction was said to be “effective from 31/12/2010 to 31/12/2011”. On 5 or 6 October 2010, CMC had made no enquires in relation to any mass restriction for vehicles using the Wide Bay Creek Bridge. [10] It is unclear when the Condition Report, closing the existing bridge to all Excess Mass vehicles effective from 31 December 2010, was made. But the parties proceeded on the basis that it was 15 December 2010. [11] Before the arbitrator, CMC submitted that the Excess Mass Vehicle load restriction that came into effect on 15 December 2010: “(a) [was] a change in [the] requirement[s] referred to in cl 14.1(c) of the contract which occurred after the 6 October 2010 being the 28th date prior to the close of tender; (b) necessitate[d] the change in the … claimant‟s method of working; and (c) caused the claimant to incur more cost than it could reasonably have anticipated at the time of tendering.” [12] The arbitrator considered that the issue was whether or not the restriction which came into effect on 15 December 2010 was a change in statutory requirements under cl 14.1(c) which necessitated a change to the contractor‟s method of working. [13] CMC‟s submission was that there were two different “regulations”. The restriction expiring on 30 December 2010 was described as the “First Regulation”. CMC submitted it was reasonable to assume that restriction would not be in place at the time that the work was undertaken under the contract. [14] The second restriction came into effect on 15 December 2010. CMC described it as the “Second Regulation”. The arbitrator described it as having “substantially the same effect”. The arbitrator accepted DTMR‟s submission “that there was no change in the statutory requirement” between the relevant date, being 6 October 2010 and July 2011 when CMC sought to use the existing bridge. It was at the latter time that CMC was required to comply with the statutory requirements by reason of GCC clause 14.1(c).5 [15] The arbitrator also stated that the two Condition Reports “show that the same restriction was in place on the existing bridge at the relevant times. The only relevant difference between the reports was the date of effect of the restriction. 3 Exhibit 1. 4 Exhibit 2. 5 Paragraph 200 of the reasons for the award (“reasons”). -- 4 of 11 -- 5 Even if it were accepted that there were two temporally different regulations, the stated restriction was the same.” Accordingly, the arbitrator found “that there was no change in a requirement under GCC cl 14.1 that necessitated a change in the temporary works or the Contract‟s method of working.”6 Because of the underlining in the original award, it can be seen that there was a finding that there was no change in requirement, rather than a finding that any change did not necessitate a change in the contractor‟s method of working. [16] The arbitrator also found that CMC “has not incurred more costs than could reasonably have been anticipated at the time of tendering when the restriction was or should have been known”.7 That amounts to a separate finding that the Second Regulation could reasonably have been anticipated at the time of tendering and that CMC ought to have foreseen that it would have incurred costs in the amount that it did incur. [17] CMC submits that the arbitrator erred in finding that because the requirement of the Second Regulation had the same effect as the requirement under the First Regulation there was no change in a requirement of a regulation. It submitted that the error was an error of law and that it was manifest on the face of paragraph 202 of the award. [18] DTMR submits that the arbitrator made no error. It submits that application of cl 14.2 requires two questions to be answered: first, what was the position with the relevant statutory requirement as at 6 October 2010? Secondly, was there any change to that statutory requirement after that date? It submits that at all times before and after 6 October 2010 no Excess Mass Vehicle was permitted on the existing bridge and there is nothing in the contract that requires the contactor to look for what the position might be with respect to statutory requirements at some future time. That is, the tenderer is to base its tender on what the position is at the relevant date, which was 6 October 2010. [19] For analysis, in my view, the relevant parts of clause 14.2. may be broken into four elements. First, there must be a change in a relevant statutory requirement; secondly, there must be a change in the contractor‟s method of working; thirdly, the change in the method of working must have been necessitated by the change in the relevant statutory requirement; and fourthly, the change in the method of working must have caused the contractor to incur more or less cost than the contractor could reasonably have anticipated at the time of tendering. [20] Although cl 14.2 uses language in the present tense, so that cl 14.2(b) is engaged where there “is… a change… which necessitates a change in… the contractor‟s method of working and thereby causes the contractor to incur more or less cost…”, the cost referred to is the cost in carrying out the works by the proposed method of working. The assessment of whether there has been a relevant change requires a comparison between what has happened and what would have happened. At 5 or 6 October 2010 and up to the time when the Contract was made, the proposed contract to construct the works including the new bridge was to be carried out over a time to be agreed. As it was agreed, the time for practical completion was 210 days after the date of the letter of acceptance. In my view, the contractor‟s “method 6 Paragraph 202 of the reasons. 7 Paragraph 202 of the reasons. -- 5 of 11 -- 6 of working” refers to the proposed method to execute the works over the relevant time period. [21] The “requirements” referred to in cl 14.1(c) constituting “regulations by-laws, orders and proclamations under the Acts” of the State which may be a “change” under cl 14.2 are those requirements which will apply in executing the works over the relevant time period. It is a change in those requirements after the relevant date which potentially engages cl 14.2(a). [22] Accordingly, in my view, the arbitrator may have erred in construing cl 14.2 as directed solely to the content of the first restriction, namely that the existing bridge was closed to all Excess Mass Vehicles as at 6 October 2009, without regard to whether, at the relevant date, the restriction was expected to apply over the period of execution of the works and therefore was expected to have an impact on the contractor‟s proposed method of working. [23] That error would be one made by the arbitrator in construing the contract. It would be an error of law. It is apparent on the face of the reasons for the award, particularly paragraphs 201 and 202 thereof. It would therefore be an error which is a manifest error of law on the face of the award within the meaning of s 38(5)(b)(i) of the Act. [24] Since the decision of the High Court in Westport Insurance Corporation v Gordian Runoff Ltd,8 the court is not concerned with the quality of an error of law in determining whether the error is manifest on the face of the award, “if the existence of error be manifest on the face of the award including the reasons given by the arbitrator, in the sense of apparent to that understanding by the reader of the award”.9 [25] DTMR relied on a plethora of cases decided before Westport, which appear to construe the meaning of “manifest” in s 38(5)(b)(i) in various ways. In my view, many of those cases must now be viewed with some caution on that point, at the least. Without attempting to essay the present authority of each case, it seems to me that they can broadly be classified as travelling down two paths: first, that “manifest” is directed to whether the putative error can be seen (and how easily it can be seen) on the face of the award; secondly, whether the putative error has a quality going to its strength, such as “fairly arguable” as opposed to “evident or obvious” or “clearly wrong”. [26] As to the former, the law now is that if the error “is apparent to that understanding by the reader of the award”,10 it need be no more “manifest” than that. As to the latter, “[t]he character or quality of the error of law falls for consideration, if relied upon, at the next stage, namely when the Supreme Court is considering under s 38(4)(b) whether to grant leave.”11 8 (2011) 244 CLR 239; [2011] HCA 37. 9 At [42]. 10 Westport at [42]. And see Yesodai Hatorah College Inc v Trustees of the Talmud Torah Congregation [2011] VSC 622 at [21]-[22]; Cole v Gebauer Nominees Pty Ltd [2012] WASC 9 at [32]; and TX Australia Pty Ltd v Broadcast Australia Pty Ltd [2012] NSWSC 4 at [20]. 11 Westport at [47]. -- 6 of 11 -- 7 [27] It is an additional requirement of the grant of leave under s 38(4)(b) of the Act that the court must consider that having regard to all the circumstances the determination of the question of law concerned could substantially affect the rights of CMC or DMRT. CMC submits that its rights are substantially affected because Variation 16 had a value in excess of $500,000. As previously stated, the amount allowed was nil. That difference is one which is relevant to whether the determination of the question of law could substantially affect the rights of the parties.12 [28] DTMR does not dispute that point. However, it does submit that the determination of the question of law could not substantially affect the rights of the parties or that the discretion to grant leave should not be exercised because correction of the putative error would not alter the outcome of the arbitration in respect of Variation 16. It submits that the arbitrator‟s finding at par 202 of the reasons for the award, that “the contractor has not incurred more costs than could have been anticipated at the time of tendering when the restriction was or should have been known”, means that cl 14.2(b) will not be engaged, in any event. That is, CMC will fail on the fourth element identified above. [29] It does not seem to be in dispute that the Contractor‟s proposed method of working changed, because CMC was unable to use the existing bridge for the passage or location of Excess Mass Vehicles. The point relied on by the DTMR is that, at the time of tendering, CMC could reasonably have anticipated that the method of working would be one which did not rely on the use of the existing bridge by Excess Mass Vehicles. [30] The arbitrator found as a matter of fact that CMC, prior to the close of tenders, “knew that there was a restriction on high mass vehicles using the existing bridge”.13 However, that finding did not extend to the precise terms of the limit under the restriction or its operational period. The superintendent had informed CMC that the existing bridge “has the standard load carrying capacity (up to 59.5 t). The restriction is on high mass only, for which you need to get a high mass permit”.14 [31] CMC submitted that under cl 14.2(b) the question of what costs the Contractor could reasonably have anticipated at the time of tendering was objective and did not depend on what actually happened. Thus, it was submitted that CMC‟s actual anticipation and knowledge did not answer the objective question posed under cl 14.2. In my view, it would be an error to ignore CMC‟s actual knowledge in determining what it reasonably could have anticipated under cl 14.2(b). [32] The reasons for the award were prepared with some skill and care. There are a number of findings that could go to the critical finding that the Contractor did not incur more costs than could reasonably have been anticipated, at the time of tendering, because CMC should have known the details of the restriction. The arbitrator may also have been affected by his finding that CMC “took a commercial view about the risk of obtaining the relevant permit, electing not to make enquiries about its availability or considering other options before submitting a tender”15 and 12 Carpaolo Nominees Pty Ltd v Marrosan Nominees Pty Ltd (1997) 136 FLR 328 at 340; [1997] NTSC 1. 13 Paragraph 191 of the reasons. 14 Paragraph 179 of the reasons. 15 Paragraph 192 of the reasons. -- 7 of 11 -- 8 his finding that “any delay which occurred was caused or contributed to by the Claimant‟s failure to make the appropriate enquiries either itself or through its sub- contractor in a timely manner”.16 [33] The arbitrator‟s finding that “the restriction was or should have been known”17 in context, is a finding that the restriction (that the existing bridge was closed to all “high mass” or Excess Mass Vehicles) should have been known at the time of tendering. It might be argued that, in terms, the arbitrator did not deal with whether or not, objectively speaking, the Contractor could reasonably have anticipated at the time of tendering that the restriction would continue in time beyond 31 December 2010. [34] The court should be wary of seeking to construe the reasons for award as though they should measure up to the standard of a statutory or contractual instrument or judicial reasons for judgment. Nevertheless, as I have already commented, the reasons in the present case were prepared with some care and skill. CMC‟s submission that it had “no reason to anticipate an extension of the restriction beyond its stated expiry date” is referred to in the reasons for award,18 but was impliedly rejected by the finding of fact that “the Contractor has not incurred more costs than could have been anticipated at the time of tendering when the restriction was or should have been known”. [35] The arbitrator took the view that CMC‟s actual misconception that a “high mass permit” could be obtained was based on failure to take reasonable steps to make enquiries as to the true position. It might also be argued that the arbitrator does not deal explicitly with what costs would have been reasonably anticipated by a contractor who made enquiries and ascertained at the time of tender that the restriction was nominated to expire on 31 December 2010. [36] That involves asking whether in assessing the costs that could reasonably have been anticipated CMC ought to have considered the likelihood of the restriction being extended in time and the likelihood that an application for a high mass permit may not have been forthcoming. Clearly enough, the arbitrator was of that view. [37] The finding of fact to that effect was made at par 202 of the reasons for award. [38] In my view, it does not seem a reasonable prospect that if the arbitrator were to reconsider the operation of clause 14.2 having regard to the circumstance that the first restriction was scheduled to expire on 31 December 2010, and that was a change in a relevant statutory requirement, he would arrive at any different finding of fact upon the question whether CMC “has not incurred more costs than could reasonably have been anticipated at the time of tendering when the restriction was or should have been known”. That is, CMC would still fail to reach the point where there is a difference to be valued under clause 40.5 in respect of Variation number 16. [39] That conclusion means that, in my view, the appropriate exercise of discretion is that leave to appeal should not be granted in respect of the suggested error of law as to the proper construction of cl 14.2(b) of the Contract. 16 Paragraph 203 of the reasons. 17 Paragraph 202 of the reasons. 18 Paragraph 195 of the reasons. -- 8 of 11 -- 9 Variation 21 [40] Clause 35.5 of the general conditions provides in part: “… if the contractor is or will be delayed in reaching practical completion by a cause described in the next paragraph… the contractor shall be entitled to an extension of time for practical completion. The causes are – (a) … (b) any of the following events… - (i) delays caused by –  …  the Superintendent… (ii) actual quantities of work in the Schedule of Rates being greater than the quantities determined by reference to the up limit of accuracy stated in item 6C of the Annexure (otherwise than by reason of a variation directed under clause 40)” [41] Clause 36 provides, in part: “Where the contractor has been granted an extension of time under clause 35.5 for any delay caused by any of the events referred to in clause 35.5(b)(i) the principal shall pay to the contractor such extra costs as are necessarily incurred by the contractor by reason of the delay …” [42] Variation 21 was a claim made under subparagraph (b)(i) of the identified causes. CMC claimed $517,420 as “an entitlement to recover „extra costs‟ under GCC cl 36 where it has been granted or should have been granted, an extension of time under GCC cl 35.5 for any delay caused by any of the events referred to in GCC clause 35.5(b)(i) of the Contract.”19 The subject matter of the claim were 28 site instructions given by the Superintendant for subgrade treatments. [43] The arbitrator rejected Variation 21, on the grounds broadly expressed that: (a) in par 260 of the reasons - “[t]here is an entitlement to an [extension of time] for a „Provisonal quantity, if ordered‟ item, only if the quantity of that work that is ordered by the Superintendant results in the upper limit of accuracy of the quantity being exceeded. If that occurs, other than as a result of a direction which is already a Variation, there is an entitlement to an [extension of time] pursuant to clause GCC 35.5(b)(ii) for the time taken to complete the excess quantity”; (b) in par 261 of the reasons - “[o]therwise, an entitlement to an extension of time can only arise for the ordering of provisional 19 Paragraph 247 of the reasons. -- 9 of 11 -- 10 quantities of subgrade work that if that work has been directed by the Superintendant in a manner which could be described as a „delay caused by the Superintendant‟…”; and (c) in par 264 of the reasons - “[CMC] does not claim that there was any delay caused by the Superintendant, which did not arise from directing subgrade treatments in accordance with the provisions of the relevant Specifications...” (emphasis added) [44] The application identifies the arbitrator‟s error of law as: “in determining that [CMC] was not entitled to any extension of time in respect of delays caused by directions issued by the Superintendant for the performance of work on „Provisional Quantity, if ordered‟ work items numbered 3402.1P and 3404.01S within the limits of accuracy provided for in the Schedule of Rates.” [45] In submissions, CMC accepts that the arbitrator asked himself the right question in par 261 of the reasons, but submits that he answered it incorrectly in par 264. CMC‟s reasoning is elliptically expressed in the following proposition: “[t]hat does not mean that events related to „Provisional quantity items, if ordered‟ items cannot otherwise [than if the upper limit of the quantity of work is exceeded] result in an entitlement to an extension of time.” [46] The error of law alleged is the contention that the arbitrator construed cl 35.5(b)(i) as only possibly operating if the upper limit of the quantity of work is exceeded. [47] In my view, that is not how the arbitrator reasoned at all. When par 260 and par 261 are read together, and in the context of par 243 and following, they set out the following logic about a Superintendant‟s instruction or direction for a subgrade treatment under the Contract in the circumstances of this case: first, a direction which amounts to a variation should be put to one side, because it is dealt with under cl 35.5(b)(iv); secondly, under cl 35.5(b)(ii) there is an entitlement to an extension of time if the upper limit of accuracy of the quantity is exceeded; thirdly, within the boundary of the upper limit of accuracy of the quantity, a Superintendant‟s instruction or direction must constitute a “delay caused by the Superintendant” under cl 35.5(b)(i) before CMC would be entitled to an extension of time. [48] CMC submits that in using the word “only” in par 260 of the reasons, the arbitrator fell into error. I do not agree. In using the word “otherwise” in par 261, the arbitrator clearly recognised that cl 35.5(b)(i) operates alongside cl 35.5(b)(ii) and where the upper limit of accuracy of the quantity has not been exceeded. [49] Further, in my view, in saying that the “claimant does not claim that there was any delay caused… which did not arise from directing subgrade treatments in accordance with the provisions of the Specifications”, the arbitrator was not excluding the possibility of an entitlement to an extension of time under cl 35.5(b)(i) by reason of a Superintendant‟s direction, where the upper limit of accuracy of the quantity has not been exceeded. Rather, the arbitrator was saying -- 10 of 11 -- 11 that the mere fact of delay from the Superintendant‟s instructions or directions was not enough, as appears from his subsequent reasons: (a) in par 265 – “I have previously noted that CMC did not make any allowance for the effect that the estimated quantity of subgrade treatments may have on its program…”; (b) in par 266 – “I have found that CMC was required to take the risk and make allowances for this work in pricing the Schedule of Rates and in compiling its program”; and (c) in par 267 – “Accordingly, I find there is no entitlement to additional time or cost associated with the 28 instructions for subgrade treatments.” [50] In my view, the error of law for which CMC contends in the arbitrator‟s construction of the contract concerning Variation 21 is not manifest on the face of the award. [51] Nor does it otherwise appear that there is strong evidence that the arbitrator made that error of law. [52] It follows, in my view, that leave to appeal should not be granted on the suggested error of law as to the proper construction of clause 35.5(b)(i) of the Contract. Conclusion [53] The orders which should be made are that: 1. The application is dismissed. 2. The applicant pay the respondent‟s costs of the application including reserved costs. -- 11 of 11 --