[2007] SASC 215

18 June 2007

 

Doyle CJ, Bleby and Sulan JJ.

[1] This is an application for permission to appeal to the Full Court against a decision by a single Judge refusing permission to appeal against a decision of an arbitrator.

[2] The application for permission to appeal from the decision of an arbitrator is, in this case, governed by the provisions of s 38(5) of the Commercial Arbitration and Industrial Referral Agreements Act 1986 (SA). That section provides:

(5) The Supreme Court shall not grant permission under subs (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.

[3] The refusal of permission to appeal can itself be the subject of an appeal to the Full Court.1

[4] The appeal to the Full Court lies only with a grant of permission, because the decision refusing permission to appeal is an interlocutory decision.2 Permission to appeal to the Full Court will only be granted in cases such as the present where the decision of the single judge is wrong or attended with sufficient doubt to warrant its reconsideration on appeal or has the effect of working a substantial injustice on the applicant.3 The relevant decision in this case is the refusal to grant permission to appeal.

[5] It is convenient to go straight to the question of whether it is arguable that the Judge erred in refusing to grant permission to appeal.

[6] The point at issue is the entitlement of a builder to recover payment for certain work carried out by the builder by way of variation to the building contract. The contract provides, relevantly, that in the event of a variation “the price of the extra work shall be the actual cost to the Builder together with the percentage as stated in item D1 of the Schedule and GST”. In the circumstances, there was no percentage stated in item D1 of the Schedule, and so the entitlement of the builder was to be paid “the actual cost to the Builder”.

[7] The argument on appeal is that before the arbitrator the builder did not prove the “actual cost” of the work. The builder relied on expert evidence as to a reasonable cost of the work carried out.

[8] The arbitrator rejected the argument that if the builder did not prove “the actual cost”, the builder was not entitled to be paid. The arbitrator said that the builder was “entitled to be paid for quantum meruit under the principle of unjust enrichment”.

[9] That appears to be an error of law. So much was conceded before the Judge. Paragraph (b)(i) of subs (5) was therefore fulfilled.

[10] But the Judge decided the question of law by holding that the reference to “actual cost” in the contract should be read to mean “reasonable cost”. The Judge took the view that the expert evidence established this cost.

[11] The applicant alleges that the Judge wrongly decided the question and that he did so without hearing the parties on that question. We assume for present purposes that the latter assertion is correct, although we have no material before us to know whether it is in fact correct.

[12] We express no view on the correctness of the Judge’s approach to the contract because it was unnecessary for him to decide the question. It was conceded by the respondent, correctly, that there was an error of law by the arbitrator. It was manifest on the face of the award.

[13] The only live question relevant to the granting of permission to appeal from the arbitrator was that arising under para (a) of s 38(5), namely whether the error of law by the arbitrator could substantially affect the rights of the parties, if not corrected.

[14] The arbitrator was satisfied that the variations in question were carried out by the builder. Those findings are not now questioned in the proposed appeal. The arbitrator was required to determine “the actual cost to the Builder” of the extra work. The use of the word “actual” would appear to contrast the builder’s outgoings in performing the variation with what appears to be a profit margin, if such is specified, in Sch D1. The arbitrator was required to determine that cost in circumstances where the builder presented no evidence of the actual cost to him. The arbitrator was nevertheless required to determine on the best available evidence what that cost was. He acted on the evidence of an expert as to the likely reasonable cost of each variation. He awarded the lesser of the amount claimed by the builder and the estimate of the expert. The arbitrator acted on the best evidence he had as to the actual cost of the extra work in each case to the builder. His error was purporting to do so “for quantum meruit under the principle of unjust enrichment”.

[15] In the end, the error of law did not produce an unjust or wrong result. The arbitrator arrived at the actual cost by relying on expert evidence. The question of law raised by the proposed grounds of appeal could not substantially affect the rights of the parties to the agreement, because the final decision is one that was open to the arbitrator, despite his error of law.

Order

[16] Whether or not we agree with the reasons of the Judge for refusing to grant permission to appeal, he was correct in doing so. As it cannot be shown that the decision of the Judge to refuse permission to appeal was wrong, permission to appeal against that refusal must also be refused.
Solicitors for the applicant – Shane Skinner: FRS Legal
Solicitors for the applicant – Bronwyn Skinner: FRS Legal
Solicitors for the respondent: O’Loughlins Lawyers

1 Minister for Industrial Affairs v Civil Tech Pty Ltd (1997) 69 SASR 348.

2 See Supreme Court Civil Rules 2006 (SA), r 281(a)(i).

3 See Harris Scarfe Ltd (In liquidation) v Ernst & Young (No 2) (2005) 242 LSJS 378; [2005] SASC 168 and the authorities referred to therein at [4]–[11].