John Holland Pty Ltd v Hunter Valley Earthmoving Company Pty Limited [2002] NSWSC 131

New South Wales Supreme Court

CITATION : John Holland Pty Ltd v Hunter Valley Earthmoving Company Pty Limited [2002] NSWSC 131 CURRENT JURISDICTION: Equity Division Commercial List FILE NUMBER(S) : SC 55049/01 HEARING DATE(S) : 13 February 2002 JUDGMENT DATE : 8 March 2002

PARTIES : John Holland Pty Ltd (Plt) Hunter Valley Earthmoving Company Pty Limited (Def) JUDGMENT OF : McClellan J

COUNSEL : F C Corsaro SC (Plt) M Pembroke SC/S Goldstein SOLICITORS : Clayton Utz (Plt) Dutton Lawyers (def) CATCHWORDS : CONSTRUCTION - leave to appeal from award of Arbitrator - whether "global claim" can be made - breach of contractual term - variation of contract obligations whether the Arbitrator erred in law in awarding delay costs. LEGISLATION CITED : Commercial Arbitration Act 1984 s 38(5) Promenade Investments Pty Ltd v State of NSW (1992) 26 NSWLR 203 Nauru Phosphate Royalties Trust v Matthew Hall Mechanical & Electrical Engineers Pty Ltd & Ors [1924] 2 VR 386 CASES CITED : Jon Holland Construction & Engineering Pty Ltd v Kvaerner RJ Brown Pty Ltd & ors (1997) 13 BCL 262 Bernhard's Rugby Landscapes Ltd v Stockley Park Consortium Ltd (1997) 82 BLR 46 Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234 DECISION : See para 30

SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION COMMERCIAL LIST

McCLELLAN J

FRIDAY 8 MARCH 2002

55049/01 - JOHN HOLLAND PTY LTD v HUNTER VALLEY EARTHMOVING COMPANY PTY LIMITED JUDGMENT 1 HIS HONOUR: The plaintiff seeks leave to appeal against a decision of Arbitrator Easton pursuant to s 38 of the Commercial Arbitration Act 1984. 2 As the defendant has not given consent, an appeal may only be prosecuted with the leave of the court (s 38(4)). Section 38(5) provides that the court: "Shall not grant leave … 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 of the 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 A manifest error of law is one that is evident or obvious rather than merely arguable. See Promenade Investments Pty Ltd v State of NSW (1992) 26 NSWLR 203 at 225. 4 The dispute arises from an agreement, entered into by the parties on or about 17 March 1994, by which the defendant, as sub-contractor, agreed to undertake the construction of the earthworks for a cut-off wall and levee embankment adjacent to the Hunter River at the Alluvial Lands Project, Hunter Valley Coal Mine ("the site"). 5 Apparently the parties did not execute a formal contract document. The Arbitrator found that the contract between the parties was comprised in various tender documents, supplementary notices, and extensive correspondence. The parties also adopted the conditions of contract published by Minenco Pty Ltd to regulate the arrangements between them. The Arbitrator found that the parties had agreed on a program of works which provided the sequence and timing for the various stages of the construction. 6 The dispute which gave rise to the proceedings before the Arbitrator relates to a claim, by the defendant, for additional payments for the cost of delays allegedly caused by the plaintiff's failure to provide timely access to the site so that the defendant could undertake its contracted tasks. These costs are referred to as "delay costs". The Arbitrator found an entitlement in the defendant to delay costs and made an award accordingly. 7 The plaintiff's summons contends that the Arbitrator made a number of errors of law. The questions of law are expressed in the following terms: "The questions of law arising out of the Arbitrator's conclusions are: (a) did the Arbitrator err in law in permitting the defendant to make a global claim; (b) did the Arbitrator err in law in holding that the defendant had discharged its evidentiary onus entitling it to make a global claim; (c) did the Arbitrator err in law in determining that the plaintiff did not have a good defence to the defendant's global claim for delay costs; (d) did the Arbitrator err in law in failing to address or adequately address in the Interim Award the plaintiff''s submissions on its defence to the defendant's global claim; or (e) did the Arbitrator err in law in holding that the defendant was not estopped from claiming costs of $464,100 for its additional costs." 8 The question raised in paragraph (e) was abandoned at the hearing. 9 At the hearing the plaintiff sought leave to rely upon an amended summons. That summons sought to add an additional question of law being: "On a proper construction of the Contract, as found by the Arbitrator, did the Arbitrator err in law in determining that the legal basis upon which the Defendant was entitled to recover extra payment for delay and disruption arose out of a breach by the Plaintiff of the Term." 10 Leave was opposed by the defendant, who submitted that although not prejudiced, the amendments were so lacking in substance that leave should be refused. In any event the defendant submits that leave to appeal should be refused both in respect of the questions raised in the original summons and the amended summons. 11 The criticism of the Arbitrator's findings in the original summons is directed to his alleged acceptance of a "global claim", which it is submitted, is not known to the law. The global claim 12 The description of a claim as a "global claim" is familiar to those involved in the construction industry. Generally, it is used as a "short-hand" method of describing a claim which does not readily permit of the individual identification of each of its component parts. Not surprisingly, this approach to a claim has generated disputes in relation to pleadings and related particulars. Defendants claiming to be embarrassed by a global claim have endeavoured to strike out pleadings. 13 In Nauru Phosphate Royalties Trust v Matthew Hall Mechanical & Electrical Engineers Pty Ltd & Anor [1994] 2 VR 386, Smith J expressed the view that it may be permissible to maintain a composite delay/disruption claim (a "global claim") where it was impossible and impractical to identify a specific nexus between each of the alleged events and the particular delay/disruption caused. In John Holland Construction & Engineering Pty Ltd v Kvaerner RJ Brown Pty Ltd & Ors (1996) 13 BCL 262 at 270, Byrne J was of the view that where it is found to be impossible or impractical to identify each aspect of the nexus, a demonstration of its probable existence is sufficient. 14 In Bernhard's Rugby Landscapes Ltd v Stockley Park Consortium Ltd (1997) 82 BLR 46 at 74, Lloyd J held that that nexus need not always be expressed since it may be inferred. Whilst principles of natural justice require the plaintiff to set out with sufficient particularity its case, "what is sufficient particularity is a matter of fact and degree in each case". 15 The fate of any strike out application may often depend upon the capacity of a plaintiff to provide necessary particulars of its claim. But as these decisions make plain, a plaintiff who has a claim will not be denied the opportunity to prosecute that claim only because there may be difficulty in identifying with precision each individual element of the claim. Whether the claim can be sustained will depend upon the evidence in relation to it. If that evidence allows a conclusion that the plaintiff has suffered a quantifiable loss, then it is open to the tribunal determining the matter to bring in a verdict for the plaintiff for the sum which it is satisfied is appropriate. It is not material that the claim is described as a "global claim" or given any other label. 16 In the present case, as I have later indicated, the Arbitrator did not accept the claim for delay costs as claimed by the defendant. However, he did accept that delay costs expressed as the cost of delays in identifiable months, were recoverable. Whether or not a claim expressed in this manner is described as a "global claim" is irrelevant. The Arbitrator concluded that he was satisfied, having regard to the material before him, that the claim was justified in the sum he determined. The contractual term 17 The amended summons raises a further issue. The defendant claimed delay costs before the Arbitrator on three alternate bases. The first alleged an entitlement to an extra payment because the plaintiff failed to provide necessary access to parts of the site by identifiable dates. The relevant contractual term was found to be: "… if access for final earthworks is granted 4 weeks after the last section of slurry wall (ie on 16 November 1994: a 4 week 'settlement' period) then we will have all earthworks for Portion 1 complete by 7 December 1994. Any delay in access after this 4 week settlement period will be subject to an extension of time claim with costs; and … if access to the final section of slurry wall is granted to us on 14 January 1995 then all earthworks will be completed by 7 February 1995 (ie a 2 week 'settlement' period). If access is delayed to a date after 14 January 1995 then an extension of time with costs will be claimed by us." 18 The second basis was rejected by the Arbitrator and is no longer relevant. The third basis, which was accepted by the Arbitrator, was expressed to be a variation of the contract at the direction or with the permission of the plaintiff. 19 The defendant submitted before the Arbitrator, and he accepted, that the quantum of any delay costs, on either of the two accepted bases, would be the same. He proceeded to determine that claim in the sum of $1,044,057. However, because the defendant had originally claimed only $649,206 and the plaintiff had compromised its claim against the proprietor in that sum, the Arbitrator determined that the defendant was only entitled to $649,206 on account of delay costs. 20 The matter was conducted before the Arbitrator with the benefit of expert evidence from both parties. The two experts took different approaches to the measurement of the delay. The defendant's position was that the overall delay experienced by the plaintiff could not be determined from an analysis of individual events but should be approached in a collective sense. The plaintiff's approach was that an individual or period analyses of delay would be more accurate. The Arbitrator preferred the approach taken by the plaintiff's expert, and held that delays, and thus delay costs, should be calculated on a month-by-month basis. Apparently, notwithstanding his evidence in chief, the defendant's expert acknowledged in cross-examination, that this approach was feasible and could be reasonably undertaken. 21 In section 10.11, the Arbitrator provides a summary of the total delay expressed as a period for each of the relevant months. 22 He then proceeds in section 12 of his award to quantify the appropriate money claim having regard to the delays he has determined. Apparently, the defendant argued before the Arbitrator that the delays which had been identified should be allowed entirely at the end of the construction period so that the quantum of the claim should be calculated having regard to the costs incurred in the final weeks of the project. However, the Arbitrator found that during this period, the costs occasioned by delay were at a minimum although the defendant was incurring its greatest monthly costs in the project. Rather than adopt the defendant's approach, the Arbitrator adopted the approach of the plaintiff's expert. He found that: "The calculation of HVE's quantum entitlement should be made using the actual monthly cost derived by Blumer applied to the monthly delay periods which I have determined in section 10 of these reasons." 23 He found an entitlement to delay costs for the period in late August 1994 because he found that: "HVE agreed to remobilse (on 30/8/94) earlier than was reasonably necessary on the basis of assurances that additional work … would be available. … (and) HVE proceeded to remobilse but the additional earthworks did not materialise as anticipated." 24 With respect to the delay costs for September 1994, the Arbitrator found that the plaintiff had recognised that there was an ongoing delay to the defendant's work arising from the lack of access and that it accepted that the defendant would have a corresponding entitlement to reimbursement for delay costs. He stated: "It is plain from the factual evidence that HVE's work under the Contract (ie as per the Programme) was subject to ongoing delay, essentially for reasons attributable to the lack of available areas for embankment construction." 25 The Arbitrator also identified delay costs for October 1994, which he found to be attributable to circumstances similar to those in September 1994. He found no delay costs for November 1994, but did find them for December 1994 to May 1995 inclusive.