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SABEMO (SA) PTY LTD v. AIW ENGINEERING PTY LTD File No. SCGRG 92/36 Judgment No. 3630 Number of pages - 15 Arbitration (1992) 9 BCL 280; [1992] SASC 3630 (24 September 1992)

Mullighan J.(1)

  Arbitration - Commercial arbitration - building sub-contract - disputes
referred to Arbitration - appeal against parts of Award - errors in law
arising out of Award - assessment of variation when costs of work not proved
release given by sub-contractor pursuant to sub-contract in Final Account
process wrongly held to be a mutual release - no estoppel by representation -
application for leave to extend cross appeal granted but leave refused -
appeal allowed. Motrix Supplies Pty Ltd v Bonds and Kirby (Victoria Avenue)
Pty Ltd (unreported, NSW, 12th September 1990) and Waltons Stores (Interstate)
Pty Ltd v Maher (1988) 164 CLR 387 referred to.
  Commercial Arbitration Act 1986 Tate and Lyle Food and <<Distribution Ltd v>>
<<Greater London>> Council and Anor (1981) 3 All ER 716; Annie Fox and Ors v PG
Wellfair Ltd (in liquidation) (1981) 2 Lloyd's Rep 514 and Pioneer Concrete
(SA) Pty Ltd  v. Jenninqs Group Ltd (1991) 161 LSJS 332, applied.  Taylor
Woodrow International Ltd v The Minister of Health (1978) 19 SASR 1 and
Chaplin v.  Hicks (1911) 2 KB 786, discussed.

ADELAIDE, 5 and 17 March 1992
#DATE 24:9:1992
  Counsel for appellant:        Mr R.F. Floreani,
                                with Mr R.J. Krautz
  Solicitor for appellant:      Fisher Jeffries
  Counsel for respondent:       Mr B.J. Jenner, with Mr S.M. Palyga
  Solicitors for respondent:    Lynch and Meyer

  Appeal allowed.  Extend the time for the application for leave to institute
the cross appeal but refuse leave to the respondent to cross appeal.

MULLIGHAN J.  The appellant appeals by leave on questions of law arising out
of the award of an Arbitrator who had been appointed pursuant to a building
contract between the parties to resolve various issues which had arisen
between them.  The respondent seeks leave to appeal with respect to other
aspects of the award.  The Arbitrator has indicated that he will abide the
outcome of the appeal and the proposed cross appeal.
2.  The appellant was the builder of a large building known as the Mark
Oliphant Building at Science Park at Bedford Park ("the Project").  The
respondent carried on business as a fabricator and supplier of steel.  By a
building sub-contract dated 1st May 1990, the respondent agreed to fabricate
and install the structural steel wall and roof frames of the project and to
perform other work as the sub-contractor of the appellant.  Disputes arose
between the parties with respect to claims made by the respondent for
variations and delay.  They were referred to Arbitration.  The Arbitrator was
appointed and conducted the Arbitration from 21st October 1991 to 1st November
1991.  He made an award on 19th December 1991 which embraced, inter alia, the
wall frame tolerances variation.  The defendant had claimed $72,023.26 and the
Arbitrator awarded $50,000.00.  The appellant appeals against the award of
that amount. Also, the Arbitrator decided that a release which had been given
by the respondent was a bilateral release and the appellant complains, on this
appeal, that the Arbitrator failed to properly construe the release.  Other
grounds of the appeal are raised by an Amended Supplementary Notice of Appeal.
They relate to other findings and conclusions made by the Arbitrator.
3.  It is necessary to briefly describe the nature of the issues which arose
concerning the wall frames.  The respondent alleged that the drawings were
deficient to the extent that certain cleats on wall frames were to be bolted.
However, the engineers of the Project and the appellant required the
respondent to weld them.  The respondent claimed that to be a variation
resulting in entitlement to the costs of the variation and some delays.  The
appellant rejected those contentions and maintained that it was always clear
that welding was required.  The respondent also claimed that the wall frames
which were delivered and installed on site were required to be erected with a
tolerance as to straightness which was far more restrictive than was required
by the specifications thereby causing additional work and delays for which a
claim was made.  That claim was also disputed.  The Arbitrator rejected the
claims of the respondent except that he decided that the respondent was
entitled to the tolerances variation.  The respondent claimed $72,023.66 which
was particularized as follows:-
    Labour 2 men 9 hours $33.93 $ 610.74
    Scissor Lift Agreed Rate 9 hours $60.00 $ 540.00
    Consumables Agreed Amount $ 60.00
    Claim per Bay $ 1,220.74
    Claim for 59 Bays $72,023.66
4.  In the award the Arbitrator recited the history of this claim, the
discussions between the representatives of the parties and the submissions to
the Architect of the Project.  Eventually the respondent formulated the claim
in the amount of $72,023.66 but the appellant always maintained that the
amount was unreasonable and had to be substantiated.  Despite the appellant
informing the respondent that it had "given insufficient reasons and
substantiation for" the claim, the respondent provided no further particulars
of the amount or basis for the calculation and declined to do so.  The
Arbitrator expressed his conclusions as follows:-
    "My view is that the quantum aspects of the claim were not
     properly pursued by the Sub-contractor, and that the Sub-contractor
     had to do a great deal more to prove its costs in the arbitration.
     First, the Sub-contractor had to establish what was allowed, or what
     should have been allowed for the work which was specified, and, on
     Mr. Furler's evidence, this information was available, although the
     amount of detail contained in his tender estimate was not made known
     in the hearing.  Mr. Cawkwell said that in the estimate 'only minor
     work' was allowed to get the frames straight, but, without
     quantification, this statement was of little assistance.  Secondly ,
     having established what was allowed for the work which was
     specified, the Sub-contractor then had to show that the amounts
     which were allowed were reasonable; Finally, the Sub-contractor, to
     prove the actual cost of the variation work, had to establish the
     cost of erecting and plumbing the wall frames, bay by bay, around
     both buildings, by reference to site records.  Further, taking into
     account the actual work methods on the site the Sub-contractor would
     have to identify the costs which were the subject of the Cleats
     Variation, and costs of inefficient and remedial work which were
     properly to the Sub-contractor's account.  If all of this had
     happened, then there would have been the basis for a measurement of
     the actual cost of the variation, which is the requirement of Clause
     10.19.  Instead, the Sub-contractor relied on the proposition that
     the work to achieve the more stringent tolerances required 2 extra
     welders and 1 extra lift, on each bay for 1 day, and, that this was
     part of the extra resources that Mr. Furler put on to the project.
     This, according to Mr. Cawkwell was the average requirement, for
     each bay over the whole project, and Mr. Holliday said that it was
     a 'consensus' emerging from the relevant discussions.  However,
     there was little to back up this assertion, and, measured in
     relation to an obligation to prove costs it was a poor effort, as
     was the use of hire rates and charge and rates which were suspect -
     a matter that I dealt with earlier in discussing the Cleats
     Variation.  In the arbitration, the Builder said that there was no
     agreement as to the value of the Tolerances Variation, and in my
     view the Sub-contractor failed to prove its costs".
5.  The appellant does not complain about any of those findings and
conclusions, and accepts that the Arbitrator correctly described the
obligation of the respondent to prove the quantum of its claim.
6.  The appellant does complain about the way in which the Arbitrator resolved
the issue of quantum.  The Arbitrator went on to say:-
    "However, as I have said the work was a variation, and the
     Sub-contractor has an entitlement, and I am left with no alternative
     but to make my own assessment; my assessment must be arbitrary, to
     some extent, but following Chief Justice Bray I take into account
     'all the contingencies, probabilities, and chances involved'.  My
     assessment is that the Sub-contractor should be compensated for the
     Tolerances Variation in the sum of $50,000.00 and that is my
     determination.  The assessment does not arise out of a particular
     arithmetic exercise; rather, it is based on an assessment of the
     extent to which the Sub-contractor's estimate of the value of the
     work may be tainted by a need to recover from what was clearly a
     project with emerging financial problems, and by the inclusion of
     work which was actually involved with the welding of end verticals,
     as well as work necessary to overcome the Sub-contractor's own
     deficiencies, both in relation to the frames, and the fascias, in
     the early period.  The Builder warned me against 'guessing'; I say
     that this is not a guess but a best assessment that I can make in
     the circumstances".
7.  He did not disclose the basis of his estimate in his award or during the
course of the arbitration.
8.  The grounds of the appeal against this part of the award are:-
    "1.  that the Arbitrator erred in law in assessing the costs
         of the wall frame variation after having rejected evidence led
         by the respondent as to the quantum of the variation.
     2.  that the Arbitrator erred in law in determining an
         entitlement to the costs of a variation without finding that
         the respondent had proved those costs".
9.  In resolving the issues raised by these grounds, it is important to keep
in mind the terms of the contract between the parties as it bears upon
variations.  Cl.10.17 provides (inter alia) that the parties must endeavour to
agree upon the value of a variation. Cl.10.19 provides that if agreement is
not achieved, as was the case here, the respondent had to keep and present in
such form as the appellant may require a proper record of the cost of the work
together with supporting evidence.  This clause goes on to provide for the
various matters to which the appellant was obliged to have regard in
determining the value of the work involved in the variation.  These
obligations are imposed upon the respondent for an obvious reason.  The
appellant was entitled to know precisely what costs and expenses had been
occasioned by a variation and at a time when they could be checked and
evaluated.  Compliance with these obligations was all the more necessary where
the respondent was involved in other activities in the Project
contemporaneously.  It was required to isolate all costs and expenses
occasioned by the variation from the costs and expenses occasioned by the
supply of other materials or work it was supplying or undertaking in the
Project.  The Arbitrator found that the respondent did not discharge those
obligations at any time before, or indeed during the hearing of, the
Arbitration.  A consequence is that the appellant was denied the opportunity
of establishing whether all or part of the costs and expenses were due to the
variation or any other cause.
10.  Mr. Floreani, for the appellant, contended that having found that the
respondent had failed to prove the costs occasioned by the variation, there
was no basis for an award in favour of the respondent.  The Arbitrator was not
entitled to make an assessment without a proven factual basis and in doing so
he fell into error.
11.  Mr. Jenner, for the respondent, argued that it was established that there
had been variations which necessarily involved some cost and expense to the
respondent.  The Arbitrator acknowledged in his reasons that "on the evidence
there was a great deal of rework required, including the application of
'massive' amounts of heat, to get the frames into their correct position".
The case for the respondent as to the actual costs was presented on the basis
that the parties had agreed the amount of those costs at the amount claimed
but it appears that the Arbitrator rejected that contention. Mr. Jenner
contended that the evidence disclosed the method adopted by the respondent in
costing the variation and as it had been established that there was a sound
basis for the variation, there was sufficient evidence upon which the
Arbitrator could make his assessment of the claim.  His conclusion that the
respondent "had to do a great deal more to prove its costs" should be
interpreted as meaning to prove all of its costs and the finding that the
respondent had "failed to prove its costs" should be read in the same way.  On
Mr. Jenner's argument, the correct understanding of the findings and approach
of the Arbitrator, is that he considered that a cost had been established but
was not proved to be to the extent claimed and, consequently, all he has done
is to make his best assessment which, nevertheless, is based upon the
evidence.  I do not think there is any basis to interpret the findings and
conclusions of the Arbitrator or his approach to the assessment in that way.
To my mind he expressed himself clearly and unequivocally.  He accepted the
variation, but the cost had not been proved.  The appellant had sought details
of the costing and its basis, but they had not been provided before or even
during, the Arbitration.
12.  The Arbitrator appears to have based his approach, at least to some
extent, upon the decision of Bray C.J. in Taylor Woodrow International Ltd. v.
The Minister of Health (1978) 19 SASR  1.  In that case, Bray C.J. was
concerned with the approach which should be taken to determining the losses
incurred by reason of delay.  He accepted that although it is not appropriate
to apply the common law rules relating to damages for breach of contract to
measure the ambit of a builder's right to recover loss or expense under the
clause of the building contract he was considering, the value of the right
should be ascertained by the normal common law rules for assessing damages
which involved weighing various contingencies: see p 12.  He referred to the
observations of Vaughan Williams L.J. in Chaplin v. Hicks (1911) 2 KB 786 at p
792 including the following:-
    "I do not agree with the contention that, if certainty is
     impossible of attainment, the damages for a breach of contract are
     unassessable ...  I only wish to deny with emphasis that, because
     precision cannot be arrived at, the jury has no function in the
     assessment of damages ...  In such a case (where it is difficult to
     apply definite rules) the jury must do the best they can, and it may
     be that the amount of their verdict will really be a matter of
     guesswork.  But the fact that damages cannot be assessed with
     certainty does not relieve the wrong-doer of the necessity of paying
     damages for his breach of contract",
and went on to say that those remarks apply to the calculation of the amount
due under the contract for delay and:-
    "it must be estimated by the architect or by the Arbitrators,
     if the matter is left to them, as a jury would have estimated it
     after having taken into account all the contingencies, probabilities
     and chances involved.  If it is incapable of precise estimate,
     nevertheless a general estimate must be attempted", (p 13).
13.  That case was concerned with the usual problem of uncertainty of various
contingencies.  No such issue was before the Arbitrator.  He was concerned
with lack of proof, not contingencies.  The problem confronting the respondent
was not only lack of proof of the costs of the work actually incurred by the
respondent because of the variation, but also the inability to value those
costs and to isolate the work occasioned by the variation from other work
undertaken by the respondent in the Project.  It seems clear that what the
Arbitrator did was to conclude that some cost must have been incurred by the
variation, but the evidence did not permit him to find what that cost was or
its value.  In those circumstances Mr. Floreani contended that the Arbitrator
was not permitted to make an estimate.  If the costs were not proved then no
award could be made. That approach was adopted in Tate and Lyle Food and
<<Distribution Ltd. v. Greater London>> Council and Anor. (1981) 3 All ER 716
where Forbes J. declined to make any allowance for managerial time incurred in
certain work.  He accepted that such time would have been expended and that it
would be difficult to quantify.  However, he concluded that appropriate
records could have been, but were not, kept and consequently there was no
evidence as to the time actually spent.  He went on to say:-
    "While I am satisfied that this head of damage can properly
     be claimed, I am not prepared to advance into an area of pure
     speculation when it comes to quantum.  I feel bound to hold that the
     plaintiffs have failed to prove that any sum is due under this
     head." (p 721)
In my view, that is the approach which should have been adopted by the
Arbitrator and support for that view is to be found in the decisions of the
Court of Appeal in Annie Fox and Ors. v. P.G. Wellfair Ltd. (In Liquidation)
(1981) 2 Lloyd's Rep 514.  Here, the Arbitrator heard the evidence and the
final submissions of counsel. The appellant's counsel made it clear that his
submission was that there was no proof of the costs of the variation or their
value and the Arbitrator could not guess what the position might be. The
Arbitrator gave no indication that he proposed to make an estimate or as to
what that estimate might be.  In Annie Fox the role of an Arbitrator in an
arbitration of this nature was discussed.  Denning M.R. said, at pp 521-522:-
    "There are some arbitrations in which the arbitrator is
     expected to form his own opinion and act on his own knowledge
     without recourse to evidence given by witnesses on either side: such
     as an Arbitrator who is to decide as to whether goods are up to
     sample, see Mediterranean and Eastern Export Ltd. v. Fortress
     Fabrics (Manchester) Ltd(1948) 81 Ll L Rep 401; (1948) 64 TLR
     337.  But there are other arbitrations in which the arbitrator is
     expected to receive the evidence of witnesses and the submissions of
     advocates and to be guided by them in reaching his conclusion: such
     as arbitrations on shipping contracts or on building contracts.  In
     such cases the arbitrator is often selected because of his knowledge
     of the trade - so that he can follow the evidence and the
     submissions.  But he must act judicially.  He must not receive
     evidence in the absence of the other party, and so forth.  In the
     present case if the defendants had been represented I have no doubt
     that the plaintiffs' experts would have been cross-examined so as to
     throw doubt on their findings and on their opinions: and the
     defendants would have called experts to support the line of
     cross-examination.  The Arbitrator would then have been able to form
     a judgment - based on evidence other than his own".
14.  At p 528, Dunn L.J. said:-
    "It is well established that where an arbitrator hears
     evidence in the absence of either or both parties, his award will be
     set aside on the ground of misconduct, unless perhaps it can be
     shown that the evidence would not have affected the award (see
     Walker v. Frobisher, (1801) 6 Ves Jun 69a; re Brock, (1864) 16
     CB (NS) 403 where it was held that the principle applied to
     mercantile as well as legal arbitration; O'Connor v. Whitlaw,
     (1919) 88 LJKB 1242; Royal Commission on the Sugar Supply v.
     Trading Society Kwik-Hoo-Tong, (1922) 38 TLR 684; and Eastcheap
     Dried Fruit Co. v. N.V. Gebroeders Catz Handelsvereeniging,
     (1962) 1 Lloyd's Rep 283).  On the analogy of those cases, it seem s
     to me that an expert arbitrator should not in effect give evidence
     to himself without disclosing the evidence on which he relies to the
     parties, or if only one to that party.  He should not act on his
     private opinion without disclosing it.  It is undoubtedly true that
     an expert arbitrator can use his own expert knowledge.  But a
     distinction is made in the cases between general expert knowledge
     and knowledge of special facts relevant to the particular
15.  He went on to say, at p 529:-
    "If the expert Arbitrator, as he may be entitled to do, forms a
     view of the facts different from that given in the evidence which
     might produce a contrary result to that which emerges from the
     evidence, then he should bring that view to the attention of the
16.  O'Connor L.J. expressed the view that an Arbitrator could not come to a
conclusion by, in effect, giving evidence to himself in contradiction to the
evidence of witnesses.  To do so was a grave miscarriage of justice: see p
533.  These observations have been applied and adopted in this country: see
Motrix Supplies Pty. Ltd.v. Bonds and Kirby (Victoria Avenue) Pty. Ltd. per
Giles J. (unreported, N.S.W., 12th September 1990.
17.  Clearly in the present case the Arbitrator was of the second type
discussed by Denning M.R. in Annie Fox (supra).  He could not use any special
knowledge to make good any deficiency in the evidence. If he had a basis for
an estimate, he should have disclosed it and given the appellant's counsel the
opportunity of meeting it with argument.
18.  I reject the argument of Mr. Jenner that even on this basis, no error of
law has been established as there was evidence upon which the assessment could
be made.  In my view, there was no evidence and the Arbitrator must have made
his assessment upon his own view of what the cost may, or could have been,
without a necessary foundation in the evidence.  The appellant has made good
these grounds of appeal.  The Arbitrator erred in law and these errors arose
out of the award.  Furthermore, there was misconduct on the part of the
Arbitrator, in making the assessment without having given the appellant the
opportunity of being heard as to the basis which he proposed to adopt.
"Misconduct", in this sense, is a technical expression used to denote
irregularity: Motrix Supplies (supra) at p 18.
19.  The third and fourth grounds of appeal are:-
    "3.  That the Arbitrator erred in law in failing properly
         to construe the release documents.
     4.  That the Arbitrator erred in law in finding that there was
         estoppel by representation on a clear indication of
         estoppel by representation."
20.  The issue arises in this way.  Cl.10.34.01 of the subcontract provides
that the appellant may, prior to the Date of Final Certificate, direct the
respondent to furnish to the appellant a final statement of all its claims
against the appellant under the subcontract or otherwise.  Cl.10.34.02
provides that within a reasonable time thereafter, the appellant shall issue
the respondent with a Final Account showing the final amount payable to the
respondent which "shall be binding on all parties unless the (respondent)
gives notice ...  that dispute or disagreement has arisen".  If such notice is
not given the respondent shall execute and deliver to the appellant a release
in a specified form.  The form of the release is to be found in appendix E of
the sub-contract. When the Final Account passed between the parties, the
respondent executed a release substantially in the required terms, save that
it reserved to the respondent the right to make its claims which became the
subject of the arbitration.  The appellant then paid the final amount due.
The terms of the release are as follows:-
    "The Subcontractor agrees that the total moneys due under or
     in any way arising out of the said Subcontract or the Project are
     $638,027.30 (subject to resolution of the direct and indirect costs
     of outstanding AIW Engineering variation claims as outlined in our
     letter of 17th June 1991).  The Subcontractor acknowledges that upon
     payment of the sum of $9,221.20 (which excludes retention) the same
     is accepted as the final payment (subject to resolution of the
     direct and indirect costs of outstanding AIW Engineering variation
     claims as outlined in our letter of 17th June 1991) due to the
     Subcontractor connection with the said Subcontract or the Project
     and Sabemo (SA) Pty Limited agrees to pay retention in accordance
     with the said Subcontract and the Subcontractor hereby releases and
     forever holds harmless Sabemo (SA) Pty Limited from all liabilities
     claims damages expenses and costs (subject to resolution of the
     direct and indirect costs of outstanding AIW Engineering variation
     claims as outlined in our letter of 17th June 1991) howsoever
     arising out of the said relationship between the Subcontractor and
     Sabemo (SA) Pty Limited whether such liabilities claims damages
     expenses and costs be direct or indirect or consequential past
     present or future certain or contingent ascertained or not
     ascertained and whether for monies payable pursuant to the said
     Subcontract or liabilities claim damages expenses or costs arising
     out of said relationship to the intent that all issues and questions
     between the Subcontractor and Sabemo (SA) Pty Limited arising of the
     said relationship which might but for these presents arise at any
     time shall be finally settled (subject to resolution of the direct
     and indirect costs of outstanding AIW Engineering variation claims
     as outlined in our letter of 17th June 1991) and Subcontractor
     agrees to indemnify and keep indemnified Sabemo (SA) Pty Limited for
     all such liabilities claims damages expenses and costs (subject to
     resolution of the direct and indirect cost outstanding AIW
     Engineering variation claims as outlined in letter of 17th June
     1991).  The Subcontractor hereby certifies that: 1) All wages and
     allowances which become due and payable to all employees who were at
     any time engaged on the works under the said Subcontract have been
     paid in full, and 2) All Statutory requirements, including but not
     limited to long service provisions, public liability and workers
     compensation insurance premiums, taxation requirements and any
     superannuation and redundancy requirements have been paid in
21.  The appellant made a claim for liquidated and ascertained damages for
alleged late completion of the works in the sum of $138,920.00 and for work
associated with packers for the wall frames in the sum of $34,177.50.  This
latter claim is said to arise because that work was contained in the
specifications but not performed.  The respondent did not become aware of the
claims by the appellant for liquidated damages and for work specified but not
performed, until the appellant's Points of Defence in the Arbitration were
received. The Arbitrator concluded that the release given by the respondent
was, in effect, a mutual release and that if he was wrong in that conclusion,
the appellant was precluded from making its claims as it was estopped by
representation.  He expressed his reasons as follows:-
    "The Sub-contractor says that the Builder cannot make these
     claims, because of the Release document, and I agree with the
     Sub-contractor.  There are specific words in the Release document
     which in my view have clear meaning and they are that 'all issues
     between the Sub-contractor and Sabemo arising out of the said
     relationship ...  shall be finally settled ...'.  Even if I am wrong
     in my interpretation of these words, there is a clear indication of
     estoppel by representation, and, in my view there was a
     representation that the Builder would make no further claims against
     the Sub-contractor, and a reliance on that representation by the
     Sub-contractor to its actual and potential detriment.  The actual
     detriment would arise if the Sub-contractor accepted less in the
     final account than it considered appropriate for all of the
     variation and delay claims, on the basis of that there would be no
     counterclaims, and, in my experience this is a common occurrence in
     settling final accounts on building projects.  There is no doubt
     that once Mr Holliday became involved the Sub-contractor was acutely
     aware of the requirements of the Contract in relation to notices,
     and the bundle of documents which became Exhibit C.46 is ample
     evidence of this; and it is likely that the delay claims, in
     particular, notified in this period were compromised in a settlement
     negotiation where the parties may well have mutually abandoned their
     respective rights to prolongation costs and liquidated damages.  The
     potential detriment lies in the arbitration process itself, both as
     to its costs, and the uncertainty of the outcome, and it may be that
     if the Sub-contractor had known that it was going to be faced with a
     substantial counterclaim, backed by the in-house expertise which the
     Builder could utilise in bringing the counterclaim to arbitration,
     then the Sub-contractor may well have sought an alternative method
     of resolving the disputes.  The Builder said that the Release
     document was unilateral and did not constitute an agreement, and it
     was no more than a procedural and accounting device, which according
     to Mr Sandrini allowed the Builder to be certain that there would be
     no further claims against it by the Sub-contractor.  I disagree with
     both these propositions.  First, the Builder signed the letter with
     which the Release form was enclosed, and the Sub-contractor signed
     the Release form.  There was an offer, acceptance and consideration,
     and I find it difficult to accept a proposition that the Release
     document was unilateral, binding only the Sub-contractor.  Secondly,
     if the Builder wants the Release document to be only a procedural
     device to finalise the accounting, then the Builder would need to
     give some attention to the actual words used in both the document
     itself, and in Clause 14.35.  Finally in the closing address the
     Builder said that the Sub-contractor did not include extension of
     time claims in matters to be excepted from the Release.  In my view
     this statement is wrong, and does not reflect the understanding
     between the parties at the relevant time."
22.  It may be seen that the Arbitrator considered that the words:-
    "...  all issues and questions between the Sub-contractor and
    Sabemo (SA) Pty. Ltd. arising out of the said relationship which
    might but for these present arise at any time shall be finally
were decisive of the nature of the transaction embodied by the release.  In my
view, he fell into error in that approach.  The release was clearly the act of
the respondent pursuant to its obligation under the sub-contract.  It was a
condition precedent to payment by the appellant of the final amount due to the
respondent pursuant to the sub-contract.  The release was required so that the
appellant would not be faced with claims arising under the contract made
subsequent to the payment of the amount due pursuant to the Final Account as
may be seen from the terms of the release.  The words thought to be
significant by the Arbitrator were taken, by him, out of the context.  What
the respondent gave was a release from all "liabilities, claims expenses and
costs", subject to the stated exceptions, of the respondent against the
appellant.  The words relied upon by the Arbitrator were prefaced by the words
"to the intent" and necessarily mean that "all issues and questions" between
the parties, that arose out of claims by the respondent "shall be finally
settled".  It is trite that a release is an act of one of the parties to a
contract: see Halsbury's Laws of England, 4th Ed., Vol.9, p 411.  The release
did not purport to embrace any claims which the appellant may have against the
respondent.  Those claims arise out of Cl.10.13 of the sub-contract which
provides that where the respondent shall fail to substantially complete the
works by the time provided in the sub-contract, it shall pay or allow to the
appellant liquidated and ascertained damages at the rate specified in the
contract.  Such a liability is independent of any amounts due to the
respondent by the appellant under the sub-contract.
23.  There was no basis for the conclusion that the release was a mutual
release by the parties.  The Arbitrator seems to have taken the view that the
steps taken by each of the parties, namely the formulation of the Final
Account, the execution of the release and the payment of the amount due to the
respondent, constituted a fresh contract presumably containing terms and
conditions which compromised all outstanding claims between the parties apart
from those excepted in the release.  That appears from his reasons where he
    "First, the Builder signed the letter with which the Release
     form was enclosed, and the Sub-contractor signed the release form.
     There was an offer, acceptance and consideration, and I find it
     difficult to accept a proposition that the Release document was
     unilateral, binding only on the sub-contractor."
24.  Those procedures cannot establish a fresh contract of such a nature.  The
giving of the release was a requirement pursuant to the sub-contract and
nothing more or less.  In my view, the third ground of appeal is established.
25.  I turn to the fourth ground.  The Arbitrator does not specify in his
reasons the conduct of the appellant which he thought constituted the
representation giving rise to the estoppel.  It seems that he may have thought
that the part played by the appellant in negotiating the various claims of the
respondent constituted such conduct and that delay claims were subsumed in the
amount stated in the Final Account.  He said that both parties "may well have
mutually abandoned their respective rights to prolongation costs and
liquidated damages".  Also, it appears that he may have regarded the Final
Account, the acceptance of the release and the subsequent payment to the
respondent as the representation.  In my view, there was no basis for any of
these conclusions.  At no time did the appellant represent to the respondent
that it had no claims against it under the sub-contract.  The respondent did
not at any time seek such an intimation before it gave the release.
26.  Upon the assumption that such a representation had been made, the
Arbitrator took the view that there could not be an estoppel unless the
respondent relied upon it to its detriment.  He found such a detriment to be
in the arbitration process itself.  In my view, even if there had been a
relevant representation, participation in an arbitration to resolve claims
made by the builder could not be regarded as a detriment in the relevant
sense.  To establish an estoppel, the respondent had to show that when it gave
the release it had the expectation or assumption that the appellant would not
make claims for liquidated and ascertained damages arising out of the
respondent's delay in completing the works, that the appellant induced that
expectation or assumption and that the respondent gave the release in reliance
of it.  Probably it would be necessary for the respondent to also establish
that the appellant intended that the respondent so act: see Waltons Stores
(Interstate) Pty. Ltd. v. Maher (1988) 164 CLR 387.  There is no basis for any
such conclusions in the evidence before the Arbitrator or by way of inference
from the circumstances in which the release was given and acted upon.  The
appellant also makes out the fourth ground of appeal.
27.  I now turn to the application of the respondent for leave to cross
appeal.  That application was filed on 5th March 1992.  The respondent wishes
to appeal against the Award on grounds which are said to be questions of law,
namely, that the Arbitrator erred in law in failing to allow and/or make an
assessment of the delay costs arising from the tolerance variation, and
including the amount of the assessment and an award of interest.  The
application was opposed.
28.  The award was made on 19th December 1991.  The appellant applied for
leave to appeal on 2nd January 1992 and leave was granted on 8th January 1992.
The Notice of Appeal was filed and served on 14th January 1992.  R.95.04 of
the Supreme Court Rules provides that where a respondent wishes to appeal, he
shall file a notice of cross appeal within 14 days of the service of the
Notice of Appeal on him. The Rules do not expressly provide for the time
within which an application for leave to cross appeal should be made but I
have proceeded on the basis that, at the latest, it should have been made
within the time prescribed for instituting a cross appeal, in this case by
28th January 1992.  I accept the evidence contained in the affidavits of the
respondent's solicitor and Mr. Weise for the purpose of this application.  Mr.
Weise is an accountant and was appointed by the Commonwealth Bank of
Australia, which is the mortgagee in possession of the assets of the
respondent, as its agent for that purpose.  He took possession of the assets
on 28th January 1992.  He became aware of the Award on 29th January 1991 and
obtained a copy of it on 3rd February 1992.  He then sought information from
officers of the respondent.  He had many other pressing duties with regard to
the respondent as well as other matters in his capacity as a registered
liquidator and chartered accountant.  Having considered the Award and after
making his enquiries, he made an appointment to discuss the award with the
respondent's solicitors on 4th March 1992.  Having done so, he gave
instructions to cross appeal.  In all the circumstances, the delay between
28th January 1992 and 5th March 1992 is understandable and not unreasonable.
Mr. Weise had come to the matter without any knowledge of the arbitration or
the Award and obviously needed time to become sufficiently informed to make a
decision as to the attitude to be taken to the appellant's appeal and as to
whether to cross appeal.  I would not wish to give the impression that persons
in the position of Mr. Weise need not pay attention to time limits and may
expect extensions of time to be granted merely because they are not fully
appraised of the affairs of the company whose assets they are administering.
However, in this case, the subject matter of the arbitration was complex and
there does not appear to have been any undue dilatoriness on the part of Mr.
Weise.  I have not overlooked that before Mr. Weise was appointed the
respondent was aware that the appeal had been instituted by the appellant and
took no action with respect to the cross appeal.  However, the subsequent
action of the Commonwealth Bank, in appointing Mr. Weise, tends to suggest
that the financial position of the respondent was such that during the period
between the making of the award and the appointment of Mr. Weise, the
respondent may not have seen any advantage in a cross appeal or may not have
had sufficient resources to undertake such an appeal.  In the circumstances
the delay should be excused.  I have not thought it necessary to decide
whether, under the Rules, a party waiting to cross appeal is obliged to seek
leave within the same time limitation as a party who wishes to appeal, as is
contended by Mr. Floreani.  I am inclined to the view that the Rules should
not be interpreted in that way as it must be acknowledged that the decision to
appeal may be made for different reasons than a decision to cross appeal.  In
all the circumstances, I grant the necessary extension of time for leave to
institute the cross appeal.
29.  However, whether leave should be granted is another question. Pursuant to
s.38(4)(b) of the Commercial Arbitration Act 1986, leave is required.  In
order to obtain leave the respondent must establish that there is a question
of law which arises out of the Award itself which is fairly arguable, which
raises a question of substance and which "touches the effect of any question
of law, any possible error, or the decision that the arbitrator actually
made": Pioneer Concrete (S.A.) Pty. Ltd. v. Jennings Group Ltd. (1991) 161
LSJS 332 per Cox J. at pp 334-335.  In that case, Cox J. drew attention to the
difficulty facing a Judge on the hearing of such an application in truly
assessing these matters at that stage of the proceedings. With those
observations in mind and because the appellant's appeal was to proceed, I
decided to hear full argument on the merits of the cross appeal before
deciding whether leave should be granted.
30.  The first issue on the proposed cross appeal relates to the decision of
the Arbitrator rejecting what is described as the prolongation claim made by
the respondent in the sum of $84,013.90. That claim is for the delay caused by
the work associated with the Tolerances Variation.  The respondent sought an
award of an extension of 20 days and the prolongation costs which I have
mentioned.  The Arbitrator rejected the claim as he took the view that the
respondent had not complied with Cl.9.01 and Cl.9.01a of the sub-contract.
These clauses are in the following terms:-
    "9.01 If progress of the Sub-Contract Works is delayed by ,
     any cause or causes beyond the control of the Sub-Contractor
     including any act (other than an instruction by the Builder as to a
     Variation default or omission on the part of the Builder in a manner
     which might reasonably be expected to result in a delay in the Head
     Contract Works reaching Practical Completion under the provisions of
     the Head Contract the Sub-Contractor shall, if he desires to claim
     an extension of time for completion of the Sub-Contract Works, as
     soon as practicable and in any event not later than ten (10) days
     after the cause of delay arose give a notice in writing to the
     Builder stating the nature, the cause and where possible, the extent
     of the delay." "9.01a No extension of time shall be granted in
     respect of the Date of Practical Completion except in the case of
     actual delay or delays to an activity which is critical to the
     maintenance of progress to the carrying out of the Works so as to
     achieve completion of the Works by the date of Practical Completion
     and approved by the Superintendent under the Head Contract
31.  The Arbitrator took the view that to comply with these clauses, the
respondent had to produce a "diagrammatic critical path programme" and it did
not do so.  He went on to say:-
    "In fact, the Sub-contractor's position is very difficult to
     understand because the requirements of (9.01a) are so clear.  The
     Sub-contractor was receiving contractual advice at the relevant
     time, and the issues of concurrency and criticality were there to be
     addressed, as well as the problems associated with the fact that the
     variation work and the specified work was proceeding simultaneously.
     .....  Instead of a delay analysis based on a critical path
     programme developed from the original contract programme and updated
     as the work proceeded, the Sub-contractor put forward a delay
     analysis that Mr Holliday described as 'academic' but which, in my
     view, contained a strong element of arithmetic 'sleight-of-hand',
     saying little more than if you add 60 man days to a task being
     undertaken by 3 crews of 2 men per crew, and the number of crews
     cannot be increased, then you add 20 days to the job programme] Of
     course there was no reason why the Sub-contractor could not have met
     the requirements of Clause (9.01a) in the arbitration, because it
     was within the Sub-contractor's capability to establish the critical
     path in the original programme, then develop an as-built programme
     showing the critical path through that programme, and measuring the
     effect of the delays associated with the Tolerances Variation in
     that programme.  The Sub-contractor chose not to this, and the only
     programming information which was presented to me in chart form was
     Mr Holliday's document, which the witness described as 'only a
     working paper' (Exhibit C.52), and Mr Furler's chart (Exhibit C.49)
     which was an inadequate attempt to establish the absence of
     significant concurrency between the three delay claims which were
     brought to the arbitration, prepared by the witness only a few days
     before the hearing, from memory, and without reliance on
     contemporaneous documents."
32.  Mr. Jenner contended that the Arbitrator erred in law by characterizing
as a pre-requisite to such a claim an obligation on the respondent to provide
a diagrammatical critical path programme. I do not think the Arbitrator
interpreted Cl.9.01a in that way. What the clause provides is that no
extension shall be granted except in the case of actual delays or delays to an
activity which is critical to the progress of the carrying out of the entire
works embraced by the sub-contract.  There was an obligation on the respondent
to establish that the delay caused by the tolerance variation was critical in
that sense.  A suitable way of discharging that obligation is by the provision
of such a programme.  It is all the more suitable because of the obligation of
the respondent under Cl.14.22 to prepare and produce, in consultation with the
appellant, a programme for the execution of all of the works and to review and
update that programme when called upon to do so.  The reason for this
provision is obvious.  Such a programme enables those responsible for
supervising the entire project to ensure that the work of all sub-contractors
is carried out efficiently and effectively.  It is difficult to see how the
respondent could discharge the onus imposed upon it by Cl.9.01a without the
sort of programme which the Arbitrator obviously thought was necessary, even
though the provision of such a programme is not specifically required by the
clause.  Mr. Jenner's argument necessarily involves reading the Arbitrator's
reasons in an unduly narrow way.  In my view he has done no more than
appreciate the obligation of proof cast upon the respondent by Cl.9.01a and to
conclude that such obligation was not discharged.  Even if I am wrong in that
conclusion and decision of the Arbitrator was an error in law arising out of
the award, it is not an error which raises a question of substance as the
Arbitrator found that the respondent had not proved that the delays were
critical to the maintenance of the progress of the entire works.
33.  In view of the conclusions which I have reached as to the appeal with
respect to the tolerances variation, it is unnecessary to consider the cross
appeal with respect to the refusal to award interest.
34.  The consequence of these conclusions is that the cross appeal could not
succeed and I dismiss the application for leave.
35.  It remains to consider what should be the consequences of the conclusions
which I have reached with regard to the appeal.  The errors in law which have
been established arose out of the award. Pursuant to s.38(2) of the Act, on
appeal, the award may be confirmed, varied, set aside or remitted to the
Arbitrator for reconsideration together with the court's opinion on the
question of law.  Where there has been misconduct on the part of the
Arbitrator, the award may be set aside wholly or in part: s.42.
36.  Mr. Jenner contended that the award with respect to the tolerances
variation should be remitted so that the Arbitrator could make a determination
in accordance with the evidence or alternatively I should call for a report
from him explaining the basis of his award of $50,000.  I do not think either
of those courses is appropriate. The Arbitrator found that the evidence did
not establish the claim and that there had been ample opportunity for the
respondent to adduce the evidence required to prove the claim.  In the
circumstances, it is not appropriate to remit that part of the award for
further consideration.  Without further evidence, the Arbitrator would have to
come to the same conclusion, namely that the claim had not been proved.  A
report by him would not be of any assistance. The proper course is to vary the
award by setting aside that part of it.
37.  The award, in so far as it relates to the rejection of the appellant's
claim for liquidated and ascertained damages, must be regarded differently.
It was denied by the respondent but rejected by the Arbitrator because of his
decision as to the effect of the release and his conclusion that there was an
estoppel by representation.  Consequently, it has not been considered by the
Arbitrator on its merits in the sense that the Arbitrator has not made a
determination with respect to the claim.  The Arbitrator did express some
conclusions as to the appellant's claim and as to the respondent's defence to
the claim.  However, they lack sufficient detail to enable the claim to be
solved on appeal by varying the award.  The award must be remitted to the
Arbitrator so that he may reconsider the claim in light of the opinion which I
have expressed as to the release and the question of estoppel.
38.  I allow the appeal.  I extend the time for the application for leave to
institute the cross appeal but I refuse leave to the respondent to cross
appeal.  I shall hear the parties as to the terms of the orders which should
be made.