Mascareignes Sterling Company Ltd v Chang Cheng Esquares Company Ltd (Mauritius)
| Jurisdiction | UK Non-devolved |
| Judge | Lord Hodge |
| Judgment Date | 19 July 2016 |
| Neutral Citation | [2016] UKPC 21 |
| Date | 19 July 2016 |
| Docket Number | Appeal No 0051 of 2015 |
| Court | Privy Council |
[2016] UKPC 21
Privy Council
From the Supreme Court of Mauritius
Lord Mance
Lord Clarke
Lord Sumption
Lord Carnwath
Lord Hodge
Appeal No 0051 of 2015
Appellant
Nerys Jefford QC Maxime Sauzier SC
(Instructed by Blake Morgan)
Respondent
Eric Wilson Ribot SC Louis Eric Ribot
(Instructed by Carrington and Associates)
Heard on 11 May 2016
This is an appeal from the Supreme Court of Mauritius. It involves a challenge to an arbitration award in a building contract dispute. It raises a preliminary issue as to the scope of an appeal in this case from the arbitrator to the courts. The parties to the appeal also contest four substantive issues, namely (i) the nature of the building contract and whether the contractor, Chang Cheng Esquares Co Ltd ("CCE") is entitled to the sum specified in the final account statement, (ii) whether there was a violation of the principle of public order in the conduct of the arbitration, (iii) whether CCE was in breach of contract in relation to the mechanical and engineering works component of the building contract and (iv) whether CCE was in breach of contract under a collateral finance agreement.
Mascareignes Sterling Co Ltd ("MSC") was the employer and CCE the contractor in a written building contract dated 3 December 1993 for the design and construction of Sterling House, a 13-storey office building in Port Louis, Mauritius. The contract was a standard form contract prepared by the Joint Tribunal Contract, of which, counsel informed the Board, developers and contractors in Mauritius have little experience. The contract in this case was the JCT Standard Form of Contract 1980 edition with Contractor's Designed Portion Supplement, as amended by the parties ("the Contract"). The contract sum was specified as Rs 100m (article 2). The architect was stated in article 3 to be R Koleejan of 5 Residences des Palmiers, Beau-Bassin, but the architect did not take part in the administration of the contract and MSC terminated his appointment. The quantity surveyor was stated in article 4 to be A Juddoo & Partners Ltd ("AJP"), and Mr Juddoo of AJP in practice administered the Contract in the absence of an architect. Although MSC engaged another architect, Mr Bhatia, to assist it in relation to technical matters, he was not formally appointed under the Contract and did not carry out the functions of the architect under it.
Work on the building commenced on 2 May 1994 and practical completion was achieved on 31 March 1996. During the course of the contract AJP produced interim valuations of the work which CCE had carried out and over time MSC paid the sums due under those valuations. At the completion of the contract works, AJP prepared a final account which it issued on 16 October 1996. That account stated that MSC owed Rs 17,582,027.83 to CCE. Shortly before AJP produced the final account, MSC by letter dated 7 October 1996 informed CCE that it had terminated AJP's services as quantity surveyor with effect from 4 October 1996. MSC did not give notice of the removal of the quantity surveyor and the arbitrator found that his removal was unlawful (para 9.4.2.3 of his award). CCE contested MSC's right to replace the quantity surveyor. MSC refused to pay the sum which AJP stated was due in the final valuation.
CCE therefore invoked the arbitration clause in the Contract to determine the dispute. In its statement of case in the arbitration CCE claimed the sum certified in the final account and certain other sums which are not material to this appeal. The arbitrator, Mr Abdurrafeek Hamuth, who was Master and Registrar of the Supreme Court of Mauritius, produced an award dated 22 July 2005 in which he awarded CCE Rs 22,784,189.80 together with interest. Included in that award were the Rs 17,582,027.82 which AJP had certified as due in the final account. The arbitrator also dismissed MSC's counterclaim.
MSC appealed to the Supreme Court on grounds both of fact and law. On 30 August 2012 the Supreme Court dismissed MSC's appeal. MSC now appeals to the Board, with the leave of the Supreme Court, against the arbitrator's award of the sum that AJP in its final account found MSC was owing to CCE and also against his failure to uphold MSC's counterclaims arising out of CCE's alleged breaches of contract.
Article 1027–1 of the Civil Procedure Code provides:
"La sentence arbitrale est susceptible d'appel à moins que les parties n'aient renoncéà l'appel dans la convention d'arbitrage. …"
Thus there is in Mauritius an unqualified right of appeal from an arbitrator unless the parties to the arbitration have restricted or excluded that right in their agreement to arbitrate.
In this case the Contract contained an arbitration clause. It provided in clause 41.6 (as amended by the parties) that
"The parties hereby agree and consent pursuant to the Code of Civil Procedure related to Arbitration, Act No 1–1981 that either party may appeal to the Supreme Court on any question of law arising out of an award made in an arbitration under this Arbitration Agreement; …"
Once CCE had asserted its entitlement to arbitration under clause 41.6 of the Contract, the parties attempted to agree terms of reference. Having failed to agree the terms, the parties entered into a further arbitration agreement dated 15 March 2002, in which they set out the terms of reference which each of the parties wished the arbitrator to consider and instructed the arbitrator to consider "the disputes given in the terms of reference of each party". Clause 6 of the agreement provided: "The decision of the Arbitrator shall be binding on the parties but shall be subject to appeal".
The Board is satisfied that the arbitration agreement to which article 1027–1 of the Civil Procedure Code refers is the combination of the arbitration agreement in the Contract and the agreement setting out the terms of reference of each of the parties. The former confines the appeal from the arbitrator to questions of law and the latter does not contradict that restriction. The Board therefore concludes that the appeal to the Supreme Court should properly have been confined to an appeal on a question or questions of law and that the appeal to the Board is similarly restricted.
The question for the Board therefore is whether the arbitrator erred in law in reaching the determinations which MSC now challenges.
Before the Supreme Court the parties focussed their attention on the question whether the Contract was properly construed as a lump sum contract or as a measure and value contract. The parties had advanced similar arguments before the arbitrator. He had determined (in para 5.29.1 of his award), first, that the Contract properly construed was a measure and value contract and, secondly and as a fall back, that, if the parties' contract was initially a lump sum contract, it was varied by the parties so that payment became due on the basis of measurement and valuation.
Before the Board, counsel for CCE conceded in his written case (para 10.1) that the Contract had been a lump sum contract but he submitted that the parties had altered it by their conduct into a measure and value contract. The Board is satisfied that the concession that the written contract was a lump sum contract was correctly made. Article 1156 of the Civil Code lays down the following rule on the interpretation of contracts:
"On doit dans les conventions rechercher quelle a été la commune intention des parties contractantes, plutôt que de s'arrêter au sens littéral des termes."
In this case the common intention of the parties was clearly manifested by the express terms of the Contract. Clause 2 of the Contract specified the contract sum as Rs 100m. Clause 14.2 provided that the contract sum could be adjusted or altered only in accordance with the express provisions of the conditions. Such provisions included clause 13, which provided for variations, which were instructed or sanctioned by the architect, their valuation and the alteration of the contract sum accordingly. Clause 30.6 provided for the final adjustment of the contract sum after practical completion and clause 30.8 provided for the architect to issue the final certificate which compared the sums paid under the interim certificates (in accordance with clause 30.1) with the contract sum adjusted as necessary in accordance with clause 30.6, and identified the difference as a balance due to or by the contractor or the employer. Further the parties deleted the fluctuations clause (clause 37) and in its place inserted:
"This contract shall be a fixed price contract and no increase whatsoever will be allowed for material or labour … The Contractor must allow in his prices for any possible increases that may affect their tender during the execution of the Works."
In the Board's view there is nothing in the admissible factual matrix of the Contract which points against its clear terms that it was a lump sum contract.
It follows that the arbitrator erred in so far as he relied on the subsequent actions of the parties to construe the Contract as being a measure and value contract. But that is not the end of the matter because he also held, in the alternative, that the parties had agreed to depart from the original contract and that variation was evidenced by their behaviour in carrying out the contract (para 5.29.1).
The arbitrator recorded (para 5.13) that MSC was aware during the contract that AJP provided interim valuations based on measuring the work done and using the rates in the bills of quantities. He held (para 5.27) that those bills were "a fully priced bill of quantities", which showed the...
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West Reg Street (property) Limited Against Central Demolition Limited
...variation of the Works. The position was similar to that in Mascareignes Sterling Co Ltd v Chang Cheng Esquares Co Ltd [2016] BLR 512, [2016] UKPC 21. In that case, like the present, the contract was a lump sum contract but the 29 contract documents included priced bills of quantities. In d......